CHAPTER 1

INTRODUCTION TO INSURANCE INDUSTRY

1. INSURANCE INDUSTRY IN INDIA

1.1 INDIAN INSURANCE MARKET – HISTORY

Insurance has a long history in India. Life Insurance in its current form was
introduced in 1818 when Oriental Life Insurance Company began its operations in India.
General Insurance was however a comparatively late entrant in 1850 when Triton
Insurance company set up its base in Kolkata.

History of Insurance in India can be broadly bifurcated into three eras: a) Pre
Nationalization b) Nationalization and c) Post Nationalization.

Life Insurance was the first to be nationalized in 1956. Consolidating the

operations of various insurance companies formed Life Insurance Corporation of India.

General Insurance followed suit and was nationalized in 1973. General Insurance
Corporation of India was set up as the controlling body with New India, United India,
National and Oriental as its subsidiaries. The process of opening up the insurance sector
was initiated against the background of Economic Reform process, which commenced
from 1991. For this purpose Malhotra Committee was formed during this year who
submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was
passed in 1999. Resultantly Indian Insurance was opened for private companies and
Private Insurance Company effectively started operations from 2001.

1.2 INSURANCE MARKET - PRESENT

The insurance sector was opened up for private participation four years ago. For
years now, the private players are active in the liberalized environment. The insurance
market has witnessed dynamic changes, which include presence of a fairly large number of
insurers both life, and non-life segment. Most of the private insurance companies have
formed joint venture partnering well-recognized foreign players across the globe.

1.3 CAPITAL REQUIREMENTS AND FOREIGN PARTICIPATION

Minimum capital requirement for direct life and Non-life Insurance company is
INR1000 million and that for reinsurance company is INR2000 million. A maximum 26%
foreign equity stake is allowed in direct insurance and reinsurance companies. In the 2004-
05 budget, the Government proposed for increasing the foreign equity stake to 49%, this is
yet to be effected.

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 There are a total of 13 life insurance companies operating in India, of which one is
a Public Sector Undertaking and the balance 12 are Private Sector Enterprises.

Sr. No. Name of the company Nature of

Holding
1 Allianz Bajaj Life Insurance Co Private
2 AMP Sanmar Assurance Co Private
3 Aviva Life Insurance Private
4 Birla Sun Life Insurance Co Private
5 HDFC Standard Life Insurance Co Private
6 ICICI Prudential Life Insurance Co Private
7 ING Vysya Life Insurance Co. Private
8 Life Insurance Corporation of India Public
9 Max New York Life Insurance Co. Private
10 MetLife Insurance Co. Private
11 Om Kotak Mahindra Life Insurance Private
12 SBI Life Insurance Co Private
13 TATA- AIG Life Insurance Company Private

Table 1.1 Different private companies in insurance industry

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 CHAPTER 2

THE TATA GROUP

2.1 THE TATA GROUP

The Tata Group is one of India's largest and most respected business
conglomerates, with revenues in 2006-07 of $28.8 billion (Rs.129,994 crore), the
equivalent of about 3.2 per cent of the country's GDP, and a market capitalisation of $72.2
billion as on December 6, 2007. Tata companies together employ some 289,500 people.
The Tata Group has operations in more than 85 countries across six continents, and its
companies export products and services to 80 countries.[1]

2.2 AMERICAN INTERNATIONAL GROUP, INC. (AIG)

American International Group, Inc. (AIG), a world leader in insurance and

financial services, is the leading international insurance organization with operations in
more than 130 countries and jurisdictions. AIG companies serve commercial, institutional
and individual customers through the most extensive worldwide property-casualty and life
insurance networks of any insurer. In addition, AIG companies are leading providers of
retirement services, financial services and asset management around the world. AIG's
common stock is listed on the New York Stock Exchange, as well as the stock exchanges
in Paris and Tokyo.[1]

