By Rovin Gupta (08FN086)

Supervisors: Mr.Puneet Marwah Prof. V.Gopal Dr. S.K.Mitra

Institute of Management Technology, Nagpur. (2008-2010)

The Summer Internship Program (SIP) undertaken by me at Sadar branch of SBI Life Insurance Company Ltd at, Nagpur was an extremely rewarding experience for me in terms of learning and industry exposure. I would like to extend my deep gratitude towards the Head of the organisation and my company guide, Mr. Puneet Marwah, Branch manager, SBI LIFE, Sadar, Nagpur who always motivated me and helped me during the internship and gave his valuable time & guidance in every step of my project. He was like a mentor for me during these 8 weeks Internship program giving me valuable inputs & much need sales exposure. I would like to thank my faculty guide Prof. V. Gopal who gave his valuable inputs in preparation report .He gave valuable time from this busy schedule to help me in the process of telling about things to lookout. I would like to thank the associates of the sales department with SBI Life Insurance Company Ltd, who constantly gave their suggestions & shared valuable insights in making my report effectively. I would also like to thank my colleagues who were working with me during the internship in SBI Life Insurance Company Ltd for their corporation & support during the entire period.

Rovin Gupta

EXECUTIVE SUMMARY Introduction of Insurance sector Nationalization Need for insurance what is Human Life Value (HLV) Role of insurance regulatory and development authority (IrDA) act, 1999 The Insurance Players Introduction of SBI LIFE Introduction of ULIPS Types of ULIPS ULIP vs. Mutual fund Why invest in ULIP Pricing of ULIP ULIP by SBI Life Sales Model What we did
Training and IRDA exam: a Big Joke Promotion How I did Interpretation

1 2 3 5 5 8 9 10 12 14 23 25 28 30 30 38
33 33 34 36

Recommendation Scope of future improvement Limitation Bibliography

37 38 38 39

Executive Summary
The project aims at analysis of pricing of different unit linked investment plans and also handling inter linkages with other Ps of marketing. Analyse insurance as an investment option/avenue. The project has a detailed study of various insurance plans offered by the major players in the insurance sector. Made a comparative analysis of the of SBI life insurance plans with that of other major players. To make a comparison between the performances of mutual funds with that of unit linked investment plans (ULIP).The report include case studies in order to illustrate the comparison between ULIP schemes with Mutual fund schemes. The project aims to help understand the consumer behaviour towards insurance. The report enhances the knowledge on how various marketing concepts learned in the classroom are implemented in a real life environment. It also deals with inter functional linkages The project entitled me to recommend Financial Advisor (FA) who will be a channel for bringing business to the SBI Life Insurance Company. I was given to choose prospective clients who were inclined for a career in insurance sector. The prospective candidate after dully scrutinised by, on fulfilling the entire criterion will be made Financial Advisor with SBI, Sadar, Nagpur. Organizing promotional activities for the company was also the part of project. The individual project assigned to me entitles me to understand ULIP as an innovative product and also to analyse pricing of ULIP and study it as an Investment Avenue.


The growth of India life insurance business continued to remain restricted till the Swedish movement gathered momentum. Industrialization with its cities. Growth of life insurance Company in any country will illustrate introduced modern life insurance business didn’t make much headway. factories. life insurance business. as it is known today. which began with the decline of the agrarian society in the western countries in the 19century. Need for Association With the rise in the number of Indian life insurance companies occasioned by the growth in the national spirit as a result of the independent movement a need was felt by the companies for an organization to assist them in solving the problems faced by them.Introduction of Insurance Sector The practice of insurance in the world is quite old infect. However. It can truly be that life insurance is a product of modern industry. The association played companies’ forum for expression of representative views on insurance and taxation legislation and imparting insurance education. is a much later development. 2 . The business passed through the period of ups and downs with the political and economic situation in the country. With a view to meeting this need and also to providing a representative body for expression of a common viewpoint of Indian insurance before the government regarding insurance legislation and Indian life Assurance offices association was established in 1928. It evolved from the great transformation in life. The business started taking its deeper roots only when in the late 19century ‘India’ insurance companies appeared on the scenes and started accepting ‘India’ lies freely on the same terms as European lives in India. cash economy and an urban ‘saving’ class set the stage for life insurance as a large – scale national institution.

Objectives of nationalization: The decision of the Government of India to nationalize life insurance industry was implemented by the passage of the life insurance Corporation Act. The demand naturally gathers mare momentum after independence. This misuse of power. 1956. essential that benefits of life insurance were made available to every family in the country and that the business should be conducted with utmost economy by the management acting in a spirit of trusteeship to enable maximization of the people’s saving that could be analyzed through the life insurance into the development programs. Another 25 insurance companies had during the same period so frittered away their resources that their business had to be transferred to other companies. by Parliament. One of the objectives of the national plans was to build a pay welfare state. Complete security to policyholders. position and privilege by these companies in the private sector was one of the most compelling reasons that influenced the decision of the government of India to nationalize the life insurance industry in 1956. Prompt and efficient services to the policyholders.Nationalization Even during days of the freedom struggle there was occasional demand for nationalization of life insurance industry. It was therefore. Conducting of the business with the utmost economy and with the full realization 3 . The life insurance industry in India had to be geared up for raising resources for execution national programs. Mismanagement had lead to liquidation of as many as 25 life insurance companies in the decade after independence.     Effective mobilization of the people’s savings. All these cost financial losses and consequent suffering to several policyholders who had entrusted their hard earned saving to the care of the company management. The objectives of nationalization of life insurance industry that emerged out of the discussion and speeches in the parliament in the time passage of the act were: Spread of message of life insurance as far and wide as possible reaching out beyond the more advanced urban areas well into hitherto neglected areas.

