A PROJECT REPORT On The Study of Solvency Margin in ICICI Prudential Life Insurance

Study of Solvency Margin in ICICI Prudential life insurance
Contents
TITLES
EXECUTIVE SUMMERY INSURANCE INDUSTRY COMPANY PROFILE RESEARCH METHODOLOGY DATA ANALYSIS LIMITATIONS OF THE SOLVENCY MARGIN FINDINGS SUGGESTIONS CONCLUSION BIBLIOGRAPHY ANNEXURY
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EXECUTIVE SUMMERY
Babasabpatilfreepptmba.com
Study of Solvency Margin in ICICI Prudential life insurance The In-plant Training was introduced to have an exposure to organization concepts. In-
plant training was for 2 months (8 weeks). It is been done with intention of correlating the organizations practical exposure with reference to the theory which I learnt in the college. ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and prudential plc, a leading international financial service group headquartered in United Kingdom. ICICI Prudential joint venture consisting of ICICI holding 74% of the equity and the balance 26% held by Prudential group of UK. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). It is now one of the leading private Life Insurance companies of India since its inception.
Topic of the study: The study of Solvency margin in ICICI Prudential life insurance. Research objectives: 1) 2) To understand the meaning and importance of solvency margin To know the procedure of calculation of solvency margin
3) To know why some companies fails in maintaining the adequate solvency margin and some measures to over come from those problems 4) To calculate the solvency margin for the past 5 financial years, of ICICI Prudential life insurance company 5) To know the limitations of solvency margin
Need for the study: Solvency margin is one of the major concepts in insurance. IRDA regulates the limits of solvency margin. Solvency margin helps the company in case of any adverse Babasabpatilfreepptmba.com 2
Study of Solvency Margin in ICICI Prudential life insurance claim situation. And it gives the confidence to the customers about the safety of the company. Scope of the study: Solvency margin has large scope for its study. Solvency margin calculation is the work of the actuary of the company, which is to be calculated as per the norms of the IRDA. Solvency margin is fully internal to any of the insurance company and the transactions are fully confidential. So the solvency margin has lots of scope for its study. Findings Solvency margin helps the company in case of any adverse claim situations. Solvency margin gives the confidence to investors to invest in the company Solvency margin is one of the major sources of fund for the government. As on 31st march 2005 ICICI Prudential Company has Rs2354040838.50 as the solvency margin. As on 31st march 2006 ICICI Prudential company has Rs5268490105.50 as the solvency margin As on 31st march 2007 ICICI Prudential company has Rs9444863631.00 as the solvency margin As on 31st march 2008 ICICI Prudential company has Rs16788443704.50 as the solvency margin As on 31st march 2009 ICICI Prudential Company has Rs19512898935.50 as the solvency margin which shows the financial strength and back up for the company Suggestions: IRDA can increase the minimum limits of the solvency margin. Even though the company feels it bit difficult in the initial stage in the long run the company will be benefited. IRDA can take the steps to publish the accounts for solvency margin along with the annual reports. It reveals the transferences of the company.. IRDA can mention solvency margin as one of the topic for the study in case of pre license IRDA compulsory training. Limitations of the study:
Study of Solvency Margin in ICICI Prudential life insurance The study is limited to 8 weeks Non availability sufficient data The study is restricted to last 5 years financial data.
INTRODUCTION
In common sense, Insurance is a provision made against possible loss due to anticipated contingencies and uncertainties in human life. It is a safe guard against accepted risks and hazards. Insurance does not avoid the possibility of risk or danger. but it spreads the loss of misfortune of a person over many persons who are exposed to similar risk and compensates the loss suffered by one of them. Insurance and be defined as A contract between parties whereby one party under takes to pay an agreed sum on happening of a certain event or to make good the loss arising from an accepted event, which may or may not occur, in return for a consideration called premium. Conceptually a general term insurance includes two concepts where as 1) Assurance 2) Insurance Assurance: Assurance is an agreement of guarantee to pay a specified amount to the other on happening of an event sure to occur such as death or attainment of certain age by a person. It refers to Life Insurance. Insurance : Insurance is an agreement to indemnify (compensate)loss suffered by a person on happening of an event which is un certain to occur such as accident, fire, collision, robbery, etc, example general insurance, namely, fire, marine and other forms of insurance.
LIFE INSURANCE
Life Insurance offers a way to replace the loss of income that occurs when someone dies. It is a contract between the insured person and the company that is providing the Insurance. If the insured dies while the contract is in force, the insurance company Pays a specified sum of money to the person or persons you name as beneficiaries. Life insurance ensures that your family will receive financial support in your absence. Put simply, life insurance provides your family with a sum of money should something happen to you. It protects your family from financial crises. In addition to serving as a protective cover, life insurance acts as a flexible moneysaving scheme, which empowers you to accumulate wealth-to buy a new car, get your children married and even retire comfortably.
History of insurance
The root of insurance might be traced to Babylonia, where tracers were encouraged to assume the risk of the caravan trade through loans that were repaid (with interest) only after the goods add arrived safety a practices resembling bottomward and given legal force in the code of Hammurabi (C.2100 BC). The Phoenicians and the Greek applied a similar system to their seaborne commerce. The Romans used burial clubs as a form of life insurance, providing funeral expenses for members and later payments to the survivors. Security and constant search for security have been the unending endeavors of human race since the beginning of the civilization. Right from the stone-age man to the modern IT personality, this search for security has brought out innovative ideas. Unlike other financial products, insurance is a complex product and one, which plays a key role in the long-term financial well being of a customer. Before the agents can advise their clients on which insurance solution is most appropriate for them, they will have to understand the financial standing of their customer, his risk profile, etc. it is for this very reason that, as per IRDA, all agents need to undergo some mandatory training before being allowed to sell a life insurance product.
Study of Solvency Margin in ICICI Prudential life insurance Life insurance in India In India, insurance started with life insurance. It was in the early 19th century when the Britishers on their postings in India felt the need of life insurance cover. It stated with English companies like, The European and the Albert. The first Indian insurance company was the Bombay Mutual Assurance Society Ltd., formed in 1870. In the wake of the Swadeshi Movement in India in the early 1900s, quite a good number of Indian companies were formed in various parts of the country to transact insurance business. To name a few: Hindustan Co-operative and National Insurance in Kolkata; United India in Chennai; Bombay Life, New India and Jupiter in Mumbai and Lakshmi Insurance in New Delhi. Nationalization of life insurance in India In 1956, life insurance business was nationalized and LIC of India came into being on 1.9.1956. The government took over the business of 245 companies (including 75 provident fund societies) who were transacting life insurance business at that time. Thereafter, LIC got the exclusive privilege to life insurance business in India. Relevant laws were amended in 1999 and LICs monopoly right to transact life insurance business in India came to end. At the close of financial year ending 31.3.2004, twelve new companies were registered with the Insurance Regulatory & Development Authority (IRDA) to transact life insurance business in India
INSURANCE REGULATORY & DEVELOPMENT AUTHORITY ACT, 1999.

