Consumer Awareness towards Insurance Products

PROJECT REPORT On A STUDY OF

“Consumer awareness towards insurance products”

In the partial fulfillment of the requirement for the award of the degree of MASTER OF BUSINESS ADMINISTRATION

Under the supervision of MISS TEENA GUPTA Lecturer S.I.T.M REWARI

Submitted by: SUMIT GUPTA ROLL NO.51 MBA 4TH SEM

SUBMITTED TO: MAHARSHI DAYANAND UNIVERSITY, ROHTAK

SOMANY (P.G) INSTITUTE OF TECHNOLOGY & MANAGEMENT

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DECLARATION I, Sumit Gupta Roll No.51, M.B.A IVth of the SOMANY (P.G) INSTITUTE OF TECHNOLOGY & MANAGEMENT, REWARI hereby declare that the Project Proposal “Consumer awareness

towards insurance products” is an original work and the same has not been submitted to any other institute for the award of any other degree. The interim report was presented to the Supervisor on 05.02.2008 and the pre submission presentation was made on 22.02.2008. the feasible suggestions have been duly incorporated in consultation with the supervisor. Countersigned

Signature of the Supervisor

Signature of Candidate

Forwarded by Director/Principal of the Institute

SUMIT GUPTA

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A WORD OF THANKS No task is single man’s effort. Any job in this world however trivial or tough cannot be accomplished without the assistance of others. I wish to record my gratitude to all the persons with whom I interacted and have contributed significantly for the completion of the project. It is very difficult to put their names individually but their contribution can not be underestimated without their help and co-ordination, this project would not have been possible. I take this opportunity to extend my heartiest thanks to MISS TEENA GUPTA, lecturer of S.I.T.M whose eradicate guidance and supervision has made this work possible. I also thanks to my parents and great almighty God whose blessings made it possible for me to complete my work.

SUMIT GUPTA MBA (2ND YEAR)

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TABLE OF CONTENTS 1.Introduction Introduction of insurance sector Objective of the study New guide lines for ULIPS Basic terminology of insurance Consideration in choosing a policy How to buy life insurance Significance of study Review of literature Conceptualization 2. Research Methodology: Research Design Sample Design Sample Procedure Data Collection

3. Objective Wise Analysis: 4. Macro analysis 5. Findings and conclusions 6. Annexure:  BIBLIOGRAPHY  QUESTIONAIRES

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INTRODUCTION TO INSURANCE Introduction:The basic customer need met by life insurance policies are protection and savings. Policies that provide protection benefit are designed to protect the policy holder or his dependents from the financial consequences of unwelcome events such as death or long term sickness /disability .policies that are designed as saving contracts allow the policy holder to build up funds to meet specific investment objectives such as income in retirement or repayment of loan. Types of policies The common type of life insurance policies are: •

endowment assurance

•

money back plan

•

whole life assurance

•

unit linked plan

•

term assurance

•

immediate annuity

•

deferred annuity

•

riders

Endowment assurance There are basically two variants of this policy a. nonparticipating endowment assurance

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b. participating endowment assurance

Non participating endowment assurance: This policy offers a guaranteed amount of money [sum assured] at the Maturity date of the policy in exchange of for a single premium at the start of the policy or a series of regular premiums through out the term of the policy If the policy holder dies before the maturity date the usually the same sum assured is paid on death.

Participating endowment assurance: The structure if this policy is same to that of the nonparticipating policy except that initial sum assured under the policy is expected to be enhanced by payment of bonuses to the policy holder In the Indian context bonuses usually take the form of additions to the initial sum assured and become payable in the event of the occurrence of the insured event, i.e. survival up to maturity date or earlier death. Money back plan: This is very popular savings cum protection policy because it provides lump sump at periodic intervals .for exp given an initial sum assured of Rs. 1000 and a term of 20 years, the policy may provide part payment of the sum assured as follows:20% at the end of 5 years 20% at the end of 10 years 20% at the end of 15 years 40% at the end of 20 years

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Continuing with this exp if the guaranteed annual addition is say rs.100 per 1000 sum assured, then policy holder gets 400 of the initial sum assured plus guaranteed addition of 2000[100x20] at the end of 20 year term .the money back policy illustrated above is non participating policy. Whole life assurance: Basically it provides long term financial protection to the dependents. It is particularly useful as a means of protecting some of the expected wealth transfer that a parent would be aiming to make to his/her children when he/she died. Such policy can also be tax efficient way of transferring wealth at any age depending on legislation.

Unit linked plan: A unit linked plan is also a investment oriented product. As compared to other investment plan, the investment portion of the unit linked plan functions like a mutual fund, it is invested in a portfolio of debt & equity instruments, in conformity with the announced investment policy, and hence it grows or erodes inline with the performance of that portfolio. Of course through out the period of investment the policyholder enjoys an insurance cover as stipulated. Term assurance:-

This is a pure protection policy, which provides the benefit on the death of as individual with in a specified term. A popular variant of the term policy is the decreasing term assurance policy under which the sum assured decreases over the term of the policy. This type of policy can be used to meet two

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specific needs firstly; it can be used to repay the balance outstanding under a loan in the event the death of the policyholder. Secondly it can be used to provide an income for the family of the deceased from the time of the death up to the end of the policy term. Immediate annuity: This type of policy meets the policyholders need for a regular income, for exp after his or her retirement. The policy can also be structured to provide an income for a limited period, for exp to pay the school fee of the policy holder’s children Deferred annuity: A deferred annuity enables the policyholder to build up a pension that becomes payable on his/her retirement from gainful employment. At the vesting date of annuity the alternative of lump sump may be offered in lieu of part or all of the pensions. Riders: Riders are add-on to the insurance policies described above. This add-on’s can be purchased with the base policy on the payment of a small additional payment. The commonly offered riders in Indian context are: Accidental death benefit Critical illness rider Waiver of premium rider Term rider

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OBJECTIVE OF THE STUDY: The project consumer awareness towards insurance products is undertaken to achieve the following objectives:

1.

To create the awareness of insurance products in people.

2.

To give buying tips to make their insurance prosper.

3.

To know the investor perception towards investment in insurance Fund as compare with other investment tools.