that the money.400 billion business in India.7% Non-life business grew by 3. and together with banking services adds about 7% to India's Gap.20%. 4 . However India's share of world insurance market has shown an increase of 10% from 0. In India insurance spending per capita was among the lowest in the world at $7. and total investible funds with the LIC are almost 8% of GDP. the total premium income generated by life and general insurance in India is estimated at around a meager 1.1% against global average of 0.6 compared to $7 in the previous year. How big is the insurance market? Insurance is an Rs.As per the latest estimates. Gross premium collection is about 2% of Gap and has been growing by 15-20% per annum. India also has the highest number of life insurance policies in force in the world. Health insurance of any kind is negligible and other forms of non-life insurance are much below international standards. Belonged to the policyholders.     Investment of funds in such a way as to secure maximum yield consistent with safety of capital.31% in 2004-2005 to 0. as a significant portion of its population is in services and the life expectancy has also increased over the years. Indian Scenario: Unfortunately the concept of insurance is not popular in our country . Amongst the emerging economies. Development of a dynamic and vigorous organization under a management conducted in sprit of trusteeship. Formulation of scheme of insurance to suit different section of the community. Yet more than three-fourths of India's insurable population has no life insurance or pension cover. Economic premium rates.34% in 2005-2006 India's market share in the life insurance business showed a real growth of 11 % thereby outperforming the global average of 7.95% of GDP. India is one of the least insured countries but the potential for further growth is phenomenal.

2.Need for insurance: Modern life insurance caters to multiple needs for insurance. 96000. The personal expense is Rs. (96000*100/6). Business needs What is Human Life Value (HLV)? Human life value is: 1. Therefore the income provided to his family is Rs.2000/month. Education needs. which can be broadly classified as under:        Cash and income needs on an immediately following death. These points will be more cleared with this example:      Suppose an individual earns Rs. the family would have to Rs. Now if he were not to earn it for them. 5 . 8000/month. Cash and income needs of a husband on the death of his wife. Family income needs. Present value of the total income lost to the family in the event death. 10000/month.1600000 in a bank so that they get Rs. The annual income provided to his family works out to Rs. Income needs of a widow on the death of her husband. Capitalized value of the net earnings. Retirement income needs. 96000 yearly at 6% interest.

6 . who is one of the parties to the contract. 1938 provides that no policy can be called in question after a period of two years from the date of its issue on the ground that any statement in proposal or a related document was false or inaccurate (making the policy indisputable). The purpose. It is equally obligatory on an agent to see that the assured doesn't obtain the contract by means of untrue representation or concealment in any respect. It is. in the interest of the policyholder to disclose all the material facts to the corporation to avoid any complication when the claim arises. therefore. The doctrine of disclosing all material facts is embodied in this important principal that applies to all forms of insurance. What is a contract of insurance? A contract of insurance is a contract of utmost good faith. In all the contracts of insurance the proposes is bound to make full disclosure of all material facts and not merely. Therefore the HLV of the person is Rs. It is the duty that the agent owes both to his client and to the corporation. Note that we have not taken into account the future income growth of the person. Therefore. those which he thinks material Misrepresentation non-disclosure or fraud in any document leading to the acceptance of the risk automatically discharges the corporation from all liability under the contract. the purpose is bound to tell the insurer everything affecting the judgment of the insurer. Although Section 45 of the Insurance Act. 1600000. is presumed to have means of knowledge that are not accessible to the corporation who is the other party to the contract. This provision is not applicable if the corporation can prove that misrepresentation or nondisclosure was on a material fact and was fraudulently made and that the policyholder knew at the time that statement he made was false. technically known as uberrima fides. Hence this is not the exact human life value but only a representation to give the customer a fair idea of how it works. Ps.

The granting of super-annulations allowance and annuities payable out of any fund applicable solely to the relief and maintenance of the person engaged or who have been engaged in any particular profession.Life insurance business 2. if so provided in the contract of insurance.Classification of insurance business: The insurance is broadly classified as: 1 . The granting of annuity of human life. Non life insurance business: Conventional classification of insurance business:    Fire insurance Marine insurance Miscellaneous insurance (accident) Modern classification of general insurance:     Insurance of person Insurance of property Insurance of interest Insurance of liability 7 . trade or employment or of the dependents of such persons. Non-life insurance business Life insurance business: It is the business of effecting contracts of insurances upon human life including any contract whereby the payment of money is assured on death or on the happening of any contingency to the dependent on human life and any contract which is subject to the payment of premiums for a term and shall be deemed to include: The granting disability and double and triple indemnity accident benefits.

