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A

PROJECT REPORT

ON

“INVEST ASSURE - NEED FOR FINANCIAL PLANNING AND INVESTMENT IN

INSURANCE INDUSTRY”

FOR

TATA-AIG LIFE INSURANCE COMPANY LIMITED,

JODHPUR

SUBMITTED TO

FACULTY OF MANAGEMENT STUDIES

M.L.S. UNIVERSITY

UDAIPUR

BY

VIKAS

IN

PARTIAL FULFILLMENT OF

MASTER IN BUSINESS ADMINISTRATION

2006-2008

ACKNOWLEDGEMENT

1



My summer training at TATA-AIG LIFE INSURANCE CO. LTD. was a unique experience

for me. Instead of routine and mandatory exercise, it was a new field of acquiring

Knowledge.

I am very grateful to Mr. Rahul Heda(Business Associate), for suggesting and planning this

project work and his interest there of a valuable guidance during the research. I am also

thankful to Mr. Shekhar Thanvi (Agency Manager), Mr. Vinay Joshi (Agency Manager) and

Mr. Dinesh (Branch Head).

Special thanks to all faculty members of FMS, Udaipur.

At last I would like to thank all my friends and other persons for giving me the moral

support, which helped me a lot during the study.

(Vikas)

2



TABLE OF CONTENTS

Sr.No. Particular Page No.

1. CERTIFICATE

2. EXECUTIVE SUMMARY 4

3. OBJECTIVES 5

4. SCOPE OF THE STUDY 6

5. COMPANY PROFILE 7

6. PRODUCT PROFILE 15

7. THEORECITAL BACKGROUND 24

8. RESEARCH METHODOLOGY 44

9. DATA ANALYSIS 47

10. FINDINGS 58

11. LIMITATIONS 59

12. SUGGESTION & RECOMMENDATION 60

13. CONCLUSION 61

14. QUESTIONNAIRE 62

15 BIBLOGRAPHY 65

EXECUTIVE SUMMARY

3



This project was carried out for the study about “Invest Assure-Need for financial planning

and Investment in insurance industry” in Jodhpur region.

This project gave me the opportunity to work with the esteemed organization like TATA-AIG

Life Insurance Company Ltd, Jodhpur. It is a joint venture between TATA and AIG

(American International Group). The aim of our organization is to help customer in taking

important financial decision at every stage in life by offering them a wide range of innovative

life insurance products to make them financially independent.

The project has been done to achieve certain objectives which are as follows:

• To find & spread the need for financial planning among the employees of Manufacturing

& other employees in Jodhpur.

• To know the opinion of people regarding investment in insurance industry.

• To find out the market penetration of Tata-AIG life Insurance Company Ltd in Jodhpur.

For these purposes, I have selected exploratory research design, a preliminary study of the

subject matter or investigation of the phenomenon. And for data collection, both primary &

secondary source of data are used. The type of sampling I choose was cluster sampling as

it was suitable to my research. For conducting the survey I have prepared a structured

questionnaire of multiple choices with the help from my guide in the company.

I have conducted the survey in Sojati gate, Banad Road, Ratanada & in Sardarpura in

Jodhpur. The sample area was Jodhpur and the sample size consists of 150 respondents.

The response was overall positive regarding having insurance policies to cover the risk.

But, there were some negative responses, also. Most of the respondents knew the Tata-

AIG life Insurance Company Ltd but don’t know much about the products. Some of them

wanted to know about our products and showed their inclination towards buying the health

policy.

4



During the period of research, I have learned a lot but faced many difficulties, too. Killing

summers and inadequate public transportation system within the city and connectivity

problems added more difficulties.

Whatever knowledge & experience I had and what I have gained during the research, I

have made suggestions & recommendations and forwarded it to the company. I think my

suggestions will benefit the organization.

OBJECTIVES

This project has been undertaken to study about “Invest Assure - awareness of need for

financial planning & investment in insurance industry” among the employees of

manufacturing & other industries as well as self-employed persons in Jodhpur. The aim was

to find out the inroads made by the Tata-AIG in Jodhpur’s insurance market.

This study has the following objectives:-

1. To know the awareness regarding need for financial planning among the people in

Jodhpur only.

2. To know the opinion of people regarding the investment in insurance industry.

3. To find out the market penetration of Tata-AIG Life Insurance in Jodhpur city.

4. To spread the importance of life Insurance in the lives of the respondents.

5. To know the opinion of the people regarding investment in Tata-AIG Life Insurance

Company Ltd.

6. To find out which product/ products of Tata-AIG is preferred by the customers.

7. To find out the competitors of Tata-AIG in the Jodhpur.

SCOPE OF THE STUDY

5



Tata-AIG Life Insurance Company Ltd is one of the leading private companies in the area of

insurance. Insurance industry is one of the fastest growing industries in India as there is

less than 30% Indians are insured. So there is a very large market still left untapped.

My study will help the organization in some ways:

In getting the awareness level of people of Jodhpur regarding the need for financial

planning & investment in insurance industry, thus help it in devising proper marketing

strategy.

My organization will come to know about its competitors and their market share.

The company will be able to come to know about the respondents/ customers requirements

and what they want. Thus, it will help the organization to provide customized product to the

customers.

The study will help to acquire new potential customers.

Overall the scope of the work / study is to increase level of awareness of life

Insurance and find out potential market for TATA-AIG.

COMPANY PROFILE

6



INTRODUCTION TO AIG INC

American International Group, Inc. (AIG) is the world's leading international insurance and

financial services organization, with operations in approximately 130 countries and

jurisdiction. AIG member companies serve commercial, institutional and individual

customers through the most extensive world wide property-casualty and life insurance

networks of any insurer.

In the United States, AIG is the largest underwriter of commercial and industrial insurance

and is one of the top three life insurers. AIG's global businesses also include financial

services, retirement savings and asset management. AIG's financial services businesses

include aircraft leasing, financial products, trading and market making.

AIG's growing global consumer finance business is led in the United States by American

General Finance. AIG also has one of the largest U.S. retirement savings businesses

through AIG Sun America and AIG VALIC, and is a leader in asset management for the

individual and institutional markets, with specialized investment management capabilities in

equities, fixed income, alternative investments and real estate. AIG's common stock is listed

in the New York Stock Exchange, as well as the stock exchanges in London, Paris,

Switzerland and Tokyo.

2002 Consolidated AIG Operating Income by Major Business Segments

Business Publication’s Views About AIG

RANK PUBLICATION YEAR

1 Fortune: Property & Causalty Stock

Insurance Organization in Revenues and

Profits

2000

2 Fortune: Most Admired Property and

Casualty Insurance Company

2000

4 On Forbes Super 500 20039 On Fortune 500 2003AIG India

7



AIG India, the Indian arm of AIG, established its presence in India in 1994. AIG entered

India in 1945, prior to nationalization of the insurance sector, and had offices in several

Indian cities. On opening up of the insurance sector to private insurance company's in2000,

AIG and the Tata Group formed a Joint venture, Tata AIG.

AIG and its affiliate funds have invested approximately $450 m in private equity in India.

These direct investments have been made in telecommunication. And toll roads & bridges

in the e infrastructure sector. Besides, investments have also been made in the

manufacturing, technology, pharmaceuticals and retailing sector. AIG continues to look with

interest for made direct investment opportunities in these sectors and in new emerging

sectors like biotechnology, IT-enabled services etc.

INTRODUCTION TO TATA GROUP

The TATA group

The TATA group is India's best-known industrial group in the private sector with a turnover

of around US $ 10.4 billion (equivalent to 2.4% of India's GDP). It is India's most respected

private business group. With 219000 employees across 94 major companies, it is also

India's largest employer in the private sector.

Founded by Jamsetji Tata in the 1860s, the Tata group's early years were inspired by thespirit of nationalism. The Tata group pioneered several firsts in Indian industry: India's first

private sector steel mill, first private sector power utility, first luxury hotel chain and first

international airline, amongst others. In more recent times, the Tata group's pioneering

spirit continues to be showcased by companies like Tata Consultancy Services (TCS),

today Asia's largest software and services company, and Tata Engineering, the first car

maker in a developing country to design and produce a car from the ground up.

