SUMMER TRAINING REPORT ON

at TAX SAVING INVESTMENT ICICI PRUDENTIAL

Submitted to the
SOS IN MANAGEMENT JIWAJI UNIVERSITY, GWALIOR (M.P.)

In The Partial Fulfillment on the requirement for the degree of MASTER OF BUSINESS ADMINISTRATION

INSTITUTE OF COMMERCE & MANAGEMENT

JIWAJI UNIVERSITY, GWALIOR (M.P.)

SUBMITTED TO: Dr. Suvijna Awasthi

SUBMITTEDBY:Ravi kumar umorya M.B.A. 3rd sem

DECLARATION

I RAVI KUMAR UMORYA

student of MBA 3rd

semester JIWAJI

UNIVERSITY, GWALIOR (M.P.) declare that all the information, facts and figures presented in this report are actually based on my experience & my open market research during the project TAX SAVING INVESTMENT ICICI PRUDENTIAL with special references to ICICI PRUDENTIAL. I assure that this project is the result of my own sincere efforts and has not been submitted in any other institute for the award of any degree or diploma.

Date: Place: -

RAVI KUMAR UMORYA MBA 3RD SEM

ACKNOWLEDGEMENT
I undertook this training in the partial fulfillment of my M.B.A. curriculum. I am glad that I got wonderful opportunity to do my research report at
AMBICA FOOD PRODUCTS district Finance is one of the key parts and the

backbone of any company. Without finance no organization can survive. My project is also based on the study of Finance which is just a drop in the ocean. I sincerely acknowledge my gratitude towards the faculty of SOS IN
MANAGEMENT

who gave me the thorough understanding of different concepts. I never forgot the name of my project mentor . who helped me in every walk of my project work. I am extremely grateful to Mr. .. (Executive) and Mr. . (Marketing Head). My project guides who were not only supportive and co-operative but inspire of their busy schedule were ready to help me with their valuable guidance and support which is of high worth.

RAVI KUMAR UMORYA

Roll no. 1290560 Batch MBA 3rd Sem

TABLE OF CONTENTS
TOPIC
1.1 History of the organization & its objectives 1.2 Organization Structure 1.3 Financial Performance 1.4 costing methods and analysis of statement 1.5 Product and Operations 1.6 1.7 Layout and Quality Control Marketing

1.8 Strength and Weakness 1.9 Special Points Chapter -1 introduction Introduction of the concept Chapter -2 object of the study Chapter-3results and discussion Chapter -4 suggestion and implication Chapter-5 conclusion Reference Annexure

1.1 History of the organization & its objectives

INTRODUCTION TO ICICI GROUP

ICICI BANK
ICICI Bank is Indias second-largest bank with total assets of about Rs.112.024 crore and a network of about 450 branches and offices and about 1750 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customer through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital, asset management and information technology. ICICI Banks equity shares are listed in India on stock exchanges at Chennai. Delhi, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICIs shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Banks acquisition of Bank of Mathura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium term and long term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank, In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the management of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic 5

alternative for both entities, and would create the optimal legal structure for the ICICI groups universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entitys access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payment system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICIs strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, Particularly fee-based services, and access to the vast talent pool of ICICI Bank approved the merger of ICICI and two of its whollyowned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, With ICICI Bank. Shareholders of ICICI and ICICI BANK approved the merger in January 2002, by the High Court of Gujarat at Jalandhar in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI groups financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank is the only Indian company to be rated above the country rating by the international rating agency moody s and the only Indian company to be awarded an investment grade international credit rating. The Bank enjoys the highest AAA (or equivalent) rating from all Leading Indian rating agencies.

Prudential P.L.C.
Established in 1848, today prudential plc is a leading international financial services company with some 16 million customers, policyholders and unit holders and some 20,000 employees worldwide. In the UK Prudential is a leading life and pensions provider with around seven million customers. M&G was acquired by Prudential in 1999 and is the Groups UK and European fund manager, responsible for managing over of 111 billion of funds (as at December 2003). Launched by Prudential in 1998, Egg is an innovative financial services company, with over three million customers, with nearly six per cent of UK credit card balances. In Asia, Prudential is the leading European life insurer with 23 life and fund management operations in 12 countries serving some five million customers. In the US,
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Prudential owns Jackson National Life, a leading life insurance company, and has more than 1.5 millions policies and contracts in force. Prudential has brought to market an integrated range of financial services products that now includes life assurance, pensions, mutual funds, banking, investment management and general insurance. In Asia, Prudential is UKs Largest life insurance company with a vast network of 22 life and mutual fund operations in twelve countries China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Since 1923, Prudential has championed customer-centric products and services, supported by over 60,000 staff and agents across the region. Prudential plcs strong mix of business around the world positions us well to benefit form the growth in customer demand for asset accumulation and income in retirement. Our international reach and diversity of earnings by geographic region and product will continue to give us significant advantage. Our commitment to the shareholders who own Prudential is to maximize the value over time of their investment. We do this by investing for the long term to develop and bring out the best in our people and our businesses to produce superior products and services, our international peer group in terms of total shareholder returns. At Prudential our aim is lasting relationships with our customers and policyholders, through products and services that offer value for money and security. We also seek to enhance our Companys reputation, built over 150 years, for integrity and for acting responsibly within society.

ICICI Prudential Life Insurance:

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential Plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from insurance Regulatory Development Authority (IRDA). ICICI Prudential s equity base stands at Rs.6.75 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the year ended March 31,2004 the company had issued over 430,000 policies, for a total sum assured of over Rs 8,000 crore and premium income in excess of Rs.980 crore. The company has a network of about 30,000 advisors; as well as 12 banc assurance tie-ups. Today the company is the number one private life insurer in the country.
INTRODUCTION TO INSURANCE COMPANY.

In order to go through the journey of LIC Path of private sector insurance companies to nationalize company to again private sector insurance companies is given as below: Path Private Life Insurance Companies

Nationalization

Privatization of Life Insurance Sector

1870 1956

1956

1995 June 2000 August 2000 October 2000 2002

Life Insurance concept was accepted with almost 250 Private Life Insurance Companies Merging of almost 250 Private Sector Life Insurance Companies in one nationalized Life Insurance Corporation of India Proposal to privatize life insurance business Registration process was notified Application was filed 1 s t license was issued with introduction of IRDA During the month of January, 11 Life and Non-Life Private Insurance license were issued

In order to elaborate the above path lets go through the history of Life Insurance Sector. On 3 r d December 1670, seven earnest men of Bombay with just seven rupees for initial expenses gave shape to a plan of offering insurance to the public without the risk of ruin and the Bombay Mutual Life Insurance Society came into existence. Right up to the end of the 19 t h century, foreign insurance companies had an upper hand in the matter of insurance business and they enjoyed mere monopoly and the partialit y were observed in the form that Indian lives were insured with 10% extra premium as a common practice, at that time Lala Harikishan Lal from Lahore was called The Napoleon of Indian Finance as he was then called to launch the Bharat Insurance Company at Lahore (1896) in Punjab.

