Professional Documents
Culture Documents
TABLE OF CONTENTS
4 Analyze of Study 41
4.1 Comparative analysis of ULIPs 42
4.2 Understanding the working of ULIPs of Kotak Mahindra 60
Life Insurance
4.3 Market Survey on ULIPs 63
4.4 Integrated Financial Planning for Life Insurance 74
5 Findings 76
6 Recommendations 79
7 Bibliography 81
8 Questionnaire 83
9 Annexure 88
Executive Summary
1. Executive Summary
The project aims at comparative study of Unit Linked Insurance Plans and also a detail study of
some of the major plans of Kotak Mahindra Life Insurance Limited. It also analyse insurance as
an investment opportunities/Avenue.
The project had a detailed study of Unit Linked Insurance Plans (ULIPs) with reference to Kotak
Mahindra Life Insurance Limited, The role of private insurance companies comparison to public
sector companies. It also reflect the basic distinction between Mutual Funds and ULIPs, in form
of structure as well as return. It provides the role Insurance Regulatory Development Authority
(IRDA) as a regulator and its functions. The above project also signifies the recent dispute
between Market regulator SEBI and IRDA with relate to Unit Linked Insurance Plan products.
The project aims to help and understand the consumer behaviour towards insurance as an
investment purpose with life cover, perception of consumers towards ULIPs investment. At the
atmost the project also provides the knowledge about detailed investment of fund under ULIPs in
various sectors including Equity and Debt. It provides the detailed knowledge about various
charges implemented under ULIPs scheme.
The internship is a bridge between the institute and the organization. This made me to be
involved in a project that helped me to employ my theoretical knowledge about the insurance
sector both in public as well as private, with reference to ULIPs Investment. The internship
period of two month in Kotak Mahindra Life Insurance provided me a opportunity to learn some
basic concepts of insurance which was not up to date for me. By preparing the project I also got
a chance to recommend my opinions and views regarding ULIPs investment for a better future
and necessary changes in it.
2. Introduction
The insurance plays a major role in the life of the humanity. Slowly people stared to realize
the necessity of the insurance and these needs are unending as long as life exists.
In fact insurance is not restricted for any category neither of the society nor in term of cast,
ages or life styles. Also many people have a notion that Insurance is very good form of an
investment, which is not right.
As Indian investors are now more exposed to the capital markets and have started
understanding its working, they want to multiply their money rapidly.
This can be done through Unit Linked Insurance Plans (market linked Plans) introduced
by the Insurance Players.
This project is about studying the insurance industry which is on the boom.
The introductory part contains the meaning of insurance, its evolution, some, Statistics of Indian
insurance Industry.
The project deals the comprehensive analysis of the ULIP schemes, what is ULIP all about, its
NAV performance, the Growth, performance of the policies since their inception, its working, its
popularity and a market survey.
Getting associated with a brand like Kotak Insurance for just 2 months was really a
Prestigious and a memorable period in my MBA tenure. Growth has been the main objective of
the company and will continue to be the driving force in the years to come by spreading the
wings wider in India and contribute in the economic and social development.
Kotak group was established in 1985. Kotak Mahindra bank is a parent company of the group.
Kotak group entered into life insurance business in 2001.Kotak Mahindra old mutual life
insurance ltd is a joint venture between Kotak Mahindra bank ltd (76 %) and Old mutual plc.
(24%). Old mutual plc is a world class international financial services company. It was
established in South Africa before 160 years. Old mutual is the largest financial services in
South Africa, through its life insurance, Asset management, banking and general insurance
operations. About Kotak and Mahindra what we understand the mutual partnership between
these two. The remaining 76% which is retained with kotak is again distributed into two parts
between kotak (70%) and Mahindra (30%). Under this distribution kotak act as an active partner
and Mahindra as a sleeping partner respectively.
MISSION
“At Kotak life insurance, we aim to help customers take important financial decisions at every
stage in life by offering them a wide range of innovative life insurance product, to make them
financially independent”.
VISION
Kotak Life insurance has deep rooted commitment to improve the quality of life of its customer,
employees and stakeholders. We aim to improve the long term value in our relationships by
continuous innovation and improvements.
Headquartered in Mumbai, Kotak Mahindra Old Mutual Life Insurance is private insurance
company established in year of 2000. Kotak Mahindra Old Mutual Life Insurance is a joint
venture between Kotak Mahindra Bank, its affiliates and Old Mutual – wealth Management
Company based in UK.
PRODUCT PORTFOLIO
Kotak Mahindra Old Mutual Life Insurance has humble portfolio which includes retirement
plans, child plan, term plans, savings & investment plans.
