2nd original report on ulip
TRANSCRIPT
A PROJECT REPORT
ON
COMPARATIVE STUDY ON UNIT LINK INSURANCE POLICY IN THE
INDIAN INSURANCE MARKET WITH SPECIAL REFERENCE TO
KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE & TATA AIG
LIFE INSURANCE
SUBMITTED BY
ANAND INGOLE
UNDER THE GUIDANCE OF
MRS. ADITI TANDALE JOSHI
UNIVERSITY SEAT NO-
SUBMITTED TO
UNIVERSITY OF PUNE
IN THE PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF BBA
S.P.MANDALI’S
SIR PARASHURAMBHAU COLLEGE,
PUNE-30
1
ACKNOWLEDGEMENT
I extend my sincere thanks to our Coordinator Dr. Rashmi Hebalkar for her
valuable suggestion, encouragement and generous help and for their direct and
indirect support for completion of this work.
I wish to express my deepest sense of gratitude and indebtness to my esteemed
guide Prof. ADITI JOSHI, of BBA, S. P. College, Pune, for her expert guidance
and scholarly supervision, endless motivation, encouragements and freedom to
carry report work. I appreciate her dedication, professionalism, genuine concern
and most important, her spirit. I thank her from my heart and express my
indebtedness for her training, which will be a lifetime asset. It is my greatest
privilege to be one of her students.
It gives me immense pleasure to offer profound thanks to my colleagues and
friends, Atul, Ashish, Rajan, Pratik, Sagar,& Vighnesh [T.Y.B.B.A] for their
valuable comments, constant motivation, criticism and discussions giving shape
and design to the research work.
My heartiest thanks to my sisters, and all my other friends for their constant
support and for listening to all my complaints. No words are adequate to describe
my gratitude to my Mother, Father, Uncle, & Aunt for their patience,
understanding, unending love, motivation and for everything they have done in
making me what I am today.
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TO WHOMSOEVER IT MAY CONCERN
This is to certify that Mr. ANAND INGOLE is a bonafide student of
S.P.College, Pune. He has successfully carried out his summer project titled
“COMPARATIVE STUDY ON UNIT LINK INSURANCE POLICY IN
THE INDIAN INSURANCE MARKET WITH SPECIAL REFERENCE TO
KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE & TATA AIG
LIFE INSURANCE”
We wish him all the best for his future
Mrs. ADITI TANDALE-JOSHI Dr. Rashmi Hebalkar
(Project Guide) (Coordinator BBA)
3
INDEX
SR. NO. TITLE PAGE NO
1 Chapter – I [Introduction]
1.1 Introduction
1.2 Title
1.3 Aim & Objective
1.4 Significance & Need
1.5 Scope & Limitations
1.6 Working Definition
1.7 Conclusion
2 Chapter – II [Review Literature]
2.1 Introduction
2.2 Review of books
2.3 Review of Articles
2.4 Company Literature
2.5 Conclusion
3 Chapter – III [Research Methodology]
3.1 Introduction
3.2 Research Methodology
3.2.1 Quantitative Methodology
3.2.2 Qualitative Methodology
3.3 Method of Data Collection
3.3.1 Primary Data
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3.4 Research Design
3.5 Conclusion
4 Chapter – IV [Analysis Of Data]
4.1 Primary Data Analysis
4.2 Secondary Data Analysis
4.3 Conclusion
5 Chapter – V [Finding & Recommendations]
5.1 Finding
5.2 Suggestions / Recommendations
5.3 Area Of Further Study
5.4 Conclusion
5
CHAPTER-1
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INTRODUCTION
1.1 INTRODUCTION OF 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.
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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. Life insurance – the only instrument that takes
care of these 3 probabilities .
1.Children’s education & marriage
2. Wealth creation
3. Living death
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 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
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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.
IV) INSURANCE CLASSIFICATION
1.Life
2.Term
3.Endowment
4.Unit-linked
5.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.
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.
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6) India’s life insurance premium as a percentage of GDP is just 1.8%
Growth Rate of Insurance sector
1.Public Sector: 5.5%
2. Private Sector: 57.4%
Indian Insurance is growing at the rate of 80%.
