Comparative Study on Ulips in the Indian Insurance Market for Tata Aig Life by Delnaaz Parvez

A PROJECT REPORT ON

“COMPARATIVE STUDY ON ULIPS IN THE INDIAN INSURANCE MARKET”

FOR

TATA AIG LIFE INSURANCE COMPANY LTD

BY

MISS DELNAAZ. PARVEZ. DOCTOR

MBA SEMESTER III

Project Guide

“Prof Vaishampayam”

In Partial Fulfillment of the Requirement of the Two Year Full Time PGDM Programme

Of the SMVIM, PUNE.

AY 2007-08

1

PREFACE

As an essential and obligatory part of my course, I have undergone two months summer training at Tata AIG Life Insurance Company Ltd, Pune. This training has helped me in getting the practical knowledge into the business environment.

I got the knowledge about the Insurance industry. In this report I have said about the current position of the insurance sector in India. This report includes a deep study made on the ULIPs in the insurance market and its impact on the person’s income.

2

TABLE OF CONTENTS

S.NO. CONTENTS PAGE NO.

1. Acknowledgement 3 4 2. Certificate from the company

Certificate from the college 5

3. Introduction 6 4. Company Profile 7-9 5. Research Methodology 10 6. Introduction to Insurance 11-17 7. About ULIPs 19-26 8.. Distinction between ULIPs & Mutual Funds

Comment on the Distinction

27-30

9. Comparative Analysis of ULIPs( Tata AIG with others) Growth & Returns Fund Performance

31-43,44-46, 47-51

10 Overall Data Analysis and Findings 52 11. Understanding the working of ULIPs of TATA AIG 53-56 12. Market Survey on ULIPs of TATA AIG 57-62 13. Integrated Financial Planning for Life Insurance 63 14. Conclusion 64 15. Recommendations 65 16. Bibliography 66-67 17. Questionnaire 68-69

3

ACKNOWLEDGEMENT

It has been an immense pleasure and truly enriching experience doing my project with

TATA-AIG LIFE INSURANCE COMPANY LTD, PUNE

I take this opportunity to thank all those people who have made this experience a

memorable one..

Firstly, I would like to extend my sincere and hearty thanks to:

Mr.Parikshit Abroal (Cluster Head – Agency, Tata-AIG Life Insurance), and Mr. Nitish

Beohar (Senior Manager BA) who gave me an opportunity to associate myself with the

Tatas.

I would like to thank my guide Miss.Anamika Dikshit (Assistant Business Manager,

Tata-AIG Life Insurance) without whose help it would be difficult to complete this

project. I am very grateful to her for being a constant trainer and motivator for me for

successful completion of the project. During the course of time she has given me

valuable tips related with my project and she was more like a friend who guided me

throughout the project.

This gratitude will remain uncompleted if I won’t mention the names of other persons

Who helped me not only in my projects but also motivated me.

I would like to thank Mr. Rahul Bendre (Business Manager – Tata- AIG Life Insurance),

Mr. Kaizad S. (DCM, Kotak Mahindra Old Mutual Life Insurance Ltd.) and

Mrs.Benaifer.S (Senior Officer, Finance Control, Societe Generale Corporate and

Investment Banking) who provided me guidance and support from time to time.

Last but not the least I extend my special gratitude to The Advisors of Tata-AIG Life

Insurance Mr. Shrikant Verma, Mr. Sudhir Chavan, Mr. Dattatray.Phule and Mr.Vikram

Balwadkar who have contributed a lot in my project completion and the other advisors

who co- operated with me to carry out the market research and the library staff of

St.Miras College.

Delnaaz Doctor

4

Certificate from the Company

5

C

6

INTRODUCTION

The insurance plays a major role in the life of the humanity. Slowly people stared to realize the

necessity of the insurance and these needs are unending as long as life exists. In fact insurance is

not restricted for any category neither of the society nor in term of cast, ages or life styles. Also

many people have a notion that Insurance is very good form of an investment, which is not right.

Insurance is just creating a protection for you and your family.

As Indian investors are now more exposed to the capital markets and have started understanding

its working, they want to multiply their money rapidly.

This can be done through Unit Linked Insurance Plans (market linked plans ) introduced by the

Insurance Players.

Therefore the only reasons for selecting this topic are

• To get more knowledge about insurance sector in India

• To undergo a comprehensive study of ULIPs.

• To get experienced of corporate scenario.

7

COMPANY PROFILE

Getting associated with a brand like Tata –AIG for just 2 months was really a

prestigious and a memorable period in my MBA tenure. Growth has been the main objective of

the company and will continue to be the driving force in the years to come by spreading the

wings wider in India and contribute in the economic and social development.

Tata- AIG LIFE Insurance Company is a joint venture between

Tata Group and American International Group (AIG.)

Let’s throw light on the facts of both the high profile and prestigious companies.

Some of the features of TATA are: • Over 260,000employees • Operates in 130 countries worldwide • Trusted by over 3 million shareholders • Diversified business interest ( 92 companies) • Largest FOREX earner • Revenues of US $ 14.25 billion • Deep rooted commitment towards society.

The Group: TATA-

The name trusted all over the country over the years.

For over 130 yrs The TATA name has stood for Leadership with Trust. As a

business group it has traversed 3 centuries and has emerged as India’s most

respectable corporate group.

It is a strong believer in ethics and its profits are placed in philanthropic trusts.

8

Some of the features of AIG are: • In business since 1919, • Over 80,000 employees worldwide • Presence in over 130 countries • Over 50 million customers worldwide • Revenues over US $ 81.3 billion • Ranks 4th on the FORBES 500 LIST OF 2003. • Deals in General and life insurance, asset management, financial services.

Tata-AIG LIFE INSURANCE

It is a joint venture between TATA and AIG. It provides insurance cover for both for life

and group. It deals in all kinds of products. And now concentrates more on UNIT LINKED

PLANS.

It is Tata-AIG which consumers trust the more when it comes to giving exact claim

valuation, best in consumer satisfaction and trusted as the best in quick disposal of claims.

Its working is based on Business brought up by Business Associates who are the

advisors/agents for the company.

Areas of business

Tata AIG Life Insurance products include a broad array of life insurance coverage to both

individuals and groups. For groups, the company has life products whereas for individuals,

it has term products, endowment products as well as money-back products. For groups and

individuals, various types of add-ons and options are available to give consumers

flexibility and choice. The company has also designed specific products for the financially

challenged and underprivileged.

The Group: AIG

American International Group is a leading US based international

insurance and financial services organization and the largest

underwriter of commercial and industrial insurance in the United

9

Some of the features are:

• 74% Stake of TATAs and 26% of AIG

• Licensed to operate on February 12, 2001

• Has over 190 branches and planning to increase the number to 120 plus by August

2007 , and 300 plus by November 2008.

• Over 5 lac + policy holders.

Tata AIG is all set to scale greater heights and has arrived at a vision of making it

A BILLION DOLLAR COMPANY BY 2009

A glimpse at the Joint Venture

TATA (74%) Ratan Tata Chairman CEO

AIG (26%) Martin J. Sullivan President & Chairman

Tata- AIG INSURANCE Farrokh K Kavarana Chairman

Tata-AIG LIFE INSURANCE

Trevor Bull Managing Director

Tata-AIG GENERAL INSURANCE

Dalip Verma Managing Director

10

RESEARCH METHODOLOGY

• Research design –descriptive

• Data sources- primary data and secondary data

• Research approach – face to face interview, observation, individual depth interview

• Research instrument –questionnaire.