Insurance regulatory and development authority is a constituted boby which is created to regulate the insurance business in India.
Mission
To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.
Insurance regularity and development Authority (IRDA) This is a corporate body established for the purpose and objects as set out in the explanation to the title. The Authority replaces Controller under Insurance Act 1938. The first schedule amends insurance act 1938 It states that if the Authority is superseded by central Government, the Controller of Insurance may be appointed till such time as the Authority is reconstituted.
Membership of IRDA a) A chairperson

b) Not more thae five whole time members c) Not more than four part time members appointed by the central government.
Functions of IRDA
To issue the certificate of registration,renew,withdraw,suspend or cancel such registration. To appoint the interests of the policy holders/insured in the matter of insurance contact with the insurance company. To specify the requisite qualification code of conduct and training for insurance intermediaries and agents. To specify the code of conduct for surveyors/loss assessors. To promote the efficiency in the conduct of insurance business. To promote and regulate professional organizations connected with the insurance and reinsurance business. To undertake inspection conduct enquiries and investigations including the audit of insurers and insurance intermediaries. To control and regulate the rates, terms and conditions to be offered by the insurer regarding general insurance business not so controlled by tariff advisory committee. To mention the form and manner for maintenance of books of accounts and the statements of accounts. To regulate investment of funds by the insurance companies. To adjudicate disputes between insurers and intermediaries of insurance. To supervise the functioning of tariff advisory committee. To specify the percentage of life insurance business and general insurance business to be undertaken in the rural or social sector.
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Scope of IRDA To permit private companies to enter the insurance market, Government has enacted Insurance Regulatory & Development Authority Act, 1999. The act was passed by the Parliament in December 1999. The Act provides for the establishment of the Authority 1. To protect the interest of holders of insurance policies. 2. To regulate, promote and ensure orderly growth of insurance industry. 3. For matters connected there with or incidental thereto. The Act also sought to amend the following Acts1. The Insurance Act, 1938. 2. The Life Insurance Corporation, 1956. 3. The General insurance Business (Nationalization) Act, 1972. The Act applies to the whole of India including J & K State.
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ICICIPRUDENTIAL LIFE INSURANCE COMPANY LIMITED The company profile

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank one of India's foremost financial services companies-and prudential plc - a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%. ICICI Prudential has started its operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, companys nation-wide team comprises of 2099 branches (inclusive of 1,116 micro-offices), over 276,000 advisors; and 18 bancassurance partners. ICICI Prudential is the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. As the company grow its distribution, product range and customer base, company\ continue to tiredlessly uphold its commitment to deliver world-class financial solutions to customers all over India.
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Promoters
ICICI Bank ICICI Bank Limited (NYSE:IBN) It is India s largest private sector bank and the second largest bank in the country with consolidated total assets of about US$ 95 billions of march 31,2009. The ICICI Bank subsidiaries include Indias leading private sector insurance companies and among its largest securities brokerage firm, mutual funds and private equity firm. The ICICI currently operation 19 countries including India.
Prudential plc It is established in London in 1848, prudential plc is a leading internal

