My Project on Ulips

Kotak Mahindra Life Insurance

TABLE OF CONTENTS

Sr. No. Contents Page No.

1 Executive Summary 3

2 Introduction 5

2.1 Introduction to Topic 6

2.2 Company Profile 8

2.3 Introduction to Insurance 14

2.4 Research Methodology 19

2.5 Role of IRDA in Indian Insurance Sector 20

3 ULIPs (Unit Linked Insurance Plans) 23

3.1 About ULIPs 24

3.2 Distinction Between ULIPs and Mutual Funds 34

3.3 Role of ULIPs in current market 39

4 Analyze of Study 41

4.1 Comparative analysis of ULIPs 42

4.2 Understanding the working of ULIPs of Kotak Mahindra Life Insurance

60

4.3 Market Survey on ULIPs 63

4.4 Integrated Financial Planning for Life Insurance 74

5 Findings 76

6 Recommendations 79

7 Bibliography 81

Institute of Management & Computer Studies, Thane Page 1


8 Questionnaire 83

9 Annexure 88



Executive Summary



1. Executive Summary

The project aims at comparative study of Unit Linked Insurance Plans and also a detail study of some of the major plans of Kotak Mahindra Life Insurance Limited. It also analyse insurance as an investment opportunities/Avenue.

The project had a detailed study of Unit Linked Insurance Plans (ULIPs) with reference to Kotak Mahindra Life Insurance Limited, The role of private insurance companies comparison to public sector companies. It also reflect the basic distinction between Mutual Funds and ULIPs, in form of structure as well as return. It provides the role Insurance Regulatory Development Authority (IRDA) as a regulator and its functions. The above project also signifies the recent dispute between Market regulator SEBI and IRDA with relate to Unit Linked Insurance Plan products.

The project aims to help and understand the consumer behaviour towards insurance as an investment purpose with life cover, perception of consumers towards ULIPs investment. At the atmost the project also provides the knowledge about detailed investment of fund under ULIPs in various sectors including Equity and Debt. It provides the detailed knowledge about various charges implemented under ULIPs scheme.

The internship is a bridge between the institute and the organization. This made me to be involved in a project that helped me to employ my theoretical knowledge about the insurance sector both in public as well as private, with reference to ULIPs Investment. The internship period of two month in Kotak Mahindra Life Insurance provided me a opportunity to learn some basic concepts of insurance which was not up to date for me. By preparing the project I also got a chance to recommend my opinions and views regarding ULIPs investment for a better future and necessary changes in it.



2. Introduction



2.1 INTRODUCTION TO TOPIC

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 experience of corporate scenario.

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.



2.2 COMPANY PROFILE

Getting associated with a brand like Kotak Insurance 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.

Kotak group was established in 1985. Kotak Mahindra bank is a parent company of the group.

Kotak group entered into life insurance business in 2001.Kotak Mahindra old mutual life

insurance ltd is a joint venture between Kotak Mahindra bank ltd (76 %) and Old mutual plc.

(24%). Old mutual plc is a world class international financial services company. It was

established in South Africa before 160 years. Old mutual is the largest financial services in

South Africa, through its life insurance, Asset management, banking and general insurance

operations. About Kotak and Mahindra what we understand the mutual partnership between



these two. The remaining 76% which is retained with kotak is again distributed into two parts

between kotak (70%) and Mahindra (30%). Under this distribution kotak act as an active partner

and Mahindra as a sleeping partner respectively.

MISSION

“At Kotak life insurance, we aim to help customers take important financial decisions at every

stage in life by offering them a wide range of innovative life insurance product, to make them

financially independent”.

VISION

Kotak Life insurance has deep rooted commitment to improve the quality of life of its customer,

employees and stakeholders. We aim to improve the long term value in our relationships by

continuous innovation and improvements.

Kotak Mahindra Old Mutual Life Insurance

Headquartered in Mumbai, Kotak Mahindra Old Mutual Life Insurance is private insurance

company established in year of 2000. Kotak Mahindra Old Mutual Life Insurance is a joint

venture between Kotak Mahindra Bank, its affiliates and Old Mutual – wealth Management

Company based in UK.

PRODUCT PORTFOLIO

Kotak Mahindra Old Mutual Life Insurance has humble portfolio which includes retirement

plans, child plan, term plans, savings & investment plans.



Retirement Plan

With rising inflation, it’s absolutely necessary to make provisions for the future which makes retirement plan an important financial decision. Better known as Pension plan, this plan takes care of financial needs after retirement by investing a part of your savings for limited period. Pension plan provides steady income after retirement and takes care of daily needs. The pension plans offered by Kotak Life are Capital Multiplier Plan and Retirement Income plan

Child Plan

Parenthood brings responsibilities and no one is better judge of that than you. Child Plan is a

plan specifically designed to take care of financial needs of your child. Child plan provides with

necessary funds that will take care of child’s education, marriage etc. By investing small portion

of your savings you secure the financial end of your child. Child plan of Kotak Life is called

Child Advantage Plan.

Term Plan

A risk plan which provides comprehensive cover for your family in the unfortunate event of

untimely demise. A term life insurance plan provides good cover at relatively nominal cost and

has no survival benefits. Kotak Life term plans are Term, Preferred term Plan, e-Term, e-

Preferred term Plan and Eternal Life Plan.

