A Project On Analysis of Ulips in India

ANALYSIS OF ULIPS IN INDIA.
CHAPTER-1
INTRODUCTION
In the commercial arena, the choice of an effective strategy is perhaps the most
important and the toughest decision to take. The decision to select among the grand
strategies and deciding upon which strategy will best meet the enterprise’s
objectives is rendered complex by multiple considerations.
The same is also true with the insurance companies in India who are constantly
revamping their strategies and coming out with innovative options to stay in the
competition. There were days when Life Insurance Corporation of India (LIC) was
the only insurance company available to people in India and where people
synonymised Insurance to LIC. Also since it was a Public Sector Undertaking
(PSU) it has a great support from people. But now times have changed a lot of
private players have entered into the fray. There have been a lot of Indian
companies collaborating with foreign insurance giants like ICICI Prudential, Bajaj
Allianz etc who have already made their presence felt in the Indian Insurance
industry.
Even though LIC is still the market leader with more than over 60% of the market
share, the private players are giving it a tough time. Since the last decade the
market share of LIC had fallen down by about more than 20%.
The new private players have started offering a variety of unlimited schemes right
from insurance plans for a 30 day old baby to that of a 70 year old senior citizen.
Also the private companies have started creating the importance and need of
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REGIONAL INSTITUTE OF COOPERATIVE MANAGEMENT COLLEGE.
insurance in today’s life. They have started positioning their brands and are
marketing their products in such a way the people have started feeling the need of
security in their lives.
Taking into account the huge population and growing per capita income besides
several other driving factors, a huge opportunity is in store for the insurance
companies in India. According to the latest research findings, nearly 80% of Indian
population are without life insurance cover while health insurance and non-life
insurance continues to be below international standards. And this part of the
population is also subjected to weak social security and pension systems with
hardly any old age income security. As per our findings, insurance in India is
primarily used
as a means to improve personal finances and for income tax planning; Indians have
a tendency to invest in properties and gold followed by bank deposits. They
selectively invest in shares also but the percentage is very small (4-5%). This in
itself is an indicator that growth potential for the insurance sector is immense. It's a
business growing at the rate of 15-20% per annum and presently is of the order of
around more than $55 billion.
India is a vast market for life insurance that is directly proportional to the growth in
premiums and an increase in life density. With the entry of private sector players
backed by foreign expertise, Indian insurance market has become more vibrant.
Competition in this market is increasing with company’s continuous effort to lure

the customers with new product offerings. However, the market share of private
insurance companies remains low in the 25-35% range. Even to this day, Life
Insurance Corporation (LIC) of India dominates Indian insurance sector. The
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heavy hand of government still dominates the market, with price controls, limits on
ownership, and other restraints. They private players are still in their initial days
and would take some more time to capture a good market share. At present they
are coming up with new and innovative ideas.
Since the last decade the life insurance industry in India has been growing very fast
and many new companies have entered this business insurance. The Indian life
insurance industry has recorded a robust growth of more than 16 % for the nine-
month period which ended on December 31, 2009.It is expected to grow at an
amazing rate of 20 per cent this year Also in the present scenario the most sought
after insurance plans are the Unit Linked insurance Plans (ULIPs).
WHAT ARE ULIPs

Most of you might have heard of ULIPs? Rather most of you might have heard
your parents talking about an insurance cover? If your answer is yes, you are at the
RIGHT place!
Unit-linked insurance plans, ULIPs, are distinct from the more familiar ‘with
profits’ policies sold for decades by the Life Insurance Corporation. ‘With profits’
policies are called so because investment gains (profits) are distributed to
policyholders in the form of a bonus announced every year.
In other words A ULIP is a life insurance policy which provides a combination of

risk cover and investment. ULIPs have gained high acceptance due to attractive
features they offer like flexibility, transparency, liquidity and a vast variety of fund
option. Unit linked plans are suitable for all customer profiles; however as a
general belief the risk averse investors tend to choose traditional plans and an
informed customer prefers a ULIP.
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ULIPs also serve the same function of providing insurance protection against death
and provision of long-term savings, but they are structured differently. In ‘with
profits’ policies, the insurance company credits the premium to a common pool
called the ‘life fund,’ after setting aside funds for the risk premium on life
insurance and management expenses.
Every year, the insurer calculates how much has to be paid to settle death and
maturity claims. The surplus in the life fund left after meeting these liabilities is
credited to policyholders’ accounts in the form of a bonus. In a ULIP too, the
insurer deducts charges towards life insurance (mortality charges), administration
charges and fund management charges.
The rest of the premium is used to invest in a fund that invests money in stocks or
bonds. The policyholder’s share in the fund is represented by the number of units.
The value of the unit is determined by the total value of all the investments made
by the fund divided by the number of units. If the insurance company offers a
range of funds, the insured can direct the company to invest in the fund of his
choice. Insurers usually offer three
choices — an equity (growth) fund, balanced fund and a fund which invests in
bonds. In both ‘with profits’ policies as well as unit-linked policies, a large part of
the first year premium goes towards paying the agents’ commissions.
ULIPs offer the kind of flexibility that no insurance product can. ULIPs essentially
combine the benefits of an insurance policy and a market-linked investment.
Investors can select a ULIP with an equity-debt combination that is in line with
their risk profile. A risk-taking investor would typically select one with a high
equity component, while a risk-averse investor would opt for a debt-heavy one.
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Simply put, ULIPs are structured in such a way that the protection element and the
savings element are distinguishable, and hence managed according to your specific
needs. In this way, the ULIP plan offers unprecedented flexibility and
transparency.
So with many players around for a company to really be successful it has to really
be very efficient on all fronts. It has to constantly adapt to the changing consumer
preferences with a lot of new innovations and implementing new technology try
to different from the lot. Especially if it is a new player in the market the company
has to really work very hard to get into the completion and stay afloat.
The investment is denoted as unit and is represented by the value that it has
attained called as Net Asset Value (NAV). ULIP came into play in 1960s and
became very popular in Western Europe and America. The reason that is attributed
to the wide spread popularity of ULIP is because of the transparency and the
flexibility which it offers to the clients.
As time progressed the plans were also successfully mapped along with life
insurance needs to retirement planning. In today’s times ULIP provides solution
for all the needs of a client like insurance planning, financial needs, financial
planning for children’s future and retirement planning.
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RISK ASSOCIATED WITH ULIPs
ULIPS as the name suggests are directly linked with the investments made by the
insured. Though he does not have a direct say in this but he does offer his choice in
the form of investment. With stock markets soaring high a few months back,
ULIPs were offering a good rate of return, but now with a sudden downfall of the
stocks, ULIPs are bound to become negative investments.
At present, a policy-holder cannot understand the growth of his investments vis-à-

vis other funds in the market, since there is no benchmark to measure one fund
against the other. Usually a policy-holder could ask his investment in a ULIP to be,
for example, 55 per cent in equity and 45 per cent in debt. These components can
be mixed according to his risk-taking ability. An investor, therefore, would have to
look at quarterly statements, where the fund would be compared with benchmarks.
However, this may not be a true representation of the NAV, as the ULIP could be a
mix of debt, liquid and equity investments.
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CHAPTER-2
TOPIC ANALYSIS
INSURANCE
Insurance may be described as a social device to reduce or eliminate risk of loss to
life and property. Under the plan of insurance, a large number of people associate
themselves by sharing risks attached to individuals. The risks which can be insured
against include fire, the perils of sea, death and accidents and burglary. Any risk
contingent upon these, may be insured against at a premium commensurate with
the risk involved. Thus collective bearing of risk is insurance.
CHARACTERISTICS OF INSURANCE
1. Sharing of risks
2. Cooperative device
3. Evaluation of risk
4. Payment on happening of a special event
5. The amount of payment depends on the nature of losses incurred.
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HISTORY OF INDIAN INSURANCE

