A PROJECT REPORT ON

COMPARATIVE STUDY ON UNIT LINK INSURANCE POLICY IN THE INDIAN INSURANCE MARKET WITH SPECIAL REFERENCE TO KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE & TATA AIG LIFE INSURANCE

SUBMITTED BY ANAND INGOLE UNDER THE GUIDANCE OF MRS. ADITI TANDALE JOSHI UNIVERSITY SEAT NO-

SUBMITTED TO UNIVERSITY OF PUNE

IN THE PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BBA

S.P.MANDALIS
SIR PARASHURAMBHAU COLLEGE, PUNE-30

ACKNOWLEDGEMENT

I extend my sincere thanks to our Coordinator Dr. Rashmi Hebalkar for her valuable suggestion, encouragement and generous help and for their direct and indirect support for completion of this work. I wish to express my deepest sense of gratitude and indebtness to my esteemed guide Prof. ADITI JOSHI, of BBA, S. P. College, Pune, for her expert guidance and scholarly supervision, endless motivation, encouragements and freedom to carry report work. I appreciate her dedication, professionalism, genuine concern and most important, her spirit. I thank her from my heart and express my indebtedness for her training, which will be a lifetime asset. It is my greatest privilege to be one of her students. It gives me immense pleasure to offer profound thanks to my colleagues and friends, Atul, Ashish, Rajan, Pratik, Sagar,& Vighnesh [T.Y.B.B.A] for their

valuable comments, constant motivation, criticism and discussions giving shape and design to the research work. My heartiest thanks to my sisters, and all my other friends for their constant support and for listening to all my complaints. No words are adequate to describe my gratitude to my Mother, Father, Uncle, & Aunt for their patience, understanding, unending love, motivation and for everything they have done in making me what I am today.

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Mr. ANAND INGOLE is a bonafide student of S.P.College, Pune. He has successfully carried out his summer project titled COMPARATIVE STUDY ON UNIT LINK INSURANCE POLICY IN THE INDIAN INSURANCE MARKET WITH SPECIAL REFERENCE TO KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE & TATA AIG LIFE INSURANCE We wish him all the best for his future

Mrs. ADITI TANDALE-JOSHI (Project Guide)

Dr. Rashmi Hebalkar (Coordinator BBA)

INDEX
SR. NO. TITLE PAGE NO

1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 2 2.1 2.2 2.3 2.4 2.5 3 3.1 3.2 3.2.1 3.2.2 3.3 3.3.1

Chapter I [Introduction] Introduction Title Aim & Objective Significance & Need Scope & Limitations Working Definition Conclusion Chapter II [Review Literature] Introduction Review of books Review of Articles Company Literature Conclusion Chapter III [Research Methodology] Introduction Research Methodology Quantitative Methodology Qualitative Methodology Method of Data Collection Primary Data

3.4 3.5 4 4.1 4.2

4.3

Research Design Conclusion Chapter IV [Analysis Of Data] Primary Data Analysis Secondary Data Analysis Conclusion
Chapter V [Finding & Recommendations] Finding Suggestions / Recommendations Area Of Further Study

5 5.1 5.2
5.3 5.4

Conclusion

CHAPTER-1
6

INTRODUCTION

1.1 INTRODUCTION OF INSURANCE

Today, only one business, which affects all walks of life, is insurance business. Thats 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.
7

The future is never certain . So its 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 . 1.Childrens education & marriage 2. Wealth creation 3. Living death ii) Benefits: 1) SAVINGS -For unforeseen circumstances. 2) EDUCATION -For childs 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 Lloyds 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
8

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 1.Life 2.Term 3.Endowment 4.Unit-linked 5.Money-back

V) INSURANCE INDUSTRY POTENTIAL 1) Asia is amongst the worlds 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. 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.
9

6) Indias life insurance premium as a percentage of GDP is just 1.8%

Growth Rate of Insurance sector 1.Public Sector: 5.5% 2. Private Sector: 57.4% Indian Insurance is growing at the rate of 80%.

LIFE INSURANCE COMPANIES IN INDIA

Public sector 1. Life Insurance Corporation of India

Private Players 2. 3. 4. 5. 6. AEGON Religare Life Insurance Aviva Life Insurance Bajaj Allianz Life Insurance Bharti AXA Life Insurance Co Ltd Birla Sunlife
10

7. 8. 9.

