Product and Service Divercifcation With Reference To Sbi Life Insurance

PRODUCT AND SERVICE DIVERCIFCATION WITH REFERENCE TO SBI
LIFE INSURANCE
A PROJECT REPORT ON:PRODUCT AND SERVICE

DIVERSIFICATION IN INDIAN INSURANCE
SECTOR
W. R. TO: - SBI LIFE INSURANCE
BACHELOR OF COMMERCE
BANKING AND INSURANCE
SEMESTER VI
2008-2009
SUBMITTED BY: UDAY S. SHAH
SEAT NO: S.K.SOMAIYA COLLEGE OF ARTS,

SCIENCE & COMMERCE
VIDYAVIHAR
T.Y.BANKING& INSURANCE

LIFE INSURANCE
INDEX
SR.
CONTENTS
NO
1 EXECUTIVE SUMMARY
2 OBJECTIVE OF STUDY
3
4
METHODOLOGY
INDIAN INSURANCE INDUSTRY
PAGE
NO.
1
2
3
4-17
Introduction
Need for insurance
The life insurance sector in India
Insurance sector reforms
Functions of insurance
STATE BANK OF INDIA
18-46
About SBI
SBI life Sanjeevan supreme
SBI launches new product MYBANK SURAKSHA
EXAMPLES
PRODUCT & SERVICE DIVERSIFICATION
47-69
Definition of diversification
Product diversification services
Need for diversification
Forms and means of diversification
Diversification in context of growth strategies
7
7
8
FINDINGS / SUGGESTION
CONCLUSION
WEBLOGRAPHY
70
71
72

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ACKNOWLEDGEMENT
First and foremost, I would like to thank Almighty god for the
energy, strength, guidance and help that has always been with
me throughout my work.
While presenting this project at this project at this juncture, I
feel deeply obliged to our Mumbai University for providing me
with an opportunity to do this project.
This project could not have seen light of the day without the
inspiring & exhortative guidance of my Prof. MAHEK
MANSURI, who guided me like a beacon in the dark.
Last but not the least; I am thankful to all my friends and
colleagues for their moral support and encouragement.
To sum up I would like to thank all those who have helped me
in some or other way in successfully completing this project. It
has been a warming experience for me, which will surely help
me in the future.

LIFE INSURANCE
EXECUTIVE SUMMARY
In labour markets, employment growth has been concentrated in firms
that operate in sectors not covered by Indias highly restrictive labour
laws. In the formal sector, where these labour laws apply, employment
has been falling and firms are becoming more capital intensive despite
abundant low-cost labour. Labour market reform is essential to achieve a
broader-based
development
and
provide
sufficient
and
higher
productivity jobs for the growing labour force. In product markets,

inefficient government procedures, particularly in some of the states, act
as a barrier to entrepreneurship and needs to be improved. Public
companies are generally less productive than private firms and the
privatization programme should be revitalized.
A number of barriers to competition in financial markets and some of the
infrastructure sectors, which are other constraints on growth, also need to
be addressed. The indirect tax system needs to be simplified to create a
true national market, while for direct taxes, the taxable base should be
broadened and rates lowered. Public expenditure should be reoriented
towards infrastructure investment by reducing subsidies. Furthermore,
social policies should be improved to better reach the poor and given
the importance of human capital the education system also needs to be
made more efficient. This era of reforms has also ushered in a remarkable
change in the Indian mindset, as it deviates from the traditional values
held since Independence in 1947, such as self reliance and socialistic
policies of economic development, which mainly due to the inward
looking restrictive form of governance, resulted in the isolation, overall
backwardness and inefficiency of the economy, amongst a host of other
problems.

LIFE INSURANCE
OBJECTIVES OF THE STUDY

The objectives of the study were to focus on the international
competitiveness of these sectors in terms of benchmarking of costs,
measuring
cost
effectiveness,
productivity,
marketing
strategies,
manpower development and R&D apart from looking at technology gaps

and tariff protection required.
In todays scenario, just looking inward is no longer enough for survival.
A presence in the export markets, as a diversification strategy has become
a must. The study has therefore looked at overseas business opportunities
and tried to identify potential countries and projects.

LIFE INSURANCE
METHODOLOGY RESERCH
The methodology is concentrated in the following areas: 1. Method of collecting data
2. Method of recording the collecting data
3. Method of editing the data
4. Method of finalizing data after collecting and editing
Methodology for collecting data with reference to the secondary data was
taken from different books and relevant web sites. The first stage is
specially for the having information from the respective officer.
PRIMARY SURVEY
Purpose of the study:
1. To ascertain customer awareness about financial planning & its
importance in saving tax by investing in insurance products.
2. To know whether they are interested to buy insurance products
with regards to tax saving in future or not & if not, why?

LIFE INSURANCE
Indian Insurance Industry:

Insurance may be described as a social device to reduce or eliminate risk
of life and property. Under the plan of insurance, a large number of
people associate themselves by sharing risk, attached to individual. The
risk, which can be insured against include fire, the peril of sea, death,
incident, & burglary. Any risk contingent upon these may be insured
against at a premium commensurate with the risk involved.
Insurance is actually a contract between 2 parties whereby one party
called insurer undertakes in exchange for a fixed sum called premium to
pay the other party happening of a certain event. Insurance is a contract
whereby, in return for the payment of premium by the insured, the
insurers pay the financial losses suffered by the insured as a result of the
occurrence of unforeseen events. With the help of Insurance, large
number of people exposed to a similar risk makes contributions to a
common fund out of which the losses suffered by the unfortunate few,
due to accidental events, are made good.
The mission of the insurance sector in India should be to extend the
insurance coverage over a larger section of the population and a wider
segment of activities. The three guiding principles of the industry must
be to charge premium no higher than what is warranted by strict actuarial
considerations, to invest the funds for obtaining maximum yield for the
policy holders consistent with the safety of capital and to render efficient
and prompt service to policy holders.
With imaginative corporate planning and an abiding commitment to
improved service, the mission of widening the spread of insurance can be

LIFE INSURANCE
achieved. As I said at the beginning, you who are graduating today have
an important role in fulfilling this mission.
NEED FOR INSURANCE

A family is dependent for its food, clothing and shelter on the income
brought by the family's breadwinner. The family is secure so long as this
breadwinner is alive and is capable of earning. A sudden death (or
disability) may leave the family in a financially difficult situation.
Uncertainty of death is inherent in human life and this uncertainty makes
it necessary to have some protection against the financial loss arising
from untimely death. Life insurance offers this protection. It can help you
safeguard the financial needs of your family.
This need has become even more important due to steady disintegration
of the prevalent joint family system, and emergence of nuclear families.
The need to protect your family's ever growing needs is why you need
Life Insurance. In simple terms, you are legally required to have
insurance for your vehicle. There are various types of insurance, some
cover only the third party and some cover you, your car, the third party
and the third parties car.
You have to read the terms and conditions of an insurance very carefully,
very important cover rules such as, does not cover riots, damage due to
war, natural disaster etc. The life insurance industry recorded a premium
income of Rs.82854.80 crore during the financial year 2004-05 as against
Rs.66653.75 crore in the previous financial year, recording a growth of
24.31 per cent. The contribution of first year premium, single premium
and renewal premium to the total premium was Rs.15881.33 crore (19.16

LIFE INSURANCE
per cent); Rs.10336.30 crore (12.47 per cent); and Rs.56637.16 crore
(68.36 per cent), respectively.
In the year 2000-01, when the industry was opened up to the private
players, the life insurance premium was Rs.34, 898.48 crore which
constituted of Rs. 6996.95 crore of first year premium, Rs. 25191.07
crore of renewal premium and Rs. 2740.45 crore of single premium. Post
opening up, single premium had declined from Rs.9, 194.07 crore in the
year 2001-02 to Rs.5674.14 crore in 2002-03 with the withdrawal of the
guaranteed return policies. Though it went up marginally in 2003-04 to
Rs.5936.50 crore (4.62 per cent growth) 2004-05, however, witnessed a
significant shift with the single premium income raising to Rs. 10336.30
crore showing 74.11 per cent growth over 2003-04.
The size of life insurance market increased on the strength of growth in
the economy and concomitant increase in per capita income. This resulted
in a favorable growth in total premium both for LIC (18.25 per cent) and
to the new insurers (147.65 per cent) in 2004-05. The higher growth for
the new insurers is to be viewed in the context of a low base in 2003- 04.
However, the new insurers have improved their market share from 4.68 in
2003-04 to 9.33 in 2004-05. There are currently fourteen life and fourteen
non-life insurance companies. Of the non-life insurance companies, two
are specialized Insurance companies viz. Agricultural Insurance
Company, which handles Crop Insurance business and Export Credit
Guarantee Corporation, which only transacts Export Credit Insurance.

