A PROJECT REPORT ON MARKET POTENTIAL OF TATA AIG LIFE INSURANCE COMPANY LTD

A Project Report Submitted For Partial Fullfillment Of The Degree Of Bachelors of Business Administration course curriculum of Christ University,Bangalore.

Submitted by: Rohit Prasad BBA-3rd year Regn.no: -1011628

Acknowledgement
Sometimes words fall short to show gratitude, the same happened with me during this project. The immense help and support received from Achievers Management Group and Tata AIG Insurance Company overwhelmed me during the project. My sincere gratitude to Ms. Bhama.T for her support and Mr. Ranjan Jana (Partner AMG, Kolkata), for providing me with an opportunity to work with TATA AIG Life Insurance company. I am highly indebted to Mr. Ravi Prakash, (Asst. Sales Manager, Tata AIG, Kolkata) and company project guide, who has provided me with the necessary information and his valuable suggestion and comments on bringing out this report in the best possible way. I am grateful to all of the members of Tata AIG Insurance Company, Kolkata branch, who have helped me to carry on the project. Last but not the least; my heartfelt love for my parents, whose constant support and blessings has helped me throughout this project.

PREFACE
The liberalization of the Indian insurance sector has been the subject of much heated debate for some years. The policy makers where in the catch 22 situation wherein for one they wanted competition, development and growth of this insurance sector which is extremely essential for channeling the investments in to the infrastructure sector. At the other end the policy makers had the fears that the insurance premium, which are substantial, would seep out of the country; and wanted to have a cautious approach of opening for foreign participation in the sector. As one of the rare occurrences the entire debate was put on the back burner and the IRDA saw the day of the light thanks to the maturing polity emerging consensus among factions of different political parties. Though some changes and some restrictive clauses as regards to the foreign participation were included the IRDA has opened the doors for the private entry into insurance. Whether the insurer is old or new, private or public, expanding the market will present multitude of challenges and opportunities. But the key issues, possible trends, opportunities and challenges that insurance sector will have still remains under the realms of the possibilities and speculation. What is the likely impact of opening up Indias insurance sector? The large scale of operations, public sector bureaucracies and cumbersome procedures hampers nationalized insurers. Therefore, potential private entrants expect to score in the areas of customer service, speed and flexibility. They point out that their entry will mean better products and choice for the consumer. The critics counter that the benefit will be slim, because new players will concentrate on affluent, urban customers as foreign banks did until recently. This seems to be a logical strategy. Start-up costs-such as those of setting up a conventional distribution network-are large and high-end niches offer better returns. However, the middle- market segment too has great potential. Since insurance is a volumes game. Therefore, private insurers would be best served by a middle-market approach, targeting customer segments that are currently untapped.

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

CHAPTER 1

INTRODUCTION TO INSURANCE

1. INTRODUCTION

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

Insurance business is divided into four classes:

Life Insurance Fire Marine Miscellaneous Insurance.

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

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

insured their assets including plant and machinery. Means of savings and investment: Insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing income-tax exemptions also, people invest in insurance. Source of earning foreign exchange: Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways. Risk free trade: Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover.

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

ROLES OF THE LIFE INSURANCE:

Life insurance as an investment: - Insurance products yield more than any other investment instruments and it also provides added incentives or bonus offered by insurance companies. Life insurance as risk cover: - Insurance is all about risk cover and protection of life. Insurance provides a unique sense of security that no other form of invests can provide.

Life insurance as tax planning: - Insurance serves as an excellent tax saving mechanism too.

IMPORTANCE OF THE LIFE INSURANCE:

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

INSURANCE CYCLE:

Fig 1: Insurance cycle

source: www.rma.usda.gov

Policy Renewal/Change Options/Application

The Insurance Cycle begins each year with the insurance offer. Actuarial documents are published annually by the Risk Management Agency (RMA). The actuarial documents list the plan of insurance, crop, type, variety, and practice that may be insured in a state and county, and show the amounts of insurance, available insurance options, levels of coverage, price elections, applicable premium rates, and subsidy amounts. The Special Provisions of Insurance list program calendar dates, and general and special statements which may further define, limit, or modify coverage.