CANARA HSBC Oriental Bank of Commerce LIFE INSURANCE Star Union Dai-ichi Life Insurance DLF Pramerica Life Insurance

10. Edelweiss Tokio Life Insurance Co. Ltd 11. 12. 13. 14. 15. 16. HDFC Standard Life Future Generali Life Insurance Co Ltd ICICI Prudential IDBI Federal Life Insurance IndiaFirst Life Insurance Company ING Vysya Life Insurance

17. Kotak Life Insurance 18. Max New York Life Insurance 19. MetLife India Life Insurance

20. Reliance Life Insurance Company Limited 21. 22. 23. 24. Sahara Life Insurance SBI Life Insurance Company Limited Shriram Life Insurance TATA AIG Life Insurance

WHAT IS AN ULIP (Unit Linked Insurance Plan)?

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). A unit-linked insurance plan provides both insurance and investment benefit. In unit linked plans, the premiums paid are invested in funds offered by the company; the policyholder determines the appropriate ratio of investments into these funds.
11

The funds are generally invested in equities, debt instruments, money market instruments, and government securities. The value of the policy is determined on any day by multiplying the number of units issued by the value of units on that day. The value of these units is called the Net Asset Value (NAV) and is normally published in newspapers on a daily basis. Unit-linked insurance products are risky because the premium money invested is subject to market risk. The funds do not offer a guaranteed or assured return. Insurance companies will only show you a projected return, which may or may not be achieved during the term of the policy.

COMPANY PROFILE OF 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.
12

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. 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 Over 5 lac + policy holders

Some of the features of TATA are: 1. 2. 3. 4. 5. Over 260,000employees Operates in 130 countries worldwide Trusted by over 3 million shareholders Diversified business interest ( 92 companies) Largest FOREX earner
13

6. 7.

Revenues of US $ 14.25 billion Deep rooted commitment towards society.

Some of the features of AIG are: 1. 2. 3. 4. 5. 6. 7. 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.

COMPANY PROFILE OF KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE

Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak Mahindra Bank Ltd. and Old Mutual plc. KOTAK GROUP is one of the top most financial product service providers in India. It is one of India's leading financial conglomerates, offering complete financial solutions that encompass every sphere of life. From commercial banking,

14

to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. The group has a net worth of over Rs5,824 crores, employs around 10,800 people in its various businesses and has a distribution network of branches, franchisees, representative offices and satellite offices across 370 cities and towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore.

Old Mutual
Old Mutual plc is an international long-term savings, protection and investment Group. Originating in South Africa in 1845, the Group provides life assurance, asset management, banking and general insurance to more than 15 million customers in Europe, the Americas, Africa and Asia. Old Mutual plc is listed on the London Stock Exchange and the Johannesburg Stock Exchange, among others. In the year ended 31 December 2010, the Group reported adjusted operating profit before tax of 1.5 billion (on an IFRS basis) and had 309 billion of funds under management, from core operations.

The

KOTAK MAHINDRA

Group was born in 1985 as Kotak Capital

Management Finance Limited. This company was promoted by Uday kotak, Sidney A. Pinto and Kotak & Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. Since then it's been a steady and confident journey to growth and success. 1.2- TITLE
15

COMPARATIVE STUDY ON ULIPS IN THE INDIAN INSURANCE MARKET WITH SPECIAL REFERENCE TO KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE & TATA AIG LIFE INSURANCE 1.3 OBJECTIVES 1. Working of ULIP To find how ULIP plans differs from the other financial products. 2.. Whether the long term investment of the investor are beneficial through ULIP plan. 3. To compare the two companies ULIP plans with each other. 4.Find strength and weakness of ULIP plan. 5. Study of the consumer perception towards ULIP.

1.4 SIGNIFICANCE & NEED 1.It helps to know difference between ULIP and other financial products. 2.It will help to know about buying behavior of consumer . 3.It will help to know consumer perception towards ulip

1.5 SCOPE AND LIMITATIONS

SCOPE OF THE STUDY This study aims to make a comparative study of the Unit Linked Insurance Plans (ULIPs) of KOTAK Life Insurance Company with that of some major selected players in the Indian insurance market and study the consumer perception towards
16

various insurance products. The comparative analysis is based on the empirical data collected from the PUNE city. The study also aims to discuss in detail the various positioning strategies adopted by KOTAK in general.

