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B
Y
Vikas Gupta
ACKNOWLEDGEMENTS
ABSRACT
LIST OF ILLUSTRATIONS
INTRODUCTION
PURPOSE
SCOPE OF THE STUDY
OBJECTIVES OF THE PROJECT
LIMITATIONS OF THE STUDY
METHODOLOGY
SOURCES OF DATA
LITERATURE STUDY
INSURANCE
CHARACTERISTICS OF INSURANCE
HISTORY OF INDIAN INSURANCE
INSURANCE MARKET – PRESENT
CAPITAL REQUIREMENTS AND FOREIGN PARTICIPATION
LIFE INSURANCE
UNIT LINKED INSURANCE PLANS
STRUCTURE OF ULIPs
TYPES OF FUNDS UNDER ULIPs
ADVANTAGES OF ULIPS
The project aims to make a detailed study of Unit Linked Insurance Plans
(ULIPs) in the Indian context, a comparative analysis of ULIPs of some well
known selected companies
The different selected companies on which the project is entirely
focused are
namely:
a. ICICI PRUDENTIAL
b. BAJAJ ALLIANZ
c. TATA AIG LIFE
d. LIFE INSURANCE CORPORATION OF INDIA
e. HDFC STANDARD LIFE
Even though LIC is still the market leader with more than over 60% of the
market share, the private players are giving it a tough time. Since the last
decade the market share of LIC had fallen down by about more than 20%.
Taking into account the huge population and growing per capita income
besides several other driving factors, a huge opportunity is in store for the
insurance companies in India. According to the latest research findings,
nearly 80% of Indian population are without life insurance cover while
health insurance and non-life insurance continues to be below international
standards. And this part of the population is also subjected to weak social
security and pension systems with hardly any old age income security. As
per our findings, insurance in India is primarily used as a means to improve
personal finances and for income tax planning; Indians have a tendency to
invest in properties and gold followed by bank deposits. They selectively
invest in shares also but the percentage is very small (4-5%). This in itself
is an indicator that growth potential for the insurance sector is immense.
It's a business growing at the rate of 15-20% per annum and presently is of
the order of around more than $55 billion.
India is a vast market for life insurance that is directly proportional to the
growth in premiums and an increase in life density. With the entry of
private sector players backed by foreign
expertise, Indian insurance market has become
more vibrant.
Competition in this market is increasing with companys’ continuous
effort to lure the customers with new product offerings. However, the
market share of private insurance companies remains low in the 25-35%
range. Even to this day, Life Insurance Corporation (LIC) of India dominates
Indian insurance sector. The heavy hand of government still dominates the
market, with price controls, limits on ownership, and other restraints. They
private players are still in their initial days and would take some more time
to capture a good market share. At present they are coming up with new
and innovative ideas.
Since the last decade the life insurance industry in India has been growing
very fast and many new companies have entered this business insurance.
The Indian life insurance industry has recorded a robust growth of more
than 16 per cent for the nine-month period which ended on December 31,
2008.It is expected to grow at an amazing rate of 20 per cent this year
Also in the present scenario the most sought after insurance plans are the
Unit Linked insurance Plans (ULIPs).
SCOPE OF THE
STUDY
This study aims to make a comparative study of the Unit Linked Insurance
Plans (ULIPs) in the Indian insurance market and study the consumer
perception towards various insurance products. The comparative analysis
is based on the empirical data collected.
METHODOLOGY
surveys and
B. Questionnaire method
Step: 1
Developing a right research design and timeline
for the project.
Step: 2
Collecting Secondary data of the
insurance Industry
Step: 3
Designing of the
Questionnaire
Step: 4
Analysis of secondary
data
Step: 5
Pilot Study
Step: 6
Collection of primary data-Questionnaires and
internet surveys
Step: 7
Analysis of primary
data
SOURCES OF
DATA
Primary
Data
Secondary
Data
The secondary data was collected directly from the companies and their
websites and internet surveys. Also a lot of similar research studies and
journals have been referred to.