Sales Closing/Cancellation/Termination Dates

Insurance applications must be completed and signed no later than the sales closing date specified in the crop actuarial documents. Applications signed after the crop sales closing date may be rejected by the insurance provider.

Insurance coverage is continuous and can be cancelled by either the insurance provider or the policyholder for the following crop year by providing a written notice to the other party no later than the cancellation date specified in the crop policy. For a policyholder insured the previous crop year, any changes he or she wishes to make to the policy coverage must be made on or before the crop sales closing date. The policy will automatically renew for the subsequent crop year unless the policyholder cancels the policy in writing on or before the crop cancellation date. Insurance coverage may be terminated by the insurance provider for the following crop year for nonpayment of outstanding debt by providing a written notice to the policyholder no later than the termination date specified in the crop policy. The insurance provider may terminate coverage on a crop if no premium is earned for three consecutive years.

Acceptance
Upon receipt of a properly completed and timely submitted insurance application, the insurance provider will accept and process the application, unless the applicant is determined to be ineligible under the contract or Federal statute or regulation. The insurance provider will issue a summary of coverage and the appropriate policy documents to the applicant. After the application is accepted, the policyholder may not cancel the policy for the initial crop year.

Insurance Attaches
For annual crops, insurance attaches annually when planting begins on the insurance unit. The crop must be planted on or before the crop's published final planting date unless late or prevented planting provisions apply. If prevented planting provisions apply, and the crop cannot be timely planted due to the causes specified in the crop provisions, such acreage may be eligible for a prevented planting payment.

Acreage Reports
The policyholder must annually report for each insured crop in the county the number of insurable and uninsurable acres planted or prevented from being planted if prevented

planting is available for the crop, the date the acreage was planted, share in the crop, the acreage location, farming practices used, and types or varieties planted to the insurance provider on or before the applicable acreage reporting date specified in the crop actuarial documents. This report is used by the insurance provider to establish the amount of coverage and premium for the crop. Insurance providers may deny coverage if the acreage report is filed after the applicable crop acreage reporting date.

Summary of Coverage
The insurance provider will process a properly completed and timely filed acreage report, and issue to the policyholder a summary of coverage that specifies the insured crop, the insured acres and amount of insurance or guarantee for each insurance unit. The policyholder may make changes to the filed acreage report, if permitted by the insurance provider.

Premium Billing
The annual premium is earned and payable at the time insurance coverage begins. The insurance provider shall issue a premium billing based upon the information contained in the acreage report no earlier than the premium billing date specified in the crop actuarial documents. The premium billing will specify the amount of premium and any administrative fees that may be due. If the premium or administrative fees are not paid by the date specified in the actuarial documents or policy, the insurance provider may assess interest on the outstanding premium balance.

Notice of Damage or Loss

A written notice of damage or loss for each unit is to be filed by the policyholder within 72 hours of the policyholder's initial discovery of damage or loss but not later than 15 days after the calendar date for the end of the insurance period unless otherwise stated in the individual crop policy. The policyholder should refer to the individual crop provisions for additiona l requirements in the event of damage or loss. These notifications provide the opportunity for the insurance provider to inspect the crop and determine the extent of damage or potential production before the crop is harvested or otherwise disposed of.

Inspection
After the insurance provider receives the written notice of damage or loss, it will be processed and, if necessary, a loss adjuster will be sent to inspect the damaged crop and gather pertinent information concerning the damage. If the policyholder wishes to destroy or not harvest the crop, the loss adjuster will gather the appropriate information, conduct an appraisal to establish the crop's remaining value and complete any forms needed. If the crop has been harvested or will not be harvested by the end of the insurance period, and the policyholder wishes to file a claim for indemnity, the loss adjuster will gather the appropriate information and assist the policyholder in filing the claim for indemnity. It is the policyholder's responsibility to establish the time, location, cause, and amount of any loss.

Indemnity Claim
After the claim for indemnity is processed by the insurance provider, an indemnity check and a summary of indemnity payment will be issued showing any deductions to the amount of indemnity for outstanding premium, interest, or administrative fees.

