An Internship Project

Submitted in Partial Fulfilment of the Requirements for MBA

Course

Submitted By
(PARTH SHRIMANKER)
(Course –MBA)

INTERNATIONAL SCHOOL OF BUSINESS & MEDIA

KOLKATA
 ACKNOWLEDGEMENT
I would like to thank the co-ordinator for providing all the encouragement and
valuable inputs to the project work and giving me all valuable guidance to improvise the
project.

I would like to thank ‘IDBI Federal Life Insurance Co. LTD.’ for providing me an
opportunity to work with them and giving necessary guidance in completing the project to
the best of my abilities. I am obliged to Avinash Kumar Jalan sir, Meetali Ma’am, IDBI
Federal Life Insurance Co. LTD., Kolkata, who provided me the essential information and
extended this best support.

I would like to extend special gratitude to Avinash Kumar Jalan sir, Meetali Ma’am,
IDBI Federal Life Insurance Co. LTD., Kolkata, for being my company guide and providing me
an insight into various issues pertaining to cases mentioned in this report. This is his & her
sincere support and constant guidance that led to completion of the project.
 INTRODUCTION

Recently, Prime Minister Narendra Modi, on 8 November, which less than a year
ago, announced that Rs 500 and Rs 1,000 notes were no longer a valid tender, stating the
move was targeted to curb terror financing, black money, and counterfeit currency. While
this is a big step in the current state of Indian Economy, this is not the first time such a step
has been taken. Not many people are aware of the fact that the Indian history is quite
familiar to the demonetization scheme. India has already undergone one major
demonetization scheme in the past, before Independence, in 1946, where the scheme was
responsible in scraping off the 5000 Rupees and 10000 Rupees notes from existence.

However, this spark of this feud of demonetization did not catch much fire as it
proved to be only partially successful. Also, the notes were reintroduced not long from then
in 1954.so what is demonetisation? It is to declare ineligible or worthless as a medium of
exchange or as legal tender. For record, main motive was targeted to curb terror
financing, black money, and counterfeit currency.

The government allowed time until the end of December 2016 for those who want
to deposit the demonetized currency notes with banks. Naturally, the fear of scrutiny from
the Income Tax Department may dissuade those with large stacks of unaccounted cash from
depositing it in the banks. Estimates about the size of the black economy are wide ranging.
However, this cash is likely accumulated from two sources: firstly money earned from legal
means (but with under reporting and evasion of income tax and other statutory taxes); and
secondly, money earned through bribes, drugs trade and other illegal means. It has many
sectors both private & public and many sub sectors i.e. IT, agriculture, insurance, etc.

Despite the temporary pain and spending squeeze that ordinary citizens will have
to undergo, experts predict there will be several long-term benefits for the economy and for
the insurance sector. However, for now, contraction in money and supply is likely to impact
cash-dependent sectors like the real estate, cement, consumer discretionary, gems and
jewellery, and automobiles. Demonetization is expected to shift the country towards a more
formal economy, and if this happens, the benefits would flow to all the sectors with greater
tax compliance.

Demonetisation has come as a boon for the life insurance sector. The move led to a sudden

spike in premium, though a temporary one. But it will bring many changes in this sector.
 Impact of Demonetization on Indian
Insurance Industry
According to the monthly numbers of life insurance companies released by IRDAI,
the individual single premiums collected in November for all life insurance subscriptions
were Rs 6,692 crore. This was a whopping 507% more than what was collected in November
2015. In fact, even on monthly basis, the insurance segment grew by 170% from Rs2,481
crore collected in October. The total amount of first-year premiums (both regular and single
premium) grew 113% on a year-on-year basis, and 45% compared to the collections in April
2017, revealed the IRDAI data.
The insurance industry, which was growing at a decent 28% on a month-on-month basis,
grew more than 40% in November. It was a pleasant surprise for all players in the sector.

Rerouting savings
The IRDAI numbers are an indicator to the already changing savings habit of Indians.
Real estate and gold are the two traditional sectors where Indians prefer to park their
money. But demonetisation has robbed the sheen from both of them. People have begun
investing in insurance, leading to the exponential growth of the sector.
***In short-term it would have negative impact on consumption behaviour. This will

1.      Create a sense of loss of cash in a mind of spending population. It is similar to when

stock market crashes and a lot of wealth disappears in front of consumer eyes.

2.      Create a cash scarcity and less cash in circulation.

3.      Impact certain businesses (such as restaurants, entertainment etc.) and consequently

will have ripple effect on employment and downstream supply chain.

