PROJECT REPORT

ON

“PERFORMANCE ANALYSIS OF ULIP

FUNDS WITH SPECIAL REFERENCE TO
LIC”

Submitted in partial fulfillment of Bachelor of Business Administration,,Sitapur-

Shiksha,Sansthan,Sitapur_Uttar-Pradesh

Submitted by
GAURAV SHUKLA

Guidance by
MR. VIPUL MISHRA

SITAPUR –SHIKSHA –SANSTHAN,

SITAPUR

AFFILIATED TO C.S.J.M. UNIVERSITY

KANPUR
 ACKNOWLEDGEMENT

“Words have never expressed human sentiments. This only an attempt to express my deep
gratitude which comes from my heart.”

It is a great pleasure for me to express my deep feeling of gratitude to my respected guide

Mr.Vipul Mishra,Lecturer, S.S.S, for her great encouragement & unfailing support which
provided needed morale & confidence to carry on my work.

I am grateful to the Dr.Rajni Rastogi, H.O.D (Manage-ment department) of Sitapur-

Shiksha,Sansthan,Sitapur_Uttar-Pradesh for making all facilities available for my work.

It is with profound gratitude that I wish to express my indebtedness to my friend

Mr.virendra pratap singh for his invaluable guidance & supervision for completion of
this project work. “Thank you friend” for all you have done.

Last but not least I am thankful to my colleagues, friends & other faculties for their
direct & indirect help for completion of this work.
Gaurav shukla
 DECLARATION

I, Gaurav shukla hereby declare that the project entitled “PERFORMANCE

ANALYSIS OF ULIP FUNDS WITH SPECIAL REFERENCE TO LIC” is the

outcome of my own research work based on personal study during academic session 2009-

2010 and has not been submitted previously for award of any degree or diploma to this

university or any other university.

Gaurav shukla
CERTIFICATE

This is to certify that Mr. Gaurav shukla has satisfactorily

completed the Project work entitled “Performance Analysis Of ULIP
Funds With Special Reference To LIC” in not less than one academic
session. This also certify that this Project work is the result of the
candidate’s own work and is of sufficiently high standard to
warrant its presentation for the BACHELOR OF BUSINESS ADMINISTRATION
programme.

To the best of my knowledge this project or its part has not been
submitted to this university or any other university for any
Degree/Diploma.

Mr.Vipul Mishra
Lecturer-BBA
department

Place:
Date:

4
 CONTENT

SR.NO CHAPTER PAGE NO.

.

1 INTRODUCTION TO TOPIC 6-28

2 COMPANY PROFILE 29-33

3 PRODUCT RANGE OF LIC 34-42

4 RESEARCH 43-46
MEHFODOLOGY

5 PRIMARY DATA 47-52

ANALYSIS

6 OBSERVATIONS 53-54

7 LIMITATIONS 55-56

8 ANNEXURE 57-60

9 BIBLIOGRAPHY 61-62

5
CHAPTER 1

INTRODUCTION TO TOPIC

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 enterprises
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

6
synonymed 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

7
and need of insurance in today’s life They have
started positioning their brand sand 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 independent
surveys, 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

8
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

companies’ 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 heavy hand of
government still dominates the market, with price

9
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 per cent
for the nine-month period which ended on
December 31, 2008.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).

A ULIP is a life insurance policy which

provides a combination of risk cover and

10
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.
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. 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.

11
 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.

INDUSTRY PROFILE

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

12
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.
incurred

HISTORY OF INDIAN INSURANCE:

History of Insurance in India can be broadly

13
bifurcated into three eras:

a. Pre Nationalization
b. Nationalization and
c. Post Nationalization

The story of insurance is probably as old as

the story of mankind. The same instinct that
prompts modern businessmen today to secure
themselves against loss and disaster existed in
primitive men also. They too sought to avert the
evil consequences of fire and flood and loss of life
and were willing to make some sort of sacrifice in
order to achieve security. Though the concept of
insurance is largely a development of the recent
past, particularly after the industrial era – past few
centuries – yet its beginnings date back almost
6000 years.

