A Comparative Analysis Of Selected Insurance Plans

A

S UMMER T RAINING R EPORT ON

A C OMPARATIVE A NALYSIS O F S ELECTED I NSURANCE P LANS U NDERTAKEN A T

A VIVA L IFE I NSURANCE C O L TD

S UBMITTED

IN

P ARTIAL F ULFILMENT F OR T HE R EQUIREMENT OF THE

M ASTER

OF

A WARD

OF

D EGREE

OF

B USINESS A DMINISTRATION ( MBA ) TO

M AHARSHI D AYANAND U NIVERSITY , R OHTAK BY

A RYA M ITRA

R OLL N O . 2809 MBA (3 rd Sem)

A MITY B USINESS S CHOOL , M ANESAR (2008-2010)

DECLARATION I, Arya Mitra, Roll No. 2809, MBA (3rdsemester) of Amity Business School, Manesar, hereby declare that the Summer Training Report entitled, “A Comparative Analysis of Selected Insurance Plans”, is an original work and the same has not been submitted to any other institute for the award of any other degree. A seminar presentation of the Training Report was made on August 28, 2009 and the suggestion as approved by the faculty was duly incorporated.

Presentation-In-Charge

Signature of the Candidate

Signature: ___________________ Name of the Faculty: _________________

Countersigned:-

Director of the Institute

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ACKNOWLEDGEMENT Making a project is a result of meticulous efforts put in by many minds that contribute to the final report formation. This is an honest effort towards putting forward whatever I have gained as a valuable experience that will surely help me move up the learning curve towards the path I have chosen. “If the words are symbol of undiluted feelings and token of gratitude then let the words play the heralding role of expressing my feelings.” I am indeed thankful to honorable Prof (Dr) R C Sharma, Director, Amity Business School, Manesar, who has provided the wonderful opportunity of getting exposed to industrial and business working know-how. I extend my deepest thank to my mentor and guide, Dr Vikas Madhukar, Professor, Amity Business School for giving me the opportunity to understand the project and for providing me the necessary information whenever required. I owe a special gratitude to Mr. Prem Singh, Deputy Branch Manager, Aviva Life Insurance Co Ltd and Mr. Ashish Bhardwaj, Assistant Sales Manager, Aviva Life Insurance Co Ltd, for providing me valuable directions and guidance. I would like to render my sincere thanks to Mr. Abhishek Verma, Branch Trainer, Aviva Life Insurance Co Ltd for his immense encouragement, guidance and invaluable lecture sessions throughout my training. He has been an inspirational mentor guiding me through every step of my project, thus making the entire Project a complete learning process. Never the last, I would take the opportunity to thank to all the staff members of “Aviva Life Insurance Co Ltd” who gave their precious time in providing me with valuable information whenever needed. ARYA MITRA MBA(3rd Sem)

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TABLE OF CONTENTS Certificate Declaration Acknowledgement

CHAPTER-I PAGE NO. 1. Significance of the study

1

2. Conceptualization

2

3. Focus of the study

37

4. Objectives of the study

38

5. Limitations of the study

39

CHAPTER-II 1. Industry Profile

41

2. Company Profile

46

CHAPTER-III 1. Review of Existing Literature

57

2. Research Methodology

62

CHAPTER-IV •

Analysis and Interpretation

65

CHAPTER-V 1. Findings

75

2. Recommendations

76

3. Conclusion

77

Bibliography

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CHAPTER-I

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SIGNIFICANCE

OF

THE STUDY

It is generally unpredictable what would going to happen next, thus, everybody require life insurance due to the uncertainties of life. Life Insurance protects the dependents of deceased person against certain economic losses that results from unexpected death of the bread winner. It basically ensures that the family of deceased person does not suffer from much loss. Besides this protection, Life insurance is also a good investment option. One can do financial planning for the various key stages (like career, marriage, childs’ education, retirement, etc.) of life cycle. Understanding the importance of Life Insurance, government of Inda established “Life Insurance Corporation of India” in 1956 and opened the market for private players in 1999. At present, there are 22 private life insurance companies in India offering a large range of insurance products keeping in view the needs of the people. Even then, a huge population of India is not insured. Unawareness among the people is one of the important reasons of this fact. Hence, this study has become more significant to people as well as to organizations. This study will help in creating awareness among people about the importance and benefits of Life Insurance that will help in creating interest of people in life insurance products and ultimately in the growth of insurance industry that will contribute to the growth of Indian economy and last in the growth of World economy. In this highly competitive scenario, this study will also help people to know about the various plans and in selecting the best insurance plan among the available plans according to their needs. In this study, an attempt has been made to compare the Child Plan, Pension Plan & Term Plan of Top 2 companies viz. ICICI Prudential Life Insurance & SBI Life Insurance with AVIVA Life Insurance which helps the company know about the plans of other companies and their competitive advantage over Aviva life’s plan. That will help company to make more competitive plans and to gain the competitive advantages over its competitor and ultimately by increasing the sale of the company, increase its market share.

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CONCEPTUALIZATION What Is Insurance ? Basically insurance is assurance. Insurance is transfer and sharing of risk by equitable loss sharing. Insurance does not get back or replace the assets, it only compensates for the loss suffered. In other words, we can say that insurance is a mechanism that provides compensation for the financial value of the assets in case of loss or damage. At last insurance an important social security tool that offers the counter balance to risk, that is, security.  I nsurance is transfer and sharing of risk by equitable loss sharing. Insurance is assurance and protect the human life. Or In other words “insurance is a form of cooperation through which all those who are subject to certain risks and losses pool their resources to compensate those who really suffer a loss”

Essential Features to Insurance There must be large numbers of similar risks.  The loss caused by the risk must be definite.  The occurrence of the loss must be accidental.  The potential loss must be large enough to cause hardships.  The cost of insuring must be economically feasible.

Need for Life Insurance:  Possibility of damage caused by any event the risk.  Uncertainty and unpredictability about future losses or damages which may or may not happen, which may happen suddenly and unexpectedly.  Insurance is relevant about the risk.  Insurance is done against the contingency of the happening of such events.  If there is no risk then no need of insurance7.  Special need like medical expenses.  Today insurance has become even more important due to the disintegration of the prevalent joint family system, a system in which a number of generations co-existed

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in harmony, a system in which a sense of financial security was always there as there were more earning members.  Times have changed and the nuclear family has emerged. Apart from other pitfalls of a nuclear family, a high sense of insecurity is observed in it today besides, the family has shrunk. Needs are increasing with time and fulfillment of these needs is a big question mark.  How will you be able to satisfy all those needs? Better lifestyle, good education, your long desired house. But again - you just cannot fritter away all your earnings. You need to save a part of it for the future too - a wise decision

Types of Insurance There are two type of insurance.  Non- life insurance  Life insurance 1. Non life insurance: In this we include health and general insurance. GIC was set up by nationalizing the non-life business of insurance sector in 1972. The GIC operates as the holding co. of its four subsidiaries, namely

•

National Insurance Company Ltd.

•

The New India Assurance Company Ltd.

•

The Oriental Insurance Company Ltd.

•

United India Insurance Company Ltd.

All the 68 Indian insurers and 45 non-Indian insurers who did business before nationalization got merged and taken over by the four subsidiaries of GIC. These four subsidiaries have branches all over the country and concentrate on non-life insurance business like marine, fire, accident, medical expenses, Car and vehicle insurance etc. GIC can invest up to 50% in private corporate and non-government sector.

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2.

Life insurance:

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the policy owner's death. In return, the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at regular intervals.

A family is dependent for its food, clothing and shelter on the income brought by the family's breadwinner. The family is secure so long as this breadwinner is alive and is capable of earning. A sudden death (or disability) may leave the family in a financially difficult situation. Uncertainty of death is inherent in human life and this uncertainty makes it necessary to have some protection against the financial loss arising from untimely death. Life insurance offers this protection. Life Insurance was there in India since 1818 carried by private and foreign insurers. In 1956, LIC Act was passed under which life insurance was nationalized and LIC was set up by taking over the business of about 245 large and medium companies doing business of life insurance. LIC had a monopoly of life business. It has set up the LIC mutual fund for mobilizing savings of the public, particularly from rural and some urban areas and provides a good return to investors. Endowment Insurance Plan: Endowment plans provide life insurance cover for a specified period. The important aspect is that on maturity i.e. if the insured survives the term of the insurance, he/she receives the sum assured at the end of the term. Term Insurance Plan: Term life insurance plans provide insurance cover for a specified period. The defining characteristic of this type of life insurance plan is the complete absence of survival benefit i.e. on maturity (surviving the term of the policy), you receive no money from the insurance company.

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Unit Linked Insurance Plan: Unit-linked Insurance Plans (ULIPs) combine the benefits of life insurance policies with mutual funds. A certain part of the premium is invested in listed equities/debt funds/bonds, and the balance is used to provide for life insurance and fund management expenses. Yields earned on investments i.e. the value of the investment or the sum assured, whichever is higher, is paid to the insured or nominee. This varies from company to company i.e. some insurance companies pay the value of the investment in addition to the sum assured. ULIPs have gained high acceptance due to attractive features they offer. These include:  Flexibility •

Flexibility to choose Sum Assured.