LIFE INSURANCE
THE LIFE INSURANCE SECTOR IN INDIA:The life insurance business in India made its debut in the year 1818 with
the establishment of the Oriental Life Insurance Company. This was
followed by a number of other businesses setting up operations within
India. Thereafter, in 1956, the central government took over the
management and control of nearly 245 foreign and Indian insurers. The
Life Insurance Corporation (LIC) was set up in the same year and was
given the exclusive privilege to conduct life insurance business in India.
Since 1956 the Life Insurance Corporation of India has held a monopoly
in Indias life insurance sector. The LIC has played a significant role in
the development of the insurance sector in India and has now an
estimated coverage of over 100 million lives68.
In the early part of the 1990s the government of India embarked on a
policy of liberalization whereby reforms were introduced in the financial
sector. The need to introduce reforms in the insurance industry was also
felt and this translated into the setting up of an eight-member committee
under the leadership of Mr.R.N.Malhotra.
The committee was entrusted with the task of reviewing the prevailing
structure of the legal and regulatory mechanisms in the insurance sector
and to make recommendations for strengthening the system. The
committee submitted a report in 1994 in which the primary proposals
were of opening up the insurance sectors to permit entry of private
10

LIFE INSURANCE
insurers and the establishment of a regulatory authority to oversee the

business of life insurance.
Thereafter after much deliberation the Indian Parliament passed the

Insurance Development and Regulatory Authority Act, 1999. Since de
regulation of the insurance sector, there have been 22 new entrants in the
life insurance sector in India69. The Insurance Regulatory and
Development (IRDA) Act of 1999 along with the Insurance Act of 1938
is the definitive legislation pertaining to the life insurance industry in
India.
11

LIFE INSURANCE
INSURANCE SECTOR REFORMS:

In 1993, Malhotra Committee headed by former Finance Secretary and
RBI Governor R.N. Malhotra was formed to evaluate the Indian
insurance industry and recommend its future direction. The Malhotra
committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at "creating a
more efficient and competitive financial system suitable for the
requirements of the economy keeping in mind the structural changes
currently underway and recognizing that insurance is an important part of
the overall financial system where it was necessary to address the need
for similar reforms" In 1994, the committee submitted the report and
some of the key recommendations included:
1) Structure
Government stake in the insurance Companies to be brought down

to 50%.
Government should take over the holdings of GIC and its

subsidiaries so that these subsidiaries can act as independent
corporations.
All the insurance companies should be given greater freedom to

operate.
2) Competition
Private Companies with a minimum paid up capital of Rs.1bn

should be allowed to enter the industry.
No Company should deal in both Life and General Insurance

through a single entity.
12

LIFE INSURANCE
Foreign companies may be allowed to enter the industry in

collaboration with the domestic companies.
4) Investments
Mandatory Investments of LIC Life Fund in government securities

to be reduced from 75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in any
company (There current holdings to be brought down to this level
over a period of time)
5) Customer Service
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked

pension plans.
Computerization of operations and updating of technology to be

carried out in the insurance industry The committee emphasized
that in order to improve the customer services and increase the
coverage of the insurance industry should be opened up to
competition.
Hence, it was decided to allow competition in a limited way by

stipulating the minimum capital requirement of Rs.100 crores. The
committee felt the need to provide greater autonomy to insurance
companies in order to improve their performance and enable them to act
as independent companies with economic motives. For this purpose, it
had proposed setting up an independent regulatory body.
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LIFE INSURANCE
MAJOR POLICY CHANGES:Insurance sector has been opened up for competition from Indian private
insurance companies with the enactment of Insurance Regulatory and
Development Authority Act, 1999 (IRDA Act). As per the provisions of
IRDA Act, 1999, Insurance Regulatory and Development Authority
(IRDA) was established on 19th April 2000 to protect the interests of
holder of insurance policy and to regulate, promote and ensure orderly
growth of the insurance industry. IRDA Act 1999 paved the way for the
entry of private players into the insurance market, which was hitherto the
exclusive privilege of public sector insurance companies/ corporations.
Under the new dispensation Indian insurance companies in private sector
were permitted to operate in India with the following conditions:
Company is formed and registered under the Companies Act, 1956;
The aggregate holdings of equity shares by a foreign company,

either by itself or through its subsidiary companies or its nominees,
do not exceed 26%, paid up equity capital of such Indian insurance
company;
The company's sole purpose is to carry on life insurance business

or general insurance business or reinsurance business.
The minimum paid up equity capital for life or general insurance

business is Rs.100 crores.
The minimum paid up equity capital for carrying on reinsurance

business has been prescribed as Rs.200 crores.
The Authority has notified 27 Regulations on various issues, which

include Registration of Insurers, Regulation on insurance agents,
Solvency Margin, Re-insurance, Obligation of Insurers to Rural and
14

LIFE INSURANCE
Social sector, Investment and Accounting Procedure, Protection of

policyholders' interest etc. Applications were invited by the Authority
with effect from 15th August 2000 for issue of the Certificate of
Registration to both life and non-life insurers. The Authority has its Head
Quarter at Hyderabad. IRDA has so far granted registration to 12 private
life insurance companies and 9 general insurance companies. If the
existing public sector insurance companies are included, there are
currently 13 insurance companies in the life side and 13 companies
operating in general insurance business. General Insurance Corporation
has been approved as the "Indian reinsurer" for underwriting only
reinsurance business
15

LIFE INSURANCE
FUNTIONS OF INSURANCE: The functions of Insurance can be bifurcated into two parts:
1. Primary Functions
2. Secondary Functions
3. Other Functions
The primary functions of insurance include the following:

Provide Protection - The primary function of insurance is to provide
protection against future risk, accidents and uncertainty. Insurance cannot
check the happening of the risk, but can certainly provide for the losses of
risk. Insurance is actually a protection against economic loss, by sharing
the risk with others.
Collective bearing of risk - Insurance is a device to share the financial

loss of few among many others. Insurance is a mean by which few losses
are shared among larger number of people. All the insured contribute the
premiums towards a fund and out of which the persons exposed to a
particular risk is paid.
Provide Certainty - Insurance is a device, which helps to change from

uncertainty to certainty. Insurance is device whereby the uncertain risks
may be made more certain.
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LIFE INSURANCE
The secondary functions of insurance include the following:

Prevention of Losses - Insurance cautions individuals and businessmen
to adopt suitable device to prevent unfortunate consequences of risk by
observing safety instructions; installation of automatic sparkler or alarm
systems, etc Prevention of losses cause lesser payment to the assured by
the insurer and this will encourage for more savings by way of premium.
Reduced rate of premiums stimulate for more business and better
protection
to
the
insured.
Small capital to cover larger risks - Insurance relieves the businessmen

from security investments, by paying small amount of premium against
larger risks and uncertainty.
Contributes towards the development of larger industries - Insurance
provides development opportunity to those larger industries having more
risks in their setting up. Even the financial institutions may be prepared to
give credit to sick industrial units which have insured their assets
including plant and machinery.
17

LIFE INSURANCE
INDIAN INSURANCE SECTOR

Finally, the Indian Insurance Sector May Go Global
Insurance has always been a politically sensitive subject in India. After 40
years of government protectionism of this massive sector, the new
United Front government is touching dangerous yet interesting
ground with their intentions of opening this sector to private Indian
business houses, as well as international players.
Insurance has always been a politically sensitive subject in India. Within
less than 10 years of independence, the Indian government nationalized
private insurance companies in 1956 to bring this vital sector under
government control to raise much needed development funds. Since then,
state-owned insurance companies have grown into monoliths, lumbering
and often inefficient but the only alternative. They have been criticized
for their huge bureaucracies, but still have millions of policyholders, as
there is no alternative.
Any attempt to even suggest letting private players into this vital sector
has met with resistance and agitation from the powerful insurance
employees unions. The Narasimha Rao government (1991-96), which
unleashed liberal changes in Indias rigid economic structure, could not
handle this political hot potato. Ironically, it is the coalition government
in power today, which has declared its intention of opening up insurance
to the private sector. Ironical because this government is at the mercy of
support from the left groups, which have been the most vociferous
opponents of any, such move?
18

LIFE INSURANCE
No policy initiatives have yet been announced, but the government has
already clarified it will not privatize the existing insurance companies.
But while the decision has been welcomed by the big companies who
were planning to make a foray into this lucrative business, trade unions
and even some left supporters of the government have criticized the
move.
In some ways it was inevitable-all segments of the financial sector had
been opened to private players and it was only a matter of time before
insurance followed. The bigger private players claim that opening up
insurance will give policyholders better products and service; the
opponents of privatization argue that in a poor country like India
insurance needs to have social objectives and newcomers will not have
that commitment.
Many international players are eyeing the vast potential of the Indian
market and are already making plans to come in. But it will take some
time before the intent translates into policy-the unions are not going to
give up without a fight and in that they will get the support of some
elements of the coalition government.
There exists huge scope of investment in the insurance sector in India.
India has an enormous middle-class that can afford to buy life, health and
disability and pension plan products. Further, insurance is one of the most
important taxes saving instrument in the country.
Insurance sector has been opened up for competition from Indian private
insurance companies with the enactment of Insurance Regulatory and
Development Authority Act, 1999 (IRDA Act). As per the provisions of
19

LIFE INSURANCE
IRDA Act, 1999, Insurance Regulatory and Development Authority

(IRDA) was established on 19th April 2000 to protect the interests of
holder of insurance policy and to regulate, promote and ensure orderly
growth of the insurance industry. IRDA Act 1999 paved the way for the
entry of private players into the insurance market, which was hitherto the
exclusive privilege of public sector insurance companies/ corporations.
Under the new dispensation Indian insurance companies in private sector
were permitted to operate in India on the fulfillment of certain
prerequisites. A large number of public and private players are competing
today in both life and general insurance segments. The FDI cap/ Equity in
the insurance sector is 26 percent under the automatic route subject to
licensing by the insurance regulatory and development authority.
Some of the major private players in the sector are:
In Life insurance Sector:
Bajaj Allianz Life Insurance Corporation
Birla Sun Life Insurance Co. Ltd. (BSLI)
HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE)
ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)
ING Vysya Life Insurance Co. Pvt. Ltd. (ING VYSYA)
Max New York Life Insurance Co. Ltd. (MNYL)
MetLife India Insurance Co. Pvt. Ltd. (METLIFE)
Kotak Mahindra Old Mutual Life Insurance Co. Ltd. SBI Life
Insurance Co. Ltd. (SBI LIFE)
20