Insurance has a long history in India. Life Insurance in its current form was
introduced in 1818 when Oriental Life Insurance Company began its operations in
India. General Insurance was however a comparatively late entrant in 1850 when
Triton Insurance company set up its base in Kolkata.
History of Insurance in India can be broadly bifurcated into three eras:

a . Pre Nationalization
b. Nationalization and
c. Post Nationalization
Life Insurance was the first to be nationalized in 1956. Consolidating the

operations of various insurance companies formed Life Insurance Corporation of
India. General Insurance followed suit and was nationalized in 1973. General
Insurance Corporation of India was set up as the controlling body with New India,
United India, National and Oriental as its subsidiaries. The process of opening up
the insurance sector was initiated against the background of Economic Reform
process, which commenced from 1991. For this purpose Malhotra Committee was
formed during this year who submitted their report in 1994 and Insurance
Regulatory Development Act (IRDA) was passed in 1999. Resultantly Indian
Insurance was opened for private companies and Private Insurance Company
effectively started operations from 2001.
PRESENT INSURANCE MARKET

The insurance sector was opened up for private participation a decade back. For
years now, the private players are active in the liberalized environment. The
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insurance market has witnessed dynamic changes, which include presence of a

fairly large number of insurers both life, and non-life segment.
Most of the private insurance companies have formed joint venture partnering
well-recognized foreign players across the globe.
The Indian life insurance market generated total revenues of $41.36 billion in
2007, thus Representing a compound annual growth rate (CAGR) of 11.84% for
the period spanning 2000-2007. Life insurance market had a growth of $22.46
billion within a period of 7 years with a growth rate of 118.24%. Estimated life
premiums rose to INR 1,470,800 million ($36.77 billion) in 2006 from INR
1,301,540 million ($32.54billion) in 2005.
We envisage that life premiums in 2011 will be $65.96 billion, a growth larger
than they were in 2007. The performance of the market is forecast to accelerate,
with an anticipated CAGR of 9.78% for the four-year period 2007-2011 expected
to drive the market to a value of $65.96 billion by the end of 2011. There would be
a growth of $24.6 billion i.e. 59.48% in the next 4 years.
Non-life premiums in India were $6.53 billion in 2007. Gross written premium
(GWP) in the Indian non-life insurance market reached a value of $5.75 billion in
2006, this representing an annual growth of 13.55% for the period spanning 2006-
2007. Estimated non-life premiums rose from INR230 billion ($5.75 billion) in
2006 to INR261 billion
($6.53 billion) in 2007. We anticipate that non-life premiums will grow by a
CAGR of 9.40% between 2007-2011. We are looking for non-life premiums to
rise by $405 million over the five years to the end of 2011 with a growth rate of
62.02%. (Source: http://www.scribd.com/doc/4996143/OVERVIEW-OF-
INSURANCE-SECTOR )With a huge population base and large untapped market,
insurance industry is a big opportunity area in India for national as well as foreign
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investors. India is the fifth largest life insurance market in the emerging insurance
economies globally and is growing at 32-34% annually. This impressive growth in
the market has been driven by liberalization, with new players significantly
enhancing product awareness and promoting consumer education
and information. The strong growth potential of the country has also made
international players to look at the Indian insurance market. Moreover, saturation
of insurance markets in many developed economies has made the Indian market
more attractive for international insurance players, according to "Booming
Insurance Market in India (2008-2011)”.
 Total life insurance premium in India is projected to grow Rs 1,230,000

crore by 2010-11.
 Total non-life insurance premium is expected to increase at a CAGR of 25%

for the period spanning from 2008-09 to 2010-11.
 With the entry of several low-cost airlines, along with fleet expansion by
existing ones and increasing corporate aircraft ownership, the Indian
aviation insurance market is all set to boom in a big way in coming years.
 Home insurance segment is set to achieve a 100% growth as financial

institutions have made home insurance obligatory for housing loan
approvals.
 Health insurance is poised to become the second largest business for non-
life insurers after motor insurance in next three years.
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 A booming life insurance market has propelled the Indian life insurance
agents into the ‘top 10 country list’ in terms of membership to the Million
Dollar Round Table (MDRT) — an exclusive club for the highest
performing life insurance agents.
(Source:http://www.marketsmonitor.com/Report/IM588_related.htm)
LIFE INSURANCE
As is evident from its very name, it deals with insurance of human life. “Life
insurance corporation of India”- a public sector undertaking has the monopoly in
this sector since its nationalization.
In our wordily life, whenever there is uncertainty, there is an involvement of risk.

The instinct for security against such risk is one of the basic motivating forces
determining human attitudes. As a squeal to this quest for Security, the concept of
insurance must have been born. The urge to provide insurance or protection against
the loss of life & property must have prompted people to make some sort of
sacrifice willingly in order to achieve security through “COLLECTIVE CO-
OPERATION”, in this sense; story of insurance is probably as old as the story of
mankind.
All life insurance companies in India have to comply with the strict regulations laid
out by Insurance Regulatory and Development Authority of India (IRDA).
Therefore there is no risk in going in for private insurance players.
In terms of being rated for financial strength like international players, only ICICI
Prudential is rated by Fitch India at National Insurer Financial Strength Rating of
AAA (Ind) with stable outlook indicating the highest claims paying ability rating.
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Life insurance.
Table-1: Trend of the Indian insurance industry ($Bn) 2000-2011
Non-Life Life
0.00 2000
10.00 2001
20.00 2002
30.00 2003
40.00 2004
50.00 2005
60.00 2006
70.00 2007
80.00 2008
90.00 2009
100.00 2010
110.00 2011
Diagram 1 shows the trend of the Inidan insurance company
(Source: The knowledge Centre)
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Life Insurance Corporation of India (LIC), the state owned behemoth, remains by
far the largest player in the market. Among the private sector players, ICICI
Prudential Life Insurance(JV between ICICI Bank and Prudential PLC)is the
largest followed by Bajaj Allianz Life Insurance Company Limited (JV between
Bajaj Group and Allianz).
The private companies are coming out with better products which are more
beneficial to the customer. Among such products are the ULIPs or the Unit Linked
Insurance Plans which offer both life cover as well as scope for savings or
investment options as the customer desires. Further, these types of plans are
subject to a minimum lock-in period of three years to prevent misuse of the
significant tax benefits offered to such plans under the Income Tax Act.
Unlike the mutual fund product that has a very simple cost structure, ULIPs carry
a greater number of costs (administration and mortality), in addition to the others.
So comparing ULIPs with mutual funds is erroneous. Right now there are a total
twenty two life insurance companies operating in India, of which one (Life
Insurance Corporation)
is a Public Sector Undertaking and the remaining twenty are all private sector
enterprises.
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LIST OF LIFE INSURANCE COMPANIES IN INDIA
1. AEGON RELIGARE
2. AVIVA
3. BAJAJ ALLIAZ
4. BHARATHI AXA
5. BIRLA SUN LIFE
6. FUTURE GENERALI
7. HDFC STANDARD LIFE
8. HSBC
9. ICICI PRUDENTIAL
10. IDBI FORTIS
11. ING VYSYA
12. KOTAK LIFE INSURANCE
13. LIC
14. MAX NEWYORK LIFE
15. MET LIFE
16. RELIANCE LIFE
17. SAHARA INDIA
18. SBI LIFE
19. SHRIRAM LIFE
20. TATA AIG LIFE
21. DLF PRAMERICA
22. CANARA HSBC OBC
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Table-2: Market share of the Indian Life Insurance industry (figures are
approximate)
Companies Percentage
LIC 64%
ICICI 9%
Bajaj 7%
SBI Life 3%
Reliance 3%
HDFC 3%
Birla 2%
Max Newyork 2%
Kotak Mahindra 1%
Others 6%
(Source: As per a report published in 2008 by Ms Pinky Walia-Financial

Advisor)
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WHY DO INSURER PREFER ULIPs?

