KOHINOOR BUSINESS SCHOOL

PROJECT REPORT ON

A COMPARATIVE STUDY OF PUBLIC AND PRIVATE NON- LIFE

INSURANCE COMPANIES IN INDIA.

SUBMITTED TO

Kohinoor Business School

BY

BHAVYA DEDHIA

02160050

Batch : 2016-2018

IN PARTIAL FULFILLMENT OF

MASTER OF MANAGEMENT STUDIES (MMS), UNIVERSITY OFMUMBAI

March 2018

UNDER THE GUIDANCE OF

PROF. PRABHAT VARMA

 DECLARATION

I, BHAVYA DEDHIA, of ‘KOHINOOR BUSINESS SCHOOL, Mumbai,of

MMS [Finance] hereby declare that I have completed my project, titled ‘A
COMPARATIVE STUDY OF PUBLIC AND PRIVATE NON- LIFE
INSURANCE COMPANIES IN INDIA’. The information submitted herein is
true and original to the best of my knowledge.

This project was undertaken as a part of academic curriculum according to the

university rules and norms and it has not commercial interest and motive, it is my
original work. It is not submitted to any other organization for any other purpose.

Date:                                                                                    Signature of the

Student
BHAVYA DEDHIA

Place:  [MUMBAI]                                                                                                 

2
 CERTIFICATE

This is to certify that the project entitled “A COMPARATIVE STUDY OF

PUBLIC AND PRIVATE NON- LIFE INSURANCE COMPANIES IN

INDIA” is successfully completed by “BHAVYA DEDHIA” during the second

year of his course, in partial fulfillment of the Masters Degree in Management

Studies, under theUniversity of Mumbai, through KOHINOOR BUSINESS

SCHOOL, Kurla, Mumbai-400070.

Date:

Place: Mumbai Prof. PRABHAT VARMA

 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep

regards to my guide Prof. PRABHAT VARMA his exemplary guidance,
monitoring and constant encouragement throughout the course of this
thesis. The blessing, help and guidance given by him time to time shall
carry me a long way in the journey of life on which I am about to
embark.
 Contents
DECLARATION..............................................................................................................................................2
CERTIFICATE................................................................................................................................................3
ACKNOWLEDGEMENT.................................................................................................................................4
INTRODUCTION...........................................................................................................................................6
IMPORTANCE OF INSURANCE......................................................................................................................8
EVOLUTION OF INSURANCE IN INDIA........................................................................................................10
EVOLUTION OF INSURANCE ORGANIZATION............................................................................................13
ABSTRACT..................................................................................................................................................16
INTRODUCTION.....................................................................................................................................16
OPERATIONAL DEFINITIONS OF THE STUDY..............................................................................................22
RESEARCH DESIGN.....................................................................................................................................24
SCOPE OF THE STUDY............................................................................................................................24
NEED FOR THE STUDY:...........................................................................................................................25
INSURANCE AND BUSINESS ENVIRONMENT..........................................................................................25
INSURANCE SECTOR REFORMS..............................................................................................................28
OBJECTIVE OF THE STUDY..........................................................................................................................30
RESEARCH METHODOLOGY.......................................................................................................................31
SOURCES OF DATA:................................................................................................................................31
LIMITATIONS OF THE STUDY..................................................................................................................32
PROFILE OF THE ORGANISATIONS:............................................................................................................33
Objectives of LIC........................................................................................................................................34
HDFC STANDARD LIFE INSURANCE........................................................................................................37
RESEARCH METHODOLOGY.......................................................................................................................41
FINDINGS AND SUGGESSION.....................................................................................................................50
CONCLUSION.............................................................................................................................................52
APPENDISES...............................................................................................................................................53
BIBLIOGRAPHY...........................................................................................................................................54
 INTRODUCTION
Insurance is a means of protection from financial loss. It is a form of risk
management primarily used to hedge against the risk of a contingent, uncertain
loss.

An entity which provides insurance is known as an insurer, insurance company, or

insurance carrier. A person or entity who buys insurance is known as an insured or
policyholder. The insurance transaction involves the insured assuming a
guaranteed and known relatively small loss in the form of payment to the insurer in
exchange for the insurer's promise to compensate the insured in the event of a
covered loss. The loss may or may not be financial, but it must be reducible to
financial terms, and must involve something in which the insured has an insurable
interest established by ownership, possession, or preexisting relationship.

The insured receives a contract, called the insurance policy, which details the
conditions and circumstances under which the insured will be financially
compensated. The amount of money charged by the insurer to the insured for the
coverage set forth in the insurance policy is called the premium. If the insured
experiences a loss which is potentially covered by the insurance policy, the insured
submits a claim to the insurer for processing by a claims adjuster.

In India, insurance has a deep-rooted history. Insurance in various forms has been
mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra)
and Kautilya (Arthashastra). The fundamental basis of the historical reference to
insurance in these ancient Indian texts is the same i.e. pooling of resources that
could be re-distributed in times of calamities such as fire, floods, epidemics and
famine. The early references to Insurance in these texts have reference to marine
trade loans and carriers' contracts.