Investment Plan

Popularly known as ULIP, an investment plan invests part of your savings in equity or debt market as per your preference. The objective of investment plan is to give you returns which easily beat the rising costs since the usual returns in a bank are extremely low. ULIP’s offered by Kotak Life are Ace Investment, Wealth Insurance, Secure Invest Insurance, Endowment Plan, Money Back Plan, Surakshit Jeevan, Premium Return Plan, Gramin Bima Yojana, Platinum and Single Invest Advantage.



DISTRIBUTION NETWORK

Kotak Life Insurance employs around 5,565 people in its various businesses and has 197

Branches across 141 cities.

Kotak Life also distributes its products like e-Preferred, term plan online.

FINANCIAL INFORMATION

The total premium earned for the half year ended September 30, 2010 was Rs 12,925 million.

The profit after tax for the same period is Rs 102 million. There have been 1414 death claims

reported during the period out of which 971 claims were settled and 32 claims were rejected.

MARKETING CAMPAIGNS

Kotak Life launches different campaigns from time to time. Initially their campaign was around

the theme “Zindagi se ek kadam aage” which implied being ahead of uncertainties with well

thought out financial planning. Recently, the campaign was changed to “Faidey ka Insurance”

which reflects that investments made in Kotak Life will have good returns because of their

expertise in finance. This idea will be projected through TVC, radio, print and other outdoor

mediums.



MANAGEMENT

Mr.Gaurang shah is the Director of Kotak Life Insurance. Mr. Pankaj Desai is the Managing

Director of Kotak Life Insurance .Mr. G Muralidhar is the CEO of Kotak Life Insurance

Mr.Sudhakar Shanbag is the CIO of Kotak Life Insurance. Mr.Andrew Cartwright is the

Appointed Actuary of Kotak Life Insurance.

Registered Office Corporate Office

9th Floor, Godrej Coliseum Kotak Infiniti, 5th Floor

Behind Everard Nagar Zone – 2 Bldg No.21

Sion (East) Infinity Park,

Mumbai 400 022 Off. Western Express Highway

India General A K Vaidya Marg

Malad (East)

Mumbai 400 097

India

Tel No. 022 – 66056825

Fax No. 022 – 67257452

Website www.kotaklife insurance.com

http://insurance.kotak.com

Email [email protected]



Various Plans in Kotak Mahindra Life Insurance

PRODUCT PLAN

Retirement/Pension Plan Kotak Capital Multiplier Plan

Retirement/Pension Plan Kotak Retirement Income Plan

Child Plan Kotak Child Advantage Plan

Child Plan Kotak Head start Child Assure

Term Plan Kotak Term/Preferred Plan

Term Plan Kotak e-Term/e-Preferred Plan

Term Plan Kotak Loan Protection Plan

Term Plan Kotak Eternal Life Plan

Savings & Investment Plan Kotak Ace Investment

Savings & Investment Plan Kotak Wealth Insurance

Savings & Investment Plan Kotak Secure Invest Insurance

Savings & Investment Plan Kotak Endowment Plan

Savings & Investment Plan Kotak Money Back Plan

Savings & Investment Plan Kotak Surakshit Jeevan

Savings & Investment Plan Kotak Premium Return Plan

Savings & Investment Plan Kotak Gramin Bima Yojana

Savings & Investment Plan Kotak Platinum

Savings & Investment Plan Kotak Single Invest Advantage



2.3 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 HAND 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.

Priorities = Children’s education and marriage

Probabilities = Dying too soon, Living death and Living too long



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.

iv) INSURANCE CLASSIFICATION

Life

Term

Endowment

Unit-linked

Money-back

v) INSURANCE INDUSTRY POTENTIAL

1) India is developing nation where still 20% of population are covered under various life

insurance policies as on 2011.

2)The Life Insurance Industry has grown by 36% p.a. from last five consecutive years, with a

premium business of Rs 1.29 lakh crores in FY 2010-2011 over Rs1.09 lakh crores in FY 2009-

2010.

Source – IRDA Journal (April 2010

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



4) India is 11th largest in insurance business with 2.7 % world market share as on 2011.

–Times of India.

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 2.5% as on 2011.

7) Indian insurance market is set to touch $350- $400 billion by 2020, with assumption of 8% of

GDP.

Growth Rate of Insurance sector in India

Private Sector insurance company has shown a decline percentage from 40% in 2008-2009 to

20% up to May 2011.Private companies also showing negative growth rate in range of 20-50%,

as people are showing faith in government sector insurance companies.



LIFE INSURANCE COMPANIES IN INDIA

1. Life Insurance Corporation of India

PRIVATE PLAYERS

2. Kotak Mahindra Old Mutual Life Insurance Ltd

3. Tata AIG Life Insurance Company Ltd

4. Birla Sun Life Insurance

5. ICICI Prudential Life Insurance

6. Aviva Life Insurance

7. Bajaj Allianz

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



2.4 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

2.5 ROLE OF IRDA IN INSURANCE INSUSTRY

IRDA is Insurance Regulatory Development Authority, that has been set up to protect

the interests of the policy holders, to regulate, promote and ensure orderly growth of

the insurance industry and for matters connected therewith or incidental there to.

