A STUDY ON INDIAN INSURANCE INDUSTRIES WITH SPECIAL REFERENCE TO RELIANCE LIFE INSURANCE INDUSTRY

A STUDY ON INDIAN INSURANCE INDUSTRIES WITH SPECIAL REFERENCE TO RELIANCE LIFE INSURANCE INDUSTRY Dr. B.SWARNALATHA Assistant professor (senior grade) Bharathiyar College of Engineering and Technology, Karaikal ABSTRACT Insurance constitutes one of the major segments of the financial market. Insurance services play predominant role in the process of financial intermediary. Today insurance industry is one of the most growing sectors in India. There is lot of potential in the Indian Insurance Industry. Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. This paper analyses the Indian insurance industries and in particular, Reliance life insurance. Key words: Life insurance, Premium, Insurer, Risk INTRODUCTION Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Insurance is a collective bearing of risk. Insurance is a financial device to spread the risks and losses of few people among a large number of people, as people prefer small fixed liability instead of big uncertain and changing liability. Insurance can be defined as a legal contract between two parties whereby one party called insurer undertakes to pay a fixed amount of money on the happening of a particular event, which may be certain or uncertain. The other party called insured pays in exchange a fixed sum known as premium. Insurance is desired to safeguard oneself and one s family against possible losses on account of risks and perils. It provides financial compensation for the losses suffered due to the happening of any unforeseen events. LIFE INSURANCE Life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individuals or individuals death or other event, such as terminal illness or critical illness. In return, the policy owner(or policy payer) agrees to pay a stipulated amount called a premium at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. As with most insurance policies, life insurance is a contract between the insurer and the policy owner(policyholder) whereby a benefit is paid to the designated Beneficiary(or Beneficiaries) if an insured event occurs which is covered by the policy. To be a life policy the insured event must be based upon life (or lives) of the people named in the policy. Life insurance may be divided into two basic classes term and permanent. Term life insurance provides for life insurance coverage for a specified term of years for a specified premium. The policy does not accumulate cash value. Permanent life insurance is life insurance that remains in force until the policy matures, unless the owner fails to pay the premium when due. Whole life insurance provides for a level premium, and a cash value table included in the policy guaranteed by the company. The primary advantages of whole life are guaranteed death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and expense charges will not reduce the cash value shown in the policy. 136

IMPORTANCE OF INSURANCE Insurance constitutes one of the major segments of the financial market. Insurance services play predominant role in the process of financial intermediary. Today insurance industry is one of the most growing sectors in India. There is lot of potential in the Indian Insurance Industry. There are many issues, which require study. The major issue right now is the hike in FDI (Foreign Direct Investment) limit from 26% to 49% in the insurance sector. Government may in near future allow 49% FDI in Insurance. This would lead to more capital inflow by foreign partners. Another major issue is the effects on LIC after the entry of private players in the market. PRIINCIPLES OF INSURANCE An insurance contract is based on some basic principles of insurance. 1. Principle of Uberrimae Fides or utmost good faith It means maximum truth. Both the parties should disclose all material information regarding the subject matter of insurance. 2. Principle of indemnity This means that if the insured suffers a loss against which the policy has been made, he shall be fully indemnified only to the extent of loss. In other words, the insured is not entitled to make a profit on his loss. 3. Principle of subrogation This means the insurer is entitled to recover from a negligent third party any loss payments made to the insured. The purposes of subrogation are to hold the negligent person responsible for the loss and prevent the insured from collecting twice for the same loss. The concept of Third Party Claims is based on the same principle. 4. Principle of causa proxima The cause of loss must be direct and an insured person has to claim for compensation. 