SUMMER TRAINING PROJECT REPORT

ICICI PRUDENTIAL CO. LTD. SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF BACHELOR OF BUSINESS ADMINISTRATION (BBA)

GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY (GGSIPU)

PROJECT GUIDE Ms. SUMEDHA DUTTA SUNMITTED BY: KARAN NARULA ENROLL NO.1291471706

SESSION 2006 2009 GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

PREFACE

Someone has greatly said that practical knowledge is far better than classroom teaching. During this project I fully realized this and come to know about the present real world of Insurance Industry since retailing includes all the activities involved in selling goods or services directly to final customers. I am pleased to know about the consumers wants and competitors activities in the real world of retailing. The subject of my study is unit linked insurance plan (ULIP) of ICICI PRUDENTIAL life insurance co ltd which is rapidly but smoothly growing in Indian market. The report contains first of all brief introduction about the company. Then it contains findings of the research and analysis of the findings and finally conclusion.

ACKNOWLEDGEMENT
I am deeply indebted to Ms,Poonam Kumar for her constant support, guidance and inspiration in completion of the internship program and preparation of this document. I would like to express my sincere gratitude to ICICI for giving me an opportunity to complete my summer internship program in their esteemed organization. I would also like to thank Mr. N. K. Kakkar, Director (MAIMS) and Ms. Sumedha Dutta (Lecturer) who guided me at every step. Last, but not the least, I would express my gratitude to my Institute- Maharaja Agrasen Institute of Management Studies for constant guidance and encouragement for completion of this project report.

NAME SIGN

TENTATIVE CHAPTER SCHEME

Introduction5 Objectives.16 Company Profile..18 Research Methodology....39 Literature Overview..41 Limitations.61 Analysis and Findings.62 Recommendation and Conclusion67 Bibliography..70

1. 2. 3. 4. 5. 6. 7. 8. 9.

10. Questionnaire71

INTRODUCTION

What is insurance?
Insurance in its basic form is defined as " A contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event." In simple terms it is a contract between the person who buys Insurance and an Insurance company who sold the Policy. By entering into contract the Insurance company agrees to pay the Policy holder or his family members a predetermined sum of money in case of any unfortunate event for a predetermined fixed sum payable which is in normal term called Insurance Premiums. Insurance is basically a protection against a financial loss which can arise on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. By paying a very small sum of money a person can safeguard himself and his family financially from an unfortunate event. For Example if a person buys a Life Insurance Policy by paying a premium to the Insurance company , the family members of insured person receive a fixed compensation in case of any unfortunate event like death. There are different kinds of Insurance Products available such as Life Insurance , Vehicle Insurance, Home Insurance, Travel Insurance, Health or Mediclaim Insurance etc. To know more about different type of Insurance Products please visit our page Learn Insurance.

OVERVIEW OF INSURANCE SECTOR

With the largest number of life insurance policies in force in the world, India's insurance sector accounted for 4.1 per cent of GDP in 2006-07, up from 1.2 per cent in 1999-2000, far ahead of China where insurance accounts for just 1.7 per cent of the GDP and even the US where insurance penetration stands at 4 per cent of the GDP. One area that continues to cause concern is the number of customer grievances in insurance, especially in a few specific classes. This calls for more transparency in designing the contract wording and on insisting that the applicant is sufficiently informed about the coverage and more particularly the exclusions. In addition, the legislation itself requires to be transformed to meet the needs of the emerging markets. The Law Commission of India which has gone extensively into the various insurance laws has submitted its report. Further, the expert committee headed by Mr. K.P. Narasimhan has also submitted its proposals requiring amendments to the laws. The demand for health insurance covers has seen a healthy increase, and today the sector is the fastest growing segment in the non-life insurance industry in India, which grew at over 40% last year. It is also emerging as an increasingly significant line of business for life insurance companies. During the last five years, the premium from health insurance products in nonlife companies has grown from 675 crores in 2001-02 to Rs 3200 crores in 2006-07, almost 5 times its level 5 years back. While this rate of growth appears to be very healthy, it is on a low base, and health insurance penetration in the country continues to be low. Only about 25 million persons are presently covered for health through commercial insurance, in a country of over 1.1 billion people. Overall, the Indian health sector is still characterized by the near absence of any significant risk protection against major health-related expenditure, as insurance and other organized forms of payment for health services, including ESIS, CGHS and other such schemes barely constitute a tenth of all health expenditure in the country. Almost four-fifths of the health spending in the country is private, out-of-pocket expenditure. In the absence of such protection, the financial impact of hospitalization can be very pronounced, and indeed is reported as one of the leading causes of impoverishment in the country

Indian insurance companies recorded a 19.9 per cent growth in premium in dollar terms (adjusted for inflation) in 2006-07, compared to the world market growth rate of 2.9 per cent. This rate of growth of the industry looks particularly impressive when seen against the fact that the combined penetration of both life and non-life is less than 2 per cent of the GDP compared to world average of 7.52 per cent. Clearly, the scope for growth is enormous. Led by the Life Insurance Corporation (LIC), the life insurance industry registered a growth of 110 per cent in fiscal 2006-07, taking the total business to US$ 19.2 billion from the previous year's US$ 9.1 billion. The life insurance market has grown rapidly over the past six years, with new business premiums growing at over 40 per cent per year owing to the entry of a host of new players with significant growth aspirations and capital commitments. The total life insurance market premiums is likely to more than double from the current US$ 40 billion to US$ 80-US$100 billion by 2012, says a study by McKinsey. The study titled 'India Insurance 2012: Fortune Favours the Bold,' expects a rise in premiums between 5.1 and 6.2 per cent of the GDP in 2012 from the current 4.1 per cent driven by greater insurance intensity per capita as the average per capita income increases and rise in penetration in urban and rural areas. The life insurance premium contributions per capita have jumped from a little over US$ 7 in 1999-2000 (pre-liberalisation) to US$ 38.5 in 2006-07. Life insurance penetration in India - which was less than 1 per cent till 1990-91 - increased to 2.53 per cent in 2005, and to 3 per cent in 2006-07. While the impetus for growth has come from both public and private insurers, the number of players in this segment have also increased to 16 (15 in private sector), with Life Insurance Corporation (LIC) being the dominant player (market share of over 74 per cent). The general insurance industry grew 11.6 per cent between April and November in 2007-08 with robust performances by private players. The 13 non-life insurers collected US$ 4.7 billion in premium against US$ 4.2 billion in the same period last year. While the public sector could increase its premiums by just 3.57 per cent, 9 private sector players clocked premium growth of 26.49 per cent. Private sector players' market share has grown to about 40 per cent in FY08 as compared to the public sector's 60

A Brief History of the Insurance Sector

The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the
life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British

INSURANCE SECTOR POLICY BY GOVERNMENT

* Foreign direct investment up to 26 per cent is permitted under the automatic route subject to obtaining a license from the IRDA. * IRDA has removed administered pricing mechanism, i.e. de-tariffing in respect of fire and engineering along with motor insurance of general insurance for premium, effective from 1 January, 2007. * The control rates on fire, engineering and workmen's compensation insurance classes has been removed from 1 September, 2007. * Some state governments have also taken a dynamic role in this sector. The Government of Andhra Pradesh after piloting the 'Arogya Sri' health insurance scheme in three districts plans to issue health cards to 18 million BPL (below the poverty line) families. As a result, about 60 million of the State's 80 million people will have insurance cover. The Karnataka Government has partnered with the private sector to provide coverage at a low cost in the Yeshaswini Insurance scheme. Launched in 2002, the scheme provides coverage for major surgical operations, including those pertaining to pre-existing conditions, to Indian farmers who previously had no access to insurance.

