Insurance BB Aastha

PROJECT REPORT ON
7 PRINCIPLES IN INSURANCE
SUBMITTED BY
AASTHA GUPTA
SEAT NO. --
T.Y.B.com (BANKING & INSURANCE)
(SEMISTER VI)
SUBMITTED TO
UNIVERSITY OF MUMBAI
PROJECT GUIDE
SONAL SAWAKAR
T.Y.BBI (SEM-VI) SUMAN EDUCATION SOCIETY (L.N. COLLEGE OF COMMERCE)
SUMAN EDUCATION SOCIETY

L.N COLLEGE OF COMMERCE
Rajendra Nagar, Borivali (E), Mumbai – 400066
PROJECT REPORT ON
SUBMITTED BY
T.Y.B.Com. BANKING AND INSURANCE
(SEMISTER V I)
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADAMIC YEAR
(2017-2018)
2
SUMAN EDUCATION SOCIETY

L.N COLLEGE OF COMMERCE
Rajendra Nagar, Borivali (E), Mumbai – 400066
CERTIFICATE
This is to certify that AASTHA GUPTA of B.Com. (Banking &

Insurance) has successfully Completed a project on
7 PRINCIPLES IN INSURANCE for the Semester – VI.
Under the guidance of SONAL SAWAKAR During the academic year

2017-2018.
PRINCIPAL
CO-ORDINATOR (SHARDA SHRIYAN) PROJECT GUIDE
INTERNAL EXAMINER COLLEGE SEAL EXTERNAL EXAMINER
3
DECLARATION
I Ms. AASTHA GUPTA from L.N. COLLEGE OF COMMERCE

Student of T.Y. BANKING AND INSURACE [Semester 6TH] hereby submit
my project on “7 PRINCIPLES IN INSURANCE” with reference to
‘INSURANCE SECTOR.’
I also declare that the project that has been the partial fulfillment of the
requirement of the degree of “T.Y.B.Com (Banking and Insurance)” of the
Mumbai University has been the result of my own efforts.
Sign of student
…………………….…………
AASTHA GUPTA
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ACKNOWEDGEMENT
I gratefully acknowledge and express deep appreciation to many people

who have made this project possible and visible. Mere thanks to our guide Prof.
SONAL SAWAKAR seems pretty small compared to the months of
tremendous support and indulgence he gave. His review, comments, corrections
and suggestions have enormously enriched my project.
Without cheerful support and motivation of our Professional Course
Co–ordinator Prof. SONAL SAWAKAR this project would not have seen the
light of the day. I am also grateful to our Principal Ms. SHARDA SHRIYAN
I also would like to thank Ms. SONAL SAWAKAR for helping me

with the expertise in the Insurance Sector, without the help of this two this
project would not be possible.
It gives me immense pleasure to present this project in the course of

Banking and Insurance, and I also would like to share the credit with our
librarian Ms. VINAYA PURALKAR for her valuable tips in this project and
understanding the concept of Leasing.
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EXECUTIVE SUMMARY
Objective:
Technology plays a vital role in effortlessly and transparently

integrating the various arms of the company to deliver to the customer
and organization the corporate envisioning. To improve their technical
proficiency by upgrading their information support by developing strong
research and development department in their respective organization.
Further, in an era of high customer expectations constant efforts of
increasing services through the use of technology become imperative
(vital). IT has to be used effectively to tap (strike) the potential market.
-----------------------------------------remainig--------------------------------------------
Methodology: Data
Books- BRITANNICA ENCYCLOPEDIA, India, Ireland
News paper- The Economic Times; Times of India
Findings:
Studying the fundamentals of general insurance policies of miscellaneous

concept in Indian scenario and challenges at world leveraging in insurance
sector, as a platform of sharing high risk also principles of general insurance
plays an important role in determining underwriting contract.
Learning:
Miscellaneous contract based on certain principles of insurance, which

should be, consider while dealing with miscellaneous contract. Also found
system of underwriting gives a risk management tools by parting with their risk
handed.
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TABLE OF CONTENT
SR.NO. PARTICULARS PG.NO.

1 Introduction 8
2 History of Insurance 10
3 Meaning and Definition of insurance 18
4 Importance of Insurance 17
5 Methods of Insurance 19
6 Types of Insurance 20
7 Principles of Insurance 24
8 Functions of Insurance 28
9 Advantages and Disadvantages 29
10 Introductions to 7 P’s 31
11 Brief Info About 7 P’s 33
12 Case Study 47
13 Conclusion 54
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INTRODUCTION
A promise of compensation for specific potential future losses in exchange for a

periodic payment. Insurance is designed to protect the financial well-being of an individual,
company or other entity in the case of unexpected loss. Some forms of insurance are required
by law, while others are optional. Agreeing to the terms of an insurance policy creates a
contract between the insured and the insurer.
Insurance is a form of risk management primarily used to hedge against the risk of a
contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one
entity to another, in exchange for a premium, and can be thought of as a guaranteed and
known small loss to prevent a large, possibly devastating loss. An insurer is a company selling
the insurance; an insured or policyholder is the person or entity buying the insurance. The
insurance rate is a factor used to determine the amount to be charged for a certain amount of
insurance coverage, called the premium.
Everyone is exposed to various risks. Future is very uncertain, but there is way to
protect one’s family and make one’s children’s future safe. Life Insurance companies help us
to ensure that our family’s future is not just secure but also prosperous. Life Insurance is
particularly important if you are the sole breadwinner for your family. The loss of you and
your income could devastate your family. Life insurance will ensure that if anything happens
to you, your loved ones will be able to manage financially.
Insurance is basically risk management device. The losses to assets resulting from
natural calamities like fire, flood, earthquake, accident etc. are met out of the common pool
contributed by large number of persons who are exposed to similar risks. This contribution of
many is used to pay the losses suffered by unfortunate few. However the basic principle is that
losses should occur as a result of natural calamities or unexpected events which are beyond
the human control. Secondly insured person should not make any gains out of insurance.
The individual become more experience and mature as the advances in age. This
raises his earnings capacity and the purposes of life insurance are to protect the income to
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individual and provide financial security to his family which is dependent of his income in the
event of his pre mature death.
It is natural to think of insurance of physical assets such as motor car insurance or fire
insurance but often be forget that creator all these assets is the human being whose effort have
gone a long way in building up to assets. In that scene human life is a unique income
generating assets. Unlike physical assets which decreases with the passage of time.
Insurance also has an element of saving in certain cases. Insurance is rupees 400
billion business in India and yet its spread in the country is relatively thin. Insurance as a
concept has not being able to make headway in India. Presently LIC enjoys a monopoly in
Life Insurance business while GIC enjoys it in general insurance business.
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HISTORY OF INSURANCE
In India, insurance has a deep-rooted history. Insurance in various forms has been
mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmashastra) and
Kautilya (Arthashastra). The fundamental basis of the historical reference to insurance in
these ancient Indian texts is the same i.e. pooling of resources that could be re-distributed in
times of calamities such as fire, floods, epidemics and famine. The early references to
Insurance in these texts have reference to marine trade loans and carriers' contracts.
Insurance in its current form has its history dating back until 1818, when Oriental Life
Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of European
community. The pre-independence era in India saw discrimination between the lives of
foreigners (English) and Indians with higher premiums being charged for the latter. In 1870,
Bombay Mutual Life Assurance Society became the first Indian insurer.
At the dawn of the twentieth century, many insurance companies were founded. In the
year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to
regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary
that the premium-rate tables and periodical valuations of companies should be certified by an
actuary. However, the disparity still existed as discrimination between Indian and foreign
companies. The oldest existing insurance company in India is the National Insurance
Company, which was founded in 1906, and is still in business.
The Government of India issued an Ordinance on 19 January 1956 nationalizing the

