COMPARATIVE ANALYSIS BETWEEN HDFC AND TATA AIG
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 5778166-HDFC-STANDARD-LIFE-INSURANCE-COMPANY-LIMITED.doc (Size: 1.09 MB / Downloads: 109)
EXECUTIVE SUMMARY
HDFC Standard Life insurance is the oldest life insurance company in the world. It is the largest insurer in the UK and is the 28th largest company in the world. In India, the company is marketing life insurance products and unit linked investment plans. From my research at HDFC SLIC, I found that the company has a lot of competition from other private insurers like ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces competition from LIC. To compete effectively HDFC SLIC could launch cheaper and more reasonable products with small premiums and short policy terms (the number of year’s premium is to be paid). The ideal premium would be between Rs. 5000 – Rs. 25000 and an ideal policy term would be 10 – 20 years.
HDFC must advertise regularly and create brand value for its products and services. Most of its competitors like Aviva, ICICI, Max, Reliance and LIC use television advertisements to promote their products. The Indian consumer has a false perception about insurance – they feel that it would not benefit them if they do not live through the policy term. Nowadays however, most policies are unit linked plans where a customer is benefited even if their death does not occur during the policy term. This message should be conveyed to potential customers so that they readily invest in insurance.
Family responsibilities and high returns are the two main reasons people invest in insurance. Optimum returns of 16 – 20 % must be provided to consumers to keep them interested in purchasing insurance.
On the whole HDFC standard life insurance is a good place to work at. Every new recruit is provided with extensive training on unit linked funds, financial instruments and the products of HDFC. This training enables an advisor/sales manager to market the policies better. HDFC was ranked 13 in the Best Places to Work survey. The company should try to create awareness about itself in India. In the global market it is already very popular. With an improvement in the sales techniques used, a fair bit of advertising and modifications to the existing product portfolio, HDFC would be all set to capture the insurance market in India as it has around the globe.
THE INSURANCE INDUSTRY IN INDIA
AN OVERVIEW
With the largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 1560.41 billion (for the financial year 2006 – 2007). Together with banking services, it adds about 7% to the country’s Gross Domestic Product (GDP). The gross premium collection is nearly 2% of GDP and funds available with LIC for investments are 8% of the GDP.
Even so nearly 65% of the Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. A large part of our population is also subject to weak social security and pension systems with hardly any old age income security. This in itself is an indicator that growth potential for the insurance sector in India is immense.
A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and strengthens the risk taking ability of individuals. It is estimated that over the next ten years India would require investments of the order of one trillion US dollars. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain the economic growth of the country. (Source: http://www.indiacore.com)
HISTORICAL PERSPECTIVE
The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non-Indian lives.
The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies.
Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance companies.
The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State led planning and development.
The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).
KEY MILESTONES
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.
INDUSTRY REFORMS
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations.
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 IRDA 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. |
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