PERFORMANCE ANALYSIS OF ULIP FUNDS

WITH SPECIAL REFERENCE TO LIC

A Major Project Report

Submitted in partial fulfillment of the requirements for BBA (Banking &

Insurance) Semester VI Programme of G.G.S.Indraprastha University,
Delhi.

Submitted by:
Aakash Saini
BBA(B&I) Semester VI
Enrl. No: 0231241808

Delhi Institute OF Rural Development

Nangli Poona
Delhi - 110036
 DECLARATION

I hereby declare that the major project report, entitled “Performance Analysis of

ULIP Funds with Special Reference to LIC”, is based on my original study and has

not been submitted earlier for award of any degree or diploma to any institute or

university.

The work of other author(s), wherever used, has been acknowledged at appropriate

place(s).

Place: New Delhi Candidate’s Signature

Date: 31st March 2011 Name: Aakash Saini

Enrol. No. : 0231241808

Countersigned

Name: Name:

Supervisor Director

Delhi Institute of Rural Development Delhi Institute of Rural Development

2
 ACKNOWLEDGEMENT

With profound sense of gratitude and regard, I express my sincere thanks

to my guide and mentor Mr. Anmol Poddar for his valuable guidance and

the confidence he instilled in me, that helped me in the successful

completion of this project report. Without his help, this project would

have been a distant affair.

His thorough understanding of the subject and the professional guidance

is indeed of immense help to me.

Aakash Saini

3
 CONTENTS

1. Introduction 5
2. Industry Profile 10
2.1 Life Insurance 14
2.2 Insurance Market – Present 16
2.3 Present structure of Insurance Industry in India 19
2.4 Related Acts 21
2.5 Life Insurance Products 23
3. Unit-Linked Insurance Plans (ULIP) 24
3.1 Structure of ULIPs 27
3.2 Advantages of ULIPs 29
3.3 Factors influencing the buying of ULIPs 31
3.4 Types of funds under ULIPs 32
4. Company Profile 33
4.1 Business objectives 36
4.2 Mission/Vision of LIC 37
4.3 Product Segments Of LIC 38
4.4 Performance Of ULIP Funds Of LIC 44
5. Objective & Scope of Project/Study 46
6. Research Methodology 49
7. Limitations 53
8. Analysis and Interpretation 55
9. Conclusions/Recommendations 64
Questionnaire
Bibliography

4
INTRODUCTION

5
 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 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 and need of insurance in today’s life They have started

6
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 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 controls, limits on ownership, and other

7
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 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.

8
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.

9
INDUSTRY PROFILE

10
 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 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.

HISTORY OF INDIAN INSURANCE:

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

a. P r e Nationalization
b. Nationalization and
c. Post Nationalization

11
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 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, 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 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

12
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 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.

13
 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-OPERTION in this sense
story of insurance is probably as old as the story of mankind.

All life insurance companies in India have to comply with the strict
regulations laid out by Insurance Regulatory and Development Authority
of India (IRDA). Therefore there is no risk in going in for private
insurance players. In terms of being rated for financial strength like
international players, only ICICI Prudential is rated by Fitch India at
National Insurer Financial Strength Rating of AAA (Ind) with stable
outlook indicating the highest claims paying ability rating.

Life Insurance Corporation of India (LIC), the state owned behemoth,

remains by far the largest player in the market. Among the private sector

14
players, ICICI Prudential Life Insurance (JV between ICICI Bank and
Prudential PLC)is the largest followed by Bajaj Allianz Life Insurance
Company Limited (JV between Bajaj Group and Allianz).

The private companies are coming out with better products which are
more beneficial to the customer. Among such products are the ULIPs or
the Unit Linked Insurance Plans which offer both life cover as well as
scope for savings or investment options as the customer desires. Further,
these types of plans are subject to a minimum lock-in period of three
years to prevent misuse of the significant tax benefits offered to such
plans under the Income Tax Act. Unlike the mutual fund product that has
a very simple cost structure, ULIPs carry a greater number of costs
(administration and mortality), in addition to the others. So comparing
ULIPs with mutual funds is erroneous.

