A Project Report on

COMPARATIVE STUDY OF ULIPS AND

MUTUAL FUNDS

THE CAPITAL BOX, GURGAON

SUMMER INTERNSHIP PROJECT

International School of Business and Media, Pune

in partial fulfillment of the requirement for the degree of
POST GRADUATE DIPLOMA MANAGEMENT (PGDM)
(Session 2019-2020)

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 INTERNAL GUIDE: SUBMITTED BY:
RAHIL JAFRI NAMITA SINGHLA

PREFACE

Beginning of the system project is entirely creative. This does not come

all of a sudden, but it comes by result of discussion, consultation and

contemplation.

Practical training is an important part of managerial courses. The

theoretical studies are not sufficient to get into the corporate world. Only

practical knowledge can help us understand the complexities of large scale

organizations.

To develop healthy managerial and administration skills in potential

managers, it is necessary that theoretical knowledge must be supported with

exposure to the real environment.

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 In my case I confronted myself to “The Capital Box” and the exposure

that I could not have gained from the books. I found it very interesting

and challenging. My topic of project is “Comparative study of Ulip and

mutual funds”.

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 DECLARATION

I, NAMITA SINGHLA hereby declare that this project Report titled

“COMPARATIVE STUDY OF ULIPS AND MUTUAL FUNDS” is the record of

authentic work carried out by me during the period from 5th May, 2020 to 5th

July, 2020 and has not been submitted to any other university or institution for

the award to any degree /diploma/certificate or published any time before.

SIGNATURE:-

NAME:- Namita Singhla

ROLL NO:- 20194430

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 ACKNOWLEDGEMENT

A few typewritten words of thanks cannot really express the sincerity of my

gratitude. But I would like to express my special thanks to my mentor Mr.

Rahil Jafri for helping me in completion of my project. No praise ample for the

never tiring efforts of my colleagues with constant support, feedback, guidance,

practical suggestions which helped me in completing this project successfully.

As well as faculty mentor, ISB&M, Pune Mr. Piyush Nathani for valuable

contribution during my training period and guidance in preparation of the

project report.

I would also like express my gratitude to my Clients for giving their support

and guidance throughout this project and believing in me.

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 TABLE OF CONTENT

PARTICULARS PAG

S.NO E NO.

.
Chapter-1 (Executive Summary) 6

1.
Chapter-2 (The Capital Box) 7

2.
Chapter-3 (Insurance) 19

3.
Chapter-4 (Comparative Study of ULIP and Mutual 40

4. Funds
Chapter-5 (Research Methodology) 51

5.
Chapter-6 (Data Analysis and Interpretation) 52

6.
Chapter-7 (Recommendation and Conclusion) 58

7.
Bibliography 59

8.

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 CHAPTER-1

EXECUTIVE SUMMARY

This project is an attempt to know how the theories can be applied to practical
situation. As a student of PGDM, it I a part of study for everyone to undergo
summer project at some good institute or organization. So for this purpose, I got
the opportunity of summer training at “THE CAPITAL BOX”.

In the first part of the project report, the general information of the company has
been collected. Information is gathered through the primary and secondary
source as well.

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In the second part of the report, contains the specialized subject study. Objective
of the project is to study the comparative analysis between ULIP and Mutual
Funds.

This study helps to know that there are many people who go for ULIP insurance
policies to cover the risk of life, and invest it in good portfolio but there is a big
portion of customers who have taken the policies to save the taxes, and many
people are aware about the tax benefits they get from insurance policies. Also
helps us to know that many people are getting the tax benefits in ULIP but in
mutual fund they have to invest their money in tax saving funds to get the
benefits.

Both ULIP and mutual funds have some benefits and more or less it depends on
the person and his ability to take risk and invest.

CHAPTER-2

‘THE CAPITAL BOX’

ABOUT

Since July 14 2016, the day we were founded, integrity has been our core value.
We at “The Capital Box” design personal solutions to protect our clients’
unique lifestyles and offer lasting peace of mind. We strive to build long-lasting
relationships with clients through attention to detail and commitment to superior
service. We provide unparalleled consulting services, financial products and
risk management strategies to individuals, families and businesses, specializing
in niche markets and portfolios with complex needs.

We firmly believe that it all starts with having a clear vision of your unique
goals. With this clarity, we combine objective advice and experience-led
execution to bring the collective vision to life. We offer every client true peace

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of mind. We define peace of mind as a deeply rooted confidence that comes
from feeling in control and knowing your financial plan is built on a foundation
of increasing self-knowledge and awareness. It is at this critical juncture – the
intersection of proactive planning and peace of mind – that we believe our
clients have the highest potential to realize their goals.

Our vision as a firm focuses on helping others achieve financial goals, as well
as understanding of each client’s unique purpose, mission and values. We strive
to empower clients by offering education, tools and resources aimed at
facilitating clear communication and bringing definition to their ambitions and
objectives. Each client has different ideas about what makes life great. We take
the burden out of managing the financial details so clients can enjoy life’s
journey and live out their unique purpose. We strive to be a force of calm, a
navigator in the face of anxiety and uncertainty that all too often accompany
financial success.

COMPETITORS
 Nestkeys
 Capital First
 Bluechip
 Wise winzer
 Policy Bazar
 Bridge Group Solutions
 Capmetrix
 Puranatha

PARTNERS
 Max Life Insurance
 Aditya Birla Capital
 Future Generali
 Star Health
 Aviva
 ICICI Prudential
 PNB MetLife
 Royal Sundaram

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CORE VALUES
 Live life on PURPOSE
 PEOPLE are more important than things
 Act with INTEGRITY

MISSION
Company’s mission is to help individuals, families, and small businesses
embrace the responsibilities of living their goals and dreams by designing,
implementing, and monitoring financial strategies consistent with their core
values.

VISION
Company’s vision is to be trusted and respected by our families, clients, and
professionals as the model financial advisory firm that helps others as they
transition through life’s financial cycles.

PRODUCTS
 Life insurance
 Term insurance
 Health insurance
 Mutual fund
 SIP
 Wealth management

SWOT ANALYSIS

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S- Strengths
 Pool of skilled professionals
 Client- focused products and services
 Transparent Functioning
 Customer Satisfaction
 Training process of BGS is robust
W- Weaknesses
 Lack of market penetration
 Less concentration towards low income group
O- Opportunities
 BGS can well extent its operations in Insurance market as it is very
gigantic
 Covid-19 emerged as an opportunity for the insurance sector as people
are starting to realize the importance of insurance and the backing it
provides.
T- Threats
 Covid-19 pandemics can be short-lived, but the economic impact on the
company can be long-term

 The impact of Covid-19 will definitely be felt across society as socio-

economic and behavioural impact on consumer preferences
 Role of governments and its policies

PESTEL ANALYSIS
P- Political
Political factors play a significant role in determining the factors that can impact
financial sector’s long term profitability in a certain country or market. They

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 operates in Savings & Loans in more than dozen countries and expose itself to
different types of political environment and political system risks. The achieve
success in such a dynamic Savings & Loans industry across various countries is
to diversify the systematic risks of political environment. They can closely
analyse the following factors before entering or investing in a certain market-

 Political stability and importance of Savings & Loans sector in the

country's economy.
 Risk of military invasion
 Level of corruption - especially levels of regulation in financial sector.
 Bureaucracy and interference in Savings & Loans industry by
government.
 Legal framework for contract enforcement
 Intellectual property protection
 Trade regulations & tariffs related to Financial
 Favoured trading partners
 Anti-trust laws related to Savings & Loans
 Pricing regulations – Are there any pricing regulatory mechanism for
Financial
 Taxation - tax rates and incentives
 Wage legislation - minimum wage and overtime
 Work week regulations in Savings & Loans
 Mandatory employee benefits
 Industrial safety regulations in the financial sector.
 Product labelling and other requirements in Savings & Loans

E- Economic
The Macro environment factors such as – inflation rate, savings rate, interest
rate, foreign exchange rate and economic cycle determine the aggregate demand
and aggregate investment in an economy. While micro environment factors
such as competition norms impact the competitive advantage of the firm.
Financial Sectors can use country’s economic factor such as growth rate,
inflation & industry’s economic indicators such as Savings & Loans industry
growth rate, consumer spending etc. to forecast the growth trajectory of not only
–sector name-- sector but also that of the organization. Economic factors that
should consider while conducting PESTEL analysis are -

 Type of economic system in countries of operation – what type of

economic system there is and how stable it is.
 Government intervention in the free market and related Financial
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 Exchange rates & stability of host country currency.
 Efficiency of financial markets – Does First Capital, Inc. needs to raise
capital in local market?
 Infrastructure quality in Savings & Loans industry
 Comparative advantages of host country and financial sector in the
particular country.  
 Skill level of workforce in Savings & Loans industry.
 Education level in the economy
 Labour costs and productivity in the economy
 Business cycle stage (e.g. prosperity, recession, recovery)
 Economic growth rate
 Discretionary income
 Unemployment rate
 Inflation rate
 Interest rates