Retirement Plan
With rising inflation, it’s absolutely necessary to make provisions for the future which makes
retirement plan an important financial decision. Better known as Pension plan, this plan takes
care of financial needs after retirement by investing a part of your savings for limited period.
Pension plan provides steady income after retirement and takes care of daily needs. The pension
plans offered by Kotak Life are Capital Multiplier Plan and Retirement Income plan
Child Plan
Parenthood brings responsibilities and no one is better judge of that than you. Child Plan is a
plan specifically designed to take care of financial needs of your child. Child plan provides with
necessary funds that will take care of child’s education, marriage etc. By investing small portion
of your savings you secure the financial end of your child. Child plan of Kotak Life is called
Child Advantage Plan.
Term Plan
A risk plan which provides comprehensive cover for your family in the unfortunate event of
untimely demise. A term life insurance plan provides good cover at relatively nominal cost and
has no survival benefits. Kotak Life term plans are Term, Preferred term Plan, e-Term, e-
Preferred term Plan and Eternal Life Plan.
Investment Plan
Popularly known as ULIP, an investment plan invests part of your savings in equity or debt
market as per your preference. The objective of investment plan is to give you returns which
easily beat the rising costs since the usual returns in a bank are extremely low. ULIP’s offered by
Kotak Life are Ace Investment, Wealth Insurance, Secure Invest Insurance, Endowment Plan,
Money Back Plan, Surakshit Jeevan, Premium Return Plan, Gramin Bima Yojana, Platinum and
Single Invest Advantage.
DISTRIBUTION NETWORK
Institute of Management & Computer Studies, Thane Page 9
Kotak Mahindra Life Insurance
Kotak Life Insurance employs around 5,565 people in its various businesses and has 197
Kotak Life also distributes its products like e-Preferred, term plan online.
FINANCIAL INFORMATION
The total premium earned for the half year ended September 30, 2010 was Rs 12,925 million.
The profit after tax for the same period is Rs 102 million. There have been 1414 death claims
reported during the period out of which 971 claims were settled and 32 claims were rejected.
MARKETING CAMPAIGNS
Kotak Life launches different campaigns from time to time. Initially their campaign was around
the theme “Zindagi se ek kadam aage” which implied being ahead of uncertainties with well
thought out financial planning. Recently, the campaign was changed to “Faidey ka Insurance”
which reflects that investments made in Kotak Life will have good returns because of their
expertise in finance. This idea will be projected through TVC, radio, print and other outdoor
mediums.
MANAGEMENT
Mr.Gaurang shah is the Director of Kotak Life Insurance. Mr. Pankaj Desai is the Managing
Director of Kotak Life Insurance .Mr. G Muralidhar is the CEO of Kotak Life Insurance
Mr.Sudhakar Shanbag is the CIO of Kotak Life Insurance. Mr.Andrew Cartwright is the
Appointed Actuary of Kotak Life Insurance.
Today, only one business, which affects all walks of life, is insurance business. That’s why
insurance industry occupies a very important place among financial services operative in the
world. Owing to growing complexity of life, trade and commerce, individuals as well as business
firms are turning to insurance to manage various risks. Therefore a proper knowledge of what
insurance is and what purpose does it serve to individual or an organization is therefore
necessary.
So it’s rightly said, “AN INSURANCE POLICY IN HAND KEEPS THE TENSION
AWAY.”
Insurance, essentially, is an arrangement where the losses experienced by a few are extended
over several who are exposed to similar risks. Insurance is a protection against financial losses
arising on the happening of an unexpected event. Insurance companies collect premium to
provide security for the purpose. In simple words it is spreading of risks amongst many people.
i) LIFE INSURANCE: It is a fundamental part of a sound financial plan which helps to insure
your loved ones
ii) BENEFITS :
1) SAVINGS
2) EDUCATION
3) RETIREMENT
The earliest transaction of insurance as practiced today can be traced back to the 14th century
AD. The business of insurance started with marine business by Traders who used to gather in the
Lloyd’s coffee house in London, wherein they had agreed to insure their ships in transit.
The 1st Life Insurance Policy was issued on 18th June, 1583, on the life of William Gibbons for
a period of 12 months.
Life Insurance in its current form came in India from the UK, with the
Establishment of British firm, Oriental Life insurance Company, in 1818
The 1st Indian insurance company was the Bombay Mutual Assurance Society Ltd, formed in
1870.
By the year 1956, when the life insurance business was nationalized and the Life Insurance
Corporation Of India ltd (LIC) was formed on 1st September, 1956 and there were 245
companies existing at that time in India.
