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M e t L i f e I n d i a I n s u r a n c e C o m p a n y L t d P a g e | 1
LOVELY PROFESSIONAL UNIVERSITY
DEPARTMENT OF MANAGEMENT
Report on Summer Training
MetLife India Insurance: Customer perception of insurance as: a tool of investment or a risk cover, a comparative study.
Submitted to: Lovely Professional University
And
MetLife India Insurance Co. Ltd.
In partial fulfilment of the
Requirements for the award of degree of
Master of Business Administration
Submitted by:
Bilal Ahmad Malla
Reg. No. 11011496
DEPARTMENT OF MANAGEMENT
LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA
(2010-12)
Bilal Ahmad Regd No. 11011496
M e t L i f e I n d i a I n s u r a n c e C o m p a n y L t d P a g e | 2
Table of Contents
Executive Summary...................................................................................................................5
HISTORY OF INSURANCE....................................................................................................7
INSURANCE IN INDIA.........................................................................................................12
Insurance..................................................................................................................................13
LIFE INSURANCE.................................................................................................................15
METLIFE PO L I C I E S ..........................................................................................................19
INSURANCE AS INVESTMENT..........................................................................................25
LITERATURE REVIEW.........................................................................................................27
OBJECTIVESOF THE STUDY..............................................................................................31
RESEARCH DESIGNAND METHODOLOGY....................................................................32
METLIFE PROFILE................................................................................................................34
MetLife`S ACHIEVEMENTS................................................................................................41
Chart showing Market Share of ULIPS in Kashmir region.....................................................44
BANCASSURANCE...............................................................................................................45
Banks as Referral Agent of an insurance company.............................................................56
Insurance products distribution by banks as Corporate Agents...........................................57
INCORPORATION OF METLIFE AS A JOINT VENTURE WITH J&K BANK...............58
FACTOR ANALYSIS.............................................................................................................63
ANALYSIS AND INTERPRETATION.................................................................................72
FINDINGS...............................................................................................................................78
RECOMMENDATIONS.........................................................................................................80
CONCLUSION........................................................................................................................81
ANNEXURE............................................................................................................................82
BIBLIOGRAPHY....................................................................................................................85
Bilal Ahmad Regd No. 11011496
M e t L i f e I n d i a I n s u r a n c e C o m p a n y L t d P a g e | 3
PREFACE
Every study needs a research to analyze the problem, and thus working on its improvement is
needed. The research provides an opportunity to a student to demonstrate application of
his/her knowledge, skills and competence required during the technical session.
My topic for research is “Customer perception of insurance as: a tool of investment or a
risk cover, a comparative study.”
The research helped me to devote my skills to analyze the problem and to work upon it and
look to suggest the alternative solutions. Further on evaluating it using theoretical and
analytical approach, it helps me to prepare feasible recommendations on the provided data.
I tried my level best to prepare this report error free and without any contamination. Every
effort has been made to offer the accuracy.
Bilal Ahmad Regd No. 11011496
M e t L i f e I n d i a I n s u r a n c e C o m p a n y L t d P a g e | 4
DECLARATION
This is to certify that I, Bilal Ahmad Malla, have personally worked on this project regarding “Customer perception of insurance as: a tool of investment or a risk cover, a comparative study”. The data mentioned in this report was obtained during the work done by me under the stewardship and supervision of my training guide Mr. Rayees Ahmad Zargar, ASM MetLife India Insurance Company Ltd. Srinagar.
In preparing this project I had taken assistance of various books, magazines and websites on the subject which are enumerated at the lowest ebb of this project.
Bilal Ahmad Malla.
Bilal Ahmad Regd No. 11011496
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ACKNOWLEDGEMENT
The successful completion of any task would be incomplete without mentioning the people
who have made it possible. So it`s with the gratitude that I acknowledge the help, which
crowned my efforts with success.
I owe my gratitude to Mr. Bilal Ahmad Bilal , Branch Head, MetLife India Insurance
Co. Ltd., Mr. Javaid Ahmad Senior Sales Manager; for their constant guidance and support.
I extend my deep gratitude to Miss Sukhwindar Mam my faculty training guide of
lovely professional university, for her constant guidance and support.
I would also like to convey my sincere thanks to Mr. Rayees Ahmad Zargar, and to
Mr.Irfan Ali Zargar, for helping me out and showing keen interest in my project.
I would also like to thank the various department officials and staff who not only
provided me with required opportunity but also extended their valuable time and I have
words to express my gratefulness to them.
Last but not the least I am very much indebted to my family and friends for their warm
encouragement and moral support in conducting this project work.
Bilal Ahmad Malla.
Executive Summary
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MetLife India Insurance Co. Pvt. Ltd. Is one of the largest, strongest and
most respected financial organizations in USA. It was incorporated in India
on April 11, 2001 as a joint venture between MetLife International Holdings
Inc., The Jammu & Kashmir Bank, M. Pallonji and Co. Pvt. Ltd. And other
private industries. The mission of the company is to provide 5 million
customers in India world class solutions for financial security and in the
process add significant value to its shareholders, associates and society by
2010.
In order to facilitate its mission the need of the company was to analyze the factors
responsible for insurance policies. Keeping in view the need of the company I took it as my
Research Problem and developed the Questionnaire with my training guide. To facilitate this
process firstly I approached CSO’s of various branches of Metlife and discussed the matter
with them. After seeing their positive response towards the same problem as discussed above
the details of customers was made and were approached personally with the prior
appointment at a convenient place of the client at a suitable time and day.
The Research was conducted in Srinagar City. As this is a Exploratory Research
different branches of J&K Bank were allotted to me to discuss the case with the Insurance
Managers/CSO for the smooth conduct of the Survey.
About 100 customers were contacted at various J&K Bank branches and at Head Office Of
MetLife India Insurance .
The main objective of the study is to know the actual problem of lapses
and loopholes in the whole system/process,
The following objectives were set for the present study:
1) To study the insurance as a tool of investment.
2) To study the insurance as a tool of risk cover.
Bilal Ahmad Regd No. 11011496
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3) To know the factors responsible for the insurance policies.
4) To know the customers perception towards insurance.
After analyzing the respondent’s views about the company a feedback were available to the
company which proved to be helpful for the company in knowing the various strengths and
the weaknesses. After knowing the company got knowledge of the different fields where it
should work if it wants to achieve the sky heights in the industry. Before this research it was
seen that the company was good in introducing new customers to the organization. But a
company cannot be successful if it focuses on new business only which was practiced in
MetLife.
The research was also helpful to the company as to know the perception of customers
towards insurance. The company is not keeping the customers interest away after they invest
but the continuously remain in touch with them and make the various departments customer
friendly which makes the image of the company as a customer focused company. To be a
customer friendly is a very good thing for the organization.
Limitation of Research:
The main limitation of the research that I feel was Shortage of time. This research was of
vast nature and six weeks time was very little for its complete study. Customer perception
level cannot be fully analyzed on the basis of 100 customers only, MetLife globally perform
surveys and this survey will just serve as a part of that in Kashmir region.
At last I can say that to achieve its goals of Insuring 5 Million customers the
MetLife can easily achieve it by simply overcoming such loopholes and there
are lot of opportunities for the Company to grow in the country like India.
Bilal Ahmad Regd No. 11011496
M e t L i f e I n d i a I n s u r a n c e C o m p a n y L t d P a g e | 8
HISTORY OF INSURANCE
As with so many things in so many facets of our lives, Insurance too was born
out of a primary need and shaped by socio-economic realities of this time.
The story goes back to around 2100 BC, to the ancient civilization of Babylon
and a business practice called "Bottomry". For all practical purposes form of
marine insurance, bottomry enabled ship owners to borrow money against
their ships to pay for the trip. With Piracy rampant on high seas, traders and
seafarers were reluctant to sail to other lands for fear of their lives and
goods. Bottomry gave them some semblance of security. The arrangement was
that if only their ship returned did traders have to repay to loan, along with
interest, which was pegged at an above market rate for the risk covered. So if
their failed to make it back, they did not have to repay the loan, thereby
recovering some or all of the loans.
O R I G I N S
With the marine route being the bedrock of trade and commerce in
those days, the practice of bottomy evolved, and spread. With the growth of
towns and trade in Europe, medieval guilds (groups organized on the basis of
some common objectives, like traders) pooled in money to protect their
members from loss by fire and shipwreck, to pay ransom if they were
captured by Pirates, and to provides burial and support in sickness and
poverty. By the middle of the 14 t h century, as evidenced by the earliest known
insurance contract (Genoa, 1347). Marine insurance was common among
maritime nations of Europe.
Lloyd's of London, the largest marine insurer today, was founded in
1688, in a coffee shop in London. Lloyd's coffee house became the preferred
place for merchants, ship owners and underwriters to transact business.
Insurance development rapidly with the growth of British commerce in the
17 t h and 18 t h centuries and started becoming organized, along the way going
through a period of defaulters and closures
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The British brought insurance to India in 1818, replete with imperialist
prejudices. The Oriental life insurance company, the first insurance company
in the country, insured only European widows, British insurers eventually
began insuring Indian lives, but for a premium that was 15-20 percent higher
than that payable by the British. It was only in 1870 that the disparity was
corrected. Six Indians, peeved by this second-Class treatment, set up by
Bombay Mutual life assurance society, and started Insuring Indian lives at
the same cost as British lives, social discrimination, in fact turned out to be a
catalyst for Indian initiative in the insurance sector. In 1909, activist Ishwar
Chandra Vidyasagar founded the Hindu family Annuity fund- the first
instance of a pension - based investment scheme targeted at Indians.
As had happened in England earlier, a flood of new players and patchy
regulations snowballed into a crisis. Several insurers defaulted on their
contractual obligations to policy holders, citing investment losses; some even
folded up. The insurance Act 1938 introduced state controls on insurance,
but even this failed to safeguard policy holder interest.
N A T I O N A L I Z A T I O N
Post-independence, discontent against insurers reached a pitch. Business
was chaotic, foreign insurer were leaving the country and Indian insurers
driven by greed and business considerations weren’t earning much credibility.
The cry for nationalizing insurance grew louder. A move that insurers were of
course opposed to.
On 19 t h January 1956 the life of insurance business was nationalized. In
one swoop the govt. snapped up 245 insurers and provident societies. Eight
months later the LIC was formed which took over the businesses of the
erstwhile private insurers and started expanding at a frenetic pace. Today this
monolith has 2100 branch offices, 800,000 agents, and offers a bevy of
insurance and investment products. LIC marked insurance less as a risk
management too and more as a saving instrument with a tax edge. A look at
LIC’s policy profile shows that just 18 percent of policies in force currently
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are protection plans; insurance cum investment plans account for 60 percent,
with the balance being pure investment plans. Still , households embraced
these safe investments avenues, with the sum assured (or the total value of
cover) increasing from Rs. 1476 crores in 1957 to Rs. 459201 crores in 1998-
1999.
Similar circumstances lead to the nationalization of Non-life (or
general insurance). As in life insurance, pre-nationalization, there were an
inordinately large number of insurers, many of whom were notorious for
floating investment norms and delaying settlement of claims Non-life
insurance was nationalized in 1972. A general insurance corporation (GIC)
was setup as a holding company; a total of 107 private insurers were merged
and grouped to form GIC’s four subsidiaries.
P R I V A T I S A T I O N
There were various reasons given by the government to nationalize the
insurance sector; take insurance to the masses, facilitate the flow of long-
term funds (which insurance companies, by virtue of the business they are
in, have ready access to) into development of infrastructure in the country,
and safeguard the interests of policyholders. Towards this end, state insurers
did develop insurance sector, though most experts believe these monopolies
could have done much, much more.
In the early nineties, the government went on a reforms blinge and
started loosening controls on Indian industry. In 1993, the government
appointed the Malhotra committee, headed by the former RBI governor R.N.
Malhotra, to draw up a blueprint for insurance sector reforms. The Panel
submitted its report a year later, recommending privatization, backed by stiff
entry guidelines and stringent regulations, so as to avoid a repeat of the pre-
nationalization fee-for-all.
The Insurance Regulatory and development Authority (IRDA) was
formed to regulate the sector and oversee the process of privatization. In
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2000, the IRDA started giving out licenses, and a year later the first of the
private players started operations. The wheel had come full circle.
Under state controls, the insurance sector, both life and non-life grew
steadily. Still , Indians are not adequately insured and lag behind most
countries. Total insurance penetration (insurance premiums as percentage of
gross domestic product) is dismal when compared to its economic standing;
just 2 percent of the population
has some form of life insurance. But in this huge gap lies a huge opportunity,
which is why private insurers are queuing up.
