18552483 Report a Viva Life Insurance India Pvt Ltd

8/2/2019 18552483 Report a Viva Life Insurance India Pvt Ltd

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AVIVA LIFE INSURANCE INDIA

Project Report

In Partial fulfillment of the Bachelors Program in Business

Administration, Bharti Vidyapeeth University, Pune

April 2009

EXECUTIVE SUMMARYAviva Life insurance is the oldest life insurance company in the world. It is

the largest insurer in the UK and is the 28th largest company in the world. In

India, the company is marketing life insurance products and unit linked

investment plans. From my research at Aviva, I found that the company has

a lot of competition from other private insurers like ICICI, HDFC, Birla Sun Life


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and Tata Aig. It also faces competition from LIC. To compete effectively Aviva

could launch cheaper and more reasonable products with small premiums

and short policy terms (the number of years premium is to be paid). The

ideal premium would be between Rs. 5000 Rs. 25000 and an ideal policy

term would be 10 20 years.

Aviva must advertise regularly and create brand value for its products and

services. Most of its competitors like HDFC, ICICI, Reliance and LIC use

television advertisements to promote their products. The Indian consumer

has a false perception about insurance they feel that it would not benefit

them if they do not live through the policy term. Nowadays however, most

policies are unit linked plans where a customer is benefited even if their

death does not occur during the policy term. This message should be

conveyed to potential customers so that they readily invest in insurance.

Family responsibilities and high returns are the two main reasons people

invest in insurance. Optimum returns of 16 20 % must be provided to

consumers to keep them interested in purchasing insurance.

On the whole Aviva life insurance is a good place to work at. Every new

recruit is provided with extensive training on unit linked funds, financial

instruments and the products of Aviva. This training enables an advisor/ sales

manager to market the policies better. Aviva was ranked 13 in the Best

Places to Work survey. The company should try to create awareness about

itself in India. In the global market it is already very popular. With an

improvement in the sales techniques used, a fair bit of advertising and

modifications to the existing product portfolio, Aviva would be all set to

capture the insurance market in India as it has around the globe.

TABLE OF CONTENTS


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Introduction to

Insurance.1

Research

Design

5

Company

Profile

..10

Financial

Analysis

.34

Competitive

analysis..3

6

Marketing

problems

40

Analysis and

Interpretation42

Future line of

research.58

Conclusion

..59


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References

..60

Appendix

..61

ACKNOWLEDGMENT

I would like to thank Miss. Anjali Sharma for supporting me during this project

and providing us an opportunity to learn outside the class room. It was a truly

wonderful learning experience.

I would like to dedicate this project to my parents and brother. Without their

help and constant support this project would not have been possible.

Lastly I would like to thank all the respondents who offered their opinions and

suggestions through the survey that was conducted by me in Delhi.


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CHAPTER I


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INDIAN INSURANCE

INDUSTRY

AN OVERVIEW

THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW

With the largest number of life insurance policies in force in the world,

Insurance happens to be a mega opportunity in India. Its a business growing

at the rate of 15-20 per cent annually and presently is of the order of Rs 450

billion. Together with banking services, it adds about 7% to the countrys

Gross Domestic Product (GDP). The gross premium collection is nearly 2% of

GDP and funds available with LIC for investments are 8% of the GDP.


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Even so nearly 80% of the Indian population is without life insurance cover

while health insurance and non-life insurance continues to be below

international standards. A large part of our population is also subject to weak

social security and pension systems with hardly any old age income security.

This in itself is an indicator that growth potential for the insurance sector in

India is immense.

A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development

and strengthens the risk taking ability of individuals. It is estimated that over

the next ten years India would require investments of the order of one trillion

US dollars. The Insurance sector, to some extent, can enable investments in

infrastructure development to sustain the economic growth of the country.(Source: www.indiacore.com)

HISTORICAL PERSPECTIVE

The history of life insurance in India dates back to 1818 when it was

conceived as a means to provide for English Widows. Interestingly in those

days a higher premium was charged for Indian lives than the non - Indian

lives, as Indian lives were considered more risky to cover. The Bombay

Mutual Life Insurance Society started its business in 1870. It was the first

company to charge the same premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General

insurance business in India, on the other hand, can trace its roots to TritonInsurance Company Limited, the first general insurance company established

in the year 1850 in Calcutta by the British. Till the end of the nineteenth

century insurance business was almost entirely in the hands of overseas

companies.


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Insurance regulation formally began in India with the passing of the Life

Insurance Companies Act of 1912 and the Provident Fund Act of 1912.

Several frauds during the 1920's and 1930's sullied insurance business in

India. By 1938 there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of

1938 that provided strict State Control over the insurance business. The

insurance business grew at a faster pace after independence. Indian

companies strengthened their hold on this business but despite the growth

that was witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life

insurers and provident societies under one nationalized monopoly

corporation and Life Insurance Corporation (LIC) was born. Nationalization

was justified on the grounds that it would create the much needed funds for

rapid industrialization. This was in conformity with the Government's chosen

path of State led planning and development.

The non-life insurance business continued to thrive with the private sector till

1972. Their operations were restricted to organized trade and industry in

large cities. The general insurance industry was nationalized in 1972. With

this, nearly 107 insurers were amalgamated and grouped into four

companies- National Insurance Company, New India Assurance Company,

Oriental Insurance Company and United India Insurance Company. These

were subsidiaries of the General Insurance Company (GIC).

KEY MILESTONES

1912: The Indian Life Assurance Companies Act enacted as the first statute

to regulate the life insurance business.


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1928: The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life and non-life

insurance businesses.

1938: Earlier legislation consolidated and amended by the Insurance Actwith the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers along with provident societies were

taken over by the central government and nationalized. LIC was formed by

an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore

from the Government of India.

INDUSTRY REFORMS

Reforms in the Insurance sector were initiated with the passage of the IRDA

Bill in Parliament in December 1999. The IRDA since its incorporation as a

statutory body in April 2000 has fastidiously stuck to its schedule of framing

regulations and registering the private sector insurance companies. Since

being set up as an independent statutory body the IRDA has put in a

framework of globally compatible regulations.

The other decision taken simultaneously to provide the supporting systems

to the insurance sector and in particular the life insurance companies was the

launch of the IRDA online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured

that the insurance companies would have a trained workforce of insurance

agents in place to sell their products.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 36%, with premium

income from new businesses at Rs. 253.43 billion during the fiscal year 2004-


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2005. Though the total volume of LIC's business increased in the last fiscal

year (2004-2005) compared to the previous one, its market share came down

from 87.04 to 78.07%.

The 14 private insurers increased their market share from about 13% to

about 22% in a year's time. The figures for the first two months of the fiscal

year 2005-06 also speak of the growing share of the private insurers. The

share of LIC for this period has further come down to 75 percent, while the

private players have grabbed over 24 percent.

With the opening up of the insurance industry in India many foreign players

have entered the market. The restriction on these companies is that they are

not allowed to have more than a 26% stake in a companys ownership.

Since the opening up of the insurance sector in 1999, foreign investments of

Rs. 8.7 billion have poured into the Indian market and 14 private life

insurance companies have been granted licenses.

Innovative products, smart marketing, and aggressive distribution have

enabled fledgling private insurance companies to sign up Indian customers

faster than anyone expected. Indians, who had always seen life insurance as

a tax saving device, are now suddenly turning to the private sector and

snapping up the new innovative products on offer. Some of these products

include investment plans with insurance and good returns (unit linked plans),

multi purpose insurance plans, pension plans, child plans and money back

plans. (www.wikipedia.com)


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CHAPTER II

RESEARCH DESIGN

RESEARCH DESIGN

INTRODUCTION


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A Research Design is the framework or plan for a study which is used as a

guide in collecting and analyzing the data collected. It is the blue print that is

followed in completing the study. The basic objective of research cannot be

attained without a proper research design. It specifies the methods and

procedures for acquiring the information needed to conduct the research

effectively. It is the overall operational pattern of the project that stipulates

what information needs to be collected, from which sources and by what

methods.