IMPACT OF INSURANCE ON INDIAN ECONOMY

1. Mobilization of saving
Life insurance has historically been an important method through which individuals with relatively low incomes have been able to save and invest effectively for the longer term. By designing relatively simple life insurance and savings contracts, which can be purchased in small amounts on a regular basis, insurance companies have been able to accumulate large amounts of money from across a large proportion of the population. By pooling these savings from many small investors into large accumulations of invest able funds, insurance companies have been able to invest not only in a wider range of investments than individuals would have been able to invest in directly themselves but have also been able to invest in larger scale and more risky investment opportunities which will be more beneficial to the economy. In addition, because in life insurance there is a regular or contractual nature to the payment of premiums by consumers, the level and stability of personal saving is increased, compared to what would be the case if the payment system is more discretionary. This contractual nature of the premium payment system in life Insurance has been reinforced by insurance companies developing good marketing strategies in order to encourage individuals to save. There is no doubt that the efforts of insurance companies in creating effective sales and marketing techniques, despite the occasional criticisms of pressure selling, have played a key role in the growth of the life insurance business, and hence indirectly stimulated the level of long term saving within the economy as a whole.

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2. Investment and the development of capital markets

It is through the investment of the premiums paid by policyholders (and also the investment of shareholder funds) that the transmission of saving is fed through into the wider economy. The mechanism through which this transmission takes place is the capital market. The range of investments in which an insurance company can invest its funds within a given economy will depend of the degree of development of the local capital market. Savings mobilized and invested in the capital market by life insurance companies clearly acts as an important stimulus to the growth of the capital market itself. However the relationship between the level of saving generated through life insurance and private pension contracts and the development of a domestic capital market is a two-way process. This is because life insurance and private p pension contracts usually involve a voluntary decision to save on the part of customers. Customers will not wish to save through these contracts if the investment opportunities that are available to insurance companies in the capital market are not attractive. Hence there is a dynamic interaction process at work, with the development of saving through life insurance and the development of the capital Market both evolving together, with one assisting the other. It is worth noting here that if there are onerous regulations placed on the investment policies of insurance company funds by insurance legislation, even though they may have the sound intention of reducing the risk of insurance company insolvency, they can inhibit both the development of the life insurance industry and the capital market. Hence there should be coordination between the insurance regulatory authority and those drafting insurance legislation and other government departments charged with this wider responsibility of seeking to develop the local capital market. In addition, life insurance companies also play a risk absorption role in the capital market as underwriters of new equity and bond issues. By guaranteeing the placement of issues and placing a floor on the issue price, this encourages the supply of new issues onto the capital market.

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3. Assisting in the reform of the pensions system

world-wide there has been a general trend for governments to play a less pervasive role in pension provision. This reflects in part political changes, but it also reflects the fact that governments are unable to justify to voters the higher taxes (or more state borrowing) necessary to support this government role. In recent times a major change has been the transfer of more of the responsibility for pension provision onto the private insurance sector. In developed economies, the projected future cost of unfunded state pensions, due to ageing populations and higher public expectations with rising standards of living has been a major determinant of this shift. And even in emerging economies with younger populations, the need for fiscal prudence, sometimes due to pressure from the IMF and World Bank, is requiring a reappraisal the balance between state and private pension provision. The life insurance industry usually plays a key role as the government wishes to shift the future burden of some of this retirement provision. This is because life insurance companies are in the long term savings business and have developed well tested pension products. Some of these pension products are personal pensions and some are group pensions, usually organized though an employer but sometimes through other affinity group, such as professional associations. It should be noted that group pension schemes offered by insurance companies existed before occupational or self-administered schemes run by the employers themselves. For occupational pension schemes the trend has been for companies, as they have become larger, to set up and manage their own pension schemes rather than have these group schemes managed by life insurance companies. One weakness in most state pension schemes is that individuals who are self employed are often inadequately covered. This is due to noncompliance by individuals, sometimes due to variability of in their income or to the black economy, and to the difficulty of enforcing the collection of contributions by the social security agencies, especially in rural communities. Life insurance companies offer personalized products and since they operate through agent and broker networks, and their offices, located across a country they usually have a more effective collection system.

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4. Economic benefits of a dynamic life insurance sector

What are the wider economic benefits that derive from the stimulation of private sector saving and its subsequent investment in the capital market within a given economy? Firstly, these savings can be made available, either in the form of equity or debt capital, to manufacturing, agricultural, energy, trading enterprises etc., in the private sector. New companies can be set up and finance is available for existing companies to increase their level of capital expenditure in new plant, equipment etc. Moreover, particularly for life insurance, since the time horizons for investment are long-term, these savings can be tied up for a long time and hence can be made Available for capital expenditure decisions that only will produce profits in the future. This investment activity of life insurance complements the lending practices of the banking system, since banks can only provide short-term finance to manufacturing and other enterprises, because of the short-term nature of their deposits. These long-term savings generated by life insurance companies can also be made available to government to allow to fund improvements in the infrastructure, since this infrastructure investment is important , especially in emerging economies, not only to underpin the growth of domestic private sector companies but also to encourage foreign companies to enter the local economy. These capital expenditure decisions, both by the private sector and by the government, should lead to increases in the level of employment and increases in the standard of living across the economy. Moreover, as the productive base of the nation increases, the export potential of the country also increases, as well as allowing the country to supply more of the goods that it currently imports from abroad. Not only is the balance of payments and foreign exchange holdings improved, but the domestic exchange rate is also strengthened. The stimulation of greater saving also has short-term economic benefits. If individuals can be persuaded to save more, then by definition they will be consuming less. This reduced consumption will help to lower any inflationary pressures that might exist within the economy. This inflation-reducing benefit will clearly be greater within an economy where consumption is tending to squeeze out potential capital expenditure.

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IRDA
DUTIES, POWER AND FUNTIONS OF IRDA
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA..(1) Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.

(2)

Without prejudice to the generality of the provisions contained in sub-section (1), the

powers and functions of the Authority shall include, -

(a) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;

(b) 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;

(c) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;

(d) Specifying the code of conduct for surveyors and loss assessors;

(e) Promoting efficiency in the conduct of insurance business;

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(f) promoting and regulating professional organizations connected with the insurance and re-insurance business;

(g) Levying fees and other charges for carrying out the purposes of this Act;

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1.0 OBJECTIVES
The summer internship program was carried with three prime objectives in mind. The entire internship program was divided into three parts, a. b. The recruitment of the insurance advisors Sales Process.

The recruitment of agent advisors is the most important responsibility of a sales manager in any insurance organization. If the manager is able to recruit quality agent advisors half of his work is done then and there. During this internship program I was involved in the recruitment of insurance agent and advisors under the supervision of the sales manager and the associate partner. This enabled me to get a first hand experience and learning of this important function which will be very helpful in my future.

1.2 SIGNIFICANCE
The companys main profile is to insure the life of a person .It provides Life Insurance and had proved its coin in the industry as an insurance company over there with a large asset base. Some of the highly reputed persons are its investors. The main strength of this company is that it gives highest returns in the entire industry because of which it is publics favorite. In India most of the population is uninsured, the company can take a very huge advantage of insuring the lives of the people over here. Also this is a kind of investment in which a person can invest his income (white or black) and can avail huge income benefits from it as the income from this source is non tax deductible under section 18C and 1010D. Therefore, it is a good source of income for a person. In India normally people trust on LIC so it may be difficult for the company to sell Life Insurance in India but can make huge profits in some other types of insurance such as med claims, auto insurances etc.