By 31.3.2002, eleven new insurers had been registered and had begun to transact Life insurance
business in India.
Life
Term
Endowment
Unit-linked
Money-back
1) India is developing nation where still 20% of population are covered under various life
insurance policies as on 2011.
2)The Life Insurance Industry has grown by 36% p.a. from last five consecutive years, with a
premium business of Rs 1.29 lakh crores in FY 2010-2011 over Rs1.09 lakh crores in FY 2009-
2010.
Source – IRDA Journal (April 2010
3) Global Life Insurance Market: $1,521 billion, Global Non-Life Insurance Market: $922 billion
4) India is 11th largest in insurance business with 2.7 % world market share as on 2011.
–Times of India.
5) Out of one billion people in India, only 35 million people are covered by insurance.
6) India’s life insurance premium as a percentage of GDP is just 2.5% as on 2011.
7) Indian insurance market is set to touch $350- $400 billion by 2020, with assumption of 8% of
GDP.
Private Sector insurance company has shown a decline percentage from 40% in 2008-2009 to
20% up to May 2011.Private companies also showing negative growth rate in range of 20-50%,
as people are showing faith in government sector insurance companies.
PRIVATE PLAYERS
Data Collection:
Primary Data:
1) Use of a Questionnaire for carrying out a survey
Institute of Management & Computer Studies, Thane Page 17
Kotak Mahindra Life Insurance
Secondary Data:
1) Books
2) Newspapers
3) Magazines
4) Newsletter
5) Internet
6) Television
7) Booklet
8) Policy Brochures
IRDA is Insurance Regulatory Development Authority, that has been set up to protect
the interests of the policy holders, to regulate, promote and ensure orderly growth of
the insurance industry and for matters connected therewith or incidental there to.
To bring about (speedy) and orderly growth of the insurance industry (including annuity
and superannuation payments), for the benefit of the common man, and to provide long
term funds for accelerating growth of the economy.
To set promote, monitor and enforce high standards of integrity, financial soundness, fair
dealing and competence of those it regulates.
To ensure that insurance customers receive precise, clear and correct information about
products and services and make them aware of their duties and responsibilities in this
regard.
To ensure speedy settlement of genuine claims , to prevent insurance frauds and other
malpractices and put in place effective grievances redressal machinery.
To promote fairness, transparency and orderly conduct in financial markets dealing with
insurance and build a reliable management information system to enforce high standards
of financial soundness amongst market players.
To bring about optimum amount of self regulation in day to day working of the industry
consistent with the requirements of prudential regulation.
Functions of IRDA
Protection of the interests of the policy holders in matters concerning assigning of policy,
nomination by policy holders, insurable interest, settlement of insurance claim, surrender
value of policy and other terms and conditions of contracts of insurance.
Promoting and regulating professional organizations connected with the insurance and re-
insurance business.
Levying fees and other charges for carrying out the purposes of the Act.
Calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance intermediaries
and other organizations connected with the insurance business.
Control and regulation of the rates, advantages, terms and conditions that may be offered
by insurers in respect of general insurance business not so controlled and regulated by the
Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938).
Specifying the form and manner in which books of account shall be maintained and
statement of accounts shall be rendered by insurers and other insurance intermediaries.
Specifying the percentage of premium income of the insurer to finance schemes for
promoting and regulating professional organizations.
Specifying the percentage of life insurance business and general insurance business to be
undertaken by the insurer in the rural or social sector.
INTRODUCTION
ULIPS also known as UNBUNBLED VARIABLE INSURANCE PLANS has possibly been the
single largest innovation in the field of life insurance in the past several decades. It wasn’t too
long back, when the good old endowment plan was the preferred way to insure oneself against an
eventuality and to set aside some savings to meet one’s financial objectives. Then insurance was
thrown open to the private sector. The result was the launch of a wide variety of insurance plans,
including the ULIPs.
Two factors were responsible for the advent of ULIPs on the domestic insurance horizon.
First was the arrival of private insurance companies on the domestic scene. ULIPs were one of
the most significant innovations introduced by private insurers. The other factor that saw
investors take to ULIPs was the decline of assured return endowment plans.
These were the two factors most instrumental in marking the arrival of ULIPs, but another factor
that has helped their cause is a booming stock market. While this now appears as one of the
primary reasons for their popularity, it is believed that ULIPs have some fundamental positives
like enhanced flexibility and merging of investment and insurance in a single entity that have
really endeared them to individuals. ULIPs came to play in the 1960s and became very popular
in Western Europe and Americas.
