Project On Tata-aig

ICFAI BUSINESS SCHOOL, DEHRADUN

Market Potential Study of Tata-AIG in Dehradun MANIMOY MONDAL

2009

1 RAJAWALA ROAD,CENTRAL HOPE TOWN,SELAQUI,DEHRADUN-248197

FINAL PROJECT REPORT A REPORT ON

MARKET POTENTIAL STUDY OF TATA AIG IN DEHRADUN CITY Submitted By Manimoy Mondal (08BSDDU00600) (IBS DEHRADUN)

Company Guide:

Faculty Guide:

Mr. Pushkar Saxena

Dr. Pavnesh Kumar

Branch Manager

ICFAI Business School

RIBL

Dehradun

Date of Submission: 23rd May 2009

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TO WHOMSOEVER IT MAY CONCERN This is to certify that Mr. Manimoy Mondal student of MBA (2008-2010) ICFAI Business School; Dehradun has done his live summer training project under my guidance and supervision from 24th February 2009 to 23rd May 2009. He has completed the project titled “Market Potential Study of TATA AIG in Dehradun City” towards the partial fulfillment of MBA under my supervision. During his project he was found to be very dedicated, sincere and attentive to small details whatsoever told to him. I wish him luck and success in future.

…………………………………………….. Mr. Pushkar Saxena Branch Manager Religare Insurance Broking Limited

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AUTHORISATION The summer Internship program has been conducted for the partial fulfillment of MBA program in ICFAI Business School-Dehradun. Summer internship program also included a project work on “Market Potential Study of Tata AIG in Dehradun City”. Religare Insurance Broking Limited and ICFAI Business School hereby authorize Mr. Manimoy Mondal to conduct his summer Internship Project under the supervision of company guide Mr. Pushkar Saxena (Branch Manager) and the faculty guide Dr. Pavnesh Kumar (Faculty of Finance). A final project report will have to be submitted to Religare Insurance Broking Limited and ICFAI Business School, Dehradun.

………………………. ...

…………………………

Mr. Pushkar Saxena

Dr. Pavnesh Kumar

Company Guide

Faculty Guide

ABDM, RIBL

IBS-Dehradu

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Acknowledgement Sometimes words fall short to show gratitude, the same happened with me during this project. The immense help and support received from Tata AIG Insurance Company overwhelmed me during the project. My sincere gratitude to Dr. Pavnesh Kumar (ICFAI Business School, Dehradun) and Mr. Pushkar Saxena(Branch Manager, RIBL, Dehradun), for providing me with an opportunity to work with TATA AIG Life Insurance company.

I am highly indebted to Mr. Ravi Prakash, (Asst. Sales Manager, Tata AIG, Dehradun) and company project guide, who has provided me with the necessary information and his valuable suggestion and comments on bringing out this report in the best possible way.

I also thank Mr. Sanjeev Malviya (Placement Officer, ICFAI Business School, Dehradun) and all the faculty members of IBS-Dehradun who has sincerely supported me with the valuable insights for this project.

I am grateful to all of the members of Tata AIG Insurance Company, Dehradun branch, who have helped me to carry on the project.

Last but not the least; my heartfelt love for my parents, whose constant support and blessings has helped me throughout this project.

Manimoy Mondal 08BSDDU0060 IBS- Dehradun

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TABLE OF CONTENT

Contents

Pages

Chapter 1 1.1 1.2 1.3 1.4 1.5 1.6 Chapter 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 Chapter 3 3.1 3.2 3.3 3.4

Preface Executive Summary Introduction to Insurance Introduction Function of Insurance Life Insurance Role of Insurance Important of insurance Insurance Cycle Introduction to Indian Insurance Industry Indian Insurance Industry A brief history of insurance sector Indian insurance market ( History) How Big Insurance Market Is Indian Scenario Role of IRDA Name of Different Insurance Companies Market Share of Different Private Players Growth of Private players Introduction to Tata AIG Tata Group Tata Group in Insurance AIG The Joint Venture

8 10 11-19 12 13 14 14 15 17 20-31 21 21 23 24 25 28 29 30 31 32-38 33 33 34 35

3.5 3.6 3.7 Chapter 4 4.1 4.2 4.3

About Tata AIG Organizational Structure of Tata AIG Distribution Channel of Ttata AIG Introduction to the Research Study Project Proposed Objective of the Project Methodology

35 36 37 39-42 40 40 40

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4.4 4.5 Chapter 5 5.1 5.2 5.3 Chapter 6 6.1 6.2 Chapter 7 7.1 7.2 Annexure I

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Questionnaire Designing Limitation of the Study Survey and Results Findings From the Research Study Reasons for Preferring Public and Private Sector Market Potential Study of Tata AIG Recommendation and Benefits Recommendation to the Company Benefits to the Company and Us Conclusion and References Conclusion References Questionnaire

41 42 43-61 44 57 60 62-64 63 64 65-67 66 67 68-70

PREFACE

The liberalization of the Indian insurance sector has been the subject of much heated debate for some years. The policy makers where in the catch 22 situation wherein for one they wanted competition, development and growth of this insurance sector which is extremely essential for channeling the investments in to the infrastructure sector. At the other end the policy makers had the fears that the insurance premium, which are substantial, would seep out of the country; and wanted to have a cautious approach of opening for foreign participation in the sector.

As one of the rare occurrences the entire debate was put on the back burner and the IRDA saw the day of the light thanks to the maturing polity emerging consensus among factions of different political parties. Though some changes and some restrictive clauses as regards to the foreign participation were included the IRDA has opened the doors for the private entry into insurance.

Whether the insurer is old or new, private or public, expanding the market will present multitude of challenges and opportunities. But the key issues, possible trends, opportunities and challenges that insurance sector will have still remains under the realms of the possibilities and speculation. What is the likely impact of opening up India‟s insurance sector?

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The large scale of operations, public sector bureaucracies and cumbersome procedures hampers nationalized insurers. Therefore, potential private entrants expect to score in the areas of customer service, speed and flexibility. They point out that their entry will mean better products and choice for the consumer. The critics counter that the benefit will be slim, because new players will concentrate on affluent, urban customers as foreign banks did until recently. This seems to be a logical strategy. Start-up costs-such as those of setting up a conventional distribution network-are large and high-end niches offer better returns. However, the middlemarket segment too has great potential. Since insurance is a volumes game. Therefore, private insurers would be best served by a middle-market approach, targeting customer segments that are currently untapped.

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EXECUTIVE SUMMARY This project has been a great learning experience for me; at the same time it gave me enough scope to implement my analytical ability. Tata Group is one of the India's largest and most respected business groups. Tata Group's name is synonymous with India's industrialization. Tata AIG Insurance Solutions is one of the leading insurance companies that provide both life insurance as well as general insurance. This pioneer company is a joint collaboration between the American International Group, Inc. (AIG) and Tata Group. They own the company in the ratio of 26:74. It is a leading financial institution that has carved a niche for itself all over the world. Tata AIG Insurance Company is having different insurance policies. At the end of the project people will be knowledgeable about various insurance organizations and different products taking into considerations hundred sample sizes in Dehradun city. Project is on the market potential study of Tata AIG Insurance Company in Dehradun city. To get to know a questionnaire has been prepared which contains open ended and close ended questions. Firstly pilot study has been done through hundred questionnaires. For collecting the data field survey method, personal interview technique has been used. Secondary data has been collected from the company. The data collected are represented into suitable tabular forms for drawing inferences. Quantitative techniques like averages, percentages, range, two-way tables, chi- square tests analysis has been applied as per the requirement. The level of preference, perception of the customers about the product and company were identified by means of a scoring scheme. For the representation of data various charts and graphs are used as per requirement. .