LIFE INSURANCE COMPANIES IN INDIA
Public sector
1. Life Insurance Corporation of India
Private Players
2. AEGON Religare Life Insurance
3. Aviva Life Insurance
4. Bajaj Allianz Life Insurance
5. Bharti AXA Life Insurance Co Ltd
6. Birla Sunlife
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7. CANARA HSBC Oriental Bank of Commerce LIFE INSURANCE
8. Star Union Dai-ichi Life Insurance
9. DLF Pramerica Life Insurance
10. Edelweiss Tokio Life Insurance Co. Ltd
11. HDFC Standard Life
12. Future Generali Life Insurance Co Ltd
13. ICICI Prudential
14. IDBI Federal Life Insurance
15. IndiaFirst Life Insurance Company
16. ING Vysya Life Insurance
17. Kotak Life Insurance
18. Max New York Life Insurance
19. MetLife India Life Insurance
20. Reliance Life Insurance Company Limited
21. Sahara Life Insurance
22. SBI Life Insurance Company Limited
23. Shriram Life Insurance
24. TATA AIG Life Insurance
WHAT IS AN ULIP (Unit Linked Insurance Plan)?
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).
A unit-linked insurance plan provides both insurance and investment benefit. In
unit linked plans, the premiums paid are invested in funds offered by the company;
the policyholder determines the appropriate ratio of investments into these funds.
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The funds are generally invested in equities, debt instruments, money market
instruments, and government securities.
The value of the policy is determined on any day by multiplying the number of
units issued by the value of units on that day. The value of these units is called the
Net Asset Value (NAV) and is normally published in newspapers on a daily basis.
Unit-linked insurance products are risky because the premium money invested is
subject to market risk. The funds do not offer a guaranteed or assured return.
Insurance companies will only show you a projected return, which may or may not
be achieved during the term of the policy.
COMPANY PROFILE OF 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.
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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.
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 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
· Over 5 lac + policy holders
Some of the features of TATA are:
1. Over 260,000employees
2. Operates in 130 countries worldwide
3. Trusted by over 3 million shareholders
4. Diversified business interest ( 92 companies)
5. Largest FOREX earner
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6. Revenues of US $ 14.25 billion
7. Deep rooted commitment towards society.
Some of the features of AIG are:
1. In business since 1919
2. Over 80,000 employees worldwide
3. Presence in over 130 countries
4. Over 50 million customers worldwide
5. Revenues over US $ 81.3 billion
6. Ranks 4th on the FORBES 500 LIST OF 2003.
7. Deals in General and life insurance, asset management, financial services.
COMPANY PROFILE OF KOTAK MAHINDRA OLD MUTUAL
LIFE INSURANCE
Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old Mutual
Life Insurance Limited is a joint venture between Kotak Mahindra Bank Ltd. and
Old Mutual plc.
KOTAK GROUP is one of the top most financial product service providers in
India. It is one of India's leading financial conglomerates, offering complete
financial solutions that encompass every sphere of life. From commercial banking,
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to stock broking, to mutual funds, to life insurance, to investment banking, the
group caters to the financial needs of individuals and corporate.
The group has a net worth of over Rs5,824 crores, employs around 10,800
people in its various businesses and has a distribution network of branches,
franchisees, representative offices and satellite offices across 370 cities and towns
in India and offices in New York, London, San Francisco, Dubai, Mauritius and
Singapore.
Old Mutual
Old Mutual plc is an international long-term savings, protection and investment
Group. Originating in South Africa in 1845, the Group provides life assurance,
asset management, banking and general insurance to more than 15 million
customers in Europe, the Americas, Africa and Asia. Old Mutual plc is listed on
the London Stock Exchange and the Johannesburg Stock Exchange, among others.
In the year ended 31 December 2010, the Group reported adjusted operating profit
before tax of £1.5 billion (on an IFRS basis) and had £309 billion of funds under
management, from core operations.
The KOTAK MAHINDRA Group was born in 1985 as Kotak Capital
Management Finance Limited. This company was promoted by
Uday kotak, Sidney A. Pinto and Kotak & Company. Industrialists Harish
Mahindra and Anand Mahindra took a stake in 1986, and that's when the company
changed its name to Kotak Mahindra Finance Limited. Since then it's been a
steady and confident journey to growth and success.
1.2- TITLE
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COMPARATIVE STUDY ON ULIPS IN THE INDIAN INSURANCE
MARKET” WITH SPECIAL REFERENCE TO KOTAK MAHINDRA OLD
MUTUAL LIFE INSURANCE & TATA AIG LIFE INSURANCE
1.3 OBJECTIVES
1. Working of ULIP To find how ULIP plans differs from the other financial
products.
2.. Whether the long term investment of the investor are beneficial through ULIP
plan.
3. To compare the two companies ULIP plans with each other.
4.Find strength and weakness of ULIP plan.
5. Study of the consumer perception towards ULIP.
1.4 SIGNIFICANCE & NEED -
1.It helps to know difference between ULIP and other financial products.