In many ways, the re-entry of private insurers has marked a second
coming for the sector. In just three years the sector has undergone a
makeover, offering the fruits of a free market; more choice, better service,
quicker settlement, tighter regulations, greater awareness. State insurers have
been compelled to get their act together. And, to think of it , these are still
very early days.
Bilal Ahmad Regd No. 11011496
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INSURANCE IN INDIA
Bilal Ahmad Regd No. 11011496
1818 The British introduce life insurance to India, with the establishment of the Oriental Life insurance company in Calcutta.
1850 Non-life insurance debuts, with Triton Insurance Company.
1870 Bombay Mutual Life Assurance Society is the first Indian-owned life
insurance business
1907 Indian Mercantile Insurance is the first Indian non-life insurer.
1912 The Indian Life Assurance Companies Act enacted to regulate the life
insurance business
1938 The Insurance Act, which forms the basis for most current insurance
laws, replaces earlier Act.
1956 Government Steps up LIC.
1958 Life insurance nationalized government takes over 245 Indian and
foreign insurers and provident societies.
1972 Non life insurance nationalized; GIC set up.
1993 Malhotra committee headed by former RBI governor R.N. Malhotra,
setup to draw up a blue print for insurance sector reforms.
1994 Malhotra committee recommends reentry of private players,
autonomy to PSU insurers
1997 Insurance regulator IRDA (Insurance Regulatory and Development
Authority) setup.
2000 IRDA starts giving licenses to private insurers;
ICICI prudential and HDFC standard life first private life insurers to
sell a policy
2001 Royal Sundaram alliance first non-life insurer to sell a policy
2002 Banks allowed to sell insurance plans; as TPA’s enter the scene,
insurers start setting non-life claims in the cashless mode
M e t L i f e I n d i a I n s u r a n c e C o m p a n y L t d P a g e | 13
InsuranceDefinition and Meaning
To insure means to make a contract that promises to payer secure payments of a specified
sum of money in case of accident, damage, loss, injury, death or any other event taking place.
The “Dictionary of Business and Finance” has defined insurance as “a form of contract or
agreement under which one party agrees, in return for a consideration, to pay an agreed
amount of money to another party to make good a loss, damage or injury to something of
value in which the insured has a pecuniary interest as a result of some uncertain event” . It
is a device by which the loss likely to be caused by an uncertain event is spread over a
number of a person who is exposed to it and who proposes to insure themselves against such
events.
MEANING OF INSURANCE
From the above definition, it becomes clear that insurance is a voluntary agreement
between two parties, viz. the insurer and the insured the former to compensate the latter
against the loss suffered by him on the happening of an event. Thus, it is a device though
which the loss is spread over large number parties. Insurance is the undertaking (assurance)
given by a company , society or the State to provide safeguard against loss, provision against
sickness, death etc. in return for a regular payments called premia (plural of premium). The
person or company which undertakes to make payment in case of loss etc. is called the
insurer and the person to whom such payments will be made is called the insured. The
person who pays the premiums or premia is called insurant. The meaning of insurance can
be well understood from the following example of fire insurance.
Suppose there are ten houses in a particular locality costing Rs 1,000 each. On an
average each year one house gets completely destroyed by fire. This means the unfortunate
owner whose house catches fire has to suffer a loss of Rs 1000. Instead, this loss can be
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spread over all the ten owners by means of insurance. By providing fire insurance, a sum of
Rs 100 ( in the form of premium) can be collected from each owner and the total amount Rs
1000 so collected can be given to the unfortunate owner to reconstruct the house. In this
way, each year one house can be built. Each owner will annually pay Rs 100 for ten years.
Thus, the loss is spread over all the owners equally. In real practice, however, it is in
proportion to the value of insurance. Thus, insurance is a device by which the loss likely to be
caused by an unforeseen event is spread over a large people who are exposed to it and who
proposed to insurance themselves against such an event.
From the legal point of view, insurance is based on a contract between two parties. It
is a written agreement to make good some loss, damage or injury .The terms and conditions
agreed to are stated in the contract which is known as insurance policy. In this way, the risk
of loss is transferred from the insured to the insurer. Insurance has nowadays become so
popular that practically everything from a pin to a giant structure can be insured against a
possible risk.
Like any other contract, the contract of insurance must also satisfy the following
conditions:
1 There must be an agreement between the two parties, the insurer and the insured.
2 The agreement called insurance policy must be in writing.
3 The parties to the agreement must give their free consent to all terms ad conditions
of it.
4 The parties must be competent to enter into contract
5 There must be mutual consideration
6 The object of the contract must be lawful.
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LIFE INSURANCE
Of all forms of insurance, life insurance or assurance occupies a
prominent place in all walks, of life. Almost every wage-earner is nowadays
interested in taking life insurance. It has made such a tremendous progress
that it has occupied a leading position in the field of insurance. This is
because the risk involved is certain. The event is bound to happen soon or
later, e.g. death. Hence sometimes the term "Assurance" is used instead of the
term insurance. A contract of assurance guarantees the payment of a specified
sum of money to the assured on the happening of a specified even. Hence life
assurance Life insurance or assurance is defined as " a contract by which the
insurer, in consideration of a certain premium, either in a lump sum or by
periodic payments, undertakes to pay certain sum of money to the assured on
his reaching " a particular age or to those entitled to it in the event of his
death". Thus, life insurance is a contract between an insurance company and
the insured whereby the insurer, in consideration for a premium, undertakes
to pay a certain sum of money on the death of the insured or n expiry of a
stipulated period whichever occurs earlier. Since each one of us, during our
lives are faced with numerous risks failing health, financial losses, accidents
and even fatalities, our instincts drives us to cover ourselves against those
risks. Though an insurance cover can't protect you against emotional losses
arising out of these risks, if softens the economic crisis that usually
accompanies these losses. Contract of life insurance is mainly based on two
principles, viz., those of utmost good faith and insurable interest. The person
who wants to take our l ife insurance pol icy must possess insurable interest
in the l i fe he wishes to get assured.
Therefore, a person can take out a life insurance policy for himself or
his wife, husband, son, daughter, parents or any other relative in whose life
he or she has insurable interest. Life assurance contact is not a contract of
indemnity. It is a contract for payment of a specific amount because actual
loss of human life cannot be measured in terms of money.
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Life insurance differs from other types of insurance in several respects. First
of all , i t is no protection to the life of insured person. It is only a cover under
compulsory saving is provided. It is a kind of channel to mobilize small
savings into investment. Thus, it promotes savings and investment. It is in the
form of a financial aid of the family of an insured person in the event of his
premature death. In case, he survives throughout the term of the policy, he is
paid a lump sum which is nothing but his own savings kept with the insurance
company in the form of premiums deposited. Secondly, in life insurance, the
amount of policy is certainly payable by the insurer sooner later except in the
circumstances of controversial death of the assured. Thirdly, the term of a
life insurance contract is sufficiently long such as 20 years or 25 years in
case of endowment policies. In case of whole life policies it may be still
longer.
Settlement of the life insurance claims
When a policy becomes due for payment in the event of the
policyholder’s death, the following procedure has to be followed by his
nominee to claim the amount of the policy.
Proof of Death: This is the first step in the procedure of getting the amount
claim. The proof of death has to be furnished to the insurance company if the
policy has become due owing to the death of the assured. A certificate given
by doctor who has treated the assured before his death is a satisfactory proof
of his death or the certificate issued by the Municipality can also be a
satisfactory proof of death. The necessary documentary evidence of death
must be submitted to the insurance company.
Proof of age: The assured is required to produce a satisfactory proof of
his age to the insurance company at the time of taking out a policy. This
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evidence of age may not be given to the insurance company at the time of
settlement, if the age was admitted by the insurance company earlier. In case,
no such proof was submitted at the time of issue of policy, the claimant of the
policy amount has to submit it , since without such a proof claim cannot be
settled by the insurance company.
Proof of title: The person who lodges a claim with the insurance
company have to establish own legal title to the amount of the policy.
Establishing legal title to the amount of the policy is necessary especially
when no nominee is named in the policy.
If the insurance company is satisfied with all the documentary proofs
submitted, the amount claim is settled by it . In case, there is any dispute
regarding the settlement of claim, the matter is referred to the court for
arbitration purpose.
THE REAL CONCEPT OF INSURANCE
A financial planner once said this about life insurance buying habits of
Indians, they don’t buy insurance, and it’s sold to them. Unfortunately, but
true. Individual awareness and understanding of life insurance products is
extremely low, and many among the insured don’t even know whether the life
insurance policy they own meets their insurance needs, and in large context,
their personal finance needs,. In most cases, chances are, they could be doing
better.
The first and the most important step towards ‘doing better’ involves
being financially being financially literate, and having, at the least, an
elementary understanding of life insurance is all about. This means being
aware of the various types of insurance products on offer in the market, as
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well as having the ability to understand one’s life insurance needs and find
appropriate fits.
Life insurance is chiefly a risk management tool, meant to offer
financial protection to your dependants in the unfortunate event of your
death. If you are adequately insured, your life insurance should enable your
dependants ( Spouse, Children, parents) to maintain their current life style
and pursue their life goals till such time as they are in a position to set up an
alternative income stream by themselves. That’s the basic purpose of life
insurance.
But in India, as in most other developing markets, life insurance has
come to represent more than just risk cover. The best selling insurance
products in the market double as investment options and offer attractive tax
breaks. In fact, i t’s because of this two-in-one profile that they appeal to the
average individuals who seeks convenience in personal finance matters.
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METLIFE PO L I C I E S
Based on their objective, basis plans offered to insurers can be classified
under three broad categories: pure insurance products (term plans), pure
investment products (pension plans) and investment-cum-insurance products
(endowment , money-back, Investment-cum-insurance products (endowment,
money-back, whole-life and unit- linked insurance plans). Increasingly, insurers
are launching hybrid variants of these plain vanilla plans.
T E R M P L A N S
Term plans are the purest form of insurance. These are no-frills policies
that cover only the risk of your death. In the event of your death during the
policy term, your nominee receives the cover amount. In insurance parlance
holders, mutual funds to unit holders, automobile clubs to members, and so on.
Factor in such freebies while computing your life cover.
E N D O W M E N T P L A N S
While term plans cover just the risk of death, endowment plans also
offer return on the premiums paid by you. So, if you die during the policy
term, your nominee gets the sum assured plus some returns; if you survive the
policy term, you still gets back the sum assured and returns. As much as this
money if you live "Philosophy is an enticing proposition, it comes at a price;
high premiums, which drag down the returns from endowment plans, to barely
4-6 percent a year.
In an endowment plan, you pay premiums for pre-defined tenure and sum
assured. The premium will depend on your age, the sum assured, the plant
tenure and the nature of returns. A portion of premium paid by you is invested
by the insurer on your behalf. Another portion goes towards. Meeting the insurer
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administrative expenses, this lowers the effective yield on your investment in
endowment plans.
WHOLE-LIFE PLAN :
The three categories of insurance plans mentioned above provide you life
cover only for a def in i te per iod , up to a cer ta in age ( g e n e r a l l y , 7 0 y e a r s ) .
Whole-life plans, on the other hand, and provides you cover through your
lifetime-the only class of insurance policies to do so.
Typically, whole-life plans are structured such the policyholder has the
option to pay premiums up to a certain age (referred to as the maturity age,
the insurer provides you the option to either continue through your lifetime
(for which no further premiums will have to be paid) or encash the maturity
benefits (sum assured plus bonuses). Some insurers do give the option to
encash the bonus during term itself, which can serve as a useful income
stream during your later years, if you so desire.
But do you really need life cover through your time? Typically, your
life insurance needs start taper off after the age of 50. Your children are
earning and probably in need of life cover themselves.
You yourself would have accumulated, or are well on your way to
accumulating, a sizeable nest-egg to see you through your retirement years.
Only if you have financial dependants or have an income steam to protect
during your post-retirement year does it make sense to buy a whole-life
policy.
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UNIT- LINKED INSURANCE PLANS
In insurance-cum-investment plans of the kind listed above, you have little
say in where your money be invested. Your insurer too is governed by
investment restrictions; it can invest just 10 per cent of the premium paid by
you in equities; the greater chunk of 90 per cent has to be invested in debt
paper . While such restr ic t ions are intended to ensure safety of your
investment, they also lead to rigidity in investment and rein in your returns,
to single digits. Unit-linked insurance plans get around such restrictions, by
giving you greater control over where your premium is invested.