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Historical perspective

Early Period:Insurance is some from is as old as historical society. So called Bottomry, contracts were known to merchants of Babylon as early as 4000-3000 BC. Bottomry was also practiced by the Hindus in 600 BC and was well understood in ancient Greece as the 4th century BC. Under a bottomry contact, loans were granted to merchants with the provision that if the shipment was lost at the loan did not have to repay. The interest on the loan covered the insurance risk. Ancient Roman law recognized the bottomry contract in which an article of agreement was drawn up and funds were deposited with a money changer. Marine insurance become highly development in the 15th century. In Rome there were also burial societies that paid funeral costs of their member out of monthly dues. The insurance contact also development early. It was known in ancient Greece and among other maritime nations in commercial contact with Greece.

MEDIEVAL PERIOD: Life insurance in its present from came to India from the United Kingdom with the establishment of British firm, oriental life insurance company, in Calcutta in1818. This was following but the formation of Bombay life insurance company in1823, the madras equitable life insurance company in 1829, and the oriental govt. life insurance company in 1874, the first general insurance company, the triton insurance.

Company limited was established in Calcutta in 1850. The Indian mercantile insurance company ltd. which was set up in Bombay in 1907 was the first Indian company to transact all classes of

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general insurance business. Even though the first life insurance company was established in 1818, there was no excusive legislation to govern the activities of all insurance companies.

In 1912, the Indian life insurance company act was enacted to control the operation of life insurance companies. Thus act was modeled on assurance company act, 1909 of UK. In 1928 the Indian insurance company act was passed. This act amended the 1912 act and provided for collection of statistics concerning insurance business other than life business. it also covered the foreign companies operating in India. MODERN ERA: In April 1945, a committee under the chairmanship of sir cowasji jehangir was appointed to enquire in to the undesirable developments in the management of insurance companies and recommended suitable measures. on the basis of recommendations of this committee, a bill was introduced in 1950 and passed in the same year as the insurance [Amendment act 1950], the life insurance corporation of India came in to being on September 1 st 1956 with the compliance of life insurance corporation of India act 1956, the general insurance business nationalization act 1972 was passed an general insurance business was nationalized with effect from January 1, 1973.

On April 7, 1993 the government appointed as a sequel a committee headed by shri R.N malhotra to examine the reforms required in the insurance sector. The committee in its report submitted on January 7, 1994 recommended among other things, the opening up of insurance sector to player other than the state owned ones. The service standards of Indian insurance majors, an extend insurance coverage to larger section of the Indian population. These recommendations were accepted by the government and insurance regulatory and development authority act 1999 Consequent amendments to the insurance act 1938, life insurance corporation act 1956 and the general insurance business act 1972 were passed in the year 2000, paving the way for the opening of the insurance sector. Subsequently, the IRDA brought out many REGULATIONS

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FOR CONDUCT OF BUSINESS IN India an opened the window for accepting the application for licensing of insurance companies with effect from augest, 16, 2000.

Insurance regulatory environment: After fighting an intense political battle for more than six years, insurance regulatory and development authority act saw the light of the day at the fag end of 1999, by the en of 2000, the insurance regulatory and development authority [IRDA] which was given the statuary power by the IRDA act, acted relentlessly to establish the rule of the law in the newly opened up domestic insurance industry. the authority has already enunciated regulations on all the vital operational areas including registration of Indian insurance companies, obligations of insurance to rural social sector regulations, general insurance and general insurance reinsurance regulations actuarial report and abstract regulation licensing of insurance agents regulations insurance advertisement and disclosure regulation, investment regulation and accounting standard regulation.

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Entry of foreign companies: With the passage of insurance regulatory and development act [IRDA] through Indian parliament in late 1999, investment in this sector has been opened up to foreign investors. The following are the salient features of the new foreign investment policy in this sector according to the present investment policies.  It requires the Indian promoter to invest either wholly in an insurance venture or team up with a foreign insurer, with a capital of 26 percent of equity for the foreign partner.  The Indian promoter is permitted to invest only after 10 years the Indian public, through a public of ring of shares, at which the equity structure will provide for equal participation between the India and foreign partner with a share of 26 percent each in the share capital.  Foreign insurance companies will not have to go to foreign investment promotion board [FIPB] to get their proposals cleared .clearance from the insurance regulatory and development authority [IRDA] is adequate. After the IRDA approval, the reserve bank of India is to be informed.

A capital of 26 percent foreign capital is meant to ensure that the financial interest substantially vests with the Indian promoter. However this will also permit the foreign co promoter a definite say in direction and management of the company. [By Indian company law, 26 percent is the minimum equity to move a resolution or veto a resolution in board of director meeting].

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Procedure for registration A company desirous of entering the insurance sector in India has to make a requisition for registration addressed to the IRDA; the company has to apply to the IRDA for grant of a certificate of registration. The application should clearly indicate the category of business.  life insurance business consisting of linked business ,non-linked business or both  general insurance business including health insurance business[or health cover]

Requirements for application for requisition:  A certified copy of the memorandum of association an article of association, where the application is a company an incorporated under company act 1956.  A statement of the class of insurance business proposed to be carried on.  A statement indicating the sources that will contribute the share capital require under section 6 of the act.

Requirements for the application for registration  Evidence of having 100 crores or more paid up equity share capital in case the registration for the grant of certificate is for life insurance business or general insurance business.  Evidence of having Rs. 20 crores or more paid up equity share capital in case the application for the grant of certificate is for re-insurance business.

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Registration fee:  A fee of Rs 50 thousand for each class of business has to be made by the application in favour of the insurance regulatory and development authority payable at New Delhi.  An application granted a certificate of registration has to commence business, for which he has been not be able to commence the business with in specific period of 12 months it can seek an extension by a proper written application to the authority.  The authority beyond 24 months grants no extension of time from the date of grant of registration.  Some of the foreign companies have started business in India and other are in process of launching their products. reliance, Sundaram, alliance, ICICI PRU, HDFC STANDARD LIFE , max new York, BIRLA SUNLIFE, ING VYASA, OM KOTAK MAHINDRA,TATA-AIG for life and non-life, IFFCO TOKYO marine for non life have already receive their license from the IRDA to start their business.

