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A
PROJECT REPORT ON
RECRUITMENT OF FINANCIAL CONSULTANTS
WITH
HDFC STANDARD LIFE INSURANCE LTD.
SUBMITTED TO:
RAJASYHAN TECHNICAL UNIVERSITY,KOTA
In the partial fulfillment of
Master of Business Administration
(2007-09)
SUBMITED BY:
HARI SINGH
DEEPSHIKHA COLLEGE OF
TECHNICAL EDUCATION
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ACKNOWLEDGEMENT
I take great pleasure to thank and acknowledgement the permission
and allowance by Mr. AJAY SHARMA, CHANNEL
DEVELOPEMENT MANAGER, HDFC STANDARD LIFE
INSURANCE, JAIPUR REGION and his help and inspiration
provided. I extend a whole hearted thanks to Mr. SUMER SINGH
under whom I worked and learned a lot and for enlightening me with
their knowledge and experience to grow with the corporate working.
Their guidance at every stage of the Project enabled me to
successfully complete this project which otherwise would not have
been possible without their constant encouragement and motivation,
without the support it was not possible for me to complete the report
with fullest endeavour.
I would also like to extend my thanks to my College FacultyMembers Mr. Satish Sharma all my colleagues in the company who
supported me in carry out my operation successfully and generously
and provided me vital information/ training regarding the my project
objective.
HARI SINGH
MBA III
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PREFACE
I had undergone a practical training under HDFC STANDARD
LIFE INSURANCE, JAIPUR REGION. It was a good exposure
for me to undergo training in such a company to get the knowledge
and experience regarding life insurance and recruitment of capable
of life insurance advisors.
Summer training is one of the major experiencing component of the
knowledge, gain of relevant of information with respect to marketing
and dealing with situations in a professional course like M.B.A.
where a professional person faces a problem in a field. I was able to
get familiarized with the customer relationship and got to know how
a company measures to resolve their grievances and service them to
the maximum for future prospect and success. Field component like
survey, generation of questionnaire with respect to marketing helped
me a lot and would be a great support in future.
It is good to have enthusiasm but it is essential to have training.
Training can be in all way of life. Thus I would say that this
training was beneficial educative & good exposure to me, which will
certainly help in my near future. This project was designed with
respect to this company. The project made me to get the enhanced
knowledge regarding life insurance concept and the process of
recruiting of financial consultant.
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Table of contents
S. No. Particulars Pages
1. INTRODUCTION 5-14
2. LIFE INSURANCE 15-20
3. LIFE INSURANCE INDUSTRY 21-26
4. ABOUT THE COMPANY HDFC STANDARD LIFE 27-36
5. PRODUCTS 37-46
6. LIFE INSURANCE IN INDIA 47-53
7. LIFE INSURANCE AGENT & FINANCIAL
CONSULTANT RECRUITMENT
54-59
8. RESEARCH METHODOLOGY 60-64
9. MARKET SURVEY 65-75
10. SWOT ANALYSIS 76-79
11. CONCLUSION 80-81
12. RECOMMENDATIONS 82-84
13. BIBLIOGRAPHY 85-86
14. QUESTIONNAIRE 87-91
15. GLOSSARY 92-109
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*****
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INTRODUCTION - INSURANCE
The insurance sector was opened up in the year 1999 facilitating the
entry of private players into the industry. With an annual growth rate
of 24.31 percent and the largest number of life insurance policies in
force, the potential of the Indian insurance industry is huge. The year
1999 saw a revolution in the Indian insurance sector, as major
structural changes took place with the ending of Government
monopoly and the passage of the Insurance Regulatory and
Development Authority (IRDA) Bill, lifting entry restrictions for
private players and allowing foreign players to enter the market with
some limits on direct foreign ownership.
According to the CSO, the insurance and banking services
contribution to the countrys GDP is 7.1 percent out of which the
gross premium collection forms a significant part. Life insurance
penetration in India was less than 1 percent till 1990-91. During the
90s, it was between 1 and 2 percent and from 2001 it was over 2
percent. In 2003-04 it was 2.4 percent.
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The impetus for increase is due to the active role played by IRDA in
licensing private players and taking positive steps in increasing the
insurance awareness among the people. Besides, the insurance
companies in general and private insurance companies in particular,
are reaching out to untapped potential in rural areas with aggressive
campaigns.
Innovative products, smart marketing, and aggressive distribution
have enabled fledgling private insurance companies to sign up Indian
customers faster than anyone expected. Life insurance is viewed as a
tax saving device. People are now turning to the private sector for
providing them with new products and greater variety for their
choice. The improvement in FDI flows reflected the impact of recent
initiatives aimed at creating an enabling environment for FDI and for
encouraging infusion of new technologies and management
practices. The Governments proposal to increase the FDI cap in the
insurance sector from the present 26 percent to 49 percent has raised
expectations among the international insurance companies.
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Insurance Defined:
Insurance is a contract in which sum of money is paid to the
assured in consideration of insurers incurring risk of paying a large
sum upon a given contingency. -- Justice Tindall
Insurance is a contract by which one party for a compensation
called in the premium assumes particular risks of the other party
and promises to pay to him or his nominee a certain sum of money
on a specified contingency. -- E.W.Fitterson
Insurance may be described as social device whereby a large group
of individuals, through a system of equitable contribution, may
reduce certain measurable risk of economic loss common to all
members of the group. --Encyclopedia Britannica
The above definitions clearly shows that insurance is a cooperative
device to spread the loss caused by a particular risk over a member
of persons who are exposed to it and who agree to insure themselves
against risk. Insurance does not eliminate risk but only reduces the
financial burden, which may be very heavy.
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Evolution of insurance
In the days of yore insurance was in its crude form and was
cooperative and voluntary in nature. When, where and how it
originated is still a matter of research in one way or the other was
prevalent in olden days. We can trace its history from the evolution
society from hunting stage to the modern industrial age. A word
YAGCHHEM occurs in the worlds most ancient Hindu Scripture
Rig Veda.
The word YAGCHHEM means insurance. It clearly indicated that
about four thousand years ago insurance was prevalent in its crude
form. It was cooperative and voluntary in nature. People formed
different groups of organizations to share the loss among themselves
incase of a particular risk. Each member contributed some amount to
a common fund to meet the unforeseen losses. Sometimes they also
contributed equally to compensate person as and when he suffered a
loss. Traces of insurance in the ancient world are also found in the
form of marino trade loans or carriers contracts which included an
element of insurance.
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Evidence is on records that arrangements embodying the idea of
insurance were made in Babylonia and India at quite an early period.
References were made to the concept of insurance in Manus code
Manu Smrity. It was akin to Yagakshemo of Rigveda in which
the well being and security of the community was aimed at.
However, there is no evidence that insurance in its present farm was
practiced prior to twelfth century.
The Nature Of Insurance
The insurance has the following characteristics which are observed
in cases of life, marine, fire and general insurance.
1. Sharing of risks: Insurance is a cooperative device to share the
financial losses which might befall on an individual or his facility
on the occurrence of specified event such as sudden death of the
bread winner, marine perils in marine insurance, fire in the fire
insurance and theft insurance etc. in the case of general insurance.
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2. It is a cooperative device: A large number of persons agree to
share the loss arising sue to a particular risk. Thus, insurance is a
cooperative device.
3. Value of risk: The risk is evaluated before insuring to charge the
amount of share called premium.
