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REPORT ON
SUBMITTED
“IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE
DEGREE OF
MASTER OF BUSINESS ADMINISTRATION”
Submitted by
ABHISHEK SINGH
1
CONTENTS
Chapter Topic Page
1 Introduction 3
1.2 Insurance 4
1.3 Life insurance 5
1.4 Evolution of Insurance In- 6
dustry
2 About the Organization 7
2.1 Introduction of IDBI Fed- 9
eral Life Insurance
2.2 About the stakeholders 10
3 Background of the Pro- 17
ject
3.1 Literature Review 18
3.2 Objectives of the study 19
4 Case Analysis 20
Data analysis & interpretation 21
Friedman Test 22
Chi-square Test 26
Pareto Chart 29
5 Conclusion, Implication & 30
Recommendation
Findings 30
References 32
Questionnaire 33
2
Chapter-1 Introduction
1.1 INTRODUCTION
Life of an individual is his/her investment whereas for his/her family it’s their asset. Life Insur-
ance in India can be categorised as an investment tool as it is based on the model of 3E’s which
represents exempt, exempt & exempt. The first exempt is for the amount paid as Premium for
the insurance, which is deductible u/s 80 C. Second exempt is for the Maturity amount which
insurer receives at the end of the insurance period [u/s 10(10D)]. Third exempt is for the any
interest received, which is also exempt u/s 10(10D).
Tax planning should start at the beginning of the financial year when individuals have complete
knowledge of what they have earned in last year. These individuals can be a salaried person, a
businessperson, or a self-employed individual. But most of the people starts investing in tax
saving tools at the last quarter of the month to claim tax deduction. Because of this they could
not evaluate the product and hence end up buying the insurance product which was not designed
for them or for their family. So one should be cautious before selecting a life insurance.
Income tax act 1961, provides section 80C which allows an individual a tax deduction up to ₹
150000. The Maturity amount is deductible u/s 10(10D) as Long-term capital gains (LTCG)
benefits. These benefits also cover the premium paid deduction and maturity amount benefit
from insurance of spouse or of child. Life insurance can be a tax saving tool but a company
should not measure life insurance policy in terms of “tax saving” tool but as an “life benefit”
tool.
1.2 INSURANCE
Insurance policy is a contract in which the insurance company assures the individual or any
entity a financial reimbursement in case of any uncertain loss. The insurance company com-
bines the hazards of individuals or entities to make the insured's payments more affordable.
Insurance policies are used to cover the danger of both large and small finan-
cial loss that arises from harm to the insured and his property, or from liability for harm or in-
jury to another party.
There are two parties "the insurer" and "the insured" here in insurance. The insurer is the one
who provides the compensation to the one who buys the compensation when a specific event
occurs. The insured is the one who purchases the insurance policy by paying premium for the
amount of years chosen, also known as the premium payment term (PPT). The pre-
mium paid allows the insured to be covered for a term, namely the term of pol-
icy (PT), which is at least equal to the term of premium payment.
3
1.3 LIFE INSURANCE
Life insurance is a contractual agreement between two parties in which one is called “insured”
& the other one is “insurer”. Insured is the party which takes or buys life insurance whereas
insurer is the party, which generally is a life insurance company. In account of the insured's
premium payment, the insurance company guarantees a death advantage.
The aim of life insurance is to provide the surviving dependents with economic security after
an insured's death. Prior to buying a life insurance policy, insured must analyze his/her eco-
nomic condition and determine the living standards required for their dependents. Life insur-
ance agents or brokers plays an important role in evaluating requirements and identifying the
kind of life insurance that is most appropriate for addressing those requirements. Several life
insurance channels, including life-long policies, are accessible. It is advisable to reassess the
life insurance annually or after major life occurrences such as marriage, divorce, birth or adop-
tion of child.
There are three major components of a life insurance policy.
1. Death advantage is the sum of cash guaranteed by the insurance company to the beneficiar-
ies identified in the policy after the insured's death. The insured will select their re-
quired death benefit quantity based on surviving heirs ' estimated future requirements.
The insurance company will determine if an insurable interest exists and if the in-
sured qualifies on the basis of the underwriting demands of the firm for coverage.
