Life Insurance And Swot Analysis Commerce Essay

spiritedness storying indemnification And Swot compendium Commerce EssaySecurity has always been a universal desire, righteousness from the earliest civilizations. This quest for hostage has been a major motivating oblige in the progress of bitkind. The early societies looked up to their families for providing this security, which beargond in sticking units. Gradu exclusivelyy, as spiritednessstyles changed and as man progressed into a more modern industrialized setup, this cohesive shade of the family started fading. One had to look for a no.her(prenominal) ways of providing economic security and somewhere a unyielding the line was born - amends.The indemnification landscape in India is in the make for of tremendous change. Closed to irrelevant competition all overdue to nationalization in 1956, the Indian indemnification pains was run by the government for over 40 historic period through the smell amends corporation of India (LIC) and four general inde mnity companies that spanned the length and breadth of the country.In the last couple of years in that respect argon a some forces typifying on the industry that have brought unspoiled signifi female genitaliat changes in the behaviour of the industry trends. Moreover there have been significant changes in the run outlook with respect to indemnification industry. From the opinion that it was an instrument mean to decl ar oneself m wiztary support at the time of the death of an individual, bearing policy policy brio indemnification grew up to be a major financial instrument during the past 50 years in our country. on that point has in corresponding manner been a change in the con comeer outlook with regards to invigoration amends as precise beneficiary financial machine as against the Jewish-Orthodox opinion of unfruitful use of money.In this highly war-ridden commercialise where mere survival has become primary objective for companies, customer assistance holds a major place in business. all(prenominal) insurance federation delivers service as per the terms of contract, however there argon very a couple of(prenominal) companies that go beyond the contract and augment the customers. This adopts a lettered and trained staff i.e. the agents. The following determinations throw light on the service perspective bringing out the fundamentals of service merchandising and its determinants. The finding of the research widens the consumer netherstanding aspect and it would be very helpful to invite customization. The research studies the changing trends in tone insurance and describes the latent capability and in addition gives a hypothesis on the future of the insurance industry based on the study of insurance vault of heaven and the expert opinion. argument of insurance policyWe live in exciting times with changes and upheavals all around. upstart(a) technologies, new inventions and changes in the economic and financial scenario , all have throw up new insurance needs needs never felt up or heard before. This type of evolutionary process, in the last fewer decades, has given hope to new types of need-based insurance covers public liability insurance, harvest liability insurance, indemnity for medical practitioners for negligence, indemnity for chartered accountants and auditors for professional lapses, etceteratera Further, covers ar engineering insurance, erection insurance, loss of profit, cover against atomic ray and space travel and contracting AIDS.Around 6000 years ago, Babylonians, whose home in the Tigris Euph crops valley lay at the crossroads of early world traffic, had demonstrable business practices to a high degree. Babylon had become the clearinghouse of trade as all the important land trade routes converged in that territory. From Armenia in the north, China and India in the east, Egypt in the west, caravans came laden with merchandise. though Babylon built up a gigantic commercial system, and her people were the front to enjoy the fruits of political sparing, their territory was touch by huge tracts of desert.Recorded evidences testify that ancient India was a spectacular maritime power. There were busy seaports on the west coast at Broach, at Kaveripumpatnam in the south and Bang in the east. Traders expressed difficulties in realizing money for the goods sent abroad. Loans were advanced to traders at specified rates of have-to doe with depending on the riskiness run and the duration of time for which money was required. work force skilled in sea voyages worked out risk agiotage rates.The archetypical Indian insurance conjunction was the Bombay Mutual Assurance Society ltd., make in 1870. This was followed by the Oriental life Assurance in 1874, the Bharat in 1896 and the Empire of India in 1897. Hindustan Cooperative was formed in Calcutta, the United India in Madras, The Bombay manners in Bombay, The National