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A
REPORT
On
“Potential of Life insurance Industry in Surat Market”
ByChirag Patel(5NB 3430)
ICFAI NATIONAL COLLEGE
SURAT
Under the Guidance of
COMPANY GUIDE FACULTY GUIDE
Mr. Jignesh Madhwani Mr. Vikas Singh
1
CERTIFICATE
This is to certify that the Summer Internship Project titled
“Potential of Life Insurance Industry in Surat market” a bona fide
work of AMAN AGGARWAL, is original and has been done
under my supervision in partial fulfillment of the requirement for
the award of M.B.A for the period of 4 months from 18th April
2006 to 12th August 2006. This report neither full nor in part has
ever before been submitted for awarding of any degree of either
this university or any other university. I am pleased to stay that
his performance during the period was extremely satisfactory.
MR. VIKAS SINGH
Faculty Guide
ICFAI NATIONAL COLLEGE
SURAT.
2
DECLARAION
I hereby declare that this work entitled “Potential of Life
Insurance Industry in Surat Market” is my work carried out
under the guidance of my faculty guide Mr. Vikas Singh and my
company guide Mr. Jignesh Madhavani. This report neither full
nor in past has ever been submitted for award of any other degree
of either this University or any other University.
Chirag Patel
(5NB3430)
3
TABLE OF CONTENTSContents Page No.
Acknowledgements 5List of Tables 6List of Illustrations/Diagrams 7Executive Summary 9Chapter 1: introduction 10
Objective 15 Limitation 17 Research Mythology 19 Data Collection 22
Chapter 2: Life Insurance Industry 23 Industry profile 24 important milestones in the life insurance business 29 Insurance sector reforms 31 IRDA 32
Chapter 3: Contribution of Life Insurance Industry 36 Contribution of Life Insurance in the Economy 36 Flow of Insurance Industry in India 37 Structure of life Insurance Industry 40 Life Insurance industry 41 Aggregation of Long Term Savings 42 Spread of financial services in rural Areas 43 Long term funds for infrastructure Development of Capital
Markets/Economic Growth44
Employment generation 45 Special Features 46 Growth Potential 47 Phase of transition 47
Chapter 4:Company Profile 49 Management 51 Area of Business 56 KMOM progress till date 65 KMOM-the partnership and Lineage 66 Products 69 Hierarchy of KMOM of Surat branch 71
Chapter 5: Survey 72 Data interpretation , editing and coding 73 Graph analysis 73
Chapter 6: Finding and Suggestion 83Chapter 7: Conclusion 84Chapter 8: References 85Chapter 9: Annexure 86
4
Acknowledgement
In preparation of this report by me, I feel great pleasure
because it gives me extensive practical knowledge in my career. I
get idea about Indian Life Insurance Industry by this project.
I express my deep sense of gratitude to My Company Guide
Mr. Jignesh Madhavani for his valuable guidance during my
project work. I also like to all staff of Kotak Life Insurance who
guide me in project work.
I am thankful to Mr. Vikas Singh (Faculty Guide) for
valuable inspiration and guidance provided me through out the
course of this project. They have patient and critically gone the
subject matter.
I would like to take opportunity to express my gratitude
towards all of them who have contributed directly or indirectly in
my project work.
Chirag Patel
5
List of Tables
Name of Tables Page no Potential of Life Insurance sector 38 Market share of LIC and all private
player38
Individual Market share of Insurance company
39
Total asset of Life Insurance companies
41
Total premium generated 41 The future premium income
Generated will be41
Untimely death benefit to policy holder in the past
44
Age vise classification 73 Gender wise classification 74 Income wise classification 75 No of member having insurance 76 How many person having insurance
in family77
Different policy bought by customers
78
Fully insured and under insured persons
79
Market share of different life insurance policy
80
6
List of Illustrations/Diagrams
Name of Illustrations/Diagrams Page No
Kotak : Area of Business 57 Age vise classification 73 Gender wise classification 74 Income wise classification 75 No of member having insurance 76 How many person having insurance in
family77
Different policy bought by customers 78 Fully insured and under insured persons 79 Market share of different life insurance 80
7
Chapter 1:
Introduction
8
Executive Summary
The service industry is one of the fastest growing sectors in India
today. The upcoming sectors which are really showing the graph
towards upwards are - Telecom, Banking, and Insurance. These
sectors really have a lot of responsibility towards the economy.
Amongst the above-mentioned areas insurance is one sector, which
took a lot of time in positioning itself. The insurance business of
non-life companies was not much in problems but the major
problem was with life insurance. Life Insurance Corporation of
India had monopoly for more than 45 years, but the picture then
was completely different. Previously people felt that “Insurance is
only for classes not for masses” but now the picture is vice-versa.
The story of insurance is probably as old as the story of mankind.
The same instinct that prompts modern businessmen today to
secure themselves against loss and disaster existed in primitive
men also. They too sought to avert the evil consequences of fire
and flood and loss of life and were willing to make some sort of
sacrifice in order to achieve security. Though the concept of
insurance is largely a development of the recent past, particularly
9
after the industrial era – past few centuries – yet its beginnings date
back almost 6000 years.
Life Insurance in its modern form came to India from England in
the year 1818. Oriental Life Insurance Company started by
Europeans in Calcutta was the first life insurance company on
Indian Soil. All the insurance companies established during that
period were brought up with the purpose of looking after the needs
of European community and these companies were not insuring
Indian natives. However, later with the efforts of eminent people
like Babu Muttylal Seal, the foreign life insurance companies
started insuring Indian lives. But Indian lives were being treated as
sub-standard lives and heavy extra premiums were being charged
on them. Bombay Mutual Life Assurance Society heralded the
birth of first Indian life insurance company in the year 1870, and
covered Indian lives at normal rates. Starting as Indian enterprise
with highly patriotic motives, insurance companies came into
existence to carry the message of insurance and social security
through insurance to various sectors of society. Bharat Insurance
Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to
more insurance companies. The United India in Madras, National
Indian and National Insurance in Calcutta and the Co-operative
Assurance at Lahore were established in 1906. In 1907, Hindustan
10
Co-operative Insurance Company took its birth in one of the rooms
of the Jorasanko, house of the great poet Rabindranath Tagore, in
Calcutta. The Indian Mercantile, General Assurance and Swadeshi
Life (later Bombay Life) were some of the companies established
during the same period. Prior to 1912 India had no legislation to
regulate insurance business. In the year 1912, the Life Insurance
Companies Act, and the Provident Fund Act were passed. The Life
Insurance Companies Act 1912 made it necessary that the
premium rate tables and periodical valuations of companies should
be certified by an actuary. But the Act discriminated between
foreign and Indian companies on many accounts, putting the Indian
companies at a disadvantage.