ADVANTAGES OF STUDYThe following are some of the advantages to study Unit linked plans TO KNOW1.Extra protection riders between two companies.. 2.Variable investment options. 3.Which company is good for investment. 4.whether it is beneficial to invest in ULIP policies. 5.Risk involved in investment.

LIMITATION OF THE STUDYFollowing are limitation of the study 1.The study is done with reference to two companies only. 2.Information provided by the companies may not be true. 3.The study is confined only to a small segment of the entire population due to time constraints and hence the results are applicable only to the city of pune city. 4.It is not always possible to evaluate companies under similar parameters since many companies deal with various businesses thus clubbing all the companies on the same parameters is not always possible.

1.6 WORKING DEFINITIONS Definition of 'Insurance'

17

A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.

Definition of ULIPULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life insurance policy which provides a combination of risk cover and investment. The dynamics of the capital market have a direct bearing on the performance of the ULIPs. IN A UNIT LINKED POLICY, THE INVESTMENT RISK IS GENERALLY BORNE BY THE INVESTOR.

CONCLUSION- In this chapter we studied about what is life insurance & ulip, Meaning,definition of ulip, objective of the study,insurance companies in India, company profile of KOTAK MAHINDRA AND TATA AIG LIFE INSURANCE COMPANY

CHAPTER-2
18

REVIEW OF LITERATURE

2.1 ABOUT UNIT LINKED INSURANCE PLANS 1.INTRODUCTION ULIPS, has possibly been the single largest innovation in the field of life insurance in the past several decades. It wasnt 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 ones financial objectives. Then insurance was thrown open to the private sector. The result was the launch of a wide variety of insurance plans,
19

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.

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.
20

In todays times, ULIP provides solutions for insurance planning, financial needs, financial planning for childrens 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 accidentDisability- Critical Illness- Surgeries Tax benefits.

3 ) ULIPS VERSUS ENDOWMENT The following points help us to get a better idea how ULIPs differ from Traditional (Endowment Plans)

1) SUM ASSURED:

21

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 in1.Government Securities 2.Corporate bonds 3.Money market instruments ( no investment in the stock market)

ULIPs invest in 1.Equities 2.Bonds 3.G-secs 4.Money market.

22

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 debtequity ,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.

23

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 persons 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.

4) ULIPS AND YOU

24

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) If you are between 25 35 years of age ULIPs help you to save for your childs education, marriage, planning for your retirement and providing for your family in case of your absence. ULIPs Child plan ------------- --------for your childs 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. 2) If you are between 35 45 years of age If you havent 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.

3) If you are above 45 years of age

25

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. 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, agents 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. 6) HOW ULIPS MANAGE MONEY
26

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. 7) STEPS FOR ULIP SELECTION 1.Understand what ULIPs are all about. 2.Focus on your need and risk profile 3.Compare ULIP products from various insurance companies 4.Go for an experienced Insurance advisor 2.2 REVIEW OF ARTICLES Probing your probity by Swami Saran Sharma | 3/7/2012 1:00:12 PM moneycontrol.com
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Its the examination season, and last week I overheard a conversation between two students on the number of sheets they used while answering. The discussion moved towards how certain teachers award higher marks to students who use more sheets, especially in subjects like English, history and economics. The insurance regulator seems to be inspired by the examination season in releasing the proposed exposure draft on guidelines on prospect product matrix for life insurance. While the move will bring in the much-needed standardisation in filling insurance forms, it is not suitable for the Indian market. First, the guideline assumes that insurance is bought only by the literate. Next, the extent of details sought in the proposal-cum-needs analysis form is too complex even for some of the aware consumers to fill. I made a valiant attempt to fill the seven-page document in which the first six sought several financial and personal details. Take for instance a question like Are you politically exposed? I see little value that an insurer will derive from this response to arrive at the mortality risk I carry. There are uncomfortable personal details sought like liabilities, expected inheritance, future income and expenditure for the next 10 years! The past decade has seen such an economic boom that any prediction on the future would have been off the mark. Equally baffling is the column on expected returns from the policy; is it risk transfer or investment that we are looking at? If it is the latter, it is no more insurance. I dont think anyone will have easy access to his/her existing savings and investment details, forget the details of existing policies.The proposed draft is based on the premise that a prospective buyer will declare all the information the insurer seeks. The approach is towards financial planning than figuring insurance needs. Will this mean that the Insurance Regulatory Development Authority (IRDA) will certify agents and distributors to qualify as financial planners to sell
28

