customer-relationship-management-in-reliance-life-insurance

RELIANCE LIFE INSURANCE, KOPPAL

A Project Report On
Customer Relationship Management in Reliance Life Insurance
KOPPAL

Submitted in partial fulfillment of the requirements for
Award of
Master of Business Administration

With Specialization
In
MARKETING

Submitted by

SUNIL CHOUDARY.K

Reg No- MBA/08/48

Under the Guidance of
COMPANY GUIDE INSTITUTE GUIDE
SANTOSH KUMAR B.R ROHITH C KALASKAR
CUSTOMER EXECUTIVE SECRETARY GENERAL
HET-IMS HUBLI

Indian Institute of Business Management
Shivajinagar, Pune – 411 005

1


Declaration

I hereby declare that the project entitled ―CUSTOMER RELATIONSHIP
MANAGEMENT‖ undertaken at RELIANCE LIFE INSURANCE
COMPANY LTD,KOPPAL submitted in partial fulfillment of the
requirement for the award of the degree in Master in Business
Administration to the Indian Institute of Business Management, Pune. It is
my original work and is not submitted for the award of any other
degree or diploma.

Place

Date SUNIL CHOWDARY.K

2


ACKNOWLEDGEMENT

As I look back after the completion of my project I feel it would not have been possible
without the guidance. I am very grateful to all the people who have lent their precious
time and advice for rendering this project successful. I take this opportunity to thank
them all.

Firstly, I am grateful to ―RELIANCE LIFE INSURANCE COMPANY LTD,
KOPPAL‖ for giving me an opportunity to undertake this project in their organization.

I sincerely express my thanks to my company project guide SANTOSH KUMAR B.R
for his strong support and inspiration during my project period.

I heartly thankful to all the executives of the company for their valuable guidance and for
sharing their experience in completing this project successfully,

I am thankful to our Chairman Dr. KALEEL AHMED for the strong inspiration during
the project period.

I would like thank our institute guide ROHITH C KALASKAR for having given me
this opportunity and for his valuable ever-patient guidance ever endeavoring support,
timely help and constant encouragement and also I am thankful to all faculty members of
my institution for their valuable guidance in completing this project successfully.

I also express thanks to my parents, my family members, and all my friends for their
valuable support in completion of this project successfully.

Last but not least I am thankful to all those people who helped us directly and indirectly.

Place:

Date: SUNIL CHOWDARY.K

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CONTENTS

Chapter 1 Rationale for the study 1
Chapter 2 Objective of the study 2-3
Title of the project
Objective of the study
Scope of the study
Chapter 3 Profile of the company 4-50
Chapter 4 Theoretical Perceptive 51-59
Chapter 5 Research Methodology 60-62
Research Design
Data collection methods / sources
Sampling plan which should include sampling unit,
sampling size and sampling methods via questionnaire
methods, interview methods, observations etc

Chapter 6 Data analysis and interpretations using various charts and 63-77
graphs
Chapter 7 Findings 78-79
Chapter 8 Limitations if any 80
Chapter 9 Expected contribution from the study 81-82
Appendix and Bibliography 83-89

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Rationale for the Project

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the
Reliance - ANIL DHIRUBHAI AMBANI Group. Reliance Capital is one of India‘s
leading private sector financial services companies, and ranks among the top 3 private
sector financial services and banking companies, in terms of net worth. Reliance Capital
has interests in asset management and mutual funds, stock broking, life and general
insurance, proprietary investments, private equity and other activities in financial
services.

Yet, nearly 80 per cent of Indian population is without life insurance cover while
health insurance and non-life insurance continues to be below international standards.
And this part of the population is also subject to weak social security and pension
systems with hardly any old age income security. This itself is an indicator that growth
potential for the insurance sector is immense.

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Title of the Project

“Customer Relationship Management in Reliance Life Insurance”

OBJECTIVES

1. To study the company‘s procedures conducted by the company for retaining the
customers.

2. To study the current market trends in Customer Relationship Management.

3. To study the companies efforts in maintaining and motivating the advisors for
retaining an existing customer and building a new customer

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SCOPE OF THE STUDY

To understand the relations maintained by the Reliance Insurance Company with
its customers. Ever increasing competition, low interest rates, and declining margins have
driven firms to discover the customer as the basic element in their business equation
Insurance as a sector has shown tremendous growth in recent years. People now are
becoming more secured in terms of their life as well as their money. They want a
profitable benefit out of their investment. There is a need to know the companies‘ efforts
towards convincing the customer about their product and to know how to create loyal
customers. 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 450 billion.

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PROFILE OF THE COMPANY

RELIANCE LIFE INSURANCE CO. LTD.

Few men in history have made as dramatic a contribution to their country‘s economic
fortunes as did the founder of Reliance, Shri. DHIRUBHAI AMBANI. Fewer still have
left behind a legacy that is more enduring and timeless.

As with all great pioneers, there is more than one unique way of describing the true
genius of DHIRUBHAI: The corporate visionary, the unmatched strategist, the proud
patriot, the leader of men, the architect of India‘s capital markets, the champion of
shareholder interest.

But the role Dhirubhai cherished most was perhaps that of India‘s greatest wealth
creator. In one lifetime, he built, starting from the proverbial scratch, India‘s largest
private sector enterprise.

When Dhirubhai embarked on his first business venture, he had a seed capital of
barely US$ 300 (around Rs 14,000). Over the next three and a half decades, he
converted this fledgling enterprise into a Rs 60,000 crore colossus—an achievement
which earned Reliance a place on the global Fortune 500 list, the first ever Indian
private company to do so.

Dhirubhai is widely regarded as the father of India‘s capital markets. In 1977, when
Reliance Textile Industries Limited first went public, the Indian stock market was a
place patronised by a small club of elite investors which dabbled in a handful of
stocks.

Undaunted, Dhirubhai managed to convince a large number of first-time retail
investors to participate in the unfolding Reliance story and put their hard-earned
money in the Reliance Textile IPO, promising them, in exchange for their trust,
substantial return on their investments. It was to be the start of one of great stories of
mutual respect and reciprocal gain in the Indian markets.

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Under Dhirubhai extraordinary vision and leadership, Reliance scripted one of the
greatest growth stories in corporate history anywhere in the world, and went on to
become India‘s largest private sector enterprise.

Through out this amazing journey, Dhirubhai always kept the interests of the ordinary
shareholder uppermost in mind, in the process making millionaires out of many of the
initial investors in the Reliance stock, and creating one of the world‘s largest
shareholder families.

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RELIANCE CAPITAL

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the
Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of India‘s leading
private sector financial services companies, and ranks among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital has
interests in asset management and mutual funds, stock broking, life and general
insurance, proprietary investments, private equity and other activities in financial
services.

Reliance Capital Limited (RCL) is a Non-Banking Financial Company (NBFC)
registered with the Reserve Bank of India under section 45-IA of the Reserve Bank of
India Act, 1934.

Reliance Capital sees immense potential in the rapidly growing financial services
sector in India and aims to become a dominant player in this industry and offer fully
integrated financial services.

Reliance Life Insurance is another step forward for Reliance Capital Limited to offer
need based Life Insurance solutions to individuals and Corporate.

Reliance capital entered into the life insurance business by acquiring AMP Sanmar in
October 2005. The business was thereafter renamed Reliance Life Insurance. Today
RLIC has over 20 products - 16 individual plans and 4 employee benefit plans - including
the two new innovative products – Connect to Life and Reliance Money Guarantee Plan -
that were launched recently.

Reliance Life Insurance Company (RLIC) has been accorded the ISO 9001-2000
certificate for its best-in-class management systems in Quality, Customer & Process
orientation.

With this, RLIC is one of the only two life insurance companies in India to get ISO
9001:2000 certifications covering all functional areas.

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The scope of the certification covers the entire gamut of business processes ranging from
product design, sales - front-end and back-end operations, customer care and investment,
to all business support functions. The certification has been awarded by internationally
acclaimed Bureau VERITAS and is valid till 2010 subject to continued satisfactory
operation of RLIC's Quality Management System.