6
The Government of India issued an Ordinance on 19 January 1956 nationalizing
the Life Insurance sector and Life Insurance Corporation came into existence in the
same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-
Indian insurers as also 75 provident societies 245 Indian and foreign insurers in all.
In 1972 with the General Insurance Business Act was passed by the Indian
Parliament, and consequently, General Insurance business was nationalized with
effect from 1 January 1973. 107 insurers were amalgamated and grouped into four
companies, namely National Insurance Company Ltd., the New India Assurance
Company Ltd., the Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance Corporation of India was
incorporated as a company in 1971 and it commence business on 1 January 1973.
 IMPORTANCE OF INSURANCE
Insurance benefits society by allowing individuals to share the risks faced by
many people. But it also serves many other important economic and societal
functions. Because insurance is available and affordable, banks can make loans
with the assurance that the loan’s collateral (property that can be taken as payment
if a loan goes unpaid) is covered against damage. This increased availability of
credit helps people buy homes and cars. Insurance also provides the capital that
communities need to quickly rebuild and recover economically from natural
disasters, such as tornadoes or hurricanes. Insurance itself has become a significant
economic force in most industrialized countries. Employers buy insurance to cover
their employees against work-related injuries and health problems. Businesses also
insure their property, including technology used in production, against damage and
theft. Because it makes business operations safer, insurance encourages businesses
to make economic transactions, which benefits the economies of countries. In
addition, millions of people work for insurance companies and related businesses.
In 1996 more than 2.4 million people worked in the insurance industry in the
United States and Canada.

Insurance as an investment that offers a lot more in terms of returns, risk cover &
as also that tax concessions & added bonuses. Not all
effects of insurance are positive ones.

The possibility of earning insurance payments motivates some people to attempt to 
cause damage or losses.  Without the possibility of collecting insurance benefits,
for instance, no one would think of arson, the willful destruction of property by
fire, as a potential source of money.

8
 THE INSURANCE INDUSTRY TODAY

Since the 1970s, the insurance business has grown dramatically and undergone
tremendous changes. As a result of the deregulation of financial services
businesses— including insurance, banking, and securities trading—the roles,
products, and services of these formerly distinct businesses have become blurred.
For instance, citizens in the U.S. state of California voted in 1988 to allow banks to
sell insurance in that state. In Canada, banks may also soon be allowed to sell
insurance. Advances in communications technology have also allowed traditionally
distinct financial businesses to keep instantaneous track of developments in
other businesses and compete for some of the same customers. Some insurance
companies now offer deposit accounts and mortgages. In the United States, life
insurance companies now sell more pension plans and other asset management
services than they do conventional life insurance. Developments in computer
technology that have given insurance providers the ability to quickly access and
process information have allowed them to custom-design policies to fit the needs
of individual customers. But the increasing complexity of policies has also made
some aspects of buying and selling insurance more difficult. In addition,
improvements in geological and meteorological technology have the potential
to change the way property insurers calculate risks of damage. For example, as
scientists improve their abilities to predict severe weather patterns, such as
hurricanes, and geological disturbances, such as earthquakes, insurers may change
how they provide protection against losses from such events.
 EVOLUTION OF INSURANCE IN INDIA
The marine insurance is the oldest form of insurance. If we trace Indian
historythere are evidence that marine insurance was practiced here about three
thousand yearsago. The code of Manu indicates that there was the practice of
marine insurance carriedout by the traders in India with those of Sri-lanka, Egypt
and Greece .it is wonderful to seethat Indians had even anticipated the doctrine of
average and contribution. Fright wasfixed according to season and was then very
much at the mercy of the wind and other elements. Travelers by sea and land were
very much exposed to the risk of losing their vessels and merchandise because of
piracy on open seas and highway robbery of caravans was very common. The
practice of insurance was very common during the ruleof Akbar to Aurangzeb, but
the nature and coverage of the insurance in this period is notwell known..The first
company known as the sun insurance office was set up in Calcutta in the year
1710.This was followed by several insurance companies like London assurance
and royal exchange assurance (1720), Phoenix Assurance Company (1782). Etc.

General Insurance business in the country was nationalized with effect from
1st January 1973 by theGeneral Insurance Business (Nationalization) Act, 1972.
More than 100 non-lifeinsurance companies including branches of foreign
companies operating within thecountry were amalgamated and grouped into four
companies, viz., the National InsuranceCompany Ltd., the New India Assurance
Company Ltd., the Oriental Insurance CompanyLtd., and the United India
Insurance Company Ltd. with head offices at Calcutta,Bombay, New Delhi and
Madras, respectively.

 Life insurance in the current form came in India from united kingdomwith the
establishment of a British firm, oriental life assurance company in 1818
followed by Bombay life assurance company in 1823, the madras equitable life

10
insurance societyin 1829 and oriental life assurance company in 1874.prior to
1871, Indian lives weretreated as sub standard and charged an extra premium of
15% to 20%. Bombay mutuallife assurance society, an Indian insurer that came in
to existence in 1871, was the first tocover Indian lives at normal rates. The Indian
insurance company Act 1923 was enactedinter alia, to enable the government to
collect statistical information about life and non-life insurance business transacted
in India by Indian and foreign insurer, including the provident insurance societies.

The aggregate effect of these events led to a high rate of bankruptcies and
liquidation of life insurance companies in India. This had adversely affected the
faith of the general public in the utility of obtaining life cover.  In this background,
the Parliament of India passed the Life Insurance of India Act on19thJune 1956,
and the Life Insurance Corporation of India was created on 1stSeptember, 1956, by
consolidating the life insurance business of 245 private life insurers and other
entities offering life insurance services.

Since 1972, the insurance sector has been totally under the control of government
of India through LIC and GIC and its subsidiaries. As a result, revenue of both of
them increased in the last years the amount of savings pooled by LIC increased
from Rs.2704 crores in 1974 to Rs.57670 in 1994 with an annual growth rate of
16.53%.similarly premium underwritten by GIC rose from 280 crores in 193 to
7647 crores in1998 showing an annual growth rate of 25.18%.Despite increase in
premium collected by both LIC and GIC there were inefficiencyand red
tapeisumcreeped in to the insurance sector. Apart from that a major policy shift by
the Narasimha Rau government during 1990’s.the Indian economy opened for
foreign competition .In this background The government of India in 1993 had set-
up a high powered committee by R.N.
Malhothra,former governor reserve bank of India, toexamine the structure of
Indian insurance sector and recommended changes to make itmore efficient and
competitive keeping in view structural changes in other part of thefinancial system
of the country. Insurance sector has been opened up for competition from Indian
private insurance companies with the enactment of Insurance Regulatory and
Development Authority Act,1999 (IRDA Act). As per the provisions of IRDA Act,
1999, Insurance Regulatory and Development Authority (IRDA) was established
on 19th April 2000 to protect the interests of holder of insurance policy and to
regulate, promote and ensure orderly growth of the insurance industry. IRDA Act
1999 paved the way for the entry of private players into the insurance market,
which was hitherto the exclusive privilege of public sector insurance companies/
corporations.

