Orignal Soft Copy Of Project Work

A Project Report on

STUDY OF CONSUMER AWARENESS WITH SPECIAL REFERENCE TO HDFC SLIC. Submitted to RTM Nagpur University in partial fulfillment for degree of Bachelor of Business Administration, specializing in

< MARKETING MANAGEMENT> For the academic year 2008-2009

Submitted by:

SNEHAL V. WAHANE.

Under the Guidance of

PRO. ANIRUDDHA BODHANKAR.

Dr.Ambedkar Institute of Management Studies & Research, Deeksha Bhoomi,

NAGPUR

CERTIFICATE This is to certify that the project titled STUDY OF CONSUMER AWARENESS

WITH SPECIAL REFERENCE TO HDFC SLIC is a benefited work carried out & developed by SNEHAL V. WAHANE in partial fulfillment for the award of degree of Bachelor of Business Administration during the academic session 2008-09, submitted to RTM Nagpur University, Nagpur under my guidance and supervision. This is also to certify that, this project is the result of candidate’s own work and is of sufficiently high standard to warrant its submission to the University for the Award of the said Degree. To the best of my knowledge the matter presented in this project report has not been submitted earlier for any other degree/diploma to any university. The assistance and help rendered during the course of this project work in the form of basic source material and information have been duly acknowledged.

Project Guide

Internal Examiner

External Examiner

Place: Nagpur Date:

Director

2

DECLARATION

I hereby declare that this project titled STYUDY OF CONSUMER AWARENESS

WITH SPECIAL REFERENCE TO HDFC SLIC is a benefited and authentic record of work done by me under supervision of MR. ANIRUDHHA BODHANKAR. During academic session 2008-09. The work presented here is not duplicated from any other source & also not submitted earlier for any other degree/diploma to any university. I understand that any such duplication is liable to be punished in accordance with the university rules.

Place: Nagpur

SNEHAL V. WAHANE

Date: ___/___/_____

3

ACKNOWLEDGEMENT I express my sincere regards to honorable Director of the Institute Dr. Sudhir S. Fulzele, for his persistent inspiration, constructive suggestion, and constant encouragement and for providing me immense valuable information. His guidance has helped me during every stage of understanding the project. I also pay my special thanks Dr. N. Kulkarni and Professor Aniruddha Bodhankar who extended a hand of cooperation through my project work. And last but not least, a very special thanks to Dr. Ambedkar Institute Of Management Studies and Research, Deekshabhoomi, Nagpur; for providing me an opportunity to do such a useful and interesting project.

Date:

SNEHAL V. WAHANE

4

A Project Report On Study Of Consumer Awareness With Special Reference To HDFC Standard Life Insurance Company Limited

Introduction HDFC Standard Life insurance is the oldest life insurance company in the world. It is the largest insurer in the UK and is the 28th largest company in the world. In India, the company is marketing life insurance products and unit linked investment plans. From my research at HDFC SLIC, I found that the company has a lot of competition from other private insurers like ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces competition from LIC. To compete effectively HDFC SLIC could launch cheaper and more reasonable products with small premiums and short policy terms (the number of year’s premium is to be paid). The ideal premium would be between Rs. 5000 – Rs. 25000 and an ideal policy term would be 10 – 20 years. HDFC must advertise regularly and create brand value for its products and services. Most of its competitors like Aviva, ICICI, Max, Reliance and LIC use television advertisements to promote their products. The Indian consumer has a false perception about insurance – they feel that it would not benefit

5

them if they do not live through the policy term. Nowadays however, most policies are unit linked plans where a customer is benefited even if their death does not occur during the policy term. This message should be conveyed to potential customers so that they readily invest in insurance. Family responsibilities and high returns are the two main reasons people invest in insurance. Optimum returns of 16 – 20 % must be provided to consumers to keep them interested in purchasing insurance. On the whole HDFC standard life insurance is a good place to work at. Every new recruit is provided with extensive training on unit linked funds, financial instruments and the products of HDFC. This training enables an advisor/sales manager to market the policies better. HDFC was ranked 13 in the Best Places to Work survey. The company should try to create awareness about itself in India. In the global market it is already very popular. With an improvement in the sales techniques used, a fair bit of advertising and modifications to the existing product portfolio, HDFC would be all set to capture the insurance market in India as it has around the globe.