5. Principle of insurable interest The assured must have insurance interest in the life or property insured. The insurable interest is that interest which considerably alters the position of the assured in the event of loss taking place and if the event does not take place, he remains in the same old positions. 6. Principle of contribution In case the insured took more than one insurance policy for same subject matter, he/she can't make profit by making claim for same loss more than once 7. Principle of loss minimisation This principle states that the insured must take all the necessary steps to minimize the losses to inured assets. INDIAN LIFE INSURANCE INDUSTRIES The insurance industry of India consists of 53 insurance companies of which 24 are in life insurance business and 29 are nonlife insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers there are six public sector insurers. Kotak Mahindra Old Mutual Life Insurance Kotak Mahindra Old Mutual Life Insurance Ltd is a 74:26 joint venture (JV) between Kotak Mahindra Bank Ltd, its affiliates, and Old Mutual. Kotak Mahindra is one of India's leading banking and financial services organizations, offering a wide range of financial services that encompass every sphere of life. Bharti AXA Life Bharti AXA Life is a life insurance player that was started in 2006. The company brings together strong financial expertise of the Paris-headquartered AXA Group and Bharti Enterprises - one of the India's leading business groups with interests in telecom, agricultural business, financial services, and retail. Bajaj Allianz It's is a joint venture between Bajaj Finserv Ltd (recently demerged from Bajaj Auto Ltd) and Allianz SE. Both enjoy a reputation of expertise, stability and strength. Bajaj Allianz received the Insurance Regulatory and Development Authority (IRDA) certificate of Registration on May 2, 2001 to conduct various businesses. Reliance Reliance Life Insurance Company (RLIC) is amongst the top five private sector life insurance companies in terms of individual weighted received premium (WRP) and new business WRP. The company has over 1 crore policy holders with a strong distribution network of over 900 branches with over 100,000 agents. 137

Max Life Insurance Max Life Insurance, one of the life insurers, is a joint venture (JV) between Max India Ltd and Mitsui Sumitomo Insurance Co Ltd. Max India is an Indian multi-business corporate, while Mitsui Sumitomo Insurance is a member of MS&AD Insurance Group, a general insurer. Future Generali Future Generali is a joint venture (JV) between India's leading retailer Future Group and Italy-based insurance major Generali. The company was incorporated in 2006 and brings together the unique qualities of both the founding companies - local experience and knowledge with global insurance expertise. Exide Life Insurance Exide Life Insurance Company Ltd was formerly known as ING Vysya Life Insurance Company Ltd. It commenced operations in 2001 and is headquartered in Bengaluru. The company is fully owned by Exide Industries Ltd and is part of a 100-year-old brand heritage in India. LIC The Life Insurance Company or LIC is an Indian state-owned insurance group and investment company which was established with the passing of the Life Insurance Corporation Act on June 19, 1956 in the Parliament of India. It was formed from a merger of about 154 Indian insurance companies, 16 non-indian and 75 provident companies. Birla Sun Life Insurance Birla Sun Life Insurance Company Ltd(BSLI) is a joint venture (JV) formed in 2000, between the Aditya Birla Group, a well-known Indian conglomerate and Sun Life Financial Inc, one of the leading international financial services organisations from Canada. HDFC Life HDFC Life was founded in 2000. It is a joint venture (JV) between Housing Development Finance Corporation (HDFC) and Standard Life plc of United Kingdom. HDFC Ltd has 72.37 per cent equity in the venture while Standard Life has 26 per cent of equity, with the rest lying with others. ICICI Prudential ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 Tata AIA Life Insurance Tata AIA Life Insurance Co Ltd (Tata AIA Life) is a joint venture (JV) company, formed by Tata Sons and AIA Group Ltd (AIA). Tata AIA Life combines Tata's preeminent leadership position in India and AIA's presence as the largest, independent listed pan-asia life insurance group in the world spanning 15 markets in Asia Pacific. SBI Life Insurance SBI Life Insurance is a joint venture between State Bank of India and BNP Paribas Cardif. SBI owns 74 per cent of the total capital and BNP Paribas Cardif the remaining 26 per cent. SBI Life Insurance has an authorized capital of Rs 2,000 crores (US$ 332.96 million) and a paid up capital of Rs 1,000 crores (US$ 166.56 million). New India Assurance New India Assurance Co Ltd, today, is a 100 per cent Government owned multinational general insurance company operating in 22 countries and headquartered at Mumbai, India. New India Assurance global business crossed Rs 12,500 crore (US$ 2.01 billion). Founded by Sir Dorabji Tata in 1919. 138

