neww........a comparative analysis of ulip of bajaj allianz life insurance co
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Chapter- 1
INTRODUCTION
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capital appreciations realized are shared by its unit holders in proportion to the number of units
owned by them.
INDIAN INSURANCE INDUSTRY
The history of life insurance in India dates back to 1818 when it was conceived as a means to
provide for English Widows. Interestingly in those days a higher premium was charged for Indian
lives than the non-Indian lives as Indian lives were considered more riskier for coverage. The
Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to
charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was
established in 1880. The General insurance business in India, on the other hand, can trace its roots
to the Triton (Tital) Insurance Company Limited, the first general insurance company established
in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business
was almost entirely in the hands of overseas companies.Insurance regulation formally began in
India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of
1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were
176 insurance companies. The first comprehensive legislation was introduced with the Insurance
Act of 1938 that provided strict State Control over insurance business. The insurance business
grew at a faster pace after independence. Indian companies strengthened their hold on this business
but despite the growth that was witnessed, insurance remained an urban phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and provident
societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was
born. Nationalization was justified on the grounds that it would create much needed funds for rapid
industrialization. This was in conformity with the Government's chosen path of State lead planning
and development.The (non-life) insurance business continued to thrive with the private sector till
1972. Their operations were restricted to organized trade and industry in large cities. The general
insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and
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grouped into four companies- National Insurance Company, New India Assurance Company,
OrientalInsurance Company and United India Insurance Company. These were subsidiaries of the
General Insurance Company (GIC).The general insurance business was nationalized after the
promulgation of General Insurance Business (Nationalizations) Act, 1972. The post-nationalization
general insurance business was undertaken by the General
Insurance Corporation of India (GIC) and its 4 subsidiaries:
Oriental Insurance Company Limited; New India Assurance Company Limited; National Insurance
Company Limited; and United India Insurance Company Limited.
Some of the important milestones in the life insurance business in India are:
1850:
Non life insurance debuts with triton insurance company.
1870:
:Bombay mutual life assurance society is the first Indian owned life insurer
1912:
The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance
business.
1928 :
:The Indian Insurance Companies Act enacted to enable the government to collect statistical
information about both life and non-life insurance businesses.
1938:
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Earlier legislation consolidated and amended to by the Insurance Act with the objective of
protecting the interests of the insuring public.
1956:
245 Indian and foreign insurers and provident societies taken over by the central government and
nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution
of Rs. 5 Crore from the Government of India. The General insurance business in India, on the other
hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company
established in the year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907:
The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general
insurance of India.
1957 :
General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct
for ensuring fair conduct and sound business practices.
1968 :
The Insurance Act amended to regulate investments and set minimum solvency margins and the
Tariff Advisory Committee set up.
1972 :
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The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance
business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into
four companies viz. the National Insurance Company Ltd., the New India Assurance Company
Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC
incorporated as a company.
1993: Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N.
Malhotra- was formed to evaluate the Indian insurance industry and recommend its future
direction. The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector.
1997 : Insurance regulator IRDA set up.
2000: IRDA starts giving licenses to private insurers:Kotak Life Insurance ,ICICI potential and
HDFC standard Life insurance are the first private insurers to sell a policy.
2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed to sell
insurance plans.
INSURANCE MARKET PRESENT
The insurance sector was opened up for private participation seven years ago. For years now, the
private players are active in the liberalized environment. The insurance market have witnessed
dynamic changes which includes presence of a fairly large number of insurers both life and non-
life segment. Most of the private insurance companies have formed joint venture partnering well
recognized foreign players across the globe.
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LIFE INSURANCE COMPANIES
Sl. No. Insurer Foreign Partners
1 HDFC Standard Life Insurance Co. Ltd. Standard Life Assurance, UK
2 Standard Life Assurance, UK New York Life, USA
3 ICICI-Prudential Life Insurance Co. Ltd. Prudential , UK
4 Om Kotak Life Insurance Co. Ltd. Old Mutual, South Africa
5 Birla Sun Life Insurance Co. Ltd. Sun Life, Canada
6 Tata-AIG Life Insurance Co. Ltd. American International Assurance Co., USA
7 SBI Life Insurance Co. Ltd. BNP Paribas Assurance SA, France
8ING Vysya Life Insurance Co. Ltd. ING Insurance International B.V.,
Netherlands
9 Allianz Bajaj Life Insurance Co. Ltd. Allianz, Germany
10 Metlife India Insurance Co. Ltd. Metlife International Holdings Ltd., USA
11 Reliance Life Insurance Co. Ltd.
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12 AVIVA Aviva International Holdings Ltd., UK
13 Sahara Life Insurance Co. Ltd.
14 Shriram Life Insurance Co. Ltd. Sanlam, South Africa
15 Bharti AXA Life Insurance Co. Ltd. AXA Holdings, France
16 Future Generali India Life Insurance
Company Ltd
Pantaloon Retail Ltd.; Sain Marketing
Network Pvt. Ltd. (SMNPL), Generali, Italy
17 IDBI Fortis Life Insurance Company Ltd. Fortis, Netherlands
18 Canara HSBC OBC Life Insurance
Company Ltd.
HSBC, UK
19 Aegon Religare Life Insurance Company
Ltd.
Religare, Netherlands
20 DLF Pramerica Life Insurance Co. Ltd. Prudential of America, USA
21 Life Insurance Corporation of India
TOP 10 LIFE INSURANCE COMPANIES IN INDIA
LIC (Life Insurance Corporation of India) still remains the largest life insurance company
accounting for 64% market share. Its share, however, has dropped from 74% a year before, mainly
owing to entry of private players with innovative products and better sales force.
ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India. It
experienced growth of 58% in new business premium, accounting for increase in market share to
8.93% in 2007-08 from 6.97% in 2006-07.
Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share went up to
6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in number of
policies sold in 2007-08, with total market share of 7.36%.
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SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked 6th in
2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an increase
of 87% over last year.
Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market share went
up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium and 4th in number
of new policies sold in 2007-08.
HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08,
registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th among the
insurance companies and 5th amongst the private players.
Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in
2007-08.
Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business
generated was Rs 641.83 crore as against Rs 387.51 crore.
Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported growthof 80%, moving from the 11th position to 9th. It captured a market share of 1.19% in 2007-
08. Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th last
year. It has presence in more than 3,000 locations across India via 221 branches and close to 40
banc assurance partnerships. Aviva Life Insurance plans to increase its capital base by Rs 344
crore.
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MARKET SHARE OF VARIOUS LIFE INSURANCE COMPANIES IN
INDIA
Here is themarket share of various Life Insurance Companies in Indiaat the end of FY2008.