Life Insurance sector and Life Insurance Corporation came into existence in the same year.
The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75
provident societies—245 Indian and foreign insurers in all.
In 1972 with the General Insurance Business (Nationalizations) Act was passed by the
Indian Parliament, and consequently, General Insurance business was nationalized with effect
from 1 January 1973.
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107 insurers were amalgamated and grouped into four companies, namely National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd and the United India Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in 1971 and it commence business on 1
January 1973.
The LIC had monopoly till the late 90s when the Insurance sector was reopened to the
private sector. Before that, the industry consisted of only two state insurers: Life Insurers
(Life Insurance Corporation of India, LIC) and General Insurers (General Insurance
Corporation of India, GIC). GIC had four subsidiary companies.
With effect from December 2000, these subsidiaries have been de-linked from the
parent company and were set up as independent insurance companies: Oriental Insurance
Company Limited, New India Assurance Company Limited, National Insurance Company
Limited and United India Insurance Company Limited.
 GUIDELINES PROVIDED BY IRDA TO INSURANCE COMPANY
The insurance regulator, IRDA in November 2010 allowed insurance companies to

sell universal life plans on the basis of new guidelines. The new guidelines mentions that
insurers would have to offer a guaranteed return if the policy terms do not entitle the insured
to receive a bonus. The guidelines laid down by IRDA are as follows-
● The new guidelines specified that universal life plans have to be called 'variable'
insurance policies. The regulator with regards to life ULIPs, imposed a cap on charges
as well as the minimum surrender value that the insured is entitled to.
● According to the guidelines, if a policy is surrendered in the first three years, the
policyholder is entitled to receive the balance in the policy account as on the date of
the surrender which will be paid out after the lock-in period. The policyholder is
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eligible for 98% of the policy balance available in his or her account in case the policy
is surrendered in the fourth or fifth policy year. If the policy is surrendered after the
fifth year the balance in the policy account has to be paid out immediately.
● The maximum expenses that can be charged to the premium paid by the policyholder
in the first year were capped at 27.5% of the first-year premium. For the second and
third-year premium, the cap is 7.5% and 5% on subsequent years.
● If the policyholder decides to increase his contribution through a one-time top-up, the
insurance company can deduct at most 3% from the top-up by way of charges.
● The new norms require that death benefit equals the guaranteed sum assured, plus the
balance in the policy account. If the insured is alive when the policy matures he will
get whatever the balance is under the policy account, plus any terminal bonus.
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MEANING AND DEFINITION OF INSURANCE
“Insurance is a contract in which a sum of money is paid to the assured as

consideration of insurer incurring the risk of paying a large sum upon a given contingency”
“Insurance is a cooperative form of distribution a certain risk over a group of persons

who are exposed to it”
“Insurance is a substitution for a small known loss for a large unknown loss which
may or may not occur”
“An arrangement by which a company or the state undertakes to provide a guarantee

of compensation for specified loss, damage, illness or death in return for payment of a
specified premium.”
Future is always uncertain and full of risk. It is not certain that what is going to happen
tomorrow. Therefore a man is always worried about security of property and life. Insurance is
a means of meeting out loss caused by future risks and uncertainties.
“Insurance is a contract between two parties whereby one party called insurer
undertakes in exchange for a fixed sum called premiums, to pay the other party called insured
a fixed amount of money on the happening of a certain event.”
According to Patterson :–
“Insurance is an agreement between two parties under which one party

undertakes specified future risk of another party and compensates the loss from that
risk on payment of some consideration known as premium payable by the later”.
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 FEATURES OF INSURANCE
1. Sharing of Risk:
Insurance is a device to share the financial losses which might befall on an
individual or his family on the happening of a specified event. The event may be death
of a bread-winner to the family in the case of life insurance, marine-perils in marine
insurance, fire in fire insurance and other certain events in general insurance, e.g., theft
in burglary insurance, accident in motor insurance, etc. The loss arising nom these
events if insured are shared by all the insured in the form of premium.
2. Co-operative Device:
The most important feature of every insurance plan is the co-operation of large
number of persons who, in effect, agree to share the financial loss arising due to a
particular risk which is insured. Such a group of persons may be brought together
voluntarily or through publicity or through solicitation of the agents.
An insurer would be unable to compensate all the losses from his own capital.
So, by insuring or underwriting a large number of persons, he is able to pay the
amount of loss. Like all co-operative devices, there is no compulsion here on anybody
to purchase the insurance policy.
3. Value of Risk:
The risk is evaluated before insuring to charge the amount of share of an
insured, herein called, consideration or premium. There are several methods of
evaluation of risks. If there is expectation of more loss, higher premium may be
charged. So, the probability of loss is calculated at the time of insurance.
4. Payment at Contingency:
The payment is made at a certain contingency insured. If the contingency
occurs, payment is made. Since the life insurance contract is a contract of certainty,
because the contingency, the death or the expiry of term, will certainly occur, the
payment is certain. In other insurance contracts, the contingency is the fire or the
marine perils etc., may or may not occur. So, if the contingency occurs, payment is
made, otherwise no amount is given to the policy-holder.
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Similarly, in certain types of life policies, payment is not certain due to

uncertainty of a particular contingency within a particular period. For example, in
term-insurance then, payment is made only when death of the assured occurs within
the specified term, may be one or two years. Similarly, in Pure Endowment payment is
made only at the survival of the insured at the expiry of the period.
5. Amount of Payment:
The amount of payment depends upon the value of loss occurred due to the
particular insured risk provided insurance is there up to that amount. In life insurance,
the purpose is not to make good the financial loss suffered. The insurer promises to
pay a fixed sum on the happening of an event.
If the event or the contingency takes place, the payment does fall due if the
policy is valid and in force at the time of the event, like property insurance, the
dependents will not be required to prove the occurring of loss and the amount of loss.
It is immaterial in life insurance what was the amount of loss at the time of
contingency. But in the property and general insurances, the amount of loss as well as
the happening of loss, are required to be proved.
6. Large Number of Insured Persons

To spread the loss immediately, smoothly and cheaply, large number of
persons should be insured. The co-operation of a small number of persons may also be
insurance but it will be limited to smaller area. The cost of insurance to each member
may be higher. So, it may be unmarketable.
Therefore, to make the insurance cheaper, it is essential to insure large number
of persons or property because the lesser would be cost of insurance and so, the lower
would be premium. In past years, tariff associations or mutual fire insurance
associations were found to share the loss at cheaper rate. In order to function
successfully, the insurance should be joined by a large number of persons.
7. Insurance is not a gambling:

The insurance serves indirectly to increase the productivity of the community
by eliminating worry and increasing initiative. The uncertainty is changed into
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certainty by insuring property and life because the insurer promises to pay a definite
sum at damage or death.
From a family and business point of view all lives possess an economic value
which may at any time be snuffed out by death, and it is as reasonable to ensure
against the loss of this value as it is to protect oneself against the loss of property. In
the absence of insurance, the property owners could at best practice only some form of
self-insurance, which may not give him absolute certainty.
Similarly, in absence of life insurance, saving requires time; but death may
occur at any time and the property, and family may remain unprotected. Thus, the
family is protected against losses on death and damage with the help of insurance.
From the company's point of view, the life insurance is essentially non-
speculative; in fact, no other business operates with greater certainties. From the
insured point of view, too, insurance is also the antithesis of gambling.
Nothing is more uncertain than life and life insurance offers the only sure method of
changing that uncertainty into certainty.
Failure of insurance amounts gambling because the uncertainty of loss is
always looming. In fact, the insurance is just the opposite of gambling. In gambling,
by bidding the person exposes himself to risk of losing, in the insurance; the insured is
always opposed to risk, and will suffer loss if he is not insured.
By getting insured his life and property, he protects himself against the risk of
loss. In fact, if he does not get his property or life insured he is gambling with his life
on property.
8. Insurance is not Charity:

Charity is given without consideration but insurance is not possible without
premium. It provides security and safety to an individual and to the society although it
is a kind of business because in consideration of premium it guarantees the payment of
loss. It is a profession because it provides adequate sources at the time of disasters
only by charging a nominal premium for the service.
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IMPORTANCE OF INSURANCE
The process of insurance has been evolved to safeguard the interests of people from
uncertainty by providing certainty of payment at a given contingency. The purpose and need
of insurance can be understood from the point of view of an individual, a group of individuals,
a business or industry and a society as a whole. Following points state the importance of
insurance in context of all these factors:
1. Safety and Security:

The insurance provides safety and security against the loss on a particular event. The
property of insured is secured against loss at a given contingency.
2. Affords Peace of Mind:

The security wish is prime motivating factor. The security vanishes fear and
uncertainty, fire, windstorm, automobile accident, damage and death are almost beyond the
control of human agency and in occurrence of any of these events, may frustrate or weaken
the human mind. By means of insurance, however, much of the uncertainty that centres about
the wish for security and its attainment may be eliminated.
3. Eliminates Dependency:
At the death of husband or father, the destruction of family needs no elaboration.
Similarly at the destruction of property and goods, the family would suffer a lot. The
insurance is her to assist them and provides adequate amount at such times.
4. Business Continuation:
Any particular partnership business may discontinue at the death of any partner
although the surviving partners can restart the business, but in both the cases the business and
the partners will suffer economically. The insurance policies provide adequate funds at the
time of death. Each partner may be insured for the amount of his interest in the partnership
and his dependents may get that amount at the death of the partner.
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5. Encourages Savings and Investment:

Life insurance is a way by which the policyholder has to compulsorily pay the
premiums on time which act as his savings and then latter on turn to be his investments.
Endowment policy, multipurpose policies, pension plans create a future income to the
policyholder. Thus, insurance acts as an avenue for savings as well as investments.
6. Economic Growth of the Country:

Insurance provides strong hand and mind, protection against loss of property and
adequate capital to produce more wealth. Insurance protects cattle and crop for farmers,
property like machines and factories for businessmen and also employee’s interest with
pension plans, etc. thus it meets all requirements of the economic growth of the country.
7. Reduction in Inflation:
Insurance extracts money by way of premiums from the public and it provides
sufficient funds for production. Thus, it narrows down the inflationary gap in the economy.
8. Wealth of the Society is Protected:

The loss of particular wealth can be protected with the insurance. Life insurance
protects loss of human wealth. Similarly, loss due to fire, accident, etc. can be well
indemnified by property insurance. Thus we can say that the present, future and potential
human and property resources are well protected. The happiness and prosperity are observed
everywhere with the help of insurance.
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METHODS OF INSURANCE
In accordance with study books of The Chartered Insurance Institute, there are the
following types of insurance:
1. Co-insurance :-
Risks shared between insurers.
2. Dual insurance :-
Risks having two or more policies with same coverage.
3. Self-insurance :-
Situations where risk is not transferred to insurance companies and solely
retained by the entities or individuals themselves.
4. Reinsurance :-
Situations when Insurer passes some part of or all risks to another Insurer
called Reinsurer.
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TYPES OF INSURANCE
There are various types of insurance as the difference in the financial risks. Today we
will discuss common types of insurance.
 Marine Insurance
Marine insurance is an agreement between the insurer and the insured by which the
former undertakes to indemnify the latter, in the manner they have agreed, the financial loss
caused by a certain sea perils in consideration to a certain premium paid periodically or in
lump sum. It is believed that it was the first developed form of insurance. In the ancient times,
international trade used to be done mainly through sea routes and the sea routes were subject
to various risks like collision of a ship with rocks or other ships, attack by sea pirates etc.
Such risks were attached both to the ship and cargo. Hence, the marine insurance was
felt necessary to be secured from the loss of ship, cargo etc. In course of time other types of
insurance were also developed gradually.
There are mainly three components (types) of marine insurance viz, cargo insurance,
hull insurance and freight insurance.
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1. Cargo Insurance :-
Cargo Insurance is the insurance of the goods loaded into the ship for delivery that he
party authorized.
2. Hull insurance :-
Hull Insurance refers to the insurance of the full body of the ship against the
probable loss caused by any specified sea perils during a particular journey or for a
certain period of time.
3. Freight insurance :-
Freight Insurance refers to the insurance of the probable loss of freight charges
for the non-delivery of goods by means of any specified sea perils.
 Life Insurance
Life insurance came into existence after the development of the marine insurance. The
first life insurers were the marine insurers who started issuing life insurance policies on the
life of the merchants, ship captains and the crew of the ship sailing along with the goods.
Every human beings wants the financial security of his/her life on one hand and the
financial security of his dependent after his death on the other. So it is a contract to recover
the financial uncertainty of the human life in some extent from business valuation method. It
is not a contract of indemnity like other insurance. Hence, life insurance may be defined as the
insurance by which the insurer undertakes to pay the fixed sum of money on the happening of
some events against the receipt of the premium. Thus life insurance contains the elements of
security as well as investment. There are commonly four types of life insurance, I have briefly
introduced below.
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 Whole life policy
It refers to the insurance policy made for the whole life of the insured. In this policy,
the insured has to pay the premium throughout his life or up to certain years usually up to the
retirement age and the insurer compensates the specified amount to the nominee or dependent
after the death of the insured.
 Endowment policy
It is the policy which is made for a fixed period of time say, 15, 20 and 25 years etc. In this
policy, the insured has to pay a certain premium up to the specified period and sum insured is
receivable to the insured on the maturity date or to his nominee or dependent on his death
whichever is earlier. It is done for the financial security of the insured at the old age or to his
dependent after his death.
 Term policy
It is such a policy, which is made for a dependent only on the death of the policy holder. If
he/she remains survived till the specified period the insurer will not be liable to pay the sum.
It is neither saving nor investment.
 Multipurpose policy
It is the one, which covers several benefits through a single policy such as, old age benefit,
retirement age benefit, income assurance benefit, dependent protection benefit etc. against the
payment of a certain premium.
 Fire Insurance
Fire insurance is a measure, which provides security against the risk of fire. It was initiated
from England when London city was caught by fire devastation in 1666 A.D. Fire insurance is
a contract between the Insurer and insured by which, the former undertakes to indemnify the
latter the financial loss caused by fire in consideration to a certain premium paid periodically
or in lump sum. In this policy, the insured must prove that the loss is caused by fire and that
must be unintentional accident case. It is generally made by the owners of cinema house,
business premises, residential house etc.
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 Miscellaneous Insurance
There are many other types of insurance policies for different financial risks.
1. Motor insurance
The insurance which is made to compensate the loss of the vehicles by means
of the pre decided events which may be caused by accident or other causes is known
as motor insurance.
2. Burglary/theft insurance
The insurance which is made for getting the compensation of the losses of
property caused by dacoit, burglary or theft that must not be by negligence of the
insured is called burglary insurance.
3. Credit insurance
It is the insurance in which a person or business firm is assured by the insurer
to compensate the loss incurred due to the insolvency of the debtor in consideration to
the payment of a certain premium.
4. Personal accident insurance

It is the insurance, which provides safety to the insured against the risk of
disability due to accident against the payment of a certain premium.
5. Health insurance
It is the insurance under which the insured is paid with a sum of money to
cover his/her hospitalization and medical expenses in case of health loss against the
payment of a certain premium.
6. Aviation insurance
The insurance, which is made to compensate the financial loss caused by
aviation risks and accidents is known as aviation insurance.
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PRINCIPLES OF INSURANCE
When a company insures an individual entity, there are basic legal requirements.
Several commonly cited legal principles of insurance include:
1. Principle of Indemnity :-
The insurance company indemnifies, or compensates, the insured in the case of

certain losses only up to the insured’s interest. Indemnity means security or compensation
against loss or damage. The principle of indemnity is such principle of insurance stating
that an insured may not be compensated by the insurance company in an amount
exceeding the insured’s economic loss.
In type of insurance the insured would be compensation with the amount equivalent to
the actual loss and not the amount exceeding the loss. This is a regulatory principal. This
principle is observed more strictly in property insurance than in life insurance. The
purpose of this principle is to set back the insured to the same financial position that
existed before the loss or damage occurred.
Indemnity means security, protection and compensation given against damage, loss or
injury. According to the principle of indemnity, an insurance contract is signed only for
getting protection against unpredicted financial losses arising due to future uncertainties.
Insurance contract is not made for making profit else its sole purpose is to give
compensation in case of any damage or loss. The amount of compensations is limited to
the amount assured or the actual losses, whichever is less.
The compensation must not be less or more than the actual damage. Compensation is
not paid if the specified loss does not happen due to a particular reason during a specific
time period. Thus, insurance is only for giving protection against losses and not for
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making profit. However, in case of life insurance, the principle of indemnity does not
apply because the value of human life cannot be measured in terms of money.
2. Principle of Insurable interest :-
The principle of insurable interest states that the person getting insured must have
insurable interest in the object of insurance. A person has an insurable interest when the
physical existence of the insured object gives him some gain but its non-existence will
give him a loss.
In simple words, the insured person must suffer some financial loss by the damage of
the insured object. Under this principle of insurance, the insured must have interest in the
subject matter of the insurance. Absence of insurance makes the contract null and void. If
there is no insurable interest, an insurance company will not issue a policy. The insured
typically must directly suffer from the loss.
Insurable interest must exist whether property insurance or insurance on a person is

involved. The concept requires that the insured have a “stake” in the loss or damage to the
life or property insured. What that “stake” is will be determined by the kind of insurance
involved and the nature of the property ownership or relationship between the persons.
3. Principle of Utmost good faith :-

