A PROJECT REPORT ON COMPARATIVE STUDY ON ULIPS IN THE INDIAN INSURANCE MARKET

FOR TATA AIG LIFE INSURANCE COMPANY LTD

BY MISS DELNAAZ. PARVEZ. DOCTOR MBA SEMESTER III

Project Guide Prof Vaishampayam

In Partial Fulfillment of the Requirement of the Two Year Full Time PGDM Programme Of the SMVIM, PUNE.

AY 2007-08

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

I got the knowledge about the Insurance industry. In this report I have said about the current position of the insurance sector in India.

This report includes a deep study made on the ULIPs in the insurance market and its impact on the persons income.

TABLE OF CONTENTS

S.NO. 1. 2.

CONTENTS Acknowledgement Certificate from the company Certificate from the college Introduction Company Profile Research Methodology Introduction to Insurance About ULIPs Distinction between ULIPs & Mutual Funds Comment on the Distinction Comparative Analysis of ULIPs( Tata AIG with others) Growth & Returns Fund Performance Overall Data Analysis and Findings Understanding the working of ULIPs of TATA AIG Market Survey on ULIPs of TATA AIG Integrated Financial Planning for Life Insurance Conclusion Recommendations Bibliography Questionnaire

PAGE NO. 3 4 5 6 7-9 10 11-17 19-26 27-30

3. 4. 5. 6. 7. 8..

9.

31-43,4446, 47-51

10 11. 12. 13. 14. 15. 16. 17.

52 53-56 57-62 63 64 65 66-67 68-69

ACKNOWLEDGEMENT
It has been an immense pleasure and truly enriching experience doing my project with TATA-AIG LIFE INSURANCE COMPANY LTD, PUNE

I take this opportunity to thank all those people who have made this experience a memorable one.. Firstly, I would like to extend my sincere and hearty thanks to: Mr.Parikshit Abroal (Cluster Head Agency, Tata-AIG Life Insurance), and Mr. Nitish Beohar (Senior Manager BA) who gave me an opportunity to associate myself with the Tatas.

I would like to thank my guide Miss.Anamika Dikshit (Assistant Business Manager, Tata-AIG Life Insurance) without whose help it would be difficult to complete this

project. I am very grateful to her for being a constant trainer and motivator for me for successful completion of the project. During the course of time she has given me valuable tips related with my project and she was more like a friend who guided me throughout the project. This gratitude will remain uncompleted if I wont mention the names of other persons Who helped me not only in my projects but also motivated me.

I would like to thank Mr. Rahul Bendre (Business Manager Tata- AIG Life Insurance), Mr. Kaizad S. (DCM, Kotak Mahindra Old Mutual Life Insurance Ltd.) and Mrs.Benaifer.S (Senior Officer, Finance Control, Societe Generale Corporate and Investment Banking) who provided me guidance and support from time to time.

Last but not the least I extend my special gratitude to The Advisors of Tata-AIG Life Insurance Mr. Shrikant Verma, Mr. Sudhir Chavan, Mr. Dattatray.Phule and Mr.Vikram Balwadkar who have contributed a lot in my project completion and the other advisors who co- operated with me to carry out the market research and the library staff of St.Miras College.

Delnaaz Doctor 3

Certificate from the Company

5 C

INTRODUCTION
The insurance plays a major role in the life of the humanity. Slowly people stared to realize the necessity of the insurance and these needs are unending as long as life exists. In fact insurance is not restricted for any category neither of the society nor in term of cast, ages or life styles. Also many people have a notion that Insurance is very good form of an investment, which is not right. Insurance is just creating a protection for you and your family. As Indian investors are now more exposed to the capital markets and have started understanding its working, they want to multiply their money rapidly. This can be done through Unit Linked Insurance Plans (market linked plans ) introduced by the Insurance Players. Therefore the only reasons for selecting this topic are To get more knowledge about insurance sector in India To undergo a comprehensive study of ULIPs. To get experienced of corporate scenario.

COMPANY PROFILE
Getting associated with a brand like Tata AIG for just 2 months was really a prestigious and a memorable period in my MBA tenure. Growth has been the main objective of the company and will continue to be the driving force in the years to come by spreading the wings wider in India and contribute in the economic and social development.

Tata- AIG LIFE Insurance Company is a joint venture between Tata Group and American International Group (AIG.) Lets throw light on the facts of both the high profile and prestigious companies.

The Group: TATAThe name trusted all over the country over the years. For over 130 yrs The TATA name has stood for Leadership with Trust. As a business group it has traversed 3 centuries and has emerged as Indias most respectable corporate group. It is a strong believer in ethics and its profits are placed in philanthropic trusts.

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

The Group: AIG American International Group is a leading US based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United Some of the features of AIG are: In business since 1919, Over 80,000 employees worldwide Presence in over 130 countries Over 50 million customers worldwide Revenues over US $ 81.3 billion Ranks 4th on the FORBES 500 LIST OF 2003. Deals in General and life insurance, asset management, financial services.

Tata-AIG LIFE INSURANCE

It is a joint venture between TATA and AIG. It provides insurance cover for both for life and group. It deals in all kinds of products. And now concentrates more on UNIT LINKED PLANS. It is Tata-AIG which consumers trust the more when it comes to giving exact claim valuation, best in consumer satisfaction and trusted as the best in quick disposal of claims. Its working is based on Business brought up by Business Associates who are the advisors/agents for the company. Areas of business Tata AIG Life Insurance products include a broad array of life insurance coverage to both individuals and groups. For groups, the company has life products whereas for individuals, it has term products, endowment products as well as money-back products. For groups and individuals, various types of add-ons and options are available to give consumers flexibility and choice. The company has also designed specific products for the financially challenged and underprivileged.

Some of the features are: 74% Stake of TATAs and 26% of AIG Licensed to operate on February 12, 2001 Has over 190 branches and planning to increase the number to 120 plus by August 2007 , and 300 plus by November 2008.

Over 5 lac + policy holders.

Tata AIG is all set to scale greater heights and has arrived at a vision of making it A BILLION DOLLAR COMPANY BY 2009 A glimpse at the Joint Venture TATA (74%) Ratan Tata Chairman CEO AIG (26%) Martin J. Sullivan President & Chairman

Tata- AIG INSURANCE Farrokh K Kavarana Chairman

Tata-AIG LIFE INSURANCE Trevor Bull Managing Director

Tata-AIG GENERAL INSURANCE Dalip Verma Managing Director

RESEARCH METHODOLOGY
Research design descriptive Data sources- primary data and secondary data Research approach face to face interview, observation, individual depth interview Research instrument questionnaire.

