CHAPTER 1

INTRODUCTION

1.1

Overview of the insurance industry

1.2

Profile of the organization

1.3

Problems of HDFC SLIC

1.1)

OVERVIEW OF THE INDUSTRY INSURANCE INDUSTRY

INTRODUCTION
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.
With such a large population and the untapped market area of this population Insurance
happens to be a very big opportunity in India. Today it stands as a business growing at the
rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to
the countrys GDP .In spite of all this growth the statistics of the penetration of the
insurance in the country is very poor. Nearly 80% of Indian populations are without Life
insurance cover and the Health insurance. This is an indicator that growth potential for
the insurance sector is immense in India. It was due to this immense growth that the
regulations were introduced in the insurance sector and in continuation Malhotra
Committee was constituted by the government in 1993 to examine the various aspects of
the industry. The key element of the reform process was Participation of overseas
insurance companies with 26% capital. Creating a more efficient and competitive
financial system suitable for the requirements of the economy was the main idea behind
this reform.
Since then the insurance industry has gone through many sea changes .The competition
LIC started facing from these companies were threatening to the existence of LIC. Since
the liberalization of the industry the insurance industry has never looked back and today
stand as the one of the most competitive and exploring industry in India. The entry of the
private players and the increased use of the new distribution are in the limelight today.
The use of new distribution techniques and the IT tools has increased the scope of the
industry in the longer run.

A BRIEF HISTORY
The origin of insurance is very old .The time when we were not even born; man has
sought some sort of protection from the unpredictable calamities of the nature. The basic
urge in man to secure himself against any form of risk and uncertainty led to the origin of
insurance.
The business of life insurance in India in its existing form started in India in the year 1818
with the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in India are:
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 nationalized. LIC formed by an Act of Parliament, viz. LIC Act,
1956, with a capital contribution of Rs. 5 crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a
code of conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.
3

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the
general insurance business in India with effect from 1st January 1973.
107 insurers amalgamated and grouped into four companies viz.
1. National Insurance Company Ltd.

2. Oriental Insurance Company Ltd.

3. New India Assurance Company Ltd.

4. United India Insurance Company Ltd.

GIC incorporated as a company.

The Insurance Regulatory and Development Authority
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.
The other decisions taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of the
IRDAs 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, which are expected to be introduced by early next year.
Since being set up as an independent statutory body the IRDA has put in a framework of
globally compatible regulations. In the private sector 12 life insurance and 6 general
insurance companies have been registered.

CURRENT SCENARIO OF THE INDUSTRY

INSURANCE MARKET IN INDIA
India with about 200 million middle class household shows a huge untapped potential for
players in the insurance industry. Saturation of markets in many developed economies has
made the Indian market even more attractive for global insurance majors. The insurance
sector in India has come to a position of very high potential and competitiveness in the
market.
Innovative products and aggressive distribution have become the say of the day. Indians,
have always seen life insurance as a tax saving device, are now suddenly turning to the
private sector that are providing them new products and variety for their choice.

Life insurance industry is waiting for a big growth as many Indian and foreign companies
are waiting in the line for the green signal to start their operations. The Indian consumer
should be ready now because the market is going to give them an array of products,
different in price, features and benefits. How the customer is going to make his choice
will determine the future of the industry.
1. CUSTOMER SERVICE
Consumers remain the most important centre of the insurance sector. After the entry of
the foreign players the industry is seeing a lot of competition and thus improvement of the
customer service in the industry. Computerisation of operations and updating of
technology has become imperative in the current scenario. Foreign players are bringing in
international best practices in service through use of latest technologies. The one time
monopoly of the LIC and its agents are now going through a through revision and training
programmes to catch up with the other private players. Though lot is being done
for the increased customer service and adding technology to it but there is a long way to
go and various customer surveys indicate that the standards are still below customer
expectation levels.
2. DISTRIBUTION CHANNELS
Till date insurance agents still remain the main source through which insurance products
are sold. The concept is very well established in the country like India but still the
increasing use of other sources is imperative. It therefore makes sense to look at wellbalanced, alternative channels of distribution.
LIC has already well established and have an extensive distribution channel and presence.
New players may find it expensive and time consuming to bring up a distribution network
to such standards. Therefore they are looking to the diverse areas of distribution channel
to have an advantage. At present the distribution channels that are available in the market
are:
Direct selling
Corporate agents
Group selling
Brokers and cooperative societies
Banc assurance

BANCASURANCE - India has an extensive bank network established over the years.
What Insurance companies have to do is to just take advantage of the customers' longstanding trust and relationships with banks. This is a mutually beneficial situation as
banks can also expand their range of products on offer to customers, while the insurance
company will also earn profits from the exposure. Another advantage is that banks, with
their network in rural
areas, help to fulfill rural and social obligations stipulated by the Insurance Regulatory
and Development Authority (IRDA) recently. Insurance companies should see banc
assurance as a tool for increasing their market penetration in India. It is also good for the
one who sees banc assurance in terms of reduced price, high quality product and delivery
at doorsteps. Everybody is a winner here. The creation of banc assurance operations has
made an important impact on the financial services industry at large. This is though a new
concept but it has gained a lot of importance in the industry at present and has a great
future.
3. PRODUCT INNOVATION
There has been a plethora of new and innovative products offered by the new players.
Customers have tremendous choice from a large variety of products from pure term (risk)
insurance to unit-linked investment products. Customers are offered unbundled products
with a variety of benefits as riders from which they can choose. More customers are
buying products and services based on their true needs and not just traditional moneyback policies, which is not considered very appropriate for long-term protection and
savings. There is lots of saving and investment plans in the market. However, there are
still some key new products yet to be introduced - e.g. health products.
4. RURAL MARKETING
Rural India seems to have an appetite for mobile phones, computers, and cars and to add
to it we have insurance. In India with the private players having entered into the insurance
industry, the expected explosion in job opportunities may not actually happen but for
them the catchments area is the opportunities in the rural India. In India the insurance
business can be said to be "a marathon, not a sprint". This is because of the nature of the
business being long term. With merely two years of the industry being opened, not
surprisingly, the new comers are making losses. The public sector companies, notably the
LIC, have gained in strength, thanks to the deepening of the market consequent to the
6

awareness created by the new companies. However this does not deterred the private
sector, which knows know that the race is a marathon, not a sprint. However it seems that
they if not anything, are only increasing their spending,
though only out of the capital. Today, there are 18 insurance companies in India excluding
the PSUs, with 12 in the life insurance business and the rest in non-life .As
insurance companies go more and more rural in search of business, there will be
opportunities in the rural sector. A research conducted exhibited that the rural consumers
are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In
the insurance the awareness level for life insurance is the highest in rural India, but the
consumers are also aware about motor, accidents and cattle insurance. In a study
conducted by MART the results
showed that nearly one third said that they had purchased some kind of insurance with the
maximum penetration skewed in favor of life insurance. The study also pointed out the
private companies have huge task to play in creating awareness and credibility among the
rural populace. The perceived benefits of buying a life policy range from security of
income bulk return in future, daughter's marriage, children's education and good return on
savings, in that order, the study adds.
Regulatory and Development Authority (IRDA) have set stiff rural targets for insurance
companies. For the life sector, in the first year, 5 per cent of the total policies written
should come from the rural sector. This will go up to 15 per cent in five years. Similarly,
for the non-life sector, two per cent of the total gross premium income should come from
the rural sector going up to 5 per cent in five years, according to the regulation. All these
moves will make the investment the rural area a big start.
5. INFORMATION TECHNOLOGY AND INSURANCE
In the insurance industry today, there is a clear trend away from selling a broad range of
products to a large volume of customers in a one size-fits-all manners. Instead of
focusing on their different products lines as silos (i.e., life, property and casualty etc)
insurers are looking for ways to offer highly targeted insurance products that are tailored
to the individuals customers with the highest propensity to buy them.

