CHAPTER 1 LIFE INSURANCE

1.1 INSURANCE
"Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event." Insurance is a form of risk management which is used primarily to hedge against the risk of a contingent, uncertain loss. Insurance defined as the equitable transfer of the risk of loss from one entity to another, in exchange for payment. Insurance is a technique wherein a number of people, who are exposed to similar risk, participate in the scheme and contribute in the shape of periodic premiums. Such premiums are received by the insurer who is able to pay out of the premiums received by him, for the losses of some of those who have participated in the scheme.

Insurance = Collective bearing of Risk

INSURANCE PROVIDES: Protection to investor. Accumulation of savings. Channeling these savings into sectors needing huge long term investment.

1.2 INSURANCE INDUSTRY: CLASSIFICATION

1.3 LIFE INSURANCE

Life insurance is a contract under which the insurer (Insurance Company) in Consideration of a premium paid undertakes to pay a fixed sum of money on the death of the insured or on the expiry of a specified period of time whichever is earlier. In case of life insurance, the payment for life insurance policy is certain. The Event insured against is sure to happen only the time of its happening is not known. So life insurance is known as Life Assurance. The subject matter of insurance is life of human being. Life insurance provides risk coverage to the life of a person. On death of the person insurance offers protection against loss of income and compensate the titleholders of the policy.

1.4 ROLES OF THE LIFE INSURANCE:

Life insurance as an investment: Insurance products yield more than any other investment instruments and it also provides added incentives or bonus offered by insurance companies. Life insurance as risk cover: Insurance is all about risk cover and protection of life. Insurance provides a unique sense of security that no other form of invest can provide.

Life insurance as tax planning: Insurance serves as an excellent tax saving mechanism

1.5 IMPORTANCE OF LIFE INSURANCE.

Life Insurance is of great importance to individuals, groups, business community and general public. Some of the main benefits of life insurance are given below. 1. Protection against untimely death Life insurance provides protection to the dependents of the life insured and the family of the assured in case of his untimely death. The dependents or family members get a fixed sum of money in case of death of the assured. 2. Saving for old age. After retirement the earning capacity of a person reduces. Life insurance enables a person to enjoy peace of mind and a sense of security in his/her old age. 3. Promotion of savings. Life insurance encourages people to save money compulsorily. When a life policy is taken, the assured is to pay premiums regularly to keep the policy in force and he cannot get back the

premiums, only surrender value can be returned to him. In case of surrender of policy, the policyholder gets the surrendered value only after the expiry of duration of the policy. 4. Initiates investments Life Insurance Corporation encourages and mobilizes the public savings and channelises the same in various investments for the economic development of the country. Life insurance is an important tool for the mobilization and investment of small savings. 5. Credit worthiness Life insurance policy can be used as a security to raise loans. It improves the credit worthiness of business.

1.6 LIFE INSURANCE IN INDIA: THE JOURNEY FROM ORIGIN TO EVOLUTION

In India, life insurance has been an integral part of most people's lives. For some, it is an investment avenue while others see it as a safety net to provide for their family's future in case of untimely death. In urban areas, life insurance is almost considered a given, with people taking multiple policies at various stages of their life. Initial steps 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. First regulation In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.

Nationalisation happens The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business. Sector reopened An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 nonIndian insurers as also 75 provident societies-245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. Basic recommendations The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies should be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.

IRDA constituted Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market. The role of IRDA IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders' interests. Today there are 23 life insurance companies operating in the country.

1.7 SOME OF THE IMPORTANT MILESTONES IN THE LIFE INSURANCE BUSINESS IN INDIA ARE:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies

taken over by the central government and nationalised. LIC formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.