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PRODUCTS: LIFE INSURANCE CORPORATION  New bima nivesh single premium  Bhavishya jeevan  Double endowment  Endowment assurance  Fixed term assurance  Jeevan griha[double cover]  Jeevan griha[triple cover]  Jeevan shree  Jeevan mitra[double cover]  Jeevan mitra[triple cover]  New Jan raksha  Unit linked insurance plan

ICICI Prudential life insurance  Save ‘n’ protect  Single premium bond MAX NEWYORK life insurance

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 Life gain plus  Stepping stones

BIRLASUN LIFE insurance  flexi save plus endowment plan  flexi cash flow b. PLAN FOR CHILDREN: LIFE INSURANCE CORPORATION  Children’s money back assurance plan  Jeevan baalya  Jeevan kishore  Jeevan sukanya[for girl child]  Bal vidhya  Komal jeevan

c. WHOLE LIFE POLICIES: LIFE INSURANCE CORPORATION:  Convertible whole life plan

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 Joint life plan  Whole life limited payment plan

MAX NEWYORK life insurance  Dread disease rider  Personal accident benefit rider

D. MONEY BACK POLICIES LIFE INSURANCE CORPORATION  Jeevan chhaya  Jeevan sachay  Jeevan surbhi  Money back policy ICICI Prudential life insurance  Cash back  Hdfc standard life insurance

E. PENSION PLANS LIFE INSURANCE CORPORATION  Jeevan suraksha  Market plus  Future plus F. TERM POLICIES

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LIFE INSURANCE CORPORATION  Bima kiran  Bima sandesh  Convertible term assurance plan  Temporary assurance plan

ICICI Prudential life insurance  Life guard  Max newyork life insurance  Five year term renewable and convertible F. SPECIAL NEED POLICIES LIFE INSURANCE CORPORATION  NEW BIMA NIVESH-SINGLE PREMIUM INVESTMENT OPTION

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POLICIES AT A GLANCE LIC FUTURE PLUS [UNIT LINKED DEFFERED PENSION PLAN] FEATURES: 1. MINIMUM AMOUNT 5000/-INCREASING THERE AFTER IN THE MULTIPLES OF 1000 2. FUNDS AVAILABLE: a. bond fund b. income fund c. balanced fund d. growth fund 3. IN CASE OF DEATH NOMINEE WILL GET SUM ASSURED+ UNIT VALUE PRICE IN THE FORM OF REGULAR PENSION LIC JEEVAN PLUS FEATURES: 1. MINIMUM AGE OF ENTRY 18 YEARS COMPLETED 2.

RIDERS AVAILABLE

3. DOBLE BENEFIT[ EATH BENIFIT + MATURITY BENIFIT] 4. ANY TIME PREMIUM PAYMENT OPTION

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5. PARTIAL SURRENER OPTION MAX NEWYORK LIFEMAKER FEATURES: 1. MINIMUM INVETMENT 15000 2. ANY TIME PREMIUM PAYMENT OPTION[ AS PER MARKET CONDITION] 3. GURANTEED BONUS 4. AUTO COVER 5. OPTION OF TOPUP EPOSIT AND WITHDRAWL 6. EXAMPTION IN TAX 80-C 7. SWITCHING FACILITY IN A. LIQUID FUNDS B. BALANCED FUNDS C. SECURED FUND GROWTH FUND

BAJAJ ALLIANZ CASH GAIN FEATURES:  15 DAYS FREE LOOK PERIOD  PREMIUM DISCOUNT FOR WOMEN  PREMIUM PAYMENT MODE THROUGH SALRY  CASH BENIFIT  ADDITIONAL BENIFITS A. FAMILY INCOME BENEFIT B. CRITICAL ILLNESS RIDER C. ACCIENT DEATH BENIFIT D. HOSPITAL CAH E. MAHILA GAIN RIDER BENIFIT

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OUTLOOK REPORT BAJAJ ALLIANZ FUNDS LAUNCHED INJULY 2004 ARE THE TOP MARKET PERFORMERS EXIBITING AN ANNUALIZED RETURN SICE INCEPTION ON 48 PERCEN ON ITS EQUITY PLUS OPTION AND 32 PERCENT ON EQUITY INDEX FUND.

NEW GUIDELINES OF ULIP  First three premiums should be paid on due date, in case if premium is not paid on due date insurance cover is lapsed only invested amount is paid there after.  After completion of 3 years any time premium facility is available  Exemption of 2 year is given for non payment of premium after three consecutive years to maintain insurance cover.  Top up amount will be 25 percent of the premium till paid 3 year lock in period for with drawl of top up amount

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BASIC TERMINOLOGY OF INSURANCE Many people go about buying insurance without being aware of basic terminology being used and the product being offered. It is not possible to touch upon all products offered by different insurance companies worldwide as there is too much variety and as many local products tailored to specific needs. Here I, touch upon the basic insurance terms and what they mean, so that the person buying the insurance product is aware of what he is going in for and the implications there of. The person buying the policy is not necessarily the beneficiary. He is the policy holder and is insured. The insurance company selling the policy is the insurer. The person who will get the money when and if the policy holder dies is the Beneficiary. The beneficiary is nominated in the policy by the policy holder or insured person. So the beneficiary is the Nominee. The premium is the amount of money you pay to the insurer to buy a policy. It can be a Single Premium Policy (premium paid only once) or an Annual Premium Policy (premium is paid annually for a fixed tenure).

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The Term of the policy is the number of years you bought the policy for. It is the number of years that the policy will run. There are primarily two kinds of policies (with minor variations built in, depending upon a country's laws and product innovations): Term Insurance provides protection in case of death of the policy holder. It is normally the cheapest type of insurance available and provides money (the sum assured) to the beneficiary (nominee) in case of death of the insured within a specified term (period) of the policy. If the insured dies beyond the term period specified in the policy, the beneficiary gets nothing.

