Gst project roshn project

PRAHLADRAI DALMIA LIONS COLLEGE OF COMMERCE AND ECONOMICS
IMPACT OF GST ON INSURANCE SECTOR 1
Chapter-1
Introduction of Goods and service tax:
The President of India approved the Constitution Amendment Bill for Goods and Services
Tax (GST) on 8 September 2016, following the bill's passage in the Indian parliament and its
ratification by more than 50% of state legislatures. This law will replace all indirect taxes
levied on goods and services by the central government and state government and implement
GST by April 2017. The implementation of GST will have a far-reaching impact on almost all
the aspects of the business operations in India. With more than 140 countries now adopting
some form of GST, India has long been a stand-out exception.
GST is a value-added tax levied at all points in the supply chain, with credit allowed
for any tax paid on input acquired for use in making the supply. It would apply to both goods
and services in a comprehensive manner, with exemptions restricted to a minimum.
In keeping with the federal structure of India, it is proposed that the GST will be levied
concurrently by the central government (CGST) and the state government (SGST). It is
expected that the base and other essential design features would be common between CGST
and SGSTs for individual states. The inter-state supplies within India would attract an
integrated GST (IGST), which is the aggregate of CGST and the SGST of the destination
state.
The following are the salient features of the proposed GST system:
 The power to make laws in respect of supplies in the course of inter-state trade or
commerce will remain with the central government. The states will have the right to
levy GST on intrastate transactions, including on services.
 The administration of GST will be the responsibility of the GST Council, which will
be the apex policy-making body for GST. Members of GST Council will comprise
central and state ministers in charge of the finance portfolio.

 The threshold for levy of GST is a turnover of Rs. 1 million. For a taxpayer who
conducts business in a north eastern state of India the threshold is Rs. 500,000.
 The central government will levy IGST on inter-state supply of goods and services.
Import of goods will be subject to basic customs duty and IGST.
 GST is defined as any tax on supply of goods and services (other than on alcohol for
human consumption).
 Central taxes such as central excise duty, additional excise duty, service tax, additional
custom duty and special additional duty, as well as state-level taxes such as VAT or
sales tax, central sales tax, entertainment tax, entry tax, purchase tax, luxury tax and
octroi will be subsumed in GST.
 A provision will be made for removing imposition of entry tax/ octroi across India.
 Entertainment tax, imposed by states on movies, theatre, etc., will be subsumed in
GST, but taxes on entertainment at panchayat, municipality or district level will
continue.
 Stamp duties, typically imposed on legal agreements by states, will continue to be
levied.
The key benefits associated with GST are:
Offers a wider tax base, necessary for lowering tax rates and eliminating classification
disputes Eliminates the multiplicity of taxes and their cascading effects Rationalizes the tax
structure and simplifies compliance procedure Automates compliance procedures to reduce
errors and increase efficiency
GST would be levied on the basis of the destination principle. Exports would be zero-
rated, and imports would attract tax in the same manner as domestic goods and services. In
addition to the IGST in respect of supply of goods, an additional tax of up to 1% has been
proposed to be levied by the central government. The revenue from this tax is to be assigned
to the origin states. This tax is proposed to be levied for the first two years or a longer period,
as recommended by the GST Council.
With GST, it is anticipated that the tax base will be comprehensive, as virtually all
goods and services will be taxable, with minimum exemptions. GST would bring in a modern

tax system to ensure efficient and effective tax administration. It will bring in greater
transparency and strengthen monitoring, thus making tax evasion difficult. While the process
of implementation of GST unfolds in the next few months, it is important for industry to
understand the impact and opportunities offered by this reform. GST will affect all industries,
irrespective of the sector. It will impact the entire value chain of operations, namely
procurement, manufacturing, distribution, warehousing, sales and pricing.
Introduction to Insurance
The business of insurance is related to the economic values of assets. Every asset has a
value. The asset would have been created through the efforts of the owner. The asset is
valuable to the owner, because he expects to get some benefits from it. It is a benefit because
it meets some of its needs. The benefit may be an income or in some other form. In case of a
factory or a cow, the product generated by it is sold and income is generated. In the case of a
motor car, it provides comfort and convenience in transportation. There is no direct income.
Both are assets and provide benefits.
Every asset is expected to last for certain period of time during which it will provide
benefits. After that, the benefit may not be available. There is a life time for a machine or a
cow or a motor car. None of them will last be forever. The owner is aware of this and he can
so manage his affairs that by the end of that period or life time, a substitute is made available.
Thus he makes sure that the benefit is not lost. However the asset may get lost earlier. An
accident or some other unfortunate event may destroy it or make it incapable of giving the
benefits. An epidemic may kill the cow suddenly. In that case, the owner and those who
enjoying the benefits there from, would be deprived of the benefits. The planned substitute
would not have been ready. There is an adverse or unpleasant situation. Insurance is a
mechanism that helps to reduce the effects of such adverse situations. It promises to pay to the
owner or beneficiary of the assets, a certain sum if the loss occurs.
Overview of Indian Insurance Sector
The Insurance sector in India Governed by Insurance Act, 1938, the Life Insurance
Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance

Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. With such a
large population and the untapped market area of this population Insurance happens to be a
very big opportunity in India. Today it stands as a business growing at the rate of 15-20
percent annually. Together with banking services, it adds about 7 percent to the country’s
GDP .In spite of all this growth the statistics of the penetration of the Insurance in the country
is very poor. Nearly 80% of Indian populations are without Life insurance cover and the
Health insurance. This is an indicator that growth potential for the insurance sector is
immense in India.
It was due to this immense growth that the regulations were introduced in the
insurance sector and in continuation “Malhotra Committee” was constituted by the
government in 1993 to examine the various aspects of the industry. The key element of the
reform process was Participation of overseas insurance companies with 26% capital. Creating
a more efficient and competitive financial system suitable for the requirements of the
economy was the main idea behind this reform.
Since then the insurance industry has gone through many sea changes .The
competition LIC started facing from these companies were threatening to the existence of LIC
.since the liberalization of the industry the insurance industry has never looked back and today
stand as the one of the most competitive and exploring industry in India. The entry of the
private players and the increased use of the new distribution are in the limelight today. The
use of new distribution techniques and the IT tools has increased the scope of the industry in
the longer run.
Insurance is an upcoming sector. In India the year 2000 was a landmark year for life
insurance industry, in this year the life insurance industry was liberalized after more than fifty
years. Insurance sector was once a monopoly, with LIC as the only company, a public sector
enterprise. But now a day the market opened up and there are many private players competing
in the market. There are twenty three (annual report 2011 issued by IRDA) private life
insurance companies entered in the industry. After the entry of these private players, the
market share of LIC has been considerably reduced. For the past some year’s private players

have launched many innovations in the industry in terms of products, market channels and
advertisement of products, agent training and customer services etc.
Brief History of Insurance:
Insurance has been known to exist in some form or other since 3000 BC. The Chinese
traders traveling treacherous river rapids would distribute their goods among several vessels,
so that the loss from any one vessel being lost would be partial and shared, and not total. The
Babylonian traders would agree to pay additional sums to lenders, as the price for writing off
the loans, in case of the shipment being stolen. The inhabitants of Rhodes adopted the
principle of general average, whereby, if goods are shipped together, the owner would bear
the losses in proportion, if loss occurs due to jettisoning during distress. The Greeks had
started benevolent societies in the late 7th century AD, to take care of the funeral and families
of members who died. The friendly societies of England were similarly constituted. The great
fire of London in 1666, in which more than 13000 houses were lost, gave a boost to insurance
and the first Fire Insurance Company, called Fire Office, was started in 1680.
The origin of insurance business as in vogue at present is traced to the Lloyd's Coffee
House in London. Traders who used to gather in the LLOYD'S Coffee House agreed to share
the losses to their goods while being carried by ships. The losses used to occur because of
pirates who robbed on the high seas or because of bad weather spoiling the goods or sinking
the ship. IN India, insurance began in1818 with life insurance being transacted by an English
company, the Oriental Life Insurance Co Ltd. The first Indian company was the Bombay
Mutual Assurance Society Ltd< formed in1870 in Mumbai.
By the year 1956, when the life insurance business was nationalized and Life
Insurance Corporation of India (LIC) was formed on 1st September1956, there were 170
companies and 75 provided fund societies transacting life insurance business in India.

