thesis on insurance vs mutual fund
DESCRIPTION
ICFAI NATIONAL COLLAGE DEHARADUNTRANSCRIPT
A Thesis ON
A COMPARATIVE STUDY OF ULIP PLANS OF
RELIANCE LIFE INSURANCE WITH MUTUAL
FUNDS IN NANDED
By
Vishal Mahavir Jain
A THESIS ON
A COMPARATIVE STUDY OF ULIP PLANS OF
RELIANCE LIFE INSURANCE WITH MUTUAL
FUNDS IN NANDED
By
Vishal Mahavir Jain
(MBA)
A report submitted in partial fulfillment of
the requirements of
THE MBA PROGRAM
(The Class of 2009)
INC NANDED
Table of Contents
Acknowledgement…………………………………………………………. . II
List of Table & illustrations………………………………………………... III
Abbreviations ……………………………………………………………… IV
Summary……………………………………………………………………...V
1. Introduction …………………………………………………………………...1
1.1 Objectives & Limitations……….………………………………… ..2
2. Research Design…………………………………………………………….....3
3. Review of Literature………………………………………………………….. 6
4. Industry Profile ….…….………………………………………………………7
4.1 Insurance companies working in Nanded…………………………. ..7
4.2 Reliance Life Insurance In Nanded………………………………… .7
4.3 Products of Reliance ……………………………………………..... 10
4.4 Mutual Fund In Nanded……………………………………………. 12
4.5 Products Of Mutual Fund…………………………………………...13
4.6 ULIP……………………………………………………………….. 18
4.7Benefits of ULIP …………………………………………………… 20
4.8 Advantages of Mutual Fund... ………………………………………21
4.9 Disadvantages of Mutual fund………………………………………22
5. Empirical analysis…………………………………………………………….. 23
5.1 Analysis of ULIP Vs Traditional Policies…………………………….23
5.2 Analysis Of ULIP Vs Mutual fund……………………………………26
5.3 Some facts for the growth of mutual funds in India..………………….30
6. Findings and Suggestion……………………………………………………… 31
7. Conclusion and Recommendations…………………………………………… 45
8. Appendices…………………………………………………… ……………..i-iv
9. References………………………………………………………………………v
10. Glossary…………………………………………………………………….. vi-x
ACKNOWLEDGEMENT
I would like to thank to Mr. Rajendra D. Dongare Campus coordinator of INC Nanded. for the moral
support, encouragement and generous assistance.
I express my heartfelt gratitude towards my faculty Supervisor, Dr. Umesh B. Dubey I wish to thank
him for the constructive criticism, continuous encouragement and guidance provided by him time to
time during the course of studies. This project would not have been possible without his help.
A heartfelt thanks to the many respondents surveyed whose ideas; critical insights and suggestions
have been invaluable in the preparation of this report.
I would also like to thank my friends, colleagues and well-wisher who directly or indirectly helped
me in the project.
Last but by no means the least I would like to convey my special thanks to Mr. Abhijit Kulkarni Sales
Manager RLIC Nanded for giving valuable guidance and encouragement to work on this project.
Vishal Mahavir Jain
INC Nanded
(7NBND003)
List of Tables
List of Illustration
Illustration
No.
Name of The Illustration Page
No.
Table. No.
Name of the Table Page No.
1 Risk and Return Mutual Fund 22
2 Demographic Profile 33
3 Awareness about ULIP 34
4 Company Preference 35
5 Awareness about Mutual Fund 36
6 Option in which already Invested 37
7 Selection of Fund in MF 38
8 Reasons to invest in Mutual Fund 39
9 Factors considered while investing in ULIP 40
10 Factors to Considered for future Investment 41
11 Mutual fund or ULIP 42
12 Rating for Reliance Life Insurance ULIP 43
13 USP Of Reliance Life Insurance ULIP 44
1 Awareness about ULIP 34
2 Company Preference 35
3 Awareness about Mutual Fund 36
4 Option in which already Invested 37
5 Selection of Fund in MF 38
6 Reasons to invest in Mutual Fund 39
7 Factors considered while investing in ULIP 40
8 Factors to Considered for future Investment 41
9 Mutual fund or ULIP 42
10 Rating for Reliance Life Insurance ULIP 43
11 USP of Reliance Life Insurance ULIP 44
ABBREVIATIONS
ADB---Accidental Death Benefit
CAGR---Cumulative average growth return
CI---Critical Illness
FC – Financial Consultant
FMC----Fund management charges
HDFC—Housing Development Finance Corporation
SDM----Sales Development Manager
IRDA—Insurance Regulatory And Development authority
NAV----Net asset value
NOP--- No. of Policy
RLIC--- Reliance Life Insurance Co. LTD.
SBI--- State Bank of India
ULIP--- Unit linked Insurance plan
USP----Unique selling preposition
SUMMARY
“A comparative study of ULIP plans of reliance life insurance with mutual funds in Nanded.”
an analysis to be done be by Vishal Mahavir Jain, student (MBA - II Regular) ICFAI National
College, Nanded.
Total Investment scenario is changing, in past people were not interested in investment because there
were no good options available for investment. Now there are many options available for investment
like life Insurance, Mutual fund, Equity market, Real asset, etc.
Today people want more services and more return on their investment. So most of the insurance
companies are providing more value – added services with the basic insurance operation
Another option for investment available in Nanded is Mutual Fund. Mutual Funds are providing good
returns. So while investing people tend more to words mutual fund as they are providing more returns
than Insurance also, with a good investment portfolio. Mutual fund companies are providing more
liquidity.
The project was taken to know about, what are the main aspects in Reliance Insurance Company, and
its USP (Unique Selling Preposition).Which gives it highest business and customers. Customers
always prefer to invest in a good option and in a company which is market leader.
After survey and analysis I came to know that most of the people go for ULIP insurance policies to
cover the risk of life, and invest it in a good Portfolio but there is big portion of customers have taken
the policies to save the taxes. And people are aware about the tax benefits they get for insurance
policies. Therefore, while investing in any Investment option investor checks whether his money is
safe or not, Mutual funds provides good returns but investments are directly exposed to risk. As in
ULIP returns are related to stock market but they are having some insurance benefit and IRDA
regulates the investment.
Many people are getting the tax benefits in ULIP. In Mutual Fund they have to invest their money in
tax saving funds to get the tax benefit. Now a day’s people want good returns without any efforts the
plans like Automatic Investment plan are providing good Benefit & returns to investors.
Introduction
To make comparison of products of Private life Insurance companies with Reliance Life Insurance Co.
Ltd. and to Create awareness about Unit Linked Insurance Plan (ULIP) Benefits. Comparison of ULIP
products of private Life Insurance companies and how to create awareness about ULIP The overall
goal of this project was to create awareness about investments. The Above problem arises because
every life insurance company has their products having different positive and negative aspects.
