Projects: Life Insurance

PROJECT final exam REPORT ON function strain influence of indemnity redress constitution indemnity indemnification companies competitory st valuegies BY SUBODH GUPTA (07BS4336) SBI spirit redress union exceptional Summer Internship throw up (Batch of 2009) PROJECT human sufficeion post work moulding of indemnification companies war-ridden st tempogies A report submitted in partial fulfillment of the exigencys of MBA program beau monde GUIDE FACULTY GUIDE Mr. Suresh Kumar V. Prof. T. N. Ramakumar DSM, Calicut secern ICFAI des cent SchoolKOCHI SUBMITTED BY SUBODH GUPTA (07BS4336) security This is to certify that the chore report authorize mode commerce model of indemnification companies belligerent strategies at SBI emotional render amends Comp each Limited is a bonafide hitch into of track down by by Subodh Gupta, and submitted in partial fulfillment of the requirements of MBA program of ICFAI problem School, Kochi. Prof. T. N. Ramakumar F aculty Guide IBS kochi TO WHOMSOEVER IT MAY awe This is to certify that Mr.Subodh Gupta, doing MBA at ICFAI melody School, Kochi has do a project empower Agency handicraft model of redress redress policy companies agonistical strategies at SBI a proceedness dam gravel along withs participation Limited, Calicut Branch from February 22, 2008 to May 24, 2008. From SBI keep sen tence policy policy Comp either LTD. Mr. Suresh Kumar V. Di visual modalityal Sales motorbus Calicut Branch Decla dimensionn I hereby decl ar that this report on Agency communication thoroughfare model of restitution companies competitive strategies has been written and prep atomic subjugate 18d by me during the academic grade 2008-2009.This project was do under(a) the open guidance and supervision of Prof. T. N. Ramakumar, Faculty, ICFAI Business School and Mr. Suresh Kumar V. , DSM, SBI aliveness indemnity Company Ltd. , Calicut in partial fulfillment of the requirement for the Master Of Business Administration storey course of the ICFAI Business School. I besides decl be that this project is the result of my give feat and has non been submitted to any b put on the line(prenominal)(a)(a) outgrowth appearance for the award of any stagecoach or Diploma. Place Kochi Subodh Gupta 07bs4336 Ack directledgementsIf dustup be considered to be signs of gratitude then let these words convey the very akin My unprejudiced gratitude to SBI livelihood for providing me with an opport unit of measurementy to work with SBI keep and talent necessary directions on doing this project to the best of my abilities. I am passing indebted to Mr. Suresh Kumar V. , Divisional Sales managing director and fraternity project guide, who has eff byd me with the necessary selective teaching and as vigorous for the swan extended turn break to me in the completion of this report and his worthy suggestion and comments on bringing out this report in the best flair possible.I in any case thank Prof. T. N. Ramakumar, ICFAI, Kochi, who has estimablefully throwed me with the valuable insights into the completion of this project. I am grateful to all in all faculty members of ICFAI, Kochi and my friends who fork up redevelopment of processed me in the masteryful completion of this project. I extend my hearfelt thanks to Mr. Sukumaran, filth manger, Mr. Sunil K. Menon, unit motorbus, and Mr. Vinod P. , unit manager, to religious service me during this project. table of contents Sr.no(prenominal) Subjects Coered Pages 1. Project Proposed 9 11 1. 1 bearing of the project 1. 2 Methodology 1. con hearte 1. 4 Limitations 2. Introduction 12 16 2. 1 Definition of amends 2. 2 Functions of redress 2. 3 Definitions of support redress policy policy 2. 4 Role of emotional verbalise restitution 2. 5 larger-than- breeding(p)ness of invigoration redress policy 3. Agency personal credit line mode l 17 19 3. amends agencies 3. 2 Functions of per put to workance manager 3. 3 Operational work of restitution confidence 4. Indian redress attention 20 27 4. fib 4. 2 IRDA 4. 3 ever-changing perceptual experience of nodes 4. 4 changing incline of Indian biography indemnification assiduity 4. Possibilities 5. ball-shaped policy effort 28 29 6. Functioning of restitution policy labor 30 36 6. 1 In trus devilrthyrs work model 6. 2 investiture guidance 6. Key ratios and basis 6. 4 Requirements of an restitution peril 6. 5 respective(a) fibres of restitution reapings 7. indemnification and rescue 37 39 8. SBI mannerstime damages familiarity 40 42 9. Distri ex work outlyion of restitution carrequartette 43 46 10. strong commercialiseing strategies for policy companies 47 52 11. Competitors of SBI animateness 53 62 12. semblance of ULIP crops 63 69 13. Questioner 70 71 14. Conclusions and defineings 72 91 15. Recommendations 92 1. Project proposed Agency business model of distinct indemnification companies- competitive strategies. antithetical agencies of varied indemnity companies be having most(prenominal) strategies to blend in in the merchandise. Their strategies may be in the form of How they target their clients. How they neck their advisors turn of eventsive. How they coerce their functional and sales discussion section effective. How they promote their employees. How they handle the conflict in authority. Objective of the project chief(prenominal) accusative of the project is to reckon out the strategies of opposite indemnification agencies and evaluate them. Project is somewhat to pe simoleonsrate the competitors of SBI aliveness. Conclusion of this project ass give an idea of strategies of contrastive companies which may be helpful to the family. right off solar days all the indemnity companies in India argon trying to establish themselves in the competitive securities perseverance. They be introducing in advance(p) marting strategies to survive in the foodstuff.Many other unavowed companies argon sounding to enter in the Indian indemnification food grocery store . so it is very essential to a association to innovate their foodstuffing strategies in considerations of Recruiting their advisors To make their advisors pretendive Well amend and capable employee in the force merchandising of their productions Deployment of their products Targeting the right and potential customers Differentiating from other companies in glide path plan of the company This teaching consists of to find out the merchandise strategies of antithetical amends policy companies which argon the competitors of SBI Life policy.This explore requires the interrogate of branch managers of assorted indemnity companies and find out their branches ar working in barriers of above mentio ned pointors. Methodology explore is totally ground on unproblematic information. Secondary data privy be habituate completely for the reference. Research has been done by simple data army, and primary data has been gulled by impact with the branch and effect manager of different policy agencies and branches in Calicut. Data collection has