1.8 RELATED ACTS OF LIFE INSURANCE IN INDIA

The Insurance Act, 1938 The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business. Life Insurance Corporation Act, 1956 Even though the first legislation was enacted in 1938, it was only in 19 January 1956, that life insurance in India was completely nationalized, through a Government ordinance; the Life Insurance Corporation Act, 1956 effective from 1.9.1956 was enacted in the same year to, inter-alia, form LIFE INSURANCE CORPORATION after nationalization of the 245 companies into one entity. There were 245 insurance companies of both Indian and foreign origin in 1956. The Life Insurance Corporation of India was created on 1 September, 1956, as a result and has grown to be the largest insurance company in India as of 2006. General Insurance Business (Nationalization) Act, 1972 The General Insurance Business (Nationalization) Act, 1972 was enacted to nationalize the 100 odd general insurance companies and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance, and United India Insurance which were headquartered in each of the four metropolitan cities.

CHAPTER 2 TYPES OF LIFE INSURANCE POLICIES IN INDIA

Life insurance policies can be grouped into the following categories:

TERM POLICY
In case of Term assurance plans, insurance company promises the insured for a nominal premium to pay the face value mentioned in the policy in case he is no longer alive during the term of the policy. Term assurance policy has the following features: It provides a risk cover only for a prescribed period. Usually these policies are short-term plans and the term ranges from one year onwards. If the policyholder survives till the end of this period, the risk cover lapses and no insurance benefit payment is made to him. The amount of premium to be paid for these policies is lower than all other life insurance policies. As savings and reserves are not accumulated under this policy, it has no surrender value and loan or paid-up values are not allowed on these policies.

 This plan is most suitable for those who are initially unable to pay high premium

WHOLE LIFE POLICY This policy runs for the whole life of the assured. The sum assured becomes payable to the legal heir only after the death of the assured. The whole life policy can be of three types. (1) Ordinary whole life policy In this case premium is payable

periodically Throughout the life of the assured. (2) Limited payment whole life policy In this case premium is

payable for a specified period (Say 20 Years or 25 Years) Only. (3) Single Premium whole life policy In this type of policy the

entire premium is payable in one single payment. ENDOWMENT LIFE POLICY In this policy the insurer agrees to pay the assured or his nominees a specified sum of money on his death or on the maturity of the policy which ever is earlier. The premium for endowment policy is comparatively higher than that of the whole life policy. The premium is payable till the maturity of the policy or until the death

of the assured which ever is earlier. It provides protection to the family against the untimely death of the assured. HEALTH INSURANCE SCHEMES An individual is subject to uncertainty regarding his health. He may suffer from ailments, diseases, disability caused by stroke or accident, etc. For serious cases the person may have to be hospitalized and intensive medical care has to be provided which can be very expensive. It is here that medical insurance is helpful in reducing the financial burden. JOINT LIFE POLICY This policy is taken on the lives of two or more persons simultaneously. Under this policy the sum assured becomes payable on the death of any one of those who have taken the joint life policy. The sum assured will be paid to the survivor(s). For example, a joint life policy may be taken on the lives of husband and wife, sum assured will be payable to the survivor on the death of the spouse.

DOUBLE ACCIDENT BENEFIT POLICY

This policy provides that if the insured person dies of any accident, his beneficiaries will get double the amount of the sum assured.

ANNUITY POLICY
Under this policy, the sum assured is payable not in one lump sum payment but in monthly, quarterly and half-yearly or yearly installments after the assured attains a certain age. This policy is useful to those who want to have a regular income after the expiry of a certain period e.g. after retirement. Annuity is paid so long as the assured survives. In annuity policy medical checkup is not required. Annuity is paid so long as the assured survives.

GROUP INSURANCE
Group life insurance is a plan of insurance under which the lives of many persons are covered under one life insurance policy. However, the insurance on each life is independent of that on the other lives. Usually, in group insurance, the employer secures a group policy for the benefit of his employees. Insurer provides coverage for many people under single contract.

POLICIES FOR CHILDREN

Policies for children are meant for the various needs of the children such as education, marriage, security of life etc. Some of the major children policies are: (1) Childrens deferred assurances (2) Marriage endowment and educational annuity plans (3) Children endowment policy

MONEY BACK POLICY

In this case policy money is paid to the insured in a number of separate cash payments. Insurer gives periodic payments of survival benefit at fixed intervals during the term of policy as long as the policyholder is alive.