The formation of IRDA, entrance of private life insurance
companies into India with one foreign partner, compulsory training
of Insurance agents etc. developments started to take place. And
this was the time when these companies started searching for
proper channel partners who can help the organization in
expanding its network and business in India.
Channel partners are those who are going to be into direct selling
of company’s products i.e. the insurance policies. They are the link
11
between the customers and the management or company. These
channel partners are people with different profiles. They are
selected on some grounds like their network of people, their
problem handling ability, convincing power and lot many things.
The main idea behind company’s Questionnaire Survey is to find
out and analyze the proper profile that can be recruited by
company as a channel partner. Company has been focusing on
some of the profile that can be very beneficial for the company.
For example Chartered Accountants, Tax Consultants, Postal
agents, Bank’s Daily Collection Agents etc. the main idea behind
targeting the above profile is strong client network which is really
very important for an insurance company.
The project title is “Potential of Life Insurance
Industry in Surat Market”. This shows the scope for private
insurance companies have great opportunities to cover the market
and can insure the customer. With the initiation of the deregulation
in the Indian insurance market, the monopoly of big public sector
companies in life insurance market has been broken. New private
players have entered the market and with their innovative
approaches and better use of distribution channels and technology,
they are eating in to the shares of established public sector
12
companies in Indian Insurance Market. Since the deregulation has
been put in to place, the market share of LIC has come down to
71.4% in life insurance market while the private players have
captured around 17% market in the general insurance segment.
This report includes the key private players in the insurance market
such as ICICI Prudential, Kotak Life Insurance Bajaj Allianz, Birla
Sun life, and TATA AIG. It also includes the leading competitors
in the life insurance and general insurance segments along with
their market shares.
13
Chapter 2
Objective
Limitation
Methodology
Data collection
14
1. Objective:
The main of the present study of is accomplish the following
objective.
Proper understanding and analysis of life insurance
industry.
To know about brand awareness of Kotak Life
Insurance and customer’s preference about Kotak Life
Insurance.
Conduct market survey on a sample selected from the
entire population and derived opinion on that research.
According the market survey come know about how
much potential of insurance market in our city.
And base on analysis of the result thus obtained make a
report on that research.
Training aims at recruiting maximum number of Life
Advisors and to Sell the maximum policies for the
company and bring the business for the company which
ever is going at the particular point of time.
Along with it I will be gaining the thorough knowledge
of insurance sector. This will give me in more
confidence in marketing products given to me.
15
As the Kotak Life Insurance well reputed company in
India it’s great chance for me to observed different
products launch by other competitor companies like
ICICI prudential, Bajaj alliance ,LIC, Max New York
life etc. In all, it is to understand the overall working of
the Life insurance sector.
The objective behind the project is as follows:
To find the right candidate.
To about their family background, occupation, social
relation, Qualification, Age.
Finalize candidates for the IRDA training
16
5: Limitation:
Some of the difficulties and limitations faced by me
during my training are as follows:
Lack of awareness among the people – This is the biggest
limitation found in this sector. Most of the people are not
aware about the importance and the necessity of the
insurance in their life. They are not aware how useful life
insurance can be for their family members if something
happens to them.
Perception of the people towards Insurance sector –
People still consider insurance just as a Tax saving device. So
today also there is always a rush to buy an Insurance Policy only
at the end of the financial year like January, February and March
making the other 9 months dry for this business.
Insurance does not give good returns – Still today people
think that Insurance does not give good returns. They are not
aware of the modern Unit Linked Insurance Plans which are
offered by most of the Private sector players. They are still under
the perception that if they take Insurance they will get only 5-6%
17
returns which is not true nowadays. Nowadays most of the
modern Unit Linked Insurance Plans gives returns which are
many times more than that of bank Fixed deposits, National
saving certificate, Post office deposits and Public provident fund.
Lack of awareness about the earning opportunity in the
Insurance sector – People still today are not aware about the
earning opportunity that the Insurance sector gives. After the
privatization of the insurance sector many private giants have
entered the insurance sector. These private companies in order to
beat the competition and to increase their Insurance Advisors to
increase their reach to the customers are giving very high
commission rates but people are not aware of that.
Increased competition – Today the competition in the
Insurance sector has became very stiff. Currently there are 14
Life Insurance companies working in India including the LIC
(life insurance Corporation of India). Today each and every
company is trying to increase their Insurance Advisors so that
they can increase their reach in the market. This situation has
created a scenario in which to recruit Life insurance Advisors and
to sell life Insurance Policy has became very very difficult.
18
RESEARCH METODOLOGY
Research always starts with a question or a problem. Its purpose is
to question through the application of the scientific method. It is a
systematic and intensive study directed towards a more complete
knowledge of the subject studied. Marketing research is the
function which links the consumer, customer and public to the
marketer through information- information used to identify and
define marketing opportunities and problems generate, refine, and
evaluate marketing actions, monitor marketing actions, monitor
marketing performance and improve understanding of market as a
process.
Marketing research specifies the information required to address
these issues, designs, and the method for collecting information,
manage and implemented the data collection process, analyses the
results and communicate the findings and their implication.
I have prepared our project as descriptive type, as the objective of
the study demands the answers of the question related to find the
19
potentiality of life insurance in Surat: How much potential is there
in Surat?