Insurers love ULIPs for several reasons. Most important of all, insurers can sell
these policies with less capital of their own than what would be required if they
sold traditional policies. In traditional ‘with profits’ policies, the insurance
company bears the investment risk to the extent of the assured amount. In ULIPs,
the policyholder bears most of the investment risk. Since ULIPs are devised to
mobilise savings, they give insurance companies an opportunity to get a large
chunk of the asset management business, which has been traditionally dominated
by mutual funds.
STUDY OF ULIPs
India, ULIP insurance policies are on the top in the popularity chart because it
offers more benefits than traditional life insurance plans. There are many benefits
are available such as higher returns on investment, partial withdrawal, flexibility to
choose life cover, wider fund options, top up facility, free switches, tax benefits,
etc.
If you are looking for long term investment and better returns, ULIP is a right
option to achieve your goal. But, you may find difficulties while purchasing the
ULIP, because there are single and regular premium option. You have to choose
the right option for you. In single premium ULIP, you need to pay a single
payment and you will enjoy the benefits throughout the policy term. In case of
regular premium, you need to pay premium on regular basis, it can be paid by
annual, half annual, quarterly and monthly mode.
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In terms of investment, both products offers similar options like equity, debt and
liquid. Under regular premium option you may ask for commitment to pay more.
But, under single premium product nobody will ask you to pay more as a matter of
commitment. In the initial years of ULIP, single premium product offer better
returns than regular premium product. But, it's balance power shifts down latter.
But this is not in effect, the product is sold very aggressively due to IRDA norms.
Regular premium ULIP products are also good in various factors such as
affordability, tax benefit and large return.
There are also ULIP charges to consider than single and regular premium. It is also
important to take a overview of different charges are under ULIP plans. It includes
premium allocation charge, risk cover charges, policy administration charges, fund
management charges, service tax charge, miscellaneous charge, etc.
At the end, ULIP is a good mixture of life cover and investment. But don't buy it
for investment purpose only, there are another good options available for the
investment. Unit linked insurance plan (ULIP) is a life insurance solution that
provides the client with the benefits of protection and flexibility in investment. It is
a solution which provides for life
insurance where the policy value at any time varies according to the value of the
underlying assets at the time .
STRUCTURE OF ULIPs
ULIPs offered by different insurers have varying charge structures. Broadly the
different types of fees and charges are given below. However the insurers have the
right to revise or cancel the fees and charges over a period of time
( Source: http://www.scribd.com/doc/7044410/ULIPs)
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Charges Under ULIP
Contribution Related Charges:

These are the charges that are represented as a percentage of the regular or single
contribution paid. In case of a regular contribution plan, it is usually high in the
first year to pay for the distribution cost. This charges pays for the issuance and for
distribution commissions. This charges are running for the policy.
Administrative Charges:
These are charges that are levied for the administration of the policy and the
related cost of administration of the insurance company,itself. They are more
related to the cost like IT , operational, etc cost of continuing the policy.
Fund Management Charges:

These are the charges for buying and selling debt and equity. These are the charges
are adjusted in NAV itself.
Mortality Charges:
This covers the cost of providing life protection for the insured and may be paid
once at the start of the policy for a recurrent manner for example this charges
levied to provide the insurance cover under the plan . Normally these charges are
one year charges as per the age of the holder.
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Figure 3: Premium break -up under ULIPs
Premium
Less charges
Investment represent ides Life cover

unit
Rider charges
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Rider charges are similar in nature to the mortality charges as they are levied to
pay for the other protection benefits that the policy holder has choosen for- like the
critical illness benefit or the accident benefit,etc.
Surrender Charges
When the policy holder decides to surrender the policy or partially withdraw some
of the units for cash , a surrender charge may be apply.
Surrender charges are used to cover initial expenses that have been incurred by the
company but not yet recovered from the policyholder yet.
Bid offer Charges

In ULIP specifically certain insurers might create a difference in the price at which
they sell the unit and the price at which they buy the units. Investor’s contribution
are used to buy units in the investment fund at the offer price and are sold when
benefits are required at the bid price. The difference between the offer and bid
prices Is known as the “bid-offer spread", this is used to cover expenses when
setting up the policy.
Transactional specific Charges

These charges are levied when the client does some specific transaction like
changing funds, topping up the investment component or withdrawals.
Premium Allocation charges

This is a percentage of the premium appropriated towards charges before allocating
the units under the policy. This charge normally includes initial and renewal
expenses apart from commission expenses.
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Figure 4: Advantages of Unit Linked Insurance Plans
Long term wealth Insurance plus

creation Investment
Allow top ULIPS

Tax benefit
Generated capital Riders

return Advantages of ULIPS
Flexibility Transparency
Premium Investment as per your

holiday risk appetite
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TAX IMPLICATIONS
• Provide Tax Benefits under section 80C.
• ULIPs: Very flexible in moving between equity and debt funds(not tax
implications until maturity of the policy).
• ULIPs: Some strings attached for your policy to be in effect. Minimum

number of premiums needs to be paid. Minimum fund balance needs to be
always maintained
How To Select The Right ULIP
For a product capable of adding significant value to investors' portfolios, ULIPs

have far too many critics. We at Personal have interacted with a number of
investors who were very disillusioned with their ULIPs investments; often the
disappointment stemmed from poor and inappropriate selection.
We present a 5-step investment strategy that will guide investors in the selection
process and enable them to choose the right ULIP.
1. Understand The Concept Of ULIPs
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Do as much homework as possible before investing in an ULIP. This way you will
be fully aware of what you are getting into and make an informed decision.
More importantly, it will ensure that you are not faced with any unpleasant
surprises at a later stage. Our experience suggests that investors on most occasions
fail to realise what they are getting into and unscrupulous agents should get a lot of
'credit' for the same. Gather information on ULIPs, the various options available
and understand their working. Read ULIP-related information available on
financial Web sites, newspapers and sales literature circulated by insurance
companies.
2. Focus On Your Need And Risk Profile

Identify a plan that is best suited for you (in terms of allocation of money between
equity and debt instruments). Your risk appetite should be the deciding criterion in
choosing the plan. As a result if you have a high risk appetite, then an aggressive
investment option with a higher equity component is likely to be more suited.
Similarly your existing investment portfolio and the equity-debt allocation therein
also need to be given due importance before selecting a plan. Opting for a plan that
is lop-sided in favour of equities, only with the objective of clocking attractive
returns can and does spell disaster in most cases.
3. Compare ULIP Products From Various Insurance Companies

Compare products offered by various insurance companies on parameters like
expenses, premium payments and performance among others. For example,
information on premium payments will help you get a better picture of the
minimum outlay since ULIPs work on premium payments as opposed to sum
assured in the case of conventional insurance products .Compare the ULIPs'
performance i.e. find out how the debt, equity and balanced schemes are
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performing; also study the portfolios of various plans. Expenses are a significant
factor in ULIPs hence an assessment on this parameter is warranted as well.
Enquire about the top-up facility offered by ULIPs i.e. additional lump sum
investments which can be made to enhance the policy's savings portion. This
option enables policyholders to increase the premium amounts, thereby providing
presenting an opportunity to gainfully invest any surplus funds available. Find out
about the number of times you can make free switches (i.e. change the asset
allocation of your ULIP account)
from one investment plan to another. Some insurance companies offer multiple
free switches every year while others do so only after the completion of a
stipulated period.
4. Go For An Experienced Insurance Advisor

