A PROJECT REPORT ON

An analysis of Indian insurance industry with

special reference to

ICICI PRUDENTIAL

PRESENTED BY
Prem Prasad Maharana
Roll no.: 13771U072039

GUIDED BY

Mr.Jayanta Kumar Bihari Kumari Rosalin

Faculty of KIIMS,Cuttack H.O.D of KIIMS, Cuttack

Session 2007-09
 PREFACE

The Indian Insurance Industry is broadly

segmented into public and private insurance
companies. Before year 2000, only public
sector insurance companies were allowed to
do business in India. But after year 2000,
insurance sector was thrown open for private
insurance companies as well.

But there is now around 12 private life

insurance companies and around 9 private
non-life insurance companies doing business
in India.

This report is prepared with an aim to provide

an overview of present Indian Insurance
Industry. Also with LIC, heading the public life
insurance companies and ICICI Prudential
heading the private life insurance players, this
report also provides a comparative analysis of
LIC’s New Jeevan Suraksha-I vs. ICICI’s
Forever Life policies.

Based on this report, the prospecting

insurance customers would get help in
choosing the right insurance products for
themselves.
 (ii)

CERTIFICATE

This is to certify that the project

entitled: “An analysis of Indian
insurance industry with special
reference to ICICI PRUDENTIAL”
submitted by ‘Prem Prasad
Maharana’, of “Kushagra Institute of
Information & Management
Science”(KIIMS) towards the partial
fulfillment of the degree of “Master
Of Finance & Control”(MFC) is a
bonafied record of research work
carried by him under my
supervision. The content of the
record in full or in part have not
been submitted to any other
Institution for award of any degree
or diploma.

Jayanta Kumar Bihari

Kumari Rosalin
(Project Guide)

(Counter Sign by H.O.D.)

(iii)

CERTIFICATE

This is to certify that the project

entitled: “An analysis of Indian
insurance industry with special
reference to ICICI PRUDENTIAL”
submitted by ‘Prem Prasad
Maharana’ of “Kushagra Institute of
Information & Management
Science” (KIIMS) towards the partial
fulfillment of the degree of “Master
Of Finance & Control” (MFC) is a
bonafied record of research work
carried by him under the
supervision of ‘Mr. Jayanta Kumar
Bihari’. The content of the record in
full or in part have not been
submitted to any other Institution for
award of any degree or diploma.

Date: 04.09.08 Prof. (Dr.)

Ananta Kumar Sahoo
(Principal, KIIMS)

(iv)

DECLARATION
I do hereby declare that the project
entitle “An analysis of Indian
insurance industry with special
reference to ICICI PRUDENTIAL” is
an original work done by me. This is
submitted as a part of fulfillment of
the requirement for the degree of
Master of Finance & Control
(MFC).This is entirely of my own
work and this is not submitted to
any other Institution or published
anywhere before.

Date: 04.09.08 Prem

Prasad Maharana
(KIIMS)
 Roll No:
13771U0720
3
(v)

ACKNOWLEDG
EMENT

The Project report has been

prepared with proper advice and
suggestions of many teachers and
friends’ .It is my duty to
acknowledge all of them for their
help and contribution in connection
with my project work.

First of all I expressed my sincere

thanks to my Company guide ‘Mr.
Biswajit Sahoo’ for his kind support
and co-operation.

I expressed my sincere gratitude to

my internal guide ‘Mr. Jayanta
Kumar Bihari’ for his able guidance.
I expressed my gratitude to all the
faculty members of our department
for their cons tinted support and
inspiration in completing this project
work.

Last but not the least I pay my

thanks to all my friends and family
members for their kind support and
co-operation.

(vi)
TABLE OF CONTENTS

Chapter 1: Introduction

01-36

1.1 Overview of the Industry

10
1.2 Profile of the Organization
16
1.3 Problems of the Organization
33
1.4 S.W.O.T. Analysis of the
Organization 34
 1.5 Competition Information
35
Chapter 2: Objective & Methodology
37-38

2.1 Significance of the study

37
2.2 Managerial usefulness of the study
37
2.3 Objectives of the study
37
2.4 Scope of the Study
38
2.5 Methodology
38

Chapter 3: Conceptual Discussion

39-49

Chapter 4: Data Analysis

50-53

Chapter 5: Findings & Recommendations

54-55

Annexure
56-62

Bibliography
63

(vii)
 Chapter – 1
INTRODUCTION

The entire effort of human life is to proceed

from uncertainty to certainty. The rigmarole of
life proceeds with first acquiring the
wherewithal to earn a living and then striving
for its betterment and ensuring that the
comfort and pleasure derived from a physical
commodity or a human being continues. It is at
the latter stage that the mechanism of
Insurance comes in play.

The concept of insurance is in essence related

to the protection of the economic value of
assets. Every asset whether physical or in
form of a human being has a value. The asset
is built up in the expectation that, either
through the income generated there from or
some other output, some needs of the
individual would be met. For example, in the
case of an industry its production is sold and
income generated. In the case of a vehicle, it
provides comfort and convenience in
transportation.

1ST Insurance in India started from

1817.Basically it is divided into two types such
as General insurance & Life insurance. After
freedom there are 245 companies in India who
provide life insurance. In 1956 finance minister
‘C.D.Deshmukh’ seize all those companies.
There is only one life insurance company
from1956-2000 that is ‘LIC of India’. In 1993
the finance secretary ‘R.N.Malhotra’ introduce
IRDA(Insurance Regulatory Development
Authority) act. After that private life insurance
companies came into existence. HDFC is the
1st private insurance company in India. After
that ICICI prudential Life insurance corporation
started its operation. From 2001-2008 ICICI
place the 1st position among all private
insurance company. Now days there are 12
private life insurance companies.
As compare to past now a days insurance
companies provides not only life cover plan
but also provides investment plan. In recent
trend there are two type of plan provided by
the Life insurance company such as:

(1)

- Traditional Plan
- ULIP (Unit Linked Insurance Plan)

Traditional Plan consisting of a long maturity

period where as ULIP consists of both
insurance and investment having shorter
maturity period.

Fundamental definition:
In the words of ‘D.S. Hansell’, “Insurance
accumulated contributions of all parties
participating in the scheme.”

Contractual definition:
In the words of ‘Justice Tindall’, “Insurance is
a contract in which a sum of money is paid to
the assured as consideration of insurer’s
incurring the risk of paying a large sum upon a
given contingency.”

Characteristics of insurance:
♦Sharing of risks
♦Cooperative device
♦Evaluation of risk
♦Payment on happening of a special event
♦The amount of payment depends on the
nature of losses incurred.
♦The success of insurance business depends
on the large number of
people insured against similar risk.
♦Insurance is a plan, which spreads the risk
and losses of few people
among a large number of people.
♦The insurance is a plan in which the insured
transfers his risk on the insurer.
♦Insurance is a legal contract which is based
upon certain principles of insurance which
includes utmost good faith, insurable interest,
contribution, indemnity, causes proximal,
subrogation, etc.
♦The scope of insurance is much wider and
extensive.

(2)
Functions of insurance:

Primary functions:

1. Provide protection: - Insurance cannot

check the happening of the risk, but can
provide for the losses of risk.
2. Collective bearing of risk: - Insurance is a
device to share the financial losses of few
among many others.
3. Assessment of risk: - Insurance determines
the probable volume of risk by evaluating
various factors that give rise to risk.
4. Provide certainty: - Insurance is a device,
which helps to change from uncertainty to
certainty.

Secondary functions:

1. Prevention of losses: - Insurance cautions

businessman and individuals to adopt suitable
device to prevent unfortunate consequences
of risk by observing safety instructions.
2. Small capital to cover large risks: -
Insurance relives the businessman from
security investment, by paying small amount
of insurance against larger risks and
uncertainty.
3. Contributes towards development of larger
industries.

Other Function:

Means of savings and investment:

Insurance companies are business houses.
The product they sell is financial protection. To
succeed and survive, they must cover their
costs, which include payments to cover the
losses of policyholders, as well as sales and
administrative expenses, taxes and dividends.

(3)
Insurance companies have two
sources of income for covering
these costs:

Premiums and Investment income. The

premiums are collected on a regular basis and
invested in Government Bonds, Gilt, stocks,
mutual funds, real estates and other
conservative avenues. However, investment
income depends on market conditions, interest
rates, economy etc. and varies from year to
year. Because of the uncertainty associated
with the investment income, insurance
companies must generate enough income
from premiums to cover the bulk of their
expenses.

The risk becomes insurable if the

following requirements are
complied with:

♦The insured must suffer financial loss if the

risk operates.

♦The loss must be measurable in money,

♦The object of the insurance contract must be
legal.
♦The insurer should have sufficient knowledge
about the risks he accepts.