insurance? It is unlikely for an agent to manage all the details listed in the form, which is why the draft guideline provides a leeway to them by not binding them with the details being sought. According to the guideline, if the prospect refuses to provide information as sought by the insurer, agent or broker; the latter shall certify such refusal on the proposalcum-needs analysis form. Many agents will use this lacuna and not get the form filled completely, leading to mis-selling on record. But will the form need to be filled by online buyers, and how will tele-calling intermediaries handle the form? Overall, I find the move completely flawed. This procedure is likely to work in societies with a high financial literacy. We are far from such finesse in data gathering, analysis and maintenance. My worry is also about the misuse of the data that I share with the insurer as it can compromise my financial safety. This issue is far more complicated than the UID project if it is enforced in its current form. Lastly, if standardisation of the proposal form is allowed; it will do away with the USP that each insurer has. Unlike tax forms, which can be standardised; life insurance is a customised solution that can be tailored to suit the needs of a prospect. Moreover, the experience of the advisor comes into play when suggesting insurance plans. By adopting a template product-matrix to suit customer needs, IRDA is assuming the limitations in an agents ability to suggest the right policy to a client. And if the insurer has nothing that fits the prospects needs? It is unlikely that an agent will suggest the client to buy one from a competitor.

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Market Research Projects ICT Insurance Market Growth in India at 14% CAGR Through 2015 by- find articles.com MarketResearch.com has announced the addition of the new report "ICT in Insurance Industry in India 2012," to their collection of IT Services market reports. For more information, visit http://www.marketresearch.com/Netscribes-India-PvtLtd-v3676/ICT-Insurance-India-6823146/ ICT adoption in Insurance Industry is expected to witness a dynamic growth in the ensuing years. Currently, the adoption of ICT in insurance industry is undergoing a dynamic growth rate owing to the growing complexities arising from huge customer base. Insurers primarily implement technology in the areas of customer service, data analytics and process management. With the ongoing growth in customer base and daily transactions, insurers in India are gradually shifting their focus towards the adoption of ICT oriented tools, services and platforms. Until now, the ICT adoption in insurance industry has occurred in a phased manner, wherein it has exhibited a steady but impressive growth rate over the years. "Judging by the current scenario in the market, ICT spending by insurers in India stood at INR 76.17 bn in 2011 and is anticipated to grow at a CAGR of around 14% til 2015," says Mr. Kalyan Banga, Product Manager at Netscribes. Maturing along with technology standards, the current ICT landscape within the insurance industry can be associated with rising demand and cut throat competition amongst the ICT vendors. Types and attributes of the solutions that experience the most demand within the insurance sector have also changed over the years. "Primarily, technologies focused to provide better customer services are preferred the most. Analysis of colossal amount of data and information along with generating insights from these data are also experiencing
30

exponential surge in demand. Advancement in the field of mobile technology and the immense popularity of social networking sites have also grabbed the attention of industry significantly," noted Kalyan. The report begins with a snapshot of the insurance industry which briefs about the facts and figures of insurers operating in India. It lists down the number of insurers operating in the sector along with the segmentation of public and private insurers. The hierarchy of the Indian insurance industry is well illustrated for which it gives a brief highlight about the operational model of the industry. It also enlists the primary drivers and challenges for the overall insurance industry. "Primary reasons to propel the market forward are comprised of young consumer segment, wide range of products, technological advancement and growing middle class, whereas the basic challenges faced by the sector are the tight premium rates and dependence on overseas re-insurers," says Kalyan. Moving along, the report features a section on the ICT in Insurance wherein the growth rate and spending on ICT is enlisted in great details. "IT spending basically comprises the costs associated with hardware, software and services while the telecom services mainly include support and services," added Kalyan. The report covers an explicit break up of IT expenses of insurers in terms of hardware, software and services.