In Endowment Insurance, a saving element is added. It provides protection for life and also gives a basic sum assured to the insured if he outlives the policy tenure. The sum assured is paid to nominee in case of death, or if there is no death, within the term of the policy, the insured gets a payment at the end of the policy term. So it combines savings with protection. These policies are normally with a heavier premium and may have multiple variations with companies innovating to attract new customers with multiple variable products within the ambit of an endowment policy. Before we proceed further, we must understand that the Sum assured is the guaranteed amount of payment specified by the insurer (insurance company) in case of death or in case you outlive the policy ( in case of endowment policies). This may also be known as Coverage. Maturity Value is the amount of money the insurance company is bound to pay you and is an addition of the Sum Assured and any declared Bonuses. Bonus is the amount the insurer agrees to pay in addition to the sum assured. It may be a Reversionary bonus and is added to the policy throughout the term of the

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policy. It may not be payable immediately but will be given to beneficiary in case of death or the insured in case, maturity amount is payable. This bonus can either be a with-profit bonus or a guaranteed bonus. This means this bonus may be tied with the profits of the insurance company (discretionary in nature) or it may be a fixed guaranteed value. A Rider is an optional feature that can be added on to a basic policy. You may want to buy a rider for say critical illnesses or accidents etc. The insurer will normally charge an additional premium value for every rider you add on.

An Annuity is regular payments and insurance company may guarantee at some future date. It is normally an instrument of retirement planning and may be a monthly / quarterly or annual return depending upon the terms of the policy. You may want to discontinue your policy after a specific time on account of various factors. The amount of money the insurance company pays you when you surrender this policy before its maturity value is the Surrender Value. Normally the insurance company will try to limit the payment under this process and the insured is likely to lose out on bonuses and other accrued additions. The Paid up Value of the policy is a different concept to the surrender value. If you stop paying the premium after a number of years before the full payment term of the policy, the policy is adjusted downwards for the Paid up Value. It will now run normally without additional payments till maturity but the value of the sum assured will have been adjusted downwards. Survival Benefit is the amount of money that will be paid if you survive (live for) specified terms under the policy. You could be paid money if you survive for say

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five years, ten years and so on, till the maturity of the policy. The sum assured is paid to the beneficiary incase of death, irrespective of any survival benefits paid.

Consideration in choosing a policy Bear in mind the following considerations in choosing a policy:

 Review your own insurance need and circumstances. Choose the kind of policy that has benefits that most closely fit your needs. a life insurance agent or a financial advisor can help you in this task  Be sure that you can handle premium payments. Can you afford the initial premium? If the premium increases later and you still need insurance, can you still afford it?  Don’t buy life insurance unless you intend to stick with your plan. it may be very costly if you quit during the early years of your policy terms  If you are thinking of surrending your insurance policy or replacing it with a new one, you should carefully assess the surrender value and the rights and the benefits of the new policy.

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How to Buy Life Insurance Buying life insurance is an easy way to protect your family after you're gone. If you know what to look for, you can get great coverage at a price you can afford. Why buy life insurance? Topping the list of reasons to buy life insurance is the financial protection life insurance offers. If you're single and just starting out, you may not need life insurance. But as you take on more responsibilities and your family grows your need for life insurance increases. The proceeds from a life insurance policy can replace the income lost to your family upon your death. You might also want to buy life insurance to pay off debts and expenses, leave money to charity, and cover final and estate expenses. Choose term or cash value There are two basic types of life insurance: term life insurance, which provides life insurance coverage for a specified period of time (the term), and cash value (permanent) life insurance, which combines a death benefit with a cash value component. Cash value insurance offers lifetime protection, while term insurance may be the most affordable option if you're buying life insurance mainly for the financial protection it offers, and your need for life insurance is temporary (until your 28

children leave the nest, for instance). Some term policies (called "convertible") will permit you to exchange the term life insurance policy for a permanent one at some point. Decide how much coverage you'll need The amount of life insurance protection you should buy depends on how much income your survivors will need, how much you own and owe, and the amount of other life insurance available to you. If you're married, both you and your spouse should consider buying life insurance. One of the easiest ways to estimate how much life insurance protection you should buy is to use a life insurance needs calculator.

Pick a number between 1 and 30 Term life insurance is usually offered for periods ranging from 1 to 30 years. Consider choosing a term that matches your need for life insurance protection. For instance, if your main reason for buying life insurance is to protect your 7-year-old twins until they're out of college, you'll want to buy a policy with a term of at least 15 years. How much will it cost? How much you pay for life insurance will depend on a number of risk factors, including your age, your health, whether you use tobacco, your family health history, and the type and amount of life insurance you're buying. Keep in mind that the premium you're quoted initially will increase later. For instance, when you buy term life insurance, rates are guaranteed only until the end of the term (annually for annual renewable term or at the end of a specified number of years for level term). While most life insurance policies can be renewed at the end of the term, you'll pay a higher premium for coverage. Shop around When comparing quotes for life insurance, make sure that the insurance coverage you're comparing

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is similar. And remember, any policy that you buy is only as good as the company that issues it. Find out what rating the company has received from major ratings services, such as A. M. Best or Standard & Poor's. These companies evaluate an insurer's financial condition and claims-paying ability. The company giving you a quote should provide you with this information. You can also contact your state's department of insurance to find out more about an insurer's record. Submit an application Once you're ready to purchase a life insurance policy, you'll fill out a life insurance application that contains questions about your current and past health history and lifestyle. You'll generally be required to take a medical exam, arranged and paid for by the insurance company. The answers you give on your application, along with the results from the medical exam and your past health history, will help the insurance company determine whether to offer you a policy, and if so, at what price.

Learn the lingo Maybe a life insurance contract isn't as exciting as a best-selling novel, but read it anyway. Policy provisions, the amount of benefits, the premium, and other charges you'll pay will be listed along with other important information such as the beneficiaries you've named and the premium guarantee period. Make sure you understand everything in the policy. Under the laws of your state, you may have a "free look" period (typically at least 10 days) during which time you can cancel the policy without penalty.

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FUTURE TRENDS: More expectations from the new players: Though LIC and GIC were the only insurance companies in India, the penetration level of these companies have not been very high. 1. Per capita premium in India is quite low compare to developed economies. Per capita insurance premium in India in 1999, US$823 for Hong Kong and US$144 for Malaysia. 2. while insurance premium as a percentage of GDP was 14% for japan,13% for south Africa 12% for korea,9% for UK and France, it was only around 2% in India[compared to world average of 7.8% in 1999] 3. While the insurance premium as a percentage of GDS gross domestic saving was 52% for UK, 35% for other European and American countries, it was only 9% India in 1999. 4. The share of India in the world market in terms of gross insurance premium is again very small. for instance while Japan has 31%,european union 35%,south Africa 2.3%,canada 1.7% share

of

the

global

insurance

premium,

it

is

only

0.3%

for

India.

