A PROJECT REPORT ON
“COMPARATIVE STUDY ON ULIPS IN THE INDIAN INSURANCE MARKET”
FOR TATA AIG LIFE INSURANCE COMPANY LTD
BY MISS DELNAAZ. PARVEZ. DOCTOR MBA SEMESTER III
Project Guide “Prof Vaishampayam”
In Partial Fulfillment of the Requirement of the Two Year Full Time PGDM Programme Of the SMVIM, PUNE.
AY 2007-08
PREFACE As an essential and obligatory part of my course, I have undergone two months summer training at Tata AIG Life Insurance Company Ltd, Pune. This training has helped me in getting the practical knowledge into the business environment.
I got the knowledge about the Insurance industry. In this report I have said about the current position of the insurance sector in India.
This report includes a deep study made on the ULIPs in the ins urance market and its impact on the person’s income.
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TABLE OF CONTENTS
S.NO.
CONTENTS
PAGE NO.
1. 2.
Acknowledgement Certificate from the company
3 4 5
3. 4. 5. 6. 7. 8..
Certificate from the college Introduction Company Profile Research Methodology Introduction to Insurance About ULIPs Distinction between ULIPs & Mutual Funds Comment on the Distinction
6 7-9 10 11-17 19-26 27-30
9.
Comparative Analysis of ULIPs( Tata AIG with others) Growth & Returns Fund Performance
31-43,4446, 47-51
10 11. 12. 13. 14. 15. 16. 17.
Overall Data Analysis and Findings Understanding the working of ULIPs of TATA AIG Market Survey on ULIPs of TATA AIG Integrated Financial Planning for Life Insurance Conclusion Recommendations Bibliography Questionnaire
52 53-56 57-62 63 64 65 66-67 68-69
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ACKNOWLEDGEMENT It has been an immense pleasure and truly enriching experience doing my project with TATA-AIG LIFE INSURANCE COMPANY LTD, PUNE
I take this opportunity to thank all those people who have made this experience a memorable one.. Firstly, I would like to extend my sincere and hearty thanks to: Mr.Parikshit Abroal (Cluster Head – Agency, Tata-AIG Life Insurance), and Mr. Nitish Beohar (Senior Manager BA) who gave me an opportunity to associate myself with the Tatas.
I would like to thank my guide Miss.Anamika Dikshit (Assistant Business Manager, Tata-AIG Life
Insurance) without whose help it would be difficult to complete this
project. I am very grateful to her for being a constant trainer and motivator for me for successful completion of the project. During the course of time she has given me valuable tips related with my project and she was more like a friend who guided me throughout the project. This gratitude will remain uncompleted if I won’t mention the names of other persons Who helped me not only in my projects but also motivated me.
I would like to thank Mr. Rahul Bendre (Business Manager – Tata- AIG Life Insurance), Mr. Kaizad S. (DCM, Kotak Mahindra Old Mutual Life Insurance Ltd.) and Mrs.Benaifer.S (Senior Officer, Finance Control, Societe Generale Corporate and Investment Banking) who provided me guidance and support from time to time.
Last but not the least I extend my special gratitude t o The Advisors of Tata-AIG Life Insurance Mr. Shrikant Verma, Mr. Sudhir Chavan, Mr. Dattatray.Phule and Mr.Vikram Balwadkar who have contributed a lot in my project completion and the other advisors who co- operated with me to carry out the market research and the library staff of St.Miras College.
Delnaaz Doctor
3
Certificate from the Company
4
5 C
INTRODUCTION
The insurance plays a major role in the life of the humanity. Slowly people stared to realize the necessity of the insurance and these needs are unending as long as life e xists. In fact insurance is not restricted for any category neither of the society nor in term of cast, ages or life styles. Also many people have a notion that Insurance is very good form of an investment, which is not right. Insurance is just creating a protection for you and your family. As Indian investors are now more exposed to the capital markets and have started understanding its working, they want to multiply their money rapidly. This can be done through Unit Linked Insurance Plans (market linked plans ) introduced by the Insurance Players. Therefore the only reasons for selecting this topic are •
To get more knowledge about insurance sector in India
•
To undergo a comprehensive study of ULIPs.
•
To get experienced of corporate scenario.
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COMPANY PROFILE Getting associated with a brand like Tata –AIG for just 2 months was really a prestigious and a memorable period in my MBA tenure. Growth has been the main objective of the company and will continue to be the driving force in the years to come by spreading the wings wider in India and contribute in the economic and social development.
Tata- AIG LIFE Insurance Company is a joint venture between Tata Group and American International Group (AIG.) Let’s throw light on the facts of both the high profile and prestigious companies.
The Group: TATAThe name trusted all over the country over the years. For over 130 yrs The TATA name has stood for Leadership with Trust. As a business group it has traversed 3 centuries and has emerged as India’s most respectable corporate group. It is a strong believer in ethics and its profits are placed in philanthropic trusts .
Some of the features of TATA are: • • • • • • •
Over 260,000employees Operates in 130 countries worldwide Trusted by over 3 million shareholders Diversified business interest ( 92 companies) Largest FOREX earner Revenues of US $ 14.25 billion Deep rooted commitment towards society.
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The Group: AIG American International Group is a leading US based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United Some of the features of AIG are: • • • • • • •
In business since 1919, Over 80,000 employees worldwide Presence in over 130 countries Over 50 million customers worldwide Revenues over US $ 81.3 billion Ranks 4th on the FORBES 500 LIST OF 2003. Deals in General and life insurance, asset management, financial services.
Tata-AIG LIFE INSURANCE
It is a joint venture between TATA and AIG. It provides insurance cover for both for life and group. It deals in all kinds of products. And now concentrates more on UNIT LINKED PLANS. It is Tata-AIG which consumers trust the more when it comes to giving exact claim valuation, best in consumer satisfaction and t rusted as the best in quick disposal of claims. Its working is based on Business brought up by Business Associates wh o are the advisors/agents for the company. Areas of business Tata AIG Life Insurance products include a broad a rray of life insurance coverage to both individuals and groups. For groups, the company has life products whereas for individuals, it has term products, endowment products as well as money-back products. For groups and individuals, various types of add-ons and options are a vailable to give consumers flexibility and choice. The company has also desi gned specific products for the financially challenged and underprivileged.
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Some of the features are: •
74% Stake of TATAs and 26% of AIG
•
Licensed to operate on February 12, 2001
•
Has over 190 branches and planning to increase the number to 120 plus by August 2007 ,
•
and 300 plus by November 2008.
Over 5 lac + policy holders.
Tata AIG is all set to scale greater heights and has arrived at a vision of making it A BILLION DOLLAR COMPANY BY 2009
A glimpse at the Joint Venture AIG (26%) Martin J. Sullivan President & Chairman
TATA (74%) Ratan Tata Chairman CEO
Tata- AIG INSURANCE Farrokh K Kavarana Chairman
Tata-AIG LIFE INSURANCE Trevor Bull Managing Director
Tata-AIG GENERAL INSURANCE Dalip Verma Managing Director
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RESEARCH METHODOLOGY •
Research design –descriptive
•
Data sources - primary data and secondary data
•
Research approach – face to face interview, observation, individual depth interview
•
Research instrument –questionnaire.
