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A REPORT On “Potential of Life insurance Industry in Surat Market”
By Chirag Patel (5NB 3430) ICFAI NATIONAL COLLEGE SURAT
Under the Guidance of
Mr. Jignesh Madhwani
Mr. Vikas Singh
CERTIFICATE This is to certify that the Summer Internship Project titled “Potential of Life Insurance Industry in Surat market” a bona fide work of AMAN AGGARWAL, is original and has been done under my supervision in partial fulfillment of the requirement for the award of M.B.A for the period of 4 months from 18th April 2006 to 12th August 2006. This report neither full nor in part has ever before been submitted for awarding of any degree of either this university or any other university. I am pleased to stay that his performance during the period was extremely satisfactory.
MR. VIKAS SINGH Faculty Guide ICFAI NATIONAL COLLEGE SURAT.
I hereby declare that this work entitled “Potential of Life Insurance Industry in Surat Market” is my work carried out under the guidance of my faculty guide Mr. Vikas Singh and my company guide Mr. Jignesh Madhavani. This report neither full nor in past has ever been submitted for award of any other degree of either this University or any other University.
Chirag Patel (5NB3430)
TABLE OF CONTENTS Contents Acknowledgements List of Tables List of Illustrations/Diagrams Executive Summary Chapter 1: introduction Objective Limitation Research Mythology Data Collection Chapter 2: Life Insurance Industry Industry profile important milestones in the life insurance business Insurance sector reforms IRDA Chapter 3: Contribution of Life Insurance Industry Contribution of Life Insurance in the Economy Flow of Insurance Industry in India Structure of life Insurance Industry Life Insurance industry Aggregation of Long Term Savings Spread of financial services in rural Areas Long term funds for infrastructure Development of Capital Markets/Economic Growth Employment generation Special Features Growth Potential Phase of transition Chapter 4:Company Profile Management Area of Business KMOM progress till date KMOM-the partnership and Lineage Products Hierarchy of KMOM of Surat branch Chapter 5: Survey Data interpretation , editing and coding Graph analysis Chapter 6: Finding and Suggestion Chapter 7: Conclusion Chapter 8: References
Page No. 5 6 7 9 10 15 17 19 22 23 24 29 31 32 36 36 37 40 41 42 43 44 45 46 47 47 49 51 56 65 66 69 71 72 73 73 83 84 85
Chapter 9: Annexure
Acknowledgement In preparation of this report by me, I feel great pleasure because it gives me extensive practical knowledge in my career. I get idea about Indian Life Insurance Industry by this project. I express my deep sense of gratitude to My Company Guide Mr. Jignesh Madhavani for his valuable guidance during my project work. I also like to all staff of Kotak Life Insurance who guide me in project work. I am thankful to Mr. Vikas Singh (Faculty Guide) for valuable inspiration and guidance provided me through out the course of this project. They have patient and critically gone the subject matter. I would like to take opportunity to express my gratitude towards all of them who have contributed directly or indirectly in my project work.
Chirag Patel 5
List of Tables Name of Tables Page no 38 • Potential of Life Insurance sector 38 • Market share of LIC and all private player 39 • Individual Market share of Insurance company 41 • Total asset of Life Insurance companies 41 • Total premium generated 41 • The future premium income Generated will be 44 • Untimely death benefit to policy holder in the past 73 • Age vise classification 74 • Gender wise classification 75 • Income wise classification 76 • No of member having insurance 77 • How many person having insurance in family 78 • Different policy bought by customers 79 • Fully insured and under insured persons • Market share of different life 80 6
List of Illustrations/Diagrams Name of Illustrations/Diagrams • • • • • •
Kotak : Area of Business Age vise classification Gender wise classification Income wise classification No of member having insurance How many person having insurance in family • Different policy bought by customers • Fully insured and under insured persons • Market share of different life insurance
Page No 57 73 74 75 76 77 78 79 80
Executive Summary The service industry is one of the fastest growing sectors in India today. The upcoming sectors which are really showing the graph towards upwards are - Telecom, Banking, and Insurance. These sectors really have a lot of responsibility towards the economy. Amongst the above-mentioned areas insurance is one sector, which took a lot of time in positioning itself. The insurance business of non-life companies was not much in problems but the major problem was with life insurance. Life Insurance Corporation of India had monopoly for more than 45 years, but the picture then was completely different. Previously people felt that “Insurance is only for classes not for masses” but now the picture is vice-versa. 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 9
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 these companies were not insuring Indian natives. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National
Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies
The formation of IRDA, entrance of private life insurance companies into India with one foreign partner, compulsory training of Insurance agents etc. developments started to take place. And this was the time when these companies started searching for proper channel partners who can help the organization in expanding its network and business in India.