LITERATURE
STUDY
Till today a lot of research has been done on the Indian insurance industry
especially the life insurance sector. The material for this study was
collected from various internet sites, journals and books by various
authors. Similar research has been carried out by Sathak Mohanty who
worked on the risk profile of ULIPs and analyzed insurance as an
investment option. He says that Life Insurance Corporation of India (LIC) is
still the undisputed leader in the Indian context.
CHARACTERISTICS OF
INSURANCE
1. Sharing of risks
2. Cooperative device
3. Evaluation of risk
4. Payment on happening of a special event
5. The amount of payment depends on the nature of losses incurred.
HISTORY OF INDIAN
INSURANCE
Insurance has a long history in India. Life Insurance in its current form was
introduced in 1818 when Oriental Life Insurance Company began its
operations in India. General Insurance was however a comparatively late
entrant in 1850 when Triton Insurance company set up its base in Kolkata.
a. Pre
Nationalization b.
Nationalization and
c. Post
Nationalization
The insurance sector was opened up for private participation a decade back.
For years now, the private players are active in the liberalized
environment. The insurance market has witnessed dynamic changes, which
include presence of a fairly large number of insurers both life, and non-life
segment. Most of the private insurance companies have formed
joint venture partnering well-recognized foreign players across the globe.
With the entry of several low-cost airlines, along with fleet expansion
by existing ones and increasing corporate aircraft ownership, the
Indian aviation insurance market is all set to boom in a big way in
coming years.
http://www.marketsmonitor.com/Report/IM588_related.ht
m)
Minimum capital requirement for direct life and Non-life Insurance company
is INR1000 million and that for reinsurance company is INR2000 million.
(Source:
www.irdaindia.org)
LIFE
INSURANCE
90.0
0
80.0
0
70.0
0 Life
60.0
Non-life
0
50.0
0
40.0
0
30.0 2000 2001 2002 2003 2004 2005 2006 2007 2008
0 2009 2010 2011
20.0
0
10.0
0
0.0
0
Figure 1: The trend of the Indian insurance
industry ($Bn) 2000-2011 (Source: The
knowledge Centre)
(Source: http://www.scribd.com/doc/136703/Indian-Insurance-Changing-
Trends-and-a-Fresh- Perspective)
Right now there are a total twenty two life insurance companies operating
in India, of which one (Life Insurance Corporation) is a Public Sector
Undertaking and the remaining twenty are
all private sector enterprises. (Source:
www.irdaindia.org)
Unit linked insurance plan (ULIP) is a life insurance solution that provides
the client with the benefits of protection and flexibility in investment. It
is a solution which provides for life insurance where the policy value at
any time varies according to the value of the underlying assets at the time.
The investment is denoted as unit and is represented by the value that it
has attained called as Net Asset Value (NAV).
Simply put, ULIPs are structured in such that the protection element and
the savings element are distinguishable, and hence managed according
to your specific needs. In this way, the ULIP plan offers unprecedented
flexibility and transparency.
ULIPs came into play in 1960s and became very popular in Western
Europe and America. The reason that is attributed to the wide spread
popularity of ULIP is because of the transparency and the flexibility which it
offers to the clients.
As time progressed the plans were also successfully mapped along with life
insurance needs to retirement planning .In today’s times ULIP provides
solution for all the needs of a client like insurance planning, financial
needs, financial planning for children’s future and retirement planning.
( Source:http://www.scribd.com/doc/7216240/Understand-ULIP-Insurance)
STRUCTURE OF
ULIPs
Premium Allocation
charges
This is a percentage of the premium appropriated towards charges before
allocating the units under the policy. This charge normally includes
initial and renewal expenses apart from
commission
expenses.
Mortality Charges
These are charges to provide for the cost of insurance coverage under
the plan. Mortality charges depend on number of factors such as age,
amount of coverage, state of health etc.
Fund Management Charges
These are fees levied for management of the fund(s) and are deducted
before arriving at the
Net Asset Value (NAV) .
