SWOT Analysis of IDBI Federal Life Insurance PVT. Ltd.

Categories: Swot Analysis

LPG was the platform which made insurance sector live and realistic. LPG stands for liberalization, privatization and globalization. Liberalization with entry of private companies in insurance, the indian insurance sector has started changing it’s entire shapes. Within a shorter period of time private insurance was acquired around 13 percent of life insurance market and 14 per cent of non life market. This growth Is really appreciable but there is still a huge untapped demand for this product. This things are happening due to a gap between private company and public company’s offerings, demands, competition in the sector, total number of benefit associated with that product and strategy.

These are the things which affect the entire insurance market greatly. Secondly this sector is faced by a lot of challenges, which are unavoidable in nature. Thirdly and most important part is entry of other new financial tools. In comparison to insurance other financial tools such as equity, mutual fund and bonds etc are very attractive in nature and nowadays people are very much attracted towards that products and inflation is playing vital role in this field so the entire insurance sector is get affected.

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The term insurance is looking very small but in reality it is not. It is the backbone of an individual’s as well as country’s risk management system. Risk is an important part of our life, in simple word we can say that our each and every steps of life are uncertain, anything can be happened at any time.

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So in order to minimize this, insurance was started. Generally there are a lot of definition of insurance and we are using that definition as per our requirement. For an example we can say that it is a simple investment tool, where we can invest certain amount for a fixed period and will get a better return after maturity period. We can also say that it is a protection tool, in case of death or any contingencies time it will give us monetary support. Then some people treat it as tax benefit tool because under section 80(C) and 10(10D) the total return on insurance is tax free. It is also an important tool for a country’s financial intermediation (brokerage) chain and also a source of long term capital for different projects and infrastructure. It’s contribution towards financial market is also very important as it provide support in balancing the markets by evening out any high fluctuations. So we are treating this insurance term as per our needs and requirement. The term insurance was originally started from cape town (South Africa) and with time lapses it was greatly accepted by the entire world.

Generally there are 3 types of insurance available. They are Life insurance, Non life insurance and Reinsurance. Life insurance includes all types of life protection, income protection, child life protection, pension plan, retirement plan, wealthsurance plan. Nonlife insurance is also known as general insurance. It means any insurance which insure something other than anyone’s life. And at last reinsurance means that insurance which protect an insurance firm or company.

If we go back to history then we can find that the concept of insurance was started by Lloyd coffee house in London. In India the first life insurance company was Oriental Life Insurance company ltd. The first non life insurance company in india was Triton insurance company ltd. The first Indian insurance company was established in 1870 and it was known as “Bombay mutual assurance society limited.

National insurance company was the oldest insurance company of India, which was established in 1906. That time there was no act or regulations available for regulating those insurance companies. So in 1912 Life insurance Companies Act was enforced and it was continued till 1938. Then in 1938, new Insurance Act was enforced by government to regulate the entire insurance sector market. In 1956 Life Insurance Corporation was formed by merging 170 life insurance company and 75 provident fund companies. Then IRDA was formed in 1999 by government of india to control the entire insurance insudtry. In now a days total 57 insurance companies are there in India. There are total 23 life insurance companies and 34 general insurance companies. LIC is only the public sector insurance company. Insurance sector is now one of the booming sector, growth rate is higher in case of insurance sector. The Life insurance industry is going to touch US$ 280billion by 2020. Currently the domestic life insurance industry registered 11 per cent y-o-y growth. The total amount raised by insurance sector in 2017 through public issues was 434.3 billion rupees. In February 2018 LIC was declared as the market leader with highest 70.31% market share. The insurance sector is now in growth stage but still only 12.2% people are aware about insurance and only few portion of total people are interested towards this financial tool.

