Lapse Portfolio & Gap Report

A PROJECT REPORT WITH SPECIAL REFERENCE

TO

Project : LAPSE PORTFOLIO & GAP REPORT

Lapse Portfolio & Gap Report

ACKNOWLEDGEMENT I take immense pleasure in completing this project and submitting this final project report. The whole summer internship period with ICICI PRUDENTIAL LIFE INSURANCE has been full of learning and sense of contribution towards the organization. I would like to thank ICICI PRUDENTIAL LIFE INSURANCE for giving us an opportunity of learning and contributing through this project. I also take this opportunity to thank all those people that made this experience a memorable one. A successful project can never be prepared by the single efforts of the person to whom project is assigned, but it also demand the help and guardianship of some conversant person who helped the undersigned actively or passively in the completion of successful project. In this context as a student of IMS, KURUKSHETRA UNIVERSITY, KURUKSHETRA I would first of all like to express my gratitude to Mr. Ravi Gaikwad for assigning me such a worthwhile topic LAPSE PORTFOLIO AND GAP REPORT to work upon in ICICI PRUDENTIAL LIFE INSURANCE.

During the actual project work Mr. Kuldeep Bhorkar (Sr. Relationship Manager) has been a source of inspiration through his constant guidance, personal interest, encouragement and help. I convey my sincere thanks to him. In spite of his busy schedule he always found time to guide me through the project. I am also grateful to him for reposing confidence in my abilities and giving me the freedom to work on my project.

The project couldnt have been complete without timely and vital help of other office staff. Special thank to Mr. Vikrant Joshi, Mr. Vijay Singh, Ms. Sonal Chopra, Ms. Sweta for their invaluable guidance, keen interest, cooperation, inspiration and of course moral support through out my project session. 2

Lapse Portfolio & Gap Report

DECLARATION

I,

Vishal

Singhal,

Roll

No.18,

student

of

INSTITUTE

OF

MANAGEMENT STUDIES, Kurukshetra University, Kurukshetra in 9th semester hereby declare that the summer training report entitled Lapse Portfolio And GAP Report is the original work done by me and the same has not been submitted to any other institute for award of any other degree.

(Vishal Singhal)

Lapse Portfolio & Gap Report

TABLE OF CONTENTS Title 1. Industry Profile 1.1 Overview of the insurance sectors 1.2 Review of the insurance 1.3 Life insurance scenario in India 1.4 Privatization of Insurance 1.5 IRDA 1.6 Liberalization of Insurance Sector 1.7 Advantage of Liberalization 1.8 Insurance in India 1.9 Need of Brand Name 1.10 Overview of ICICI Group 2. Company Profile 2.1 Prudential 2.2 Partners 2.3Vision & Distribution 2.4 Objectives 3. Products of ICICI Prudential 3.1 Savings Plan 3.2 Protection Plan 3.3 Education Plan 3.4 Retirement Plan 3.5 Investment Plan 3.6 Health Plan 4. Comparative Analysis of Insurance Products of Different 28 4 22 18 Page no. 6

Lapse Portfolio & Gap Report Insurance Companies.

5. Changing the Face of Insurance 5.1 How it Breakdown? 5.1.1 Life & health Insurance 5.1.2 Property & Causality Insurance 5.2 Insurance Brokers 5.3 Re-insurance 5.4 Job Prospect 6. Channel Structure of an Insurance Company 7. Insurance Sale Agents 7.1 Job outlook 8. Advisor At ICICI Prudential 8.1. Training 8.2 Career 8.3 Reward & Recognition 9. Bibliography

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INDUSTRY PROFILE Insurance may not be the sexiest industry, but theres a steady demand for its products and its a good industry if we are looking for a relatively stable career. Some 1,800 U.S. insurance companies offer personal and commercial product lines including basic health/life and property/casualty protection as well as a long list of other coverage ranging from automobiles to mortgages to insurance for insurance companies (known as reinsurance). These products protect customers from losses resulting from illegal actions, medical needs, theft, earthquakes and hurricanes, and a variety of other causes. Insurance companies calculate the likely cost of a given loss, divide it by the number of people who want protection against it, add something for profit, and reach an amount that they charge each customer for a policy guaranteeing compensation should the loss occur. Insurance companies also mount huge marketing campaigns to convince customers that they need protection in general and the company's products in particular. They also function as financiers, deriving a large part of their revenues from investments. Insurance companies must maintain enormous reserves of capital to back up potential claims obligations. They invest those reserves in stocks, bonds, and real estate, within the United States and overseas, providing an enormous amount of liquidity to financial markets and giving the industry an influence on the national economy far out of proportion to its size. That can be a risk as when industry wide over investment in Latin America. During the 1970s led to huge losses for the industry and repercussions far beyond the insurance industry. Overview of the Insurance sector The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 6

Lapse Portfolio & Gap Report 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1957: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

Lapse Portfolio & Gap Report

Review of Insurance Sector India is having population of 1 Billion with a middle class population estimated upto 300 million. It being the 5th largest economy in the world in terms of Purchasing Power Parity (PPP) has a GDP growth rate of over 6% per year on an average for the last decade. The saving rate is estimated to be about 26% of the GDP. In the total population, the insured population is estimated to be about 70 million.