Role of IRDA in insurance sector

To protect the interest and secure fair treatment to policyholders.

To bring about (speedy) and orderly growth of the insurance industry (including annuity

and superannuation payments), for the benefit of the common man, and to provide long

term funds for accelerating growth of the economy.

To set promote, monitor and enforce high standards of integrity, financial soundness, fair

dealing and competence of those it regulates.

To ensure that insurance customers receive precise, clear and correct information about

products and services and make them aware of their duties and responsibilities in this

regard.

To ensure speedy settlement of genuine claims , to prevent insurance frauds and other

malpractices and put in place effective grievances redressal machinery.

To promote fairness, transparency and orderly conduct in financial markets dealing with

insurance and build a reliable management information system to enforce high standards

of financial soundness amongst market players.

To take action where such standards are inadequate or ineffective enforced.



To bring about optimum amount of self regulation in day to day working of the industry

consistent with the requirements of prudential regulation.

Functions of IRDA

Protection of the interests of the policy holders in matters concerning assigning of

policy, nomination by policy holders, insurable interest, settlement of insurance claim,

surrender value of policy and other terms and conditions of contracts of insurance.

Specifying requisite qualifications, code of conduct and practical training for

intermediary or insurance intermediaries and agents.

Specifying the code of conduct for surveyors and loss assessors.

Promoting efficiency in the conduct of insurance business.

Promoting and regulating professional organizations connected with the insurance and re-

insurance business.

Levying fees and other charges for carrying out the purposes of the Act.

Calling for information from, undertaking inspection of, conducting enquiries and

investigations including audit of the insurers, intermediaries, insurance intermediaries

and other organizations connected with the insurance business.

Control and regulation of the rates, advantages, terms and conditions that may be offered

by insurers in respect of general insurance business not so controlled and regulated by the

Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938).

Specifying the form and manner in which books of account shall be maintained and

statement of accounts shall be rendered by insurers and other insurance intermediaries.

Regulating investment of funds by insurance companies.



Regulating maintenance of margin of solvency.

Adjudication of disputes between insurers and intermediaries or insurance intermediaries.

Supervising the functioning of the Tariff Advisory Committee.

Specifying the percentage of premium income of the insurer to finance schemes for

promoting and regulating professional organizations.

Specifying the percentage of life insurance business and general insurance business to be

undertaken by the insurer in the rural or social sector.

Exercising such other powers as may be prescribed.



3. Unit Linked Insurance Plans



3.1 About ULIPs

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.



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.



Today many individuals are adding ULIPs to their portfolios to generate wealth and protection

over a long time.

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 investment 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.

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 won’t 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.



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.

IRDA and ULIPs

Unit Linked Insurance Plans were first started by Unit Truat of India, some 8 to 9 years back.

A unit-linked insurance plan (ULIP) is a type of life insurance where the cash value of a policy

varies according to the current net asset value of the underlying investment assets. It allows

protection and flexibility in investment, which are not present in other types of life

insurance such as whole life policies. The premium paid is used to purchase units in investment

assets chosen by the policyholder. Investments are made majorly in mutual funds and risk-free

instruments like government securities .

Unit Linked guidelines were notified by IRDA on 21st December 2005. The main intent of the

guidelines was to ensure that they lead to greater transparency and understanding of these

products among the insured, especially since the investment risk is borne by the policyholder. It

is the endeavor of IRDA to enable the buyer to make the most informed decision possible when

planning for financial security.

The Insurance Regulatory and Development Authority (IRDA) issued circulars on 28 June 2010

outlining fresh guidelines for ULIPs. According to the new norms, the investors who wish to

prematurely withdraw now have a reason to be happy as their investments would have some

protection. The IRDA capped charges from the sixth year. The charges would be applicable from

1 September 2010.

The circular specified certain clauses to be incorporated in all ULIPs to be sold from 1

September 2010. They are as follows-


http://www.investologic.com/insurance/details-of-lic-samridhi-plus/

http://www.investologic.com/insurance/details-of-lic-samridhi-plus/

http://www.investologic.com/mutual-funds/all-about-investing-in-mutual-funds/


Lock-in period for all ULIPs was changed from three years to five years, including top-

up premiums and no residuary payments on policies which are lapsed, surrendered or

discontinued would be made during this period.

Residuary payments for policies arising out of policies which are lapsed, surrendered or

discontinued during the lock-in period would be paid on the expiry of the lock-in period.

Regular premium and limited premium ULIPs would have uniform and level paying

premiums and any additional payments made would be treated as single premium for the

purpose of insurance cover.

All limited premium ULIPs with the exception of single premium products will have a

premium paying term of at least 5 years.

All ULIPs, other than pension and annuity products, to provide a minimum mortality

cover or a health cover and the annual health cover at no time would be less than 10.5 %

of the total premiums paid.

All ULIPs pension or annuity products would offer a minimum guaranteed return of

4.5% per annum or as specified by IRDA from time to time.