2.It will help to know about buying behavior of consumer .
3.It will help to know consumer perception towards ulip
1.5 SCOPE AND LIMITATIONS
SCOPE OF THE STUDY
This study aims to make a comparative study of the Unit Linked Insurance Plans
(ULIPs) of KOTAK Life Insurance Company with that of some major selected
players in the Indian insurance market and study the consumer perception towards
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various insurance products. The comparative analysis is based on the empirical
data collected from the PUNE city. The study also aims to discuss in detail the
various positioning strategies adopted by KOTAK in general.
ADVANTAGES OF STUDY-
The following are some of the advantages to study Unit linked plans
TO KNOW-
1.Extra protection riders between two companies..
2.Variable investment options.
3.Which company is good for investment.
4.whether it is beneficial to invest in ULIP policies.
5.Risk involved in investment.
LIMITATION OF THE STUDY-
Following are limitation of the study –
1.The study is done with reference to two companies only.
2.Information provided by the companies may not be true.
3.The study is confined only to a small segment of the entire population due to
time constraints and hence the results are applicable only to the city of pune city.
4.It is not always possible to evaluate companies under similar parameters since
many companies deal with various businesses thus clubbing all the companies on
the same parameters is not always possible.
1.6 WORKING DEFINITIONS
Definition of 'Insurance'
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A contract (policy) in which an individual or entity receives financial protection
or reimbursement against losses from an insurance company. The company pools
clients' risks to make payments more affordable for the insured.
Definition of ULIP-
ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life
insurance policy which provides a combination of risk cover and investment. The
dynamics of the capital market have a direct bearing on the performance of the
ULIPs. IN A UNIT LINKED POLICY, THE INVESTMENT RISK IS
GENERALLY BORNE BY THE INVESTOR.
CONCLUSION- In this chapter we studied about what is life insurance & ulip,
Meaning,definition of ulip, objective of the study,insurance companies in India,
company profile of KOTAK MAHINDRA AND TATA AIG LIFE INSURANCE
COMPANY
CHAPTER-2
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REVIEW OF LITERATURE
2.1 ABOUT UNIT LINKED INSURANCE PLANS
1.INTRODUCTION
ULIPS, 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,
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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.
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.
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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·
Tax benefits.
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.
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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-
1.Government Securities
2.Corporate bonds
3.Money market instruments
( no investment in the stock market)
ULIPs invest in
1.Equities
2.Bonds
3.G-secs
4.Money market.
3) FLEXIBILITY:
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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 debtequity
,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:
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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.
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.
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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.
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.
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
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ULIP pension plan must have matured, so now you can opt for an Annuity
(immediate or deferred) depending on your need.
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.
6) HOW ULIPS MANAGE MONEY
ULIPs are different from traditional plans.
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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 RISKS
RETURNS.
In case of equity, the risk and return is the highest, and vice verse for Money
market instruments.
7) STEPS FOR ULIP SELECTION
1.Understand what ULIPs are all about.
2.Focus on your need and risk profile
3.Compare ULIP products from various insurance companies
4.Go for an experienced Insurance advisor
2.2 REVIEW OF ARTICLES
Probing your probity by
Swami Saran Sharma | 3/7/2012 1:00:12 PM moneycontrol.com
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It’s the examination season, and last week I overheard a conversation between two
students on the number of sheets they used while answering. The discussion moved
towards how certain teachers award higher marks to students who use more sheets,
especially in subjects like English, history and economics. The insurance regulator
seems to be inspired by the examination season in releasing the proposed exposure
draft on guidelines on prospect product matrix for life insurance.
While the move will bring in the much-needed standardisation in filling insurance
forms, it is not suitable for the Indian market. First, the guideline assumes that
insurance is bought only by the literate. Next, the extent of details sought in the
proposal-cum-needs analysis form is too complex even for some of the aware
consumers to fill. I made a valiant attempt to fill the seven-page document in
which the first six sought several financial and personal details. Take for instance a
question like ‘Are you politically exposed?’ I see little value that an insurer will
derive from this response to arrive at the mortality risk I carry. There are
uncomfortable personal details sought like liabilities, expected inheritance, future
income and expenditure for the next 10 years! The past decade has seen such an
economic boom that any prediction on the future would have been off the mark.
Equally baffling is the column on expected returns from the policy; is it risk
transfer or investment that we are looking at? If it is the latter, it is no more
insurance.