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hence the opening up of the insurance sector to private insurance has put a great responsibility on them to ensure fast growth of insurance so that India can come up to the level of developed countries of the world in offering the insurance cover to citizens. Those reflect that there is a big scope for new players in the liberalized insurance sector.

GROWING NEED FOR INSURANCE In India insurance is traditionally considered an instrument of savings. The potential of insurance products as risk compensators has always been underemphasized. Consider these findings of an LIC survey as many as percent of insurance buyers consider insurance product avenues for compulsory savings. Only 26% see insurance as old age pension, while just 18% consider it as provision for risk and uncertainties. This trend might be in change soon.” customer prefers to have more options. They want not just basic products but investment base insurance products, pension products, and health care products as well”

Innovative products as well defined target: Insurance products have a correlation to both lifestyle and level of economic activity. it would be folly to assume that products, which are marketing success in the west, will be equally success in India today LIC has more than 60 products and GIC has more than 180 products offer in the market but many of them are outdated and may not be best suited to the needs of the modern day consumers. Old as well as new insurance will have to offer innovative products to the consumers.

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1. Being agriculture based economy; there are immense opportunities for the new entrants to provide the liability and risk associated in this sector like weather insurance, rain fall insurance, cyclone insurance, crop insurance etc. 2. Housing finance, auto finance, credit cards and consumer loans all offer an opportunity for insurance companies to introduce new products like creditor insurance etc. 3.

The lack of comprehensive social security system combine with a willingness to save means that India demand for pension products will be large.

4. Service sector is taking a large and growing share of India’s GDP this offers immense opportunities for expansion opportunities.

There are other segments such as natural disaster insurance or insurance against terrorism that may provide potential opportunities. Insurance companies create products and go out to find customers. They do not create products that the market went factors such as increasing life expectancy, is integration of the traditional joint family system and the rising cost of healthcare are bound to make the market claimer for the variety of insurance products. For exp tata AIG general insurance has launched business guard policies for shopkeepers. Business guard policy offers a package of insurance that would cover earthquake fire loss of rent burglary and personal accident cover. There are two versions of the policy-jyoti and sanjeevni while jyoti targets small shopkeepers with a maximum sum assured of Rs. 10 lakh sanjeevni is meant for big shopkeepers with a significantly higher sum insured. Multiple distribution channels: distribution will be a key determinant of success for all insurance companies regardless of age or ownership. if insures are to take advantage of India’s large population an reach a profitable mass of customers, new distribution avenues and alliances will be imperative,

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though face to face selling will dominate but foreign players with the domestic partner’s strong Values can test the unconventional distribution channel like brokers corporate agencies, financial intermediaries, bank assurance, affinity group and direct marketing through telesales financial intermediaries. Some channels will be cheaper than others; hence there will be competition among the channels. The new insurance can leverage by multiple distribution channels.

Training for agents: Under the new IRDA regulations and application for agent seeking license for the first time has to under go a minimum of one hundred hours practical training in life insurance. The objective of the training is to develop technical skills and selling skills among insurance agents. It will help them to bring professionalism in their profession. Earlier customer interest was not the prime focus as both the company [LIC&GIC] has enjoyed a monopoly or a sellers market. In the new environment however, the focus of every company would be to attract and retain more customers. Training in customer focus and selling skills will also be important. These HR challenges will be more peculiar in public sector companies. Leadership of life insurance corporation: Today LIC has around 7, 00,000 agents in the country, and has also create an enviable brand name, particularly among the rural population of the country. It has around US$40billion as its life fund and is a strong player in the financial sector. However, on the qualitative side, it has very little to take pride in and therein lies the potential for foreign players in Indian insurance sector. in future the LIC urban market share will be

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effected by new entrants but LIC can compensate with strong brand equity in rural area because it would not be easy for them to gain trust of the rural masses. Application of IT: Entry of new private players will also bring in updated technology, efficient management system and a healthy business culture. the new players with state of art technology under their belt will be in advantageous position. Expected profit period: The new insurance will have to invest a minimum capital of Rs 100crore. The normal gestation period is of five years. The generation of profit starts normally in sixth year. Hence the new insurer will have to be ready for locking up their capital for at least 5 years before earning profits.

Untapped potential: There is no doubt that the potential market for buyers of insurance is significant in India and offers a great scope of growth. Though a vast population waits to be served a well-defined strategy to reach out to this population is a must. Much of the demand may not be accessible because of poor distribution, large distance or high cost relative to returns. Solutions to such problems must come out clearly from the strategy. Rather than adopting a myopic. Strategy of targeting the business of existing companies, the new entrants should spell out a strategy to expand its market. Most of the Indian corporation planning to enter insurance has no prior experience in the insurance business. But they can bring to the table valuable insights into the psyche of the typical Indian consumer. Their knowledge of the distribution channel, a key ingredient for the successful delivery of insurance products, is a substantial value addition to the relationship. Low premium by better asset management:

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Inefficient asset management and low investment yield are responsible for high premium charged by Indian insurance companies; private companies would be more proactive in managing their investment in spite of the restriction on investment by IRDA. Role of regulator: Private insurance industry is in very nascent stage. It requires some extra care. Therefore IRDA has twin roles regulations as well as development. it is said that no game is possible without rules but too many rules spoil the game. Hence the regulator has to ensure a balance in the enactment of the regulations.

Indian psyche ground reality will dominate: Although foreign players may be tempted to keep their operation in the big cities for the creamy layer of the society the real market lies in rural India which accounts for the lions share of LIC’S present business. The foreign players must learn to adapt to Indian realities. The well publicized failures of world famous consumer goods companies like Electrolux, whirl-pool, Reebok, Nike etc. to gauge the Indian psyche and sentiment 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”. Other companies such as Mc Donald have modified the business strategy, keeping in view the eating habits, culture and psyche of the local customer.