S- Social
Society’s culture and way of doing things impact the culture of an organization
in an environment. Shared beliefs and attitudes of the population play a great
role in how marketers will understand the customers of a given market and how
they design the marketing message for Savings & Loans industry consumers.
Social factors that leaders should analyse for PESTEL analysis are -  

 Demographics and skill level of the population

 Class structure, hierarchy and power structure in the society.
 Education level as well as education standard in the First Capital, Inc. ’s
industry
 Culture (gender roles, social conventions etc.)
 Entrepreneurial spirit and broader nature of the society. Some societies
encourage entrepreneurship while some don’t.
 Attitudes (health, environmental consciousness, etc.)
 Leisure interests

T- Technological
Technology is fast disrupting various industries across the board. Transportation
industry is a good case to illustrate this point. Over the last 5 years the industry
has been transforming really fast, not even giving chance to the established
players to cope with the changes. Taxi industry is now dominated by players
like Uber and Ola. Car industry is fast moving toward automation led by
technology firm such as Google & manufacturing is disrupted by Tesla, which
has stated an electronic car revolution.
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 A firm should not only do technological analysis of the industry but also the
speed at which technology disrupts that industry. Slow speed will give more
time while fast speed of technological disruption may give a firm little time to
cope and be profitable. Technology analysis involves understanding the
following impacts -

 Recent technological developments competitors

 Technology's impact on product offering
 Impact on cost structure in Savings & Loans industry
 Impact on value chain structure in Financial sector
 Rate of technological diffusion

E- Environmental
Different markets have different norms or environmental standards which can
impact the profitability of an organization in those markets. Even within a
country often states can have different environmental laws and liability laws.
For example in United States – Texas and Florida have different liability clauses
in case of mishaps or environmental disaster. Similarly a lot of European
countries give healthy tax breaks to companies that operate in the renewable
sector.

Before entering new markets or starting a new business in existing market the
firm should carefully evaluate the environmental standards that are required to
operate in those markets. Some of the environmental factors that a firm should
consider beforehand are –

 Weather
 Climate change
 Laws regulating environment pollution
 Air and water pollution regulations in Savings & Loans industry
 Recycling
 Waste management in Financial sector
 Attitudes toward “green” or ecological products
 Endangered species
 Attitudes toward and support for renewable energy

L- Legal
In number of countries, the legal framework and institutions are not robust
enough to protect the intellectual property rights of an organization. A firm

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 should carefully evaluate before entering such markets as it can lead to theft of
organization’s secret sauce thus the overall competitive edge. Some of the legal
factors that leadership should consider while entering a new market are -

 Anti-trust law in Savings & Loans industry and overall in the country.
 Discrimination law
 Copyright, patents / Intellectual property law
 Consumer protection and e-commerce
 Employment law
 Health and safety law
 Data Protection

PORTER’S FIVE FORCE ANALYSIS

Threats of New Entrants

New entrants in Savings & Loans brings innovation, new ways of doing things
and put pressure through lower pricing strategy, reducing  costs, and providing
new value propositions to the customers. Financial Sector has to manage all
these challenges and build effective barriers to safeguard its competitive edge.
How Financial Sector can tackle the Threats of New Entrants
 By innovating new products and services. New products not only brings
new customers to the fold but also give old customer a reason to buy products.
 By building economies of scale so that it can lower the fixed cost per
unit. 
 Building capacities and spending money on research and development.
New entrants are less likely to enter a dynamic industry where the established
players keep defining the standards regularly. It significantly reduces the
window of extraordinary profits for the new firms thus discourage new players
in the industry.

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 Bargaining Power of Suppliers
All most all the companies in the Savings & Loans industry buy their raw
material from numerous suppliers. Suppliers in dominant position can decrease
the margins that financial Co. can earn in the market. Powerful suppliers in
financial sector use their negotiating power to extract higher prices from the
firms in Savings & Loans field. The overall impact of higher supplier
bargaining power is that it lowers the overall profitability of Savings & Loans.

How Financial Sector can tackle Bargaining Power of Suppliers

 By building efficient supply chain with multiple suppliers.
 By experimenting with product designs using different materials so that if
the prices go up of one raw material then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm.
One of the lessons can be learn from Wal-Mart and Nike is how these
companies developed third party manufacturers whose business solely depends
on them thus creating a scenario where these third party manufacturers have
significantly less bargaining power compare to Wal-Mart and Nike.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different
ways, industry profitability suffers. For example services like Dropbox and
Google Drive are substitute to storage hardware drives. The threat of a
substitute product or service is high if it offers a value proposition that is
uniquely different from present offerings of the industry.
How Financial Sector can tackle the Treat of Substitute Products / Services

 By being service oriented rather than just product oriented.

 By understanding the core need of the customer rather than what the
customer is buying.
 By increasing the switching cost for the customers.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will
drive down prices and decrease the overall profitability of the industry. First
Capital, Inc. operates in a very competitive Savings & Loans industry. This
competition does take toll on the overall long term profitability of the
organization.

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 How Financial Sector can tackle Intense Rivalry among the Existing
Competitors

 By building a sustainable differentiation

 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just
competing for small market.

MARKETING MIX
Marketing Mix is the key concept in the modern marketing and considered to be
core of marketing. It is the set of tools that the firm uses to pursue its marketing
objectives in the target market. Decisions must be made for both the distribution
channels and the final consumers. It consists 7 P’s: Product, Price, Place,
Promotion, People, Physical evidence, Process.
1. Product: The main component of the marketing mix is the product. For
this reason, the marketing strategy must be designed around products or
services. For a product to be successful, it must highlight the merits
offered to the buyer/investor.
In tangible products, the perception of quality and the added value is
much easier to see through the senses. In services, however, several
problems arise. The value cannot be seen, smelled or felt, so it can be
difficult for a customer to evaluate it. When buying a product/service, the
customer needs to trust that company and the person who sells the
service. The most important products and services offered by Financial
Investment Services companies are:
 The reception and transmission of orders for one or more financial
instruments.
 Execution of orders in relation to one or more financial
instruments, other than their own;
 Trading of financial instruments on their own ;
 The management of portfolios of individual investors on a
discretionary basis, in compliance with the mandate given to them,
when these portfolios include one or more financial instruments;
 Underwriting or placing financial instruments based on a firm
commitment;
 The custody and administration of financial instruments;

 The rental of safe deposit boxes;

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  Granting credits or loans to an investor, to allow him to carry out a
trade in one or more financial instruments, where the investment
firm granting the credit or loan is involved in the trade;

 Advice to entities on capital structure, industrial strategies and

related matters, and advice and services relating to mergers and
purchase of entities;

 Investment advice concerning financial instruments;

 Investment research and financial analysis or other forms of
general recommendation on trading with financial instruments;
2. Price: Another element of the marketing mix is the price the investor
pays for services provided by Financial Investment Services Companies.
Price is the only element of the marketing mix that generates revenue for
the company. Most of the times it is reflected in the amount of money
charged per trade, but not exclusively. There are services that the investor
may pay a cost for markets view in real-time for customers who do not
trade online, SMS Alerts, and so on.
In this competition between financial investment services companies, to
attract customers, regular or permanent decrease in fees can be used as a
strategy. Although lowering fees can be a means of attracting customers,
it is not a strategy for keeping investors because they can be constantly in
alert to find the best price.

3. Place: Due to significant differences between products and services,

traditional distribution channels cannot be used in financial services
marketing. Discussing placement (distribution), the role of intermediaries
in the marketing channel. Since the financial investment services
companies are intermediaries, it is important to resume the following:

 Financial investment services companies are intermediaries

between demand and supply, where listing on Bucharest Stock
Exchange;

 Financial investment services companies are intermediaries

between supply and demand of shares on the Bucharest Stock
Exchange;
 Financial investment services companies can offer
products/services equity through specific distribution channels.

4. Promotion: The financial sector has become globally competitive only

in the last 20 years when liberalization of financial services and actions of

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 mergers and acquisitions have increased competition in the banking
sector, investment in the stock exchange, loans, insurance, etc.

Financial investment services companies internal control department is

directly responsible for compliance with all relevant legislation on
promoting the company and its products/services. Under regulation 32 of
2006 of the ASF, the investment firm must comply with all rules on the
promotion.
Applicable promotion methods used by financial investment services
companies, can be classified into: online promotion methods and offline
promotion methods. Some offline promotion methods are advertising,
through branches and agencies represented by brokers or delegate
brokers.

