unit linked life insurance plan

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

SS/PGP/ISBE/11-13 SS/11-13/F/252/AHMEDABAD/ISBE Page 1

THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

AHMEDABAD

A Study on New IRDA ULIP Guidelines and Comparative Analysis on New ULIP vis--vis Mutual Funds

ALUMNI REFERENCE NUMBER

SS/11-13/F/252/AHMEDABAD/ISBE

STUDENT NAME THESIS GUIDE NAME

PRASHANT MAHARSHI MR. TUSHAR DAVE

SIGNATURE OF STUDENT SIGNATURE OF GUIDE



ABSTRACT

In India, weve had over a decade of experience with multiple investment options available for

us, where ULIPs and mutual funds play a very different role.

This has been a fairly well accepted idea. The number of investors opting for ULIPs and Mutual

funds has gone up in high volume when compared with other investment product and this is

because to gain equity high returns with high risk.

The recent past witnessed several leading Mutual fund companies and ULIPs companies has

went with good success.

Looking at duo, there are several changes in the guidelines provided by IRDA and hence what

were the outcomes that resulted into various changes would be analyzed.

ULIP are nothing but Unit Link Insurance Plans, which provides you a good platform for

investment with insurance cover, whereas Mutual funds are only meant for investment

purpose and to make good returns in todays volatile market conditions.



CERTIFICATE OF ORIGINALITY

This is to certify that this thesis titled A Study on New IRDA ULIP Guidelines and Comparative

Analysis on New ULIP vis--vis Mutual Funds is prepared and submitted by Prashant Maharshi

to IIPM, Indian Institute of Planning and Management, Ahmedabad in partial fulfillment for

the award of the Masters Degree in Business Administration and this report has not been

submitted to this university or to any other university.

Date: 25th August 2013

Mr. Tushar Dave Prashant Maharshi

Cluster Head

ICICI Securities

Baroda, Gujarat.



LETTER OF CONSENT

To,

The Dean,

IIPM,

Ahmedabad.

Dear Sir,

Subject: Consent to act as Thesis Guide

I, Tushar Dave, Cluster Head of ICICI Securities Ltd, Baroda, express my consent to act as a guide

to Mr. Prashant Maharshi (Batch: PGP/ISBE/SS/2011-13). He has expressed his interest in

writing thesis on A Study on New IRDA ULIP Guidelines and Comparative Analysis on New

ULIP vis--vis Mutual Funds and has requested me to guide him through the same.

This is to inform that I shall support him as guide for his thesis on the abovementioned topic

and share my knowledge and help in all possible ways.

With warm Regards

Yours Faithfully

Tushar Dave

Cluster Head

ICICI Securities

M 8980006742

Email [email protected]



ACKNOWLEDGEMENT

First and foremost, I offer my sincerest gratitude to my supervisor, Mr. Tushar Dave, who has

supported me throughout my thesis with his patience and knowledge. He has shared thoughtful

suggestions and valuable comments on every chapter on my work. His guidance helped me

throughout the research and writing of this thesis. Without him, this thesis could not have been

completed.

My sincere thanks also go to our faculties, staff members, and whole IIPM fraternity and all our

seniors and colleagues who have helped me to carry out this whole project with their

enthusiasm, encouragement and assistance.

Once again, I would like to thank my thesis guide Mr. Tushar Dave who gave me precious

knowledge through discussions, over a period of time and bared his precious time for

enlightenment of my knowledge regarding the topic which I could put in my thesis to make it

more effective.

In my efforts, I would also like to extend my deep gratitude to our Academic Head Prof. Robin

Thomas for his guidance and encouragement during the preparation of project and also to

guide me through academic procedures and presentation skills.

At last I would also like to extend my gratitude to the whole IIPM, Ahmedabad fraternity for

their overwhelming support in overcoming the hurdles at initial stage and during preparation

stage.

PRASHANT MAHARSHI



TABLE OF CONTENT

S.R NO PARTICULARS PAGE NO

1 Abstract 02

2 Certificate of Originality 03

3 Letter of Consent 04

4 Acknowledgements 05

5 Thesis Synopsis 07

6 Introduction to IRDA 11

7 IRDA Guidelines for ULIP 14

Recently Regulatory Initiatives 15

Need for Change 19

8 Introduction to ULIPs and Mutual Funds 21

ULIPs and Types of ULIPs 21

Mutual Funds and Types of Mutual Funds 22

9 Objectives and Limitations of study 28

10 Advantages and Risks Associated with ULIPs 29

11 Advantages and Disadvantages of Mutual Funds 30

12 Reason for Comparison 33

13 Comparison between ULIPs and Mutual Funds 34

14 Questionnaire 38

15 Data Interpretation and Analysis 42

16 Findings and Suggestions 65

17 Conclusions and Recommendations 66

18 Bibliography 67

19 Response Sheets 68



THESIS SYNOPSIS

Name: Prashant Maharshi

Batch: ISBE/PGP/SS/2011-13

Phone Number: 9510085579

Email Address: [email protected]

