Max New York Life Insurance

MAX NEW YORK LIFE INSURANCE PVT. LTD.

Submitted in partial fulfillment of requirement of Bachelor of Business Administration (BBA)

PUNJAB TECHNICAL UNIVERSITY,JALANDHAR

SELLING STRATEGIES OF MAXNEW YORK LIFE INSURANCE PVT. LTD.

Trainee Supervisor Submitted by:SIDDHARTH KUMARAnil Mittal

Enrollment no.820121160

Session: 2008-2011

PUNJAB TECHNICAL UNIVERSITY JALANDHAR

Max New York Life Insurance

TABLE OF CONTENTS

CERTIFICATE

PREFACE

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

CONTENTS Page no.

CHAPTER 1-INTRODUCTION 7-46

1.1. OVERVIEW OF INDUSTRY AS A WHOLE 7-14

1.2. PROFILE OF THE ORGANIZATION 14-31

1.3. PROBLEMS OF THE ORGANIZATION 31-34

1.4. COMPETITION INFORMATION 35-45

1.5. S.W.O.T ANALYSIS OF THE COMPANY 45-46

CHAPTER 2-OBJECTIVE AND METHODOLOGY 47-50

2.1. SIGNIFICANCE 47

2.2. MANAGERIAL USEFULNESS OFV THE STUDY 47

2.3. OBJECTIVES 48

2.4. SCOPE OF THE STUDY 48

2.5. METHODOLOGY 48-50

CHAPTER 3-CONCEPTUAL DISCUSSION 51-55

CHAPTER 4-DATA ANALYSIS 56-63

CHAPTER 5-FINDINGS AND RECOMMENDATIONS 64-66

ANNEXURES: 67-69

SAMPLE QUESTIONNAIRES

FINANCIAL STATEMENT

BIBLOGRAPHY 70

1


PREFACE

In the two yeas since the Insurance Regulation and Development authority (IRADA)

licensed private players into the life insurance industry, there have been unpredictable

boom in the insurance market. A number of private players associated with the

multinational giant have appeared in market jostling with pre-established public

sector company, particularly LIC, recognized as behemoth life insurance Corporation

of India. To sustain in the vast market of Insurance Industry a veritable explosion of

the products appeared in the market that was introduced by the private players. It

offers customers a much richer menu of options.

Yet despite these strategies, LIC continues to remain the pack leader having a new

premium accretion of at least 2,791crore whereas private player mopped up 285crore

in the same period. The combined premium of the private sector is barely 10% of this

figure. Despite its terming one billion populations, India still has a low penetration of

1.95 percent, 31st in the world. This is in spite of this fact India has a saving rate of

around 25%, although less than 5 percent is spent on insurance the Confederation of

Indian Industry’s (CII) Expend group on Insurance has put the aggregate insurance

market at a conservative figure of Rs.1,88,700crores by 2009-10 while life premiums

are set to touch Rs.1,45,000crores by that year from Rs.21,500crores in 2005-06 non-

life premiums are set to touch 38,600 from 8,400crores personal line premiums are

expected to rise to Rs.5,100crore from Rs.400crores. Herein, I am required to focus

on the planning, procedure and achievement of some private players and two big

group ICICI life prudential and HDFC from private sector and Life Insurance

Corporation from public sector established in Insurance market.

Lack of adequate data on improvement in mortality and the falling interest rate

regime are making life difficult for private players. In the backdrop of uncertainties

and the absence of level playing field, the private insurance players expect anywhere

between five and seven years for them to attain breakeven.

2


ACKNOWLEDGEMENT

I would like to acknowledge the support and guidance that was extended to me from

time to time by all the people during the period of the project.

I extend my deep gratitude and thanks to Mr.ANIL MITTAL(Trainee Supervisor)

for his overall guidance and support.

I hope this project serves the purpose it was intended for and benefits the

organization in as many ways as possible.

I would like to extend our gratitude to MS.NEETI CHOPRA,Who inspired me to go for Financial Project.

Last but not the least, our faculty members who have been a guiding light right from day one and whose encouragement and support; have helped us complete our project.

SIDDHARTH KUMAR

3


EXECUTIVE SUMMARY

IN TODAY’S COMPETITIVE AND DYNAMIC WORLD, WITH EVERY business

providing the same kind of product or service, only that firm which comes up with an

innovative idea can hope to survive in the long -run, by attracting and luring

customers.

Insurance sure is an upcoming sector but with the privatization of the same, selling

insurance products has become tough due to the competition angle attached to it.

It is usually said that if you can sell insurance, you can sell anything in the world

including garbage. The reason behind this concept is the hesitant and unaware

population, who simply run away at the mere mention of its name.

Providing insurance to a huge population such as ours encompassing different strata

of society has indeed been a formidable task for the last few decades. WHO statistics

put the insurance access in India at around 65 percent. The remaining 35 percent do

not have any access at all. Governments in most parts of the world, developed or

otherwise, realize the limitations when it comes to providing Insurance per se or its

financing aspects. In a globalize market-driven economy, it becomes imperative for

each country to look for the solutions and structure them to suit the domestic needs.

While there will be various factors both external and internal influencing this search,

there is no doubt that public and private healthcare providers and financers will have

to keep the customer in focus when formulating a well thought out and highly

integrated approach to cover all sorts of requirements.

CHAPTER-14


1.1 INTRODUCTION TO THE INDUSTRY

The insurance sector in India has come a full circle from being an open competitive

market to nationalization and back to a liberalized market again. Tracing the

developments in the Indian insurance sector reveals the 360-degree turn witnessed

over a period of almost two centuries.

Insurance industries in India have a long history. Life Insurance in existing form

came in India from UK in 1818 with Oriental Life Insurance Company. The Indian

Life Assurance companies Act, 1912 was the first measure to regulate Life Insurance

business. Later in 1928, the Indian Insurance Companies act was enacted, which was

amended in 1938. Finally, Government of India in 1950 again amended this act. Life

Insurance Corporation of India was formed in September 1956 by passing LIC Act,

1956 in Indian parliament.

The first general insurance company- Sun Insurance Office Ltd. was established in

Calcutta in the year 1710. The General Insurance Business Act nationalized general

Insurance business in India with effect from 1.1.73. From 1973, The General

Insurance Company (GIC) as a holding company divided in four subsidiaries as:

- National Insurance Company Ltd.

- The New India Assurance Company Ltd.

- The Oriental Insurance Company Ltd.

- The United India Insurance Company Ltd.

DEVELOPMENTS IN THE INDIAN INSURANCE SECTOR

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Liberalization and reforms have the potential to change the complexion of an

industry. The Indian insurance sector is no exception. Until recently, India continued

to be one of the few remaining countries of the world to remain insulated from the

foreign direct investment in its insurance sector. In a bid to make this sector more

competitive the government constituted an eight-member committee chaired by Mr.

R N Malhotra in 1993. The committee took a year to submit its report. The main

thrust of its recommendations was:

Open up the insurance sector

Improve the service standards of Indian insurance majors

Extend insurance coverage to a larger section of the Indian population.