5. Person: For any investment firm, human capital is its main asset, being
a resource that can be exploited. Creativity, ahead of other factors can
differentiate societies in the fight with the competition. In fact, the staff
is one of the few tangible factors as the investor interacts with society.
Expressing the importance of human capital, Edvinsson and Malone
stated: “If we imagine a firm as a living organism, for example a tree,
one can say organizational plans, annual and quarterly reports, firm
brochures, and other documents are the trunk, branches and leaves. An
investor might examine the tree to determine if she/he can harvest ripe
fruit, but to assume that he has now seen the whole tree, because he has
seen what's visible, is a grave mistake. Much of the tree is invisible,
below the surface, being nurtured through its roots. The taste of the fruits
and the color of the leaves make a good presentation of the present health
of the tree, but it is much more effective to look at what goes on in the
roots if one wants to form an opinion about the health of the tree for the
coming years. There may be damages below the surface, which, as time
goes by, may kill the tree. This is what makes intellectual capital
investigation, the roots of an organization's value, into measurement of
dynamic factors.”
6. Process: The process is part of the marketing mix that ensures the
availability and quality of services in order to balance supply and demand
service.
For an effective process, financial investment services companies must
meet the following requirements: to respond efficiently to online trading
problems, prompt execution of orders to transfer cash, efficient operation
of transferring shares, efficient operation of putting orders in the trading
systems and contracts with banks that provide financial benefits to
customers of financial investment services companies.

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 7. Physical Evidence: Being the 7th element physical evidence, it is the
only tangible element. All forms of intermediation are based on a
contract, signed by both parties. Trades, portfolios, bank statements they
are confirmed by the customer’s signature. This form of exercising the
physical evidence is regulated by Law 297/2004 updated in 2014.
Evidence of trades, share transfers, cash transfers, account statements
regularly, archived and subject to regular inspections.
CHAPTER-3
INSURANCE

INTRODUCTION TO INSURANCE

Insurance is defined as the equitable transfer of the risk of a loss, from one
entity to another, is exchange for a premium.

The Act, system or business of insuring property, life, one’s person etc against
loss or harm arising in specified contingencies as fire, accident, death
,disablement ,or the like in consideration of a payment proportionate to the risk
involved.

The business of insurance is related to the protection of the economic value of

assets. Every asset has a value. The asset would have been created through the
efforts of the owner, because he expects to get some benefits from it. It is a
benefit because it meets some of his needs. The benefit may be an income or in
some other form. In the case of a factory or a cow, the product generated by it is
sold and income is generated. In the case of a motor car, it provides comfort and
convenience in transportation. There is no direct income. Both are assets and
provide benefits.

BRIEF HISTORY OF INSURANCE

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Insurance has been known to exist in some form or other since 3000 BC. The
Greeks had started benevolent societies in the late 7th century AD, to take care
of the funeral and families of members who died. The friendly societies of
England were similarly constituted. The Great fire of London in 1666, in which
more than 13000 houses were lost, gave a boost to insurance and the first fire
insurance company, called the Fire Office, was started in 1680.

The origin of insurance business as in vogue at present, is traced to the Lloyd’s

Coffee House in London. Traders who used to gather in the Lloyd’s coffee
house in London, agreed to share the losses to their goods while being carried
by ships. The losses used to occur because of pirates who robbed on the high
seas or because of bad weather spoiling the goods or sinking the ship. In India,
insurance began in 1818 with life insurance being transacted by an English
company, the Oriental Life Insurance Co. Ltd. The first Indian insurance
company was the Bombay Mutual Assurance Society Ltd, formed in 1870 in
Mumbai. This was followed by the Bharat Insurance Co. in 1896 in Delhi, the
Empire of India in 1897 in Mumbai, the United India in Chennai, the National
Indian and the Hindustan Cooperative in Kolkata.

Later, were established the Cooperative Assurance in Lahore, the Bombay Life,
the Indian Mercantile, the New India and the Jupiter in Mumbai and the
Lakshmi in New Delhi. These were all Indian companies started as a result of
the Swadeshi movement in the early1900s. By the year 1956, when the life
insurance business was nationalized and the life insurance corporation of India
was formed on 1st September 1956, there were 170 companies and 75 provident
fund societies transacting life insurance business in India. After the amendments
to the relevant laws in 1999, the L.I.C did not have the exclusive privilege of
doing life insurance business in India.

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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 was consolidated and amended by the Insurance Act
with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies were 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.

BEGINNING OF INSURANCE IN INDIA

Insurance regulation formally began in India with the passing of the Life
Insurance Companies Act of 1912 and the provident fund Act of 1912. Several
frauds during 20's and 30's sullied insurance business in India. By 1938 there
were 176 insurance companies. The first comprehensive legislation was
introduced with the Insurance Act of 1938 that provided strict State Control
over insurance business. The insurance business grew at a faster pace after
independence. Indian companies strengthened their hold on this business but
despite the growth that was witnessed, insurance remained an urban
phenomenon.

The Government of India in 1956, brought together over 240 private life
insurers and provident societies under one nationalized monopoly corporation
and LIC was born. Nationalization was justified on the grounds that it would
create much-needed funds for rapid industrialization. This was in conformity

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with the Government's chosen path of State led planning and development. The
(non-life) insurance business, however, continued to thrive with the private
sector till 1972. Their operations were restricted to organized trade and industry
in large cities. The general insurance industry was nationalized in 1972. With
this, nearly 107 insurers were amalgamated and grouped into four companies-
National Insurance Company, New India Assurance Company, Oriental
Insurance Company and United India Insurance Company. These were
subsidiaries of the General Insurance Company (GIC).

HOW INSURANCE WORKS

There are certain principles, which make it possible for insurance to remain a
preferred and fair arrangement. The first is that it is difficult for any one
individual to bear the community shares the burden. The second is that the peril
should occur in an accidental manner. Nobody should be in a position to make
the risk happen. In other words none in the group should set fire to his assets
and ask others to share th loss. This would be taking unfair advantage of an
arrangement put into place to protect people from the accident risks they are
exposed to. The occurrence has to be random, accidental and not the deliberate
creation of the insured person.

Example: In a village, there are 400 houses, each valued at Rs.20000. Every
year, on an average, 4 houses get burnt, resulting into a total loss of Rs. 80000.
If all the 400 owners come together and contribute Rs.200 each, the common
fund would be Rs.80000. this would be enough to pay Rs.20000 to each of the 4
owners whose houses got burnt. Thus the loss of Rs. 20000 each of 4 owners is
shared by 400 house owners of the village, bearing Rs.200each. This works out
to 1% of the value of the house which is the same as the probability of risks (4
out of 400 houses).

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ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT
 For economic development investments are necessary. Investments are
made out of savings.

 A life insurance company is major instruments for the mobilization of

savings of people, particularly from the middle and lower income groups.
These savings are channeled into investments for economic growth.

 All good life insurance companies have huge funds, accumulated through
the payments of small amounts of premium of individuals. These funds
are invested in ways that contribute substantially for the economic
development of the countries in which they do business.

 Apart from investments, business and trade benefit through insurance.

Without insurance trade & commerce will find it difficult to face the
impact of major perils like fire, earthquake, floods, etc. Financiers, like
banks, would collapse if the factory, financed by it is reduced to ashes by
a terrible fire. Insurers cover also the loss to financiers if their debtors
default.

ADVANTAGES OF INSURANCE
 Perfect cover for your family after you are gone: As it is impossible to
predict the future, no one knows what happens next. Protecting your
family from an unforeseen potential peril could be your top priority. An
insurance policy can render a helping hand when you are unable to
support your family or after your death.
 Benefit of compensation: The financial loss caused by the peril is
compensated by insurance. If the untoward incident happens before

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 completion of the tenure, you can claim the financial loss covered under
the insurance without much hassle. It reduces lot of your mental stress
and agony caused by the peril. In case of life insurance, your family gets
a financial cover after your death.
 Tax Benefits: Irrespective of the insurance plan you buy, you can claim
tax benefits up to 1.5 lakhs. Under section 80C as per Income Tax Act
1961.
Financial support post retirement: There are special insurance plans that
are tailor-made to support after your retirement. It makes you financially
healthy after when you would not be able to earn money at old age.
Moreover, buying insurance at a young age becomes cheaper in the long
run.
 For specific purposes: Insurance is earmarked for specific goals unlike
other financial instruments. This helps you utilize the funds for the
purpose you had initially opted.
 For smooth business operation: Even when you meet with unexpected
loss in the business, insurance can help you manage the loss. An
insurance policy taken for your employee becomes a motivating factor at
the workplace and helps in smooth business operation.

DISADVANTAGES OF INSURANCE
 Tricky terms and conditions: While taking an insurance policy, some of
the terms and conditions could be tricky that you may not get
compensation for all the losses. It is important to read through the
conditions before buying it.
 Lengthy legal formalities: Though you may have opted for a good plan,
claiming the insurance money could take a long time due to its lengthy
legal procedures to be carried out by the company.

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  Potential crime incidents: Life insurance policies could lead to potential
crime incidents as the beneficiaries of the policy might get tempted to
resort to wrong ways to get obtain the insured amount.

CURRENT TRENDS OF INSURANCE

 The property and casualty (P&C) sector is the biggest
insurance sector in the US. 
(NAIC)
This doesn’t come as a surprise as, since 2018, the P&C market’s net
income has been soaring. Currently, it’s sitting at $58 billion, up from
$39 billion in 2017. A 10.5% boost in net premiums was a contributing
factor to the market growth alongside the $3 billion underwriting gain. 
 Insurtech partnerships are on the rise. 
(J.D. Power)
According to J.D. Power, customer-focused digital solutions will be
brought on by strong partnerships between traditional carriers and start-
ups. Aside from providing better customer experience, these partnerships
should also help insurers in cutting costs and improving business process
efficiencies.  
Companies like American Family and Nationwide already forged
partnerships with insurtech start-ups, establishing a more collaborative
industry in 2020 and beyond.