"This certification is a significant milestone in our continuous quest to offer innovative
products, outstanding services and improved customer satisfaction. It indicates that we
have been able to install systems, processes & performance measures that are in line with
the best in the industry and will form the basis of our business growth in future", said P
Nandagopal, CEO, Reliance Life Insurance Company.

Reliance Life Insurance is the fastest growing life insurance company in India and has an
incremental market share of 4 per cent amongst private insurers. The company has third
largest distribution network in terms of number of agents operating out of 143 locations
across the country.

CORPORATE OBJECTIVE

At Reliance Life Insurance, we strongly believe that as life is different at every stage, life
insurance must offer flexibility and choice to go with that stage. We are fully prepared
and committed to guide you on insurance products and services through our well-trained
advisors, backed by competent marketing and customer services, in the best possible
way.

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CORPORATE VISION AND MISSION

Vision

Empowering everyone live their dreams

Mission

Create unmatched value for everyone through dependable, effective, transparent and
profitable life insurance and pension plans.

Our Goal

Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:

Emerge as transnational Life Insurer of global scale and standard

Create best value for Customers, Shareholders and all Stake holders

Achieve impeccable reputation and credentials through best business practices

Achievements

RLIC has been one of the fast gainers in market share in new business premium
amongst the private players with an incremental market share of 4.1% in the
Financial Year 2007-08 – from 3.9% in April 07 to 8% in Feb 08. ( Source:
IRDA)
Also continues to be amongst the fast growing Private Life Insurance
Companies with a YOY growth of 195% in new business premium as of
Mar‘08.
A Company that has crossed 1.7 Million policies in just 2 years of operation,
post takes over of AMP Sanmar business.

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Initiated Express Life – an Unique ’Over the Counter’ sales process for Unit
Linked Insurance Policies in the Industry.
Accomplished a large distribution ramp-up in the Industry in a short span of time
by opening 600 branches in 10 months taking the overall branch network above
740.
RLIC continues to be one of the two Life Insurance companies in India to be
certified ISO 9001:2000 for all the processes.
Awarded the Jamnalal Bajaj Uchit Vyavahar Puraskar 2007- Certificate of
Merit in the Financial Services category by Council for Fair Business Practices
(CFBP).

PRODUCTS OFFERED BY RELIANCE LIFE

Reliance has number of insurance products in it‘s Portfolio. It offers different products
for different customer profile. It targets its product according to the needs of people
which make them its customer.

Protection Plans

In today‘s uncertain world, there could be calamity at every step of the life. It is up to you
to ensure that your family stays protected always.

Reliance Protection Plans helps you do exactly the same. You have a wide range of
options to choose a plan from. Right from limited period plans to lifetime protection
plans, you can opt for the one that suits your lifestyle.

While we understand that nothing can compensate for the loss of a life, we intend to
provide you the peace of mind. Investing in Reliance Protection Plans would mean your
family‘s future is in safe hands.

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1.Reliance Term Plan
Invest in the Reliance Term Plan, a pure life insurance plan that offers you
comprehensive and affordable coverage for a limited period of time to suit your needs.

2. Reliance Simple Term Plan
Make a smart investment move by investing in the cost-effective Reliance Simple Term
Plan, which offers you comprehensive coverage for a specified period of time to suit your
need.

3. Reliance Special Term Plan
Imagine a life insurance policy, which on maturity returns to you all the premiums you
had paid for your basic policy. The Reliance Special Term Plan offers that and much
more.

4. Reliance Credit Guardian Plan
The Reliance Credit Guardian Plan secures your family from any loan liabilities you have
incurred in case of your untimely demise. On survival at maturity, you will be returned
all the premiums paid for the basic policy.

5. Reliance Special Credit Guardian Plan
Invest in the Reliance Special Credit Guardian Plan and protect your family from any
loan liabilities you have incurred. On survival at maturity, all premiums paid for the basic
policy will be returned to you.

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6. Reliance Endowment Plan
The Reliance Endowment Plan gives you financial independence by allowing you to
decide the amount of Sum Assured based on your current financial position and expected
future expenses… Dream!!..

7. Reliance Special Endowment Plan
Imagine an endowment plan that protects you for a certain period even after you have
received your lump sum—that is exactly what the Reliance Special Endowment Plan
offers you with other added benefits.

8. Reliance Connect 2 Life
The Reliance Connect 2 Life Plan gives you the option to upgrade your life cover to keep
pace with your changing lifestyle. As your income grows, your family will have
sufficient cover.

9.Reliance Whole Life Plan
Give your family a lifetime of timely financial support by investing in the Reliance
Whole Life Plan. This will help you enjoy your life to the fullest.

10. Reliance Wealth + Health Plan
Invest in the Reliance Wealth Health Plan and balance your health needs and wealth
needs, without compromising on either health or wealth.

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11. Reliance Cash Flow Plan
Invest in the Reliance Cash Flow Plan and reap the dual benefits of a life insurance plan
and easy liquidity through lump sum cash, which means you can get a percentage of the
Sum Assured at periodic intervals.

Savings & Investment Plans

In life, you have always given your family whatever they have wanted. Yet, there are
some promises you have to fulfill, such as taking your family for a vacation, or buying
that dream house.

Set aside some money to achieve these specific goals with the help of Reliance Savings
& Investment Plans. The plan allows you to experience the joys of life and provide for
your family‘s needs.

Enjoy life without worrying about the promises you have made—we are here to fulfill
them.

1. Reliance Super Invest Assure Plan
Reliance Super Invest Assure is a complete plan which addresses your vital needs like
Flexibility, Security, Investment Return and Financial Planning. With all its key benefits,
it is here to ensure that there will always be more than you can ask for!

2. Total Investment Plan I - Insurance
Reliance TIPS -Series I- Insurance is a Unit Linked Investment + Insurance Plan that
helps you meet all your financial needs, without the complexity of managing multiple
products.

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3. Reliance Wealth + Health Plan

4. Reliance Automatic Investment Plan
The Reliance Automatic Investment Plan is an enhanced unit linked plan that allows you
to choose the right investment mix to reap maximum benefits. It also provides you with
enhanced Life Cover.

5. Reliance Money Guarantee Plan
To reap the benefits of a rising market and to protect yourself from any market decline,
invest in the unit linked Reliance Money Guarantee plan that gives you the perfect
balance between Protection and Savings.

6. Reliance Cash Flow Plan
Invest in the Reliance Cash Flow Plan and reap the dual benefits of a life insurance plan
and easy liquidity through lump sum cash, which means you can get a percentage of the
Sum Assured at periodic intervals.

7. Reliance Market Return Plan
The Reliance Market Return Plan gives you insurance protection and allows you to
benefit from investment growth. It works through your life and meets the changing
requirements you may have from time to time.

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8. Reliance Endowment Plan
The Reliance Endowment Plan gives you financial independence by allowing you to
decide the amount of Sum Assured based on your current financial position and expected
future expenses.

9. Reliance Special Endowment Plan
Imagine an endowment plan that protects you for a certain period even after you have
received your lump sum—that is exactly what the Reliance Special Endowment Plan
offers you with other added benefits.

10. Reliance Whole Life Plan
Give your family a lifetime of timely financial support by investing in the Reliance
Whole Life Plan. This will help you enjoy your life to the fullest.

11. Reliance Golden Years Plan
The Reliance Golden Years Plan helps you save systematically and generate the much-
needed corpus to help you enjoy life after retirement.

12. Reliance Golden Years Plan Value
Realize all your dreams of playing golf, or going for a world tour after retirement by
investing in the Reliance Golden Years Plan Value, which helps you generate the amount
you will need for the future.

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13. Reliance Golden Years Plan Plus
Invest in the special Reliance Golden Years Plan Plus that not only helps you build the
corpus you need after, but also collects a basic minimum amount in case something were
to happen before you realize your dreams.

14. Reliance Connect 2 Life Plan
The Reliance Connect 2 Life Plan gives you the option to upgrade your life cover to keep
pace with your changing lifestyle. As your income grows, your family will have
sufficient cover.

Retirement Plans

You are a young and earning individual. The income you earn allows you to enjoy life,
your only worry being whether you will be able to continue the same lifestyle after
retirement.

