SUMMER TRAINING PROJECT REPORT

INSURANCE IS NOT MERE AN INSURANCE IT S AN INVESTMENT

A Report submitted in partial fulfilment of the requirements of the two-year full time Post Graduate Diploma in Management

CONTENTS

Preface(i)

Acknowledgement...(ii)

Executive Summary..(iii)

Objective of the study(7)

Chapter-I. 8 - 26

Chapter-2.. 27 - 37

Chapter-3. 38 - 43

Chapter-444 - 49

Chapter-550 - 55

Chapter-6 56 - 62

Chapter-763 - 66

Suggestion and Recommendations 67 68

Conclusion..69

References..70

PREFACE

The past one month I have spent at Reliance Life Insurance Company Limited has been a wonderful learning experience. The project was to meet individuals from various segment in Delhi and NCR and offering them the opportunity of being a financial advisor or Business Partner for enhancing the distribution channel at RLIC followed by to make aware more and more people to get insured their valuable life by educating them with various plan available in the company with several benefits. The work was carried out over a span of 25 days. The project involved meeting with graduates, housewives, businessmen, retired person to sell the proposal of being a financial consultant and convincing them to be apart of channel development program and using their contacts thereby assessing the financial need of the customer by handling their financial matter. No amount of words written will be sufficient and adequate to

acknowledge all the people who have provided us with the inspiration, guidance and help during the preparation of the project. Therefore, I extend my deep sense of gratitude toward them. Last but not the least I would like to thank my parents, friends who gave constatnt support and inspired me throughout this tim

Acknowledgement
I take this opportunity to thank all my Trainers at Reliance Life Insurance for their professionalism, and dedication to the task at hand by rendering me their years of experience thus making my internship period easy and convenient. I am grateful to my team mates for their support, encouragement and kept my motivation and spirits high. Their inspiring words gave me solace in my hard time. But, most of all, I am indebted to Mr. Devendra Singh, Branch Head , Mr. Saurabh Gaur, Senior Sales Manager, Reliance Life Insurance Dwarka, New Delhi for their steadfast support and patronage.

EXECUTIVE SUMMARY

In Todays Corporate and Competitive world I find that insurance sector has the maximum growth and potential as compared to the other sectors. Insurance has a maximum growth rate of 70-80%while as FMCG sector has 12-15% of growth rate. The growth potential attracts me to enter in this sector and RLIC has given me the opportunity to work and get the experience in highly competitive and enhancing sector.

The success story of good market share of different market organization depends upon the availability of the product and services near to the customer ,which can be distributed through a distribution channel includes only agent or agency holder of the company . If accompany like RLIC,TATA AIG,MAX have adequate agent in the market they can capture big market as compared to the other companies polity emerging consensus among factions of different political parties through some changes and restrictive clauses as regard to the foreign participation were included the IRDA has opened the doors for the private entry into insurance whether like insurer is old or new ,private or public expanding the market will present the multiplied challenges and opportunities but the issues ,positive trends ,opportunities and challenges .The insurance sector will have still remains under the realms of the possibilities and speculations .What is the likely impact of opening up Indias Insurance sector.

OBJECTIVE OF THE STUDY

Primary Objective

INSURANCE IS NOT MERE AN INSURANCE BUT ITS AN INVESTMENT

Iron is strong but fire melts it, Man is strong but ultimately fire turns him into ashes so survive death through Life Insurance.

SECONDARY OBJECTIVE

To know basics about the products available in the Reliance Life Insurance Corporation Limited.

To know about the Indian Insurance Industry and its origin.

To know various distribution channels in the life insurance industry and the players of an industry (private vs. public)

To know about the changing scenario of the insurance s

CHAPTER- I
INTRODUCTION OF INSURANCE What is Insurance?

Insurance in its basic form is defined as A contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event."

Part 1

Definitions, Interpretation and Application of Act Definitions and interpretation as per the provision of Insurance Act 1938

"Contract" means a contract of insurance and includes a policy, certificate, interim receipt, renewal receipt or writing evidencing the contract, whether sealed or not, and a binding oral agreement. "Insurance" means the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certain risk or peril to which the object of the insurance may be exposed, or to pay a sum of money or other thing of value on the happening of a certain event. 7

"Insurance Money" means the amount payable by an insurer under a contract, and includes all benefits, surplus, profits, dividends, bonuses and annuities payable under the contract.

Policy" means the instrument evidencing a contract. "Premium" means the single or periodical payment under a contract for the insurance, and includes dues, assessments and other consideration. "Prescribed" means prescribed under this Act.

Part 2

What is Investment? In finance Investment means buying securities or other monetary or paper (financial) assets in the money markets or capital markets, or in fairly liquid real assets, such as Gold as an investment, real estates etc. Types of financial investments include shares and other equity investments and bonds. Equity investments generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and Capital gain as the value of stock rises. 1. Investment is the postponed consumption. Investment means the purchase of goods which are invest and not used today, which will give benefit in future.

2. Investment means putting some thing (money) to any things (shares, funds, businesses), it will return some profit or interest in future. 3. The money you earn is partly spent and rest saved for future expenses. Instead of keeping savings ideal this money is invested to earn additional income this is called investment. 4. Investment refers to investing in shares, stocks, commodities or in any financial instrument for the purpose of gaining profit.

Investment is a term, which is frequently used in the field of economics, business management, finance and it means savings or savings made through delayed consumption. Investment can be divided into different types according to various theories and principles.

A particular amount of money is invested in the bank or an asset is bought in the anticipation that some return will be received from the investment in the future. There can be a number of definitions of Investment. While dealing with the various options of investment, the definitional variations of investment need to be kept in mind.

What is investment in terms of Economics: According to economic theories, investment is defined as per unit production of goods, which have not been consumed, however, will be used for the purpose of future production. Examples of this type of investments are tangible goods like construction of a factory or bridge and intangible goods like 6 months of on-job training. In terms of national production and income,

Gross Domestic Product (GDP) has an essential constituent, which is called as gross investment.

What is investment in terms of Business Management: According to business management theories, investment refers to tangible assets like machinery and equipments and buildings and intangible assets like copyrights or patents and goodwill. The decision for investment is also known as capital budgeting decision, which is regarded as one of the key decisions. What is investment in terms of finance: In finance, investment refers to purchasing securities or any other financial assets from the capital market or money market or purchasing real properties with high market liquidity for example, gold, silver, real properties, and precious items. Financial investments are investment in stocks, bonds, and many other types of security investments. Indirect financial investments can also be done with the help of mediators or third parties, such as pension funds, mutual funds, commercial banks, and insurance companies.

How tax is save through investment Tax Savings What is Income Tax? An income tax is a tax levied on the financial income of persons, corporations or other legal entities. Tax rates levied on your income may be:

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Progressive: A progressive tax rate is charged based on how much you earn, which means that if you earn more you are taxed more.

Flat: A flat tax rate charges the same rate no matter how much you earn. Regressive: The regressive tax rate charges you only up to a certain level of income, for example, the first Rs. 90,000 of your income.

In India, progressive income tax is levied on the income of individuals, Hindu Undivided Families (HUFs), companies (firms), co-operative societies and trusts. There are certain slabs on which income tax calculations are considered:

If you earn up to Rs. 1,50,000* per year, then no income tax is charged. If you earn between Rs. 1,50,0013,00,000 per year, the tax charged is 10% of the amount greater than Rs. 1,50,000..

If you earn between Rs. 3,00,0015,00,000 per year, the tax charged is 20% of the amount greater than Rs. 3,00,000 + Rs. 15000.