36

Private insurance can bring a paradigm shift in insurance Sector if they resolve:To conduct business according to honesty and fairness and to render that services to its customers which, in the same circumstances it would applied to or demand for it self.  To provide competent and customer focused sale and service.  To engage in active and fair competition  To provide advertising and sales material those are clear as to purpose and honest and fair as to content.  To provide for fair and expeditious handling of customer complaints and disputes.  To maintain a system of supervision and review that is reasonably design to achieve complaints with these principles of ethical market conduct.

37

SIGNIFICANCE OF THE PROBLEM: In our worldly life, wherever there is uncertainty, there is an involvement of risk. The instant for security against such risk is one of the basic motivating forces for determining human attitudes. As a sequel to this quest for security, the concepts of insurance have been born. The urge to provide insurance or projection against the loss of life and property must have prompted people to make some sort of sacrifice willingly in order to achieve security through collective cooperation. In this sense, the story of insurance is probably as old as the story of mankind. Thus the urge of security and protection against risk in a man lead to the concept of insurance.

It was in the 12th century in which the idea of insurance was first conceptualize. At the time it was used more as a tool for protection against financial loss of sea fearer in foreign trade. Since then this concept has undergone several changes. It is basically the unforeseen contingencies of human life that has given a totally new look to the insurance industry. Gradually as competition increased the benefits given by the industry to its customers improved by leaps and bound. It was

38

the breakup of the traditional extended family system that provided a natural umbrella to each an every member of the family, which give the insurance institution an impetus to excel.

Journey of insurance business in India is very long. There was mushroom growth of insurance company during the period. In spite of mushrooming of many insurance companies percapita insurance India was merely Rs. 8 in 1944 as against rs.600 in US and UK respectively. Even this limited growth is marked by many malpractices, deficiencies and frequent liquidations of insurance companies shaking public confidence and depriving policyholders of their saving and security. it is reported that in those days insurance and banking was in the control of big industry houses in resulting in interlocking of funds between bank and insurance companies. These irregularities are mainly of two types. Firstly malpractices that had crept into management of insurance company especially during 1940s such as acquisition of insurance

company by financeries and use of life insurance funds to serve other enterprises in which the financiers was interested or for speculation ,

Payment of large emolument to nominees of the controlling interests and interlocking of funds between banks and insurance company. Secondly factors which have operated for year towards disruption of Indian insurance such as excessive costs, rebating and unsatisfactory standards of management of business.

Life insurance Corporation in the year 1956 dominated personal insurance sector. General insurance sector still was in private hands. It was mainly confined to small entrepreneurs and ancillary units attached to big industrial plants. With the growth in the process of industrialization in India, because of three wars in decade [1962, 1965, 1971] focus of central government shifted from industrial sector to defense sector.

39

The shift caused economic slowdown which resulted in fund shortage faced by industrial units. All these development has a bad impact on the general insurance sector.

Taking into the account the bad health of private operators and vast funds mobilization potential in this sector, government of India nationalized the general insurance sector with effect from 1st January 1973. It formed four subsidries [new India insurance company ltd., the oriental insurance company ltd., the united India insurance company lt., the national insurance company ltd.

The privatization of insurance and constitution of insurance regulatory and development authority [IRDA] envisages improving the performance of the state insurance sector in the country by increasing benefits from the competition in terms 0f lower cost and increased level of consumer satisfaction.

POSITIVE CHALLENGES BROUGHT BY PRIVATIZATION: The health insurance market is pegged at Rs. 500 crores. The recent enter private insurance is expected to bring about a total transformation in the exist system of providing health insurance.  wide variety of health products  Cost reduction.  Medical plans as per the individual needs and at the rates suited.  lower premium  improvement in the health care system

FACTORS COTRIBUTING TO THE GROWTH WERE: 1. MONOPOLY: - the insurance sector till now enjoyed monopoly so it has total control over the business.

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2. SOCIAL FACTORS: - collapse of joint Hindu family system an advent of nuclear family system because of better career opportunities at places far away from native places as result of increasing industrialization caused greater social security. So more and more people were motivated towards insurance. 3. ECONOMIC FACTORS: - more jobs and better opportunities because of industrialization improved the standard of living. New products and services change in the life style of people. So they opted for insurance of recovering the risk of theft and other mishappening. Besides other factors like more tension in challenging jobs, tax benefits associated with insurance instruments greater life expectancy, increased risk to the life of a person because of rapid changes in the environment also resulted in more persons going for insurance.

PERFORMANCE OF LIC:LIC has been growing at annual rate of 15 to 20 % consistently for the last several years. The claim settlement ratio of LIC is at the order of 97% the malhotra committee report, which looked in to the performance of this sector, found a fairly high degree of consumer satisfaction. govt of India invested by way of equity Rs. 5 crores in LIC 1972. Without additional need for investment in equity LIC has generated enormous surplus and has been paying large dividends and corporate taxes to the govt. year after year.

The govt. was of the order of Rs. 197.97 crores after paying corporate taxes of Rs. 563.03 crores. Policy holders have in general received good return on their investment. This is confirmed by increase in bonus rates, which have gone up from Rs. 12.80 per thousand to Rs. 102 per thousand for whole life policies in period 1997-98.

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Information given about LIC clearly shows the excellent growth rate of LIC. Today LIC has become the leading investment institution of India. In order to reach to people in every part of country it has developed as vast service network, comprising of 7 zonal offices, 100 divisional offices, and 2048 branches which together employ 124000 persons and 651000 agents. Besides LIC contributed in social welfare projects like water through life funds, book value of socially invested increased from Rs. 1218.52 crores in 1974-75 to Rs. 88831 crores in 1998-99 showing an annual growth of 35.82%.

REVIEW OF LITERATURE:The union govt. introduced the insurance [amendment] bill 2001 during the monthly concluded monsoon session of parliament. The draft bill proposes entry of operative in insurance sector, appointment of brokers as intermediaries, and merchant for insurance through credit cards. The bill seeks to permit co-operative concerns to enter the underwriter business by setting up a separate society. It also permits to issue cooperative societies to enter the distribution business. It recognizes as intermediaries in the insurance business and enables them to receive brokerage fee. at present cooperative societies can only enter the insurance sector by parliament they setup and underwriter company under cooperative act. INSURANCE IN INDIA: SOME BURNING ISSUES:

Liberalization of Indian insurance sector has been the subject of much debate for some years. The policy makers wanted competition, development and growth of this insurance sector which is essential for channels the investment into infrastructure sector. At the other end the policy has

42

the fear the insurance premium which are substantial, would but of the country, and wanted to have cautious approach for participation in the sector. Though some changes and some active clauses as regards to the foreign participants were included.