Think of them as insurance plans that double as mutual funds. The
annual premium you pay on unit linked plans is linked to the sum assured and
the policy tenure. In the illustration given below for example, for a sum
assured of Rs. 1 lakh on a 20- year plan, the premium payable is Rs 6,000 a
year. In the first year, typically, around 20 per cent of the premium is
deducted by the insurer towards your risk cover and to meet its own
administrative expenses (this figure drops gradually through the plan term,
tapering off at around 5 percent). The balance 80 per cent in the first year
(more in the subsequent years) is invested in an investment plan of your
choice, and your are allocated unit, based on the prevailing net asset value
(NAV) of the plan you have opted for. Just like in a mutual fund.
The investment plans on offer cover the risk reward spectrum. You can
choose from income plans (high on debt, low on equity), growth plans (high
on equity, low on debt) and balanced plans (roughly equal distribution
between debt and equity).
Insurers, based on the historical performance of their plans and their
return expectations, tend to project a range of returns for each plan. Take
note that these are just guesstimates- what end up with could be higher or
lower, depending on your plan's performance.
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You can swi tch f rom one p lan to another f ree of cos t once a year (a
nominal amount is charged for additional switches). So, if you think stocks
are going cheap, you can move to the growth plan; or, if you think stocks are
overvalued, you can move your money to the income plan. Thus, unlike
endowment plans, you can control your investment in unit-linked insurance
plans.
Unit-linked plans also enable you to periodically monitor the
performance of your investment. Insurers declare the NAV of the various
plans periodically-generally, once in three months. Exiting these plans is also
easier and it doesn't invite prohibitive penalties. After a lock in period
(generally, one year), you can withdraw your units anytime, in part or in full,
at the then-prevailing NAV; your life cover will be reduced accordingly , You
can also make incremental investments any time, and add a corresponding
amount to your life cover.
By their very nature, unit-linked insurance plans are meant for
individuals who understand investing and the stock market but prefer to leave
it to the experts to do active money management; they are prepared to forfeit
assurance on returns for a chance to take home more than what a conventional
endowment plan would offer.
The case to prefer unit-linked plans over conventional endowment
plans is compelling. Insurance plans are long-term plans, with tenures
stretching to 10, 15, 20 years-durations that give a good chance to reap the
true returns potential of equities. In endowment plans, though your money
stays locked for similar lengths of periods. At least 90 percent of it is
invested in low yielding debt instruments, as a result of which returns from
them are p e d e s t r i a n . I n o t h e r w o r d s , e n d o w m e n t p l a n s d o n ' t m a x i m i z e
r e t u r n s , especially for knowledgeable investors. Unit-linked plans offer that
possibility.
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PENSION PLANS
Pension plans differ from the five types of insurance plans mentioned
above in a fundamental way: not all of them offer life cover. So, why are we
talking about them here? Because pension plans feature among the bevy of
products offered by insurers and are pitched as retirement planning schemes,
similar to other investment- based insurance plans.
Pension plans are investment options that let you set up an income
stream in your post-retirement years by routing your savings through an
insurer, who invests it on your behalf for a fee. The precise returns you will
get depend on several factors: your age when you begin investing, the
contributions you make, your investment preferences based on your risk
profile, the age at which your want the money to start coming back to you,
and the number of years for which you want the returns.
Immediate or deferred? The payback from pension plans generally takes the
form of an annuity you are paid a certain sum every year. There are two types
of annuities, depending on when the insurer begins the annuity paybacks.
With an immediate annuity, the payments start the year you buy the contract.
You hand over a lump sum (Say, your superannuation benefits) to your
insurer and choose the periodicity of payments and the number of years for
which you want a pension, based on your assessment of your life expectancy
and needs of your financial dependants. Typically, this option would appeal
to those who retired or are about to retire, are looking to set up an immediate,
regular income stream, and feel ill-equipped to handle their investments on
their own.
The other type of annuity is a deferred annuity, wherein the annuity
payments are deferred for later years (at a predefined age of vesting, as i t is
called). During the accumulation phase, your investments earn a return, and
grow without being taxed-unti l you receive your annuity payments.
Consequently, investments in well-managed annuity plans have the potential
to grow substantial ly over a long period. However, you are l iable to tax (at
appropriate slab rates) on your annuity withdrawals, which are treated as
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income. Therefore, deferred annuit ies make financial sense if you're l ikely
to move to lower tax bracket after your retirement.
Deferred annuity schemes enforce a savings discipline: unlike with self
managed investments, you are committed to making periodic payments.
Additionally, since these are conceived of as long- term investment vehicles,
premature withdrawals invite prohibitive penalties, so it 's important to stick
with them; only then will you also benefit from the power of compounding.
Increasingly, insurers are packing in a few options that provide greater
flexibility to your pension plan.
Participative or unit-linked? The most important among this relates to
where your money is invested and by extension, how much returns you can
expect. Based on the surety of returns (which is reflected in the manner in
which these plans are structured), pension plans can be classified as
participative or unit-linked. In a participative plan, at the time of investing ,
the insurer will indicate (not assure) the annuity amount you are likely to
receive during the benefit period.
No such indicative assurances are given under unit-linked pension
plans. Your contributions are directed to an investment plan of your choice.
For each investment you make, you will be given some units, based on the
scheme's then- prevailing NAV. As in unit-linked insurance plans, you can
choose from a variety of scheme profiles (typically, income, growth and
balanced) and make a free switch once a year (a nominal charge is levied for
additional switches). Each contribution made by you will entitle you to
additional units. Depending on the performance of your scheme, the value of
your investment will appreciate or depreciate. Pension plans facilitate
disciplined, long-term investing-one of the pillars of wealth creation. Each
year, you set aside a certain, pre-specified sum towards you retirement kitty.
This money says invested for long periods of time, reaping the benefits of
compounding. Premature withdrawals invite prohibitive penalties- typically;
you lose 7 percent of the current value of your investment if you withdraw
within a year, 3.5 to 5 percent within 3 years and 3.5 percent after three
years. On reaching the vesting age, you can withdraw your money.
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Alternatively, you can use it (in part or in full) to buy a participative annuity,
from your existing insurer or from another insurer. The variable option gives
you a play on equities, and therefore has the potential (but no assurance) to
outperform the fixed- return option. It 's a risk- return trade-off, and you have
to find your fit .
Some insurers, on some of their plans, give you the option to bundle
life insurance along with these pension plans. You can c h o o s e t h e a m o u n t
o f l i f e c o v e r y o u w a n t , b a s e d o n w h i c h a premium will be deducted
from your contribution, which will make a difference to your maturity
amount: It will show up as marginally lower annuities in participative plans
and lower sum invested in unit-linked plans
INSURANCE AS INVESTMENT
Endowment plans are the best selling life insurance product in the
country. This single fact says a lot about how most Indians who get
themselves covered like their insurance products to be: insurance cum
investment plans. Individuals have been known to banks on endowment plans
to get their lives insured, save on tax, build a retirement corpus, and fund
their children’s education and among other things. But are they maximizing
their returns, or can they do better, without compromising on the life
insurance benefits? In other words, do life insurance plans make good
investments?
The answers to these questions are not straight forward, given the
number of factors that influence returns on your investments. These include
the impossibility of predicting interest rates and tax rates over twenty years
or more-tenures typically of insurance contracts .Yet, with some realistic
assumptions, it is possible to assess if endowment plans make good
investments.
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THE RETURN EQUATION
Illustration : The case of a healthy 30- year old male who wants life cover of
Rs 5 lakh for 20 years. He has two options before him. The first is to buy an
endowment plan which gives him life cover of Rs 5 lakh by way of a term
plan ( the cheapest life cover), and invest the premium differential in
investments of his choice.
We have considered Insurance plans from LIC, the country’s largest
Life Insurer. The endowment plans is Endowment Assurance Plan, in which
he will have to pay an annual premium of Rs 23,978. The term plan is Jeevan
Anmol, in which a cover of Rs 5 lakh can be had for a premium of Rs 1,528 a
year. The differential of Rs 22,450 is invested in various instruments. In
order to give an idea of the return possibilities, we looked at three
instruments that span the risk- rewards spectrum: PPF (risk-free, moderated
returns), debt funds (moderate risks, moderate returns) and equity funds (high
risk, high return. ( In an endowment plan they declare an annual bonus of Rs
50 per Rs 1,000 sum assured – a realistic assumption – through the term
yields Rs 10 lakh (tax – free) the end of the term, which translated into a
return of 6.6 per cent a year. That’s significantly less than what in other
options would yield, even if the premium differential was invested in a
comparable risk-free instrument, like the 8 per cent PPF; the returns would
increase further if the premium differential was able to earn the historical
returns debt funds and equity funds has been known to give over such long
periods.
THE ROAD AHEAD
Returns from endowment plans have fallen sharply; between 1999 and
2005, bonus rates have dropped from 9 percent of sum assured to 4 percent
and these could drop even further
FALLING RETURNS
There are guidelines on where life insurer can invest the money they collect
by way of premiums from you on endowment plans. Around 90 per cent of it
is to be invested in safe debt instruments, leaving just 10 percent for the high
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yielding asset class that is equities. It follows that profits of insurers will
closely track returns from debt paper.
Literature Review
1. M. ShriNivas Osmania University Hyderabad , 2008
This study was a modest attempt to analyze the causes for lapsation after
privatization on the basis of the experiences of the functionaries like branch
managers, development officers, Agency managers and insurance agents
(CSO’s) who are the core marketing staff for MetLife India Ins. Co. Pvt. Ltd.
After privatization significant progress has taken place in Indian insurance
sector especially in life insurance business. However still lot of potential for
life insurance consumption is available in India as the India's Life Insurance
penetration and density is low when compared to Asian average or world
average. In spite of rapid progress the sector is suffering with high rate of
lapsation of policies . This study reveals that forced selling of policies
without caring for matching of MetLife products with requirements of the
policy holders plays a vital role in lapsation of policies in the first year of
policy life. This is happening due to the fact that beneficiaries are unaware
about the insurance products and their comparative merits and limitations. In
addition the services after sale of policies are not as per the requirements of
the policy holders. Hence there is a need to organize special training camps
to agents and awareness camps to beneficiaries periodically. Attention has to
be paid on not to yield for forced selling, target oriented last movement
selling without caring for matching of insurance products with that of the
requirements of policy holder.
2. Misbah Showkat, Student of K.U., J&K, 2008
In her study Misbah has clarified that For the purpose of identifying prime
causes for lapsation, the perceptions of the core functionaries in the
marketing network of MetLife are ascertained by canvassing questionnaire.
They include Branch managers, Area Managers, Sales Managers,
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Development Officers and Agents. For the purpose stratified random
sampling is applied in selecting sample of Branch managers (BMs),
Development Officers (Dos) and Banca Agents. The study is confined to the
city of Srinagar. The findings include awareness levels of the customer
(about personal risks, insurance and insurance product knowledge), product
mismatch (lack of need based selling/ forced selling/ wrong selling),
incompetent services (by agent and MetLife), financial problems of customers
(due to insufficient income, inflation, lack of financial planning ),
Competition (with other financial institutions and other investments with
higher returns).
3. Irfan Ali Zargar, student of Kashmir University, J&K, 2007
In his study Irfan Ali has listed that purchase of insurance more than
affordability, purchase of wrong type policies, purchase of expensive policies
etc are some of the causes for lapsation. He has included the Srinagar city as
epicenter, since Srinagar is the best site of Kashmir valley for successful
business. Presently he is the Area manager of Sales Department; this is the
result of his sincere efforts towards the mission of organization. The
conclusion and recommendations were very helpful to the management. He
has reinstated almost 100 (one hundred) lapsed policies .
4. IRDA journal Aug., 2008:
The focus of this issue of journal is on “LAPSATION OF LIFE INSURANCE
BUSINESS”. It starts with an article discussing inter alia the vulnerabilities
that insurers are exposed to account of early lapsation. In the next article, a
team of life insurance domain consultants project ‘persistency’ of business
as the fifth ‘p’, which is as important as the other four ‘p’s of Marketing.
Another article draws light about the important role that the distributor
[Agency personnel or CSO] plays in ensuring that life insurance contracts
don’t die an immature death. One significant adverse feature of high
lapsation in life insurance is the financial crisis that it brings about, both for
the insurer as well as the insured. This journal also focuses on the remedial
measures adopted by life insurers. Although in an insurance contract, the
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insurer promises to pay the assured sum on the happening of the event,
sometimes the claims are not paid on account of various reasons, this gives
birth to the problem of “REPUDATION OF CLAIMS”.