Lapse Portfolio & Gap Report

INDIAN INSURANCE INDUSTRY The Indian Insurance market has a grand history. The development of insurance dates back to the 19th century when the Europeans started the Oriental Life Insurance Company, Calcutta in 1888. The first Indian Insurance Company Bombay Mutual Life Insurance came into existence in 1870 to cover Indian lives at normal rates. The year 1870 is also important in the sense that the British Government enacted for the first time act that year. Four years later Feroz Shah Mehta one of the doyens of Indian Financial Sector, Oriental government established the Oriental Government Security Life Assurance Company and after that, many Insurance companies in surfaced on Indian soil. However, the first Indian Insurance act was passed on 1912, again in 1938 and an amendment in 1950, when it was nationalized however the sector was once again thrown open to the private sector in December 1999 followed by the establishment of IRDA (Insurance Regulatory and Development Authority) in April 2000. The Indian Insurance Industry was dominated by two states Insures i.e., The Life Insurance Corporation in Life Insurance The General Insurance Corporation in general insurance before 2000 which were created after the nationalization of the Life and Non-Life sectors in 1956 and 1972 respectively. In Dec99, the IRDA Act was passed which limited foreign investors to a 26% cap on equity participation, and minimum capital requirement of $20 million. At present, more than 12 private players are in the market and some are still in the pipeline. The advent of the new kids poses to LIC to somewhat extent, for which LIC will have to change its current policies regarding marketing and product management.

Lapse Portfolio & Gap Report

Life Insurance Scenario in India Since 1956, with the nationalization of insurance industry, the state-run Life Insurance Corporation of India (LIC) has held the monopoly in countrys life insurance sector. General Insurance Corporation of India (GIC), with its four subsidiaries, was its counterpart in the casualty sector. Over the time, taking advantages of its monopoly and virtual prerogative in establishing premiums, LIC has evolved into a monolith. With around 60,000 agents in every nook and corner of the vast country, it has created an enviable brand name, particularly among the rural population of the country. It has around $40 billion as its financial sector. However, on the qualitative side, it has every little to take pride in. And there lies the potential for players to challenge this behemoth. As is typical with monopolies, the premium rates charged LIC are among the highest in the world, and its track record in customer service can at best be called shabby. With a huge unionized, rigid workforce mostly in the clerical category, LIC run the risk of high fixed cost, which will be the deciding factor productivity in the competitive scenario. While boasting fullscale automation of its operation, the truth is that its technology is outdated. The new players, with the state-of-the art technology under the belt, will be in advantageous position. 80% of LICs business is procured by 20% of its ill-trained agent force. The foreign player, with the domestic partners string band value, can test the unconventional distribution channels like brokers, the Internet, the banking distribution system etc., although foreign players may be tempted to keep their operations in big cities for the cream layer of the society, the real market lies in rural India, which accounts for the lions share of LICs present business. The foreign players must adapt to Indian realties, the well-published failures of the world famous consumer goods companies like Electrolux, Whirlpool, Reebok, Nike etc. to gauge the Indian psyche and sentiments demonstrate the concept. They failed in the areas of realistic pricing, product promotion and reaching to the consumer. The foreign companies need to know the ground realities to the details.

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Privatization of Insurance The Indian Insurance sector has finally opened up and it is with much anticipation that new players are awaiting their share of market. License have been issued to both Indian and foreign players- Reliance, HDFC-Standard Life, Max India-New York, Royal Sundaram Alliance, ICICI Prudential, IFFCO-Tokyo Marine, Bajaj Allianz, Birla Sun life, Tata AIG, AVIVA Life Insurance, SBI Life, OM Kotak Mahindra are some of the entrants into the newly liberalized Indian Insurance market. ICICI Prudential and HDFC-Standard Life have issued their life policies-the first from the private sector after 45 years. The first move for the liberalization came with the Malhotra Committee Report in 1993 which recommended the privatization of insurance, setting of an insurance regulatory authority and restructuring the government monopoly LIC and GIC and its subsidiaries. IRDA Act passed in November 1999 had set ball rolling for the entry of private players in domestic sector. IRDA The insurance sector has been opened up in India, as there was an urgent need. The international experience indicates those country with a liberalized insurance sector have witnessed a rapid growth in premium volumes enhancing the domestic saving rate. This happened in China, Malaysia and Singapore where a competitive market has led to improvement in services and quicker settlement of claims. It is also important to note that competition will bring about advancement in information, communication and technology. And rightly therefore a decision was taken by the Government of India to open up insurance sector. The establishment of IRDA in the month of April 2000 has been important development in this direction, making the end of monopoly in the insurance sector.

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Lapse Portfolio & Gap Report

The IRDA Governs the critical aspect of insurance sector including: The number and role of Private sector operates including-Roman area intermediaries. Regulate covering investment, solvency norms etc. Product range. Accounting practices. Consumer protection norms. Ensuring the rural and health insurance are developed. Fixing of license fee. Perhaps of all the most critical regulation is the 26% equity Capital for foreign Insurers. This regulation bring in issues regarding management control and one of the reasons for joint venture breaking up Cubb-Kotak, Liberty-Dabur, All State-Dabur, Manu Life-UTI are some of the broken up alliances.