Whether the insurer is old or new, private or public, expanding the market will present multitude of challenges and opportunities that insurance sector will have still remain under the realms of the possibilities and speculation. What is the likely impact of opening up India’s insurance sector?

CONCEPTUALIZATION:Insurance is an arrangement to deal with unpleasant contingencies. It is contractual arrangement which partial or total protection against adverse, typically financial outcomes. While there are many outcomes of risks which are insurable, there are many more against which there can be no insurance. Broadly insurance contracts can be divided into life and nonlife insurance. Life insurance in particulars provides protection to the house holds against the rise of premature death of its income earning member. In traditional; societies such as India, the joint family system itself provided an insurance umbrella and successor to surviving family members. in modern times such arrangements are now increasingly made to the market mechanism by buying insurance. Thus, individual pay a price called premium to the insurance company for such a contractual arrangement, and the insurance company in turn provides compensation if specified event occurs or any mishappening. By making such contractual agreement with a large number of individuals and organizations the insurance company can spread the risk. This gives insurance its social characteristics, in sense that it entails pooling of individual risks.

43

Life insurance in modern times also provide protection against other life relate risks such as risk of longevity [i.e. risk or outliving other source of income] and risk of disease an richness [health insurance].

44

RESARCH DESIGN: Research

design

collecting

the

stands

relevant

in the view the objective design The

in fact research

research

has study

for

data of

research

present.

no control over the

and the

of

methods to

be

adopted

availability of time and money.

a great bearing on reliability carried

includes surveys and at

planning

for

and the techniques to be used in their analysis keeping

major purpose of these types exists

advance

out fact

is

of

results arrived

descriptive and diagnostic

finding

and enquiries

of

in

at. nature. Descriptive

different

of research is description of states of

Research

kinds. The

affairs

as

it

The main characteristic of this method is that the researcher has variables;

he can only

report

what has happened or what is

happening. In this research we seek to measures items like:

45

•

Preference

of

people

among various investment options

and

insurance

is to design a sample and

the sample

policies. •

Awareness of insurance among

•

Behavior pattern of investors.

general public

.

SAMPLE DESIGN After

research

design

is

made, next

step

will made after considering the objectives of research

and budgetary constraints.

SAMPLE PROCEDURE The

sample

probability

size

taken

sampling.

systematic sampling, used

stratified

drawn so

in

to

research

Probability sampling stratified

is 50. are

In

obtain

a

our research

those based

sampling, area sampling.

sampling. In the study the population

does not constitute

as

this

homogenous

representative

sample.

group.

on

In

we random

have

used

sampling,

our research we have

from which the sample to be So,

we

apply

Under this technique,

the

stratified sampling population

is

stratified in to different sub population known as strata and sample items are selected from each stratum. In our research study,

we divide the

population in to 4 strata’s:•

Lawyers in the city

•

Doctors in the city

•

Professors in the city

•

Teachers in the city

46

•

Businessman in the city

We have divided our population in to 4 strata’s because these 4

group

investment

different.

portfolio, awareness

of

financial

activities

Is also

pattern was also different. Some were risk averter

and

selected from

sampling. So, firstly

population

each stratum

is based

in to different strata’s and

on then

random select

the

some

items

risk

have

different

Their behavior

gamblers.

randomly.

we It

Items

divide the

is known as

stratified random sampling.

DATA COLLECTION The

data is of two types:•

Primary data

•

Secondary data

Primary data

are

those

happens to be original In been Collected statistical

by

process. In

some our

which

are collected afresh And for the first time and thus

character . Secondary one

else

and

data

which

are have

those

which have

been Passed

already

through

the

research we have used both types of data

COLLECTION OF PRIMARY DATA We

have collected primary •

data using:-

Questionnaires 47

•

Telephonic conversation

COLLECTION OF SECONDARY DATA In

our

research

we are

using

various

sources

for Collection

of

published

and

unpublished data with the help of fact sheets of various companies, annual reports, news bulletins, and information brouchers, web sites.

48

AGE WISE CLASSIFICATION particulars up to 30 31-40 41-50 above 50 total

no. of respondents 19 13 25 3 50

percentage 38 26 30 6 100

49

upto 30 31-40 41-50 above50

The following graph depicts that 64% of the respondents below age 40 and only 6% of the respondents are of age 50. It indicates that young people are more aware and conscious toward insurance policies. Category.

EDUCATION LEVEL particulars 10th level 12th level graduates postgraduates total

no. of respondents 10 13 25 12 50

percentage 20 26 50 24 100

50

10thlevel 12thlevel graduate post grauate

The following graph depicts that 20% of the respondents have education till 10th and 26% of the respondents are 12th pass 50% respondents are graduates,24% are post graduates It indicates that graduates are much conscious than under graduates.

OCCUPATION PARTICULARS GOVT PRIVATE PROFFESIONALS SELF EMPLOYED TOTAL

NO OF RESPONDENTS 14 21 9 6 50

PERCENTAGE 28 42 18 12 100

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GOVT PRIVATE PROFESSION SELFEMPLOY ED

The following figure shows that 42%of the respondents are private employees, 28% are govt. employees, 18% are professionals and 12% are self employee it means employees are more aware towards insurance policies.

MARITAL STATUS PARTICULARS married single TOTAL

NO.OF RESPONENTS 33 17 50

PERCENTAGE 66 34 100

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single married

It is observed that from the above table that 33 respondents are married 17 respondents are single married persons are more aware of insurance.