MEANING OF ULIPS
A policy, which provides for life insurance where the policy value at any time varies according to
the value of the underlying assets at the time. ULIP is life insurance solution that provides for the
benefits of protection and flexibility in investment. The investment is denoted as units and is
represented by the value that it has attained called as Net Asset Value (NAV).
In order to offset the erosion of money, ULIPS are introduced. The Sum Assured is expressed in
units whose price is linked to an inflation related index.
In today’s times, ULIP provides solutions for insurance planning, financial needs, financial
planning for children’s future and retirement planning.Features of ULIPs distinguish itself
through the multiple benefits that it provides to the customer which are as follows
Life protection
Investment and Savings
Flexibility
Adjustable Life Cover
Investment Options
Transparency
Options to take additional cover against- Death due to accident- Disability- Critical
Illness- Surgeries·
Liquidity·
Tax benefits.
Today many individuals are adding ULIPs to their portfolios to generate wealth and protection
over a long time.
The following points help us to get a better idea how ULIPs differ from Traditional (Endowment
Plans)
1) SUM ASSURED
This is the most fundamental difference between ULIPs and the traditional plans.
In case of endowment the agent will ask you “HOW MUCH INSURANCE COVER DO YOU
NEED?” & the premium is calculated as per the estimated sum assured.
In case of ULIPs you are asked “HOW MUCH PREMIUM CAN YOU PAY?” & accordingly the
Sum Assured is estimated.
2) INVESTMENTS
ULIPs invest in
Equities
Bonds
G-secs
Money market.
3) FLEXIBILITY
In case of ULIPs the investor can choose the fund in which he wants to
Allocate his portfolio. He can go for pure Equity, or a combination of debt equity, depending on
his requirements.
The investor also has the option of switching from one fund to another.
Usually Free switches are given during the year. This option is not available in case of
Endowment.
4) TOP UP FACILITY
A top up is a one time additional investment in the ULIP over and above the annual premium.
This feature works well when you have a surplus that you are looking to invest in a market
linked avenue, rather than keeping in an FD or Savings account.
This feature is not for Endowment.
5) TRANSPARENCY
ULIPs are more transparent than Endowment Plans as their NAV is declared EVERYDAY. As a
result you can know how your ULIP has performed.
In case of Endowment, the insurance company sends you an annual statement of bonus declared
during the YEAR. , which gives us an idea how our plan is performing.
6) LIQUIDITY
Since ULIPs investments are NAV based it is possible to withdraw a portion of your investments
before maturity (after 3yrs lock in period is over).The withdrawal is possible provided the
minimum fund value is maintained.
In case of Endowment, you can only surrender your policy, but you won’t get everything that
you have earned on your policy in terms of premium and bonus. The Surrender Value is much
less than the Sum Assured and the Bonus is also not paid.
THUS investing in ULIPs or in ENDOWMENT depends on the person’s RISK taking ability. A
Risk Averse person may go for an Endowment, whereas a person who wants his corpus to
appreciate and is ready to take risks can go for ULIPs.
Therefore we can say that investing in ULIPs is the best in a growing Economy as compared to
the TRADITIONAL PLANS.
IRDA has played a part in making ULIPs more investor friendly. Today more individuals are
opting for ULIPs to create wealth over a long term. Over here I have outlined how ULIPs can
help you to fulfill that responsibility.
ULIPs Endowment plan------------- for helping you to meet investment objectives like buying a
house or setting up a business.
ULIPs Pension plan-------------------for your retirement. A long term retirement planning could be
done with an Equity push, as it is necessary to build up a strong corpus to face your rigorous
retirement.
Unit Linked Insurance Plans were first started by Unit Truat of India, some 8 to 9 years back.
A unit-linked insurance plan (ULIP) is a type of life insurance where the cash value of a policy
varies according to the current net asset value of the underlying investment assets. It allows
protection and flexibility in investment, which are not present in other types of life
insurance such as whole life policies. The premium paid is used to purchase units in investment
assets chosen by the policyholder. Investments are made majorly in mutual funds and risk-free
instruments like government securities .
Unit Linked guidelines were notified by IRDA on 21st December 2005. The main intent of the
guidelines was to ensure that they lead to greater transparency and understanding of these
products among the insured, especially since the investment risk is borne by the policyholder. It
is the endeavor of IRDA to enable the buyer to make the most informed decision possible when
planning for financial security.