IRDA on Unit Linked Insurance Plans Banned By SEBI

ULIP is saving-cum-investment product that offers the option of life cover along with market

liked returns. These products are increasingly gaining popularity among the investors on account

of its multi-purpose catering of life cover and equity market linked returns both. Additionally,

they also provide Tax savings, so they could very call All-in-One Policies.

However, SEBI’s contention is that ULIPs are not pure insurance products and such products are

coupled with investment products which fall under its purview of regulation. The investment

component of the ULIPs, which ultimately finds its way into the equity markets, is in the nature

of mutual funds which falls under the jurisdiction of SEBI’s governance.

SEBI has banned the following 14 Private Insurance companies form selling Unit Link

Insurance Plans

Aegon Religare Life Insurance Company Limited

Aviva Life Insurance Company India Limited

Bajaj Allianz Life Insurance Company Limited

Bharti AXA Life Insurance Company Limited

Birla Sun Life Insurance Company Limited

HDFC Standard Life Insurance Company Limited

ICICI Prudential Life Insurance Company Limited

ING Vyasa Life Insurance Company Limited



Kotak Mahindra Old Mutual Life Insurance Limited

Max New York Life Insurance Co. Limited

Metlife India Insurance Company Limited

Reliance Life Insurance Company Limited

SBI Life Insurance Company Limited

TATA AIG Life Insurance Company Limited

CONTROVERSY RESULT

Government settles issue by issuing ordinance and it was settled in favour of IRDA as unit Link

Insurance Plans are basically life insurance products and provide nature of insurance with risk,

the premiums are invested in equity funds, balanced funds, debts funds etc.

The government has brought down curtains on the two-month long tussle between two regulators

by ruling that Unit-linked Insurance Products (Ulips) will be governed by the Insurance

Regulatory and Development Authority (IRDA).

Ulips account for more than 50 per cent of the life insurance business in the country. The money

collected is invested in equities.An amendment favoring Irda over the Securities and Exchange

Board of India was signed by President Pratibha Patil on June 18.

The law ministry issued an ordinance amending the RBI Act 1934, Insurance Act 1938, SEBI

Act 1992 and Securities Contract Regulations Act 1956, clarifying that life insurance business

will include any unit-linked insurance policy or scripts or any such instruments. This has thus

settled the issue of regulating Ulips.

The two regulators have been warring over the jurisdiction over Ulips after Sebi on April 9

barred 14 life insurance companies from selling or renewing Ulips unless they registered with it.



A day later, IRDA struck back telling insurers to ignore the Sebi order on the grounds that the

capital markets regulator had no jurisdiction over insurance companies.

This resulted in the government intervention and the finance minister asked both the regulators to

file a joint application with an appropriate court to resolve the matter. However, SEBI issued a

clarification saying that insurance companies need to register with SEBI.

3.2 Difference between Mutual Funds and ULIPs

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 cannibalize 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.

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

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.



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

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%. 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

Very flexible. Plenty of scope

to correct mistakes if

Any wrong investment

decisions are made. Portfolios

can be easily shuffled in MFs.



fund house can be expensive.

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

Switchovers :-

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.



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 taxsaving

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.



3.3 Role of ULIPs in Current market

The current market scenario is leaving a great impact and has changed many things in our lives.

During the last bear market, the impact of market weakness was limited to stock market and

hence the worst affected were those who took a bet on stocks. In the current edition of market

weakness, the numbers of affected by equity are many more, thanks to the popularity of unit-

linked plans.

Technically, insurance sector should have little to worry about as investors in the policy are long

term investors. However, due to the wrong selling strategy of investors and advisors, insurance,

in recent times, particularly the ULIPs, have been sold on the basis of shorter tenure. In fact,

many insurance companies even launched policies with shorter tenure of as little as 3 years on

the premise that policyholders had shrunk their commitment towards their premiums.

While one could get away with shorter tenures during 2003-07, it may not be the case for the

coming year and hence, those who signed up for ULIPs may have to hold on to their policies for

more than three years. Besides staying invested, ULIP policyholders can also make a better use



of their investment through some changes in their investment strategies. Here are some tips for

managing your existing ULIPs:

Switch to monthly from annual: if you are an investor with long term focus for your insurance

policy, continue with your equity allocation. However, monthly mode for premium may work

better than annual premium mode as stock market has been volatile. In the case of monthly

premium, investor gets to enjoy the benefits of volatility like SIP (systematic investment plan).

The good thing with ULIP is that there is plenty of flexibility with premium payment and

investor can change from one mode to another at any time.

Increase allocation for debt: ULIP, often, is associated with equity though in reality, every

insurance company offers at least 4-5 investment options for the premium. As a result, investors

who signed up for ULIP more than 4-5 years can look at the option of reducing equity exposure

for the next one year. The logic is simple. When these investors signed up for ULIP, the stock

market was closer to the present level or slightly lower than the current level. If you have made

some gains from your ULIP, protection of profits can be an option and hence reduce your equity

exposure. The ratio between equity and debt can be according to your comfort. Those with

medium risk appetite can look at 30-40% in favour of debt. If you can't decide for yourself, look

at the option of balanced funds which allocate up to 35-40% in favour of debt. You can revert to

100% equity once the stock market stabilises.