Life and Retirement products might see a slow-down in sales due to lower
consumption behaviour. Car and bike should be largely unaffected as it is mandatory to
have a motor insurance. Consumers might consider buying health insurance as a more
attractive option due to scarcity of cash in circulation.
***In long-term, assuming government would bring more measures to keep a check on the
size of cash economy, this would

1.      Move the median income up at the bottom of the pyramid.

2.      Migrate more transactions from cash to electronic or mobile form.

3.      Give more power and legitimacy to Digital India and India Stack (e-KYC, Digital Locker,
Unified Payment Interface, E-Signature).

4.      Create more productive money for the economy – either in the bank or higher tax
collection. This in turn can be ploughed back to the economy through low interest loans or
government investment in infrastructure.

5.      More small businesses would consider buying insurance to cover the risks as the cash
transactions become limited.

Market for insurance may expand as income at the bottom of the pyramid (individual
and business) is expected to rise. This would be positive for the overall Insurance industry.
Online and mobile channels will become more effective channels for sale and service due to
increased online and mobile adoption. Influence and contribution of Web aggregators will
increase over agent force in long-term.

Penetration of Insurance in India is less than half compared to developed countries.

India is one of the fastest growing Insurance markets in the world. Such initiative would
further help the momentum.

Insurers should look to develop effective products for the market at the bottom of
the pyramid. From Distribution perspective, most effective way to reach to these consumers
will be Online, Mobile channels and Web Aggregator. From servicing standpoint, Insurers
should accelerate integration with Digital India and India Stack framework. Both Insurers
and consumers will win in long-term due to this move.

The major insurance sector in India is covered by the government agencies such as the

Life Insurance Corporation of India (LIC),

Oriental Insurance Co. Ltd,

New India Assurance Co. Ltd, etc.

These insurance companies have already started taking steps towards making lives easier
for the general public who seem to be distraught by the demonetization schemes. LIC for
example, extended its grace period for the customers to pay their premiums of several
policies without any penal fee for a period of 20 days after the scheme was introduced. This
allowed people to have some time in order to withdraw any necessary amount from the
bank ATMs.

The private insurance sector which mainly deals in cash is hit hard by the
demonetization drive as it is not ready to except the premiums in terms of online banking or
credit in terms of bank transfers. This will basically ensure that people are lured more
towards the national government operated insurance companies which can still freely
operate by means of internet banking.
Hence, the insurance and banking sector of India will be forced to be converted into a digital
market where the promise of cash deliverance is reduced. This will ensure a major increase
in the internet banking sector of India.

According to industry experts, demonetisation has had a significant role to play in this,
since about Rs12.44 trillion has come into the formal system, some of which is bound to
make its way into financial assets.

“As a lot of money has come into the formal channel, the financial industry will see a lot
of inflows. Not just insurance but even mutual funds would see a huge growth. This trend is
here to stay... till the money stays in the banking system,” said Vighnesh Shahane, chief
executive officer and whole-time director, IDBI Federal Life Insurance Co. Ltd.

So we can derive possible impact of demonetization on insurance,

Traditionally, asset classes like real estate and bullion are considered as the de facto
modes to build legacy and lend security to one’s family. Insurance policies and long-term
investment products rarely get the serious consideration they deserve.

Building on the popular notion that real estate and bullion attract the largest share of black
market funds, the post-demonetization era can induce a significant shift in behaviour.

Retail investors have begun reconsidering their financial decisions. There are signs of

switching to channels like mutual funds and insurance for investing their money and
safeguarding the goals of their family.

Along with communicating the obvious benefits like higher liquidity, more flexibility,
transparency, ease of maintenance and a ready secondary market, insurance companies
can leverage this shift in spending patterns, evolving consumer behaviour and the digital
drive in India to increase penetration and tap the significantly untapped latent potential.

There are enormous opportunities for insurance generally, and insurance-linked investment
products could take a major role in this new consumer mindset.
 Demonetisation helped life insurance
companies –how?

* Life insurers get demonetisation bonus

Of the Rs12.44 trillion that has come into the formal system, some has found its way
into financial assets such as life insurance policies. Lot of money from bank accounts came
into insurance products. While the impact of the government’s move to demonetise high
denomination currency notes is still being evaluated, the insurance sector seems to have
benefitted in the immediate aftermath.