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CHAPTER-3 RESEARCH DESIGN

RESEARCH DESIGN
(3.1) Introduction: RESEARCH: Research in common parlance refers to a search for knowledge. One can define Research as a scientific and systematic search for pertinent information
32

on a specific topic. In fact, research is an art of scientific investigation. Research is an academic activity and as such the term should be used in a technical sense. According to Clifford woody research comprises defining and redefine and problems, formulating hypothesis or suggested solutions; collecting and organizing and evaluating data; making deductions reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis. In short, the search for knowledge injective and systematic method of finding solution to a problem is research. The systematic approach concerning and the formulation of a theory is also research. As term research refers to the systematic method. 3.2 Research Methodology: Research methodology refers to the analysis of principles of methods, rules and techniques. It involves the systematic study of methods which are applied to analyze a specific project or study. In order to make the research organized and to increase its reliability different methodologies are adopted. Research methodology involves the collection of theories, concepts or ideas, comparative studies to different approaches and individual methods which are conduced when a research work is performed. There are two main types of Research Methodology, 1- Quantitative methodology 2- Qualitative methodology 1- Quantitative methodology-

33

It is the type by which you test the significance of your hypothesis, in other words you answer the words: How much Is there a relationship Quantitative methods tend to be systematic and use numbers... Actually it is a deep sea. 2- Qualitative methodology It is the type by which you are depending on your observations and descriptions. It is subjectively and descriptive, no facts.... This kind of method is used to assess knowledge, attitudes, behaviours, and opinions of people depending on the topic of your research. Researcher, in this type of method uses his opinion and experience which are not allowed to be used in quantitative method at all. About the types of sample and sample size, I think they are apart of research design not apart of the methodology. METHOD OF DATA COLLECTION Data to be collected Data includes facts and figures, which are required to be collected to achiever the objectives of the project. 3.2.1 Primary Data The data that is being collected for the first time or to particularly fulfill the objectives of the project is known as primary data. The above primary data were collected through responses of consumer was conducted through questionnaires prepared for them. 3.2.1 Secondary Data

34

Secondary data are that type of data, which are already assembled and need not to collected from outside. These types of data were i) Company Profile ii) Product Profile iii) Competitors Profile

35

CHAPTER -4 ANALYSIS OF DATA

36

4.1COMPARATIVE ANALYSIS OF ULIPS

This chapter covers the comparison of ULIPs of 2 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. 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 2 insurance companies are taken for comparison. 1)KOTAK MAHINDRA LIFE INSURANCE---------Advantage multiplier 2) TATA-AIG--------------------- Invest Assure II

37

4.2 ANALYSIS OF PRIMARY DATA

COMPANY NAME

KOTAK

MAHINDRA

OLD TATA AIG LIFE INSURANCE (INVEST ASSURE )

MUTUAL LIFE INSURANCE (INVEST MAXIMA)

1)POLICY OBJECTIVE

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

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

investment without sacrificing the multiple fund options. protection of your family 2)Eligilibility Criteria (Minimum, Maximum age at entry):3) Policy term Regular Premium: 10, 15, 20, 25 15, 20, 30 years & 30 yrs Limited Premium: 10, 15, 20, 25 & 30 yrs Single Premium: 10 yrs Min: 0 years , Max : 65 years Min age= 30 days Max age= 45,55,65 years

38

Regular - `50,000 - `1,00,000 4) Premium Limited `75,000 - `1,00,000 Single `1,00,000 - `2,50,000

20,000 p.a.

(Minimum):-

5)

Mode

of Annually, single Annually, half yearly, quarterly, monthly

Premium Payment:-

6) Sum Assured Single Premium: (Minimum, Maximum):Option I : 5 times SP Option II : 1.25 times SP AP: Annualised Premium SP: Single Premium

For Insured's Age < 45 years: Higher of (10*Annualised Premium or 0.5*Policy Term*Annualised Premium) For Insured Age>= 45 years: Higher of ( 7* Annualised Premium or 0.25*Policy Term*Annualised Premium)

7)Surrender option/ withdrawal option

Partial

Withdrawals

will

be Allowed only after 3 years form

partial allowed after completion of five the date of issuance of the policy years and provided five full policy.Surrender charges are a years premiums are paid. Minimum amount for percentage of regular

partial premiumsFund value. Charge

39

withdrawal is `10,000. Minimum Applicable for 6 yrs---20 or balance of one premium for 30 yr policy Regular & Limited Premium Charge Applicable for 5 yrs----15

payment option and `10,000 for yr policy Surrender & partial Single Premium Payment option withdrawal Available Min of up should be maintained in the Main to 4 partial withdrawals Account after Partial Withdrawals.