Contract Change Date

Changes to the insurance program may be made by RMA from one year to the next. The insurance provider will notify the policyholder in writing of any changes to the policy, actuarial documents, or the Special Provisions of Insurance prior to the calendar date for contract changes specified in the crop policy. The policyholder will have the opportunity to review the changes and, if he/she desires, continue the insurance coverage for the following crop year, change the policy coverage, or cancel the insurance coverage. Any changes to the policy coverage that the policyholder makes must be made no later than the crop sales closing date. If the policyholder wishes to cancel the policy, a written notice must be submitted to the insurance provider on or before the crop cancellation date.

CHAPTER 2

INTRODUCTION TO INDIAN INSURANCE INDUSTRY

2.1. INDIAN INSURANCE INDUSTRY

The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the countrys GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India. It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation Malhotra Committee was constituted by the government in 1993 to examine the various aspects of the industry. The key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more efficient and competitive financial system suitable for the requirements of the economy

was the main idea behind this reform. Since then the insurance industry has gone through many sea changes .The competition LIC started facing from these companies were threatening to the existence of LIC .since the liberalization of the industry the insurance industry has never looked back and today stand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run.

2.2. A BRIEF HISTORY OF THE INSURANCE SECTOR:

The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are given in the following table. Some of the important milestones in the life insurance business in India are:
Years 1912 Milestones in the life insurance business in India The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 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.

Table 1

The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are given in the following table.
Year 1907 Milestones in the general insurance business in India The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business 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.

Table 2
1993 Setting up of Malhotra Committee 1994 Recommendations of Malhotra Committee 1995 Setting up of Mukherjee Committee 1996 Setting up of (interim) Insurance Regulatory Authority (IRA) Recommendations of the IRA. 1997 Mukherjee Committee Report submitted but not made public

1997 The Government gives greater autonomy to LIC, GIC and its subsidiaries with regard to the restructuring of boards and flexibility in investment norms aimed at channeling funds to the infrastructure sector. 1998 The cabinet decides to allow 40% foreign equity in private insurance companies26% to foreign companies and 14% to NRIs, OCBs and FIIs. 1999 The Standing Committee headed by Murali Deora decides that foreign equity in private insurance should be limited to 26%. The IRA bill is renamed the Insurance Regulatory and Development Authority (IRDA) Bill. 1999 Cabinet clears IRDA Bill. 2000 President gives Assent to the IRDA Bill.

2.3. INDIAN INSURANCE MARKET (HISTORY):

Insurance has a long history in India. Life Insurance in its current form was introduced in 1818 when Oriental Life Insurance Company began its operations in India. General Insurance was however a comparatively late entrant in 1850 when Triton Insurance company set up its base in Kolkata. History of Insurance in India can be broadly bifurcated into three eras: a) Pre Nationalization b) Nationalization and c) Post Nationalization. Life Insurance was the first to be nationalized in 1956. Life Insurance Corporation of India was formed by consolidating the operations of various insurance companies. General Insurance followed suit and was nationalized in 1973. General Insurance Corporation of India was set up as the controlling body with New India, United India, National and Oriental as its subsidiaries. The process of opening up the insurance sector was initiated against the background of Economic Reform process which commenced from 1991. For this purpose Malhotra Committee was formed during this year who submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was passed in 1999. Resultantly Indian Insurance was opened for private companies and Private Insurance Company effectively started operations from 2001.

2.4. HOW BIG IS THE INSURANCE MARKET?

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

Insurance is a Rs.400 billion business in India, and together with banking services adds about 7% to India's Gap. Gross premium collection is about 2% of Gap and has been growing by 15-20% per annum. India also has the highest number of life insurance policies in force in the world, and total investible funds with the LIC are almost 8% of GDP. Yet more than three-fourths of India's insurable population has no life insurance or pension cover. Health insurance of any kind is negligible and other forms of non-life

insurance are much below international standards.