There is a evolutionary change in the technology that has revolutionized the entire
insurance sector. Insurance industry is a data-rich industry, and thus, there is dire need to
use the data for trend analysis and personalization.
With increased competition among insurers, service has become a key issue. Moreover,
customers are getting increasingly sophisticated and tech-savvy. People today dont want
to accept the current value propositions, they want personalized interactions and they look
for more and more features and add ones and better service The insurance companies
today must meet the need of the hour for more and more personalized approach for
handling the customer. Today managing the customer intelligently is very critical for the
insurer especially in the very competitive environment. Companies need to apply
different set of rules and treatment strategies to different customer segments. However, to
personalize interactions, insurers are required to capture customer information in an
integrated system.
With the explosion of Website and greater access to direct product or policy information,
there is a need to developing better techniques to give customers a truly personalized
experience. Personalization helps organizations to reach their customers with more impact
and to generate new revenue through cross selling and up selling activities. To ensure that
the customers are receiving personalized information, many organizations are
incorporating knowledge database-repositories of content that typically include a search
engine and lets the customers locate the all document and information related to their
queries of request for services. Customers can hereby use the knowledge database to
mange their products or the company information and invoices, claim records, and
histories of the service inquiry. These products also may be able to learn from the
customers previous knowledge database and to use their information when determining
the relevance to the customers search request.
The insurance sector remains a very competitive market and those companies that are
able to best utilize their data and provide their customer with the most personalized
options will have the distinct competitive advantage. The insurers that come up to the top
will be those who leverage the appropriate technology solutions effectively in order to
foster customer loyalty, attract new customers and improve operational efficiency by
providing common information across their lines of business.

6. MERGERS AND AQUISITIONS

This is an era of mergers and acquisitions. Private companies including MNCs are
amalgamating the world over to get more competitive edge. Currently, the general
insurance industry has been opened up. The question here is that for over two years, eight
private companies have operated and has the size of the cake expanded. The insurers are
doing enough to raise the level of risk awareness or are they merely content to compete in
the markets organized and established. However sooner or later the private sector players
will have to put in place strategies aimed not at winning the existing accounts of the
public players but at diversifying markets penetration as a whole. The private players in
the future would have to turn their attention to working in the unorganized and under
served markets.
What is likely to happen is that the private players would continue to skim the profitable
segments of the already organized business in the urban areas? The time has already come
for the government of India to evaluate the performance of private companies vis--vis
their declared objective of opening up the industry.
However it is high time for the government to realize that importance of merging the
public sector general insurance companies into single entity. The resent scenario calls for
a better performance from part of each of the public sector insurance companies against
each other; or in other words a competition to be the best. The result what we see is the
undercutting of premium to retain or wrest business and quoting an uneconomical rate of
premium. While this allows one of the Public Sectors Company to win a business form
another in this manner. The others suffer a loss and the resultant effect is a cannibalization
with a fall in the average premium of the public sector itself. This at many times brings
advantage to the private players who grab the business because of the
unethical competition among the public players.
The purpose of having four companies all subsidiaries of General Insurance Corporation
of India (GIC) National Insurance Company, New India Assurance Company, Oriental
Insurance Company, And The United India Insurance Company; at the time of
nationalization was to have competition among themselves in service and products at the
same price. The service provided by them was also equally good or bad depending on the
experience of the customers.

Now with real competition coming in with most of the global insurance players setting
footprints here, it is felt that the time for merger has come and to enjoy the benefits if the
size. It is to be sated that size does matter in insurance business. All over the worlds
mergers and acquisitions in the risk-underwriting sector is common. The benefits if the
four insurance companies merge will be enormous. The merged entity will enjoy higher
underwriting and risk retention capacity; increase in reinsurance premium, reduction in
reinsurance outflow, healthy solvency margins, setting right the asset liability mismatch
and reduction in cost. The insurance market thus becomes a gambling place. Had the
public sector companies made into a single entity, perhaps the total premium of the four
public sector companies in the year 2003-04 would have gone up but 25 percent. But the
public sector alone is forced to underwrite the loss making motor third party liability
(TPL) insurance. The public insurance companies insured a loss of Rs 1943 crore on this
portfolio on just one year (03-04). The cumulative loss under this portfolio is
astronomical. The loss of profitable business in view of undeserved competition among
the public sector companies is hampering the subsidization of social insurance including
the motor TPL.
It is thus clear that it is good for the public sector companies to merge immediately when
they are still strong, lest a merger becomes inevitable later after the independent public
sector companies fail one after another. This does not bid well for the public sector, nor
fort he insuring public and not for the economic development either. For a progress me
require merger of strong public sector companies. Else it would render public sector
companies weak and destroy them.
POTENTIAL OF INSURANCE INDUSTRY IN INDIA :

Only ONE out of FIVE insurable population in India have insurance coverage.

In terms of Insurance premium per capita and premium per GDP, India ranks as
one of the lowest in the world.

Life insurance premium constitutes only 9% of domestic savings.

By 2010, hundred million elderly look to planning for old age pension and
annuities.

More than 325 million labor forces have no social security.

10

With an annual growth rate of 15-20% and the largest number of life insurance policies in
force, the potential of the Indian insurance industry is huge. Total value of the Indian
insurance market (2004-05) is estimated at Rs. 450 billion (US$10 billion). According to
government sources, the insurance and banking services' contribution to the country's
gross domestic product (GDP) is 7% out of which the gross premium collection forms a
significant part. The funds available with the state-owned Life Insurance Corporation
(LIC)for investments are 8% of GDP.
Till date, only 20% of the total insurable population of India is covered under various life
insurance schemes, the penetration rates of health and other non-life insurances in India is
also well below the international level. These facts indicate the of immense growth
potential of the insurance sector.
The year 1999 saw a revolution in the Indian insurance sector, as major structural changes
took place with the ending of government monopoly and the passage of the Insurance
Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for
private players and allowing foreign players to enter the market with some limits on direct
foreign ownership.
Though, the existing rule says that a foreign partner can hold 26% equity in an insurance
company, a proposal to increase this limit to 49% is pending with the government. Since
opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have
poured into the Indian market and 21 private companies have been granted licenses.
Innovative products, smart marketing, and aggressive distribution have enabled fledgling
private insurance companies to sign up Indian customers faster than anyone expected.
Indians, who had always seen life insurance as a tax saving device, are now suddenly
turning to the private sector and snapping up the new innovative products on offer.
The life insurance industry in India grew by an impressive 36%, with premium income
from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff
competition from private insurers. Though the total volume of LIC's business increased in
the last fiscal year (2004-2005) compared to the previous one, its market share came
11

down from 87.04 to 78.07%. The 14 private insurers increased their market share from
about 13% to about 22% in a year's time. The figures for the first two months of the fiscal
year 2005-06 also speak of the growing share of the private insurers. The share of LIC for
this period has further come down to 75 percent, while the private players have grabbed
over 24 percent.
There are presently 12 general insurance companies with four public sector companies
and eight private insurers. According to estimates, private insurance companies
collectively have a 10% share of the non-life insurance market.
1.2 PROFILE OF THE ORGANISATIONHDFC STANDARD LIFE INSURANCE
CO. LTD
HDFC

i.e

HOUSING

DEVELOPMENT AND

FINNANCE

CORPORATION.

