final ankit

8/6/2019 Final Ankit

1/104


2/104

A

REPORT

ON

COMPARATIVE STUDY AND FINANCIAL ANALYSIS

OF ULIP PLANS AND MARKETING RESEARCH

BY

ANKIT KUMAR SHAH

(09BS0000276)

IDBI FORTIS LIFE INSURANCE COMPANY LIMITED.

A report submitted in partial fulfilment of the requirements of MBA program of

the ICFAI University, Dehradun.

Faculty Guide: Company Guide:

Prof Aparna Hawaldar Mrs Shanthi Yagyanath

(Faculty Guide) (Company Guide)

Date of Submission: 24th May, 2010

2 | P a g e


3/104

AUTHORISATION

This is to certify that the project entitled Comparative study and financial analysis of ULIP

Plans and Marketing Research is submitted in partial fulfilment of the requirement of MBAProgram of ICFAI University, Dehradun and is a record of the bonafide work carried out by

Ankit Kumar Shah of ICFAI Business School, Bangalore at IDBI FORTIS LIFE INSURANCE

COMPANY LTD.,Bangalore under my supervision and has not been submitted else for any

other purpose.

Prof. Aparna Hawaldar Mrs. Shanthi Yagyanath

(Faculty, IBS Bangalore) (Manager distribution

Chief,IDBI FORTIS)

3 | P a g e


4/104

ACKNOWLEDGEMENTSA summer internship project is a golden opportunity for learning and selfdevelopment. I consider myself very lucky and honoured to have so manywonderful people lead me through in completion of this project.

My grateful thanks to Mrs. Shanthi Yagyanatha, Manager distribution Chief ,who in spite of being extraordinarily busy with her duties, took timeout to hear, guide and keep me on the correct path. I do not know where Iwould have been without her guidance. A humble Thank you Madam.

Prof. Aparna Hawaldar whose patience I have probably tested to thelimit. She was always so involved in the entire process, shared herknowledge, and encouraged me to think. Thank you, Dear Madam.

Last but not the least I would like to thank all the respondents who offeredtheir opinions and suggestions and sometimes critical views throughout thesurvey which made me constantly update myself come out with a successfulproject.

Ankit Kumar Shah09BS0000276

IBS, Bangalore

ContentsAUTHORISATION........................................................................................................3

ACKNOWLEDGEMENTS..............................................................................................4

4 | P a g e


5/104

EXECUTIVE SUMMARY...............................................................................................7

1. INTRODUCTION.....................................................................................................9

1.1 OVERVIEW.......................................................................................................9

1.2 PURPOSE.......................................................................................................11

1.3 SCOPE OF THE STUDY....................................................................................11

1.4 OBJECTIVES OF THE PROJECT.........................................................................11

1.5 METHODOLOGY..............................................................................................11

2. INDUSTRY PROFILE............................................................................................12

2.1 LIST OF PRIVATE SECTOR LIFE INSURANCE COMPANIES...............................14

2.2 FINANCIAL YEAR 2009-10(LIFE INSURANCE).................................................15

3. COMPANY PROFILE..............................................................................................17

3.1 ABOUT IDBI FORTIS........................................................................................17

3.1.1 VISION.....................................................................................................18

3.1.2 MISSION..................................................................................................18

3.1.3 VALUES...................................................................................................18

3.2 PRODUCT MIX OF IDBI FORTIS.......................................................................19

3.2.1 WEALTHSURANCE- A wealth building plan protected by insurance.........19

3.2.2 INCOMESURANCE - A versatile product that suits every need................22

3.2.3 RETIRESURANCE.....................................................................................23

3.2.4 HOMESURANCE.......................................................................................233.2.5 BONDSURANCE.......................................................................................23

4. UNIT LINKED INSURANCE PLANS........................................................................24

4.1 STRUCTURE OF ULIPs...................................................................................25

4.2 EXAMPLE TO ELABORATE HOW ULIPS WORK................................................27

4.3 ADVANTAGES OF ULIPS..................................................................................28

5. COMPARATIVE SECONDARY DATA ANALYSIS OF UNIT LINKED INSURANCE PLANS

(ULIPs).....................................................................................................................29

5.1 IDBI FORTIS LIFE INSURANCE COMPANY........................................................295.2 TATA AIG vsIDBI FORTIS.................................................................................32

5.3 HDFC STANDARD vs IDBI FORTIS...................................................................36

5.4 LIC vs IDBI FORTIS..........................................................................................39

5.5 ICICI PRUDENTIAL vs IDBI FORTIS...................................................................42

5.6 FUND OPTIONS AVAILABLE UNDER ULIPs......................................................45

5 | P a g e


6/104

5.7 COMPARISON OF EQUITY FUNDS(2009-10)....................................................46

5.7.1 EQUITY OUTLOOK.....................................................................................46

5.7.2 TERMS TO UNDERSTAND.........................................................................47

5.7.3 TATA AIG LIFE EQUITY FUND..................................................................50

5.7.4 ICICI PRUDENTIAL EQUITY FUND..............................................................51

5.7.5 HDFC STANDARD - UNIT LINKED ENDOWMENT PLUS EQUITY MANAGED

FUND.................................................................................................................52

5.7.6 RELIANCE GOLDEN YEARS PLAN - EQUITY FUND.....................................53

5.7.7 IDBI FORTIS WEALTHSURANCE EQUITY GROWTH FUND...........................54

5.7.8 SBI LIFE HORIZON....................................................................................55

5.7.9 Kotak Easy Growth Plans(5 Times)...........................................................56

5.8 ANALYSIS......................................................................................................57

5.8.1 Returns:...................................................................................................57

5.8.2 Fund Standard Deviation........................................................................59

5.8.3 Fund Sharpe Ratio....................................................................................61

6. SURVEY ANALYSIS...............................................................................................63

6.1 AIM.................................................................................................................63

6.2 METHODOLOGY..............................................................................................63

6.3 FINDINGS & ANALYSIS....................................................................................63

6.4 FACTOR ANALYSIS (USING SPSS)..................................................................72

OUTPUT SHEET & DETAILED ANALYSIS................................................................73

7 .ULIP BUSINESS IN INDIA......................................................................................79

7.1 The Battle Of Ulips.........................................................................................80

7.2 ULIPS vs MUTUAL FUNDS...............................................................................88

7.3 EFFECT OF INTRODUCTION OF DIRECT TAX CODE(DTC) ON ULIPS................92

8. FINDINGS & CONCLUSION...................................................................................94

9. RECOMMENDATION AND SUGGESTIONS.............................................................96

9. RECOMMENDATION AND SUGGESTIONS

EXECUTIVE SUMMARY

6 | P a g e


7/104

As part of the academic requirement of a B-School, I Ankit Kumar Shah (09BS0000276), a

student of IBS Gurgaon, did my Summer Internship Project at IDBI FORTIS LIFE

INSURANCE COMPANY LTD from Feb 20, 2010 to May 25, 2010. IDBI FORTIS is a joint

venture between IDBI Bank, FORTIS and Federal Bank

The project aims at making a detailed comparative study of the Unit linked Insurance plans

(ULIPs) of IDBI Fortis with that of other selected players in the Insurance industry operating in

India and in the process identify the strengths and weaknesses of IDBI Fortis. In addition to this,

the project tries to capture the consumer perception towards various Insurance products.

The different selected companies apart from IDBI Fortis on which the project is entirely focused

on are namely:

1. Life Insurance Corporation of India

2. ICICI Prudential

3. TATA AIG Life

4. HDFC Life Insurance

5. Bajaj Allianz

6. Reliance Life Insurance

7. Kotak Om

The project can be divided into 4 parts

Comparison of the ULIP plans i.e comapison of the features offered by Ulips offered by

various Insurance companies with that of IDBI Fortis.The features include various

charges levied, maturity benefits, fund options, riders, tax benefits to name a few.

Comparison of the performance of equity funds of the above companies and IDBI

FORTIS.Performance was measured on various factors such as returns, standard

deviation of funds and Sharpe Ratio.These were then compared to the benchmark i.e

Nifty A primary research was conducted in which 240 people were surveyed .The method of

collecting primary data was approaching people in the malls, online surveys and

telephonic interviews. The sample of respondents has been carefully selected, targeting

respondents from all age groups. The data gathered from the primary data was analysed

using various charts and SPSS and thus factors were extracted.

7 | P a g e


8/104


9/104

considerations. The same is also true with the insurance companies in India who are constantly

revamping their strategies and coming out with innovative options to stay in the competition.

There were days when Life Insurance Corporation of India (LIC) was the only insurance

company available to people in India and where people synonymised Insurance to LIC. Also

since it was a Public Sector Undertaking (PSU) it has a great support from people. But now

times have changed a lot of private players have entered into the fray. There have been a lot of

Indian companies collaborating with foreign insurance giants like ICICI Prudential, Bajaj

Allianz etc who have already made their presence felt in the Indian Insurance industry.

