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A

Comprehensive Project Report

OnMOTIVES STUDY OF CONSUMERS PURCHASING LIFE

INSURANCE PRODUCTS

PREPARED BY

NAME ENROLLMENT NUMBER

PATEL YATINKUMAR JAYANTILAL 108050592005

PATEL LAKHANKUMAR AMARUTLAL 108050592033

SUBMITTED TO

GUJARAT TECHNOLOGICAL UNIVERSITY,

AHEMEDABAD

MASTER OF BUSINESS ADMINISTRATION (MBA)

THROUGH

S.R. LUTHRA INSTITUTE OF MANAGEMENT,

SURAT

BATCH 2010-2012


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COMPANY CERTIFICATE


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DECLARATION

We undersigned Mr. YATINKUMAR JAYANTILAL PATEL and Mr.

LAKHANKUMAR AMARUTLAL PATEL, students of MBA hereby declare that this

report is based purely on our work and has been carried out under the guidance of Miss.

RUPAL KHAMBHATI, faculty of S. R. Luthra Institute of Management, Surat. This report

is submitted as a part of study curriculum and as a partial fulfilment of the degree of M.B.A.

Masters of Business Administration. Utmost care & complete effort has been taken to make

this study as authentic as possible. We ensure that this project report has not been submitted

for the award to any other university for degree, diploma or any other such prizes.

Date: YATINKUMAR JAYANTILAL PATEL

Place: Surat

LAKHANKUMAR AMARUTLAL PATEL


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CERTIFICATE

This is to certify that this Comprehensive Project Report titled MOTIVES STUDY OF

CONSUMERS PURCHASING LIFE INSURANCE PRODUCTS has been completed

by MR. YATINKUMAR JAYANTILAL PATEL and Mr. LAKHANKUMAR

AMARUTLAL PATEL, students of S. R. Luthra Institute of Management, Surat. This

project report incorporates the result of their study and analysis. The project is forwarded for

further evaluation to Gujarat technological university.

PLACE: SURAT

DATE:

Project Guide

DIRECTOR

(Dr. A. S. Charan)


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PREFACE

The MBA is well structured and integrated course of business studies. The main objective of

practical training at MBA level is to develop skill in student by supplement to the theoretical

study of business management in general. Industrial training helps to gain real life knowledge

about the industrial environment and business practices. The MBA provides student with a

fundamental knowledge of business and organizational functions and activities, as well as an

exposure to strategic thinking of management.

In every professional course, training is an important factor. Professors give us theoretical

knowledge of various subjects in the college but we are practically exposed of such subjectswhen we get the training in the organization. It is only the training through which I come to

know that what an industry is and how it works. I can learn about various departmental

operations being performed in the industry, which would, in return, help me in the future

when I will enter the practical field.

Training is an integral part of MBA and each and every student has to undergo the training

for 6 to 8 weeks in a company and then prepare a project report on the same after the

completion of training.

During this whole training I got a lot of experience and came to know about the management

practices in real that how it differs from those of theoretical knowledge and the practically in

the real life.

In todays globalize world, where cutthroat competition is prevailing in the market,

theoretical knowledge is not sufficient. Beside this one need to have practical knowledge,

which would help an individual in his/her carrier activities and it is true that Experience is

best teacher.


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ACKNOWLEDGEMENT

First and foremost, we praise and thank God Almighty from the depth of our heart, which

has been the source of strength in the completion of this project work.

It is our profound concern to thank the Director, D r . A . S . C H A R A N , S. R.

Luthra Institute of Managementwho paved the path for offering us this opportunity and

avenues of infinite possibilities of knowledge.

And w e a r e deeply indebted to Miss. RUPAL KHAMBHATI for her guidance,

assistance and for giving all the formal support to conduct this study and for

completing this project work.

And at last we would like to thank other faculty members of S. R. Luthra Institute of

Management who supported us in this project work. We also thank our friends and all other

people who directly or indirectly help in this project work.


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TABLE OF CONTENTS

Sr. No. Perticulers Page No.

1 Company Certificate 2

2 Student Decleration 3

3 Institute Certificate 4

4 Preface 5

5 Acknowledgement 6

6 Executive Summary

7 Introduction

8 Industry Profile

9 Company Profile

10 Review of Letrature

11 Research Methodology

12 Bibliography


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EXECUTIVE SUMMARY

Insurance is a vital economic activity and there is an excellent scope for its growth in the

emerging markets. The opening up of the insurance sector has raised high hopes among

people both in India and abroad.

The Government of India liberalized the insurance sector in March 2000, which lifted the

entry restrictions for private insurance players, allowing foreign players to enter into the

market and start their operations in India. The entry of private players helps in spreading and

keeping the operation in the Indian insurance sector which in turn results in

Restructuring and revitalizing of public sector companies.

This project work entitled MOTIVES STUDY OF CONSUMERS PURCHASING LIFE

INSURANCE PRODUCTS has been prepared by two researchers MR. YATINKUMAR

JAYANTILAL PATEL and Mr. LAKHANKUMAR AMARUTLAL PATEL. This project

work has been done through collecting primary data from respondents and also researchers

have used secondary data. Questionnaire is always the best tool for collecting primary data,

under this study the researchers use questionnaire to collect primary data. It has also usedvarious secondary data from internet, books; annual report etc. From the primary data the

researchers took help of SPSS (Statically analysis software for Cross Tabulation purpose).

After the collection of data it has analyzed and than from that analysis, the conclusion and

recommendation is made.