•

Flexibility to choose premium amount.

•

Option to change level of Premium /Sum Assured even after the plan has started.

•

Flexibility to change asset allocation by switching between funds

 Transparency •

Charges in the plan & net amount invested are known to the customer

•

Convenience of tracking one’s investment performance on a daily basis.

 Liquidity •

Option to withdraw money after few years (comfort required in case of exigency)

•

Low minimum tenure.

•

Partial / Systematic withdrawal allowed

 Fund Options •

A choice of funds (ranging from equity, debt, cash or a combination)

•

Option to choose your fund mix based on desired asset allocation

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SOME INSURANCE TERMINOLOGIES Sum Assured: It is the minimum guaranteed amount the nominee get in case of an unfortunate demise of the life covered. Premium: The consideration paid by the insured to the insurer for making an insurance. If it is paid regularly during the term of policy, it is called Regular premium and if it is paid as lump sum, for the whole policy term, it is called Single premium. Premium Payment Term (PPT): It is the time period for which one have to pay the Regular Premium. It can be less than or equal to policy term. Additional Regular Premium (ARP): It is the extra amount paid above the Regular Premium. Once you opt for this feature, you are bound to pay it for the whole premium payment term. The minimum and maximum amount is different in different insurance companies. Top-Up Premium: It is also the extra amount paid over and above the Regular Premium. The only difference between ARP and Top-up premium is that one does not obliged to pay it for the whole policy term. The minimum and maximum top-up amount is different for different companies. Partial Withdrawal (PW): One, if needed, can withdraw some amount from the fund value pertaining to regular premium and top-up premium after completion of the 3or 5 policy anniversary or as per the rules of the companies. Fund Option: Premium you paid, after deducting all the charges, rest amount is invested in the Debt, Money and Equity market. Every Life insurance company has some options according to the percentage of money allocated in these markets. These are called Fund Options.

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Switch: By opting this feature you can switch from one fund option to another fund option available in the plan depending on your financial priorities and investment decision. Switching policy of different companies are different. Like minimum and maximum amount switched between fund options are different in different companies and switching charges are also different. Systematic Transfer Plan (STP): This option allows you to enter and exit the equity market not abruptly, at once, but slowly at different times and at different levels. This has the effect of averaging out the risks associated with the equity market, thus reducing the overall risk you face. In this option some proportion of the fund value is automatically switched from debt dominated fund to equity dominated fund on regular basis. Automatic Asset Allocation (AAA): This option helps you to automatically decrease your exposure to equity and increase your exposure to dept, as you grow older. This option relies on the fact that an individual’s risk appetite reduces with age and he tends to be more conservative with his investment. This option provides you the flexibility of leveraging the returns from equitys market and secure/ book the profits by the way of auto asset allocation as he advances in his age. Premium Re-direction: This option helps you to modify the allocation proportion of your future premium into various funds in accordance with your changing needs / preferences. Settlement Option: This option allows you to keep your money invested in the fund even after maturity and enables you to receive the same systematically over a period of up to 5 years. Cover Continuance Option: This option ensures that your life insurance cover continues in case you are unable to pay premiums, anytime after payment of first three years premium. All applicable charges will be automatically deducted from the units available in your fund.

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Free Look Period: You can review the terms and conditions of the policy, 15 days from the date of the receipt of the policy document and where you disagree to any of those terms and conditions, you have the option to return the policy stating the reason of your objection. Waiver of Premium Rider: According to this rider, In case of an unfortunate event of death of the policy holder, the sum assured is paid to nominee at that point of time and all the future premium will be paid by the company. Income Benefit (IB) Rider: If this rider is opted for, then upon your death, 10% of the income benefit rider sum assured will be payable to the appointee for every year. Accidental Death Benefit (ADB) Rider: If this rider is opted for, then in case of accidental death, the nominee will receive an additional sum assured along with the death benefit. Comprehensive Health Benefits (CHB) Rider: If this rider is opted for, then upon permanent total disability due to illness or accident or contracting any of listed 18 critical illnesses, then we shall pay the benefits payable in case of your death.

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INTRODUCTION ABOUT THE PLANS 1. CHILD PLANS  Aviva Young Scholar Plan Features: Entry Age(Last Birthday)

Parent: 18 – 50 years

Policy Term (PT)

Child: 0 – 17 years 10-25 years, subject to maximum maturity

Premium Payment Term(PPT) Annual Premium

age of 70 years 3 years/5 years/equal to policy term Minimum Rs. 15000 if PPT = PT Minimum Rs. 50,000 if PPT = 3years/5years

Top-up Premium

Maximum = No Limit Minimum: Rs. 1,000; Maximum: 25% of total regular premium

Sum Assured (SA)

paid Minimum: 5* Annual Premium Maximum: 1.5*Policy Term*Annual

Riders Available

Premium In Built: Waiver of Premium Optional: Accidental Death Benefit(ADB) Rider Income Benefit(IB) Rider

Premium Frequency Fund Options

Comprehensive Health Benefit(CHB) Rider Yearly, Half yearly, Quarterly, Monthly Enhancer, Growth, Balanced, Protector &

Partial Withdrawal

Bond Regular Premium: After 5 Policy Years Top-up Premium: After 3 Years Minimum: Rs. 5000,

Switches

Maximum: 25% of Fund value 1st 4 switches free of charge in a Policy year Subsequent switches are charged at 0.5% of amount switched, subject to a maximum of 500 per switch Minimum switch amount: Rs. 5000

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Benefits  Death Benefit •

Sum Assured will be paid immediately.

•

All the future premium will be waived and paid into your fund.

 Loyalty Benefit At the end of every 5th policy year, some amount as a percentage of fund value is added in your fund as loyalty benefit. The rate of amount is as: End of Policy Year

Loyalty Addition as a % of Fund Value

Policy Year 5 Policy Year 10 Policy Year15 Policy Year 20 Policy Year 25

pertaining to Regular Premium 0.50% 1.00% 1.50% 2.00% 2.50%

 Maturity Benefit •

Fund value pertaining to Regular Premium and Top-up Premium will be paid at the time of maturity.

 Tax Benefit •

The premium paid will be eligible for tax benefit as per Section 80C, 80D and Section 10(10D) of the Income Tax Act, 1961.

Charges:  Policy Administration Charges: •

Policy administration charge will be Rs. 55 per month. This charge will increase from 1st Jan every year by 5%.

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 Fund Management Charges: •

Bond Fund:

1.00% per annum

•

Protector Fund

1.00% per annum

•

Balanced Fund

1.25% per annum

•

Growth Fund

1.50% per annum

•

Enhancer Fund

1.75% per annum

 Allocation Charges: •

Regular premium: Allocation charges for PPT =PT

Annual

Year 1

Year 2

Year 3 & 4 Year5

Year 6 &

Premium <50,000 20% >=50,000 to 18%

10% 10%

5% 5%

2% 2%

thereafter 1% 1%

<1,00,000 >=1,00,000

10%

5%

2%

1%

16%

Allocation charges for PPT = 3 Years/5 Years Policy Year Year 1 Year 2 Year 3 & thereafter •

Allocation Charge 10% 4% 2%

Top-up Premium: The allocation charge shall be 98% of top-up premium.

 Mortality Charges: •

It is levied on the Sum at Risk (SAR).

•

Sum at Risk = Sum Assured + Sum of future premiums payable till the date of maturity.

•

Sample annual charges per thousand SAR for a healthy male are given below:

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Age Rs.

25 1.31100

30 1.34665

35 1.65025

40 2.47250

 Surrender Charge: Completed Policy years for which

Surrender charges on Fund Value

premium is paid

pertaining to regular premium For PPT = PT Less than 1 year 100% 1 year 90% 2 years 60% 3 years 30% 4 years 20% 5 years 5% 8 years 1% More than 8 years Nil For PPT = 3 years less than 1 year 100% 1 year 90% 2 years 20% More than 2 but less than 3 years 10% 3 years Nil For PPT = 5 years Less than 1 year 100% 1 year 90% 2 years 20% 3 years 10% More than 3 but less than 5years 5% 5 years Nil

•

ICICI PRU SMART KID UNIT-LINKED REGULAR PREMIUM Features:

Entry Age(Last Birthday)

Parent: 20 – 60 years

Maturity Age

Child: 0 – 15 years Parent: 75 Years

Policy Term (PT)

Child: 19 - 25 years 10-25 years, subject to maximum maturity

Annual Premium

age of 75 years Minimum Rs. 10,000

Top-up Premium

Maximum = No Limit Minimum: Rs. 2,000; Maximum: 25% of total regular premium 17 |

Sum Assured (SA)

paid Minimum: 1,00,000

Riders Available

Maximum: 5*Annual premium Waiver of Premium Accidental Death & Disability Benefit(ADDB) Rider

Premium Frequency Fund Options

Income Benefit(IB) Rider Yearly, Half yearly, Monthly R.I.C.H II, Multiplier II, Flexi Growth II, Flexi Balanced II, Balancer II, Protector II,

Partial Withdrawal

Preserver,Return Guarantee Fund Regular Premium: After 5 Policy Years Top-up Premium: Any time during PT Minimum: Rs. 2000, Maximum: 25% of Fund value 1 PW in a Policy Year Maximum 5 PW during entire PT 1st 4 switches free of charge in a Policy year

Switches

Subsequent switches are charged at Rs. 100 per switch Minimum switch amount: Rs. 2000

Benefits  Death Benefit •

Sum Assured will be paid immediately.