12
 EVOLUTION OF INSURANCE ORGANIZATION
With a view to serve the society, the insurance organizations have been developed
in different forms with innovation of insurance practice for social welfare and
development; some of these forms are outlined here.

a) Self-insurance
The arrangement in which an individual or concern sets up a private fund to meet
the future risk. If some losses happened in the future the firm meets the loss out of
the fund. While it may be called ‘self insurance’ it is not a single matter of fact,
insurance atoll because there is no hedge, no shifting, or distributing the burden of
risk among larger Persons. It is merely a provision to meeting the unforeseen
event. Here the insured become the insurer for the
particular risk. But it can be effectively worked only when there is wide
distribution of risks subjected the same hazard.

b) Partnership
A partnership firm may also carry on the insurance business for the sake of profit.
Since it’s not an entity distinct from the persons comprising it, the personal
liability of partners in respect to the partnership debts is unlimited. In case of huge
loss the partners may have to pay from their own personal funds and it will not be
profitable to them to starts insurance business in the early period before the advent

of joint stock companies many insurance undertakings were partnership firms or

unincorporated companies.

c) Joint stock companies

The joint stock companies are those, which are organized by the shareholders who
subscribe the necessary capital to start the business. These are formed for earning
profits for the stockholders who are the real owners of the companies. The
management of accompany is entrusted to a board of directors who is elected by
the shareholders from amongst themselves. The company can operate insurance
business and policyholders have nothing to do with the management of the
concern. But in life insurance it is the practice to share certain portion of profit
among the certain policyholders. 

d) Mutual fund companies

The mutual fund companies are co- operative association formed for
the purpose of effecting insurance on the property of its members. The policyholde
rs arethemselves the shareholders of the companies each member is insured as well
as insured. They have power to participate in management and in the profit sharing
to the full extent. Whenever the income is more than the expenses and claims, it is
accumulated I the form of saving and is entitled in reducing the rate of premium.
Since the insured are insurers also, they always try to reduce the management
expenses and to keep the business at sound level.

e) Co-operative insurance organizations

Cooperative insurance organizations are those concerns, which are incorporated

and registered under Indian cooperative societies Act. The concerns are also called
‘cooperative insurance societies’ these societies like mutual fund companies are
nonprofit organization .the aim is to provide insurance protection to its members at
the lowest reasonable net cost the Indian insurance Act. 1938, has provided
special provisions for the co-operative insurance societies, but after nationalization 
the societies have ceased to exist.

f) Lloyd’s Association

14
Lloyd’s association is one of the greatest insurance institutions in the world.Taking
its name from the coffee house Lloyd where underwriters assembled to
transact business and pickup news. The organization traces its origins to the latter p
art of theseventeenth century .so it is the oldest insurance organization in existing
form in theworld. In 1871,Lloyds Act was passed incorporating the members of the
association intoa single corporate body with perpetual succession and a corporate
seal .the powers of Lloyds corporation were extended from the business of marine
insurance to the other insurance and guarantee business. The Lloyds Association
also publishes, Lloyds list andregister of shipping for the information of insuring
public and the insurers

g) State Insurance

The government of a nation, sometimes, owns the insurance and runs

the business for the benefit of the public. The sate insurance is defined as that insur
ancewhich is under public sector. In Brazil, Japan and Mexico, the insurance are
largely nationalized. Previously, the state undertook only those insurances, which
were regardedas vital for the national interest.
 ABSTRACT
With the privatization of insurance, monopolistic competition of public sector
insurance companies came to anend, giving wider opportunities to the customers to
select their insurers as per their requirements. In todays hypercompetitive
environment, insurers are operating under shrinking premiums, growing customer
expectations and tightening regulations which are narrowing their margins. Falling
investment returns, tougher competition, rising operational costs, managing risks,
supporting multiple distribution channels, complying with regulatory changes and
shifting customer preferences are sticky areas any insurance company has to tread
on, at any time. With the entry of private players, the competition is becoming
intense. In this paper, an attempt is made to analyze the performance of public and
private nonlife insurance companies in India.

INTRODUCTION
The insurance industry today functions in a highly competitive environment, with
increasing private participationand an expanding product portfolio. In this
changing landscape, insurers have to invent ways to offer more value than ever
before. The various components of non- life Insurance or general insurance are
fire, marine, motor, engineering, health and aviation. Chart 1 shows the Insurance
industry in India. There are 24 non-life insurance companies operating in I3ndia, of
which four are under public sector, three standalone health insurers and the two
specialized institutions.