After the amendments to the relevant law as in1999, the LIC did not have the
exclusive privilege of doing life insurance business in India. Now the private sector
companies are allowed to do Life Insurance Business in India.
The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance
Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance
Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. With such a
large population and the untapped market area of this population Insurance happens to be a
very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per
cent annually. Together with banking services, it adds about 7 per cent to the country’s GDP.
In spite of all this growth the statistics of the penetration of the insurance in the
country is very poor. Nearly 80% of Indian populations are without Life insurance cover and
the Health insurance. This is an indicator that growth potential for the insurance sector is
immense in India. It was due to this immense growth that the regulations were introduced in
the insurance sector and in continuation “Malhotra Committee” was constituted by the
government in 1993 to examine the various aspects of the industry. The key element of the
reform process was Participation of overseas insurance companies with 26% capital. Creating
a more efficient and competitive financial system suitable for the requirements of the
economy was the main idea behind this reform.
Since then the insurance industry has gone through many sea changes. The
competition LIC started facing from these companies were threatening to the existence of
LIC. Since the liberalization of the industry the insurance industry has never looked back and
today stand as the one of the most competitive and exploring industry in India. The entry of
the private players and the increased use of the new distribution are in the limelight today. The
use of new distribution techniques and the IT tools has increased the scope of the industry in
the longer run.
The insurance industry of India consists of 57 insurance companies of which 24 are in
life insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance

Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
insurers there are six public sector insurers. In addition to these, there is sole national re-
insurer, namely, General Insurance Corporation of India (GIC Re). Other stakeholders in
Indian Insurance market include agents (individual and corporate), brokers, surveyors and
third party administrators servicing health insurance claims.
Out of 33 non-life insurance companies, five private sector insurers are registered to
underwrite policies exclusively in health, personal accident and travel insurance segments.
They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance
Company Ltd, Max Bupa Health Insurance Company Ltd, Religare Health Insurance
Company Ltd and Cigna TTK Health Insurance Company Ltd. There are two more
specialized insurers belonging to public sector, namely, Export Credit Guarantee Corporation
of India for Credit Insurance and Agriculture Insurance Company Ltd for crop insurance.
Market Size
Government's policy of insuring the uninsured has gradually pushed insurance penetration in
the country and proliferation of insurance schemes are expected to catapult this key ratio
beyond 4 per cent mark by the end of this year, reveals the ASSOCHAM latest paper.
The number of lives covered under Health Insurance policies during 2015-16 was 36 crore
which is approximately 30 per cent of India's total population. The number has seen an
increase every subsequent year as 28.80 crore people had the policy in the previous fiscal.
During June 2016 to May 2017 period, the life insurance industry recorded a new premium
income of Rs 1.87 trillion (US$ 29.03 billion. The life insurance industry reported 9 per cent
increase in overall annual premium equivalent in April-November 2016. In the period, overall
annual premium equivalent (APE)- a measure to normalize policy premium into the
equivalent of regular annual premium- including individual and group business for private
players was up 16 per cent to Rs 1,25,563 crore (US$ 18.76 billion) and Life Insurance
Corporation up 4 per cent to Rs 1,50,456 crore (US$ 22.48).

Investments
The following are some of the major investments and developments in the Indian insurance
sector.
 New India Assurance filed the prospectus for initial public offering (IPO) in which it
will sale a total stake of 14.56 per cent to raise around Rs 7000 crore ($1.07 Billion)
and it plans to use the capital raised for supporting growth of its business and
maintaining solvency levels.
 New York Life Insurance Company, the largest life insurance company in the US, has
invested INR 121 crore (US$ 18.15 million) in Max Ventures and Industries Ltd for a
22.52 per cent stake, which will be used by Max for investing in new focus areas of
education and real estate.
 New York Life Investments, the global asset management division of New York Life,
along with other investors like Jacob Ballas, will own a significant minority ownership
in Centrum Capital by being one of the leading global investors in buying the available
30 per cent stake worth US$ 50 million of Centrum Capital.
 Aviva Plc, the UK-based Insurance company, has acquired an additional 23 per cent
stake in Aviva Life Insurance Company India from the joint venture (JV) partner
Dabur Invest Corporation for Rs 940 crore (US$ 141.3 million), thereby increasing
their stake to 49 per cent in the company.
Government Initiatives
The Union Budget of 2017-18 has made the following provisions for the Insurance Sector:
 The Budget has made provisions for paying huge subsidies in the premiums of
Pradhan Mantri Fasal Bima Yojana (PMFBY) and the number of beneficiaries will
increase to 50 per cent in the next two years from the present level of 20 per cent. As

part of PMFBY, Rs 9,000 crore (US$ 1.35 billion) has been allocated for crop
insurance in 2017-18.
 By providing tax relief to citizens earning up to Rs 5 lakh (US$ 7500), the government
will be able to increase the number of taxpayers. Life insurers will be able to sell them
insurance products, to further reduce their tax burden in future. As many of these
people were understating their incomes, they were not able to get adequate insurance
cover.
 Demand for insurance products may rise as people’s preference shifts from formal
investment products post demonetization.
 The Budget has attempted to hasten the implementation of the Digital India initiative.
As people in rural areas become more tech savvy, they will use digital channels of
insurers to buy policies.
The Government of India has taken a number of initiatives to boost the insurance industry.
Some of them are as follows:
 Government of India launches Pradhan Mantri Vaya Vandana Yojana, a pension
scheme which will provide guaranteed 8 per cent annual return to all the senior citizen
above 60 years of age for a policy tenure of 10 years.
 The Union Cabinet has approved the public listing of five Government-owned general
insurance companies and reducing the Government’s stake to 75 per cent from 100 per
cent, which is expected to bring higher levels of transparency and accountability, and
enable the companies to raise resources from the capital market to meet their fund
requirements.
 The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue
redesigned initial public offering (IPO) guidelines for insurance companies in India,
which are to looking to divest equity through the IPO route.

 IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds
that are issued by banks to augment their tier 1 capital, in order to expand the pool of
eligible investors for the banks.
Road Ahead
The future looks promising for the life insurance industry with several changes in regulatory
framework which will lead to further change in the way the industry conducts its business and
engages with its customers. Insurance Penetration mark is expected to cross 4 per cent mark in
the year 2017 as it has shown a continuous increase in the year 2014 and 2015 with market
penetration rate of 3.3 per cent and 3.44 per cent respectively.
The country’s insurance market is expected to quadruple in size over the next 10 years from
its current size of US$60 billion.
Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of Indian
life insurance.
Exchange Rate Used: INR 1 = US$ 0.015 as on October 5, 2017

Name of the player marketshare (%)
Name of the player Market share (%)
Life Insurance Corporation of India 82.3
ICICI Prudential 5.63
Birla Sun Life 2.56
Bajaj Allianz 2.03
SBI Life Insurance 1.8
HDFC Standard 1.36
TATA AIG 1.29
MAX New York 0.9
AVIVA 0.79
OM Kotak Mahindra 0.51
ING Vysya 0.37
MET Life 0.21

Life Insurance Corporation OF India (LIC)
Life Insurance Corporation of India (LIC) was formed in September, 1956 by an Act
of Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution from the
Government of India. The then Finance Minister, Shri C.D. Deshmukh, while piloting the bill,
outlined the objectives of LIC thus: to conduct the business with the utmost economy, in a
spirit of trusteeship; to charge premium no higher than warranted by strict actuarial
considerations; to invest the funds for obtaining maximum yield for the policy holders
consistent with safety of the capital; to render prompt and efficient service to policy holders,
thereby making insurance widely popular.
Since nationalisation, LIC has built up a vast network of 2,048 branches, 100 divisions
and 7 zonal offices spread over the country. The Life Insurance Corporation of India also
transacts business abroad and has offices in Fiji, Mauritius and United Kingdom. LIC is
associated with joint ventures abroad in the field of insurance, namely, Ken-India Assurance
Company Limited, Nairobi; United Oriental Assurance Company Limited, Kuala Lumpur and
Life Insurance Corporation (International) E.C. Bahrain. The Corporation has registered a
joint venture company in 26th December, 2000 in Kathmandu, Nepal by the name of Life
Insurance Corporation (Nepal) Limited in collaboration with Vishal Group Limited, a local
industrial Group. An off-shore company L.I.C. (Mauritius) Off-shore Limited has also been
set up in 2001 to tap the African insurance market.
The story of insurance is probably as old as the story of mankind. The same instinct
that prompts modern businessmen today to secure themselves against loss and disaster existed
in primitive men also. They too sought to avert the evil consequences of fire and flood and
loss of life and were willing to make some sort of sacrifice in order to achieve security.
Though the concept of insurance is largely a development of the recent past, particularly after
the industrial era – past few centuries – yet its beginnings date back almost 6000 years.
Life Insurance in its modern form came to India from England in the year 1818.
Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance

company on Indian Soil. All the insurance companies established during that period were
brought up with the purpose of looking after the needs of European community and Indian
natives were not being insured by these companies. However, later with the efforts of eminent
people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian
lives.
But Indian lives were being treated as sub-standard lives and heavy extra premiums
were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of
first Indian life insurance company in the year 1870, and covered Indian lives at normal rates.
Starting as Indian enterprise with highly patriotic motives, insurance companies came into
existence to carry the message of insurance and social security through insurance to various
sectors of society.
Bharat Insurance Company (1896) was also one of such companies inspired by
nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies.
The United India in Madras, National Indian and National Insurance in Calcutta and the Co-
operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative
Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet
Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi
Life (later Bombay Life) were some of the companies established during the same period.
Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life
Insurance Companies Act, and the Provident Fund Act were passed.
Life Insurance Companies Act, 1912 made it necessary that the premium rate tables
and periodical valuations of companies should be certified by an actuary. But the Act
discriminated between foreign and Indian companies on many accounts, putting the Indian
companies at a disadvantage twentieth century saw lot of growth in insurance business. From
44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with
total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance
companies many financially unsound concerns were also floated which failed miserably. The
Insurance Act 1938 was the first legislation governing not only life insurance but also non-life
insurance to provide strict state control over insurance business.

The demand for nationalization of life insurance industry was made repeatedly in the
past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was
introduced in the Legislative Assembly. However, it was much later on the 19th of January,
1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16
non-Indian companies and 75 provident were operating in India at the time of nationalization.
Nationalization was accomplished in two stages; initially the management of the companies
was taken over by means of an Ordinance, and later, the ownership too by means of a
comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the
19th of June 1956, and the Life Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more widely and in particular to the
rural areas with a view to reach all insurable persons in the country, providing them adequate
financial cover at a reasonable cost.
LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its
corporate office in the year 1956. Since life insurance contracts are long term contracts and
during the currency of the policy it requires a variety of services need was felt in the later
years to expand the operations and place a branch office at each district headquarter. Re-
organization of LIC took place and large numbers of new branch offices were opened. As a
result of re-organization servicing functions were transferred to the branches, and branches
were made accounting units.
It worked wonders with the performance of the corporation. It may be seen that from
about 200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in
the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new
business. But with re-organization happening in the early eighties, by 1985-86 LIC had
already crossed 7000.00 crore Sum Assured on new policies.
Today LIC functions with 2048 fully computerized branch offices, 109 divisional
offices, 8 zonal offices, 992 satellite offices and the corporate office. LIC’s Wide Area
Network covers 109 divisional offices and connects all the branches through a Metro Area
Network. LIC has tied up with some Banks and Service providers to offer on-line premium
collection facility in selected cities. LIC’s ECS and ATM premium payment facility is an

addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centers have
been commissioned at Mumbai, Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata, New
Delhi, Pune and many other cities. With a vision of providing easy access to its policyholders,
LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner
and closer to the customer. The digitalized records of the satellite offices will facilitate
anywhere servicing and many other conveniences in the future.
LIC continues to be the dominant life insurer even in the liberalized scenario of Indian
insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC
has issued over one crore policies during the current year. It has crossed the milestone of
issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67%
over the corresponding period of the previous year.
From then to now, LIC has crossed many milestones and has set unprecedented
performance records in various aspects of life insurance business. The same motives which
inspired our forefathers to bring insurance into existence in this country inspire us at LIC to
take this message of protection to light the lamps of security in as many homes as possible and
to help the people in providing security to their families.
The latest GST is expected to freeze at 18 percent under the GST update. This is a bad news
for all the policyholders, as this hike will impact adversely on the insurance sector, typically
in terms of insurance premiums. Life insurance reach in India has reduced from 4.6 percent in
the year 2009 to 2.6 percent in the year 2016. It reflects a no growth at all in the last a few
years. The hike in the GST from 15 percent to 18 percent would increase the premium of
purchasing a new as well as renewing an existing insurance policy.
Basically, the premium deciding factor of an insurance plan is subject to the insurance
plan type you want to purchase. Based on that, we have two major categories of insurance
policies – Life Insurance and General Insurance.
A contract between and individual and an insurer, a life insurance policy provides an assured
sum of money to a designated nominee upon the death of the policyholder, which is in
exchange for a premium.

Life insurance policies are sub-divided into four categories, i.e. Term plans, Pension
plans, ULIPs, and Endowment plans. The service tax levied on these different insurance
instruments is also different. A Term plan offers death benefit and is defined as a risk-free
plan. The nominee gets the sum assured if the insured person dies during the policy term. The
policyholder doesn’t get any maturity benefit in a basic term plan. There are some term plans
that offer the return of premium (TROP) benefit. The premium element of a term plan mainly
includes the risk component in order to provide an insured person with a risk cover as long as
the policy is active.
ULIPs and endowment plans provide coverage benefit and death maturity whatever
instance occurs first. These plans compute investment and risk in the premium element and it
makes these plans expensive in the comparison with a term plan.
The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the year
1850 in Calcutta by the British.
MissionOf LIC
"Explore and enhance the quality of life of people through financial security by
providing products and services of aspired attributes with competitive returns, and by
rendering resources for economic development."
Vision Of LIC
"A trans-nationally competitive financial conglomerate of significance to societies and
Pride of India."
Role played by LIC
1. LIC provided insurance services in Rural areas like Ratnagiri district
2. LIC provided income earning facilities in Ratnagiri district
3. LIC hired both permanent employees and commission based Agent to provide income
source which help people in Ratnagiri to improve their standard of living

4. Mobilization of saving- with the help of LIC people started savings in various insurance
plans, which in terms, Health, Economic development of the country.