Life Insurance is booming sector in today’s economy. So the responsibilities of the insurance companies
have been increased as compare to the past. Because in past people were taking insurance policies for
protection tool only. In present scenario insurance sector is providing more services with the basic life
insurance. Reliance Life Insurance has number of products, which gives the right way to save the
money and earn good profit by invested premium. Today people want more services and more return
on their investment. So this insurance company is providing more value – added services with the
basic insurance operation.
The project was taken to know about, what that point is in any Insurance company that is Unique selling
point (USP) which gives it highest business and customer always like to invest with that company
which gives the company a position of a leader in market.
By doing this type of study in this Insurance sector and looking at the vast scope and opportunity to study
this booming field of Life Insurance and the growing awareness among the public regarding insuring
their life through Life insurance policies as well as the growing contribution of Insurance in GDP of
country with the number of private players making entrance in this booming industry of Insurance.
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial
goal. The money thus collected is then invested in capital market instruments such as shares,
debentures and other securities. The income earned through these investments and the capital
appreciations realized are shared by its unit holders in proportion to the number of units owned by
them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a relatively low
cost.
Objectives
To Compare Investment Options available in Nanded city.
To find out the preference for Reliance Life Insurance ULIP Plan with Different mutual fund plans available in Nanded.
To find out the USP of Reliance life insurance in Nanded market.
To suggest a strategy to RLIC for creating awareness about ULIP and getting an competitive advantage over other investment options in Nanded.
Limitations
The middle class people do not know basic concept of ULIP so creating awareness is a big challenge
for me.
The findings of sample survey cannot be generalized to the entire population, as the sample is not
representative. As there is no set criterion for selecting the sample, there is a scope for the research
being influenced by the bias of the researcher.
Narrow minded thinking of middle class people as investment is not their cup of tea.
Many customers are thinking that investment in share market is very risky. As ULIP and Mutual fund
both are related to share market.
A general preference to LIC and UTI over private players.
Hesitations on the part of respondents to disclose financial information.
2. Research design/Methodology
Research design can be defined as the plan and structure of enquiry formulated in order to
obtain answers to research questions on business on business aspects. Research design can be
understood as that which gives the blueprint for collection, measurement and analysis of business data.
The research plan constitutes the overall program of the business research process. The planning
process includes the framework of the entire research process, starting from developing hypothesis to
the final evaluation of collected data.
Research design is essential because it facilitates the smooth flow of various research results can be
obtained with minimum utilization of time, money and effort. Therefore it can be said that design is
highly essential for planning research activities. If research design is not properly prepared, it will
jeopardize the whole research process and will not meet its purpose.
Exploratory Studies
Exploratory research is carried out to make problem suited to more precise investigation or to frame a
working hypothesis from an operational perspective. Exploratory studies help in understanding and
assessing the critical issues of problems. It is not used in case where a definite result is desired.
However, the study results are used for subsequent research to attain conclusive results for a particular
problem situation. Exploratory studies are conducted for three main reasons, to analyze a problem
situation, to evaluate alternatives and to discover new ideas.
Research hypothesis
If a hypothesized relationship or prediction has to be tested by scientific methods, it is called research
hypothesis. A research hypothesis is one that links an independent variable to a dependent variable. It
should generally contain one dependent and one independent variable.
Method of Data collection
Data can be collected in different ways from the subject of study. One method is to observe subjects on
certain parameters, which is called observation studies. In such studies, the subjects (respondents) by
asking them questions through a questionnaire. Here the researcher can adopt either method
based on the study that needs to be conducted. For instance, if research has to be done on the traffic
flow at a particular junction, then the observation method is best. On the other hand, if consumer
preferences about a new product are to be estimated, then a questionnaire for obtaining consumer
responses is the best method.
Research Design has been classified into four subsections they are:
1. Sample selection and size;2. Sampling procedure;3. Data collection; and
4. Analytical tools
Sample Selection and size
The first step of research is sample selection, for which the respondents were consumers in Nanded city.
The total consumers covered were 400. The same numbers of questionnaires were distributed, but only
370 fully-completed questionnaires were received. Results are based on the response of these 370
respondents.
Sampling procedure
The consumers are selected by the convenience sampling method. The selection of units from the population based on their easy availability and accessibility to the researcher is known as convenience sampling. Convenience sampling can be used as a part of a preliminary research that forms a basis for conducting the detailed research. Convenience sampling is at its best in surveys dealing with an exploratory purpose for generating ideas and hypothesis.
Steps in Sampling Procedure
Defining the target population Specifying the sampling frame Specifying the sampling Unit Selection of the sampling method Determination of sample size Specifying the sampling plan Selecting the sample
Data Collection method.
For the present study, the survey method was used for collecting primary data. A structured questionnaire
was used for the purpose. The questionnaire included multiple choice questions. The main source of
secondary data has been Insurance Chronicle, ICFAI Journal of Services Marketing, the Icfai
Journal of Consumer Behavior, Indian Journal of Marketing, and Behavioral Finance.
The study employs primary data collected by communicating with the respondents with the help of
structured questionnaire. Before undertaking the survey, pilot test of the questionnaire was done with
40 respondents. Their views were incorporated in the final questionnaire. The Marathi version of the
questionnaire was also used in the survey to include responses of investors, who are not comfortable
with the English language, as the research area is a area of Marathwada.
The study mainly deals with the financial behavior of individual investors towards mutual funds and ULIP
in Nanded.
Analytical Data The data thus collected, was tabulated, interpreted and analyzed with a view to make the study meaningful. In the present study, hypothesis testing, percentage, frequency and cross tabulation methods have been used for analysis.
3. Review of Literature
Sunayna khurana (2008) analyzed the customer preference in life insurance industry in India. She had
analyzed the customer preference regarding plans and company, their purpose of buying insurance
policies, satisfaction level and their future plans for the new insurance policy.
Mr. K B S Kumar edited the book ‘Insurance customer service’ of ICFAI University press; it includes the
chapters like ‘Tracking customer satisfaction’ by Mr Tom moormam.
U Jawaharlal and Nikhil Pareek analyzed ‘the customer service in Life Insurance’ In Insurance Chronical
(April 2004) he had analyzed the different services of Life Insurance players in India.
Narayan Krishnamurthy in Outlook money (Sep 15, 2003) article analyzed the situational need of Insurance
at different situations and steps of life in his article ‘AT every step of Life…’.
Navasiyam et al. (2006) analyzed the socioeconomic factors that are responsible for taking life insurance
policies and examined the preferences of the policyholders towards various types of policies of LIC.
From the analysis, it was found that factors such as age, educational level and sex of the policyholders are
insignificant. However, income level, occupation and family size are significant while deciding on an
insurance policy. From the analysis, it is inferred that respondents belonging to the age group of 31 to 40
years are much interested in taking a life insurance policy.
MFs have attracted a lot of attention and kindled the interest of both academic and practitioner communities.
Compared to the developed markets, very few studies on MFs are done in India. This literature review
reveals investor behavior studies. The researches on mutual funds has been extremely skewed in terms of
geographical coverage, most focused to developed countries like Us.