TITLE OF THE STUDY

A Study on Market Segmentation of the Insurance Industry in India

for Aviva Life Insurance India Pvt. Ltd.

STATEMENT OF THE PROBLEM

This study was undertaken to identify which type of insurance plans Aviva

should market to particular market segments in India. A survey was

undertaken to understand the preferences of Indian consumers with respect

to insurance. While marketing policies the sole duty of an advisor/ agent is to

provide insurance plans as per customer requirements.

In effect plans (insurance products) should be flexible to suit individual

requirements. This research tries to analyze some key factors which

influence the purchase of insurance like the term of the policy, the type of

company, the amount of annual premium payable (capacity and willingness

to spend), risk taking ability and the influence of advertising. Solutions and

recommendations are made based on qualitative and quantitative analysis of

the data.


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OBJECTIVES OF THE STUDY

To find the market share of various life insurers in India

To suggest additions to the current product portfolio

To recognize the popular insurance plans

To showcase the influence of advertising

To suggest ideal policy term and premium for insurance

To showcase the consumers willingness to spend on life insurance

To showcase the factors that motivate purchase of insurance

policies

To understand the type of company preferred for investment

To understand the awareness level of consumers about unit linked

insurance plans

RESEARCH METHODOLOGY

TYPE OF DATA COLLECTED

There are two types of data used. They are primary and secondary data.

Primary data is defined as data that is collected from original sources for a

specific purpose. Secondary data is data collected from indirect sources.

(Source: Marketing Research, Sumathi and Saranavel)

PRIMARY SOURCES

These include the survey or questionnaire method, telephonic interview as

well as the personal interview methods of data collection.

SECONDARY SOURCES

These include books, the internet, company brochures, product brochures,

the company website, competitors websites etc, newspaper articles etc.


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SAMPLING

Sampling refers to the method of selecting a sample from a given universe

with a view to draw conclusions about that universe. A sample is a

representative of the universe selected for study.

Convenience sampling is used in exploratory research where the

researcher is interested in getting an inexpensive approximation of the truth.

As the name implies, the sample is selected because they are convenient.

This non probability method is often used during preliminary research efforts

to get a gross estimate of the results, without incurring the cost or time

required to select a random sample. (Source: www.statpac.com)

SAMPLE SIZE

The sample size for the survey conducted was 130 respondents.

SAMPLING TECHNIQUE

Convenience sampling technique was used in the survey conducted.

PLAN OF ANALYSIS

Tables were used for the analysis of the collected data. The data is also

neatly presented with the help of statistical tools such as graphs and pie

charts. Percentages and averages have also been used to represent data

clearly and effectively.

STUDY AREA

The samples referred to were residing in Bangalore City. The areas covered

were Koramangla, Frazer town, Maruthinagar, C.V. Raman Nagar, MG Road

and Whitefield.
http://www.statpac.com/http://www.statpac.com/


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LIMITATIONS OF THE STUDY

The study was limited only to the city of Bangalore

The study was conducted only for a short period of one month

The study is based on the assumption that information provided by the

respondents is true

OVERVIEW OF CHAPTER SCHEME

CHAPTER 1:

Introduction to insurance - An overview of the industry in India,

history, key milestones, reforms in the industry, present scenario in India.

CHAPTER 2:

Research Design - Introduction, title of the study, statement of the

problem, objectives of the study, research methodology, sampling, plan of

analysis, study area and limitations of the study.

CHAPTER 3:

Company Profile Introduction to Aviva, products and services, vision

and core values, human resource, organizational structure, introduction to

unit linked funds, national & international presence of the organization.

CHAPTER 4:

Financial Analysis Analysis of the income statement and balance

sheet, stock analysis to determine the profitability of the firm. The

advantages of investing in Aviva compared to other financial instruments.


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CHAPTER 5:

Competitive analysis Information about the plans offered by LIC and

other private insurers in India. Comparisons between the plans to find the

most popular and beneficial plans which Aviva can incorporate into their

product portfolio.

CHAPTER 6:

Marketing problems - The techniques used to market insurance and

their advantages and disadvantages along with suggestions for

improvement.

CHAPTER 7:

Analysis and Interpretation A survey on Segmentation of the

Insurance Industry in India.

CHAPTER 8:

Problems requiring more research Future line of work

CHAPTER 9:

Conclusion

References

Appendices


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CHAPTER III

COMPANY PROFILE


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COMPANY PROFILE

AVIVA LIFE INSURANCE

INTRODUCTION

Aviva plc was previously known as CGNU plc. The name change was effected

on 1st July 2002. Prior to the re branding, CGNU was using 50 trading names

across the world. The decision for the re branding was taken with the

objective of creating a strong and powerful international services brand.

HISTORY OF THE AVIVA GROUP

1696 The worlds oldest insurance company Hand in Hand formed in

London

1797 Norwich Union founded in London

1861 Commercial Union founded in London

1885 General Accident founded in Perth, Scotland

1998 CGNU formed with the merger of Commercial Union and

General Accident

2000 CGNU formed with the merger of CGU and Norwich Union

2002 CGNU re - branded as Aviva plc on 1st July, 2002

KEY POINTS - AVIVA

5

th

largest insurance group in the world (Source: Fortune 500)

Largest insurer in the United Kingdom

28th largest company in the world

Premium income from new business 32 billion USD


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Total premium income 36 billion pounds

Shareholders funds of 14.9 billion

Over 35 million satisfied customers worldwide

Listed on the London, Paris and Dublin stock exchanges

Top five positions in Holland, Ireland, Singapore, Spain, Turkey and

Poland

Long term savings and asset management account for 71% of

premiums

KEY POINTS - AVIVA LIFE INSURANCE INDIA

Got licensed on 14th May 2002 and started operations on 6th June 2006

Pioneered the concept of indexation

Pioneered the concept of unitization

Tie - ups with ABM Amro, American Express, Canara Bank & Lakshmi

Vilas Bank

26 million customers and over 67734 crores in deposits

Paid up capital of Rs.559 crores

Growth of 118% since the last year from new business

VISION

Aviva - Where exceeding expectations through innovative solutions

is our way of life

CORE VALUES

Passion for winning


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Integrity

Innovation

Customer centricity

Empowered Team

PRODUCTS & SERVICES

The right investment strategies won't just help plan for a more comfortable

tomorrow -- they will help you get Kal Par Control. At Aviva, life insurance

plans are created keeping in mind the changing needs of you and your

family. Our life insurance plans are designed to provide you with flexibleoptions that meet both protection and savings needs. We offer our customers

a full range of transparent, flexible and value for money products. Aviva

products are modern and contemporary unitized products that offer unique

customer benefits like flexibility to choose cover levels, indexation and

partial withdrawals. (Source: www.avivaindia.com)

PLANS MAINLY FOR PROTECTION (LIFE COVER)

1) LIFE LONG

Life Long is designed to suit individual requirements, no matter which life

stage you are at, and changes as your needs change during your entire life.

For the same premium, you can opt for a higher life cover (protection) and

lower savings or lower life cover and higher savings. The choice of protection-

savings mix is yours, and the decision can be based on your priorities and

age. You can also cover your spouse under the same policy without any

additional expense through a joint life policy (first death basis).

The entry age is 18 60 years. If any rider is opted the maximum entry age

is 55 years (last birthday). This is a whole life plan with premium payment

age up to 85 years. The minimum annual premium is Rs. 6000. The minimum

sum assured is 0.5* (70 entry age) * Annual premium and the maximum


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sum assured is Annual premium * Cover level, where the cover level ranges

from 10 to 100, depending upon age at entry.

Sample Cover Level

Age 20 years 30 years 40 years 50 years

Cover

Level

97 82 54 30

One can invest their monies in a With Profits Fund and 3 Unit Linked funds;

Protector, Growth and Balanced Funds. An individual can opt for riders like

accidental death and disbursement rider, critical illness and permanent total

disability rider and hospital cash benefit. There will be 5% extra allocation of

units on the 15th policy year.

How is the money invested?

Life Long offers a With Profits Fund and 3 Unit Linked Funds which give you

the flexibility of choosing how your money should be invested in terms of the

risk and the security of the return on the investment. You can invest 100% of

your premiums either in the With Profits Fund or in any of the Unit Linked

Funds. The minimum allocation in each selected unit linked fund must be

10%.