2.5. INDIAN SCENARIO:

Indian economy is the 12th largest in the world, with a GDP of $1.25 trillion and 3rd largest in terms of purchasing power parity. With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, it is on the hinge of an ever increasing growth curve. Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small--4-5%. This in itself is an indicator that growth potential for the insurance sector is immense. Its a business growing at the rate of 15-20% per annum and presently is of the order of $47.9 billion. India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with companys continuous effort to lure the customers with new product offerings. However, the market share of private insurance companies remains very low -- in the 10-15% range. Even to this day, Life Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints. The upward growth trend started from 2000 was mainly due to economic policies adopted by the then Indian government. This year saw initiation of an era of economic liberalization and globalization in the Indian economy followed by several reforms and long-term policies that created a perfect roadmap for the success of Indian financial markets. On the basis of several macroeconomic factors like increase in literacy rate & per capita income, decrease in death rate and unemployment, better tax rebates, growing GDP etc., we estimate that the Indian insurance sector will grow by $28.65 billion and reach $76.54 billion by 2011 with a CAGR of 12.44% and a growth of 59.82%. The Indian life insurance market generated total revenues of $41.36 billion in 2007, thus representing a compound annual growth rate (CAGR) of 11.84% for the period spanning

2000- 2007. Life insurance market had a growth of $22.46 billion within a period of 7 years with a growth rate of 118.24%. Estimated life premiums rose from INR1, 470,800 million ($36.77 billion) in 2006 to INR1, 301,540 million ($32.54billion) in 2005. We envisage that life premiums in 2011 will be $65.96 billion, a growth larger than they were in 2007. The performance of the market is forecast to accelerate, with an anticipated CAGR of 9.78% for the four-year period 2007-2011 expected to drive the market to a value of $65.96 billion by the end of 2011. There would be a growth of $24.6 billion i.e. 59.48% in the next 4 years. Non-life premiums in India were $6.53 billion in 2007. Gross written premium (GWP) in the Indian non-life insurance market reached a value of $5.75 billion in 2006, this representing an annual growth of 13.55% for the period spanning 2006-2007. Estimated non-life premiums rose from INR230 billion ($5.75 billion) in 2006 to INR261 billion ($6.53 billion) in 2007. We anticipate that non-life premiums will grow by a CAGR of 9.40% between 2007-2011. We are looking for non-life premiums to rise by $405 million over the five years to the end of 2011 with a growth rate of 62.02%.

Fig 2

Source: www.indiaprwire.com

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

26.6% from 20.2% a year ago. ICICI Lombard led the private players by logging 80% growth in premium at Rs 1,592 crore, followed by Bajaj Allianz, which grew by 50% to collect Rs 1,287 crore in premium. ICICI Lombard had a market share of 7.81% and Bajaj Allianz had 6.31% of the market.

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

2.7. NAME OF MAJOR INSURANCE COMPANIES IN KOLKATA CITY

NAME OF INSURANCE LOGO NATURE OF HOLDING Life Insurance Corporation Public

Tata AIG Insurance

Private

ICICI Prudential

Private

Max New York Life Insurance

Private

HDFC Standard Insurance

Private

Reliance Life Insurance

Private

Kotak Life Insurance

Private

Aviva Life Insurance

Private

SBI Life Insurance

Private

Bajaj Allianz

Private

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

2.8. MARKET SHARE OF DIFFERENT PRIVATE PLAYERS:

Fig 3

source: www freepress.in

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

2.9. GROWTH OF PRIVATE PLAYERS:

Fig 4

Source: www.blonnet.com

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

CHAPTER 3

Introduction to TATA-AIG

Tata AIG Insurance Company

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

3.2. TATA GROUP IN INSURANCE:

Tata AIG General Insurance Company Ltd, and Tata AIG Life Insurance Company Ltd., (collectively "Tata AIG") are joint venture companies between the Tata group India's most trusted industrial house and American International Group, Inc. (AIG), the leading U. S. based international insurance and financial services organization. The Late Sir Dorab Tata, was the founder Chairman of New India Assurance Co. Ltd., a group company incorporated way back in 1919. Government of India took over the management of this company as a part of nationalization of general insurance companies

in 1972. Not deterred by the move, Tata group have ventured into risk management services having tied up with AIG group, back in 1977, with the incorporation of Tata AIG Risk Management Services Pvt. Ltd. The Tata Group is one of India's largest and most respected business conglomerates, with revenues in 2006-07 of $28.8 billion (Rs129,994 crore), the equivalent of about 3.2 per cent of the country's GDP, and a market capitalization of $72.2 billion as on December 6, 2007. Tata companies together employ some 289,500 people. The Tata Group has operations in more than 85 countries across six continents, and its companies export products and services to 80 countries.