Data Collection: Primary Data:
1) Use of a Questionnaire for carrying out a survey 2) Presentation given by the Advisors of Tata AIG life. 3) Data explaining the working of the ULIPs. Secondary Data:
1) Books 2) Newspapers 3) Magazines 4) Newsletter 5) Internet 6) Television 7) Booklet 8) Policy Brochures This project is about studying the insurance industry which is on the boom. The introductory part contains the meaning of insurance, its evolution, some, Statistics of Indian insurance Industry.
The project deals the comprehensive analysis of the ULIP schemes, what is ULIP all about, its NAV performance, the Growth, performance of the p olicies since their inception, its working, its popularity and a market survey.
The project contains various graphs, tables a nd questionnaire to further. elaborate on the explanations.
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INTRODUCTION TO INSURANCE Today, only one business, which affects all walks of life, is insurance business. That’s why insurance industry occupies a very important place among financial services operative in the world. Owing to growing complexity of life, trade and commerce, individuals as well as business firms are turning to insurance to manage various risks. Therefore a proper knowledge of what insurance is and what purpose does it serve to i ndividual or an organization is therefore necessary.
The future is never certain . So it’s rightly said, “AN INSURANCE POLICY IN HAND KEEPS THE TENSION AWAY.”
Insurance, essentially, is an a rrangement where the losses experienced by a few a re extended over several who are exposed to s imilar risks. Insurance is a protection agai nst financial losses arising on the happening of an unexpected event. Insurance companies collect premium to provide security for the purpose. In simple words it is spreading of risks amongst many people. i) LIFE INSURANCE: It is a fundamental part of a sound financial plan which helps to
insure your loved ones.
& n o i t a c u e d g e i a s r r ’ n a e m r d l i h C
Dying too soon
W e a l t h c r e a t i o n
Living death
Living too long
Life Life insurance insurance –– the the only only instrument instrument that that takes takes care care of of these 3 probabilities and 2 priorities these 3 probabilities and 2 priorities
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ii) Benefits:
1) SAVINGS For unforeseen circumstances.
2) EDUCATION For child’s education and for higher studies.
3) RETIREMENT Facilitates adequate savings for worry free retired life. iii) Insurance ------------a Flash back:
The earliest transaction of i nsurance as practiced today can be traced back t o the 14 th century AD. The business of insurance started with marine business by Traders who used to gather in the Lloyd’s coffe e house in London, wherein they had agreed to insure their ships in transit. st
The 1 Life Insurance Policy was issued on 18
th
June, 1583, on the life of
William Gibbons for a period of 12 months.
Life Insurance in its current form came i n India from the UK, with the establishment of British firm, Oriental Life insurance Company, in 1818 st
The 1 Indian insurance company was the Bombay Mutual Assurance Society Ltd, formed in 1870.
By the year 1956, when the life in surance business was nationalized and the Life st
Insurance Corporation Of India ltd (LIC) was formed on 1 September, 1956 and
there were 245 companies existing at that time in India. By 31.3.2002, eleven new insurers had been registered and had begun to transact Life insurance business in India.
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IV) INSURANCE
CLASSIFICATION
Life Term Endowment Unit-linked Money-back
V) INSURANCE INDUSTRY POTENTIAL
1) Asia is amongst the world’s largest insurance markets contributing nearly 39% of global insurance business.
2)The Life Insurance Industry has grown by 27% p.a. over the last 5 years and by about 62% in the first eleven months of 2006 -07. Source – IRDA Journal (April 2007) 3) Global Life Insurance Market: $1,521 billion, Global Non-Life Insurance Market: $922 billion 4) India is 23 rd in insurance business with 0.41% share
5) Out of one billion people in India, only 35 million people are covered by insurance.
6) India’s life insurance premium as a percentage of GDP is j ust 1.8%
7) Indian insurance market is set to touch $50 billion by 2010, on the assumption of a 7% growth in GDP (CII Projections 2001-2002)
8) The Insurance premium as a % of GDP in 2005 increase d to 3.14% and is set to touch 4.3% in 2008. (Source – Lifeline 26 th Dec 2006)
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Growth Rate of Insurance sector •
Public Sector: 5.5%
•
Private Sector: 57.4%
Indian Insurance is growing at the rate of 80%.
LIFE INSURANCE COMPANIES IN INDIA
1.Life Insurance Corporation of India
Private Players
2. Tata AIG Life Insurance Company Ltd 3. Kotak Mahindra Old Mutual Life Insurance Ltd 4. Birla Sun Life Insurance 5. ICICI Prudential Life Insurance 6. Aviva Life Insurance 7. Allianz Bajaj 8. Max New York Life Insurance 9. Bharti Axa Life Insurance 10. SBI Life Insurance 11. Reliance Life Insurance 12. ING Vysya Life Insurance 13. Sahara India Life Insurance 14. HDFC Standard Life Insurance 15. Shriram Group
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MARKET SHARE FOR 5 YEARS.
2001-02
2002-03
2003-04
2004-05
2005-06
LIC
98%
94%
87%
78%
71%
Private Player
2%
6%
13%
22%
29%
MARKET SHARE OF INDIAN INSURANCE PLAYERS
Market Share of public sector and Private sector Insurance Companies for 2006-07
market share LIC
PRIVATE
PRIVATE 26%
LIC 74%
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MARKET SHARE OF PRIVATE INSURANCE COMPANIES 2006-07
ICICI Prudential life 1.22%
Aviva Life
0.01%
Tata AIG Life
3.40%
Reliance Life
6.97%
Kotak Mahindra
0.06%
Birla Sun Life
2.15%
ING Vys ya Life
0.24%
0.96% 0.85%
5.66%
Met Life Bajaj Allianz Life Shriram Life HDFC Standard Life.
4% 0.46% 0.62%
0.82% 1.17%
sahara Life SBI Life Bharati AXA life Max New York
Source: ESCOLIFE (Insurance newspaper by Ritu Nanda, June 2007) Thus we can say that LIC has the highest market share of 74% (public sector ) and ICICI Life Insurance has a highest market share of 6.97%(private sector)
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COMPETITOR’S COMPARISION
st
LIC ranks 1 (public sector) in case of the premiums followed by ICICI PRU in the private th Sector whereas Tata AIG Ranks 10 .
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Comparative Study on ULIPS In the Indian Insurance Market
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CHAPTER 1 ABOUT UNIT LINKED INSURANCE PLANS
1.1) INTRODUCTION ULIPS also known as UNBUNBLED, VARIABLE INSURANCE PLANS has possi bly been the single largest innovation in the field of life insurance in the pas t several decades. It wasn’t too long back, when the good old endowment plan was the preferred way to insure oneself against an eventuality and to set aside some savings to meet one’s financial objectives. Then insurance was thrown open to the private sector. The result was the launch of a wide variety of insurance plans, including the ULIPs.
Two factors were responsible for the advent of ULIPs on the domestic i nsurance horizon. First was the arrival of private insurance companies on the domestic sc ene. ULIPs were one of the most significant innovations introduced by private insurers. The other factor that saw investors take to ULIPs was the decline of assured return endowment plans.
These were the two factors most instrumental in marking the arrival of ULIPs, but another factor that has helped their cause is a booming stock market. While this now appears as one of the primary reasons for their popularity, it is believed that ULIPs have some fundamental positives like enhanced flexibility and merging of investment and insurance in a single entity that have really endeared them to individuals . ULIPs came to play in the 1960s and became very popular in western Europe and Americas.