Course to which admitted: ISBE

Month & Year of admission: May, 2011

Place of Study: IIPM Ahmedabad

Thesis Topic: A Study on New IRDA ULIP Guidelines and Comparative Analysis

on New ULIP vis--vis Mutual Funds

Specialization Area: Finance

Introduction:

ULIPs or Unit Linked Insurance Plans are financial products which offer dual benefits of

Protection and Investments. These products are quite new to us as they were introduced in

India only in the year 2002 and therefore have a history of only ten years, as compared to

Mutual Funds (UTI came into existence in 1964 and Private Sector MFs in 1993). ULIPs have

almost always been criticized by most Financial Advisors as Costly. It is mostly in the list of

Not recommended products of prudent Financial Planners and they alternatively recommend

a combination of Mutual Fund and Term Insurance. Although, I agree that both Mutual Funds

and Term Insurance are great financial products, no one can undermine the significance of



ULIPs as a long term complete financial product which addresses the Protection, Investment,

Retirement as well as Tax Planning needs of an Individual.

The first ULIP was launched in India in 1971 by Unit Trust of India (UTI).With the Government of

India opening up the insurance sector to foreign investors in 2001 and the subsequent issue of

major guidelines for ULIPs by the Insurance Regulatory and Development Authority (IRDA) in

2005, several insurance companies forayed into the ULIP business leading to an over

abundance of ULIP schemes being launched to serve the investment needs of those looking to

invest in an investment cum insurance product.

A ULIP is basically a combination of insurance as well as investment. A part of the premium paid

is utilized to provide insurance cover to the policy holder while the remaining portion is

invested in various equity and debt schemes. The money collected by the insurance provider is

utilized to form a pool of fund that is used to invest in various markets instruments (debt and

equity) in varying proportions just the way it is done for mutual funds. Policy holders have the

option of selecting the type of funds (debt or equity) or a mix of both based on their investment

need and appetite. Just the way it is for mutual funds, ULIP policy holders are also allotted units

and each unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the value

based on which the net rate of returns on ULIPs are determined. The NAV varies from one ULIP

to another based on market conditions and the funds performance.

Research Objective:

a. Address the popular misconceptions and myths about ULIPs.

b. Second aspects would be on the charges part. Address the charges which were before

and today.

c. Study on New IRDA Guidelines to support ULIPs.

d. How ULIPs are better than Mutual Funds.



Research Methodology:

a. Secondary Data:

Business magazines, Editorials, Newspapers, Internet surfing, Library, and

Bibliographies.

b. Primary Data:

Guide and Expert Interviews.

Justification of choosing the topic:

This topic is very important to a student who has done specialization in Finance. This topic

would give a good study on ULIPs and Mutual Funds and how one should react when it comes

to investment in equities. As the investment is done in equity market, but where one can

generate more returns is necessary. By the help of this thesis, we would get clear idea regarding

the guidelines made by IRDA, the charges on investment in duo, other features that one can

avail with the investments, comparisons between best investment tools available in the market,

etc. Other than this, the topic would help us to study overall market share of the products and

how it has grown in several years. How one has options of diversified portfolio and how one can

switch his/her investment from one to another. Hence these are some reasons and there are

various other reasons to choose this topic and that would be coming under thesis.

Insurance companies profit will be impacted with the introduction of new guidelines for unit-

linked plans (ULIP), which invest part of funds in equities- according to insurance sector

regulator IRDA.

The regulator advised the insurance companies to reduce their expenses to maintain the

bottom line in the long run.



According to the sources the idea of guidelines is to have impact. The concern for the insurance

industry is not what is going to happen in 2010-11. The concern is that the industry must

remain healthy, be able to grow and be sustainable. The insurance companies must take a look

at long term achievements and should bear with the initial hiccups.

Insurance companies are of the opinion that the capping of surrender charges and the even

distribution of charges over the lock-in period of five years will adversely impact the

profitability of companies.

The companies as a result should adopt cost-cutting measures in order to maintain the

profitability. Trying to contain cost, it is not by doing one thing. There will be a host of things to

be implemented. The insurance companies should redesign their products and they must be in

the interest of policy holders.

Summer Training Details:

Topic: Comparative study on Buyback, Takeover and Delisting of Securities

Company Name: Interface Brokerage & Research limited

Area of Specialization: Finance



INTRODUCTION TO IRDA

The Insurance Regulatory and Development Authority (IRDA) is a national agency run by the

Government of India. IRDA is based in Hyderabad and was formed by an act of Indian

Parliament called as IRDA Act of 1999. Considering some of the emerging requirements of the

Indian insurance industry, IRDA was amended in 2002. As stated in the act mission of IRDA is

"to protect the interests of the policyholders, to regulate, promote and ensure orderly growth

of the insurance industry and for matters connected therewith or incidental thereto." Indian

insurance industry is regulated by the terms and conditions of the IRDA.

Indian law has certain expectations from the IRDA to perform in the Indian insurance industry.