Life Insurance in its modern form came to India

from England in the year 1818. Oriental Life

14
Insurance Company started by Europeans in
Calcutta was the first life insurance company on
Indian Soil. All the insurance companies
established during that period were brought up
with the purpose of looking after the needs of
European community and these companies were
not insuring Indian natives. However,
ever, later with the
efforts of eminent people like Babu Muttylal Seal,
the foreign life insurance companies started
insuring Indian lives. But Indian lives were being
treated as sub-standard lives and heavy extra
premiums were being charged on them. Bombay
Mutual Life Assurance Society heralded the birth of
first Indian life insurance company in the year
1870, and covered Indian lives at normal rates.
Starting as Indian enterprise with highly patriotic
motives, insurance companies came into existence
to carry the message of insurance and social
security through insurance to various sectors of
society. Prior to 1912 India had no legislation to
regulate insurance business. In the year 1912, the

15
Life Insurance Companies Act, and the Provident
Fund Act were passed. The Life Insurance
Companies Act, 1912 made it necessary that the
premium rate tables and periodical valuations of
companies should be certified by an actuary. But
the Act discriminated between foreign and Indian
companies on many accounts, putting the Indian
companies at a disadvantage.

The first two decades of the twentieth

century saw lot of growth in insurance business.
From 44 companies with total business-in-force as
Rs.22.44 crore, it rose to 176 companies with total
business-in-force as Rs.298 crore in 1938. The
Insurance Act 1938 was the first legislation
governing not only life insurance but also non-life
insurance to provide strict state control over
insurance business. The demand for
nationalization of life insurance industry was made
repeatedly in the past but it gathered momentum in
1944 when a bill to amend the Life Insurance Act

16
1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January,
1956, that life insurance in India was nationalized.
About 154 Indian insurance companies, 16 non-
Indian companies and 75 provident were operating
in India at the time of nationalization. The
Parliament of India passed the Life Insurance
Corporation Act on the 19th of June 1956, and the
Life Insurance Corporation of India was created on
1st September, 1956, with the objective of
spreading life insurance much more widely and in
particular to the rural areas with a view to reach all
insurable persons in the country, providing them
adequate financial cover at a reasonable cost.

17
INSURANCE MARKET - PRESENT

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

18
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

19
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%.
With a huge population base and large
untapped market, insurance industry is a big
opportunity area in India for national as well as
foreign 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

20
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.

21
  Health insurance is poised to become the
second largest business for non-life insurers
after motor insurance in next three years.

 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)
(Source:http://www.marketsmonitor.com/Report/IM
(Source:
588_related.htm)

CAPITAL REQUIREMENTS AND FOREIGN

PARTICIPATION:
Minimum capital requirement for direct life and
Non-life Insurance Company is INR1000 million and
that for Reinsurance Company is INR2000 million.
A maximum 26% foreign equity stake is allowed in
direct insurance and reinsurance companies. In the
2004-05
2004-0 budget,, the Government proposed for
increasing the foreign equity stake to 49%.

22
LIFE INSURANCE

It 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-OPER TION in this sense story

23
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.

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

24
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.

25
PRESENT STRUCTURE OF INSURANCE
INDUSTRY IN INDIA

 Life Insurance Corporation of India – Fully

owned by government.
 Postal Life Insurance
Private players:
1. Bajaj Allianz Life Insurance Co. Ltd.
2. Birla Sun Life Insurance Co. Ltd. (BSIL)
3. HDFC Prudential Life Insurance Co. Ltd.
(HDFC STANDARD LIFE)
4. ICICI Prudential Life Insurance Co. Ltd. (ICICI
PRU)
5. ING Vyasa Life Insurance Co. Ltd. (ING
VYASA)
6. Max New York Life Insurance Co. Ltd. (MNYL)
7. Met Life India Insurance Co. Ltd. (METLIFE)
8. Kotak Mahindra Old Mutual Life Insurance Co.
Ltd.
9. SBI Life Insurance Co. Ltd. (SBI Life)

26
10. TATA AIG Life Insurance Co. Ltd. (TATA
AIG)
11. AMP Sanmar Assurance Co. Ltd. (AMP
SANMAR)
12. Aviva Life Insurance Co. Ltd. (AVIVA)
13. Sahara India Life Insurance Co. Ltd.
(SAHARA LIFE)
14. PNB Life Insurance
15. Reliance Life Insurance
16. Bharati Axa Life Insurance

27
 6%
2% 1%
2% LIC
3%
ICICI Prudential
3%
Bajaj Allianz
3%
SBI Life
Reliance
7%
HDFC Standard Life
Birla Sun Life
Max Newyork Life
9% 64%
Kotak Mahindra
Others

(Source: As per a report published in 2008 by Ms

Pinky Walia-Financial Advisor)

28
RELATED ACTS

The insurance sector went through a full circle of

phases from being unregulated to be completely
regulated and now being partially deregulated. It
is governed by number of acts, with the first one
being the Insurance Act, 1938.