The insured and the insurer are bound by a good faith bond of honesty and fairness.
Material facts must be disclosed. Under this insurance contract both the parties should
have faith over each other. As a client it is the duty of the insured to disclose all the facts
to the insurance company. Any fraud or misrepresentation of facts can result into
cancellation of the contract.
In principles of insurance, principle of utmost good faith is a contract. In this insurance

contract, the risk loss of is transferred from insured to the insurer. Consequently, there
should be a good trust between the insurer and the insured. The insured must disclose
every material fact about the subject matter of the insurance contract in the proposal form
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of insurance. The full, correct and reliable information must be submitted by the insured.
In case of any concealment of fact or false statement, the insurer can declare the contract
void, and he will not be liable for paying any compensation.
4. Principle of Contribution :-
Insurers which have similar obligations to the insured contribute in the
indemnification, according to some method. Principle of Contribution is a corollary of the
principle of indemnity. It applies to all contracts of indemnity, if the insured has taken out
more than one policy on the same subject matter.
According to this principle, the insured can claim the compensation only to the extent
of actual loss either from all insurers or from any one insurer. If one insurer pays full
compensation then that insurer can claim proportionate claim from the other insurers. So,
if the insured claims full amount of compensation from one insurer then he cannot claim
the same compensation from other insurer and make a profit. Secondly, if one insurance
company pays the full compensation then it can recover the proportionate contribution
from the other insurance company.
5. Principle of Subrogation :-
The insurance company acquires legal rights to pursue recoveries on behalf of the
insured; for example, the insurer may sue those liable for the insured’s loss. The principle
of subrogation enables the insured to claim the amount from the third party responsible for
the loss. It allows the insurer to pursue legal methods to recover the amount of loss, For
example, if you get injured in a road accident, due to reckless driving of a third party, the
insurance company will compensate your loss and will also sue the third party to recover
the money paid as claim.
Subrogation means substituting one creditor for another. Principle of Subrogation is an

extension and another corollary of the principle of indemnity. It also applies to all
contracts of indemnity. According to the principle of subrogation, when the insured is
compensated for the losses due to damage to his insured property, then the ownership right
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of such property shifts to the insurer. This principle is applicable only when the damaged
property has any value after the event causing the damage. The insurer can benefit out of
subrogation rights only to the extent of the amount he has paid to the insured as
compensation.
6. Principle of Mitigation :-
In case of any loss or casualty, the asset owner must attempt to keep loss to a
minimum, as if the asset was not insured. When the event insured against takes place, the
policy holder must do everything to minimize the loss and to save what is left. This
principle makes the insured more careful in respect of this insured property.
In principles of insurance, a principle of mitigation of loss is the fundamental

principle. Under this principle, the insured must give his 100% to save his property and
not just sit and watch destruction of his property. All tough his property is insured his
effort should be there to minimize the losses.
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FUNCTIONS OF INSURANCE :-
The function of insurance may vary with its nature and types. It means the functions of
fire or marine insurance may differ from that of life insurance etc. Today I am going to
discuss some common function of the insurance.
Providing financial losses
Insurance provides assurance for the compensation of pre-decided and accidental

financial losses against the premium paid by the insured.
Reducing financial losses
Human beings are exposed to different kinds of risks in their personal as well as
business life. Such risks may cause great financial loss. Insurance acts as a mechanism to
reduce or eliminate the financial loss due to various risks by forecasting the chances of such
happenings and suggesting for their controlling measures.
Mobilization of capital
Insurance accumulates fund in terms of insurance premium from the parties willing to
get secured from the financial losses. Compensation is made to the insured who are actually
suffered and productive sectors. Hence, insurance accumulates fun and mobilized into
different areas.
Maintaining Financial stability
Risks and uncertainties create instability in the financial sector. Insurance companies
help to maintain financial stability by assuring for the compensation of the losses caused by
various risks and thus, promotes the performance efficiency, which leads to financial stability.
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ADVANTAGES AND DISADVANTAGES OF INSURANCE
 Advantages of insurance :-
1. Assures for financial compensation

Insurance provides financial security to the insured. It gives guarantee of
compensation against large financial losses in return of small premium.
2. Reduction of risks
Human beings are exposed to different kinds of financial risks, which may
cause large financial losses. It is not possible to eliminate the risks but it can be
forecasted and reduced by applying some precautionary measures. Insurance helps in
reducing risks by suggesting for pre caution measures on one side and by sharing the
losses to a group of person who has agreed to join the common pool.
3. Encouragement to saving and investment

In the insurance agreement, the insured has to pay a certain regular premium to
the insurer in return to the compensation of the probable future loss or compensation at
old age or compensation after his/her death.
Insurance is thus a method of collecting saving from the parties willing to get
secured from the financial risks. Hence, it encourages persons to make regular savings.
4. Basis of credit
An insured can easily get loan by pledging insurance policy as a security from
the insurance company itself. Besides, financial institutions grant credit facilities on
the pledge of the properties which are being insured.
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5. Maintains economic stability

Financial risks and uncertainties pushes the entire economy into instability. It
is a very bad sign to total business and social sectors. Insurance assures the
compensation of the financial losses caused by the specified future events and
considerably helps in maintaining economic stability.
6. Promotes business activities

Business sector is more risky sector. The chances of fire in the go down, loss of
stocks by theft, explosion in the ship, train or plane etc. are more frequent in this
sector. Insurance takes away these risks and promotes and develops business activities
in consideration to a nominal charge i.e. premium.
7. Provides employment opportunities

As insurance has become business in the modern day business world, hundreds
of entrepreneurs and thousands of employees have been engaging in this line. Hence,
by establishing and developing insurance companies, it has provided employment
opportunities to thousands of people as per their qualification and calibre.
 Disadvantages of Insurance :-
Besides a number of benefits, insurance has also some limitations.
● Insurance leads to negligence as the insured feels that he/she can be compensated for
any loss or damage.
● Insurance companies do not make the compensation promptly on maturity of the

policy or for the financial losses as the expectation of the insured.
● It may lead to the crimes in the society as the beneficiaries of the policy may be
tempted to commit crimes to receive the insured amount.
● Although insurance encourages savings, it does not provide the facilities that are
provided by bank.
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INTRODUCTION TO 7 P’S OF INSURANCE
Wherever there is uncertainty there is risk. We do not have any control over
uncertainties which involves financial losses. The risks may be certain events like death,
pension, retirement or uncertain events like theft, fire, accident, etc. Insurance is a financial
service for collecting the savings of the public and providing them with risk coverage. The
main function of Insurance is to provide protection against the possible chances of generating
losses. It eliminates worries and miseries of losses by destruction of property and death.
It also provides capital to the society as the funds accumulated are invested in
productive heads. Insurance comes under the service sector and while marketing this service,
due care is to be taken in quality product and customer satisfaction. While marketing the
services, it is also pertinent that they think about the innovative promotional measures.
It is not sufficient that you perform well but it is also important that you let others
know about the quality of your positive contributions. The term Insurance Marketing refers to
the marketing of Insurance services with the aim to create customer and generate profit
through customer satisfaction. The Insurance Marketing focuses on the formulation of an ideal
mix for Insurance business so that the Insurance organization survives and thrives in the right
perspective.
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The best meet the needs of its targeted market. The Insurance business deals in selling
services and therefore due weight-age in the formation of marketing mix for the Insurance
business is needed. The marketing mix includes sub-mixes of the 7 P's of marketing i.e. the
product, its price, place, promotion, people, process & physical attraction.
 Role of 7 P’s in Marketing in Insurance Sectors
1. Globally the growth of insurance is encouraging, and same is true with the Indian
Insurance Sector.
2. Insurance is emerging as one of the fastest vehicle in the panorama of the burgeoning
service sector in India.
3. Insurance is practically a necessity to business activity and is important for the growth
of the economy.
4. The Insurance business deals in selling services where the product is intangible and
requires a considerable amount of explanation of the intricacies of various products
and therefore due weightage must be given to the formation of marketing mix for the
Insurance business.
5. The marketing mix includes sub-mixes of the 7 P’s of marketing i.e. the product, its
price, place, promotion, people, process & physical evidence.
6. The present paper focuses on the performance of the Indian Insurance sector in the
recent past and further examines the role of marketing mix in marketing insurance
services in India.
7. It is important for marketers to understand the needs of the market and formulate a
marketing mix which can help the in attracting and retaining customers.
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BRIEF INFORMATION ABOUT ALL 7 P’S
 PRODUCT :-
A product means what we produce. If we produce goods, it means tangible product