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Lapse Portfolio & Gap Report

LIBERALIZATION OF INSURANCE SECTOR Liberalization commitment of the country to help in disciplining future economic policies will include the insurance reforms. When world over insurance market has been opened up. India cannot remain in isolation. History has shown that it is very difficult to prosper in isolation. Globalization is the new economic reality, which is here to stay, heralding a new era of insurance in India. With the opening of the insurance industry, India stands to gain with the following major advantages. Globalization will provide opportunities to the customer for the better production. With more reasonable and affordable pricing. The customer will get quicker services. It will enhance the saving rate. Long term funds for infrastructure development will be available to the country. It will secure for India larger inflow of foreign capital need to sustain our GDP growth. Advantages of Liberalization The opening up will enable the country to save more and invest more for the development in infrastructure. With new insurance intermediaries and more distribution channels the market is bound to develop by leaps and bounds. In the next few years it is established that the Indian insurance sector will develop a better understanding of consumer requirement leading to more satisfaction of consumers. The world class technology will be available in the market bringing about tremendous improvement in servicing. Choice of price will be available to the customers. Lead to increase in employment.

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Lapse Portfolio & Gap Report Social and rural obligations will also be served as IRDA has come out with clear regulation in this regard, which makes the development in this area mandatory. Unlike west, in India, insurance is sold as the instrument of saving. About 18%of the policies are sold as death risk consideration. Impression about LIC is that they are not meant for the market requirements. They are only intended to find customers. Insurance awareness is therefore low. Unit linked insurance products are not available. Insurance covers are expensive and returns are low. Turn over the agent is high. The choice available to the insuring public is inadequate in terms of services, products and prices. These are the areas of weakness, which may act as opportunities for new players who may work to offer policies to the customer with the value additions at a competitive premium with much improved servicing.

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Lapse Portfolio & Gap Report

INSURANCE IN INDIA Only 22% of the insurance population has been extended cover. Market penetration is low and the potential to exploit is high. Insurance premium per capita is very low. Lack of comprehensive social system benefit and welfare means that demand for pension products is high. Huge middle class of approximately 300 million. Existing insurance company score low on customer service front. The insurance market registered growth in the Asian region even though Indias share in global insurance premium is less than 0.5% (1998) as compared to USA (24.2%) and Japan (21%). Studies have revealed that in an emerging market, as disposable income rises, Insurance premium as a ratio of GDP shoots up. The confederation of Indian Industry projected a growth of life insurance premiums from Rs. 350 billion at present to Rs. 140 billion. The growth of non-life insurance premium is expected to increase from 75 billion to 375 billion. Out of which, only 10% is tapped by the existing insurer. Insurance even more than banking is a volume game. A very exclusive approach in view is unlikely to provide meaningful numbers. Currently, insurance is bought for the purpose of taxbenefits. A higher percentage of business is in the rural market. The share of rural new business insurance total new business is 55% in terms of policies and 47% in terms of sum assured. However, this needs to be viewed in the light of some recent issues that have been raised regarding as to what constitutes the rural market. Therefore, private insurers will be best served by middle market approach, targeting the customer segments that are presently unexploited. How many Indians are aware that LIC has more than 60 products and GIC has more than 180 products. Not only there is a reduction in the premiums of life insurance products have long overdue since Indian mortality rate has decreased three folds in the last 50 years. There is also scope to increase the yield on life insurance policies (presently 6%) with proper risk management in place. 15

Lapse Portfolio & Gap Report It is been debated that insurance business does not produce profit in the first five years cross subsidization is a feature of Indian market. Even the first portfolio vote that is considered profitable, cross subsidizes the other departments. Tariff reduction is likely to reduce profits, further insurers have to institute proper claims management progress in order to extract efficiencies. At present life insurance business in the country is taxed at 12.5% of the profit in financial year. The government is soon to present a new model of taxing life insurance companies at international rates. New entrants should be well advised to look ahead to the stage where brand strength will be a competitive advantage and sketch their alliances accordingly. In fact, we believe that alliance related to distribution rather than to products and technology will prove most valuable. The stages where brand strength will be competitive advantage and sketch their world accordingly. In fact we believe that alliance related to distribution rather than to produce or technology will prove most valuable in the long run. Banks and financial companies will emerge, as attractive distribution channel for this insurance trend will be led by two factors, which already apply in other world markets. First Banking food insurance, fund management and other financial services companies are being to increase their profitability and provide maximum value to their customers. Therefore, they are themselves looking for a range of products to distribute. In other market notably Europe; this has resulted in bank assurance. Bank entering into the insurance business in India to bank hope to maximize expensive existing network by selling a range of products more of a loss alliance between insurance and bank than a formal ownership. Some Indian entrants like ICICI, HDFC and reliance hope to ride their existing network and customer bases.

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Need of Brand Name in Insurance Branding is the new key challenge in the financial services industry. Life in the 21st century will be longer with more choice in more field of activity. The financial consequence of the increased life span is particularly likely to be tough. Inevitably, this will lead to more complexity, which in turn necessitates greater clarity and appeal from the service providers. Branding is more important in the financial services market which not only faces the problem of securing and retaining customers in an increasing competitive market lace but also experience the need for heightened relevance of the brand positioning in a world where brand has been termed as new religion. Focus and strategies are essential for development of brand in any sector but the less tangible world of financial products historically has escaped the branding issues that have governed development and culture in other industries. If there was an industry, which is least, considered as an essentiality it would be the insurance industry. It was always felt as abstract services or a fall back, more likely a safety net. But it is more of shifting through competitive products to select most appropriate one, but with liberalization of the industry, players have to realize the need for branding in a competitive environment. Insurance companies need to strive for a greater customer focus regardless the customer is the end user or the intermediary.

