You are on page 1of 71

A PROJECT REPORT ON

“COMPARATIVE STUDY ON ULIPS IN THE INDIAN INSURANCE MARKET”

FOR

TATA AIG LIFE INSURANCE COMPANY LTD

BY

MISS DELNAAZ. PARVEZ. DOCTOR

MBA SEMESTER III

Project Guide

“Prof Vaishampayam”

In Partial Fulfillment of the Requirement of the


Two Year Full Time PGDM Programme
Of the
SMVIM, PUNE.

AY 2007-08
PREFACE
As an essential and obligatory part of my course, I have undergone two months summer
training at Tata AIG Life Insurance Company Ltd, Pune. This training has helped me in getting
the practical knowledge into the business environment.

I got the knowledge about the Insurance industry. In this report I have said about the current
position of the insurance sector in India.

This report includes a deep study made on the ULIPs in the insurance market and its impact on
the person’s income.

1
TABLE OF CONTENTS

S.NO. CONTENTS PAGE


NO.
1. Acknowledgement 3
2. Certificate from the company 4
5
Certificate from the college
3. Introduction 6
4. Company Profile 7-9
5. Research Methodology 10
6. Introduction to Insurance 11-17
7. About ULIPs 19-26
8.. Distinction between ULIPs & Mutual Funds 27-30
Comment on the Distinction

9. Comparative Analysis of ULIPs( Tata AIG with others) 31-43,44-


Growth & Returns 46, 47-51
Fund Performance

10 Overall Data Analysis and Findings 52


11. Understanding the working of ULIPs of TATA AIG 53-56
12. Market Survey on ULIPs of TATA AIG 57-62
13. Integrated Financial Planning for Life Insurance 63
14. Conclusion 64
15. Recommendations 65
16. Bibliography 66-67
17. Questionnaire 68-69

2
ACKNOWLEDGEMENT
It has been an immense pleasure and truly enriching experience doing my project with
TATA-AIG LIFE INSURANCE COMPANY LTD, PUNE

I take this opportunity to thank all those people who have made this experience a
memorable one..
Firstly, I would like to extend my sincere and hearty thanks to:
Mr.Parikshit Abroal (Cluster Head – Agency, Tata-AIG Life Insurance), and Mr. Nitish
Beohar (Senior Manager BA) who gave me an opportunity to associate myself with the
Tatas.

I would like to thank my guide Miss.Anamika Dikshit (Assistant Business Manager,


Tata-AIG Life Insurance) without whose help it would be difficult to complete this
project. I am very grateful to her for being a constant trainer and motivator for me for
successful completion of the project. During the course of time she has given me
valuable tips related with my project and she was more like a friend who guided me
throughout the project.
This gratitude will remain uncompleted if I won’t mention the names of other persons
Who helped me not only in my projects but also motivated me.

I would like to thank Mr. Rahul Bendre (Business Manager – Tata- AIG Life Insurance),
Mr. Kaizad S. (DCM, Kotak Mahindra Old Mutual Life Insurance Ltd.) and
Mrs.Benaifer.S (Senior Officer, Finance Control, Societe Generale Corporate and
Investment Banking) who provided me guidance and support from time to time.

Last but not the least I extend my special gratitude to The Advisors of Tata-AIG Life
Insurance Mr. Shrikant Verma, Mr. Sudhir Chavan, Mr. Dattatray.Phule and Mr.Vikram
Balwadkar who have contributed a lot in my project completion and the other advisors
who co- operated with me to carry out the market research and the library staff of
St.Miras College.

Delnaaz Doctor

3
Certificate from the Company

4
5

C
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.
Insurance is just creating a protection for you and your family.
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.
Therefore the only reasons for selecting this topic are
• To get more knowledge about insurance sector in India
• To undergo a comprehensive study of ULIPs.
• To get experienced of corporate scenario.

6
COMPANY PROFILE
Getting associated with a brand like Tata –AIG 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.

Tata- AIG LIFE Insurance Company is a joint venture between


Tata Group and American International Group (AIG.)
Let’s throw light on the facts of both the high profile and prestigious companies.

The Group: TATA-


The name trusted all over the country over the years.
For over 130 yrs The TATA name has stood for Leadership with Trust. As a
business group it has traversed 3 centuries and has emerged as India’s most
respectable corporate group.
It is a strong believer in ethics and its profits are placed in philanthropic trusts.

Some of the features of TATA are:

• Over 260,000employees
• Operates in 130 countries worldwide
• Trusted by over 3 million shareholders
• Diversified business interest ( 92 companies)
• Largest FOREX earner
• Revenues of US $ 14.25 billion
• Deep rooted commitment towards society.

7
The Group: AIG
American International Group is a leading US based international
insurance and financial services organization and the largest
underwriter of commercial and industrial insurance in the United

Some of the features of AIG are:

• In business since 1919,


• Over 80,000 employees worldwide
• Presence in over 130 countries
• Over 50 million customers worldwide
• Revenues over US $ 81.3 billion
• Ranks 4th on the FORBES 500 LIST OF 2003.
• Deals in General and life insurance, asset management, financial services.

Tata-AIG LIFE INSURANCE

It is a joint venture between TATA and AIG. It provides insurance cover for both for life
and group. It deals in all kinds of products. And now concentrates more on UNIT LINKED
PLANS.
It is Tata-AIG which consumers trust the more when it comes to giving exact claim
valuation, best in consumer satisfaction and trusted as the best in quick disposal of claims.
Its working is based on Business brought up by Business Associates who are the
advisors/agents for the company.
Areas of business
Tata AIG Life Insurance products include a broad array of life insurance coverage to both
individuals and groups. For groups, the company has life products whereas for individuals,
it has term products, endowment products as well as money-back products. For groups and
individuals, various types of add-ons and options are available to give consumers
flexibility and choice. The company has also designed specific products for the financially
challenged and underprivileged.

8
Some of the features are:
• 74% Stake of TATAs and 26% of AIG
• Licensed to operate on February 12, 2001
• Has over 190 branches and planning to increase the number to 120 plus by August
2007 , and 300 plus by November 2008.
• Over 5 lac + policy holders.