The Insurance
I Act,
A , 1938
The Insurance Act, 1938 was the first legislation
governing all insurance titles to provide strict
state over insurance business.

Life Insurance
nsurance Corporation
orporation Act
ct, 1956
Even though the first legislation was enacted in
1938, it was only on 19th January, 1956, that life
insurance in India was completely nationalized
through the Life Insurance Corporation Act, 1956.
There were 245 insurance companies of both

29
Indian and foreign origin companies in 1956. The
government acquiring the companies
accomplished nationalization. The Life Insurance
Corporation of India was then formed on 1st
September, 1956.

General
eneral Insurance
nsurance Business
usiness (Nationalization)
ACT, 1972

The general insurance business (nationalization)

Act, 1972 was enacted to nationalize the 100 odd
general insurance companies by merging them to
form four different companies named National
Insurance, New India Assurance, Oriental
Insurance and United India Insurance
headquartered in each of the four metropolitan
cities of India.

30
Insurance Regulatory and
Development Authority (IRDA) Act,
1999
Reforms in the Insurance sector were initiated
with the passage of the IRDA Bill in Parliament in
December 1999. The IRDA since its incorporation
as a statutory body in April 2000 has fastidiously
stuck to its schedule of framing regulations and
registering the private sector insurance
companies.

The other decision taken simultaneously to

provide the supporting systems to the insurance
sector and in particular the life insurance
companies was the launch of the IRDA's online
service for issue and renewal of licenses to
agents.

31
The approval of institutions for imparting training
to agents has also ensured that the insurance
companies would have a trained workforce of
insurance agents in place to sell their products,
which are expected to be introduced by early next
year. Since being set up as an independent
statutory body the IRDA has put in a framework of
globally compatible regulations. In the private
sector 12 life insurance and 6 general insurance
companies have been registered.

32
LIFE INSURANCE PRODUCTS

Life insurance products are broadly classified into

two categories:

A) Traditional products which includes:

1. Term loan: It provides death risk

cover for a specified term only. Every policy
does not result into a claim.
2. Whole life insurance: Here the
sum assured is paid on death whenever it
occurs. The premium in this will be higher
compared to term plan.
3. Endowment plan: It provides for
the payment of the sum assured at the end of
the specified term or on early death. A money
back plan, where survival benefits become
payable at definite interval, is also the variant of
endowment plan.

33
 4. Annuities: They are the series of
periodic payments to the annuities for life or for
a specified period. Annuities can be immediate
(where the payment of annuity is immediate) or
deferred (where the payment of annuity
commences after a specific period).

B) Non- traditional products:

Due to inflexibility of life insurance products,

which results into high liquation, inconvenience in
sticking to premium payment regimen, lack of
transparency, etc. insurance company have come
out with non-traditional products mainly in the
form of unit linked products, which have
borrowed several beneficial features of mutual
funds.

34
UNIT-LINKED INSURANCE
PLANS (ULIP)

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. The investment is denoted as
unit and is represented by the value that it has
attained called as Net Asset Value (NAV).

ULIPs are a category of goal-based financial

solutions that combine the safety of insurance
protection with wealth creation opportunities. In
ULIPs, a part of the investment goes towards
providing a life cover. The residual portion of the
ULIP is invested in a fund which in turn investing

35
stocks or bonds; the value of investments alters
with the performance of the underlying fund opted
by the customer.

Simply put, ULIPs are structured in such

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.
ULIPs 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

36
planning for children’s future and retirement
planning

The number of units represents the

policyholder’s share in the fund. 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.

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.
time

37
Charges, Fees and Deductions in ULIP

 Premium Allocation Charge

This is a premium-based charge. After
deducting this charge from premiums, the
remainder is invested to buy units. The
Allocation charges are guaranteed for the
entire duration of policy term.