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OVERVIEW OF ICICI GROUP ICICI Bank is India's second-largest bank with total assets of about Rs.1,67,659 crore at March 31, 2008 and profit after tax of Rs. 2,005 crore for the year ended March 31, 2008 (Rs. 1,637 crore in fiscal 2007). ICICI Bank has a network of about 560 branches and extension counters and over 1,900 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Canada and Russia, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates, Bangladesh and South Africa. ICICI Bank's equity shares are listed in India on the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). April 4, 2005, ICICI Bank, with free float market capitalization* of about Rs. 308.00 billion (US$ 7.00 billion) ranked third amongst all the companies listed on the Indian stock exchanges. ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing mediumterm and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified 18

Lapse Portfolio & Gap Report financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.

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Lapse Portfolio & Gap Report COMPANY PROFILE ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential's equity base stands at Rs. 925 crore with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the financial year ended March 31, 2008, the company garnered Rs 1584 crore of new business premium for a total sum assured of Rs 13,780 crore and wrote nearly 615,000 policies. For the past four years, ICICI Prudential has retained its position as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life. ICICI Prudential has recruited and trained about 56,000 insurance advisors to interface with and advise customers. Prudential Established in 1848, Prudential plc is a leading international financial services company in the UK, with around US$250 billion funds under management and more than 16 million customers worldwide. Prudential has brought to market an integrated range of financial services products that now includes life assurance, pensions, mutual funds, banking, investment management and general insurance. In Asia, Prudential is UK''s largest life insurance company with a vast network of 22 life and mutual fund operations in twelve countries - China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Since 1923, Prudential has championed customer-centric products and services, supported by over 60,000 staff and agents across the region.

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Lapse Portfolio & Gap Report Partners ICICI and Prudential came together in 1993 to form Prudential ICICI Asset Management Company, which has today emerged as one of the leading mutual funds in India. The two companies bring together two of the strongest financial service brands in Asia, known for their professionalism, excellent quality of service and long term commitment to YOU. Riding on the success of this relationship, the two companies joined hands once more in 2000, to form ICICI Prudential Life Insurance, with a commitment to provide leading-edge life insurance solutions. ICICI Bank has 74% stake in the company, and Prudential plc has 26%. VISION To make ICICI Prudential the dominant Life and Pensions player built on trust by worldclass people and service. Understanding the needs of customers and offering them superior products and service. Leveraging technology to service customers quickly, efficiently and conveniently. Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders. Providing an enabling environment to foster growth and learning for our employees. And above all, building transparency in all our dealings. The success of the company will be founded in its unflinching commitment to 5 core values -Integrity, Customer First, Boundary less, Ownership and Passion. Each of the values describes what the company stands for, the qualities of our people and the way we work.

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Lapse Portfolio & Gap Report DISTRIBUTION Domestic Networks ICICI Prudential has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 58 cities and towns in India. These are: Agra, Ahmedabad, Ajmer, Allahabad, Amritsar, Aurangabad, Bangalore, Bhatinda, Bhopal, Bhubhaneshwar, Calicut, Chandigarh, Chennai, Coimbatore, Dehradun, Goa, Guntur, Gurgaon, Hyderabad, Hubli, Indore, Jaipur, Jalandhar, Jamnagar, Jamshedpur, Jodhpur, Kanpur, Karnal, Kochi, Kolkata, Kota, Kolhapur, Kottayam, Lucknow, Ludhiana, Madurai, Mangalore, Meerut, Mumbai, Nagpur, Nasik, Noida, New Delhi, Patiala, Pune, Raipur, Rajkot, Ranchi, Surat, Thane, Thrissur, Trichy, Trivandrum, Udaipur, Vadodara, Vashi, Vijayawada and Vizag. The company has eleven bancassurance tie-ups, having agreements with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank, and Punjab & Maharashtra Co-operative Bank, Goa State Co-operative Bank, Indoor Paraspar Sahakari Bank, Manipal State Co-operative Bank, Shamrao Vithal Co-operative Bank and Jalgaon People''s Co-operative Bank, as well as some corporate agents. It has also tied up with organisations like Dhan for distribution of Salaam Zindagi, a policy for the socially and economically underprivileged sections of society. ICICI Prudential has recruited and trained over 32,000 insurance advisors to interface with and advise customers. Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers. MAJOR PRODUCTS OF ICICI PRUDENTIAL SAVINGS PLAN ICICI Prudential offers a variety of policies that give you the benefits of protection and the opportunity to save for important assets or events, like a home, a car or a wedding. Secure Plus An insurance plan that gives added protection savings and multiple options, all in one! Cash Plus An insurance plan that gives added protection savings, multiple options, plus the power of liquidity. 22

Lapse Portfolio & Gap Report Life Time II A complete market-linked insurance plan that adapts itself to your changing protection and investment needs, throughout a lifetime. Saven Protect A traditional endowment savings plan that offers both high returns and protection. Cash Bak An endowment savings plan that allows you to get back substantial survival benefits without having to wait till the maturity date.

PROTECTION PLAN Life Guard ICICI Prudential Life Insurance offers LifeGuard - a set of pure protection plans. Choose from amongst three different product structures to insure your life and provide total security to your family, at a very affordable cost. Level Term Assurance with return of premium On death the entire sum assured will be paid. On maturity, all the premiums paid will be returned.