Even though LIC is still the market leader with more than over 60% of the market share, the

private players are giving it a tough time. Since the last decade the market share of LIC had

fallen down by about more than 20%.

The new private players have started offering a variety of unlimited schemes right from

insurance plans for a 30 day old baby to that of a 70 year old senior citizen. Also the private

companies have started creating the importance and need of insurance in todays life. They have

started positioning their brands and are marketing their products in such a way the people have

started feeling the need of security in their lives.

Taking into account the huge population and growing per capita income besides several other

driving factors, a huge opportunity is in store for the insurance companies in India. According to

the latest research findings, nearly 80% of Indian population are without life insurance cover

while health insurance and non-life insurance continues to be below international standards.

And this part of the population is also subjected to weak social security and pension systems

with hardly any old age income security. As per our findings, insurance in India is primarily

used as a means to improve personal finances and for income tax planning; Indians have a

tendency to invest in properties and gold followed by bank deposits. They selectively invest in

shares also but the percentage is very small (4-5%). This in itself is an indicator that growth

potential for the insurance sector is immense. It's a business growing at the rate of 15-20% per

annum and presently is of the order of around more than $55 billion.

India is a vast market for life insurance that is directly proportional to the growth in premiums

and an increase in life density. With the entry of private sector players backed by foreign

9 | P a g e


10/104

expertise, Indian insurance market has become more vibrant.

Competition in this market is increasing with companys continuous effort to lure the

customers with new product offerings. However, the market share of private insurance

companies remains low in the 25-35% range. Even to this day, Life Insurance Corporation

(LIC) of India dominates Indian insurance sector. The heavy hand of government still

dominates the market, with price controls, limits on ownership, and other restraints. They

private players are still in their initial days and would take some more time to capture a good

market share. At present they are coming up with new and innovative ideas

A ULIP is a life insurance policy which provides a combination of risk cover and investment.

ULIPs have gained high acceptance due to attractive features they offer like flexibility,

transparency, liquidity and a vast variety of fund option. Unit linked plans are suitable for all

customer profiles; however as a general belief the risk averse investors tend to choose

traditional plans and an informed customer prefers a ULIP. ULIPs offer the kind of flexibility

that no insurance product can. ULIPs essentially combine the benefits of an insurance policy

and a market-linked investment. Investors can select a ULIP with an equity-debt combination

that is in line with their risk profile. A risk-taking investor would typically select one with a

high equity component, while a risk-averse investor would opt for a debt-heavy one. Simply

put, ULIPs are structured in such a way that the protection element and the savings element are

distinguishable, and hence managed according to your specific needs. In this way, the ULIP

plan offers unprecedented flexibility and transparency.

So with many players around for a company to really be successful it has to really be very

efficient on all fronts. It has to constantly adapt to the changing consumer preferences with a lot

of new innovations and implementing new technology try to different from the lot. Especially if

it is a new player in the market the company has to really work very hard to get into the

completion and stay afloat.

1.2 PURPOSEThe project is being done as a part of summer internship program of ICFAI University,

Dehradun. The completion of the project is a partial fulfilment requirement for being awarded

the Masters in Business Administration (MBA) degree from the university.

10 | P a g e


11/104

1.3 SCOPE OF THE STUDY

This study aims to make a comparative study of the Unit Linked Insurance

Plans (ULIPs) of IDBI FORTIS Life Insurance Company with that of some

major selected players in the Indian insurance market and in the process

identify the strengths and weaknesses of IDBI Fortis. In addition to this the

project tries to capture the consumer perception towards various insurance

products. The comparative analysis is based on the empirical data collected

through surveys.

1.4 OBJECTIVES OF THE PROJECT

To compare the features of the Unit Linked Insurance Plans (ULIPs) of

IDBI Fortis with that of some other selected players in the Indian

Insurance industry.

To compare the performance of Equity funds of selected players in the

financial year 2009-10

To identify the strengths and the weaknesses of IDBI Fortis and

suggest areas where it could focus more and improve upon.

To study the consumer perception towards various Insurance products

and their preferred investment pattern.

To discuss the various changes arising and controversies surrounding

the product and its effect in the near future

1.5 METHODOLOGYThe project report is based on Primary as well as Secondary data collection.For the primary

data, a questionnaire had been prepared, It was formulated on the basis of information carefully

gathered by me about the various mindsets of the people. This questionnaire was mainly

formulated to target the common man to see his perception and awareness of various investment

options available through online surveys, approaching people directly in Bangalore and even

tele-calling.This data was analyzed critically using SPSS ans a factor analysis done on the data

brought out the top most factors affecting the consumer minds in insurance products.

Secondary data was needed for comparing the ULIP plans of various life insurance players and

their funds.The internet served as a very important medium as the plans of all the competitors

would be available on their respective websites and the monthly Fund Performance sheets were

very help in further claculations. Besides various books and journals on the insurance industry

were referred to.

11 | P a g e


12/104

2. INDUSTRY PROFILE

As is evident from its very name, it deals with insurance of human life. Life insurance

corporation of India- a public sector undertaking has the monopoly in this sector since its

nationalization.

In our wordily life, whenever there is uncertainty, there is an involvement of risk. The instinct

for security against such risk is one of the basic motivating forces determining human attitudes.

As a squeal to this quest for Security, the concept of insurance must have been born. The urge to

provide insurance or protection against the loss of life & property must have prompted people to

make some sort of sacrifice willingly in order to achieve security through

COLLECTIVE CO-OPERATION, in this sense; story of insurance is probably as old as the

story of mankind.

All life insurance companies in India have to comply with the strict regulations laid out by

Insurance Regulatory and Development Authority of India (IRDA). Therefore there is no risk in

going in for private insurance players. In terms of being rated for financial strength like

international players, only ICICI Prudential is rated by Fitch India at National Insurer Financial

Strength Rating of AAA (Ind) with stable outlook indicating the highest claims paying ability

rating.

90.00

80.00

70.00

60.00

50.00 Life

12 | P a g e


13/104

40.00Non-life

30.00

20.00

10.00

0.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

The trend of the Indian insurance industry ($Bn) 2000-2011

Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far the largest

player in the market with a market share of over 65%. Among the private sector players, ICICI

Prudential Life Insurance(JV between ICICI Bank and Prudential PLC)is the largest followed

by Bajaj Allianz Life Insurance Company Limited (JV between Bajaj Group and Allianz).

The Indian Insurance sector has gone through several phases and changes, especially after 1999,

when the Govt. of India opened up the insurance sector for private companies to solicit

insurance, allowing FDI up to 26%. Since then, the Insurance sector in India is considered as a

flourishing market amongst global insurance companies

The private companies are coming out with better products which are more beneficial to the

customer. Among such products are the ULIPs or the Unit Linked Insurance Plans which offer

both life cover as well as scope for savings or investment options as the customer desires.

Further, these types of plans are subject to a minimum lock-in period of three years to prevent

misuse of the significant tax benefits offered to such plans under the Income Tax Act.

At present there are a total twenty three(23) life insurance companies operating in India, of

which one (Life Insurance Corporation) is a Public Sector Undertaking and the remaining are all

private sector enterprises.

2.1 LIST OF PRIVATE SECTOR LIFE INSURANCE COMPANIES

Sl

No.

Insurer Foreign Partner Year of

Operation

1. HDFC Standard Life Insurance Co.

Ltd.

Standard Life Assurance,

UK

2000-01

13 | P a g e


14/104

2. Max New York Life Insurance Co.

Ltd.

New York Life, USA 2000-01

3. ICICI-Prudential Life Insurance Co.

Ltd.

Prudential , UK 2000-01

4. Om Kotak Life Insurance Co. Ltd. Old Mutual, South Africa

5. Birla Sun Life Insurance Co. Ltd. Sun Life, Canada 2001-02

6. Tata-AIG Life Insurance Co. Ltd. American nternational

Assurance Co., USA

2000-01

7. SBI Life Insurance Co. Ltd. BNP Paribas Assurance

SA, France

2000-01

8. ING Vysya Life Insurance Co.Ltd. ING Insurance

International B.V.,

Netherlands

2001-02

9. Allianz Bajaj Life Insurance Co. Ltd. Allianz, Germany 2001-02

10. Metlife India Insurance Co. Ltd. Metlife International

Holdings Ltd., USA

11. Reliance Life Insurance Co. Ltd. --- 2001-02

12. AVIVA Life Insurance Aviva International

Holdings Ltd., UK

2001-02

13. Sahara Life Insurance Co. Ltd --- 2001-02

14. Shriram Life Insurance Co. Ltd. Sanlam, South Africa 2001-02

15. Bharti AXA Life Insurance Co. Ltd. AXA Holdings, France 2002-03

16. Future Generali India Life Insurance

Company Ltd.