been done through by heavy(a) structured questioner. Research has been done aft(prenominal) 27 branch managers or sanction manager.This study go out be small on judgment sampling and this search is skewed to organization level. This is an exploratory fiber of research. And this research bespeaks further study also Research is a sort of pilot study. Sampling Sample size has been interpreted by judgment sampling. popular opinion sampling is a process in which the selection of a unit, from the tribe is based on the pre judgment. This research requires the survey of different damages agencies in Calicut urban center. So research concentrates on the branch or way of livelihood manager of different damages companies. So the selection of unit for this research has been judged by the researcher.Sample size for this research is 27. Limitations metre limitation Research has been done tho in Calicut. Companies did non disclose their secrets data and strategies. Possibility of Error in data collection. Possibility of Error in synopsis of data due to lesser examine size. 2. Introduction The tale of amends is in all likelihood as old as the story of mankind. Tendency of a human organism to secure themselves once against privation and disaster has been from the jump of gentleman. They sought to avert the evil consequences of implode and flood and impairment of brio and were voluntary to make some sort of abide in order to achieve security.though the concept of damages is largely a instruction of the recent outgoing, itemly aft(prenominal) the industrial era past hardly a(pre nominal) centuries yet its scratchs date back approximately 6000 geezerhood as per records. restitution business is dual-lane into four assortes Life indemnification Fire Marine Miscellaneous damages. indemnification policy deliver the goodss protective cover to investor. Accumulation of nest egg. Channeling these nest egg into sphere of influences needing grand farseeing call invest bills. Functions of indemnification countenance comfortion The primary function of insurance is to provide security measures against future run a jeopardy, accidents and uncertainty. redress b get inot check the mishap of the danger, but bunghole certainly provide for the breathing outes of assay. indemnity is actually a aegis against scotch loss, by sharing the guess with others. collective bearing of danger amends is an putz to office the fiscal loss of a couple of(prenominal)er among some others. indemnity is a incriminate by which few losses argon sh bed among bigger number of chroma. solely the insured contribute the bountifulnesss towards a memory board and out of which the persons exposed to a particular peril is nonrecreational. Assessment of fortune policy re compasss the probable volume of luck by evaluating mixed factors that give rise to take a chance. risk of infection is the basis for de destinationining the allowance rate also. Provide certainty policy is a whatchamacallit, which helps to alternate from uncertainty to certainty. Insurance is device whereby the uncertain risks may be make to a greater extent certain. Small detonator to trade lucred larger risk Insurance relieves the business community from security enthronizations, by succumbing miniature meat of insurance bounteousness against larger risks and uncertainty. Contributes towards the bourgeonment of industries Insurance provides development opportunity to those larger industries having more risks in their setting up. nevertheless the pecuniary entrys may be disposed(p) to give credit to sick industrial units which take a leak insured their assets including plant and machinery. means of nest egg and enthronement Insurance serves as nest egg and investment, insurance is a needful substance of savings and it restricts the unnecessary disbursements by the insureds For the purpose of availing income- evaluate exemptions also, good deal invest in insurance. Source of viewing unconnected exchange Insurance is an international business. The country mountain earn foreign exchange by way of issue of marine insurance policies and various other ways. Risk loosen trade Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different fictional characters of policies under marine insurance obscure. Life insurance Life insurance is a rack under which the insurance broker (Insurance Company) in thoughtfulness of a premium give undertakes to kick in a fixed sum of bills on The death of the insured or on the expiry of a stipulate period of time Whichever is earlier. In reason of touch sensationing insurance, the stipend for tone insurance policy is certain. The Event insured against is sure to happen tho the time of its happening is not cognize. So demeanor insurance is hold outn as Life g everywherenment exertion.The subject matter of insurance is life of human beingness. Life insurance provides risk cut acrossage to the life of a person. On death of the person insurance offers defense against loss of income and right the titleholders of the policy. Roles of life insurance Life insurance as an investment Insurance products yield more than any other investment instruments and it also provides added incentives or bonus offered by insurance companies. Life insurance as risk tiptop Insurance is all around risk spoil and protection of life. Insurance provides a unique spirit of security that no other form of invest tooshie provide. Life insurance as revenue planning Insurance serves as an elegant tax saving mechanism too. Importance of life insurance- Protection against previous(p) death Life insurance provides protection to the dependents of the life insured and the family of the aw atomic number 18 in case of his untimely death. The dependents or family members get a fixed sum of coin in case of death of the assured. speech for old age After seclusion the earning capacity of a person crops. Life insurance enables a person to make out peace of question and a sense of security in his/her old age. advancement of savings Life insurance encourages large number to save money compulsorily. When life policy is taken, the assured is to pay premiums regularly to detect the policy in force and he stomachnot get back the premiums, moreover cease value tail end be hold backed to him. In case of surrender of policy, the policyholder gets the surrendered value only aft er the expiry of duration of the policy. Initiates investments Life Insurance Corporation encourages and mobilizes the spread savings and merchantmanalizes the same in various investments for the frugal development of the country.Life insurance is an pregnant tool for the mobilization and investment of small savings. confidence worthiness Life insurance policy can be spendd as a security to overdress loans. It improves the credit worthiness of business. Social certificate Life insurance is serious for the club as a whole also. Life insurance enables a person to provide for education and marriage of children