If you earn above Rs. 5,00,000 per year, the tax charged is 30% of the amount greater than Rs. 5,00,000 + Rs. 55,000.

*The basic exemption limit for women is Rs.180,000 and senior citizens is Rs.225,000. A surcharge of 10% is payable on tax for incomes exceeding Rs. 10 lakhs. How to Save Tax? You should always consider tax planning as a necessary exercise in your financial planning process. How much tax you can save depends on factors like risk appetite, investment objective and tenure of investment.

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Section 88 Prior to the Finance Bill 2005, provisions for tax rebates fell under the gamut of Section 88. To claim tax benefits under this Section, you would have had to make investments of up to Rs. 1,00,000 in Public Provident Fund (PPF), National Savings Certificate (NSC), tax-saving funds (also referred to as Equity Linked Saving SchemesELSS) and infrastructure bonds. The problem with this Section was that there were caps on the amount you could invest in each taxsaving instrument and there was no flexibility in choosing the tax-saving instruments. Section 88 decided everything for you. Enter Section 80C In the Finance Bill 2005, Section 88 was scrapped and it gave way to the new Section 80C. Under this section, you can invest up to Rs. 1,00,000 in tax-saving instruments, but the biggest advantage is that you can make your own investment choices, i.e. you can decide how to spread your investment of Rs. 1,00,000 over PPF, NSC, ELSS and infrastructure bonds.

Importance and significance of insurance with other savings Life Insurance V/S Other Savings Contract of Insurance A contract of insurance is technically known as uberrima fides, which means it is a contract of utmost good faith. In this principle, you have the doctrine of disclosing all material facts and that applies to all forms of insurance. Any

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misrepresentation, fraud or non-disclosure in any document leading to the acceptance of the risk will render the insurance contract null and void. Protection Life insurance assures payment of the entire amount assured (along with bonuses, wherever applicable) in case of demise, whereas in other savings schemes, only the amount saved (with interest) is payable. Aid to Thrift Life insurance schemes allow thrift, that is, it allows long-term savings because premium payments can be made through an easy installment facility. Premium payments can be monthly, quarterly, half-yearly or yearly. Some insurance schemes provide a convenient method of paying premium each month by deducting the amount from your income. Security on Loan Generally, a life insurance policy is accepted as security, even for a commercial loan. You can acquire loans on the sole security of a policy that has acquired loan value. Tax Relief The best way to enjoy deductions on income tax and wealth tax is through life insurance. The deductions are available for amounts paid by way of premium for life insurance subject to the prevailing income tax rates. You can also avail of provisions in the law for tax relief, in which case you, as the assured, can pay a lower premium for the insurance than what you normally pay.

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Easy Liquidity at Periodic Intervals You can avail of money when you need it if you have taken a suitable insurance plan, or a combination of plans. It will help you meet certain financial needs as and when the need arises. Situations such as childrens education, marriage or any other need for cash can be made less stressful with the help of such policies. You can also use policy money at the time of retirement from service, or for any other purpose such as purchase of a house, investments, etc.

Benefits of Term Life Insurance While everyone's needs are different, term life insurance offers a number of unique benefits:

Less Costly: Whole life insurance is expensive, due mainly to its investment aspect, while term life insurance is very affordable. We're talking thousands of dollars a year for whole life as opposed to the mere hundreds of dollars a year that the majority of term life insurance policies cost consumers. Depending on your age, lifestyle, health, and term of the policy you choose, you may find monthly rates under $10 per $100,000 of coverage.

Simplicity: Term life insurance is simple to understand, and allows for personal choice. You pay a monthly premium based on the term length and amount of coverage you choose. That's it. Simple. You can choose term lengths such as 10, 20 or 30 years, and coverage amounts anywhere from $100,000 to several million dollars.

Self-Directed: Do you want to manage your money, or have someone else do it for you? With term life, you can invest your hard-earned money yourself, rather than having an insurance company does it for you (as with whole life insurance).

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More Flexible: Your life goes through many stages, and term life insurance is easier to adjust to your changing needs. For example, parents can buy a policy that expires after their children graduate from college, to ensure that each child's education is paid for in case anything was to happen to them. Another example: The main breadwinner in a house could buy a term policy that matches the length of his or her house's mortgage.

Additional Recommendations

Get an online quote that comparison shops across insurance companies. Each insurance company evaluates risks (age, health, lifestyle, and tobacco use) differently, so just calling one company may be an expensive solution. An additional benefit of online insurance quotes is that you only need to fill out one application form, not one for each insurance company.

Buy enough life insurance to meet your needs; life insurance is not the place to skimp. Absent a specific need, consider coverage equal to at least 6 times your annual gross income.

Match the policy term to your needs. Make sure your dependents are covered until they can provide for themselves, or that your spouse is covered until retirement income becomes available.

Buy when you are healthy, and try to match your terms to when you will still be healthy. As you get older, it may be harder to find affordable term life insurance. That in mind, buy a term that you can renew before you get too old, or one that is long enough to cover you well into your retirement.

Don't lie on your policy; as life insurance companies will investigate before paying. If you do not admit to a habit, behavior or health risk on your application, your beneficiaries may have a hard time making a successful claim if the need arises.

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Changing scenario of Insurance in the view of investor Investors eager for quick returns

Investment philosophy

to procure and seek consistent and superior long

term returns with a well defined and disciplined investment approach symbolizing integrity and transparency to benefit all stakeholders.

Life Insurance as an Investment? Life insurance is often used as an investment for retirement planning. Basic life insurance can be divided into two general categories, term insurance and whole life insurance. When you buy term insurance, you pay premiums in exchange for a death benefit over a specified period of time. This is the least expensive type of life insurance. Because the death benefit is all that you get with term insurance, it's never sold as an investment. Whole life insurance, also known as permanent- or cash value life insurance, not only promises to protect you for your entire life, but also includes an investment the cash value. Initially, the premiums are higher than term life premiums, but later in life they become more comparable and could possibly even be lower. With the excess premium paid over the actual cost of the death benefit, the insurance company sets up an investment, which is known as an accumulation account. The appeal of whole life insurance as a retirement investment is its tax treatment of the accumulation account. This money grows tax deferred, which means that taxes are postponed on income and capital gains. Assuming that you need life

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insurance at all, the argument over whether whole life insurance is a good investment basically centers on the question of whether you would be better off buying an inexpensive term policy and separately investing the additional amount that the whole life policy would have cost. In making that decision, there are several issues that you should consider:

Your ability to pay the premiums. First, you should determine how

much insurance you need. Next, you'll need to check the premium costs for both term and whole life policies. If you can afford only the term policy, buy it. You should never skimp on the amount of your death benefit.

Your federal and state tax brackets. The benefit of a tax deferral is

only as valuable as the amount of taxes that would be deferring. The higher your tax bracket the more valuable the benefit is.

The possibility that you might not be able to get affordable

insurance later in life. As potential health issues increase with age, this could be of major concern. If it is, compare guaranteed renewable term policies with the price of whole life.

Your willingness to shop for no-load (or, no commission)

insurance policies. Unless you buy no- or low-load insurance policies, the costs of whole life erode returns so much that it almost always makes more sense to buy term insurance and invest the difference. Unfortunately, there isn't a cookie-cutter answer when it comes to using life insurance as part of your investment portfolio. A clear benefit of investing in insurance products is the tax-deferred treatment of the cash accumulation part of the policy. Of course, the higher your tax bracket and the longer you have until retirement, the more valuable this benefit can be. However, a very important disadvantage of using life insurance as an investment is the high fees and expenses that make it difficult to compete with the returns of even ordinary security instruments, such as mutual funds.

