PROJECT REPORT ON LIFE INSURANCE

Submitted by SUMIT JAIN BBA - Semester 1 Div. B

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CONTENTS

S No. 1 2 3 4 5 6 7 8 9 10 11 12 Certificate of the Institute Declaration Acknowledgement Objectives of the Report Business and its Classification Insurance and the Sector LIC-Introduction SWOT Analysis Competitors

Topic

Page No. 3 4 5 6 7-8 9-12 13 14 15-16 17 18 19

Promotional Strategy and Success Conclusion Bibliography

CERTIFICATE OF THE INSTITUTE

This is to certify that the project report entitled Life Insurance submitted at Symbiosis Centre for Management Studies - Noida is a bonafide record of work done by Mr. Sumit Jain in the partial fulfillment of his BBA program of Symbiosis Centre for Management Studies Noida.

Date: Place:

17/10/2011 Noida

Professor Rajbir Kaur

DECLARATION

I, Sumit Jain, student of Business Organization Div.B, Semester-1 of Symbiosis Centre for Management Studies, hereby declare that the Report on Life Insurance is submitted by me for the partial fulfillment of course objectives for the BBA Degree.

I assure that this project is the result of my own efforts and all the information and facts furnished in this Project are based on my intensive study.

Date:

17/10/2011
4

Sumit Jain

Place:

Noida

ACKNOWLEDGEMENT

I, Sumit Jain, express my sincere gratitude to Professor Rajbir Kaur for giving us the opportunity to work under her guidance on this report.

I am grateful to my colleagues and other friends for their valuable suggestions in the execution of the report.

I am also thankful to other staff that guided and helped me very kindly at each and every step whenever I required.

I also acknowledge & convey thanks to the library staff, computer department for their kind and valuable support.

Date: 17/10/2011
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Sumit Jain

Place: Noida

Objectives of the Report:

Life Insurance should widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. Life Insurance is the most emerging sector with a great future as in a country like India, most of the population is not insured and with the growth of the sector with 15-20%.

Insurance companies should maximize mobilization of people's savings by making insurance-linked savings adequately attractive. Insurance companies must conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. Insurance companies should act as trustees of the insured public in their individual and collective capacities. Meeting the various life insurance needs of the community that would arise in the changing social and economic environment. Involving all people working in the Sector to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.

BUSINESS AND ITS CLASSIFICATION

A Business (also known as enterprise or firm) is an organization engaged in the trade of goods, services, or both to consumers. The Basic motive of Business is to earn profit which is nowadays shifting towards costumers satisfaction. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. A business owned by multiple individuals may be referred to as a company, although that term also has a more precise meaning. The etymology of "business" relates to the state of being busy either as an individual or society as a whole, doing commercially viable and profitable work. The term "business" has at least three usages, depending on the scope the singular usage to mean a particular organization; the generalized usage to refer to a particular market sector, "the music business" and compound forms such as agribusiness; and the broadest meaning, which encompasses all activity by the community of suppliers of goods and services. However, the exact definition of business, like much else in the philosophy of business, is a matter of debate and complexity of meanings.

On the basis of functions, Business can be classified under the categories: -INDUSTRY: It includes all those business activities which are connected with raising, producing or processing of consumer goods or capital goods. -Commerce It includes the establishment of link between producers and ultimate consumers and maintains a smooth and uninterrupted flow of goods from producers to consumers.

Industry

Primary

Secondary
(Manufacturing Sector)

TERTIARY
(Service Sector)

Primary Sector: The primary sector of the economy extracts or harvests products from the earth. The primary sector includes the production of raw material and basic foods. Activities associated with the primary sector include agriculture (both subsistence and commercial), mining, forestry, farming, grazing, hunting and gathering, fishing, and quarrying. The packaging and processing of the raw material associated with this sector is also considered to be part of this sector. Secondary Sector: The secondary sector of the economy manufactures finished goods. All of manufacturing, processing, and construction lies within the secondary sector. Activities associated with the secondary sector include metal working and smelting, automobile production, textile production, chemical and engineering industries, aerospace manufacturing, energy utilities, engineering, breweries and bottlers, construction, and shipbuilding. Tertiary Sector: The tertiary sector of the economy is the service industry. This sector provides services to the general population and to businesses. Activities associated with this sector include retail and wholesale sales, transportation and distribution, entertainment (movies, television, radio, music, theatre, etc.), restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law.

ABOUT THE INSURANCE AND THE SECTOR:

Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance. The party bearing risk is known as the insurer or assurer and the party whose risk is covered is known as the insured or assured. 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. Insurance sector falls under that of the category of the Tertiary (Service) sector.