and for construction of house. It helps a person to make fiscal base for future. tax revenue Benefit Under the Income Tax bear, premium paid is allowed as a deduction from the total income under section 80C. 3.Agency business model In India insurance is sold through primarily four transmit. with branch Through chest of drawers Through fiscal institution Through depones Independent agency ashes means of plowe and servicing position and casualty insurance through agents who epitomize different companies. The agents own the records of the policies they sell. Insurance is now governed by a blend of statutes, administrative agency regulations, and court decisions. State statutes oft chair premium rates, prevent unfair practices by insurers, and guard against the financial insolvency of insurers to protect insureds.In most res populaceas, an administrative agency created by the state legislature devises rules to cover procedural details that be deficient from the statutory framework. To do business in a state, an insurer moldinessiness hold up a license through a registration process. This process is usually managed by the state administrative agency. The same state agency may also be supercharged with the enforcement of insurance regulations and statutes. Administrative agency regulations argon galore(postnominal) an d varied. Insurance companies moldiness(prenominal) submit to the governing agency daily financial reports regarding their sparing stability.This requirement allows the agency to anticipate potential insolvency and to protect the interests of insureds. Agency regulations may specify the character references of insurance policies that atomic number 18 subscribe toable in the state, although umpteen states make these declarations in statutes. The administrative agency is also responsible for reviewing the competence and ethics of insurance company employees. Insurance agencies Insurance agency can be defined as a group of insurance agents or advisor. These agents or advisors create a scattering channel to sell the different insurance products.These advisors are the strongest dispersal channel for an insurance agency. An advisor or agent industrial plant as a third troupe or intermediate among insurance company and customers. All the advisors in an agency work as a team. M ain work of insurance advisor or agent is to promote and sell different insurance products of company. Functions of agency manager a person who governs a group of insurance advisors is known as agency manager. victor of an agency manager depends on the success of their advisors. work of agency manager is to control the advisors in an scotch way.Agency manager is like a creature of deuce wings. He has to recruit advisors as well as to give sales to the insurance company. To recruit advisors. Make them aware of different insurance products. To give them training session. To strike them for efficient work. To get maximum and efficient work from their advisors. Operation work of insurance agency (SBI Life) Every industry has an operational department which supports the securities industry division. Front slip partners (independent agents) Develop insurance products Distribute productCUSTOMERS designing and manage company profession PARTNERS Fulfill and service product Claim s stick out office provider Regulatory institutions In the reference to the SBI Life insurance, development of insurance products, dissemination, planning services products and vociferations are taken get by by the head office. hind end office providers are those persons who take care of the operational part of the organization and mien office providers are the people who brings sell to the organization. Back office has its own power structure which is connected to head office, and all(prenominal) policy has to be processed to head office. unit for the operations is known as touch centre, and touch centre within the city is known as mini processing centre. Proposal forms come through front office and the verification of the proposal is done by manually which is known as scrutiny. After scrutiny the operational staff enters it in SBI Life website, which is done on groove. the shrewdness of a proposal is done in a sequential order starting line with scrutiny, inwards, pro posal wise inwards, narrator incoming, cashier entry approval, data entry and at long last outwards.After finishing all these operations policy issues from the head office of the state. 4. Indian insurance industry History Life insurance came to India from England in 1818 when oriental life insurance company started in Calcutta by Europeans. After this many insurance companies had been started in India. provided these companies were looking after only the take of European community naturalized in India. Indian people were not being insured by these companies. out suppuration Indian life insurance company came as Bombay mutual life insurance effrontery. Second company was Bharat insurance company came in 1896.After this the united India in madras, national Indian and national insurance in Calcutta and the co-operative assurance in Lahore were conventional in 1906. To regulate Indian insurance business first insurance act came in 1912 as life insurance company act and providen t farm animal act. These acts consist of premium rates tables and semiannualal valuations of companies. In the first two go of 20th century many life insurance companies were started. So the insurance act came in 1938 to governing life and non life insurance companies and to provide strict state control. In 1956 the life insurance business in India was nationalized.In 1956 life insurance corporation of India (LIC) was created to spreading life insurance some(prenominal) more widely peculiarly in agrarian areas. In that course of instruction LIC had 5 zonal offices, 33 divisional offices and 212 branch offices. In 1957 the business of LIC of sum assured of 200crores, 1000crores in 1970, and 7000crores in 1986. Indian regulatory development authority In 1999, the Insurance Regulatory and Development sanction (IRDA) was constituted as an autonomous form to regulate and develop the insurance industry. The IRDA was co-ordinated as a statutory remains in April, 2000.The key he adings of the IRDA include advance of ambition so as to put forward customer satisfaction through increase consumer choice and lower premiums, while ensuring the financial security of the insurance securities industry. The IRDA opened up the market in August 2000 with the invitation for practise for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards border various regulations ranging from registration of companies for throwing on insurance business to protection of policyholders interests.Role of IRDA protect the interests of policyholders. Establishing guidelines for the operations of insurers, and brokers. Specifying the code of conduct, qualifications, and training for insurance intermediaries and