retail financial services group with significant operation is Asia and UK. Prudential has been writing prote3ction and savings insurance for over the 160 years, and today has more than 21million customers worldwide and over 249billion assets under management as of December 31, 2008. In Asia, Prudential is leading Europe-based life insurance with operations in China, Hong Kong, India, Indonesia, Japan,, Korea, Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam, prudential is largest asset management. And operation in ten market including China, Hong Kong, India, Japan, Korea,Singpore, Taiwan,Vietnam,and United Arab Emirates.
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Vision
To be the dominant Life and Pension player built on trust by world class people and service. This the company hope to achieve by: Understanding the needs of customers and offering them superior products and service Leveraging technology service customers quickly, efficiently and conveniently Developing and implementing super risk management and investment strategies to offer sustainable and stable returns to their policyholders Providing an enabling environment to foster growth and learning for their employees And above all, building transparency in all their dealings.
Mission In the ICICI prudential Life Insurance Company is continues process, movement and direction to enable every individuals as a member of ICICI company community, to realize and active his potential so as to contribute to the achievement of the insurance goal and derive satisfaction there from Objectives Excellence in customer service. Profit orientation. Belongings and commitment to the organization. Fairness in all dealings and relations. Risk taking and innovation. Team playing. Learning and renewal Integrity. Transparency and discipline. In policies and system
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BOARD OF DIRECTORS
The ICICI prudential Life Insurance Company Limited Board Comprises reputed people from the finance industry both from India and abroad.
Mr.Chanda D.Kochhar, Mr. N. S. Kannan, Mr. K.Ramkumar, Mr. Barry Stowe, Mr. Adrisan OConnor, Mr. Keki Dadiseth, Prof. Marti G. Subranhmanyam, Ms. Rama Bijapurkar, Mr. Vinod Kumar Dhall, Mr. V. Vaidyanathan,
Chairperson Director Director Director Director Independent Director Independent Director Independent Director Independent Director Managing Director andCEO
Management team
Mr. V. Vaidyanathan Ms. Anita Pai Dr. Avijit Chatteriee Mr. punit Nanda Managing Director & CEO Executive Vice President Customer Service, Technology & Marketing Appointed Actuary Executive Vice President
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Assets held in the company as on 31st July 2009

Equity Debt Total 63% 37% 100% 289724 millions 168554 millions 458278 millions
Assets held by :
Linked policy holders Other policy holders Total 90.3% 09.7% 100% 413836 millions 44442 millions 458278 millions
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STUDY OF DEPARTMENTS IN THE ICICI PRUDENTIAL Finance

Finance function in ICICI Prudential is committed to create an infrastructure that is aligned to shareholder expectations. Finance basically comprises of four functions. . Corporate Planning and MIS provide feedback on business strategies. This includes driving the budgeting process, providing strategic inputs for decision-making and management reporting and analysis. The Accounts function includes preparation and maintenance of financial records, funds management, and expense processing and treasury operations. Compliance ensures that every action is within the regulatory framework. This includes reviewing compliance requirements and supporting the ethical framework of ICICI Prudential life. Internal audit provides assurance to the management over the organizations' control framework and includes process risk management, information security assessment and business continuity assessment.
Marketing
The Marketing function at ICICI Prudential life insurance covers an array of activities - brand and media management, channel support, direct marketing and corporate communications. The Brand and Communications team is in charge of advertising, consumer research, media planning & buying and Public Relations; that helps develop and nurture ICICI Prudential's corporate identity while effectively communicating its varied product offerings to the customer. Channel marketing provides support to the sales force by streamlining the design and development of collaterals and sales tools across distribution channels. The Direct marketing team was set up to generate high quality leads for profitable business. The team achieves this through target database acquisition and communicating customized product information through e-mailers, telemarketing and innovative direct mailers.
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Tied Agency
Tied Agency is the largest distribution channel of ICICI Prudential, comprising a large advisor force that targets various customer segments. The strength of tied agency lies in an aggressive strategy of expanding and procuring quality business. With focus on sales & people development, tied agency has emerged as a robust, predictable and sustainable business model.
Rewards and recognition: ICICI prudential has its own rewards and recognition
programs like, club membership, career growth opportunity, foreign tours, additional pay outs, various training programs for high achievers etc., which boost the performance and morale of the employees.
Bancassurance and Alliances