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Lapse Portfolio & Gap Report Level Term Assurance without return of premium On death the entire sum assured will be paid. No survival or maturity benefits. The above two policies enhances the life guard plan: Accident and disability benefit riders Wavier of premium rider (WOP) Accident and disability benefit riders: Benefits payable on death due to an accident. If the policyholder dies due to an accident, 100% of the rider sum assured is paid in addition to the basic sum assured. In case the policyholder dies in a land surface, mass public transport system wherein the policyholder was traveling as a fare-paying passenger, then 200% of the rider sum assured is paid. Benefits payable in case of permanent disability due to an accident if the policyholder survives an accident but becomes permanently disabled then the premium for the basic plan is completely waived off to the extent of the rider sum assured.Plus, 10% of the rider sum assured is paid for the next 10 years, which helps in providing that extra money and takes care of sudden financial set back that occurs after a tragic disability. Accident & Disability Benefit rider is available with Save n Protect, Cashbak, SmartKid Child Plans, Golden Years, Premier Life, Lifetime, LifeTime II, LifeTime Pension II, ForeverLife, SecurePlus, CashPlus, SecurePlus Pension, LifeGuard ROP, LifeGuard WROP, Group Term Plan, InvestShield Life, InvestShield Cash, InvestShield Gold and InvestShield Pension . In case of Golden Years, PremierLife, Lifetime II, Lifetime Pension II, SecurePlus, CashPlus, LifeGuard ROP and LifeGuard WROP, the waiver of premium benefit is not available. Premiums paid under this rider are eligible for tax benefits under Section 80C.

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Lapse Portfolio & Gap Report EDUCATION PLAN As a responsible parent, you will always strive to ensure a hassle-free, successful life for your child. However, life is full of uncertainties and even the best-laid plans can go wrong. Here's how you can give your child a 100% safe and assured tomorrow, whatever the uncertainties. SmartKid is designed to provide flexibility and safeguard your child's future education and lifestyle, taking all possibilities into account. SmartKid regular premium SmartKid unit-linked regular premium SmartKid unit-linked single premium All these plans offer: Guaranteed Financial Benefits: Regular payments at critical stages in your child's life, like Board examinations, Graduation and Post-graduation. Total peace of mind Sum Assured is paid immediately: Ensures that your loved ones stay financially secure, All future premiums are waived: Ensuring that your family is not financially burdened in Policy benefits continue: The educational benefits of the policy continue, ensuring that Development Allowance: SmartKid guarantees regular income to secure your child's even in your absence. your absence. your child can realize his or her dreams without any hassles. educational career and also ensures his or her all-round development, for a nominal additional amount. The Income Benefit Rider takes care of this through an annual payment of 10% of the sum assured, to your child, till the maturity of the policy, in the unfortunate event of the death of the parent. All SmartKid plans can be enhanced with the Accident & Disability Benefit Rider and Income Benefit Rider.You can also an Accident Benefit Rider to a SmartKid Regular Premium policy,and a Waiver of Premium Rider (WOP) to SmartKid unit-linked regular premium policy. 25

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RETIREMENT PLAN Life Expectancy has been rising rapidly and today you can expect to live longer than your earlier generations. For you, this increase will mean a longer retirement life, stretching into a couple of decades. ICICI Prudential presents Retirement Solutions that combine the best of insurance and investment. These solutions are developed to ensure your peace of mind for the years to come.: Lifetime Pension II A regular premium linked pension plan that gives you the freedom to choose the amount of premium, and invest in market-linked funds, to generate potentially higher returns. LifeLink Pension II A single premium linked pension plan that gives you the freedom to choose the amount of premium, and invest in market-linked funds, to generate potentially higher returns. Golden Years A flexible unit-linked retirement solution that offers flexibilities during the accumulation as well as payout phase. SecurePlus Pension A regular premium pension plan that gives you the flexibility to choose between 3 levels of sum assured for the same level of total annual contribution Forever Life A regular premium pension plan that helps you save for your retirement while providing you with life insurance protection. Five Annuity options at the time of investing Life Annuity Life Annuity with return of purchase price Life Annuity guaranteed for 5, 10, 15 years Joint Life, Last Survivor without return of purchase price Joint Life, Last Survivor with return of purchase price

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Lapse Portfolio & Gap Report INVESTMENT PLAN Life Link Super LifeLink Super is a unique plan that combines the security of a life insurance policy with the opportunity of enjoying high returns on your investments, without the market risks comprising on the protection of your family. Death Benefit: The Sum Assured under the product has 2 options, either 500% of the initial premium or 105% of the initial premium. In the event of an unfortunate death, the beneficiary will receive higher of the value of units or the initial death benefit, less any with drawls. Withdrawal Benefit: One can make partial withdrawals from the accumulated value of the policy after completion of one policy. Flexibility: Choose from four fund options, based on your investment. Objective and risk appetite. If at a later stage your financial priorities change, you can switch between the various fund options, absolutely free, 4 times a year. HEALTH PLANS Cancer Care Comprehensive Cancer Protection Plan. Health Assure A Long-term Critical Illness Protection Plan Health Assure Plus A Long-term Critical Illness Protection Plan with Life Cover.