The 5 core values of the Group

8



The Tata group has always sought to be a value-driven organization. These values

continue to direct the group's growth and businesses. The five core TATA values

underpinning the way we do business are:

•

Integrity - We must conduct our business fairly, with honesty and transparency.Everything we do must stand the test of public scrutiny.

• Understanding - We must be caring, show respect, compassion and humanity for our

colleagues and customers around the world and always work for the benefit of India.

• Excellence: We must constantly strive to achieve the highest possible standards in our

day to day work and in the quality of the goods and services we provide.

• Unity: We must work cohesively with our colleagues across the group and with our

customers and partners around the world, building strong relationships based ontolerance, understanding and mutual cooperation.

• Responsibility: We must continue to be responsible, sensitive to the countries,

communities and environments in which we work, always ensuring that what comes

from the people goes back to the people many times over.

Business Sectors

The TATA Group operates business in seven key industry sectors. The chart below

illustrates how, in percentage terms, TATA companies in each of these sectors contribute to

the overall makeup of the group. The table follows the group's sector wise financial

performance.

Tata Group Figures

Year

Total

turnover

Sales

turnover

Value of

assets

Gross

block

PAT

Exports

2006-07

542270

521337

50927

434809

38926

130764

2005-06

494568

479999

496222

403647

34307

125738

2004-05

412906

400623

447341

352938

10982

65120

2003-04

386071

371535

417381

329014

9873

50170

Group Companies

There are 80 companies across seven sectors.

9



Some of them are:

Energy

• Tata Power

Services

• India hotels

• Tata Finance

• Tata TD Asset

•

Management

• Tata AIG Life insurance

• Tata AIG general Insurance

Materials

• Tata Steel

• Tata Metaliks

• Tata Refractories

Communication & IT

• Tata Telecom

• Tata Teleservices

• Tata Consultancy

• CMC

•

Engineering

• Tata motors

• Tata Cummins

• Telco

Consumer Products

• Tata Tea

• Tata Tetley

• Titan Industries

10



Chemicals

• Tata Chemicals

• Rallis IndiaThe Tata brand is recognized as the largest homegrown brand in India and the most

respected brand across consumer segments. The Tata Group's stable of brands also

include many national and some internationally renowned product and service brands,

including Tata Indica, Tata Indigo, Tata Safari, Taj (Hotels, Resorts & Palaces), Voltas, Tata

Tea, Tata Salt, Titan, Tanishq, Westside and the largest addition, Tata Indicom.

The Tata Group has always believed in returning wealth to the society it serves. Thus,

nearly two-third of the equity of Tata sons, the Tata Group's promoter company, is held by

philanthropic trusts which have created a host of national institutes in communitydevelopment, education and research centers, hospitals and scientific and cultural

establishments. The trusts also give substantial annual grants and endowments to

deserving individuals and institution in the areas of education, healthcare and social

upliftment.

By combining ethical values with business acumen, globalization with national interests and

core business with emerging ones, the Tata Group aims to be the largest and mostrespected global brand from India whilst fulfilling its long-standing commitment to improving

the quality of life of its stakeholders.

INTRODUCTION TO TATA AIG

The AIG Life Insurance Company Ltd and Tata AIG General Insurance Company Ltd.

(Collectively “Tata AIG”) are joint venture companies, formed from the Tata Group and

American International Group, Inc. (AIG). Tata AIG combines the strength and integrity of

the Tata Group with AIG’s international expertise and financial strength. Tata Group holds

74 percent stake in the two insurance ventures while AIG holds the balance 26 per cent

stake.

Tata AIG Life Insurance Company Ltd. provides insurance solutions to individuals and

corporates. Tata AIG Life Insurance Company was licensed to operate in India on February

11



12, 2001 and started operations on April 1, 2001. Tata AIG Life offers a broad array of life

insurance coverage to both individuals and groups, with various types of add-ons options

available on basic life products to give consumers flexibility and choice.

The non-life insurance arm, Tata AIG General Insurance Company, which started its

operations in India on January 22, 2001, offers the complete range of insurance for

automobile, home personal accident, travel, energy, marine, property and casualty, as well

as several specialized financial lines.

OUR VISION

To be the fastest growing Life Insurance Company in India, measured by annualized

premium growth, procuring persistent business, delivering first class customer

service, adding shareholder value by 2007.

Financial Results For the fiscal 05-06

Total Premium: Rs. 497 cr (96% growth)

First year Premium Income Rs. 292cr. Agent strength: 25,000

THE NEW ORDER

Premium income (in Rs. Cr)

Company First Quarter (2006 – 2007)

LIC 3,322.35

ICICI 334.12

Bajaj Allianz 185.52

HDFC 142.02

Tata AIG 85.52

Birla Sun Life 81.67

SBI Life 75.11

Max NY Life 63.99

12



Aviva life 50.53

Kotak Mahindra 33.95

ING 23.59

AMP 20.81

Met life 17.13

Sahara 1.08

Market Share of Different Insurance Company

Sr. No. Company Name Market Share

1 LIC 782 ICICI 7.683 Bajaj Allianz 4.184 HDFC Std 2.915 BIRLA Sun Life 2.456 Tata-AIG 27 SBI Life 1.758 Other 1.06

13



0

10

20

30

40

50

60

70

80

90

LIC ICICI Bajaj

Allianz

HDFC Std Birla Sun

Life

TATA-AIG SBI life Others

Area 1

Media release about Tata-Aig Life Insurance

VOICE Survey reveals Tata AIG Life Insurance as a clear winner in the life insurance

category.

May 10, 2006

A recent survey conducted by the Voluntary Organisation In Interest of Consumer

Education (VOICE) revealed Tata AIG Life Insurance Company (Tata AIG Life) as the clear

winner in terms of customer satisfaction in the life insurance category. This is India's first-

ever customer satisfaction study for the insurance sector.

The survey also revealed that Tata AIG Life had a high recall as a reputed brand name.

The ability to provide innovative and customer-focused service such as allowing the

maximum grace period for premium payment has not only further distinguished Tata AIG

Life from other life insurance companies but also appealed to consumers.

Commenting on the survey results, Trevor Bull, managing director, Tata AIG Life Insurance

Company, said, "The quest of the company has always been to be the best at what we do

rather than adopting a simplistic market share at all costs approach. Achieving this VOICE

14



recognition required huge effort from Tata AIG Life team; however retaining the number one

position will be tougher. Being ranked the best in the life insurance category by an

independent consumer group is an encouraging and fitting manifestation of our successful

completion of five years of service in the insurance industry. We look forward to the

challenges that lie ahead and are confident of maintaining and improving further our current

standards of service and efficiency."

The survey, which was conducted across eight cities and covered around 1,250 life

insurance customers, evaluated the different life insurance companies on the parameters of

tangibility, problem solving ability, reliability, responsiveness, assurance and empathy. The

objective of the survey was to understand and measure overall customer satisfaction within

the insurance sector. The Voluntary Organisation In Interest of Consumer Education(VOICE) is a voluntary action group, whose objective is to protect and further the interests

of the consumer.

(Source: CONSUMER VOICE, Vol. 7, Issue 3 May-June 2006)

PRODUCT PROFILE

ASSURE 21 YEARS MONEY SAVER

This savings plan gives you the cash payments at specified intervals to fund your family’s

needs at critical milestones or support your financial obligations. You get the dual benefits

of life insurance coverage plus the flexibility of periodic payments.

Key features include:

10% of the sum assured is paid on survival on the 3rd /6th /9th /12th /15th and 18th policy

anniversaries

40% of the sum assured will be paid on maturity (i.e. on the 21st anniversary of this policy).

The entire sum assured is distributed to your beneficiaries, irrespective of cash paymentsalready made, in the unfortunate event of your death before the end of the policy’s term

15



A 10% Guaranteed Addition is payable on death or maturity, if the policy has been inforce

for 10 years.

A reversionary and terminal bonus payable on death or maturity. Terminal bonus is

available only if policy is in force for more than 10 years.

Bonuses are paid depending on performance of the company.

Tax Benefits, Riders and Age Eligibility:

Premiums paid under this plan are eligible for tax benefits under Section 80C of the Income

Tax Act, 1961. Any sum received under this plan is exempt from tax under section 10(10D)

of the Income Tax Act, 1961.*

Term, Critical Illness, Accident and Disability riders are available for added protection at a

nominal extra cost.