 Mobile apps are changing the insurance account servicing

landscape.
(J.D. Power)
The same report shows that 74% of insurance companies are using a
mobile app, allowing policyholders to access and manage their policy and
claims information on the go. 
Interestingly, customers who used mobile apps had a more satisfying
experience than those who used desktops or mobile browsers to interact
with their insurance companies. As we move further along into the digital
age, this is one strong digital insurance trend to prevail this year and in
the near future.
 68% of young insurance agents believe that the industry is
too slow to adapt to new technology.
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 (Statista)
Regardless of how progressive the previous stat was a booming 68% of
young insurance agents think that the digital transformation of insurance
companies is too slow. This stunted digital maturity might be due to a
lack of resourcefulness.
The recent trends in the insurance industry are urging companies to
deliver advanced self-service tools and integrated digital communications
to keep up with the leading websites in other industries.
  Prudential Life is in the lead with $800 billion in assets in
the US.
(Statista)
In 2018, Prudential Life was hailed as the top insurance company in the
US. On a global scale, the company has over $1 trillion of assets under
management as of September 2019. Berkshire Hathway, who secured the
second spot with $708 billion of assets, may take the lead in the future.
 The life insurance premiums only had a real growth rate of
0.2% in 2018.
(Capgemini)
This isn’t good news for life insurance companies. The industry is
changing and this stat shows that everyone involved should keep up.
Exploring new customer segments such as the gig economy and
Millennials is one way of breathing new life into premiums. 
  The gig economy could be a viable source of profit for the
life insurance market.
(Capgemini)
As mentioned above, gig economy workers are among the emerging
customer segments today. Typically, they don’t have access to group
benefits and this is something that life insurers can attend to.
  There’s a huge coverage gap in life insurance for
Millennials. 
(New York Life)
In the US, only 10% of Millennials have a life insurance policy in place.
This translates to a 78% coverage gap for insurers to fill. Surprisingly,
Millennials seem to be financially confident despite having the least
amount of insurance coverage.
 The days for a single business model for insurance are over. 
(Peer Insight)
Insurance industry growth trends show that a multiple-business model
will thrive this year. For instance, major players like Allstate operates
their traditional offerings while delivering online insurance products via

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 its subsidiary insurance. MassMutual is also making the same impact by
operating its wholly-owned start-up, Haven Life.
 The global life insurance providers market is forecasted to
reach $3.6 trillion by 2022. 
(AP News) 
This market includes the sale of life insurance policies. In 2018, North
America was the largest region to drive market growth, followed by the
Asia Pacific. Currently, the lack of awareness about complex insurance
products restrains the full growth of the market.
 69% of consumers would be willing to have a sensor
attached to their car if it would lower their premiums.

(PwC) 
Based on a PwC survey, a large portion of the customer base is in favor
of using car sensors, particularly if doing so would help them cut costs.
This kind of innovative technology could also help the auto insurance
industry extend coverage into untapped markets, making policies and
premiums much more affordable for everyone.

 Claims management and policy serving will be automated

with the help of AI bots.

(Augusta Free Press) 

Artificial Intelligence (AI) has the power to enhance data processing
capabilities. When the AI algorithm is merged with automation, we get
faster car insurance claims powered by streamlined and automated
processes. 

In terms of automation, Erie Insurance and Allstate are leading the way as
they already started using drones for automated vehicle inspection. 

 88% of consumers demand more personalized insurance

products.   

(V12) 
Consumers are now used to getting customized solutions and the
auto insurance industry is no exception to this trend. From messages and
pricing to recommendations, most insurance customers are looking for
personalized offers to meet their needs.

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  Insurance distribution channels are evolving. 

(V12) 
The use of multiple distribution channels is becoming more important for
the industry given that it increases market reach. Direct-to-consumer
online channels are also prevalent, eliminating the hassle to get car
insurance. Of course, traditional direct channels are not going away
anytime soon and that signals some positive insurance brokerage industry
trends.  

Alongside this, review websites, such as ours, are increasing in number as

well. Although most of these websites are not directly linked to insurance
companies, they help with the initiative to make insurance shopping much
easier.

 Auto coverage will likely shift its focus from individuals to

vehicles.

(KPMG) 
Based on recent trends and the rise of self-driving cars, auto insurance
coverage may move away from insuring drivers to insuring the vehicle
itself.  A possible alternative is that auto insurance will split into two —
third-party liability coverage and separate coverage for the vehicle against
damage.
 State Farm Group leads the P&C market with $65 billion
direct premiums written. 

(Agency Checklists) 
With $65 billion direct premiums earned/written and 9.76% market share,
State Farm Group continues to dominate the market. Berkshire Hathaway,
the owner of GEICO and several specialty insurers, takes second place
with $43 billion direct premiums written and 6.50% market share. 

 The US P&C insurance market has roughly 622,000

employees in 2018. 

(Statista) 

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 Fortunately, P&C does not only affect the lives of consumers but those
who are seeking insurance jobs as well. As the market grows, it would
need more people to deliver sales and improve revenue.

 Near real-time data will propel the growth of P&C

insurance companies forward. 

(Peer Insight)
By using wearables, smartphones, smart meters, and drone data capture,
insurers should be able to handle policies and claims much better, as the
latest insurance industry trends suggest. For instance, drones can get into
disaster zones quickly and generate accurate data for property claims.
This idea has already been put into practice by start-up Geomni in Lehi,
Utah. 

 By 2025, 95% of customer interactions will be powered by

chatbots.

(Duck Creek Technologies) 

Chatbots, the love-child of AI and machine learning, can interact with
customers, assisting them with policy application or claims
process. GEICO’s “Kate” is one great example of this new technology.
Following this trend, digital insurance experts believe that chatbot
capabilities will continue to prevail in 2020 (and beyond). 

 Hyperlocal weather and climate data and analytics will be

utilized to improve insurance pricing. 

(CB Insights) 
Climate and weather forecasts remain a risk factor that P&C insurers
consider when operating in various areas. Through AI and traditional
approaches, they hope to finally eliminate this risk.
 The US travel insurance sector is expected to increase by
1.2% in 2020. 
(IBIS World) 
Between 2015 and 2020, the travel insurance sector grew by an average
of 1.9% per year. As such, a decline in industry growth may be visible in
2020.

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  International trips are the biggest opportunity for growth in the
travel insurance sector.
(IBIS World) 
It is now safe and less costly to travel inside or outside the US, thanks to
the advancements in aircraft technology. If the number of US residents
traveling internationally (be it for leisure or business purposes) increases,
the travel insurance industry will have a bright future ahead.
 Trip cancellation/interruption is the most popular travel
insurance benefit among consumers. 
(US Travel Insurance Association) 
In 2018, policies with trip cancellation/interruption benefits were
responsible for 90% of travel protection products sold. Other benefits that
may be viable for the consumers this 2020 include lost luggage, medical
evacuation, and emergency medical programs. 
 Over 66 million people in the US are protected when
traveling.
(US Travel Insurance Association) 
These travel insurance industry trends mark an increase of 49% from
2016. What’s more, these people are protected by more than 46 million
plans provided by travel insurance carriers and allied businesses.
 64% of travellers are considering taking their family on
business trips. 
(California Broker Magazine) 
So what does this insurance trend tell us? Well, for insurers, this provides
an opportunity to offer multi-individual or multi-trip policies. Travelers
taking these new offerings wholeheartedly means a renewed interest in
safeguarding travel investments.

TYPE OF INSURANCE
In life, unplanned expenses are a bitter truth. Even when you think that you are
financially secure, a sudden or unforeseen expenditure can significantly hamper
this security. Depending on the extent of the emergency, such instances may
also leave you debt-ridden.
While you cannot plan ahead for contingencies arising from such incidents,
insurance policies offer a semblance of support to minimise financial liability
from unforeseen occurrences.
There is a wide range of insurance policies, each aimed at safeguarding certain
aspects of your health or assets.
Broadly, there are 8 types of insurance, namely:

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 Life Insurance
 Motor insurance
 Health insurance
 Travel insurance
 Property insurance
 Mobile insurance
 Cycle insurance
 Bite-size insurance

LIFE INSURANCE
Life Insurance refers to a policy or cover whereby the policyholder can ensure
financial freedom for his/her family members after death. Suppose you are the
sole earning member in your family, supporting your spouse and children.
In such an event, your death would financially devastate the whole family. Life
insurance policies ensure that such a thing does not happen by providing
financial assistance to your family in the event of your passing.
Types of Life Insurance Policies
There are primarily seven different types of insurance policies when it comes to
life insurance. These are:
 Term Plan - The death benefit from a term plan is only available for a
specified period, for instance, 40 years from the date of policy purchase.
 Endowment Plan - Endowment plans are life insurance policies where a
portion of your premiums go toward the death benefit, while the remaining is
invested by the insurance provider. Maturity benefits, death benefit and periodic
bonuses are some types of assistance from endowment policies.
 Unit Linked Insurance Plans or ULIPs - Similar to endowment plans, a
part of your insurance premiums go toward mutual fund investments, while the
remaining goes toward the death benefit.
 Whole Life Insurance - As the name suggests, such policies offer life
cover for the whole life of an individual, instead of a specified term. Some
insurers may restrict the whole life insurance tenure to 100 years.
 Child’s Plan - Investment cum insurance policy, which provides
financial aid for your children throughout their lives. The death benefit is
available as a lump-sum payment after the death of parents.