 Mortality Charge
The Mortality Charge will apply on the Sum at
Risk (SAR = Sum Assured less the Fund
Value pertaining to regular premiums). It will
be deducted by monthly cancellation of units
from the accumulation unit account. The
Mortality Charge shall remain guaranteed
throughout the policy term.

 Fund Management Charge

1% p.a. on With Profits Fund, 1% p.a. on Debt
Fund, 1.25% p.a. on Balanced Fund and 1.50%

38
p.a. on Growth Fund. FMC will be applied on
the fund while calculating NAV on a daily
basis. The maximum FMC on any fund is 2%
p.a. subject to prior approval by the IRDA.

 Policy Administration Charge

Rs. 60 per month, which will increase by 5%
p.a. on the 1st of January each year. PAC will
be deducted monthly by cancellation of units
from the accumulation unit account. If
premiums are discontinued, this charge
would reduce to 60% of the charge applicable
for the premium paying policies

 Surrender Charge
This is the charge that applies when the
policy is surrendered. It is equal to 50% of the
difference between regular premiums
expected and those paid in the first year of
the contract.

39
  Service Tax Deductions
12.36% service tax is applicable on the first
premium of life insurance policy.

Tax Benefits
Tax benefits will be as per Section 80C & Section
10(10D) of the Income Tax Act, 1961. Insurance is
tax free up to Rs. 100000 per annum and the
returns on investment on maturity of the policy
are also tax free.

ULIPs Structure
Administration Fund management
charges charges

Mortality charges Administration charges

Fund management charges
Premium
Mortality charges
allocation charges
Premium allocation charges
Investment amount
Investment amount

Figure 3: Premium break -up under ULIPs

40
ADVANTAGES OF ULIPS

ULIP distinguishes itself through the multiple

benefits that it provides to the consumer. The plan
is a one stop solution for everything the
customers want. Unit Linked Insurance Plans
(ULIPs)are different from traditional plans purely
because, they are much more transparent,
various charges are shared with the customer
before the sale of the product, so as to enable
the customer to make an informed decision.

Customers have the flexibility to choose their

life cover. Also the customers have the choice of
multiple fund options based on their risk
appetite, thereby enabling an investor to make
the desired returns from the investment.

The following are some of the advantages of Unit

linked plans:

41
A. Life protection
B. Investment and Savings
 Market linked fund based on risk profile
 Switch option
 Premium redirection
 Automatic Transfer Plan(ATP)
C. Tax Planning
D. Flexibility of cover continuance
E. Transparency
F. Extra protection with riders
 Death due to accident
 Disability
 Critical illness
G. Liquidity
 Partial withdrawals during the term
 At maturity
H. Variable investment options
I. Premium holiday
J. Allow Top-ups

42
FACTORS INFLUENCING THE BUYING OF UNIT
LINKEDINSURANCE PLAN (ULIPs)

The degree of buying of ULIPs insurance

varies from person to person. It depends upon
many factors. The factors can be classified into
personal, social, economic, psychological and
company related variables. Age and experience of
policyholder are personal factors, while the co-
education is a social factor. Economic factors
include occupation, income and wealth, and the
psychological factors consist of perception,
satisfaction about the services rendered by
insurance companies, the impact of
advertisement and personal selling made by
insurance companies on policyholders. The
company related variables are the promotional
efforts to sell the policies to prospective buyers.
These include advertisement and personal selling
too.

43
TYPES OF FUNDS UNDER ULIPs

Most insurers offer a wide range of funds to

suit one is investment objectives risk profile and
time horizons. Different funds have different risk
profiles. The potential for returns also varies from
fund to fund. The following are some of the
common types of funds available along with an
indication of their risk characteristics..

General Nature of Risk

Description Investments Category
Primarily invested
in company
Equity
stocks with the High
Funds
general aim of capital
appreciation
Invested in
Income,
corporate bonds,
fixed interest Medi
government securities
and Bond um
and other fixed income
funds
instruments

44
 Sometimes known
as Money
Cash Market Funds —
Low
Funds invested in cash, bank
deposits and money
market instruments
Combining equity
Balance investment Medi
d Funds with fixed interest um
instruments

45
CHAPTER 2
COMPANY PROFILE

The Parliament of India passed the Life

Insurance Corporation Act on the 19th of June
1956, and the Life Insurance Corporation of India
was created on 1st September, 1956, with the
objective of spreading life insurance much more
widely and in particular to the rural areas with a
view to reach all insurable persons in the country,
providing them adequate financial cover at a
reasonable cost.