Now the question is should everyone review their ULIP premium strategy? The answer is yes if

you are not a long term investor. On the other hand, if ULIP is an option to build corpus for your

medium term needs or children's education with tenure of over 10 years, you need not worry

much about the market volatility. In fact, insurance companies themselves do value picking with

their funds as they don't have the pressures of redemptions when compared with mutual funds.

That is also the reason why insurance companies managed to post better returns with their ULIPs

during the market meltdown.



Hence although in this current market situation it seems more preferable to go in for ULIP's and

those who have existing policies to review them.

4. Analysis of the study



4.1 Comparative Analysis of ULIPS

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, 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 cannibalize

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.

HOW ULIPS MANAGE MONEY

ULIPs are different from traditional plans.

They invest their monies in Shares, bonds, Government Securities, Money market instruments in

varied proportions.

Insurance companies usually maintain 4 types of funds.

Growth Fund 100 % Equity

Balanced Fund 60 % Equity and 40 % Debt

Debt Fund 100 % Debt

Money Market Fund 100 % money market instruments for period of

one year

Institute of Management & Computer Studies, Thane Page 43Equity


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.

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 years,

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.


Money Market

Debt

Balance


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.

Cancellation/ Surrender charges: It is charged when an individual wishes to surrender his ULIP

policy.

Study of some ULIPs plan of Kotak Mahindra Life Insurance

Kotak Classic Opportunity Fund

Fund Strategy: Aims to maximize opportunity for you through long-term capital growth, by

holding a significant portion in a diversified and flexible mix of large / medium sized company

equities.

Kotak Classic opportunity fund guarantees you an additional income every year, for 20 years

provided the policy is in force. In addition, on maturity you receive 110% to 104% of Basic Sum

Assured. You also enjoy life cover for the entire policy term thereby protecting your family

should something happen to you.

Advantages

Enjoy Assured Annual Income for 20 years



Receive lump sum on maturity

Provide protection to your family for 30 years

Avail of policy loan to meet sudden expenses

Boost your protective cover through optional rider benefits

Key Features

Enjoy Assured Annual Income for 20 years

Maturity Benefit - Receive lump sum on maturity

Death Benefit - Provide protection to your family for 30 years

Avail of policy loan to meet sudden expenses

Boost your protective cover through optional rider benefits

Tax Benefits

As on 31st Aug 2011.

Performance Meter Kotak Classic

Opportunities Fund

Benchmark

Inception(16-09-10) 9.3% 3.9%

5 years n.a. n.a.

4 years n.a. n.a.

3 years n.a. n.a.

2 years n.a. n.a.

1 years 3.2% - 1.0 %

6 month 2.0 % - 0.8 %



3 month -1.2% -4.5%

1 month -1.3% -2.5%

Equity % to Fund

Infosys Ltd 6.25%

I T C Ltd 5.39 %

ICICI Bank Ltd 5.14 %

Tata Consultancy Services Ltd 4.59 %

HDFC Bank Ltd 4.48 %

Larsen And Toubro Ltd 4.16 %

Reliance Industries Ltd 3.55 %

Housing Development Finance Corp. Ltd 2.64 %

Bharti Airtel Ltd 2.53 %



Oil & Natural Gas Corporation Ltd 2.48 %

Bharat Petroleum Corporation Ltd 2.05 %

IndusInd Bank Limited 2.00 %

Sun Pharmaceuticals Ltd 1.81 %

Coal India Ltd 1.71 %

Axis Bank Ltd 1.63 %

Mahindra & Mahindra Ltd 1.62 %

National Thermal Power Corporation Ltd 1.60 %

Idea Cellular Ltd 1.54 %

Cummins India Ltd 1.37 %

Others 35.38 %

Total 93.90%

Kotak Dynamic Floor Fund

Fund Strategy: Aims to provide you with stable long-term inflation beating growth over medium

to long-term and defend your capital against short-term capital shocks.

Benchmark Details: Equity - 37.5% (Nifty); Debt - 62.5%



Kotak Platinum is a unit linked investment plan with low charges along with convenient

premium payment options. A great combination of 8 funds and loyalty additions, this plan helps

you build substantial wealth for yourself.

Advantages

Maximize your wealth through a plan with low charges

Capitalize on a wide array of funds to build a substantial corpus

Enhance your long term savings through loyalty additions

Enjoy liquidity through policy loans and partial withdrawals

How Does the Plan Work?

You may decide your premium based on how much and for how long you wish to invest.

You choose the Basic Sum Assured, depending on your existing insurance cover and need. You can further opt for rider benefits to enhance the protective cover of your plan

Premiums paid by you, net of premium allocation charges, are invested in the funds of your choice.

Now you can sit back and relax. Our investment experts will ensure that your plan earns you handsome returns.

Performance Meter Kotak Dynamic FloorFund Benchmark

Inception (17-Dec-09) 4.5% 5.3%

5 years n.a. n.a.

4 years n.a. n.a.

3 years n.a. n.a.

2 years n.a. n.a.