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Lapse Portfolio & Gap Report Telecalling Survey and Interaction (A)OBJECTIVES: To collect information on random basis, on various parameters on lapsed policies in ICICI Prudential. To understand discrepancies between the actual flow of work and the ground realities, and formulating reasons of the same To collect feed back from agent advisors and customers To understand the problem faced by agent advisors and customers To ascertain the objectives of questions to be asked and there relevance to lapsed portfolio. To bring out the findings and observations To study the above and provide recommendations to harness the current As-in-process in the company and state the draw backs

(B)STEPS TAKEN: 1) Firstly prepared two questioners on the basis of common Questions/quarries and problems faced by: a) Agent advisors b) Customers whose policy has lapsed (Copy of both provided) 2) Randomly tele - calling customers and agents from the sample selected 3) Filling in the data and information provided by them in the questioners 4) Assimilated the information and structured it into a comprehensive meaningful manner with the help of statistical tools. 5) After assembling the data, analyses were made and trends studied to pinpoint and highlight the discrepancies. 6) Recommendations were made for both the customers and agents (copies of both provided)

(C) SAMPLE a. For Customers: there were in total 120 telephonic calls made to the HIGH VALUE Lapsed customers out of which 72 Leads were generated. b. For Agent Advisors: there were in total 50 telephonic call made to the agent advisors with high lapsed portfolio out of which 28 leads were generated *Therefore in total 100 leads were used as sample.

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Lapse Portfolio & Gap Report GAP-Report (Findings From Agent Advisors): 1) Is Renewal and Lapsed Data Received by Agents

11%

14% 46%

YES NO SOME TIME DIFFICULTY 29%

a) The pie chart above shows that 46% of the Agents receive their monthly lapsed and Renewal Data from the General Office, 29% of the Agents do not receive it. Where as 14% only received it some time and not on regular basis where as 11% has difficulty in getting their data. b) The Agents think that lapsed data would be of help in maintaining persistency, however the lapsed data is not delivered even on request by the agent to the concerned Sales Manager. c) The monthly detail list is put in the pigeonholes on agent basis but the sales managers do not confirm their collection by the agent, as few agents are not collecting them.

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Lapse Portfolio & Gap Report 2) Customer intimated about re instatement clause
C s m r Inim t dA o t u to e s t ae b u R in t t m n C u e e sae e t la s

3% 6 6% 4

ys e n o

a) Only 64% of the customers are verbally intimated as to the provision of reinstatement attached with the policy, where as 36% of the customers are not told at all. b) 90% of the customers do not read the policy documents terms, provisions and conditions there in. c) Out of the 64% only 5% of the customers are told about the reinstatement clause at the time of sales and rest only once the policy lapses. d) Few of the customers who do not receive the letter of lapsation from the company and do not know the reinstatement clause, presume that there interest in the policy is forfeited and do not make an effort to confirm the same.

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Lapse Portfolio & Gap Report 3) Post sales contact with customer
P OS T S AL E S C ON T AC T W IT H C U S T OM E R S
14 12 No of times contact made 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 101112131415161718192021222324252627 Co un t of Age nts P O S T S A LE S CO NTA CT

a) b) c)

The average post sales customer contact maintained by agents is 4.3% annually; these figures do not take in account the contacts made as on renewal dates. The findings show that, the agents were maintaining rapport and building relations with the customers, the agents make good efforts. The customers are even contacted through phone calls, greetings cards and other tokens of appreciations on festivals and various occasions such as customers birthday etc.

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Lapse Portfolio & Gap Report

4) The reminder letters, that are PRM01, PRM09, PRM14 are: Not reaching the customer at all, or Reaching the customer late, even after the renewal premiums are paid, or Not all the three communications are delivered to the customer. Therefore if customers are told that their policies have lapsed they do not believe the agents and the customers trust in both the company and the agent is lost

5) Product option provided by agent

P o u t O tio P o id dB A e ts r dc p n r v e y gn

4 % 3% 2 6% 4 ys e n o s m tim s o e e

(a) It is seen that there is a great amount of competition taking place in the market, especially in the western and northern ones; customer attrition is high because, as the customer is leaving the product of ICICI Prudential and purchasing a different category of product in another company. One of the contributory reasons is that the customer is not aware of other products and benefit available with ICICI Prudential. (b) We even infer that only 64% of the agents briefly name the various product range available with the company, where as 32% do not even name the product options and only explain one product to the customers which they think is suited to customers needs. 4% of agents some times explain more than one product.

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Lapse Portfolio & Gap Report 6) Agent opinion on reason for lapsation
A e t ' O in nO R a o F r g ns p io n e s n o L p aio ast n
7 %

1% 1 2% 5

Pr oa es n l S r ic ev e 5% 7 Po u t r dc S le a s

a) 57% of the agents are of the opinion that the main reason for a policy to lapse is the Personal Issue of the customer. In it Financial constraints and other priorities are covered b) 25% of the agents believe that the Service Issue is the reason leading to lapsation of a policy. Service Issue could be from the companys end: 1. Non response for complaint and endorsement 2. Non communication of changes, non delivery of letters 3. No calls or SMS received by customers 4. If request of changes as to mode of payment by agents on behalf of customers are cumbersome Service Issue could be form the Agents end: 1. Non communication of renewals dates personally to the customer 2. Non collection of renewal premiums on time and at convenience of the customers 3. Lack of interest shown to changes in the policies desired by the customers c) 11% of the agents are of the view that a policy lapses when product issue arises: No more need for the current product is feel by the customers. The customer perceives that there are better competitive products available in the market. Post sales changes option not available with product, as they arise with span of time. d) 7% of the agents themselves state that there are times when a policy lapses due to Sales Issue Wrong Product sold to the customer Obligatory sales made. 33

Lapse Portfolio & Gap Report

GAP-Report (Findings from Customers): 1) Reasons of customers for non payment of renewal premiums

NONE COUNTER OFFER-GWEN LATE AFTER FOUR MONTHS

4.17 1.39 2.78

2.78

11.11 1.39

AGENT ISSUE-WRONG SALES, POOR SERVICE, NO RESPONSE FINANCIAL CONSTR;\INS, WANTS SOME TO CALL HIM FINANCIAL CONSTRAINS, SATISFIED WITH AGENT AND COMP.