•

All the future premium will be waived and paid by the company till maturity of the policy.

 Maturity Benefit •

Fund value pertaining to Regular Premium and Top-up Premium will be paid at the time of maturity.

 Tax Benefit

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•

The premium paid will be eligible for tax benefit as per Section 80C, 80D and Section 10(10D) of the Income Tax Act, 1961.

Charges:  Policy Administration Charges: •

Policy administration charge will be Rs. 60 per month.

 Fund Management Charges: •

Protector II

0.75% per annum

•

Preserver

0.75% per annum

•

Balancer II

1.00% per annum

•

Flexi Balanced II

1.00% per annum

•

R.I.C.H. II

1.50% per annum

•

Flexi Growth II

1.50% per annum

•

Multiplier II

1.50% per annum

•

Return Guarantee

1.50% per annum

 Allocation Charges: •

Regular premium:

Annual

Year 1

Year 2 - 5

Year 6 – 10

Year 11

Premium <20,000 20% >=20,000 to 19%

5% 5%

2% 2%

onwards 1% 1%

<50,000 >=50,000

5%

2%

1%

•

18%

Top-up Premium: The allocation charge shall be 1% of top-up premium.

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 Mortality Charges: Mortality charges are deducted on the basis of Sum Assured. Indicative charges per thousand Sum Assured for a healthy male and female life per annum are shown in table: Age(yrs) Male Female

<7 0 0

20 1.33 1.26

30 1.46 1.46

40 2.48 2.12

50 5.91 4.85

 Surrender Charges: Completed policy years

Surrender value as a %

for which premiums are

of Fund Value

paid Less than 1 year 1 year 2 years

0% 25% 40%

Surrender Charges

100% 75% 60%

However, this surrender value would be payable only after completion of three policy years or whenever the policy is surrendered thereafter. Following are the surrender values and charges applicable after payment of 3 full years’ premium.

•

No. of completed policy

Surrender Value

Surrender Charge

years 3 policy years 4 policy years 5 policy years & above

96% 98% 100%

4% 2% 0%

SBI LIFE- UNIT PLUS CHILD PLAN Features:

Entry Age(Last Birthday)

Parent: 18 – 57 years

Maturity Age

Child: 0 – 15 years Parent: 65 Years

Policy Term (PT)

Child: 18 - 25 years Min.: 8yrs or (18 – child’s age at entry) whichever is higher Max. : 25 yrs 20 |

Premium Payment Term(PPT) Annual Premium

3yrs/ 5yrs/ 7yrs/ Till the child attains 18yrs Minimum Rs. 84,000; for PPT = 3yrs Minimum Rs. 60,000; for PPT = 5yrs Minimum Rs. 48,000; for PPT = 7yrs Minimum Rs. 12,000; for PPT = PT

Top-up Premium

Maximum = No Limit Minimum: Rs. 2,000; Maximum: 25% of total regular premium

Sum Assured (SA)

paid Minimum: 5*Annual Premium Maximum: For age 18 – 40 yrs = 25*AP For age 41 – 50 yrs = 20*AP

Riders Available

For age 51 – 57 yrs = 15*AP Waiver of Premium Accidental Death & Disability(ADD) Rider

Premium Frequency Fund Options

Dhanvantri Supreme (CI) Rider Yearly, Half yearly, Quarterly, Monthly Equity Optimiser Fund, Equity Fund, Bond

Partial Withdrawal (PW)

Fund, Growth Fund, Balanced Fund Regular Premium: After 3 Policy Years Top-up Premium: Any time during PT Minimum: Rs. 2000, Maximum: 25% of Fund value 4 PW are free in a Policy Year Maximum 5 PW during entire PT 1st 4 switches free of charge in a Policy year

Switches

Subsequent switches are charged at Rs. 100 per switch Minimum switch amount: Rs. 10,000

Benefits  Death Benefit •

Sum Assured will be paid immediately.

•

All the future premium will be waived and paid by the company till maturity of the policy.

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•

Fund Value will be paid at maturity.

 Maturity Benefit •

Fund value pertaining to Regular Premium and Top-up Premium will be paid at the time of maturity.

 Loyalty Benefit •

To celebrate the 18th birthday of your child, SBI Life offer loyalty units by way of free allocation of units based on the average of last 24 months Fund value. 0.15*average last 24 months fund value*No. of policy till age 18

 Tax Benefit •

The premium paid will be eligible for tax benefit as per Section 80C, 80D and Section 10(10D) of the Income Tax Act, 1961.

CHARGES:  Policy Administration Charges: •

Policy administration charge will be Rs. 60 per month. This charge will increased by 2% per annum for each subsequent year on the 1st business day of the policy month following 1st April each year, subject to maximum of Rs.300 per month.

 Fund Management Charges: •

Equity Fund

1.50% per annum

•

Equity Optimiser Fund

1.50% per annum

•

Bond Fund

1.00% per annum

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•

Balanced Fund

1.25% per annum

•

Growth Fund

1.35% per annum

 Allocation Charges: •

Regular premium:

Annual

Year 1

Year 2 – 3

Year 4 – 7

Year 8

Premium Upto 500,000 18% 500,100 to 17%

5% 5%

2% 2%

onwards 1% 1%

10,00,000 10,00,000 & 15%

5%

2%

1%

above •

Top-up Premium: The allocation charge shall be 1% of top-up premium.

 Surrender Charges: Year Surrender

2 25%

3 15%

4 4%

5 2%

charges

2 PENSION PLANS •

AVIVA PENSION PLUS Features:

Entry Age

Min: 18 Years

Vesting/Maturity Age

Max: 65 Years Min: 40 years

Policy Term

Max: 70 years Min: 5 years 23 |

6 & onwards Nil

Max: Vesting age chosen Min: 10,000

Annual Premium

15,000 For PT < 10 Years 100,000 for Single Premium Additional Regular Premium

Max: No Limit Minimum: 1000

Top-up Premium

Maximum: No Limit Minimum: 1000

Fund Options

Maximum: No Limit Pension Index, Pension growth, Pension

Switches

Balanced, Pension Protector 1st 4 switches free of charge in a Policy year Subsequent switches are charged at 0.5% of amount switched, subject to a maximum of 500 per switch Minimum switch amount: Rs. 5000

Benefits  Death Benefit •

100% of the value of units pertaining to regular/single premium.

•

The value of units pertaining to top-up premium(s) and additional regular premium, if any, are paid in addition to the above.

 Loyalty Addition For all regular premium policies with term of 20 years and above, Aviva provides a loyalty addition as a percentage of units pertaining to regular premiums only. Policy Term (years)

Loyalty Addition as a % of Fund Value

20 21 22 23 24 25 26 27

pertaining to Regular Premium 1.0% 1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7%

24 |

28 29 30 & above

1.8% 1.9% 2.0%

 Maturity Benefit •

Take up to 1/3rd of the fund value as lump sum and use the balance to purchase an annuity from Aviva.

•

Buy an annuity from any other life insurance company.

 Tax Benefit •

Tax benefit will be as per Section 80C/80CCC(1) & Section 10(10A)(3) of the Income Tax Act, 1961.

CHARGES:  Policy Administration Charges: •

Policy administration charge will be Rs. 51 per month (Rs. 30 in case of Single Premium policies). This charge will increase from 1st Jan every year by 5%.

 Fund Management Charges: •

Pension Index Fund:

0.75% per annum

•

Pension Protector Fund

1.00% per annum

•

Pension Balanced Fund

1.25% per annum

•

Pension Growth Fund

1.50% per annum

 Allocation Charges: 25 |

•

Regular premium: Annual Premium < 10,000 10,000 to 29,999 30,000 to 99,999 100,000 to 499,999 500,000 & above Single Premium <500,000 500,000 & above

•

Year 1 Year 2 onwards 25% 2% 20% 2% 12.5% 2% 10% 2% 7.5% 2% Allocation Charge 2% 1%

Top-up Premium: The allocation charge shall be 2% of top-up premium.

