Comparative Analysis Of Different Insurance Products

A Project Report On COMPARATIVE ANALYSIS OF INSURANCE PRODUCTS

(With special reference to KARVY)

SUBMITTED BY: Gautam Saraogi WA 2008 PGDM 14 f013 Institute for technology and management ( Warangal )

Under the guidance of: Mr. Rohit Mahipal

(Broking head), Eastern region, Page 1

KARVY, Kolkata

Table of Contents 1. Authorization……………………………………………………………………………………...4 2. Acknowledgement………………………………………………………………………………..5 3. Executive Summary………………………………………………………………………………6 4. Introduction………………………………………………………………………………………..7 5. Review of Literature 5.1 About Insurance Industry………………………………………………………………….8 5.2 Advantages of Life Insurance…………………………………………………………….13 5.3 Types of Insurance Products………………………………………………………….....15 5.4 India : The next Insurance giant……………………………………………………..…..18 5.5 Valuing the Invaluable……………………………………………………………….….....21 5.6 Busting some Insurance Myths………………………………………………….……....23 6. Company profile……………………………………………………………………….………..25 7. Birla Sun Life insurance……………………………………………………………………….27 8. Life Insurance Corporation Of India…………………………………………...…………....28 9. National insurance company limited….…………………………………………….………29 10. Tata AIG life……………………………………………………………………………………30 11. Reliance General Insurance………………………………………………..……………….30 12. RSEARCH METHODOLGY 12.1 Sources…………………………………………………………..……..……………….31 12.2 Methodology…………………………………………………………..………..………32 13. COMPARTAIVE ANALYSIS………………………………………………...…….………….33 14. Findings and Interpretations………………………………………………...……….….....39

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15. Results……………………………………………………………………….………………47 16. Suggestions and Recommendations…………………………………………………..48 17. Conclusion………………………………………………………….………………………49 18. Limitations……………………………………………………....………………………….50 19. Attachments………………………………………………..………………………………51 20. References……………………………………………..……..……………………………53

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Authorization THIS REPORT IS SUBMITTED AS PARTIAL FULFILLMENT OF THE REQUIREMENT OF MBA PROGRAM OF ITM THE MAKING OF THIS HAS BEEN AUTHORIZED BY THE KARVY STOCK BROKING LTD. (INSURANCE DEPARTMENT)

Acknowledgement

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My sincere thanks are due to the management of Karvy Stock Broking Ltd for having provided the summer internship opportunity. I take this opportunity to express my sincere gratitude and profound regards to PROF. G.Ravinder my faculty guide, who has always given me motivational boost to go and perform. I would further like to thank him for his persistence to listen to my problems and to give apart solutions. I would like to thank my company guide Mr. ROHIT MAHIPAL who in spite of his busy schedule has cooperated with me continuously and indeed, his valuable contribution

and

guidance

have

been

certainly

indispensable for my project work. I would also like to thank Mr. CHANDRADEEP MAITRA (Product Head), Mr. CHANCHAL RANJAN SAHU (Deputy Manager), for their invaluable advice and enlightening my path at every stage of my project and all the senior executives and every associate of Karvy Stock Broking Ltd (INSURANCE DEPARTMENT), without their cooperation this project would have been impossible. Last but not the least, I feel indebted to all those person and organization who Page 5

have provided help directly or indirectly in successful completion of this study.

Executive Summary Summer Internship Program is conducted by every business school as a part of their curriculum so that the students get an exposure to the real corporate world. The internship enables the student to get a feel of the working environment of big corporate houses. This report provides the outline of my work till now as a part of the Summer Internship Program, which corroborate the application of my theoretical knowledge to the practical business world. For my industrial spotlight and a first exposure to the corporate world, I had selected “KARVY STOCK BROKING LTD”.

I joined Karvy Stock Broking Ltd. on 1st May 2009. I have been given chance to work in the Sales department. On my first day I met my company guide Mr.Rohit Mahipal, who is the broking head of eastern region. I had initial discussion about my project with him. He explained me in brief the workings of the department.

The project is all about comparative analysis of different insurance products of different companies. The objective of the project was to check the awareness level of Insurance and attitude of the people towards insurance in the current market. Survey was also done regarding the preference of insurance sector depending on the age group (whether they prefer private players or public companies) .

In the beginning, we gain an insight about the company and its values and inherit them in our life, and then studied different types of insurance plans like ULIP’s, term plan, endowment plan, and various other plans.

Now, on to the statistical part, we designed a questionnaire that will provide a base for studying the awareness level and perception of the life insurance. The project helped me in developing my communication skill and interpersonal skills. During the tenure of

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my internship I learned a lot from my seniors, colique etc but above all I learned a lot from my own personal experience.

4. INTRODUCTION About the project The project deals with comparative analysis of different insurance products offered by insurance companies.

Purpose of the project The main purpose of the project is to do comparative analysis of different insurance products, check the awareness level and perception of insurance by the individuals. The project would also help in understanding preference of people regarding private and public insurance companies. The main objective of the research is

•

Making comparative analysis between:i) Birla sun life insurance with life insurance Corporation of India. ii) Birla sun life insurance with Tata AIG life insurance. iii) National Health Plan with Reliance Health Wise Policy.

•

Finding out the features and benefits of these plans

•

To find out the awareness level of insurance in Kolkata

•

To determine customer preference towards private insurance companies and public insurance companies.

•

Marketing of different insurance products.

Scope of the project The entry of foreign MNC’s and the conductive business environment fostered by the government, it is no wonder that the re-entry of private insurance has marked a second coming for the sector. In just five years, the sector has undergone a makeover, offering more choice, better services, quicker settlement, tighter regulation and greater awareness ‘s the environment become more and more competitive and services and products become alike, creating a differentiation is becoming extremely tough. Thus, the main objective of my project was to find out the preference of people regarding Page 7

insurance companies, which would help karvy employees to market their product. The study then goes on to evaluate and analyze the findings so as to present a clear picture of recent trends in the Insurance sector.