2.3 TATA AIG INSURANCE COMPANY LIMITED

Tata AIG Life Insurance Company Limited and Tata AIG General Insurance
Company Limited (collectively 'Tata AIG') are joint ventures of the Tata Group and
American International Group, Inc. (AIG). Tata AIG combines the strength and integrity of
the Tata Group with AIG's international expertise and financial strength. Tata AIG Life
Insurance Company Limited (Tata AIG Life) is a joint venture company, formed by the
Tata Group and American International Group, Inc. (AIG). Tata AIG Life combines the
Tata Group’s pre-eminent leadership position in India and AIG’s global presence as the
world’s leading international insurance and financial services organization. The Tata
Group holds 74 per cent stake in the insurance venture with AIG holding the balance 26
percent. Tata AIG Life provides insurance solutions to individuals and corporates. Tata
AIG Life Insurance Company was licensed to operate in India on February 12, 2001 and
started operations on
April 1, 2001.

Tata AIG Life Insurance Company Ltd. "Tata AIG Life" offers a broad array of life
insurance products to individuals, associations and businesses of all sizes, with a wide
variety of additional coverage to ensure our customers can find an insurance product to
meet their needs.[1]

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2.4 LIST OF PRODUCT OFFERED BY TATA-AIG

The life insurance plans are generally divided into two types: (a) Traditional plans
(b) Unit linked insurance plans (ULIP). Traditional plans are basically insurance plus
savings whereas ULIPs are insurance plus investment. Further they are classified into pure
protection, savings, investments, pension and living benefits. The classification are shown
in the table below.[2]

Traditional plans
Pure protection Savings Investments Pension Living benefits
1. Raksha 1.Maha Life - 1.Nirvana Plus 1.Health protector
gold 2.Easy retire 2.Riders
3.Riders

Unit linked insurance plans (ULIPs)

Pure protection Savings Investments Pension Living benefits
- 1.Invest 1.Invest 1.Invest assure 1.Health investor
Assure Gold assure plus future

2.Invest 2.Invest
Assure II assure flexi

Table 2.1 Different products offered by TATA AIG Life Insurance

2.5 NEEV – THE FOUNDATION PROGRAM

This is three days training program at TATA AIG office about product knowledge.
We were trained about different TATA AIG Life insurance products and their details. As
we are working under Tier one we have been given few product knowledge. The products
taught are

a) Raksha (Pure Protection)

b) Health Protector (Living Benefits)
c) Mahalife Gold (Savings)
d) InvestAssure II (Savings)
e) InvestAssure Gold (Savings)
f) InvestAssure Plus (Investment)
g) Nirvana Plus (Pension)
h) InvestAssure Flexi (Investment)
i) InvestAssure Future (Pension)

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 Out of these products my focus is Unit Linked Insurance Plans (ULIPs). So the
following are the ULIP that are discussed further

a) InvestAssure II (Savings)
b) InvestAssure Gold (Savings)
c) InvestAssure Plus (Investment)
d) InvestAssure Flexi (Investment)
e) InvestAssure Future (Pension)

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 CHAPTER 3

INTRODUCTION OF THE RESEARCH STUDY

3.1 INTRODUCTION

The marketing of insurance policies involves unique practices when compared to

marketing of any other product. Insurance policies are services and hence intangible in
nature. So people do not realize the need and importance of insurance. The sales of any
particular product depends on how the agents sells it, different agents sells on basis
different parameter like commission gained, agent’s perception about the product, agent’s
understanding about the products, his convincing power etc.

3.2 OBJECTIVES OF THE STUDY

The following are the main objectives of the study.

1. To study the sales insurance service in Noida and Ghaziabad region.

2. To analyze the buying behavior of the policyholders in the study area with
respect to age for ULIPs.

3. To study about preference of the customer among the selected private insurance
companies i.e. Aviva life insurance, ING Vysaya life insurance, Bajaj Allainz life
insurance and Met life insurance

4. To study the comparison of the various products by the above mention

companies and to know in which parameters does TATA AIG’s product is lagging
behind according to customers.