1938 and General Insurance Business Act 1972. the primary obligation to its policyholders. Spread Life Insurance much more 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 . Promote amongst all agents and employees of the Corporation a sense of participation. pride and job satisfaction through discharge of their duties with ded1cat1on towards achievement of Corporate Objective. 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.ROLE OF INSURANCE REGULATORY AND DEVLOPMENT AUTHORITY (IRDA) ACT. keeping in view national priorities and obligations of attractive return. 1999 An act to provide for the establishment of an authority to protect the interests of policyholders. Meet the various life insurance needs of the community that would arise in the changing social and economic environment. 1956 and the insurance Act. without losing sight of the interest of the. 8 .the country and providing them adequate financial cover against death at a reasonable Cost. Act as trustees of the insured public in their individual and collective capacities. whose money it holds in trust. community as a whole. in the investment of funds. Maximize mobilization of people's savings by making insurance linked savings adequately attractive. the Life Insurance Corporation Act. Conduct business with utmost economy and with the full realization that the moneys belong to: the policyholders. Bear in mind. to regulate. to promote and ensure orderly growth of the insurance industry and for matters connected therewith for incidental thereto and further to amend. the funds to be deployed to the best advantage of the investors as well as the community as a whole.

The Insurance Players… SBI Life Insurance Company Limited HDFC Standard Life Insurance Company Limited Birla Sun Life Insurance Company Limited TATA AIG Life Insurance Company Limited Max New York Life Insurance Company Limited Kotak Mahindra Old Mutual Life Insurance Limited ING Vysya Life Insurance Company Limited Bajaj Allianz Life Insurance Company Limited ICICI Prudential Life Insurance Company Limited MetLife Life Insurance Company Limited Aviva Life Insurance Company Limited Reliance Life Insurance Company Limited Sahara India Life Insurance Limited Shriram Life Insurance Company Limited 9 .

arguably the largest in the world. Agency and Group Corporate. SBI Group has the unrivalled strength of over 14. SBI Life Insurance is registered with an authorized capital of Rs 2000 crores and a Paid-up capital of Rs 1000 Crores. part of the world’s top 6 group of banks by market value and a European leader in global banking and financial services. BNP Paribas Assurance is the life and property & casualty insurance unit of BNP Paribas . SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans.INTRODUCTION OF SBI LIFE SBI Life Insurance Company Limited is a joint venture between the State Bank of India and BNP Paribas Assurance. offers door to door insurance solutions to customers. BNP Paribas Assurance operates in 41 countries mainly through the banc assurance and partnership model. BNP Paribas Assurance is the fourth largest life insurance company in France. Along with its 7 Associate Banks. 10 . SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%. BNP Paribas. and a worldwide leader in Creditor insurance products offering protection to over 50 million clients.000 Insurance Advisors. is one of the oldest foreign banks with a presence in India dating back to 1860. comprising of the most productive force of more than 63. SBI’s access to over 100 million accounts across the country provides a vibrant base for insurance penetration across every region and economic strata in the country ensuring true financial inclusion.Euro Zone’s leading Bank.500 branches across the country. Agency Channel. SBI Life has a unique multi-distribution model encompassing Banc assurance. State Bank of India enjoys the largest banking franchise in India.

it is a regional banking behemoth. has the largest branch network in India. and renamed it the State Bank of India. with over 16000 branches. SBI provides a range of banking products through its vast network in India and overseas. The bank traces its ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta. making it the oldest commercial bank in the Indian Subcontinent. including products aimed at NRIs.SBI State Bank of India (SBI) is the largest bank in India. In 2008. The State Bank Group. It has a market share among Indian commercial banks of about 20% in deposits and advances. BNP Paribas announced that it could not fairly value the underlying assets in three funds as a result of exposure to U. These managers took the retirement allowances and then went on the become senior managers at new private sector banks. Together with Société Générale and Crédit Lyonnais (now known as LCL). the European Central 11 . it is one of the "three old" banks of France. with the Reserve Bank of India taking a 60% stake. BNP Paribas BNP Paribas is one of the main banks in Europe. The State bank of India is 29th most reputable company in the world according to Forbes. the Government took over the stake held by the Reserve Bank of India. Faced with potentially massive (though unquantifiable) exposure. and SBI accounts for almost one-fifth of the nation’s loans. It is a constituent of the CAC 40 index. subprime mortgage lending markets.S. With an asset base of $250 billion and $195 billion in deposits. The Government of India nationalized the Imperial Bank of India in 1955. On 9 August 2007. It was created on 23 May 2000 through the merger of Banque Nationale de Paris (BNP) and Paribas. SBI has tried to reduce its over-staffing through computerizing operations and Golden handshake schemes that led to a flight of its best and brightest managers.

ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. Aa1 by Moody's and AA by Fitch. a part of the investment goes towards providing you life cover.65 percent of shares voted in favor of BNP's purchase of a 75 percent stake in Fortis Bank. what are ULIPs? Here.V.8 billion (then US$130 billion) in low-interest credit. 12 . Simply put. The residual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds.99%. On 28 April 2009. In this way. The long term debt of the group is currently ranked AA by S&P. and hence managed according to your specific needs.Bank (ECB) immediately stepped in to ease market worries by opening lines of €96. you will find all the information you need to set your mind at ease about how to invest in ULIPs. the General Meeting of Shareholders of Fortis SA/NV in Ghent voted in favor of the transactions with the Belgian State and BNP Paribas with a majority of 72. the value of investments alters with the performance of the underlying fund opted by you. INTRODUCTION OF ULIPs Most importantly. and which ULIP is right for you. in Utrecht on April 29. This confirms the deal for BNP Paribas to take a majority stake in Fortis Bank to make it the euro zone’s largest deposit holder through its positions in Belgium and Luxembourg. ULIPs are structured in such that the protection element and the savings element are distinguishable. the ULIP plan offers unprecedented flexibility and transparency. In ULIPs. 77. At the General Meeting of Shareholders of Fortis N. the Belgian banking business now in state hands.