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

The project deals the comprehensive analysis of the ULIP schemes, what is ULIP all about, its NAV performance, the Growth, performance of the policies since their inception, its working, its popularity and a market survey.

The project contains various graphs, tables and questionnaire to further. elaborate on the explanations.

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INTRODUCTION TO INSURANCE
Today, only one business, which affects all walks of life, is insurance business. Thats why insurance industry occupies a very important place among financial services operative in the world. Owing to growing complexity of life, trade and commerce, individuals as well as business firms are turning to insurance to manage various risks. Therefore a proper knowledge of what insurance is and what purpose does it serve to individual or an organization is therefore necessary.

The future is never certain . So its rightly said, AN INSURANCE POLICY IN HAND KEEPS THE TENSION AWAY.

Insurance, essentially, is an arrangement where the losses experienced by a few are extended over several who are exposed to similar risks. Insurance is a protection against financial losses arising on the happening of an unexpected event. Insurance companies collect premium to provide security for the purpose. In simple words it is spreading of risks amongst many people. i) LIFE INSURANCE: It is a fundamental part of a sound financial plan which helps to insure your loved ones.

en s ma educ rria ati ge on &

We a h a lt h r cre a atio

ildr

Ch

Dying too soon

Living death

Living too long

Life insurance the only instrument that takes care of Life insurance the only instrument that takes care of these 3 probabilities and 2 priorities these 3 probabilities and 2 priorities

11

ii) Benefits:

1) SAVINGS For unforeseen circumstances.

2) EDUCATION For childs education and for higher studies.

3) RETIREMENT Facilitates adequate savings for worry free retired life. iii) Insurance ------------a Flash back: The earliest transaction of insurance as practiced today can be traced back to the 14th century AD. The business of insurance started with marine business by Traders who used to gather in the Lloyds coffee house in London, wherein they had agreed to insure their ships in transit. The 1st Life Insurance Policy was issued on 18 th June, 1583, on the life of William Gibbons for a period of 12 months.

Life Insurance in its current form came in India from the UK, with the establishment of British firm, Oriental Life insurance Company, in 1818 The 1st Indian insurance company was the Bombay Mutual Assurance Society Ltd, formed in 1870. By the year 1956, when the life insurance business was nationalized and the Life Insurance Corporation Of India ltd (LIC) was formed on 1st September, 1956 and there were 245 companies existing at that time in India. By 31.3.2002, eleven new insurers had been registered and had begun to transact Life insurance business in India.

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IV) INSURANCE CLASSIFICATION

Life Term Endowment Unit-linked Money-back

V) INSURANCE INDUSTRY POTENTIAL

1) Asia is amongst the worlds largest insurance markets contributing nearly 39% of global insurance business.

2)The Life Insurance Industry has grown by 27% p.a. over the last 5 years and by about 62% in the first eleven months of 2006 -07. Source IRDA Journal (April 2007) 3) Global Life Insurance Market: $1,521 billion, Global Non-Life Insurance Market: $922 billion 4) India is 23rd in insurance business with 0.41% share

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

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

7) Indian insurance market is set to touch $50 billion by 2010, on the assumption of a 7% growth in GDP (CII Projections 2001-2002)

8) The Insurance premium as a % of GDP in 2005 increased to 3.14% and is set to touch 4.3% in 2008. (Source Lifeline 26th Dec 2006)

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Growth Rate of Insurance sector Public Sector: 5.5% Private Sector: 57.4%

Indian Insurance is growing at the rate of 80%.

LIFE INSURANCE COMPANIES IN INDIA 1.Life Insurance Corporation of India

Private Players 2. Tata AIG Life Insurance Company Ltd 3. Kotak Mahindra Old Mutual Life Insurance Ltd 4. Birla Sun Life Insurance 5. ICICI Prudential Life Insurance 6. Aviva Life Insurance 7. Allianz Bajaj 8. Max New York Life Insurance 9. Bharti Axa Life Insurance 10. SBI Life Insurance 11. Reliance Life Insurance 12. ING Vysya Life Insurance 13. Sahara India Life Insurance 14. HDFC Standard Life Insurance 15. Shriram Group

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MARKET SHARE FOR 5 YEARS.

2001-02

2002-03

2003-04

2004-05

2005-06

LIC Private Player

98% 2%

94% 6%

87% 13%

78% 22%

71% 29%

MARKET SHARE OF INDIAN INSURANCE PLAYERS

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

market share
LIC PRIVATE

PRIVATE 26%

LIC 74%

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MARKET SHARE OF PRIVATE INSURANCE COMPANIES 2006-07

ICICI Prudential life 1.22% 0.01% 3.40% 0.06% 2.15% 0.24% 0.96% 0.85% 5.66% 4% 0.46% 0.62% 0.82% 1.17% 6.97% Aviva Life Tata AIG Life Reliance Life Kotak Mahindra Birla Sun Life ING Vysya Life Met Life Bajaj Allianz Life Shriram Life HDFC Standard Life. sahara Life SBI Life Bharati AXA life Max New York

Source: ESCOLIFE (Insurance newspaper by Ritu Nanda, June 2007) Thus we can say that LIC has the highest market share of 74% (public sector) and ICICI Life Insurance has a highest market share of 6.97%(private sector)

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COMPETITORS COMPARISION

LIC ranks 1st (public sector) in case of the premiums followed by ICICI PRU in the private Sector whereas Tata AIG Ranks 10th.

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Comparative Study on ULIPS In the Indian Insurance Market

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CHAPTER 1
ABOUT UNIT LINKED INSURANCE PLANS

1.1) INTRODUCTION
ULIPS also known as UNBUNBLED, VARIABLE INSURANCE PLANS has possibly been the single largest innovation in the field of life insurance in the past several decades. It wasnt too long back, when the good old endowment plan was the preferred way to insure oneself against an eventuality and to set aside some savings to meet ones financial objectives. Then insurance was thrown open to the private sector. The result was the launch of a wide variety of insurance plans, including the ULIPs.

Two factors were responsible for the advent of ULIPs on the domestic insurance horizon. First was the arrival of private insurance companies on the domestic scene. ULIPs were one of the most significant innovations introduced by private insurers. The other factor that saw investors take to ULIPs was the decline of assured return endowment plans.