Minimum age to qualify for this product is 30 days. Maximum age limit is 55 years.

For juveniles only Pay or benefit rider is available.

MAHALIFE

This distinctive policy provides a steady income and insurance coverage for life. Premiums

are payable only for the first 12 years. You can even use this to cover future expenses of

your children.


A guaranteed annual coupon of 5% of sum assured, every year for the rest of the insured’slife from the 12th policy anniversary onwards.

If Tata AIG Life performs well, you get yearly cash dividend from the 6th policy anniversary

onwards.

On death or at maturity at age 100, the entire sum assured will be paid tax-free according

to current Income Tax Laws.


16






Attach Disability, Accident, Term and Critical Illness riders to this policy for added

protection, at a nominal extra cost. (For juveniles, only Payor Benefit Rider is available).

You have to be aged between 0 years and 60 years to qualify.

STARKID

Do you want your child to get the best? A professional education could cost around Rs. 10

lakhs. Marriage expenses could also cost another Rs. 12 lakhs. Have you saved enough to

cover these costs?

Star Kid is an exceptional Child Endowment Policy that will ensure that you can afford to

give your child everything he needs.


Your child will receive cash benefits to the equivalent of 20% of the sum assured at the age

of 18, 19, 20, 21 & 22.

Flexible and affordable premiums, which can be paid annually, semi-annually, quarterly, or

even monthly.

No medical examination of your child is needed.

Free Look Period - A money-back guarantee, which allows you to return the policy within 15

days of receipt for a full refund (minus nominal administrative charges).





Inbuilt Payor Benefit rider: In the event of Payer’s death or disability the policy pays outfollowing benefits:

17



During the premium paying period: All future premiums are waived off.

After the premium paying period: 50% of Sum Assured is paid to the nominee of the policy.

• TATA AIG LIFE HEALTH PROTECTOR - 5 YEAR GUARANTEED RENEWAL

ACCIDENT AND HEALTH PLAN

This product is designed to protect you against most unforeseen causalities through a wide

spectrum of benefits. So that you can live worry-free. Policy premium remains constant for

5 years.


Accidental Death Benefit (ADB): Under this benefit, in the event of your unfortunate death

due to accident, your family will receive an amount equal to ADB sum assured that has

been specified by you .

Family Accidental Death and Dismemberment Benefit (FADD): In the event of your

unfortunate death due to accident your family will receive 100% of the your sum assured; in

case of an unfortunate accident that results in the death of the spouse, you receive 50% of

the your sum assured and in the case of children you can claim a benefit that amounts to

25% of your sum assured. In case of dismemberment, you will be paid the full amounts as

mentioned above or a percentage of those based on the severity of the dismemberment.

Accidental Hospitalization Cash (AHC): On minimum confinement of 3 consecutive days a

lump sum amount equal to the AHC Sum Assured will be paid.

Total Permanent Disability (TPD): Under this benefit a lump sum amount equal to the TPD

sum assured will be paid in the event of sickness and accident.

Critical Illness (CI): This benefit provides you with a lump sum on diagnosis of any 1 of 12

Critical Illness or Surgeries.

Cancer Care: In case you are diagnosed with cancer, the policy shall provide you with alump sum amount.

18



Death Benefit: In the unfortunate event of your death this entitles your family to the sum

assured as opted by you for this benefit

FADD will not be offered if ADB has been taken.

Cancer and CI cannot be taken together.

Tax Benefits and Age Eligibility

Premiums paid for Health Insurance Benefits are eligible for tax benefits under section 80D,

while premiums for Life Insurance Benefits are eligible for tax benefits under section 80C of

the Income Tax Act, 1961.*

Anyone between ages 18 and 60 can apply for this policy.

• ShubhLife

ShubhLife provides you 100% life insurance protection and a range of bonuses but the

premiums you pay are among the lowest of any similar endowment policy.


• Term policies just give you death cover. This policy gives you bonuses along with

death cover.

• You can choose a term of 10, 15, 20, 25 or 30 years.

• Apart from full premium paying term, you can pay your premiums over 3, 5, 7 or 10

years.

• Guaranteed addition of 3% of sum assured of the Basic Policy is added on the first

(1st) policy anniversary and on every alternate policy anniversary thereafter up till a

maximum of half the policy term. The GA will be payable if the insured dies while the

policy has been in force or if the policy matures.

• A simple reversionary bonus will be credited from the sixth policy anniversary until

the end of the plan term depending on the performance of our Company.

Tax Benefits, Riders and Age Eligibility

19



• Premiums paid under this plan are eligible for tax benefits under Section 80C of the

Income Tax Act, 1961. Any sum received under this plan is exempt from tax under

section 10(10D) of the Income Tax Act, 1961.*

• Attach Disability, Accident, Term, Waiver of premium and Critical Illness riders to this

policy for added protection.

Endowment Plan Age Eligibility10 Years 18 to 65 Years15 Years 18 to 60 Years20 Years 18 to 55 Years25 Years 18 to 50 Years30 Years 18 to 45 Years

• InvestAssurePlus

InvestAssurePlus is a single premium Unit Linked insurance plan especially designed for

the investment-savvy. It gives you the flexibility of choosing your own investment strategy,

besides providing protection to your loved ones in case. This plan gives you an opportunity

to make the most of good market returns, albeit with an increased investment volatility. At

the same time, it does not compromise the security that you want to provide to your loved

ones.

Multiple benefits of Invest Assure

Plus:

• Provides security to your family in case of your unfortunate death.

• Gives you the flexibility to choose your fund based on your risk profile.

• Enables you to enjoy market-linked returns with a potential for higher growth.


• Policy terms of 15, 20, 25 or 30 years.

• No penalty charges for surrendering the policy any time after the 3rd year.

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• Flexibility to choose your Sum Assured, depending on your age profile and your

needs.

• You have a choice of premium multiples to choose from.

• Any premium not deducted for coverage and charges will be invested in the funds

chosen by you viz. Equity Fund, Income Fund, Aggressive Growth Fund, Stable

Growth Fund and a Short Term Fixed Income Fund.

• Flexibility to switch between funds and partial withdrawal.

Invest Assure Plus also offers Top-ups premiums and the facility to have a Sum assured on

the Top-up premium as well.

Tax Benefits




Age Eligibility

• InvestAssureGold

Term of Policy Minimum Age Maximum Age15 years 30 days 60 years20 years 30 days 55 years25 years 30 days 50 years30 years 30 days 45 years Maturity and Death

Benefits

21



InvestAssure Gold is a non-participating Whole Life Unit Linked insurance plan, which

offers you the unique advantage of combining the protection and tax advantages of life

insurance with the attractive prospects of investing in different kinds of securities through

multiple fund options. With this plan, you can direct the investments by creating your own

investment fund portfolio from a range of options to suit your needs and preferences.


• Flexibility to choose your premium payment term: 5 years or for the entire duration of

the policy.

• Benefit period: For the entire life till 100 years of age.

•

Facility to increase the premium through Top up Premium.• Provides security to your family in case of your unfortunate death.

• Facility to increase the Sum Assured through Top up Premium.

• Gives you the flexibility to choose your fund based on your risk profile - Whole Life

Mid Cap Equity, Whole Life Aggressive Growth, Whole Life Stable Growth, Whole

Life Income, and Whole Life Short Term Fixed Income. You may choose to switch

between the funds, anytime subject to certain conditions.

• Enables you to enjoy market-linked returns with a potential for higher growth.

• Opportunity to bring you additional income on funds that might have otherwise given

you minimum returns in your savings account, subject to market performance.

• Loyalty Benefit: Additional 0.25% of units under the Regular Premium Account every

5 years provided the policy is in force.


•

Premiums paid under this plan are eligible for tax benefits under Section 80C of theIncome Tax Act, 1961. Any sum received under this plan is exempt from tax under


• You may attach Accidental Death Benefit, Accidental Death and Dismemberment,

Payor benefit or Critical Illness Riders at an extra cost.

• Policy is available for persons between 30 days and 70 years of age. The policy

matures at age 100.

