36711590 Life Insurance Project

8/8/2019 36711590 Life Insurance Project

1/86Karunya School of Management, Coimbatore 1

A Comparative Analysis of ULIP of Bajaj Allianz Life Insurance

Co. Ltd with Mutual Fund

MINI PROJECT REPORT

Submitted by

RAJEEV JOSEPH

REG.NO:08BA020

1st

Year MBA

KARUNYA UNIVERSITY

Under the guidance of

Ms. P.M. ANUSHIA

LECTURER

KARUNYA SCHOOL OF MANAGEMENTKARUNYA UNIVERSITY

COIMBATORE 641114

2008-2010



DECLARATION

I, Rajeev Joseph, do hereby declare that this project work entitled A

Comparative Analysis of ULIP of Bajaj Allianz Life Insurance Co. Ltd with

Mutual Fund is an outcome of my study and is submitted in partial fulfillment of

the requirement for the award of the degree of Master of Business Administration,

Karunya University.

I also declare that this report has not been submitted by me fully or partially

for the award of any degree, diploma, title, recognition or any other fellowship of

any other university before.

Place: Changanacherry

Date: 21-06-2009 RAJEEV JOSEPH



ACKNOWLEDGEMENT

Initially, let me thank the almighty God for guiding me all through the project

work.

I express my deep and sincere gratitude to Ms. P.M. Anushia, Faculty guide for

providing the necessary assistance for the project.

I sincerely acknowledge my gratitude to Mr. Justin Paul, Branch Manager of

Bajaj Allianz Life Insurance Company Ltd, Changanacherry branch and Mr.

Biju Sebastian ,Sales Manager for giving me an opportunity to do this project.

I also owe my sincere thanks to all the staff in Bajaj Allianz Life Insurance

Company Ltd, Changanacherry branch, and the faculties of the Department of

Business Administration, KARUNYA UNIVERSITY for their valuable

guidance and suggestion in the preparation of this report and completing the

same successfully.


4/86



EXECUTIVE SUMMARY

A comparative Analysis of ULIP plans of Bajaj Allianz Life Insurance with mutual funds

in Changanacherry Branch an analysis to be done be by Rajeev Joseph, student(MBA) of

Karunya University, Coimbatore.

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 estate, etc.

Today people want more services and more return on their investment. So, most of the insurancecompanies are providing more value added services with the basic insurance operation.

Another option for investment available 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 Bajaj Allianz Life 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.



INTRODUCTION

To make comparison of ULIP plans with Mutual funds in Bajaj Allianz Life Insurance Co. Ltd.

and to Create awareness about Unit Linked Insurance Plan (ULIP) Benefits. 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 todays 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. Bajaj Allianz 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.

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 understand the reason for which customers prefer ULIP as one of the best insurance

investment mode rather than Mutual fund.

To find the significance difference between customers of different income with that of

investment mode.

To Compare Investment Options of customers in ULIPs and Mutual Funds.

LIMITATIONS

The middle class people do not know basic concept of ULIP so creating awareness is abig challenge for me.

The findings of my research is from a small sample size.

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 andMutual fund both are related to share market.

A general preference to LIC and SBI over private players.

Hesitations on the part of respondents to disclose financial information.



INDIAN INSURANCE INDUSTRY

The history of life insurance in India dates back to 1818 when it was conceived as a means to

provide for English Widows. Interestingly in those days a higher premium was charged for

Indian lives than the non-Indian lives as Indian lives were considered more riskier for coverage.

The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company

to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company

was established in 1880. The General insurance business in India, on the other hand, can trace its

roots to the Triton (Tital) Insurance Company Limited, the first general insurance company

established in the year 1850 in Calcutta by the British. Till the end of nineteenth century

insurance business was almost entirely in the hands of overseas companies.Insurance regulation

formally began in India with the passing of the Life Insurance Companies Act of 1912 and the

provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in

India. By 1938 there were 176 insurance companies. The first comprehensive legislation was

introduced with the Insurance Act of 1938 that provided strict State Control over insurance

business. The insurance business grew at a faster pace after independence. Indian companies

strengthened their hold on this business but despite the growth that was witnessed, insurance

remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers and provident

societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC)

was born. Nationalization was justified on the grounds that it would create much needed funds

for rapid industrialization. This was in conformity with the Government's chosen path of State

lead planning and development.The (non-life) insurance business continued to thrive with the

private sector till 1972. Their operations were restricted to organized trade and industry in large

cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurerswere amalgamated and grouped into four companies- National Insurance Company, New India

Assurance Company, OrientalInsurance Company and United India Insurance Company. These

were subsidiaries of the General Insurance Company (GIC).The general insurance business was

nationalized after the promulgation of General Insurance Business (Nationalizations) Act, 1972.

The post-nationalization general insurance business was undertaken by the General



Insurance Corporation of India (GIC) and its 4 subsidiaries:

Oriental Insurance Company Limited; New India Assurance Company Limited; National

Insurance Company Limited; and United India Insurance Company Limited.

Some of the important milestones in the life insurance business in India are:

1850:

Non life insurance debuts with triton insurance company.

1870:

:Bombay mutual life assurance society is the first Indian owned life insurer

1912:

The Indian Life Assurance Companies Act enacted as the first statute to regulate the life

insurance business.

1928 :

:The Indian Insurance Companies Act enacted to enable the government to collect statistical

information about both life and non-life insurance businesses.

1938:

Earlier legislation consolidated and amended to by the Insurance Act with the objective of

protecting the interests of the insuring public.

1956:

245 Indian and foreign insurers and provident societies taken over by the central government and

nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution

of Rs. 5 Crore from the Government of India. The General insurance business in India, on the

other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance

company established in the year 1850 in Calcutta by the British.



Some of the important milestones in the general insurance business in India are:

1907:

The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of

general insurance of India.

1957 :

General Insurance Council, a wing of the Insurance Association of India, frames a code of

conduct for ensuring fair conduct and sound business practices.

1968 :

The Insurance Act amended to regulate investments and set minimum solvency margins and

the Tariff Advisory Committee set up.

1972 :

The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance

business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into

four companies viz. the National Insurance Company Ltd., the New India Assurance Company

Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC

incorporated as a company.

1993: Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N.