Data Collection:

Primary Data: 1) Use of a Questionnaire for carrying out a survey 2) Presentation given by the Advisors of Tata AIG life. 3) Data explaining the working of the ULIPs. Secondary Data: 1) Books 2) Newspapers 3) Magazines 4) Newsletter 5) Internet 6) Television 7) Booklet 8) Policy Brochures This project is about studying the insurance industry which is on the boom.

The introductory part contains the meaning of insurance, its evolution, some,

Statistics of Indian insurance Industry.

The project deals the comprehensive analysis of the ULIP schemes, what is ULIP all

about, its NAV performance, the Growth, performance of the policies since their

inception, its working, its popularity and a market survey.

The project contains various graphs, tables and questionnaire to further.

elaborate on the explanations.

11

INTRODUCTION TO INSURANCE

Today, only one business, which affects all walks of life, is insurance business. That’s

why insurance industry occupies a very important place among financial services operative in

the world. Owing to growing complexity of life, trade and commerce, individuals as well as

business firms are turning to insurance to manage various risks. Therefore a proper

knowledge of what insurance is and what purpose does it serve to individual or an

organization is therefore necessary.

The future is never certain .

So it’s rightly said, “AN INSURANCE POLICY IN HAN D KEEPS THE

TENSION AWAY.”

Insurance, essentially, is an arrangement where the losses experienced by a few are

extended over several who are exposed to similar risks. Insurance is a protection against

financial losses arising on the happening of an unexpected event. Insurance companies

collect premium to provide security for the purpose. In simple words it is spreading of

risks amongst many people.

i) LIFE INSURANCE: It is a fundamental part of a sound financial plan which helps to

insure your loved ones.

Life insurance – the only instrument that takes care of

these 3 probabilities and 2 priorities



Living too longDying too soon

Chi

ldre

n ’s

educ

atio

n &

mar

riag

eW

ealth creation

Living death





Living too longDying too soon

Chi

ldre

n ’s

educ

atio

n &

mar

riag

eW

ealth creation

Living death

12

ii) Benefits:

1) SAVINGS

For unforeseen circumstances.

2) EDUCATION

For child’s education and for higher studies.

3) RETIREMENT

Facilitates adequate savings for worry free retired life.

iii) Insurance ------------a Flash back:

The earliest transaction of insurance as practiced today can be traced back to the 14th

century AD. The business of insurance started with marine business by Traders who

used to gather in the Lloyd’s coffee house in London, wherein they had agreed to insure

their ships in transit.

The 1st Life Insurance Policy was issued on 18th June, 1583, on the life of

William Gibbons for a period of 12 months.

Life Insurance in its current form came in India from the UK, with the

establishment of British firm, Oriental Life insurance Company, in 1818

The 1st Indian insurance company was the Bombay Mutual Assurance Society Ltd,

formed in 1870.

By the year 1956, when the life insurance business was nationalized and the Life

Insurance Corporation Of India ltd (LIC) was formed on 1st September, 1956 and

there were 245 companies existing at that time in India.

By 31.3.2002, eleven new insurers had been registered and had begun to transact

Life insurance business in India.

13

IV ) I NSURANCE CLASSIFICATION

Life

Term

Endowment

Unit-linked

Money-back

V) INSURANCE INDUSTRY POTENTIAL

1) Asia is amongst the world’s largest insurance markets contributing nearly 39% of global

insurance business.

2)The Life Insurance Industry has grown by 27% p.a. over the last 5 years and by about 62%

in the first eleven months of 2006 -07.

Source – IRDA Journal (April 2007)

3) Global Life Insurance Market: $1,521 billion, Global Non-Life Insurance Market: $922

billion

4) India is 23rd in insurance business with 0.41% share

5) Out of one billion people in India, only 35 million people are covered by insurance.

6) India’s life insurance premium as a percentage of GDP is just 1.8%

7) Indian insurance market is set to touch $50 billion by 2010, on the assumption of a 7%

growth in GDP

(CII Projections 2001-2002)

8) The Insurance premium as a % of GDP in 2005 increased to 3.14% and is set to touch

4.3% in 2008.

(Source – Lifeline 26th Dec 2006)

14

Growth Rate of Insurance sector

• Public Sector: 5.5%

• Private Sector: 57.4%

Indian Insurance is growing at the rate of 80%.

L IFE I NSURANCE COMPANIES IN INDIA

1.Life Insurance Corporation of India

Private Players

2. Tata AIG Life Insurance Company Ltd

3. Kotak Mahindra Old Mutual Life Insurance Ltd

4. Birla Sun Life Insurance

5. ICICI Prudential Life Insurance

6. Aviva Life Insurance

7. Allianz Bajaj

8. Max New York Life Insurance

9. Bharti Axa Life Insurance

10. SBI Life Insurance

11. Reliance Life Insurance

12. ING Vysya Life Insurance

13. Sahara India Life Insurance

14. HDFC Standard Life Insurance

15. Shriram Group

15

MARKET SHARE FOR 5 YEARS.

2001-02 2002-03 2003-04 2004-05 2005-06

LIC 98% 94% 87% 78% 71%

Private Player

2% 6% 13% 22% 29%

MARKET SHARE OF INDIAN INSURANCE PLAYERS

Market Share of public sector and Private sector Insurance Companies for 2006-07

market share

LIC74%

PRIVATE26%

LIC PRIVATE

16

MARKET SHARE OF PRIVATE INSURANCE COMPANIES 2006-07

6.97%

0.96%

0.85%

4%

0.82%

1.17%0.62%

0.46%

5.66%

0.24%

2.15%

0.06%

3.40%

0.01%

1.22%ICICI Prudential life

Aviva Life

Tata AIG Life

Reliance Life

Kotak Mahindra

Birla Sun Life

ING Vysya Life

Met Life

Bajaj Allianz Life

Shriram Life

HDFC Standard Life.

sahara Life

SBI Life

Bharati AXA life

Max New York

Source: ESCOLIFE (Insurance newspaper by Ritu Nanda, June 2007)

Thus we can say that LIC has the highest market share of 74% (public sector) and ICICI Life

Insurance has a highest market share of 6.97%(private sector)

17

COMPETITOR’S COMPARISION

LIC ranks 1 st (public sector) in case of the premiums followed by ICICI PRU in the private

Sector whereas Tata AIG Ranks 10th.

18

Comparative Study on ULIPS

In the Indian Insurance Market

19

CHAPTER 1

ABOUT UNIT LINKED INSURANCE PLANS

1.1) INTRODUCTION

ULIPS also known as UNBUNBLED, VARIABLE INSURANCE PLANS has possibly

been the single largest innovation in the field of life insurance in the past several decades. It

wasn’t too long back, when the good old endowment plan was the preferred way to insure

oneself against an eventuality and to set aside some savings to meet one’s financial

objectives. Then insurance was thrown open to the private sector. The result was the launch

of a wide variety of insurance plans, including the ULIPs.

