Comparison of Kotak Mahindra ULIP with other private Insurance

players
ACKNOWLEDGEMENT

Successfully accomplished project work and the completion of this report have
been made possible by the significant contributions of many people.

I would like to express my sincere gratitude towards Mr. Ashish Datta Roy, my
Industrial guide for giving me the support and encouragement that I needed, and
providing many valuable suggestions and insights for my work. I would also
like to thank my institutional guide Prof. K.C.Arora for his support.

I’d also like to thank Mr. Shitij Pasricha, Mr. Paramjeet Singh, Ms. Renu
Soodan, and the entire sales and marketing team of Kotak Mahindra, Hisar for
extending their support and assistance as and when I required it.

Finally I’m thankful to Kotak Mahindra Company for providing me the

opportunity to work for my project and gaining knowledge about the Insurance
sector & the ULIP in general.

2
Table of contents

SNo. TOPIC PAGE NO.

1 Introduction of Insurance 5

2 Principles of Insurance 5

3 Functions of Insurance 6

4 Types of Insurance 8

5 Insurance sector in India 15

6 Important parts/features of ULIPS 16

7 Children Plans 22

8 Family Plans 25

9 Statement of Problem 29

10 Findings and Analysis 30

11 Recommendations 39

12 References 40

13 Appendix 41

3
Table of Graphs/Tables

SNo. TOPIC PAGE NO.

1 Introduction of Kotak Mahindra Group 14

2 Insurance sector in India 16

3 Comparison of Children Plans 23

4 Comparison of Family Plans 26

5 No. of years in Insurance Sector 31

6 Awareness of Insurance Plans 32

7 Purpose of buying an Insurance policy 33

8 Current & potential customers 34

9 Level of Risk and Return 35

10 Age level of Proposer 36

11 Customers level of Income 37

12 Savings for Investment in ULIPs 38

4
Insurance

Insurance is basically sharing of losses. In Law and economics, insurance is a

form of risk management primarily used to hedge against the risk of a
contingent loss. Insurance is defined as the equitable transfer of the risk of a
potential loss, from one entity to another, in exchange for a premium. Insurer,
in economics, is the company that sells the insurance. Insurance rate is a factor
used to determine the amount, called the premium, to be charged for a certain
amount of insurance coverage. Risk management, the practice of appraising and
controlling risk, has evolved as a discrete field of study and practice.

Principles of insurance

 A large number of homogeneous exposure units: - The vast

majority of insurance policies are provided for individual members of
very large classes.

 Definite Loss:- The event that gives rise to the loss that is subject to
insurance should, at least in principle, take place at a known time, in a
known place, and from a known cause

 Accidental Loss: - The event that constitutes the trigger of a claim

should be fortuitous, or at least outside the control of the beneficiary of
the insurance. The loss should be ‘pure,’ in the sense that it results from
an event for which there is only the opportunity for cost.

 Large Loss: - The size of the loss must be meaningful from the
perspective of the insured. Insurance premiums need to cover both the
expected cost of losses, plus the cost of issuing and administering the
policy, adjusting losses, and supplying the capital needed to reasonably
assure that the insurer will be able to pay claims.

5
 Affordable Premium:- If the likelihood of an insured event is so
high, or the cost of the event so large, that the resulting premium is large
relative to the amount of protection offered

 Calculable Loss: - There are two elements that must be at least

estimatable, if not formally calculable: the probability of loss, and the
attendant cost.

 Limited risk of catastrophically large losses: - The essential risk

is often aggregation. If the same event can cause losses to numerous
policyholders of the same insurer, the ability of that insurer to issue
policies becomes constrained, not by factors surrounding the individual
characteristics of a given policyholder, but by the factors surrounding the
sum of all policyholders so exposed.

6
FUNCTIONS OF INSURANCE

1. Primary function
2. Secondary functions
3. Other functions

Primary functions

 Provide Protection - The primary function of insurance is to provide

protection against future risk, accidents and uncertainty. Insurance cannot
check the happening of the risk, but can certainly provide for the losses
of risk. Insurance is actually a protection against economic loss, by
sharing the risk with others.

 Collective bearing of risk - Insurance is a device to share the

financial loss of few among many others. Insurance is a mean by which
few losses are shared among larger number of people. All the insured
contribute the premiums towards a fund and out of which the persons
exposed to a particular risk is paid.

 Assessment of risk - Insurance determines the probable volume of

risk by evaluating various factors that give rise to risk. Risk is the basis
for determining the premium rate also.

 Provide Certainty - Insurance is a device, which helps to change

from uncertainty to certainty. Insurance is device whereby the uncertain
risks may be made more certain.

7
Secondary functions

 Prevention of Losses - Insurance cautions individuals and

businessmen to adopt suitable device to prevent unfortunate
consequences of risk by observing safety instructions; installation of
automatic sparkler or alarm systems, etc. Prevention of losses cause
lesser payment to the assured by the insurer and this will encourage for
more savings by way of premium. Reduced rate of premiums stimulate
for more business and better protection to the insured.

 Small capital to cover larger risks - Insurance relieves the

businessmen from security investments, by paying small amount of
premium against larger risks and uncertainty.

 Contributes towards the development of larger industries -

Insurance provides development opportunity to those larger industries
having more risks in their setting up. Even the financial institutions may
be prepared to give credit to sick industrial units which have insured their
assets including plant and machinery

Other functions

 Means of savings and investment - Insurance serves as savings

and investment, insurance is a compulsory way of savings and it restricts
the unnecessary expenses by the insured's For the purpose of availing
income-tax exemptions also, people invest in insurance.