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CHAPTER 1

INTRODUCTION TO INSURANCE

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1.1. INTRODUCTION "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 may be described as a social device to reduce or eliminate risk of life and property. Under the plan of insurance, a large number of people associate themselves by sharing risk, attached to individual. With the help of Insurance, large number of people exposed to a similar risk makes contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good. Insurance is a tool by which fatalities of a small number are compensated out of funds collected from plenteous. Gradually as competition increased benefits given by industry to its customers increased by leaps and bounds. Insurance is a basic form of risk management which provides protection against possible loss to life or physical assets. Person who seeks protection against such loss is termed as insured, and company that promises to honor claim, in case such loss is actually incurred by insured, is termed as Insurer. In order to get insurance, insured is required to pay to insurance company a certain amount called premium. Premium is collected by insurance companies which acts as trustee to pool created through contributions made by persons seeking to protect themselves from common risk. Any loss to the insured in case of happening of an uncertain event is paid out of this pool.

Insurance business is divided into four classes: Life Insurance Fire Marine Miscellaneous Insurance.

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Insurance provides: Protection to investor. Accumulation of savings. Channeling these savings into sectors needing huge long term investment.

1.2. FUNCTION OF INSURANCE:

Provide protection: The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others. Collective bearing of risk: Insurance is an instrument to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. Assessment of risk: Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also. Provide certainty: Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain. Small capital to cover larger risk: Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contributes towards the development of industries: Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.

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Means of savings and investment:

Insurance serves as savings and investment,

insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing income-tax exemptions also, people invest in insurance. Source of earning foreign exchange:

Insurance is an international business. The

country can earn foreign exchange by way of issue of marine insurance policies and various other ways. Risk free trade: Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover.

1.3. LIFE INSURANCE: Life insurance is a contract under which the insurer (Insurance Company) in Consideration of a premium paid undertakes to pay a fixed sum of money on The death of the insured or on the expiry of a specified period of time Whichever is earlier. In case of life insurance, the payment for life insurance policy is certain. The Event insured against is sure to happen only the time of its happening is not known. So life insurance is known as „Life Assurance‟. The subject matter of insurance is life of human being. Life insurance provides risk coverage to the life of a person. On death of the person insurance offers protection against loss of income and compensate the titleholders of the policy.

1.4. ROLES OF THE LIFE INSURANCE: Life insurance as an investment: - Insurance products yield more than any other investment instruments and it also provides added incentives or bonus offered by insurance companies. Life insurance as risk cover: - Insurance is all about risk cover and protection of life. Insurance provides a unique sense of security that no other form of invest can provide. Life insurance as tax planning: - Insurance serves as an excellent tax saving mechanism too.

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1.5. IMPORTANCE OF THE LIFE INSURANCE: Protection against untimely death: - Life insurance provides protection to the dependents of the life insured and the family of the assured in case of his untimely death. The dependents or family members get a fixed sum of money in case of death of the assured. Saving for old age: - After retirement the earning capacity of a person reduces. Life insurance enables a person to enjoy peace of mind and a sense of security in his/her old age. Promotion of savings: - Life insurance encourages people to save money compulsorily. When life policy is taken, the assured is to pay premiums regularly to keep the policy in force and he cannot get back the premiums, only surrender value can be returned to him. In case of surrender of policy, the policyholder gets the surrendered value only after the expiry of duration of the policy. Initiates investments: - Life Insurance Corporation encourages and mobilizes the public savings and canalizes the same in various investments for the economic development of the country. Life insurance is an important tool for the mobilization and investment of small savings. Credit worthiness: - Life insurance policy can be used as a security to raise loans. It improves the credit worthiness of business. Social Security: - Life insurance is important for the society as a whole also. Life insurance enables a person to provide for education and marriage of children and for construction of house. It helps a person to make financial base for future. Tax Benefit: - Under the Income Tax Act, premium paid is allowed as a deduction from the total income under section 80C.

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1.6. INSURANCE CYCLE:

Fig 1: Insurance cycle

source: www.rma.usda.gov

Policy Renewal/Change Options/Application The Insurance Cycle begins each year with the insurance offer. Actuarial documents are published annually by the Risk Management Agency (RMA). The actuarial documents list the plan of insurance, crop, type, variety, and practice that may be insured in a state and county, and show the amounts of insurance, available insurance options, levels of coverage, price elections, applicable premium rates, and subsidy amounts. The Special Provisions of Insurance list program calendar dates, and general and special statements which may further define, limit, or modify coverage. Sales Closing/Cancellation/Termination Dates Insurance applications must be completed and signed no later than the sales closing date specified in the crop actuarial documents. Applications signed after the crop sales closing date may be rejected by the insurance provider. Insurance coverage is continuous and can be cancelled by either the insurance provider or the policyholder for the following crop year by providing a written notice to the other party no later

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than the cancellation date specified in the crop policy. For a policyholder insured the previous crop year, any changes he or she wishes to make to the policy coverage must be made on or before the crop sales closing date. The policy will automatically renew for the subsequent crop year unless the policyholder cancels the policy in writing on or before the crop cancellation date. Insurance coverage may be terminated by the insurance provider for the following crop year for nonpayment of outstanding debt by providing a written notice to the policyholder no later than the termination date specified in the crop policy. The insurance provider may terminate coverage on a crop if no premium is earned for three consecutive years. Acceptance Upon receipt of a properly completed and timely submitted insurance application, the insurance provider will accept and process the application, unless the applicant is determined to be ineligible under the contract or Federal statute or regulation. The insurance provider will issue a summary of coverage and the appropriate policy documents to the applicant. After the application is accepted, the policyholder may not cancel the policy for the initial crop year. Insurance Attaches For annual crops, insurance attaches annually when planting begins on the insurance unit. The crop must be planted on or before the crop's published final planting date unless late or prevented planting provisions apply. If prevented planting provisions apply, and the crop cannot be timely planted due to the causes specified in the crop provisions, such acreage may be eligible for a prevented planting payment. Acreage Reports The policyholder must annually report for each insured crop in the county the number of insurable and uninsurable acres planted or prevented from being planted if prevented planting is available for the crop, the date the acreage was planted, share in the crop, the acreage location, farming practices used, and types or varieties planted to the insurance provider on or before the applicable acreage reporting date specified in the crop actuarial documents. This report is used by the insurance provider to establish the amount of coverage and premium for the crop.