Two factors were responsible for the advent of ULIPs on the domestic insurance horizon.

First was the arrival of private insurance companies on the domestic scene. ULIPs were one

of the most significant innovations introduced by private insurers. The other factor that saw

investors take to ULIPs was the decline of assured return endowment plans.

These were the two factors most instrumental in marking the arrival of ULIPs, but another

factor that has helped their cause is a booming stock market. While this now appears as one

of the primary reasons for their popularity, it is believed that ULIPs have some fundamental

positives like enhanced flexibility and merging of investment and insurance in a single entity

that have really endeared them to individuals. ULIPs came to play in the 1960s and became

very popular in western Europe and Americas.

20

1.2) MEANING OF ULIPS A policy, which provides for life insurance where the policy value at any time varies

according to the value of the underlying assets at the time. ULIP is life insurance solution that

provides for the benefits of protection and flexibility in investment. The investment is

denoted as units and is represented by the value that it has attained called as Net Asset Value

(NAV). In order to offset the erosion of money, ULIPS are introduced. The Sum Assured is

expressed in units whose price is linked to an inflation related index.

In today’s times, ULIP provides solutions for insurance planning, financial needs,

financial planning for children’s future and retirement planning.

Features of ULIPs distinguish itself through the multiple benefits that it provides to

the customer which are as follows

• Life protection • Investment and Savings • Flexibility • Adjustable Life Cover • Investment Options • Transparency • Options to take additional cover against- Death due to accident- Disability- Critical

Illness- Surgeries· • Liquidity· • Tax benefits. According to Vijay Sinha, Asst Director Agency, Tata – AIG LIFE Insurance,

“ULIPs is ideal for some one who is looking for a long term investment product, is

under insured and is averse to taking a traditional life plan. ULIP should be looked at

from both an investment as well as insurance point of view and not in isolation.”

Today many individuals are adding ULIPs to their portfolios to generate wealth. and protection over a long time.

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1.3 ) ULIPS VERSUS ENDOWMENT The following points help us to get a better idea how ULIPs differ from Traditional

(Endowment Plans)

1) SUM ASSURED:

This is the most fundamental difference between ULIPs and the traditional plans.

In case of endowment the agent will ask you “HOW MUCH INSURANCE

COVER DO YOU NEED?” & the premium is calculated as per the estimated sum

assured.

In case of ULIPs you are asked “HOW MUCH PREMIUM CAN YOU PAY?” &

accordingly the Sum Assured is estimated.

2) INVESTMENTS: Endowment plans invest in

• Government Securities • Corporate bonds • Money market instruments

( no investment in the stock market) ULIPs invest in • Equities • Bonds • G-secs • Money market.

3) FLEXIBILITY: In case of ULIPs the investor can choose the fund in which he wants to

allocate his portfolio. He can go for pure Equity, or a combination of debt-

equity ,depending on his requirements.

The investor also has the option of switching from one fund to another .

Usually Free switches are given during the year.

This option is not available in case of Endowment.

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4) TOP UP FACILITY: A top up is a one time additional investment in the ULIP over and above the annual

premium. This feature works well when you have a surplus that you are looking to invest in a

market linked avenue, rather than keeping in an FD or Savings account.

This feature is not for Endowment.

5) TRANSPARENCY:

ULIPs are more transparent than Endowment Plans as their NAV is declared

EVERYDAY. As a result you can know how your ULIP has performed.

In case of Endowment, the insurance company sends you an annual statement of bonus

declared during the YEAR. , which gives us an idea how our plan is performing.

6) LIQUIDITY:

Since ULIPs investments are NAV based it is possible to withdraw a portion of Your

investments before maturity (after 3yrs lock in period is over).The withdrawal is possible

provided the minimum fund value is maintained.

In case of Endowment, you can only Surrender your policy, but you wont get

everything that you have earned on your policy in terms of premium and bonus. The

Surrender Value is much less than the Sum Assured and the Bonus is also not paid.

THUS investing in ULIPs or in ENDOWMENT depends on the person’s RISK

taking ability. A Risk Averse person may go for an Endowment, Whereas a person who

wants his corpus to appreciate and is ready to take risks can go for ULIPs.

Therefore we can say that investing in ULIPs is the best in a growing Economy as

compared to the TRADITIONAL PLANS.

23

1.4) ULIPS AND YOU

IRDA has played a part in making ULIPs more investor friendly. Today more individuals

are opting for ULIPs to create wealth over a long term. Over here I have outlined how ULIPs

can help you to fulfill that responsibility.

1.4.1) If you are between 25 –35 years of age

ULIPs help you to save for your child’s education, marriage, planning for your retirement and

providing for your family in case of your absence.

ULIPs Child plan ------------- --------for your child’s education, marriage.

ULIPs Endowment plan------------- for helping you to meet investment objectives like buying

a house or setting up a business.

ULIPs Pension plan-------------------for your retirement. A long term retirement planning

could be done with an Equity push, as it is necessary to build up a strong corpus to face your

rigorous retirement.

1.4.2) If you are between 35 –45 years of age

If you haven’t invested in ULIPs, it is not too late even now.

You can opt for some ULIPs as mentioned earlier. Remember ,unlike Endowment

,which gets really expensive at an advanced age, ULIPs because of the way they are , do not

turn out to be expensive.

1.4.3) If you are above 45 years of age

In this age bracket, you have to review your insurance cover, taking into consideration

the changes of your life style, income needs, etc. By this time your ULIP pension plan must

have matured, so now you can opt for an Annuity (immediate or deferred) depending on your

need.

24

1.5) EXPENSES IN ULIPs Following expenses have to be incurred for ULIPs: a) Mortality charges: charged by the company to cover the risk of an eventuality to an

individual. b) Administration Charges: charged by the company to cover the daily expenses,

overhead costs, agent’s commission etc. c) Fund Management charges: are levied by Insurance companies to cover the expenses

incurred by them in managing ULIP monies. Charges are high for managing monies in an Equity Fund.

d) ULIP Fund switch charges: Such are borne by the individuals when they decide to

switch their money form one type of find to another. e) Top up Charges: A certain % is deducted from the Top up amount to recover the

expenses incurred on managing the same. f) Cancellation/ Surrender charges: It is charged when an individual wishes to surrender

his ULIP policy.

25

1.6) HOW ULIPS MANAGE MONEY ULIPs are different from traditional plans.

They invest their monies in Shares, bonds, G-secs, money market instruments in

varied proportions.

Insurance companies usually maintain 4 types of funds.

Growth Fund: 100% equity

Balanced Fund: 60% equity, 40% debt.

Debt Fund: 100% debt.

Money Market Funds 100% MM instruments for a period of one

year

RISKS RETURNS In case of equity, the risk and return is the highest, and vice verse for Money market

instruments. It is a principle of Financial management, the higher the risks you take , the higher the return

you get.

Money Market

Debt

Balanced

Equity

26

1.7) STEPS FOR ULIP SELECTION • Understand what ULIPs are all about. • Focus on your need and risk profile • Compare ULIP products from various insurance companies • Go for an experienced Insurance advisor It is estimated that India’s economy will become the 3rd largest economy within a few

yrs, with a high GDP growth and a low inflation rate, followed by booming stock

market (SENSEX soaring as high as 20,000 points). So right time to increase your

wealth and become rich starts from today. And ULIPS are the best to invest in.