Channel partners are those who are going to be into direct selling of company’s products i.e. the insurance policies. They are the link between the customers and the management or company. These channel partners are people with different profiles. They are selected on some grounds like their network of people, their problem handling ability, convincing power and lot many things. The main idea behind company’s Questionnaire Survey is to find out and analyze the proper profile that can be recruited by company as a channel partner. Company has been focusing on some of the profile that can be very beneficial for the company. For example Chartered Accountants, Tax Consultants, Postal agents, Bank’s Daily Collection Agents etc. the main idea behind targeting the above profile is strong client network which is really very important for an insurance company. The project title is “Potential of Life Insurance Industry in Surat Market”. This shows the scope for private insurance companies have great opportunities to cover the market and can insure the customer. With the initiation of the deregulation in the Indian insurance market, the monopoly of big public sector companies in life insurance market has been broken. New private players have entered the market and with their innovative
approaches and better use of distribution channels and technology, they are eating in to the shares of established public sector companies in Indian Insurance Market. Since the deregulation has been put in to place, the market share of LIC has come down to 71.4% in life insurance market while the private players have captured around 17% market in the general insurance segment. This report includes the key private players in the insurance market such as ICICI Prudential, Kotak Life Insurance Bajaj Allianz, Birla Sun life, and TATA AIG. It also includes the leading competitors in the life insurance and general insurance segments along with their market shares.
Objective Limitation Methodology Data collection
The main of the present study of is accomplish the following objective. Proper understanding and analysis of life insurance industry.
To know about brand awareness of Kotak Life Insurance and customer’s preference about Kotak Life Insurance.
Conduct market survey on a sample selected from the entire population and derived opinion on that research. According the market survey come know about how much potential of insurance market in our city.
And base on analysis of the result thus obtained make a report on that research.
Training aims at recruiting maximum number of Life Advisors and to Sell the maximum policies for the company and bring the business for the company which ever is going at the particular point of time.
Along with it I will be gaining the thorough knowledge of insurance sector. This will give me in more confidence in marketing products given to me. 15
As the Kotak Life Insurance well reputed company in India it’s great chance for me to observed different products launch by other competitor companies like ICICI prudential, Bajaj alliance ,LIC, Max New York life etc. In all, it is to understand the overall working of the Life insurance sector. The objective behind the project is as follows: To find the right candidate. To about their family background, occupation, social relation, Qualification, Age. Finalize candidates for the IRDA training
5: Limitation: Some of the difficulties and limitations faced by me during my training are as follows:
Lack of awareness among the people – This is the
biggest limitation found in this sector. Most of the people are not aware about the importance and the necessity of the insurance in their life. They are not aware how useful life insurance can be for their family members if something happens to them.
Perception of the people towards Insurance sector
– People still consider insurance just as a Tax saving device. So today also there is always a rush to buy an Insurance Policy only at the end of the financial year like January, February and March making the other 9 months dry for this business.
Insurance does not give good returns – Still today
people think that Insurance does not give good returns. They are not aware of the modern Unit Linked Insurance Plans which are offered by most of the Private sector players. They are still under the perception that if they take Insurance they will get only 5-6% returns which is not true nowadays. Nowadays most of the 17
modern Unit Linked Insurance Plans gives returns which are many times more than that of bank Fixed deposits, National saving certificate, Post office deposits and Public provident fund.
Lack of awareness about the earning opportunity
in the Insurance sector – People still today are not aware about the earning opportunity that the Insurance sector gives. After the privatization of the insurance sector many private giants have entered the insurance sector. These private companies in order to beat the competition and to increase their Insurance Advisors to increase their reach to the customers are giving very high commission rates but people are not aware of that.
Increased competition – Today the competition in the
Insurance sector has became very stiff. Currently there are 14 Life Insurance companies working in India including the LIC (life insurance Corporation of India). Today each and every company is trying to increase their Insurance Advisors so that they can increase their reach in the market. This situation has created a scenario in which to recruit Life insurance Advisors and to sell life Insurance Policy has became very very difficult.
RESEARCH METODOLOGY Research always starts with a question or a problem. Its purpose is to question through the application of the scientific method. It is a systematic and intensive study directed towards a more complete knowledge of the subject studied. Marketing research is the function which links the consumer, customer and public to the marketer through information- information used to identify and define marketing opportunities and problems generate, refine, and evaluate marketing actions, monitor marketing actions, monitor marketing performance and improve understanding of market as a process. Marketing research specifies the information required to address these issues, designs, and the method for collecting information, manage and implemented the data collection process, analyses the results and communicate the findings and their implication.
I have prepared our project as descriptive type, as the objective of the study demands the answers of the question related to find the
potentiality of life insurance in Surat: How much potential is there in Surat?