Malhotra- was formed to evaluate the Indian insurance industry and recommend its future

direction. The Malhotra committee was set up with the objective of complementing the reforms

initiated in the financial sector.

1997 : Insurance regulator IRDA set up.

2000: IRDA starts giving licenses to private insurers:Kotak Life Insurance ,ICICI potential and

HDFC standard Life insurance are the first private insurers to sell a policy.

2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed to sell

insurance plans.



INSURANCE MARKET PRESENT

The insurance sector was opened up for private participation seven years ago. For years now,

the private players are active in the liberalized environment. The insurance market have

witnessed dynamic changes which includes presence of a fairly large number of insurers both life

and non-life segment. Most of the private insurance companies have formed joint venture

partnering well recognized foreign players across the globe.

LIFE INSURANCE COMPANIES

Sl. No. Insurer Foreign Partners

1 HDFC Standard Life Insurance Co. Ltd. Standard Life Assurance, UK2 Standard Life Assurance, UK New York Life, USA3 ICICI-Prudential Life Insurance Co. Ltd. Prudential , UK4 Om Kotak Life Insurance Co. Ltd. Old Mutual, South Africa5 Birla Sun Life Insurance Co. Ltd. Sun Life, Canada6 Tata-AIG Life Insurance Co. Ltd. American International Assurance Co.,

USA7 SBI Life Insurance Co. Ltd. BNP Paribas Assurance SA, France

8ING Vysya Life Insurance Co. Ltd. ING Insurance International B.V.,

Netherlands

9 Allianz Bajaj Life Insurance Co. Ltd. Allianz, Germany10 Metlife India Insurance Co. Ltd. Metlife International Holdings Ltd., USA11 Reliance Life Insurance Co. Ltd.

12 AVIVA Aviva International Holdings Ltd., UK13 Sahara Life Insurance Co. Ltd.

14 Shriram Life Insurance Co. Ltd. Sanlam, South Africa15 Bharti AXA Life Insurance Co. Ltd. AXA Holdings, France16 Future Generali India Life Insurance

Company LtdPantaloon Retail Ltd.; Sain Marketing

Network Pvt. Ltd. (SMNPL), Generali,Italy

17 IDBI Fortis Life Insurance Company Ltd. Fortis, Netherlands18 Canara HSBC OBC Life Insurance

Company Ltd.HSBC, UK

19 Aegon Religare Life Insurance CompanyLtd.

Religare, Netherlands

20 DLF Pramerica Life Insurance Co. Ltd. Prudential of America, USA21 Life Insurance Corporation of India



TOP 10 LIFE INSURANCE COMPANIES IN INDIA

LIC (Life Insurance Corporation of India) still remains the largest life insurance company

accounting for 64% market share. Its share, however, has dropped from 74% a year before,

mainly owing to entry of private players with innovative products and better sales force.

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India. It

experienced growth of 58% in new business premium, accounting for increase in market share to

8.93% in 2007-08 from 6.97% in 2006-07.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share went up

to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in number

of policies sold in 2007-08, with total market share of 7.36%.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked 6th in

2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an

increase of 87% over last year.

Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market share went

up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium and 4th in

number of new policies sold in 2007-08.

HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08,

registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th among the

insurance companies and 5th amongst the private players.

Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in

2007-08.

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new

business generated was Rs 641.83 crore as against Rs 387.51 crore.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported

growth of 80%, moving from the 11th position to 9th. It captured a market share of 1.19% in



2007-08. Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th

last year. It has presence in more than 3,000 locations across India via 221 branches and close to

40 banc assurance partnerships. Aviva Life Insurance plans to increase its capital base by Rs 344

crore.

MARKET SHARE OF VARIOUS LIFE INSURANCE COMPANIES IN

INDIA

Here is themarket share of various Life Insurance Companies in Indiaat the end of FY2008.

Company Name Market Share (in %)

LIC 48.1%

ICICI Prudential 13.7%

Bajaj Allianz 10.3%

SBI Life 6.2%

HDFC Standard 4.1%

Birla Sunlife 3.4%

Reliance Life 3.4%

Max New York 2.4%

OM Kotak 1.9%

AVIVA 1.8%

Tata AIG 1.5%

MetLife 1.4%

ING Vysya 1.2%

Shriram Life 0.3%

Bharti Axa Life 0.2%



BOOMING INSURANCE MARKET IN INDIA

With a huge population base and large untapped market, insurance industry is a big opportunity

area in India for national as well as foreign investors. India is the fifth largest life insurance

market in the emerging insurance economies globally and is growing at 32-34% annually. This

impressive growth in the market has been driven by liberalization, with new players significantly

enhancing product awareness and promoting consumer education and information. The strong

growth potential of the country has also made international players to look at the Indian

insurance market. Moreover, saturation of insurance markets in many developed economies has

made the Indian market more attractive for international insurance players

This research report will help the client to analyze the leading-edge opportunities critical to the

success of insurance industry in India. Based on this analysis, the report gives a future forecast of

the market that is intended as a rough guide to the direction in which the market is likely to

move.

Total life insurance premium in India is projected to grow Rs 1,230,000 Crore by 2010-11.

y Total non-life insurance premium is expected to increase at a CAGR of 25% for the

period spanning from 2008-09 to 2010-11.

y With the entry of several low-cost airlines, along with fleet expansion by existing ones

and increasing corporate aircraft ownership, the Indian aviation insurance market is all

set to boom in a big way in coming years.

y Home insurance segment is set to achieve a 100% growth as financial institutions have

made home insurance obligatory for housing loan approvals.

y Health insurance is poised to become the second largest business for non-life insurers

after motor insurance in next three years.

y A booming life insurance market has propelled the Indian life insurance agents into the

top 10 country list in terms of membership to the Million Dollar Round Table (MDRT)

an exclusive club for the highest performing life insurance agents.



COMPANY PROFILE

Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance

Company and Bajaj Finserv.

Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in

the world,managing assets worth over a Trillion(Over INR 55,00,000 Crores).Allianz SE has

over 115 years of financial experience and is present in over 70 countries around the world.

At Bajaj Allianz Life Insurance, customer delight is the guiding principle. Their business

philosophy is to ensure excellent insurance and investment solutions by offering customized

products, supported by the best technology.