IRDA should protect the interest of policyholders by ensuring fair treatment by the insurance

companies. The growth of insurance companies in a speedy and orderly manner should be

taken care by the IRDA. It should monitor and implement quality competence and fair dealing

of the insurance companies in the industry. IRDA should make sure that the insurers are

providing precise and correct information about the products offered by them for the insurance

customers. IRDA should also ensure speedy settlement of genuine claims of the policyholders

and prevent malpractices in the process of claims settlement.

According to the Section 14 of IRDA Act of 1999 there are certain duties, powers and functions

laid down for the IRDA and they are as follows:

(1) Subject to the provisions of this Act and any other law for the time being in force, the

Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance

business and re-insurance business.

(2) Without prejudice to the generality of the provisions contained in sub-section (1), the

powers and functions of the Authority shall include,

(a) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or

cancel such registration;



(b) protection of the interests of the policy holders in matters concerning assigning of policy,

nomination by policy holders, insurable interest, settlement of insurance claim, surrender value

of policy and other terms and conditions of contracts of insurance;

(c) Specifying requisite qualifications, code of conduct and practical training for intermediary or

insurance intermediaries and agents;

(d) Specifying the code of conduct for surveyors and loss assessors;

(e) Promoting efficiency in the conduct of insurance business;

(f) Promoting and regulating professional organizations connected with the insurance and re-

insurance business;

(g) Levying fees and other charges for carrying out the purposes of this Act;

(h) calling for information from, undertaking inspection of, conducting enquiries and

investigations including audit of the insurers, intermediaries, insurance intermediaries and

other organizations connected with the insurance business;

(i) control and regulation of the rates, advantages, terms and conditions that may be offered by

insurers in respect of general insurance business not so controlled and regulated by the Tariff

Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);

(j) Specifying the form and manner in which books of account shall be maintained and

statement of accounts shall be rendered by insurers and other insurance intermediaries;

(k) Regulating investment of funds by insurance companies;

(l) Regulating maintenance of margin of solvency;

(m) Adjudication of disputes between insurers and intermediaries or insurance intermediaries;

(n) Supervising the functioning of the Tariff Advisory Committee;



(o) Specifying the percentage of premium income of the insurer to finance schemes for

promoting and regulating professional organizations referred to in clause (f);

(p) Specifying the percentage of life insurance business and general insurance business to be

undertaken by the insurer in the rural or social sector; and

(q) Exercising such other powers as may be prescribed

Insurance Regulatory and Development Authority (IRDA) in India consists a Chairman and some

permanent and part time members in the administration. However, the regulations are enacted

under the guidance of a statutory advisory committee.



IRDA GUIDELINES FOR ULIP

IRDA has, from time to time, taken various initiatives for protecting the interests of

policyholders by bringing out Regulations, Guidelines, Circulars etc applicable to insurers and

intermediaries covering the various stages in the lifecycle of an insurance product, commencing

from solicitation, sale, policy servicing, to claims servicing and grievance redressal.

With expansion of the insurance sector and more and more innovative insurance products, in

particular the Unit Linked Insurance Products coming into the life insurance market, IRDA has

been sensitive to the changing scenario and the challenges that go with it. In particular, IRDA

has been conscious of how these changes have been impacting the policyholder and has taken

several steps to bring in changes in the regulatory framework to address various concerns of

the policyholder.

IRDA had stipulated that insurers must provide the prospect/policyholder all relevant

information regarding amounts deducted towards various charges for each policy year so that

the prospect could take an informed decision. Insurers were required to provide Benefit

Illustrations giving two scenarios of interest rates, 6% and 10% respectively. The prospect was

required to sign on the illustration while signing the proposal form. This was done to ensure

transparency and proper disclosures by the insurers.

It is necessary to demystify complex products and ensure that proper product disclosures are

made to the prospect/policyholder. Towards this end, IRDA has already come out with an

exposure draft on need to issue Key Features Documents. Responses received by the Authority

are under examination and the initiative will be taken forward further. Similarly, Needs Analysis

is another initiative identified by IRDA as a step in curbing wrong advice and miss-selling. An

exposure draft on this requirement is already circulated and responses are coming in. Whilst

on miss-selling, IRDA has identified Distance Marketing as yet another area of concern and draft

guidelines in this regard have been put up as an exposure note for all stakeholders to respond

to.



Mention must be made of what is perhaps the most important step that the Authority has

taken keeping in view the interests of policyholders. IRDA set up an exclusive Consumer Affairs

Department that focuses on consumer related issues and initiatives including grievance

redressal and consumer education through Insurance Awareness Campaigns. With a view to

creating a central repository of industry-wide insurance grievance data and facilitating

monitoring of disposal of grievances by insurers, IRDA is on the verge of implementing the

Integrated Grievance Management System (IGMS). IGMS will not only help monitor the redress

systems of insurers but also create a gateway for policyholders to register complaints with

insurance companies first and if need be escalate them to the IRDA Grievance Cells. The

Consumer Affairs department goes beyond facilitation and works towards taking grievances to

their logical end by calling for explanations where required, carrying out enquiries and

inspections etc. It is proposed to make the institution of the Insurance Ombudsman handle all

types of complaints including those relating to policy sale and servicing rather than just

restricting it to claims. IRDA is also shortly making its Call Centre operational for policyholders

to lodge their grievances and also seek their status over phone/e-mail.