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CONCEPT OF LIFE INSURANCE

Life has always been an uncertain thing. To be secure against unpleasant possibilities, always

requires the utmost resourcefulness and foresight on the part of man. To pray or to pay for

protection is the spirit of the humanity. Man has been accustomed to pray God for protectionand security from time immemorial. In modern days Insurance Companies want him to pay

for protection and security. The insurance man says "God helps those who help themselves";

probably he is correct. Too many people in this country are not in employment; and work for

too many no longer guarantees income security. Several millions are part-time, self employed

and low-earning workers living under pitiable circumstances where there is no security cover

against risk. Further the inherent changing employment risks, the prospect of continual

change in the work place with its attendant threats of unemployment and low pay especially

after the adoption of New Economic Policy and the imminent life cycle risks - a new source

of insecurity which includes the changing demands of family life, separation, divorce and

elderly dependents are tormenting the society. Risk has become central to one's life. It is

within this background life insurance policy has been introduced by the insurance companies

covering risks at various levels. Life insurance coverage is against disablement or in the event

of death of the insured, economic support for the dependents. It is a measure of social

security to livelihood for the insured or dependents. This is to make the right to life

meaningful, worth living and right to livelihood a means for sustenance. Therefore, it goes

without saying that an appropriate life insurance policy within the paying capacity and means

of the insured to pay premium is one of the social security measures envisaged under the

Indian Constitution. Hence, right to social security, protection of the family, economic

empowerment to the poor and disadvantaged are integral part of the right to life and dignity

of the person guaranteed in the constitution. Man finds his security in income (money) which

enables him to buy food, clothing, shelter and other necessities of life. A person has to earn

income not only for himself but also for his dependents, viz., wife and children. He has to

provide legally for his family needs, and so he has to keep aside something regularly for a

rainy day and for his old age. This fundamental need for security for self and dependents

proved to be the mother of invention of the institution of life insurance.


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WHAT IS INSURANCE

The business of insurance is related to the protection of the economic values of assets. Every

asset has a value. The asset would have been created through the efforts of the owner. The

asset is valuable to the owner, because he expects to get some benefit from it. The benefitmay be an income or something else. It is a benefit because it meets some of his needs. In the

case of a factory or a cow, the product generated by is sold and income generated. In the case

of a motor car, it provides comfort and convenience in transportation. There is no direct

income. Every asset is expected to last for a certain period of time during which it will

perform. After that, the benefit may not be available. There is a life-time for a machine in a

factory or a cow or a motor car. None of them will last forever. The owner is aware of this

and he can so manage his affairs that by the end of that period or life-time, a substitute is

made available. Thus, he makes sure that the value or income is not lost. However, the asset

may get lost earlier. An accident or some other unfortunate event may destroy it or make it

non-functional. In that case, the owner and those deriving benefits from there would be

deprived of the benefit and the planned substitute would not have been ready. There is an

adverse or unpleasant situation. Insurance is a mechanism that helps to reduce the effect of

such adverse situations. Insurance, in law and economics, is a form of risk management

primarily used to hedge Against the risk of a contingent loss. Insurance is defined as the

equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a

premium. Insurer, in economics, is the company that sells the insurance. Insurance rate is a

factor used to determine the amount, called the premium, to be charged for a certain amount

of insurance coverage. Risk management, the practice of appraising and controlling risk, has

evolved as a discrete field of study and practice.


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ORIGIN OF INSURANCE

PRACTICE OF INSURANCE IN INDIA: 1818-1956

It is claimed that insurance was practiced in India even in Vedic times in one form or the

other. The Sanskrit term "Yogakshema" in the Rigveda meant some kind of insurance, which

was practiced by the Aryans in India nearly 3000 years ago. During the Mughal period

insurance took firm roots. There are even references to the cover against war risks. Losses

due to the passage of royal troops through farms were compensated by the State as a gesture

of goodwill.

The year 1818 is an epoch -making year in the history of our country. The first Life Insurance

Company on India soil appears to have been started in this year. A group of Europeans

pioneered the establishment of the Oriental Life Insurance Society to afford relief to the

distressed relatives of European. The venture was not quite successful but the company was

reformed in 1829.The renewed Company also got into trouble in 1833 when Agency House

of Calcutta, partners of the same, fell.

Prince Dwarkanath Tagore was the only solvent partner & the sole responsibility for carrying

on the institution developed on him. Meanwhile, early in Janury1834, the Government made

up its mind to establish a Public Insurance Company & a Committee was set up for this

purpose .A number of foreign Insurance Companies then operating in the country viewed this

move with alarm. They set up Committees of their own enquire into their individual affairs.

Dwarkanath Tagore, too, had a Committee appointed to look into the affairs of the Oriental.

As a result, another company was born out of the previous one in the name of "New Oriental

Company"

In the reorganization of the "Oriental" in the year 1834, two other gentlemen were associated.

One was Ramtanu Lahiri and the other Rustamjee Cowasjee. The latter was another

prominent figure of the business world. Rustamjee entered insurance business in 1828, he

was already known to the community and the Government as a wealthy Parsi merchant.

Rustamjee's connection with insurance also started with "Laudable Societies", but he was

later on associated with Companies like "Sun Life Office (1834) ", New Oriental (1835),

Universal Life (1835), New Laudable (1840), and Indian Laudable (1841). He was also on

the Committee of the Union Insurance Company which was formed by a group of five

persons. This Company was issuing policies covering river-risks only. He was intimatelyconnected with the Committee of Insurance Offices in Calcutta. Rustamjee Cowasjee &


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Dwarkanath Tagore was probably the first Indians to join in partnership business with the

Europeans & in the field of insurance they were pioneers on this side of the country. Apart

from Calcutta, several enterprising people in Bombay started in 1823 the "Bombay Life"

Assurance Company. The company went into liquidation soon and could not revive. In 1829,

the "Madras Equitable "was formed. It finally ceased to function in 1921 due to financial

difficulties after the First World War. The effort to set up a public insurance company at the

government level also went in vain, mainly from objection of private operators. Majority of

the early attempts to form insurance

Offices were in the province of Bengal. This was due to its political & economic importance

at that time. The contribution of Raja Ram Mohan Roy, one of the greatest social reformers

of India, to the development of life insurance is very great. He was deeply concerned about

the sad plight of desperate widows and helpless orphans.