The Indian life insurance industry has begun to recover and is likely to report 12-15% growth in financial year (FY) 2016-17, according to an ICRA paper (Investment Information and Credit Rating Agency of India Limited )analysing the performance of nine life insurance companies in India, one in the public sector and eight in the private sector. Together, they represent over 87% of the total annualised premium equivalent (APE) of the life insurance industry during first nine months (April-December) of financial year (FY) 16. The companies analysed are: Life Insurance Corporation of India (LIC), ICICI Prudential Life Insurance Corp. Ltd, Bajaj Allianz Life Insurance Co. Ltd, SBI Life Insurance Co. Ltd, Birla Sunlife Insurance Co. Ltd, Max Life Insurance Co. Ltd, Reliance Life Insurance Co. Ltd, Kotak Mahindra Old Mutual Life Insurance Ltd, and HDFC Standard Life Insurance Co. Ltd. During the period, the industry APE grew 6% year-on-year (y-o-y), as against a contraction of 9% y-o-y in FY15 to stand at Rs.37,300 crore (it was Rs.35,000 crore in the first nine months of FY15). The growth for private companies was 13% y-o-y during the period. LIC witnessed an improvement to 1% y-o-y during April-December FY16 from a contraction of 24% in FY15. As per statistics released by the IRDAI(Insurance Regulatory and Development Authority of India ), the life insurance industry in India collected weighted new business premiums of INR373 billion in the first nine months of FY2015-16, representing a growth of 6.5% over the corresponding period in FY2014-15. Weighted new business premiums are calculated as 100% of regular premium and 10% of single premium. State-owned LIC observed a marginal increase of 1% in its weighted new business premium collections, but witnessed a decline in its market share from 54.3% to 51.5%. LIC continues to show a decline in its individual business, but has witnessed a positive growth of 13.3% in its group business, which is better than the growth achieved by private players for group business. Press reports suggest that LIC has been able to improve its growth and indicate a further positive outlook for the remainder of the financial year, owing to introduction of new products just ahead of the critical last quarter of the financial year, when purchase of life insurance noticeably increases as consumers aim to reap benefits of any unutilised income tax credits available from purchase of life insurance. Private insurers have continued to witness optimistic performance over the first nine months of FY2015-16 reporting a year on year growth of 13%, along with improvement in their combined market share from 45.7% to 48.5%. Private players recorded a rise in their individual and group business by 13.4% and 11.7% respectively. Growth in single and new business regular premium collections were 29.1% and 12.3% respectively indicating continued buoyancy for single premium business. ICICI Prudential Life has continued to maintain its position as the market leader amongst private insurers, with a rise in its market share from 8.7% to 9.3%, year-on-year, supported by a growth of 13.3% in its weighted new business collections similar to the overall growth achieved by private insurers combined. Except for Reliance Life, Bajaj Allianz Life and Max Life, all of the top 10 private insurers have registered a positive growth in their weighted new business premium collections during the reporting period. Tata AIA Life has registered a turn-around growth of 159.4% in its weighted new business premium collections, due to a low base effect. Kotak Life and Shriram Life have also witnessed significant surge in their weighted new business collections in excess of 60% compared to the previous year. On the other hand, Aviva Life has witnessed a fall of 40.8% in its weighted new business premium collections over the first nine months of FY2015-16. 139