Prior to 1912, India had no legislation for regulating insurance. The Life Insurance Companies Act 1912 and the Provident Fund Act 1912 were passed. The Insurance Act 1938 was the first comprehensive legislation governing not only life but also non -life branches of insurance to provide strict state control over insurance business. But after the introduction of Insurance Act 1938, the demand for nationalization of Life Insurance Industry was raised, there were so many reasons in order to nationalize the i nsurance sector. They are: Policyholders will be provided cent percent security. Expenses will be reduced due to Absence of duplication, wasteful competition Better service due to absence of profit motive. The funds will be available for nation building activities. Insurance is servicing sector and so that it should be in the hands of government only. have contributed and then after in merged in to one into existence.

Above are few but strong reasons, which towards nationalization of insurance sector, the year 1956, all insurance compa nies were and Life Insurance Corporation of India came

Till the year 1999, LIC of India was the only insurance sector in economic market with ever -increasing growth rate and market share with the capacity to earn high rate of profit and thus profitability. In spite of all these merits of LIC, the overall status of insurance sector was not so satisfactory.

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Business figure before the introduction of IRDA

Population Insurable Population No. Of insured individuals Potential uninsured individuals New Business premium 1.00 Billion 0.36 Billion 0.08 Billion 0.28 Billion 0.66 Billion

Above stated figures clearly shows that from 1 Billion

population of India, almost 0.28 Billion population was uninsured. Again the existing government unit did not properly meet the emerging segments like retirement, disability. Moreover, the government wanted 25% p.a. gro wth rate in new business premium from insurance sector. All these factors combine forced the government to take the decision about the privatization of insurance sector. In order to increase the business activities, the introduction of IRDA was made by G overnment. Thus, IRDA (Insurance Regulatory and Development Authority) witnessed the existence power to co-ordinate regular and control the insurance business.

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Private Insurers in Indian Insurance Market

Registration No. Date of Registration Name of the Company

101 104 105

23.10.2000 15.11.2000 24.11.2000

HDFC Standard Life Max New York Life ICICI Prudential Life

107

10.01.2001

Om Kotak Mahindra Life

109 110 111

31.01.2001 12.02.2001 30.03.2001

Birla Sun Life Insurance TATA AIG Life Insurance SBI Life Insurance

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Board Committees Board Governance & Remuneration Committee Mr. N. Vaghul Mr. Anupam Puri Mr. M. K. Sharma Mr. P. M. Sinha Prof. Marti G. Subrahmanyam Credit Committee Mr. N. Vaghul Mr. Narendra Murkumbi Mr. M .K. Sharma Mr. P. M. Sinha Mr. K. V. Kamath Risk Committee Mr. N. Vaghul Mr. Sridar Iyengar Prof. Marti G. Subrahmanyam Mr. V. Prem Watsa Mr. K. V. Kamath

Audit Committee Mr. Sridar Iyengar Mr. Narendra Murkumbi Mr. M. K. Sharma

Customer Service Committee N. Vaghul Narendra Murkumbi M.K. Sharma P.M. Sinha K. V. Kamath Fraud Monitoring Committee Mr. M. K. Sharma Mr. Narendra Murkumbi Mr. K. V. Kamath Ms. Kalpana Morparia Ms. Chanda D. Kochhar Share Transfer & Shareholders'/ Investors' Grievance Committee
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Asset-Liability Management Committee

Mr. M. K. Sharma Mr. Narendra Murkumbi Ms. Kalpana Morparia Ms. Chanda D. Kochhar Committee of Directors Mr. K. V. Kamath Ms. Lalita D. Gupte Ms. Kalpana Morparia Ms. Chanda D. Kochhar Dr. Nachiket Mor

Ms. Lalita D. Gupte Ms. Kalpana Morparia Ms. Chanda D. Kochhar Dr. Nachiket Mor

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1.2 Organization Structure

The organization structure at ICICI web trade is somewhat like this:
C.E.O. Mr. K.V. Kamath

Board of Directors

National Head (at Mumbai-branch)

Area manger/ In charge of Project at Jalandhar (Navin Aggarwal) Assistant unit manager (Miss Pinki Gupta)

Sales

Sales

Sales

Sales

In any organization there is what is termed a hierarchy, refers to Executive Executive Executive Executive various levels of authority in an organization, ranging from the Board of Directors at the top to the sales executives at the bottom.

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1.3 Financial Performance

Financial management, as an academic discipline, has undergone fundamental changes in its scope and coverage. In the early years of its evolution it was treated synonymously with the raising of funds. In the current literature pertaining to financial Management, a broader scope so as to include, in addition to procurement of funds, efficient use of resources is universally recognized. Similarly, the academic thinking as regards the objective of financial management is also characterized by a change over the years. Financial management, as an integral part of overall management, is not a totally independent area. It draws heavily on related disciplines and fields of study, such as economics, accounting, marketing, production and quantitative methods. Although these disciplines are interrelated, there are key differences among them. The relationship between finance and accounting, conceptually speaking, has two dimensions: (1) They are closely related to the extent that accounting is an important input in financial decision-making and (2) There are key differences in viewpoints between them. The viewpoint of accounting relating to the funds of the firm is different from that of finance. The measurement of funds (income and expenses) in accounting is based on the accrual principle/system. Capitalization and Capital Structure: Capital structure can affect the value of a company by affecting either its expected earnings or the cost of capital, or both. While it is true that financingmix cannot affect the total operating earnings of a firm, as they are determined by the investment decisions, it can affect the share of earnings belonging to the ordinary shareholders. The capital structure decision can influence the value of the firm through the earnings available to the shareholders. But the leverage can largely influence the value of the firm through the cost of capital. In exploring the relationship between leverage and value of a firm the relationship between leverage and cost of capital from the standpoint of valuation. The importance of an appropriate capital structure is, thus, obvious. There is a viewpoint that strongly supports the close relationship between leverage and value of a firm. There is an equally strong body of opinion, which believes that financing-mix or the combination of debt and equity has no impact on the 16

shareholders wealth and the decision on financial structure is irrelevant. In other words, there is nothing such as optimum capital structure. Capital structure theories are based on certain assumptions, they are: [1] There are only two sources of funds used by a firm: perpetual risk less debt and ordinary shares. [2] There are no corporate taxes. This assumption is removed later. [3] The dividend-payout ratio is 100. That is, the total earnings are paid out as dividend to the shareholders and there are no retained earnings. [4] The total assets are given and do not change. The investment decisions are, in other words, assumed to be constant. [5] The total financing remains constant. The firm can change its degree of leverage (capital structure) either by selling shares and use the proceeds to retire debentures or by raising more debt and reduce the equity capital. [6] The operating profits (EBIT) are not expected to grow. [7] All investors are assumed to have the same subjective probability distribution of the future expected EBIT for a given firm. [8] Business risk is constant over time and is assumed to be independent of its capital structure and financial risk. [9] Perpetual life of the firm. Leverage Analysis: A firm can make use of different sources of financing whose costs are different. These sources may be, for purposes of exposition, classified into those that carry a fixed rate of return and those on which the returns vary. The fixed returns on some sources of finance have implications for those who are entitled to a variable return. Thus, since debt involves the payment of a stated rte of interest, the return to the ordinary shareholders is affected by the magnitude of debt in the capital structure of a firm. The employment of an asset or source of funds for which the firm has to pay a fixed cost or fixed return may be termed as leverage. Consequently, the earnings available to the shareholders as also the risk are affected. If earnings les the variable costs exceed the fixed cost, or earnings before interest and taxes exceed the fixed return requirement, the leverage is called favorable. When they do not, the result is unfavorable leverage. There are 2 types of leverage- operating and financial. The leverage associated with investment (asset acquisition) activities is referred to as operating leverage, 17