16
 Insurance Industry in India

Life Insurance Non-Life Insurance / General Insurance

Motor Fire Health Marine

Insurance Insurance Insurance Insurance

The general insurance industry is estimated to grow by over 18 percent to reach a

size of Rs 100,000 crore by2015 and Rs. 2, 50,000crore by 2020. The current size
of the non-life industry is Rs. 58,344 crore growing at the rate of 23.16%. In terms
of penetration general insurance in India is 0.60 percent of GDP against the world
average of 2.14 percent. The huge market largely remains untapped in both rural
and urban India as 70 percent of the population is still not touched by insurance
companies.
Source: IRDA Annual Report 2010-11

The potential and performance of the insurance sector is universally assessed with
reference to two parameters,

viz., Insurance Penetration and Insurance Density. Insurance penetration is defined

as the ratio of premium underwritten in a given year to the Gross Domestic Product
(GDP). Insurance density is defined as the ratio of premium underwritten in a
given year to the total population (measured in USD). The insurance penetration
was 2.32 per cent (Life: 1.77 per cent and Non-life: 0.55 per cent) in the year 2000
when the sector was opened up for private sector. It increased to 5.10 per cent in
2010 (Life: 4.40 per cent and Non-life: 0.70 per cent). The insurance density stood
at USD 64.4 in 2010 (Life: USD 55.7 and Non-life: USD 8.7) from USD 9.9 in
2000 (Life: USD 7.6 and Non-life: USD 2.3). The non-life insurance sector
witnessed significant growth of 8.1 per cent during 2010. Its performance is far
better when compared to global non-life premium, which expanded by 2.1 per cent
during the same period. The share of Indian non-life insurance premium in global
non-life insurance premium increased slightly to 0.58 per cent, thereby
improvising its global ranking to 19th in comparison to 26th rank. Table 2 shows
the details of market share of public and private non-life insurance companies for
the years 2009-10 and 2010-11.

Among Public sector undertakings market leader and public sector giant New India
Assurance stood with 16.75 per cent market share, followed by United India. In the
private sector ICICI Lombard is the leader as far as market share is concerned. Till
March 2009, private players were growing faster than their public sector
counterparts, but after wards registered a low market share. Non-Life insurers
contributed to the extent of only 5 per cent of total investments held by the

18
insurance industry. The total investments of the sector, as on 31st March, 2011,
stood at Rs. 82,520 crore.

During 2010- 11, the net increase in investments was Rs. 16,148 crore (24.33 per
cent growth over previous year), up from Rs. 66,372 crore in 2009-10.

Statement showing Market Share of Public and Private Non- Life Insurance
Companies
Insurance Companies 2009-10 2010-11
Private Sector
Royal Sundaram 2.67 2.71
Reliance General 6.04 3.98
IFFCO Tokio 4.22 4.18
TATA AIG General 2.53 2.79
Bajaj Allianz General 7.25 6.79
ICICI Lombard 9.81 10.2
Cholamandalam General 2.37 2.31
Cholamandalam General 2.37 2.31
Cholamandalam General 2.37 2.31
Future Generali 1.10 1.45
Universal Sompo 0.51 0.68
Shriram General 1.18 1.81
Bharti AXA General 0.08 1.29
Raheja QBE - - 0.01
SBI General - - 0.08
L&T General - - 0.02
Public Sector
United India 14.88 14.96
Oriental Insurance 13.53 12.48
National Insurance 13.41 14.15
New India Insurance 17.74 16.75
Total 100.00 100.00

20
 Number of New Policies Issued:

During 2010-11the non-life insurers have issued 793 lakh new policies, out of
which 506 lakh policies are issued

by public sector and the private sector has issued 287 lakh policies. While public
sector reported an increase of 16.52 percent (-3.84 percent in 2009-10) in the
number of policies issued over the previous year, the private sector insurers
reported a decline of 9.86 percent (19.44 percent increase in 2010-11) in the
number of new policies issued. Overall the industry witnessed a 17.56 percent
increase (0.64 percent in 2009-10) in the number of policies issued.

Table 3 displays the details of number of new policies issued by public and private
non-life insurance companies

from 2002-03 to 2010-11.

Non-Life Insurers: Number of Policies Issued

(Rs in Lakhs)

Insurer 2010- 2009- 2008- 2007- 2006- 2005- 2004- 2003- 2002-03
11 10 09 08 07 06 05 04
Public 505.76 434.04 451.37 385.47 339.72 421.93 446.34 384.27 418.85
Sector
 (16.52) (-3.84) (17.09) (13.47) (- (-5.47) (16.15) (-8.26) -
19.48)
Private 287.652 240.84 219.23 187.03 126.92 89.48 51.45 32.99 16.77
Sector

(19.44) (9.86) (17.21)) (47.36) (41.85) (73.92) (55.96) (96.72) -

TOTA 793.41 674.88 670.60 572.50 466.64 511.41 497.79 417.26 435.62
L

(17.56) (0.64) (17.13) (22.69) (-8.75) (2.74) (19.30) (-4.21) -

-

Source: IRDA Annual reports

OPERATIONAL DEFINITIONS OF THE STUDY

 Marketing:

Marketing is a social and managerial process by which individuals and group

obtain what they need and want through creating, offering and exchanging
products of value with others.

 Marketing Management:

22
Marketing Management is the process of planning and executing the conception,
pricing, promotion and distribution of individual and organizational goals.

 Marketing Research:

Marketing research is the systematic and objective search for, and analysis of
information relevant to the identification and solution of any problems in the field
of marketing.

 Consumer Research:

Consumer research is the methodology used to study consumer behavior.

 Consumer Behavior:

Consumer behavior is the study of how individuals make decisions to spend

their available resources [time, money, efforts] on consumption related items.

 Market Segmentation:

Market segmentation is the process of dividing a market in the distinct subsets

of consumer with common needs or characteristics and selecting one or more
segments to target with distinct marketing mix.

 Positioning:

Positioning is the act of designing the company’s offering and image so that they
occupy a meaningful and distinct competitive position in the target consumer’s
mind.

 Perception:
Perception is the process by which an individual selects, organizes, and interprets
information input to create a meaningful picture of the world. For a marketer to
influence a motivated buyer to buy their products rather than competitors they
must be careful to take the perception process into account while designing their
marketing campaigns. Perception therefore influence what product consumer buys.

 Attitude:

An attitude is a person enduring favorable or unfavorable evaluation, emotional

feeling, and action tendencies towards some object or idea.