These were the two factors most instrumental in marking the arrival of ULIPs, but another factor that has helped their cause is a booming stock market. While this now appears as one of the primary reasons for their popularity, it is believed that ULIPs have some fundamental positives like enhanced flexibility and merging of investment and insurance in a single entity that have really endeared them to individuals. ULIPs came to play in the 1960s and became very popular in western Europe and Americas.

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1.2) MEANING OF ULIPS

A policy, which provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time. ULIP is life insurance solution that provides for the benefits of protection and flexibility in investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV). In order to offset the erosion of money, ULIPS are introduced. The Sum Assured is expressed in units whose price is linked to an inflation related index.

In todays times, ULIP provides solutions for insurance planning, financial needs, financial planning for childrens future and retirement planning. Features of ULIPs distinguish itself through the multiple benefits that it provides to the customer which are as follows

Life protection Investment and Savings Flexibility Adjustable Life Cover Investment Options Transparency Options to take additional cover against- Death due to accident- Disability- Critical Illness- Surgeries Liquidity Tax benefits.

According to Vijay Sinha, Asst Director Agency, Tata AIG LIFE Insurance,

ULIPs is ideal for some one who is looking for a long term investment product, is under insured and is averse to taking a traditional life plan. ULIP should be looked at from both an investment as well as insurance point of view and not in isolation.

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

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1.3 ) ULIPS VERSUS ENDOWMENT

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

1) SUM ASSURED: This is the most fundamental difference between ULIPs and the traditional plans. In case of endowment the agent will ask you HOW MUCH INSURANCE COVER DO YOU NEED? & the premium is calculated as per the estimated sum assured. In case of ULIPs you are asked HOW MUCH PREMIUM CAN YOU PAY? & accordingly the Sum Assured is estimated.

2) INVESTMENTS: Endowment plans invest in Government Securities Corporate bonds Money market instruments ( no investment in the stock market) ULIPs invest in Equities Bonds G-secs Money market.

3) FLEXIBILITY: In case of ULIPs the investor can choose the fund in which he wants to allocate his portfolio. He can go for pure Equity, or a combination of debtequity ,depending on his requirements. The investor also has the option of switching from one fund to another . Usually Free switches are given during the year. This option is not available in case of Endowment.

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4) TOP UP FACILITY:
A top up is a one time additional investment in the ULIP over and above the annual premium. This feature works well when you have a surplus that you are looking to invest in a market linked avenue, rather than keeping in an FD or Savings account. This feature is not for Endowment.

5) TRANSPARENCY: ULIPs are more transparent than Endowment Plans as their NAV is declared EVERYDAY. As a result you can know how your ULIP has performed. In case of Endowment, the insurance company sends you an annual statement of bonus declared during the YEAR. , which gives us an idea how our plan is performing.

6) LIQUIDITY: Since ULIPs investments are NAV based it is possible to withdraw a portion of Your investments before maturity (after 3yrs lock in period is over).The withdrawal is possible provided the minimum fund value is maintained.

In case of Endowment, you can only Surrender your policy, but you wont get everything that you have earned on your policy in terms of premium and bonus. The Surrender Value is much less than the Sum Assured and the Bonus is also not paid.

THUS investing in ULIPs or in ENDOWMENT depends on the persons RISK taking ability. A Risk Averse person may go for an Endowment, Whereas a person who wants his corpus to appreciate and is ready to take risks can go for ULIPs. Therefore we can say that investing in ULIPs is the best in a growing Economy as compared to the TRADITIONAL PLANS.

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1.4) ULIPS AND YOU IRDA has played a part in making ULIPs more investor friendly. Today more individuals are opting for ULIPs to create wealth over a long term. Over here I have outlined how ULIPs can help you to fulfill that responsibility.

1.4.1) If you are between 25 35 years of age

ULIPs help you to save for your childs education, marriage, planning for your retirement and providing for your family in case of your absence.

ULIPs Child plan ------------- --------for your childs education, marriage.

ULIPs Endowment plan------------- for helping you to meet investment objectives like buying a house or setting up a business.

ULIPs Pension plan-------------------for your retirement. A long term retirement planning could be done with an Equity push, as it is necessary to build up a strong corpus to face your rigorous retirement.

1.4.2) If you are between 35 45 years of age

If you havent invested in ULIPs, it is not too late even now. You can opt for some ULIPs as mentioned earlier. Remember ,unlike Endowment ,which gets really expensive at an advanced age, ULIPs because of the way they are , do not turn out to be expensive.

1.4.3) If you are above 45 years of age In this age bracket, you have to review your insurance cover, taking into consideration the changes of your life style, income needs, etc. By this time your ULIP pension plan must have matured, so now you can opt for an Annuity (immediate or deferred) depending on your need.

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1.5) EXPENSES IN ULIPs Following expenses have to be incurred for ULIPs: a) Mortality charges: charged by the company to cover the risk of an eventuality to an individual. Administration Charges: charged by the company to cover the daily expenses, overhead costs, agents commission etc. Fund Management charges: are levied by Insurance companies to cover the expenses incurred by them in managing ULIP monies. Charges are high for managing monies in an Equity Fund. ULIP Fund switch charges: Such are borne by the individuals when they decide to switch their money form one type of find to another. Top up Charges: A certain % is deducted from the Top up amount to recover the expenses incurred on managing the same. Cancellation/ Surrender charges: It is charged when an individual wishes to surrender his ULIP policy.

b)

c)

d)

e)

f)

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1.6) HOW ULIPS MANAGE MONEY ULIPs are different from traditional plans. They invest their monies in Shares, bonds, G-secs, money market instruments in varied proportions. Insurance companies usually maintain 4 types of funds.

Growth Fund: Balanced Fund: Debt Fund: Money Market Funds

100% equity 60% equity, 40% debt. 100% debt. 100% MM instruments for a period of one year

Equity

RISKS
Balance d Debt Money Market

RETURNS
In case of equity, the risk and return is the highest, and vice verse for Money market instruments. It is a principle of Financial management, the higher the risks you take , the higher the return you get.

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1.7) STEPS FOR ULIP SELECTION Understand what ULIPs are all about. Focus on your need and risk profile Compare ULIP products from various insurance companies Go for an experienced Insurance advisor

It is estimated that Indias economy will become the 3rd largest economy within a few yrs, with a high GDP growth and a low inflation rate, followed by booming stock market (SENSEX soaring as high as 20,000 points). So right time to increase your wealth and become rich starts from today. And ULIPS are the best to invest in.