15
 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 a compound annual growth rate
(CAGR) of 11.84% for the period spanning 2000-2007. Life insurance
market had a growth of $22.46 billion within a period of 7 years with a
growth rate of 118.24%. Estimated life premiums rose to INR 1,470,800
million ($36.77 billion) in 2006 from INR 1,301,540 million
($32.54billion) in 2005. We envisage that life premiums in 2011 will be
$65.96 billion, a growth larger than they were in 2007. The performance
of the market is forecast to accelerate, with an anticipated CAGR of
9.78% for the four-year period 2007-2011 expected to drive the market to
a value of $65.96 billion by the end of 2011. There would be a growth of
$24.6 billion i.e. 59.48% in the next 4 years.

Non-life premiums in India were $6.53 billion in 2007. Gross written

premium (GWP) in the Indian non-life insurance market reached a value
of $5.75 billion in 2006, this representing an annual growth of 13.55%

16
for the period spanning 2006-2007. Estimated non-life premiums rose
from INR230 billion ($5.75 billion) in 2006 to INR261 billion ($6.53
billion) in 2007.

We anticipate that non-life premiums will grow by a CAGR of 9.40%

between 2007-2011. We are looking for non-life premiums to rise by
$405 million over the five years to the end of 2011 with a growth rate of
62.02%.

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
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

17
 ownership, the Indian aviation insurance market is all set to boom in a
big way in coming years.
• Home insurance segment is set to achieve a 100% growth as
financial institutions have made home insurance obligatory for
housing loan approvals.
• Health insurance is poised to become the second largest business
for non-life insurers after motor insurance in next three years.
• 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)

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 budget, the
Government proposed for increasing the foreign equity stake to 49%.

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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)
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

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20
 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 Act, 1938

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

Life Insurance Corporation Act, 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 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 Insurance Business (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

21
Assurance, Oriental Insurance and United India Insurance headquartered
in each of the four metropolitan cities of India.

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.

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.

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 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.
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-

23
traditional products mainly in the form of unit linked products, which
have borrowed several beneficial features of mutual funds.

UNIT-LINKED INSURANCE
PLAN (ULIP)

24
 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
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.

25
As time progressed the plans were also successfully mapped along with
life insurance needs to retirement planning in today’s times ULIP
provides solution for all the needs of a client like insurance planning
financial needs financial planning for children’s future and retirement
planning

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.

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 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.

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% p.a. on Growth Fund. FMC will be applied on
the fund while calculating NAV on a daily basis. The maximum FMC on

27
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.

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.

28
 Figure : Premium break -up under ULIPs

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:

A. Life protection

B. Investment and Savings

29
 • 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

30
 FACTORS INFLUENCING THE BUYING OF UNIT
LINKED INSURANCE 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.

Social Factor
Age and experience of policyholder are personal factors, while the co-
education is a social factor.

Economic Factor
Economic factors include occupation, income and wealth.

Psychological Factor
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.

31
Company Related Variable
The company related variables are the promotional efforts to sell the
policies to prospective buyers. These include advertisement and personal
selling too.

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 Investments Risk Category

Description
Equity Funds Primarily invested in High
company stocks with the
general aim of capital
appreciation
Income, fixed Invested in corporate Medium
bonds, government
interest and Bond
securities and other fixed
funds income instruments
Cash Funds Sometimes known as Money Low
Market Funds — invested
in cash, bank deposits and
money market instruments
Balanced Funds Combining equity Medium

32
 investment with fixed
interest instriments

COMPANY PROFILE

33
 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 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

34
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.

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.

35
 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 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

36
 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 dedication towards achievement of Corporate
Objective.
MISSION/VISION 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."

37
 PRODUCT SEGMENTS OF LIC

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:

1. Profit Plus:

In this policy, the investment risk in investment portfolio is borne by the

policy holder.

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.

38
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).

Features:-

2. 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.

39
Features:-

3. 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.

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.

Features:-

40
 4. 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 units may increase or
decrease, depending on the Net Asset Value (NAV).

Features:-

41
 5. 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.

Features:-

42
43
PERFORMANCE OF ULIP FUNDS OF LIC

44
45
OBJECTIVE & SCOPE OF
PROJECT

46
 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.
• To identify the insurance needs of the Indian population with
respect to their emotional, physical and financial conditions.
• Comparative study of various insurance players in the market.
• To study the varied reasons of availing life insurance plans.
• To clearly understand the rationale behind the investment in
policies of LIC and private sector insurance companies.