ICICI Prudential was a pioneer in offering life insurance solutions through banks and alliances. Within a short span of two years, and with nearly a large number of partners, B & A has emerged as a vital component of the companys sales and distribution strategy, contributing to approximately one third of companys total business. The business philosophy at B&A is to leverage distribution synergies with our partners and add value to its customers as well as the partners. Flexibility, adaptation and experimenting with new ideas are the hallmarks of this channel.
Customer Service
The Operations department oils the work processes between the customer and the company to ensure consistent and quality service to the customer. To streamline the operations, the Operations department interfaces between the clients and the agents, the branches and the underwriters, and manages work processes. The Vision at Customer Service is to deliver World Class Service at every opportunity. Units such as the 9 to 9 contact centre, Outbound Call Centre, Customer Care and Query Resolution Unit are all committed to providing effective solutions to over lakhs of customers across the country.
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Operations:
This department works in the company in case of processing of the policies at the initial stage, primary underwriting, department of cash, etc.
Human Resource
The people strategy of ICICI Prudential is To build a committed team with a culture of innovation, learning and growth. The Human Resource Function at ICICI Prudential drives the people strategy of the business. With its initial focus on operational excellence to deliver benefits and services to staff members, HR is now committed to building capability through state of the art processes. A robust performance management system, compensation system and a segmented training architecture enable it to deliver value to the organization.
Information Technology
The Information Technology function at ICICI Prudential is committed to enable business through the use of technology. It is segmented into 4 groups to enable highest levels of delivery to the customers: Life Asia Solutions Group that provides flexibility in designing better product offerings to end-users, the Solutions Group- Web that provides real-time information to customers and is responsible for customer relationship management, IT Architecture & Corporate Solutions Group is in charge of developing and maintaining a blueprint for the IT architecture for the enterprise as a whole. This team works as an in house R&D Solution Group, exploring new technological initiatives and also caters to information needs of corporate functions in the organization. IT Infrastructure group is responsible for providing hardware, software, network services to the whole organization. This group runs the 'Digital Nervous System' of the Enterprise at the highest levels of efficiency and provide robust, scalable and highly available platform for deployment of business application.
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Training:
The department of training always aims at educating its employees of the organization. In the company the training will be given to each level of employees. Training may be conducted because of the requirement from the employees or it may be as the initiation from the company. Training will be conducted in the different occasions like promotion of an employee, the launch of the new product, etc.
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ICICI PRUDENTIAL LIFE INSURANCE PRODUCTS/ PLANS Insurance Solutions for Individuals:
ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its products can be enhanced with up to 5 riders, to create a customized solution for each policyholder.
Protection Solutions
Life Guard: Is a protection plan, which offers life cover at very low cost. It is available in 3 options Level term assurance, level term assurance with return of premium and single premium. Home Assure: Is a mortgage reducing term assurance plan designed specifically to help customers cover their home loans in a simple and cost-effective manner.
Child Plans
Smart Kid: Is Education plans provide guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the childs life. Smart Kid plans are also available in unit-linked form both single premium and regular premium.
Retirement Solutions
Forever Life is a retirement product targeted at individuals in their thirties. Secure Plus Pension: Is a flexible pension plan that allows one to select between 3 levels of cover.
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Market-linked products
Lifetime Pension: is a regular premium market-linked pension plan Life Link Pension II is a single premium market-linked pension plan. Invest Shield Pension is a regular premium pension plan with a capital guarantee on the investible premium and declared bonuses. Golden Years: is a limited premium paying retirement solution that offers tax benefits. up to Rs 100,000 u/s 80C, with flexibility in both the accumulation and payout stages. ICICI Prudential also launched Salaam Zindagi, a social sector group insurance policy targeted at the economically underprivileged sections of the society. Life Time Super: A market-linked insurance products that adapts itself returns, Death benefit, partial withdrawals, Tax benefits. Life Link Super: It is the unique, single premium united linked investment-cuminsurance solution. It offers attractive premium allocation along with flexible investment options to opportunity to enjoy potentially high returns on your investments, without compromising on the protection of your family. Life Time Plus: It is one stop solution for investors who are looking for a plan offers for the benefits of the insurance cover along with flexible investment options. The payment will be three different modes like Monthly, half yearly, Year. Premier Life Gold: The Premier Life Gold High net worth segment is looking for plan which gives potional high returns, liquated and a flexibility option to design there own plan. And wealth along with insurance protection. to
changing protection and investment need. The benefits are potentional to earn high
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Savings Solutions
Secure Plus: Is a transparent and feature-packed savings plan that offers 3 levels of protection. Cash Plus: Is a transparent, feature-packed savings plan that offers 3 levels of protection as well as liquidity options. Saven Protect: Is a traditional endowment savings plan that offers life protection along with adequate returns. Cash Back :Is an anticipated endowment policy ideal for meeting milestone expenses like a childs marriage, expenses for a childs higher education or purchase of an asset. Life Time Gold: Is offer customers the flexibility and control to customize the policy to meet the changing needs at different life stages. Each offer 4 fund options ? Preserver, Protector, Balancer and Maximiser. Life Link II: Is a single premium Market Linked Insurance Plan which combines life insurance cover with the opportunity to stay invested in the stock market. Premier Life: Is a limited premium paying plan that offers customers life insurance cover till the age of 75. Invest Shield Life: Is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest. Invest Shield Cash: Is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest along with flexible liquidity options.
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Study of Solvency Margin in ICICI Prudential life insurance Invest Shield Gold: Is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest along with limited premium payment terms.
Health Solution
Health Assure: Is a regular premium plan which provides l ong term cover against 6 critical illnesses by providing policyholder with financial assistance, irrespective of the actual medical expenses. Health Assure Plus: Is a regular premium plan which provides long term cover against 6 critical illnesses by providing financial assistance, irrespective of actual medical expenses, as well as an equivalent life insurance cover
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Flexible Rider Options

