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A Roll No:-137 Topic:- Unit Linked Insuranse Plan (ULIPs) Academic year:- 2009-2010 Submitted To:- swami Shajanand college of commerce & management
(B.B.A) Bhavnager University
I undersigned Zala Devendrasinh Pratapsinh , the student of T.Y B.B.A. Hereby declares that the project work presented in this report is my own and carried under the guideline of Branch Maneger Girirajsinh Gohil and Business Development Manager and agency manager jignesh pandya
DATE :- 01/01/2010 PLACE:-BHAVNAGER
-: SIGNATURE :Zala Devendrasinh Pratapsinh
first of all I am thankful to GOD because of him , my existence is created and that’s why I am able to doing this work . than how can I forget my PARENTS ,their warm guidance and motivation helps through out my journey of developing the project. I feel great pleasure in submitting this report as a part of a practical training and studies in the professional course of management .this visit has been helped me a lot in acquiring the knowledge regarding the company. I am very helpful to our principal shilpa bhatt . our coordinator Neatra medam and the all supportive college staff for giving me the information about the project. I am also very thankful to branch manager Girirajsinh Gohil business development Manager and agency manager jignesh pandya and whole staff of TATA AIG BHAVNAGER. Research of any unit is different as more as you attempt more you go deep ,new and new detail emerged. It is not easy exercise .it is with the help of combine efforts and guidelines of our teacher, present and friends. However, I can’t express my thank to all the people of the staff in tata AIG, BHAVNAGER and for their support giving us such a great help,without a guidance of whom it is very difficult to prepare such a report.
Zala Devedrasinh Pratapsinh
As we know that vitamins are vital to the heelth of people and animals. In the present world not only the theoretical work is important but also the practical work is important ,which is not given in the classroom.we know that the practical work is useful in every field as well as our future lifetime. In short,student can improve his knowledge about all the sectors of markets.during the study,the student can improve their skills. In comparison to bookish knowledge, practical studies prove to be very impruvenent and nessassary as it helps a student to the practical tobe very important and necessary as it helps a student to the practical fields and get the idea about the exact position of the entrepreneur and the manager.in this way after competing studies ,one can better in the fiel of business.swami shahajanad college of commerce (sscc), BHAVNAGER,helps the student to develop their knowledge in the field of industry environment and business by the means of management of company. As a student of T.Y.B.B.A program, I have opportunity to have got practical training in the TATA AIG, BHAVNAGER. In this report I have tried to do my best to collect much can do my best as much information as I can. This report is reflection of which I undestad and learn from my traning session .this report is prepared the purpose of the study, not in theoretical way but in a practical way. Heredy I am submitting the report……..
Zala Devendrasinh Pratapsinh T.y.B.B.A
2 3 4 5 6
Insurance Mutual fund Unit link insurance plan Research & conclusion Bibliography
Tata Group profile American International Group Profile Tata AIG insurance company LTD Vision Product profile 7 8 4 5 5
21. Tata is a rapidly growing business group based in India with significant international operation.543 crores).9 million.Tata powar. materials.578 crores)The grup emplos around 350.5 billion(around rs. of which 61% was from business outside India. services.4 billion(around Rs.engineering. and chemicals. (AIG) Profile .Engineering. Materials Services energy.Tata Motors. American international group. a period when India had just set out on the road to gaining independence from british rule. jamsetji Tata and those who followed him aligned business opportunities with the objective of nation buidding.Tata group profile THE Tata Group comprises 98 operating companies in seven business sectors. 251.Tata chemicals. Consequently.the group was founded by jamsetji Tata in the mid 19th centure .The Group’s Net profit for 2007-08 are USD 5.energy.Tata Teleservices and tata communications.Tata consultancy services(TCS). inc. The Tata name has been respected in India for 140 years for its adherence to strong values and business ethics The business operations of the Tata group currently encompass seven business sectors – communications and information Technology. among the highest among Indian business houser and a shareholder base of 2. Revenues in 2007-08 are USD 62.000 people wordwide.consumer products and chemicals The Group 28 publicly listed enterprises have a combined market capitalization of around $60 billion. Information systems and communications. Indian hotels.consumer products.The major companies in the Group include Tata steel. Tata tea.This approach remains enshrined in the Group’s to this day.
Tata AIG Life insurance company was licensed to operate in India on India on February 12.2001 and started operations on April 1.institutional and individual customers through the most extensive wordwide property-casuaity and life insurance networks of any insurer in addition AIG companies are leading providers of retirement services. Tata AIG Life Insurance company Limited (Tata AIG Life) Tata AIG Life insurance company Limited (Tata AIG Life ) is a joint venture company.AIG’s common stock exchanges in paris.financial services and asset management around the world. Inc.AIG companies serve commercial. a world leader in insurance and financial services .formed by the Tata Grooup and American Intarnatinal Group.American intarnatinal group.is the leading international insurance organization with operation in more than 130 countris and jurisdiction.switzerIand and Tokyo.Inc. .2001. (AIG)Tata AIG Life combines the Tata Group’s pre-eminent Ieadership position in India and AIG’s global presence as one of the world’s leading intarnatinal insurance and financial services organization The Tata Group holds 74 per cent stake in the insurance venture with AIG holding the balance 26 per cent Tata AIG Life provides insurance solutions to individuais and corporates. (AIG).
217 30.Yearwise Number of Policies and Revenue:Fiscal No.81.189 7.318 New business FY(rs.of policies sold in FY 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 21. Accelerated growth . 3.) 7 69 180 857 2717 4270 5730 in Key Achievement :188.8.131.52. 2.500 cr. Shareholders capital base of rs.in cr.00. 700 cr.443 2.5.14. 4. Over 50.79. Asset under management rs.000 satisfied costomers A countrywide network of 876 offices.685 20.376 1.965 1.
2. 5.Vision 1. A good market reputation as a world class organization An extensive distribution network. 4. Adequate experience of running a large organization. Financial strength and stability to support the insurance busines A strong brand-equity. 3. PRODUCT PROFILE FOR CHILDRAN 1. Ample money available to pay for education or marriage with tata AIG life assure 21 years money saver . 6. A 10 million strong base of retail customers using tata products.