while leverage associated with financing activities is called financial leverage. While we are basically concerned with financial leverage for purposes of the financing decision of a firm, the discussion of operating leverage is to serve as a background to the understanding of financial leverage because the two types of leverage are closely related. Operating leverage is determined by the relationship between the firms sales revenues and its earnings before interest and taxes (EBIT). The earnings before interest and taxes are also generally called as operating profits. Financial leverage represents the relationship between the firms earnings before interest and taxes (operating profits) and the earnings available for ordinary shareholders. The operating profits (EBIT) are thus, used as the pivotal point in defining operating and financial leverage. In a way, operating and financial leverage represents two stages in the process of determining the earnings available to the equity shareholders and, Apart from the elaboration of the return-risk implications, their combined effect has also been discussed. Operating leverage results from the existence of fixed operating expenses in the firms income stream. The operating leverage may be defined as the firms ability to use fixed operating costs to magnify the effects of changes in sales on its earnings before interest and taxes. Operating leverage occurs any time a firm has fixed costs that must be met regardless of volume. We employ assets with fixed cost in the hope that volume will produce revenues more than sufficient to cover all fixed and variable costs. In other words, with fixed costs, the percentage change in profits accompanying a change in volume is greater than the percentage change in volume. This occurrence is known as operating leverage. Financial leverage relates to the financing activities of a firm. The sources from which funds can be raised by a firm, from the point of view of the cost/charges, can be categorized into [1] those which carry a fixed financial charge, and [2] those which do not involve any fixed charge. The sources of funds in the first category consist of various types of long-term debt, including bonds, debentures, and preference shares. Long-term debts carry a fixed rate of interest which is a contractual obligation for the firm. Although the dividend on preference shares is not a contractual obligation, it is fixed charge and must be paid before anything is paid to the ordinary shareholders. The equity shareholders are entitled to the remainder of the operating profits of the firm after all the prior obligations are met. Financial leverage results from the presence of fixed financial charges in the firms income stream. These fixed charges do not vary with the earnings before interest and taxes (EBIT) or operating profits. Capital Budgeting: 18

Capital budgeting decision pertains to fixed/long-term assets which by definition refer to assets which are in operation, and yield a return, over a period of time, usually, exceeding one year. They therefore, involve a current outlay or series of outlays of cash resources in return for an anticipated flow of future benefits. In other words, the system of capital budgeting is employed to evaluate expenditure decisions which involve current outlays but are likely to produce benefits over a period of time longer than one year. These benefits may be either in the form of increased revenues or reduced costs. Capital expenditure management, therefore, includes addition, disposition, modification and replacement of fixed assets. Capital budgeting decisions are of paramount importance in financial decisionmaking. In the first place, such decisions affect the profitability of a firm. They also have a bearing on the competitive position of the enterprise mainly because of the fact that they relate to fixed assets. The fixed assets represent, in a sense, the true earning assets of the firm. They enable the firm to generate finished goods that can ultimately be sold for profit. The current assets are not generally earning assets. Rather, they provide a buffer that allows the firms to make sales and extend credit. True, current assets are important to operations, but without fixed assets to generate finished products that can be converted into current assets, the firm would not be able to operate. Further, they are strategic investment decisions as against tactical- which involve a relatively small amount of funds. Therefore, such capital investment decisions may result in a major departure from what the company has been doing in the past. Acceptance of a strategic investment will involve a significant change in the companys expected profits and in the risks to which these profits will be subject. Working Capital Management: Working capital management is concerned with the problems that arise in attempting to manage the current assets, the current liabilities and the interrelationship that exists between them. The term current assets refer to those assets which in the ordinary course of business can be, or will be, converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivable and inventory. Current liabilities are those liabilities which are intended, at their inception, to be paid in the ordinary course of business, within a year, out of the current assets or earnings of the concern. The basic current liabilities are accounts payable, bills payable, bank overdraft, and outstanding expenses. The goal of working capital 19

management is to manage the firms current assets and liabilities in such a way that a satisfactory level of working capital, it is likely to become insolvent and may even be forced into bankruptcy. The current assets should be large enough to cover its current liabilities in order to ensure a reasonable margin of safety. Each of the current assets must be managed efficiently in order to maintain the liquidity of the firm while not keeping too high a level of any one of them. Each of the short-term sources of financing must be continuously managed to ensure that they are obtained ad used in the best possible way. The interaction between current assets and current liabilities is, therefore, the main theme of the working capital management. Receivables Management: The receivables represent an important component of the current assets of a firm. The receivables are defined as debt owned to the firm by customers arising from sale of goods or services and in the ordinary course of businesses. When a firm makes an ordinary sale of goods or services and does not receive payment, the firm grants trade credit and creates accounts receivable, which could be collected in the future. Receivables management is also called trade credit management. Thus, accounts receivables represent an extension of credit to customers, allowing them a reasonable period of time in which to pay for the goods received. The sale of goods on credit is an essential part of the modern competitive economic systems. In fact, credit sales and, therefore, receivables are treated as a marketing tool to aid the sale of goods. The credit sales are generally made on open account in the sense that there are no formal acknowledgements of debt obligations through a financial instrument. As a marketing tool, they are intended to promote sales and thereby profits. However, extension of credit involves risk and cost. Management should weigh the benefits as well as cost to determine the goal of receivables management. The objective of receivables management is to promote sales and profits until point is reached where the return on investment in further funding receivables is less than the cost of funds raised to finance that additional credit (i.e. cost of capital). The specific costs and benefits, which are relevant to the determination of the objectives of receivables management, are: o o o o o Cost Collection cost Capital cost Delinquency cost Default cost

