1.

COMPANY PROFILE
Sundaram Finance Limited was incorporated in 1954 and has grown into one of the

most trusted financial services group in India and a part of TV Sundaram Iyengar and Sons group
of companies, one of Indias largest industrial conglomerates and diversified industrial
conglomerate with principal base in Chennai and Madurai. Almost all the companies in the
group are privately held. The company was started with a paid-up capital of Rs.2Lakhs and
later went public in 1972.
1.2.1 FOUNDER OF THE COMPANY
The Company was founded by Sri. T. S. Santhanam. He has a rich experience in the
automobile and road transport sector for nearly six decades. He was the founder, Director and
First managing director of Sundaram Finance Limited and has served on various committees
constituted by the Central Government and Reserve Bank of India on various aspects relating to
growth and development of the Road Transport and Non-Banking Financial Companies.
The company has been rated as MAA by the ICRA signifying the highest number of
deposits.

The Company mobilizes its funds from driver sources at competitive rates thus

achieving a reduction in overall cost of funds. The company gets its funds from the main sources
namely,

Deposits
Bank/Industrial Finance
Debentures
Commercial Papers

1.2.2 THE MAIN ACTIVITIES OF SUNDARAM FINANCE LIMITED

Deposits
Hire Purchasing
Leasing

1.2.3 FIVE PILLARS OF SUNDARAM FINANCE LIMITED

1.
2.
3.
4.
5.
1.2.4

Faith
Depositors confidence
Institutional trust
Investor safety
Employee loyalty
CORPORATE PHILOSOPHY OF THE COMPANY
Truth and fairness guide the management of finance
Customer satisfaction through excellent service and reliability
Prudence and conservation in finance operations
Truth, honesty and efficiency in all dealings
Professional management with high standards of integrity
Full compliance with law and regulations.

1.2.5 OBJECTIVES OF THE COMPANY

Sundaram Finance was initiated with the sole objective of financing commercial
vehicles and passenger cars. Within a span of 55 years they have spread their wings to every
exposable area in the Non-banking finance sector. Sundaram Finance Where Truth, Fairness
and Transparency guide the management of finance.
1.2.6 VALUES
A set of values have governed their growth over the years. Among them are transparent
in their business practices, dedicated customer service fair, efficient and safe financial policies.
1.2.7

STRENGTH

Support of the group companies.

Involvement of the directors on major policy matters.

High employee morale.

Good initial system for operation and control.

Efficiency and sophisticated software system for decision support system.

Investors trust and faith in the company.

Easy financing schemes for all cars new and second hand cars.

Simple documentation, quick processing and speedy approval.

Customized schemes, personalized service.

Direct dealing between customer and company.

No hidden costs.

Tailor made products to suit individual requirements.

1.2.8

SUBSIDARIES / GROUPS

Sundaram Finance

Sundaram BNP Paribas Asset Management

Sundaram BNP Paribas Home Finance Limited

Royal Sundaram Alliance Insurance

Sundaram InfoTech Solutions

Sundaram Business Services

Sundaram Finance Distribution Limited

Infrieght Logistics Solutions Limited

1.2.9 AWARDS RECEIVED

Certificate of Commendation award by the Government of India under the scheme of

Good Tax Payers.

Second Best Tax Payer in the category of Private Sector Company for Assessment
Year 1994-95 in Tamil Nadu Region, from the Income Tax Department, Tamil Nadu.

Rolling Trophy by Rotary Club of Madras South West for Best Employer-Employee
Relationship for the year 1995-96.

Best Tax Payer in the category of Private Sector Company for Assessment Year 199596 in Tamil Nadu Region, from the Income Tax Department, Tamil Nadu.

Automan Award to Shri T S Santhanam, Chairman, from Motor India in 1998.

Pioneering Service Award to Shri T S Santhanam Chairman, from Chennai Good

Transport Association.

Sarige Ratna Award to Shri T S Santhanam, Chairman, from the Bangalore City
Lorry Transporting Agents Association (Regd).