LIFE INSURANCE
ABOUT SBI: SBI Life Insurance is a joint venture between the State Bank of India
and Cardiff SA of France. SBI Life Insurance is registered with an
authorized capital of Rs 1000 crore and a paid up capital of Rs 500
crores. SBI owns 74% of the total capital and Cardiff the remaining 26%.
State Bank of India enjoys the largest banking franchise in India. Along
with its 7 Associate Banks, SBI Group has the unrivalled strength of over
14,500 branches across the country, arguably the largest in the world.
Cardiff is a wholly owned subsidiary of BNP Paribas, which is the Euro
Zones leading Bank. BNP Paribas is one of the oldest foreign banks with
a presence in India dating back to 1860. Cardiff is ranked 2nd worldwide
in creditors insurance offering protection to over 35 million
policyholders and net income in excess of Euro 1 billion. Cardiff has also
been a pioneer in the art of selling insurance products through
commercial banks in France and in 35 more countries.
SBI Life Insurances mission is to emerge as the leading company
offering a comprehensive range of Life Insurance and pension products at
competitive prices, ensuring high standards of customer service and
world class operating efficiency .SBI Life has a unique multi-distribution
model encompassing Banc assurance, Agency and Group Corporate. SBI
Life extensively leverages the SBI Group as a platform for cross-selling
Insurance products along with its numerous banking product packages
such as housing loans and personal loans, SBIs access to over 100
million accounts across the country provides a vibrant base for insurance
penetration across every region and economic strata in the country
ensuring true financial inclusion.
21

LIFE INSURANCE
Agency Channel, comprising of the most productive force of more than

25,000 Insurance Advisors, offers door-to-door insurance solutions to
customers.
SBI Life Insurance, where SBI holds 74%, has made history moving to
the fifth slot among the global insurance companies listed by the Illinoisbased Million Dollar Roundtable (MDRT), 2006, in terms of number of
members. MDRT is an association of the worlds best life insurance sales
(advisors) professionals. Founded in 1927, membership to the MDRT is
calculated on the commission derived from the first year premium.
To make it to the club, the advisor needs to get a minimum commission
of $69,000 or the minimum premium paid should be $132,000 in the said
calendar year. SBI Life is the first Indian company to figure among the
top 10 global insurance firms in terms of MDRT membership. The Indian
entry comes within 10 years of the domestic insurance being opened to
the private sector. The Indian company recorded the maximum rise in
terms of first-time membership at 99.5%.
Korean insurer Samsung Life Insurance leads the table with 2,638
members. SBI Life Insurance at fifth spot has 801 MDRT members. LIC
of India, Indias biggest insurer, is placed 21st with 345 MDRT members
followed by Max New York Life at the 22nd spot with 345 MDRTians.
Other prominent Indian players include Reliance Life Insurance (39th),
MetLife India (68th) and ICICI Prudential (80th).
22

LIFE INSURANCE
Our Mission: To emerge as the leading company offering a

comprehensive range of life insurance and pension products at
competitive prices, ensuring high standards of customer satisfaction and
world class operating efficiency, and become a model life insurance
company in India in the post liberalization period".
Our Values:
Trustworthiness
Ambition
Innovation
Dynamism
Excellence
23

LIFE INSURANCE
SBI Life Insurance is one of the leaders among the

fast:Current milestones:1st in "lives covered" amongst private players - 2.8 Million at last
count
1st in the Group Insurance segment
4th in terms of premium income, with Rs 600 Crores in 2004-05
Ranked as one of the Most Trusted Brands amongst Life Insurance
Companies by Brand Equity, The Economic Times Starting out in 2001
with an enviable pedigree, SBI Life Insurance is a joint venture between
State Bank of India - India's largest bank, and Cardiff - the insurance
arm of BNP Paribas. Cardiff is the largest 'Banc assurance' company
globally, and BNP Paribas is one of top ten global banks.
With our combined strengths and successes, we symbolize the virtues of
'security' and 'sustainability' in a business, where relationships with
customers can span up to 25 years. Our financial solidity, ethical
practices and domain expertise truly mean - WITH US YOU ARE
SURE.
24

LIFE INSURANCE
Our distribution channels enable us to reach all customer

segments:
Banc assurance - through SBI Group's 14000 branches
Agency channel - through a growing network of insurance advisors
Corporate Agents and Brokers - in major cities
Corporate & Institutional sales
Credit Life - tie ups with companies offering life insurance along
with their home loan and vehicle loan schemes
NRI Sales - reaching out to Non-Resident Indians through SBI's
NRI/ NRE accounts
With so many strengths, we are uniquely placed to achieve our mission:
"To emerge as a leading company offering a comprehensive range of life
insurance and pension products at competitive prices, ensuring high
standards of customer satisfaction, and world class operating efficiency
and become a model firm in the liberalized life insurance industry in
India." To enable our fast-paced growth, we need to reinforce our
dynamic team at SBI Life.
25

LIFE INSURANCE
STATE BANK OF INDIA

A CASE STUDY ON SBI IN the Financial Express: December
5, 2005
SBI is the largest bank in India with deposits of Rs 3, 67,000 crore as on
March 31, 2005. It dominates the Indian banking sector with a market
share of around 20% in terms of total banking sector deposits. The
increasing focus on upgrading the technology back-bone of the bank will
enable it to leverage its reach better, improve service levels, provide new
delivery platforms, and improve operating efficiency to counter the threat
of competition effectively. Once the core banking solution (CBS) is fully
implemented, it will cover over 10,000 branches and ATMs of the State
Bank group, and emerge as the strongest technology enabled distribution
network in India.
The increasing integration of SBI with its associate banks (associates) and
subsidiaries will further strengthen its dominant position in the banking
sector and position it as the countrys largest universal bank.
Resource-raising capabilities
SBIs funding profile is strong, underpinned by its strong retail deposit
base. The bank is facing increasing competition in its metropolitan and
urban franchise. SBIs strong franchise gives it access to a steady source
of stable retail funds, which constitute around 59% of the total resources
as on March 31, 2005 (56% as at March 31, 2004).
26

LIFE INSURANCE
Savings deposits have shown a strong three-year growth of 19%. Thus,

despite a reduction in the proportion of current account deposits, low-cost
deposits have continued to constitute over 40% of total deposits as at
March 31, 2005. The banks cost of deposits (excluding IMD) has
significantly reduced to 4.70% for the 2004-05 (refers to financial year
from April 1 to March 31), compared with 5.48% in 2003-04. The banks
liquidity position is very strong due to healthy accretion to deposits, large
limits in the call market, and significant surplus SLR investments. SBI
will maintain its strong funding profile and a low cost resource position
in view of its strong retail base and wide geographical reach.
Earnings profile to remain good
SBI will maintain a good earnings profile in the medium term despite
high pressure on yields due to the increasing competition in the banking
sector. SBIs earning profile is characterized by consistency in the return
on assets (PAT/Average Assets), at around 1% per annum for the past
three years, and diverse income streams. To maintain yields and pursue
credit growth, the bank is aggressively targeting retail finance and small
and medium enterprises (SMEs). The banks core fee income of 1% of
average funds deployed bolsters its revenue profile. However, with the
opening of government business like tax collection to other banks and
increased competition, the growth in fee income is expected to slow
down. The banks operating expense at 2.44% of average funds deployed
in 2004-05 is in line with other public sector banks. The banks cost
structure is rigid as fixed employee cost accounted for 74% of the
operating expenditure in 2004-05. Thus, despite good asset growth and
technology efficiency gains, the banks operating costs will remain high in
the medium term. To be able to reap the full benefits of technology
27

LIFE INSURANCE
Implementation, the bank will have to reduce or redeploys work force;

since this is a sensitive issue, it is expected to happen gradually.
The banks fund based and fee income earnings are diversified across
industries, regions, asset classes, and customer segments. Strong
diversification in income streams will ensure that the banks earnings
remain relatively stable, despite the decline in profitability in some
segments.
Comfortable capital position
SBI is adequately capitalized with a tier I capital adequacy ratio of 8.04%
and a large capital base of Rs 240.72 billion as at March 31, 2005. The
bank has considerably improved its net worth coverage for net NPAs to
4.4 times as at March 31, 2005 due to lower slippages reflecting an
improving asset quality, witnessed across the entire banking sector. The
capitalization levels of SBI are adequate to address the asset side risks
and support the business growth in the medium term.
Management strategies
In retail finance, the bank has leveraged its corporate relationships,
pursued business growth selectively, and has not competed based on
interest rate. The bank has taken initiatives like on-line tax returns filing
and faster transfer of funds to protect its dominant position in the
government business. The bank also has a clear technology strategy that
will enable it to compete with the new generation private sector banks in
customer service and operational efficiency.
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LIFE INSURANCE
Asset quality to remain at average levels