With Profits

Fund

Unit Linked Funds

Protector

Fund

Growth Fund Balanced Fund

Fund ObjectiveSteady returns on

your investments

by smoothening

market volatility

through crediting

bonuses to your

Progressive

returns on your

investment by

investing

higher element

of assets in

High Capital

growth by

investing higher

element of assets

in the equity

market

Capital growth

by availing

opportunities in

debt and equity

markets and

providing you a


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fund on a daily

basis

debt securities

with minimum

exposure to

equities

good balance

between risk and

return

Fund Composition (Range)Debt securities:

70 100%

Equities: 0 20%

Money market &

cash: 0 10%

Debt securities:

60 100%

Equities: 0

20% Money

market & cash:

0 20%

Debt securities:

0 50%

Equities: 30

85%

Money market &

cash: 0 20%

Debt securities:

50 90%

Equities: 0 45%

Money market &

cash: 0 10%

Changing Allocation Proportions

You have the option to change the allocation proportion of your premiums to

different funds at anytime, up to 2 times a year, for all future premiums. The

minimum allocation in each selected fund must be 10%. A policy holder can

switch accumulated funds from one investment fund to another (either partly

or fully). In case of a part switch, the minimum amount switched should be

Rs. 10,000 and the minimum balance in the fund after the switch should be

Rs. 5,000. The first 2 switches in a policy year are free of charge.

Allocation of Units

Units purchased with the first years premium and the first incremental

regular premium due to indexation and / or additional regular premium

will be used to allocate initial units. Units purchased from the second

years premium onwards and after the first incremental regular

premium due to indexation and / or additional regular premium will be

used to allocate accumulation units

The unit price shall be calculated on a daily basis in accordance with

Insurance Regulatory and Development Authority (IRDA) guidelines

from time to time. The Unit Price will be calculated as follows: Unit


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price for Unit Linked Funds is equal to the market value of

assets held by the fund plus the value of current assets and

accrued income minus the value of current liabilities, fund

management charges and provisions, if any, divided by the

total number of units outstanding

Unit price for With Profits Fund is calculated by applying the equivalent

daily rate to the current unit price on a daily compounding basis. The

equivalent daily unit growth rate = (1 + annual regular bonus

rate) ^ (1/365)*(1-fund management charge per annum /365) -

1. Aviva guarantees that the unit price in this fund will never

fall

Units shall be allocated on the day the proposal is completed and

results into a policy by adjustment of application money towards

premium. The premium shall be adjusted on the due date even if it has

been received in advance

In respect of premiums received within a time specified by IRDA

through a local cheque or a demand draft, payable at par, at the place

where the premium is received, the closing NAV of the day on which

premium is received shall be applicable. Currently, this time is 4:15

p.m.

In respect of premiums received after the time specified by IRDA

through a local cheque or a demand draft, payable at par, at the place

where the premium is received, the closing NAV of the next business

day shall be applicable


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In respect of premiums received through outstation cheque / demand

draft, at the place where the premium is received or through direct

debit / ECS, the closing NAV of the day on which the cheque / demand

draft / money is realized, shall be applicable

Extra Allocation of Units

On the 15th policy anniversary, Life Long gives you a 5% Extra Allocation on

existing units. These units are given if all the due premiums have been paid.

The additions will apply to the units attributable to regular premiums existing

at the end of the specified policy anniversary. This benefit will not be

applicable to units pertaining to the top-up premiums or additional regular

premiums.

Can I make lump-sum investments?

You have the flexibility of making lump-sum investments through top-up

premiums to increase the investment value of your policy without increasing

the sum assured provided all due premiums till date are paid. The minimum

top-up premium is Rs. 1,500.

The total of top-up premiums cannot exceed 25% of the total regular

premiums paid till date at any point in time. Units purchased from top-up

premiums will be used to allocate accumulation units to various investment

funds in the same proportion as selected by you for your regular premiums

Can I increase the sum assured?

You can increase your sum assured anytime before age 67 or the 27th policy

year, whichever is earlier, provided that all due premiums have been paid.

This is subject to the maximum increase allowed at that age. The sum

assured under the riders (except HCB) will also increase up to the maximum

limit allowed under each rider. Evidence of health may be required before

such an increase in sum assured is made.


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Can I increase my regular premium?

You can increase your regular premiums through any of the 2 methods

mentioned below:

Indexation

You have the option to increase your regular premiums by an indexation rate

at any policy anniversary to protect the real value of your investment against

inflation. The rate of indexation will be in line with the increase in the Whole

Sale Price Index (or in the event that this Index ceases to be published such

other index as the Company may select for this purpose). The base sum

assured and sum assured of any attached rider (except HCB) would also be

increased by the corresponding indexation increase.

The maximum sum assured limits under the riders for the purchased policy

would not apply in this case. You can opt for indexation at the inception of

the plan only. Once opted for, this will become a default option unless altered

by you. The indexation benefit is available till age 67 or the 27th policy year,

whichever is earlier.

Additional Regular Premiums (ARP)

On every policy anniversary you have the option to increase the regular

premium amount through ARP at any time up to age 67 or the 27th policy

year, whichever is earlier. The minimum ARP is Rs. 1,000.

ARP will increase the sum assured automatically. The sum assured of any

attached rider (except HCB) would also increase provided the increased sum

assured is within the maximum limits allowed for the riders. Evidence of

health may be required before such an increase in sum assured is made.


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When can I withdraw my money?

You have the flexibility of making partial withdrawals from accumulation

units in respect of regular premiums as well as top up premiums provided all

due premiums till date are paid. Any partial withdrawal will first be made

from the top up premium account (if any and if eligible for withdrawal)

followed by the regular premium account, if required.

Partial withdrawals from top-up premium account can be made after 3

years from the allocation date of that top-up premium

Partial withdrawals from units pertaining to regular premiums can be

made after completion of 3 policy years

Only 4 partial withdrawals are allowed in a policy year.

The minimum partial withdrawal is Rs. 5,000 and the fund value should

not be less than two times the annual premium

Till age 58 years, the total partial withdrawal with respect to regular

premiums in a policy year should not exceed 25% of the fund value

pertaining to regular premiums at the beginning of the policy year.

Post age 58 years this restriction does not apply. There is no restriction

on the maximum amount of partial withdrawal with respect to top-up

premiums.

What are the riders that I can opt for?

Apart from the death cover under the base plan, Life Long offers extra

protection through optional riders:

Accidental Death and Dismemberment Rider (AD&D): Coverage from

risk of death or dismemberment due to an accident


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Critical Illness and Permanent Total Disability Rider (CI&PTD):

Coverage against contracting a critical illness or becoming totally and

permanently disabled due to a disease or an accident

Hospital Cash Benefit Rider (HCB): The Company will make fixed cash

payments for each day of hospitalization. These riders can be attached

to the base plan at inception only and the rider covers expire at 60

years of age.

What happens if I die?

In the unfortunate event of your death or if your spouse dies before you (if

jointly assured) the following payments would be made:

Higher of sum assured or fund value (value of initial and accumulation

units in respect of regular premiums) is payable

An additional sum assured would also be payable if AD&D rider has

been opted for and death is due to accident

The sum assured as well as the rider sum assured will be reduced by

all partial withdrawals made from regular premium account within the

last 2 years prior to death. If death occurs after age 60, the sum

assured will be reduced by all partial withdrawals made after age 58

till death

The value of units attributable to the top-up premiums, if any, would

also be payable

If you have invested in the With Profits fund, a final bonus, if any, will

also be payable

What are the charges on my policy?