Fundamentals of Insurance

The fundamental Principles of the Insurance

are as follows:
♦Insurable Interest: Insurable interest means
the legal right to insure. Insurable Interest is a
must and only then the insurance contract is
enforceable at law. This principle differentiates
a Contract of insurance from wager. Lack of
insurable interest renders the contract null and
void. For Insurable Interest to exist there must
be Property, Rights, Interest, Life or Liability;
this must be insured and the Insured should
have a legally recognizable relationship
thereto. The Insured should be benefited by
the safety of the property or is prejudiced by
its loss. Insurable Interest may arise in the
following manner:

(4)

1. Ownership: Absolute ownership entitles the

owner to insure the property. This is the
commonest method whereby Insurable
Interest arises.

2. Partial Interest is also insurable e.g. a

mortgagee. A creditor can also insure the life
of his debtor but only to the extent of his loan.

3. Administrators and executors i.e. officials

appointed by a court of law to take care of a
property may also insure the property.

4. Relationship does not automatically

constitute insurable interest. The only
relationship recognized by law for this purpose
is the one between a husband and wife.
5. An employer can insure his employee
under a Personal Accident Policy as he has
insurable interest in them.

♦Proximate cause: Generally, the claims are

payable under insurance policies if they arise
out of events which are proximately caused by
the insured perils. In other words, the
proximate cause of the event has to be peril
covered by the policy, so as to constitute a
valid claim.
♦Contribution: An insured may have several
insurance on the same subject matter. If he
recovers his loss under all these insurance, he
will obviously make a profit out of loss. This
will be an infringement of the principle of
indemnity. Common Law has, therefore,
evolved the doctrine of contribution whereby
the insured is prevented from recovering more
than his loss, despite his having several
insurance on the subject matter.

♦Subrogation: The principle of indemnity

seeks to prevent the insured from making
profit out of loss. However, it may so happen
that that the insured may recover his loss
under his policy and he may also have rights
against third parties. If, after the insurance
claim

(5)

is settled, the insured is allowed to enforce his

rights against third parties and to retain
whatever damages he receives from them, he
will certainly make a profit and the principle of
indemnity will be infringed.
Common Law has therefore, evolved the
doctrine of subrogation as corollary to the
principle of indemnity. Subrogation may be
defined as the transfer of rights and remedies
of the insured to the insurers who have
indemnified the insured in respect of the loss.
The Common Law right of subrogation is
implied an all contracts on indemnity, as it
arises only after payment of loss.

♦Utmost Good Faith: In all General

Insurance contracts we know that a property
or interest or liability or life is offered for
insurance and the insured has to take
decisions on the acceptance of the proposal. If
he decides to accept the proposal a premium
commensurate with the risk has to be
charged. To enable him to take necessary
decision in this regard, the insurer must have
certain facts about the risk offered. These
facts influence the judgment of the insurer in
deciding about the acceptance or otherwise of
the risk and the rate of premium to be
charged, if accepted. Such facts are known as
material facts.

Nature of Insurance Contracts

When the insured pays the premium and the

insurers accept the risks, the contract of
insurance is concluded. The policy issued by
the insurers is the evidence of the contract.
The contract of insurance, like any other
contract, for example a contract for the sale of
goods, is subject to the general law of contract
as embodied in the
Indian Contract Act, 1872.
According to this Act, a contract must have
certain essential features in order to make it
legally valid and enforceable. The following
are the essential elements:

(6)

a) Offer and acceptance: Usually, the offer is

made by the proposer, and acceptance made
by the insurer.

b) Consideration: This means that the contract

must involve some mutual benefit to the
parties. The premium is the consideration from
the insured and the promise to indemnity is
the consideration from the insurers.

c) Agreement between the parties: Both the

parties should agree to the same thing in the
same sense.

d) Capacity of the parties: Both the parties to

the contract must legally competent to enter
into the contract. For example, minors cannot
enter into insurance contracts.

e) Legality: The object of the contract must be

legal and the contract should not violate any
legal requirements. E.g. no insurance can be
had for smuggled goods.
Risk
Reasonable or not, risks are inescapable in
business. Every business venture is
something of a gamble, because the
possibility of loss is as real as the prospects
for profits. And even though managers do
everything possible to ensure that their
business succeed, they cannot guard against
every conceivable form of risk.
Pure Risk versus Speculative Risk
♦Pure Risk: Events representing the kind of
risk that no business can predict or escape,
known as Pure Risk, it is the threat of a loss
without the possibility of gain. In other words,
a disaster such as avalanche or fire is costly
for the business it strikes, but the fact that no
disaster occurs contributes nothing to a firm's
profit.
♦Speculative Risk: It is the type of risk that
offers the prospect of making profit - and
prompts people to go into business in the first
place. Every business accepts the possibility
of losing money in order to make money.
(7)
Approaches to Risk Management
Risk Management is the process of reducing
the threat of loss due to uncontrollable events.
Steps in selecting a risk management
approach:
♦To identify all the things those can possibly
go wrong. ·
♦To consider the probability that an event will
occur.
Techniques of Risk Management are:
1. Avoiding the Risk: When a company
avoids risk, it eliminates the possibility that a
particular event will occur. To avoid the
possibility of a suit, for example, not to
produce any products -which would, of course,
eliminate both the threats of a lawsuit and the
opportunity to profit. With rare exceptions,
avoiding risk entirely is extremely difficult.

2. Reducing Risk: A more practical approach

is to reduce the risk by taking precautions.
Risk reduction is an important element in most
companies' approach to risk management.
Typical precautions include putting safety
locks on doors to prevent robberies, installing
overhead sprinklers to minimize fire damage,
and periodic checking motor vehicles to
prevent accidents.

3. Assuming risk: Many companies draw on

current revenues or set aside a "Contingency
Fund" to cover unexpected losses. Setting
aside money on regular basis could be
cheaper than purchasing insurance. Moreover,
the company can earn interest on the reserved
cash. Such assumption of risk is also called
self-insurance or risk retention.

4. Transferring the risk: Most companies still

rely on outside insurance firms for financial
protection against catastrophic losses. In
buying insurance, companies transfer the risk
of loss to an insurance firm, which agrees to
pay for certain types of losses. In exchange,
the insurance firm collects a fee known as a
premium.

(8)
Insurable and Uninsurable Risks:
Insurable risks: An insurable risk - one that
an insurable company will cover - Generally
meets the following requirements. The peril
insured against must not be under the control
of the Insured. This means, of course that
insurer do not pay for losses that are
intentionally caused by an insured, caused at
the Insured's direction, or caused with the
insured's collusion. For example, a fire
insurance policy excludes loss caused by the
Insured’s own arson. It does, however, include
loss caused by an employee's arson. Losses
must be calculable, and the cost of insuring
must be economically feasible. To operate
profitably, insurance companies must have
data on the frequency of losses caused by a
given peril. If this information covers a long
period of time and is based on a large number
of cases, Insurance companies can usually
predict quite accurately how many losses will
occur in the future. For example, the insurance
companies to fix up the rate of premium of
Personal Accident Insurance may use the
information of the number of people who will
die each year in India in accidents. The peril
must be unlikely to affect all insured
simultaneously. Unless an insurance company
spreads its coverage over large geographic
areas or a broad population base or different
classes of Insurance, a single disaster might
force it to pay out all its policies at once. The
possible loss must be financially serious to the
Insured. An Insurance company could not
afford the paperwork involved in handling
numerous small claims of a few Rupees each.
As a result, many policies have a clause
specifying that the insurance company will pay
only that part of a loss greater than an amount
- the deductible or excess - stated in the
policy. The excess represents small losses
that the Insured has to absorb.

(9)
1.1 OVERVIEW OF THE
INDUSTRY

Origin of life insurance

Life Assurance was born in England when the

first policy providing temporary cover for a
period of 12 months was issued as easy as
1583 A.D. The Amicable Society started
granting fluctuating sum on death since 1705
and a fix sum since 1757, with the
development of mortality tables, the life
Assurance acquired a scientific character.
The Equitable Society founded in 1762 was
the first Society established on scientific basis.

Origin of life assurance in India

In India, after failure of two British companies,

the European and the Albert in 1870, which
attempted writing business on Indian lives, first
Indian Life Assurance Society was formed in
the same year called Bombay Mutual
Assurance Society Ltd. It was followed by the
Oriental Life Assurance Company Limited in
1874, Bharat in 1896 and Empire of India in
1897. The Idea of insurance was born out of a
desire of the people to share loss of an
individual by many.

Originally it restricted to forms other than life

assurance. It started with Marine Insurance,
where the losses on account of perils of sea
were shared by all who were engaged in
trade. Reference to some forms of insurance,
is found in the codes of Hammurabi, Manu
(Manav Dharma Shastra). The word
`Yogakshema’ is used in the Rig Veda
suggesting that some form of community
insurance was practiced by the Aryans in India
over 3000 years ago. In India during Buddhist
period burial societies existed which were
mutual in their character and used to help a
family by building a house, protecting the
widow, marrying the girls.

(10)

The Swadeshi Movement of 1905 provided

impetus to the formation of several companies
such as the `Hindustan Cooperative’, the
`United India’, the `Bombay Life’, the
`National’. Further in the wake of freedom
movement number of companies such as the
`New India’, the `Jupiter’ the `Lakshmi’
emerged.