The Marketing Research Process
As marketing research is a systemic and formalized process, it
follows a certain sequence of research action. The marketing
process has the following steps:
Formulating the problems
Developing objectives of the research
Designing an effective research plan
Data collection techniques
Evaluating the data and preparing a research report
There are two types of data collection method use in my project
report.
– Primary data
– Secondary data.
For my project, I decided on primary data collection method for
observing working of company and approaching customers
directly in the field, tele-calling, cold calling, campaigning and
through references to know their interest in business with company
20
in my project and also make questionnaire for creating database of
business class people is Surat city for company.
I decided on Secondary data collection method was used by
referring to various websites, books, magazines, journals and daily
newspapers for collecting information regarding project under
study.
21
DATA COLLECTION
After the research methodology, research problem in
marketing has been identified and selected; the next step is
together the requisite data. There are two types of data collection
method – primary data and secondary data.
In our live project, we decided primary data collection
method because our study nature does not permit to apply
observational method. In survey approach we had selected a
questionnaire method for taking a customer view because it is
feasible from the point of view of our subject & survey purpose.
We conducted 200 sample of survey in our project.
Chapter: 3
22
Industry profile:
important milestones in the life insurance
business
Insurance sector reforms
The Insurance Regulatory and
Development Authority (IRDA)
23
Brief History of the Insurance Sector in
India
The business of life insurance in India in its existing form started
in India in the year 1818 with the establishment of the Oriental
Life Insurance Company in Calcutta.
The story of insurance is probably as old as the story of mankind.
The same instinct that prompts modern businessmen today to
secure themselves against loss and disaster existed in primitive
men also. They too sought to avert the evil consequences of fire
and flood and loss of life and were willing to make some sort of
sacrifice in order to achieve security. Though the concept of
insurance is largely a development of the recent past, particularly
after the industrial era – past few centuries – yet its beginnings date
back almost 6000 years.
Life Insurance in its modern form came to India from England in
the year 1818. Oriental Life Insurance Company started by
Europeans in Calcutta was the first life insurance company on
Indian Soil. All the insurance companies established during that
period were brought up with the purpose of looking after the needs
of European community and these companies were not insuring
Indian natives. However, later with the efforts of eminent people
24
like Babu Muttylal Seal, the foreign life insurance companies
started insuring Indian lives. But Indian lives were being treated as
sub-standard lives and heavy extra premiums were being charged
on them. Bombay Mutual Life Assurance Society heralded the
birth of first Indian life insurance company in the year 1870, and
covered Indian lives at normal rates. Starting as Indian enterprise
with highly patriotic motives, insurance companies came into
existence to carry the message of insurance and social security
through insurance to various sectors of society. Bharat Insurance
Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to
more insurance companies. The United India in Madras, National
Indian and National Insurance in Calcutta and the Co-operative
Assurance at Lahore were established in 1906. In 1907, Hindustan
Co-operative Insurance Company took its birth in one of the rooms
of the Jorasanko, house of the great poet Rabindranath Tagore, in
Calcutta. The Indian Mercantile, General Assurance and Swadeshi
Life (later Bombay Life) were some of the companies established
during the same period. Prior to 1912 India had no legislation to
regulate insurance business. In the year 1912, the Life Insurance
Companies Act, and the Provident Fund Act were passed. The Life
Insurance Companies Act 1912 made it necessary that the
premium rate tables and periodical valuations of companies should
25
be certified by an actuary. But the Act discriminated between
foreign and Indian companies on many accounts, putting the Indian
companies at a disadvantage.
The first two decades of the twentieth century saw lot of growth in
insurance business. From 44 companies with total business-in-
force as Rs.22.44 crore, it rose to 176 companies with total
business-in-force as Rs.298 crore in 1938. During the
mushrooming of insurance companies many financially unsound
concerns were also floated which failed miserably. The Insurance
Act 1938 was the first legislation governing not only life insurance
but also non-life insurance to provide strict state control over
insurance business. The demand for nationalization of life
insurance industry was made repeatedly in the past but it gathered
momentum in 1944 when a bill to amend the Life Insurance Act
1938 was introduced in the Legislative Assembly. However, it was
much later on the 19th of January 1956 that life insurance in India
was nationalized. About 154 Indian insurance companies, 16 non-
Indian companies and 75 provident were operating in India at the
time of nationalization. Nationalization was accomplished in two
stages; initially the management of the companies was taken over
by means of an Ordinance, and later, the ownership too by means
of a comprehensive bill. The Parliament of India passed the Life
26
Insurance Corporation Act on the 19th of June 1956, and the Life
Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more
widely and in particular to the rural areas with a view to reach all
insurable persons in the country, providing them adequate financial
cover at a reasonable cost.
LIC had 5 zonal offices, 33 divisional offices and 212 branch
offices, apart from its corporate office in the year 1956. Since life
insurance contracts are long-term contracts and during the currency
of the policy it requires a variety of services need was felt in the
later years to expand the operations and place a branch office at
each district headquarter. Re-organization of LIC took place and
large numbers of new branch offices were opened. As a result of
re-organization servicing functions were transferred to the
branches, and branches were made accounting units. It worked
wonders with the performance of the corporation. It may be seen
that from about 200.00 Crores of New Business in 1957 the
corporation crossed 1000.00 Crores only in the year 1969-70, and
it took another 10 years for LIC to cross 2000.00 crore mark of
new business. But with re-organization happening in the early
eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum
Assured on new policies.
27
Today LIC functions with 2048 fully computerized branch offices,
100 divisional offices, 7 zonal offices and the corporate office.
LIC’s Wide Area Network covers 100 divisional offices and
connects all the branches through a Metro Area Network. LIC has
tied up with some Banks and Service providers to offer on-line
premium collection facility in selected cities. LIC’s ECS and ATM
premium payment facility is an addition to customer convenience.
Apart from on-line Kiosks and IVRS, Info Centers have been
commissioned at Mumbai, Ahmedabad, Bangalore, Chennai,
Hyderabad, Kolkata, New Delhi, Pune and many other cities. With
a vision of providing easy access to its policyholders, LIC has
launched its SATELLITE SAMPARK offices. The satellite offices
are smaller, leaner and closer to the customer. The digitalized
records of the satellite offices will facilitate anywhere servicing
and many other conveniences in the future.