The very best college &post graduate education with Tata AIG life starkid. FOR ADULT 1. 7. 4. The money they need to start a succesfuly career with Tata AIG life assure carreer builder. 3. What sefty net and more control over your returns? See Tata AIG life investAssure 11. 2. Ge tyour life back and your money. Want unit linked insurance plan with inbuilt critical illness benefit? See Tata AIG life investassure care . 6. see Tata AIG health investor What a safety net and more control over your return?see Tata AIG life investassure 2. Financial support to receive the best education possible with Tata AIG life assure Educated at 18 & Assure Educare at 21. 8.2. Watch your saving grow as fast as your chiled’s aspirations with Tata AIG life United Ujjwal Bhavishya. Stay protected against 12 critical illnesses. 4. Are hospitalized or have aprolonged illness? See Tata AIG life investassure helth &tata AIg life health first & tata AIG life health protector -5 year guaranteed renewal accident and health plan. 3. 5.no matte rwhat happens? See Tata AIG Life Mahalife gold.lifetime income with tata AIG life mahalife Gold. What a unit –linked policy with a single-premium paying term? See tata AIG life invest AASSURE plus. What your children to have asteady income . A steady . 5.
See Tata AIG Life InvestAssure Gold Want a unit-linked policy with a single premium paying term? See Tata AIG Life InvestAssure Plus Want to optimize your return. 8. 3. and term to age 60 known as Assure Lifeline to Age 60 Want your money back if you outlive your policy? See Tata AIG Life LifePlus Want coverage and flexibility to get your money when you need it? See Tata AIG Life Assure 21 years Money Saver Want safety and high returns? See Tata AIG Life Assure 10 Years/15 Years/20 Years/30 Years Security and Growth Plans Want a low-cost term plan which offers a large cover? See Tata AIG Life Raksha 10/15/20/25 Want high returns at a low premium? See Tata AIG Life ShubhLife Keep your capital safe and growing with Tata AIG Life Assure Golden Years Plan Want an immediate annuity plan with return of Purchase price? See Tata AIG Life Easy Retire 7. and protect yourself against any unforeseen eventuality? See Tata AIG Life InvestAssure Optima Don’t want to face financial risk. Want a unit-linked insurance plan with an in-built Payor Benefit? See Tata AIG Life InvestAssure Extra Want a unit-linked endowment investment plan with a host of flexible features? See Tata AIG Life InvestAssure Flexi Reap attractive rewards for a lifetime with a whole life unit linked plan.1. 2. 13. Want an immediate annuity plan with Return of Purchase price? See Tata AIG Life Easy Retire . 12. Keep your capital safe and growing with Tata AIG Life Assure Golden Years Plan 2. 6. RETIREMENT 1. 11. 10. 5. but cannot afford high premiums? See Tata AIG Life Assure 1 year/5 Years/10 Years/15 Years/20 Years/25 Years Lifeline Plans. 4. 9.
Want a custom-made retirement solution? See Tata AIG Life InvestAssure Future 8. Give you the flexibility to choose when to retire with Tata AIG Life Nirvana 5.3. Want a safety net and more control over your returns? See Tata AIG Life InvestAssure II 6. Reap attractive rewards for a lifetime with a whole life unit linked plan. See Tata AIG Life InvestAssure Gold 7. Guarantee additions to your sum assured with Tata AIG Life Nirvana Plus INSURANCE Fundamental of insurance Brief history of insurance sector Brief history of insurance sector in India 11 12 14 . Provide a stable. lifetime income for you and your family with Tata AIG Life MahaLife Gold 4.
particularly person who dies was an earning member or even potentially earning member. There are then concerns about the financial stability of the dependents.Types of insurance Insurance regulatory & development 16 19 FUNDAMENTALS OF INSURANCE In life every human being – you and we included is exposed to an element of risk. But financial losses can and must be addressed and using risk management tool and that is Insurance. the future of workers and fate of suppliers and consumer attached to the business. Similarly. the family suffers a grievous loss. when a factory is gutted in a fire. in addition to the loss of property. . For instance when a person dies. little can be done about non-financial losses. commonly defined as the possibility of loss. every loss has two implications: financial and non-financial. which can perhaps never be compensated. there are other considerations: the effort to rebuild the factory. But the family also suffers another significant loss – financial loss. In both instances. These broadly relate to two spheres – our lives and our material possessions. Further.
WHAT IS Insurance? “Insurance is a financial service for collecting the saving of the public and providing them with a risk coverage. Among such seventeen century London coffee houses was one called Lloyd’ Coffee house owned by Edward Lloyd and situated in Tower Street. ”Insurance is a plan by which large number of people associate and transfer to the shoulders of all risks that attach to individuals. In the early London Coffeehouses were centers not only of commerce and literature but of debate and intellectual exercise as well. The coffee house and the advantage of .” BRIEF HISTORY OF INSURANCE SECTOR Insurance Law had its genesis in London. They also had a political influence that moved the reigning king Charles II to attempt unsuccessfully their suppression. ”Thus in insurance. The Risk The Insured The Insurer General Definition: In words of John Magee.
is still commonly used as standard form with suitable additional clauses to suit modern requirements. All insurance policies have to be in agreement with the provisions of law if contracts. In the seventeenth century there were no corporate entities engaged in insurance activities. In England Marine a specific statute regulates insurance while other forms of insurance are covered by general legislation. Lloyd’s Coffee house thus the favorite venue for such guarantors who came to be called Underwrites to conduct business informally over cups of coffee. other forms of insurance evolved gradually with dynamic requirements of the society. The provisions of the Insurance Act 1938 regulate the other variations of insurance policies. ink. 1906 is the legislation dealing only with aspect of Marine Insurance policies. Edward Lloyd encouraged the business by providing the customers in the coffee house with pen. British statutes inspire the statutes in India. In India the marine insurance Act 1963 base on the English Marine Insurance ACT.being near to river Thames thus attracting the patronage of men interested and connected with marine activities. Marine insurance law was thus the first form of insurance. The insurance activities in the coffee house culminated in the formation of Corporation of Lloyd under the Act of 1871. The name was immortalized although Edward Lloyd’s passed away in the year 1713. A policy of insurance codifies a contract between the insurer and the insured hence all principles of law of contracts between two or more is the Indian Contract Act 1872. The practice prevalent was that individuals wrote their names below some clauses to guarantee commercial ventures on personal basis. paper and shipping information obtained for the water front. With passage of time Lloyd’s Coffee house become recognized as a place for people wanting insurance over to fine the underwriters. Lloyd‘s Marine Insurance policy originally adopted in the year 1779. . Lloyds may thus be rightly known as the creators of insurance concept.