Tata AIG is all set to scale greater heights and has arrived at a vision of making it
A BILLION DOLLAR COMPANY BY 2009

A glimpse at the Joint Venture

AIG (26%)
TATA (74%) Martin J. Sullivan
Ratan Tata President & Chairman
Chairman CEO

Tata- AIG INSURANCE


Farrokh K Kavarana
Chairman

Tata-AIG LIFE Tata-AIG GENERAL


INSURANCE INSURANCE
Trevor Bull Dalip Verma
Managing Director Managing Director

9
RESEARCH METHODOLOGY
• Research design –descriptive
• Data sources- primary data and secondary data
• Research approach – face to face interview, observation, individual depth interview
• Research instrument –questionnaire.

Data Collection:

Primary Data:
1) Use of a Questionnaire for carrying out a survey
2) Presentation given by the Advisors of Tata AIG life.
3) Data explaining the working of the ULIPs.

Secondary Data:
1) Books
2) Newspapers
3) Magazines
4) Newsletter
5) Internet
6) Television
7) Booklet
8) Policy Brochures

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.

The project contains various graphs, tables and questionnaire to further.


elaborate on the explanations.

10
INTRODUCTION TO 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.

The future is never certain .


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.
&
ge on
rria ati

We
ma educ

a lt h
cre
’s
en

atio
ildr

n
Ch

Dying too soon Living too long


Living death

Life
Life insurance
insurance –– the
the only
only instrument
instrument that
that takes
takes care
care of
of
these
these 33 probabilities
probabilities and
and 22 priorities
priorities

11
ii) Benefits:

1) SAVINGS
For unforeseen circumstances.

2) EDUCATION
For child’s education and for higher studies.

3) RETIREMENT
Facilitates adequate savings for worry free retired life.
iii) Insurance ------------a Flash back:

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 18 th 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.

12
IV) INSURANCE CLASSIFICATION

Life
Term
Endowment
Unit-linked
Money-back

V) INSURANCE INDUSTRY POTENTIAL

1) Asia is amongst the world’s largest insurance markets contributing nearly 39% of global
insurance business.

2)The Life Insurance Industry has grown by 27% p.a. over the last 5 years and by about 62%
in the first eleven months of 2006 -07.
Source – IRDA Journal (April 2007)

3) Global Life Insurance Market: $1,521 billion, Global Non-Life Insurance Market: $922
billion

4) India is 23rd in insurance business with 0.41% share

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 1.8%

7) Indian insurance market is set to touch $50 billion by 2010, on the assumption of a 7%
growth in GDP
(CII Projections 2001-2002)

8) The Insurance premium as a % of GDP in 2005 increased to 3.14% and is set to touch
4.3% in 2008.
(Source – Lifeline 26th Dec 2006)

13
Growth Rate of Insurance sector
• Public Sector: 5.5%
• Private Sector: 57.4%

Indian Insurance is growing at the rate of 80%.

LIFE INSURANCE COMPANIES IN INDIA

1.Life Insurance Corporation of India

Private Players
2. Tata AIG Life Insurance Company Ltd
3. Kotak Mahindra Old Mutual Life Insurance Ltd
4. Birla Sun Life Insurance
5. ICICI Prudential Life Insurance
6. Aviva Life Insurance
7. Allianz Bajaj
8. Max New York Life Insurance
9. Bharti Axa Life Insurance
10. SBI Life Insurance
11. Reliance Life Insurance
12. ING Vysya Life Insurance
13. Sahara India Life Insurance
14. HDFC Standard Life Insurance
15. Shriram Group

14
MARKET SHARE FOR 5 YEARS.

2001-02 2002-03 2003-04 2004-05 2005-06

LIC 98% 94% 87% 78% 71%

Private 2% 6% 13% 22% 29%


Player

MARKET SHARE OF INDIAN INSURANCE PLAYERS

Market Share of public sector and Private sector Insurance Companies for 2006-07

market share
LIC PRIVATE

PRIVATE
26%

LIC
74%

15
MARKET SHARE OF PRIVATE INSURANCE COMPANIES 2006-07

ICICI Prudential life


1.22% Aviva Life
0.01% Tata AIG Life
3.40% 6.97% Reliance Life
Kotak Mahindra
0.06%
Birla Sun Life
2.15%
ING Vysya Life
0.24% Met Life
0.96%
Bajaj Allianz Life
0.85%
Shriram Life
5.66% HDFC Standard Life.
4% sahara Life
0.46%
0.82% SBI Life
0.62% Bharati AXA life
1.17%
Max New York

Source: ESCOLIFE (Insurance newspaper by Ritu Nanda, June 2007)


Thus we can say that LIC has the highest market share of 74% (public sector) and ICICI Life
Insurance has a highest market share of 6.97%(private sector)

16
COMPETITOR’S COMPARISION

LIC ranks 1st (public sector) in case of the premiums followed by ICICI PRU in the
private
Sector whereas Tata AIG Ranks 10th.

17
Comparative Study on
ULIPS
In the Indian Insurance
Market

18
CHAPTER 1

ABOUT UNIT LINKED INSURANCE PLANS

1.1) 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.

19
1.2) 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.

According to Vijay Sinha, Asst Director Agency, Tata – AIG LIFE Insurance,

“ULIPs is ideal for some one who is looking for a long term investment product, is
under insured and is averse to taking a traditional life plan. ULIP should be looked at
from both an investment as well as insurance point of view and not in isolation.”

Today many individuals are adding ULIPs to their portfolios to generate wealth.
and protection over a long time.

20
1.3 ) ULIPS VERSUS ENDOWMENT
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:
Endowment plans invest in
• Government Securities
• Corporate bonds
• Money market instruments
( no investment in the stock market)

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.

21
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 wont 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.

22
1.4) ULIPS AND YOU
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.

1.4.1) If you are between 25 –35 years of age

ULIPs help you to save for your child’s education, marriage, planning for your retirement and
providing for your family in case of your absence.

ULIPs Child plan ------------- --------for your child’s education, marriage.

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.

1.4.2) If you are between 35 –45 years of age

If you haven’t invested in ULIPs, it is not too late even now.


You can opt for some ULIPs as mentioned earlier. Remember ,unlike Endowment
,which gets really expensive at an advanced age, ULIPs because of the way they are , do not
turn out to be expensive.