 Source of earning foreign exchange - Insurance is an

international business. The country can earn foreign exchange by way of
issue of marine insurance policies and various other ways.

8
  Risk Free trade - Insurance promotes exports insurance, which
makes the foreign trade risk free with the help of different types of
policies under marine insurance cover.

Types of Insurance

 Automobile insurance, known in the UK as motor insurance, is

probably the most common form of insurance and may cover both legal
liability claims against the driver and loss of or damage to the insured's
vehicle itself.

 Aviation insurance- insures against hull, spares, deductible, hull

war and liability risks.

 Boiler insurance- (also known as boiler and machinery insurance

or equipment breakdown insurance) insures against accidental physical
damage to equipment or machinery.

 Builder's risk insurance- insures against the risk of physical loss

or damage to property during construction. Builder's risk insurance is
typically written on an "all risk" basis covering damage due to any cause
(including the negligence of the insured) not otherwise expressly
excluded.

 Business insurance- can be any kind of insurance that protects

businesses against risks. Some principal subtypes of business insurance
are (a) the various kinds of professional liability insurance, also called
professional indemnity insurance, which are discussed below under that
name; and (b) the business owners policy (BOP), which bundles into one

9
 policy many of the kinds of coverage that a business owner needs, in a
way analogous to how homeowners insurance bundles the coverage’s
that a homeowner needs.

 Casualty insurance- insures against accidents, not necessarily tied

to any specific property.

 Credit insurance- repays some or all of a loan back when certain

things happen to the borrower such as unemployment, disability, or
death. Mortgage insurance (which see below) is a form of credit
insurance, although the name credit insurance more often is used to refer
to policies that cover other kinds of debt.

 Crime insurance insures the policyholder against losses arising

from the criminal acts of third parties. For example, a company can
obtain crime insurance to cover losses arising from theft or
embezzlement.

 Crop insurance "Farmers use crop insurance to reduce or manage

various risks associated with growing crops. Such risks include crop loss
or damage caused by weather, hail, drought, frost damage, insects, or
disease, for instance.
 Defense Base Act Workers' compensation or DBA Insurance:
Insurance provides coverage for civilian workers hired by the
government to perform contracts outside the US and Canada. DBA is
required for all US citizens, US residents, US Green Card holders, and
all employees or subcontractors hired on overseas government contracts.
Depending on the country, Foreign Nationals must also be covered under
DBA. This coverage typically includes expenses related to medical
treatment and loss of wages, as well as disability and death benefits.

10
 Directors and officers liability insurance protects an organization
(usually a corporation) from costs associated with litigation resulting
from mistakes incurred by directors and officers for which they are
liable. In the industry, it is usually called "D&O" for short.

 Disability insurance policies provide financial support in the event the

policyholder is unable to work because of disabling illness or injury. It
provides monthly support to help pay such obligations as mortgages and
credit cards.

a. Total permanent disability insurance provides benefits when a

person is permanently disabled and can no longer work in their
profession, often taken as an adjunct to life insurance.

 Errors and omissions insurance: See "Professional liability insurance"

under "Liability insurance".

 Expatriate insurance provides individuals and organizations operating

outside of their home country with protection for automobiles, property,
health, liability and business pursuits.

 Financial loss insurance protects individuals and companies against

various financial risks. For example, a business might purchase cover to
protect it from loss of sales if a fire in a factory prevented it from
carrying out its business for a time. Insurance might also cover the
failure of a creditor to pay money it owes to the insured. This type of
insurance is frequently referred to as "business interruption insurance."
Fidelity bonds and surety bonds are included in this category, although
these products provide a benefit to a third party (the "obligee") in the

11
 event the insured party (usually referred to as the "obligor") fails to
perform its obligations under a contract with the obligee.

 Health insurance policies will often cover the cost of private medical
treatments if the National Health Service in the UK (NHS) or other
publicly-funded health programs do not pay for them. It will often result
in quicker health care where better facilities are available.

 Liability insurance is a very broad superset that covers legal claims

against the insured. Many types of insurance include an aspect of
liability coverage. For example, a homeowner's insurance policy will
normally include liability coverage which protects the insured in the
event of a claim brought by someone who slips and falls on the property;
automobile insurance also includes an aspect of liability insurance that
indemnifies against the harm that a crashing car can cause to others'
lives, health, or property. The protection offered by a liability insurance
policy is twofold: a legal defense in the event of a lawsuit commenced
against the policyholder and indemnification (payment on behalf of the
insured) with respect to a settlement or court verdict. Liability policies
typically cover only the negligence of the insured, and will not apply to
results of willful or intentional acts by the insured.

• Environmental liability insurance protects the insured from

bodily injury, property damage and cleanup costs as a result of the
dispersal, release or escape of pollutants.

• Professional liability insurance also called professional indemnity

insurance, protects professional practitioners such as architects,
lawyers, doctors, and accountants against potential negligence
claims made by their patients/clients. Professional liability

12
 insurance may take on different names depending on the
profession. For example, professional liability insurance in
reference to the medical profession may be called malpractice
insurance. Notaries public may take out errors and omissions
insurance (E&O). Other potential E&O policyholders include, for
example, real estate brokers, home inspectors, appraisers, and
website developers.