154 Indian insurers. 1870. on the life of William Gibbons for a period of 12 months. Different insurance companies like Bombay Insurance Company LTD. and the merchants. the West Minister Society (1792) was the important societies. The business was confined to few communities and occupations only. The Equitable life Assurance society (1762). 1866. During the period from 1870 to 1900. the insurance business attracted attention among middle class people. By 1956. (1793) and Oriental life Assurance Company. At that time life insurance business was concentrated . societies began to be formed for issuing life insurance policies. During the period from 1912-1930. It was in the eighteenth century. The British companies started life insurance business in India. The act still applies to all kinds of insurance business by instituting necessary amendments from time to time. During the period from 1900 to 1992. As a result.BRIEF HISTORY OF LIFE INSURANCESECTOR IN INDIA The early developments of life insurance were closely linked with that of marine insurance. The first insurers of life were the marine insurance underwriters who started issuing life insurance policies on the life of master and crew of the ship. the Government of India passed insurance Act. After several changes have been made for the period from 1930 to 1938. They sometimes issued policies on the lives of Indian’s by charging extra. by issuing policies exclusively on the lives of European soldiers and civilians. The first life insurance policy was issued on 18th June 1583. Was formed in Dec. a larger number of Indian companies were formed under the Indian companies Act. 1938. Among such societies the Amicable Society (1705). 16 foreign insurers and 75 provident societies were carrying on life insurance business in India. the insurance business witnessed a setback. The early insurance contracts took the nature of policies for a short period only. Government of India passed the insurance Act on the model of British Assurance Act. the first Indian Company named as Bombay Mutual Life Insurance Society Ltd. The premium rates were varied in view of reputation and the health condition of the insured.
in urban areas and confined to the higher strata of the society. 2000.Malhotra. the insurance Regulatory Authority (IRDA) Act. The Rao government appointed a committee of Reforms in the insurance sector in April 1993 under the chairmanship of R. They can be classified into following two categories. Only two government giants namely LIC & GIC ruled it till it was set open to the private players.N. Types of Insurance There are basically two types of Insurance. The Indian insurance market was restricted sector. INSURANCE LIFE INSURACNE GENERAL INSURANCE . January 1956 the management of life insurance business of 245 Indian and foreign insurers and provident societies were taken over by the central Government with a capital contribution of Rs.50 mn. IRDA open its window for Application for giving new licenses to the prospective players on 16th August. and than nationalized on 1st September 1956 in the parliament an Life insurance Corporation(LIC). 1999 could be passed by the Parliament during November 1999. The Narasimha Rao government unleashed liberal changes in india’s rigid economic sector.
food. The insured does not receive money while he is alive. Annuities / Children’s policies – The nominee receives a guaranteed amount of money at a predetermined time and not immediately on death of the insured. Whole life policies – cover the insured for life. Life insurance is all about making sure your family has adequate financial resources to make those plans and dreams come true. Shelter. the nominee receives the sum assured plus bonus upon death of the insured. transportation. education. These policies are best suited for planning children’s future education and marriage costs. It provides financial protection to help your family or business to manage after your death. . Money back policies – The nominee receives money immediately on death of the insured. On survival the insured receives money at the same pre-determined time.LIFE INSURANCE : Your family counts on you every day for financial support. These policies cost more than endowment with profit policies. Insurance provides you with that unique sense of security that no other form of investment provides. and much more. On survival the insured receives money at regular Intervals during the term. Endowment Policies – Cover the insured for a specific period. The insured receives money on survival of the term and is not covered thereafter.
. political disturbance. Assets would have been created through the efforts of owner. Concepts of insurance have been extended beyond the coverage of tangible asset. Now the risk of losses due to sudden changes in currency exchange rates. Personal Accident Insurance – This insurance policy provides compensation for loss of life or injury (partial or permanent) caused by an accident. It provides protection for property and interest of the insured and family. machinery and other tangible properties. his nominee would receive the benefits either as a lump sum or as a pension every month. GENERAL INSURANCE : Every asset has a value and the business of general insurance is related to the protection of economic value of assets. Health Insurance – It provides cover. which takes care of medical expenses following hospitalization from sudden illness or accident. which can be in the form of building. Since a single policy cannot meet all the insurance objectives. If the insured dies during the term of the policy. The policy is designed to cover the various risks under a single policy. But if a person judiciously invests in insurance for his property prior to any unexpected contingency then he will be suitably compensated for his loss as soon as the extent of damage is ascertained. Property Insurance – The home is most valued possession.Pension schemes – There are policies that provide benefits to the insured only upon retirement. one should have a portfolio covering all the needs. vehicles. This includes reimbursement of cost of treatment and the use of hospital facilities for the treatment. negligence and liability for the damages can also be covered.
IRDA Regulator and Development Authority as it was provided that it had broader role to perform in the Indian insurance market. The regulator was initially known as the insurance Regulator Authority but was subsequently . 1999. Motor Insurance – Motor Vehicles Act states that every motor vehicle plying on the road has to be insured. the life Insurance Corporation Act. It covers the insured against personal accident. 2000. 1972. 1938. promote and ensure orderly growth of the insurance industry and for matters connected there with or incidental there to and further to amend the insurance Act. 1999. one should have a portfolio covering all the needs. Since a single policy cannot meet all the insurance objectives.Travel Insurance – the policy covers the insured against various eventualities while traveling abroad. while other covers insurers all liability and damages caused to one’s vehicles. was enacted by Parliament in the fiftieth year of the Republic of India to provide for the establishment of an Authority to protect the interests of holders of insurance policies. It has not only to frame was setup in 1996 but it was formally constituted as a regulator of the insurance industry in April 2000. with at least Liability only policy. Insurance Regulatory and Development Authority (IRDA) The insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the business of insurance and re-insurance in India. vide Government of India’s notification No. IRDA was constituted in terms of the Insurance Regulatory and Development Authority Act. 1956 and the General Insurance Business act. 277. There are two types of policy one covering the act of liability. Liability Insurance – This policy indemnifies the Directors or Officers or other professionals against loss arising from claims made against them by reason of any wrongful Act in their Official capacity. as the regulator of the Indian Insurance industry. The Authority was constituted on April 19. loss of checked baggage. medical expenses and repatriation. The insurance Regulatory and Development Authority Act. passport etc. to regulate.