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

Company Background: AIG's history dates back to 1919, when Cornelius Vander
Starr established an insurance agency in Shanghai, China. Starr was the first Westerner in Shanghai to sell insurance to the Chinese. In 1962, Starr gave management of the company's less than successful U.S. holdings to Maurice R. \"Hank\" Greenberg, who shifted the company's U.S. focus from personal insurance to high-margin corporate coverage. The company went public in 1969. American International Group, Inc is the leading U.S. based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. Its member companies write a wide range of commercial and personal insurance products through a variety of distribution channels in over 130

countries and jurisdictions throughout the world. AIG's Life Insurance operations comprise of the most extensive worldwide network of any life insurer. AIG's global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products.

3.4. THE JOINT VENTURE:

Tata AIG Life Insurance Co. Ltd. is capitalized at Rs. 205.57 crores of which 74 per cent has been brought in by Tata Sons and the American partner brings in the balance 26 per cent. Mr. George Oommen has been named managing director of Tata AIG Life. TataAIG plans to provide broad array of life insurance plans to cover to both individuals and groups. The company headquartered in Mumbai, with branch operations in Delhi, Chennai, Hyderabad, Bangalore Calcutta, Pune and Chandigarh.

3.7. DISTRIBUTION CHANNELS OF TATA AIG:

The winds of liberalization initiated vast changes in the functioning of the industry today. Increasing number of multinational partnership with private insurers have paved the way for a radical shift in insurance selling- through a number of new distribution channels besides bringing about more awareness on the need for insurance and also stressing on the important role technology can play. In the developed markets, many insurers have a preferred mode of distribution. In India, many players are hedging their bets because the need for scale outweighs considerations of focus and because non-agency distribution, which is presently operational for the last two years, forms a basis for study. Tata AIG has a corporate agency channel, which handles its corporate agents and has tieups with 38 corporate houses. Insurers want to lower distribution costs by finding more efficient channels. The new private players are developing multiple channel models; many insurers use or plan to use several banks as distributors. Because most banks have

strong regional bias, in this regards Tata AIG has agreement with HSBC (corporate agency distribution) through that it is doing both life insurance and general insurance business.. Because most banks have a strong regional bias, Insurers can use several banks without creating large overlap. Many larger banks are sourcing products from several insurers acting as manufacturers. An important distribution challenge facing insurers is the need to meet the rural and social sector legislative requirements stipulated in terms of market opening. For Tata AIG, it takes rural insurance as an opportunity and not an obligation. For achieving objective in rural area it has also tie with NGOs (Bridge stone for Karnataka and Kerala). In this project mainly focus is distribution channel of Life Insurance of Tata AIG and little bit of distribution of General Insurance of Tata AIG also. So as the whole topic of distribution can be known for the both company of Tata AIG (Life and General insurance). Gradually channels are incorporating day by day for the growth of business. In the span of two to three years Tata AIG achieve much more business growth what it expected at the time of entrance in Indian market. It happened because it has quality people, innovative management, be able to employ technology effectively besides having right products with effective and modern distribution channel.

4. Objective of studying the organization The objective of the study is to study the market potential of TATA AIG in Kolkata City and to understand the potential of current insurance industry

5. Brief History TATA-AIG:

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

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

6. Nature of the OrganisationNature of Business Tata Aig is majorly into insurance service providers such as automobile insurance, home insurance, Accidental and health insurance. They are into insurance sector.