The benefits of liberalization of Indian insurance sector were deemed to be that

reforms would lead to:

A competitive environment

World-class sophisticated technology

Better & wider range of products with more reasonable & affordable pricing

Price war, leading to competitive pricing of the products

Efficient & effective service

Efficiency in the conduct of insurance business

Global expertise & practices of insurance

New entrants with a professional approach & state of art technology to

revolutionize the market

Services of intermediaries like corporate agents, brokers etc

Malhotra Committee, in its report stated that only 22% of the Indian population is

insured. The poor reach of insurance in the country and the sheer numbers make

India a market with tremendous potential. The following facts show how under-

developed the Indian insurance business is due to state monopoly and lack of

aggressive marketing of insurance policies:

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1. Per capita insurance premium in India is a mere US$ 6, one of the lowest in

the world. In South Korea, the corresponding figure is US$1,338, in USA it is

$ 2250 and in UK it is $1589.

2. Insurance premium in India accounts for a mere 2 per cent of GDP compared

to the world average of 7.8 per cent and G-7 average of 9.2 per cent.

3. Insurance premium as a percentage of savings is barely 5.95 per cent in India

compared to 52.5 per cent in the UK.

Nationalized insurance companies have not been able to target niche markets that are

currently served poorly or not at all. Life insurance products provide a good example.

They compete with investment and savings options like mutual funds. It is imperative

that they should offer comparable returns and flexibility. For instance, pure

protection products like term assurance account for up to 20 per cent of policies sold

in developed countries. In India, the figure is less than one percent because policies

are inflexible. Besides, no Indian life assurance product is linked to non-traditional

investment avenues such as stock market indices. Therefore, returns are lower than

those on other savings instruments.

Retail segment or personal lines insurance, especially in general insurance is another

area unexplored. Currently personal insurance, including health, householders,

shopkeepers, personal accident, travel insurance and professional indemnity covers

constitute only 12 per cent of Indian general insurance premium. This poor figure is

largely due to the lack of adequate distribution channels rather than a lack of

products. By tapping such under-served niches, new entrants can expand the market

substantially. Since service and speed will be valued, a price premium is also

possible.

Keeping in mind the problems that ensnared LIC & GIC, the Malhotra Committee

Report recommended the end of monopoly market in insurance.

This recommendation was implemented with the passage of Insurance Regulatory

Development Act (IRDA) through Indian Parliament in late 1999.

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Due to this Act the private players were allowed to enter the market from 1999.

Several Indian private companies have entered into the insurance market, and some

companies have joined with foreign partners. After the passage of this Act, with

effect from December 2000, all the four subsidiaries of GIC have been de-linked

from the parent company and have been made independent insurance companies. GIC

now functions as a National Reinsure.

IRDA, for the time being, prohibits 100% foreign equity in insurance. It requires the

Indian promoter to invest either wholly in an insurance venture or team up with a

foreign insurer, with a cap of 26% of equity for a foreign partner.

Since the opening up of Insurance Sector, 12 private players have entered the Life

Insurance sector & 9 private players have entered the general insurance sector.

THE REGULATORS

Insurance Regulatory & Development Authority

Under the Insurance Regulatory Development Act, Insurance Regulatory &

Development Authority (IRDA) was formed which acts as the regulatory authority in

the insurance sector. The main aim of the Act is to activate an insurance regulatory

apparatus essential for proper monitoring and control of the Insurance industry. TAC

is a Statutory Body under Insurance Act 1938. Tariff Advisory Committee controls

and regulates the rates, advantages, terms and conditions that may be offered by

insurers in respect of General Insurance Business relating to Fire, Marine (Hull),

Motor, Engineering and Workmen Compensation.

Liberalization Scenario in India

Recent economic liberalization started few years ago have started bringing in new

investments from global giants and the government was hard pressed to facilitate

global integration by lowering trade barriers for the free flow of technology,

intellectual and financial capital. Additionally, reforms are essential if the Indian 8


economy is to achieve and sustain a growth rate of 7 to 8 per cent per annum.

Reaching a faster growth path also implies attracting foreign direct investment

inflows of $ 10 Billion every year, up from the current level of $ 3 to $ 3.5 Billion.

Thus liberalization of insurance creates an environment for the generation of long-

term contractual funds for infrastructural investments.

Nationalized Sector’s Performance

In 1995-96, LIC had a total income from premium and investments of $ 5 Billion

while GIC recorded a net premium of $ 1.3 Billion. During the last 15 years, LIC

income grew at a healthy average of 10 per cent as against the industry's 6.7 per cent

growth in the rest of Asia (3.4 per cent in Europe, 1.4 per cent in the US).

LIC has even provided insurance cover to five million people living below the

poverty line, with 50 per cent subsidy in the premium rates. LIC claims settlement

ratio at 95 per cent and GIC at 74 per cent are higher than that of global average of

40 per cent. Compounded annual growth rate for Life insurance business has been

19.22 per cent per annum and for General insurance business it has been 17 per cent

per annum.

However, there is other side of the coin too. Their large scale of operations, public

sector bureaucracies and cumbersome procedures hampers nationalized insurers. The

field staff and the agents of the GIC and its four wholly owned subsidiary companies

have seldom bothered to venture out into the rural hinterland to sell crop or any other

personal line insurance. The domestic insurance companies, despite meeting their

social objectives of going into the deepest interiors of the country, have lagged

behind in meeting customer expectations in products and services.

Private Players in Insurance Sector

Potential private entrants expect to score in the areas of customer service, speed and

flexibility. It is expected that their entry will mean better products and choice for the

consumer. Critics counter that the benefit will be slim, because new players will

concentrate on affluent, urban customers as foreign banks did until recently.

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This might seem a logical strategy from the point of view of new players. Start-up

costs-such as those of setting up a conventional distribution network-are large and

high-end niches offer better returns. However, in the long run 'middle-market' offers

the greatest potential as in terms of it is the second largest market in the world. This

may still be an urban market but goes beyond the affluent segment.

Insurance, even more than banking, is a volume game. A very exclusive approach is

unlikely to provide meaningful numbers. Therefore, private insurers would be best

served by a middle-market approach, targeting customer segments that are currently

untapped.

Repositioning of Public Sector Companies

Floodgates of competition opened up by the privatization of insurance industry did

throw a challenge to the well-protected nationalized sector and it seems they have

picked up the gauntlet. LIC and GIC, both are trying to reposition themselves by

having re-engineering done on the structure and operations of their respective

organizations.

Life Insurance Corporation is at present going through presentations from top

management consultants. These consultants have been asked to narrate their

experiences in countries where the insurance sector has been opened up for private

competition so that the public sector player can draw lessons. Based on these, LIC

will appoint a consultant which can provide them broad terms of reference on what

changes are required to tackle the impending competition.

GIC has already identified the areas that need to be activated and given a shape

through the four subsidiary companies. Foremost is the area of providing health

insurance services. A change in the GIC Act will enable the corporation to float a

joint venture company for health insurance. Other areas that the GIC is looking at are

savings-linked insurance products and use of alternate distribution channels including

banc assurance. Also in progress is the co-ordination of all foreign operations of the

group.

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The PSU companies have offered VRS to their employees in an effort to reduce the

manpower cost & to make their operations more effective.