It 1. their conduct of business.japan AIG. Thus. The following players have applied and some have got licenses and even started operations in India. and clarification but it has also to perform a developmental and promotional role. Follows the practice of prior consultation and discussion with various interest groups before issuing regulation and guidelines. Indian partner HDFC Reliance Sundaram Max India Bajaj auto Kotak mahindra ICICI ICICI IFFCO Tata group Aditya birla group SBI Vysya bank Foreign partner Stander life UK No partner Royal & sun alliance New york life Allianz Old mutual south Prudential. IRDA has till 2001 issued seventeen regulations in the areas of registration of insurers. guidelines. conduct of reinsurance business. and code of conduct intermediaries.UK Lombard Tokyo marin. non-life Life Life life Present status In operation Operation to begin shortly In operation In operation Applied for license Started operation In operation Applied for license Received license In operation In operation Received license Received license NUMBER OF REGISTRERED INSURERS IN INDIA . solvency margins. the objectives of IRDA are twofold: policyholder protection and healthy growth of the insurance market. licensing.USA Sun life Cardif france ING specialization Life Non-life Non-life life Non-life and life Life Life Non-lilfe Non-life Life.rechristened as Insurance and issue statutory and regulator stipulations.
Type of Public sector business Life insurance 01 General insurance 06 reinsurance total 01 08 Private sector 13 08 0 21 Total 14 14 01 29 MUTUAL FUND Definition What is mutual fund Characteristics Advantages Disadvantages Product types 22 22 24 25 26 27 .
In return for putting money into the fund. the fund manager charges fees based on the value of the fund’s assets. Principal Distributor: Co-ordinates the sale of the fund to investors. bonds or other securities according to specific investment objectives that have been established for the fund. In return for administering fund and managing its investment portfolio.DEFINATION :Mutual Fund is a pool of money. The manager uses the money to buy stocks. including: Mutual Fund Manager: Establishes one or more mutual funds. and existing investor can return their units or share to the fund for redemption at any time. When you redeem your units or shares of a mutual fund you will receive a cheque based on the current market value of the fund’s portfolio. What is Mutual Fund? A mutual fund is a pool of money that is managed on behalf of investors by a professional money manager. markets them and oversees their general administration. . and is invested according to certain investment objective. The Mutual Fund Manager also often acts as the Portfolio Adviser. collected from investors. Several parties are invoked in the organization and operation of a mutual fund. meaning that new investors can contribute money to the fund at any time. you’ll receive either units or shares that represent your proportional share of the pool of fund assets. Mutual funds are ‘open-ended’ investment funds. either directly or through a network of registered dealers. Portfolio Adviser: The professional money manager appointed by the Mutual Fund Manager to direct the fund’s investments.
Trustee: The entity that has title to the securities owned by the fund on behalf of the unit holders. Mutual funds can be classified as :1) closed-end funds 2) open-end funds 3) large cap funds 4) mid cap funds 9) exchange traded funds 10) value funds 11) money market funds 12) international mutual funds . Auditor: The independent accountants retained by the Mutual Fund Manager to audit each year.Custodian: The bank or trust company appointed by the Mutual fund manager to hold all of the securities owned by the fund Transfer Agent and Registrar: The group responsible for maintaining a list of all investor in the fund. and report on the financial statements of the fund.
5. every day. The pool of funds is invested in a portfolio of marketable investments. Who earn a fee for their services. Investment professionals and other service providers. 3. manage a mutual fund. from the fund. The value of the units changes with change in the portfolio’s value. 4. The ownership of the mutual fund is in the hands of the investors. The value of one unit of investment is called the Net Asset value or NAV. The value of the portfolio is updated every day. The investor’s share in the fund is denominated by ‘units’.5) equity funds 6) balanced funds 7) growth funds 8) no load funds 13) regional mutual funds 14) sector funds 15) index funds 16) fund of funds CHARACTERISTICS:1. 2. . The investment portfolio of the mutual fund is created according to the stated investment objectives of the fund. A mutual fund actually belongs to the investors who have pooled their funds.
9. 11. They cannot create made portfolios.Advantages of mutual funds investor 6. 8. in order to tailor a portfolio for him. Regulators usually limit the expenses of mutual funds. . 10. 7. with the costs of monitoring them and using them. No control over costs: Since investor do not directly monitor the fund’s operations they cannot the costs effectively. into which investors invest. No tailor-made portfolios: Mutual fund portfolios are created and marketed by AMCs. 14. Portfolio diversification Professional management Higher rate of return Reduction of transaction Liquidity Convenience and flexibility Disadvantages of mutual funds to investors 12. 13. an investor may be holding a portfolio of funds. being incurred by him. Managing portfolio of funds: As the number of mutual funds increases.
3. Bond issues by central and state governments Public financial institutions and private sector companies Public sector organizations . There are varieties of ways in which an equity portfolio can be created for investors. However funds investing in debt products can also offer a growth option to their invertors.Product types Equity funds Debt funds Balance funds Equity funds This fund is pre-dominantly in equity share of component. 18. Since most debt securities pay periodic interest to investors. The universe of debt securities comprise of long-term instruments such as: 1. 17. these funds are also known as income funds. Simple equity funds: Primary market funds: Sectorial funds: Index funds: Debt funds Debt funds are those that pre-dominantly invest in debt securities. 16. 15. 2.