VISION

To be the first choice insurer for customers

To be the preferred employer for staff in the insurance industry.

To be the number one insurer for creating shareholder value.

MISSION

As a responsible, customer focused market leader, we will strive to understand the insurance needs of the

consumers and translate it into affordable products that deliver value for money.

Accelerated Growth

Fiscal Year No. of policies sold New Business in FY

2001-2002(6 mths) 21,37 Rs. 7 cr.

2002-2003 1,15,965 Rs. 63.3 cr.

2003-2004 1,86,443 Rs. 180 cr.

2004-2005 2,88,189 Rs. 857 cr.

2005-2006 7,81,685 Rs. 2,717 cr.

2006-2007 20,79,217 Rs. 4,302 cr.

2007-2008 37,44,742 Rs. 6,674 cr.



Bajaj Allianz General Insurance received the Insurance Regulatory and Development Authority

(IRDA) certificate of Registration on 2nd May, 2001 to conduct General Insurance business

(including Health Insurance business) in India. The Company has an authorized and paid up

capital of Rs 110 crores. Bajaj Finserv Limited holds 74% and the remaining 26% is held by

Allianz, SE.

As on 31st March 2009, Bajaj Allianz General Insurance maintained its premier position in the

industry by achieving growth as well as profitability. The company garnered a premium income

of Rs. 2866 crore, achieving a growth of 11 % over the last year. Bajaj Allianz has made a profit

before tax of Rs. 149.8 crore and has become the only private insurer to cross the Rs.100 crore

mark in profit before tax in the last two years. The profit after tax was Rs.95 crores, which is also

the highest by any private insurer. The company ranked second (after LIC) in number of policiessold in 2007-08, with total market share of 7.36%.

RESULTS FOR CURRENT FY TILL 31ST DECEMBER 2008

The Gross Written Premiums (GWP) for the nine months ended on 31st Dec 2008, is Rs 6726

crores as compared to Rs 5219 crores in the corresponding period of the previous year - growth

of 29%. New Business premium for the nine months ended on 31st Dec 2008 is Rs. 3003 crores

as compared to Rs. 3780 crores in the corresponding period of previous year.

Commission on new business premium, which was 27% during nine months ended on 31st Dec

2007, came down to 20% during the current period.

Operating expenses came down to 20% of GWP for the current period of nine months ended on

31st Dec 2008 as compared to 26% for the corresponding period of previous year.

The Company posted a profit of Rs 364 lacs for the period ended 31st Dec 2008 as compared to

a profit of Rs 5358 lacs in the corresponding period of the previous year. The policyholder

surplus is Rs 15514 lacs (corresponding period of previous year Rs 18681 lacs) and the

shareholders loss stands at Rs 15150 lacs (corresponding period of previous year: Rs 13323

lacs).



Number of policies underwritten during the nine months ended 31st Dec 2008 were 18,08,495

(corresponding period of the previous year 23,62,496). Policies in force as on 31 st Dec 2008 is

around 70 lacs. The company ranked second (after LIC) in number of policies sold in 2007-08,

with total market share of 7.36%.

The share capital (including share premium) is Rs. 1211 crores as on 31st December 2008. The

solvency as on 31 st Dec 2008 stands at 261% (required solvency is 150%). During the period

ended 31st Dec 2008, no additional capital has been infused. Despite challenging environment,

the company has been able to not only reduce commission but also operating expenses. The

solvency margin of the company continues to be very strong.

As on 31st Dec 2008, the Company employed on roll 22,129 staff as against 20,764 staff at 31st

March 2008.The Company operates out of 1,138 offices as on 31 Dec 2008.



PRODUCTS PROFILE

Unit Linked Plan

New family gain

New unit gain plus

New unit gain premier

Traditional plan

Invest gain

Cash gain

Child gain

Retirement Solutions

Swarna visranthi

New unit gain easy pension plus

Health Plan

Care first

Health care

Term Plan

Risk care

Term care



UNIT LINKED INSURANCE POLICY

(ULIP)



UNIT LINKED INSURANCE POLICY (ULIP)

A unit linked insurance policy is one in which the customer is provided with a life insurance

cover and the premium paid is invested in either debt or equity products or a combination of thetwo. In other words, it enables the buyer to secure some protection for his family in the event of

his untimely death and at the same time provides him an opportunity to earn a return on his

premium paid. In the event of the insured person's untimely death, his nominees would normally

receive an amount that is the higher of the sum assured (insurance cover) or the value of the units

(investments).However, there are some schemes in which the policyholder 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 advantage of ULIP is that since the investments are made for long periods, the chances of

earning a decent return are high.

Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes while

those who have an appetite for risk can opt for balanced or equity schemes. However, the

charges paid in these schemes in terms of the 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 as also in the manner in which they are charged.

Tax benefits

The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows a a

maximum of Rs. 1,00,000 premiums paid for taxable income below Rs 8,50,000 and Proceeds

from ULIPs are tax-free under section 10(10D) unlike those from a mutual fund which attract

short term capital gains tax.



Key features

Premiums paid can be single, regular or variable. The payment period too can be regular or

variable. The risk cover (insurance cover) can be increased or decreased.As in all insurance

policies, the risk charge (mortality rate) varies with age. However, for an individual the risk

charge is always based on the age of the policyholder in the year of commencement of the

policy. These charges are normally deducted on a monthly basis from the unit value. For

instance, if there is an increase in the value of units due to market conditions, the sum at risk

(sum assured less the value of investments) reduces and so the risk charges are lower. The

maturity benefit is not typically a fixed amount and the maturity period can be advanced (early

withdrawal) or extended.

Investments can be made in gilt funds (government securities), balanced funds (part debt, part

equity), money-market funds; growth funds (equities) or bonds (corporate bonds).

The policyholder can switch between schemes (for instance, balanced to debt or gilt to equity).

The investment risk is transferred to the policyholder.The maturity benefit is the net asset value

of the units. The value would be high or low depending on the market conditions during the

period of the policy and the performance of the fund manager.

Thus there is no capital protection on maturity unless the scheme specially provides for it. There

could be policies that allow the policyholder to remain invested beyond the maturity period in

the event of the maturity value not being satisfactory.