 Life insurance provides a monetary benefit to a decedent's family or

other designated beneficiary, and may specifically provide for burial,
funeral and other final expenses. Life insurance policies often allow the
option of having the proceeds paid to the beneficiary either in a lump
sum cash payment or an annuity.

b. Annuities provide a stream of payments and are generally

classified as insurance because they are issued by insurance
companies and regulated as insurance and require the same kinds
of actuarial and investment management expertise that life
insurance requires. Annuities and pensions that pay a benefit for
life are sometimes regarded as insurance against the possibility that
a retiree will outlive his or her financial resources. In that sense,
they are the complement of life insurance and, from an
underwriting perspective, are the mirror image of life insurance.

 Locked funds insurance is a little-known hybrid insurance policy jointly

issued by governments and banks. It is used to protect public funds from
tamper by unauthorized parties. In special cases, a government may
authorize its use in protecting semi-private funds which are liable to
tamper. The terms of this type of insurance are usually very strict.
Therefore it is used only in extreme cases where maximum security of
funds is required.
 Marine insurance and marine cargo insurance cover the loss or
damage of ships at sea or on inland waterways, and of the cargo that may
be on them. When the owner of the cargo and the carrier are separate
corporations, marine cargo insurance typically compensates the owner of

13
 cargo for losses sustained from fire, shipwreck, etc., but excludes losses
that can be recovered from the carrier or the carrier's insurance. Many
marine insurance underwriters will include "time element" coverage in
such policies, which extends the indemnity to cover loss of profit and
other business expenses attributable to the delay caused by a covered
loss.
 Mortgage insurance insures the lender against default by the borrower.
 National Insurance is the UK's version of social insurance.
 No-fault insurance is a type of insurance policy (typically automobile
insurance) where insured are indemnified by their own insurer regardless
of fault in the incident.
 Nuclear incident insurance covers damages resulting from an incident
involving radioactive materials and is generally arranged at the national
level. (For the United States, see the Price-Anderson Nuclear Industries
Indemnity Act.)
 Pet insurance insures pets against accidents and illnesses - some
companies cover routine/wellness care and burial, as well.
 Political risk insurance can be taken out by businesses with operations
in countries in which there is a risk that revolution or other political
conditions will result in a loss.
 Pollution Insurance. First-party coverage for contamination of insured
property either by external or on-site sources. Coverage for liability to
third parties arising from contamination of air, water, or land due to the
sudden and accidental release of hazardous materials from the insured
site. The policy usually covers the costs of cleanup and may include
coverage for releases from underground storage tanks. Intentional acts
are specifically excluded
 Property insurance provides protection against risks to property, such as
fire, theft or weather damage. This includes specialized forms of
insurance such as fire insurance, flood insurance, earthquake insurance,
home insurance, inland marine insurance or boiler insurance.
 Purchase insurance is aimed at providing protection on the products
people purchase. Purchase insurance can cover individual purchase
protection, warranties, guarantees, care plans and even mobile phone

14
 insurance. Such insurance is normally very limited in the scope of
problems that are covered by the policy.
 Retrospectively Rated Insurance is a method of establishing a premium
on large commercial accounts. The final premium is based on the
insured's actual loss experience during the policy term, sometimes
subject to a minimum and maximum premium, with the final premium
determined by a formula. Under this plan, the current year's premium is
based partially (or wholly) on the current year's losses, although the
premium adjustments may take months or years beyond the current
year's expiration date. The rating formula is guaranteed in the insurance
contract. Formula: retrospective premium = converted loss + basic
premium × tax multiplier. Numerous variations of this formula have
been developed and are in use.
 Social insurance can be many things to many people in many countries.
But a summary of its essence is that it is a collection of insurance
coverage’s (including components of life insurance, disability income
insurance, unemployment insurance, health insurance, and others), plus
retirement savings, that mandates participation by all citizens. By forcing
everyone in society to be a policyholder and pay premiums, it ensures
that everyone can become a claimant when or if he/she needs to. Along
the way this inevitably becomes related to other concepts such as the
justice system and the welfare state. This is a large, complicated topic
that engenders tremendous debate, which can be further studied in the
following articles (and others):

c. Social welfare provision

d. Social security
e. Social safety net
f. National Insurance
g. Social Security (United States)
h. Social Security debate (United States)

 Terrorism insurance provides protection against any loss or damage

caused by terrorist activities.

15
 Title insurance provides a guarantee that title to real property is vested in
the purchaser and/or mortgagee, free and clear of liens or encumbrances.
It is usually issued in conjunction with a search of the public records
performed at the time of a real estate transaction.
 Travel insurance is an insurance cover taken by those who travel abroad,
which covers certain losses such as medical expenses, lost of personal
belongings, travel delay, personal liabilities, etc.
 Workers' compensation insurance replaces all or part of a worker's
wages lost and accompanying medical expense incurred because of a
job-related injury.

16
 KOTAK MAHINDRA GROUP

Build-up of businesses

Today, Kotak Mahindra group is one of the well known brands in India.
Started in 1985, kotak mahindra group is enjoying a net worth of more than
Rs.30000 crore and a leading financial institution of India.

Kotak mahindra old mutual life insurance is a joint venture between kotak
Mahindra Bank ltd. it’s affiliates and Old mutual plc.