A Reliance Retirement Plan will help you save money for your retirement. It ensures that
you continue to get some income after retirement thereby ensuring that you do not have
to depend on any other person or make any compromises to maintain the same lifestyle.

Invest in a Reliance Retirement Plan today and enjoy life after retirement on your own
terms.

1. Total Investment Plan II - Pension
When you invest in the Reliance Total Investment Plan, you give yourself the assurance
that you will make each one of your dreams come true!.

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2. Reliance Golden Years Plan
The Reliance Golden Years Plan helps you save systematically and generate the much-
needed corpus to help you enjoy life after retirement.

3. Reliance Money Guarantee Plan
To reap the benefits of a rising market and to protect yourself from any market decline,
invest in the unit linked Reliance Money Guarantee plan that gives you the perfect
balance between Protection and Savings...

Child Plans

Being a parent is one of the joys of life. Your child looks up to you and depends on you
for love, protection and support. You want to provide your child with the best in life.

The Reliance Child Plan helps you save systematically so that you can secure your
child‘s future needs. Be it higher education, his or her first home or any other
requirement, you will always be there for your child when he or she needs you.

So, invest in a Reliance Child Plan right away—it is the best gift you could ever give
your child.

1. Reliance Super Invest Assure Plan
Reliance Super Invest Assure is a complete plan which addresses your vital needs like
Flexibility, Security, Investment Return and Financial Planning. With all its key benefits,
it is here to ensure that there will always be more than you can ask for!

2. Reliance Child Plan
Save systematically and secure the financial future of your child by investing in the
Reliance Child Plan and let your child enjoy today without worrying about tomorrow.

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3. Reliance Secure Child Plan
Reliance Life Insurance presents a unit linked insurance plan that secures your child‘s
financial future, leaving you free from worry.

4.Reliance Wealth + Health Plan

SOME LUCRATIVES PLANS WHICH RELIANCE OFFERS

RELIANCE ENDOWMENT PLAN

It takes a lot for a dream to become a reality. And money is surely an important part of it.

Reliance Endowment Plan gives you just the financial independence to realize your
dreams in the future. It lets you decide how much you would like to set as your Sum
Assured based on your current financial position and your expected future expenses.

So, go ahead... dream!!.

Key Features

1 .On maturity receive Sum Assured plus bonuses

2. Wealth creation through bonus additions

3. More Value for your money by way of High Sum Assured Rebate

4. Choose to add the Benefit of three Riders-Reliance Term Life Insurance Benefit Rider,
5. Reliance Critical Conditions Rider and Reliance Accidental Death and Total and
6.Permanent Disablement Rider

7. Choose to avail of Policy Loan after three years

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CASH FLOW PLAN

While most insurance plans block your money for a certain period of time, Reliance Cash
Flow Plan gives you the double benefit of life insurance along with easy liquidity through
lump sum cash. It provides money periodically when you need it.

It lets you live life to the fullest today and at the same time, helps you stay protected for
tomorrow by giving you the flexibility of receiving a specified percentage of the Sum
Assured at specified intervals

Key Features

Easy Liquidity - Get periodic cash flows at the end of the fourth year and thereafter at the
end of every three years

Wealth creation through bonus additions

On maturity, accumulated bonuses along lump sum payout receive with final

More value for your money by way of High Sum Assured Rebate

Full Sum Assured plus bonuses in case of your unfortunate death, this is

over and above the Survival Benefits already paid

Option to add two Riders - Critical Illness Rider & Accidental Death Benefit and Total
and Permanent Disablement Rider

RELIANCE HEALTH + WEALTH PLAN

UNDER THIS PLAN THE INVESTMENT RISK IN THE INVESTMENT
PORTFOLIO IS BORNE BY THE POLICYHOLDER.

There are times when late working hours take precedence over your health check-ups.
And there are times when a visit to the doctor seems more important than dividends on
your shares. In the rat race to make money, we often forget to take care of ourselves.

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We understand this predicament. Here is a plan that will ensure that your wealth keeps
increasing constantly and yet your health does not take a backseat. The Reliance
Wealth+Health Plan. A plan that gives you the benefits of wealth bhi. health bhi

Life changes. And as it does, so do your priorities. After all, the circumstances of your
life can determine the type of health coverage you need.

India has made rapid strides in the health sector. Since Independence, life expectancy has
gone up markedly and survival rates have also increased, still critical health issues
remain. Infectious diseases continue to claim a large number of lives.

Perhaps you're a freshly minted graduate, a joyful newlywed, retiring early or between
jobs. Maybe you're running your own business or raising a family — or both. In any of
the situations, GOOD or BAD, health cannot be taken for granted. All are affected by the
rising costs of medical expenses. That‘s why it is important to plan early and in advance.

Reliance Wealth + Health Plan, a health insurance plan underwritten by Reliance Life
Insurance Company Limited, is designed to work in conjunction with contributions
towards savings. The uniqueness of this plan is that it not only provides benefits for
covered injuries but also for other injuries by encashment from the unit fund. This plan
from Reliance Life offers the Hospitalization and Surgical Benefits and also covers
Critical Illnesses. In short this plan provides you with a personalized quality health cover
that fits your lifestyle.

Key Feature

A Unit Linked plan with Unique Savings Component

Twin benefit of market linked return and health protection

Choose from two different plan options

Flexibility to take care of your family‘s health

Flexibility to switch between funds / plan options

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Option to pay Top-ups

Option to package with multiple riders

Liquidity through partial withdrawals

RELIANCE SUPERINVESTASSURE PLAN

PORTFOLIO IS BORNE BY THE POLICYHOLDER.

You have always aspired for the best in life. And we help you achieve that.

Here‘s a unique plan which combines protection and savings. It also offers complete
flexibility to gain control over your investments vis-à-vis your financial needs and risk
appetite.

We value your regular investments and thus reward you with guaranteed additions thus
promising unmatched benefits. This plan also offers you a unique option of moving from
a conservative fund to an aggressive fund systematically, to take advantage of the Rupee
cost averaging model.

A plan that promises you, what you ought to deserve as you reach greater heights in life.
What more can you ask for except gifting yourself with Reliance Super Invest Assure
Plan

Key features – Reliance Super InvestAssure Plan

Twin benefit of market linked return and insurance protection.

Guaranteed additions at the rate of 50% of your first year‘s basic premium at interval of
every 5 years from 10th year till policy is in force

Investment opportunity with flexibility -Choose from 8 pure investment fund options.

Option to pay Top-up premium(s)

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Liquidity in the form of partial withdrawals

A host of optional rider benefits to enhance protection cover.

RELAINCE AUTOMATIC INVESTMENT PLAN

PROTFOLIO IS BORNE BY THE POLICYHOLDER

Life is indeed delightful if you have the freedom to make choices. The Reliance
Automatic Investment Plan gives you just that ample freedom! And we make this
freedom more enjoyable by giving you a sense of security. Whether it‘s your insurance or
investments, we let you make the choice and leave the rest to us.

So allow us to take over and you can be rest assured, because for us your LIFE comes
FIRST… always.

This plan promise enhanced Life Cover, with complete flexibility to gain control over
your investments in tune with your financial needs and your risk appetite. A plan that
promises you what you deserve as you reach greater heights in life.

For a select few like you, the Reliance Automatic Investment Plan is an enhanced Unit
Linked plan addressing comprehensive needs to strike that perfect balance of protection
and Savings with full flexibility as you grow in your career. The Reliance Automatic
Investment Plan gives you full flexibility to choose just the right investment mix to reap
higher benefits.

Key Features

Two plan option to choose from Ready-made and Tailor-made

Life Stage asset allocation to ensure automatic change in investment patterns, under the
Ready-made Plan option

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Freedom to decide your own fund mix based on your risk profile under the Tailor-made
Plan

Allows Systematic Transfer Plan to average out the cost of unit purchased in equality

Regular, limited, single premium paying options

Unmatched flexibility through out ‗Exchange Option ‗

Liquidity in the form of partial withdrawal

Option to avail of Accidental Death and Total & Permanent Disability and Term
Insurance riders

RELAINCE TOTAL INVESTMENT PLAN SERIES -1

The journey of life, even though it may seem simple, comes with its own twists and turns,
some good, some unfortunate. And along with these moments come new dreams. With
every little twist, our dreams change and so do our ambitions. And most of all we desire a
security that will help us follow our dreams, both financial and emotional. It is this
security that Reliance Life Insurance Company Limited promises to bring to you with its
Total Investment Plan Series I Insurance.