2. Using actuarially based statistics, Premium payments are set. The insurer will deter-
mine the insurance expenses (COI) or the amount needed to cover the expenses of mortal-
ity, administrative charges and other charges for maintaining the policy. The age of the in-
sured, medical history, occupational dangers and personal risk propensity are other varia-
bles that affect the premium. If premiums are presented as needed, the in-
surer will stay obliged to pay the death advantage.
The premium quantity involves the insurance price (Cost of Insurance) with term poli-
cies. The premium quantity comprises of the COI and a money value quantity for continu-
ous or universal strategies.
3. An element that serves two aims is the Cash value of perpetual or universal life insur-
ance. It is a savings account that the policyholder can use, with cash accumu-
lated on a tax deferred basis, during the life of the insured. Some strate-
gies may have withdrawal constraints depending on the use of borrowed cash. Cash val-
ue's second aim is to offset increasing costs or provide insurance as the insured ages.
4
1.4 EVOLUTION & ANALYSIS OF INDIAN INSURANCE INDUSTRY
5
1.4. B) Insurance Industry
After-liberalization, insurance industry of India grew significantly. Due to the coun-
try's strong economic growth and greater private disposable income, the insurance sector of
India is anticipated to enlarge up to US$ 280.1 billion by FY-2020. Overall, from 2.71% in
2001, penetration of insurance in India reached 3.7% in 2017. In India, gross premiums
amounted to ₹5.8 trillion (US$ 82.7 billion) in FY-19, with ₹4.1 trillion (US$ 58.6 billion) from
life insurance and ₹1.7 trillion (US$ 24.4 trillion) from non-life insurance.
Over FY_12–18, premiums from new “life insurance” businesses in India grew by 14.452% to
₹1.95 trillion and “non-life insurance” premiums increased by 16.651% at CAGR. In FY-19,
new life insurance premium rose to ₹2.14 trillion (US$ 30.68 billion) by 10.7 percent year-on-
year.
For the next three to five years, the life insurance sector in the nation is anticipated to de-
velop 12-15 percent annually.
In FY-19, non-life insurers' gross direct premiums went up to ₹1.66 trillion (US$ 24.3 bil-
lion), showing a growth rate of 12.8% year-on-year.
In the Indian market, there are Twenty Four life insurance companies and Thirty Three non-
life insurance companies competing on “services & prices” to get clients. Insurance industry
was driven by innovation in product & vibrant distribution channels coupled with the insurer
targeted advertising and promotional campaigns. In the non-life insurance market, the mar-
ket share of private sector businesses grew from 13.12% in FY03 to 54.7% in FY19. Pri-
vate insurance companies had a market share of 25.3% in new business in FY-
19 in the life insurance segment.
Government raised the maximum limit of Foreign Direct Investment (FDI) in the insur-
ance industry from 26% to 49%, which opened the flood-gate for foreign investment in the
industry.
There were Ten merger and acquisition (M&A) agreements (in 2017) worth US$ 900 mil-
lion in the Indian insurance industry. Pradhan Mantri Suraksha Bima Yojana (PMSBY) regis-
tration in 2017-18 reached 130.41 million. As part of Ayushman Bharat, the Na-
tional Health Protection Scheme was announced as part of “Budget 2018-19”. The sys-
tem will provide over 100 million vulnerable households in India with insurance cover-
age of up to ₹5 Lakh.
Increase in life expectancy, favorable savings and more private-sector employment are ex-
pected to ignite demand for retirement plans in the future. Similarly, an important factor
for the motor insurance market would be strong growth in the “automotive indus-
try” over the next decade.
6
There are currently “24 life insurance companies” operating in India. These are as follows:-
7
Chapter-2 About the Organization
2.1 INTRODUCTION
IDBI Federal Life Insurance Co. Ltd. is among the fastest growing life insurance compa-
nies in India and provides a broad variety of protection, pension and property management so-
lutions for general people and corporate clients.
This company was formed after signing a Memorandum of Understanding by IDBI Bank, In-
dia's business and growth elite bank; Federal Bank, one of India's top non-public (pri-
vate) sector bank & Ageas, a European-based multinational insurance firm.