5. Life Insurance Companies Are Consistently Coming up With
More New Policies
Now days there are so many ways where we can save our earnings and invest for the future.
Investing in life insurance policy is one of the foremost way of doing that. MetLife has got so
many products from which we can benefit ourselves. They are the whole term life insurance
policy, the mortgage policy, the health insurance policy, the universal life insurance policy
and many more. All the products offered by MetLife are very good, we can benefit ourselves
from them if we in invest according to our requirements. MetLife offers various products for
various life stages, it has got wealth accumulation plans, retirement, child care plans. So we
should invest according to our need. Before investing in life insurance we should consult
various persons like friends, family members etc. especially we should consult the customers
of that very company in which we want to invest. We should inquire various important things
from which reinstatement is one. We should always take decisions keeping in view both the
aspects ie; could be, could not be. If somehow your policy gets lapsed then reinstatement is
the obvious tool to change its states. Hence reinstatement is a compulsory thing which we
should take care of. From the track record it is confirm that MetLife is using this tool with
good technique.
6. PREMIUMS AND REINSTATEMENT
Renewal premiums are those paid after the initial premium. MetLife offers its customers so
many frequency with which renewal premiums will be paid. Renewal payment options given
by MetLife are monthly, quarterly, semi-annually and annually. A policy at MetLife will
lapse if the renewal premium has not been paid and the grace period has expired. Grace
period at MetLife is a specified period of time, usually 30 or 31 days after the due date,
during which the premium may be paid without penalty and coverage remains in force. If a
renewal premium is not paid by the end of the grace period, the policy lapses, which means
coverage ends and the company is no longer bound by the insurance contract. Metlife may
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waive its right to have premiums paid on the due date.
If your policy lapses because you did not pay the premium by the end of the grace period,
you may be able to reinstate your policy at MetLife with some special ease than other
companies. It is because the reinstatement guidelines followed at MetLife are quite different
from others, they are more customer focused. Policies at may be reinstated after termination.
Payment of past due premiums is required. MetLife require an application and evidence you
are insurable under their underwriting rules then in effect. Reinstatement takes effect on the
date Metlife approve the application of reinstatement. If MetLife do not decline reinstatement
in writing within 45 days, the policy will be reinstated on the 45th day after date of the
conditional receipt will give you in exchange for your payment of all premiums due.
7. Keep your Life Insurance Policy Current
There are two basic types of life insurance, and premium payments are processed differently
for each of them. Failure to pay your premiums will have a different effect on your policy
depending on the type of product purchased. There are many reasons why policy at MetLife
lapses. The two most common reason a customer let's a Life Insurance Policy lapse is
because they forgot to renew it or they don't think they can afford the premium. Allowing a
Life Insurance Policy to lapse is a very bad thing. Don`t think you can simply call MetLife
and reinstate your policy some time after it lapses similar to a cable, cell phone or electricity
bill but the fact is you can't. If you allow your policy to lapse it is very likely you will need to
apply for a new policy. This can be very costly as you may have had a term life insurance
policy locked in 10 years ago when you were young and healthy. There is no doubt your
premium will now go up even with the same death benefit but how much the premium goes
up depends on how well your health is. Don't forget to renew it! MetLife have made it very
easy to ensure you never forget to renew it. So before you invest in MetLife make sure that
you are satisfied with the reinstatement procedure so that in will not prove costly to you.
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OBJECTIVESOF THE STUDY
Objectives of the Study :
The main objective of the study is to know the actual problem of
lapses and loopholes in the whole system/process,
The following objectives were set for the present study:
1) To study the insurance as a tool of investment.
2) To study the insurance as a tool of risk cover.
3) To know the factors responsible for the insurance policies.
4) To know the customers perception towards insurance.
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RESEARCH DESIGNAND METHODOLOGYRESEARCH DESIGN
A Descriptive Research was adopted to conduct this study.
In order to realize the objective of the study, primary data was collected through
“QUESTIONNAIRE” besides the use of Secondary data.
Sampling Plan
The population of interest was the policy holders of Kashmir valley. Respondents from
Srinagar were selected for the sample. The customers were approached at their respective
residences, business establishments or at the concerned bank branches. Some of the
customers were contacted telephonically.
DATA COLLECTION
Data Source:
Primary as well as secondary were used
Primary data has been collected from the survey conducted through
systematic gathering of data from structured sample of customers through
questionnaire.
Secondary data comprised mainly of management books and various
websites.
The report mainly consists of primary data gathered through the questionnaire
filled by the respondents.
.
INTERVIEWING PROCESS
The survey was conducted through interviews with the FA’s and customers
were asked the reason of lapsed policies and the interviewer noted down the
responses. This ensured high response rate and eliminated wrong irrelevant
responses.
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Pilot survey
The questions in questionnaire were pre tested for errors and ease of understanding. The
errors thus determined were eliminated. The understanding issues were also eliminated to the
extent they could be without any effect on the intended purpose of the query.
This brought some changes in the questionnaire.
Statistical tools
SPSS 16.0 and Microsoft Excel were used for tabulation of data, percentages
are drawn for generalizing the study and graphs are used for having better
pictorial representation.
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METLIFE PROFILE
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The spirit of MetLife’s commitment………..
V I S I O N
Build financial freedom for all through leadership in providing
professional financial advice and building long term relationships through
innovative protection, accumulation and retirement products, robust
underwriting processes and creating a world-class customer service
experience for our customers.
O U R M I S S I O N
By 2010, provide 5 million customers in India world-class solutions for
financial security and in the process add significant value to our
shareholders, associates and society.
O U R C O R E V A L U E S
1We lead through innovation to offer world class and competitive
products to our customers.
2We build long term relationships with our customers by creating a world
class service experience through operational excellence and the
innovative use of technology.
3We create a customer centered and result focused division that inspires
and has the buy in of all our associates and has their buy-in.
4We are committed to creating a high performance organization by
creating an environment that allows each one of our associates to
perform at their peak. As a result we will also be recognized as an
employer of choice.
5We are committed to partnering with our internal and external customers
for mutual success.
6We work with integrity, fairness and financial prudence in all our
dealings keeping the interest of our shareholders, customers and
employees paramount.
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………….Partnering for excellence
MetLife proudly inherits its parent company's over- 136 year- o l d r e p u t a t i o n
o f h e l p i n g b u i l d f i n a n c i a l f r e e d o m f o r e v e r y o n e .
Ranked 38 on the Fortune 500 list (April 2004) MetLife insurances
(MetLife) is one of the largest, strongest and most respected financial
organizations. MetLife through its ' affiliates is the number one life insurer in
the U.S with approx. @2.5 trillion of life insurance in force (as of Dec. 2002)
and has been delivering reliable, high quality service to its customers since
1868.
MetLife is a leader in group benefits that serve 88 of the top one
hundred FORTUNE 500® companies, and providing benefits to 37 million
employees and family members through its sponsors in the U.S. The MetLife
companies are also ranked #1 in group life and #1 in commercial dental in the
U.S. Headquartered in New York. MetLife through its affiliates, subsidiaries
and representative offices, operates in 15 countries throughout the America,
Europe and Asia. MetLife's institutional clients have approx. 35 million
employees and members. MetLife has assets under management worth $255
billion.
(FORTUNE 500® is a registered trademark of FOURTUNE® Magazine, a
division of Time, Inc)
MetLife insurance Company private Limited was incorporated in India
on April 11, 2001 as a joint venture between MetLife international Holdings
Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and
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other private investors. MetLife has-developed and distributes a range of life
insurance in India.
MetLife is headquartered in Bangalore with officers and presence in
major Indian cities, and an additional 1000 outreach points through its
channel partners.
Through our highly professional agency system, we are dedicated to
helping Indian consumers plan for their financial security through customized
solutions.
MetLife is driven by the principles of uncompromising integrity and
the highest level of professionalism. Its mission is to work with utmost
integrity, fairness and financial prudence in all its dealings.
MetLife benefits from its parent company's global presence in the field
of insurance, track record of establishing successful insurance operations in
emerging markets and the unique strengths of its other Indian promoters.
Drawing from these experiences, MetLife will be able to address the needs of
the Indian customer.
MetLife aspires to build on MetLife history of meeting policy holder
and contract obligations and the, ability to withstand the impact of adverse
economic factors. The MetLife brand, known for empowering people to feel
protected, guided and hopeful about their lives, will do the same for its
Indian customers.
In the past two years, MetLife has made significant contributions to
the growth of MetLife international. Since selling its first policy in January
2002, MetLife has experienced strong growth from its agency force, which
increased 45% during 2003 alone. The company presently has more than
240,00 policies in place and has recently entered the institutional market with
a group life product. While group insurance in India is not currently a large
market, the segment is forecasted to grow rapidly in the next two-to-three
years. By focusing on this untapped market, MetLife can meet the needs of
large corporations, helping them establish benefit programs that help them
attract and retain top talent. However, it is pertinent to mention here that
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India's Banc assurance and Corporate Agency has also played a significant
role in contributing to this success. The goal is for MetLife to contribute
significantly to the MetLife mission of reaching 100 million customers by
2010. To help reach that goal, MetLife plan on launching innovative products
in the near future, this will act as a major differentiator among competitors.
In additions, with the launch of the new MetLife television commercials,
which is a first for our India operation, this will add greatly to MetLife's
global brand recognition. The combination of this brand and the continued
outstanding efforts will provide the fuel to drive MetLife further up the road
of success.
MetLife delivers value and world-class service to customers through its
financial advisors and corporate sales representatives. The mission of
MetLife Insurance is to build financial freedom for all . What is financial
freedom? It is all about securing one's future. It about approaching life’s
major milestones without any worries. True financial freedom arises from
identifying your financial capabilities, setting realistic goals based on your
dreams and aspirations and achieving them through a comprehensive plan.
Most importantly, while you set out to draw up financial plans for your life-
you need to understand that it isn't a one-time plan. The planning that goes
into attaining your financial freedom should be dynamic, since life itself is
dynamic. What's good for you today might not be next year.
During the course of your life you need to achieve your aspirations
(life owning of house), meet certain financial obligations (life educating your
children or-getting them married), ride over unforeseen contingencies and
plan a financially independent retirement phase. The Met Advice Financial
Planning could be the first step in your planning exercise. It attempts to give
you on overview of the various investment options available in the market
today.
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P R O D U C T S O F M E T L I F E
1. MET 100
2. MET SUKH
3. MET MORTAGAGE PROTECTOR SINGLE PAY
4. MET PLATINUM (PARTICIPATIVE ENDOWNMENT)
5. MET 100 GOLD (PARTICIPATIVE WHOLE LIFE)
6. MET 100 PLATINUM (PARTICIPATIVE WHOLE LIFE)
7. MET GOLD (NON PARTICIPATIVE ENDOWNMENT)
8. MET BHAVISHYA
9. MET SUVIDHA (NON PARTICIPATIVE REGULARPAY)
10. MET SUVIDHA (NON PARTICIPATIVE LIMITED PAY)
11. MET SUVIDHA (NON PARTICIPATIVE SINGLE PAY)
12. MET SUVIDHA (NON PARTICIPATIVE SINGLE PAY)
13. MET SUVIDHA (PARTICIPATIVE LIMITED PAY)
14. MET SUVIDHA (PARTICIPATIVE LIMITED PAY)
15. MET SUVIDHA (PARTICIPATIVE SINGLE PAY)
16. MET PENSION (PARTICI PATIVE SINGLE PAY)
17. MET PENSION (PARTICIPATIVE REGULAR PAY)
18. MET PENSION (PARTICIPATIVE LIMITED PAY)
19. MET SURAKSHA (NON PARTICIPATIVE REGULARPAY)
20. MET SURAKSHA (NON PARTICIPATIVE LIMITEDPAY)
21. MET SURAKSHA (NON PARTICIPATIVE SINGLEPAY)
22. MET SURAKSHA LIMITED TO AGE 60 (NON PARTICIPATIVE
REGULAR. PAY)
23. MET SURAKSHA LIMITED TO AGE 60 (NON PARTICIPATIVE
LIMITED PAY)
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24. MET SURAKSHA LIMITED TO AGE 60 (NON PARTICIPATIVE
SINGLE PAY)
25. MET SMART PLUS-RP
26. MET SMART PREMIER-RP
27. MET SMART PLUS SINGLE
28. MET SMART PREMIER SINGLE
29. MET ADVANTAGE PLUS-
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MetLife`S ACHIEVEMENTS
MetLife enjoyed a golden performance on May 15, 2009 (New York) - At the 15th Annual
FCS Annual Portfolio Awards, the Financial Communications Society (FCS): four awards, all
Gold trophies, plus the Best-in-Show Multicultural award for its "South Asian Brand
Television Campaign," created by IW Group. The award was sponsored by Forbes. MetLife
also won Gold in the new ROI category, which recognized the success of marketing
campaigns for their stated return on investment.