5. REVIEW OF LITERATURE 5.1 About Insurance Industry "Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event."Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the premiums collected from the insuring public and the Insurance Companies act as trustees to the amount collected. For Example, in a Life Policy, by paying a premium to the Insurer, the family of the insured person receives a fixed compensation on the death of the insured. Similarly, in a car insurance, in the event of the car meeting with an accident, the insured receives the compensation to the extent of damage. It is a system by which the losses suffered by a few are spread over many, exposed to similar risks.

Logic of insurance It is a system by which the losses suffered by a few are spread over many, exposed to similar risks. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the amount premiums collected from the insuring public and the Insurance Companies act as trustees to the collected.

Need of insurance Insurance is desired to safeguard oneself and one's family against possible losses on account of risks and perils. It provides financial compensation for the losses suffered due to the happening of any unforeseen events. By taking life insurance a person can have peace of mind and need not worry about the financial consequences in case of any untimely death. Certain Insurance contracts are also made compulsory by legislation. For example, Motor Vehicles Act 1988, stipulates that a person driving a vehicle in a public place should hold a valid insurance policy covering “Act" risks. Another example of compulsory insurance pertains the Environmental Protection Act, wherein a person using or to carrying hazardous substances (as defined in the Act) must hold a valid public liability (Act) policy.

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Insurance in India Insurance is a federal subject in India and has a history dating back to 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP. The Insurance sector in India has gone through a number of phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up the insurance sector by allowing private companies to solicit insurance and also allowing FDI up to 26%. Ever since, the Indian insurance sector is considered as a booming market with every other global insurance company wanting to have a lion's share. Currently, the largest life insurance company in India is still owned by the government.

History of Insurance in India Insurance in India has its history dating back till 1818, when Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the needs of European community. Pre-independent era in India saw discrimination among the life of foreigners and Indians with higher premiums being charged for the latter. It was only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian insurance company covered Indian lives at normal rates. At the dawn of the twentieth century, insurance companies started mushrooming up. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. However, the disparage still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is National Insurance Company Ltd, which was founded in 1906 and is doing business even today. The Insurance industry earlier consisted of only two state insurers: Life Insurers i.e. Life Insurance Corporation of India (LIC) and General Insurers i.e. General Insurance Corporation of India (GIC). GIC had four subsidiary companies. With effect from December 2000, these subsidiaries have been de-linked from parent company and made as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.

Life Insurance Corporation Act, 1956 Even though the first legislation was enacted in 1938, it was only in 19 January 1956, that life insurance in India was completely nationalized, through a Government ordinance; the Life Insurance Corporation Act, 1956 effective from 1.9.1956 was Page 9

enacted in the same year to, inter-alia, form LIFE INSURANCE CORPORATION after nationalization of the 245 companies into one entity. There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition of the management of the companies. The Life Insurance Corporation of India was created on 1 September, 1956, as a result and has grown to be the largest insurance company in India as of 2006 .

General Insurance Business (Nationalization) Act, 1972 The General Insurance Business (Nationalization) Act, 1972 was enacted to nationalize the 100 odd general insurance companies and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance, and United India Insurance which were headquartered in each of the four metropolitan cities.

Insurance Regulatory and Development Authority (IRDA) Act, 1999 Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of India then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies into the insurance. Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. In recent years many private players entered in the Insurance sector of India. Companies with equal strength started competing in the Indian insurance market. Currently, in India only 2 million people (0.2 % of total population of 1 billion), are covered under Medi claim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. With more and more private players in the sector this scenario may change at a rapid pace

Different Insurance Companies Insurance is an upcoming sector, in India the year 2000 was a landmark year for life insurance industry, in this year the life insurance industry was liberalized after more than fifty years. Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise. But nowadays the market opened up and there are many private players competing in the market. There are fifteen private life insurance companies has entered the industry. After the entry of these private players, the market share of LIC has been considerably reduced. In the last five years the private players is able to expand the market (growing at 30% per annum) and also has improved their market share to 18%. For the past five years private players have launched Page 10

many innovations in the industry in terms of products, market channels and advertisement of products, agent training and customer services etc. The various life insurers entered India:-

1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Co. Ltd 3. HDFC Standard life Insurance Co. Ltd 4. ICICI Prudential Life Insurance Co. Ltd. 5. ING Vysya Life Insurance Company Ltd. 6. Max New York Life Insurance Co. Ltd 7. Met Life India Insurance Company Ltd. 8. Kotak Mahindra Old Mutual Life Insurance Limited 9. SBI Life Insurance Co. Ltd 10. Tata AIG Life Insurance Company Limited 11. Reliance Life Insurance Company Limited. 12. Aviva Life Insurance Co. India Pvt. Ltd.

13. Sahara India Life Insurance Co, Ltd. 14. Shriram Life Insurance Co, Ltd. 15. Bharti AXA Life Insurance Company Ltd. 16. Future General Life Insurance Company Ltd. 17. IDBI Fortis Life Insurance Company Ltd. 18. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd 19. AEGON Religare Life Insurance Company Limited. 20. DLF Pramerica Life Insurance Co. Ltd. 21. Star Union Dai-ichi Life Insurance Comp. Ltd.

The various other general Insurance Companies are as under:Page 11

1. National Insurance Company Limited. 2. Reliance General Insurance. 3. Star Health Plus Insurance. 4. Oriental Insurance Company. 5. United India Insurance Company Ltd. 6. New India Assurance Company Ltd. 7.

Bajaj Allianz General Insurance Company Ltd.