Here, IDBI Bank owns 48% of the equity whereas both Federal Bank & Ageas owns 26% of
equity share each, which is shown below in, figure 2.1
Equity Contribution
26%
48%
26%
8
2.2 ABOUT THE STAKEHOLDERS
9
2.3 VISION
Vision is to be the leader in wealth management solution, protection and retirement solutions
that satisfies the customer requirement and add value to their lives.”
2.4 MISSION
To enhance customer experience
To be transparent and maintain integrity
To build quality human capital from investment
2.5 VALUES
Passion
Integrity
Ambition
Execution
Transparency
2.6 PRODUCTS
10
2.7 SWOT Analysis of IDBI Federal:
Strengths
Weakness Opportunities Threats
I was given a target to sell any of these four plans to atleast two customers. We were also asked
to make a prospect list of the customers and a questionnaire to build to understand different
aspects of selling like believe in your product, care about your client, generate good leads, know
your target market, product presentation & what’s trending in the market.
11
2.9 CORE MANAGEMENT TEAM OF IDBI F. LIFE INSURANCE:
Vighnesh Shahane
MD & CEO
Ashley Kennedy
Executive V.President
Fig 2.4
Source: www.idbifederal.com/
12
2.10 Financial performance of IDBI Federal (FY 2018-19)
13
Fig 2.6
14
Fig 2.7
<Picture source of Fig 2.5, 2.6 & 2.7 is Annual Report of IDBI Federal Life Insurance Co>
15
Chapter-3 Background of the Project
Tati, R.K. and Baltazar, E.B.B. (2018) “Factors Influencing the Choice of Investment in Life
Insurance Policy. Theoretical Economics Letters, 8, 3664-3675”. Income level of Indians are
increasing with increase in opportunities as India is developing with a highest growth rate. As
a result of this, disposable income of Indians are also increasing which will provide path to
private insurance companies to explore this new opportunities. Quality of service with assur-
ance can help private companies to make India biggest insurance market. Study focused to
identify the factors that can influence the individuals to invest in “Life Insurance”. Conclusion
of this study was- There exists no relation between factors that influence “choice of investment”
and “Annual income”.
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3.2 THEORETICAL FRAMEWORK
Government of India is providing a full tax rebate to all those who are earning less than ₹5 Lakh
a year. As a result, more than 2.5 crore people will be exempted from paying tax. This will
increase the disposable income of Indians. So, life insurance companies can cater this “added
income”. Keeping this in mind, following framework has been developed-
Age
Deduction
u/s 80C
17
3.4 RESEARCH METHODOLOGY
In this study, both type of data has been used i.e. primary and secondary data. For primary data,
question relating to the objectives of the study was asked from the respondents in a self-admin-
istered questionnaire. The questionnaire contained demographics like Age, Annual Income,
Gender etc. & certain questions relating to the awareness level among individuals towards tax
benefits of life insurance. It also contained questions relating to the preference of investors in
investment tools. To obtain the objectives, Chi-square test and Friedman Test was used.
Scales used in questionnaire:
1) Rating scale- This scale is generally used for qualitative measure. Respondents
were asked to rate different choices of investment.
2) Likert scale- This scale is used to measure attitude of people towards a subject.
On this scale respondents were asked to mark from strongly disagree to strongly
agree for the reasons for taking life insurance.
3) General question- A general question was asked whether respondents take life
insurance to save tax or not.
3.5 SAMPLING METHODOLOGY
Sample size- 80 respondents
Sample unit- Housemaker, Businessperson and salaried men & women.
Sampling Area- West Bengal.
Sampling Technique- Convenience sampling technique.
Collection of primary data was through self-administered questionnaire using Google ques-
tionnaire forms.
18
Chapter-4 Case/Data Analysis
Fig 4.1
Fig 4.1 shows the annual income of the sample, through pie chart
BELOW 5 LAKH- 37
5-10 LAKH- 33
11-15 LAKH- 9
16-20 LAKH- 1
21 LAKH & ABOVE- 0
19
Factors affecting investment decision?-
Fig 4.2
Fig 4.2 shows the different factors that influencing the investment decision, through pie chart
PARENTS- 19
SPOUSE- 16
RELATIVES/FRIENDS- 9
PROFESSIONALS- 18
NONE OF THE ABOVE- 18
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Friedman Test
a) Milton Friedman developed the Friedman test. This test is a type of the Repeated-Measure
ANOVA that can be performed on ranked (ordinal) data.
b) In Friedman test, null hypothesis states, “there are no differences between the variables”. If
the calculated probability is lower than ‘p value’ or ‘significance level’ than the null hy-
pothesis is rejected and alternate hypothesis is selected. Alternate hypothesis states that at-
least two variables are significant.
c) Assumptions-
(i) Each groups to be measured on 3 or more occasions.