Most Valued Customer Award to Shri T S Santhanam Chairman, from the State Bank
of India.

The Best Financier of the New Millennium 2000 to Shri. G K Raman, Managing
Director, from the All India Motor Transport Congress.

2.11. HISTORY OF INSURANCE IN INDIA

In India, insurance has a deep-rooted history. It finds mention in the writings of

Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ).
The writings talk in terms of pooling of resources that could be re-distributed in
times of calamities such as fire, floods, epidemics and famine. This was probably a
pre-cursor to modern day insurance. Ancient Indian history has preserved the
earliest traces of insurance in the form of marine trade loans and carriers contracts.
Insurance in India has evolved over time heavily drawing from other countries,
England in particular.

1818 saw the advent of life insurance business in India with the establishment
of the Oriental Life Insurance Company in Calcutta. This Company however failed in
1834. In 1829, the Madras Equitable had begun transacting life insurance business
in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and
in the last three decades of the nineteenth century, the Bombay Mutual (1871),
Oriental (1874) and Empire of India (1897) were started in the Bombay Residency.
This era, however, was dominated by foreign insurance offices which did good
business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and
London Globe Insurance and the Indian offices were up for hard competition from
the foreign companies.

In 1914, the Government of India started publishing returns of Insurance

Companies in India. The Indian Life Assurance Companies Act, 1912 was the first

statutory measure to regulate life business. In 1928, the Indian Insurance

Companies Act was enacted to enable the Government to collect statistical
information about both life and non-life business transacted in India by Indian and
foreign insurers including provident insurance societies. In 1938, with a view to
protecting the interest of the Insurance public, the earlier legislation was
consolidated and amended by the Insurance Act, 1938 with comprehensive
provisions for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there
were a large number of insurance companies and the level of competition was high.
There were also allegations of unfair trade practices. The Government of India,
therefore, decided to nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance
sector and Life Insurance Corporation came into existence in the same year. The LIC
absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies245
Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the
Insurance sector was reopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in the
west and the consequent growth of sea-faring trade and commerce in the 17 th
century. It came to India as a legacy of British occupation. General Insurance in
India has its roots in the establishment of Triton Insurance Company Ltd., in the year
1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set
up. This was the first company to transact all classes of general insurance business.

1957 saw the formation of the General Insurance Council, a wing of the Insurance
Associaton of India. The General Insurance Council framed a code of conduct for
ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum
solvency margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalisation) Act,
general insurance business was nationalized with effect from 1 st January, 1973. 107
insurers were amalgamated and grouped into four companies, namely National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd and the United India Insurance Company Ltd. The General
Insurance Corporation of India was incorporated as a company in 1971 and it
commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending to
nearly 200 years. The process of re-opening of the sector had begun in the early
1990s and the last decade and more has seen it been opened up substantially. In
1993, the Government set up a committee under the chairmanship of RN Malhotra,
former Governor of RBI, to propose recommendations for reforms in the insurance
sector.The objective was to complement the reforms initiated in the financial
sector. The committee submitted its report in 1994 wherein , among other things, it
recommended that the private sector be permitted to enter the insurance industry.
They stated that foreign companies be allowed to enter by floating Indian
companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the

Insurance Regulatory and Development Authority (IRDA) was constituted as an
autonomous body to regulate and develop the insurance industry. The IRDA was
incorporated as a statutory body in April, 2000. The key objectives of the IRDA
include promotion of competition so as to enhance customer satisfaction through
increased consumer choice and lower premiums, while ensuring the financial
security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application
for registrations. Foreign companies were allowed ownership of up to 26%. The
Authority has the power to frame regulations under Section 114A of the Insurance
Act, 1938 and has from 2000 onwards framed various regulations ranging from
registration of companies for carrying on insurance business to protection of
policyholders interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India

were restructured as independent companies and at the same time GIC was
converted into a national re-insurer. Parliament passed a bill de-linking the four
subsidiaries from GIC in July, 2002.