OVERSEAS INSURERS:

Initially, when Life Offices were established in large numbers in Britain, some of them

ventured to issue sterling policies to the British residents in India. Premiums collected here

were credited to England largely for British beneficiaries. Business seems to have been brisk

and profitable and was usually under short term policies. Insurance mortality tables and

insufficient mortality data of Englishmen in India made the premiums heavy-heavier than at

home. Insurance was denied to the "natives" even if they wanted it- for their lives were

always considered risky and sometimes valueless. When Indian lives were accepted as a very

special case, the extras charged were still heavier. Prominent amongst the companies which

came to India around this period was the "Medical

Invalid and General" incorporated in London in 1841. As more areas were annexed and the 8

ruling power, with vested interests in developing trade, took charge , the "Medical" extended

its area of operation, established large connections, absorbed the" Agra Life" and in

1835,took over the "New Oriental". P.M. Tate, the then manager of the "Medical", was a

keen businessman, widely liked, influential and shrewd. With W.F. Ferguson, who was the

manager of the "New Oriental" before amalgamation, he commenced very active operations

which were temporarily affected by the 1857 "Mutiny". The Universal Life Insurance

Company established in England in 1836 opened its Indian Branch in 1840 and enjoyed a

long period of successful operations until it was taken over by the "North British" in May

1901. Insurance exceeding Rs. 10 crore were issued in India during this period. Another


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English Company operating in India at that time was the Colonial Life Assurance Company.

It was established in 1846 under the auspices of the Standard Life Assurance Company. The

original prospectus of this company declared its purpose as "extending to the Colonies of

Great Britain and to Indian the full benefit of Life Assurance". It appointed agents with local

boards which were first established on Calcutta, Bombay, Madras and Colombo. Later on this

company was taken over by the "Standard Life" and made valuable contribution to

investigations into the mortality experience of assured lives in India. Eventually it ceased its

operations in India in 1938. It is difficult to say which was the oldest Life Policy in India, but

the oldest known appears to be one sold by the Royal Insurance (which commenced business

in India in 1845) on the life was to Cursetjee Furdonjee on 6th January 1848, no reference to

any earlier policy being available. In the year 1853, the Liver pool and London and Globe

Insurance Company established in England in 1836, commenced business in India. Sir

Charles Forbes was its first agent, succeeded by M/s. Forbes, Forbes and Campbell. It

accepted only European lives and commenced insuring Indian lives only after 1929.This too,

was mainly to oblige good agents of the Company for classes other than life business. The

North British and Mercantile was the next company to appear on the Indian scene. It started

fire insurance business in the year 1861 and life business 1864. The London Assurance

started life business in 1864, limited principally to European lives and closed down its life

department when the Life Assurance Companies Act 1912 made submission of returns

compulsory. On 3rd December, 1870, seven earnest men of Bombay with just seven rupees

for initial expenses gave shape to a plan of offering insurance to the public without the risk of

ruin and the "Bombay Mutual Life Assurance Society" came into existence.

THE BIRTH OF INDIAN INSURERS:

With the advent of the 20th century, the glorious renaissance of swadeshi days dawned. At

the same time, well- to do Indians realized the potentiality of Indian Insurance business. The

Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India

in Madras, National Indian and National Insurance in Calcutta and the Co-operative

Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance

Company took its birth in one of the rooms of the Jorasanko House of the great poet

Rabindranath Tagore, in Calcutta. The Indian Mercantile (1907) was started in Bombay, 9

General Assurance (1908) at Ajmer and the Swadeshi Life (Later Bombay Life) in Bombay

in 1908. The end of the First World War (1914-18) witnessed an influx of insurance


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companies in India. Famous Indian business houses started new insurance companies.

Industrial and Prudential Bombay, Western India, Satara, were floated before the war, but by

1919, companies like Jupiter General, New India, Vulcan Insurance Company etc. came into

being. Pandit K.Santhanam with blessing of Lala Lajpat Rai and Pandit Motilal Nehru started

Laxmi Insurance Co. Similarly, Andhra Insurance was started in Masulipatnam, with the

initiative of stalwarts like Dr. Pattabhi Sitaramaiah. From political platforms also, national

leaders supported this cause. It is duty to every Indian to support only Indian Insurance. The

keynote of our Swaraj is in placing all our insurance with our Indian companies", said

Mahatma Gandhi in his message. "I hope Indians will realize the importance of patriotism

only through Indian insurance institution", stated Pandit Jawaharlal Nehru. Thus, the cause of

Indian insurance became a national issue.

PROGRESS IN INSURANCE BUSINESS:

The growth of Life Insurance in concrete terms could be said to being during the first two

decades of twentieth century when most of the major companies were founded. They grew in

terms of rise in the number of companies, in terms of number of policies and sum assured as

well as total life fund. Indian Insurance Year Book, published for the first time in 1914, gives

he figure of the total business-in -force as 22.44 crore which grew to Rs. 298 crore in 1938.

In 1914, there were only 44companies transacting insurance business in India, and during the

next 25 years their number rose to 176. The total progress on all the primary heads, viz. life

fund (Rs. 50.50 crore), premium income (Rs. 10.50 crore) and new business (Rs. 43.30 crore)

indicate that Indian Insurance Business had been making a definite headway during this year.

The inter-war -years thus saw rapid growth life insurance in India. The promotion of new life

insurance companies continued to be almost a craze and insurance companies mushroomed.

In this period, 176 insurance companies were formed and many of them failed. Thus

unhealthy growth was harmful to the interest of the policy holders and insurance business in

India. Feeling concerned about it, the All India Life Assurance Offices' Association urged

upon the Government in 1932 to undertake the insurance legislation to.

(a) Compulsorily register all Life Insurance companies.

(b) Secure a deposit of Rs.2 lakh from all Life Insurance companies.

(c) Compel foreign companies doing business in India to keep sufficient funds in

India securities to meet their liabilities under all policies issued in India.


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INSURANCE ACT, 1938

The Insurance Act, 1938, was the first comprehensive legislation governing not only life but

also non- life branches of insurance to provide strict state control over insurance business. In

sub- sections to dealt with provident companies, mutual offices and co-operative societies aswell.