Generali, Italy 2004-05

17. IDBI Fortis Life Insurance Company

Ltd.

Fortis, Netherlands 2005-06

18. Canara HSBC OBC Life Insurance

Company Ltd.

HSBC, UK 2006-07

19. Aegon Religare Life Insurance

Company Ltd.

Religare,

Netherlands

2007-08

20. DLF Pramerica Life Insurance Co.

Ltd.

Prudential of America,

USA

2007-08

21. Star Union Dai-ichi Dai-ichi Mutual

14 | P a g e


15/104

Life Insurance, Japan 2008-09

22. IndiaFirst life Insurance company Legal & General Middle

East Limited, UK

2009-10

2.2 FINANCIAL YEAR 2009-10(LIFE INSURANCE)The first year premium collection of life insurance companies surged 68.3% to Rs 25399.02

crore in March 2010, accounting for 23.2% of the total new business premium collection during

2009-10. During March 2010, the strong growth in premium income was supported by 82.7%

and 46.7% increase in premium collection of Life Insurance Corporation (LIC) and Private Life

Insurer to Rs 16570.82 crore and Rs 8828.20 crore, respectively.

The life insurance industry has breached the Rs 1 trillion mark for new premium collection

during 2009-10. The premium collection surged 25.5% to Rs 109290.37 crore in 2009-10, while

snapping 7.0% fall for last financial year.

The new business premium collection of private life insurers increased 12.4% to Rs 38399.32

crore in 2009-10. Meanwhile, the new premium collection of LIC zoomed 33.9% to Rs

70891.05 crore compared to 11.7% fall recorded in 2008-09. However, the market share of LIC

rebounded to 64.86% in 2009-10 from 60.79% in 2008-09, which was declining continuously

since the sector was opened in 2000.

SBI Life Insurance has emerged as the leading private insurer in terms of new business

premium collection during 2009-10, displacing the ICICI Prudential Life. The new

business premium collection for SBI Life increased 30.7% Rs 7040.66 crore in 2009-10. SBI

Life has improved its share in the life insurance market to 6.44% in 2009-10 from 6.18% in

2008-09. Among the 13 life private life insurers, which have been operating for more than 6

years, SBI Life was the only life insurer to strengthen its market as rest have lost their market

shares during 2009-10, to LIC and new private players.

ICICI Prudential Life recorded a 7.0% fall in new premium collection to Rs 6334.31 crore,

while its market share dipped to 5.80% in 2009-10 from 7.82% in 2008-09. Further, Metlife and

Sahara life posted 6.8% and 5.5% fall in new premium income during 2009-10. The premium

collection of Bajaj Allianz eased 0.9% to Rs 4451.09 crore, while its markets share also

declined to 4.07% in 2009-10 from 5.16% in 2008-09.

Among the newer private insurers, the premium collection of Future Generali has more than

trebled to Rs 485.82 crore during 2009-10 compared to Rs 152.44 crore in 2008-09. The

15 | P a g e


16/104

premium income of Canara HSBC Life has more

than doubled to Rs 640.27 crore, while that Aegon

Religare has zoomed 381.8% to Rs 150.37 crore in

2009-10 over 2008-09.

Star Union Dai-ichi life which stared operations in February 2009, has posted a multi-fold

increase in new premium collection to Rs 519.49 crore in 2009-10, compared to Rs 51.75 crore

in 2008-09. IndiaFirst Life that started operations in November 2009 has touched the premium

income of Rs

201.6 crore in

its first year's of

operation, 2009-10.

SHARE OF PRIVATE LIFE INSURANCE COMPANIES AS ON 31st March 2010

3. COMPANY PROFILE

16 | P a g e


17/104

3.1 ABOUT IDBI FORTIS

IDBI Fortis Life Insurance Co Ltd is a joint venture between three leading financial

conglomerates Indias premier development and commercial bank, IDBI Bank, one of Indias

leading private sector banks, Federal Bankand Europes banking and insurance giant, Fortis,

each of which enjoys a significant status in their respective business segments. In this venture,

IDBI Bank owns 48% equity while Federal Bank and Fortis own 26% equity each.

IDBI Fortis launched its first set of products across India in March 2008, after receiving the

requisite approvals from the Insurance Regulatory Development Authority (IRDA). The

company offers its services through a vast nationwide network across the branches of IDBI

Bank and Federal Bank in addition to a sizeable network of advisors and partners. At IDBIFortis, people endeavor to deliver products that provide value and convenience to the customer.

Through a continuous process of innovation in product and service delivery the company

intends to deliver world-class wealth management, protection and retirement solutions to Indian

customers IDBI Ltd. continues to be, since its inception, Indias premier industrial development

bank. Created in 1956 to support Indias industrial backbone, IDBI has since evolved into a

powerhouse of industrial and retail finance. Today, it is amongst Indias foremost commercial

banks, with a wide range of innovative products and services, serving retail and corporate

customers in all corners of the country from over 490 branches and more than 600 ATMs. The

Bank offers its customers an extensive range of diversified services including project financing,

term lending, working capital facilities, lease finance, venture capital, loan syndication,

corporate advisory services and legal and technical advisory services to its corporate clients as

well as mortgages and personal loans to its retail clients.

Federal Bank is one of Indias leading private sector banks, with a national network and

dominant presence in the state of Kerala. It has a strong network of over 550 branches and 450

ATMs spread across India. The bank provides over four million retail customers with a wide

variety of financial products. Federal Bank is one of the first large Indian banks to have an

entirely automated and interconnected branch network. They operate on the core banking

platform and are RTGS/ NEFT enabled through which the Bank offers state-of-the-art

technology enabled products and services.

17 | P a g e


18/104

Fortis, a European financial services provider engaged in banking and insurance with a

presence in over 50 countries, offers its personal, business and institutional customers a

comprehensive package of products and services through its own channels, in collaboration with

intermediaries and through other distribution partners. With a market capitalization of over EUR

40 billion, Fortis ranks among the 20 largest financial institutions in Europe. Fortis sound

solvency position and dedicated, professional workforce of over 80,000, enables it to combine

global strength with local flexibility to provide its clients with optimum support and service.

3.1.1 VISION

To be the leading provider of wealth management, protection and retirement solutions that

meets the needs of our customers and adds value to their lives.

3.1.2 MISSION

To continually strive to enhance customer experience through innovative product

offerings, dedicated relationship management and superior service delivery while

striving to interact with our customers in the most convenient and cost effective manner. To be transparent in the way we deal with our customers and to act with integrity.

To invest in and build quality human capital in order to achieve the mission

3.1.3 VALUES

Transparency: Crystal clear communication to our partners and stakeholders.

Value to Customers: A product and service offering in which customers perceive value.

Rock Solid and Delivery on Promise: This translates into being financially strong,

operationally robust and having clarity in claims.

Customer-friendly: Advice and support in working with customers and partners.

Profit to Stakeholders: Balance the interest of customers, partner employees,

shareholders and community at large.

3.2 PRODUCT MIX OF IDBI FORTIS

18 | P a g e


19/104

IDBI Fortis offers a variety of innovative and interesting Insurance products targeting each and

every segment of the society , be it a three year old child or a seventy year old senior citizen it

has products for everyone. The product basket consist of namely :

Wealthsurance

Incomesurance

Retiresurance

Homesurance

Bondsurance

3.2.1 WEALTHSURANCE- A wealth building plan protected by insurance.

The Wealthsurance Foundation Plan enables you to save and build wealth to meet your financial

goals. However, unlike other investment alternatives, it also enables you to achieve your wealth

goals even in the event of unexpected death, accidents, disablement or serious illness.

The Wealthsurance Foundation Plan can ensure that your plans for wealth creation are achieved

by protecting that plan with insurance benefits.

With Wealthsurance Foundation Plan, you can:

Save into the Plan as much money as you want whether at one time, at regular intervals

or as per your convenience.

Build your wealth by choosing the investments your savings go into and change them

from time to time as you wish.

Get adequate life insurance cover with a unique built-in terminal illness benefit, so that

the financial security of your loved ones is assured and your plans are always

realised.

Get health, accident and disablement benefits so you can ensure that your wealth-

building plans are not affected by unexpected medical expenses or loss of earning

capacity in case of serious ailments, accidents or disablement.

Grow wealth faster with tax free income, thus making the whole package even more

attractive.

19 | P a g e


20/104

All in all, the Wealthsurance Foundation Plan can be a complete financial plan that puts the

power of choice in your hands.

HOW DOES WEALTHSURANCE WORK ?