Today there are 14 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 14 life insurance companies operating in the
country.
The insurance sector is a colossal one and is growing at a speedy rate of 1520%. Together with banking services, insurance services add about 7% to the
countrys GDP. A well-developed and evolved insurance sector is a boon for
economic

development

as

it

provides

long-

term

funds

for

infrastructure

development at the same time strengthening the risk taking ability of the country.

2.12. MILESTONES IN INDIAN LIFE INSURANCE BUSINESS

1912: The Indian Life Assurance Companies Act came into force for regulating
the life insurance business.

1928: The Indian Insurance Companies Act was enacted for enabling the
government to collect statistical information on both life and non-life
insurance businesses.

1938: The earlier legislation consolidated the Insurance Act with the aim of
safeguarding the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies were taken
over by the central government and they got nationalized. LIC was formed by
an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5
crore and that too from the Government of India.

The history of general insurance business in India can be traced back to Triton
Insurance Company Ltd. (the first general insurance company) which was formed in
the year 1850 in Kolkata by the British.
2.13. IMPORTANT MILESTONES IN THE INDIAN INSURANCE BUSINESS

1907: The Indian Mercantile Insurance Ltd. was set up which was the first
company of its type to transact all general insurance business.

1957: General Insurance Council, an arm of the Insurance Association of

India, framed a code of conduct for guaranteeing fair conduct and sound
business patterns.

1968: The Insurance Act improved for regulating investments and set minimal
solvency levels and the Tariff Advisory Committee was set up.

1972: The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India. It was with effect from
1st January 1973.

107 insurers integrated 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 was incorporated
as a company.

2.14. Economic policy context and imperatives of

liberalization of insurance sector:
There are several imperatives for opening of the insurance and health insurance
sector in India for private investment. Here we review some of these imperatives.
Economic policy reforms started during late eighties and speeded up in nineties are
the context in which liberalization of insurance sector happened in India. It was very
obvious that the liberalization of the real (productive) and financial sector of the
economy has to go hand in hand. It is imperative that these sectors are consistent
with policies of each other and unless both function efficiently and are in
equilibrium, it would be difficult to ensure appropriate economic growth. Given
these facts liberalization of both sectors has to proceed simultaneously.Indian
economic system has been developed on paradigm of mixed economy in which
public and private enterprises co-exist. The past strategies of development based
on socialistic thinking were focusing on the premise of restrictions, regulations and
control and less on incentives and market driven forces. This affected the
development process in the country in serious way. After the economic liberalization
the paradigm changed from central planning, command and control to market
driven

development.

Deregulation,

decontrol,

privatization,

delicensing,

globalization became the key strategies to implement the new framework and
encourage competition. The
social sectors did not remain unaffected by this change. The control of government
expenditure, which became a key tool to manage fiscal deficits in early 1990s,
affected the social sector spending in major way. The unintended consequences of
controlling the fiscal deficits have been reduction in capital expenditure and nonsalary component of many social sector programmes.This has led to severe
resource constraints in the health sector in respect of non-salary expenditure and
this has affected the capacity and credibility of the government health care system
to deliver good quality care over the years. Given the increasing salaries, lack of
effective monitoring and lack of incentives to provide good quality services the
provides in the government sector became indifferent to the clients. Clients also did
not demand good quality and better access, as government services were free of
cost.

Under this situation more and more clients turned to the private sector health
providers and thus the private sector healthcare has expanded. Given the socialistic
political thinking and populist policy it has been generally difficult for any
government to introduce cost recovery in public health sector. Given that
government is unable to provide more resources for health care, and institute cost
recovery, one of the ways to reduce the under-funding and augment the resources
in the health sector was to encourage the development health insurance.