15.28 19.44

FINANCIAL CONSTRAINS, UNSATISFIED WITH AGENT WANTS TO REVWE AND PAY, SOME ONE TO CALL NOT HAPPY WITH ATTITUDE OF COMPANY OFFICER

8.33 5.56 1.39 8.33 11.11 8.33

HAPPY WITH AGENT AND COMPANY BUT OUT OF TOWN REPLACED FOR COMPETETOR'S PRODUCT, BETTER PERCIEVED WANT CHANGE IN MODE OF PAYMENT CONVERTED TO ANOTHER MNYL POLICY POLICY DOCUMENT NOT DELIVERED TILL DATE OR LATE PAYMENT MADE BUT NOT CREDITED TO ACCOUNT

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Lapse Portfolio & Gap Report

Remarks NONE COUNTER OFFER-GIVEN LATE AFTER FOUR MONTHS AGENT ISSUE-WRONG SALES, POOR SERVICE, NO RESPONSE FINANCIAL CONSTRAINTS, WANTS SOME TO CALL HIM FINANCIAL CONSTRAINS, SATISFIED WITH AGENT AND COMP. FINANCIAL CONSTRAINS, UNSATISFIED WITH AGENT WANTS TO REVIEW AND PAY, SOMEONE TO CALL NOT HAPPY WITH ATTITUDE OF COMPANY OFFICER HAPPY WITH AGENT AND COMPANY BUT OUT OF TOWN REPLACED FOR COMPETETOR'S PRODUCT, BETTER PERCEIVED WANT CHANGE IN MODE OF PAYMENT CONVERTED TO ANOTHER ICICI PRUDENTIAL POLICY POLICY DOCUMENT NOT DELIVERED TILL DATE OR LATE PAYMENT MADE BUT NOT CREDITED TO ACCOUNT

No. 8 1 14 4 6 8 6 1 6 11 1 2 3 2

Total 72 72 72 72 72 72 72 72 72 72 72 72 72 72

% 11.11 1.39 19.44 5.56 8.33 11.11 8.33 1.39 8.33 15.28 1.39 2.78 4.17 2.78

(a) It can be concluded that it is the agents' poor service attitude and wrong product sales which has contribute 20% towards lapsed portfolio. (b) The other inference taken out is that 16% of the policies lapsed as the customer had opted for a competitor company's products. (c) 11 % of the policies lapsed as the customer was facing financial problems. (d) 11 % of the lapsed customer did not have any reason to state for nonpayment.

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2) Total score of agents given by customer

428 430 425 420 415 Score 410 405 400 395 390 Product & Feature Agents Courtesy Agents Concern for Clear and Explaion By Agent and Friendliness best Purchase with Undestandable Budget Sales Process Made 404 415 421

a) b) c)

The data shows that total score given to the agents on attribute of Product and Feature explanation is 404 which is 56% of the total scale. The score given agents courtesy, appearance and friendliness is 415, which is 58% of the total scale.

Agents concern that the customer purchases the best product as per the needs taking in to account the customers budget got a score of 421 which is 59% of the total scale. d) Agents ability to provide complete answers to customers question and making the sales process clear and understandable received a total score 428 which is 60% on scale.

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Lapse Portfolio & Gap Report 3) Does the customer want to reinstate?

NEED TIME TO DECIDE 26% 31% YES NO

43%

The above pie chat shows the number of customers in lapsed bucket willing to reinstate their policies or not Willing - 43% Not Willing 31% Have To Decide 26%

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Lapse Portfolio & Gap Report 4) Customer awareness of reinstatement clause

68% 70% 60% 50% 40% 30% 20% 10% 0% NO YES 32%

a) Here we see that only 68% of the total number of customers whose policies have lapsed are aware of the reinstatement clause, rest of the 32%are not aware. b) More over the survey also brought out the fact that agents themselves do not know the reinstatement clause and do not communicate to the customer at the time of sales or lapsation. c) 60% out of the 32% of customers who were not aware of the clause, when explained, were ready to consider reinstatement of their policies as maximum customers do not read the document provided to them.

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Lapse Portfolio & Gap Report 5) No. of letters received by customer as percentage

17%

8%

1 2 3

7% 68%

1. 2. 3. 4.

Not Reaching Reaching Late Not all are Delivered All are Received

The reminder letters, that are PRM01, PRM09, PRM14 are: Not reaching the customer at all, or Reaching the customer late, even after the renewal premiums are paid, or Not all the three communications are delivered to the customer. There force if customers are told that their policies have lapsed they do not believe the agents and the customers trust with both the company and agent is lost. Continuity and persistency on average delivery is not maintained. The reading show that only 68% of the customers receive all the three letters where as it is mandatory by IRDA regulations to send letter of lapsation. 32% of the customers are not aware of the changes as to their policies and even about lapsation.