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CHAPTER 2
DIFFERENCE BETWEEN ULIPS & MUTUAL FUNDS:Points of Difference
1) Meaning :These are the Insurance policies which are linked to units It is an investment organization with a main of Mutual Fund. objective of collecting funds from various segments of people and investing the same in a variety of securities.

ULIPS(Unit Linked Insurance Plans)

MFs(Mutual Funds)

2) Primary Objective :3) Investment Duration:4) Insurance Cover :-

Its main objective is investment & protection It works out for long term investment only .

Its objective is only investments. It works out to medium term, long term, & short term. Risky for short term investors.

ULIPs provide insurance cover (except annuity products which may be issued with/ without risk cover) and from the amount invested in ULIPs after netting out the risk premium for life risk cover and administrative expenses, the insurer invests the balance as per the objective of the specific ULIP product. Insurance companies have a relatively free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, the Insurance Regulatory and Development Authority (IRDA)

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

5) Expenses :-

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

27

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

6) Flexibility :-

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

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

7) Liquidity :8) Investment Objective :-

Limited liquidity .It need to stay invested for minimum years before redeeming. ULIPs can be used for achieving only long term objectives (Children education, marriage, Retirement planning).

Very liquid. MF units can be sold any time(except ELSS). MFs can be used as vehicle for investments to achieve different objectives.(E.g.: Buying a car three years from now. Down payment for a home five years from now. Childrens education 10 years from now. Childrens marriage 15 years from now. Retirement planning 25 years from now. Medical expenses after retirement 25 years from now).

9) Flexibility of Switchovers :-

Insurance companies permit their ULIP investors In MFs an investor usually is subjected to exit load usually 3-4 switch overs free of charge and thereafter and/or entry load when he/she exercises a switch over every additional switch over beyond the permissible limit option. is permitted at some cost. ULIPs currently are with a minimum lock-in of three years. MF schemes (except ELSS which has a lock-in of three years) do not have any such lock in.

10) Minimum Lock- in Period

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11) Investment styles and Portfolio Disclosures :12) Tax benefits and implications :-

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

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

Irrespective of the nature of the plan chosen by the In the case of mutual funds, only investments in taxinvestor, all ULIP investments qualify for deductions up saving funds i.e Equity-linked savings schemes to one lakh under Section 80C of the Income Tax Act. In (ELSS) are eligible for Section 80C benefits the case of ULIPs the maturity proceeds are tax-free. On the other hand, in the case of equity-oriented mutual funds, if the investments are held for a period over 12 months, the gains are tax free and if sold within a 12-month period they attract short-term capital gains tax @ 10 percent. Similarly, debt-oriented funds attract long-term capital gains tax @ 10 percent while short-term capital gain is taxed at the investors marginal tax rate.

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Mutual funds are essentially short to medium term products. The liquidity that these products offer is valuable for investors. ULIPs, in contrast, are now positioned as long-term products and going ahead, there will be separate playing fields for ULIPS and MFs, with the product differentiation between them becoming more pronounced. ULIPs now do not seek to replace mutual funds, they offer protection against the risk of dying too early, and also help people save for retirement. Insurance has to be an integral part of ones wealth management portfolio. ULIPs and mutual funds are, therefore, not likely to cannibalise each other in the long run. While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and structure, the first and foremost purpose of insurance is and will always be protection. The value that it provides cannot be downplayed or underestimated. As an instrument of protection, insurance provides benefits that no investment can offer. It is important for an investor to understand his financial goals and horizon of investment in order to make an informed investment decision. The decision to invest in either a mutual fund or a ULIP should depend on the time period of investment, individual financial goals as well as risk taking appetite, and its about time the industry and customer realize it.

CHAPTER 3
COMPARATIVE ANALYSIS OF ULIPS
This chapter covers the comparison of ULIPs of 4 Insurance companies, how much growth the fund has showed since its Inception, returns for a period of one month compared with the market and tracking of the NAVs for a period of one month. Initially ULIPs were started by a few private players way back in 2001-02. But now almost every Insurance company has got ULIPS suiting the varied requirements of the customers. If one has to choose among the ULIP schemes provided by the insurance, it is necessary to do a through comparison to choose the right one for you.

ULIPs of 4 top performing insurance are taken for comparison. 1) 2) 3) TATA-AIG--------------------- Invest Assure II ICICI PRUDENTIAL--------- Life Time Super RELIANCE LIFE ------------- Automatic Investment Plan

4)

LIC-------------------------------- Market Plus

Besides these TATA AIG also provides some other ULIPs which are as follows: Invest Assure Gold Invest Assure Plus Invest Assure

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Tata AIG Life Insurance Company

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

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

Reliance Life (Automatic Investment Plan)

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

Life Insurance Corporation

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

2) Eligilibility Criteria (Minimum, Maximum age at entry):Min age= 30 days Max age= 45,55,65 years Min age= 0 Max age= 65 years Min age= 0 Max age= 65 years Min age= 18 years complete Max age= 70 years (age nearer birthday)

3) Policy term :15, 20, 30 years 10- 75 years 40- 75 years 5-30 years

4) Premium (Minimum):-

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Rs 12000 pa

Rs 18,000 pa

Rs. 10000 pa

Rs 5000 pa

5) Mode of Premium Payment:Annually, half yearly, quarterly, monthly. Annually, half yearly, monthly. Annually, half yearly, quarterly, monthly Annually, half yearly, quarterly.

6) Sum Assured (Minimum, Maximum):It is the multiple of annual regular premium payable. Min: Annual Premium* Term/2, subject to a min of Rs.100, 000. Min: Annualized premium for 5 yrs or annualized for half of the policy term, whichever is the highest. Max: no limit Maturity: Total Fund Value + Top up if any. Death: Fund Value or Sum assured whichever is higher Min: Rs 50000 for regular premium Max: 20 times of the annualized premium.

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

8)Riders :Accidental Death Benefit Accidental Death & Dismemberment Accident & Disability Benefit Critical Illness Waiver of premium Accident Death & Accidental Total & Permanent Disablement benefit. Accident Benefit.