3.3 METHODOLOGY

The study was aimed at measuring the customer’s preference for life insurance
companies and the comparison of various ULIP insurance policies of the various
companies on basis of various parameters based on customer’s responcse in Noida and
Ghaziabad region. The survey was done on 150 general residents of the selected region.

Methods adopted for surveys

1. Field survey method

2. Personal interview technique
3. Secondary sources viz company database

The data collected are represented into suitable tabular forms for drawing
inferences. Quantitative techniques like averages, percentages, range, two-way tables, chi-
square tests analysis are applied as per the requirement. The level of preference, perception
of the

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customers about the product and company were identified by means of a scoring scheme.
For the representation of data various charts and graphs are used as per requirement

3.4 FACTORS INFLUENCING THE BUYING OF UNIT LINKED

INSURANCE PLANS (ULIPs)

The degree of buying of ULIPs insurance varies from person to person. It depends
upon many factors. The factors can be classified into personal, social, economic,
psychological and company related variables. Age and experience of policyholder are
personal factors, while the co education is a social factor. Economic factors include
occupation, income and wealth, and the psychological factors consist of perception,
satisfaction about the services rendered by insurance companies, the impact of
advertisement and personal selling made by insurance companies on policyholders. The
company related variables are the promotional efforts to sell the policies to prospective
buyers. These include advertisement and personal selling. The questionnaire contains
suitable questions and the answers elicited from the respondents were presented into tables
in coming chapter.

The factors influencing the buying of policies by the policyholders were identified.
For this, eight factors pertaining to policyholder’s personal economic and psychological
aspects were chosen. The degree of influence of these factors on buying the policies, by
the policyholders was studied with the help of two-way tables, percentages, averages and
chi-square () tests as found necessary. In order to find the relationship between the
personal, socio-economic and psychological variables, it was hypothesized that all
background variables influence the value of insurance purchased by the policyholders. The
value of insurance policy can be related to the amount of premium paid by the
policyholders. Hence, the amount of premium is taken as the variable and the background
variable and the background variables are treated as independent variables. Buyer behavior
is the act of individuals directly involved in obtaining and using goods and services. It is a
process in which potential customers are subjected to various stimuli. Hence, an attempt is
made to study the buying behavior of insurance policyholders in the study area-especially
their profile, pattern of buying insurance policies, degree of awareness on different types
of policies, renewal of policies, coinsurance, claims and settlement and problems faced by
the policyholders.

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 CHAPTER 4

SURVEYS AND RESULTS

4.1 AGE AND PREFERENCE OF ULIPs

Age is a crucial factor in decision-making. Age and experience are interrelated.

Young persons are expected to buy more number of unit linked insurance policies than
their older counterparts, because young people can bear more market risk. An attempt was
made to analyze the relationship between the age of the respondents and their preferences
for unit linked insurance plans. For this the respondents were classified, according to their
age viz., young, middle aged and old aged.

Sr. No. Age No. of % Average Range S.D.

respondents Min Max
1. Young 62 41.4 54.5 35 80 6.9
2. Middle 52 34.6 36.4 15 48 7.7
3. Old 36 24 36.5 21 49 9.6
Total 150 100

Table 4.1 Age and preference of ULIP

The above table shows that premium paid by the young policyholders ranged
between 35 and 80 with an average of 54.5. The middle-aged respondents’ ranged between
15 and 48 with an average of 36.4. On the other hand, the old aged respondents ranged
between 21 and 49 with an average of 36.5. Thus, it is inferred from the above analysis
that the respondents belonging to young age group prefers more of the ULIP insurance
policies. With a view to find the degree of association between age of the respondents and
their preference, a two-way table is prepared and the results are shown in the following
table.