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Weigh the pros and cons carefully when deciding whether life insurance has a place in your investment or retirement plans. If it does, educate yourself and shop wisely, preferably opting for low- or no-load products that will meet your needs. Insurance as an Investment Although some insurance products have an investment component, such as variable life policies and some annuities, we don't suggest you consider insurance as one of your options for investment vehicles that make money. But if you really stop to ponder the role of insurance, you'll quickly realize that it's theoretically one of the most important purchases you make because it protects your other investments. When you buy health insurance or homeowner's insurance, you are making an investment toward realizing your goals. For example, if you did not purchase health insurance and found that you had to undergo major surgery, you would be responsible for the hospital and doctor bills on your own. Most of us faced with this situation would have to tap into our investments (our home's equity, sell some bonds and mutual funds) and, in a worst-case scenario, could end up unable to meet our financial obligations and lose our precious assets. Insurance is a type of investment that anticipates adverse events and mitigates or even eliminates the potential consequences, which can range from inconvenient to financial ruin. The insurance section of this guide discusses in depth the various types of insurance

INVESTORS who rushed for insurance stocks in the recent past appear too eager for returns on their investments.

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This drastic change is become possible because of the following reasons:

1 . Rise in the size of disposable income of an individual

2. Awareness towards insurance of an individual get increased

3. Improvement in the standard of living of an individual

4. Entry of Private players in the Industry makes it more easy and handy.

5. Because of the bigger risk appetite of the individual.

WHY INSURANCE IS NEEDED A life insurance policy vouchsafes security for your dependents after your demise. They can eek out their living even at the absence of other active source of income. Moreover the amount that you are going to get at the end of the policy period in a term life policy also makes it a rewarding investment. Take a look at the article .The article covers

Why take a life insurance policy? What are benefits of life insurance?

Life Insurance Policy is a form of security for the person who insures his life and his family. Life insurance policies have helped trade and other economic activities to flourish in a great manner. It has generated lots of job opportunities. It is looked upon as a lucrative career option. Life insurance companies have also entered the international business scenario.

The following reasons substantiate why a life insurance policy should be taken:

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A) Early Deaths The mortality rate is experiencing a declining trend in many parts of the world. However it is also important to note that the age at which People die is also ever decreasing. Some reasons for this include unhealthy living style, stress, pollution, and some natural calamities. This necessitates people to make adequate measures to yield income for their family and dependents. This could be a serious concern if the insured happens to be the sole bread winner. Some individuals see this as an option to plan their retirement. B) Advancements in Health Care The mortality rate has declined rapidly even though the fact remains that the number of people who die at an early age is on the increase. This is mainly due to the advancement in healthcare and the awareness on medical facilities. This results in an increased spending at an old age. This increased spending is also due to increase in the costs of living apart from paying expensive medical bills. Unless they invest in Life insurance or other forms of insurance like health insurance it becomes next only to impossible to meet the financial demands especially during the old days. C) Increase in the Cost of Living and Spending Power The purchasing power of the consumers and the standard of living has experienced a steep rise over the years. The increase in National Income and gross domestic product are partly responsible for this. Individuals incur many unexpected expenses due to the growing needs. Insurance comes in handy to meet such an unexpected expense. It also makes sure that an individual is able to meticulously plan his finances. Insurance option is more or less an interest free loan. An individual can cancel his insurance policy and obtain a huge amount if it is imperative in meeting an urgent expenses and he does not have alternative sources for finance. Life insurance companies therefore do the needful to consumers.

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D) Tax Concessions Income tax concessions are available to individuals and corporate houses who adopt insurance policies. Many have been making investments in Insurance with the sole aim of enjoying tax benefits. This naturally increases spending power. Since the investments increases the economic activities in the country automatically increases. E) Best Option for Salaried Youth Insurance is by and large regarded as one of the savings scheme. Students who earn while studying and those who take up full time employment after their studies see insurance as a profitable scheme to regulate their savings. Apart from tax concessions life insurance entails individuals to enjoy more benefits as they have special and attractive schemes for this segment. G) Facilitates Wealth Creation Life insurance is not only meant to provide financial security or meet an unexpected expense. Life insurance also helps individuals to plan wealth accumulation. Suppose an individual posses huge sum of money and wants to invest it on a later period for some purpose like purchasing a huge plant, funding the business started by his heir then life insurance will help him to realize that. I) Provides for Means to Repay Loans Supposing you buy a property, on raising a loan, you need to make adequate finances for repaying them. One good option will be insurance whereby you can pay the premiums regularly and collect the policy amount after maturity. There is another advantage as far as this is concerned. If your house is damaged or burgled you will be eligible to reimburse the expenses incurred to rectify them if you have taken an additional home insurance/ burglary insurance as the case may be. The same strategies can be used for other loans like student loans, business loans etc.

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J) Improves Financial Credibility Insurance policies indicate the financial strength of an individual or company. This will help them to raise the necessary finances as their credit reports are stronger. Apart from helping to secure the necessary finance an insurance policy also ensures that an individual or a business house is protected from unexpected loss as long as they are covered in the schemes. K) Flexible on Coverage and Premiums Most of the life insurance policies allow the consumers to alter the coverage and premium with some restrictions and conditional clauses. This is beneficial to the consumers if they feel that they are unable to afford a particular sum over a period of time or are able to afford more money. Similarly if the consumers feel that they don't require coverage on particular areas or if they feel they require more coverage insurance policies are flexible enough to accommodate them. The growth of insurance industry will help to improve the economy of the country besides benefiting the stakeholders. Life Insurance benefits are numerable. Life insurance policies help the consumers in planning their finances.

How to Protect Your Financial Asset

It doesnt take much intuition to realize that insurance is a very necessary, and often legally required, expense. In todays fast-paced, unpredictable, dangerous world the protection that it affords cannot be overstated. And the knowledge that there will be compensation in the event of the loss of financial assets can provide a high degree of peace of mind for most families.

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But many people fail to realize the full value that insurance can provide. Just as its importance in financial coverage cannot be overlooked, insurances place as a part of a well-rounded investment portfolio should neither be neglected. The overall impact that insurance can have is substantial, guaranteeing a continued quality of life in the event of unforeseen circumstances. There are many different types of insurance. From life insurance to pet insurance, auto insurance to travel insurance, homeowners insurance to health insurance, there is coverage available for virtually anything imaginable. How do you determine what type of insurance best suits your needs? And in what amounts should it be purchased? Its probably safe to assume that most people do not understand how insurance works, how companies assign risk and set premium rates, or even know what to look for in a policy. As with any other critical decision that you will be faced with, your most reliable help is solid, relevant information. You must determine your own financial needs and goals, then find the proper program to help you achieve them. Study the various insurance articles of this educational section; they will provide you with a solid knowledge base from which to proceed. Take advantage of every resource that is available to you. Insurance is a critically important issue; you must be prepared in order to choose wisely. Tips to choose the pocket friendly life insurance policy Your future benefits should not eat most of your present income. It is prudent to do proper research before taking up any insurance. The best insurance is which can yield maximum benefits with minimum premium. Finding such a policy may be time consuming but it is the smartest route to save money. Here are the tips for you to find the pocket friendly insurance. The article covers

Suggestions for finding a low cost life insurance policy Best ways to find low cost insurance Do tax concessions have any role to play?