Vision - Empowering every one live their dreams Mission Create unmatched volume for everyone through dependable, effective, transparent and profitable life insurance and pension plans To develop life insurance business in the best interest of the company To provide financial security to individuals by offering insurance products and service of high quality of affordable cost

6. Product Lines

List of products offered by Tata AIG

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

Traditional Plan Pure Protection

Raksha 1.Maha Life Gold 1.Nirvana Plus 2.Easy retire 3.Riders 1.Health protect

Savings

Investment

Pension

Living Benefits

Table 4

Unit linked insurance plans (ULIPs) Pure protection

1.Invest Assure Gold 1.Invest Assure Plus

Savings

Investments

Pension Living
1.Invest assure future

benefits

1.Health Investor

2.Invest Assure II

2.Invest Assure Flexi

Table 5

Various products offered by Tata AIG Life Insurance

Children Plans - Currently available products to purchase. 1. Tata AIG Life Starkid: Is a child endowment policy which provides for your childs future needs like education or for marriage.

2. Tata AIG Life Assure Career Builder: Is a money back policy, which provides funds for every step of your childs future.

3. Tata AIG Life MahaLife Gold: Is a policy where you need to make premium payments only for the first 15 years. It gives an income and cover for life. 4. Tata AIG Life Assure Educare at 18 & Tata AIG Life Assure Educare at 21: Are endowment policies where the plan matures once your child turns 18 or 21 years depending upon which policy is taken.

5.Tata AIG Life Assure 21 years Money Saver: This is a money back plan, which gives you money at specified intervals.

6. Tata AIG Life Assure 10 Years / 20 Years / 30 Years Security & Growth Plans: Is an endowment plan where in an unfortunate event of the death of the policyholder the family members are secured.

7. TATA AIG Life Gyan Kosh - The plan has been designed to provide financial protection for childrens education, marriage, providing funds for setting up a business and so on. Children Plans - Old products not available for fresh purchase. 1. Tata AIG Life United Ujjwal Bhavishya: Is a unit linked endowment policy for your child to help him realize his dreams. 2. Tata AIG Life Invest Assure II: Is a unit linked plan giving you a Life Insurance cover as well as investment benefits. 3. Tata AIG Life Invest Assure Flexi: Is a unit-linked endowment policy. 4. Tata AIG Life Invest Assure Plus: Is a single premium unit linked plan.

7. ORGANIZATIONAL STRUCTURE OF TATA-AIG:

Fig 5

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

7.1 Main Offices

Registered Office: 9th Floor, Piramal Towers, Peninsula Corporate Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai - 400 013

WEST BENGAL DURGAPUR

Durgapur 1st Floor City GYM Building Sahid Khudiram Sarani City Centre Durgapur713216 Tel: 0343-6457801/802

KOLKATA

Kolkata 2/F Constantia Bldg Dr.Brahmachari Street Kolkata-700017 Tel: 03364505000 Fax: 033-22895032

Kolkata - Salt Lake DC Block City Center Building Block-D 4th Flr Unit No - 403 Sector - 1 Salt Lake Kolkata-700064 Tel: 033-64597025/64597031/645

HYDERABAD

Hyderabad 4th Floor Block -A My Home Tycoon Kundanbagh Begumpet Lifestyle Building Hyderabad-500016 Tel: 040-66575000 Fax: 040-66668451

VISHAKHAPATNAM

Vishakhapatnam Isnar Complex above icici bank Dwarka nagar Road Vizag Vishakhapatnam533016 Tel: 0891-6616771/72/73 Fax: 0891-2716 336

ASSAM GUWAHATI

Guwahati Mayur Garden 3rd Floor Opp HDFC Bank G.S.Road Guwahati-781005 Tel: 0361-2462343 Fax: 0361-2462559

DELHI

Delhi-Lotus Towers Lotus Towers 1st Floor Community Centre New Friends Colony New Delhi - 110 025 Tel: 011-66563600

Delhi-Kirti Nagar A-2 2nd Floor Main Nazafgarh Road Near Kalra Hospital Kirti Nagar NewDelhi110015 Tel: 011-66563600

ASSAM HARYANA JHARKHAND

KARNATAKA KERALA MADHYA PRADESH MAHARASHTRA ORISSA PONDICHERRY PUNJAB RAJASTHAN TAMIL NADU UTTAR PRADESH

8. Functions of the HR Department of TATA AIG

Recruitment and Selection Induction Competence Development Providing compensation and other employee benefits Performance Management Talent and Career Management

9. Short-Falls/weakness of HRM Department

The HRM department lacks in coordination-the coordination between the employees is minimal. This at times has an adverse effect on certain events and plans. There is no much of a face-to-face interaction with the employees with the respective issues and most of them are dealt through mails and calls. There is no proper delegation of responsibilities among the employees. This results in chaos at certain point of time.