and when we produce or generate services, it means intangible service product. A product is
both what a seller has to sell and a buyer has to buy. Thus, an Insurance company sells
services and therefore services are their product. In India, the Life Insurance Corporation of
India (LIC) and the General Insurance Corporation (GIC) are the two leading companies
offering insurance services to the users. Apart from offering life insurance policies, they also
offer underwriting and consulting services. The intangibility of the service and their non-
transferability is applicable to insurances services also.
Each service product in insurance is specific to the service customer for it has been
designed, to which the financial bonus etc., in case the insurance industry refers to the product
insurance policies that are sold to the customer along with the risk coverage. The risk
coverage is the intangibility for the happening that may not even take place hence the
tangibility is provided by a policy to the customer.
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The formulation of product mix for the insurance business makes it significant to take
a look at the services and schemes of insurance organization. The product portfolio is known
and the process of formulating a package should be known. It is natural that the users expect a
reasonable return for their investments. It is quite natural that the insurance organizations
want to maximize profitability. Both of these dimensions are found interrelated.
It is well known that the key objectives of insurance business are mobilization of
savings and channelization of investments. This makes it essential that insurance business is
made lucrative so that the users /potential users get incentives to buy a policy or to invest in
the insurance organizations. The insurance organizations also need to promote the
underwriting activities, which would activate the process of arresting the regional imbalance.
In the context of formulating the product mix, it is essential that the insurance organizations
promote innovation and in the product portfolio include even those services and schemes
which are likely to get a positive response in the future.
The corporate objectives indicate that the insurance organizations are required to be
careful, especially while launching a new policy. The policies should not only generate
enough premium but it is also important that the policies cover persons working in the
informal sector, serving as porter, working as manual labourer, or engaged in farm sector. It is
the need of the hour that the insurance organizations make their service internationally
competitive. This makes a strong advocacy in favour of innovative product mix strategy for
the public sector insurance organizations. Thus the formulation of product mix should be in
face of innovative product strategy. Strategies of foreign and private insurance companies
should be taken into consideration while initiating the innovative process.
The policies have been adding on values, new proposals, and new selling USPs with
the introductions of global competition in the Indian insurance industry. The current list some
of the policy offers reads as under:-
1. Life insurance policy

2. Life endowment policy
3. Term life policy
4. Equity linked policies
5. Tax saving policies
6. Investment growth and life insurance linked policies
7. Accident insurance policy
8. Health insurance policy
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9. House and insurance policy

10. Liability insurance policy
11. Travel and in transit insurance policy
12. Commercial insurance policy
13. Automobile and vehicle insurance policy
14. Baggage and personal belonging insurance policy
15. Cattle and livestock policy
16. Engineering insurance
17. Marine cargo insurance
18. Air cargo insurance
In fact the insurance policy changes its face almost everyday with the insurance
companies adding on values to the existing policies, innovating new ways of attracting
customers for their innovative policies could also be linked to the tax saving motivations or
even earning more returns through managing of investments by the insurance companies. That
means the insurance products now have a constituent of the financial management besides the
normal components of the life and property of the customers.
 Thus the product planning and development should:
1. Give due weightage to the socially and economically backward classes.

2. Maximize the mobilization of savings by offering lucrative schemes.
3. Assign due weightage to interests of investors.
4. Maintain economy in business by promoting cost effectiveness.
5. Act as a trustee of policyholders.
6. Keep in mind the emerging trends in business environment.
7. Improve the quality of customer / user services.
 Product Planning & Development
1. The purpose of insurance business is to generate profits besides subserving the social
interests. The present business is likely to be more competitive.
2. Product is like a stage on which the entire drama of successful marketing is acted. It is
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like an engine that pulls the rest of the marketing programmes. It is in this context that
the product management in an insurance organization needs an intensive care.
3. Yesterday, the policyholders had limited hopes and aspirations but today they expect
more and they would even like something more tomorrow. This focuses on the fact
that strategic decisions are influenced by the environmental conditions.
4. The product development needs a new vision, a new approach and a new strategy. Till
now the public sector insurance organizations have made possible an optimum
utilization of their marketing resources especially in rural areas where tremendous
opportunities are available. Thus they should assign due weightage to the development
services /schemes which cater to changing needs and requirements of the rural
segment.
 PRICE :-
In the insurance business, the pricing decisions are concerned with the premium
charged against the policies interest charged for defaulting the payment of premiums & credit
facilities, commission charged for underwriting & consultancy services. The formulation of
pricing strategies becomes significant with the viewpoint of influencing the target market or
prospects. To be more specific in the Indian context where the disposable income in the hands
of prospects is found low, the increasing inflationary pressure has been instrumental in
contracting the discretionary income, the increasing consumerism has been making an assault
on the saving potentials of masses, it is pertinent that the insurance organizations in general &
public sector insurance organizations in particular adopt such a strategy for pricing that makes
it a motivational tool & paves the ways for increasing the insurance business. Of course, a
motivational pricing strategy is required to be given due weightage. This necessitates a new
vision for setting premium structure & paying the bonus & charging the interest.
The strategy may have a new vision in the sense that the insurance organizations
prefer to make a mix of high & low pricing strategy. The motive is to make the premium
structure commercially viable so that the insurance organizations succeed in having a sound
product portfolio besides fuelling development orientation. The pricing decisions make it
essential that the insurers keep in their minds the nature of policy vis-à-vis the segment to
which the prospects belong.
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Following are the Pricing strategies made by Insurance company :-
i. The premium charged against the policies,

ii. Interest charged for defaulting the payment of premium and credit facility, and
iii. Commission charged for underwriting and consultancy activities.
In the tangible products, cost of production is taken as the basis for fixation of prices.
Even in the insurance business, it is found to be an important consideration & a dominating
base. This makes the cost of insurance a decisive factor for charging premium. The important
bases for determining the cost are rate of death, rate of interest & the expenses incurred on the
insurance business. The mortality table helps the determination of death rate. It is to predict
future mortality. The best method of construction of mortality table is to select a large number
of persons at attained age, which is meant age close to the birth rate. The second important
element is the rate of interest.
On the basis of mortality rate, it is estimated that when & how much amount is to be
received as premium & would be paid as claims but on the basis of interest rate, it is estimated
that how much interest can be earned by investing the insurance funds.
With a view of influencing the target market or prospects the formulation of pricing
strategy becomes significant. The pricing in insurance is in the form of premium rates. The
three main factors used for determining the premium rates under a life insurance plan are
mortality, expense and interest. The premium rates are revised if there are any significant
changes in any of these factors.
1. Mortality (deaths in a particular area) :-

When deciding upon the pricing strategy the average rate of mortality is one of
the main considerations. In a country like South Africa the threat tolife is very
important as it is played by host of diseases.
2. Expenses :-
The cost of processing, commission to agents, reinsurance companies as well
as registration are all incorporated in to the cost of installments and premium sum and
forms the integral part of the pricing strategy.
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3. Interest:-
The rate of interest is one of the major factors which determines people's
willingness to invest in insurance. People would not be willing to put their funds to
invest
in insurance business if the interest rates provided by the banks or other financial
instruments are much greater than the perceived returns from the insurance premiums.
The process of rate of fixation in the insurance organizations is not so scientific &
identifies the cases of moral hazard. It is easier to identify the physical hazard but the task of
identifying the moral hazard is found difficult. The premium charged is to be made rational to
cater to the payment of claims on a priority basis including the catastrophic losses,
management expenses & margin of profit. It is essential that various related to both the
hazards are estimated in a scientific way. The actual process of rating consists of three steps,
e.g. classification, discrimination & scheduling.
The price mix decisions are:
1. Making possible cost of effectiveness.