Company Name Market Share (in %)
LIC 48.1%
ICICI Prudential 13.7%
Bajaj Allianz 10.3%
SBI Life 6.2%
HDFC Standard 4.1%
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Birla Sunlife 3.4%
Reliance Life 3.4%
Max New York 2.4%
OM Kotak 1.9%
AVIVA 1.8%
Tata AIG 1.5%
MetLife 1.4%
ING Vysya 1.2%
Shriram Life 0.3%
Bharti Axa Life 0.2%
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BOOMING INSURANCE MARKET IN INDIA
With a huge population base and large untapped market, insurance industry is a big
opportunity area in India for national as well as foreign investors. India is the fifth
largest life insurance market in the emerging insurance economies globally and is
growing at 32-34% annually. This impressive growth in the market has been driven by
liberalization, with new players significantly enhancing product awareness and
promoting consumer education and information. The strong growth potential of the
country has also made international players to look at the Indian insurance market.
Moreover, saturation of insurance markets in many developed economies has made
the Indian market more attractive for international insurance players
This research report will help the client to analyze the leading-edge opportunities
critical to the success of insurance industry in India. Based on this analysis, the report
gives a future forecast of the market that is intended as a rough guide to the direction
in which the market is likely to move.
Total life insurance premium in India is projected to grow Rs 1,230,000 Crore by 2010-
11.
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1. Total non-life insurance premium is expected to increase at a CAGR of 25% for
the period spanning from 2008-09 to 2010-11.
2. With the entry of several low-cost airlines, along with fleet expansion by
existing ones and increasing corporate aircraft ownership, the Indian aviation
insurance market is all set to boom in a big way in coming years.
3. Home insurance segment is set to achieve a 100% growth as financial
institutions have made home insurance obligatory for housing loan approvals.
4. Health insurance is poised to become the second largest business for non-life
insurers after motor insurance in next three years.
COMPANY PROFILE
Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance Company
and Bajaj Finserv.
Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in
the world,managing assets worth over a Trillion(Over INR 55,00,000 Crores).Allianz SE has over
115 years of financial experience and is present in over 70 countries around the world.
At Bajaj Allianz Life Insurance, customer delight is the guiding principle. Their business
philosophy is to ensure excellent insurance and investment solutions by offering customized
products, supported by the best technology.
VISION
To be the first choice insurer for customers
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To be the preferred employer for staff in the insurance industry.
To be the number one insurer for creating shareholder value.
MISSION
As a responsible, customer focused market leader, we will strive to understand the insurance needs of the
consumers and translate it into affordable products that deliver value for money.
Accelerated Growth
Fiscal Year No. of policies sold New Business in FY
2001-2002(6 mths) 21,37 Rs. 7 cr.
2002-2003 1,15,965 Rs. 63.3 cr.
2003-2004 1,86,443 Rs. 180 cr.
2004-2005 2,88,189 Rs. 857 cr.
2005-2006 7,81,685 Rs. 2,717 cr.
2006-2007 20,79,217 Rs. 4,302 cr.
2007-2008 37,44,742 Rs. 6,674 cr.
Bajaj Allianz General Insurance received the Insurance Regulatory and Development Authority
(IRDA) certificate of Registration on 2nd May, 2001 to conduct General Insurance business
(including Health Insurance business) in India. The Company has an authorized and paid up capital
of Rs 110 crores. Bajaj Finserv Limited holds 74% and the remaining 26% is held by Allianz, SE.
As on 31st March 2009, Bajaj Allianz General Insurance maintained its premier position in the
industry by achieving growth as well as profitability. The company garnered a premium income of
Rs. 2866 crore, achieving a growth of 11 % over the last year. Bajaj Allianz has made a profit
before tax of Rs. 149.8 crore and has become the only private insurer to cross the Rs.100 crore
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mark in profit before tax in the last two years. The profit after tax was Rs.95 crores, which is also
the highest by any private insurer. The company ranked second (after LIC) in number of policies
sold in 2007-08, with total market share of 7.36%.
RESULTS FOR CURRENT FY TILL 31ST DECEMBER 2008
The Gross Written Premiums (GWP) for the nine months ended on 31st Dec 2008, is
Rs 6726 crores as compared to Rs 5219 crores in the corresponding period of the
previous year - growth of 29%. New Business premium for the nine months ended on
31st Dec 2008 is Rs. 3003 crores as compared to Rs. 3780 crores in the
corresponding period of previous year.
Commission on new business premium, which was 27% during nine months ended on
31st Dec 2007, came down to 20% during the current period.
Operating expenses came down to 20% of GWP for the current period of nine months
ended on 31st Dec 2008 as compared to 26% for the corresponding period of
previous year.
The Company posted a profit of Rs 364 lacs for the period ended 31st Dec 2008 as
compared to a profit of Rs 5358 lacs in the corresponding period of the previous year.
The policyholder surplus is Rs 15514 lacs (corresponding period of previous year Rs
18681 lacs) and the shareholders loss stands at Rs 15150 lacs (corresponding period
of previous year: Rs 13323 lacs).
Number of policies underwritten during the nine months ended 31st Dec 2008 were 18,08,495
(corresponding period of the previous year 23,62,496). Policies in force as on 31 st Dec 2008 is
around 70 lacs. The company ranked second (after LIC) in number of policies sold in 2007-08,
with total market share of 7.36%.
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The share capital (including share premium) is Rs. 1211 crores as on 31st December
2008. The solvency as on 31 st Dec 2008 stands at 261% (required solvency is 150%).
During the period ended 31st Dec 2008, no additional capital has been infused.
Despite challenging environment, the company has been able to not only reduce
commission but also operating expenses. The solvency margin of the company
continues to be very strong.
As on 31st Dec 2008, the Company employed on roll 22,129 staff as against 20,764
staff at 31st March 2008.The Company operates out of 1,138 offices as on 31 Dec
2008.
PRODUCTS PROFILE
Unit Linked Plan
1. New family gain
2. New unit gain plus
3. New unit gain premier
Traditional plan
1. Invest gain
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2. Cash gain
3. Child gain
Retirement Solutions
1. Swarna visranthi
2. New unit gain easy pension plus
Health Plan
1. Care first
2. Health care
Term Plan
1. Risk care
2. Term care
UNIT LINKED INSURANCE POLICY (ULIP)
A unit linked insurance policy is one in which the customer is provided with a life insurance cover
and the premium paid is invested in either debt or equity products or a combination of the two. In
other words, it enables the buyer to secure some protection for his family in the event of his
untimely death and at the same time provides him an opportunity to earn a return on his premium
paid. In the event of the insured person's untimely death, his nominees would normally receive an
amount that is the higher of the sum assured (insurance cover) or the value of the units
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(investments).However, there are some schemes in which the policyholder receives the sum
assured plus the value of the investments.
Every insurance company has four to five ULIPs with varying investment options, charges and
conditions for withdrawals and surrender. Moreover, schemes have been tailored to suit different
customer profiles and, in that sense, offer a great deal of choice.
The advantage of ULIP is that since the investments are made for long periods, the chances of
earning a decent return are high.
Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes whilethose who have an appetite for risk can opt for balanced or equity schemes. However, the charges
paid in these schemes in terms of the entry load, administrative fees, underwriting fees, buying and
selling charges and asset management charges are fairly high and vary from insurer to insurer in
the quantum as also in the manner in which they are charged.
Tax benefits
The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows a a
maximum of Rs. 1,00,000 premiums paid for taxable income below Rs 8,50,000 and Proceeds
from ULIPs are tax-free under section 10(10D) unlike those from a mutual fund which attract short
term capital gains tax.
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Key features
Premiums paid can be single, regular or variable. The payment period too can be regular or
variable. The risk cover (insurance cover) can be increased or decreased.As in all insurance
policies, the risk charge (mortality rate) varies with age. However, for an individual the risk charge
is always based on the age of the policyholder in the year of commencement of the policy. These
charges are normally deducted on a monthly basis from the unit value. For instance, if there is an
increase in the value of units due to market conditions, the sum at risk (sum assured less the value
of investments) reduces and so the risk charges are lower. The maturity benefit is not typically a
fixed amount and the maturity period can be advanced (early withdrawal) or extended.
Investments can be made in gilt funds (government securities), balanced funds (part debt, part
equity), money-market funds; growth funds (equities) or bonds (corporate bonds).
The policyholder can switch between schemes (for instance, balanced to debt or gilt to equity). The
investment risk is transferred to the policyholder.The maturity benefit is the net asset value of the
units. The value would be high or low depending on the market conditions during the period of the
policy and the performance of the fund manager.
POINTS TO REMEMBER ABOUT ULIP
First-year charges: Usually, a minimum of 15 per cent. However, high premiums attract lower
charges and vice versa. Charges can be as high as 70 per cent if the scheme affords a lot of
flexibility. Subsequent charges: Usually lower than first-year charges. However, some insurers
charge higher fees in the initial years and lower them significantly in the subsequent years.
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Administration charges: This ranges between Rs 15 per month to Rs 60 per month and is levied
by cancellation of units and also depends on the nature of the scheme.
Risk charges: The charges are broadly comparable across insurers.
Asset management fees: Fund management charges vary from 0.6 per cent to 0.75 per cent for a
money market fund, and around 1.5 per cent for an equity-oriented scheme. Fund management
expenses and the brokerage are built into the daily net asset value.
Switching charges: Some insurers allow four free switches in every year but link it to a minimum
amount. Others allow just one free switch in each year and charge Rs 100 for every subsequentswitch. Some insurers don't charge anything.
Top-ups: Usually attracts 1 per cent of the top-up amount. Top-up normally goes directly into your
investment account (units) unless you specifically ask for an increase in the risk cover.
Surrender value of units: Insurers levy certain charges if the policy is surrendered prematurely.
This levy varies between insurers and could be around 75 per cent in the first year, 60 per cent in
the second year, 40 per cent in the third year and nil after the fourth year.
Fund performance: You could check out the performance of similar schemes (balanced with
balanced; equity with equity) across insurance companies.
Look at NAV performance over a period of at least two to three years. This can only give you
some indication about the credibility of the fund manager because past performance is no
guarantee to future returns, especially in insurance products where the emphasis is on long-term
performance (10 years or more).
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Since insurance is a product, which entails a long-term commitment on the part of the insurer, it is
important not to go only by the features or the cost advantages of schemes but by the parentage of
the insurer as well.
Comparing schemes based on costs is a fairly complex exercise. As a rule, the higher the initial
years' expenses the longer it takes for the policy to outperform its peers with low initial years' costs
and slightly higher subsequent year expenses.
Retire unhurt
Pension plans are essentially tailored to meet old age financial requirements. But there are certain
advantages in joining a pension plan.
First of all, contribution to pension funds upto Rs 10,000 is eligible for tax deduction under section
80CCC. In other words, your pension contribution will get deducted from your taxable income.
So if you are in the top tax bracket, liable to pay to a 30.6 per cent tax, then your tax savings will
be that much.
All life insurance companies offer pension products - both conventional and unit-linked. In both
cases you pay a certain premium amount for a specified length of time.
Usually, the minimum entry age is 18 years and the maximum age is 60 years. You can choose to
pay the premium for five to 30 years. When the policy matures, you receive one-third of the value
of the accumulated amount as a lump-sum payment.
For the remaining, you can buy annuities either from the existing insurer or any other insurer.
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While in a conventional scheme, your money is managed through the insurer's pooled investment
account and you are entitled to bonuses every year, in a ULIP you receive the value of the
investment in your individual account.
In a ULIP you have the flexibility to choose between a conservative scheme or an aggressive
scheme with high allocation to equities. Pension policy imposes huge penalties for early
termination.
HOW DOES ULIP WORK
Sara is a thirty-year old who wants a product that will give him market-linked returns as well as alife cover. He wants to invest Rs 50,000 a year for 10 years in an equity-based scheme. Based on
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this premium, the sum assured works out to Rs 532,000, the exact amount of premium being Rs
50,032.
Based on the current NAV of the plan that Sara chooses to invest in, he is allotted units in the
scheme. Then, units equivalent to the charges are deducted from his portfolio.
The charges in the first year include a 14 per cent sales charge, an administration charge (7 per cent
for the first Rs 20,000 and 3 per cent for the remaining Rs 30,000) and underwriting charges,
which are deducted monthly.
Besides, mortality charges or the charges for the life cover are also deducted. For the remaining
nine years a 3.5 per cent sales charge and an administrative charge of 4 per cent (for the first Rs
20,000 and 2 per cent for the remaining Rs 30,000) are levied in addition to mortality charges.
Fund management fee of 1.5 per cent (equity) and brokerage are also charged. This cost is built
into the calculation of net asset value.
On maturity - that is, after 10 years - Sara would receive the sum assured of Rs 532,000 or the
market value of the units whichever is higher.
Assuming the growth rate in the market value of the units to be 6 per cent per annum Sara would
receive Rs 581,500; assuming the growth rate in the market value of the units to be 10 per cent,
Sara would receive Rs 7,24,400.
In case of Sara's untimely death at the end of the ninth year, his beneficiaries would receive the
sum assured of Rs 532,000 or the market value of the units whichever is higher. Assuming the
growth rate in the market value of units is 6 per cent per annum, the value of investment would be
Rs 510,200.
However, his family will get Rs 532,000 as it is the sum assured.
Assuming a growth rate of 10 per cent per annum, the value of units at the end of the ninth year
would be Rs 621,900. Hence, the beneficiaries would get Rs 621,900.
ADVANTAGES OF ULIP
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1. Can easily rebalance your risk between equity and debt without any tax implications.
1. 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.