8. Universal Sompo Insurance Company Ltd. 9.

Future General Insurance Company Ltd.

10. ICICI Lombard General Insurance Ltd.

5.2 ADVANTAGES OF LIFE INSURANCE i)

Protection against risk of untimely death

Life insurance is a product, which offers protection against the risk of death the full sum assured is made available under a life assurance policy, whereas under other savings schemes, the total accumulated savings alone will be available. ii)

Protection during old age

Life insurance can also be used as a means of saving for one’s future. There are a number of life insurance policies, which in addition to life cover also provide the means of investing one’s income. The sum as per the policy will be received only after a period of time. This amount thus provides for the old age.

iii)

Forced savings

Payment of life insurance premiums is compulsory and becomes a habit. Savings in other scheme can be easily withdrawn and may be used for less worthy purpose. Termination of a life insurance policy by the policyholder usually results in Page 12

substantial loss in benefits under the policy to the policyholder. One is thus encouraged to save and keep one’s policy alive.

iv)

Educational requirements and charity

The object of insurance may be to serve as a security to educational funds in respect of loans advanced for educational purpose or to provide donations to charitable institutions like hospital and school.

v)

Nomination and assignment

The life insured can name the person or persons to whom the policy money would be payable in the event of his death .the proceeds of a life insurance policy can be protected against the claims of the creditors of the life insured by effecting a valid assignment of the policy. The beneficiaries are fully protected from creditors expect to the extent of any interest in the policy retained by the insured.21Marketability and suitability for borrowing After 3 years, if the policyholder finds that he is unable to continue payment of premiums he can surrender a policy for a cash sum. A life insurance policy is accepted as a security for a commercial loan.

vi)

Loans from the insurance company

A policy holder can take a loan from his insurance company against the Security of his life insurance policy provided the terms of the terms of his policy allow such a loan. This loan can be taken usually after a period of 3 years from commencement of the policy and is a percentage of its surrender value.

vii)

Investment options

The unit link products gives comprehensive insurance solutions that cater to an individual’s dual need of earning potentially high returns as well as stay for life. Thus there is an option to invest money in the products that combine the best of insurance and investment. In a volatile market conditions it is possible to secure both as one can hedge the investment with saver investment vehicles that provide a diversified portfolio.

viii) Tax benefits Page 13

The Indian income tax act provides tax concessions to the policyholder both on payment of premium and on the maturity amount. Under sec 88 the tax benefits on premium paid by an individual for life insurance policies on his own life\on the life of spouse \children minor or major, including married daughters. Under sec 6 of the married women’s property act if a married man takes a policy of life insurance on his own life and expenses on the face of it to be for the benefit of his wife or of his wife and children or any of them, then it shall be deemed to be a trust for the benefit of his wife and children or any of them, According to the interest so expressed and shall not so long as any object of trust remains be subject to the control of the husband or to his creditors or form part of his estate. An insurance policy taken by a married man in the above manner is ideal way to protect the interest of his wife and children, even after his untimely death.

5.3 Types of insurance products Term assurance plan- In insurance language this is a “pure risk cover” and can be described as an insurance or risk management product in its purest and simplest form. In case of your untimely death, your dependents will receive the risk-cover amount or the ‘sum assured’. On the other hand, there is no survival benefits if you survive the policy term, and you also do not get back the premiums paid.

Endowment assurance plans- It is a traditional investment-cum-insurance plan. In other words, it provides both life cover (in the event of death of life insured) or maturity benefits if he/she survives the policy term. Endowment plans are typically frontloaded. Therefore it makes sense for you to remain in the policy for at least 12-15 years.

Money-back policy- It is a variant of the endowment assurance policy-the difference is that you get the survival benefits intermittently over the life of the policy. Thus taking care of his lump-sum monetary requirements to enable him to meet his financial goals and major commitments. The maturity benefit is the sum assured value less the survival benefits already paid under the policy, plus bonuses accrued, if any. In case of untimely death the nominee will receive the entire sum assured without considering the payouts already made to you before the unfortunate death. Page 14

Whole life plan- This policy provides the life assurance cover for almost the entire life. Most of the insurance companies provide protection up to the age of 100 years. The sum assured is paid to you once you reach this age, and the policy is terminated. In this payment of premium is for whole life, and the sum assured is paid to your nominee in the event of your death. In other words, this is equivalent to a term plan over your lifetime.

Pension plan- A pension plan can be looked as more of an investment product offered by insurers to cater to the “golden” retirement years of an individual. Also referred to as retirement plans, these are designed to ensure that you are financially independent during your retirement years. Most of the pension plans also provide an optional life assurance cover in them.

Child plan- It basically aims at ensuring the achievement of life goals of your child. The goal can be higher education, financial help in establishing a business or profession, or even marriage. In a child plan, the life assured can be the parent or the child. The beneficiary for the policy, however, is the child. As a child is a minor, the life insurance contract is between the parent and the insurance company. In case of early death of the parent, the premium payment is waived off by the insurance company and the policy continues as originally planned.

Unit Linked Insurance Plan- ULIPs have been the darling of insurance companies, intermediaries and the insured population alike over the last five years. The main reason for this popularity is the twin advantage of a pure life cover (insurance component) and a range of investment funds or options (savings component) to match your risk profile. While the pure life cover provides the much needed financial security to your dependents in the event of your untimely death, the savings component allows you to participate in the capital markets and build wealth over the long-term tenure of the policy.

Changing face of Indian insurance industry Indian life-insurance market is the target market of all the companies who either want to extend or diversify their business. To tap the Indian market there has been tie-ups between the major Indian companies with other International insurance companies to start up their business. The government of India has set up rules that no foreign insurance company can setup their business individually here and they have to tie up with an Indian company and this foreign insurance company can have an investment of only 24% of the total start-up investment. Indian insurance industry can be featured by: •

Low market penetration. Page 15

• •

• •

Ever growing middle class component in population. Growth of customer’s interest with an increasing demand for better insurance products. Application of information technology for business. Rebate from government in the form of tax incentives to be insured.

