Mritunjay Kr Project

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“DISTRIBUTION ENHANCEMENT”

At

HDFC Standard life

Navi Mumbai

A Project report submitted in partial fulfillment for the award of

Post Graduate Program in Business Management

By

Mritunjay kumar singh(Reg.No:-2019, Batch :-2006-2008)

Khandala

April – May 2007



HDFC STANDARD LIFE INSURANCE COMPANY LIMITED

Branch office: Ground floor, Near Lakshdeep Hospital, Plot No. IC / 2, Sector 9A, Vashi, Navi Mumbai -400703.Tel: 022 – 2766 8423 / 9234 / 9529 9571 Fax: 022 – 27669175Regd. Office: Ramon House, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai – 400 020

Date: 06/06/2007

To Whom So Ever It May Concern

This is to certify that Mr. Mritunjay kumar singh had been appointed as

“Project Trainee” w.e.f. 05-Apr-2007 for the Project on “Distribution Enhancement”.

The project continued for period of 60 days starting from his joining date. During this

period of project his performance was satisfactory.

We wish him all the best for his future career.

For HDFC Standard Life Insurance Co. Ltd.

Rajiv Ranjan

Branch Sales Manager

Vashi, Navi Mumbai.



School of Business & Research

KBS Khandala

CERTIFICATE

This is to certify that Mritunjay kumar singh is a Post-graduate

student of Kohinoor Business School, Khandala and has successfullyundergone a Summer Internship Program (SIP), in the topic“Distribution Enhancement”, during the period 05/April/2007-5/June/2007 with HDFC Standard life

The information submitted is true and original to the best of ourknowledge.

Dr.Bigyan P. Verma Prof. Jayaseelan G.M.

Director, Assistant Professor &

Kohinoor Business School Co-ordinator–Internship Program

Kohinoor Business School, Khandala.Khandala Campus : Kohinoor Business School, Old Pune-Mumbai Highway, Khandala - 410301. Dist - Pune. Maharashtra. Tel :(02114) 269 229; Fax : (02114) 269 230; Email : [email protected].

Head Office : Kohinoor Corporate Office, Senapati Bapat Marg, Dadar (West), Mumbai - 400028. Tel :6653 0000, Fax : 6653 0011, Toll Free No. : 1800 22 6010; Web Site : www.kohinoor.ac.in



DECLARATION

I, Mritunjay kumar singh, a bonafide student of Kohinoor Business SchoolKhandala, would like to declare that the project entitled “Distribution

Enhancement” is submitted in partial fulfillment of Post Graduate Program in

Business Management and is my original work.

Place:

Date: (Signature of Student)



ACKNOWLEDGEMENT

I extend my thanks and indebt-ness to my guide Dr. Bigyan P Verma,

Director, Kohinoor Business School, Khandala for constant encouragement

and valuable support through out the course of the project.

I wish to acknowledge my sincere thanks to all of the faculty members for

their valuable advice and suggestions.

I am very grateful and deeply indebted to Mr. R.Ranjan, Branch Sales

Manager and Mr. Avinash waag, Sales Development Manager, HDFC

Standard life, the man behind the project assignment with the company, for

there invaluable co-operation in helping me to complete the project successfully.

My profound thanks and extreme gratefulness to the organization of HDFC

standard life that gave me the project and valuable suggestions to complete the

same.

Last but not the least I wish to acknowledge my deep felt gratitude to all of

my respondents for their co-operation which helped me to form the base for the

project work.



CONTENTS

Chapter No. Chapter Name Page No.

1. Industry Profile 1-12

2. Company Profile 13-23

3. Product Profile 24-28

4. Objectives of the study 29

5. Limitations 29

6. Research Methodology 30-31

7. Data Analysis and Interpretation 31-33

8. Summary of findings 34

9. Summary of suggestions 34

10. Bibliography 35



1

Industry Profil:

Insurance:

What is Insurance?

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Insurance is defined as the equitable transfer of therisk of a potential loss, from one entity to another, in exchange for a premium and duty of care.

The business of insurance is related to the protection of the economic values of the

asset. Every asset has a value. The asset would have been created through the efforts of theowner, because he expects to get some benefits from it. The benefit may be an income or something else. It is a benefit because it meets some of his needs.

Every asset is expected to last for a certain period of time during which it will perform. After that,the benefit may not be available. There is a life-time for a machine in a factory or a motor car.None of them will last for ever. The owner is aware of this and he can so manage his affairs thatby the end of that period or a life-time, a substitute is made available. Thus, he makes sure thatthe value or income is not lost. However, the asset may get lost earlier. An accident or someother unfortunate event may destroy it or make it non-functional. In that case, the owner andthose deriving benefits there from, would be deprived of the benefit and the planned substitutewould not have been ready. There is an adverse or unpleasant situation. Insurance is amechanism that helps to reduce the effect of such adverse situations.

HISTORY OF INSURANCE :

Early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BCE respectively. Chinese merchants travelingtreacherous river rapids would redistribute their wares across many vessels to limit the loss dueto any single capsizing. The Babylonians developed a system which was recorded in thefamous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing

merchants. If a merchant received a loan to fund his shipment, he would pay the lender anadditional sum in exchange for the lender's guarantee to cancel the loan should the shipment bestolen.

A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'.Merchants whose goods were being shipped together would pay a proportionally dividedpremium which would be used to reimburse any merchant whose goods were jettisoned duringstorm or sinkage.

http://en.wikipedia.org/wiki/Law

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http://en.wikipedia.org/wiki/Risk_management

http://en.wikipedia.org/wiki/Hedge_%28finance%29

http://en.wikipedia.org/wiki/Risk

http://en.wikipedia.org/wiki/Financial

http://en.wikipedia.org/wiki/Loss


http://en.wikipedia.org/wiki/China

http://en.wikipedia.org/wiki/Babylonia

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http://en.wikipedia.org/wiki/Common_Era

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http://en.wikipedia.org/wiki/Mediterranean

http://en.wikipedia.org/wiki/Merchant

http://en.wikipedia.org/wiki/Rhodes

http://en.wikipedia.org/wiki/General_average

http://en.wikipedia.org/wiki/General_average

http://en.wikipedia.org/wiki/Rhodes

http://en.wikipedia.org/wiki/Merchant

http://en.wikipedia.org/wiki/Mediterranean

http://en.wikipedia.org/wiki/Code_of_Hammurabi

http://en.wikipedia.org/wiki/Common_Era

http://en.wikipedia.org/wiki/Millennium

http://en.wikipedia.org/wiki/2nd_millennium_BC

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http://en.wikipedia.org/wiki/Babylonia

http://en.wikipedia.org/wiki/China


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http://en.wikipedia.org/wiki/Economics

http://en.wikipedia.org/wiki/Law



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The Greeks and Romans introduced the origins of health and life insurance c. 600 AD whenthey organized guilds called "benevolent societies" which acted to care for the families andfuneral expenses of members upon death. Guilds in the Middle Ages served a similar purpose.The Talmud deals with several aspects of insuring goods. Before insurance was established inthe late 17th century, "friendly societies" existed in England, in which people donated amounts

of money to a general sum that could be used in case of emergency.

Separate insurance contracts (i.e. insurance policies not bundled with loans or other kinds ofcontracts) were invented in Genoa in the 14th century, as were insurance pools backed bypledges of landed estates. These new insurance contracts allowed insurance to be separatedfrom investment, a separation of roles that first proved useful in marine insurance. Insurancebecame far more sophisticated in post-Renaissance Europe, and specialized varietiesdeveloped.

Toward the end of the seventeenth century, the growing importance of London as a center fortrade led to rising demand for marine insurance. In the late 1680s, Mr. Edward Lloyd opened acoffee house which became a popular haunt of ship owners, merchants, and ships’ captains,

and thereby a reliable source of the latest shipping news. It became the meeting place forparties wishing to insure cargoes and ships, and those willing to underwrite such ventures.Today, Lloyd's of London remains the leading market for marine and other specialist types ofinsurance, but it works rather differently than the more familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666devoured 13,200 houses. In the aftermath of this disaster Nicholas Barbon opened an office toinsure buildings. In 1680 he established England's first fire insurance company, "The FireOffice," to insure brick and frame homes.

The first insurance company in the United States provided fire insurance and was formed inCharles Town (modern-day Charleston), South Carolina, in 1732.

Benjamin Franklin helped to popularize and make standard the practice of insurance,particularly against fire in the form of perpetual insurance. In 1752, he founded the PhiladelphiaContributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the firstto make contributions toward fire prevention. Not only did his company warn against certain firehazards, it refused to insure certain buildings where the risk of fire was too great, such as allwooden houses.