Tamal Datta chaudhuri, Jayanta Kumar seal, edited the book named ‘Mutual Funds Industry’ it includes
empirical study made by Navdeep agrwal and Mohit Gupta titled ‘performance of mutual fund in
India: an empirical study’.
Mary Rowland written ‘The New Common sense Guide to mutual funds’ it includes the guidelines while
investing in mutual fund. How should one invest in mutual fund and when what step should be taken in a
situation by a investor.
Gupta LC (1993) conducted a household investor survey with the objective to provide data on investor
preferences on MFs and other financial asset.
Raja Rajan (1997,1998) high lightened segmentation of investors on the basis of their characteristics,
investment size, and the relationship between stage in life cycle of the investors and their investment
pattern.
4. Industry Profile
4.1 Life Insurance players in Nanded
1. Max New York Life Insurance Company Ltd.
2. ICICI Prudential Life Insurance Company Ltd.
3. Bajaj Allianz Life Insurance Company Ltd.
4. HDFC Life Insurance Company Ltd.
5. Reliance Life Insurance Company Ltd.
6. SBI Life Insurance Ltd.
7. Aviva Life Insurance Company Ltd.
4.2 Company Profile
Reliance Life Insurance Company Limited
Type Private limited company
Headquarters Headquarters in Chennai, India
Key people Mr. P Nandagopal (CEO), Mr. Anil Ambani (founder)
Industry Life insurance
Products Individual and Group Insurance Plans
http://www.reliancelife.com/
Registered Office:
H Block, 1st Floor,
Dhirubhai Ambani Knowledge City,
Navi Mumbai,
Maharashtra - 400710,
Phone No: +91-22-3033 8181
Email : [email protected]
NANDED OFFICE
Reliance Life Insurance Company Limited
3rd floor, Ali Bhai Towers, Shivaji Nagar
Nanded-431602
4.3 Different Products offered by Reliance Life in Nanded
1) Reliance Endowment Plan
Part of Reliance Group, can be trusted
High Returns and Life Security
More value for money
2) Reliance Cash Flow Plan
Liquidity/Life Insurance Protection/Growth
Life cover for full sum assured for full Policy term irrespective of Survival benefits paid already- Protection
Survival Benefits payable at the end of 4th year and every 3 years thereafter over the full policy term-Liquidity
Policy participates in profits. Bonus calculated on maturity or premature death. – Wealth appreciation
3) Reliance Whole Life Plan
Long life cover up to 85 years or death
Option to extend cover up to 99 years
PPT 5 years to 40 years- wide options
PPT for selected term or death
Loans can be availed
Participates in profits throughout lifetime if premium is paid up to date
4) Reliance Child Plan
Providing for future goals of children-education or marriage
Lump sum payments at appropriate times-not related to age of child
Four regular guaranteed payments-last 4 years of policy term
On death of life assured, future premiums waived
Policy participates in Profits- simple bonus at end of policy term
Minimum policy term-5 years- we can get payment from 2nd year if wanted.
5) Reliance Total Investment Plan Series
that give you ‘Total Investment, Total Flexibility’
Invest as much as you want, anytime you want
7 Funds and 52 Free Switches every year
Easy Liquidity with Partial Withdrawals -absolutely free !
Charges as low as 1% for subsequent purchases
Tax Benefits
6) Reliance Automatic Investment Plan
a. Ready Made Option
b. Tailor Made Option
c. Exchange Option
d. Riders
e. Tax Benefits
f. Top up Payment
g. Partial Withdrawals
h. Switching Option
i. Settlement Option
j. Convenient Premium Payment Options
All Investments eligible for tax deduction under section 80C Fund Value completely tax exempt under
section 10(10D) up to age 45 For the first time –3 New Fund Offers in the same plan Infrastructure
Fund, Energy Fund, Mid-Cap Fund.
4.4 Different mutual fund companies Available in Nanded.
1) UTI mutual fund.
2) SBI Mutual fund.
3) Reliance Mutual fund.
4) ICICI Prudential Mutual Fund.
5) Kotak Mutual Fund.
6) Birla Sun Life Mutual Fund
7) HSBC Mutual Fund
8) HDFC Mutual Fund
9) ING Vysya Mutual Fund
10) Prudential ICICI Mutual Fund
11) Sahara Mutual Fund
12) Unit Trust of India Mutual Fund
13) Standard Chartered Mutual Fund
14) Franklin Templeton India Mutual Fund
15) LIC Mutual Fund
4.5 Mutual Fund Schemes/ Funds provided by Mutual fund companies in
Nanded
Mutual fund means indirect investment in share market, mutual fund has following characteristics
• It is a pool of money, collected from investors, invested according to certain investment objectives
• The ownership of the fund is thus joint or mutual; the fund belongs to all investors.
• Mutual Funds are also known as Financial Intermediaries
• In India, Mutual Funds are constituted as Trust.
• The investors share is denominated by ‘units’ whose value is called as Net Asset Value (NAV) which changes every day.
• The investment portfolio is created according to the stated investment objectives of the fund.
• The ownership is in the hands of the investors who have pooled in their funds.
• It is managed by a team of investment professionals and other service providers.
• An equity fund will invest in Equity shares, Preference Shares, Warrants etc.
• A Debt Fund will invest in Debt Instruments only.
Following are the different products and services Offered by Mutual Fund Companies in Nanded
Open ended schemes
Close ended schemes
Growth/Equity oriented Schemes
Income/Debt oriented Schemes
Balanced Funds
Money market or liquid funds
Gilt Funds
Index Funds
Exchange Traded Funds
Sectoral Funds
Thematic Funds
Commodity Funds
Real Estate Funds
Tax Saving Funds
Hybrid Funds
There are several ways for investment and disinvestments in mutual funds such as :
Systematic Investment Plans (SIPs)
Value Averaging
Systematic Transfer Plans (STPs)
Systematic Withdrawal Plans(SWPs)
Automatic Reinvestment Plans.
Open ended fund
In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related
prices, from the fund itself.
The corpus of open-ended funds, therefore, changes every day.
Close ended fund
A closed-end fund offers units for sale only in the NFO. It is then listed in the market.
Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end funds
sell at a discount to NAV.
The corpus of a closed-end fund remains unchanged.
Growth fund
Provide capital appreciation over the medium to long-term
• Investor who does not require periodic income distribution can choose the option, where the incomes
earned are retained in the investment portfolio and allowed to grow, rather than being distributed to
investors.
• Investors with longer investment horizons and limited requirements for income choose this option.
• The return to the investor who chooses a growth option is the rate at which his initial investment has
grown over a period for which he has invested in the fund.
• The investor choosing this option will vary the NAV with the value of the investments portfolio ,
while the no. of units held with remains constant.
Income fund
Provide regular and steady income to investor
Balanced fund
Provide both growth and regular income.
Money market fund
Provide easy liquidity, regular income and preserve the income
Tax saving scheme
offer tax rebeats to the under specific provisions of the Indian income tax laws
Investment made under some schemes are allowed as deduction U/S 88 of the income tax act .