MARKET SHARES:- TABLE-1 S.No. Insurer Market Share in % 1 LIC 71.44 2 Bajaj Allianz 7.56 3 ICICI Prudential 7.35 4 HDFC Standard 2.87 5 SBI Life 2.31 6 Brila Sun Life 1.89 7 Tata AIG 1.29 8 Max New York 1.23 9 Aviva 1.14 10 Kodak Mahindra OLD Mutual 1.11 11 ING Vysya 0.79 12 Reliance Life 0.54 13 MetLife 040 14 Sahara Life 0.06 15 Shriram Life 0.03 Major companies market share Comparison of market share of private life Insurers 140

Here are some performance highlights of the Indian insurance industry. Life Insurance Business Performance: 2014-15 2013-14 Public Sector Private Sector Public Sector Private Sector Premium Underwritten (Rs in Crores) 239667.65 88433.49 236942.30 77340.90 New Policies Issued (in Lakhs) 201.71 57.37 345.12 63.60 Number of Offices 4877 6156 4839 6193 Benefits Paid (Rs in Crores) 144125 67054 158081 58380 Individual Death Claims (Number of Policies) 755901 121927 760334 125027 Individual Death Claims Amount Paid (Rs in Crores) 9055.18 2733.49 8475.26 2385.33 Group Death Claims (Number of lives) 273794 192989 267296 158682 Group Death Claims Amount Paid (Rs in Crores) 2037.27 1483.55 1882.83 1222.25 Individual Death Claims (Figures in per cent of policies) 98.19 89.40 98.14 88.31 Group Death Claims (Figures in per cent of lives covered) 99.64 91.20 99.65 90.45 141

No. of Grievances reported during the year 80944 198048 85284 289336 Grievances resolved during the year 80944 193119 85828 288836 Grievance Resolved (in percent) 100.00 97.51 100.64 99.83 Source: Annual Report (2014-15 & 2013-14) Expenses of private life insurers Expenses of life insurers have received increased attention recently with ongoing deliberations among industry participants on the appropriate limit for expenses of management. Further, increasing attention is being paid to allocation of total company expenses by line of business, as expenses allocated to participating business are directly shared with the policyholders. High expense ratios remain a general concern for the industry as most players continue to experience expense over-runs relative to long term expense loadings allowed for in pricing despite nearly a decade and a half since privatisation. Nevertheless, the overall expense ratio for the life insurance industry (excluding Aviva Life and Sahara Life) has come down from 18.7% for FY2013-14 to 16.3% for FY2014-15 as concerted efforts are being made towards expense rationalization. REVIEW OF LITERATURE Khan.M.K. (1978) attempts to know the opportunities and prospects in the life insurance sector. He explains about what a good career is and how a good career should be for selling of life insurance products. There is no age barrier and it requires no previous occupational experience but one must be a professional and capable of creating opportunities in building personality. The relationship of life Insurance agent with clients is not temporary and the service rendered has no substitutes. He also observes that life insurance agent remains, in a sense, permanentserver to the clients.sheshaayyar, V. (1986) in his article entitled Product Development has discussed various issues connected with developing new polices such as the importance of developing new schemes and various problems involved in the development of new schemes in Company. He suggested the need for including ancillary benefits such as accident benefits, disablement and hospitalization benefits. Mishra, M.N. (1987) made a study to appraise the strategies of Life Insurance Company. While reviewing the strategies, the author felt that before 1960Life Insurance Company did not give much attention to the objective of customer satisfaction, but from 1980 onwards the corporation has taken several remedial measures to provide better customer service and improve the customer satisfaction. The Insurance Institute of India prepared a Project Report on Marketing of Life Insurance, (1987). This project was undertaken to examine the following aspects: Extent of life insurance coverage, awareness, attitudes and beliefs of people on life insurance, perceptions, sense of identification of employees with Life Insurance Company. He concluded that LIC is a better avenue of investmentthan bank deposits. LIC products are sold easily among the consumers on account of its reliability.rao, B.S.R. and AppaRaoMachiraju (1988) in their article entitled Life Insurance and Emerging Trends in Financial Services Market, contends that the agents of life insurance should improve their services to the level of financial experts. The authors felt that the change in the economic scenario would help the corporation in better services field.raghunadhan, R. (1988) in his article Population - Insurable and Insured made an attempt to analyze the insurance coverage of the insurable population and concluded that