6

TABLE OF CONTENTS Introduction to Insurance

4

Research Methodology Company Profile

10

of HDFC SLIC

13 Challenges faced in insurance marketing

26

Analysis and Interpretation

30

Conclusion

50

Bibliography

52

7

CHAPTER I

INDIAN INSURANCE INDUSTRY “AN OVERVIEW”

8

THE INSURANCE INDUSTRY IN INDIA AN OVERVIEW With the largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 1560.41 billion (for the financial year 2006 – 2007). Together with banking services, it adds about 7% to the country’s Gross Domestic Product (GDP). The gross premium collection is nearly 2% of GDP and funds available with LIC for investments are 8% of the GDP. Even so nearly 65% of the Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. A large part of our population is also subject to weak social security and pension systems with hardly any old age income security. This in itself is an indicator that growth potential for the insurance sector in India is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and strengthens the risk taking ability of individuals. It is estimated that over the next ten years India would require investments of the order of one trillion US dollars. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain the economic growth of the country. (Source: www.indiacore.com)

HISTORICAL PERSPECTIVE

9

The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon. The Government of India in 1956, brought together over 240 private life insurers

and

provident

societies

under

one

nationalized

monopoly

corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State led planning and development. The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With

10

this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

KEY MILESTONES 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.

INDUSTRY REFORMS Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations.

11

The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA The life insurance industry in India grew by an impressive 47.38%, with premium income at Rs. 1560.41 billion during the fiscal year 2006-2007. Though the total volume of LIC's business increased in the last fiscal year (2006-2007) compared to the previous one, its market share came down from 85.75% to 81.91%. The 17 private insurers increased their market share from about 15% to about 19% in a year's time. The figures for the first two months of the fiscal year 2007-08 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. With the opening up of the insurance industry in India many foreign players have entered the market. The restriction on these companies is that they are not allowed to have more than a 26% stake in a company’s ownership. Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 19 private life insurance companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers

12

faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. Some of these products include investment plans with insurance and good returns (unit linked plans), multi – purpose insurance plans, pension plans, child plans and money back plans. (www.wikipedia.com)

CHAPTER II RESEARCH METHODOLOGY.

13

RESEARCH DESIGN INTRODUCTION A Research Design is the framework or plan for a study which is used as a guide in collecting and analyzing the data collected. It is the blue print that is followed in completing the study. The basic objective of research cannot be attained without a proper research design. It specifies the methods and procedures for acquiring the information needed to conduct the research effectively. It is the overall operational pattern of the project that stipulates what information needs to be collected, from which sources and by what methods.

TITLE OF THE STUDY “Study Of Consumer Awareness With Special Reference To HDFC SLIC”

RESEARCH METHODOLOGY

14

TYPE OF DATA COLLECTED There are two types of data used. They are primary and secondary data. Primary data is defined as data that is collected from original sources for a specific purpose. Secondary data is data collected from indirect sources. (Source: Research Methodology, By C. R. Kothari) PRIMARY SOURCES These include the survey or questionnaire method, telephonic interview as well as the personal interview methods of data collection.

SAMPLING

Sampling refers to the method of selecting a sample from a given universe with a view to draw conclusions about that universe. A sample is a representative of the universe selected for study.

SAMPLE SIZE The sample size for the survey conducted was 270 respondents. This sample size was taken on 95% confidence level and 6 significant level. Data universe for this sample is 10,00,000 which is approx population of Nagpur excluding people below age of 18 years. SAMPLING TECHNIQUE Random sampling technique was used in the survey conducted.

SECONDARY SOURCES These include books, the internet, company brochures, product brochures, the company website, competitor’s websites etc, newspaper articles etc.

15

PLAN OF ANALYSIS Tables were used for the analysis of the collected data. The data is also neatly presented with the help of statistical tools such as graphs and pie charts. Percentages and averages have also been used to represent data clearly and effectively.

CHAPTER III

COMPANY PROFILE OF

16

HDFC STANDARD LIFE INSURANCE COMPANY LTD.

17

HDFC STANDARD LIFE INSURANCE COMPANY LIMITED INTRODUCTION HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since emerged as the largest residential mortgage finance institution in the country. The corporation has had a series of share issues raising its capital to Rs. 119 Crores. The gross premium income for the year ending March 31, 2007 stood at Rs. 2,856 Crores and new business premium income at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year ending March 31, 2007.

HDFC operates through almost 450 locations throughout the country with its corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing company in India for the last 27 years.

SNAPSHOT-I •

Incorporated in 1977 as the first specialized Mortgage Company in India.

•

Almost 90% of initial shareholding in the hands of domestic institutes and retail investors. Current 77% of shares held by foreign institutional investors.

•

Besides the core business of mortgage HDFC has evolved into a financial conglomerate with holdings In:  HDFC Standard Life insurance Company- HDFC holds 78.07 %.  HDFC Asset Management Company – HDFC holds 50.1%  HDFC Bank- HDFC holds 22.25%.

 Intel net Global (Business Process Outsourcing) – HDFC holds 50%.

18

 HDFC Chubb General Insurance Company – HDFC holds 74%.