Select an advisor who is not only conversant with the functioning of debt and
equity markets, but also independent and unbiased. Ask for references of clients he
has serviced earlier and cross-check his service standards.
When your agent recommends a ULIP from a given company, put forth some
product-related questions to test him and also ask him why the products from other
insurers should not be considered. Insurance advice at all times must be unbiased
and independent; also your agent must be willing to inform you about the pros and
cons of buying a particular plan. His job should not be restricted to doing paper
work like filling forms and delivering receipts; instead he should keep track of
your plan and offer you advice on a regular basis.
5. Does Your ULIP Offer A Minimum Guarantee?
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In a market-linked product, protecting the investment's downside can be a huge

advantage. Find out if the ULIP you are considering offers a minimum guarantee
and what costs have to be borne for the same.
ADVANTAGES OF ULIPs
 Can easily rebalance your risk between equity and debt without any tax
implications.
 Best suited for medium risk taking individuals who wish to invest in equity
and debt funds (at least 40% or higher exposure to debt). No additional tax
burden for those investing mainly in debt unlike in MFs.
 The accretion to the fund invested can be checked on daily basis unlike the
traditional policies.
 There is lot more flexibilities like partial withdrawal, switching, redirection,

early withdrawal, Sum Assured reduction, top up contribution, etc.
 Charges are transparent in nature, with the latest AML guidelines insisting
on common nomenclature of charges for all insurance companies
 The customer can time the market by exercising switch options and make
the most when markets are zooming or choose to be conservative when
markets are falling..its thus win-win situation
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 He gets a life cover at a nominal cost unlike mutual funds,
 Almost all companies provide riders like accidental death and

disability/dismemberment riders, crtitical illness rider, hospital cash benefit
rider, income loss rider, etc
 Stages in one life like education of children, marriage, and retirement needs
can be soundly planned by the help of ULIPs.
 Tax advantages are also offered by the ULIPs.
Disadvantages
 Investor find it difficult to understand the nuances of capital market and

therefore goes by the herd mentality. i.e.they invest because their friends and
family is investing without understanding how ULIPS are designed.
 ULIPS are attractive for risk taking people and less attractive for risk
adverse people.
 Some consider taking term insurance and a mutual fund as a combination to

beat the ULIP.
 Some consider charges levied exorbitant and not commensurate to the

returns offered
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 The complicated design of the polices make them less aware of the product
features and chances of misspelling by agents are very high.
ULIP And Mutual Funds difference?

In structure both ULIP and Mutual Funds looks similar. But, in objective they are
different. Because of the high first-year charges, mutual funds are a better option if
you have a five-year horizon. But if you have a horizon of 10 years or more, then
ULIPs have an edge. To explain this further a ULIP has high first-year charges
towards acquisition (including agents’ commissions). As a result, they find it
difficult to outperform mutual funds in the first five years. But in the long-term,
ULIP managers have several advantages over mutual fund managers. Since
policyholder premiums come at regular intervals, investments can be
planned out more evenly. Mutual fund managers cannot take a similar long-term
view because they have bulk investors who can move money in and out of schemes
at short notice.
Unit Linked Insurance Plan, popularly called ULIP, it is to be borne in mind that
ULIP’s being a market linked instrument will fetch good returns on a long term
basis. The basic advantage of a ULIP over other investment instruments is that it
offers the twin benefits of life insurance as well as an investment. Apart from that,
there are a number of ways in which ULIP’s can prove to be advantageous over
Mutual Funds, Regular Insurance Policies and Fixed Deposits. Let’s analyze:
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Ulip An Better Investment Option For Your Money
Maxi miser: If high growth is your priority, this is the plan for you. You can
enjoy long-term capital appreciation from a portfolio that is invested primarily in
equity and equity-related securities
Protector: If on the other hand, your priority is steady returns, you can opt for the
protector Plan. Plan, you can accumulate a steady income at a low risk across a
medium to long-term period from a portfolio, which is primarily invested in fixed
income securities.
Balancer: If you prefer a balance of growth and steady returns, choose our
balancer plan. This would ensure that your portfolio is invested in equity-linked
securities, as well as in fixed income securities.
Preserver: The objective of this plan is not ensuring capital protection by

investing in very low risk investments like the cash and call money markets.
However, the returns generated may also be on the lower side due to the
investment pattern. At inception, investments up to 20% can be allocated to this
fund.
ULIPs- Systematic Insurance cum Investment Plan

Any individual who has purchased a life insurance policy in the last year or so
surely would have a Unit Linked Insurance Plan (ULIP). ULIPs have been selling
like Wonder Products in the recent past and they are likely to continue to outsell
their plain vanilla counterparts going ahead.
28
A ULIP is a market-linked insurance plan. The difference between a ULIP and

other insurance plans is the way in which the premium money is invested.
Premium from, say, an endowment plan, is invested primarily in risk-free
instruments like government securities (gsecs) and AAA rated corporate paper,
while ULIP premiums can be invested in stock markets in addition to corporate
bonds and gsecs. So what else apart from this reason makes ULIPs so attractive to
the individual? Here, we have explored some reasons, which have made ULIPs so
irresistible.
Transparency
However, ULIPs offer a transparent option for customers to plan their various life
stage needs Through market-led investments as compared to traditional investment
plans.
Insurance cover plus savings

ULIPs serve the purpose of providing life insurance combined with savings at
market-linked returns. To that extent, ULIPs can be termed as a two-in-one plan in
terms of giving an individual the twin benefits of life insurance plus savings. This
is unlike comparable instruments like a mutual fund for instance, which does not
offer a life cover.
Multiple investment options

➢ULIPs offer variety than traditional life insurance plans. So there are multiple
options at the individual's disposal. ULIPs generally come in three broad variants:
➢Aggressive ULIPs (which invest 80%-100% in equities, balance in debt)
➢Balanced ULIPs (invest around 40%-60% in equities)
➢Conservative ULIPs (invest up to 20% in equities)
29
Although this is how the ULIP options are generally designed, the exact
debt/equity allocations may vary across insurance companies. A ULIP
policyholder has the option to invest in a variety of funds, depending on his risk
profile. If one does not have the appetite to invest in equity, they can choose a debt
or balanced fund.
Flexibility
Individuals can switch between the ULIP variants outlined above to capitalise on
investment opportunities across the equity and debt markets. Some insurance
companies allow a certain number of free' switches. This is an important feature
that allows the informed individual/investor to benefit from the vagaries of
stock/debt markets. For instance, when stock markets were on the brink of 7,000
points (Sensex), the informed investor could have shifted his assets from an
Aggressive ULIP to a low-risk Conservative ULIP.
Switching also helps individuals on another front. They can shift from an
Aggressive to a Balanced or a Conservative ULIP as they approach retirement.
This is a reflection of the change in their risk appetite, as they grow older.
Works like a SIP