The Government began to exercise a certain

measure of control on Insurance business by
passing the `Insurance Act’ in 1912. For
controlling investment of funds, expenditure
and management, a comprehensive Act was
passed known as `The Insurance Act 1938’.
For controlling the affairs, the office of
Controller of Insurance was established. The
act was extensively amended in 1950.

In the year 1955, approximately 170 Insurance

Offices and 80 Provident Fund Societies had
been registered for transacting Life Assurance
business in India. There were, however, no full
guarantees to the policyholders. The concept
of trusteeship was lacking. Many insurance
companies went into liquidation. There were
malpractices in insurance business. For
achieving the following purposes it was felt
necessary to nationalize the insurance
business in India.

(i) To provide security to the policyholders.

(ii) To utilize the funds for nation-building
activities.
(iii) To avoid cut throat competition.
(iv) To abolish mal-practices.
(v) To spread the insurance message to the
rural areas.

The first step in this direction was taken by the

Government of India by issuing the Life
Insurance (the Emergency provisions)
Ordinance, 1956 on 19th January, 1956. The
then Finance Minister, Shri C. D. Deshmukh
mentioned the purpose of nationalisation as
reaching the goal of socialistic pattern of
society, rendering genuine service to the
 (11)

people in the rural area. The Life Insurance

Corporation Act (Act XXXI of 1956) was
passed by the Parliament in June 1956 which
came in force on 1st July 1956. The Life
Insurance Corporation of India came into
existence on 1st September 1956.

Insurance Sector Reforms

Having looked at the insurance sector, let us

look at the efforts made by the government to
make the industry more dynamic and
customer friendly. To begin with, the Malhotra
committee was set up with the objective of
suggesting changes that would achieve the
much required dynamism.

The Malhotra Committee Report

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. In 1994, the committee
submitted the report and gave the following
recommendations:

Structure:

♦Government stake in the insurance

Companies to be brought down to 50%.

♦Government should take over the holdings of

GIC and its subsidiaries so that these
subsidiaries can act as independent-
corporations.
♦All the insurance companies should be given
greater freedom to operate.

(12)
Market Regulations

♦Private Companies with a minimum paid up

capital of Rs.1bn should be allowed to enter
the industry.

♦No Company should deal in both Life and

General Insurance through a single entity.

♦Foreign companies may be allowed to enter

the industry in collaboration with the domestic
companies.

♦Postal Life Insurance should be allowed to

operate in the rural market.

♦Only one State Level Life Insurance

Company should be allowed to operate in
each state.

Regulatory Body

♦The Insurance Act should be changed.

♦An Insurance Regulatory body should be set

up.

♦Controller of Insurance (Currently a part from

the Finance Ministry) should be made
independent.
Investments

♦Mandatory Investments of LIC Life Fund in

government securities to be reduced from
75% to 50%.

♦GIC and its subsidiaries are not to hold more

than 5% in any company (There current
holdings to be brought down to this level over
a period of time).

(13)
Customer Service

♦LIC should pay interest on delays in

payments beyond 30 days.

♦Insurance companies must be encouraged to

set up unit linked pension plans.

♦Computerization of operations and updating

of technology to be carried out in the
insurance industry.

Overall, the committee strongly felt that in

order to improve the customer services and
increase the coverage of the insurance
industry should be opened up to competition.
But at the same time, the committee felt the
need to exercise caution as any failure on the
part of new players could ruin the public
confidence in the industry. Hence, it was
decided to allow competition in a limited way
by stipulating the minimum capital requirement
of Rs.1 bn. This amount is not very high for
foreign firms, as it translates to only about
US$25 million. Further, to date it is unclear
whether equity should be payable in one go or
should be brought in as installments. Also, the
foreign equity participation was to be restricted
to only 40%.The committee
felt the need to provide greater autonomy to
insurance companies in order to improve their
performance and enable them to act as
independent companies with economic
motives. For this purpose, it had proposed
setting up an independent regulatory body.

The industry and analysts find that there is

lack of clarity in the following areas:-
♦Though coverage of rural areas was to be
made compulsory, it raises the question as to
who would subsidies the rural policies as they
would be difficult to service and hence costs
will go up.
♦There is some confusion with respect to
investments. Where the funds should be
invested? Currently 70% of the funds with LIC
& GIC are invested in Government securities.
Would new entrants be allowed to invest in
GOI securities?

(14)
♦The report also does not enumerate exit
options available to the new entrants. In the
event of failure, there should be an
arrangement made whereby the other
Companies pool in to bail the customers, who
in all probability would be middle class
individuals.

Potentiality of Insurance in Indian Market

Marketing inefficiency of general insurers has
kept society in dark even when so many
personal as well as commercial lines of
insurance covers are available for them.
Insurers have failed to identify the need of the
individual risk factors and thereafter selecting
proper market segments and developing
demand of these needs by adopting proper
marketing mix. There is great scope of
commercial line of insurance as we are
developing at a very fast rate but the
potentiality and scope of personal lines of
insurance is vast as this area is still under-
tapped. Product designing and pricing is also
simple and growth of this portfolio is
guaranteed in this country which has a base
of over 100 crore population, where there are
about 25 crore dwellings, 20 crore schools,
colleges and educational institutions and
about 5 crore small and big shops. But despite
this the Indian insurers share in personal line
of business is very low or negligible.

There are enormous growth opportunities to

Indian as well as foreign insurers because of
such a huge base of population there is ample
scope to introduce the new line of covers as
per the changing needs and to increase the
per capita share of the insurance.

By encouraging risk transfer by investing small

portion of the savings of the individuals.By
opening up the sector far more opportunities
has came up in insurance and reinsurance
market. After privatization of this sector
presence of the foreign players has also
increased. Therefore the insurers, in time to
come, will have to change their attitude from
selling of the product to marketing of the
protection needs of the insured and for this is
required is:

(15)
♦ Effective product planning
♦ Suitable pricing
♦ Efficient promotion and physical distribution.
♦ Proper physical evidence.
♦ Good and well trained sales force.

1.2 PROFILE OF THE ORGANISATION:

ICICI Prudential Life Insurance

ICICI Prudential Life Insurance is a joint
venture between the ICICI Group and
Prudential PLC, of the UK. ICICI started off its
operations in 1955 with providing finance for
industrial development, and since then it has
diversified into housing finance, consumer
finance, mutual funds to being a Virtual
Universal Bank and its latest venture Life
Insurance.
Foreign Partner:

Established in 1848, Prudential PLC. of U.K.

has grown to be the largest life insurance and
mutual fund company in U.K. Prudential PLC.
has had its presence in Asia for the past 75
years catering to over 1 million customers
across 11 Asian countries.
Prudential is the largest life insurance
company in the United Kingdom (Source:
S&P's UK Life Financial Digest, 1998).

ICICI and Prudential came together in 1993 to

provide mutual fund products in India and
today are the largest private sector mutual
fund company in India.

Their latest venture ICICI Prudential Life plans

to take care of the insurance needs at various
stages of life.

(16)

ICICI Prudential Life Insurance was

established in 2000 with a commitment to
expand and reshape the life insurance
industry in India. The company was amongst
the first private sector insurance companies to
begin operations after receiving approval from
Insurance Regulatory Development Authority
(IRDA), and in the time since, has taken
several steps towards its realizing its goal.

The company's wide range of products,

distribution strengths and powerful brand has
driven its growth across a cross-section of
people and cities. As on March 31, 2003, the
company had issued nearly 350,000 policies,
with a total premium income of over INR 5
billion and a total sum assured in excess of
INR 87 billion. Today, the company has
established itself as the No. 1 private life
insurer in the country.
ICICI Prudential Life Insurance Company is a
joint venture between ICICI, a premier
financial powerhouse and Prudential PLC, a
leading international financial services group
headquartered in the United Kingdom. ICICI
Prudential was amongst the first private sector
insurance companies to begin operations in
December 2000 after receiving approval from
Insurance Regulatory Development Authority
(IRDA).

ICICI Prudential’s equity base stands at Rs.

4.25 billion with ICICI Bank and Prudential plc
holding 74% and 26% stake respectively. As
of March 31, 2003, the company had issued
nearly 350,000 policies with a sum assured in
excess of Rs 8,700 crore and total premium
income of over Rs. 500 crore. Today the
company is the #1 private life insurers in the
country.

Company Vision

To make ICICI Prudential the dominant Life

and Pensions player built on trust by world-
class people and service.

(17)
This is what ICICI Prudential hope to
achieve by:

•Understanding the needs of customers and

offering them superior products and service
•Leveraging technology to service customers
quickly, efficiently and conveniently
•Developing and implementing superior risk
management and investment strategies to
offer sustainable and stable returns to our
policyholders

•Providing an enabling environment to faster

growth and learning for ICICI Prudential
employees
•And above all, building transparency in all
ICICI Prudential dealings.

The success of the company will be founded

in its unflinching commitment to 5 core values
-- Integrity, Customer First, Boundary less,
Ownership and Passion. Each of the values
describes what the company stands for, the
qualities of our people and the way we work.