in Calcutta, The New India in Bomba y, The Jupiter in Bombay and the Lakshmi in New Delhi. These were all Indian companies started as a result of the swadeshi movement in the early 1900s. By the year 1956, when the feel insurance business was nationalized and the spirit damages Corporation of India (LIC) was formed on beginning(a) September 1956, there were 170 companies and 75 provident fund societies interacting life insurance business in India. After the amendment to the relevant laws in 1999, the LIC did not have the exclusive privilege of doing life insurance business in India. By 31st march 2002, eleven new insurance companies had been registered and began to transact life insurance business in India.Does one need insuranceThe business of insurance is related to nurseion of the economic values of the pluss. Every addition is of some value and is expected to last for a reliable period of time during which it provide deliver that value. In slip the asset is destroyed it ceases to provide the value to the owner thus leading to an rough situation. amends is a mechanism to slenderize the effect of such virulent situation. Human life is considered to be a value generating asset and is likewise subject to risks. Assets ar take cargond because there if a possibility that perhaps they might get destroyed, through accidental occurrences. Such possible occurrences atomic number 18 called perils. If such perils can cause damage to the asset we say that the asset is exposed to risk. To be more prcised Perils are the events and risks are the eventful losses or damages. The risk precisely means that there is a possibility of a loss or damage, the loss whitethorn or whitethorn not happen. Insurance is done against the contingency that it might happen. Insurance is relevant only if there are uncertainties. If there is no uncertainness close to the occurrence of an event, it cannot be insured against. In case of order beings death is certain however the time of death is uncertain.In surance doesnt protect the asset. It doesnt prevent the loss due to its peril. The perils can sometime be avoided by ensuring break dance safety and damage control attention. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. Only economic consequences can be insured. If the loss is not financial, insurance may not be possible. Moreover insurance is backed up with galore(postnominal) economic benefits which can be enlisted as follows. life insurance provides financial security to the family in case of untimely or untimely death. brio insurance is also a potent instrument for saving.Life insurance provides financial independence in old age.Organizations or individuals, who are in credit business, can ensure for themselves recovery of loan in case their debtor dies.A partnership firm can insure partners to the extent of capital invested by each in the business.Under -key man insurance, an organization can insure the lives of their executives, whose expertise greatly contributes to their profits.Organizations can bribe free radical insurance policies as a part of their employee- wel off the beaten track(predicate)e program.Life insurance also provides tax benefits to the holder.Life insurance policies create an estate.Life insurance policies also create thrift. I.e. a compulsory saving.A form _or_ system of government of life insurance can be used as a collateral security for procuring loans from the grocery.Working of life-Insurance Business There are tierce primary methods to avoid risk viz.A) AVOIDB) REDUCEC) impartInsurance deals with transfer of risk from the consumer to the provider. Insurance works on a fundamental principle of pooling of risk. People who are exposed to the same risk come together and agree that, if any one of them suffers a loss, the others result share the loss and make good the person who has suffered the loss. The manner in which the loss is to be shared can be determined beforehand. It may be proportional to the risk that each person is exposed to. This would be indicative of the benefit he would invite if the peril befell him. Insurance companies bespeak the share in the form of agios and create a fund from which losses are paid this fund is known as the life fund. The insurance company endures the losses to the members of that group. The insurance company also invests the funds in governmental and personal organizations. Ex. LIC has lent a capital of Rs.215million to NABARD for its rural finance activities.Life Insurance Marketing TriangleThe above diagram explains the serve triangle with its three constituents, namely, the company, the provider and the consumer. separately of them have been explained as follows-The connection The bon ton makes various promises to its customers through external securities industrying. The way and means of marketing ordain be covered it the marketing com pranceture.The Provider The agent s