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Waiver of premium Payor Benefit Critical Illness

Term life insurance benefit

9) Fund options :Option of choosing from 5 funds or a combination of them. Equity fund: Equity shares.(100%) Income fund: Government Bonds & Fixed Income Instruments. . (100%) Aggressive growth fund: Equity (50-80%), Government Bonds (2050%). Stable Growth Fund: Government Bonds (50-70%), Equity (30-50%) Short Term Fixed Income Fund: Government securities & Fixed Income Instruments (100%), Money Market Instruments (20%). We offer you 6 investment funds. Flexi Growth: Equity & Related Securities Debt, Money Market & Cash (80-100%). Maximiser: Equity & Equity Related Securities Debt, Money Market & Cash (25%-100%) Flexi Balanced: Equity & Related Securities Debt, Money Market & Cash (60-100%) Balancer: Equity & Equity Related Securities Debt, Money Market & Cash (40-100%) Protector: Debt, Money Market & Cash (100%) Tailor made and Readymade funds. Tailor Made: Money Market (100%) Gilt (100%) Corporate (100%) Equity ( 100%) Readymade: Fund A Fund B Fund C Growth Fund: Debt (0-40%) Equity (60-80%) Balanced Fund: Debt (0-70%) Equity (30-50%) Secured Fund: Debt (0-85%) Equity (15-35) Bond Fund: Debt (100%) Equity (0%)

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

10) Surrender option/ partial withdrawal option :Allowed only after 3 years form the date of issuance of the policy. Surrender charges are a percentage of regular premiumsFund value. Charge Applicable for 6 yrs---20 or 30 yr policy Charge Applicable for 5 yrs----15 yr policy Surrender & partial withdrawal available Min of up to 4 partial withdrawals available. Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium . Partial withdrawal can be done up to min of Rs 2000. Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium The surrender value or the partial withdrawal value is equal to the Fund value. Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium.

Surrender & partial withdrawal available

Surrender & partial withdrawal available

Partial withdrawal facility is not available.

11) Reinstatement/ Revival :In case the policy lapses, you can reinstate it within 5 years from the date of lapse. If you are unable to reinstate the policy within 5 years, If full premium for the first 3 policy years is not paid, the policy lapses. Therefore the policy has to be You may revive the policy within 3 years from the 1st unpaid premium. If not revived, then the policy A lapsed policy can be revived within 2 years fro the date of the first unpaid premium. Or gets surrendered.

35

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

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

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

12) Premium Holiday:After completion of 3 years of the policy, if you are unable to pay the premium within the grace period, then a Premium Holiday facility is given with a charge of 3% of the regular premium. The policy brochure has no This option is available here, which ensures that your life mention of premium holiday insurance cover continues incase you are unable to pay the premium, after completion of 3 years of the policy. The option here is called A Cover Continuance option. The policy brochure has no mention of premium holiday.

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

36

14) Grace Period: Here the grace period provided is for 31 days. Nothing is mentioned about the grace period in the policy brochure. For regular premiums the grace period is for 30 days, For monthly premiums grace period is for 15 days Nothing is mentioned about the grace period in the policy brochure.

15) Settlement Benefits :You have the option to receive your maturity benefit either in lumpsum or in the from of periodical payments over period of time. This period will not exceed 5 years from the maturity date. On maturity of the policy, you You have the option to receive can choose to take the fund value. your maturity benefit either in lumpsum or in the from of You can opt to get payments on periodical payments over period yearly, half yearly, quarterly or of time . This period will not monthly (through ECS) basis, for exceed 5 years from the maturity a period of 1,2,3,4 or 5 yrs, post date. maturity. At any time during settlement period, you have the option to withdraw the remaining fund value. No benefit Re direction of all the future premiums under a policy, in an alternative proportion to the various Fund units is available. No benefit

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

37

17)Top Up premium:Minimum top up amount is Rs 10,000 Amount not mentioned. Minimum top up amount is Rs 2500 Minimum top up amount is Rs 1000.

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

38

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

a) MORTALITY CHARGES b) FUND MANAGEMENT CHARGES c) SWITCH OVER CHARGES d) POLICY ADMINISTRATION CHARGES

A GRAPHICAL REPRESENTATION WILL MAKE THE CHARGES UNDERSTANDABLE AND EASY TO COMPARE

39

a) MORTALITY CHARGES
MORTALITY CHARGES (Rs)
AGE
20yrs 30yrs 40yrs 50yrs

Tata AIG ( Invest Assure II)

1.05 1.17 2.15 5.53

ICICI (Life Time Super)

1.33 1.46 2.48 5.91

Reliance(Automatic Investment Plan)

1.117 1.287 2.36 6.085

MORTALITY CHARGES
20 18 16 14 RATES (RS) 12 10 8 6 4 2 0 20yrs 30yrs AGE 40yrs 50yrs Reliance ICICI Tata AIG

Interpretation: The mortality charges of Reliance (Automatic Investment Plan) are the highest whereas The charges of Tata AIG (Invest Assure II) is the least.

40

b) FUND MANAGEMENT CHARGES (Only for Equity Fund)

FMC (pa) FOR EQUITY FUND ONLY
Tata AIG ( Invest Assure II) ICICI (Life Time Super) Reliance (Automatic Investment Plan) LIC (Market Plus) 1.75% 2.25% 1.50%

1.50%

FMC CHARGES
2.50% 2.25% 2.00% 1.75% RATES % pa 1.50% 1.50% CHARGES 1.00% 1.50%

0.50%

0.00% Tata AIG ICICI Reliance LIC

COMPANY

Interpretation: ICICI have the highest FMC whereas Charges of Tata AIG are comparatively higher than the other two.

41

c) SWITCH OVER CHARGES

Tata AIG ( Invest Assure II) ICICI (Life Time Super) Reliance (Automatic Investment Plan) The first 25 switches per policy will be free. LIC (Market Plus)

The first 4 switches per policy will be free.

The first 4 switches per policy will be free.

The first 4 switches per policy will be free.

Tata AIG ( Invest Assure II) ICICI (Life Time Super) Reliance (Automatic Investment Plan) LIC (Market Plus)

Charge (Rs) 250 2000 100 100

SWITCH OVER CHARGES

100 100

250

Tata AIG ICICI Reliance LIC

2000

Interpretation: Even in this case ICICI has got the highest switch over charge, whereas charge of Tata AIG are comparatively than the other two. Over here Reliance proves to be superior as it provides 52 switches free as compared to just 4 switches offered by others and its charges are . also less

42

d) POLICY ADMINISTRATION CHARGES

Tata AIG ( Invest Assure II) ICICI (Life Time Super) Reliance (Automatic Investment Plan) LIC (Market Plus)

Charges( Rs /month) 38 --40 20

POLICY ADMINISTRATION CHARGES per month (RS)

60

60 50 40 RATES 30 20 10 0 Tata AIG Reliance COMPANY 38 40

CHARGES per month

LIC

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

43

GROWTH & RETURNS

THE GROWTH RATE OF ULIPS
THE NAVs taken over here only belong to The Equity Fund of the Policies. (No other fund taken into consideration) Growth rate of ULIPs (Equity Fund) of the 4 Insurance companies
Date of Inception Tata AIG ( Invest Assure II) ICICI (Life Time Super) Reliance (Automatic Investment Plan) LIC (Market Plus) NAV as on NAV as on Increase Growth % inception July,20 Rs 2007 Rs 24 Jan, 2004 10 30.45 20.45 204.5

16 Nov,2001

10

53.32

43.32

433.2

28 May,2007

10

10.98

0.98

9.8

5 July, 2006

10

11.89

1.89

18.9

From the tabular compilation, it can be observed that the Equity Fund of the policies has performed very well over the years.