Investment and Insurance in a 2-in-1 Account.

Wealthsurance is a wealth-management account with sub-accounts for investments and

insurance. It is designed to meet twin goals of wealth-building and insurance protection.

Wealth building The Wealthsurance Investment Account holds all the investments you

have chosen. The investments made out of your premium allow you to manage and build

your wealth.

Insurance Protection The Wealthsurance Insurance Account holds the insurance

benefits you have chosen, which allows you to claim benefits in the event of a serious

ailment, disablement, accident or death

20 | P a g e


21/104

My Investment Account

The premiums you pay are fully invested into the investment options you choose in the

proportion that you specify.There is no deduction of any allocation charge. IDBI Fortis

InvestmentBasket contains all the investment options we offer.The balance in your Investment

Account reflects the wealth built over time from your premium contributions and the returns

from the investment options chosen by you.

My Insurance Account

You can also choose any of the insurance benefits we offer under IDBI Fortis InsuranceBasket.You pay for only those benefits you choose and the charges are deducted from your Investment

Account.

3.2.2 INCOMESURANCE - A versatile product that suits every need

Incomesurance is loaded with lots of benefits which ensure that you get Guaranteed Annual

Payout along with insurance protection which will help you to reach you goals with full

confidence. Incomesurance Plan is very flexible and allows you to customise your Plan as per

your individual and familys future requirements. Moreover it also allows you to choose

Premium Payment Period, Payout Period, Payout Options and more.

HOW DOES INCOMESURANCE WORK ?

21 | P a g e


22/104

3.2.3 RETIRESURANCE

Retiresurance is a pension plan without life cover that allows a longer policy term so that thecustomers investment can get the benefit of compounding. The customer has to choose any

vesting age between 40 -75 years. The vesting age chosen can also be postponed or pre-poned

within the above range by informing the company 30 days in advance. It is specially for people

who wish to lead a happy and prosperous life even after their retirement.

22 | P a g e


23/104

3.2.4 HOMESURANCE

The Homesurance Protection Plan is a reducing term plan, which provides insurance cover

equal to the outstanding balance of your home loan. In the unfortunate event of death of the

home loan borrower, the insurance cover enables repayment of the home loan liability.

3.2.5 BONDSURANCE

Bondsurance is a single premium plan which allows you to make a one-time investment and get

a guaranteed amount on maturity. You can choose a maturity period of 5 or 10 years for your

investment. At the end of the chosen period you will receive a guaranteed maturity amount.

Bondsurance also provides life insurance cover. In case of death before the maturity death, a

death benefit which is also guaranteed will also be paid. Thus you can also get a life insurance

cover, while earning an assured return on your investment.

4. UNIT LINKED INSURANCE PLANS

Unit linked insurance plan (ULIP) is a life insurance solution that provides the client with the

benefits of protection and flexibility in investment. It is a solution which provides for life

insurance where the policy value at any time varies according to the value of the underlying

assets at the time. The investment is denoted as unit and is represented by the value that it has

attained called as Net Asset Value (NAV).

ULIPs are a category of goal-based financial solutions that combine the safety of insurance

23 | P a g e


24/104


25/104

This is a percentage of the premium appropriated towards charges before allocating the units

under the policy. This charge normally includes initial and renewal expenses apart from

commission expenses.

Mortality Charges

These are charges to provide for the cost of insurance coverage under the plan. Mortality

charges depend on number of factors such as age, amount of coverage, state of health etc.

Fund Management Charges

These are fees levied for management of the fund(s) and are deducted before arriving at the Net

Asset Value (NAV) .

Policy/ Administration Charges

These are the fees for administration of the plan and levied by cancellation of units. This could

be flat throughout the policy term or vary at a pre-determined rate

Surrender Charges

A surrender charge may be deducted for premature partial or full encashment of units wherever

applicable, as mentioned in the policy conditions.

Fund Switching Charge

Generally a limited number of fund switches may be allowed each year without charge, with

subsequent switches, subject to a charge. But now a days many insurers offer fund switching

free of cost.

25 | P a g e


26/104

Service Tax Deductions

Before allotment of the units the applicable service tax is deducted from the risk portion of the

premium

ULIPs StructureFund

Management

Mortality Charges

Administration Charges

Charges

Premium

AllocationCharges

Invested

Amount

BREAK UP OF ULIP CHARGES

4.2 EXAMPLE TO ELABORATE HOW ULIPS WORK

Client pays annual premium of Rs.20,000

Deduct 40% as Premium Allocation Charge - Rs.8,000

Deduct Rs.200 per month as fixed monthly administration expense

Deduct Rs.100 on the first month as mortality charge

Balance Rs.11,700 is used to purchase units as per investment choice of the

customer

26 | P a g e


27/104

Investment Fund (Rs.11,700) is used to buy units based upon NAV Values of the

fund on that Day

If NAV is Rs.10 on that day then Rs.11,700/10 = 1170 units are purchased

For the first month the units are cancelled up- front and amount deducted to pay for

the risk cover and expenses, this is 1/12 th of the annual amount so calculated

Every month the required no. of units are cancelled to cover mortality charges and

fixed monthly administration expenses

Suppose in the second month the NAV is 12, 16.6666 units cancelled at Rs.12/-, to

generate Rs.200/- so 963.3334 Units Remain

This is repeated every month till end of the year

Client pays renewal annual premium of Rs.20,000

Deduct 20% as 2nd year Premium Allocation Charge - Rs.4,000

Deduct Rs.200 per month as fixed monthly administration expenses

Deduct Rs.80 on the first month of the second yr. as mortality charge

Suppose in the second year beginning the NAV is Rs.14 Per Unit, so Rs.13,720/14

= 980 Units are purchased

So total units= units at end of first year + 980 units

4.3 ADVANTAGES OF ULIPS

ULIP distinguishes itself through the multiple benefits that it provides to the consumer. The

plan is a one stop solution for everything the customers want. Unit Linked Insurance Plans

(ULIPs) are different from traditional plans purely because, they are much more transparent,

various charges are shared with the customer before the sale of the product, so as to enable the

customer to make an informed decision.

27 | P a g e


28/104

Customers have the flexibility to choose their life cover. Also the customers have the choice of

multiple fund options based on their risk appetite, thereby enabling an investor to make the

desired returns from the investment.

The following are some of the advantages of Unit linked plans:

a. Life protection

b. Investment and Savings

Market linked fund based on risk profile

Switch option

Premium redirection

Automatic Transfer Plan(ATP)

c. Tax Planning

d. Flexibility of cover continuance

e. Transparency

f. Extra protection with riders

Death due to accident

Disability

Critical illness

g. Liquidity

Partial withdrawals during the term

At maturity

h. Variable investment options

i. Premium holiday

j. Allow Top-ups

5. COMPARATIVE SECONDARY DATA ANALYSIS OF UNITLINKED INSURANCE PLANS (ULIPs)

28 | P a g e


29/104

5.1 IDBI FORTIS LIFE INSURANCE COMPANYThere are many financial plans that can meet different needs of yours, but very few can offer

comprehensive investments and protection benefits on a single platform. This is the very reason

for choosing Wealthsurance the flagship product of IDBI Fortis, an Unit linked insurance plan

(ULIP), which we have taken up for our comparative study and analysis with the other

prominent ULIP plans of the selected players. Also since the Wealthsurance Plan was

introduced in 2008, for a fair comparative evaluation , we have selected ULIP plans of the

selected players which were introduced in the market at the same time.

As discussed earlier we would be comparing the Unit Linked Insurance Plans (ULIPs) of the

companies selected with those of IDBI FORTIS and then make a detailed analysis. This analysis

would be well supported by the primary data analysis and then the final results would be

analysed.

FEATURE WEALTHSURANCEMin/Max Entry Age 1 Month/65 YearsMin/Max Maturity Age 75 YearsMin Premium Rs. 20,000 yearly/Rs. 10,000 for

half yearly /Rs. 5,000 for

quarterly/ Rs. 2,000 for

monthly mode

Term Term can be chosen in multiplesof 5 years starting from a minterm of 10 years.

Fund Options 10 Fund Options Monthly Guaranteed

Interest Fund Guaranteed Retun Funds Dynamic Guaranteed

Funds Market Fund Options

Equity Growth Fund Nifty Index Fund Midcap Fund Bond Fund Income Fund Liquid Fund

Asset Allocator Funds

29 | P a g e


30/104

Fund Management Charges 1.25% p.a. + investment

guarantee

charge of 0.15% p.a. for MGIF. 1.25% p.a. + 0.25% p.a.

for GRF 1.35% p.a. + 0.90% p.a.

for DGF 1.35% p.a. for Market

Funds. No FMC for Asset Allocator

Fund.