POINTS TO REMEMBER ABOUT ULIP

First-year charges: Usually, a minimum of 15 per cent. However, high premiums attract lower

charges and vice versa. Charges can be as high as 70 per cent if the scheme affords a lot of

flexibility. Subsequent charges: Usually lower than first-year charges. However, some insurers

charge higher fees in the initial years and lower them significantly in the subsequent years.

Administration charges: This ranges between Rs 15 per month to Rs 60 per month and is levied

by cancellation of units and also depends on the nature of the scheme.



Risk charges: The charges are broadly comparable across insurers.

Asset management fees: Fund management charges vary from 0.6 per cent to 0.75 per cent for a

money market fund, and around 1.5 per cent for an equity-oriented scheme. Fund management

expenses and the brokerage are built into the daily net asset value.

Switching charges: Some insurers allow four free switches in every year but link it to a

minimum amount. Others allow just one free switch in each year and charge Rs 100 for every

subsequent switch. Some insurers don't charge anything.

Top-ups: Usually attracts 1 per cent of the top-up amount. Top-up normally goes directly into

your investment account (units) unless you specifically ask for an increase in the risk cover.

Surrender value of units: Insurers levy certain charges if the policy is surrendered prematurely.

This levy varies between insurers and could be around 75 per cent in the first year, 60 per cent in

the second year, 40 per cent in the third year and nil after the fourth year.

Fund performance: You could check out the performance of similar schemes (balanced with

balanced; equity with equity) across insurance companies.

Look at NAV performance over a period of at least two to three years. This can only give yousome indication about the credibility of the fund manager because past performance is no

guarantee to future returns, especially in insurance products where the emphasis is on long-term

performance (10 years or more).

Since insurance is a product, which entails a long-term commitment on the part of the insurer, it

is important not to go only by the features or the cost advantages of schemes but by the parentage

of the insurer as well.

Comparing schemes based on costs is a fairly complex exercise. As a rule, the higher the initial

years' expenses the longer it takes for the policy to outperform its peers with low initial years'

costs and slightly higher subsequent year expenses.



Retire unhurt

Pension plans are essentially tailored to meet old age financial requirements. But there are

certain advantages in joining a pension plan.

First of all, contribution to pension funds upto Rs 10,000 is eligible for tax deduction under

section 80CCC. In other words, your pension contribution will get deducted from your taxable

income.

So if you are in the top tax bracket, liable to pay to a 30.6 per cent tax, then your tax savings will

be that much.

All life insurance companies offer pension products - both conventional and unit-linked. In bothcases you pay a certain premium amount for a specified length of time.

Usually, the minimum entry age is 18 years and the maximum age is 60 years. You can choose to

pay the premium for five to 30 years. When the policy matures, you receive one-third of the

value of the accumulated amount as a lump-sum payment.

For the remaining, you can buy annuities either from the existing insurer or any other insurer.

While in a conventional scheme, your money is managed through the insurer's pooled investment

account and you are entitled to bonuses every year, in a ULIP you receive the value of the

investment in your individual account.

In a ULIP you have the flexibility to choose between a conservative scheme or an aggressive

scheme with high allocation to equities. Pension policy imposes huge penalties for early

termination.

HOW DOES ULIP WORK

Sara is a thirty-year old who wants a product that will give him market-linked returns as well as a

life cover. He wants to invest Rs 50,000 a year for 10 years in an equity-based scheme. Based on

this premium, the sum assured works out to Rs 532,000, the exact amount of premium being Rs

50,032.



Based on the current NAV of the plan that Sara chooses to invest in, he is allotted units in the

scheme. Then, units equivalent to the charges are deducted from his portfolio.

The charges in the first year include a 14 per cent sales charge, an administration charge (7 per

cent for the first Rs 20,000 and 3 per cent for the remaining Rs 30,000) and underwriting

charges, which are deducted monthly.

Besides, mortality charges or the charges for the life cover are also deducted. For the remaining

nine years a 3.5 per cent sales charge and an administrative charge of 4 per cent (for the first Rs

20,000 and 2 per cent for the remaining Rs 30,000) are levied in addition to mortality charges.

Fund management fee of 1.5 per cent (equity) and brokerage are also charged. This cost is built

into the calculation of net asset value.

On maturity - that is, after 10 years - Sara would receive the sum assured of Rs 532,000 or the

market value of the units whichever is higher.

Assuming the growth rate in the market value of the units to be 6 per cent per annum Sara would

receive Rs 581,500; assuming the growth rate in the market value of the units to be 10 per cent,

Sara would receive Rs 7,24,400.

In case of Sara's untimely death at the end of the ninth year, his beneficiaries would receive the

sum assured of Rs 532,000 or the market value of the units whichever is higher. Assuming the

growth rate in the market value of units is 6 per cent per annum, the value of investment would

be Rs 510,200.

However, his family will get Rs 532,000 as it is the sum assured.

Assuming a growth rate of 10 per cent per annum, the value of units at the end of the ninth year

would be Rs 621,900. Hence, the beneficiaries would get Rs 621,900.

ADVANTAGES OF ULIP

y Can easily rebalance your risk between equity and debt without any tax implications.



y Best suited for medium risk taking individuals who wish to invest in equity and debt

funds (at least 40% or higher exposure to debt). No additional tax burden for those

investing mainly in debt unlike in MFs.

RISKS ASSOCIATED WITH ULIPS

ULIPS as the name suggests are directly linked with the investments made by the insured.

Though he does not have a direct say in this but he does offer his choice in the form of

investment.

With stock markets soaring high a few months back, ULIPs were offering a good rate of return,

but now with a sudden downfall of the stocks, ULIPs are bound to become negative investments.

At present, a policy-holder cannot understand the growth of his investments vis--vis other funds

in the market, since there is no benchmark to measure one fund against the other. Usually a

policy-holder could ask his investment in a ULIP to be, for example, 55 per cent in equity and 45

per cent in debt. These components can be mixed according to his risk-taking ability. An

investor, therefore, would have to look at quarterly statements, where the fund would be

compared with benchmarks. However, this may not be a true representation of the NAV, as the

ULIP could be a mix of debt, liquid and equity investments.