The Impact on Life Insurance Premium
A policyholder pays service tax only on the risk factor of the premium element,
whereas the investment component of the insurance plans usually isn’t included in the service
tax umbrella. After the GST is implemented, insurance plans, including life, motor, and health
would become more expensive, as taxes would be hiked.
Term Plans
Earlier, 15 percent service tax was levied on the premium of term plans. After the
updated is implemented, the tax would be hiked by 3 percent and it will be 18 percent. The
individuals buying insurance plans for the first time or renewing their existing insurance
policies would have to pay 18 percent GST.
It means that that for the payment of every 100 rupees (towards the premium), a
service tax of Rs. 15 was levied, which now it is going to be Rs. 18 as per the updated tax
plan. To be precise, the premium will be increased by 3 percent.
Endowment Plans
Endowment plans are considered as one of the traditional insurance saving plans.
Previously, these plans used to attract a service tax of 3.75 percent on the insurance premium
while buying an insurance plan. Now, it would be increased to 4.5 percent as per the updated
tax regime. Now, the policyholders are supposed to pay 1.88 percent service tax on the
premium payment of their endowment plan(s) if they are renewing it for the second time.
General Insurance
A General Insurance policy also refers to a contract between and insurer and an
individual, which provides an assured sum of money as compensation for loss caused by a
natural or manmade scenario. The policy could be issued for healthcare, home, travel,
automobile etc.

Health Plans
As of now, the health insurance policies (standalone as well as a family health plan)
charge 15 percent as the service tax on the premium. After the updated GST is implemented,
the medical insurance plans would be costlier such as mediclaim policy for senior citizens. It
would attract an increase of 3 percent in its tax regime, making it 18 percent that will be
charged on the premium from 1st July 2017.
Travel Insurance
Those who are looking forward to traveling abroad anytime soon will also have to pay
an additional tax of 3% as the new GST will be in effect from July 1. The customer will now
have to pay 18% GST instead of 15% service tax earlier in effect. So, if you don't want to pay
more money than buy or renew travel insurance before 1st July 2017.
Automobile Insurance
Automobile insurance premium includes 15 percent as the service tax. It will be hiked
to 18 percent when the tax rate is frozen up to this particular percentage. If you are die heart
fan / lover of your car & two wheeler then it's best time to renew your policy with auto
insurance companies so that you can save your money & plan to travel somewhere with your
family.

GST Rate on insurance policies
What would be the Ideal Way Out for the Insurance Buyers?
It is of utmost importance for a person to safeguard his/her life. This becomes even
more important in case a person is the sole bread winner in his family. Life insurance policies,
particularly the term plans, are the life insurance plans in the true sense. These policies
provide the coverage to you and compensates financially so that when you are not there, you
can still look after the financial needs of your family members.
When you look forward to buying an insurance policy, pay your undivided attention to
the variants of the insurance plan, including its overall benefits, disadvantages, inclusions,
exclusions, policy coverage, policy term, its premium etc. Keep in your mind that premium

should not be the only criteria for selecting or rejecting an insurance plan. Otherwise, you
would end up depriving your family of the overall financial coverage that they rightfully
deserve if you are no more because of any unfortunate incident, such as death, total or partial
disability, terminal illness etc.
Thanks to the rise in the insurance premiums, a storm would be triggered and there
would be a cut throat competition between the insurance providers to offer best of the best
insurance plans to their potential clients. This would be beneficial for them as far as their
financial future is concerned.
It is recommended to draw a comparison, shop around, and then purchase an insurance
plan that suits your insurance requirement, structure, objectives, liabilities, and budget of you
and your family.
The Relationship between the GST Rule and Life Insurance Business
The insurance policies’ premium represents two components- savings and risk
coverage. The service tax is levied specified only on the premium component.
According to the GST rules, the value of service on which the GST is levied regarding
the life insurance sector shall be accordingly.
The gross premium would be reduced by the amount allocated for or savings or
investment on policyholders’ behalf.
When it comes to the single premium annual policies, ten percent of the single
premium would be charged from the policyholder.
In other cases, 25 percent of the premium for the first year and 12.5 percent of the
premium in the upcoming years will be charged. For example, if an endowment plan’s
premium is Rs. 100, then the 18 percent GST would be levied on the 25 percent of premium
(which would be Rs. 25) the GST would be Rs. 4.50.
In case the total premium paid by the policyholder is towards the life insurance’s risk
cover, only the 18 percent GST would be levied on the total premium.

Because of the increased GST percentage that awaits the implementation. The overall
impact of the GST would be the increased expenditure (premium and the increased GST),
when it comes to term insurance and endowment plans.
The policyholders stand a chance to be benefited if the insurance providers get a green
signal on the input tax credit benefit. Unfortunately, as of yet, it is still unclear since the
center/state GST structure is very complex. It might create confusions and conformity for the
insurance buyers and increase the administrative expenses for the insurance providers. If the
insurance buyers remain confused about the GST update, then irrespective of the increase or
decrease in the prices, the solvency of the market along with the financial strength will be
adversely affected.
The general insurance sector will be equally impacted. The overall outgo for health,
car, and various non-life plans would be increased by 3 percent.
Post GST implementation, the existing and new insurance buyers would have to bear
the updated prices. For example, the current insurance premium of a term plan is Rs. 10,000,
(without the 15 percent service tax) the updated GST will increase the premium comprising
taxes by Rs. 300. It means from Rs. 11,500, it will be changed to Rs. 11,800.
When you compare insurance premiums, especially for the term plans, ensure that you
look out for the premiums including or excluding GST by the various insurance providers.
There should be no changes in the selection process, as the GST impact is the same for all the
insurance providers. Follow a proper selection process in order to get the right insurance plan
that offers you maximum coverage and fulfils your insurance expectations. This table will
help you to get a better understanding of how the updated GST impacts the various insurance
products and to which extent.
Though the hike is nominal, the increased insurance premiums seem too much for a
major section of policyholders. If someone is spending Rs. 50,000 on the annual premium for
home, motor, medical, personal accident insurance, and term plan, they will have to pay 18
percent more. They won’t get any additional benefits or coverage. In this article, you got to
know about the impact of the updated GST on the insurance sector. In true sense, the real

impact of GST on the policyholders will come out after its implementation. For the existing
policyholders, as of now, there is no change required to be made prior GST implementation.
The Lok Sabha, on 8 August, passed the long overdue Constitution (122nd
Amendment) Bill to roll out the Goods and Services Tax (GST), with 443 lawmakers voting
in favour of the legislation, and AIADMK MPs staging a walkout after registering their
opposition. The passage of the bill marked a historic step towards tax reforms, said Prime
Minister Narendra Modi, adding that the GST was “crucial” to end tax terrorism and also to
reduce black money and corruption. According to Modi, the consumer will be the “king” now,
and he thanked all parties that supported the bill. Earlier, on 3 August, the GST bill was
passed in Rajya Sabha.
The GST will replace 17 federal and state taxes with a single national sales tax
structure. It’s also expected to reduce business transaction costs. While the rate of GST is yet
to be finalised, rumours peg it at around 18%, in line with what has been recommended by the
concerned government panel.
But the common man is more interested on the impact the bill is likely to have on
various sectors of the economy, and on their daily lives, regardless of what the government
and policymakers think. While the “One Nation, One Tax” scheme has become a reality, and
there’s every reason to cheer, services are likely to cost more once the GST is rolled out. As a
result, if you are one of those already paying a hefty premium for health, life or even motor
insurance policies, prepare yourself for some pain, once the new tax structure is implemented.
Come April 2017, all the three insurances are likely to cost more, as taxes are slated to rise a
maximum of 300 basis points. One basis point equals a hundredth of a percent.
The moot question. Period. Well, it actually depends on the type of insurance policies
you have. Not all polices attract the 15% service tax now. Besides, the method to calculate
service tax differs between policies. Service tax, under a unit-linked insurance plan (ULIP), is
calculated on the premium component that covers the risk. But in case of an endowment plan,
the 3.75% service tax is levied flat on the premium amount.