In the United States, regulation of the insurance industry is highly Balkanized, with primaryresponsibility assumed by individual State insurance departments. Whereas insurance marketshave become centralized nationally and internationally, state insurance commissioners operateindividually, though at times in concert through a national insurance commissioner's

organization. In recent years, some have called for a federal regulatory system for insurancesimilar to that of the banking industry.

INSURANCE INSTITUTE OF INDIA:

The insurance Institute of India was established in 1955 for purpose of impartinginsurance education to person engaged or intrested in insurance.

http://en.wikipedia.org/wiki/Ancient_Greece

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http://en.wikipedia.org/wiki/Guild

http://en.wikipedia.org/wiki/Middle_Ages

http://en.wikipedia.org/wiki/Talmud

http://en.wikipedia.org/wiki/Good_%28economics%29

http://en.wikipedia.org/wiki/Genoa

http://en.wikipedia.org/wiki/Renaissance

http://en.wikipedia.org/wiki/Europe

http://en.wikipedia.org/wiki/Lloyd%27s_of_London

http://en.wikipedia.org/wiki/Great_Fire_of_London

http://en.wikipedia.org/wiki/Nicholas_Barbon

http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Charleston%2C_South_Carolina

http://en.wikipedia.org/wiki/South_Carolina

http://en.wikipedia.org/wiki/Benjamin_Franklin

http://en.wikipedia.org/wiki/Fire

http://en.wikipedia.org/wiki/Perpetual_Insurance

http://www.contributionship.com/


http://en.wikipedia.org/wiki/Regulation

http://en.wikipedia.org/wiki/Balkanization

http://en.wikipedia.org/wiki/U.S._state

http://en.wikipedia.org/wiki/Commissioner

http://en.wikipedia.org/wiki/Commissioner

http://en.wikipedia.org/wiki/U.S._state

http://en.wikipedia.org/wiki/Balkanization

http://en.wikipedia.org/wiki/Regulation



http://en.wikipedia.org/wiki/Perpetual_Insurance

http://en.wikipedia.org/wiki/Fire

http://en.wikipedia.org/wiki/Benjamin_Franklin

http://en.wikipedia.org/wiki/South_Carolina

http://en.wikipedia.org/wiki/Charleston%2C_South_Carolina

http://en.wikipedia.org/wiki/United_States

http://en.wikipedia.org/wiki/Nicholas_Barbon

http://en.wikipedia.org/wiki/Great_Fire_of_London

http://en.wikipedia.org/wiki/Lloyd%27s_of_London

http://en.wikipedia.org/wiki/Europe

http://en.wikipedia.org/wiki/Renaissance

http://en.wikipedia.org/wiki/Genoa

http://en.wikipedia.org/wiki/Good_%28economics%29

http://en.wikipedia.org/wiki/Talmud

http://en.wikipedia.org/wiki/Middle_Ages

http://en.wikipedia.org/wiki/Guild

http://en.wikipedia.org/wiki/Death

http://en.wikipedia.org/wiki/Funeral

http://en.wikipedia.org/wiki/Family

http://en.wikipedia.org/wiki/Ancient_Rome

http://en.wikipedia.org/wiki/Ancient_Greece



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Types of insurance companies:

Insurance companies may be classified as:-

Life insurance companies:

These insurance companies sell life insurance, annuities and pensions products.

Non-life or general insurance companies:

These insurance companies who sell other types of insurance.

Players in the Indian Insurance Market:

LIFE INSURERS:

1. Bajaj Allianz Life Insurance Co. Ltd

2. Birla Sun Life Insurance Co. Ltd

3. HDFC Standard Life Insurance Co. Ltd

4. ICICI Prudential Life Insurance Co. Ltd

5. ING Vysya Life Insurance Co. Ltd. 6. Life Insurance Corporation of India

7. Max New York Life Insurance Co. Ltd

8. Met Life India Insurance Company Pvt. Ltd.

9. Kotak Mahindra Old Mutual Life Insurance Ltd.

10. SBI Life Insurance Co. Ltd.

11. Tata AIG Life Insurance Co. Ltd

12 Reliance Life Insurance Co. Ltd.

13 Aviva Life Insurance Co. India Pvt. Ltd.

14 Sahara India Life Insurance Co, Ltd.

15 Shriram Life Insurance Co, Ltd.

16 Bharti AXA Life Insurance Co. Ltd.



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NON-LIFE INSURERS:

1. Bajaj Allianz General Insurance Co. Ltd.

2. ICICI Lombard General Insurance Co. Ltd.

3. IFFCO Tokio General Insurance Co. Ltd.

4. National Insurance Co.Ltd.

5. The New India Assurance Co. Ltd. New India Assurance Bldg. 87, M.G. Road, Fort,

6. The Oriental Insurance Co. Ltd.

7. Reliance General Insurance Co. Ltd.

8. Royal Sundaram Alliance Insurance Co. Ltd

9. Tata AIG General Insurance Co. Ltd.

10. United India Insurance Co. Ltd.

11. Cholamandalam MS General Insurance Co. Ltd.

12. HDFC-Chubb General Insurance Co. Ltd.

13. Export Credit Guarantee Corporation of India Ltd.

14. Agriculture Insurance Co. of India Ltd.

15. Star Health and Allied Insurance Company Limited

CURRENT SCENARIO OF THE INDUSTRY

Size of global insurance industry:

Global insurance premiums grew by 9.7% in 2004 to reach $3.3 trillion. This follows 11.7%

growth in the previous year. Life insurance premiums grew by 9.8% during the year due to risingdemand for annuity and pension products. Non-life insurance premiums grew by 9.4% aspremium rates increased. Over the past decade, global insurance premiums rose by more thana half as annual growth fluctuated between 2% and 10%.

Advanced economies account for the bulk of global insurance. With premium income of$1,217bn in 2004, North America was the most important region, followed by the EU ($1,198bn)and Japan ($492bn). The top four countries accounted for nearly two-thirds of premiums in2004. The United States and Japan alone accounted for a half of world insurance, much higher



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than their 7% share of the global population. Emerging markets accounted for over 85% of theworld’s population but generated only 10% of premiums. The volume of UK insurance businesstotaled $295bn in 2004 or 9.1% of global premiums.

INSURANCE MARKET IN INDIA

India with about 200 million middle class household shows a huge untapped potential forplayers in the insurance industry. Saturation of markets in many developed economies hasmade the Indian market even more attractive for global insurance majors. The insurance sectorin India has come to a position of very high potential and competitiveness in the market.Innovative products and aggressive distribution have become the say of the day. Indians, havealways seen life insurance as a tax saving device, are now suddenly turning to the privatesector that are providing them new products and variety for their choice. Life insurance industryis waiting for a big growth as many Indian and foreign companies are waiting in the line for thegreen signal to start their operations. The Indian consumer should be ready now because themarket is going to give them an array of products, different in price, features and benefits. Howthe customer is going to make his choice will determine the future of the industry.

INFORMATION TECHNOLOGY AND INSURANCE

In the insurance industry today, there is a clear trend away from selling a broad range ofproducts to a large volume of customers in a one –size-fits-all manners. Instead of focusing ontheir different products lines as silos (i.e., life, property and casualty etc) insurers are looking forways to offer highly targeted insurance products that are tailored to the individual’s customerswith the highest propensity to buy them.

There is a evolutionary change in the technology that has revolutionized the entire insurancesector. Insurance industry is a data-rich industry, and thus, there is dire need to use the data fortrend analysis and personalization.

With increased competition among insurers, service has become a key issue. Moreover,customers are getting increasingly sophisticated and tech-savvy. People today don’t want toaccept the current value propositions, they want personalized interactions and they look formore and more features and add ones and better service

The insurance companies today must meet the need of the hour for more and morepersonalized approach for handling the customer. Today managing the customer intelligently isvery critical for the insurer especially in the very competitive environment. Companies need toapply different set of rules and treatment strategies to different customer segments. However, topersonalize interactions, insurers are required to capture customer information in an integrated

system.

The insurance sector remains a very competitive market and those companies that areable to best utilize their data and provide their customer with the most personalized options willhave the distinct competitive advantage. The insurers that come up to the top will be those wholeverage the appropriate technology solutions effectively in order to foster customer loyalty,attract new customers and improve operational efficiency by providing common informationacross their lines of business.



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The insurance industry has made great strides forward in the last four years with customer-centric developments being the mainstay of the improvements. A product that was earlierviewed only as a tax-saving option is now considered a viable financial instrument to meetdifferent needs. Higher standards of service, convenient access through advisors, agents andbanks, choice and flexibility in products, greater transparency, and use of information

technology are some of the key differentiating factors since the opening up of the industry in2000.