Further, keeping in view the need for efficient functioning of the insurance sector for protecting

the interests of policyholders, it is necessary to have reliable, timely and accurate data relating

to insurance. In order to ensure that proper data is collected, processed and disseminated in

the manner required, IRDA has set up an independent body, namely the Insurance Information

Bureau (IIB). The IIB has started functioning and has already made good progress.

RECENT REGULATORY INITIATIVES

More recently, IRDA has taken a holistic view of the features of ULIPs and addressed issues

impacting the policyholders including the way such products are sold/bought; how ULIPs can be

better financial instruments for providing risk coverage; how sale by unlicensed personnel and

several other malpractices existing in this market may be curbed by plugging legal loopholes

and tightening of the regulatory ambit; legal mandate to initiate direct penal action against

Corporate Agents etc. IRDA therefore initiated exposure drafts covering these areas and

received considerable feedback from various stakeholders on the issues put forth. The issues



were then presented to and discussed with the members of the Insurance Advisory Committee

as well as the members of the Board of the Authority. The following regulatory initiatives have

been approved by the Authority during the Board meeting on 31.05.10.

I. Distribution channel related changes:

1. IRDA has amended the IRDA (Insurance Advertisements and Disclosure) Regulations to

remove any scope for the involvement of unlicensed personnel/entities in the sale of insurance

products.

2. IRDA has amended the IRDA (Licensing of Corporate Agents) Regulations to further tighten

the Code of Conduct of corporate agents to ensure that the prospect does not deal with any

unlicensed person. The Regulations have also been amended to ensure that there is no scope

for any kind of remuneration other than commission where sale has been affected. This

measure will reduce the expenses of the insurer, thereby lowering premiums to be paid by the

policyholder.

3. Regulations for referrals: IRDA has also addressed the issue of Referrals by bringing out

separate Regulations leaving no scope for misuse of the system. Companies which wish to

share their database of customers with insurers would need to get approval from IRDA after

having conformed to the requirements as laid down in the Regulations. Further, there are

restrictions on the business activities of the referral company to ensure that there is no misuse

of the system. For instance, the referral company shall not be in any business of extending

loans and advances or accepting deposits etc though there are exceptions such as for Regional

Rural Banks, Co-operative banks etc. The Regulations cast obligations on the referral company

as well as the insurer including submission of data as and when called for by the Authority.

II. ULIP STRUCTURE RELATED CHANGES:

(1) Lock in period increased to five years:



IRDA has increased the lock-in period for all Unit Linked Products from three years to five years,

including top-up premiums, thereby making them long term financial instruments which

basically provide risk protection.

(2) Level Paying Premiums:

Further, all regular premium /limited premium ULIPs shall have uniform/level paying premiums.

Any additional payments shall be treated as single premium for the purpose of insurance cover.

(3). Even Distribution of Charges:

Charges on ULIPs are mandated to be evenly distributed during the lock in period, to ensure

that high front ending of expenses is eliminated.

(4). Minimum Premium Paying Term Of Five Years:

All limited premium unit linked insurance products, other than single premium products shall

have premium paying term of at least five years.

(5). Increase In Risk Component:

Further, all unit linked products, other than pension and annuity products shall provide a

mortality cover or a health cover thereby increasing the risk cover component in such products.

The minimum mortality cover should be as follows:

Minimum Sum assured for age at entry of

below 45 years

Minimum Sum assured for age at entry of

45 years and above

Single Premium (SP) contracts: 125 percent

of single premium.

Regular Premium (RP) including limited

premium paying (LPP) contracts: 10 times the

annualized premiums or (0.5 X T X annualized

premium) whichever is higher. At no time

Single Premium (SP) contracts: 110 percent

of single premium

Regular Premium (RP) including limited

premium paying (LPP) contracts: 7 times the

annualized premiums or (0.25 X T X

annualized premium) whichever is higher.



the death benefit shall be less than 105

percent of the total premiums (including top-

ups) paid.

At no time the death benefit shall be less

than 105 percent of the total premiums

(including top-ups) paid.

In case of whole life contracts, term (T) shall be taken as 70 minus age at entry

The minimum health cover per annum should be as follows:

Minimum annual health cover for age at

entry of below 45 years

Minimum annual health cover for age at

entry of 45 years and above

Regular Premium (RP) contracts: 5 times the

annualized premiums or Rs. 100,000 per

annum whichever is higher,

At no time the annual health cover shall be

less than 105 percent of the total premiums

paid.

Regular Premium (RP) contracts: 5times the

annualized premiums or Rs. 75,000 per

annum whichever is higher.

At no time the annual health cover shall be

less than 105 percent of the total premiums

paid.

(6). MINIMUM GUARANTEED RETURN FOR PENSION PRODUCTS:

As regards pension products, all ULIP pension/annuity products shall offer a minimum

guaranteed return of 4.5% per annum or as specified by IRDA from time to time. This will

protect the life time savings for the pensioners, from any adverse fluctuations at the time of

maturity.