1 year 4.9% 4.1%



6 mth 1.1% 2.0%

3 mth -0.9% -0.7%

1 mth -0.7% -0.6%

Asset class Distribution

Debt Portfolio % to Fund

7.80% GOI - 11.04.2021 1.86%

8.26% GOI - 02.08.27 1.84%

8.85% SBI Upper Tier II - 04.10.2021 Call

04.10.2016

1.78%

9.95% SBI 2026 - 16.03.2026 Call 16.03.2021 1.56%

2.00% Tata Motors - 31.03.2014 1.50%

8.45% EXIM Bank - 08.09.2015 1.48%



9.75% Tata Sons - 19.07.2016 1.45%

9.15% PNB - 16.04.2016 1.45%

9.60% HDFC - 07.04.2016 1.41%

8.48% LIC Housing Finance - 27.09.2013 1.41%

6.90% OIL SPL - 04.02.2026 1.39%

10.10% SBH Bank FD - 12.03.2014 1.29%

9.55% NABARD - 12.07.2014 P/C

12.07.2013

1.28%

6.35% OMC GOI BOND - 23.12.2024 1.00%

IDBI Bank CD - 15.05.12 0.98%

9.40% NABARD - 19.07.16 0.96%

8.26% LIC Housing Finance - 08.07.2015 0.94%

Indian Overseas Bank CD - 05.03.2012 0.91%

9.85% REC - 28.09.17 0.89%

7.59% GOI 2016 0.87%

Current Asset/Liabilities 4.10%

Others 33.16%

Total 63.50%



Kotak Balanced Fund

Fund Strategy: Aims for moderate growth for you by holding a diversified mix of equities and

fixed interest instruments.

Benchmark Details: Equity - 60% (BSE 100); Debt - 40%.

Kotak Wealth Insurance is a unit-linked insurance plan , that provides you with investment

growth to take care of your family's goals and comprehensive protection to help your family and

you meet unplanned events head on.

Advantages

O Comprehensive triple benefit to secure your family's future

O Wide array of fund options to suit your investment needs

O Liquidity to take care of contingencies

O Convenience of shorter payment term

O Optional rider benefits to boost protection

Key Features

O Maturity Benefit

O Death Benefit

O Rider Benefits for boosted protection

O Invest surplus capital as Top-Up Premiums

Performance Meter Kotak Balanced Fund Benchmark

Inception (21-Dec-09 7.0% 4.1%

5 years n.a. n.a.


http://insurance.kotak.com/individual/savings-invest/secure-invest-insurance.php


4 years n.a. n.a.

3 years n.a. n.a.

2 years n.a. n.a.

1 year 3.4% 1.8%

6 mth 2.2% 0.7%

3 mth -0.6% -2.1%

1 mth -0.9% -1.3%

Allocation By Sector in Equity



Kotak Dynamic Growth Fund

Fund Strategy: Aims for a high level of capital growth by holding a significant portion in large

sized company equities.

Benchmark details: Equity - 80% (BSE 100); Debt - 20%

This plan would like to protect your family in the eventuality of you not being around yet receive

all your premiums back on maturity.

Advantages

Twin benefit of risk cover and savings



Affordable premiums

Hassle free premium payments

No medical examinations

Key Features

Return of premiums

Hassle-free

Death Benefit

Maturity Benefit

Performance Meter Kotak Dynamic Growth

Fund

Benchmark

Inception (27-Jun-03) 17.1% 15.8%

5 years 10.4% 9.6%

4 years 3.8% 4.7%

3 years 6.7% 7.4%

2 years 9.1% 6.1%

1 year 3.1% 0.7%

6 mth 0.9% -0.1%

3 mth -2.0% -3.3%

1 mth -2.1% -2.0%

Asset Class Distribution



Debt Maturity Profile



Kotak Money Market Fund

Fund Strategy: Aims to protect your capital and not have downside risks.

Benchmark details: Equity - 0% (NA); Debt - 100%.

The Kotak Money Market Fund offers the key benefit of cash lump sums at periodic intervals of

five years, ensuring that you are able to meet any of your financial obligations which arise from

time to time. This money back plan not only lets you enjoy regular cash flows during the policy

term, but it also gets you a substantial life cover, which increases every year.

Advantages

Guaranteed additions on maturity

Earn bonuses on the plan

Death benefit increasing at 7% of sum assured at the end of each year



Cash lump sums at intervals of 5 years

Key Features

Bonus

Maturity Benefit

Increasing Death Benefit

Automatic Cover Maintenance

Performance Meter Kotak Money Market

Fund

Benchmark

Inception (5-Jan-10) 5.4% 6.2%

5 years n.a. n.a.

4 years n.a. n.a.

3 years n.a. n.a.

2 years n.a. n.a.

1 year 6.5% 7.3%

6 mth 3.7% 3.9%

3 mth 2.0% 1.9%

1 mth 0.7% 0.6%



Asset Class Distribution

100 % money invested in Short term Debt market.

Debt Maturity Profile



4.2 Understanding working of ULIPs of Kotak Mahindra Life Insurance

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.

SAMPLE SALES ILLUSTRATION OF KOTAK CLASS OPPURTUNITY FUND

(KOTAK MAHINDRA LIFE INSURANCE LTD).