4. Payment made at contingency: The payment is made at a
certain contingency insured. The Contingency may be death, fire,
marine perils etc.
5. Amount of payment: The amount of payment depends upon
policy insured.
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Functions of Insurance
A) Primary Functions
1. Insurance provides certainty: Insurance provide certainty of
payments at the uncertainty of losses. The element of uncertainty
is reduced by better planning and administration.
2. Insurance provides protection. The risk will occur or not, when
will occur and how much loss will be there. There are
uncertainties of happening of time and amount of losses. The
main function of the insurance is to provide protection against the
losses.
3. Risk sharing: Risk is uncertain and therefore, the loss arising
from the risk is also uncertain. All business concern faces the
problem of the risk and if the concern is big enough the handling
of risk becomes a specialized function. Insurance, as a device is
the outcome of the existence of various risks in our day to day
life. It spreads the whole losses over a large number of persons
who are exposed by a particular risk.
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B. Secondary Functions
1. Prevention of loss: Prevention is always better than cure.
Prevention is by far the best solution to the problem of risk. It is
more effective and cheapest method to avoid the unfortunate
consequence. But sometimes prevention is not always possible
and Effective.
2. It provides capital: It provides the capital to the society. For plan
development of country there is a great need for huge amount of
capital. Now days, the insurance companies are rendering
positive help in the development of trade, commerce and industry
of the country.
3. It improves efficiency: Achievement of goals, it improves not
only his efficiency of the masses is also advanced. The insurance
eliminates worries and miseries of losses as death and destruction
of property care free person can devote his energies for better.
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4. It ensures the welfare of society: Insurance is a saga of service
and security to thee society. Security of the life and property
given by insurance bring peace of mind to the insured. The
investment in LIC in welfare schemes like electricity, housing,
water supply, agro industry estates are able to solve many
problems in India.
5. It helps in economic progress: Insurance provides an initiative
to work hard for the betterment of the masses. Life insurance
involves the element of saving investment through small savings.
And which has been growing in recent yrs at an annual rate of
about Rs. 400 crs, life insurance is not a mere business
organization, it has nobler welfare responsibilities in the
development of the economy.
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*****
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LIFE INSURANCE
Definition
The life insurance contract embodies an agreement in which broadly
stated, the insurer undertakes to pay a stipulated sum upon the death
of the insurer to a designated beneficiary. -- J.H.MAGEE
Life insurance contract may be defined whereby the insurer, in
consideration of premium paid either in lumpsum installments,
undertakes to pay an annuity on the death of the insured of a certain
number of years. -- R.S.SHARMA
A contract of life assurance is that in which one party agrees to pay
a given sum on the happening of a particular event contingent upon
the duration of human life in consideration of immediate payment of
a smaller sum by another. BUNYONS LAW OF LIFE INSURANCE
Some outstanding advantages of life insurance
1.) It is superior to an ordinary saving plan: this is so because unlike
other saving plans, it offers full protection against risk of death.
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2.) Insurance encourages and enforces thrift : many people may not
have the will power to continue a long term saving plan which they
may formulate regular payments in face of money other uses to
which their limited income could be put.
3.) Easy installments and protections against creditors: the proceeds
of a life insurance policy can be protected against the claims of the
creditors of life assured by affection a valid assignment of the
policies.
4.) Tax relief: the income tax act exempts from tax that part of an
individuals income which is devoted to payment of life insurance
premium.
5.) Estate duty: life insurance is the most practicable way to ensure
definite payment on ones death without having resort to conversion
of realizable asset at a loss.
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Why Life Insurance
?
Life Insurance has come a long way from the earlier days when it
was originally conceived as a risk covering medium for short periods
of time, covering temporary risk situations, such as sea voyages. As
life insurance became more established, it was realized what a useful
tool it was for a number of situations, including -
a) Temporary needs / threats: The original purpose of life
insurance remains an important element, namely providing for
replacement of income on death etc.
b) Regular Savings: Providing for one's family and oneself, as a
medium to long term exercise (through a series of regular payment
of premiums). This has become more relevant in recent times as
people seek financial independence for their family.
c) Investment: Put simply, the building up of savings while
safeguarding it from the ravages of inflation. Unlike regular saving
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products, investment products are traditionally lump sum
investments, where the individual makes a one off payment.
d) Retirement: Provision for later years becomes increasingly
necessary, especially in a changing cultural and social environment.
One can buy a suitable insurance policy, which will provide
periodical payments in one's old age.
Let us take an example to understand the need for insurance:
Mr. Pranay is 45 years of age and self-employed. His wife Nandini,
who is a housewife, looks after their two children aged 3 and 7 years.
They stay in a rented accommodation, where the rent is 15,000
rupees per month. Mr. Atul has taken up a loan of Rs. 2 lakh. His
monthly earnings on average are 40,000 rupees. Mr. Atul passes
away in an unfortunate road accident. What are some of the financial
implications of his death on his family? There may be several
financial implications on his family. Some of these are:
a) The monthly income, previously provided by Mr. Atul would stop.
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b) His wife and children may have to seek financial assistance from
other relatives.
c) His wife may not have enough money to pay back the loan of Rs.
2 lakhs.
d) The family may have to move into a cheaper accommodation.
e) His widow may have to take up work to earn money.
f) The education of his children may suffer.
This simple example illustrates the impact premature death can have
on a family, where the main earner has no life cover. Had Mr. Atul
taken life cover, his family would not have faced such hardships in
the event of his unfortunate death. A simple life insurance policy
could have provided Mr. Atul's family with a lump sum that could
have been invested to provide an income equal to all or part of his
income.
In simple words, insurance protects against untimely losses.
Insurance has been found useful in the lives of persons both in the
short term and long term. Short term needs like sudden medical costs
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and long term needs like marriage expenses etc can be met with
using life insurance.
*****
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INSURANCE INDUSTRY
India Insurance Industry: - New Avenues For Growth
With an annual growth rate of 15-20% and the largest number of life
insurance policies in force, the potential of the Indian insurance
industry is huge. Total value of the Indian insurance market (2004-
05) is estimated at Rs.450 billion (US$10 billion). According to
government sources, the insurance and banking services
contribution to the country's gross domestic product (GDP) is 7% out
of which the gross premium collection forms a significant part.
The funds available with the state-owned Life Insurance Corporation
(LIC) for investments are 8% of GDP. Till date, only 20% of the total
insurable population of India is covered under various life insurance
schemes, the penetration rates of health and other non-life insurances
in India is also well below the international level. These facts
indicate the of immense growth potential of the insurance sector.
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The year 1999 saw a revolution in the Indian insurance sector, as
major structural changes took place with the ending of government
monopoly and the passage of the Insurance Regulatory and
Development Authority (IRDA) Bill, lifting all entry restrictions for
private players and allowing foreign players to enter the market with
some limits on direct foreign ownership.
Though, the existing rule says that a foreign partner can hold 26%
equity in an insurance company, a proposal to increase this limit to
49% is pending with the government. Since opening up of the
insurance sector in 1999, foreign investments of Rs. 8.7 billion have
poured into the Indian market and 21 private companies have been
granted licenses.
Innovative products, smart marketing, and aggressive distribution
have enabled fledgling private insurance companies to sign up Indian
customers faster than anyone expected. Indians, who had always
seen life insurance as a tax saving device, are now suddenly turning
to the private sector and snapping up the new innovative products on
offer.