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1.2) MEANING OF ULIPS A policy, which provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time. ULIP is life insurance solution that provides for the benefits of protection and flexibility in investment. The investment is denoted as units and is represented by the value that i t has attained called as Net Asset Value (NAV). In order to offset the erosion of money, ULIPS are introduced. The Sum Assured is expressed in units whose price is linked to an inflation related index.
In today’s times, ULIP provides solutions for insurance planning, financial needs, financial planning for children’s future and retirement planning. Features of ULIPs distinguish itself through the multiple benefits that it provides to the customer which are as follows • • • • • • •
• •
Life protection Investment and Savings Flexibility Adjustable Life Cover Investment Options Transparency Options to take additional cover against- Death due to accident- Disability- Critical Illness- Surgeries· Liquidity· Tax benefits.
According to Vijay Sinha, Asst Director Agency, Tata – AIG LI FE Insurance,
“ULIPs is ideal for some one who is looking for a long term investment product, i s under insured and is averse to taking a traditional life plan. ULIP should be looked at from both an investment as well as insurance point of view and not in isolation.”
Today many individuals are adding ULIPs to their portfolios to generate wealth. and protection over a long time.
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1.3 ) ULIPS VERSUS ENDOWMENT The following points help us to get a better idea how ULIPs differ from Traditional (Endowment Plans)
1) SUM ASSURED:
This is the most fundamental difference between ULIPs and the traditional plans. In case of endowment the agent will ask you “HOW MUCH INSURANCE COVER DO YOU NEED?” & the premium is calculated as per the estimated sum assured. In case of ULIPs you are asked “HOW MUCH PREMIUM CAN YOU PAY?” & accordingly the Sum Assured is estimated.
2) INVESTMENTS: • • •
• • • •
Endowment plans invest in Government Securities Corporate bonds Money market instruments ( no investment in the stock market) ULIPs invest in Equities Bonds G-secs Money market.
3) FLEXIBILITY:
In case of ULIPs the investor can choose the fund in which he wants to allocate his portfolio. He can go for pure Equity, or a combination of debtequity ,depending on his requirements. The investor also has the option of switching from one fund to another . Usually Free switches are given during the year. This option is not available in case of Endowment.
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4) TOP UP FACILITY: A top up is a one time additional investment in the ULIP over and above the annual premium. This feature works well when you have a surplus that you are looking to invest in a market linked avenue, rather than keeping in an FD or Savings account. This feature is not for Endowment.
5) TRANSPARENCY:
ULIPs are more transparent than Endowment Plans as their NAV is declared EVERYDAY. As a result you can know how your ULIP has performed. In case of Endowment, the insurance company sends you an annual statement of bonus declared during the YEAR. , which gives us an idea how our plan is performing.
6) LIQUIDITY:
Since ULIPs investments are NAV based it is possible to withdraw a portion of Your investments before maturity (after 3yrs lock in period is over).The withdrawal is possible provided the minimum fund value is maintained.
In case of Endowment, you can only Surrender your policy, but you wont get everything that you have earned on your polic y in terms of premium and bonus. The Surrender Value is much less than the Sum Assured a nd the Bonus is also not paid.
THUS investing in ULIPs or in ENDOWMENT depends on the person’s RISK taking ability. A Risk Averse person may go for an Endowment, Whereas a person who wants his corpus to appreciate and is ready to take risks can go for ULIPs. Therefore we can say that investing in ULIPs is the best in a growing Economy as compared to the TRADITIONAL PLANS.
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1.4) ULIPS AND YOU
IRDA has played a part in making ULIPs more investor friendly. Today more individuals are opting for ULIPs to create wealth over a long term. Over here I have outlined how ULIPs can help you to fulfill that responsibility.
1.4.1) If you are between 25 –35 years of age
ULIPs help you to save for your child’s education, marriage, planning for your retirement and providing for your family in case of your absence.
ULIPs Child plan ------------- --------for your child’s education, marriage.
ULIPs Endowment plan------------- for helping you to meet investment objectives like buying a house or setting up a business.
ULIPs Pension plan-------------------for your retirement. A long term re tirement planning could be done with an Equity push, as it is necessary to build up a strong corpus to face your rigorous retirement.
1.4.2) If you are between 35 –45 years of age
If you haven’t invested in ULIPs, it is not too la te even now. You can opt for some ULIPs as mentioned earlier. Remember ,unlike Endowment ,which gets really expensive at an advanced age, ULIPs because of the way they are , do not turn out to be expensive.
1.4.3) If you are above 45 years of age In this age bracket, you have to review your insurance cover, taking into consideration the changes of your life style, income needs, etc. By this time your ULIP pension plan must have matured, so now you can opt for an Annuity (immediate or deferred) depending on your need.
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1.5) EXPENSES IN ULIPs
Following expenses have to be incurred for ULIPs: a)
Mortality charges: charged by the company to cover the risk of an eventuality to an individual.
b)
Administration Charges: charged by the company to cover the daily expenses, overhead costs, agent’s commission etc.
c)
Fund Management charges: are levied by Insurance companies to cover the expenses incurred by them in managing ULIP monies. Charges are high for managing monies in an Equity Fund.
d)
ULIP Fund switch charges: Such are borne by the individuals when they decide to switch their money form one type of find to another.
e)
Top up Charges: A certain % is deducted from the Top up amount to recover the expenses incurred on managing the same.
f)
Cancellation/ Surrender charges: It is charged when an individual wishes to surrender his ULIP policy.
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1.6) HOW ULIPS MANAGE MONEY
ULIPs are different from traditional plans. They invest their monies in Shares, bonds, G-secs, money market instruments in varied proportions. Insurance companies usually maintain 4 types of funds.
Growth Fund:
100% equity
Balanced Fund:
60% equity, 40% debt.
Debt Fund:
100% debt.
Money Market Funds
100% MM instruments for a period of one year
Equity
RISKS Balance Debt Money Market
RETURNS In case of equity, the risk and return is the hi ghest, and vice verse for Money market instruments. It is a principle of Financial management, the higher the risks you take , the higher the return you get.
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1.7) STEPS FOR ULIP SELECTION • • • •
Understand what ULIPs are all about. Focus on your need and risk profile Compare ULIP products from various insurance companies Go for an experienced Insurance advisor
It is estimated that India’s economy will become the 3
rd
largest economy within a few
yrs, with a high GDP growth and a low inflation rate, followed by booming stock market (SENSEX soaring as high as 20,000 points). So right time to increase your wealth and become rich starts from today. And ULIPS are the best to invest in.
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CHAPTER 2 DIFFERENCE BETWEEN ULIPS & MUTUAL FUNDS:Points of Difference
ULIPS(Unit Linked Insurance Plans)
MFs(Mutual Funds)
1) Meaning :These are the Insurance policies which are linked to units It is an investment organization with a main of Mutual Fund. objective of collecting funds from various segments of people and investing the same in a variety of securities.
2) Primary Objective :-
Its main objective is investment & protection
3) Investment Duration:-
It works out for long term investment only .
4) Insurance Cover :-
5) Expenses :-
ULIPs provide insurance cover (except annuity products which may be issued with/ without risk cover) and from the amount invested in ULIPs after netting out the risk premium for life risk cover and administrative expenses, the insurer invests the balance as per the objective of the specific ULIP product. Insurance companies have a relatively free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, the Insurance Regulatory and Development Authority (IRDA)
Its objective is only investments. It works out to medium term, long term, & short term. Risky for short term investors.