The bank continues to have a high level of gross NPAs at 5.95% of gross
advances as at March 31, 2005, compared with 4.9% for all scheduled
commercial banks (SCBs) taken together. The bank is facing challenges
to improve the quality of assets originated, as can be seen in the
consistently higher levels of slippages (additions to NPAs) at 2.71% in
2004-05.
To contain NPAs and ensure credit growth, the bank has decided to focus
on financing the retail (personal) segment as well as SMEs. The share of
retail advances has increased to 24.73% (Rs 522.08 billion) of total
advances as at September 30 2005. In the retail loan segment, SBI is
targeting primarily the housing loans segment, which constitutes Rs.
283.41 billion (54.3%) of total retail loans. The NPAs in retail finance are
low currently; however they are steadily increasing (especially in the
housing finance portfolio) and have started showing signs of stress. SBIs
retail portfolio has grown at over 37% CAGR in the last two years and
hence a significant portion of the portfolio is largely unseasoned. The
housing finance portfolio has a 12-month, lagged gross NPA of 4.34% as
at March 31, 2005.The bank will face significant challenges in the
medium term to develop effective credit appraisal and collection systems
in order to contain NPAs in retail finance. SBIs asset quality is expected
to remain at average levels, as the banks large and diverse asset portfolio
reflects of the asset quality of the banking system.
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LIFE INSURANCE
Business description
SBI along with its associate banks offer a wide range of banking products
and services across its different client markets. The bank has entered the
market of term lending to Corporates and infrastructure financing,
traditionally the domain of the financial institutions. It has increased its
thrust in retail assets in the last two years, and has built a strong market
position in housing loans.
SBI, through its non-banking subsidiaries, offers a host of financial
services, viz., merchant banking, fund management, factoring, primary
dealership, broking, investment banking and credit cards. SBI has
commenced its life insurance business by setting up a subsidiary, SBI
Life Insurance Company Limited, which is a joint venture with Cardiff
S.A., one of the largest insurance companies in France. SBI currently
holds 74% equity in the joint venture.
Industry prospects
To leverage benefits such as access to low cost resources and the facility
to provide a larger gamut of services, a number of finance companies
such as Kotak Mahindra Finance Limited and HDFC Limited have
promoted banks. Simultaneously, yet another emerging trend is that of
foreign banks promoting NBFCs to benefit from regulatory flexibility
available to such entities in areas like absence of statutory liquidity ratio
and cash reserve ratio requirements, priority sector requirements, and
corporate exposure limits.
New private sector banks capture market share with technological edge
and a strong marketing thrust, private sector banks have been stealing
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LIFE INSURANCE
market share in retail deposits and the corporate fee business from public
sector banks. Together with some foreign banks, these private banks have
also aggressively entered the retail asset financing space, hitherto the
domain of non-banking finance companies.
Given their focus on cross selling and optimizing their customer base,
they now offer the entire range of products and services on the asset and
liability side to retail and wholesale customers
Asset quality to improve
Banks have not yet fully resolved the stress in the asset quality of their
legacy corporate loan portfolios, however. Though slippages to NPAs and
provisioning were high for some banks in FY2004, as they moved to the
90-day norm for recognizing and provisioning for NPAs, the treasury
gains enabled significant provisioning to be made with the result that net
NPAs for most public sector banks are now less than 3%.
Going forward, steady growth in gross domestic product should help
improve the banks asset quality and increase corporate lending. The
securitization and reconstruction of financial assets and enforcement of
security interest (Sarfaesi) Act should also help banks in limiting
slippages and improving NPA recoveries.
Better capitalization levels
Banks have demonstrated a fair amount of flexibility in raising fresh
equity capital through public issues in recent years, thereby improving
their capitalization levels. The steady accruals to net worth and falling
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LIFE INSURANCE
non-performing asset levels have resulted in an improvement in the

capitalization position of banks in recent years.
Challenges ahead
Competition from new private sector and foreign banks remains a key
challenge for public sector banks. They need to reorient their staff and
effectively utilize technology platforms to retain customers and reduce
costs. They also need to fortify their credit risk management systems to
mitigate the risks arising from small-ticket lending to the retail, small and
medium enterprises, and services segments.
Consolidation and emergence of universal banking groups
The cap on foreign ownership of banks has already been raised from 49%
to 74%. The competition in the sector could get further intensified if the
10% cap on voting rights is also relaxed. New private sector banks are
expanding their geographical coverage and making inroads into
government business. The new private and foreign banks will continue to
gain market share from public sector banks because of their efficient cost
structures, technological edge, focused marketing approach and
operational freedom.
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LIFE INSURANCE
Life Insurance SBI Life Sanjeevan Supreme, Sowmya

Sunder ... A window for global diversification
SBI Life Sanjeevan Supreme
Sowmya Sunder
SBI Life `Sanjeevan Supreme' is a limited premium payment money-back

plan. The policy provides life cover for the entire tenure of the policy.
How it works?
The policy tenure is divided into the premium payment, the growth and
the money-back periods. You can choose from four plans, each with a
specified combination of premium payment, growth and money back
periods.
For instance, if you take a policy for 15 years, you pay premiums for six
years and allow the money to grow for four. For the next five years, you
will receive 20 per cent of the sum assured per annum. You get a life
cover for the entire 15 years. You also get a bonus, which is not
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LIFE INSURANCE
guaranteed, at the end of the term. In case of death during the plan term,
the entire sum assured along with accrued bonus till the date is payable in
addition to the earlier payouts.
Riders
You can opt for a term assurance cover and an accidental cover on
payment of additional premium. Under the term assurance rider, the
nominee gets an additional sum equal to the sum assured.
If the policyholder meets with an accident, resulting in total permanent
disability, 10 per cent of the sum assured is paid out in 10 annual
installments under the Accident Rider. All other rider cover ceases to
exist thereafter. The base cover continues, provided all premiums due are
paid.
Premium rebate
A rebate of 2 per cent in the case of annual premiums and a rebate of 1
per cent on half-yearly premiums are given.
Additional rebates are available on policies with sum assured exceeding
Rs 1 lakh. A special rebate of 5 per cent on the standard premium rate is
given for women applicants.
Suitability
The plan is similar to other limited premium plans available. It is suitable
for people who want to accumulate in a short term and receive the money
at a later date
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SBI Life Insurance plans to hike paid-up capital

Launches new insurance product Mybank Suraksha
Mr. U.S. Roy, Managing Director and CEO

Our Bureau
Bangalore, Oct. 12 SBI Life Insurance Company Ltd proposes to hike its
paid-up capital by another Rs 300 crore by this year-end to meet its
business requirements. The Managing Director, Mr. Uday Shankar Roy,
told presspersons today We are maintaining a healthy growth and hope
to sustain it.
SBI Life is a joint venture between State Bank of India and Cardiff SA of
France, where the French insurer holds 26 per cent stake. The company
currently has a paid-up capital of Rs 500 crore and an authorized capital
of Rs 1,000 crore.
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LIFE INSURANCE
Premium accretions
Till August, SBI Life had gross premium accretions of Rs 868.11 crore,
or a growth of 71 per cent, over the previous year, according to data
available with the Insurance Regulatory and Development Authority. For
the financial year ended March 2007, the company earned a premium of
Rs 2,566 crore registering a growth of 210 per cent compared to the
corresponding period last year. Mr. Roy said that SBI Life had sustained
this growth momentum in the second quarter, though he declined to give
any numbers. He said that most of the premium accretions were
contributed by SBI Lifes banc assurance arrangements with the parent
bank and its associates/subsidiaries.
Doubling sales force
This year, he said that the company also intended to expand its agency
force and double it by year-end. Currently it has a sales force of about
24,000 agents spread around the country. We plan to expand this to
about 50,000 agents this year-end. Bulk of the premium accretions has
been in the Unit Linked Insurance Policies (ULIPs), with a bias to growth
funds. With the Sensex soaring, customers have looked for greater
returns, ULIPs accounted for just about 65 per cent of the gross
premiums. The rest was in the form of traditional products both savings
linked insurance plans and term plans. For most new insurers, ULIPs
accounted for over 80 per cent of the premium accretions.
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LIFE INSURANCE
SBI Life, as part of plans to grow new business, launched a fixed depositlinked insurance product along with State Bank of Mysore (SBM),
branded Mybank Suraksha.
A. When is a "diversification growth strategy" appropriate?

Answer: Diversification means selling new products or services in new markets. It
can be done in four ways:
1. Horizontal diversification: this occurs when Co. acquires or develops
new products that may appeal to existing customer groups even though
the new products may be technologically unrelated to existing product
lines.
2. Vertical diversification: The Co. moves into business of suppliers or
that of its customers. This is normally done to reduce threat from the
suppliers and customers. The customers mean the channel members.
3. Concentric diversification: results in new products/services that have
technological and/or mktg synergies with existing product lines.
4. Conglomerate diversification: occurs when there is neither
technological or mktg synergies with existing product lines and involves
reaching new customer groups. Large companies to balance cyclical
portfolio with non-cyclical one do this.
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Glorious Banking Tradition

The origins of State Bank of India date back to 1806, when the Bank of
Calcutta (later called the Bank of Bengal) was established. In 1921, the
Bank of Bengal and two other banks (Bank of Madras and Bank of
Bombay) were amalgamated to form the Imperial Bank of India. In 1955,
the Reserve Bank of India acquired the controlling interests of the
Imperial Bank of India and the State Bank of India was created by an Act
of Parliament to succeed the Imperial Bank of India. The Bank has
completed 201 years of its existence, going back to the Bank of Calcutta,
which came into existence on 2nd June 1806.
The State Bank of India is committed to best practices in the area of
corporate governance. The Bank believes that proper corporate
governance facilitates effective management and control of business.
This, in turn, enables the Bank to maintain a high level of business ethics
and to optimize value for all its stakeholders.
Capital and Shareholding Pattern
SBI's shares are listed for trading on all the major Indian stock exchanges,
viz., Mumbai Stock Exchange and stock exchanges at New Delhi,
Kolkata, Chennai and Ahmedabad and at the National Stock Exchange
(NSE). The bonds are listed only on the NSE. The Bank's GDRs are listed
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LIFE INSURANCE
on the London Stock Exchange. The total number of shareholders as on

31st March 2007 was 526,782.
The Government of India acquired in June 2007 the entire shareholding
of Reserve Bank of India (RBI) in State Bank of India consisting of over
314 million equity shares at a total amount of over Rs.355 billion.
Associates and Subsidiaries