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Dividend policy: Dividend refers to that portion of a firms net earnings which are paid out to the shareholders. Since dividends are distributed out of profits, the alternative to the payment of dividends is the retention of earnings/profits. The retained earnings constitute an easily accessible important source of financing the investment requirements of firms. There is, thus, a type of inverse relationship between retained earnings and cash dividends. Larger the retention, lesser dividends, and smaller retentions, larger dividends. Thus, the alternative uses of the net earningsdividends and retained earnings-are competitive and conflicting. A major decision of financial management is the dividend decision in the sense that the firm has to choose between distributing the profits to the shareholders and plugging them back into the business. The choice would obviously hinge on the effect of the decision on the maximizing present values; the firm should be guided by the consideration as to which alternative use is consistent with the goal of wealth maximization. That is, the firm would be well advised to use the net profits for paying dividends to the shareholders if the payment will lead to the maximization of wealth of the owners. If not, the firm should rather retain them to finance investment programes. The relationship between dividends and value of the firm should, therefore, be the decision criterion. There are however, conflicting opinions regarding the impact of dividends on the valuation of a firm. According to one school of thought, dividends are irrelevant so that the amount of dividends paid has no effect on the valuation of a firm. On the other hand certain theories consider the dividend decision as relevant to the value of the value of the firm measured in terms of the market price of the shares. The crux of the argument supporting the irrelevance of dividends to valuation is that the dividend policy of a firm is a part of its financing decision. As a part of the financing decision, the dividend policy of the firm is a residual decision and dividends are a passive residual. If the dividend policy is strictly a financing decision, whether dividends are paid out of profits, or earnings are retained, will depend upon the available investment opportunities. It implies that when a firm has sufficient investment opportunities, it will retain the earnings to finance them. Conversely, if acceptable investment opportunities are inadequate, the implication is that the earnings would be distributed to the shareholders. The test of adequate acceptable investment opportunities is the relationship between the return on investments and the cost of capital. As long as investments exceed cost of capital, a firm has acceptable investment opportunities. In other 21

words, ifs firm can earn a return higher tan its cost of capital; it will retain the earnings to finance investment projects. If the retained earnings fall short of the total funds required, it will raise external funds-both equity and debt-to make up the shortfall.

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1.4 Costing Methods And Analysis Of Statement

Assets Under Management (AUM) as at the end of Feb-2007 (Rs in Lakhs)
AUM Mutual Fund Name Average AUM For The Month

1. ABN AMRO Mutual Fund 2. AIG Global Investment Group Mutual Fund 3. Benchmark Mutual Fund 4. Birla Sun Life Mutual Fund 5. BOB Mutual Fund 6. Canbank Mutual Fund 7. DBS Chola Mutual Fund 8. Deutsche Mutual Fund 9. DSP Merrill Lynch Mutual Fund 10. Escorts Mutual Fund 11. Fidelity Mutual Fund 12. Franklin Templeton Mutual Fund 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund JM Financial Mutual Fund JPMorgan Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Lotus India Mutual Fund Morgan Stanley Mutual Fund PRINCIPAL Mutual Fund ICICI PRUDENTIAL Mutual Fund Quantum Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund

Excluding Fund Of Excluding Fund Of Fund Of Funds Fund Of Funds Funds Funds 527298.61 34793.7 520357.41 35962.1 N/A 493459.19 2107032.33 13189.46 220055.55 267272.69 632738.66 1363796.81 11892.52 567052.22 2210219.06 3107988.05 1196159.48 465070.34 382811.94 N/A 1340625.72 1149722.96 123858.99 287119.9 1060032.69 4328067.51 5380.17 4221591.34 17596.99 1847383.96 1299706.71 780107.96 1419829.99 23543.31 3860299.44 35330904.55 N/A 0 1901.45 0 0 0 0 0 0 7885.48 32939.41 0 0 91168.93 0 N/A 55835.13 0 0 0 0 3731.96 0 0 0 0 2886.65 0 0 0 0 231142.71 N/A 565300.47 2276874.74 12710.58 224400.85 236941.15 643309.79 1337579 9857 594872.17 2343907.4 3222873.02 1219830.8 469516.87 386731.37 N/A 1335816.27 1197068.82 84093.35 310427.14 1094027.66 3907924.85 5818.48 4359281.53 16987.98 1874050.79 1381960.47 793897.25 1448329.74 25362.02 3926014.55 35826123.52 N/A 0 2016.87 0 0 0 0 0 0 8669.47 33551.3 0 0 97905.45 0 N/A 59243.32 0 0 0 0 3982.85 0 0 0 0 2861.86 0 0 0 0 244193.22

28. Standard Chartered Mutual Fund 29. Sundaram BNP Paribas Mutual Fund 30. Tata Mutual Fund 31. Taurus Mutual Fund 32. UTI Mutual Fund Grand Total

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Asset Under Management

Mutual Fund Name ABN AMRO Mutual Fund Alliance Capital Mutual Fund Birla Sun Life Mutual Fund Canbank Mutual Fund Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund Fidelity Mutual Fund Franklin Templeton Mutual Fund HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund JM Financial Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund PRINCIPAL Mutual Fund Prudential ICICI Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund Standard Charted Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund UTI Mutual Fund AUM 1580.36 1431.46 10049.66 1565.19 1004.62 2366.72 6472.80 1628.06 16704.74 15707.82 7250.63 2072.86 3780.83 6501.52 2959.15 6264.96 17095.89 9907.89 565.50 7189.35 7636.86 2035.21 8713.95 170.76 21975.57 Equity & Balance 464.589. 589.48 1668.77 224.35 232.63 96.57 1462.33 1628.06 6965.36 6126.04 1987.93 337.25 85.52 1065.12 277.46 1682.48 2169.46 4226.40 25.74 2311.54 0.00 997.91 2629.09 157.53 8791.81 Debt & MIP 1115.92 841.98 8380.89 1340.84 771.99 2270.15 5010.47 0.00 9739.38 9581.78 5262.70 1735.62 3694.51 5436.41 2681.69 4582.48 14926.44 5681.49 539.76 4877.81 7636.86 1037.31 6084.86 13.23 13183.77 Equity % 29.39 41.18 16.61 14.33 23.16 4.08 22.59 100.00 41.70 39.00 27.42 16.27 2.26 16.38 9.38 26.86 12.69 42.66 455 32.15 0.00 49.03 30.17 92.25 40.01 Debt % 70.61 58.82 83.39 85.67 76.84 95.92 77.41 0.00 58.30 61.00 72.58 83.73 97.74 83.62 90.62 73.14 87.31 57.34 95.45 67.85 100.00 50.97 69.83 7.75 59.99

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List of Assets Management Companies and their assets under management

As on June 2008 (In Crores.) ICICI PRUDENTIAL 1593.8546 47.9336 2.0978 179.0116 2107.78 1551.236 823.2623 479.4336 3778.4525 6932.384 469.6412 412.9397 150.5677 563.5074 6961.6842 17095..89

Particulars Diversified Tax Planning Index Sector Total Equity FMP MIP Debt ST Income Total Debt Balanced Gilt LT Gilt ST Total Gilt Liquid Total

(Above Table showing Acquisition and Utilization of fund of ICICI PRUDENTIAL) Fund Manager does utilization of fund, ICICI PRUDENTIAL AMC has variety of scheme and each scheme has different Fund Manager who is responsible of investing money into market and also responsible to give return to investors.

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1.5 Product and Operations

PRODUCTS.

Insurance solution for individuals.. ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its 17 products cab is enhanced with up to 6 riders, to create a customized solution for each policyholder.

Savings Solutions.. Secure Plus is a transparent and feature-packed savings plan that offers 3 levels of protection. Cash Plus is a transparent, feature-packed savings plan that offers 3 levels of protection as well as liquidity options. Save n Protect is a traditional endowment savings plan that offers life protection along with adequate returns. Cash Back is an anticipated endowment policy ideal for meeting milestone expenses like a childs marriage, expenses for a childs higher education or purchase of an asset.

Protection Solutions. LifeGuard is a protection plan, which offers life cover at very low cost. It is available in 3 coupons level term assurance, level term assurance with return or premium and single premium.

