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International Journal of Research & Development in Technology and Management Science - Kailash
International Journal of Research & Development in Technology and Management Science - Kailash
International Journal of Research & Development in Technology and Management Science - Kailash
by
ABSTRACT
I. INTRODUCTION
The study aims at unit linked investment plans ULIPs. Analyse insurance as an investment
option/avenue. Meaning Of ULIP: Unit linked insurance plan (ULIP) is life insurance solution
that provides for the benefits of risk 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).
Published by:
Page 38 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
In a ULIP, the invested amount 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. A Unit is the component of the Fund in a Unit Linked
Insurance Policy. The returns in a ULIP depend upon the performance of the fund in the
capital market. ULIP investors have the option of investing across various schemes,
In a ULIP, investors have the choice of investing in a lump sum (single premium) or making
premium payments on an annual, half-yearly, quarterly or monthly basis. Investors also have
the flexibility to alter the premium amounts during the policy's tenure.
For example, if an individual has surplus funds, he can enhance the contribution in ULIP.
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). ULIP investors can shift
their investments across various plans/asset classes (diversified equity funds, balanced funds,
debt funds) either at a nominal cost.
Mortality Charges: These are charges for the cost of insurance coverage and depend
on number of factors such as age, amount of coverage, state of health etc.
Fund Management Fees: Fees levied for management of the fund and is deducted
before arriving at the NAV.
Administration Charges: This is the charge for administration of the plan and is levied
by cancellation of units.
Fund Switching Charge: Usually a limited number of fund switches are allowed each
year without charge, with subsequent switches, subject to a charge.
Service Tax Deductions: Service tax is deducted from the risk portion of the premium
Published by:
Page 39 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
(ULIP) 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).
ULIP came into play in the 1960s and is popular in many countries in the world. The reason
that is attributed to the wide spread popularity of ULIP is because of the transparency and the
flexibility which it offers..
Unit Linked Insurance Plan - is a financial product that offers you life insurance as well as an
investment like a mutual fund. Part of the premium you pay goes towards the sum assured
(amount you get in a life insurance policy) and the balance will be invested in whichever
investments you desire - equity, fixed-return or a mixture of both.
Mutual fund means indirect investment in share market, mutual fund has following
characteristics
Published by:
Page 40 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
The investors share is denominated by units whose value is called as Net Asset Value
(NAV) which changes every day.
The investment portfolio is created according to the stated investment objectives of the
fund.
The ownership is in the hands of the investors who have pooled in their funds.
To identify the key factors that influence customers preference towards ULIPs
Harry M. Kat (2000), highlighted the popularity of equity linked plans for which data from
various companies about their plans and sale of those plans. He used Hypothesis testing as a
tool for analysis to complete the interpretation of his study. He found that many have invested
in Equity linked plans
T.R. Rajeshwari (2001) , did a research To understand the savings avenue preference among
Published by:
Page 41 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
Kavita Ranganathan (2004), conducted a study to assess the saving objectives among
individual investors and to assess the mutual fund conceptual awareness. The Research
methodology used was through an exploratory study by Judgment sampling of 100 investors of
Mumbai. The tools used for analysis were ANOVAs and chi square. It was found that main
saving objective is to save for retirement, majority of sample preferred mutual funds over
equity and maximum were aware about mutual funds.
Dr. Bhagaban Das (2006) , conducted a study to understand the retail investors behavior
towards different savings avenues, to identify the preferred source of information and to
identify the scheme preference of investors. The research methodology used was primary
survey on 100 educated investors. The tools used for analysis were Percentage Method, Chi-
square, Two-way ANOVA, Rank correlation and Z-test and t-test: to test the significance. It
was found that the investors have a wide difference with respect to their profession and also the
different investment patterns vary widely.
P Prasada Rao and Vedanatam (2006), conducted a study to identify the key factors that
influence customers preference for a particular mutual fund. Study was Exploratory by a
survey on 110 respondents by mode of a structured questionnaire. Factor analysis was the
underlying tool for analysis.
It was found that tax benefit is the first factor, secondly core product feature factor, and thirdly
fund strength factor.
B S Bodla and Sushma Rani Verma (2007) , examined buying behavior study in rural areas
to examine the preference of the policyholders towards various types of policies of insurance.
For which a survey was done on 188 respondents with the mode of a pre tested questionnaire.
Interpretation tool used was percentages. It was concluded that rural people have less faith in
private players and women segment is still untapped in rural market.
Variance and coefficient of variance (CV) were the key tools for analysis and interpretation of
data collected.
Published by:
Page 42 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
He categorized investors in three categories, the dare devils, the image driven and the
conservative.