In case of Tata AIG--------the Equity Fund has grown up to 204.5% in 3 years from the date of inception. In case of ICICI--------the Equity Fund has grown up to 433.2% in 5 years from the date of inception. Also Reliance Equity Fund has increased to 9.8% in a short span of 2mths. LIC has also done a good job with a growth up to 18.9% in 1 year.

44

COMPARISON OF RETURNS
RETURNS OF Tata AIG Equity Fund, ICICI equity fund, Reliance equity fund, LIC equity fund, V/s BSE SENSEX & NSE NIFTY.

PERIOD OF 1 MONTH FROM JUNE 20, 2007 TO JULY 20, 2007 Particulars Tata AIG Equity Fund ICICI Equity Fund Reliance Equity Fund LIC Equity Fund BSE SENSEX NSE NIFTY From 28.25 48.43 10.14 11.25 14411.95 4248.65 To 30.45 53.32 10.98 11.89 15565.55 4566.05 Increase By 2.20 4.89 0.84 0.64 1153.55 317.4 Return % 7.79 10 8.2 5.6 8 7.4 Rank

1
2
6 3 5

45

RETURNS
12.00% 10.00% 7.79% 8.00% 6.00% 4.00% 2.00% 0.00%
Fu nd

10% 8.20% 5.60% 8% 7.40%

RATES

nd

nd

nd

Fu

Fu

Fu

SE

qu it y

ui ty

ui ty

SE N

ity

Eq u

Eq

Eq

IC IE

AI G

ia nc e

Ta ta

IC

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

Tata AIG Equity Fund has marginally outperformed NIFTY. Also it is very close to SENSEX..

LIC Equity Fund has given the least returns.

Re l

LI

BS E

NS E

IF T

46

FUND PERFORMANCE (Only of Equity Fund) Period: 1month

From 20th June, 2007--------20th July, 2007 NAVs of the Equity Fund (Rs)

Tata AIG (Invest ICICI (Life

Assure II) Time Super)

Reliance (Automatic
Investment Plan)

LIC (
Market Plus)
11.25 11.26 11.13 11.35 11.45 11.3 11.31 11.39 11.4 11.45 11.46 11.52 11.57 11.59 11.64 11.64 11.65 11.72 11.73 11.81 11.82 11.85 11.93 11.89

20-Jun 21-Jun 22-Jun 25-Jun 26-Jun 27-Jun 28-Jun 29-Jun 30-Jun 2-Jul 3-Jul 4-Jul 5-Jul 6-Jul 9-Jul 10-Jul 11-Jul 12-Jul 13-Jul 16-Jul 17-Jul 18-Jul 19-Jul 20-Jul

28.24 28.49 28.49 28.61 28.77 28.62 28.841 29.13 29.14 29.39 29.57 29.54 29.53 29.69 29.89 29.65 29.59 30 30.34 30.26 30.65 30.94 30.34 30.45

48.43 48.44 48.75 48.85 48.95 48.66 48.45 48.33 49.1 50.52 50.25 50.49 50.45 51 51.47 51.22 51.5 52 52.6 52.3 52.45 52.39 53.21 53.32

10.14 10.15 10.13 10.15 10.22 10.21 10.27 10.33 10.34 10.38 10.48 10.54 10.53 10.63 10.73 10.72 10.69 10.83 10.93 10.94 10.87 10.85 11.5 10.98

47

N A V (R S )
6 /2

10

20

30

40

50

60

CONSOLIDATED FUND PERFORMANCE SHOWN GRAFICALLY.

1 MONTH (20JUNE--20JULY) Tata AIG (Invest Assure II) ICICI (Life Time Super) Reliance (Automatic Investment Plan) LIC ( Market Plus)

FUND PERFORMANCE

0/ 6 /2 2 0 0 7 2/ 6 /2 2 0 0 7 4/ 6 /2 2 0 0 7 6/ 6 /2 2 0 0 7 8/ 6 /3 2 0 0 7 0 /2 7/2 0 0 7 /2 7/4 0 07 /2 7/6 0 07 /2 7/8 0 07 / 7 /1 2 0 0 7 0 /2 7 /1 0 0 7 2/ 7 /1 2 0 0 7 4/ 7 /1 2 0 0 7 6/ 7 /1 2 0 0 7 8/ 7 /2 2 0 0 7 0 /2 00 7

48

NAV RS
6 /2

26.5 27 28 29 30 31

27.5

28.5

29.5

30.5

31.5

TATA AIG Invest Assure Super

6 /2
45 46 47 48 49 50 51 52

DATES Tata AIG (Invest Assure II)

nav R s 53 54

Tata AIG (Invest Assure II)

0 /2 6 /2 0 0 7 2 /2 6 /2 0 0 7 4 /2 6 /2 0 0 7 6 /2 6 /2 0 0 7 8 /2 6 /3 0 0 7 0 /2 7 /2 0 0 7 /2 0 7 /4 0 7 /2 0 7 /6 0 7 /2 0 7 /8 0 7 /2 7 /1 0 0 7 0 /2 7 /1 0 0 7 2/ 7 /1 2 0 0 7 4 /2 7 /1 0 0 7 6/ 7 /1 2 0 0 7 8 /2 7 /2 0 0 7 0 /2 00 7

0 /2

INDIVIDUAL EQUITY FUND PERFORMANCE

ICICI (Life Time Super)

Dates

6 /2 0 0 7 2 /2 6 /2 0 0 7 4 /2 6 /2 0 0 7 6 /2 6 /2 0 0 7 8 /2 6 /3 0 0 7 0 /2 7 /2 0 0 7 /2 0 7 /4 0 7 /2 0 7 /6 0 7 /2 7 /8 0 0 7 /2 7 /1 0 0 7 0 /2 7 /1 0 0 7 2/ 7 /1 2 0 0 7 4 /2 7 /1 0 0 7 6 /2 7 /1 0 0 7 8 /2 7 /2 0 0 7 0 /2 00 7
ICICI (Life Time Super)