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Insurance providers may deny coverage if the acreage report is filed after the applicable crop acreage reporting date. Summary of Coverage The insurance provider will process a properly completed and timely filed acreage report, and issue to the policyholder a summary of coverage that specifies the insured crop, the insured acres and amount of insurance or guarantee for each insurance unit. The policyholder may make changes to the filed acreage report, if permitted by the insurance provider. Premium Billing The annual premium is earned and payable at the time insurance coverage begins. The insurance provider shall issue a premium billing based upon the information contained in the acreage report no earlier than the premium billing date specified in the crop actuarial documents. The premium billing will specify the amount of premium and any administrative fees that may be due. If the premium or administrative fees are not paid by the date specified in the actuarial documents or policy, the insurance provider may assess interest on the outstanding premium balance. Notice of Damage or Loss A written notice of damage or loss for each unit is to be filed by the policyholder within 72 hours of the policyholder's initial discovery of damage or loss but not later than 15 days after the calendar date for the end of the insurance period unless otherwise stated in the individual crop policy. The policyholder should refer to the individual crop provisions for additional requirements in the event of damage or loss. These notifications provide the opportunity for the insurance provider to inspect the crop and determine the extent of damage or potential production before the crop is harvested or otherwise disposed of. Inspection After the insurance provider receives the written notice of damage or loss, it will be processed and, if necessary, a loss adjuster will be sent to inspect the damaged crop and gather pertinent information concerning the damage. If the policyholder wishes to destroy or not harvest the crop,

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the loss adjuster will gather the appropriate information, conduct an appraisal to establish the crop's remaining value and complete any forms needed. If the crop has been harvested or will not be harvested by the end of the insurance period, and the policyholder wishes to file a claim for indemnity, the loss adjuster will gather the appropriate information and assist the policyholder in filing the claim for indemnity. It is the policyholder's responsibility to establish the time, location, cause, and amount of any loss. Indemnity Claim After the claim for indemnity is processed by the insurance provider, an indemnity check and a summary of indemnity payment will be issued showing any deductions to the amount of indemnity for outstanding premium, interest, or administrative fees. Contract Change Date Changes to the insurance program may be made by RMA from one year to the next. The insurance provider will notify the policyholder in writing of any changes to the policy, actuarial documents, or the Special Provisions of Insurance prior to the calendar date for contract changes specified in the crop policy. The policyholder will have the opportunity to review the changes and, if he/she desires, continue the insurance coverage for the following crop year, change the policy coverage, or cancel the insurance coverage. Any changes to the policy coverage that the policyholder makes must be made no later than the crop sales closing date. If the policyholder wishes to cancel the policy, a written notice must be submitted to the insurance provider on or before the crop cancellation date.

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CHAPTER 2

INTRODUCTION TO INDIAN INSURANCE INDUSTRY

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2.1. INDIAN INSURANCE INDUSTRY The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the country‟s GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India. It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation “Malhotra Committee” was constituted by the government in 1993 to examine the various aspects of the industry. The key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more efficient and competitive financial system suitable for the requirements of the economy was the main idea behind this reform. Since then the insurance industry has gone through many sea changes .The competition LIC started facing from these companies were threatening to the existence of LIC .since the liberalization of the industry the insurance industry has never looked back and today stand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run.

2.2. A BRIEF HISTORY OF THE INSURANCE SECTOR: The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are given in the following table.

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Some of the important milestones in the life insurance business in India are: Year 1912 1928 1938 1956

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

Table 1 The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are given in the following table. Year 1907 1957 1968 1972

Milestones in the general insurance business in India The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

Table 2

1993 Setting up of Malhotra Committee 1994 Recommendations of Malhotra Committee 1995 Setting up of Mukherjee Committee

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1996 Setting up of (interim) Insurance Regulatory Authority (IRA) Recommendations of the IRA. 1997 Mukherjee Committee Report submitted but not made public 1997 The Government gives greater autonomy to LIC, GIC and its subsidiaries with regard to the restructuring of boards and flexibility in investment norms aimed at channeling funds to the infrastructure sector. 1998 The cabinet decides to allow 40% foreign equity in private insurance companies-26% to foreign companies and 14% to NRI‟s, OCB‟s and FII‟s. 1999 The Standing Committee headed by Murali Deora decides that foreign equity in private insurance should be limited to 26%. The IRA bill is renamed the Insurance Regulatory and Development Authority (IRDA) Bill. 1999 Cabinet clears IRDA Bill. 2000 President gives Assent to the IRDA Bill.

2.3. INDIAN INSURANCE MARKET (HISTORY): Insurance has a long history in India. Life Insurance in its current form was introduced in 1818 when Oriental Life Insurance Company began its operations in India. General Insurance was however a comparatively late entrant in 1850 when Triton Insurance company set up its base in Kolkata. History of Insurance in India can be broadly bifurcated into three eras: a) Pre Nationalization b) Nationalization and c) Post Nationalization. Life Insurance was the first to be nationalized in 1956. Life Insurance Corporation of India was formed by consolidating the operations of various insurance companies. General Insurance followed suit and was nationalized in 1973. General Insurance Corporation of India was set up as the controlling body with New India, United India, National and Oriental as its subsidiaries. The process of opening up the insurance sector was initiated against the background of Economic Reform process which commenced from 1991. For this purpose Malhotra Committee was formed during this year who submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was passed in

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1999. Resultantly Indian Insurance was opened for private companies and Private Insurance Company effectively started operations from 2001.

2.4. HOW BIG IS THE INSURANCE MARKET? The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and nonlife segment. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe. There are now 29 insurance companies operating in the Indian market – 14 private life insurers, nine private non-life insurers and six public sector companies. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario. There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion. There are opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60 receive pensions. The IRDA has issued the first license for a standalone health company in the country as many more players wait to enter. The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase. The deepening of the health database over time will also allow players to develop and price products for larger segments of society.

Insurance is a Rs.400 billion business in India, and together with banking services adds about 7% to India's Gap. Gross premium collection is about 2% of Gap and has been growing by 15-20% per annum. India also has the highest number of life insurance policies in force in the world, and total investible funds with the LIC are almost 8% of GDP. Yet more than three-fourths of India's

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insurable population has no life insurance or pension cover. Health insurance of any kind is negligible and other forms of non-life insurance are much below international standards.

2.5. INDIAN SCENARIO: 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 hinge of an ever increasing growth curve. 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. 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

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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 of 12.44% and a growth of 59.82%. The Indian life insurance market generated total revenues of $41.36 billion in 2007, thus representing a compound annual growth rate (CAGR) of 11.84% for the period spanning 20002007. Life insurance market had a growth of $22.46 billion within a period of 7 years with a growth rate of 118.24%. Estimated life premiums rose from INR1, 470,800 million ($36.77 billion) in 2006 to INR1, 301,540 million ($32.54billion) in 2005. We envisage that life premiums in 2011 will be $65.96 billion, a growth larger than they were in 2007. The performance of the market is forecast to accelerate, with an anticipated CAGR of 9.78% for the four-year period 2007-2011 expected to drive the market to a value of $65.96 billion by the end of 2011. There would be a growth of $24.6 billion i.e. 59.48% in the next 4 years. Non-life premiums in India were $6.53 billion in 2007. Gross written premium (GWP) in the Indian non-life insurance market reached a value of $5.75 billion in 2006, this representing an annual growth of 13.55% for the period spanning 2006-2007. Estimated non-life premiums rose from INR230 billion ($5.75 billion) in 2006 to INR261 billion ($6.53 billion) in 2007. We anticipate that non-life premiums will grow by a CAGR of 9.40% between 2007-2011. We are looking for non-life premiums to rise by $405 million over the five years to the end of 2011 with a growth rate of 62.02%.