To know more, read further…

We value your dreams in this journey of life. Reliance Total Investment Plan Series I -
Insurance (TIPS-I -Insurance) helps you bring them to reality. Your need for investment,
protection and financial liquidity keeps changing at different stages of life. The birth of a
child will require you to increase your insurance cover; a marriage in the family will
require additional money. We provide you that kind of flexibility which suits you best at
your convenience. Similarly on a promotion you may want to increase your investments
to create a large kitty for future expenses. As you progress on this ladder of life we
provide you the platform to increase your investment. Usually you would require

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multiple financial products to meet all your needs and would have to actively manage
them. However with the Reliance TIPS-I -Insurance, Unit Linked Investment + Insurance
Plan you can meet all your financial needs, without the complexity of managing multiple
products

Key Features

This is a Single Premium unit linked savings life insurance plan with options to purchase
the same plan with reduced allocation charges in subsequent policy years. Since more
Premium is allocated towards investment due to lower allocation charges on subsequent
purchases, greater would be the returns. Purchasing the same plan in the subsequent years
is an option.

1st purchase would be called as ―Classic‖

2nd purchase would be called as ―Silver‖

3rd purchase would be called as ―Gold‖

4th purchase would be called as ―Diamond‖

5th purchase would be called as ―Platinum‖

Once you purchase the first policy there will full flexibility, as to when second and
subsequent purchase can be made and how much Premium should be paid for each
purchase subject to the following:

The minimum Premium on each purchase should be at least Rs. 25000 for life assured
aged up to 40 and Rs. 50000 for life assured aged 41 to 64.

The maturity date on each purchase cannot exceed 70 years.

All the polices should mature on maturity date of the first purchase.

The term of the polices purchased during second, third, fourth and fifth policy years will
be 9, 8, 7 and 6 respectively.

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New policy can be purchased only if all the previous polices are in force on the date of
purchase of new policy.

Plan Objective :

The pace setter plan with protection to life which gives

Tax benefit under Sec. 80C and Sec. 10(10D)* of Income Tax Act 1961

Investment opportunity with flexibility

Life protection

Control over your investments

OVERVIEW OF INSURANCE SECTOR

With 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 450 billion. Together with banking
services, it adds about 7 per cent to the country‘s GDP. Gross premium collection is
nearly 2 per cent of GDP and funds available with LIC for investments are 8 per cent of
GDP.

Yet, nearly 80 per cent of Indian population is without life insurance cover while
health insurance and non-life insurance continues to be below international standards.
And this part of the population is also subject to weak social security and pension
systems with hardly any old age income security. This itself is an indicator that growth
potential for the insurance sector is immense.

A well-developed and evolved insurance sector is needed for economic
development as it provides long-term funds for infrastructure development and at the

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same time strengthens the risk taking ability. It is estimated that over the next ten years
India would require investments of the order of one trillion US dollar. The Insurance
sector, to some extent, can enable investments in infrastructure development to sustain
economic growth of the country.

Insurance is a federal subject in India. There are two legislations that govern the
sector- The Insurance Act- 1938 and the IRDA Act- 1999. The insurance sector in India
has come a full circle from being an open competitive market to nationalization and back
to a liberalized market again. Tracing the developments in the Indian insurance sector
reveals the 360-degree turn witnessed over a period of almost two centuries.

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 make
contributions to a common fund out of which the losses suffered by the unfortunate
few, due to accidental events, are made good

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Potential Largely untapped market: 17% of the world‘s population

o Nearly 80% of the Indian population is without Life, Health and Non-life
insurance
o Life insurance penetration is low at 4.1% in 2006-07
o Non-life penetration is even lower at 0.6% in 2006-07
o The per capita spend on life and non-life insurance is US$33.2 and US$5.2
(2006-07), respectively compared to a world average of US$330 and
US$224
o Strong economic growth with increase in affluence and rising risk
awareness leading to rapid growth in the Insurance sector
o Innovative products such as Unit Linked Insurance Policies are likely to
drive future industry growth
o Investment opportunities exist in both Life and Non-life segments
o Total estimated investment opportunity of US$14-15 billion

STRUCTURE

Indian Insurance market was opened to private & foreign investment in 1999-2000

 The Indian Insurance industry consists of a total of 31 players
 Life: 1 Public sector player; 15 private players
 Non-Life: 6 public sector players; 9 private players
 Major international players like AIG, Aviva, MetLife, New York Life,
Prudential, Allianz, Sun Life, Standard Life and Lombard are already present with
minority stakes in joint ventures with Indian companies for both Life and Non-life
segments
 Life Insurance market is still dominated by Life Insurance Corporation (LIC) - a
public sector company which has 75% share of first year premium in 2006-07

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 In Non-life, private sector companies (almost all are joint ventures with foreign
insurers) accounted for 34% of the market in 2006 to 07.

POLICY

FDI up to 26% is permitted under the automatic route subject to obtaining a license
from the Insurance Regulatory and Development Authority (IRDA)

Plans to increase FDI up to 49%

Insurance Regulatory Development Authority (IRDA) is the regulator for the Insurance
industry

In a landmark move the government detariffed the General Insurance business on 1st
January 2007

What is Life Insurance?

Life insurance is a guarantee that your family will receive financial support, even
in your absence. Put simply, life insurance provides your family with a sum of money
should something happen to you. It thus permanently protects your family from financial
crises.

In addition to serving as a protective cover, life insurance acts as a flexible
money-saving scheme, which empowers you to accumulate wealth-to buy a new car, get
your children married and even retire comfortably.

Life insurance is a contract that pledges payment of an amount to the person
assured (or his nominee) on the happening of the event insured against.

The contract is valid for payment of the insured amount during:

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The date of maturity, or
Specified dates at periodic intervals, or
Unfortunate death, if it occurs earlier

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.

Assessment of risk - Insurance determines the probable volume of risk by evaluating
various factors that give rise to risk. Risk is the basis for determining the premium rate
also

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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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.

THE OTHER FUNCTIONS OF INSURANCE INCLUDE THE FOLLOWING:

Means of savings and investment - Insurance serves as savings and investment,
insurance is a compulsory way of savings and it restricts the unnecessary expenses by the
insured's For the purpose of availing income-tax exemptions also, people invest in
insurance.

Source of earning foreign exchange - Insurance is an international business. The
country can earn foreign exchange by way of issue of marine insurance policies and
various other ways.

Risk Free trade - Insurance promotes exports insurance, which makes the foreign trade
risk free with the help of different types of policies under marine insurance cover.

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Need for Life Insurance
Today, there is no shortage of investment options for a person to choose from.
Modern day investments include gold, property, fixed income instruments, mutual funds
and of course, life insurance. Given the plethora of choices, it becomes imperative to
make the right choice when investing your hard-earned money. Life insurance is a unique
investment that helps you to meet your dual needs - saving for life's important goals, and
protecting your assets.

LET US LOOK AT THESE UNIQUE BENEFITS OF LIFE INSURANCE IN DETAIL.

Asset Protection
From an investor's point of view, an investment can play two roles - asset
appreciation or asset protection. While most financial instruments have the underlying
benefit of asset appreciation, life insurance is unique in that it gives the customer the
reassurance of asset protection, along with a strong element of asset appreciation.

The core benefit of life insurance is that the financial interests of one‘s family
remain protected from circumstances such as loss of income due to critical illness or
death of the policyholder. Simultaneously, insurance products also have a strong inbuilt
wealth creation proposition. The customer therefore benefits on two counts and life
insurance occupies a unique space in the landscape of investment options available to a
customer.

Goal based savings
Each of us has some goals in life for which we need to save. For a young, newly
married couple, it could be buying a house. Once, they decide to start a family, the goal
changes to planning for the education or marriage of their children. As one grows older,
planning for one's retirement will begin to take precedence.