ICICI Life Time

49

nav R s 10 11 12 10.5 11.5 9.5 9

RELIANCE

Plus Automatic Investment Plan

Reliance (Automatic Investment Plan)

Dates

6 /2 0 6 /2 /2 0 0 7 2 6 /2 /2 0 0 7 4 6 /2 /2 0 0 7 6 6 /2 /2 0 0 7 8 6 /3 /2 0 0 0/ 7 7 /22 0 0 7 /2 7 /4 0 0 7 /2 7 /6 0 0 7 /2 7 /8 0 0 7 7 /1 /2 0 0 7 0 7 /1 /2 0 0 2 7 7 /1 /2 0 0 7 4 7 /1 /2 0 0 7 6 7 /1 /2 0 0 7 8 7 /2 /2 0 0 7 0 /2 00 7

6/2

N av R s 10.6 11 10.8 11.2 11.4 11.6 11.8 12

0 /2 00

Reliance (Automatic Investment Plan)

6/2

Dates

LIC ( Market Plus)

LIC

Market

50

2 /2 7 6/2 00 7 4 /2 6/2 00 7 6 /2 6/2 00 7 8 /2 6/3 00 7 0 /2 0 7 /2 0 7 /2 0 7 /4 0 7 /2 0 7 /6 0 7 /2 0 7 /8 0 7 /2 7/1 007 0 /2 7/1 00 7 2 /2 7/1 00 7 4 /2 7/1 00 7 6 /2 7/1 00 7 8 /2 7/2 00 7 0 /2 00 7

LIC ( Market Plus)

From the above graphs, it can be seen that the NAV of Reliance Automatic Investment plan is fluctuating less as compared to the others.

NAV of ICICI Life Time Super has fluctuated more as compared to the others. Tata AIG has moderate NAV Fluctuations

It has been observed that the lesser the fluctuations in the NAV, the better it is for the fund. But the good thing is that all the NAVs are on a rising trend. which indicates the strength of the Equity Fund.

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

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

51

OVERALL DATA ANALYSIS & FINDINGS

This analysis is done by giving ranks to all the policies taking into consideration the following criteria

(1= excellent, 2=good, 3=fair, 4=average) In the end, whichever fund has the least score will be the best buy CRITERIA
Amount of Premium Mode of premium payment Revival of the Policy Amount of Top up premium Oldest policy Policies issued Premiums collected Mortality charges FMC Policy Administration charges Switch over charges Fund performance Returns Market share

TATA AIG
3 1 1 1 2 4 4 1 2 2 2 2 3 4

ICICI
4 2 3
Not given

RELIANCE
2 1 2 2 4 3 3 3 1 3 1 3 2 3

LIC
1 2 3 3 3 1 1
Not given

1 2 2 2 3
Not given 3 1 1 2

1 1 1 4 4 1

TOTAL SCORES

32

26

34

26

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

52

CHAPTER 4:- UNDERSTANDING THE WORKING OF ULIPS of Tata AIG

ULIPs are said to be the most lucrative from of investment, which not only give you high market returns but also protection from risk, and also secures the livelihood of your loved ones even after your death. Here is an illustration which explains how a ULIP makes your money work. Harder than you.

SAMPLE SALES ILLUSTRATION OF INVEST ASSURE II (TATA AIG LIFE)

Name of the proposed insured: Miss Dimple Solanki Age of the proposed insured : 23 yrs Name of the policy holder Age of the policyholder Insurance plan Benefit period : Miss Dimple Solanki : 23 yrs Premium Paying period 30yrs Premium multiple Annual premium Modal premium Proposal no. Date Currency Payment Mode Sum Assured (SA) 270000 : 1577 : 15/7/07 : Rupees : Annual Additional coverage Fund

Invest Assure II

30 yrs

22.50

12000

12000

270000

Equity 100%

53

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

Invest assure II 30 YEAR POLICY

Min Return on units=10%( non guaranteed) CHARGES:
Balance invested in the Equity fund

1st year= 50% of premium 50% 2nd year= 25% of premium 75% 3rd year= 1 %of premium 99%

YEAR 1
12000 premium

YEAR 2
12000 premium 1%

YEAR 3
12000 premium

50%

50%= Rs 6000 Return =Rs 600 Total =Rs 6600

25%

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

99%= Rs 11880 Return= Rs 1188 Total = Rs 13068

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

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

NAV =RS 30 (16500+13068)=Rs 29568 No of units= Rs 29568/ 30=986 units

54

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

Therefore the units keep on increasing with the change in the NAVs. There is an inverse relation between the NAVs and the No. of Units. As the NAVs rises the no of units decrease. & As the NAVs fall, the No of Units increase. E.g.: In the 3rd year, the investment was Rs 29568. NAV was Rs 30. So the no. of Units was 986. Now if the NAV Falls to Rs 20. Then the no. of Units would have been 1479.

55

Therefore the rising trend of NAV is not always a good sign, as your no of units decrease. Therefore if Miss Dimple Solanki continues with her policy for 30 years , she will get a Maturity benefit = existing Fund Value which is the sum of the regular premium fund value On death = SA Rs 270000 or NAV whichever is higher

On Death due to Accident= Double the SA.

56

CHAPTER 7
MARKET SURVEY
A questionnaire was prepared, wherein 10 advisors of Tata AIG were asked to fill it. The reason for carrying out a market survey was to know the opinion of the advisors and the popularity of ULIPs in the market.

Questionnaire for Advisors of Tata AIG

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

pensi oner , 0% self employ ed, 40% Salar ied, 50% Salar ied house wif e sel f employed pensi oner house wif e, 1 0%

57

Q 2) Which policies the client opts for?

a. Traditional b. ULIPS

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

90%

10%
Traditional ULIPs

Schemes

Q 3) Are ULIP schemes popular?

a. yes b. no c. cant say

CAN'T SAY, 0% NO, 30%

YES NO CAN'T SAY

YES, 70%

58

Q 4) Are the clients aware of ULIP schemes?

a. b. c. d.

less than 10% 10% --- 30% 30%---- 60% Above 60%

0% 20% 30% Less Than 10% 10%- 30% 30%- 60% 60%& above

50%

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

ANS) On an average 6 clients out of 10 opt for ULIPs.

60%

50%
50% 40%

Q 6) How much commission do you get from the company on ULIP policy?