Nowadays where inflation rate is 4.96% which is comparatively lower then past years but still there are lack of financial tools which can able to beat inflation. Insurance, bank deposits, FD, RD, Share market, mutual fund, bonds, crypto currencies etc. financial tools are available which are able to beat inflation but which one is good among all of this? That is the point which we have to pay attention in order to find the better source of investment because in nowadays where time value of money is continuously decreasing, we have to think seriously about investment to make our financial position strong and future bright.

By saying about IDBI federal limited, it was started in 2008. It is a joint venture business between IDBI bank, a well known public sector bank of India, federal bank, well known private sector bank and ageas, Belgium based insurance company. The company tasted it’s first profit in 2013 and in 2017 it was selected as top 10 best insurance company in india. It has a lot of products but basically it’s famous product is life insurance product and in this project I will compare it’s life insurance product with other financial tools with relation to inflation to find out the best investment tool.

Background Information About IDBI Federal Life Insurance

IDBI federal life insurance is a three way joint venture insurance company incorporated in 2006. IDBI bank is the main stakeholder of this organization. It has total 48% share in this joint venture, FEDERAL bank, one of india’s leading private sector bank and ageas, belgium based insurance giant company. Both federal bank and ageas have 26% share each in this joint venture. In the primary stage the main objective of this company was to capture customer market within a small time period, and as a result the company tested it’s first profit in the year 2013 when it crossed it’s break even point. In the year 2017 it ranked as 9 in india’s top 10 insurance company. Now it’s main aim is to increase total market share through customer acquisition and to enter into top 5 of india’s best insurance company. The company got IRDAI certification in December 2007 and sold it’s first policy in 2008. After touching the break even point in 2013, the company showed a highest profit of Rs. 80 crore in 2014 and crossed Rs. 1000 crore business in 2015 and at last in the year 2017 the company awarded as best innovative insurance company of india with higher growth rate of 27%.

SWOT Analysis of IDBI Federal Life Insurance PVT. Ltd.

Objective and Purpose

  • To discover all the financial tools available for investment.
  • To compare IDBI federal’s life insurance plan with other financial tools with relation to inflation.
  • To find out merits and demerits of various financial investment tools.
  • To know the financial tools which can beat the heat of inflation.
  • To know whether insurance is good or not from investment point of view.

Fink et al. (2005) studied on this topic for a longer period and then found that granger causality test is very important in order to find out the effect of financial markets on economic growth. To make this study more effective they did study on many countries by using regression models and find out that there is a linier relationship is there between financial market products and economic growth such as GDP, Inflation etc.

Rule (2001) examined this topic and tried to find out the linkage between the insurance sector products and other financial sector products, by considering all the role played by insurance companies and other financial sectors with relation to inflation and economic growth.

Beenstock et al. (1988) and Browne and Kim (1993) both examined this topic by putting a step forward by studying and analyzing the sub sectors within insurance sector. They found comfortable to focus on the relationship between income and property liability insurance penetration, while the latter worked across all countries on life insurance demand and other financial product demand.

Cull et al. (2003) studied on insurance and financial market sector to find out the growth of insurance deposits and it’s impact on financial consistency and development. They found this relationship between these two variables after using tobit model analysis and heckman two step method. At last they concluded this topic by showing that only the government funded insurance deposits has a clear negative impact on financial consistency and development.in the medium and long run except only those countries where bank regulation has sufficient independence from legal system and acts.

Haiss and Sumegi (2006) examined this topic by putting spotlight on the role of the insurance industry and it’s links to other financial products of greater advantages and importance. This study reviewed all the factors and elements of the insurance sector which have influence on economic growth like inflation. They have surveyed 29 countries from 1992 to 2004 and found that that factors of insurance industries have positive impact on economic growth.

Khan and Kumar (2003) pointed out after examined this topic from a very different angel and that was to find out the total insurance premium rate of india with relation to global insurance premium rate. They found that the rate in india is 8.2 percent where the global rate is 3 to 3.5 per cent. That means the indian insurance industry is in growth stage and lower inflation rate helping it so much in achieving economic goals.