• InvestAssure II

22



InvestAssure II is a unique, flexible insurance plan which combines the security of a life

insurance policy with the opportunity to exploit the upside of market returns by investing in

different kinds of securities through multiple fund options. You can direct the investments

by creating your own investment fund portfolio from a range of options to suit your needs

and preferences.


• Policy terms of 15, 20 or 30 years.

• No penalty for surrendering the policy any time after the 6th year.

•

The Sum Assured is a multiple of the Annual Regular Premium payable. The multiplevaries according to age at entry and policy term. You have a choice of premium

multiples to choose from.

• Any premium not deducted for coverage and charges may be invested in a wide

range of investment vehicles, including: an Equity Fund, Income Fund, Aggressive

Growth Fund, Stable Growth Fund and a Short Term Fixed Income Fund.

• InvestAssure II also offers the flexibility to switch between funds, premium top-ups,

partial withdrawal, premium holiday, policy reinstatement, and multiple premium

payment modes.





• Attach Accident, Waiver of premium, Payor Benefit (for juvenile policy) and Critical

Illness riders to this policy at a nominal extra cost for added protection.

23



THEORETICAL BACKGROUND

Life Insurance

Life insurance is a contract between the policy owner and the insurer, where the insurer

agrees to pay a sum of money upon the occurrence of the policy owner's death. In return,

the policy owner (or policy payer) agrees to pay a stipulated amount called a premium at

regular intervals.

As with most insurance polices, life insurance is a contract between the insurer and the

policy owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or

Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy

the insured event must be based upon life (or lives) of the people named in the policy.

Insured events that may be covered include:

1. Death,

2. Accidental death

Life policies are legal contracts and the terms of the contract describe the limitations of the

insured events. Specific exclusions are often written into the contract to limit the liability of

the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

Life based contracts tend to fall into two major categories:

24



• Protection policies - designed to provide a benefit in the event of specified event,

typically a lump sum payment.

• Investment policies - where the main objective is to facilitate the growth of capital by

regular or single premiums

Life Insurance plans are designed to suit various needs of the clients. As a financial

consultant it is important for you to understand the design of the life insurance plans that

you would be selling so that you have can suggest the right plan to you client after

analyzing his need.

Life insurance can satisfy various financial needs of a client. The life insurance plans are

designed to satisfy one or more of the financial needs. However a single plan cannot satisfyall the needs of the client and it is important for you to offer a combination on one or more

plans to satisfy various needs.

“Life Insurance Plans are a means to achieve a solution to the client’s financial needs”.

Framework of Life Insurance In India

With largest number of life insurance policies in force in the world, Insurance happens to be

a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent annually

and presently is of the order of Rs 450 billion. Together with banking services, it adds about

7 per cent to the country’s GDP. Gross premium collection is nearly 2 per cent of GDP and

funds available with LIC for investments are 8 per cent of GDP.

Yet, nearly 80 per cent of Indian population is without life insurance cover while health

insurance and non-life insurance continues to be below international standards. And this

part of the population is also subject to weak social security and pension systems with

hardly any old age income security. This itself is an indicator that growth potential for the

insurance sector is immense.

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

provides long term funds for infrastructure development and at the same time strengthensthe risk taking ability. It is estimated that over the next ten years India would require

investments of the order of one trillion US dollar. The Insurance sector, to some extent, can

25



enable investments in infrastructure development to sustain economic growth of the

country.

Insurance is a federal subject in India. There are two legislations that govern the sector-

The Insurance Act- 1938 and the IRDA Act- 1999. The insurance sector in India has come

a full circle from being an open competitive market to nationalisation and back to a

liberalised market again. Tracing the developments in the Indian insurance sector reveals

the 360 degree turn witnessed over a period of almost two centuries.

Historical Perspective

The history of life insurance in India dates back to 1818 when it was conceived as a means

to provide for English Widows. Interestingly in those days a higher premium was charged

for Indian lives than the non-Indian lives as Indian lives were considered more riskier for

coverage.

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

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

Assurance Company was established in 1880. The General insurance business in India, on

the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the firstgeneral insurance company established in the year 1850 in Calcutta by the British. Till the

end of nineteenth century insurance business was almost entirely in the hands of overseas

companies.

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

Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and

30's sullied insurance business in India. By 1938 there were 176 insurance companies. The

first comprehensive legislation was introduced with the Insurance Act of 1938 that provided

strict State Control over insurance business. The insurance business grew at a faster pace

after independence. Indian companies strengthened their hold on this business but despite

the growth that was witnessed, insurance remained an urban phenomenon.

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

provident societies under one nationalised monopoly corporation and Life Insurance

Corporation (LIC) was born. Nationalisation was justified on the grounds that it would createmuch needed funds for rapid industrialization. This was in conformity with the Government's

chosen path of State lead planning and development.

26



The (non-life) insurance business continued to thrive with the private sector till 1972. Their

operations were restricted to organised trade and industry in large cities. The general

insurance industry was nationalised in 1972. With this, nearly 107 insurers were

amalgamated and grouped into four companies- National Insurance Company, New India

Assurance Company, Oriental Insurance Company and United India Insurance Company.

These were subsidiaries of the General Insurance Company (GIC).

Important milestones in the life insurance business in India:

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

life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect

statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the

objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central

government and nationalised. LIC formed by an Act of Parliament- LIC Act 1956- with a

capital contribution of Rs. 5 crore from the Government of India.

Insurance Sector Reforms

In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N.

Malhotra- was formed to evaluate the Indian insurance industry and recommend its future

direction.The Malhotra committee was set up with the objective of complementing the

reforms initiated in the financial sector. The reforms were aimed at creating a more efficientand competitive financial system suitable for the requirements of the economy keeping in

mind the structural changes currently underway and recognising that insurance is an

important part of the overall financial system where it was necessary to address the need

for similar reforms. In 1994, the committee submitted the report and some of the key

recommendations included:

i)Structure

Government stake in the insurance Companies to be brought down to 50%. Government

should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act

27



as independent corporations. All the insurance companies should be given greater freedom

to operate.

ii)Competition

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the

sector. No Company should deal in both Life and General Insurance through a single entity.

Foreign companies may be allowed to enter the industry in collaboration with the domestic

companies.

Postal Life Insurance should be allowed to operate in the rural market. Only one State Level

Life Insurance Company should be allowed to operate in each state.

iii)Regulatory BodyThe Insurance Act should be changed. An Insurance Regulatory body should be set up.

Controller of Insurance- a part of the Finance Ministry- should be made independent

iv)Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75%

to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (there

current holdings to be brought down to this level over a period of time)

v) Customer Service

LIC should pay interest on delays in payments beyond 30 days. Insurance companies must

be encouraged to set up unit linked pension plans. Computerisation of operations and

updating of technology to be carried out in the insurance industry.

The committee emphasised that in order to improve the customer services and increase the

coverage of insurance policies, industry should be opened up to competition. But at the

same time, the committee felt the need to exercise caution as any failure on the part of new

players could ruin the public confidence in the industry. Hence, it was decided to allow

competition in a limited way by stipulating the minimum capital requirement of Rs.100

crores.

The committee felt the need to provide greater autonomy to insurance companies in order

to improve their performance and enable them to act as independent companies with

economic motives. For this purpose, it had proposed setting up an independent regulatorybody- The Insurance Regulatory and Development Authority.

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

Parliament in December 1999. The IRDA since its incorporation as a statutory body in April

2000 has fastidiously stuck to its schedule of framing regulations and registering the private

sector insurance companies. Since being set up as an independent statutory body the

IRDA has put in a framework of globally compatible regulations. The other decision taken

simultaneously to provide the supporting systems to the insurance sector and in particular

the life insurance companies was the launch of the IRDA online service for issue and

renewal of licenses to agents. The approval of institutions for imparting training to agents

has also ensured that the insurance companies would have a trained workforce of

insurance agents in place to sell their products.

The Government of India liberalised the insurance sector in March 2000 with the passageof 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. Under the current guidelines, there is a 26 percent equity

cap for foreign partners in an insurance company. There is a proposal to increase this limit

to 49 percent.

The opening up of the sector is likely to lead to greater spread and deepening of insurance

in India and this may also include restructuring and revitalizing of the public sector

companies. In the private sector 12 life insurance and 8 general insurance companies have

been registered. A host of private Insurance companies operating in both life and non-life

segments have started selling their insurance policies since 2001.