With such a large population and the untapped market area of this population Insurancehappens to be a very big opportunity in India. Today it stands as a business growing at the rateof 15-20 per cent annually. Together with banking services, it adds about 7 percent to thecountry’s GDP

Current Insurance penetration levels in India:

The growth potential of insurance in India is huge, considering the size and volume ofthe market. Currently, the life insurance penetration in India is very low at around 2% ofgross domestic product (GDP). However, with the advent of private insurancecompanies, new models of distribution and selling and higher levels of customerawareness, we are already seeing fantastic growth rates, making insurance one of thefastest growing sectors in the country today.

From the above chart we can easily figure out that in India insurance penetration is so low(14%) despite of the fact, it gives us back greater return (8 to 9.5 %) than any other savinginstrument like term deposit (5.5 to 6%) and bank saving accounts (4 to 5.5 %). Beside these it

gives us tax benefits and insurance cover. The only reason why people are so inured to bankand term deposit is low awareness of insurance in India.

Insurance as Investment

Insurance may not be the best place to invest hard-earned money. But there are sufficientreasons for one to believe that it can be a highly lucrative avenue to facilitate savings. Peopleoften talk about yield on investment and tend to compare their values with those available on



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various insurance schemes. This is particularly typical within the Indian sub-continent where oneconveniently forgets the element of risk covered by life insurance.

It is extremely unfair to compare the performance of insurance against other investmentswithout considering the core features of insurance. The very essence of insurance is to protect

your family from the uncertainty of your life. Hence it proves very logical to evaluate the costsinvolved towards this feature.

We must accept that out of the total amount paid by us for our life insurance, a certain amount isused for providing the risk cover and only the balance can be utilized as savings.

In other words, the total premium we pay minus the amount evaluated as the cost of insurancemust be considered as the amount invested to get the maturity amount. If you calculate the yieldfrom returns, you will be in for a surprise.

Secondly, we tend to think very unrealistically about our life. We often compare the results aftersay 10 years from an investment scheme, for instance PPF. And then we try to convince

ourselves that PPF is providing a better yield than an insurance policy.

For instance, if you invest Rs.10,000/- in PPF after 1 year your money will grow to Rs.11100/-accruing a return of 11 percent. But what if your death occurs in the first year itself? TheRs.10,000/- can give you an insurance cover up to an approximate sum of Rs.12 lakhs(depending upon the plan, age, etc) and this amount shall become available to the nominee ofthe policyholder as against the mere paltry Rs.11,100/- that PPF shall pay.

Investment of insurance premiums:

Life insurance is a long-term financial investment and HDFCSL’s invests policyholders’ funds inorder to earn sustainable, consistent returns over the long-term. In the pursuit of transparencyand fairness to all policyholders, HDFC Standard life maintains separate funds for its differentproduct categories – participating, market-linked and non-participating. Each of them aremanaged to earn the best possible returns for the policyholder and to ensure the safety of thefunds. The return on each product depends on the type of product it is.

At HDFC standard life, investments are made after considerable research, which is both top-down and bottom–up i.e. macroeconomic as well specific to a particular company, sector and itslong-term prospects. Moreover, there are separate investments and compliance team, so thatthere is segregation between execution and control. Regular monitoring and frequent reportingenable the company to closely track the investment portfolio and make changes as necessary.Further, the IRDA also regulates the investments made by life insurance companies through anumber of checks and measures.

Impact of Liberalization:The introduction of private players in the industry has added to the colors in the dull industry.The initiatives taken by the private players are very competitive and have given immensecompetition to the on time monopoly of the market LIC. Since the advent of the private playersin the market the industry has seen new and innovative steps taken by the players in this sector.The new players have improved the service quality of the insurance. As a result LIC down the



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Years have seen the declining phase in its career. The market share was distributed among theprivate players. Though LIC still holds the 75% of the insurance sector but the upcomingnatures of these private players are enough to give more competition to LIC in the near future.LIC market share has decreased from 95% (2002-03) to 81 %( 2004-05). The followingcompanies have the rest of the market share of the insurance industry.

Name of The Player Market Share (%) LIC 82.3ICICI PRUDENTIAL 5.63BIRLA SUN LIFE 2.56BAJA ALLIANZ 2.03SBI LIFE 1.80HDFC STANDARD 1.36

TATA AIG 1.29MAX NEW YORK 0.90AVIVA 0.79OM KOTAK MAHINDRA 0.51ING VYASA 0.37AMP SANMAR 0.26METLIFE 0.21



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Why Life insurance?

Life Insurance cover is essential for it provided the following benefits:

• A lump sum payment to the nominees at the time of the death of the policy holder;• A regular payment to the nominees in the event of the death of the policy holder;• Tax benefits, as premiums paid reduce the liability of tax;• Relieves economic hardships in the family on the uneventful death of the sole income

holder;• Inculcates the habit of saving.

What does Life Insurance provide?

The proceeds accruing from Life Insurance policy can be utilized for:

• Final expenses resulting from death•

Guaranteed maintenance of lifestyle• Replacement of income• Mortgage or liquidation payments• Costs of education• Estate and other taxes• Continuity & security of interests

Advantages of life insurance

• Life insurance has no competition from any other business. Many people think that lifeinsurance is an investment or a means of saving. This is not a correct view. When aperson saves, the amount of funds available at any time is equal to the amount of money

set aside in the past, plus interest. This is so in a fixed deposit in the bank, in nationalsavings certificates, in mutual funds and all other saving instruments. If the money isinvested in buying shares and stocks, there is the risk of the money being lost in thefluctuations of the stock market. Even if there is no loss, the available money at any timeis the amount invested plus appreciation. In life insurance, however, the fund available isnot the total of the savings already made (premiums paid), but the amount one wished tohave at the end of the savings period (which is the next 20 or 30 years). The final fund issecured from the very beginning. One is paying for it later, out of the savings. One has topay for it only as long as one lives or for a lesser period if so chosen. There is no otherscheme which provides this kind of benefit. Therefore life insurance has no substitute.

• Even so, a comparison with other forms of savings will show that life insurance has thefollowing advantages:

1) In the event of death, the settlement is easy. The heirs can collect the moneysquicker, because of the facility of nomination and assignment. The facility ofnomination is now available for some bank accounts.

2) Creditors can not claim the life insurance moneys. They can be protected againstattachments by courts.

3) There are tax benefits, both in income tax and in capital gains4) Marketability and liquidity are better. A life insurance policy is property and can be

transferred or mortgaged. Loans can be raised against the policy.



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Key concepts:Risk cover versus investment returns

Insurance options range from policies with low premium that offer you almost no returns tothose with high premium that effectively offer post-tax returns of around 8% to 9.5% p.a. Thesereturns are at the lower end of fixed-income returns available today and hence are relativelyunattractive. We recommend you buy an insurance policy skewed towards investment returnsonly if you are in the high-tax bracket, prefer to invest in low-risk, fixed-income options and haveexhausted all the other such investment options available. See Financial Investment Optionsand Government Schemes Directory for details of low-risk, fixed-income investment optionsavailable.

Whole life versus limited period

As you grow older, you may not have as many dependents (your children would become self-dependent) or your wealth may reach a level where it can support your dependents’ financialneeds in the event of your death.These possibilities bring us to the interesting question on whether you should insure yourself forwhole life or for a limited term. Obviously, the cost of insurance for the latter is lower. Werecommend you insure for whole life only if you never expect your wealth to reach a level whereit can support the financial needs of your dependents.

Tax Planning

The premium paid for an LIC policy also qualifies for tax rebate under Section 88 of the IncomeTax Act. The maximum premium amount that can qualify for rebate is Rs60,000 per annum andyou get a rebate equivalent to 20% of the premium paid, from your tax liability for the year.

How should an individual go about in selecting an Insurance policy?

One of the most important aspects to consider when buying a life insurance policy is to ensurethat the cover is commensurate with one’s current and likely future financial position, i.e. aperson who has a high income or is likely to be earning high amounts in the future, would havea high sum assured. The key thing to keep in mind is one’s "Human Life Value" (HLV). This isthe net present value of one’s future earnings. Put simply, it is the amount that a person’s familywould permanently lose, should anything unfortunate happens to that person. As a thumb rule,

a 30-year old should insure oneself for about 8 times his or her annual income. At 35, this isabout 6 times. Of course, the exact amount must be adjusted according to the number ofdependents, existing investments and one’s life stage. For instance, if at 30, a person has twochildren and parents to provide for, the amount of insurance should also be higher.