(7). RATIONALISATION OF CAP ON CHARGES:

With a view to smoothening the cap on charges, the capping been rationalized to ensure

that the difference in yield is capped from the 5th year onwards. This will not only reduce

the overall charges on these products, but also smoothen the charge structure for the

policyholder.



III. DISCONTINUANCE OF CHARGES:

IRDA has also addressed the issue of discontinuance of charges for surrender of ULIPs. The

IRDA (Treatment of Discontinued Linked Insurance Policies) Regulations brought out by

IRDA in this regard ensure that policyholders do not get overcharged when they wish to

discontinue their policies for any emergency cash requirement. The Regulations stipulate

that an insurer shall recover only the incurred acquisition costs in the event of

discontinuance of policy and that these charges are not excessive. The discontinuance

charges have been capped both as percentage of fund value and premium and also in

absolute value. The Regulations also clearly define the Grace Period for different modes of

premium payment. Upon discontinuance of a policy, a policyholder shall be entitled to

exercise an option of either reviving the policy or completely withdrawing from the policy

without any risk cover. Further, the regulations also enable IRDA to order refund of

discontinuance charges in case they are found excessive on enquiry.

These regulations are applicable to all new ULIP products approved by IRDA after these

regulations are notified.

NEED FOR CHANGE IN GUIDELINES

THE CHANGE

Capping of charges on ULIPs, extension of lock-in period from 3 years to 5 years and raising of

minimum cover to 10 times the premium.

THE INTENT

The aim was to improve the returns for investors by reducing charges and to ensure that ULIPs

are seen as long-term products. The hike in the minimum cover stresses on the insurance

aspect of ULIPs, while the increase in minimum lock-in period promotes the financial protection

facet.



THE IMPACT

It is paradoxical that the most sold financial product is also the one with the most problems.

ULIPs give you the best of both worlds by combining life insurance and market-linked

investments.

They can help you create long-term wealth through investments in equities. At least, that's the

marketing peg. The reality is that very few investors in ULIPs understand what they have

bought. Most are unaware of the high charges levied in the initial years. Nor do they realize

what the agent is up to when he says that they have to pay the premium only for a few years.

On the face of it, it seems this change will only result in higher returns for investors, but the

impact goes beyond this. To ensure that the difference is within the suggested cap, insurance

firms will be forced to offer long-term plans.

The minimum sum assured has been hiked from five times the annual premium to 10 times.

While this means higher cover for the policyholder, it also means higher mortality charges.

However, keep in mind that to qualify for tax deduction under the proposed Direct Taxes Code,

the death benefit needs to be 20 times the annual premium.

The most important point is that the new guidelines will ensure investors look at ULIPs as long-

term products. The lock-in period has been increased from three years to five years and the

minimum premium paying term has been increased to five years. No longer will investors exit

after three years, which had benefited the broker more than anyone else. This is likely to make

policyholders adopt a disciplined savings and investment strategy.



INTRODUCTION TO ULIPs AND MUTUAL FUNDs

ULIPs

A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that unlike a

pure insurance policy gives investors the benefits of both insurance and investment under a

single integrated plan.

The first ULIP was launched in India in 1971 by Unit Trust of India (UTI). With the Government

of India opening up the insurance sector to foreign investors in 2001 and the subsequent issue

of major guidelines for ULIPs by the Insurance Regulatory and Development Authority (IRDA) in

2005, several insurance companies forayed into the ULIP business leading to an over

abundance of ULIP schemes being launched to serve the investment needs of those looking to

invest in an investment cum insurance product.

A ULIP is basically a combination of insurance as well as investment. A part of the premium paid

is utilized to provide insurance cover to the policy holder while the remaining portion is

invested in various equity and debt schemes. The money collected by the insurance provider is

utilized to form a pool of fund that is used to invest in various markets instruments (debt and

equity) in varying proportions just the way it is done for mutual funds. Policy holders have the

option of selecting the type of funds (debt or equity) or a mix of both based on their investment

need and appetite. Just the way it is for mutual funds, ULIP policy holders are also allotted units

and each unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the value

based on which the net rate of returns on ULIPs are determined. The NAV varies from one ULIP

to another based on market conditions and the funds performance.

What types of funds do ULIP offer?

Most insurers offer a wide range of funds to suit one's investment objectives, risk profile and

time horizons. Different funds have different risk profiles. The potential for returns also varies

from fund to fund. The following are some of the common types of funds available along with

an indication of their risk characteristics.



1) Equity Funds (Medium to High risk) - Primarily invested in company stocks with the general

aim of capital appreciation

2) Income, Fixed Interest and Bond Funds (Medium risk) - Invested in corporate bonds,

government securities and other fixed income instruments

3) Cash Funds (Low risk) - Sometimes known as Money Market Funds invested in cash, bank

deposits and money market instruments

4) Balanced Funds (Medium risk) - Combining equity investment with fixed interest instruments

MUTUAL FUNDS

A mutual fund is a type of professionally managed collective investment vehicle that pools

money from many investors to purchase securities. While there is no legal definition of the

term "mutual fund", it is most commonly applied only to those collective investment vehicles

that are regulated and sold to the general public. They are sometimes referred to as

"investment companies" or "registered investment companies." Most mutual funds are "open-

ended," meaning investors can buy or sell shares of the fund at any time. Hedge funds are not

considered a type of mutual fund.