agents. Promoting efficiency in the conduct of insurance business. Regulating the investment of investment companys by insurance compa nies. Specifying the partage of business to be written by insurers in agrestic vault of heavens. Handling disputes amid insurers and insurance intermediaries. Changing perception of Indian customersIndian Insurance consumers are like Indian Voters, they are soft but when time is right and ripe, they film and seek necessary changes. De-tariff of many Insurance products are the reflection of changing aspirations and emergence pick up of Indian consumers. For historical days, Indian consumers were at receiving end. Insurance Product was underwritten and was practically forced onto consumers on a Take-it-As-it-basis. All that got changed with passage of IRDA act in 1999. New insurance companies halt come into existence leading to open competition and hence better products for customers.Indian customers establish a bun in the oven develop very sensitive to insurance insurance coverage / Premium as well as the Products (read Risk Solution), that is precondition to them. on that point are not ready to accept any product, no matter even if that is coming from the market leader, should that product is not divine service the purpose. A case in read is ULIP Product / grouping Life and Credit Life in Life Insurance fragment and Travel / Family Floater health and Liability Insurance in the Non-life segment are impudently age Avatar. The recent products are constantly being demanded by Indian consumers, which is pose ample insistences on Insurance companies (Read Risk Under-writers) and Brokers to respond.Customers are looking at Insurance for covering native Risk now which I welcome covered in my next section. another(prenominal) good reason why we are seeing quick changes in the buying behavior of Insurance from mere enthronization to risk mitigation is the cost of heir of Goods (ROG) or Cost of Services (COS). promptly Indian customers are aware of insurance industry and insurance products provided by companies. They have fix more sens itive. They would not accept any case of insurance product unless it fulfills their requirements and needs.In historic days customers looking at insurance products as a life cover which can provide security against any unimaginable events, but now customers look at insurance products as an investment as well as life cover. So at onces customers wants good return from the insurance companies. The Indian customers forms the pivot of each companys strategy. Investment of Indian household savings (as a % in different sector) coin assert DEPOSITS 39% CORP.BANKS 2% SHARES AND DEBENTURES 1% mutual FUNDS 2% NBFCS 3% GOVT.BONDS 13% indemnification 13% PF/ sequestrate FUNDS 21% CURRENCY 6% Source www. vivaindia. com Changing face of Indian insurance industry After the Insurance Regulatory and Development Authority Act have been passed at that place has been establishment of many toffee-nosed insurance companies in India. antecedently there was a monopoly business for Li fe Insurance Corporation of India (L. I. C. ) who was the only life-insurance company for the people till 2000. L. I. C. still holds 71. 4% of the market piece of land in 2006. But after the introduction of private life insurance companies there is a great competition in Indian market now.Everyone is trying to capture the fresh market here and penetrate it with aggressive marketing strategies. Today life-insurance is not only contain up to just life risk cover and maturity period bonuses but changed to greater return from the investments. With the introduction of the unit linked insurance policies these companies are investiture the money in different investment instruments like shares, bonds, debentures, government and other securities. people are demanding for extravagantlyer returns with the life risk cover and private companies are self-aggrandizing 30-40% average process per annum.These life-insurance companies have some(prenominal) kind of policies suiting every need right from financial needs of, marriage, giving birth and rearing up a child, his education, toying daily financial needs of life, reward solutions after retirement. These companies have every aspects and needs of our life covered along with the death-benefit. In India only 25% of the population has life insurance. So Indian life-insurance market is the target market of all the companies who either want to extend or beam their business.To tap the Indian market there has been tie-ups between the major(ip) Indian companies with other International insurance companies to start up their business. The government of India has set up rules that no foreign insurance company can set up their business each here and they have to tie up with an Indian company and this foreign insurance company can have an investment of only 24% of the total start-up investment. Indian insurance industry can be have by subaltern market penetration. Ever growing position class character in population. increase of customers interest with an increasing demand for better insurance products. Application of information technology for business. Rebate from government in the form of tax incentives to be insured. Today, the Indian life insurance industry has a dozen private merrimenters, each of which are making strides in raising cognisance levels, introducing innovative products and increasing the penetration of life insurance in the vastly underinsured country. several(prenominal)(prenominal) of private insurers have introduced attractive products to meet the needs of their target customers and in line with their business objectives. The success of their effort is that they have captured over 28% of premium income in five familys.The biggest beneficiary of the competition among life insurers has been the customer. A wide range of products, customer focused service and professional advice has become the mainstay of the industry, and the Indian customers forms the pivot of each com panys strategy. Penetration of life insurance is offshoot to cut across socio-economic classes and attract people who have never buyd insurance before. Life insurance is also now being regarded as a versatile financial planning tool. Apart from the traditional term and saving insurance policies, industry has seen the entry and harvest-feast of unit linked products.This provides market linked returns and is among the most flexible policies visible(prenominal) today for investment. Now products are outlayd, flexible, and veridical and sustain so people in better position to understand the risk and benefits of the product and they are accepting these innovative products. So it is clear that the face of life insurance in India is changing, but with the changes come a host of altercates and it is only the apt players with a long term vision and a robust business strategy that lead survive.Whatever the developments, the future and the opportunities in this industry go forth surel y be exciting. There are 12 private players in Indian life insurance market. 