Rupee cost-averaging is another important benefit associated with ULIPs.
Individuals have probably already heard of the Systematic Investment Plan (SIP),
which is increasingly being advocated by the mutual fund industry. With an SIP,
individuals invest their monies regularly over time intervals of a month/quarter and
don't have to worry about `timing' the stock markets. These are not benefits
peculiar to mutual funds. Not many
30
realise that ULIPs also tend to do the same, albeit on a quarterly/half-yearly basis.
As a matter of fact, even the annual premium in a ULIP works on the rupee cost-
averaging principle. An added benefit with ULIPs is that individuals can also
invest a one-time amount in the ULIP either to benefit from opportunities in the
stock markets or if they have an investible surplus in a particular year that they
wish to put aside for the future. When you're buying a ULIP, make sure you select
one that works well for you. The important thing is to look for and understand the
nuances, which can considerably alter the way the product works for you. Take the
following into consideration:
Charges : Understand all the charges levied on the product over its tenure, not just
the initial charges. A complete charge structure would include the initial charges,
the fixed administrative charges, the fund management charges, mortality charges
and spreads, and that too, not only in the first year but also through the term of the
policy
Fund Options and Management : Understand the various fund options available
to you and the fund management philosophy and objectives of each of them.
Examine the track record of the funds and how they are performing in comparison
to benchmarks. Who manages the funds and what experience do they have? Are
there adequate controls?
Importantly, look at how easily you can access information about your fund's
performance when you need it -- are their daily NAVs? Is the portfolio disclosed
regularly?
Features : Most ULIPs are rich in features such as allowing one to top-up or
switch between funds, increase or decrease the protection level, or premium
31
holidays. Carefully understand the conditions and charges associated with each of
these. For instance, is there a minimum amount that must be switched? Is there a
charge on the same? Must you go through medical underwriting if you want to
increase the sum assured?
Company : Last but not least, insure with a brand you can trust to honour its
commitment and service you according to your requirements
First and foremost, investors need to understand that a ULIP is a bundled product
of their investments and their insurance proceeds. Since privatization in 2000 and
the introduction of ULIPs as a life insurance product category, the overall
insurance penetration in the country has grown from around 2% to 4%. Today,
more than 70 per cent of the new business premium for life insurers comes from
Ulips.
All Ulips have several funds in which your money can be put to work, much like a
mutual fund. Assuming that you choose the growth or the equity plan, ask for the
NAV performance for the last two years at least. Choose three with the highest
performance track record vis-a-vis the benchmark. Now choose the best
performing policy in terms of returns with the lowest cost. Here's a 5-step
investment strategy that will guide investors in the selection process and enable
them to choose the right unit-linked insurance plans (ULIPs).
But before we get there, let's understand what ULIPs are all about?
For the generation of insurance seekers who thrived on insurance policies with
assured returns issued by a single public sector enterprise, unit-linked insurance
plans are a revelation. Traditionally insurance products have been associated with
attractive returns coupled with tax benefits. The returns part was often so
32
compelling that insurance products competed with investment products for a place
in the investor's portfolio.
Perhaps insurance policies then were symbolic of the times when high interest
rates and the absence of a rational risk-return trade-off were the norms. The
subsequent softening of interest rates introduced a degree a much-needed
rationality to insurance products like endowment plans; attractive returns at low
risk became a thing of the past. The same period also coincided with an upturn in
equity markets and the emergence of a new breed of market-linked insurance
products like ULIPs.
While in conventional insurance products the insurance component takes

precedence over the savings component, the opposite holds true for ULIPs. More
importantly ULIPs (powered by the presence of a large number of variants) offer
investors the opportunity to select a product which matches their risk profile; for
example an individual with a high risk appetite can shun traditional endowment
plans (which invest about 85% of their funds in the debt instruments) in favour of a
ULIP which invests its entire corpus in equities.
In traditional insurance products, the sum assured is the corner stone; in ULIPs
premium payments is the key component. ULIPs are remarkably alike to mutual
funds in terms of their structure and functioning; premium payments made are
converted into units and a net asset value (NAV) is declared for the same.
Investors have the choice of enhancing their insurance cover, modifying premium
payments and even opting for a distinct asset allocation than the one they originally
opted for. Also if an unforeseen eventuality were to occur, in case of traditional
products, the sum assured is paid along with accumulated bonuses; conversely in
33
ULIPs, the insured is paid either the sum assured or corpus amount whichever is
higher.
Insurance seekers have never been exposed to this kind of flexibility in traditional
insurance products and it would be fair to say that ULIPs represent the new face of
insurance.
While few would dispute the value-add that ULIPs can provide to one's insurance
portfolio and financial planning; the same is not without its flipside. For the
uninitiated,
understanding the functioning of ULIPs can be quite a handful! The presence of

what seem to be relatively higher expenses, rigidly defined insurance and
investment components and the impact of markets on the corpus clearly make
ULIPs a complex proposition. Traditionally the insurance seeker's role was a
passive one restricted to making premium payments; ULIPs require greater
participation from both the insured and the insurance advisor.
As is the case with most evolved investment avenues, making informed decisions
is the key if investors in ULIPs wish to truly gain from their investments. The
various aspects of ULIPs dealt with in this publication will certainly further the
ULIP investor's cause.
34
CHAPTER-3
RESEARCH DESIGN
Problem Statement
Investors are being confused because many insurance companies approach and
explain that their product is better than other companies’ product. They have been
explained only about the NAV returns and not the actual returns what they
(investors) will receive after amortizing the charges.
OBJECTIVES OF THE PROJECT

.
• To compare the hot selling Unit linked plans in India and to suggest the
customers which company is giving better returns by ranking them.
• To compare the Unit Linked Insurance Plans (ULIPs) with some selected
companies.
• To study the consumer perception towards various insurance products.
35
• To study in detail the positioning strategies of selected companies in general.
• Awareness of Life Insurance is being created among the people.
METHODOLOGY
The techniques used for data collection are:
A. Internet surveys and
B. Questionnaire method
The following methodology has been followed to achieve the objectives of the
project.
SOURCES OF DATA
In the data collection method, we have collected both primary and secondary data
to meet our objectives
Primary Data
The primary data was collected by a survey based on the questionnaire. It was
formulated on the basis of information carefully gathered by me about the various
mindsets of the people. This questionnaire was mainly formulated to target the
common man to see his perception and awareness of various investment options
available.
Secondary Data
36
The secondary data was collected directly from the companies and their websites
and internet surveys. Also a lot of similar research studies and journals have been
referred .
Benefits Of Unit Linked Plan

ULIP distinguishes itself through the multiple benefits that it provides to the
consumer. The plan is a one stop solution providing
1. Life protection
2. Investment and Savings
➢Market linked fund based on risk profile
➢Switch option
➢Premium redirection
➢Automatic transfer plan(ATP)
3. Flexibility of cover continuance
4. Transparency
5. Extra protection with riders
➢Death due to accident
➢Disability
➢Critical illness
6. Liquidity
➢During the term partial withdrawals
➢ At Maturity
7. Tax planning
37
Limitations:
I. Only five Life Insurance companies have been considered for the study.
II. Risk (death) cover charges are not considered.
III. The scope of the project is limited to conceptual and marketing aspects of
Life Insurance Companies and doesn’t include Claim Settlement and the
under writing part of the operations which are equally important aspect of
learning.
IV. It is not always possible to evaluate companies under similar parameters

since many companies deal with various businesses thus clubbing all the
companies on the same parameters is not always possible.
38
CHAPTER-4
COMPARITIVE SECONDARY DATA ANALYISIS
TATA AIG LIFE INSURANCE COMPANY

TATA AIG OFFERS FOUR DIFFERENT TYES OF ULIPs
a. INVEST ASSURE CARE

b. INVEST ASSURE FLEXI
c. INVEST ASSURE II
d. INVEST ASSURE EXTRA
INVEST ASSURE CARE

Min entry age 30 yrs
Max entry age 45 yrs
Max Maturity age 65
Min premium 12000
39
No of funds 5
Riders ADBR,CIBR
Min premium payment term NM
INVEST ASSURE FLEXI