19

SNAPSHOT-II •

Loan Approvals

Rs. 805 billion.

(up to Dec 2007)

•

(US $ 18.30 bn.)

Loan Disbursements

Rs.669 billion

(up to Dec. 2007)

(US $ 15.20 bn)

•

Housing Units Financed

•

Distribution

2.5 million.

 Offices

181

 Outreach Programs

90

KEY PLAYERS Mr. Deepak S Parekh is the Chairman of the Company. He is also the Executive Chairman of Housing Development Finance Corporation Limited (HDFC Limited). He joined HDFC Limited in a senior management position in 1978. He was inducted as a whole-time director of HDFC Limited in 1985 and was appointed as its Executive Chairman in 1993. He is the Chief Executive Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered Accountants (England & Wales).

Mr. Deepak M Satwalekar is the Managing Director and CEO of the Company since November, 2000. Prior to this, he was the Managing Director of HDFC Limited since 1993. Mr. Satwalekar obtained a Bachelors Degree in Technology from the Indian Institute of Technology, Bombay and a Masters Degree in Business Administration from The American University, Washington DC.

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GROUP COMPANIES HDFC Bank: World Class Indian Bank- among the top private banks in India. HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager. Intelenet Global: BPO services for international customers. CIBIL: Credit Information Bureau India Limited. HDFC Chubb: Upcoming Private companies in the field of General Insurance. HDFC Mutual Fund HDFC reality.com: Helps to search properties in all major cities in India HDFC securities

STANDARD LIFE Standard Life is Europe’s largest mutual life assurance company. Standard Life, which has been in the life insurance business for the past 175 years is a modern company surviving quite a few changes since selling its first policy in 1825. The company expanded in the 19th century from kits original Edinburgh premises, opening offices in other towns and acquitting other similar businesses.

21

Standard Life Currently has assets exceeding over £ 70 billion under its management and has the distinction of being accorded “AAA” rating consequently for the six years by Standard and Poor.

SNAPSHOT •

Founded in 1875, company supporting generation for last 179 years.

•

Currently over 5 million Policy holders benefiting from the services offered.

•

Europe’s largest mutual life insurer.

JOINT VENTURE HDFC Standard Life Insurance Company Limited was one of the first companies to be granted license by the IRDA to operate in life insurance sector. Reach of the JV player is highly rated and been conferred with many awards. HDFC is rated ‘AAA ’ by both CRISIL and ICRA. Similarly, Standard Life is rated ‘AAA’ both by Moody’s and Standard and Poor’s. These reflect the efficiency with which HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively.

HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000. HDFC is the majority stakeholder in the insurance JV with 81.4% staple and Standard of as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture. HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private Life Insurance Companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.) India’s leading housing finance institution and the Standard Life Assurance Company, a leading provider of financial services from the United Kingdom. Both the promoters are will

22

known for their ethical dealings and financial strength and are thus committed to being a long-term player in the life insurance industry- all important factors to consider when choosing your insurer.

BUSINESS GROWTH Track Record so far The gross premium income of HDFC, for the year ending March 31, 2007 stood at Rs. 2,856 crores and new business premium income at Rs. 1,624 crores. The company has covered over 8,77,000 lives year ending March 31, 2007. Company also declared our 5th consecutive bonus in as many years for our ‘with profit’ policyholders.

KEY STRENGTH Financial Expertise As a joint venture of leading financial services groups. HDFC standard Life has the financial expertise required to manage long-term investments safely and efficiently.

Range of Solutions HDFC SLIC has a range of individual and group solutions, which can be easily customized to specific needs. These group solutions have been designed to offer complete flexibility combined with a low charging structure.

Strong Ethical Values: HDFC SLIC is an ethical and Cultural Organization. False selling or false commitment with the customers is not allowed.

23

Most respected Private Insurance Company HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the World Class Magazine Business World for Integrity, Innovation and Customer Care.

CORPORATE OBJECTIVE Vision 'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'.

'The most obvious choice for all'.

Values .Integrity .Innovation .Customer centric .People Care One for all .Teamwork .Joy and Simplicity

PRODUCTS & SERVICES The right investment strategies won't just help plan for a more comfortable tomorrow -- they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, life insurance plans are created keeping in mind the changing needs of family. Its life insurance plans are designed to provide you with flexible options that meet both protection and savings needs. It offers a full range of transparent, flexible and value for money products. HDFC SLIC products are modern and contemporary unitized products that offer unique customer benefits like

24

flexibility to choose cover levels, indexation and partial withdrawals. (Source: www.hdfcslic.com)