The term mutual fund is less widely used outside of the United States and Canada. For

collective investment vehicles outside of the United States, see articles on specific types of

funds including open-ended investment companies, SICAVs, unitized insurance funds, unit



trusts and Undertakings for Collective Investment in Transferable Securities, which are usually

referred to by their acronym UCITS.

In the United States, mutual funds must be registered with the Securities and Exchange

Commission, overseen by a board of directors (or board of trustees if organized as a trust rather

than a corporation or partnership) and managed by a registered investment adviser. Mutual

funds, like other registered investment companies, are also subject to an extensive and detailed

regulatory regime set forth in the Investment Company Act of 1940. Mutual funds are not taxed

on their income and profits if they comply with certain requirements under the U.S. Internal

Revenue Code.

Mutual funds have both advantages and disadvantages compared to direct investing in

individual securities. They have a long history in the United States. Today they play an

important role in household finances, most notably in retirement planning.

Types of Mutual Funds

Open-end funds

Open-end mutual funds must be willing to buy back their shares from their investors at the end

of every business day at the net asset value computed that day. Most open-end funds also sell

shares to the public every business day; these shares are also priced at net asset value. A

professional investment manager oversees the portfolio, buying and selling securities as

appropriate. The total investment in the fund will vary based on share purchases, share

redemptions and fluctuation in market valuation. There is no legal limit on the number of

shares that can be issued.

Open-end funds are the most common type of mutual fund. At the end of 2011, there were

7,581 open-end mutual funds in the United States with combined assets of $11.6 trillion.

Closed-end funds



Closed-end funds generally issue shares to the public only once, when they are created through

an initial public offering. Their shares are then listed for trading on a stock exchange. Investors

who no longer wish to invest in the fund cannot sell their shares back to the fund (as they can

with an open-end fund). Instead, they must sell their shares to another investor in the market;

the price they receive may be significantly different from net asset value. It may be at a

"premium" to net asset value (meaning that it is higher than net asset value) or, more

commonly, at a "discount" to net asset value (meaning that it is lower than net asset value). A

professional investment manager oversees the portfolio, buying and selling securities as

appropriate.

At the end of 2011, there were 634 closed-end funds in the United States with combined assets

of $239 billion.

Unit investment trusts

Unit investment trusts or UITs issue shares to the public only once, when they are created. UITs

generally have a limited life span, established at creation. Investors can redeem shares directly

with the fund at any time (as with an open-end fund) or wait to redeem upon termination of

the trust. Less commonly, they can sell their shares in the open market.

Unit investment trusts do not have a professional investment manager. Their portfolio of

securities is established at the creation of the UIT and does not change.

At the end of 2011, there were 6,022 UITs in the United States with combined assets of $60

billion.

Exchange-traded funds

A relatively recent innovation, the exchange-traded fund or ETF is often structured as an open-

end investment company, though ETFs may also be structured as unit investment trusts,

partnerships, investments trust, grantor trusts or bonds (as an exchange-traded note). ETFs

combine characteristics of both closed-end funds and open-end funds. Like closed-end funds,

ETFs are traded throughout the day on a stock exchange at a price determined by the market.



However, as with open-end funds, investors normally receive a price that is close to net asset

value. To keep the market price close to net asset value, ETFs issue and redeem large blocks of

their shares with institutional investors.

Most ETFs are index funds. ETFs have been gaining in popularity. At the end of 2011, there were

1,134 ETFs in the United States with combined assets of $1.1 trillion.

Investments and classification

Mutual funds are normally classified by their principal investments, as described in the

prospectus and investment objective. The four main categories of funds are money market

funds, bond or fixed income funds, stock or equity funds and hybrid funds. Within these

categories, funds may be sub classified by investment objective, investment approach or

specific focus. The SEC requires that mutual fund names not be inconsistent with a fund's

investments. For example, the "ABC New Jersey Tax-Exempt Bond Fund" would generally have

to invest, under normal circumstances, at least 80% of its assets in bonds that are exempt from

federal income tax, from the alternative minimum tax and from taxes in the state of New

Jersey.

Bond, stock and hybrid funds may be classified as either index (passively managed) funds or

actively managed funds.

Money market funds

Money market funds invest in money market instruments, which are fixed income securities

with a very short time to maturity and high credit quality. Investors often use money market

funds as a substitute for bank savings accounts, though money market funds are not

government insured, unlike bank savings accounts.

Money market funds strive to maintain a $1.00 per share net asset value, meaning that

investors earn interest income from the fund but do not experience capital gains or losses. If a

fund fails to maintain that $1.00 per share because its securities have declined in value, it is said



to "break the buck". Only two money market funds have ever broken the buck: Community

Banker's U.S. Government Money Market Fund in 1994 and the Reserve Primary Fund in 2008.