MetLife’s corporate vision – to build financial freedom for everyone – guides the
company’s response to people’s growing need for first-rate financial products and
services through various life stages and economic cycles. MetLife’s trusted brand,
capital strength, and existing relationships with millions of individual and institutional
customers around the globe uniquely position MetLife among its competitors.
The "everyone" in MetLife’s vision took on added meaning in 2000 as the company
welcomed an important new constituency: shareholders. MetLife transformed itself
from mutual to stock ownership in April of that year through a demutualization and
initial public offering that was completed in just 18 months after Board authorization.
The year 2001 was a true test of the qualities that define MetLife. The company’s core
values, brought to life in what MetLife does every day, were no more evident than in
MetLife’s response to the tragic events that shook our nation on September 11.
MetLife responded quickly. The company served its customers, communities and
employees during this difficult time. At the same time, MetLife invested $1 billion in
a broad array of publicly-traded common stocks.
In 2001, MetLife was the first insurance company to establish a financial holding
company with a nationally chartered bank. Leveraging its unparalleled distribution
channels, MetLife entered the retail-banking arena with the launch of MetLife Bank,
making it an easy and convenient way for MetLife’s customers to realize their
financial goals.
MetLife announced in 2002 that it would be continuing its long-standing relationship
with Snoopy and the rest of the PEANUTS® characters. The company signed a new
contract that would allow the characters to appear in MetLife’s domestic and
international advertising for the next 10 years.
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The sale of State Street Research & Management Company to BlackRock, Inc. was
announced in 2004. In line with MetLife’s strategy to focus on core business growth,
the sale benefited many of the company’s Individual and Institutional Business clients
who held investments through State Street Research, as it became part of one of the
largest publicly traded investment management firms in the U.S.
The company’s stated long-term goal is to become the recognized leader throughout
the world for relationship building, connectedness and caring in financial services – in
the "giant league" with over 100 million people as MetLife customers by the year
2010.
MetLife took a major step toward realizing this goal in 2005, when it acquired
Travelers Life & Annuity and substantially all of Citigroup’s international insurance
businesses for $12 billion. Completed on July 1, 2005, the Travelers acquisition made
MetLife the largest individual life insurer in North America based on sales, the second
largest provider of retail annuities and the largest provider of institutional annuities.
Working Mother magazine honoured MetLife in 2005 by naming the company one of
the "100 Best Companies for Working Mothers," for the seventh consecutive year. In
2005, the company was named to Diversity Inc.’s list of the Top 50 Companies for
Diversity. In early 2006, MetLife was also named to the National Association for
Female Executives’ annual list of Top 30 Companies for Executive Women.
In 2006, MetLife appointed C. Robert (Rob) Henrikson chairman of the board of
directors, president and chief executive officer of MetLife, Inc. Henrikson was
appointed CEO on March 1, 2006 and chairman of the board on April 25, 2006.
Henrikson has been the architect of an aggressive growth strategy that included
double-digit organic growth, the divestiture of non-core businesses, and an M&A
strategy which resulted in market leadership in all of MetLife’s core product lines.
Before it was commonly talked about, Henrikson recognized the opportunities
presented by the changing demographics in a global marketplace and set the company
on a course for continued success by developing innovative products and services and
strengthening the company’s distribution power in the U.S. and 16 markets in Asia
Pacific, Latin America and Europe.
Today, a time when consumers are feeling a greater financial burden than ever before,
MetLife is helping millions of customers create their own personal safety net. At no
time in the company’s history has MetLife been as well positioned to capitalize on its
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history, its reputation for security and stability, and its innovative products and
services as it is today.
In the future, MetLife will continue to grow its business with focus, innovation and
profitability. This will be accomplished by drawing on the reservoir of history that has
produced an enduring set of corporate values based on more than 138 years of
integrity, social responsibility, strong leadership and financial strength.
Some other achievements
Largest life insurer in the US with approximately $3.4 trillion of life insurance in force1
Serves 70 million customers and experiences the existence of over 140 years in the
industry
Ranked 39 on the FORTUNE 500 listing
Ranked 6th In Fortune Magazine 2009 List of “America’s Most Admired Companies”
Named by Forbes magazine as “The Best Managed Insurance Company in America
(2008)”
3rd Runner up in customer loyalty survey Conducted by Business Standard & AC Nielson in 2008
Chart showing Market Share of ULIPS in Kashmir region
1Metlife inc. through its affliates
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Bajaj Allianz27%
ICICI Prud33%
MetLife40%
Market Share Of Major Players
Inference and analysis:
The Graph shows that 31.39 Cr is the market share of Kashmir region
regarding ULIPS(Unit Linked Insurance Policies ), 27 Cr is that of ICICI
prudential and 22.5 Cr that of Bajaj Allianz.
Inference :
It implies that major portion of ULIPS market is that of MetLife India
Insurance Ltd. But there is a tough completion among the three that is Bajaj
Allianz, ICICI Prudential and MetLife. So, MetLife have an edge over others
and should continue the same in the market.
BANCASSURANCE
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B A N C A S S U R A N C E
Banc assurance in its simplest form is the distribution of insurance
products through a bank's distribution channels. In concrete terms banc
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assurance, which is also known as Allfinanz - describes a package of financial
services that can fulfill both banking and insurance needs at the same time.
It takes various forms in various countries depending upon the
demography and economic and legislative climate of that country.
Demographic profile of the country decides the kind of products banc
assurance shall be dealing in with, economic situation will determine the
trend in terms of turnover, market share, etc., whereas legislative climate will
decide the periphery within which the bane assurance has to operate.
The motives behind banc assurance also vary. For banks it is a means
of product diversification and a source of additional fee income. Insurance
companies see banc assurance as a tool for increasing their market
penetration and premium turnover. The customer sees banc assurance as a
bonanza in terms of reduced price, high quality product and delivery at
doorsteps. Actually, everybody is a winner here.
Benefits to bank
Using bank as a distribution channel benefits both the insurance
company and the bank. Benefits of using bank as a distribution channel are:
1) Banks provide a readymade infrastructure and, therefore, reduces
the time and cost in establishing distribution network by the
insurance company Bank can supplement fee income without
utilizing large amounts of capital.
3) Leverage its strength in distribution of banking.-products.
4) Customer retention by offering convenient window for banking and
insurance products.
Benefits to the insurance companies
Benefits that would accrue to the insurance companies:
1 Banks have the potential to avoid expensive agency system and
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facilitate prospecting of smaller term life insurance policies which
are not covered by the existing agency system.
2 Banks' customer focused information system in the banks facilities
automating the process of prospecting customers for specific
products.
3 Banks provide an effective channel for direct marketing by periodic
mailing and also online access.
4 Access to readymade customer base for selling insurance products.
5 Avoiding wasteful expenditure on data procurement, data
warehousing and data mining.
Critical success factor
Bank Assurance has been successful for selling insurance products due to:
Easy accessibility
Customer trust on bank
Frequent interaction with the customer
Quick service
Improved sales
Reduced cost of
High conversion rates of the customer
Convergence of Banking and Insurance Industries
Key Issues for Banks in India
As banks in India increasingly show active interest in entering the insurance
sector, several managerial issues, regular concerns and operational challenges
are beginning to surface. Her we seek to review the factors driving the
phenomenon and then to consider some of the technical challenges that
converge poses to senior bank managers. In particular, it advocates the need
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for a coherent articulation of the convergence proposal by every bank
involved, and the implications the initiative holds for the core banking
business. The study closes by considering some of the long-term implications
in the initiative for public sector banks, which dominate the Indian financial
system. The objective of the paper is to raise the awareness of banking and
finance professionals about the global phenomenon of convergence in the
financial sector and certain unique issues in the Indian context due to
ownership and other aspects that underline the need for a careful trading of
the path.
The pressure to move towards convergence
There are three factors driving banks in India to look at entry into the
insurance sector:
1) The attraction of fee income in the face of declining interest spread
2) The scope to divert the staff rendered surplus due to massive
computerization
3) The motivation to enlarge the product range to bank customers.
It is relevant to note that the factors that have pushed banks abroad into financial convergence
by way of Banassurance are not entirely the same as in India. In continental Europe, well
established Banasurance programmes contributes 20 to 30 % of the retail banking profits. The
main driving force in their case has been to establish synergy with insurance to secure an
additional and more stable stream of income. Banks have sought to leverage their extensive
customer base and sell a range of financial services to increase customer retention. Another
motive for banks overseas has been to reduce the risk based capital requirement for the same
level of revenue.
In a study published by the Economist Intelligence Unit in 1996 titled “Creating
tomorrow’s leading retail bank”, one of the conclusions was that as retail banking became
intensely competitive from electronic commerce, banks needed to quickly take up customer-
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centric business model, and Banc assurance emerged an important activity to aid banks
”based on their segmentation knowledge, develop pricing strategies and channel offerings
for every single customer that are customized to the fullest possible extent”.
Declining interest spread
Banks in India at the present stage are not driven by such a customer segmentation approach
before embarking on a new sector such as Insurance. At the same time, the three factors
mentioned above are becoming important. While Indian banks have recorded an increase in
net interest income spread) in the recent past, this is largely due to containment of interest
expenditure in a softer interest regime witnessed at present. The ratio of spread earning
foreign banks, as yields on assets have declined more than proportionately vis-à-vis the cost
of liabilities.
The net interest margin of the banks in India (as a percentage of total assets) was 2.85
% in 2001, which came down to 2.57 % in 2002. It is still higher than more competitive
markets, such as UK (2.02 %), France (1.03 %), and Germany ( 0.8 %), and it can be
expected that the margin would shrink to international levels as the competitive condition
intensify.
Re-deploying surplus staff:
The second factor driving banks into insurance sector, viz. deploying staff ( most clerical)
rendered surplus by the ongoing technology initiative, is a unique factor in India. Employee
costs for Indian Banks have been high, especially for public sector banks at about 20 % of
total expenses. The core banking initiatives undertaken by a number of banks will
substantially streamline the transaction processing and back office operations, resulting in the
need for major re-shuffle of personnel. As per an estimate, at least 20% of the clerical staff
members engaged in these functions would need to be diverted for other work, and several
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banks are proposing to utilize them to undertake simple marketing or loan recovery initiative.
In this context, a related question is whether the ongoing IT initiatives in banks are clearly
planned with a view to quickly benefit from cross selling financial products to their vast
customer base. A World Bank Review team that visited India in February 2001 to follow up
the implementation of the Financial Sector Development Project had commented that the IT
initiatives of Indian banks are not being driven by business or customer needs. The team
found an undue focus on the hardware part of the technology without a corresponding
attention being paid to the productivity aspect. This is an important observation that
underlines the need to target the technology spend in banks to draw more value from
customer, a key difference that characterizes the initiatives of banks abroad towards the
convergence process.
Expanding the range of Products:
The third factor encouraging banks into insurance, viz. the urge to provide a broader
range of products to customers, is an outcome of increasing competition in the banking
industry. Banks have realized the importance of introducing new products and services which
enhance the standing of the banks among customers. Introducing of new products brings
publicity to banks and helps enhance their reputation among the peers.
It is, however, important to recognize that banks in India tend to launch new products or
services without having doing adequate homework. Banks in developed markets offer new
services such as selling insurance products based on a deep study and research of customer
behavior and their expectations, and extensive cost/benefit analysis. Product launches are
preceded by a clear goal setting for the marketing team to achieve minimum levels of
business. Marketing budgets are set, and the benefits flowing from the initiatives are closely
monitored. On the other hand, most banks at home do not draw a clear roadmap for
implementing new products, or set up a proper system to evaluate the benefits of new
products at regular intervals. This is an important issue in the convergence process, which
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needs serious attention from the top level in the banks to achieve expected results.
