CHAPTER.

INTRODUCTION

‘‘A COMPARATIVE STDUY OF KOTAK LIFE INSURANCE & ICICI

PRUDENTIAL LIFE INSURANCE”

1.1. CONCEPT OF INSURANCE:

 Definition
“Any property human or animal life or any event that may lead to the loss of a legal right,
including value or the creation of legal liabilities is referred to as the subject matter of
insurance. Insurance is an event that may or may not occur”

The insurance industry has both economic and social purpose and relevance. It provides
social security and promotes individual welfare. The insurance companies are biggest
investors in long process of infrastructure development projects. Insurance reduces risk and
help to raise productivity in the economy. Insurance is a device for the transfer of risk of
individual entities to an insurer who agrees for a consideration to assume to a specified extent
losses suffered by the insured. Insurance covers insurable risks and the profitability of
insurable risk can be determined or forecasted for e.g risk related to life, property, riots, theft
are insurable.

The insurance companies are also financial intermediaries as they collect and invest large
amount of premiums in government projects. They offer protection to the investor, provide
means for accumulating savings and channelize funds to the government and other sectors.
They are a contractual saving agency which receives mostly without fail, steady inflow of
funds in the form of premiums or regular contribution to pension plans. They are also in a
position to predict, relatively accurately, when and what amounts of insurance or pension
benefits have to be paid

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  History Of Life Insurance
The story of insurance is probably as old as the story of mankind. The same instinct that prompts
modern businessmen to secure themselves against loss and disaster existed in primitive men also.
They too sought to avert the evil consequences of fire and flood and loss of life and were willing to
make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a
development of the recent past, particularly after the industrial era – past few centuries – yet its
beginning date back almost 6000 years. . Life insurance in its modern from come to India from
England in the year 1818. Oriental life insurance company started by Europeans in Calcutta
was the first life insurance company onlndian soil. All the insurance companies established
during that period were brought up with the purpose of looking after the need of European
community and Indian natives were not being insured by these companies. However, later
with the efforts of eminent people like babumuttylal seal, the foreign life insurance
companies started insuring Indian lives. But Indian lives were treated as sub-standard lives
and heavy extra premium were being changed on them. Bombay Mutual Life Assurance
Society heralded the birth of first Indian lives at normal rates. Starting as Indian enterprises
with highly patriotic motives, insurance companies come into existence to carry the message
of insurance to various sector of society. Bharat insurance company (1896) was also one of
such companies inspired by nationalism. The swadeshi movement 1905-1907 gave a rise to
more insurance companies. The United Indian Madras, National India and National Insurance
in Calcutta and the Co-operative assurance at Lahore were establish in 1906. In 1907,
Hindustan insurance company took its birth in one of the rooms of the jorasanko, house of the
great poet Rabindranath Tagore, in Calcutta.
The Indian Mercantile, General Assurance and Swedish Life (later Bombay life) were some
of the companies established during the same period. Prior to 1912 India had no legislation to
regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the
Provident Fund Act were passed.

 Insurance vs. assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In
general, in jurisdictions where both terms are used, "insurance" refers to providing coverage
for an event that might happen (fire, theft, flood, etc.), while "assurance" is the provision of
coverage for an event that is certain to happen. In the United States, both forms of coverage
are called "insurance" for reasons of simplicity in companies selling both products. By some
definitions, "insurance" is any coverage that determines benefits based on actual losses

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whereas "assurance" is coverage with predetermined benefits irrespective of the losses
incurred. Life insurance may be divided into two basic classes: temporary and permanent; or
the following subclasses: term, universal, whole life, and endowment life insurance.

 Term insurance

Term assurance provides life insurance coverage for a specified term. The policy does not
accumulate cash value. Term insurance is significantly less expensive than an equivalent
permanent policy but will become higher with age. Policy holders can save to provide for
increased term premiums or decrease insurance needs (by paying off debts or saving to
provide for survivor needs). Mortgage life insurance insures a loan secured by real property
and usually features a level premium amount for a declining policy face value because what
is insured is the principal and interest outstanding on a mortgage that is constantly being
reduced by mortgage payments. The face amount of the policy is always the amount of the
principal and interest outstanding that are paid should the applicant die before the final
instalment is paid.

 Group life insurance

Group life insurance (also known as wholesale life insurance or institutional life insurance) is
term insurance covering a group of people, usually employees of a company, members of a
union or association, or members of a pension or superannuation fund. Individual proof of
insurability is not normally a consideration in its underwriting. Rather, the underwriter
considers the size, turnover, and financial strength of the group. Contract provisions will
attempt to exclude the possibility of adverse selection. Group life insurance often allows
members exiting the group to maintain their coverage by buying individual coverage. The
underwriting is carried out for the whole group instead of individuals.

 Permanent life insurance

Permanent life insurance is life insurance that covers the remaining lifetime of the insured. A
permanent insurance policy accumulates a cash value up to its date of maturation. The owner
can access the money in the cash value by withdrawing money, borrowing the cash value, or
surrendering the policy and receiving the surrender value. The three basic types of permanent
insurance are whole life, universal life, and endowment.

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  Whole life:
Whole life insurance provides lifetime coverage for a set premium amount (see main article
for a full explanation of the many variations and options).

 Universal life coverage:

Universal life insurance (ULl) is a relatively new insurance product, intended to combine
permanent insurance coverage with greater flexibility in premium payments, along with the
potential for greater growth of cash values. There are several types of universal life insurance
policies, including interest- sensitive (also known as "traditional fixed universal life
insurance"), variable universal life (VUL), guaranteed death benefit, and has equity-indexed
universal life insurance.

 Endowments:

The endowment policy is a life insurance contract designed to pay a lump sum after a specific
term (on its 'maturity') or on death. Typical maturities are ten, fifteen or twenty years up to a
certain age limit. Some policies also pay out in the case of critical illness.

Policies are typically traditional with-profits or unit-linked (including those with unitized
with-profits funds).

Endowments can be cashed in early (or surrendered) and the holder then receives the
surrender value which is determined by the insurance company depending on how long the
policy has been running and how much has been paid into it.

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Some of The Important Milestones in The Life Insurance Business in IndiaAre:
1818: Oriental Life Insurance Company, the first life insurance company on Indian soil
Started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started
its business.
1912: The Indian Life Assurance Companies’ Act enacted as the first statute to regulate the
life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance business.
1938: Earlier Legislation Consolidated and Amended to by the insurance Act with the
objective of protecting the interest of the insuring public.
1956: 245 Indian and Foreign insurers and provident societies are taken over by the central
government and nationalize. LIC formed by an Act of parliament, viz LIC Act, 1956, with a
capital contribution of Rs. 5 crore from the Government of India.
The general insurance business in India on the other hand, can trace its roots to the triton
insurance company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British.

Some of the Important milestones in the General Insurance Business India.

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of
general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of the India frames a
code of conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to Regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) act, 1972 nationalized the general
insurance business in India with effect from 1st January 1973.
107 insurers amalgamated and grouped into four companies’ viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance company Ltd.
And the United India Insurance Company Ltd. GIC incorporated as a company.