Changes in Distribution Channel

Substantial shift in the distribution of insurance in India is likely to take place. Many

of these changes will echo international trends. Worldwide, insurance products move

along a continuum from pure service products to pure commodity products. Initially,

insurance is seen as a complex product with a high advice and service component.

Buyers prefer a face-to-face interaction and place a high premium on brand names

and reliability.

As products become simpler and awareness increases, they become off-the-shelf,

commodity products. Sellers move to remote channels such as the telephone or direct

mail. Various intermediaries, not necessarily insurance companies, sell insurance. In

the UK for example, retailer Marks & Spencer now sells insurance products. In some

countries like Netherlands and Japan, insurance is marketed using post office's

distribution channels. At this point, buyers look for low price. Brand loyalty could

shift from the insurer to the seller.

In other markets, notably Europe, this has resulted in banc assurance: banks entering

the insurance business. The Netherlands led with financial services firms providing

an entire range of products including bank accounts, motor, home and life insurance,

and pensions. Other European markets have followed suit. In France over half of all

life insurance sales are made through banks. In the UK, almost 95% of banks and

building societies are distributing insurance products today.

In India too, banks hope to maximize expensive existing networks by selling a range

of products. Various seminars and conferences on banc assurance are taking place

and many bankers have clearly shown their inclination to enter insurance market by

leveraging their strengths in the areas of brand image, distribution network, and face

to face contact with the clients and telemarketing coupled with advanced information

technology systems.

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1.2 PROFILE OF THE ORGANIZATION

Max New York Life Insurance Company Ltd. is a joint venture between New York

Life, a Fortune 100 company and Max India Limited, one of India's leading multi-

business corporations. The company has positioned itself on the quality platform. In

line with its vision to be the most admired life insurance company in India, it has

developed a strong corporate governance model based on the core values of

excellence, honesty, knowledge, caring, integrity and teamwork. The strategy is to

establish itself as a trusted life insurance specialist through a quality approach to

business.

In line with its values of financial responsibility, Max New York Life has adopted

prudent financial practices to ensure safety of policyholder's funds. The Company's

paid up capital is Rs.657crore, which is more than the norm laid down by IRDA.

Max New York Life has identified individual agents as its primary channel of

distribution. The Company places a lot of emphasis on its selection process, which

comprises four stages - screening, psychometric test, career seminar and final

interview. The agent advisors are trained in-house to ensure optimal control on

quality of training.

Max New York Life invests significantly in its training program and each agent is

trained for 152 hours as opposed to the mandatory 100 hours stipulated by the IRDA

before beginning to sell in the marketplace. Training is a continuous process for

agents at Max New York Life and ensures development of skills and knowledge

through a structured program spread over 500 hours in two years. This focus on

continuous quality training has resulted in the company having amongst the highest

agent pass rate in IRDA examinations and the agents have the highest productivity

among private life insurers.

201 agent advisors have qualified for the Million Dollar Round Table membership in

2005. MDRT is an exclusive congregation of the world’s top selling insurance agents

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and is internationally recognized as the standard of excellence in the life insurance

business.

Having set a best in class agency distribution model in place, the company is

spearheading a major thrust into additional distribution channels to further grow its

business. The company is using a five-pronged strategy to pursue alternative channels

of distribution. These include the franchisee model, rural business, direct sales force

involving group insurance and telemarketing opportunities, banc assurance and

corporate alliances.

Max New York Life offers a suite of flexible products. It now has 26 life insurance

products and 8 riders that can be customized to over 400 combinations enabling

customers to choose the policy that best fits their need.

VISION

To become the most admired life insurance Company in India.

MISSION

1. Become one of the top quartile life insurance companies in India

2. Be a national player

3. Be the brand of first choice

4. Be the employer of choice

5. Become principal of choice for agents

VALUES

1. KNOWLEDGE

Knowledge leads to expertise; and our expertise is in helping people protect them.

Perfectly combining global expertise with local knowledge, we are India's life

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insurance specialist. Max New York Life believes that for knowledge to be of value it

must be focused, current, tested and shared.

2. CARING

Max New York Life is redefining the life insurance paradigm by focusing

on customers first. The service process is responsive, personalized, humane and

empathetic. Every individual who represents the company is for us our brand

champion.

3. HONESTY

Honesty is the heart of the life insurance business. It is all about trust.

Transparency, integrity and dependability form the cornerstones of the Max New

York Life experience. The company ensures that everyone who represents the brand

carries a promise: we care — in word as well as deed.

4. EXCELLENCE

Excellence at Max New York Life implies the ability to perform at a consistently

high level. Focused on the value of continuous improvement in people, processes and

the organization, the company strives for the highest standards of quality in every

aspect of its business.

SALES PERFORMANCE OF THE ORGANIZATION

Operating Earnings Reach $1.1 Billion, Up 17% from 2005

Surplus and AVR, a Cushion of Safety, Increases $1 Billion to $13.9 Billion

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Insurance Sales Increase 28%, Investment Sales Rise Nearly 24%, Operating Revenue Up 11%

NEW YORK, April 4, 2007 — New York Life Insurance Company, America’s

largest mutual life insurance company, set new records in 2006 for sales of insurance

and investment products, as well as reached new highs in operating earnings, surplus,

operating revenue, and assets under management. The company’s net income reached

$2.3 billion in 2006, compared with $855 million in 2005. The rise in net income was

the result of strong operating earnings coupled with realized capital gains that

included a $1,011 million one-time gain from a change in accounting for a company

investment.

Among the Significant Records New York Life Achieved in 2006:

Operating earnings increased 17% to $1.1 billion in 2006, from $934 million in

20051.

Operating revenue grew more than $1.2 billion, or 11%, to $12.3 billion in 20061.

Surplus and Asset Valuation Reserve grew $1 billion to $13.9 billion.

Total insurance sales exceeded $2.8 billion in 2006, an increase of 28%.

Total investment sales increased more than $6.6 billion, or nearly 24%, to $34.9

billion.

Assets Under Management increased by more than $39 billion to nearly $265

billion in 2006.

Sy Sternberg, chairman and chief executive officer, said, “The company’s operations

had a year for the record books in 2006. Our broad array of products, including

traditional life insurance products, lifetime income products, long term care

insurance, and institutional and retail investment products and services, are clearly

meeting the varied needs of our policyholders and clients. The robust growth

achieved in 2006 reflects outstanding execution of our strategy, including our focus

on life insurance, on career agents, on remaining a mutual company, and of course,

maintaining financial strength, a hallmark of our company. Surplus reached a new

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high of $13.9 billion, providing a superb cushion of safety and security for our

policyholders.”

Strong Earnings

Operating earnings, the company’s measure to track profitability from ongoing

operations, increased 17% to a record $1.1 billion in 2006, compared with 2005

operating earnings of $934 million. Significantly, earnings from International and

New York Life Investment Management, both of which represent future earnings

growth engines, exceeded expectations in 2006. The company’s GAAP net income

(including realized capital gains and losses) totaled $2.3 billion in 2006, compared

with $855 million in 2005. These results included net realized capital gains of $1,205

million in 2006, compared with net realized capital losses of $180 million in 2005.