26

Child Solutions. Smart kid child plans provide guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the childs life. SmartKid child planed are also available with in unit-linked form both single premium and regular premium.

Market-linked Solutions LifeLink is a single premium Market Linked Insurance Plan, which combines life insurance cover with the opportunity to stay, invested in the stock market. Life Time offers customers the flexibility and control to customize the policy to meet the changing needs at different life stages. It offers 3 investment options Growth Plan, Income plan and Balance plan.

Retirement Solutions Forever Life is a retirement products targeted at individual in there thirties. Secure Plus Pension is a flexible pension plan that allows one to select between 3 levels of cover. Market-linked retirement products Life Time Pension is a regular premium market-linked pension plan. Life Link Pension is a single premium market linked pension plan. ICICI Prudential also launched Salaam Zindagi, a social sector group insurance policy targeted at the economically underprivileged sections of the society.

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Group Insurance Solutions ICICI Prudential also offers Group Insurance Solutions for companies seeking to enhance benefits to their employees.

Group Gratuity Plan ICICI Prus group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner. The plan can also customize to structure schemes that can provide benefits beyond the statutory obligations.

Group Superannuation Plan ICICI Bank offers flexible defined contribution superannuation scheme to provide a retirement kitty for each member of the group. Employees have the option of choosing from various annuity options or opting for partial commutation of the annuity at the time of retirement. Group Term Plan

Group Term Plan ICICI Prus flexible group term solution helps provides affordable cover to members of group. The cover could be uniform or based on designation/rank or a multiple of salary. The benefit under the policy is paid to the beneficiary nominated by the member on his/her death.

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Flexible Rider Options ICICI Pru Life offers flexible riders, which can be added to the basic policy at marginal cost, depending on the specific of the customer. Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit. Accident benefit: This rider option pays the sum assured the rider on death due to accidents. Critical Illness Benefit: protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical prior to death. Major Surgical Assistance Benefits: provides financial support in the event of medical emergencies, ensuring that benefits are payable to the life assured for medical expenses Incurred for surgical procedures. Cove is offered against 43 different surgical procedures. Income Benefit: This rider pays the 10% of the sum assured to the nominee every year, till maturity, in the event of the death of the life assured. It is available on SmartKid, SecurePlus and Cashplus. Waiver of Premium: In Case of total and permanent due to an accident, the premiums are waived till maturity. This rider is available with SecurePlus and CashPlus.

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1.6

Layout and Quality Control

Ratio Current ratio EPS Div payout to unit holders Div. payout Div. to total income Profit on sales redemption to total income

Formula Current asset/current liability Total profit/unit capital Div. paid/unit capital Div. paid/net profit Dividend/total income Profit/sales redemption

2008 2438.37/1818.15=1.34 23311.45/7700.63=3.02 941.81/7700.63=0.12(12%)Div. paid/unit capital 941.81/23311.45=0.04(4%) 428.45/18041.54=0.24(2.4%)

2007 1275.46/1066.90=1.19 14126.20/9981.01=1.41 621.86/9981.01=0.62(6.2% ) 621.86/14126.20=0.04(4% ) 717.53/14882.68=0.48(4.8 %) 12074.52/14882.68=0.81(8 1%)

13834.17/18041.54=0.77(77%)

(Above Table Showing - Ratio analysis of ICICI PRUDENTIAL AMC)

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1.7

Marketing
Today the definition of marketing has been changed. The marketing activity of an organization before the product is produced and continues even after the product is sold. In the buyer market of recent times the sharpest weapon that a company can develop is globalize marketing place in the value creation and delivery. The proud and demanding customer of today brings before corporate a critical fact, when the customer is jury. It is the value generation for the customer that will separate the victor from vanquished. The value of customer service cascades all over the company. The aim of customer focus is not just satisfaction but delight satisfaction. Till the year 1999 the life insurance business was exclusively conducted by the Life Insurance Corporation (LIC) while the general insurance business in India, was exclusive by General Insurance Corporation and its four subsidiaries. The insurance sector is opened for private participation since November, 2000. Before 1999 there was no marketing done by LIC due to its monopoly but now after 5 years the picture has changed. Now there are private players in market. With the effective marketing techniques the private players has changed the whole scenario of the insurance sector. They are slowly and gradually driving the business out of the hands of the LIC. Before 1999 customer had no option other then LIC, but now they have got many options. This is the significant change in insurance industry. Now the customer is back in the center state. All the companies are trying to please the customer with the innovative schemes and better service. Relationship Marketing in Insurance Introduction It is five times more expensive to acquire a new customer than to retain an old one. Relationship marketing is the practice of building long term satisfying relationship with key parties customers and suppliers. They accomplish this by promoting and delivering high quality, goods, services, and fair prices to other parties overview. Relationship marketing results in strong economic, technical and social ties among the parties.

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Definition of Relation Marketing: Relationship marketing can be defined as the process to identify, establish, maintain and other stakeholders at a profit so that the objective of all parties involved are net and this is done by mutual exchange and fulfillment of promises. The important objectives of relationship marketing to acquire new customers maintain and enhance relationship with existing customers, re-activities of excustomers and handling of customer terminations. The key objective of relationship marketing is to establish one to one relationship with all the customers. This may have sound like a day dream few dream few years ago but thanks to the technological breakthrough and technological solution providers, it is very much of a reality. How to add value through relationship Marketing Identify loyal customers Recognize their special needs Provide special reward for loyalty Establish continuing relationship Ensure increase in customer value Relationship marketing is one of the hottest tread in the present marketing scenario. Satisfied customers not only stay with a company but they are also walking talking advertisement for the companys product.

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1.8 Strength and Weakness

STRENGTHS
Efficiently trained sales force and advisors. There is improvement in response and turnaround times in specific areas such as delivery of first policy receipt, policy document, premium notice, final maturity payment, settlement of claims etc. Competitive activity, evolution of the distribution channels.

WEAKNESSES
More or less all players (including the market leader LIC) have aggressively recruited and trained advisors, appointed agents, launched new products, improved customer service standards and revamped/expanded their distribution networks. If at all there was any major difference between players it was only in time lag in launching of services. Consumer awareness, though increasing, is still low and the different types of policies available and the specific benefits of each often confuse them; thus it's the job of insurance companies to educate them about these.