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Policy Administration Charge (PAC): Rs. 67 per month, which will

increase by 5% p.a. on the 1st of January each year. PAC will be

deducted monthly by cancellation of units from the accumulation unit

account. If premiums are discontinued, this charge would reduce to

60% of the charge applicable for the premium paying policies

Initial Management Charge (IMC): 10% p.a. of initial units during

the first 30 years. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1%

p.a. on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a.

on Growth Fund. FMC will be applied on the fund while calculating NAV

on a daily basis. The maximum FMC on any fund is 2% p.a. subject to

prior approval by the IRDA

Mortality Charge: The Mortality Charge will apply on the Sum at Risk

(SAR = Sum Assured less the Fund Value pertaining to regular

premiums). It will be deducted by monthly cancellation of units from

the accumulation unit account. The Mortality Charge shall remain

guaranteed throughout the policy term.

Rider Premium Charges: Rider charges will be made by monthly

cancellation of units from the policy accumulation unit account. The

AD&D rider charge will apply on Sum Assured; the CI&PTD rider charge

will apply on the Sum at Risk, while the HCB rider charge is a fixed

amount.

Rider charges may change based on the Companys claims experience

and approval by the IRDA. The Company shall charge the applicable


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service tax over and above the mortality charge and rider premium

charge mentioned above

Surrender Charge on Initial Units: [1-(1/1.10^N)] * value of initial

units, at the unit price, on the date of surrender on Accumulation

Units pertaining to regular premiums: [1-{1/(1 + x)}^N] * value of

accumulation units, at their unit price, on the date of surrender.

What are the tax benefits I get?

Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax

Act, 1961. Insurance is tax free up to Rs. 100000 per annum and the returns

on investment on maturity of the policy are also tax free.

2) LIFE SHIELD

Life Shield is an ideal life insurance plan that helps you protect your family's

future. While there can be no compensation for the loss of life, Life Shield

ensures that your family's financial needs are met should something

unfortunate happen to you. Its aim is to pay out a guaranteed cash amount in

the unfortunate event of your death during the term of the policy.

Key Features of Life Shield

Life Shield is a low cost life insurance plan which guarantees to pay a

lump sum amount in case of your death during the term of the policy.

Life Shield can be purchased for any life between 18 to 55 years of

age. However, the maximum age of the life insured at expiry of the

policy is 65 years.

The minimum and maximum policy terms are 5 years and 40 years,

respectively.


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The minimum annual premium is Rs.2000 and the minimum sum

insured is Rs.500000.

The sum insured of the policy can be increased (only up to 40 years of

age) once by 50% (subject to maximum increase of Rs.1,000,000)

during the term of the policy, without submitting any evidence of good

health, if:

- You decide to increase the sum insured within three months of

your marriage.

- You decide to increase the sum insured within three months of

the birth of your child.

This option to increase the sum insured is available if the policy has

been accepted on standard rates. It can be exercised only when

outstanding term of the policy is at least 5 years and the policy is in

force for full sum insured.

What are the benefits of this plan?

The plan pays out a sum insured in the unfortunate event of your

death before the maturity date.

We offer preferred rates to customers opting for higher sum insured

and to Pension Plus policyholders of Aviva.

- You will receive a discount of Rs. 0.50 per thousand of sum

insured on standard premium rates if you are opting for a sum

insured of Rs. 1,000,000 and above.

- If you are a Pension Plus policyholder, you will get an additional

discount of 7.5% on the premium rate stated in the Premium

Rate Table of Life Shield, provided your Life Shield policy has

been accepted on standard rates.


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Illustration

This illustration is of a 30 year old, who pays premiums annually for a sum

insured ofRs. 1,000,000.

PolicyTerm

(Years)

BaseAnnual

Premium(Rs.)

Base AnnualPremium forPension PlusPolicyholder(with 7.5%discount)

(Rs.)

Discount*@50

paise/'000(Rs.)

BaseAnnual

Premium(Rs.)

AnnualPremium

forPension

PlusPolicyhold

er (Rs.)

10 3160 2923 500 3160 2423

15 3390 3136 500 3390 2636

20 3620 3349 500 3620 2849

PLANS MAINLY FOR SAVINGS & INVESTMENT

1) EASY LIFE PLUS

Easy Life Plus is a simple unit linked endowment plan with the benefit of life

protection. By choosing an appropriate premium level and term, you can

match the maturity date of the plan to a specific savings need such as your

childs education, wedding or any other financial need. Easy Life Plus also

offers an extra protection against accident without requiring you to undergo

any medical examinations.

The entry age for the policy is 18 50 years. The policy term is 10, 15, 20 or

25 years. Maximum age at maturity is 60 years. The minimum annual

premium is Rs. 6000 and maximum is Rs. 50000. Sum assured is calculated

as higher of 10 times the annual premium and 0.5 * policy term * annual

premium subject to a minimum of Rs. 60,000 and a maximum of Rs. 50,000.

The investment fund options available are protector, growth and balanced

funds.

On maturity, you can either take out the maturity proceeds (fund value in

respect of regular premiums) and terminate the policy or opt for a settlement

option wherein all or part of maturity proceeds would be paid out to you as

structured payouts in accordance with the settlement option then offered by


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the Company. The settlement option is available only on Unit Linked funds

and only if all due premiums have been paid.

Sample Illustration: This illustration is for a 30 year old male who pays

premiums annually for a period of 20 years:

AnnualPremium

SumAssured

With Profits Fund Unit Linked (BalancedFund)

Projected Maturity Value (Rs.) assuming gross

returns6% 10% 6% 10%

7500 75000 186041 263391 195678 308956

15000 150000 398277 563041 421045 662236

25000 250000 680616 961711 718325 1128244

50000 500000 1386459 1958382 1461524 2293258

What happens if I die?

In case of a non accidental death in the first policy year 50% of the sum

assured or fund value which ever is higher is paid. From the 2nd policy year,

higher of sum assured or fund value is payable. In case of accidental death

an additional sum assured is payable.


Policy Administration Charge (PAC): Rs. 43 per month, which will

increase by 5% p.a. on the 1st of January each year. PAC will be

deducted monthly by cancellation of units from the accumulation unit

account. If premiums are discontinued, this charge will reduce to 60%

of the charge applicable for the premium paying policies


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Initial Management Charge (IMC): 5% p.a. of initial units during the

policy term. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1%

p.a. on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a.

on Growth Fund. FMC will be applied on the fund while calculating NAV

on a daily basis. The maximum FMC on any fund is 2% p.a. subject to

prior approval by the IRDA

Mortality Charge: The Mortality Charge will apply on the Sum at Risk

(SAR = Sum Assured less the Fund Value). It will be deducted by

monthly cancellation of units from the accumulation unit account. The

Mortality Charge shall remain guaranteed throughout the policy term.

The charge for the ADPTD benefit will apply on Sum Assured and will

remain flat throughout the term of the policy.

Premium Allocation Charge:

Annual Premium

Allocation rate

Yearly and half yearly

premium frequency

Quarterly and Monthly

premium frequency< Rs. 7500 93% 92%

Rs. 7500 Rs. 9999 94% 93%

Rs. 10,000 and above 95% 94%

2) YOUNG ACHIEVER

Young Achiever is a regular premium life insurance product designed to meet

the financial needs of your children - be it higher education, marriage,


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starting a career or a business, or any other need. The plan can be purchased

on the life of any one of the parents with the child as the nominee. Through

this policy, you save regularly to meet your childrens needs, and at the

same time their financial needs are taken care ofshould something unfortunate

happen to you.

The entry age for this policy is 21 55 years. The term of the policy is 8 to 21

years (maximum age at maturity 65 years). If your childs age is between 0

13 years, the policy term will be 21 minus the age of your child at entry. For

example if the age of your child is 10 years at the time of purchasing the

policy, the policy term will be 11 years (21 10). The minimum annual

premium payable is Rs. 6000. The minimum sum assured is Rs. 36000 and

maximum sum assured is Rs. 10,000,000. For each policy term there is a lowand high sum assured to choose from ranging from 6 to 21 times the annual

premium.

Can I withdraw my money during the policy term?

You have the flexibility of making partial withdrawals from accumulation

units in respect of regular premiums as well as top up premiums provided all

due premiums till date are paid. Any partial withdrawal will first be made

from the top up premium account (if any and if eligible for withdrawal)

followed by the regular premium account, if required.