and varies from product to product. Mortality charges and ULIP administration charges are thereafter deducted on a periodic (mostly monthly) basis by cancellation of units. Since the fund of your choice has an underlying investment – either in equity or debt or a combination of the two – your fund value will reflect the performance of the underlying asset classes. The rest of the premium is invested in the fund or mixture of funds chosen by you. you are entitled to receive the fund value as at the time of maturity.Working of ULIPs It is critical that you understand how your money gets invested once you purchase a ULIP: When you decide the amount of premium to be paid and the amount of life cover you want from the ULIP. This portion is known as the Premium Allocation charge. whereas the ULIP fund management charges are adjusted from NAV on a daily basis. At the time of maturity of your plan. the insurer deducts some portion of the ULIP premium upfront. The pie-chart below illustrates the split of your ULIP premium: 13 .

chances are that there is a ULIP which is just right for you. The figure below gives a general guide to the different goals that people have at various age-groups and thus. Today an increasing number of people have stated planning for their retirement for below mentioned reasons Almost 96% of the working population has no formal provisions for retirement 14 . various life-stages.Types of ULIPs One of the big advantages that a ULIP offers is that whatever be your specific financial objective. Depending on your specific life-stage and the corresponding goal. there is a ULIP which can help you plan for it. ULIPS FOR RETIREMENT PLANNING Retirement is the end of active employment and brings with it the cessation of regular income.

Both of them want to retire at the age of 60. In all. Also at the time of vesting you can make a lump sum tax-exempted withdrawal of up to 33 per cent of the accumulated corpus.With the growing nuclearization of family structure. Gaurav starts investing Rs.000 every year from the age of 25 till the time that he retires. 10. he would have invested Rs. If his investments were to earn 7% 15 . Most of the Unit linked pension plans also come with a wide range of annuity options which gives you choice in structuring the post-retirement benefit pay-outs. traditional support system of the younger earning members – is no longer available Developments in the healthcare space has lead to an increase in life expectancy Cost of living is increasing at an alarming rate Pension plans from insurance companies ensure that regular. You can opt to receive the annuity at any time after vesting age (age at which you become eligible for pension chosen by you at the inception of the plan). disciplined savings in such plans can accumulate over a period of time to provide a steady income post-retirement.000. 350. In a retirement plan. Let us take an example of Gaurav & Hari. Your money is then invested in funds of your choice. the earlier you begin the greater you gain post retirement due to the power of compounding. Usually all retirement plans have two distinctive phases The accumulation phase when you are saving and investing during your earning years to build up a retirement corpus and The withdrawal phase when you actually reap the benefits of your investment as your annuity payouts begin In a typical pension plan you have the flexibility to make a lump sum payment or a regular contribution every year during your earning years.

invests Rs. Which is why. 3. it is never too early to invest in a ULIP for retirement planning. 82. you see how despite setting aside more than 50% of Gaurav’s annual contribution.return every year.735.000 every year (which is 50% more than Gaurav’s annual investment). he would have invested Rs. So. That is the power of compounding. at the age of 35) and in order to make up for the lost time. by the time of his retirement.75. he will end up with a retirement corpus of Rs 9.000. at the time of his retirement. Hari ends up with a retirement corpus which is almost a third lesser than Gaurav’s. Gaurav will have a retirement corpus of Rs. Hari starts investing 10 years later (i.15.368. So. 48. 13. 16 .e. Now. And assuming the same annual return of 7%.

These plans are ideal insurance-cum-investment option for customers who want to enjoy the potentially higher returns (over the long term) of a market linked instrument. but without taking any market risk. time horizon and your investment preferences and needs. Such plans are ideal for people who are in their late 20s and early 30s and by investing in such a plan get the flexibility of using it to fund any of their long-term financial goals such as purchase of a house or funding their children’s education. 17 . bank deposits and money market instruments with aim of capital preservation) so that you can decide to invest your money in line with your market outlook.built range of fund options to choose from –ranging from aggressive funds (Primarily invested in equities with the general aim of capital appreciation) to conservative funds (invested in cash.ULIPS FOR LONG TERM WEALTH CREATION ULIPs are the right insurance solutions for you if you are looking for a strong wealth creation proposition allied to a core insurance benefit. On the other hand non guarantee plans comes with an in . The added element of life cover serves to make these plans a wholesome financial investment option. Wealth Creation ULIPs can be primarily classified as: Single premium .Regular premium plan: Depending upon you needs & premium paying capacity you can either opt for a single premium plan where you need to pay premium only once during the term of entire policy or regular premium plans where you can premium at a frequency chosen by you depending upon your convenience Guarantee plans – Non guarantee plans: Today there is wealth creation ULIPS which also offer guaranteed benefit.