Life Insurance Market

The Life Insurance market in India is an underdeveloped market that was only tapped by

the state owned LIC till the entry of private insurers. The penetration of life insurance

products was 19 percent of the total 400 million of the insurable population. The state

owned LIC sold insurance as a tax instrument, not as a product giving protection. Most

customers were under- insured with no flexibility or transparency in the products. With the

entry of the private insurers the rules of the game have changed.

The 12 private insurers in the life insurance market have already grabbed nearly 9 percent

of the market in terms of premium income. The new business premiums of the 12 private

29



players has tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile, state owned

LIC's new premium business has fallen.

Innovative products, smart marketing and aggressive distribution. That's the triple whammy

combination that has enabled fledgling private insurance companies to sign up Indian

customers faster than anyone ever expected. Indians, who have 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.

The growing popularity of the private insurers shows in other ways. They are coining money

in new niches that they have introduced. The state owned companies still dominate

segments like endowments and money back policies. But in the annuity or pensionproducts business, the private insurers have already wrested over 33 percent of the market.

And in the popular unit-linked insurance schemes they have a virtual monopoly, with over

90 percent of the customers.

The private insurers also seem to be scoring big in other ways- they are persuading people

to take out bigger policies. For instance, the average size of a life insurance policy before

privatisation was around Rs 50,000. That has risen to about Rs 80,000. But the private

insurers are ahead in this game and the average size of their policies is around Rs 1.1 lakh

to Rs 1.2 lakh- way bigger than the industry average.

Buoyed by their quicker than expected success, nearly all private insurers are fast-

forwarding the second phase of their expansion plans. No doubt the aggressive stance of

private insurers is already paying rich dividends. But a rejuvenated LIC is also trying to fight

back to woo new customers

Life Insurance Plans are like medicines

Life insurance plans can be compared to medicines. No one pill can cure all the diseases:

one insurance plan can also not provide the solution to all financial problems. One has to

use a combination of plans to arrive at an insurance solution. Taking the right medicine for the disease is important, similarly taking the right kind of insurance plan is important to

achieve financial goals. Different methods lie pills, injections, can administer medicines. Life

insurance plans are also come in with profits and unit linked options. Sugar coating makes

30



the medicines edible but do not make the medicines effective. Similarly some features of an

insurance plan make the plan attractive but may not be much help in achieving the financial

goals. As a financial consultant you need to understand this and explain this to your clients

so that client makes the right choice which purchasing 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 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. Atul is 45 and self-employed. His wife Nadine, 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 lacs. His monthly earnings

31



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.

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.

Type of Life Insurance

Term Insurance policy Whole Life Policy

Endowment Policy

Money Back Policy

Annuities and Pension

Most of the products offered by Indian life insurance companies are developed and

structured around these “basic” policies and are usually an extension or a combination of these policies.

Term Insurance Policy

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A term insurance policy is a pure risk cover for a specified period of time. What time means

is that the sum assured is payable only if the policyholder dies within the policy term. For

instance, if a person buys Rs.2 lakh policy for 15 years, his family is entitled to the money if

he dies within that 15 years period.

Whole life Policy

As the name suggest, a Whole life policy is an insurance cover against death irrespective

when it happens.

Endowment Policy

A pure endowment policy is a form of financial saving, whereby if the person covered

remains alive beyond the tenure of the policy; he gets back the sum assured with some

other investments benefits.

Money Back Policy

These policies are structured to provide sums required as anticipated expenses (marriage,

education etc) over a stipulated period of time. With inflation becoming a big issue,

companies have realized that sometimes the money value of the policy is eroded. That is

why with-profit policies are also being introduced to offset some of the losses incurred onaccount of inflation.

A portion of the sum assured is payable at regular intervals. On survival the reminder of the

sum assured is payable.

Annuities and Pension

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In an annuity, the insurer agrees to pay the insured a stipulated sum of money periodically.

The purpose of an annuity is to protect against risk as well as provide money in the form of

pension at regular intervals.

PERSONAL FINANCIAL PLANNING

Personal financial planning (PFP) is the development and implementation to total,

coordinated plans for achieving one’s overall financial objectives. The term private wealth

management also is increasingly being applied to this process, particularly when it involves

large investment portfolios and estates.

Most people use a variety of financial instrument s to achieve their objectives. Thus, such

basic financial tools as common stocks, bonds, mutual funds, insurance, fixed and variable

annuities, money market accounts, certificate of deposit, saving accounts, individual

retirement accounts, qualified retirement plans and other employee benefits, personal

trusts, and real estate may be element of soundly conceived financial plans.

HISTORY:

Since the end of World War II, our economy has developed an almost unheard-of level of

affluence that has made financial planning important for larger and larger no. of people. We

further observed that increasing role of the workforce , particularly at the executive &

professional levels, and the rapid growth of multi-income earner families in the US are

placing more and more person in a position in which they need to apply sophisticated

financial planning techniques to their personal & family affairs. In recent years this also has

been referred as private wealth management, particularly for higher net worth people.

Financial institutions have recognized this and have developed many products and servicesto serve the financial planning or wealth management needs of the public. There is an ever

increasing no. of professional financial planners who are applying the concepts of sound

financial planning.

INVESTMENT:

A layman normally comes across the word “INVESTMENT”, when he thinks of saving a

portion of his earnings by depositing it in a bank or buying bonds or shares in the stock

34



market in order to earn interest or dividends on his savings. He would probably make his

decision to invest by considering the amount of interest he would receive in the future and

the profitability of price appreciation judged either personally or based on his stock broker’s

advice.

The problem of choosing right type of investment to suit one’s circumstances and need is,

however, faced not only by individuals but also by institutional investors; banks, investment

trust, insurance companies, etc. where a large inflow of money is experienced daily and has

to be invested in such a manner as to suit their normal business requirements. These

institutions employ a more methodical approach to investment problem in so far as they

study the economic condition of the company and the industry in which the investment is

being considered in particular and of the country in general and their estimates of

profitability of their investments are apt to be more scientific than those of individuals who

rely on a friendly word from a stock broker. Whatever may be the nature of investment, the

final judgment comes out of the comparison of estimates of cash investment outlays with

the estimate of future cash receipts. Economic development and the growth of national

income depends upon the quantum of net investments undertaken in an economy and the

capital output ratio which indicates how much additional capital is required to increase the

national income by one monetary unit.

In the macro sense of the economy, savings are used for investment to lead to, additional

capital formation and growth of income, employment and output in the economy.

Investment attitudes results in portfolio decisions, the investment choices remain a

profound secret. Therefore, the investors try to balance various considerations in choices of

financial assets which will be understood better if empirical data on such choices are

available.

The followings are the investment related characteristics:

Life cluster and investment size

Expected rate of return

Portfolio choices

Risk bearing capacity

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Times perspective

Sources of information

Future investment preferences.

INVESTMENT IN INSURANCE INDUSTRY

INVESTMENT – A CHALLENGE FOR INSURANCE COMPANIES

PATTERN OF INVESTMENT: -

The insurance companies receive premiums while extending risk cover and in carrying out

underwriting business apart from providing loans to financial institutions.

The investment made by these companies will yield regular income and constitutes an

integral part of the financial activities of insurers. Since invested funds belong to the

policyholders and claims have to be met out of these funds, as soon as they arise, it is

essential that insurers should keep sufficient cash reserves to meet claim obligations. In

most of the countries, investment operations are subjected to supervisory regulations so

that the interest of the policyholders is protected and investments are not made in

unproductive channels. The efficiently carried out investment policies help in meeting

solvency margin requirements on part of these companies.

INVESTMENT OF FUNDS

Insurance companies have a large amount of money at their disposal. This arises from thefact that there is a time gap between the receipt of a premium and the payment of a claim.

A premium could be paid in January and a claim may not occur till December, if it does not

occur at all, the insurer has this money to invest it.