From then to now, LIC has crossed many milestones and has set
unprecedented performance records in various aspects of life
insurance business. The same motives which inspired our
forefathers to bring insurance into existence in this country inspire
us at LIC to take this message of protection to light the lamps of
security in as many homes as possible and to help the people in
providing security to their families.
28
Some of the important milestones in the life
insurance business in India are:
1850Non life insurance debuts with triton insurance company.
1870 Bombay mutual life assurance society is the first Indian
owned life insurer
1912 The Indian Life Assurance Companies Act enacted as the
first statute to regulate the life insurance business.
1928 The Indian Insurance Companies Act enacted to enable
the government to collect statistical information about both life and
non-life insurance businesses.
1938 Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests of the
insuring public.
1956 245 Indian and foreign insurers and provident societies taken
over by the central government and nationalized. LIC formed by
an Act of Parliament, viz. LIC Act, 1956, with a capital
contribution of Rs. 5 Crore from the Government of India.
29
The General insurance business in India, on the other hand, can
trace its roots to the Triton Insurance Company Ltd., the first
general insurance company established in the year 1850 in Calcutta
by the British. Some of the important milestones in the general
insurance business in India are:
1907 The Indian Mercantile Insurance Ltd. set up, the first
company to transact all classes of general insurance business.
1957 General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring fair
conduct and sound business practices.
1968 The Insurance Act amended to regulate investments and set
minimum solvency margins and the Tariff Advisory Committee set
up.
1972 The General Insurance Business (Nationalization) Act,
1972 nationalized the general insurance business in India with
effect from 1st January 1973. 107 insurers amalgamated and
grouped into four companies’ viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the
Oriental Insurance Company Ltd. and the United India Insurance
Company Ltd. GIC incorporated as a company.
30
Insurance sector reforms
In 1993, Malhotra Committee, headed by former Finance Secretary
and RBI Governor R. N. Malhotra, was formed to evaluate the
Indian insurance industry and recommend its future direction.
The Malhotra committee was set up with the objective of
complementing the reforms initiated in the financial sector. The
reforms were aimed at “creating a more efficient and competitive
financial system suitable for the requirements of the economy
keeping in mind the structural changes currently underway and
recognizing that insurance is an important part of the overall
financial system where it was necessary to address the need for
similar reforms…” In 1994, the committee submitted the report
and some of the key recommendations included.
1997 Insurance regulator IRDA set up
2000 IRDA starts giving licenses to private insurers: Kotak
Life Insurance ICICI prudential and HDFC Standard Life
insurance first private insurers to sell a policy
2001 Royal Sundaram Alliance first non life insurer to sell
a policy 2002 Banks allowed to sell insurance plans.
31
The Insurance Regulatory and Development
Authority (IRDA)
The Insurance Act, 1938 had provided for setting up of the
Controller of Insurance to act as a strong and powerful supervisory
and regulatory authority for insurance. Post nationalization, the
role of Controller of Insurance diminished considerably in
significance since the Government owned the insurance
companies.
But the scenario changed with the private and foreign companies
foraying in to the insurance sector. This necessitated the need for a
strong, independent and autonomous Insurance Regulatory
Authority was felt. As the enacting of legislation would have taken
time, the then Government constituted through a Government
resolution an Interim Insurance Regulatory Authority pending the
enactment of a comprehensive legislation.
The Insurance Regulatory and Development Authority Act, 1999 is
an act to provide for the establishment of an Authority to protect
the interests of holders of insurance policies, to regulate, promote
and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto and further to amend the
32
Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and
the General insurance Business (Nationalization) Act, 1972 to end
the monopoly of the Life Insurance Corporation of India (for life
insurance business) and General Insurance Corporation and its
subsidiaries (for general insurance business).
The act extends to the whole of India and will come into force on
such date as the Central Government may, by notification in the
Official Gazette specify. Different dates may be appointed for
different provisions of this Act.
The Act has defined certain terms; some of the most important
ones are as follows
appointed day means the date on which the Authority is established
under the act. Authority means the established under this Act.
Interim Insurance Regulatory Authority means the Insurance
Regulatory Authority set up by the Central Government through
Resolution No. 17(2)/ 94-lns-V dated the 23rd January, 1996.
Words and expressions used and not defined in this Act but
defined in the Insurance Act, 1938 or the Life Insurance
Corporation Act, 1956 or the General Insurance Business
33
(Nationalization) Act, 1972 shall have the meanings respectively
assigned to them in those Acts
A new definition of "Indian Insurance Company" has been
inserted. "Indian insurance company" means any insurer being a
company (a) which is formed and registered under the Companies
Act, 1956
(b) in which the aggregate holdings of equity shares by a foreign
company, either by itself or through its subsidiary companies or its
nominees, do not exceed twenty-six per cent. Paid up capital in
such Indian insurance company (c) whose sole purpose is to carry
on life insurance business, general insurance business or re-
insurance business.
34
Chapter: 4
Contribution of Life Insurance Sector in the Economy
FLOW OF Insurance Industry in India
STRUCTURE OF INSURANCE INDUSTRY: Snap Shot Industry Aggregation of Long Term Savings Spread of financial services in rural Areas Long term funds for infrastructure
Development of Capital Markets/ Economic Growth
Employment generation Special Futures Growth Potential Phase of transition
35
FLOW OF Insurance Industry in India
• Structure of Insurance Industry: Snap Shot
• Contribution to Indian Economy
• Special Features
STRUCTURE OF INSURANCE INDUSTRY: Snap Shot
Historical Perspective(i) Prior to 1956 242 companies operating(ii) 1956 - 2001 Nationalization – LIC monopoly player – Government control(iii) 2001 -- Opened up sector
36
IndustrySnap Shot - Contd.• (a) LIC – Fully owned by Government (b) Postal Life Insurance• (ii) Private players -1. Bajaj Allianz Life Insurance Co. Ltd.2. Birla Sun Life Insurance Co. Ltd. (BSLI)3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE)4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA)6. Max New York Life Insurance Co. Ltd. (MNYL)7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE)8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd.9. SBI Life Insurance Co. Ltd. (SBI LIFE)10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)11. Reliance Life Insurance12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA)13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)14. Shriram Sunlam• (iii) Other likely players – PNB Life Insurance, Axa Bharti Enterprises
Potential of the Insurance sector:
37
Source: Financial Express-Delhi.