Name of the Proposed Insured: Mr. Dinesh Behera

Age of the proposed insured: 25 yrs

Name of the policy holder: Mr. Dinesh Behera

Age of the policyholder: 25 yrs

Proposal No: 1577

Date: 15/7/11

Currency: Rupees

Payment Mode: Annual



Insurance plan KOTAK CLASS OPPURTUNITY FUND

Benefit period 30 years

Premium Paying period 30 years

Premium Multiple 33.33

Annual premium 15000

Modal premium 15000

Sum Assured (SA) 500000

Additional coverage 500000

Fund Equity 100 %

Note :

1)SA is the multiple of annual premium: 15000*33.33= 5,00,000

2) Additional coverage given as Accident Death Benefit Rider taken by the policy holder.

3) Investment in Equity is 100%.

KOTAK CLASS OPPURTUNITY FUND 30 Years Policy

Min Return on units=10%

CHARGES:

1st year= 50% of premium

2nd year= 25% of premium

3rd year= 1 %of premium


Balance invested in the

Equity fund

50%

75%

99%


YEAR 1

15000 premium

50% 50%= Rs 7500

Return =Rs 750

Total =Rs 8250

NAV =RS 10

No. of units =Rs 8250/10=

825units

YEAR 2

15000 premium

25% 75% = Rs 11250

Return= Rs 1125

Total = Rs 12375

NAV=RS. 20

(12375+8250)=Rs20625

No. of units = Rs20625/ 20=

1031 units

YEAR 3

15000 premium

1% 99%= Rs 14850

Return= Rs 1485

Total = Rs 16335

NAV =RS 30

(16335+20625)=Rs 36960

No of units= Rs 36960/

30=1232 units

TOTAL UNITS IN HAND: 825+1031+1232=3088 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 36960. NAV was Rs 30. So the no. of Units was

1234

Now if the NAV Falls to Rs 20. Then the no. of Units would have been 1848.

Therefore the rising trend of NAV is not always a good sign, as your

no of units decrease.

Therefore if Mr. Dinesh Behera continues with his policy for 30 years, He will get a Maturity

benefit = existing Fund Value which is the sum of the Regular premium fund value

·

On death = SA Rs 5,00,000 or NAV whichever is higher.

On Death due to Accident= Double the SA.



4.3 Market Survey on ULIPs

A questionnaire was prepared, wherein 10 advisors of Kotak Mahindra Life Insurance 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

Q 1) What type or class of customers visits your office?

a. salaried

b. housewives

c. self employed

d. retired

e. pensioner

Q 2) Which policies the client opts for?

a. Traditional

b. ULIPS



Q 3) Are ULIP schemes popular?

a. Yes

b. No

c. Can’t say



Q 4) Are the clients aware of ULIP schemes?

a. less than 10%

b. 10% --- 30%

c. 30%---- 60%

d. Above 60%

Q 5) Out of ten, how many clients opt for ULIPs?

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%



Q 7) How many clients have the background of finance?

a. 0 – 30 %

b.30 % and above

Q8) Mode of payment of premium.

a. Cheque

b. Demand Draft

c. Cash



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.



Q 10) Qualifications

a. HSC Pass b. Graduate c. Post Graduate

Q 11) how is ULIP different from the other policies?

Please refer to pg 24 “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 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.



Questionnaire for Investors

1) What is your occupation?

Ans) a) Self Employed b) Service

c) Student d) Retired

2) What is your opinion about insurance about investmnent ?

Ans) a) Agree b) Strongly agree

c) disagree d) Strongly disagree



3) Are you aware about Kotak Mahindra Life Insurance Limited ?

Ans) a) Yes b) No

4) Are you aware about Unit Linked Insurance Plans?

Ans) a) Yes b) No



5) Which Insurance Company you are familiar about ?

Ans) a) LIC b) ICICI

c) Kotak d) Others

6)Your Perception towards investment in ULIPs ?



Ans) a) Better Investment b) Quite Same as Mutual Fund

c) Safe Investment d) Poor Investment

7) In which Sector would you like to invest ?

Ans) a) Equity Market b) Debt Market

8) Towards which neccesity you look ULIPs as an better investment ?



Ans) a) Child Education b) Future Needs

c) Retirement d) Others

9) How do you rank ULIPs compare to Traditional plans?

Ans) a) Good b) Excellent

c) Average d) Poor



10) Are You aware about Kotak ULIPs Plan ?

Ans) a) Yes b) No

4.4 Integrated Financial Planning for Life Insurance

Your Need

Starting a Job, Single individual Low protection, high asset creation and

accumulation.

Recently married, no kids Reasonable protection, still high on

Asset creation.

Married, with kids Higher protection, still high on asset creation

but steadier options, increase Savings for child.



Kids going to school, college Higher Protection, high on asset Creation but

steadier options, liquidity for education

expenses.

Higher studies for child, marriage Lump sum money for education,

Marriage. Facility to stop premium for 2- 3 yrs

for these extra expenses

Children independent, nearing the

Golden years.

Safe accumulation for the golden Years.

Considerably lower life insurance as The

dependencies have decreased.

Flexibility

Starting a Job, Single individual Choose low death benefit,

Choose growth/balanced option for

Asset creation.

Recently married, no kids Increase death benefit, choose

growth/balanced option for asset

Creation.

Married, with kids Increase death benefit; choose

Balanced option for asset creation.