1. Call money lending Commercial papers Certificates of deposit Treasury bills Debt funds tend to create a variety of option for investors by choosing one or more of these segments of the dent markets in their investment portfolio. 2. Similarly there are predominantly debt funds (over 70%in debt securities).4. by bringing in debt. 6. Liquid funds & money market funds : Gilt funds : Simple debt funds : Sectoral debt funds : Balanced funds Funds that invest both in debt and equity markets are called balanced funds. to provide some growth potential their funds. 5. which invest in equity. The variations are funds that invest pre-dominantly in equity (about 70%) and keep a smaller part of their portfolios indebt securities. A typical balanced fund would an almost equally invested in both the markets. 4. 3. 7. These funds seek to enhance the income potential of their equity component. A balanced fund also tends to provide investors exposure to both equity and debt markets in one product. .
UNIT LINKED INSURANCE PLAN Introduction of ULIPs Overview of ULIPs Key features of ULIPs Benefits of ULIPs Expenses involved in ULIPs ULIPs plan comparison Should investor opt for ULIPs Five steps for selecting right ULIPs 30 31 33 34 38 39 45 46 .
In addition non. The premium amount is fixed at the outset and the same quantum of premium needs to be paid throughout the term of policy. So unit linked insurance plans can be said the combination of characteristic of mutual fund and insurance. The main different is in choice of investment .this fund differ decides that risk exposure and appreciation.Introduction As the competition increases in insurance industry and more invstament avenues are available to investor. which are decided by the companies on his behalf. Insurance industry has also upgraded them by introducing marketing linked insurance plan. Policyholder has no say in the choice of investment.guaranteed bonuses in the from of share in the profits of the company may also be offered depending on whether the policy is participating policy or not.in unit linked insurance plan companies will generally offer combination of different product with different combination of debt-equity mix . Mutual Insurance ULIPs .
balanced and equity funds. So if you are opting for a plan that invests primarily in equity. The daily unit price is based on the market value of the underlying assets (equities. As in all insurance policies. bonds. should the buzz die down. investigating in a plan that has an equity tilt may not be a good idea. The ideal time to buy a unit-linked plan is when one can expect long-term growth ahead. Premiums paid can be single.one can afford you take the risk associate with equities. Unit-linked life insurance products are those where the benefits are expressed in terms of number of units and unit price. If you opt for a unit-linked endowment policy. The risk cover can be increased or decreased. The payment period too can be regular or variable. The advantages of unit linked plans are that they are simple. This is especially so if one also believes that current market values (stock valuations) are relatively low. as one approaches retirement the quantum of return should be subordinated to capital preservation. However. Investors welcome these products as they provide capital appreciation even as the yields on government securities have fallen below 6 percent. Being transparent the policyholder gets the entire upside on the performance of his fund. government securities etc. the majority of your premiums will get invested in debt securities like gilts and bonds. clear. the buzzing market could lead to windfall returns. .) and computed from the net asset value. and easy to understand. If one invest in a unit-linked pension plan early on . you can choose to invest your premiums in dent. Considering that unit-linked plans are relatively new launches. However. Unit-linked products are exempted from tax and they provide life insurance. balanced or equity plans. The number of units. at least in the plan’s initial stages. If you choose a debt plan. which has made the insurers slash payouts. would depend on the unit price when he pays his premium. At this stage.Overview of ULIP Most insurers in the year 2004 have started offering at least a few unit-linked plans. their short history does not permit an assessment of how they will perform in different phases of the stock market.say 25. They can be viewed as a combination of insurance and mutual funds. the risk charge (mortality rate) varies with age. Key Features of ULIPs 1. According to the IRDA. regular or variable. a company offering unit linked plans must give the investor an option to choose among debt. 2. investors could be left stung. which the customer would get.
The investment components of the premium is converted into unit-much like mutual fund premiums are unitized through the policy tenure. component in it as well. 12.this means that as your risk appetite changes with age. 14. managing director. They are simple. Being transparent the policyholder gets the entire episode on the performance of his fund. Investor gets an option to choose among debt. The maturity benefit is the net asset value of the units.” says Stuart Purdy. A part of the premium you pay goes towords buying you insurance cover and what’s left of the rest is invested in equitl and debt instruments. 8. balanced to debt or gilt to equity. balanced and equity funds. Aviva life insurance” Investment options:It is in the range of investment option that unt-linked plans offer that they stand apart from other insurance-cum-investment products. Benefits Cover-plus:In a sense. money markets funds. The costs in ULIP are higher because there is a life insurance. 7. “with these plans . in addition to the investment component. 6. Investments can be made in gilt funds. between once and four times a year free of cost . The policyholder can switch between schemes. 11. ICICI prudential life insurance. unit-linked plans work like endowment plans-they combine insurance with investment. 13. Provides capital appreciation. 5. Lead to an efficient utilization of a capital. growth funds or bonds. typically 15 or 20 years. balanced funds. The maturity benefit is not typically a fixed amount and the maturity period can be advanced or extended. 10. And information on this is put out regurarly by insurere. an you want to move to a lower risk . etc. 4. 9. ULIP products are exempted from tax and they provide life insurance. Most insurers in fallow you to switch from one stream to another. “One of the major advantages of unit-linked plans is that they are very transparent. Insurance companies have the discretion to decide on their investment portfolios.3. clear. and easy to understand.you can choose a mix of asset classes for your investment chief actuary. for instance.