Opportunities
There are 17 insurance companies in the market today. More companies like Reliance and Sahara will soon enter the fray. According to a UN survey, only 4 to 6 per cent of India's population is insured. Of this, 22 per cent are under-insured. So the market presents opportunities for the enterprising. Only 22 per cent of the insurable population possesses life insurance. Whats more, in a country of over one billion people, life insurance premia forms only 1.8 per cent of the GDP, indicating the extent of underinsurance ICICI Prudential Life Insurance Company has entered into a strategic tie-up with the Federal Bank for the distribution of life insurance products. ICICI PruLife financial service consultants (FSC's) could now approach Federal Bank customers, based on referrals from the Bank. This 33

alliance expands ICICI Prulife's reach to around 2 lakh customers across 30 bank branches in Kerala and 30 in other cities including a large number of NRI customers. ICICI Prudential Life Insurance Company has recruited talent at a lateral level from various industries, such as FMCG, banking, telecom, etc, for its middle and senior management teams. Says Shubhro Mitra, Chief, Human Resources, ICICI Prudential Life, "The candidates must have the requisite qualifications in their functions and relevant experience, however not necessarily in the field of insurance. In fact, only two people amongst the senior management team has any experience in insurance the head of sales and the chief actuary. Most importantly, the individuals must have a winning attitude, energy, willingness to learn and be able to bring fresh ideas and perspectives to the business." ICICI Prudential Life Insurance has flagged off operations in Chennai, the fourth office of the company. It has accepted five proposals sponsored by Madras Cements Ltd and Lucas TVS favouring underprivileged children. 'Salaam zindagi', a social sector policy will cover larger groups amongst the economically weaker sections of society. The company targets to cross the one lakh policy mark by the end of the next fiscal and has already sold 1,500 policies till date. It hopes to break even in four to six years and for now has no plans to introduce any new products. The policies currently on offer are ICICI Pru Single Premium Bond, ICICI Pru Save'n Protect, ICICI Pru Forever Life, ICICI Pru CashBak and ICICI Pru LifeGuard ICICI Prulife has very quickly gone on to become Indias largest private life insurance company. Again the success lay in aggressive marketing, smart advertising, omnipresence and quick expansion. ICICI also has a strong presence in the general insurance sector with ICICI Lombard General Insurance Company Limited A large part of the success of the new entrants ran be attributed to the governmentappointed Insurance Regulatory and Development Agency (IRDA), which developed the regulatory framework. The regulations governingthe life and non-life insurers are pragmatic and forward-looking, ensuring the customer is protected and creating an environment for thriving private sector participation and a level playing field. 34

Bancassurance and corporate agents are the two emerging channels that give companies an opportunity to reach out to a much larger number of individuals who might be interested in insurance. Moreover, people inherently trust their local bank with which they have transacted for many years, so an insurance product through that channel is also regarded with less suspicion. These channels have only just emerged, but are already making their mark. With time and the appropriate regulations, the contribution of such channels is bound to drive penet.'at;on.of the category.

THREATS ICICI Prudential Life Insurance Company Pvt. Ltd. (ICICI PruLife) is a joint venture company in the life insurance segment in India. It is the leading private life insurance company India. Expanding at a rapid pace ICICI PruLife is opening branches across multiple cities and towns in India. With multiple branches across the country a need was identified by the head office to service their internal employees in the same way as they would service an external customer. The user base was growing with people being added every day.

35

1.9 Special Points

36

CHAPTER -1 INTRODUCTION

37

ICICI Prudential is a case study in the role of marketing in reshaping an industry. It highlights how an industry where sell and push were oft used words and consumer was nothing more than a file no., has changed to one where consumer preference and consumer pull rules the roost. Heres a look at how ICICI Pru changed the rules of the game and emerged a leader in the process. Background: When the insurance sector was liberalized in 2000, the private players had to contend with a few issues. Ratio of premium to GDP was low: 1.3% of GDP was invested in insurance. Insurance penetration was at an abysmal 22% of the insurable population. Besides the above the private players were faced with: Attitudinal Barriers, Perception of insurance as a tax saving tool and lack of a consumer centric approach in service and product offerings. Differentiation Strategy A) Reposition the category in the consumer's mind. Influence the consumer to view it as a protection instrument and not a tax saving product alone. B) In the process, create differentiation for the ICICI Pru brand as a provider of social security and family protection. C) Achieve leadership status in saliency, image & product parameters. D) Build credibility and trust. The Target Audience: Representing an ideal mix of medium to high net worth individuals: The consumers most disposed towards buying life insurance. Middle-aged professionals, primarily male, salaried and self employed, age group: 28 - 45 years, household income: Rs.20, 000 and above. Creative Strategy: The essence of the creative strategy: To get the consumer to re look at Insurance as a means to lead a worry free life and not as a necessary evil. To this effect the core brand insight highlighted was "As head of the family it's my responsibility to take care of my loved ones and protect them 38

from the uncertainties of life", summed up in the advertising idea: We cover you at every step in life (Suraksha Zindagi ke har kadam par, as interpreted in Hindi ). ICICI Pru was positioned as an enabler of protection relevant to the needs of the life stage that you are in. At the core of the communications strategy was appropriating the generic category benefit (protection) through its greatest metaphor Sindoor. The Creative execution: TVC: Building image and creating a differential in the most creative and compelling manner. The creative execution heightened the emotional connect with the ICICI Pru brand - Indian; satisfaction of knowing that ones loved ones are protected. Symbolic representation of the protector of the family through situations showcasing various life stages and creating endearing imagery of protection and familial bonding. Press: Gave the consumer a rational and tangible reason to buy insurance first and secondly from ICICI Prudential. The product specific advertising focused on changing the prevalent perception about insurance and breaking a few myths: non- affordability, insurance not being good investment option and the myth that insurance was good only for tax saving. Other Communications: Other programs included direct mail, PR of communications campaign in press & TV, website marketing; and database generation through Bancassurance channels. Media Strategy: In a market likely to be cluttered, they used multiple touch points to reach the consumer. The role for each medium was envisaged. The TV medium was used to enhance the emotional link with the brand. Strategic use of 15 sec. edits facilitated high frequency levels. In print, cost per response rather than cost per thousand as responses were measured in form of call-ins. Radio FM, Cinema, Internet were used to create a media multiplier effect. For e.g- Building an emotional connect with the audiences is their constant endeavour and one of the biggest challenges. Its these same audiences who closely follow and aspire to be like the characters that 39

they see in films and on TV everyday. In a unique move, Jassi, one of TV's most popular personas, will be buying a life insurance policy from none other than ICICI Pru! So check out Jassi Jaisi Koi Nahi, to see how this biz-whiz protects her family! Sum up: In just over a year ICICI Pru has emerged as Indias no.: 1 Private Life Insurance Company with almost 50% market share of the private players. Has sold highest no. of policies both in volume and value. Major Milestone - Over 100000 policies on Mar 31, 2002. MARKET SEGMENTS The life insurance and pension business has two distinct customers segments - individuals and corporates. In case of the retail business for individuals, the 4 sub-segments are - protection, investment, savings and pension. Apart from the existing leader LIC, new companies such as HDFC Standard Life, TATA AIG, ICICI Prudential and more will seek to be present across all the segments of the market. Among the retail products for individuals, pure risk protection products have been introduced by some of the new life insurance companies in the market. As these products have no savings component to it, the premiums are very low compared to other products. Investment products provide long term investment growth and insurance cover. This segment is growing rapidly. Savings products like Endowments and Money-Backs provide a combination of protection and investment benefits. The last segment of pension includes products that are aimed at offering customers an income during their retirement years.