LIC had 5 zonal offices, 33 divisional offices

and 212 branch offices, apart from its corporate
office in the year 1956. Since life insurance
contracts are long-term contracts and during the
currency of the policy it requires a variety of
services need was felt in the later years to expand
the operations and place a branch office at each

46
district headquarter. Re-organization of LIC took
place and large numbers of new branch offices
were opened. As a result of re-organization
servicing functions were transferred to the
branches, and branches were made accounting
units. It worked wonders with the performance of
the corporation. It may be seen that from about
200.00 crores of New Business in 1957 the
corporation crossed 1000.00 crores only in the
year 1969-70, and it took another 10 years for LIC
to cross 2000.00 crore mark of new business. But
with re-organization happening in the early
eighties, by 1985-86 LIC had already crossed
7000.00 crore Sum Assured on new policies
.
Today LIC functions with 2048 fully
computerized branch offices, 100 divisional
offices, 7 zonal offices and the corporate office.
LIC’s Wide Area Network covers 100 divisional
offices and connects all the branches through a
Metro Area Network.

47
LIC continues to be the dominant life insurer even
in the liberalized scenario of Indian insurance and
is moving fast on a new growth trajectory
surpassing its own past records. LIC has issued
over one crore policies during the current year. It
has crossed the milestone of issuing 1,01,32,955
new policies by 15th Oct, 2005, posting a healthy
growth rate of 16.67% over the corresponding
period of the previous year.
From then to now, LIC has crossed many
milestones and has set unprecedented
performance records in various aspects of life
insurance business.

48
BUSINESS OBJECTIVES

OBJECTIVES OF LIC

 Spread Life Insurance widely and in

particular to the rural areas and to the
socially and economically backward
classes with a view to reaching all insurable
persons in the country and providing them
adequate financial cover against death at a
reasonable cost.
 Maximize mobilization of people's savings
by making insurance-linked savings
adequately attractive.
 Bear in mind, in the investment of funds,
the primary obligation to its policyholders,
whose money it holds in trust, without
losing sight of the interest of the
community as a whole; the funds to be
deployed to the best advantage of the

49
 investors as well as the community as a
whole, keeping in view national priorities
and obligations of attractive return.
 Conduct business with utmost economy
and with the full realization that the moneys
belong to the policyholders.
 Act as trustees of the insured public in their
individual and collective capacities.
 Meet the various life insurance needs of the
community that would arise in the changing
social and economic environment.
 Involve all people working in the
Corporation to the best of their capability in
furthering the interests of the insured
public by providing efficient service with
courtesy.
 Promote amongst all agents and employees
of the Corporation a sense of
participation, pride and job satisfaction
through discharge of their duties with

50
 dedication towards achievement of
Corporate Objective.

MISSION/VISSION OF LIC

Mission:
"Explore and enhance the quality of life of people
through financial security by providing products
and services of aspired attributes with
competitive returns, and by rendering resources
for economic development."
Vision:
"A trans-nationally competitive financial
conglomerate of significance to societies and
Pride of India."

CHAPTER 3
PRODUCT RANGE OF LIC

PRODUCT SEGMENTS OF LIC

51
Individual Products
Life Insurance Corporation realizes that not
everyone has the same kind of needs. Keeping
this in mind, it has a varied range of products that
you can choose from to suit all your needs. These
will help secure your future as well as the future
of your family. These are:

 Profit Plus
 Market Plus-I
 Fortune Plus
 Money Plus-I
 Child Fortune Plus

 Profit Plus:

In this policy, the investment risk in investment

portfolio is borne by the policy holder.

52
 It is a unit linked Endowment plan where the
premium payment term (PPT) is limited to single
lump sum, or uniformly over 3, 4 or 5 years. You
can choose the level of cover within the limits,
which will depend on whether the policy is a
Single premium or Limited premium contract,
term chosen and on the level of premium you
agree to pay.