Partial Withdrawal Allowed provided fund value afterthe partial withdrawal is not less

than two times the annual regularpremium or 50% of initial single

premium subject to a minimum of

Rs 20,000 in case of a single

premium policy.

Increase of sum assured on top -ups Whenever top-up premiums are

paid, sum insured will

automatically increase by 125%

of the top-up premium paid.

Premium allocation charges NilAdditional allocation on premium Rs 50,000- Rs 99,999 :

0.5% Rs 100000- Rs 4,99,999 :

1.5% Rs 5,00,000 + :

2.5%*

Policy Administration charges Monthly charge expressed as

a percentage of sum insured

Varies by premium paymentterm and policy year*

Surrender charges Based on policy year and

number of annual premiums

paid.

No surrender charge after 5thyear. *

30 | P a g e


31/104

Riders Life & Terminal illness benefit,Accidental death benefit,Accidental death & disablementbenefit, Major diseases benefit,Hospital cash benefit, Waiver of

premium benefit.Mortality Charges Mortality and Terminal Illness

Charges are calculated on theSum at Risk which is SumInsured - Fund Value. These arededucted at the beginning ofeach month by cancellation ofunits in your InvestmentAccount*

Maturity benefits Maturity Benefit is equal to the

Fund Value in your Investment

account on the date of maturity.

Tax benefits Contributions by way of premiumsare eligible for deduction under

Sec 80C. Insurance charges for

health benefits are eligible for

deduction under Sec 80D. Benefits

are tax-free under

Sec 10(10D), allowing you to earntax-free income and benefits.

Other benefits Free switching b/w Funds, Planflexibility.

Additional allocation Premium (IDBI Fortis)

Policy Administration Charges (IDBI Fortis)

31 | P a g e


32/104

Mortality Charges (IDBI Fortis)

Surrender Charges (IDBI Fortis)

32 | P a g e


33/104

5.2 TATA AIG vsIDBI FORTIS

FEATURE TATA AIG LIFE LAKSHYAPLUS

WEALTHSURANCE

Min/Max Entry

Age

30 Days/60 Years 1 Month/65 Years

Max Maturity Age 75 Years 75 YearsMin Premium Rs. 18,000 p.a. Rs. 20,000 yearly/Rs.

10,000 for half

yearly /Rs. 5,000 for

quarterly/ Rs. 2,000

for monthly mode

Term 15/20/25/30 Years -

Min PremiumPayment Term Same as Policy Term Term can be chosen inmultiples of 5 yearsstarting from a minterm of 10 years.

Fund Options 8 Fund Options Top 50 Fund

Top 200 Fund

Aggressive Flexi

Fund

Stable Flexi Fund

Bond Fund

Large Cap Equity

Fund

Infrastructure

Fund

Super Select

Equity Fund

10 Fund Options Monthly

GuaranteedInterest Fund

GuaranteedRetun Funds

Dynamic

GuaranteedFunds Market Fund

Options Equity Growth

Fund Nifty Index

Fund Midcap Fund

33 | P a g e


34/104

Bond Fund Income Fund Liquid Fund

Asset AllocatorFunds

FundManagementCharges

A FMC of 1.20 % p.a.of the fund value is

charged for each of the

8 funds.

1.25% p.a. +investment

guarantee charge

of 0.15% p.a. will

be appropriated

while computing

the Net Asset

Value of the

MGIF.

1.25% p.a. +0.25% p.a. forGRF

1.35% p.a. +0.90% p.a. forDGF

1.35% p.a. forMarket Funds.

No FMC AssetAllocator

Partial

Withdrawal

Withdrawals from

Regular Premium

Account are allowed

from the 6th policy

year and only after the

insured has attained

18 years of age. Min

partial withdrawal is

Rs.5,000 and the Total

Fund Value after any

withdrawal should besuch that the

Surrender value does

not fall below an

amount equal to One

Annualised Regular

Premium.There are no

partial withdrawal

Allowed provided fund

value after the partial

withdrawal is not less

than two times the

annual regular

premium or 50% of

initial single premium

subject to a minimum

of Rs 20,000 in case of

a single premium

policy.

34 | P a g e


35/104

charges under this

product.

Increase of sumassured on top

-ups

You have the flexibility

to pay additional

premium as "Top-Up

Premium" at any time

during the policy term

without taking

additional Sum

Assured.

Whenever top-uppremiums are paid,

sum insured willautomatically increaseby 125% of the top-uppremium paid.

Premiumallocation

charges

This will be deducted

from the premium

amount at the time of

premium payment &

units will be allocated

thereafter.

1st Yr- 30% of

Annualised Premium,

0% from 2nd Yr o/w.

Top-up premium

allocation charge: 1.5%

of the Top-Up

Premium.

No premium allocationcharge for all policies.

Additionalallocation onpremium

The Additional

allocation is additional

premium credited to

the respective funds

every year till end of

policy term, begins

from the third policy

anniversary of your

policy.*

Additional Allocation is

not available on Top-

Up Premium.

Rs 50,000- Rs99,999 : 0.5%

Rs 100000- Rs4,99,999 : 1.5%

Rs 5,00,000 +: 2.5%*

Policy A monthly PMC of Monthly charge

35 | P a g e


36/104

Administrationcharges

Re.1.1 per Rs.1000

Basic Sum Assured will

be deducted by

cancelling Units at Unit

Price from the Fund

Value of the Policy +

there will be Sum

Assured related charge

of Rs. 4 p/m per

Rs.1000 of Basic Sum

Assured for the first 2

policy years.

expressed as a

percentage of sum

insured

Varies by premium

payment term andpolicy year*

Switching Charge There are 12 free

switches per policy

year. Thereafter a

charge of Rs.100/- per

switch will be

applicable.

No Switching charges.Any Number ofswitches can be madein a month .

Surrendercharges

Policy can be

surrendered any time

during the term.

However

when the request isreceived in first three

policy years, the

surrender value will be

frozen as on date of

surrender and shall be

payable at the end of

three policy years.

These will be subject

to the surrendercharges applicable at

that time of

surrender.*

Based on policy year

and number of annual

premiums paid.

No surrender charge

after 5th year. *

Riders Death benefit- In case

of unfortunate death

of the insured while

Life & Terminal illnessbenefit, Accidentaldeath benefit,

36 | P a g e


37/104

the policy is in

force & before the

maturity date, the

nominee will get

Higher of (I) the SumAssured net of all

Deductible Partial

Withdrawals, if any,

from the Regular

Premium Account , or

(ii) the Regular

Premium Fund Value at

applicable unit price.

Accidental death &disablement benefit,Major diseases benefit,Hospital cash benefit,Waiver of premium

benefit.

Mortality Charges Mortality charge is theamount of insurance

cover for the month

multiplied by the

applicable Mortality

Charges for the month,

based on the age of

the Life Assured. It is

deducted on a monthly

basis on the life cover.Indicative charges per

thousand Sum Assured

for a sample age are as

shown below.*

Mortality and TerminalIllness Charges are

calculated on the Sum

at Risk which is

defined as Sum

Insured minus Fund

Value. Mortality and

Terminal Illness

Charges are deducted

at the beginning ofeach month by

cancellation of units in

your Investment

Account*

Maturity benefits On survival to the end

of the policy term, you

will not only receive

the Total Fund Value

which is equal to thevalue of the Regular

Premium Account plus

the value of the Top-

Up Premium Account(if

applicable) valued at

applicable unit price

but also the

Maturity Benefit isequal to the FundValue in yourInvestment account onthe date of maturity.

37 | P a g e


38/104

Guaranteed Maturity

Addition of 8% of your

Regular Premium Fund

Value.

Tax benefits Premiums paid underthis plan are eligible

for tax benefits under

5 section 80C of the

Income Tax Act, 1961+

life insurance proceeds

enjoy tax benefits as

per section 10(10D) of

the said Act.

Contributions by way ofpremiums are eligible for

deduction under Sec

80C. Insurance charges

for health benefits are

eligible for deduction

under Sec 80D. Benefits

are tax-free under

Sec 10(10D), allowing

you to earn tax-free

income and benefits.

Other Remark Optimize market

returns by investing

through Systematic

Money Allocation &

Regular Transfer

Investment (SMART).

Flexibility to Inc/ Dec

the Top-up Sum

Assured. Flexibility of

Premium Mode.

Flexibility To Get

additional Cover under

Tata AIG Life

Accidental Death

Benefit Limited

Underwriting Rider

Free switching b/wFunds, Plan Flexibility.

38 | P a g e


39/104

5.3 HDFC STANDARD vs IDBI FORTIS

FEATURE HDFC SIMPLILIFE WEALTHSURANCEMin/Max EntryAge

18 /45 Years 1 Month/65 Years

Max Maturity Age 60 Years 75 YearsMin Premium Rs. 15,000 (Annual)

Rs. 8,000 (Half- Yearly)

Rs. 20,000 yearly/Rs.