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 1.2 INTRODUCTION OF KOTAKLIFE INSURANCE:

Kotak Mahindra Old Mutual Life Insurance Limited (‘the Company’), a joint venture
between Kotak Mahindra Bank Limited, its affiliates and Old Mutual Plc, was incorporated
on August 31, 2000 as a Company under the Companies Act, 1956 to undertake and carry on
the business of life insurance and annuity. Kotak Life Insurance Company is a joint venture
between Kotak Mahindra Bank (74%) and Old Mutual Plc (26%) headquartered in London.
The company started its operations in the year 2001. The official name of the company
is Kotak Mahindra Old Mutual Life Insurance Company. The company has more than 200
branches.
The Kotak Mahindra Group is one of India's trusted names in financial services. It was
established in 1985 and currently caters to the entire spectrum of financial products. Kotak
Mahindra Bank is one of its flagship businesses with an established presence as a private
bank in the country. Its other established lines of businesses include asset management,
broking, and investment. The Company’s life insurance business comprises of individual life
and group business, including participating, non participating, pension, annuity, group
gratuity, group leave encashment, group superannuation, unit linked insurance products.
These products are distributed through individual agents, corporate agents, banks, brokers,
the Company’s proprietary sales force and the Company website. The Company obtained a
license from the Insurance Regulatory and Development Authority of India (‘IRDAI’) dated
January 10, 2001 for carrying on the business of life insurance and annuity. The Company’s
registration is valid in compliance to Section 3 read with Section 3A of Insurance Act, 1938
as amended by the Insurance Laws (Amendment Act), 2015.The company is jointly owned
by Kotak Mahindra group of India and old mutual of south Africa in 74:26 ratio respectively.
The company was founded in 2001. The company currently caters to 15 million customer.
The company has presence of 232 branches in around 167 cities and towns in India has an
agency strength of 99275 agents. Under the umbrella, the company offer various protection
plans, saving and investment plans, child plans and retirement plans.

 Old Mutual:

Old Mutual is an international long-term savings, protection and investment group. The
company is based out of South Africa and was established in 1845. The company owns 26%-
owned joint venture in India with Kotak Mahindra Bank providing life insurance, retirement
pensions, savings and investments.
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 1.3 History of kotak life insurance company:

Uday Kotak (born 15 March 1959) is an Indian banker, the executive vice chairman and
managing director of Kotak Mahindra Bank. In early 1980s, while India was still a closed
economy and economic growth was muted, Uday Kotak decided to start out on his own,
refusing a lucrative job option from a multinational. Over the next few years, he diversified
his business into various areas of financial services, establishing a prominent presence in bills
discounting, stock broking, investment banking, car finance, life insurance and mutual funds.
On 22 March 2003, Kotak Mahindra Finance Ltd. became the first company in India’s
corporate history to receive a banking license from Reserve Bank of India. India magazine
ranked him 8th in India's 50 Most powerful people of 2017 list.

 Corporate History:

The Kotak Mahindra Group Was Founded In 1985 As A Provider of Financial Services. In
February 2003, Kotak Mahindra Finance Ltd. (KMFL), The Group's Flagship Company,
Received Banking License from The Reserve Bank Of India (RBI) To Conduct Banking
Operations In The Country And Was Renamed As Kotak Mahindra Bank Ltd, The Parent
Company of Kotak Life Insurance.

 Market Share of Kotak Life Insurance Company :

The following table shows Kotak Life Insurance market share. This is based on the Business
premium collected in each of the financial year from 2011-2016.

Year 2011-12 2012-13 2013-14 2014-15 2015-16

Market Share 1.0% 1.1% 1.1% 1.4% 1.6%

 Claims ratio of Kotak Life Insurance Company:

Year 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Claims
77.08 86.97 89.3 92.1 92.04 90.69 90.73 89.09
ratio

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 The process in kotak life insurance :

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 1.4 The Competitors of kotak life insurance company:

Competition
1. SBI Life Insurance
2. HDFC Life Insurance
 Competitors
3. Birla Life Insurance
4. ICICI Life Insurance

1. SBI Life Insurance :

SBI life insurance is a joint venture life insurance company between State Bank of
India(SBI), the largest state-owned banking and financial services company in India, and
BNP Paribas Cardiff in 2001. BNP Paribas is a French multinational bank and financial
service company with global headquarters in Paris. SBI owns 70.1% of the total capital and
BPN Paribas Cardiff 26% of the capital other investor are Value Line Pte Ltd. And Mac
Ritchie Investment Pte Ltd., holding 1.95% of the capital each. SBI life insurance has an
authorized capital of Rs.20 billion and a paid-up capital of Rs.10 billion.

2. ICICI Prudential Life Insurance :

ICICI Prudential Life Insurance Company Ltd. (ICICI Prudential Life) is a joint venture
between ICICI Bank Ltd., one of India's largest private sector banks, and Prudential
Corporation Holdings Limited.ICICI Prudential Life began its operations in fiscal year
2001 and has consistently been the market leader* amongst private players in the Indian
life insurance sector. Our Assets Under Management (AUM) as on 31st March 2017 were
`1,229.19 billion. At ICICI Prudential Life, we operate on the core philosophy of
customer centricity. They offer long term savings and protection products to meet
different life stage requirements of our customers. They have developed and implemented
various initiatives to provide cost-effective products, superior quality services, consistent
fund performance and a hassle-free claim settlement experience to our customers.
ICICI Prudential Life is the first private life insurer to attain assets under management of 1
trillion and In-force sum assured of over `3 trillion. ICICI Prudential Life is also the first
insurance company in India to be listed on NSE and BSE.

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 3. HDFC Standard Life :
HDFC Life is one of the leading long-term life insurance company that offers a range of
individual and group insurance solutions that meet various customer needs such as
Protection, Pension, Savings & Investment and Health, along with Children’s & Women’s
Plans. It is a joint venture between Housing Development Finance Corporation Ltd
(HDFC), one of India's leading housing finance institution and Standard Life plc, leading
well known provider of financial savings & investments services in the United Kingdom.
On August 14, 2015 HDFC Ltd. Established in 2000, HDFC Life is one of the leading
long-term life insurance solutions provider in India, offering a range of individual and
group insurance solutions that meet various customer needs such as Protection, Pension,
Savings, Investment and Health. Customers have the added advantage of customizing
plans, by adding optional benefits called riders, at a nominal price. As on November 30th,
2016, the Company has 29 individual and 10 group products in its portfolio, along with 8
optional rider benefits catering to a diverse range of customer needs.

4. Birla Sun Life Insurance Company Limited :

Birla sun life insurance company ltd is joint venture between the India conglomerate Aditya
Birla Group and Sun Life Financial Inc. an international financial service organization from
Canada. BSLI has a customer based of over two and half million policy holders. The Aditya
birla group is an indian multinational conglomerate named after Aditya vikrambirla,
headquartered in the Aditya birla center in worli, Mumbai, India. It operates in 40 countries
with more than 120000 employees worldwide. The group was founded by seth shiv Narayan
Birla in 1857. The group interests in sectors such as viscose staple fiber, metals, cement
(largest in India), branded apparel, carbon black, fertilizers, chemicals insulators financial
services, telecom (third largest in India), BPO and IT services. The group had a revenue of
approximately USD 41 billion in year 2015.
Aditya birla financial services group is the umbrella brand for all financial services business
of the Aditya birla group. They have strong existence across the life insurance, asset
management, lending, housing finance, equity and commodity broking, wealth management
and distribution, online money management portal, general insurance advisory and private
equity and health insurance business.

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 1.5 SWOT Analysis Of Kotak Life Insurance:

This SWOT Analysis of Kotak Life Insurance provides a full SWOT analysis of the
company's businesses and operations. The profile shows a comprehensive view of the
company's key strengths and weaknesses and the potential opportunities and threats.

SWOT Analysis

1. State of art Actuarial I.T Infrastructure

2. Has network across 300 towns

3. Innovative Product range with transparent practices
4. The company covers over 3 million customers and is one of the
Strengths fastest growing insurance companies in India

1. Lack of presence in various parts of country

2. Limited Advertising and low brand visibility as compared to

Weaknesses leading competitors

1. Growing potential in the semi-urban and rural market

Opportunities 2. Better investment awareness amongst the younger generation

1. Fluctuating economic scenarios

Threats 2. Entry of new NBFCs in the sector increasing competition

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 1.7The Marketing Mix Of Kotak Life Insurance (4 P’s):

 Product:

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 Price:

Kotak life insurance has got several products and hence a diverse price range as well. Initially
in the insurance sector there was only one large player, but now there is tough competition
specially from private players; so, price plays an important factor for dominance in this sector
for kotak Life Insurance. Price of the insurance schemes depend on the term of scheme and
return that it gives. In the pension schemes the price Kotak life insurance of a minimum
purchase of ₹100000 or ₹150000 and a minimum age of 30 to up to 85 years. Service Tax is
levied under pension scheme this increases to price amount to a very less extend. In the
endowment schemes premium is paid on monthly, quarterly, half yearly or annually; thus,
making it convenient for customers to available such schemes. For the Health insurance
schemes the premium starts form as low as ₹1400, price depends on the age of the insurer

and the gender of the insurer. This gives an overview on the pricing policies in its marketing
mix.