I don’t think anyone will have easy access to his/her existing savings and
investment details, forget the details of existing policies.The proposed draft is
based on the premise that a prospective buyer will declare all the information the
insurer seeks. The approach is towards financial planning than figuring insurance
needs. Will this mean that the Insurance Regulatory Development Authority
(IRDA) will certify agents and distributors to qualify as financial planners to sell
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insurance? It is unlikely for an agent to manage all the details listed in the form,
which is why the draft guideline provides a leeway to them by not binding them
with the details being sought.
According to the guideline, if the prospect refuses to provide information as sought
by the insurer, agent or broker; the latter shall certify such refusal on the proposal-
cum-needs analysis form. Many agents will use this lacuna and not get the form
filled completely, leading to mis-selling on record.
But will the form need to be filled by online buyers, and how will tele-calling
intermediaries handle the form? Overall, I find the move completely flawed. This
procedure is likely to work in societies with a high financial literacy. We are far
from such finesse in data gathering, analysis and maintenance. My worry is also
about the misuse of the data that I share with the insurer as it can compromise my
financial safety. This issue is far more complicated than the UID project if it is
enforced in its current form.
Lastly, if standardisation of the proposal form is allowed; it will do away with the
USP that each insurer has. Unlike tax forms, which can be standardised; life
insurance is a customised solution that can be tailored to suit the needs of a
prospect. Moreover, the experience of the advisor comes into play when suggesting
insurance plans. By adopting a template product-matrix to suit customer needs,
IRDA is assuming the limitations in an agent’s ability to suggest the right policy to
a client. And if the insurer has nothing that fits the prospect’s needs? It is unlikely
that an agent will suggest the client to buy one from a competitor.
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Market Research Projects ICT Insurance Market Growth in India at 14%
CAGR Through 2015 by- find articles.com
MarketResearch.com has announced the addition of the new report "ICT in
Insurance Industry in India 2012," to their collection of IT Services market reports.
For more information, visit http://www.marketresearch.com/Netscribes-India-Pvt-
Ltd-v3676/ICT-Insurance-India-6823146/
ICT adoption in Insurance Industry is expected to witness a dynamic growth in the
ensuing years. Currently, the adoption of ICT in insurance industry is undergoing a
dynamic growth rate owing to the growing complexities arising from huge
customer base. Insurers primarily implement technology in the areas of customer
service, data analytics and process management.
With the ongoing growth in customer base and daily transactions, insurers in India
are gradually shifting their focus towards the adoption of ICT oriented tools,
services and platforms. Until now, the ICT adoption in insurance industry has
occurred in a phased manner, wherein it has exhibited a steady but impressive
growth rate over the years. "Judging by the current scenario in the market, ICT
spending by insurers in India stood at INR 76.17 bn in 2011 and is anticipated to
grow at a CAGR of around 14% til 2015," says Mr. Kalyan Banga, Product
Manager at Netscribes. Maturing along with technology standards, the current ICT
landscape within the insurance industry can be associated with rising demand and
cut throat competition amongst the ICT vendors. Types and attributes of the
solutions that experience the most demand within the insurance sector have also
changed over the years. "Primarily, technologies focused to provide better
customer services are preferred the most. Analysis of colossal amount of data and
information along with generating insights from these data are also experiencing
30
exponential surge in demand. Advancement in the field of mobile technology and
the immense popularity of social networking sites have also grabbed the attention
of industry significantly," noted Kalyan.
The report begins with a snapshot of the insurance industry which briefs about the
facts and figures of insurers operating in India. It lists down the number of insurers
operating in the sector along with the segmentation of public and private insurers.
The hierarchy of the Indian insurance industry is well illustrated for which it gives
a brief highlight about the operational model of the industry. It also enlists the
primary drivers and challenges for the overall insurance industry. "Primary reasons
to propel the market forward are comprised of young consumer segment, wide
range of products, technological advancement and growing middle class, whereas
the basic challenges faced by the sector are the tight premium rates and
dependence on overseas re-insurers," says Kalyan. Moving along, the report
features a section on the ICT in Insurance wherein the growth rate and spending on
ICT is enlisted in great details. "IT spending basically comprises the costs
associated with hardware, software and services while the telecom services mainly
include support and services," added Kalyan. The report covers an explicit break
up of IT expenses of insurers in terms of hardware, software and services.
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CHAPTER-3
RESEARCH DESIGN
RESEARCH DESIGN
(3.1) Introduction:
RESEARCH: Research in common parlance refers to a search for knowledge. One
can define Research as a scientific and systematic search for pertinent information
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on a specific topic. In fact, research is an art of scientific investigation. Research is
an academic activity and as such the term should be used in a technical sense.