INTRODUCTION OF MUTUAL FUNDS:
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A mutual fund is simply a financial intermediary that allows a group of investors to pool their
money together with a predetermined investment objective. The mutual fund will have a fund
manager who is responsible for investing the pooled money into specific securities (usually stocks
or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual
fund and become a shareholder of the fund.
Mutual funds are one of the best investments ever created because they are very cost efficient and
very easy to invest in (you don't have to figure out which stocks or bonds to buy).
By pooling money together in a mutual fund, investors can purchase stocks or bonds with much
lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual
funds is diversification.
ACCORDING TO AMFI (ASSOCIATION OF MUTUAL FUND OF INDIA):
A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and the
capital appreciation realized is shared by its unit holders in proportion to the number of units
owned by them.
CHARACTERISTICS OF A MUTUAL FUND:
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1. Investors own the mutual fund.
2. Professional managers manage the affairs for a fee.
3. The funds are invested in a portfolio of marketable
4. Securities, reflecting the investment objective.
5. Value of the portfolio and investors holdings, alters with
6. Change in market value of investments.
ADVANTAGES OF MUTUAL FUNDS:
The advantages of investing in a Mutual Fund are:
1. Professional Management:You avail of the services of experienced and skilled professionals
who are backed by a dedicated investment research team which analyses the performance and
prospects of companies and selects suitable investments to achieve the objectives of the scheme.
2. Diversification: Mutual Funds invest in a number of companies across a broad cross section of
industries and sectors. This diversification reduces the risk because seldom do all stocks decline at
the same time and in the same proportion.You achieve this diversification through a Mutual Fund
with far less money than you can do on your own.
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3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you
avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with
brokers and companies. Mutual Funds save your time and make investing easy and convenient.
4. Return Potential:Over a medium to longterm, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.
5. LowCosts: Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.
6. Liquidity: In open-ended schemes, you can get your money back promptly at AssetValue
(NAV) related prices from the Mutual Fund itself.With close-ended schemes, you can sell your
units on a stock exchange at the prevailing market price or avail of the facility of repurchase
through Mutual Funds at NAV related prices which some close-ended and interval schemes
offer you periodically.
7. Transparency: You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion invested in each
class of assets and the fund managers investment strategy and outlook.
8. Flexibility: Through features such as Systematic Investment Plans (SIP), Systematic
Withdrawal Plans (SWP) and dividend reinvestment plans, you can systematically invest or
withdraw funds according to your needs and convenience.
9. Choice of Schemes:Mutual Funds offer a variety of schemes to suit your varying needs
over a lifetime.
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DISADVANTAGES OF MUTUAL FUNDS:
No Guarantees: No investment is risk free. If the entire stock market declines in value, the
value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors
encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their
own. However, anyone who invests through a mutual fund runs the risk of losing money.
Fees and commissions: All funds charge administrative fees to cover their day-to-day
expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial
consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will
pay a sales commission if you buy shares in a Load Fund.
Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay
taxes on the income you receive, even if you reinvest the money you made.
A measurement of an option position or premium in relation to the underlying instrument. In
mutual fund also there is certain amount of risk-return factor associated according to the
investment option these are as follows,
RISK RETURN
Equity High High
Balanced Medium Medium
Debt Low Low
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TYPES OF MUTUAL FUNDS:
I. Closed-end or Open-end
Open-end Funds: An open-end fund is one that has units available for sale and repurchase at all
time. An investor can buy or redeem units from the fund itself at a price based on the Net Asset
Value (NAV) per unit.
Close-end Funds: A close ended fund makes a one-time sale of a fixed number of unit. It does not
allow investors to buy or redeem units directly from the funds. However, to provide liquidity to
investors many closed-end funds get themselves listed on stock exchange. Funds do offer buy-
back of funds/units thus offering another avenue for liquidity to closed-end fund investor.
II. Load vs. No Load: Marketing of a new mutual fund scheme involves initial expense.
These expenses may be recovered from the investors in different ways at different times. Three
usual ways in which a funds sales expenses may be recovered from the investors are:
1. At the time of investors entry into the fund/scheme, by deducting a specific amount from his
initial contribution: front-end or entry load.
2. By charging the fund/scheme with a fixed amount each year, during the stated number of years:
deferred load.
3. At the time of the investors exit from the fund/scheme, by deducting a specific amount from the
redemption proceeds payable to the investor: back end or exit load These charges made by the fund
managers to the investors to cover distribution/sales/marketing expenses are often called loads.
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Funds that charge front-end, back-end or deferred loads are called load funds. Funds that make no
such charges or loads for sales expenses are called no-load funds.
In India, SEBI has defined a load as the one-time fee payable by the investor to allow the fund to
meet initial issue expenses including brokers/agents/distributors commissions, advertising and
marketing expenses.
A load funds declared NAV does not include load charges
III. Tax-exempt vs. Non-Tax exempt Funds: Generally, when a fund invests in tax-
exempt securities, it is called a tax-exempt fund. In India, after the 1999 Union Government
Budget, all of the dividend income received from any of the mutual funds is tax-free in the hands
of the investors. However, funds other than Equity Funds have to pay a distribution tax, before
distributing income to investors. In other words, equity mutual fund schemes are tax-exempt
investment avenues, while other funds are taxable for distributable income.
Different types of mutual fund
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Types of Mutual Fund:
Once we have reviewed the fund classes, we are ready to discuss more specific fund types. Funds
are generally distinguished from each other by their investment objectives and types of securities
they invest in.
A. Broad Fund Types by Nature of Investments
Mutual funds may invest in equities, bonds or other fixed income securities, or short-term money
market securities. So we have Equity, Bonds and Money Market Funds. All of them invest in
financial assets. But there are funds that invest in physical assets. For example, we may have Gold
or other Precious Metal Funds, or Real Estate Funds.
B. Broad Fund Types by Investment Objective
Investors and hence the mutual funds pursue different objectives while investing. Thus,
Growth Funds invest for medium to long term capital appreciation.
Income Funds invest to generate regular income, and less for capital appreciation.
Value Funds invest in equities that are considered under-valued today, whose value will be
unlocked in the future.
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C. Broad Fund Types by Risk Profile
The nature of a funds portfolio and its investment objective imply different levels of risk
undertaken. Funds are therefore often grouped in order of risk. Thus, Equity Funds have a greater
risk of capital loss than a Debt Fund that seeks to protect the capital while looking for income.
Money Market Funds are exposed to less risk than even the For internal use by Training
Department of Prudential ICICI Mutual Fund Bond Funds, since they invest in short-term fixed
income securities, as compared to longer-term portfolios of Bond Funds.
Money Market Funds: Lowest rung in the order of risk level, Money Market Funds invest in
securities of a short-term nature, which generally means securities of less than one-year maturity.
Gilt Funds: Gilts are government securities with medium to long-term maturities, typically of over
one year (under one-year instruments being money market securities).