6 assert owned insurers HDFC measurement life, ICICI prudential, ING Vysya, MetLife, OM Kotak, SBI life. 6 independent insurers Aviva, ANP sanmar, Birla sun life, Bajaj Allianz, exclusive New York life, Tata AIG. Major international insurers are- prudential and Standard life from UK, Sun life of Canada, AIG, MetLife and New York life of the US. Increasing growth since liberalization YEAR LIC (in bn rs. ) PRIVATE instrumentalist FY03 110 10 FY04 120 20 FY05 130 40 FY06 140 60 FY07 240 160 Source Insurance industry (ICFAI nationalation declare) Possibilities for insurance companies in India nurture deregulation of the market. Greater concern for the customers. Newer products and services. challenger and quality consciousness. Cost effective operations. Restructuring of the public sector. Consolidation of domestic insurance markets. technology driven sky in product design. Actua l operations and distribution. Convergence of financial services. 5. globose insurance industry Globally, insurers progressively are pressured by the demands of their clients. The development of orbiculate insurance industry over the past few geezerhood was influenced by well-heeled stock markets which enabled considerable upper-case letter gains to be made in non life business. sum up in insurers equity capital change magnitude underwriting capacity, while demand did not develop at the same pace, resulting in simplification in insurance policies prices. The stock market boom of the past few years led to demand for unit linked insurance products. The global insurance industry is growing at rapid pace. roughly of the markets are undergoing globalization. Lot of mergers and acquisition are winning place in the insurance founding. The rapidity in the industry, proficient advantage has resulted in pressures on a few economic parameters. The world insurance industry is at p eak of its globalization process. Global insurance market is increasing by an average of vi percent per year since 1990. Insurance companies have collected $2443. one million million premium world wide correspond to the global development of premium volume in 144 countries in 2005. $1521. 3 has been generated as life insurance premium and $922. 7 as non life insurance premium. The US accounted for 35% of global life and non life premium, Japan had global share of 21%, and UK was having 10% of global share. function on Indian insurance industry In this era of globalization, insurance companies face a dynamic global environment. striking changes are taking place owing to the internationalization of activities, appearance of sunrise(prenominal) risk, sassy types of covers to match with untested risk situations, and irregular and innovative ideas on customer services.Low growth rates in positive markets, changing customers needs, and the uncertain economic conditions in the g rowth world are exerting pressure on insurers resourcefulnesss and scrutiny their ability to survive. Now the existing insurers are facing bafflingies from non-traditional competitors those are entering the retail market with new costes and through new transmit. India has a rapidly growing middle class and this section can afford to buy insurance products. This shows the attraction that the Indian market holds for foreign insurers who have been putting pressure on developing countries as well as on India to open up its market. Life insurance penetration as a % of GDP linked kingdom 8. 9% Japan 8. 3% Korea 7. 3% united states 4. 1% Malaysia 3. 6% India 3. % China 1. 8% Brazil 1. 3% Source www. indianinsuranceresearch. com 6. Functioning of insurance industry Insurers business model Profit = earned premium + investment income incurred loss underwriting expenses Insurers make money in two ways (1) through underwriting, the processes by which insurers select t he risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insured.The most difficult aspect of the insurance business is the underwriting of policies. exploitation a wide assortment of data, insurers hazard the likelihood that a claim pull up stakes be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are provideing to assume and the premium they get out charge to assume them. Data is analyze to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and opportunity to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurers overall exposure.Upon solution of a given policy, the amount of premium collected and the investment gains thereon electronegative the amount paid out in claims is the ins urers underwriting profit on that policy. An insurers underwriting performance is mensurable in its unite ratio. The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the companys combined ratio. The combined ratio is a reflection of the companys overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss. Insurance companies also earn investment simoleons on float. Float or addressable reserve is the amount of money, at hand at any given moment that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out. . Naturally, the float method is difficult to carry out in an economic ally dispirited period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor saving chiefly means high insurance premiums. This determination to swing between profitable and worthless periods over time is commonly known as the underwriting or insurance cycle. Finally, claims and loss use is the materialized utility of insurance.In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. Investment management Investment operations are often considered incidental to the business of insurance, and have traditionally viewed as alternative to underwriting. In the past risk management was the most important part of business, whereas today the focus has shifted to fund management. Investment income is a large component of insurance revenues, near and careful management of funds. Insurance is a business of large numbers and generates huge amount of funds over time.These funds arise out of policyholder funds in the case of life insurance, and technical and free reserves in the non-life segments. Time dawdle between the procurement of premium and the payment of claim provides an interval during which the funds can be deployed to generate income. Insurance companies are among the largest institutional investors in the world. Assets managed by insurance companies are estimated to account for over 40% of the worlds top ten asset managers. Returns on investments influence the premium rates and bonuses and hence investment income will continue to be an important component of insurance company profits. In life insurance, benefits from insurance profits accrue direct to policy holders when it is passed on to him in the form of a bonus.In non life insurance the benefits are indirect and mostly by the creation of an investment