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1.3 MANAGERIAL USEFULNESS OF THE STUDY

Research simply means a search for facts answers to questions and solutions to problems. It is a purposive investigation. It is an organized enquiry. In other words research means search for knowledge and research methodology is a systematic way to solve he research problem. It is a science of study how the search is actually done. It presents the source of data collection, the sampling procedures and tools of investigation and limitations of the study. My research project has a specified framework for collecting the data in an effective manner. Such framework is called research design.

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2.0 COMPANY PROFILE

Overview
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank - one of India's foremost financial services companies-and Prudential plc - a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 42.72 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%. We began our operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide team comprises of over 2000 branches (inclusive of 1,095 micro-offices), over 261,000 advisors; and 24 bancassurance partners.

The ICICI Prudential edge.

The ICICI Prudential edge comes from our commitment to our customers, in all that we do be it product development, distribution, the sales process or servicing. Here's a peek into what makes us leaders. 1. Our products have been developed after a clear and thorough understanding of customers' needs. It is this research that helps us develop Education plans that offer the ideal way to truly guarantee your child's education, Retirement solutions that are a hedge against inflation and yet promise a fixed income after you retire, or Health insurance that arms you with the funds you might need to recover from a dreaded disease. 2. Having the right products is the first step, but it's equally important to ensure that our customers can access them easily and quickly. To this end, ICICI Prudential has an advisor base across the length and breadth of the country, and also partners with leading banks, corporate agents and brokers to distribute our products .

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3. Robust risk management and underwriting practices form the core of our business. With clear guidelines in place, we ensure equitable costing of risks, and thereby ensure a smooth and hassle-free claims process. 4. Entrusted with helping our customers meet their long-term goals, we adopt an investment philosophy that aims to achieve risk adjusted returns over the long-term.

5. Last but definitely not the least, our 28,000 plus strong team is given the opportunity to learn and grow, every day in a multitude of ways. We believe this keeps them engaged and enthusiastic, so that they can deliver on our promise to cover you, at every step in life.

Vision & values Vision:To be the dominant Life, Health and Pensions player built on trust by world-class people and service. This we hope to achieve by: Understanding the needs of customers and offering them superior products and service Leveraging technology to service customers quickly, efficiently and conveniently Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders Providing an enabling environment to foster growth and learning for our employees And above all, building transparency in all our dealings

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The success of the company will be founded in its unflinching commitment to 5 core values -- Integrity, Customer First, Boundaryless, Ownership and Passion. Each of the values describe what the company stands for, the qualities of our people and the way we work. We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to our growth. Values:Every member of the ICICI Prudential team is committed to 5 core values: Integrity, Customer First, Boundaryless, Ownership, and Passion. These values shine forth in all we do, and have become the keystones of our success.

Fact sheet ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential Life's capital stands at Rs. 42.72 billion (as of June 30, 2008) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. For the quarter ended June 30, 2008, the company garnered Retail Weighted New Business Premium of Rs. 1,174 crores as against Rs 810 crores for the quarter ended June 30, 2007, thereby posting a growth of 45% and has underwritten over 6 lakh policies over this period. The company has assets held over Rs. 30,600 crore as on August 31, 2008. ICICI Prudential Life is also the only private life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. The AAA (Ind) rating is the 20

highest rating, and is a clear assurance of ICICI Prudential's ability to meet its obligations to customers at the time of maturity or claims. For the past seven years, ICICI Prudential Life has retained its leadership position in the life insurance industry with a wide range of flexible products that meet the needs of the Indian customer at every step in life. Distribution:ICICI Prudential Life has one of the largest distribution networks amongst private life insurers in India. It has a strong presence across India with over 2000 branches (includung 1,095 micro-offices) and an advisor base of over 261,000 (as on August 31, 2008). The company has 24 bancassurance partners having tie-ups with ICICI Bank, Bank of India, South Indian Bank, Shamrao Vitthal Co-Op Bank, Jalgaon Peoples Co-op Bank, Ernakulam District Co-op Bank, Idukki District Co-op Bank, Ratnagiri Sindhudurg Gramin Bank, Solapur Gramin Bank, Wainganga Kshetriya Gramin Bank, Aryawart Gramin Bank, Jharkhand Gramin Bank, Narmada Malwa Gramin Bank, Baitarani Gramya Bank, Ratnagiri District Central Co-op Bank, Seva Vikas Co-op Bank, Sangli Urban Co-Operative Bank, Baramati Co-operative Bank, Ballia Kshetriya Co-Operative Bank, The Haryana State CoOperative Bank, Renuka Nagrik Sahakari Bank, Amanath Co-Operative Bank, Arvind Sahakari Bank, Bhandara Urban Co Operative Bank

Products:Insurance Solutions for Individuals ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its products can be enhanced with up to 4 riders, to create a customized solution for each policyholder.

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Savings & Wealth Creation Solutions

Save'n'Protect is a traditional endowment savings plan that offers life protection along with adequate returns. CashBak is an anticipated endowment policy ideal for meeting milestone expenses like a child's marriage, expenses for a child's higher education or purchase of an asset. It is available for terms of 15 and 20 years.

LifeTime Gold is a unit-linked plan that offers customers the flexibility and control to customize the policy to meet the changing needs at different life stages. It offers 7 fund options - Preserver, Protector, Balancer, Flexi Balanced Multiplier, R.I.C.H and Flexi Growth.

LifeStage RP is unit linked plan that provides you with an option of lifecycle-based portfolio strategy that continuously re-distributes your money across various asset classes based on your life stage. This will help you achieve the right Asset Allocation to meet your desired financial goals.

LifeLink Super is a single premium unit linked insurance plan which combines life insurance cover with the opportunity to stay invested in the stock market. Premier Life Gold is a limited premium paying plan specially structured for longterm wealth creation. InvestShield Life New is a unit linked plan that provides premium guarantee on the invested premiums and ensures that the customer receives only the benefits of fund appreciation without any of the risks of depreciation.

InvestShield Cashbak is a unit linked plan that provides premium guarantee on the invested premiums along with flexible liquidity options. LifeStage Assure a unit linked insurance plan that provide upto 450 % of first year premium guarantee on maturity, with the additional advantage of a lifecycle based portfolio strategy that allocates the investors money across various asset classes based on his life stage and risk appetite.

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Protection Solutions

LifeGuard is a protection plan, which offers life cover at low cost. It is available in 3 options - level term assurance, level term assurance with return of premium & single premium.

HomeAssure is a mortgage reducing term assurance plan designed specifically to help customers cover their home loans in a simple and cost-effective manner.

Education Solutions

SmartKid New ULRP provides guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the child's life. SmartKid plans are also available in traditional form.

Retirement Solutions

ForeverLife is a traditional retirement product that offers guaranteed returns for the first 4 years and then declares bonuses annually. LifeTime Super Pension is a regular premium unit linked pension plan that helps one accumulate over the long term and offers 5 annuity options (life annuity, life annuity with return of purchase price, joint life last survivor annuity with return of purchase price, life annuity guaranteed for 5, 10 and 15 years & for life thereafter, joint life, last survivor annuity without return of purchase price) at the time of retirement.