1.4.3) If you are above 45 years of age


In this age bracket, you have to review your insurance cover, taking into consideration
the changes of your life style, income needs, etc. By this time your ULIP pension plan must
have matured, so now you can opt for an Annuity (immediate or deferred) depending on your
need.

23
1.5) EXPENSES IN ULIPs

Following expenses have to be incurred for ULIPs:

a) Mortality charges: charged by the company to cover the risk of an eventuality to an


individual.

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.

f) Cancellation/ Surrender charges: It is charged when an individual wishes to surrender


his ULIP policy.

24
1.6) HOW ULIPS MANAGE MONEY

ULIPs are different from traditional plans.


They invest their monies in Shares, bonds, G-secs, money market instruments in
varied proportions.
Insurance companies usually maintain 4 types of funds.

Growth Fund: 100% equity


Balanced Fund: 60% equity, 40% debt.
Debt Fund: 100% debt.
Money Market Funds 100% MM instruments for a period of one
year

Equity

RISKS
Balance
d
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.

25
1.7) STEPS FOR ULIP SELECTION

• Understand what ULIPs are all about.


• Focus on your need and risk profile
• Compare ULIP products from various insurance companies
• Go for an experienced Insurance advisor

It is estimated that India’s economy will become the 3rd largest economy within a few
yrs, 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.

26
CHAPTER 2

DIFFERENCE BETWEEN ULIPS & MUTUAL FUNDS:-


Points of Difference ULIPS(Unit Linked Insurance Plans) MFs(Mutual Funds)
1) Meaning :-
These are the Insurance policies which are linked to units It is an investment organization with a main
of Mutual Fund. objective of collecting funds from various segments
of people and investing the same in a variety of
securities.

2) Primary Objective :- Its main objective is investment & protection Its objective is only investments.

3) Investment Duration:- It works out for long term investment only . It works out to medium term, long term, & short
term. Risky for short term investors.

4) Insurance Cover :- ULIPs provide insurance cover (except annuity products


which may be issued with/ without risk cover) and from MF schemes do not cover the life risk and the amount
the amount invested in ULIPs after netting out the risk invested, net of expenses, gets invested as per the
premium for life risk cover and administrative expenses, investment objective of the scheme.
the insurer invests the balance as per the objective of the
specific ULIP product.

5) Expenses :- Insurance companies have a relatively free hand in In MFs, expenses charged for various activities like
levying expenses on their ULIP products with no upper sales/marketing, administration and fund
limits being prescribed by the regulator, the Insurance management are capped (for example in equity-
Regulatory and Development Authority (IRDA) oriented mutual funds, expenses are capped at 2.5%

27
per annum) as per the guidelines of the Securities and
Exchange Board of India (SEBI). Similarly funds
usually charge their investors entry (at the timing of
making an investment) and exit (at the time of sale)
loads.

6) Flexibility :- Flexibility is limited to moving across different funds Very flexible. Plenty of scope to correct mistakes if
offered with policy. Correcting mistakes can turn out to any wrong investment decisions are made. Portfolios
be expensive. Moving funds from one ULIP to another can be easily shuffled in MFs.
ULIP of a different fund house can be expensive.

7) Liquidity :- Limited liquidity .It need to stay invested for minimum Very liquid. MF units can be sold any time(except
years before redeeming. ELSS).

8) Investment Objective ULIPs can be used for achieving only long term MFs can be used as vehicle for investments to
:- objectives (Children education, marriage, Retirement achieve different objectives.(E.g.: Buying a car three
planning). years from now. Down payment for a home five
years from now. Children’s education 10 years from
now. Children’s marriage 15 years from now.
Retirement planning 25 years from now. Medical
expenses after retirement 25 years from now).

9) Flexibility of Switch- Insurance companies permit their ULIP investors In MFs an investor usually is subjected to exit load
overs :- usually 3-4 switch overs free of charge and thereafter and/or entry load when he/she exercises a switch over
every additional switch over beyond the permissible limit option.
is permitted at some cost.

10) Minimum Lock- in ULIPs currently are with a minimum lock-in of three MF schemes (except ELSS which has a lock-in of
Period years. three years) do not have any such lock in.

28
11) Investment styles Insurance companies declare their portfolios once in a Most MFs usually declare their portfolios on monthly
and Portfolio quarter and their investment style are less aggressive and basis and MFs are generally known to be more active
they resort to less churning. in fund management
Disclosures :-
12) Tax benefits and Irrespective of the nature of the plan chosen by the In the case of mutual funds, only investments in tax-
implications :- investor, all ULIP investments qualify for deductions up saving funds i.e Equity-linked savings schemes
to one lakh under Section 80C of the Income Tax Act. In (ELSS) are eligible for Section 80C benefits
the case of ULIPs the maturity proceeds are tax-free.
On the other hand, in the case of equity-oriented
mutual funds, if the investments are held for a period
over 12 months, the gains are tax free and if sold
within a 12-month period they attract short-term
capital gains tax @ 10 percent.
Similarly, debt-oriented funds attract long-term
capital gains tax @ 10 percent while short-term
capital gain is taxed at the investor’s marginal tax
rate.

29
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 cannibalise 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.
CHAPTER 3
COMPARATIVE ANALYSIS OF ULIPS
This chapter covers the comparison of ULIPs of 4 Insurance companies, how much growth
the fund has showed since its
Inception, returns for a period of one month compared with the market and tracking of the
NAVs for a period of one month.

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 of 4 top performing insurance are taken for comparison.

1) TATA-AIG--------------------- Invest Assure II

2) ICICI PRUDENTIAL--------- Life Time Super

3) RELIANCE LIFE ------------- Automatic Investment Plan

4) LIC-------------------------------- Market Plus

Besides these TATA –AIG also provides some other ULIPs which are as follows:
• Invest Assure Gold
• Invest Assure Plus
• Invest Assure

31
Tata – AIG Life Insurance ICICI Prudential Reliance Life Life Insurance
Company Corporation
(Invest Assure II) (Life Time Super) (Automatic Investment Plan) (Market Plus)

1) Policy objective :-
It is a unique, flexible insurance A regular unit linked insurance The plan promises enhanced life The unique plan promises a safe
plan which combines security of policy that offers flexible cover with complete flexibility to and a tension free life along
life with the opportunity to exploit investment options along with the gain control over your with a good amount of wealth
the upside of the market returns by benefit of life insurance cover, investments in tune with your creation.
investing in different kinds of and an opportunity to earn financial needs and your risk
securities through multiple fund potentially higher returns on your appetite.
options. investment without sacrificing
the protection of your family.