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 Money-Back - Such policies pay a certain percentage of the plan’s sum
assured after regular intervals. This is known as survival benefit.
 Retirement Plan - Also known as pension plans, these policies are a
fusion of investment and insurance. A portion of the premiums goes toward
creating a retirement corpus for the policyholder. This is available as a lump-
sum or monthly payment after the policyholder retires.
Benefits of Life Insurance
If you possess a life insurance plan, you can enjoy the following advantages
from the policy.
 Tax Benefits - If you pay life insurance premiums, you are eligible for
tax benefits in India, under Section 80(C) and 10(10D) of the Income Tax Act.
Thus, you can save a substantial sum of money as taxes by opting for a life
insurance plan.
 Encourages Saving Habit - Since you need to pay policy premiums,
buying such an insurance policy promotes the habit of saving money.
 Secures Family’s Financial Future - The policy ensures your family’s
financial independence is maintained even after your demise.
 Helps Plan Your Retirement - Certain life insurance policies also act as
investment options. For instance, pension plans offer a lump-sum payout as
soon as you retire, helping you to fund your retirement.
Now that you know all about life insurance policies read on to understand the
various facets of other general insurance policies.

MOTOR INSURANCE
Motor insurance refers to policies that offer financial assistance in the event of
accidents involving your car or bike. Motor insurance can be availed for three
categories of motorised vehicles, including:
 Car Insurance - Personally owned four-wheeler vehicles are covered
under such a policy.
 Two-wheeler Insurance - Personally owned two-wheeler vehicles,
including bikes and scooters, are covered under these plans.
 Commercial Vehicle Insurance - If you own a vehicle that is used
commercially, you need to avail insurance for the same. These policies ensure
that your business automobiles stay in the best of shapes, reducing losses
significantly.
Types of Motor Insurance Policies
Based on the extent of cover or protection offered, motor insurance policies are
of three types, namely:
 Third-Party Liability - This is the most basic type of motor insurance
cover in India. It is the minimum mandatory requirement for all motorised

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 vehicle owners, as per the Motor Vehicles Act of 1988. Due to the limited
financial assistance, premiums for such policies also tend to be low. These
insurance plans only pay the financial liability to the third-party affected in the
said mishap, ensuring that you do not face legal hassle due to the accident.
They, however, do not offer any financial assistance to repair the policyholder’s
vehicle after accidents.   
 Comprehensive Cover - Compared to the third-party liability option,
comprehensive insurance plans offer better protection and security. Apart from
covering third party liabilities, these plans also cover the expenses incurred for
repairing the damages to the policyholder’s own vehicle due to an
accident. Additionally, comprehensive plans also offer a payout in case your
vehicle sustains damage due to fire, man-made and natural calamities, riots and
others such instances. Lastly, you can recover your bike’s cost if it gets stolen,
when you have a comprehensive cover in place. One can also opt for several
add-ons with their comprehensive motor insurance policy that can make it
better-rounded. Some of these add-ons include zero depreciation cover, engine
and gear-box protection cover, consumable cover, breakdown assistance, etc.
 Own Damage Cover - This is a specialised form of motor insurance,
which insurance companies offer to consumers. Further, you are eligible to avail
such a plan only if you purchased the two-wheeler or car after September 2018.
The vehicle must be brand new and not a second-hand one. You should also
remember that you can avail this standalone own damage cover only if you
already have a third party liability motor insurance policy in place. With own
damage cover, you basically receive the same benefits as a comprehensive
policy without the third-party liability portion of the policy.
Benefits of Motor Insurance Policies
Cars and bikes are increasingly more expensive with each passing day. At such
a time, staying without proper insurance can lead to severe monetary losses for
the owner. Listed below are some advantages of purchasing such a plan.
 Prevents Legal Hassle - Helps you avoid any traffic fines and other
legalities that you would otherwise need to bear.
 Meets All Third-Party Liability - If you injure a person or damage
someone’s property during a vehicular accident, the insurance policy helps you
meet the monetary losses, effectively.
 Financial Assistance to Repair your own Vehicle - After accidents, you
need to spend considerable sums on repairing your own vehicle. Insurance plans
limit such out of pocket expenses, allowing you to undertake repairs
immediately.
 Theft/loss cover - If your vehicle is stolen, your insurance policy will
help you reclaim a portion of the car/bike’s on-road price. You can expect
similar assistance if your vehicle is damaged beyond repair due to accidents.

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 Additionally, individuals who own a commercial car/two-wheeler can also avail
tax benefits if they pay premiums for that vehicle.       

HEALTH INSURANCE
Health insurance refers to a type of general insurance, which provides financial
assistance to policyholders when they are admitted to hospitals for treatment.
Additionally, some plans also cover the cost of treatment undertaken at home,
prior to a hospitalisation or after discharge from the same.
With the rising medical inflation in India, buying health insurance has become a
necessity. However, before proceeding with your purchase, consider the various
types of health insurance plans available in India.
Types of Health Insurance policies
There are eight main types of health insurance policies available in India. They
are:
 Individual Health Insurance - These are healthcare plans that offer
medical cover to just one policyholder.
 Family Floater Insurance - These policies allow you to avail health
insurance for your entire family without needing to buy separate plans for each
member. Generally, husband, wife and two of their children are allowed health
cover under one such family floater policy.
 Critical Illness Cover - These are specialised health plans that provide
extensive financial assistance when the policyholder is diagnosed with specific,
chronic illnesses. These plans provide a lump-sum payout after such a
diagnosis, unlike typical health insurance policies.
 Senior Citizen Health Insurance - As the name suggests, these policies
specifically cater to individuals aged 60 years and beyond.
 Group Health Insurance - Such policies are generally offered to
employees of an organisation or company. They are designed in such a way that
older beneficiaries can be removed, and fresh beneficiaries can be added, as per
the company’s employee retention capability.
 Maternity Health Insurance - These policies cover medical expenses
during pre-natal, post-natal and delivery stages. It covers both the mother as
well as her new born.
 Personal Accident Insurance - These medical insurance policies only
cover financial liability from injuries, disability or death arising due to
accidents.
 Preventive Healthcare Plan - Such policies cover the cost of treatment
concerned with preventing a severe disease or condition.
Benefits of Health Insurance

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 After assessing the various kinds of health insurance available, you must be
wondering why availing such a plan is essential for you and your loved ones.
Look at the reasons listed below to understand why.
 Medical Cover - The primary benefit of such insurance is that it offers
financial coverage against medical expenditure.
 Cashless Claim - If you seek treatment at one of the hospitals that have
tie-ups with your insurance provider, you can avail cashless claim benefit. This
feature ensures that all medical bills are directly settled between your insurer
and hospital.
 Tax Benefits - Those who pay health insurance premiums can
enjoy income tax benefits. Under Section 80D of the Income Tax Act one can
avail a tax benefit of up to Rs.1 Lakh on the premium payment of their health
insurance policies.
There may be additional advantages, depending on the insurance provider in
question.

TRAVEL INSURANCE
When talking about the different types of insurance policies, one must not
forget to learn more about travel insurance plans. Such policies ensure the
financial safety of a traveller during a trip. Therefore, when compared to other
insurance policies, travel insurance is a short-term cover.
Depending on the provider you choose, travel insurance may offer financial aid
at various times, such as during loss of baggage, trip cancellation and much
more. Here is a look at some of the different types of travel insurance plans
available in the country:
 Domestic Travel Insurance - This is the kind of travel insurance policy
that safeguards your finances during travels within India. However, if you plan
to step outside the country for a vacation, such a policy would not offer any aid.
 International Travel Insurance - If you are stepping out of the country,
ensure you pick an international travel insurance plan. It allows you to cover the
unforeseen expenses that can arise during your trip like medical emergencies,
baggage loss, loss of passport, etc.
 Home Holiday Insurance - When you are travelling with family, your
home remains unguarded and unprotected. Chances of burglary are always
significant, which may lead to significant losses. Thankfully, with home holiday
insurance plans, which are often included within travel policies, you are
financially protected from such events as well. 
Benefits of Travel Insurance
The following aspects are covered under travel insurance plans:

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 Cover Flight Delay - Flight delays or cancellations can lead to
significant losses for the passenger. If you buy travel insurance, you can claim
such financial losses from the insurer.
 Baggage Loss/Delay - Travel insurance lets you claim monetary
assistance if there is a delay or you happen to lose your luggage during the trip.
With this amount, you can purchase some of the necessary items.
 Reclaim Lost Travel Documents - Visa and passport are essential
documents during an international trip. Opting for international travel insurance
ensures that you have the necessary financial backing to reapply for interim or
replacement documents as and when necessary.
 Trip Cancellation Cover - A sudden death in the family or a medical
emergency may play spoilsport with your travel arrangements. Thankfully,
international travel insurance plans support trip cancellations in such events.
You can claim financial assistance to pay penalties and cancellation charges for
flights, hotels, etc.
Make sure that you choose an insurer carefully, especially a company that is
reliable and available 24x7 to assist you.