Debt Funds (or Income Funds): Next in the order of risk level, we have the general category
Debt Funds. Debt funds invest in debt instruments issued not only by governments, but also by
private companies, banks and financial institutions and other entities such as infrastructure
companies/utilities.
Diversifies Debt Funds: A debt fund that invests in all available types of debt securities, issued by
entities across all industries and sectors is a properly diversified debt fund. A diversified debt fund
is less risky than a narrow-focus fund that invests in debt securities of a particular sector or
industry.
Focused Debt Funds: Some debt funds have a narrow focus, with less diversification in its
investment. Examples include sector, specialized and offshore debt funds. Other examples of
focused funds include those that invest only in Corporate Debentures and Bonds or only in Tax
Free Infrastructure or Municipal Bonds.
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High yield Debt Funds: There are funds which seek to obtain higher interest rates by investing in
debt instruments that are considered below investment grade. e.g. Junk Bond Funds.
Assured Return Funds an Indian Variant: The SEBI permits only those funds whose sponsors
have adequate net-worth to offer assurance of return. For e.g. MIPs. Investors have some lock-in
period.
Fixed Term Plan Series Another Indian Variant: These are essentially closed-end. These
plans do not generally offer guaranteed returns. This scheme is for short-term investors who
otherwise place money as fixed term bank deposits or inter corporate bonds.
Equity Fund: As investors move from Debt Fund category to Equity Funds,
they face increased risk level.
1. No guarantee returns
2. High potential for growth of capital
Types of Equity Fund
a) Aggressive Growth Fund
1. Maximum capital appreciation
2. Invests in less researched or speculative shares.
3. Very volatile & riskier.
b) Growth Fund
1. Growth fund invest in companies whose earnings are expected to
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2. Rise above average rate. e.g. Technology Fund
3. Capital appreciation in 3 5 years
4. Less volatile then aggressive growth fund.
c) Specialty Fund
They invest in companies that meet predefined criteria.
i) Sector Funds
1. Technology Fund
2. Pharmaceutical Fund
3. FMCG Fund
ii) Offshore Funds
Invest in equities in one or more foreign countries.
iii) Small-Cap equity Funds
Invest in shares of companies with relative lower market capital.
d) Diversified Equity Funds
A fund that seeks to invest only in equities, except for a very small portion in liquid money market
securities, bur is not focused on any one or few sectors or shares, may be termed a diversified
equity fund. While exposed to all equity price risks, diversified equity funds seek to reduce the
sector or stock specific risks through diversification.
i) Equity Linked Savings Schemes: An Indian Variant
Investment in these schemes entitles the investor to claim an income tax rebate, but usually has alock-in period before the end of which funds cannot be withdrawn.
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e) Equity Index Funds
An index fund tracks the performance of a specific stock market index. The objective is to match
the performance of the stock market by tracking an index that represents the overall market. The
funds invest in share that constitute the index and in the same proportion on the index.
f) Value Funds
Value Funds try to seek out fundamentally sound companies whose shares are currently under-
prices in the market. Value Funds will add only those shares to their portfolios that are selling atlow price-earnings ratios, low market to book value ratios and are undervalued by other yardsticks.
Fund concentrate on future growth prospect having good potential.
g) Equity Income Funds
There are equity funds that can be designed to give the investor a high level of current income
along with some steady capital appreciation, investing mainly in shares of companies with high
dividend yields.
1. Hybrid Funds Quasi Equity/Quasi Debt: Many mutual funds mix these (money
market, debt and equity) different types of securities in their portfolios. Such funds are
termed hybrid funds as they have a dual equity/bond focus.
2. Commodity Funds: While all of the debt/equity/money market funds invest in financial
assets, the mutual fund vehicle is suited for investment in any other- for examples- physical
assets.
3. Real Estate Funds: Specialized Real Estate Funds would invest in Real Estate directly, or
may fund real estate developers, or lend to them, or buy shares of housing finance
companies or may even buy their securities assets.
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Following are the different products and services Offered by Mutual Fund
Companies
1. Open ended schemes
2. Close ended schemes
3. Growth/Equity oriented Schemes
4. Income/Debt oriented Schemes
5. Balanced Funds
6. Money market or liquid funds
7. Gilt Funds
8. Index Funds
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9. Exchange Traded Funds
10. Sectoral Funds
11. Thematic Funds
12. Commodity Funds
13. Real Estate Funds
14. Tax Saving Funds
15. Hybrid Funds
There are several ways for investment and disinvestments in mutual funds such as :
1. Systematic Investment Plans (SIPs)
2. Value Averaging
3. Systematic Transfer Plans (STPs)
4. Systematic Withdrawal Plans(SWPs)
5. Automatic Reinvestment Plans.
1. Open ended fund
In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related
prices, from the fund itself.
The corpus of open-ended funds, therefore, changes every day.
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2. Close ended fund
A closed-end fund offers units for sale only in the NFO. It is then listed in the market.
Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end
funds sell at a discount to NAV.
The corpus of a closed-end fund remains unchanged.
3. Growth fund
Provide capital appreciation over the medium to long-term
1. Investor who does not require periodic income distribution can choose the option, where
the incomes earned are retained in the investment portfolio and allowed to grow, rather than being
distributed to investors.2. Investors with longer investment horizons and limited requirements for income choose this
option.
3. The return to the investor who chooses a growth option is the rate at which his initial
investment has grown over a period for which he has invested in the fund.
4. The investor choosing this option will vary the NAV with the value of the investments
portfolio , while the no. of units held with remains constant.
5. Income fund
Provide regular and steady income to investor
6. Balanced fund
Provide both growth and regular income.
7. Money market fund
Provide easy liquidity, regular income and preserve the income
8. Tax saving scheme
offer tax rebeats to the under specific provisions of the Indian income tax laws
Investment made under some schemes are allowed as deduction U/S 88 of the income tax act .
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9. Automatic Reinvestment Plans
Reinvestment of amount of dividend made by fund in the same fund.
In this option, the no. of units held by the investor will change with every reinvestment.
The value of units will be similar to that under the dividend option
There are four types of plans as follows
10. Lump sum Investment
It is one time investment..
Investors can invest particular amount one time for fixed time of period.
11.Systematic Investment Plans( SIP) For regular investment
SIP is investing a fixed sum periodically in a disciplined manner for long term.
It gives benefit of Rupee Cost averaging.
In SIP monthly minimum Rs.500 or Rs.100 are invested.
Interest is calculating compoundly.
Many SIP gives insurance benefits.
VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the investor
flexibility with respect to the amount and frequency of investment.
In VAP, investor has to impose voluntary self discipline.
12. Systematic Withdrawal Plan ( SWP) For regular income
The lump sum amount is invested for one time and then fixed percent amount is withdraw
monthly.
Remaining amount will grow continuously.
This plan is suitable for retired person, because it gives regular income.
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13. Systematic Transfer Plan ( STP)
Transfer on a periodic basis a specified amount from one scheme to another within the
same fund family.