17
Insurance sector in India

Insurance sector in India was opened for private players in 2001, because of
a huge proportion of India’s population was untapped by Life Insurance
corporation of India, well known by its name LIC. Today we have more
than 15 insurance layers in India, which are competing for more and more
business with approximately equal benefits to policy holders, but with same
benefits in different ways. When we have so many options available, then it
is very difficult for us to select best plan, which can provide us best benefits.
Today India’s Insurance sector with banking sector is adding more than
8.9% to country’s GDP. Out of all players LIC is enjoying more than 60%
business alone, but over the time LIC’s business has reduced in percentage
terms. Market share of various companies in India for 2010 is –

18
 Rs. In crores
Insurer Till 2009 Till 2006 Market share in
percentage
LIC 55934.69 25645.19 74.18

Bajaj Allianz 4269.68 2715.62 5.66

HDFC standard 1624.24 1028.94 2.15

life
ICICI PRU 5254.64 2638.38 6.97

Kotak OM 614.94 397.54 .816

Birla sun life 882.72 678.09 1.17

SBI life 2566.08 828.52 3.4

Tata AIG 642.35 463.49 .85

Aviva 724.03 407.54 .96

Max New York 920.34 443.27 1.22

Sahara Life 43.17 21.81 .057

Shriram Life 179.78 10.31 .238

Bharti Axa Life 7.77 0 .0103

19
 Reliance Life 930.46 193.43 1.234

ING Vysya 467.44 284.07 .62

Met Life 344.09 142.63 .456

Important parts and features of ULIPs

Annual Premium ---- This is the amount that any proposer will have to select
for beginning of contract. Annual premium can vary from only Rs. 10000/- to
any amount, but most of the ULIP plans offer minimum premium limit at Rs.
10000/- p.a.

Sum Assured--- Sum assured is the amount for which proposer/ insurer want a
risk cover. This can vary from minimum 5 times of annual premium to- No. of
term years*annual premium with different plans and with different companies.

Funds available for allocation of premium to select from—Here we have a

lot of option available with us. Here one thing that matters is that most of the
companies and plans are investing in the same type of funds but they are using
different names for each and every fund.

If we broadly divide all these funds into different categories, then we can
classify these funds into these categories.

1. Dynamic money market-This is the most secure investment place

provided by most of the plans, but the only problem here is that rate of
return in money market is very low and may be it will not be able to beat
inflation. Another thing to keep in mind here is that, we can’t invest in

20
 money for long run, because more and more economy will grow, our
needs will increase but because of low return our overall purchasing
power of money will keep on decreasing day by day. Here companies
invest our money in call and money market.

2. Dynamic Bond, floating rate, gilt fund- here most of our money will
be invested in debt market and government securities, this fund is
somehow more conservative then money market fund, because here rate
of return is more than money market and it provide a little protection
against inflation. Here our more than 80% money will be invested in debt
market plus some money in money market sometimes because of some
downside trends in debt markets.

3. Dynamic floor- This fund provides us opportunity of earning a higher

rate of return by investing up to 75 per cent of our money in stock
market, but with that it also provide us a safe guard against downside in
stock market with option of investing in debt market up to 100% and
with another option of investing 20% money in call/ money market.
Here one another thing to notice is that this plan I more cautious than
preceding two funds, but this fund provide some real funds to policy
holders.

4. Dynamic balanced- In this fund we invest our 30-60 % money in stock

market, rest of the money we can invest in debt market, this fund is
moderate than earlier plans because here it is compulsory for us to kept
our at least 30% money in stock market, which make it more return
offering and more risky fund, rest of the money can be investing in debt
and call money market according to demand and market trends.

5. Dynamic/ aggressive growth fund- This fund is the most aggressive and
risky funds available with any company. Only because of this fund
Insurance companies offer a high rate of return to its customers, because
a sharp and acute watch on stock market can help them earn a good
amount of money. Allocation of money in this fund can vary from 40-
100% in stock market, with a safety guard against adverse market trends

21
 by availability of option of investing in money market and debt market as
well.

Top ups- Top ups are the extra money except to our regular premiums. This
facility can be seen a as a addition benefit to both the parties plan holder as well
as insurance company. If plan is working more efficiently then policy holder
can earn a good return by adding his savings to his policy and when ever he
want that money he can take this money back. On the other hand insurance
which want more and more business, they can invest this extra money can
expand their business. As most of the insurance companies charge 2%
allocation charges on Top ups, this help them in earning extra benefits for
working more efficiently. Minimum limit for top ups is Rs.5000/- with some
exceptions.
Companies are also proving additional increase in sum assured which can be
vary from 125%- 500% of amount in Top ups exceeding 25% of regular
premiums paid till the date.

Premium changes- Companies are also providing option a change in premium

paid. Policy holders can increase amount of money, for which minimum is kept
Rs.5000/- by most of the companies.

Riders- Policy holder also can opt for extra benefits like accidental and
disability benefit, critical illness benefit, waivers. These benefits are provided
by most of the companies, but there are also some companies which are
providing health care benefits as well. Here it is very important to notice that
riders can be availed by a person who is at least 18 year old.

Partial withdrawal- In ULIPs companies are not providing loan facilities, but
the same facility is provided in traditional policies. But what about loan from
our own, It means we can withdraw money from our fund value, there are some
restriction on withdrawal like , we can’t withdraw money within first 3 years of
our policy and in case of Insurer is a minor then we can’t withdraw money till
the minor reach the age of 18 years. Another restriction on withdrawal is that
we have to keep our fund value at least equal to our first year’s premium

22
amount, but there are some companies which ask for a minimum balance of up
to 150 % of first year premium, but not more than that that in any case.