 Place:

Kotak life insurance has got an exceptional geographic reach across India. With headquarters
based in Mumbai, Kotak life insurance has an extensive network in India. Kotak life
insurance has 11000+ branch offices spread across India. With 8 zonal offices, 110+
divisional offices, 2000+ branch offices, 1400+ satellite offices, and 1200+ mini offices; It
has the largest insurance network in the country. Life Insurance Corporation of India also has
many of the foreign offices. Foreign branches are present in Port Louis in Mauritius, Suva
and Lautoka in Fiji Islands and Wembley in United Kingdom. Also, it has got joint ventures
with various other insurance companies in many other countries, in a way increasing their
wide outreach. It is also present in the online channel, its website provides its customers all
required information for any scheme in a very precise manner. It has got an app in all
platforms; this helps customers to easily access them anytime and anywhere.

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  Promotion:

Kotak life insurance undertakes various promotional activities in its marketing mix strategy.
Its primary mode of promotion is via Television Advertisement. Other modes of
advertisements include print media and distribution of Pamphlets Kotak life insurance
undertakes various CSR activities, a famous one includes awarding meritorious students of
12th standard with sum amount of money so as to continue their future studies comfortably.
Social media, electronic and bill boards are also incorporated into their promotional activities.
Kotak life insurance also sponsors in various sports activities like basketball and football.
Kotak life insurance sponsors in cricket; which is hugely popular and is followed by the large
part of Indian population. Since this is a service marketing brand, here are the other three Ps
to make it the 4Ps marketing mix of Kotak life insurance

 Process:

Kotak life insurance has got several business processes in place for its customers and
business activities. Insurance is a type of service sector where customers do not come by
itself to available it, companies need to reach out to the customers in order to sell it. So,
quality of service should be at the outmost level in case of insurance sellers. Kotak life
insurance keeps this in mind and thus maintained a seamless process which they cater for the
public. It needs to follow strict IRDA rules and guidelines in order to provide quality service.
From buying of any policy or scheme till the delivery of the sum amount, Kotak life
insurance follows a meticulous process such that customers and are on the same page at any
point of time.

 People:

Kotak life insurance focuses on people management very meticulously. In order to be

consistent market leader in the insurance sector, it is very important to have a team of people
to be able to constantly deliver the products and services. It boasts in having a strong agent
network across India. It has a total of 2016565 number of agents on the field reaching out to
potential customers every day. Total number of white collar officers working for It is 247541.
This level can be reached only by qualifying competitive examinations specially designed for
Kotak life insurance. The Kotak life insurance entrance examination serves this purpose

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 1.7 INTRODUCTION TO ICICI PRUDENTAL LIFE INSURANCE:

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank 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 and
Development Authority of India (IRDAI). As of 2010, the managing director and CEO was
Sandeep Bakhshi.

ICICI Prudential Life began its operations in fiscal year 2001 and has consistently been the
market leader* amongst private players in the Indian life insurance sector. At ICICI
Prudential Life, we operate on the core philosophy of customer centricity. We offer long term
savings and protection products to meet different life stage requirements of our customers.
We have developed and implemented various initiatives to provide cost-effective products,
superior quality services, consistent fund performance and a hassle-free claim settlement
experience to our customers. ICICI Prudential Life is the first private life insurer to attain
assets under management of `1 trillion and In-force sum assured of over `3 trillion. ICICI
Prudential Life is also the first insurance company in India to be listed on NSE and BSE.

ICICI Prudential Life's capital infused stands at Rs. 48.16 billion (as of March 31, 2015) with
ICICI Bank Ltd. and Prudential plc holding 68% and 32% stake respectively . For the
financial year 2015, the company garnered a total premium of Rs. 153.07 billion. The
company has assets under management of Rs. 1001.83 billion as on March 31, 2001.

 Fiscal Particulars:
2001 Company started operations
2002 Crossed the mark of 100,000 policies
2005 Crossed the mark of 1 million policies
Crossed the mark of 5 million policies
2008 Crossed receipt of `100 billion of total premium
Crossed `250 billion of assets under management
Established Subsidiary for the purposes of undertaking pension funds related
business
2010
Our Company turned profitable - registered profit of `2.58 billion
Crossed `500 billion of assets under management
2012 Started paying dividends
2015 Crossed `1 trillion of assets under management
2017 First insurance company in India to list on NSE and BSE

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 MARKET SHARE OF ICICI PRUDENTIAL LIFE INSURANCE &
ITS COMPETITORS:

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1.8 The SWOT Analysis of ICICI Prudential Life Insurance:

SWOT Analysis
1.Strong brand name and good financial
position

2.Leading financial service-provider

3.Good network and diverse products and
services

4. Strong financial rating

Strengths 5.Has over 40,000 employees

1.Legal issues

2.High number of people switching jobs

3.Was involved in one of the largest investor
Weaknesses frauds in USA

1.Expansion in other countries

2.Diversifying portfolios for customers

3.Acqusitions and JVs

Opportunities 4.New emerging markets

1.Changing govt regulations and financial
crisis like recessions

2.Increase in insurance frauds

3.Volatile nature of financial market

Threats 4.Fierce competition

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 1.9 THE MARKETING MIX OF ICICI PRUDENTIAL LIFE INSURANCE :

 Products:

The Company offers a range of life, pension and savings products across traditional and unit-
linked platforms to provide a range of long term savings and protection solutions. In order to
strengthen our Protection offerings, we have launched new products on retail, mortgage and
group platforms

Different Types of Life Insurance Plans :

1. Term Insurance Plans

2. Participating Traditional Insurance Plans

3. Non-Participating Traditional Insurance Plans

4. Unit Linked Insurance Plans (ULIPs)

5. Retirement or Pension plans

*Group Plans:

Group Term Insurance Plan a flexible group term plan which provides an inexpensive cover
to members of a group. The cover is either given based on 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.

*Health Insurance Plans:

1. Diabetes Plans : It is a long term insurance policy created for individuals with Type II
diabetes and pre-diabetes. It offers long term (upto 20 years) control over diabetes through a
specially designed Wellness Programme including regular health checkups and a Diabetes
Coach to facilitate diabetes management. It also provides you coverage against seven major
critical illnesses.

2. Cancer Plans : It provide a regular premium plan that helps you with a cash benefit on the
diagnosis as well as at different stages in the treatment of various cancer conditions.

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*Retirement Plans:

1. Forever Life : A traditional retirement product that offers guaranteed returns for the first 4
years. 2.
LifeStagePension: A regular premium unit linked pension plan that provides you with a
unique lifecycle-based strategy that continuously re-distributes your money across various
asset classes based on your age and risk profile.

3. Lifetime Super Pension: It is a regular premium unit linked pension plan that helps one
accumulate over the long term and offers 5 annuity options (life annuity, life annuity with
return of purchase price, joint life last survivor annuity with return of purchase price, life
annuity guaranteed for 5, 10 and 15 years & for life thereafter, joint life, last survivor
annuity without return of purchase pric5. at the time of retirement.

 Price:
Pricing is very important in life insurance as policyholders are attracted towards it more
often. ICICI Prudential has some unique policies which is different from other companies.
Example: ICICI Prudential- Pure Protect
Below is the table that shows premium for various age-term combinations fore Sum Assured
of Rs.50 lakhs.Age 10 years 15 years 20 years 25 years30 year Rs.7608 Rs.8378 Rs.9444
Rs.12558,35 year Rs.9889 Rs.11390 Rs.13,327 Rs.18809, 40 year Rs.14394 Rs.17064 Rs.20067
Rs.27075.