The reality is that most of the ULIPs take more than 5 years to break even. Policies where the

costs are 65 per cent and upwards have not even recovered the principal despite the strongest bull

market we have ever witnessed.



MUTUAL FUND

INTRODUCTION OF MUTUAL FUNDS:

A mutual fund is simply a financial intermediary that allows a group of investors to pool their

money together with a predetermined investment objective. The mutual fund will have a fund



manager who is responsible for investing the pooled money into specific securities (usually

stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the

mutual fund and become a shareholder of the fund.

Mutual funds are one of the best investments ever created because they are very cost efficient

and very easy to invest in (you don't have to figure out which stocks or bonds to buy).

By pooling money together in a mutual fund, investors can purchase stocks or bonds with much

lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual

funds is diversification.

ACCORDING TO AMFI (ASSOCIATION OF MUTUAL FUND OF INDIA):

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 appreciation realized is 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. The flow chart below describes broadly the working of a mutual fund.

CHARACTERISTICS OF A MUTUAL FUND:



y Investors own the mutual fund.

y Professional managers manage the affairs for a fee.

y The funds are invested in a portfolio of marketable

y Securities, reflecting the investment objective.

y Value of the portfolio and investors holdings, alters with

y Change in market value of investments.

ADVANTAGES OF MUTUAL FUNDS:

The advantages of investing in a Mutual Fund are:

1. Professional Management:You avail of the services of experienced and skilled professionals

who are backed by a dedicated investment research team which analyses the performance and

prospects of companies and selects suitable investments to achieve the objectives of the scheme.

2. Diversification: Mutual Funds invest in a number of companies across a broad cross section

of industries and sectors. This diversification reduces the risk because seldom do all stocks

decline at the same time and in the same proportion.You achieve this diversification through a

Mutual Fund with far less money than you can do on your own.

3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you

avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with

brokers and companies. Mutual Funds save your time and make investing easy and convenient.

4. Return Potential:Over a medium to longterm, Mutual Funds have the potential to provide a

higher return as they invest in a diversified basket of selected securities.



5. LowCosts: Mutual Funds are a relatively less expensive way to invest compared to directly

investing in the capital markets because the benefits of scale in brokerage, custodial and other

fees translate into lower costs for investors.

6. Liquidity: In open-ended schemes, you can get your money back promptly at AssetValue

(NAV) related prices from the Mutual Fund itself.With close-ended schemes, you can sell your

units on a stock exchange at the prevailing market price or avail of the facility of repurchase

through Mutual Funds at NAV related prices which some close-ended and interval schemes

offer you periodically.

7. Transparency: You get regular information on the value of your investment in addition to

disclosure on the specific investments made by your scheme, the proportion invested in each

class of assets and the fund managers investment strategy and outlook.

8. Flexibility: Through features such as Systematic Investment Plans (SIP), Systematic

Withdrawal Plans (SWP) and dividend reinvestment plans, you can systematically invest or

withdraw funds according to your needs and convenience.

9. Choice of Schemes:Mutual Funds offer a variety of schemes to suit your varying needs

over a lifetime.

10. Well Regulated:All Mutual Funds are registered with SEBI and they function within the

provisions of strict regulations designed to protect the interests of investors.The operations

of Mutual Funds are regularly monitored by SEBI.

DISADVANTAGES OF MUTUAL FUNDS:



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,

RISK RETURN

Equity High High

Balanced Medium Medium

Debt Low Low

TYPES OF MUTUAL FUNDS:

I.Closed-end or Open-end



Open-end Funds: An open-end fund is one that has units available for sale and repurchase at all

time. An investor can buy or redeem units from the fund itself at a price based on the Net Asset

Value (NAV) per unit.

Close-end Funds: A close ended fund makes a one-time sale of a fixed number of unit. It does

not allow investors to buy or redeem units directly from the funds. However, to provide liquidity

to investors many closed-end funds get themselves listed on stock exchange. Funds do offer

buy-back of funds/units thus offering another avenue for liquidity to closed-end fund investor.

II. Load vs. No Load: Marketing of a new mutual fund scheme involves initial expense.

These expenses may be recovered from the investors in different ways at different times. Three

usual ways in which a funds sales expenses may be recovered from the investors are:

1. At the time of investors entry into the fund/scheme, by deducting a specific amount from his

initial contribution: front-end or entry load.

2. By charging the fund/scheme with a fixed amount each year, during the stated number of

years: deferred load.

3. At the time of the investors exit from the fund/scheme, by deducting a specific amount from

the redemption proceeds payable to the investor: back end or exit load These charges made by

the fund managers to the investors to cover distribution/sales/marketing expenses are often called

loads. Funds that charge front-end, back-end or deferred loads are called load funds. Funds

that make no such charges or loads for sales expenses are called no-load funds.

In India, SEBI has defined a load as the one-time fee payable by the investor to allow the fund

to meet initial issue expenses including brokers/agents/distributors commissions, advertising

and marketing expenses.

A load funds declared NAV does not include load charges

III. Tax-exempt vs. Non-Tax exempt Funds: Generally, when a fund invests in tax-

exempt securities, it is called a tax-exempt fund. In India, after the 1999 Union Government

Budget, all of the dividend income received from any of the mutual funds is tax-free in the hands

of the investors. However, funds other than Equity Funds have to pay a distribution tax, before



distributing income to investors. In other words, equity mutual fund schemes are tax-exempt

investment avenues, while other funds are taxable for distributable income.

Different types of mutual fund

Types of Mutual Fund:

Once we have reviewed the fund classes, we are ready to discuss more specific fund types. Funds

are generally distinguished from each other by their investment objectives and types of securities

they invest in.

A. Broad Fund Types by Nature of Investments

Mutual funds may invest in equities, bonds or other fixed income securities, or short-term money

market securities. So we have Equity, Bonds and Money Market Funds. All of them invest in

financial assets. But there are funds that invest in physical assets. For example, we may have

Gold or other Precious Metal Funds, or Real Estate Funds.

B. Broad Fund Types by Investment Objective

Investors and hence the mutual funds pursue different objectives while investing. Thus,

Growth Funds invest for medium to long term capital appreciation.

Type offunds

MaturityBasis

Closeended

Openended

Load Basis

Load fundNo load

fund

Tax Basis

Tax -exempt

Non Taxexempt



Income Funds invest to generate regular income, and less for capital appreciation.