In case of the group business, there are three sub-segments - protection, statutory savings and pension. Group insurance products are taken to provide low cost life insurance cover to a group of people. Group insurance can be taken to provide low cost life insurance cover as part of employee benefit packages to motivate employees or to cover the housing or vehicle loan given by employer to employee. It can also be used as a substitute for the statutory EDLI subject to approval by the Regional Provident Fund Commissioner. The statutory savings segment essentially comprises of the gratuity products for companies. The pension segment will include products like group superannuation, which will enable a company to benefit from the actuarial, 40

investment and operational expertise of a specialist company to manage its superannuation funds. Source: CII Insurance Committee Report 1999 MARKETING MIX POLICIES Different companies can choose to position themselves differently and hence the marketing mix would be different. However, there are certain common characteristics that one can cull out from the possible strategies that companies can adopt. Product: The development of flexible products to suit individual requirements is what will differentiate the winners from the also-rans. The key to success is in providing insurance solutions, not standardised insurance products. The concept of riders/optional benefits has already been a huge innovation brought about by the new players, which has led to customisation of products for individual needs. However, companies may differentiate themselves on the basis of product segments that they choose to focus on and excel in. Distribution: Different companies may however choose different channels and different geographies to focus on. The channel options are - tied agency force, corporate agents and brokers and this is an area where different companies will make different choices. Many companies like HDFC Standard Life are focussing on all channels whereas companies like Max New York Life are focussing on the tied agency force only. Customer interface will be a key challenge for life insurance companies and includes every that interaction that the customer has with the company, such as sales, new business underwriting, policy servicing, premium payments, claim processing and so on. Technology can play a crucial role in delivering the highest standards of service set by the company and it will be imperative for any serious player to excel in all of these. Price: Price is a relevant differentiator only in two segments - pure term insurance and in pure annuities. Here too, service delivery and financial strength will need to be present at a minimum acceptable level for price to be a relevant differentiator. In case of savings oriented products, long term returns generated will be more relevant than just the price of the product. A focus on generating good investment performance and keeping a tight control on costs will help in 41

generating good long-term maturity value for customers. Norms have been laid down on all of these by IRDA and adhering to these while delivering good returns will be a challenge. Advertising and promotion: The level of demand is latent and will have to be activated considerably. The market needs to be developed. Greater awareness of insurance and the need to have it as a protection tool rather than as a tax planning measure needs to be appreciated by the Indian people. Various communication tools including advertising, direct marketing and road shows will contribute to all this and different companies will take different approaches on these.

Introduction of the concept

Insurance would assist businesses to operate with less volatility and risk of failure and provide for greater financial and societal stability from the growth pangs of an estimated growth rate over 8 % in GDP

Government has arranged for disaster management and for funds. NGOs and public institutions assist with fund raising and relief assistance. Besides government provides for social security programs. There is considerable impact upon government in these respects. Insurance substantially steps in to provide these services. The effect would be to reduce the strain on the tax payer and assist in efficient allocation of societal resources

Facilitates trade, business and commerce by flexible adaptation to changing risk needs particularly of the burgeoning Services sector.

Like any other financial institution insurance companies generate savings from the insurance sector within the economy and make available the same in well directed areas of the economy deserving investments ; a sector with potential for business as is the case with Indian insurance provides incentive to develop it all the more faster

It enables risk to be managed more efficiently through risk pricing and risk transfers and this is an area which provides unlimited opportunities in the Indian context for consulting, broking and education in the post-privatization phase with newer employment opportunities

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The insurance industry of its own accord is interested in loss minimization. Its expertise in understanding losses assists it to share the experience across the economy thus enabling better loss control and preservation of national assets

In its risk pricing and investment decisions the insurance industry sets the tone for investment by others in the economy. Informed assessment by the insurance companies thus signals allocation of resources by others contributing to efficiency in allocation. In India visibility of LIC and GIC have been dwarfed by governments actions and other high profile institutions like ICICI, IDBI and UTI. Of late AIG is visible in the media and its investment announcements are being followed keenly by institutional investors in India. ING Savings Trust and Zurich are active in asset management and are being keenly followed by retail investors.

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Chapter -2 Object of the study

44

Object of the study

Objective
Some insurers, such as ICICI PruLife, have fulfilled their mission to be a scale player in the mass market by intro-ducing a range of 13 products to meet the needs of each customer. Others have taken a more focused approach, introducing select products that they believe hold potential and fill market gaps. STRATEGIC ALTERNATIVES If one analyses the history of growth of the insurance industry since reforms, it is marked by allround growth of all players. More or less all players (including the market leader LIC) have aggressively recruited and trained advisors, appointed agents, launched new products, improved customer service standards and revamped/expanded their distribution networks. If at all there was any major difference between players it was only in time lag in launching of services. Every player would like the customers to believe that its service standards are the best or that its agents are the most informed and ethical, but is debatable whether there are any significant differences. In other words, each company is trying to be everything to everybody. Our argument is that the strategy of being everything to everybody is risky. Some players justify the above strategy on the basis that the Indian market is huge and it can accommodate everybody. Still, in a market where it is difficult to distinguish oneself sufficiently on service or any other parameter to be able to charge a premium, it will lead to unmitigated price competition to the detriment of all players. One may achieve sales turnover, but margins and profitability will suffer severely. In the insurance industry where large amounts of capital are required, this is risky. While there is room for a few scale players with a finger in every pie, it is profitable for other players to focus on different segments to survive and thrive in a multi-firm open environment. While each company has to choose its own unique positioning based on its unique strengths, the below-mentioned generic positioning alternatives5 appear worth considering. Needless to say the positioning choices discussed here are not mutually exclusive and can be overlapping.

45

CHOOSING THE RIGHT STRATEGY The right strategic choice is not a matter of positioning choice alone. It involves the very way a company organises itself to do business. It is the configuration of the entire value chain of the company through a different set of activities to deliver unique value to consumers. The set of activities cover all upstream and downstream activities, from the selection of the product mix, the way the products are priced, promoted, the type of distribution mechanism used, the way customers are serviced and so on.

Some life insurance companies focusing on rural markets have adopted innovative means of distribution. Instead of appointing agents as is done typically, they have used gramsevaks in different villages across the country to promote life insurance and act as their sales arm.

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CHAPTER-3 RESULTS AND DISCUSSION

47

RESULTS AND DISCUSSION Policy Holders

A sample size of 50 people has undertaken. The analysis of the questions has been done with the help of pie charts. It helps is presenting a clear picture of the responses of the people. The analysis has been done differently for each question. It is as follows:

1.

Do you own a life insurance policy?

Yes

No

38%
Yes

62%
No

Analysis:

Only 62 % people own a life insurance policy and rest of the people dont own a policy. The reasons may be lack of awareness among people or people dont want to invest their money in insurance policies.

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2.

Are you aware of various policies offered by ICICI Prudential and LIC? Yes No

LIC

ICICI Prudential

4%
Yes No

46% 54%
Yes No

96%

Analysis: 96% people are aware of LIC whereas only 54% of people are aware of ICICI Prudential. The reason behind is that LIC is the oldest insurance player in the market since 1954 and had been enjoying monopoly for the last 40 years. Where as ICICI Prudential has come into the market only 3-4 years back.

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3. What factors do you consider before purchasing a life insurance policy?

Risk coverage Saving/Investment Tax saving All of the above

14 12 10 8 6 4 2 0
Risk coverage Tax Saving Saving/ Investment All of the Above

Factors

Analysis: 13 out of 31 people want life insurance as a tax saving option rather than a risk coverage instrument. Whereas 10 people consider life insurance policy as an investment option and only 5 people want all the features in their policies. Only 3 people are considering risk factor as the major reason for taking a life insurance policy, which is not an acceptable norm.