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Fig 2

Source: www.indiaprwire.com

The general insurance industry grew by 16% in 2006-07 as private insurers continued their robust performance, while public sector players like New India Assurance and Oriental Insurance improved their show. Despite continuous fall in business of government-owned National Insurance, the 12 non-life insurers collected Rs 20,378 crore in first year premium in the last fiscal compared to Rs 17,531 crore collected in 2005-06, according to data compiled by regulator IRDA. New India Assurance collected Rs 4,762 crore in premium and continued to lead the non-life sector by cornering 23.36% of the market. National Insurance was at the second spot by collecting Rs 3,524 crore in premium, a decline of 7%, but had a market pie of 17.29%. Oriental Insurance mopped up Rs 3,518 crore in premium income after logging 16.6% growth in business to corner a market share of 17.26%. Another PSU insurer United India grew by a modest 6.8% to collect Rs 3,147 crore in premium and had 15.44% of the market. The eight private players expanded their business by 52% to collect Rs 5,427 crore in premium income and increased their combined market share to 26.6% from 20.2% a year ago.

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ICICI Lombard led the private players by logging 80% growth in premium at Rs 1,592 crore, followed by Bajaj Allianz, which grew by 50% to collect Rs 1,287 crore in premium. ICICI Lombard had a market share of 7.81% and Bajaj Allianz had 6.31% of the market. 2.6. ROLE

OF INSURANCE REGULATORY AND DEVLOPMENT

AUTHORITY (IRDA) ACT, 1999 An act to provide for the establishment of an authority to protect the interests of policyholders, to regulate, to promote and ensure orderly growth of the insurance industry and for matters connected therewith for incidental thereto and further to amend, the Life Insurance Corporation Act, 1956 and the insurance Act, 1938 and General Insurance Business Act 1972. Spread Life Insurance much more widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in .the country and providing them adequate financial cover against death at a reasonable Cost. Maximize mobilization of people's savings by making insurance linked savings adequately attractive. Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the; community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. Conduct business with utmost economy and with the full realization that the moneys belong to: the policyholders. Act as trustees of the insured public in their individual and collective capacities. Meet the various life insurance needs of the community that would arise in the changing social and economic environment. Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy. Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with ded1cat1on towards achievement of Corporate Objective.

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2.7. NAME OF MAJOR INSURANCE COMPANIES IN DEHRADUN CITY NAME OF INSURANCE

LOGO

COMPANIES

NATURE OF HOLDING

Life Insurance Corporation

Public

Tata AIG Insurance

Private

ICICI Prudential

Private

Max New York Life Insurance

Private

HDFC Standard Insurance

Private

Reliance Life Insurance

Private

Kotak Life Insurance

Private

Aviva Life Insurance

Private

SBI Life Insurance

Private

Bajaj Allianz

Private

Table 3

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Above all the company they are having various types of insurance plans. All the plans are giving a good rate of return after a certain period of time. But all the plans don‟t get success in the market. Many of the companies they are having almost same type of plan but sometimes it happens one of them is successful and another is not. Always it doesn‟t depend on the plan of the insurance sometimes it depends on the marketing strategies, promotion of the product, reputation of the company, employees of the company etc.

2.8. MARKET SHARE OF DIFFERENT PRIVATE PLAYERS:

Fig 3

source: www freepress.in

If we see market share of different private players in the financial year 2009 then from the above chart we can understand ICICI Prudential is holding the maximum market share i.e. 21.6%. After that SBI Life and Bajaj Allianz is holding 14.8% and 13.2% respectively. Reliance Life Birla Sun life and HDFC Standard they are also holding a good market share all over the India. Tata AIG is holding 3.3% of market share all over the India.

30

2.9. GROWTH OF PRIVATE PLAYERS:

Fig 4

Source: www.blonnet.com

If we see the growth rate of private players in Indian economy then it will be seen that fastest growing insurance companies are Reliance Life and Birla Sun Life, growing rate is 335% and 152% respectively. Next fastest growing companies are SBI Life, Met Life, Kotak Old, ICICI Prudential, Bajaj Allianz and TATA AIG. Their growing rate is 138%, 125%, 121%, 116%, 105%, 100% respectively. Less growing companies are HDFC Standard, ING Vysya, Aviva and Max New York Life respectively.

31

CHAPTER 3

Introduction to tata-aig

32

Tata AIG Insurance Company Tata Enterprises with 82 companies, spread over seven sectors and with an annual turnover exceeding US $ 8.8 billion, employs more than 262,000 people. Tata Group has shown over years that it is a value driven company and has pioneering contributions in various fields including insurance, aviation, iron and steel. In terms of capital market performance as many as 40 listed Tata companies account for nearly 5% of the total market capitalization of all listed companies. The Group has had a long association with India's insurance sector having been the largest insurance company in India prior to the nationalization of insurance.

3.2. TATA GROUP IN INSURANCE: Tata AIG General Insurance Company Ltd, and Tata AIG Life Insurance Company Ltd., (collectively "Tata AIG") are joint venture companies between the Tata group India's most trusted industrial house and American International Group, Inc. (AIG), the leading U. S. based international insurance and financial services organization. The Late Sir Dorab Tata, was the founder Chairman of New India Assurance Co. Ltd., a group company incorporated way back in 1919. Government of India took over the management of this company as a part of nationalization of general insurance companies in 1972. Not deterred by the move, Tata group have ventured into risk management services having tied up with AIG group, back in 1977, with the incorporation of Tata AIG Risk Management Services Pvt. Ltd.

The Tata Group is one of India's largest and most respected business conglomerates, with revenues in 2006-07 of $28.8 billion (Rs129,994 crore), the equivalent of about 3.2 per cent of the country's GDP, and a market capitalization of $72.2 billion as on December 6, 2007. Tata companies together employ some 289,500 people. The Tata Group has operations in more than 85 countries across six continents, and its companies export products and services to 80 countries.

33

3.3. AIG: American International Group, Inc. (AIG), is a major American insurance corporation based at the American International Building in New York City. The British headquarters are located on Fenchurch Street in London, continental Europe operations are based in La Défense, Paris, and its Asian HQ is in Hong Kong. According to the 2008 Forbes Global 2000 list, AIG was the 18th-largest company in the world.

Company Background: AIG's history dates back to 1919, when Cornelius Vander • Starr established an insurance agency in Shanghai, China. Starr was the first Westerner in Shanghai to sell insurance to the Chinese. • In 1962, Starr gave management of the company's less than successful U.S. holdings to Maurice R. \"Hank\" Greenberg, who shifted the company's U.S. focus from personal insurance to high-margin corporate coverage. • The company went public in 1969. American International Group, Inc is the leading U.S. based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. Its member companies write a wide range of commercial and personal insurance products through a variety of distribution channels in over 130 countries and jurisdictions throughout the world. AIG's Life Insurance operations comprise of the most extensive worldwide network of any life insurer. AIG's global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products.

34

3.4. THE JOINT VENTURE: Tata AIG Life Insurance Co. Ltd. is capitalized at Rs. 185 crores of which 74 per cent has been brought in by Tata Sons and the American partner brings in the balance 26 per cent. Mr. George Oommen has been named managing director of Tata AIG Life. Tata-AIG plans to provide broad array of life insurance plans to cover to both individuals and groups. The company headquartered in Mumbai, with branch operations in Delhi, Chennai, Hyderabad, Bangalore Calcutta, Pune and Chandigarh.