The Marketing Research Process As marketing research is a systemic and formalized process, it follows a certain sequence of research action. The marketing process has the following steps: Formulating the problems Developing objectives of the research Designing an effective research plan Data collection techniques Evaluating the data and preparing a research report
There are two types of data collection method use in my project report. – Primary data – Secondary data. For my project, I decided on primary data collection method for observing working of company and approaching customers directly in the field, tele-calling, cold calling, campaigning and through references to know their interest in business with company
in my project and also make questionnaire for creating database of business class people is Surat city for company. I decided on Secondary data collection method was used by referring to various websites, books, magazines, journals and daily newspapers for collecting information regarding project under study.
DATA COLLECTION After the research methodology, research problem in marketing has been identified and selected; the next step is together the requisite data. There are two types of data collection method – primary data and secondary data. In our live project, we decided primary data collection method because our study nature does not permit to apply observational method. In survey approach we had selected a questionnaire method for taking a customer view because it is feasible from the point of view of our subject & survey purpose. We conducted 200 sample of survey in our project.
important milestones in the life insurance business
Insurance sector reforms
The Insurance Regulatory and Development Authority (IRDA)
Brief History of the Insurance Sector in India 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. 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 these companies were not insuring 24
Indian natives. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act 1912 made it necessary that the
premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies
The first two decades of the twentieth century saw lot of growth in insurance business. From 44 companies with total business-inforce as Rs.22.44 crore, it rose to 176 companies with total business-in-force
mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January 1956 that life insurance in India was nationalized. About 154 Indian insurance companies, 16 nonIndian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means
of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office in the year 1956. Since life insurance contracts are long-term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. Re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organization servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation. It may be seen that from about 200.00 Crores of New Business in 1957 the corporation crossed 1000.00 Crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But with re-organization happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies.
Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7 zonal offices and the corporate office. LIC’s Wide Area Network covers 100 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LIC’s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centers have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. The same motives which inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take this message of protection to light the lamps of security in as many homes as possible and to help the people in providing security to their families.
Some of the important milestones in the life insurance
1850Non life insurance debuts with triton insurance company. 1870 Bombay mutual life assurance society is the first Indian owned
1912 The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928
The Indian Insurance Companies Act enacted to enable
the government to collect statistical information about both life and non-life insurance businesses. 1938
Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests of the insuring public.
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: 1907
The Indian Mercantile Insurance Ltd. set up, the first
company to transact all classes of general insurance business. 1957
General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring fair conduct 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.
Insurance sector reforms In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at “creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…” In 1994, the committee submitted the report and some of the key recommendations included.
IRDA starts giving licenses to private insurers: Kotak
Life Insurance ICICI prudential and HDFC Standard Life insurance 2001
Royal Sundaram Alliance first non life insurer to sell
a policy 2002
Banks allowed to sell insurance plans.
The Insurance Regulatory and Development Authority (IRDA) The Insurance Act, 1938 had provided for setting up of the Controller of Insurance to act as a strong and powerful supervisory and regulatory authority for insurance. Post nationalization, the role of Controller of Insurance diminished considerably in significance
companies. But the scenario changed with the private and foreign companies foraying in to the insurance sector. This necessitated the need for a strong, independent and autonomous Insurance Regulatory Authority was felt. As the enacting of legislation would have taken time, the then Government constituted through a Government resolution an Interim Insurance Regulatory Authority pending the enactment
The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the 32
Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end the monopoly of the Life Insurance Corporation of India (for life insurance business) and General Insurance Corporation and its subsidiaries
The act extends to the whole of India and will come into force on such date as the Central Government may, by notification in the Official Gazette specify. Different dates may be appointed for different
The Act has defined certain terms; some of the most important ones
appointed day means the date on which the Authority is established under the act. Authority means the established under this Act. Interim Insurance Regulatory Authority means the Insurance Regulatory Authority set up by the Central Government through Resolution No. 17(2)/ 94-lns-V dated the 23rd January, 1996. Words and expressions used and not defined in this Act but defined in the Insurance Act, 1938 or the Life Insurance Corporation Act, 1956 or the General Insurance Business
(Nationalization) Act, 1972 shall have the meanings respectively assigned
A new definition of "Indian Insurance Company" has been inserted. "Indian insurance company" means any insurer being a company (a) which is formed and registered under the Companies Act,
(b) in which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed twenty-six per cent. Paid up capital in such Indian insurance company (c) whose sole purpose is to carry on life insurance business, general insurance business or reinsurance business.