HDFC Standard Life is a joint venture between HDFC of India and Standard Life of UK.
The new company, Hdfc Standard Life, was one of the first to be awarded a license in the
recently deregulated Indian market and one of the first to open its doors for business and
issue policies.
Founded in 1977, HDFC id Indias market leader in housing finance, providing finance
for more than 1.5mn homes. They have 83 offices in India, one international office in
Dubai and three service associates in Kuwait, Qatar and the Sultanate of Oman.
Like Standard Life, HDFC is strongly committed to providing quality products and
excellent customer service and has won a number of important awards : in Jan 2001
Asiamoney named them as second Best managed company in India.
HDFC is also financially very strong and for the last six years has enjoyed the highest
financial strength ratings from Indias two leading rating agencies.
The HDFC group includes:

HDFC Bank

HDFC Asset Management

HDFC Realty Ltd.

12

HDFC Securities Limited

Over the period of operations, HDFC group has been felicitated with various rewards.
Some of them are as follows:

United Nations Scroll of Honor 1991

Indias best managed company by Asiamoney magazine 1995 and 1996

Most competitive Indian company by Euromoney 1997

One of the 5 best Indian Boards by Business Today 1997

Rated as one of the best companies in India for strategy & management and
investor relations by Asiamoney 1998.

Excellence in service industry by the Indian Institute of Marketing Management &

Top Management Club (Pune) 1998

Shield for the best presented accounts for banks and financial institutions over
11 times (last 8 years in a row)

1999 IMC Ramakrishna Bajaj National Quality Award in the service category.

CII-Exim Bank Commendation Certificate for commitment to Total Quality

Management 2000.

Our parentage
HDFC Limited
HDFC is Indias leading housing finance institution and has helped build mote than
2300000 houses since its incorporation in 1977.
In Financial Year 2003-04 its assets under management crossed Rs.36000 Cr.
As at financial year 31, 2004, outstanding deposits stood at Rs. 7840 crores. The
depositors base now stands at around 1 million depositors.
Rated AAA by CRISIL and ICRA for the 10 th consecutive years Stable and experienced
management high service standards Awarded The economic Times Corporate Citizen of
the year Award for its long standing commitment to community development.
Presented the Dream Home award for the best housing finance provider in 2004 at the
third Annual Outlook Money Awards.
Standard life groups (standard life plc and its subsidiaries)
The Standard life group has been looking after the financial needs customers for over 180
years. It currently has a customer base of around 7 million people who rely on the
company for their insurance, pension, investment, banking and health care needs. Its
investment manager currently administers $ 125 billion in assets. It is a leading pensions

13

provider in the UK, and is rated by Standard and Poor as strong with a rating of A+ and
as good with a rating of A1 by Moodys. Standard Life was awarded the best pension
Provider at the Money market Awards and it was voted a 5 star life and pensions
provider at the Financial Adviser Service awards for the last ten years running. The 5
star accolade has also been awarded to standard Life Investments for the last 10 years,
and to standard Life bank since its inception in 1998. standard Life Bank was awarded the
Best Flexible Mortgage Lender at the Mortgage Magazine Awards in 2006.

Work culture at HDFC SL

HDFC SL is known for its stimulating environment with high levels of motivation,
empowerment and recognition. We encourage an open and informal culture that values
integrity, commitment, teamwork and excellence in customer service. We adopt a policy
of strong learning and development initiatives, which promotes day to day learning as
well as decision- making. We believe our strength is our people, so we endeavour to
surpass their expectation and give them the best possible work environment and benefits
that match the best in the industry. Young professionals opting to make a career with
HDFC SL can make interpersonal relationships are accorded a high priority while
creating a more congenial and people oriented milieu across the organization, which
shows in our contribution management system.
Learning and Development Initiatives
We believe that the best way of shaping HDFC SL foe tomorrow is to invest in our best
resource: our people. People who will take this organization in to the future and will hold
the key in helping the company reach the challenging goals that it has set for itself. Our
Learning & Developing initiating are aimed at both functional and behavioral
development.
Contribution Management system
The Contribution Management System has emerged from the realization that the
organization would reach a position of excellence and sustained growth only if superior
job performance is accompanied by a forceful display of achievement traits and
demonstrated company values.
The system incorporates the organisations stand on laying equal emphasis on both
means and ends there by ensuring an objective and increasingly transparent process
of measuring performance.

MISSION STATEMENT OF HDFCSLIC :

We aim to be the top new life insurance company in the market.
This does not just mean being the largest or the most productive company in the
market, rather it is a combination of several things like

Customer service of the highest order

14

Value for money for customers

Professionalism in carrying out business

Innovative

products

to

cater

to

different

needs

of

different

customers

Use of technology to improve service standards

Increasing market share.

VISION STATEMENT
The most successful and admired life insurance company, which means that we are the
most trusted company, the easiest to deal with , offer the best value for money, and set the
standards in the industry. In short, the most obvious choice for all.
VALUES THAT WILL BE OBSERVED IN HDFCSL :
Integrity
Innovation
Customer Centric
People Care
Team Work One for all & all for one
Joy & Simplicity
Accolades and Recognition
Rated by Businesworld as Indias most Respected Private Life insurance company in
2004
Rated as the Best New Insurer-2003 by outlook Money magazine, Indias number 1
personal finance magazine.

1.3 PROBLEMS OF HDFCSL

Since HDFC SLIC is a private player in the insurance industry, it has not yet
reached break-even. Hence, it has high cost due to which its premiums are high as
compared to LIC.
It has to create credibility in the public.
It has to compete with the wide range of products that its competitors offer.
It has to focus towards rural segment also which has a great scope of growth.

15

 It has to decide on the strategies to be adopted which will help to counter

competition.
It has to increase its no. of branches and also enhance its network of agents so that
it can compete with LIC.
It has to focus on providing effective training to its agents so that the customer
base can be increased and moreover customer satisfaction can be ensured.

1.4 S.W.O.T ANALYSIS OF HDFCSL

STRENGTHS
Premiums are increasing and so are commissions.
The variety of products is increasing.
Transparency in working is followed.
Fund charges are less i.e 0.8%
Stronger financial base.
Employee centric organization.

WEAKNESSES

Strong competitors like LIC, ICICI Pru, Birla Sun Life etc.

Premium is priced high as compared top the market leader.

Infrastructure cost is high.

Less expenditure on promotion.

Products not customized for lower segment.

OPPORTUNITIES
The ability to cross sell financial services barely being tapped.
Technology is improving to the point that paperless transactions are available.
The client's increasing need for an "insurance consultant" can open new ways to
service the client and generate income.
THREATS
Government regulations on issues like health care, mold and terrorism can
quickly change the direction of insurance.
16

 The increasing expenses and lower profit margins.