Analytical procedure:
Pie diagrams
Bar Graphs
Mean, and percentages
ANOVA (Analysis Of variance)
Correlation
SPSS
ANALYSIS
Rank the Objectives of your savings:(1 for the most preferred , 6 for least preferred)
Objective Mean
Retirement Benefit 3.51
Tax Reduction 2.36
Meet Contingencies 3.28
Children's Education 4.04
Purchase of Assets 4.24
Capital Appreciation 3.6
Published by:
Page 43 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
VIII. INTERPRETATION
As per the response of sample it can be inferred that the primary goal of investment of
investors in tricity is tax benefit. The reason for the same is that income of most of the sample
is above 3 lakhs for which they need to save on their taxes and under 80 c they get exemption
of 1,00,000 on their savings. The second main Objective is to meet uncertainties/
contingencies as people plan for future.
The other objectives follow thereafter like, capital appreciation, childrens education,
retirement benefit and purchase of assets.
Rank the following in the order of your preference as the convenient source of
information for investment decisions (1 for most preferred, 7 for least preferred)
Published by:
Page 44 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
INTERPRETATION
Since the source of information for financial decisions is through reference groups therefore the
decision is influenced by reference groups by majority of respondents.
Thereafter spouse and self decision certainly matters. only minority pay to financial advisor for
financial advisory services, which further implies there is a huge untapped market for financial
advisors.
What is your preference of following as Savings Avenue? (Rank from 1 first preference
to 8 last preference)
Avenue Mean
Bank Deposit 1.54
ULIP 4.69
Pension & P.F. 3.86
Shares 6.04
Mutual Funds 5.54
Real Estates 5.51
Gold 5.74
Postal Savings 3.01
Published by:
Page 45 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
INTERPRETATION
According to the analysis of collected data, the most preferred investment/saving avenue by the
investors in tricity is various forms of bank deposits. The second favored avenue is Postal
savings and pension and P.F specifically by service class.
ULIPs are ranked at 4th surplus after saving in the first three preferred avenues in diversified
in ULIPs ,mutual funds, real estate ,shares, Gold etc.
Using the 5 point scale offer your response in the following scale 5-highly satisfied 4-
satisfied 3-neutral 2-dissatisfied 1-highly dissatisfied
Published by:
Page 46 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
Published by:
Page 47 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
Transaction Costs
ULIPs Percent
Valid Highly Dissatisfied 4.9
Dissatisfied 39.0
Neutral 18.3
Satisfied 20.7
Highly Satisfied 17.1
Total 100.0
Liquidity of investment
ULIPs Percent Mutual Funds Percent
Valid Highly Dissatisfied 15.9 Valid Highly Dissatisfied 4.9
Dissatisfied 24.4 Dissatisfied 29.3
Neutral 23.2 Neutral 29.3
Satisfied 25.6 Satisfied 31.7
Highly Satisfied 11.0 Highly Satisfied 4.9
Total 100.0 Total 100.0
Published by:
Page 48 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
ULIPs Percent
Valid Highly Dissatisfied 7.3
Dissatisfied 20.7
Neutral 29.3
Satisfied 22.0
Highly Satisfied 20.7
Total 100.0
Mutual Funds Percent
Valid Highly Dissatisfied 12.2
Dissatisfied 40.2
Neutral 22.0
Satisfied 15.9
Highly Satisfied 9.8
Total 100.0
Published by:
Page 49 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
Symmetric Measures
Asymp. Std.
Value Errora Approx. Tb Approx. Sig.
N of Valid Cases 82
INTERPRETATION
Since the correlation is .050 hence it can be inferred that the AGE and preference for ULIPs
are correlated, the ULIPs vary for different age people.
Symmetric Measures
Asymp. Std. Approx.
Value Errora b
Approx. T Sig.
N of Valid Cases 82
Published by:
Page 50 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
INTERPRETATION
Since the correlation is more than .050 hence it can be inferred that the Gender and preference
for ULIPs are positively correlated, the preferences for ULIPs vary for males and females.
Test is done to verify wether there is a significance difference between income of the
respondents and rating of QUALITY OF SERVICE (ULIP vs Mutual Fund)
ANOVA
Sum of Mean
Squares df Square F Sig.
Total 689.512 81
Total 698.451 81
INTERPRETATION:
As the p- value for significance is more than .05 it can be inferred that the different groups
based on the incomes of respondents do not differ in their ratings of quality of service.
Test is done to verify wether there is a significance difference between income of the
respondents and rating of Benefits to investors(ULIP vs Mutual Fund)
Published by:
Page 51 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
ANOVA
Sum of Mean
Squares df Square F Sig.