Policy/ Administration Charges
These are the fees for administration of the plan and levied by cancellation
of units. This could be flat throughout the policy term or vary at a pre-
determined rate
PREMIU
M
LESS
CHARGES
Fund
ULIPs Manageme
Mortalit Structure nt Charges
y
Administrati
Charg
on
es
Charges
Premiu
m
Allocati
on Invested
Charges Amount
Figure 3 : Premium break -up under ULIPs
Surrender
Charges
A surrender charge may be deducted for premature partial or full
encashment of units wherever applicable, as mentioned in the policy
conditions.
Fund Switching
Charge
Generally a limited number of fund switches may be allowed each year
without charge, with subsequent switches, subject to a charge. But now a
days many insurers offer fund switching free of cost.
Service Tax
Deductions
Before allotment of the units the applicable service tax is deducted from
the risk portion of the premium.
TYPES OF FUNDS
UNDER ULIPs
(Source:
www.irdaindia.org)
ULIP distinguishes itself through the multiple benefits that it provides to the
consumer. The plan is a one stop solution for everything the customers
want. Unit Linked Insurance Plans (ULIPs) are different from traditional
plans purely because, they are much more transparent, various charges
are shared with the customer before the sale of the product, so as to
enable the customer to make an informed decision.
(Source:www.scribd.com/doc/7044410/ULIPs)
Customers have the flexibility to choose their life cover. Also the customers
have the choice of multiple fund options based on their risk appetite,
thereby enabling an investor to make the desired returns from the
investment.
a. Life protection
b. Investment and Savings
Market linked fund based on risk profile
Switch option
Premium redirection
Automatic Transfer Plan(ATP)
c. Tax Planning
d. Flexibility of cover
continuance e.
Transparency
f. Extra protection with riders
Death due to accident
Disability
Critical
illness g.
Liquidity
Partial withdrawals during the term
At maturity
h. Variable investment
options i. Premium
holiday
j. Allow Top-ups
Insuranc
e+
Long Allow Top Ups
Term Investm
Wealth ent
Creation
Tax Riders
Benefits
ADVANTAGE
S OF
ULIPS
Guarante Transparency
ed
Capital
Returns
Flexibility Invest as
per your risk
appetite
Premiu
m
Holid
ay
The Wealthsurance Foundation Plan can ensure that his plans for wealth
creation are achieved by protecting that plan with insurance benefits.
Wealthsurance is one of its kind in India. The company offer 11 investment
options and 8 protection benefits under the plan apart from tax benefits
(Source: www.idbifortis.com)
Under Wealthsurance there are a lot of different funds available which
are explained below:
WEALTHSUR
ANCE Min entry age 30 dys
Max entry age 65
yrs
Min premium
10000
Max maturity age 75
yrs
Riders ADBR,ADB,WOPR,MAJOR DISEASES
BENIFIT,HOSPITAL CASH BENEFIT,TERMINAL
ILLNESS BENEFIT
Min premium payment term
3
yrs
Types of funds EQUITY,NIFTY,Capital Guarantee,
Asset Allocator, GRF,MONTHLY INT
A/C,INCOME,LIQUID
As discussed earlier we would be comparing the Unit Linked Insurance
Plans (ULIPs) of the companies selected initially with those of IDBI FORTIS
and then make a detailed analysis. This analysis would be well supported
by the primary data analysis and then the final results would be interpreted
.So here first we would be listing out various ULIPs of the selected
companies and their details. After that we make a detailed comparison
with that of the plans under Wealthsurance of IDBI FORTIS and explain it.
CARE
b. INVEST ASSURE FLEXI
c. INVEST ASSURE II
d. INVEST ASSURE EXTRA
GOLD
b. UNIT GAIN PREMIER
c. CENTURY PLUS
d. NEW UNIT GAIN PLUS
e. PENSION GUARANTEE
12000 50000
No of funds 6 No of funds 3
Riders 6(after Riders NM
18) Min premium payment term Min premium payment term
3 yrs 3
yrs
a. MARKET PLUS
b. PROFIT PLUS (RP & SP)
c. FORTUNE PLUS
FORTUNE
PLUS
Min entry age 12
yrs Max entry age 60
yrs Max Maturity age 65
yrs Min premium
20000
No of funds 4
Riders
(Source:
www.licindia.com)
COMPARITIVE ANALYSIS
ENDOWMENT ENHANCED
PLUS II LIFE
PROTECTIO
Min entry age 18 N II
Max entry age 65 Min entry age 18
Max Maturity age 75 Max entry age 45
Min premium 12000 Max Maturity age 75
No of funds 7 Min premium 12000
Riders No of funds 7
Riders NO
ADBR,CIBR Min premium payment Min premium payment term
term TERM
TERM
TERM
(www.hdfcstandardlife.