Today, the Indian life insurance industry has a dozen private players, each of which are making strides in raising awareness levels, introducing innovative products and increasing the penetration of life insurance in the vastly underinsured country. Several of private insurers have introduced attractive products to meet the needs of their target customers and in line with their business objectives

5.4 India: The Next Insurance Giant Market Performance & Forecast: In 2000, Indian insurance market size was $21.71 billion. Between 2000 and 2007, it had an increase of 120% and reached $47.89 billion. Between 2000 and 2007, total premiums maintained an average growth rate of 11.96% and the CAGR growth during this time frame has been 11.96%. It was one of the most consistent growth patterns we have noticed in any other emerging economies in Asian as well as Global markets.

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Indian Insurance Market Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion and 3rd largest in terms of purchasing power parity. With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, it is on the fulcrum of an ever increasing growth curve. Insurance is one major sector which has been on a continuous growth curve since the revival of Indian economy. Taking into account the huge population and growing per capita income besides several other driving factors, a huge opportunity is in store for the insurance companies in India. According to the latest research findings, nearly 80% of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subjected to weak social security and pension systems with hardly any old age income security. As per our findings, insurance in India is primarily used as a means to Page 17

improve personal finances and for income tax planning; Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small 4-5%. This in itself is an indicator that growth potential for the insurance sector is immense. It’s a business growing at the rate of 15-20% per annum and presently is of the order of $47.9 billion. India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with company’s continuous effort to lure the customers with new product offerings. However, the market share of private insurance companies remains very low -- in the 10-15% range. Even to this day, Life Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints.

Major Driving Factors ✔ Growing demand from semi-urban population ✔ Entry of private players following the deregulation ✔ Rising demand for retirement provision in the ageing population ✔ The opening of the pension sector and the establishment of the new pension regulator ✔ Rising per capita incomes among the strong middle class, and spreading affluence ✔ Growing consumer class and increase in spending & saving capacity ✔ Public private partnerships infrastructure development ✔ Dearth of innovative & buyer-friendly insurance products ✔ Success of Auto insurance sector

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Emerging Areas ✔ Healthcare Insurance & Pension Plans ✔ Mutual fund linked insurance products ✔ Multiple Distribution Networks .i.e. Bank assurance

The upward growth trend started from 2000 was mainly due to economic policies adopted by the then Indian government. This year saw initiation of an era of economic liberalization and globalization in the Indian economy followed by several reforms and long-term policies that created a perfect roadmap for the success of Indian financial markets. On the basis of several macroeconomic factors like increase in literacy rate & per capita income, decrease in death rate and unemployment, better tax rebates, growing GDP etc., we estimate that the Indian insurance sector will grow by $28.65 billion and reach $76.54 billion by 2011 with a CAGR (compounded annual growth rate) of 12.44% and a growth of 59.82%.

5.5 Valuing the invaluable Both under insurance and over insurance can often be attributed to the lack of proper understanding of the exact insurance needs for oneself and the family, and the failure to spot and cover all liabilities properly and adequately, or being over-conservative in this regard.

Under Insurance Under insurance, typically occurs when the existing financial liabilities and insurance needs are fully taken care of. In the event of the untimely death of the only (or the main earning) member of the family, his financial liabilities would obviously fall on his dependents, leaving them in a state of financial distress that could threaten their need of sustenance.

Over Insurance Conversely, there are also instances where individuals indulge in life insurance covers that far exceed in value than what is actually required. This is a classic case of over insurance, which leads to an unnecessarily higher premium payment, leaving you much poorer. It results in unnecessary expenditure that could otherwise be wisely invested elsewhere. The need for an adequate insurance cover is never static and keeps on varying with changes in the life stages and important events of an individual. The table below provides an insight into the various life stages and events when life insurance cover usually requires a revision. Page 19

Life stage Start work life

Requirement for a life insurance cover An individual usually does not have any dependent like spouse or children, thus allowing the need to take a life cover. However, if your parents are dependents then you need to take appropriate life cover on their behalf. Moreover, you may have taken a loan to finance your higher education or professional studies or purchase a car. You should take a suitable insurance cover so that in the event of your untimely death, the burden of EMI payments does not pass to your parents or other members of the family.

Recently married

Marriage requires a revision of your insurance needs. This can take a form of increase in life cover, taking into considerations an expected increase in expenses and repayment of liabilities, if any. Also, an insurance cover on the life of the spouse, although for a lesser amount, can be considered. However, if both the husband and the wife are working, the extent and value of life insurance coverage on both lives will depend on their respective remuneration packages, personal liabilities, as well as extent of financial dependence on one another.

Birth of children

The arrival of a child brings with it a great amount of responsibility. At this stage, a revision of insurance needs is based mainly on securing the financial needs of the child up to the time he/she has grown up and settled in life.

Purchase of a house, car, etc

Purchasing a house is a major financial decision not only on regard to the choice of property but also in regard to the commitment for repayment of the loan availed to finance the Page 20

property. Therefore, you should take out a mortgage redemption plan to the extent of the outstanding loan amount. Purchasing a car through a vehicle loan, too, calls for a life cover of the borrower to the extent of the outstanding loan. The same holds good for any other asset or event which has been financed by a loan.

Loan taken for business/profession

The loan taken to set up or enhance your profession or business should be fully covered.