According to the monthly business figures for life insurance companies released by
the Insurance Regulatory and Development. Falling interest rates, one of the main reasons
behind the sharp y-o-y increase in April has been growth of single-premium business for the
Life Insurance Corporation of India (LIC) & other companies. In April, IDBI collected Rs5, 438
crore (approx) as premium for individual single-premium plans, compared to Rs799 crore
(approx) in April last year—clocking a growth of over seven times.

According to an emailed response from the insurance company, the growth was due
to the sale of various plans including an immediate annuity product.

Annuity is a pension product that guarantees income for life. According to insurance
companies, it was not demonetisation that had a role to play in the performance but
vigorous sales pitches and sustained marketing activities. “The sale was also driven by the
fact that there was downward revision in the annuity rates of products with effect from 1
December,” they said in its response. Some experts believe that falling interest rates have
been a factor as well.

There is growth primarily because a fall in interest rates increases the attractiveness
of fixed guaranteed returns (non-participating plans) products, so life insurance agents
encourage their customers (approx) to buy these guaranteed products before they are
discontinued and re-filed by the insurers with lower guarantees. Demonetisation would
have had a minimal impact on the life insurance sales growth.

The life insurance industry in India could witness a re-pricing of existing products and
could also lower the bonuses on traditional insurance plans. Insurance companies have
already begun the re-filing process. While demonetisation and falling interest rates may
have been the reasons behind the bumper performance, some say that post-Diwali sales
should be factored in as well.
 Investment in insurance surged
during demonetisation

While Prime Minister Narendra Modi’s historic announcement of scrapping high

denomination notes led to an acute cash crunch since November 9, investment in insurance
surged as cash transactions in other assets such as real estate and gold were crimped.

Insurance premium payment was up by 31% during April to February 2016-17, data from
financial regulators show.

What is surprising, the growth in investment in insurance schemes has been stupendous in
November, when the ban on Rs 500 and Rs 1,000 notes came into effect.

The demonetisation drive led to a fall in bank deposit rates, which prompted investors to
park Rs 52,000 crore in debt schemes of mutual funds in the three months to January 2017.
Investors had pulled out Rs 53,550 crore out of debt funds during the same period a year
ago.

“Reduction in deposit interest rates by banks after demonetisation enhanced the relative
attractiveness of debt oriented mutual funds,” the Reserve Bank of India said in a report
titled “Macroeconomic impact of demonetization—a preliminary assessment.

Separately, Insurance Regulatory and Development Authority of India (IRDAI) data reveals
that investment in insurance policies jumped 113% to Rs 16,100 crore in November, 18% in
December and 27.8% in January. The first premium collections, however, fell 4.5% in
February.

Still, the total investment in insurance schemes jumped 31% to Rs 1.4 lakh crore during
April-February 2016-17.

“Premiums collected by life insurance companies more than doubled in November.

Premiums collected by Life Insurance Corporation of India (LIC) increased by more than
140% in November 2016 as compared with less than 50% by private sector life insurance
companies,” the RBI report said.

A significant portion of the deposit has found way into the capital market through insurance,
analysts say.

Most important, the demonetisation slowed investment of black money in gold and real
estate, forcing many Indians to look for high-yielding financial assets like equity mutual
funds.
With demonetisation severely clamping down on investments into real estate and gold,
consumers seem to be putting their money in insurance as per the latest data released by
the IRDAI.

ICICI Prudential, the only public insurer, posted a growth as high as 48% year-over-year with
premium of Rs 884.98 crore for the month of February. Peers such as IDBI Federal Life
Insurance (14%), Birla Sun Life (26%) and Max Life (12.6%) also saw good growth for the
month.

ICICI Prudential (Rs 884.98 crore), IDBI Federal Life Insurance (Rs 660.06 crore), Kotak Life
Insurance (Rs 229.58 crore) seem to have particularly benefited from their channels for their
strong performance in the month of February. Other insurers, who did not fare as well, are
said to be facing changes in their distribution network, top management and business
structure, said industry observers.

The upbeat sentiment might get reflected in the life insurance penetration numbers.
Insurance penetration had risen to 3.4% in 2015-16 after it hit a 10-year low of 3.3% in
2014-15, according to a Swiss Re report.

"We see that the economy is growing, household income and mean disposable income has
increased. So it is fair to say that going forward we might see life insurance penetration
increase to 4-5% range," said the sources.

IDBI Federal Life Insurance

IDBI Federal Life Insurance is one of India’s growing life insurance companies and offers a
diverse range of wealth management, protection and retirement solutions to individual and
corporate customers. 

IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier
development and commercial bank, Federal Bank, one of India’s leading private sector
banks and Ageas, a multinational insurance giant based out of Europe. 

Having commenced operations in 2008, IDBI Federal was able to achieve breakeven within
just 5 years; the Company’s passion for innovation and growth helped it achieve this feat.
BASIC TERMS USED IN INSURANCE SECTOR
LC or SA Life Cover or Sum Assured
PPT Premium Paying Term
PT Policy Term/ Maturity Term
MB Maturity Benefit
SRB Simple Reversionary Bonus
TB Terminal Bonus
LA Life Assured
IB Interim Bonus
MSA Maturity Sum Assured
DB Death Benefit

1. IDBI Federal IncomesuranceTM Guaranteed Money Back Insurance Plan 7 Pay (UIN:

135N042V01)

We don’t know what lies in our future and therefore when we invest, we seek a
guarantee. IDBI Federal Incomesurance Guaranteed Money Back Insurance Plan 7 pay
(hereinafter referred as Incomesurance 7 pay) is a plan that enables you to stop being
concerned of the future and rest assured, since the plan gives you payouts annually. And
yes, it’s guaranteed!
 Plan Overview

IDBI Federal IncomesuranceTM Guaranteed Money Back Insurance Plan 7 Pay is a money-
back plan that gives you the confidence of guaranteed income. You pay for 7 years and start
reaping the benefits from the 8th year onwards with the annual payouts ranging from
126.66% to 143.23% of premiums paid. Additionally, you can also guarantee a secure future
for your family even when you are not around. 

Criteria Minimum Maximum

Age at 10 years* 50 years

Entry (as
on last
birthday)

Age at 24 years 64 years

Maturity
(as on last
birthday)

Premium Rs 35,000 annually Rs. 20,00,000 annually

Amount

Policy Fixed – 14 years

term

Premium Fixed – 7 years

payment
Term

Premium Annual
Payment
Mode

All ages are as per last birthday. * Policies on lives of minors can be taken only by parents /
grand-parents
 2. Childsurance® Savings Protection Insurance Plan (UIN: 135N032V01)

Being a good parent means making sure your child gets good education so that her
future stays secure. The cost of education has shot up significantly and is expected to
rise further. Add to that the cost of your child’s marriage or giving her a head start in
career. It is therefore important for you to stay prepared. Plan early to help your
child’s dreams come true tomorrow and support her at every important milestone of
life. Go ahead; secure your child’s future. At every step!
 Plan Overview

IDBI Federal Childsurance ® Savings Protection Plan (UIN: 135N032V01) is a non-

linked participating endowment plan that ensures your child’s future financial needs are
fulfilled. Childsurance® Savings is designed to give you guaranteed annual payouts and aid
the important milestones in your child’s life. What’s more, in the unfortunate event of you
not being around, the policy will continue exactly as you had planned it, without any further
premiums being paid. .In other words, this plan ensures that your child gets to live his/her
dream exactly as you have planned, whether or not you are around. 

 Why Childsurance® Savings Protection Insurance Plan?

 Guaranteed annual payouts for important milestones

Childsurance® gives you guaranteed annual payouts either in the last 3 or last 5
years of the policy, depending on the policy term you choose.
 Bonuses to add to your savings
Right from the 1st year, you get reversionary bonus. Along with reversionary bonus,
interim and terminal bonuses (if any) would also be paid out at maturity.
 Immediate payout of lump sum in case of your unfortunate death
In case of an unfortunate event, the death sum assured will provide for your child’s
 immediate needs.
 Waiver of future premiums
In case of an unfortunate event of you not being around, all future premiums of the
policy will be waived off.
 Plan continues and benefits are paid as planned
Even in the unfortunate event of death, the guaranteed annual payouts and bonuses
will be paid on their respective due dates.
 Two tax benefits
Childsurance® allows you to enjoy deductions under Section 80C of the Income Tax
Act, 1961 on the premiums you pay. It also gives you maturity amount that is tax-
free under section 10(10D). Childsurance offers you tax benefits for all the payouts.
 Flexibility to plan for your needs
With Childsurance®, you have the option of choosing the maturity sum assured,
policy term, premium payment term, and payment mode as per your child’s future
needs.
 Exclusive fund for your loved ones
By endorsing your Childsurance® policy under the Married Women’s Property Act,
1874, you can create an exclusive fund for your loved ones which is legally protected
from creditors and claimants.
 Loan facility
In case of an emergency, you can avail of the loan facility on your policy. Loan is
available once the policy attains surrender value. For more on loans please refer to
the product brochure

3. IDBI Federal Wealthsurance® Growth Insurance Plan Single Premium (Product UIN:
135L034V01)

in today’s fast moving world, we have little time for various things, yet we expect the
desired output. When it comes to our investments, the expectation is the same.