Premium redirection- We can redirect allocation of our premium whenever

we like, in this case most of the companies are asking for a reallocation of
amount minimum Rs. 5000/-.

Maturity age- most of the companies are proving this option with in the range
of 70- 75 years, but there are other option as well where we can keep on our
policy activate after that age limit.

Settlement options- Some companies are also offering option of buying an

annuity from that companies or any other company. Except to that they are also
providing of keeping their maturity value in the same account upto five years,
where they can withdraw their money on monthly, quarterly, half-yearly, yearly
basis for time frame chosen by policy holder. Here all the charges like
mortality charges, extra benefit charges etc. Here another thing which is very
necessary to mention is that Risk will be borne by policy holder.

Allocation charges- Allocation charges are those charges which are deducted
from annual premium and rest of the money after charging allocation charges
will be available for investment in funds. Allocation is one of the most
important to keep in mind while buying an ULIP plan.

Surrender charges- ULIPs are considered to be a long term investment option

instead of a short term investment option. In earlier 2-3 years of plan allocation
charges charged are very high than the later stages. So ULIP don’t provide any
option of surrendering in first 3 years of the contract. After competing 3 years
most of the companies charge some surrender charges, but in most of the cases
after completing 6 years of the contract surrender charges are ZERO.

Fund management charges- A low percentage of fund value as a fund

management charges is the key for higher returns in long run and this is one of
the most important area for income for the insurance companies. If any fund
has a fund value of Rs. 100 billion and if the company will charge only 1% fund

23
management charges then the company’s income will increase by 1 billion,
enough for writing for most of the administration charges.

Administration charges- This is the amount which insurance company charge

from fund value for earning their administration charges. These charges vary
from Rs. 20-60/- in various companies.

Death Benefit- Death benefit is another thing to keep in mind while buying an
insurance plan. Here is some silent features in some plans.

Mortality charges- Mortality charges are those charges which are charged by
insurance companies for protecting policy holder’s life. There is not so much
difference between mortality charges, so not a big thing to worry about while
buying an ULIP plan.

Grace period- Most of the companies are providing grace period of 15 days,
but some others are also providing grace period up to 30 days.

Switching charges- Some companies are providing switching options 4-6 free
of cost in a policy year, but another thing for consideration here is that when we
are not aware of each and every thing about stocks, so it is least possible that
our decision of switching may not be the best one. There will be a opportunity
cost. More over in today’s time our economy is not so unstable that we need to
switch our funds each and every day. So 4-6 free switching is enough in a
policy year.

Lapses- Where the premiums for the first 3 years are not paid within the grace
period, the policy together with the rider benefits, shall lapse from the due date
of unpaid premiums.

Revival period- Any lapsed policy can be revived within 2 years of the date of
lapse by payment of arrears of premiums with interest and collection charges.
Revival charges and time duration for revival is mostly equal in all the plans
with every company.

24
Automatic cover maintenance- This is one another feature available, where if
any plan holder who is not able to pay further premium can opt for this facility.
The policy will be in charge, company will charge all the expenses by selling
units available in insurers account and the policy will be in force till the date
there is enough units in insurers account from which company can charge all
the charges applicable, the policy will be closed and fund value will be returned
to policy holder. Most of the times, this facility is available only after regular
payment of first three premiums.

Now after considering all of these facts, We can make a point of view that for
comparing ULIPs it is not compulsory to consider each and every thing. There
are only a few things which make all the difference between ULIPs.

From all these differences some are company specific, and some others are plan
specific.

While comparing all these policies we can compare these policies we can define
our criteria for differentiation and comparison.

1. Policy holder’s point of view( whether policy is a child plan, pension

plan or life long)
2. Criteria undertaken for comparison
A. Allocation charges
B. Fund management charges
C. Surrender charges
D. Guaranteed maturity value
E. Death benefits
F. Policy Administration charges

25
CHILDREN PLANs

Children plan are those plans which are launched targeting young couples
and who have a lot of dreams for their children, but may be their income
will not allow them to fulfill their dreams after years down the line when
their children actually want a adequate of lump sum with them for the
purpose of higher education, professional qualification etc. As life is
uncertain, these plans are launched keeping in mind that, whether parents
will be their or not, children can fulfill their dreams.

Some of these plans are

a. Headstart future protect(Kotak Mahindra OM)
b. Smart kid(ICICI prudential)
c. Children’s Dream plan(Birla Sun Life)
d. Child Gain( Bajaj Allianz)

Assumptions while comparing children plans provided by various Insurers-

1. Growth rate is expected to be 20% through out the policy.
2. Other charges are considered with fund management charges and
expected to be approximately equal.
3. Annual Premium is considered to be same for a better comparison, except
Kotak OM and ICICI Pru, because these companies are charging
different allocation charges for different levels.
4. All companies are assumed to be equally proficient; they can offer same
levels of returns.
5. Fund management charges charged by various companies are different,
but for a better comparison we are charging same level of charges. In
long term fund management can make a lot of difference in returns, but it
is not feasible from a customer’s point of view, because he may not be
able to compare all the plans in the best way.