ICICI Prudential Life offers flexible riders, which can be added to the policy at a marginal cost, depending on the specific needs of the customer. Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the rider sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit. Accident Benefit: This rider option pays the sum assured under the rider on death due to accident. Critical Illness Benefit: Protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical expenses prior to death. Income Benefit: This rider pays the 10% of the sum assured to the nominee every year, till maturity, in the event of the death of the life assured. It is available on Smar Kid, Secure Plus and Cash Plus Waiver of Premium: In case of total and permanent disability due to an accident, the premiums are waived till maturity. This rider is available with Secure Plus and Cash Plus. basic
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Competitors for the ICICI Prudential life insurance company in the Indian life insurance industry
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 --------------101 104 107 109 110 111 114 116 117 121 122 127 128 130 133 135 136 -------------23.10.2000 15.11.2000 10.01.2001 31.01.2001 12.02.2001 30.03.2001 02.08.2001 03.08.2001 06.08.2001 13.01.2002 14.05.2002 06.02.2004 17.11.2005 14.07.2006 04.09.2007 19.12.2007 08.05.2008 27.06.2008 27.06.2008 Life insurance corporation of India. HDFC Standard Life Insurance Company Ltd. Max New York Life Insurance Co. Ltd. Kotak Mahindra Old Mutual Life Insurance Limited Birla Sun Life Insurance Company Ltd. Tata AIG Life Insurance Company Ltd. SBI Life Insurance Company Limited. ING Vysya Life Insurance Company Private Limited Bajaj Allianz Life Insurance Company Limited Metlife India Insurance Company Ltd. Reliance life insurance company limited Aviva Life Insurance Co. India Pvt. Ltd. Sahara India Insurance Company Ltd. Shriram Life Insurance Company Ltd. Bharti AXA Life Insurance Company Ltd. Future Generali India Life Insurance Company Limited IDBI Fortis Life Insurance Company Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. Aegon Religare Life Insurance Company Ltd. DLF Pramerica Life Insurance Company Ltd.
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SWOT ANALYSIS
Strengths:
Vast untapped market
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Study of Solvency Margin in ICICI Prudential life insurance In a country of 1 billion people there is a huge potential market for life insurance products. In India the penetration of the insurance sector in the rural and semi-urban areas is low. There is a market of 900 million for life insurance and 200 million for householders insurance policy. In addition to this the affluent section can be tapped for Overseas Medi claim and Travel Insurance policies.
Huge pool of skilled professionals At ICICI Prudential Life Insurance company there is no dearth of skilled
professionals to carry out a successful Life Insurance venture. Weakness:
Lack of networking among branches In spite of growing emphasis on total branch mechanization (TBM) and full
computerization of branches, the rural and semi-urban branches have still to see information technology as an enabler. Complete integration of branch network involves huge investments for creating IT and communication infrastructure.
Low savings rate Though we have a huge market for insurance policies, the middle class who
constitutes the bulk of this market is today burdened under inflationary pressures. The secret lies in inculcating savings habit but considering the amount of surplus funds available with the middle class for investing in future security, the ability to save is very nominal
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Opportunities:
Data mining Banks have a huge customer database which has to be properly leveraged. Target
segments should be identified and tapped.
A wide distribution network of banks provides a great opportunity to sell insurance products through banks. Another potential area of growth of Bancassurance is exploiting the corporate customers and tying up for insurance of the employees of corporate clients
Threats:
Human Resource Challenges Success in Bancassurance venture requires a change in mindset. Though we have a
large talent pool, the inability to sell complex insurance products on the part of bank professionals and their reluctance to learn can be severe setback. There has to be a change in the thinking, approach and work culture.
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Segmentation of the insurance products in ICICI Prudential
segmentation Young & Single Young & Just married Married with kids Middle aged with grown up kids Across all life-stages
Purpose of the segment Asset creation Asset creation & protection Children's education, Asset creation and protection Planning for retirement & asset protection Health plans
Suitable plans Wealth creation plans Wealth creation and mortgage protection plans Education insurance, mortgage protection & wealth creation plans Retirement solutions & mortgage protection Health Insurance
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AWARDS
ICICI Pru Life ranked as the Most Trusted Pvt Life Insurance brand in the Brand Equity "Most Trusted Brands 2009" survey
ICICI Prudential Life won a Gold award for About ULIPS.com and Health Saver campaign, innovation award for www.taxguru 08-09.com and a silver award for its Insurance yoga campaign at the ICICI Group Marketing Excellence award. Confederation of Indian Industry (CII) - Western Region recently awarded ICICI Prudential Life a 'Commendation for Strong Commitment to HR Excellence 2008' at the CII HR Summit 2008.
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ICICI Prudential Life Insurance was awarded with the coveted 'ICAI Award for Excellence in Financial Reporting' by the Institute of Chartered Accountants of India (ICAI) for the financial year ended March 31, 2008.
ICICI Prudential Life was awarded the Life Insurance Company of the Year at the12th Asia Insurance Industry Awards 2008.
ICICI Prudential Life won the Award for Brand Excellence in the Banking and ICICI Prudential life insurance
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ICICI Prudential Life was awarded with two Bronze Effie's in the sevices catgeory for its Corporate campaign and Retirement Number campaign ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runner up at the Outlook Money & NDTV Profit Awards 2008 ICICI Prudential Life was awarded the SAP ACE 2008 Best Business Objects Award for its IT practices
ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runner up at the Outlook Money & NDTV Profit Awards 2007
ICICI Prudential Lifes, retirement solutions campaign for the year 2006-07 was awarded the Bronze Effy trophy in the services category.It also won the Brand Equity Bravery Award 2007, instituted by Ad club.
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Innovation Award for launching Diabetes Care Prudence Award 2006. People Award for excellence in training and people development - Prudence Award 2006 .
Best Life Insurer 2003. Outlook Money Awards 2003 & 2004 IMM Award for Excellence. Institute of Marketing & Management
India's Most Customer Responsive Insurance Company. Avaya Global Connect Economic Times. Customer Responsiveness Awards Organisation with Innovative HR Practices Indira Group of Institutes
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Superbrand 2003-04
Silver Effie for Effectiveness of the Retire from Work not life advertising campaign Effies 2003
Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance Co. Ltd. was adjudged the Businesswoman of the year at The Economic Times Awards for Corporate Excellence, 2007-08.
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ICICI Prudential Life won the UK Trade & Investment India Business Awards 2008 in the Business Partnership Award-Large Company category
Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was adjudged the Entrepreneur of the Year-Manager at the Ernst and Young Entrepreneur Awards 2007.
Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was awarded the Outstanding Businesswoman of the Year at CNBC TV18's India Business Leader Awards 2007
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Prudence Customer Centricity Award 2004 & 2005. Prudential Corporation Asia
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RECOGNISATION
ICICI Prudential Life was recognized as the most trusted brand amongst private life insurers in the Economic Times-Most Trusted Brand survey 2008. IMM Award for Excellence. Institute of Marketing & Management Organization with Innovative HR Practices. India Group of Institutes Organization with Innovative HR Practices. Asia-Pacific H R Congress Awards for HR Excellence
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Topic of the study:
The study of Solvency margin in ICICI Prudential life insurance.
Research objectives:
1) 2) To understand the meaning and importance of solvency margin To know the procedure of calculation of solvency margin
3) To know why some companies fails in maintaining the adequate solvency margin and some measures to over come from those problems 4) To calculate the solvency margin for the past 5 financial years, of ICICI Prudential life insurance company 5) To know the limitations of solvency margin
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Need for the study:

Solvency margin is one of the major concepts in insurance. IRDA regulates the limits of solvency margin. Solvency margin helps the company in case of any adverse claim situation. And it gives the confidence to the customers about the safety of the company.
Scope of the study:

Solvency margin has large scope for its study. Solvency margin calculation is the work of the actuary of the company, which is to be calculated as per the norms of the IRDA. Solvency margin is fully internal to any of the insurance company and the transactions are fully confidential. So the solvency margin has lots of scope for its study.
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SOLVENCY MARGIN
Solvency margin is the amount by which the assets of an insurer exceed its liabilities, and will form part of the insurers shareholders funds. Methods of valuations of assets and liabilities of an insurer are prescribed in the insurance regulations, Rules for estimating the liabilities will obviously be different for long-term and general insurance business. The regulations stipulated the minimum solvency margin, which an insurer must maintain. Why is the solvency margin needed? All insurance companies have to pay claims to policy holders. These could be current or future claims of policy holders. Insurers are expected to put aside a certain sum to cover these liabilities. These are also referred to as technical provisions. Insurance, however, is risky business and unforeseen events might occur sometimes, resulting in higher claims not anticipated earlier. For instance, calamities like the Mumbai floods, J&K earthquake, fire, accidents of a large magnitude, etc may impose an unbearable burden on the insurer. In such circumstances, technical provisions though initially prudent, may prove insufficient for taking care of liabilities. If the liability is large, there is a possibility of the insurance company becoming insolvent. This would create an awkward situation for the insurance sector, regulator and also the government. The solvency margin is thus aimed at averting such a crisis. The purpose of the extra capital all insurers are required to keep as per the regulatory norms is to protect policy holders against unforeseen events. This also helps the company to settle the emergency claims and gives the confidence to the public to invest in the respected company.
41
Why some companies failing to maintain the solvency margin..?

There are certain factors which affects the working of the solvency margin some of those factors are: Poor mortality experience Poor expense experience Expense inflation Inadequate investment returns Poor lapse and surrender experience Asset default and depreciation Mismatched investments Guaranteed surrender values/investments returns Liquidity Options Change in business mix Inadequate reinsurance Operational risks
42
How to handle threats to maintain appropriate solvency margin..?

Management actions Role of the Appointed Actuary Regulations Timely intervention by regulator Conservative asset and liability valuations Risk based capital/solvency margin Holistic and integrated approach to risk management Incentives to encourage prudent risk management
43
How much solvency margin required.?