Clearly, as your life stage and therefore your financial goals change, the
instrument in which you invest should offer corresponding benefits pertinent to the new
life stage.

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Life insurance is the only investment option that offers specific products tailor-made for
different life stages. It thus ensures that the benefits offered to the customer reflect the
needs of the customer at that particular life stage, and hence ensures that the financial
goals of that life stage are met.

The table below gives a general guide to the plans that are appropriate for different life
stages.

Life Insurance
Life Stage Primary Need Product

Young &
Asset creation Wealth creation plans
Single

Young & Wealth creation and
Asset creation &
mortgage protection
Just married protection
plans

Children's
Married education, Education insurance,
mortgage protection &
With kids Asset creation wealth creation plans
and protection

Middle aged Planning for
Retirement solutions &
with grown up retirement &
mortgage protection
kids asset protection

Across all lif-
Health plans Health Insurance
stages

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Insurance Life V/S Other Savings

Contract of Insurance:
A contract of insurance is a contract of utmost good faith technically known as
uberrima fides. The doctrine of disclosing all material facts is embodied in this important
principle, which applies to all forms of insurance.

At the time of taking a policy, policyholder should ensure that all questions in the
proposal form are correctly answered. Any misrepresentation, non-disclosure or fraud in
any document leading to the acceptance of the risk would render the insurance contract
null and void.

Protection:
Savings through life insurance guarantee full protection against risk of death of
the saver. Also, in case of demise, life insurance assures payment of the entire amount
assured (with bonuses wherever applicable) whereas in other savings schemes, only the
amount saved (with interest) is payable.

Aid to Thrift:
Life insurance encourages 'thrift'. It allows long-term savings since payments can
be made effortlessly because of the 'easy installment' facility built into the scheme.
(Premium payment for insurance is monthly, quarterly, half yearly or yearly).
For example: The Salary Saving Scheme popularly known as SSS provides a convenient
method of paying premium each month by deduction from one's salary.
In this case the employer directly pays the deducted premium to LIC. The Salary Saving
Scheme is ideal for any institution or establishment subject to specified terms and
conditions.

Liquidity:
In case of insurance, it is easy to acquire loans on the sole security of any policy
that has acquired loan value. Besides, a life insurance policy is also generally accepted as

36


security, even for a commercial loan.

Tax Relief:
Life Insurance is the best way to enjoy tax deductions on income tax and wealth
tax. This is available for amounts paid by way of premium for life insurance subject to
income tax rates in force.
Assesses can also avail of provisions in the law for tax relief. In such cases the assured in
effect pays a lower premium for insurance than otherwise.

Money When You Need It:

A policy that has a suitable insurance plan or a combination of different plans can
be effectively used to meet certain monetary needs that may arise from time-to-time.
Children's education, start-in-life or marriage provision or even periodical needs for cash
over a stretch of time can be less stressful with the help of these policies.
Alternatively, policy money can be made available at the time of one's retirement from
service and used for any specific purpose, such as, purchase of a house or for other
investments. Also, loans are granted to policyholders for house building or for purchase
of flats (subject to certain conditions) .

Who Can Buy A Policy?
Any person who has attained majority and is eligible to enter into a valid contract
can insure himself/herself and those in whom he/she has insurable interest.

Policies can also be taken, subject to certain conditions, on the life of one's spouse
or children. While underwriting proposals, certain factors such as the policyholder‘s state
of health, the proponent's income and other relevant factors are considered by the
Corporation.

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Insurance For Women
Prior to nationalization (1956), many private insurance companies would offer
insurance to female lives with some extra premium or on restrictive conditions. However,
after nationalization of life insurance, the terms under which life insurance is granted to
female lives have been reviewed from time-to-time.

At present, women who work and earn an income are treated at par with men. In
other cases, a restrictive clause is imposed, only if the age of the female is up to 30 years
and if she does not have an income attracting Income Tax.

Medical And Non-Medical Schemes
Life insurance is normally offered after a medical examination of the life to be
assured. However, to facilitate greater spread of insurance and also to avoid
inconvenience, LIC has been extending insurance cover without any medical
examination, subject to certain conditions.

With Profit And Without Profit Plans
An insurance policy can be 'with' or 'without' profit. In the former, bonuses
disclosed, if any, after periodical valuations are allotted to the policy and are payable
along with the contracted amount.

In 'without' profit plan the contracted amount is paid without any addition. The
premium rate charged for a 'with' profit policy is therefore higher than for a 'without'
profit policy.

Key man Insurance
Key man insurance is taken by a business firm on the life of key employee(s) to
protect the firm against financial losses, which may occur due to the premature demise of
the Key man

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PRINCIPLES OF INSURANCE

Insurance is a specialized type of contract. Apart from the usual essentials of a
valid contract, insurance contracts are subject to some additional principles. These
principles provide the framework within which the product and all the contracts of
insurance operate.

 Principle of cooperation: A device to share risk & uncertainties collectively, one
for all and all for one‘‘
 Principle of probability: Important determinant of insurance premium, Rate of
premium depends on quantum of risk & probability of risk
 Principle of Insurable Interest: Interest of such a nature that the possessor
would be financially injured by the occurrence of the event insured against, `` LA
to be more valuable alive then dead
 Principle of utmost good faith: The parties to the contract (insurer and insured)
are legally bound to reveal each other all information about the subject matter,
which would influence each other‘s decision.
 Principal of warranties: A warranty is an undertaking by assured that some
conditions shall be fulfilled, or a certain thing shall be or shall not be done. A
warranty may be Express or Implied
 Principle of Cause Proximal: In order to make the Insurer liable for loss, such
loss must have been proximately caused by the Peril insured against. E.g. ADBR.

These 6 principles are applicable to all the products, both life and Non-Life.
These principles provide the framework within which the products and all the
contracts of Life Insurance operate.

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HISTORY OF INDIAN INSURANCE INDUSTRY

The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market again.

Tracing the developments in the Indian insurance sector reveals the 360-degree
turn witnessed over a period of almost 190 years.

The business of life insurance in India in its existing form started in India in the
year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are
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 to by the Insurance Act with
the objective of protecting the interests of the insuring public.

1956 - 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalized. LIC formed by an Act of Parliament, viz. LIC
Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.

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Some of the important milestones in the general insurance business in India are:

1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact
all classes of general insurance business.

1957 - General Insurance Council, a wing of the Insurance Association of India,
frames a code of conduct for ensuring fair conduct and sound business practices.

1968 - The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.

1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized
the general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a
company.

Before insurance sector was opened to the private sector Life Insurance
Corporation (LIC) was the only insurance company in India. After the opening up of
Insurance sector in India there has been a glut of insurance companies in India. These
companies have come up with innovative and flexible insurance policies to cater to
varying needs of the individual. Opening up of the Insurance sector has also forced the
LIC to tighten up its belt and deliver better service. All in all it has been a bonanza for the
consumer.

The life insurance business in India started since 1818. Till 1956, the
insurance business was mixed and decentralized. In 1956, the life insurance business
of all companies was nationalized and a single monolithic organization, the Life
Insurance Corporation of India (LIC), was set up. The Insurance Regulatory and

41


Development Authority (IRDA) Bill was passed by Indian parliament in December
1999. The IRDA become a statutory body in April 2000 and has been framing
regulations and restrictions the private sector insurance companies.
The insurance sector was opened up to the private sector in August 2000.
Consequently, some Indian and foreign private companies have entered the insurance
business. There are about 16 life insurance companies operating in the private sector in
India.
The insurance sector in India has come a full circle from being an open
competitive market to nationalization and back to a liberalized market again. Tracing the
developments in the Indian insurance sector reveals the 360 degree turn witnessed over a
period of almost two centuries.

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ABOUT THE INDUSTRY:

With an annual growth rate of 15-20% and the largest number of life insurance
policies in force, the potential of the Indian insurance industry is huge. Total value of the
Indian insurance market (2004-05) is estimated at Rs. 450 billion (US$10 billion).
According to government sources, the insurance and banking services' contribution to the
country's gross domestic product (GDP) is 7% out of which the gross premium collection
forms a significant part. The funds available with the state-owned Life Insurance
Corporation (LIC) for investments are 8% of GDP.