The Bank has six domestic non-banking subsidiaries providing various
financial services like merchant banking, funds management, factoring
services, securities trading, credit cards and insurance. The Bank also has
seven foreign subsidiaries/joint ventures/associates. The Bank is a copromoter of Credit Information Bureau of India Ltd. and Clearing
Corporation of India Ltd. The Bank has set up Asset Reconstruction
Company (India) Ltd. under SARFAESI Act, 2002 jointly with seven
other commercial banks. The Bank has promoted a new technology
company, C-Edge Technologies Ltd., as a joint venture with Tata
Consultancy Services Ltd.
Domestic Branch Network
At the core of the Bank's commercial banking business is its nationwide
network of 9,517 branches as on March 31, 2007, by far the largest
branch network of any bank in India. The Bank's domestic branches
represent approximately 14% of all bank branches in India. In addition to
Bank's own branches and 4,820 branches of seven associate banks, Bank
has network of 2,334 branches in Regional Rural Banks (RRBs).
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LIFE INSURANCE
This widespread branch network gives the Bank a substantial and stable
deposit base, to provide a wide range of lending products and other
financial Services and to diversify lending risks geographically as well as
by type of credit risk and customer. The Bank's ability to diversify and
enhance the quality of service related to its deposit mobilization as well
as its lending activities and other financial services is a fundamental
strength of the Bank.
Fixed deposits in multiples of Rs 50,000 placed with SBM for a

minimum period of 5 years would be paid an interest of 8.25 per cent and
simultaneously covered by SBI Life for an equivalent amount.
This product is targeted at depositors aged between 18 and 55. The
minimum prescribed deposit is Rs 50,000 and would have an insurance
cover from SBI Life for an equivalent amount. The SBM Managing
Director, Mr. P.P. Pattanayak, said: SBM will bear the premium costs
for this product.
The upper limit for the cover is Rs 5 lakh, for depositors up to 39 years.
For those depositors above 40 years, but less than 55 years, the ceiling is
Rs 3 lakh. All subsidiaries have been diversifying successfully. SBI
Funds Management entered into Portfolio Management and Investment
Advisory Services for institutions.
Two of the subsidiaries of SBI Capital Markets, the UK subsidiary
responsible for its international mandate such as cross-border mergers
and acquisitions, and its broking subsidiary, SBICAP Securities, have
recorded profits in their very first year of operations, while SBICAPS
Ventures has set up a Knowledge sector fund jointly with SBI Holdings
Inc (Soft bank) Japan. Another example has been set by SBI DFHI,
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LIFE INSURANCE
which quickly took advantage of diversification of activities

permitted by RBI in 2006, with significant benefit to its bottom-line.
Technology has dramatically lowered the cost of business, and if a viable
business model can be formulated, it should be possible to provide basic
banking services to all. Gradually, the provision of infrastructure will
reduce transportation costs and facilitate the opening up of more markets.
More companies will consider potential business opportunities in rural

areas, and non-farm employment and incomes should also rise.
The financial sector will also have to prepare itself for dealing with an
increasingly globalized economy. Various policy and regulatory changes
are being considered to further develop the financial markets and open up
the Indian financial sector. These include measures for facilitating the
gradual development of the interest rate, currency and credit derivative
markets as well as the corporate bond and securitization markets. To the
extent that the recommendations of the Committee on Fuller Capital
Account Convertibility (FCAC) and the High Powered Expert Committee
on making Mumbai an international financial centre are implemented, it
could have far-reaching implications on the liberalization of domestic
financial markets, and the development of institutions, products and
services.
There is no doubt that structural changes are taking place in the economy,
for which banks and other financial service providers should be prepared.
Demographics, rising incomes, and changing life styles, as well as
increasing integration of our economy with the world, are going to force
the pace of diversified financial service provision.
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A major challenge for the Bank in customer service is ensuring

consistency in service across its 9500 branches. Ideally, quality customer
service should not depend on whether the customer is being served by a
particular branch or a particular person. The end state of the Banks
Business process re-engineering (BPR) exercise is expected to result in
all back-end processing tasks at branches being moved to central
processing cells staffed with requisite skills.
This enables standardization of processes, which, in turn, contributes to

higher quality service by ensuring a substantially reduced turnaround
time. At the same time, the Bank is proactively reaching out to customers
by re-focusing the attention of branch staff, deploying sales forces,
deepening relationship banking, and redesigning branches. Special
training programmes in soft skills for frontline staff have been organized
engaging trainers and staff from other service organizations.
In addition, we have more than 5000 branches enabled for Internet
Banking, which can be used to transfer funds to any account in any
branch, to pay bills, insurance premium, taxes, purchase railway and air
tickets, and pay out salaries. The corporate Internet banking service is one
of the best in the market.
The Corporate Strategy and New Business Group has been set up to focus
on emerging opportunities and start businesses that will enhance the
brand equity of SBI. To cater to the needs of the growing affluent class,
your Bank proposes to launch financial planning and advisory services
shortly, which would be upgraded to wealth management services at a
later stage.
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LIFE INSURANCE
We are planning to float a subsidiary to manage pension funds under the

New Pension Scheme (NPS). Your Bank has been short listed by PFRDA
as one of four players. Pension funds offer a huge business opportunity in
terms of resources to be managed in the future as only 11% of the current
workforce of 450 million is covered by retirement benefits. In some
countries pension fund assets are as large as 65% of GDP. With our
advantages of a high domestic savings rate and a growing labour force,
the potential resources may even eventually exceed the resources of the
banking system, as the experience of developed countries shows.
In a rapidly growing economy with high credit expansion, changing

portfolio composition, and large movements in financial markets
(currency exchange rates, interest rates, equity and commodity prices),
risk management assumes even greater importance. As we enter new
areas of business, there will be different risks. Strengthening of risk
management practices is therefore crucial.
This year your Bank will be adopting a New Capital Adequacy
Framework in line with Basel II norms, along with other banks that
have international presence. This will lead to a more efficient allocation
of capital resources based on improved risk assessment. Human resources
(HR) Management is critical to the transformation drive to attract and
retain talent, to upgrade skills, to provide incentives and develop career
paths. To achieve better financial planning and reduce the demand on
Bank for capital infusion in some of our subsidiaries, we are considering
setting up of a Holding Company for our non-banking subsidiaries. To
start with, the Banks shareholdings in the asset management company
and the insurance company would form the Holding Company. The
Holding Company can be listed separately and capital raised for the use
of the two companies.
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A CASE STUDY ON SBI Holdings Ends Capital Relationship with

Softbank
TOKYO -- In a recent two-part stock sell-off, Internet and media
conglomerate Softbank Corporation (TOKYO:9984) reciprocally ended
its capital ties with SBI Holdings (TOKYO:8473), the fast-growing
financial services giant.
The two-part transaction saw a sale of 1.11 million shares by Softbank on
August 1st back to SBI Holdings, followed on August 2nd by a larger
2.13 million share sale to Goldman Sachs Japan who, overnight, sold the
majority of shares to an influential group of approximately one-hundred
institutional investors. SBI clearly benefits from the sale in creating a
greater
diversification
of
long-term
committed
institutional
shareholders, along with a new autonomy to extend its powerful

customer relationships and serve non-financial products to its core
clientele.
The banks fund based and fee income earnings are diversified across
industries, regions, asset classes, and customer segments. Strong
diversification in income streams will ensure that the banks earnings
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LIFE INSURANCE
remain relatively stable, despite the decline in profitability in some

segments.
SBI along with its associate banks offer a wide range of banking products
and services across its different client markets. The bank has entered the
market of term lending to corporate and infrastructure financing,
traditionally the domain of the financial institutions. It has increased its
thrust in retail assets in the last two years, and has built a strong market
position in housing loans. SBI, through its non-banking subsidiaries,
offers a host of financial services, viz., merchant banking, fund

management, factoring, primary dealership, broking, investment banking
and credit cards. SBI has commenced its life insurance business by
setting up a subsidiary, SBI Life Insurance Company Limited, which is a
joint venture with Cardiff S.A., one of the largest insurance companies in
France. SBI currently holds 74% equity in the joint venture.
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LIFE INSURANCE
One of the Example of Diversification from Which Child

Life Get Benefited:How to fund your child's education
Most of us would put our children's education above any other priority in
life including, our own retirement. Planning, therefore, is imperative and
should begin as early as possible.
With so many products and opportunities available in the market, a whole
lot of emotive advertising and innovative products hitting the market
every day, it's very easy to get it wrong.
Step 1: How much would you need and when?
Let's assume you are 30 years and have become a parent recently. Also,
assuming that the cost of higher/professional education you desire for
your child is about Rs 900,000 at current value.
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LIFE INSURANCE
Since he will enter college at 18, you need to start planning for 18 years
later. Since education costs increase faster then inflation, it is safe to
assume an increase of 10 per cent per annum. Based on these numbers,
you would need Rs 50 lakh (Rs 5 million) after 18 years.
Step 2: Which asset class should I choose - fixed income, real estate or
equities?
Fixed income investments like public provident fund, National Savings
Certificates, fixed deposits, fixed maturity plans etc are the safest form of
investment but they give poor returns after adjusting for inflation and
taxes.
COST OF EDUCATION
For
investment(Rs)
Diversified Equity
Fund
ICICI Child Plan
ETF Index Fund
Nifty
11,146
11,000
9250
For
Insurance
(Rs)
282
282
Total
(Rs)
11,428
11,000
9532
Real estate could give good returns but it needs to be ruled out because of
high initial capital requirement and high entry/exit costs. This leaves us
with equities. It scores over others in more ways than one. Among others,
there is scope for diversification, low investment risk if the horizon is
long, good inflation adjusted returns and of course, easy liquidity.
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LIFE INSURANCE
Step 3: Now that we have decided on equities, what are our options?
They are:
Direct investments
Diversified mutual funds
Exchange trade funds (the Nifty index fund)
Education plan through an insurance company
Direct investment in shares could be very dangerous if you are not an

expert. The other three are managed by professional money managers. So
let us analyze them in detail.
Assume a very safe return of 10 per cent over the next 18 years in all the
three options -diversified funds, exchange traded funds as well as child
plans. As far as the cost goes, you can see that the entry load is the
maximum in case of the insurance cum investment plan. It is the
minimum in case of the ETF tracking the Nifty. Asset management fees
are the highest for diversified funds and lowest for the ETF.
ENTRY AND MANAGEMENT COSTS
One time
Diversified Equity Fund
ETF Index Fund - Nifty
"ICICI Child Plan"
entry
allocation charge
2.25%
0.00%
load/ Annual
Asset
Management Fees
2.00%
0.50%
"1st yr - 18%
2nd - 5th yr - 5%
1.50%
6th - 10th year - 2%