more self employed and agricultural laborers are to be tapped. The author gave a suggestion to improve and introduce new schemes to satisfy the groups. The National Council of Applied Economic Research, New Delhi conducted two surveys in 1988 and 1989 on Appraisal of Quality Service in Service Organizations and Quality Services in Life Insurance Company respectively. These two studies were sponsored by the Life Insurance Company. The policyholders general feeling is that the demand notice must be sent in time. Some policyholders rated the quality of services was excellent. Hence, by providing promptservices, the customer relationship is maintained for a long period of time.appi Reddy and Narasimha Murthy, G. (1992) have attempted toexamine true marketing practices followed by Life Insurance Company in rural areas and problems involved in providing the services. The organization appoints development officers with responsibility in specified territory (Trust with Trust) andspecial promotional efforts like field publicity vans, film shows, exhibitions etc are insisted. The study found that only 4.55 crores people have been insured 142

against the insurable population of 21 crores, in spite of consistent efforts. Raghu Gulati (1999) in his survey attempts to observe the Life insurance market in relation to products and customers. A basic understanding of life insurance business, product portfolio, strategy the company adopts, demographic analysis, the customer strategy that the organization repeatedly follows when launching insurances. is studied. The study also reveals that the company has deep penetration in urban areas, but the people are under insured, yet there exist potential to increase the coverage of insurance. 50% of Life Insurance Company business comes from rural areas and agents seem to be the most effective channels regarding sales. In product strategy, if the customer is in need of basis insurance product, the company should come forward to launch term profit that is to be matched with risk; a unit link product is to be launched etc.sheshaayyer, V. (1999) in his article entitled New Insurance Products in the Next Century expressed his views about new products. The possibility of the aged living too long has become real because of advancement in medical facilities. Pension schemes have thus become popular though at a slow pace. Divorce rates are increasing and the insurer can look into the problem and introduce new schemes to fit them. OBJECTIVES OF THE STUDY 1. To understand the financial products offered by Reliance life insurance company. 2. To determine the relationship between income level of respondents and insurance schemes taken by them. HYPOTHESIS OF THE STUDY H0 : There is no association between income level of respondents and insurance schemes taken by them. H1 : There is an association between income level of respondents and insurance schemes taken by them. METHODOLOGY A research design is the arrangement of conditions for collection and analysis data in a manner that aims to combine relevance to the researcher purpose with economy in procedure. It constitutes the blueprint for the collection, measurement and analysis of data. The design includes an outline of framing the hypothesis and its operational implication to final analysis of data. The Research Design adapted for the study is Descriptive one. A study, which wants to portray the characteristics of a group or individuals or situation, is known as Descriptive study. The sample size for the study is 50 customers of Life insurance policyholders and the sample method adopted is simple random sampling. Here data collection was done by primary as well as secondary sources. The results were analysed using Percentage method and Chi-square test. ANALYSIS OF THE STUDY TABLE 2: TABLE SHOWING THE MARKET SHARE OF INSURANCE COMPANIES S.No. INSURANCE COMPANIES No. of Respondents Percentage (%) 1 RELIANCE 10 20 2 TATA AIG 15 30 3 LIC 23 46 4 MAX NEWYORK LIFE 2 4 TABLE 3: TABLE SHOWING MOTIVES OF TAKING INSURANCE S.No. MOTIVE No. of Respondents Percentage (%) 1 TAX BENEFIT 20 40 2 SAVINGS 5 10 3 RISK COVERAGE 23 46 4 RETURN/YIELD 2 4 143