MF schemes do not cover the life risk and the amount invested, net of expenses, gets invested as per the investment objective of the scheme.
In MFs, expenses charged for various activities like sales/marketing, administration and fund management are capped (for example in equityoriented mutual funds, expenses are capped at 2.5%
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per annum) as per the guidelines of the Securities and Exchange Board of India (SEBI). Similarly funds usually charge their investors entry (at the timing of making an investment) and exit (at the time of sale) loads.
6) Flexibility :-
Flexibility is limited to moving across different funds offered with policy. Correcting mistakes can turn out to be expensive. Moving funds from one ULIP to another ULIP of a different fund house can be expensive.
Very flexible. Plenty of scope to correct mistakes if any wrong investment decisions are made. Portfolios can be easily shuffled in MFs.
7) Liquidity :-
Limited liquidity .It need to stay invested for minimum years before redeeming.
Very liquid. MF units can be sold any time(except ELSS).
8) Investment Objective :-
ULIPs can be used for achieving only long term objectives (Children education, marriage, Retirement planning).
MFs can be used as vehicle for investments to achieve different objectives.(E.g.: Buying a car three years from now. Down payment for a home f ive years from now. Children’s education 10 years from now. Children’s marriage 15 years from now. Retirement planning 25 years from now. Medical expenses after retirement 25 years from now).
9) Flexibility of Switchovers :-
Insurance companies permit their ULIP investors usually 3-4 switch overs free of charge and thereafter every additional switch over beyond the permissible limit is permitted at some cost.
In MFs an investor usually is subjected to exit load and/or entry load when he/she exercises a switch over option.
10) Minimum Lock- in Period
ULIPs currently are with a minimum lock-in of three years.
MF schemes (except ELSS which has a lock-in of three years) do not have any such lock in.
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11) Investment styles and Portfolio Disclosures :-
Insurance companies declare their portfolios once in a quarter and their investment style are less aggressive and they resort to less churning.
Most MFs usually declare their portfolios on monthly basis and MFs are generally known to be more active in fund management
12) Tax benefits and implications :-
Irrespective of the nature of the plan chosen by the In the case of mutual funds, only investments in taxinvestor, all ULIP investments qualify for deductions up saving funds i.e Equity-linked savings schemes to one lakh under Section 80C of the Income Tax Act. In (ELSS) are eligible for Section 80C benefits the case of ULIPs the maturity proceeds are tax-free. On the other hand, in the case of equity-oriented mutual funds, if the investments are held for a period over 12 months, the gains are tax free and if sold within a 12-month period they attract short-term capital gains tax @ 10 percent. Similarly, debt-oriented funds attract long-term capital gains tax @ 10 percent while short-term capital gain is taxed at the investor’s marginal tax rate.
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Mutual funds are essentially short to medium term products . The liquidity that these
products offer is valuable for investors. ULIPs, in contrast, are now positioned as long-term products and going ahead, there
will be separate playing fields for ULIPS and MFs, with the product differentiation between them becoming more pronounced. ULIPs now do not seek to replace mutual funds, they offer protection against the risk of dying too early, and also help people save for retirement. Insurance has to be an integral part of one’s wealth management portfolio. ULIPs and mutual funds are, therefore, not likely to cannibalise each other in the long run. While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and structure, the first and foremost purpose of insurance is and will always be ‘protection’. The value that it provides cannot be downplayed or underestimated. As an instrument of protection, insurance provides benefits that no investment can offer. It is important for an investor to understand his financial goals and horizon of investment in order to make an informed investment decision. The decision to invest in either a mutual fund or a ULIP should depend on the time period of investment, individual financial goals as well as risk taking appetite, and it’s about time the industry and customer realize it.
CHAPTER 3 COMPARATIVE ANALYSIS OF ULIPS This chapter covers the comparison of ULIPs of 4 Insurance companies, how much growth the fund has showed since its Inception, returns for a period of one month compared with the market and tracking of the NAVs for a period of one month. Initially ULIPs were started by a few private players way back in 2001-02. But now almost every Insurance company has got ULIPS suiting the varied requirements of the customers. If one has to choose among the ULIP schemes provided by the insurance, it is necessary to do a through comparison to choose the right one for you.
ULIPs of 4 top performing insurance are taken for comparison. 1)
TATA-AIG--------------------- Invest Assure II
2)
ICICI PRUDENTIAL--------- Life Time Super
3)
RELIANCE LIFE ------------- Automatic Investment Plan
4)
LIC-------------------------------- Market Plus
Besides these TATA –AIG also provides some other ULIPs which are as follows: Invest Assure Gold Invest Assure Plus Invest Assure • • •
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Tata – AIG Life Insurance Company (Invest Assure II)
ICICI Prudential
Reliance Life
Life Insurance Corporation
(Automatic Investment Plan)
(Market Plus)
A regular unit linked insurance policy that offers flexible investment options along with the benefit of life insurance cover, and an opportunity to earn potentially higher returns on your investment without sacrificing the protection of your family.
The plan promises enhanced life cover with complete flexibility to gain control over your investments in tune with your financial needs and your risk appetite.
The unique plan promises a safe and a tension free life along with a good amount of wealth creation.
Min age= 0 Max age= 65 years
Min age= 0 Max age= 65 years
Min age= 18 years complete Max age= 70 years (age nearer birthday)
10- 75 years
40- 75 years
5-30 years
(Life Time Super)
1) Policy objective :It is a unique, flexible insurance plan which combines security of life with the opportunity to exploit the upside of the market returns by investing in different kinds of securities through multiple fund options.
2) Eligilibility Criteria (Minimum, Maximum age at entry):Min age= 30 days Max age= 45,55,65 years
3) Policy term :15, 20, 30 years
4) Premium (Minimum):-
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Rs 12000 pa
Rs 18,000 pa
Rs. 10000 pa
Rs 5000 pa
Annually, half yearly, monthly.
Annually, half yearly, quarterly, monthly
Annually, half yearly, quarterly.
Min: Annual Premium* Term/2, subject to a min of Rs.100, 000.
Min: Annualized premium for 5 yrs or annualized for half of the policy term, whichever is the highest. Max: no limit
Min: Rs 50000 for regular premium Max: 20 times of the annualized premium.
Maturity: Total Fund Value + Top up if any. Death: Fund Value or Sum assured whichever is higher
Maturity: Total Fund Value + Top up if any. Death: Fund Value or Sum assured whichever is higher
Maturity: Total Fund Value + Top up if any. Death: Fund Value or Sum assured whichever is higher
Accident & Disability Benefit Critical Illness Waiver of premium
Accident Death & Accidental Total & Permanent Disablement benefit.
Accident Benefit.
5) Mode of Premium Payment:Annually, half yearly, quarterly, monthly.
6) Sum Assured (Minimum, Maximum):It is the multiple of annual regular premium payable.
7) Benefits :Maturity: Total Fund Value + Top up if any. Death: Fund Value or Sum assured whichever is higher Sum Assured is a multiple of regular premium payable.