Another imperative for liberalization of the insurance sector was the need for longterm financial resources on sustainable basis for the development of infrastructure
sector such as roads, transports etc. It was realized that during the course of
economic liberalization, the funds to development the infrastructure also became a
major constraint. Country certainly needed infrastructure development. For this the
finances are major constraint. In these investments the benefits are more social
than private. The major concern was how these finances can be made available at
low costs. In past the development of social sector were financed using government
channeled funds through various semi-government financial institutions. Under the
liberalized economy this may not be possible. One hope is that if the insurance
sector develops rapidly under privatization then it can provide long-term finance to
the infrastructure sector.

The financial sector, which consists of banks, financial institutions, insurance

companies,
provident funds schemes, mutual funds were all under government control. There
was less competition across these units. As a result these institutions remained
significantly less developed in their approach and management. Insurance sector
has been most affected by the government controls. Government had significant
control on the policies these insurance companies could offer and utilization of the
resources mobilized by insurance companies. One can see that most of the

insurance products (e.g., life insurance products) were promoted as mechanisms to

improve the savings and tax shelters rather as risk coverage instruments. Other
segments of the insurance products grew because of the statutory obligations (e.g.,
Motor Vehicle, Marine and Fire) under various acts. The management and
organization of insurance sector companies remained less developed and they
neglected new product development and marketing. Thus one of the hopes in
opening of the insurance sector was that the private and foreign companies would
rapidly develop the sector and improve coverage of the population with insurance
using new products and better management.

Last imperative for opening of the insurance sector was signing the WTO India. After
this there was little choice but to open the entire financial sector - including
insurance sector to private and foreign investors. (Dholakia 1999).

2.15. LIST OF INSURANCE COMPANIES IN INDIA:

LIFE INSURERS

Websites

Public Sector
Life Insurance Corporation of India

www.licindia.com

Private Sector
Allianz Bajaj Life Insurance Company Limited

www.allianzbajaj.co.in

Birla Sun-Life Insurance Company Limited

www.birlasunlife.com

HDFC Standard Life Insurance Co. Limited

www.hdfcinsurance.com

ICICI Prudential Life Insurance Co. Limited

www.iciciprulife.com

ING Vysya Life Insurance Company Limited

www.ingvysayalife.com

Max New York Life Insurance Co. Limited

www.maxnewyorklife.com

MetLife Insurance Company Limited

www.metlife.com

Om Kotak Mahindra Life Insurance Co. Ltd.

www.omkotakmahnidra.com

SBI Life Insurance Company Limited

www.sbilife.co.in

TATA AIG Life Insurance Company Limited

www.tata-aig.com

AMP Sanmar Assurance Company Limited

www.ampsanmar.com

Dabur CGU Life Insurance Co. Pvt. Limited

www.avivaindia.com

GENERAL INSURERS
Public Sector
National Insurance Company Limited

www.nationalinsuranceindia.com

New India Assurance Company Limited

www.niacl.com

Oriental Insurance Company Limited

www.orientalinsurance.nic.in

United India Insurance Company Limited

www.uiic.co.in

Private Sector
Bajaj Allianz General Insurance Co. Limited

www.bajajallianz.co.in

ICICI Lombard General Insurance Co. Ltd.

www.icicilombard.com

IFFCO-Tokio General Insurance Co. Ltd.

www.itgi.co.in

Reliance General Insurance Co. Limited

www.ril.com

Royal Sundaram Alliance Insurance Co. Ltd.

www.royalsun.com

TATA AIG General Insurance Co. Limited

www.tata-aig.com

Cholamandalam General Insurance Co. Ltd.

www.cholainsurance.com

Export Credit Guarantee Corporation

www.ecgcindia.com

HDFC Chubb General Insurance Co. Ltd.