According to Clifford woody research comprises defining and redefine and
problems, formulating hypothesis or suggested solutions; collecting and organizing
and evaluating data; making deductions reaching conclusions; and at last carefully
testing the conclusions to determine whether they fit the formulating hypothesis. In
short, the search for knowledge injective and systematic method of finding solution
to a problem is research. The systematic approach concerning and the formulation
of a theory is also research. As term research refers to the systematic method.
3.2 Research Methodology:
Research methodology refers to the analysis of principles of methods, rules and
techniques. It involves the systematic study of methods which are applied to
analyze a specific project or study. In order to make the research organized and to
increase its reliability different methodologies are adopted. Research methodology
involves the collection of theories, concepts or ideas, comparative studies to
different approaches and individual methods which are conduced when a research
work is performed.
There are two main types of Research Methodology,
1- Quantitative methodology
2- Qualitative methodology
1- Quantitative methodology-
33
It is the type by which you test the significance of your hypothesis, in other
words you answer the words: How much Is there a relationship Quantitative
methods tend to be systematic and use numbers... Actually it is a deep sea.
2- Qualitative methodology
It is the type by which you are depending on your observations and descriptions. It
is subjectively and descriptive, no facts.... This kind of method is used to assess
knowledge, attitudes, behaviours, and opinions of people depending on the topic of
your research. Researcher, in this type of method uses his opinion and experience
which are not allowed to be used in quantitative method at all. About the types of
sample and sample size, I think they are apart of research design not apart of the
methodology.
METHOD OF DATA COLLECTION
Data to be collected
Data includes facts and figures, which are required to be collected to achiever the
objectives of the project.
3.2.1 Primary Data
The data that is being collected for the first time or to particularly fulfill the
objectives of the project is known as primary data.
The above primary data were collected through responses of consumer was
conducted through questionnaires prepared for them.
3.2.1 Secondary Data
34
Secondary data are that type of data, which are already assembled and need not to
collected from outside. These types of data were
i) Company Profile
ii) Product Profile
iii) Competitors Profile
35
CHAPTER -4 ANALYSIS OF DATA
36
4.1COMPARATIVE ANALYSIS OF ULIPS
This chapter covers the comparison of ULIPs of 2 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.
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 2 insurance companies are taken for comparison.
1)KOTAK MAHINDRA LIFE INSURANCE---------Advantage multiplier
2) TATA-AIG--------------------- Invest Assure II
37
4.2 ANALYSIS OF PRIMARY DATA
COMPANY
NAME
KOTAK MAHINDRA OLD
MUTUAL LIFE INSURANCE
(INVEST MAXIMA)
TATA AIG LIFE INSURANCE
(INVEST ASSURE )
1)POLICY
OBJECTIVE
A regular unit linked insurance
policy that offers flexible
investment options along with the
benefit of life insurance cover,
and an opportunity to earn
potentially higher returns on your
investment without sacrificing the
protection of your family
It is a unique, flexible insurance
plan which combines security of
life with the opportunity to
exploit the upside of the market
returns by investing in different
kinds of securities through
multiple fund options.
2)Eligilibility
Criteria
(Minimum,
Maximum age at
entry):-
Min: 0 years , Max : 65 years Min age= 30 days
Max age= 45,55,65 years
3) Policy term Regular Premium: 10, 15, 20, 25
& 30 yrs
Limited Premium: 10, 15, 20, 25
& 30 yrs
Single Premium: 10 yrs
15, 20, 30 years
38
4) Premium
(Minimum):-
Regular - `50,000 - `1,00,000
Limited – `75,000 - `1,00,000
Single – `1,00,000 - `2,50,000
20,000 p.a.
5) Mode of
Premium
Payment:-
Annually, single Annually, half yearly, quarterly,
monthly
6) Sum Assured
(Minimum,
Maximum):-
Single Premium:
Option I : 5 times SP
Option II : 1.25 times SP
AP: Annualised Premium
SP: Single Premium
For Insured's Age < 45 years:
Higher of (10*Annualised
Premium or 0.5*Policy
Term*Annualised Premium)
For Insured Age>= 45 years:
Higher of ( 7* Annualised
Premium or 0.25*Policy
Term*Annualised Premium)
7)Surrender
option/ partial
withdrawal
option
Partial Withdrawals will be
allowed after completion of five
policy years and provided five full
years premiums are paid.
Minimum amount for partial
withdrawal is `10,000. Minimum
Allowed only after 3 years form
the date of issuance of the
policy.Surrender charges are a
percentage of regular premiums
—Fund value. Charge Applicable
for 6 yrs---20 or
39
balance of one premium for
Regular & Limited Premium
payment option and `10,000 for
Single Premium Payment option
should be maintained in the Main
Account after Partial Withdrawals.