The silent features of the Act were as follows:

(A) Constitution of a Department of Insurance under a superintendent vested with

Wide powers of supervision and control over all kinds of insurance companies.

(B) Regulation for the compulsory registration of insurance companies and for filing

Of returns of investment and financial conditions.

(C) Provisions for deposit, to prevent insurers of inadequate financial resources of

Speculative concerns for commencing business.

(D) Provisions that 55% of the net life fund of an Indian or non- Indian insurer should

Invested in Indian Government and approved securities with at least 25% in Indian

Government Rupee securities. All other companies, i.e., foreign companies must

Invest 100% of their Indian liabilities in Indian Government and approved securities,

With at least 33.3% Indian Government securities.

(E) Prohibition of rebating, restriction of commission, licensing of agents etc.

Maximum rates of commission were fixed at 40% of the first premiums and 5% of the

Renewal premium in respect of life assurance business. The agent must be licensed, to

Improve the status of the profession.

(F) Periodical valuation of Indian Insurance business of foreign companies and the

Business of Indian companies.

(G) Provision for policyholders' directors, making it possible for the representatives of

Policyholders to be on the Board of directors.

(H) Standardization of policy conditions required all companies to file standard forms

And tables of premium approved by an Actuary. Under this requirement, the initial

Deposit for life insurance business was raised from Rs. 25000 in Government

Securities to Rs. 50000 in cash approved securities, which was subsequently to be

Rose by installments to Rs. 2 lakh within a specified time limit.


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PRESENT SCENARIO OF INSURANCE INDUSTRY:

India with about 200 million middle class household shows a huge untapped potential

for players in the insurance industry. Saturation of markets in many developed

economies has made the Indian market even more attractive for global insurance

majors. The insurance sector in India has come to a position of very high potential and

competitiveness in the market. Indians, have always seen life insurance as a tax saving

device, are now suddenly turning to the private sector that are providing them new

products and variety for their choice.

Consumers remain the most important centre of the insurance sector. After the entry of

the foreign players the industry is seeing a lot of competition and thus improvement of

the customer service in the industry. Computerization of operations and updating of

technology has become imperative in the current scenario. Foreign players are bringing

in international best practices in service through use of latest technologies.

The insurance agents still remain the main source through which insurance products are

sold. The concept is very well established in the country like India but still the

increasing use of other sources is imperative. At present the distribution channels that

are available in the market are listed below.

Direct selling

Corporate agents

Group selling

Brokers and cooperative societies

Banc assurance

Customers have tremendous choice from a large variety of products from pure term

(risk) insurance to unit-linked investment products. Customers are offered unbundled

products with a variety of benefits as riders from which they can choose. More

customers are buying products and services based on their true needs and not just

traditional money back policies, which is not considered very appropriate for long-term

protection and savings. There is lots of saving and investment plans in the market.

However, there are still some key new products yet to be introduced - e.g. health

products.

The rural consumer is now exhibiting an increasing propensity for insurance products.

A research conducted exhibited that the rural consumers are willing to dole out

anything between Rs 3,500 and Rs 2,900 as premium each year. In the insurance the


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awareness level for life insurance is the highest in rural India, but the consumers are

also aware about motor, accidents and cattle insurance. In a study conducted by MART

the results showed that nearly one third said that they had purchased some kind of

insurance with the maximum penetration skewed in favour of life insurance. The study

also pointed out the private companies have huge task to play in creating awareness and

credibility among the rural populace. The perceived benefits of buying a life policy

range from security of income bulk return in future, daughter's marriage, children's

education and good return on savings, in that order.

BASIC FUNCTIONS OF THE INSURANCE INDUSTRY

1. Risk Perception and Evaluation:

The fundamental function of an insurer is to provide a cover against the detriment caused to

the insured due to the happening of certain specified and agreed events. Thus, prior to

providing such umbrella through a product, the insurer has to assess the risk involved in the

transaction. The insurer has to identify the element of risk prevalent in the concerned industry

or a particular unit. The perception of risk requires the study of variables through various

methods including the application of scientific and statistical techniques and correlation

thereof with the industry or unit under study in light of their basic environmental and infra-

structural characteristics. After the identification and categorisation of the risks perceived, the

probability of happening of the loss-causing events and the severity of the loss has to be

assessed.

2. Designing the Insurance Product:

On the basis of the risks perceived, the insurer develops a product to cover the stipulated

risks. While designing an insurance product, an insurer decides its cost to be charged from

the insured in the form of premium, reduction thereof in certain cases like not lodging any

claim during the previous covered period(s), suggesting the implementation of risk-mitigating

measures, etc. The features of a product should be flexible enough to provide for the

determination of premiums, rebates, additional premiums, etc. depending upon the risk

benchmarks as determined.

3. Marketing of the Product:

The core function of the marketing force of an insurance company is to generate awareness

about the insurance products among the target market. But in the Indian scenario, where the

insurance penetration is too low as compared to the other nations, the marketing force needs


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to perform the pro-active role in developing an insurance culture. It is through the efficiency

of the sales force of an insurance company that the desirability and the success of a product

are determined.

In Indian insurance market, the function is, basically performed by the agents. The persons

desiring to function as insurance agents have to obtain license to act as such from the IRDA

or an officer authorised by the Authority in this behalf. The agents approach the prospective

buyers and apprise them of the basic features of the products. In order to dispense with the

functions, the agents need to possess adequate knowledge of the insurance industry, products

and the modalities attached therewith.

4. Selling of the Products:

The term selling in the context of insurance industry connotes the issuance of policies to the

applicant proposer. The non-life insurance policy basically embodies the covenant between

the insurer and the insured wherein the former agrees to indemnify the latter for the loss

caused to him on the happening of the certain agreed events up to a specified limit. The life

insurance policy generally contains the agreement whereby the insurer agrees to pay to the

insured or the beneficiary of the policy an agreed amount on the expiry of the term of the

policy or in the event of the death of the insured respectively. The additional benefits in the

shape of Riders viz. Accidental Death Benefit, Double Sum Assured, Critical Illness benefits,

Waiver of Premiums, etc. can also be appended with the policy on the payment of an

additional premium in Indian industry, the function is, generally performed by the insurer. In

addition, the insurance companies depute their Direct Selling Representatives to look after

the function. They receive the proposal documents, vet them and issue policies to the

proposers.