26
Comparison of children plans provided by various companies

27
Particulars Kotak Mahindra ICICI Prudential Bajaj Allianz Birla Sun
/Features OM LIFE Insurance LIFE Insurance LIFE Insurance
LIFE Insurance

1. On Death Sum assured+ Sum assured+ Sum assured+

Sum Assured+ remaining remaining remaining
Remaining premiums will be premiums will premiums will
premiums will be paid by company be paid by be paid by
added to fund on due dates company on due company on
value at the time dates due dates
2. Premiums
of death Rs. 25000/Rs.
taken for
simplification 15000 Rs. 25000 Rs. 25000
Rs. 25000/Rs. ( because
of calculation
15000 allocation charges
( because are different for
allocation charges these premium
are different for levels)
3. Allocation
these premium 70% 100%
in first year
levels) 80% / 79%
Less-charges
like fund 8% 8%
72% / 68% 8% / 8%
management,
mortality 62 92%
8% / 8% 72% / 71%
charges

64% / 60%
4. Fund
value after 1 74.4% 110.4
year 86.4% / 85.2%
5. Allocation 70 100
76.8% / 72% 95% / 95%
in 2nd year
144.4% 210.4%
91% / 86% 181.4% / 5% 5%
6. charges
180.2%
167.8% / 158% 5% / 5%
7. Fund value
5% / 5% 167.2% 246.5%
after 2 years

8. Allocation 211.7% / 99% 100%

28
in 3rd year 194.4% / 210.24%
183.6% 266.2% 346.5%
9. Charges 95% / 5% 5%
95% / 95% 261.2% 340.5%
10. Fund 93%
value after 3 306.7% / 313,44% 419.8%
years 289.4% / 305.24%
11. allocation 276.6% 5% 99% 100%
in fourth year 5% / 5% 5%
284.4% / 301.7% / 413.64% 511%
12. charges 271.6% 300.24% 5% 5%
408.64% 506%
13. fund 341.3% / 362 % / 490.4 607.2%
value at the 325.92% 360.3%
end of 4
years 99% / 99% 95% / 95%

14. 440.3% / 457% / 99% 100

Allocation 424.92% 455.3%
for 5th year 5% / 5% / 5%
5% 452% / 8% 8%
15. charges 435.3% / 450.3% 581.4% 697.2%
419.92% 542.4% /
522.4% / 540.4% Sum assured + Sum assured+
What if 503.9% future premium enhanced sum
Proposer will be paid by assured+
will die company on it’s maturity
during 5th own continuation
year of the 95% / 95% charges
policy 99% / 99%

If not- 8% / 8%
16. fund 8% / 8% 629.4% / 697.7%
value at the 613.4% / 627.4% 836.6%
end of 5th 594.9%

29
year Sum assured +
Sum assured + future premium 99%
17. allocation fund value will will be paid by 796.7% 100%
for 6th year increase by company on it’s 936.6%
1000% own 10%
18. charges 786.7% 10%
926.6%

944%
19. fund 1112%
value at the 755.3% /
end of 6th 736.1% / 752.9%
year 713.9%

98% /
99% / 99% 98%
835.1% / 864.8% /
812.9% 862%

10 % / 10 10% /
% 10%
825.1% / 862.5% /
802.9% 859.5%

990.12% / 963.5 1035% /

1031.4%

From the above table, we can assume that Birla Sun life is providing maximum
returns, but in the case of demise of proposer Kotak OM is the most beneficiary
for family of proposer.

30
FAMILY PLANs

These plans are more focused on future protection and savings. As these plans
are very different from children plans, because children plans are considered to
be long term plans or most of the times considered for a fixed time period and
some of the condition make it safe for Insurance companies to make it
minimum exit period, but on the other hand Family Plans are more transaction
based plans.
Charges are more in case of family plans, in comparison to children plans. So it
becomes more difficult for any Investor to decide which policy can give him
maximum benefits.

While comparing Family plans we are considering these charges as a base of

comparison –
I. Allocation charges
II. Fund management charges
III. Policy administration charges
IV. Death benefits
V. Growth rate-30%p.a.
VI. Charges as fund management charges and mortality charges
VII. Policy administration are considered as a part of allocation
charges and adjusted as a part of allocation charges only.

31
Comparison of Family plans provided by various Insurance companies.

Particulars KOTAK OM ICICI PRU. BAJAJ BIRLA SUN

/Features Safe ALLIANZ LIFE
Investment II
1. On Death Sum assured or Sum assured
Sum assured fund value which Sum assured will or fund value
will be paid ever is higher. be paid only which ever is
only after after completion higher.
completion of 5 of 7 years of
years of policy, policy, before
before completion of 7
completion of 5 years only fund
years only fund value or
value or premiums paid
premiums paid till date will be
till date will be paid(whichever
paid(whichever is higher)
2. Premiums is higher) We can assume We can
taken for same level of assume same
simplification premiums for all level of
of calculation We can assume of the We can assume premiums for
same level of plans( Rs.20000) same level of all of the
premiums for premiums for all plans( Rs.200
all of the plans( of the 00)
3. Allocation Rs.20000) plans( Rs.20000)

32
in first year 80%
Less-charges 92%
like admin 86% 70%
charges
4. Fund 7%
management, 79% 2%
mortality 3%
charges 2% 4%
78%
6. Fund 89%
value after 1 77% 101.4% 66%
year 115.7%
5. Allocation 100.1% 92.5% 85.8
in 2nd year 94%
92.5% 97%
6. charges 4.8%
189.1% 4%
7. Fund value 4% 245.83% 6% 205.7%
after 2 years 188.6% 176.8% 267.4%
245.2 228.84%
8. Allocation 96%
in 3rd year 94%
92.5 97%
9. Charges 8%
333.83% 5.4%
10. Fund 6% 444% 7.84% 356%
value after 3 327.7% 319% 462.8%
years 426% 96% 414.7%
11. allocation 96%
in fourth year 92.5% 97%
13%
12. charges 527% 8.3%
9% 685% 12.3% 550.5%
13. fund 509.5% 499.4% 730.6%
value at the 662.35% 649.2%