30 yr policy
Charge Applicable for 5 yrs----15
yr policy Surrender & partial
withdrawal Available Min of up
to 4 partial withdrawals
8)Reinstatement/
Revival
Applicable only for Regular and
Limited premium payment option.
A policy can be revived with or
without riders until the expiry of
the Notice Period. The
policyholder shall also have
the right to revive a discontinued
policy within two years from the
date of discontinuance and not
later than the expiry of lock in
period, in which case the
discontinuance charge will be
reversed.
If the premium remains unpaid at
the end of the Grace period and
the Policy has not been
completely withdrawn for its
Total Fund Value it can be
revived, within stipulated time
period subject to: (i)
Policyholder's written application
for revival; (ii) production of
Insured's current health certificate
and/or other evidence of
insurability satisfactory to us, if
required (iii) payment of all
overdue Regular Premiums.
9)Premium
Holiday
The policy brochure has no
mention of premium holiday
After completion of 3 years of the
policy, Premium Holiday facility
is given with a charge of 3% of
40
the regular premium.
10) Free look
Period
The policyholder is offered 15
days free look period, from the
date of receipt of the policy
wherein the Policyholder may
choose to return the policy within
15 days of receipt if he is not
agreeable with any of the terms
and conditions of the plan. Should
he choose to return the policy,
he/she shall be entitled to refund
of the premium paid after
adjustment for stamp duty,
administration expenses and
proportionate risk premium.
You have the right to cancel the
Policy by giving written notice to
the Company and receive the
premiums invested into the funds
at Unit Price as at the date of
cancellation along with the
charges paid after deducting a)
for proportionate Risk and Rider
Premium (if any) for the period
on cover b) Stamp duty and
medical examination costs which
have been incurred for issuing the
Policy. Such notice must be
signed by the Policyholder and
received directly by the Company
within 15 days after you receive
the Policy Document..
11)Grace Period: There is a Grace Period of 30 days
for the annual mode from the due
date for payment of premium. If
the premium is not paid until the
end of the Grace Period, within the
next 15 days Kotak Life Insurance
will send a notice to the
policyholder to either revive the
policy or terminate the policy
If you are unable to pay your
Regular Premium on time,
starting from the regular premium
paid to date, a grace period of 30
days will be offered for policies
on Annual, Semi- Annual or
Quarterly Modes. For Policies on
monthly mode the grace period
would be 15 days. During this
41
without any risk cover. The Notice
Period ends 30 days after receipt
of the notice by the policyholder.
In case of death during the Grace
Period and Notice Period, unpaid
premium shall be deducted from
the Basic Sum Assured.
period your policy is considered
to be in force with the risk cover
as per the terms & conditions of
the policy.
12)Settlement
Benefits
Entire maturity proceeds as an
immediate payout in one go OR
Part of the maturity proceeds as a
lump sum and part as
installments.OR
Whole amount as installments.
The installments can be taken over
a maximum period of 5 years.
You have the option to receive
your maturity benefit either in
lumpsum or in the from of
periodicalpayments over period
of time. This period will not
exceed 5 years from the maturity
date.
13)Premium
Redirection
Switch between fund options or
change your future premium
allocation as per your needs and to
maximize your returns.
Re direction of all the future
premiums under a policy, in an
alternative proportion to the
various Fund units is available.
14) Top Up
premium:-
Min: `20,000
Max: For Regular & Limited
Premium: 10 x AP
Minimum top up amount is Rs
5,000
42
15)Tax Benefits:- You can avail of tax benefits under
Section 80C and Section 10 (10D)
of Income Tax Act,
1961. Tax benefits are subject to
change in the tax laws. You are
advised to consult your Tax
Advisor for details.
Premiums paid under this plan
are eligible for tax benefits under
section 80C of the Income Tax
Act, 1961 and are subject to
modifications made thereto from
time to time. Moreover, life
insurance proceeds enjoy tax
benefits as per section 10(10D) of
the said Act.