The calculation of Solvency margin depends on the factors like total reserve for the conventional products total fund that the management of any insurance company intended to invest and also the total sum assured that the any insurance company writes. According to the guidelines of the IRDA total solvency margin required is 4% of reserve for conventional products +1%of all unit linked insurance funds without any guarantee + 2% of all unit linked insurance funds with some guarantee+0.3% of (sum assured (reserves for conventional product + unit linked insurance fund with some guarantee+ unit linked insurance product without any guarantee)) The first two factors ensure that the insurance company is protected against moments and interest rates or investment income and 0.3% of (sum assured policy holders fund) ensures that the company is protected against the adverse claim situations. As an additional safety measure IRDA mandates that an insurance company must maintain 150% of solvency margin as the solvency margin or Rs50 crores as a solvency margin whichever is higher. This can be explained much better with the following example. Suppose the company has Rs200 million as a reserve for conventional product, Rs500 million units fund without guarantee, Rs50 million unit funds with some guarantee. So the total fund is 750 million. Then the company calculates the solvency margin as, for the conventional policy holders fund (200 million *0.4), for the unit fund without any guarantee (500 million *0.1), for the unit funs with some guarantee (50 million *0.2) here if the insurance company has sum assured of 5000 million then, 5000million-750million (sum of above 3 types of fund) that comes 4250 million which should be multiplied by 0.3 % then,
4% of 200million is Rs8 million
44
Study of Solvency Margin in ICICI Prudential life insurance 1% of 500 million is Rs5 million 2% of 50 million is Rs1 million 0.3% of 4250 million is Rs12.75 million Then the total becomes 26.75 million (total of all the above) Now IRDA wants any insurance company to maintain 150% of the above calculated fund i.e. 26.75*150% is equal to Rs40.12 million.
45
CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR.. PARTICULARS AMOUNT (IN MILLIONS)
RESERVE FOR CONVENTIONAL PRODUCTS POLICY HOLDERS UNIT FUND WITH SOME GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY GURENTEE
200 50
500
TOTAL AMOUNT OF POLICY HOLDERS FUND
750
SUMASSURED WRITTEN BY THE COMPANY
5000
46
CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR........ PERTICULERS AMOUNT (MILLIONS) PERCENTAGE %AMOUNT (MILLIONS)
200
4%
8.00
50
2%
1.00
500
1%
5.00
750
14.00
(SUMASSURED WRITTEN BY THE COMPANY TOTAL AMOUNT OF POLICY HOLDERS FUND) TOTAL
4250
0.3%
12.75
26.75
CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDA SPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 26.75 * 150% = 40.12 MILLION RS
47
Calculation of solvency margine for the past 5 years of the ICICI prudential life insurance company.
CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2005 PARTICULARS AMOUNT(in 000,s)
8252789.00 2674799.20
24073192.80
35000781.00
350007810.00
48
CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2005 PERTICULERS AMOUNT (IN 000S) RESERVE FOR CONVENTIONAL PRODUCTS POLICY HOLDERS UNIT FUND WITH SOME GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY GURENTEE 8252789.00 PERCENTAGE % AMOUNT (IN 000S) 33011.5600
4%
2674799.20
2%
53495.9840
24073192.80
1%
240731.9280
TOTAL AMOUNT OF POLICY HOLDERS FUND (SUMASSURED WRITTEN BY THE COMPANY TOTAL AMOUNT OF POLICY HOLDERS FUND)
327239.5600
315007029.oo
0.3%
945021.8070
TOTAL
1569360.5590
CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDA SPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 1569360.559 * 150% = 2354040.8385
49
CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2006 PARTICULARS AMOUNT(in 000,s)
11567031.OO 7203515.OO
64831635.OO
83602181.OO
836021810.00
50
CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2006 PERTICULERS AMOUNT (IN 000S) PERCENTAGE % AMOUNT (IN 000S)
11567031
4%
462681.2400
7203513
2%
144070.2600
64831635
1%
648316.3500
TOTAL AMOUNT OF POLICY HOLDERS FUND 1075067.8500
752419629
0.3%
2257258.8870
3512326.7370
51
CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2007 PARTICULARS AMOUNT (in 000s)
18044258.00 13388448.60
120496037.40
151928744.00
1519287440.00
52
CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2007 PERTICULERS AMOUNT (IN 000S) RESERVE FOR CONVENTIONAL PRODUCTS POLICY HOLDERS UNIT FUND WITH SOME GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY GURENTEE 18044258.0 PERCENTAGE % AMOUNT (IN 000S) 721770.3200
4%
13388448.6
2%
267768.9720
120496037.4
1%
1204960.3740
2194499.6660
(SUMASSURED WRITTEN BY THE COMPANY TOTAL AMOUNT OF POLICY HOLDERS FUND)
1367358696.0
0.3%
4102076.0880
TOTAL
6296575.7540
53
CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2008 PARTICULARS AMOUNT (in 000s)
24831049.00 25075304.00
225677736.00
275584089.00
2755840890.00
54
24831049
4%
993241.9600
25075304
2%
501506.0800
225677736
1%
2256777.3600
TOTAL AMOUNT OF POLICY
3300175.4000
2480256801
0.3%
7440770.4030
11192295.8030
55
CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2009 PARTICULARS AMOUNT (IN 000S)
31569812.00 286668999.70
258002097.30
318238809.00
3182388090.00
56
31569812.00
4%
1262792.4800
28666899.70
2%
573337.9940
258002097.30
1%
2580020.9730
28666899.70 4416151.4470
2864149281.00
0.3%
8592447.8430
13008599.2900
57
Limitations of the solvency margin