Intense competition from LIC.

CHAPTER 2
OBJECTIVES & METHODOLOGY

2.1 Managerial usefulness

2.2 Objectives of the study
2.3 Role of Financial Consultant
2.4 Research Methodology used

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2.1 MANAGERIAL USEFELNESS OF THE STUDY

A thorough research and a detailed study of the market is very important for the
management to take the right strategy suiting the market condition.
The study gives the information regarding the market competition, innovative products
offered by competitors, present demand of the products in the market etc.
The main usefulness of the study on the managerial level is:
Market survey will help to know the prevailing market condition and also help in
framing the policies accordingly.
The study will help the management to understand the customer mindset and also
estimating the present and future market demand for the products.
It will help to estimate the level of awareness established in the market and in
deciding the extent of promotion required.
It will help in finding out the customers expectations about the product and also
help to know the customer physiology.
It will help to know the class on which HDFC SLIC must concentrate.
2.2 OBJECTIVES OF THE STUDY

To find the preferences of products and companies among the wide range
available in the insurance industry.

To define the role of the financial consultants.

To know about the criteria and eligibility for financial consultants.

To study the range of product offerings of the different insurance players.

To study the level of awareness about HDFC SLICs products.

To know how financial consultants work.

SUB-OBJECTIVE:
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To conduct market research about how people perceive HDFC SLIC as a brand and what
are their expectations from the current insurance industry.

ROLE OF FINANCIAL CONSULTANT

Financial consultants increasingly offer comprehensive financial planning services,
including retirement and estate planning; as a result, in addition to offering insurance
policies, agents sell mutual funds, annuities, and securities.
Agents must obtain a license in the States where they plan to do their selling.
Despite slower than average growth, job opportunities should be good for college
graduates who have sales ability, excellent interpersonal skills, and expertise in a wide
range of insurance and financial services.
Successful agents often have high earnings, but many beginning agents fail to earn
enough from commissions to meet their income goals and eventually transfer to other
careers. Most insurance sales agents employed in wage and salary positions work for
insurance agencies and brokerages. A decreasing number work directly for insurance
carriers. Although most insurance agents specialize in life and health insurance or
property and casualty insurance, a growing number of multiline agents sell all lines of
insurance. A small number of agents work for banks and securities brokerages as a result
of the increasing integration of finance and insurance industries. Approximately 1 out of 4
insurance sales agents is self-employed.
Insurance sales agents are employed throughout the country, but most work in or near
large urban centers. Some are employed in the headquarters of insurance companies, but
the majority work out of local offices or independent agencies. Insurance and investments
are becoming more complex, and many people and businesses lack the time and expertise
to buy insurance without the advice of an agent. Moreover, most individuals and
businesses consider insurance a necessity, regardless of economic conditions. Therefore,
agents are not likely to face unemployment because of a recession. Most people have
their first contact with an insurance company through an insurance sales agent. These
workers help individuals, families, and businesses select insurance policies that provide
the best protection for their lives, health, and property. Insurance sales agents who work
exclusively for one insurance company are referred to as captive agents. Independent
insurance agents, or brokers, represent several companies and place insurance policies for
their clients with the company that offers the best rate and coverage. In either case, agents
prepare reports, maintain records, seek out new clients, and, in the event of a loss, help
policyholders settle their insurance claims. Increasingly, some are also offering their
clients financial analysis or advice on ways the clients can minimize risk.
Insurance sales agents, commonly referred to as producers in the insurance industry,
sell one or more types of insurance, such as property and casualty, life, health, disability,
and long-term care. Property and casualty insurance agents sell policies that protect
individuals and businesses from financial loss resulting from automobile accidents, fire,

19

theft, storms, and other events that can damage property. For businesses, property and
casualty insurance can also cover injured workers compensation, product liability claims,
or medical malpractice claims.

CRITERIA AND ELIGIBILITY FOR FINANCIAL CONSULTANTS

For Financial Consultants, most companies and independent agencies prefer to hire
college graduatesespecially those who have majored in business or economics. High
school graduates are occasionally hired if they have proven sales ability or have been
successful in other types of work. In fact, many entrants to insurance sales agent jobs
transfer from other occupations. In selling commercial insurance, technical experience in
a particular field can help sell policies to those in the same profession. As a result, new
agents tend to be older than entrants in many other occupations.
College training may help agents grasp the technical aspects of insurance policies and the
fundamentals and procedures of selling insurance. Many colleges and universities offer
courses in insurance, and a few schools offer a bachelors degree in the field. College
courses in finance, mathematics, accounting, economics, business law, marketing, and
business administration enable insurance sales agents to understand how social and
economic conditions relate to the insurance industry. Courses in psychology, sociology,
and public speaking can prove useful in improving sales techniques. In addition, because
computers provide instantaneous information on a wide variety of financial products and
greatly improve agents efficiency, familiarity with computers and popular software
packages has become very important.
Insurance sales agents must obtain a license in the States where they plan to do their
selling. Separate licenses are required for agents to sell life and health insurance and
property and casualty insurance. In most States, licenses are issued only to applicants who
complete specified prelicensing courses and who pass State examinations covering
insurance fundamentals and State insurance laws. The insurance industry is increasingly
moving toward uniform State licensing standards and reciprocal licensing, allowing
agents who earn a license in one State to become licensed in other States upon passing the
appropriate courses and examination.
A number of organizations offer professional designation programs that certify ones
expertise in specialties such as life, health, and property and casualty insurance, as well as
financial consulting. For example, The National Alliance for Education and Research
offers a wide variety of courses in health, life and property, and casualty insurance for
independent insurance agents. Although voluntary, such programs assure clients and
employers that an agent has a thorough understanding of the relevant specialty. Agents are
usually required to complete a specified number of hours of continuing education to
retain their designation.
Employers also are placing greater emphasis on continuing professional education as the
diversity of financial products sold by insurance agents increases. It is important for
insurance agents to keep up to date on issues concerning clients. Changes in tax laws,
government benefits programs, and other State and Federal regulations can affect the
20

insurance needs of clients and the way in which agents conduct business. Agents can
enhance their selling skills and broaden their knowledge of insurance and other financial
services by taking courses at colleges and universities and by attending institutes,
conferences, and seminars sponsored by insurance organizations. Most State licensing
authorities also have mandatory continuing education requirements focusing on insurance
laws, consumer protection, and the technical details of various insurance policies.
As the demand for financial products and financial planning increases, many insurance
agents are choosing to gain the proper licensing and certification to sell securities and
other financial products. Doing so, however, requires substantial study and passing an
additional examinationeither the Series 6 or Series 7 licensing exam, both of which are
administered by the National Association of Securities Dealers (NASD). The Series 6
exam is for individuals who wish to sell only mutual funds and variable annuities,
whereas the Series 7 exam is the main NASD series license that qualifies agents as
general securities sales representatives. In addition, to further demonstrate competency in
the area of financial planning, many agents find it worthwhile to earn the certified
financial planner or chartered financial consultant designation. The Certified Financial
Planner credential issued by the Certified Financial Planner Board of Standards, requires
relevant experience, completion of education requirements, passing a comprehensive
examination, and adherence to an enforceable code of ethics. The CFP exams test the
candidates knowledge of the financial planning process, insurance and risk management,
employee benefits planning, taxes and retirement planning, and investment and estate
planning. The Chartered Financial Consultant (ChFC) designation, issued by the
American College in Bryn Mawr, Pennsylvania, which requires experience and the
completion of an eight-course program of study. The CFP and ChFC designation and
other professional designations have continuing education requirements.
Insurance sales agents should be flexible, enthusiastic, confident, disciplined, hard
working, and willing to solve problems. They should communicate effectively and inspire
customer confidence. Because they usually work without supervision, sales agents must
be able to plan their time well and have the initiative to locate new clients.
An insurance sales agent who shows ability and leadership may become a sales manager
in a local office. A few advance to agency superintendent or executive positions.
However, many who have built up a good clientele prefer to remain in sales work. Some
particularly in the property and casualty fieldestablish their own independent
agencies or brokerage firms.