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Insurance policies generally tend to be priced reasonably. However as a consumer you need to choose a low cost life insurance policy that gives maximum benefits at a minimum price. You have to make certain plans to ensure that the company charges a low premium or you yourself bargain a lower price and thereby avail low cost life insurance at the lowest life insurance rates. Some of the suggestions for finding a low cost life insurance policy are as follows Check the Policies that Charges Agent's Commission Some companies charge you legally for paying their commission to the agent. Nevertheless you are not obliged to pay any commission to the agent though not for all policies. Should you prefer to buy that particular policy whose price is inclusive of the agent's commission if you have to avail his services then you may very well choose to buy those policies by yourself, If you do not have the time to complete the formalities or if the agents service is indispensable you might as well choose for similar policies that do not charge you for the agents commission. However as long as the policies don't charge you for an agent's commission you can avail his services. Health Aspects The insurance company will require you to pay higher premiums as far as your medical history is not satisfactory. Similarly people who have the habit of consuming alcohol or cigarettes will be asked to pay higher premiums when compared with the others. The best way to bargain for low premiums from your insurer is to remain healthy thereby producing satisfactory medical records. Actually life insurance companies don't provide coverage for certain illness. If your medical records are extremely unsatisfactory they can even refuse to offer you a policy on medical records whether or not other criterions are met. Access Online Resources You can visit the websites of various insurance service providers and their agents. This is the best and shortest method to develop in-depth and full-fledged knowledge of insurance products. You have to offer personal information as and

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when they are asked and as and where it is secured. This will help you to get quotes precisely. You can thus bargain for competitive rates by knowing the nuances and pricing strategies of different insurance companies. You need to explore more to find about low cost term life insurance and methods for lowest life insurance rates for other policies. Meet all Your Requirements Another method of choosing a life insurance policy is to see to that it meets all your requirements and it is not excessive. This happens to be an important factor because some consumers happen to buy more than what they need and what they can afford. Their aim is to earn more profits by way of greater returns and as well as enjoy greater coverage. Finally they end up discontinuing the policy or surrendering it if possible. You have to avoid this by clearly weighing your financial potential and the required coverage and thereby choose an appropriate and cheap insurance policy. Make Modifications if Necessary Many times your needs or resources may increase in the course of continuing your insurance policy. This might tempt you to but a new insurance policy for more coverage and better income. This is a costly affair. On the other hand you can try to make alterations in your existing policy and thereby change the term in all aspects right from death benefits to the amount of premiums to period of paying premiums. You might go for a second policy only if it is not possible to carry the amendments in the existing one or such amendments Be an Early Bird to Find Low Cost Insurance If you choose to buy an insurance policy at an earlier stage you stand to get more benefits. You will be required to pay lesser premiums on account of your young age and health records. This is the right time to invest in insurance and you will be able to allocate funds for other needs simultaneously. You will not accept the price of the insurer or the agent and will bargain to get the best because at this stage insurance is not an obligation unlike the old age. 25

CHAPTER-II

AN OVERVIEW OF AN INSURANCE INDUSTRY

Brief history of inurance: The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era past few centuries yet its beginnings date back almost 6000 years.

Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by 26

nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of

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India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-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 reorganisation happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies. Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7 zonal offices and the Corporate office. LICs Wide Area Network covers 100 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LICs ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future.

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LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the corresponding period of the previous year. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. The same motives which inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take this message of protection to light the lamps of security in as many homes as possible and to help the people in providing security to their families.

Some of the important milestones in the life insurance business in India are: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

29

1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. INDIAN INSURANCE INDUSTRY: Insurers Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers: Life Insurers:

Life Insurance Corporation of India (LIC)

General Insurers:

General Insurance Corporation of India (GIC) (with effect from Dec'2000, a National Reinsurer)

GIC had four subsidiary companies, namely (with effect from Dec'2000, these subsidiaries have been de-linked from the parent company and made as independent insurance companies. 1. The Oriental Insurance Company Limited 2. The New India Assurance Company Limited, 3. National Insurance Company Limited 4. United India Insurance Company Limited. Yr: 2000-2001: (From 2nd April '2000 to 31st December'2001)

Insurance Industry in the year 2000-2001 had 16 new entrants, namely:

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Life Insurers: S.No. Registration Date Number 1 2 3 4 5 6 7 8 9 10 101 104 105 107 109 110 111 114 116 117 Reg. 23.10.2000 HDFC Standard Life Insurance Company Ltd. 15.11.2000 Max New York Life Insurance Co. Ltd. 24.11.2000 ICICI Prudential Life Insurance Company Ltd. 10.01.2001 Kotak Mahindra Old Mutual Life Insurance Limited 31.01.2001 Birla Sun Life Insurance Company Ltd. 12.02.2001 Tata AIG Life Insurance Company Ltd. 30.03.2001 SBI Life Insurance Company Limited . 02.08.2001 ING Vysya Life Insurance Company Private Limited 03.08.2001 Bajaj Allianz Life Insurance Company Limited 06.08.2001 Metlife India Insurance Company Pvt. Ltd. of Name of the Company

General Insurers : S.No. Registration Date Number 1 102 of Name of the Company

Registration 23.10.2000 Royal Sundaram Alliance Insurance Limited Company

103

23.10.2000

Reliance Insurance Limited.

General Company

106

04.12.2000

IFFCO

Tokio

General

Insurance Co. Ltd

31

108

22.01.2001

TATA

AIG

General

Insurance Company Ltd. 5 113 02.05.2001 Bajaj Limited 6 115 03.08.2001 ICICI Lombard General Company Allianz General Company

Insurance

Insurance Limited.

Yr:

2001-2002

From

1st

Jan

2001

to

Dec.

2002)

Insurance Industry in this year, so far Life Insurers: S.No. Registration Date Number 1 121 Reg.

has 5new entrants; namely

of Name of the Company

03.01.2002 AMP Sanmar Life Insurance Company Limited.

122

14.05.2002 Aviva Life Insurance Co. India Pvt. Ltd.

General Insurers : S.No. Registration Date Number 1 123 of Name of the Company

Registration 15.07.2002 Cholamandalam General

Insurance Company Ltd.

32

2.

124

27.08.2002

Export Credit Guarantee Corporation Ltd.

3.

125

27.08.2002

HDFC-Chubb Insurance Co. Ltd.

General

Yr:

2003-2004:

(From

1st

Jan

2003

till

Date)

Insurance Industry in this year, so far

has 1new entrants; namely

Life Insurers: S.No. Registration Date Number 1 127 Reg. 06.02.2004 Sahara India Insurance Company Ltd. of Name of the Company

33

Yr:

2004-2005

: has 1new entrants; namely

Insurance Industry in this year, so far Life Insurers: S.No. Registration Date Number 1 128 Reg.

of Name of the Company

17.11.2005 Shriram Life Insurance Company Ltd.

INSURANCE BUSINEES: Insurance business is divided into four classes : 1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance. Life Insurers transact life insurance business; General Insurers transact the rest. No composites are permitted as per law. LEGISLATION (as on 1.4.2000): Insurance is a federal subject in India. The primary legislation that deals with insurance business in India is: Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999.