Partial withdrawals from top-up premium account can be made after 3

years from the allocation date of that top-up premium

Partial withdrawals from units pertaining to regular premiums can be

made in the last 4 policy years. There is no restriction on the


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maximum amount of partial withdrawal with respect to top-up

premiums

The minimum partial withdrawal is Rs. 5,000 and the fund value should

not be less than two times of annual premium

Only 4 partial withdrawals are allowed in a policy year

No partial withdrawal can be made from the initial units


Policy Administration Charge (PAC): Rs. 57 per month, which

will increase by 5% p.a. on the 1st of January each year. PAC will be

deducted monthly by cancellation of units from the accumulation

unit account. If premiums are discontinued, this charge would

reduce to 60% of the charge applicable for the premium paying

policies

Initial Management Charge (IMC): 10% p.a. of initial units

during the policy term. IMC will be deducted monthly from initial

units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund,

1% p.a. on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50%

p.a. on Growth Fund. FMC will be applied on the fund while

calculating NAV on a daily basis. The maximum FMC on any fund is

2% p.a. subject to prior approval by the IRDA

Mortality Charge: The Mortality Charge will apply on the Sum

Assured. It will be deducted by monthly cancellation of units from


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the accumulation unit account. The Mortality Charge shall remain

guaranteed throughout the policy term.

Sample Mortality Charges

Age (Male) 25 years 35 years 45 years 55 years

Annual Mortality

charges per 1000

sum assured

1.19700 1.50675 3.43770 9.47310

3) LIFE SAVER

Life saver is a flexible endowment savings plan. Its entry age is 18 65

years. This policy can be taken jointly with your spouse. The sum assured

is calculated as annual premium * cover level; where cover level ranges

from 5 68 depending upon the age at entry and the policy term. Since it

is an endowment plan the sum assured is fixed right from the acceptance

of the policy. The minimum policy term is 5 years and maximum age atmaturity is 70 years. The policy term may be selected according to the

goals of the prospect.

The minimum premium payable is Rs. 6000 and there is no maximum

limit. This is a contribution based plan. It means that the customer can

decide how much money he wants to set aside in his investment. The

premium payment term is the same as the policy term and it encourages

disciplined savings. Top up premiums are allowed with a minimum top up

of Rs. 1500 and a maximum of up to 25% of the total regular premium

paid. The allocation rate for the top up premium is 96%.

A policy holder can avail a premium holiday 6 months after the 5 th policy

year for 4 times during the policy term. During this time the policy does


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not lapse. A grace period of 30 extra days are given to the policy holder to

pay premium beyond the premium paying due date. On the death of the

policy holder the higher of the sum assured or fund value is paid. The sum

assured protects the policy holder and their corpus whereas invest able

premiums grow the savings component.

The customer has the option to return the policy within 15 days and no

surrender penalty would be levied on the same. You can experience the

service and if you are not satisfied you have a chance to cancel the policy.

This is called the free look period. Tax free partial withdrawal is allowed

after the three policy years. No surrender value is payable in the first

three policy years. If the policy has lapsed it can be reinstated within two

years from the date of the first unpaid premium. The settlement option isavailable at maturity.

4) LIFE BOND

A wide age band can opt for this policy. The eligibility is 1 65 years. There

are no riders available with this policy. The minimum sum assured is Rs.

31,250 and there is no maximum limit. The minimum premium payable is Rs.

25000 and there is no maximum limit. The customer decides how much

money he wants to set aside in this investment. Only single premium is

allowed. No additional regular premiums are allowed. The minimum top up

premium is Rs. 6250 and the maximum top up premium is 25% of the total

regular premiums paid. The allocation rate for top ups is illustrated as

below:

Premium amount (Rs.) Allocation Rate (%)

< Rs. 35000 97%

Rs. 35000 Rs. 99999 99%

Rs. 100000 Rs. 149999 101%

Rs. 150000 and above 102%


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Policy Charges

Policy administration charge: 1.5% p.a. of the single premium for

the first year and 1% p.a. thereafter. This is also true for the top up

premiums.

Fund management charges: 1% on with profit and protector, 1.25%

on the balanced fund and 1.5% on the growth fund.

Mortality Charges: Apply on the sum at risk which is the sum

assured less the fund value

5) SAVE GUARD

This policy is a limited premium paying term whole life plan. The eligibility

age for this plan is 18 50 years. The minimum premium payable is Rs.

12000 and the maximum is Rs. 360000. Annual premiums have to be

multiples of 6000.

The sum assured is calculated as 0.5*PT*AP and the maximum is Rs.

18,00,000 for 10, 15 years term and 12,00,000 for 20, 25 and 30 years term.

The premium paying term is 10, 15, 20, 25 and 30 years. The minimum

policy term is 10 years and maximum is 30 years. The maximum age at

maturity is 70 years. The three funds available for investment are secure

fund, balanced fund and growth fund.

Policy proceeds are tax free under the section 10 (10D) of the Income Tax

Act, 1961 (provided the total premium paid in any policy year does not

exceed 20% of the capital sum assured). A tax deduction is also applicable

under section 80C of the Income Tax Act, 1961.

6) TREASURE PLUS

Treasure plus is a savings cum protection plan. The entry age is 18 to 50

years. The maximum age at maturity is 65 years. This policy has various


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premium payment terms of 10, 15 and 20 years. The minimum annual

premium is Rs 12000/- and the minimum sum assured is 10 times annual

premium subject to a maximum of 6 lakhs. The investment option available is

100% investment in secure fund. The composition of the fund is 0-20% equity

50-100% debt and 0-20% money market.

The maturity benefit is higher of the fund value or minimum maturity value

where minimum maturity value is equal to annual premium into policy term.

The administration charges is Rs 38/- per month. The initial management

charge of 7% per annum will be charged on initial units during the premium

paying term. Mortality charges are based on gender, age and term of the

policy.

7) FREEDOM LIFE PLAN

Freedom life plan is a limited payment term investment cum protection plan.

The eligibility age is 18 60 years. This policy can cover you and your spouse

for the same premium amount. The maximum age at maturity is 70 years.

The policy term is 10 30 years. The minimum premium payable is Rs.

25000 p.a. for 10, 15, 20, 25 or 30 years and a minimum of Rs. 200000 p.a.

for 3 or 5 years.

The minimum sum assured is 0.5*PT*AP and the maximum sum assured is

1.25*PT*AP. There is an option of increasing the sum assured before the age

of 40 years by 50%, within 3 months of marriage or within 3 months of the

birth of the child. This feature helps the policy holder to alter the policy to

suit his life stage and need. There are guaranteed loyalty additions of 5% on

the 10th policy year and 3% on every subsequent 5th policy anniversary till the

date of maturity. The HCB, CIPTD and ADD riders are available.

Composition of funds

Security Secure Balanced Growth

Equity 0% 20% 0% - 45% 20% - 60%

Debt 50% - 100% 50% - 90% 0% - 50%

Money market 0% - 30% 0% - 30% 0% - 30%


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8) PENSION PLUS

It is a regular savings personal pension plan. The eligibility age is 18 65

years. The term of the policy is equal to the premium paying term (maximum

up to the age of 70 years). You have the option to choose term based on

retirement age. The minimum premium is Rs. 6000 per annum for regular

premium and Rs. 100,000 for single premium.

The term of the policy is subject to a maximum of 70 years. The minimum

vesting is 40 years and maximum vesting age is 70 years. You have the

provision to start your pension from as early as 40 years of age. The

allocation rate is 98% for below Rs.500, 000 and 99% for above Rs. 500,000.

The maturity benefit is 100% of the corpus used to purchase regular pension

from the annuity options available and commutation of 33.33% and the

balance for purchasing pension from Aviva or the open market.

HUMAN RESOURCE

With a strong sales force of over 16,000 Financial Planning Advisers (FPAs),

Aviva has initiated an innovative and differentiated sales approach to the

business. Through the Financial Health Check (FHC) Avivas sales force has

been able to establish its credibility in the market. The FHC is a free service

administered by the FPAs for a need-based analysis of the customers long-

term savings and insurance needs. Depending on the life stage and earnings

of the customer, the Financial Health Check assesses and recommends the

right insurance product for them.