ULIP
Unit-linked Insurance Plans (ULIPs), introduced by the private players, are hugely popular, because they combine the benefits of life insurance policies with mutual funds. A certain part of the premium is invested in listed equities/debt funds/bonds, and the balance is used to provide for life insurance and fund management expenses.

Pension Plan
Pension plans are different from other types of life insurance because they do not provide any life insurance cover, but ensure a guaranteed income, either for life or for a certain period. You make the investment for a pension plan either with a single lump sum payment or through installments paid over a certain number of years. In return, you get a specific sum every year, every half-year or every month, either for life or for a fixed number of years.

CHAPTER 3 LIFE INSURANCE COMPANY ANALYSIS IN INDIA 3.1 Life Insurance Companies in India
Currently there are 24 life insurance companies undertaking life insurance business in India. Government owned Public Sector Company, Life Insurance Corporation of India is the largest life insurer in the country. The Indian Insurance sector underwent several phases and changes, in 1999, when the Government of India opened up the insurance sector for private companies to solicit insurance, allowing FDI up to 26%, the Insurance sector in India is grew by leaps and bounds.

PUBLIC SECTOR COMPANY Life Insurance Corporation of India PRIVATE SECTOR COMPANY 1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Co. Ltd 3. HDFC Standard Life Insurance Co. Ltd 4. ICICI Prudential Life Insurance Co. Ltd 5. IndiaFirst Life Insurance Company Ltd 6. ING Vysya Life Insurance Company Ltd.

7. Max New York Life Insurance Co. Ltd 8. Met Life India Insurance Company Ltd. 9. Kotak Mahindra Old Mutual Life Insurance Limited 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. SBI Life Insurance Co. Ltd Tata AIG Life Insurance Company Limited Reliance Life Insurance Company Limited. Aviva Life Insurance Company India Limited Sahara India Life Insurance Co, Ltd. Shriram Life Insurance Co, Ltd. Bharti AXA Life Insurance Company Ltd. Future Generali India Life Insurance Co, Limited IDBI Fortis Life Insurance Company Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Aegon Religare Life Insurance Company Limited DLF Pramerica Life Insurance Company Limited Star Union Dai-Ichi Life Insurance Company Limited IndiaFirst Life Insurance Company Limited Edelweiss Tokio Life Insurance Co. Ltd.

Company Ltd.

3.2 ICICI PRUDENTIAL LIFE INSURANCE

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and prudential PLC, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). It is largest private insurance company and second largest insurance in India after LIC. The company has assets held over Rs. 70,000 crores as on June 30, [Link] Prudential Life Insurance has maintained its focus on offering a wide range of flexible products that meet the needs of the Indian customer at every step in life.

PLANS Health Solutions Icici pru health saver: While the hospitalisation insurance benefit ensures complete coverage for expenses incurred in the event of a hospitalisation, the health fund created; by investing a part of your premium in market linked funds, under the health savings benefit, ensures you of an adequate support system to take care of any other medical expenses.

 ICICI Pru Crisis Cover: It is a comprehensive critcal illness insurance policy that provides coverage against 35 critical illnesses, total and permanent disability, and also death

.Retirement Solutions ICICI Pru Immediate Annuity : a plan that not only give you an income for life but also provide you options to match your needs. Minimum annuity payable is Rs12000 pa. Maximum age at entry is 45 years and minimum age at entry in 20 years. ICICI Pru Shubh Retirement: provides this solution the benefit of equity participation with the comfort of capital guarantee. In this plan, a combination of equity and debt will help you build an adequate retirement corpus and protect your savings from market downturns. Child Plans SmartKid education plans provide guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the childs life. SmartKid plans are also available in unit-linked form both single premium and regular premium.

Group Insurance Solutions Group Gratuity Plan: These statutory payments to

employees create a gratuity liability for you as an employer. As an employer, one of your paramount concerns will be availability of sufficient funds to meet your company's obligation for these gratuity payments. The Group Term Life insurance: it cover from ICICI Prudential is a pure term group insurance product which ensures financial security for your member's family in the event of unfortunate death of the member.

