SIP PROJECT REPORT ON COMPARATIVE ANALYSIS OF ULIPS OF MAJOR COMPANIES AND WITH MUTUAL FUND

SIP PROJECT REPORT SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF PGDM PROGRAM

By Rovin Gupta (08FN086)

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

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

ACKNOWLEDGEMENT
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

CONTENTS
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.

Introduction of Insurance Sector

The practice of insurance in the world is quite old infect. However, life insurance business, as it is known today, is a much later development. It evolved from the great transformation in life, which began with the decline of the agrarian society in the western countries in the 19century. Industrialization with its cities, factories, cash economy and an urban saving class set the stage for life insurance as a large scale national institution. It can truly be that life insurance is a product of modern industry. Growth of life insurance Company in any country will illustrate introduced modern life insurance business didnt make much headway. 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. The growth of India life insurance business continued to remain restricted till the Swedish movement gathered momentum. The business passed through the period of ups and downs with the political and economic situation in the country. 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. 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. The association played companies forum for expression of representative views on insurance and taxation legislation and imparting insurance education.

Nationalization
Even during days of the freedom struggle there was occasional demand for nationalization of life insurance industry. The demand naturally gathers mare momentum after independence. Mismanagement had lead to liquidation of as many as 25 life insurance companies in the decade after independence. Another 25 insurance companies had during the same period so frittered away their resources that their business had to be transferred to other companies. 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. This misuse of power, 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. The life insurance industry in India had to be geared up for raising resources for execution national programs. One of the objectives of the national plans was to build a pay welfare state. It was therefore, 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 peoples saving that could be analyzed through the life insurance into the development programs. 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, 1956, by Parliament. 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. Effective mobilization of the peoples savings. Complete security to policyholders. Prompt and efficient services to the policyholders. Conducting of the business with the utmost economy and with the full realization

that the money. Belonged to the policyholders. Investment of funds in such a way as to secure maximum yield consistent with safety of capital. Economic premium rates. 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.

How big is the insurance market? Insurance is an Rs.400 billion business in India, and together with banking services adds about 7% to India's Gap. 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, and total investible funds with the LIC are almost 8% of GDP. Yet more than three-fourths of India's insurable population has no life insurance or pension cover. Health insurance of any kind is negligible and other forms of non-life insurance are much below international standards. Indian Scenario: Unfortunately the concept of insurance is not popular in our country .As per the latest estimates, the total premium income generated by life and general insurance in India is estimated at around a meager 1.95% of GDP. However India's share of world insurance market has shown an increase of 10% from 0.31% in 2004-2005 to 0.34% in 2005-2006 India's market share in the life insurance business showed a real growth of 11 % thereby outperforming the global average of 7.7% Non-life business grew by 3.1% against global average of 0.20%. In India insurance spending per capita was among the lowest in the world at $7.6 compared to $7 in the previous year. Amongst the emerging economies, India is one of the least insured countries but the potential for further growth is phenomenal, as a significant portion of its population is in services and the life expectancy has also increased over the years.

Need for insurance:

Modern life insurance caters to multiple needs for insurance, which can be broadly classified as under: Cash and income needs on an immediately following death. Family income needs. Income needs of a widow on the death of her husband. Cash and income needs of a husband on the death of his wife. Retirement income needs. Education needs. Business needs

What is Human Life Value (HLV)?

Human life value is: 1. Capitalized value of the net earnings. 2. Present value of the total income lost to the family in the event death. These points will be more cleared with this example: Suppose an individual earns Rs. 10000/month. The personal expense is Rs.2000/month. Therefore the income provided to his family is Rs. 8000/month. The annual income provided to his family works out to Rs. 96000. Now if he were not to earn it for them, the family would have to Rs.1600000 in a bank so that they get Rs. 96000 yearly at 6% interest. (96000*100/6).

Therefore the HLV of the person is Rs. 1600000.