PROPERTY INSURANCE
Any building or immovable structure can be insured through property
insurance plans. This can be either your residence or commercial space. If any
damage befalls such a property, you can claim financial assistance from the
insurance provider. Keep in mind that such a plan also financially safeguards
the content inside the property.
Types of Property Insurance in India
Here are some types of property insurance policies available in India:
 Home Insurance - With such a policy, you remain free from all financial
liabilities that may arise from damage to your home or contents inside due to
fires, burglaries, storms, earthquakes, explosions and other events.
 Shop Insurance - If you own a shop, which acts as a source of income for
you, it is integral to protect yourself from financial liability arising from the
same. Whether the liability occurs due to natural calamities or due to accidents,
with these plans, you can immediately undertake repairs to the shop.
 Office Insurance - Another type of property insurance policy, office
insurance ensures that the office building and all the equipment inside are
significantly protected in the event of unforeseen events. Generally, office
spaces include expensive equipment, such as computers, servers and much
more. Thus, availing these plans is essential.

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 Building Insurance - If you own a complete building, opting for home
insurance may not be sufficient. Instead, you can purchase building insurance to
cover the entire premises.
Benefits of Property Insurance
If you still think that property cover is not one of the types of insurance plans
you need to avail, take a look at some of the advantages from the same.
 Protection against Fires - While the insurance policy cannot prevent fires,
it can prevent financial liabilities from such an event.
 Burglaries - If your property exists in an area prone to theft and
burglaries, such a policy is vital to ensure financial security.
 Floods - In certain parts of India, floods are common. These floods can
ravage your property leading to substantial losses. Property insurance also
protects against such events.
 Natural Calamities - The plan also offers financial aid against damage
arising from earthquakes, storms and more.
Rebuilding or renovation of a property is immensely expensive. Thus, property
insurance policies are the best option to ensure long-term financial health.    

MOBILE INSURANCE
Owing to the rising price of mobile phones and their several applications today,
it has become imperative to insure the device. Mobile insurance allows you to
reclaim money that you spend on repairing your phone in the event of
accidental damage.
Further, you can also claim the same in case of phone theft, making it easier to
replace the handset with a new phone.
Benefits of Mobile Insurance
Mobile insurance policies are extremely beneficial, especially for those who
own a premium smartphone.
 Comprehensive protection for new devices - The value of phones tend
to decline with time. Thus, when the handset is new, phone insurance can help
safeguard its significant value.
 Coverage against Damage to Screen - If you accidentally damage the
smartphone screen, which is one of the most important parts of such devices,
your insurance plan will pay for the repair expenses.
 Theft or Robbery of Smartphone - Nothing is worse than buying your
dream smartphone and losing it due to theft or burglary. Well, phone insurance
will help you afford a replacement handset if such an unfortunate thing happens.
Some insurers may not allow you to buy insurance for the smartphone after a
month or two passes from the purchase of the handset.

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 CYCLE INSURANCE
Bicycles are valuable properties in India as some people rely on these vehicles
for their daily commute. A cycle insurance policy ensures that you have access
to necessary funds should your bicycle undergo accidental damage or theft. It
saves your out of pocket expenses, while also ensuring immediate repairs to the
vehicle.
Benefits of Cycle Insurance
The advantages of availing such an insurance policy are:
 Worldwide Coverage - Depending on the insurance provider, cycle
insurance policies provide financial assistance regardless of where your bicycle
undergoes damage. Even if you meet with a cycling accident in a different
country, such a plan will offer aid.
 Protection against Fires and Riots - If your bicycle sustains damage
due to accidental fires and/or rioting, insurance policies will provide the
necessary financial assistance to repair or undo the damage.
 Accidental Death Benefit - If you pass away due to bicycle accidents,
the insurance policy for the cycle would offer a lump-sum payout to your
surviving family members.
Regardless of your cycle’s price, opting for insurance can reduce your financial
liabilities significantly.

BITE-SIZE INSURANCE
Bite-sized insurance policies refer to sachet insurance plans that minimise your
financial liability for a very limited tenure, generally up to a year.
These insurance plans allow you to protect your finances against specific
damage or threats. 
For instance, particular bite-sized insurance may offer accidental cover of Rs. 1
Lakh for a year. You can choose this policy when you think you might be
particularly susceptible to accidental injuries.
Another example is insurance cover for specific diseases. For instance, if your
area is prone to water-borne diseases, such as cholera, you can pick a policy that
covers cholera treatment and all associated costs for a 1-year period. 
Benefits of Bite-sized Insurance
The primary benefit of bite-size insurance policies is that it allows you to avail
financial protection at very limited prices.

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The premiums are so low that it hardly makes any impact on your overall
monthly expenditures. In comparison, the sum insured is significant. 

CHAPTER-4
COMPARATIVE STUDY OF ULIP AND
MUTUAL FUNDS

ULIP (Unit Linked Insurance Plans)

What is ULIP?

ULIP offers a combination of the insurance and investment of to the

policyholder.
Ulips or Unit Linked Insurance Plans help you to serve two goals in a single
product: investment and insurance. It provides you a life cover and also lets you
reap the benefits of the stock market, debt funds or both, as the case may be.
Ulips have come a long way since its inception in 1971. The first Ulip was
introduced by the Unit Trust of India (UTI) in 1971 and then by Life Insurance
Corporation (LIC) in 1989.

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How do Ulips work?

Ulips are products that provide you a combination of a life insurance policy and
also an investment opportunity though a mutual fund in a single plan. Ulips are
provided by life insurers so your payments to these companies when you buy a
Ulip plan are called ‘premiums’ as primarily Ulips are more similar to insurance
plans.
A portion of your premium is diverted towards the investment bit, which is the
mutual fund portion: equity, debt, hybrid or as the case may be. There are fund
managers who look after your investments. You are also allowed to switch
between different types of funds to make the best ulip plan for yourself.

Lock-in period of a ULIP?

Ulip insurance plan comes with a lock-in period of five years. However, Ulip
being a combination of a life insurance policy and a mutual fund, both of which
are long term investments, should be held for 15 years or more.

Costs associated with ULIPS 

 Premium allocation charges: These charges are deducted upfront from

your premium payment. An upfront deduction means that before your
Ulip investment gets apportioned between the insurance and investment
bit, some money is deducted as premium allocation charges. These
charges are for the expenses incurred by the insurer in underwriting and
selling the product to you.
 Fund management charges: These charges are deducted by the insurer
for managing the funds in your Ulip plan and are capped at 1.35% by the
IRDAI. FMC is deducted before the insurer arrives at the net asset value
of the fund.
 Mortality charges: These charges are levied by the insurer to manage
the insurance bit of the product. The calculation of these charges depends
on the insured’s age, health condition, amount and duration of life
insurance policy sought. The rationale behind mortality charges is that a
company assumes the insured will survive until a certain age before the
insurer will have to pay out the insurance policy. Mortality charges
compensate the insurer in case the insured does not live until the insurer’s
assumed age.

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  Policy administration charges: As the name suggests, these charges are
deducted to cover for all the administrative work done by the insurer in
maintaining your policy.
 Switching charges: Your insurer can levy charges on you in case you
want to switch between funds in the investment portion of Ulips. For
example, if you were invested in an equity fund earlier and now you want
to move to a different fund, say a debt or a hybrid fund, the insurer can
levy a switching charge.
 Surrender charges: An insurer levies surrender charges for premature
withdrawal and the charges depend on if you withdraw before or after the
lock-in period.

Types of ULIPs

The categorization of Ulip depends on the type of mutual fund associated with
the product. There can be roughly 3 kinds of Ulip funds:
 Equity funds: Such Ulips invest most of its funds in equity or equity-
oriented assets like stocks of various companies.
 Debt funds: Ulip plans which invest the premiums in debt instruments
or money market instruments, government securities, bonds and likewise.
 Balanced funds: Here the premiums are invested in a combination of
equity and debt market instruments.
 4G or Whole Life Ulips: Few life insurers have floated new Ulip plans
in the market which carry minimal charges and newer features. This has
earned them the title of ‘new age ulips’, ‘whole life ulips’, or ‘4G ulips’.
Some of the features of these new-age ULIPs include the removal of
return on mortality charges (ROMC) on maturity and premium allocation
charges. This category seeks to remove the negative bias against Ulips
and increase awareness towards the new customer-centric changes.