2. Restructuring of premium.
3. Due priority to profit generating investments.
4. Rationalizing or optimizing the social costs.
5. Paving avenues for channelising the productive investments.
6. Assigning dude weightage to the policies meant for the socially & economically
backward classes.
7. Making the ways for maximizing profit.
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 PLACE :-
This component of the marketing mix is related to two important facets
i) Managing the insurance personnel, and
ii) Locating a branch.
The management of agents and insurance personnel is found significant with the view
point of maintaining the norms for offering the services. This is also to process the services to
the end user in such a way that a gap between the services- promised and services - offered is
bridged over. In a majority of the service generating organizations, such a gap is found
existent which has been instrumental in making worse the image problem. The transformation
of potential policyholders to the actual policyholders is a difficult task that depends upon the
professional excellence of the personnel. The agents and the rural career agents acting as a
link, lack professionalism.
The insurance personnel if not managed properly would make all efforts insensitive.
Even if the policy makers make provision for the quality upgradation, the promised services
hardly reach to the end users. This makes it significant that the insurance organizations in
general and the public sector insurance organizations in particular keep their minds in
changing the expectations of customers and the prospects. The behavioral profile of insurance
personnel is studied in a right fashion and the changes required due to the changing perception
of expectation are incorporated. It is essential that they have rural orientation and are well
aware of the lifestyles of the prospects or users. They are required to be given adequate
incentives to show their excellence.
While recruiting agents, the branch managers need to prefer local persons and by
conducting refresher courses to brush up their faculties to know the art of influencing the
users/prospects. In addition to the agents, the front-line staff also needs an intensive training
program. This makes it essential that the branch managers organize an ongoing training
program, which focuses on behavioral management.
Another important dimension to the Place Mix is related to the location of the
insurance branches. While locating branches, the branch manager needs to consider a number
of factors, such as smooth accessibility, availability of infrastructural facilities and the
management of branch offices and premises.
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In addition it is also significant that the branch managers assign due weightage to the
safety provisions. The management of offices makes it significant that the branch managers
are particular to the office furnishing, civic amenities and facilities, parking facilities and
interior office decoration.
Thus the place management of insurance branch offices needs a new vision, distinct
approach and an innovative style. This is essential to make the work place conducive,
attractive and proactive to the generation of efficiency. The motives are to offer the promised
services to the end users without any distortion and making the branch offices a point of
attraction. The branch managers need professional excellence to make place decisions
productive.
 PROMOTION :-
The insurance services depend on effective promotional measures. In a country like

India, the rate of illiteracy is very high and the rural economy has dominance in the National
economy. It is essential to have both personal and impersonal promotion strategies. In
promoting insurance business, the agents and the rural career agents play an important Role.
Due attention should be given in selecting the promotional tools for agents and rural career
agents and even for the branch managers and front line staff. They also have to be given
proper training in order to create impulse buying. Advertising and Publicity, organization of
conferences and seminars, incentive to policyholders are impersonal communication.
Arranging Kirtans, exhibitions, participation in fairs and festivals, rural wall paintings and
publicity drive through the mobile publicity van units would be effective in creating the
impulse buying and the rural prospects would be easily transformed in to actual policyholders.
With the advent of private players in the insurance, companies resort to rampant
promotion. Promotion mix for this sector is as follows:
 Advertisement
Advertisement can be done through the telecast media, broadcast media and print
media. Insurance companies have been making optimal use of all the three kinds. Use of
World Wide Web, as media is almost negligible and will not be very frequent in the near
40
future considering the fact that the majority of customer base of these companies is not yet
exposed to the Internet. The telecast media has been the most effective of all in case of the
insurance sector. Most of the companies have their separate advertising section to take care of
this aspect. An important consideration while making the decision as to the selection of the
media is budgetary constraint.
 Publicity
It is a device to promote business without making any payment and therefore it could
be also called as unpaid form of persuasive communication bearing a high rate of sensitivity.
Developing rapport with the media is an important aspect of publicity. This makes it essential
that the PR officers working in the insurance organisations maintain contacts with the media
personnel, organise press conference, and offer small gifts and momento to them. These days
LGD marketing is gaining popularity the world over. It also can be applicable here. At the
apex and regional levels, the PRO’s bear the responsibility of projecting positive image of the
organisation. Thus it is necessary to select suitable personnel for this. They should be in
particular taught to deal with people, simple things like talking, greeting etc.
 Sales Promotion
Incentives to the end users for taking the policy play an important role in promoting
the insurance business. Since the insurance business is also related to achieving of a particular
target, it is pertinent that the policymakers assign due weightage to the same. The offering of
small gifts during a particular period, the rebate, discount, bonus can increase business of
organisation by leaps and bounds. Besides, there can be gifts for the insurance agents also.
 Personal Selling
Personal selling in case of the insurance organisations is quite important considering

the existence of the insurance agents spread at all levels. Selection of these agents, their
training is responsibility of the organisation. There is difference in urban and rural market.
Rural customers might be uneducated / uninformed etc. compared to the urban customer.
Hence the organisations will have to make selections of the rural and urban agents
accordingly.
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 Word of Mouth Promoting.
The word – of- mouth communications result into wider publicity, which substantially
sensitise the process of influencing the impulse of users/prospects of the insurance services.
The satisfied group of customers, opinion leaders, the social reformists, the popular
personalities act as word of mouth communicators. The advertisement slogans may be
insensitive, the publicity measures may be ineffective but the positive feelings of friends and
relations communicated cannot be ineffective. This makes it clear that the most important
thing in the promotion of any business is the quality of services.
 Telemarketing
With the development of satellite communication facilities and with the expansion of
the television network, we find telemarketing gaining popularity the world over. The
insurance organisations in general need to promote telemarketing. The foreign insurance
companies have been assigning due weightage to this and in India this is beginning to gain
importance with the advent of competition in this sector. The telemarketer is supposed to be
well aware of the telephonic code so that the task of satisfying the customers/their queries will
not consume much of time.
 World Wide Web
In banking as well as insurance, more and more importance is being given to online
contact facilities whereby complaints/comments could be sent through an email. Email is
fastest written mode of communication and since it has been recognized legally, its use to
clear doubts has been in full swing.
 PEOPLE :-
People are most important component of marketing mix for the insurance industry.
Sophistication in the process of technological advances makes the ways for the personnel in
such a way that an organization succeeds in making possible a productive utilization of
technologies used or likely to be used. Professional qualification requirements change as
technological develops & evolves. The use of computers microcomputers, fax machines,
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sophisticated telephonic service, e-mailing, intra-net service have been found throwing a big
impact on the perception of quality of service.
This makes it essential that the insurance organizations also think in favour of
developing personnel in line with the development and use of information technologies. The
front-line-staff as well as the branch managers are required to be given the training facilities
so that they in position to make possible an effective use of the technologies.
The insurance organizations bear the responsibility of developing the credentials of