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The life insurance industry in India grew by an impressive 36%, with
premium income from new business at Rs. 253.43 billion during the
fiscal year 2004-2005, braving stiff competition from private
insurers. RNCOSs report, Indian Insurance Industry: New Avenues
for Growth 2012, finds that the market share of the state behemoth,
LIC, has clocked 21.87% growth in business at Rs.197.86 billion by
selling 2.4 billion new policies in 2004-05. But this was still not
enough to arrest the fall in its market share, as private players grew
by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29
billion in 2003-04.
Though the total volume of LIC's business increased in the last fiscal
year (2004-2005) compared to the previous one, its market share
came down from 87.04 to 78.07%. The 14 private insurers increased
their market share from about 13% to about 22% in a year's time.
The figures for the first two months of the fiscal year 2005-06 also
speak of the growing share of the private insurers. The share of LIC
for this period has further come down to 75 percent, while the
private players have grabbed over 24 percent.
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There are presently 12 general insurance companies with four public
sector companies and eight private insurers. According to estimates,
private insurance companies collectively have a 10% share of the
non-life insurance market.
Though the focus of this market research report is on the potential
growth on the Indian Insurance Sector, it also talks about the market
size, market segmentation, and key developments in the market after
1999. The report gives an instant overview of the Indian non-life
insurance market, and covers fire, marine, and other non-life
insurance. The data is supplied in both graphical and tabular format
for ease of interpretation and analysis. This report also provides
company profiles of the major private insurance companies.
Report Highlights:
Gains of Liberalization in Indian Insurance Sector
Indian Insurance Market Segmentation By Products
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Size of the Market and Market Share Of Life Insurers, In INR
(crore)
Market Share Of Non-Life Insurers
Forecast of Life Insurance Growth Up to 2012
Forecast of Non-Life Insurance Growth Up to 2012
Market Revenue of Both Public and Private Insurers
Policies and Measures Taken By IRDA To Develop The
Insurance Market
Research and Development Activities
Regulation of insurance and reinsurance companies
Major Challenges That Indian Insurance Sector is Facing
Profiles of the Major Players
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*****
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HDFC STANDARD LIFE INSURANCE
The Introduction
Standard Life Insurance Company Ltd. is one of India's leading
private insurance companies, which offers a range of individual and
group insurance solutions. It is a joint venture between Housing
Development Finance Corporation Limited (HDFC Ltd.), India's
leading housing finance institution and a Group Company of the
Standard Life, UK. HDFC as on March 31, 2007 holds 81.9 per cent
of equity in the joint venture.
Our key strengths
Financial Expertise: As a joint venture of leading financial services
groups, HDFC Standard Life has the financial expertise required to
manage your long-term investments safely and efficiently.
Range of Solutions: We have a range of individual and group
solutions, which can be easily customised to specific needs. Our
group solutions have been designed to offer you complete flexibility
combined with a low charging structure.
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Track Record so far: Our gross premium income, for the year
ending March 31, 2007 stood at Rs. 2, 856 crores and new business
premium income at Rs. 1,624 crores. The company has covered over
8,77,000 lives year ending March 31, 2007
HDFC and Standard Life first came together for a possible joint
venture, to enter the Life Insurance market, in January 1995. It was
clear from the outset that both companies shared similar values and
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
the relationship.
The next three years were filled with uncertainty, due to changes in
government and ongoing delays in getting the IRDA (Insurance
Regulatory and Development authority) Act passed in parliament.
Despite this both companies remained firmly committed to the
venture. In October 1998, the joint venture agreement was renewed
and additional resource made available.
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Around this time Standard Life purchased 2% of Infrastructure
Development Finance Company 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
companies agreed the time was right to move the operation to the
next level. Therefore, in January 2000 an expert 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 HDFC Bank. In a further development
Standard Life agreed to participate in the Asset Management
Company promoted by HDFC to enter the mutual fund market.
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Promoters of HDFC Standard Life Insurance:
1. HDFC Limited
HDFC is Indias leading housing finance institution and has helped
build more than 23,00,000 houses since its incorporation in 1977. In
Financial Year 2003-04 its assets under management crossed Rs.
36,000 Cr. As at March 31, 2004, outstanding deposits stood at Rs.
7,840 crores. The depositor base now stands at around 1 million
depositors.
Rated AAA by CRISIL and ICRA for the 10th consecutive year
Stable and experienced management
High service standards
Awarded The Economic Times Corporate Citizen of the year
Award for its long-standing commitment to community
development.
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Presented the Dream Home award for the best housing finance
provider in 2004 at the third Annual Outlook Money Awards.
Standard Life Group (Standard Life plc and its subsidiaries)
The Standard Life group has been looking after the financial needs
of customers for over 180 years. It currently has a customer base of
around 7 million people who rely on the company for their
insurance, pension, investment, banking and health-care needs.
Its investment manager currently administers 125 billion in assets.
It is a leading pensions provider in the UK, and is rated by Standard
& Poor's as 'strong' with a rating of A+ and as 'good' with a rating
of A1 by Moody's Standard Life was awarded the 'Best Pension
Provider' in 2004, 2005 and 2006 at the Money Marketing Awards,
and it was voted a 5 star life and pensions provider at the Financial
Adviser Service Awards for the last 10 years running.
The '5 Star' accolade has also been awarded to Standard Life
Investments for the last 10 years, and to Standard Life Bank since its
inception in 1998. Standard Life Bank was awarded the 'Best
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Flexible Mortgage Lender' at the Mortgage Magazine Awards in
2006
Incorporation: Hdfc Standard Life Insurance Company Limited
The company was incorporated on 14th August 2000 under the name
of HDFC Standard Life Insurance Company Limited.
Our ambition from as far back as October 1995, was to be the first
private company to re-enter the life insurance market in India. On the
23rd of October 2000, this ambition was realised when HDFC
Standard Life was the only life company to be granted a certificate
of registration. HDFC are the main shareholders in HDFC Standard
Life, with 81.4%, while Standard Life owns 18.6%.
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 be the yardstick
by which all other insurance company's in India are measured.
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Our Mission
We aim 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, rather it 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
Our Values
1. SECURITY: Providing long term financial security to our policy
holders will be our constant endeavour. We will be do this by
offering life insurance and pension products.
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2. TRUST: We appreciate the trust placed by our policy holders in
us. Hence, we will aim to manage their investments very
carefully and live up to this trust.
3. INNOVATION: Recognizing the different needs of our
customers, we will be offering a range of innovative products to
meet these needs. Our mission is to be the best new life insurance
company in India and these are the values that will guide us in
this.
Board of Directors:-
1. Mr. Deepak S Parekh is the Chairman of the Company. He is also
the Executive Chairman of Housing Development Finance
Corporation Limited (HDFC Limited).
2. Mr. Keki M Mistry is currently the Managing Director of HDFC
Limited. Mr. Alexander M Crombie is the Group Chief Executive
of the Standard Life Group in March 2004.
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3. Ms. Marcia D Campbell is currently the Group Operations
Director in the Standard Life group and is responsible for Group
Operations, Asia Pacific Development, Strategy & Planning,
Corporate Responsibility and Shared Services Centre.
4. Mr. Keith N Skeoch is currently the Chief Executive in Standard
Life Investments Limited and is responsible for overseeing
Investment Process & Chief Executive Officer Function.