2) Eligilibility Criteria
(Minimum, Maximum age at
entry):-
Min age= 30 days Min age= 0 Min age= 0 Min age= 18 years complete
Max age= 45,55,65 years Max age= 65 years Max age= 65 years Max age= 70 years (age nearer
birthday)

3) Policy term :-
15, 20, 30 years 10- 75 years 40- 75 years 5-30 years

4) Premium (Minimum):-

32
Rs 12000 pa Rs 18,000 pa Rs. 10000 pa Rs 5000 pa

5) Mode of Premium
Payment:-
Annually, half yearly, quarterly, Annually, half yearly, monthly. Annually, half yearly, quarterly, Annually, half yearly, quarterly.
monthly. monthly

6) Sum Assured (Minimum,


Maximum):-
It is the multiple of annual regular Min: Annual Premium* Term/2, Min: Annualized premium for 5 Min: Rs 50000 for regular
premium payable. subject to a min of Rs.100, 000. yrs or annualized for half of the premium
policy term, whichever is the Max: 20 times of the annualized
highest. premium.
Max: no limit
7) Benefits :-
Maturity: Total Fund Value + Top Maturity: Total Fund Value + Maturity: Total Fund Value + Maturity: Total Fund Value +
up if any. Top up if any. Top up if any. Top up if any.
Death: Fund Value or Sum assured Death: Fund Value or Sum Death: Fund Value or Sum Death: Fund Value or Sum
whichever is higher assured whichever is higher assured whichever is higher assured whichever is higher
Sum Assured is a multiple of
regular premium payable.

8)Riders :-
Accidental Death Benefit Accident & Disability Benefit Accident Death & Accidental Accident Benefit.
Accidental Death & Critical Illness Total & Permanent Disablement
Dismemberment Waiver of premium benefit.

33
Waiver of premium Term life insurance benefit
Payor Benefit
Critical Illness

9) Fund options :-
Option of choosing from 5 funds or We offer you 6 investment funds. Tailor made and Readymade Growth Fund: Debt (0-40%)
a combination of them. funds. Equity (60-80%)
Equity fund: Equity shares.(100%) Flexi Growth: Equity & Related Tailor Made:
Securities Debt, Money Market Money Market (100%) Balanced Fund: Debt (0-70%)
Income fund: Government Bonds & Cash (80-100%). Gilt (100%) Equity (30-50%)
& Fixed Income Instruments. . Corporate (100%)
(100%) Maximiser: Equity & Equity Equity ( 100%) Secured Fund: Debt (0-85%)
Related Securities Debt, Money Equity (15-35)
Aggressive growth fund: Equity Market & Cash (25%-100%) Readymade:
(50-80%), Government Bonds (20- Fund A Bond Fund: Debt (100%)
50%). Flexi Balanced: Equity & Fund B Equity (0%)
Related Securities Debt, Money Fund C
Stable Growth Fund: Government Market & Cash (60-100%)
Bonds (50-70%), Equity (30-50%)
Balancer: Equity & Equity
Short Term Fixed Income Fund: Related Securities Debt, Money
Government securities & Fixed Market & Cash (40-100%)
Income Instruments (100%),
Money Market Instruments (20%). Protector: Debt, Money Market
& Cash (100%)

34
Preserver: Debt, Money Market
& Cash (50-100%)

10) Surrender option/ partial


withdrawal option :-
Allowed only after 3 years form the Allowed only after 3 years form Allowed only after 3 years form Allowed only after 3 years form
date of issuance of the policy. the date of issuance of the policy the date of issuance of the policy the date of issuance of the
and on payment of full 3 yrs and on payment of full 3 yrs policy and on payment of full 3
Surrender charges are a percentage premium premium yrs premium.
of regular premiums—Fund value. .
Partial withdrawal can be done The surrender value or the partial
Charge Applicable for 6 yrs---20 or up to min of Rs 2000. withdrawal value is equal to the
30 yr policy Fund value.
Charge Applicable for 5 yrs----15
yr policy

Surrender & partial withdrawal Partial withdrawal facility is not


available Surrender & partial withdrawal Surrender & partial withdrawal available.
available available
Min of up to 4 partial withdrawals
available.

11) Reinstatement/ Revival :-


In case the policy lapses, you can If full premium for the first 3 You may revive the policy A lapsed policy can be revived
reinstate it within 5 years from the policy years is not paid, the within 3 years from the 1st within 2 years fro the date of
date of lapse. If you are unable to policy lapses. unpaid premium. the first unpaid premium. Or
reinstate the policy within 5 years, Therefore the policy has to be If not revived, then the policy gets surrendered.

35
then the policy will be surrendered. revived within a period of 2 will be terminated.. And the
years, if not then the policy will policy will be surrendered.
In case of lapse, only the Fund be surrendered.
Value will be given on death. (no
SA) In case of lapse, only the Fund
Value will be given. (no SA)

12) Premium Holiday:-


After completion of 3 years of the This option is available here, The policy brochure has no The policy brochure has no
policy, if you are unable to pay the which ensures that your life mention of premium holiday mention of premium holiday.
premium within the grace period, insurance cover continues incase
then a Premium Holiday facility is you are unable to pay the
given with a charge of 3% of the premium, after completion of 3
regular premium. years of the policy.
The option here is called A Cover
Continuance option.

13) Free look Period :-


The policy can be cancelled within The policy can be cancelled The policy can be cancelled The policy can be cancelled
a free look period of 15 days form within a free look period of 15 within a free look period of 15 within a free look period of 15
the date of receipt of the policy. days form the date of receipt of days form the date of receipt of days form the date of receipt
The market value of the invested the policy the policy. The market value of of the policy
premiums along with the charges the invested premiums along with
paid will be refunded after making the charges paid will be refunded
some nominal deductions. after making some nominal
deductions

36
14) Grace Period: -
Here the grace period provided is Nothing is mentioned about the For regular premiums the grace Nothing is mentioned about the
for 31 days. grace period in the policy period is for 30 days, grace period in the policy
brochure. For monthly premiums grace brochure.
period is for 15 days

15) Settlement Benefits :-


You have the option to receive your On maturity of the policy, you You have the option to receive
maturity benefit either in lumpsum can choose to take the fund value. your maturity benefit either in
or in the from of periodical lumpsum or in the from of
payments over period of time. You can opt to get payments on periodical payments over period
This period will not exceed 5 years yearly, half yearly, quarterly or of time . This period will not
from the maturity date. monthly (through ECS) basis, for exceed 5 years from the maturity
a period of 1,2,3,4 or 5 yrs, post date.
maturity.
At any time during settlement
period, you have the option to
withdraw the remaining fund
value.
16) Premium Redirection: -
Re direction of all the future No benefit Re direction of all the future No benefit
premiums under a policy, in an premiums under a policy, in an
alternative proportion to the various alternative proportion to the
Fund units is available various Fund units is available.