 Place:
Mostly Life Insurance companies have offices at main locations in cities and towns. But most
of the customers buy insurance policies with the help of a agents. Therefore place is important
but other than place what is more important is wide distribution of a policies through banks
directly. It is known as Bancassurance. Bancassurance is the term used to describe the
partnership or relationship between a bank and an insurance company whereby the insurance
company uses the bank sales channel in order to sell insurance products. Bank staff and
tellers, rather than an insurance salesperson, become the point of sale/point of contact for the
customer.

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Bank staff are advised and supported by the insurance company through product
information, marketing campaigns and sales training. Both the bank and insurance company
share the commission. Insurance policies are processed and administered by the insurance
company. By selling insurance policies bank earns a revenue stream apart from interest. It is
called as fee-based income. This income is purely risk free for the bank since the bank simply
plays the role of an intermediary for sourcing business to the insurance company. So, ICICI
Bank uses bancassurance to distribute policies to its customers. ICICI Prudential Life has one
of the largest distribution networks amongst private life insurers in India. It has a strong
presence across India with 1,960 branches (including 1,096 micro-offices)and an advisor base
of over 230,000 (as on December 31, 2009).

 Promotion:
Over the last few months, ICICI Prudential has been advertising in outdoor, TV and press.
The company launched a corporate television campaign which took the emotions and thoughts
of initial Sindoor corporate film a few steps further.
The film highlights the strength of promises that a husband makes to his wife, through the
depiction of everyday situations, and then goes on to emphasise that ICICI Prudential will
stand by the husband to help him fulfil all these promises. The TV campaign has also been
extended to outdoor. The company has also undertaken press and internet campaigns to
inform customers about benefits of some of its products, particularly retirement solutions,
through the Chintamani campaign. In addition to advertising, the company has also initiated
several activities to raise consumer awareness about life insurance and ICICI Prudential.
includes seminars – ICICI Prudential regularly holds consumer awareness meets on the need
for retirement planning in different cities such as Pune, Aurangabad,Coimbatore, Nagpur,
Bangalore and Mangalore. These are very well attended and have contributed significantly
towards increasing awareness about the category and the company. Apart from this, it also
entered into alliances with telecom companies, as well as companies like BPCL and Dominos.

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 1.10 SCOPE OF THE STUDY

This project aims at making an in-depth study of Life insurance companies only, both in
the public sectored and private sector. It deals with products offered by life insurance
companies consisting of Endowment Assurance (Participating), and money bank
(Participating), and unit linked insurance policies. An elaborate study is undertaken
covering a period of three years since the inception of the IRDA and the resultant entry of
private players in the insurance segment. The study was conducted on customers of the
public-sector life insurance corporation of India and private sector companies.

1.11 SIGNIFICANCE OF INSURANCE SECTOR.

 Provide safety and security:
Insurance provide financial support and reduce uncertainties in business and human
life. It provides safety and security against particular event. Insurance provide cover
against sudden losses.
 Generate financial resources:
Insurance generate funds by collecting premium. These funds are invested in
government securities and stock. This fund is profitably used for industrial
development and economic development etc.
 Encourage savings:
Insurance not only protect against risk but also provides an investment channel too.
Due to payment of regular premium systematic saving done. It encourage the habit of
saving for future purpose.
 Promotes economic growth:
Insurance enable to mitigate loss, financial stability and promote trade and commerce
activities those result into economic growth and development. Thus, insurance play an
crucial role in sustainable growth of economy.
 Medical support:
a medical insurance considered essential in managing risk in health. Anyone can be a
victim of critical illness unexpectedly. And rising medical expenses is of great concern.
It is one of the insurance policies that cater for different type of health risk.

21
 CHAPTER.2

LITERATURE REVIEW :

Sr. Name of the Author Year Title Journal Vol Iss Page
no ue No
1 Dr. P.K. Gupta 2000 Exploring Rural International 4 1 1045-
Markets For Private Journal of 1065
Life Insurance Player Multidisciplinary
In India and Scientific
Emerging
Research
2 Subir Sen 2008 An Analysis Of Life International 1 7 625-
Insurance Demand Journal of 635
Determinants For Advance
Selected Asian Research in
Economic And India Computer Science
and Management
Studies
3 2008 Innovation And New International 5 3 71-74
Lavanya Vedagiri Rao Service Development Journal of
In Select Private Life Scientific
Insurance Companies Research
In India
4 Nagaraj rao 2010 challenges in European 2 11 680-
designing need based academic research 685
product in life
insurance for inclusive
growth in India
5 C. Balaji 2015 Customer awareness International 2 1 9-12
and satisfaction of life Journal of
insurance policy Interdisciplinary
holders with reference Research in Arts
to Mayiladuthurai and Humanities
town
6 Sachin, Suvarna & Amar 2013 Lapsation Of Policy; International 1 5 448-
A Threat For Life Journal of 465
Insurance Industry Applied Research
7 Alok Mittal and Akash 2003 An Exploratory Study International 2 9 221-
Kumar of Factors Affecting Journal of 235
Selection of Life Commerce,
Insurance Products Business and
Management
8 Savita Jindal 2014 Ethical Issues In International 4 12 5-15
Insurance Companies: Journal of
A Challenge For Applied Research
Indian Insurance
Sector

22
2.1 “Exploring Rural Markets For Private Life Insurance Player In India” , Dr. P.K.
Gupta , 2000
In research paper had primary objective of examine the present state of affairs of rural life
insurance in India and attempt to explore the cause, which led to poor penetration of rural life
insurance markets for which for which a survey of 2000 sample of rural customer was been
conducted to examine their perception and attitude towards buying life insurance products.
The author found interesting fact to lights like rural households with head of the family more
educated but with less family income are more likely to purchase a life insurance policy than
those with better social security but lesser education and rural customer consider safety of
invested fund as the most important factor in buying a life insurance followed by claim
settlement and assistance in policy purchase.
The author concluded that the key to success in insurance penetration in rural areas for
private players are accessibility, reasonably price product, effective communication and after
sale service.

2.2 “An Analysis Of Life Insurance Demand Determinants For Selected Asian
Economic And India”, Subir Sen, 2008
the author wanted to examine the major economic and socio-political variables, which play a
significant role in explaining the life insurance consumption pattern in greater china region
and six Asian countries for the 11-year period 1994 – 2004 and also tried to re-assess whether
or not the variable best explaining the life insurance consumption pattern for twelve selected
Asian economies in the panel are significant for India for the period 1965 to 2004. The author
highlighted that in India the economic variable such as income, saving, price of insurance
product, inflation and interest rate which effect the insurance consumption.

2.3 “Innovation And New Service Development In Select Private Life Insurance
Companies In India”, Lavanya Vedagiri Rao, 2008
The author tries to examine how service firm actually innovate by interviewing zonal
managers of select 10 private life insurance companies in India. The authorstated that private
life insurance organization use systematic procedure in the areas of new service development
strategic and deploy that for new service and the study also report on how the organizations
involve their customer in the service innovation process. Another observation of research was

23
that the top executives of all the ten companies participate in the generation stage. This
research strongly concluded that liberalization of the insurance industry, the customer will be
the single most important factor forcing changes in the life insurance business and on life
insurance company part new service development is an ongoing activity in the organization.
And finally, researcher positively states that there is an effective system of innovation in
these services organization in India.

2.4 “challenges in designing need based product in life insurance for inclusive growth in
India”, Nagaraj rao, 2010
The author analyses the challenges faced by the insurers in designing need based product in
insurance for inclusive growth, and concludes that the policies of life insurance companies
are still not rural centric, catering to the specific needs of the people, with a view to
popularizing life insurance, he recommends that the consumer need to study the rural market,
analyses the specific need of each segment and innovative product, to suit the request of the
people to the objective of inclusive growth.

2.5 “Customer awareness and satisfaction of life insurance policy holders with reference
to Mayiladuthurai town by C. Balaji in 2015

In this research paper, tries to measure awareness among the urban and rural consumer, about
the insurance sector and also the various policies involving; various premium rates. The study
was conducted by examining around 100 sample respondents which revealed that 100% of
respondents are aware of the insurance policies; where as 87% of the respondents came to
know about insurance policies through agents. But it also came to light that most of the
respondents are aware of government insurance company LIC and in the private sector
HDFC Standard Life Insurance. Finally the research concludes that the penetration level of
insurance in India is only 2.3% when compared to 9-15% in the developed nations. So there
is a huge market for the Insurance products in the future in India.