The value of investment of a life insurance organization increases or decreases comparing

to that of a general insurance organization – as said earlier due to the time gap in time

between the receipt of premium and the payment of claims in respect of GIC. Another

aspect worth noting is that the pattern of investment is not the same for the two types of insurance companies/corporations. Again, this has a lot to do with the nature of the risks

being run. In life insurance there is expected to be some time between the receipt of the

36



premium and eventual payment of the claim, as a result the funds can be invested in long-

term ventures. In General Insurance the money cannot be locked away for so long and

therefore has to be spread over long, medium and short term investments. The use of this

money within the economy as a whole is where the benefit lies; both the government and

industry have access to a large pool of working money.

PRINCIPLES CONCERNING INVESTMENT DECISION

The investment operations by the insurance companies are carried out from the

accumulated funds of the policyholders. Insurers have to meet their claim obligations out of

these funds and thereby protect the interest of the policyholders for meting the objective –

safety first, returns second. Capital investments by insurance companies have the following

principles:

1. SAFETY OF INVESTMENT: - As the insurance companies have to fulfill their

obligations of claim payment as soon as the loss arises, the investments have to be safe

and secure.

2. YEILD PROFITABILITY OF ASSETS: - The investments should not only be safe but

should also produce high yield income and be profitable. The investments should generate

high and sustained yield while conforming to safety and liquidity parameters.

3. LIQUIDITY: - It is liquidity of assets. It is imperative for insurance companies to always

hold certain proportion of assets in their portfolios, which are highly liquid in nature and

could be easily converted into cash.

4. DIVERSIFICATION AND SPREADING: - There is a conflict in pursuing simultaneouslythe goals of the safety, profitability and liquidity. Most of the high yielding forms of

investments are subject to a large risk. This conflict may be resolved to certain extent by

diversification and spreading.

5. CONGRUENT COVERAGE: - Followed by those insurance companies who have

business operations abroad and also who have to settle claims in foreign currency.

37



There are two types of risk i.e. financial risk and non-financial risk. Insurance is concerned

only with the financial risk. Again risk can be divided into two parts i.e. dynamic risk and

static risk.

Dynamic risk result from changes in the economy like price levels, consumer tastes and

technology etc. and are less predictable.

Static risk involves those losses that would occur even there were – no changes in the

economy. They are not a source of gain to society and occur with a degree of regularity and

hence are predictable. Static risks are more suited to insurance treatment than dynamic

risk.

CONCLUSION: - All investment companies do have a number of features in common

with other financial intermediaries. They provide a variety of important services to the public

– such as risk, denomination and maturity intermediation as well as convergence of

insurance and it is these services that have been accounted for.

Classification of life insurance plans

Life insurance plans can be classified into the following four categories according to the

features:

Protection Plans

Pension Plans

Savings Plans

Investment Plans

Protection plans

As the name suggests this category of plans are designed to protect the income earningcapacity of the life assured. The present income of the life assured therefore forms the

basis of the life insurance. A person with no income therefore with no income therefore

38



cannot to given this plan. The plan is therefore not offered to students, housewives and

minors.

The plans are in the nature of assurances rather than pure insurance. Under the plan the

insurance company assures the policyholder that a lump sum of money would be paid on

the happening of the insured even. Thus even if the life assured does not earn the same

level of income at the time of the happening of the insured event, as at the time whine the

tool the insurance, the lump sum is still payable.

The premium collected under this category of plans is generally sufficient to cover, however

a saving element can be built under the plans to return the saving amount at maturity. The

plans do not share in the profits of the company and have no bonuses.

The plans can be explained with the following diagram.

The risk is common to the pool of policyholder who by purchasing the plan chooses toshare the risk with the group. The claims are paid from the contribution made by the

policyholder. The premium paid by the policyholder is sufficient to cover thr risk and the

39

Fund

Sufficient to

pay claims

and meet all

expenses

Pension



expenses, hence generally on the expiry of the cover nothing is payable. Under the

protection plans the risk is covered for a premium, which is sufficient to pay the claims and

the expenses.

The plan should be sold on the basis of the Human Life Value concept. As a consultant you

should sell this plan to clients who have an income and a financial responsibility. This form

of insurance is also called a “young persons privilege” and Rider benefit also fall in this

category of plans.

1. Term Assurance Plan

2. Loan Cover Term Assurance Plan

Saving Plans

The saving plans are designed to help a person save for a long-term event. Long-term

saving has inherent un-certainties. Besides long term savings instrument are not availablein the market. The savings plans aims to provide a solution to the client in this area with the

benefit of life insurance.

It is important to note that the insurance cover offered is on the savings. While purchasing

the plan that the policyholder has a savings target in mind. The plan aims to protect this

target in the event of the death of the life assured. In the event of the death of the life

assured during the term, in addition to the amount saved the amount, which could not besaved is also paid to the beneficiary.

The premium paid by the policyholder consists of the savings,. The risk cover cost on the

savings forms a very small portion of the premium. This effectively means that the premium

paid by the policyholder would determine the maturity amount that the policyholder would

ultimately get. Thus comparison on the saving products of two companies, on the basis of

the premium and the sum assured is a wrong method of comparison.

Savings plans offer the clients a good vehicle a built savings for a long-term financial need.

The earlier the client starts a savings plan the lesser he would have to contribute as his

40



savings would grow bigger due to the effect of compound interest. To sell a savings plans

you need to identify the long term savings needs of the client and explain to him the

benefits of savings through life insurance.

Saving plans have a risk element, which needs to be underwritten to ensure that the death

claims are controlled. In case a company is very liberal in granting the covers the chances

are that policyholder who survive would get a lower maturity benefits. Maturity benefits can

be enhanced by a strict control on the claims and the expenses. A policyholder should be

explained that although two savings plans look the same the benefits under the same could

be different.

Savings plan can be offered as a with profit plan or a unit linked plan. A with profits funds

aims to smoothen the returns to the policyholder using the bonus mechanism while the

returns to the policyholder under a unit linked plan depends on the movement of the unit

prices.

TATA-AIG Life Insurance offers the following saving plans:

1. life plus

2. Raksha.

3. Shubh life

4. Nirbhay life

5. Health protector

Pension Plans

Pension plans are designed to provide pension. With the interest rates fluctuating and the

increase in longevity the interest in the pension products has been growing in the recent

past, Life pensions provide an income till death and this is attractive in the above-

mentioned scenario.

The Indian society has been moving from the joint family system to the nuclear familysystem. There is also no form of social security schemes, which provide an income in the

old age. It is therefore important that all individuals think about their retirement and save for

41



an income in the old age. Pension Plans help the client to built the pension fund, which is

earmarked, to provide for the pensions and pay the pensions on the chosen sentiment date.

Pension Plans can be further classified into the following two categories:

1. Deferred Pension Plans- these plans help the client build the pensions fund during

his earning year and convert the fund into pensions on the chosen retirement date.

2. Immediate Pension Plans- these plans pay a pension immediately after the lump

sum purchase price is paid to the insurance company

The deferred Pension plan has two parts,. In the first part the savings of the policyholder is

accumulated to crate a fund for the purchase of a pension on the chosen date. This

accumulation can be offered trough a with profits fund of through the unit linked

mechanism.

In the second part the fund is used to purchase an annuity chosen by the policyholders.

There are various immediate annuities, which are available, and the client should choose

one, which suits him the best. The choice of the immunities is therefore given to the client

just before the annuity starts.

The aim of a deferred pension plan is to provide a good annuity to the client. Risk covers

are therefore not built in the plan. This is to ensure that the const of the risk cover does not

reduce the amount available for pension.

The deferred pension plan works like saving plans with the difference that the amount at the

end of the contract is paid in the form of pension. In the event of death before the pension

starts the premium is returned with interest.

TATA-AIG Life Insurance launched the following plans in this category:

1. Nirvana

2. Nirvana plus

3. Mahalife

4. Mahalife gold

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Investment Plans

As the name suggests the plans are designed to help the person reduce some of the risk of

investment. All the investment risks cannot be reduced. What the investment plans try tocrate a pill of investors so that they can get the advantage of large funds, diversified

investment professional management and better returns Investment plan can be designed

to protect the policyholder against the market fluctuations. However all policyholders cannot

to allow the protection to a small group of policyholder at any given point of time.

One of the objective of the investment type of pans is to give a good return to the

policyholder. When risk cover are integrated with the investment plans the cost of the risk

covers reduce the returns to the policyholders. To avoid the risk cover costs the plans do

not offer huge risk covers. Hence you will find that the policyholder has to pay a premium,

which is almost equal to the sum assured.