Risks Associated With ULIPs

The risk associated with Ulip plans will depend on the type of fund attached to
it. For example, an equity fund is riskier than a debt fund while a balanced fund
shares the risk between the mix of equity and debt portfolios. The Ulip plan will
carry the risk factor accordingly. Ulips are also riskier when compared to other
investments. For example, ELSS, which also falls under 80 C, is a more
diversified investment and is less risky.
If you compare Ulips to a standalone insurance plan or a mutual fund product,
then the former will carry greater risks. Here’s why. The cost structure of Ulips
makes it expensive and it becomes difficult to get returns that will cover you for

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the costs and help you add extra over and above that. Considering that Ulips are
more expensive, we can say that the risk factor is on the heavier side.

Pros and Cons of investing in ULIPS

Pros:
 Long term goals: Given that the charges are high in Ulips and it invests
in equities, a Ulip product is bound to be held for a long period of time to
get the benefits of the markets. This means, ULIP may be a product to
consider only when you want to achieve long term goals like buying a
house in the future, marriage, higher education of children, retirement, etc
and liquidity is not a concern.
 Switching: Ulips gives you the liberty to switch between equity, debt
or mutual funds during the tenure of your Ulip plan to suit your
requirements.
 Tax benefits: While the investment made in Ulips is eligible for
deduction under section 80(C), the returns from the policy are exempt
from taxation on maturity under section 10 (10D) of the income tax act

Cons:
 Benefits of standalone plans: All advisors are on board with the idea
that if you buy life insurance and a mutual fund plan separately then the
chances of you getting the real benefits of both these products are way
higher than a Ulip, even after accounting for the investment you make in
each of them.
 Returns are compromised at times: Ulips may earn good returns for
you due to the investment element but the long series of high charges at
times compromise the returns in the end.
 Volatile returns: Returns are also very volatile in Ulips but that goes
with any investment that has an equity element in it.

How does ULIP compare with other investment options under 80

C: Comparative analysis:

Sr
Particulars Ulips ELSS PPF
No.

Lock-in
1. Five years Three years 15 years
period

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 80C and
80C and returns from
maturity
policy on maturity
2. Tax benefits 80C amount is
are exempt under
exempt from
section 10 (10D).
taxation too

Gains above Rs 1
Gains are taxable lakh in any given
3. Taxation depending on the financial year is None
underlying asset taxable under
LTCG at 10%

Underlying Equity, debt and Fixed-income

4. Equity 
assets balanced oriented

Considered
risk-free with
Risk (when
Highest among the Not as risky as guaranteed
5. compared to
lot Ulips returns as it is
each other)
backed by the
government

6. Charges There are at least five Expense ratio is One-time

charges in Ulips:  mostly in the range account
of 1.05 to 2.25%. opening
 Mortality Very few plans charge of Rs
charge have an expense 100
ratio of more than
 premium
2.25% and may
allocation charge range up to 3% or
 switching more.
charge
  surrender
charge
 Policy

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 administration
charge

Things to keep in mind before selecting a ULIP plan

Things to keep in mind before investing in Ulips are not different from
parameters that you need to consider before investing in any instrument.
 Finances and goals: First and foremost you need to assess the funds you
have at hand and what is the goal you want to achieve through this
investment. You should consider investing in Ulips for long term life
goals any other life goals that don’t require premature withdrawals or
redemptions. The charges levied, in that case, will neutralize your gains
or make it negative in some cases.
 Risk appetite: Assessing your personal risk appetite will help you to
know which Ulip you should go for: an equity fund Ulip will carry a
higher risk than a debt-fund Ulip.
 Charges: It is essential for you to do proper research on the product and
look at all the charges levied to understand where your affordability lie.
Do keep these things in mind, do your research and consult your advisor
before investing in Ulips.
MUTUAL FUND
What is Mutual Fund?

Mutual fund is nothing but a collection of stocks or bonds that a professional

fund manager buys on your behalf. The fund manager decides which/how many
stocks or bonds to buy.
A mutual fund then distributes the entire investment amount in small units
(called units). Investors can buy these units instead of buying stocks directly.

How does a Mutual Fund start – NFO?

 A company that is in the business of managing mutual funds (also called
fund house) decides to launch a new fund. Such a launch is called New
Fund Offering (NFO).
 The fund house will then advertise the fund to the potential investors,
through ads in the paper, TV and online. Interested investors then provide
the money (called Application Money).

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  The fund house gives the investors an account identified by a number
(called Folio Number) and puts units of a newly launched fund to that
account.
 They may deduct a portion of the application money (called entry-load),
to cover the launch expenses, like advertising cost and dealer
commission. Each unit price (called Net Asset Value or NAV) is usually
₹10 at the time of NFO (All NFO’s are first priced at ₹10).

How Do Mutual Funds Work?

 The money with the Mutual Fund (called Assets of the Mutual Fund) is
given to an employee (called Fund Manager) to invest as advertised to the
initial investors.
 Fund manager of an equity fund will buy shares of companies (called
equity). Fund manager of a debt fund will invest in deposits of companies
and/or government (called debt).
 Depending on how these investments perform, the fund’s assets will
change with the corresponding change in the Net Asset Value (NAV) of
each unit. The number of units will not change though.

Mutual Fund Expense Ratio

 A fund house will take some money from the fund to cover its expenses.
These expenses include employee salaries, distributor’s commission,
marketing costs, and profit for the fund house.
 This expense is charged as a percentage of the total assets (called
Expense Ratio) and is usually in the range of 0.5% to 3%.

Growth and Dividend Mutual Funds

 Depending on the fund, some money (called Dividend) may be returned
to the investor periodically (typically every year). This dividend is paid
out of the fund’s asset and it reduces the fund’s NAV.
 Some funds offer two options, namely (i)a Dividend option and (ii) a
Growth option (with no dividend). As you would expect, the dividend
option will have lesser NAV as compared to the growth option for the
same fund.

Investing in an Existing Mutual Fund

 Investors may decide to invest in an existing mutual fund. Such investors
will have to buy the fund’s units at the current NAV.
 This investment will be added to the fund’s assets and the fund’s units
will increase accordingly. Note that the fund’s NAV does not change
when a new investment is made.

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Redemption – Taking Money Out of a Fund
 When an investor wants to withdraw money from the fund, he will get an
amount which is equal to the number of units sold, multiplied by the
current NAV.
 Depending on the fund, the investor may be charged with an expense
(called exit load). Once the money is paid, the fund’s assets and the
number of units will decrease with no effect on the NAV.

Type of Mutual Funds
There are 20K+ mutual fund schemes.
 Open: You can invest and redeem anytime. It is the most popular
scheme.
 Closed: You can invest only during the start and redeem when it’s tenure
ends.
 Interval: You can invest or redeem only on pre-defined dates.

Broadly, there are 4 types of mutual funds based on investments:

 Equity: Investing in equity funds are risky, but provide high returns.
 Debt: They invest in bonds (give interest) issued by the government,
banks and corporates. They are safe, but provide low returns.
 Hybrid: They invest in both equity and bonds. They provide moderate
returns and have moderate risk attached to them
 Others: Investing in gold, real-estate, commodities, etc. They also
provide moderate returns and have moderate risk attached to them.

Equity Mutual Funds

Equity mutual funds can be further classified into 5 types listed below:
 Large Cap: They invest in stocks of large companies with a market cap
of more than $5B. They are relatively less risky.
 Small/ Mid Cap: They invest in stocks of medium/ small companies with
a market cap less than $5B. They are relatively riskier.
 Multi-Cap: They invest in all types of large, medium and small cap
companies. They are relatively more risky than large caps but less risky
than a small/ mid cap.
 Sector Funds: They invest in specific sectors like IT, pharma, banking,
etcetera. They are considered risky as they have sector-specific risks but
some sectors like pharma and IT are inherently less risky.
 Others: Invest in themes like Rural, MNC, etc. They are also high risk.
 Tax Saving Mutual Funds (ELSS): These are special kinds of mutual
funds that provide a tax advantage under section 80C of IT Act

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 (exempted up to ₹1,50,000). Both principal (certain limit) and gains are
tax-free. They have a shorter lock-in period as compared to other tax-
saving investments and have a chance to garner higher returns as
compared to other tax saving instruments.

Debt Mutual Funds

Debt mutual funds can be further classified into 5 types listed below:
 Liquid: They mostly invest in bonds by banks and the government. It has
a  maturity (time to get the principal back) of 90 days.
They are considered the safest type of mutual fund. They give returns
very similar FD.
 Ultra Short Term: They invest in bonds by banks, governments. or
corporates and have a  maturity of 1 year.
They are deemed as a safe mutual fund and give 1% higher returns than
fixed deposit. The returns may sometimes vary by 2% as well.
 Mid/ Short Term:  They invest in bonds by banks, governments, or
corporates. It has a maturity of 3-6 years.
They are also considered safe and provide returns which are 2% higher
than fixed deposits, but returns vary by 5% due to interest rate variation.
 Gilt Long Term: They invest in bonds by the government and have a
maturity period of 7-12 years.
They are also considered safe from the principal perspective but they
carry high interest rate risks.
They provide 3% higher returns than fixed deposits, but returns vary by
8%.
 Dynamic: They invest in bonds of different maturity depending on an
expectation of interest rates.
Hence, the maturity can vary. They are also considered safe from the
principal perspective and provide 3% higher returns than fixed deposits,
but the returns vary by 10%, due to interest rate variation.
 Income: They invest in bonds to generate regular income. The returns
and risk are between mid/short-term funds and long-term funds.
 Credit Opportunities: They invest in bonds by corporates which have
high interest rates. They are considered as the riskiest debt mutual funds.