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Lapse Portfolio & Gap Report 6) Post sales customer contact by agency/company

80% 60% 40% 20% 0% NO YES 21% 79%

a) Out of the customers who were contacted only 21%has been contacted again by the agent/company, post sales and 79% were not. b) This reflects upon the companys level of efficiency in relation to follow-up post sales. Following two points come into light: The sense of belongingness of the customer towards the company and acknowledgement of brand equity is minimum. The satisfaction level of the customer is not measured as in the earlier years it has to be maintained at a higher level.

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Lapse Portfolio & Gap Report 7) Was policy document delivered on time to the customers?

9 %

N O YES

9% 1

1. We can conclude that 9% of the customer do not received the policy document with in the promised time by the company. 2. There are 2% of customer who do not receive policy document at all or receive after a years duration. 3. 5% of the customer stated that the policy documents delivered is not good condition.

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Lapse Portfolio & Gap Report RECOMMENDATIONS When a policy lapses, neither the policy owner nor the insurer is benefited. The life assured losses the insurance risk cover. This signifies the reversal of the decision to arrange for the risk cover. They also loose the full benefit for which they have paid till then. On the other hand the insurers loose the expected future revenues and the calculations done in advance for the policy are hampered. The cost in the initial years of the policy are high as they include high administrative expenses and issue cost of the policy, its only when the policy completes there years the insurance company comes to a break even. The other factor is that the agents loose there income source and the efforts put in at the time of sales and during the currency of the term is wasted. As we see that lapsation affects all parties and because Lapsation is always not intended by the insured to happen (Lapsation may occur due to sheer neglect to pay or because of temporary financial difficulty). There fore there should be a great importance given to revive the lapsed policies and to reduce lapsation rate. 1) Lapsation and Renewal list to agents and General Offices: a) Renewal lists reach General offices on the 6th of every month and are received by agents on 10th therefore this time lag should be reduced by sending the lists on last day of every month. b) The Agents should also be given from the Head Office, Renewal list either through Post, e-mail, SMS or Telecalling. This would reduce the time lag and the customers would be intimated in time about there renewal payments. c) Lapsation list must be given to the agents on demand, directly from the Head Office. It can also be given to them by there respective sales managers along with renewal details. d) It should be ensured that details are received by agents on regular basis, and should be checked by sales managers and head office to maintain supervision on random basis for the same. 2) Customers to be educated about: a) Reinstatement Clause as one of the provision of the policy at the time of sales by the agents. b) Agents should be directly to make conscious efforts to ensure that the customers read the policy documents. c) There should be Reading Material and Information Broachers about the companys performance, insurance information, future goals and aspirations send to the customers on quarterly and half yearly mode. This can be done by providing for a column in the proposal form to be filled by customers if they wish to receive the same. 42

Lapse Portfolio & Gap Report This in return would increase the sense of belonging generate interest and provide scientific insurance consciousness to the customers. 3) The postal communication should: a) Reach the customers on time, the dispatch of all the written communication should be handled by a specialize staff. The letters should be dispatched well in advance so that they are received by the customer on time. b) The specialized staff so appointed for the purpose should be made responsible to maintain persistency and quality in dispatching all the letters so that the customers are well informed about all the changes being made to the policy. c) A customer should receive all the three letters in time. 4) Product Options should be mentioned by the agents to the customers. As for now maximum agents only explain one product to the customers which they wish to sell after doing the need analysis. They do not provide for an optional product to the customers, this in return dissatisfies the customers optional product to the customers; this in return dissatisfies the customers, as they are lost to the competitors in the market on different products. 5) Agents should make extra efforts to: a) Collect renewal premiums be maintain good rapport with the customers. Customer contact apart from renewals should be increased specially on festivals and important occasions as birthdays, anniversaries, functions etc. as life insurance is a business which is done through reference sales, healthy and long terms relations should be maintain there own Data Base and Staff to ensure steady renewals. b) Like many all the agents who sell policies as part time business should be advised to maintain there own Data Base and Staff to ensure steady renewals. c) The agents are provided with Palm Tops by company but due to lack of knowledge they are still non-operational. The company should provide some training as to this regard. d) The agents should be advised to maintain higher level of customer services with regard to providing timely and efficient feedbacks to customers complaints, to ensure that customers request as to endorsement and changes are made in minimum time span. e) Non-response to customers request should be eliminated.

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Lapse Portfolio & Gap Report

6) Policy Documents: a) Should be delivered in time as promised to the customers. There are cases where the documents are with the agents even after one year of sales. These should be avoided as it leads to dissatisfaction of the customer, tarnishing the corporate image and lapsation of the policies. b) Many a time the document received by the agents or the customers are not in good condition this should be eliminated as the delivery of policy documents are the first communication from the customer. 7) The agents should be made to feel as the part of the family and there moral should be kept at high as they are the ones on which the renewals depends. They should be made feel special. 8) Sales Managers: a) They Should be more concerned to the problems faced be the agents and should put more efforts to maintain there satisfaction. b) The attitude and sense of superiority shown to the agents should be avoided and team work approach should be adopted. c) As there are times when the sales manages are transferred from the General Office or quits the jobs, there the new Sales manager appointed to the existing agents should show interest in them and their needs.

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