LifeStage Pension is a regular premium unit linked pension plan that provides you with a unique lifecycle-based strategy that continuously re-distributes your money across various asset classes based on your life stage, eventually providing you with a customized retirement solution.

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LifeLink Super Pension is a single premium unit linked pension plan. Immediate Annuity is a single premium annuity product that guarantees income for life at the time of retirement. It offers the benefit of 5 payout options. PremierLife Pension is a unique and convenient retirement solution with a limited premium paying term of three or five years, to suit professionals and businessmen, especially those who require more flexibility and customization while planning their finances.

Health Solutions

Health Assure Plus: Health Assure is a regular premium plan which provides long term cover against 6 critical illnesses by providing policyholder with financial assistance, irrespective of the actual medical expenses. Health Assure Plus offers the added advantage of an equivalent life insurance cover.

Cancer Care: is a regular premium plan that pays cash benefit on the diagnosis as well as at different stages in the treatment of various cancer conditions. Cancer Care Plus: is a wellness plan that includes all the benefits of Cancer Care and also provides an additional benefit of free periodical cancer screenings. Diabetes Care: Diabetes Care is a unique critical illness product specially developed for individuals with Type 2 diabetes and pre-diabetes. It makes payments on diagnosis on any of 6 diabetes related critical illnesses, and also offers a coordinated care approach to managing the condition. Diabetes Care Plus also offers life cover.

Diabetes Care Plus: is a unique insurance policy that provides an additional benefit of life cover for Type 2 diabetics and pre-diabetics Hospital Care: is a fixed benefit plan covering various stages of treatment hospitalisation, ICU, procedures & recuperating allowance. It covers a range of medical conditions (900 surgeries) and has a long term guaranteed coverage upto 20 years.

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Crisis Cover : is a 360-degree product that will provide long-term coverage against 35 critical illnesses, total and permanent disability, and death. MediAssure is a health insurance policy that provides assured insurability till age 75 years, assured coverage for accepted pre-existing illnesses after 2 years and an assured price for 3 years.

Group Insurance Solutions ICICI Prudential Life also offers Group Insurance Solutions for companies seeking to enhance benefits to their employees. Group Gratuity Plan: ICICI Prudential Life's group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner and also avail of tax benefits as applicable to approved gratuity funds. Group Superannuation Plan: ICICI Prudential Life offers a flexible market linked scheme that provides substantial benefits to both employers and employees. Both defined contribution (DC) and defined benefit (DB) schemes are offered to optimise returns for members of the trust and rationalise cost. Members have the option of choosing from various annuity options or opting for a partial commutation of the annuity at the time of retirement. Group Immediate Annuities: ICICI Prudential Life realises the importance of prudent retirement planning. With this in mind, we have developed a suite of annuity products that not only give you an income for life but also provide you options to match your needs. In addition to the annuities offered to existing superannuation customers, we offer immediate annuities to superannuation funds not managed by us. Group Term Plan: ICICI Prudential Life's flexible group term solution helps provide an affordable cover to members of a group. The cover could be uniform or based on designation/rank or a multiple of salary. The benefit under the policy is paid to the beneficiary nominated by the member on his/her death. 25

Flexible Rider Options ICICI Prudential Life offers flexible riders, which can be added to the basic policy at a marginal cost, depending on the specific needs of the customer.

1. Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the rider sum assured under the policy. If an accident results in total and permanent disability, 10% of rider sum assured will be paid each year, from the end of the 1st year after the disability date for the remainder of the base policy term or 10 years, whichever is lesser. If the death occurs while travelling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit. 2. Critical Illness Benefit: protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical expenses prior to death. 3. Waiver of Premium: In case of total and permanent disability due to an accident, the future premiums continue to be paid by the company till the time of maturity. This rider is available with SmartKid, LifeTime Plus, LifeTime Super and LifeTime Super Pension. 4. Income benefit rider: In case of death of the life assured during the term of the policy, 10% of the sum assured is paid annually to the nominee on each policy anniversary till the maturity of the rider.

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Board of directors:The ICICI Prudential Life Insurance Company Limited Board comprises reputed people from the finance industry both from India and abroad.

Mr.K.V. Kamath, Chairman Ms.Chanda Kochhar, Director Mr. Barry Stowe, Director Mr. H.T. Phong, Director Prof. Marti G. Subrahmanyam, Director Mr. Mahesh Prasad Modi, Director Ms. Rama Bijapurkar, Director Mr. Keki Dadiseth, Director Ms. Shikha Sharma, Managing Director Mr. N.S. Kannan, Executive Director Mr. Bhargav Dasgupta, Executive Director

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Management team:The ICICI Prudential Life Insurance Company Limited Management team comprises reputed people from the finance industry both from India and abroad. Ms. Shikha Sharma, Managing Director & CEO Mr. N. S. Kannan, Executive Director Mr. Bhargav Dasgupta, Executive Director Ms. Anita Pai, Executive Vice President Customer Service & Technology Dr. Avijit Chatterjee, Appointed Actuary Mr. Puneet Nanda, Executive Vice President & Chief Investment Officer

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Awards:-

ICICI Prudential Life won the Award for Brand Excellence in the Banking and Financial services category at the Asia Brand Congress 2008.

Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance Co. Ltd. was adjudged the Businesswoman of the year at The Economic Times Awards for Corporate Excellence, 200708. 29

ICICI Prudential Life won the UK Trade & Investment India Business Awards 2008 in the Business Partnership Award-Large Company category

ICICI Prudential Life won the ICICI Group Marketing Excellence Award 2008 in three key categories for its marketing initiatives

30

ICICI Prudential Life was awarded the INDYs Award for Excellence in Mass Communication in the category of Most Creative Advertisement-Television

India's

Most

Customer

Responsive

Insurance

Company

Avaya Global Connect - Economic Times Customer Responsiveness Awards, 2007. Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was adjudged as one of the 50 Most Powerful Women in Business by The Financial Express.

31

Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was adjudged the Entrepreneur of the Year-Manager at the Ernst and Young Entrepreneur Awards 2007

Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was awarded the Outstanding Businesswoman of the Year at CNBC TV18's India Business Leader Awards 2007

32

ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runner up at the Outlook Money & NDTV Profit Awards 2007

ICICI Prudential Lifes, retirement solutions campaign for the year 2006-07 was awarded the Bronze Effy trophy in the services category.It also won the Brand Equity Bravery Award 2007, instituted by Ad club.

ICICI Prudential Lifes website, www.iciciprulife.com was awarded the best website among private life insurers at the Web 18 and Frost & Sullivan Genius of the Web Awards 2007 for commendable work in the online.

33

Innovation Award for launching Diabetes Care Prudence Award 2006 People Award for excellence in training and people development - Prudence Award 2006

India's Most Customer Responsive Insurance Company Avaya GlobalConnect - Economic Times Customer Responsiveness Awards

Most Trusted Private Life Insurer The Economic Times - A C Nielsen Survey of Most Trusted Brands 2003, 2004 and 2005

34

Prudence Customer Prudential Corporation Asia

Centricity

Award

2004

&

2005

Best Life Outlook Money Awards 2003 & 2004

Insurer

2003

35

IMM Award Institute of Marketing & Management

for

Excellence

Organisation with Indira Group of Institutes

Innovative

HR

Practices

Superbrand 2003-04

Organisation with Innovative Asia-Pacific H R Congress Awards for HR Excellence

HR

Practices

Silver Effie for Effectiveness of the Retire from Work not life advertising campaign Effies 2003

36

Recognitions:IMM Award for Excellence Institute of Marketing & Management. Organisation with Innovative HR Practices Indira Group of Institutes. Organisation with Innovative HR Practices Asia-Pacific H R Congress Awards for HR Excellence.