47
 SCOPE OF THE STUDY

This study aims to make a performance analysis of the Unit Linked

Insurance Plans (ULIPs) of LIFE 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 Delhi city.

48
 RESEARCH
METHODOLOGY

49
 RESEARCH 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
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

50
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 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:
Random sampling technique was used in the survey conducted.

Study Area:
The samples referred to were residing in Delhi 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.

51
 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.

52
LIMITATIONS

53
 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 Delhi 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 many aspects affect the company performance,
companies deal with various businesses thus clubbing all parameters
is not always possible.
• As there is no stipend which is provided by the company, it does not
lead to any motivation. This study is totally about meeting people, which
involves moving within the city, which certainly requires money.
• There are always some chances of errors creeping in such as non
response errors, biased response errors etc. Some errors might also creep
in during interpretation.

54
DATA ANALYSIS
&
INTERPRETATION

55
 DATA ANALYSIS AND INTERPRETATION

PRIMARY DATA ANALYSIS

We have done a detailed survey in Delhi 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 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)

56
 1. Break-up of respondents between different age groups.

Age No of Respondents Percentage

18-30 19 38%

30-50 26 52%

>50 5 10%

Total 50 100%

Interpretation:

The sample included respondents from all the age groups out of which
people in the age group 18-40 constituted around 70%.

57
 2. Break-up of respondents by their occupations.

Interpretation:
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%.

58
 3. Break-up of respondents based on their preferences for
various savings instruments.

Interpretation:
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%.

59
 4. Break-up of respondents based on preferences for various
forms of investment.

Interpretation:
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.

60
 5. Break-down of respondents who own insurance policies in
various life insurance companies.

Interpretation:

Around 89% respondents has own insurance policies in various life

insurance companies.

61
 6. Break-down of respondents who rated risk involved in
ULIPs.

Interpretation:

Around 63% respondents felt that there was an amount of moderate to

high risk involved with ULIPS.

62
 7. Break-down of respondents who own insurance policies in
various life insurance companies.

Interpretation:

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.

63
 CONCLUSIONS
&
RECOMMENDATIONS

64
 CONCLUSIONS

• There is a great future of the life insurance sector in India as 80%

of the Indian population is still without life cover and people are just
now coming in response to the awareness campaigns being carried out
by almost all the insurance companies.
• We have found out that age plays a major role in deciding the
investment patterns of people as generally the younger class of people
tend to take more risk and invest in various instruments more
frequently, 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.

65
 RECOMMENDATIONS

• Insurance and investments must be treated differently.

• Consumer awareness must be created for ULIP’s.
• Should not be mis-sold as investment products but ‘risk cover’
products.
• Relationship building must be focused at, rather than pitching in
the wrong product. This will create customer loyalty.
• A person already having a ULIP, can lower costs and increase
returns by the following:
a. Try topups
b. Reduce life cover
c. Stay away from riders105

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ANNEXURE

67
 QUESTIONNAIRE

(This questionnaire is only for the sake of some research work being done on
insurance companies. Confidentiality would be maintained.)

Q1. Name (Optional):

Q2. Gender:

Male Female Contact no (Optional):

Q3. Age Group:

18-30 31-40 41-50 >50

Q4. Qualification:

Post Graduate Graduate 12th < 12th

Q5. Occupation:

Government Service Businessman Private Company

Self Employed Any Other (Please specify)

Q6. Your income range (per annum):

68
 Below 150000 150000-250000 250000-350000

350000-450000 More than 450000

Q7. Your savings per year:

Below 10000 10000-25000 25000-50000

50000-100000 More than 100000

Q8. You would prefer savings in which form?

Bank deposits Fixed deposits Investments

Post Office schemes Any other (please specify)

Q9. Your opinion about investment:

Tax Saving Good returns Better future post retirement

Wealth creation Any other (please specify)

Q10. Preferably you would like to invest in:

Mutual funds Stocks and shares Insurance products

Govt. Bonds & securities Any other (please specify)

Q11. 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

Q12.

69
Q13.

70
 BIBLIOGRAPHY

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

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