The type of policy that a person buys should be based primarily on his or her needs and comfortlevels. Some people might prefer to buy a policy or a series of participating policies, each of,which would meet different needs such as buying a house or providing for their child’s



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education. Such a person would have to very carefully plan his milestones so that the incomesand installments from his participating policies flow to him at the right time. On the other hand,there will be others who prefer to aggregate their needs into a single policy and buy a market-linked policy, like HDFC Standard life’s Whole Life Insurance Policy, which can be adjusted tomeet different needs. In the long run, such a policy is more cost effective, as it allows one to

adjust the investment and protection components at a particular point in time

Figures in the sector

It's now official. The Insurance Regulatory and Development bill is now an Act. With this India isnow the cynosure of all the global insurance players. Numerous players, both Indian andforeign, have announced their intention to start their insurance shops in India. IRDA, under thechairmanship of Mr. Rangachary, opened the window for applying licenses in India on the 16 th of August. But before any one starts to talk about the insurance sector in India, it is important toknow the figures that entice each and every body in the sector.

Figures in the sector

Table No.1

Life Insurance Statistics

Indian population 1 bn

GDP as on 2000 ( bn) 20000 bn

Gross domestic savings as a % of GDP 23%

NCAER estimate of insurable population 240 mn

Estimated market by 2005 650 mn

India has an enormous middle-class that can afford to buy life, health, and disability andpension plan products. The low level of penetration of life insurance in India compared to otherdeveloped nations can be judged by a comparison of per capita life premium.

Table No.2

Country Life Premium Per Capita US $ in 1994

Japan 3,817

UK 1,280

USA 964

India 4

Clearly, there is considerable scope to raise per capita life premium if the market is effectivelytapped.



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India has traditionally been a high savings oriented country - often described as being on parwith the thrifty Japan. Insurance sector in the US of A is as big in size as the banking industrythere. This gives us an idea of how important the sector is. Insurance sector channelizes thesavings of the people to long-term investments. In India where infrastructure is said to be ofcritical importance, this sector will bring the nations own money for the nation.

In 3 years time we would expect the 10% of the population to be under some sort of aninsurance cover. This assuming a premium of Rs. 5000 on an average, amounts to 100 million xRs.5000 = Rs. 500 bn.

This has made the sector the hottest one in India after IT. With social security and security tothe public at large being the agenda for opening the sector, the role of the regulator becomes allthe more serious and one that would be carefully watched at every step.



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Company Profile:

HDFC Standard Life first came together for a possible joint venture, to enter the Life Insurancemarket, in January 1995. It was clear from the outset that both companies shared similar valuesand beliefs and a strong relationship quickly formed. In October 1995 the companies signed a 3

year joint venture agreement.

Around this time Standard Life purchased a 5% stake in HDFC, further strengthening therelationship.

The next three years were filled with uncertainty, due to changes in government and ongoingdelays in getting the IRDA (Insurance Regulatory and Development authority) Act passed inparliament. Despite this both companies remained firmly committed to the venture.

In October 1998, the joint venture agreement was renewed and additional resource madeavailable. Around this time Standard Life purchased 2% of Infrastructure Development FinanceCompany Ltd. (IDFC). Standard Life also started to use the services of the HDFC Treasury

department to advise them upon their investments in India.

Towards the end of 1999, the opening of the market looked very promising and both companiesagreed the time was right to move the operation to the next level. Therefore, in January 2000 anexpert team from the UK joined a hand picked team from HDFC to form the core project team,based in Mumbai.

Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake in HDFCBank.

In a further development Standard Life agreed to participate in the Asset ManagementCompany promoted by HDFC to enter the mutual fund market. The Mutual Fund was launchedon 20th July 2000

The company was incorporated on 14th August 2000 under the name of HDFC Standard LifeInsurance Company Limited.

Their ambition from the beginning was to be the first private company to re-enter the lifeinsurance market in India. On the 23rd of October 2000, this ambition was realised when HDFCStandard Life was the first life company to be granted a certificate of registration.

HDFC are the main shareholders in HDFC Standard Life, with 81.4%, while Standard Life owns18.6%. Given Standard Life's existing investment in the HDFC Group, this is the maximum

investment allowed under current regulations.

HDFC and Standard Life have a long and close relationship built upon shared values and trust.The ambition of HDFC Standard Life is to mirror the success of the parent companies and bethe yardstick by which all other insurance companies in India are measured.The company israted as "very strong" by Standard & Poor's (AA) and "excellent" by Moody's(Aa2). HDFCStandard Life's cumulative premium income, including the first year premiums andrenewal premiums is Rs. 672.3 Crores for the financial year, Apr-Nov 2005. So far thecompany has covered over 11,00,000 individuals and has declared 5th consecutive



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bonus in as many years for its 'with profit' policyholders. HDFC Standard life hasemerged as the first private life insurer in the country, with a wide range of flexibleproducts that meet the needs of the Indian customer at every step in life.

The Mission of HDFC Standard life :

To be the top new life insurance company in the market.

This does not just mean being the largest or the most productive company in the market, ratherit is a combination of several things like-

• Customer service of the highest order• Value for money for customers• Professionalism in carrying out business• Innovative products to cater to different needs of different customers• Use of technology to improve service standards• Increasing market share

The Values of HDFC standard life:

• SECURITY: Providing long term financial security to our policy holders will be ourconstant endeavour. We will be do this by offering life insurance and pension products.

• TRUST: We appreciate the trust placed by our policy holders in us. Hence, we will aimto manage their investments very carefully and live up to this trust.

Target Market:

At a broad level, HDFC Standard life aim to secure the families of the middle and upper classworking people in urban and rural India. Our strategy has always been to focus on deliveringvalue and convenience to the customer, whether they are in rural or urban areas. Hence, inurban areas we have focused on offering product choice and flexibility and building easy accessfor the customers; while in rural areas the focus is on partnering with NGO’s and grass-rootorganizations and offering a simple product that can be understood by the customers.

HDFC Standard life MarketingThe purpose of all business is to create and retain customers. Without customers, there can beno business. Customers do not come on their own. They have to become aware of theavailability of the goods or services on offer. Awareness is not enough. It must be convenient to

access the offer. The cost must be seen to be reasonable for the benefit offered. An excellentproduct does not guarantee that sales will happen, unless people interested in that productcome to know about it and find that the effort to get it is not too taxing. They will continue ascustomers when they are satisfied with what they have got. Business, therefore, has to informthe likely customers through media that reach them, make the goods and services available atconvenient outlets and ensure that the customers experiences satisfactions while using them.Marketing is the activity that comprises of all these. It focuses on the customer. The marketerasks questions like what do people buy, why do they buy ( what are the needs), when and



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where do they buy, how do they buy, how much are they prepared to pay, what are theirpreferences and priorities, what do they look for while buying, etc.

Marketing of the Products:

The core function of the marketing force of an insurance company is to generate awarenessabout the insurance products among the target market. But in the Indian scenario, where theinsurance penetration is too low as compared to the other nations, the marketing force needs toperform the pro-active role in developing an insurance culture. It is through the efficiency of thesales force of an insurance company that the desirability and the success of a product aredetermined.

In Indian insurance market, the function is, basically performed by the financial advisers. Thepersons desiring to function as insurance financial advisers have to obtain license to act as suchfrom the IRDA or an officer authorized by the Authority in this behalf. The financial adviserapproach the prospective buyers and apprise them of the basic features of the products. Inorder to dispense with the functions, the financial advisers need to possess adequate

knowledge of the insurance industry, products and the modalities attached therewith. Further,the marketing personnel should be adequately backed by the back-office setup.

Strategies:

Our strategy is simple. Look for what makes sense for the customer and try to deliver maximumvalue. Whether it is distribution, service, or products, we do what we think is in the customer’sbest interest. So we went multi-channel virtually on day one. We went multi-product with a fullsuite of products because every customer does not need the same product. Although we were ayoung company, we invested in the web and in call centres so customers can contact us easily.We empowered our agents with technology so that they had the information they needed whenthey were talking to customers. HDFC standard life’s success has been built on its consistentfocus on the customer and delivering on his/her needs. This includes several initiatives, suchas:

• Developing flexible products that are based on consumer needs and insights• Offering differentiated service to the customer in a manner that is most convenient to

him/her – be it through the web, call centres, branches, etc.• Scientific risk management• Investment strategy with a focus on safety, stability and returns are some of the factors

that have facilitated our growth.

Since its inception, HDFC Standard life has invested in building a meaningful brand in the mindof its customers. These efforts have borne fantastic results, with the company enjoying totalbrand awareness, the one of the best performer amongst private life insurers.