34

INSURANCE PRODUCTS (as on 1.4.2000) (for latest information get in touch with the current insurers website information of insurers is provided at the web page Life Insurance: Popular Products: Endowment Assurance (Participating), and Money Back (Participating). More than 80% of the life insurance business is from these products. General Insurance: Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle insurance is compulsory. Tariff Advisory Committee (TAC) lays down tariff rates for some of the general insurance products (please visit website of GIC for details ) 2001 New products have been launched by life insurers. These include linkedproducts. For details, please visit the websites of life insurers. for insurers ):

INFORMATION About the insurance industry, the following documents may be helpful: Malhotra Committee Report (The Report of the Committee on Reforms in the Insurance Sector);

35

IRDA's First Annual Report - 2001

CUSTOMER PROTECTION:

Insurance Industry has Ombudsmen in 12 cities. Each Ombudsman is empowered to redress customer grievances in respect of insurance contracts on personal lines where the insured amount is less than Rs. 20 lakhs, in accordance with the Ombudsman Scheme. Addresses can be obtained from the offices of LIC and other insurers

36

CHAPTER-III

COMPANY PROFILE

RELIANCE LIFE INSURANCE COMPANY LIMITD Reliance Life Insurance Reliance Life Insurance is the fastest growing life insurance company in India. When we acquired AMP Sanmar less than two years ago, it was among the smallest life insurance players in the Indian market, with an annual premium income of Rs 105 crore (US$ 26 million) and less than 40,000 policies. In the short time since, we have emerged as one of India's top 5 private sector life insurance companies, with gross business premium of nearly Rs 1,000 crore (US$ 246 million) - an increase of nearly 900 per cent. We are fast approaching the half million mark in terms of number of policies. Our distribution network at the end of March 2007, stood at 217 branches - up from 120 branches the year before. The number of our agents at the end of the year was a shade under 1,10,000 over four times the corresponding figure in FY 05-06. Despite the growth momentum witnessed by the industry over the past few years, the potential for future expansion as strong as ever, thanks to low penetration levels, attractive demographics, robust economic prospects and increasing investor awareness. India's Life Insurance market is currently pegged at US $33 billion or just under 3 per cent of GDP as against 7.3 per cent in Korea and 8.9 per cent in the UK. Analysts suggest that this market is likely to expand at a compounded annual growth rate of 30 per cent to touch US $ 73 billion by FY10. During the same period, private sector players are expected to grow at nearly double the industry 37

average a CAGR of 60 per cent. Reliance Life Insurance will infuse over Rs 2,000 crore (US$ 493 million) over the next three to four years to scale up the business, further expand its reach and distribution, and emerge as one of the top 3 private sector life insurance companies in the country. Reliance General Insurance As in life, so in genera insurance. We are now the fastest growing company in this segment, and rank among the top 4 private sector general insurance companies in the country. Reliance General Insurance earned an annual Gross Direct Premium of Rs. 912 crore (US$ 225 million) for the last financial year - an increase of 462 per cent. During the same period, we have multiplied our customer base from 130,000 to over 1.5 million policy holders. In April 2007, we further improved our position to emerge as India's 2nd largest private sector general insurance company. We also earned the distinction of becoming the No. 1 company in new premium generation across the entire general insurance industry. Our distribution network was scaled up to 85 branches by March 31, 2007, as against a mere 20 branches on March 31, 2006. We have since received approval for the opening of another 115 new offices, as also a liaison office at London. With gross written premium of around 0.6 per cent of GDP, India continues to be one of the most under-served and under-penetrated insurance markets anywhere in the world. In many developed nations, non-life insurance penetration is pegged at 40-50 per cent of the life insurance market. For India, this figure stands at a mere potential for growth in the years ahead. 20 per cent, reflecting the immense

38

VISION OF THE COMPANY: . MISSION OF THE COMPANY Create unmatched value for everyone through dependable, effective, transparent and profitable life insurance and pension plans. Create awareness towards the untapped market. Insured the maximum Chunk of the Indian population. 2006-2007: During the year AMP SENMAR become RELIANCE LIFE INSURANCE COMPANY LIMITED(RILC ranked .18 number) 2007-2008: Procure the position amongst top five players of the industry .It registered on the third position. 2008-2009 : Procure the top fifth ranked amongst the private player of the industry. 2009-2010 : operation, 2010-2011 : Procure the position amongst top five companies in the world. Beat L.I.C by opening approximately 2000 branches in

Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below: Emerge as transnational Life Insurer of global scale and standard Create best value for Customers, Shareholders and all Stake holders

39

Achieve impeccable reputation and credentials through best business practices

Achievements

RLIC has been one of the fast gainers in market share in new business premium amongst the private players with an incremental market share of 4.1% in the Financial Year 2007-08 from 3.9% in April 07 to 8% in Feb 08. ( Source: IRDA)

Also continues to be amongst the fast growing Private Life Insurance Companies with a YOY growth of 195% in new business premium as of Mar08.

A Company that has crossed 1.7 Million policies in just 2 years of operation, post take over of AMP Sanmar business.

Initiated Express Life an Unique Over the Counter sales process for Unit Linked Insurance Policies in the Industry.

Accomplished a large distribution ramp-up in the Industry in a short span of time by opening 600 branches in 10 months taking the overall branch network above 740.

RLIC continues to be one of the two Life Insurance companies in India to be certified ISO 9001:2000 for all the processes.

Awarded

the

Jamnalal

Bajaj

Uchit

Vyavahar

Puraskar

2007-

Ceritificate of Merit in the Financial Services category by Council for Fair Business Practices (CFBP).

40

Reliance Life Insurance gets IRDA''s recognition The Insurance Regulatory and Development Authority (IRDA) is a public authority as defined in the Right to Information Act, 2005. As such, the Insurance Regulatory and Development Authority is obliged to provide information to members of public in accordance with the provisions of the said Act. The Insurance Regulatory and Development Authority (IRDA) has approved the change in the name of AMP Sanmar Life Insurance Company Limited to Reliance Life Insurance Company Limited. The change was necessitated after the acquisition of the holdings of AMP Australia and the Sanmar group in AMP Sanmar by Reliance Capital for Anil Ambani's proposed life insurance venture, now called Reliance Life Insurance for an undisclosed sum. Subsequently, a fresh certificate of incorporation was issued by the Registrar of Companies, Tamil Nadu, changing the name of the company on January17, 2006. Accepting the change in the name of the company in its registers, the IRDA has permitted Reliance Life to carry on life insurance business subject to the condition that the company should honour the commitments to the policyholders of the AMP Sanmar without altering any of the terms and conditions of the original policy. After the acquisition of the stake of the two promoter companies, Reliance Capital has been busy chalking aggressive growth plans for the life insurance company. It plans to have one million policyholders by this year end. The company under the new ownership has been selling policies at a faster pace than ever before. For the nine month ended 31st December 2005, AMP Sanmar / Reliance Life has a fresh premium income of Rs114.48 crore, selling 41,488 policies with the average premium per policy of Rs27,593. As AMP Sanmar, the company had

41

earned fresh premium of Rs61.04 crore from the 23,328 policies it sold during April-December 2004 at an average premium per policy of Rs26,166.

CHAPTER IV

ROLE OF FINANCIAL ADVISORS

According to section 182 of the Indian contracts Act , an agent is a person employed to do any act for another or to represent another in dealing with a

42

third person . In the insurance industry , the term agent is ordinarily applied to a person engaged by the insurer to procure new business .

DEFINITION OF AN AGENT

The Insurance Act defines an insurance agent as one who is licensed under section 42 of that Act and is paid by way of commission or otherwise ,in consideration of his soliciting or procuring insurance business , including business relating to the continuance ,renewal or revival of policies of insurance . He is, for all purpose ,an authorized salesman for insurance and needs a licence

Some insurers designate their agents as advisor,consultant etc.as if they Are independent persons. It is the nature of function ,which determines the relationship of agency ,not the designation .An independent advisor or consultant would not be an insurance company .