Automatic Reinvestment Plans
Reinvestment of amount of dividend made by fund in the same fund.
In this option, the no. of units held by the investor will change with every reinvestment.
The value of units will be similar to that under the dividend option
There are four types of plans as follows
Lump sum Investment
It is one time investment..
Investors can invest particular amount one time for fixed time of period.
Systematic Investment Plans( SIP) – For regular investment
SIP is investing a fixed sum periodically in a disciplined manner for long term.
It gives benefit of Rupee Cost averaging.
In SIP monthly minimum Rs.500 or Rs.100 are invested.
Interest is calculating compoundly.
Many SIP gives insurance benefits.
VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the investor flexibility with
respect to the amount and frequency of investment.
In VAP, investor has to impose voluntary self discipline.
Systematic Withdrawal Plan ( SWP) – For regular income
The lump sum amount is invested for one time and then fixed percent amount is withdraw monthly.
Remaining amount will grow continuously.
This plan is suitable for retired person, because it gives regular income.
Systematic Transfer Plan ( STP) –
Transfer on a periodic basis a specified amount from one scheme to another within the same fund family.
It gives option to the investor if the current fund performance in not satisfactory.
Dividend option
Investors will receive dividends from the mutual fund , as an and when dividends are declared.
Dividends are paid in the form of warrants or are directly credited to the investor’s bank accounts.
In normal dividend plan , periodicity of dividends is left to the fund managers, the timing of the
dividend payout is decided by fund manager.
Mutual funds provide the option of receiving dividends at pre-determined frequencies,wich can
vary from daily,weekly,monthly,quarterly,half-yearly and annual. Investors can choose the
frequency of dividend distribution that suits their requirements.
Investors choosing this option have a fixed no. of units invested in the fund and earned incomes
on this investment.
The NAV of this investors holding will vary with changes in the value of portfolio and the impact
of the proportion of income earned by the fund to what is actually distributed as dividend.
4.6 Unit linked Insurance plan
In earlier days, insurance was bought primarily for tax purposes and very few people actually bothered
about life cover as such. LIC was the only player and offered money back policies, endowment
policies and few single premium policies like Bima Nivesh. However as an asset class it wasn’t
considered as an option.
Now the scenario has completely changed, there are lots of private players and many new options have
come up. One among these new products is ULIPs which are hugely popular and sold as an attractive
asset with insurance/retirement benefit.
Insurers have developed plans that combine the benefits of life insurance as well as giving various options
of participating in the growth of capital market. Such plans are called ULIP.
Unit Linked Insurance Plan is a life insurance policy which provides a combination of life insurance
protection and investment. ULIP is a most famous and safe way of investment in current scenario.
In the event of the insured person’s untimely death, his nominees would normally receive an amount that
is higher of the sum assured (insurance cover) or the value of the units (Investments). However, there
are some schemes in which the policy holder receives the sum assured plus the value of the
investments.
Every insurance company has four to five ULIPs with varying investment options, charges and conditions
for withdrawals and surrender. Moreover, schemes have been tailored to suit different customer
profiles and, in that sense, offer a great deal of choice.
The charges paid in these schemes in terms of entry load, administrative fees, underwriting fees, buying
and selling charges and asset management charges are fairly high and vary from insurer to insurer in
the quantum and also in manner in which they are charged.
Some of the other features offered by insurers along with ULIPs are the following. These are not
offered by all insurers. they offered by RLIC only.
The policyholder can pay additional premium for investment at any time.
Partial or total withdrawal is allowed. Sometimes there are conditions attached. Some insurers, not all, charge a redemption fee in such cases.
These policies will not entitled to any bonus
There is no annual bonus, but there may be a loyalty bonus paid at the end
Option of Funds
Reliance Life Insurance offer policyholders a choice of funds in which their moneys may be invested like
Equity Fund: In this type of fund, sometimes also called Growth Funds, there would be more
investments in equities which are shares/ stocks traded in the stock market.
Debt Fund: In this type of fund, also called bond Funds, the investments are primarily in government
and government guaranteed securities and such safe debts and other high investment grade corporate
bonds.
Money Market Funds: In this type of fund, sometimes also called Liquid Funds, the investment may be
more in short term money market instruments such as treasury bills, commercial papers, etc.
Balanced Fund: In this type of funds, the investments are in both equity as well as debts.
4.7 Advantages of Unit Linked Insurance policies of Reliance
The main three advantages of Unit Linked policies of reliance over Traditional Policies are
Choice
Freedom to choose Sum Assured of your choice for a given Premium.
Freedom to choose where your money should be invested.
Freedom to choose to withdraw your money according to your need.
Transparency
Knowledge of exactly how much money has been deducted and for
what and exactly how much money has been invested.
Knowledge of the value of your investment on any given day.
Flexibility
Flexibility to increase my Sum Assured in the same policy at a later date without paying extra premium.
Flexibility to change your choice of investment at any time during the tenure of your policy
4.8 The advantages of Mutual Fund
Mutual fund
In the current investment circumstances this is an option which has shown a mind boggling growth and it
has become one of the most popular choices in recent times. This is the segment which is the main
competitor for the unit linked insurance plans (ULIPS) of insurance companies.
Mutual fund is a common pool of money into which the investors place their contributions that are to be
invested in accordance with the stated objective. A mutual fund is set up as a trust which supervises
the function of an Asset Management Company (AMC) which manages the investments in mutual
fund schemes.
Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value.
Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell.
Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud.
Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash.
Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet.
Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index
4.9 The disadvantage of Mutual Fund
No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.
Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.
Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.
Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers
A measurement of an option position or premium in relation to the underlying instrument. In mutual
fund also there is certain amount of risk-return factor associated according to the investment option
these are as follows
Table No.1 Risk and Return of Mutual Fund
Risk Return
Equity High High
Balanced Medium Medium
Debt Low Low
5. Empirical Study
5.1 ULIPs v/s Traditional ‘With Profit’ Policies
Unit-linked insurance plans, ULIPs, are distinct from the more familiar ‘with profits’ policies sold for
decades by the Life Insurance Corporation. With profits’ policies are called so because investment
gains (profits) are distributed to policyholders in the form of a bonus announced every year. ULIPs
also serve the same function of providing insurance protection against death and provision of long-
term savings, but they are structured differently.
In ‘with profits’ policies, the insurance company credits the premium to a common pool called the
‘life fund,’ after setting aside funds for the risk premium on life insurance and management expenses.
Every year, the insurer calculates how much has to be paid to settle death and maturity claims. The
surplus in the life fund left after meeting these liabilities is credited to policyholders’ accounts in the
form of a bonus.
In a ULIP too, the insurer deducts charges towards life insurance (mortality charges), administration
charges and fund management charges. The rest of the premium is used to invest in a fund that invests
money in stocks or bonds. The policyholder’s share in the fund is represented by the number of units.