 Attributes:

Attributes are the strengths and weaknesses of a brand that create attitudes and are
used by consumers to choose between brands that are relatively similar or function
ally equivalent

 Values:

A value is a concept of the desirable. An internalized standard of evaluation a

person possession. This standard determines or guide an individual evaluation of
the many objects encountered in everyday life.

 Brand:

RESEARCH DESIGN
STATEMENT OF THE PROBLEM:

The process of Globalization and Liberalization has influenced Indian Insurance

Sector. The Public Sector Life Insurance Corporation and Private Sector
24
companies have been competing with each other for providing best services and
best products to the customers. Customer is kind in any market and Insurance
Market is no exception. Every company is trying for innovative product to satisfy
customers' needs.
This research paper attempt to analyses the performance of Insurance Company in
Public Sector LIC and Private Companies operating in India under the provisions
of IRDA, 1999.
This Study will help us to understand the consumer’s perception about life
insurance companies. This study will help the companies to understand, how a
consumer selects, organizes and interprets the Quality of service and product
offered by life insurance companies.

SCOPE OF THE STUDY

This study is limited to the consumers within the limit of Bangalore city. The study
will be able to reveal the preferences, needs, perception of the customers regarding
the life insurance products, It also help the insurance companies to know whether
the existing products are really satisfying the customer’s needs .

NEED FOR THE STUDY:

The deeper the understanding of consumer’s needs and perception, the earlier the
product is introduced ahead of competitors, the expected contribution margin will
be greater .Hence the study is very important.
Consumer markets and consumer buying behavior can be understood before sound
product and marketing plans are developed

This study will help companies to customize the service and product, according to
the consumer’s need.

This study will also help the companies to understand the experience and
expectations of the existing customers.

Apart from creating, manufacturing and distribution capabilities for life insurance
products, an in depth study of the consumers, their preferences and demand for
their product is very necessary for setting up an efficient marketing network.

INSURANCE AND BUSINESS ENVIRONMENT

Insurance is considered as one of the important segment of the economy for its
growth and development. This industry provides long term funds which are
essential for the growth and development of the nation .so the growth of insurance
industry largely depends up on the environment in which they exists. Here I would
like to mention about Indian business environment and their impact on insurance
sector. There are two type of environment which affect the business one is
environment which is internal to the organization (internal environment) and the
other one which is external to the organization (external environment). Internal
environment includes management, technology, competitors, employees,
shareholders, policyholders, marketing intermediary etc. 

The external environment of insurance business has been classified in four parts,
namely legal, economic, financial, and commercial. let us discus them in detail by
taking one by one.

26
There are a number of policies for specific insurance needs. Some of these include:

Family income life insurance.

This is a decreasing term policy that provides a stated income for a fixed period
of time, if the insured person dies during the term of coverage. These payments
continue until the end of a time period specified when the policy is purchased.

Family insurance.

A whole life policy that insures all the members of an immediate family --husband,
wife and children. Usually the coverage is sold in units per person, with the
primary wage-earner insured for the greatest amount.

Senior life insurance.

Also known as graded death benefit plans, they provide for a graded amount to
be paid to the beneficiary. For example, in each of the first three to five years
after the insured dies, the death benefit slowly increases. After that period, the
entire death benefit is paid to the beneficiary. This might be appropriate if
the beneficiary is not able to handle a large amount of money soon after the death,
but would be in a better position to handle it a few years later.

Juvenile insurance.

This is life insurance on a child. Coverage is paid for by an adult, usually

the parents or guardians. Such policies are not considered traditional life
insurance because the child is not producing an income that needs to be protected.
However, by buying the policy when the child is young, the parents are able to
lock in an extremely low premium rate and allow many more years of tax-deferred
cash value buildup.

Credit life insurance.

This insurance is designed to pay off the balance of a loan if you die before you
have repaid it. Credit life insurance is available for many kinds of loans including
student loans, auto loans, farm equipment loans, furniture and other personal loans
including credit cards. Credit life insurance can be purchased by an individual.
Usually it is sold by financial institutions making loans, like banks, to borrowers at
the time they take out the loan. If a borrower dies, the proceeds of the policy repay
the loan directly to the lender or creditor.6.

Mortgage insurance

This decreasing term coverage is designed to pay off the unpaid balance of a
mortgage if you die before the mortgage is paid off. Premiums are generally level
throughout the term of the policy. The policy is usually independent of the
mortgage, meaning that the financial institution granting the mortgage is separate
from the insurance company issuing the policy. The proceeds of the policy are paid
to the beneficiaries of the policy, not the mortgage company. The beneficiary is not
required to use the proceeds to pay off the mortgage

Annuity

An annuity is a form of insurance that enables you to save for your retirement.
Basically, you give the insurance company money for a certain period of time, and

28
then after you retire they will pay you a certain amount of money every year until
you die. There are many different forms of annuities. Most people who buy
annuities are 55 or older.

INSURANCE SECTOR REFORMS
Having looked at the insurance sector, the efforts made by the government to make
the industry more dynamic and customer friendly. To begin with, the Malhotra
Committee was set up with the objective of suggesting changes that would achieve
the much required dynamism.

The Malhotra Committee Report :

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. In 1994, the committee submitted the report
and gave the following recommendations:

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

 Competition 

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

enter the industry 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.

Regulatory Body 

The Insurance Act should be changed. An Insurance Regulatory body should be set
up. Controller of Insurance (Currently a part from the Finance Ministry)

Investments 

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

from75% 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).

30
 OBJECTIVE OF THE STUDY

 Ascertain the profile and characteristics of potential buyers.

 To have an insight into the attitudes and behaviors of customers.

 To find out the differences among perceived service and expected service.

 To produce an executive service report to upgrade service characteristics

of life insurance companies.