 Surrender Charge: Completed Policy years for which

Surrender charges on Fund Value

premium is paid Upto 1 year More than 1 but upto 2 year More than 2 but upto 3 policy years More than 3 but upto 4 policy years More than4 policy years

pertaining to regular premium 100% 25% 5% 2% Nil

 ICICI PRU LIFE TIME SUPER PENSION Features: Entry Age

Min: 18 Years

Vesting/Maturity Age

Max: 65 Years Min: 45 years Max: 75 years

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Policy Term (PT)

Min: 10 years

Annual Premium(APE)

Max: 57 years Min: 10,000

Sum Assured(SA)

Max: No Limit Minimum: 100,000

Top-up Premium

Maximum: PT*Annual Premium Minimum: 2000

Fund Options

Maximum: No Limit Pension R.I.C.H. II, Pension Flexi Growth II, Pension Multiplier II, Pension Flexi Balanced II, Pension Balancer II, Pension Protector II, Pension Preserver, Pension Return Guarantee Fund 1st 4 switches free of charge in a Policy year

Switches

Subsequent switches are charged at Rs. 100 per switch Minimum switch amount: Rs. 2000 Accidental Death & Disability Rider, Waiver

Riders Available

of Premium Rider

BENEFITS  Death Benefit •

The Nominee will get the higher of sum assured or fund value as lump sum where spouse is not the nominee.

•

Where spouse is nominee, this amount can be given as lump sum or can be used to purchase an annuity from the company. Alternately, 1/3rd of this value can be taken as lump sum and balance can be used to purchase an annuity.

 Maturity Benefit •

Take up to 1/3rd of the fund value as lump sum and use the balance to purchase an annuity from ICICI Prudential.

•

Buy an annuity from any other life insurance company.

 Tax Benefit

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•

Tax benefit will be as per Section 80CCC & Section 10(10A) of the Income Tax Act, 1961.

CHARGES:  Policy Administration Charges: •

Policy administration charge will be Rs. 40 per month.

 Fund Management Charges: •

Pension R.I.C.H. II:

1.50% per annum

•

Pension Flexi Growth II

1.50% per annum

•

Pension Multiplier II

1.50% per annum

•

Pension Return Guarantee Fund

1.50% per annum

•

Pension Balancer II

1.00% per annum

•

Pension Flexi Balanced

1.00% per annum

•

Pension Protector II

0.75% per annum

•

Pension Preserver

0.75% per annum

 Allocation Charges: •

Regular premium:

Annual

Year 1

Premium 10,000-19,999 20,000-49,999 50,000 & above •

20% 17% 14%

Year 2 9% 9% 9%

Year 3 – 10

Year 11

1% 1% 1%

Onward Nil Nil Nil

Top-up Premium: The allocation charge shall be 1% of top-up premium. 28 |

 Surrender Charge: Completed policy years

Surrender value as a %

for which premiums are

of Fund Value

paid Less than 1 year 1 year 2 years

0% 25% 40%

Surrender Charges

100% 75% 60%

However, this surrender value would be payable only after completion of three policy years or whenever the policy is surrendered thereafter. Following are the surrender values and charges applicable after payment of 3 full years’ premium. No. of completed policy

Surrender Value

Surrender Charge

years 3 policy years 4 policy years 5 policy years & above

96% 98% 100%

4% 2% 0%

 SBI LIFE UNIT PLUS II PENSION Features: Entry Age

Min: 18 Years

Vesting/Maturity Age

Max: 65 Years Min: 50 years

Policy Term (PT)

Max: 70 years Min: 5 years

Annual Premium(APE)

Max: as per the vesting age chosen Min: 24,000 Min: 25,000 for single premium

Sum Assured(SA)

Max: No Limit Single Premium Mode Age 18-35

125% of SP, Max:

10 lac 36-45 Same, Max: 5 lac 46-60 Same, Max: 1.2 lac Regular Premium Mode 29 |

Age 18- 35

5/10*APE, Max: 10 lac Same, max: 5 lac 1.2 lac

Top-up Premium

36-45 46-60 Minimum: 5000

Fund Options

Maximum: No Limit Equity Optimiser, Equity Pension, Bond

Switches

Pension, Growth Pension, Balanced Pension 1st 4 switches free of charge in a Policy year Subsequent switches are charged at Rs. 100 per switch Minimum switch amount: Rs. 10,000 Accidental Death & Permanent Disability

Riders Available

Rider, Dhanvantri Supreme (Critical illness) Rider

BENEFITS  Death Benefit •

The Nominee will get the higher of sum assured or fund value.

 Maturity Benefit •

Take up to 1/3rd of the fund value as lump sum and use the balance to purchase an annuity from SBI Life.

•

Buy an annuity from any other life insurance company.

 Tax Benefit •

Tax benefit will be as per Section 80CCC (1) of the Income Tax Act, 1961.

CHARGES:  Policy Administration Charges:

30 |

•

Policy administration charge will be Rs. 60 per month. This charge will increased by 2% per annum for each subsequent year on the 1st business day of the policy month following 1st April each year, subject to maximum of Rs.300 per month.

 Fund Management Charges: •

Equity Optimiser Fund

1.50% per annum

•

Equity Pension Fund

1.50% per annum

•

Bond Pension Fund

1.00% per annum

•

Growth Pension Fund

1.35% per annum

•

Balanced Pension Fund

1.25% per annum

 Allocation Charges: • Annual

Regular premium: Year 1

Year 2 & 3

Year 4 & 5

Year 6-10

Year 11

Premium 24,000-

15%

7.5%

5%

2%

Onward Nil

99,999 100,000-

12%

5%

5%

2%

Nil

49,999 500,000&

9%

3%

3%

2%

Nil

above •

Single Premium: Annual Premium 25,000-100,000 100,000-500,000 500,000 & above

•

Allocation Charges 4% 3% 2%

Top-up Premium:

31 |

The allocation charge shall be 1% of top-up premium received during 1st 10 policy years. 11th onward allocation charges will be nil.

 Surrender Charge: Policy Year

For Regular Premium

For single Premium

Year 4 & 5 Year 6-10 11 onwards

Mode 2% of F.V. 1% of F.V. Nil

Mode Nil Nil Nil

3

PROTECTION PLANS

 AVIVA LIFE SHIELD PLUS Features: Entry Age

Minimum: 18 years

Maturity Age

Maximum: 55 years Minimum: 28 years

Policy Term (PT) Sum Assured (SA)

Maximum: 65 years 10 – 30 years Minimum: 10 lacs

Premium Frequency

Maximum: No Limit Single Regular: Yearly, Half-yearly, Quarterly &

Riders Available

Monthly In-Built: No Additional: Accidental Death Benefit Aviva Dread Disease

BENEFITS:  Death Beneit: In case of your unfortunate death during the policy term, nominee will receive the full Sum Assured.

32 |

 Maturity Benefit: As this is a purely protection plan (Term Plan), there is no maturity benefit.  Tax Benefit: Tax Benefits will be as per the Section 80C, 80D & 10(10D) of the Income Tax Act, 1961.

 ICICI PRU PURE PROTECT FEATURES: Entry Age

Minimum: 18 years

Maximum Coverage Age Policy Term (PT) Premium Sum Assured (SA)

Maximum: 55 years 75 years 10 – 30 years Minimum: 2400 per annum Maximum: 24,99,999 for Classic Minimum: 25 lacs for Elite

Riders Available

Maximum: No Limit In-Built: No Additional: Accidental Death & Disability Benefit Rider, Waiver of Premium Rider

BENEFITS:  Death Benefit: In case of your unfortunate death during the policy term, nominee will receive the full Sum Assured.  Maturity Benefit: As this is a purely protection plan (Term Plan), there is no maturity benefit.  Tax Benefit:

33 |

Tax Benefit as per section 80C.

 SBI LIFE- SHIELD Features: Entry Age

Minimum: 18 years

Maximum Coverage Age Policy Term (PT) Sum Assured (SA)

Maximum: 60 years 65 years 5 – 25 years Minimum: 3 lacs

Riders Available

Maximum: No Limit In-Built: No Additional: Accidental Death & Permanent Disability Benefit Rider, Premium Waiver Benefit Rider

Benefits:  Death Benefit: In case of your unfortunate death during the policy term, nominee will receive the full Sum Assured.

 Maturity Benefit: As this is a purely protection plan (Term Plan), there is no maturity benefit.  Tax Benefit: Tax Benefit as per Section 80C & 10(10D).

34 |

FOCUS OF THE PROBLEM In India, one public sector life insurer that is Life Insurance Corporation and 22 private sector companies are providing a wide range of insurance products. Even then a huge part of the population does not have life insurance and the people those have life insurance, are not sufficiently covered. As the work was to sell the insurance plans of Aviva life insurance company mainly “Aviva Young Scholar Plan, Aviva Pension Plus, Aviva Life Shield Plus”. During the field work, people having income more than 3 lac per annum had been approached. The most of them were focusing on the various charges levied in the plans. The responses were, “Charges are very high”. Hence the focus of the study is the charges levied in various plans in various companies. An attempt is made to compare the charges levied in the plans by Aviva Life Insurance co. with the same levied by the current top two private companies viz. ICICI Prudential Life Insurance Co. and SBI Life Insurance Co. in their respective plans.

35 |

OBJECTIVES OF THE STUDY The main objectives of this study are: To compare the plans of Aviva with its competitors.  To compare the features offered in various plans.  To compare the various charges levied in the plans.  To find out a plan that best secures the child’s future.  To find out one best retirement solution and protection plan that protects your life in cheapest cost.