Ps. Note that we have not taken into account the future income growth of the person. Hence this is not the exact human life value but only a representation to give the customer a fair idea of how it works. What is a contract of insurance? A contract of insurance is a contract of utmost good faith, technically known as uberrima fides. The doctrine of disclosing all material facts is embodied in this important principal that applies to all forms of insurance. The purpose, who is one of the parties to the contract, is presumed to have means of knowledge that are not accessible to the corporation who is the other party to the contract. Therefore, the purpose is bound to tell the insurer everything affecting the judgment of the insurer. In all the contracts of insurance the proposes is bound to make full disclosure of all material facts and not merely, 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. Although Section 45 of the Insurance Act, 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), 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. It is, therefore, in the interest of the policyholder to disclose all the material facts to the corporation to avoid any complication when the claim arises. 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 the duty that the agent owes both to his client and to the corporation.

Classification of insurance business:

The insurance is broadly classified as: 1 .Life insurance business 2. 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, if so provided in the contract of insurance. The granting of annuity of human life. 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, trade or employment or of the dependents of such persons. 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

ROLE OF INSURANCE REGULATORY AND DEVLOPMENT AUTHORITY (IRDA) ACT, 1999

An act to provide for the establishment of an authority to protect the interests of policyholders, 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 Life Insurance Corporation Act, 1956 and the insurance Act, 1938 and General Insurance Business Act 1972. 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 .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 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 ded1cat1on towards achievement of Corporate Objective.

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

INTRODUCTION OF SBI LIFE

SBI Life Insurance Company Limited is a joint venture between the State Bank of India and BNP Paribas Assurance. SBI Life Insurance is registered with an authorized capital of Rs 2000 crores and a Paid-up capital of Rs 1000 Crores. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%. State Bank of India enjoys the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,500 branches across the country, arguably the largest in the world. BNP Paribas Assurance is the life and property & casualty insurance unit of BNP Paribas - Euro Zones leading Bank. BNP Paribas, part of the worlds top 6 group of banks by market value and a European leader in global banking and financial services, is one of the oldest foreign banks with a presence in India dating back to 1860. BNP Paribas Assurance is the fourth largest life insurance company in France, and a worldwide leader in Creditor insurance products offering protection to over 50 million clients. BNP Paribas Assurance operates in 41 countries mainly through the banc assurance and partnership model. SBI Life has a unique multi-distribution model encompassing Banc assurance, Agency and Group Corporate. 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. SBIs 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. Agency Channel, comprising of the most productive force of more than 63,000 Insurance Advisors, offers door to door insurance solutions to customers.

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SBI
State Bank of India (SBI) is the largest bank in India. 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. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network in India and overseas, including products aimed at NRIs. The State Bank Group, with over 16000 branches, has the largest branch network in India. With an asset base of $250 billion and $195 billion in deposits, it is a regional banking behemoth. It has a market share among Indian commercial banks of about 20% in deposits and advances, and SBI accounts for almost one-fifth of the nations loans. 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. These managers took the retirement allowances and then went on the become senior managers at new private sector banks. The State bank of India is 29th most reputable company in the world according to Forbes.

BNP Paribas
BNP Paribas is one of the main banks in Europe. It was created on 23 May 2000 through the merger of Banque Nationale de Paris (BNP) and Paribas. Together with Socit Gnrale and Crdit Lyonnais (now known as LCL), it is one of the "three old" banks of France. It is a constituent of the CAC 40 index. On 9 August 2007, BNP Paribas announced that it could not fairly value the underlying assets in three funds as a result of exposure to U.S. subprime mortgage lending markets. Faced with potentially massive (though unquantifiable) exposure, the European Central

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Bank (ECB) immediately stepped in to ease market worries by opening lines of 96.8 billion (then US$130 billion) in low-interest credit. The long term debt of the group is currently ranked AA by S&P, Aa1 by Moody's and AA by Fitch. On 28 April 2009, 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 72,99%. At the General Meeting of Shareholders of Fortis N.V. in Utrecht on April 29, 77.65 percent of shares voted in favor of BNP's purchase of a 75 percent stake in Fortis Bank, the Belgian banking business now in state hands. This confirms the deal for BNP Paribas to take a majority stake in Fortis Bank to make it the euro zones largest deposit holder through its positions in Belgium and Luxembourg.