HOW FINANCIAL CONSULTANT WORKS

A FINANCIAL CONSULTANT DOES THE FOLLOWING:

draw up lists of clients from a variety of sources;

contact potential clients, usually by telephone, to arrange interviews;

interview clients to identify their insurance needs and how insurance policies
might meet those needs;

21

assist the client to make an informed decision;

explain to clients the details of insurance policies including the risks for which
they are covered, the rates and comparative benefits;

recommend an appropriate amount and type of cover to individual clients;

collect premiums and keep records of payments; and

regularly review clients circumstances to ensure that the level of insurance is

appropriate

Most Financial consultants are based in small offices, from which they contact clients and
provide information on the policies they sell. However, much of their time may be spent
outside their offices, traveling locally to meet with clients, close sales, or investigate
claims. Agents usually determine their own hours of work and often schedule evening and
weekend appointments for the convenience of clients. Although most agents work a 40hour week, some work 60 hours a week or longer. Commercial sales agents, in particular,
may meet with clients during business hours and then spend evenings doing paperwork
and preparing presentations to prospective clients.
Most insurance sales agents employed in wage and salary positions work for insurance
agencies and brokerages. A decreasing number work directly for insurance carriers.
Although most insurance agents specialize in life and health insurance or property and
casualty insurance, a growing number of multiline agents sell all lines of insurance. A
small number of agents work for banks and securities brokerages as a result of the
increasing integration of finance and insurance industries. Approximately 1 out of 4
insurance sales agents is self-employed.
Insurance sales agents are employed throughout the country, but most work in or near
large urban centers. Some are employed in the headquarters of insurance companies, but
the majority work out of local offices or independent agencies.
Most Insurance Agents have an office base but spend a large proportion of their time
visiting clients at their premises or homes. May be part of a team but spend considerable
amount of time on their own. Work done in evenings and on weekends.
SCOPE AND GROWTH FOR A FINANCIAL CONSULTANT
These professionals identified the niche market, in the areas of Project development,
Project Implementation and Organisational Development. It is recognised that the project
developers are happy to identify an agency who can take single point responsibility
during the developmental stage of the project and act as an in-house project team. The
scope of activities range from preparation of feasibility report, detailed project report,
processing with Statutory/Governmental agencies, processing and finalising the various
contracts, interaction with legal consultants/financial consultants/lending institutions etc.
This can be defined as the role of a Project Consultant.
Similarly when the project is getting implemented the developer/promoter is content with
an agency who can take single point responsibility to follow through the implementation
of the project in conformity to the statutory approvals and contract specifications to
22

control the project cost and the project schedule. This role can be defined as a role of a
financial consultants.
Although employment of insurance sales agents is expected to grow more slowly than
average for all occupations through 2014, opportunities will be favorable for college
graduates who have sales ability, excellent interpersonal skills, and expertise in a wide
range of insurance and financial services. Multilingual agents also should be in high
demand because they can serve a wider range of customers. Insurance language tends to
be quite technical, so it is important for insurance sales agents to have a firm
understanding of relevant technical and legal terms. Many beginning agents fail to earn
enough from commissions to meet their income goals and eventually transfer to other
careers. Most job openings are likely to result from the need to replace agents who leave
the occupation or retire. A large number of agents are expected to retire over the next
decade.
Future demand for insurance sales agents depends largely on the volume of sales of
insurance and other financial products. Sales of health insurance and long-term-care
insurance are expected to rise sharply as the population ages. In addition, a growing
population will increase demand for insurance for automobiles, homes, and high-priced
valuables and equipment. As new businesses emerge and existing firms expand their
insurance coverage, sales of commercial insurance also should increase, including
coverage such as product liability, workers compensation, employee benefits, and
pollution liability insurance.
Employment of agents will not keep up with the rising level of insurance sales, however.
Many insurance carriers are trying to contain costs. As a result, many are shedding their
captive agentsthose agents working directly for insurance carriersand are relying
more on independent agents or direct marketing through the mail, by phone, or on the
Internet.
Agents who incorporate new technology into their existing businesses will remain
competitive. Agents who use the Internet to market their products will reach a broader
client base and expand their businesses, but because most clients value their relationship
with their agent, the Internet should not threaten jobs, given that many individuals still
prefer discussing their policies directly with their agents, rather than through a computer.
Also, the automation of policy and claims processing is allowing insurance agents to take
on more clients.
Agents may face increased competition from traditional securities brokers and bankers as
they begin to sell insurance policies. Because of increasing consolidation among
insurance companies, banks, and brokerage firms, and due to increasing demands from
clients for more comprehensive financial planning, insurance sales agents will need to
expand the products and services they offer.
Agents who offer better customer service also will remain competitive. Call centers are
another important way carriers and agents are offering better service to customers,
because such centers provide greater access to their policies and more prompt services.
Insurance and investments are becoming more complex, and many people and businesses
lack the time and expertise to buy insurance without the advice of an agent. Moreover,

23

most individuals and businesses consider insurance a necessity, regardless of economic

conditions. Therefore, agents are not likely to face unemployment because of a recession.

24

2.4) RESEARCH METHODOLOGY USED

After specifying the objective of research it becomes essential to make an efficient plan
for gathering the needed information.
Market research involves the following steps:
Step 1: Define the problem and research objectives.
Step 2: Developing the research plan

Selection method

Questionnaire method

Sampling method

Contact method

Step 3: Collect the information

Step 4: Analyze the information.
Step 5: Present the findings.
Step 1: Define the research objective
After discussing with the external project guide the topic for the project was selected as:
LIFE

INSURANCE

ROLE

GROWTH

AND

SOPE

FOR

FINANCIAL

CONSULTANTS.
Step 2: Developing the research plan

Questionnaire method

Marketing researchers have the best instrument in collecting primary data i.e. a
questionnaire to collect the data and to establish the view of the people from all the
sectors of the society.
Questionnaires are designed to elicit information that meets the studies requirements.
Questions should be:

25

clear

easy to understand

directed towards meeting an objective.

Need to define objectives before designing the questionnaire. Must maintain

impartiality and be very careful with personal data. Four basic types of questions
are:
o

Open ended

Dichotomous

Multiple choice.

Scaled (lickert)

The questionnaire designed for this project contains open-ended questions. All the
questions are clearly defined. The questions are framed keeping in mind the
objective of research and kind of information required .Sampling method
To

select

representative

units

from

total

population.