Max entry age 70yrs
Max Maturity age 80
Min premium 15000
No of funds 7
Riders ADBR,CIBR
INVEST ASSURE II
Min entry age 15,20,30 yrs
40
Max Maturity age 60
Min premium 12000
No of funds 5
Riders ADBR,CIBR,WOP
INVEST ASSURE EXTRA
Min entry age 15,20,30 yrs
Max Maturity age 60
Min premium 12000
No of funds 4
Riders ADBR,CIBR
ADBR-Accidental Death Benefit Rider, CIBR-Critical Illness Benefit Rider, NM-

Not Mentioned (Source: www.tata-aig-life.com)
41
INVEST ASSURE CARE:
I. Through Wealthsurance a customer can even invest at the age of 65

where as in this product if the customer is beyond 45 years he will not
be allowed to invest.
II. Customer can keep his money invested till the age of 75 years and take
benefit of the market performance whereas here the plan matures at the
age of 65.
III. In Wealthsurance Free partial withdrawal starts after completion of 3
years where as in this product the customer needs to wait for 5
completed years before he can do a withdrawal
INVEST ASSURE:
I. Wealthsurance has a Premium allocation charge of only 4% as against

50% allocation in this product.
II. Through Wealthsurance a customer can even invest at the age of 65
where as in this product if the customer is beyond 45 years he will not
be allowed to invest.
III. Customer can keep his money invested till the age of 75 years and take
benefit of the market performance whereas here the plan matures at the
age of 60.
INVEST ASSURE EXTRA: 42

43
BAJAJ ALLIANZ LIFE INSURANCE COMPANY

BAJAJ ALLAINZ OFFERS FIVE TYES OF ULIPs
a. UNIT GAIN PLUS GOLD

b. UNIT GAIN PREMIER
c. CENTURY PLUS
d. NEW UNIT GAIN PLUS
e. PENSION GUARANTEE
UNIT GAIN PLUS GOLD

Min entry age 0 yrs
Max Maturity age 70yrs
Min premium 12000
No of funds 6
Riders 6(after 18)
Min premium payment term 3yrs
UNIT GAIN PREMIER

44
Min entry age 0 yrs
Min premium 50000
No of funds 3
Riders NM
CENTURY PLUS
Min entry age 8 yrs
Min premium 25000
No of funds 7
Riders ADBR

NEW UNIT GAIN PLUS
45
Min entry age 0 yrs
Min premium 10000
No of funds 7
Riders ADBR,WOPCIBR, FIB,HCB
PDBM in premium payment term 3yrs
PENSION GUARANTEE
Min entry age 45yrs
Max Maturity age NA
Min premium 25000-purchase price
No of funds NM
Riders NM
Min premium payment Term NM
46
ADBR-Accidental Death Benefit Rider,

CIBR-Critical Illness Benefit Rider,
NM-Not Mentioned,
WOP-Waiver of Premium,
FIB-Family Income Benefit,
HCB-Hospital Cash Benefit,
PDB-Permanent Disability Benefit
(Source: www.bajajallianz.com)
COMPARITIVE ANALYSIS
UNIT GAIN PLUS GOLD:

♦ Wealthsurance only has a allocation charge of only 4% in comparison to 15% in this
product.
♦ Max entry age in wealthsurence is 65 as against 60 of unit gain gold plus.
♦ Wealthsurence has an min entry age of 0 years against this product where the entry
age is 8 years.
UNIT GAIN PREMIER:

♦ Min premium in wealthsurence is only 10,000 rupees in comparison to 50,000 rupees
of this product.
♦ Max entry age in wealthsurence is 65 as against this product which has a cut of 60
years.
CENTURY PLUS:
47
♦ Min premium in wealthsurence is only 10,000 rupees in comparison to 25,000 rupees
of this product.
♦ In wealthsurence there is a choice of 5 riders where as in this product only 1 rider is
available.
NEW UNIT GAIN PLUS:

♦ Wealthsurance only has a allocation charge of only 4% in comparison to 55% in
this product
♦ Max entry age in wealthsurance is 65 as against 60 of unit gain gold plus
PENSION GUARANTEE:
♦ Wealthsurance can be customised for retirement planning.
♦ Customer can opposite for a partial withdrawal without any changes post 3 years
from his fund value and use the money as pension. There is no tax charges on the
money withdrawn or taken as pension.
48
LIFE INSURANCE CORPORTAION (LIC) OF INDIA

LIC OFFERS THREE DIFFERENT TYPES OF ULIPS
a. MARKET PLUS
b. PROFIT PLUS (RP & SP)
c. FORTUNE PLUS
MARKET PLUS
Min premium 5000 RP

10000 SP
No of funds 4
Riders ADBR
PROFIT PLUS (RP&SP)

49
Min entry age 0 yrs
Max Maturity age 70,75 yrs
Min premium 1000 RP

20000 SP
No of funds 4
Riders ADBR,CIBR
FORTUNE PLUS
Max Maturity age 65 yrs
Min premium 20000
No of funds 4
Riders ADBR

50
ADBR-Accidental Death Benefit Rider, CIBR-Critical Illness Benefit Rider (Source:

www.licindia.com)
MARKET PLUS:
♦ Premium allocation charges is 16.5% in this product where as wealthsurance has a

change of max 4%.
♦ In wealthsurance there is unlimited switching redirection and partial withdrawal
allowed absolutely free of charge.
♦ There are no riders available in this product as against wealthsurance has a host of
riders to choose from.
♦ After 3 years we can go for unlimited partial withdrawals as against in this product
there are no partial withdrawal available.
PROFIT PLUS(RP&SP):
♦ Premium allocation charge is 15% min in this product where as wealthsurance has a
change of max 4%.
♦ In wealthsurance there is unlimited switching redirection and partial withdrawal
allowed absolutely free of charge.

♦ There are no riders available in this product as against wealthsurance has a host of
riders to choose from.
FORTUNE PLUS:
51
♦ Min entry age in wealthsurance is 0 years as against in this product it is 12 years.
52
ANALYSIS OF ULIPS IN INDIA
HDFC STANDARD LIFE INSURANCE COMPANY

HDFC STANDARD LIFE OFEERS FOUR DIFFERENT TYPES OF ULIPs.
ENDOWMENT PLUS II b.
ENHANCED LIFE PROTECTION II c.
UNIT LINKED PENSION RP d.
UNIT LINKED PENSION SP
ENDOWMENT PLUS II
Min entry age 18
Max entry age 65
Max Maturity age 75
Min premium 12000
No of funds 7
Riders ADBR,CIBR
Min premium payment term TERM
53
REGIONAL INSTITUTE OF COOPERATIVE MANAGEMENT.
ENHANCED LIFE PROTECTION II

Min entry age 18
Max entry age 45
Max Maturity age 75
Min premium 12000
No of funds 7
Riders NO
UNIT LINKED PENSION RP

Min entry age 18
Max entry age 65
Max Maturity age 75
Min premium 12000
No of funds 7
Riders NO
54
UNIT LINKED PENSION SP

Min entry age 18
Max entry age 70
Max Maturity age 75
Min premium NM
No of funds 7
Riders NO
ENDOWMENT PLUS:
♦ Min entry age in wealthsurance is0 years as against in this product it is 18
years.
♦ Premium allocation charge is 40% in this product where as wealthsurance
has change of max 4%.

♦ Min premium in wealthsurance is 10000 as against this product.
55
ENHANCED LIFE PROTECTION:

♦ Min entry age in wealthsurance is0 years as against in this product it is 18
years.
♦ Premium allocation charge is 40% in this product where as wealthsurance
has change of max 4%.

♦ Min premium in wealthsurance is 10000 as against this product. Max
entry age in this product is only 45 years where as in wealthsurance it is
65 years.
♦ In wealthsurance after 3 years unlimited partial withdrawal are allowed
where as in this product the customer need to wait till the 5th year.
UNIT LINKED PENSION RP:

♦ There are no riders available in this product as against wealthsurance has
a host of riders to choose from.