5.6 Busting some insurance myths With a range of products flooding the market, people today are more confused about insurance than ever. Here are a bagful of myths floating around and I have made an effort to bust a few of the significant ones. 1. I don’t want to put my hard-earned money into a pure term assurance plan if I don’t even get back all the premiums paid on survival of the term. ➢ A pure term assurance plan is a risk mitigation tool and not an investment product. In the event of your untimely death during the policy term, your dependents get a “sum assured” to enable them to continue living their existing lifestyle, repay loan liabilities and meet long-term financial goals. To achieve this, you only need to pay a premium amount that is a fraction of the “sum assured”. Moreover unlike investments, where it takes years to build a suitable corpus, the “sum assured” on your insurance policy is payable, in the event of your untimely death, from the date of its commencement. 2. It would be enough if only the main breadwinner of the family takes life insurance. ➢ While the main breadwinner should take out a life insurance policy on a priority basis; the other members of the family should also be covered. If the wife is working, then she should be covered to the extent of loss of income to the family in the event of her untimely death. On the other hand, even if she is not working, she should be covered, albeit for a smaller sum, because her contribution to the family, in form of household services, has monetary value. 3. I will get back all my premiums when I surrender my endowment policy prematurely.

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➢ You couldn’t be more wrong! You only get back the “surrender value”, which is based on the “paid-up value” is a proportion of the original “sum assured” based on the number of years for which premium was paid against the total premium-paying years. The paid-up value of the policy is also calculated and available as per the policy conditions.

4. Insurance is primarily useful as a tax-saving instrument. ➢ Again, this is a huge misconception! While you do get attractive tax breaks, the primary objective of insurance is risk mitigations followed by wealth creation for the long term. Many people end up taking this myth too seriously, particularly without considering the costs and benefits involved. 5. After three years, I can walk away from any ULIP, along with the accrued investment or the fund value. ➢ Sure, you can do that! However, you need to remember that a ULIP, at least in the initial years, is very different from a mutual fund. While a mutual fund only charges o nominal fund management charge every year, a ULIP is front loaded. That means a significant chunk of your premium is allocated across various charges in the initial years of the policy and only the balance gets invested in a fund of your choice. As these charges taper off and average over time, it makes sense to stay in a ULIP for at least 15 years. Therefore, if your investment horizon is just 3-5 years, you better off in a mutual fund, and you can take out a separate term assurance plan for the required risk cover.

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6.Company Profile Karvy Stock Broking Ltd. The karvy group was formed in 1983 at Hyderabad, India. KARVY, is a premier integrated financial services provider, and ranked among the top five in the country in all its business segments, services over 16 million individual investors in various capacities, and provides investor services to over 300 corporates, comprising the who is who of Corporate India. KARVY covers the entire spectrum of financial services such as Stock broking, Depository Participants, Distribution of financial products like mutual funds, bonds, fixed deposit, Merchant Banking & Corporate Finance, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, placement of equity, IPOs, among others. Karvy has a professional management team and ranks among the best in technology, operations, and more importantly, in research of various industrial segments. Karvy computer share limited is India’s largest registrar and transfer agent with a client base of nearly 500 blue chip corporate, managing over 2 crores accounts. Karvy stock brokers limited, member of national stock exchange of India and the Bombay stock exchange, rank among the top five stock brokers in India with over six lakh active account it ranks among the top five depositary participants in India, registered with NSDL and CSDL, karvy commorade, member of NCDEX and MCX ranks among the top three commodities brokers in the country. A Karvy insurance broker is registered as a broker with IRDA and ranks among the top five insurance agent in the country. Registered with AMFI as a corporate agent, karvy is also among top mutual fund mobilize with over Rs 5000 crores under management. Karvy realty services, which started in 2006, have quickly established itself as a broker, who adds value in the realty sector. Karvy global offer niche off to off shoring services to U.S clients. Karvy has 575 offices in 375 locations across India and overseas at Dubai and New York. Over 9000 highly qualified people staff karvy.

Quality Policy To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by combining its human and technological resources, to provide Page 23

superior quality financial services. In the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives As per the Quality Policy, Karvy will : •

Build in-house processes that will ensure transparent and harmonious relationships with its clients and investors to provide high quality of services.

•

Establish a partner relationship with its investor service agents and vendors that will help in keeping up its commitments to the customers.

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Provide high quality of work life for all its employees and equip them with adequate knowledge & skills so as to respond to customer's needs.

•

Continue to uphold the values of honesty & integrity and strive to establish unparalleled standards in business ethics.

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Use state-of-the art information technology in developing new and innovative financial products and services to meet the changing needs of investors and clients.

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Strive to be a reliable source of value-added financial products and services and constantly guide the individuals and institutions in making a judicious choice of same.

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Strive to keep all stake-holders(shareholders, clients, investors, employees, suppliers and regulatory authorities) proud and satisfied.

Achievements •

Among the top 5 stock brokers in India (4% of NSE volumes)

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India's No. 1 Registrar & Securities Transfer Agents

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Among the top 3 Depository Participants Page 24

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Largest Network of Branches & Business Associates

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ISO 9002 certified operations by DNV

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Among top 10 Investment bankers

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Largest Distributor of Financial Products

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Adjudged as one of the top 50 IT uses in India by MIS Asia

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Full Fledged IT driven operations.