5. Mr. Gautam R Divan is a practising Chartered Accountant and is a
Fellow of the Institute of Chartered Accountants of India.
6. Mr. Ranjan Pant is a global Management Consultant advising
CEO/Boards on Strategy and Change Management.
7. Mr. Ravi Narain is the Managing Director & CEO of National
Stock Exchange of India Limited.
8. Mr. Deepak M Satwalekar is the Managing Director and CEO of
the Company.
9. Ms. Renu S. Karnad is the Executive director of HDFC Limited.
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*****
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PRODUCTS
At HDFC Standard Life, we offer a bouquet of insurance solutions to
meet every need. We cater to both, individuals as well as to
companies looking to provide benefits to their employees. This
section gives you details of all our products. We have incorporated
various downloadable forms and product details so that you can
make an informed choice about buying a policy.
For individuals, we have a range of protection, investment, pension
and savings plans that assist and nurture dreams apart from
providing protection. You can choose from a range of products to
suit your life-stage and needs.
For organisations we have a host of customised solutions that range
from Group Term Insurance, Gratuity, Leave Encashment and
Superannuation Products. These affordable plans apart from
providing long term value to the employees help in enhancing
goodwill of the company.
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Individual Products
We at HDFC Standard Life realise that not everyone has the same
kind of needs. Keeping this in 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 of mind at a small
price. Our Protection range includes our Term Assurance Plan &
Loan Cover Term Assurance Plan.
Investment Plans
Our Single Premium Whole Of Life plan is well suited to meet your
long term investment needs. We provide you with attractive long
term returns through regular bonuses.
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Pension Plans
Our Pension Plans help you secure your financial independence even
after retirement. Our Pension range includes our Personal Pension
Plan, Unit Linked Pension, Unit Linked Pension Plus
Savings Plans
Our Savings Plans offer you flexible options to build savings for
your future needs such as buying a dream home or fulfilling your
childrens immediate and future needs. Our Savings range includes
Endowment Assurance Plan, Unit Linked Endowment, Unit Linked
Endowment Plus, Money Back Plan, Childrens Plan, Unit Linked
Youngstar, Unit Linked Youngstar Plus .
Group Products
One-stop shop for employee-benefit solutions
HDFC Standard Life has the most comprehensive list of products for
progressive employers who wish to provide the best and most
innovative employee benefit solutions to their employees.
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We offer different products for different needs of employers ranging
from term insurance plans for pure protection to voluntary plans
such as superannuation and leave encashment. We now offer the
following group products to our esteemed corporate clients:
Group Term Insurance
Group Variable Term Insurance
Group Unit-Linked Plan
An investment solution that provides funding vehicle to manage
corpuses with Gratuity, Defined Benefit or Defined Contribution
Superannuation or Leave Encashment schemes of your company
Also suitable for other employee benefit schemes such as salary
saving schemes and wealth management schemes
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Social Products
Development Insurance Plan
Development Insurance plan is an insurance plan which provides life
cover to members of a Development Agency for a term of one year.
On the death of any member of the group insured during the year of
cover, a lump sum is paid to that members beneficiaries to help
meet some of the immediate financial needs following their loss.
Eligibility
Members of the development agency and their spouses with:
- Minimum age at the start of the policy 18 years last birthday
- Maximum age at the start of policy 50 years last birthday
Employees of the Development Agency are not eligible to join the
group. The group to be covered is only eligible if it contains more
than 500 members.
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Premium Payments
The premium to be paid will be quoted per member in the group and
will be the same for all members of the group. The premium can
only be paid by the Development Agency as a single lump sum that
includes all premiums for the group to be covered. Cover will not
start until the premium and all the member information in our
specified format has been received. The premium rate is Rs. 25 per
Rs. 10,000 of lump sum, per member.
Benefits
On the death of each member covered by the policy during the year
of cover a lump sum equal to the sum assured will be paid to their
beneficiaries or legal heirs. Where the death is as a result of an
accident, an additional lump sum will be paid equal to half the sum
assured. There are no benefits paid at the end of the year of cover
and there is no surrender value available at any time.
The role of the Development Agency
Due to the nature of the groups covered, HDFC Standard Life will be
passing certain administrative tasks onto the Development Agency.
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By passing on these tasks the premium charged can be lower. These
tasks would include:
Submission of member data in a specified computer format
Collection of premiums from group members
Recording changes in the details of group members
Disbursement of claim payments and the mortality rebate (if
any) to group members
These tasks would be in addition to the usual duties of a policyholder
such as:
Payment of premiums
Reporting of claims
Keeping policy holder information up to date
Training and support will be available to give guidance on how to
complete the tasks appropriately. Since these additional tasks will
impose a burden on the Development Agency, the Development
Agency may charge a Rs. 10 administration fee to their members.
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Prohibition of rebates
Section 41 of the Insurance Act, 1938 states
No person shall allow or offer to allow, either directly or indirectly,
as an inducement to any person to take out or renew or continue an
insurance in respect of any kind of risk relating to lives or property
in India, any rebate of the whole or part of the commission payable
or any rebate of the premium shown on the policy, nor shall any
person taking out or renewing or continuing a policy accept any
rebate, except such rebate as may be allowed in accordance with the
published prospectus or tables of the insurer If any person fails to
comply with sub regulation (previous point) above, he shall be liable
to payment of a fine which may extend to rupees five hundred
Tax Benefits
INCOME TAX SECTION GROSS ANNUAL SALARY HOW
MUCH TAX CAN YOU SAVE? HDFC STANDARD LIFE PLANS
Sec. 80C Across All income Slabs. Upto Rs. 33,990 saved on
investment of Rs. 1,00,000. All the life insurance plans.
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Sec. 80 CCC Across all income slabs. Upto Rs. 33,990 saved on
Investment of Rs.1,00,000. All the pension plans.
Sec. 80 D* Across all income slabs. Upto Rs. 3,399 saved on
Investment of Rs. 10,000. All the health insurance riders available
with the conventional plans.
TOTAL SAVINGS POSSIBLE ** Rs. 37,389
Rs. 33,990 under Sec. 80C and under Sec. 80 CCC , Rs.3,399 under
Sec. 80 D, calculated for a male with gross annual income exceeding
Rs. 10,00,000.
Sec. 10 (10)D Under Sec. 10(10D), the benefits you receive are
completely tax-free, subject to the conditions laid down therein.
* Applicable to premiums paid for Critical Illness Benefit,
Accelerated Sum Assured and Waiver of Premium Benefit.
** These calculations are illustrative and based on our understanding
of current tax legislations, which are subject to change.
Please contact your tax consultant for exact calculation of your tax
liabilities.
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*****
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LIFE INSURANCE IN INDIA
With such a large population and the untapped market area of this
population Insurance happens to be a very big opportunity in India.
Today it stands as a business growing at the rate of 15-20 per cent
annually. Together with banking services, it adds about 7 percent to
the countrys GDP .In spite of all this growth the statistics of the
penetration of the insurance in the country is very poor. Nearly 80%
of Indian populations are without Life insurance cover and the
Health insurance.
This is an indicator that growth potential for the insurance sector is
immense in India. It was due to this immense growth that the
regulations were introduced in the insurance sector and in
continuation Malhotra Committee was constituted by the
government in 1993 to examine the various aspects of the industry.