Insurance Industry in India

Life Insurance Motor Insurance Fire Insurance

General Insurance
Health Insurance Marine Insurance

Life Insurance: Life insurance offers a way to replace the loss of income that occurs when someone dies (usually the person who produces the majority of income in a family situation). It is a contract between you as the insured person and the company or "carrier" that is providing the insurance. If you die while the contract is in force, the insurance company pays a specified sum of money free of income tax "cash benefits" to the person or persons you name as beneficiaries. A good life insurance program does more than just replace the loss of income that occurs if you die. It should also provide money to cover the new costs that arise after your death funeral expenses, taxes, probate costs, the need for housekeepers and child care, and so on. And these cash benefits should provide for your family's future needs as well, including college education for your children and part or all of your spouse's retirement needs. In almost all cases, your beneficiary can use the cash benefits in the way he or she sees fit, without restriction. Some types of life insurance permanent life insurance policies have a cash value that you can obtain by cashing out the policy or by borrowing against it. Though it can seem attractive, most financial experts agree that this feature should be seen as a secondary purpose of life insurance. Another type of insurance is term life insurance policies are available as well. To learn more click the respected link. Need for Life Insurance:

If there is someone who would suffer economic hardship if you died, then the answer is yes... you need life insurance! Families with young children have a clear need for life insurance. If both spouses work, the loss of one income will cause the family immediate economic hardship and make it harder for them to realize future goals, such as paying for the children's' education. But even if one spouse works "inside the home" and doesn't bring in a formal income, his or her death will require the surviving spouse to hire child care, housekeepers and other professionals to help run the household - and that can be a significant new expense. If you are married without children or single, then you may need life insurance to protect your partner or surviving family members against the costs associated with your death. Funeral expenses, probate and administrative fees, outstanding debts, special obligations to charities, and federal and state taxes are costs that all of us must consider. And, they can add up quickly. Unless you already have sufficient financial resources, your survivors will probably need life insurance to cover these expenses.

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What Happens To Your Family If You Don't Have Enough Coverage?

Under any circumstances, the loss of a loved one is a traumatic experience. But, if your family is also left without sufficient money to meet basic living needs or prepare for future goals, they will have to cope with a financial crisis at the same time. Depending upon their current financial resources and ability to "get back on their feet" emotionally and financially, your family might be forced to move to a less desirable home or community, abandon education and career plans, reorder family priorities (such as the amount of time spent with the children) and, in general, cut back on the quality of life you have worked hard to achieve. Your family might even be forced to go into debt simply to pay the expenses, like funeral costs, taxes, and medical bills that result from your death. A moment's reflection will tell you that the lack of sufficient life insurance coverage when a loved one dies can have devastating consequences for a family...consequences that can last for years.

Types of Life Insurance Products:

TERM LIFE INSURANCE: Under a Term Life contract, the insurance company pays a specific lump sum to the designated beneficiary in case of the death of the insured. These policies are usually for 5, 10, 15, 20 or 30 years. Term life insurance are the most popular in advance countries but were not so popular in India. However, after the entry of the private operators and aggressive marketing by few players this kind of policies are becoming popular. The premium on such type of policies is comparatively quite low when compared with other types of life insurance policies, mainly due to the fact that these policies do not carry cash value. PERMANENT LIFE INSURANCE: In a Permanent Life contract, a portion of the money paid as premiums is invested in a fund that earns interest on a tax-deferred basis. Thus, over a period of time, this policy will accumulate certain "cash value" which you will be able to get back either during the period of the policy or at the end of the policy. Your need for life insurance can change over a lifetime. At any age, you should consider your individual circumstances and the standard of living you wish to maintain for your dependents. In most cases, you need life insurance only if someone depends on you for support. Your life insurance premium is based on the type of insurance you buy, the amount you buy and your chance of death while the policy is in effect. This type of policy not only provides protection for your
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dependents by paying a death benefit to your designated beneficiary upon your death, but it also allows you to use some part of the money while you are alive or at the end of the policy. Some examples of such policies are: - Whole Life, Universal Life and Variable-Universal Life. ENDOWMENT POLICIES: These policies provide for period payment of premiums and a lump sum amount either in the event of death of the insured or on the date of expiry of the policy, whichever occurs earlier. MONEY BACK POLICIES: These policies provide for periodic payments of partial survival benefits during the term of the policy itself. A unique feature associated with this type of policies is that in the event of death of the insured during the policy term, the designated beneficiary will get the full sum assured without deducting any of the survival benefit amounts, which have already been paid as money-back components. Moreover, the bonus on such policies is also calculated on the full sum assured. ANNUITY / PENSION POLICIES / FUNDS: This policies / funds require the insured to pay the premium as a single lump sum or through instalments paid over a certain number of years. The insured in return will receive back a specific sum periodically from a specified date onwards (the returns can can be monthly, half yearly or annually), either for life or for a fixed number of years. In case of the death of the insured, or after the fixed annuity period expires for annuity payments, the invested annuity fund is refunded, usually with some additional amounts as per the terms of the policy. Annuities / Pension funds are different from all other forms of life insurance as an annuity policy / fund does not provide any life insurance cover but merely offers a guaranteed income either for life or a certain period. Therefore, this type of insurance is taken so as to get income after the retirement. 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.

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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 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.