ORGANIZATION STRUCTURE


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At Aviva in Bangalore, the internal structure of the organization was as given

above. The branch was headed by the zonal manager. He controlled the

south zone. The branch manager was the next person in authority. All

strategic decisions about the firms future were taken by these two

individuals. There job profile was to monitor the performance of the

organization and see that all the operations were going smoothly.

The HR department was responsible for recruiting new financial planning

advisors. The department was headed by a HR Manager. The main sales

force comprised of the sales managers and the advisors. The sales managers

had to manage teams of 15 20 advisors. They would help in filling out

applications, providing relevant databases to prospect customers,

accompany advisors on their sales calls and make sure everyone in the team

is motivated.

The financial planning advisors are the main link between the customer and

the company. They are the individuals who try to market the insurance

policies to prospects. They are provided training for the same. Every advisor

must pass the insurance examination as specified by the IRDA. Only a

Zonal Manager

Branch Manager

Sales ManagerHR

DepartmentSales Manager

Financial Planning Advisors

(team)

Operations

Department

Tele callers

(Recruiting) GeneralStaff


42/80

licensed advisor is allowed to procure business for the firm. Apart from this

training is provided on unit linked funds and the savings/ protection products

Aviva offer.

INTROUCTION TO UNIT LINKED FUNDS

Unit linked plans are based on the component of the premium or the

contribution of the customer towards the plan. This contribution can be in

different modes like yearly, half yearly, quarterly and monthly. Unit linked

plans have multiple benefits like life protection, rider protection, savings,

transparency, investment choices, liquidity and planning for taxes. These

plans work like mutual funds.

The premium is collected from the policy holder. He is allotted a certain

number of units based of his contribution. The Net Asset Value is the value of

each unit of the fund. It is found by subtracting the charges and current

liabilities from the current assets and investments and dividing this number

by the total number of outstanding units.

Let us take an example. There are 100 investors and each invests Rs. 10 in a

fund. The total value of the fund is Rs. 1000 and each person is allotted 1

unit of Rs 10. Now the money (Rs. 1000) is invested in the debt or equity

market. Suppose the fund value increased by 20%. As a result the Rs. 1000

invested became Rs. 1200. Hence the value of every investor is now Rs. 12

and not Rs. 10.

PICTORIAL REPRESENTATION


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NATIONAL & INTERNATIONAL PRESENCE

Aviva has over 59000 employees serving 40 million customers worldwide. It

is present in the United Kingdom, Asia, Australia, Canada, China, France,

Germany, Cyprus, Greece, Hong Kong, Hungary, India, Ireland, Italy,

Luxembourg, Netherlands, Poland, Romania, Russia, Singapore, Spain, Sri

Lanka, Turkey and USA. Aviva has 113 branches in India supporting its

distribution network. Aviva products are available is 497 towns and cities

across India thanks to the Bancassurance partner locations.

PREMIUM CONTRIBUTION

(LESS) CHARGES

(LESS) MORTALITY CHARGES

INVESTIBLE PREMIUM

INVESTED AFTER

UNITIZATION

LIFE PROTECTION

FUND VALUE


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CHAPTER IV

FINANCIAL

ANALYSIS

FINANCIAL ANALYSIS

Aviva Life Insurance is listed on the Bombay stock exchange. The chart below

gives the companies performance from 31 Dec 2005 31 Dec 2006.


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Net Sales 18.06 46.96 36.55 15.06Other Income 0.02 0.04 - 10.5

Total Income 18.08 47 36.55 25.56Expenditure -17.79 -46.79 -36.05 -14.9

Operating Profit 0.3 0.21 0.5 10.67Interest - -0.01 - -

Gross Profit 0.29 0.2 0.5 10.67Depreciation -0.06 0.15 -0.06 -

Profit before Tax 0.24 0.34 0.44 10.67Tax -0.04 -0.1 -0.01 -

Profit after Tax 0.2 0.24 0.43 10.67Net Profit 0.2 0.24 0.43 10.67

Equity Capital 14.99 14.99 14.99 14.99Reserves - - - 14.71

EPS 0.13 0.16 0.29 7.12

The chart below gives the performance from 31 Dec 2004 31 Dec 2005:

Net Sales 15.06 - - - -

Other Income 10.5 0.21 2.45 - 0.02

Total Income 25.56 0.21 2.45 - 0.02

Expenditure -14.9 -0.13 -0.06 -0.35 -

Operating Profit 10.67 0.08 2.39 -0.35 0.02

Gross Profit 10.67 0.08 2.39 -0.35 0.02

Depreciation - - - -0.07 -

Profit before Tax 10.67 0.08 2.39 -0.42 0.02

Profit after Tax 10.67 0.08 2.39 -0.42 0.02

Net Profit 10.67 0.08 2.39 -0.42 0.02

Equity Capital 14.99 14.99 14.99 14.99 14.99

Reserves 14.71 - - - -

EPS 7.12 0.05 1.59 - -

The companys total income is Rs. 18.06 million. Last year it was Rs. 25.56

million. This means that net income or net premium collected has decreased

since the last year. The expenses have increased by 2.8 million but the net

income has not. Hence the companies performance has fallen in the year

2006. Operating profits were only 0.3 million down from 10.67 million last

year. Earnings per share also fell from Rs. 7.12 to Rs. 0.13.

The company faces stiff competition from other private player like Bajaj

Allianz, ICICI Prudential, HDFC Standard Life Insurance, Tata Aig and SBI. Now

it will face additional competition from Bharti Axa and Reliance Life Insurance


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(both companies are into the telecom sector as well). ICICI, HDFC and SBI are

large banks which also provide the service of insurance. Tata and Bajaj are

mainly companies in the auto section and have diversified into this field.

UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS

Parameters RBI Bonds Fixed

Deposits

Mutual Funds Unit linked

Safety High High Medium High

Liquidity None High High High

Returns Low Low High High

Life Cover 1 time

amount

1 time

amount

1 time

amount

10 times

Tax benefits Tax free Taxed Taxed Tax free

We find that life insurance unit linked plans is a good area to invest money in

as it provides liquidity, safety, high returns, life cover and tax benefits in a

single plan. Aviva offers the option of indexation to beat inflation. Risk is

reduced to a large extent as the company invests in a diversified portfolio of

stocks.

CHAPTER V


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COMPETITIVE

ANALYSIS

COMPETITIVE ANALYSIS

LIFE INSURANCE CORPORATION OF INDIA (LIC)

LIC has an excellent money back policy which provides for periodic payments

of partial survival benefits as long as the policy holder is alive. 20% of the

sum assured is payable after 5, 10, 15 and 20 years and the balance 40% is

payable at the 20th year along with accrued bonus. (www.lic.com)


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For a 25 years term , 15% of the sum assured becomes payable after 5,10,15

and 20 years and the balance 40% plus the accrued bonus becomes payable

at the 25th year. An important feature of these types of policies is that in the

event of the death of the policy holder at any time within the policy term the

death claim comprises of full sum assured without deducting any of the

survival benefit amounts which have already been paid. The bonus is also

calculated on the full sum assured.

Aviva does not have a money back policy. It could offer a money back plan

and capture some portion of this market. While marketing insurance products

I found that many customers wanted to purchase these plans.

LIC offers 66 different plans; plans are formulated for specific occasions

whole life plans, term assurance plans, money back plan for women, child

plans, plans for the handicapped individuals, endowment assurance plans,

plans for high worth individuals, pension plans, unit linked plans, special

plans, social security schemes diversified portfolio of products. Aviva could

diversify its product portfolio. It could add more plans for high worth

individuals and women.

The minimum premium payable for an LIC policy is Rs. 5000 p.a. It increases

at Rs. 1000 per year. At Aviva minimum premium for easy life plus is Rs.

6000 which increases in multiples of 6000 per year. Hence Aviva should

reduce the minimum premium amount payable to compete with LIC. The

guaranteed sum assured in case of the death of the policyholder is larger in

LIC than in Aviva.

Switching from one fund to another is cheaper for LIC it is only Rs. 100 to

switch from one fund to another whereas at Aviva it is Rs. 500. More number

of switches is allowed free per year in the case of LIC.