Value Funds invest in equities that are considered under-valued today, whose value will be

unlocked in the future.

C. Broad Fund Types by Risk Profile

The nature of a funds portfolio and its investment objective imply different levels of risk

undertaken. Funds are therefore often grouped in order of risk. Thus, Equity Funds have a greater

risk of capital loss than a Debt Fund that seeks to protect the capital while looking for income.

Money Market Funds are exposed to less risk than even the For internal use by Training

Department of Prudential ICICI Mutual Fund Bond Funds, since they invest in short-term fixed

income securities, as compared to longer-term portfolios of Bond Funds.

Money Market Funds: Lowest rung in the order of risk level, Money Market Funds invest in

securities of a short-term nature, which generally means securities of less than one-year maturity.

Gilt Funds: Gilts are government securities with medium to long-term maturities, typically of

over one year (under one-year instruments being money market securities).

Debt Funds (or Income Funds): Next in the order of risk level, we have the general category

Debt Funds. Debt funds invest in debt instruments issued not only by governments, but also by

private companies, banks and financial institutions and other entities such as infrastructure

companies/utilities.

Diversifies Debt Funds: A debt fund that invests in all available types of debt securities, issued

by entities across all industries and sectors is a properly diversified debt fund . A diversified debt

fund is less risky than a narrow-focus fund that invests in debt securities of a particular sector or

industry.

Focused Debt Funds: Some debt funds have a narrow focus, with less diversification in its

investment. Examples include sector, specialized and offshore debt funds. Other examples of

focused funds include those that invest only in Corporate Debentures and Bonds or only in Tax

Free Infrastructure or Municipal Bonds.



High yield Debt Funds: There are funds which seek to obtain higher interest rates by investing

in debt instruments that are considered below investment grade. e.g. Junk Bond Funds.

Assured Return Funds an Indian Variant: The SEBI permits only those funds whose

sponsors have adequate net-worth to offer assurance of return. For e.g. MIPs. Investors have

some lock-in period.

Fixed Term Plan Series Another Indian Variant: These are essentially closed-end. These

plans do not generally offer guaranteed returns. This scheme is for short-term investors who

otherwise place money as fixed term bank deposits or inter corporate bonds.

Equity Fund: As investors move from Debt Fund category to Equity Funds,

they face increased risk level.

y No guarantee returns

y High potential for growth of capital

Types of Equity Fund

a) Aggressive Growth Fund

y Maximum capital appreciation

y Invests in less researched or speculative shares.

y Very volatile & riskier.

b) Growth Fund

y Growth fund invest in companies whose earnings are expected to

y

Rise above average rate. e.g. Technology Fundy Capital appreciation in 3 5 years

y Less volatile then aggressive growth fund.

c) Specialty Fund

They invest in companies that meet predefined criteria.



i) Sector Funds

y Technology Fund

y Pharmaceutical Fund

y FMCG Fund

ii) Offshore Funds

Invest in equities in one or more foreign countries.

iii) Small-Cap equity Funds

Invest in shares of companies with relative lower market capital.

d) Diversified Equity Funds

A fund that seeks to invest only in equities, except for a very small portion in liquid money

market securities, bur is not focused on any one or few sectors or shares, may be termed a

diversified equity fund. While exposed to all equity price risks, diversified equity funds seek to

reduce the sector or stock specific risks through diversification.

i) Equity Linked Savings Schemes: An Indian Variant

Investment in these schemes entitles the investor to claim an income tax rebate, but usually has a

lock-in period before the end of which funds cannot be withdrawn.

e) Equity Index Funds

An index fund tracks the performance of a specific stock market index. The objective is to match

the performance of the stock market by tracking an index that represents the overall market. The

funds invest in share that constitute the index and in the same proportion on the index.

f) Value Funds

Value Funds try to seek out fundamentally sound companies whose shares are currently under-

prices in the market. Value Funds will add only those shares to their portfolios that are selling at

low price-earnings ratios, low market to book value ratios and are undervalued by other

yardsticks. Fund concentrate on future growth prospect having good potential.



g) Equity Income Funds

There are equity funds that can be designed to give the investor a high level of current income

along with some steady capital appreciation, investing mainly in shares of companies with high

dividend yields.

y Hybrid Funds Quasi Equity/Quasi Debt: Many mutual funds mix these (money

market, debt and equity) different types of securities in their portfolios. Such funds are

termed hybrid funds as they have a dual equity/bond focus.

y Commodity Funds: While all of the debt/equity/money market funds invest in financial

assets, the mutual fund vehicle is suited for investment in any other- for examples-

physical assets.

y Real Estate Funds: Specialized Real Estate Funds would invest in Real Estate directly,

or may fund real estate developers, or lend to them, or buy shares of housing finance

companies or may even buy their securities assets.

Following are the different products and services Offered by Mutual Fund

Companies

y Open ended schemes

y Close ended schemes

y Growth/Equity oriented Schemes

y Income/Debt oriented Schemes

y Balanced Funds

y Money market or liquid funds

y Gilt Funds

y Index Funds



y Exchange Traded Funds

y Sectoral Funds

y Thematic Funds

y Commodity Funds

y Real Estate Funds

y Tax Saving Funds

y Hybrid Funds

There are several ways for investment and disinvestments in mutual funds such as :

y Systematic Investment Plans (SIPs)

y Value Averaging

y Systematic Transfer Plans (STPs)

y Systematic Withdrawal Plans(SWPs)

y Automatic Reinvestment Plans.

y 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.

y 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.

y 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.

y Income fund

Provide regular and steady income to investor

y Balanced fund

Provide both growth and regular income.

y Money market fund

Provide easy liquidity, regular income and preserve the income

y Tax saving schemeoffer 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 .

y 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

y Lump sum Investment

It is one time investment..

Investors can invest particular amount one time for fixed time of period.



y 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.

y 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.

y 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.

y Dividend option

y Investors will receive dividends from the mutual fund , as an and when dividends

are declared.

y Dividends are paid in the form of warrants or are directly credited to the investors

bank accounts.

y In normal dividend plan , periodicity of dividends is left to the fund managers, the

timing of the dividend payout is decided by fund manager.

y 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.

y Investors choosing this option have a fixed no. of units invested in the fund and

earned incomes on this investment.

y 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.