3.5. ABOUT TATA-AIG: Tata AIG Insurance Solutions is one of the leading insurance companies that provide both life insurance as well as general insurance. This pioneer company is a joint collaboration between the American International Group, Inc. (AIG) and Tata Group. They own the company in the ratio of 26:74. It is a leading financial institution that has carved a niche for itself all over the world. Tata AIG Insurance provides facilities to both corporate and individuals. Starting its operations on April 1, 2001, it seeks to serve different categories of people. It acquired its license for carrying out operations in India on February 12, 2001. Tata AIG Insurance Solutions is one of the most prestigious organizations in the business world. It employs thousands of employees and offers various opportunities to people to build a prospective career. As a leading name in the financial world, it identifies the potential and experience of the individual. This insurance company identifies the clients‟ needs and works accordingly. It stresses on innovative aspect and opening of new markets. It believes in new economy and latest Internet technology. Tata AIG Insurance offers a number of products for the General Insurance holders. General insurance products include:

35

Individual insurance Small business insurance Corporate insurance

Tata AIG Insurance offers flexible life insurance to the individuals, business organization and other association. For the corporate, there are various insurance products like group pensions, employee benefits, work place solutions and credit life. For the individuals, Tata AIG Insurance offers various products for adults, children and for retirement planning.

3.6. ORGANIZATIONAL STRUCTURE OF TATA-AIG:

Fig 5

36

source: CGAP working group o Micro insurance good and bad practices

3.7.

DISTRIBUTION CHANNELS OF TATA AIG:

The winds of liberalization initiated vast changes in the functioning of the industry today. Increasing number of multinational partnership with private insurers have paved the way for a radical shift in insurance selling- through a number of new distribution channels besides bringing about more awareness on the need for insurance and also stressing on the important role technology can play.

In the developed markets, many insurers have a preferred mode of distribution. In India, many players are hedging their bets because the need for scale outweighs considerations of focus and because non-agency distribution, which is presently operational for the last two years, forms a basis for study.

Tata AIG has a corporate agency channel, which handles its corporate agents and has tie-ups with 38 corporate houses. Insurers want to lower distribution costs by finding more efficient channels. The new private players are developing multiple channel models; many insurers use or plan to use several banks as distributors. Because most banks have strong regional bias, in this regards Tata AIG has agreement with HSBC (corporate agency distribution) through that it is doing

both

life

insurance

and

general

insurance

business..

Because most banks have a strong regional bias, Insurers can use several banks without creating large overlap. Many larger banks are sourcing products from several insurers acting as manufacturers. An important distribution challenge facing insurers is the need to meet the rural and social sector legislative requirements stipulated in terms of market opening. For Tata AIG, it takes rural insurance as an opportunity and not an obligation. For achieving objective in rural area it has also

tie

with

NGOs

(Bridge

stone

for

Karnataka

and

Kerala).

In this project mainly focus is distribution channel of Life Insurance of Tata AIG and little bit of distribution of General Insurance of Tata AIG also. So as the whole topic of distribution can be known for the both company of Tata AIG (Life and General insurance). Gradually channels are incorporating day by day for the growth of business.

37

In the span of two to three years Tata AIG achieve much more business growth what it expected at the time of entrance in Indian market. It happened because it has quality people, innovative management, be able to employ technology effectively besides having right products with effective and modern distribution channel.

3.8. List of products offered by Tata AIG The life insurance plans are generally divided into two types: (a) Traditional plans (b) Unit linked insurance plans (ULIP). Traditional plans are basically insurance plus savings whereas ULIPs are insurance plus investment. Further they are classified into pure protection, savings, investments, pension and living benefits. The classifications are shown in the table below.

Traditional Plan Pure Protection Raksha

Savings 1.Maha Life Gold

Investment -

Pension 1.Nirvana Plus 2.Easy retire 3.Riders

Living Benefits 1.Health protector 2.Riders

Table 4

Unit linked insurance plans (ULIPs) Pure protection -

38

Savings 1.Invest Assure Gold 2.Invest Assure II

Investments 1.Invest assure plus 2.Invest assure flexi Table 5

Pension Living 1.Invest assure future

benefits 1.Health investor

Chapter 4

INTRODUCTION OF THE RESEARCH STUDY

39

4.1. Project proposed “Market Potential Study of TATA AIG life Insurance in Dehradun City”

4.2. OBJECTIVE OF THE PROJECT: - Main objective of the project is to find out the market potentialility of Tata AIG in Dehradun city. Project is about to find out the competitors Tata AIG Life Insurance company. Nowadays all the insurance companies in India are trying to establish themselves in the competitive market. They are introducing innovative marketing strategies to survive in the market. Many other private companies are looking to enter in the Indian insurance market. To find out the market potentiality of Tata AIG in Dehradun city. Main competitors of Tata AIG. Which type of policies is preferable? Most preferable plans in Dehradun city. Which sector is most preferable public or private Targeting the right and potential customers Differentiating from other companies

4.3. METHODOLOGY: Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by meeting with the people in Dehradun. Data collection has been done through by giving structured questioner. This study will be based on sampling. This is an exploratory type of research. The study was aimed at measuring the customer‟s preference for life insurance companies and the comparison of various insurance policies of the various companies on basis of various parameters based on customer‟s responcse in Dehradun region only. The survey was done on hundred general residents of the selected region.

40

Methods adopted for surveys 1. Field survey method 2. Personal interview technique 3. Secondary sources viz company database

The data collected are represented into suitable tabular forms for drawing inferences. Quantitative techniques like averages, percentages, range, two-way tables, chi- square tests analysis are applied as per the requirement. The level of preference, perception of the customers about the product and company were identified by means of a scoring scheme. For the representation of data various charts and graphs are used as per requirement.

4.4. Questionnaire Designing: The project is on “Market Potential Study of Tata AIG in Dehradun city”. To know the market potentiality of Tata AIG a questionnaire has been prepared. The questionnaire is having both open ended and close ended questions. It is also having ranking, multiple choice and check list type of questions. First part of the questionnaire is the demographic part. Questionnaire has been prepared in such a way that we can understand insurance policies are dependable on the occupation of a person or income level of a person. Which type of investment do they prefer? For it cluster analysis will be used. Nowadays private players are giving a good rate of return rather than the public player. So in which sector (private or public) do they like to invest and what is the reason behind that? To get to know the reason Likert scale has been used. To get to know how much Tata AIG is preferable in Dehradun city a ranking scale has been used where name of different major Insurance Companies have been given and according to the ranking given by citizen we can get to know the potentiality of Tata AIG in Dehradun city. There is different type of insurance policies in the market. Which type of policies do they prefer can

41

understand from the questionnaire. Which life insurance policies of Tata AIG are most preferable we can get from it. To know all of these cluster analysis will be used.

Sample questionnaire has been attached with annexure I.