The key element of the reform process was Participation of overseas
insurance companies with 26% capital. Creating a more efficient and
competitive financial system suitable for the requirements of the
economy was the main idea behind this reform.
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Since then the insurance industry has gone through many sea
changes .The competition LIC started facing from these companies
were threatening to the existence of LIC. Since the liberalization of
the industry the insurance industry has never looked back and today
stand as the one of the most competitive and exploring industry in
India. The entry of the private players and the increased use of the
new distribution are in the limelight today. The use of new
distribution techniques and the IT tools has increased the scope of
the industry in the longer run.
A Brief History
The origin of insurance is very old .The time when we were not even
born; man has sought some sort of protection from the unpredictable
calamities of the nature. The basic urge in man to secure himself
against any form of risk and uncertainty led to the origin of
insurance. The insurance came to India from UK; with the
establishment of the Oriental Life insurance Corporation in 1818.
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The Indian life insurance company act 1912 was the first statutory
body that started to regulate the life insurance business in India. By
1956 about 154 Indian, 16 foreign and 75 provident firms were been
established in India. Then the central government took over these
companies and as a result the LIC was formed. Since then LIC has
worked towards spreading life insurance and building a wide
network across the length and the breath of the country. After the
liberalization the entrance of foreign players has added to the
competition in the market.
The General insurance business in India, on the other hand, can trace
its roots to the Triton Insurance Company Ltd., the first general
insurance company established in the year 1850 in Calcutta by the
British. In 1957 General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring fair
conduct and sound business practices. In 1972 The General
Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January
1973.
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It was after this that 107 insurers amalgamated and grouped into four
companies viz. the National Insurance Company Ltd., the New India
Assurance Company Ltd., the Oriental Insurance Company Ltd. and
the United India Insurance Company Ltd. GIC incorporated as a
company.
Present Scenario
The government of India liberalized the insurance sector in march
2000 with the passage of the Insurance Regulatory and Development
Authority (IRDA) bill. Lifting all entry restrictions for private
players to enter the market with some limits on direct foreign
ownership. premium rate of most general insurance. Policies come
under the purview of the government appointed Tariff Agenty
Committee. The opening up of the sector is likely to lead to greater
spread and deepening of insurance in India and this may also
restructuring and revitalizing of the public sector companies. A host
of private insurance companies operating in both life and non life
segments have started selling their insurance policies since 2001.
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Non life insurance market, In December 2000, the GIC subsidiaries
were restructured as independent insurance companies. At the same
time, GIC was converted into national re-insurer. In July2002,
Parliament passed a bill, delinking the four subsidiaries from GIC.
Presently there are 12 general insurance companies with 4 public
sector companies and 8 private insures. Although the public sector
companies still dominate the general insurance business, the private
insurance companies have a 10 percent share of the market, up from
4 percent in 2001. In the first half of 2002, the private companies
booked premium worth 6.34 billion. Most of the new entrants
reported losses in first yr of their operation in 2001.
Insurance costs constitute roughly around 1.2 2 % of the total
project costs. Under the existing norms, insurance premium
payments are treated as part of the fixed costs. Consequently they are
treated as pass through costs for tariff calculations.
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For projects costing up to Rs.1 billion, the tariff Agent committee
sets the premium rates, for projects between 1 billion and 15 billion,
the rates are set in keeping with committees guidelines; and projects
above 15 billion are subjected to reinsurance pricing. It is the last
segment that has a number of additional products and competitive
pricing. Insurance, like project finance, is extended by a consortium.
Normally one insurer takes the lead, shouldering about 40-50% of
the risk and receiving proportionate percentage of the premium.
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*****
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LIFE INSURANCE FINANCIAL CONSULTANT
Eligibility for an Insurance Agent
Every person who has cleared higher secondary examination can
become an Agent other than a minor or the person who is convicted
in any court for crime or any legal proceedings. Men and women
both can work as an Agent. A single person can be associated with
other life insurance companies.
A training program is there to train a person who wants to become an
Agent. There is 100 Hrs. training program which can be done either
with the physical appearance in the class room or the interest basis.
In the classroom training the trainee has to be physically present in
the training session. There are difference sessions of training
program. A trainee can attend any session according to his comfort.
The training period is of 25 days approx. If the trainee does not have
enough time to devote in the classroom training, then there is another
option left that is training on Internet.
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On the basis of Internet the trainee has provided a login number
along with the password through which he operated his login and
completed his training hrs. as convenient. Each and every hour pass
on the net under his login head will be count on his account. The test
for the training program is also on line. This is only procedure to be
an Insurance Agent.
Scope of Insurance Agent
In the present scenario the living standard is becoming higher and
higher everyday. Every person who has a family to survive wants to
provide his family each and every possible comfortable thing. He
wants his children to be a well dressed, to be higher qualified in a
well recognized school, colleges, institutes and wants his children to
go abroad for higher education. He wants to live a luxury life full of
pleasure.
To fulfill all of his needs he has to earn more and more. Any person
can be on a job at a time or can be on a business cant fulfill his
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pleasure requirement. There is a source through which he can make
money in a legal way that is insurance sector.
Becoming an insurance Agent provides him the legal source by
which he can earn money with his current status. It is the business in
which you deal with you personal contacts and can gain extra
income. This business needs low investment an not of much effort.
Its all depend on your social contacts and your skills to convince
people by helping them to suggest the product which suited them the
most.
As due to critical diseases, growing percentage of accident and fear
of financial crisis every one wants to secure his or her future.
Insurance sector plays a vital role in assuring people about their
future. As the scope of insurance enhancing, the need of an insurance
Agent who can guide the potential customers is growing.
Being an Insurance Agent of HDFC-STANDARD LIFE
INSURANCE provides a legal mean to earn money which protects a
person from earning through a illegal source which is harmful for
society as well as himself. For the youngsters it provides great
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platform to prove them. On the basis of their performance they can
be recruited as unit manager.
Its recruitment procedure is very easy. A person with high educating
and well experience can be recruited after a personal interview and
group discussion. After the training program is completed the
Insurance Agent has to appear for the pre-examination conducted by
IRDA. As he clear the exam he provides a license, which is the proof
of a legalized insurance Agent, which permits him to deal in his
insurance business.
RECRUITMENT PROCESS:
Steps in recruitment of Insurance Agents
Approach to the likely person
Appointment as per condition
Discuss the topic
Give the documents which includes:-
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1. Prospectus of the company
2. Brochure
3. Companys plan
4. Questionnaire
Collect the document after its completion
Forward it to project manager
Feed it in the computer as the database
Follow up as per conditions
Modes of Contact
Personal Contacts
References
Phone Calls
Guidance as per Unit Manager
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*****
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RESEARCH METHODOLOGY
Research: - is a process of collecting, analyzing, interpreting and
summarizing in a significant manner for the purpose of framing out
necessary conclusion and findings of data perceived and formulated
for deriving out the meaningful information. To carry our research
necessary telephonic calls needed to be done, suitable appointments
were to be fixed and therefore market survey is to be followed.
Objective of training: - To understand life insurance and
recruitment of capable life insurance advisors for growth prospects.
Process: Methodology or process involving in the Research followed
during the course of summer training is as follows: -
a) Collection of data : - This is an important aspect in formulating
the objective of research process where the data is collected via
two process: - i) Primary Sources and ii) Secondary sources
i) Primary sources: - Where the data is collected primarily by
interviewing and personal observation and is original in nature
and accurate to the considerable extent.