 To access the degree of satisfaction of the consumers with their current

brand of Insurance products.
 RESEARCH METHODOLOGY
The data is basically secondary in nature collected from the annual reports of
IRDA, from the various journals,research articles and websites. An attempt is
made to analysis whether there is any significant difference in the growth of
number of new policies, gross direct premium collected and net incurred claims
among public and private non-life insurance companies or not. For this purpose,
Mann-Whitney – U- Test was applied. Mann-Whitney U Test is a nonparametric
test. This test is used to determine whether two independent samples have been
drawn from the same population.

SOURCES OF DATA:
After identifying and defining the research problem and determining specific
information required to solve the problem the researcher will look for the type and
sources of data which may yield the desired results, while deciding about the
method of data collection to be used for the study, there are two types of data.

Secondary Data:

Secondary data means data that are already available i.e. they refer to the data
which have been collected and analyzed by someone and can save both money 
and time of the researcher. Secondary data may be available in the form of
company records, trade publications, libraries etc. Secondary data sources are as
follows:

Company Reports Daily Newspaper Standard Textbook Various Websites

Primary Data:

32
Primary data are those, which are collected for the first time. Primary data is
collected by framing questionnaires. The questionnaire contained questions, which
are both open-ended and closed-ended. Open-ended questions are
questions requiring answers in the responder’s own words. Closed-ended questions
are those wherein the respondent has to merely check the appropriate answer from
a list of options available. Any doubts raised by the respondents were clarified
to get the perfect answers from the distributors. Open-ended questions yielded
more insightful information, whereas closed-Ended questions were relatively
simple to tabulate and analyze.

LIMITATIONS OF THE STUDY

Although the study was carried out with extreme enthusiasm and careful planning
there are several limitations, which handicapped the research viz.

Time Constraints:

The time stipulated for the project to be completed is less and thus there are
chances that some information might have been left out, however due care is taken
to include all the relevant information needed.

Sample size:

Due to time constraints the sample size was relatively small and would definitely
have been more representative if I had collected information from more
respondents.

Accuracy:

It is difficult to know if all the respondents gave accurate information; some

respondents tend to give misleading information
 PROFILE OF THE ORGANISATIONS:

LIFE INSURANCE CORPORATION OF INDIA

Life Insurance Corporation of India was formed in September 1956 by passing LIC
Act, 1956 in Indian parliament. On the nationalization of the life insurance in
1956, the premium rating of Oriental Government security life Assurance company
were adopted by LIC with a reduction of 5% of the tabular premium or Re. 1
per thousand sum assured, whichever was less. This reduction was made in
anticipation of economies of scale that would emerge on the merger of different
insurers in a single entity. Life Insurance Corporation Of India - there are many
things to consider as Life Insurance Corporation of India offers various insurance
products which are very complex, but underlying this complexity is a simple fact.
The building blocks for all Life Insurance Corporation of India are (1) investment
return; (2) mortality experience; and (3) expense management; for your Life
Insurance Corporation Of India

34
 

Objectives of LIC
 Spread Life Insurance much more widely and in particular to the rural areas
and to the socially and economically backward classes with a view to
reaching all insurable persons in the country and providing them adequate
financial cover against death at a reasonable cost.
 Maximize mobilization of people's savings by making insurance-linked
savings adequately attractive.
 Bear in mind, in the investment of funds, the primary obligation to
its policyholders, whose money it holds in trust, without losing sight of the i
nterestof the community as a whole; the funds to be deployed to the best
advantage of the investors as well as the community as a whole, keeping in
view national priorities and obligations of attractive return.
 Conduct business with utmost economy and with the full realization that the
moneys belong to the policyholders.
 Act as trustees of the insured public in their individual and collective
capacities.
 Meet the various life insurance needs of the community that would arise in
the changing social and economic environment.
 Involve all people working in the Corporation to the best of their capability
in furthering the interests of the insured public by providing efficient service
with courtesy. Promote amongst all agents and employees of the
Corporation a sense of
 participation, pride and job satisfaction through discharge of their duties wit
h dedication towardsachievement of Corporate Objective

VISION

"A trans-nationally competitive financial conglomerate of significance to societies

and Pride of India “

MISSION

"Explore and enhance the quality of life of people through financial security by
providing products and services of aspired attributes with competitive returns, and 
by renderingresources for economic development”

Various policies offered by life insurance corporation of India are

1) Whole Life Schemes

Whole life with profit 

Limited payment whole life

Single Premium whole life

Convertible whole life plan

2) Endowment Schemes

Endowment plan with profit

36
Limited payment Endowment

Jeevan Mitra (Double Cover)

Jeevan Mitra (Triple cover)

Bhavishya Jeevan

Jeevan Anand

New Jana Raksha

3) Term Assurance Plan

Anmol Jeevan

2 Year Term Assurance

Covertible Term

New Bima Kiran

Few Life Insurance policies are:

Whole life policies

- Cover the insured for life. The insured does not receive money while he is alive;
the nominee receives the sum assured plus bonus upon death of the insured.

Endowment policies

- Cover the insured for a specific period. The insured receives money on survival
of the term and is not covered thereafter.
Money back policies

- The nominee receives money immediately on death of the insured. On survival

the insured receives money at regular intervals during the term. These policies cost
more than endowment with profit policies.

Annuities / Children's policies

- The nominee receives a guaranteed amount of money at a pre-determined time

and not immediately on death of the insured. On survival the insured receives
money at the same pre-determined time. These policies are best suited for planning
children's future education and marriage costs.

