Project-Comparative Analysis of ULIPs With Traditional Plans

A PROJECT REPORT ON Comparative Analysis Between ULIPs and Traditional Plans

Submitted in Partial Fulfillment for the Award of the Degree of Master of Business Administration Guided By:

Submitted by:

Ms. Urvashi Sahitya Lecturer, MBA

Gaurav Kumar Roll No.: 00920803909

Bhagwan Parshuram Institute of Technology (Aff. to Guru Gobind Singh Indraprastha University)

DECLARATION

I, Gaurav Kumar, hereby declare that the project report entitled “Comparative Analysis of ULIPs with Traditional Plans” is an authenticated work carried out by me at MetLife India Insurance Company Ltd., under the guidance of Ms. Urvashi Sahitya, Lecturer, BPIT for the summer internship of MASTERS OF BUSINESS ADMINISTRATION and this work has not been submitted for similar purpose anywhere else except to BPIT, BHAGWAN PARSHURAM INSTITUTE OF TECHNOLOGY,

ROHINI,

affiliated

to

GURU

GOBIND

SINGH

INDRAPRASTHA UNIVERSITY, DELHI.

Date: Place: GAURAV KUMAR

Bhagwan Parshuram Institute of Technology

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ACKNOWLEDGEMENT

I would like to express my sincere gratitude to my company guide Mr. Nikhil Kak, Agency Manager MetLife India Insurance Company Ltd., Delhi for guiding me throughout my summer internship. His encouragement, time and effort are greatly appreciated. I would also like to thank my project manager Mr. Yoginder Kumar, MetLife. I would then like to thank my faculty guide, Ms. Urvashi Sahitya, for all his valuable inputs and constant support towards me throughout my project and providing me an opportunity to learn outside the class room. It was a truly wonderful learning experience. I would like to thank the training heads Mr. Nitin Pathak, and Sales Manager Mr. Surinder Kumar for helping me with the training and other activities and constantly motivating me to give my best. I would like to thank all my friends who did their SI from MetLife India Insurance Co. Ltd. for their valuable suggestions and support.

GAURAV KUMAR


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Executive Summary

This project was completed with MetLife India Insurance Co. Ltd. for the duration of 8 weeks. This project is accomplished under the title of “Comparative Analysis between ULIPs and Traditional Plans”

The study is mainly focused on understanding the basics of Insurance and to study the comparison of different investment avenues & ULIP of MetLife India Insurance Co. Ltd. The objective of the study indicates the comparison of ULIPs with other investment avenues.

People generally invest their money in government deposits and bank deposits, and it is being proved by the research work, as they consider it more reliable as compared to private companies though they agreed that the services offered by private companies are better. Major reason of their investment is to save tax, and they want higher returns on their money, yet 50 % people are not satisfied with their current investments, due to many reasons like, they are not getting as much return as they expected and they are not satisfied with the services and/or reliability of the investment company. ULIPs are slowly gaining acceptance due to attractive features they offer. ULIPs provide the flexibility in investment, transparency, liquidity and various fund options. But people are not fully aware of the various features and characteristics of Unit Linked Insurance Plan (ULIPs), and they prefer savings and protection plan rather than pension and child plan. Most people look for the company’s brand name/image and the amount of return they will get while investing in the Insurance Company.


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Traditional Plans: These are the oldest types of plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are:

Steady Investment

Various Features

Traditional policies are advisable where: •

The objective is only Risk cover and not savings, thus cost of insurance is minimum.

Unit Linked products are advisable where: •

The intention is to provide security with a purpose.

Some of the recommendations to the company are:

The company should emphasis on advertisements to promote their products; should increase the advisor’s commission and launch various attractive schemes so as to motivate them; currently MetLife offers services from around 600 locations across India, so the company should focus on opening up of new offices so as to make it more accessible. Currently most of the ULIP plans demands high premiums (min Rs. 40,000), they should launch some products with similar feature but with low initial premium. Administration charges should be reduced; currently it is up to 40% of premium, so as to compete with other investment avenues like Mutual Funds, NSS, etc. Market surveys should be conducted regularly to know about customer demands and changing needs; and should be regular training for the employees.


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List of Illustrations Title Name

Page Nos.

3.1 Growing need for Insurance with Age 3.2 Division of Premium 3.3 Breakup of Premium charges in ULIPs 3.4 Advantage of Unit Linked Insurance Plans 3.5 Choices of Funds Available 6.1 Number of People make Investments 6.2 Preferred Investment Sector 6.3 Reasons of Investment 6.4 Number of People satisfied with their Investments 6.5 Number of People who have taken LI Policy 6.6 Preferred Sector of Investment 6.7 Services of Private sector 6.8 Reliability of Private LI Companies 6.9 Awareness about ULIPs 6.10 Degree of Awareness of ULIPs regarding working of ULIPs 6.11 Degree of awareness of ULIPs regarding criteria for returns 6.12 Degree of awareness of ULIPs regarding different plans 6.13 Degree of awareness of ULIPs regarding fund investment 6.14 Degree of awareness of ULIPs regarding Switching Option 6.15 Number of People Invested in ULIPs 6.16 Investments in Different Plans 6.17 Reasons of Investment in ULIPs 6.18 Name of Insurer 6.19 Expectations of Return from ULIPs 6.20 Factors influencing in purchasing the Insurance Plan 6.21 Riskiness of ULIPs 6.22 Number of People plans to buy ULIPs 6.23 Reasons of not purchasing ULIPs 6.24 Suggestions to make ULIPs more popular 6.25 Source of taking Insurance 6.26 Views about Insurance Policy 6.27 Awareness of FMC 6.28 Riskiness of Insurance Products 6.29 Name of Popular Companies 6.30 Views about MetLife Company


12 17 18 20 21 37 38 39 40 40 41 42 42 43 44 44 45 45 45 46 47 48 49 50 51 52 52 54 55 56 57 58 59 60 61

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List of Tables

Title Name

Page Nos.