Tenures:- . in rupee terms.9 per cent(or Rs 956) from the third year onwards.3 per cent and 9. there’s no denying that tilt the balance in favour of unit-linked plans-even if you are financially savvy an feel equipped to manage your investments through. general expenses(agent’s commissions and underwriting costs). The actual expense structure may very from one product to another depending on. insurers have scaled back their expense structures in newer products.9 per cent (or Rs 20.appetite changes with age. “ The rationale behind the high commissions is that unit-linked plans need greater level of advisory services . equity funds. Since these expenses are deducted from the premium you pay. upon investing Rs20.which goes down sharply in later years.456) in the second year to 1.8 per cent in the subsequent years.which comes down to 21.3 per cent from the third year onwards . among other things. But in response to greater investor awareness about the high expense .) Among mutual funds. general expenses .6 per cent. the amount invested.460.9 per cent (or Rs 10. Rs 4. ICICI prudential’s lifetime charges 19 per cent in the first technology in administration and management .12.460 and Rs 660 respectively. if you invest Rs 50. you will pay 42.they qualify for deduction under section 80CCC.accounts for the biggest components-typically. On the other hand. the investment component shrinks to that extent-and Impacts your returns. around 40 per cent (of the premium paid ) in the first two years . Tax breaks:The premiums you pay on unit-linked plans qualify for rebate under section 88.8 per cent in year 1 ( for a premium of Rs10. The second head. with a three-year lock-in. For instance. classic life.and fund management costs. the investment tenure and the period beyond which withdrawals are permitted. ( in the case on unit-linked pension plans .000 a year in the same plan for the sane tenure. insurers have scaled life’s new unit-linked plan.” says Mysore. expense ratio of 69. and you want to move a lower risk option secure your accumulations. your expense structure scales back from 40. insurers are expected to lower these expense structure further. that works out to Rs 8. page: Although tax breaks aren’t by themselves reasons enough to decide on a choice of investments. Expenses:one area where unit-linked plans come in for widespread criticism related to the expenses that insurers charge under three broad heads :-mortality charges ( which goes towards paying for your insurance cover).456) in the first year to 20. For instance. say. only equity-linked saving schemes offer section 88 rebate. you can migrate your money to safer havens. has an expense ratio of 16 per cent in the first year.000 a year for 15 in TataAIG’s invest assure policy.000 a year).
only if you factor in the income accruing from the additional investment of the section 88 drawback in PPF do the return from unit-linked plans fare better those from equity funds. which is small if the top-up exceeds a threshold defined by the particular insurer.or five-year tenure. but if you are not financially savvy or have little time to monitor your investments and don’t have access to professional investment managers and still want marketlinked returns on your investment.The heavy frontloading of expenses effectively acts as a disincentive for early withdrawals. you might just want to savour the flavour of the season. if you invest for 15 years.000 a year. you get tax-free return of Rs 8. perform better in the long run. Under this. typically Rs 10. by which time the expense ratio is much smaller. top-ups in the charges decline over the tenure.” says Rajagopalan. (for instance. On the other hand. a fund manager for a unit-linked product can. ”says Rohit Sarin of client associates.6 lakh from the unit-linked plan even if you’re not eligible for section 88 rebate.5 per cent charge. over three. post-tax.3 lakh. If you feel equipped to manage your investment on your own or are not comfortable with long lock-ins or you can’t make the most of these tax breaks. and over the years lets you divert more of your overall premium payout to the investment component. unit-linked plans in most cases compare poorly with equity funds on pre-tax return.for instance. Are they for you? “unit-linked products are finally products of choice. you may be better off investing elsewhere after securing your life insurance needs. On the other hand.) what this strategy lets you do is to lower your expense outgo in the early years (when they ere are very high). the equity fund will only return Rs 8. you can keep your premium to the minimum required under the plan. “unlike mutual funds. staying invested for longer tenures offers returns that can match-and even better-equity funds . therefore. For instance. single top-ups above RS 25.000 on Tata AIg’s invest assure policy invite a 1.you may have to pay a fee for this the this facility. . Top-up strategy:One way of lowering your expense structure is by making imaginative use of the top-up provision that most insurers offer. a private wealth management firm. You can then ‘to up’ from the second year onwards. And for those who don’t must perforce be 15 years or more for it to make financial sense. unit-linked plans don’t face redemption pressure. But .
44 % Hori zon 15.80 % Unit Gain pluse 24.00% 1.00 0% 0.36 % 47.2 0% 50.0 0% 1.68 % Ksi p 15.0 0% 0.00 % 47.20 % Inve St Assu Re 50.36 % Future project 46.48 % 27.2 0 % 4.91 % 13.40% 0.9 1% .Expenses involved in ULIP Policy Ici Ci pru Bir La Sbi Life Km Om Met Life Alli Anz Baj Aj Hdfc Icici Prude Ntial Ma x Ta Ta AIG Expense Charges In first Year Cost of life cover Adminis Trative charges Total Pre Mier life 12.6 8% 18.48 % Endow Ment Unit linked 27.4 4% 16.44% Clas Sic life 15.00 % MET LIFE 16.0 0% 3.0 0% 21.60 % Life Mak er 46.0 0 % 24.00 % 0.4 4% 16.0 0% 1.0 0% 1.
Unit Linked Endowment Plans from Life Insurance Corporation of India. The overheads for the ULIP are higher compared to a mutual fund. Fortune Plus and Profit Plus from LIC:1. 3. no. 2. Balanced Fund. Secured Fund. 187) Profit Plus (T. part of the monthly premium is used to provided insurance cover for the person and the remaining amount is invested in the stock market. If a person is wealthy or has no dependents. Growth Fund Unlimited switches (4 free switches per year) Accident benefit rider Critical illness rider (Profit Plus) . However. the buyer of ULIPs should also be prepared for negative returns when share prices fall. 4. insurance premium are low. insurance cover may not be required. so purchasing a term policy may be a better option. 3. 188) Features:1. At a young age (less than 30). so the returns may be lower. Most of the insurance companies offer attractive commissions to their agents for Unit Linked Insurance Plans (ULIP). no. Bond Fund.UNIT LINKED PLANS COMPARISION:In a ULIP. Fortune Plus (T. 2. so many people buy ULIPs without reading the print as theses is marketed aggressively by companies providing investor services.
2. It is available for persons up to 65 years. 10. Five year premium period Entry even at 70 Loyalty units every cover till age of 100 Premium paid in ULIPs are subject to investment risks associated with capital markets and the NAV of the units may go up or down based on the performance of the fund and factor influencing capital Markets and the insured are responsible for his decision. its future prospects or returns. Past performance is not indicative of future results. This product is underwritten by Tata AIG Life Insurance Company Limited.000. . 20. Invest Assure Gold from TATA AIG Life Insurance Company :(whole life unit linked insurance policy) Features:1. premium can be paid in one installment or a number of installments over a period of up to 5 years. 20.000 for single premium and Rs. Minimum premium payable in the first year is Rs. Tata AIG life insurance company limited is the name of the insurance company and invest Assure Gold is the name if the ULIP contract and does not in any way indicate the quality of the contracts. 3. The premium is limited to 5 years for Fortune Plus and is available for the age group 1260.For Profit Plus. Premium paid in Unit Linked Life Insurance Policies are subject to investment risks associated with capital Markets and the NAV of the units may go up or down based on the performance of the fund and factor influencing capital markets and the insured responsible for his/her decisions. Minimum premium is Rs.000 per annum for term policies.