Total 1136.744 81
Total 1012.598 81
INTERPRETATION
As the p- value for significance is more than .05 it can be inferred that the different groups
based on the incomes of respondents do not differ in their ratings of Benefits to Investors..
It is inferred from the data analysis that aspirations and goals of investors before making
investment are primarily for tax reduction, to meet contingencies, capital appreciation, to
provide for childrens education etc.
Another important inference that came up from analysis of research that most preferred
source of information for investors is their reference groups. The reason for which is that
financial products are sold mainly through references. Most of the business generation in
insurance industry is through referrals.
It is found from the analysis that reference groups are the major source of information for
investment decisions. The reason is that people have the tendency to go by the words of
Published by:
Page 52 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
their peer members and experiences of their friends. This has always been observed by the
other studies of behavioral finance.
Since the source of information for financial decisions is through reference groups
therefore the decision is influenced by reference groups by majority of respondents.
Thereafter spouse and self decision certainly matters. only minority pay to financial advisor
for financial advisory services, which further implies there is a huge untapped market for
financial advisors.
When satisfaction level of ULIPs was contrasted with Mutual Funds it was inferred:
a. There is a moderate level of satisfaction of respondents, for both of them for parameters
like reasonableness of amount of investment, provision of premature delivery, regular
and steady income, as for these parameters maximum respondents were satisfied when
asked them to rate.
b. There comes a neutral response for capital appreciation in ULIPs and Mutual Funds.
c. The respondents are satisfied as far as the tax benefits in ULIPs are concerned whereas
they are neutral when tax benefits in mutual funds are concerned.
d. In case of liquidity of investment the investors rate both ULIPs and Mutual Funds as
Satisfactory.
e. In case of transaction costs the maximum respondents are dissatisfied. In case of ULIPs
39% respondents are dissatisfied and in case of Mutual funds 22%. The reason for
which is charges in ULIPs at initial stage are very high.
After applying ANOVA (analysis of variance), it was inferred that different income
groups dont rate differently the quality of services delivered by ULIPs and Mutual funds
companies . they rate them similar for both of the investment avenues.
ANOVA was also applied to know that whether there is a significance difference between
benefits to investors provided by ULIPs and Mutual Funds, by different income groups.
But it was found that there is no significant difference between both.
Published by:
Page 53 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
Correlation was applied to know whether there is any correlation between age and
preference for ULIPs , and it was found that there is a positive relationship between both
the variables.
Correlation was also applied to find whether there is any significant relation between
Gender and preference towards ULIPs.
X. CONCLUSION
To sum up and conclude it can be revealed from the research, that , investors in the tricity are
aware of their investment decisions ,specifically in ULIPs, therefore they are satisfied with the
returns they are getting from ULIPs and Mutual Funds. They take wise investment decisions
not only by self, but by discussing with their spouse and most importantly the reference groups
or peer groups. Also, most of the retail investors invest more than 1,00,000 p.a for saving and
future purposes. The sole reason of dissatisfaction among investors is the huge transaction
costs.
Thanks to the growth of Insurance industry which have a ULIP for need of anyone and
everyone, ULIPs meet the aspirations and goals of retail investors.
XI. LIMITATIONS
Sample size could have been more; the accuracy would have been more.
Non cooperation and careless response of some of the respondents became a hassle in the
study.
ULIP could be compared with other investment avenues as well not only Mutual Funds.
Time limit was also a constraint in the study.
XII. RECOMMENDATIONS
Sample Size can be increased to get more accuracy in data , research and analysis.
ULIPs can be compared with other investment avenues as well.
Even rural investors perception can be mapped regarding ULIPs and other investment
avenues.
Perceptual mapping of various ULIPs, or Insurance Companies can be done.
Published by:
Page 54 of 57
International Journal of Research & Development in
Technology and Management Science Kailash
Volume - 21| Issue 4 | OCTOBER 2014 | ISBN - 1-63102-448-5
European Article Number [EAN]- 978-163-102-448-1
editor.ijrdtm@rtmonline.in | editor@ijrdtm.com | http://journal.rtmonline.in | http://www.ijrdtm.com
Insurance companies should advertise more in financial magazines and televisions as they
are the preferred source of information for the investors.
XIII. REFERENCES
2. Kat. M Henry 2000, Equity linked saving A New Product Range for Retail Investors
Accessed at http://ssrn.com/sol3/papers.cfm?abstract_id=256659
7. Rao.Prasada.P and Vedanatam 2006 , Mutual funds: exploring the retail customer
expectations. , the icfai journal of service marketing vol. IV No. 2 sept. 2007
8. Bodla. B.S 2007, life insurance policies in rural areas: understanding buyer behavior
the icfai journal of service marketing vol. IV No. 2 dec 2007
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