Contribution of Life Insurance Sector in the Economy
FLOW OF Insurance Industry in India
STRUCTURE OF INSURANCE INDUSTRY: Snap Shot
Industry Aggregation of Long Term Savings
Spread of financial services in rural Areas
Long term funds for infrastructure Development of Capital Markets/ Economic Growth
Employment generation Special Futures Growth Potential Phase of transition
FLOW OF Insurance Industry in India
• Structure of Insurance Industry: Snap Shot • Contribution to Indian Economy • Special Features
STRUCTURE OF INSURANCE INDUSTRY: Snap Shot
Historical Perspective (i) Prior to 1956 242 companies operating (ii) 1956 - 2001 Nationalization – LIC monopoly player – Government control (iii) 2001 -- Opened up sector
Industry Snap Shot - Contd. • (a) LIC – Fully owned by Government (b) Postal Life Insurance • (ii) Private players 1. Bajaj Allianz Life Insurance Co. Ltd. 2. Birla Sun Life Insurance Co. Ltd. (BSLI) 3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE) 4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU) 5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA) 6. Max New York Life Insurance Co. Ltd. (MNYL) 7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE) 8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd. 9. SBI Life Insurance Co. Ltd. (SBI LIFE) 10. TATA AIG Life Insurance Co. Ltd. (TATA AIG) 11. Reliance Life Insurance 12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA) 13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE) 14. Shriram Sunlam • (iii) Other likely players – PNB Life Insurance, Axa Bharti Enterprises
Potential of the Insurance sector: Total population
Total population of Insurable class
Total population insured
Source: Financial Express-Delhi. Market share: 2001-02 2002-03
LIC Private Players 2%
Industry growth rate at 36% (2004-05) with premium income From new business. Source: Financial ExpressDelhi
Market Share Company
Aviva life Bajaj Allianz Birla sun life HDFC Standard ICICI Prudential ING Vysya
Indian Promoter/ Partner
Market share based on premium Dabur Aviva, UK 1.12 Bajaj Auto Allianz, 6.12 Germany Aditya Sun Life, 1.84 Birla Canada group HDFC Standard 2.96 Life, UK ICICI Prudential, 7.11 Bank UK Vysya ING 0.63 Bank Insurance, Netherlands Kotak Old Mutual 0.71 Mahindra South Bank Africa
Kotak Mahindra, Old Mutual Max New Max India York MetLife Jammu & Kashmir Bank Sahara Sahara Life India Insurance SBI Life SBI Tata AIG
New York Life, US MetLife, US
Cardiff, France AIG, US
CONTRIBUTION TO INDIAN ECONOMY (i) Life Insurance is the only sector which garners long term savings (ii) Spread of financial services in rural areas and amongst socially less privileged (iii) Long term funds for infrastructure (iv) Strong positive correlation between development of capital markets and insurance/ pension sector (v) Employment generation
Aggregation of Long Term Savings
(i) Total Assets of Life Insurance Companies 2002-2003 2,80,450Cr
2004-2005 4,23,000 Cr
(ii) Total Premium generated 2002-2003 57,708 Cr
2003-2004 66,278 Cr
2004-2005 79,000 Cr
(iii) Industry is growing @ 19 p.a.
(iv) At this growth rate, the future premium income generated will be 2005-2006 94,000 Cr
2006-2007 1,12000 Cr
2007-2008 1,33,000 Cr
(v) Life Insurance funds account for 15% of household savings. (vi)The industry has the potential to increase the share to 20%. 41
Spread of financial services in rural areas and amongst socially underprivileged • IRDA Regulations provide certain minimum business to be done (i) In rural areas (ii) In the socially weaker sections • Life Insurance offices are spread over nearly 1400 centers. • Presence of representative in every tensile – deeper penetration in rural areas. • Insurance agents numbering over 6.24 lakhs in rural areas. • Policies sold in rural areas (2004-05) - No. of policies - 55 lakhs Sum assured 46,000 cr • Social security - No. of lives covered 2003-04 17.4 lakhs 2004-05 42.1 lakhs
Long term funds for infrastructure • For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential. • Estimates of funds required for development of infrastructure vary widely. • An investment of 6, 19,600 crore is anticipated in the next 5 years (Source : SSKI India) • Tenure of funding required for infrastructure normally ranges from 10 to 20 years. • Major portion of these funds are routed through debt/private equity participation
Development of Capital Markets/ Economic Growth •Industry also contributes in economic development through investments in capital market. Present level of investments is over Rs. 40,000 crore. (Mark to Market basis around 80,000 Crores). •Annual Investment of around 9000 Crores in capital markets. •Contribution to Five Year Plans9th Plan 2, 30,900 Crores Last Two Years 1, 70,900 Crores • Helps inculcate a sense of security by protecting earning of people in case of untimely death. Benefits to Policy Holders 2002-2003 20,800 Cr
2003-2004 24,200 Cr
2004-2005 28,700 Cr
EMPLOYMENT GENERATION • Life insurance industry provides increased employment opportunities. • Employees in insurance sector as on 31st March, 2005 is around 2 lakhs. • Many agents depend on insurance for their Livelihood–No. of agents on 31st March 2004 – 15.59 lakhs •Brokers, corporate agents, training establishments provide extra employment opportunities. • Many of these openings are in rural sectors.