4.1 List of Insurance Companies in India 4.2 List of Non-Life Insurers 5.1 Management Team 5.2 Met Health Care Plan 5.3 Monthly Income Plan 6.1 Number of People make Investments 6.2 Preferred Investment Sector 6.3 Reasons of Investment 6.4 Number of People satisfied with their Investments 6.5 Number of People who have taken LI Policy 6.6 Preferred Sector of Investment 6.7 Services of Private sector 6.8 Reliability of Private LI Companies 6.9 Awareness about ULIPs 6.10 Degree of awareness of ULIPs 6.11 Number of People Invested in ULIPs 6.12 Investments in Different Plans 6.13 Reasons of Investment in ULIPs 6.14 Name of Insurer 6.15 Expectations of Return from ULIPs 6.16 Factors influencing in purchasing the Insurance Plan 6.17 Riskiness of ULIPs 6.18 Number of People plans to buy ULIPs 6.19 Reasons of not purchasing ULIPs 6.20 Suggestions to make ULIPs more popular 6.21 Source of taking Insurance 6.22 Views about Insurance Policy 6.23Awareness of FMC 6.24 Riskiness of Insurance Products 6.25 Name of Popular Companies 6.26 Views about MetLife Company 8.1 Comparison of ULIPs with Traditional Policy 8.2 Comparison of ULIPs with other Investment Modules


28 29 32 36 36 37 38 39 39 40 41 42 42 43 44 45 46 48 48 49 50 51 52 53 55 56 57 58 59 59 60 64 66

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Table of Contents Title Name

Page Nos.

Declaration

II

Acknowledgement

III

Executive Summary

IV

List of Illustrations

VI

List of Tables

VII

Chapter 1. Introduction

1–2

Chapter 2. Objective of the Study

3

Chapter 3. Research Methodology

4–5

2.1 Scope of the Study

4

2.2 Research Design

4

2.3 Tools Techniques

6

Chapter 3. Literature Review 3.1 Insurance

7 – 21 7

3.1.1 Purpose and Need of Insurance

6

3.2 Article Review

8

3.3 Functions of Insurance

9

3.4 Life Insurance

10

3.4.1 Why Life Insurance

11

3.4.2 Benefits of Life Insurance

9

3.5 Unit Linked Insurance Plan (ULIPs) 3.5.1 The things we must know about ULIPs

15 16

3.6 Advantages of ULIPs

19

3.7 Choices of funds Available

21

Chapter 4. Industry Profile 4.1

History

22 – 29 22


Page VIII

4.2

Industry Structure

27

4.3

Capital Requirements and Foreign Participation

28

4.4

List of Insurance Companies in India

28

Chapter 5. Company Profile

30 – 36

5.1

MetLife (India)

30

5.2

Company’s Values

31

5.3

Management Team

32

5.4

Services offered by MetLife Company

33

5.5

Plans of MetLife Insurance

33

Chapter 6. Data Analysis and Interpretation

37 – 61

Chapter 7. Limitations of the Study

62

Chapter 8. Findings and Conclusion

63

8.1 Comparison of ULIPs with Traditional Plans

63

8.2 Comparison of ULIPs with other Investment Modules

66

8.3 Conclusion

66

Chapter 9. Recommendations

68

Bibliography Annexure


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Chapter 1 INTRODUCTION

In the commercial arena, the choice of an effective strategy is perhaps the most important and the toughest decision to take. The decision to select among the grand strategies and deciding upon which strategy will best meet the enterprise’s objectives is rendered complex by multiple considerations. The same is also true with the insurance companies in India who are constantly revamping their strategies and coming out with innovative options to stay in the competition. There were days when Life Insurance Corporation of India (LIC) was the only insurance company available to people in India and where people synonymised Insurance to LIC. Also since it was a Public Sector Undertaking (PSU) it has a great support from people. But now times have changed a lot of private players have entered into the fray. There have been a lot of Indian companies collaborating with foreign insurance giants like ICICI Prudential, Bajaj Allianz etc who have already made their presence felt in the Indian Insurance industry. Even though LIC is still the market leader with more than over 60% of the market share, the private players are giving it a tough time. Since the last decade the market share of LIC had fallen down by about more than 20%. The new private players have started offering a variety of unlimited schemes. Also the private companies have started creating the importance and need of insurance in today’s life. They have started positioning their brands and are marketing their products in such a way the people have started feeling the need of security in their lives. Taking into account the huge population and growing per capita income besides several other driving factors, a huge opportunity is in store for the insurance companies in India. According to the latest research findings, nearly 80% of Indian population are without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subjected to weak social security and pension systems with hardly any old age income security. As per our findings, Insurance in India is primarily used as a means to improve personal finances and for income tax planning; Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small (4-5%). This in itself is an indicator that growth potential for the insurance sector is immense. It's a business growing at the rate of Comparative Analysis of ULIPs with Traditional Plans

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15-20% per annum and presently is of the order of around more than $55 billion. India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with company’s continuous effort to lure the customers with new product offerings. However, the market share of private insurance companies remains low in the 25-35% range. Even to this day, Life Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints. Private players are coming up with new and innovative ideas. Since the last decade the life insurance industry in India has been growing very fast and many new companies have entered this business insurance. The Indian life insurance industry has recorded a robust growth and it is expected to grow at an amazing rate of 20%. Also in the present scenario the most sought after insurance plans are the Unit Linked insurance Plans (ULIPs). A ULIP is a life insurance policy which provides a combination of risk cover and investment. ULIPs have gained high acceptance due to attractive features they offer like flexibility, transparency, liquidity and a vast variety of fund option. Unit linked plans are suitable for all customer profiles; however as a general belief the risk averse investors tend to choose traditional plans and an informed customer prefers a ULIP. ULIPs offer the kind of flexibility that no insurance product can. ULIPs essentially combine the benefits of an insurance policy and a market-linked investment. Investors can select a ULIP with an equity-debt combination that is in line with their risk profile. A risk-taking investor would typically select one with a high equity component, while a risk-averse investor would opt for a debt-heavy one. Simply put, ULIPs are structured in such a way that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency. So with many players around for a company to really be successful it has to really be very efficient on all fronts. It has to constantly adapt to the changing consumer preferences with a lot of new innovations and implementing new technology try to different from the lot. Especially if it is a new player in the market the company has to really work very hard to get into the completion and stay afloat.

Comparative Analysis of ULIPs with Traditional Plans

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Chapter 2 Objective of the Study

OBJECTIVES OF THE STUDY

1. To understand the insurance concept deeply. 2. To study the ULIP plans of MetLife India Insurance Company Ltd. 3. Find out the advantages & disadvantages of ULIP plans. 4. To compare ULIP plans with traditional plans.