Solvency margin is very internal for any insurance company. It is not fixed for the specific period it becomes bit difficult to calculate on regular basis because it is the work of higher authorities if the company. It becomes a very heavy amount to those companies who have just entered the industry. Even though it is one of the major reserve that the company keeps it cannot be published in the final reports of the insurance company.
58
Findings
Solvency margin helps the company in case of any adverse claim situations. Solvency margin gives the confidence to investors to invest in the company Solvency margin is one of the major sources of fund for the government. As on 31st march 2005 ICICI Prudential Company has Rs2354040838.50 as the solvency margin. As on 31st march 2006 ICICI Prudential company has Rs5268490105.50 as the solvency margin As on 31st march 2007 ICICI Prudential company has Rs9444863631.00 as the solvency margin As on 31st march 2008 ICICI Prudential company has Rs16788443704.50 as the solvency margin As on 31st march 2009 ICICI Prudential Company has Rs19512898935.50 as the solvency margin which shows the financial strength and back up for the company. Solvency margin of ICICI Prudential is increasing in the rate of its growth in business.
59
Suggestions:
It can be suggested that the persons in the organizations can be made aware of the solvency margin. by conducting the training sessions for both the employees and advisors It gives them more confidence to sell the insurance products. IRDA can increase the minimum limits of the solvency margin. Even though the company feels it bit difficult in the initial stage in the long run the company will be benefited. IRDA can take the steps to publish the accounts for solvency margin along with the annual reports. It reveals the transferences of the company.. IRDA can mention solvency margin as one of the topic for the study in case of pre license IRDA compulsory training. IRDA can also simplify the investment norms so that the money can be better utilized and income from the solvency margin amount can be increased (Rs1951289893.50 is not the small amount).
60
Conclusion:
Every study and project needs to be concluded. Hence, the study conducted in ICICI Prudential helped me to know some thing about its product, working environment of the company, rules and regulations to be followed in the company, how to handle the work pressure. I got the maximum exposure because personally I met the customer and I have also sold some of the insurance products this gave us the confidence to how to work and helped us to apply the theoretical knowledge to the practical job, because practical exposure differs significantly From text book knowledge.
ICICI Prudential is performing fantastically well in the Indian insurance industry and is the No. 1 private player among the 19 other private life insurance players. Topic: solvency margin is one of the important terminologies in the insurance sector.
Every insurance company has to maintain the solvency margin according to the guidelines issued by the IRDA. Solvency is beneficial to IRDA because it reduces the burden, helpful for the company because it helps the company to manage the adverse the claim situation, and also helps the customers because it gives them the since of security for their investments.
61
Bibliography:
Books: Marketing research by A Parashuraman, Dhurv Grewal, R Krishnan. IRDA Pre-licencing training exam book(IRDA syllabus). ICICI Prudetial product training materials.
Magazines: Insurance word
Web sites: www.iciciprulife.com www.iciciprupartner.com www.irdaindia.org icici prudential intranet.
62
Annexture:
Five years balance sheet of ICICI Prudential life insurance.
63

A PROJECT REPORT On The Study of Solvency Margin in ICICI Prudential Life Insurance

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Study of Solvency Margin in ICICI Prudential life insurance

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Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

INSURANCE REGULATORY & DEVELOPMENT AUTHORITY ACT, 1999.

Membership of IRDA a) A chairperson

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

ICICIPRUDENTIAL LIFE INSURANCE COMPANY LIMITED The company profile

Study of Solvency Margin in ICICI Prudential life insurance

Prudential plc It is established in London in 1848, prudential plc is a leading internal

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Assets held in the company as on 31st July 2009

Study of Solvency Margin in ICICI Prudential life insurance

STUDY OF DEPARTMENTS IN THE ICICI PRUDENTIAL Finance

Study of Solvency Margin in ICICI Prudential life insurance

Bancassurance and Alliances

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Flexible Rider Options

Study of Solvency Margin in ICICI Prudential life insurance

Vast untapped market

professionals to carry out a successful Life Insurance venture. Weakness:

Study of Solvency Margin in ICICI Prudential life insurance

segments should be identified and tapped.

Study of Solvency Margin in ICICI Prudential life insurance

Segmentation of the insurance products in ICICI Prudential

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Topic of the study:

The study of Solvency margin in ICICI Prudential life insurance.

Study of Solvency Margin in ICICI Prudential life insurance

Need for the study:

Scope of the study:

Study of Solvency Margin in ICICI Prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

Why some companies failing to maintain the solvency margin..?

Study of Solvency Margin in ICICI Prudential life insurance

How to handle threats to maintain appropriate solvency margin..?

Study of Solvency Margin in ICICI Prudential life insurance

How much solvency margin required.?

4% of 200million is Rs8 million

Study of Solvency Margin in ICICI Prudential life insurance

TOTAL AMOUNT OF POLICY HOLDERS FUND

SUMASSURED WRITTEN BY THE COMPANY

Study of Solvency Margin in ICICI Prudential life insurance

TOTAL AMOUNT OF POLICY HOLDERS FUND