33
end of 4
years 100%
96%
14. 92.5% 97%
Allocation 19.6%
for 5th year 765.4% 12.6%
14% 995% 17.9% 814.0%
15. charges 748.85% 728.3% 1058.2%
963.1% 946.8%
16. fund
value at the 96%
end of 5th 96%
year 92.5% 97%
25.8%
17. allocation 1065.2% 19%
for 6th year 16% 25.1% 1135.2%
1039.6% 1018.7%
18. charges 1384.8%
1475.8%
1351.5% 1324.3%

19. fund
value at the
end of 6th
year

34
1. When we will analyze above table for the first time then we can say that
BIRLA SUN LIFE is providing best benefits in comparison to other
companies, but this is not the only criteria to analyze performance of the
other companies. Here we need to analyze all the facts very closely for a
better analysis. Some of these facts are as follows.

2. Birla sun life is charging a net charge of 1.44 % sum assured, it means in
the case of a sum assured of Rs. 10 lakh BSLI will charge a policy
administration charges equal to Rs.14400 from fund value, it means up to
30-40% of premium paid. For simplification of calculation I have not
charged 30-40% of premium, because this can create a lot of confusion for
others, because then they will think these charges as actual charges, here I
have charged only 1.44% of fund value, so I can say it as a hidden cost,
which can manipulate all the calculation for investors while investing there
hard earned money. Yes may be this is a small amount for a minimum sum
assured, but in the case of high Sum assured, this can effect adversely to any
investor. In the case of surrender of policy this will effect adversely to any
investor. Low fund management and high allocation charges will not be so
many beneficiaries for plan holder, but this charge will affect to every
investor for whole his life.
3. In case of other companies, ICICI is providing more gain than KOTAK
OM and BAJAJ ALLIANZ, but fund management charges are very high in
comparison to other companies, and as all of us know that low fund
management charges is key for higher rate of returns in long term.
4. Riders (Additional benefits) provided by KOTAK OM is more than
provided by any other company. ICICI PRU is providing a few addition
benefits.

35
Statement of the problem

1. Lack of brand awareness of kotak Mahindra old mutual amongst the people
of Haryana
2. Lack of confidence among the consumers on private players making it
difficult for the company to establish itself
3. Existence of other private players and competitors in the market before
entering of kotak
4. Concern on the aspect of ULIP policy on account of higher risk quotient
5. Few agent representatives make it difficult to explore new markets and
customers

FINDINGS & ANALYSIS

36
ULIPs are not very old products for insurance sector in India. Customers are
not well aware of ULIPs. Insurance advisors are representing ULIPs as higher
return products in addition to risk cover. They are providing only positive parts
of plans and hiding risk factors attached to plan. So it is not beneficial to
survey ULIP holders for finding out reliable statistics. Life advisors who are
key players between insurance company and customers are more reliable than
customer can provide some reliable data.

While asking life advisors about a customer survey I have chosen a sample size
of 100, but out of these only 50 were able to provide some statistics. While
making survey I have tried to make personal contacts to life advisors. For more
information with reference from advisors I meet personally, I used Telephone
for collecting information needed.

Research methodology used- random sampling

Data collection method- interview & survey
Sample size- 50
Universe- Life advisors of private insurance companies
Tool of analysis- Microsoft Excel

37
 No. of years in Insurance sector

20%
less than 2 years

50% 2-5 years

30% more than 5 years

The company had started its operations at Hisar in Nov. 2006 itself.
Accordingly, it has been able to attract insurance advisors ranging from a year
to 5 years or more. With a 50% ratio having only less than 2 year experience in
insurance sector, the co. has a young population at its disposal. However, with
co. also having people with experience of more than 5 years, the co. has a good
scope of promoting its policies & improving sales.

38
 Awareness of Insurance plans

aware of some
17% plans
33%
aware of many
plans
50% aware of all plans

The survey brought out the interesting aspect of 50% people having awareness
of many plans but only 17% having a sound knowledge of all the plans
available in the market. However, one-third of the people surveyed were only
aware of a few plans.

39
 Purpose of buying an Insurance plan

20%
wealth creation
child education
53%
27% future protection

40
The aspect of future protection ranks topmost for taking insurance policies
followed by child education, with wealth creation being given the least
importance as people have better avenues available for investment & growth of
money. With promotion of insurance policies being done to highlight the aspect
of future protection & security, it is not surprising that people taking policies
for that purpose only.

41
 Current & potential customers

40%
Rural Areas
Urban Areas
60%

In a place like hissar, customers are more into the rural segment. With 60%
identified in the rural segment the scope for potential in insurance business
seems to be large. Here urban area does not include any big cities, but only
cities with more than population more than 50000.

42
 level of return & risk

13% Low risk, low

return
Avg. risk, avg.
50% return
37%
High risk, high
return

As ULIPs are risk-return policies, people have varied needs for taking risk &
getting a return. Here, the customers seem more interested in taking ULIP
policies having high risk & high return. Only a few people seem to be taking
ULIP for low return. Also, more than one-third having avg. risk-return
perspective.