We do believe that we are on the threshold of

an exciting new opportunity, where we can
play a significant role in redefining and
reshaping the sector. Given the quality of our
parentage and the commitment of our team,
there are no limits to ICICI Prudential growth.

(18)
Board of Directors
The ICICI Prudential Life Insurance Company
Limited Board comprises reputed people from
the finance industry both from India and
abroad.

Mr. K.V. Kamath, Chairman

Mr. Mark Tucker

Mrs. Lalita D. Gupte

Mr. Danny Bardin

Mrs. Kalpana Morparia

Mrs. Chanda Kochhar

Mr. M.P. Modi

Mr. R Narayanan

Mr. S.P.Subhedar, (Alternate Director to Mr.

Danny Bardin)

Mr. Derek Stott, (Alternate Director to Mr.

Mark Tucker)

Ms. Shikha Sharma, Managing Director

Management Team

Ms. Shikha Sharma, Managing Director

Ms. Anita Pai, Chief - Operations &

Underwriting

Mr. Bill Lisle, Chief Agency Officer

 (19)

Mr. Sandeep Batra, Chief Financial Officer &

Company Secretary

Mr. Saugata Gupta, Chief – Marketing

Mr. Shubhro J. Mitra, Chief - Human

Resources

Mr. V. Rajagopalan, Appointed Actuary

Mr. Anil Tikoo, Head - Information Technology

Products Insurance Solutions for

Individuals:

ICICI Prudential Life Insurance offers a range

of innovative, customer-centric products that
meet the needs of customers at every life
stage. Its 13 products can be enhanced with
up to 4 riders, to create a customized solution
for each policyholder.

Savings Solutions:

ICICI Pru Save n Protect is a traditional

endowment savings plan that offers life
protection along with adequate returns.

ICICI Pru CashBak is an anticipated

endowment policy ideal for meeting milestone
expenses like a child's marriage, expenses for
a child's higher education or purchase of an
asset.
Protection Solutions:

ICICI Pru LifeGuard is a protection plan,

which offers life covers at very low cost. It is
available in 3 options - level term assurance,
level term assurance with return of premium
and single premium.

(20)
Child Solutions:

ICICI Pru SmartKid provides guaranteed

educational benefits to a child along with life
insurance cover for the parent who purchases
the policy. The policy is designed to provide
money at important milestones in the child's
life.

Market-linked Solutions:

ICICI Pru LifeLink is a single premium Market

Linked Insurance Plan which combines life
insurance cover with the opportunity to stay
invested in the stock market.

ICICI Pru.LifeTime offers customers the

flexibility and control to customize the policy to
meet the changing needs at different life
stages. It offers 3 investment options - Growth
Plan, Income Plan and Balanced Plan.

Retirement Solutions:
ICICI Pru ForeverLife is a retirement product
targeted at individuals in their thirties. Market-
linked retirement productsICICI Pru

LifeTime Pension is a regular premium

market-linked pensionplan

ICICI Pru LifeLink Pension is a single

premium market-linked pension plan.

Single Premium Solutions:

ICICI Pru AssureInvest is a single premium
savings product with life cover for terms of 5, 7
or 10 years.

ICICI Pru ReAssure is a retirement product

for senior citizens who are on the verge of
retirement or have just retired.

(21)

ICICI Prudential also launched ''Salaam

Zindagi'', a social sector group insurance
policy targeted at the economically
underprivileged sections of the society.

Group Insurance Solutions:

ICICI Prudential also offers Group Insurance

Solutions for companies seeking to enhance
benefits to their employees.

ICICI Pru Group Gratuity Plan:

ICICI Pru''s group gratuity plan helps

employers fund their statutory gratuity
obligation in a scientific manner. The plan can
also be customized to structure schemes that
can provide benefits beyond the statutory
obligations.

ICICI Pru Group Superannuation Plan:

ICICI Pru offers a flexible defined contribution

superannuation scheme to provide a
retirement kitty for each member of the group.
Employees have the option of choosing from
various annuity options or opting for a partial
commutation of the annuity at the time of
retirement.

ICICI Pru Group Term Plan:

ICICI Pru''s flexible group term solution helps

provide affordable cover to members of a
group. The cover could be uniform or based
on designation/rank or a multiple of salary.
The benefit under the policy is paid to the
beneficiary nominated by the member on
his/her death.

(22)
Flexible Rider Options:

ICICI Pru Life offers flexible riders, which can

be added to the basic policy at a marginal
cost, depending on the specific needs of the
customer.
1.Accident & disability benefit: If death
occurs as the result of an accident during the
term of the policy, the beneficiary receives an
additional amount equal to the sum assured
under the policy. If the death occurs while
traveling in an authorized mass transport
vehicle, the beneficiary will be entitled to twice
the sum assured as additional benefit.

2. Accident benefit: This rider option pays

the sum assured under the rider on death due
to accident.

3.Critical Illness Benefit: protects the insured

against financial loss in the event of 9
specified critical illnesses. Benefits are
payable to the insured for medical expenses
prior to death.

4.Major Surgical Assistance Benefit:

provides financial support in the event of
medical emergencies, ensuring that benefits
are payable to the life assured for medical
expenses incurred for surgical procedures.
Cover is offered against 43 different surgical
procedures.
 (23)
About The Partners

ICICI Bank (NYSE:IBN) is India’s second

largest bank with an asset base of Rs. 106812
crore. ICICI Bank provides a broad spectrum
of financial services to individuals and
companies. This includes mortgages, car and
personal loans, credit and debit cards,
corporate and agricultural finance. The Bank
services a growing customer base of more
than 7 million customer accounts and 5 million
bondholders accounts through a multi-channel
access network. This includes about 450
branches and extension counters, 1675 ATMs,
call centres and Internet banking
(www.icicibank.com). ICICI Bank posted a net
profit of Rs.1, 206 crore for the year
ended March 31, 2003. ICICI Bank is the only
Indian company to be rated above the country
rating by the international rating agency
Moody''s and the only Indian company to be
awarded an investment grade international
credit rating. The Bank enjoys the highest AAA
(or equivalent) rating from all leading Indian
rating agencies.

Established in 1848, Prudential plc is a

leading international financial services
company in the UK, with some US$250 billion
funds under management and more than 16
million customers worldwide. Prudential has
brought to market an integrated range of
financial services products that now includes
life assurance, pensions, mutual funds,
banking, investment management and general
insurance. In Asia, Prudential is UK''s largest
life insurance company with a vast network of
22 life and mutual fund operations in twelve
countries - China, Hong Kong, India,
Indonesia, Japan, Korea, Malaysia, the
Philippines, Singapore, Taiwan, Thailand and
Vietnam. Since 1923, Prudential has
championed customer-centric products and
services, supported by over 60,000 staff and
agents across the region.

(24)
Insurance Plans

Savings Plans:

Most endowment policies are a good way of

saving for the future. A policy can be designed
to make your savings grow and have them
available to you at the end of a fixed number
of years. Or, a policy could provide you with
an income every three or four years.
You can browse through these policies to find
one that best suits your needs:

•SmartKid - a superior way to guarantee your

child’s future no matter what the uncertainty.

•LifeTime - a complete market-linked

insurance plan that adapts itself to your
changing protection and investment needs,
throughout a lifetime.
•Save'n' Protect - a traditional endowment
savings plan that offers both high returns and
protection.

•CashBak - an endowment savings plan that

allows you to get back substantial survival
benefits without having to wait till the maturity
date.

Depending on your particular needs,

Savings Plans could allow you to do one or
more of the following:

•Plan For Tangibles: buy that fashionable

car, that huge refrigerator, etc.

•Plan For A Cosy Nest: by facilitating the

purchase of that home you have always
dreamt of.

(25)
•Plan For Milestones: ensure a good
education for your children, children's
wedding, etc.

•Save on Deferred Taxes: because the

interest income and maturity benefits of the
Policy are tax exempt.

•Lifestyle Planning: maintain your lifestyle -

even if your income was to reduce in the
future.
•Legacy Creation: buy property; invest in
shares, bonds, etc. for your children or
grandchildren.

•Attain Greater Heights: ensure that your

children's education continues undisrupted.
Protection Plans

We all hope to live a full life till a ripe old age...

to ensure our children's sustenance and
healthy growth. But what if a sudden disability
or illness strikes? Besides the grief and the
pain, such an event also completely disrupts
life for all the people who are financially
dependent on us. Our life insurance policies
offer a comprehensive range of protection
benefits:

•Lifeguard - A low cost-high protection plan

that offers protection over a specified period.

•Riders - Additional benefits that one can add

on to the policy. The rider can be opted for at
the time of taking the basic policy. Additional
premium is charged for each rider.

•An insurance policy can be tailor made to

provide protection to you and your loved ones.
If something were to happen to you, it can
help:

•Safeguard Your Better Half: ensure life's

continuity for your loved one.

(26)
•Dear and Near Ones: ensure continuity of
lifestyle for your dependents.
•Attain Greater Heights: ensure your
children's education continues undisrupted.