Hybrid
Hybrid mutual fund can be further classified into 3 types listed below
 Balanced: These equity-oriented hybrid funds have 65% of AUM
invested in equity and the rest in long-term debt.
For tax purposes, these are considered as equity mutual funds.

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  Debt-Oriented: These are debt oriented hybrid funds with majority
AUM invested in debt and the rest in equity. For tax purposes, these are
considered as debt mutual funds.
 Others: They invest in all types of securities, like debt, equity and gold.
For tax purposes, these are considered as debt mutual funds.

Mutual Fund Taxation

There are 4 types of mutual funds from the tax perspective.
 Equity and Balanced Mutual Funds: These are funds with 65%+ of
investment in equity shares of Indian companies.
 Debt Mutual Funds: Any other fund other than an equity mutual fund.
 Money Market/ Liquid Funds: These are special kinds of debt funds
that invest in <90 days matured securities.
The only difference is the dividend treatment for such schemes.
 Gold Mutual Funds: They invest in gold/ gold based securities, but are
also treated very similar to debt funds from the tax perspective.

  COMPARATIVE STUDY
Abstract
The evaluation of financial planning has been increased through decades, the
existing studies on factors influencing selection of mutual fund and life
insurance schemes are very few and very little information is available about
investor perceptions, preferences, attitudes and behaviour. The saving
objectives and source of information for investors advise the companies and
individuals as to which is the most preferred investment avenue. A mutual fund
is a type of professionally-managed type collective investment scheme that
pools money from many investors. ULIP stands for Unit Linked Insurance Plan.
ULIPs combines the features of both insurance cover and investment
opportunities under a single plan. Both ULIPs and mutual funds carry a certain
element of risk in them that arise from investing. With this background this
paper makes an earnest attempt to study the behaviour of the investors in the
selection of these two investment vehicles in an Indian perspective by making a
comparative study.

Objective of study
 To analyse Mutual Funds and ULIPs.
 To draw comparison between the Mutual funds and ULIPs.

Research methodology

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The research is based on secondary data of journals, articles and magazines.
Considering the objective of study descriptive type research design is adopted.

Comparative Analysis
Both ULIPs and mutual funds carry a certain element of risk in them that arise
from investing. While the risk may be lower in case of debt investments, it is
higher in case of equity investments. While debt investments face the risk of
defaults and changes in interest rates, equity investments face the risk of market
volatility and the fund manager’s skills. Life insurance products such as unit
linked insurance plan (Ulip) can be considered a more reliable wealth creation
solution over the long term, keeping in mind the returns, protection and tax
savings, all combined in one product. Amongst several investor friendly
features, one of the unique propositions of ULIP is that it permits investing
one’s premium in a mix of debt and equity funds in varying proportions,
allowing inter-fund transfers through switching and all this with no tax liability.
The average investor enjoys numerous tax-saving options like PFs and PPFs,
life insurance plans, ELSS investments, ULIPs and more. When comparing
different instruments, it is always advisable to choose an option that offers the
combined benefits of wealth protection, value appreciation, strategic flexibility,
and tax savings.

Basis of difference ULIPS Mutual Funds

Investment amount Determined by the investor
and can be modified as and
when needed.
Objective Unit link insurance plans
offers an investor long term
plan with dual benefit of
insurance and investment.
Tax rebate All Unit link plans offers
investors tax rebate of 80c
under income tax act.
Portfolio disclosure Not mandatory
Switching option Ulips allow its investors to
switch their investment
between the funds linked to
Minimum investment amount
be determined by fund house.
Mutual funds are short term
plans.
Only investments in tax saving
funds are eligible for section
80C benefits.
Quarterly disclosure is
necessary
No switching option is
available.

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 plans.
Expenses No upper limit, expenses Upper limit for expenses
determined by insurance chargeable to investors have
company been set by the regulator.
Benefits Dual benefit of investment Suitable for short and medium
and insurance Suitable for term Easy exit possible
long term

Conclusion
Smart tax planning is an integral part of sensible financial planning. A mutual
fund is the ideal investment vehicle for present scenario .Today each and every
person is fully aware of every kind of investment proposal .Everyone wants to
invest money, which entitled of low risk high return and easy redemption .so
before investing in mutual fund, one should be fully aware of each and every
thing. .At the same time ULIP as an investment avenue is good for people who
have interest in staying in longer period of time. Investing in a combination
product like ULIP is the simplest and most elegant way to enjoy the triple
benefits of life cover, high returns, and tax savings with minimal risk of losses
or other complications. In an ideal situation, separate investments in life
insurance and mutual funds would help the individual enjoy good returns,
assured protection, and attractive tax savings. Unfortunately, striking the right
balance between multiple investment products can be a very difficult task.

CHAPTER-5
RESEARCH METHODOLOGY

SIP OBJECTIVES

 To work under the supervision of senior finance personnel.

 To understand the financial processes and procedures of the company and
work accordingly.
 To gain knowledge about the Financial Product like Mutual Fund, Life
Insurance, Health Insurance and equity.
 To gain practical exposure by meeting individuals through referrals,
corporate activities, promotional drives, etc. and generating leads for the
organization.

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  To interview clients, review their fiscal situations to understand their
Financial Positions and suggest tools to assist in meeting financial goals.

METHODS USED IN PROJECT

The task of data collection begins after a research problem has been defined and
research design has been made. Basically, there are two methods of collection
one is primary and other is secondary. Primary data are those which are
collected for the first time while secondary data are those which have already
been passed through the statistical process.
For the purpose of project, data is very much required which works as a food for
process which will ultimately give output in the form of information.
For the present study, the survey method was used for collecting primary data.
A structured questionnaire was used for this purpose. The questionnaire
contains 15 multiple choice questions. Apart from this interview method was
also used as a source of primary data. The main source of secondary data has
been Internet.
Personal interview method was applied to collect the actual data for the research
study. The interaction with the few respondents before filling questionnaires
have made them more friendly and free to give the information.

CHAPTER-6
DATA ANALYSIS AND INTERPRETATION

Ques1. Do you save?

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Ques2. What do you do with your savings?

Ques3. Have you ever invested in Ulip or Mutual Funds?

Ques4. If yes, why you have invested in Mutual Funds?

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Ques5. If yes, why you have invested in Ulip?

Ques6. Current Investment portfolio?

Ques7. Objectives of your investment?

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Ques8. How frequently do you invest?

Ques9. Most preferred form of investment?

Ques10. Do you agree that insurance products are susceptible to

very low risk when compared to the other options for investment?

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Ques11. Type of Scheme (Rank from 1-4 ) 1- most preferred, 4-
Least Preferred

Ques12. How long do you plan to stay in Ulip?

Ques13. Why do you want to invest in Ulip?

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Ques14. What financial goals do you plan to achieve through the
money you get from Ulip?

Ques15. Which of the following source of information influence

you most in selection of Mutual funds?

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Ques16. What has been your experience with returns expected
from investment in mutual funds?

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 CHAPTER-7
RECOMMENDATIONS AND CONCLUSION

CONCLUSIONS

 From income analysis we can conclude that most of customers are belong
to high income group which is beneficial for the company.
 80% customers were come to know about the company through agents
which shows that most of customers were get attracted through agents.
 Return objectives analysis says that most of customers give very
importance to return.
 Tax Savings is also very important for customers.
 From the analysis of key features of ULIP we can conclude that 35%
customers don’t know about the key features of ULIP which they have
taken, which shows customers carelessness about their own products.
 Fund analysis says that approx. 75% customers know the different kinds
of funds available in their plan, it so because investment is always made
by customers own choice for the funds.
 Many customers have knowledge about administrative charges and other
charges.
 A few customers know about the investment portfolio of the company
under the fund chosen by them. Basically customers don’t know what an
investment portfolio is so they don’t take interest for knowledge of it.

RECOMMENDATIONS
 Company should give effective training to their agent so that more
customers get attracted towards ULIP products.
 Company should try for giving the knowledge to its customers that
investments are subject to market risks and past performance is not a
guide to future results.
 Company should promote the promotional activity of the product in the
market.
 Company decreases the allocation charges and other charges after that
company increases in the selling of the products.

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 BIBLIOGRAPHY

BOOKS

 Life Insurance (Insurance Institute of India

 Insurance Industry (ICFAI publications)
 Study Guide- Principles and practices of Life/ General Insurance by
AIMA.

WEBSITES
 www.insurance.ind.com
 www.irda.org
 www.insuranceworld.com
 www.fondarticles.com
 http://thecapitalbox.com

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