Insurance at Karvy At karvy Insurance Broking Ltd. we provide both life and non-life insurance products to retail individual, high net worth client and corporate with the opening up of the insurance sector and with a large number of private players in the business, we are in a position to provide tailor made policies for different segments of customers. In our journey to emerge as a personal financial advisor, we will be better positioned to leverage our relationship with the product providers and place the requirements of our customers appropriately with the product providers. With Indian market seeing a sea change, both in term of investment pattern and attitude of investors, insurance is no more seen as only a tax saving product but also as an investment product. By setting up a separate entity we would be positioned to provide the best of the products available in this business to our customers. Our wide national network, spanning the length and breadth of India, further supports these advantages. Further, personalized service is provided here by a dedicated team committed in giving hassle-free service to the clients. Now as I have made a comparative analysis between the products of various insurance companies, so its necessary to know something about those companies:-

7. Birla Sun Life Insurance Birla sun life Insurance Company limited is a joint venture between the Aditya Birla group, one of the largest business houses in India and Sun Life Financial Inc., as leading international financial services organization. The local knowledge of the Aditya Birla group combined with the expertise of Sun Life Financial Inc., offer a formidable protection for your future. The Aditya Birla group has a turnover of Rs. 1,33,875 corers Page 25

(as on 31st march 2008). It has over 100,000 employees across all its units worldwide. It is led by its chairman – Mr. Kumar Mangalam Birla. Some of its key companies are Hindalco, Grasim and Aditya Birla Nuvo. Sun Life Financial Inc. and its partners, have operations in key markets worldwide. These include Canada, U.S, U.K, Hong Kong, the Philippines, Japan, Indonesia, India, china and Bermuda. Sun Life Financial Inc. has assets under management of over us$ 404.7 BILLION (as on 31st March, 2008). It is a leading performer in the life insurance market in Canada. Birla sun life insurance (BSLI) has been operating for 7 years. It has contributed significantly to the growth and development of the life insurance industry in India. It pioneered the launch of unit linked life insurance plans amongst the private player in India. It pioneered the launch of united linked life insurance plans amongst the private players in India. It was the first player in industry to sell its policies through the Bancassurance route and through the internet. It was the first private sector player to introduce a pure term plan in the Indian market. BSLI has covered more than 2 million lives since it commenced operations.

8. Life Insurance Corporation Of India Mission "Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering Page 26

resources for economic development."

Vision "A trans-nationally competitive financial conglomerate of significance to societies and Pride of India Every day we wake up to the fact that more than 220 million lives are part of our family called LIC. We are humbled by the magnitude of the responsibility we carry and realize that the lives that are associated with us are very valuable indeed. Although this journey started five decades ago, we are still conscious of the fact that, while insurance may be a business for us, being part of millions of lives every day for the past 52 years has been a process called TRUST.

9. National Insurance Company Limited National Insurance Company Limited was incorporated in 1906 with its registered office in Kolkata. Consequent to passing of the General Insurance Business Nationalisation Act in 1972, 21 Foreign and 11 Indian Companies were amalgamated with it and National became a subsidiary of General Insurance Corporation of India (GIC) which is fully owned by the Government of India. After the notification of the General Insurance Business (Nationalisation) Amendment Act, on 7th August 2002, National has been delinked from its holding company GIC and presently operating as a Government of India undertaking. Page 27

National Insurance Company Ltd (NIC) is one of the leading public sector insurance companies of India, carrying out non life insurance business. Headquartered in Kolkata, NIC's network of about 1000 offices, manned by more than 16,000 skilled personnel, is spread over the length and breadth of the country covering remote rural areas, townships and metropolitan cities. NIC's foreign operations are carried out from its branch offices in Nepal. National transacts general insurance business of Fire, Marine and Miscellaneous insurance. The Company offers protection against a wide range of risks to its customers. The Company is privileged to cater its services to almost every sector or industry in the Indian Economy viz. Banking, Telecom, Aviation, Shipping, Information Technology, Power, Oil & Energy, Agronomy, Plantations, Foreign Trade, Healthcare, Tea, Automobile, Education, Environment, Space Research etc. National Insurance is the second largest non life insurer in India having a large market presence in Northern and Eastern India.

10. Tata AIG life-A New Look at Life Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company, formed by the Tata Group and American International Group, Inc. The Tata Group holds 74 percent stake in the insurance venture with AIG holding the balance 26 percent. Tata AIG Life provides insurance solutions to individuals and corporate. Tata AIG Life Insurance Company was licensed t operates in India on February 12, 2001 and started operations on April 1, 2001. Tata AIG Life offers a broad array of life insurance coverage to both individuals and groups, providing various types of add-ons and options on basic life products to give consumers flexibility and choice. Page 28

11. Reliance General Insurance Reliance General Insurance is the fastest growing private sector general insurance company in India with innovative product offerings and customer service standards that are benchmarked to the best insurance practices in the world. Reliance General Insurance offers a range of products for corporate and individual customers. With a focus on customer-centric products, multiple distribution channels and technology, reliance general insurance aims to increase its presence in the retail sector. Reliance General Insurance is 100% subsidiary of reliance capital limited, which is one of the India’s leading and fastest growing private sector financial services companies. It ranks among the top three private sector financial companies and banking groups in terms of net worth. Reliance capital has interests in asset management and mutual funds, life insurance, general insurance, private equity and proprietary investments, stock broking and other activities in financial services. Reliance capital is a part of the Reliance – Anil Dhirubhai Ambani Group.

12. RESEARCH METHODOLOGY 12.1 Sources The success of any Insurance company depends on how well they are able to align with the objectives and needs of individual customers, and is able to provide proper solutions to them. To know how a company is performing and whether they have any cutting edge advantage over competitors, an intensive study of the market is absolutely necessary. In order to understand the performance of different companies in the market, we did two types of surveys, primary survey and secondary survey.

Primary survey Page 29

Primary survey included:➢ Visiting websites and fixing appointments with their agents. ➢ Creation of database of prospective clients from different sources calling them up to fix appointment and then visiting them. ➢

Prepare a questionnaire for the market survey .

➢ Meeting different people to know their views, perception and preference of different insurance companies. Secondary survey Secondary survey included of consulting books, magazines, journals, internet and also taking reference from:library. Internet. karvy the finapolis.

12.2 Methodology We would go in for a qualitative research as our objective is to judge the perception and preference of different insurance products. The research would be done from primary data.