3.3 LIFE INSURANCE CORPORATION OF INDIA.

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 much the objective of spreading life insurance 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 offices in the year 1956.

PLANS Children plan Komal Jeevan: This is a Children's Money Back Plan that provides financial protection against death during the term of plan with periodic payments on survival at specified durations. This plan can be purchased by any of the parent or grandparent for a child aged 0 to 10 years. The risk commences either after 2 years from the date of commencement of policy. Jivan chhaya: This is an Endowment Assurance plan that provides financial protection against death throughout the term of the plan. Besides payment of Sum Assured immediately on death, one-fourth of Sum Assured is payable at the end of each of last four years of policy term whether the life assured dies or survives the term of the policy.

 Child Career Plan: This plan is specially designed to meet the increasing educational and other needs of growing children. It provides the risk cover on the life of child not only during the policy term but also during the extended term (i.e. 7 years after the expiry of policy term). Joint life plan Jeevan Saathi: This is an Endowment Assurance Plan issued on the lives of husband and wife. The plan provides financial protection against death of both the lives. It pays the maturity amount on survival of one or both the lives to the end of the policy term.

Endowment PLUS Endowment PLUS: This is a unit linked Endowment plan which offers investment cum insurance cover during the term of the policy. You can choose the level of insurance cover within the limits, which will depend on the mode and level of premium you agree to pay. minimum premium is Rs.20000 and maximum premium is Rs.100000.

Special Money Back Plan for Women LICs Jeevan Bharati-I: It is a plan exclusively for women. It is a with profit plan having special features considering the needs of women. The plan also provides for Accident Benefit, Critical Illness Benefit and Congenital Disability Benefit as optional Riders

Pension plan New Jeevan Nidhi: LIC's New Jeevan Nidhi Plan is a conventional with profits pension plan which provides for death cover during the deferment period and offers annuity on survival to the date of vesting. Jeevan Akshay VI: It is an Immediate Annuity plan, which can be purchased by paying a lump sum amount. The plan provides for annuity payments of a stated amount throughout the life time of the annuitant.

3.3 LIFE INSURANCE MARKET

The Life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population. The state owned LIC sold insurance as a tax instrument, not as a product giving protection. Most customers were under- insured with no flexibility or transparency in the products. With the entry of the private insurers the rules of the game have changed. The 12 private insurers in the life insurance market have already grabbed nearly 9 percent of the market in terms of premium income. The new business premium of the 12 private players has tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile, with regard to state owned LICs new premium business has fallen. The growing popularity of the private insurers is evidenced in other ways. The state owned companies still dominate segments like endowments and money back policies. But in the annuity or pension products business, the private insurers have already wrested over 33 percent of the market. And in the popular unitlinked insurance schemes they have a virtual monopoly, with over 90 percent of the customers.

Buoyed by their quicker than expected success, nearly all private insurers are fast- forwarding the second phase of their expansion plans. No doubt the aggressive stance of private insurers is already paying rich dividends. But a rejuvenated LIC is also trying to fight back to woo new customers.

3.4 MARKET SHARE OF LIFE INSURANCE COMPANY IN INDIA

CHAPTER 4 DOMINANCE IN INDIAN MARKET: LIC

All this time, we find a dominant position being enjoyed by state owned LIC in life insurance market. This has to be substantiated to prove its dominance in the relevant market. In India, LIC is the only state owned enterprise working in life insurance sector. There are several private players in this market but only one state owned enterprise A look at the business underwritten by all the players, including LIC indicates that LIC continues to be the dominant player in the life insurance business. Prior to the opening up of private participation in August 2000, the insurance sector was a government monopoly consisting of LIC and GIC with its four subsidiaries. Now there are several new Life insurance companies and General life insurance companies. LIC has huge investment and financial strength. Owing its bigger size it has the best advantage of pricing as well as getting better investment returns which can subsidies its original insurance product. Therefore, Like SBI continues to be market leader despite of so many private banks coming, LIC is still the big player.