Unforeseen circumstances: bear the cost of

fighting an illness, disability, etc.

Retirement Plans

Most of you picture yourselves enjoying the

fruits of labor after retirement, going on your
dream vacation, or helping your children's
career take wing. But do you realize that
financing all this will most likely depend partly
on your personal savings? Because personal
savings and investments represent a
significant source of retirement income for
many people, you can never save too much.

Currently, you are at a stage where you are

juggling many roles, as nurturing parents,
dutiful caregivers to elders, supportive life
partners, while trying to maintain a career. It is
too easy to get carried away handling and
solving the day-to-day problems to not look
into your retirement needs. It may also seem
too far away to be of concern. But a look at the
issues below will make the need for some
strategic planning at this stage amply clear.

Today, thanks to a healthier lifestyle and

advances in medicine, the average Indian
lives longer. This makes the challenge of
accumulating enough money for retirement
even more difficult, since it may have to last
longer. Also, with the falling interest rate
scenario and the rising costs of medical
expenses retirement means monetary
uncertainty for most of us. More so, because
there is also the ever-persistent evil of
inflation, which erodes your purchasing power.
The graph below illustrates how much Rupees
will 10,000/- amount to after some years:

(27)
Inflation erodes your purchasing power

8000
7000
6000
5000 Inflation rate at
4000 10%
3000 Inflation rate at
5%
2000
1000
0
5yr 10yr 20yr 30yr

Therefore, the message is simple - no matter

whether you are 30 or 50, you should start
planning early to have a healthy retirement
kitty. (See graph below for an illustration)

Start early, Gain more

 2000000
1800000
1600000
1400000
1200000 Saving
1000000
800000 Retirement
600000 Kitty
400000
200000
0
A B

(28)
As can be seen the cost of delaying is high.
Situation A is when you are saving Rs 10000
annually from the age of 25 to 34 years and
Situation B is when you save the same annual
amount from the age of 35 to 59 years. As can
be seen in the example, even after investing
your money for a 2.5 times longer duration,
the maturity value in the second case is much
lesser (the figures are based on a hypothetical
interest rate of 10%). The longer your money
is allowed to grow at a compounded rate, the
more dramatic will the difference be
eventually.

Therefore, the message is simple - Put Time

on Your Side and Start Early.

ICICI Prudential Life Insurance believes in the

philosophy of providing meaningful and
comprehensive insurance solutions to plan
your retirement. Our insurance solutions are
the most optimal tools to plan your retirement
because they give you Safety, Liquidity, Tax
benefits, Health cover and Life protection and
thus ensure that you are comprehensively
covered.

ICICI Prudential offers flexible products for

planning your retirement:
ForeverLife - A deferred annuity plan that
helps you save for retirement while providing
you life insurance protection.

LifeLink Pension- A single premium plan

which allows you to park a lump sum amount
for a secure future.

LifeTime Pension - A plan which gives

you the twin benefit of market-linked annuity
and life insurance cover.

ReAssure - A plan that helps you invest

your money prudently and safely and offers
you the benefit of a regular income while
providing you life insurance protection.

(29)
Depending on your particular needs, our
Retirement Solutions could allow you to do
one or more of the following:

Maintaining the Same Living Standard

Post-retirement:

Get your retirement monies to earn you the

benefit of a regular income while providing life
insurance protection. So now you can really
enjoy even your post-retirement days.

Provide for a Lifetime of Pension:

Annuities can play a valuable role in

retirement saving. A deferred annuity allows
you to accumulate money for retirement on a
tax-deferred basis. You are also in control of
when you want to begin receiving payments.
An annuity gives you a fixed income for life.
Protect Your Better Half:

If you are married, it is preferable that your

retirement plan includes your spouse. The
"Joint Life Last Survivor" annuity option in
ICICI ForeverLife pays benefits as long as
either one of you is living.

Investment Plans:

Often you may have some investible funds

lying idle - a bonus or maybe a windfall. You
can either secure your family through
insurance or invest it for growth. The need for
insurance is crucial but you also want to see
your money grow through market investments.
But in volatile market conditions how do you
secure both?

Relax, because now you can hedge your

investments with safer investment vehicles
that provide you with a diversified portfolio.

ICICI Prudential Life Insurance presents a

package of Investment Solutions, which
provide you high returns, while guaranteeing
complete peace of mind.

(30)
This follows from our understanding that life
has many facets and they are manifested
through its various needs. Therefore our
philosophy is to provide you with
comprehensive insurance solutions that cater
to your dual needs of earning potentially high
returns as well as stay insured for life. Thus
we offer you a unique package of Investment
Solutions that combine the best of insurance
and investment.

ICICI Prudential offers flexible solutions for

planning your investment.

LifeLink - an investment plan that gives you

the flexibility of choosing your investment
options while keeping you insured for life.

AssureInvest - a single premium

endowment plan that gives you potentially
high returns coupled with insurance protection.
Depending on your particular needs,
Investment Plans could allow you to do
one or more of the following:

•Plan for Tangibles: buy that fashionable car,

that huge refrigerator, etc.

•Earn Market-linked Returns: earn market-

related returns while your family remains
protected, even in volatile market conditions.
•Save on Deferred Taxes: because the
interest income and maturity benefits of the
Policy are tax exempt.

•Lifestyle Planning: maintain your lifestyle -

even if your income was to reduce in the
future.

•Legacy Creation: buy property; invest in

shares, bonds, etc. for your children or
grandchildren

(31)
Group Insurance Solutions

Employee care - the defining edge

In this new age of rapid developments and

just-in-time methodologies, one big challenge
that organizations face is to establish and
maintain a competitive edge over others.
Today's cutting-edge product or service
becomes tomorrow's undifferentiated
commodity. In an era of competitive parity, the
only asset that makes a decisive difference
between corporate success and failure is the
quality of human capital.

Investment in one’s employees is an

investment in the future:

Employees are a company’s human capital.

Not only do companies care for them, but also
provide an environment that fosters a deep
and lasting sense of belonging. Employees
determine the present and decide the future of
a company.

Employee benefits have proven to be an

excellent tool to optimize the retention of talent
and improve an organization’s bottom line.
The quality of an organization’s employee
benefits establishes and maintains a
company's image as a caring employer.
Optimum care of employees is a long-term
investment that results in a sustained
competitive advantage for an organization in
the times to come.

ICICI Pru Group Insurance Solutions

Advantage

•An integrated basket of flexible group

insurance solutions that offer incomparable
flexible benefits.

•Sound investment management that focuses

on safety, stability and profitability of the
portfolio.

•Personalized financial planning for your

employee that takes care of his/her changing
financial needs at every stage of life.
(32)
•Quality service initiatives and transparency
across all operations, promising superlative
operational efficiency.

Group Gratuity Plan:

 A plan that helps employers funds their
statutory gratuity obligation in a scientific
manner.

Group Term Assurance: A plan that helps

provides affordable cover to members of a
group.
Group Superannuation Plan: A flexible
Defined Contribution Superannuation scheme
that provides for a retirement kitty for each
member of the group.

Contact Information

ICICI Prudential Life Insurance Company

Limited
Registered Office

1089, ICICI Prudential Towers,

Appasaheb Marg,
PrabhaDevi,Mumbai - 400 051.

1.3 PROBLEMS OF THE ORGANISATION:

Multiple players in the life insurance so, ICICI

Prudential faces very tough competition from
other leaders in the industry. The ICICI
Prudential needs to work hard in order to stay
competitive insurance market. Further, the
ICICI Prudential should appoint professional
agent who should be able to provide customer
with a comparison of multiple schemes and
also explain them in simple terms, so that
customer able to make an informed decision.
 (33)

1.4 S.W.O.T. ANALYSIS

Strengths

The biggest strength of this organization is

the:

Money power, which makes them ignorant

about the gestation period.

Brand image, Business experience, and

Innovative products

The agents are very selectively chosen

have excellent communication skills.

Service quality, which is the crux of their

mission.

Large network branches which is helped to

customer for the payment

Weaknesses

High targets for financial advisors and for

the sales departments.

Many competitors in the market offer same

product by the little difference in the premium
and offerings.

Sustainable to risk associated with

investments in money market.
Try to catch middle-lower level people also.

(34)
Opportunity

Huge market is literally untapped; out of

estimated 320 millions insurable markets only
20% of the population is insured.
Health insurance and pension schemes, an
estimated market potential of approximately
$15 billion.

ICICI Prudential should give the insurance

coverage both to the parent and child so that
their life could be covered in both cases. The
customer doesn’t mind paying some extra
premium for that.

Threats

Players like Bajaj and Birla Sun life with low

premium for the similar plans.

Entry of many other private companies with

equally strong experience and financial
strength of foreign partners making the
competition difficult and saturating the urban
markets.

Current Govt. policies do not encourage

gross domestic savings. If the tax liability of
the service class rises, the customer will have
little money to invest.

LIC has woken up from sleep and is

following competitive strategies. Its huge
surplus in Life Fund gives a capability to lodge
Price war.