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ii) Secondary sources: -Where the data is obtained from some
published and printed sources such as newspaper, magazines,
websites and so on.
b) Analyzing of collected data : - The data collected through market
survey and published sources is then processed to obtained
necessary inferences and findings for the purpose of achieving the
objective as well as to derive necessary conclusion. A
considerable skill and knowledge is involved in analyzing the
data for the purpose of interpreting thereof.
c) Interpreting of data : - it is the significant step where the data
collected and analyzed is interpreted in the forms of graphs and
figures is depicted in the report called Project report.
d) Summarizing of data : - Thereby necessary summary is prepared
which is essential in the project report of the summer training
being done under an organization.
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Helpful Arms of Research Methodology: -
Questionnaire: - Questionnaire is a set or group of questions being
framed for the purpose of obtaining market perspective about a
particular aspect or topic.
There are two types questionnaire bing carried necessary for the
market survey of the summer training being undertaken and put for
the by the trainee to the sample people taken as a base for entire
population:
a) Open ended Questionnaire: - where the people (also called
respondents) are required freedom to present their views and
suggestions for the benefits and success of the organization.
b) Close ended questionnaire: - where the respondents is limited to
the choice of answer being delivered by the interviewer itself so
that quick and fast means of responses be derived out without
wasting much time. Here close ended questionnaire being
followed by me during the course of the summer training market
survey.
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Sampling: - Sampling is a process of obtaining a number of
individuals taken a base for the entire population since entire
population can not be asked about the necessary objective upon
which a questionnaire is put forth needed for the responses to be
derived for the purpose of generation of facts and customer view
point regarding their perception of particular product or services.
There are two type of sampling i) Random Sampling and ii)
Systematic sampling.
i) Random sampling: - Random sampling is a process of
selecting the sample size randomly and no choice or
preference to be made about the selection of respondents for
the market survey and questionnaire to be put forth against
him. Here, Random sampling being adopted by me.
ii) Systematic sampling: - it is a sampling where the limited
number of selected respondents is figured out based on some
criteria so that only those respondents can be asked for the
purpose of filing questionnaire.
Sample Size: - 105 respondents.
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*****
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MARKET SURVEY
LIFE INSURANCE IS:51
38
16
0
10
20
30
40
50
60
Protection ofhuman asset value
against uncertainty
Tax benefit device Both
CATEGORY
RESPONSES
From the survey it was drawn that life insurance is more a protection
of human asset value against uncertainty (conferred by 51
respondents) where it is a tax saving option (being accepted by 38
respondents). Life insurance is a service involving both these
prerequisites as depicted by remaining 16 respondents. The
following depicted this:
Protection of human asset value against uncertainty 51
Tax benefit device 38
Both 16
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78
27
0
10
20
30
40
50
60
70
80
NO.OF
RESPONDENTS
Yes No
RESPONSES
IS LIFE INSURANCE ESSENTIAL?
It has been observed and applied as a Life insurance is an essential
service and should be applicable to every one, as favored by
considerable 78 respondents where it is not essential to an extent by
27 respondents from the summer training project survey by putting
forth the set questionnaire.
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RESPONDENT'S QUALIFICATION
33%
10%
57%
Post graduate
Graduate
Senior secondary
When further enquired about the qualification of respondents, it was
found that 57% of the respondents were graduates, 33% were post
graduates and remaining 10% were of higher secondary out of total
105 respondents. Further depicted in the following tabular
representation : -
Post graduate 35Graduate 59
Senior secondary 11
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AGE QUALIFICAITON:
39%
20%
6%
35%
18-25 age group
25 35 age group
35 45 age group
Above 45 age group
Further, the age qualification for agency recruitment, it was found
that 39% respondents were belonging to 18 25 age group, 35%
were belonging to 25 35 age group where as 20% to 35 -45 age
group and remaining 6% to above 45 age group. Also depicted in the
following tale mentioned below: -
18-25 age group 41
25 35 age group 37
35 45 age group 21
Above 45 age group 6
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CAUSES OF DISSATISFACTION
17%
16%
10%23%
34%
Low employment
Low earning / income
Low status
Huge capital investment
All of the above
Respondents had different views about the dissatisfaction from the
present status of working or occupation. Dissatisfaction has been
depicted in a table below and graphically above:
Low employment 24
Low earning 3
6 Huge capital investment 17
Low status 18 All of the above
1
0
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ABOUT CAREER IN LIFE INSURANCE
59
46
0
10
20
30
40
5060
70
Yes NoRESPONSES
NO.OF
RESPONDENTS
When asked about whether they would like to know about a glorified
career in life insurance agency where they can fulfill any and every
desire of their life, 59 respondents agreed while 46 respondents said
No and will see later sometime in future. It has been depicted that
life insurance sector should be promoted at the wide extent as it
contribute to the economy as a useful source beneficial for both
nation as well as is citizens.
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86
19
0
20
40
60
80
100
NO.OF
RESPONDENTS
Yes No
RESPONSES
IS LIFE INSURANCE A NOBLE SERVICE?
Indeed Life insurance is a noble business as it provides a needful
financial support in the situation of fatal calamity where the family is
deprived by the fact to live in future and sustains their living. When
surveyed about life insurance as a noble service. 89 respodents
agreed and believe that insurance is a bettering service to human life
and society as a whole where as 19 respondents show disagreement.
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18
41
0
10
20
30
40
50
NO.OF
RESPONDENTS
Yes No
RESPONSES
ACCEPT LIFE INSURANCE AS A CAREER?
From the 59 respondents who agreed to know about the life
insurance as a career, 18 of them agreed to join HDFC Standard life
insurance for agency and come to the company fore more
information whereas 41 still took time to think and postponed to
some future date. People are highly dissatisfied from the earning,
status and living standard they are sustaining at present and would
definitely like to make some additional source of earning and for this
agency for life insurance would prove a boon.
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92
13
0
20
40
60
80
100
RESPONDENTS
Yes No
RESPONSES
IS LIFE INSURANCE INDUSTRY GROWING?
From all 105 respondents, 92 agreed that life insurance sector is a
growing concern and will grow at a rapid pace in future where as 13
took as a mere stagnant industry. Financial services are growing at a
tremendous pace as people are urging to make their investment in
lucrative opportunities and therefore life insurance sector is playing a
vital role in educating the people to make their investment which
could secure their future, needs and living despite some fatal
calamity that might or might not occur.
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AGREE WITH PRIVATISATION OF LIFE
INSURANCE?
74
31
0
10
20
30
40
50
60
70
80
Yes NoRESPONSES
RESPONDENTS
Among 74 respondents from 105 respondents favored the
privatization of the life insurance and perceive that the people of
India will know be more aware and knowledgeable with respect to
life insurance than that in the past 50 years with the working of LIC.
The myth of LIC since it is a Government concern is still continue to
prevail even though people have become more advanced and they
can invest their hard earned money after undertaking their pros nad
cons and company position in the market.
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*****
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SWOT ANALYSIS
STRENGTHS
1. HDFC Standard life insurance offers a range of individual and
group insurance solutions.
2. HDFC Standard Life has the financial expertise required to
manage your long-term investments safely and efficiently.
3. The company has covered over 8,77,000 lives year ending
March 31, 2007
4. Rated AAA by CRISIL and ICRA for the 10th consecutive
year for High service standards
5. Life insurance industry is a rapid growing and a nobler service
industry.