♦ Allocation charge of 25% on this product and wealthsurance has a 4%
charge.
♦ Annuity is taxable where as all the funds in wealthsurance is tax free.
Wealthsurance can be customised to be a tax free retirement plan.
♦ Post 3 years customers can also do unlimited partial withdrawal
whenever there is need for money without being charged or taxed.
UNIT LINKED PENSION SP:
♦ There are no riders available in this product as against wealthsurance
has a host of riders to choose from.
56
♦ Allocation charges of 6% on this product and wealthsurance has a

4%charge.
♦ Post 3 years customers can also do unlimited partial withdrawal
whenever there is need for money without being charged or taxed.
57
ICICI PRUDENTIAL LIFE INSURANCE COMPANY

ICICI PRUDENTIAL OFFERS ELEVEN DIFFERENT TYPES OF ULIPs.
a. LIFE TIME GOLD
b.LIFE LINKSUPER
c.PREMIER LIFE GOLD
d. LIFE TIME PLUS
e. LIFE STAGE
f. SMART KID CHILD PLAN
g. LIFE TIME SUPER PENSION
h. LIFE STAGE RP PRNSION
i. LIFE STAGE RP
j. LIFE STAGE ASSURE
k. INVEST SHEILD LIFE NEW
58
LIFE TIME GOLD

Min entry age 0
Max entry age 65
Max Maturity age 75
Min premium 20000
No of funds 7
Riders ADBR,CIBR,WOP
Min premium payment term 3 yrs
LIFE LINK SUPER

Min entry age 0
Max entry age 65
Max Maturity age 70
Min premium 50000
No of funds 7
Riders NO
Min premium payment term SP
59
PREMIER LIFE GOLD

Min entry age 0
Max entry age 65,69
Max Maturity age 75
Min premium 10000
No of funds 7
Riders ADBR,CIBRWORP
Min premium payment term 3,5 yrs
LIFE TIME PLUS

Min entry age 0
Max entry age 65
Max Maturity age 75
Min premium 20000
No of funds 7
Riders ADBR,CIBR
Min premium payment term 3 yrs
60
LIFE STAGE
Min entry age 0
Max entry age 65
Max Maturity age 75
Min premium 15000
No of funds 7
ADB
Riders R,CIBR
Min premium LIFE BASED

payment term
LIFE TIME GOLD:

♦ Premium allocation charge is premium based in this product where as
♦ Wealthsurance has a charge of max 4% and with higher premium the
allocation charge decreases.
♦ Min premium in Wealthsurance is only Rs.10000 as against in this product it
is 20000
♦ In Wealthsurance there is unlimited switching redirection and partial
withdrawal allowed absolutely free of charge.
61
LI FE LINK SUPER:
♦ Premium allocation charge is 20% in this product where as
Wealthsurancehas a charge of max 4%.
is 20000
PREMIER LIFE GOLD:

♦ There are no riders available in this product as against
Wealthsurancehashas a host of riders to choose from.
LIFE TIME PLUS:

is 20000
62
LIFE STAGE:
♦ Min premium in Wealthsurance is only Rs.10000 as against in this
product it is 20000
♦ There are only 2 riders available in this product as against Wealthsurance
has a host of riders to choose from.
63
CHAPTER-5
PERFORMANCE OF ULIPs IN THE SELECTED COMPANIES
Here in order to compare the performances of the ULIPs in the selected five
companies with that of IDBI FORTIS we have selected a particular type of fund
called equity growth funds. The reason for selecting equity growth fund is that we
would be very clearly able to understand the effect of market slowdown on these
companies. Here we have considered the Net asset Values (NAV) of the equity
growth funds from April 1st 2008 to April 30th2009.We have then compared the
maximum and minimum NAVs during the period and found out the percentage
change for the NAVs observed for the equity funds of the respective selected
companies selected companies.
We have calculated the average NAV for every month (from April 1st 2008 to
April 30th2009) for all the companies and then plotted them on graphs. We have
then found out the extent to which each company was affected due to the market
slowdown. We have also taken into consideration the latest NAVs of these
companies to see the pattern of growth of these funds post recession. The
percentage change (negative) in the Net Asset value for all the companies has been
calculated below and we observe growth as we can see from its present NAV. that
LIC was the least affected among the selected companies with only a percentage
change of only -23.38% which is quite low compared to -43.84% of that of Bajaj
Allianz.
IDBI Fortis has shown a percentage change of -38.95%.But since IDBI Fortis is a
new company which was started just a year back we can say that it has managed
quite well and right now it is showing a quite good and positive .
64
Table3 & Figure 5: NAVs of HDFC Standard Life
Month NAV
Apr-08 8.4099
May-08 7.7124
Jun-08 7.5374
Jul-08 8.1797
Aug-08 7.9632
Sep-08 5.5974
Oct-08 5.7968
Nov-08 5.6706
Dec-08 5.5100
Jan-09 5.4479
Feb-09 5.1516
Mar-09 6.1597
Apr-09 6.4646
Table 4 & Figure 6: NAVs of Bajaj Allianz

Month NAV
Apr-08 8.4099
May-08 7.7124
Jun-08 7.5374
Jul-08 8.1797
65
Aug-08 7.9632
Sep-08 5.9740
Oct-08 5.7968
Nov-08 5.6706
Dec-08 5.5100
Jan-09 5.4479
Feb-09 5.1516
Mar-09 6.1597
Apr-09 6.4646
Table 5&figure7:NAVs of ICICI

Month NAV
Apr-08 56.3500
May-08 56.6050
Jun-08 48.9250
Jul-08 48.8700
Aug-08 51.4450
Sep-08 49.1450
Oct-08 39.4450
Nov-08 35.6850
Dec-08 36.4000
66
Jan-09 34.8450
Feb-09 34.2650
Mr-09 33.4050
Apr-09 39.9150
Table 6 & Figure 8: NAVs of LIC
Month NAV
Apr-08 12.2400
May-08 12.1735
Jun-08 11.6585
Jul-08 11.0290
Aug-08 11.4950
Sep-08 11.1155
Oct-08 9.5505
Nov-08 9.3775
Dec-08 9.6165
Jan-09 9.6130
Feb-09 9.5395
Mar-09 9.4765
Apr-09 10.5715
67
Table 8 & Figure 10: NAVs of TATA AIG
Month NAV
Apr-08 13.4790
May-08 13.3460
Jun-08 11.9805
Jul-08 11.9125
Aug-08 12.3240
Sep-08 11.7975
Oct-08 10.1290
Nov-08 9.8400
Dec-08 9.9140
Jan-09 9.8000
Feb-09 9.6675
Mar-09 9.4175
Apr-09 10.7340
68
CHAPTER-6
FINDINGS:
 There is a great future of the life insurance sector in India as 80% of the Indian
population is still without life cover and people are just now coming in response to
the awareness campaigns being carried out by almost all the insurance companies.
 We have found out that age plays a major role in deciding the investment
patterns of people as generally the younger class of people tend to take more risk
and invest in various instruments more frequently in a year( 2.10 times a year)
when compared with the older class of people(1.46 times a year).
 Life insurance Corporation (LIC) of India is the company to be least affected

during this market slowdown as NAV of its equity growth funds came down just
by 23% during this major recession.
69
 Life Insurance Corporation (LIC) of India is still the undisputed market leader
as 63% of the respondents surveyed owned a policy in it and it has also got a
tremendous rating of 4.2 out of 5 in the survey conducted.
 All the products of LIC &ICICI under Wealthsurance are really very good and
have an edge over most of the products of other major life insurance companies as
the plans offered by the company are really very flexible.
SUGGESTIONS:
 Bajaj allianz has to improve its distribution network as its reach to a common
man is very limited .Also the number of agents working for the company is very
less right now when compared to the other companies
 The company should constantly come out with innovative products as the
competition is very tough with around 22 companies fighting hard for the market
share. Some new innovative ideas have been suggested below.
♦ There should be various benefits under this plan for the customers like in
case of a premature or a complicated birth the company would bear the
expenses till the baby is healthy again through the insurance policy. Also
there could be death benefits in case of the death of the baby inside the
womb or at the time of delivery. This plan could really be successful as in
India there are lot of premature child deaths and if the company comes out
70
with a plan like this very tactfully with some implied conditions it would be
the first Indian company to offer insurance to unborn babies.
♦ An insurance plan for mentally retarded and physically handicapped people.