A population "universe", all elements, units or individuals that are of interest to

researchers for a specific study. IE all registered voters for an election.
Sampling procedures are used in studying the likelihood of events based on
assumptions about the future.
o

Random sampling, equal chance for each member of the population

Stratified sampling, population divided into groups re: a common

characteristic, random sample each group

Area sampling, as above using areas

Quota sampling, judgmental, sampling error cannot be measured

statistically, mainly used in exploratory studies to develop a hypotheses,
non-probablistic.

Random sampling is selected as the sampling method for this project.

Selection Method

26

o Mail-wide area, limited funds, need incentive to return the questionnaire

Mail panels, consumer purchase diaries. Must include a cover letter to
explain survey!!
o Telephone-speed, immediate reaction is negative, WATS, computer
assisted telephone interviewing.
o Personal interviews-flexibilty, increased information, non-response can be
explored. Most favored method among those surveyed. Can be conducted
in shopping malls.
o In home (door-to-door) interview, get more information but it is costly and
getting harder to accomplish.
o Mall intercepts-interview a % of people passing a certain point. Almost
half of major consumer goods and services orgs. use this technique as a
major expenditure. Can use demonstration, gauge visual reactions.
Regarding social behavior, mall surveys get a more honest response than
telephone surveys. There is a bias toward those that spend a lot of time in
malls. Need to weight for this. On site computer interviewing, respondents
complete self administered questionnaires conducted in shopping malls.
Questions can be adaptive depending on the responses.
o Focus groups-observe group interaction when members are exposed to an
idea or concept, informal, less structured. Consumer attitudes, behaviors,
lifestyles, needs and desires can be explored in a flexible and creative
manner. Questions are open ended. Cadillac used this method to determine
that they should be promoting safety features.
A sample of 200 people was taken and judgement was done to select the right
prospects to secure accurate information. The sample consisted of people like
businessman, doctors, pvt. Company employees.

Contact/Observation method

Record overt behavior, note physical conditions and events. Can be combined with
interviews, i.e. get demographic variables.
Mechanical observation devices, IE cameras, eye movement recorders, scanner
technology, Nielsen techniques for media.

27

Observation avoids the central problem of survey methods, motivating respondents to

state their true feelings or opinions. If this is the only method, then there is no data
indicating the causal relationships.
Step 3: Collection of information
The information of the project was gathered in 2 forms:
Primary data
In primary data collection, you collect the data yourself using methods such as interviews
and questionnaires. The key point here is that the data you collect is unique to you and
your research and, until you publish, no one else has access to it.
There are many methods of collecting primary data and the main methods include:

questionnaires

interviews

focus group interviews

observation

case-studies

diaries

critical incidents

portfolios.

Secondary data
Secondary data - collected by others to be "re-used" by the researcher

What Form Does Secondary Data Take?

o

Qualitative Sources

Sources for Qualitative Research:

Biographies - subjective interpretation involved

Diaries - more spontaneous, less distorted by memory lapses

28

Memoirs - benefit/problem of hindsight

Letters - reveal interactions

Newspapers - public interest & opinion

Novels & Literature In General Handbooks, Policy Statements,

Planning Documents, Reports, Historical & Official Documents
(Hansard, Royal Commission reports)

Quantitative Sources

Published Statistics:

National Government Sources

Local Government Sources

Other Sources

Non-Published / Electronic Sources

Data Archives eg the Data Archive At Essex

On-Line Access To National Computing Centres

International Sources on Internet & Web

For this project the secondary sources used are:

Journals

Company product brouchers

Internet

Step 4: Data Analysis

The analysis was conducted by editing and coding the data. Coding was done in the form
of tabulation and editing was done by reviewing the questions.
Step 5: Present the findings
The findings of the project are the presented along with the recommendations.
Market Research Design

29

Research

Descriptive type

Data Source

Primary & secondary

Research approach

Survey method

Research instrument

Questionnaire

Type of questions

Closed ended

Sample sizes

100 samples

Mode of collecting data

collection

Respondents to be
:

chosen randomly.

30

CHAPTER 3
CONCEPTUAL DISCUSSION

31

Q1. What is insurance ?

Insurance is the business of providing protection against financial aspects of risk, such as
those to property, life, health and legal liability. It is one method of the overall concept
known as risk management.
In insurance, the insured makes payments called "premiums" to an insurer, and in return
is able to claim a payment from the insurer if the insured suffers a defined type of loss.
This relationship is usually drawn up in a formal legal contract, also known as a policy.
The contract will set out in detail the exact circumstances under which a benefit payment
will be made and the amount of the premiums.
In one classic example of insurance, a ship-owner insures a ship and receives payment if
the ship is damaged or destroyed. This example is one of the earliest uses and
developments of concepts like insurance. Interestingly, ships are now more often insured
through risk pooling and spreading organizations such as Lloyd's of London because the
loss of a large ship going down is too great for one insurer to accept.
In the case of annuities, such as a pension, similar concepts apply, but in some sense in
the reverse. When applied to annuities, the terms risk and loss are somewhat different
from traditional insurance as they concern the chances of living beyond life expectancy
and the need for income during the period between annuitization and death.
Insurance attempts to quantify risk by pooling together a large number of risks. This
makes use of the law of large numbers. As applied to insurance, this means that the
greater the number of similar risks, the greater accuracy with which insurers can estimate
the overall risk.
For example, many individual people purchase health insurance policies and they each
pay a small monthly or yearly premium to an insurance company. When a policyholder
gets ill, the insurance company provides money to cover medical treatment. For some
individuals the insurance benefits may total far more money than they have ever paid
into the insurance policy. Others may never make a claim. When averaged out over all of
the people buying policies, value of the claims even out. Insurance companies set their
premiums based on their calculated payouts. They plan to take in more money (in

32

premiums and in profit from the float, see below) than they pay out in the end to cover
expenses. For-profit insurance companies set their rates to make a profit rather than to
break even.
Insurance companies also earn investment profits, because they have the use of the
premium money from the time they receive it until the time they need it to pay claims.
This money is called the float. When the investments of float are successful, they may
earn large profits, even if the insurance company pays out in claims every penny received
as premiums. In fact, most insurance companies pay out more money than they receive in
premiums. The excess amount that they pay to policyholders is the cost of float. An
insurance company will profit if they invest the money at a greater return than their cost
of float.
Insurance can also be thought of as a wager or bet that executes over the policy period.
The insurance company bets that you or your property will not suffer a loss while you put
money on the opposite outcome. The difference in the fees paid to the insurance company
vs the amount they can be held liable for if an accident happens is roughly analogous to
the odds one might expect when betting on a racehorse, i.e. 10:1. For this reason, a
number of religious groups including the Amish avoid insurance and instead depend on
support provided by their communities when disasters strike. In closing, supportive
communities where others will actually step in to rebuild lost property, this arrangement
can work. Most societies could not effectively support this type of system.
Q2. Why should you take insurance ?
Life is unpredictable. But in face of adversity, our responsibilities towards our parents,
children and loved ones need not be compromised. Insurance planning equips you to
smooth out the uncertainties and adversities that life might send your way, so that the best
that life has to offer, secure in the knowledge that your beloved ones are well provided
for.

Q3. Who provides Insurance ?

Insurance companies may be classified as

33

Life insurance companies, who sell life insurance, annuities and pensions
products.

Non-life or general insurance companies, who sell other types of insurance.