It gives option to the investor if the current fund performance in not satisfactory.
14. Dividend option
15. Investors will receive dividends from the mutual fund , as an and when
dividends are declared.
16. Dividends are paid in the form of warrants or are directly credited to the
investors bank accounts.17. In normal dividend plan , periodicity of dividends is left to the fund
managers, the timing of the dividend payout is decided by fund manager.
18. Mutual funds provide the option of receiving dividends at pre-determined
frequencies,wich can vary from daily,weekly,monthly,quarterly,half-yearly and
annual. Investors can choose the frequency of dividend distribution that suits their
requirements.
19. Investors choosing this option have a fixed no. of units invested in the fund
and earned incomes on this investment.
REGULATORS IN INDIA
1. SEBI - The capital markets regulators also regulates the mutual funds in India. SEBI
requires all mutual funds to be registered with them. SEBI issues guidelines for all mutual
funds operations - investment, accounts, expenses etc.
2. RBI as supervisor of banks owned mutual funds - As banks in India came under the
regulatory jurisdiction of RBI, bank owned funds to be under supervision of RBI and SEBI.
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3. RBI as supervisor of Money Market Mutual Funds - RBI has supervisory responsibility
over all entities that operate in the money markets. Hence in the past Money Market Mutual
Funds scheme of Mutual funds had to be abide by policies laid down by RBI.
Recently, it has been decided that Money Market Mutual Funds of registered mutual funds will be
regulated by SEBI through SEBI (Mutual Fund) Regulations 1996.
COMPARISON OF ULIP VS MUTUAL FUND
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in
terms of their structure and functioning. As is the cases with mutual funds, investors in ULIPs are
allotted units by the insurance company and a net asset value (NAV) is declared for the same on a
daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to the ones
found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to
name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance
component.
However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs
1. Mode of investment/ investment amounts
Mutual fund investors have the option of either making lump sum investments or investing using
the systematic investment plan (SIP) route which entails commitments over longer time horizons.
The minimum investment amounts are laid out by the fund house.
ULIP investors also have the choice of investing in a lump sum (single premium) or using the
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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 onvenienceclearly 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.
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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 moniesare 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
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As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely
comparable. For example plans that invest their entire corpus in equities (diversified equity funds),
a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt
instruments (debt funds) can be found in both ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the
same fund house, he could have to bear an exit load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to shift investments
across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are
allowed free of charge every year and a cost has to be borne for additional switches).Effectively the ULIP investor is given the option to invest across asset classes as per his
convenience in a cost-effective manner.
This can prove to be very useful for investors, for example in a bull market when the ULIP
investor's equity component has appreciated, he can book profits by simply transferring the
requisite amount to a debt-oriented plan.
5. Tax benefits
ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds
good, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual
funds domain, only investments in tax-saving funds (also referred to as equity-linked savings
schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example
diversified equity funds, balanced funds), if the investments are held for a period over 12 months,
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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.
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Chapter- 2
REVIEW OF LITERATURE
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REVIEW OF LITERATURE
Mr.Madhu(1949) T, made a study on ULIPs hold edge over mutual funds.The findings showsthat distributors would push unit linked insurance plans (ULIPs) to earn better commission. ULIPs
offer attractive frontend commissions to agents. However, independent financial advisors believe
that though there is a possibility of some distributors favoring ULIPs in the short term, the new
directive would be beneficial for both the industry and investors in the long run.(Mr.Madhu T, The
Economic Times,June2009).
Mr.Deepak Shenoy(1950) ,in his article Comparing ULIP returns to Mutual Funds, he reveals
that,over the last three years, their growth mutual fund has given better returns than the"MAXIMISER" option of their ULIPs.(Deepak Shenoy, The Indian Investors Blog, August 2006).
Mr.Murthaza and Sony(1961), in their article An Overview on ULIP, This article is an initiative
from Bajaj Allianz to create better understanding of ULIPs and its benefits so that investors can
avail maximum returns from their investments.
Mr.Bernz Jayma P(1962), made a study on Mutual Fund disadvantages. He suggested that ,If
you're new to stock market investing you may have heard that mutual funds would be a good way
for you to get started. That's actually good advice, but mutual funds have their own pitfalls to
watch out for.
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Chapter- 3
Research
Methodology
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RESEARCH DESIGN
Descriptive research procedure is used for describing the resent situations in the
organization and analytical research to analyze the results by using research tools.
Descriptive Research:
This research includes surveys and facts finding enquires of different kinds. The major
purpose of descriptive research is that the research can only describe the state of affairs existing at
present in the organization. The main feature of this method is that the researcher has no control
over the extraneous variables called the respondents as they are going to interview the employees
of the organization in order to perform study. They can only report what happened or what is
happening. In social science and business research, we quiet often use the terms ex-post facto
research for descriptive research studies, the researcher can discover and describe the causes for
various situations but they cannot control the situations.
TYPES OF RESEARCH:-
Descriptive research attempts to describe systematically a situation, problem, phenomenon,
service or programmed, or provides information about , say, living condition of a community, or
describes attitudes towards an issue.
Correlation research attempts to discover or establish the existence of a relationship/
interdependence between two or more aspects of a situation.
Explanatory research attempts to clarify why and how there is a relationship between two ormore aspects of a situation or phenomenon.
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Exploratory research is undertaken to explore an area where little is known or to investigate the
possibilities of undertaking a particular research study (feasibility study / pilot study)
RESEARCH TOOLS
Data Source : Primary & Secondary Data
Research Approach : Survey method
Research Instrument: Questionnaire
Sampling scheme : Simple random sampling
Contact method : Personal / Direct
Sample size : 50
DATA SOURCES AND COLLECTION METHODS
There are two type for collecting data
1. Primary data
2. Secondary data
PRIMARY DATA
Primary data are those which are collected a fresh and for the first time & thus
happen to be original in character. Primary data is obtained by the study specially designed to
fulfill the data needs to problem hand. Such data are original in characters generated by the
way of conducting survey.
SECONDARY DATA
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Secondary data are those which have already been collected by someone else and which
have already been passed through the statistical process. The Secondary data consist of reality
available compendices already complied statistical statements. Secondary data consists of not only
published records and reports but also unpublished record
OBJECTIVES
1. To understand the reason for which customers prefer ULIP as one of the best
insurance investment mode rather than Mutual fund.
2. To find the significance difference between customers of different income with thatof investment mode.
3. To Compare Investment Options of customers in ULIPs and Mutual Funds.
LIMITATIONS
1. The middle class people do not know basic concept of ULIP so creating awareness is a big
challenge for me.
2. The findings of my research is from a small sample size.
3. Narrow minded thinking of middle class people as investment is not their cup of tea.
4. Many customers are thinking that investment in share market is very risky. As ULIP andMutual fund both are related to share market.