Four types of investment Funds are offered.

Premiums paid after allocation charge will
purchase units of the Fund type chosen. The Unit
Fund is subject to various charges and value of
units may increase or decrease, depending on the
Net Asset Value (NAV).

53
 Market Plus –I:

In this policy, the investment risk in investment

portfolio is borne by the policy holder.

This is a unit linked pension plan wherein the

pension is payable after a specified period. Four
types of investment Funds namely Bond, Secured,
Balanced and Growth Fund are offered. Though
primarily a Pension product, the plan has many
attractive features and options, which make it an
ideal Retirement solution for the future.

 Fortune Plus

It is a unit linked assurance plan where

premium payment term (PPT) is 5 years and the
premium payable in the first year will be 50% of
total premium payable under the policy. The level
of cover will depend on the level of premium you
agree to pay.

54
 Four types of investment funds are offered.
Premiums paid after allocation charge will
purchase units of the Fund type chosen. The Unit
Fund is subject to various charges and value of
the units may increase or decrease, depending on
the Net Asset Value (NAV). The plan therefore
serves the purpose of insurance-cum-investment.

 Money Plus-I

This is a unit linked Endowment plan with

regular premium paying term, which offers
investment cum insurance during the term of the
policy. You can choose the level of cover within
the limits, which will depend on the level of
premium you agree to pay.

Four types of investment Funds are offered.

Premiums paid after allocation charge will
purchase units of the Fund type chosen. The Unit
Fund is subject to various charges and value of

55
units may increase or decrease, depending on the
Net Asset Value (NAV).

# Child Fortune Plus

In this policy, the investment risk in investment

portfolio is borne by the policy holder.

All of us wish to ensure the best possible

future for our children. With the cost of education
sky rocketing, it is all the more important that an
early provision is made to ensure that your loved
ones get a good head start in life. LICs Child
Fortune Plus is a total solution to their education
and other needs. The plan is a unit linked one
offering the prospects of long term capital
appreciation.

56
GENERAL FEATURES OF THE VARIED
PRODUCTS OF LIC

MARKET PLUS-I

Min entry age 18 yrs

Max entry age 70 yrs
Max Maturity 75 yrs
age
Min premium 5000 RP
10000 Single
Premium
Riders ADBR
Min premium payment term 5 yrs

PROFIT PLUS(RP&SP)
Min entry age 0 yrs
Max entry age 65 yrs
Max Maturity 70,75 yrs
age
Min premium 1000 RP
20000 Single
Premium
Riders ADBR, CIBR

57
Min premium payment term 3 yrs

FORTUNE PLUS
Min entry age 12 yrs
Max entry age 60 yrs
Max Maturity 65 yrs
age
Min premium 20000
Riders ADBR
Min premium payment
term 5 yrs

MONEY PLUS-I
Min entry age 0 yrs
Max entry age 65 yrs
Max Maturity 75 yrs
age
Min premium Rs.5,000
Riders ADBR, CIBR
Min premium payment
term 5 yrs

58
 CHILD FORTUNE PLUS
Min entry Less than17
age
yrs
Max 17 yrs
entry age
Max 25 yrs of child
Maturity
age or of the
insured 75 yrs
Min Rs.10,000
premium
Riders ADBR
Min premium payment
term 5 yrs

ADBR-Accidental Death Benefit Rider, CIBR-

Critical Illness Benefit Rider

(Source: www.licindia.com)

59
PERFORMANCE OF ULIP FUNDS OF LIC

PRODUCT BASIC NET REPURCHASE SALE

VALUE (AS ASSET VALUE VALUE
ON DATE OF VALUE
LAUNCH) (AS ON 12 NOVEMBER, 2009)
TH

MARKET DATE OF
PLUS-I: LAUNCH

17.06.200
8
BOND 10 11.472 11.4720 11.472
FUND 0 0
SECURED 10 11.783 11.7832 11.783
FUND 2 2
BALANCED 10 11.920 11.9203 11.920
FUND 3 3
GROWTH 10 12.809 12.8098 12.809
FUND 8 8
PROFIT DATE OF
PLUS: LAUNCH

23.08.200
7
BOND 10 12.552 12.5528 12.552
FUND 8 8
SECURED 10 11.786 11.7868 11.786
FUND 8 8
BALANCED 10 12.255 12.2553 12.255
FUND 3 3