not only will the child receive the sum assured immediately but will also continue to receive money at the key educational milestones. it becomes important to expose your child to different activities such as dance. ULIPS FOR CHILDREN’S EDUCATION One of the most important responsibilities you have as a parent is to ensure that your child gets the best possible education that can be provided. Flexibility of adding on various riders like Income benefit rider. Today there are ULIPs that offer money at key milestones of your child's education thus ensuring that your child’s education continues unhampered even if something unfortunate happens to you. Apart from conventional schooling. In case of unfortunate incidence of the death of a parent. the death of a parent is an irreparable emotional loss. painting and sports training for holistic development. Here the initial allocation is decided as per your age since age is a significant indicator of risk appetite. Apart from above mentioned benefit. the child will receive a regular pre-determined amount every year to meet the educational expenses. In case of income benefit rider.For e.Life Stage based – Non life Stage based: Life Stage based Ulips factor in the fact that your priorities differ at different life stages & hence distribute your money across equity & debt. 18 . disability rider etc to get additional benefits .g. child education plans safeguard the child against the financial ramifications of the death of a parent. Such a strategy ensures that the asset allocation at all times is in sync with your age and changing financial needs. As a parent. child plans also offers below mentioned features. In the event of the death of the parent. While. you want to ensure that their development is not hampered either due to rising costs or unforeseen circumstances.

Adhering to these key principles will allow you to make optimum utilization of your ULIP. Thus it is important for you to invest in health insurance today so that tomorrow you are fully prepared to meet rising healthcare expenses. It aims to create a health savings kitty by investing in a long term flexible savings plan with multiple fund options. but saving for health care is never considered or left for later. You can also avail of tax benefit on premium paid u/s 80D. retirement etc. education. During these years we have various sources of income or savings on which we can rely for health emergencies. In a health ULIP part of your premiums are allocated for investment designed specifically to build a health fund to meet future health related expenses. which would be incurred during old age. When ULIP work best? Get the most out of your ULIP Whether you are in the process of deciding which ULIP to invest in. The health fund thus created allows you to claim for health related expenses of any kind and also fund your future health insurance charges.ULIPs for HEALTH SOLUTIONS When you are young and working you save for various goals like marriage. Health ULIP is a recent innovation from the health insurance industry. or whether you already have a unit linked insurance policy to secure your important financial goals there are some key principles which should govern any decision related to ULIPs. 19 . This is forcing families to borrow or sell assets to meet expenses during medical emergencies. And during old age health care expenses increase due to health deterioration because of age and higher incidence of chronic illness. with the right health insurance plan. But with increasing cost of healthcare. proportion of this spend is increasing at an alarming pace.

Generally speaking. diversified equity funds. Mode of investment/ investment amounts Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. ULIPs can be termed as mutual fund schemes with an insurance component. However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs. 20 .     Appropriate Life Cover Right Fund Option Long Term Investment Know the Charges Know the Features ULIPs vs. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain. 1. balanced funds and debt funds to name a few. The minimum investment amounts are laid out by the fund house. How ULIPs can make one RICH! Despite the seemingly comparable structures there are various factors wherein the two differ.e. i. Mutual Funds: Who's better? Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis. As is the cases with mutual funds.

Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator. expenses charged for various activities like fund management. This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter. The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts.e. the Insurance Regulatory and Development Authority. Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. making premium payments on an annual.ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route. administration among others are subject to predetermined upper limits as prescribed by the Securities and Exchange Board of India. Expenses In mutual fund investments. In ULIPs. either is applicable). half-yearly. determining the premium paid is often the starting point for the investment activity. Similarly funds also charge their investors entry and exit loads (in most cases. conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). any expense above the prescribed limit is borne by the fund house and not the investors. quarterly or monthly basis. sales and marketing.e. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested. 2. i. i.5% per annum on a recurring basis for all their expenses. This explains the complex and at times 'unwieldy' expense 21 . For example equity-oriented funds can charge their investors a maximum of 2. ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure.

During our interactions with leading insurers we came across divergent views on this issue. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio. There is lack of consensus on whether ULIPs are required to disclose their portfolios. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement. the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand.structures on ULIP offerings. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. Some insurance companies do declare their portfolios on a monthly/quarterly basis. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory. ULIP-related expenses have been dealt with in detail in the article "Understanding ULIP expenses". The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings. 3. albeit most fund houses do so on a monthly basis. 22 . regular portfolio disclosures on the other hand can enable investors to make timely investment decisions. Portfolio disclosure Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis.

23 .ULIPs vs. expenses Upper limits for expenses determined by the insurance chargeable to investors have company been set by the regulator Quarterly disclosures are mandatory Portfolio disclosure Not mandatory* Modifying asset allocation Generally permitted for free Entry/exit loads have to be or at a nominal cost Tax benefits borne by the investor Section 80C benefits are Section 80C benefits are available investments on all ULIP available funds only on investments in tax-saving * There is lack of consensus on whether ULIPs are required to disclose their portfolios. While some insurers claim that disclosing portfolios on a quarterly basis is mandatory. others state that there is no legal obligation to do so. Mutual Funds ULIPs Investment amounts Mutual Funds investment Determined by the investor Minimum the fund house and can be modified as well amounts are determined by Expenses No upper limits.

Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually. he could have to bear an exit load and/or entry load. irrespective of the nature of the plan chosen by the investor. only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits. For example plans that invest their entire corpus in equities (diversified equity funds). balanced funds). This holds well. a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds. he can book profits by simply transferring the requisite amount to a debt-oriented plan. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house. This can prove to be very useful for investors. 5. 24 . conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%. offerings in both the mutual funds segment and ULIPs segment are largely comparable. In case of equity-oriented funds (for example diversified equity funds. Flexibility in altering the asset allocation As was stated earlier. On the other hand in the mutual funds domain. a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches). if the investments are held for a period over 12 months. for example in a bull market when the ULIP investor's equity component has appreciated. Maturity proceeds from ULIPs are tax free.4. Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. the gains are tax free.

ULIPs are structured such that the protection (insurance) element and the savings element can be distinguished and hence managed according to one's specific needs. match the consumer's lifestyle. ULIPs are one stop solution for an individual’s financial goals that are designed to enable consumers plan and fulfill all their long term financial goals. As always. be it child education or marriage. However. wealth creation or even creating a retirement kitty. for those who want a convenient. one-stop solution. while a shortterm capital gain is taxed at the investor's marginal tax rate. the policyholder had no control over asset allocation. different goals of an individual were addressed with separate products. However. necessarily. 25 . Why invest in ULIPs Traditionally. people wonder whether it is better to purchase separate financial products for their protection and savings needs. economical. Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. it is vital for investors to be aware of the nuances in both offerings and make informed decisions. This may be a viable option for those who have the time and skill to manage several products separately. Prior to the introduction of ULIPs. often. so it did not. flexibility or transparency. one of the most significant innovations in the field of life insurance over the past several decades. offering unprecedented flexibility and transparency. ULIPs are the best bet. Further. With the help of one product category it has addressed and overcome several concerns that customers had about life insurance –be it liquidity.Similarly. debt-oriented funds attract a long-term capital gains tax @ 10%. WHY INVEST IN ULIPS THE introduction of unit-linked insurance plans (ULIPs) has been.

wealth creation along with providing them protection. The balance could be invested in a fund of his choice.ULIPs by design encourage long-term systematic and disciplined savings towards specific financial goals like -– retirement. Automatic asset allocation/Diversification in several asset classes. and savings in the same policy. Tax benefits under Section 80c of the Income Tax Act. therefore. As the children grow. Key features of ULIPs:       Combination of investment + insurance. he gives himself the margin or flexibility to counter market uncertainties. systematic and goal-based investment. child's education or marriage. By investing across several asset classes it adds diversification to help manage risk. possibly a balanced or growth option. if he gets a significant raise. let us take the example of a 35-year-old man with two young children. 26 . he could begin with a sum assured of Rs 5 lakhs. Switching funds at no extra cost. lies on the fact that when an investor diversifies across asset classes. which could be done by liquidating some of the units to pay for a risk premium. he could increase the savings element in the policy by topping it up. As sound investment instrument. Flexibility and transparency. ULIPs take both risk and return potential into account. The underlying principle of asset allocation. On the other hand.000 per annum. Long-term. he might want to increase the level of protection. To understand how a ULIP meets the multiple needs of protection of both health and life. With a premium of Rs 30.

Further. ADDITIONAL ATTRACTIVE FEATURES OF ULIPS Flexibility and transparency are the two key features of the product. the premiums paid and the maturity proceeds from ULIPs are generally tax-free. ULIPs also provide an option to ‘enhance’ the kitty using top-ups that add to the existing fund value. consumers can also decrease or increase protection over the term of the plan. Every time the customer chooses a ULIP. ULIPs are as transparent as other market-led investments. he/she is provided a sales benefit illustration that explains the premium utilization and charges. Most ULIPs also offer customization whereby the customer can enhance or reduce or even totally drop such additional insurance covers during the term of the product. Through ULIPs. they offer the flexibility to add health insurance coverage by adding critical illness riders. with their low or nil surrender charges. 27 . The initial charges could be high. ULIPs also have a very competitive fund management charge in the industry. Most ULIPs provide options to increase or reduce premiums after three years. While discontinuing premium payment is not conducive to long-term wealth generation. ULIPs also provide customers the freedom to switch between funds at no extra cost as against other market linked investments in which the customer bears the entry load (and even exit loads in some cases) for moving from debt to equity fund or vice versa. From a tax perspective. are customer-friendly and allow withdrawal of fund value in emergencies. instead it is a competitively priced product over a long term. owing to the long term nature of the product.CHARGE STRUCTURE It is a common myth that ULIPs are expensive financial products. as the protection needs of an average customer changes over his/her lifespan. for the term of the plan. overall charge structure for the term comes down substantially over a long period of time. year by year. However. ULIPs.

it is charged on the difference between the sum assured and the fund value. This can be as high as 60 per cent in some ULIPS but in some others it could zilch 2. In some ULIPS the mortality charge is levied on the sum assured for the whole term. Mortality charges get deducted according to the sum assured of your choice. Here is a preview of the type of costs usually involved. That is. making them an attractive 'wealth management-financial protection' solution. Premium Allocation Charge This is the initial percentage of funds that are separated for charges before units are allocated according to the guidelines of the policy. 1.All these benefits rolled into one single product category is available only with ULIPs. Age. administrative costs etc. To sum up. 28 . this charge is initially deducted from the entire sum assured. These charges can be as steep as 40-65 per cent of your premium payments in the initial year and it will even out to around 5 to 15 per cent after the first year. This remainder amount will be the investible surplus that is utilized for investment in funds. health of the policy holder. ULIPs are unique as they automatically help policyholders enter into a systematic investment process besides providing the benefit of a life cover. PRICING OF ULIP There is no fixed premium for a given sum assured in a ULIP. At the final stage. Mortality Charges This involves the cost of insurance or life cover that is allocated for the plan. You will also have to pay fund management charge. The basis of this charge depends on the type of ULIP. and the amount specified for coverage determines this charge.