Qualitative aspect of its investment strategy:

It’s a question of where we invest our energy as an organization. Did we invest our energiesonly in marketing or only in distribution, or holistically across the organization? Many insurancecompanies might have decided to invest in the front-end first, ignoring the back-end of the



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business. We have not done that. In order to get both the front and back end in place, weinitiated Six Sigma.

We hired two fund managers with excellent track records when we had a policyholder fund ofunder Rs 1 crore. We did not favor taking advice from somebody else to manage out portfolio.

As the fund size grows, we will hire additional fund managers.

As far as fund management is concerned, you must have the right philosophy, the right policyand the right control systems. We have fairly well defined limits and policies on how they caninvest. These limits are apart from what IRDA has prescribed

Strategic AlternativesIf one analyses the history of growth of the insurance industry since reforms, it is marked by all-round growth of all players. More or less all players (including the market leader LIC) haveaggressively recruited and trained advisors, appointed agents, launched new products,improved customer service standards and revamped/expanded their distribution networks. If atall there was any major difference between players it was only in time lag in launching of

services. HDFC standard life would like the customers to believe that its service standards arethe best or that its financial advisers are the most informed and ethical, but is debatable whetherthere are any significant differences. In other words, each company is trying to be ‘everything toeverybody’. Our argument is that the strategy of being everything to everybody is risky. Someplayers justify the above strategy on the basis that the Indian market is huge and it canaccommodate everybody. Still, in a market where it is difficult to distinguish oneself sufficientlyon service or any other parameter to be able to charge a premium, it will lead to unmitigatedprice competition to the detriment of all players. One may achieve sales turnover, but marginsand profitability will suffer severely. In the insurance industry where large amounts of capital arerequired, this is risky. While there is room for a few scale players with a finger in every pie, it isprofitable for other players to focus on different segments to survive and thrive in a multi-firmopen environment. While each company has to choose its own unique positioning based on its

unique strengths, the below-mentioned generic positioning alternatives appear worthconsidering. Needless to say the positioning choices discussed here are not mutually exclusiveand can be overlapping.

Variety-based PositioningThis type of positioning is based on varieties in products and services rather thancustomer segments. It is a sensible strategy for those companies who have distinctiveadvantages or strengths in offering certain products and services.HDFC Standard life has achieved a unique position by focusing on certain category ofproducts, which has been placing particular focus on investment-related products since itslaunch in India.Through its superior fund management capabilities, HDFC Standard life is delivering better

returns on its investment-linked products and thereby carve for itself a leadership position in thissegment. Then there is the entire category of pension products, which is widely touted to haveimmense growth potential in India due to imminent pension reforms. It has made possible toachieve profitable positioning by focusing and excelling in only pension products.

Needs-based Positioning



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This is the most commonly understood positioning and is based on the differing needs ofdifferent groups of consumers. This is done successfully by HDFC Standard life with its uniquestrengths to service a group of customer needs better than others. The insurance needs ofcustomers vary significantly for different groups of customers. The insurance needs of youngfamily with small children will be quite different from that of a family in which the income-earner

is close to retirement. However, in India most of the life insurance companies have a widevariety of products tailored for different customer needs and there is no company focusing on aparticular customer need. An example would be a life insurance company that focuses only onHigh Net-worth Individuals (HNIs). The needs of HNIs would be quite different from those of ageneral consumer and would require an entirely different marketing mix right from the type ofproducts offered and the way they are distributed, to the promotion methods employed.

Channels of distribution:

In keeping with its philosophy of giving the customers choice in how they want to approach thecompany, HDFC Standard life is the life insurer to launch operations with a multi-channel

distribution strategy that included financial advisors, bank assurance, corporate agents, directmarketing and most recently, its online application system – Insta Insure. The company has anetwork of financial advisors, which contribute the greatest percentage of business. Alternatechannels such as corporate agents and bank relationships contributed as well.

Sold, not bought:Life insurance is not bought by any body. General insurance is often bought because there arecompulsions under the law (motor vehicles) or from the financiers asking for insurance ascollateral security. In the case of life insurance, there is very little compulsion. The tendency isto defer the decision. The possibility of death is either ignored or not considered imminent. Therequirements of today take priority over the requirements of tomorrow. Even if not absolutelyessential, the requirements of today seem to be more compelling. Superstitious beliefs and

cultural or religious backgrounds often interfere with the process of considering the usefulnessof life insurance. There is also a tendency to leave every thing to fate. There are notions aboutlife insurance not being a good investments (yields are low, the money after 20 years is worthmuch less) and so on. By the time some one realizes him the need for life insurance; thechances are that he may not be in the best of health and the insurer may have doubts about theinsurability. Life insurance has to be had when in the best of health. Otherwise, the insurer willrefuse to grant the insurance cover. In this complex milieu, people need to be persuaded thatthere is need to be concerned about the future and that life insurance is a necessity, not anoption. Insurance has to be sold. The person, who is met by a financial consultant at his normalplace or work or residence, is a better risk than the one who comes to the office and asks forinsurance. The financial consultant, who is the primary underwriter, can study and report on thecircumstances and motivations of the former. The latter is likely to be a case of moral hazard

and must be looked at more carefully.

Selling of the Products

The term selling in the context of insurance industry connotes the issuance of policies to theapplicant proposer. The non-life insurance policy basically embodies the covenant between theinsurer and the insured wherein the former agrees to indemnify the latter for the loss caused tohim on the happening of the certain agreed events up to a specified limit. The life insurance



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policy generally contains the agreement whereby the insurer agrees to pay to the insured or thebeneficiary of the policy an agreed amount on the expiry of the term of the policy or in the eventof the death of the insured respectively. The additional benefits in the shape of Riders viz.Accidental Death Benefit, Double Sum Assured, Critical Illness benefits; Waiver of Premiums,etc. can also be appended with the policy on the payment of an additional premium.

In Indian industry, the function is, generally performed by the insurer. In addition, the insurancecompanies depute their Direct Selling Representatives to look after the function. They receivethe proposal documents, vet them and issue policies to the proposers.

The Chartered Accountants can engage themselves in the process by entering into agreementwith the insurance companies to function as the Direct Sellers of their products and chargecommission in lieu of the services so rendered from them. The area promises attractive scopefor the constituents of the profession.

Different steps involved in selling of insurance:The first requirement is to have a continually expanding list of prospectus, persons who can be

approached for insurance. These are names of people within reach, obtained fromacquaintances, newspapers reports, directories, contacts at parties, meetings, seminars, etc.These names have to be qualified, which means that some preliminary work should be done tocollect details about them. These details may indicate whether it may be worth approachingthem for insurance. The work of ‘qualifying’ is done to ensure that the prospect is not apparentlyunfit for insurance like being sick, or with great moral hazard.Those in the qualified prospect list have to be met. A sale results when the salesman takes theprospect through well defined steps. The steps are not separate and clear-cut but blend into oneintegrated process.

The steps are:

1. Pre-approach 2. Approach 3. Interview 4. Objections 5. Close

1. Pre-approach:Pre-approach means preparing to approach the prospect. This requires forming some idea as tohow the interview could begin and proceed, for which you require basic information regardinghis income, his habits, his concerns, his interests, his saving capacity, his family position, etc.These facts can be had from a variety of sources, and you may even have to make a personalcall on the man himself, and get from him the facts you need to persuade him in taking adecision. If such a call is made, the proposal for insurance is not made at that stage, although insome circumstances a pre-approach call may develop further and end with the proposal and thecheque. The information collected during pre-approach will provide a reasonable idea of theprospect’s financial position and his needs and concerns, and help to make a tentativerecommendation of a plan. If you make the sale first in your mind, you will find it easy to makethe sale to the prospect. It is advisable to write down the proposal. The advantages of a writtenproposal are:

• Details are not missed by either the advisor or the prospect



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• The impression is more lasting• The prospect can go back to earlier data on his own• The prospect can understand, at his own pace• It is easy to stop at any point, clarify questions and continue further without losing the

trend

2. Approach:When you knock on the prospect’s door and are face to face with him, the dynamic phase ofsales begins. You should make known to the prospect, at the very earliest, that you are callingon him for life insurance. There is no need to hesitate on this or to feel apologetic. The advisorhas to believe that he is calling on the prospect to render him the valuable service of ensuringfinancial security for him and his family.The advisor should open the talk by explaining the purpose of his call in such a way so as toarouse enough interest. Otherwise, he may not pay attention to the proposal. In most of thecases, the situation may arise where the prospect will come out with a ‘no’. At this juncture ofapproach, when the prospect says ‘no’, the agent should not be in a hurry to convert the ‘no’into ‘yes’. The purpose of the approach stage is not to sale insurance, but to sale interview,

which gives him the opportunity to talk about what he wants the prospect to think about.