At the end of 2011, money market funds accounted for 23% of open-end fund assets.

Bond funds

Bond funds invest in fixed income or debt securities. Bond funds can be sub classified according

to the specific types of bonds owned (such as high-yield or junk bonds, investment-grade

corporate bonds, government bonds or municipal bonds) or by the maturity of the bonds held

(short-, intermediate- or long-term). Bond funds may invest in primarily U.S. securities

(domestic or U.S. funds), in both U.S. and foreign securities (global or world funds), or primarily

foreign securities (international funds).

At the end of 2011, bond funds accounted for 25% of open-end fund assets.

Stock or equity funds

Stock or equity funds invest in common stocks which represent an ownership share (or equity)

in corporations. Stock funds may invest in primarily U.S. securities (domestic or U.S. funds), in

both U.S. and foreign securities (global or world funds), or primarily foreign securities

(international funds). They may focus on a specific industry or sector.

A stock fund may be sub classified along two dimensions: (1) market capitalization and (2)

investment style (i.e., growth vs. blend/core vs. value). The two dimensions are often displayed

in a grid known as a "style box."

Market capitalization ("cap") indicates the size of the companies in which a fund invests, based

on the value of the company's stock. Each company's market capitalization equals the number

of shares outstanding times the market price of the stock. Market capitalizations are typically

divided into the following categories:



1. Micro cap

2. Small cap

3. Mid cap

4. Large cap

While the specific definitions of each category vary with market conditions, large cap stocks

generally have market capitalizations of at least $10 billion, small cap stocks have market

capitalizations below $2 billion, and micro cap stocks have market capitalizations below $300

million. Funds are also classified in these categories based on the market caps of the stocks that

it holds.

Stock funds are also sub classified according to their investment style: growth, value or blend

(or core). Growth funds seek to invest in stocks of fast-growing companies. Value funds seek to

invest in stocks that appear cheaply priced. Blend funds are not biased toward either growth or

value.

At the end of 2011, stock funds accounted for 46% of the assets in all U.S. mutual funds.

Hybrid funds

Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced funds, asset

allocation funds, target date or target risk funds and lifecycle or lifestyle funds are all types of

hybrid funds.

Hybrid funds may be structured as funds of funds, meaning that they invest by buying shares in

other mutual funds that invest in securities. Most fund of funds invest in affiliated funds

(meaning mutual funds managed by the same fund sponsor), although some invest in

unaffiliated funds (meaning those managed by other fund sponsors) or in a combination of the

two.



OBJECTIVES

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

investment mode rather than Mutual fund.

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

investment mode.

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

LIMITATIONS

The middle class people do not know basic concept of ULIP so creating awareness is a

big challenge for me.

The finding 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 and

Mutual 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.



ADVANTAGES OF ULIP

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

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.



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 long term, Mutual Funds have the potential to provide a

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

5. Low Costs: 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 Asset Value

(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 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.

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



REASON FOR COMPARISON

Comparison between ULIP plans and Mutual funds is made to create awareness about various

investment tools. 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. Today people want more services and more return

on their investment.

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.



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

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 faith 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.



QUESTIONNAIRE

PERSONNAL INFORMATION

1. Name:

2. Gender:

(a) Male (a) Female

3. Marital status:

(a) Married (b) Unmarried

4. Age:

(a) 20-30 (b) 30-40

(c) 40-50 (d) 50-60

(e) 60-70

5. Occupation:

(a) Government (b) Private Service

(c) Business (d) NRIs

(e) Others

6. Annual Income:

(a) Below 2 lakhs (b) 2-4 lakhs

(c) 4- 6 lakhs (d) 6-8 lakhs

(e) Above 8 lakhs



1. Sources that helps you in making the investment decisions.

(a) Financial journal (b) Television

(c) Brokers or agents (d) Friends

(e) Consultants

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

(a) Attractive schemes (b) Tax benefits

(c) High reputation (d) Rate of return

(e) Variety of products

3. You generally like to invest money in.

(a) Insurance (b) Stock Market

(c) Mutual Fund (d) Bank deposits

(e) Both insurance and mutual fund

4. I would like to invest money in ULIPs.

(a) Strongly agree (b) Agree

(c) Neutral (d) Disagree

(e) Strongly disagree

5. Reason for choosing ULIPs because of insurance coverage.






6. I would like to invest money in Mutual Funds.




7. Mutual funds are more risky than ULIP products.




8. ULIPs have advantage over Mutual funds.




Do you view following factors/sources of information important while investing in ULIP.

Strongly Agree Agree Neutral Disagree Strongly disagree

(9) Safety

(10) Rate of Return

(11) Tax Savings

(12) Past schemes Performance

(13) Advertisement



Do you view following factors/sources of information important while investing in Mutual

Funds.