Till date, only 20% of the total insurable population of India is covered under
various life insurance schemes, the penetration rates of health and other non-life
insurances in India is also well below the international level. These facts indicate the of
immense growth potential of the insurance sector.

The year 1999 saw a revolution in the Indian insurance sector, as major structural
changes took place with the ending of government monopoly and the passage of the
Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry
restrictions for private players and allowing foreign players to enter the market with some
limits on direct foreign ownership.

Though, the existing rule says that a foreign partner can hold 26% equity in an
insurance company, a proposal to increase this limit to 49% is pending with the
government. Since opening up of the insurance sector in 1999, foreign investments of Rs.
8.7 billion have poured into the Indian market and 21 private companies have been
granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled fledgling

43


private insurance companies to sign up Indian customers faster than anyone expected.
Indians, who had always seen life insurance as a tax saving device, are now suddenly
turning to the private sector and snapping up the new innovative products on offer.
The life insurance industry in India grew by an impressive 36%, with premium income
from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff
competition from private insurers. This report "Indian Insurance Industry: New Avenues
for Growth 2012", finds that the market share of the state behemoth, LIC, has clocked
21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in
2004-05. But this was still not enough to arrest the fall in its market share, as private
players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in
2003-04

Though the total volume of LIC's business increased in the last fiscal year (2004-
2005) compared to the previous one, its market share came down from 87.04 to 78.07%.
The 14 private insurers increased their market share from about 13% to about 22% in a
year's time. The figures for the first two months of the fiscal year 2005-06 also speak of
the growing share of the private insurers. The share of LIC for this period has further
come down to 75 percent, while the private players have grabbed over 24 percent.

There are presently 12 general insurance companies with four public sector
companies and eight private insurers. According to estimates, private insurance
companies collectively have a 10% share of the non-life insurance market.

44


Indian Insurance Industry Forecast (2007-2009)

The market research report ―Indian Insurance Industry Forecast (2007-2009)‖
gives an in-depth analysis of the present and future of the Indian Insurance Industry. The
market research report looks in to the details as well as gives an overview of the Indian
insurance market with focus on the performance of the key players.

With the initiation of the deregulation in the Indian insurance market, the
monopoly of big public sector companies in life insurance as well as general (non-life
insurance) market has been broken. New private players have entered the market and
with their innovative approaches and better use of distribution channels and technology,
they are eating in to the shares of established public sector companies in Indian Insurance
Market.

Since the deregulations have been put in to place, the market share of LIC has
come down to 71.4% in life insurance market while the private players have captured
around 17% market in the general insurance segment. It is said that, public sector
insurance companies such as LIC and New India Assurance are registered impressive
double-digit growths, which reflects on the overall health of the Indian insurance sector.

45


Indian Insurance Sector

The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance
Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972,
Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related
Acts.

Life Insurance Corporation of India (LIC):

Life Insurance Corporation of India (LIC) was formed in September, 1956 by an
Act of Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution
from the Government of India. Then the Finance Minister, Shri C.D. Deshmukh, while
piloting the bill, outlined the objectives of LIC thus: to conduct the business with the
utmost economy, in a spirit of trusteeship; to charge premium no higher than warranted
by strict actuarial considerations; to invest the funds for obtaining maximum yield for the
policy holders consistent with safety of the capital; to render prompt and efficient service
to policy holders, thereby making insurance widely popular.

Since nationalization, LIC has built up a vast network of 2,048 branches, 100
divisions and 7 zonal offices spread over the country. The Life Insurance Corporation of
India also transacts business abroad and has offices in Fiji, Mauritius and United
Kingdom. LIC is associated with joint ventures abroad in the field of insurance, namely,
Ken-India Assurance Company Limited, Nairobi; United Oriental Assurance Company
Limited, Kuala Lumpur and Life Insurance Corporation (International) E.C. Bahrain. The
Corporation has registered a joint venture company in 26th December, 2000 in
Kathmandu, Nepal by the name of Life Insurance Corporation (Nepal) Limited in
collaboration with Vishal Group Limited, a local industrial Group. An off-shore company
L.I.C. (Mauritius) Off-shore Limited has also been set up in 2001 to tap the African
insurance market.

46


General Insurance:

General insurance business in the country was nationalized with effect from 1st
January 1973 by the General Insurance Business (Nationalization) Act, 1972. More than
100 non-life insurance companies including branches of foreign companies operating
within the country were amalgamated and grouped into four companies, viz., the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd., and the United India Insurance Company Ltd. with head offices at
Calcutta, Bombay, New Delhi and Madras, respectively. General Insurance Corporation
(GIC) which was the holding company of the four public sector general insurance
companies has since been de-linked from the later and has been approved as the "Indian
Reinsure" since 3rd November 2000. The share capital of GIC and that of the four
companies are held by the Government of India. All the five entities are Government
companies registered under the Companies Act.

The general insurance business has grown in spread and volume after
nationalization. The four companies have 2699 branch offices, 1360 divisional offices
and 92 regional offices spread all over the country. GIC and its subsidiaries have
representation either directly through branches or agencies in 16 countries and through
associate/ locally incorporated subsidiary companies in 14 other countries. A wholly-
owned subsidiary company of GIC, i.e. Indian International Pvt Ltd. is operating in
Singapore and there is a joint venture company, viz. Ken India Assurance Ltd. in Kenya.
A new wholly owned subsidiary called New India International Ltd., UK has also been
registered.

47


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:

i) 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

ii) 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.
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies. Postal Life Insurance should be allowed to operate in the rural
market. Only one State Level Life Insurance Company should be allowed to operate in
each state.

48


iii) Regulatory Body:

The Insurance Act should be changed. An Insurance Regulatory body should be
set up. Controller of Insurance (Currently a part from the Finance Ministry) should be
made independent.

iv) 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)

v) 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. But at the same
time, the committee felt the need to exercise caution as any failure on the part of new
players could ruin the public confidence in the industry.

Hence, it was decided to allow competition in a limited way by stipulating the
minimum capital requirement of Rs.100 crore. 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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The Insurance Regulatory and Development Authority

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.

The other decisions taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies were the launch of the
IRDA‘s 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.

Since being set up as an independent statutory body the IRDA has put in a
framework of globally compatible regulations. In the private sector 12 life insurance and
6 general insurance companies have been registered.

Duties, Powers and Functions of IRDA

Section 14 IRDA Act, 1999 lays down the duties, powers and functions of IRDA

1. The Authority has the duty to regulate, promote and ensure orderly growth of the
Insurance business and reinsurance business.
2. This Include -

a) Issue to the applicant a certificate of registration, renew, modify,

Withdraw, suspend or cancel such registration

b) Protection of interests of the policy holders in matter concerning assigning Of
policy, nomination by policyholders, insurable interest, settlement of insurance
claim, surrender value of policy and condition of contracts of insurance.

50


c) Specifying the code of conduct and practical training

For intermediary or insurance intermediaries and agents

d) Specifying the code of conduct for surveyors and loss assessors
e) Promoting efficiency in the conduct of insurance business
f) Promoting and regulating professional organization connected with insurance and
reinsurance business.
g) Levying fees and other charges for carrying out the purposes of this act.
h) Calling from information from, undertaking inspection of, conducting enquiries
and investigation including audit of the insurers, intermediaries and other
organization connected with the insurance business
i) Control and regulation of the rates, advantages, terms and condition
j) Specifying the form and manner in which books of accounts shall be maintained
and statement of account shall be rendered by insurers and other intermediaries.
k) Regulating investment of funds by insurance companies.
l) Regulating maintenance of margin of solvency.
m) Adjudication of disputes between Insurers and intermediaries or insurance
intermediaries.
n) Supervising the functioning of the Tariff Advisory Committee.
o) Specifying the % of Premium, Income of the insurer to finance schemes for
promoting and regulating professional organizations

Specifying the % of Life Insurance Business and general Insurance Business to be
undertaken by the Insurer in the rural or social sector

Insurers
Insurance industry, as on 1.4.2000, comprised mainly two players: the state
insurers

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Life Insurers

Life Insurance Corporation of India (LIC)

General Insurers

General Insurance Corporation of India (GIC) (with effect from Dec'2000, a
National Reinsure)

GIC had four subsidiary companies, namely:

1. The Oriental Insurance Company Limited

2. The New India Assurance Company Limited,

3. National Insurance Company Limited

4. United India Insurance Company Limited.

With effect from Dec'2000, these subsidiaries have been de-linked from the parent
company and made as independent insurance companies.