FUNCTION OF AN AGENT

The agents main function is to solicit and procure life insurance business for the insurer , which has appointed him for the purpose .At the same time ,he is trusted by the prospect to advise him suitably ,keeping his circumstances and needs in mind . He is thus , in the unique role of a person trusted by both parties to the transaction .His function s would require him to

Understand the prospects needs and persuade him to buy a plan of life insurance that suits his interests best

Complete the formalities (paper work, medical examination) necessary to get the policy expeditiously

43

Keep in touch to ensure that changing circumstances are reflected in the agreements relating to premium payments ,nomination and other necessary alterations

Facilitate quick settlement of claims

Be totally honest with both the prospect and the insurer

RELIANCE LIFE INSURANCE COMPANY LIMITED CONSIDERED THEIRE AGENTS AS BUSINESS PARTNER AND OFFER THEM CAREER OPPURTUNITY.

ABOUT COMMISSION THINGS TO REMEMBER

1. Commission is processed by Life asia System in Reliance Life Insurance.

2. Commissions are processed twice a month .i.e 15th and 30th/31st of every month.

3.

It normally takes 7-8 working days from the date of running the commission cycle to check the commissions and make them ready for disptach.

4. Commissions are either directly paid in Bank account of the advisors or distributed through cheques.

5. If any Licensed advisor has an account with ICICI,HDFC and SBI then the commissions cans be directly transferred to his bank account.

44

6.

Life asia processes commissions for only licensed agents whose details are entered by the agency support team from chennai.

7.

Commission details on contract level are circulated to each advisor through a statement which is sent to all branches at the end of each cycle as mentioned in point 1 above.

8.

The details of commission on contract level is also available on the PTS (Policy tracking system) . The same can be easily downloaded by any agent.

9. Commission processing is centralised at Mumbai HO.

10. All the cheques of commission of licensed advisors are directly sent to branch.

11. Commission related queries can be logged on to RCRM.

ADVISOR COMMISSION WHEN DUE AND PAYABLE

Policy has crossed 20 days from date of issue. i.e due to Free look period

AND
The Cheque / Demand draft is cleared by the bank and the funds are credited to the Companys bank account. If it is credit card payment then funds should be credited by Credit card company to our bank account

45

When advisor commission will not get processed

If the policy has not crossed 20 days from the date of issue.

If the cheques / draft is pending realization from the bank and the money is not credited to Company Bank account.

If there is a data entry error done by the branch while entering the application and receipt details in the Web receipting system and in life asia system i.e wrong cheque number,wrong amount of cash/ cheque entered.

Wrong branch code entered in system. e.g if an advisor has submitted the application at Mumbai branch but by mistake the branch entered the same in Delhi branch code.

If there are any earlier commissions recoverable from the advisor due to cheque bounces.

If the total value of the commission in a cycle payable is less than Rs 500.

If there are any reconciliation mismatch between the bank statement of the Insurance company and with the data entered by branch in the Web receipting system.

If the day end reconciliation of cash and cheque is not done by branch by generating the pay in slip.(PIS) duly signed by Branch Manager and Customer executive.

If the advisor is terminated in Life asia system and not reinstated.

46

If renewal from a licensed advisor is logged under referral code in Web receipting system.

If there are multiple application forms with the same application number. This is due to the printer error.

What you should do get your commission faster

Submit your bank account details to Mumbai head office by filling a form and attaching a cancelled cheque.

Make sure that you got the correct receipt with correct amount from the
cashier at the branch. If any mistakes are there , please get the same immediately rectified.

Write correct cheque and demand draft numbers on the application form of the client.

Write the same amount of premium on application form which matches the amount of cheque / Demand draft / Cash collected from the advisor.

Collect local cheques / cash / Demand draft only from the client and not the outstation cheques.

Close the CFRs immediately to get the policy issued.

47

Read your statements of commission carefully to avoid any confusions.

Regularly check your bank account to ensure that commissions have been credited.

Get you correct Mobile number, email id and address details updated in
our systems so that we can reach you faster for any details.

Banks wrongly bounces the Premium cheques and subsequently gives credit of the funds.

Delays in clearing of the cheques by the RBI.

No RBI cheque clearing center available in a particular Branch location. Hence the local cheques will also be treated as outstation cheques.

No guarantee of time in clearance of outstation cheques by RBI or banks

and Bank holidays

CHAPTER V

FUND PERFORMANCE

FUND OBJECTIVE : Provide high real rate of return in the long term through high exposure to equity investments , while recognizing that there is significant probability of negative returns in the short-term .The risk appetite is high. FUND RISK PROFILE : Which can be classified viz .as Low, Low to moderate, moderate, moderate to high and high

48

PRODUCT OF RECENT TREND: Reliance Market Return Plan- Equity Fund Option Reliance Golden Year Plan -Equity Fund Option Reliance Automatic Investment Plan -Equity Fund Option

49

Gross Period Fund Return Benchmark Funds return standard Benchmark Funds standard Fund s sharp ratio Last 1Year 54.49 % Last 2Year*(CAGR) Last year(CAGR) Since 46.35 % 3 42.39 % 44.92 47.36% 20.10% 20.73% 1.99% 2.04% 43.43% 20.91% 21.59% 1.79% 1.77% 47.11% 20.38% 21.42% 2.03% 1.78% 54.77% 21.13% 23.56% 2.36% 2.11% Benchmark fund sharp ratio

deviation deviation

inception(CAGR) % *CAGR Compound Annual Growth Rate

NAV(Net Assets Value) AS PER RECENT RECORDS Plan (MRP) Equity Fund Option Rs 34.0799

Reliance Market Return

Reliance Golden Year Plan (GYP)- Equity Fund Option Rs 42.3654

Reliance Automatic Investment Plan(AIP) Equity Fund Option 55 .0021

Funds Managers Report

This time the market scaling a new high . the positive

trend was influenced by strong IIP numbers and expectation of further Fed rate cut . The market saw strong participation from the FII and mutual funds for the

50

month . Looking at the positive trend in the markets and the risk profile of the scheme is high.

THE ANALYST EXPRESSION Gross Fund Return This is the return calculated on an NAV basis plus the fund management fees which are debited periodically to the fund. We calculate gross fund returns in order to give uniformity while evaluating fund management performance as the fund management fees vary from company to company. Benchmark Return A benchmark is a standard against which the investment performance of a fund can be measured. Benchmarks are pre-determined primarily on the basis of the asset allocation structure of the fund. Benchmarks can be readily available in the market or have to be constructed. The CNX Nifty is a readily available benchmark for our equity portfolio manager as the equity fund primarily invests in equities. Fund Standard Deviation Risk of investing in a fund is identified by the volatility of the fund's periodic returns. Standard deviation measures the volatility of the fund's returns. Standard Deviation for a particular time period gives us the deviation from the mean returns for that fund

51

during that period. Higher the standard deviation greater is the volatility and therefore, greater is the risk of investing in that fund. Fund Sharpe Ratio Sharpe Ratio of a fund tells us how much return the fund has been able to generate per unit of risk. The higher the Sharpe Ratio, the better the performance of a fund from the risk point of view. The excess return generated by a fund for a particular time is first calculated by subtracting the risk free rate from the rate of return generated by that fund. Dividing this result by the standard deviation of the fund return, one can obtain the Sharpe Ratio. Benchmark Sharpe Ratio Just as fund returns are compared to a benchmark return, the Sharpe Ratio of the fund is also compared to the benchmark's Sharpe Ratio in order to evaluate the risk-adjusted performance. Modified Duration of Debt Portfolio Modified duration indicates the sensitivity of the value of the debt portfolio to any given change in interest rates. Modified duration represents a weighted average of the time periods to maturity. The weights for each time period are equal to the present values of the cash flows in each time periods. Modified duration gives one a 'rule of thumb' - the percentage change in the price of a bond is the duration multiplied by the change in interest rates. Fund Beta

52

Beta measures the risk of a security (say a particular stock) in relation to its broad market. The broad market is generally defined as the specified benchmark index. The beta assigned to the benchmark index is 1. Beta of the stock describes the sensitivity of the price of the stock to the benchmark index. The fund beta is the sum of the weighted individual stock betas in the portfolio.