Market share:
2001-02 2002-03 2003-04 2004-05 2005-
06LIC
98% 94% 87% 78% 72%PrivatePlayers 2% 6% 13% 22% 28%
Industry growth rate at 36% (2004-05) with premium income From new business. Source: Financial Express- Delhi
Market Share
Total population 1.1 billion
Total population of Insurable class
253 millions
Total population insured
88.5 millions
38
Company Indian Promoter/
Partner
Foreign Insurance
Market share
based on premium
Aviva life Dabur Aviva, UK 1.12Bajaj
AllianzBajaj Auto Allianz,
Germany6.12
Birla sun life
Aditya Birla group
Sun Life, Canada
1.84
HDFC Standard
HDFC Standard Life, UK
2.96
ICICI Prudential
ICICI Bank
Prudential, UK
7.11
ING Vysya
Vysya Bank
ING Insurance,
Netherlands
0.63
Kotak Mahindra,
Old Mutual
Kotak Mahindra
Bank
Old Mutual South Africa
0.71
Max New York
Max India New York Life, US
1.32
MetLife Jammu & Kashmir
Bank
MetLife, US
0.40
Sahara Life
Insurance
Sahara India
None 0.80
SBI Life SBI Cardiff, France
1.52
Tata AIG Tata Group
AIG, US 1.78
39
CONTRIBUTION TO INDIAN ECONOMY
(i) Life Insurance is the only sector which garners
long term savings
(ii) Spread of financial services in rural areas and
amongst socially less privileged
(iii) Long term funds for infrastructure
(iv) Strong positive correlation between
development of capital markets and insurance/
pension sector
(v) Employment generation
40
Aggregation of Long Term Savings
(i) Total Assets of Life Insurance Companies
2002-2003 2003-2004 2004-20052,80,450Cr 3,52,608Cr 4,23,000 Cr
(ii) Total Premium generated
2002-2003 2003-2004 2004-200557,708 Cr 66,278 Cr 79,000 Cr
(iii) Industry is growing @ 19 p.a.
(iv) At this growth rate, the future premium income generated will be
2005-2006 2006-2007 2007-200894,000 Cr 1,12000 Cr 1,33,000 Cr
(v) Life Insurance funds account for 15% of household savings.
(vi)The industry has the potential to increase the share to 20%.
41
Spread of financial services in rural areas and amongst socially
underprivileged
• IRDA Regulations provide certain minimum business to be done
(i) In rural areas
(ii) In the socially weaker sections
• Life Insurance offices are spread over nearly
1400 centers.
• Presence of representative in every tensile –
deeper penetration in rural areas.
• Insurance agents numbering over 6.24 lakhs
in rural areas.
• Policies sold in rural areas (2004-05) - No. of
policies - 55 lakhs Sum assured 46,000 cr
• Social security - No. of lives covered 2003-04
17.4 lakhs 2004-05 42.1 lakhs
42
Long term funds for infrastructure
• For GDP to grow at 8 to 10%, qualitative improvement in
infrastructure is essential.
• Estimates of funds required for development of infrastructure
vary widely.
• An investment of 6, 19,600 crore is anticipated in the next 5 years
(Source : SSKI India)
• Tenure of funding required for infrastructure
normally ranges from 10 to 20 years.
• Major portion of these funds are routed through debt/private
equity participation
Development of Capital Markets/
43
Economic Growth
•Industry also contributes in economic development through
investments in capital market. Present level of investments is over
Rs. 40,000 crore. (Mark to Market basis around 80,000 Crores).
•Annual Investment of around 9000 Crores in capital markets.
•Contribution to Five Year Plans9th Plan 2, 30,900 Crores Last
Two Years 1, 70,900 Crores
• Helps inculcate a sense of security by protecting earning of people in case of untimely
death. Benefits to Policy Holders
2002-2003 2003-2004 2004-2005
20,800 Cr 24,200 Cr 28,700 Cr
EMPLOYMENT GENERATION
44
• Life insurance industry provides increased
employment opportunities.
• Employees in insurance sector as on 31st March,
2005 is around 2 lakhs.
• Many agents depend on insurance for their
Livelihood–No. of agents on 31st March 2004 –
15.59 lakhs
•Brokers, corporate agents, training establishments
provide extra employment opportunities.
• Many of these openings are in rural sectors.
45
SPECIAL FEATURES
• Tax clubbing of various savings short term and long term into
same bracket have a bias towards short term savings.
• Distinction between the short term savings and long term savings
is critical from investor’s point of view. More prone to inflationary
pressures
• Clearly, long term savings more than 10 years deserve special
consideration under tax regime.
46
GROWTH POTENTIAL
At present insurance penetration in India is quite low
– 2.26% of GDP.
PHASE OF TRANSITION
• Life Insurance industry is under the phase of infancy after 50
years of monopoly
• Competition from within and other sectors of financial market
• Needs environmental support till it reaches a comfort zone
47
Chapter: 5
Company profile
Management
Areas of Business
KMOM- Progress till date
KMOM- the Partnership and
Lineage
Products
Hierarchy of KMOM Life
Insurance Ltd. (Surat Branch)
COMPANY PROFILE
48
Stock broking businesses in the UK. Kotak Group was established
in 1985.Kotak Mahindra Bank is the parent company of the group.
Kotak Group entered into the life insurance business in 2001.
Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture
between Kotak Mahindra Bank Ltd. (76%) and Old Mutual plc.
(24%) Old Mutual plc.Is a world-Class international financial
services company. It was established in South Africa before 160
years.