27

CHAPTER 2

DIFFERENCE BETWEEN ULIPS & MUTUAL FUNDS:- Points of Difference ULIPS(Unit Linked Insurance Plans) MFs(Mutual Funds)

1) Meaning :- These are the Insurance policies which are linked to units of Mutual Fund.

It is an investment organization with a main objective of collecting funds from various segments of people and investing the same in a variety of securities.

2) Primary Objective :- Its main objective is investment & protection

Its objective is only investments.

3) Investment Duration:- It works out for long term investment only . It works out to medium term, long term, & short term. Risky for short term investors.

4) Insurance Cover :- ULIPs provide insurance cover (except annuity products which may be issued with/ without risk cover) and from the amount invested in ULIPs after netting out the risk premium for life risk cover and administrative expenses, the insurer invests the balance as per the objective of the specific ULIP product.

MF schemes do not cover the life risk and the amount invested, net of expenses, gets invested as per the investment objective of the scheme.

5) Expenses :- Insurance companies have a relatively free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, the Insurance Regulatory and Development Authority (IRDA)

In MFs, expenses charged for various activities like sales/marketing, administration and fund management are capped (for example in equity-oriented mutual funds, expenses are capped at 2.5%

28

per annum) as per the guidelines of the Securities and Exchange Board of India (SEBI). Similarly funds usually charge their investors entry (at the timing of making an investment) and exit (at the time of sale) loads.

6) Flexibility :- Flexibility is limited to moving across different funds offered with policy. Correcting mistakes can turn out to be expensive. Moving funds from one ULIP to another ULIP of a different fund house can be expensive.

Very flexible. Plenty of scope to correct mistakes if any wrong investment decisions are made. Portfolios can be easily shuffled in MFs.

7) Liquidity :- Limited liquidity .It need to stay invested for minimum years before redeeming.

Very liquid. MF units can be sold any time(except ELSS).

8) Investment Objective :-

ULIPs can be used for achieving only long term objectives (Children education, marriage, Retirement planning).

MFs can be used as vehicle for investments to achieve different objectives.(E.g.: Buying a car three years from now. Down payment for a home five years from now. Children’s education 10 years from now. Children’s marriage 15 years from now. Retirement planning 25 years from now. Medical expenses after retirement 25 years from now).

9) Flexibility of Switch-overs :-

Insurance companies permit their ULIP investors usually 3-4 switch overs free of charge and thereafter every additional switch over beyond the permissible limit is permitted at some cost.

In MFs an investor usually is subjected to exit load and/or entry load when he/she exercises a switch over option.

10) Minimum Lock- in Period

ULIPs currently are with a minimum lock-in of three years.

MF schemes (except ELSS which has a lock-in of three years) do not have any such lock in.

29

11) Investment styles and Portfolio Disclosures :-

Insurance companies declare their portfolios once in a quarter and their investment style are less aggressive and they resort to less churning.

Most MFs usually declare their portfolios on monthly basis and MFs are generally known to be more active in fund management

12) Tax benefits and implications :-

Irrespective of the nature of the plan chosen by the investor, all ULIP investments qualify for deductions up to one lakh under Section 80C of the Income Tax Act. In the case of ULIPs the maturity proceeds are tax-free.

In the case of mutual funds, only investments in tax-saving funds i.e Equity-linked savings schemes (ELSS) are eligible for Section 80C benefits On the other hand, in the case of equity-oriented mutual funds, if the investments are held for a period over 12 months, the gains are tax free and if sold within a 12-month period they attract short-term capital gains tax @ 10 percent. Similarly, debt-oriented funds attract long-term capital gains tax @ 10 percent while short-term capital gain is taxed at the investor’s marginal tax rate.

Mutual funds are essentially short to medium term products. The liquidity that these

products offer is valuable for investors.

ULIPs, in contrast, are now positioned as long-term products and going ahead, there

will be separate playing fields for ULIPS and MFs, with the product differentiation

between them becoming more pronounced.

ULIPs now do not seek to replace mutual funds, they offer protection against the risk of

dying too early, and also help people save for retirement.

Insurance has to be an integral part of one’s wealth management portfolio. ULIPs and

mutual funds are, therefore, not likely to cannibalise each other in the long run.

While ULIPs as an investment avenue is closest to mutual funds in terms of their

functioning and structure, the first and foremost purpose of insurance is and will always

be ‘protection’. The value that it provides cannot be downplayed or underestimated. As

an instrument of protection, insurance provides benefits that no investment can offer.

It is important for an investor to understand his financial goals and horizon of investment

in order to make an informed investment decision. The decision to invest in either a

mutual fund or a ULIP should depend on the time period of investment, individual

financial goals as well as risk taking appetite, and it’s about time the industry and

customer realize it.

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CHAPTER 3 COMPARATIVE ANALYSIS OF ULIPS

This chapter covers the comparison of ULIPs of 4 Insurance companies, how much growth the fund has showed since its

Inception, returns for a period of one month compared with the market and tracking of the NAVs for a period of one month.

Initially ULIPs were started by a few private players way back in 2001-02.

But now almost every Insurance company has got ULIPS suiting the varied requirements of

the customers.

If one has to choose among the ULIP schemes provided by the insurance, it is necessary to do

a through

comparison to choose the right one for you.

ULIPs of 4 top performing insurance are taken for comparison. 1) TATA-AIG--------------------- Invest Assure II 2) ICICI PRUDENTIAL--------- Life Time Super 3) RELIANCE LIFE ------------- Automatic Investment Plan 4) LIC-------------------------------- Market Plus Besides these TATA –AIG also provides some other ULIPs which are as follows: • Invest Assure Gold • Invest Assure Plus • Invest Assure

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Tata – AIG Life Insurance Company

(Invest Assure II)

ICICI Prudential

(Life Time Super)

Reliance Life (Automatic Investment Plan)

Life Insurance Corporation (Market Plus)

1) Policy objective :- It is a unique, flexible insurance plan which combines security of life with the opportunity to exploit the upside of the market returns by investing in different kinds of securities through multiple fund options.

A regular unit linked insurance policy that offers flexible investment options along with the benefit of life insurance cover, and an opportunity to earn potentially higher returns on your investment without sacrificing the protection of your family.

The plan promises enhanced life cover with complete flexibility to gain control over your investments in tune with your financial needs and your risk appetite.

The unique plan promises a safe and a tension free life along with a good amount of wealth creation.

2) Eligilibility Criteria (Minimum, Maximum age at entry):-

Min age= 30 days Max age= 45,55,65 years

Min age= 0 Max age= 65 years

Min age= 0 Max age= 65 years

Min age= 18 years complete Max age= 70 years (age nearer birthday)

3) Policy term :- 15, 20, 30 years

10- 75 years 40- 75 years 5-30 years

4) Premium (Minimum):-

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Rs 12000 pa

Rs 18,000 pa Rs. 10000 pa Rs 5000 pa

5) Mode of Premium Payment:-

Annually, half yearly, quarterly, monthly.

Annually, half yearly, monthly.

Annually, half yearly, quarterly, monthly

Annually, half yearly, quarterly.