The Insurance Regulatory and Development Authority (IRDA) issued circulars on 28 June 2010
outlining fresh guidelines for ULIPs. According to the new norms, the investors who wish to
prematurely withdraw now have a reason to be happy as their investments would have some
protection. The IRDA capped charges from the sixth year. The charges would be applicable from
1 September 2010.
The circular specified certain clauses to be incorporated in all ULIPs to be sold from 1
September 2010. They are as follows-
Lock-in period for all ULIPs was changed from three years to five years, including top-
up premiums and no residuary payments on policies which are lapsed, surrendered or
discontinued would be made during this period.
Residuary payments for policies arising out of policies which are lapsed, surrendered or
discontinued during the lock-in period would be paid on the expiry of the lock-in period.
Regular premium and limited premium ULIPs would have uniform and level paying
premiums and any additional payments made would be treated as single premium for the
purpose of insurance cover.
All limited premium ULIPs with the exception of single premium products will have a
premium paying term of at least 5 years.
All ULIPs, other than pension and annuity products, to provide a minimum mortality
cover or a health cover and the annual health cover at no time would be less than 10.5 %
of the total premiums paid.
All ULIPs pension or annuity products would offer a minimum guaranteed return of
4.5% per annum or as specified by IRDA from time to time.
CONTROVERSY RESULT
Government settles issue by issuing ordinance and it was settled in favour of IRDA as unit Link
Insurance Plans are basically life insurance products and provide nature of insurance with risk,
the premiums are invested in equity funds, balanced funds, debts funds etc.
The government has brought down curtains on the two-month long tussle between two regulators
by ruling that Unit-linked Insurance Products (Ulips) will be governed by the Insurance
Regulatory and Development Authority (IRDA).
Ulips account for more than 50 per cent of the life insurance business in the country. The money
collected is invested in equities.An amendment favoring Irda over the Securities and Exchange
Board of India was signed by President Pratibha Patil on June 18.
The law ministry issued an ordinance amending the RBI Act 1934, Insurance Act 1938, SEBI
Act 1992 and Securities Contract Regulations Act 1956, clarifying that life insurance business
will include any unit-linked insurance policy or scripts or any such instruments. This has thus
settled the issue of regulating Ulips.
The two regulators have been warring over the jurisdiction over Ulips after Sebi on April 9
barred 14 life insurance companies from selling or renewing Ulips unless they registered with it.
A day later, IRDA struck back telling insurers to ignore the Sebi order on the grounds that the
capital markets regulator had no jurisdiction over insurance companies.
This resulted in the government intervention and the finance minister asked both the regulators to
file a joint application with an appropriate court to resolve the matter. However, SEBI issued a
clarification saying that insurance companies need to register with SEBI.
Mutual funds are essentially short to medium term products. The liquidity that these products
offer is valuable for investors.
ULIPs, in contrast, are now positioned as long-term products and going ahead, there will be
separate playing fields for ULIPS and MFs, with the product differentiation between them
becoming more pronounced.
ULIPs now do not seek to replace mutual funds; they offer protection against the risk of dying
too early, and also help people save for retirement.
Insurance has to be an integral part of one’s wealth management portfolio. ULIPs and mutual
funds are, therefore, not likely to cannibalize each other in the long run.
While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and
structure, the first and foremost purpose of insurance is and will always be ‘protection’. The
value that it provides cannot be downplayed or underestimated. As an instrument of protection,
insurance provides benefits that no investment can offer.
It is important for an investor to understand his financial goals and horizon of investment in
order to make an informed investment decision. The decision to invest in either a mutual fund or
a ULIP should depend on the time period of investment, individual financial goals as well as risk
taking appetite, and it’s about time the industry and customer realize it.
3) Investment Duration:- It works out for long term It works out to medium term,
investment only. long term, & short term. Risky
for short term investors.
4)Insurance Cover :- ULIPs provide insurance MF schemes do not cover the
cover (except annuity life risk and the amount
Institute of Management & Computer Studies, Thane Page 33
Kotak Mahindra Life Insurance
The current market scenario is leaving a great impact and has changed many things in our lives.
During the last bear market, the impact of market weakness was limited to stock market and
hence the worst affected were those who took a bet on stocks. In the current edition of market
weakness, the numbers of affected by equity are many more, thanks to the popularity of unit-
linked plans.
Technically, insurance sector should have little to worry about as investors in the policy are long
term investors. However, due to the wrong selling strategy of investors and advisors, insurance,
in recent times, particularly the ULIPs, have been sold on the basis of shorter tenure. In fact,
many insurance companies even launched policies with shorter tenure of as little as 3 years on
the premise that policyholders had shrunk their commitment towards their premiums.