36 |

LIMITATIONS OF THE STUDY  The study is limited to few companies and few plans only.  All the charges are not disclosed by the companies.  The study is restricted to limited geographical area.  The study is limited to a time period of July-August 2009.

37 |

CHAPTER-II

GENESIS

38 |

Insurance in India can be traced back to the Vedas. For instance, Yogakshema, the name of Life Insurance Corporation of India's corporate headquarters, is derived from the Rig Veda. The term suggests that a form of "community insurance" was prevalent around 1000 BC and practiced by the Arya. Insurance, in its modern form, first arrived in India through a British company called the Oriental Life Insurance Company in 1818, followed by the Madras Equitable Life Insurance Society in 1829 and the Bombay Assurance Company in 1870. They insured the lives of Europeans living in India. The first company that sold policies to Indians was the Bombay Mutual Life Assurance Society starting in 1871. The first general insurance company, Triton Insurance Company Limited, was established in 1850. For the next hundred years, both life and non-life insurance were confined mostly to the wealthy living in large metropolitan areas. Regulation of insurance companies began with the Indian Life Assurance Companies Act, 1912. In 1938, all insurance companies were brought under regulation when a new Insurance Act was passed. It covered both life and non-life insurance companies. It clearly defined what would come under life and non-life insurance business. The Act also covered, among other deposits, supervision of insurance companies, investments, commissions of agents and directors appointed by the policyholders. This piece of legislation lost significance after the insurance business was nationalized in 1956 (life) and 1972 (non-life) respectively. When the market was opened to private participation in 1999, the earlier Insurance Act of 1938 was reinstated as the backbone of the current legislation of insurance companies, as the IRDA Act of 1999 was superimposed on the 1938 Insurance Act. Insurance business was nationalized in 1956 with the Life Insurance Corporation of India (LIC) designated the sole provider – its monopolistic status was revoked in 1999. There were several reasons behind the nationalization decision:  Firstly, the government wanted to channel more resources to national development programs.  Secondly, it sought to increase insurance market penetration through nationalization.

39 |

 Thirdly, the government found the number of failures of insurance companies to be unacceptable. The government argued that the failures were the result of mismanagement and nationalization would help to better protect policyholders. In 2006, the Indian insurance market ranked 19th globally and was the 5th largest in Asia. The insurance industry in India has come a long way since the time when businesses were tightly regulated and concentrated in the hands of a few public sector insurers. Following the passage of the Insurance Regulatory and Development Authority Act in 1999, India abandoned public sector exclusivity in the insurance industry in favour of market-driven competition. This shift has brought about major changes to the industry. The inauguration of a new era of insurance development has seen the entry of international insurers, the proliferation of innovative products and distribution channels, and the raising of supervisory standards. By mid-2004, the number of insurers in India had been augmented by the entry of new private sector players to a total of 28, up from five before liberalization. A range of new products had been launched to cater to different segments of the market, while traditional agents were supplemented by other channels including the Internet and bank branches. These developments were instrumental in propelling business growth, in real terms, of 19% in life premiums and 11.1% in non-life premiums between 1999 and 2006. There are good reasons to expect that the growth momentum can be sustained. In particular, there is huge untapped potential in various segments of the market. While the nation is heavily exposed to natural catastrophes, insurance to mitigate the negative financial consequences of these adverse events is underdeveloped. The same is true for both pension and health insurance, where insurers can play a critical role in bridging demand and supply gaps. Major changes in both national economic policies and insurance regulations will highlight the prospects of these segments going forward. Last one decade of reforms in India have started yielding the results in the Indian economy. The Government's resolve to push the reforms measures further, less bureaucratic hurdles, investors' friendly business environment all put together have given tremendous boost to the industries in terms of FDI and investments from FIIs. The service industry in India has achieved a phenomenal growth in the recent past and among them, Insurance is one sector, which has witnessed high decibel growth thanks to the investor friendly regulator in the name of Insurance Regulatory Development Authority (IRDA). The

40 |

growth the market has achieved in terms of 18-20% in life insurance and 15-17% in non-life insurance stands testimony to that. Looking back at the history, the ride had not been so smooth to the public sector players like LIC, GIC and its subsidiaries. For a long time, the insurance policies are not bought but sold in the country because of so many odd reasons like low awareness level, aversion towards the products as such, superstitious beliefs and less diverse product portfolio. The monolith in the life insurance sector, Life Insurance Corporation of India had been basking in its past glory and enjoying the monopolistic situation in the market. Even the General Insurers like GIC and its subsidiaries were able to reach the people with very few products out of many products in their kitty offering little or no options to the customers. In 1956, when the Government of India nationalized the business of life insurance, there were 245 private insurance companies operating in the country. And sixteen years later, when the same happened to General insurance, there were 106. But the seeds were sown as far back as 1993, when the Malhotra Committee headed by former Finance Secretary and Ex-RBI Governor R.N.Malhotra was created to recommend the directions the Indian industry should take. By 1994, the Committee was ready with its report. In April 2000, Insurance Regulatory Development Authority (IRDA) came into being as a statutory body to regulate the industry and to keep an eye on the private players. The mission of IRDA is to protect the interests of the policyholders, regulate, promote and ensure orderly growth of the insurance industry and for matters connected with the matter. After April 2000 a number of private players have entered the market and with this the insurance sector has reached new heights. The number of people insured, penetration and the general awareness has increased manifolds.

Some Major players With Their Registration Nos. S.No.

Date of Reg.

1

Registration Number 101

2

104

15.11.2000

3

105

24.11.2000

Name of the Company HDFC Standard Life Insurance Company Ltd. Max New York Life Insurance Co. Ltd. ICICI Prudential Life Insurance Company

23.10.2000

41 |

4

107

10.01.2001

5

109

31.01.2001

6

110

12.02.2001

7

111

30.03.2001

8

114

02.08.2001

9

116

03.08.2001

10

117

06.08.2001

11

133

04.09.2007

12

135

19.12.2007

13

121

03.01.2002

14

122

14.05.2002

15

127

06.02.2004

16

128

17.11.2005

17

130

14.07.2006

18

133

04.09.2007

19

135

19.12.2007

20

136

08.05.2008

21

138

27.06.2008

Ltd. Kotak Mahindra Old Mutual Life Insurance Limited Birla Sun Life Insurance Company Ltd. Tata AIG Life Insurance Company Ltd. SBI Life Insurance Company Limited . ING Vysya Life Insurance Company Private Limited Bajaj Allianz Life Insurance Company Limited Metlife India Insurance Company Ltd. Future Generali India Life Insurance Company Limited IDBI Fortis Life Insurance Company Ltd. Reliance Life Insurance Company Limited. Aviva Life Insurance Co. India Pvt. Ltd. Sahara India Insurance co. ltd. Shriram Life Insurance Company Ltd. Bharti AXA Life Insurance Company Ltd. Future Generali India Life Insurance Company Limited IDBI Fortis Life Insurance Company Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd. Aegon Religare Life 42 |

22

140

Insurance Company Ltd. DLF Pramerica Life Insurance Company Ltd.

27.06.2008

COMPANY PROFILE 43 |

Aviva Life Insurance India is a private insurance company formed from collaboration between the Aviva insurance group of UK and the Dabur group, one of India's oldest and top producer of traditional Health Care Products. Aviva's products are meant to provide customers flexibility, transparency and value for money. Aviva insurance group in UK with a history dating back to 1696, today stands as one of the leading provider of life and pension products to Europe and other parts of the world. The history of Aviva Life Insurance India starts at 1834 during nationalization when Aviva was the largest foreign insurance group in terms of the compensation paid by the Indian Government. In 1995 Aviva was the first foreign insurance company to start its representative office in India. At present in Aviva Life Insurance India, the Aviva group is a 26% share holder and the Dabur group holds 74% shares in the joint venture

Serving Partners:

26% stake

Joint venture, 2002

74% stake

44 |

Founded in 1884, Dabur is one of India's oldest and largest group of companies. A professionally managed company, it is the country's leading producer of traditional healthcare products.

Aviva is UKs largest and the worlds fifth largest insurance Group. It is one of the leading providers of life and pensions products to Europe and has substantial businesses elsewhere around the world.

AVIVA INSURANCE GROUP 45 |

Aviva Plc is the world’s fifth largest insurance Group, the largest insurance group in the UK and the second-largest insurance group in Canada operating as  Type  Founded  Headquarters



      

Public 1696 London, England, United Kingdom Key People Lord Sharman, Chairman Andrew Moss, CEO Industry Insurance Products Life Insurance Pensions Revenue £36,206 (2008) Asset Under mgt. £381 billon Market capitalization $ 25 billon Employees 54,000(2009) Website www.aviva.com

The main activities of Aviva are:  Long-term Savings  Asset Management co.  General insurance

Aviva Canada. It is one of the leading providers of life and pensions products in Europe and has substantial businesses elsewhere around the world. Founded in 1696, Aviva has 57,000 employees serving over 50 million customers in 28 countries around the world. It has more than £381 billion of assets under management. Aviva plc is listed on the London Stock Exchange.