INVESTMENT STRATEGY AND RISK CONTROL Macro Analysis of the economy is carried out by tracking the trends in key economic indicators. Market Dynamics are also studied apart from the above to determine our view of the changes likely in the interest rate scenario and equity market movements. Price movements in the market are monitored at all times along with factors that affect them such as the prevailing market sentiments, cash flows in the market and views/actions of key market participants including institutional investors like FIIs and mutual funds. For analyzing the debt markets, yield curve movements and changes in its shape are also studied. The risk appetite and investment objective is clearly defined for each fund keeping in mind the investment horizon, liquidity requirements etc. A range of acceptable holdings under each asset class is determined at the investment policy level. The asset allocation primarily takes into account , the investment objectives, regulatory issues and the likely risk return matrix to obtain a potential return which is the highest achievable for the risk that is assumed. Within the strategic asset allocation, the fund managers determine the weights of

53

the various asset classes; primarily factoring in the developing market scenarios. Based on the investment objectives of each fund option, a rigorous security selection process is followed. The fixed income fund manager identifies cheaper securities across the yield curve and builds a basket of securities to arrive at the optimum level of yield within the range of pre-determined 'duration' for the entire portfolio after paying particular attention to the liquidity position and the liquidity premium on the securities. An active fund management style is followed or the equity portfolios. A core portfolio of stocks is first created driven by a top-down approach and a research based bottom-up stock selection method is followed. Benchmarks are pre-determined for each fund based on the most appropriate indices available in the market or by constructing proxy benchmarks out of multiple indices. Performance of each fund is continuously tracked based on the benchmarks and recalibrated. A statistical analysis is carried out to determine that the risk levels are in tune with the risk appetite of the particular fund. Statistical tools such as the standard deviation and risk-adjusted return measures such as the Sharpe Ratio are calculated in order to compare the returns generated per unit of risk vis--vis benchmarks. The investment policy has been designed by the Board to cover regulatory guidelines, the various product investment objectives, risk appetite strategic asset allocation and the investment style. It is ensured that the portfolio is always kept complaint with the relevant regulations.

54

CHAPTER VI

RLIC VARIOUS PRODUCT

Reliance life insurance is the huge private insurance player in the industry which deals in of policies . These are issued to meet the varying and special needs of the members or policyholders of the community the main and important types are as follows.

A) Solution for Individual;

B) Solution for Groups.

Solution for Individual : Such type of solutions protect an individual and which further classified into four parts .viz as A.1) Protection Plans In todays uncertain world, there could be calamity at every step of the life. It is up to you to ensure that your family stays protected always. Reliance Protection Plans helps you do exactly the same. You have a wide range of options to choose a plan from. Right from limited period plans to lifetime protection plans, you can opt for the one that suits your lifestyle.

55

While we understand that nothing can compensate for the loss of a life, we intend to provide you the peace of mind. Investing in Reliance Protection Plans would mean your familys future is in safe

A.2) Savings & Investment Plans In life, you have always given your family whatever they have wanted. Yet, there are some promises you have to fulfil, such as taking your family for a vacation, or buying that dream house. Set aside some money to achieve these specific goals with the help of Reliance Savings & Investment Plans. The plan allows you to experience the joys of life and provide for your familys needs. Enjoy life without worrying about the promises you have madewe are here to fulfil them. Reliance Super Invest Assure Plan Reliance Super Invest Assure is a complete plan which addresses your vital needs like Flexibility, Security, Investment Return and Financial Planning. With all its key benefits, it is here to ensure that there will always be more than you can ask for

Reliance Total Investment Plan Series I - Insurance Reliance TIPS -Series I- Insurance is a Unit Linked Investment + Insurance Plan that helps you meet all your financial needs, without the complexity of managing multiple products.

56

Reliance Wealth + Health plan Reliance TIPS -Series I- Insurance is a Unit Linked Investment + Insurance Plan that helps you meet all your financial needs, without the complexity of managing multiple products

Reliance Automatic Investment plan The Reliance Automatic Investment Plan is an enhanced unit linked plan that allows you to choose the right investment mix to reap maximum benefits. It also provides you with enhanced Life Cover. Reliance Money Guarantee plan To reap the benefits of a rising market and to protect yourself from any market decline, invest in the unit linked Reliance Money Guarantee plan that gives you the perfect balance between Protection and Savings... Reliance Cash Flow plan Invest in the Reliance Cash Flow Plan and reap the dual benefits of a life insurance plan and easy liquidity through lump sum cash, which means you can get a percentage of the Sum Assured at periodic intervals.. Reliance Endowment plan The Reliance Endowment Plan gives you financial independence by allowing you to decide the amount of Sum Assured based on your current financial position and expected future expenses.

57

Reliance Whole Life plan Give your family a lifetime of timely financial support by investing in the Reliance Whole Life Plan. This will help you enjoy your life to the fullest... A.3) Retirement Plans You are a young and earning individual. The income you earn allows you to enjoy life, your only worry being whether you will be able to continue the same lifestyle after retirement. A Reliance Retirement Plan will help you save money for your retirement. It ensures that you continue to get some income after retirement thereby ensuring that you do not have to depend on any other person or make any compromises to maintain the same lifestyle.

Reliance Total Investment Plan Series II-Pension Invest in a Reliance Retirement Plan today and enjoy life after retirement on your own terms. When you invest in the Reliance Total Investment Plan, you give yourself the assurance that you will make each one of your dreams come true. Reliance Golden Years Plan The Reliance Golden Years Plan helps you save systematically and generate the much-needed corpus to help you enjoy life after retirement. Reliance Golden Years Plan Value Realise all your dreams of playing golf, or going for a world tour after retirement by investing in the Reliance Golden Years Plan Value, which helps you generate the amount you will need for the future.

58

Reliance Golden Years Plan Plus Invest in the special Reliance Golden Years Plan Plus that not only helps you build the corpus you need after, but also collects a basic minimum amount in case something were to happen before you realise your dreams. Reliance Wealth + Health plan Invest in the Reliance Wealth Health Plan and balance your health needs and wealth needs, without compromising on either health or wealth. Reliance Automatic Investment Plan The Reliance Automatic Investment Plan is an enhanced unit linked plan that allows you to choose the right investment mix to reap maximum benefits. It also provides you with enhanced Life Cover. Reliance Money Guarantee Plan To reap the benefits of a rising market and to protect yourself from any market decline, invest in the unit linked Reliance Money Guarantee plan that gives you the perfect balance between Protection and Savings.