37
17)Top Up premium:-
Minimum top up amount is Rs Amount not mentioned. Minimum top up amount is Rs Minimum top up amount is Rs
10,000 2500 1000.

18) Tax Benefits:-


Premiums paid under the policy are Premiums paid under the policy Premiums paid under the policy Premiums paid under the policy
eligible for tax benefit u/s 80C of are eligible for tax benefit u/s are eligible for tax benefit u/s are eligible for tax benefit u/s
the Income Tax Act, 1961. 80C of the Income Tax Act, 80C of the Income Tax Act, 80C of the Income Tax Act.
Life insurance proceeds are tax free 1961. 1961. Life insurance proceeds are tax
u/s 10(10D). Life insurance proceeds are tax Life insurance proceeds are tax free u/s 10(10D).
free u/s 10(10D) free u/s 10(10D).

38
19)CHARGES
Most of the life insurance companies incur certain charges which are as follows:

a) MORTALITY CHARGES
b) FUND MANAGEMENT CHARGES
c) SWITCH OVER CHARGES
d) POLICY ADMINISTRATION CHARGES

A GRAPHICAL REPRESENTATION WILL MAKE THE CHARGES


UNDERSTANDABLE AND EASY TO COMPARE

39
a) MORTALITY CHARGES

MORTALITY CHARGES (Rs)


AGE Tata AIG ICICI Reliance(Automatic
( Invest Assure II) (Life Time Super) Investment Plan)
20yrs 1.05 1.33 1.117
30yrs 1.17 1.46 1.287
40yrs 2.15 2.48 2.36
50yrs 5.53 5.91 6.085

MORTALITY CHARGES

20
18

16
14
RATES (RS)

12 Reliance
10 ICICI
8 Tata AIG

6
4
2
0
20yrs 30yrs 40yrs 50yrs
AGE

Interpretation:
The mortality charges of Reliance (Automatic Investment Plan) are the highest whereas The
charges of Tata AIG (Invest Assure II) is the least.

40
b) FUND MANAGEMENT CHARGES
(Only for Equity Fund)

FMC (pa) FOR EQUITY FUND ONLY


Tata AIG ( Invest Assure II) 1.75%

ICICI (Life Time Super) 2.25%

Reliance (Automatic Investment 1.50%


Plan)

LIC (Market Plus) 1.50%

FMC CHARGES

2.50%
2.25%

2.00%
1.75%

1.50% 1.50%
RATES % pa

1.50%

CHARGES

1.00%

0.50%

0.00%
Tata AIG ICICI Reliance LIC
COMPANY

Interpretation:
ICICI have the highest FMC whereas Charges of Tata AIG are comparatively
higher than the other two.

41
c) SWITCH OVER CHARGES
Tata AIG ( Invest ICICI (Life Time Reliance LIC (Market Plus)
Assure II) Super) (Automatic
Investment Plan)

The first 4 switches The first 4 switches The first 25 The first 4 switches
per policy will be per policy will be switches per policy per policy will be
free. free. will be free. free.

Charge (Rs)
Tata AIG ( Invest Assure II) 250

ICICI (Life Time Super) 2000

Reliance (Automatic Investment Plan) 100

LIC (Market Plus) 100

SWITCH OVER CHARGES

100 100 250

Tata AIG
ICICI
Reliance
LIC

2000

Interpretation: Even in this case ICICI has got the highest switch over charge, whereas charge
of
Tata AIG are comparatively than the other two. Over here Reliance proves to be superior as it
provides 52 switches free as compared to just 4 switches offered by others and its charges are
. also less

42
d) POLICY ADMINISTRATION CHARGES
Charges( Rs /month)
Tata AIG ( Invest Assure II) 38

ICICI (Life Time Super) ---

Reliance (Automatic Investment Plan) 40

LIC (Market Plus) 20

POLICY ADMINISTRATION CHARGES per month


(RS)

60
60
50
38 40
40
RATES 30
20 CHARGES per month

10
0
Tata AIG Reliance LIC
COMPANY

Interpretation: In this case charges of Tata AIG are higher than LIC but lower than Reliance.

43
GROWTH & RETURNS

THE GROWTH RATE OF ULIPS


THE NAVs taken over here only belong to The Equity Fund of the
Policies. (No other fund taken into consideration)

Growth rate of ULIPs (Equity Fund) of the 4 Insurance companies


Date of NAV as on NAV as on Increase Growth %
Inception inception July,20
Rs 2007 Rs
Tata AIG ( 24 Jan, 2004 10 30.45 20.45 204.5
Invest Assure
II)

ICICI (Life 16 Nov,2001 10 53.32 43.32 433.2


Time Super)

Reliance 28 May,2007 10 10.98 0.98 9.8


(Automatic
Investment
Plan)

LIC (Market 5 July, 2006 10 11.89 1.89 18.9


Plus)

From the tabular compilation, it can be observed that the Equity Fund of the policies has
performed very well over the years.

In case of Tata AIG--------the Equity Fund has grown up to 204.5% in 3 years from the
date of inception.

In case of ICICI--------the Equity Fund has grown up to 433.2% in 5 years from the date of
inception.

Also Reliance Equity Fund has increased to 9.8% in a short span of 2mths.

LIC has also done a good job with a growth up to 18.9% in 1 year.

44
COMPARISON OF RETURNS

RETURNS OF Tata AIG Equity Fund, ICICI equity fund, Reliance equity fund,
LIC equity fund,

V/s

BSE SENSEX & NSE NIFTY.