Record Sales and Operating Revenue

Insurance sales increased 28% in 2006, to $2.85 billion, propelled by strong sales in

the United States of life insurance (up 24%) and lifetime income annuities (up 45%)

and by a 26% increase in sales of life insurance in the company’s International

operations. New York Life is the largest seller of life insurance and lifetime income

annuities in the United States, according to an industry source2. In addition, sales of

life insurance through AARP increased 22% in 2006.

Investment sales increased nearly 24%, to $34.9 billion in 2006, driven by a 27%

increase in sales at New York Life Investment Management, which saw particularly

strong sales in its Institutional, retirement services, and retail mutual fund businesses.

New York Life’s operating revenue of $12.3 billion was up 11%, a new company

milestone, led by a 24% increase in operating revenue from International operations.

Review of Businesses

U.S. Insurance Operations

The company’s U.S. Insurance Operations include its Life and Annuity and Special

Markets business units. Life and Annuity is the company’s largest revenue generator,

selling a full array of products in the United States including individual, bank- and

16


corporate-owned life insurance, lifetime income annuities and a variety of variable

and fixed investment annuities. Key highlights of 2006 were:

Operating revenue in Life and Annuity increased 10% to $7.8 billion, compared

with $7.1 billion in 2005.

New York Life continued its leadership in the Million Dollar Round Table, the

industry’s most prestigious professional organization for agents, for the 52nd

consecutive year. The company had 2,331 agents achieve this recognition in

2006, nearly a third of New York Life’s active field force in the U.S.

Special Markets increased operating revenue by 8% to $1.4 billion, compared

with $1.3 billion in 2005.

Through the AARP programs, New York Life is America’s leading direct

marketer of life insurance, and in 2006 launched a new program offering lifetime

income annuities to AARP members.

New York Life is also the largest underwriter of professional association

insurance programs in the United States, covering members of more than 500

associations across the country.

The company’s long term care insurance operation ranks as the seventh largest

provider in this field, according to an industry source2, with sales up 15% in

2006, versus industry sales that declined by 8%.

New York Life Investment Management

New York Life Investment Management ranks among the largest asset management

firms in the United States. Through its multiple boutique investment structure, New

York Life Investment Management delivers superior investment performance through

an array of products designed for both institutional and retail clients. With its

MainStay Investments brand, New York Life Investment Management distributes

some of the most highly regarded mutual funds and wrap accounts in the industry.

And its Guaranteed Products area provides guaranteed investment contracts, funding

agreements and other products that leverage New York Life’s triple-A credit rating.

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New York Life Investment Management achieved strong performance in 2006

through strategic expansion of its product shelf and distribution channels. Highlights

from 2006 included:

The acquisition of Institutional Capital Corporation (ICAP), a premier value

equity institutional investment firm based in Chicago, Illinois.

An 18% increase in assets under management over 2005, exceeding $235 billion

by year-end.

Total sales climbed to a record $28.2 billion, up 27% over 2005.

New York Life International

New York Life International has operations in nine markets including China, Hong

Kong, India, South Korea, Taiwan, Thailand, Argentina, and Mexico. New York Life

International operations remain in growth mode, expanding rapidly in a number of

the world’s most attractive emerging markets, including India and China. Key

highlights of 2006 were:

Operating revenue grew to $2.3 billion in 2006, up 24% over the prior year.

Insurance sales increased 26% to $729 million, driven primarily by exceptional

growth in the company’s operations in India, Mexico and Hong Kong.

Max New York Life, the company’s joint venture in India, virtually doubled

insurance sales over the prior year. It grew the number of licensed agents in India

to nearly 18,000 and expanded its network of offices to 90 in 55 Indian cities.

Insurance sales in China grew 70% as we entered four new cities, including the

provincial capital of Nanjing.

Overall, International’s career agent sales force continues to grow,

with more than 29,000 agents registered in the nine markets.Incorporated in 2000, Max New York Life started commercial

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operation in 2001. In line with its values of financial

responsibility, Max New York Life has adopted prudent

financial practices to ensure safety of policyholder's

funds. The Company's paid up is Rs. 1,232 crore.

Having set a Best in Class Agency Distribution Model in

place, the company is spearheading a major thrust into

additional distribution channels to further grow its

business. The company has multi-channel distribution that

includes the agency distribution, partnership distribution,

Banc assurance, distribution focused on emerging markets and

alliance marketing through employed sales force. The company

currently has 33 banc assurance relationships, 14 corporate

agency tie-ups and direct sales force at 14 locations. Max

New York Life has put in place a unique hub and spoke model

of distribution to deepen rural penetration. The company has

39 (9 hub office 30 spoke offices) offices dedicated to

emerging markets in Punjab and Haryana. Max New York Life

offers a suite of flexible products. It now has 38 products

covering both life and health insurance and 8 riders that

can be customized to over 800 combinations enabling

customers to choose the policy that best fits their need.

Besides this, the company offers 6 products and 4 riders in

group insurance business.

The company currently has more than 11,338 employees

Max New York Life Insurance, one of the leading life insurance companies of India,

on Wednesday announced it First Year Premium (FYP) income for financial year

ended March 2008. During the year the company has recorded a growth of 70% in

individual first year premium adjusted for single pay. The adjusted individual FYP

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for FY 2008 stood at Rs.1,308 crore as compared to Rs.769 crore during previous

financial year.

During the last quarter of the financial year (Jan–Mar 08), the company grew by 95%

over the corresponding period last year. The adjusted individual FYP for quarter

ended March 2008 stood at Rs.471 crore as compared to Rs.241 crore for quarter

ended March 2007.

Commenting on the continued high growth of the company, Mr. Gary Bennett,

Managing Director & CEO, Max New York Life Insurance, said, “We have built a

robust and values driven business model. We have the best in class agent advisors

who are acknowledged for their quality of advice. We always had a strong focus on

customer needs and during past one year we further sharpened our customer

centricity. This reflects in our entry into new product segments like health insurance

and retirement planning and superior customer service and claims record. These

efforts are reflected in our financial performance for the year and will help us

continue on this growth trend.”

Max New York Life Insurance sold 8.7lakh policies during the financial year 2008,

an increase of 58% over 5.5lakh policies sold during financial year 2007. The

company has acquired around 23lakh policies since inception. In the financial Year

2008 the Assets Under Management also doubled to over Rs3,600 crore as compared

to Rs.1,800crore as at the end of previous financial year.

During the Financial Year 2008, Max New York Life further strengthened its

distribution network. The company launched 77 new offices and now has presence in

157 cities across the country through 242 offices. The rural business of Max New

York Life Insurance started its hub and spoke operations in Haryana after witnessing

stupendous success in Punjab. The company also strengthened its partnership

distribution channel by signing 4 corporate agency relationships, 5 broking house tie-

ups and 8 referral tie-ups with banks.

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Max New York Life Insurance launched 13 new products during the financial year

and now has a portfolio of 38 products and 8 riders for individuals. The company

entered the health insurance segment with the launch of...