Yr:2000-2001: (From 2nd April '2000 to 31st December'2001)
In the year 2000-2001, Insurance industry had 16 new entrants(private), namely:

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Life Insurance: Major Players

Name of Company

Public Sector

LIFE INSURANCE CORPORATION

Private Sector

ICICI Prudential

Bajaj Allianz

Birla Sun Life

HDFC Standard Life

Tata AIG

Private Sector

ICICI Lombard

Bajaj Allianz

IFFCO Tokio

Tata AIG

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IMPACT OF FOREIGN INSURERS ENTERING INDIA:

''LIBERALIZATION''

For a long period after Independence, Indian business was characterized by
government regulations-- the ‗license raj‘. The government not only exercised control
over industrial growth and expansion, but also ran monopoly undertakings and took over
loss-making industries on the grounds of mismanagement. Then, in 1985, the late Mr
Rajiv Gandhi initiated the first set of economic reforms. After so many years of
developmental effort they had not been able to eradicate poverty, remove inequalities or
establish an egalitarian society. The resultant disillusionment came out in the open when
the socialist economies collapsed. As the Indian economy got further integrated with the
world‘s, the necessity for globalization increased. This introduced a new buzzword--
Liberalization.

The term is used for a more ‗outward-oriented‘ policy, which includes the
elimination of anti-export biases, lowering high import tariffs, reducing and phasing out
Quantitative Restrictions (QRs) on inputs and switching to tariff-related measures.
However, the government would not completely abandon all forms of control and place
the entire economy at the mercy of MNCs. Liberalization and globalization would mainly
remove certain imbalances and restrictions that hamper the free flow of trade. The goals
of liberalization were to motivate Indian manufacturers to prefer updated technology and
to deliver the better products at lower costs. This would increase competition and provide
incentives to deliver world-class goods and services at affordable prices, which leads to
quality assurance.

54


Customer Relationship Management

Customer Relationship Management focuses on acquiring, developing and
creating satisfied loyal customer; achieving profitable growth; and creating economic
value in company‘s brand.
Customer Relationship Management strives to improve the customer‘s experience
of how they interact with the company and produce high customer equity .the more loyal
customer, the higher are the customer equity.

Recently CRM has taken a center stage in the business world with businesses
concentrating on saving money and increasing profits by redefining internal processes
and procedures. It costs a company dramatically less to retain and grow an existing
client, than it does to court new ones. It is said that ―It is seven times more expensive to
acquire a new customer than to keep an existing one”, therefore the value of customer
information and management should never be underestimated

Customer equity comprises of three drives
Value equity
Brand equity
Relationship equity

CRM (Customer Relationship Management) is something that is not restricted to any
country or culture. Wherever customers are there, business cannot afford to keep them
unhappy; and that is where CRM comes in as a strong requirement.

In India, the trend is positive. When compared to about twenty years ago , people
have more choice and every company knows it can‘t take customer for granted .May be
the movement is slow ,but we see a steady progress towards an increased focus on the
customer rather than merely on the products and price .

55


Today‘s era is of service because customers are ultimate base line for any business to
sustain in this competitative world
For example: Banks started providing ‗gold‘, ‗silver‘ cards to its valued customer,
depending on their needs the customer get faster services.

The concept of CRM is relatively simple and familiar to insurers. The two points of
the concept are:

Understand your customers' unique requirements.

Offer them the services and products over their lifetime that will maintain
or increase their profitability and retain them as your customers.

These are the some supporting strategies that implement these concepts to yield
significantly greater results and a true competitive advantage.

These supporting strategies generally fall into three groupings: analytical,
marketing and operational. The analytical path focuses on mining the data you have on
your existing customers, and marrying that data with external data when possible to
develop a scoring index. This index can then be reliably applied to individual customers
to indicate their level of profitability, tendency to remain a customer, and propensity to
acquire other products and services.

The current trends in corm followed by insurance companies

While the CRM market in India is still nascent, bigger players such as ICICI
Prudential Life Insurance Company are adopting it in a big way. The company was
earlier using Gold Mines (a sales and marketing tool) and HEAT (an operational CRM
solution) from Front Range Solutions. Last year it took a decision to invest in CM3 from
Tera data and SAS‘s statistical tool for BI. Anil Tikoo, head-IT at ICICI Prudential Life
Insurance Company says, ―As a forward looking company, we see CRM playing a
significant role in acquiring new customers. CRM lets us obtain granular details about
our customers, helping us to design better products, improve service levels and reduce
operational costs.‖ CRM has helped ICICI Prudential Life capture five lack customers
through effective event-based marketing and lead tracking to cross- and up-sell products.

56


Business drivers for CRM
Margins are under pressure: A couple of years ago, LIC dominated the insurance
market with the help of its sales force and channels and margins were reasonably high.
Today, there are close to 20 companies offering both life and general insurance products.
All of them have equally strong international and local partners; all are focusing upon
similar geographies and target audiences. The new firms selling life insurance and non-
life insurance [pensions, insurance as saving, etc] have failed to emulate the LIC model
because margins are getting squeezed. There are several pain areas that new insurance
firms face—acquiring new customers, retaining them, cross-selling products and
controlling rising costs while providing comprehensive support.

Insurers have added a variety of products and services to their kitty. These range
from insurance as an investment option to pension plans. They target the younger
generation in the 20 to 30 years age group. ―The convergence of four factors—protection,
saving (investment option), loans and pension—have compelled insurance companies to
align with banks in reaching out to a larger audience,‖ says Tikoo. This trend has led to
another—insurance companies are joining hands with banks by becoming channel
partners for insurance. Tata AIG has a marketing alliance with HSBC, Birla Sun Life has
one with Citibank and IDBI and LIC ally with Corporation Bank, while Kotak Life
Insurance has an arrangement with Kotak Bank. This strategy helps insurance firms
increase their footprint to cover a larger part of the customer base in the 20-30 years
demographic. CRM helps connect a bank‘s high net worth customers with insurance
firms.

57


Where to begin—operational CRM or analytical CRM?

The choice between operational and analytical CRM as a starting point depends
upon the insurer‘s needs. Gartner says that insurance companies with multiple financial
products and a big customer base, such as integrated insurance solution providers, will
leverage their customer base to cross- and up-sell different financial products, including
insurance. Such providers will benefit from adopting analytical CRM. Market
segmentation, campaign management and data mining applications will benefit them in
many ways.

Call center text mining: This tool can help improve the customer experience by
resolving complaints rapidly. Insurers are using these tools to mine text from call
center transcripts to identify issues faced by customers. Text mining tools also
help detect and capture other useful pieces of information around a customer‘s life
stage, financial needs and product interests. These can be used to generate leads
and trigger cross-selling. However, to be fully effective, customer service
representatives must be trained to probe for information that will help in cross
selling during the text-mining phase. Text mining tools are leading edge today,
but are predicted to take off quickly.
Event-triggering and profiling: ―Insurers can use event triggers to generate leads
that can be acted upon quickly, usually within 24 hours,‖ says Tikoo. Event-
triggering tools monitor incoming transaction and contact data in near-real-time to
recognize changes in a customer‘s behavior or profile to trigger actions or alerts.

Lead management gets sophisticated: Often the ability of an insurer to generate leads
by means of event-triggering, re-engineered touch points and cross line-of-business
referral can outstrip their ability to manage said leads. In such a situation, though the
number of leads generated rises, the conversion rate does not. It may even drop. CRM
can help provide sales representatives with a mechanism to prioritize and manage leads.