2.6“Lapsation Of Policy; A Threat For Life Insurance Industry”, Sachin Surana &
Amar,2013

The research paper had main objective is to find out the cause and effects relationship of the
lapsation of policy. This study explains that lapsation refers to the situation when thecustomer
fails to pay the premium on his policy within timeframe plus the grace period allowed by the

24
company and it is often term as persistency. The author highlighted that wrong commitment
by insurance agent, malpractice by the insurance distribution agencies, financial burden of the
customer and finally poor service quality are few reasons causing laps in insurance policies.
This lapsation not only affect the customer in terms of lack of benefit but also majority effect
insurance companies in terms of high initial cost, adverse effect on liquidity position and
majority decrease of public image all this totally hamper the overall growth of insurance
company.

2.7“An Exploratory Study of Factors Affecting Selection of Life Insurance Products” by

Alok Mittal and Akash Kumar in 2003

In their study they has attempted to identify the factors which are affecting the consumers in
taking into consideration before selecting a life insurance product and determining the extent
to which these factors are taken into consideration for choosing life insurance products. The
study highlighted that consumers take into consideration factors like product attributes,
customer delight, payment mode, product flexibility, risk coverage, grace period, professional
advisor, and maturity period as important before making a decision on selection of a life
insurance product but most important factors which are of viral importance was product
attributes, and the least important was maturity period.

2.8 “Ethical Issues In Insurance Companies: A Challenge For Indian Insurance Sector”,
Savita Jindal, 2014
The research paper has main objective is to find out various ethical issue of insurance
companies in India by examine a sample of 50 people from insuring public were interviewed
with insurance policies of life insurance to find out the ethical ways to settlement of claims.
The author found that the insurance companies in India are failing in identifying the
customer’s needs and recommend product and services that meet their need followed by
misrepresenting in terms and condition while selling product to customers, unethical remark
about competitors, their product, or their employees or agent and lastly lack of expertise or
skill to competently performs one’s duties. Finally, the author concluded that insurance
company have recognized the moral dilemma in claims settlement; if claim are not settled in
ethical manner it will result in bad consequences for company image which will fall back on
the insured or the beneficiary. And finally the author stated that insurance business sector has
many areas for improvement and development.

25
 CHAPTER 3

OBJECTIVE OF THE STUDY

Objectives are the ends that states specifically how goal be achieved. Every study must
have an objective for which all the efforts have been done. Without objective, no result
can be obtained. On the basis of objectives all the research process is followed. It gives
direction to go through the research problem.

1. To study the financial performance of selected companies engaged in insurance

industry of India.
2. To examine and compare between the two Insurance companies.
3. To analyze the financial statements of the two Insurance Companies for the past three
years

26
 CHAPTER .4

RESEARCH METHODOLOGY

The project is undertaken for comparative study of two insurance companies in India. The
procedure adopted for conducting the research requires a lot of attention as it has direct
bearing on accuracy, reliability and adequacy of results obtained. It is due to this reason
that research methodology, which we used at the time of conducting the research needs to
be elaborate upon. It may be understood as a science of studying how research is done
scientifically. So the research methodology not only talks about the research method but
also consider the logic behind the method used in the context of the research study.
Research methodology is a way to systematically study and solve the research problem.

4.1 RESEARCH DESIGN

Research design can be described as a general plan about what you will do to answer the
research question. Research design is the arrangement of conditions for collection and
analysis data in a manner that aims to combine relevance to the research purpose with
economy in procedure. Research design is conceptual structure with in which research is
conducted. It constitutes the blueprint for the collection measurement and analysis of
data. Research design is a framework for the study and is used as a guide in collection and
analysing the data. It is a strategy specifying which approach will be used for gathering
and analysing the data.

4.2 RESEARCH DESIGN USED IN THE STUDY

Descriptive research design is used in this study because it will ensure the minimization
of bias and maximization of reliability of data collected. Descriptive study is based on
some previous understanding of the topic. Research has got a very specific objective and
clear-cut data requirements. The researcher had to use fact and information already
available through financial statements of earlier years and analyze these to make critical
evaluation of the available material. Hence by making the type of the research conducted
to be both descriptive and analytical in nature. From the study, the type of data to be
collected and the procedure to be used for this purpose were decided.

27
4.3 DATA COLLECTION METHOD

Every research is based on sound facts and data that ate collected data by the researcher.
The kind of data collected and the methods used to collect data has a very important
aspect of the research. There are two basic means of collecting of data as follows:

 Primary data- it is first hand data, which is collected by researcher itself. Primary
data is collected by various approaches so as to get a precise, accurate, realistic
and relevant data. The main tool in gathering primary data was investigation and
observation. It was achieved by a direct approach and observation from the
officials of the company.
 Secondary data- it is the data which is already collected by someone else.
Researcher has to analyse the data and interprets the results. It has always been
important for the completion of any report; it provides reliable, suitable, adequate
and specific knowledge.

4.4 Types of data used in the study

Secondary type of data is used in the study. the more emphases is on secondary data
because the researcher undertakes research in financial performance for which it needs all
annual reports and records from the selected companies, which are in the nature of
secondary data.

The required data for the study are basically secondary in nature and the data are
collected from:

 The audited reports of the KOTAK LIFE INSURANCE and ICICI life
INSURANCE.
 INTERNET- which includes required financial data collected from KOTAK LIFE
ISNURANCE’S and ICICI LIFE’s official website and some other websites on
the internet for the purpose of getting required financial data of the bank and to
get detailed knowledge about both the insurance companies for the convenience of
the study.

28
4.5 TOOLS AND TECHNIQUES USED FOR STUDY:

Ratio Analysis

A ratio analysis is a quantitative analysis of information contained in a company’s financial

statements. Ratio analysis is based on line items in financial statements like the balance sheet,
income statement and cash flow statement; the ratios of one item – or a combination of items
- to another item or combination are then calculated. Ratio analysis is used to evaluate
various aspects of a company’s operating and financial performance such as its efficiency,
liquidity, profitability and solvency. The trend of these ratios over time is studied to check
whether they are improving or deteriorating. Ratios are also compared across different
companies in the same sector to see how they stack up, and to get an idea of comparative
valuations. Ratio analysis is a cornerstone of fundamental analysis.

Following are the ratios which we used for the study:

 VOLUME OF CAPITAL
volume of capital is a measure of stock liquidity calculated as, current year share
capital is subtracted from the previous year share capital and divided by previous
year. It gives the change in share capital over a year. We can find out if the share
capital rose as compare to previous year

Volume of Capital = SHARE CAP (CY)-SHARE CAP (PY) x 100

SHARE CAP (PY)

 DEBT EQUITY RATIO

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage,
calculated by dividing a company’s total liabilities by its stockholders' equity. The D/E
ratio indicates how much debt a company is using to finance its assets relative to the
amount of value represented in shareholders’ equity.

DEBT EQUITY = DEBT

EQUITY

29
 PE RATIO:

The price/earnings ratio (PER) is the most widely used method. The PER depends
on the market’s perception of the risk and future growth in earnings. A company
with a low PER indicates that the market perceives it as higher risk or lower growth
or both as compared to a company with a higher PER. The PER of a listed
company’s share is the result of the collective perception of the market as to how
risky the company is and what its earnings growth prospects are in relation to that of
other companies. Investors use the PER to compare their own perception of the risk
and growth of a company against the market’s collective perception of the risk and
growth as reflected in the current PER.

PRICE EARNING RATIO = STOCK PRICE

EARNING PER SHARE

 GROWTH OF ASSET
Growth rates refer to the percentage change of a specific variable within a specific
time period, given a certain context. For investors, growth rates typically represent
the compounded annualized rate of growth of a company's revenues, earnings,
dividends and even macro concepts such as GDP and the economy as a whole.
Expected forward-looking or trailing growth rates are two common kinds of growth
rates used for analysis.