SWOT ANALYSIS:Strength

ICICI Prudential is the no.1 private sector company.

Weakness

Now days most of the people are aware of life insurance, still only 8% of the

Indians are insured.

Difficulty in convincing people as they are still engaged with the traditional

LIC policies.

Because of lack of knowledge, policy holders often buy unfavorable policies,

in response to these issues, governments often make detailed regulations which set down minimum standards for policies and govern how they may be advertised and sold.

37

Opportunities

As a result of increasing awareness of the people regarding secure

investments, life insurance is the best option which gives the benefit of insurance & investment

Life insurance is an effective way of saving taxes. All ICICI Prudentials

pension plans are eligible for a deduction under Sec. 80 CCC (1)

Being the major player, it is easier for the Sales Channel to convince people

and increase its share.

Most of the offices are located at places from where it is easier to tap the

HNIs (High Net worth Individuals)

As the growth in private insurance sector from 5.66% in 2004-05 to 12.95% in 2005-06, it will give a boost to companies.

Threats

The FDI hike announced by Mr. P. Chidambaram of UPA Govt. in the

budget 2006 from 26% to 49% is the major threat to the Indian Insurance Industry.

38

3.0 RESEARCH METHODOLOGY

Research in common parlance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. The word research has been derived from French word Researcher means to search. FRANCIES RUMMER defined Research: It is a careful inquiry or examination to discover new information or relationship and to expand or verify existing knowledge. Research is the solution of the problem, whether created or already generated. When research is done, some new out come, so that the problem (created or generated) to be solved.

Methodology Research Design:

Research Design is the conceptual structure within which research is conducted. It constitutes the blueprint for collection, measurement and analysis of data. The design used for carrying out this research is Descriptive- means that the study is done in detail.

DATA SOURCE:
In this research the source of data collection is:

Primary data

It is original and first hand information. Primary data can be collected by following ways:1. Direct personal interview. 2. Indirect personal interview.

39

3. Information from correspondents. 4. Questionnaires filled by enumerators.

Secondary data

It is collected through other source. E.g. any government publication is primary for government and secondary for a research worker. Secondary data can be collected by following sources:1. Published sources. 2. Unpublished sources. The sources of collection of secondary data are:

Books Websites Magazine

40

4.0 LITERATURE OVERVIEW

Unit linked insurance plan (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). The policy value at any time varies according to the value of the underlying assets at the time. ULIP came into play in the 1960s and became very popular in Western Europe and Americas. The reason that is attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility which it offers. As times progressed the plans were also successfully mapped along with life insurance need to retirement planning. In todays times, ULIP provides solutions for insurance planning, financial needs, financial planning for childrens future and retirement planning.

ULIP PROVIDES MULTIPLE BENEFITS TO THE CONSUMER. THE BENEFITS INCLUDE:

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 41

ULIP: INVESTMENT & INSURANCE

Mutual funds is the 'safety of the principal' guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. Insurance is a provision against risk and it is a device with which man tries to protect himself from risk in life. The recent development in the financial innovation is Unit Link Insurance Policy (ULIP), which covers the concept of mutual fund and insurance. A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two. In other words, it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. In the event of the insured person's untimely death, his nominees would normally receive an amount that is the higher of the sum assured or the value of the units (investments). To put it simply, ULIP attempts to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. It saves the investor/insurance-seeker the hassles of managing and tracking a portfolio or products.

42

HOW ULIPS MANAGE MONEY

Unit Linked Insurance plans (ULIPs) have become much sought after by individuals who want to buy life insurance. Not only do they offer an insurance cover but also have potential to generate attractive returns as compared to plain-vanilla plans. The method in which ULIPs manage their money differs from that for a traditional endowment plans. Here, I have outlined just how unit linked plans manage their money. ULIPs are different from traditional plans in the sense that they invest the premium money in market-linked instruments; primarily in stocks, bonds, government securities and money market instruments. ULIPs also differ significantly from traditional plans in that they offer several options to individuals based on the equity component varying from zero to a maximum of 100%. Therefore, individuals are free to structure their ULIP portfolio. They have the choice to invest their premium money in stocks, bonds, government securities or a combination of the above to suit their requirements.

Let us take a look at just what these options are and how they differ from each other.

ULIP options Broadly speaking, most life insurance companies offer individuals 4 options to choose from; Aggressive/Growth funds, Balanced funds, Debts funds and money market funds. They differ primarily in the nature of their investments as well as their risk profile. A graph will help in understanding the same better.

43

Aggressive/Growth fund Such types of funds invest a major portion of the premium in the equity markets. They are therefore, considered to be high on risk parameter. The investment mandate, though largely the same, may differ slightly across various life insurance companies. For example, while most companies have a mandate of being able to invest up to 100% of the aggressive/growth fund corpus in stocks, a few cannot exceed say, 80% of their investments in equities. The above mandate has the potential to make a difference to the returns generated by the ULIP portfolio. For example, if stock market look attractive from a longterm perspective, an individual can take advantage of the same by investing in the aggressive/growth fund option so long as his risk profile coincides with the higher risk levels associated with such an investment.

Balanced fund
A balanced fund invests the premium money in a portfolio, which consists of both equities as well as debt instruments. The balance is stuck by investing up to 60% of the portfolio in equities and the balance 40% in debt instruments like government securities and bonds. Balanced funds are considered to be medium-risk investments. Investments in balanced funds are ideal for individuals who are apprehensive of taking the 100% equity route but would still like to add a dash of equity to their portfolio to spruce up returns. Balanced funds also add value to individuals would like to temper their risks by going down on equities.

44

Debt Fund
These types of funds invest the premium money indebt instruments like government securities, bonds and AAA rated securities. Such funds are considered to be safe in nature when compared to their riskier equity/balanced counterparts. The returns though, tend to be lower and steadier than the equity/balanced fund. Debt fund act as a good avenue for individual to park their corpus in case they feel that the stock markets are overheated and could be headed for a correction. They also add value for individuals who feel that they have attained their targeted returns and would now like to book profits by shifting a part/whole of their corpus into debt instrument. Besides, if one considers the tax benefits which life insurance offers to individuals, then debt investment offer a good opportunity when compared to avenues such as bank deposits?

Money market fund/Liquid fund

Such a fund invests the premium money it receives in short term liquid instruments like bank deposits and the money markets. By short term, we mean instruments, which have a maturity of one year or less. This fund is considered to be very safe on the risk parameter and stable on the returns front. Individuals can use such funds to park their money for the short term.

Maturity Benefit:
On maturity, you would receive either the guaranteed maturity value (GMV) or the market value of the units, whichever is higher. Along with, you would also receive the market value of your units in the supplementary account.

45

Death Benefit:

In the unfortunate event of death of the life insured, the beneficiary would receive higher of (0.5 *T*AP or5*AP) less relevant part withdrawals or the market value of the units in main account, whichever is higher, plus the amount in the supplementary account. Where the life insured is minor, the death benefits during the first five year of the policy term or below the age of 18, will only be the greater of all the premiums paid (excluding rider premiums) or the value of units.If there has been a withdrawal from the main account during the policy term, the sum assured would stand reduced in the same proportion.