16)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)MORTALITY CHARGES
AGE Kotak Mahindra life
insurance
Tata aig life insurance
43
20yrs 1.199 1.14
30yrs 1.404 1.435
40yrs 4.264 2.274
50yrs 6.293 9.022
20yrs 30yrs 40yrs 50yrs0
1
2
3
4
5
6
7
8
9
10
b) FUND MANAGEMENT CHARGES
44
(Only for Equity Fund)
53%47%
KOTAK MAHINDRA LIFE INSURANCE TATA AIG LIFE INSURANCE
C) SWITCH OVER CHARGES
45
KOTAK MAHINDRA LIFE
INSURANCE
1.35%
TATA AIG LIFE
INSURANCE
1.20%
Company Charges
KOTAK MAHINDRA
LIFE INSURANCE
500
TATA AIG LIFE
INSURANCE
100
KOTAK MAHINDRA LIFE INSURANCE TATA AIG LIFE INSURANCE0
100
200
300
400
500
600
d) POLICY ADMINISTRATION CHARGES
46
COMPANY CHARGES
KOTAK MAHINDRA LIFE
INSURANCE
500
TATA AIG LIFE
INSURANCE
150
KOTAK MAHINDRA TATA AIG0
100
200
300
400
500
600
47
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
COMPANY Date of
Inception
NAV as
on
inception
Rs
NAV as on
29/2/2012
increase Growth%
KOTAK
MAHINDRA
10/8/2009 10 15.4573 5.4573 84.355 %
TATA AIG
LIFE
INSURANCE
15/01/2008 9.999 11.8904
1.8914 15.906%
In case of KOTAK MAHINDRA LIFE INSURANCE--------the Equity Fund has
grown up to 84.355% in 3 years from the date of inception.
In case of TATA AIG LIFE INSURANCE--------the Equity Fund has grown up
to 15.906% in 4years from the date of inception.
48
CONCLUSION- KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE
company’s ulip invest maxima has a great performance as compared to TATA
AIG’S invest assure.From invest maxima’s inception date it has shown 84%
increase within 3 years than of invest assure ‘s which has increased only by 15%
from its inception date. In next chapter we will study about overall findings and
recommendations.
49
CHAPTER -5 FINDINGS AND
RECOMMENDATIONS
50
MARKET SURVEY
A questionnaire was prepared, wherein 20 ulip insurers of different insurance
companies were asked to fill it. The reason for carrying out a market survey was to
1.Find strength and weakness of ULIP plan,2. Study of the consumer perception
towards ULIP. 3.To know other important aspects affecting the interest of the
policy holders.
1.Do you think privatization of insurance companies has increased insurance awareness & competition in general?
Feedback No.of Respondents
Percentage
Yes 15 75%
No 05 25%
51
75%
25%
YesNo
2.Do you think ULIP as investment is good as compared to:
Feedback No.of respondents
Percentage
Yes no Yes No Direct stock market investment
15 05 75% 25%
Mutual fund investment
12 08 60% 40%
Bank deposit 18 02 90% 10%
Postal investment-nsc
14 0 30% 70%
52
Direct
stock
market
investm
ent
Mutual fund in
vestm
ent
Bank d
eposit
Postal in
vestm
ent-n
sc0
4
8
12
16
20
No.of respondents Yes No.of respondents no
3.Do you know insurance is a risk protection +investment?
Feedback No.of Respondents
Percentage
Yes 18 90%
No 02 10%
53
90%
10%
YesNo
4.DO YOU KNOW FOLOWING ABOUT ULIP-
4.1 There is a wide range of variety of products in ULIP available
Feedback No.of Respondent
Percentage
54
sYes 16 80%
No 04 20%
Yes No
0
2
4
6
8
10
12
14
16
18
.
4.2 There is transparency in ULIP
Feedback No.of Percentage
55
Respondents
Yes 12 60%
No 08 40%
12
8
YesNo
4.3 Stock market risk is borne by the policy holder.
56
Feedback No.of Respondents
Percentage
Yes 17 85%
No 03 15%
85%
15%
Yes No
4.4 In case of death claim fund value or sum assured, whichever is higher is paid to nominee.
Feedback No. of Respondents
Percentage
57
Yes 19 95%
No 01 05%
95%
5%
Yes No
4.5 If you pay premium for 3/5 years and then discontinue,the life insurer can foreclose your policy
Feedback No.of Percentage
58
Respondents
Yes 08 40%
No 12 60%
8; 40%12;
60%
YesNo
5.Do you know the benefits of ULIP depends on the performance of stock/money market and benefits of traditional policies on the performance of life insurance.
59
Feedback No.of Respondents
Percentage
Yes 15 75%
No 05 25%
75%
25%Yes No
6.Reasons for surrender of ULIPS-
1.Fluctuations instock market
60
2.unexpected returns3.investment for short term4.unaffordable amount of premium
Feedback No.of respondents
Percentage
Yes no Yes No Fluctuations in stock market
11 09 55% 45%
Unexpected returns
05 15 25% 75%
Investment for short term
02 18 10% 90%
Unfordable amount of premium
03 17 15% 85%
Fluctu
ations in
stock
market
Unexpect
ed re
turns
Investm
ent fo
r short
term
Unfordab
le am
ount of p
remium
02468
101214161820
No.of respondents YesNo.of respondents no
7.Codes of professional ethics are not implemented by the intermediaries in marketing of ULIP.