GROWTH OF ASSET = TOTAL ASSET (CY)-TOTAL ASSET(PY) x 100

TOTAL ASSET (PY)

30
  ROA RATIO :

Return on Asset (ROA) is a financial ratio that measures a company's profitability and the
efficiency with which its capital is employed. Capital Employed” as shown in the
denominator is the sum of shareholders' equity and debt liabilities; it can be simplified as
(Total Assets – Current Liabilities). Instead of using capital employed at an arbitrary point in
time, analysts and investors often calculate ROCE based on “Average Capital Employed,”
which takes the average of opening and closing capital employed for the time period.

RETURN ON ASEET – EBIT x 100

Capital Employed

 Earnings ratios:

 LOSS RATIO
The loss ratio is the difference between the ratios of premiums paid to an insurance
company and the claims settled by the company. The loss ratio is the total losses paid
by an insurance company in the form of claims. The losses are added to adjustment
expenses and then divided by total earned premiums. Loss ratios vary depending on
the type of insurance.

LOSS RATIO = Net claims Incurred x 100

Net Premium Earned

31
  EXPENSES RATIO
The expense ratio in the insurance industry is a measure of profitability calculated by
dividing the expenses associated with acquiring, underwriting and servicing premiums
by the net premiums earned by the insurance company. The expenses can include
advertising, employee wages and commissions for the sales force. The expense ratio
signifies an insurance company's efficiency before factoring in claims on its policies
and investment gains or losses. The expense ratio is combined with the loss ratio to
give an insurance company's combined ratio.

EXPENSE RATIO =Management Expenses +/(-) Net commission paid/ (earned) x 100
Net Premium Earned

 COMBINED RATIO
This refers to the sum of loss ratio and the expenses ratio. The figure measures the
claim losses and operating expenses vis-à-vis the premium earned. A ratio below
100% indicates that the company is making underwriting profit while a ratio above
100% means that it is paying out more money in claims that it is receiving from
premiums.

COMBINED RATIO = Loss Ratio + Expense Ratio

32
 INVESTMENT YIELD
The investment yield ratio compares the income that an insurance company brings
in from its investment activities rather than its operations. It is used to determine the
profitability of an insurance company. This ratio measures the average return on the
company’s invested asset before and after capital gains and losses. While
calculating the investment yield including capital gains, both realized as well as
unrealized capital gains are considered

INVESTMENT YIELD = Interest income, rents and other investment income

Average total investments

 RETURN ON NETWORTH
It measures the ability of a firm to generate profits from its shareholders investment
in the company. The return on net worth is useful for comparing the profitability of
a company to that of other firms in the same industry. a rising ratio suggest that a
company is increasing its ability to generate profit without needing as much capital.
It also indicates how well a company’s management is deploying the shareholder’s
capital. Higher the ratio the better

RETURN ON NET WORTH = Profit after Tax

Average Net worth

33
 Liquidity Ratio:

 CURRENT LIQUIDITY
This ratio is used to measure a companies’ ability to pay its short-term debts with
asset. Higher the ratio, the better the financial position of the company. If liquidity
ratio is below 1, then company may have problems paying its bill on time

CURRENT LIQUIDITY = Liquid assets

Current Liabilities

34
 4.6 RATIO ANALYSIS:

VOLUME OF CAPITAL= = SHARE CAP (CY)-SHARE CAP (PY) x 100

SHARE CAP (PY)

KOTAK LIFE INSURANCE:

YEAR ANS
2013-2014 0
2014-2015 0.010
2015-2016 0

ICICI PRU LIFE INSURANCE:

YEAR ANS
2013-2014 0
2014-2015 0
2015-2016 0.015

INTERPRETATION:
volume of capital is a measure of stock liquidity calculated as, current year share capital is
subtract form the previous year share capital and divided by previous year. It gives the
change in share capital over a year. We can find out if the share capital rose as compare to
previous year. Here, volume of share capital is 0 is all three years, the reason is there is no
change in share capital; it remains constant for all three years. Kotak life insurance share
capital has been Rs.13000 (in Lakh) and Icici life share capital is Rs.190000. This means,
there is no decrease or increase in share capital and it remains same.

35
DEBT EQUITY RATIO

DEBT EQUITY RATIO = DEBT

EQUITY

KOTAK LIFE INSURANCE:

YEAR ANS

2014 0.00%

2015 0.00%

2016 0.00%

ICICI PRU LIFE INSURANCE:

YEAR ANS

2014 0.00%

2015 0.00%

2016 0.00%

INTERPRETATION
it is used to measure leverage. It is a financial, liquidity ratio that compares a company’s total
debt to total equity. It shows the percentage of company financing that comes from creditors
and investors. The higher debt equity ratio indicates that more creditor financing is used than
investor financing. The lower debt equity ratio implies a more financially stable business and
higher ratio are considered more risky.
Here, both the companies have 0% in their debt equity ratio; the reason is the borrowings of
both the companies are 0.00.

36
P/E RATIO

PRICE EARNING RATIO = STOCK PRICE

EARNING PER SHARE

P/E RATIO OF KOTAK LIFE INSURANCE:

STOCK PRICE/EPS ANS

640/35.22 18.17

P/E RATIO OF ICICI PRU LIFE INSURANCE:

STOCK PRICE/EPS ANS

327.16/15.10 21.66

INTERPRETATION:
The price-earnings ratio is the ratio for valuing a company that measures its current share
price relative to its per-share earnings. Share price is the price of a single share of a number
of saleable stocks of the company, derivatives or other financial asset. PE ratio shows what
the market is willing to pay for a stock based on its current earning. Higher ratio means that
investors anticipate higher performance and growth in the future. It also means that
companies with losses have poor PE ratio. It can also explain as, if the PE ratio is high then it
means that the stock is expensive to purchase; whereas, if the ratio is low it indicates that the
stock is cheap to buy.
Here, the PE ratio of kotak life insurance is 18.17 and PE ratio of Icici pru life insurance is
21.66 So the kotak life insurance is consider to be a better buy as market price has not gone
up to reveal the earning prospects of the company. But Icici pru life insurance is consider to
show higher growth prospects as compare to kotak life insurance.

37
GROWTH OF ASEET

GROWTH OF ASSET – TOTAL ASSET (CY)-TOTAL ASSET(PY) x 100

TOTAL ASSET (PY)

KOTAK LIFE INSURANCE:

YEAR ANS

2014 4.05%

2015 9.25%

2016 6.58%

ICICI PRU LIFE INSURANCE:

YEAR ANS

2014 15.29%

2015 8.37%

2016 14.05%

INTERPRETATION:
Growth of asset measures the rate at which the value of a financial institutions asset is
increasing. Historical growth rate is good prediction of future behaviour, since assets are
expected to behave consistently. To calculate the year over year asset growth rate, the total
assets from the same quarters of two consecutive years are fond. Then, that total asset figure
from the current year is subtracted then total asset from the previous year and is divided by
previous year asset to get the growth rate of asset.
Here, kotak life insurance‘s asset growth has increased in 2014-15 at 9.25% and again came
down at 6.58% in 2015-16. Whereas, in Icici pru life insurance thegrowth rate came down
from 15.29% in 2014 to 8.37% in 2015 and again increase to 14.05%. Which means that
kotak life has stable growth of asset, were Icici pru life has decreased in the year 2015.

38
RETURN ON ASSET

RETURN ON ASEET = EBIT x 100

Capital Employed

KOTAK LIFE INSURANCE:

YEAR ANS

2014 2.05%

2015 2.46%

2016 2.89%

ICICI PRU LIFE INSURANCE:

YEAR ANS

2014 42.69%

2015 48.18%

2016 57.43%

INTERPRETATION:
ROA ratio shows how much profit employed capital generates. Higher ratio is favourable
because it means that more profit is generated. Return on capital employed is a profitability
ratio measures how efficiently a company can generate profits from its capital employed by
comparing net operating profit to capital employed.
ROA ratio of Kotak life of India was 2.05% in 2014 it goes up to 2.46% in 2015 and in 2016
it was 2.86%. Icici life ROA ratio is higher as compare to Kotak life’s ROA ratio. In 2014
ROA of Icici life was 42.69% in 2015 it was gone up to 48.18% and slightly up to 57.43%.
ROA ratio of both companies are favourable it means both companies are efficient to make
profit. If the ratio are unfavourable it means current liability is greater as compare to the total
asset.