5.000. Mahesh invests an annual premium of 70. Administration Charges This can be a flat charge deducted on a monthly basis throughout the plan or may increase over time at a particular percentage. 7.5 per cent of the assets that are managed. This could be in the range of 1. 4.1. Now. This is generally quoted at Rs 100 to 150 per switch after you have exhausted your share of free switches. Fund Switching Charge You are given the choice to switch your funds to different equity or debt options as applicable in your policy. 29 . He pays a premium allocation charge of 65 per cent in his first year. which works out to Rs 45. the number of times you can make this switch is restricted to a certain number exceeding which you will be levied a charge. Fund Management Fees This is charged towards managing your funds and deductible before arriving at the net asset value of your funds.3.5 per cent to 5 per cent in second and third year. This will be to the tune of 7. Surrender Charges A surrender charge is levied when you Ancash the fund units partially or in full at a premature date. 6. let’s look at an example to understand how exactly these charges are deducted from the premium amount you have paid.000 for a sum assured of Rs 7 lakhs. However. Service Tax Service tax is deducted from the funds that are actually used for investment from the premium.

and it affects mainly those businesses that are in production. UNIT LINKED PRODUCTS OFFERED BY SBI LIFE      SBI Life . SBI Life has a unique multi-distribution model encompassing Banc assurance.PLACE simply refers to how you will sell your products to your customers. Depending on what it is you are selling will directly influence how you distribute it. However. Agency and Group Corporate. the method of distribution is extremely important as it could affect how their product is received and how it sells. SBI’s access to over 100 million accounts across the country provides a vibrant base for insurance penetration across every region and economic strata in the country ensuring true financial inclusion.Unit Plus Child Plan SBI Life . If for example you own a small retail outlet or offer a service to your local community then you are at the end of the distribution chain so and will be directly supplying a variety of products directly to the customer. SBI life insurance Ltd is backed by SBI.Smart ULIP SBI LIFE: SALES MODEL. 30 .Unit Plus II SBI Life . the biggest bank in India.Unit Plus Elite SBI Life . SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans. if you are a producer.Horizon II SBI Life .

Here. but he also has to maintain a relationship for future sales. What we did? As management trainees. and other sources like employment exchange. Under a branch sales manager. Finally I was able to 31 . He is the interface between company and customers. we were asked to recruit agents for the company. An Agent is the last and the most important link in this chain. Interested candidates were called for a small informal meeting.Agency Channel. but also to threats in front of a salesman. Next step was to make a pitch through face to face meetings or calling. list of post office agents. I prepared a list of prospective agents by direct meetings. I chose them because they already know the market and the know how to sell. Each Agency manager has a number of agents under him. offers door to door insurance solutions to customers. He also does nonmarketing functions like premium collection. comprising of the most productive force of more than 63. list of small saving scheme agents and other various sources. Tasks of an agency manager are to recruit and train agents and driving sales through Corporate Agents & Brokers of the region allocated. finances and operations of that branch. Work of an agent is not limited to just sell and promote the products. What we did? I selected salesmen of non competing companies as my Target.000 Insurance Advisors. there is a territory manager and who takes care of all sales efforts by agency managers. Agency Channel An SBI Life branch is headed by a Branch sales manager. They were introduced with company and the prospects available as SBI Life agents. He is a financial advisor appointed by the company to advice customers about products according to their needs. He takes care of sales. they were not only introduced to opportunities available.

Selling insurance is a business and you better understand what's under all their sweet talk and projects. Unfair selling (Selling insurance products without understanding your needs) is rampant and whether you are a newborn or a 60 year old. What was not right? Selling insurance is considered to be a tough job by some industry insiders. They are two separate decisions having different impacts on your life. The trainers gave them mandatory 50 hour training. ULIP.convert 3 existing agents of a PSU bank as our agents. And there's no prize for guessing why insurance policy advisors and agents of all hues sell high costing insurance products like the unit linked insurance plan. 32 . Now becoming a MDRT does not mean that you have advised your clients in their best interests. it simply means that you have sold more policies and hit targets required to qualify for MDRT. But most of the agents tout MDRT as if this were any substitute for good advice that they give and some sort of a qualification. The company took Rs 500 from them for a mandatory test taken by IRDA the regulatory body of insurance sector. In case you didn't know. insurance will be the first product sold to you. Well not exactly by some hot shot MDRTs. It is Not FD or RD it’s a ULIP. Don't mix insurance with investment. MDRT stands for Million Dollar Round Table and this is the most coveted title in the insurance sales industry.