61
strongly Agree Agree to some extent
Neither0
2
4
6
8
10
12
14
16
No of respondents
No of respondents
8.What is te impact of life insurance advertisements in your mind.
62
Feedback No of respondents
percentage
stongly Agree
15 75%
Agree to some extent
02 10%
Neither 03 15%
85%
5% 10%
No of respondentsPositive Increase curiosity No impact
9.which media is attractive for te life insurance advertisement?
63
Feedback No of respondents
Percentage
Positive 17 85%
Increase curiosity
01 5%
No impact 02 10%
. 1 2 3 4
0
2
4
6
8
10
12
14
Feedback No of respondents
10.From whom you would like to buy the insurance policy?
Individual agents
64
Feedback No of respondents
Percentage
Newspaper and magazine
02 10%
Television 06 30%
Radio 02 10%
Any other-agents
12 50%
Corporate agentsBanks(bankassurance)Through internetDirectly from insurance co.
feedback No of respondents Percentage Individual agents 10 50%Corporate agents 0 0%Banks 04 20%Internet 04 20%Direct from company 02 10%
50%
20%
20%
10%
Individual agents Corporate agents Banks Internet Direct from company
FINDINGS
For the changes in ULIPs:
65
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
In case of KOTAK MAHINDRA LIFE INSURANCE--------the Equity Fund has
grown up to 84.355% in 3 years from the date of inception.
In case of TATA AIG LIFE INSURANCE--------the Equity Fund has grown up
to 15.906% in 4years from the date of inception.
KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE company’s ulip
invest maxima has a great performance as compared to TATA AIG’S invest
assure.From invest maxima’s inception date it has shown 84% increase within 3
years than of invest assure ‘s which has increased only by 15% from its inception
date. In next chapter we will study about overall findings and recommendations.
MY LEARNING FROM PROJECT
I have learnt many things which I might not be able to learn under
66
class room training like looking at the stock market terminal and
analyzing the stocks performance and thus designing the portfolio on the basis of
their performances.
First and the most important I learnt about ULIP Industry. Before this project I
dint have much knowledge about ULIP funds. But now I have good knowledge
about ULIP and INSURANCE INDUSTRY.
·
ANNEXURE
1.Do you think privatization of insurance companies has increased insurance awareness & competition in general?
1.yes2.no
2.Do you think ULIP as investment is good as compared to:
1. Direct stock market investment 2. Mutual fund investment3. Bank deposit4. Postal investment-nsc
3.Do you know insurance is a risk protection +investment?
1.yes
2.no
4.DO YOU KNOW FOLOWING ABOUT ULIP-
4.1 There is a wide range of variety of products in ULIP available
1.yes2.no
67
4.2 There is transparency in ULIP
1.yes2.no
4.3 Stock market risk is borne by the policy holder.
1.yes2.no
4.4 In case of death claim fund value or sum assured,whichever is higher is paid to nominee.
1.yes2.no
4.5 If you pay premium for 3/5 years and then discontinue,the life insurer can foreclose your policy
1.yes2.no
5.Do you know the benefits of ULIP depends on the performance of stock/money market and benefits of traditional policies on the performance of life insurance.
1.yes2.no
6.Reasons for surrender of ULIPS-
1.Fluctuations instock market 2.unexpected returns3.investment for short term4.unaffordable amount of premium
7.Codes of professional ethics are not implemented by the intermediaries in marketing of ULIP.
68
1.stongly Agree
2.Agree to some extent
3.Neither
8.What is te impact of life insurance advertisements in your mind.
1.Positive
2.Increase curiosity
3.No impact
9.which media is attractive for te life insurance advertisement?
1.Newspaper and magazine
2.Television
3.Radio
4.Any other-agents
10.From whom you would like to buy the insurance policy?
1.Individual agents2.Corporate agents3.Banks(bankassurance)4.Through internet5.Directly from insurance co.
69
BIBLIOGRAPHY
1. Money Outlook, 2011 edition
2. IRDA Annual Report
Websites:-
1. www.irdaindia.org
2. www.insuranceworld.com
3. www.findarticles.com
4. www.kotaklife.com
5.www.bimabazar.com
6.www.tataaiginsurance.com
70
Special Thanks to:-
Wikipedia, the free encyclopedia.htm
http://www.google.com
http://www.economywatch.com/business-and-financial/IPO-industry
71