8)Riders :Accidental Death Benefit Accidental Death & Dismemberment
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Waiver of premium Payor Benefit Critical Illness
Term life insurance benefit
9) Fund options :Option of choosing from 5 funds or a combination of them. Equity fund: Equity shares.(100%) Income fund: Government Bonds & Fixed Income Instruments. . (100%) Aggressive growth fund: Equity (50-80%), Government Bonds (2050%). Stable Growth Fund: Government Bonds (50-70%), Equity (30-50%) Short Term Fixed Income Fund : Government securities & Fixed Income Instruments (100%), Money Market Instruments (20%).
We offer you 6 investment funds. Flexi Growth: Equity & Related Securities Debt, Money Market & Cash (80-100%). Maximiser: Equity & Equity Related Securities Debt, Money Market & Cash (25%-100%) Flexi Balanced: Equity & Related Securities Debt, Money Market & Cash (60-100%)
Tailor made and Readymade funds. Tailor Made: Money Market (100%) Gilt (100%) Corporate (100%) Equity ( 100%) Readymade: Fund A Fund B Fund C
Growth Fund: Debt (0-40%) Equity (60-80%) Balanced Fund: Debt (0-70%) Equity (30-50%) Secured Fund: Debt (0-85%) Equity (15-35) Bond Fund:
Debt (100%) Equity (0%)
Balancer: Equity & Equity Related Securities Debt, Money Market & Cash (40-100%) Protector: Debt, Money Market & Cash (100%)
34
Preserver: Debt, Money Market & Cash (50-100%)
10) Surrender option/ partial withdrawal option :Allowed only after 3 years form the date of issuance of the policy. Surrender charges are a percentage of regular premiums—Fund value. Charge Applicable for 6 yrs---20 or 30 yr policy Charge Applicable for 5 yrs----15 yr policy Surrender & partial withdrawal available
Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium . Partial withdrawal can be done up to min of Rs 2000.
Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium
Surrender & partial withdrawal available
Surrender & partial withdrawal available
If full premium for the first 3 policy years is not paid, the policy lapses. Therefore the policy has to be
You may revive the policy within 3 years from the 1st unpaid premium. If not revived, then the policy
Allowed only after 3 years form the date of issuance of the policy and on payment of full 3 yrs premium.
The surrender value or the partial withdrawal value is equal to the Fund value.
Partial withdrawal facility is not available.
Min of up to 4 partial withdrawals available.
11) Reinstatement/ Revival :In case the policy lapses, you can reinstate it within 5 years from the date of lapse. If you are unable to reinstate the policy within 5 years,
A lapsed policy can be revived within 2 years fro the date of the first unpaid premium. Or gets surrendered.
35
then the policy will be surrendered. In case of lapse, only the Fund Value will be given on death. (no SA)
revived within a period of 2 years, if not then the policy will be surrendered.
will be terminated.. And the policy will be surrendered.
In case of lapse, only the Fund Value will be given. (no SA) .
12) Premium Holiday:After completion of 3 years of the policy, if you are unable to pay the premium within the grace period, then a Premium Holiday facility is given with a charge of 3% of the regular premium.
This option is available here, The policy brochure has no which ensures that your life mention of premium holiday insurance cover continues incase you are unable to pay the premium, after completion of 3 years of the policy. The option here is called A Cover Continuance option.
The policy brochure has no mention of premium holiday.
The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy
The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy
13) Free look Period :The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy. The market value of the invested premiums along with the charges paid will be refunded after making some nominal deductions.
The policy can be cancelled within a free look period of 15 days form the date of receipt of the policy. The market value of the invested premiums along with the charges paid will be refunded after making some nominal deductions
36
14) Grace Period: Here the grace period provided is for 31 days.
Nothing is mentioned about the grace period in the policy brochure.
For regular premiums the grace period is for 30 days, For monthly premiums grace period is for 15 days
Nothing is mentioned about the grace period in the policy brochure.
15) Settlement Benefits :You have the option to receive your maturity benefit either in lumpsum or in the from of periodical payments over period of time. This period will not exceed 5 years from the maturity date.
On maturity of the policy, you You have the option to receive can choose to take the fund value. your maturity benefit either in lumpsum or in the from of You can opt to get payments on periodical payments over period yearly, half yearly, quarterly or of time . This period will not monthly (through ECS) basis, for exceed 5 years from the maturity a period of 1,2,3,4 or 5 yrs, post date. maturity. At any time during settlement period, you have the option to withdraw the remaining fund value.
16) Premium Redirection: Re direction of all the future premiums under a policy, in an alternative proportion to the various Fund units is available
No benefit
Re direction of all the future premiums under a policy, in an alternative proportion to the various Fund units is available.
No benefit
37
17)Top Up premium:Minimum top up amount is Rs 10,000
Amount not mentioned.
Minimum top up amount is Rs 2500
Minimum top up amount is Rs 1000.
Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act, 1961. Life insurance proceeds are tax free u/s 10(10D)
Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act, 1961. Life insurance proceeds are tax free u/s 10(10D).
Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act. Life insurance proceeds are tax free u/s 10(10D).
18) Tax Benefits:Premiums paid under the policy are eligible for tax benefit u/s 80C of the Income Tax Act, 1961. Life insurance proceeds are tax free u/s 10(10D).
38
19)CHARGES Most of the life insurance companies incur certain charges which are as follows:
a) MORTALITY CHARGES b) FUND MANAGEMENT CHARGES c) SWITCH OVER CHARGES d) POLICY ADMINISTRATION CHARGES
A GRAPHICAL REPRESENTATION WILL MAKE THE CHARGES UNDERSTANDABLE AND EASY TO COMPARE
39
a) MORTALITY CHARGES MORTALITY CHARGES (Rs) AGE
Tata AIG ( Invest Assure II)
ICICI (Life Time Super)
Reliance(Automatic Investment Plan)
20yrs
1.05
1.33
1.117
30yrs
1.17
1.46
1.287
40yrs
2.15
2.48
2.36
50yrs
5.53
5.91
6.085
MORTALITY CHARGES 20 18 16 14 ) S 12 R ( S 10 E T A 8 R
Reliance ICICI Tata AIG
6 4 2 0 20yrs
30yrs
40yrs
50yrs
AGE
Interpretation: The mortality charges of Reliance (Automatic Investment Plan ) are the highest whereas The charges of Tata AIG (Invest Assure II) is the least.
40
b) FUND MANAGEMENT CHARGES (Only for Equity Fund) FMC (pa) FOR EQUITY FUND ONLY Tata AIG ( Invest Assure II)
1.75%
ICICI (Life Time Super)
2.25%
Reliance (Automatic Investment Plan)
1.50%
LIC (Market Plus)
1.50%
FMC CHARGES 2.50% 2.25% 2.00% 1.75% 1.50%
p 1.50% % S E T A R 1.00%
1.50% CHARGES
0.50%
0.00% Tata AIG
ICICI
Reliance
LIC
COMPANY
Interpretation: ICICI have the highest FMC whereas Charges of Tata AIG are comparatively higher than the other two.
41
c) SWITCH OVER CHARGES Tata AIG ( Invest Assure II)
ICICI (Life Time Super)
Reliance (Automatic Investment Plan)
LIC (Market Plus)
The first 4 switches per policy will be free.
The first 4 switches per policy will be free.
The first 25 switches per policy will be free.
The first 4 switches per policy will be free.