3. Interview:The interview should first of all, make the prospect listen. This happens if the financialconsultant refers to things which interest him, his needs, or things that matter to him, withoutmaking it appear like patronizing or flattering. Any hint that the prospect’s decisions of the past(relating to insurance or investments) were not appropriate or need to be changed, will have theopposite effect. The proposal being made by the advisor should be seen as beneficial andcomplimentary to the existing arrangements. The FC’s has to follow some simple rules like theones mentioned below:

• Do not talk more than necessary.• Ask questions, and make the prospect talk. Make it interactive.• Create doubts and get him to ask questions for clarifications.• Listen to the prospect’s point of view carefully. Do not interrupt, contradict or argue.

People feel good when they are listened to and then they listen better.• Make your talk interesting. Tell a true story of how life insurance has helped families in

various situations and how families have suffered without it. Make the story which haspersonal appeal. Use names of his children or relatives. That will make the story moreappealing.

• Use graphs and written presentations. And if possible use power point presentation.• Let the prospect write down the figures of his needs, of his liabilities, of benefits of the

insurance plan and of the premium. This ensures concentrated attention.• Advice must be in the interest of the prospect not in our interest.

4. Objections:Prospects will raise objections, one after another. Objections are a part of every sale. Ifprospects did not object, there would be no need for salesman. People would buy on their own.Also, if the prospect remained silent, you will not know how his mind is working. The objection inhis way of referring to the further information that he needs. The entire selling process is,therefore, interspersed with objections. At the stage of approach itself the prospect may say ‘Ido not believe in life insurance’, ‘I do not need life insurance’, and the like. Such objections are



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not against life insurance but rather against the advisor whom he wants to put off gracefully, orsigns of indecisions, or of a fear of being “forced” in to buying. Then there are objections duringthe interview, like, ‘I pay more than what I get back’, ‘it is advantageous only if I die’, ‘meet meafter six months’. Such objections, which come up during the main discussion are realobjections. However, their intention is not to put you off. It is quite the contrary. The prospect

wants you to give him detailed information that will remove his fears and doubts and to back uphis talent or unstated desire to buy. Every objection tells you about the prospect’s thinking andgives you an opportunity to remove his mental blocks. Indeed, a prospect, who puts forward anobjection, is actually asking you to give him one more reason to buy. A true agent shouldtherefore welcome objections. Then there are objections raised at the closing stage, such as,’ Iwill think it over’, ‘I will consult my father’, etc. these objections reveal an inability to take a majordecision. Objections can not be treated in a summary manner. The answers must be completeand convincing to the prospect. He needs help to make the decisions to buy. His doubts ordifficulties need to be removed or clarified. The financial consultant, while answering theobjections, should never get into an argument.

For example. An financial consultant may say:”Mr. Prospect, I agree that conditions are hard

and people have difficulty in saving; but imagine how much more difficult it will be if your familyhas to carry on without you”. The secret of successful selling is to make the prospect feel thathe has taken the decision- you only help him in the process by answering his objections.Consultants should remember that an objection is a “blessing in disguise”. It is also steppingstone to a sale.

5. Closing:The ‘close’ has to be sensed and timed, because very few prospects will, of their own accord,say ‘I will insure’. The consultant sensing the close, takes the prospect’s positive decisions forgranted by asking for his implied consent. “Will you pay premium by cash or cheque?”, “do youhave your school certificate at hand now or can you give it tomorrow?” A positive answer to anyone of these questions is an indication to go ahead. If the interview does not end with a close

and is put off to another time, the interview will have to be gone through all over again. In sellinglife insurance, an appeal to the heart of the prospect is more useful than an appeal to the head.Life insurance is bought for the prime reason of protecting the loved ones, affording a good startin life to the children, duty to aged person, or perhaps a desire for self-preservation in old age.So a sale can be accomplished only when an appeal is made to one of these motives; anappeal to the sentiments of love, of affection and of concern. The consultant need not be anexpert in psychology to do this.

Evaluating customer’s life insurance needs:

Life insurance is one of the most popular savings/ investment vehicles in India. Ironically, it s theleast understood too. An insurance policy offers much more than just tax planning and

investment returns. It offers you the ability to plan for unforeseen events that could affect yourfamily's financial profile adversely.

Factors to consider Your financial profile and needs are different from that of your neighbour. And the same is truefor your insurance needs.

However, irrespective of the differences, the number of dependents you have and their financial



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needs are the most important factors to consider.Issues to consider while evaluating the above factors include:

the wealth, income and expense levels of your dependents,their significant foreseeable expenses,the inheritance you would leave them, and

the lifestyle you want to provide for them.

How much insurance do you need? Obviously the above factors mean nothing to the insurance planning process unless theyare quantified. Globally, the time-tested approach used by insurance and financial planners isthe capital needs analysis method. Our Are You Adequately Insured planning tool, based on this

approach, will help you arrive at how much insurance you need..

Selecting life insurance policy:

Understand how much insurance you need

This is the single most important factor to evaluate before you select a life insurance policy. Forthis, you must consider the current expense profile of your dependents and the current wealthlevel of your family. Also, consider what your dependent’s risk tolerance level is. Our Are YouAdequately Insured planning tool can take you step-by-step in addressing this issue.

Selecting your Premium Paying Term (PPT) How long do you want to pay your insurance premium for? Key factors this decision coulddepend upon are -

How many years you see yourself earning a regular incomeThe level of your regular savingsThe amount you can commit to paying regularly as insurance premium

How long you want to be insured versus how long you expect to pay a premium for?

Other important questions to ask

Besides understanding how much insurance you need and selecting your premium-paying term,you need to consider some other key factors, such as -

Do you want to participate in bonus/ profit share?What is the primary objective of your seeking insurance - mainly risk cover, mostly investment

returns?Do you want accident cover?

For a detailed understanding of the factors you need to consider while selecting a life insurancepolicy, and the rationale for the same, use our Insurance Planner.

This planning tool will also take you step by step and arrive at a shortlist of life insurancepolicies appropriate for you, based on your personal profile.To understand life insurance terms, you can read The Basics of Life Insurance.

Functions of a consultant: The consultant’s main function is to solicit and procure life insurance business for the insurer,which has appointed him for that purpose. At the same time, he is trusted by the prospect to



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advise him suitably keeping his circumstances and needs in mind. He is thus in the unique roleof a person trusted by both parties to the transaction. His functions would include:

• Understand the prospect’s needs and persuade him to buy a plan of life insurance thatsuits his interests best.

• Complete the formalities (paper work, medical examination) necessary to get the policy

expeditiously.• Keep in touch to ensure that changing circumstances are reflected in the arrangements

relating to premium payments, nominations and other necessary alterations.• Facilitate quick settlement of claims.• Be totally honest with both the prospect and the insurer.• A life insurance consultant would be required to solicit and procure new life insurance

business, in a manner i.e. consistent with the interests of the policy holders and of theinsurance company.

• The insurance consultant is a consultant of the prospect as well. He is looked up on as aknowledgeable person, who can be trusted to give the right advice. To be able to matchthese expectations, the agent must be familiar with the benefits and advantages of otherfinancial instruments suitable for savings and investments and also the laws, particularly

on taxation matters, relevant to these instruments the variety of instruments available forindividual, is very vast and it is difficult for any one to master the details of all of them.

Servicing

The functions of an insurer include the provision of the Post-sales services to the insured.Among the services rendered by the insurer is the service of processing and release of claims.The insurers need to verify the accuracy of the facts presented in relation to the insurance claimand the documents produced in support thereof. Any personal services to clients are handled by

the advisors like getting references, collection of payments, medical examinations any otherqueries of clients, etc. These kinds of services help advisors to build good and long relationshipwith the clients and through this relationship advisor can gain more number of clients and moreon that it builds better image as a person.

Management of Portfolio

The management of the portfolio includes the assessment of requirement of funds, identificationof various sources of finance, the evaluation of the sources in the light of their cost, availability,timing, etc., reconciling the features of various sources with the needs of the company and theselection of appropriate conjunction of sources. The insurer possesses huge amount of funds,which need proper management. The management of the portfolio of an insurance company

requires the identification of investment avenues, evaluation thereof and the selection of themost appropriate mix of alternatives where the funds of the company can be invested. Theselection requires the knowledge of finance-related functions and techniques apart from the in-depth knowledge of the patterns of requirement of funds in the company as well as in theindustry as a whole and the regulations of the IRDA in this behalf. The decision with regard tothe reinsurance of risks also falls in the domain of the activity of management of portfolio. Theinsurer has to assess the risk involved in a single or multiple insured units and reach at theretention or transfer of the excess risks. In case the insurer reckons the degree of risk involved



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to be too high, it passes the risk on through reinsurance or shares the same in consortium withthe other insurers.