8)Reinstatement/ Revival

Applicable only for Regular and If the premium remains unpaid at Limited premium payment option. the end of the Grace period and A policy can be revived with or the Policy has not been

without riders until the expiry of completely withdrawn for its the Notice Period. The Total Fund Value it can be revived, within stipulated time subject to: (i)

policyholder shall also have

the right to revive a discontinued period

policy within two years from the Policyholder's written application date of discontinuance and not for revival; (ii) production of later than the expiry of lock in Insured's current health certificate period, in which case the and/or other evidence of

discontinuance charge will be insurability satisfactory to us, if reversed. required (iii) payment of all overdue Regular Premiums.

40

9)Premium Holiday

The

policy

brochure

has

no After completion of 3 years of the policy, Premium Holiday facility is given with a charge of 3% of the regular premium.

mention of premium holiday

10)

Free

look The policyholder is offered 15 You have the right to cancel the days free look period, from the Policy by giving written notice to date of receipt of the policy the Company and receive the wherein the Policyholder may premiums invested into the funds choose to return the policy within at Unit Price as at the date of 15 days of receipt if he is not cancellation along with the

Period

agreeable with any of the terms charges paid after deducting a) and conditions of the plan. Should for proportionate Risk and Rider he choose to return the policy, Premium (if any) for the period he/she shall be entitled to refund on cover b) Stamp duty and of the premium for paid stamp expenses after medical examination costs which duty, have been incurred for issuing the and Policy. Such notice must be signed by the Policyholder and received directly by the Company within 15 days after you receive the Policy Document.. 11)Grace Period: There is a Grace Period of 30 days If you are unable to pay your for the annual mode from the due Regular Premium on time,

adjustment

administration

proportionate risk premium.

date for payment of premium. If starting from the regular premium the premium is not paid until the paid to date, a grace period of 30 end of the Grace Period, within the days will be offered for policies

41

next 15 days Kotak Life Insurance on Annual, Semi- Annual or will send a notice to the Quarterly Modes. For Policies on

policyholder to either revive the monthly mode the grace period policy or terminate the policy would be 15 days. During this without any risk cover. The Notice period your policy is considered Period ends 30 days after receipt to be in force with the risk cover of the notice by the policyholder. as per the terms & conditions of In case of death during the Grace the policy. Period and Notice Period, unpaid premium shall be deducted from the Basic Sum Assured.

12)Settlement Benefits

Entire maturity proceeds as an You have the option to receive immediate payout in one go OR your maturity benefit either in Part of the maturity proceeds as a lumpsum or in the from of lump sum and part as periodicalpayments over period of time. This period will not

installments.OR

Whole amount as installments. exceed 5 years from the maturity The installments can be taken over date. a maximum period of 5 years.

13)Premium Redirection

Switch between fund options or Re direction of all the future change your future premium premiums under a policy, in an proportion to the

allocation as per your needs and to alternative maximize your returns.

various Fund units is available.

42

14)

Top

Up Min: `20,000

Minimum top up amount is Rs

premium:-

Max: For Regular & Limited 5,000 Premium: 10 x AP

15)Tax Benefits:- You can avail of tax benefits under Premiums paid under this plan Section 80C and Section 10 (10D) are eligible for tax benefits under of Income Tax Act, section 80C of the Income Tax

1961. Tax benefits are subject to Act, 1961 and are subject to change in the tax laws. You are modifications made thereto from advised to consult your Tax time to time. Moreover, life Advisor for details. insurance proceeds enjoy tax benefits as per section 10(10D) of the said Act.

16)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

43

A)MORTALITY CHARGES AGE Kotak insurance 20yrs 30yrs 40yrs 50yrs 1.199 1.404 4.264 6.293 1.14 1.435 2.274 9.022 Mahindra life Tata aig life insurance

10 9 8 7 6 5 4 3 2 1 0 20yrs 30yrs 40yrs 50yrs

44

b) FUND MANAGEMENT CHARGES (Only for Equity Fund)