Pension schemes

- are policies that provide benefits to the insured only upon retirement. If the
insured dies during the term of the policy, his nominee would receive the benefits
either as a lump sum or as a pension every month. Since a single policy cannot
meet all the insurance objectives, one should have a portfolio of policies covering
all the needs 

HDFC STANDARD LIFE INSURANCE

The Partnership:

 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,
38
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. 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. The Mutual Fund
was launched on 20th July 2000

Incorporation of HDFC Standard Life Insurance Company Limited:

The company was incorporated on 14th August 2000 under the name of HDFC
Standard Life Insurance Company Limited. Companies 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 realized 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. Products offered by the company are:

40
INDIVIDUAL PLAN GROUP PLANS

With Profit Endowment Assurance Group Term Insurance

Single Premium Whole of Life Development Insurance Plan

Term assurance Plan

Loan Cover Term Assurance

Personal Pension Plan

Children’s Plan

SCORES OF DIFFERENT LIFE INSURANCE COMPANIES 

COMPANIES   SCORES RANK

LIC 345 1
ICICI PRUDENTIAL  211 2
HDFC 194 3
TATA AIG 123 4
ING VYSYA 121 5
BIRLA SUNLIFE 118 6
MET LIFE 90 7
OTHERS 41 8

From the table we can rank the life insurance companies, LIC stands first, followed
by ICICI Prudential followed by HDFC Standard life, followed by TATA AIG.
 RESEARCH METHODOLOGY

 The documents include the most common method of data collection used in
 qualitative research
 The literature review section critically examine the recent or historically
significant studies, company data or industry reports that acts as a basis for
proposed studies to begin with the research discussion of the related
literature and relevant secondary data from a comprehensive prospective,
moving to more specific studies, that are associate with research problem.
Basically the literature should be applied to the study, than the researcher
proposes. The literature may also explain the needs for the proposed work to
appraise the short comings and informational gaps in secondary data
sources. To carry the research work the researcher has gone through a few
reports, books,
journals and websites. The details regarding Life Insurance Industry, history,
origin and growth of the industry is also taken from some books, magazines
etc. The sources of this information are as follows:
 Catalogues and Broachers from various life insurance companies.
 Articles from magazines and news paper.

What factors influenced to select a Life Insurance company?

a) Personal interest 
b) Friends
c) Family
d) Agents
e) Advertisements
f) Others

42
 What factors influenced to select a Life Insurance
company?

4%
Personal interest 
21%
Friends 
25%
Family
Agents
8% Advertisements
others

14%

28%

ANALYSIS
21% of the people are influenced to select a life insurance company by personal interest 8% persons
are influenced by friends 28% of the people are influenced by the insurance agents 14% are influenced
by family members 25% of people are influenced of advertisements. Advertisement industry plays a
big role in insurance industry. 4% of the people are influenced by other factors

What is the value of your life insurance?

a) >10,000 
b) 10,000-25,000
c) 25,000-50,000
d) 50,000-1,00,000
 e) <1,00,000

What is the value of your life insurance?

8%

10%

36% >10,000 
10,000-25,000 
25,000-50,000
50,000-1,00,000
18% <1,00,000

27%

ANALYSIS
Generally people who invest below 10000 are 34%. People who invest in range
of 10000 to 25000 are 28%. People who invest in range of 25000 to 50000 are
19%. People who invest in range of 50000 to 100000 are 10%. People who
invest more than 1000000 are 8%

what do you prefer in investing?

a) Insurance Company
b) Bank

44
 What do you prefer in investing?

38%
Insurance Company
Bank 

62%

ANALYSIS
Generally people tend to invest in banks than insurance companies. People who
invest in banks are 62% and people who invest in insurance companies are 38%

Are you satisfied with your current Life Insurance Company?

a) Yes
b) No
 Are you satisfied with your current Life Insurance
Company?

18%

YES

NO

82%

ANALYSIS
According to the survey, on an average 18% of the people are not satisfied by
the insurance companies for some reasons and 82% of the people are satisfied
with their insurance companies

How do you rate the service offered by your Life Insurance Company?
a) Excellent 
b) Very Good
c) Good
d) Average
e) Poor

46
 How do you rate the service offered by your Life Insurance
Company?

8%
12%

19% Excellent 

33%
Very Good 

Good

Average

Poor
28%

ANALYSIS
According to the survey people who rated the service offered by the life
insurance as excellent are 12% people who rated very good were 19% people
who rated good were 28% people who rated average were 33% people who rated
poor were just 8%
How many Life insurance Companies do you know?
a) <5
b) 5-7
c) 8-10
d) >10
 How many Life insurance Companies do you know?

4%

13%

<5 
35% 5-7 
8-10 
>10

48%

ANALYSIS
People generally know only the top rated companies people who know less than
five are 35%. People who know companies between five to seven are 48%.
People who know companies between eight to ten are 13%. Only less people
know companies more than 10 they are just 4%
How do you rate the following Life Insurance Companies?
a) LIC
b) HDFC
c) ING VYSYA
d) MET LIFE INDIA
e) BIRLA SUNLIFE
f) ICICI PRUDENTIAL
g) TATA AIG
h) OTHERS

48
 How do you rate the following Life Insurance Com-
panies?

3%
7%

27% LIC
13% HDFC

ING VYSYA

MET LIFE INDIA

BIRLA SUNLIFE

ICICI Prudential
18% 11% TATA AIG

Others

12%
9%

ANALYSIS
People generally invest in top rated companies people rated LIC as 27%
HDFC as 11% ING VYSYA as 12% MET LIFE as 9% BIRLA SUNLIFE as
18% ICICI Prudential as 13% TATA AIG as 7% Others as 3%

Would You like to continue with the same Life Insurance Company?

a) Yes
b) No
 Would You like to continue
with the same Life Insurance Company?

13%

YES
NO

87%

ANALYSIS
People who are satisfied with the same insurance company and would like to
continue are 87% people not satisfied and are not going to invest in the
previously invested company and who are thinking to change the company are
13%

Any suggestions for improving the service offered by life insurance

Companies?