58


Changing customer behavior in insurance buying

In insurance buying, most customers would probably describe their level of
understanding of insurance contracts in the above manner. Customers know generally
what a policy covers; they also know that there are several fine prints in insurance
contracts, which they do not know, or perhaps care to know, at the time of buying. And
they also seem to generally conclude that when it comes to making a claim under an
insurance policy, there could be several issues of which they are just unaware at the time
of buying the policy in the first place.

Changing expectations

A remarkable trend in the insurance industry in the last three years is the rapid
change in the knowledge level as well as expectations of the customers. A study
conducted last year by Forte, a collaborative effort between FICCI and ING Vysya
Insurance Co. about the consumer behavior in the pre and post liberalization days of the
industry had revealed stunning changes in consumer expectations.

It looks as though the docile, uninformed, insurance consumer has suddenly been
transformed into an aggressive and highly demanding species. While the fresh air of
competition in every sector of the economy brings in major changes in consumer
expectations (witness the sea change in the attitude of automobile buyers in India in the
last five years), the insurance industry has witnessed a few unique aspects, such as
regulation-inspired efforts to educate insurance buyers, and a vast change in the skills and
capabilities of the intermediaries involved in distribution.

Motivating factors

In respect of life insurance, potential buyers are driven to buying a policy for one
or more of three major reasons: security of the money invested, saving for one or more

59


specific purposes, and the availability of tax benefit. Customers are increasingly known
to place less reliance on the tax benefit factor, and stress more on the security aspect and
the end-use objective. The challenge of the insurance companies is to address the
motivating factors imaginatively and come up with genuine solutions. Take for example,
the consumer‘s objective of taking a policy to save money for higher education of a child.
This has been a driving force in the sale of new insurance contracts in several other
countries too, notably in Asia.

A potential buyer primarily expects that the saving should be a painless process
and that the money saved should be absolutely safe. The challenge is to provide not only
convenient payment options, but also mechanisms that could offer some measure of
protection and relief to the customer if he is forced to disrupt the payment arrangement
for unforeseen reasons.

On the issue of the consumers‘ perception of security of the money invested, there
are two important aspects. One is how the features of the insurance contract are put
across to the buyer (whether it is a unit-linked policy or endowment oriented).

The second is how to address more effectively the question about the
dependability of the new generation companies that potential new insurance buyers raise
during sales calls especially outside metros and in small towns (referred to in publicity
jargon as buyers in the SEC B and C categories). Both insurance companies and the
Regulator need to address this behavioral challenge more actively.

Consumer’s experience

There has been a vast change in the approach of the insurance agent from the pre-
liberalization days. While the agent in the past established informal contacts with
potential buyers and often depended on referrals from friends and family members, the
new age companies insist on a professional, and often aggressive stance on the part of the

60


sales staff. Customer expectations in this regard revolve around two key aspects: first,
whether the customer is getting truthful advice from the agent, or if he is pushing a
product that yields him the highest commission rate. Invariably, the customers today
expect the insurance agent (and other intermediaries such as the banc assurance sales
staff) to provide a ready comparison of competitors‘ products and how the product the
agent is suggesting is superior to the others. How far is the need-based analysis of
insurance requirement, that the new age sales staff are trained to offer, found to be
relevant and useful to potential insurance buyers? The answer varies from the metro cities
and small towns. However outside metro cities, customers tend to take a clear view that
saving-oriented policies are more needed. There is also marked reluctance to disclose the
true personal financial status and the corresponding insurance needs to insurance
salespersons.

The second aspect of customers‘ perception about the new generation of
insurance agents is the level of continuing commitment of the agent to arrange post-sale
service. Potential insurance buyers are unsure that they would continue to deal with the
same agent who sold the policy throughout the term.

They would tend to place more reliance on the company‘s general promises of
service and commitment. This is an important message for the insurance companies. As
insurance customers increasingly make arrangements to pay periodical premiums directly
through the electronic medium, or though automatic transfers from their bank accounts,
thereby bypassing the need for regular post-sale service by the agents, customers would
tend to place more reliance on the direct standard of service from the company
concerned. Instances of customers requiring agents to arrange for loans against their
policies, or change nominations etc. are rare. Therefore companies need to gear
themselves to provide high service standards directly.

61


Premium shopping

Is pricing or the premium rate for a policy, a deciding factor for buying
insurance? It is indeed so in a price sensitive market such as ours. In several forums,
customers have voiced the general feeling that as insurance products become more
complex, and they get bundled with several riders, it is becoming impossible to make
price comparisons between different companies.

An increasingly larger segment of customers now questions why the premium rate
should be the same for a policy if bought direct from the company over Internet, or
through a channel considered simpler, such as the banc assurance channel. There is logic
in the insurance companies passing on the cost saving to customers in such cases.

It is time the Regulator seriously considered the customer expectations of
differential premium rates for the same policy bought through different channels and
allowed the practice. It should therefore be conceivable to offer premium rebate to
insurance buyers who consciously decide to approach the company directly for buying a
policy (after presumably taking the trouble of educating themselves about the product
features and other aspects), and choose to deal with the company directly for future
servicing needs.

High expectations

One aspect of customer service from new age insurance companies that a remains
to be tested widely is the claim payment record. While consumers seem to be satisfied
that the survival benefits under a life insurance policy would get paid rather promptly
from the tech-savvy new companies, obviating the need for interlocution by the insurance
agent, insurance buyers are not yet convinced about hassle-free payment in the event of a

62


claim, whether under a life policy or a general insurance policy. This is especially so in
respect of rider benefits such as critical illness or hospitalization benefits.

The level of consumer skepticism on claim payment is markedly high in respect
of non-life insurance products, such as Householders‘ Package or Medicaid policies.
There is considerable work to be done to boost the level of confidence both by insurance
companies and the Regulator. By the time a company completes the development of a
strategy and makes investments to pursue the strategy, the opportunity often ceases to
exist. It is therefore important that the new age insurance companies become ‗kinetic‘
enterprises, which can take advantage of unpredictable customer demands and
unexpected market events immediately. This is vastly relevant for the Indian market
where the insurance consumers are rapidly coming of age.

63


RESEARCH METHODOLOGY

The research based will be Descriptive Research.

Type of data

1.Primary data

2.Secondary data

Primary data

The primary or the first hand data will be collected with the help of handing out the
questionnaire to the customers &employees.

Secondary data

The major source of secondary or supporting data will be internet .

Using this data measurement technique, information was collected by personal
interviews.

Secondary data was collected through company websites, discussions with company
guide.

The collected data was processed through S.P.S.S. Package.

Sampling Design

The research was mainly opted on customer‘s survey, adviser‘s survey as well as
sales officer‘s survey.

The sample selected for survey was stratified sample. Sample size is 50
Customers, 10 Sales officers and 50 advisers.

64


Sample Character

Respondents are sales officers, and existing customers of reliance
insurance and the advisers.
.

Sampling Plan

For Customers
Sampling unit : Individuals.

Sampling Method : Non Probability, Convenience Sampling.

Sampling Size : 50 Customers.

For sales officers

Sampling unit : 10 Sales officers

For Advisers

Sampling unit : Advisors .

Sampling Method : Non Probability, Convenience Sampling

Sampling Size : 50 Advisers.

Sampling Plan : Questionnaires.

Sample Area : KOPPAL

65


Tools and Technique of Data Collection

Personal Interviews

Where customers, sales officers and advisers were interviewed personally that
face to face interaction were done.

Questionnaire:

It is a systematic designed questionnaire is used for collecting primary data. These
data are used for further descriptive research.

66


Table 1: Do you agree that reliance insurance variety of products.

Cumulativ e
Frequenc y Percent Valid Percent Percent
strongly agree 30 60.0 60.0 60.0
agree 17 34.0 34.0 94.0
normal 3 6.0 6.0 100.0
Total 50 100.0 100.0

Figure: 1 Do you agree that reliance insurance variety of products

no rma l
6. 0%

ag re e
34 .0 %

st rong ly a gree
60 .0 %

Findings
From the 50 respondents surveyed

60% Customers are strongly agreed that Reliance have variety of products.

34% Customers are agree that reliance has variety of products.

6% Customers feel that Reliance has Neutral of products.

67

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