4.5.LIMITATION OF THE STUDY: Time limitation Research has been done only in Dehradun. Companies did not disclose their secrets data and strategies. Possibility of Error in data collection. Possibility of Error in analysis of data due to small sample size. Respondents error Limited resources

42

Chapter 5

Survey and results

43

5.1

Findings from the research Study

A study has been conducted till date. From the study through hundred questionnaires we got different data according to the questionnaire. The pilot study has been conducted in the Dehradun city by meeting the people personally. From the study we have got as belowOccupation of respondents: Occupation

Numbers of respondents

Service

60

Business

20

Professional

18

Others

2

Table: 6

Proportion of Different Occupation Service

Business

professional

others

2% 18% 20%

60%

Fig 6: Number of respondents according to the occupation

Number of respondents according to the income level:

Income/annum

Number of person

50000-100000

29

100000-300000

40

300000-500000

26

500000-1000000

5

>1000000

0

Table: 7

44

Income Level 50000-100000

100000-300000

500000-1000000

<1000000

300000-500000

5% 0%

29%

26%

40%

Fig 7: Proportion of respondent according to the income level Number of family members of the respondents: Number of family members

Number of Respondents

a) 1-4

72

b) 4-8

16

c) 8-12

2

d) 12-16

0

e) >16

0

Table: 8

Number of family memebers 2% 0%

0% a

18%

b c d 80%

Fig 8: Number of family members according to the respondents

45

e

Number of dependent family members of the respondents: Number of dependant family members

Number of respondents

a) None

23

b) 1-2

54

c) 2-4

19

d) 4-6

3

e) 6-8

1

Table: 9 none d c Series1

b a 0

20

40

60

Fig 9: Number of dependent family members of the respondents

Different Sectors people like to invest their money: Name of different sector

Numbers of respondents

Fixed deposit

55

Post office deposit

18

Mutual Fund

25

Share buying

10

Insurance

63

Table: 10

46

Investment in different sector fixed deposit

post office

mutual fund

share

Insurance

32%

37%

10% 15% 6%

Fig10: Different sector people like Invest their money

Ratio of Insured and Uninsured person In Dehradun city: Number of insured person

93

Number of Uninsured person

7 insured person

uninsured person

7%

93%

Fig 11: Ratio of Insured and Uninsured person in Dehradun city

Preferred sector in Dedradun city: Name of sector

Preferred Number

Public Sector

63

Private Sector

37

Table: 11

47

Preferred Sector private sector 37%

public sector 63%

Fig 12: Preferred Sector in Dehradun city Investment in different Insurance Company in Dehradun City: Name of the companies

Number of respondents

LIC

80

Tata AIG

15

Birla Sun Life

5

ICICI Prudential

18

Max New York Life

8

Others

10

Table: 12

Investment in different Insurance Company lic

tata aig

birla 6%

icici

max new york

others

7%

13% 11%

59%

4%

Fig 13: Investment in different insurance company in Dehradun city

48

Preferred Insurance Plan in Dehradun city Name of Insurance Plan

Number of respondents

Life Insurance

68

Vehicle Insurance

13

Pension Plan

28

Medi Claim

18

Others

10

Table: 13

Preferred Insurance Plan Others 7%

Mediclaim 13%

pension plan 20%

Life Insurance 50% Vehicle Insurance 10%

Fig 14: Preferred Insurance Plan in Dehradun city Comparison between number of dependent family members and Insured person Respondents

Insured

Uninsured

Total

a) None

23

21

2

46

b) 1-2

54

51

3

108

c) 2-4

19

17

2

38

d) 4-6

3

3

0

6

e) 6-8

1

1

0

2

100

93

7

200

Number of dependents

Total

Table: 14

49

Ho:µ=There is no significant relationship between number of dependent members and insured persons H1:µ= There is a significant relationship between number of dependent members and insured persons. (fo)

(fe)

(fo-fe)2

(fo-fe)2/fe

23

23

0

0

Insured

21

21.39

0.1521

0.007

Uninsured

2

1.61

0.1521

0.094

No of

54

54

0

0

Insured

51

50.22

0.6084

0.012

Uninsured

3

3.78

0.6084

0.16

No of

19

19

0

0

Insured

17

17.67

0.4489

0.025

Uninsured

2

1.33

0.4489

0.337

No of

3

3

0

0

Insured

3

2.79

0.441

0.158

Uninsured

0

-

-

-

No of

1

1

0

0

Insured

1

.93

0.0049

0.005

Uninsured

0

-

-

-

Dependent None No of Respondents

Dependent 1-2

Respondents

Dependent 2-4

Respondents

Dependent 4-6

Respondents

Dependent 6-8

Respondents

Table: 15 2

The value of CHI-SQUARE is ∑(fo-fe) /fe= 0.798 Degree of freedom is (no of row-1)*(no of column-1) = (5-1)*(3-1) = 8 At the significance level 0.01 and the df is 8 the value of CHI-SQUARE is 1.646. Null hypothesis is accepted.

50

Fig: 15

0.798

1.646

100% 90% 80% 70% 60%

UnInsured

50%

Insured

40%

No of dependant

30% 20% 10%

0% none

a

b

c

d

Fig 16: Comparison between number of dependent family members and Insured person

Comparison between occupation, insured person and preferred sector:

51

Occupation

No of

Insured

Uninsured

Public

private

Respondent Service

60

58

2

43

17

Business

20

16

4

12

8

Professional

18

17

1

8

10

Others

2

2

0

0

2

Table: 16 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

0 1

2 17

0 8

2

12

10

16 4

8 43

58

17 2

insured service

uninsured business

public professional

private others

Fig 17: Comparison between number of dependent family members and Insured person Comparison between occupation and preferred sector: Occupation

No of

Vote for Public

Vote for Private

Respondents

Sector

Sector

Service

60

43

17

120

Business

20

12

8

40

Professional

18

8

10

36

Others

2

0

2

4

Total

100

63

37

200

Table: 17 Ho: µ= There is no significant relationship between occupation and preferred sector. H1:µ= There is significant relationship between occupation and preferred sector.

52

Total

(fo)

(fe)

(fo-fe)2

(fo-fe)2/fe

60

60

0

0

Public

43

37.8

27.04

0.718

Private

17

22.2

27.04

1.218

No of

20

20

0

0

Public

12

12.6

0.36

0.03

Private

8

7.4

0.36

0.048

No of

18

18

0

0

Public

8

11.34

11.15

0.983

Private

10

6.66

11.15

1.674

No of

2

2

0

0

Public

0

-

-

-

Private

2

0.74

1.58

2.13

Occupation Service

No of respondents

Business

respondents

Professional

respondents

Others

respondents

Table: 18 The value of CHI-SQUARE is ∑ (fo-fe)2/fe= 6.801 Degree of freedom is (no of row-1)*(no of column-1) = (4-1)*(3-1) = 6 At the significance level 0.01 and the df is 6 then from the CHI-SQUARE distribution table we can get the value 0.872. Null hypothesis is rejected and alternative hypothesis is accepted. There is a significant relationship between occupation and preferred sector.

Fig: 18

53

0.872

6.801

Axis Title

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Number

Insured

Uninsure d

Public

Private

<1000000

0

0

0

0

0

500000-1000000

5

5

0

5

0

300000-500000

26

26

0

16

10

100000-300000

40

38

2

25

15

50000-100000

29

24

5

17

12

Fig 19: Comparison between income level, insured person and preferred sector

Comparison between level of Income and preferred sector: Level of Income

No of

Vote for Public

Vote for Private

Total

Respondents

Sector

Sector

50000-100000

29

17

12

58

100000-300000

40

25

15

80

300000-500000

26

16

10

52

500000-1000000

5

5

0

10

Total

100

63

37

200

Table: 19 Ho:µ= There is no significant relationship between level of income and preferred sector H1:µ= There is a significant relationship between level of income and preferred sector.

54

(fo)

(fe)

(fo-fe)2

(fo-fe)2/fe

29

29

0

0

Public

17

18.27

1.6129

0.09

Private

12

10.73

1.6129

0.15

100000-

No of

40

40

0

0

300000

respondents Public

25

25.2

0.04

0.001

Private

15

14.8

0.04

0.002

300000-

No of

26

26

0

0

500000

respondents Public

16

16.38

0.114

0.006

Private

10

9.62

0.114

0.012

500000-

No of

5

5

0

0

1000000

respondents Public

5

3.15

3.4225

1.08

Private

0

-

-

-

Level of Income No of

50000-100000

respondents

The value of CHI-SQUARE is ∑ (fo-fe)2/fe= 1.341

Table:20

Degree of freedom is (no of row-1)*(no of column-1) = (4-1)*(3-1) = 6 At the significance level 0.01 and the df is 6 then from the CHI-SQUARE distribution table we can get the value 0.872. Null hypothesis is rejected and alternative hypothesis is accepted. There is a significant relationship between occupation and preferred sector.