Regulatory support for the convergence process in India
India is one of the select countries that have provided a regulatory baking to the coming
together of banking and insurance at a fairly stage of opening up the insurance sector. The
banking regulator has divided the initiatives of banks to enter into the insurance business
under three broad categories:
Banks aspiring to take only distribution of insurance products without any form of risk
participation. Such banks are freely permitted to do subject to certain filling requirements.
a) Bank proposing to take strategic equity stake in insurance ventures up to 10% of
the equity capital of the insurance venture. Such initiatives are allowed in the case
of strong banks with good profit record
b) Banks seeking to form insurance joint ventures with up to 50% equity stake (and
exceptionally up to 74%). This is allowed by the central bank in the case of very
strong banks having a minimum net worth of not less than 500 crores, capital
adequacy ratio of not less than 10%, good profit record and low level of impaired
loans.
The Indian regulations concerning bank’s entry into insurance sector compare favorably with
several other Asian countries. Thailand, for example allows banks to hold a maximum of only
10% of shares in insurance companies, while Taiwan allows only 5 %.
EVOLUTION OF THE CONVERGENCE PROCESS
The model that allows pure distribution of insurance products through bank branches is
catching up in India, with more than 20 banks announcing distribution arrangement for life
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and non life insurance products.
Referral Model:
There are two distribution models practiced here: the ‘referral’ arrangements and the
‘corporate agency’ arrangement. The referral arrangement refers to process whereby
insurance company secures customer leads from the bank branch manager, by placing an
insurance agent at the bank premises other means. It is a form of uncommitted relationship
under which banks provide physical infrastructure to insurance companies within their select
branches and earn a fee for each referral made by him. The insurance regulator has prescribed
rules to restrict the referral model from becoming a major alternative to the more serious and
binding corporate agency arrangement.
Corporate Agency:
Under the Corporate Agency Model, a bank becomes the authorized agent of an insurance
company (life and non life) to distribute its products actively to customers. In the process, the
bank agrees to undertake certain responsibilities. Corporate agency is a committed form of
relationship that requires the bank staff involved in insurance selling to be trained and
qualified for the purpose and the bank assuming responsibility to oversee that the sales
activity is pursued as per the Insurance Regulations. In particular, the bank staff is expected
to follow the standards of customer service prescribed the regulator.
Under both Referral and Corporate Agency arrangements, a bank is allowed to tie up on
exclusive basis with one life insurer and one non-life insurer. In other words, multiple tie-ups
with several insurance companies is not allowed, so that bank can develop the required
expertise by aligning with one firm. Banks aspiring to distribute products of more than one
insurance company are required to take license as a broker and set up a separate firm owned
by the bank
As at March 2003, the regulator has approved strategic equity stake by four banks in
Insurance companies. A strategic alliance may enable the bank partner to cooperate in
developing insurance products suited to the bank distribution, and possibly in sharing
customer information. The regulator has also approved full fledged joint venture arrangement
in the case of four banks, with equity stake ranging from 26% to 74%.
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Ideal Bancassurance model:
Is there an optimal Bancassurance model suitable for India? There is no straight answer. The
form of convergence that a bank chooses with an insurance company depends on the vision
of the bank board, the size of the bank, its geographical reach and the client mix, and the
capacity of the bank management to successfully manage the integration process. Given the
divergent size and other characterizes of banks in India, it is likely that there will be multiple
banassurance models here, perhaps all practiced successfully.
In the popular model of entering into distribution agreements, the fundamental challenge for
the bank and the insurance company is to reach a decision on a suitable commission structure,
which provides adequate incentives to both. The major challenge in a corporate agency
relationship is to make it work at the operational level. The task involved in making the
frontline bank staff become competent insurance sales person and in the process overcoming
several cultural and mindset barriers is somewhat indeed in our environment..
In the case of a bank assuming strategic equity stake without assuming risk participation in
the insurance business, the key issue is what propels the bank to opt for this arrangement:
whether it is proposed as a prelude to a more integrated form of entry, or an arrangement of
convenience. In strategic stake relationship[s, the bank tends to remain a minority partner,
thereby being unable to being about an alignment of its own interests with the insurance
venture. Since the bank will be sharing equity partnership in the insurance firm with other
minority and major holders, the inter se relationship issues would also assume importance.
In a joint venture structure, both the partners are usually involved in setting up a new
company as a green field operation, and the issues here are deeper. The decision of the bank
to enter into a joint venture should be based on extensive discussions and negotiation between
the bank and the insurance partner. A joint venture is a long term arrangement that should be
well thought out and should work out in the mutual interest of both parties. There should be a
strong commitment on the part of both the parties to create a truly partnership – based
organization that reflects the virtues of both. Since bank- sponsored insurance ventures tend
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to draw more value from the bank partner than from the insurance partner at least in the early
stages, the needs and expectations of both have to be balanced to create a participatory
arrangement.
An important issue for bank-sponsored insurance joint ventures in India is the higher level of
equity ownership that the bank is required to take up in the early stages in accordance with
the ownership rules in force, and the timing and manner of diluting the bank’s stake in the
period ahead. Experience shows that the Indian banks are not adept at looking at equity
ownerships with the eyes of an investor. A shrewd investor always spots opportunities for
diluting the stake partly or fully at the right time with a view to book capital gains; Indian
banks tend to carry on with the original level of equity holding irrespective of the
performance of the invested entities until the regulatory authority directs them to disinvest.
This is the case in respect of the asset management companies and other outfits set up by
public sector banks, which continue to remain under their dominant ownership until the
central bank directs them to lower the ownership levels, or totally exit from the business.
It is too early to assess the performance of the relationship[ between banks and the insurance
companies in India under the arrangements currently in force. Experience in other countries
suggests that not all Banassurance models have been successfully everywhere. Quite a few of
them have succumbed to problems encountered during the implementation phase.
Business risk
A bank may also run the risk of adverse impact on the banking relationship with a customer
following a dispute between the customer who has bought an insurance product from the
bank, and the insurance company. This could arise in distribution of non—life insurance
products, such as property insurance cover, or marine cargo cover. Any dispute in claim
settlement could spill over to the banker-borrower relationship. For example, non settlement
of a claim under a fire insurance policy may result in the loan becoming a non-performing
asset, with the client seeking to take the bank to task for selling a policy on which the
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settlement is not forthcoming.
Strong customer education at the timer of distributing the insurance policy by stressing the
respective role of the bank and the insurer, and clear description in product literature about
the insurance responsibility for claim settlement would help to mitigate the risk.
In our context, as earlier stated, the Indian regulations apply the exclusivity principle in
distribution arrangements between a bank and an insurer, which could add to the dimension
of the risk. Since a bank is allowed to tie up with only one insurer, it will be obliged to place
the business relating to all its clients with the insurance company concerned. The capabilities
of the latter to service the needs of the large number of bank clients would become a critical
factor.
Channel conflict risk
One of the risks insurance companies run in entering into the banc assurance distribution
arrangements is invoking the potential ire of the agency force. Individual agents are the main
source of procuring business for insurance companies. The powerful agents usually
Bancassurance partnership that competes with their business sources. There have been
instances of agents boycotting insurance companies on account of bank distribution
arrangements and create problems of channel management for insurers.
This may have indirect problems for the bank taking up insurance distribution. Faced
with such action, an insurance company tying up with bank may choose to design a different,
probably less attractive or remunerative products for the bank distribution.
Banks as Referral Agent of an insurance companyMajor aspects of the Insurance Regulations
1. A Referral arrangement is entered into with a bank for access to its database,
provisions of physical infrastructure and for display of publicity material of the
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insurer.
2. A bank entering into such arrangement shall not be allowed to enter into any
similar arrangement with another life insurance or non- Life Insurance Company.
3. Where a bank has been licensed to act as a corporate agent for an insurance
company, the bank shall not enter into referral arrangement with another insurance
company.
4. The purchase of insurance products by the customers of bank should be on a
voluntary basis, and this should appear prominently in all publicity materials
distributed by the bank and the insurer.
5. There shall be no linkage either direct or indirect between the provision of
banking services and sale of insurance products.
6. Every referral arrangement shall be for a fixed period.
7. A copy of the Referral Agreement entered into between the bank and the
insurance company should be filed with the Insurance Regulatory Authority and
RBI.
8. Referral fee paid to the bank should be treated as acquisition cost to the insurer
concerned, and the total of such referral fees paid should beat a proportion to the
gross premium income earned through the arrangement. For instance, where the
referral arrangement generates 10 % of the gross premium, the maximum payout
as referral fee cannot exceed 5.5% of the premium amount.
9. No commission or other remuneration shall be paid along with referral fee.
Insurance products distribution by banks as Corporate Agents.Major aspects of the Insurance Regulations
1. A Corporate Agent cannot be an agent for more than one Life Insurance or one non-
life Insurance company at the same time.
2. Every bank aspiring to become a corporate agent should designate an officer as the
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‘Corporate Insurance Executive’ (CIE). CIE’s are generally a director or a senior
officer who shall be overall in-charge of the function of corporate agency.
3. Only Specified Persons (SPs) in a corporate agent shall solicit and procure insurance
business.
4. Both CIE’s and SP’s should undergo the practical training of 100 hours and pass the
test conducted for Corporate Agents by IRDA before they are given the license. IRDA
has prescribed those employees possessing CAIIB qualification, or marketing,
Chartered accountancy, cost accountancy, MBA qualification or such specified
qualifications, need to undergo only 50 hours of training before taking the mandatory
test.
5. The insurer shall issue a license to the bank as the Corporate Agent, which shall be
valid for a period of three years and could be renewed thereafter. There is a token fee
of Rs 250 for issuing the license.
6. A Corporate Agent is entitled for commission remuneration as provided in the
Insurance Act, 1938 which ranges from a minimum of 2%for single premium policies
and 40 % for policies with regular premium mode.
7. The bank as a Corporate Agent shall be responsible for all acts of CIE and SPs. It
shall ensure that only trained, skilled and authorized persons in the bank solicit or
procure insurance business.
8. The corporate agent shall not force any person to buy an insurance product. The
employee selling the products shall give adequate pre-sales and post-sales advice to
the insurer, and render all possible help and cooperation to an insured in completion
of all formalities and documentation in the event of a claim. The Sp’s should explain
to the prospect the nature of information required in the proposal form by the insurer
and also the importance of disclosure of material information.
9. The corporate agent shall bring to the notice of the insurer any adverse habits of the
prospect, and not induce a prospect to submit wrong information.
10. The corporate agent shall not offer different rates, advantages, benefits other than
those offered by the insurer.
11. The corporate agent shall not have portfolio of insurance business from one person or
organization in excess of fifty percent of total premium procured in nay year.
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INCORPORATION OF METLIFE AS A JOINT VENTURE WITH J&K BANK
Our Banc assurance partner in life insurance is MetLife India, which is a joint venture of
MetLife International Holdings Inc, the No 1 Life Insurer of USA, J&K Bank, M. Pallonji &
CO and private equity investors with the following capital structure
MetLife India 26% 41.60 Crores
J&K Bank Ltd 25% 40. 00 Crores
M.Pallonji & co 31% 49. 60 Crores
Other private equity 18% 28.80 Crores
Investors
Total 100% 160 .00 Crores
The initial authorized share capital of the joint venture company was Rs 110 crores
divided into 11. 00 Crores equity shares of Rs 10/- each. However the joint ventures will
require approximately Rs 450 Crores of capital over six years from the date the joint venture
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company was duly registered. In October 2003 the joint venture partners contributed
additional share capital of Rs 50.00 crores out of which the bank’s contribution was 12.50
crores thereby raising the Bank’s share to Rs 40.00 crores.
MetLife India formally launched its operation in J&K State on 7 th of March 2002 at Srinagar
with a small range of products namely Met Sukh ( Money Back Policy), Met Shanti
(Endowment Policy) and Met 100 ( Whole Life Product). The product range was enhanced
by introducing some new products as per the insurance needs of customers.
The existing product range includes the following:
Met Mortgage Protector policy:
Specially devised to secure the interest of J&K Bank staff and the borrowers availing the
Housing Loan, Car loan and term Loan facilities with a repayment period of 5 years and
above
Met Gold ( Endowment)
Met 100 Gold (Whole Life Policy)
Met Suvidha ( Endowment)
Met 100 Platinum (Participating whole life for face amounts above Rs 5 lacs)
In addition to the above products Metlife India has recently launched a pension product
namely Met Pension.