REINSURER
General Insurance Corporation of India

www.gicindia.com

2.16. CONCEPT AND FUNCTIONS OF INSURANCE

Insured, are you? The functions of Insurance will give you an idea on how to go
ahead with the approach of insurance and what type of insurance to choose. In a
layman's words, insurance means, a guard against pecuniary loss arising on the
happening of an unforeseen event. In developing economies, the insurance sector
still holds a lot of potential which can be tapped. Majority of the people in the
developing countries remains unaware of the functions and benefits of insurance
and it is for this reason that the insurance sector is still to grow.
Tangible or intangible an individual can insure anything! Be it a house, car, factory,
or the voice of a singer, leg of a footballer, and the hand of an author.....etc. It is
possible to insure all these as they have the possibility of becoming non functional
by any disaster or an accident.

BASIC FUNCTIONS OF INSURANCE:

1. 1.Primary Functions
2. 2.Secondary Functions

3. 3.Other Functions

Primary functions of insurance

Providing protection The elementary purpose of insurance is to allow

security against future risk, accidents and uncertainty. Insurance cannot
arrest the risk from taking place, but can for sure allow for the losses arising
with the risk. Insurance is in reality a protective cover against economic loss,
by apportioning the risk with others.

Collective risk bearing Insurance is an instrument to share the financial

loss. It is a medium through which few losses are divided among larger
number of people. All the insured add the premiums towards a fund and out
of which the persons facing a specific risk is paid.

Evaluating risk Insurance fixes the likely volume of risk by assessing

diverse factors that give rise to risk. Risk is the basis for ascertaining the
premium rate as well.

Provide Certainty Insurance is a device, which assists in changing

uncertainty to certainty.

Secondary functions of insurance

Preventing losses Insurance warns individuals and businessmen to

embrace appropriate device to prevent unfortunate aftermaths of risk by
observing safety instructions; installation of automatic sparkler or alarm
systems, etc.

Covering larger risks with small capital Insurance assuages the

businessmen from security investments. This is done by paying small amount
of premium against larger risks and dubiety.

Helps in the development of larger industries Insurance provides an

opportunity to develop to those larger industries which have more risks in
their setting up.

Other functions of insurance

Is a savings and investment tool Insurance is the best savings and

investment option, restricting unnecessary expenses by the insured. Also to
take the benefit of income tax exemptions, people take up insurance as a
good investment option.

Medium of earning foreign exchange Being an international business,

any country can earn foreign exchange by way of issue of marine insurance
policies and a different other ways.

Risk Free trade Insurance boosts exports insurance, making foreign trade
risk free with the help of different types of policies under marine insurance
cover.

Insurance provides indemnity, or reimbursement, in the event of an unanticipated

loss or disaster. There are different types of insurance policies under the sun cover
almost anything that one might think of. There are loads of companies who are
providing such customized insurance policies.

2.17. CHALLENGES FACING INSURANCE INDUSTRY:

Threat of New Entrants: The insurance industry has been budding with
new entrants every other day. Therefore the companies should carve out
niche areas such that the threat of new entrants might not be a hindrance.
There is also a chance that the big players might squeeze the small new
entrants.

Power of Suppliers: Those who are supplying the capital are not that big a
threat. For instance, if someone as a very talented insurance underwriter is
presently working for a small insurance company, there exists a chance that
any big player willing to enter the insurance industry might entice that
person off.

Power of Buyers: No individual is a big threat to the insurance industry and

big corporate houses have a lot more negotiating capability with the
insurance companies. Big corporate clients like airlines and pharmaceutical
companies pay millions of dollars every year in premiums.

Availability of Substitutes: There exist a lot of substitutes in the insurance

industry. Majorly, the large insurance companies provide similar kinds of
services be it auto, home, commercial, health or life insurance.

How to choose an insurance company?

There are many factors to probe into when an investor chose an insurance
company.

The consumers as well as the investors should only focus on the insurer's
financial strength and capability to meet ongoing responsibilities to its
policyholders.

The fundamentals of the insurance company should be strong and should not
indicate a poor investment opportunity as this might also deter growth.