INTRODUCTION OF ULIPs
Most importantly, what are ULIPs? Here, you will find all the information you need to set your mind at ease about how to invest in ULIPs, and which ULIP is right for you. 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 you life cover. The residual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; the value of investments alters with the performance of the underlying fund opted by you. 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.

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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, the insurer deducts some portion of the ULIP premium upfront. This portion is known as the Premium Allocation charge, and varies from product to product. The rest of the premium is invested in the fund or mixture of funds chosen by you. Mortality charges and ULIP administration charges are thereafter deducted on a periodic (mostly monthly) basis by cancellation of units, whereas the ULIP fund management charges are adjusted from NAV on a daily basis. 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. At the time of maturity of your plan, you are entitled to receive the fund value as at the time of maturity. The pie-chart below illustrates the split of your ULIP premium:

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Types of ULIPs
One of the big advantages that a ULIP offers is that whatever be your specific financial objective, 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, various life-stages.

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. 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

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With the growing nuclearization of family structure, 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, disciplined savings in such plans can accumulate over a period of time to provide a steady income post-retirement. 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. Your money is then invested in funds of your choice. 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). 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. 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. In a retirement plan, the earlier you begin the greater you gain post retirement due to the power of compounding. Let us take an example of Gaurav & Hari. Both of them want to retire at the age of 60. Gaurav starts investing Rs. 10,000 every year from the age of 25 till the time that he retires. In all, he would have invested Rs. 350,000. If his investments were to earn 7%

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return every year, at the time of his retirement, Gaurav will have a retirement corpus of Rs. 13, 82,368. Now, Hari starts investing 10 years later (i.e. at the age of 35) and in order to make up for the lost time, invests Rs.15,000 every year (which is 50% more than Gauravs annual investment). So, by the time of his retirement, he would have invested Rs. 3,75,000. And assuming the same annual return of 7%, he will end up with a retirement corpus of Rs 9, 48,735.

So, you see how despite setting aside more than 50% of Gauravs annual contribution, Hari ends up with a retirement corpus which is almost a third lesser than Gauravs. That is the power of compounding. Which is why, it is never too early to invest in a ULIP for retirement planning.

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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. 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 childrens education. 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. 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. On the other hand non guarantee plans comes with an in - 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, 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, time horizon and your investment preferences and needs.

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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. Here the initial allocation is decided as per your age since age is a significant indicator of risk appetite. Such a strategy ensures that the asset allocation at all times is in sync with your age and changing financial needs.

ULIPS FOR CHILDRENS 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. Apart from conventional schooling, it becomes important to expose your child to different activities such as dance, painting and sports training for holistic development. As a parent, you want to ensure that their development is not hampered either due to rising costs or unforeseen circumstances. Today there are ULIPs that offer money at key milestones of your child's education thus ensuring that your childs education continues unhampered even if something unfortunate happens to you. While, the death of a parent is an irreparable emotional loss, child education plans safeguard the child against the financial ramifications of the death of a parent. Apart from above mentioned benefit, child plans also offers below mentioned features. Flexibility of adding on various riders like Income benefit rider, disability rider etc to get additional benefits .For e.g. In case of income benefit rider, In the event of the death of the parent, the child will receive a regular pre-determined amount every year to meet the educational expenses. In case of unfortunate incidence of the death of a parent, not only will the child receive the sum assured immediately but will also continue to receive money at the key educational milestones.

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ULIPs for HEALTH SOLUTIONS

When you are young and working you save for various goals like marriage, education, retirement etc. but saving for health care is never considered or left for later. During these years we have various sources of income or savings on which we can rely for health emergencies. But with increasing cost of healthcare, proportion of this spend is increasing at an alarming pace. 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. Thus it is important for you to invest in health insurance today so that tomorrow you are fully prepared to meet rising healthcare expenses, which would be incurred during old age, with the right health insurance plan. Health ULIP is a recent innovation from the health insurance industry. 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. It aims to create a health savings kitty by investing in a long term flexible savings plan with multiple fund options. The health fund thus created allows you to claim for health related expenses of any kind and also fund your future health insurance charges. You can also avail of tax benefit on premium paid u/s 80D. When ULIP work best? Get the most out of your ULIP Whether you are in the process of deciding which ULIP to invest in; 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. Adhering to these key principles will allow you to make optimum utilization of your ULIP.