SELLING STRATEGIES OF MAX NEW YORK LIFE INSURANCE

In 1999, when the insurance sector was opened to private players in India, Max India

Limited tied up with New York Life to form Max New York Life (MNYL) to

provide individual and group life insurance solutions. In a short span of around 5

years, it established a wide distribution network with 28 offices and representatives

across 21 cities in India. Max New York Life offered 13 products and 9 riders’

customized to over 400 combinations that provided a number of options to the

customer.

Max New York Life mission, vision and values were all directed towards becoming

the most admired and preferred Life insurance Company in India. They also aimed to

be the first choice for employees as well as agents. In 2000, Max New York Life

realized that to compete against LIC, the only large player in the life insurance

segment, it had to build a huge network and implement a product differentiation

strategy to gain customers. However, the tie up with New York life ensured that

different options were given to the customer as against LIC products which were not

differentiated.

There was also an opportunity in the Indian markets as penetration rates were only

1.3% and insurance policies were mainly considered as a tax-saving investment,

rather than risk coverage. The leading player (LIC) concentrated only on selling and

very little qualitative advice was offered to the customer buying its insurance

policies. This service gap enabled a customer-oriented player like Max New York

21


Life to impress the potential customers.

Max New York Life laid stress on training of agents, as personal relationships were

the key to success in selling insurance. For this purpose, it took special measures to

train agent advisors who were the primary source of distribution. In 2002, it had

around 1900 agent advisors who underwent 152 hours of training before selling as

against 100 hours stipulated byIRDA.

These training programs were spread over 2 years for 500 hours and ensured up

gradation of skills and knowledge. The training program covered consumer

psychology, the financial markets, and development of selling skills, discipline and

the right attitude in the agents. These agents were groomed to become financial

advisors to customers. Commenting on internal brand building, Debashis Sarkar

(Sarkar), senior vice-president, marketing, Max New York Life said:

“We will also be focusing on internal brand-building, since brand-building has a

larger context in the service sector. Internal employees are all opinion shapers and

indirect brand-builders and brand promise needs to be replicated down the chain at

every customer touch point”.

To strengthen its distribution system further, in 2003, Max New York Life adopted

alternative distribution channels viz. franchisee model, rural business, telemarketing,

banc assurance and corporate alliances. It appointed ‘gram sahayaks’ in some rural

locales who were trained to identify and sell specialized insurance products.

There are tapping opinion leaders in the village like schoolteachers, social workers

and chemists, and creating products which suit rural needs," commented Sarkar. The

company tied up with Shoppers' Stop and reached out to customers who held the

chain's "First Citizen" discount card and bought children's clothes more than once a

month. Such customers were tapped for child saving schemes as well.

Max New York Life created product differentiation by giving “Whole Life “policies

that offered customers the correct balance between protection and savings. They

22


offered for the first time in India a free-look period i.e., a customer had 15 days

period to weigh the various options offered by Max New York Life which helped

him to take an informed decision. This standard was adopted by IRDA as the best

practice to be emulated by all players in the Indian insurance market. They were also

the first company to sell a policy with riders.

For example, 5-Year Term Renewable and Convertible Policy had two riders

attached to it viz. Personal accident benefit and Dread disease benefit, which could be

attached at the time of purchase of policy or later, subject to certain conditions. Max

New York Life also offered a specialized rural policy provided term insurance for

Rs10,000 for a sum of Rs100, which was affordable to that particular segment of

society.

Max New York Life offered cash bonus in May 2003 to its Whole Life policyholders,

who joined before February 6, 2002. As a value added service, this bonus could be

used in five different ways: accumulated with the company and earn interest, buy

paid up additions to raise the death benefit of the base policy, offset against future

payable premiums, taken in cash or buy an additional term cover for one year.

In 2003, Max New York Life realized that it needed a new workflow system, as the

existing one was unable to meet the customer requirements efficiently. Therefore, it

tied up with nugent to supply business process management tools. These

technological improvements helped to reduce the turnaround time for customer

request by 45%, aided in immediate retrieval of information, and generated savings

on paperwork and telephone costs.

Max New York Life also fixed benchmarks on claim processing time, processing of

complaints and customer satisfaction and monitored these regularly. All these

measures served to enhance customer service levels in the company.

At the outset, the mission and vision of Max New York Life clearly defined its

objective to be the most admired and preferred insurance company in India. It then

23


went about doing a SWOT analysis that formed the basis for its marketing strategy. It

had the advantage of variety of products from New York Life, a leading insurance

player in the US, which had to be introduced with Indian perspective.

The largest threat was LIC, which had a big distribution network. Max New York

Life also saw an opportunity in the under-penetrated insurance market where

insurance policies are considered as an investment or tax-saving tool. Using this

market analysis it went about building its distribution network through direct sales

personnel called “agent advisors”.

Special attention was given to training them so that they could go beyond selling and

offer professional advice to customers. Max New York Life leveraged the fact that

insurance policies were mainly treated as tax savers or investment tools.

Therefore, it emphasized on protection against risk in its products and combined

savings with protection creating a differentiated product. These measures coupled

with other product differentiations and customized processes helped it to gain a

presence in the insurance market.

Max New York Life mainly used the concept of protection against risk to promote its

products. It felt that existing insurance products, although having a money-back

offer, did not offer protection to the customer.

The “Whole Life” policies of Max New York Life, therefore concentrated on a

unique combination of protection and saving that appealed to the customer. Along

with this, riders in the form of supplementary policies served as an additional benefit

to the customer.

Another first for Max New York Life was its cash bonus offer which offered cash

back on certain policies. As a value addition, there were various options wherein this

cash could be invested with the company. Continuing with its innovations, Max New

24


York Life also offered a free-look for 15 days, which later became the norm for

insurance industry.

With a focused approach to the rural areas, Max New York Life introduced a rural

policy with minimum investment to suit the pockets of the lower income groups

residing in villages. To make this section of customers understand the benefits of

their policies, they adopted a unique strategy of appointing schoolteachers and social

workers as agents, who being opinion leaders helped convince the villagers about the

product.

Other distribution channels like banks and corporate alliances were a means to

expand the customer base of Max New York Life via customers visiting these places.

The direct selling agents established personal rapport with customers on one-to-one

basis, thereby increasing goodwill and loyalty towards Max New York Life.

To support their products and distribution, they built a customized business process

system using the web platform to generate quick customer response.

This model also helped them to track complaints and measure customer satisfaction.

The improved productivity and low costs helped to improve Max New York Life’s

profits and gave them increased business.

VARIOUS SELLING STRATEGIES ADOPTED BY MAX NEW

YORK LIFE ARE DISCUSSED BELOW :

1. BONUS STRATEGY

Bonus is a function of surplus funds available after adjusting for future liabilities and

current assets. This is based on actuarial experience.

25


Therefore, based on actuarial experience, bonuses will be announced not before three

years of operations.

Max New York Life offers innovative and immediate (not reversionary) bonus

options, which add value to customers. Bonuses can be received in cash, employed to

offset premium, left on deposit with interest, used to buy additional insurance by way

of paid-up additions or term insurance.