and the learning officers act as the front-line staff and they are in direct contact with the potential difference or existing customers. They are the ones who keep or satisfy the promises do by the company. The marketing of insurance basically comes under concept selling. The agents are thus given various incentives, rewards, commissions and all the necessary training required. As regards incentive, they receive PLI (Productivity Linked Incentive), which is based on the increase in premium amount and the sums awake(predicate) by the agent. They are also given tautologic commissions in case of policies, which are of high value. There are ordinary promotions for any good work done on a repair basis. The agents generally work under the training and guidance of their respective development officers.The Consumers The consumers are the policyholders. Apart from the routine life insurance policies other function like housing finance, mutual funds, pension and group insurance. T hus the betray of consumers is far and wideLife insurance mixThe identification of the sevener Ps of marketing mix helps a firm to form better marketing strategies and also to serve the customers in a more effectual manner.Product MixThe best way to get and keep customers is to forever figure out how to give them more for less. A ware mix is the set of all crossroads and items that a particular seller offers for sale. In case of insurance firmament, the ware mix comprises of Life and Non life insurance policies that are offered to the customer by the company. A companys product mix has certain width, length, abstrusity and consistency. The length of a product mix refers to the make sense number of items in the mix. In case of insurance empyrean, the following is the length of product mixWhole Life insuranceLimited Payment Life standardized Whole Life PolicyJoint Life Endowment PolicyDouble Endowment PolicyJeevan SaathiMoney Back Policyannuity PlansGroup Insurance PolicyB ima SandeshWith or Without hit PolicyThe discernment of a product mix refers to how many variants are offered of each product in the line in the insurance sector, one policy can be made available in different variations. Some of the examples are as followsWHOLE LIFE SCHEMESWhole life policy square lifeLimited payment whole lifeSingle agio With profit policyThese product mix dimensions permit the company to stretch forth its business. E.g. It can add new product lines thus widening its product mix.Product DifferentiationProduct differentiation may be referred to as the points or the qualities that a firm has in its product, which makes the product different from its competitors product. The product differentiation as far as the insurance sector and LIC in particular is concerned are as follows-Bonus- insurance companies issue bounty to their policyholders when they make a substantial amount of profit. If a company issues a high amount of indemnity, it delights the customer and creates a good image in the eyes of the customer.Past records- the differentiation can be done on the basis of past records. Customers choose to take policy from that company which has puff up past records in terms of claim settling periods, premium accretion intervals etc.Market reputation- a company with a good market reputation and good result is perceived to deliver the best of the service quality and customer satisfaction.Technology- technology plays an important part in product differentiation. For e.g. LIC was the inaugural company in the insurance sector to introduce use of I.T and Computers. This makes customers feel that the company is not lagging behind the world and is capable of fashioning the full use of technology to satisfy the customers.Feedback- feedback from customers also is an important tool with which product of the company can be differentiated. If effective steps are been taken on the feedback of the customers, it leaves a long lasting impression on the minds of the customers.Price- if a particular company charges more for the same product as compared to their competitors, it may lose the customers and vice versa.Price MixPrice is one element in the marketing mix that produces revenue all the other elements produce costs. Prices are easiest marketing mix elements to adjust product features, carry and even promotion take more time. Price also communicates to the market the companys intended value positioning of its product or brand. In the insurance sector, every company has to deposit an initial fixed capital of about Rest. 100 crore with Insurance regulatory Development Authority, which is considered as the apex dust of Insurance sector. The company gets periodic interest on this amount. With this interest amount, the company pays for the recruitment, training and development of the agents. The legal injury in case of insurance sector refers to the premium charged on the policy. The Tariff