The premium under the plans mainly consists of investment. It would not be correct to

compare this category of plans on the basis to the sum assured and the premium paid. In

case huger premium is collected under the plan the company would be in a better position

to pay a bigger amount on maturity/ death. A better way of comparison would be to

compare what the client pays what he world get under the plans. At the time of selling

unfortunately you would not be able to show to the client as to what he world get under the

plan. Illustrations and past bonuses are something you cans use to convince the client .

Life insurance investment plans are designed for long-term investment. It is not cost

effective for a life insurance company to design a short-term plan. It is therefore usual for

these types of plans to have a term of 10 years and above. It is important make the client

understand that he is entering into a long-term investment when the purchase and

investment plan from a life insurance company. Surrenders and loans would not be in the

interest of the policyholders, as these would not give him the benefits of good returns.

Investment Plans are singles premium plans where the client has to pay the premium and

wait for the investment to grow. You can suggest this plan when the client is looking for

investment for a long term financial needs which requires investment of money for a long

term.

43



The investment plan can be designed as a with- profit contract or a unit linked contract. In a

with profits contact the return are smoothened while under the unit linked contract the

returns to the client depend on the movement of the net asset values of the unit purchased.

TATA-AIG Life Insruance launched the following plans in this category.

1. InvestAssureII

2. InvestAssureGold

3. InvestAssurePlus

Some of these plans have been explained before in the title ‘product profile’

RESEARCH METHODOLOGY

RESEARCH:

Research is a careful investigation or enquiry especially through search for new facts in any

branch of knowledge”

According to Clifford Woody “research comprises defined and redefining problems,

formulating hypothesis or suggested solution; collecting, organizing, and evaluating data;

making deduction and reaching conclusions to determine whether they fit the formulatinghypothesis”

Research methods refer to the methods the research use in performing research

operations.

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may beunderstood as science of studying how research is done scientifically.

44



First and foremost important thing is to understand the market research problem. There

should be some objective related to the problem. After defining the objectives an efficient

plan should be developed for gathering information with the help of my guide and superior

in Tata-AIG, I have formulated the objective and accordingly worked on it. Our main

objective was to conduct to survey regarding “need for financial planning & investment in

insurance industry” among the employees of manufacturing and others industry in selected

area in Jodhpur city.

RESEARCH DESIGN:

A research design is a conceptual structure within which research is conducted; constitute

the blue print for the collection, measurement and analysis of data. A good research design

has the characteristics viz. problem definition, specific method of data collection and

analysis, time required for research project and the estimate of expenses to be incurred.

There are three type of basic design viz.

1) Exploratory research design

2) Descriptive research design

3) Casual research design

TYPE OF RESEARCH DESIGN CHOOSEN

EXPLORATORY RESEARCH: -

It is a preliminary study of the subject matter or investigation of the phenomenon. It is

usually pilot study and is followed by descriptive, experimental research. It attempts to see

what is there rather than trying to predict the underlying relationships. It does not have a

formal and rigid design as the researcher may have to change his focus or directiondepending upon the availability of new ideas, new hypothesis etc.

SOURCES OF DATA:-

Once the research design has been decided the next stage is of selecting that of sources of

data or information.

PRIMARY DATA: -

The primary data are those, which are collected afresh and for the first time, and thus

happen to be original in character. Methods of data collections are as:

45



Observation method

Interview method

Questionnaire method

Schedules

Others e.g. consumer panel, depth interview, content analysis, etc.

SECONDARY DATA:-

The secondary data are those which have been collected by someone else and which have

been passed through statistical process.

I have selected data from various sources:

Company website

Information booklet provided by the company

Published reports

Relevant books

QUESTIONNAIRE:

A questionnaire contains questions that a researcher wishes to ask his respondents. It is a

most important tool for data collection.

I have used structured questionnaire as a tool for data collection. Keeping all objectives in

my mind I have designed it carefully. A sample of my questionnaire is as follows:

Demographical question

Employment / occupation detail

Awareness of critical illness.

Product awareness, investment objective etc.

SAMPLE DESIGN:-

A sample design is a definite plan determined before any data are actually collected for

obtaining a sample from a given population. A proper sampling plan is very in research

process & it also makes the research process easy.

TYPE OF SAMPLE DESIGN SELECTED FOR THE STUDY :-

46



CLUSTER SAMPLING:

It involves grouping the population and then selecting the groups or clusters rather than

individual elements for inclusion in the sample. Thus in cluster sampling the total population

is divided into a number of relatively small sub- divisions which are themselves clusters of

still smaller units and then some of these clusters are randomly selected for inclusion in the

overall sample.

SAMPLING FUNDAMENTALS:-

UNIVERSE:-

It refers to the total of items or units in any field of inquiry. My universe for the study was

Jodhpur city.

SAMPLE FRAME :-

It consists of a list of items from which the sample is to be drawn. In this case, my sample

frame is Sojati gate, Banad Road, Ratanada & in Sardarpura in Jodhpur.

SAMPLE SIZE:-

In this project the sample size consist of 150 respondents.

SAMPLE UNIT:-

My sample units for the project were the employees of Manufacturing & other industry and

self employed persons, too.

DATA ANALYSIS

(1) IS FINANCIAL PLANNING IMPORTANT ?

Attribute No. of respondents

Yes 120

No 30

47



0

20

40

60

80

100

120

Yes No

INTERPRETATION: -

80% Respondent thinks financial planning is important while 20% thinks otherwise.

(2) DO YOU NEED FINANCIAL HELP TO SOLVE FINANCIAL PROBLEMS ?

Attributes No. of respondents

Yes 70No 80

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64

66

68

70

72

74

76

78

80

Yes No

INTERPRETATION: -

47% Respondents said they need financial help from a professional financial planner.

53% respondents said they don’t need as they themselves are capable of solving

financial problems.

(3) BEST WAY TO OVERCOME FIANCIAL PROBLEMS ?

Attribute Liquidate

Property\Asset

Money from

family\Friends

Lifetime

Saving

Medical

InsuranceNo:- of

respondents

5 15 30 100

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0

10

20

30

40

50

60

70

80

90

100

Liquidate

Property/Asset

Money f rom

family/friends

Lifetime Saving Medical Insurance

INTERPRETATION:

• 67% respondents think medical insurance is best way to overcome financial problems.

• While 20% thinks it is lifetime savings.

• 10% think it is money from family & friend / charity.

• Only 3% think liquidate property is the best solution.

(4) BEST AVENUE FOR INVESTMENT ?

Attributes Shares Mutual

funds

Fixed

deposit

Real

Estate

Insurance Gold

No of respondents

70 15 5 15 40 5

50



0

10

20

30

40

50

60

70

Shares Mutual

Funds

Fixed

Deposit

Real Estate Insurance Gold

INTERPRETATION:

• 70 respondents think share market is best avenue to invest while 5 respondents

each think it is gold and Fixed Deposit respectively.

• 40 out of 150 respondents thinks it is insurance industry while 15 respondents each

thinks each think mutual fund and real estate is best avenue.(5) SAVE FOR UNFORESEEN CIRCUMSTANCES

Attribute No. of respondents Yes 126

No 24

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0

20

40

60

80

100

120

140

Yes No

INTERPRETATIONS:

• 84% respondents want to save for future while 16% thinks otherwise.

(6) IN WHICH COMPANY DO YOU HAVE INSURANCE POLICY ?

Name of companies

No. of respondents

LIC 58

TATA-AIG 10

HDFC 25

ICICI 28

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Birla Sun Life Insurance 10

Bajaj Alliance 15

Others 04

0

10

20

30

40

50

60

LIC TATA-

AIG

HDFC ICICI Birla sun

Life

Bajaj

Allianze

Others

INTERPRETATION

• The above chart depicts that the numbers of respondents have LIC Policies are

more than any other policy holder of any other company. LIC is still market leader

followed by ICICI, HDFC.

• TATA-AIG has 6% respondents as its customers.

(7) SOURCE OF INFORMATION ?