2. RURAL STRATEGY

Max New York Life recognizes the rural market and social sectors as being distinct,

requiring different selling and product strategies. Therefore, Max New York Life

have designed specific products and appointed village cooperatives in various

districts across India. These village cooperatives help increase awareness of life

insurance.

3. COMMUNICATION STRATEGY

Max New York Life objective is to build India’s most admired Life Insurance

Company. Max New York Life seeks to build trust with customers.

Max New York Life focus on life insurance and experience of over 158 years has

helped position us as life insurance specialists.

The selling strategy is to provide a consistent brand experience across all stakeholders

— customers, shareholders, employees, agents, regulator and the public.

The brand experience will be based on positioning of being a trusted life insurance

specialist that can partner the customer for life.

Max New York Life is also sparing no efforts to increase awareness for the true value

of life insurance, which lies in risk protection.

4 .STRONG AGENCY FORCE AND DIFFERENT AGENCY

COMMISION STRUCTURE

26


Max New York Life has over 3,000 agents / advisors. Max New York Life believe in

a quality approach to business and therefore select and train only the best in class

people so that they can deliver value to the customer.

The company places a lot of emphasis on its selection process, which comprises four

stages — screening, psychometric test, career seminar and final interview.

The agents are given in-house training to ensure optimal control on quality.

Commission is purely a function of the business that they generate. Given approach

to business it will not be unusual to see some agents earn more remuneration than the

managing director of the company.

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FUTURE PLANS OF THE ORGANIZATION

EXPANSION PLANS: Mr Sy Sternberg, Chairman & CEO, New York Life

Insurance Company, and Mr Analjit Singh, Chairman, Max India Ltd, at a press

conference in the Capital on Tuesday. - Kamal Narang

New Delhi , Nov. 28

Max New York Life Insurance plans to foray into the micro insurance sector. The

company is right now looking at the various aspects of micro insurance in terms of

product packaging, pricing and chalking out distribution models, Mr Gary R.

Bennett, Managing Director and CEO of Max New York Life Insurance Co Ltd, said.

Speaking to newspersons, he said, "we are in the early stages of talks with a general

insurance company for a tie up for the micro insurance foray." He, however, declined

to give any time frame when the company is likely to go for the venture. It is going to

be a great opportunity for the insurance company, he said adding, the next phase of

development of the life insurance industry will be in rural areas.

Capital infusion

Speaking about the fresh capital infusion, Mr Analjit Singh, Chairman, Max India

Ltd and Max New York Life, said, the company planned to raise its paid-up capital to

Rs 1,000 crore in next two years and eventually to Rs 1,500 crore. Currently, the

paid-up capital of the company stands at Rs 617 crore.

The company expects to break even by 2008-09. The company, which registered

28


more than 100 per cent growth last year, intends to roll out about seven new products

next year.

FDI limit

Asked about the foreign direct investment limit (FDI) in the insurance sector, New

York Life Insurance Co, Chairman and Chief Executive Officer, Mr Sy Sternberg,

said the company wants the Indian Government to raise the FDI in the insurance

sector. "Our highest priority at the moment is to see the FDI cap lifted. It will help us

scale up our investment in India," he added.

New York Life has 26 per cent equity — the highest permitted at present and has

committed to increase its stake to 49 per cent, when the Government raises the cap.

1.3 PROBLEMS OF THE ORGANIZATION

Problems

Consumer awareness level is still off the mark. According to the recently conducted

FICCI survey on the Present State of Indian insurance industry, a copy of which is

available with all of you, the awareness levels regarding Insurance are still in the

realm of medium to low. This clearly indicates the onerous task that companies have

in creating awareness about "need to Insure" and also tremendous potential they have

in expanding the markets by getting more customers in their fold by increasing

awareness levels.

Insurers in India should also explore distribution through non-financial organizations.

For example, insurance for consumer items such as refrigerators can be offered at the

point of sale. This piggybacks on an existing distribution channel and increases the

likelihood of insurance sales. Alliances with manufacturers or retailers of consumer

goods will be possible. With increasing competition, they are wooing customers with

various incentives, of which insurance can be one.

29


Another potential channel that reduces the need for an owned distribution network is

worksite marketing. Insurers will be able to market pensions, health insurance and

even other general covers through employers to their employees. These products may

be purchased by the employer or simply marketed at the workplace with the

employer’s co-operation.

Finally, some potential Indian entrants into insurance hope to ride their existing

distribution networks and customer bases. For example, financial organizations like

ICICI, HDFC or Kotak Mahindra intend to tap the thousands of customers who

already buy their deposits, consumer loans or housing finance. Other hopeful entrants

anticipate specific alliances such as with hospitals to provide health cover.

International Experience

Cross-country experience shows that nowhere in the world have the entry of foreign

firms threatened the position of domestic companies. Whether it is Malaysia, where

the insurance sector has been open for more than 50 years and foreign companies

account for about 10 per cent of market penetration or it is Indonesia, Thailand,

China or the Philippines, where the market has been opened more recently, the total

market share of foreign companies is less than 10 per cent except in Indonesia where

it is about 20 per cent. Closer home, we have the experience of the banking sector

where despite the presence of 42 foreign banks, their share in total banking assets is

less than 10 per cent.

Today hardly 20 per cent of the population in India is insured and insurance premium

(life as well as non-life) account for just 2 per cent of GDP as against the G-7 average

of 9.2 per cent. Consequently, the fear that new companies will displace public

companies is misplaced. There is room for more for not only the existing companies

but also for any number of competitors.

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LIFE INSURANCE

Life Insurance is a contract for payment of a sum of money to the person assured (or

failing him/her, to the person entitled to receive the same) on the happening of the

event insured against.

Usually the insurance contract provides for the payment of an amount on the date of

maturity or at specified dates at periodic intervals or at unfortunate death if it occurs

earlier. Obviously, there is a price to be paid for this benefit. Among other things, the

contract also provides for the payment of premiums by the assured. Life Insurance is

universally acknowledged as a tool to eliminate risk, substitute certainty for

uncertainty and ensure timely aid of the family in the unfortunate event of the death

of the breadwinner. In other words, it is the civilized world's partial solution to the

problems caused by death

In a nutshell, life insurance helps in two ways: premature death, which leaves

dependent families to fend for itself and old age without visible means of support.

Benefits of Life Insurance:

Superior to Any Other Savings Plan

Unlike any other savings plan, a life insurance policy affords full protection against

risk of death. In the event of death of a policyholder, the insurance company makes

available the full sum assured to the policyholders' near and dear ones. In

comparison, any other savings plan would amount to the total savings accumulated

till date. If the death occurs prematurely, such savings can be much lesser than the

sum assured. Evidently, the potential financial loss to the family of the policyholder

is sizable.

Encourages and Forces Thrift

A savings deposit can easily be withdrawn. The payment of life insurance premiums,

however, is considered sacrosanct and is viewed with the same seriousness as the

payment of interest on a mortgage. Thus, a life insurance policy in effect brings about

compulsory savings.

Easy Settlement and Protection against Creditors31


A life insurance policy is the only financial instrument the proceeds of which can be

protected against the claims of a creditor of the assured by effecting a valid

assignment of the policy.