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Chapter 3 Research Methodology Research Methodology deals with, the procedure adopted to carry out the study. “A research design is the specification of methods and procedures acquiring the information needed. It is the overall operational pattern or framework of the project that stipulates which information is to be collected from which sources by what procedures’’. For conducting the study, the researcher has adopted both primary as well as secondary method of data collection.

2.1 SCOPE OF THE STUDY •

Scope of the study extends to Delhi city.

•

Insurance industry study was taken as a market research.

•

The study involved comparison of ULIP plan with other traditional plans.

2.2 RESEARCH DESIGN (1) SAMPLING TECHNIQUES: Mainly Simple Random Sampling and Convenience Sampling techniques are used in the research.

1. SAMPLE SIZE : The total samples for this study is of 50 respondents. 2. SAMPLE AREA: Delhi and NCR respondents were chosen for the study.


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Data Collection Sources/Techniques DATA SOURCES

PRIMARY DATA

SECONDARY DATA

(2) DATA CLLECTION SOURCES/TECHNIQUES: The data collection for this study was obtained from primary & secondary sources.

(A) PRIMARY DATA: It is the first hand information collected directly from customer. The primary data are those, which are collected for the first time for the specific purpose of the study. Primary data are collected by: •

QUESTIONNAIRE: It is a set of definite questions formed to collect the required facts or opinions from others. While preparing questionnaire the attention was given at the objective. Various questions were asked to the respondents to conduct the survey.

•

PERSONAL INTERVIEW: In personal Interview various questions are asked in a face-to-face meeting. The respondents were asked certain unstructured questions to obtain the important information on knowledge, attitudes and opinions about insurance.

B) SECONDARY DATA The secondary data are those which have already been collected by someone else & which have been already through the statistical process & useful to study. It was collected from various insurance books, reports of MetLife India Insurance Co. Ltd. and various websites. Secondary data was collected from 1. Internal sources


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2. Libraries 3. Magazines/Journals 4. Internet

2.3 Tools Techniques

Percentage refers to a special kind of ratio and is used in making comparisons between two or more series of data, and it also helps to describe the relationships with other factors. Percentage technique was used in data analysis and Interpretation.


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Chapter 3 Literature Review

3.1 INSURANCE Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks which can be insured against include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance. 3.1.1 PURPOSE AND NEED OF INSURANCE As said earlier that the making is exposed to many serious perils which risk the security of their belongings. The risk here means that there is a possibility of occurrence of loss or damage to the property, it may happen or may not happen. Insurance is relevant only in the contingency of uncertainty. If there is no uncertainly about the occurrence of the loss it can’t be insured against:

Assets are likely to be destroyed or made non-functional due to perils like firefloods, breakdowns, lightning and earthquake.

Damage to assets caused by any perils is the risk that assets are exposed to.

Insurance become relevant only if there is uncertainly of occurrence of event leading to loss.

No uncertainty No insurance.

We can say that the human life value is an ongoing generating asset, which can be lost on early death or disability caused by accidents.

Insurance doesn’t protect the assets but only compensates the economic or financial loss.

Basically insurance covers tangible assets but the concept can be extended to intangible also.


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3.2 Review of Articles 3.2.1 Financial Express: Investors still perplexed about ULIPs, dated April 16, 2010 Most holders of unit-linked insurance plans, or ULIPs, say their insurance agent informed them about the commission upfront, though very few know, or were informed, that it is often upwards of 20 to 30%. Although a majority of policyholders are satisfied with the performance of their ULIPs, under a fourth bought them for insurance reasons, reveals a four-city FE-Synovate Ulip Survey conducted on 14th April. Though the life insurance firms may love to find succor in these figures, truth be told, such confusion amongst policyholders is an ominous sign for the industry, caught in a bitter, week-old regulatory tug-of-war over Ulips between Insurance Regulatory Authority of India and the Securities and Exchange Board of India. Ulips account for over three-fourths of all insurance premiums collected every year by about two dozen life insurers in the country. “The damage is done,” rues Kolkata-based architect Manoj Bhattacharya, who had bought Ulips a few years ago. “Now I find that the surrender value of my policies is almost 80% of what I have paid so far. I cannot even get out as I will lose financially,” he adds. Bhattacharya’s story of a confused and mis-sold consumer resonates with the over seven crore Ulip-holders who collectively forked out over Rs 1 lakh crore as premium for these hybrid insurance-cum-investment products last fiscal; a fact borne by the survey, which points that, more people bought it as a mutual fund-type product (26%) than an insurance-led scheme (23%). Low financial literacy, even amongst rich investors, and the fact that Ulips have been hawked as ‘horses for courses’ products by insurance agents for all manner of financial needs––from insurance, investment to tax planning––give credence to the call for tighter regulation of Ulips and whittling or even scrapping of high agent commissions here a la mutual funds. It is instructive for the industry that over a third of the FE-Synovate survey respondents were unaware of the Ulip commission Comparative Analysis of ULIPs with Traditional Plans

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structure, and the rest unclear on what portion of their funds was apportioned as agent commission and administrative charges by the insurer. Says Banglorean Naveen Prasad, who works for a consultancy firm; “I was convinced by my agent that as a long-term investment, Ulip is the best bet. But during the first year of fund allocation, I realised that 24% of what I was paying went as fund management charges, which I feel is ridiculous. There should be a system where only a minimum amount can be charged for fund maintenance and not such a huge percentage.” Many Ulip-holders, however, look at the silver lining in the current Irda-Sebi imbroglio. Says Mumbai-based entrepreneur Sandeep Desai: “As a Ulip investor, I expect these controversies to bring out more stringent rules for private players, which will help establish transparency and ensure that they sell Ulips with proper disclosures and responsibility towards their clients.” The FE-Synovate Ulip Survey was conducted amongst 206 Ulip-holders spread across four cities––Delhi, Mumbai, Kolkata and Bangalore.

3.3 FUNCTIONS OF INSURANCE The functions of Insurance can be bifurcated into two parts:

1. Primary Functions 2. Secondary Functions

The primary functions of insurance include the following: Provide Protection - The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others. Collective bearing of risk - Insurance is a device to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. Comparative Analysis of ULIPs with Traditional Plans

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Assessment of risk - Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also Provide Certainty - Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain.