Sample Design

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Target population: The target population for the research would be people who are in the age group beyond 40 and age group between 25 to 40.We targeted this group of population because these populations are the potential customers of insurance.

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Sampling Frame: The research would be conducted in Kolkata. The survey has been conducted among the potential customers of karvy from different sectors as karvy deals in many sectors of business.

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Sampling Technique: The sampling technique that is adopted is the simple random sampling wherein every element in the target population has an equal chance or probability of getting selected in the sample. That means every unit of the population who is more is in the above mentioned age group, have an equal chance of getting selected

Sample Size: I did a survey among 100 people by taking two categories in consideration of 50 each; that is 1.) Age group beyond 40 2) Age group between 25 to 40

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Data Collection: The research would be conducted from the source of primary data collection. Secondary data would help us in knowing the trends prevailing in the insurance market and would help us in analyzing and interpretation of the primary data.

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13. COMPARATIVE ANALYSIS Birla sun life insurance Life Insurance Corporation Of India Name of the scheme Saral jeevan plan

Name of the scheme Jeevan saral

Purpose BSLI saral jeevan plan comes with a bouquet of benefits, which fulfill needs of life cover and investment at an affordable rate.

Purpose jeevan saral plan comes with a bouquet of benefits, which fulfill needs of life cover.

Type of policy Unit linked endowment plan Returns and added benefits 1. An easy and simple plan 2. Earn efficient returns 3. Match your risk profile at every stage 4. Death benefits with a plus, that is, sum assured plus the fund value. 5. Unmatched liquidity 6. At the end of policy term you get fund value. 7. The policy can be surrendered at any time during the tenure of the

Type Of Policy Traditional plan Returns and added benefits 1. Maturity benefit is total premium + bonus (approx Rs 50/thousand) 2. Death benefit is 250 times of monthly premium 3. The policy can be surrendered at any time during the tenure of the policy subject to surrender charge. The charge will be zero after 4th policy year.

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policy subject to surrender charge. The charge will be zero after 4th policy year. Payment of premium Pay the premiums on an annual, semi-annual, quarterly or monthly mode.

Payment of premium Pay the premiums on an annual, semi-annual, quarterly or monthly mode

Eligibility 18 to 55 years of age

Eligibility 18 to 70 years of age

Term of maturity There is an option of three policy terms 10 years, 15 years and 20 years.

Term of maturity There is an option of three policy terms 10 years, 15 years and 20 years.

Tax benefit Avail of tax benefit under section 80C and section 10(10 D) of the Income Tax Act, 1961.

Tax benefit Avail of tax benefit under section 80C and section 10(10 D) of the Income Tax Act, 1961.

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Birla sun life insurance Tata AIG life Name of the scheme Gold-plus II plan

Name of the scheme Invest assure apex

Purpose A simple, hassle free plan it helps you strike the right proportion between protection and savings.

Purpose The plan provides a platform ensuring the upside potential of the equity markets while safeguarding the investor’s interest by offering a guaranteed maturity unit price (GMUP).

Type of policy This is a non-participating unit linked savings plan.

Type of policy This is a unit linked life insurance plan.

Returns and added benefits 1. Match your risk profile at Returns and added benefits every stage. 1. Can make partial withdrawal 2. Unlimited partial only after completion of 3 withdrawals after 3 policy years. A maximum of 4 years, free of cost. partial withdrawals is 3. The policy can be allowed in one policy year. surrendered at any time No charges are applicable. during the tenure of the 2. Minimum sum assured: 5 policy subject to times the annualized surrender charge, the premium. charge will be zero after 3. Maximum sum assured: 60 th 4 policy year. times the annualized Page 34

4. At the end of the policy term you get the fund value. 5. On death the nominee will get the greater of (a) the fund value or (b) the sum assured reduced for partial withdrawals.

premium. 4. The policy can be surrendered any time after 3 policy years by a written notice, subject to deduction of the applicable surrender charges. 5. On death the nominee will get higher of: the sum 6. Minimum sum assured or the fund value. assured:5*annual 6. On maturity the nominee premium will get higher of the fund value or the guaranteed maturity unit price multiplied by the number of Additional coverage units. Nil Additional coverage ➢ Tata AIG life accidental death benefit rider. ➢ Tata AIG life accidental death and dismemberment rider ➢ Tata AIG life critical illness Payment of premiums rider Premium is paid for a period of 3 years with the flexibility to Payment of premium reduce premium (subject to Premium is paid for a period of 3 minimum of Rs.10000) from the years with the option to reduce, second policy year onwards subject to minimum limit, which without reduction in sum is higher of 75% of the first year assured. regular premium paid or Rs.90000.the sum assured Page 35

Eligibility 18 to 70 years of age. Term of maturity The policy term is 8 years.

remains same even if reduction in premium is affected. Eligibility 18 to 70 years of age. Term of maturity The policy term is 10 years.

Tax benefits Avail of tax benefit under section 80C and section 10(10 Tax benefit D) of the Income Tax Act, 1961. Avail of tax benefit under section 80C and section 10(10 D) of the Income Tax Act, 1961.

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National Insurance

Reliance General

Company ltd.

Insurance

Name of the scheme The National health plan

Name of the scheme Reliance health wise policy

Purpose To provide financial support , spiraling cost of health care, protect your savings from unforeseen circumstances

Purpose To provide financial support, spiraling cost of health care, protect your savings from unforeseen circumstances.

Type of policy Family floater coverage available up to 6 members of a family including dependent children under the age of 25 years and dependent parents below 65years.

Type of policy Covers your family on a floater basis applicable to a maximum of four persons you, your spouse and two dependent children under the age of 21 years.