43
 Age level of Proposer

Less than 25
years

13% 7% 25-30 years

13%
30-40 years
27%
40% 40-45 years

More than 45
years

The age of people going in for a insurance plan are mostly the married people
having children. This is brought forward in the survey with people of 30-40
years & 40-45 years are the ones going in a majority. With people in age group
around 25 to 30 years less in numbers for taking a ULIP plan.

44
 Customers level of income

17% Less than 1 lac

30% 1 lac - 2 lac
2 lac - 3 lac
20%
3 lac - 5 lac
20% 13%
More than 5 lac

There is also persons with a little and uncertain level of income, most of the
household, who are dependent on agriculture income, have limited resources,
and because of a few acres of land and another reason is joint family. Yes, we

45
can accept that now there is not so much trend of joint families in rural India as
well, but parents(Karta) of family does not to any member to live alone ill the
time all the member of the family are got settled. On the other hand, most of
the people are dependent on self employment in agriculture sector, so their
income is uncertain and their expenses are increasing day be day, which are not
in the same proportion to increase in their income. They also want protection
for their families, so they opt for ULIPs and buy ULIPs with a little premium
amount. But there are also service persons, who are earning a fixed income, but
not so much that they can fulfill dreams of their children’s dream 10 years
down the line. Persons with higher level of income who are well aware of
market trends and want to adopt a good life style, but bank savings don’t allow
them to beat Inflation only. So they go for ULIPs because of protection and
good returns. Higher level of income society chose for insurance plans, for
1. saving of income tax
2. higher rate of return

Savings for Investment in ULIPs (p.a)

10% 3% 3% Less than 20k

20k - 40k
40k- 60k
23% 61% 60k - 75k
More than 75k

46
The insurance premiums which the people are interested in paying for savings
in ULIPs are less than Rs. 20 k per annum. This leaves the scope for high
growth business untapped to a large extent in the range of 40 k and above.

Recommendations-

1. In the case of children Plans, headstart is the best plan, especially in the
case of death of the proposer, but if there is no case of demise of the
proposer than headstart plan is lacking behind some how behind other
companies and the one of the reason behind this is allocation charges in
the earlier years of the policy. What we can do here is that we can
increase our fund management charges by some basic points up to
(.2-.3%). This will help us in attracting because after that also, we will
be charging low fund management charges.
2. Here one thing for compensation of loss of earlier earnings to company,
we can offer a low rate of incentives to our representatives(advisors) and
we can compensate them with additional incentives from the earnings on
later years of policy from increased fund management charges, by that
way each party can enjoy high rates of return.
3. In case of (safe investment plan II), our policy administration charges are
much more than other competitors through out the period, which don’t
allow us to perform more efficiently and real growth of policy don’t

47
 match with the growth rate for which we are known in the market, our
policy administration charges are based on premium level.
4. Here we can’t do the same thing as we can do with children plan, but
here also we can fix these charges as a percentage of fund value, with this
type of charges our policy holder can be attracted more and more towards
this plan, and they will be ready to higher premiums as well with us.
5. Our advisors needed to be well aware of plans provided by other private
players, not only of plans provided by LIC. So that they can provide
valuable information to customers, to switch them towards us instead of
targeting only LIC only while discussion with customers.
6. Brand matters a lot, Yes we are well known brand, but our presence in
Rural is not so much by the name of Kotak, we are known by name
Mahindra, so here we can play a game. We can advise our advisors to
represent the name Mahindra and kotak instead of kotak and mahindra,
because most of times we focus only on what we say at the first place. In
the case of other companies, all of them are using their brand name, like
ICICI, HDFC, BAJAJ, BIRLA at the first place.
7. For big cities where our presence by name KOTAK is more, we can use
the same name KOTAK Mahindra.

References-

www.kotaklifeinsurance.com
www.birlasunlife.com
www.iciciprulife.com
www.bimaonline.com
www.bajajallianz.com
www.hdfclifeinsurance.com
www.wikipedia.com
www.investopedia.com

Readings….
1. Asia Insurance post

48
 2. IRDA journal
3. Insurance Industry- by. U JAWAHARLAL

APPENDIX

Customer’s Need for a Insurance policy

1. No. of years in Insurance sector

 Less then 2 years
 2-5 years
 More than 5 years
2. Knowledge of Insurance Plans
 Aware of some plans
 Aware about many plans
 Aware about all the plans

3. Purpose behind buying an Insurance policy.

 Wealth Creation
 Child Education
 Future protection

4. Where do our current & potential customers live-?

49
 Rural (Villages)
 Urban (Cities, towns)

2. Level of rate of return and risk chosen by customers

 Low risk, low return (safety of money in addition to risk cover)
 Average (14-16)% of return for a little high risk (Increase in
value of money to beat inflation with some additional return so that
there in money can earn some real returns)
 Higher rate of return (for higher return with additional benefits)

6. Age level of proposer and Life to be Assured

 Less than 25
 Between 25-30
 Between 30-40
 Between 40-45
 More than 45

7. Customers Level of Income

A) - Less than 100000
B) - Rs. 100000 to Rs. 200000
C) - Rs. 200000 to Rs. 300000
D) - Rs. 300000 to Rs. 500000
E) - Above Rs. 500000

8. Level of premium Invested in ULIPs

A) - Less than Rs 10000 p.a.
B) - Rs. 10000 to Rs. 20000 p.a.
C) - Rs. 20000 to Rs. 30000 p.a.
D) - Rs. 30000 to Rs. 50000 p.a.
E)– Above Rs. 50000 p.a.

9. Name of the Insurance Advisor.

50
10. Contact no. of the Insurance Advisor

51