2.18. TOP INSURANCE COMPANIES IN INDIA:

Life Insurance Corporation of India The Life Insurance Corporation of India (LIC) is undoubtedly India's largest life
insurance company. Fully owned by government, LIC is also the largest investor of
the country. LIC has an estimated asset of Rs. 8 Trillion. It also funds almost 24.6%
of the expenses of Government of India.
Established in 1956 and headquartered in Mumbai, Life Insurance Corporation of
India has 8 zonal offices, 100 divisional offices, 2,048 branch offices and a vast
network of 10,02,149 agents spread across the country.

Tata AIG Insurance SolutionsTata AIG Insurance Solutions, one of the leading insurance providers in India, started
its operation on April 1, 2001. A joint venture between Tata Group (74% stake) and
American International Group, Inc. (AIG) (26% stake), Tata AIG Insurance Solutions
has two different units for life insurance and general insurance. The life insurance
unit is known as Tata AIG Life Insurance Company Limited, whereas the general
insurance unit is known as Tata AIG General Insurance Company Limited.
AVIVA Life Insurance AVIVA Life Insurance, one of the popular insurance companies in India, is a joint
venture between the renowned business group, Dabur and the largest insurance
group in the UK, Aviva plc. AVIVA Life Insurance has an extensive network of 208
branches and about 40 Bancassurance partnerships, spread across 3,000 cities and
towns across the country. There are more than 30,000 Financial Planning Advisers
(FPAs) working for AVIAV Life Insurance. It offers various plans like Child, Retirement,
Health, Savings, Protection and Rural.
MetLife Insurance MetLife India Insurance Company Limited is another popular player in Indian
insurance sector. A joint venture between the Jammu and Kashmir Bank, M. Pallonji
and Co. Private Limited and other private investors and MetLife International
Holdings, Inc., MetLife Insurance offers a wide range of financial solutions to its
customers including Met Suraksha, Met Suraksha TROP, Met Mortgage Protector and
Met Suraksha Plus etc. It has its branches situated over 600 locations across the
country. More than 50,000 Financial Advisors work for MetLife.
ING Vysya Life Insurance ING Vysya Life Insurance entered into the Indian insurance industry in September
2001. A joint venture between ING Group, Ambuja Cements, Exide Industries and
Enam Group, ING Vysya Life Insurance uses its two channels, viz. the Alternate

Channel and the Tied Agency Force to distribute its products. The first channel has
branches in 234 cities across the country and has got 366 sales teams. On the other
hand, the later one has more than 60,000 advisors. Currently, ING Vysya Life
Insurance has tie ups with more than 200 cooperative banks.

Birla Sun Life Financial Services Birla Sun Life Financial Services is a joint venture between Aditya Birla Group and
Sun Life Financial Inc, Canada. It has got an extensive network of more than 600
branches. More than 1,75,000 empanelled advisors work for Birla Sun Life, which
currently covers over 2 million lives.
MAX New York Life Max New York Life Insurance Company Ltd. is one of the top insurance companies in
India. A joint venture between Max India Limited and New York Life International (a
part of the Fortune 100 company - New York Life), Max New York Life Insurance
Company Ltd. started its operation in April 2001. It currently has around 715 offices
located in 389 cities across the country. It also has around 75,832 agent advisors.
Max New York Life offers 39 products, which cover both, life and health insurance.
Bajaj Allianz Bajaj Allianz is a joint venture between Bajaj Finserv Limited and Allianz SE, where
Bajaj Finserv Limited holds 74% of the stake, whereas Allianz SE holds the rest 26%
stake. Bajaj Allianz has been rated iAAA by ICRA for its ability to pay claims. The
company also achieved a growth of 11% with a premium income of Rs. 2866 crore
as on March 31, 2009.
Bharti AXA Life Insurance Bharti AXA Life Insurance, one of the top insurance companies in India, is a joint
venture between Bharti group and world leader AXA. Bharti holds 74% stakes,
whereas AXA holds the rest of 26%. Bharti AXA has its branches located in 12 states
across the country. It offers a range of individual, group and health plans for its
customers. Currently more than 8000 employees work for Bharti AXA Life Insurance.