1.5 COMPETITION INFORMATION:

•Bajaj Allianz General Insurance: Bajaj

Allianz General Insurance Company Limited is
a joint venture between Bajaj Auto Limited and
Allianz AG of Germany. Both enjoy a
reputation of expertise, stability and strength.

(35)
•Birla Sun Life Insurance: The Aditya Birla
Group contributes its knowledge of the Indian
market while Sun Life Financial contributes
global expertise in the areas of protection and
wealth management.
•HDFC Standard Life Insurance: HDFC and
Standard Life have a long and close
relationship built upon shared values and trust.
Providing long term financial security to policy
holders will be the constant endeavor.

•ING Vysya Life Insurance: ING, the world’s

second largest life insurance company
together with Vysya Bank, one of India’s
leading private sector banks, forms ING Vysya
Life Insurance.

•Life Insurance Corporation (LIC): Life

Insurance Corporation (LIC) has been one of
the pioneering organizations in India who
introduced use of Information Technology in
their business.

•MetLife India: The Metropolitan Life

Insurance Company is the number one insurer
in the U.S. It is helping build financial
independence for its customers.

•Oriental Insurance: The Oriental Insurance

Company Ltd. (OICL) is one of the leading
General Insurance companies in India and is a
subsidiary of the General Insurance
Corporation (GIC) of India.

•Royal Sundaram Alliance Insurance: Royal

Sundaram marks the coming together of
Sundaram Finance; one of India’s most
respected and trusted finance companies, and
Royal and Sun Alliance, one of the largest
insurance groups in the world.

•Tata AIG Insurance: Life insurance &

general insurance for individuals & corporates
by Tata AIG. This site will guide you on how to
capitalize on opportunities and protect against
uncertainties.

(36)

Chapter 2

OBJECTIVE & METHODOLOGY

2.1 SIGNIFICANCE OF THE STUDY

A study of the products and services of the

ICICI Prudential Life Insurance will help me
understand the difference between its
products and that of competitors. Also I will get
to know the consumer perception about the
various life insurance products available in
India

2.2 MANAGERIAL USEFULNESS OF THE

STUDY

ICICI Prudential Life Insurance has a place in

the Insurance sector. The study of its
marketing strategies and consumer perception
of life insurance product will give me a crucial
idea behind the success of the company and
the facets of marketing that made the success
possible.

2.3 OBJECTIVES OF THE STUDY

1. To Study the marketing strategies of ICICI

Prudential Life Insurance

2. To study the consumer perception about the

various life insurance products available in
India.

3. To analyze the life insurance products of

ICICI Prudential Life Insurance Company and
compare them with other players in Life
Insurance segment.
 (37)
2.4 SCOPE OF THE STUDY

The study is for the products of ICICI

Prudential Life Insurance and Consumer
Perception of life insurance product will be
limited to the New Delhi and NCR only. The
information will be based on the company’s
website, literature provided by the company
and questionnaire analysis.

2.5 METHODOLOGY

Primary Sources:

Data collected from Insurance companies

through verbal Questionnaire

Secondary Sources:

•IRDA act, 1999

•Handbook of Insurance agents of different

Life Insurance companies

•Internet websites of IRDA and various Life

Insurance companies & various websites.

The primary study will be targeted towards the

marketers. The study will also include semi-
structured interview with marketing managers
of various Insurance companies who are
successfully selling Life Insurance Policies to
Indian Consumers.
The Secondary Sources will help in tracing the
historical framework of Insurance companies
of post independent India as well as the pre-
privatization and post-privatization Insurance
environment in India. This secondary study will
help in serving the theoretical groundwork for
the study.

(38)
Chapter – 3

CONCEPTUAL DISCUSSION

MARKETING CONCEPT IN FINANCIAL

SERVICES MARKETS

Financial Services Marketing

According to ‘Philip Kotler’:

“Marketing is a social and

managerial process by which
individuals and groups obtain
what they need want through
creating, offering and
exchanging products of value
with others. This definition of
marketing rests on the
following core concepts: needs,
wants, and demands; products
(good, services and ideas);
values, cost and satisfaction;
exchanger and transactions;
relationships and networks;
markets; and marketers and
prospects".
The concept of financial Services Markets is a
combination of two different words, Finance
and Marketing. In a true sense, it is application
of marketing principles in the financial services
or conceptualization of marketing in the
decision-making process of financial
organization.

It is a right to say that financial marketing is

related to the product, promotion, place, and
pricing and people decisions of the financial
organizations, which simplify the taste of
restructuring of revamping their decisions in
tune with the changing business environment.
In addition, the financial marketing also
includes in it’s the activities related to the
behavioral profile of the customers and the
marketing information system so that the
marketing decision involve more dynamism in
it’s to meet the financial and more the
customers and
(39)
market. The right from the making of services
product, promotion, place, pricing and people
decisions to the study of financial
organisations and customers, market
conditions and environment become an
integral part of financial marketing. Further it
also includes in its purview the auditing of
marketing strategies so as to make the
marketing decisions creative and innovative.

In an age of electronic financial services the

concept of financial marketing is required to be
reviewed. The emerging trends in the word
economy indicate recession, the mounting
intensity of competition, and the increasing
domination of information technologies.

Thus we find financial marketing helping an

optimal blending of the core and peripheral
services. The elimination and inclusion
processes it the service mix are done
effectively and this simplified the task of
formulating and innovating the product mix in
tune with the changing expectations of
customers.

DISTINCTION BETWEEN SERVICES

MARKETING AND PRODUCT MARKETING

Nature and Role of Goods Marketing

In manufacturing, the marketing function plays

an important role in the identification of
customer’s need. Here customer needs are
identified before production. Customers
assess the brands promised benefits during
consumption, strengthening or weakening
brand preference accordingly. In figure below
the sequence of the four functional phases are
show. It also gives the contributions of post-
production marketing, consumption and word
of mouth communications.
 (40)
Nature of Role of Goods Marketing

Create Awareness
Marketing
Pre-production

Production Induce Trial

World of Mouth
Communication
Post-production Demonstrate Benifits
Marketing

Build Brand
Consumption Preference

Strong Influence
Weak Influence

Nature and Role of Services Marketing

Although both services marketing and goods

marketing start with the critical need
identification and product design functions,
goods generally are produced before it is sold
and services generally are sold before it is
produced. Moreover, services marketing has
more limited influence an customers before
the purchase than goods marketing. Figure
given below shows the nature and roles of
marketing for services.
In services, both post sale marketing and
word-of-mouth communication has prominent
effect in winning customers loyalty. Thus,
services marketers can create brand
awareness, and include trial before the sale,
but they demonstrate benefits and build brand
awareness most effectively after the sale.

(41)
Nature and role of Service Marketing

Pre production Create Awareness

marketing

Induce Trial
Word of Mouth
Communication
Post-production Demonstrate
Marketin, Benefits
Consumption &
Marketing
Build Brand
Preference

Strong Influence
Weak Influence

MEANING OF INSURANCE
The business of insurance is related to the
protection of the economic value of assets.
Every asset has a value. The asset would
have been created through the efforts of the
owner, in the expectation that, either through
the income generated there from or some
other output, some of his needs would be met.
In the case of a motorcar, it provides comfort
and convenience in transportation. There is no
direct income. There is a normally expected
lifetime for the asset during which time, it is
expected to perform. The owner, aware of this,
can so manage his affairs that by the end of
that life time, a substitute is made available to
ensure that the value or income is not lost.
However, if the asset gets lost earlier, being
destroyed or made non-functional, through an
accident or other unfortunate event, the owner
and those deriving benefits there from suffer.
Insurance is a mechanism that helps to reduce
such adverse consequences.

(42)
Life Assurance

It is the business of effecting contracts of

insurance upon human life, including any
contract whereby the payment of money is
assured (except death by accident only) or the
happening of specified any contingencies
dependent on human life, like death a
specified age. The contract would be subject
to the payment of premiums for a term,

Non-Life Insurance or General Insurance

Even though conventional classification of

General Insurance has been in three
branches-

1.Fire Insurance

2.Marine Insurance
3.Miscellaneous (Accident) Insurance,

In modern times, it is classified as follows:

a)Insurance of Person

b)Insurance of Property

c)Insurance of Interest

d)Insurance of Liability

(43)
WHY INSURANCE?

However there is a normally expected life

cycle for every asset during which time it is
expected to perform its assigned role. So, a
prudent individual can manage his affairs so
that by the end of that life cycle, a substitute is
in place to ensure continued benefit/comfort.
However, if due to an accident or other
unfortunate event, the asset gets destroyed or
made non- functional, the person deriving
benefits there, from suffer. Insurance is the
mechanism that helps to soften the impact of
such adverse consequences by providing for
some monetary substitution to face such
unforeseen circumstances.
The need of insurance arises from the
chances of an accidental occurrence
destroying or making an asset non-functional.
Such loss producing eventualities are called
perils e.g. Fire, floods, breakdowns, lightning,
earthquakes, etc However, it has to be
remembered that what is being talked about is
only a probability of a loss. The protection of
Insurance is against a contingency that may or
may not happen.