This might be hard to digest but if at all plans like these are possible and
really come out then a good amount of Indian population would really be
interested.
♦ The company could also come out with a plan for both the husband and wife
where automatically the wife gets insured along with her husband when her
husband purchases the policy. This could also be the other way round.
♦ This could be called the combo family plan. In simple words it means buy
one policy and get another free. No other company has done something like
this till now.
 As the company is a new company it has to really work hard to get itself
promoted. The company could start sponsoring major events and conduct talk
shows and seminars to get noticed. It could also take the help of NGOs. There are
many people in India who still do not know about the concept of insurance.The
company could take this as an opportunity by trying to create awareness.
 The company could start using star personalities for their endorsements
especially cricket stars and film stars as India is a nation of crazy cricket and film
followers and there is nothing better than reaching to the hearts of people through
cricket.
71
 The company should come out with some really outstanding and out of the
world advertisements like the ones Vodafone has released recently which people
find it hard to forget soon.
CONCLUSION:
As we have all know today’s scenario, awareness of Life Insurance is
being created among the people, standard of life is increasing day-by-day; many
people tend to cover their risk associated with their life by taking Insurance for
their life.
People are expecting high returns from ULIPs. Since ULIPs are hot
selling product in Life Insurance Industry Contributing more than 70 % of the
premium collected by each company per year.
Investors need the clarity about the products of different life insurance
companies particularly ULIP’s. Hence we have tried to give our best to the
investors by comparing the ULIP’s of 5 leading insurance companies.
72
Based on the returns given by the companies, which we have compared,

SBI has given the maximum return compared to the other 4 insurance companies.
And, if we calculate the returns from the inception, the ICICI PRUDENTIAL has
given good returns.
ANNEXURE - I (QUESTIONNAIRE)
QUESTIONNAIRE
(This questionnaire is only of the sake of some research work being done on
insurance companies. Confidentiality would be maintained.)
Name :__________________________________________________
Gender : Male Female
Contact no: _______________________________
Age Group: 18-30 31-40 41-50 >50
Qualification:
73
Post Graduate Graduate 12th < 12th
Occupation:
Government Service Businessman Private Company
Self Employed Any Other(Specify) ____________________
Your income range (per annum):
Below 150000 150000-250000 250000-350000
350000-450000 More than 450000
Your savings per year:
Below 10000 10000-25000 25000-50000
50000-100000 More than 100000
You would prefer savings in which form?
74
Bank deposits Fixed deposits Investments
Post Office schemes Any other ( specify) ___________________
What do you consider while making an investment decision?
Family’s opinion Friends advice Broker’s advice
Your own decision Any other (specify) _____________________
Your opinion about investment:
Tax Saving Good returns Better future after retirement
Wealth creation Any other ( specify) ___________________
Preferably you would like to invest in:
Mutual funds Stocks and shares Insurance products
Govt. Bonds & securities Any other (specify) ________________
How frequently do you invest?
Once a year 2-3 times a year More than times a year
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Not investing (no idea) Not interested
Do you agree that Insurance products are susceptible to very low risk when
compared to the other options for investment?
Yes No Don’t know
What do you understand by the term “Wealthsurance”?

A tax savings plan A savings plan with good returns
A financial security and risk coverage for your family
All the above I have no idea
Name three insurance companies that come to your mind:
1. ___________________________________
2. ___________________________________
3.___________________________________
Do you own an insurance policy?
Yes No
If yes in which company? ______________________
76
According to you what is the amount of risk involved in (ULIPs) Unit Linked
Investment Plans?
High risk Moderate risk Low risk
They are Safe No Idea
BIBLIOGRAPHY
www.hdfcstandardlife.com
www.licindia.com
www.bajajallianz.com
www.iciciprulife.com
www.tata-aig-life.com
http://www.scribd.com/doc/4996143/OVERVIEW-OF-INSURANCE-SECTOR
Principles of Marketing-Philip Kotler
Marketing Research-Naresh Malhotra
http://www.marketsmonitor.com/Report/IM588_related.htm
77
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ANALYSIS OF ULIPS IN INDIA.

Competition in this market is increasing with company’s continuous effort to lure

WHAT ARE ULIPs

In other words A ULIP is a life insurance policy which provides a combination of

RISK ASSOCIATED WITH ULIPs

At present, a policy-holder cannot understand the growth of his investments vis-à-

HISTORY OF INDIAN INSURANCE

History of Insurance in India can be broadly bifurcated into three eras:

Life Insurance was the first to be nationalized in 1956. Consolidating the

PRESENT INSURANCE MARKET

insurance market has witnessed dynamic changes, which include presence of a

 Total life insurance premium in India is projected to grow Rs 1,230,000

 Total non-life insurance premium is expected to increase at a CAGR of 25%

 Home insurance segment is set to achieve a 100% growth as financial

In our wordily life, whenever there is uncertainty, there is an involvement of risk.

Diagram 1 shows the trend of the Inidan insurance company

(Source: The knowledge Centre)

LIST OF LIFE INSURANCE COMPANIES IN INDIA

(Source: As per a report published in 2008 by Ms Pinky Walia-Financial

WHY DO INSURER PREFER ULIPs?

Charges Under ULIP

Contribution Related Charges:

Fund Management Charges:

Figure 3: Premium break -up under ULIPs

Investment represent ides Life cover

Bid offer Charges

Transactional specific Charges

Premium Allocation charges

Figure 4: Advantages of Unit Linked Insurance Plans

Long term wealth Insurance plus

Allow top ULIPS

Generated capital Riders

Premium Investment as per your

• Provide Tax Benefits under section 80C.

• ULIPs: Some strings attached for your policy to be in effect. Minimum

How To Select The Right ULIP

For a product capable of adding significant value to investors' portfolios, ULIPs

1. Understand The Concept Of ULIPs

2. Focus On Your Need And Risk Profile

3. Compare ULIP Products From Various Insurance Companies

4. Go For An Experienced Insurance Advisor

5. Does Your ULIP Offer A Minimum Guarantee?

In a market-linked product, protecting the investment's downside can be a huge

 There is lot more flexibilities like partial withdrawal, switching, redirection,

 He gets a life cover at a nominal cost unlike mutual funds,

 Almost all companies provide riders like accidental death and

 Tax advantages are also offered by the ULIPs.

 Investor find it difficult to understand the nuances of capital market and

 Some consider taking term insurance and a mutual fund as a combination to

 Some consider charges levied exorbitant and not commensurate to the

features and chances of misspelling by agents are very high.

ULIP And Mutual Funds difference?

Ulip An Better Investment Option For Your Money

Preserver: The objective of this plan is not ensuring capital protection by

ULIPs- Systematic Insurance cum Investment Plan

A ULIP is a market-linked insurance plan. The difference between a ULIP and

Insurance cover plus savings

Multiple investment options