Administering the Legacy for Beneficiaries

Speculative or unwise expenses can quickly cause the proceeds to be squandered.

Several policies have foreseen this possibility and provide for payments over a period

of years or in a combination of installments and lump sum amounts.

Ready Marketability and Suitability for Quick Borrowing

A life insurance policy can, after a certain time period (generally three years), be

surrendered for a cash value. The policy is also acceptable as a security for a

commercial loan, for example, a student loan. It is particularly advisable for housing

loans when an acceptable LIC policy may also cause the lending institution to give

loan at lower interest rates.

Disability Benefits

Death is not the only hazard that is insured; many polices also include disability

benefits. Typically, these provide for waiver of future premiums and payment of

monthly installments spread over certain time period.

Accidental Death BenefitsMany policies can also provide for an extra sum to be paid (typically equal to the sum

assured) if death occurs as a result of accident.

Tax Relief

Under the Indian Income Tax Act, the following tax relief is available

a) 20 % of the premium paid can be deducted from your total income tax liability .

b) 100 % of the premium paid is deductible from your total taxable income.

When these benefits are factored in, it is found that most polices offer returns that are

comparable/ or even better than other saving modes such as PPF, NSC etc. Moreover,

the cost of insurance is a very negligible

1.4 COMPETITION INFORMATION32


COMPETITORS:

1. ICICI LIFE INSURANCE

2. LIFE INSURANCE CORPORATION

3. AVIVA LIFE INSURANCE

4. MET LIFE

5. BAJAJ ALLIANZ

6. BIRLA LIFE INSURANCE

1.5 SWOT ANALYSIS OF MAX NEW YORK LIFE

STRENGTHS

Knowledge based

Being quality conscious rather than quantity oriented

Providing in-house training to advisors rather than online training

Cost effective organization

Persuasiveness of customer service representative to address the problems.

Effective customer Personal consulting for customized policy.

Perceived financial loyalty programmers.

Customized policies that cover the specific terminal disease.

WEAKNESSES

Less Brand Awareness

Time consuming ( in picking advisors)

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Process Oriented( process are too lengthy)

Fewer suggestions in terms of precautionary measures for avoiding perils.

Are pulled by the engine of powerful brands like TATA AIG and

Bajajallianz.

OPPORTUNITIES

It can enter in the General insurance sector.

Opportunity in the rural sector as there is an under-penetrated insurance

market in rural sector.

Relative market potential in not only the rural markets but also the semi-

urban markets.

Better customer services like utmost promptness in issuance of the policy,

giving cheque pick up facilities and not making customers waiting for

months.

Making more loyal customers and attracting other customers with better

service.

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THREATS

LIC being the major market share holder

Competitors in the private sector

With players like SBI Life and ICICI Prudential spending lot in

advertisements, it may take away the market.

Focusing more on innovating new products takes the fruitfulness out of

good products.

Less number of agents compared to other companies leading to a bad

distribution network.

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CHAPTER-2

OBJECTIVE AND METHODOLOGY

2.1SIGNIFICANCE

SIGNIFICANCE OF THE STUDY

It plays a very important role in the day-to-day activities of the common man,

business houses, industries, agriculturists and other service providers. Insurance not

only provides protection for individual and industry through risk coverage; it also

mobilizes funds for economic activity, and encourages savings. Thus an insurance

cover is considered an important tool for economic stability. The insurance industry

is a key sector in the economy of any country.

Significance for the researcher

To facilitate in appreciative of marketing situation of Max New York Life Insurance .

2.2 MANAGERIAL USEFULNESS OF THE STUDY

1. It will help in serving the customer efficiently.

2. It will help in improving sales.

4. By this study we will understand the comportitors policy easily.

5. It will help in to improve sales of the company.

6. It will help in making further strategies better.

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2.3 OBJECTIVES

Objective One

To study the insurance sector in India with special consideration to Max New York

Life Insurance.

Objective Two

To study selling strategies of Max New York Life Insurance

2.4 SCOPE OF THE STUDY

The insurance industry in our country is on the threshold of a new era of rapid

expansion. A more competitive environment is emerging with new participants

entering the insurance industry. Risk management has a wide application. To

understand risk, measure it and weigh its consequences are an integral part of

management. Financial institutions in the management of the funds placed with them

have to reckon with market risk, credit risk, and counter party risk and liquidity risk.

To mitigate the impact of various risks is the essence of risk management.

2.5 RESEARCH METHODOLOGY

Title: Selling Strategies of Max New York Life Insurance Ltd.

Title Justification: There was also an opportunity in the Indian markets as

penetration rates were only 1.3% and insurance policies were mainly considered as a

tax-saving investment, rather than risk coverage. The leading player (LIC)

concentrated only on selling and very little qualitative advice was offered to the

37


customer buying its insurance policies. This service gap enabled a customer-oriented

player like Max New York Life to impress the potential customers.

RESEARCH DESIGN

During this research Descriptive and Exploratory approach is taken into

consideration because of the availability of relevant information to describe the

relationships between the marketing problem and the available information.

TYPES OF DATA USED.

Both primary and secondary data is used in the research –

Data Collection Methods

To conduct the market research the data is collected by two sources.

Primary Data

The primary sources of data refer to the first hand information Primary data is

collected during the survey with the help of Questionnaires.

Secondary Data

Secondary data is one which already exists and is collected from the published

sources.

The sources from which secondary data was collected are:

Newspapers and Magazines like Economic Times

Internet

SAMPLING METHODOLOGY

Sampling Technique: Judgmental sampling and Convenient Sampling

Sampling Area: New Delhi

Sample Size: 50

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Limitation:

1. The duration of time for the study was limited & hence a comprehensive &

elaborate study could not be undertaken.

2. To make the study more relevant in context to my focus, samples were taken

from those people who were at Insurance companies and also from general

public.

3. The limitations of secondary data will also be associated with my project.

4. Study was restricted to Delhi and NCR, which might not give the national

picture.

39


CHAPTER-4

DATA ANALYSIS

QUESTIONNAIRE ANALYSIS

1. What are the reasons you purchase insurance?

Factors Tax Benefits

Safe Investmen

t

Returns Risk Managemen

t

Pension Benefits

Other Reasons

% 38% 23% 23% 6% 2% 8%

Fig 1.1

1. 38% Respondents go for the tax-benefits. They prefer to pay tax through legal means (known as the tax avoidance technique).

2. 23% want to make themselves safe from the uncertainties.3. 11% support the regular income benefit at lesser efforts.4. 8% respondents give different reasons; like family size,

dependents, etc.

40


2. Do you have any awareness about insurance?

Factors YES NO% 92% 8%

%

Factors Fig 1.2

1. 92% gave a positive response. They are much aware about the importance of lip in present scenario and that’s why they want to reduce the uncertainty.

1. only 8% don’t have any lip but they are the potential customers

41


3. Have you ever done life insurance planning?

Factors YES NO% 40% 60

%

Life Insurance Planning

In %

Fig 1.3

1. 40% say yes ever done life insurance planning

2. 60% say that no ever done life insurance planning

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4. From which company have you been insured to suit your needs?