The secondary functions of insurance include the following: Prevention of Losses - Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc. Prevention of losses causes lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business

and

better

protection

to

the

insured.

Small capital to cover larger risks - Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contributes towards the development of larger industries - Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.

3.4 Life Insurance Life insurance is a contract where the person requiring and insurance pays a consideration / premium to maintain a policy and the insurer promises to pay a sum assured or a guaranteed amount on the happening of an eventuality. If no eventuality occurs then the insured may be eligible for some bonus also.

Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against.


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The contract is valid for payment of the insured amount during: •

The date of maturity, or

•

Specified dates at periodic intervals, or

•

Unfortunate death, if it occurs earlier.

Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death

of

the

breadwinner.

By and large, life insurance is civilisation's partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: 1. That of dying prematurely leaves a dependent family to fend for itself. 2. That of living till old age without visible means of support.

3.4.1 Why life Insurance:

1. Protection of the interest of the family member. 2. Provision for education and marriage of the children. 3. Post retirement income for self and dependents 4. Special needs for medical expenses. 5. Provision for health /illness. 6. Provision for housing. 7. Provision for income tax rebate.


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Fig: 3.1 Growing need for Insurance with Age.

3.4.2 Benefits of life Insurance:

Insurance not only serves the ends of individuals or of special groups of individuals but also is advantageous to the society as a whole.

(1) Benefits to the Individual Superior to any other saving plans: Unlike any other saving plan, a life insurance policy affords full protection against risk of death. In the event of death of a policy holder, the insurance company makes available the full sum assured to the near and dear of policy holder. In comparison, any other saving plan would amount the total saving accumulated till date. If the death occurs prematurely, such saving can be much lesser than sum assured. Evidently, the potential financial loss of the family of the policy holder is sizable. Encourages and forces thrift: A saving deposit can easily be withdrawn. The payment of Life insurance premiums, however, is considered sacrosanct and is viewed with the same seriousness as the


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payment of interest on a mortgage. Thus, a life insurance policy in effect brings about compulsory saving. Easy Settlement And Protection Against Creditors: A life insurance policy is the only financial instrument, the proceeds of which can be protected against the claims of a creditor of the assured by affecting a valid assignment of the policy. Administering the legacy for beneficiaries: Speculative or otherwise, expenses can quickly cause the proceeds to be squandered. Several policies have foreseen this possibility and provide for payment over a period of years or in a combination of installments and lump sum amounts. Ready marketing and suitability for quick borrowing: A life insurance policy can, after a certain period (generally Three years ), is surrendered for a cash value. The policy is also acceptable as a security for commercial loans, for example, a student loan. Disability benefits: Death is not only hazard that is insured; many policies may include disability benefits. Typically, these provide for waiver of future premiums and payment of monthly installment periods. Accidental death benefits: Many policies can also provide for an extra sum to be paid (typically equal to the sum assured) if death occurs as a result of accident. Tax relief: Under the Indian income tax act, the following tax relief is available 1. 20% of premium can be deducted from total income tax liability. 2. 100% of the premium paid is deductible from your total

taxable income.

When these benefits are factored in, it is found that most Policies offer returns that are comparable /or even better than other saving modes such as PPF, NSC etc. moreover, the cost of insurance is a very negligible.


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(2) Benefits to business: Insurance results in business continuation and welfare of employees. Uncertainty of business losses is reduced by insurance.

(3) Benefits of society: The welfare of the society is protected. Insurance results in economic growth of the country and reduction in inflation. Protection: Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable. Aid to Thrift: Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy installment' facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half yearly or yearly). For example: The Salary Saving Scheme popularly known as SSS, and it provides a convenient method of paying premium each month by deduction from one's salary. In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions. Liquidity: In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan. Tax Relief: Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income

tax

rates


in

force.

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Assessees can also avail of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for insurance than otherwise.

3.5 UNIT LINKED INSURANCE PLAN (ULIPs)

Unit linked insurance plan (ULIP) is a life insurance solution that provides the client with the benefits of protection and flexibility in investment. It is a solution which provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time. The investment is denoted as unit and is represented by the value that it has attained called as Net Asset Value (NAV). ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing a life cover. The residual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; the value of investments alters with the performance of the underlying fund opted by the customer. Simply put, ULIPs are structured in such that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency. ULIPs came into play in 1960s and became very popular in Western Europe and America. The reason that is attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility which it offers to the clients. As time progressed the plans were also successfully mapped along with life insurance needs to retirement planning .In today’s times ULIP provides solution for all the needs of a client like insurance planning, financial needs, financial planning for children’s future and retirement planning.

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


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insured person's untimely death, his nominees would normally receive an amount that is the higher of the sum assured (insurance cover) or the value of the units (investments).However, there are some schemes in which the policyholder receives the sum assured plus the value of the investments. Every insurance company has four to five ULIPs with varying investment options, charges and conditions for withdrawals and surrender. Moreover, schemes have been tailored to suit different customer profiles and, in that sense, offer a great deal of choice. The advantage of ULIP is that since the investments are made for long periods, the chances of earning a decent return are high. Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes while those who have an appetite for risk can opt for balanced or equity schemes. However, the charges paid in these schemes in terms of the entry load, administrative fees, underwriting fees, buying and selling charges and asset management charges are fairly high and vary from insurer to insurer in the quantum as also in the manner in which they are charged.

3.5.1 The things we must know about ULIPs: ULIPs offered by different insurers have varying charge structures. Broadly the different types of fees and charges are given below. However the insurers have the right to revise or cancel the fees and charges over a period of time.

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. Policy/ Administration Charges These are the fees for administration of the plan and levied by cancellation of units. This could be flat throughout the policy term or vary at a pre-determined rate.


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Mortality Charges These are charges to provide for the cost of insurance coverage under the plan. Mortality charges depend on number of factors such as age, amount of coverage, state of health etc.

Fig: 3.2 Division of Premium

Premium Allocation charges This is a percentage of the premium appropriated towards charges before allocating the units under the policy. This charge normally includes initial and renewal expenses apart from commission expenses. Fund Management Charges These are fees levied for management of the fund(s) and are deducted before arriving at the Net Asset Value (NAV). Surrender Charges A surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as mentioned in the policy conditions. 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 Switching Charge Generally a limited number of fund switches may be allowed each year without charge, with subsequent switches, subject to a charge. But now a day’s many insurers offer fund switching free of cost.