LIC is said to have a dominant position in insurance market and the factors leading to distortion in level playing field are as follows :-

1. Sovereign Guarantee
LIC has sovereign guarantee from central government. By sovereign guarantee, government gives the policy holders of LIC a commitment that it will fulfill all the promises made by the company. Private players and insurance regulator IRDA have been asking the government to remove sovereign guarantee given to LIC to create a level playing field. In 1956, when life insurance industry was nationalized, Parliament directed LIC to take the message of Life insurance to every part of the country. It also directed the government to guarantee the sums assured under all policies issued as well as taken over by the corporation(section 37 of LIC act). Some forces are lobbying vigorously for the withdrawal of the guarantee which will later twist the facts and launch a publicity blitzkrieg, stating that it is a proof of the Government's loss of confidence in the ability of the corporation to survive competition, and succeed in impairing its image. The consequences that follow may affect millions of families in the country. LIC enjoys this dominance because it is obvious that investors want a guarantee of their money irrespective of cycles of market. They know that it would be a safe play to invest in LIC as the government guarantee to bail out in case of any mishap. This denies the life insurance market from a level playing field to the

competitors. The private players have been in the market for 10 years now but could not bring a big change in market share of life insurance. Peoples trust is build up with LIC due to such sovereign guarantee. Sovereign guarantee reduces the sector from healthy competition and gives an undue advantage to LIC to attain the faith of people due to which other private players suffer a loss. Through the LIC Act of 1956, government provides sovereign guarantee to LIC which comforts approximately 16 crore policy holders and its withdrawal would require an amendment to the LIC Act,1956.

2. Distribution network
We cannot deny that insurance are not bought, it is sold. The industry covers approx. 3% of the population of our country. The market has a great scope to grow agents seem to be the most important distribution channel in this industry. Agents connect with people and influence them to buy any insurance policy. For the same such agents charge commission on the policies they get for the company. There is a fixed percentage of commission for which these agents work. Distribution channel is an important stimulant of competition in market. In India, An agent can work for only one insurer. LIC has more than 10 lakh agents which are supposedly to grow more in future which in comparison to private players is mammoth. The new players have comparatively few agents. The policy of IRDA hinders distribution network. It leads to an exclusionary behaviour

of distribution network. Such behaviour gives LIC a dominant position in the market. It is important to mention here that agents cover 55% market factor influencing purchase of insurance. Also it is important that LIC spends Rs.116 crore in 2008 where as major players like Bajaj Allianz and ICICI Prudential are Rs.17.7 cr and 15.4 cr respectively. With more market share, it is obvious that LIC has better capacity to invest more on advertisement which leads them to dominate the market much more than other players.

3. Other factors
It has been reported several times through several journals that every time the stock market falls sharply; government asks LIC to step in as a buyer to curtail the fall in the market. Its investment decision is influenced by the government last year. LIC has to follow the guidelines of IRDA and there is a proper system to take investment decisions. There has been incidence where it seems that LIC gets offers from big companies as well to pump in money in market when they are in need of cash. This gives LIC a dominant position as it acts as a saviour during crisis due to its surplus liquid cash reserve. Nevertheless, it cannot be denied that LIC is a government agency and is therefore trusted by a lot of companies and has a lot of share in these companies. Therefore it has a major role to play in influencing the decisions of such companies and big market players.

CHAPTER 5 TRENDS IN INSURANCE SECTOR

5.1 INDIAN INSURANCE IN 21ST CENTURY:
2000: IRDA starts giving licenses to private insurers: ICICI

prudential and HDFC Standard Life insurance first private insurers to sell a policy 2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002: Banks allowed selling insurance plans. As TPAs enter the insurers start setting non-life claims in the cashless

scene, mode

2007: First Online Insurance portal, [Link] set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt Ltd. The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Minimum capital requirement for direct life and Non-life Insurance company is INR1000 million and that for reinsurance company is INR 2000 million.