The decision requires the deep knowledge of the intricacies of the risk assessment and properand timely application thereof.

The consultant has to be well versed with the insurance and investment market and trend onlythen he will be able to guide customers regarding his investment management. Proper study ofdata and market situation gives them proper idea about managing funds, and well managedfunds will definitely turn in to good return which will make consultant trustworthy.



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Product Profile:

HDFC Standard Life Insurance offers a range of innovative, customer-centric products that meetthe needs of customers at every life stage. HDFC Standard Life offer a bouquet of insurancesolutions to meet every need. This section gives details of all our products. We have

incorporated various product details so that you can make an informed choice about buying apolicy.

INDIVIDUAL PRODUCTS:-

We at HDFC Standard Life realise that not everyone has the same kind of needs. Keeping thisin mind, we have a varied range of Products that you can choose from to suit all your needs.These will help secure your future as well as the future of your family.

Protection Plans

You can protect your family against the loss of your income or the burden of a loan in the

event of your unfortunate demise, disability or sickness. These plans offer valuable peace ofmind at a small price. Our Protection range includes

HDFC TERM ASSURANCE PLAN

You have always ensured that your loved ones keep living a respectable life with theirheads held high. But life can be uncertain. As a prudent family man, you need to secureyour family's future and protect your pride and your family's self respect. You need to have aplan to take care of your family if something unfortunate were to happen to you.With our Protection Plans, you can protect your family from uncertainties in life such as yourunfortunate death or critical illness. And ensure that your family lives a life of self-respectand dignity even in your absence.

HDFC LOAN COVER TERM ASSURANCE PLANYou have always ensured that your loved ones keep living a respectable life with their heads held

high. But life can be uncertain. As a prudent family man, you need to secure your family's future and

protect your pride and your family's self respect. You need to have a plan to take care of your family

if something unfortunate were to happen to you.

With our Protection Plans, you can protect your family from uncertainties in life such as yourunfortunate death or critical illness. And ensure that your family lives a life of self-respectand dignity even in your absence.

Investment Plans

Our Single Premium Whole Of Life plan is well suited to meet your long term investmentneeds. We provide you with attractive long term returns through regular bonuses.

Pension Plans

Our Pension Plans help you secure your financial independence even after retirement. Our

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Pension range includes

HDFC PERSONAL PENSION PLAN

We understand your need to build a secure future for yourself. Hence, the HDFCPersonal Pension Plan is an insurance policy that is designed to provide a post -retirement income for life with the freedom to choose your retirement date.

HDFC UNIT LINKED PENSION

The HDFC Unit Linked Pension is an insurance policy that is designed to provide aretirement income for life with the freedom to maximise your investment returns. Stride intoyour golden years of retirement with dignity and pride.

HDFC UNIT LINKED PENSION PLUS

The HDFC Unit Linked Pension Plus is an insurance policy that is designed to provide aretirement income for life with the freedom to maximise your investment returns. Stride intoyour golden years of retirement with dignity and pride.

Savings Plans

Our Savings Plans offer you flexible options to build savings for your future needs such asbuying a dream home or fulfilling your children’s immediate and future needs. Our Savingsrange includes

HDFC Endowment Assurance Plan

With HDFC Endowment Assurance Plan, you can ensure that your family remainsfinancially independent, even if you are not around. You can ensure that they live a life ofrespect and dignity. Always.

HDFC UNIT LINKED ENDOWMENT

You have given your family the very best and there is no reason why they should not get thevery best in the future too. With HDFC Unit Linked Endowment, you can ensure that yourfamily remains financially independent, even if you are not around. You can ensure that they

live a life of respect and dignity Always.

HDFC UNIT LINKED ENDOWMENT PLUS

You have given your family the very best and there is no reason why they should not get thevery best in the future too. With HDFC Unit Linked Endowment Plus, you can ensure thatyour family remains financially independent, even if you are not around. You can ensure that



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they live a life of respect and dignity. Always.

HDFC Money Back Plan

You have always believed in living life on your own terms. So why let the changing realities

of everyday life overwhelm you and make your aspirations take a back seat? You can plannow to ensure that you have the necessary funds to meet your future financial needs.

HDFC CHILDREN'S PLAN

As a parent, your priority is your child's future and being able to meet your child's dreamsand aspirations.

Today, providing a good education, establishing a professional career or even a modestwedding is expensive. Costs are increasing fast. Just imagine how much you'll need whenyour child takes these important steps in life!

HDFC UNIT LINKED YOUNG STAR

As a parent, your priority is your children's future and being able to meet their dreams andaspirations. Today, providing a good education, establishing a professional career or even amodest wedding is expensive. Costs are rising fast. Just imagine how much you will needwhen your children take these important steps in life.

Plan today to ensure a bright future for your children. Start saving today with our HDFC UnitLinked Young Star so that your child is able to lead a life of respect and dignity with asecured financial future.

HDFC UNIT LINKED YOUNG STAR PLUS

As a parent, your priority is your children's future and being able to meet their dreams andaspirations. Today, providing a good education, establishing a professional career or even amodest wedding is expensive. Costs are rising fast. Just imagine how much you will needwhen your children take these important steps in life.

Plan today to ensure a bright future for your children. Start saving today with our HDFC UnitLinked Young Star Plus so that your child is able to lead a life of respect and dignity with asecured financial future.

.

Group Products:-

GROUP TERM INSURANCE PLAN



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The Group Term Insurance (GTI) plan meets this need and serves as an ideal wayfor companies to reinforce their bond with their employees. The sort of needs, you,as an employer need to cater to could be in form of:

• Employee benefits• Cover for housing or vehicle loans given by you to your employees• A GTI cover for future service gratuity liability to be taken along with the HDFC

Group Unit Linked Plan

GROUP VARIABLE TERM INSURANCE

The Group Variable Term Insurance is a tailor made insurance policy for third partyinstitutions. HDFC Standard Life Insurance Company will offer life insurance to customer’s

of one or more of the third party’s specific products in order that in the event of their death,there will be a lump sum available.

The Group Variable Term Insurance:

• On death, will pay a lump sum known as a sum assured. The sum assured variesover time in order that the customer receives the cover that they need

• Is a group policy

• Has no lengthy underwriting procedure

• Is simple to administer

GROUP UNIT LINKED PLAN Gratuity Schemes

Most employers have a statutory obligation to pay a gratuity to its employees on termination ofemployment. This gratuity is in the form of a one-off payment made on termination ofemployment. It depends on salary and number of years of service, so will therefore increasewith time. The HDFC Group Unit Linked plan is a new and innovative unit-linked plan, whichoffer employers and gratuity scheme trustees a flexible and cost effective way to fund thisgratuity liability. The plan helps a corporate by:

• Building a fund systematically, which will be used to meet your future gratuityliability

• Providing the opportunity to maximise investment returns and thus provide

the benefit in a cost-effective manner

One factor that helps you to maximise the investment returns is low charges. Ourcharges are the lowest in the industry and therefore can improve your long-term returns.

GROUP UNIT LINKED PLAN Superannuation Schemes

Many organisations realise that the statutory requirement benefits are not sufficient for their



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trusted employees to continue enjoying their quality of life after they retire. The HDFC GroupUnit Linked Plan is a great way for an employer to show his employees that he not only takescare of them while in service, but has also ensured that they can lead a comfortable life afterretirement.

The HDFC Group Unit Linked plan is also a great employee retention and motivation tool thathelps employers to fund their employees’ post-retirement needs in a systematic, tax-efficientand cost-effective manner. Moreover, as a unit-linked plan, it gives you tremendous flexibilityand freedom to customise individual retirement funds for your employees based on theirappetite for risk and the stage of life they are in.

GROUP UNIT LINKED PLAN Leave Encashment Schemes

Many employers provide their employees with the option of encashing their leave to their credit

at the time of retirement or resignation. Accounting Standard 15 requires that an actuarialvaluation of a company leave encashment liability be carried out and reflected in the books ofaccounts. The HDFC Group Unit Linked Plan is an innovative plan, which offers employers aflexible and cost effective way to fund this Leave Encashment liability. The plan helps anorganisation by:

• Creating a fund that can be built up to meet your future leave encashment liability• Providing the opportunity to maximise investment returns and thus provide the

benefit in a cost-effective manner

One factor that helps maximise investment returns is low charges. Our fund managementcharges are the lowest in the industry today and therefore can improve your long-term returns.