advisory committee fixes the terms f or each policy. Hence all insurance companies have to charge approximately similar premium on similar policies. However, different elements affect the rate of premium to be charged on each policy. The footing for the same policy is different for different companies.The company must set its price in relation to the value delivered and perceived by the customer. If, the price is high than the value received, the customer will not be willing to pay so high and the company will lose potential profits. If the price is less than the value received then, the company will fail to receive the profit that it deserves for providing a good service.BLUE PRINTING SEVICE MAPPINGThe gloomfulweed printing show what the product should look like a details the specification to which it should conform. In contrast to the physical architecture of building, ship, or piece of equipment service process have a largely intangible structure. The process of logistics, industrial engineering, decision the ory, and computer system analysis each of which employs blue print techniques to describe processes involving flow, sequences, relationship and dependencies.Sectorial studyInsurance is curtly gaining all the attention and what used to be a strange would in it is a household name, thanks to enterprise up of the industry, while there are several reasons for opening up of insurance sector the foreign investors are eyeing it as a very lucrative prospect. After the opening up, several cloak-and-dagger insurers have started operating in life insurance, in particular in subway system areas. New marketing channels like Banc assurance, brokers, etc. are also in the offing.KEY MARKET INDICATORS.Size of market life non-life$16 billion supply Global insurance premium (as on 2001)$2408.25 billion(-1.5% as against 2000)Rate of annual addition 2002-03Life- 11.27%Non-life- 23%Geographical limitation for new playersNone. Players can operate all over the country. fitting labourComposite regis tration not available.Equity restriction in the new Indian insurance companyForeign investor can hold up to 26% of the equity.Number of registered companies.Public sector 01 Private sector 13Comparison of similar policy of competition familyPolicy minute of arc/Max insertion ageMinimum superiorMin sum assuredLiquidity yearsMaturity benefitsLICMoney back with Profit13/50Rs. 3186 yearlyRs. 500005,10,15,2040% of sum assured + bonusesICICI prudent currencybook16/55Rs. 6000 yearlyRs. 750004,8,12,16,2050% of sum assured + bonusesBajaj AllianzCash Gain14/50Rs. 5000 yearlyRs. 500004,8,12,16,20125% of sum assured + bonusesLife insurers in IndiaAs an answer to globalization of preservation and the change magnitude pressure of the WTO regulations, the govt. appointed the Malhotra Committee. After considering all aspects, the government ultimately enacted Insurance regulatory and development authority and vested the authority to formulate regulations for insurance industry. IRDA and the LIC allowed the entry of foreign investors on a limit that they enter in quislingism with a local company.Public sectorPrivate sectorLife Insurance Corporation of India(LIC)1. Allianz Bajaj life insurance companionship limited.2. Birla sun life insurance federation limited.3. HDFC standard life insurance company limited.4. ICICI prudential life insurance Company limited.5. Reliance life insurance Company limited.6. ING visa life insurance Company limited.7. Max New York life insurance Company limited.8. MetLife insurance company limited.9. Om Kodak Mahindra life insurance co. ltd.10. SBI insurance company limited11. TATA-AIG life insurance Company limited.12. AMP-Samar Assurance Company limited.13. Aviva Life insurance company limitedLife Insurance Players in India1. Yr. 1947-2000 (From 1947 to 1st April 2000)First life insurance company (LIC) set by Indian government in 1956. This is public company.2. Yr. 2000-2001 (From 2nd April 2000 to 31st December2001)Insurance fabricatio n in the year 2000-2001 had 10 new entrants, namelySynod.RegistrationNumber employment of Reg. lay down of the Company110123.10.2000HDFC old-hat Life Insurance Company Ltd.210415.11.2000Max New York Life Insurance Co. Ltd.310524.11.2000ICICI Prudential Life Insurance Company Ltd.410710.01.2001KodakHYPERLINK http//www.omkotakmahindra.com/Mahindra Old Mutual Life Insurance Limited510931.01.2001Birla Sun Life Insurance Company Ltd.611012.02.2001Tata AIG Life Insurance Company Ltd.711130.03.2001SBI Life Insurance Company Limited.811402.08.2001ING HYPERLINK http//www.ingvysyalife.com/Visa Life Insurance Company Private Limited911603.08.2001Bajaj Allianz Life Insurance Company Limited1011706.08.2001MetLifeHYPERLINK http//www.metlife.co.in/India Insurance Company Pvt. Ltd.3. Yr 2001-2002 (From 1st Jan 2001 to Dec. 2002)Insurance industry in this year, so farhas 5 new entrants namelyS.No.RegistrationNumberDate