Riders
Every person has a different need and we at ICICI Life Insurance recognize this. To give you the flexibility to customize and enhance your cover, we offer a set of riders which you may opt for along with your basic policy and shape your policy to suit your individual needs.

The riders may be availed of at the time of purchasing the plan, at a nominal cost. The maximum amount of benefit you can avail is equal to the basic sum assured. The aggregate premium on all value-adds should not, however, exceed 30% of the basic premium.

Accidental Death Benefit (ADB)

This benefit provides an additional amount (over and above the death benefit) to the beneficiary in the event of accidental death of the life insured. Accident is defined as that which causes death by violent, accidental, external and visible means and independent of any physical or mental illness.

46

The maximum cover available under this benefit is equal to the basic sum assured (subject to a maximum of Rs 10 lakhs)

Permanent Disability Benefit (PDB)

This benefit can be added to the basic life insurance plan to provide financial support in case of permanent disability due to an accident. Permanent Disability is defined as permanent and immediate inability to work or permanent loss of use of two limbs or total and permanent loss of sight. The maximum cover available under this benefit is equal to the basic sum assured (subject to a maximum of Rs 10 lakhs)

Critical Illness Benefit (CIB)

This benefit can be added to the basic life insurance plan to provide financial support in the event of medical emergencies. On the first occurrence of critical illness during the term of the plan, you would receive a portion of the sum assured to help you reduce your financial burden in this emergency. The maximum Critical Illness Benefit that you can avail of is equal to half of the basic sum assured(subject to a maximum of Rs 20 lakhs) .

47

Life Guardian Benefit (LGB)

In case of the unfortunate death of the proposer, this benefit keeps the policy alive by waiving all future premiums on the policy. This benefit can be availed of only when the life assured and proposer are two different people.

Accidental Disability Guardian Benefit (ADGB)

In case the policyholder is permanently disabled as a result of accident, this benefit keeps the policy alive by waiving all future premiums on the policy

Various Schemes
However, there are some schemes in which the policyholder receives the sum assured plus the value of the investments. Various schemes have been tailored to suit different customer profiles and, in that sense, offer a great deal of choice. The advantage of ULIP is that since the investments are made for long periods, the chances of earning a decent return are high. Just as in the case of mutual funds, buyers who are risk averse can buy debt schemes while those who have an appetite for risk can opt for balanced or equity schemes.

ULIP - Key Features

1. Premiums paid can be single, regular or variable. The payment period too can be regular or variable. The risk cover can be increased or decreased. 2. As in all insurance policies, the risk charge (mortality rate) varies with age. 3. The maturity benefit is not typically a fixed amount and the maturity period can be advanced or extended.

48

4. Investments can be made in gilt funds, balanced funds, and money ` growth funds or bonds.

market funds,

5. The policyholder can switch between schemes, for instance, balanced to debt or gilt to equity, etc. 6. The maturity benefit is the net asset value of the units. 7. The costs in ULIP are higher because there is a life insurance component in it as well, in addition to the investment component. 8. Insurance companies have the discretion to decide on their investment portfolios. 9. They are simple, clear, and easy to understand. 10. Being transparent the policyholder gets the entire episode on the performance of his fund. 11. Lead to an efficient utilization of capital. 12. ULIP products are exempted from tax and they provide life insurance. 13. Provides capital appreciation. 14. Investor gets an option to choose among debt, balanced fund and equity funds. Cover-Plus In a sense, unit-linked plans work like endowment plans-they combine insurance with investment. A part of the premium you pay goes towards buying you insurance cover and what's left of the rest (after deducting a host of charges-from fund management to administration expenses) is invested in equity and debt instruments. The investment component of the premium is converted into units-much like mutual fund units, to be bought and sold at the prevailing Net Asset Value (NAV); your premiums are unitised through the policy tenure, typically 15 or 20 years. Investment gains will accrue from an appreciation in the value of your units, and information on this is put out regularly by insurers.

49

Expenses One area where unit-linked plans come in for widespread criticism relates to the expenses that insurers charge under three broad heads:

mortality charges (which goes towards paying for your insurance cover), general expenses (agents' commissions and underwriting costs), and Fund management costs.

The second head, general expenses, accounts for the biggest component typically, around 40 per cent (of the premium paid) in the first two years, which goes down sharply in later years. The actual expense structure may vary from one product to another depending on, among other things, the amount invested, the investment tenure and the period beyond which withdraws are permitted.

Should Investor Opt for ULIP

Unit Linked Insurance Plans (ULIPs) were always seen as a 'wonder product' that simultaneously fulfilled an individual's needs for investment and insurance. However, the recent downswings in the markets have forced investors to do a rethink. Very often it was poor selection that was responsible for the investors' woes. Here is a 5-step strategy for investing in ULIPs. 1. Understand the concept of ULIPs Try to do as much homework as possible before investing in an ULIP. This way you will know what you are getting into and won't be faced with unpleasant surprises at a later stage. Our experience suggests that many a time people do not realize what they are getting into (in

50

fact we have been approached by several people who wanted to cancel the ULIPs they had been coerced into taking by unscrupulous agents). Gather information on ULIPs, the various options available and understand their working. Read the literature available on ULIPs on the Web sites and brochures circulated by insurance companies. 2. Focus on your requirement and risk profile Identify a plan that is best suited for you (in terms of allocation of money between equity and debt instruments). Your risk appetite should play an important role in the plan you choose. So if you have a high-risk appetite, go in for a more aggressive investment option and vice-a-versa. Opting for a plan that is lop-sided in favour of equities when you are a risk-averse individual might spell disaster for you (this is true in most cases currently).

3. Compare ULIPs of different insurance companies Compare products of the leading insurance companies. Enquire about the premium payments as ULIPs work on minimum premium basis as opposed to sum assured in the case of conventional insurance policies. Check the fund's performance over the past six months. Find out how the debt and equity schemes are performing and how steady the performance has been. Enquire about the charges you will have to pay. In ULIPs the costs involved are a big deciding factor. Ask about the top-up facility offered by ULIPs i.e. additional lump sum investments you can make to increase the savings portion of your policy. The companies give you the option to increase the premium amounts, thereby providing you with the opportunity to gainfully utilize surplus funds at your disposal.

51

Enquire about the number of times you can make free switches (i.e. change the asset allocation of the money in your ULIP account) from one investment plan to another. Some insurance companies offer you free switch for a 2-year period while others do so only for 1 year. 4. Go for an experienced insurance advisor Select an advisor who is not only professional and informed, but also independent and unbiased. Also enquire whether he has serviced clients like you. When your agent recommends a ULIP of X company ask him a few product-related questions to test him and also ask him why the other products should not be considered. Insurance advice at all times must be unbiased and independent and your agent must be willing to inform you about the pros and cons of buying a particular plan. His job should not just begin by filling the form and end after he deposits the cheque and gives you the receipt. He should keep a track of your plan and inform you on a regular basis. The key is to go for an advisor who will offer you value-added products. 5. Does your ULIP offer a minimum guarantee?

In market linked product if your investment's downside can be protected, it would be a huge advantage. Find out if the ULIP you are considering offers a minimum guarantee and what costs have to be borne for the same. This will enable you to make an informed choice.