co m )
COMPARATIVE ANALYSIS
ADBR,CIBR ADBR,CI
BR WOP
Min premium payment term LIFE Min premium payment term 3 yrs
BASED
(Source: www.iciciprulife.com)
COMPARATIVE ANALYSIS
IDBI FORTIS is a new company with over just over one year of operations
and so we have very less information about its past performance.
Therefore not many negatives can be found with the company in regard to
the Unit Linked Insurance Plans. Some general demerits with regard to the
distribution network and marketing strategies have been mentioned after
the analysis of the primary data.
IDBI Fortis has shown a percentage change of -38.95%.But since IDBI Fortis
is a new company which was started just a year back we can say that it
has managed quite well and right now it
is showing a quite good and positive growth as we can see from
its present NAV.
Month NA
Apr- V8.409
08
May- 9
7.712
HDFC STANDARD LIFE
08
Jun- 4
7.537 9
08Jul- 4
8.179 8
08 7 7
Aug- 7.963 6
08
Sep- 2
5.974 5
NA
08 0 4
V
Oct- 5.796
3
08
Nov- 8
5.670 2
08
Dec- 6
5.510 1
0
08
Jan- 0
5.447
Aug-
May-
Nov-
Mar-
Jul-
09 9
Sep-
Dec-
08
Feb-
Oct-
Apr-
Apr-
Jan-
Jun-
Feb- 5.151
08
08
09
08
09
08
08
08
09
08
09
08
09
Mar- 6
6.159
09
Apr- 7
6.464
MONTH
NA
15
V
08
Oct- 0
5.796 10
08
Nov- 8
5.670 5
08
Dec- 6
5.510 0
08
Jan- 0
5.447
Aug-
May-
Nov-
Mar-
Jul-
Sep-
Dec-
08
Feb-
Oct-
Apr-
Apr-
Jan-
09 9 Jun-
08
08
09
08
Feb- 5.151
09
08
08
08
09
08
09
08
09
Mar- 6
6.159
09 7 MONTH
Apr- 6.464
09 6
Table 4 & Figure 6: NAVs of
Bajaj Allianz
(Source:
www.bajajallianz.com)
Month NA
Apr- V
56.350
08
May- 0
56.605 ICICI PRUDENTIAL
08
Jun- 0
48.925 60
08
Jul- 0
48.870 50
08
Aug- 0
51.445 40
08
Sep- 0
49.145
NA
30
V
08
Oct- 0
39.445 20
08
Nov- 0
35.685 10
08
Dec- 0
36.400 0
08
Jan- 0
34.845
Aug-
May-
Nov-
Mar-
Jul-
Sep-
Dec-
08
Feb-
Oct-
Apr-
Apr-
Jan-
Jun-
08
08
09 0
09
08
Feb- 34.265
09
08
08
08
09
09
08
08
09
Mar- 0
33.405
09 0 MONTH
Apr- 39.915
09 0
Table 5 & Figure 7: NAVs of
Bajaj Allianz
(Source:
www.iciciprulife.com)
Mont NA
h
Apr- V
12.240
08
May- 0
12.173 LIC
14
08
Jun- 5
11.058
12
08
Jul- 5
11.029
10
08
Aug- 0
11.495 8
08 0
NA
Sep- 11.115 6
V
08
Oct- 59.550
4
08
Nov- 5
9.377 2
08
Dec- 5
9.616 0
08
Jan- 5
9.613
Aug-
May-
Nov-
Mar-
Jul-
Sep-
Dec-
08
Feb-
Oct-
Apr-
Apr-
Jan-
Jun-
08
08
09
08
09
Feb- 0
9.539
09
08
08
08
09
08
09
08
09
Mar- 5
9.476
09 5 MONTH
Apr- 10.571
09 5
Table 6 & Figure 8:
NAVs of LIC
(Source:
www.licindia.com)
Mont NA
h
Apr- V
10.583
08
May- 8
10.499 IDBI FORTIS
08
Jun- 19.176 12
08
Jul- 5
9.344 10
08
Aug- 8
9.818 8
08 3
NA
Sep- 9.091 6
V
08
Oct- 5
7.078 4
08
Nov- 5
6.902 2
08
Dec- 8
6.915 0
08
Jan- 1
6.686
Aug-