NO. OF DEPENDENTS PARTICULARS 1 2 MORE THAN 2 TOTAL

NO.OF RESPONENTS 16 8 26 50

PERCENTAGE 32 16 52 100

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1 2 M ORE THAN 2

It is observed that from the above table that 26 respondents have more than 2 dependents, 8 respondents have 2 dependents and 16 have 1 dependents

ANNUAL INCOME PARTICULARS BELOW 50000 50001-100000 100001-150000 ABOVE150000 TOTAL

NO OF RESPONDENTS 9 17 11 13 50

PERCENTAGE 18 34 22 26 100

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below50000 50001-100000 100001-150000 above150000

The following graph depicts that 34% of the respondents are in the income level of 50001-100000 , 26% respondents has got above 100000 income,22% of respondents comes in net annual income and rest 18% comes under below 50000 category.

INVESTMENT AVENUE PARTICULARS INSURANCE MUTUAL FUNDS BANKS SHARE MARKET TOTAL

NO OF RESPONDENTS 12 18 10 10 50

PERCENTAGE 24 36 20 20 100

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bank insurance mutual funs stock mkt

The following graph depicts that 36% of the respondents are interested in mutual funds, 24% respondents are interested in investing in insurance 20% are interested in banks an rest of the 20% are interested in share market

REASON TO TAKE POLICY PARTICULARS TO COVER RISK TO AVOID TAX INVESTMENT

NO.OF RESPONDENTS 15 8 17

PERCENTAGE 30 16 34

GOOD RETURN

10

20

TOTAL

50

100

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cover risk

avoid tax

investment

good return

It is observed that from the above table that 15 respondents take insurance policy to secure their future, 8 respondents take insurance to avoid tax and 17 take insurance for investment purpose, 10 respondents observe that it gives good return.

POLICY CHOICE PARTICULARS TERM PLAN MONEY BACK RIDERS ENDOWMENT PLAN TOTAL

NO OF RESPONDENTS 18 12 10 10 50

PERCENTAGE 36 24 20 20 100

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endowment riders term plan money back

The following figure shows investor attitude towards the policy 18 respondents wants to take term plan 12 respondents wants to take money back 10 respondents wants to take riders, consumer is much crazy in taking term policy.

AWARENESS THROUGH PARTICULARS FRIENDS AGENTS ADVERTISEMENT OTHER TOTAL

NO OF RESPONDENTS 12 18 10 10 50

PERCENTAGE 24 36 20 20 100

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advertisement friends agents others

The following graph depicts that 36% of the respondents get knowledge through agents in mutual funds, 24% respondents get knowledge through friends, and 20% get knowledge from advertisement and other sources

MACRO ANAYLYSIS This project is a study related to marketing of insurance in Rohtak assessing the marketing opportunities. After the survey conducted in Rohtak, it was found that LIC is the backbone of the insurance sector and no.1 position with respect to its competitors. LIC is the only an only one company that consists of no. of policy avenues of all age group, but now a days other private companies are capturing the market. In the end I would like to say that LIC is the heart of insurance sector in terms of its old age brand popularity in insurance sector. New private players are coming in the market but still LIC has got its brand popularity that’s why it is the choice of a novice and experienced investor.

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FINDINGS: BASED ON MY ANALYSIS OF DATA COLLECTED DURING MY RESEARCH WORKS ON” CONSUMER AWARENESS TOWARDS INSURANCE PROUCTS” I HAVE GOT THE FOLLOWING FINDINGS:  64% of the respondents belongs to the age group of 40 years  88% of the respondents have their education level up to collage.  majority of the respondents i.e. 42%belongs to private jobs  66% of the respondents are in married category  52% of the respondents have more than two members as dependents.  Maximum respondents have income level Rs. 50001-100000 60

 covering risk is the major reason to take insurance  Majority of the investors want to take term plans.  most of the respondents come to know about new companies through agents  premium offered is the main reason to choose a new company

LIMITATION OF THE STUDY

However I have tried my best in collecting the relevant information yet there are always present some limitations under which researcher has to work. Here following are some limitations under which I had to work to as shown below:

1.

Limited time: There was limited time in which this project has to be completed. Therefore it was a major limitation of the study.

2.

Limited Area :

The area covered in this project was only Rohtak, not whole Haryana.

61

3.

Few interaction:

There was little interaction with the people as we were only limited with

in area. 4

Communication Problem : The accurate decision can not be taken by the information collected; people were relucate while giving their personal information

6

Dynamic nature of the environment, what is true and relevant today may not be true and relevant tomorrow.

CONCLUSION: An attempt is made by the respondents to identify the level o awareness among the respondents towards the new policies offered by companies. From the study it is observed that because of new companies various schemes and low premium the investor has a forced attraction to invest in the new companies. The new companies as well existing company should develop a suitable strategy to attract and retain their customers. These companies can protect not only the investor’s interest but also the interest of the company at large.

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SUGGESTIONS: 1. THEIR SHOULD BE TRANSPARENCY IN CONTEXT OF CHARGES TAKEN BY INSURANCE COMPANIES 2. ALLOCATION OF UNITS SHOULD BE CLEARLY STATED IN CASE OF ULIPS 3. IT IS ADVISABLE FOR THE AGENTS THAT THEY SHOULD MAKE REGULAR FOLLOW UP WITH THE INSURER.

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BIBLIOGRAPHY: Kothari, C.R 2003[research methodology, 2nd edition] Indian journal of industrial relations vol-37 number 3, january2004 by r. Anand sen gupta, Ashish sen gupta. Indian journal of marketing vol-xxxii, no 8, august 2003 65

Karvy finapollis June, july2006

www.insurancemagic.com www.investor.com/scripts/insucareer.asp www.moneyguru.com www.delhischools.com/career/insurance.htm

Questionnaire 1. What is your age? a. up to 30

b. 31-40

c. 41-50

d. above 50

2. What is your qualification? a. 10th

b. 12th

c. graduate

d. post graduate

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3. What is your occupation? a. private job

b. govt. job

c.professional

d. self employed

4. What is your marital status? a. married

b. single

5. How many dependents do you have? a. One

b. two

c. more than two 6. What is your annual income? a. below 50000

b. 50001-100000

C.100001-150000

d. above 150000

7. Where do you invest your money? a. insurance

b. mutual fund

c. bank

d. stock market

8. Reason to take insurance policy? a. safety

b. tax saving

c. investment

d. good return

9. Policy would u like to prefer? a. term plan

b. endowment plan

c. riders

d. money back

10. What are your sources of awareness? a. advertisement

b. friends

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c. agents

d. others

68