WEAKNESSES
1. LIC is prevalent and sustains even today a major source of
population.
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2. Low number of offices and network and number of life
insurance agents.
3. Lack of knowledge and expertise.
OPPORTUNTIIES
1. Life insurance has captured its mere15 20% growth therefore
a wide open untapped market is open to the company to
develop, grow and measure its success.
2. Still the number of companies are few and company has every
capabilities to grow and forward its performance areas to the
widest
THREATS
1. People are hesitant to invest and put their hard earned money
to the private life insurance company with the fear of getting
lost.
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2. Belief towards LIC as it is a government corporation phobia is
continue to surmount the people of India despite lots of flaws
and development and liberalization of life insurance.
3. Alternative financial services such as mutual fund, banking
services, share and securities also pose problems and threats to
the working of the life insurance sector.
4. Illiteracy and unemployment also pose threat.
5. Rising real estate industry also pose threat as people are
investing a bulk of their money over to that industry.
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*****
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CONCLUSION
Summer training is a best example for a trainee to learn about the
company working, corporate culture under which is operating the
functions. HDFC standard life insurance is a life insurance company
under which I gained a significant knowledge with respect to life
insurance, its importance and applicability as well as undertook the task
to recruit capable life insurance advisors which is conducive for the
company to grow with more prosperity. What I taught in the
management institute utilized them fruitfully leading to the best
advantage to the company and to the best experience for mine.
At far I can conclude that life insurance is a noble service which is
very important for every citizen to learn and realize its importance
because this is the only source which can remain the status where
one is with the family bread earner and ever when he is not.
With the growing financial sector I would like to opt this industry for
my future career advancement and as an opportunity to service this
industry.
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*****
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RECOMMENDATIONS
Following are suggestions made for the benefits and augmentation of
the sound working of the company HDFC Standard life insurance:
1. Need to train and develop life insurance agents with more
comprehensive knowledge and skills to counter every queries
of the customer.
2. It is suggested that company should not left any stone unturned
towards sound advertisement and promotional measures on
every section whether it is printed, media or or air via radio.
3. It is also suggested that skilled management graduates need to
be places on sales and marketing of financial servies who can
render their best ideas for the accomplishment of the company
goals and objectives to the best extent.
4. Also, care need to be taken that every customers grievance
should be met with delight whether before purchase or after
sales.
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5. There should be an expansion measure for more offices and
6. location of more centres for offices of the company be
established sop that company may grow its network.
7. there should more advanced measures are required to develop
to capture the needs of customer so that they can be inspire and
motivated to invest in the life insurance products being
provided by the HDFC Standard life insurance.
8. Life insurance Products should be made flexible so as to suit
every section of society.
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*****
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BIBLIOGRAPHY
Following are sources which helped me during my summer training:
BOOKS:
KOTHARI C.R.:Research Methodology Management, 3rd Edition
KOTLER PHILIP: Marketing Management 11th Revised edition ,2002
GUPTA S.P.: Statistical Methods Thirteen revised edition, 2001
MAGAZINES:
India Today
Business World
REFERENCES
Websites: -
www.hdfcinsurance.com
www.irdaindia.org
www.liccouncil.org
www.businessconnect.com
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*****
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QUESTIONNAIRE
Name: -
Age:-
Location: -
Occupation: -
Q.1. What do you mean by life insurance?
a) Protection of human asset value against uncertainty
b) A sum received after death
c) Both
Q.2. Do you think life insurance is essential for every one?
a) Yes
b) No
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e) All of the above
Q.6. Would you like to know about a career in life insurance
advisor ship where you can fulfill every desire of your life?
a) Yes
b) No
Q.7 Do you perceive that life insurance business is a noble
service oriented business?
a) Yes
b) No
Q.8. Would you like to become or opt for life insurance advisor
under esteemed and prospering organization HDFC Standard
Life insurance?
a) Yes
b) No
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Q.9. Do you agree that the life insurance business is a growing
industry and will grow and rapid pace in future?
a) Yes
b) No
Q.10. Do you favor the privatization of life insurance by the
Government where a significant number of companies now in
the market for life insurance to the customers with the alliance
of multinationals?
a) Yes
b) No
Suggestions: -
1.
2.
3.
4.
5.
VISHAL KUMAR SHRIVAISHNAV
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HDFC STANDARD LIFE INSURANCE
GLOSSARY
Application for insurance: This is the form on where you state
information and answer questions from the insurance company about
yourself and your history. This application along with information
from a medical examination, if taken, from your physicians, any
hospitals you may have visited and investigation are what's used by
the insurance company to decide whether or not to offer you life
insurance and at what rate.
Accident Benefit: A rider or An add-on with a life policy. It
compensates a policyholder in the event of death or injury by
accident
Annuity: An investment option that makes a series of regular
payments to an individual in exchange for a premium or a series of
premia.
Appreciate: To grow in value
Asset: Everything owned or due to a person
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Asset allocation: How your investments are spread across various
asset classes
Beneficiary: The person(s) named in the policy to receive the life
insurance proceeds upon the death of the insured.
Bond: It is like an IOU. By buying a bond you loan money to a
company, a municipality, state or the Central Government
Bonus: The amount paid as return in a with-profit policy. The
bonus, expressed as a percentage of the sum assured, is generally
declared every year. The amount is linked to the profits earned by the
insurer. Depending on the time of withdrawal, there are two kinds of
bonuses reversionary and cash. A reversionary bonus can be
encashed only on maturity of the policy; a cash bonus can be
withdrawn when declared
Budget: It is a tool used to monitor and control expenditures and
purchases.
Cash (Surrender) Value: The amount that is available in cash for
loans and that may be available for withdrawals in a whole life
insurance, universal life insurance or survivorship life insurance
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policy. Accessing Cash Surrender Value may reduce the death
benefit and may increase the risk of lapse.
Contestability, Contestable Clause: In insurance there is a clause,
which explains the conditions under which the insurer may contest
or void the life insurance policy. This contestability is for a limited
period of time, which in most states is two years. After that period
of time the insurance company cannot contest the policy.
Convertible Term Insurance: Term insurance which can be
exchanged (converted), at the option of the policyowner and without
evidence of insurability, for a whole life insurance policy or
universal life insurance policy.
Capital gains: Profit earned from the sale of stocks, mutual fund
units and real estate. Long-term capital gains arise from assets
owned for more than a year while short-term capital gains are made
from assets owned for less than a year.
Compound Interest: Interest computed on principal plus interest
accrued during the previous periods of the investment
Critical illness rider: A rider that provides a policyholder financial
protection in the event of a critical illness
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Death benefit: The amount payable to the nominee on death of the
policyholder. The amount paid is the sum assured plus benefits
applicable (if any) less outstanding loans.
Declining term cover: A type of pure life protection insurance policy
where the premia remain the same while the life coverage keeps
declining.
Disability / dismemberment benefit rider: A rider that provides for
additional cover in the event of disability, or dismemberment, of the
policy holder due to an accident
Dividends: Payments made by companies and mutual funds to
shareholders and unit-holders, respectively, from the income
generated by it.
Dividend yield: The percentage of dividend paid on a share to the
value of the share.
Emergency fund: The money, in the form of liquid investments in
bank savings accounts, 2-in-1 accounts and liquid funds to take care
of emergencies like a job loss not covered by insurance policies.