11th yr onwards -1%"
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LIFE INSURANCE
Based on the above charges and expected return of 10 per cent, to reach
Rs 50 lakh in 18 years, you would need to invest about Rs 11,150 in a
diversified equity fund, or Rs 11,000 in a child plan or Rs 9250 in the
ETF.
Besides putting this money aside every month for your child's education,
there is another important factor one must not forget. What if something
unfortunate was to happen to you tomorrow? Since there won't be anyone
else to pay for the education, your investments will not be able to
generate the target of Rs 50 lakh.
To guard against this uncertainty you must buy a pure term insurance on
your life. The amount of insurance should be adequate enough to generate
Rs 50 lakh in 18 years would be Rs 13-14 lakh (rs 1.3-1.4 million),
assuming that the entire corpus is invested in the ETF in case of your
unfortunate death. A 30-year old can get a term policy from SBI Life
Insurance of Rs 14 lakh (Rs 1.4 million) cover for 18 years at just Rs 282
per month!
Since the child plan already has insurance built into it, we have to
consider this additional payment for others. So our total outgo per month
would be Rs 11,428 for diversified, Rs 11,000 for the child plan and Rs
9532 for the ETF index plan.
So you could plough in lower amounts in earlier years and increase them
gradually, For example, you could pay Rs 282 per month for insurance
and the ETF investments could be:
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LIFE INSURANCE
Rs 6,000 per month for the first four years
Rs 8,000 for the next four years
Rs 11,000 in the next four years and Rs 16,000 in the remaining six
years and still reach our goal of Rs 50 lakhs
As we can see that whichever way you may look at it, the ETF combined
with the cheapest term insurance on your life, is the best way to plan of
one's child's future.
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Definition: - Diversification
A strategy to increase the variety of business, service, or product types
within an organization, Diversification can be a growth strategy, taking
advantage of market opportunities, or spreading interests may aim it at
reducing risk over different areas. It can be achieved through acquisition
or through internal research and development, and it can involve
managing two, a few, or many different areas of interest. Diversification
can also be a corporate strategy of investment in acquisitions within a
broad portfolio range by a large holding company. One distinct type is
horizontal diversification, which involves expansion into a similar
product area, for example, domestic furniture manufacturer producing
office furniture. Another is vertical diversification, in which a company
moves into a different level of the supply chain, for example, a
manufacturing company becoming a retailer. A well-known example of
diversification is the move of BIC, the ballpoint pen manufacturer, into
the production of disposable razors. Diversification is a potential catalyst
for organizational change when the aim of a firms Diversification
strategy is to obtain operational synergies between business units because
a shift toward coordinated operations necessarily requires organizational
adjustments.
Diversification is a form of growth marketing strategy for a company. It
seeks to increase profitability through greater sales volume obtained from
new products and new markets. Diversification can occur either at the
business unit or at the corporate level. At the business unit level, it is
most likely to expand into a new segment of an industry in which the
business is already in. At the corporate level, it is generally entering a
promising business outside of the scope of the existing business unit.
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LIFE INSURANCE
Diversification also offers agencies additional growth outlets. For

example, an agency may decide to pursue a classic product extension
strategy in which it leverages its brand name and/or expertise to layer on
complimentary products and services. Broadly diversified firms can
"capture" patients at multiple entry points, and subsequently refer them to
other services within the "patient care continuum". In its most elegant
form, if an agency invests in and takes full advantage of an infrastructure
that can be shared by multiple business lines (admittedly, much easier
said than done), diversification can generate revenue-enhancing and cost
reducing operational synergies.
Department of Posts eyes rural life insurance market
LIFE in rural areas is set to get tougher for life insurance companies with
a non-insurance giant slowly waking up in the countryside to take charge
of the rural life insurance market.
In a move that is likely to give a real run to the established players
including those with wide reach such as Life Insurance Corporation (LIC)
and SBI Life Insurance Co, the Department of Posts has drawn up an
elaborate plan to capture a sizable chunk of the rural insurance market
and has set a target of collecting Rs 7,160 crore as sum assured for its
Rural Postal Life Insurance (RPLI) scheme, which is nearly double of the
Rs 3,612 crore sum assured collected in the previous year.
Backed by a A.F. Ferguson & Co report on its future insurance activities,
the postal department has also decided to vastly increase the number of
life scheme on offer in the rural areas along with decentralization of the
marketing and sales function to the divisional level for a ground level
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LIFE INSURANCE
thrust. The Postal Services Board had cleared the new insurance
initiatives to be taken up by the department.
"There is a vast untapped potential in the rural areas and we are uniquely
placed to capture since even LIC does not have the penetration like us.
We have plans to tap every rural family with an array of new products,"
Among the new schemes under consideration are single premium
policies, scheme for the girl child and money back policies besides the
routine policies such as the endowment policy that have been on offer till
now. Moreover, learning from the recent practices in the insurance
market, it has also been decided to offer riders (add-on features) to the
policies such a disability cover to provide greater flexibility to the
insured.
"We wanted to diversify our products to earn more revenue from
our insurance activities," Ms BAL Subramanian said.
"We plan to have one direct agent for each head post office which would
mean an initial team of 840 agents dedicated for the purpose. "The agents
would be working in close cooperation with the postal staff who have
first hand knowledge of the entire rural population,"
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LIFE INSURANCE
PRODUCT DIVERSIFICATION SERVICES

Product diversification is getting more and more boardroom attention as
the importance of product segmentation and individualization continues
to grow for the four sectors we focus on. Regulators are closely following
market trends and are consequently introducing and adapting new
regulations outlining minimum good practices to be followed to get
market approval and global access on variations of products. Our current
offer is organized around two services: Combination Products; Product
Life Cycle Extensions
Combination Products: On May 6, 2004, FDA released a new proposed
rule with respect to combination products. Combination products, those
containing a combination of a drug, a device, or a biological product,
represent a growing category of products incorporating cutting edge,
novel technologies that hold great promise for advancing patient care. In
September 2004, FDA issued draft guidance on GMP for combination
products. 4XScience provides assistance and compliance services for
European countries willing to enter the US market with combination
products. Similarly, we help companies to correctly position cross sector
products (eg across food and pharmaceuticals) in line with regulations.
As we specifically look for cross-fertilizing across our client industries,
we also believe to be a strong collaboration partner for identifying
opportunities for combining products.
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LIFE INSURANCE
Product Life Cycle Extensions: Extending product life cycles can be a

strong cost - benefit strategy for specific products, often per country,
population, and therapeutic area. By combining products with other
products within or across the sectors, clients might experience revamped
Products, while research, development and regulatory costs might be
significant lower then new developments. By leveraging across
industries, 4XScience believes to be able to add significant value for our
clients.
Product Distribution, Advertising and Promotion, Sales and Service:There are several major methods you can use to get your products or
services to your customers or clients. The following link will help you
select the most appropriate method(s).
Distribution: -Advertising and promotion of products and services are
often some of the most under-rated activities by new business owners.
Many people strongly believe that if they build it, buyers will come. In
this increasingly expanding and competitive marketplace, you must
ensure your products and services are prominently in the minds of your
customers and clients. This requires ongoing advertising and promotion.
Advertising and Promotion :Even if your products and services are prominently in the minds of your
customers and clients, you need to facilitate the process of their buying
(or, sometimes in the case of nonprofits, using) your products and
services. This often requires cultivating an ongoing relationship with
customers and clients to understand their needs, explain how your
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LIFE INSURANCE
products and services can meet those needs, and facilitate the "closing" of
the sale, that is, where they sign "on the dotted line".
Sales: Customers are increasingly knowledgeable and intelligent in their buying
habits. Depending on the nature of the product or service, a warranty (or
promise of ongoing repair and/or support for some period of time) can
greatly reassure customers when considering the purchase of your
products.
Need of Diversification
The two principal objectives of diversification are: 1. Improving core process execution, and/or
2. Enhancing a business unit's structural position.
The fundamental role of diversification is for corporate managers to
create value for stockholders in ways stockholders cannot do better for
themselves1. The additional value is created through synergetic
integration of a new business into the existing one thereby increasing its
competitive advantage.
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Forms and Means of Diversification
Diversification typically takes one of three forms:

1. Vertical integration - along your value chain
2. Horizontal diversification - moving into new industry

3. Geographical diversification - to open up new markets
Means of achieving diversification include internal development,
acquisitions, strategic alliances, and joint ventures. As each route has its
own set of issues, benefits, and limitations, various forms and means of
diversification can be mixed and matched to create a range of options.
Herein lays a conceptual framework for evaluating diversification
strategies:
Level One Diversification: - This is the easiest diversification strategy one that can offer substantial gains with minimal distraction. At Level
One, an agency does not stray far from its core services and payors.
Rather, it diversifies from within. For example, this could include adding
services within a product category; expanding geographically; or even
developing a broad and balanced sales force and referral base in which no
representative or referral "controls" a disproportionate amount of
revenue. Consider the case of a certified home health agency that
currently focuses on orthopedic patients, developing additional diseasespecific programs for COPD and CHF in order to boost its revenues and
reduce its risk of negative changes in therapy reimbursement. A hospice
that focuses on long lengths of stay adopting a more open access model in
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order to reduce its risk of exceeding patient caps is another example. Or