60
GROWTH 10 10.689 10.6895 10.689
FUND 5 5
FORTUNE DATE OF
PLUS: LAUNCH

23.08.200
7
BOND 10 12.208 12.2086 12.208
FUND 6 6
SECURED 10 12.074 12.0740 12.074
FUND 0 0
BALANCED 10 10.867 10.8677 10.867
FUND 7 7
GROWTH 10 10.851 10.8518 10.851
FUND 8 8

Money Date of
plus-I: launch
22.05.200
8
Bond 10 12.4177 12.4177 12.4177
fund
Secured 10 13.8626 13.8626 13.8626
fund
Balance 10 13.6496 13.6496 13.6496
d fund
Growth 10 12.8678 12.8678 12.8678
fund
Child Date of
fortune

61
plus: launch
01.11.200
8
Bond 10 10.6557 10.6557 10.6557
fund
Secured 10 13.6108 13.6108 13.6108
fund
Balance 10 13.5517 13.5517 13.5517
d fund
Growth 10 13.5517 13.5517 13.5517
fund

CHAPTER 4
RESEARCH METHODOLOGY

SCOPE OF THE STUDY

This study aims to make a performance analysis

of the Unit Linked Insurance Plans (ULIPs) of LIFE

62
INSURANCE CORPORATION OF INDIA in the Indian context,
insurance market and study the consumer
perception towards various insurance products.
The performance analysis is based on the
empirical data collected from the Nagpur city..

OBJECTIVES OF THE PROJECT

 To understand the insurance products at

length.
 To understand Unit Linked Insurance Plans
(ULIPs) of LIC.
 To analyse the performance selective Unit
Linked Insurance Plans (ULIPs) of LIC.
 To study the consumer perception towards
various insurance products.

63
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.

Step: 1
Developing a right research design and timeline
for the project.

Step: 2
Collecting Secondary data of the insurance
Industry

Step: 3
Designing of the Questionnaire

64
Step: 4
Analysis of secondary data

Step: 5
Collection of primary data-Questionnaires and
internet surveys

Step: 6
Analysis of primary data

Step: 7
Interpretation of the results

Step: 8
Preparation of the final report

SOURCES OF DATA
There are two types of data used. They are
primary and secondary data. Primary data is
defined as data that is collected from original
sources for a specific purpose. Secondary data is

65
data collected from indirect sources. (Source:
Research Methodology, By C. R. Kothari)

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.

Sample Size:
The sample size for the survey conducted was 50
respondents.

Sampling Technique:

66
Random sampling technique was used in the
survey conducted.

Study Area:
The samples referred to were residing in Nagpur
City.

Secondary Data;
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 to.

LITERATURE STUDY
Till today a lot of research has been done on
the Indian insurance industry especially the life
insurance sector. The material for this study was
collected from various internet sites, journal sand
books by various authors.

67
CHAPTER 5
DATA ANALYSIS AND INTERPRETATION
PRIMARY DATA ANALYSIS

We have done a detailed survey in Nagpur

city to understand and study the consumers’
responses. The primary data was collected
through questionnaires. This questionnaire was
mainly formulated to target the common man to
see his perception and awareness of various
investment options available. The sample size of
the survey was 50. Out of these 34 were male and
16 were female. The sample of respondents was
carefully selected covering people in all age
groups and with different backgrounds and
occupations. The analysis of these questionnaires
gives us an insight about the mindset of people
regarding various investments. Customer
preferences as to where they would like to invest
have been studied. Also we come to know about

68
the preferences given by customers towards
various top life insurance companies and their
reasons for it.
Following is the analysis of the primary data
collected through questionnaires.
(Please refer to annexure I)

The sample included respondents from all the

age groups out of which people in the age group
18-40 constituted around 70%.

Age No of Percentage
Respondents
18-30 19 38%

30-50 26 52%

>50 5 10%

Total 50 100%

69
Figure 12: Break-up of respondents between
different age groups

The sample of respondents was heterogeneous

with people of various occupations right from
government service to ones who were self
employed. Out of these people who were working
in private companies constituted round 65%.