5. Management of Portfolio:

The management of the portfolio includes the assessment of requirement of funds,

identification of various sources of finance, the evaluation of the sources in the light of their

cost, availability, timing, etc., reconciling the features of various sources with the needs of

the company and the selection of appropriate conjunction of sources. The insurer possesses

huge amount of funds, which need proper management. The management of the portfolio of

an insurance company requires the identification of investment avenues, evaluation thereof

and the selection of the most appropriate mix of alternatives where the funds of the company

can be invested. The selection requires the knowledge of finance related functions and


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techniques apart from the in-depth know of the patterns of requirement of funds in the

company as well as in the industry as a whole.

FOREIGN DIRECT INVESTMENT (FDI) POLICY IN INSURANCESECTOR

As per the current (Mar 06) FDI norms, foreign participation in an Indian insurance company

is restricted to 26.0% of its equity / ordinary share capital. The Insurance Regulator has

stipulated that foreign investment in Indian Insurance companies be limited to 26% of total

equity issued (FDI limit) with the balance being funded by Indian promoter entities. The limit

to foreign investment includes both direct and indirect investment and has been a cause of

significant lobbying by foreign insurance companies for a change in regulations to increasethe FDI limit to 49% of equity issued.

The Indian government has supported an increase in the FDI limit, which requires a change in

the Insurance Act. The Union Budget for fiscal 2005 had recommended that the ceiling on

foreign holding be increased to 49.0%.

A change in the Insurance Act requires a passage of the bill in both houses of Parliament. The

Indian government has tabled the bill in the Upper House of Parliament in August 2010.


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INITIAL PUBLIC OFFER (IPO) RULES FOR INDIAN LIFE

INSURANCE COMPANIES

A key piece of legislation impacting on the Life Insurance industries capital raising abilities

is the lock-in period of 10 years for investment to be limited to promoter group equity

investments. Under the Insurance Guidelines, Indian Life Insurance companies can opt for a

public issue of equity through an Initial Public Offer (IPO) after 10 years of operations.

In October 2010, the securities market regulator, Securities and Exchange Board of India

(SEBI), issued disclosure norms for Indian Life Insurance Companies seeking to make an

initial public offer for sale of equity shares to the public. And recently it has been approved

by the sebi to the private companies to issue IPO in the market for additional capital

All life insurance companies in India have to comply with the strict regulations laid out byInsurance Regulatory and Development Authority of India (IRDA).

Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far the

largest player in the market. The private companies have come out with products called

ULIPs (Unit Linked Investment Plans) which offer both life cover as well as scope for

savings or investment options as the customer desires. These type of plans are subject to a

minimum lock-in period of three years to prevent misuse of the significant tax benefits

offered to such plans under the Income Tax Act. Comparison of such products with mutual

funds would be erroneous.

LIST OF LIFE INSURERS

Apart from Life Insurance Corporation, the public sector life insurer, there are 22 other

private sector life insurers, most of them joint ventures between Indian groups and global

insurance giants.

LIFE INSURER IN PUBLIC SECTOR1. LIFE INSURANCE CORPORATION OF INDIA, LIC
http://en.wikipedia.org/wiki/Life_Insurance_Corporation_of_Indiahttp://en.wikipedia.org/wiki/Life_Insurance_Corporation_of_India


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LIFE INSURERS IN PRIVATE SECTOR

1. SBI LIFE INSURANCE

2. METLIFE INDIA LIFE INSURANCE

3. ICICI PRUDENTIAL LIFE INSURANCE4. BAJAJ ALLIANZ LIFE

5. MAX NEW YORK LIFE INSURANCE

6. SAHARA LIFE INSURANCE

7. TATA AIG LIFE

8. HDFC STANDARD LIFE

9. BIRLA SUN LIFE

10.KOTAK LIFE INSURANCE

11.AVIVA LIFE INSURANCE

12.RELIANCE LIFE INSURANCE COMPANY LIMITED

13.ING VYSYA LIFE INSURANCE

14.SHRIRAM LIFE INSURANCE

15.BHARTI AXA LIFE INSURANCE CO LTD

16.FUTURE GENERALI LIFE INSURANCE CO LTD

17.IDBI FORTIS LIFE INSURANCE

18.AEGON RELIGARE LIFE INSURANCE

19.DLF PRAMERICA LIFE INSURANCE

20.CANARA HSBC ORIENTAL BANK OF COMMERCE LIFE INSURANCE

21.INDIA FIRST LIFE INSURANCE COMPANY LIMITED

22.STAR UNION DIA-ICHI LIFE INSURANCE CO. LTD
http://sbilife.co.in/http://www.metlife.co.in/http://www.iciciprulife.com/public/default.htmhttp://www.bajajallianzlife.co.in/http://www.maxnewyorklife.com/http://www.saharalife.com/http://www.tata-aig-life.com/http://www.hdfclife.com/http://www.birlasunlife.com/http://www.kotaklifeinsurance.com/http://www.kotaklifeinsurance.com/http://www.avivaindia.com/http://www.avivaindia.com/http://en.wikipedia.org/wiki/Reliance_Life_Insurance_Company_Limitedhttp://en.wikipedia.org/wiki/Reliance_Life_Insurance_Company_Limitedhttp://www.inglife.co.in/http://www.inglife.co.in/http://www.bharti-axalife.com/http://www.bharti-axalife.com/http://en.wikipedia.org/wiki/IDBI_Fortis_Life_Insurancehttp://en.wikipedia.org/wiki/IDBI_Fortis_Life_Insurancehttp://www.aegonreligare.com/http://www.aegonreligare.com/http://www.canarahsbclife.com/http://www.canarahsbclife.com/http://www.canarahsbclife.com/http://www.aegonreligare.com/http://en.wikipedia.org/wiki/IDBI_Fortis_Life_Insurancehttp://www.bharti-axalife.com/http://www.inglife.co.in/http://en.wikipedia.org/wiki/Reliance_Life_Insurance_Company_Limitedhttp://www.avivaindia.com/http://www.kotaklifeinsurance.com/http://www.birlasunlife.com/http://www.hdfclife.com/http://www.tata-aig-life.com/http://www.saharalife.com/http://www.maxnewyorklife.com/http://www.bajajallianzlife.co.in/http://www.iciciprulife.com/public/default.htmhttp://www.metlife.co.in/http://sbilife.co.in/