SPECIAL FEATURES • Tax clubbing of various savings short term and long term into same bracket have a bias towards short term savings. • Distinction between the short term savings and long term savings is critical from investor’s point of view. More prone to inflationary pressures • Clearly, long term savings more than 10 years deserve special consideration under tax regime.
GROWTH POTENTIAL At present insurance penetration in India is quite low – 2.26% of GDP.
PHASE OF TRANSITION • Life Insurance industry is under the phase of infancy after 50 years of monopoly • Competition from within and other sectors of financial market • Needs environmental support till it reaches a comfort zone
Areas of Business
KMOM- Progress till date
KMOM- the Partnership and Lineage
Hierarchy of KMOM Life Insurance Ltd. (Surat Branch)
COMPANY PROFILE Stock broking businesses in the UK. Kotak Group was established in 1985.Kotak Mahindra Bank is the parent company of the group. Kotak Group entered into the life insurance business in 2001. Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture between Kotak Mahindra Bank Ltd. (76%) and Old Mutual plc. (24%)
Old Mutual plc.Is a world-Class international financial
services company. It was established in South Africa before 160 years. OLD MUTUAL is the largest financial services business in South Africa, through its life insurance, asset management, banking and general insurance operations. The company serves 4 million life insurance policyholders and employs over 13 000 South Africans in its local operations. In the USA, OLD MUTUAL is one of the top ten fixed annuity businesses offering an array of specialist asset management skills
through its 23 asset management businesses. The company’s US Life business recorded sales of $4 billion at the end of 2002. Operations in the United Kingdom are focused on wealth management, through Gerrard as one of the leading private client The OLD MUTUAL Group has the ability to cater for a variety of consumer segments and offers a comprehensive and innovative range of products for all income groups.
Mission: “At Kotak Life Insurance, we aim to help customers take important financial decisions at every stage in life by offering them a wide range Of innovative life insurance products, to make them financially independent.”
MANAGEMENT MR. UDAY KOTAK is the CEO of the company. Other Top Management persons are as follows:Mr. Gaurang Shah (Managing Director)
Mr. Gaurang Shah is the Managing Director of Kotak Mahindra Old Mutual Life Insurance Limited. Mr. Gaurang Shah is a Chartered Accountant and a Cost and Works Accountant. He has also done his Company Secretary ship from the Institute of Company Secretaries of India. Mr. Gaurang Shah has been with the Kotak Group for the past eight years where he has held different positions of great responsibility and juggled multiple tasks effectively. His cumulative experience, primarily in financial services, stands at over 21 years, several of those in building the retail finance business. At Kotak Life Insurance, Mr. Shah will focus on developing new lines of businesses and leveraging the company's existing competencies and network to steer Kotak Life Insurance on its ongoing growth path with even greater thrust. Mr. Shah has a commendable expertise in managing a large number of employees. Mr. Shah has been previously associated with Kotak Mahindra Primus since its inception and has contributed towards its growth to become a Rs.2000 Cr plus business. Before coming to Kotak Life Insurance, Gaurang Shah was Group Head of Retail Assets for Kotak Mahindra Bank. The Retail Assets
include commercial vehicles, personal loans, structured products, car loans and loans against shares.
Mr. G Murlidhar (Chief Financial Officer) Mr. Murlidhar is a Chief Financial Officer and Company Secretary of Kotak Life Insurance. Mr. Murlidhar is an associate member of the Institute of Chartered Accountants of India, an associate member of the Institute Of Company Secretaries of India, and graduate member of the Institute of Cost & Works Accountants of India. Mr. Murlidhar possesses over 20-year work experience and has earlier worked with National Dairy Development Board (NDDB), MDS Switchgear Limited and Nicholas Piramal India Limited and Ion Exchange Ltd. Prior to Kotak Life Insurance; he held the position of VP-Finance at Gujarat Glass Ltd. As Chief Financial Officer at Kotak Life Insurance, he oversees all aspects of Finance including Operations, Regulatory,
Internal Control, Finance, Accounts and Treasury.
Mr. Nandip Vaidya (Vice President - Sales)
Mr. Nandip Vaidya is the Vice President - Sales at Kotak Life Insurance. Mr. Vaidya holds a B.Tech (Mechanical) degree from IIT Mumbai and has also completed his Post Graduate Diploma in Business Management from IIM-Ahmedabad. He started his career as a Management Consultant at A.F. Fergusson. After completing 5 years there, he moved onto various
positions within the Kotak Mahindra group starting from Car Financing (Kotak Mahindra Finance Ltd) to Stock broking & Distribution of investment products/ Mutual funds (Kotak Securities). Mr. Vaidya set up the private banking business and private equity fund for the Kotak group.