10,000 for half

yearly /Rs. 5,000 for

quarterly/ Rs. 2,000for monthly mode

Min PremiumPayment Term

-

Min/Max Term 15/20 Years Term can be chosen inmultiples of 5 yearsstarting from a minterm of 10 years.

Fund Options 7 Fund Options Liquid Fund

Options II

Stable Managed

Fund II

Secure Managed

Fund II

Defensive

Managed Fund II




DynamicGuaranteedFunds

Market Fund

39 | P a g e


40/104

Balanced

Managed Fund II

Equity Managed

Fund II

Growth Fund II

Options Equity Growth

Fund Nifty Index

Fund

Midcap Fund Bond Fund Income Fund Liquid Fund



A fund management

charge of 1.35% per

annum will be

applicable. There will

be an additionalcharge for the cost of

investment guarantee

of 0.10% per annum.

These will be made by

adjustment to the NAV.

1.25% p.a. +

investment

guarantee charge

of 0.15% p.a. will

be appropriatedwhile computing

the Net Asset

Value of the

MGIF.

1.25% p.a. +0.25% p.a. forGRF

1.35% p.a. +0.90% p.a. for

DGF 1.35% p.a. for

Market Funds. No FMC Asset

AllocatorPartialWithdrawal

From 6th policy year

onwards, 1 partial

withdrawal allowed

every year, subject to

a max 20% of the Fund

Value as on the date ofpartial withdrawal. The

minimum amount is

Rs.2000 .These partial

withdrawals will be

free ofcharge. Also

this will have an




than two times the

annual regular

premium or 50% ofinitial single premium



a single premium

policy.

40 | P a g e


41/104

impact on the Sum

Assured.

Increase of sumassured on top

-ups

Top Up premium is not

allowed under this

product.

Whenever top-uppremiums are paid,

sum insured willautomatically increaseby 125% of the top-uppremium paid.

Premiumallocationcharges


from the premium


premium payment &


thereafter.*



On maturity, there will

be an Additional

Allocation to the

policy. This will be

calculated as 3% of the

Fund Value on the date

of maturity.

Rs 50,000- Rs99,999 : 0.5%

Rs 100000- Rs4,99,999 : 1.5%

Rs 5,00,000 +: 2.5%*

PolicyAdministration

charges

0.3% of the original

annualised premium

per month.

Monthly charge

expressed as a

percentage of sum

insured

Varies by premiumpayment term andpolicy year*

Switching Charge 24 switches will begiven free in a policyyear & any additionalswitch will be charged

Rs 100 per switch.

No Switching charges.Any Number ofswitches can be madein a month .

Surrendercharges

The Surrender Value

where 3 full years'

premiums have not

been paid will be 30%

of the Fund Value.

The Surrender Values



premiums paid.

No surrender charge

after 5th year. *

41 | P a g e


42/104

where 3 full years'premiums have beenpaid- see table below*

Riders Death benefit Life & Terminal illnessbenefit, Accidental

death benefit,Accidental death &disablement benefit,Major diseases benefit,Hospital cash benefit,Waiver of premiumbenefit.

Mortality Charges Mortality charges will

be deducted on a

monthly basis on the

life cover. Life cover is

the difference between

the Sum Assured and

the Fund Value at the

time of deduction of

charges. Indicative

charges per thousand

Sum Assured

for a healthy male andfemale life are asshown below.*

Mortality and Terminal

Illness Charges are


at Risk which is

defined as Sum

Insured minus Fund


Terminal Illness


at the beginning of

each month by


your Investment

Account*

Maturity benefits At maturity, the higher

of the Fund Value and

Guaranteed Value as

on the maturity date,

along with the

Additional Allocation

shall be payable.*

Maturity Benefit isequal to the FundValue in yourInvestment account onthe date of maturity.

Tax benefits Premium and anybenefit amount

received under this

policy will be eligible

for the tax

benefit as per the

prevailing Income Tax

Contributions by way ofpremiums are eligible for

deduction under Sec




under Sec 80D. Benefits

are tax-free under

42 | P a g e


43/104

laws. Sec 10(10D), allowingyou to earn tax-free


Other Remark No Plan flexibility, Get

the benefit of thehighest NAV recorded

on a daily basis, in the

first 7 years of the

fund, at maturity. If

there are any policy

alterations during the

policy term, they will

be subject to a

miscellaneous charge

of Rs. 250 per

alteration.

Free switching b/w

Funds, Plan Flexibility.

5.4 LIC vs IDBI FORTIS

FEATURE LIC Market Plus -1 WEALTHSURANCE

Min/Max Entry

Age

18 Years/65 Years 1 Month/65 Years

Min/Max

Maturity Age

40 Years/75 Years 75 Years

43 | P a g e


44/104

Min Premium

Rs. 5000 p.a. for

deferment term of 20

years & +

Rs 10000 p.a. for

term of 15-19 years

Rs 15000 p.a. for

term of 10-14 years

Rs. 20,000 yearly/Rs.

10,000 for half yearly

/Rs. 5,000 for quarterly/

Rs. 2,000 for monthly

mode

Min Premium

Payment Term

Term

-

10 years Regular

Premium/ 5 Years

-Single

Term can be chosen in

multiples of 5 years

starting from a min term

of 10 years.

Fund Options 4 Fund Options 10 Fund Options

Bond Fund

Secured Fund

Balanced Fund

Growth Fund

Monthly Guaranteed

Interest Fund

Guaranteed Return

Funds

Dynamic Guaranteed

Funds

Market Fund Options

- Equity Growth Fund

- Nifty Index Fund

- Midcap Fund

- Bond Fund

- Income Fund

- Liquid Fund

Asset Allocator Funds

44 | P a g e


45/104

Fund

Management

Charges

0.50% p.a. of Unit

Fund for Bond Fund

1.25% p.a. +


0.60% p.a. of Unit

Fund for SecuredFun

0.70% p.a. of Unit

Fund for Balanced

Fund

0.80% p.a. of Unit

Fund for Growth

Fund

charge of 0.15% p.a. will

be appropriated whilecomputing the Net Asset

Value of the MGIF.

1.25% p.a. + 0.25%

p.a. for GRF

1.35% p.a. + 0.90%

p.a. for DGF

1.35% p.a. for Market

Funds.

No FMC for Asset

Allocator Fund.

Partial

Withdrawal

No Partial Withdrawal

will be allowed



withdrawal is not less than

two times the annual

regular premium or 50% of

initial single premiumsubject to a minimum of Rs

20,000 in case of a single

premium policy.

Increase of

sum assured

on top -ups

No Such Increase Whenever top-up

premiums are paid, sum

insured will

automatically increase

by 125% of the top-up

premium paid.

Premium

allocation

charges

Single Premium Policy

: 3.3%

No premium allocation

charge for all policies.

45 | P a g e


46/104


47/104

Riders Death benefit, Life

cover option,

Accidental benefit

option, Critical

benefit option rider

Life & Terminal illness

benefit, Accidental death

benefit, Accidental death

& disablement benefit,

Major diseases benefit,

Hospital cash benefit,

Waiver of premium

benefit.

Maturity

benefits

Maturity Benefit is

equal to the Fund

Value in your

Investment account

on the date of

maturity.

Maturity Benefit is equal

to the Fund Value in

your Investment account

on the date of maturity.

Tax benefits

Contributions by way of

premiums are eligible

for deduction under Sec

80C. Benefits are tax-

free under Sec 10(10D),

allowing you to earn

tax-free income and

benefits.


premiums are eligible for

deduction under Sec 80C.

Insurance charges for

health benefits are eligible

for deduction under Sec

80D. Benefits are tax-free

under

Sec 10(10D), allowing you

to earn tax-free income

and benefits.

Other Remark No Free switching

b/w Funds, No Plan

FLexibilty, An

alteration such as

reduction in policy

term , change in

premium mode

subject to a charge of

Rs. 50/-. A service tax

levied on all of the

above policy charges.

Allocation charge for

top up-1.25%

Free switching b/w

Funds, Plan FLexibilty

47 | P a g e


48/104

5.5 ICICI PRUDENTIAL vs IDBI FORTIS

FEATURE ICICI PRU PINNACLE WEALTHSURANCEMin/Max EntryAge

8 /65 Years 1 Month/65 Years

Max Maturity Age 75 Years 75 YearsMin Premium Rs. 50,000 p.a. Rs. 20,000 yearly/Rs.

10,000 for halfyearly /Rs. 5,000 for

quarterly/ Rs. 2,000

for monthly mode

Min PremiumPayment Term

3 Years -

Term 10 years Term can be chosen inmultiples of 5 yearsstarting from a minterm of 10 years.