Impact of GST on insurance premium
It will be evident from the table given below that health insurance and term insurance
policies would be the two most affected categories once the GST becomes operational. The
service tax charged on the premium paid may climb to 18% from the present 15%.
Type of policy After GST
implementation
Current
rate
Pure risk insurance/term insurance 18% 15%
ULIPs 18% 15%
Annuity: single premium 1.8% 1.5%
Motor insurance 18% 15%
Endowment policies (1st year) 4.5% 3.75%
Endowment policies (2nd year
onwards)
2.25% 1.88%
Health insurance 18% 15%
The basic reason is that both health and term insurances pay back only when something
happens to the subscriber or the insured. More specifically, under term insurance plans, the

insurer is liable to pay only when the insured passes away with the policy still operational.
The insurer’s liability is zero if the insured person outlives the plan. The premium which the
subscriber has paid, is also not paid back, unless the policy has some unique feature which
permits it.
Likewise, under a health insurance plan, no direct benefits are offered to the subscriber
unless he/she falls sick and is hospitalised. The insurer, of course, will add a no claims bonus
(NCB) to the cover, but to claim it, the subscriber is required to have a medical condition. The
inherent nature of both health and term insurance plans make them price sensitive i.e. people
usually buy schemes that cost less. A greater incidence of service tax is likely to trigger price
wars between insurers because buyers would now become even more price conscience. A
similar eventuality holds good for motor insurance too.
According to media reports, the life insurance industry in India has been shrinking for
some time now. The growth rate fell to 2.6% in 2016 from 4.6% in 2009. Fears abound the
industry that the rates may further go southwards once the GST is implemented.
The Life Insurance Council, the apex industry body of insurance companies, has
already written to the finance ministry, urging that GST be charged only on premium
collected by the insurer, for their life insurance services, without factoring in the investment
portion, where the companies act solely in the fiduciary capacity.
Ideally, premium should not be the sole consideration when you purchase insurance
policies. Rather, you must inspect the insurance company’s claim settlement track record and
its after-sales service. Please never forget that the fundamental motive to buy an insurance
policy is to cover your risks. Avoid getting carried away by unbelievably low premiums.
Many times, it’s prudent to ignore the costs to a reasonable extent, if you manage to get the
cover you are looking for. The fact remains that subscribing to a term insurance is perhaps the
most economical ways to cover your risks.
Similarly, all individuals should buy a health insurance, regardless of what surprise the
final GST rate throws up. Since the number of levies that are now part of the premium you
pay, would be subsumed into a single tax, it will considerably lower the cost of compliance.

While the exact impact can be ascertained only when the final rate is fixed, preliminary
estimates suggest a net 2% rise in the premium paid. So, if your premium payable is now
₹1,000, you may just have to pay ₹20-30 more.
With both Houses of Parliament stamping its approval on the GST bill, it would now
have to be ratified in at least 16 of the 29 state assemblies. That seems to be a mere formality
as none except AIADMK opposed its passage. And insurance policy subscribers shall have to
wait for the final rate to be declared by the GST Council.
Top Highlights of Union Budget 2018 Today, the Finance Minister Arun Jaitley
presented the Union Budget of 2018-2019 in the parliament. The Union Budget 2018-19 refer
to be the last budget of NDA government before the general elections that would take place in
the last year. It is the first budget after several but big reforms such as GST, PSU bank
recapitalization
Insurance sector in India has come of age. It has been roughly around 15 years that the private
sector has entered into this arena. Until the year 2000, it was the LIC of India that was
dominating the life insurance market with monopolistic privileges. Similar was the story with
the general insurance space wherein public sector When it comes to term plans, the single
most important parameter is whether the company will pay out claims to your dependents.
After all, that is what the policy is taken for in the first place.
Life Insurance for Tax Benefits
There are many life insurance plans out there from various insurance companies that can help
you save on tax under various sections of the Income Tax Act, 1961.
Saving on Tax with Life Insurance:
Deductions
Section 80C:
There are many investments that can help you save on tax under Section 80C, the most
popular and beneficial of which is investing in a good life insurance policy.

This deduction is available for individuals and Hindu Undivided Families (HUF).
The maximum amount that can be exempted from taxation under Section 80C, 80CC and
80CCD is Rs.1,50,000.
Deductions are only allowed for Premiums up to 20% of the Sum Assured, if the amount of
Premium paid in a particular financial year for a policy is in excess of 20% of the actual Sum
Assured. This is relevant only to policies that were issued before 31 March 2012.
In the case of insurance policies issued on or after the 1st of April, 2012, the deductions are
only allowed for so much of the premiums payable as don’t exceed 10% of the actual capital
Sum Assured.
If the benefit has been claimed under this section, and the policy has been terminated or
annulled within 2 years from the commencement of the policy, the benefit will be reversed.
This is relevant to all life insurance policies, except ULIPs.
If the benefit has been claimed under this section, and the ULIP has been terminated or
annulled within 5 years from the commencement of the ULIP, the benefit will be reversed.
EXEMPTED INSURANCE SCHEMES:
Life insurance provided by Government schemes are excused from GST. Here is a list of
schemes in which GST is not applicable.
 Janashree Bima Yojana (JBY)
 Varishtha Pension BimaYojana
 Aam Aadmi Bima Yojana (AABY)
 Pradhan Mantri Jan Dhan Yogana
 Pradhan Mantri Vaya Vandan Yojana
 Pradhan Mantri Jeevan Jyoti BimaYojana
 Life insurance provided by Central Government to members of the Army, Navy and
Air Force.