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LIFE INSURANCE IN INDIA

The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956,

and the Life Insurance Corporation of India was created on 1st September, 1956, with the

objective of spreading life insurance much more widely and in particular to the rural areas

with a view to reach all insurable persons in the country, providing them adequate financial

cover at a reasonable cost.

LIC Started it functioning with a 5 crore capital from the government and still paying the

dividend to the government.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate

office in the year 1956. Since life insurance contracts are long term contracts and during thecurrency of the policy it requires a variety of services need was felt in the later years to

expand the operations and place a branch office at each district headquarter. Re-organization

of LIC took place and large numbers of new branch offices were opened. As a result of re-

organisation servicing functions were transferred to the branches, and branches were made

accounting units. It worked wonders with the performance of the corporation. It may be seen

that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00

crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore

mark of new business. But with re-organisation happening in the early eighties, by 1985-86

LIC had already crossed 7000.00 crore Sum Assured on new policies.

Life Insurance is the fastest growing sector in India since 2000 as Government allowed

Private players and FDI up to 26%. Life Insurance in India was nationalized by incorporating

Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time

were taken over by LIC.

In 1993 the Government of Republic of India appointed RN Malhotra Committee to lay down

a road map for privatization of the life insurance sector.

While the committee submitted its report in 1994, it took another six years before the

enabling legislation was passed in the year 2000, legislation amending the Insurance Actof

1938 and legislating the Insurance Regulatory and Development Authority Actof 2000. The

same year that the newly appointed insurance regulator - Insurance Regulatory and

Development Authority IRDA --started issuing licenses to private life insurers.


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MISSION, VISION,OBJECTIVES AND COMMITMENT

OF LIC

Mission:

"Explore and enhance the quality of life of people through financial security by providing

products and services of aspired attributes with competitive returns, and by rendering

resources for economic development."

Vision:

"A trans-nationally competitive financial conglomerate of significance to societies and Prideof India."

Objectives:

1. Spread Life Insurance 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.

2. Maximize mobilization of people's savings by making insurance-linked savings

adequately attractive.

3. 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.4. Conduct business with utmost economy and with the full realization that the moneys

belong to the policyholders.

5. Act as trustees of the insured public in their individual and collective capacities.

6. Meet the various life insurance needs of the community that would arise in the

changing social and economic environment.

7. 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.


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8. Promote amongst all agents and employees of the Corporation a sense of

participation, pride and job satisfaction through discharge of their duties with

dedication towards achievement of Corporate Objective.

COMMITMENT TO CLIENTS - SETTLEMENT OF CLAIMS :

1. NO. 1 INSURANCE COMPANY IN THE WORLD in terms of settlement of claims.

PER SECOND LIC settles more than 2 claims!!!

2. LIC settled 149 lacs claims during the year 2008/2009.

3. Prompt settlement of claims - 97% maturity claims settled on or before Due

date.93.22% Non-early death claims settled within 20 days of intimation.

4. Lowest outstanding claim ratio in the world (Maturity+SB = 0.26%) (Death Claim =

2.21%).

ADVANCED TECHNOLOGY - FOR BETTER CUSTOMER

SERVICES.

1. Computerized and networked 2048 Branch Offices and 810 Satellite Offices

throughout the country.

2. LIC is the SECOND largest PC user in the country.3. Premium payment facility extended through network of 2048 Branches and 810

Satellite Offices, 9500 Empowered Agents and 510 Senior Business

Associates,ECS,ATM of Corp. & Axis Banks, through internet, online portals,

Collecting Bank (Axis Bank), AP online, MP online, Through SMS.


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ORGANISTIONAL STRUCTURE OF LIC AT TOP LEVEL

MANAGEMENT

Here in the LIC the organisational structure is formally made at the top level with the central

office controlling the other departments done on the basis of the geographical form of

departmentation.

In LIC this is the line form of organisational structure followed where in the vertically form

of authority and responsibility flows.


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ORGANISTIONAL STRUCTURE OF LIC AT

ORGANISATIONAL LEVEL


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ORGANISTIONAL STRUCTURE OF LIC AT BRANCH

LEVEL


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SWOT ANALYSIS

STRENGHTS

1. The ONE & ONLY - Government owned Life Insurance Company in India.

2. The most trusted & oldest insurance company in India since 1956.

3. Largest insurance company in the world on Customer Base (25 Crore customers).

4. Only 4 countries in the World have more population than LIC's policy holders!!!

5. No. I Insurance Company in the world in terms of agency force (13 lacs agents).

And No. I Insurance Company in the world on selling of policies 3.59 crore policies.

6. 2nd Biggest Real Estate Owner next to Indian Railways.

7. LIC has highest number of Club Member Agents.

8. It is the pride taking fact that this PSU is working for 60 years and has not incur losses

for a single year

WEAKNESS

1. Due to heavy customer base the management of it is not up to that level

2. It is over employed and so expenses are high

3. The infrastructure is not as advanced as other rivals

4. It is under the influence of government and mobilize their fund accordingly

OPPORTUNITY

1. It can make use of its hefty funds properly in profitable area rather than following the

traditional way

2. With the heavy team force and personnel can attain the new venture development

3. LIC has a good amount of funds which should be used for the development of the

country.