Attribute No of respondents

Media 65Friends & Relatives 40

Agents\ Adviser 45

53



0

10

20

30

40

50

60

70

Media Friends &

Relatives

Agents/Advisors

INTERPRETATION

• The above diagram shows that the major source of information is the Media (print &

electronic) and the agents & advisors.

• 27% respondents come to know through their friends & family about Tata-AIG and its

products.

.

(8) MOTIVATION FACTOR TO GO FOR TATA-AIG PRODUCT ?

Attribute No. of respondentsGood return 15

Tax benefit 20

54



Risk coverage 45

Brand name 50

Settlement of claim 20

0

5

10

15

20

25

30

35

40

45

50

Good Return Tax Benefit Risk coverage Brand Name Settlement of

Claim

INTERPRETATION

• 30% respondents said that it is risk coverage that acts as motivator to go for Tata-

AIG products.

• While 10% said good return and 34% feels brand name acts as motivator to them.

• 13% felt it is settlement of claim and further 13% think it is Tax benefit.

(9)INVESTMENT OBJECTIVES?

Attributes No. of respondentsLong term 15Short term 10Retirement 50

Children education 40Medical expenses 35

55



0

5

10

15

20

25

30

35

40

45

50

Long Term Short Term Retirement Children

Education

Medical

Expenses

INTERPRETATION

The above chart depicts that 27% respondents’ investment objective was their childreneducation and 33% thinks it was retirement purposes.

23% respondent’s objective was to meet medical expenses in case of emergency.

While 10% have long term objective and 7% respondents have short term objective.

(10) FUTURE INVESTMENT IN TATA-AIG ?

Attribute No. of respondentsYes 45NO 65Can’t say 40

56



0

10

20

30

40

50

60

70

Yes No Can't Say

INTERPRETATION:

• The above diagram shows that 30% respondent want to invest in TATA-AIG while 43%

do not want to invest.

• 27% respondent said they can’t say at the moment.

(11) PRODUCT’S RATING ?

Attributes No. of respondents

Excellent 10Good 45

Average 80Bad 15

57



0

10

20

30

40

50

60

70

80

Excellent Good Average Bad

INTERPRETATION OF DIAGRAM

• The above diagram depicts that 53% respondents think that the products of Tata-AIG is

of average in products rating in terms of its offering & quality.

• 30% respondents think it is good.

• While 7% feels it is excellent.

• And the remaining, think that it is bad.

FINDINGS

According to the survey and the feedback of the questionnaire, following are the main

findings of the research project:

Almost all the respondents knew about Tata-AIG that it deals in insurance sector.

80% Respondents thinks financial planning is very important to fulfill their

financial needs while 20% think otherwise.

58



53% respondents said they can manage financial activity efficiently whereas 47%

said they can’t.

More than 45% respondents think share market is the best avenue to invest while 27% think it is the Insurance Industry

More than 38% respondents have insurance policies in LIC while in ICICI and HDFC

18% and 17% have insurance policies. Only 7% respondents have policies

in Tata-AIG life Insurance Company Ltd.

30% respondents want to invest in Tata-AIG Life Insurance Company Ltd. Among the respondents 30% think tax benefit, 20% think investment opportunity and

27% think risk coverage as their motivation to go for Tata-AIG Life Insurance

Policies.

The objective of majority of customers’ investment in Tata-AIG was retirement plan,

to bear their children’s education expenses and to be able to bear medical expenses

in case of emergency.

Most of the respondents prefer payment of premium through cheque as payment

mode.

And they also complained that there is very few branches of Tata-AIG in Jodhpur.

Among the respondents 30% think policies offered by Tata-AIG is good while 53%think it is average.

LIMITATIONS

During the research I have faced many difficulties & problems due to some limitations. The

limitations I have faced are as follows:

59



People are not willing to give appointment during their busy schedule.

Time was inadequate to cover more customers/respondents as there were only two

months allotted to complete the project.

Some respondents were not willing to answer the entire set of questions.

Respondents may not have been true in answering various questions, and may be

biased in answering some questions.

The research was confined to Jodhpur city only. The respondents were jodhpuritesonly, so it reflects only their opinions.

The public transportation system is inadequate in terms of frequency & connectivity

in Jodhpur.

During the summer project heavy rains created problem in conducting the market

survey.

The questionnaire for the customer response was closed ended; therefore the

information got from these customers is very limited.

SUGGESTIONS & RECOMMENDATIONS

With my knowledge and experience from the entire research, I suggest the company

should: -

60



Stress the need for proper financial planning among the people and convey them

that company provides customized financial solution to financial problems.

Generate awareness among the public about its products through media (print &electronic), conduct seminar and organize public meetings etc.

Make the customer aware about the hidden cost being taken by other companies/

institutions.

Devise proper strategy & run promotional campaign to make customer aware about

the investment opportunities in TATA-AIG that will give them good return with their investment being safe and secure.

Give detailed information of its products range and features so that it

becomes easier for them to select the best insurance product.

Also give trainings to Business Advisors on Tax Benefit &their updates as they are

the interface between the company and the customers.

Try to offer innovative products like customized insurance policies.

Increase the no. of branches.

CONCLUSION

It was a pleasure to have an opportunity to undergo practical training and it is a matter of

satisfaction for me. It has helped me in getting practical knowledge regarding practical

implementation and management principles in the organization. It is a great pleasure for me

to part of TATA-AIG.

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From the surveys I came to know that: -

People are more aware regarding their financial planning and take the professional advice

whenever they need. Tata-AIG is also providing financial solutions to its customer but it

should increase its customer base as it is in its growth stage.

TATA-AIG has competitors such as ICICI Pru, Baja allianz, Birla Sunlife, HDFC Life

Insurance etc. so, it should devise competitive strategy to sustain and grow in insurance

industry.

The children’s education scheme, retirement plan Health Protector and InvestAssure

products of the company act as motivation factor for the investors in the company.

LIC is still the market leader. But in private companies/ corporations ICICI Pru is market

leader followed by the Bajaj Allianz, HDFC Life etc. There is scope for TATA-AIG to

increase it market share apart from it TATA is a brand name in India where it has the trust

of people, so it should capitalize it, too.

QUESTIONNAIRE

1) Name of the respondent:________________________________

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2) Address:-______________________________________________________

3) Age

Age in years Use √ sign to indicate your answer 15 – 3030 – 4040 – 50Above 50

4) Income per annum:

Rs. Use √ sign to indicate your answer Up to 50,00050,000 – 2,00,0002,00,000 – 50,000Above 5,00,000

5) Sex Status: Male………… Female…………..

6) Do you think financial planning is important for you?

Attribute Use √ sign to indicate your answer

Yes

NO

7) Do you need financial help to solve your financial Problem?


YesNO

8) In your opinion what is best way to overcome financial problem?

Use √ sign to indicate your answer

Liquidate Property\AssetMoney from family\friendsLifetime Saving

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Medical Insurance

9) What is Best Avenue for investment for you?

Use √ sign to indicate your answer SharesMutual FundsFixed DepositReal EstateInsuranceGold

10) Do you save money for unforeseen circumstances?


YesNO

11) In which company do you have insurance policy ?

Name of companies Use √ sign to indicate your answer LICTATA-AIGHDFCICICIBirla Sun Life InsuranceBajaj AllianceOthers

12) From which source you get the information about insurance companies and their

products?

Attribute Use √ sign to indicate your answer MediaFriends & RelativesAgents\ Adviser

13) What will be motivation factor for you to go for TATA-Aig’s products?

Attribute Use √ sign to indicate your answer Good return

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Tax benefitRisk coverageBrand nameSettlement of claim

14) What are your investment objectives?

Attributes Use √ sign to indicate your answer Long termShort termRetirementChildren educationMedical expenses

15) Would you like to invest in TATA-AIG in future?


YesNOCan’t say

16) What will be your rating to the products of TATA-AIG?

Attributes Use √ sign to indicate your answer

ExcellentGoodAverageBad

BIBLIOGRAPHY

1. Information booklet provided by the company.

2. www.tata-aig.com

3. Research Methodology By C.R. KOTHARI

4. Services Marketing By Rampal, Gupta

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http://www.tata-aig.com/

http://www.tata-aig.com/



5. The Insurance Times, Journal

6. Website of Life Insurance Corporation of India

7. www.wikipedia.org

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tata aig investment panning

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