Charge (Rs) 250
Tata AIG ( Invest Assure II) ICICI (Life Time Super)
2000
Reliance (Automatic Investment Plan)
100
LIC (Market Plus)
100
SWITCH OVER CHARGES
100 100
250
Tata AIG ICICI Reliance LIC
2000
Interpretation: Even in this case ICICI has got the highest switch over charge, whereas charge of Tata AIG are comparatively than the other two. Over here Reliance proves to be superior as i t provides 52 switches free as compared to just 4 s witches offered by others and its charges are . also less
42
d) POLICY ADMINISTRATION CHARGES Charges( Rs /month) 38
Tata AIG ( Invest Assure II) ICICI (Life Time Super)
---
Reliance (Automatic Investment Plan)
40
LIC (Market Plus)
20
POLICY ADMINISTRATION CHARGES per month (RS) 60
60 50 40
38
40
RATES 30 CHARGES per month
20 10 0 Tata AIG Reliance
LIC
COMPANY
Interpretation: In this case charges of Tata AIG are higher than LIC but lower t han Reliance.
43
GROWTH & RETURNS THE GROWTH RATE OF ULIPS THE NAVs taken over here only belong to The Equity Fund of the Policies. (No other fund taken into consideration) Growth rate of ULIPs (Equity Fund) of the 4 Insurance companies Date of Inception
NAV as on NAV as on Increase Growth % inception July,20 Rs 2007 Rs 10 30.45 20.45 204.5
Tata AIG ( Invest Assure II)
24 Jan, 2004
ICICI (Life Time Super)
16 Nov,2001
10
53.32
43.32
433.2
Reliance (Automatic Investment Plan)
28 May,2007
10
10.98
0.98
9.8
LIC (Market Plus)
5 July, 2006
10
11.89
1.89
18.9
From the tabular compilation, it can be observed that the Equity Fund of the policies ha s performed very well over the years.
In case of Tata AIG--------the Equity Fund has grown up to 204.5% in 3 years from the date of inception. In case of ICICI--------the Equity Fund has grown up to 433.2% in 5 years from the date of inception. Also Reliance Equity Fund has increased to 9.8% in a short span of 2mths. LIC has also done a good job with a growth up to 18.9% in 1 year .
44
COMPARISON OF RETURNS
RETURNS OF Tata AIG Equity Fund, ICICI equity fund, Reliance equity fund, LIC equity fund, V/s BSE SENSEX & NSE NIFTY.
PERIOD OF 1 MONTH FROM JUNE 20, 2007 TO JULY 20, 2007 Particulars
From
To
Increase By
Return %
Rank
Tata AIG Equity Fund
28.25
30.45
2.20
7.79
4
ICICI Equity Fund
48.43
53.32
4.89
10
1
Reliance Equity Fund
10.14
10.98
0.84
8.2
2
LIC Equity Fund
11.25
11.89
0.64
5.6
6
BSE SENSEX
14411.95
15565.55
1153.55
8
3
NSE NIFTY
4248.65
4566.05
317.4
7.4
5
45
RETURNS
S E T A R
12.00% 10.00% 7.79% 8.00% 6.00% 4.00% 2.00% 0.00%
10% 8.20%
8%
7.40%
5.60%
d d X n n d n T Y n d E u u u F u I S F F F F N N y y y y t t t i E t i i E i u S u u u S q q q N E E E E q E S I B I C I G I C c e L A n C I i a l t a e a T R
ICICI Equity Fund has outperformed all others giving the highest returns, followed by Reliance.
Tata AIG Equity Fund has marginally outperformed NIFTY. Also it is very close to SENSEX..
LIC Equity Fund has given the least returns .
46
FUND PERFORMANCE (Only of Equity Fund) Period: 1month From 20th June, 2007--------20th July, 2007
NAVs of the Equity Fund (Rs)
Tata AIG (Invest ICICI (Life Assure II)
Time Super)
Reliance (Automatic
LIC (
Investment Plan) 20-Jun 21-Jun 22-Jun 25-Jun 26-Jun 27-Jun 28-Jun 29-Jun 30-Jun 2-Jul 3-Jul 4-Jul 5-Jul 6-Jul 9-Jul 10-Jul 11-Jul 12-Jul 13-Jul 16-Jul 17-Jul 18-Jul 19-Jul 20-Jul
28.24 28.49 28.49 28.61 28.77 28.62 28.841 29.13 29.14 29.39 29.57 29.54 29.53 29.69 29.89 29.65 29.59 30 30.34 30.26 30.65 30.94 30.34 30.45
48.43 48.44 48.75 48.85 48.95 48.66 48.45 48.33 49.1 50.52 50.25 50.49 50.45 51 51.47 51.22 51.5 52 52.6 52.3 52.45 52.39 53.21 53.32
10.14 10.15 10.13 10.15 10.22 10.21 10.27 10.33 10.34 10.38 10.48 10.54 10.53 10.63 10.73 10.72 10.69 10.83 10.93 10.94 10.87 10.85 11.5 10.98
Market Plus) 11.25 11.26 11.13 11.35 11.45 11.3 11.31 11.39 11.4 11.45 11.46 11.52 11.57 11.59 11.64 11.64 11.65 11.72 11.73 11.81 11.82 11.85 11.93 11.89
47
CONSOLIDATED FUND PERFORMANCE SHOWN GRAFICALLY. FUND PERFORMANCE 60
50
40
Tata AIG (Invest Assure II)
S R V
ICICI (Life Time Super)
30
Reliance (Automatic Investment Plan)
A N
LIC ( Market Plus) 20
10
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 0 2 0 2 0 2 0 2 0 2 / 2 / 2 / 2 / 2 2 / 2 / 2 / 2 / 2 2 2 / / / / 4 / 6 / 8 / 0 / 4 / 6 / 8 0 0 2 4 6 8 0 2 / / 2 / 2 / 2 / 2 / 2 / 3 7 7 7 7 / 1 / 1 1 / 1 / 1 / 2 / / 6 6 6 6 6 6 7 7 7 7 7 7
1 MONTH (20JUNE--20JULY)
48
INDIVIDUAL EQUITY FUND PERFORMANCE TATA AIG Invest Assure Super
ICICI Life Time
Tata AIG (Invest Assure II) ICICI (Life Time Super)
31.5 54
31 53
30.5 30
52
29.5
51
S R V
29
Tata AIG (Invest Assure II)
A
s
N
R
50 ICICI (Life Time Super)
v a
28.5
n
49
28 48
27.5 47
27 46
26.5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 0 2 0 2 0 2 0 2 0 2 / 2 / 2 / 2 / 2 2 / 2 / 2 / 2 / 2 2 2 / / / / 4 / 6 / 8 / 0 / 4 / 6 / 8 0 0 2 4 2 6 2 8 3 0 7 / 7 / 2 2 2 2 7 7 1 / 1 1 / 1 / 1 / 2 / / / / / / / / 6 6 6 6 6 6 7 7 7 7 7 7
DATES
45 0 0 0 0 0 0 0 2 0 0 2 0 2 0 2 0 2 0 2 0 / 0 2 0 2 0 2 0 2 0 2 2 / 2 / 2 / 6 / 2 2 / / 4 / 6 / 8 / 0 / / / 4 / 6 / 8 / 0 / 2 7 4 8 0 / / 7 / 0 2 2 7 2 2 2 / 2 / 2 / 3 7 1 1 / 1 / 1 / 2 / / / / 1 7 / / 6 6 6 6 6 6 7 7 7 7 7
Dates
49
LIC
RELIANCE
Market Plus Automatic Investment Plan LIC ( Market Plus)
Reliance (Automatic Investment Plan)
12
12
11.8 11.5
11.6 11
11.4 10.5
LIC ( Market Plus)
Reliance (Automatic Investment Plan)
11.2 10
11
9.5
10.8
10.6
9 0 2 0 2 0 2 0 0 0 0 0 0 0 0 / 0 / 0 / 0 / 0 / 0 / 2 / 6 / 8 / / 2 2 2 2 2 2 2 / 2 / 2 / 2 / 2 / 2 / 2 7 4 / / / 7 / 1 0 2 / 4 / 6 / 8 / 0 7 2 / 4 / 6 / 8 / 0 7 2 2 2 2 2 3 1 1 1 1 2 / / / 0 7 / 6 6 6 6 6 6 7 7 7 7 7
Dates
0 2 0 2 0 2 0 0 0 0 0 0 0 0 2 0 2 0 2 0 2 0 2 0 / 2 / 6 / 8 / / 2 2 / 2 / 2 / 2 / 2 / 2 / / 4 / 6 / 8 / 0 / / 2 / 4 / 7 / 1 0 2 0 1 2 1 4 1 6 1 8 2 0 7 7 2 2 2 / 2 / 2 / 3 7 / / / / 7 / 7 / 7 / 7 / 7 / 6 6 6 6 6 6 7
Dates
50
From the above graphs, it can be seen that the NAV of Reliance Automatic Investment plan is fluctuating less as compared to the others.