their employees. In this context, it is also significant that they think about the behavioral
profile of insurance personnel. It is pertinent that the employees are well aware of the
behavioral management. They know & understand the changing level of expectations of users
& make sincere efforts to fulfill the same.
In this context, it is also significant that the senior executive while recruiting, training
& developing the insurance personnel make it sure that employees serving the organization
have a high behavioral profile in which empathy has been given due place. The psychological
attributes become significant with the viewpoint of influencing the prospects or retaining the
users.
It is in this context that the insurance companies need a rational plan for the
development of insurance personnel. Understanding the customer better allows to design
appropriate products. Being a service industry which involves a high level of people
interaction, it is very important to use this resource efficiently in order to satisfy customers.
Training, development and strong relationships with intermediaries are the key areas
to be kept under consideration. Training the employees, use of IT for efficiency, both at the
staff and agent level, is one of the important areas to look into. Human resources can be
developed through education, training and by psychological tests. Even incentives can inject
efficiency and can motivate people for productive and qualitative work.
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 PROCESS :-
The process should be customer friendly in insurance industry. The speed and
accuracy of payment is of great importance. The processing method should be easy and
convenient to the customers. Installment schemes should be streamlined to cater to the ever
growing demands of the customers. IT & Data Warehousing will smoothen the process flow.
IT will help in servicing large no. of customers efficiently and bring down overheads.
Technology can either complement or supplement the channels of distribution cost
effectively. It can also help to improve customer service levels. The use of data warehousing
management and mining will help to find out the profitability and potential of various
customers product segments.
1. Flow of activities :-
All the major activities of banks follow RBI guidelines. There has to be
adherence to certain rules and principles in the banking operations. The activities have
been segregated into various departments accordingly.
2. Standardization :-
Banks have got standardized procedures got typical transactions. In fact not
only all the branches of a single-bank, but all the banks have some standardization in
them. This is because of the rules they are subject to. Besides this, each of the banks
has its standard forms, documentations etc. Standardization saves a lot of time behind
individual transaction.
3. Customization :-
There are specialty counters at each branch to deal with customers of a
particular scheme. Besides this the customers can select their deposit period among the
available alternatives.
4. Number of stores :-
Numbers of steps are usually specified and a specific pattern is followedto
minimize time taken.
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5. Simplicity :-
In banks various functions are segregated. Separate counters exist with clear
indication. Thus a customer wanting to deposit money goes to deposits counter and
does not mingle elsewhere. This makes procedures not only simple but consume less
time. Besides instruction boards in national boards in national and regional language
help the customers further.
 PHYSICAL EVIDENCE :-
Distribution is a key determinant of success for all insurance companies. Today, the
nationalized insurers have a large reach and presence in India. Building a distribution network
is very expensive and time consuming. Technology will not replace a distribution network
though it will offer advantages like better customer service. Finance companies and banks can
emerge as an attractive distribution channel for insurance in India. In Netherlands, financial
services firms provide an entire range of products including bank accounts, motor, home and
life insurance and pensions. In France, half of the life insurance sales are made through banks.
In India also, banks hope to maximize expensive existing networks by selling a range of
products. The physical evidences include signage, reports, punch lines, other tangibles,
employee‘s dress code etc.
1. Tangibles :-
Banks give pens, writing pads to the internal customers. Even the passbooks,
chequebooks, etc. reduce the inherent intangibility of services.
2. Punch lines :-
Punch lines or the corporate statement depict the philosophy and attitude of the
bank. Banks have influential punch lines to attract the customers. Banking marketing
consists of identifying the most profitable markets now and in future, assessing the
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present and future needs of customers, setting business development goals, making
plans-all in the context of changing environment.
3. Signage :-
Signage personifies the insurance company. It gives an identity by which users
recognize the company. A signage depicts the company’s philosophy and policy.
Physical evidence is the environment in which the service is delivered and where the
company and the customers interact and any tangible goods that facilitate the performance and
communication of the service.
Services are intangible and heterogeneous. Intangibility means that services cannot be
displayed, physically demonstrated or illustrated; heterogeneity means that consumers cannot
be certain about performance on any given day. It plays a major role in enhancing customers’
perception of the service quality.
However, in case of insurance sector, the customer rarely visits the insurance
company. The customer comes mostly only in contact with the service provider.
Companies try to demonstrate their service quality through physical evidence and
presentation. However, in case of insurance sector, the customer rarely visits the insurance
company. The customer comes mostly only in contact with the service provider hence the
service provider (insurance agent) should
● Look presentable
● Have a pleasant personality
● Have good communication skills
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CASE STUDY
7 P’S IN LIC (LIFE INSURANCE CORPORATION) :-
Life Insurance Corporation of India or simply known as LIC is an Indian company that
deals in insurance and investments. This largest company of insurance is an Indian state
owned company and has its headquarters in Mumbai, India. Life Insurance Corporation was
established in the year 1956 after the Indian parliament passed an act to nationalize the
industry of private insurance.
Nearly two hundred and forty five companies of insurance were merged in order to
create this company LIC. Since that time until the year 2000, the sector of insurance has been
under the monopoly of LIC. The main objective of nationalization of LIC- Life Insurance was
to remove the risk of loss and to provide the policyholder the protection in terms of money.
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Product in the 7 P’S of LIC
LIC- Life Insurance has designed several products in accordance with the
requirements of the common people. Insurance is mainly taken out with the purpose of
providing for the family members in case of death by natural causes or accident to the
breadwinner of the family. LIC- Life Insurance offers its customers various insurance
products such as the following-
• Life Insurance
• Investment Management
• Health Insurance
• Mutual Fund
• Property Insurance
• Auto Insurance
• Home Insurance
• Casualty Insurance
•Liability Insurance
•Credit Insurance
Besides this, various pension plans, annuities, group schemes, special plans and unit-
linked plans are also in place for the benefit of consumers. LIC- Life Insurance has also
launched several products especially for children, senior citizens, women and handicapped.
LIC also has schemes for people who are on the borderline of poverty.
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Place in the 7 P’s of LIC
As LIC- Life Insurance is a service industry, the distribution of its products and
facilities is done through various channels – direct and indirect. Numerous routes are taken to
reach the potential customers. The most important and basic channel member until this date
has been the “Insurance agent”. Taking various innovative routes in order to reach the corner
that is the farthest and remotest is the objective of the LIC Company. Physical distribution of
the service products, which in this case is funds and support at the right time and place is an
important factor of marketing policy of LIC- Life Insurance Company.
The organization’s channel of distribution consists of agents, brokers, development

officers, retail services related to finance, branch office, alliance with banks and distributors,
corporate agencies and proper and well-maintained infrastructure. Presently LIC- Life
Insurance distributive channel consists of numerous development officials, agents and service
branches who are active participants. Presently the number of zonal offices LIC has is eight,
divisional offices are 109, satellite offices is 992, branches is 2,048 and numerous corporate
offices. It also has a network of corporate agents that are 242, individual agents that are
1,337,064, referral agents that are79, brokers that are 98 and tie-ups with 42 banks.
organization’s channel of distribution consists of agents, brokers, development

officers, retail services related to finance, branch office, alliance with banks and distributors,
corporate agencies and proper and well-maintained infrastructure.
Presently LIC- Life Insurance distributive channel consists of numerous development

officials, agents and service branches who are active participants. Presently the number of
zonal offices LIC has is eight, divisional offices are 109, satellite offices is 992, branches is
2,048 and numerous corporate offices. It also has a network of corporate agents that are 242,
individual agents that are 1,337,064, referral agents that are79, brokers that are 98 and tie-ups
with 42 banks.
Price in the 7 P’s of LIC
49
A suitable pricing policy is a very important factor in the successful running of an

insurance company as it is the pricing policy that affects the sales volume of a company. Price
is actually the valuation that is offered for the product by the offerer. For any LIC- Life
Insurance policy, the policyholder has to pay a premium that is paid either annually, half-
yearly, quarterly or in some cases monthly. The management takes the decision of fixing the
premium of every policy relating to a particular period.
A complete market analysis is done and information about various facts are collected
like how much money can an individual afford for a particular scheme, and what is the
economic and financial condition of the market at that particular time. This data helps in
making the fair and reasonable pricing policies. The management also makes pricing
decisions about the premium mode, premium level, investment return, loan interest and the
commissions. If you compare LIC products with other insurance products, then you will find
that LIC is very much a value for money product. With its excellent brand value, and service
quality, a customer can get full value as per the price paid for an LIC product.
50
Promotions in the 7 P’s of LIC
The promotional strategy of LIC- Life Insurance is very simple and straightforward.
Its main aim is to inform the consumers about its various policies and about its brand. In order
to fulfill this it has taken steps like personal selling, exhibitions, demonstrations at events,
advertising and new schemes. Bags, diaries calendars are distributed as gifts and incentives to
the policyholders. Advertisements are shown on televisions, newspapers, billboards as
promotional activities.
A mobile van for publicity roams across the rural areas creating awareness about the
company. LIC- Life Insurance has its own website and webpage where all the detailed
information about every possible query is supplied to satisfy the consumers. The majority of
advertising is driven towards insurance which can be purchased by the common man so as to
increase the reach of the company and at the same time, the sale of the product. Thus, product
introduction and product retention in the mind of the customers is the major objective of
promotions by Life insurance corporation.
51
7 P’S IN BAJAJ ALLIANZ :-
Product in the 7 P’s of Bajaj Allianz
Following are the products provided by Bajaj Allianz company :
1. Motor Insurance
2. Asset Insurance
3. Health Insurance
4. Travel Insurance
5. Corporate Insurance
Price in the 7 P’s of Bajaj Allianz
The price structure is based on the type of policies of Bajaj Allianz company. The
three main factors used for determining the premium rates under a life insurance plan are
mortality, expense and interest. The premium rates are revised if there are any significant
changes in any of these factors.
Place in the 7 P’s of Bajaj Allianz

Thus in Bajaj Allianz the place management of insurance branch offices needs a new
vision, distinct approach and an innovative style. This is essential to make the work place
conducive, attractive and proactive to the generation of efficiency.
Promotion in the 7 P’s of Bajaj Allianz
1. Huge advertisements on Television and radios.