(ii) From the population, each group is taken as a random sample.
(iii) Normally distributed sample is not required.
d) Hypothesis:
H0 : No significant difference between groups.
H1 : Significant difference between atleast two or more groups.
Steps in SPSS for the Friedman Test:
Click on Analyze -> Then go to Nonparametric Test -> Select Legacy Dialogs -> Now select
K related samples. A dialog box will appear.
Now within dialog box, select all the ordinal data and send them to Right side empty box.
Fig 4.3
21
Fig 4.4
Fig 4.5
22
From the test result i.e. Fig 4.5, we can infer that the asymptotic significant value is .000 which
is less than 0.05. Hence, “the null hypothesis will be rejected and alternate hypothesis will be
selected”. It means that all the five variables are independent and have no relation.
From the test we can also deduce that Deposit/Fixed deposit is having the lowest mean rank
and so their rank, as per Friedman test, is highest. Second is Assets. Life insurance at the third
rank. Fourth is Stock market & last one is Others.
Friedman Test defines whether there exists any relation among the variables or not. But it fails
to explain the association between 2 variables. For this we will use another Test called Posthoc
Test.
Now a Dialog box will appear. Select customize analysis in Objective. In Fields, select Use
custom field assigned and within this select and send all the relevant data set in Right side
empty box.
Now come to settings. Here select Friedman’s 2 way ANOVA by ranks and keep other op-
tions unchecked. In Friedman select All Pairwise and RUN the test.
23
Result of Posthoc Test:
Fig 4.6
From the above Fig 4.6 i.e. result of Posthoc Test, we can see that 8 out of 10 pair test results
have “significance level lower than 0.05 (p <0.05)”. Hence, all the related pairs are different
and have no relation at all.
But 2 pairs i.e. (1) Assets & Life Insurance and (2) Life insurance & Stock market shows a
relation as their significance value is more than 0.05 (p > 0.05). Hence these 2 pairs are related
with each other.
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Chi square test
a) Chi square test in statistics is a test that compares the expected data with a raw data obtained
from random, mutually exclusive & independent variables.
Chi square measures if all the variables are “independent or not”. It calculates an expected
value and checks whether the observed data is similar to expected data or not.
b) Assumptions-
(i) Frequencies or count data should be used.
(ii) Variables being mutually exclusive should fit in one and only one level of variable.
(iii) Should be an independent group.
(iv) 5 should be the value of the expected cells.
c) Hypothesis:
H0 : Annual income & Life insurance to save tax are independent.
H1 : Annual income & Life insurance to save tax are not independent.
Fig 4.7
25
Now a Dialog box will appear. Select Display clustered bar charts. In Statistics select
Chi_square. In Cells select both Observed & Expected and continue. Now click on OK.
Fig 4.11
26
Fig 4.12
The Fig 4.11 gives an overview of expected and count. If Expected value is equal or near about
equal to Count value it means that variables are independent or vice versa.
From Fig 4.12 we can see that p-value of Chi square is .157 which is greater than 0.05 (p >
0.05). Hence we can say that variables are independent and have no association.
27
Pareto Chart
Vilfredo Pareto, Italian economist in 19th century, came with an idea of 80/20, which states that,
80 percent of performance or quality improvement can be expected by driving away 20 percent
of factors that are causing performance or quality defect.
The Pareto chart represents the same diagrammatically. Here the bar chart has percentage sum
up to 100 percent.
From the Fig 4.14 we can deduce that out of 4 factors, which influences people to take/buy Life
insurance, 2 are the important ones. Tax shelter & Life Risk Coverage has combined value of
more than 80%. Here, as per Pareto Chart, 50% (i.e. 2 out of 4) of factors influences 80% of
buying decision.