PERIOD OF 1 MONTH FROM JUNE 20, 2007 TO JULY 20, 2007

Particulars From To Increase Return Rank


By %
Tata AIG Equity Fund 28.25 30.45 2.20 7.79 4

ICICI Equity Fund 48.43 53.32 4.89 10


1
Reliance Equity Fund 10.14 10.98 0.84 8.2 2
LIC Equity Fund 11.25 11.89 0.64 5.6 6

BSE SENSEX 14411.95 15565.55 1153.55 8 3

NSE NIFTY 4248.65 4566.05 317.4 7.4 5

45
RETURNS

12.00% 10%
10.00% 7.79% 8.20% 8% 7.40%
8.00%
RATES

5.60%
6.00%
4.00%
2.00%
0.00% nd

Y
nd
nd

X
nd

T
SE
Fu

Fu
Fu

IF
Fu

N
N
it y

ty
ity

ty

SE

E
ui
qu

ui
u

NS
Eq
Eq

Eq

E
IE

BS
C
G

IC

e
nc

LI
AI

IC

ia
ta

l
Re
Ta

ICICI Equity Fund has outperformed all others giving the highest returns, followed
by Reliance.

Tata AIG Equity Fund has marginally outperformed NIFTY.


Also it is very close to SENSEX..

LIC Equity Fund has given the least returns.

46
FUND PERFORMANCE
(Only of Equity Fund)
Period: 1month

From 20th June, 2007--------20th July, 2007

NAVs of the Equity Fund (Rs)

Tata AIG (Invest ICICI (Life Reliance LIC (


Assure II) Time Super) (Automatic Market
Investment Plan) Plus)

20-Jun 28.24 48.43 10.14 11.25


21-Jun 28.49 48.44 10.15 11.26
22-Jun 28.49 48.75 10.13 11.13
25-Jun 28.61 48.85 10.15 11.35
26-Jun 28.77 48.95 10.22 11.45
27-Jun 28.62 48.66 10.21 11.3
28-Jun 28.841 48.45 10.27 11.31
29-Jun 29.13 48.33 10.33 11.39
30-Jun 29.14 49.1 10.34 11.4
2-Jul 29.39 50.52 10.38 11.45
3-Jul 29.57 50.25 10.48 11.46
4-Jul 29.54 50.49 10.54 11.52
5-Jul 29.53 50.45 10.53 11.57
6-Jul 29.69 51 10.63 11.59
9-Jul 29.89 51.47 10.73 11.64
10-Jul 29.65 51.22 10.72 11.64
11-Jul 29.59 51.5 10.69 11.65
12-Jul 30 52 10.83 11.72
13-Jul 30.34 52.6 10.93 11.73
16-Jul 30.26 52.3 10.94 11.81
17-Jul 30.65 52.45 10.87 11.82
18-Jul 30.94 52.39 10.85 11.85
19-Jul 30.34 53.21 11.5 11.93
20-Jul 30.45 53.32 10.98 11.89

47
N A V (R S )
6 /2

0
10
20
30
40
50
60
0/
6 /2 2 0 0 7
2/
6 /2 2 0 0 7
4/
6 /2 2 0 0 7
6/
6 /2 2 0 0 7
8/
6 /3 2 0 0 7
0 /2
7/2 0 0 7
/2
7/4 0 07
/2
7/6 0 07
/2
7/8 0 07
/
7 /1 2 0 0 7
0 /2

1 MONTH (20JUNE--20JULY)
7 /1 0 0 7
2/
7 /1 2 0 0 7
4/
7 /1 2 0 0 7
FUND PERFORMANCE

6/
7 /1 2 0 0 7
8/
GRAFICALLY.

7 /2 2 0 0 7
0 /2
00
7
LIC ( Market Plus)
ICICI (Life Time Super)
Tata AIG (Invest Assure II)
CONSOLIDATED FUND PERFORMANCE SHOWN

Reliance (Automatic Investment Plan)

48
NAV RS
6 /2

26.5
27
27.5
28
28.5
29
29.5
30
30.5
31
31.5
0 /2
6 /2 0 0 7
2 /2
6 /2 0 0 7
4 /2
6 /2 0 0 7
6 /2

Super
6 /2 0 0 7
8 /2
6 /3 0 0 7
0 /2
7 /2 0 0 7
/2 0
7 /4 0 7

TATA AIG
/2 0
7 /6 0 7
/2 0

Invest Assure

DATES
7 /8 0 7
/2
7 /1 0 0 7
0 /2
7 /1 0 0 7
2/

Tata AIG (Invest Assure II)


7 /1 2 0 0 7
4 /2
7 /1 0 0 7
6/
7 /1 2 0 0 7
8 /2
7 /2 0 0 7
0 /2
00
7

Tata AIG (Invest Assure II)


nav R s
6 /2

45
46
47
48
49
50
51
52
53
54

0 /2
6 /2 0 0 7
2 /2
6 /2 0 0 7
4 /2
6 /2 0 0 7
6 /2
6 /2 0 0 7
8 /2
6 /3 0 0 7
0 /2
7 /2 0 0 7
/2 0
7 /4 0 7
/2 0
7 /6 0 7
/2

Dates
7 /8 0 0 7
/2
7 /1 0 0 7
0 /2
7 /1 0 0 7
ICICI (Life Time Super)

2/
7 /1 2 0 0 7
4 /2
7 /1 0 0 7
6 /2
INDIVIDUAL EQUITY FUND PERFORMANCE

7 /1 0 0 7
8 /2
ICICI

7 /2 0 0 7
0 /2
00
7
Life Time

49
ICICI (Life Time Super)
nav R s
6 /2

9
9.5
10
10.5
11
11.5
12
0
6 /2 /2 0 0 7
2
6 /2 /2 0 0 7
4
6 /2 /2 0 0 7
6
6 /2 /2 0 0 7
8 Plus
6 /3 /2 0 0
0/ 7
7 /22 0 0 7
/2
RELIANCE

7 /4 0 0 7
/2
7 /6 0 0 7
/2

Dates
7 /8 0 0 7
7 /1 /2 0 0 7
0
7 /1 /2 0 0
2 7
7 /1 /2 0 0 7
4
7 /1 /2 0 0 7
6
7 /1 /2 0 0 7
Reliance (Automatic Investment Plan)