5.2 GLOBALISATION IN LIFE INSURANCE

While nationalized insurance companies have done a

commendable job in extending the volume of the business, opening up insurance sector to private players was a necessity in the context of globalization of financial sector. The introduction of private players in the industry has added colours to the dull industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. The new players have improved the service quality of the insurance. As a result LIC down the years have seen the declining in its career. The market share was distributed among the private players. Though LIC still holds 75% of the insurance sectors the upcoming nature of these private players are enough to give more competition to LIC in the near future. Marketing after globalization has become: More customer oriented Mostly better service oriented More competitive Better satisfaction, more value addition and strategic development can help any insurance sector to sustain in the present era.

NAME OF THE PLAYER LIC ICICI PRUDENTIAL BIRLA SUN LIFE BAJA ALLIANZ SBI LIFE HDFC STANDARD TATA AIG MAX NEW YORK AVIVA OM KOTAK MAHINDRA ING VYASA AMP SANMAR METLIFE

MARKET SHARE (%) 82.3 5.63 2.56 2.03 1.80 1.36 1.29 0.90 0.79 0.51 0.37 0.26 0.21

OPPORTUNITES
A state monopoly has little incentive to innovative or offers a wide range of products. It can be seen by a lack of certain products from LICs portfolio and lack of extensive risk categorization in several GIC products such as health insurance. More competition in this business will encourage firms to offer several new products and more complex and extensive risk categorization. It would also result in better customer services and help improve the variety and price of insurance products. With the entry of private players, it is expected that insurance business roughly 400 billion rupees per year now, more than 20 per cent per year even leaving aside the relatively under developed sectors of health insurance. More importantly, it will also ensure a great moblisation of funds that can be utilized for purpose of infrastructure development that was a factor considered for globalisation of insurance. More importantly, it will also ensure a great moblisation of funds that can be utilized for purpose of infrastructure development that was a factor considered for globalisation of insurance.

CHALLENGES
The existing insurer, LIC and GIC, have created a large group of dissatisfied customers due to the poor quality of service. Hence there will be shift of large number of customers from LIC and GIC to the private insurers. LIC may face problem of surrender of a large number of policies, as new insurers will woo them by offer of innovative products at lower prices. The corporate clients under group schemes and salary savings schemes may shift their loyalty from LIC to the private insurers. There is a likelihood of exit of young dynamic managers from LIC to the private insurer, as they will get higher package of remuneration. LIC has more than to 60 products and GLC has more than 180 products in their kitty, which are outdated in the present context as they are not suitable to the changing needs of the customers. Not only that they are not competent enough to complete with the new products offered by foreign companies in the market. Reaching the consumer expectations on par with foreign companies such as better yield and much improved quality of service particularly in the area of settlement of claims, issue of new policies, transfer of the policies and revival of policies in the liberalized market is very difficult to LIC and GIC.

5.3 TECHNOLOGY TREND IN INSURANCE MARKET ARE AS FOLLOWS

Computerization:

Initially, in the late 1950s the insurance companies used Unit Record Machines (Electro Magnetic Machines) to process data punched into cards. Computers were introduces in the mid 1960s and by the 1980s the Unit Phased Machines were phased out and the entire process was computerized. This brought about greater efficiency and quick service delivery

Internet:
Today, the internet has completely changed the service delivery process. Internet is today used to even sell insurance policies. Internet is, in fact, proving to be one of the widely used distribution networks for selling insurance policies. Also internet is used for sending premium notices to policy holders through e-mails Companies like LIC ([Link]), ICICI

([Link]) all have websites from which people can get the information about their products, prices, various schemes,

and lots of other information. People can also purchase the product through this website.

Electronic Clearance Service (ECS):

Almost all the big organizations today provide the ECS facility to its customers. A policy holder having an account in any bank which is a member of the local clearing house can opt for ECS debit to pay premiums. The advantage here is that once the option is exercised, the policy holder need not visit a branch for paying the premium or collecting the receipts. On the day indicated by the policy holder, the premium amount will be directly debited to the bank account of the policyholder and the receipt will be issued by the designated branch office.