 Life micro-insurance product with maximum cover of Rs. 50,000 approved by the
Insurance Regulatory and Development Authority
 Any other State Government insurance scheme notified by Government of India on the
recommendation of GSTC.
Chapter 2
Objectives of the Study
 To see the awareness of insurance in customer on Indian scenario after implementation
of GST
 To know the contribution of the insurance sector to Economic Growth and
Employment
 To study the sales and marketing strategies for Life Insurance.
 To study the service marketing mix on behalf of insurance sector
To see the awarenessofinsurance in customers after implementation of
GST
 Consumer Awareness
 How they go about
To know the Contribution of the Insurance Sectorto Economic Growthand
Employment
 Contribution of the Insurance
 How the insurance sector fosters economic growth

 Providing broader insurance coverage directly To firms, improving their
financial soundness
 Fostering entrepreneurial attitudes, encouraging Investment, innovation, market
dynamism, and competition
 Offering social protection alongside the state, Releasing pressure on public
sector finance
 Enhancing financial intermediation, creating liquidity and mobilizing savings
 Promoting sensible risk management by firms and households, contributing to
sustainable and responsible development
 Fostering stable consumption throughout life
 An institutional role for the private insurance sector
To study the sales and marketing strategies for life insurance Sales
Strategies for Life Insurance on gst
 Prospecting
 Buying Lists
 Niche Marketing
 Finding Value
 Know the Market
 Establish a Plan
 Measure Effectiveness
 Offline Marketing Strategies
 Discount Pricing
 Loyalty Programs
 Direct Mail
 Co-Branding Strategies

To study the service Marketing-Mix on behalf of Insurance-sector
Service Marketing-Mix
Marketing –mix for Insurance companies:
1. Product
2. Pricing
3. Place
4. Promotion
5. People
6. Process
7. Physical distribution

Chapter 3
The Evolution Of Life Insurance
There is a misconception that is prevalent in our society and this misconception is that every
individual needs life insurance. This is not true. Neither is it true that every earning individual,
a sub set of the former category, needs life insurance.
You need life insurance if you have financial dependents, and you need to plan and provide
for their life goals, or if you have liabilities such as a car loan or any other loan, and you do
not want this loan to devolve onto your financial dependents in case of your untimely demise.
In these circumstances, you do need adequate life insurance. In fact, because life insurance is
so important for these individuals, it is one of the first aspects addressed in your financial
plan.
While your life is definitely priceless to your loved ones, it is however important to put an
actual number on the value of the breadwinner in the family, so that you know how much life
insurance you actually require. This way, in case of any unfortunate circumstance, your loved
ones have some income that they will receive that can help them meet their financial needs.
The Evolution of Life Insurance
Do all life insurance policies pay out only on death of the policy holder? Are there other
types? Life insurance comes in a few different forms; let's see what these are and what
purposes each one serves:
The Term Plan
The first form is one of pure protection - the Term Plan. This pays only on the death of the
policy holder. It is pure insurance and has the lowest premium for the highest payout. If you
survive the term of the policy, you do not receive any payment. Your premiums paid go fully
toward insuring your life. There is no investment made out of your premiums in a Term Plan,
hence it is called a pure insurance policy. The term plan is available in two forms, the online
and the offline term plan - each has its own pros and cons

The Endowment Policy
Because to some people the term plan seemed like a waste of premiums paid over the years in
case of surviving the policy period, life insurance companies modified their product to come
up with the Endowment Policy.
Here, the premium is significantly higher than a Term Plan. Part of the premium goes towards
insuring your life, and the rest is invested in fixed income products that yield a very low rate
of return (approximately 5% per annum). From the future corpus of the invested amount of
your premiums, the Endowment Policy pays out the Sum Assured to the nominated
beneficiary on the death of the policy holder and even if the policy holder survives the policy
term, he or she receives a defined payout on maturity of the policy. So this type of product
addressed the concern of premiums not yielding any profits, even though that is not what life
insurance premiums are supposed to do.
The Money Back Policy
While the term plan addressed the needs of those who wanted pure life insurance, and the
endowment policy addressed the needs of those who wanted a payout even on survival of the
policy period, there remained a gap - the people who wanted interim payouts on surviving part
of the term, and didn't want to wait until the end of the policy period to receive their Sum
Assured.
So the money back policy was born - giving interim payouts (or money back) depending on
survival of a certain defined period. For example, on survival of 5 years, 10 years and 15
years of the term, the policy holder receives a certain sum of money back from the insurance
company. These policies pay out the same rate of return as endowment policies i.e. roughly
5% per annum.
ULIPs and ULPPS
While endowments and money back plans invest in safe fixed income instruments yielding
very low rates of return, diversification prompted the creation of a life insurance product that
invested into equity and so the ULIP and ULPP were born. Unit Linked Insurance Plans and

Unit Linked Pension Plans invest a chunk of the very high annual premium into equity, and a
very small component goes towards paying for actual life insurance. Thus these products are
savings based and market linked investment plans.
What's the common factor here?
Regardless of what policy type you go for (and remember - at PersonalFN we recommend
only pure term plans), you do need to read your policy document very, very carefully to
ensure that the policy is the right one for you. Don't depend on your insurance agent to tell
you everything
Secondly, based on extensive discussion with a number of insurance agents, it is seen that
often the intricate details of the policy are not known by the agents. This is not as much a
result of the agent's lack of time to study the policy as it is of the insurance company's training
and development.
So, we're in a situation of ‘caveat emptor'. The onus of understanding the product lies on
you - the buyer. In today's world which is full of uncertainties, buying life insurance has
become inevitable for almost every individual; but while buying it you should also always
make sure that you understand each and every term contained in the policy document. Some
of these terms might seem simple and you would want to ignore them, but it is extremely
important that you understand.
Here is a list of some of the terms contained in life insurance policies which can help you to
better understand your life insurance policy. Some of the simplified life insurance terms are as
follows:
 Life Assured: Life assured is the person who will be covered under the life insurance
policy. It might be the same person who is paying the premium but not compulsory as in
case an individual paying premium for his spouse, in such a scenario life assured is
spouse and not the person paying the premium.
 Proposer: Proposer is the person who is paying the premium under the life insurance
policy and is not necessarily life assured under the policy.

 Nominee: Nominee is the person who will receive the death benefits under the life
insurance policy in case of the death of the life assured.
 Date of Commencement: Date of Commencement is the start date of the policy from
which insurance cover will be effective.
 Sum Assured: Sum Assured is the amount of insurance cover you will get under the
policy. This amount is payable to the nominee in case of deathof the life assured.
 Premium: Premium is the amount you will pay under the insurance policy for getting the
insurance cover.
 Term: Term is the duration of the policy for which the insurance policy will be valid.
 Premium Paying Term: Premium Paying Term is the duration under the policy for which
the Premium amount has to be paid. It can differ from the Term of the policy as in some
insurance policies Premium Paying Term is less than the Term of the policy.
 Mode: Mode is the frequency of premium payment; it can be Monthly, Quarterly, Half-
Yearly, Yearly or it might be Single Premium in case you have to pay only 1 premium for
the whole Term of the policy.
 Maturity Date: Maturity Date is the date when all your benefits under life insurance
policy will cease and you will no longer be covered under the policy. Any maturity
benefit will be paid out and the policy will be closed.
 Survival Benefit: Survival benefit is the amount payable in case of money back policy.
This amount is paid as a benefit after every few years during the term of the policy. It
usually ranges between 15-25% of sum assured.
 Surrender Value: Surrender value is the amount you will receive in case you do not wish
to continue with the policy. It is the certain percentage of the premiums paid (after
deduction of surrender charges) which you will receive in case you surrender the policy.
 Fund Value: Fund value is applicable in case of Unit Linked Insurance Plans (ULIP). It is
the current value of your investment made towards ULIP. This investment is market
linked and will fluctuate depending upon the performance of the fund manager managing
the portfolio.
 Maturity Value: Maturity Value is the amount which you will receive at the time of
maturity of the policy.

Even though the above mentioned terms might look very simple to you but it is very
important that you understand them while taking the policy. This will ensure that you know
what you are buying.