of Reg.Name of the Company112103.01.2002AMP HYPERLINK http//www.ampsanmar.com/S amar Life Insurance Company Limited.212214.05.2002Aviva Life Insurance Co. India Pvt. Ltd.4. Yr 2003-2004 (From 1st Jan 2003 till Date)Insurance Industry in this year, so farhas 1new entrants namelyS.No.RegistrationNumberDate of Reg.Name of the Company112706.02.2004Sahara India Insurance Company Ltd.Performance of the IndustryPost-Privatization, the life insurance industry grows by leaps and bounds. The attitude of people towards life insurance itself is changing. People are becoming more and more aware of the advantages of the Life insurance policies. Generally performance in life is mensural in terms of first year premium collection and no. of lives covered. In 2003-04 Life Industry grew by 10.5% in terms of first year premium. It is showing steady growth rate in the reliable financial year as well. The sector witnessed a growth of over 50% for the month of April 2004, vis--vis April 2003. The premium in comparison, LIC underwrote premium of Rs.72, 304.62 lakh i.e., a market sha re of 82.33%. In terms of policies Underwritten, the market share of the backstage players was 17.88% as against 82.17% of LIC. The premium underwritten by the cloistered players for individual policies stood at Rs.12, 107.63 lakh, towards 89,918 policies with group premium accounting for Rs.3, 411.30 lakh towards 84 schemes. The number of lives covered under group schemes was 1, 01,392. ICICI Prudential continued to lead amongst the semiprivate players with premium at 6.15% and policies at 4.85%. In terms of number of lives covered, OM Kodak led with 21,325 lives viz., 5.83% of the total lives covered. Premium underwritten by LIC under Varishtha Bima Yojana during the month of April, 2004 was Rs.26, 734.25 lakh towards 13899 policies of which 29.60%, in terms of some(prenominal) premium and policies, was underwritten in the rural sector.From the opinion that it was an instrument intended to provide monetary support at the time of the death of an individual, life insurance life insurance grew up to be a major financial instrument during the past 50 years in our country. There has also been a change in the consumer outlook with regards to life insurance as very beneficiary financial tool as against the orthodox thinking of unfruitful use of money. Increasing number of people has been opting for it. The number of policies issued by the LIC of India since 1995-96 is a clear indication of the popularity gained by life insurance.Competitors on life insuranceYear.No. of policies (total)No. of policies (rural)1995-961996-971997-981998-991999-20002002-20031.10 core1.23 crore1.33 crore1.48 crore1.70 crore2.42 crore52.57 lacs.60.33 lacs.68.40 lacs.81.23 lacs.97.04 lacs.45.23 lacs.Form the above dining table it is eminent that the importance of life insurance has grown gradually over a period of time not only in metro areas but also in rural areas.As there has been a dramatic increase in the importance of life insurance, the number of policies issued per annum has a lso increased, thus leading to a great change in the total premium amount collected. The total amount mobilized by LIC during the past few yearsstands witness to the growing importance of insurance.(Rs. In Cores) Total amount mobilized1998-992002-03Total premium income from investmentsRs.22,805.80 Rs. 13,183.92Rs.54602.37 Rs.25030.50Market share of private playerCharacteristics of Insurance sector as oligopoly are as follows1. Presence of few sellers After slackening the no. of sellers increased from 1 to 13 as on date, like LIC, ICICI Prudential, HDFC Standard, Birla Sun life, Om Kodak, SBI Life, ING Visa, and MAX New York Life etc.2. Regulator IRDA (Insurance Regulatory Development Authority) regulates the Insurance industry. License to the new comer is granted by it only. All products, premiums, Tariffs require its approval.3. Price Giver Price of the policy i.e. premium is calculated by the actuaries of the respective companies depending upon the nature of risks covered, covera ge of the policy and many other probability calculations. But premium as well as the product needs to be approved by IRDA.4. Entry or Exit Barrier There is no free entry into this sector as already outlined New entrants has to satisfy certain condition before entering into this industry. Exit is even tougher since all the contracts are long term so there are very strict regulations for make pass from the industry by IRDA.5. Product Differentiation There are no homogenous products. There are wide varieties of products available in the market. Each seller can introduceAny new policy depending on the efficiency of its product development team within the broad guidelines of IRDA.6. advertizement Sellers spend huge amount of their yearly budget on advertizement to educate the consumers about their products and their company. IRDA