Strongly agree Agree Neutral Disagree Strongly disagree

(14) Safety Factor

(15) Liquidity

(16) Rate of Return

(17) Past schemes

Performance

(18) Advertisement



DATA INTERPRETATION AND ANALYSIS

(A) Gender:

Gender

Frequency Percent Valid Percent Cumulative Percent

Valid Married 37 74.0 74.0 74.0

Unmarried 13 26.0 26.0 100.0

Total 50 100.0 100.0

INTERPRETATION: The above graph shows that out of 50 samples, 74% of the respondents are

male and the rest 26% are female.



(B) Marital Status:

Marital


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, 66% of the respondents are unmarried and the rest

34% are married.



(C) Age:

Age


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


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 respondents are working in the

Government sector i.e.36%, 28% of them are engaged in Private services, 22% of them are

business field, 6% of them are NRIs and 8% of them are engaged in other works.



(E) Annual Income:

Annual income


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 respondents get a salary of 2-4 lakhs, 38%

of the respondents get a salary below 2 lakhs, and 12% of the respondents get a salary of 4-6

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.


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, 54% of the respondents strongly agree that the

agents or brokers helps them to make investment decision, 26% of the respondents point out

their friends take part in the investment decision. And 10% of the respondents reveal that the

financial journals help 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 a particular company.


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% of respondents agree that the tax benefit 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.


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, 56% of the respondents 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. I would like to invest money in ULIP.

I would like to invest money in ULIP.


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, 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.



5. Reason for choosing ULIPs because of insurance coverage.

Reason for choosing ULIPs because of insurance coverage.



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, 64% of the respondents agree, 28% of them strongly

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

most of the respondents choose ULIP because of insurance coverage.



6. I would like to invest money in Mutual Funds.

I would like to invest money in mutual funds.



Agree 13 26.0 26.0 32.0

Neutral 14 28.0 28.0 60.0

Disagree 18 36.0 36.0 96.0


Total 50 100.0 100.0

INTERPRETATION: From a sample of 50, 26% of the respondents agree with that fact, 6% of

them strongly support it, 28% have no idea about it, and remaining 10% disagreed, out of this

10%, 4% strongly disagreed with it.



7. Mutual funds are more risky than ULIP products.

Mutual funds are more risky than ULIP products.



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, 54% of the respondents think that mutual funds are

more risky than ULIP products, 34% strongly agree with this statement. 8% of them have no

opinion about it, and remaining 4% disagree with it.



8. ULIPs have advantage over Mutual funds.

ULIP have advantage over mutual funds.



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 respondents agree with ULIP have advantage over mutual fund

statement. 24% of them strongly agree with this fact. 4% of do not support the statement. And

remaining 10% have no opinion about it.



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

Safety



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, 52% of the respondents agree, 8% strongly agree, 30%

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

factor is Important in the investment of ULIP.



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

Rate of return



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, majority of the respondents agree i.e. 42%, 12%

strongly agree with that fact, 24% disagree, 16% strongly disagree, and remaining 6% neither

agree nor disagree with that statement.



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

Tax savings



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






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

past scheme's performance



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, majority of the respondents disagree i.e. 46%, 8%

strongly disagree with that fact, 16% strongly agree, 16% agree, and remaining 14% neither




13. Advertisement influences the investment decision in ULIP.

Advertisement



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, 22% agree, 18% strongly agree with that fact, 10%

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

statement.



14. Do you think the safety factor is important in your investment in Mutual Fund.

Safety



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, 8% respondents agree, 4% strongly agree, 60%

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

safety factor is important in the investment of mutual fund.



15. Do you think the Liquidity factor is important in your investment in mutual fund?

Liquidity



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






16. Do you think the Rate of return factor is important in your investment in mutual fund?

Rate of return



Agree 7 14.0 14.0 18.0

Neutral 21 42.0 42.0 60.0

Disagree 15 30.0 30.0 90.0


Total 50 100.0 100.0

INTERPRETATION: From a sample of 50, 30% disagree, 10% strongly disagree with that fact,

14% agree, 4% strongly agree, and remaining 42% neither agree nor disagree with that

statement.



17. Past schemes performance influence your investment decision in mutual fund.

Past scheme's performance



Agree 22 44.0 44.0 56.0

Neutral 15 30.0 30.0 86.0

Disagree 7 14.0 14.0 100.0

Total 50 100.0 100.0

INTERPRETATION: From a sample of 50, 44% agree, 12% strongly agree with that fact, 14%

disagree, and remaining 30% neither agree nor disagree with that statement.



18. Advertisement influences the investment decision in mutual fund.

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Agree 16 32.0 32.0 40.0

Neutral 24 48.0 48.0 88.0

Disagree 4 8.0 8.0 96.0


Total 50 100.0 100.0

INTERPRETATION: From a sample of 50, 8% strongly agree, 32% agree with that fact, 8%

strongly disagree, 4% disagree, and remaining 24% neither agree nor disagree with that

statement.



FINDINGS AND SUGGESTIONS

After survey there are some findings and suggestions as follows.

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 towards ULIP.

Middle class people who are interested in investment but they are not aware of such

options, s

unit linked life insurance plan

Documents

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