First and foremost, investors need to understand that a ULIP is a bundled product of their investment and their insurance proceeds. So if you have a ULIP invest in equities, you are exposing your life insurance monies as well as your investible surplus to the vagaries of equity market. While it is fine and even sensible to let your investible assets get an equity flavour, the same cannot be said about your life insurance monies, which to a large extent should be scared. 52

A ULIP policyholder has the option to invest in a variety funds, depending on his risk profile. If one does not have appetite to invest in equity, they can choose a debt or balanced fund. However, the structure of a ULIP takes care of quite a bit of the uncertainty in the markets. Insurance companies understand the need to give insurance seekers the flexibility to rethink their investment strategy in view of market histrionics. It is the investors to make the right switch they need to track markets actively and be well informed, which is actually the job of the investment advisor/consultant. ULIP is suitable for individuals who are already adequately insured and are reasonably well informed and savvy to take active investment decisions by using the 'switch option' that is provided to a ULIP policyholder. Also policyholders with regular endowment plans that are not satisfied with the 4-6 per cent returns can consider taking a ULIP with a lower equity component.

Market Factoid 1. The growth options of ULIP have recorded annualized returns of over 20 per cent. 2. Various charges amounting to approximately 25 per cent in the initial years in all the schemes. 3. Most companies normally allow customers to switch, a fixed number of times annually from one fund to other fund. Later, they charge approximately Rs.100 per switch. 4. Private insurance companies 50 per cent sales up because of ULIPs today. 5. Individuals availing tax exemption under section 88 of Income Tax Act. 6. New Schemes coming into the market, which covers life insurance and accident insurance.

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IRDA's ULIP guidelines will protect policyholders

IRDA's new guidelines are aimed at protecting the interests of ULIP policyholders and enabling the customer to take an informed decision. The Insurance Regulatory and Development Authority (IRDA) recently introduced its muchawaited guidelines to govern unit-linked insurance policies (ULIPs), which are among the most popular class of life insurance policies sold in the country today. The primary advantage of ULIPs is that the customer gets the advantages of both insurance and mutual fund investment in a single contract. An in-house team invests and manages the premiums and gets the customer a return. ULIPs also offer tax deduction of up to Rs100,000 from the gross total income under Section 80C of the Income Tax Act, 1961. Returns from ULIPs are exempt from tax, subject to the conditions under Section 10(10D). The downside is that, generally, there are limited guarantees, and market risks are passed on to the customer completely. Returns could be lucrative if the market is upbeat, but the unit value could decline if the market goes down. First some background - ULIPs made an entry at a rather opportune time for insurance companies. The mood in equity markets was very pessimistic; however, at those levels (BSE Sensex less than 3,000 points) markets could go in only one direction - up. And take off they did in an unprecedented manner. From 3,000 points, the BSE Sensex surged furiously to over 12,000 points leaving investors breathless. On July 1, 2006, the IRDA introduced revised ULIP guidelines to correct "some" anomalies, we say some because much is yet to be achieved, but more on that later. For one IRDA has given the new ULIP a 'face', in insurance a face can be taken as the sum assured and the tenure. The old ULIP lacked both and individuals did not have inkling about either even after taking the ULIP. The latest guidelines dictate that:

54

1. Term/Tenure

The ULIP client must have the option to choose a term/tenure. If no term is defined, then the term will be defined as '70 minus the age of the

client'. For example if the client is opting for ULIP at the age of 30 then the policy term would be 40 years.

The ULIP must have a minimum tenure of 5 years.

2. Sum Assured

On the same lines, now there is a sum assured that clients can associate with. The minimum sum assured is calculated as: (Term/2 * Annual Premium) or (5 * Annual Premium) whichever is higher. There is no clarity with regards to the maximum sum assured. The sum assured is treated as sacred under the new guidelines; it cannot be reduced at any point during the term of the policy except under certain conditions - like a partial withdrawal within two years of death or all partial withdrawals after 60 years of age. This way the client is at ease with regards to the sum assured at his disposal.

3. Premium payments
If less than first 3 years premiums are paid, the life cover will lapse and policy will be terminated by paying the surrender value. However, if at least first 3 years premiums have been paid, then the life cover would have to continue at the option of the client.

4. Surrender value
The surrender value would be payable only after completion of 3 policy years.

55

5. Top-ups
Insurance companies can accept top-ups only if the client has paid regular premiums till date. If the top-up amount exceeds 25% of total basic regular premiums paid till date, then the client has to be given a certain percentage of sum assured on the excess amount. Top-ups have a lock-in of 3 years (unless the top-up is made in the last 3 years of the policy).

6.Partial withdrawals
The client can make partial withdrawals only after 3 policy years.

7. Settlement
The client has the option to claim the amount accumulated in his account after maturity of the term of the policy upto a maximum of 5 years. For instance, if the ULIP matures on January 1, 2007, the client has the option to claim the ULIP monies till as late as December 31, 2012. However, life cover will not be available during the extended period.

8. Loans
No loans will be granted under the new ULIP.

9. Charges
The insurance company must state the ULIP charges explicitly. They must also give the method of deduction of charges.

10. Benefit Illustrations

The client must necessarily sign on the sales benefit illustrations. These illustrations are shown to the client by the agent to give him an idea about the returns on his policy. Agents are bound by guidelines to show illustrations based on an optimistic estimate of 10% and a

56

conservative estimate of 6%. Now clients will have to sign on these illustrations, because agents were violating these guidelines and projecting higher returns. While what the IRDA has done is commendable, a lot more needs to be done. At Personalfn, we have our own wish list with regards to ULIP portfolios: 1. Regular disclosure of detailed ULIP portfolios. This is a problem with the

industry; for all their talk on being just like (or even better than) mutual funds, ULIP portfolios are nowhere near their mutual fund counterparts in frequency as well as in transparency. 2. On the same lines, other data points like portfolio turnover ratios need to be mentioned clearly so clients have an idea on whether the fund manager is investing or punting. 3. ULIPs (especially the aggressive options) need to mention their investment mandate, is it going to aim for aggressive capital appreciation or steady growth. In other words will it be managed aggressively or conservatively? Will it invest in large caps, mid caps or across both segments? Will it be managed with the growth style or the value style? 4. Exposure to a stock/sector in a ULIP portfolio must be defined. Diversified equity funds have a limit to how much they can invest in a stock/sector. Investment guidelines for ULIPs must also be crystallised. Our interaction with insurance companies indicates that there is little clarity on this front; we believe that since ULIPs invest so heavily in stockmarkets they must have very clear-cut investment guidelines.

57

How ULIPs can make you RICH!

Despite the seemingly comparable structures there are various factors wherein the two differ. In this article we evaluate the two avenues on certain common parameters and find out how they measure up.

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) rout the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house. This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter. ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses
In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India.For example equity-oriented 58

funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors. Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. . Frequently Asked Questions (FAQs)

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. We hope the following FAQs will enable a better insight to all buyers about the character and features of Unit linked Products.

59

1.What is a ULIP? ULIP 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. REMEMBER THAT IN A UNIT LINKED POLICY, THE INVESTMENT RISK IS GENERALLY BORNE BY THE INVESTOR. 2.What is a Unit Fund? The allocated (invested) portions of the premiums after deducting for all the charges and premium for risk cover under all policies in a particular fund as chosen by the policy holders are pooled together to form a Unit fund. 3. What is a Unit? It is a component of the Fund in a Unit Linked Policy. 4. What Types of Funds do ULIP Offer? Most insurers offer a wide range of funds to suit ones investment objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for returns also varies from fund to fund.