A.4)Reliance Child Plan Plan for your child today so that they can reap the benefits tomorrow As a parent, it is only natural to dream of a smooth and blissful life for your child. Which is exactly why you need to secure your child's tomorrow, today. Reliance Child Plan helps you save systematically so that you can give your child the much-needed financial security in the future. Simply put, Reliance Child Plan

59

gives you the freedom to enjoy every moment with your child today, without worrying about his/her tomorrow. Key Features Risk protection for you during the term of the Policy. Accumulated bonus at the end of the Policy Term 25% of Sum Assured payable every year as lump sum Benefit during the last four Policy Anniversaries All future premiums are waived in the event of unfortunate loss of life Guaranteed Fixed Benefits continue even after loss of life of the Policy holder More value for your money by way of High Sum Assured Rebate Choose to add the Benefit of two Riders - Critical Illness and Accidental Death Benefit and Total and Permanent Disablement Rider Policy participates in profit even after the loss of life of the life Assured Solutions for Groups As an employer, you believe in providing the best opportunities for your employees while keeping the interests of the company in mind. How will you strike a balance between the two? Reliance Life Insurance offers you a win-win solution with Solutions for Groups. Not only are your employees covered for life from accidents and disablements, you can also efficiently manage their future with gratuity and pension plans.

60

So invest in Reliance Solutions for Groups to give your employees a sense of belonging and feel at peace knowing that you have fulfilled your obligation towards your corporate family.

B.1) Employers Liability Solutions

Freedom from forecasting and managing liability for employees Gratuity, Leave Encashment and Pension

B.2) Employee Protection Solutions

Have you always wanted to give your employees total cover from any accidents, disabilities or untimely deaths? Invest in Reliance Employee Protection Solutions today and show your employees that you care.

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CHAPTER VII

COMPARISION AND ANALYSIS OF PRIVATE AND PUBLIC PLAYER OF THE INDUSTRY

The major attractions for the policy holder in private and public sector RLIC VS LIC Reliance Life Flexibility in buying major surgeries benefit 4+3 Fund Options available Two Plans - Tailor & Ready made option Better growth with 100% equity Life Insurance Corp No flexibility (buying of major surgeries mandatory) Only 1 fund option Only one plan available Lower growth with only 50% investment in equity Longer waiting period of 180 days None Higher allocation charge 30% & 6% Lower comissions at 10%

S. No.

option in tailor made Lower waiting period of 90 days Switching / Redirection allowed Lower allocation charge 25% & 5% Higher commissions at 20%

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The latest data released by the Insurance Regulatory and Development Authority (Irda) show that during April and May this year, premium from the sale of new policies rose to Rs 8,119 crore compared with Rs 7,331 crore, representing a rise of 10 per cent. In the first two months of 2007-08, the industry had reported a 25 per cent rise in the first premium income.

Insurance company executives said buyers were staying away from Ulips, which are insurance-cum-investment policies with 90-95 per cent of the corpus invested in stock markets. Instead, people are preferring to purchase pension plans, health insurance and traditional insurance policies,. Irda, however, does not provide a break-up of the traditional and Ulip premium.

Premium from the sale of individual single-premium policies fell 3.2 per cent to Rs 1,508 crore as against Rs 1,559 crore in the year-ago period. In contrast, income from new individual regular-premium policies grew 8.7 per cent to Rs 4,928 crore during April-May this year.

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BITTER-SWEET First year premium of life insurers April to May In Rs crore 2007 LIC ICICI Prudential Bajaj Allianz Reliance Life SBI Life HDFC Standard Life Industry total 5,049.87 632.52 408.47 99.58 269.64 222.70 7,331.70 Per 2008 4,170.87 951.76 485.81 354.32 546.34 287.90 8,119.28 change -17.41 50.47 18.93 255.81 102.62 29.28 10.74

RUN cent

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The main reason for industry's lower growth was a 17 per cent drop in Life Insurance Corporation's first premium income. Its new business income shrunk to Rs 4,170.87 crore during April and May of this year as against a first-year premium of Rs 5,049.87 crore in 2007-08. The 18 private players, however, managed to put up a better show with a 73 per cent rise in first premium income, which was estimated at Rs 3,948.41 crore during April-May of this year compared with Rs 2281.83 crore in the corresponding period last year. Part of the reason for the rise in premium income is the higher number of private players this year. The growth rate more than doubled from 35.35 per cent in the first two months of the last financial year. LIC also saw its market share drop to 51.36 per cent in the first two months, while SBI Life Insurance overtook Bajaj Allianz to emerge as the third biggest life insurer. SBI Life Insurance had a first premium income of Rs 546.34 crore as against a first premium of Rs 269.64 crore in the corresponding period.

Similarly, Reliance Life is now the fifth largest insurer with a first premium income of Rs 354.32 crore during April-May this year compared with HDFC Standard Life's Rs 287.9 crore.

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Suggestion and Recommendation

Need to Change the conventional thinking of an individuals:-

Here is an

requirement for an insurance industry to increase the confidence levels of large chunk of society .This will happen if the grievances are addressed properly and customer service increases with the guarantee that the claims are settled in a least time .This is really going to help ,as todays customers are looking for best use of their money .

Diversification of rural area:- Basically the problem coming for insurance industry is lack of resources , awareness , Training institution , medical facility and appropriate products which would cater their financial needs .These are the problems which need to be studied so that they can diversify their offerings to customers.

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Marketing support :- More marketing support is required to create awareness in the market about the policies of the company as done by close competitors. It was observed that people are really very conscious about the advertisement run by the company while appointing agents this problem was faced as they questioned about the less marketing support by the company.

Good Attractive Brochures :- An eye catching an attractive brochures are required to have a good impact on the customers because once the policy is communicated by the agent to the customer the brochure remains the key representative of the company . Hence agent requires good more attractive brochures.

Service satisfaction :- Service satisfaction is very important in the service industry and RLIC as a group has a good name in rendering good quality services but due to some loopholes areas services gets affected and hence service has to be given the utmost important to create goodwill in the market.

Continuous up gradation :- Financial consultants wants a continuous up gradation about the policies of the company .They should be continuously upgraded as RLIC does and this point should be highlighted while offering the agency

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Conclusion Today marketing must be

understand not in the old sense of making a sale

telling and selling but in the new sense of satisfying customer needs . While selling life insurance one does not sell any tangible product. Thats why it becomes very essential to understand customer needs , which will help to distribute and promote the product effectively and it be easy to sell the products.

Life insurance is all selling about life, which one should be very realistic and practical because its matter of a persons life . Selling a policy is not an easy job it is all about convincing for a safe future .

RLIC is most respected private life insurance company .In very short span of period it has won the confidence of people because of its unique features like

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good services and promising future in insurance sector . While working on this project I came to know several facts about insurance business , that there is a cut throat competition and every company is trying its best to sell the products . Hence it is required to strengthen the selling chain as to compete in the market ,as a part of my project I have tried to strengthen the chain by employing few people for the company with a desired profile . I have discussed various issues in the project , which should be taken care of while recruiting the financial consultants for the company . And above all its the light time to take insurance as an investment in a broader sense and as a venturesome career opportunity for an individual.

References

http://www.ndtvprofit.com/2008/01/16195839/What-is-Insurance.html

Books

http://www.qp.gov.bc.ca/statreg/stat/I/96226_01.htm#section1 http://www.allinterview.com/showanswers/1726.html

http://finance.mapsofworld.com/investment/

1. Elements of Mercantile Law Written by N.D. Kapoor 29th revised

edition ,2008 (page 445,446,447and 450) published by Sultan Chand and Sons

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2. Ic-33 Life Insurance(New Syllabus) (page-201,202and203)

3. Records and documents of External supervisor.

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