The value of the unit is determined by the total value of all the investments made by the fund divided
by the number of units. If the insurance company offers a range of funds, the insured can direct the
company to invest in the fund of his choice. Insurers usually offer three choices — an equity (growth)
fund, balanced fund and a fund which invests in bonds.
The strong arguments in favour of unit-linked plans are that — the investor knows exactly what is
happening to his money and two , it allows the investor to choose the assets into which he wants his
funds invested. An investor in a ULIP knows how much he is payingsssssssssssssssss towards
mortality, management and administration charges. He also knows where the insurance company has
invested the money. The investor gets exactly the same returns that the fund earns, but he also bears
the investment risk. The transparency makes the product more competitive.
A traditional ‘with profits,’ on the other hand, is a black box and a policyholder has little knowledge
of what is happening. Traditional ‘with profits’ policies too invest in the market and generate the same
returns prevailing in the market. But here the insurance company evens out returns to ensure that
policyholders do not lose money in a bad year. In that sense they are safer.
As IRDA is a regulating authority for Insurance, so it has its total control over the business of all
Insurance companies. On July 1, 2006, the IRDA introduced revised ULIP guidelines. The following
are the provisions of the latest guidelines:
1. Term/Tenure
The ULIP client must have the option to choose a term/tenure.
If no term is defined, then the term will be defined as '70 minus the age of the client'. For example if the
client is opting for ULIP at the age of 30 then the policy term would be 40 years.
The ULIP must have a minimum tenure of 5 years.
2. Sum Assured
On the same lines, now there is a sum assured that clients can associate with. The minimum sum
assured is calculated as:
(Term/2 * Annual Premium) or (5 * Annual Premium) whichever is higher.
There is no clarity with regards to the maximum sum assured.
The sum assured is treated as sacred under the new guidelines; it cannot be reduced at any point during the
term of the policy except under certain conditions - like a partial withdrawal within two years of death
or all partial withdrawals after 60 years of age. This way the client is at ease with regards to the sum
assured at his disposal.
3. Premium payments
If less than first 3 years premiums are paid, the life cover will lapse and policy will be terminated by
paying the surrender value. However, if at least first 3 years premiums have been paid, then the life
cover would have to continue at the option of the client.
4. Surrender value
The surrender value would be payable only after completion of 3 policy years.
5. Top-ups
Insurance companies can accept top-ups only if the client has paid regular premiums till date. If the
top-up amount exceeds 25% of total basic regular premiums paid till date, then the client has to be
given a certain percentage of sum assured on the excess amount. Top-ups have a lock-in of 3 years
(unless the top-up is made in the last 3 years of the policy).
6.Partial withdrawals
The client can make partial withdrawals only after 3 policy years.
7. Settlement
The client has the option to claim the amount accumulated in his account after maturity of the term of
the policy upto a maximum of 5 years. For instance, if the ULIP matures on January 1, 2007, the client
has the option to claim the ULIP monies till as late as December 31, 2012. However, life cover will
not be available during the extended period.
8. Loans
No loans will be granted under the new ULIP.
9. Charges
The insurance company must state the ULIP charges explicitly. They must also give the method of
deduction of charges.
10. Benefit Illustrations
The client must necessarily sign on the sales benefit illustrations. These illustrations are shown to the
client by the agent to give him an idea about the returns on his policy. Agents are bound by guidelines
to show illustrations based on an optimistic estimate of 10% and a conservative estimate of 6%. Now
clients will have to sign on these illustrations, because agents were violating these guidelines and
projecting higher returns.
1. Regular disclosure of detailed ULIP portfolios. This is a problem with the industry; for all their talk on being just like (or even better than) mutual funds, ULIP portfolios are nowhere near their mutual fund counterparts in frequency as well as in transparency.
2. On the same lines, other data points like portfolio turnover ratios need to be mentioned clearly so clients have an idea on whether the fund manager is investing or punting.
3. ULIPs (especially the aggressive options) need to mention their investment mandate, is it going to aim for aggressive capital appreciation or steady growth. In other words will it be managed aggressively or conservatively? Will it invest in large caps, mid caps or across both segments? Will it be managed with the growth style or the value style?
4. Exposure to a stock/sector in a ULIP portfolio must be defined. Diversified equity funds have a limit to how much they can invest in a stock/sector. Investment guidelines for ULIPs must also be crystallised. Our interaction with insurance companies indicates that there is little clarity on this front; we believe that since ULIPs invest so heavily in stockmarkets they must have very clear-cut invesunds in terms of their structure tment guidelines.
5.2 Comparison of ULIP Vs Mutual Fund on different issues as
follows
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. As is the cases with mutual funds, investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component.
However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs
1. Mode of investment/ investment amounts
Mutual fund investors have the option of either making lump sum investments or investing using the
systematic investment plan (SIP) route which entails commitments over longer time horizons. The
minimum investment amounts are laid out by the fund house.
ULIP investors also have the choice of investing in a lump sum (single premium) or using the
conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly
basis. In ULIPs, determining the premium paid is often the starting point for the investment activity.
This is in stark contrast to conventional insurance plans where the sum assured is the starting point and
premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. For
example an individual with access to surplus funds can enhance the contribution thereby ensuring that
his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the
option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP).
The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge
over their mutual fund counterparts.
2. Expenses
In mutual fund investments, expenses charged for various activities like fund management, sales and
marketing, administration among others are subject to pre-determined upper limits as prescribed by
the Securities and Exchange Board of India.
For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a
recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund
house and not the investors.
Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry
loads are charged at the timing of making an investment while the exit load is charged at the time of
sale.
Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits
being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This
explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only restraint
placed is that insurers are required to notify the regulator of all the expenses that will be charged on
their ULIP offerings.
Expenses can have far-reaching consequences on investors since higher expenses translate into lower
amounts being invested and a smaller corpus being accumulated.
3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund
houses do so on a monthly basis. Investors get the opportunity to see where their monies are being
invested and how they have been managed by studying the portfolio.
There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our
interactions with leading insurers we came across divergent views on this issue.
While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other
believes that there is no legal obligation to do so and that insurers are required to disclose their
portfolios only on demand.
Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of
transparency in ULIP investments could be a cause for concern considering that the amount invested
in insurance policies is essentially meant to provide for contingencies and for long-term needs like
retirement; regular portfolio disclosures on the other hand can enable investors to make timely
investment decisions.
4. Flexibility in altering the asset allocation
As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely
comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a
60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt
instruments (debt funds) can be found in both ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same
fund house, he could have to bear an exit load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to shift investments across
various plans/asset classes either at a nominal or no cost (usually, a couple of switches are allowed
free of charge every year and a cost has to be borne for additional switches).
Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a
cost-effective manner.
This can prove to be very useful for investors, for example in a bull market when the ULIP investor's
equity component has appreciated, he can book profits by simply transferring the requisite amount to a
debt-oriented plan.
5. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds good,
irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds
domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are
eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified
equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are
tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @
10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain
is taxed at the investor's marginal tax rate.
Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of
advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and
make informed decisions.
5.3 Some facts for the growth of mutual funds in India
100% growth in the last 6 years.
Numbers of foreign AMC’s are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.
Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required.
We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion.
'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities.
Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products.
SEBI allowing the MF's to launch commodity mutual funds.
Emphasis on better corporate governance.
Trying to curb the late trading practices.
Introduction of Financial Planners who can provide need based advice.
Findings and Suggestions
After survey there are some findings and suggestions as follows. These findings and suggestions are
explained with the help of Following tables and Illustrations
As insurance sector is growing rapidly so most of the life insurance players are selling ULIP plans.
And the awareness about ULIP is growing most of the people knows the ULIP of life insurance. Since
last 4-5 years the returns provided by ULIP were very good so people tend more to words ULIP
Middle class people who are interested in investment but they are not aware of such options so more
awareness should be there, as main target customer are the middle class people of Nanded
While investing any insurance company customer prefers for good branded company Reliance is
India’s one of the most famous and richest family. And second preference is given to SBI life as many
people perceive that SBI Life is a govt. owned company so people want security for their investment.
As now till date people in India don’t wanted to invest in share market because then were thinking that
it is a bad thing but as the awareness about Mutual fund is increasing as more and more private players
are entering in the market. So awareness about MF is good and it can be improved.
While survey I found that many all customers had already invested in ULIP and Mutual Fund some
people had invested in both options. 44% of people had invested in Mutual Fund and 56% people had
invested in ULIP and 11% people had invested in both the options.
While investing in Mutual Fund the preference for the fund are changing as per the age of the
customer means the people from the age group of 25-40 who are generating more income, they are
risk takers and most of them preferring the equity fund.
As age is increasing the investment pattern moving to words more secured options like balanced and
debt funds. All age group people are tend to invest in Tax saving funds to avail the tax deduction.
While investing in mutual fund 80% investors preferring more to the returns the mutual fund is
providing and 60% for the Investment and Liquidity reasons.
First reason or preference that why an investor is interested in ULIP is Investment Purpose, and second
is to its returns and after that they investing because they are getting the tax benefit. Then again there
are some people who are investing for pension planning and security.
In future people will be more preferring to the security of their money means they want a secured
option which should provide good returns. As ULIP are the option in which you can have the security
also and good returns. The second choice of the investors is return of their money.
As most of the people want the option which should provide security and good returns and there is
only option available with good liquidity is ULIP of Reliance. 54% people had opted for ULIP as
their future investment and 45% of people opted for Mutual Fund. So we can find that there not so
much difference in these option.
62% of people given Best rating to the Reliance Life Insurance ULIP, so from this we can analyze that
Reliance Life Insurance is doing good but it is having good potential in Market. To improve its market
share they should improve the awareness level of the common people.
Innovative Products and good brand name are the main success factor for Reliance Life Insurance.
35% customers are attracted due to the Innovative products offered by RLIC. So if RLIC wants to
penetrate its market share they should improve the should give more emphasis on marketing strategy,
improving the distribution channel etc.
Demographic Analysis
The Segmentation of sample as on the basis of gender, age, family status, annual income,
occupation etc. the demographic profile is as follows
Table No.2 Demographic Profile
Frequency Percentage
Gender
Male 255 69%
Female 115 31%
Total 370 100%
Age
21-30 140 37%
31-40 80 22%
41-50 108 29%
More than 50 42 12%
Total (Approx.) 370 100%
Family Status
Married 214 58%
Single 156 42%
Total (Approx.) 370 100%
Annual Income ( lakhs)
Up to 1 lakh 128 35%
1-2 140 37%
2-3 44 12%
3-4 32 9%
More than 4 26 7%
Total (Approx.) 370 100%
Occupation
Civil servant 60 16%
Private Employee 48 13%
Self-Employed 32 8.5%
Businessman/women 102 28%
Farmer 32 8.5%
Others 96 26%
Total 370 100%
Awareness about ULIP Insurance
Table No. 3 Awareness about ULIP
No. of Responses Awareness About ULIP
(No. of persons)
335 YES
35 NO
370 Total
Illustration No. 1Awareness about ULIP
Interpretation
As insurance sector is growing rapidly so most of the life insurance players are selling ULIP plans. And
the awareness about ULIP is growing most of the people knows the ULIP of life insurance. Since last
4-5 years the returns provided by ULIP were very good so people tend more to words ULIP.
Company preference for ULIP
Table No.4 Company Preference
Responses Company Name
(No. of Persons)
155 Reliance Life Insurance
80 SBI Life Insurance
55 Max New York Life insurance
45 HDFC life Insurance
35 Bajaj Allianz Life Insurance
Illustration No.2 Company Preference
Interpretation
While Investing any insurance company customer is preferring for good branded company Reliance is
Indians one of the most famous and richest family. And second preference is given to SBI life as many
people perceive that SBI Life is a govt. owned company so people want security for their investment.
Awareness about Mutual Fund?
Table No. 5 Awareness about Mutual Fund
Awareness About Mutual Fund No. of Responses
(No. of persons)
Yes 324
No 46
Total 370
Illustration No.3 Awareness about Mutual Fund
Interpretation
As now till date people in India don’t wanted to invest in share market because then were thinking that it
is a bad thing but as the awareness about Mutual fund is increasing as more and more private players
are entering in the market. So awareness about MF is Good and it can be improved.
Existing investors in ULIP and Mutual Fund
Table. 6 option in which already Invested
Sr.
N
o
.
Investment option Responses
(No. of
Persons)
1 Mutual Fund 160
2 ULIP 210
Total 370
40 People had taken mutual fund and ULIP both.
Illustration No. 4 Option in which already Invested
Interpretation
While survey I found that many all customers had already invested in ULIP and Mutual Fund some people
had invested in both options. 44% of people had invested in Mutual Fund and 56% people had
invested in ULIP and 11% people had invested in both the options.
Fund Preference while investing in a Mutual Fund
Table No.7. Selection of Fund in MF
Sr.No. Name of the fund Responses
(No. of Persons)
Age
1 Equity Fund 146 25-40
2 Debt Fund 27 50-65
3 Balanced Fund 40 40-50
4 Tax saving Fund 57 25-60
Illustration No.5 Selection of Fund in MF
Int
erpretation
While investing in Mutual Fund the preference for the fund are changing as per the age of the customer
means the people from the age group of 25-40 who are generating more income, they are risk takers
and most of them preferring the equity fund. As age is increasing the investment pattern moving to
words more secured options like balanced and debt funds. All age group people are tend to invest in
Tax saving funds to avail the tax deduction.
Factors considering most to invest in Mutual Fund
Table 8. Reasons to invest in Mutual Fund
Sr.
N
o
.
Factors considered most while
investment
Responses
Age of
1 Only Investment 60
2 Good returns 80
3 Liquidity 60
Total 200
Illustration No. 6 Reasons to invest in Mutual Fund
Interpretation
While investing in mutual fund 80% investors preferring more to the returns the mutual fund is providing
and 60% for the Investment and Liquidity reasons.