brand. Internet and Mobile Phones) in which the advertiser pays an advertising agency to place the ad  Below the line promotion: All other promotion. but as new agents are only part time partners of company. TV. Outdoor Advertisements. personal selling. It is one of the four key aspects of the marketing mix.  Above the line promotion: Promotion in the media (e. Sponsoring events and sales meetings are also organized. public relations. These sales efforts are supported by brochures.g. E. Outdoor activates like installing canopies in strategic business locations. sales promotion. endorsements.g. newspapers. sponsorship.Training and IRDA exam: a Big Joke Though there should be mandatory 50 hour training. An IRDA exam can be passed just by mugging few questions as the questions are repeated. handouts and similar printed material and Print Advertisements. Much of this is intended to be subtle enough for the consumer to be unaware that promotion is taking place. The person who sales the policy is different from the person who passes exam and takes agency. merchandising. product placement. they are too busy to take 50 hour training so company crash it to 1 day or you can even dodge them. direct mail. or company. radio. product line. 33 . All this is Supported by heavy Electronic Media Advertisements. trade shows Insurance is subject matter of solicitation and hence most frequently used medium of promotion is mouth to mouth promotion and direct sales efforts by sales force. PROMOTION Promotion involves disseminating information about a product.

I Concentrated on Four activities. and places like post offices and employment exchange were we could find prospective agents. 4. 3. Sponsoring events like blood donation camp or college festivals helps in creating a synergy with society. Referrals or mouth to mouth promotion builds a positive image in minds of customers.Decision related to above the line promotion is taken at senior level. These Below the Line Promotion activities are helpful in following ways 1. 34 . We pasted posters and banners on those locations. Outdoor activities give chance to meet perspective clients and agents. Mailers HOW I DID? Distribution of printed material and Posters First I selected commercial centers in city were we can get perspective clients. Generate awareness about company products and reinforce company presence 2. Below the line promotion decision are taken at the Branch level.     Informal Meetings Canopies activity Distribution of printed material and Posters. WHAT WE DID? We were asked to organize below the line promotion activities for SBI Life.

Canopies activity We selected jilla i. After taking permission from concerned authority and payment of fee of Rs 50. Nagpur district centre as a place of promotion. Mailers We prepared a list of prospective clients after collecting data from outdoor activities.Informal Meetings We called prospective clients for informal meetings where they were introduced to different products like ULIP. 35 . The affectivity was measured by increased foot fall and increased inquires on phone. We also played few games and it ended with tea and refreshments.e. We followed up by sending them letters through postal mails. we installed canopy there.

Indian people are prone to investing in properties and gold followed by banks deposits. Life insurance market has become more vibrant. of people know about SBI life.P. then bank and then Post-Office and after that prefer P.C. The main reason behind the insurance plan or ULIP preference is switching facility or option to choose fund. Smashing all doubts over the decision to liberalize the industry. 36 . insurance is generally considered as a tax-saving device instead of its other implied long-term financial benefits. and other.F. as compare to private insurance company. They selectively invest in shares also but the percentage is very small—4. the overwhelming first year performance of the Indian insurance sector is test case of a massive success story of private players entering into the erstwhile state monopoly. People mainly purchase life insurance policy for investment and then for tax-saving they give 2nd preference to protection. Even to this day.Interpretation In India. Mainly people prefer low growth safe return as compare to high growth some risky return. I also find that people mainly prefer L.5%. Now people mainly prefer ULIP for saving. It was also find out that only moderate no.I.

it is possible to achieve a unique position by focusing on certain category of products.) which will differentiate them from other companies  Needs-based Positioning This is based on the differing needs of different groups of consumers. It is a sensible strategy for those companies who have distinctive advantages or strengths in offering certain products and services. In the insurance industry too. in India most of the life insurance companies have a wide variety of products tailored for different customer needs and there is no company focusing on a particular customer need. An example would be a life insurance company that focuses only on High Net-worth Individuals (HNIs). 37 .RECOMMENDATIONS  Variety-based Positioning This type of positioning is based on varieties in products and services rather than customer segments. to the promotion methods employed. This can be done successfully if a company has unique strengths to service a group of customer needs better than others The insurance needs of customers vary significantly for different groups of customers. The needs of HNIs would be quite different from those of a general consumer and would require an entirely different marketing mix right from the type of products offered and the way they are distributed. SBI LIFE can provide certain distinct services to its customers (such as: providing the information to the clients about their policies over the internet etc. However.

Lack of knowledge of Marathi language is a barrier during conversation with customers of the local market.    Project is limited to Sadar branch of SBI Life Insurance Company Ltd at.SCOPE OF FUTURE IMPROVEMENT     One can analyze the base of costing for pricing of ULIP One can broaden study with taking in view practices adopted by other companies and branches of the same company One can also study the level of competency of Sales force of the company in terms of understanding of product. One can also correlate this competency level with defaults rate. 38 . etc. The major limitation was in terms of collecting the right information as the insurance players resist in revealing their marketing strategies. Limitations of the study  The scope of the project is limited to conceptual and marketing aspects of Life Insurance Companies and doesn’t include Claim Settlement and the underwriting part of the operations which are equally important aspect of learning. Nagpur.

in www.Marketing Management” Websites: www. “Malhotra Naresh (2008). www. Marketing Research”.co.amfi.BIBLIOGRAPHY Books: www. “Kotler Philip(2008). Prentice Hall of 39 www.moneycontrol.

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