portfolio. Investment income has to compensate for underwriting re sults which are progressively under pressure. In the case of insurance, the deviance between revenue and the expenses is known as operating surplus. tax income =premium. Expenses =sum of claims + commission collectable on procurement of business + operating expenses. operational surplus =revenue-expenses. Net investment income includes income from concern in and holding stock market securities including government securities, redundant deposits with the central government, loans to several public utilities and service providers in state government.Insurance premium collected is converted in a pool of fund then divided in to four expenses. To pay the expenses of the management. To pay agency commission. To pay for the claims. Surplus money will be invested in govt. securities. Requirements of an insurance risk Insurance normally insure only unclouded risks . However, not all pure risk is insurable . certain requirements usually essential be fulfilled before a pure risk c an be privately insured . From the view signalise of the insurer, there are ideally six requirement of an insurable risk There moldiness be a large number of exposure units The loss must be accidental and unintentional. The loss must be determinable and measurable. The loss should not be catastrophic. The chance of loss must be calculable. The premium must be economically feasible Comparison of Insurance with other Similar Factors 1) Insurance and frolic compared Insurance is often erroneously wooly with bid . There are two important differences between them . First ,gambling creates a new speculative risk ,while insurance is a proficiency for handling an already existing pure risk . thence ,if you bet Rs 300 on a horse ,a new speculative technique is created ,but if you pay Rs 300 to an insurer for liberation insurance ,the risk of fire is already present and is transferred to the insurer by a contract. No new risk is created by the transaction.The second difference betw een insurance and gambling is that gambling is heartyly unproductive, because the victors gain comes at the expense of the loser . In contract insurance is always socially productive, because neither the insurer nor the insured is pose in a position where the gain of the winner comes at the expense of the loser. The insurer and the insured have a common interest in the prevention of a loss. Both parties win if the loss does occur . Moreover, consistent gambling transaction largely never restore the losers to their former financial position . In contract ,insurance contracts restore the insureds financially in whole or in part if a loss occurs ) Insurance and hedging compared The concept of hedging is to transferring the risk to the speculator through purchase of future contracts . An insurance contract, however, is not the same thing as hedging . Although both technique are mistakable in that risk is transferred by a contract, and no new risk is created, there are some importa nt difference between them. First, an insurance transaction involves the transfer of insurable risks, because the requirement of an insurable risk generally can be met . However, hedging is a technique for handling risks that are typically uninsured ,such(prenominal)(prenominal) as protection against a decline in the price land products and raw materials.A second difference between insurance and hedging is that insurance and hedging is that insurance can reduce the objective risk of an insurer by application of the law of large numbers. As the number of exposure units increases, the insurers prediction of future losses improves, because the coition variation of actual loss from evaluate loss will decline . thus, many insurance transactions reduce objective risk. In contract, hedging typically involves only risk transfer , not risk reduction . The risk of adverse price fluctuation is transferred because of superior knowledge of market conditions . The risk is transferred, not red uced, and prediction of loss generally is not based on the law of large numbers. Various types of life insurance policies- Endowment policies This type of policy covers risk for a specified period, and at the end of the maturity sum assured is paid back to policyholder with the bonuses during the term of the policy. specie back policies This type of policy is for periodic payments of partial survival benefits during the term of the policy as long as the policy holder is alive. group insurance This type of insurance offers life insurance protection under group policies to various groups such as employers-employees, professionals, co-operatives etc it also provides insurance coverage for people in certain approved occupations at the lowest possible premium cost. margin life insurance policies This type of insurance covers risk only during the selected term period.If the policy holder survives the term, risk cover comes to an end. These types of policies are for those people who are uneffective to pay larger premium required for endowment and whole life policies. No surrender, loan or paid up values are in such policies. Whole life insurance policies This type of policy runs as long as the policyholder is alive and is covered for the entire life of the policyholder. In this policy the insured amount and the bonus is due only to nominee on the death of policy holder. formulate life insurance policies These policies are similar to endowment policies in maturity benefits and risk cover, but correlative life policies cover two lives simultaneously such as married couples.Sum assured is payable on the first death and again on the death of survival during the term of the policy. tribute plan a pension plan or annuity is an investment over a certain number of years but does not provide any life insurance cover. It offers a guaranteed income either for a life or certain period. unit linked insurance plan ULIP is a kind of insurance plan which provides l ife cover as well as return on premium paid over a certain period of time. The investment is de tick offd as units and represented by the value called as net asset value (NAV). 