Choose riders for enhanced protection. Use



top-ups to

increase your accumulation.

Kids going to school, college Withdrawal from the account for

The education expenses of the child.

Higher studies for child, marriage Withdrawal from the account for

Higher education/marriage expenses of the

child. Premium

holiday-to stop premium for a

Period without lapsing the policy.

Children independent, nearing the

Golden years.

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.



5. Findings

Findings

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.

ULIPs are simple combination of Term assurance and investment.

Synergy, flexibility, durable tax advantages, flexibility 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.

However there are also some classes of consumers in society who are still unaware of investment

plans and strongly rely upon traditional plans. This might be due to unawareness, unwillingness

to take or bear risk.

Life Insurance Corporation of India still plays a major role in market, As it is government

oriented, major percentages of investors still trust on LIC of India. Only consumers having some

prior knowledge about market and investment opportunities and simultaneously returns are ready

to willing to invest in private insurance companies.

Life advisor plays a crucial role under private insurance companies, as it is totally depend upon

the presentation how he or she presents to investor or client. Ultimately its client, who if

understand the plan properly, will invest in plan only if they are provided with lucrative returns

and risk cover. They should also be made to understand the importance of Insurance Regulatory

Development Authority (IRDA).As IRDA as a watch dog will regulate the insurance companies

and will protect the interest of the investors.

ULIPs are different from Mutual Funds not in Structure but in terms of returns. As ULIPs

provide risk cover and death benefit which is unavailable in mutual fund. The charges of ULIPs

like Fund Management Charges, Allocation Charges, Mortality charges and Administrative

charges are transparent including transaction. So Investor need not have to worry as industry

people will manage the premium amount and they will provide switch option too. Switch option

is a option where investor can willingly order to diversify fund, if he or she feels insecure in the

particular sector.



If you are considering long term investment, ULIP is excellent means to securely invest your

savings. ULIP provides insurance cover, investment and tax benefits. ULIP is transparent by

nature as you can daily track the net asset value of your fund. ULIP is also flexible as you can

manage your systematically manage the invested amount in any type of fund. ULIP does not

require your constant attention as your premium is managed by industry professionals.

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



6. Recommendations

Recommendations

For the Company based on the above market survey.

1) The company should now target pensioners & housewives as they constitute less percentage 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.



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.



7. Bibliography

BIBLIOGRAPHY

Books

Insurance Institute of India.

News Paper

The Economic Times



The Times of India

The Business Standard

The Wealth

Brochures

Policy Brochures of Kotak Mahindra Life Insurance

Internet

www.irda.gov.in

www.investopedia.com

www.sebi.gov.in

www.et.com

www.kotaklifeinsurance.com

www.myinsuranceclub.com

www.bimadeal.com

www.insurance.kotak.com

www.google.com


http://www.google.com/

http://www.insurance.kotak.com/

http://www.bimadeal.com/

http://www.myinsuranceclub.com/

http://www.kotaklifeinsurance.com/

http://www.et.com/

http://www.sebi.gov.in/

http://www.investopedia.com/

http://www.irda.gov.in/


8. Questionnaire

Questionnaire

QUESTIONNAIRE FOR ADVISORS

Q 1) What type or class of customers visit your office?

Ans· salaried

· housewives

· self employed

· retired

· pensioner



Q 2) Which policies the client opts for?

Ans · Traditional

· ULIPS

Q 3) Are ULIP schemes popular?

Ans · Yes

· No

· can’t say

Q 4) Are the clients aware of ULIP schemes?

Ans · 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?

Ans · 0--- 10%

· 11—20%

. 21---30%

· 31--- 40%

Q 7) How many clients have the background of finance?

Ans · 10—20%

· 20—40%

· 40% & above.



Q8) Mode of payment of premium.

Ans · cheque

· Demand Draft

· Cash

Q9) What is the better positioning for ULIP?

Ans · 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

· Post Graduate

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?

Questionnaire for Investors.

Name:

Date of Birth:

Address:

Contact No:

Email Id:

1) What is your occupation?

Ans) a) Self Employed b) Service



c) Student d) Retired

2) What is your opinion about insurance about investmnent ?

Ans) a) Agree b) Strongly agree

c) disagree d) Strongly disagree

3) Are you aware about Kotak Mahindra Life Insurance Limited ?

Ans) a) Yes b) No

4) Are you aware about Unit Linked Insurance Plans?

Ans) a) Yes b) No

5) Which Insurance Company you are familiar about ?

Ans) a) LIC b) ICICI

c) Kotak d) Others

6) Your Perception towards investment in ULIPs ?

Ans) a) Better Investment b) Quite Same as Mutual Fund

c) Safe Investment d) Poor Investment

7) In which Sector would you like to invest ?

Ans) a) Equity Market b) Debt Market

8) Towards which neccesity you look ULIPs as an better investment ?

Ans) a) Child Education b) Future Needs



c) Retirement d) Others

9) How do you rank ULIPs compare to Traditional plans?

Ans) a) Good b) Excellent

c) Average d) Poor

10)Are You aware about Kotak ULIPs Plan ?

Ans) a) Yes b) No

9. Annexure




Documents

My Project on Ulips