In most countries, life and non-life insurers are subject to different regulations, tax and
accounting rules. The main reason for the distinction between the two types of company
is that life business is very long term in nature - coverage for life assurance or a pension
can cover risks over many decades. By contrast, non-life insurance cover usually covers
shorter periods, such as one year.
Companies may sell both life and non life insurance, in which case they are sometimes
known as composite insurance companies.
Insurance companies are also often classified as either mutual or stock companies. This is
more of a traditional distinction as true mutual companies are becoming rare. Mutual
companies are owned by the policyholders, while stockholders, (who may or may not
own policies) own stock insurance companies.
Reinsurance companies sell insurance cover to other insurance companies. This helps
insurance companies to spread their risks, and protects them from very large losses. The
reinsurance market is dominated by a few very large companies, with huge reserves.
There are also companies which are known as Insurance Brokers. Like a mortgage broker,
these companies are paid a fee by the customer to shop around for the best insurance
policy amongst many companies.
Q4. What are the alternatives to Insurance ?
These days, when everyone seems to be suing everyone else, insurance premiums
continue to soar. Yet some insurance companies, fearing that the possibility of such
lawsuits is too great, actually refuse to make certain types of insurance available to
businesses. So in most cases you have insurance you can barely afford, and in some cases
you can't even get insurance. What's a small business owner to do?
One solution is to explore alternatives to traditional insurance. In this discussion we'll
examine a couple of insurance alternatives. As we do this, please remember that some
insurance is required as a matter of law (auto liability for example) and that some types
34

may be so important given your line of work (general liability insurance, malpractice
insurance) that you don't belong in business if you can't afford it or can't get it at all.
Self Insurance. With self insurance you simply set aside money some businesses
choose to set aside what they would be paying in premiums if they had purchased
insurance and use that money when an unfortunate event occurs. For a small business,
the best place to think about self insuring is with property insurance rather than liability
insurance because the risks are more manageable. For example, suppose you are paying
for auto theft, fire, and collision (that is, the kind of insurance that replaces your car if it's
in an accident, not someone else's) protection on your vehicle. If you dropped this
coverage and put your savings in premiums into a bank, eventually you would save
enough money to replace a vehicle from these funds.
Of course, one of the dangers with this approach is that you could have an unfortunate
incident before you have enough money in your fund. You also cannot use this approach
if you have financed the property in question and are required to maintain insurance by
your lender.
But even if you can't totally self insure, you may be able to self insure a little by
purchasing policies with higher deductibles. Suppose, for example that you maintain fire,
theft, and collision protection on a vehicle, but agree to be responsible for the first $1,000
of any damage to the vehicle rather than the first $250 as is standard in many policies.
Your additional risk is not that great only $750 and you may realize substantial
savings on your auto premiums.
Postal Life Insurance
Postal Life Insurance is 117 years young. It was started in 1884 as a welfare measure for
the employees of Posts & Telegraphs Department under Government of India dispatch
No. 299 dated 18-10-1882 to the Secretary of State. Due to popularity of its schemes,
various departments of Central and State Governments were extended its benefits. Now
Postal Life Insurance is open for employees of all Central and State Government
Departments, Nationalized Banks, Public Sector Undertakings, Financial Institutions,

35

Local Bodies like Municipalities and Zila Parisads, Educational Institutions aided by the
Government etc/
Q5. What are benefits of insurance?
The benefits are:
1) Superior to any other savings plan.
2) Encourages & forces thrift.
3) Easy settlement & protection against creditors.
4) Administering the legacy of beneficiaries.
5) Ready marketability and suitability for quick borrowing.
6) Disability benefits.
7) Accidental death benefits.
8) Tax Relief.

WHAT IS LIFE INSURANCE

Life insurance is a form of insurance that pays monetary proceeds upon the death of the
insured covered in the policy. Essentially, a life insurance policy is a contract between the
named insured and the insurance company wherein the insurance company agrees to pay
an agreed upon sum of money to the insured's named beneficiary so long as the insured's
premiums are current. People take out life insurance policies for a number of reasons.
Such insurance provides security to family members upon the loss of a loved one. For
instance, if the primary wage earner dies in his or her prime, the death benefit received
from a life insurance policy will assist the surviving family members in overcoming the
burden of the tragic loss. Life insurance can be purchased by individuals, but is also
offered as a perk by many employers. Often times, large employers and government
employers offer group life insurance at no cost to the employee. Should the employee
wish to obtainadditional life insurance from the employer's insurance company, they can
usually do so at reduced rates.
The cost of life insurance varies depending on such factors as the insured's age, health,
and occupation. For example, the premium for a 25-year-old, male, non-smoker in
excellent health will be far less expensive than a similar policy for a 65-year-old male
smoker. Similarly, a sky dive instructor would have to pay much higher premiums for life
insurance than would a librarian.
Life insurance is available in a number of different forms to fit the tastes of the proposed
insured.
Some of the typical forms of life insurance policies include: whole life, variable life, and
term life. Term life insurance policies begin with low premiums during the initial stages
36

of the policy and these premiums increase steadily as the insured grows older. There is no
cash build-up in a term policy and, accordingly, the death benefit will not increase.
With whole life and variable life insurance, a portion of each premium pays for the
insurance and the remainder serves as a tax-free investment. A whole life policy sets a
premium at the beginning of the policy and that premium does not change over the life of
the policy. This form of insurance allows for a cash build-up during the insured's life. This
cash build-up can be used during the course of the policy or it will simply serve to
increase the death benefit in the end.
In a variable life product, the premium remains the same over the life of the policy, and
there should be a cash build-up as long as the various mutual funds selected by the
insured perform well.
Just about everyone has heard of life insurance, but not everyone knows exactly what it
is, or when you need it.
So what is life insurance?
Life insurance is a form of insurance that protects a person or family against losing their
income if the income earner dies. Life insurance provides financial stability and peace of
mind for couples or particularly for families who may be seriously affected financially by
the death of the earning member of the family.
Think about this for a moment. If you are the main earner in your family, what would
happen to your family financially if you died? If you're independently wealthy then they
would probably be fine. But if not? Then you should think about life insurance.
And if you aren't the earner, then how would you fare if your main income earner died?
Again, if this worries you, you need to think about getting a life insurance quote or two.
How about things like the mortgage. How would that get paid? The car payments? The
kids schooling?
There's 101 things that would be affected by the death of the main earner, and that
situation can cause a crisis for some families.
LIFE INSURANCE - AN OVERVIEW

At its core, life insurance is a simple concept. Essentially, it is a means of providing for
those who are left behind in the event of a wage-earner's death. Life insurance proceeds
are tax-free to beneficiaries and so it also plays a role in estate-planning, wealth
accumulation, wealth-accumulation and wealth-transfer.
While life insurance is conceptually straightforward, in practice, things are slightly more
complicated. There are many kinds of life insurance products on the market today and
each has their own sets of benefits and drawbacks. As with any financial services product,
do your research before you buy and it never hurts to get expert advice.

37

This site will provide an overview of the broad categories of insurance available today. It
is not intended to be a comprehensive guide but rather to give you a broad understanding
of the life insurance landscape.
LIFE INSURANCE - DEFINITIONS

Before we get into a discussion of the various kinds of life insurance, there are two terms
we need to define:

Death-Benefit: This is the dollar amount paid out to the policy beneficiaries upon
the policy-holder's death.
Cash-Value: This is the dollar amount that is paid out to the policy holder in the
event that the policy is dissolved before the policy holder dies.