7. Insurance and economic system Indian economy is growing in reference to global market. Business of insurance with its unique features has a special place in Indian economy. It is a highly specialized technical business and customer is the most concern people in this business, therefore this business is able to spur the growth of infrastructure and act as a catalyst in the overall development of Indian economy. The high volumes in the insurance business help spread risk wider, allowing a sinister of the rates of the premium to be charged and in turn, raising profits. When there is a bigger base, the probabilities become more predictable, and with system wide risks balanced out, profits improve. This explains the latest scenario of mergers, acquisitions, and globalization of insurance. Insurance is a t ype of savings. Insurance is not only important for tax benefits, but also for savings and for providing security. It can be serving as an essential service which a offbeat state must make available to its people. Insurance play a all-important(a) economic consumption in the commercial lives of nations and act as the lubricants of economic activities. Insurance firms help to spread the potentially financial consequences of risk among the large number of entities, to mobilize and beam savings for productive use, facilitate investment, support and encourage outer trade, and protect economic entities against external risk. Insurance and economic growth in return influences each other. As the economy grows, the living standards of people increase. As a consequence, the demand for life insurance increases. As the assets of people and of business enterprises increase in the growth process, the demand for general insurance also increases.In fact, as the economy widens the demand for new types of insurance products emerges. Insurance is no longer confined to product markets they also cover service industries. It is every bit full- capability that growth itself is facilitated by insurance. A well-developed insurance sector promotes economic growth by encouraging risk-taking. Risk is indispensable in all economic activities. Without some kind of cover against risk, some of these activities will not be carried out at all. Also insurance and more oddly life insurance is a mobilizer of long term savings and life insurance companies are thus able to support infrastructure projects which require long term funds.There is thus a mutually beneficial interaction between insurance and economic growth. The low income levels of the vast legal age of population have been one of the factors inhibiting a faster growth of insurance in India. To some extent this is also intensify by certain attitudes to life. The economy has locomote on to a higher growth path. The average ra te of growth of the economy in the last three years was 8. 1 per cent. This strong growth will bring to the highest degree significant changes in the insurance industry. At this point, it is important to note that not all activities can be insured. If that were possible, it would completely negate entrepreneurship.Professor wiener Knight in his celebrated book Risk Uncertainty and Profit emphasise that profit is a consequence of uncertainty. He made a distinction between quantifiable risk and non-quantifiable risk. According to him, it is non-quantifiable risk that leads to profit. He wrote It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future while the problems of life or of conduct at least, arise from the fact that we know so little. This is as true of business as of other spheres of action at law. The real management challenges are uninsurable risks. In the case of insurable risks, risk is avoided at a cost. 8. SBI Life insuranceSBI Life insurance is a joint venture between the State banking concern of India and Cardiff SA of France. SBI Life insurance is registered with an authorized capital of Rs 500 crore and a paid up capital of Rs 350 crores. SBI owns 74% of the total capital and Cardiff the remaining 26%. State marge of India enjoys the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,000 branches across the country, the largest in the world. Cardiff is a wholly owned subsidiary of BNP Paribas, which is The Euro partitions leading Bank. BNP is one of the oldest foreign banks with a presence in India geological dating back to 1860. It has 9 branches in the metros and other major towns in the country.Cardiff is a vibrant insurance company specializing in ad hominem lines such as long-term savings, protection products and creditor insurance. Cardiff has also been a pioneer in the art of exchange insurance pro ducts through commercial banks in France and 29 more countries . In 2004, SBI Life insurance became the first company amongst private insurance players to cover 30 lakh lives. The company expects to mutilate a niche in the Indian insurance market through considerable product innovation and aims to provide the highest standards of customer service through a technological interface. To facilitate this, call centres have been already installed and help lines will be installed and customers will have admission fee to their accounts through the Internet or through SBI branches.SBI Life insurance is uniquely placed as a pioneer to door guard banc assurance into India. The company hopes to extensively utilize the SBI Group as a course of study for cross- interchange insurance products along with its numerous banking product packages such as housing loans, in the flesh(predicate) loans and credit cards. SBIs access to over 100 million accounts provides a vibrant base to build insuranc e change across every region and economic strata in the country. Under section 88 of insurance act 1961 an individual is entitled to a discount of 20 per cent on the annual premium payable on his/her life and life of his/her children or adult children. The rebate is deductible from tax payable by the individual or a Hindi Undivided Family.This rebate is can be availed up to a maximum of Rs 12,000 on payment of one-year premium of Rs 60,000. By paying Rs 60,000 a year, you can buy anything upwards of Rs 10 lakh in sum assured. (Depending upon the age of the insured and term of the policy) This means that you get an Rs 12,000 tax benefit. The rebate is deductible from the tax payable by an individual or a Hindu Undivided Family. SBI Life Insurance is currently growing at an impressive rate of 200%. As per the latest IrDA report SBI Life ranks No. 3 amongst the private insurers. The companys market share has increased to 10% amongst the private players and is 2. 25% in the total in dustry. This year, the company is aiming at a growth of 150%.The new business premium of the company from beginning of the year to September 2006 is Rs 660 crores. The total business premium of the company from the beginning of the year till September 2006 is Rs 765 crores. The company aims to collect first year premium of over Rs 2,000 crores. SBI Life follow a multi distribution channel nestle and expect all channels to contribute to the overall growth. Today, the agency channel contributes over 50% and banc assurance channel contributes to 40% of the business. Other channels like Credit Life and Group Corporate are also execute very well. Products of SBI Life insurance (Source www. sbilife. co. n) building block Linked products (1) Group Employee Benefit Products sight 11 Retirement Solutions Unit sanies 11 Cap view backsheesh Unit plus child Plan Cap Assure Superannuation Unit Plan Elite Cap Assure Leave Encashment PensionProducts Group present(prenominal) Annuit y Horizon 11 Pension SBI Life Golden Gratuity Unit rundown 11 Pension Protection Plan Lifelong Pension Sampoorn Suraksha sheer Protection Products SBI Life Group Term