A business man always keeps some reserve

to meet the future unexpected loss. In our day
to day life we also plan for secured future.
Similarly to face and to overcome the
unexpected risk of life one must have to insure
his/her life.

(44)
THE INSURANCE BUSINESS

The business of insurance done by

insurance companies (called insurers), is to

bring together persons with common insurable

interests (sharing the same risks) collecting
the share or contribution (called premium)
from all of them, and paying out
compensations (called claims) to those who
suffer. The premium is determined as
indicated above with some addition for the
expenses of administration.

The insurer acts as a trustee for managing the

common fund for and on behalf of the
community. He has to ensure that nobody is
allowed to take undue advantage of the
arrangement. In other words the management
of the business requires care to prevent entry
into the group of people whose risks are not of
the same kind, as well as not paying claims on
losses which are not accidental. The decision
to allow entry is the process of underwriting of
risk. Both underwriting and claim settlement
have to done with great care.

INSURANCE AS A SOCIAL SECURITY

TOOL

On the eve of the promulgation of the Life

Insurance (Emergency Provision) Ordinance
the then Finance Minister C.D. Deshmukh said
in his broadcast to the nation. "The
nationalisation of Life Insurance will be
another milestone. In the implementation of
the Second Five Year Plan, it is bound to give
material assistance. Into the lives of millions in
the rural areas, it will introduce a new sense of
awareness of building for the future in the
spirit of calm confidence which insurance
alone can give. It is a measure conceived in a
genuine spirit of service to the people. It will
be for the people to respond, confound the
doubters and make it a resounding success.
With this as the guiding light the corporate
objectives of the Life Insurance Corporation
inter alia sought to achieve the following:

(45)
•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 reach 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 trustee of the insured public in their

individual and collective capacities.
The need for these objectives is obvious in the
eyes of a family which may have lost its sole
bread winner. With his death the family's
income dies. The economic condition of the
family is affected, unless other arrangements
come into being to restore the situation. Life
insurance provides such an alternate
arrangement. If there was no life insurance the
social cost would be reflected in a
impoverished family becoming a burden on
the Government or taking to anti social means
to make both ends meet. Therefore, the life
insurance business is complimentary to the
state's efforts in social management.

Conceptually under a socialistic system it is

the responsibility of the State to find resources
for providing social security, where as in a
capitalistic society, providing for security is
largely left to the individuals. The society
provides instruments like insurance, which

(46)
can be used in securing this aim. However the
distinction between
these systems have got blurred over a period
of time, with Socialists leaving individuals to
fend for themselves and Capitalist taking the
first steps to social security.

In India, Article 41 of our Constitution requires

the State, within the limits of its economic
capacity and development, to make effective
provision for securing the right to work, to
education and to provide public assistance in
case of unemployment, old age, sickness and
disablement and in other cases of undeserved
want. Part of the State's obligations to the
poorer sections, are met through the
mechanism of life insurance.
In keeping with its social responsibility as an
instrument of the Government and as a good
business organization LIC has made
payments to policyholders amounting to
Rs.11,170 crores in 1999-2000 (as against
Rs.9,106 crores in the previous year). During
the same period, LIC settled 66.42 lacs claims
for an amount of Rs. 9211 crores.
ROLE OF INSURANCE IN ECONOMIC
DEVELOPMENT

Insurance benefits society by way of

a)Providing relief to the insured from any

mishappening.

b) Reducing burden of Government in

providing relief to the senior citizens.

c) Providing funds to Govt. for nation building

activities.

Direct investments made by LIC serve a

twofold purpose. It acts as a major instrument
for the mobilization of savings of people,
particularly from the middle and lower income
groups. These savings are channelled into
investments for economic growth thereby
creating

(47)
employment. These savings in turn go into the
task of nation building.
As on 31.3.2000, the total investments of the
LIC exceeded Rs 1,47,000 crores, of which
more than Rs. 84, 000 crores were directly in
Government (both State and Centre) related
securities, nearly Rs.12,000 crores in the
securities State Electricity Boards, Rs.16,000
crores in housing loans and Rs.3,000 crores in
water supply and sewerage systems: Other
investments included road transport, setting
up of industrial estates and direct financing of
industry. Investments in the corporate sector
(shares, debentures and term loans)
exceeded Rs. 28,000 crores.

LEGISLATIVE AND REGULATORY

MATTERS

Market consists of buyers, sellers,

intermediaries and regulators. There is hardly
any market which is not regulated. As between
markets, the only difference in the matter of
regulation could be in the degree of regulation
which is exercised in different markets but
every market is regulated without exception.
For regulating any market, laws are required
to be passed by the appropriate legislature.
The market economy has to function within the
legal framework. The legal frame work in turn
has to undergo changes to take care of the
market aspirations and the advancement in
technology.
Some of the important legislative measures
taken up in the insurance sector of the Indian
economy are considered herein.

LIFE INSURANCE CORPORATION ACT,

1956

Life Insurance business in India was

nationalised with effect from 1st September
1956. From this date, the life insurance
business transacted by 154 Indian life
insurers, the Indian business of 16 foreign
insurers and 75 provident societies was taken
over by Government of India. Earlier, LIC of
India Act had been passed by the Parliament
on 18th June 1956 which came into effect
from 1st. July 1956. Some of the important
provisions of this Act (as amended by IRDA
Act 1999) are stated hereafter.
(48)
Life Insurance Corporation (LIC) was
established w.e.f. 19 May 1956, as a body
corporate having perpetual succession and a
common seal with power to acquire, hold and
dispose of property and may by its name sue
and be sued in its name. It consists of not
more than 16 members appointed by the
Government, one of whom shall be appointed
as its Chairman.

Under Section 30 of the LIC of India Act, from

the appointed date i.e. 1 Sept 1956, the
corporation shall have the exclusive privilege
of carrying on life insurance business in India
and that certificate of registration granted to
any insurer under the Insurance Act, 1938
shall cease to have effect from the said date.
Now the above provisions of Section 30 have
been altered by insertion of Section 30A
consequent to the enactment of the IRDA Act,
1999. As a result, the exclusive privilege given
to the LIC has been withdrawn.
 (49)

Chapter – 4

DATA ANALYSIS

Data gives preference of respondents of insurance

company.

Company’s Name No.Of Respondent Share(%)

LIC 78 78
SBI Life Insurance 7 7
ICICI Prudential 10 10
OM Kotak Mahindra 3 3
HDFC 2 2
Total 100 100
 80
LIC
70
60
No.Of Respondent SBI Life
50 Insurance
40 ICICI Prudential

30
OM Kotak
20 Mahindra
10 HDFC
0

Interpretation

78% of the people have LIC policy and is

ranked number one by that percent of
respondent.

(50)
Data gives benefits of insurance cover perceived
by respondents.

Benefits No. Of Respondent Share(%)

Cover future 55 55
Uncertainity
Tax Deduction 20 20
Future Investment 25 25
Total 100 100
 60

50

No. Of Respondents
Cover Future
40 Uncertainity
Tax Deduction
30

20 Future Investment

10

Interpretation

55% of the respondents believe that covering

future uncertainty is the biggest benefit of
insurance policy20% & 25% of them believe
that other benefits are tax deduction & future
investment

20% & 25% of them believe that other benefits

are tax deduction & future investment

(51)

Data provides features of insurance policy

attracted the respondents.

Feature No. Of Respondent Share (%)

Money Back 15 15
Guarantee
Larger Risk Coverage 37 37
Easy Access to 7 7
 Agent
Low Premium 30 30
Reputation Of 11 11
Company
Total 100 100

Features Of Insurance Policy

M oney Back Guarantee

Larger Risk Coverage
Easy Access to Agent
Low Premium
Reputation Of Company

Interpretation

Majority of the respondent found larger risk

coverage as the most attracted feature of their
policy.

(52)
Data provides number of insurance policy type
respondents.

Policy Type No. Of. Share (%)

Respondents
Life Policy 75 75
Non- Life Policy 25 25
Both 45 45
 Nature of Policy

80
No. Of. Respondents

70
60
50
Life Policy
40
Non-Life Policy
30
20 Both
10
0
Chart Types

Interpretation

75% of the respondents have life insurance

policy while 45% have both.

(53)
Chapter 5

FINDINGS AND RECOMMENDATIONS

5.1 FINDINGS
The project study report has the following
findings:
1. Almost 80% of respondents have an
insurance policy.
2. People have more number of life insurance
policies as compared to non life insurance.
3. Majority of the respondent preferred/have
L.I.C. policy since it was the only option due to
complete government control in insurance
sector.
4. Majority of the respondents believe that
covering future uncertainty is the most
important benefit of an insurance policy.
5. Majority of the respondent believed that
larger risk coverage of their policy was the
main feature of their policy that attracted them
to buy that policy though low premium was the
next important feature.
6. Due to the increasing concern of people
towards their health/life the life insurance
business has good prospects.
7. Due to increased in consumerism new
product is launched everyday. Thus non-
life/general insurance business is also going to
have boom period.
8. ICICI Prudential is the largest private player
in the insurance industry in India. It has sold
over one lakh fifty thousand policies till date.
Besides LIC, ICICI Prudential is facing stiff
competition from other private insurance
players.
9. Out of total population of 1 billion of country,
only 22% have insurance cover. So we can
say that there is still large potential for both the
public and private companies. Private
companies have to give varied customized
product to compete with the LIC which is
holding about 97% of the total market.
(54)
5.2 RECOMMENDATIONS

The insurance companies should now try to

identify the gap between current level of
customer service and customer expectations.
Some of the strategies being recommended
are as follows:

Product Differentiation: Offering a product

that is distinctly different from other products
available in the market.