6) Sum Assured (Minimum, Maximum):-

It is the multiple of annual regular premium payable.

Min: Annual Premium* Term/2, subject to a min of Rs.100, 000.

Min: Annualized premium for 5 yrs or annualized for half of the policy term, whichever is the highest. Max: no limit

Min: Rs 50000 for regular premium Max: 20 times of the annualized premium.

7) Benefits :- Maturity: Total Fund Value + Top up if any. Death: Fund Value or Sum assured whichever is higher Sum Assured is a multiple of regular premium payable.

Maturity: Total Fund Value + Top up if any. Death: Fund Value or Sum assured whichever is higher



8)Riders :- Accidental Death Benefit Accidental Death & Dismemberment

Accident & Disability Benefit Critical Illness Waiver of premium

Accident Death & Accidental Total & Permanent Disablement benefit.

Accident Benefit.

34

Waiver of premium Payor Benefit Critical Illness

Term life insurance benefit

9) Fund options :-

Option of choosing from 5 funds or a combination of them. Equity fund : Equity shares.(100%) Income fund: Government Bonds & Fixed Income Instruments. . (100%) Aggressive growth fund: Equity (50-80%), Government Bonds (20-50%). Stable Growth Fund: Government Bonds (50-70%), Equity (30-50%) Short Term Fixed Income Fund: Government securities & Fixed Income Instruments (100%), Money Market Instruments (20%).

We offer you 6 investment funds. Flexi Growth : Equity & Related Securities Debt, Money Market & Cash (80-100%). Maximiser: Equity & Equity Related Securities Debt, Money Market & Cash (25%-100%) Flexi Balanced: Equity & Related Securities Debt, Money Market & Cash (60-100%) Balancer: Equity & Equity Related Securities Debt, Money Market & Cash (40-100%) Protector: Debt, Money Market & Cash (100%)

Tailor made and Readymade funds. Tailor Made: Money Market (100%) Gilt (100%) Corporate (100%) Equity ( 100%) Readymade: Fund A Fund B Fund C

Growth Fund : Debt (0-40%) Equity (60-80%) Balanced Fund: Debt (0-70%) Equity (30-50%) Secured Fund: Debt (0-85%) Equity (15-35) Bond Fund: Debt (100%) Equity (0%)

35

Preserver: Debt, Money Market & Cash (50-100%)

10) Surrender option/ partial withdrawal option :-

Allowed only after 3 years form the date of issuance of the policy. Surrender charges are a percentage of regular premiums—Fund value. Charge Applicable for 6 yrs---20 or 30 yr policy Charge Applicable for 5 yrs----15 yr policy Surrender & partial withdrawal available Min of up to 4 partial withdrawals available.

Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium . Partial withdrawal can be done up to min of Rs 2000. Surrender & partial withdrawal available

Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium The surrender value or the partial withdrawal value is equal to the Fund value. Surrender & partial withdrawal available

Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium. Partial withdrawal facility is not available.

11) Reinstatement/ Revival :-

In case the policy lapses, you can reinstate it within 5 years from the date of lapse. If you are unable to reinstate the policy within 5 years,

If full premium for the first 3 policy years is not paid, the policy lapses. Therefore the policy has to be

You may revive the policy within 3 years from the 1st unpaid premium. If not revived, then the policy

A lapsed policy can be revived within 2 years fro the date of the first unpaid premium. Or gets surrendered.

36

then the policy will be surrendered. In case of lapse, only the Fund Value will be given on death. (no SA)

revived within a period of 2 years, if not then the policy will be surrendered. In case of lapse, only the Fund Value will be given. (no SA) .

will be terminated.. And the policy will be surrendered.

12) Premium Holiday:- After completion of 3 years of the policy, if you are unable to pay the premium within the grace period, then a Premium Holiday facility is given with a charge of 3% of the regular premium. 13) Free look Period :-

This option is available here, which ensures that your life insurance cover continues incase you are unable to pay the premium, after completion of 3 years of the policy. The option here is called A Cover Continuance option.

The policy brochure has no mention of premium holiday

The policy brochure has no mention of premium holiday.

The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy. The market value of the invested premiums along with the charges paid will be refunded after making some nominal deductions.

The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy

The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy. The market value of the invested premiums along with the charges paid will be refunded after making some nominal deductions

The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy

37

14) Grace Period: - Here the grace period provided is for 31 days.

Nothing is mentioned about the grace period in the policy brochure.

For regular premiums the grace period is for 30 days, For monthly premiums grace period is for 15 days

Nothing is mentioned about the grace period in the policy brochure.

15) Settlement Benefits :- You have the option to receive your maturity benefit either in lumpsum or in the from of periodical payments over period of time. This period will not exceed 5 years from the maturity date.

On maturity of the policy, you can choose to take the fund value. You can opt to get payments on yearly, half yearly, quarterly or monthly (through ECS) basis, for a period of 1,2,3,4 or 5 yrs, post maturity. At any time during settlement period, you have the option to withdraw the remaining fund value.

You have the option to receive your maturity benefit either in lumpsum or in the from of periodical payments over period of time . This period will not exceed 5 years from the maturity date.

16) Premium Redirection: - Re direction of all the future premiums under a policy, in an alternative proportion to the various Fund units is available

No benefit Re direction of all the future premiums under a policy, in an alternative proportion to the various Fund units is available.

No benefit

38

17)Top Up premium:- Minimum top up amount is Rs 10,000

Amount not mentioned. Minimum top up amount is Rs 2500

Minimum top up amount is Rs 1000.

18) Tax Benefits:- Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act, 1961. Life insurance proceeds are tax free u/s 10(10D).

Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act, 1961. Life insurance proceeds are tax free u/s 10(10D)

Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act, 1961. Life insurance proceeds are tax free u/s 10(10D).

Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act. Life insurance proceeds are tax free u/s 10(10D).

39

19)CHARGES Most of the life insurance companies incur certain charges which are as follows:

a) MORTALITY CHARGES b) FUND MANAGEMENT CHARGES c) SWITCH OVER CHARGES d) POLICY ADMINISTRATION CHARGES A GRAPHICAL REPRESENTATION WILL MAKE THE CHARGES UNDERSTANDABLE AND EASY TO COMPARE

40

a) MORTALITY CHARGES

MORTALITY CHARGES

0

2

4

6

8

10

12

14

16

18

20

20yrs 30yrs 40yrs 50yrs

AGE

RA

TE

S (

RS

)

Reliance

ICICI

Tata AIG

Interpretation: The mortality charges of Reliance (Automatic Investment Plan) are the highest whereas The

charges of Tata AIG (Invest Assure II) is the least.

MORTALITY CHARGES (Rs) AGE Tata AIG

( Invest Assure II) ICICI (Life Time Super)

Reliance(Automatic Investment Plan)

20yrs 1.05 1.33 1.117

30yrs 1.17 1.46 1.287

40yrs 2.15 2.48 2.36

50yrs 5.53 5.91 6.085

41

b) FUND MANAGEMENT CHARGES (Only for Equity Fund)

FMC CHARGES

1.75%

2.25%

1.50% 1.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Tata AIG ICICI Reliance LIC

COMPANY

RA

TES

% p

a

CHARGES

Interpretation:

ICICI have the highest FMC whereas Charges of Tata AIG are comparatively

higher than the other two.