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4.Do you think that services have improved after allowing private players in insurance sector? Yes No

20%
Yes

80%

No

Analysis: A large number of people are of the view that privatization is the appreciatable step of Indian government which is directly contributing in the way of growth of insurance sector in India.

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Q.7

Is your current Insurance policy Unit Linked or Traditional? Criteria Only Unit Linked Only Traditional Both No. of Respondents 0 39 11

Respondents Having ULIP and Traditional Insurance Products

22%

0% Only Unit Linked Only Traditional Both 78%

From the Q. No. 7 we can say that even though the modern products available in the market since more than two years and which are having the more flexibility and also giving the higher return than traditional one most of the people do not have or may be not aware of it which shows the lack of brand awareness and it requires an aggressive promotional efforts on the part of company. There is a lot of scope available for the company to attract more customers by giving or introducing most suitable ULIP products and at the same time increase the customer base.

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Q.8

If given a choice, where would you like to invest your money? (Please Rank Your Choice) 1 0 4 4 17 22 0 0 10 2 1 12 8 3 12 2 6 5 3 5 14 1 0 12 4 12 0 4 1 4 2 5 2 10 19 2 5 25 8 2 2 2 1 1 1 6 12 3 5 6 0 14 0 0 7 5 0 13 1 0 2 3 0 8 1 0 13 0 0 0 1 2 Total 50 45 48 34 50 33 42 20

Choice/Rank Mutual Fund Insurance Gold Equities Post Office Debenture Bank Deposit Other

Investment Priorities
No. of Respondents
60 50 40 30 20 10 0 Mutual Fund Insurance Gold Equities Post Office Debenture Bank Deposit Other

Rank

This question is mainly designed to know the investment priorities of the people of Jalandhar town. The objective behind this Q. is that after the Charotar Nagrik Co-oprerative Bank and other Credit Societies, which are giving higher interest on deposits, the whole scenario of city is changed. Most of the people prefer to invest in post office saving schemes and where their money is safe even though the return is very less. So there is a great need to divert the efforts of the company towards the safety and security as ICICI Prulife is a private insurance Company.

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Total

Q.9

According to you what are the factors that would affect you decision while purchasing an insurance policy? 1 12 21 20 1 1 2 15 17 14 1 2 3 15 8 15 9 0 4 6 2 1 18 16 5 2 2 0 21 21 50 50 50 50 50 40

Criteria/Rank Premium Return Safety Liquidity Market Condition

Factors Affecting the Insurance Decision

No. of Respondents

60 40 20 0 1 2 3 4 5 6 Rank

Criteria/Rank Premium Return Safety Liquidity Market Condition

The question No. 9 is designed to know which the factors are affecting the most to the prospect while making decision to invest in insurance. As far as investment in insurance is concerned most of the people want that it should be safe and at the same time giving the compatible returns because insurance is not only for death benefit it is also a saving tool for future. So the mix response of respondents is welcomed. Available data is such that there is a bit ambiguity. But we can say that the most affecting factors to the prospect are return and safety. As per the finance theory risk and return goes in hand in hand but as far as insurance is concerned it is all about the compatible and safe returns over others.

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CHAPTER -4 SUGGESTION AND IMPLICATION

55

SUGGESTION AND IMPLICATION

Opening up the sector certainly means more awareness amongst customers and higher expectations, which can be satisfied by brand awareness i.e brand image has to be created, new products, better packaging and improved customer service. Potential buyers for most of this Insurance lie in the middle class. ICICI Prudential will have to explore new distribution and marketing channels to reach the customers. They should follow proper advertising strategies as they just started by endorsing Jassi Jaisi Koi Nahin and Launching ICICI Prudential Zone in Mobile Phones (STEP 1 AND STEP 2, STEP 3 AND STEP 4, STEP 5). The vast potential of the 250million strong middle class population of India, can be unleashed by repositioning Life Insurance as a risk cover instrument. The key to tap the rural market can be through Co-operative societies, Village Panchayats and Post Offices. Where the Co-operative societies and village Panchayats can act as Corporate Agents to create the brand image of ICICI PRUDENTIAL in the rural market.

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CHAPTER-5 CONCLUSION

57

CONCLUSION
For the last few years I have seen the development in the insurance sector after privatization. This step of government of India has resulted in form of competition in the market & prospects to cover up the huge untapped market. Before privatization LIC had 100 % market share but after privatization it has come down to 90 % and 10 % for private players. Insurance sector is developing at a faster pace as compare to earlier one but still it has more scope to grow at the fastest pace it ever grows. Private players are giving a stiff competition to LIC. Though LIC offers a wide range of products as compare to other private players like ICICI Prudential , but still they are performing better with features like online services, transparency, flexibility, quick settlement of claims etc. ICICI Prudential has become the # 1private player in the market due to its performance as I can measure by its 3 % holding of market share out of 10 % holding of all the private players in the market. However, still now there is a huge untapped market for insurance in India. In a survey it was found that still there is 250million strong middle class population of India, which is still untapped. On the other hand rural areas and small towns offer a huge potential to the Insurance companies. This potential was largely untapped due to inadequate distribution It shows that there is a great scope of insurance business in India. In India health insurance is also not so popular. The reason behind is that people are not aware of their insurance needs. In India insurance is sold only as a tax saving and investment option rather than a risk-cover instrument. In my survey I found a number of reasons for the inadequate performance of insurance sector in India. Reasons like brand image, lack of awareness for insurance needs, lack of educated & talented sales force with insurance companies, Lack of penetration due to inadequate marketing/delivery system are main problems. Therefore, steps should be taken by ICICI PRUDENTIAL to overcome these 58

hassles and try to become a leader in the insurance sector.

The following are some

recommendations given by me as I analyzed after getting the placement from IIPM in ICICI PRUDENTIAL and working there from last 11 months as a UNIT MANAGER.

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Reference
1.
3. Insurance Management Anand Ganguly (New Age International)

Insurance in India P. S. Palande, Shah & M. L. Lunawat (Response books)

Brochures / Information Booklets ICICI Prudential L.I.C. Annual Report Product List L.I.C.

Report/Acts Malhotra Committee Report on Reforms in the Insurance Sector, 1993. The Insurance Regulatory and Development Authority Bill, 1999.

Newspapers / Magazines Insurance Post The Economic Times The Insurance Times

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Questionnaire (ICICI Prudential) 1 What do you think are the major problems of Insurance sector in India?

2 Can you mention some measures, which are required to remove the difficulties faced by insurance sector in India?

3 What are the market prospects for life insurance in India? Poor _ Fair _ Satisfactory _ Good _ Excellent _

4 Do you think that financial position of people in India becomes a problem in the way of taking insurance policy? Yes _ No _

5 Is health insurance popular in India? Yes _ No _

Why people are not very concerned regarding insurance in India?

7 8

India has huge untapped market for insurance. What steps do you take to tap this market? What type of products and services provided by your organization that is better than LIC?

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