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Appropriate Life Cover Right Fund Option Long Term Investment Know the Charges Know the Features

ULIPs vs. 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. As is the cases with mutual funds, 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. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, 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. How ULIPs can make one RICH! Despite the seemingly comparable structures there are various factors wherein the two differ. 1. 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. The minimum investment amounts are laid out by the fund house.

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ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity. 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. ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; 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). The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts. 2. Expenses In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to predetermined upper limits as prescribed by the Securities and Exchange Board of India. For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors. Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times 'unwieldy' expense

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structures on ULIP offerings. 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. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. ULIP-related expenses have been dealt with in detail in the article "Understanding ULIP expenses". 3. Portfolio disclosure Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund houses do so on a monthly basis. 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. During our interactions with leading insurers we came across divergent views on this issue. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand. Some insurance companies do declare their portfolios on a monthly/quarterly basis. 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; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions.

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ULIPs vs. 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, 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.

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4. Flexibility in altering the asset allocation As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), 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. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load. 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, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches). Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. This can prove to be very useful for investors, for example in a bull market when the ULIP investor's equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan. 5. Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds well, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits. Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%.

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Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a shortterm capital gain is taxed at the investor's marginal tax rate. Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and make informed decisions.

WHY INVEST IN ULIPS

THE introduction of unit-linked insurance plans (ULIPs) has been, one of the most significant innovations in the field of life insurance over the past several decades. With the help of one product category it has addressed and overcome several concerns that customers had about life insurance be it liquidity, flexibility or transparency. Prior to the introduction of ULIPs, different goals of an individual were addressed with separate products. However, ULIPs are one stop solution for an individuals financial goals that are designed to enable consumers plan and fulfill all their long term financial goals, be it child education or marriage, wealth creation or even creating a retirement kitty. 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, offering unprecedented flexibility and transparency. Why invest in ULIPs Traditionally, the policyholder had no control over asset allocation, so it did not, necessarily, match the consumer's lifestyle. Further, often, people wonder whether it is better to purchase separate financial products for their protection and savings needs. This may be a viable option for those who have the time and skill to manage several products separately. However, for those who want a convenient, economical, one-stop solution, ULIPs are the best bet.

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

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CHARGE STRUCTURE
It is a common myth that ULIPs are expensive financial products; instead it is a competitively priced product over a long term. The initial charges could be high, owing to the long term nature of the product. However, overall charge structure for the term comes down substantially over a long period of time. ULIPs also have a very competitive fund management charge in the industry. ULIPs are as transparent as other market-led investments. Every time the customer chooses a ULIP, he/she is provided a sales benefit illustration that explains the premium utilization and charges, year by year, for the term of the plan. 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.

ADDITIONAL ATTRACTIVE FEATURES OF ULIPS

Flexibility and transparency are the two key features of the product. 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, with their low or nil surrender charges, are customer-friendly and allow withdrawal of fund value in emergencies. ULIPs also provide an option to enhance the kitty using top-ups that add to the existing fund value. Through ULIPs, consumers can also decrease or increase protection over the term of the plan, as the protection needs of an average customer changes over his/her lifespan. Further, they offer the flexibility to add health insurance coverage by adding critical illness riders. 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. From a tax perspective, the premiums paid and the maturity proceeds from ULIPs are generally tax-free.