FMC (pa) FOR EQUITY FUND ONLY Tata AIG ( Invest Assure II)

1.75%

ICICI (Life Time Super)

2.25%

Reliance (Automatic Investment Plan)

1.50%

LIC (Market Plus) 1.50%

42

c) SWITCH OVER CHARGES

SWITCH OVER CHARGES

250

2000

100 100

Tata AIG

ICICI

Reliance

LIC

Interpretation: Even in this case ICICI has got the highest switch over charge, whereas charge

of Tata AIG are comparatively than the other two. Over here Reliance proves to be superior as it provides 52 switches free as compared to just 4 switches offered by others and its charges are . also less

Tata AIG ( Invest Assure II)



LIC (Market Plus)

The first 4 switches per policy will be free.

The first 4 switches per policy will be free.

The first 25 switches per policy

will be free.

The first 4 switches per policy will be

free.

Charge (Rs) Tata AIG ( Invest Assure II)

250


2000


100

LIC (Market Plus) 100

43

d) POLICY ADMINISTRATION CHARGES

Charges( Rs /month) Tata AIG ( Invest Assure II)

38


---


40

LIC (Market Plus) 20

38 40

60

0

10

20

30

40

50

60

RATES

Tata AIG Reliance LIC

COMPANY

POLICY ADMINISTRATION CHARGES per month (RS)

CHARGES per month

Interpretation: In this case charges of Tata AIG are higher than LIC but lower than Reliance.

44

GROWTH & RETURNS

THE GROWTH RATE OF ULIPS THE NAVs taken over here only belong to The Equity Fund of the Policies. (No other fund taken into consideration)

Growth rate of ULIPs (Equity Fund) of the 4 Insurance companies Date of

Inception NAV as on inception Rs

NAV as on July,20 2007 Rs

Increase Growth %

Tata AIG ( Invest Assure II)

24 Jan, 2004 10 30.45 20.45 204.5


16 Nov,2001 10 53.32 43.32 433.2


28 May,2007 10 10.98 0.98 9.8

LIC (Market Plus)

5 July, 2006 10 11.89 1.89 18.9

From the tabular compilation, it can be observed that the Equity Fund of the policies has performed very well over the years. In case of Tata AIG --------the Equity Fund has grown up to 204.5% in 3 years from the date of inception. In case of ICICI --------the Equity Fund has grown up to 433.2% in 5 years from the date of inception. Also Reliance Equity Fund has increased to 9.8% in a short span of 2mths. LIC has also done a good job with a growth up to 18.9% in 1 year.

45

COMPARISON OF RETURNS

RETURNS OF Tata AIG Equity Fund, ICICI equity fund, Reliance equity fund,

LIC equity fund,

V/s

BSE SENSEX & NSE NIFTY.

PERIOD OF 1 MONTH FROM JUNE 20, 2007 TO JULY 20, 2007

Particulars From To Increase By

Return %

Rank

Tata AIG Equity Fund

28.25 30.45 2.20 7.79 4

ICICI Equity Fund

48.43 53.32 4.89 10 1 Reliance Equity Fund

10.14 10.98 0.84 8.2 2

LIC Equity Fund

11.25 11.89 0.64 5.6 6

BSE SENSEX

14411.95 15565.55 1153.55 8 3

NSE NIFTY

4248.65 4566.05 317.4 7.4 5

46

RETURNS

7.79%10%

8.20%

5.60%

8% 7.40%

0.00%2.00%4.00%6.00%8.00%

10.00%12.00%

Tata A

IG E

quity F

und

ICIC

I Equ

ity F

und

Relianc

e Equ

ity F

und

LIC E

quity

Fun

d

BSE SENSEX

NSE NIFTY

RA

TE

S

ICICI Equity Fund has outperformed all others giving the highest returns, followed

by Reliance.

Tata AIG Equity Fund has marginally outperformed NIFTY.

Also it is very close to SENSEX..

LIC Equity Fund has given the least returns.

47

FUND PERFORMANCE (Only of Equity Fund)

Period: 1month

From 20th June, 2007--------20th July, 2007

NAVs of the Equity Fund (Rs)

Tata AIG (Invest Assure II)



LIC ( Market Plus)

20-Jun 28.24 48.43 10.14 11.25 21-Jun 28.49 48.44 10.15 11.26 22-Jun 28.49 48.75 10.13 11.13 25-Jun 28.61 48.85 10.15 11.35 26-Jun 28.77 48.95 10.22 11.45 27-Jun 28.62 48.66 10.21 11.3 28-Jun 28.841 48.45 10.27 11.31 29-Jun 29.13 48.33 10.33 11.39 30-Jun 29.14 49.1 10.34 11.4

2-Jul 29.39 50.52 10.38 11.45 3-Jul 29.57 50.25 10.48 11.46 4-Jul 29.54 50.49 10.54 11.52 5-Jul 29.53 50.45 10.53 11.57 6-Jul 29.69 51 10.63 11.59 9-Jul 29.89 51.47 10.73 11.64

10-Jul 29.65 51.22 10.72 11.64 11-Jul 29.59 51.5 10.69 11.65 12-Jul 30 52 10.83 11.72 13-Jul 30.34 52.6 10.93 11.73 16-Jul 30.26 52.3 10.94 11.81 17-Jul 30.65 52.45 10.87 11.82 18-Jul 30.94 52.39 10.85 11.85 19-Jul 30.34 53.21 11.5 11.93 20-Jul 30.45 53.32 10.98 11.89

48

CONSOLIDATED FUND PERFORMANCE SHOWN

GRAFICALLY.

FUND PERFORMANCE

0

10

20

30

40

50

60

6/20 /2007

6/22/2007

6/24/2007

6/26 /2007

6/28/2007

6/30/2007

7/2/2007

7/4/2007

7/6/2007

7/8/2007

7/10/2007

7/12 /2007

7/14 /2007

7/16/2007

7/18/2007

7/20 /2007

1 MONTH (20JUNE--20JULY)

NA

V (

RS

) Tata AIG (Invest Assure II)



LIC ( Market Plus)

49

INDIVIDUAL EQUITY FUND PERFORMANCE

TATA AIG ICICI Invest Assure Life Time Super


45

46

47

48

49

50

51

52

53

54

6 /20 /2007

6 /22 /2007

6/24 /200 7

6/26 /200 7

6/28 /2007

6 /30 /20077 /2 /2007

7/4 /2007

7 /6/2 007

7 /8 /2007

7/10 /2007

7 /12 /2007

7 /14 /2007

7 /16 /2007

7/18 /200 7

7 /20 /2007

Dates

nav

Rs



26.5

27

27.5

28

28.5

29

29.5

30

30.5

31

31.5

6 /20 /2007

6/22 /2007

6 /24 /2007

6/26 /2007

6 /28 /2007

6/30 /200 7

7 /2 /2007

7/4/2007

7/6/2007

7 /8 /2007

7 /10 /2007

7/12 /2007

7 /14 /2007

7/16 /2007

7 /18 /2007

7/20 /2007

DATES

NA

V R

S


50

RELIANCE LIC Market

Plus Automatic Investment Plan


9

9.5

10

10.5

11

11.5

12

6 /20 /200 7

6 /22 /200 7

6 /24 /200 7

6 /26 /200 7

6 /28 /200 7

6 /30 /200 77 /2 /2 007

7 /4 /2 007

7 /6 /2 007

7 /8 /2 007

7 /10 /200 7

7 /12 /200 7

7 /14 /200 7

7 /16 /200 7

7 /18 /200 7

7 /20 /200 7

Dates

nav

Rs


LIC ( Market Plus)