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Some insurers allow 4-12 free switches in every year but link it to a minimum amount. Others allow just one free switch in each year and charge Rs 100 for every subsequent switch. Some insurers don't charge anything.

ULIP Structure Invested Amount Premium Allocation Charges Administration Charges Mortality Charges Fund Management Charges

Fig: 3.3 Breakup of Premium charges in ULIPs

Service Tax Deductions Before allotment of the units the applicable service tax is deducted from the risk portion of the premium. 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 equityoriented scheme. Fund management expenses and the brokerage are built into the daily net asset value. 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. 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). Comparative Analysis of ULIPs with Traditional Plans

Page 18

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.

3.6 ADVANTAGES OF ULIPS ULIP distinguishes itself through the multiple benefits that it provides to the consumer. The plan is a one stop solution for everything the customers want. Unit Linked Insurance Plans (ULIPs) are different from traditional plans purely because, they are much more transparent, various charges are shared with the customer before the sale of the product, so as to enable the customer to make an informed decision. Customers have the flexibility to choose their life cover. Also the customers have the choice of multiple fund options based on their risk appetite, thereby enabling an investor to make the desired returns from the investment.

The following are some of the advantages of Unit linked plans: 1. Life protection 2. Investment and Savings a) Market linked fund based on risk profile b) Switch option c) Premium redirection d) Automatic Transfer Plan(ATP) 3. Tax Planning The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows 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


Page 19

10(10D) unlike those from a mutual fund which attract short term capital gains tax. 4. Flexibility of cover continuance 5. Transparency 6. Extra protection with riders a) Death due to accident b) Disability c) Critical illness d) Liquidity e) Partial withdrawals during the term f) At maturity g) Variable investment options h) Premium holiday i) Allow Top-ups

Fig: 3.4 Advantage of Unit Linked Insurance Plans


Page 20

3.7 Choice of Funds Available: Fig: 3.5 Choices of Funds Available


Page 21

Chapter 4 Industry Profile 4.1 History Insurance in India has its history dating back until 1818, when Oriental Life Insurance Company was started by Anita Bhavsar in Kolkata to cater to the needs of European community. The pre-independence era in India saw discrimination between the lives of foreigners (English) and Indians with higher premiums being charged for the latter. In 1870, Bombay Mutual Life Assurance Society became the first Indian insurer. At the dawn of the twentieth century, many insurance companies were founded. In the year 1912, the Life Insurance Companies Act and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium-rate tables and periodical valuations of companies should be certified by an actuary. However, the disparity still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is the National Insurance Company Ltd., which was founded in 1906. It is in business. Before that, the industry consisted of only two state insurers: Life Insurers (Life Insurance Corporation of India, LIC) and General Insurers (General Insurance Corporation of India, GIC). GIC had four subsidiary companies. With effect from December 2000, these subsidiaries have been de-linked from the parent company and were set up as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited. The insurance sector in India has completed all the facets of competition –from being an open competitive market to being nationalized and then getting back to the form of a liberalized market once again. The history of the insurance sector in India reveals that it has witnessed complete dynamism for the past two centuries approximately.

With the establishment of the Oriental Life Insurance Company in Kolkata, the business of Indian life insurance started in the year 1818. Comparative Analysis of ULIPs with Traditional Plans

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In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (Manusmrithi), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies.

In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.


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The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business. 1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973. Comparative Analysis of ULIPs with Traditional Plans

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This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein , among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.


Page 25

Today there are 14 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 14 life insurance companies operating in the country.

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country. Important milestones in the Indian life insurance business •

1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business.

•

1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses.

•

1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.

•

1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India.

•

Insurance companies in India IRDA has till now provided registration to 23 private life insurance companies and 23 general insurance companies including public sector companies. General Insurance Corporation has been sanctioned as the "Indian reinsurer" for underwriting only reinsurance business.

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


Page 26

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, according to "Booming Insurance Market in India (2008-2011)”. •

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

•

Total non-life insurance premium is expected to increase at a CAGR of 25% for the period spanning from 2008-09 to 2010-11.

•

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.

•

Home insurance segment is set to achieve a 100% growth as financial institutions have made home insurance obligatory for housing loan approvals.

•

Health insurance is poised to become the second largest business for non-life insurers after motor insurance in next three years.

•

A booming life insurance market has propelled the Indian life insurance agents into the ‘top 10 country list’ in terms of membership to the Million Dollar Round Table (MDRT) — an exclusive club for the highest performing life insurance agents.

4.2 INDUSTRY STRUCTURE Currently, a $41 billion industry, India is the world's fifth largest life insurance market and growing at a rapid pace of 32-34% annually as per Life Insurance Council studies. Currently, in India only two million people (0.2 % of the total population of 1 billion) are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. With more and more private companies in the sector, the situation may change soon. Comparative Analysis of ULIPs with Traditional Plans

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4.3 CAPITAL REQUIREMENTS AND FOREIGN PARTICIPATION Minimum capital requirement for direct life and Non-life Insurance company is INR 100 crore and that for reinsurance company is INR 200 crore. A maximum 26% foreign equity stake is allowed in direct insurance and reinsurance companies.

4.4 LIST OF INSURANCE COMPANIES IN INDIA Table: 4.1 List of Insurance Companies in India S No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Name of Life Insurer IDBI Fortis Life Insurance Company Ltd. DLF Pramerica Life Insurance Co. Ltd. AEGON Religare Life Insurance Company Limited Star Union Dai-ichi Life Insurance Company Ltd. India First Life Insurance Company Ltd. Bharti AXA Life Insurance Co. Ltd. Future Generali India Life Insurance Co. Ltd. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd. Aviva Life Insurance Co. India Ltd. Sahara India Life Insurance Co. Ltd. Shriram Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. Tata AIG Life Insurance Company Limited Reliance Life Insurance Company Limited Max New York Life Insurance Co. Ltd Met Life India Insurance Company Ltd. Kotak Mahindra Old Mutual Life Insurance Limited ICICI Prudential Life Insurance Co. Ltd ING Vysya Life Insurance Company Life Insurance Corporation of India Bajaj Allianz Life Insurance Co. Ltd. Birla Sun Life Insurance Co. Ltd HDFC Standard Life Insurance Co. Ltd


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Table: 4.2 List of Non-Life Insurers S.NO NAME OF THE Non Life Insurers 1

Bajaj Allianz General Insurance Co. Ltd.