Presenting, IDBI Federal Wealthsurance Growth Insurance Plan SP (hereafter referred to as

Wealthsurance SP), which recognises your need for little effort and desired return. With this
plan, you pay premium just once and you can enjoy the growth of your wealth. What’s
more, your family stays financially secured with a life cover!

 Plan Overview

The IDBI Federal Wealthsurance SP is a single premium unit-linked insurance plan. A one-
time investment plan, whereby paying the premium once, you allow your investment to
enjoy returns of the selected funds. The plan also offers you life cover providing your loved
ones with financial protection in case of any eventuality. In a nutshell, it is a smart
investment plan that helps you maximise the potential of your windfall, rather than let it sit
idle. 

 Wealthsurance SP comes with a range of Benefits that help you earn maximum
returns on your investments:
 One-time premium payment
You pay premium just once and enjoy returns of the selected funds! If you find
regular premium payments a hassle, Wealthsurance SP is the plan for you. What’s
more, this plan never lapses!
 Choice of 9 funds and the freedom to switch among funds
IDBI Federal Investment Basket gives you the choice of 9 funds to invest in based on
your risk profile and return expectations. In case you manage your funds on your
own, you can switch your investment between funds, without any charges.
 Guaranteed loyalty additions to boost your investment
At the end of the 5th policy year and every 5 years thereafter, you get guaranteed
loyalty additions as a reward for staying invested in the plan. For more details on
loyalty additions, please refer the product brochure.
 Easy access to your investment through partial withdrawal
In case of any emergency fund requirement, you can withdraw money from your
Wealthsurance SP policy through partial withdrawals. These partial withdrawals are
free of cost and can be availed of after the 5th policy anniversary. You can withdraw
from a minimum of Rs 10,000 to a maximum of 20% of your fund value at the
beginning of corresponding policy year. For more details on partial withdrawals
please refer the product brochure.
 Life cover for the financial protection for your loved ones
In case of an unfortunate event of your demise, your nominee will get the death
benefit which is the higher of the sum assured or the fund value at that time. The
death benefit will always be at least 105% of the single premium paid.

4. IDBI Federal Termsurance® Life Protection Insurance Plan (UIN: 135N040V01)

Happiness and security for our families are things all of us strive to achieve.
However, there are times when you ask yourself - what if something was to happen
to me? What would happen to my loved ones?

IDBI Federal Termsurance® Life Protection Insurance Plan (hereinafter

referred to as Termsurance Life Protection) is a non-linked, non-participating
insurance plan that enables you to protect your family in case of an eventuality. It
ensures that your family’s dreams remain secure, no matter what!

 Why Termsurance® Life Protection Insurance Plan?

Termsurance Life Protection comes with the following benefits:

 Options to suit your need:

This plan has two options:
o Pure Protection Option:
This plan covers you through the policy term and in case of an eventuality,
your family gets the Death Benefit.
o Return of Premium on Maturity Option:
This plan covers you through the policy term. In case you live till the end of
the policy term, your premiums are returned* to you. In case of an eventuality
during the policy term, your family gets the Death Benefit.
*Refund of basic premiums paid excluding service tax and additional premium.
 Policy term to suit your life stage

Choose the policy term according to your age and needs. Besides with age, your
responsibilities and liabilities also keep changing. Which is why, we have built in
flexibility in the policy term of the plan. You can opt for any term between 10 years and
30 years.

 Premium payment options to suit your wallet

Choose from regular or single premium payment option. You can opt for a single
lump-sum premium payment or a regular premium payment for the policy term that
can be easy on your wallet. For your convenience, we have provided all premium
payment modes: yearly, half-yearly, quarterly and monthly.
 Attractive discounts
Avail of premium discounts, and get more out of your plan
 Advantage Women
If you’re a woman, we have good news. We offer a premium discount for women.
This means you pay lower charges for the same amount of cover.
 High Sum Assured Discount
 We offer an attractive premium discount structure. You are eligible for a discount, if
the Sum Assured is Rs.10 lacs or above.
 Tax Benefits:
With Termsurance Life Protection, you can enjoy tax benefits under section 80C and
section 10(10D) of the Income Tax Act, 1961.