10.6

10.8

11

11.2

11.4

11.6

11.8

12

6 /20 /200 7

6/2 2 /20 0 7

6/2 4 /20 0 7

6/26 /2 00 7

6 /28 /200 7

6 /30 /200 77 /2 /2 007

7 /4 /2 007

7/6 /2 00 7

7/8 /2 00 7

7 /10 /200 7

7 /12 /200 7

7/1 4 /200 7

7/16 /2 00 7

7/18 /2 00 7

7/20 /200 7

Dates

Nav

Rs

LIC ( Market Plus)

51

From the above graphs, it can be seen that the NAV of Reliance Automatic Investment plan

is fluctuating less as compared to the others.

NAV of ICICI Life Time Super has fluctuated more as compared to the others.

Tata AIG has moderate NAV Fluctuations

Thus as far as NAV consistency is concerned, investing in Reliance Equity Fund can be a Prudent decision.

It is expected that the NAVs will rise in the future, promising good returns for the Investors.

It has been observed that the lesser the fluctuations in the NAV, the better it is for the fund.

But the good thing is that all the NAVs are on a rising trend. which indicates the strength of the Equity Fund.

52

OVERALL DATA ANALYSIS & FINDINGS This analysis is done by giving ranks to all the policies taking into consideration the following criteria

(1= excellent, 2=good, 3=fair, 4=average) In the end, whichever fund has the least score will be the best buy

From the above analysis it can be said that, ICICI and LIC have scored the least. Therefore a person can either buy a ULIP form ICICI or from LIC.

CRITERIA

TATA AIG

ICICI RELIANCE LIC

Amount of Premium 3 4 2 1 Mode of premium payment 1 2 1 2 Revival of the Policy 1 3 2 3 Amount of Top up premium 1 Not given 2 3 Oldest policy 2 1 4 3 Policies issued 4 2 3 1 Premiums collected 4 2 3 1 Mortality charges 1 2 3 Not given FMC 2 3 1 1 Policy Administration charges 2 Not given 3 1 Switch over charges 2 3 1 1 Fund performance 2 1 3 4 Returns 3 1 2 4 Market share 4 2 3 1 TOTAL SCORES 32 26 34 26

53

CHAPTER 4:- UNDERSTANDING THE WORKING OF ULIPS of Tata AIG ULIPs are said to be the most lucrative from of investment, which not only

give you high market returns but also protection from risk, and also secures

the livelihood of your loved ones even after your death.

Here is an illustration which explains how a ULIP makes your money work.

Harder than you.

SAMPLE SALES ILLUSTRATION OF INVEST ASSURE II (TATA AIG LIFE) Name of the proposed insured: Miss Dimple Solanki Proposal no. : 1577 Age of the proposed insured : 23 yrs Date : 15/7/07 Name of the policy holder : Miss Dimple Solanki Currency : Rupees Age of the policyholder : 23 yrs Payment Mode : Annual Insurance plan

Benefit period

Premium Paying period

Premium multiple

Annual premium

Modal premium

Sum Assured

(SA)

Additional coverage

Fund

Invest Assure II 30 yrs 30yrs 22.50 12000 12000 270000 270000 Equity 100%

54

Note : 1)SA is the multiple of annual premium: 12000*22.50= 270,000 2) Additional coverage given as Accident Death Benefit Rider taken by the policy holder. 3) Investment in Equity is 100%.

Invest assure II 30 YEAR POLICY

Min Return on units=10%( non guaranteed) CHARGES:

1st year= 50% of premium 2nd year= 25% of premium 3rd year= 1 %of premium

YEAR 1

12000 premium

50% 50%= Rs 6000 Return =Rs 600

Total =Rs 6600

NAV =RS 10

No. of units =Rs 6600/10= 660units

YEAR 2

12000 premium

25% 75% = Rs 9000 Return= Rs 900 Total = Rs 9900

NAV=RS. 20 (6600+9900)=Rs16500 No. of units = Rs16500/ 20= 825 units

YEAR 3 12000 premium

1% 99%= Rs 11880 Return= Rs 1188 Total = Rs 13068 NAV =RS 30 (16500+13068)=Rs 29568 No of units= Rs 29568/ 30=986 units

Balance invested in the Equity fund 50% 75% 99%

55

TOTAL UNITS IN HAND: 660+825+986=2471 UNITS AFTER 3 YEARS.

Therefore the units keep on increasing with the change in the NAVs. There is an inverse relation between the NAVs and the No. of Units. As the NAVs rises the no of units decrease. & As the NAVs fall, the No of Units increase.

E.g.: In the 3rd year, the investment was Rs 29568. NAV was Rs 30. So the no. of Units was 986. Now if the NAV Falls to Rs 20. Then the no. of Units would have been 1479.

56

Therefore the rising trend of NAV is not always a good sign, as your no of units decrease. Therefore if Miss Dimple Solanki continues with her policy for 30 years ,

she will get a • Maturity benefit = existing Fund Value which is the sum of the

regular premium fund value • On death = SA Rs 270000 or NAV whichever is higher • On Death due to Accident= Double the SA.

57

CHAPTER 7 MARKET SURVEY

A questionnaire was prepared, wherein 10 advisors of Tata AIG were asked to fill

it. The reason for carrying out a market survey was to know the opinion of the

advisors and the popularity of ULIPs in the market.

Questionnaire for Advisors of Tata AIG

Q 1) What type or class of customers visits your office? a. salaried b. housewives c. self employed d. retired e. pensioner

Salar ied, 50%

house wif e, 10%

self employed,

40%

pensioner, 0%

Salar ied

house wif e

self employed

pensioner

58

Q 2) Which policies the client opts for? a. Traditional b. ULIPS

10%

90%

0%

10%20%

30%40%

50%

60%70%

80%90%

100%

Traditional ULIPs

Schemes

Q 3) Are ULIP schemes popular?

a. yes b. no c. can’t say

YES, 70%

NO, 30%

CAN'T SAY, 0%

YES

NO

CAN'T SAY

59

Q 4) Are the clients aware of ULIP schemes?

a. less than 10% b. 10% --- 30% c. 30%---- 60% d. Above 60%

0%

30%

50%

20%

Less Than 10%

10%- 30%

30%- 60%

60% & above

Q 5) Out of ten , how many clients opt for ULIP ? ANS) On an average 6 clients out of 10 opt for ULIPs. Q 6) How much commission do you get from the company on ULIP policy?

a. 0--- 10% b. 11—20% c. 21---30% d. 31--- 40%

20%

10%

50%

20%

0%

10%

20%

30%

40%

50%

60%

0-10% 11%-20% 21%-30% 31%-40%

C o mmissio n

60

Q 7) How many clients have the background of finance? a.10—20%

b.20—40% c. 40% & above

40%

60%

0% 10%-20%

20%-40%

40%-above

Q8 ) Mode of payment of premium.

a. cheque b. Demand Draft c. Cash

cheque, 100%

demand draft, 0%

cash, 0%

cheque

demand draft

cash

61

Q9) What is the better positioning for ULIP? a. as a tax saving plan b. as a retirement plan c. as a child education plan d. as a security cum profitable plan.