Mr. Arun Patil (Vice President - Sales & Management Development)
Mr. Eksteen de Waal is the Sales Training Head of Kotak Life Insurance. He joined on secondment from Old Mutual South Africa for a period of two years. Eksteen is a post- graduate in Law and practiced Law as well as lectured at South African Universities before joining the Life Insurance Industry. He has over 23 years'
experience in the Life Insurance Industry. He worked for Sanlam Life in South Africa for 3 years before joining Old Mutual more than 20 years ago. Eksteen started with Old Mutual as a Legal Adviser and after that held various positions. He sold life assurance for some time, served as Head of Old Mutual's Training Division, Head of Old Mutual's Trust Company, Project Leader for implementing a new Sales Process with McKinsey's, Head of Conventions and Motivation, Head of Agency Marketing and finally Head of Banc assurance with Old Mutual Bank. In addition he played a role in the wider Industry. He was Vice-President of the South African Insurance Institute for two years as well as VicePresident of the Financial Planning Institute for three years. In this time Eksteen pioneered the introduction of the CFP qualification into South Africa. He has traveled widely during his career, working in the USA and England and also implemented Training Programme in Namibia, Zimbabwe, Malawi and Kenai. His current role is to substantially upgrade the level of Training and assist in the implementation of Performance Management Systems in Kotak Life Insurance.
AREAS OF BUSINESS Kotak Mahindra one of India's leading financial institutions was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Mr. Uday Kotak, Mr. Sidney A. A. Pinto and Kotak & Company. Industrialists Mr. Harish Mahindra and Mr. Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. It's been a steady and confident journey to growth and success.
In October 2005, Kotak Group acquired the 40% stake in Kotak Mahindra Prime held by Ford Credit International (FCI) and FCI acquired the stake in Ford Credit Kotak Mahindra (FCKM) held
In March 2006, Kotak Group has agreed to buy 25% stake held by Goldman Sachs in KMCC and KS subject to regulatory approvals. Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. The group has a net worth of around Rs.2,000 crore and employs around 6,000 employees across its various businesses servicing around one million four hundred thousand customer accounts through a distribution network of branches, franchisees, representative offices and satellite offices across 216 cities and towns in India and offices in New York, London, Dubai and Mauritius.
KOTAK GROUP IS INVOLVED IN THE FOLLOWING AREAS OF BUSINESS:-
Kotak Mahindra Prime Ltd.
Kotak Mahindra Prime Limited (KMPL) is a 100% subsidiary of Kotak Mahindra Group (Kotak Group) formed to finance all passenger vehicles. The company is dedicated to financing and supporting automotive and automotive related manufacturers, dealers and retail customers. The Company offers car financing in the form of loans for the entire range of passenger cars and multi utility vehicles. The Company also offers Inventory funding to car 59
dealers and has entered into strategic arrangement with various car manufacturers in India for being their preferred financier. As on March 31, 2005, KMP has a retail distribution network comprising of 54 branches (including representative offices) covering about 100 locations in 17 states in the country and has a wide network of Direct Marketing Associates, brokers and agencies supporting the distribution network and servicing around 113,000 customers.
Kotak Mahindra Capital Company Ltd. Kotak Investment Banking* (KIB) is India's premier Investment Bank Kotak Investment Banking (KIB) and Kotak Institutional Equities represent the securities business of the Kotak Mahindra Group ** (KI), Kotak Investment Bank is a full service Investment Bank bringing to its clients the global reach and the local knowledge and skills of Kotak Mahindra. As a full service Investment Bank, Kotak Investment Baking’s core business areas include Equity Issuances,
Mergers & Acquisitions, Advisory Services and Fixed Income Securities and Principal Business. Its strength lies in understanding the clients' businesses backed by a strong research team and an extensive distribution network, which spans a wide variety of investors across the country. It is also the first Indian Investment Bank to be registered with the Securities & Futures Authority in the UK (through our wholly owned subsidiary) and the National Association of Securities and Dealers in the USA. It’s the first Indian Investment Bank to be appointed by the Government of India as a Co-lead Manager in their international divestment of Gas Authority of India Ltd through a GDR offering. Kotak Investment Bank today well positioned in an increasing globalize environment to provide full service to its clients based either in India or overseas.