May-
Nov-
Mar-
Jul-
Sep-
Dec-
08
Feb-
Oct-
Apr-
Apr-
Jan-
Jun-
08
08
09
08
09 1
09
08
08
08
09
08
09
08
Feb- 6.532
09
Mar- 8
6.460
MONTH
09
Apr- 5
7.774
09 6
Table 7 & Figure 9: NAVs of
IDBI FORTIS
(Source:
www.idbifortis.com)
Month NA
Apr- V
13.479
08 0 TATA-AIG
May- 13.346 16
08
Jun- 0
11.980 14
08
Jul- 5
11.912 12
08
Aug- 5
12.324 10
8
NA
08
Sep- 0
11.797
V
6
08
Oct- 5
10.129 4
08
Nov- 09.840 2
08
Dec- 0
9.914 0
08
Jan- 0
9.800
Aug-
May-
Nov-
Mar-
Jul-
Sep-
Dec-
08
Feb-
Oct-
Apr-
Apr-
Jan-
Jun-
08
08
09
08
09
08
09 0
08
08
09
09
08
08
Feb- 9.667
09
Mar- 5
9.417 MONTH
09
Apr- 5
10.734
09 0
Table 8 & Figure 10: NAVs of TATA AIG
(Source: www.tata-aig-life.com )
COMPANY %
BAJAJ ALLIANZ CHANGE
-
HDFC STANDARD 43.84%
-
LIFE
ICICI 38.74%
-
PRUDENTIAL
IDBI FORTIS 40.98%
-
LIC 38.95%
-
TATA AIG 23.38%
-
30.13%
PERCENTAGE (% )
CHANGE
TATA
ALLIANZ
AI
LI
IDBI FORTIS
ICICI
PRUDENTIAL
HDFC STANDARD
LIFE BAJAJ
-30.13%
-40.98%
-23.38%
-38.74%
-38.95%
-43.84%
The sample included respondents from all the age groups out of which
people in the age group
18-40 constituted
around 70%.
50
45
40
REPONDENTS
35
30
25
20
NO. OF
15
10
5
0
18-30 31-40 41-50
>50
AGE
GROUP
60%
PERCENTAGE OF 40%
RESPONDENTS
20%
0%
OCCUPATI
ON
Also the customers’ preferences for different forms of savings have been
carefully studied. The main savings instruments generally preferred by
customers are bank deposits, fixed deposits, investments and post office
schemes. Out of these Investments has been preferred by around
43% respondents and fixed deposits by
around 27%.
PREFERENCE OF
SAVINGS
6%
12
Bank Deposits
12% %
Fixed Deposits
Investments
27%
Post Office Schemes
Others
43%
50%
40%
PERCENTAGE OF
RESPONDENTS
30%
20%
10%
0%
Family's Friend' Broker' Own Any
Opinion s s Decisio Other
Advic Advic n s
e e
DECISION
MAKING
FORMS OF
INVESTMENT
35%
29%
20%
13%
5%
Mutua l fun
Stocks and
Shares Insuranc Produc Govt Bonds Others
e ts
FREQUENCY OF
INVESTMNET
1% Once a year
14%
2-3 Times a year
15% 45
% More than 3 Times a year
Not Interested
OWN AN INSURANCE
POLICY
89
%
11
%
Yes No
Figure 18: Break-down of respondents who own/do not own an
insurance policy
Unit Linked
Insurance Plans
39%
28%
23%
6%
4%
LIC
1% ICICI Prudential
2%
2% IDBI Fortis
5%
Bajaj Allianz
7% 3%
HDFC Standard Life
1 2 3 4 5
BAJAJ ALLIANZ
ICICI PRUDENTIAL
IDBI FORTIS
LIC
TATA-AIG
w WEALTHSURANCE
No idea 29%
26
%
3%
Many people responded that they have no idea about IDBI Fortis or its
various products under the umbrella “wealthsurance”.That is true as it is a
new company it has a long way to go as responded by around 26% of the
respondents.