The bank has been selling the insurance products of MetLife India as theirCorporate Agents
w.e.f. 23.06.03. MetLife India sold about 10000 policies with Annualized premiums of Rs
1027.62 Lacks through our branches . Bank earned a commission income of Rs 263.93 Lacks
during the said period. The quantum of life insurance business mobilized by J&K bank
during the year 2002-03 constitutes about 38% of the total business done by MetLife India
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through the country during the said period. The bank while using its 520 branch distribution
channels for sales of MetLife India products provided a ready made infrastructure to Metlife
India thereby reducing the time and cost in establishing a distribution network for the
company’s products. Commission is paid on the following rates to Bank by MetLife
40% (maximum) For the first Year Premium
7.5 % For 2nd and 3rd year
5% For 4th year and onwards
Bank in association with its Bancassurance partner i.e MetLife India has been providing fast
and competent insurance services to its customers and earned their loyalty. Employee
productivity of the bank has also increased as its customers buy the insurance products of
their choice in less time at one shop. Presently the bank has got about 200 trained/licensed
Insurance Managers and about 400 Clerks ( having product knowledge) whose services are
utilized in prospecting the insurance customers for Bancassurance business throughout the
country.
Objective
To generate fee income for the Jammu & Kashmir Bank of Rs 40 Crores by the 7th year of
operation.
Assumptions
1) Insurance income will pay Jammu & Kashmir Bank 40% Commission subject to
regulations
2) Reimbursement of expenses incurred by the bank will be determined. Average
premium per policy Rs 5000
Products
3) Traditional Life Products similar to that of LIC
4) Endowment
5) Money Back
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Strategy is to price similar to LIC to achieve expense loading, thereby giving better
value to the customer
Other Products
6) Credit Insurance
7) Capital Repayment
Operational Plan
8) Identify JKB branches and employees who will be designated for insurance sales.
9) Put them through IRDA agent licensing for composite licenses ( both for life and non
life)
10) Additional training to gain prospecting and selling skills
11) Marketing and sales support to be provided by MetLife India Insurance Company
12) Products sold through JKB branches to be Co-branded.
Underwriting
13) MetLife will install electronic underwriting software at all designated branches of
Jammu & Kashmir Bank
14) It is anticipated that approximately 85% of all applications will be electronically
underwritten
15) MetLife offices will issue policies and courier them to Jammu & Kashmir Bank
Branches
Policy Holder Services
16) The IT architecture will facilitate providing customer service from Jammu & Kashmir
Bank branches.
17) MetLife will also consider establishing a call centre for Jammu and Kashmir
Bank Customer.
Additional Support
18) MetLife will enjoy special advisors ad station them in Jammu & Kashmir Bank to
support the sales efforts of J&K Bank employees.
19) MetLife will open dedicated offices in Jammu & Kashmir to provide pre and post
sales support to Jammu & Kashmir Bank.
20) These dedicated offices will also have full-time courier agents to develop the markets
in Jammu & Kashmir.
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21) These offices would also support the rural branches of J&K Bank to generate business
from rural areas to comply with IRDA regulations.
22) Continue Interactive process between MetLife India Insurance Company and Jammu
& Kashmir Bank.
23) Identify branches and employees for licensing training
24) MetLife India will identify dedicated ban assurance coordinators
25) Joint effort to help Jammu & Kashmir Bank secure corporate agency License.
26) Discuss and finalize distribution agreement
27) Jammu & Kashmir Bank to send IT Director to MetLife to understand IT architecture
of J&K Bank as well as MetLife India
FACTOR ANALYSIS:-
Table 1
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KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
.507
Bartlett's Test of Sphericity
Approx. Chi-Square 143.946
df 120
Sig. .067
Table 2
Communalities
Initial Extraction
Future Benefits 1.000 .560
Emergencies 1.000 .605
Children 1.000 .687
Savings 1.000 .435
Investments 1.000 .554
Tax Benefits 1.000 .538
Better rate of return for the premium paid
1.000 .719
Brand image of the company
1.000 .713
Product Flexibility 1.000 .659
Effective Advertisements
1.000 .668
Financial advisor 1.000 .670
Interest Rates 1.000 .599
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Low cost risk cover 1.000 .661
Choice of premium options
1.000 .460
Inflation 1.000 .685
Provides money at the time of need
1.000 .838
Extraction Method: Principal Component Analysis.
Table 3
Total Variance Explained
Component
Initial EigenvaluesExtraction Sums of Squared
LoadingsRotation Sums of Squared
Loadings
Total% of
VarianceCumulati
ve % Total% of
VarianceCumulati
ve % Total% of
VarianceCumulati
ve %
1 2.044 12.776 12.776 2.044 12.776 12.776 1.683 10.519 10.519
2 1.649 10.305 23.081 1.649 10.305 23.081 1.503 9.394 19.913
3 1.494 9.338 32.419 1.494 9.338 32.419 1.502 9.390 29.303
4 1.424 8.899 41.318 1.424 8.899 41.318 1.421 8.883 38.186
5 1.232 7.702 49.020 1.232 7.702 49.020 1.355 8.469 46.655
6 1.147 7.168 56.188 1.147 7.168 56.188 1.304 8.149 54.804
7 1.062 6.639 62.827 1.062 6.639 62.827 1.284 8.023 62.827
8 .945 5.909 68.736
9 .862 5.386 74.122
10 .829 5.181 79.303
11 .750 4.684 83.987
12 .598 3.735 87.722
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13 .576 3.601 91.323
14 .506 3.159 94.483
15 .481 3.007 97.490
16 .402 2.510 100.000
Extraction Method: Principal Component Analysis.
Table 4
Component Matrixa
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Component
1 2 3 4 5 6 7
Future Benefits .588 -.100 -.116 .215 -.050 -.301 -.226
Emergencies .504 -.006 -.261 -.062 .325 .393 -.139
Children -.117 .223 .613 .457 .104 .043 -.162
Savings -.102 -.398 -.016 .280 .405 .076 -.134
Investments -.614 -.149 .357 -.050 .062 -.014 -.143
Tax Benefits .448 .233 .072 -.032 .049 .189 .489
Better rate of return for
the premium paid.155 -.024 .248 -.449 .152 -.638 .041
Brand image of the
company.198 -.518 .085 .228 .261 .171 .498
Product Flexibility -.586 -.261 -.250 -.262 .159 .249 .174
Effective
Advertisements-.321 .436 .293 .207 .457 -.066 .185
Financial advisor .407 -.216 .587 -.201 .222 -.029 .149
Interest Rates .006 -.244 .144 .593 -.378 .135 -.077
Low cost risk cover .281 .636 .196 -.040 -.076 .345 -.112
Choice of premium
options-.285 .376 -.032 -.102 -.273 .078 .381
Inflation -.075 .367 -.369 .091 .587 -.046 -.230
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Provides money at the
time of need .046 -.202 .381 -.553 -.027 .458 -.366
Extraction Method: Principal Component Analysis.
a. 7 components extracted.
Table 5
Rotated Component Matrixa
Component
1 2 3 4 5 6 7
Future Benefits -.720 .105 -.143 .039 .012 -.078 .056
Emergencies -.248 .160 -.227 .372 .427 .332 -.189
Children -.115 .021 .800 -.074 -.097 .060 -.123
Savings .010 .611 .105 -.125 .140 .032 -.122
Investments .425 .126 .331 -.448 -.151 .131 .084
Tax Benefits -.057 -.136 .022 .716 -.018 -.026 .041
Better rate of return for
the premium paid-.140 -.042 -.020 -.063 -.040 -.003 .832
Brand image of the
company.084 .643 -.023 .480 -.232 -.073 -.034
Product Flexibility .717 .215 -.248 -.157 .089 .022 -.069
Effective
Advertisements.283 -.018 .651 .093 .299 -.222 .129
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Financial advisor -.160 .238 .229 .370 -.236 .381 .444
Interest Rates -.240 .168 .182 -.109 -.451 -.107 -.503
Low cost risk cover -.156 -.548 .291 .313 .200 .282 -.183
Choice of premium
options.398 -.454 .033 .143 -.115 -.237 -.060
Inflation -.013 .047 .097 -.077 .803 -.151 -.018
Provides money at the
time of need .141 -.040 -.046 -.074 -.103 .891 .066
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 16 iterations.
Table 6
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Component Transformation Matrix
Component 1 2 3 4 5 6 7
1 -.760 .004 -.201 .575 .014 .204 .098
2 -.016 -.779 .374 .171 .440 -.173 -.028
3 -.009 .006 .732 .065 -.462 .397 .299
4 -.337 .312 .453 -.013 -.073 -.497 -.576
5 .131 .542 .275 .178 .704 .062 .286
6 .328 .011 -.004 .352 .070 .549 -.679
7 .428 .049 -.054 .693 -.294 -.468 .159
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
INTERPRETATION AND ANALYSIS:-
The output of the factor analysis is obtained by requesting Principal Component Analysis
(PCA). We get output in Tables as shown above comprising of KMO test of 0.507 for all 16
variables and the Eigen values of all the factors which have Eigen values 1 or greater than 1
(I have assumed only extracted factors having Eigen values 1 or more).
The first step in interpreting the output is to look at the factors extracted, their Eigen values
and the cumulative percentage of variance. From table 3 that the seven factors extracted
together account for 62.83% of the total variance (information contained in 16 original
values). This is good for me, because we are able to economise on the number of variables
(from 16 I have reduced them to 7 underlying factors), and I lost only 37.17% of the
information content (62.83% is retained by the 7 factors extracted out of the 16 original
variables).
Now I have to move to interpret what these 7 extracted factors represent. This can be done
with the help of table 5 (rotated component matrix).
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Looking at table 5, the rotated component matrix I notice that variable no.’s 5 and 9, having
loadings of .425 and .717 respectively. This means that factor 1 is the combination of these
two variables, which are
I prefer the insurance policy only for purpose of investments. I prefer the insurance because of its product flexibility.
Now I have to find a suitable phrase, which captures the essence of the original variables,
which continues the underlying concept. In this case factor 1 could be named as benefits.
Now I have to interpret factor 2. The 3rd column of the table 5 states the variable 4 and 8 have
high holdings of .611 and .643 respectively. This indicates that the factor 2 is the combination
of these 2 variables which are:
I prefer to insurance only for the purpose of savings. I prefer the insurance because of brand image of the company.
Now I have to find a suitable phrase, which captures the essence of the original variables.
The factor 2 could be named as risk.
Now I have to interpret factor 3. The 4th column of the table 5 states the variable 3 and 10
have high holdings of .800 and .643 respectively. This indicates that the factor 3 is the
combination of these 2 variables which are:
I prefer to insurance plans for my children.
I prefer the insurance policy because of its effective advertisements.
Now I have to find a suitable phrase, which captures the essence of the original variables.
The factor 3 could be named as future value.
Now I have to interpret factor 4. The 5th column of the table 5 states the variable 6 have high
holdings of .716. This indicates that the factor 4 does not have any combination, so it should
be taken as only one factor and the factor is:
I prefer the insurance for the purpose of tax benefits.
Now I have to find a suitable phrase, which captures the essence of the original variable. The
factor 4 could be named as it is.
Now I have to interpret factor 5. The 6th column of the table 5 states the variable 2 and 15
have high holdings of .427 and .800 respectively. This indicates that the factor 5 is the
combination of these 2 variables which are:
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I prefer the insurance plans for emergencies.
I prefer the insurance because rate of inflation is increasing.
Now I have to find a suitable phrase, which captures the essence of the original variables.
The factor 5 could be named as value of money.
Now I have to interpret factor 6. The 7th column of the table 5 states the only variable 16 have
high holdings of .891. This indicates that the factor 6 does not have any combination, so it
should be taken as only one factor and the factor is:
I prefer the insurance policy because it provides me money at the time of need.
I did not think that the name of the factor should be changed.
Now I have to interpret factor 7. The 8th column of the table 5 states the only variable 7 have
high holdings of .832. This indicates that the factor 7 does not have any combination, so it
should be taken as only one factor and the factor is:
I prefer the insurance policy because it gives me better rate of return for the premium
paid.
I did not think that there is no need to change the name of this factor.
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ANALYSIS AND INTERPRETATION:-
Q.1
INTEPRETATION:-
It is clear from the questionnaire that saving of money in Kashmir is 100%.
Q.2
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INTEPRETATION:-
Out of 100 respondents 92% have insurance policies and only 8% respondents do not have
insurance policies.
Q.3
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INTEPRETATION:-
When we talk about premiums paying annually 36% pay 10000-15000,23% pay 15000-
20000,24% pay 5000-10000 and only 9% 1000-5000.