TABLE 4: TABLE SHOWING INCOME LEVEL OF RESPONDENTS S.No. INCOME PER ANNUM No. of Respondents Percentage (%) 1 LESS THAN Rs. 2 lacs 10 20 2 Rs.2 lacs to Rs.5 lacs 15 30 3 Rs. 5 lacs to Rs.10 lacs 7 14 4 Rs. 10 lacs and above 18 36 TABLE 5: TABLE SHOWING SOURCE OF INFORMATION S.No. SOURCE No. of Respondents Percentage (%) 1 ON MY OWN 25 50 2 FAMILY DECISION 7 14 3 EMPLOYER DECISION 4 8 4 AGENT GUIDANCE 14 28 TABLE 6: TABLE SHOWINGTYPES OF INSURANCE SCHEMES S.No. INSURANCE SCHEMES No. of Respondents Percentage (%) 1 ENDOWMENT PLAN 7 14 2 CASH FLOW 19 38 3 CHILD PLAN 15 30 4 TERM PLAN 9 18 TABLE 7: TABLE SHOWING REASON FOR TAKING INSURANCE S.No. REASON No. of Respondents Percentage (%) 1 VARIETY SCHEMES 11 22 2 QUALITY OF SERVICE 13 26 3 PREMIUM 16 32 4 RETURN ON INVESTMENT 10 20 RESULTS AND DISCUSSION Reliance Life Insurance Company Limited (RLIC) is amongst the leading private sector life insurers with a private sector market share of over 5% in terms of new business premium. It offers need based products to target at individuals and groups that cater to three distinct segments namely protection, retirement and investment plans. RLIC is committed to emerge as a leading Life Insurer with global scale and standards. The various Reliance products are Health insurance, Protection plan, Savings and investment plan, Retirement plan, Child plan, Health and Wealth plan, Unit linked plan and solution for groups. 46% of the respondents motive for 144

taking insurance is risk coverage, 40% respondents have tax benefit as motive and 10% of them have motive as savings. 36% of the respondents have income as Rs.ten lacs and above. 28% of the respondents get insurance information from agents, 50% of them get from their friends and relatives. 38% of the respondents have taken cash flow plan, 30% of them have taken child plan, 18% of them have taken term plan and 14% of them have taken endowment plan. 32% of the respondents have taken insurance policies for premium, 26% for quality of service, 22% for variety schemes and 20% of the respondents have taken insurance policies for return on their investments. Chi square analysis Degrees of freedom Level of significance Calculated value Table value 9 5% 37.55 16.91 Since the calculated value is more than the table value, null hypothesis is rejected and alternative hypothesis is accepted and thus there is an association between income level of respondents and insurance schemes taken by them. CONCLUSION It is concluded that the respondents are aware of various companies and their insurance products. T h i s s t u d y is b a s e d on t h e s u r v e y f o r f i n d i n g t h e position of various insurance policies offered by the insurance companies. In this study, the various insurance policies of Reliance Life Insurance are covered. Life insurance products provide a definite amount of money to the dependants of the insured in case of any happenings to his/her life. It is important to cover the risk and thus the respondents are looking beyond LIC for their insurance needs and are willing to trust private players with their hard earned money. They are impressed by the marketing and advertising campaigns of insurance companies. It is concluded that The Reliance life insurance organization has to concentrate more on prompt service and customer needs. REFERENCES 1. Appi Reddy and Narasimha Murthy, G., Marketing of Life Insurance Services in Rural Areas,Management Researcher, Vol. 11, No 3 & 4, Jan-Jun 1996, P. 23-28. 2. Khan, M.K., Prospects of a Career in Life Insurance Business in India - An Analysis, IndianJournal of Marketing, Volume 7, No. 6, Feb 1978, P. 23-31. 3. A Project on Marketing of Life Insurance, The Insurance Institute of India, Bombay 1987. 4. Mishra, M.N., Appraisal of Marketing Strategies of the Life Insurance Corporation of India, 5. The National Council of Applied Economic Research, New Delhi, Appraisal of Quality Service inservice Organizations and Quality Services in LIC, 1988 and 1989. 6. Rao, B.S.R. and AppaRaoMachiraju, Life Insurance and Emerging Trends in Financial ServicesMarket, Yogakshema, 1988, P. 25. 7. Raghunadhan, R., Population Insurable and Insured, Yogakshema, Feb. 1988, P. 15. 8. Raghu Gulati, Study of Life Insurance Market: Products and Customers, (GE Capital, India),1999. 9. SheshaAyyer, V., New Insurance Products in the Next Century, Journal, Jan- June 1999, P. 47. 10. Vijayavani, J., Cost Effective Distribution Channels of Life Insurance Products, The Indian Journal, July Dec 1999, pp 57. 11. https://www.ibef.org/industry/insurance-sector-india.aspx 12. http://www.livemint.com/money/3kvsmcikytklk4e9zw8mwl/life-insurance-industry-set-to-grow-1215-in-fy17- report.html 13. http://www.policyholder.gov.in/indian_insurance_market.aspx 14. http://www.ibef.org/industry/insurance-sector-india/showcase 15. https://www.towerswatson.com/en-in/insights/newsletters/asia-pacific/india-market-life-insurance/2015/60-industry- Statistics-Sept-2015 16. file:///c:/users/wifi%20lab/downloads/india-market-life-insurance-update-sept-2015.pdf 145