KOTAK MAHINDRA LIFE 1.35% INSURANCE TATA AIG LIFE 1.20%

INSURANCE

KOTAK MAHINDRA LIFE INSURANCE

TATA AIG LIFE INSURANCE

47% 53%

45

C) SWITCH OVER CHARGES

Company KOTAK

Charges MAHINDRA 500

LIFE INSURANCE

TATA

AIG

LIFE 100

INSURANCE

600 500 400 300 200 100 0 KOTAK MAHINDRA LIFE INSURANCE TATA AIG LIFE INSURANCE

46

d) POLICY ADMINISTRATION CHARGES COMPANY CHARGES

KOTAK MAHINDRA LIFE 500 INSURANCE

TATA

AIG

LIFE 150

INSURANCE

600 500 400 300 200 100 0 KOTAK MAHINDRA TATA AIG

47

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 COMPANY Date of NAV on inception Rs KOTAK MAHINDRA TATA LIFE INSURANCE AIG 1.8914 15.906% 10/8/2009 10 15.4573 5.4573 84.355 % as NAV as on increase Growth% 29/2/2012

Inception

15/01/2008

9.999

11.8904

In case of KOTAK MAHINDRA LIFE INSURANCE--------the Equity Fund has grown up to 84.355% in 3 years from the date of inception.
48

In case of TATA AIG LIFE INSURANCE--------the Equity Fund has grown up to 15.906% in 4years from the date of inception.

CONCLUSION- KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE companys ulip invest maxima has a great performance as compared to TATA AIGS invest assure.From invest maximas inception date it has shown 84% increase within 3 years than of invest assure s which has increased only by 15% from its inception date. In next chapter we will study about overall findings and recommendations.

49

CHAPTER

-5

FINDINGS

AND

RECOMMENDATIONS

50

MARKET SURVEY
A questionnaire was prepared, wherein 20 ulip insurers of different insurance companies were asked to fill it. The reason for carrying out a market survey was to 1.Find strength and weakness of ULIP plan,2. Study of the consumer perception towards ULIP. 3.To know other important aspects affecting the interest of the policy holders. 1.Do you think privatization of insurance companies has increased insurance awareness & competition in general?

Feedback Yes No

No.of Percentage Respondents 15 05 75% 25%

51

25% 75% Yes No

2.Do you think ULIP as investment is good as compared to:

Feedback

Direct market investment Mutual fund 12 investment Bank deposit 18 Postal investment-nsc 14

No.of respondents Yes no stock 15 05

Percentage Yes No 75% 25%

08 02 0

60% 90% 30%

40% 10% 70%

52

20 18 16 14 12 10 8 6 4 2 0 Direct stock market investment Mutual fund investment Bank deposit Postal investmentnsc

No.of respondents Yes

No.of respondents no

3.Do you know insurance is a risk protection +investment?

Feedback Yes No

No.of Percentage Respondents 18 02 90% 10%

53

10%

Yes No

90%

4.DO YOU KNOW FOLOWING ABOUT ULIP-

4.1 There is a wide range of variety of products in ULIP available

54

Feedback Yes No

No.of Percentage Respondents 16 04 80% 20%

18 16 14 12 10 8 6 4 2 0 Yes No

4.2 There is transparency in ULIP

55

Feedback Yes No

No.of Percentage Respondents 12 08 60% 40%

8 12 Yes No

56

4.3 Stock market risk is borne by the policy holder. Feedback Yes No No.of Percentage Respondents 17 03 85% 15%

Yes

No

15%

85%

4.4 In case of death claim fund value or sum assured, whichever is higher is paid to nominee.

57

Feedback Yes No

No. of Percentage Respondents 19 01 95% 05%

Yes

No

5%

95%

58

4.5 If you pay premium for 3/5 years and then discontinue,the life insurer can foreclose your policy Feedback Yes No No.of Percentage Respondents 08 12 40% 60%

8, 40 12, % 60 %

Yes No

59

5.Do you know the benefits of ULIP depends on the performance of stock/money market and benefits of traditional policies on the performance of life insurance.

Feedback Yes No

No.of Percentage Respondents 15 05 75% 25%

Yes

No

25%

75%

60

6.Reasons for surrender of ULIPS1.Fluctuations instock market 2.unexpected returns 3.investment for short term 4.unaffordable amount of premium

Feedback

No.of respondents Yes no Fluctuations in 11 09 stock market Unexpected 05 15 returns Investment for 02 18 short term Unfordable 03 17 amount of premium
20 18 16 14 12 10 8 6 4 2 0 Fluctuations Unexpected Investment Unfordable in stock returns for short amount of market term premium

Percentage Yes 55% 25% 10% 15% No 45% 75% 90% 85%

No.of respondents Yes No.of respondents no

61

7.Codes of professional ethics are not implemented by the intermediaries in marketing of ULIP.