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All these benefits rolled into one single product category is available only with ULIPs, making them an attractive 'wealth management-financial protection' solution. To sum up, 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. Mortality charges get deducted according to the sum assured of your choice. You will also have to pay fund management charge, administrative costs etc. 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. Here is a preview of the type of costs usually involved. 1. 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. This can be as high as 60 per cent in some ULIPS but in some others it could zilch 2. Mortality Charges This involves the cost of insurance or life cover that is allocated for the plan. Age, health of the policy holder, and the amount specified for coverage determines this charge. The basis of this charge depends on the type of ULIP. That is, this charge is initially deducted from the entire sum assured. At the final stage, it is charged on the difference between the sum assured and the fund value. In some ULIPS the mortality charge is levied on the sum assured for the whole term.

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3. Fund Management Fees This is charged towards managing your funds and deductible before arriving at the net asset value of your funds. This could be in the range of 1- 1.5 per cent of the assets that are managed. 4. 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. 5. Surrender Charges A surrender charge is levied when you Ancash the fund units partially or in full at a premature date. 6. Fund Switching Charge You are given the choice to switch your funds to different equity or debt options as applicable in your policy. However, the number of times you can make this switch is restricted to a certain number exceeding which you will be levied a charge. This is generally quoted at Rs 100 to 150 per switch after you have exhausted your share of free switches. 7. Service Tax Service tax is deducted from the funds that are actually used for investment from the premium. Now, lets look at an example to understand how exactly these charges are deducted from the premium amount you have paid. Mahesh invests an annual premium of 70,000 for a sum assured of Rs 7 lakhs. He pays a premium allocation charge of 65 per cent in his first year, which works out to Rs 45,000. This will be to the tune of 7.5 per cent to 5 per cent in second and third year.

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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, and it affects mainly those businesses that are in production. 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. However, if you are a producer, the method of distribution is extremely important as it could affect how their product is received and how it sells.

UNIT LINKED PRODUCTS OFFERED BY SBI LIFE

SBI Life - Horizon II SBI Life - Unit Plus II SBI Life - Unit Plus Child Plan SBI Life - Unit Plus Elite SBI Life - Smart ULIP

SBI LIFE: SALES MODEL.

SBI life insurance Ltd is backed by SBI, the biggest bank in India. SBI Life has a unique multi-distribution model encompassing Banc assurance, Agency and Group Corporate. 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. SBIs 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.

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Agency Channel, comprising of the most productive force of more than 63,000 Insurance Advisors, offers door to door insurance solutions to customers. Agency Channel An SBI Life branch is headed by a Branch sales manager. He takes care of sales, finances and operations of that branch. Under a branch sales manager, there is a territory manager and who takes care of all sales efforts by agency managers. Each Agency manager has a number of agents under him. Tasks of an agency manager are to recruit and train agents and driving sales through Corporate Agents & Brokers of the region allocated. An Agent is the last and the most important link in this chain. He is the interface between company and customers. Work of an agent is not limited to just sell and promote the products, but he also has to maintain a relationship for future sales. He also does nonmarketing functions like premium collection. He is a financial advisor appointed by the company to advice customers about products according to their needs.

What we did?
As management trainees, we were asked to recruit agents for the company. What we did? I selected salesmen of non competing companies as my Target. I chose them because they already know the market and the know how to sell. I prepared a list of prospective agents by direct meetings, and other sources like employment exchange, list of post office agents, list of small saving scheme agents and other various sources. Next step was to make a pitch through face to face meetings or calling. They were introduced with company and the prospects available as SBI Life agents. Interested candidates were called for a small informal meeting. Here, they were not only introduced to opportunities available, but also to threats in front of a salesman. Finally I was able to

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convert 3 existing agents of a PSU bank as our agents. The company took Rs 500 from them for a mandatory test taken by IRDA the regulatory body of insurance sector. The trainers gave them mandatory 50 hour training. What was not right? Selling insurance is considered to be a tough job by some industry insiders. Well not exactly by some hot shot MDRTs. In case you didn't know, MDRT stands for Million Dollar Round Table and this is the most coveted title in the insurance sales industry. 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, ULIP. 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. Unfair selling (Selling insurance products without understanding your needs) is rampant and whether you are a newborn or a 60 year old, insurance will be the first product sold to you. Selling insurance is a business and you better understand what's under all their sweet talk and projects. Don't mix insurance with investment. They are two separate decisions having different impacts on your life. It is Not FD or RD its a ULIP.