Chapter 4
Opportunities and Challenges
Opportunities
 Social: The balance of power is shifting towards customers. New and ongoing social
trends will shake up traditional business patterns in the insurance industry, resulting in an
increase in consumer power
 Customer Expectations Customers (consumers and businesses) are increasingly
demanding simplicity, transparency and speed in their transactions with businesses,
including insurance agents/advisers and carriers. The relentless march of online and
mobile technology is continuing to fuel this change in customer expectations. The online
world is also becoming increasingly mobile as smartphone and tablet use increases and
fuels the demand for localised information, available anytime, anywhere.
 Social Networks The rapid adoption and fast evolution of social networks will continue to
empower both consumers and businesses to communicate more transparently and to
harness the buying power of virtual communities. The growth of social networking – one
of the fastest ever global adoptions – will help shift the balance of power towards
customers. In just six years since its launch, for example, Facebook has attracted over 800
million users. As consumers become even more comfortable with social networks several
scenarios are likely to develop.
 Technological: Advances in software and hardware that transform ‘big data’ into
actionable insights. Historically, the insurance sector has been dominated by
intermediaries who have played the role of understanding consumer and business needs,
and then matching and tailoring insurance products and solutions to their needs. Internet,
mobility and social networking have changed the game over the past decade and have
created a new generation of customers who demand simplicity, speed and convenience in
their interactions. These trends will accelerate, leading to a situation where customers will
be more willing to buy ‘direct’ using their online and offline ‘trust’ network of friends and
family to guide their choice. This will result in a fundamental redefinition of the role of
advice and the disappearance of distributors as a sales channel.

5.Environmental: The rise of more sophisticated risk models and risk transfer to address
the increasing severity and frequency of catastrophic events. Historically, the insurance
sector has been good at developing catastrophic models that capture known high
severity/low frequency events (e.g. earthquakes, tsunamis, etc.). However, most of these
models perform poorly when it comes to unknown ‘Black Swan’ events. Over the next
decade the insurance sector could be overwhelmed with uncorrelated catastrophic events
reducing capacity and raising prices. Alternatively, new sensing and monitoring
technology, together with risk transfer mechanisms, could cushion insurers and reinsurers
against abnormal losses.
6. Economic: The rise of economic and political power in e merging markets. The
increasing attractiveness of the emerging markets, combined with uncertain growth in the
developed world and stricter regulatory guidelines will make carriers re-evaluate their
strategic goals towards developing countries.
Other Opportunities:
 Aggressive marketing strategies by private sector insurers will maintain consumer
awareness of risk and expand the markets for products.
 Competition in the insurance sector will allow market forces to set premiums that are
appropriate for exposures and push insurers to differentiate their products and services.
 There is a probability of a spurt in employment opportunities.
 The falling interest rates, thescope for entering related areas like banking and pensions in
a bit for synergy and the promise of ecommerce are some of the opportunities knocking at
the door of the insurance sector.
 Given the enormous potential the Indian insurance market, it is expected that there will be
enough business for the industry entrants.
 Privatization of Insurance eliminated the monopolistic business of Life Insurance
Corporation of India. It helps to introduce new range of products which covered wide
range of risks.
 It resulted in better customer services and help improve the variety and price of insurance
products.

 The entry of new player has speed up the spread of both life and general insurance. It will
increase the insurance penetration and measure
Challenges
1. Money laundering in insurance: Mutual funds and banking products have traditionally
been more susceptible to money laundering. Insurance has not been a favourite sector for
money launderers because of its typical way of functioning whereby only a premium is
charged upfront for the promise of a huge contingent payment later. But in the wake of
innovations such as single premium policies and unitlinked plans, the insurance sector has
become far more prone to money laundering than it was earlier. Companies characterized by
large customer bases and their dependence on third parties for sourcing their businesses are
soft targets for money launderers as it makes it relatively easier for them to hide their dubious
intentions. In this regard, Indian insurance companies have to deal with issues emerging from
geographically dispersed distribution networks and contact points through the agency sales
force. Apart from establishing comprehensive KYC norms, they would also have to put in
place processes to know the agents.
2. Solvency Norms: Solvency is part of prudential norms and as risks increase across
markets, the solvency margin also needs to go up tangentially. In order to satisfy the solvency
margin requirements, companies have to systematically build up reserves by transferring a
part of the surplus to a special reserve called “Solvency Margin Reserve.” However,
transferring the surplus will result in a reduction in bonus rates declared and make insurance
unattractive vis-a-vis other financial instruments. Therefore, only a part of the amount needed
to meet solvency margin requirements can come from the surplus held back. The balance
requirement has to be met by other sources for capital, which include:
 Share capital
 Free reserves in the shareholders’ fund
 Difference between the market value and book value of assets
This coupled with the constraints on capital raising (FDI restrictions in
private insurers and mandatory majority government shareholding in public

insurers) poses significant challenges for insurers to maintain 150% solvency
margins in a rapidly growing industry scenario.
3. Technological advancement: A key driver of growth in a long-term business like life
insurance, technological advancement will be critical to functions like data management,
underwriting, fund management, actuarial efficiency, and the end-to-end service delivery
process. Technology will provide the cutting edge in terms of improved disclosure to the
policy holder as well as the regulator in due course of time.
4. Quality of manpower: Insurance is an intensively peopleoriented business and human
resources will be the undoubted differentiator like in any other retail industry. The quality of
manpower attracted and retained by insurers and how their abilities and ambitions are
harnessed would be the litmus test for the industry
5. Investment strategy and fund management: Expertise in fund management is the value
proposition that any insurance company offers and the quality of asset-liability management
(ALM) in a falling or stable interest rate regime will thus be a key challenge. The regulator is
progressively in favour of insurance companies setting up their own investment research and
dealing cells and against knowledge sharing with group asset management companies. Bonus
performance on traditional plans and the net asset value (NAV) performance on ULIPs will
determine the demand patterns and investment strategy will remain at the core of successful
insurance business.
6. Meeting Cost Challenges: Increasing the distribution reach to less populated areas will
increase the costs of insurers. Such costs will have to be estimated and priced into the
products. Issues relating to cross-subsidization may arise. Alternatively, insurers could
introduce new products for these specific market segments and price them to recover the
incremental costs of their distribution. Controlling the distribution of specific products
through agents has always been difficult. Another method of controlling costs by increasing
productivity is to get agents to focus on particular generic products. Historically, this has been
difficult to achieve and may not be in the best interests of the customer.

7. Recruitment and selection of agents: As stated earlier, attracting and retaining of agents
is one of the major challenges. To overcome this challenge, the companies need to involve
local management to recruit agents among the local population. For such wide recruitment
efforts, local managers could be provided support in managing applications and conducting
the selection process. Further, to ensure the success of this decentralization process it should
become a part of the performance appraisal of the local management. Traditionally, the
success rate of print advertisements attracting good applicants is very low. Unusual initiatives
like presentations in social functions in clubs and meetings are expected to be powerful. Live
examples of a few highly successful agents could be given during the presentations. The
selection of agents should include behavioral traits and analytical abilities.
8. Commission: The agents work primarily on the commission which is paid to them on the
basis of annualized premium per policy. The percentage of commission varies from product to
product. There is no fixed remuneration to them. The IRDA guidelines prohibit paying any
compensation to agents. It makes the early career phase of the agents difficult as they
generally do not get too many policies in that phase. There is a need to find ways of
overcoming the early phase difficulties and revising the existing norms. More help could be
extended by sales managers to agents in the early phase to make them learn ways to get
business. However, socially networked agents find it relatively easy to get more policies from
their networks. In reality, an average agent is able to sell one to two policies per month. There
were 21, 09,718 agents as of end January 2015 as against 21,89,000 at the beginning of April
last. While 5,03,000 new agents joined the sector since the beginning of this fiscal, as many as
5,83,000 agents have left the industry as of end January, resulting in a net attrition of 80,000
agents during the 10- month period, as per data. As per the existing system, up to 25 per cent
of the first year premium is given to the agents as commission in traditional policies.
However, this is a low 15 per cent in case of money-back policies and other ULIPS products.
The new Insurance Act empowers IRDAI to finalize the agency commission structure. Also, it
can enact regulations in such a way that commissions become attractive for the agents.