There are however some drawbacks to investing in LIC. The allocation

charges are higher. Therefore the money invested in the fund is lower than

what Aviva will invest. This is true across all policies. Aviva covers its costs

over the policy term whereas LIC charges a high amount for the first five


49/80

years and then charges a very nominal amount from the 6 th year onwards.

The investment benefit is not as high as Aviva.

ICICI PRUDENTIAL

ICICI Prudential is a stiff competitor for Aviva. The company is a merger

between ICICI Bank which is the biggest private bank in India and Prudential

Plc which is a global life insurance company.

The company has an investment plan which is market related Invest Shield

Life. In this plan even if the market falls, the premium will be returned to

investors. It is a guaranteed plan which ensures the company carefully

invests your money. The stock market performance of ICICI Prudential is

much better than Aviva. The returns on the growth fund were 46.28%

compared to the 39.59% offered by Aviva. Customers are attracted by higher

returns and this is a plus point for Prudential.

The company is very well advertised. The advertisements are showcased in

movies, television, newspapers, magazines, bill boards, radio etc. The

company has an excellent brand ambassador Mr. Amitabh Bacchan. His

promotion of the company builds trust and faith in the minds of our people.

However the charges are very high in the plans offered by ICICI Prudential. It

is 35% during the first year, 15% in the next year and 3% from the third year

onwards. Also a higher minimum premium of Rs. 8000 is charged. Hence the

policies are not accessible to the lower strata of the society. (Source:

www.iciciprulife.com)

BIRLA SUN LIFE

Birla Sun Life Insurance Company Limited is a joint venture between The

Aditya Birla Group, one of the largest business houses in India and Sun Life

Financial Inc., a leading international financial services organization. The

local knowledge of the Aditya Birla Group combined with the expertise of Sun


50/80

Life Financial Inc., offers a formidable protection for your future. (Source:

www.birlasunlife.com)

The Aditya Birla Group has a turnover close to Rs. 33000 crores with a

market capitalization of Rs. 53400 crores (as on 31st March 2006). It has

over 72000 employees across all its units worldwide. It is led by its Chairman

- Mr. Kumar Mangalam Birla. Some of the key organizations within the group

are Hindalco and Grasim.

Sun Life Financial Inc. and its partners today have operations in key markets

worldwide, including Canada, the United States, the United Kingdom, Hong

Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. It had

assets under management of over US$343 billion, as on 31st March 2006.

The company is a leading player in the life insurance market in Canada.

Being a customer centric company, BSLI has invested heavily in technology

to build world class processing capabilities. BSLI has covered more than a

million lives since inception and its customer base is spread across more

than 1000 towns and cities in India. All this has assisted the company in

cementing its place amongst the leaders in the industry in terms of new

business premium income. The company has a capital base of 520 crores as

on 31st July, 2006.

Its Flexi Life Line Plan offers life long insurance cover till the policy holder is

100 years of age. There are guaranteed returns of 3% p.a. net of policy

charges after every 5 years from the eleventh policy year onwards. However

the charges are very high. The initial charges for the first year are 65%.

Hence the fund value is greatly reduced.

BAJAJ ALLIANZ

Bajaj Allianz is a joint venture between Allianz AG with over 110 years of

experience in over 70 countries and Bajaj Auto, a trusted automobile

manufacturer for over 55 years in the Indian market. Together they are

committed to offering you financial solutions that provide all the security you


51/80

need for your family and yourself. Bajaj Allianz is the number one private life

insurer for the year 2005 2006. It is leading by 78 crores. It has

experienced a whopping growth of 216% in the last financial year.

The company has sold 13, 00,000 policies and is backed by 550 offices

across India. It offers travel insurance, motor insurance, home insurance,

health and corporate insurance. The mortality charges are lower than Aviva.

The entry age could be zero years which allow even new born babies to be

insured. (Source: www.bajajallianz.com)

TATA AIG

Tata Aig is a joint venture between the Tata group and AmericanInternational Group Inc. In one of the plans the company offers hospital cash

benefit wherein it will pay Rs. 2500 per day in case of hospitalization and

Rs.12.5 lakhs in case the person suffers from any critical illness. Annual

premium is much less (about Rs. 6712) to avail such a good benefit. Charges

are relatively low compared to Aviva for some policies.

The company offers high coverage plans at low cost. There is a plan even for

a policy term of 1 year. Your family can continue to enjoy their currentlifestyle even in the case of something happening to you. These plans are

very flexible and Aviva could adopt this idea of insuring individuals for short

periods of time. For example; there is a family of four. The only earning

member is the father.

He has just taken a loan from a bank of 20 lakhs to purchase a new home. He

is able to repay the loan with his current salary in 15 years. The problem

arises if something were to happen to him within these fifteen years. Not only

will the family face the emotional and financial loss of their father but they

will also have to repay the home loan or risk being homeless. (Source:

www.tataaig.com)


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CHAPTER VI

MARKETING

PROBLEMS


53/80

MARKETING PROBLEMS

The old and out dated technique of tele marketing is used to prospect

customers. More modern techniques must be adopted. The company must

sponsor shows and give presentations in corporate houses. The financial

health check must be performed for every prospect to assess his/her true

financial position and needs. Some of the advisors skip this vital step and the

prospect ends up with a plan they do not appreciate and soon surrender or

discontinue.

Some of the main problems in marketing the policies are:

Large amount of competition (15 players in the market)

Other brands are well advertised and have higher recall value

LIC is considered a safer option

Face competition from banks and mutual funds

High premium policies are difficult to market

Incorrect perception about insurance

Interested prospects might have a lack of time and postpone

investments

Customers get defensive if you cold call

Short term plans are available only at large premium

Customers do not have risk appetite to invest in shares

Some prospects have already invested and are not interested in

further investments

Consumers dont want to undertake medical examinations

Large amount of documentation

Customers do not like their money locked up for many years


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Lack of awareness about the unit linked funds in the market

No money back plan present in the product portfolio

SUGGESTIONS FOR IMPROVEMENT

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, 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

Promote Aviva as an Indian Company to build trust

Aviva is actually Aviva Dabur Dabur has a good brand name and this

brand name could be used to give a push to its products

Aviva could have a brand ambassador or a mascot to promote its

services

Should have partial withdrawals from the first year onwards


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Tap the rural market where there is large potential

Diversify product portfolio

Make products more straight forward reduce complexities

CHAPTER VII

ANALYSIS

&

INTERPRETATION


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ANALYSIS & INTERPRETATION

A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA

AGE GROUP OF SURVEYED RESPONDENTS

TABLE 1:

Age group No. of Respondents

18 - 25 years 6226 - 35 years 33

36 - 49 years 22

50 - 60 years 12

More than 60 years 2

CHART 1:

47%

25%

17%

9%

2%

18 - 25 years

26 - 35 years

36 - 49 years

50 - 60 years

More than 60 years

Analysis:


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From the chart above we find that 47% of the respondents fall in the age

group of 18 25 years, 25% fall in the age group of 26 35 years and 17%

fall in the age group of 36 49 years.

Therefore most of the respondents are relatively young (below 26 years of

age). These individuals could be induced to purchase insurance plans on the

basis of its tax saving nature and as an investment opportunity with high

returns.

Individuals at this age are trying to buy a house or a car. Insurance could

help them with this and this fact has to be conveyed to the consumer. As of

now many consumers have a false perception that insurance is only meant

for people above the age of 50. Contrary to popular belief the younger you

are the more insurance you need as your loss will mean a great financial loss

to your family, spouse and children (in case the individual is married) who

are financially dependent on you.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE 2:

Particulars No. of Respondents

Male 113

Female 17

CHART 2:


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Gender of the respondents

17

113

0

20

40

60

80

100

120

Male Female

No.ofrespon

d

Male

Fem

CUSTOMER PROFILE OF SURVEYED RESPONDENTSTABLE 3:

Customer profile No. of respondents

Student 30

Housewife 3

Working Professional 55

Business 24

Self Employed 12

Government service employee 7

CHART 3:


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23%

2%

43%

18%

9%

5%Student

Housewife

Working Professional

Business

Self Employed

Government serviceemployee

Analysis:

From the chart above it can clearly be seen that 43% of the respondents are

working professionals, 23% are students and 18% are into business.