8
7 /2 /2 0 0 7
Automatic Investment Plan

0 /2
00
7

Reliance (Automatic Investment Plan)

N av R s
6/2

10.6
10.8
11
11.2
11.4
11.6
11.8
12

0 /2
6/2 00
2 /2 7
6/2 00 7
4 /2
6/2 00 7
6 /2
6/2 00 7
8 /2
6/3 00 7
0 /2
0
7 /2 0 7
/2 0
7 /4 0 7
/2 0
7 /6 0 7

Dates
/2 0
7 /8 0 7
/2
7/1 007
LIC ( Market Plus)

0 /2
7/1 00 7
LIC

2 /2
7/1 00 7
Market

4 /2
7/1 00 7
6 /2
7/1 00 7

50
8 /2
7/2 00 7
0 /2
00
7
LIC ( Market Plus)
From the above graphs, it can be seen that the NAV of Reliance Automatic Investment plan
is fluctuating less as compared to the others.

NAV of ICICI Life Time Super has fluctuated more as compared to the others.
Tata AIG has moderate NAV Fluctuations

It has been observed that the lesser the fluctuations in the NAV, the better it is
for the fund.

But the good thing is that all the NAVs are on a rising trend. which indicates the
strength of the Equity Fund.

Thus as far as NAV consistency is concerned, investing in Reliance Equity Fund can be a
Prudent decision.

It is expected that the NAVs will rise in the future, promising good returns for the
Investors.

51
OVERALL DATA ANALYSIS & FINDINGS
This analysis is done by giving ranks to all the policies taking into consideration the
following criteria
(1= excellent, 2=good, 3=fair, 4=average)
In the end, whichever fund has the least score will be the best buy
CRITERIA TATA ICICI RELIANCE LIC
AIG
Amount of Premium 3 4 2 1
Mode of premium payment 1 2 1 2
Revival of the Policy 1 3 2 3
Amount of Top up premium 1 Not given 2 3
Oldest policy 2 1 4 3
Policies issued 4 2 3 1
Premiums collected 4 2 3 1
Mortality charges 1 2 3 Not given
FMC 2 3 1 1
Policy Administration charges 2 Not given 3 1
Switch over charges 2 3 1 1
Fund performance 2 1 3 4
Returns 3 1 2 4
Market share 4 2 3 1
TOTAL SCORES 32 26 34 26

From the above analysis it can be said that, ICICI and LIC have scored the least.
Therefore a person can either buy a ULIP form ICICI or from LIC.

52
CHAPTER 4:- UNDERSTANDING THE WORKING OF ULIPS of Tata AIG
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.
Harder than you.

SAMPLE SALES ILLUSTRATION OF INVEST ASSURE II (TATA AIG LIFE)


Name of the proposed insured: Miss Dimple Solanki Proposal no. : 1577

Age of the proposed insured : 23 yrs Date : 15/7/07

Name of the policy holder : Miss Dimple Solanki Currency : Rupees

Age of the policyholder : 23 yrs Payment Mode : Annual

Insurance plan Benefit Premium Premium Annual Modal Sum Additional Fund
period Paying multiple premium premium Assured coverage
period (SA)

Invest Assure II 30 yrs 30yrs 22.50 12000 12000 270000 270000 Equity
100%

53
Note : 1)SA is the multiple of annual premium: 12000*22.50= 270,000
2) Additional coverage given as Accident Death Benefit Rider taken by the policy holder.
3) Investment in Equity is 100%.

Invest assure II 30 YEAR POLICY

Min Return on units=10%( non guaranteed)


CHARGES: Balance invested in the Equity fund

1st year= 50% of premium 50%


2nd year= 25% of premium 75%
3rd year= 1 %of premium 99%

YEAR 1 YEAR 2 YEAR 3


12000 premium
12000 premium 12000 premium

1% 99%= Rs 11880
50% 50%= Rs 6000 25% 75% = Rs 9000 Return= Rs 1188
Return =Rs 600 Return= Rs 900 Total = Rs 13068
Total =Rs 6600 Total = Rs 9900

NAV =RS 10 NAV=RS. 20 NAV =RS 30

No. of units =Rs 6600/10= 660units (6600+9900)=Rs16500 (16500+13068)=Rs 29568

No. of units = Rs16500/ 20= 825 units No of units= Rs 29568/ 30=986 units

54
TOTAL UNITS IN HAND: 660+825+986=2471 UNITS AFTER 3 YEARS.
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 29568. NAV was Rs 30. So the no. of Units was 986.
Now if the NAV Falls to Rs 20. Then the no. of Units would have been 1479.

55
Therefore the rising trend of NAV is not always a good sign, as your
no of units decrease.

Therefore if Miss Dimple Solanki continues with her policy for 30 years ,
she will get a

• Maturity benefit = existing Fund Value which is the sum of the


regular premium fund value

• On death = SA Rs 270000 or NAV whichever is higher

• On Death due to Accident= Double the SA.

56
CHAPTER 7
MARKET SURVEY

A questionnaire was prepared, wherein 10 advisors of Tata AIG 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.

Questionnaire for Advisors of Tata AIG


Q 1) What type or class of customers visits your office?
a. salaried
b. housewives
c. self employed
d. retired
e. pensioner

pensi oner , 0%

self employ ed, Salar ied


40% house wif e
Salar ied, 50%
sel f employed
pensi oner

house wif e, 10%

57
Q 2) Which policies the client opts for?
a. Traditional
b. ULIPS

100% 90%
90%
80%
70%
60%
50%
40%
30%
20% 10%
10%
0%
Traditional ULIPs

Schemes

Q 3) Are ULIP schemes popular?


a. yes
b. no
c. can’t say

CAN'T
SAY, 0%
NO, 30%
YES
NO
CAN'T SAY
YES, 70%

58
Q 4) Are the clients aware of ULIP schemes?
a. less than 10%
b. 10% --- 30%
c. 30%---- 60%
d. Above 60%

0%
20%
30%
Less Than 10%
10%- 30%
30%- 60%
60%& above

50%

Q 5) Out of ten , how many


clients opt for ULIP ?
ANS) On an average 6 clients out 60%
of 10 opt for ULIPs. 50%
50%

40%

Q 6) How much commission do 30%


20% 20%
you get from the company on
20%
ULIP policy? 10%
a. 0--- 10% 10%

b. 11—20%
0%
c. 21---30% 0-10% 11%-20% 21%-30% 31%-40%
d. 31--- 40%
C o mmissio n

59
Q 7) How many clients have the background of finance?
a.10—20%
b.20—40%
c. 40% & above

10%-
0%
20%
40% 20%-
60% 40%
40%-
above

Q8 ) Mode of payment of premium.


a. cheque
b. Demand Draft
c. Cash

demand draft,
0%
cash, 0%

cheque
demand draft
cash

cheque, 100%

60
Q9) What is the better positioning for ULIP?
a. as a tax saving plan
b. as a retirement plan
c. as a child education plan
d. as a security cum profitable plan.