NAV of ICICI Life Time Super has fluctuated more as compared to the others. Tata AIG has moderate NAV Fluctuations
It has been observed that the lesser the fluctuations in the NAV, the better it is for the fund.
But the good thing is that all the NAVs are on a rising trend. which indicates the strength of the Equity Fund.
Thus as far as NAV consistency is concerned, investing in Reliance Equity Fund can be a Prudent decision.
It is expected that the NAVs will rise in the future, promising good returns for the Investors.
51
OVERALL DATA ANALYSIS & FINDINGS This analysis is done by giving ranks to all the policies taking into consideration the following criteria
(1= excellent, 2=good, 3=fair, 4=average) In the end, whichever fund has the least score will be the best buy CRITERIA
TATA AIG
ICICI
RELIANCE
LIC
Amount of Premium Mode of premium payment Revival of the Policy Amount of Top up premium Oldest policy Policies issued Premiums collected Mortality charges FMC Policy Administration charges Switch over charges Fund performance Returns Market share
3 1 1 1 2 4 4 1 2 2 2 2 3 4
4 2 3
1 2 3 3 3 1 1
Not given 3 1 1 2
2 1 2 2 4 3 3 3 1 3 1 3 2 3
TOTAL SCORES
32
26
34
Not given
1 2 2 2 3
Not given
1 1 1 4 4 1
26
From the above analysis it can be said that, ICICI and LIC have scored the least. Therefore a person can either buy a ULIP form ICICI or from LIC.
52
CHAPTER 4:- UNDERSTANDING THE WORKING OF ULIPS of Tata AIG ULIPs are said to be the most lucrative from of investment, which not only give you high market returns but also protection from risk, and also secures the livelihood of your loved ones even after your death. Here is an illustration which explains how a ULIP makes your money work. Harder than you.
SAMPLE SALES ILLUSTRATION OF INVEST ASSURE II (TATA AIG LIFE) Name of the proposed insured: Miss Dimple Solanki
Proposal no.
: 1577
Age of the proposed insured : 23 yrs
Date
: 15/7/07
Name of the policy holder
: Miss Dimple Solanki
Currency
: Rupees
Age of the policyholder
: 23 yrs
Payment Mode
: Annual
Insurance plan
Benefit period
Premium Paying period
Premium multiple
Annual premium
Modal premium
Sum Assured (SA)
Additional coverage
Fund
Invest Assure II
30 yrs
30yrs
22.50
12000
12000
270000
270000
Equity 100%
53
Note : 1)SA is the multiple of annual premium: 12000*22.50= 270,000 2) Additional coverage given as Accident Death Benefit Rider taken by the policy holder. 3) Investment in Equity is 100%.
Invest assure II 30 YEAR POLICY Min Return on units=10%( non guaranteed) CHARGES:
Balance invested in the Equity fund
1st year= 50% of premium 50% nd 2 year= 25% of premium 75% rd 3 year= 1 %of premium 99%
YEAR 1
YEAR 2
12000 premium
12000 premium
YEAR 3 12000 premium
1% 50%
50%= Rs 6000 Return =Rs 600 Total
=Rs 6600
NAV =RS 10 No. of units =Rs 6600/10= 660units
25%
75% = Rs 9000 Return= Rs 900 Total =
99%= Rs 11880 Return= Rs 1188 Total = Rs 13068
Rs 9900
NAV=RS. 20
(6600+9900)=Rs16500 No. of units = Rs16500/ 20= 825 units
NAV =RS 30
(16500+13068)=Rs 29568 No of units= Rs 29568/ 30=986 units
54
TOTAL UNITS IN HAND: 660+825+986=2471 UNITS AFTER 3 YEARS. Therefore the units keep on increasing with the change in the NAVs. There is an inverse relation between the NAVs and the No. of Units. As the NAVs rises the no of units decrease. & As the NAVs fall, the No of Units increase. E.g.: In the 3 year, the investment was Rs 29568. NAV was Rs 30. So the no. of Units was 986. rd
Now if the NAV Falls to Rs 20. Then the no. of Units would have been 1479.
55
Therefore the rising trend of NAV is not always a good sign, as your no of units decrease. Therefore if Miss Dimple Solanki continues with her policy for 30 years , she will get a •
Maturity benefit = existing Fund Value which is the sum of the regular premium fund value
•
On death
•
On Death due to Accident= Double the SA.
= SA Rs 270000 or NAV whichever is higher
56
CHAPTER 7 MARKET SURVEY A questionnaire was prepared, wherein 10 advisors of Tata AIG were asked to fill it. The reason for carrying out a market survey was to know the opinion of the advisors and the popularity of ULIPs in the market.
Questionnaire for Advisors of Tata AIG Q 1) What type or class of customers visits your office?
a. b. c. d. e.
salaried housewives self employed retired pensioner
pensioner, 0% self employed,
Salaried
40% Salaried, 50%
house wif e self employed pensioner
house wif e, 10%
57
Q 2) Which policies the client opts for?
a. Traditional b. ULIPS
90%
100% 90% 80% 70% 60% 50% 40% 30%
10%
20% 10% 0%
Traditional
ULIPs
Schemes
Q 3) Are ULIP schemes popular?
a. yes b. no c. can’t say
CAN'T SAY, 0% NO, 30% YE S NO CAN'T SAY
YES, 70%
58
Q 4) Are the clients aware of ULIP schemes?
a. b. c. d.
less than 10% 10% --- 30% 30%---- 60% Above 60%
0% 20% 30% Less Than 10% 10%- 30% 30%- 60% 60%& abov e
50%
Q 5) Out of ten , how many clients opt for ULIP ?
ANS) On an average 6 clients out of 10 opt for ULIPs.
60%
50% 50% 40%
Q 6) How much commission do you get from the company on ULIP policy?
a. b. c. d.