Reasons to Invest In ULIP
Table 9. Factors considered while investing in ULIP
Sr. No.
Factors Considered Reponses
(No. of Persons
1 Investment 70
2 security 40
3 Pension Planning 35
4 Good returns 65
5 Tax Relief 50
Total 250
Illustration No. 7 Factors considered while investing in ULIP
Interpretation
First reason or preference that why an investor is interested in ULIP is Investment Purpose, and second is
to its returns and after that they investing because they are getting the tax benefit. Then again there are
some people who are investing for pension planning and security.
Factors to be Considered in future Investment
Table 10. factors to Considered for future Investment
Sr.
N
o
.
Factors Considered Responses
(No. of Persons)
1 Returns 165
2 Security of Money 195
Total 370
Illustration No.8 factors to Considered for future Investment
Interpretation
In future people will be more preferring to the security of their money means they want an secured option
which should provide good returns. As ULIP are the option in which you can have the security also
and good returns. The second choice of the investors is return of their money.
Most preferred way for investment
Table11. Mutual fund or ULIP
Sr.No. Investment Option Response
(No. of Persons)
1 Mutual Fund 170
2 ULIP 200
Total 370
Illustration No. 9 Mutual fund or ULIP
Interpretation
As most of the people want the option which should provide security and good returns and there is only
option available with good liquidity is ULIP of Reliance. 54% people had opted for ULIP as their
future investment and 45% of people opted for Mutual Fund. So we can find that there not so much
difference in these option.
Rating for Reliance life Insurance ULIP
Table 12. Rating for Reliance Life Insurance ULIP
Sr. No. Ratings Response
(No. of Persons)
1 Fair 30
2 Average 30
3 Good 80
4 Best 230
Illustration No. 10 Rating for Reliance Life Insurance ULIP
Interpretation
62% of people given Best rating to the Reliance Life Insurance ULIP, so from this We can analyze that
Reliance Life Insurance is doing good but it is having good potential in Market. To improve its market
share they should improve the awareness level of the common people.
Reasons to invest in RLIC
Table 13. USP of Reliance Life Insurance
Sr.
N
o.
Factors Responses
(No. of
Persons)
1Innovative Products
110
2 Good returns 70
3 Good Brand Name 90
4 Good Marketing strategy 65
Illustration11. USP of Reliance Life Insurance
Illustration
Innovative Products and good brand name are the main success factor for Reliance Life Insurance. 35%
customers are attracted due to the Innovative products offered by RLIC. So if RLIC wants to penetrate
its market share they should improve the should give more emphasis on marketing strategy, improving
the distribution channel etc.
7. Conclusions and/or Recommendations
From above analysis and survey we can conclude as follows
Awareness of ULIP is increasing as more number of private players are entering in life
insurance industry.
Mutual Fund is also getting more and more famous in Indian market as many private
companies innovating new funds as the investors demand.
ULIP differentiate from Mutual fund in respect of Insurance cover.
Investors in Reliance Life ULIP will be getting the advantage of life insurance cover.
ULIP and Mutual fund are providing same type of investment funds like, equity funds,
debt funds, infrastructure fund, balanced fund etc.
In terms of expenses mutual funds are having low expenses as compared to ULIP of
Reliance life insurance.
Mutual fund companies charging 1.5% to 2.5% as entry and exit load, Reliance life
insurance are charging 25% yearly as asset allocation charges.
People are turning to words the ULIP as a good investment option but as ULIP is in its
starting phase so customers are preferring only big brands.
Mutual fund is having good growth but many customers from rural areas don’t have any
knowledge about Mutual fund.
Even investors from cities like NANDED don’t have that much of Knowledge about
fund selection they all are depend on Brokers.
People in Nanded are investing in only good branded companies as they don’t believe
on other financial companies for taking ULIP.
There is a need for insurers to undertake a demand audit in order to understand what the
policyholder wants and needs.
Deriving the right feedback from customers and bringing out innovative products which
cater to customer demands will go a long way in tapping the market potential of the
insurance and Mutual fund sector.
Mutual fund and ULIP insurance both are facing fierce competition; increasingly more
organizations are seeking to enhance their demand in the market place.
For Reliance Life Insurance They should go for creating more awareness about its ULIP
as now also people are just investing because Reliance is India’s most Known and
Favorite brand in past.
RLIC should go for innovating more and more products and improving the distribution
channels as per the area of sales.
7. Appendices
A) Computation
Hypothesis testing
H 0 - People will not prefer investment in ULIP of RLIC as Compared to mutual fund in Nanded
H 1 - People will prefer investment in ULIP of RLIC as Compared to mutual fund in Nanded
The Sample size taken for this Hypothesis is 370. The preference of 370 will be recorded and can be
analyzed by ‘z’ test. Because sample size is more than 30
I have taken the response of 370 people. 210 persons had given positive preference for Reliance Life
ULIP.
= 210
= 370
= 10
Sample size > 30
Z =
Z = 210-370/10
= -16
Level of significance = 5% i.e.1.96
Two tailed test
-16 falls in rejection region so Ho is rejected
H0 is Rejected and H1 is accepted then we can say that People will prefer investment in ULIP of RLIC
as Compared to mutual fund in Nanded
-1.96 +1.96
B) Questionnaire
ULIP or Mutual Fund
Name of the Person __________________________________________
Address _______________________________________________
_______________________________________________
Phone N0. _______________________________________________
Occupation _______________________________________________
Age _______________________________________________
Education _______________________________________________
Average Annual Income
50000 -100000
100000 -200000
More than 200000
Q1) Do you know About ULIP Insurance?
Yes No
Q2) Do you have taken any ULIP insurance policy? Can you name it?
Yes No
_____________________________________________
Q3) If yes, which company’s ULIP you have taken and why?
_____________________________________________
For investment
For Security
For Pension planning
For Good returns
For Tax Relief only
Q4) Do you know about Mutual fund?
Yes No
Q5) Do you have taken any Mutual Fund? Can you name it?
Yes No
Q6) If yes, which company’s Mutual Fund you have taken and why?
________________________________________________
For only Investment
For Good returns
For Liquidity
Q7) Which is the factor you consider the most while choosing any
Investment Option?
Returns Security of money
Q8) Whom Do you prefer first for investment?
ULIP Mutual Fund
Q9) How would you rate Reliance life insurance ULIP?
Fair Average Good Best
Q10) what is the Main Reason to Invest in RLIC ULIP?