Factors LIC ICICI HDFC MAX Others% 86% 8% 2% 1% 3%

Fig 1.4

1. 86% of the people trust LIC2. 8% of the people buy insurance from ICICI3. 2% people buy insurance from HDFC4. Max 1 %( each) people buy insurance from other

companies.

43


5. What were the reasons for above choice?

Factors Brand Name

Customer Service

Product Features

Higher returns

Other Reasons

% 43% 26% 6% 12% 13%

Fig 1.51. 43% say brand name is a strong reason that lets the people

decide their company.2. 26% say that customer service is the reason3. 6% favored the company because of it’s strong product

features.4. 13 % respondents gave returns as the reasons.5. 12 % respondents gave higher returns.

1. What was the most preferred Policy?

Money Back Child Care Pension Endowment42% 16% 3% 39%

44


Fig 1.6

1. 42 % respondents prefer money back policy because it provides twin benefits of saving cum protection and generates return after fix intervals. Investor always believe in early returns, they are conservative in their investment matters and want to minimize the risk.

2. 16% relay on child care policy because of too much competition and increase in educational expenditures.

3. 3% wants to save their future especially after retirement that is why they prefer pension policy.

4. 39% respondents are diversified in nature and prefer different endowment policy, which is wide in nature

7. What were the factors you consider while purchasing insurance ?

45


Factors Riders Premium Returns Maturity Risk Others% 29% 24% 20% 9% 3% 15%

Factors considered while looking for a LIP

Fig 1.7

1. 29% consider rider an important factor2. 24% take into consideration the premium amount.3. 20% go for returns4. 9% seek the maturity period5. 3% go for risk6. 15% go for other reasons like convertibility, loan.

46


CHAPTER-5

FINDINGS AND RECOMMENDATION

From the above graphs 42 % respondents prefer money back policy because it

provides twin benefits of saving cum protection and generates return after fix

intervals. Investor always believes in early returns, they are conservative in their

investment matters and want to minimize the risk.

16% relay on child care policy because of too much competition and increase in

educational expenditures.

3% wants to save their future especially after retirement that is why they prefer

pension policy.

39% respondents are diversified in nature and prefer different endowment policy,

which is wide in nature.

78% respondents always prefer to buy insurance policies through agents because of

the personal relations with their agents. He also insures them about the reliability of

policy as well as the company.

11% respondents prefer to buy their policies from the banks because they felt that a

bank is a safe institution to buy an insurance policy, which also provides all the

information’s.

7% buy their policies directly from the companies because the insurer companies

provide best solution to them as per their requirements.

RECOMMENDATIONS

1. Improvement in the quality of customer services through healthy competition

in the insurance sector.

47


2. Availability of a variety of products at competitive prices to meet the

demands and preferences of various categories of customers.

3. Tap the vast potential in the insurance sector in the country by encouraging

new players in the field of insurance both in life and general insurance sector.

Intensity of insurance coverage in India is low. Insurance premium in India is

2.01% of GDP, which is among the lowest.

4. Permitting free play of market forces.

5. Permitting competition in max New York Life will enable consumers to reap

the benefit in terms of service, product and prices.

6. Increase in the employment opportunities though expansion of insurance

market.

7. Expansion of Insurance market will help generate additional resources for

infrastructure and social sector.

Conclusion

What is a life insurance policy? As the old saying goes, it’s really nothing more

complicated than “A drop of ink, a piece of paper and a promise to pay.”

In other words, the real value of your policy rests entirely on how well – and for how

long – an Insurer can keep its promises.

Total investment portfolio of the insurers in India, as at the end of March 2005 was

Rs4, 65, 864 cr. .The total premium collected by the insurers both life and non-life in

2004-05 was Rs.1, 00,335crore. The major contribution came from life insurance.

The insurance penetration i.e., premier as percentage of GDP was 3.17 per cent in

2004. While this ratio is steadily increasing, it is far below the world average of 8.06

per cent. This shows the vast potential that exists.

The insurance industry in our country underwent a big change in 2000 when private

participants were allowed into the industry along with a streamlined regulatory and

48


supervisory regime. There are at present 14 private life insurance companies along

with LIC and 12 entities in non-life sector. There is evidence to show that

competition has done well to insurance industry. The rate of growth of the industry

in the post liberalization period has been faster. It has also developed in terms of

product innovation and the use of alternative distribution channels.

In some sense we can say that insurance appears simultaneously with the appearance

of human society. We know of two types of economies in human societies: money

economies (with markets, money, financial instruments and so on) and non-money or

natural economies (without money, markets, financial instruments and so on). The

second type is a more ancient form than the first. In such an economy and

community, we can see insurance in the form of people helping each other. For

example, if a house burns down, the members of the community help build a new

one. Should the same thing happen to one's neighbor, the other neighbors must help?

Otherwise, neighbors will not receive help in the future. This type of insurance has

survived to the present day in some countries where modern money economy with its

financial instruments is not widespread (for example countries in the territory of the

former Soviet Union).

The mission of the insurance sector in India should be to extend the insurance

coverage over a larger section of the population and a wider segment of activities.

The three guiding principles of the industry must be to charge premium no higher

than what is warranty given by strict actuarial considerations, to invest the funds for

obtaining maximum yield for the policyholders consistent with the safety of capital

and to render efficient and prompt service to policyholders. With imaginative

corporate planning and an abiding commitment to improved service, the mission of

widening the spread of insurance can be achieved.

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Annexure

Questionnaire

1. What are the reasons why you purchase insurance?

TAX BENEFIT RISK MANAGEMENT

SAFE INVESTMENT PENSION BENEFITS

GREATER RETURNS OTHER REASONS

REGULAR INCOME

2. Do you have any awareness about insurance?

YES NO

3. Have you ever done Life Insurance Planning?

YES NO

4. From which company have you been insured to suit your needs?

LIC BAJAJ ALLIANZ

ICICI SBI LIFE

HDFC ING VYSYA

BIRLA SUNLIFE OTHERS

5. What were the reasons for above choice? 50


BRAND NAME RETURNS

CUSTOMER SERVICE OTHER REASONS

PRODUCT FEATURES

6. What was the most preferred policy?

MONEY BACK RETIREMENT

CHILD CARE ENDOWMENT

OTHERS

7. What were the factors you consider while purchasing insurance?

RIDERS MATURITY

PREMIUM RISK

RETURNS OTHERS

8. From where did you buy insurance?

AGENTS BANKS

ONLINE DIRECT FROM COMPANY

OTHERS

ANNUAL REPORT OF THE COMPANY

Year Ended Year Ended March 31,2007 March 31,2006

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Income Gross sales 176.61 142.35 Less: Sales returns (1.21) (0.87) Excise duty (20.06) (16.63) Net sales 155.34 124.85 Service and other income 40.37 23.97 Total Income 195.71 148.82 Expenditure Manufacturing and other expenses 164.61 129.66 Financial expenses 4.92 9.54 Depreciation and amortization 5.76 6.10 Total Expenditure 175.29 145.30 Profit before Tax 20.42 3.52 Tax expense 6.20 (2.37) Profit after Tax 14.22 5.89 6007.88 720.13

ICICI Prudential

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Max New York Life Insurance

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