OLD MUTUAL is the largest financial services business in South
Africa, through its life insurance, asset management, banking and
general insurance operations. The company serves 4 million life
insurance policyholders and employs over 13 000 South Africans
in its local operations.
In the USA, OLD MUTUAL is one of the top ten fixed annuity
businesses offering an array of specialist asset management skills
through its 23 asset management businesses. The company’s US
Life business recorded sales of $4 billion at the end of 2002.
Operations in the United Kingdom are focused on wealth
management, through Gerrard as one of the leading private client
49
The OLD MUTUAL Group has the ability to cater for a variety of
consumer segments and offers a comprehensive and innovative
range of products for all income groups.
Mission:
50
“At Kotak Life Insurance, we aim to help customers take important
financial decisions at every stage in life by offering them a wide
range Of innovative life insurance products, to make them
financially independent.”
MANAGEMENT
MR. UDAY KOTAK is the CEO of the company.
Other Top Management persons are as follows:-
Mr. Gaurang Shah (Managing Director)
Mr. Gaurang Shah is the Managing Director of Kotak
Mahindra Old Mutual Life Insurance Limited.
Mr. Gaurang Shah is a Chartered Accountant and a Cost and
Works Accountant. He has also done his Company Secretary
ship from the Institute of Company Secretaries of India. Mr.
Gaurang Shah has been with the Kotak Group for the past eight
years where he has held different positions of great
51
responsibility and juggled multiple tasks effectively. His
cumulative experience, primarily in financial services, stands at
over 21 years, several of those in building the retail finance
business. At Kotak Life Insurance, Mr. Shah will focus on
developing new lines of businesses and leveraging the
company's existing competencies and network to steer Kotak
Life Insurance on its ongoing growth path with even greater
thrust. Mr. Shah has a commendable expertise in managing a
large number of employees.
Mr. Shah has been previously associated with Kotak Mahindra
Primus since its inception and has contributed towards its
growth to become a Rs.2000 Cr plus business. Before coming
to Kotak Life Insurance, Gaurang Shah was Group Head of
Retail Assets for Kotak Mahindra Bank. The Retail Assets
include commercial vehicles, personal loans, structured
products, car loans and loans against shares.
Mr. G Murlidhar (Chief Financial Officer)
Mr. Murlidhar is a Chief Financial Officer and
52
Company Secretary of Kotak Life Insurance. Mr.
Murlidhar is an associate member of the Institute of
Chartered Accountants of India, an associate
member of the Institute Of Company Secretaries of
India, and graduate member of the Institute of Cost
& Works Accountants of India. Mr. Murlidhar
possesses over 20-year work experience and has
earlier worked with National Dairy Development
Board (NDDB), MDS Switchgear Limited and
Nicholas Piramal India Limited and Ion Exchange
Ltd. Prior to Kotak Life Insurance; he held the
position of VP-Finance at Gujarat Glass Ltd.
As Chief Financial Officer at Kotak Life Insurance, he oversees
all aspects of Finance including Operations, Regulatory,
Internal Control, Finance, Accounts and Treasury.
53
Mr. Nandip Vaidya (Vice President - Sales)
Mr. Nandip Vaidya is the Vice President - Sales at Kotak Life
Insurance. Mr. Vaidya holds a B.Tech (Mechanical) degree from
IIT Mumbai and has also completed his Post Graduate Diploma in
Business Management from IIM-Ahmedabad.
He started his career as a Management Consultant at A.F.
Fergusson. After completing 5 years there, he moved onto various
positions within the Kotak Mahindra group starting from Car
Financing (Kotak Mahindra Finance Ltd) to Stock broking &
Distribution of investment products/ Mutual funds (Kotak
Securities). Mr. Vaidya set up the private banking business and
private equity fund for the Kotak group.
54
Mr. Arun Patil (Vice President - Sales & Management
Development)
Mr. Eksteen de Waal is the Sales Training Head of Kotak Life
Insurance. He joined on secondment from Old Mutual South
Africa for a period of two years. Eksteen is a post- graduate in
Law and practiced Law as well as lectured at South African
Universities before joining the Life Insurance Industry. He has
over 23 years' experience in the Life Insurance Industry. He
worked for Sanlam Life in South Africa for 3 years before joining
Old Mutual more than 20 years ago. Eksteen started with Old
Mutual as a Legal Adviser and after that held various positions. He
sold life assurance for some time, served as Head of Old Mutual's
Training Division, Head of Old Mutual's Trust Company, Project
Leader for implementing a new Sales Process with McKinsey's,
Head of Conventions and Motivation, Head of Agency Marketing
and finally Head of Banc assurance with Old Mutual Bank. In
addition he played a role in the wider Industry. He was Vice-
President of the South African Insurance Institute for two years as
well as Vice-President of the Financial Planning Institute for three
years. In this time Eksteen pioneered the introduction of the CFP
55
qualification into South Africa. He has traveled widely during his
career, working in the USA and England and also implemented
Training Programme in Namibia, Zimbabwe, Malawi and Kenai.
His current role is to substantially upgrade the level of Training
and assist in the implementation of Performance Management
Systems in Kotak Life Insurance.
AREAS OF BUSINESS
Kotak Mahindra one of India's leading financial institutions was
born in 1985 as Kotak Capital Management Finance Limited. This
company was promoted by Mr. Uday Kotak, Mr. Sidney A. A.
Pinto and Kotak & Company. Industrialists Mr. Harish Mahindra
and Mr. Anand Mahindra took a stake in 1986, and that's when the
company changed its name to Kotak Mahindra Finance Limited.
It's been a steady and confident journey to growth and success.
56
In October 2005, Kotak Group acquired the 40% stake in Kotak
Mahindra Prime held by Ford Credit International (FCI) and
FCI acquired the stake in Ford Credit Kotak Mahindra (FCKM)
held by Kotak Group.
In March 2006, Kotak Group has agreed to buy 25% stake held
by Goldman Sachs in KMCC and KS subject to regulatory
approvals.
Kotak Mahindra is one of India's leading financial institutions,
offering complete financial solutions that encompass every sphere
of life. From commercial banking, to stock broking, to mutual
funds, to life insurance, to investment banking, the group caters to
the financial needs of individuals and corporate.