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5. A general preference to LIC and SBI over private players.
6. Hesitations on the part of respondents to disclose financial information.
Chapter- 4
DATA INTERPRETATION
AND
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ANALYSIS
(A) Gender:
Gender
Frequency Percent Valid Percent
Cumulative
Percent
Valid Male 37 74.0 74.0 74.0
Female 13 26.0 26.0 100.0
Total 50 100.0 100.0
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INTERPRETATION :
The above graph shows that , out of 50 customers, 74% of the respondents are male policy holders
and the rest 26% are female policy holders.
(B) Marital Status:
Marital
Frequency Percent Valid Percent
Cumulative
Percent
Valid Married 33 66.0 66.0 66.0
Unmarried 17 34.0 34.0 100.0
Total 50 100.0 100.0
INTERPRETATION :
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From a sample of 50 customers, 66% of the policy holders are unmarried and the rest 34% of the
policy holders are married.
(C) Age:
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Age
Frequency Percent Valid Percent
Cumulative
Percent
Valid 20-30 6 12.0 12.0 12.0
30-40 14 28.0 28.0 40.0
40-50 17 34.0 34.0 74.0
50-60 11 22.0 22.0 96.0
60-70 2 4.0 4.0 100.0
Total 50 100.0 100.0
INTERPRETATION :
The graph shows that majority of the sample respondents were in the age group of 40-50 yrs
ie,34%, 12% were in the age group of 20-30 yrs & 28% of them were 30-40 yrs, 22% were in the
age group of 50-60 yrs and 4% were in the age group of 60-70 yrs.
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(D) Occupation:
Occupation
Frequency Percent Valid Percent
Cumulative
Percent
Valid Government 18 36.0 36.0 36.0
Private service 14 28.0 28.0 64.0
Business 11 22.0 22.0 86.0
NRIs 3 6.0 6.0 92.0
Others 4 8.0 8.0 100.0
Total 50 100.0 100.0
INTERPRETATION :
The graph shows that majority of the policy holders are working in the Government sector i.e.36%
, 28% of them are engaged in Private service, 22% of them are business field, 6% of them are NRIs
and 8% of them are engaged other works.
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(E) Annual Income:
Annual income
Frequency Percent Valid Percent
Cumulative
Percent
Valid Below 2 lakhs 19 38.0 38.0 38.0
2-4 lakhs 23 46.0 46.0 84.0
4-6 lakhs 6 12.0 12.0 96.0
6-8 lakhs 2 4.0 4.0 100.0
Total 50 100.0 100.0
INTERPRETATION :
The graph shows that 46% of the policy holders get a salary of 2-4 lakhs, 38% of the policy holders
get a salary of below 2 lakhs, 12% of the policy holders get a salary of 4-6 lakhs, 3 of the policy
holders get a salary below 2 lakhs and 4% of them above 6-8 lakhs.
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Sources that helps you in making investment decision.
Sources that helps you in making the investment decisions.
Frequency Percent Valid Percent
Cumulative
Percent
Valid Financial journal 5 10.0 10.0 10.0
Television 2 4.0 4.0 14.0
Brokers/Agent 27 54.0 54.0 68.0
Friends 13 26.0 26.0 94.0
Consultants 3 6.0 6.0 100.0
Total 50 100.0 100.0
I would like to invest money in ULIP.
I would like to invest money in ULIP.
Frequency Percent Valid Percent
Cumulative
Percent
Valid Strongly agree 2 4.0 4.0 4.0
Agree 33 66.0 66.0 70.0
Neutral 8 16.0 16.0 86.0
Disagree 5 10.0 10.0 96.0
Strongly disagree 2 4.0 4.0 100.0
Total 50 100.0 100.0
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INTERPRETATION :
From a sample of 50 customers, 66% agree, 4% of them strongly supporting that fact, and 16% has
no opinion about it. And 4% strongly disagreed, remaining 10% also disagree with investment in
ULIP.
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7. Reason for choosing ULIPs because of insurancecoverage.
Reason for choosing ULIPs because of insurance coverage.
Frequency Percent Valid Percent
Cumulative
Percent
Valid Strongly agree 14 28.0 28.0 28.0
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
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INTERPRETATION :
From a sample of 50 customers,26% of the customers agree with that fact,6% of the customers
strongly support it,and 28% customers have no idea about it.And remaining 10% disagreed,out of
this 10%, 4% strongly disagreed with it.
9. Mutual funds are more risky than ULIP products.
Mutual funds are more risky than ULIP products.
Frequency Percent Valid Percent
Cumulative
Percent
Valid Strongly agree 17 34.0 34.0 34.0
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
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INTERPRETATION :
From a sample of 50 customers, majority of the customers agree i.e. 42%, 12% strongly agree with
that fact. And 32% disagree,4% strongly disagree, and remaining 10% neither agree nor disagree
with that statement.
15. Past schemes performance influence your investment
decision in ULIP.
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past scheme's performance
Frequency Percent Valid Percent
Cumulative
Percent
Valid Strongly agree 8 16.0 16.0 16.0
Agree 8 16.0 16.0 32.0
Neutral 7 14.0 14.0 46.0
Disagree 23 46.0 46.0 92.0
Strongly disagree 4 8.0 8.0 100.0
Total 50 100.0 100.0
INTERPRETATION :
From a sample of 50 customers, majority of the customers disagree i.e. 46%, 8% strongly disagree
with that fact. And 16% strongly agree,16% agree, and remaining 14% neither agree nor disagree
with that statement
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16. Advertisement influence the investment decision in
ULIP.
Advertisement
Frequency Percent Valid Percent
Cumulative
Percent
Valid Strongly agree 9 18.0 18.0 18.0
Agree 11 22.0 22.0 40.0
Neutral 19 38.0 38.0 78.0
Disagree 5 10.0 10.0 88.0
Strongly disagree 6 12.0 12.0 100.0
Total 50 100.0 100.0
INTERPRETATION :
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From a sample of 50 customers, 22%agree, 18% strongly agree with that fact. And 10%
disagree,12% strongly disagree, and remaining 38% neither agree nor disagree with that statement.
17. Do you think the safety factor is important in your investment in mutual
fund.
Safety
Frequency Percent Valid Percent
Cumulative
Percent
Valid Strongly agree 2 4.0 4.0 4.0
Agree 4 8.0 8.0 12.0
Neutral 8 16.0 16.0 28.0
Disagree 30 60.0 60.0 88.0
Strongly disagree 6 12.0 12.0 100.0
Total 50 100.0 100.0
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HYPOTHESIS-1
H0: There is no relationship between investment of ULIP and Insurance
coverage.
H1: There is relationship between investment of ULIP and insurance coverage.
CORRELATIONS
Correlations
I would like to
invest money in
ULIP.
Reason for
choosing ULIPs
because of
insurance
coverage.
I would like to invest money
in ULIP.