Kotak Mahindra Bank Ltd. Kotak Mahindra Bank Limited (KMBL) is the holding company and the flagship of the Kotak Mahindra Group. It was actually incorporated as Kotak Capital Management Finance Limited on
November 2, 1985 and obtained its ‘Certificate of Commencement of Business on February 11, 1986. It commenced operations with Bill Discounting and soon started other fund-based activities like corporate leasing & hire purchase, automobile finance and money market operations. Subsequently, it also entered the funds syndication and the Investment banking business.
Kotak Mahindra Asset Management Company Kotak Mahindra Asset Management Company (KMAMC), a wholly owned subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 1, 35,000 investors in various schemes. KMMF offers schemes catering to investors with varying risk- return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. International Subsidiaries
Kotak Mahindra International Limited (KMIL) is the international arm of the Kotak Mahindra Group and was incorporated in 1994 in Mauritius, with a branch in Dubai. Today the international operations also cover the United Kingdom, through Kotak Mahindra U.K. Limited and in the USA, through Kotak Mahindra Inc. USA. These companies are subsidiaries of Kotak Mahindra Capital Company (KMCC) – the Investment Banking Division of the Group. Services offered include GDR and ADR trading and broking, debt syndication, placement of Indian securities and advisory services. Kotak Mahindra was the first Indian group to be registered with the Securities and Futures Authority, U.K. Also, Kotak Mahindra is the first Indian group registered in the US providing service to both Institutional investors and High Net worth Clients in the US for their investments into Indian markets. Kotak Securities Kotak Securities Ltd., subsidiary of Kotak Mahindra Bank Ltd., is one of India’s largest brokerage and distribution house. Over the years Kotak Securities has been one of the leading investment service providers catering to the needs of various investor categories both institutional and non-institutional. The Private client group (PCG) of the Company provides value added investment advisory services to high net worth individuals, 63
NRI investors, trusts, corporate and Banks. The investment product range offered by PCG covers equity investment and equity trading, equity derivatives, portfolio management, IPO’s and Mutual funds. The Company has a full fledged research division involved in macro economic studies, sectoral research and company specific equity research combined with a strong and well networked sales force which helps deliver current and up to date market information and news. Kotak Securities Ltd., Depository Participant with National Securities Depository Limited (NSDL) and Central Depository Services Ltd. (CDSL) provides dual benefit services wherein the investors can use the brokerage services of the Company for executing the transactions and the depository services for settling them. Under the Portfolio Investment Scheme offered by the Company, the funds of the investors are managed by a highly competent team comprising of Equity Strategist, a Portfolio Manager and a team of equity, technical and derivatives analysts. Kotak Securities Ltd., also an Approved Intermediary under the Securities Lending Scheme, 1997, facilitates clients to borrow and lend securities.
KMOM – PROGRESS TILL DATE • 44 branches in 31 cities. • 7500 life advisors. • 1000employees of very good quality. •
Ranks 2nd in terms of average premium per policy.
Ranks 4th in total advertising awareness.
• First year premium income: 2001-02: 7 Crores 65
2002-03: 35 Crores 2003-04: 124 Crores 2004-05: 375 Crores
KMOM – THE PARTNERSHIP AND LINEAGE A 26%-74% JOINT VENTURE BETWEEN
KOTAK LIFE INSURANCE Brand equity 66
Entrepreneurial employees Branch network Knowledge of the Indian market Access to customer base Distribution associates
OLD MUTUAL PLC Domain knowledge Technology Product innovation Training expertise Global perspective System and processes Multi channel management
Old Mutual was established more than 150 years ago. Old mutual plc. is a world-class international financial service company. It owns the largest companies in the following areas in South Africa. They are: 1. Life Insurance Company 2. Asset Management Company 3. Bank 67
4. Non-life insurance company It has been developed into an International financial services group whose activities are focused on asset gathering and asset management. The Old Mutual Group offers a diverse range of financial services in three principal geographies: South Africa, the United States and the United Kingdom. The company is listed on the London Stock Exchange with a market capitalization of approximately $6 billion and is a member of the elite FTSE 100 index. In the 2003 rankings of the World's 500 largest corporations by Fortune magazine, Old Mutual climbed 87 places to position number 366 and was also listed as the 14th largest insurance company in the world. Old Mutual is the largest financial services business in South Africa, through its life insurance, asset management, banking and general insurance operations. The company serves 4 million life insurance policyholders and employs over 13 000 South Africans in its local operations. In the USA, Old Mutual is one of the top ten fixed annuity businesses offering an array of specialist asset management skills through its 23 asset management businesses. The company’s US Life business recorded sales of $4 billion at the end of 2002.
Operations in the United Kingdom are focused on wealth management, through Gerrard as one of the leading private client stock broking businesses in the UK. The Old Mutual Group has the ability to cater for a variety of consumer segments and offers a comprehensive and innovative range of products for all income groups.