Preserver IV 7.a Option : Life cycle based and fixed portfolio. 2007 1. 6. mid term option change allowed up to 4 times free of cost Funds available : Flexi Growth IV. Horizon II pension from SBI life :Unit linked insurance policy (ULIP). 8. Details of risk factor. Balancer IV. Investments in ULIPs are subject to market risk. Based on the age of the person. Maximiser IV. 5. 100 % fund value paid on surrender from 5th policy year New fund opens at Rs 10 on August 25. 4. equity % is higher initially and reduces close to the retirement age.000 p. which adjusts equity % automatically with age) Features:Unit linked insurance plan which adjusts the investment according to age 1. the debt equity component is periodically adjusted Available in select cities Age at entry : 18-75 years Minimum premium : Rs 15. Features :- . 2. Protector IV.Life Stage RP from ICICI prudential life insurance :(Unit linked insurance policy. Flexi Balanced IV. terms and conditions are available in sales brochure. 3.
4. lus Gold from Tata AIG. Growth plan is similar to dynamic plan. Insurance cover of Rs 4.a Option : Dynamic plan and Growth plan. 7. 9. top-ups and switches Tax savings under section 80C and 80D of prevailing income tax regulations.1. 100% fund value paid on surrender from 4th policy year onward. 5. Once a dynamic or growth plan is selected. For Dynamic plan. 80-100% of the funds will be invested in equity markets initially and the remaining amount in bonds or the money market. 8. it cannot be changed. As the person ages. 11. 3. but the initial equity component is ever lower. 13. Funds available : Equity pension. High allocation up to 85% UL waiver of premium and UL family income benefit Flexibility with premiums. the equity investment decreases gradually to 0-15% at the end of the 20 year term and the investment in bonds increases. 14. Minimum premium : Rs 12. . 2. the debt equity component is periodically adjusted Age at entry : 18-60 year. 6.2 Lakh for a policy taken at age 25 with a premium of Rs 2000 per month. Based on the age of the person. Unit linked insurance plan which adjusts the investment according to age. 15. 10.000 p. ures:- 16. Risk factors / warning statements:Unit gain Plus Gold is a Unit Linked insurance Pla(ULIP). bond pension and money market pension funds.:[Unit linked insurance policy (ULIP)] 12.
5. Bajaj Alliance Life Insurance and Unit Gain Plus Gold are only the name of the insurance company and the product respectively and does not in any way indicate the quality of the products. The policy holder is solely responsible for his/her decisions while investing in ULIPs. its future prospects or returns. 3. 2.Investment in ULIPs is subject to risks associated with capital market. 4. Guarantees return of up to 175% of first year’s premium Invest up to 100% of all subsequent premiums Partial withdrawals allowed Premium holiday option Flexibility to switch between investment funds . Aspire life from Bharti Axa life insurance:[unit linked insurance policy (ULIP)] Features (claimed by the company) 1.
which is actually the job of the investment advisor/consultant. ‘The switch option allows customers to switch between fund option.Should Investors opt for ULIPs? First and foremost. the structure of a ULIP takes care of quite a bit of the uncertainty in the markets. Insurance companies understand the need to give insurance-seekers the flexibility to rethink their investment strategy in view of market histrionics. 1. they can choose a debt or balanced fund. There is an option for the insurance-seeker to switch to another plan with a lower or zero equity components to stem the loss in a falling equity market. While it is fine and even sensible to let your investable assets get an equity flavor.’ However. The volatility in equity markets can disturb the calmest of minds and the last thing you want to see is your nest egg being eroded by the latest slide in equity markets. HDFC standard life allows policyholder to make as many switches as they like. thereby making adjustments to any perceived risks. So if you have a ULIP invested in equities. ULIPs are suitable for individuals who are already adequately insured and are reasonably well-informed and savvy to take active investment decisions by using the ‘switch option’ that is provided to a ULIP policyholder. However. depending on his risk profile. you are exposing your life insurance monies as well as your investable surplus to the vagaries of equity markets. Ideally they need to avoid taking the aggressive 100% equity ULIP. So if insuranceseekers/investors play their cards right. If one does not have the appetite to invest in equity. Understand the concept of ULIPs:- . We present a 5-step strategy for investing in ULIP s. investors need to understand that a ULIP is a bundled product of their investment and their insurance proceeds. ‘A ULIP policyholder has the option to invent in a variety of funds. FIVE STEPS FOR SELECTING RIGHT ULIP Unit linked insurance plans (ULIP s) were seen as a “wonder product” that simultaneously fulfilled an individual’s needs for investments and insurance to do a rethink. It is best if insurance-seekers tread the middle path and choose balanced plans (with about 50-60% equity component). Very often it was poor selection that was responsible for the investors’ woes.’ Tata AIG allows policyholder to make this switch four times a year at no cost. An expert elaborates. Experts’ points out. the same cannot be said about your life insurance monies. with Rs 100 at every additional switch after that. Also policyholder with regular endowment plans who are not satisfied with the 4-6% returns can consider taking a ULIP with a lower equity component. which to a large extent should be scared. they can make this options work. for investors to make the right switch they need to track markets actively and be well informed. which could needlessly expose their assets to market volatility.