Sr. No. Age Low Medium High Total

1. Young 15 27 20 62
(24.19) (43.5) (32.25)
2. Middle 12 22 18 52
(23.07) (42.3) (34.6)
3. Old 5 20 11 36
(13.8) (55.5) (30.5)
Total 32 69 49 150

Table 4.2 Age and preference of ULIP (Two way table)

It is found from the above table that the percentage of high preference of ULIP
insurance was the highest (34.6) among the middle-aged respondents and the lowest (30.5)
among the old respondents. The percentage of medium level of preference of ULIP
insurance was the highest (55.5) among the old aged respondents and the same was the

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lowest (42.3) among the middle-aged respondents. On the other hand, the percentage of
low preference of ULIP insurance was the highest (24.19) among the young aged
respondents and the lowest (13.8) among the old aged policyholders.

In order to find the relationship between the age of the respondents and the level of
preference of ULIP insurance, a chi-square test was used and result of the test is shown in
the following table.

Factor Calculated χ2 Table value D.F. Remarks

Value
Age 2.33 9.488 4 Significant at
5% level

Table 4.3 Age and preference of ULIP (Chi-squares table)

It is noted from the above table that the calculated Chi-square value is less than the
table value and the result is significant at 5% level. Hence, the null hypothesis “the age of
the respondents and the preference of ULIP insurance” holds good. From the above
analysis it is concluded that there is a close relationship between the age of the
respondents and the preference of the ULIP insurance plans.

4.2 CUSTOMERS AND PRERENCE OF COMPANY

After privatization in India many foreign companies have entered in the life
insurance industry out of which we have compared between the following companies

1. Bajaj allainz life insurance

2. ING Vysaya life insurance
3. Aviva life insurance
4. Met life insurance

Under this survey we have asked customers to give their preference against the
above mention companies and rate them out of 50. The customers have given their
preference according to their experience and perception about the products of the
company. These responses depend on many other factors, which are discussed in the next
section of the survey. The following shows preference of the customers and companies

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 Sr. No. Companies No. of % Average Range
respondents Min Max
1. Met life 9 6 24.4 15 35
2. ING 17 11.3 32.1 13 40
Vysaya
3. Bajaj 30 20 38.9 27 47
Allianz
4. TATA AIG 70 46.7 39.5 29 49
5. Aviva Life 24 16 36.3 18 49
Total 150 100

Table 4.4 Customer and preference of companies

The above table shows that the customer response for TATA AIG is highest at
46.7% of the total 150 customers, with second Bajaj Allianz at 20%, at third it is Aviva
Life insurance with 16%, fourth is ING Vysaya with 11.3 and Met life insurance at fifth
position with 6% of total respondents.

In terms of rating of the customers for preference out 50 again TATA AIG leads
with the average rating of 39.5, at second Bajaj Allianz with average of 38.9, at third it is
Aviva Life insurance with 36.3, fourth is ING Vysaya with 32.1 and Met life insurance at
fifth position with 24.4 average.

From this survey we can clearly see that the customer preference for TATA AIG’s
product leads among the four competitors in insurance sectors. The reason for this
preference is shown in the next survey.

The above rating chart has been scaled downed to 1 to 5 rates and shown in a
semantic scale below.

Figure 4.1 Semantic Differential Chart of different companies and customer

preferences rated from 1 to 5

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4.3 REASONS FOR CUSTOMER’S PREFERENCE FOR COMPANY

Customer preference is based on many parameters, as it is intangible product.

Different companies have different products with various features. Out of all the features
we have taken some of the features and tried to compare the above-mentioned company’s
product. In the above survey we have seen that customer preferred for TATA AIG’s
product so in this section we have taken some salient feature of the ULIP product and
asked customer for his responses

The features of the product are returns, premium, flexibility, no of funds and
transparency of the taxes. The following table shows the response of the customer’s
perception of the product of different company.