PRODUCTS Term Plans Kotak Term Assurance Plan Kotak Preferred Term Plan Endowment Plans Kotak Endowment Plan Kotak Money Back Plan Kotak Child Advantage Plan
Kotak Capital Multiplier Plan Kotak Retirement Income Plan Kotak Premium Return Plan Unit Linked Plans Kotak Retirement Income Plan (Unit-linked) Kotak Safe Investment Plan II Kotak Flexi Plan Kotak Easy Growth Plan Kotak Privilege Assurance Plan Group Employee Benefits Kotak Term Grouplan Kotak Credit-Term Grouplan Kotak Complete Cover Grouplan Kotak Gratuity Grouplan Kotak Superannuation Group Plan Rural Kotak Gramin Bima Yojana
HIERARCHY OF KMOM LIFE INSURANCE LIMITED (SURAT BRANCH) Branch manager
Branch Operations In charge (BOE)
Sales Manager Operation Executive
Data interpretation of the Survey Graph analysis 72
Age Wise Clasification 44
No. of Customers
35 30 25
20 15 10
5 0 18-25
46 & Above
No of Member
AGE 18-25 26-30 31-45 46 to above
No Of Members 11 22 44 23
Gender wise clasification 70
No. of Customers
30 20 10 0 MALE
50 45 40
No. of Customers
35 30 25 20 15
10 5 0 2 to 4
5 to 8
8 to aboce No of members
Family member 2-4 5-8 8 to above
No of Member 40 48 12
Income 40K -70K 70K-1 Lake 1 Lake to 3 Lakes 3 Lacks
No of Members 17 41 28 14
Income Wise Classification 45
No. of Customers
30 25 20
15 10 5 0 40 k to 70k
70k to 1 Lake
1 Lake to 3 3 Lake to Lakes Above Income (P.A)
Insurable Member 42%
Uninsurable member 58%
NO OF MEMBER HAVING INSURANCE
NO 58% YES 42%
Only 42%people having insurance in surat so it is potential for insurance company to capture to all that market
No. of Customers
10 5 0 Self
Among that 42% people who having insurance, they have insurance 40% for self 28%for spouse 21% for children and 18% for their parents and 11% for all family member.
Having insurance self spouse children parents all
No of members 40 28 21 18 11
Different policy bought bye customers 80
30 25 20 15
No. of Customers
ICICI Birla Sunlife SBI HDFC
Unit Link Plan
Kotak Mahindr a ING Vyasya
Max Newyork Met Life
Under insurable persons 82%
Fully insurable persons 18%
Potential of life insurance
Under Insured 82%
Fully Insured 18%
Only 42 % people having life insurance but among them 82% people are underinsurance and only 18% people are fully insured according to them income
Insurance Plan Term Plan Money back Plan Endowment Plan Child Plan Unit link Plan
Market Share 39% 14% 15% 8% 24%
Market share of diffrent Insurance plan
Unitlink plan 24%
Child Plan 8% Endownment Plan 15%
Term Plan 39%
Moneyback Plan 14%
Finding and Suggestion •
According the survey only 42% people are insured in Surat so reaming other part is potential for insurance sector.
Among that 42% people who having insurance, they have insurance 40% for self 28%for spouse 21% for children and 18% for their parents and 11% for all family member, also its very help full for insurance sector so they should take necessary step for capture this potential.
• Only 42% people having insurance in Surat in that 42% there are 82 % people are under insured and other 18% people are fully insured according to their income so that is also plus point for insurance sector to capture the market
Chapter 7 85
All the insurance company must advertise more in the market because not all people know more about life Insurance policy.
Most number of people wants Guaranteed Returns so company must focus on this for the customer investment. Make insurance policy which can buy any one so we can insured them through this type of life insurance policy.
8 References In order to obtain more information regarding the present study and to substantiate it with theoretical proof, the following references were made: -
“Insurance Industry 2006”.
Websites visited: www.kotaklifeinsurance.com www.google .com
Chapter 9: Annexure
2) Age 1) 18-25 2)26 to 30 3) 31 to 45 4) 46 to above 3) Gender 1) male ____) female____ 4) Occupation: 1) Service 2) Business 3) Professional 4 ) other 5) Family member 1) 2 to 4 2) 5 to 8 3) 8 to above 6) Do u have a life insurance? Yes_______
If yes, Which is it? Company’s Term Endow Whole name plan ment life
Money Retire Child Unit back ment Plan link 88
Plan LIC ICICI Prudential Birla Sunlife SBI Life HDFC Standard Life Bajaj Alliance TATA AIG Kotak Mahindra ING Vysya Max Newyork Met Life Reliance Shri Ram Sahara 7) What is your annual income? 1) 40 K to 70 K 2) 70 K to 1 lake 3) 1 lake to 3 lakes 4) 3 lakes to above