20%

0%

10%

70%

0%

10%

20%

30%

40%

50%

60%

70%

80%

as a tax savingplan

as a retirementplan

as a childeducation plan

as a securitycum profitable

plan

Q 10) Qualifications

a. HSC pass b. Graduate c.MBA

30%

50%

20%

0%

10%

20%

30%

40%

50%

60%

HSC Graduate MBA

62

Q 11) How is ULIP different from the other policies? Please refer to pg 21 “ULIPs v/s Endowment.” Q 12) How does a client respond, if any new policy is suggested to him? ANS: According to the survey, the client’s reaction depends upon the presentation that is

given to him by the Advisor.

Usually the client shows positive signs of buying the product, sometimes are reluctant to buy

due to financial problems.

According to most of the advisors the 1st quest asked by the client is about the guarantee and

returns.

They want to know about the popularity of the policy as well as the insurance company.

63

CHAPTER 8

Integrated Financial Planning for Life Insurance Starting a job,

Single individual

Recently married, no kids

Married, with kids

Kids going to school, college

Higher studies for child, marriage

Children independent, nearing the golden years

Your Need Low protection, high asset creation and accumulation

Reasonable protection, still high on asset creation

Higher protection, still high on asset creation but steadier options, increase savings for child

Higher Protection, high on asset creation but steadier options, liquidity for education expenses

Lump sum money for education, marriage. Facility to stop premium for 2-3 yrs for these extra expenses

Safe accumulation for the golden yrs.Considerably lower life insurance as the dependencies have decreased

Flexibility Choose low death benefit, choose growth/balanced option for asset creation

Increase death benefit, choose growth/balanced option for asset creation

Increase death benefit; choose balanced option for asset creation. Choose riders for enhanced protection. Use top-ups to increase your accumulation

Withdrawal from the account for the education expenses of the child

Withdrawal from the account for higher education/marriage expenses of the child. Premium holiday-to stop premium for a period without lapsing the policy

Decrease the death benefit-reduce it to the minimum possible. Choose the income investment option. Top-ups form the accumulation (with reduced expenses) for the golden yrs cash accumulation

64

CONCLUSION:

From the above project , I would point out that the insurance industry is growing at a very

fast pace .The Insurance needs of the people are increasing.

ICICI Prudential is a key player in the private sector and LIC is a leader in the public sector

with the largest market share.

The returns provided by ICICI is the highest as compared to other companies and is superior

to others in all respects. Therefore a person can rightly choose to buy insurance from ICICI .

Thus ULIPs are simple combination of Term assurance and investment.

Synergy, flexibility, durable tax advantages, flexibity in debt- equity ratio, top up facility,

transparency, subjected to market conditions, capital appreciation makes ULIPs structurally

more effective for achieving long term financial goals.

There is no other investment avenue which provides double the amount invested, in case of

death due to accident or on death.

Therefore insurance has and should be a part of every person’s portfolio which satisfies twin

objectives of protection against risks & to increase your wealth.

Putting your money in the ULIP equity fund will give you a good return and capital

appreciation.

So relax and enjoy your life as ULIPs is there behind you.

65

RECOMMENDATIONS

For the Company based on the above market survey. 1) The company should now target pensioners & housewives as they constitute only 10% in

the selection of ULIPs.

2) The company can arrange a seminar for the existing clients informing them about the

progress made by the company, and also give some lessons on understanding the basics of

FINANCE.

3) Since ULIPs are less popular “as a retirement plan”, Tata AIG should advertise inorder to

attract the attention of salaried people and to make them understand the importance of

investing in ULIPS for retirement. Publicity on a large scale about the different policies to be

given in all means of communication. (Basically on TV during prime hours)

For the changes in ULIPs: 1. The amount of premium should be reduced in order to cater to the lower income groups. 2. On maturity, the policy holder should receive the Fund value or the Sum Assured whichever is higher, (as in the case of death benefit.) 3. Reduction in the charges. 4. Commission structure to be revised 5. Give a Pure traditional plan along with the ULIPs. 6. Remove the charges on surrender or partial withdrawal. 7. Increase the number of Switch options. as four is not enough. 8. Design ULIPs for meeting short term investment goals. 9. The investment style should be more aggressive.

66

BIBLIOGRAPHY

A. BOOKS

1. Insurance Principles & Practices

-----M.N.Misra S Chand Publications.

2. Insurance

------ M.J.Mathew RBSA Publications.

3. Insurance Fundamentals, Environment & Procedures

-------B.S.Bodla, M.C. Garg, K.P. Singh

Deep & Deep Publications of 2003

4. Insurance Institute of India IC 33------S.J. Gidwani

5. Taxmann Life Insurance agent ---- P.R. Khanna , Taxmann Allied service pvt

ltd

4th edition 2005.

B. NEWSPAPERS

1. Economic Times

2. Times Of India

3. ESCOLIFE PAPER on Insurance by Ritu Nanda

Vol 2, Issue viii June, 2007.

C. MAGAZINES

1. Money Simplified --Vol xxx ,Feb 2007 “ ULIPs how they fit in” 2. Consumer Voice ---Vol 7, Issue 3

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D. NEWSLETTER 1. Tata AIG Life Agency Newsletter

Vol 1, Edition 6 , March ,2007. E. INTERNET www.tata-aig.com www.licofindia.com www.iciciprulife.com www.reliancelife.com www.moneycontrol.com www.personalfn.com www.et.com www.google.com (Note- The above Sites were logged on between 20 June,07 to 21st July,2007 ) F. CNBC TV 18 G. BOOKLET on the Orientation Programme of Employees at Tata AIG H. Policy Brochures of Tata AIG, ICICI Prudential, Reliance Life & LIC.

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QUESTIONNAIRE FOR ADVISORS

Q 1) What type or class of customers visit your office? • salaried • housewives • self employed • retired • pensioner Q 2) Which policies the client opts for? • Traditional • ULIPS Q 3) Are ULIP schemes popular? • yes • no • can’t say Q 4) Are the clients aware of ULIP schemes? • less than 10% • 10% --- 30% • 30%---- 60% • Above 60% Q 5) Out of ten, how many clients opt for ULIP? Q 6) How much commission do you get from the company on ULIP policy? • 0--- 10% • 11—20% • 21---30% • 31--- 40% Q 7) How many clients have the background of finance? • 10—20% • 20—40% • 40% & above. Q8) Mode of payment of premium. • cheque • Demand Draft • Cash Q9) What is the better positioning for ULIP?

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• as a tax saving plan • as a retirement plan • as a child education plan • as a security cum profitable plan. Q 10) Qualifications • HSC pass • Graduate • MBA Q 11) How is ULIP different from the other policies? Q 12) How does a client respond, if any new policy is suggested to him?

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THANK YOU

Documents

Comparative Study on Ulips in the Indian Insurance Market for Tata Aig Life by Delnaaz Parvez