Fig: 20

55

0.872

1.341

From the secondary data which has been got from the company we can understand how much proportion of people is using Tata AIG insurance product and other insurance company‟s products.

Number of Policy Aegon Religare

aviva

birla

icici

kotak

Met Life

Reliance

SBI

Tata AIG

15%

5%

16%

9% 2% 1% 19%

31%

2%

Fig 21: Proportion of using insurance of different insurance companies So in Dehradun city Tata AIG is having 15% market share among the private players.

using of different insurance plan Tata Maha Life Gold

Life Invest Assure

Invest Assure Optima

37%

58% 5%

Fig 22: Using of different insurance product of Tata AIG

So most preferred plan of Tata AIG in Dehradun city is Tata Maha life gold and Invest Assure Optima. Life Invest Assure is less preferred plan in Dehraun city.

56

5.2. REASONS FOR PREFERRING PUBLIC AND PRIVATE SECTOR: To know the reasons why public sector or private sector is preferable we have given eight reasons and used Likert scale. According to the preference respondents gave their ranking. To find out the most preferable reason we have added all the values; they are given below. Sector

Guarantee d rate of return

Govt. Undertakin g

Maximu m rate of return

Servic e

Age of the compan y

Shar e

Loan facilitie s

Securit y

Public

365

381

283

288

322

293

277

409

217

172

310

334

215

213

183

214

Sector Private

Sector

Table: 21

Prefarable reason for selecting public setor Gauranted rate of return 14% Govt. Undertaking 14%

Security 16%

Loan facilities 11% Share 11%

Age of the company 12%

Service 11% Maximum rate of return 11%

Fig 23: Preferable reason for selecting public sector Interpretation: a) Firstly public sector is the most preferable because of security. b) Next preferable reason is Government undertaking. c) Another reason is guaranteed rate of return.

57

d) Age of the company is also a preferable reason. e) So most of the people in the Dehradun city they want security and Government undertaking. People want the guaranteed rate of return means there is no hidden cost in the policy. It should be transparent. Age of the company is also a great factor because if a company survives for a long time in the then it‟s a faith to the people that the company may not get out of the market suddenly. So invested money would be secured. Reasons for preferring Private Sector:

Preferable reason for selecting private sector

Loan facilities 10%

Gauranted rate of return 12% Govt. Undertaking 9%

Security 11%

Share 11% Age of the company 12%

Maximum rate of return 17% Service 18%

Fig 24: Preferable reason for selecting private sector Interpretation:

a) Private sector is preferable firstly for the service b) The next reason for selection of private sector is maximum rate of return.

58

Comparison between public sector and private sector of different factors

Security Loan facilities Axis Title

Share Age of the company Service

Private sector

Maximum rate of return

Public sector

Govt. Undertaking Gauranted rate of return 0

100 200 300 400 500 Axis Title

Fig 25: Comparison between public sector and private sector of different factors Interpretation: From the bar diagram it can be interpreted that Public sector is most preferable than the private sector. From the bar diagram we can see that public sector gets more points than private sector in every factors except service and maximum rate of return. a) Most of the people preferred Public sector because of security which public sector provide more than private sector. b) A loan facility is not a vital for choosing public sector. Because it is seen from the graph difference between private and public is not more. c) Market share is not also playing the vital role for choosing the public sector. d) Age of the company has a small impact for choosing the public sector. e) According to the customer view service of the private sector is more preferable. f)

According to the customers view maximum rate of return is offered by private sector.

g) Government undertaking is a vital factor for choosing public sector. Most of the people believe on Government. So public sector is preferable. h) Guaranteed rate of return is also playing a vital role for choosing the public sector. Most of the people believe that there is no hidden cost in public sector so they can get a guaranteed rate of return.

59

5.3. MARKET POTENTIAL STUDY OF TATA AIG: 100 sample sizes have been taken to know the market potentiality of Tata AIG. Out of 100 samples 15 sample sizes have been rejected due to insufficient information. So we have taken sample size of 85. To find out the market potentiality of Tata AIG we have taken the ranking of ten major insurance companies and sum of the ranking of those particular companies are following below. Name of

LIC

the

SBI

ICICI Reliance Bajaj TATA HDFC

Life

AIG

Companies Sum of the

Max

Kotak

ING

New

Life

Vysya

York Insurance 95

313

348

395

484

490

579

609

676

686

1

2

3

4

5

6

7

8

9

10

1.11 3.68

4.09

4.64

5.69

5.76

6.81

7.16

7.95

8.07

9.89 7.32

6.91

6.36

5.31

5.24

4.19

3.84

3.05

2.93

ranking(r) Final Rank Average (r/sample size) Marks

Table: 22 Marks= Number of factor + 1- Average, i.e. Marks= 11- Average In the ranking scale 1 is most preferred and 10 are least preferred. Out 4675 points LIC has got 95 points and SBI Life Insurance, ICICI Prudential, Reliance life Insurance, Bajaj Life Insurance, ,Tata AIG, HDFC Life Insurance, Max New York Life Insurance, Kotak Life Insurance, ING Vysya, got 313 pts, 348 pts, 395 pts, 484 pts, 490 pts, 579 pts, 609 pts, 676 pts, and 586 pts respectively. It has been found that potentiality of the private sector is 37% only whereas public sector holding 63% of market share in the Dehradun city. If only private sector has considered then these nine major private companies holding the 37% of the insurance market in Dehradun city.

60

Name of

SBI

the

Life

ICICI

Reliance

Bajaj

TATA

HDFC

AIG

Companies

Marks

Max

Kotak

ING

New

Life

Vysya

York

Insurance

7.32

6.91

6.36

5.31

5.24

4.19

3.84

3.05

2.93

16.2%

15.3%

14.0%

11.7%

11.6%

9.3%

8.5%

6.7%

6.5%

6

5.6

5.18

4.32

4.3

3.4

3.14

2.5

2.4

Obtained % of Marks Out of 37% marks obtained

* Market potentiality of Tata-AIG in Dehradun city is 4.3%

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Table: 23

Chapter 6

RECOMMENDATIONS AND BENEFITS

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6.1. RECOMMENDATIONS TO THE COMPANY: Being the best product player in the private sector, but still survey TATA AIG needs to improvement regarding its premium charges and advertisement to its target customers. a) Premium charges Owing to its high premium charges (Tata AIG Apex Plan, Premium RS. 90000/-) customers perception about the company‟s product has become that its only for the upper middle class people. Whereas TATA AIG do has some policy with low premium but the charges of allocation are too high. So we would like to suggest slowing down its premium charges to some extend by reducing administration charges and other charges. b) Advertisement: During survey we have found that due to lack of advertisements about the products and agents selling the products in which they get high commissions customers are somewhere mislead and they know about very few products though TATA AIG has wide range of variety of the products. So we would recommend TATA AIG to invest more in advertisement in form of TV commercials, pamphlets and hoardings. c) Wrong perception: AIG is on the edge of filing bankruptcy. So Tata AIG is also going to on the brink of filling bankruptcy. But insurance in India is a highly regulated industry. Any company that wants to set up an insurance business has to follow very stringent norms given by the Insurance Regulatory & Development Authority (IRDA). So company should take positive measure to remove this wrong perception from the people. d) Sample size: For this research study only hundred sample size has been taken. The result will be more appropriate if a large sample size is considered.