4. It can start its subsidiaries in other companies and can expand the scope ofdevelopment

THREATS

1. New Private companies are emerging with a qualitative approach and customer

oriented so LIC cannot posses the monopoly.

2. Due to availableness of newer product the lapsation of policies can be a major

problem

Private companies are attracting the LIC employees and get through the strategy.


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REASONS TO BUY LIFE INSURANCE

(Source: Article From Beaton Insurance Services )

JOHN BEATON

When you plan for the future, one of the things you count on is continued income for yourself

and your family. Your premature death could result in a drastic reduction of your family's

standard of living. There are no U-turns on the road of life. We are all travelling on an

inevitable trip from birth to eventual death. You may die sooner than expected or hopefully

live a long and prosperous life. Life insurance addresses the tragedy of premature death by

providing tax free funds to help survivors who depended on you, get on with their lives.

At death, your capital (cottage, land, business, non-registered and registered assets) can be

transferred to your spouse without tax. However, 50% of the capital gain and 100% of the

registered assets will be taxable upon the death of the last surviving spouse, at which time, all

assets are counted in the final tax return propelling many taxpayers from an insignificant tax

bill to the highest tax bracket. You may want to preserve your estate value for your children.

Life insurance can be purchased for a fraction of the total projected tax bill payable at death.

Life insurance is sometimes acquired for a child as the beginning of a lifetime financial plan.

Quickly paid up whole life plans with growing cash values are very inexpensive when

children are young and can become a valuable asset when paid up.

Successful business owners, proud of their accomplishments may want to pass their

businesses on to their children so that they can continue to profit from the parent's labour.

Don't just leave it to them in your will. First make sure you teach them how to run it. And

then make sure the tax department doesn't benefit from their inheritance more than your

children do. One way to do that is to buy life insurance, the value of which equals the amount

of taxes your kids will have to pay on your business the day they inherit it. If they don't have

cash to pay those taxes, they may be forced to sell the business at a fire sale price to raise the

money quickly. [The tax department has not been known to grant time to pay.]

Business people also find life insurance valuable to fund partnership agreements. Upon the

death of a business partner, that partner's surviving family can be quickly and efficiently


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WHY DO A PERSON NEED LIFE INSURANCE?

(Source: Article by Nationwide Financial Services)

Think you dont need life insurance if you dont have kids? Think again. It may seem like anunnecessary expense. But there are many reasons to have life insurance, even if youre not

supporting a family.

1. Mortgage protection

Whether you live by yourself, with a spouse or significant other, you may want to buy life

insurance as mortgage protection. Think about it you dont want the person you live with to

be homeless if you die unexpectedly, do you?

Term life insurance can be used to pay off an outstanding mortgage balance. Just select a

term that matches the length of your mortgage payment period. Some companies even offer

decreasing term insurance, which means the death benefit decreases along with your

mortgage balance.

2. Income replacement

You and your significant other may have planned for a future based on two incomes but

what if one of you passes away unexpectedly? Life insurance can be used to replace the lost

income so the survivor can maintain the same standard of living.

3. Final expenses

Youve seen the commercials funeral expenses, burial costs and medical bills can add up to

a hefty amount. The last thing you want is for your loved ones to shoulder this extra burden.

4. College funding

Life insurance can help fund a college education. If you die, the death benefit may be

invested and potentially grow to the needed amount by the time your children reach college

age. Feel better knowing that you helped prepare for their future even if you are not there to

see it.

1. Life insurance correctly planned will on premature death provide funds to deal with

monies due, mortgages, and living expenses. It offers protection to the family you leave

behind and serves as a cash resource.

2. It secures your hard earned estate on death by providing tax free cash which can be utilized

to pay estate and death duties and to tide over business and personal expenses.

3. Life insurance can have a savings or pension component that provides for you during

retirement.


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4. Some policies have riders like coverage of critical illness or term insurance for the children

or spouse. There are certain rules regarding eligibility for riders which you will need to

determine clearly.

5. Having a valid insurance policy is considered as financial assets which improves your

credit rating when you need health insurance or a home loan or business loan.

6. In case of bankruptcy, the cash value as well as death benefits of an insurance policy is

exempt from creditors.

7. Life insurance can be planned such that it will cover even your funeral expenses.

8. Term life insurance has double benefits, it protects and you can get your money back

during strategic points in your life.

9. Insurance protects your business from financial loss or any liabilities in case a business

partner dies.

10. It can contribute towards maintaining a family's life style when one contributing partner

suddenly dies.

Insurance is vital to good financial planning and security but you would need to assess your

personal risk and long term commitments. Insurance stands a person in good stead throughout

life and can be used in case of emergencies during a life time by requesting a withdrawal or

loan.


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The Best Motives for Buying Life Insurance

(Source:Article Bysuze Orman Life Insurance)

Insurance is one of those things that you never miss it until you need it. Life insurance is

something you may be uncomfortable discussing, but you really should acquire. It is a

financial safeguard that could eventually protect your family.

1. Financial SecurityLife insurance is a financial security blanket for your family in the event of a tragic accident

or misfortune. It helps offset any loss of income that may occur in the event of your death.

2. Offset ExpensesLife insurance can help offset funeral expenses and cover excessive medical bills.

3.

TaxesLife insurance may help with probate or estate taxes associated with your assets after your

passing.

4. FamilyInsurance can provide for your surviving family members, including your spouse, children or

other relatives. You can designate several beneficiaries on your policy.

5. Annuity InsuranceSome plans include annuities that offer rates of return on the money you pay for a life

insurance policy. This can act as retirement policy if your family never makes a claim on

your life insurance policy.

6. Peace of MindIf you can afford to pay the monthly fees, there is no need to leave your surviving family

members with financial concerns. This is a small price to pay for your peace of mind and

their future security.
http://www.ehow.com/search.html?rs=1&s=Suze+Orman%20Life%20Insurance&skin=money&t=allhttp://www.ehow.com/search.html?rs=1&s=Suze+Orman%20Life%20Insurance&skin=money&t=all


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RESEARCH METHOLOGY

Research Methodology can be defined as the plan and structure of enquiry formulated in

order to obtain answers to research questions on business on business aspects. Research

Methodology can be understood as that which gives the blueprint for collection, measurement

and analysis of business data. The research plan constitutes the overall program of the

business research process. The planning process includes the framework of the entire

research process, starting from developing hypothesis to the final evaluation of collected data.