Chapter 4

INTRODUCTION OF THE RESEARCH STUDY

10.1. Project proposed

Market Potential Study of TATA AIG life Insurance in Kolkata City

10.2. OBJECTIVE OF THE PROJECT: - Main objective of the project is to

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

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

Methods adopted for surveys 1. Field survey method 2. Personal interview technique 3. Secondary sources viz company database The data collected are represented into suitable tabular forms for drawing inferences. Quantitative techniques like averages, percentages, range, two-way tables, chi- square tests analysis are applied as per the requirement. The level of preference, perception of the customers about the product and company were identified by means of a scoring scheme. For the representation of data various charts and graphs are used as per requirement.

10.4. Questionnaire Designing:

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

different type of insurance policies in the market. Which type of policies do they prefer can understand from the questionnaire. Which life insurance policies of Tata AIG are most preferable we can get from it. To know all of these cluster analysis will be used. Sample questionnaire has been attached with annexure I.

10.5.LIMITATION OF THE STUDY:

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

Chapter 5

Survey and results

5.1 Findings from the research Study

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

Occupation of respondents:
Occupation Service Business Professional Others Numbers of respondents 60 20 18 2

Table: 6 Proportion of Different Occupation

None d c b

Fig 6: Number of respondents according to the occupation

Number of respondents according to the income level

Income/annum
50000-100000 100000-300000 300000-500000 500000-1000000 >1000000

Number of person
29 40 26 5 0

Table: 7

None d c b

Fig 7: Proportion of respondent according to the income level

Number of family members of the respondents:

Number of family members a) 1-4 b) 4-8 c) 8-12 d) 12-16 e) >16

Number of Respondents 72 16 2 0 0

Table: 8

None d c b a

Fig 8: Number of family members according to the respondents

Number of dependent family members of the respondents:

Number of dependant family members

a) None b) 1-2 c) 2-4 d) 4-6 e) 6-8

Number of respondents

23 54 19 3 1

a b c d None 0 20 40 60 80

Series1

Annexure I

QUESTIONNAIRE Market Potential study of Tata AIG in Kolkata City

Dear Sir/Madam, We are conducting a survey on Market potential study of Tata AIG in Dehradun city by Insurance organizations. We hope for your kind coordination. Name: ............................................................................................................ Age: .............................. Contact Number: ................................................................................................ E-mail address: .................................................................................................. 1. Family Members: (Please tick) a) 1-4 b) 4-8 c) 8-12 d) 12-16 e)16> Sex: Male [ ] Female [ ]

2. Number of dependent family members: (Please Tick) a) 1-2 b) 2-4 c) 4-6 d) 6-8 e) More

3. Occupation: (Please Tick) a) Service b) Business c) Professional d) Any

other: ................................................ 4. Annual Income: (Please Tick) a) 50000-100000 b) 100000-300000 c) 300000-500000

d) 500000-1000000 e) 1000000 5. In which would you like to invest? (Please Tick) a) Fixed deposit b) Post office c) Mutual Fund d) Share buying

e) Insurance policy 6. Do you have any insurance policy? (Please Tick) a) Yes b) No 7. Which sector do you prefer? (Please Tick)

a) Public Sector b) Private Players

8. Do you have any Insurance policy in the Following companie? (Please Tick) a) LIC b) Tata AIG c)Birla Sun life d) ICICI e)

Max New York

f) Any Other: .............

10. Rank different company according to your opinion. Most preferred rank is 1 and least preferred is 10 (Rank from 1 to 10)

LIC ICICI Prudential Tata AIG Life Insurance Max new York Life HDFC standard Life Reliance Life Insurance ING Vysya Kotak Life Insurance Bajaj Allianz SBI life Insurance

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

a) Life Insurance b) Vehicle Insurance c) Pension plan d) Medi claim e) Any Other:

Any Comments: ....................................................................................... ............................................................................................................ .......

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