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6.2.

BENEFITS TO THE COMPANY AND US:

During the survey time sales have been done. It is a win-win Situation for both company and me. The benefits of this summer internship program are discussed below.

1. Benefit to the company: a) This survey has been done in Dehradun region on comparison of TATAAIG‟s product and its competitor can give an idea of this position in the market. As TATA AIG leads in most of the parameters so it should continue to serve in the same manner. b) The survey also shows the customers perception about TATA AIG‟s life Insurance product with which it can improve its impression better than now. c) The recommendation has given in this report will help TATA AIG to position its product properly to the target customers d) Moreover the sales has been done during this internship have done a good business for the company

2. Benefit to us:

a) Doing internship in TATA AIG have given me immense experience in the insurance industry for these fourteen weeks. b) Interaction with the customers for survey and sales has developed our marketing skills. c) Working in the office premises has given exposure to corporate world and an experience in working in corporate pressure.

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Chapter 7

CONCLUSION AND REFERENCE

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7.1

CONCLUSION

Indian insurance sector is likely to register unprecedented growth of 200% and attain a size of Rs. 2000 billion ($51.2 billion) by 2009-10, in which a private sector insurance business will achieve a growth rate of 140% as a result of aggressive marketing technique being adopted by them against 35-40% growth rate of state owned insurance companies. The rural market offers tremendous growth opportunities for insurance companies and insurers should develop viable and cost-effective distribution channels; build consumer awareness and confidence. The state owned insurance companies such as LIC and GIC have limited number of policies to offer to their subscribers while in case of private insurance companies, their policy numbers are many more and the premium amount as well as the maturity period is much competitive as against those of government insurance companies. The private sector insurance players have started exploring the rural markets in which until recently, the state owned companies had the monopoly.

Here it can be concluded that the summer internship program, done for partial fulfillment of the MBA course in ICFAI University, in TATA AIG Life Insurance Co. Ltd. has been completed successfully. Following are the achievements done during the summer internship from 24 February 2009 to th

23rd May 2009. a) Survey done with interest of TATA AIG has been conducted successfully and results are discussed above. b) Sales done during the time have done great business to the company. c) The experience gained during the internship has sharpen my skills and given a corporate exposure.

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7.2. RFERENCES For the references different books, journals, and newspapers have been used and different websites have been used. Name of websites:  www.tata-aig.com/life insurance, access on 8th April 2009  www.tata-aiggeneral.com , access on 8th April 2009  www.tata-aig-life.com, access on 8th April 2009  www.mouthshut.com/product-reviews/Tata_AIG_General_Insurance access on 10th April 2009  www.irdaindia.org/duties/htm access on 15 April 2009  www.mydigitalfc.com/tata-aig-eyes-10-growth-motor-insurance-556.htm, access on

16th April 2009

 www.economy watch.com/insurance-overview access on 12 May 2009  www.managementparadise.com/29381-distribution-channels-tata-aig.html, access on 12 May 2009

 www.andhra.net/27-Tata-AIG-General-60949.asp.htm access on 14th May 2009  www.marketresearch.com/product/disply.asp?productid=1475505 access on 15th May 2009  www.allcoferences.com/Insurance Sector Reforms in India Challenges and Opportunities.htm, access on 15th May 2009  www.livemint.com/LIC-holds-its-groundLIC-holds-its-ground-private.html-private.html access on 16th May 2009

Name of book and journal:  Insurance Industry (ICFAI Publication)  Business Research Method (ICFAI publication)  Tata AIG Life Insurance Company Ltd, India, CGAP Working Group on Micro insurance Good and Bad Practices, Case Study No 14, James Roth and Vijay Athreye- September 2005  Privatization of the Insurance Market in India: From the British Raj to Monopoly Raj to Swaraj, Tapen Sinha, CRIS Discussion Paper Series – 2002.X Name of newspaper:      

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Asia Economy Watch 21sr March 2008 Business Line 20th September 20008 The Hindu Editorial 23rd, 24th, 26th March 2009 The Economic Times, 17th September 2008, 23rd March 2009 Business Standard 17 march 2009, 18th April 2009 The Financial Express 17th April, 14th May 2009

`

Annexure I

QUESTIONNAIRE Market Potential study of Tata AIG in Dehradun City Dear Sir/Madam, We are conducting a survey on Market potential study of Tata AIG in Dehradun city by Insurance organizations. We hope for your kind coordination. Name: ……………………………………………………………………………………………… Age: ………………………… Sex: Male [ ] Female [ ] Name and address of the organization: ……………………………………………………………. ……………………………………………………………………………………………………… ……………………………………………………………………………………………………… Contact Number: …………………………………………………………………………………... E-mail address: ……………………………………………………………………………………..

1. Family Members: (Please tick) a) 1-4 [ ] d) 12-16 [ ]

b) 4-8 e) 16>

[ ] [ ]

c) 8-12

2. Number of dependent family members: (Please Tick) a) 1-2 [ ] b) 2-4 [ ] c) 4-6 d) 6-8 [ ] e) More: ………………………… 3. Occupation: (Please Tick) a) Service [ ] b) Business [ ] d) Any other: ………………………………………... 4. Annual Income: (Please Tick) a) 50000-100000 [ ] b) 100000-300000 d) 500000-1000000 [ ] e) 1000000

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[ ]

c) Professional

[ ]

[ ] c) 300000-500000 [ ]

[ ]

5. In which would you like to invest? (Please Tick) a) Fixed deposit [ ] b) Post office d) Share buying [ ] e) Insurance policy 6. Do you have any insurance policy? (Please Tick) a) Yes b) No

[ ]

[ ] [ ]

[ ] [ ]

c) Mutual fund

[ ]

7. Which sector do you prefer? (Please Tick) a) Public Sector b) Private Players

[ ] [ ]

8. Why do you prefer public or private sector? Reason

Public Player Private Players Rating Rating Least...…………………Most Least…………………Most 1 2 3 4 5 1 2 3 4 5

Guaranteed Rate of Return Government undertaking Maximum Rate of Return within a time limit Service Age of the Company Market Share Loan Facilities Security 9. Do you have any Insurance policy in the Following companies? (Please Tick) a) LIC [ ] b) Tata AIG [ ] c) Birla Sun life [ ] c) ICICI [ ] e) Max New York [ ] f) Any Other: …………. 10. Rank different company according to your opinion. Most preferred rank is 1 and least preferred is 10 (Rank from 1 to 10) LIC ICICI Prudential Tata AIG Life Insurance Max new York Life HDFC standard Life Reliance Life Insurance ING Vysya Kotak Life Insurance Bajaj Allianz SBI life Insurance

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11. Which type of policy do you prefer? (Please Tick) a) Life Insurance

[ ]

b) Vehicle Insurance [ ] c) Pension plan

d) Medi claim

[ ]

e) Any Other: ……………………

[ ]

Any Comments: …………………………………………………………………………… ……………………………………….…………………………………………………………… ……………………………………………………………………………………………………… ……………………………………………………………………………… Thank you, for your kind co-operation. Signature: ………………………………….. Date: ………………………………………..

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