ensures that advertisement does not mislead people. The IRDA has made it needed that every advertisement carries the line Insurance is matter of solicitati on- so that people know that they are reading an advertisement.7. coronation Policy Investment of life fund up to 75% in government securities is mandatory as per IRDA. 89% of the total surplus to be distributed to policyholder as bonus every year.8. Market Share Still the private sector companies are in nascent stage and major chunk of market pie is legato owned by public sector giant (LIC). But private players are also competing very bravely.The influence of private players has created the following benefitsBenefits to customers simplification in the price of product under competitive market.More ripe products to be available in a competitive market.Improved management of investment portfolio.Improved quality of service due to use of IT and multi diffusion channels.Benefits to IndustryNew Insurers to earn high profit in the initial stages due to large size of Indian insurance market.Insurance intermediaries will include agents, Brokers, Independent Financial Consultants etc. T he commission paid may exceed Rs.46000 Cores in a period of 10 yrs. annually.Advertising campaigns may reap benefits as an additional advt. market for Rs.10000 Cores will be overt in 10 yrs. directly related to the insurance sector.Computer industries will benefit.Placement services, management institutes training institutes will also be benefited as the insurance sector after opening up will require many people thus increasing the employment opportunities.PEST epitome for Insurance services Political/ LegalInfluences which have an impact on financial services and consumer pledge include the following The Insurance Regulatory and Development Authority (IRDA)Reforms in the Insurance sector were initiated with the passage of the IRDA philippic in Parliament in December 1999. The IRDA since its incorporation as a statutory proboscis in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDAs online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products, which are expected to be introduced by early next year. The IRDA since its incorporation as a statutory body has been framing regulations and registering the private sector insurance companies. IRDA being an independent statutory body has put a framework of globally compatible regulations.Privatization of Insurance sectorThe introduction of private players in the industry has added to the colours in the dull industry. The initiatives taken by the private players are very competitive and have given immense competition to the one time monopoly of the market LIC. Since the advent of the private players in the market the industry has seen new and forward-looking steps taken by the players in this sector. The new players have amend the service quality of the insurance. As a result LIC down the years have seen the declining phase in its career. The market share was distributed among the private players. Though LIC still holds the 80% of the insurance sector but the upcoming natures of these private players are enough to give more competition to LIC in the near future. FDI in insurance sectorThen, the issue came of amount of FDI to be allowed by a foreign player in the insurance sector. The government had allowed the private players to have foreign equity up to just 26 %. Efforts are going on to raise this to 49 %. After the opening up of the sector, a total of 18 private sector companies have entered the life insurance business and all of them have entered with a foreign partner. economic factors are key variables which have an impact on the activity in the financi al services sector. The level of consumer activity is governed by income levels and personal wealth. As income levels grow, more discretionary income is available to spend on financial services. Consumer confidence in the prudence and in job security also has a major impact if lean times are foreseen ahead, savings will take priority over loans and other forms of expenditure. Consumers may also look easy access savings and be willing to tie up their money for longer periods with potentially more attractive investments. Indian economy growth projectionsBy 2025 the Indian economy is projected to be about 60 per cent the size of the US economy. The transformation into a tri-polar economy will be complete by 2035, with the Indian economy only a little smaller than the US economy but bigger than that of Western Europe. By 2035, India is likely to be a larger growth driver than the six largest countries in the EU, though its impact will be a little over half that of the US. India, whic h is now the fourth largest economy in terms of purchasing power parity, will overtake japan and become third major economic power within 10 years.All these facts or forecasts only drive at one point. India is