an agency
may choose to expand into new geographic areas that inevitably increase
its breadth of referral sources. All such examples can provide
opportunities for agencies to increase their revenue and reduce their risk.
Level Two Diversification: - This is where things get substantially
more complex. At Level Two, agencies diversify into an entirely new
product category or an entirely new payors, either of which takes the
organization out of at least one of its comfort zones. Consider an HHA
targeting managed care or participating as a provider in disease
management programs; a Medicaid waiver company expanding into a
new state with different Medicaid policies and reimbursement
regulations; or a highly skilled private duty agency adding Medicare
services. These examples represent "same major product line, new payor"
diversification strategies.
At the other end of the spectrum - "same payors, new product line"
examples - include HHAs expanding into hospice; private duty agencies
adding case management services or non-medical home care; or Medicaid
waiver firms adding specialized pediatric, MR/DD, or TBI services. By
holding either their product lines or payors constant, agencies attempting
Level Two diversification, tend to take on more manageable - though
nonetheless challenging - tasks.
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Level Three Diversification: - As you may have surmised, at Level

three, agencies diversify into new product categories and new payors
simultaneously. This is by far the most challenging of diversification
strategies and the one most prone to failure. For example, an agency
diversifying into infusion therapy and/or home medical equipment, is a
classic Level Three strategy - one that has had limited success due to the
extraordinary difficulty entailed in managing and wringing operational
synergies from such disparate products and services, include billing and
collections, referral patterns, human resource requirements, cultures, etc.
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Where such drastic diversification has been successful, firms essentially

operate their multiple business lines as separate entities. While this limits
opportunities to capture synergistic operational strategies, such a model
does provide risk diversification and outlets for growth. We have seen
large Medicaid waiver agencies successfully diversify into Medicare
services.
This is likely due to the fact that while Medicaid waiver services are
generally far different than those of certified agencies, they are at least
related, making the product jump a little more manageable.
As a company moves into new products and payors, operational
complexity increases dramatically. Accordingly, in evaluating
diversification options, it may be reasonable for agencies to tackle
each hierarchy in turn, building the confidence and skill set
required to succeed - and where appropriate - move to the next
level.
Product diversification includes strategies to produce new products for
new or existing target markets. Having more than one product or market
can reduce risks. Farm businesses often have resources to compete in
different markets. For example, a farm winery may diversify its operation
by developing a restaurant or offering a line of beer. Diversification
strategies often attempt to increase sales by offering new products that
will attract new customers or increase sales to existing customers.
Because diversification activities often push producers into new and
uncertain markets, it is perhaps the most risky of the marketing strategy
options. Examples of diversification include expanding a pick-your-own
apple orchard business to include selling ready-to-use apple pie filling,
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apple cider, jams and jellies, fried pies or dried apples for food
preparation and crafts/decorations
DIVERSIFICATION STRATEGY
Diversification strategies are used to expand firms' operations by adding
markets, products, services, or stages of production to the existing
business. The purpose of diversification is to allow the company to enter
lines of business that are different from current operations. When the new
venture is strategically related to the existing lines of business, it is called
concentric diversification. Conglomerate diversification occurs when
there is no common thread of strategic fit or relationship between the new
and old lines of business; the new and old businesses are unrelated.
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DIVERSIFICATION IN THE CONTEXT

OF GROWTH STRATEGIES
Diversification is a form of growth strategy. Growth strategies involve a
significant increase in performance objectives (usually sales or market
share) beyond past levels of performance. Many organizations pursue one
or more types of growth strategies. One of the primary reasons is the view
held by many investors and executives that "bigger is better." Growth in
sales is often used as a measure of performance. Even if profits remain
stable or decline, an increase in sales satisfies many people. The
assumption is often made that if sales increase, profits will eventually
follow.
Rewards for managers are usually greater when a firm is pursuing a
growth strategy. Managers are often paid a commission based on sales.
The higher the sales level, the larger the compensation received.
Recognition and power also accrue to managers of growing companies.
They are more frequently invited to speak to professional groups and are
more often interviewed and written about by the press than are managers
of companies with greater rates of return but slower rates of growth.
Thus, growth companies also become better known and may be better
able, to attract quality managers.
Growth may also improve the effectiveness of the organization. Larger
companies have a number of advantages over smaller firms operating in
more limited markets.
1. Large size or large market share can lead to economies of scale.
Marketing or production synergies may result from more efficient
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Use of sales calls, reduced travel time, reduced changeover time, and
longer production runs.
2. Learning and experience curve effects may produce lower costs as
the firm gains experience in producing and distributing its product
or service. Experience and large size may also lead to improved
layout, gains in labor efficiency, redesign of products or production
processes, or larger and more qualified staff departments (e.g.,
marketing research or research and development).
3. Lower average unit costs may result from a firm's ability to spread
administrative expenses and other overhead costs over a larger unit
volume. The more capital intensive a business is, the more
important its ability to spread costs across a large volume becomes.
4. Improved linkages with other stages of production can also result
from large size. Better links with suppliers may be attained through
large orders, which may produce lower costs (quantity discounts),
improved delivery, or custom-made products that would be
unaffordable for smaller operations. Links with distribution
channels may lower costs by better location of warehouses, more
efficient advertising, and shipping efficiencies. The size of the
organization relative to its customers or suppliers influences its
bargaining power and its ability to influence price and services
provided.
5. Sharing of information between units of a large firm allows
knowledge gained in one business unit to be applied to problems
being experienced in another unit. Especially for companies relying
heavily on technology, the reduction of R&D costs and the time
needed to develop new technology may give larger firms an
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advantage over smaller, more specialized firms. The more similar the
activities are among units, the easier the transfer of information
becomes.
6. Taking advantage of geographic differences is possible for large
firms. Especially for multinational firms, differences in wage rates,
taxes, energy costs, shipping and freight charges, and trade
restrictions influence the costs of business. A large firm can
sometimes lower its cost of business by placing multiple plants in
locations providing the lowest cost. Smaller firms with only one
location must operate within the strengths and weaknesses of its
single location.
CONCENTRIC DIVERSIFICATION
Concentric diversification occurs when a firm adds related products or
markets. The goal of such diversification is to achieve strategic fit.
Strategic fit allows an organization to achieve synergy. In essence,
synergy is the ability of two or more parts of an organization to achieve
greater total effectiveness together than would be experienced if the
efforts of the independent parts were summed. Synergy may be achieved
by combining firms with complementary marketing, financial, operating,
or management efforts. Breweries have been able to achieve marketing
synergy through national advertising and distribution. By combining a
number of regional breweries into a national network, beer producers
have been able to produce and sell more beer than had independent
regional breweries. Financial synergy may be obtained by combining a
firm with strong financial resources but limited growth opportunities with
a company having great market potential but weak financial resources.
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For example, debt-ridden companies may seek to acquire firms that are
relatively debt-free to increase the lever-aged firm's borrowing capacity.
Similarly, firms sometimes attempt to stabilize earnings by diversifying
into businesses with different seasonal or cyclical sales patterns.
Strategic fit in operations could result in synergy by the combination of
operating units to improve overall efficiency. Combining two units so
that duplicate equipment or research and development are eliminated
would improve overall efficiency. Quantity discounts through combined
ordering would be another possible way to achieve operating synergy.
Yet another way to improve efficiency is to diversify into an area that can
use by-products from existing operations. For example, breweries have
been able to convert grain, a by-product of the fermentation process, into
feed for livestock.
Management synergy can be achieved when management experience and
expertise is applied to different situations. Perhaps a manager's
experience in working with unions in one company could be applied to
labor management problems in another company. Caution must be
exercised, however, in assuming that management experience is
universally transferable. Situations that appear similar may require
significantly different management strategies. Personality clashes and
other situational differences may make management synergy difficult to
achieve. Although managerial skills and experience can be transferred,
individual managers may not be able to make the transfer effectively.
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CONGLOMERATE DIVERSIFICATION
Conglomerate diversification occurs when a firm diversifies into areas
that are unrelated to its current line of business. Synergy may result
through the application of management expertise or financial resources,
but the primary purpose of conglomerate diversification is improved
profitability of the acquiring firm. Little, if any, concern is given to
achieving
marketing
or
production
synergy
with
conglomerate
diversification.
One of the most common reasons for pursuing a conglomerate growth
strategy is that opportunities in a firm's current line of business are
limited. Finding an attractive investment opportunity requires the firm to
consider alternatives in other types of business. Philip Morris's
acquisition of Miller Brewing was a conglomerate move. Products,
markets, and production technologies of the brewery were quite different
from those required to produce cigarettes.
Firms may also pursue a conglomerate diversification strategy as a means
of increasing the firm's growth rate. As discussed earlier, growth in sales
may make the company more attractive to investors. Growth may also
increase the power and prestige of the firm's executives. Conglomerate
growth may be effective if the new area has growth opportunities greater
than those available in the existing line of business.
Probably the biggest disadvantage of a conglomerate diversification
strategy is the increase in administrative problems associated with
operating unrelated businesses. Managers from different divisions may
have different backgrounds and may be unable to work together
effectively. Competition between strategic business units for resources
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may entail shifting resources away from one division to another. Such a
move may create rivalry and administrative problems between the units.
Caution must also be exercised in entering businesses with seemingly
promising opportunities, especially if the management team lacks
experience or skill in the new line of business. Without some knowledge
of the new industry, a firm may be unable to accurately evaluate the
industry's potential. Even if the new business is initially successful,
problems will eventually occur. Executives from the conglomerate will
have to become involved in the operations of the new enterprise at some
point. Without adequate experience or skills (Management Synergy) the
new business may become a poor performer.
Without some form of strategic fit, the combined performance of the
individual units will probably not exceed the performance of the units
operating independently. In fact, combined performance may deteriorate
because of controls placed on the individual units by the parent
conglomerate. Decision-making may become slower due to longer review
periods and complicated reporting systems.
INTERNAL DIVERSIFICATION
One form of internal diversification is to market existing products in new
markets. A firm may elect to broaden its geographic base to include new
customers, either within its home country or in international markets. A
business could also pursue an internal diversification strategy by finding
new users for its current product. For example, Arm & Hammer marketed
its baking soda as a refrigerator deodorizer. Finally, firms may attempt to
change markets by increasing or decreasing the price of products to make
them appeal to consumers of different income levels.
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Another form of internal diversification is to market new products in