Therefore the target market would be working individuals in the age group of

18 25 years having surplus income, interested in good returns on their

investment and saving income tax.

MARKET SHARE OF LIFE INSURANCE COMPANIES

TABLE 4:

LIFE INSURER NUMBER OF POLICIES

HDFC STANDARD LIFE 5BIRLA SUN LIFE 4

AVIVA LIFE INSURANCE 8

BAJAJ ALLIANZ 9

LIC 64

TATA AIG 8

ICICI PRUDENTIAL 14

ING VYSYA 7


60/80

BHARTI AXA 3

OTHERS 2

CHART 4:

4%3%

6%

7%

53%

6%

11%

6%2% 2%

HDFC STANDARD LIFE

BIRLA SUN LIFE

AVIVA LIFE INSURANCE

BAJAJ ALLIANZ

LIC

TATA AIG

ICICI PRUDENTIAL

ING VYSYA

BHARTI AXA

OTHERS

Analysis:

In India, the largest life insurance company is Life Insurance Corporation of

India. It has been in existence in India since 1956 and is completely owned

by the Government of India. Today the organization has grown to 2048

offices serving 18 crore policies and has a corpus of over 340000 crore INR.

The largest private insurance company in India is ICICI Prudential. It is a joint

venture between ICICI Bank and Prudential plc, a leading international

financial services group headquartered in the UK. In just 4 years time (till


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39%

25%

17%

10%

4% 2% 3%

Rs. 5000 - Rs. 1000

Rs. 10001 - Rs. 150

Rs. 15001 - Rs. 249

Rs. 25000 - Rs. 500

Rs. 50001 - Rs. 600

Rs.60001 - Rs. 8000

Rs. 80001 - Rs. 100

Analysis:

From the chart above we find that, 39% of the respondents surveyed pay an

annual premium less than Rs. 10001 towards life insurance. 25% of the

respondents pay an annual premium less than Rs. 15001 and 17% pay an

annual premium less than Rs. 25000. Hence we can safely say that Aviva Life

insurance would be able to capture the market better if it introduced

products/plans where the minimum premium starts at Rs. 5000 p.a.

Only 19% of the respondents pay more than Rs. 25000 as premium and most

products sold by Aviva have Rs.25000 as the minimum annual premium

amount. They should introduce more products like Easy Life Plus and Safe

Guard where the minimum premium is Rs.6000 p.a. and Rs. 12000 p.a.

respectively. This would definitely increase their market share as more

individuals would be able to afford the policies/plans offered.

POPULAR LIFE INSURANCE PLANS

TABLE 6:


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Type of Plan No. of Respondents

Term Insurance Plans 53

Endowment Plans 62Pension Plans 8

Child Plans 4

Tax Saving Plans 10

CHART 6:

POPULAR LIFE INSURANCE PLANS

39%

45%

6%

3%

7%

Term Insurance Plans

Endowment Plans

Pension Plans

Child Plans

Tax Saving Plans

Analysis:

From the chart given above we can clearly see that 45% of the respondents

hold endowment plans and 39% of the respondents hold term insurance

plans. Endowment plans are very popular and serve two purposes life cover

and savings.

If the policy holder dies during the policy term the nominee gets the death

benefit that is, sum assured and accumulated bonus. On survival the policy

holder receives the survival benefit with a bonus.


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A term plan is a pure risk cover plan wherein the insured pays a lower

premium for a higher sum assured. Term insurance is the cheapest form of

insurance and helps the policy holder insure himself for a relatively low

premium. For the returns sensitive investor term plans do not find favor as

they do not offer a return in case the individual does not die during the policy

term.

AWARENESS OF UNIT LINKED INSURANCE PLANS

TABLE 7:

Awareness of Unit Linked Plans No. of Respondents

Yes 74

No 56

CHART 7:

AWARENESS OF UNIT LINKED INSURANCE PLANS

57%

43%Yes

No

Analysis:

From the chart given above we find that 57% of the respondents are aware

of unit linked life insurance plans and 43% are not aware of such plans.


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These plans should be promoted through advertising. The company can

advertise through television, radio, newspapers, bill boards and pamphlets.

This would increase awareness and arouse curiosity in the minds of the

consumer which would enable the company to market its products more

effectively.

Unit linked plans are those where the benefits are expressed in terms of

number of units and unit price. They can be viewed as a combination of

insurance and mutual funds. The number of units a customer would get

would depend on the unit price when they pay the premium.

When the policy matures the individual gets his fund value. The value of his

fund is calculated by multiplying the net asset value and number of units

held by them on that day.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

TABLE 8:

Willingness to spend on premium No. of respondents Percentage

Less than Rs. 6000 20 15%

Rs. 6001 - Rs. 10000 35 27%

Rs. 10001 - Rs. 25000 54 41%

Rs. 25001 - Rs. 50000 20 15%

Rs. 50001 - Rs. 100000 2 2%

CHART 8:

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM


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0

10

20

30

40

50

60

Less than Rs.

6000

Rs. 6001 - Rs.

10000

Rs. 10001 - Rs.

25000

Rs. 25001 - Rs.

50000

Rs. 50001 - Rs.

100000

Analysis:

From the graph above, we can clearly see that 41% of the respondents would

be willing to spend between Rs. 10001 Rs. 25000 for life insurance. 27 %

would be willing to spend between Rs. 6001 Rs. 10000 per annum. Only

15% would be willing to spend more than Rs. 25000 per annum as life

insurance premium.

We could say that the maximum premium payable by most consumers is less

than Rs. 25000 p.a. This is further reduced as most customers have already

invested with LIC, ICICI Prudential, Birla Sun Life, Bajaj Allianz etc.

Aviva is faced with a large amount of competition. There are 15 insurance

companies in India inclusive of LIC. Hence to capture a larger part of the

market the company could introduce more reasonable plans with lesserpremium payable per annum.

CHART SHOWING IDEAL POLICY TERM

TABLE 9:


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Ideal policy term No. of respondents

3 - 5 years 25

6 - 9 years 20

10 - 15 years 46

16 - 20 years 18

21 - 25 years 12

26 - 30 years 2

More than 30 years 1

Whole life Policy 6

CHART 9:

CHART SHOWING IDEAL POLICY TERM

19%

15%

35%

14%

9%

2%

1%5%

3 - 5 years

6 - 9 years

10 - 15 years

16 - 20 years

21 - 25 years

26 - 30 years

More than 30 yea

Whole life Policy

Analysis:

From the chart given above it can be seen that 35% of the respondents

prefer a policy term of 10 15 years, 19% prefer a term of 3 5 years and


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15% prefer a term of 6 9 years. This means that Aviva could introduce more

plans wherein the premium paying term is less than 15 years.

The outlook of insurance as a product should be changed from something

which you pay for your whole life (whole life policy) and do not receive any

benefit (the nominee only receives the benefit in case of your death) to an

extremely useful investment opportunity with the prospects of good returns

on savings, tax saving opportunities as well as providing for every milestone

in your life like marriage, education, children and retirement.

FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE

TABLE 10:

Parameter No. of Respondents

Advertisements 17

High returns 42

Advice from friends 23

Family responsibilities 45

Others 8

CHART 10:

13%

31%

17%

33%

6%

Advertisements

High returns

Advice from friends

Family responsibilities

Others

Analysis:

From the chart above it can be seen that 33% of the respondents purchase

life insurance to secure their families, 33% take life insurance to get high


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returns, 17% purchase insurance on the advice of their friends and 13%

purchase insurance because of the influence of advertisements.

The main purpose of insurance is to cover the financial or economic loss that

occurs to the family in case of the uncertain death of the policy holder. But

nowadays this trend is changing. Along with protection (life cover), a savings

element is being added to insurance.

With the introduction of the new unit linked plans in the market, policy

holders get the option to choose whe

18552483 Report a Viva Life Insurance India Pvt Ltd

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Transcript of 18552483 Report a Viva Life Insurance India Pvt Ltd