Ask about the top-up facility offered by ULIP s i. Find out how the debt and equity schemes are performing and how steady the performance has been.e. Enquire about the premium as ULIP s work on minimum premium basis as opposed to sum assured in the case of conventional insurance policies. Your risk appetite should play an important role in the plan you choose. Check the fund’s performance over the past six months. 4. Focus on your requirements and risk profile:Identify a plan that is best suited for you (in terms of allocation of money between equity and debt instruments). In UPIL s the costs involved are a big deciding factor. Compare ULIP s of different insurance companies:Compare products of the leading insurance companies. When your agent recommends a ULIP of X company ask him a few product-related questions o him and ask him also why the other products should not be considered . Some insurance companies offer you free switch for a 2-yr period while others do so only for 1 year. Enquire about the number of times you can make free switches (i. additional lump sum investments you can make to increase the savings portion of your policy. So if you have a high-risk appetite. go in for a more aggressive investment option and vice-a-versa. Our experience suggests that many a time people do not realize what they are getting into (in fact we have been approached by several people who wanted to cancel the ULIP s they had been coerced into talking by unscrupulous agents).Try to do as much homework as possible before investing in an ULIP.e. Go for an experienced insurance advisor:Select an advisor who is not only professional and informed. Enquire about the charges you will have to pay. This way you will know what you are getting into and won’t be faced with unpleasant surprises at a later stage. Opting for a plan that is lop-sided in favor of equities when you are a risk-averse individual might spell disaster for you (this is true in most cases currently). 3. the various options available and understand their working. Gather information on ULIP s. Also enquire whether he has serviced clients like you. change the asset allocation of the money in your ULIP account) from one investment plan to another. thereby providing you with the opportunity to gainfully utilize surplus funds at your disposal. Read the literature on ULIP s on the websites and brochures circulated by insurance companies. but also independent and unbiased. The companies give you the option to increase the premium amounts. 2.
. 8. To know basic mechanism of ULIPs and Mutual Fund. it would be a huge advantage. 11. Mutual Fund is an instrument which helps in the measuring the risk. Other Objectives 6.Insurance advice at all times must be unbiased and independent and your agent must be willing to inform you about the pros and cons of buying a particular plan. expertise and the technology through which the actual game is played makes the winning easier. The key is to do for an advisor who will offer value-added products. Does your ULIP offer a minimum guarantee? In market linked product if your investment’s downside can be protected. 10. skill. 5. To know evolution and growth of insurance sector. The main aim of this report is to study the mechanism of mutual fund and ULIPs in the emerging sector of the capital market. But without having the proper and inadequate knowledge in the market one can’t get proper return but can get secure his life with life insurance. Unit Linked Insurance plan is like to invest your money in mutual funds as a safer side with covering your life insurance and that keeps your investment moving and maximize your financial level of return. His job should not just begin by filling the form and end after he deposits the check and gives you the receipt. and compared to that this is very vital market having very wide scope of getting returns. So knowing about the risk and the proficiency. To identify market potential of ULIPs as a part of investment in Mutual fund Comparative analysis of ULIPs of Tata AIG with other competitive plans. To understand the criteria for investment in ULIPs. He should keep a track of your plan and inform you on a regular basis. 7. Even a small and a simple game to be played needs proper and accurate knowledge. This will enable you to make an informed choice. RESEARCH & CONCLUSION Research Objectives Study of Unit Linked Insurance Plan as an investment option in Mutual Funds is of major importance to the financial markets as well as finds the net Asset value of the insurance. 9. Find out if the ULIP you are considering offers a minimum guarantee and what costs have to be borne for the same.
Primary Data Collection Secondary Data Collection Primary Sources of Data :- Primary data may pertain to demographic. awareness and other similar as Secondary Sources of Data :- Secondary data are those data. socio. for obtaining primary data are as under. There are mainly two types of secondary sources of data and they are: Types of secondary Data al It includes various internal reports prepared by the firm like. there are two sources of data. which are collected from earlier research work and application as well as usa tudy of research. attitudes and opinions of people. their he main methods.economic haracteristics of consumers. I can’t use any internal primary data. sales rt. 12.Research Methodology SOURCE OF INFORMATION ata Collection Methods Once the research design has been decided. magazines. production report. 13. nal data External data can be collected from the web site. Essentially. the next stage is that of selecting sources of data. which are used. RESEARCH FINDING Potentiality in the insurance sector . naws paper and so on.
D.PPF and other fixed return securities. .Number polices in forces 20 18 16 14 12 10 8 6 4 2 0 1999 2000 2002 2004 2006 2008 2010 GDS% Year Life premium as a proportion of gross domestic savings About investment pattern 80 70 60 50 40 30 20 10 0 gov sha insu mu If has been found out that out of survey only 20% people were investing in mutual funds. And majority of people were investing in F.
Adequate insurance=(54 years-present age)*yearly income .About mutual funds About insurance First of the respondents were asked that whether they are having insurance or not then it was explained that what is adequate or not on the basis of below formula.
.Unit linked insurance plans During the survey it was asked to respondents that whether they know about marked linked plans which provides insurance cover and returns. the data are collected from internet. Research scope The information given in research findings is collected by data collection method. In insurance it was found out that most of the people did not know the benefits of ULIPs so first of all company should explain the benefits of ULIPs to the customers. All the data’s collected are secondary. So the scope for collecting this data is very wide. Recommendations 14. magazines and newspaper. most of them knew little about the plans.
mutual funds are investments avenues to participate in the growth of financial markets and do not provide any tax deduction (except ELSS and pension funds). This goes to the sum assured or the life insurance cover. CONCLUSION Both these instruments are designed to serve different purpose and are not comparable. 16. which is based on mortality rates as calculated by actuaries.25 percent and a flat fee of Rs15-20 per month. People know the options available for the investment but they don’t know which option will be best suited for them. these costs are lower than unit-linked plans. A unit-linked plan from an insurance company is in an insurance policy designed to pay a lump sum on maturity or on death if earlier. Premium paid under these plans is eligible for tax act. you would be at a loss because of higher initial administrative charges. For example. Moreover.8-1. unit-linked plans are not as liquid as mutual funds. the upfront charges for the first two premium amounts are as high as 20-27 percent. 17. Then there is an annual management fee of 0.5 per cent). . In some cases people didn’t have the faith it private companies. There is a lock-in of three years. So company should make them convince about the benefits of private companies and about the products which are more flexilbe. Though mutual funds too have entry exit loads (maximum 2 per cent) and expenses (maximum 2. Finally is a deduction for risk cover. On the other hand. Even if one redeems after three years.15. Private companies have to create awareness of not only those products which will be mare beneficial to them but all products.
com www. www. 4.mutualfundsindia.iloveindia. 3.moneycontrol.com www.com cccwww. 2.traderji. 7.in www. 5. 6.com . www.com.tataaing.karvy.Sebi.Bibliography Magazines Business Word (October 2001) Business today (June 2001) Business Today (April 2005) Business India ( May 2004) Websites 1.com www.gov.