57
The group has a net worth of around Rs.2,000 crore and employs
around 6,000 employees across its various businesses servicing around
one million four hundred thousand customer accounts through a
distribution network of branches, franchisees, representative offices
and satellite offices across 216 cities and towns in India and offices in
New York, London, Dubai and Mauritius.
58
KOTAK GROUP IS INVOLVED IN THE FOLLOWING
AREAS OF BUSINESS:-
Kotak Mahindra Prime Ltd.
Kotak Mahindra Prime Limited (KMPL) is a 100% subsidiary of
Kotak Mahindra Group (Kotak Group) formed to finance all
passenger vehicles. The company is dedicated to financing and
supporting automotive and automotive related manufacturers,
dealers and retail customers. The Company offers car financing in
the form of loans for the entire range of passenger cars and multi
utility vehicles. The Company also offers Inventory funding to car
dealers and has entered into strategic arrangement with various car
manufacturers in India for being their preferred financier.
As on March 31, 2005, KMP has a retail distribution network
comprising of 54 branches (including representative offices)
covering about 100 locations in 17 states in the country and has a
wide network of Direct Marketing Associates, brokers and
agencies supporting the distribution network and servicing around
113,000 customers.
59
Kotak Mahindra Capital Company Ltd.
Kotak Investment Banking* (KIB) is India's premier Investment
Bank
Kotak Investment Banking (KIB) and Kotak Institutional Equities
represent the securities business of the Kotak Mahindra Group **
(KI),
Kotak Investment Bank is a full service Investment Bank bringing
to its clients the global reach and the local knowledge and skills of
Kotak Mahindra. As a full service Investment Bank, Kotak
Investment Baking’s core business areas include Equity Issuances,
Mergers & Acquisitions, Advisory Services and Fixed Income
Securities and Principal Business.
Its strength lies in understanding the clients' businesses backed by
a strong research team and an extensive distribution network,
which spans a wide variety of investors across the country. It is
also the first Indian Investment Bank to be registered with the
Securities & Futures Authority in the UK (through our wholly
owned subsidiary) and the National Association of Securities and
Dealers in the USA.
60
It’s the first Indian Investment Bank to be appointed by the
Government of India as a Co-lead Manager in their international
divestment of Gas Authority of India Ltd through a GDR offering.
Kotak Investment Bank today well positioned in an increasing
globalize environment to provide full service to its clients based
either in India or overseas.
Kotak Mahindra Bank Ltd.
Kotak Mahindra Bank Limited (KMBL) is the holding company
and the flagship of the Kotak Mahindra Group. It was actually
incorporated as Kotak Capital Management Finance Limited on
November 2, 1985 and obtained its ‘Certificate of Commencement
of Business on February 11, 1986.
It commenced operations with Bill Discounting and soon started
other fund-based activities like corporate leasing & hire purchase,
automobile finance and money market operations. Subsequently, it
also entered the funds syndication and the Investment banking
business.
61
Kotak Mahindra Asset Management Company
Kotak Mahindra Asset Management Company (KMAMC), a
wholly owned subsidiary of KMBL, is the asset manager for Kotak
Mahindra Mutual Fund (KMMF). KMAMC started operations in
December 1998 and has over 1, 35,000 investors in various
schemes. KMMF offers schemes catering to investors with varying
risk- return profiles and was the first fund house in the country to
launch a dedicated gilt scheme investing only in government
securities.
International Subsidiaries
Kotak Mahindra International Limited (KMIL) is the international
arm of the Kotak Mahindra Group and was incorporated in 1994 in
Mauritius, with a branch in Dubai. Today the international
operations also cover the United Kingdom, through Kotak
Mahindra U.K. Limited and in the USA, through Kotak Mahindra
Inc. USA. These companies are subsidiaries of Kotak Mahindra
Capital Company (KMCC) – the Investment Banking Division of
the Group. Services offered include GDR and ADR trading and
broking, debt syndication, placement of Indian securities and
advisory services. Kotak Mahindra was the first Indian group to be
registered with the Securities and Futures Authority, U.K. Also,
Kotak Mahindra is the first Indian group registered in the US
62
providing service to both Institutional investors and High Net
worth Clients in the US for their investments into Indian markets.
Kotak Securities
Kotak Securities Ltd., subsidiary of Kotak Mahindra Bank Ltd., is
one of India’s largest brokerage and distribution house. Over the
years Kotak Securities has been one of the leading investment
service providers catering to the needs of various investor
categories both institutional and non-institutional.
The Private client group (PCG) of the Company provides value
added investment advisory services to high net worth individuals,
NRI investors, trusts, corporate and Banks. The investment product
range offered by PCG covers equity investment and equity trading,
equity derivatives, portfolio management, IPO’s and Mutual funds.
The Company has a full fledged research division involved in
macro economic studies, sectoral research and company specific
equity research combined with a strong and well networked sales
force which helps deliver current and up to date market
information and news.
Kotak Securities Ltd., Depository Participant with National
Securities Depository Limited (NSDL) and Central Depository
Services Ltd. (CDSL) provides dual benefit services wherein the
63
investors can use the brokerage services of the Company for
executing the transactions and the depository services for settling
them.
Under the Portfolio Investment Scheme offered by the Company,
the funds of the investors are managed by a highly competent team
comprising of Equity Strategist, a Portfolio Manager and a team of
equity, technical and derivatives analysts.
Kotak Securities Ltd., also an Approved Intermediary under the
Securities Lending Scheme, 1997, facilitates clients to borrow and
lend securities.
64
KMOM – PROGRESS TILL DATE
44 branches in 31 cities.
7500 life advisors.
1000employees of very good quality.
Ranks 2nd in terms of average premium per policy.
Ranks 4th in total advertising awareness.