30%

20%
20%

20% 10%

a. b. c. d.

0--- 10% 1120% 21---30% 31--- 40%

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

C o mmissio n

59

Q 7) How many clients have the background of finance? a.1020%

b.2040% c. 40% & above

0% 40% 60%

10%20% 20%40% 40%above

Q8 ) Mode of payment of premium.

a. cheque b. Demand Draft c. Cash

demand draft, 0% cash, 0% cheque demand draft cash

cheque, 100%

60

Q9) What is the better positioning for ULIP?

a. b. c. d.

as a tax saving plan as a retirement plan as a child education plan as a security cum profitable plan.

80% 70% 60% 50% 40% 30% 20% 10% 0% as a tax saving plan as a retirement plan as a child education plan 0% 20% 10%

70%

as a security cum profitable plan

Q 10) Qualifications a. HSC pass b. Graduate

60%

c.MBA
50%

50% 40% 30% 30% 20% 20% 10% 0% HSC Graduate MBA

61

Q 11) How is ULIP different from the other policies? Please refer to pg 21 ULIPs v/s Endowment.

Q 12) How does a client respond, if any new policy is suggested to him? ANS: According to the survey, the clients reaction depends upon the presentation that is

given to him by the Advisor. Usually the client shows positive signs of buying the product, sometimes are reluctant to buy due to financial problems. According to most of the advisors the 1st quest asked by the client is about the guarantee and returns. They want to know about the popularity of the policy as well as the insurance company.

62

CHAPTER 8

Integrated Financial Planning for Life Insurance

Kids going Higher studies Children to school, for child, independent, college marriage nearing the golden years Higher Safe Lump sum Your Need Low protection, Reasonable Higher high asset protection, protection, Protection, money for accumulation creation and still high on still high on high on education, for the golden accumulation asset asset creation asset marriage. yrs.Considera creation but steadier creation but Facility to stop bly lower life options, steadier premium for 2- insurance as increase options, 3 yrs for these the savings for liquidity for extra expenses dependencies child education have expenses decreased Flexibility Choose low death benefit, choose growth/balance d option for asset creation Increase death benefit, choose growth/bala nced option for asset creation Increase death benefit; choose balanced option for asset creation. Choose riders for enhanced protection. Use top-ups to increase your accumulation Withdrawal from the account for the education expenses of the child Withdrawal from the account for higher education/marri age expenses of the child. Premium holiday-to stop premium for a period without lapsing the policy Decrease the death benefitreduce it to the minimum possible. Choose the income investment option. Topups form the accumulation (with reduced expenses) for the golden yrs cash accumulation Starting a job, Recently Married, Single married, no with kids individual kids

63

CONCLUSION:
From the above project , I would point out that the insurance industry is growing at a very fast pace .The Insurance needs of the people are increasing. ICICI Prudential is a key player in the private sector and LIC is a leader in the public sector with the largest market share. The returns provided by ICICI is the highest as compared to other companies and is superior to others in all respects. Therefore a person can rightly choose to buy insurance from ICICI . Thus ULIPs are simple combination of Term assurance and investment. Synergy, flexibility, durable tax advantages, flexibity in debt- equity ratio, top up facility, transparency, subjected to market conditions, capital appreciation makes ULIPs structurally more effective for achieving long term financial goals. There is no other investment avenue which provides double the amount invested, in case of death due to accident or on death. Therefore insurance has and should be a part of every persons portfolio which satisfies twin objectives of protection against risks & to increase your wealth. Putting your money in the ULIP equity fund will give you a good return and capital appreciation. So relax and enjoy your life as ULIPs is there behind you.

64

RECOMMENDATIONS

For the Company based on the above market survey.

1) The company should now target pensioners & housewives as they constitute only 10% in the selection of ULIPs.

2) The company can arrange a seminar for the existing clients informing them about the progress made by the company, and also give some lessons on understanding the basics of FINANCE.

3) Since ULIPs are less popular as a retirement plan, Tata AIG should advertise inorder to attract the attention of salaried people and to make them understand the importance of investing in ULIPS for retirement. Publicity on a large scale about the different policies to be given in all means of communication. (Basically on TV during prime hours)

For the changes in ULIPs:

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

65

BIBLIOGRAPHY
A. BOOKS 1. Insurance Principles & Practices -----M.N.Misra 2. Insurance ------ M.J.Mathew RBSA Publications. S Chand Publications.

3. Insurance Fundamentals, Environment & Procedures -------B.S.Bodla, M.C. Garg, K.P. Singh Deep & Deep Publications of 2003 4. Insurance Institute of India IC 33------S.J. Gidwani

5. Taxmann Life Insurance agent ---- P.R. Khanna , Taxmann Allied service pvt ltd 4th edition 2005.

B. NEWSPAPERS 1. Economic Times 2. Times Of India 3. ESCOLIFE PAPER on Insurance by Ritu Nanda Vol 2, Issue viii June, 2007.

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

66

D. NEWSLETTER 1. Tata AIG Life Agency Newsletter Vol 1, Edition 6 , March ,2007.

E. INTERNET www.tata-aig.com www.licofindia.com www.iciciprulife.com www.reliancelife.com www.moneycontrol.com www.personalfn.com www.et.com www.google.com (Note- The above Sites were logged on between 20 June,07 to 21st July,2007 )

F. CNBC TV 18

G. BOOKLET on the Orientation Programme of Employees at Tata AIG

H. Policy Brochures of Tata AIG, ICICI Prudential, Reliance Life & LIC.

67

QUESTIONNAIRE FOR ADVISORS

Q 1) What type or class of customers visit your office? salaried housewives self employed retired pensioner Q 2) Which policies the client opts for? Traditional ULIPS Q 3) Are ULIP schemes popular? yes no cant say Q 4) Are the clients aware of ULIP schemes? less than 10% 10% --- 30% 30%---- 60% Above 60% Q 5) Out of ten, how many clients opt for ULIP? Q 6) How much commission do you get from the company on ULIP policy? 0--- 10% 1120% 21---30% 31--- 40% Q 7) How many clients have the background of finance? 1020% 2040% 40% & above. Q8) Mode of payment of premium. cheque Demand Draft Cash Q9) What is the better positioning for ULIP?

68

as a tax saving plan as a retirement plan as a child education plan as a security cum profitable plan.

Q 10) Qualifications HSC pass Graduate MBA Q 11) How is ULIP different from the other policies? Q 12) How does a client respond, if any new policy is suggested to him?

69

THANK YOU

70