The value of a policy is determined by the amounts of the death benefit and the cash
value. How these values are computed and paid out form the basis of the differences
between the various types of life insurance instruments available. Typically, the death
benefit is the face value of the policy. If you buy $1 million in life insurance, that amount
is the death benefit that will be paid out. If there is any cash value associated with the
policy, then it accumulates over time as you pay in premiums.
CONCEPT OF LIFE INSURANCE
There are three parties in a life insurance transaction: the insurer, the insured, and the
owner of the policy, although the owner and the insured are often the same person. For
example, if John Smith buys a policy on his own life, he is both the owner and the
insured. But if Mary Smith, his wife, buys a policy on Johns life, she is the owner and he
is the insured.
Another important person involved is the beneficiary. The beneficiary is the person or
persons who will receive the policy proceeds upon the death of the insured. The
beneficiary is not a party to the policy, but is designated by the owner, who may change
the beneficiary unless the policy has an irrevocable beneficiary designation. With an
irrevocable beneficiary, that beneficiary must agree to changes in beneficiary, policy
assignment, or borrowing of cash value.
The policy, like all insurance policies, is a legal contract specifying the terms and
conditions of the risk assumed. Special provisions apply, including a suicide clause
wherein the policy becomes null if the insured commits suicide within a specified time for
the policy date (usually two years). Any misrepresentation by the owner or insured on the
application is also grounds for nullification.
The face amount of the policy is normally the amount paid when the policy matures,
although policies can provide for greater or lesser amounts. The policy matures when the
insured dies or reaches a specified age. The most common reason to buy a life insurance
policy is to protect the financial interests of the owner of the policy is the event of the
38

insureds demise. The insurance proceeds would pay for funeral and other death costs or
be invested to provide income replacing the deceaseds wages. Other reasons include
estate planning and retirement. Because the insureds death will be to the financial
betterment of the policy owner, the owner, by law, must have an insurable interest (i.e., a
legitimate reason for insuring another persons life.)
The insurer (i.e., life insurance company) prices the policies with an intent to recover
claims to be paid and administrative costs, and to make a profit. Claims to be paid are
determined by actuaries using mortality tables. Actuaries are professionals who use
actuarial science which is based in mathematics (primarily probability and statistics).
Mortality tables are statistically based tables showing average life expectancies.
Normally, the only three considerations in a mortality table are the insureds age, gender,
and whether or not they use tobacco.
The insurance company receives the premiums from the policy owner and invests them,
using the time value of money and compound return principles to create a pool of money
from which claims are paid. Therefore, rates charged for life insurance are sensitive to the
insureds age because the insurer will have less premium dollars to invest and less time to
invest them for an older person.

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CHAPTER 4
DATA ANALYSIS

40

Q1. HOW DO YOU PREDICT THE FUTURE OF INSURANCE INDUSTRY IN INDIA?

This question was asked to know hoe people predict the future of insurance industry.

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42

Q2. WHAT IS YOUR PROFESSION ?

This question was asked to see the class of people who are interested to be a financial
consultant.
Q3. WHAT AGE GROUP YOU FALL INTO?

This question was asked to determine that people of which age group are interested
in becoming a financial consultant and which age group the co. must target on i.e the
potential group.

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Q4. DO YOU KNOW ABOUT IRDA?

This question was asked to determine the prevailing level of awareness of IRDA.
Q5. WHY PEOPLE LIKE TO SELL INSRANCE POLICIES AND WHY THEY
WANT TO BECOME A FINANCIAL CONSULTANT ?

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This question was asked to determine the advantages due to which people ar ready
to be a financial consultant.

45

Q6.

WHAT SHOULD BE THE PAYMENT MODE FOR THE FINANCIAL

CONSULTANTS?

Q7. WHY DO PEOPLE DISLIKE TO SELL THE INSURANCE POLICIES?

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CHAPTER 5
FINDINGS AND RECOMMENDATIONS

5.1 Findings
5.2 Recommendations

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5.1

FINDINGS

1) 50% people like to become a financial consultant due to its part time and full time
working facility 35% to earn money 15% to groom in insurance industry.
2) Only 43% of the sample population is aware of IRDA. Therefore attempts have to
be made to create greater awareness about IRDA which help to increase the
reliability.
3) 30% people dislike to sell the insurance policies due to field work 35% because
of no fix salary and 20% due to lack of skills.
4) 45% people want that the payment mode to financial consultant should be salary
based 35% are in favor of semi-commission and rest 20% are in favor of
commission.
5) 45% people think that the future of insurance industry in India is Bright 30% very
bright 15% average and 10% people think that it will be poor.
6) HDFC SLIC has to focus on lower charges and providing greater benefits to
create a greater customer base.

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5.2

RECOMMENDATIONS
The payment mode should be fix salary plus incentive so that the people can be
persuade.

Greater awareness about IRDA and the organization has to be created through
advertisements.

Te training of financial consultants should be 3 or 4 days in a week so that the

working people can manage for the manual training.

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CHAPTER 6
LIMITATIONS

ANNEXURES
BIBILIOGRAPHY

50

LIMITATIONS
1.

The time for which the research was conducted was just two
months. Hence the sample size was restricted to 100 only.

2.

The scope of study was also restricted to the study of awareness

about the HDFC SLIC policies and consumer preferences. It could be
widened to cover various others aspects of insurance product demand.

3.

As there are many competitors of HDFC SLIC in the pvt. Insurance

sector. The people have to be given more information about HDFC SLIC.

4.

The area from where the sample population was selected was
Delhi only. Other cities and moreover rural area was not covered under the
study.

5.

The primary data was collected form present and potential

customers of insurance products to evaluate their preferences.

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ANNEXURES

QUESTIONNAIRE

Q1. How do you predict the future of insurance industry in India?

Very Bright

Bright

Average

Poor

Q2. The payment mode for financial consultant should be

Commission based

salary based

semi-commission based

Q3. Do you like to sell Insurance?

Yes

No

somewhat

Q4. Why do you like to sell the insurance?

Groom in insurance industry

earn money

Part time and full time work facility

others__________

Q5. Why do you dislike to sell insurance?

Field work

no fix salary

lack of skills

others_______

Q6. Do you know about IRDA?

Yes

No

Q7.Do you think that the financial consultants play a major role in the growth of insurance
industry
Yes

No

Why___________

Q8. What type of skills are required to become a financial consultant?

Interpersonal skills

Target oriented skills

Q9. What growth opportunities you think can have in insurance industry?
Professional

Social service

Building network

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wasting time

Q10. would you like to grow with HDFC Standard Life as a financial consultant if you get an
opportunity?
YES

NO

if no why_______________

Q11. Quote a line for HDFC SLIC

Name____________________

Company name___________________

Designation________________

Age___________________

Contact No._______________

Sig.____________________

BIBILIOGRAPHY
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1. Marketing Management Philips Kotler

2. Service Marketing - Zeithal
3. Insurance Post Asia Apr 05, Jun 05
4. Marketing Mastermind May 05
5. Case Folio Insurance marketing
6. C R Kothari, Research Methodology
Websites:
www.lic.com
www.hdfcsl.com
www.icicipru.com
www.hdfcinsurance.com

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