2. Tele-marketing
3. Promotion in front of corporate offices
4. Internet marketing
5. Hoardings and brochures
52
People in the 7 P’s of Bajaj Allianz
People are the main assets of financial organizations because of service factor attached
to it. . Training the employees, use of IT for efficiency, both at the staff and agent level, is one
of the important areas to look into. Human resources can be developed through education,
training and by psychological tests.
Process in the 7 P’s of Bajaj Allianz
The prestigious awards itself speaks the smooth functioning of the insurance activity.
The processing method should be easy and convenient to the customers. Installment schemes
should be streamlined to cater to the ever growing demands of the customers.
Physical Evidence in the 7P’s of Bajaj Allianz
The physical evidences include signage, reports, punch lines, other tangibles,
employee‘s dress code etc.
53
Conclusion
In India, banks hope to maximize expensive existing networks by selling a range of

products. It is anticipated that rather than formal ownership arrangements, a loose network of
alliance between insurers and banks will emerge, popularly known as bank assurance.
Another innovative distribution channel that could be used are the non-financial organisations.
We can‘t deny the fact that if foreign banks are performing fantastically, it is not only
due to the sophisticated information technologies they use but the result of a fair
synchronization of new information technologies and a team of personally committed
employees. The development of human resources makes the ways for the formation of human
capital. This background, the study is done to analyse the profitability of select private sector
banks in India. It is identified that banks differ in terms of Interest Spread, Return on Long
Term Fund (%), Return on Net Worth, Return on Assets Excluding Revaluations, Interest
Expended / Interest Earned, Operating Expense / Total Income and Selling Distribution Cost
Composition.
This may be due to the managerial and administrative differences across various
banks. Further, it is attempted to find the difference in profitability aspects of banks over a
period of time. Adjusted Cash Margin (%) and Net Profit Margin ratio showed a significant
difference over the years. It shows that there is a change in total income and net profit. This is
due to the growth and advances made by these banks over the same period.
54
APPENDIX
QUESTIONNAIRE
1. What support, tools/ resources, skills or empowerment do you need to be

more effective?
Ans.:
___________________________________________________________
___________________________________________________________
___________________________________________________________
______.
2. How long you are using the internet?

Less than a month
Less than a year
1-2 years
2-4 years
More than 4 years
3. Do you think brand equity plays any role?

Yes
No
4. What according to you helps us take any decision?

Price Factor Quality of Printing
Per Page Cost All the Factor
5. D
o you submit financial report of the company to a state institution?
Yes
No
55
6. Is there any product or service that you require that is currently not
offered?
Ans.:
___________________________________________________________
___________________________________________________________
___________________________________________________________
______.
7. H
ow is the quality of customer service you received?
Very poor
Average
Superior
8. H
ow satisfied are customer with your products?
Very poor
Average
Superior
9. H
ow long has your company been operating in the Indian Market?
Less than a month

Less than a year
1-2 years
2-4 years
More than 4 years
56
10.With how many other companies your company is competing in Insurance

Market?
Ans.:
___________________________________________________________
___________________________________________________________
___________________________________________________________
______.
11.While advertising what is the main message that you wish to convey
about insurance to your customer?
Ans.:
___________________________________________________________
___________________________________________________________
___________________________________________________________
______.
12.What have been the growth strategies of your company?
Focus on Advertising
Focusing on proper channel mix for distribution of product
Brining out products that suit specific needs of the buyer.
Managing the marketing mix in an integrated manner.
13. What is your current market share of

the Insurance business being done in India?
Ans.:
___________________________________________________________
___________________________________________________________
___________________________________________________________
______.
14. Which are the different modes that have been adopted by your company to
deliver the brand message in an effective and efficient manner?
57
Advertising in electronic and print media.

Stressing long term relationships with the customers and creating
brand loyalty.
Using the brand value proposition as the key deriver of your
company’s strategy.
Making use of tools like PR sponsorship events and getting media
to talk about brand.
15.Which are the different methods of promotional mix strategies had been
adopted by your company?
Advertising in electronic and print media

Word of mouth
Telemarketing
Sales promotion
Combination of all of them
16. Can you express in terms of

increase in volume of business, percentage of growth and/or average of
new lives?
Ans.:
___________________________________________________________
___________________________________________________________
___________________________________________________________
______.
58

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PROJECT REPORT ON

T.Y.B.com (BANKING & INSURANCE)

SUMAN EDUCATION SOCIETY

T.Y.B.Com. BANKING AND INSURANCE

SUMAN EDUCATION SOCIETY

This is to certify that AASTHA GUPTA of B.Com. (Banking &

7 PRINCIPLES IN INSURANCE for the Semester – VI.

Under the guidance of SONAL SAWAKAR During the academic year

INTERNAL EXAMINER COLLEGE SEAL EXTERNAL EXAMINER

I Ms. AASTHA GUPTA from L.N. COLLEGE OF COMMERCE

I gratefully acknowledge and express deep appreciation to many people

Without cheerful support and motivation of our Professional Course

I also would like to thank Ms. SONAL SAWAKAR for helping me

It gives me immense pleasure to present this project in the course of

Technology plays a vital role in effortlessly and transparently

Books- BRITANNICA ENCYCLOPEDIA, India, Ireland

News paper- The Economic Times; Times of India

Studying the fundamentals of general insurance policies of miscellaneous

Miscellaneous contract based on certain principles of insurance, which

SR.NO. PARTICULARS PG.NO.

3 Meaning and Definition of insurance 18

9 Advantages and Disadvantages 29

11 Brief Info About 7 P’s 33

A promise of compensation for specific potential future losses in exchange for a

The Government of India issued an Ordinance on 19 January 1956 nationalizing the

 GUIDELINES PROVIDED BY IRDA TO INSURANCE COMPANY

The insurance regulator, IRDA in November 2010 allowed insurance companies to

MEANING AND DEFINITION OF INSURANCE

“Insurance is a contract in which a sum of money is paid to the assured as

“Insurance is a cooperative form of distribution a certain risk over a group of persons

“An arrangement by which a company or the state undertakes to provide a guarantee

“Insurance is an agreement between two parties under which one party

Similarly, in certain types of life policies, payment is not certain due to

6. Large Number of Insured Persons

7. Insurance is not a gambling:

8. Insurance is not Charity:

1. Safety and Security:

2. Affords Peace of Mind:

5. Encourages Savings and Investment:

6. Economic Growth of the Country:

8. Wealth of the Society is Protected:

 Whole life policy

4. Personal accident insurance

The insurance company indemnifies, or compensates, the insured in the case of

2. Principle of Insurable interest :-

Insurable interest must exist whether property insurance or insurance on a person is

3. Principle of Utmost good faith :-

In principles of insurance, principle of utmost good faith is a contract. In this insurance

Subrogation means substituting one creditor for another. Principle of Subrogation is an

In principles of insurance, a principle of mitigation of loss is the fundamental

Providing financial losses

Insurance provides assurance for the compensation of pre-decided and accidental

Reducing financial losses

Maintaining Financial stability

ADVANTAGES AND DISADVANTAGES OF INSURANCE

1. Assures for financial compensation

3. Encouragement to saving and investment

5. Maintains economic stability

6. Promotes business activities

7. Provides employment opportunities

Besides a number of benefits, insurance has also some limitations.

● Insurance companies do not make the compensation promptly on maturity of the

INTRODUCTION TO 7 P’S OF INSURANCE