Core Values  Performance  Progressiveness  Team Work  Integrity

46 |

DABUR INDIA LIMITED Dabur India Limited is a leading Indian consumer goods Company with interests in Health Care, Personal Care and Food Products. It is most famous for Dabur Chyawanprash,

Hajmola,

Glucose-D,

Vatika Life. Over more than a 100 years Dabur India Public (NSE, BSE ) 1884 Ghaziabad, India V.C. Burman Health Care, Food Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola & Real  Market capitalization $ 2 billon  Turn over 2286 crore  Website www.dabur.com      

Type Founded Headquarter Key people Industry Products

Ltd. has been dedicated to providing nature-based solutions for a healthy and holistic lifestyle. Through the comprehensive range of products Dabur touches the lives of all consumers, in all age groups, across all social boundaries.

VISION  Dedicated to the Health & Well Being of every household

MISSION

•

To Popularize a natural life style

CORE VALUES 

Ownership



Passion for Winning



People Development



Consumer Focus



Team Work



Innovation



Integrity

47 |

AVIVA LIFE INSURANCE CO. LTD.

Life Insurance

KAL PAR CONTROL History: Aviva insurance group in UK with a history dating back to 1696, today stands as one of the leading provider of life and pension products to Europe and other parts of the world. The history of Aviva Life Insurance India starts at 1834 during nationalization when Aviva was the largest foreign insurance group in terms of the compensation paid by the Indian Government. In 1995 Aviva was the first foreign insurance company to start its representative office in India. At present in Aviva Life Insurance India, the Aviva group is a 26% share holder and the Dabur group holds 74% shares in the joint venture.

Mission:

•

To be amongst India’s leading life insurers with quality business modal focus on sustainable growth

Vision:  AVIVA – where exceeding expectations through innovative solutions is “our” way of life

Values:  Customer centricity  Passion for winning  Integrity  Innovation  Empowered team

48 |

PARTNERS:  ABN AMRO Bank Aviva's relationship with ABN India commenced in June 2002 under which the bank introduces its customers to Aviva for insurance and provides access to its affluent customer base across the country through its operations in 21 branches at 14 locations.  The Lakshmi Vilas Bank Ltd The Lakshmi Vilas Bank Ltd, based out of Karur, is among the top private banks in India. It has 221 branches with a customer base of 1.2 million, across 10 states. Currently Aviva products are sold across 204 branches of LVB.  Punjab & Sind Bank The Punjab & Sind Bank was established in the year 1908. Based on the principles of social commitment to the people, to help the farmers, and the weaker sections of the society to raise their standard of living and play a significant role in the development of the country. Even after 96 years of its inception, the Punjab & Sind Bank stands committed to honor the high ideals of its founding fathers. Punjab and Sindh Bank has a network of 759 branches and 132 extension counters all over the country with close to 9,765 employees. Forty-two per cent of its branches are in the rural and semi-urban areas.  IndusInd Bank IndusInd Bank Ltd., is one of the leading new-generation private-sector banks in India. It commenced operations in 1994 and had a net worth of Rs.866 crore as of March 31, 2006. At present, the Bank has a network of 148 branches and 87 offsite ATMs spread over 118 geographical locations in 24 states and Union Territories.  Bank of Rajasthan A private sector bank, with 467 branches and a major presence in North (Rajasthan), has its Head Office in Mumbai. Having a customer base of nearly 14 lakh and a Rs 13,000 crore deposit base, the bank spreads across 12 regions of Jaipur, Jodhpur, Bikaner, Kota, Bhilwara, Udaipur, Chandigarh, Delhi, Kolkata, Indore, Mumbai and Bangalore.

49 |

MANAGEMENT TEAM:  TR Ramachandran Chief Executive Officer & Managing Director  Abhay Johorey Chief Operating Officer  Rajeev Arora Director, Finance & Actuarial  Shoumitro Roye Sales Director  Anil Sahgal Director, Strategy & Chief Investment Officer  Monica Agrawal Director, Corporate Initiatives  Chandan Khasnobis Appointed Actuary  Mohammad Shahber Associate Director, Human Resources  Vishal Gupta Director, Marketing  Sumit Behl Director, Business Risk & Internal Audit  Ravi Bhadani Company Secretary and Associate Director – Compliance & Legal  Munish Sharda Director, Direct Sales Force  Rishi Piparaiya Director, Bancassurance

50 |

AVIVA LIFE INSURANCE FACT SHEET Founded

2002

Started Operations

2nd June, 2002

Headquarter

Gurgon, India

World Wide Web Address

www.avivaindia.com

Managing Director & CEO

T.R Ramachandran

Paid-Up Capital

Rs. 1498.8 crores

Employees

7713

Number of Products

21

Number of Branches

224

AWARDS AND RECOGNITION:  Aviva has been felicitated with the "Bronze Award for Excellence in People Management" by Grow Talent Company Limited and Business world.  Aviva has been ranked amongst the top 25 companies as per the Grate Place to Work survey in the last four years.  Aviva got the 4th rank among “India’s Best Companies to work for 2009” as per the study done by “The Economic times & Great Place to work”.  Aviva India won the coveted Award for Talent Management during the national round of Asia Pacific HRM Congress.  Aviva India was also felicitated by the HR Excellence Award by Amity Business School.

51 |

Market Share:

Market Share of Aviva is 2.3% in Private players.

ORGANISATIONAL STRUCTURE

52 |

SWOT ANALYSIS Strength: •

Joint venture between125 years old company i.e. Dabur India Ltd. And 313 years old world’s 5th largest insurance group Aviva plc.

•

Financial health checkup tool (LLKK) is used as a need generation tool.

• Special training to Agents & Advisors. •

Solvency Margin Of Aviva is 350%.

Weakness: • Less awareness About Aviva Life Insurance among people. • Do not use the name of Dabur. • Less distribution channel.

53 |

Opportunities: •

Huge amount of Indian Population is not under Insurance cover.

•

People having Insurance cover are not adequately covered. 94% Insured people are under insured.

Threats: •

Huge Competition in the market having 23 Life insurance companies.

•

LIC, which has a big distribution network, is very well known in rural areas and also has got the advantage of being the only public sector company.

54 |

CHAPTER-III

55 |

REVIEW OF EXISTING LITERATURE For long, policyholders in India shunned term insurance plans in favour of endowment policies — i.e. policies with a savings component. This is despite term insurance being a crucial component of financial planning in all developed countries. Term insurance is the most basic life insurance policy where the only benefit is compensation to the nominee if the insured person dies. But in India the thought of not getting the money ‘invested’ back on maturity has been pushing buyers towards money back schemes and, in the past few years, unit-linked insurance plans (Ulips), which boast of a seemingly irresistible combination of investment, insurance and tax saving. Insurance agents too have actively been pushing Ulips as these have helped pump up premium volumes. While the level of premium has gone up, the purchase of protection has not been commensurate with the growth in the income. All this is set to change with insurers effecting cuts in premium rates on term insurance, particularly for high-value policies entailing a sum assured of over Rs 25 lakh. For instance, Birla Sun Life’s term insurance cover is available for an annual premium as low as Rs 13,400 (excluding 10.3% service tax) for a sum assured of Rs 1 crore and a 20-year term, if the proposer is a healthy 30-year-old female. This is in sharp contrast to a decade ago, when a 30-year-old would have to spend at least Rs 50,000 for a Rs 1-crore cover. Because of such high premiums, policyholders were reluctant to ‘spend’ without any scope for returns. Today, LIC offers a Rs 1-crore cover for an annual premium of Rs 25,700. The new low-premium regime marks a significant leap forward in terms of affordability, and is capable of sparking considerable interest amongst insuranceseekers for pure protection-oriented plans. Touching new ‘lows’ Term insurance rates have come down primarily because of two reasons — competition and increased life expectancy. Following the advent of Ulips, insurance policies have become so complex that it is near impossible to compare products of two companies. The only product that can really be compared is the term insurance policy. Moreover, the comparison has been made easier with

56 |

quite a few internet-based aggregators giving term insurance quotes across companies. With over 17 life companies in the fray, competition has pushed term insurance rates further down.

Decrease in mortality rates too has played its part. Most individuals buy term insurance to cover any loss of revenue for their families if they die during their earning years. With the mortality rates for those below 60 years coming down, insurance companies have been able to sharply reduce term insurance premium. In the past couple of years, the term insurance premium rates have declined by almost 30%, with major private players like ICICI Prudential Life Insurance, Birla Sun Life and HDFC Standard Life Insurance slashing their rates. There are other factors for rate reduction as well. These include deepening insurance penetration and the reduction in solvency margins prescribed by IRDA and availability of better mortality data — which helps companies ascertain the risks better. Insurers have been able to reduce cost of high-value policies further because well-heeled urban Indians, enjoying the fruits of a blossoming economy, are seeing marked improvement in mortality rates. Their life expectancy is enhanced by the quality of their lifestyle and access to best-in-class healthcare facilities, leading to low probability of death due to natural causes. Consequently, insurance companies do not view offering them inexpensive term cover as a risky proposition. This, coupled with the increasing demand from this segment, has swollen the volumes, which in turn, have contributed to shrinking rates. Therefore, life insurers’ margins

for

the

term

insurance

portfolio

haven’t

come

under

pressure.