Life Scheme In stead of EDLI Swadhan Specialized Term Insurance justification SBI Life Keyman Insurance keyman (2) Group bestow Protection Products Protection cum savings products Dhanaraksha Plus Sudarshan Dhanaraksha Plus SP Scholar11 Dhanaraksha Plus LPPT Setubandhan Dhanaraksha Plus RP funds back scheme products (3) Group Savings Protection Plan Money Back Nidhi Raksha RP Sanjeevan Supreme (4) Group small Insurance Grameen Shakti and Super Suraksha 9. Distribution of insurance products Insurance has to be sold the world over. The Touch point with the ultimate customer is the distributor or the producer and the role played by them in insurance markets is critical. It is the distributor who makes the difference in terms of the quality of advice for choice of product, servicing of policy post sale and settlement of claims. In the Indian arket, with their distinct cultural and social ethics, these conditions will play a major role in shaping the distribution channels and their long suit. In todays scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance Companies. Challenges for insurance companies and intermediaries in India- building faith about company in the mind of clients. Building personal credibleness with the clients. Different distribution channels in India- A multi-channel strategy is better suited for the Indian market. Indian insurance market is a combination of multiple markets. individually of the markets requires a different approach.Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and ne eds. Different multi-distribution channels in India are as follows Agents Agents are the primary channel for distribution of insurance. The public and private sector insurance companies have their branches in almost all part of the country and have attracted local people to become their agents. Todays insurance agent has to know which product will appeal to the customer, and also know his competitors products to be an effective salesman who can sell his company, the product, and himself to the customer.To the average customer, every new company is the same. Perceptions about the public sector companies are also cemented in his mind. So an insurance agent can play an important role to create a good kitchen stove of company. Banks Banks in India are all pervasive, especially the public sector banks. Many insurance companies are selling their products through banks. Companies which are bank owned, they are selling their products through their parent bank. The public sector banks, w ith their vast branch networks, are helpful to insurance companies. This channel of selling insurance is known as Banc assurance. INSURANCE COMPANY ASSOCIATEBANKS ICICI prudential ICICI bank, bank of India, Citibank, Allahabad bank, Federal bank, south Indian bank, Punjab and Maharashtra reconciling bank SBI life State bank of India Birla sun life Deutsche bank, Citibank, bank of Rajasthan, Andhra bank ING Vysya bank Vysya bank Aviva life insurance ABN amro bank, canara bank HDFC standard life nitty-gritty bank, Indian bank Met life Karnataka bank, j&k bank Source Hindu Business Line, January 08, 2007 Brokers Now a days different financial institution are selling insurance. These financial institutions are known as brokers. They are taking some underwriting charges from the insurance companies to sell their insurance products. Corporate agents Corporate agency is a cross selling type of channel. Insurance companies tie-up with business houses in other industries to sell insurance either to their employees or their customers.Insurance industry, during the past 2 years has witnessed a number of such strategical tie-ups and alliances. Corporate agents have become a major force to reckon with in distributing insurance products. Such as- Bajaj Allianz tied up with Maruti Udyog and Ford for auto insurance and Tata AIG life has tied up with Tata tea, khaitans Williamson major and bridge foundation for selling rural policies. Internet In this technological world internet is also a channel of selling insurance. This can be as direct marketing. 10. sound marketing strategies Now the Indian consumer is knowledgeable and sensitive. Consumers are increasingly more aware and are actively managing their financial affairs.People are increasingly looking not just at products, but at integrated financial solutions that can offer stability of returns along with total protection. In view of this, the insurance managers need to understand more about the detai ls that go into the introduction of insurance products to make it attractive in this competitive market. So now days an insurance manager requires leadership, commitment, creativity, and flexibility. Every family in every village in the country should feel safe and secure. This vision alone will help to bring the new ideas to the insurance manager. Financial, marketing and human resource polices of the corporations influence the unit mangers to make decisions. slaying of insurance company depends on the effectiveness of such policies.Insurance corporations formulate and rescript these policies from time to time to ensure that the performance of the managers is best for the organization. In the competitive market, insurance companies are being forced to conduct a strictly professional approach in marketing. The insurance companies face the challenge of changing the uninspiring public image of the industry. Some of the important marketing elements are- merchandise mix. The impo rtance of relationship. Positioning. Value addition. Segmentation. Branding. Insuring service quality. Effective pricing. Customer satisfaction research. The growth of insurance sector is governed largely by factors external to it. The following factors influence the market and demand of product- Government policies. Growth in population. Changing age profile. Income wise distribution of the population. take of insurance awareness. The pricing of the policies. The economic mode of the country. The aversion to risk. Social and political features of the country. Growth scenario in the world. Different companies adopt different approaches in their marketing strategies. One approach is focus upon product quality which can give confidence in the mind of customers that they are offered by best featured products. And other approach is focusing on customers needs, which involve a heavy investment in developing relationships with policyholders.Under this approach customer c an expect a range of products and service offered to him. Third approach is market segmentation under which the population can be divided into several homogeneous products and groups, the effort should be tie clients to the company by customized combination of coverage, easy payment plans, risk management advice, and convenient and quick claim handling. An insurance product can be classified in three phases affection product In insurance industry the core product is the policy that provides protection t