39
  EARNING RATIO :

 LOSS RATIO:

Loss Ratio = Net claims Incurred x 100

Net Premium Earned

KOTAK LIFE INSURANCE:

YEAR ANS

2014 48.15%

2015 49.04%

2016 47.61%

ICICI PRU LIFE INSURANCE:

YEAR ANS

2014 86.12%

2015 64%

2016 52.78%

INTERPRETATION
The ratio measures the company’s loss experience as a proportion of premium income earned
during the year. Insurers that consistently experience high loss ratio may be in bad financial
health. They may not be collecting enough premiums to pay claims, expenses. It shows how
well the insurance company is doing. In first year 2014 the loss experience of ICICI life is
86.12%, In second year 2015 loss experience was fall to 64%, and in third year it again fall to
52.78%. In first year of Kotak life loss ratio is 48.15% it increase by 49.04% and 47.61% in
2016. it indicates the better performance of ICICI life year by year. Claim incurred is less
than premium earned value. It proves that the companies are doing well.

40
  EXPENSES RATIO :

Expense Ratio = Management Expenses +/(-) Net commission paid/ (earned) x 100
Net Premium Earned

KOTAK LIFE INSURANCE :

YEAR ANS

2014 9.05%

2015 8.29%

2016 7.76%

ICICI LIFE INSURANCE:

YEAR ANS

2014 7.65%

2015 5.70%

2016 6.55%

INTERPRETATION
The lower the expenses ratio, the better the profitability of the insurer. The expense ratio
signifies an insurance company’s efficiency before factoring in claims on its policies and
investment gains and losses.
Here, At end of financial year 2014 the kotak life’s expenses ratio is 9.5% in 2015 it came
down to 8.29% and slightly fall down to 7.78% in the year 2016. At end of financial year
2014 the expenses ratio of ICICI life is 7.65%, in 2015 it goes down to 5.70% and slightly
fall down to 6.55% in the year 2016. The fall in the expenses ratio of ICICI life shows the
better profitability. It means that both the companies are having better profits.

41
  COMBINED RATIO

Combined ratio = Loss Ratio + Expense Ratio

KOTAK LIFE INSURANCE:

YEAR ANS

2014 55.15%

2015 54.39%

2016 53.44%

ICICI PRU LIFEINSURANCE:

YEAR ANS

2014 88.21%

2015 67.82%

2016 52.49%

INTERPRETATION:
This refers to the sum of loss ratio and the expenses ratio. The figure measures the claim
losses and operating expenses vis-à-vis the premium earned. A ratio below 100% indicates
that the company is making underwriting profit while a ratio above 100% means that it is
paying out more money in claims that it is receiving from premiums.
Kotak life’s combined ratio for 2014 is 55.15%, in 2015 it was54.39% and in 2016 it was
53.44%. For ICICI life the ratio was 88.21% in 2014, in 2015 it was 67.82% and in 2016 it
was 52.49%. All the combine ratio of ICICI Pru life and kotak life insurance is below 100%
highlighting profitability and efficiency of the insurance company.

42
  INVESTMENT YIELD:

Investment Yield = Interest income, rents and other investment income

Average total investments

KOTAK LIFE INSURANCE:

YEAR ANS

2014 0.0654

2015 0.0891

2016 0.0695

ICICI PRU LIFE INSURANCE :

YEAR ANS

2014 0.15

2015 0.19

2016 0.06

INTERPRETATION:
the investment yield ratio compares the income that an insurance company brings in from its
investment activities rather than its operations. It is used to determine the profitability of an
insurance company. This ratio measures the average return on the company’s invested asset
before and after capital gains and losses. While calculating the investment yield including
capital gains, both realized as well as unrealized capital gains are considered.
Here Kotak life’S investment yield in 2014 is 0.064in 2015 it is0.0891and in 2016 it is
0.0695. as for ICICI life’s in 2014it is 0.15, in 2015 it is 0.19 and in 2016 it is 0.06.

43
  RETURN ON NETWORTH :

Return on Net worth = Profit after Tax

Average Net worth

KOTAK LIFE INSURANCE:

YEAR ANS

2014 8.20

2015 9.37

2016 6.09

ICICI PRU LIFE INSURANCE :

YEAR ANS

2014 0.35

2015 0.32

2016 0.01

INTERPRETATION:
it measures the ability of a firm to generate profits from its shareholders investment in the
company. The return on net worth is useful for comparing the profitability of a company to
that of other firms in the same industry. a rising ratio suggest that a company is increasing its
ability to generate profit without needing as much capital. It also indicates how well a
company’s management is deploying the shareholder’s capital. Higher the ratio the better. In
2014 it was 8.20 and increased to 9.37 in 2016 it was 6.09 of Kotak life and ICICI life’s ratio
has been decreasing and it came down from 0.35 in 2014 to 0.32 in 2015 and 0.01 in 2016.

44
  LIQUIDITY RATIO

 CURRENT LIQUIDITY

Current Liquidity = Liquid assets

Current Liabilities

KOTAK LIFE INSURANCE:

YEAR ANS

2014 13.77

2015 9.4

2016 1.90

ICICI PRU LIFE INSURANCE:

YEAR ANS

2014 3.75

2015 2.56

2016 2

INTERPRETATION:
this ratio is used to measure a companies’ ability to pay its short-term debts with asset.
Higher the ratio, the better the financial position of the company. If liquidity ratio is below 1,
then company may have problems paying its bill on time. Here the ratio of Kotak life
decreased from 13.77 to 1.90 from 2014 to 2016 and as for ICICI life it came down to 2 in
2016 from, 3.75 in 2014. High liquidity ratio indicates that a business is holding too much
cash that could be utilized in other areas. Low ratio means a firm may struggle to pay short-
term obligations. It means that kotak life insurance is more able to pay its debt as compared
to ICICI Life Insurance who may have a problem with pay its short-term debts.

45
 CHAPTER 5
FINDING
 Volume of capital is a measure of stock liquidity calculated as; current year share
capital is subtracted from the previous year share capital and divided by previous
year. It gives the change in share capital over a year. We can find out if the share
capital rose as compare to previous year. Here, volume of share capital is 0 is all
three years, the reason is there is no change in share capital; it remains constant for all
three years. Kotak life insurance’s share capital has been Rs.13000 (in Lakh) . This
means, there is no decrease or increase in share capital and it remains same in both
companies. Volume of capital of kotak life and Icici life is 0% throughout 2014-2016 as the
share capital has been constant

 Debt equity ratio is used to measure leverage. It is a financial, liquidity ratio that
compares a company’s total debt to total equity. It shows the percentage of company
financing that comes from creditors and investors. The higher debt equity ratio
indicates that more creditor financing is used than investor financing. The lower debt
equity ratio implies a more financially stable business and higher ratio are considered
more risky. Here, both the companies have 0% in their debt equity ratio, the reason is
the borrowings of both the companies are 0.00.

 The price-earnings ratio is the ratio for valuing a company that measures its current
share price relative to its per-share earnings. Share price is the price of a single share
of a number of saleable stocks of the company, derivatives or other financial asset. PE
ratio shows what the market is willing to pay for a stock based on its current earning.
Higher ratio means that investors anticipate higher performance and growth in the
future. It also means that companies with losses have poor PE ratio. It can also
explain as, if the PE ratio is high then it means that the stock is expensive to purchase;
whereas, if the ratio is low it indicates that the stock is cheap to buy.
Here, the Kotak life’s PE ratio is 18.17 and Icici Life is 21.66. Then Kotak life is
considered to be a better buy as market price has not gone up to reveal the earnings
prospects of the company. But Icici life is considered to show higher growth prospects
as compared to Kotak life insurance.