PLANS THAT ARE OFFERED BY HDFC STANDARDS LIFE INSURANCE

Individual Products Protection Plans A person can protect his family against the loss of his income or the burden of a loan in the event of his unfortunate demise, disability or sickness. These plans offer valuable peace of mind at a small price. Protection range includes our Term Assurance Plan & Loan Cover Term Assurance Plan. Investment Plans HDFC SLIC’s Single Premium Whole of Life plan is well suited to meet long term investment needs. This provides attractive long term returns through regular bonuses. Pension Plans Pension Plans help to secure financial independence even after retirement. Pension range includes Personal Pension Plan, Unit Linked Pension, Unit Linked Pension Plus. Savings Plans Savings Plans offer a flexible option to build savings for future needs such as buying a dream home or fulfilling your children’s immediate and future needs. Savings range includes Endowment Assurance Plan, Unit Linked Endowment, Unit Linked Endowment Plus, Unit Linked Endowment Plus II, Money Back,

25

Unit Linked Enhanced Life Protection II, Children's Plan, Unit Linked Young Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus II.

Group Products One-stop shop for employee-benefit solutions HDFC Standard Life has the most comprehensive list of products for progressive employers who wish to provide the best and most innovative employee benefit solutions to their employees. It offers different products for different needs of employers ranging from term insurance plans for pure protection to voluntary plans such as superannuation and leave encashment. HDFC SLIC offers the following group products to esteemed corporate clients: Group Term Insurance Group Variable Term Insurance Group Unit-Linked Plan An investment solution that provides funding vehicle to manage corpuses with Gratuity, Defined Benefit or Defined Contribution Superannuation or Leave Encashment schemes of your company Also suitable for other employee benefit schemes such as salary saving schemes and wealth management schemes

Social Product Development Insurance Plan Development Insurance plan is an insurance plan which provides life cover to

26

members of a Development Agency for a term of one year. On the death of any member of the group insured during the year of cover, a lump sum is paid to those member beneficiaries to help meet some of the immediate financial needs following their loss. Eligibility Members of the development agency and their spouses with: - Minimum age at the start of the policy 18 years last birthday - Maximum age at the start of policy 50 years last birthday Employees of the Development Agency are not eligible to join the group. The group to be covered is only eligible if it contains more than 500 members. Premium Payments The premium to be paid will be quoted per member in the group and will be the same for all members of the group. The premium can only be paid by the Development Agency as a single lump sum that includes all premiums for the group to be covered. Cover will not start until the premium and all the member information in our specified format has been received.

Benefits On the death of each member covered by the policy during the year of cover a lump sum equal to the sum assured will be paid to their beneficiaries or legal heirs. Where the death is as a result of an accident, an additional lump sum will be paid equal to half the sum assured. There are no benefits paid at the end of the year of cover and there is no surrender value available at any time. The role of the Development Agency Due to the nature of the groups covered, HDFC Standard Life will be passing certain administrative tasks onto the Development Agency. By passing on these tasks the premium charged can be lower. These tasks would include: Submission of member data in a specified computer format Collection of premiums from group members

27

Recording changes in the details of group members Disbursement of claim payments and the mortality rebate (if any) to group members These tasks would be in addition to the usual duties of a policyholder such as: Payment of premiums Reporting of claims Keeping policy holder information up to date Training and support will be available to give guidance on how to complete the tasks appropriately. Since these additional tasks will impose a burden on the Development

Agency,

the

Development

Agency

may

charge

a

Rs.

10

administration fee to their members. Prohibition of rebates Section 41 of the Insurance Act, 1938 states No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectus or tables of the insurer If any person fails to comply with sub regulation (previous point) above, he shall be liable to payment of a fine which may extend to rupees five hundred

INTROUCTION TO UNIT LINKED FUNDS Unit linked plans are based on the component of the premium or the contribution of the customer towards the plan. This contribution can be in different modes like yearly, half yearly, quarterly and monthly. Unit linked plans have

multiple

benefits

like

life

protection,

rider

protection,

savings,

transparency, investment choices, liquidity and planning for taxes. These plans work like mutual funds. The premium is collected from the policy holder. He is allotted a certain number

28

of units based of his contribution. The Net Asset Value is the value of each unit of the fund. It is found by subtracting the charges and current liabilities from the current assets and investments and dividing this number by the total number of outstanding units. Let us take an example. There are 100 investors and each invests Rs. 10 in a fund. The total value of the fund is Rs. 1000 and each person is allotted 1 unit of Rs 10. Now the money (Rs. 1000) is invested in the debt or equity market. Suppose the fund value increased by 20%. As a result the Rs. 1000 invested became Rs. 1200. Hence the value of every investor is now Rs. 12 and not Rs. 10.

UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS Parameters

RBI Bonds

Fixed

Mutual Funds

Unit linked

Safety

High

Deposits High

Medium

High

Liquidity

None

High

High

High

Returns

Low

Low

High

High

Life Cover

1 time

1 time

1 time

10 times

Tax benefits

amount Tax free

amount Taxed

amount Taxed

Tax free

We find that life insurance unit linked plans is a good area to invest money in as it provides liquidity, safety, high returns, life cover and tax benefits in a single plan. HDFC SLIC offers the option of indexation to beat inflation. Risk is reduced to a large extent as the company invests in a diversified portfolio of stocks.

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Tax Benefits INCOME

TAX GROSS

SECTION

Sec. 80C

HOW

MUCH HDFC

STANDARD

ANNUAL

TAX CAN YOU LIFE PLANS

SALARY

SAVE?

Across All income Upto Rs. 33,990 All the life insurance Slabs

saved

on plans.

investment

of

Rs. 1,00,000. Sec. 80 CCC

Across all income Upto Rs. 33,990 All the pension plans. slabs.

saved

on

Investment

of

Rs.1,00,000. Sec. 80 D

Across all income Upto slabs

Rs.

saved Investment Rs. 10,000.

TOTAL

SAVINGS

POSSIBLE

Sec. 10 (10)D

3,399 All

the

health

on insurance of

available

riders with

the

conventional plans. Rs37,389

Rs. 33,990 under Sec. 80C and under Sec. 80 CCC , Rs.3,399 under Sec. 80 D, calculated for a male with gross annual income exceeding Rs. 10,00,000.

Under Sec. 10(10D), the benefits you receive are completely tax-free, subject to the conditions laid down therein.

30

CHAPTER III CHALLENGES FACED IN INSURANCE MARKETING

31

MARKETING PROBLEMS The old and out dated technique of tele marketing is used to prospect customers. More modern techniques must be adopted. The company must sponsor shows and give presentations in corporate houses. The financial health check must be performed for every prospect to assess his/her true financial position and needs. Some of the advisors skip this vital step and the prospect ends up with a plan they do not appreciate and soon surrender or discontinue. Some of the main problems in marketing the policies are:

 Large amount of competition (18 players in the market)  Other brands are well advertised and have higher recall value  LIC is considered a safer option  Face competition from banks and mutual funds  High premium policies are difficult to market  Incorrect perception about insurance  Interested prospects might have a lack of time and postpone investments  Customers get defensive if you cold call  Short term plans are available only at large premium  Customers do not have risk appetite to invest in shares  Some prospects have already invested and are not interested in further investments  Consumers don’t want to undertake medical examinations  Large amount of documentation

32

 Customers do not like their money locked up for many years  Lack of awareness about the unit linked funds in the market  No money back plan present in the product portfolio

SUGGESTIONS FOR IMPROVEMENT  Advertise about the company and its products – it motivates individuals to purchase insurance  Create a positive perception about insurance  Speak about the good features a plan offers like high returns, life cover, tax benefits, indexation, accident cover while prospecting customers  Try to sell the product/plan which the consumer requires and not the plan where the advisors benefit is higher  Improve the efficiency in operations  Bring out policies with small premiums payable for short periods of time – Rs. 5000 – Rs. 10000 per annum for 10 years  Attract the youth of India with higher returns on investment as returns are the motivating factor which influence purchase of insurance  Promote insurance in colleges and corporate houses

 Promote HDFC SLIC as an Indian Company to build trust  HDFC SLIC could have a brand ambassador or a mascot to promote its services  Should have partial withdrawals from the first year onwards  Tap the rural market where there is large potential

33

 Diversify product portfolio  Make products more straight forward – reduce complexities

CHAPTER IV ANALYSIS & INTERPRETATION

34

ANALYSIS & INTERPRETATION “A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA” AGE GROUP OF SURVEYED RESPONDENTS TABLE 1: Age group

No. of Respondents

18 - 25 years

127

26 - 35 years

67

36 - 49 years

46

50 - 60 years

24

More than 60 years

6

CHART 1:

35

Analysis: From the chart above we find that 47% of the respondents fall in the age group of 18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36 – 49 years. Therefore most of the respondents are relatively young (below 26 years of age). These individuals could be induced to purchase insurance plans on the basis of its tax saving nature and as an investment opportunity with high returns. Individuals at this age are trying to buy a house or a car. Insurance could help them with this and this fact has to be conveyed to the consumer. As of now many consumers have a false perception that insurance is only meant for people above the age of 50. Contrary to popular belief the younger you are the more insurance you need as your loss will mean a great financial loss to your family, spouse and children (in case the individual is married) who are financially dependent on you.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

36

TABLE 2: Particulars

No. of Respondents

Male

193

Female

77

CHART 2:

CUSTOMER PROFILE OF SURVEYED RESPONDENTS TABLE 3: Customer profile

No. of respondents

Student

62

Housewife

5

Working Professional

116

Business

49

Self Employed

24

Government service employee

14

37

CHART 3:

Analysis: From the chart above it can clearly be seen that 43% of the respondents are working professionals, 23% are students and 18% are into business. Therefore the target market would be working individuals in the age group of 18 – 25 years having surplus income, interested in good returns on their investment and saving income tax. NO. OF RESPONDENTS WHO HAVE LIFE INSURANCE POLICY IN THEIR NAME TABLE 4: Person who have life insurance policy Yes 103 No 167

38

CHART 4:

ANALYSIS: This graph shows that out of total 270 respondents only 103 or 38% respondents have life insurance policy in their name. Rest all don’t have a single policy in their name. So there is a very big scope for life insurance companies to cover these people. So in future business of life insurace will gro further. MARKET SHARE OF LIFE INSURANCE COMPANIES TABLE 5: LIFE INSURER

NUMBER OF POLICIES

HDFC STANDARD LIFE BIRLA SUN LIFE AVIVA LIFE INSURANCE BAJAJ ALLIANZ LIC TATA AIG ICICI PRUDENTIAL ING VYSYA BHARTI AXA OTHERS

4 3 6 7 55 6 12 6 2 2

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CHART 5:

Analysis: In India, the largest life insurance company is Life Insurance Corporation of India. It has been in existence in India since 1956 and is completely owned by the Government of India. Today the organization has grown to 2048 offices serving 18 crore policies and has a corpus of over 340000 crore INR.

40

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE TABLE 6:

Premium paid (p.a.)

No. of respondents

Rs. 5000 - Rs. 10000

40

Rs. 10001 - Rs. 15000

26

Rs. 15001 - Rs. 24900

18

Rs. 25000 - Rs. 50000

10

Rs. 50001 - Rs. 60000

4

Rs.60001 - Rs. 80000

2

Rs. 80001 - Rs. 100000

3

CHART 6: ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

Analysis:

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From the chart above we find that, 39% of the respondents surveyed pay an annual premium less than Rs. 10001 towards life insurance. 25% of the respondents pay an annual premium less than Rs. 15001 and 17% pay an annual premium less than Rs. 25000. Hence we can safely say that HDFC SLIC would be able to capture the market better if it introduced products/plans where the minimum premium starts at Rs. 5000 per annum. Only 19% of the respondents pay more than Rs. 25000 as premium and most products sold by HDFC SLIC have Rs.12000 as the minimum annual premium amount. They should introduce more products like Easy Life Plus and Safe Guard where the minimum premium is Rs.6000 p.a. and Rs. 12000 p.a. respectively. This would definitely increase their market share as more individuals would be able to afford the policies/plans offered.

POPULAR LIFE INSURANCE PLANS TABLE 7:

Type of Plan

No. of Respondents

Term Insurance Plans

105

Endowment Plans

122

Pension Plans

16

Child Plans

8

Tax Saving Plans

19

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CHART 7: POPULAR LIFE INSURANCE PLANS

Analysis: From the chart given above we can clearly see that 45% of the respondents hold endowment plans and 39% of the respondents hold term insurance plans. Endowment plans are very popular and serve two purposes – life cover and savings. If the policy holder dies during the policy term the nominee gets the death benefit that is, sum assured and accumulated bonus. On survival the policy holder receives the survival benefit with a bonus. A term plan is a pure risk cover plan wherein the insured pays a lower premium for a higher sum assured. Term insurance is the cheapest form of insurance and helps the policy holder insure himself for a relatively low premium. For the returns sensitive investor term plans do not find favor as they do not offer a return in case the individual does not die during the policy term.

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AWARENESS OF UNIT LINKED INSURANCE PLANS TABLE 8: Awareness of Unit Linked Plans

No. of Respondents

Yes

154

No

116

CHART 8: AWARENESS OF UNIT LINKED INSURANCE PLANS

Analysis: From the chart given above we find that 57% of the respondents are aware of unit linked life insurance plans and 43% are not aware of such plans. These plans should be promoted through advertising. The company can advertise through television, radio, newspapers, bill boards and pamphlets. This would increase awareness and arouse curiosity in the minds of the consumer which would enable the company to market its products more effectively. Unit – linked plans are those where the benefits are expressed in terms of number of units and unit price. They can be viewed as a combination of

44

insurance and mutual funds. The number of units a customer would get would depend on the unit price when they pay the premium. When the policy matures the individual gets his fund value. The value of his fund is calculated by multiplying the net asset value and number of units held by them on that day.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM TABLE 9:

Willingness to spend on premium

No. of respondents

Percentage

Less than Rs. 6,000

41

15%

Rs. 6,001 - Rs. 10,000

73

27%

Rs. 10,001 - Rs. 25,000

110

41%

Rs. 25,001 - Rs. 50,000

41

15%

Rs. 50,001 - Rs. 1,00,000

5

2%

CHART 9: CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

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Analysis: From the graph above, we can clearly see that 41% of the respondents would be willing to spend between Rs. 10001 – Rs. 25000 for life insurance. 27 % would be willing to spend between Rs. 6001 – Rs. 10000 per annum. Only 15% would be willing to spend more than Rs. 25000 per annum as life insurance premium. We could say that the maximum premium payable by most consumers is less than Rs. 25000 p.a. This is further reduced as most customers have already invested with LIC, ICICI Prudential, Birla Sun Life, Bajaj Allianz etc. HDFC SLIC is faced with a large amount of competition. There are 18 insurance companies in India inclusive of LIC. Hence to capture a larger part of the market the company could introduce more reasonable plans with lesser premium payable per annum.

CHART SHOWING IDEAL POLICY TERM TABLE 10: Ideal policy term

No. of respondents

3 - 5 years

51

6 - 9 years

41

10 - 15 years

95

46

16 - 20 years

38

21 - 25 years

24

26 - 30 years

5

More than 30 years

3

Whole life Policy

13

CHART 10: CHART SHOWING IDEAL POLICY TERM

Analysis: From the chart given above it can be seen that 35% of the respondents prefer a policy term of 10 – 15 years, 19% prefer a term of 3 – 5 years and 15% prefer a term of 6 – 9 years. This means that HDFC SLIC could introduce more plans wherein the premium paying term is less than 15 years.

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The outlook of insurance as a product should be changed from something which you pay for your whole life (whole life policy) and do not receive any benefit (the nominee only receives the benefit in case of your death) to an extremely useful investment opportunity with the prospects of good returns on savings, tax saving opportunities as well as providing for every milestone in your life like marriage, education, children and retirement.

FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE TABLE 11: Parameter Advertisements High returns Advice from friends Family responsibilities Others

No. of Respondents 35 84 46 89 16

CHART 11:

Analysis:

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From the chart above it can be seen that 33% of the respondents purchase life insurance to secure their families, 33% take life insurance to get high returns, 17% purchase insurance on the advice of their friends and 13% purchase insurance because of the influence of advertisements. The main purpose of insurance is to cover the financial or economic loss that occurs to the family in case of the uncertain death of the policy holder. But now a days this trend is changing. Along with protection (life cover), a savings element is being added to insurance. With the introduction of the new unit linked plans in the market, policy holders get the option to choose where their money will be invested. They can invest their money in the equity market, debt market, money market or a combination of these. The debt and money markets usually have low risk attached whereas the equity market is a high risk investment option. PREFERRED COMPANY TYPE OF THE RESPONDENTS TABLE 12: Type of Company

No. of Respondents

Percentage

Government Owned Company

127

47%

Public Limited Company

62

23%

Private Company

49

18%

Foreign Company

32

12%

CHART 12: PREFERRED COMPANY TYPE OF THE RESPONDENTS

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Analysis: From the graph above we find that 60% of the respondents preferred to purchase insurance from a government owned company, 29% of the respondents preferred to purchase insurance from a public limited company and only 4% of the respondents preferred a foreign based company. Heavy advertising through television, newspapers, magazines and radio is required. MINIMUM EXPECTED RETURN ON INVESTMENT TABLE 13: Expected Returns

No. of respondents

Less than 5%

5

5% - 10%

39

11% - 15%

46

16% - 20%

49

21% - 25%

46

26% - 30%

27

31% - 40%

22

41% - 50%

14

More than 50%

22

CHART 13:

50

Analysis: From the chart above it can clearly been seen that 18% of the respondents would like 16 – 20% returns, 17% would like returns between 21 – 25% and 17% would like returns of 11 – 15% on their investments. Therefore the average return on investment should be at least 16 – 20 %. Most consumers are willing to adapt to some amount of risk but still want some guaranteed returns. Therefore the bulk of investment should be made in the balanced fund with 50% debt and 50% equity. The returns on the Secure Fund are guaranteed as these involve investment is government securities and the debt market. But the returns on these instruments are low (8 – 10%). If the company invests in shares, returns are higher (39%) but correspondingly risk borne by the policy holder is also higher. Therefore a good combination of the two instruments is often a wise choice.

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CHAPTER V FUTURE LINE OF RESEARCH

52

53

FUTURE LINE OF RESEARCH The future topics for research in the organization could be setting up of an appropriate ad campaign. It is very vital to the companies’ success that the people of India know about HDFC SLIC, its products and their special features and how insurance in general can help them in their future. The advertisements have to be emotionally appealing. They might also include a celebrity. The brand name of HDFC could be used to give a push to HDFC SLIC and its products. The general perception of insurance as “inauspicious” should be done away with and individuals and corporations accept insurance on power with other investment opportunities.