Sustaining the premiums at these levels doesn’t seem likely to hit a roadblock in the future and, in fact, there are signs that the market could see low-cost insurance scaling new highs in the coming days. “Offering pure term insurance at cheaper rates for HNI consumers is an idea, which we might see more of in the near future,” says Manik Nangia, corporate vicepresident

and

head,

product

management,

Max

New

York

Life

Insurance.

A win-win situation? If indeed most people are living well beyond their earning years, does a term life insurance pass the utility test from the policy holders’ perspective? While every individual needs to 57 |

carry out his/her own cost-benefit analysis before zeroing in on a suitable policy, overall, these protection covers are worth buying, feel financial planners, particularly for those falling in the high-income category. After all, their family is used to a superior lifestyle, and should anything happen to the provider, the term cover’s sum assured should act as an appropriate replacement for the income lost. Also, given the high level of indebtedness of today’s working class, either in the form of home loans or auto loans, there is a risk that the family is left with a liability rather than an inheritance if the breadwinner dies. For such individuals, variants of term insurance cover — mortgage protection plans and credit shield — would ensure that life insurance takes care of their outstanding loans. The thumb rule for buying a protection cover dictates that the sum assured should be equal to 100 times the insured’s monthly income. Though this estimate is generally considered to be accurate, there is a view that to ensure complete peace of mind, the basic term cover could be enhanced with riders like critical illness and disability benefit. The rationale behind this argument is that in the event of an accident resulting in severe physical impairment or a serious ailment, the term cover will be rendered ineffective as it comes into play only after the insured’s death. More complaints against insurance cos. A seminar was held on Wednesday to help deal with consumer complaints related to insurance service providers at the respective companies’ level itself. Rita Bhattacharya, secretary of General Body Insurance Council, Mumbai, addressed those present. An insurance ombudsman’s office has been set up in Chandigarh, which deals with complaints from the city, Punjab, Jammu & Kashmir, Haryana and Himachal Pradesh. Assistant secretary with the office, AC Keshav, stated that it was a facility, which people could approach easily to raise insurance-related issues. He said complaints against life insurance firms in the city had risen to 74 this year as compared to 68 for 2008. Public sector insurance providers are higher on the grievance list as compared to private firms, he added. “The northern region had 619 life insurance-related complaints this year, which numbered 517 last year,” said Keshav.

58 |

Officials from LIC of India, New India Assurance, Oriental Insurance, ICICI Lombard, HDFC Standard life and SBI Life attended the seminar. Lifeless premium collections upset coverage 29 Jul 2009, 0616 hrs IST, Paramita Chatterjee, ET Bureau A 12 % jump in the number of life insurance policies sold in April-June this year has resulted in only 0.95% rise in new premium collections as consumers preferred smaller investments in an economic downturn. “Sale of life insurance products remained flat during the first quarter of the current fiscal year. Consumers are preferring to invest smaller amounts in insurance products,” said Sanjay Kumar Jha, zonal manager for north and head of pension business at Bajaj Allianz. Life insurers collected Rs 14,456 crore as new premium in the first quarter of this fiscal compared to Rs 14,320 crore during the corresponding period last year, according to data released by the Insurance Regulatory and Development Authority (Irda). The companies sold 84.5 lakh policies in this fiscal year’s first quarter. At a time when large salary hikes are on hold in corporate India and there is a check on recruitment in several sectors, consumers are preferring to hold on to their money. “This year, we have seen a month on-month improvement in performance. By the end of the year, the industry will surely register a good growth rate,” said Reliance Life Insurance president Malay Ghosh. State-run Life Insurance Corporation, meanwhile, collected Rs 9,028 crore from 59 lakh policies in the first quarter, up 20% over the corresponding period of last fiscal. The public sector insurer sold 48 lakh policies in the year-ago period. The 22 private life insurers sold 25.4 lakh policies in this period, collecting Rs 5,427 crore in premium from new products — a decline of 20% on Rs 6,795 crore premium collections during the corresponding period last fiscal year.

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“Insurance is not a priority when it comes to consumer spending. The maximum sale of insurance products happens only during the last quarter of every financial year when consumers look at ways to save tax,” said an executive at a private insurer.

Insurance: A sunrise sector 29 Jul 2009, 0303 hrs IST, Pallavee Dhaundiyal Panthry, ET Bureau The insurance sector in India offers immense growth opportunities. The potential can be judged by the fact that today life insurance premiums account only 2.5% of the country's GDP, while general insurance premiums are at only 0.65%. The sector has been thrown open for private participation, but the largest life insurance company in India is still owned by the government, known as Life Insurance Corporation. While the rest of the world is in grip of an economic downturn and the year 2009 is witnessing a downtrend in the life insurance industry, with almost flat growth, India for the very first time has been ranked amongst the top10 life insurance markets worldwide. The facts, data and reports for the year 2008-09 state that insurance sector penetration, both in life and non-life segments, has improved since the time the sector has been opened for private participation.

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RESEARCH METHODOLOGY RESEARCH APPROACHES Two types of approaches are used during this study: 1.

Analytical

2.

Descriptive

DATA COLLECTION METHODS To conduct the Business research the data is collected by: Secondary Data: Secondary data is one which already exist and is collected from the published sources. The sources from which secondary data was collected are:  Newspapers like Economic Times  Internet 

BOOKS ON THE SUBJECT



PUBLISHED REPORTS



RECORDS OF ORGANIZATION

UNIVERSE: Insurance Companies operating in India is the universe of this study.

POPULATION: The following three Insurance companies made the population of this study: •

Aviva Life Insurance Co Ltd

•

ICICI Prudential Life Insurance Co Ltd

•

SBI Life Insurance Co Ltd

SAMPLE: Child Plan, Pension Plan and Term Plan were taken for comparison as sample.

COMPARISON TECHNIQUE The plans of selected companies were compared based on three important factors:

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•

Plan features

•

Allocation charge

•

Policy Administration charges.

Each feature fetch 1 point. Points Regarding Allocation charges & Policy Administration charges were as follows:

•

Least Allocation Charges & Policy Admin. Charges fetch 15 points each.

•

Next least Allocation Charges & Policy Admin. Charges fetch 10 points each.

•

Highest Allocation Charges & Policy Admin. Charges fetch 5 points each.

Then all the points regarding features, allocation charges and policy administration charges were added to find out the total points collected by the plans of each company. The plan having highest points is rated 1 and so on. The Term plan is compared on other basis because there is no allocation charges and no policy administration charges. The annual premium is calculated for different age people opting for the same policy term and same sum assured. The company offering least annual premium in an age group for the same policy term and same sum assured is rated 1 and so on.

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CHAPTER-IV

63 |

COMPARISON OF CHILD PLANS: Product Features

Aviva Young

ICICI PRU

SBI Life- Unit Plus

Scholar

SmartKid New

Child Plan

Cover on parent Cover On Child WOP IB Rider ADB Rider CHB Rider Increase/Decrease

Yes No Yes Yes Yes Yes Yes

ULRP Yes No Yes Yes Yes Yes No

Yes No Yes No Yes Yes Yes

Premium Increase/Decrease

Yes

Yes

Yes

S.A Top-up premium Partial Withdrawal Cover continuance

Yes Yes Yes

Yes Yes Yes

Yes Yes Yes

option Premium Re-direction Switches Systematic Transfer

Yes Yes Yes

No Yes Yes

Yes Yes No

plan Automatic Asset

Yes

No

No

Allocation Settlement option Loyalty Addition Free Look Period Total Points

Yes Yes Yes 17

Yes No Yes 13

Yes Yes Yes 14

Comparison of Charges The charges are compared with the help of examples. Consider Policy Term:

15 Years

Premium Payment Term:

15 Years

Annual Premium:

15,000/20,000/50,000

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Allocation Charges: Year

APE: 15,000 Aviva ICICI SBI Young

PRU

Life- Young

Schola SmartKi r

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total

3000 1500 750 750 300 150 150 150 150 150 150 150 150 150 150 7800

d ULRP

3000 750 750 750 750 300 300 300 300 300 150 150 150 150 150 8250

APE: 20,000 Aviva ICICI SBI

Unit

PRU

Schola SmartKi

Plus

r

d ULRP

APE: 50,000 Aviva ICICI SBI

Life- Young Unit

PRU

Schola SmartKi

Plus

r

d ULRP

LifeUnit Plus

Chil

Chil

Child

d

d

Plan

Plan 2700 750 750 300 300 300 300 150 150 150 150 150 150 150 150 6600

4000 2000 1000 1000 400 200 200 200 200 200 200 200 200 200 200 10,400

3800 1000 1000 1000 1000 400 400 400 400 400 200 200 200 200 200 10,800

Plan 3600 1000 1000 400 400 400 400 200 200 200 200 200 200 200 200 8800

9000 5000 2500 2500 1000 500 500 500 500 500 500 500 500 500 500 25,000

9000 2500 2500 2500 2500 1000 1000 1000 1000 1000 500 500 500 500 500 26,500

9000 2500 2500 1000 1000 1000 1000 500 500 500 500 500 500 500 500 22,00

charge

0

s From the above table, It can infer that in every case the allocation charges are least in SBI Life Unit Plus Child Plan and highest in ICICI PRU SmartKid Unit Linked Regular Premium. Hence rating According to Allocation charges are: 1. SBI Life Unit Plus Child Plan