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 Growth of asset measures the rate at which the value of a financial institutions asset is
increasing. Historical growth rate is good prediction of future behaviour, since assets
are expected to behave consistently. To calculate the year over year asset growth rate,
the total assets from the same quarters of two consecutive years are fond. Then, that
total asset figure from the current year is subtracted then total asset from the previous
year and is divided by previous year asset to get the growth rate of asset.
Here, kotak life’s asset growth has increased in 2014-15 at 9.25% and again came
down at 6.58% in 2015-16. Whereas’ in ICICI life the growth rate came down from
8.37% in 2014-15 to 14.05% in 2015-16. This means that kotak life has stable growth
of asset

 ROA ratio shows how much profit employed capital generates. Higher ratio is
favourable because it means that more profit is generated. Return on capital employed
is a profitability ratio measures how efficiently a company can generate profits from
its capital employed by comparing net operating profit to capital employed.
Kotak life’s ROA ratio was 2.05% in 2014 and didn’t change much in 2016 which is
2.89%. ICICI life’s ROA ratio is higher as compare to Kotak life ’s but in 2016 ICICI
life’s ratio, in 2014 it was 42.69% and in 2016 it gone up to 57.43%.

 Earnings ratios:
Profitable operations are necessary for insurance companies to operate as a going
concern. The measurement of earnings focuses on an insurers’ ability to efficiently
translate its strategies and competitive strengths into growth opportunities and
sustainable profit margins. It analyses the profitability of the underwriting and
investment functions separately.
Under this we have used:
 LOSS RATIO
 EXPENSES RATIO
 COMBINED RATIO
 INVESTMENT YIELD
 RETURN ON NETWORTH

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 Loss ratio is the difference between the premiums earned and the claims settled by the
company. Conversely, insurers that consistently experience high loss ratio may be in
bad financial health. They may not be collecting enough premiums to pay claims,
expenses. It shows how well the insurance company is doing. This ratio reflects
whether a company collecting premiums higher than the amount paid in claims or not.
Here both kotak life’s and ICICI life’s, claim incurred is less than premium earned
value. It proves that both the companies are doing well.
Kotak life’s loss ratio is 48.15% in 2014 and came down slightly in 2016 at 49.04%.
ICICI life has decreased loss ratio which become 52.78% in 2016 from 86.12% in
2014

 Expenses ratio is calculated by dividing underwriting expenses by net premiums

earned gives the expenses ratio. Underwriting expenses refers to the cost of obtaining
new policies from insurance carriers. The lower the expenses ratio, the better the
profitability of the insurer.
The expense ratio signifies an insurance company’s efficiency before factoring in
claims on its policies and investment gains and losses.
Here, At end of financial year 2014 the Kotak life insurance expenses ratio is 9.05%
in 2015 it came down to 8.29% and slightly fall down to 57.76% in the year 2016.
ICICI life not changed much as it was 7.65% in 2014 and was 6.55% in 2016. Both
the insurance companies are having low expenses ratio. It means that both the
companies are having better profits.

 The combined ratio is calculated with the sum of incurred losses and expenses. A
ratio below 100% indicates that the company is making underwriting profit while a
ratio above 100% means that it is paying out more money in claims that it is receiving
from premiums.Kotak life’s combined ratio for 2014 is 55.15% and in 2016 it was
53.44%.
For ICICI life the ratio was 88.21% in 2014 and in 2016 it was 52.49%. Kotak life
insurance and ICICI life both have below 100% combined ratio it states that both
companies have profitability and efficiency in the business.

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 The investment yield ratio compares the income that an insurance company brings in
from its investment activities rather than its operations. It is used to determine the
profitability of an insurance company. This ratio measures the average return on the
company’s invested asset before and after capital gains and losses. While calculating
the investment yield including capital gains, both realized as well as unrealized capital
gains are considered.
Here Kotak life’s investment yield in 2014 is 0.0654 and in 2016 it is 0.069. As for
ICICI life in 2014it is 0.15 and in 2016 it is 0.06.
This result shows that Kotak life insurance’s income from investment activities are
more than its operation.

 Return on net worth ratio measures the ability of a firm to generate profits from its
shareholders investment in the company. The return on net worth is useful for
comparing the profitability of a company to that of other firms in the same industry. A
rising ratio suggest that a company is increasing its ability to generate profit without
needing as much capital. It also indicates how well a company’s management is
deploying the shareholder’s capital. In 2014 it was 8.20 and increased 9.93 to in 2016,
in other words, shareholders saw a 448% return on their investment in kotak life
insurance and ICICI life ratio has been decreasing and it came down from 0.35 in
2014 to 0.01% in 2016. It means shareholders saw a % return on their investment in
SBI life. It shows that kotak life insurance is funding its operations. While ICICI life
is declining shows that it will be not able to pay back the debt.

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 Liquidity ratio
Good liquidity helps an insurance company to meet policyholder’s obligations
promptly. An insurer’s liquidity depends upon the degree to which it can satisfy its
financial obligations by holding cash and investments that are sound, diversified and
liquid or through operating cash flows. A high degree of liquidity enables an insurer
to meet the unexpected cash requirements without untimely sale of investments,
which may result in substantial realized losses due to temporary market conditions
and/or tax consequences.
Under this the ratios are:

 CURRENT LIQUIDITY:

Current liquidity ratio is used to measure a companies’ ability to pay its short-term debts
with asset. Higher the ratio, the better the financial position of the company. If liquidity
ratio is below 1, then company may have problems paying its bill on time. Here the ratio
of kotak life insurance decreased from 13.77 to 1.90 from 2014 to 2016 and as for ICICI
life insurance it came down to 2 in 2016 from 3.75 in 2014. High liquidity ratio indicates
that a business is holding too much cash that could be utilized in other areas. Low ratio
means a firm may struggle to pay short-term obligations. It means that kotak life
insurance is more able to pay its debt as compared to ICICI life who may have a problem
with pay its short-term debts.

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 CHAPTER. 6

CONCLUSION

If properly analysed and interpreted, financial statement can provide valuable insight into a
firm’s performance. Financial statement analysis may be done for a variety of purpose. This
may range from simple analysis of the short-term liquidity position of the firm to a
comprehensive assessment of the strength and weakness of the firm in various areas. It also
helps in assessing corporate excellence, judging credit worthiness, predicting bankruptcy and
assessing market risk.

The project analysed balance sheet and profit and loss account of Kotak life insurance and
ICICI Pru. life insurance for three years 2014, 2015 and 2016.The financial statements are the
responsibility of company’s management. Financial Statement analyses and interpretation is
essential to examine the performance between firms and the firm over the years. The main
objective of the study to evaluate the financial performance of the Kotak Life Insurance and
ICICI Life Insurance during the period 2013-2014 to 2015-2016. It has been observed that
both the insurance companies are doing well in the market. ICICI & KOTAK life insurance
being the old company & is facing lot of competition in the market from the private
companies but they are still doing well with its assets, investing activities, and managing their
profits.

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 CHAPTER. 7

BIBLIOGRAPHY

1. www.insurance.kotak.in
2. Wikipedia
3. https://www.icicpruilife.co.in
4. www.investopedia.com
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In India”
6. Subir Sen,(2008). “An Analysis Of Life Insurance Demand Determinants For
Selected Asian Economic And India”
7. Lavanya Vedagiri Rao, (2008). “Innovation And New Service Development In Select
Private Life Insurance Companies In India”
8. Nagaraj Rao, (2010) “Challenges In Designing Need Based Product In Life Insurance
For Inclusive Growth In India”
9. Syed Ibrahim, (2012). “Consumer Grievance Redressal System In Indian Life
Insurance Industry”
10. Sonal Nena, (2013).” Performance Evaluation Of Life Insurance Corporation Of
India”
11. Sachin Surana & Amar, (2013). “Lapsation Of Policy; A Threat For Life Insurance
Industry”
12. Savita Jindal, (2014). “Ethical Issues In Insurance Companies: A Challenge For
Indian Insurance Sector”, Savita Jindal, 2014

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