The other area of research could be in the management of funds HDFC SLIC possesses and how it can maximize returns for its investors. A research project could be undertaken on how to ensure that the money gets invested in the right companies and earns a medium – high return on investment. Another area of research could be an analysis of the sales and marketing techniques used by HDFC SLIC. A large number of changes could be introduced and this would help in saving operating costs and improving the efficiency of the firm.

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CHAPTER VI CONCLUSION

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CONCLUSION HDFC standard life insurance is first life insurance Company in India. It has businesses spread out across the globe. It was registered on 23rd December 2000. It currently ranks number 4 amongst the insurers in India (Source: annual premium provided by the company) The company faces a large amount of competition. To sustain itself it must promote its products through advertising and improve its selling techniques. Consumers must be aware of the new plans available at HDFC SLIC. The medium of advertising used could be television since most of its competitors use this tool to promote their products. The company must be promoted as an Indian company since consumers seem to have more trust in investing in Indian firms. The unit linked concept must be specifically promoted. The general perception of life insurance has to change in India before progress is made in this field. People should not be afraid to invest money in insurance and must use it as an effective tool for tax planning and long term savings. HDFC SLIC could tap the rural markets with cheaper products and smaller policy terms. There are individuals who are willing to pay small amounts as premium but the plans do not accept premiums below a certain amount. It was usually found that a large number of males were insured compared to females. Individuals below the age of 30 (mostly male) were interested in investment plans. This was a general conclusion drawn during prospecting clients.

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BIBLIOGRAPHY www.hdfcslic.com www.tata-aig-life.com www.irdaindia.com www.lic.com www.money control.com www.bajajallianz.com www.icici.prulife.com Magazine – Insurance World The Outlook Money Secrets of Successful Insurance Sales by Mr. Jack Kinder

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A SURVEY ON ‘INSURANCE INDUSTRY’ Dear Sir/Madam, I am a student of Dr. Ambedkar Institute of Management studies and research Nagpur. As part of the requirements for my Graduation in Management I am required to do a research based project. Kindly spend a few minutes of your valuable time and fill in this questionnaire.

 Do

you have a life insurance policy/investment plan in your name?

o

Yes

o

No

 If o o o o o

yes which company’s insurance policies do you hold? o Aviva Life HDFC Standard Insurance o Bajaj Allianz Life Life Insurance Birla Sun Life Insurance o LIC Insurance Tata AIG Life o ING Vysya Life Insurance Insurance ICICI Prudential o Bharti Axa Life Life Insurance Insurance Others (specify name)

 What is the approximate premium paid by you annually (in Rupees)?

o Rs. 5,000 – Rs.

o Rs. 50,001 – Rs. 10,000 60,000 o Rs. 10,001 – Rs. o Rs. 60,001 – Rs. 15,000 80,000 o Rs. 15,001 – Rs. o Rs. 80,001 – Rs. 25,000 1,00,000 o Rs. 25,001 – Rs. 50,000 o More than Rs. 1,00,000 (specify premium)  What would

kind suit

of

insurance

you

best

current stage of life? o

Life Insurance

58

in

policy your

o

Life Insurance and Investment Plans

o

59

Pension Plans

o o

Child Plans Tax saving plans

 Are you aware of the new unit linked insurance plans in the market? o

Yes

o

No

 How much would you be willing to spend per annum if you were to go for an investment/insurance plan?

o Less

than Rs. o Rs. 25,001 – Rs. 6,000 50,000 o Rs. 6,001 – Rs. o Rs. 50,000 – Rs. 10,000 1,00,000 o Rs. 10,001 – Rs. o More than Rs. 25,000 1,00,000  Which according to you is an ideal policy term? (Number of years you would be willing to pay premium) o o o o

3 to 5 years 6 to 9 years 10 to 15 years 16 to 20 years

o o o o

21 to 25 years 26 to 30 years More than 30 years Whole life policy

 What motivates you to purchase insurance/investment plans? o o

Advertisements High Returns

o o

o

Advice from friends Family responsibilities

Others (specify)

 In which kind of company would you prefer to make a purchase of insurance? o

Government owned company

o

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Public Limited Company

o

Private Company

o

Foreign based company

 Typically what kind of returns would you look at from your investments? (Please note: Higher returns involve greater risk) o

o o o

Less than 5% 6% - 10 % 11% - 15 % 16% - 20 %

o o o o o

21% - 25% 26% - 30% 31% - 40% 41% - 50% More than 50%

Personal Details: Name: Address: Age:

Contact No. :

Profile of respondent: • Student • Housewife • Working Professional

• • •

Date:

61

Business Self – Employed Government Service Employee