70
Figure: Break-up of respondents by their
occupations

Also the customers’ preferences for different

forms of savings have been carefully studied the
main savings instruments generally preferred by
customers are bank deposits, fixed deposits,
investments and post office schemes. Out of
these Investments has been preferred by around
43% respondents and fixed deposits by around
27%.
The various forms of investments generally
preferred by customers have been identified as
mutual funds, stocks and shares, insurance

71
products and government bonds. Out of these
around 35% preferred stocks and shares and
around 20% preferred insurance products.

Figure: Break-up of respondents based on their

preferences for various savings
instruments

The various forms of investments generally

preferred by customers have been identified as
mutual funds, stocks and shares, insurance
products and government bonds. Out of these
around 35% preferred stocks and shares and
around 20% preferred insurance products.

72
Figure: Break-up of respondents based on
preferences for various forms of investment

Figure: Break-down of respondents who own

insurance policies in various life insurance
companies

73
Around 63% respondents felt that there was an
amount of moderate to high risk involved with
ULIPs.

Figure: Break-down of respondents who rated risk

involved in ULIPs

Around 63% of the respondents owned an

insurance policy in LIC which clearly shows that
LIC still continues to be the market leader in as it
has been since the last 50 years or so in spite of
the presence various powerful private players
which are still finding hard to capture a major
market share. Around 13%b respondents chose
ICICI Prudential.

74
Figure: Break-down of respondents who own
insurance policies in various life
insurance companies

CHAPTEZ 6
OBSERVATIONS

 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.

75
 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,
when compared with the older class of
people.

 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.

 Life Insurance Corporation (LIC) of India is

still the undisputed market leader as 63% of
the respondents surveyed owned a policy
in it.

76
CHAPTER 7

LIMITATIONS

LIMITATIONS OF THE STUDY

 The study is confined only to a small

segment of the entire population due to
monetary and time constraints and hence
the results are applicable only to the
Nagpur city.

 The scope of the project is limited to

conceptual aspects of Life Insurance
Companies and does not include all the
ULIP as well as insurance products of LIC
part of the operations which are equally
important aspect of learning

 It is not always possible to evaluate

companies under similar parameters since

77
 many aspects affect the company
performance, companies deal with various
businesses thus clubbing all parameters is
not always possible.

CHAPTER 8
ANNEXURE

QUESTIONNAIRE

(This questionnaire is only for the sake of some

research work being done on insurance
companies. Confidentiality would be maintained.)

Name (Optional):

Gender:
Male Female Contact no
(Optional)

78
Age Group:
18-30 31-40 41-50 >50

Qualification:
Post Graduate Graduate 12 th
< 12th

Occupation:
Government Service Businessman
Private Company
Self Employed Any Other (Please
specify)____________________

Your income range (per annum):

Below 150000 150000-250000
250000-350000
350000-450000 More than 450000

79
Your savings per year:
Below 10000 10000-25000
25000-50000
50000-100000 More than 100000

You would prefer savings in which form?

Bank deposits Fixed deposits
Investments
Post Office schemes Any other (please
specify) _________________________

Your opinion about investment:

Tax Saving Good returns
Better future post retirement Wealth creation
Any other (please specify)
_________________________

Preferably you would like to invest in:

Mutual funds Stocks and shares
Insurance products

80
Govt. Bonds & securities
urities Any other (please
specify) _____________________

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

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?
______________________

According to you what is the amount of risk

involved in (ULIPs) Unit Linked Investment Plans?

81
High risk Moderate risk
They are Safe
Low risk No Idea

According to you which is the best insurance

company and why?
___________________________________________
___________________________________________
___________________________________________
___________________________________________
___________________________________________
_
-------------THANK YOU SO MUCH FOR YOUR
VALUABLE TIME------------------

82
CHAPTER 9
BIBLIOGRAPHY

REFERENCES
Websites:

http://www.licindia.com

http://www.irdaindia.org

http://www.financialexpress.com

http://wealth.moneycontrol.com

http://economictimes.indiatimes.com/Personal-Finance/Insurance/Life-
insurance-industry

http://www.marketsmonitor.com

http://www.quickmba.com/marketing/research

http://www.moneycontrol.com

Books: Marketing Research- Naresh Malhotra

&

Insurance Principles and Practices- M.N. Mishr S. B.Mishra .

Mishra &S.

83