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Endowment plans: An insurance plan that provides a policyholder
risk cover and some return on investment.
Effective rate of interest: The true rate as against the nominal rate,
which may be incorrect.
Equity: The actual ownership interest in a specific asset or group of
assets
Financial planning: It covers the essential elements of a persons
financial affairs and is aimed at achieving a persons financial goals.
Fixed deposit: Funds placed on deposit in a bank, company or post
office at a fixed rate of interest.
Face Amount: The amount stated on the face of the policy that will
be paid in case of death. It does not include additional amounts
payable under accidental death or other special provisions, or
acquired through the application of policy dividends.
Fixed-income investment: Any investment that provides a stated
percentage of value, say 6 per cent, on the invested amount.
Group Insurance: An insurance policy taken out by employers to
provide life cover to their employees. Cheapest form of insurance
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Guaranteed additions: The amount paid as returns in assured-return
insurance plans. Guaranteed additions are expressed as a percentage
of the sum assured, with the amount payable being stated by the
insurer at the outset.
Grace Period: Life insurance premiums are due on a certain date, if
you are late in paying, policies allow a period of time where you can
still pay your premium and not lose your polcy. This is the grace
period. Most policies allow a grace period of 30 days from the due
date. After the grace period, if the premium is not paid, the policy
can lapse i.e. be terminated by the insurance company.
Insurability: Acceptability to the company of an applicant for
insurance. Where Insured or Insured Life: The person on whose life
the policy is issued.
Immediate annuity: An annuity that starts payments immediately
after, or soon after, the first premium is paid
Index fund: A scheme whose portfolio mirrors the progress of a
particular index, both in terms of composition and individual stock
weight ages. Its a passive investment option, as a funds
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performance will mimic the index concerned, barring a minor
tracking error.
Insured: The policyholder
Insurer: The insurance company
Investments: Assets like fixed deposits, post office savings, bonds
and stocks that are acquired for the purpose of earning a return
Investment risks: The risks that your investments face. These include
the risk of interest rate fluctuations impacting your debt investments
or the prices of equities going down.
Key person life insurance: When one has a key person in a business
without whom the business would suffer financially, key person life
insurance is often purchased which helps to reimburse the company
for the business loss incurred by the death of this person.
Level Premium (Life Insurance): Life insurance for which the
premium remains the same from year to year. The premium is
normally more than the actual cost of protection during the earlier
years of the policy and less than the actual cost in the later years. The
building of a reserve is a natural result of level premiums. The
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payments in the early years, together with the interest that is to be
earned, serves to balance out the underpayment of the later years.
Level term cover rider: A rider that increases the life cover in non-
term plans, up to a maximum of the sum assured on the base policy.
The rider offers death benefit along, and serves the need for extra
protection for a specified time period.
Life annuity: An annuity that makes regular income payments till the
policyholder is alive. On the policyholders death, all income
payments cease and there are no beneficiary benefits.
Liquidity: The quality of assets that can be easily and quickly
converted into cash without any, or significant, loss in value.
Loyalty additions: Additional benefits (other than guaranteed
additions/bonus) paid to policyholders on maturity of certain
investment-based insurance plans for staying on through its term.
Lock-in period: The period of time for which investments made in an
investment option cannot be withdrawn.
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Life Expectancy: The average number of years remaining for an
individual to live shown at each age based on long term studies by
insurance companies. These statistics as shown on charts called
mortality tables..
Life Insurance: A contract between an owner (often the insured
person) and a life insurance company that guarantees the payment of
a stated amount of money on the death of the insured.
Loan (Policy Loan):A loan made by a life insurance company from
its general funds to a policy owner on the security of the cash value
of a policy.
Market value: The monetary value an asset will fetch if sold in the
market today.
Maturity date: The date on which a policy term or fixed-income
investment like fixed deposit or bond comes to an end.
Money-back plans: A variant of endowment plans where survival
benefits are disbursed through the policy term, than paid lump sum.
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Net asset value (NAV): A schemes NAV is its net assets (the market
value of the financial securities it owns minus whatever it owes)
divided by the number of units it has issued.
Nominee: The person(s) nominated by the policyholder to receive
the policy benefits in the event of his death.
Participative plans: with-profit policy
Pension Plan: Investment products offered by insurance companies
and mutual funds that required the investor to make defined
contributions over regular periods, mostly every year. The
contributions are invested according to a pre-decided investment
plan. At retirement, the accumulation is paid out through regular
pay-out options.
Periodic payment investments: Investment options that have payouts
in fixed intervals. For example, money-back life insurance policies.
Permanent partial disability: Permanent loss of any body part, one
eye, one limb or one finger or a toe, or injuries that render the
insured in capable of earning an income from the date of the accident
onwards from any work, occupation or profession.
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Permanent total disability: Permanent loss of use of any two limbs,
or permanent and complete loss of sight in both eyes or any other
injury that renders the insured incapable of earning an income.
Policy: The legal document issued by an insurance company to a
policyholder that states the terms and conditions of an insurance
contract.
Policyholder: The person who buys an insurance policy as insured.
Policy term: period for which an insurance policy provides cover
Post office schemes: Also known as Small Savings schemes, they are
offered at post offices and carry the highest returns among fixed
income instruments. Government backing makes these instruments
like Public Provident Fund (PPF), National Savings Certificate
(NSC), Kisan Vikas Patra (KVP) and Post Office Monthly Income
Scheme (POMIS) risk-free
Premium: The amount paid by the insured to the insurer to buy cover
Recurring deposit: This is offered both in post office and banks
where you are required to contribute a fixed amount ever month. It is
a great tool for making small and regular savings.
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Revolving credit: A pre-established credit line, typically in a credit
card, against which a person may borrow to make purchases.
Riders: Additional covers that can be added to a life policy, for a cost
Sum assured: The amount of cover taken under a life insurance
policy, it is the minimum amount that will be paid on death of the
policyholder during the policy term.
Surrender value: The amount payable by the insurer to the owner of
an investment-based plan in case he opts to terminate the policy after
three years (the mandatory lock-in period) but before its maturity
date.
Survival benefits: The amount payable to a policyholder under an
investment-based plan if he survives the policy term.
Temporary total disability: An injury that results from an accident
and renders a person immobile or affects his earning capacity
temporarily.
Term plans: A plan that provides life cover for a specified period of
time, but no return on the premia paid
Terminal bonus: one-time bonus paid on maturity viawith-profit plan
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Vesting date: It is a date signifying a milestone in a policy. In
pension plans, it is the date from which the policyholder starts
receiving pension. In childrens plans, it is the date from which a
child becomes the owner of a policy taken out in his name
(generally, around his 18th birthday).
Waiver of premium rider: A rider that waives the premia payable on
the base policy and other riders in certain circumstances mostly
related to death, disability or injury. An important feature especially
for investment products such as childrens policies.
Wealth: The difference between the value of what you own (assets)
and what you owe (liabilities).
With-profit policy: An insurance plan in which the policyholder gets
a share of the insurers profits ( in the form of guaranteed additions /
bonus). Along with the sum assured.
Without-profit policy: An insurance plan in which the policyholder
does not get any share of the insurers profits
Whole-life plans: Class of life insurance policies that provide cover
through your lifetime.
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Mutual life insurance company: A life insurance company owned by
the policyholders. Policyholders of a mutual life insurance company
may participate in the "divisible surplus" of the li
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