Pearson Correlation 1 .729**
Sig. (2-tailed) .000
N 50 50
Reason for choosing ULIPs
because of insurance
coverage.
Pearson Correlation .729** 1
Sig. (2-tailed) .000
N 50 50
**. Correlation is significant at the 0.01 level (2-tailed).
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HYPOTHESIS-2
H0: There is no relationship between the investment pattern and annual
income of the customers.
H1: There is a relationship between the investment pattern and annual income
of the customers.
T-Test
Group Statistics
Annuaincome N Mean Std. Deviation Std. Error Mean
I would like to invest money
in ULIP.
Below 2 lakhs 19 2.26 .806 .185
6-8 lakhs 2 2.00 .000 .000
I would like to invest money
in mutual funds.
Below 2 lakhs 19 3.37 .955 .219
6-8 lakhs 2 4.00 .000 .000
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Independent Samples Test
Levene's Test for Equality ofVariances
t-test for Equalityof Means
F Sig. t
I would like to invest money
in ULIP.
Equal variances assumed 1.428 .247 .451
Equal variances not assumed 1.424
I would like to invest money
in mutual funds.
Equal variances assumed 3.956 .061 -.914
Equal variances not assumed -2.882
Independent Samples Test
t-test for Equality of Means
df Sig. (2-tailed) Mean Difference
I would like to invest money
in ULIP.
Equal variances assumed 19 .657 .263
Equal variances not assumed 18.000 .172 .263
I would like to invest money
in mutual funds.
Equal variances assumed 19 .372 -.632
Equal variances not assumed 18.000 .010 -.632
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Chapter-5
CONCLUSION
FINDINGS AND
SUGGESTIONS
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FINDINGS AND SUGGESTIONS
After survey there are some findings and suggestions as follows.
1. 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 towords ULIP
1. Middle class people who are interested in investment but they are not aware of such options
so more awareness should be there, as main target customer are the middle class peoples.
2. While investing any insurance company customer prefers for good branded company Bajajis Indias one of the most famous and richest family. And second preference is given to SBI
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life as many people perceive that SBI Life is a govt. owned company so people want
security for their investment.
3. As now till date people in India dont wanted to invest in share market because then were
thinking that it is a bad thing but as the awareness about Mutual fund is increasing as more
and more private players are entering in the market. So awareness about MF is not very
good and it can be improved.
4. While survey I found that many all customers had already invested in ULIP and Mutual
Fund some people had invested in both options. 12% of people had invested in Mutual
Fund and 26% people had invested in ULIP and 4% people had invested in both the
options.5. While investing in mutual fund 44% of the customers looks their return,42% customers
observe the schemes performance in past years.
6. First reason or preference that why an investor is interested in ULIP is Investment Purpose,
and second is to its returns and after that they investing because they are getting the tax
benefit. Then again there are some people who are investing for pension planning and
security.
7. In future people will be more preferring to the security of their money means they want a
secured option which should provide good returns. As ULIP are the option in which you
can have the security also and good returns. The second choice of the investors is return of
their money.
8. 54% of people given Best rating to the Bajaj Allianz Life Insurance ULIP, so from this we
can analyze that Bajaj Allianz Life Insurance is doing good but it is having good potential
in Market. To improve its market share they should improve the awareness level of the
common people.
9. Innovative Products and good brand name are the main success factor for Bajaj Allianz
Life Insurance. 6% customers are attracted due to the high reputation of the company. So if
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BALIC wants to penetrate its market share they should improve the marketing strategy,
improving the distribution channel etc.
CONCLUSION AND RECOMMENDATIONS
From above analysis and survey we can conclude as follows
1. Awareness of ULIP is increasing as more number of private players are entering in life
insurance industry.
2. Mutual Fund is also getting more and more famous in Indian market as many private
companies innovating new funds as the investors demand.
3. ULIP differentiate from Mutual fund in respect of Insurance cover.
4. Investors in Bajaj Allianz Life ULIP will be getting the advantage of life insurance cover.
5. People are turning towords the ULIP as a good investment option but as ULIP is in its
starting phase so customers are preferring only big brands.
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1. Mutual fund is having good growth but many customers from rural areas dont have any
knowledge about Mutual fund.They think it is very risky.
2. Even investors from cities like Ghauran dont have that much of Knowledge about fund
selection they all are depend on Brokers.
3. People in Ghauran are investing in only good branded companies as they dont believe on
other financial companies for taking ULIP.
4. There is a need for insurers to undertake a demand audit in order to understand what the
policyholder wants and needs.
BIBLIOGRAPHY
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REFERENCE:
1) Research Methodology, C.R Kothari, 2nd edition
2) Outlook Money, 15 May 2005, ULIP Mania.
3) The Business Line, 10 June 2007, Know all About ULIPS.
WEBSITE
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www.irdaindia.gov
www.bajajallianzlife.co.in
www.quickmba.com
www.amfindia.com
www.mba.com
www.articlebase.com
76
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QUESTIONNAIRE
QUESTIONNAIRE
I am CHAMANDEEP KAUR student ofChandigarh university doing a
project on A COMPARATIVE STUDY OF ULIP PLANS OF BAJAJ ALLIANZ
LIFE INSURANCE WITH MUTUAL FUNDS and this questionnaire is a part of the
project and the information collected through this questionnaire would be used only for
academic purposes and strictly confidential
PERSONNAL INFORMATION
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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
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(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.
(a) Insurance (b) Stock
Market
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(c) Mutual Fund (d) Bank
deposits
(e) Both insurance and mutual fund
4. According to you who among the following Life
Insurance companies is best.
(a) BAJAJ ALLIANZ (b) HDFC
STANDARDLIFE
(c) TATA AIG (d) AVIVA LIFE
INSURANCE
(e) SBI LIFE
5. How would you rate our products.
(a) Excellent (b) Good
(c) Fair (d)
Poor
(e) Very poor
6. I Would like to invest money in ULIP.
(a) Strongly agree (b) Agree
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(c) Neutral (d)
Disagree
(e) Strongly disagree
7. Reason for choosing ULIPs because of insurance
coverage.
(a) Strongly agree (b) Agree
(c) Neutral (d)
Disagree
(e) Strongly disagree
8. Iwould like to invest money in Mutual Funds.
(a) Strongly agree (b) Agree
(c) Neutral (d)Disagree
(e) Strongly disagree
9. Mutual funds are more risky than ULIP products.
(a) Strongly agree (b) Agree
(c) Neutral (d)
Disagree
(e) Strongly disagree
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10. ULIPs have advantage over Mutual funds.
(a) Strongly agree (b) Agree
(c) Neutral (d)
Disagree
(e) Strongly disagree
Do you view following factors/sources of information
important while investing in ULIP.
Strongly
agree
Agree Neutral Disagree Strongly
disagree
(11) Safety
(12) Liquidity
(13) Rate of
Return