Fund Options 1 Fund OptionPinnacle Fund*-The investment

objective of the fund is

to generate optimal

returns through an

actively managed

equity portfolio while

using debt instruments

to manage the

guarantee.




DynamicGuaranteedFunds

Market FundOptions

Equity GrowthFund

Nifty IndexFund

Midcap Fund Bond Fund Income Fund Liquid Fund

48 | P a g e


49/104



A fund management

charge of 1.35% per

annum will be

applicable. There will

be an additional

charge for the cost of


of 0.10% per annum.

These will be made by

adjustment to the NAV.

1.25% p.a. +

investment

guarantee charge

of 0.15% p.a. will

be appropriated

while computing

the Net Asset

Value of the

MGIF.

1.25% p.a. +0.25% p.a. forGRF

1.35% p.a. +0.90% p.a. forDGF

1.35% p.a. forMarket Funds.

No FMC AssetAllocator

PartialWithdrawal

From 6th policy year

onwards, 1 partial

withdrawal allowed

every year, subject toa max 20% of the Fund

Value as on the date of

partial withdrawal. The

minimum amount is

Rs.2000 .These partial

withdrawals will be

free ofcharge. Also

this will have an

impact on the Sum

Assured.




than two times theannual regular

premium or 50% of

initial single premium



a single premium

policy.

Increase of sumassured on top-ups

Top Up premium is not

allowed under this

product.

Whenever top-uppremiums are paid,sum insured willautomatically increaseby 125% of the top-uppremium paid.

49 | P a g e


50/104

Premiumallocationcharges


from the premium


premium payment &


thereafter.*



On maturity, there will

be an Additional

Allocation to the

policy. This will be

calculated as 3% of the

Fund Value on the date

of maturity.

Rs 50,000- Rs99,999 : 0.5%

Rs 100000- Rs4,99,999 : 1.5%

Rs 5,00,000 +: 2.5%*

PolicyAdministrationcharges

The PMC is apercentage of the

annual premium and

will be charged only in

the first 3 policy years,

regardless of the

premium payment

status. These charges

will be deducted by

cancellation of units.*

Monthly chargeexpressed as a

percentage of sum

insured

Varies by premiumpayment term andpolicy year*

Switching Charge N.A No Switching charges.Any Number ofswitches can be madein a month .

Surrendercharges

The Surrender Value

where 3 full years'

premiums have not

been paid will be 30%

of the Fund Value.

The Surrender Valueswhere 3 full years'premiums have beenpaid- see table below*



premiums paid.

No surrender charge

after 5th year. *

Riders Death benefit Life & Terminal illnessbenefit, Accidentaldeath benefit,

50 | P a g e


51/104

Accidental death &disablement benefit,Major diseases benefit,Hospital cash benefit,Waiver of premium

benefit.Mortality Charges Mortality charges will

be deducted on a

monthly basis on the

life cover. Life cover is

the difference between

the Sum Assured and

the Fund Value at the

time of deduction of

charges. Indicative

charges per thousand

Sum Assured

for a healthy male andfemale life are asshown below.*

Mortality and Terminal

Illness Charges are


at Risk which is

defined as Sum

Insured minus Fund


Terminal Illness


at the beginning of

each month by


your Investment

Account*

Maturity benefits At maturity, the higher

of the Fund Value and

Guaranteed Value as

on the maturity date,

along with the

Additional Allocation

shall be payable.*

Maturity Benefit isequal to the FundValue in yourInvestment account on

the date of maturity.

Tax benefits Premium and any

benefit amount

received under this

policy will be eligible

for the tax

benefit as per theprevailing Income Tax

laws.


premiums are eligible for

deduction under Sec




under Sec 80D. Benefitsare tax-free under

Sec 10(10D), allowing

you to earn tax-free


51 | P a g e


52/104

Other Remark No Plan flexibility, Get

the benefit of the

highest NAV recorded

on a daily basis, in the

first 7 years of the

fund, at maturity. If

there are any policy

alterations during the

policy term, they will

be subject to a

miscellaneous charge

of Rs. 250 per

alteration.

Free switching b/wFunds, Plan Flexibility.

5.6 FUND OPTIONS AVAILABLE UNDER ULIPsMost insurers offer a wide range of funds to suit ones 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.

FUND Nature of investments Risk category

Equity Funds Primarily invested in

company

stocks with the general

aim of capital appreciation.

High

Income, Fixed Interest

andBond Funds

Invested in corporate

bonds,government securities and

other fixed income

instruments.

Medium

52 | P a g e


53/104

Cash Funds Sometimes known as

Money Market Funds

invested in cash, bank

deposits and money market

instruments

Low

Balanced Funds Combining equity

investment

with fixed interest

instruments

Medium

5.7 COMPARISON OF EQUITY FUNDS(2009-10)

5.7.1 EQUITY OUTLOOK

Fiscal year 2009-10 was a stupendous year for the Indian equity markets. Booming growth in

India's economy, robust quarterly results from companies and consistent investments from FIIs

fuelled the rise over the past year. From the point of extreme pessimism in March 2009,

investors' money almost doubled. Sensex gained 80.54% and Nifty rose 73.76%. Broader

market indices outpaced the key benchmarks by a huge margin.

BSE Midcap rose 130.23% while BSE Smallcap gained 161.73%. FIIs parked in a whopping Rs

1.10 lakh crore in the Indian stock markets for the FY

09-10.

Spirits were lifted by the stability and continuity at the Centre with the Congress-led UPA

government taking charge last year. The momentum continued, supported by the earnings

upgrade on the back of better growth guidance from companies and the strong performance in

the past few quarters. Signs of recovery in global markets also helped the return of the risk

appetite.

53 | P a g e


54/104

Optimism continued to build up as the government tabled the framework for India's growth at

the Union Budget. FM Pranab Mukherjee announced plans to bring down fiscal deficit from

6.5% of GDP in FY10 to 4.8% in FY12 and 4.1% in the following year. Allocations to

infrastructure development and direct tax concessions were cheered by the market. Meanwhile,

the gradual withdrawal of stimulus packages was inevitable, given

the need for fiscal consolidation. On the other hand, RBI raising LAF lending rates by 25 bps

was on expected lines, though the timing surprised the

market.

Equity markets are expected to react positively to earning upgrades and robust liquidity

flows.However, high inflation, interest rates tightening and high fiscal deficit numbers can act

as dampener for the markets.

5.7.2 TERMS TO UNDERSTAND

Normally people and agents just look into one aspect of the funds i.e the returns and make a

decision.But considering the returns is not enough and while choosing a fund or a company

various other aspects should be taken into consideration.They are as follows

RETURNS

ANNUALISED STANDARD DEVIATION

SHARPE RATIO

Fund: This is a collective pool of money created from individual investments such that

each individual shares risks and rewards in the proportion of their contribution. Since a

fund is managed as a single investment vehicle, all the investors will face the same risks

and rewards. A professional fund manager invests the fund according to

the objective of the fund defined in the offer document or policy document. In case of a

policyholder who pays premium, a predetermined part of this is used to pay for life

cover and other expenses. The remaining part of the premium is the investment which is

put in the various funds (such as Maximiser and Balancer) as per the investors

instructions. The investor is free to change the allocation of investments at any time

54 | P a g e


55/104

during the term of the policy.

NAV:Net Asset Value of a fund on a given day is the total closing value of the securities

held in the portfolio of the fund divided by the number of units outstanding. When a

person invests a sum (say Rs. 10000) in a fund on a certain day when the NAV was Rs. 20

per unit he is assigned 1000020=500 units. On any given day, the investor can find the

value of his investment in the fund by multiplying the units he holds by the NAV of the

day. So if the NAV of the fund has become Rs. 30 per unit, the investor can calculate the

value of his holdings as 500x30=Rs. 15000. The NAV

changes with changes in value of investments in the fund.

Risk: Concept of risk of an investment essentially captures the possibility of loss in that

investment. Risk, in terms of portfolio management, is defined as variability of the

returns of a fund or more correctly expected variability. So if fund A and fund B both

given 10% annualized returns, however fund A gives this same 10% consistently every

year but fund B gives 3% in one year, 12% in another year and so on but still averages

10% per annum in the long run, then fund B is said to be more risky than fund A. Risk is

generally measured as standard deviation or variance of returns. For similar levels of

returns a rational investor will always choose the least risky asset.