LIC of India: the market leader in Life Insurance Sector

About the company:

LIC was established in 1956 25 crore customers across the Nation. Nationalization of the life Insurance sector took place. Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers and 75 provident societies 245 Indian and foreign insurers in all. LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. The Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. In1999, following the recommendations of the Malhotra Committee report, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry and in 2000, The IRDA was incorporated as a statutory body.
LIC, Today, Holds a market share of about 64% and 3.58 crores of policies, SumAssured is Rs. 390053 crores and Premium of Rs. 35321 crores Winning the trust of the people. Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal offices, 992 satellite offices and the corporate office. LICs Wide Area Network covers 109 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. 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.
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SWOT ANALYSIS of LIC: STRENGTHS:

o o o o

Indias top insurance company and best among Public sector company. Provide better infrastructure than any other Public company. LIC of India provides various types of insurance policies to the customer. LIC make good relationship with customers and provide extra unique features for the customer who wants to take policy from them. Provides all types of insurance advisories. And the transparency is also much better from other insurance companies with least employee turnover.

WEAKNESSES:
o o o o

Average waiting time for the customer is 15 to 20 minutes. No separate customer care unit. Rude attitude of the employees. No other facility such as, multiplicity and free financial advice of the company.

OPPORTUNITIES:
o o o o

Setup a marketing cell at the local branch. Ensure that policies are diversified across several customer segments.

Low Insurance penetration- 2.8 % of GDP, World Average- 6-9 % Still 75 % of Indian Population not covered by Insurance So, there is a huge market for Life Insurance---expected to grow at 20-30% for next 10-15 years.
THEREATS:

Growth of private players has led to shifting emphasis from public sector companies. Increase in foreign insurance companies resulted in taking away business from PSUs. ( Public sector Undertaking )

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Competitors in the Market:

1. LIC (Life Insurance Corporation of India) still remains the largest life insurance company accounting for 64% market share. Its share, however, has dropped from 74% a year before, mainly owing to entry of private players with innovative products and better sales force. 2. ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India. It experienced growth of 58% in new business premium, accounting for increase in market share to 8.93% in 2007-08 from 6.97% in 2006-07.

3. Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in number of policies sold in 2007-08, with total market share of 7.36%. 4. SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked 6th in 2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an increase of 87% over last year.

5. Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market share went up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium and 4th in number of new policies sold in 2007-08. 6. HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08, registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 Th among the insurance companies and 5th amongst the private players.

7. Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in 2007-08. The company moved to the 7th position in 200708 from 8the a year before, pushing down Max New York Life insurance company. 8. Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore. The company was pushed down to the 8th position from 7th in 2007-08.

9. Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported growth of 80%, moving from the 11th position to 9th. It
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captured a market share of 1.19% in 2007-08. Last year the company doubled its branch network to 150 from 74. 10. Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th last year. It has presence in more than 3,000 locations across India via 221 branches and close to 40 bank assurance partnerships. Aviva Life Insurance plans to increase its capital base by Rs 344 crore. With the fresh investment, total paid-up capital of the insurer would go up to Rs 1,348.8 crore.
Companies LIC ICICI Prudential Bajaj Allianz SBI Life Insurance Reliance Life Insurance HDFC Standard Birla Sun life Max New York Kotak Mahindra Aviva Life Insurance Market Share 64% 8.9% 6.9% 5% 2.9% 2.8% 2.1% 1.5% 1.2% 1%

Market Share
70 60 50 40 30 20 10 0 Market Share

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Promotional Strategy: Promotion is defined as the coordination of all seller-initiated efforts to set up channels of information and persuasion in order to sell goods and services or promote an idea. Advertising is defined as any paid form of non personal communication about any product, organization, services or idea by an identified sponsor. Objective of promotion and advertisement is creating brand identity and brand equity. A Brand is defined as a name, term, sign, symbol or design or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. In the case LIC has taken help of advertising agencies to promote the Brand LIC. They used creative slogans which affects the customers mindset and able to attract their attention. Those slogans helped LIC to make the customer emotionally attached to services provided by them. They spend huge amount of money in advertising and sales promotions to build their brand equity and identity. To avoid the interference in communication to customer, they reduced the number of ad agencies and worked with limited number of those agencies so that the message reached to customer, doesnt lose the main objective. LIC as a successful brand:
o o o o

Indias top insurance company and best among Public sector company. Provide better infrastructure than any other Public company. LIC of India provides various types of insurance policies to the customer. LIC make good relationship with customers and provide extra unique features for the customer who wants to take policy from them.

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CONCLUSION
While doing the project report on LIFE INSURANCE I came to a conclusion that this project has helped me in getting knowledge about the Life Insurance, The sector, companies and their operations

I came to know that it is Important for one to get Life Insurance as it minimizes the risk of loss of money followed by the risk of uncertainty.

I gathered knowledge about LIC of India and came to know about the customers satisfaction provided by them and also their success.

Also, Project Report proved to be different from that of a presentation.

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BIBLIOGRAPHY

Websites:
WWW.LICINDIA.IN BLOGS.SILICONINDIA.COM WWW.WIKIPEDIA.ORG

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