60

Limitation of the Project

Although the project has been worked out at its best yet there are some limitations which cannot be overlooked. Had these limitations been overcomed, the findings would be more accurate. Some of the limitations are 1. 2. Time constraint- Time was really a limiting factor in the project. Its really Data Constraint- since Delhi is very vast, its really difficult to collect data

difficult to work out such a large project between two months time. from whole of Delhi, Most of the data has been collected from South and central part of Delhi.

61

5.0 Analysis & finding

Based on questionnaire the people perception about insurance sector People whom I met belong to this age group: AGE GROUP: Below 25 years 25 to 35 35 to 50 50 to 60 above 60 years 10% 26% 33% 18% 13%
13% 18% 10% 26% below 25 years 25 to 35 35 to 50 50 to 60 33% above 60

AGE GROUP

62

Target population is indulged in this occupation: OCCUPATION: Business Professional Service Student 28% 37%
30%

OCCUPATION

5%

28%

Business Professional Service

30%
37%

Student

5%

63

The target population belongs to this income group ANNUAL INCOME: Less than 1.5 lakhs 1.5 lakhs to 3 lakhs 3 lakhs to 5 lakhs Above 5 lakhs 9% 30% 47% 14%
14% ANNUAL INCOME Less than 1.5lakhs 30% 47% Above 5lakhs 1.5 to 3 lakhs 3 to 5 lakhs

9%

64

With how many insurance companies do you have a relationship? 1. None 2. Only1 0.00 10.00

3. 2 companies 25.00 4. 3 companies 50.00 5. More than 3 15.00

aproximately, half of the population associates with 2 insurance companies. The response is so positive that there is no one who doesnt know about insurance company.

65

Reason for this relation with insurance company? Recommended by family/friends Brand name/ reputation of the bank Advertisement Branch near Residence/Office 88%
0% 12% Recommended by family Brand name/ reputaion of bank Advertisement 88%

12% 0% 0%

0%

Branch near residence/office

Most of the target population came to know about insurance through agents, who in their relation as a friend or a family member. Today also people do not believe on outsider for taking insurance policy. Some people also consider company reputation while taking policy.

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6.0 Recommendation& Conclusion

Recommendation There are certain flaws existing in this working of the insurance industry. There are some of the recommendation we ad come up with while doing this project. It will help to make insurance more important sector in todays economy. 1. The need of the hour is to devise a comprehensive strategy that will help the

firms face the challenges of the future. The financial services industry around the world over is undergoing a major transformation. It is very important that trained marketing professionals who are able to communicate specific features of the policy should sell the policy. 2. From our research we could find out that people are not aware about the policies and features of insurance. Therefore LIC and ICICI & Bharti Axa Life Insurance are recommended to shed light on policies and explain the benefits, thus increasing the awareness. 3. The penetration of insurance in India is around 22%. This indicates that a vast majority of rural population is not covered. The market player needs to explore this untapped potential through their marketing and sales network. 4. 5. The returns of the policies are not properly managed and never given in time. Pricing of insurance products, as empirically available in India, shows that So, these must be looked at. pricing is not in consonance with market realities. Life Insurance premium is generally perceived, as being too high while general insurance (especially motor insurance) is priced too low. 6. Some insurance products, which are not available in India, should, be introduced in market. There are areas for new product development: Industry all risk

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policies, Large projects risk cover, Risk beyond a floor level, Extended public and product liability cover

7.

Insurance companies will also had to get savvy in distribution. Enhanced

marketing thus will be crucial. Already many companies have full operation capabilities over a 12-hour period. Facilities such as customer service center are already into 24-hour mode. These will provide services such as motor vehicle recovery. Technology will also play an important role on the market.

The lines of distinction between banks insurance companies and brokerages are getting blurred. The future seems to belong to financial supermarkets that will offer a host of services and products to the consumer. In the next millennium all these activities would play a crucial role in the overall development and maturity of the insurance industry

Conclusion The various conclusions we had drawn from our project are: There has been tremendous change in the insurance history. And with it there has been continuous growth in this sector both in Indian as well as world context. The opening up of the insurance sector has changed the whole look of the industry. While the LIC in order to face the competition is coming with new strategies. New players like ICICI Prudential are leading the sector due to their strategic management and tailored made projects.

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From our research also we conclude that though the awareness and people opting for LIC plans are more as compare to ICICI Prudential & Bharti Axa Life Insurance but the later are gaining momentum in the market day by day. The primary reasons for buying an insurance policy, whether life or non-life is to protect us from vagaries of life. We do not invest in insurance for returns; rather we invest in it for regrettable necessities. Though a large proportion of policies available in the country provide for returns, but nobody is looking for returns to the inflation rate. So what does insurance offer, perhaps peace of mind, but even that takes time, due to poor claim performance The demand for insurance is likely to increase with rising per-capita incomes, rising literacy rates and increase of the service sector, as has been seen from the example of several other developing countries. In fact, opening up of the insurance sector is an integral part of the liberalization process being pursued by many developing countries . Insurance is a Rs.400 billion business in India and yet its spread in the country is relatively thin. Insurance as a concept has not been able to make headway in India. There has been a strong fall in insurance business in recent years. Furthermore, it can be observed that non-life business is not increasing as strongly as life business. On the other hand, growth fluctuations have been relatively small with growth rates varying between 1% and 5%. Life insurance business by contrast achieved average growth rates of 6%, although the actual rates ranged from 0% to 13%. This shows on the one hand the increasing significance of life insurance as an instrument for old age provisions and on the other hand indicates the sensitivity of life insurance to changes in the institutional and economic environment. So lets conduct this business with utmost economy with the spirit of trusteeship; thereby making insurance widely popular.

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BIBLIOGRAPHY
1. BOOKS

Kothari, C.R. Research Methodology by Prentice Hall India Customer behavior ICICI prudential product module

2. INTERNET

www.icicipru.com www.bimaonline.com www.yahoo.com www.indiamart.com www.mnyl.com

3. MAGAZINES & NEWSPAPERS

Business today Network magazine India today Times of India Hindustan times

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QUESTIONAIRE
NAME: _______________________ ADDRESS: ________________________________________ AGE: [ ] Below 25 years [ ] 25 to 40 OCCUPATION: Business [ ] Professional [ ] Service [ ] student [ ] Others[ ] [ ] 35 to 50 [ ] 50 to 60 [ ] Above 60 years

ANNUAL INCOME: Less than 1.5 lakhs [ ] Above 5 lakhs [ ] With how much insurance company do you have a relationship? 1. NONE 4. 2-4 2. ONLY 1 5. MORE THAN 4 3. 1-2 1.5 lakhs to 3 lakhs[ ] 3 lakhs to 5 lakhs[ ]

2. What is the longest duration of relationship you have had with any insurance company? [ ] less than 2 year [ ] 4-10 [ ] 2-4 year year [ ] 10-15 year [ ] more than 15

3. Reason for this relation with insurance company? Recommended by family/friends Brand Name/Reputation of Bank Advertisement Branch near Residence/Office

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Other Reason (please specify)

4. Rate your Satisfaction level on the following specific parameters regarding the services offered by Life Insurance Company. Very Satisfied Lower premium Larger risk cover Money back gurantee Reputation of company Easy access to agents Cover future uncertainties Tax saving device Saving tool Future investment Somewhat Satisfied Neither Somewhat Satisfied nor Dissatisfied Dissatisfied Very Dissatisfied

5. Are there any suggestions which according to you will make the services of the insurance company better? If yes please specify in the space below. __________________________________________________________________________ __________________________________________________________________________ ____________________________________________________________________

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