Feedback No of percentage respondents stongly 15 75% Agree Agree to 02 10% some extent Neither 03 15%

No of respondents
16 14 12 10 8 6 4 2 0 strongly Agree Agree to some extent Neither

No of respondents

62

8.What is te impact of life insurance advertisements in your mind.

Feedback Positive

No of Percentage respondents 17 85% 5% 10%

Increase 01 curiosity No impact 02

No of respondents
Positive 5% Increase curiosity No impact

10%

85%

63

9.which media is attractive for te life insurance advertisement?

Feedback

No of Percentage respondents Newspaper 02 10% and magazine Television 06 30% Radio 02 10% 50%

Any other- 12 agents

14 12 10 8 Feedback 6 4 2 0 No of respondents

64

10.From whom you would like to buy the insurance policy? Individual agents Corporate agents Banks(bankassurance) Through internet Directly from insurance co.
feedback Individual agents Corporate agents Banks Internet Direct from company No of respondents 10 0 04 04 02 Percentage 50% 0% 20% 20% 10%

Individual agents Internet

Corporate agents Direct from company

Banks

10% 20% 50%

20%

0%

65

FINDINGS
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

In case of KOTAK MAHINDRA LIFE INSURANCE--------the Equity Fund has grown up to 84.355% in 3 years from the date of inception.

In case of TATA AIG LIFE INSURANCE--------the Equity Fund has grown up to 15.906% in 4years from the date of inception. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE companys ulip invest maxima has a great performance as compared to TATA AIGS invest assure.From invest maximas inception date it has shown 84% increase within 3 years than of invest assure s which has increased only by 15% from its inception date. In next chapter we will study about overall findings and recommendations.

66

MY LEARNING FROM PROJECT I have learnt many things which I might not be able to learn under class room training like looking at the stock market terminal and analyzing the stocks performance and thus designing the portfolio on the basis of their performances. First and the most important I learnt about ULIP Industry. Before this project I dint have much knowledge about ULIP funds. But now I have good knowledge about ULIP and INSURANCE INDUSTRY.

ANNEXURE
1.Do you think privatization of insurance companies has increased insurance awareness & competition in general? 1.yes 2.no 2.Do you think ULIP as investment is good as compared to: 1. 2. 3. 4. Direct stock market investment Mutual fund investment Bank deposit Postal investment-nsc

3.Do you know insurance is a risk protection +investment?

1.yes 2.no
4.DO YOU KNOW FOLOWING ABOUT ULIP-

4.1 There is a wide range of variety of products in ULIP available

67

1.yes 2.no
4.2 There is transparency in ULIP

1.yes 2.no

4.3 Stock market risk is borne by the policy holder. 1.yes 2.no

4.4 In case of death claim fund value or sum assured,whichever is higher is paid to nominee. 1.yes 2.no 4.5 If you pay premium for 3/5 years and then discontinue,the life insurer can foreclose your policy 1.yes 2.no 5.Do you know the benefits of ULIP depends on the performance of stock/money market and benefits of traditional policies on the performance of life insurance. 1.yes 2.no 6.Reasons for surrender of ULIPS1.Fluctuations instock market 2.unexpected returns 3.investment for short term 4.unaffordable amount of premium
68

7.Codes of professional ethics are not implemented by the intermediaries in marketing of ULIP. 1.stongly Agree 2.Agree to some extent 3.Neither

8.What is te impact of life insurance advertisements in your mind. 1.Positive 2.Increase curiosity 3.No impact 9.which media is attractive for te life insurance advertisement? 1.Newspaper and magazine 2.Television 3.Radio 4.Any other-agents 10.From whom you would like to buy the insurance policy? 1.Individual agents 2.Corporate agents 3.Banks(bankassurance) 4.Through internet 5.Directly from insurance co.
69

BIBLIOGRAPHY

1. Money Outlook, 2011 edition 2. IRDA Annual Report Websites:1. www.irdaindia.org 2. www.insuranceworld.com 3. www.findarticles.com 4. www.kotaklife.com 5.www.bimabazar.com
70

6.www.tataaiginsurance.com Special Thanks to: Wikipedia, the free encyclopedia.htm http://www.google.com http://www.economywatch.com/business-and-financial/IPO-industry

71