Other Challenges:
 Premium rates will remain under pressure due to intense competition on the more
profitable lines.
 Public and private sector insurer’s greater reliance on their investment portfolios to
generate sufficient income and gains for net profits would subject them to the volatility
of the financial markets.
 As far as the prospective are concerned, the greatest challenge is that of setting up
infrastructure and to reach out to as many areas as possible.
 The biggest challenge for public sector giant, the Life Insurance Corporation is one of
the sustaining the huge growths it has shown in the recent times.
 Despite the liberalization in the insurance sector, public sector insurance companies
are expected to maintain their dominant positions, at least in the foreseeable future.
 Falling premium income -- without a corresponding reduction in claims -- is likely to
drive down profits
 Reinsurance is likely to cost more as treaty reinsurers reduce ceding commissions to
compensate for the lower rates following deregulation
 Private insurers need to raise more capital, otherwise growth could be constrained
since reliance on reinsurance for capital relief is not always viable or available
 Traditional distribution channels, especially tied agents, need to be improved to match
the new product offerings
 There is general lack of transparency as financial and operational data for insurers are
not readily available as none of India’s insurers are directly listed on stock exchanges
 Like all developing economies on a fast track, the shortage of trained insurance
professionals and technicians at all levels cannot be remedied in the short term.
 Natural catastrophes will always be present; the Indian subcontinent is vulnerable to
cyclones, floods, hurricanes and earthquakes, and until there is a national capacity
(similar to the terrorism pool) to manage losses, dependence on overseas reinsurers
will continue.

Chapter 5
Research Methodology
Theresearch article is based upon descriptive as well as exploratory research. Secondary
sources of data collection have been adopted for the study. The relevant and required data are
collected from the text books, national and international articles, as well as annual reports of
LIC, Statistical Hand book of Insurance and IRDA.
Type of Research Exploratory& Descriptive
Data Sources: Completely Secondary Based
Data collection is must as a source at various levels of the report. Primary data is more
relevant, accurate for giving detailed information from the relevant persons. It will provide
explanation of different terms, definitions and concepts incorporated in the primary data
collection procedure.
Methods of primary Data Collection:
1.Personal Interview
2.Questionnairemethod will be used as necessary. Questionnaire will contain questions
and provide space for answers. This method is necessary to collect direct, cost effective,
time saving data. Wider coverage can be possible in this method as the questionnaires can
be sent to the customers by post.
Methods of Secondary Data Collection:

Secondary data is also important. They are reliable and authentic. This is to compare
the information collected to the based one. It will surely clear the picture of various
analysis assumptions and hypothesis.
The source of the secondary data will be given if available, as needed by the
University. Various Secondary data as for example the data published by the Reserve
bank of India on the interest rate are necessary for our project
Sampling
A sample is that part of population which we select for the purpose of investigation.
In this project we are going to take samples as per the size of the customers of both the
concerned companies (concerned branches only). We have Selected Stratified Sample
method. The Sample size will be 100. Information will be collected through text books,
newspapers, magazines, journals and internet is necessary as Secondary Data for our
Project.
The study was conducted on the bases of survey through questionnaires given to
respondents.
 Sampling Design
 Population: Mumbai
 Sample Size: Population of 100
 Sample Technique: Convenience Sampling
 Statistical Tools: Correlation
Limitations
For further enhancement of the project
 More geographical area can be concerned
 More no. of samples can be collected.
 This will help to draw some more realistic conclusion and make some generalization.

Chapter 6
Data analysis and interpretation
1. Do you support GST ?
INTERPRETATION:-
From the above diagram show that 87% are supporting GST and the 13% are not supporting
the GST

2. According to you implementing GST in India is ?

INTERPRETATION:-
From the above pie diagram shows that implementing on GST in India 84% people are
thinking it good decision, or 8% people are thinking it is a bad decision taken by Prime
Minister Narendra Modi or 7% thinking they don’t know about GST, or 1% people are
thinking very good decision taken by Modi for our country.
3.Are you insured under GST insurance ?

INTERPRETATION:
From the above pie chart, it is concluded that 67% of the people are insured under GST and
33 % of the people are not insured. These are the people which are surveyed by me.
3. Who influence you to get insured?
INTERPRETATION:
From the above pie chart, it is been known that 44% of the people are influenced by
friends and relatives, 7% are influenced by print media, 19% are influenced by electronic
media and 30% are influenced by insurance agents.

4. For what you have insured yourself?
INTERPRETATION:
From the above pie chart, it isconcludedthat17% of the people are insuredfornone of the above
reasons,25% of the people are insuredunderall the above reasons,13% are insuredforsecurityto
familypurposes,13%are insuredfortax benefitreasonsandabout32% of the people are insuredfor
savingreasons.
5. Which of the following polices you have?

INTERPRETATION: From the above information, it is being cleared that the people
surveyed under my questionnaire have endowment policy of about 22%, Single premium
policy of about 19%, Children policy of about 8%, Pension plan policy of about 11%,
Money back policy of about 19% and 40% for others.
6. How would you like to pay premium?
INTERPRETATION:
From the above pie chart,25% of the people wouldlike topaypremiumbyyearlybasis,10% of the
people wouldpayhalf yearly,20%wouldpayquarterlyandabout 45% wouldlike topayby monthly
basis.
7. Are you regularly paying the premium?

INTERPRETATION
From the above pie chart,about 21% of the people are notpayingpremiumona regularbasisand
79% of the people are payingpremiumregularly.
8. Have you received any incentive from insurance agent on insurance premium?
INTERPRETATION:

From the above pie chart it is been known that 49% of the people had received incentives
from insurance agents in insurance premiums and 51% of the people have not received
such incentives.
9. Are you aware about the life insurance bonus of the policies?
INTERPRETATION:
From the above pie chart, it is been cleared that 71% of the people are aware about the life
insurance bonus of the policies and 29% of the people are not aware of the same.
10. Have you availed any loan against insurance policy?

INTERPRETATION:
From the above pie chart, 38% of the people had availed loan against insurance policy and
about62% of the people are notavailedforthe same reason.
11.Is life Insurance Corporation follows the rules of IRDA?
INTERPRETATION:
From the above pie chart,we came to know that 75% of the Life insuranceCorporationfollowsthe
rulesof IRDA and25% of the LIC do notfollow the rulesof IRDA.

Chapter 7
Conclusion
As per the data collected from various sources and by taking response from policy holder The
real effect of GST on the insurance sector is a good initiative taken by the Government. It will
be beneficial for long –term. The good news is some of the higher insurance cost should be
offset if tax on services availed by the industry are allowed to be taken into account to reduce
insurers' tax paid. This will ensure insurance industry will be able to pass on the benefits of
this big-bang reform to end-customers soon. With GST now harmonizing this at all the levels
of value add taxes existing across states, there will be only one taxation rate applicable for the
insurance industry which is at 18%.
Initially,All policyholders will have to pay higher premiums on their insurance policies due to
increase in GST rates.
By emerging as an effective method of tax collection, GST is sure to help build a stronger
Indian insurance industry and aid in protecting Indians better.

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