0--- 10% 11—20% 21---30% 31--- 40%
30%
20%
20%
20%
10% 10% 0% 0-10%
11%-20%
21%-30%
31%-40%
Commission
59
Q 7) How many clients have the background of finance? a.10—20%
b.20—40% c. 40% & above
10%-
0%
20% 40%
20%40%
60%
40%above
Q8 ) Mode of payment of premium.
a. cheque b. Demand Draft c. Cash
demand draft, 0% cash, 0% cheque demand draft cash
cheque, 100%
60
Q9) What is the better positioning for ULIP?
a. b. c. d.
as a tax saving plan as a retirement plan as a child education plan as a security cum profitable plan.
80%
70%
70% 60% 50% 40% 30%
20%
20%
10%
10%
0%
0% as a tax saving plan
Q 10) Qualifications a. HSC pass b. Graduate
as a retirement plan
as a child education plan
as a security cum profitable plan
c.MBA
60% 50% 50% 40% 30% 30% 20% 20% 10% 0% HSC
Graduate
MBA
61
Q 11) How is ULIP different from the other policies? Please refer to pg 21 “ULIPs v/s Endowment.”
Q 12) How does a client respond, if any new policy is suggested to him? ANS: According to the survey, the client’s reaction depends upon the presentation that is
given to him by the Advisor. Usually the client shows positive signs of buying the product, sometimes are reluctant to buy due to financial problems. According to most of the advisors the 1 st quest asked by the client is about the guarantee and returns. They want to know about the popularity of the policy as well as the insurance company.
62
CHAPTER 8
Integrated Financial Planning for Life Insurance Starting a job, Recently Married, Single married, no with kids individual kids Your Need Low protection, Reasonable
Flexibility
high asset creation and accumulation
protection, still high on asset creation
Choose low death benefit, choose growth/balance d option for asset creation
Increase death benefit, choose growth/bala nced option for asset creation
Kids going Higher studies Children to school, for child, independent, college marriage nearing the golden years
Higher protection, still high on asset creation but steadier options, increase savings for child
Higher Protection, high on asset creation but steadier options, liquidity for education expenses
Lump sum money for education, marriage. Facility to stop premium for 23 yrs for these extra expenses
Safe accumulation for the golden yrs.Considera bly lower life insurance as the dependencies have decreased
Increase death benefit; choose balanced option for asset creation. Choose riders for enhanced protection. Use top-ups to increase your accumulation
Withdrawal from the account for the education expenses of the child
Withdrawal Decrease the from the death benefitaccount for reduce it to higher the minimum education/marri possible. age expenses of Choose the the child. income Premium investment holiday-to stop option. Toppremium for a ups form the period without accumulation lapsing the (with reduced policy expenses) for the golden yrs cash accumulation
63
CONCLUSION: From the above project , I would point out that the insurance industry is growing at a very fast pace .The Insurance needs of the people are increasing. ICICI Prudential is a key player in the private sector and LIC is a l eader in the public sector with the largest market share. The returns provided by ICICI is the highest as compared to other companies and is superior to others in all respects. Therefore a person can rightly choose to buy insurance from ICICI . Thus ULIPs are simple combination of Term assurance and investment. Synergy, flexibility, durable tax advantages, flexibity in debt- equity ratio, top up facility, transparency, subjected to market conditions, capital appreciation makes ULIPs structurally more effective for achieving long term financial goals. There is no other investment avenue which provides double the amount invested, in case of death due to accident or on death. Therefore insurance has and should be a part of every person’s portfolio which satisfies twin objectives of protection against risks & to increase your wealth. Putting your money in the ULIP equity fund will give you a good return and capital appreciation. So relax and enjoy your life as ULIPs is there behind you.
64
RECOMMENDATIONS
For the Company based on the above market survey. 1) The company should now target pensioners & housewives as they constitute only 10% in the selection of ULIPs.
2) The company can arrange a seminar for the existing clients informing them about the progress made by the company, and also give some lessons on understanding the basics of FINANCE.
3) Since ULIPs are less popular “as a retirement plan”, Tata AIG should advertise inorder to attract the attention of salaried people and to make them understand the importance of investing in ULIPS for retirement. Publicity on a large scale about the different policies to be given in all means of communication. (Basically on TV during prime hours)
For the changes in ULIPs: 1. The amount of premium should be reduced in order to cater to the lower income groups. 2. On maturity, the policy holder should receive the Fund value or the Sum Assured whichever is higher, (as in the case of death benefit.) 3. Reduction in the charges. 4. Commission structure to be revised 5. Give a Pure traditional plan along with the ULIPs. 6. Remove the charges on surrender or partial withdrawal. 7. Increase the number of Switch options. as four is not enough. 8. Design ULIPs for meeting short term investment goals. 9. The investment style should be more aggressive .
65
BIBLIOGRAPHY A. BOOKS 1. Insurance Principles & Practices
-----M.N.Misra
S Chand Publications.
2. Insurance
------ M.J.Mathew
RBSA Publications.
3. Insurance Fundamentals, Environment & Procedures
-------B.S.Bodla, M.C. Garg, K.P. Singh Deep & Deep Publications of 2003 4. Insurance Institute of India IC 33------ S.J. Gidwani
5. Taxmann Life Insurance agent ---- P.R. Khanna , Taxmann Allied service pvt ltd 4th edition 2005.
B. NEWSPAPERS
1. Economic Times 2. Times Of India 3. ESCOLIFE PAPER on Insurance by Ritu Nanda Vol 2, Issue viii June, 2007.
C. MAGAZINES
1. Money Simplified --Vol xxx ,Feb 2007 “ ULIPs how they fit in” 2. Consumer Voice ---Vol 7, Issue 3
.
66
D. NEWSLETTER
1. Tata AIG Life Agency Newsletter Vol 1, Edition 6 , March ,2007.
E. INTERNET
www.tata-aig.com www.licofindia.com www.iciciprulife.com www.reliancelife.com www.moneycontrol.com www.personalfn.com www.et.com www.google.com (Note- The above Sites were logged on between 20 June,07 to 21 st July,2007 )
F. CNBC TV 18
G. BOOKLET on the Orientation Programme of Employees at Tata AIG
H. Policy Brochures of Tata AIG, ICICI Prudential, R eliance Life & LIC.
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QUESTIONNAIRE FOR ADVISORS Q 1) What type or class of customers visit your office? salaried housewives self employed retired pensioner • • • • •
Q 2) Which policies the client opts for? Traditional ULIPS • •
Q 3) Are ULIP schemes popular? yes no can’t say • • •
Q 4) Are the clients aware of ULIP schemes? less than 10% 10% --- 30% 30%---- 60% Above 60% • • • •
Q 5) Out of ten, how many clients opt for ULIP? Q 6) How much commission do you get from the company on ULIP policy? 0--- 10% 11—20% 21---30% 31--- 40% • • • •
Q 7) How many clients have the background of finance? 10—20% 20—40% 40% & above. • • •
Q8) Mode of payment of premium. cheque Demand Draft Cash • • •
Q9) What is the better positioning for ULIP?
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• • • •
as a tax saving plan as a retirement plan as a child education plan as a security cum profitable plan.
Q 10) Qualifications HSC pass Graduate MBA • • •
Q 11) How is ULIP different from the other policies? Q 12) How does a client respond, if any new policy is suggested to him?
.
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