Call Centres and SMS services:

Almost all the insurance companies have their own call centres which cater to the phone based queries of the policyholders. This service is 24x7 and they have the Interactive Voice Response (IVR) systems at all the branches

5.4 GROWTH OF LIFE INSURANCE MARKET

5.5 BANCASSURANCE
An arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank's client base. This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sales forces or pay commissions to insurance agents or brokers.

ROLE OF BANCASSURANCE IN INSURANCE SECTOR:

The opening up of the insurance industry to private sector participation in December 1999 has led to the entry of 20 new players, with 12 in the life insurance sector and eight in the non-life insurance sector. Insurers have been turning in ever-greater numbers to alternative modes of distribution because of the high costs they have paid for agent services. These costs became too much of a burden for many insurers compared to the returns they generated Insurers operate through bancassurance own and control relationships with customers. Insurers found that direct relationships with customers gave them greater control of their business at a lower cost. Insurers who operate through the agency relationship are hardly having any control on their relationship with their clients. Insurers have much to gain from marketing through banks. Over the last decade, life agents have sold fewer and larger policies to a more upscale client base. Middle-income consumers, who comprise the bulk of bank customers, get little attention from most life agents. By capitalizing on bank relationships, insurers will recapture much of this underserved market.

CHAPTER 6
PRESENT SCENARIO IN THE INSURANCE SECTOR 6.1 PRESENT SCENARIO
Insurance agents are the main intermediaries in the Indian insurance market, but with liberalization brokers will be an additional channel for selling insurance products. Brokers are likely to play a major role in ensuring clients get insurance covers tailor made to suit their requirements at good terms. Fast growing middle class of 300 million who can afford insurance. Increasing financial strength of middle class with disposable income. Narrowing gap between rural and urban populace in terms of access to information and services. More and more entrepreneurs in traditional and modern

business areas. Increase in number of double income families leading to lifestyles and attitude changes.

 Growth of rural market is at 4 times of urban markets. Insurance market is set to touch 25 billion by 2010 in India. (It was only 7.2 billion in 98-99 survey. At that time Indias rank in annual premium was 23rd for Life insurance and contribution in GDP was merely 1.4%). Presently it is still lower then develops economy but increased to 2.61% of GDP in [Link] immense opportunity cant be ignoring.

6.2 NEW PRODUCT LAUNCH

Some of the recent product launches in the Indian life insurance market are listed below:

1. AEGON Reliance life has launched a participating endowment product aim at the education of children, the Educare plan. The plan offers guaranteed payout during last four policy years. In case of the policy holder in addition to the sum assured, accrued bonus and guaranteed payout, an option to receive 10 percent of the sum assured each year till the end of the premium period is also available. 2. The LIC has launched a single premium endowment plan, Jeevan Ankur, with profit child plan. In case of the death of the policy holder the benefit payable to the nominee under the plan equal the basic sum assured together income benefit equal to 10 percent of the sum assured each policy anniversary thereafter till the end of the policy term. On maturity, sum assured plus loyalty addition are payable.

3. The LIC has launched a single premium endowment plan, Jeevan Vridhi. In case of the death of the policy holder the basic sum assured equal to five times single premium is payable. On maturity the guaranteed sum assured along with

any loyalty addition shall be payable to the policy holder. The policy term under this plan is fixed at 10 years. 4. Max New York life has introduced an endowment plan, premium return term plan . The plan provides maturity benefit wherein the policy holder is entitled to receive 100 percent of the paid premium. In case of the death of the policy holder the basic sum assured payable while in case of death of the accident, an additional 50 percent of the basic sum assured is paid to the nominee.

5. Met life insurance has launched regular premium unit-linked children saving plan, Met smart Child. The plan provides maturity benefit of fund value and loyalty addition. In case of the assured or 105 percent of regular premium paid is payable and future premium are waived off. The policy holder can choose the listed unit link funds. 6. Bajaj Alliannz life has launched a single premium unit linked plan, guaranteed maturity insurance plan targeted at rural markets. The plan guaranteed a maturity benefit of at least double the single premium in addition to the life covrage throughout the term 10 years product.