2

ICICI Lombard General Insurance Co. Ltd.

3

IFFCO Tokio General Insurance Co. Ltd.

4

National Insurance Co.Ltd.

5

The New India Assurance Co. Ltd.

6

The Oriental Insurance Co. Ltd.

7

Reliance General Insurance Co. Ltd.

8

Royal Sundaram Alliance Insurance Co. Ltd

9

Tata AIG General Insurance Co. Ltd.

10

United India Insurance Co. Ltd.

11

Cholamandalam MS General Insurance Co. Ltd.

12

HDFC ERGO General Insurance Co. Ltd.

13

Export Credit Guarantee Corporation of India Ltd.

14

Agriculture Insurance Co. of India Ltd.

15

Star Health and Allied Insurance Company Limited

16

Apollo Munich Health Insurance Company Limited

17

Future Generali India Insurance Company Limited

18

Universal Sompo General Insurance Co. Ltd.

19

Shriram General Insurance Company Limited,

20

Bharti AXA General Insurance Company Limited

21

Raheja QBE General Insurance Company Limited,

22

SBI General Insurance Company Limited

23

Max Bupa Health Insurance Company Ltd.


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Chapter 5 Company Profile 5.1 MetLife (India) MetLife India Insurance Company Limited (MetLife) is an affiliate of MetLife, Inc. and was incorporated as a joint venture between MetLife International Holdings, Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors. MetLife is one of the fastest growing life insurance companies in the country. It serves its customers by offering a range of innovative products to individuals and group customers at more than 600 locations through its bank partners and company-owned offices. MetLife has more than 50,000 Financial Advisors, who help customers achieve peace of mind across the length and breadth of the country. MetLife, Inc., through its affiliates, reaches more than 70 million customers in the Americas, Asia Pacific and Europe. Affiliated companies, outside of India, include the number one life insurer in the United States (based on life insurance inforce), with over 140 years of experience and relationships with more than 90 of the top one hundred FORTUNE 500® companies. The MetLife companies offer life insurance, annuities, automobile and home insurance, retail banking and other financial services to individuals, as well as group insurance, reinsurance and retirement and savings products and services to corporations and other institutions. With a 140-year-old parentage, MetLife today is one of the fastest growing life insurance companies in the country. Positioned as a long term player, the company has developed a strong corporate governance model based on the core values of personal responsibility, people count, partnership, integrity and honesty, innovation and financial strength.

The last 8 years of its presence in India, have seen MetLife evolve into a strong brand, serving its customers through a diversified distribution approach. The company offers a range of innovative products ranging from individuals to group customers across the length and breadth of the country through its various bank


Page 30

partners and company-owned offices.

In line with its vision to be the most formidable player in the Indian life insurance industry, MetLife aims to grow faster than the industry. The strategy is to clearly establish itself as India’s trusted life insurance specialist, wherein the brand will stand for peace of mind, financial strength and fair dealings with the customer. They are also committed to creating a workplace that attracts, engages, develops committed professionals, and rewards excellent performance.

5.2 Company’s Values

Personal Responsibility "Coming into your own", performs as a Leader to be really effective and successful by acting and making decisions independently to get results. People Count It's all about People, MetLife's key resource. MetLife will succeed because we are winning from within. Partnership Functioning productively in teams towards a common purpose; realising the collective power of diverse work-groups. Financial Strength Operating with an intense dedication to managing monetary resources for strong business results. Integrity and Honesty Conducting all business endeavours with truth, sincerity and fairness. Innovation Continuously creating and introducing new and original ideas and ways of doing things.


Page 31

Celebrating 140 years, MetLife, Inc. is a leading provider of insurance and financial services with operations throughout the United States and the Latin America, Europe, and Asia Pacific regions. Through its domestic and international subsidiaries and affiliates, MetLife, Inc. reaches more than 70 million customers around the world and MetLife is the largest life insurer in the United States (based on life insurance inforce). The MetLife companies offer life insurance, annuities, auto and home insurance, retail banking and other financial services to individuals, as well as group insurance and retirement & savings products and services to corporations and other institutions.

5.3 Management Team Table: 5.1 Management Team Rajesh Relan Managing Director

MSVS Phanesh Appointed Actuary

Rajesh has twenty years experience in the

Sameer Bansal Director- Agency

Balachander Sekhar Director – Marketing

spent ten years in the Indian Life

Nitish Asthana DirectorBancassurance & Business Partnerships

Gaurav Sharma Director Customer Service and Operations

and growth, he became a part of this

KS Raghavan Chief Administrative Officer P. S. Sankaran Director – Compliance & Internal Controls

these

Joydeep Mukherji Chief Financial Officer KR Anil Kumar Director - Legal & Risk and Company Secretary Shilpa Vaid Deputy DirectorHuman Resources

financial services sector, of which he has

Insurance industry. Visualizing the scope

sunrise industry in 1999, much before it was opened to the private players. Over years,

he

has

contributed

significantly through his strategic vision to the development of the private life insurance industry in areas like regulatory &

policy

formulation,

product

development, policyholders’ protection and distribution models. He is widely recognized for the pivotal role he played

towards three different life insurance ventures in the country. In the first, he played a critical role as a key project team member that led to the successful formation of the JV. With the second life insurance company, a start-up, he was one amongst the first five employees instrumental in launching and growing its Indian operations. Finally, Comparative Analysis of ULIPs with Traditional Plans

Page 32

in his third stint he has been leading another life insurance company – MetLife, of which he is the Managing Director for India for the last three and a half years. Rajesh joined MetLife India in 2006 and has transformed the organization since then. With exceptional skills in business strategy & planning, he has laid the foundation for MetLife’s success in the Indian market.