28
Chapter-5 Conclusion, Implication & Recommendation
5.1 FINDINGS
1. There exists no relation between Annual income and Tax saving as factors. Therefore, we
can conclude that tendency to save tax doesn’t depend on the income level of an individual.
2. Among the available savings or investment tools, individuals prefer the Deposits/Fixed
deposit most. It can be deduced that simplicity to understand and liquidity of an investment
tool attracts most of the individuals.
3. After analysing the four factors on Pareto chart, it can deduced that Tax shelter & Life risk
coverage is the main factors which influences individuals to take life insurance.
5.2 LIMITATIONS
1. The study was mainly conducted in West Bengal; hence, the results can be regional biased.
2. Due to time constraint, only 80 responses were collected.
3. People are reluctant in providing complete information about them. This can affect the re-
sponse.
4. The lack of information among customers about the “financial instruments” can be an im-
portant limitation.
5. Queries of respondents while filling the form was not addressed as “primary data” was col-
lected through online survey.
5.3 RECOMMENDATIONS
1. In a country of 132 crore people only 6.84 crore people file their tax returns which is too
low. Hence, the number of people to worry about the tax is very low. However, there was a
rise of 26% in direct tax filling in 2018, which is a good indication for business dealing in
tax tools like life insurance.
2. The company needs to tap the crowd of age group of 21-30 and convince them to invest in
their products, as they are the new income earners.
3. Investment avenues like share market, mutual funds need more awareness among salaried
individuals so that more individuals can be attracted.
4. In most of the products, the minimum premium to be paid per year is ₹15000. This has
restricted the company from entering into micro insurance sector. Pradhan Mantri Surakhsa
Bima Yojana is a hit because it provides death benefit upto ₹2 Lakh at a yearly premium of
₹330.
29
5.4 CONCLUSION
Life insurance is sold keeping many aspects in mind and one of the major promoting aspects is
taxation. In this regard, the study conducted has proved that taxation plays an important role in
the promotion of life insurance plans. Disposable income of individuals are increasing and this
creates a way for life insurance companies to explore the new coming opportunities.
The taxpayers plan their tax only at the last quarter (Jan-Feb-Mar) of the financial year thus the
industry is required to start its advertising campaigns and product promotion well ahead. The
demographic profile of the clients should also be taken into account during product sales thus
targeting more on the private industry employees and higher cadre employees.
People who consider taxation to be personal burden are prospective clients of insurance indus-
try. They are the individuals who need to be focused on. This study also concludes that deposits
are the preference among individuals as investment tool. Hence, company can push their “Guar-
anteed plans” more than other risk related plans.
30
References
1. Athma, p. And kumar, r. (2007)) " an explorative study of life insurance purchase decision
making: influence of product and non-product factors ", icfai journal risk & insurance,
vol. Iv, october 2007, pg. No 19-21.
2. Investopedia. (2019). Life Insurance term plan. https://www.in-
vestopedia.com/terms/l/lifeinsurance.asp retrieved as on 04/07/2019 at 14:37
9. Tati, R.K. and Baltazar, E.B.B., 2018. Factors Influencing the Choice of Investment in
Life Insurance Policy. Theoretical Economics Letters, 8(15), p.3664.
31
Questionnaire for SIP
1) Gender
a) Male
b) Female
c) Others
2) Age
a) 21-30
b) 31-40
c) 41-50
d) 51-60
e) 61 & above
3) Marital status
a) Single
b) Married
c) Separated
d) Widowed
e) Divorced
4) Education background
a) Higher secondary
b) Bachelor
c) Diploma
d) Masters
e) Doctorate
5) Primary source of income
a) Business
b) Salary
c) Rent
d) Fees
e) Others (Please specify)
6) Annual income (Approx.)
a) Below 5 lakh
b) 5 –10 lakh
c) 11-15 lakh
d) 16-20 lakh
e) 21 lakh & above
32
8) Among the following, who influence your investment decision? (Please select only one)
Invest-
ment/Savings
Life risk cov-
erage tool
Tax saving
tool
Future plan-
ning tool
10) Rate the following investment tools as per your preference- (1=worst & 5=best)
1 2 3 4 5
I invest in Assets
I invest in Others
NO
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