Returns: Return is the reward one has got for taking risk and giving time. Absolute rate

of return (or simply return) in a period is the ratio of increase (or decrease) in the NAV of

the fund at the end of the period over the NAV at the start of the period. Generally when

reporting for a period longer than 1 year, the return is annualized (generally using the

CAGR method) for the purpose of comparison. For example

if in the last 1 year, the NAV of a fund has increased from Rs. 20 to Rs. 25, then absolute

return (and in this case the annualized return as well) is (25-20)20=25%. If over the last

2 years, the NAV has grown from Rs. 15 to Rs. 30 then the absolute return in 2 years is

(30-15)15=100%; however the annualized return, or compound annual growth rate is

41.4% per annum.

Benchmark: Every investment has to have a yardstick to evaluate whether it has met the

55 | P a g e


56/104

objective of investment. A benchmark is a standard against which the performance of a

fund can be compared. The benchmark for each fund is predetermined based on the

investment objective and target asset allocation of the fund. At a macro level, a

benchmark captures the average returns of all funds which have the same objective and

funds that perform better than the benchmark can be said to be better than the average.

Benchmarks can be either those that are readily available in the market or synthetically

created.The benchmark taken for comparison with Equity funds is the NIFTY 50.

Debt: Debt or fixed income as an asset class refers to investment in securities that have

well defined pay offs, and mostly pf a fixed nature or a fixed rate of return for a fixed

period. Because of the fixed nature of returns debts as an asset class is less risky than

equity. All securities where the borrower is the government are classified as government

securities or gifts and have a negligible level of risk of default, i.e., Non-payment. Other

borrowers have varying levels of risk of default, determined by a neutral third party such

as CRISIL or Moody by looking at the financial strength of the borrower and being

described in the rating of the security where AAA is the safest followed by AA+,AA and

so on. Among debt securities there are various types of instruments viz., money market

instruments, Certificate of Deposits, Fixed Deposits, Corporate bonds, Gifts, Loans, etc.,

which have different maturity, risk and reward profiles.

Equity: Equity investment means holding shares of companies, meaning that the investor

is taking part ownership of a company rather that lending to the company. As a part owner

of a business, the shareholder shares all the risks and rewards of the business. Several

factors lead to appreciation in equity investments - all of which in some way relate to

current and future prospects of the business of the company, also called fundamentals.

Because of the variable nature of these factors, equity investments are more risky than

debt investments, but have historically shown signifantly better returns in the long-run

(investment horizon greater than 5 years).

Sharpe Ratio: This is a popular measure of risk adjusted returns. This is an important

measure because it is inaccurate to compare the returns of funds that have different risk

profiles or objectives. For instance, fund A may perform better than fund B but this may

be because it is investing in small cap companies that are more risky. Sharpe

ratio helps to compare the returns of funds taking into account the riskiness of returns, and

is defined as reward of investing in a risky asset per unit risk taken. More accurately, it is

56 | P a g e


57/104

measured as:

Sharpe Ratio = Annualized Excess Return/Annualized Std Deviation of Excess Returns

Excess Return is the difference between the fund return and the risk free rate of return.

Standard Deviation is a common measure of risk. So a higher Sharpe Ratio means a fund

has given superior returns (over an asset that has no risk such as

a government security) for every unit of risk.

57 | P a g e


58/104

5.7.3 TATA AIG LIFE EQUITY FUND

58 | P a g e

FUND

x NAV(1.4.09)

17.35

Y NAV(31.3.10) 30.55

g Growth=((y-x)/x)*100 76.07

%

z Annualised Standard

Deviation(Calculated in

Excel) 26.12

%

r Risk free rate(G sec)

5%

s Sharpe Ratio=(g-r)/z

2.72

BENCHMARK(NIFTY

)

Returns 73.76%

Standard Dev. 31.11%

Sharpe Ratio 1.93%


59/104

5.7.4 ICICI PRUDENTIAL EQUITY FUND

59 | P a g e

FUNDx NAV(1.4.09)

6.4

Y NAV(31.3.10) 10.62

g Growth=((y-x)/x)*100 65.94

%



Excel)

24.56

%

r Risk free rate(G sec) 5%

s Sharpe Ratio=(g-r)/z 2.48

BENCHMARK(NIFTY

)

Returns 73.76%


Sharpe Ratio 1.93%


60/104

5.7.5 HDFC STANDARD - UNIT LINKED ENDOWMENT

PLUS EQUITY MANAGED FUND

5.7.6 RELIANCE GOLDEN

YEARS PLAN - EQUITY

FUND

60 | P a g e

FUND

x NAV(1.4.09) 35.6

Y NAV(31.3.10)

63.41

g Growth=((y-x)/x)*100 78.12

%



Excel)

22.99

%


s Sharpe Ratio=(g-r)/z 3.18%

BENCHMARK(NIFTY

)

Returns 73.76%


Sharpe Ratio 1.93%


61/104

61 | P a g e

BENCHMARK(NIFTY

)

Returns 73.76%


Sharpe Ratio 1.93%

FUND

x NAV(1.4.09)

7.95

Y NAV(31.3.10) 13.38

g Growth=((y-x)/x)*100

68.21

%



Excel)

23.22

%




62/104

5.7.7 IDBI FORTIS WEALTHSURANCE EQUITY GROWTH

FUND

5.7.8 SBI LIFE HORIZON

62 | P a g e

FUND

x NAV(1.4.09) 7.01

Y NAV(31.3.10) 12.87

g Growth=((y-x)/x)*100 83.60

%



Excel) 26.66

%



BENCHMARK(NIFTY

)

Returns 73.76%


Sharpe Ratio 1.93%


63/104

5.7.9 Kotak Easy Growth Plans(5 Times)

63 | P a g e

BENCHMARK(NIFTY

)

Returns 73.76%


Sharpe Ratio 1.93%

FUND

x NAV(1.4.09) 21.12

Y NAV(31.3.10) 35.98

g Growth=((y-x)/x)*100 70.36

%

z Annualised StandardDeviation(Calculated in

Excel)

28.98%




64/104

5.8 ANALYSIS

64 | P a g e

BENCHMARK(NIFTY

)

Returns 73.76%


Sharpe Ratio 1.93%

FUND

x NAV(1.4.09)

19.05

Y NAV(31.3.10) 32.95

g Growth=((y-x)/x)*100 72.97

%


Deviation(Calculated inExcel)

26.27

%




65/104

5.8.1 Returns:

Fund returns: Fund returns here would be the percentage difference in the NAV

values between the starting date(1.04.09)and the last day(31.3.10) of the financial

year.

Benchmark returns: Benchmark returns here would be the percentage difference in

the benchmark values between the starting date(1.04.09)and the last day(31.3.10) of

the financial year.The Benchmark for Equity Funds is NIFTY

Company Returns(2009-10)NIFTY Returns(2009-

10)

IDBI FORTIS 83.60%

73.76%

TATA AIG 76.07%

KOTAK 72.97%

SBI LIFE 70.36%

RELIANCE LIFE 68.21%

HDFC STANDARD 78.12%

ICICI PRUDENTIAL 65.94%RETURNS EQUITY FUNDS 2009-10

Comparing the 7 plans above it is clear that IDBI FORTIS has given the highestrreturns this despite being the youngest player

Therefore if we were to rank these in order of the returns given by the equity funds

in the past financial year(2009-10) their ranking would be as follows

1. IDBI Fortis Wealthsurance Equity Growth Fund

2. HDFC Standard - Unit Linked Endowment Plus Equity Managed Fund

3. TATA AIG Equity Fund

4. Kotak Easy Growth Plans(5 Times)

65 | P a g e


66/104

5. Sbi Horizon

6. Reliance Golden Years Plan - Equity Fund

7. ICICI Prudential

If we compare these to the benchmark i.e NIFTY we find that 3 out of the 7 funds have beenable to outperform it.These are

IDBI Fortis Wealthsurance Equity Growth Fund

HDFC Standard - Unit Linked Endowment Plus Equity Managed Fund

TATA AIG Equity Fund

5.8.2 Fund Standard Deviation

Risk of investing in a fund is identified by the volatility of the funds periodic returns.Standard deviation measures the volatility of the funds returns for a given time period.

In other words, Fund Standard Deviation for a particular time period gives us the

deviation from the mean returns, that has occurred for that fund during that time period.

For e.g. let us assume that the Balanced Fund has generated an average (mean) return of

11.55% for the last 2 years and that the corresponding standard deviation was 4.44%.

That means that during the last 2 year time period, the balanced fund return varied

between 15.99% (i.e. 11.55+ 4.44) and 7.11% (i.e. 11.55-4.44) during 65% of the time.

Higher the standard deviation, the greater the volatility, and therefore, the greater

the risk of investing in that fund.

Thus, an investor has more information available at his disposal to evaluate the quality

of performance of the fund and how volatile its returns are.

To carry it a step further, it is highly unlikely that a funds return in any one year will

be exactly the average. Rather, it will always be either higher or lower than the average.

Thus, st

final ankit

Documents