While one could get away with shorter tenures during 2003-07, it may not be the case for the
coming year and hence, those who signed up for ULIPs may have to hold on to their policies for
more than three years. Besides staying invested, ULIP policyholders can also make a better use
of their investment through some changes in their investment strategies. Here are some tips for
managing your existing ULIPs:
Switch to monthly from annual: if you are an investor with long term focus for your insurance
policy, continue with your equity allocation. However, monthly mode for premium may work
better than annual premium mode as stock market has been volatile. In the case of monthly
premium, investor gets to enjoy the benefits of volatility like SIP (systematic investment plan).
The good thing with ULIP is that there is plenty of flexibility with premium payment and
investor can change from one mode to another at any time.
Increase allocation for debt: ULIP, often, is associated with equity though in reality, every
insurance company offers at least 4-5 investment options for the premium. As a result, investors
who signed up for ULIP more than 4-5 years can look at the option of reducing equity exposure
for the next one year. The logic is simple. When these investors signed up for ULIP, the stock
market was closer to the present level or slightly lower than the current level. If you have made
some gains from your ULIP, protection of profits can be an option and hence reduce your equity
exposure. The ratio between equity and debt can be according to your comfort. Those with
medium risk appetite can look at 30-40% in favour of debt. If you can't decide for yourself, look
at the option of balanced funds which allocate up to 35-40% in favour of debt. You can revert to
100% equity once the stock market stabilises.
Now the question is should everyone review their ULIP premium strategy? The answer is yes if
you are not a long term investor. On the other hand, if ULIP is an option to build corpus for your
medium term needs or children's education with tenure of over 10 years, you need not worry
much about the market volatility. In fact, insurance companies themselves do value picking with
their funds as they don't have the pressures of redemptions when compared with mutual funds.
That is also the reason why insurance companies managed to post better returns with their ULIPs
during the market meltdown.
Hence although in this current market situation it seems more preferable to go in for ULIP's and
those who have existing policies to review them.
Initially ULIPs were started by a few private players way back in 2001-02. But now almost every
Insurance company has got ULIPS suiting the varied requirements of the customers. If one has to
choose among the ULIP schemes provided by the insurance, it is necessary to do a through
comparison to choose the right one for you.
ULIPs, in contrast, are now positioned as long-term products and going ahead, there will be
separate playing fields for ULIPS and MFs, with the product differentiation between them
becoming more pronounced.
ULIPs now do not seek to replace mutual funds, they offer protection against the risk of dying
too early, and also help people save for retirement. Insurance has to be an integral part of one’s
wealth management portfolio. ULIPs and mutual funds are, therefore, not likely to cannibalize
each other in the long run.
While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and
structure, the first and foremost purpose of insurance is and will always be ‘protection’. The
value that it provides cannot be downplayed or underestimated. As an instrument of protection,
insurance provides benefits that no investment can offer.
It is important for an investor to understand his financial goals and horizon of investment in
order to make an informed investment decision. The decision to invest in either a mutual fund or
a ULIP should depend on the time period of investment, individual financial goals as well as risk
taking appetite, and it’s about time the industry and Customer realize it.
Equity
Balance
Risks
Debt
Money
Market
Returns
In case of equity, the risk and return is the highest, and vice verse for Money market instruments.
It is a principle of Financial management, the higher the risks you take , the higher the return you
get.
It is estimated that India’s economy will become the 3rd largest economy within a few years,
with a high GDP growth and a low inflation rate, followed by booming stock market (SENSEX
soaring as high as 20,000 points). So right time to increase your wealth and become rich starts
from today. And ULIPS are the best to invest in.
EXPENSES IN ULIPs
b) Administration Charges: charged by the company to cover the daily expenses, overhead
costs, agent’s commission etc.
c) Fund Management charges: are levied by Insurance companies to cover the expenses
incurred by them in managing ULIP monies. Charges are high for managing monies in an Equity
Fund.
d) ULIP Fund switch charges: Such are borne by the individuals when they decide to switch
their money form one type of find to another.
e) Top up Charges: A certain % is deducted from the Top up amount to recover the expenses
incurred on managing the same.
Cancellation/ Surrender charges: It is charged when an individual wishes to surrender his ULIP
policy.
Fund Strategy: Aims to maximize opportunity for you through long-term capital growth, by
holding a significant portion in a diversified and flexible mix of large / medium sized company
equities.
Kotak Classic opportunity fund guarantees you an additional income every year, for 20 years
provided the policy is in force. In addition, on maturity you receive 110% to 104% of Basic Sum
Assured. You also enjoy life cover for the entire policy term thereby protecting your family
should something happen to you.