FINDINGS AND SUGGESSION

 FINDINGS:

50
 The majority of respondents belonged to the age group of 19 to 28years
which formed 48% followed by age group of 29 to 38 years which formed
26%.
 The majority of the consumers of life insurance companies are private
employees with 48% and Government employees with 40%
 The factors which influenced to select a life insurance company is
the personal factor, followed by family, friends, agents and advertisements.
 The value of respondents life insurance policy costs more than1, 00,000
followed by 50,000 to 1, 00,000.
 Majority of the people (52%) prefer to invest in bank others (48%) prefer to
invest in insurance company.Majority of consumers are satisfied with the
service and quality of products of their life insurance companies.
 Majority of consumers (78%) would like to communicate the service offered
by life insurance companies.
 Majority of consumers (58%) are aware about 5 to 7 life insurance
companies.
 LIC stands first followed by ICICI prudential, followed by HDFCStandard
Life

SUGGESTIONS:
 With regard to insurance companies, consumers respond at different rates,
depending on the consumers characteristics. Hence Insurance companies
should try to bring their new product to the attention of potential early
adopters
 Keeping the cost, quality and return on investment in tact is necessary
in order to tackle the competition.
 Return on investment, company reputation and premium outflow are
most preferred attributes that are expected by the respondents. Hence greater
focus should be given to these attributes.
 Private life insurance companies should adopt effective promotional
strategies to increase the awareness level among the consumers.
 Life insurance companies should ask for their consumer feedback to know
whether the consumers are really satisfied or dissatisfied with the service
and product of the companies. If they are dissatisfied, then the reasons
for dissatisfaction should be found out and should be corrected in future.
 The LIC brand name has earned a lot of goodwill and enjoys a high brand
equity. As there is intense competition in life insurance market, LIC should
work hard to maintain its top position and offer better service and product.

52
 CONCLUSION
An Insurance policy is an investment oriented plan. As compared to other
investment plans, the investment portfolio of the Insurance Policy functions like a 
mutual fund andother investment. It is invested in a portfolio of debt and equity
instruments, inconformity with the announced investment policy. Hence it grows
or erodes in line with the performance of that portfolio. From this study it reveals
that the consumer’s attitude towards Insurance Policy and Insurance Company
changed a lot. A 5 years before the consumers and the general public were not
interested to take an Insurance Policy but now days there are many options and
choices in front of the customers. They are interested to take high return policies in
order to secure their lives. People are aware of all the benefits and returns of
insurance policies. As a result of this new international and domestic companies
are coming to the Indian Market. Since there are many players in the Indian
Insurance Market the competition level is very high. So the companies are
introducing new schemes. From this it is found that The LIC is the major market
share holder in the insurance field. Even if there are many players in this field still
it is an untapped market. Only a few portion of Indian population is insured.

Comparatively public sectors firms have done well mostly because of their
aggressive pricing and the retention of business. New India Assurance in PSU
companies and ICICI Lombard in private companies will continue to hold the
leadership position for the next few years. The Indian general insurance market is
relatively underdeveloped. Higher disposable incomes, rising aspiration of the
people and growing awareness about need for insurance are some of the factors
that would continue to drive the growth of the insurance sector in India in the
coming decade.
 APPENDISES
 What factors do you consider while selecting Life Insurance Company?

 What factors influenced to select Life Insurance Company?

 What is the value of your life insurance?

 What do you prefer in investing?

 Are you satisfied with your current life insurance company?

 How do you rate the service offered b life insurance company?

 How many life insurance companies do you have?

 How do you rate the following life insurance companies?

 Would you like to continue with the same life insurance company?

54
 BIBLIOGRAPHY 
Dr. Singh, Avtar, Principles of Insurance Law, S Chand & Sons, Delhi,2003.2)

 Kotler Philip, Marketing Management, Pearson Education Inc. 11thEdition.4)

Rutchnee .T & K.S.Arun Kumar,Consumer preference & buying perception

of readymade silk garments, PGDSM, International center for training & research
in tropical sericulture,

Newspapers

Economic Times  Business Line

World Wide Web:

www.lic.com www.irda.org

www.wikipedia.com

https://en.wikipedia.org/wiki/Insurance_in_India

https://www.irdai.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?
page=PageNo4&mid=2

https://www.policybazaar.com/life-insurance

REFERENCES

1. Rao, V.S.K, “Retail Products – The Future of Non-Life Insurance”. The Journal
of Insurance Institute of India, Vol.No.1 Issue No.1 Oct-Dec, 2012

2. IRDA Annual Reports

3. Handbook on Indian Insurance Statistics 2009-10

4. Sethu, P.V., “Marketing Approach and Strategies of (non-life) General
Insurance in the Current Competitive Market”. The Insurance Times, Vol. XXXI
No.9, Sept, 2011.

A Comparative Study of Public and Private Non- Life Insurance Companies

in India 19

5. Jagendra Kumar, “This Fiscal may be deuce, for Private and Public Sector
General Insurers”, The InsuranceTimes, Vol. XXX No. 6, June, 2010

6. Rana, J.K., “The Ticketsize of General Insurance Market in India”. The

Insurance Times, Vol. XXXII No. 08,August, 2012.

7. Vinay Verma, “Efficiency and Effectiveness in Competitive Era in General

Insurance Companies in Public Sector”–A Journey of from objectives to Results in
2012-13, The Insurance Times, Vol. XXXII No. 04, April,2012.

8. Shiv Narayana M, “Forgotten Monies of the Non-Life Insurers”. The Insurance

Times, Vol. No.12, December,2010.

9. Guria, R.C., “Downsizing of Global Economy- Threats as well as Opportunities

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10. Selva Kumar, M. and Vimal Priyan, J., “A Comparative Study of Public and
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56