REGULATORS IN INDIA

y

SEBI - The capital markets regulators also regulates the mutual funds in India. SEBIrequires all mutual funds to be registered with them. SEBI issues guidelines for all

mutual funds operations - investment, accounts, expenses etc.

y RBI as supervisor of banks owned mutual funds - As banks in India came under the

regulatory jurisdiction of RBI, bank owned funds to be under supervision of RBI and

SEBI.

y RBI as supervisor of Money Market Mutual Funds - RBI has supervisory responsibility

over all entities that operate in the money markets. Hence in the past Money Market

Mutual Funds scheme of Mutual funds had to be abide by policies laid down by RBI.

Recently, it has been decided that Money Market Mutual Funds of registered mutual funds will

be regulated by SEBI through SEBI (Mutual Fund) Regulations 1996.

COMPARISON OF ULIP VS MUTUAL FUND

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 onvenience

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.



REVIEW OF LITERATURE

Mr.Madhu T, made a study on ULIPs hold edge over mutual funds.The findings shows

that distributors would push unit linked insurance plans (ULIPs) to earn better

commission. ULIPs offer attractive frontend commissions to agents. However, independent

financial advisors believe that though there is a possibility of some distributors favoring ULIPs

in the short term, the new directive would be beneficial for both the industry and investors in the

long run.(Mr.Madhu T, The Economic Times,June2009).

Mr.Deepak Shenoy ,in his article Comparing ULIP returns to Mutual Funds, he reveals

that,over the last three years, their growth mutual fund has given better returns than the"MAXIMISER" option of their ULIPs.(Deepak Shenoy, The Indian Investors Blog, August

2006).

Mr.Murthaza and Sony, in their article An Overview on ULIP, This article is an initiative from

Bajaj Allianz to create better understanding of ULIPs and its benefits so that investors can avail

maximum returns from their investments.

Mr.Bernz Jayma P, made a study on Mutual Fund disadvantages. He suggested that ,If you're

new to stock market investing you may have heard that mutual funds would be a good way for

you to get started. That's actually good advice, but mutual funds have their own pitfalls to watch

out for.



DATA INTERPRETATION

AND

ANALYSIS



(A) Gender:

Gender

Frequency Percent Valid Percent

Cumulative

Percent

Valid Male 37 74.0 74.0 74.0

Female 13 26.0 26.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

The above graph shows that , out of 50 customers, 74% of the respondents are male policy

holders and the rest 26% are female policy holders.



(B) Marital Status:

Marital


Cumulative

Percent

Valid Married 33 66.0 66.0 66.0

Unmarried 17 34.0 34.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 66% of the policy holders are unmarried and the rest 34% of the

policy holders are married.



(C) Age:

Age


Cumulative

Percent

Valid 20-30 6 12.0 12.0 12.0

30-40 14 28.0 28.0 40.0

40-50 17 34.0 34.0 74.0

50-60 11 22.0 22.0 96.0

60-70 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

The graph shows that majority of the sample respondents were in the age group of 40-50 yrs

ie,34%, 12% were in the age group of 20-30 yrs & 28% of them were 30-40 yrs, 22% were in the

age group of 50-60 yrs and 4% were in the age group of 60-70 yrs.



(D) Occupation:

Occupation


Cumulative

Percent

Valid Government 18 36.0 36.0 36.0

Private service 14 28.0 28.0 64.0

Business 11 22.0 22.0 86.0

NRIs 3 6.0 6.0 92.0

Others 4 8.0 8.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

The graph shows that majority of the policy holders are working in the Government sector

i.e.36% , 28% of them are engaged in Private service, 22% of them are business field, 6% of

them are NRIs and 8% of them are engaged other works.



(E) Annual Income:

Annual income


Cumulative

Percent

Valid Below 2 lakhs 19 38.0 38.0 38.0

2-4 lakhs 23 46.0 46.0 84.0

4-6 lakhs 6 12.0 12.0 96.0

6-8 lakhs 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

The graph shows that 46% of the policy holders get a salary of 2-4 lakhs, 38% of the policy

holders get a salary of below 2 lakhs, 12% of the policy holders get a salary of 4-6 lakhs, 3 of the

policy holders get a salary below 2 lakhs and 4% of them above 6-8 lakhs.



1. Sources that helps you in making investment decision.

Sources that helps you in making the investment decisions.


Cumulative

Percent

Valid Financial journal 5 10.0 10.0 10.0

Television 2 4.0 4.0 14.0

Brokers/Agent 27 54.0 54.0 68.0

Friends 13 26.0 26.0 94.0

Consultants 3 6.0 6.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From the sample of 50 customers, 54% of the customers are strongly agree that the agents or

brokers helps them to make investment decision, 26% of the customers point out their friends

take part in the investment decision. And 10% customers reveal that the financial journals helps

them, Remaining 6% is from consultants, and 4% selects television as the source.



2. Factors that influence your investment decision in a particular company.

Factors that influence your investment decisions in aparticular company.


Cumulative

Percent

Valid Attractive schemes 2 4.0 4.0 4.0

Tax benefits 27 54.0 54.0 58.0

High reputation 3 6.0 6.0 64.0

Rate of return 14 28.0 28.0 92.0

Variety of products 4 8.0 8.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

54% customers agree that the tax benefit is influence them to buy policy ,28% looks

the rate of return what they will earn, variety of products from the company attracts 8%

customers, and high reputation of the company attracts 6% of the customers, and remaining 4%

pointing out the attractive schemes.



3. You generally like to invest money in.

You generally like to invest money.


Cumulative

Percent

Valid Insurance 13 26.0 26.0 26.0

Stock market 1 2.0 2.0 28.0

Mutual fund 6 12.0 12.0 40.0

Bank deposit 28 56.0 56.0 96.0

Both insurance and mutual

fund

2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 56% of the customers invest money in bank deposit, 26% in

insurance sector,12% in mutual fund, then 4% in both insurance and mutual fund,and remaining

2% in stock market.



4. According to you who among the following life insurance company is best.

According to you who among the followinglife insurance companies is best.