Q.4
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INTEPRETATION:-
Most of the people in Kashmir take insurance for the purpose of risk cover and savings as it is
clear from the data obtained from questionnaire which is 27% and 26% respectively out of
100%. A very less number of respondents take insurance for the purpose of investment and
rate of return and 6% respondents do insurance for other purposes.
Q.5
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INTEPRETATION:-
When we talk about the duration of the insurance policies of customers 30% of customers
are insured from last 4 years,26% customers are insured from 3 years, 12% customers are
insured from more than 4 years and rest of the customers are insured from last 2 and 1 year.
Q.6
INTEPRETATION:-
35% of respondents are having the term insurance because it is considered as the purest form
of insurance, 25% are having endowment plans , 23% are having ULIPs and only 9%
respondents are having multiple plans.
Q.8
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INTEPRETATION:-
From 100 respondents only 8% respondents do not have any insurance policy and from these
8% respondents 50% said that because of daily expenses they don’t have insurance policy,
25% say because of less salary and 12.50% do not give any reason.
Q.9
INTEPRETATION:-
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Out of 100 respondents 71% were male and 29% were female respondents.
Q.10
INTEPRETATION:-
Most of the respondents were from the age group of 30-40 years and the ratio was 37%, 30%
from 40-50, 25% from 20-30 and only 8% were above 50.
Q.11
INTEPRETATION:-
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Out of 100 respondents 41% were serviceman, 26% were businessman and 33% don’t specify
what they are doing.
FINDINGS
1. Most number of the customers prefers the insurance policies are done for future
benefits, moreover people also prefer insurance in order to take the advantage of tax
benefits.
2. Most of the families in Kashmir valley are middle class so the save less amount that is
why Kashmir valley don’t have maximum percentage of insured people.
3. Most of the customers prefer medium premium policies because of the low incomes.
Analysis showed that 36% customers pay about 10000-15000 premium annually.
4. Most number of the customers who are insured is youngsters between the ages of 25-
35. It is because of the awareness which the youngsters possess nowadays about
insurance.
5. Females are not concerned about insurance because analysis showed that 71%
respondents were males whereas only 29% females are there. It is because that most
number of the females doesn’t work there in Kashmir valley.
6. Convenience sampling became necessary because in filling the questionnaire you will
find 2 out of 10 are insured so you need to have proper database of the customers to
make your research more fruitful.
7. Maximum number of the customers prefers term insurance because they don’t want to
indulge in this for a very longer period of time they want returns in a short span of
time.
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8. Metlife is not very good at attracting the new customers because most of the
customers in our study were insured from last more than 4 years that suggests new
customer’s inclusion is very slow.
9. The most important reasons for the customers to have insurance are “RISK COVER”
and “SAVING”. Customers feel somehow secure in insuring themselves.
10. Customers who are associated with Metlife are illiterate so the F.A’s have to put lot of
efforts in convincing the customers.
11. Metlife lack in advertisement in Srinagar..
Religion plays a very important part in hindering the sales of insurance companies in
Kashmir valley because Muslims don’t insure themselves as it is against their religion.
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RECOMMENDATIONS
MetLife has got a good distribution in the valley, it has also benefitted from the
distribution of the J&K bank as much as it could. But it should use other marketing
tools; it should make more and more people aware about the MetLife. Only then
MetLife will be able to capture maximum market share.
The effort which MetLife is making to introduce new customers to the company is
good but they should put some more effort in retaining the existing customers.
The company should make the people aware about the growth of the company and its
achievements; this can be done by publishing the performance reports in the various
newspapers etc. By doing this people will understand that if they will invest in
MetLife then their investment is secure.
The staff should be asked to behave in more customers’ friendly nature.
It should be made sure that renewal premium notices should be delivered to every
customer and on time.
Premium receipts is an important document, it should be delivered to the customers as
soon as possible.
Proper guidance and training should be provided to the financial advisors and channel
sales officers so that they will sell different products to different customers on merit
basis i.e., a customer should be advised to buy a product which he/she can afford. The
MetLife salesman should not sell products as per commission level.
MetLife should provide user friendly online system which will help
customers to check their policy details anywhere and at any time and
get all necessary information about their policies and also MetLife.
The customers should be updated regarding the products of the company.
Customers should be advised to keep proper track of the policies, MetLife should also
help customers in this.
Policy bonds should be dispatched as soon as possible and the different documentary
processes should be eased up to some extent so that it becomes easy to buy an
insurance product.
Different information database of customers should be updated on timely bases so that
proper track of customers will be kept which will help in updating customers about
the MetLife.
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Conclusion
It was revealed from the research that MetLife is a successful player due to its various
remarkable efforts towards the customers. Due to these factors more than half of the
customers agreed that they will suggest others to join the MetLife, likewise to several
other things customer feedback was supporting to the MetLife which is good from
company`s perspective.
Another aspect which came in front of us after the analysis was that there are
customers who are not happy from the services provided by the company, which is
not good for MetLife. It was also revealed that MetLife has used the goodwill of J&K
bank upto a great extent and also its distribution in the valley. MetLife is also having
a good distribution but it should use other marketing tools as well in introducing the
customers to MetLife. It was also seen that MetLife is making good efforts to bring
new customers to the company but the retention part is not performing as it should be.
No doubt that MetLife is continuously growing and also that with a
remarkable growth rate. Due this growth rate the market share of MetLife has
increased from 1.8% in 2006 to 3.8% in 2009(Q1). But if the company wants to
achieve new heights and wants to grab the maximum of the market then they
definitely need to work in some of the fields so that the company will perform as it is
expected by the customers. Simply we can say that MetLife has to become more
customer focused and they need to provide quality services to the customers.
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ANNEXURE
QUESTIONNAIRE
Dear Sir /Madam,
I (Bilal Ahmad) the student of Lovely Professional University, Phagwara conducting a survey
on “Customer perception of insurance as: a tool of investment or a risk cover, a comparative
study”. I request you to fill this questionnaire and I assure you that this data will be used only
for study academic purposes and it will be kept confidential.
Q1. Do you save money?
a.) Yes b.) No
If no, go to question no. 8
Q2. If yes, do you have an insurance policy?
a.) Yes b.) No
If no, go to question no.8
Q3.How much insurance premium are you paying annually?
a.) 1000-5000 b.) 5000-10000
c.) 10000-15000 d.) 15000-20000
Q4. For what purposes you are taking the insurance policy?
a.) Investment b.) Savings
c.) Risk cover d.) Rate of return
e) Others
Q5.) How long you have been you have been insured?
a) 1 year b.) 2 years
c.) 3 years d.) 4 years
e.) More than 4 years
Q6.)What insurance plan do you have?
a.) Term Insurance b.) ULIP
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c.) Endowment d.) Multiple plans
Q7.) Rate the following factors on a scale of 1-5 which impacts your perception level towards
insurance?
Where, 1 being strongly agree, 2 being agree,3 being neither agree nor disagree, 4 being
disagree, and 5 being strongly disagree.
Statement 1 2 3 4 5
a.) I prefer the insurance policy for future benefits.
b.) I prefer the insurance plans for emergencies.
c.) I prefer to insurance plans for my children.
d.) I prefer to insurance only for the purpose of savings.
e.) I prefer the insurance policy only for purpose of
investments.
f.) I prefer the insurance for the purpose of tax benefits.
g.) I prefer the insurance policy because it gives me better rate
of return for the premium paid.
h.) I prefer the insurance because of brand image of the
company.
i.) I prefer the insurance because of its product flexibility.
j.) I prefer the insurance policy because of its effective
advertisements.
k.) I prefer insurance plan because the financial advisor helps
me a lot.
l.) I prefer the insurance plan because of good interest rates.
m.) I prefer the insurance plan because of low cost risk cover.
n.) I prefer the insurance plan because of choice of premium
options.
o.) I prefer the insurance because rate of inflation is increasing.
n.) I prefer the insurance policy because it provides me money
at the time of need.
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Q8 .) Why don’t you have any insurance policy?
a.) Less salary b.) Family size
c.) Daily expenses d.) Any other reason
Q9.) Personal details?
i) Name ___________________________________.
ii) Gender
a.) Male b.) Female
iii) Age
a.) 20-30 Years b.) 30-40 Years
c.) 40-50 Years d.) Above 50
iv) Occupation
a.) Businessman b.) Salaried person
b.) Any other
.........................Thank you for your cooperation.........................
BIBLIOGRAPHY
http://www.metlife.co.in/
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http://metapp07/sites/mos/MOS/MetLife%20Ops%20School.web/MOS.html http://
www.rgare.com/corporateoverview/history/
http://metapp07/Remittance%20and%20Retention/Retention%20MIS/Forms/
AllItems.aspx
http://www.fcsinteractive.com/news/citi-leads-list-of-winners-at-15th-annual-fcs.aspx
http://www.metlife.com/about/press-room/us-press-releases/2008/index.html?
compID=588
http://www.rgare.com/corporateoverview/ratings/
http://www.ins.state.ny.us/press/2001/p0101161.htm
http://www.moneycontrol.com/annual-report/karnatakabank/chairmans-speech/KB04
http://www.metlife.co.in/MetLifeIndPlans_Child_MetLittleStar.aspx
http://www.metlife.co.in/MetLifeIndPlans_Child_MetBhavishya.aspx
http://www.metlife.co.in/MetLifeIndPlans_Child_MetJuniorMoneyBack.aspx
http://www.metlife.co.in/MetLifeIndPlans_Retirement_MetAdvantagePlus.aspx
http://www.metlife.co.in/MetLifeIndPlans_Retirement_MetPension%20-%20Par.aspx
http://www.metlife.co.in/MetLifeIndPlans_Savings_Met100.aspx
http://www.metlife.co.in/MetLifeIndPlans_Inv_MetEasy.aspx
http://www.metlife.co.in/MetLifeIndPlans_Protection_MetSuraksha.aspx
http://www.metlife.co.in/MetLifeWhyMetlife_landing.aspx
http://www.metlife.co.in/MetLifeIndPlans_Protection_MortgageProtector.aspx
http://www.metlife.co.in/MetLifeIndPlans_Rural_MetVishwas.aspxAffordable
protection. 2. All your money back and more on surviving the coverage term. 3.
Convenience of paying ju
http://www.metlife.co.in/MetLifeAboutUs_MetLifeIndia.aspx
Bilal Ahmad Regd No. 11011496
M e t L i f e I n d i a I n s u r a n c e C o m p a n y L t d P a g e | 87
It is an Endowment plan that offers both savings and life insurance.2. Flexible
premium paying options to suit various income cycles.3. A plan which
participates in the bonuses declared by the company.4. Customization possible
with Accident Death Benefit, Critical Illness, Term, Waiver of Premium Riders
for comprehensive
protection.http://www.metlife.co.in/MetLifeIndPlans_Rural_MetSuvidha.aspx
http://www.metlife.co.in/MetLifeIndPlans_Inv_MetEasy.aspx
http://www.metlife.co.in/MetLifeAboutUs_MetLifeIndia.aspx
http://www.metlife.co.in/MetLifeIndPlans_Inv_SmartGold.aspx#
http://www.metlife.co.in/MetLifeIndPlans_Retirement_MetAdvantagePlus.aspx
http://www.metlife.co.in/MetLifeIndPlans_Inv_MetEasy.aspx
http://www.lifeinsurancehub.net/lapsed-life-insurance-policies.html
http://www.articlesbase.com/finance-articles/term-life-insurance-life-insurance
companies-are-consistently-coming-up-with-more-new-policies-457267.html
http://www.articlesbase.com/finance-articles/term-life-insurance-life-insurance-is-a-
must-for-a-family-person-444510.html
http://www.e-wisdom.com/articles/life-insurance/read-the-fine-print-on-your-life-
insurance-policy.html
http://insurance.freeadvice.com/information/disability/article/157
http://www.e-wisdom.com/articles/life-insurance/guide-to-buying-term-life-
insurance.html
D.R. Cooper P.S. Schindler, Business Research Methods-9 t h edition, Tata
McGraw-Hill companies, 2008
IRDA journal Aug. 2008, vol.-VI, no.8, “lapsation in life insurance , the
No-Win”.
Ms. Misbah (2008), project work on “customer satisfaction at MetLife
Insurance, Srinagar city”
Mr. Irfan Ali Zargar (2007) project work on “lapsation of policies with
MetLife’s loopholes”
Bilal Ahmad Regd No. 11011496