This could be due to the fact that IDBI FORTIS has a limited presence and it
has just started its operations just more than a year ago.
We also have found out the age played an important role in deciding the
investing patterns of the respondents .It was found out that people who
were generally in between 18-30 had a higher tendency to invest quite
frequently in a year. The following table and the figure below
show us the
results.
0
18-30(young) 30-50(middle)
>50(old)
AG
E
In order to find the relationship between the age of the respondents and
their investment patterns, a chi-square test for independence of attributes
was used and results of the test is
shown in the following table:
It is noted from the above table that the calculated Chi-square value is less
than the table value and the result is significant at 5% level. Hence, the null
hypothesis “the age of the respondents and frequency of investment” holds
good. From the above analysis it is concluded that there is a close
relationship between the age of the respondents and their investment
patterns
Also we can see from below that the KMO coefficient is 0.702. The
coefficient always lies between 0 and 1 and the requirement is that it
should not be less than 0.50. So here we can say
this is a good
test.
Si .000
g
Table 12: KMO and Bartlett’s test of sphericity
1. Rate of return
2 .Death benefits and lock in period
3. Present market scenario and tax benefits
4. Past performance of the company
5. Flexible investment options and the risk involved
6. Amount payable and the after investment service
7. Opinion of media, friends and acquaintances
8. Level of knowledge about investment
9 .Commercials associated with investments
QUESTIONNAIRE
(This questionnaire is only of the sake of some research work being done on insurance
companies. Confidentiality would be maintained.)
Name :
Age Group:
Qualification:
th th
Post Graduate Graduate 12 < 12
Occupation:
Do you agree that Insurance products are susceptible to very low risk when compared to the
other options for investment?
A financial security and risk coverage for your family All the above
I have no idea
1.
2.
3.
Yes No
According to you what is the amount of risk involved in (ULIPs) Unit Linked Investment Plans?
Company Rating
IDBI FORTIS
ICICI Prudential
Life Insurance Corporation of India
Bajaj Allianz
Max NewYork Life Insurance
Tata AIG Life
Please rate between 1-5 for all the following factors depending on thier effectiveness in
influencing you to make an investment decision.
1- If the factor has no effect on your preference for the investment option
2- If the factor has only a slight affect on your preference for investment option
4- If the factor will strongly affect your preference for the investment option
5- If the factor will be decisive in your preference for the investment option
Particulars Rating
Rate of return( The amount which you get in return)
Extra returns for extra investments
Returns constant in all conditions (No opportunity for multiple returns)
Can give huge returns but high risk ( no guarantee of even min returns)
Tax benefits
Lock in period (Money cannot be withdrawn before a specific period)
Death benefits( Benefits upon your inadvertent death)
Compulsory investment (Mandatory for you to save a specific amount every
year making you get greater amount at maturity date, e.g. Regular premium in
insurance )
Transmission ( The investment option gets transferred to your nominee in case
of any eventuality for example death)
Amount payable can be adjusted later
Amount payable ( Amount that you have to pay for investing)
Amount of charges( Amount deducted for maintenance of your investment etc)
Level of knowledge about an investment option in particular
General level of knowledge about investment options
Level of knowledge to be developed once you start investing
After investment service( Level of advice you get when needed)
Renewal procedure( in case of any discontinuity in payment)
Time to be spent in future
Regulatory authority
Past history& performance of that investment option
Market scenario
Opinion of friends & acquaintances
Opinion of Media
Commercials associated with an investment option
Your past experience in investments.
Political factors( Government policies)
Investment option caters to my group (Retired employees, etc)
Other factors( Known person working in that sector etc)