80%
70%
70%
60%
50%
40%
30%
20%
20%
10%
10%
0%
0%
as a tax saving as a retirement as a child as a security
plan plan education plan cum profitable
plan

Q 10) Qualifications
a. HSC pass
b. Graduate c.MBA
60%
50%
50%

40%
30%
30%
20%
20%

10%

0%
HSC Graduate MBA

61
Q 11) How is ULIP different from the other policies?

Please refer to pg 21 “ULIPs v/s Endowment.”

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
given to him 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.

62
CHAPTER 8

Integrated Financial Planning for Life Insurance


Starting a job, Recently Married, Kids going Higher studies Children
Single married, no with kids to school, for child, independent,
individual kids college marriage nearing the
golden years
Your Need Low protection, Reasonable Higher Higher Lump sum Safe
high asset protection, protection, Protection, money for accumulation
creation and still high on still high on high on education, for the golden
accumulation asset asset creation asset marriage. yrs.Considera
creation but steadier creation but Facility to stop bly lower life
options, steadier premium for 2- insurance as
increase options, 3 yrs for these the
savings for liquidity for extra expenses dependencies
child education have
expenses decreased
Flexibility Choose low Increase Increase death Withdrawal Withdrawal Decrease the
death benefit, death benefit; from the from the death benefit-
choose benefit, choose account for account for reduce it to
growth/balance choose balanced the higher the minimum
d option for growth/bala option for education education/marri possible.
asset creation nced option asset creation. expenses of age expenses of Choose the
for asset Choose riders the child the child. income
creation for enhanced Premium investment
protection. holiday-to stop option. Top-
Use top-ups to premium for a ups form the
increase your period without accumulation
accumulation lapsing the (with reduced
policy expenses) for
the golden
yrs cash
accumulation

63
CONCLUSION:
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.
ICICI Prudential is a key player in the private sector and LIC is a leader in the public sector
with the largest market share.
The returns provided by ICICI is the highest as compared to other companies and is superior
to others in all respects. Therefore a person can rightly choose to buy insurance from ICICI .
Thus ULIPs are simple combination of Term assurance and investment.
Synergy, flexibility, durable tax advantages, flexibity in debt- equity ratio, top up facility,
transparency, subjected to market conditions, capital appreciation makes ULIPs structurally
more effective for achieving long term financial goals.
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.
So relax and enjoy your life as ULIPs is there behind you.

64
RECOMMENDATIONS

For the Company based on the above market survey.


1) The company should now target pensioners & housewives as they constitute only 10% 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.

3) Since ULIPs are less popular “as a retirement plan”, Tata AIG should advertise inorder to
attract the attention of salaried people and to make them understand the importance of
investing in ULIPS for retirement. Publicity on a large scale about the different policies to be
given in all means of communication. (Basically on TV during prime hours)

For the changes in ULIPs:


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.

65
BIBLIOGRAPHY
A. BOOKS

1. Insurance Principles & Practices


-----M.N.Misra S Chand Publications.
2. Insurance
------ M.J.Mathew RBSA Publications.

3. Insurance Fundamentals, Environment & Procedures


-------B.S.Bodla, M.C. Garg, K.P. Singh
Deep & Deep Publications of 2003
4. Insurance Institute of India IC 33------S.J. Gidwani

5. Taxmann Life Insurance agent ---- P.R. Khanna , Taxmann Allied service pvt
ltd
4th edition 2005.

B. NEWSPAPERS
1. Economic Times
2. Times Of India
3. ESCOLIFE PAPER on Insurance by Ritu Nanda
Vol 2, Issue viii June, 2007.

C. MAGAZINES

1. Money Simplified --Vol xxx ,Feb 2007 “ ULIPs how they fit in”
2. Consumer Voice ---Vol 7, Issue 3

66
D. NEWSLETTER
1. Tata AIG Life Agency Newsletter
Vol 1, Edition 6 , March ,2007.

E. INTERNET

www.tata-aig.com
www.licofindia.com
www.iciciprulife.com
www.reliancelife.com
www.moneycontrol.com
www.personalfn.com
www.et.com
www.google.com

(Note- The above Sites were logged on between 20 June,07 to 21st July,2007 )

F. CNBC TV 18

G. BOOKLET on the Orientation Programme of Employees at Tata AIG

H. Policy Brochures of Tata AIG, ICICI Prudential, Reliance Life & LIC.

67
QUESTIONNAIRE FOR ADVISORS
Q 1) What type or class of customers visit your office?
• salaried
• housewives
• self employed
• retired
• pensioner

Q 2) Which policies the client opts for?


• Traditional
• ULIPS

Q 3) Are ULIP schemes popular?


• yes
• no
• can’t say

Q 4) Are the clients aware of ULIP schemes?


• less than 10%
• 10% --- 30%
• 30%---- 60%
• Above 60%

Q 5) Out of ten, how many clients opt for ULIP?

Q 6) How much commission do you get from the company on ULIP policy?
• 0--- 10%
• 11—20%
• 21---30%
• 31--- 40%

Q 7) How many clients have the background of finance?


• 10—20%
• 20—40%
• 40% & above.

Q8) Mode of payment of premium.


• cheque
• Demand Draft
• Cash

Q9) What is the better positioning for ULIP?

68
• as a tax saving plan
• as a retirement plan
• as a child education plan
• as a security cum profitable plan.

Q 10) Qualifications
• HSC pass
• Graduate
• MBA

Q 11) How is ULIP different from the other policies?

Q 12) How does a client respond, if any new policy is suggested to him?

69
THANK YOU

70