Innovative Products
Good returns
Good Brand Name
Good Marketing strategy
References
1. S.Balchandran, IRDA, IC-33 LIFE INSURANCE
2. Icfai university press Indian Financial services (current trends)
3. U Jawaharlal, Icfai university press, Insurance Industry The current Scenario
4. KBS Kumar, Icfai University Press, Insurance Customer services
5. Insurance Chronicle Sep 2007 Icfai University Press.
6. E. Mrudula. & Priya Raju.Mutual Fund Industry in India
7. Tamal Datta Chaudhuri, Jayanta Kumar seal, Icfai University press, Mutual Fund Industry
8. Services Marketing Journal Sep 08 Icfai University Press
9. Mary Rowland, The New Commonsense Guide to Mutual Funds
http://www. Visionbooksindia.com
10. “Companies and Products of Mutual Fund Industry In India” http://www.amphi.com
11. “Life Insurance Industry in India” http://www.irda.gov.in:
12. “History and Profile of RLIC” http://www.Relianelifeinsurance.com
Glossary
Agent
A securities firm is classified as an agent when it acts on behalf of its clients as buyer or seller of a
security. The agent does not own the security at any time during the transaction.
Annual Report
A publication, including financial statements and a report on operations, issued by a company to its
shareholders at the company's fiscal year-end.
Bonds
Promissory notes issued by a corporation or government to its lenders, usually with a specified
amount of interest for a specified length of time
Book
An electronic record of all pending buy and sell orders for a particular stock.
Capital
To an economist, capital means machinery, factories and inventory required to produce other
products. To investors, capital means their cash plus the financial assets they have invested in
securities, their home and other fixed assets.
Commission
the fee charged by an investment advisor or broker for buying or selling securities as an agent on
behalf of a client.
Commodities
Products used for commerce that are traded on a separate, authorized commodities exchange.
Commodities include agricultural products and natural resources such as timber, oil and metals.
Commodities are the basis for futures contracts traded on these exchanges.
Common Shares or Common Stock
Securities that represent part ownership in a company and generally carry voting privilege. Common
shareholders may be paid dividends, but only after preferred shareholders are paid. Common
shareholders are last in line after creditors, debt holders and preferred shareholders to claim any of a
company's assets in the event of liquidation.
Corporation or Company
A form of business organization created under provincial or federal laws that has a legal identity
separate from its owners. The shareholders are the corporation's owners and are liable for the debts of
the corporation only up to the amount of their investment. This is known as limited liability.
Dividend
The portion of the issuer's equity paid directly to shareholders. It is generally paid on common or
preferred shares. The issuer or its representative provides the amount, frequency (monthly, quarterly,
semi-annually, or annually), payable date, and record date. The exchange that the issue is listed on
sets the ex-dividend/distribution (ex-d) date for entitlement. An issuer is under no legal obligation to
pay either preferred or common dividends.
Earnings Per Share (EPS)
A listed issuer's earnings per share/unit (EPS) reported by TSX is EPS as presented by the issuer,
including special items, such as extraordinary items or discontinued operations. EPS is reported
according to Canadian Generally Accepted Accounting Principles (GAAP), except for a small
number of foreign issuers that may report according to different accounting standards. If EPS is not
reported by the issuer, it will not be calculated by TSX.
Equities
Common and preferred stocks, which represent a share in the ownership of a company
Face Value
The cash denomination of the individual debt instrument. It is the amount of money that the holder of
a debt instrument receives back from the issuer on the debt instrument's maturity date. Face value is
also referred to as par value or principal.
Insurance agent
Individual licensed to sell insurance.
Portfolio
Holdings of securities by an individual or institution. A portfolio may include various types of
securities representing different companies and industry sectors.
Preferred Share
A class of share capital that entitles the owner to a fixed dividend ahead of the issuer's common
shares and to a stated dollar value per share in the event of liquidation. It usually does not have voting
rights, unless a stated number of dividends have been omitted.
Yield
This is the measure of the return on an investment and is shown as a percentage. A stock yield is
calculated by dividing the annual dividend by the stock's current market price. For example, a stock
selling at $50 and with an annual dividend of $5 per share yields 10%. A bond yield is a more
complicated calculation, involving annual interest payments, plus amortizing the difference between
its current market price and par value over the life of the bond
Transactions
As reported in exchange trading statistics, represents the total number of trades for a specified period
Securities
Transferable certificates of ownership of investment products such as notes, bonds, stocks, futures
contracts and options.
Net Asset Value (NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities. per unit NAV is
the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
Load
This is the price of buying a unit. Most funds sell units at a premium to its underlying net asset value,
and purchase them at the net asset value. When the fund company charges a load when it sells units, it
is called entry load. When it charges a load at the time of buying the units back from an investor, it is
called exit load.
Investment banker
Firm that sells stocks or bonds to brokerages which, in turn, sell them to investors on a securities
exchange.
Investment company
Firm that, for a management fee, invests pooled funds of small investors in securities appropriate for
its stated investment objectives.
Share
Unit of ownership.
Shareholder
One who owns shares. In a mutual fund, this person has voting rights.
Common stock
Unit of ownership in a public corporation with voting rights, but with lower priority than either
preferred stock or bonds if the company is ever liquidated.
Assets
Everything a company or person owns, including money, securities, equipment and real estate. Assets
include everything that is owed to the company or person. Assets are listed on a company's balance
sheet or an individual's net worth statement.
Subscription Price
Price at which the issue of security can be subscribed to by the investors.
Sale Price
is the price you pay when you invest in a scheme. Also called offer Price. It may include a sales load.
Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-end load.
This is also called Bid Price.
Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem
their units on maturity. Such prices are NAV related.
Sales Load
Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that
do not charge a load are called ‘No Load’ schemes.
Repurchase or ‘Back-end’ Load
is a charge collected by a scheme when it buys back the units from the unit holders.
Investment company
Firm that, for a management fee, invests pooled funds of small investors in securities appropriate for
its stated investment objectives.
Junk bond funds
Mutual funds that invest in bonds issued by companies or governments that are rated below BBB by
Standard and Poor's or Moody's. Also know as high-yield bond funds.
Long-term bond funds
Mutual funds that invest in bonds that mature in more than 10 years.
No-load mutual fund
Mutual fund that is sold without sales commission.
Open-end funds
Funds that permit ongoing purchase and redemption of fund shares (mutual funds are open-end
funds).
Over-the-counter market
Market that uses a network of brokers to buy and sell securities rather than an exchange.
Precious metals mutual fund
Mutual funds that invest in precious metals and mining stocks.
Preferred stock
Type of stock that takes priority over common stock in the payment of dividends or if the company is
liquidated.
Secondary market
Market wherein bonds, stocks, or other securities are bought and sold after they're already issued.
Securities
Stocks, bonds, or rights to ownership, such as options, typically sold by a broker.
Securities exchange
Tightly regulated marketplace where stocks, bonds, and cash are traded.
Share
Unit of ownership.
Shareholder
One who owns shares. In a mutual fund, this person has voting rights.
Short-term bond funds
Mutual funds that generally invest in bonds that mature in less than three years.
Competitor
The auction participant on the same side of the Initiator's order. If the Initiator is a buyer then the
competitor enters buy orders for the same security.
Closing Price
The trade price of a security at the end of a trading day. Based on the closing price of the security, the
base price at the beginning of the next trading day is calculated.
Portfolio
A combination of assets or collection of securities owned by individual or institution.