5.4 Services offered by the MetLife companies: •

Life insurance

•

Annuities

•

Automobile and home insurance

•

Retail banking

•

Other financial services to individuals

•

Group insurance

•

Reinsurance

•

Retirement and savings products and services

5.5 Plans of MetLife Insurance Child Plan: Every parent would dream of fulfilling the child's need. Expenses are on the rise every day, thus ensuring a good future for the child in increasingly becoming difficult. The child insurance plans of Metlife secure the future of the child such that you do not have to think tomorrow. •

Met Bhavishya

•

Met Junior Endowment

•

Met Little Star

•

Met Junior Money Back


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•

Met Magic

Retirement Plan: New beginnings, new joys and the opportunity to explore the unfulfilled dreams of the past - these are the essential elements of a post retirement life. Financial independence is very important at this stage. The exhaustive retirement plans of Metlife guarantee a financially secure retirement. •

Met Growth

•

Met Advantage Plus

•

Met Pension-Par

Savings Plan: Everybody dreams. And dreams can take any shape - be it the wedding of your child, buying a house or a car and anything. The savings plans of MetLife help realize the dreams and secure the future. •

Met Sukh

•

Met Suvidha

•

Met Saral

•

Met 100

Protection Plan: The protection plans of Metlife Insurance relieve you from the burden of home loans, EMIs and similar responsibilities. •

Met Suraksha

•

Met Suraksha TROP

•

Met Mortgage Protector

•

Met Suraksha Plus


Page 34

Rural Plan: The rural plans of Metlife Insurance shield your loved ones against financial obligations and also assist you to save for tomorrow. The rates of premium are quite affordable. •

Met Vishwas

•

Met Suvidha-Rural

Investment Plan: The Unit-Linked Insurance Plans of Metlife guarantees that your wealth is enhanced. Offering protection and wealth optimization at the same time, they are customized to meet your requirements. •

Met Easy

•

Met Smart Gold

•

Met Smart Plus-Regular Pay

•

Met Smart Premier- Regular Pay

•

Met Smart Plus- Single Pay

•

Met Smart Premier- Single Pay

Health Plan: Get yourself a health insurance plan from Metlife to meet the contingencies during ill health or ill financial health consequently. The Met Health Care, an elementary health insurance policy has unique advantages associated for you and your family. Family

comprises

of

spouse

and

two

children.

Met Health Care is a long term health insurance plan from MetLife which covers the following: 1. Against Hospitalisation disbursements by offering you a Daily Cash benefit 2. Against 10 major vital illnesses by giving you a lump sum benefit.


Page 35

3. Against Total & Permanent Disability due to accident by allowing you a lump sum benefit.

Met Health Care Plan at a glance Table: 5.2 Met Health Care Plan Maximum/ Minimum 18 years-55 years (At first entry, for the Principal insured) 3 age of entry months-55 years (For Secondary Insured lives) Cover ceasing age

65 years

Maturity/Death Benefit

No Maturity/Death Benefit payable 1. 2. 3. 4. 5.

Benefits Offered

Daily Hospitalisation Cash Benefit Daily ICU Cash Benefit Recuperation Benefit Critical Illness Benefit Accidental Total & Permanent Disability benefit

Premium paying frequency

Yearly. Half-Yearly mode is available only if each of the persons insured select a daily cash benefit of Rs. 3000 or more.

Modal factor

Half-yearly -0.5131. Multiply the tabular premium by the modal factor to get to the figure as premium payable.

Monthly Income Plan: MetLife's Monthly Income Plan' ensures a monthly fixed income for you and your family.

Monthly Income Plan - plan at a glance Table: 5.3 Monthly Income Plan Min - 18 years Entry Age (Last Birthday) Max - 60 years Maximum Maturity Age

85 years

Minimum Monthly Income Rs. 2,000 p.m. Sum Assured (fixed)

180 times the Monthly Income

Premium Payment Term

5 years/10 years

Policy Term

20 years/25 years


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Chapter 6 Data Analysis and Interpretation Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with the goal of highlighting useful information, suggesting conclusions, and supporting decision making. Data is analysed using percentage technique.

Q. 1 Do you Make Investments? Table: 6.1 Number of People make Investments CATEGORY NO.OF PEOPLE

Percentage

YES

44

88

NO

6

12

Fig: 6.1 Number of People make Investments

Do you Make Investments? NO 12%

YES 88%

Interpretation: Majority of the persons are interested in making investments for many purposes like, appreciation of money, tax benefits etc.


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Q. 2 If yes, then to which sector you will give preference while investing at present? Table: 6.2 Preferred Investment Sector CATEGORY NO.OF Percentage Respondents Insurance Investment Plan Mutual Fund Stock Market Real Estate Bank Deposits Govt. Deposits Gold

8

18.18182

3

6.818182

2

4.54545455

0 0 19 43.1818182 12 27.2727273 0 0

Fig: 6.2 Preferred Investment Sector

Which sector you will give preference while investing at present? Gold 0%

Govt. Deposits 27%

Insurance Investment Plan 18%

Mutual Fund 7% Stock Market 5% Real Estate 0%

Bank Deposits 43%

Interpretation: Majority of the persons (About 70 %) are still believing in investing their money in banks and government deposits. Now people are becoming aware of various new investment options like Insurance, Mutual Funds etc.


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Q. 3 What are the reasons to make Investments? Table: 6.3 Reasons of Investments CATEGORY NO.OF PEOPLES % Tax Saving 15 34.09091 Capital 6 Appreciation 13.63636 Life Covers 6 13.63636 Return 9 20.45455 Secure Investment 8 18.18182 Fig: 6.3 Reasons of Investments

What are the reasons to make Investments?

Secure Investment 18%

Tax Saving 34%

Return 20% Life Covers 14%

Capital Appreciation 14%

Interpretation: About one third of Persons are investing their money as it is essential to save Income tax. Only one seventh persons are really invested their money to cover their life risk and this number is increasing day by day as more and more persons are becoming aware of the benefits of Insurance.

Q. 4 Are you satisfied with your Investments? Table: 6.4 Number of People satisfied with their Investments CATEGORY NO.OF PEOPLES Yes No

% 21 47.72727273 23 52.27272727


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Fig: 6.4 Number of People satisfied with their Investments

Are you satisfied with your Investments?

Yes 48%

No 52%

Interpretation: About fifty percent people are not satisfied with their investments either they are not getting that much return/appreciation which they expected or they want more transparency and benefits with their investments.