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Training and IRDA exam: a Big Joke Though there should be mandatory 50 hour training, but as new agents are only part time partners of company, they are too busy to take 50 hour training so company crash it to 1 day or you can even dodge them. An IRDA exam can be passed just by mugging few questions as the questions are repeated. The person who sales the policy is different from the person who passes exam and takes agency.

PROMOTION
Promotion involves disseminating information about a product, product line, brand, or company. It is one of the four key aspects of the marketing mix.

Above the line promotion: Promotion in the media (e.g. TV, radio, newspapers, Internet and Mobile Phones) in which the advertiser pays an advertising agency to place the ad

Below the line promotion: All other promotion. Much of this is intended to be subtle enough for the consumer to be unaware that promotion is taking place. E.g. sponsorship, product placement, endorsements, sales promotion, merchandising, direct mail, personal selling, public relations, 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. These sales efforts are supported by brochures, handouts and similar printed material and Print Advertisements. Outdoor activates like installing canopies in strategic business locations, Outdoor Advertisements, Sponsoring events and sales meetings are also organized. All this is Supported by heavy Electronic Media Advertisements.

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Decision related to above the line promotion is taken at senior level. Below the line promotion decision are taken at the Branch level. These Below the Line Promotion activities are helpful in following ways 1. Generate awareness about company products and reinforce company presence 2. Sponsoring events like blood donation camp or college festivals helps in creating a synergy with society. 3. Outdoor activities give chance to meet perspective clients and agents. 4. Referrals or mouth to mouth promotion builds a positive image in minds of customers.

WHAT WE DID? We were asked to organize below the line promotion activities for SBI Life. I Concentrated on Four activities. Informal Meetings Canopies activity Distribution of printed material and Posters. Mailers

HOW I DID? Distribution of printed material and Posters First I selected commercial centers in city were we can get perspective clients, and places like post offices and employment exchange were we could find prospective agents. We pasted posters and banners on those locations.

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

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Interpretation
In India, insurance is generally considered as a tax-saving device instead of its other implied long-term financial benefits. Indian people are prone to investing in properties and gold followed by banks deposits. They selectively invest in shares also but the percentage is very small4.5%. Even to this day, Life insurance market has become more vibrant. Smashing all doubts over the decision to liberalize the industry, 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. Now people mainly prefer ULIP for saving, then bank and then Post-Office and after that prefer P.P.F. and other. The main reason behind the insurance plan or ULIP preference is switching facility or option to choose fund. Mainly people prefer low growth safe return as compare to high growth some risky return. People mainly purchase life insurance policy for investment and then for tax-saving they give 2nd preference to protection. I also find that people mainly prefer L.I.C. as compare to private insurance company. It was also find out that only moderate no. of people know about SBI life.

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RECOMMENDATIONS
Variety-based Positioning

This type of positioning is based on varieties in products and services rather than customer segments. 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, it is possible to achieve a unique position by focusing on certain category of products. 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.) which will differentiate them from other companies Needs-based Positioning

This is based on the differing needs of different groups of consumers. 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. However, 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). 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, to the promotion methods employed.

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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.

Limitations of the study

The scope of the project is limited to conceptual and marketing aspects of Life Insurance Companies and doesnt include Claim Settlement and the underwriting part of the operations which are equally important aspect of learning. Project is limited to Sadar branch of SBI Life Insurance Company Ltd at, Nagpur. The major limitation was in terms of collecting the right information as the insurance players resist in revealing their marketing strategies, etc. Lack of knowledge of Marathi language is a barrier during conversation with customers of the local market.

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BIBLIOGRAPHY

Books: 1. Malhotra Naresh (2008), Marketing Research, Prentice Hall of India.

2. Kotler Philip(2008),Marketing Management

Websites: www.sbilife.co.in www.iciciprulife.com www.rediff.com www.moneycontrol.com www.amfi.com www.google.co.in www.wikipedia.com

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