First year premium income:
2001-02: 7 Crores
2002-03: 35 Crores
2003-04: 124 Crores
2004-05: 375 Crores
65
KMOM – THE PARTNERSHIP AND
LINEAGE
A 26%-74% JOINT VENTURE BETWEEN
KOTAK MAHINDRA AND OLD MUTUAL
KOTAK LIFE INSURANCE
Brand equity
Entrepreneurial employees
Branch network
Knowledge of the Indian market
Access to customer base
Distribution associates
OLD MUTUAL PLC
Domain knowledge
Technology
Product innovation
Training expertise
Global perspective
System and processes
Multi channel management
66
Old Mutual was established more than 150 years ago. Old
mutual plc. is a world-class international financial service
company. It owns the largest companies in the following areas in
South Africa. They are:
1. Life Insurance Company
2. Asset Management Company
3. Bank
4. Non-life insurance company
It has been developed into an International financial services group
whose activities are focused on asset gathering and asset
management. The Old Mutual Group offers a diverse range of
financial services in three principal geographies: South Africa, the
United States and the United Kingdom. The company is listed on
the London Stock Exchange with a market capitalization of
approximately $6 billion and is a member of the elite FTSE 100
index. In the 2003 rankings of the World's 500 largest corporations
by Fortune magazine, Old Mutual climbed 87 places to position
number 366 and was also listed as the 14th largest insurance
company in the world.
Old Mutual is the largest financial services business in South
Africa, through its life insurance, asset management, banking and
67
general insurance operations. The company serves 4 million life
insurance policyholders and employs over 13 000 South Africans
in its local operations.
In the USA, Old Mutual is one of the top ten fixed annuity
businesses offering an array of specialist asset management skills
through its 23 asset management businesses. The company’s US
Life business recorded sales of $4 billion at the end of 2002.
Operations in the United Kingdom are focused on wealth
management, through Gerrard as one of the leading private client
stock broking businesses in the UK.
The Old Mutual Group has the ability to cater for a variety of
consumer segments and offers a comprehensive and innovative
range of products for all income groups.
PRODUCTS
Term Plans
68
Kotak Term Assurance Plan
Kotak Preferred Term Plan
Endowment Plans
Kotak Endowment Plan
Kotak Money Back Plan
Kotak Child Advantage Plan
Kotak Capital Multiplier Plan
Kotak Retirement Income Plan
Kotak Premium Return Plan
Unit Linked Plans
Kotak Retirement Income Plan (Unit-linked)
Kotak Safe Investment Plan II
Kotak Flexi Plan
Kotak Easy Growth Plan
Kotak Privilege Assurance Plan
Group
Employee Benefits
Kotak Term Grouplan
Kotak Credit-Term Grouplan
Kotak Complete Cover Grouplan
Kotak Gratuity Grouplan
Kotak Superannuation Group Plan
69
Rural
Kotak Gramin Bima Yojana
HIERARCHY OF KMOM LIFE INSURANCE
LIMITED
(SURAT BRANCH)
70
Branch manager
Assistant BM Branch Operations In
charge (BOE)
Sales Manager
Operation Executive
Assistant SM Operations
Life advisor
Chapter: 5
71
Data interpretation of the Survey
Graph analysis
72
AGE No Of Members18-25 1126-30 2231-45 44
46 to above 23
73
Gender No of Member
MALE 66
FEMALE 34
74
Family member No of Member2-4 405-8 48
8 to above 12
75
Income No of Members40K -70K 17
70K-1 Lake 411 Lake to 3 Lakes 28
3 Lacks 14
76
Insurable Member Uninsurable member42% 58%
77
Only 42%people having insurance in surat so it is potential for insurance company to capture to all that market
78
Among that 42% people who having insurance, they have
insurance 40% for self 28%for spouse 21% for children and 18%
for their parents and 11% for all family member.
Having insurance No of membersself 40
spouse 28children 21parents 18
all 11
Different policy bought bye customers
79
80
Under insurable persons Fully insurable persons82% 18%
Only 42 % people having life insurance but among them 82% people are underinsurance and only 18% people are fully insured according to them income
81
Insurance Plan Market ShareTerm Plan 39%Money back Plan 14%Endowment Plan 15%Child Plan 8%Unit link Plan 24%
82
Chapter 6:
Finding
Suggestion
83
Finding and Suggestion
According the survey only 42% people are insured in
Surat so reaming other part is potential for insurance
sector.
Among that 42% people who having insurance, they
have insurance 40% for self 28%for spouse 21% for
children and 18% for their parents and 11% for all
family member, also its very help full for insurance
sector so they should take necessary step for capture
this potential.
Only 42% people having insurance in Surat in that 42%
there are 82 % people are under insured and other 18%
people are fully insured according to their income so
that is also plus point for insurance sector to capture the
market
Chapter 7
84
Conclusion
All the insurance company must advertise more in the market because not all people know more about life Insurance policy.
Most number of people wants Guaranteed Returns so company must focus on this for the customer investment.
Make insurance policy which can buy any one so we can insured them through this type of life insurance policy.
8 References
85
In order to obtain more information regarding the present study
and to substantiate it with theoretical proof, the following
references were made: -
Insurance chronicle, January 2006 Special issue
“Insurance Industry 2006”.
Websites visited :
www.kotaklifeinsurance.comwww.google .com
Chapter 9:
86
Annexure
Questionnaire
1) Name ______________________________
2) Age
1) 18-25 2)26 to 30 3) 31 to 45 4) 46 to above
3) Gender 1) male ____) female____
4) Occupation:
1) Service 2) Business 3) Professional 4 ) other
5) Family member 1) 2 to 4 2) 5 to 8 3) 8 to above
6) Do u have a life insurance?
Yes_______ No_______
If yes, Which is it?
Company’s name
Term plan
Endowment
Whole life
Money back
Retirement
ChildPlan
Unit linkPlan
LIC
87
ICICI Prudential Birla Sunlife SBI Life HDFC Standard LifeBajaj AllianceTATA AIGKotak MahindraING VysyaMax Newyork Met LifeReliance Shri Ram Sahara
7) What is your annual income? 1) 40 K to 70 K 2) 70 K to 1 lake 3) 1 lake to 3 lakes 4) 3 lakes to above
88
89