Sinha (2003) studied on this topic and have tried to examine the trends in the development and growth of indian insurance sector. His focus was to find out all the challenges, difficulties faced by indian insurance industry. This study explained the development of indian insurance maket and explained all the opportunities , strength and challenges associated to this sector.

Joshi (2003) examined the entire insurance as well as financial sector and highlighted the current consumer behavior such as changing customer’s need, wants in this sector during post - liberalization. He took india as sample country and did his research in five major metro city and results show that the sector is in developing stage due to liberalization and massive customer satisfaction. Harry M. Kat (2000), examined the popularity of ULIP (unit linked plans) also known as equity linked plans. He collected data from various companies to know about their plans and it’s selling position. He analyzed the entire study by using hypothesis testing and found that the growth in insurance sector is due to this plans.

T.R. Rajeswari (2001), conducted her research to understand the relationship between money market investment and insurance industry investment. She did a survey of 300 educated investors and used different tools such as chi square test, standard deviation and found that most famous savings avenue is money market investment and the main reason behind this is safety.

B S Bodla and Sushma Rani Verma (2007), studied on consumer buying behavior in rural and urban areas to know the preference of the public towards various types of insurance products. A survey on 188 respondents was collected through questionnaire and tested through coefficient of variance and found that they are not interested to invest in insurance and it is not due to inflation rate but it is due to their mindset towards banking products.

Cole et al. (2009), examined the entire financial sector in india and found that only 10% of the total sample population are interested and they have insurance policy. And they don’t want any type of security of money but they want long term financial safety and planning. Cole and his team got this reply after analyzing the survey responses by using two way annova and chi square test.

Prasada Rao and Vedanatam (2006), conducted a study to know all the key factors that make impact on customers preference in investment opportunities. They did survey on 110 respondents by mode of a structured questionnaire and then analyzed it by factor analysis and found that in investment the most important thing is return and also found that mutual fund is most favored investment tools used by people.

Dr. Bhagaban Das (2006) , studied on this topic to understand the retail investors behavior towards different investment and saving avenues, to understand this thing more clearly they took sample of 100 educated investors and analyzed all the information by using chi square and rank correlation method. It was found that the investors have different view towards investment such as tax benefit, meet long term goal etc and they prefer insurance as a one time solution tool for this platform. Cox and Schwebach (1992) also examined the merits and demerits of various insurance products from hedging various risk point of view. They found that most of the business organization use this product for hedging risk, individual use this insurance policy to meet long term goal and contingencies. D’Arcy and France (1992) examined the effectiveness of insurance products such as life insurance, health insurance etc. on the basis of loss indices and conclude that people don’t have any type of interest towards insurance product due to undisclosed return because there is no particular SRB rate in insurance sector it varies from 4% to 8%. Another reason is people want to invest in risk free asset where insurance is not treated as a risk free asset.

Annaert et al. (2009) examined the difference between insurance and other financial product, they found that insurance sometime failed to give returns more than it’s benchmark level and for this reason it is not so much popular in relation to mutual fund or other financial products. But in some where it attract some investors due to lower risk factor.

Benninga (1990) examine entire insurance sector and found that this sector in now days are more concerned about stop-loss strategies and due to this reason they tends to make more improved portfolio insurance strategies in case of both the sharpe ratio and expected terminal wealth. He got this result after analyzing the properties of different portfolio strategies and by comparing these strategies with each other.

Crosby and Stephens (1987) documented the standard challenges face by insurance industry, they found that the entire insurance sector is run by traditional concept except ULIP plan. In now a days popularity towards insurance sector is increasing rapidly in india, it enable the insurance sector to launch new product with strong strategies to prove itself better than investment in other financial product and definitely it may take certain time to touch that feet.

Updated: Feb 27, 2024
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SWOT Analysis of IDBI Federal Life Insurance PVT. Ltd.. (2024, Feb 27). Retrieved from https://studymoose.com/swot-analysis-of-idbi-federal-life-insurance-pvt-ltd-essay

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