Benefits

Benefits

1. Covers pre-existing diseases (excluding chemotherapy, radiotherapy and dialysis.) 2. Maternity coverage (nine months waiting

1. Covers pre-existing diseases after two/four continuous renewals. 2. Day care treatment expenses covered 3. Cashless facility 4.

Pre-post

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14. Findings and Interpretations We have presented below the findings and analysis of the questionnaire addressed to the respondents to gauge the attitude and perception of the people towards insurance.

Respondents having life Insurance The question was asked to the respondents to know how many of the respondents had a life insurance policy.

From the survey it was found out that 85% of the respondents had a life insurance policy whereas 15% of the respondents didn’t had a life insurance policy.

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Insurance policy taken from which company The question was asked to the respondents so as to get to know from which insurance company they have bought the policy

The finding which came out from the survey was that 40% of the respondents who have a life insurance cover bought life insurance from Life Insurance Corporation of India (LIC). LIC is the most preferred brand in the insurance industry because it is the only government company which offers insurance. People prefer to buy insurance from LIC because of the security being one of the prime factors. In the figure we can also see that nowadays people mindset have changed towards insurance and are opting for private company for insurance cover or policy.

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From whose suggestion have the respondents taken a policy? It was asked to gain an insight from the respondents that on whose suggestion did they opt for a life insurance cover or policy.

After the survey it was found that most of the respondents took policy or life insurance cover from the suggestions of their friends or family.And only 23 respondents took policy on the recommendation of the agents.Other sources like banks, corporate tie-ups and etc. plays a minute role in reaching out people for insurance policies.

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Type of plan The respondents were asked which type of plan they go in for when they take up insurance cover or policy.

After the survey it was found that term plan was the most preferred plan. Next on the list was endowment plan. Pension plan and health plan are the least preferred by customers .

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Preference of insurance sector according to age group:Age group beyond 40

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Pie – Chart

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Age Group Between 25 – 40

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Pie-chart

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15. Results After the survey it was found that still major portion of customers go for public insurance companies, but with the entry of more and more private companies the scenario is Page 46

changing rapidly, people with a need of more and better returns are opting for private companies, and this can be justified by the increasing market share of private companies in the Indian insurance sector. There are various ways in which private companies are found much more lucrative than public companies and the facts which support this statement are as follows:1. Versatility of products. 2. Efficient fund managers. 3. Better customer services. 4. More returns. 5. Regular follow up. 6. Quicker settlement

16. Suggestions and recommendation ✔ People are not aware of the life insurance. Most of them know only one company which provides life insurance i.e. LIC. So awareness campaign should be run so that people are aware of different life insurance companies in India. Page 47

✔ People should be educated about the different types of products or plans offered by the life insurance companies. Most of them don’t know much of the different types of plan or products.

✔ It was felt that most of the people took life for tax savings or just to cover up their life, not as an investment avenue. Life Insurance companies need to advertise in such a manner that people start investing in life insurance like the way they invest in the stock market

✔ Now at the time of global turmoil insurance company had to hold on to the policyholders trust which might lead the company to the path of success

✔ Insurance companies should try to adopt different strategies to market their products or plan. Companies should not primarily focus on the agents for their business.

17. Conclusion Insurance is one sector that witnessed continuous growth owing to the reforms in 2000. The insurance sector is likely to attain a size of Rs. 2,00,000 crore ($ 51.2 billion) in 2009-10. In life insurance, the business grew by 23.3% to Rs. 93,000 crore in 2007-08 Page 48

(Source:Assocham). The sector alone employs close to 30 lakh people (including agents and direct employees).

A well-functioning insurance market plays an important role in economic development and financial stability of developing economies such as India’s. First, it inculcates and encourages the habit of saving. Second, it provides a safety net to rural and urban enterprise and productive individuals.

The life insurance market in India is on a growth path. In spite of this, the country lags far behind the others in awareness about life insurance. The challenge is to spread awareness about life insurance and it true benefits. The industry has to convince people to park their hard earned money in long-term insurance and not just look at it as a tax saving instrument.

18. Limitations 1. Useful Financial insights are not easily available. 2. Due to time constraint sufficient research on all the investment tools is difficult. 3. The survey sample is not very large for analysis . Page 49

4. Properly convincing people to invest in insurance products is challenging. 5. Due to recession there is liquidity crunch in the market. 6. There might have been tendencies among the respondents to amplify or filter their responses under the testing conditions . 7. The research is confined to Kolkata and does not necessarily shows a pattern applicable to other parts of the country.

19. Attachments. Questionnaire 1. Sex : 2. Age : 3. Occupation : 4. Income : Page 50

5. Marital status : 6. No. of family members : 7. Mobile no. : 8. Are you insured

yes/no

9. If yes , then with

life/ non-life/both

10. In which company

________________

11.How you rank your insurance company ?

|----------------|-----------------------|------------------|-----------------------| excellent bad

very good

good

fair

12. Who suggested you to take the Insurance Policy? Friends

Family

Agents

Others, please specify 13. In which of the insurance plan have you invested the money? Term Plan

Endowment plan

Money Back Plan

Children Plan Health Plan

Pension plan ULIP (Unit Linked Insurance Plan) Others please specify_______________________________

14. Rank the insurance co. according to your preference: a) LIC/GIC

_____

b) BIRLA

_____

c) TATA AIG

_____

d) AVIVA

_____

e) RELIANCE

_____

f) _______

_____ Page 51

15. Where do government insurance co. need to improve ? [

]

a) Service b) Return c) Information d) Varity e) Easy claim 16. Reason behind the preference of your insurance company? _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ ___.

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20. References: •

The monthly fact sheet available from the company for studying the features of products.

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Online information from the various websites namely:www.lic.co.in www.wikipedia.com www.tata-aig-life.com www.birlasunlife.com www.irdaindia.org www.google.com www.wikipedia.com

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