Innovativeness: Identifying means of a

delightful customer experience.

Riders: These are additional offerings along

with the main product.

Flexibility: The companies should make

their products flexible for the convenience of
their customer.

Hassle Free Service: All bureaucracy in

customer interactions should be eliminated.

Proper Policy Documentation: Wrong

interpretations/ non-awareness of policy
document by the customer may have serious
implications in the long term and the possibility
of the same should be alleviated by the
insurance companies.
 (55)

ANNEXURE
S
 (56)
QUESTIONNAIRE

1. Are You Employed?

Yes
[ ]

No
[ ]

2. Do you have any insurance policy?

Yes
[ ]

No
[ ]

If Answer of Q.2 is Yes, then proceed else

answer Q.8
3. Which insurance policy do you have?

Life
[ ]
Non-Life
[ ]
Both
[ ]

4. Which Company’s Insurance Policy you

prefer the most?
(Rank them)
a) LIC
[ ]
b) ICICI Prudential
[ ]
c) SBI Life Insurance
[ ]
d) ING Vysya Life
[ ]
e) Om Kotak Mahindra
[ ]
f) TATA AIG Life
[ ]
g) Any Other (please
specify)________________________

(57)
5. For how many years do you have insurance
policy? (Please tick)
a)<5YRS

b) 5-10 YRS
c)10-15 YRS
d) Any Other (please
specify)_____________________________

6. What do you think are the benefits of

insurance cover? (rank them)
a) Cover Future Uncertainty
b) Tax Deductions
c) Future Investment
d) Any Other (please
specify)_____________________________

7. Which feature of your policy attracted you to

buy it? (Rank Them)
a) Low Premium
b) Larger Risk Coverage
c) Money Back Guarantee
d) Reputation of Company
e) Easy Access to Agents
f) Any Other (please
specify)_____________________________

8. YOUR MONTHLY HOUSEHOLD INCOME?

a) <10k
b) 10k-20k
c) 20k-30k
d) 30k-40k
e) Any Other (please
specify)_____________________________
 (58)
9. Do you really think insurance policy cover in
today’s scenario is not essential?
_____________________________________
_____________________________________
_____________________________________
_____________________

THANKYOU!

NAME:
_________________________

ADDRESS:

OCCUPATION:___________________
 (59)
COMPARATIVE ANALYSIS OF MAJOR
INSURANCE PLAYERS
 MONEYBACK POLICIES - 20 Years (Increasing
insurance cover, Tax-free money receivable at regular
intervals)

ALLIANZ BIRLA ICICI PRU ING VYSYA LIC OM TATA AIG

BAJAJ SUNLIFE KOTAK
(Rs) Cash care Money Cash Back Maximizing Life Money Money Assure 21
Protect Back Moneyback Back Back Years Money
Pack Saver
Sum 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000
Assured
Term(yrs) 20 20 20 20 20 20 21

Prem. 20 20 20 20 20 20 21
Paying
term(yrs)
Yrly. 6,402 6,144 6,818 6,158 6,564 7,495 9,369
Prem.
Tot. Prem. 1,28,040 1,22,880 1,36,366 1,23,160 1,31,280 1,49,900 1,96,749

ALLIANZ BIRLA ICICI PRU ING VYSYA LIC OM TATA AIG

BAJAJ SUNLIFE KOTAK
(Rs) Cash care Money Cash Back Maximizing Life Money Money Assure 21
Protect Back Moneyback Back Back Years Money
Pack Saver
Death
Benefit
Min. 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000
Cover
Year 8 1,26,677 1,48,080 1,36,857 1,00,000+Bonus 1,46,400 1,56,000 1,47,746

Year 16 160,471 243,854 1,87,298 1,92,800 2,12,000 2,28,287

ALLIANZ BIRLA ICICI PRU ING VYSYA LIC OM TATA AIG

BAJAJ SUNLIFE KOTAK
(Rs) CashCare Moneyback Cashbak Maximizing Life Moneyback Money back Assured 21
Protect Moneyback Years Money
Single Cover Saver
Interim 10,000Yr 4, 15,000 Yr 10,000Yr4, 20,000 Yr 5, 20,000Yr5, 20,000Yr5, 10,000Yr3,
Benefits 15,000Yr 8, 5, 15,000Yr8, 20,000 Yr 10, 20,000Yr10, 20,000Yr10, 10,000Yr6,
25,000Yr12, 15,000Yr1 20,000Yr12, 20,000 Yr 15 20,000 Yr15 20,000 Yr15 10,000Yr9,
25,000Yr16 0, 25,000 Yr16 10,000Yr12,
15,000Yr 10,000Yr15,
15 10,000 Yr18
Maturity Benefits

On 130,611 217,048 169,112 40,000 + bonus 156,000 130,300 228,596

Maturity
Total amt 205,611 217,048 239,112 100,000+bonus 216,000 190,300 288,596

(60)
Rate of return (%)
Pre-tax 6.8 5.2 7.0 not indicate 6.5 3.3 4.3
Post-tax 11.9 8.2 11.7 not indicate 11.7 8.4 8.6
30%
Post-tax 9.9 7.1 9.9 not indicate 9.7 6.4 6.9
20%
Post-tax 9.1 6.5 9.1 not indicate 8.8 5.6 6.2
15%

Comparison Of Premium of Money back Policies

Age 30 years Policy Term 20 Age 30 years Policy Term 15
Years Years
PREMIUM PREMIUM
Company SA:1Lac SA:2lac Company SA:1Lac SA:2Lac
1 LIC 6280 12559 1 LIC 7953 15906
2 ICICI PRU 6592 12884 2 ICICI PRU 9094 17888
3 ALLIANZ BAJAJ 6158 11836 3 ALLIANZ BAJAJ 8362 16244
4 TATA-AIG 9099 17698 4 TATA-AIG N.A N.A
5 OM KOTAK 7120 14240 5 OM KOTAK 8890 16480
6 MAX NEWYORK N.A N.A 6 MAX NEWYORK N.A N.A
7 BIRLA SUNLIFE 5856 11412 7 BIRLA SUNLIFE 7572 14844

Age 35years Policy Term 20 Age 35 years Policy Term 15

Years Years
PREMIUM PREMIUM
Company SA:1Lac SA:2lac Company SA:1Lac SA:2Lac
1 LIC 6464 12928 1 LIC 8089 16177
2 ICICI PRU 6683 13067 2 ICICI PRU 9160 18019
3 ALLIANZ BAJAJ 6252 12024 3 ALLIANZ BAJAJ 8432 16384
4 TATA-AIG 9219 17938 4 TATA-AIG N.A N.A
5 OM KOTAK 7330 14660 5 OM KOTAK 9010 16700
6 MAX NEWYORK N.A N.A 6 MAX NEWYORK N.A N.A
7 BIRLA SUNLIFE 6000 11700 7 BIRLA SUNLIFE 7668 15036

SA-Sum Assured

(61)
 GUARANTEES ON INSURANCE &
PENSION PRODUCTS

Current as on March 2006

IRRs/
Guarantees
Company Insurance Pension
ALLIANZ BAJAJ 2.14% NA
AVIVA -1.80% FDNA
AMP sanmar FDNA FDNA
Birla Sun Life 0.7-1.5% 1-1.5%
HDFC Standard 0.73% 1.7-1.9%
ICICI Pru 1.7-4.95% 3.06%
ING Vysya 0.70% NA
LIC 4-6% 1.3-2%
MXNYL 3.05% 1.4-1.9%
Metlife 5.5-5.7% NA
OM Kotak -0.04% 2.10%
SBI Life 0.73-4.7% 4%*
Tata AIG -2-4.4% 1.3%

FDNA - Further Data Not Available

# - From April 1, 2003 when 3% guaranteed

returns would be provided on all three fund
options.

* - Guarantees for premiums for first seven

years.

Pls. note that the above provides a range of

returns offered by companies wherever
possible. For others returns have been
computed for a particular term, age and Sum
Assured of an Endowment product. Most of
the returns pertain to particular products.
 (62)

BIBLIOGRAPHY

•Insurance Advisor’s Manuals and Study

Material of ICICI Prudential.

•NIS Sparta Ltd. (New Delhi)

•Insurance Watch and other Magazines.

•Economic Times

•Library of College

•www.google.com

•www.icicipru.com

•www.bimaonline.com

•www.moneycontrol.com

•www.licindia.com
(63)