Advantages
Enjoy Assured Annual Income for 20 years
Receive lump sum on maturity
Provide protection to your family for 30 years
Avail of policy loan to meet sudden expenses
Boost your protective cover through optional rider benefits
Key Features
Enjoy Assured Annual Income for 20 years
Maturity Benefit - Receive lump sum on maturity
Death Benefit - Provide protection to your family for 30 years
Avail of policy loan to meet sudden expenses
Boost your protective cover through optional rider benefits
Tax Benefits
Equity % to Fund
I T C Ltd 5.39 %
Others 35.38 %
Total 93.90%
Fund Strategy: Aims to provide you with stable long-term inflation beating growth over medium
to long-term and defend your capital against short-term capital shocks.
Kotak Platinum is a unit linked investment plan with low charges along with convenient
premium payment options. A great combination of 8 funds and loyalty additions, this plan helps
you build substantial wealth for yourself.
Advantages
You may decide your premium based on how much and for how long you wish to invest.
You choose the Basic Sum Assured, depending on your existing insurance cover and need. You
can further opt for rider benefits to enhance the protective cover of your plan
Premiums paid by you, net of premium allocation charges, are invested in the funds of your
choice.
Now you can sit back and relax. Our investment experts will ensure that your plan earns you handsome
returns.
Others 33.16%
Total 63.50%
Fund Strategy: Aims for moderate growth for you by holding a diversified mix of equities and
fixed interest instruments.
Kotak Wealth Insurance is a unit-linked insurance plan , that provides you with investment
growth to take care of your family's goals and comprehensive protection to help your family and
you meet unplanned events head on.
Advantages
Key Features
O Maturity Benefit
O Death Benefit
Fund Strategy: Aims for a high level of capital growth by holding a significant portion in large
sized company equities.
This plan would like to protect your family in the eventuality of you not being around yet receive
all your premiums back on maturity.
Advantages
Affordable premiums
No medical examinations
Key Features
Return of premiums
Hassle-free
Death Benefit
Maturity Benefit
Fund Strategy: Aims to protect your capital and not have downside risks.
The Kotak Money Market Fund offers the key benefit of cash lump sums at periodic intervals of
five years, ensuring that you are able to meet any of your financial obligations which arise from
time to time. This money back plan not only lets you enjoy regular cash flows during the policy
term, but it also gets you a substantial life cover, which increases every year.
Advantages
Key Features
Bonus
Maturity Benefit
ULIPs are said to be the most lucrative from of investment, which not only give you high market
returns but also protection from risk, and also secures the livelihood of your loved ones even
after your death.
Here is an illustration which explains how a ULIP makes your money work.
Date: 15/7/11
Currency: Rupees
Note :
1)SA is the multiple of annual premium: 15000*33.33= 5,00,000
2) Additional coverage given as Accident Death Benefit Rider taken by the policy holder.
3) Investment in Equity is 100%.
50%
1st year= 50% of premium
2nd year= 25% of premium 75%
3rd year= 1 %of premium
99%
Therefore the units keep on increasing with the change in the NAVs.
There is an inverse relation between the NAVs and the No. of Units.
As the NAVs rises the no of units decrease.
& As the NAVs fall, the No of Units increase.
E.g.: In the 3rd year, the investment was Rs 36960. NAV was Rs 30. So the no. of Units was
1234
Now if the NAV Falls to Rs 20. Then the no. of Units would have been 1848.
Therefore the rising trend of NAV is not always a good sign, as your
no of units decrease.
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Kotak Mahindra Life Insurance
Therefore if Mr. Dinesh Behera continues with his policy for 30 years, He will get a Maturity
benefit = existing Fund Value which is the sum of the Regular premium fund value
·
On death = SA Rs 5,00,000 or NAV whichever is higher.
A questionnaire was prepared, wherein 10 advisors of Kotak Mahindra Life Insurance were
asked to fill it. The reason for carrying out a market survey was to know the opinion of the
Advisors and the popularity of ULIPs in the market.
Q 6) How much commission do you get from the company on ULIP policy?
a. 0--- 10%
b. 11—20%
c. 21---30%
d. 31--- 40%
Q 10) Qualifications
Q 12) how does a client respond, if any new policy is suggested to him?