Research Methodology is essential because it facilitates the smooth flow of various research

results can be obtained with minimum utilization of time, money and effort. Therefore it can

be said that Methodology is highly essential for planning research activities. If research

Methodology is not properly prepared, it will jeopardize the whole research process and will

not meet its purpose.

PROBLEM STATEMENT:

Motives study of consumers purchasing life insurance products.

OBJECTIVES OF THE STUDY:

To examine the current status, volume of competitions and challenges faced by the

Life Insurance Corporation of India to find out the motives which are to be targeted

and form new products.

To know the consumer preference for buying life insurance policy from LIC and

motivational determinants to purchase it.

RESEARCH DESIGN: Descriptive research design.

TYPES OF DATA USED FOR THIS STUDY

Primarily it has used primary data for this research collected through questionnaire. It is

necessary to note that researchers also used some secondary data from various sources for

this project report.


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SAMPLE SELECTION AND SAMPLE SIZE

The first step of research is sample selection, for which the respondents were Policy holders

of various life insurance companies. The total Respondents covered were 150 . The same

numbers of questionnaires were distributed, & 150 fully-completed questionnaires werereceived. Results are based on the response of these 150 respondents.

SAMPLING METHOD

The Respondents were selected by the convenience sampling method. The selection of units

from the population based on their easy availability and accessibility to the researcher is

known as convenience sampling. Convenience sampling can be used as a part of a

preliminary research that forms a basis for conducting the detailed research. Conveniencesampling is at its best in surveys dealing with an exploratory purpose for generating ideas and

hypothesis. Researchers used the non probabilistic Sampling method for this project report.

SELECTION OF SAMPLE FROM POPULATION

This project report is prepared by two students; both are belonging to Surat. So it is decided

to take of responses from the consumers of Life Insurance Products of LIC living in Surat

city. As a result of this decision they took 150 responses from Surat city. And the respondents

were the customer of the mentor at the organisation

QUESTIONNAIRE AS A TOOL OF COLLECTING INFORMATION

A questionnaire is a research instrument consisting of a series ofquestions and other prompts

for the purpose of gathering information from respondents. Although they are often designed

for statistical analysis of the responses, this is not always the case. The questionnaire was

invented by Sir Francis Galton.

Questionnaires have advantages over some other types of surveys in that they are cheap, do

not require as much effort from the questioner as verbal or telephone surveys, and often have

standardized answers that make it simple to compile data.

Sample Size 150

Sample Policy Holders of various life insurance companies
http://en.wikipedia.org/wiki/Researchhttp://en.wikipedia.org/wiki/Questionhttp://en.wikipedia.org/wiki/Statisticshttp://en.wikipedia.org/wiki/Francis_Galtonhttp://en.wikipedia.org/wiki/Statistical_surveyhttp://en.wikipedia.org/wiki/Statistical_surveyhttp://en.wikipedia.org/wiki/Francis_Galtonhttp://en.wikipedia.org/wiki/Statisticshttp://en.wikipedia.org/wiki/Questionhttp://en.wikipedia.org/wiki/Research


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Sampling Method Non probabilistic Sampling method.

Convenience Sampling Method.

Data Collection Tool Questionnaire

Sample Selection 150 From Surat CityResearch Design Descriptive Research Design

Data Sources Primary Data with the help of Questionnaire

Secondary data via internet, books, magazines etc.


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BIBILIOGRAPHY

ARTICLES

JOHN BEATON,Reasons To Buy Life Insurance,

http://www.beaton-insurance.com/whylife.html.

NATIONWIDE FINANCIAL SERVICE, Why Buy Life Insurance,

http://www.nationwide.com/why-buy-life-insurance.jsp

EHOW.COM,Motives Buying Life Insurance,

http://www.ehow.com/facts_5028510_motives-buying-life-insurance.html

PAUL W WILSON,10-Key-Reasons-Why A Person Needs Life Insurance

http://ezinearticles.com/?10-Key-Reasons-Why-A-Person-Needs-Life-

Insurance&id=144005

WEBSITE

LIFE INSURANCE CORPORATION OF INDIA,Industry Profile,Company Profile,http://www.licindia.in/

Beaton Insurance Services15310 Pacific Avenue

White Rock, British Columbia, Canada V4B 1P9Tel: (604) 535-2404

Toll Free Canada: 1-800-667-8818Website: http://www.beaton-insurance.com

E-mail:[email protected] Copyright 1996 - 2011 Beaton Insurance Services

All rights reserved.
http://www.beaton-insurance.com/whylife.htmlhttp://www.nationwide.com/why-buy-life-insurance.jsphttp://www.ehow.com/facts_5028510_motives-buying-life-insurance.htmlhttp://ezinearticles.com/?expert=Paul_W_Wilsonhttp://ezinearticles.com/?expert=Paul_W_Wilsonhttp://ezinearticles.com/?10-Key-Reasons-Why-A-Person-Needs-Life-Insurance&id=144005http://ezinearticles.com/?10-Key-Reasons-Why-A-Person-Needs-Life-Insurance&id=144005http://www.licindia.in/http://www.licindia.in/http://www.licindia.in/http://ezinearticles.com/?10-Key-Reasons-Why-A-Person-Needs-Life-Insurance&id=144005http://ezinearticles.com/?10-Key-Reasons-Why-A-Person-Needs-Life-Insurance&id=144005http://ezinearticles.com/?expert=Paul_W_Wilsonhttp://www.ehow.com/facts_5028510_motives-buying-life-insurance.htmlhttp://www.nationwide.com/why-buy-life-insurance.jsphttp://www.beaton-insurance.com/whylife.html

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