7. Bharti AXA Life has launched eproduct, its first online term insurance plan. The minimum sum assured under the policy is Rs 2.5 million. The plan offer special rate offer for non smoker if the sum assured chosen exceeds 5 miliion. In case of the death of the policy holder , Rs 100000 from the sum assured is paid to the nominee as Family Care Benefit within 48 hours of the recipt of the relevant documents subject to condition. 8. HDFC Life has entered in online distribution channel with the launch of an online term assurance product click 2 protect. The minimum sum assured under the plan is Rs 1 million and the minimum premium payable is Rs 2,000 per annum.

6.3 PRESENT ISSUES OF LIFE INSURANCE INDUSTRY

Top Insurance Industry Issues in 2012 describes in detail the challenges insurers are facing and the strategies they can use to cope with change, manage risk, enhance their operations, and grow. In 2011, life insurers started to feel meaningful effects from the low interest rate environment, including declining sales, revenue, profitability, and company valuations. If interest rates continue to stay low - and it appears likely that they will for at least another two years - then life insurers financial pain will be broader and deeper. In a volatile market, analysts' lack of confidence in prevailing disclosure standards can only heighten investor uncertainty. This makes it even more important for insurers to provide stakeholders clear and informative financial information. Expansion remains a challenge for many insurers. The M&A environment has been muted in recent years, and growth beyond stagnant developed markets into more dynamic emerging ones presents both opportunity and risk. A key consideration for all companies is that one size does not fit all when determining M&A strategy and/or how to expand into new geographic markets.

 Technology, including mobile devices and sensors, offers insurers great promise for developing a competitive edge, but only if they can effectively analyze the huge amount of data that is now available. If they can meet this challenge, then they will be able to reduce costs, improve efficiencies, and enhance their ongoing attempts to move from product-focused to customer oriented operating models. Current claims, policy administration and billings systems

replacements have reached their practical limits, and modern and flexible platforms have become "table stakes" for any successful carrier. Quite simply, the cost of establishing a common view through superior IT execution and pricing segmentation could prove to be the cost of staying in business. There have been major tax compliance developments in the past several months that strongly affect insurers, notably SSAP 101 and FATCA. The latter has the potential to have an especially big impact on compliance functions both in the US and globally.

CHAPTER 7 SUGGESTION

People suggest that LIC should have increased their interest rate. People suggest that LIC should have advertised its product with well known brand ambassador in order to increase its sales. People suggest that LIC should have provided a good service after sale of product or policy of it. Advertise about the company and its products it motivates individuals to purchase insurance. Create a positive perception about insurance. Speak about the good features a plan offers like high returns, life cover, tax benefits, indexation, and accident cover while prospecting customers. Try to sell the product/plan which the consumer requires and not the plan where the advisors benefit is higher. Improve the efficiency in operations.

 Bring out policies with small premiums payable for short periods of time Rs. 5000 Rs. 10000 per annum for 10 years. Attract the youth of India with higher returns on investment as returns are the motivating factor which influence purchase of insurance. Promote insurance in colleges and corporate houses. Should have partial withdrawals from the first year onwards. Tap the rural market where there is large potential. Diversify product portfolio. Make products more straight forward reduce complexities.

CONCLUSION

Where almost all the industries in the world trying hard for survival due to the major economic meltdown, Indian life insurance industry is one of the sectors that is still observing good growth. Indian insurance industry has modified itself with the passage of time by introducing customized products based on customers need, through innovative distribution channels, Indian life insurance industry searched its path to grow. Changing government policy and guideline of the regulatory authority, IRDA have also played a very vital role in the growth of the sector. Similarly, opening on the sector for private insurer broke the monopoly of LIC and bring in a tough competition among the players. The life insurers should conduct more extensive market research before introducing insurance products targeted at specific segments of the population so that insurance can become more meaningful and affordable.

BIBLIOGRAPHY
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