existing markets. Generally this strategy involves using existing channels
of distribution to market new products. Retailers often change product
lines to include new items that appear to have good market potential.
Johnson & Johnson added a line of baby toys to its existing line of items
for infants. Packaged-food firms have added salt-free or low-calorie
options to existing product lines.
It is also possible to have conglomerate growth through internal
diversification. This strategy would entail marketing new and unrelated
products to new markets. This strategy is the least used among the
internal diversification strategies, as it is the most risky. It requires the
company to enter a new market where it is not established. The firm is
also developing and introducing a new product. Research and
development costs, as well as advertising costs, will likely be higher than
if existing products were marketed. In effect, the investment and the
probability of failure are much greater when both the product and market
are new.
EXTERNAL DIVERSIFICATION
External diversification occurs when a firm looks outside of its current
operations and buys access to new products or markets. Mergers are one
common form of external diversification. Mergers occur when two or
more firms combine operations to form one corporation, perhaps with a
new name. These firms are usually of similar size. One goal of a merger
is to achieve management synergy by creating a stronger management
team. This can be achieved in a merger by combining the management
teams from the merged firms.
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Acquisitions, a second form of external growth, occur when the

purchased corporation loses its identity. The acquiring company absorbs
it. The acquired company and its assets may be absorbed into an existing
business unit or remain intact as an independent subsidiary within the
parent company. Acquisitions usually occur when a larger firm purchases
a smaller company. Acquisitions are called friendly if the firm being
purchased is receptive to the acquisition. (Mergers are usually "friendly.")
Unfriendly mergers or hostile takeovers occur when the management of
the firm targeted for acquisition resists being purchased.
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Key definitions: Products

Products are 'tangible objects that exist in both time and space' (Shostack,
1 Manzini (1996) describes them as artifacts that supply the consumer
with benefits, noting that production is usually separated by time and
place from consumption.
Services
Services 'consist solely of acts or process (es), and exist in time only.
They are intangible (i.e. they do not occupy space) and, as such, they
cannot be possessed; they can only be experienced, created or
participated in. There is direct interactivity between supplier and
customer, and the process of production and consumption is
simultaneous.
Product-Service mix or Product-Service combinations
The relationship between products and services is complex. In practice
the provision of services involves a number of tangible and intangible
elements, while the supply of products relies on the culmination of a long
chain of services. Products and services are therefore intimately and
symbiotically linked. The idea of service-less products or product-less
services is thus flawed (Shostack, 1982). In reality there is a spectrum
from product-dominant entities (e.g. salt) to service-dominant entities
(e.g. teaching).
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The configuration (quantity and quality) of products and services

supplied to meet the demand for well-being may be described as a
product-service mix (Manzini, 1996) or product-service combination (Te
Riele et al, 1999).
A CASE OF SBI Holdings Ends Capital Relationship with Softbank

TOKYO -- In a recent two-part stock sell-off, Internet and media
conglomerate Softbank Corporation (TOKYO:9984) reciprocally ended
its capital ties with SBI Holdings (TOKYO:8473), the fast-growing
financial services giant.
The two-part transaction saw a sale of 1.11 million shares by Softbank on
August 1st back to SBI Holdings, followed on August 2nd by a larger
2.13 million share sale to Goldman Sachs Japan who, overnight, sold the
majority of shares to an influential group of approximately one-hundred
institutional investors. SBI clearly benefits from the sale in creating a
greater
diversification
of
long-term
committed
institutional
shareholders, along with a new autonomy to extend its powerful

customer relationships and serve non-financial products to its core
clientele.The two companies plan to continue their close collaboration in
Japan, linking together portfolio companies such as SBI E*TRADE
Securities (JASDAQ:8701) and Yahoo! Japan (TOKYO:4689), and this
move will enable SoftBank to expand upon its media ambitions, while
SBI Holdings maintains its strong focus on financial services. For its part,
SBI Holdings will continue to increase what many see as the world's
largest portfolio of online financial services firms. SBI Group's armada
today consists of nearly 70 such companies, 18 venture capital funds,
mutual funds,
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a non-life insurance company, an Internet bank and a rapidly increasing

number of interrelated projects in China, India and South Korea.
Yoshitaka Kitao, CEO of SBI Holdings, said this of the split with
SoftBank.
"These
well-timed
developments
illustrate
logical
partitioning-off of two increasingly disparate business lines while, at the

same time, it symbolizes a point of maturity for two companies that found
meteoric success in the Internet Age. We will of course continue the
special friendship we share alongside the SoftBank family."
SBI Holdings' operations span three main business areas: (1) Asset
Management; (2) Brokerage and Investment Banking; and (3) Financial
Services. The company's genesis hails from the union of two former
SoftBank Corporation subsidiaries: SoftBank Finance and SoftBank
Investment. In addition to venture capital, many of the firm's 70
companies have taken leadership positions in various consumer-oriented
online financial services such as equities and commodities brokering,
home equity loans, and insurance comparison. Internationally, the firm
has recently formed joint partnerships with groups controlled by
Singapore's Temasek Holdings and State Bank of India. SBI also plans to
launch Japan's first full-service Internet bank sometime next year.
SBI Life Insurance Co. Ltd. is a joint venture between State Bank of
India and Cardiff S.A. of France. We are a registered life insurance
company. SBI is a household name, and it stands as the last word for
financial strength and security in the country. SBIs illustrious
background dates back to the year 1806 when it started business as a
presidency bank known as Bank of Bengal. Over the long journey, it has
learnt to combine the best of banking practices handed
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down from the imperial management with the more dynamic ways of
doing banking in the modern India. It has grown as a responsible giant in
the banking field over the years. Today, it has a branch network of over
9000 branches, an aggregate deposit base of nearly Rs196821 crore
(US$45,121mm) and a total balance sheet size of Rs.261504 crore (US59,
950 mm). Together with its 7 Associate Banks, SBI commands about
30% of the market share in banking. SBI is the strongest and most
profitable bank in the country. It has a tangible net worth of Rs.12146
crore (US$2,784mm) as at March 2000, and it earned a pre-tax profit of
Rs.2051 crore (US$470 mm) for the fiscal ending that date.Cardiff is a
wholly owned subsidiary of BNP Paribas, which is one of the top 10
banks in the world, and the third largest in Europe. BNP is one of the
oldest foreign banks with a presence in India dating back to 1860. It has 9
branches in major metros in the country. Cardiff came into being in 1973.
It has grown over the years into a vibrant insurance company specializing
in personal lines such as long-term savings, protection products and
creditor insurance. Cardiff had a premium income of over US$ 4 billion
in 1999, and more than US$ 23 billion of funds under its management.
Cardiff has been specializing in the art of selling insurance products
through commercial banks in France and 23 other countries. France is
the mother of banc assurance in the world. Over 65% of life insurance
business is done through banks and financial institutions' counters in
France, and the trend is rapidly catching up in other countries. SBI Life
Insurance Company Ltd is registered as a life insurance company with the
Insurance Regulator. The Company's authorized capital is Rs.250 crore,
and the paid-up capital at present is Rs.125 crore. SBI owns 74% of the
total equity, and Cardiff the balance 26%.
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FINDINGS: The Companies consultants had adopted a proactive methodology

and took up the role of facilities of changes management. I-flex
consulting worked with representatives from each business
segment, enabling them to take the lead in defining change in their
respective areas. The proposed changes were validated through
meetings with the senior management where: Concepts were presented, discussed and reviewed; policies and
procedures of each business group were deliberated and documented.
SUGGESTION:
The need for the diversification in India must required which helps
to brought Private players who are trying very hard but they are not
up to their benchmark because of the largest Population problem.
Customer care service should be implemented in the voluntary
method and customers should be made aware about the advantages
of each & every Policy, which he is going to receive from
Insurance Company.
There should be transparency in all services offered by the
Insurance Companys right from accepting the premiums to the
settlement of claims.
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LIFE INSURANCE
CONCLUSION: I here by conclude my Project on PRODUCT & SERVICE

DIVERSIFICATION W.R.TO SBI LIFE INSURANCE.
Diversification can
help an investor manage risk and reduce the volatility of an asset's price movements.
Remember though, that no matter how diversified your portfolio is, risk can never be
eliminated completely. You can reduce risk associated with individual stocks, but general
market risks affect nearly every stock, so it is important to diversify also among different asset
classes. The key is to find a medium between risk and return; this ensures that you achieve
your financial goals while still getting a good night's rest.
The common consensus is that a well-balanced portfolio with approximately 20 stocks
diversifies away the maximum amount of market risk. Owning additional stocks takes away
the potential of big gainers significantly impacting your bottom line, as is the case with large
mutual funds investing in hundreds of stocks. We leave you with the sage words of the
"Oracle of Omaha",
Warren Buffet: "wide diversification is only required when investors
do not understand what they are doing".
Insurance products are different from banking products and require

different level of expertise in underwriting skills. Insurance marketing
depends more on professional approaches as the business depends on
solicitation. They may lose the opportunity and advantages of product
design and strategic planning. Training sessions for branch staff has to be
conducted to learn about insurance and insurance products.
Diversification is like ice cream: most people would agree that both diversification
and ice cream are "good" things. This doesn't mean you can't have too much of a good thing.
Eat too much ice cream and you'll end up with a stomachache.
WEBLIOGRAPHY: -
1. http://www.SBI.com/aboutus/milestones/Milestones.asp
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LIFE INSURANCE
2. http://www.SBI
LIFE
INSURANCE
.com/
privacy
policy/
Privacy-Policy. asp
3. http://www.SBI.com/corporate/index.asp
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PRODUCT AND SERVICE DIVERCIFCATION WITH REFERENCE TO SBI

A PROJECT REPORT ON:PRODUCT AND SERVICE

SEAT NO: S.K.SOMAIYA COLLEGE OF ARTS,