Cumulative

Percent

Valid Bajaj Allianz 27 54.0 54.0 54.0

HDFC Standard life 5 10.0 10.0 64.0

Tata AIG 4 8.0 8.0 72.0

Aviva Life 3 6.0 6.0 78.0

SBI Life 11 22.0 22.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,54% customers select Bajaj Allianz is the best insurance

company, and 22% customers choose SBI Life,10% select HDFC,8% for Tata AIG and

remaining 6% stands for Aviva life insurance company.



5. How would you rate our products.

How would you rate ourproducts.


Cumulative

Percent

Valid Excellent 2 4.0 4.0 4.0

Good 37 74.0 74.0 78.0

Fair 9 18.0 18.0 96.0

Poor 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,74% customers thinks that the products offered by Bajaj Allianz

Life insurance co. is good,4% thinks its excellent,18% of them select Bajaj Allianz products are

fair, and remaining 4% not satisfied with our products.



6. I would like to invest money in ULIP.

I would like to invest money in ULIP.

Frequency Percent Valid PercentCumulative

Percent

Valid Strongly agree 2 4.0 4.0 4.0

Agree 33 66.0 66.0 70.0

Neutral 8 16.0 16.0 86.0

Disagree 5 10.0 10.0 96.0

Strongly disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 66% agree, 4% of them strongly supporting that fact, and 16%

has no opinion about it. And 4% strongly disagreed, remaining 10% also disagree with

investment in ULIP.



7. Reason for choosing ULIPs because of insurance coverage.

Reason for choosing ULIPs because of insurance coverage.


Percent


Agree 32 64.0 64.0 92.0

Neutral 2 4.0 4.0 96.0

Disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 64% of the customers agree, ,28% of them strongly support

it,4% customers didnt say anything, and remaining 4% disagree with that fact. So we can see

that most of the Customers choose ULIP because of insurance coverage.



8. Iwould like to invest money in Mutual Funds.

I would like to invest money inmutual funds.


Percent


Agree 13 26.0 26.0 32.0

Neutral 14 28.0 28.0 60.0

Dsagree 18 36.0 36.0 96.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,26% of the customers agree with that fact,6% of the customers

strongly support it,and 28% customers have no idea about it.And remaining 10% disagreed,out

of this 10%, 4% strongly disagreed with it.



9. Mutual funds are more risky than ULIP products.

Mutual funds aremore risky than ULIP products.


Percent


Agree 27 54.0 54.0 88.0

Neutral 4 8.0 8.0 96.0

disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,54% of the customers thinks that mutual funds are more risky

than ULIP products,34% strongly agree with this statement.8% customers have no opinion about

it,and remaining 4% disagree with it.



10. ULIPs have advantage over Mutual funds.

ulip has advantage overmutual funds.


Percent


Agree 31 62.0 62.0 86.0

Neutral 5 10.0 10.0 96.0

Disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

INTERPRETATION :

62% of the customers agree with ULIP have advantage over mutual fund statement.24%

customers strongly agree with this fact. And 4% of customers not supporting the statement. And

remaining 10% have no opinion about it.



11. Do you think the safety factor is important in your investment in ULIP.

Safety


Cumulative

Percent


Agree 26 52.0 52.0 60.0

Neutral 2 4.0 4.0 64.0

Disagree 15 30.0 30.0 94.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,52% customers agree,8% strongly agree,30% customers were

disagree with that fact,6% strongly disagree, and remaining 4% have no opinion about safety

factor is important in the investment of ULIP.



12. Do you think the Liquidity factor is important in your investment in

ULIP.

Liquidity


Cumulative

Percent


Agree 5 10.0 10.0 16.0

Neutral 5 10.0 10.0 26.0

Disagree 30 60.0 60.0 86.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, majority of the customers disagree i.e. 60%, 14% strongly

disagree with that fact. And 6% strongly agree,10% agree,and remaining 10% neither agree nor

disagree with that statement.



13. Do you think the Rate of return factor is important in your investment in

ULIP.

Rate of return


Cumulative

Percent


Agree 21 42.0 42.0 54.0

Neutral 3 6.0 6.0 60.0

Disagree 12 24.0 24.0 84.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, majority of the customers agree i.e. 42%, 12% strongly agree

with that fact. And 24% disagree,16% strongly disagree, and remaining 6% neither agree nor

disagree with that statement



14. Do you think the Tax savings is influence your investment decision in

ULIP.

Tax savings


Cumulative

Percent


Agree 21 42.0 42.0 54.0

Neutral 5 10.0 10.0 64.0

Disagree 16 32.0 32.0 96.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, majority of the customers agree i.e. 42%, 12% strongly agree

with that fact. And 32% disagree,4% strongly disagree, and remaining 10% neither agree nor




15. Past schemes performance influence your investment decision in ULIP.

past scheme's performance


Percent


Agree 8 16.0 16.0 32.0

Neutral 7 14.0 14.0 46.0

Disagree 23 46.0 46.0 92.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, majority of the customers disagree i.e. 46%, 8% strongly

disagree with that fact. And 16% strongly agree,16% agree, and remaining 14% neither agree nor




16. Advertisement influence the investment decision in ULIP.

Advertisement


Percent


Agree 11 22.0 22.0 40.0

Neutral 19 38.0 38.0 78.0

Disagree 5 10.0 10.0 88.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, 22%agree, 18% strongly agree with that fact. And 10%

disagree,12% strongly disagree, and remaining 38% neither agree nor disagree with that

statement.



17. Do you think the safety factor is important in your investment in mutual

fund.

Safety


Cumulative

Percent


Agree 4 8.0 8.0 12.0

Neutral 8 16.0 16.0 28.0

Disagree 30 60.0 60.0 88.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers,8% customers agree,4% strongly agree,60% customers were

disagree with that fact 12% strongly disagree, and remaining 16% have no opinion about safety

factor is important in the investment of mutual fund.



18. Do you think the Liquidity factor is important in your investment in

mutual fund.

Liquidity


Cumulative

Percent


Agree 19 38.0 38.0 52.0

Neutral 15 30.0 30.0 82.0

Disagree 6 12.0 12.0 94.0


Total 50 100.0 100.0

INTERPRETATION :

From a sample of 50 customers, majority of the customers ag

36711590 Life Insurance Project

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