:

15

2. AVIVA Young Scholar

:

10

3. ICICI PRU SmartKid Unit Linked Regular Premium:

05

Policy Administration Charges: Year

Aviva Young

ICICI PRU

SBI Life- Unit Plus

1

Scholar 660

SmartKid ULRP 720

Child Plan 750 65 |

2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total

693 728 765 803 843 885 929 976 1024 1075 1129 1186 1245 1307 14,248

720 720 720 720 720 720 720 720 720 720 720 720 720 720 10,800

765 780 795 811 828 844 861 878 896 914 932 951 970 990 12,965

From the above table, It can infer that Policy Administration charges are least in ICICI PRU Life SmartKid Unit Linked Regular Premium and highest in AVIVA Young Scholar. Hence rating according to the Policy administration charges are: 1. ICICI PRU Life SmartKid Unit Linked Regular Premium:

15

2. SBI Life Unit Plus Child Plan

10

3. AVIVA Young Scholar

05

Total Points Collected Are: Company AVIVA LIFE ICICI PRU LIFE SBI LIFE

Features 17 13 14

Allocation Charges 10 05 15

Policy Admin. Charges 05 15 10

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Total Points 32 33 39

Interpretation: From the above Column chart, it is clear that AVIVA Young Scholar has got the least points, ICICI PRU Life SmartKid Unit Linked Reguiar Premium got the second highest points. Hence SBI Life Unit Plus Child Plan is the best plan among these three life Insurer.

COMPARISON OF PENSION PLANS Product Features Option of Life Cover WOP ADDB Rider Critical Illness Rider Increase RP Additional RP

Aviva Pension Plus

ICICI PRU Life

SBI Life- Unit Plus

No No No No No Yes

Time Super Pension Yes Yes Yes No No No

II Pension Yes No Yes Yes Yes No

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Indexation Top-up premium Partial Withdrawal Cover continuance

Yes Yes No No

No Yes No Yes

No Yes NO Yes

option Premium Re-

Yes

No

Yes

direction Switches Systematic Transfer

Yes No

Yes No

Yes No

plan Automatic Transfer

No

Yes

No

Strategy Change of Maturity

Yes

Yes

No

Date Loyalty Addition Free Look Period Open Market Option Single Premium Total Points

Yes Yes Yes Yes 10

No Yes Yes No 10

Yes Yes Yes Yes 12

Comparison of Charges The charges are compared with the help of examples. Consider Policy Term:

15 Years

Annual Premium:

25,000/50,000/100,000/500,000

Allocation Charges: Year

1

APE: 25,000 Aviva ICICI SBI

APE: 50,000 Aviva ICICI SBI

APE: 100,000 Aviva ICICI SBI

Pensio

PRU

Life-

Pensio

PRU

Life-

Pensio

PRU

Life-

n Plus

Life

Unit

n Plus

Life

Unit

n Plus

Life

Unit

time

Plus II

time

Plus II

time

Plus II

Super

Pensio

Super

Pensio

Super

Pensio

Pensio

n

Pensio

n

Pensio

n

3750

n 7000

7500

n 14000

12000

5000

n 4250

6250

10,000

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2 3 4 5 6 7 8 9 10 11 12 13 14 15 Total

500 500 500 500 500 500 500 500 500 500 500 500 500 500 12000

2250 250 250 250 250 250 250 250 250 0 0 0 0 0 8500

1875 1875 1250 1250 500 500 500 500 500 0 0 0 0 0 12,500

1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 20,250

4500 500 500 500 500 500 500 500 500 0 0 0 0 0 15,500

3750 3750 2500 2500 1000 1000 1000 1000 1000 0 0 0 0 0 25,000

2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 38,000

9000 1000 1000 1000 1000 1000 1000 1000 1000 0 0 0 0 0 31,000

5000 5000 5000 5000 2000 2000 2000 2000 2000 0 0 0 0 0 42,000

charge s From the above table, It can infer that in every case the allocation charges are least in ICICI Prudential Life Time Super pension and highest in SBI Life Unit Plus II Pension. Hence rating According to Allocation charges are: 1

ICICI Prudential Life Time Super pension

15

2

Aviva Pension Plus

10

3

SBI Life Unit Plus II Pension

05

Policy Administration Charges: Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Aviva Pension Plus

ICICI PRU Life

612 643 675 709 744 782 821 862 905 950 998 1047 1100 1155

time Super Pension 480 480 480 480 480 480 480 480 480 480 480 480 480 480

SBI Life- Unit Plus II Pension 765 781 796 812 829 845 862 879 897 915 933 952 971 990

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15 Total

1213 13216

480 7200

1010 13237

From the above table, It can infer that Policy Administration charges are least in ICICI PRU Life Time Super Pension and highest in SBI Life- Unit Plus II Pension. Hence rating according to the Policy administration charges are: 1. ICICI PRU Life Time Super Pension

15

2. AVIVA Pension Plus

10

3. SBI Life- Unit Plus II Pension

05

Total Points Collected are Company

Allocation Charges AVIVA LIFE 10 ICICI PRU LIFE 15 SBI LIFE 05

Policy Admin. Charges 10 15 05

Features

Total Points

10 10 12

30 40 22

Interpretation: From the above column chart, it is clear that ICICI PRU LIFE has got the maximum points & SBI LIFE has got the minimum points. Hence ICICI PRU Life Time Super Pension is the best retirement solution among the 3 Insurer.

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COMPARISON OF TERM PLAN Term plan can be compared on the basis of premium payable for level covered. Table below shows the sample of premium payable for Policy Term of 10 & Sum Assure of 15 lacs for different companies: Premium payable for PT=10 & SA=1500000 Age 30 35 40

Aviva Life Shield Plus 2465 3177 4583

ICICI Pru Pure Protection 2920 3771 5373

SBI Life- Shield 2988 3753 5237

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From the above data it is clear that Aviva Life Shield provide you the basic cover level for your life charging the minimum cost amoung the 3 life Insurer.

CHAPTER-V

72 |

FINDINGS The findings from the above study are as follows:  Allocation charges in Aviva Young Scholar Plan are higher than SBI Life- Unit Plus Child Plan.  Policy Administration Charges in Aviva Young Scholar Plan are very much high than other 2 Insurer.  There is no option of life cover in Aviva pension Plus plan, whereas ICICI Pru life & SBI Life provide you the option of life cover in their respective retirement plans.  Aviva Pension Plus does not have any Rider, whereas ICICI Pru Life & SBI Life provide you two Riders in their respective plans.  Aviva Pension Plus have the option of Additional RP & Indexation, which the other 2 Insurer do not provide.  Allocation charges & Policy Administration charges in Aviva Pension Plus Plan are higher than ICICI Pru Life time Super Pension but lower than SBI Life- Unit Plus II Pension.  Annual premium in Aviva Life Shield Plus is lower than Other 2 Insurer.  LIC is more popular among people than any other private insurance company.  Aviva Life Insurance Company is not very much recognized among people.

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RECOMMENDATIONS Based upon the above findings, the following recommendations were made:  Company should reduce the charges in order to make the products more competitive.  Company must reduce the policy administration charges levied in Aviva Pension Plus Plan. PAC is approximately 2 times than levied by ICICI Pru.  Company should provide the option of life cover & Rider in Pension Plan as done by the other 2 Life Insurers.  The company should spend more on the promotional activities like advertisement in television, newspapers to create more awareness of the product as they have more recall value.  Company needs greater awareness of its product among target audience.  Company should use the name of Dabur to create more awareness among the people.  Company should open more of its branches so as to promote its product. .

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CONCLUSION After comparison of the plans of these three company, it is concluded that charges are varying significantly between companies. Policy Administration Charges levied by Aviva Life Insurance and SBI Life Insurance Companies are approximately two times levied by ICICI Prudential Life Insurance Company. Hence among Pension plans, ICICI Prudential Life Time Super Pension Plan is the best plan among these 3 life insurers. Whereas for Child Plan, SBI Life- Unit Plus Child Plan is the best plan among these 3 companies. Aviva provides the cheapest Term among these 3 life insurance companies.

75 |

ANNEXURE

76 |

BIBLIOGRAPHY Website: 

www.avivaindia.com



www.aviva.com



www.irdaindia.com 

www.dabur.com



www.iciciprulife.com



www.sbilife.com

Book: •

Kothari CR (2005), ‘Research Methodology’, 2nd Edition, New Age International (p) Ltd. Publisher, New Delhi

Journal: 

Annual Report of IRDA (2007-2008)



IRDA Journal, Volume VII, No. 7, July 2009



IRDA Journal, Volume VI, No. 6, June 2009

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