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Objectives of the study:

To make people more familiar with the Life Insurance Industry and raise awareness of HDFCStandard life.

• To give a general overview of the Life Insurance & Pensions policies being provided byHDFC Standard life.

• To make people realize that apart from being a tool for covering future risks anduncertainties, insurance is also a useful saving and tax saving alternative.

• To create awareness of the business opportunity that HDFC Standard life provides toindividuals.

• To give an overview of the various benefits of being an insurance FC with HDFCStandard life.

• To go forward with the formalities incase the candidate is interested in becoming anFinancial consultant and to take references of other potential individuals who may beinterested in the same.

Limitations:

• A certain territory was assigned to each student depending upon their respectivebranches.

• Even though the minimum eligibility for being an Insurance advisor is that the candidatemust be H.S.C. passed, we were told only to look for people who were at leastgraduates.

• In the course of the project we were told to avoid individuals who had a full time job asthey wouldn’t be able to put in the required time and effort required from an advisor.

• We were told to look for candidates who have been a resident of Mumbai.



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Research Methodology:

Method of study -

Data Collection

Primary Data Secondary Data

Internet Books Magazines

Data for the study was collected by the survey method with the accessoriesquestionnaire keeping in mind the objectives. Thus primary data was for attainingthe objectives while the secondary data were relied to write the literature

Primary data:

Primary data can be obtained through observation or through direct communication withrespondents or through personal interaction. There are several method of collecting primarydata, through survey & descriptive research.

They are:

Direct Personal Method

Indirect Oral Investigator

One to One Instruction Method

Secondary Data:

Secondary data means, the data that has already collected and analyzed by someone else.Various sources of secondary data are as follows:

Books



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Magazines

Internet

Newspapers

Reports

Projects etc.

Data Analysis and Interpretation:

Target Marketing:

In the initial training sessions we were asked to identify different segments of potential peoplewho could benefit the company most as advisors. Therefore after some thought and research I

came to the conclusion that ambitious people who had at least 1-2 hours to spare in a day andwouldn’t mind an extra income would be perfect candidates for the job. Hence, the segmentsthat I surveyed and targeted are given in the following pie chart:

Preferred investments for tax planning:

When the respondents were asked what was the best medium to invest in for tax planning themajority replied Mutual Funds and Insurance. Incidentally almost all life insurance companieshave come up with ‘ULIP Plans’ i.e. Unit Link Plans which are quite similar to Mutual Funds asthe premium paid in this case is converted into units and is managed by a separate PortfolioManager within the company. Like Mutual Funds, ULIP gives the customer the alternative toinvest in an Equity Fund or Gilt Fund or Debt Fund and so on and so forth. The preference ofthe respondents are illustrated in the following figure:



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Preference of respondents for tax planning

Benefits of a CONSULTANT:

There are four major benefits that an individual gets out of being an advisor. They are – Flexibility, Career Progression, Money and R&R. An advisor need not put in a fixed amount oftime or effort towards selling insurance policies. It is completely upon his discretion the amount

of time he wishes to put in, the amount of clients he would like to convert or which part of theday he feels is suitable for him to work. Another benefit of being an consultant is that in casethey want to pursue a career in the insurance sector they need to complete a certain target andgo through some basic assessment and thereafter can become an Unit Manager handling ateam of advisors. The third and the obvious one is the

monetary benefit. The commission provided by HDFC Standard life to its consultants rangesfrom 2% to 35% depending on different policies. Therefore the earning potential is really goodand there is no limit as such to the amount one can earn by advising people to take upinsurance policies. The fourth and the last benefit is Rewards & Recognition. There are variousrewards given by the company to the advisors such as bonuses, foreign trips, cars, consumerdurables etc. depending upon their respective performances and their activations. Apart from

that it’s a privilege to be associated to a reputed organization such as HDFC Standard life.However, when surveyed majority of the people felt that the major benefits of an consultantwere the monetary benefit followed by flexibility.



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Benefits of being a consultant as perceived by the respondent

Preferred Life Insurance company:

Prior to 2000, there were no private Life Insurance companies. LIC was the only major player inthe field and people didn’t have much option and therefore the brand positioning of LIC in theminds of people was really good and in fact even today despite of so much competition peoplestill prefer being associated to LIC over other competitors, one major reason being, LIC is agovernment owned company. But in the recent past, with LIC losing its market share graduallyto the private insurance companies, people have started realizing that the private companiescould be better than LIC. The following bar diagram illustrates the preference of the surveyedrespondents in being associated with an insurance company:

0%5%

10%

15%

20%

25%

30%

35%

40%

Series1

LIC ICICI

Pru

BAJAJ

Allianz

HDFC

Std

Life

TATA

Aig

SBI

Life

Life Insurance Companies



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Summary of findings: Creating awareness of HDFC Standard life as one of the major Life Insurance & Pensionsplayer was one of our major objectives. While meeting the people I found that almost all of therespondents except the rare one or two were quite aware of the company however most of them

were not quite aware of the different products of the company. When told about the wholeconcept of insurance and how it could be a substitute to the conventional methods of savings,most were impressed and on being made to realize how it was a great tax-saving tool, moststarted considering their insurance needs. Most of the respondents thought that insurance wasa must for every working individual. However majority of the individuals still felt that MutualFunds was the best method of savings and tax-planning which made it even more easier for meto introduce the ULIP Plans which were almost similar to Mutual Funds and also doubled as aninsurance policy. I found that most of the individuals who hadn’t been insured was due the lackof knowledge of the benefits of insurance.When I asked the respondents if they were interested in having an additional source of income,the obvious answer was ‘yes’. This set the platform to introduce the business opportunity thatHDFC Standard life was providing to its FC’s and to make people aware of the various benefits

of being an FC for HDFC Standard life. Most people were aware of the monetary benefits thatan insurance advisor got but most were not aware of the various other benefits such asFlexibility, R&R, Career Progression and that they need not necessarily have their owninfrastructure for commencing the business and the fact that they could use the HDFC Standardlife infrastructure anytime as per their convenience.Most found the opportunity interesting, however, the majority of them were not really keen ongrabbing it. When asked why, most answered that they didn’t havethe time. Some answered that would rather put in their time and efforts towards something thatcould give them a fixed income rather than commissions whereas some thought being called aninsurance agent was degrading for their image. Amongst those who were interested in theopportunity, majority said they would rather be associated with LIC as it was a governmentowned company and that they trusted LIC more than any private players in the industry. Some

were not interested as they said they did not have enough time for the 18 days training as mademandatory by IRDA. Out of the 49 people I surveyed I was successful in converting 13individuals as FC for HDFC Standard life out of which four were software developing engineer’sand one was HR executive in well reputed company, which was an achievement in itself.

Summary of suggestions:

HDFC Standard life came up with a plan deciding to waive off the training fees and therefore,they charge only Rs 600 as of IRDA registration charge to wannabe Financial consultants. Postthis decision, very few people opted to become consultants as they were reluctant to paying as

most of the companies today do not charge any fees. Therefore I strongly suggest that thetraining fees should be waived off permanently.

Another important thing that I would like to suggest is that a lot of effort should be put intocreating awareness of the various benefits that an consultant gets because unfortunately anegative impression has been created of the term ‘insurance agent’ in the minds of peoplewhich has to be rectified.



Bibliography:

1. Basic Marketing – McCarthy2. “Research and Market Report on Insurance Outsourcing Focuses on India”-

www.insurancejournal.com.3. http://www.hdfcstandardlife.com4. http://in.insurance.yahoo.com 5. www.licindia.com 6. www.ciionline.org 7. www.indiacore.com/insurance.html 8. www.myiris.com/insurance 9. www.indiainfoline.com/news/ 10. www.insuranceinstituteofindia.com 11. www.wikipedia.com

12. www.moneycontrol.com

http://in.insurance.yahoo.com/

http://www.licindia.com/

http://www.ciionline.org/

http://www.indiacore.com/insurance.html

http://www.myiris.com/insurance

http://www.indiainfoline.com/news/

http://www.insuranceinstituteofindia.com/

http://www.wikipedia.com/

http://www.moneycontrol.com/

http://www.moneycontrol.com/

http://www.wikipedia.com/

http://www.insuranceinstituteofindia.com/

http://www.indiainfoline.com/news/

http://www.myiris.com/insurance

http://www.indiacore.com/insurance.html

http://www.ciionline.org/

http://www.licindia.com/

http://in.insurance.yahoo.com/

Mritunjay Kr Project

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Transcript of Mritunjay Kr Project