ANS: According to the survey, the client’s reaction depends upon the presentation that is by the
Advisor. Usually the client shows positive signs of buying the product, sometimes are reluctant
to buy due to financial problems. According to most of the advisors the 1st quest asked by the
client is about the guarantee and returns. They want to know about the popularity of the policy as
well as the insurance company.
c) Student d) Retired
Ans) a) Yes b) No
Institute of Management & Computer Studies, Thane Page 65
Kotak Mahindra Life Insurance
Ans) a) Yes b) No
c) Kotak d) Others
Institute of Management & Computer Studies, Thane Page 66
Kotak Mahindra Life Insurance
c) Retirement d) Others
c) Average d) Poor
Ans) a) Yes b) No
Your Need
Starting a Job, Single individual Low protection, high asset creation and
accumulation.
Kids going to school, college Higher Protection, high on asset Creation but
steadier options, liquidity for education
expenses.
Higher studies for child, marriage Lump sum money for education,
Marriage. Facility to stop premium for 2- 3 yrs
for these extra expenses
Children independent, nearing the Safe accumulation for the golden Years.
Golden years. Considerably lower life insurance as The
dependencies have decreased.
Flexibility
5. Findings
Findings
From the above project, I would point out that the insurance industry is growing at a very fast
pace .The Insurance needs of the people are increasing.
There is no other investment avenue which provides double the amount invested, in case of death
due to accident or on death.
Therefore insurance has and should be a part of every person’s portfolio which satisfies twin
objectives of protection against risks & to increase your wealth.
Putting your money in the ULIP equity fund will give you a good return and capital appreciation.
However there are also some classes of consumers in society who are still unaware of investment
plans and strongly rely upon traditional plans. This might be due to unawareness, unwillingness
to take or bear risk.
Life Insurance Corporation of India still plays a major role in market, As it is government
oriented, major percentages of investors still trust on LIC of India. Only consumers having some
prior knowledge about market and investment opportunities and simultaneously returns are ready
to willing to invest in private insurance companies.
Life advisor plays a crucial role under private insurance companies, as it is totally depend upon
the presentation how he or she presents to investor or client. Ultimately its client, who if
understand the plan properly, will invest in plan only if they are provided with lucrative returns
and risk cover. They should also be made to understand the importance of Insurance Regulatory
Development Authority (IRDA).As IRDA as a watch dog will regulate the insurance companies
and will protect the interest of the investors.
ULIPs are different from Mutual Funds not in Structure but in terms of returns. As ULIPs
provide risk cover and death benefit which is unavailable in mutual fund. The charges of ULIPs
like Fund Management Charges, Allocation Charges, Mortality charges and Administrative
charges are transparent including transaction. So Investor need not have to worry as industry
people will manage the premium amount and they will provide switch option too. Switch option
is a option where investor can willingly order to diversify fund, if he or she feels insecure in the
particular sector.
If you are considering long term investment, ULIP is excellent means to securely invest your
savings. ULIP provides insurance cover, investment and tax benefits. ULIP is transparent by
nature as you can daily track the net asset value of your fund. ULIP is also flexible as you can
manage your systematically manage the invested amount in any type of fund. ULIP does not
require your constant attention as your premium is managed by industry professionals.
6. Recommendations
Recommendations
1) The company should now target pensioners & housewives as they constitute less percentage in
the selection of ULIPs.
2) The company can arrange a seminar for the existing clients informing them about the progress
made by the company, and also give some lessons on understanding the basics of FINANCE.
1. The amount of premium should be reduced in order to cater to the lower income groups.
2. On maturity, the policy holder should receive the Fund value or the Sum Assured whichever is
higher, (as in the case of death benefit.)
3. Reduction in the charges.
4. Commission structure to be revised
5. Give a Pure traditional plan along with the ULIPs.
6. Remove the charges on surrender or partial withdrawal.
7. Increase the number of Switch options. As four is not enough.
8. Design ULIPs for meeting short term investment goals.
9. The investment style should be more aggressive.
7. Bibliography
BIBLIOGRAPHY
Books
News Paper
The Wealth
Brochures
Internet
www.irda.gov.in
www.investopedia.com
www.sebi.gov.in
www.et.com
www.kotaklifeinsurance.com
www.myinsuranceclub.com
www.bimadeal.com
www.insurance.kotak.com
www.google.com
8. Questionnaire
Institute of Management & Computer Studies, Thane Page 78
Kotak Mahindra Life Insurance
Questionnaire
Q 6) How much commission do you get from the company on ULIP policy?
Ans · 0--- 10%
· 11—20%
. 21---30%
· 31--- 40%
Q 10) Qualifications
· HSC pass
· Graduate
· Post Graduate
c) Student d) Retired
Ans) a) Yes b) No
Ans) a) Yes b) No
c) Kotak d) Others
c) Retirement d) Others
c) Average d) Poor
Ans) a) Yes b) No
9. Annexure