Companies/ Met Life Ing Vysaya Bajaj TATA AIG Aviva Life
Parameters Allianz Life
Premium 1.8 2.4 4.5 2.2 3
Charged
Flexibility 2.5 3.1 3.6 4 3.4
No. of Funds 2.9 3.2 3.5 4.5 3.7
Fund Returns 2.7 2.3 3.4 4.6 3.5
Transparency 2.1 2.4 1.8 4.5 3.2

Table 4.5 Table of ratings of service by different companies based on different parameters

The above table shows that TATA AIG lags behind with respect to premium
charged to other companies. As per customers the premium charge by TATA AIG is more
than other companies with so rated average at 2.2. The leading company in this category is
Bajaj Allianz with 4.5 rates. Flexibility means customization of the product according to
the customers need. In flexibility TATA AIG life leads with 4 points followed by Bajaj
Allianz. Number of funds is another parameter to judge the company’s product. In ULIP
the money are invested in the particular funds these are funds are classified according to
the risk related to market. TATA AIG leads this category because of its unique capital
guaranteed fund in which gains are guaranteed by the company upto some extend. Fund
return is basically the performance of the fund with market. According to survey the
returns given by the funds of TATA AIG is highest in December 2007. The most important
thing id transparency of the allocation of the premium of the customers, this section is
grabbed by TATA AIG as it clearly specifies about the service tax and premium allocation
so there is no hidden charges that creates confusion to the customer.

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The above table is represented in a graphical way as below

Figure 4.2 Graphical Representation of the above table

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 CHAPTER 5

RECOMMENDATIONS AND BENEFITS

5.1 RECOMMENDATIONS TO THE COMPANY

As in case of ULIP TATA AIG has one of the best products as compared to the four
private companies, but still our survey result says that TATA AIG needs some minor
improvement regarding its premium charges and advertisement to its target customers

1. Premium charges

Due to its high premium charges customers perception about the company’s
product has become that its only for the upper middle class people. Where as TATA
AIG do has some policy with low premium but the charges of allocation are too
high. So we would like to suggest lowing down its premium charges to some
extend by reducing administration charges and other charges.

2. Advertisement

During surveys we have found that due to lack of advertisements about the
products and agents selling the products in which they get high commissions
customers are somewhere mislead and they know about very few products though
TATA AIG has wide range of variety of the products. So we would recommend
TATA AIG to invest more in advertisement in form of TV commercials, pamphlets
and hoardings

5.2 BENEFITS TO THE COMPANY AND US

With the valuable time spend on the surveys and sales done by us it is a win-win
situation for both company and me. The benefits of this summer internship program are
discussed below

1. Benefit to the company

a) This survey done in Noida and Ghaziabad region on comparison of TATA

AIG’s product and its competitor can give a idea of this position in the market.
As TATA AIG leads in most of the parameters so it should continue to serve in
the same manner.
b) The survey also shows the customers perception about TATA AIG’s life ULIP
product with which it can improve its impression better than now.
c) The recommendation given in this report will help TATA AIG to position its
product properly to the target customers
d) Moreover the sales done during this internship of 2 lakhs have done a good
business for the company

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2. Benefit to us

a) Doing internship in TATA AIG have given me immense experience in the

insurance industry for these fourteen weeks.
b) Interaction with the customers for survey and sales has developed our
marketing skills.
c) Working in the office premises has given exposure to corporate world and an
experience in working in corporate pressure.
d) Commissions obtained from sales is the stipend received during this internship

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 CHAPTER 6

CONCLUSION AND REFERENCE

6.1 CONCLUSION

Here I conclude that the summer internship program, done for partial fulfillment of
the MBA course in ICFAI University, in TATA AIG Life Insurance Co. Ltd. has been
completed successfully.

Following are the achievements done during the summer internship from 24th
February 2008 to 24th May 2008

a. Survey done with interest of TATA AIG has been conducted successfully
and results are discussed above.
b. Sales done during the time have done great business to the company.
c. The experience gained during the internship has sharpen my skills and
given a corporate exposure

6.2 REFERENCE

The report have been made on the basis of following references

a. www.tata-aig-life.com
b. www.italic.com
c. www.indianinsuranceresearch.com
d. www.bimaonline.com

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