Q. 5 Have you ever taken a Life Insurance Policy from any Company? Table: 6.5 Number of People who have taken a LI Policy CATEGORY NO.OF PEOPLES % Yes No

17 27

38.63636364 61.36363636

Fig: 6.5 Number of People who have taken a LI Policy

Have you ever taken a Life Insurance Policy from any Company?

Yes 39% No 61%


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Interpretation: Majority of the people are not having any Insurance policy. It simply means that the Insurance companies have a vast scope in India and the Insurance sector can remain on boom for the next 10 – 15 years or so.

Q. 6 In which Sector do you prefer to invest your money? Table: 6.6 Preferred Sector of Investment CATEGORY NO.OF PEOPLES % Private Sector 15 34.0909091 Government 29 Sector 65.9090909

Fig: 6.6 Preferred Sector of Investment

In which Sector do you prefer to invest your money?

Private Sector 34% Government Sector 66%

Interpretation: Still majority of people believe in investing their money in Government sectors over the private sectors. The private Insurance companies should have to increase their credibility in the minds of the customers.


Page 41

Q. 7 Do you think services provided by private sector will be better than public sector? Table: 6.7 Services of Private sector CATEGORY NO.OF PEOPLES % Yes 29 No 21

58 42

Fig: 6.7 Services of Private sector

Do you think services provided by private sector will be better than public sector?

No 42% Yes 58%

Interpretation: Majority of persons believe that the services offered by private companies are better than the government sector. It is a good sign for private insurance companies. Q. 8 Are Private Life Insurance Companies reliable for Investment?

Table: 6.8 Reliability of Private LI Companies CATEGORY NO.OF PEOPLES %

Yes No

14 36

28 72

Fig: 6.8 Reliability of Private LI Companies

Are Private Life Insurance Companies reliable for Investment? Yes 28% No 72%


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Interpretation: About three fourth of the people believe that the private Life Insurance companies are not reliable for investment. The companies should increase their credibility and transparency in the minds of customers so as to attract more and more persons to invest in Life Insurance.

Q. 9 (a) Are you aware of Unit Linked Insurance Plans (ULIP)? Table: 6.9 Awareness about ULIPs CATEGORY NO.OF PEOPLES Yes No

%

31 19

62 38

Fig: 6.9 Awareness about ULIPs

Are you aware of ULIPs?

No 38% Yes 62%

Interpretation: About two third people are aware of ULIPs, this is a good sign for Insurance companies, but this number should keep on increasing.

(b) If Yes, Do you, FULLY AWARE, LITTLE AWARE, UNAWARE with The working of ULIP, Criteria for returns, Different Plans, Where your fund invested by insurer, Switching Option.


Page 43

Table: 6.10 Degree of Awareness of ULIPs CATEGORY FULLY AWARE The working of ULIP Criteria for returns, Different Plans Where your fund invested by insurer Switching Option

LITTLE AWARE

UNAWARE

11 22 13

27 19 22

12 9 15

24 20

22 22

4 8

Fig: 6.10 Degree of Awareness of ULIPs regarding working of ULIPs

Are you aware of the working of ULIP?

UNAWARE 24%

FULLY AWARE 22%

LITTLE AWARE 54%

Fig: 6.11 Degree of awareness of ULIPs regarding criteria for returns

Are you aware of Criteria for returns?

UNAWARE 18% FULLY AWARE 44% LITTLE AWARE 38%


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Fig: 6.12 Degree of awareness of ULIPs regarding different plans

Are you aware of Different Plans?

FULLY AWARE UNAWARE 26% 30% LITTLE AWARE 44%

Fig: 6.13 Degree of awareness of ULIPs regarding fund investment

Are you aware of Where your fund invested by insurer? UNAWARE 8%

LITTLE AWARE 44%

FULLY AWARE 48%

Fig: 6.14 Degree of awareness of ULIPs regarding Switching Option

Are you aware of Switching Option? UNAWARE 16%

LITTLE AWARE 44%

FULLY AWARE 40%


Page 45

Interpretation: Only few persons (less than one-fourth) are fully aware about the working of ULIPs. Less than fifty percent people are aware of about the criterion of returns in ULIPs. Companies should focus on spreading the awareness about the working of ULIPs, criterion of return, different plans and the switching options so that more and more persons are attracted towards ULIPs.

Q. 10 (a) Have you ever invested in ULIP plans? Table: 6.11 Number of People Invested in ULIPs CATEGORY NO.OF PEOPLES %

Yes No

35 15

70 30

Fig: 6.15 Number of People Invested in ULIPs

Have you ever invested in ULIP plans?

No 30% Yes 70%

Interpretation: Majority of the people who took participate in the survey have invested in ULIP plans. This helps us to know what actually customer wants.

(b) If yes, please specify Plan Name: Saving plan

Protection plan

Pension plan

Children’s plan


Page 46

Table: 6.12 Investment in Different Plans Category NO.OF PEOPLES % Saving plan Protection plan Pension plan Children’s plan

18 11 4 2

51.428571 31.428571 11.428571 5.7142857

Fig: 6.16 Investments in Different Plans

If yes, please specify Plan Name: Children’s plan 6%

Pension plan 11%

Protection plan 31%

Saving plan 52%

Interpretation: Majority of the people are interested in saving plans. Then about one third people are investing their money in protection plans. Company should focus on various saving plans and should offer variety of schemes to suit the needs of customers.

(c) What are the reasons for investment in ULIP? Life protection

Investment and Savings

Flexibility

Transparency

Liquidity

Tax planning

Table: 6.13 Reasons of Investment in ULIPs Category NO.OF PEOPLES % Life protection Investment and Savings Flexibility Transparency Liquidity Tax planning

11 31.42857 21 60 0 0 0 0 0 0 3 8.571429


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Fig: 6.17 Reasons of Investment in ULIPs

Reasons for investment in ULIP?

Tax planning 9% Transparency 0% Flexibility 0%

Liquidity 0%

Life protection 31% Investment and Savings 60%

Interpretation: Majority of the people invest their money for saving & investment purpose. About one third people invest their money for the purpose of Life protection. The companies should encourage people to invest their money to protect their life and invest in life insurance policies.

Q. 11 From which company you have got insured? Life Insurance Corporation of India Reliance Life Insurance HDFC Standard Life Insurance MetLife India Insurance SBI Life Table: 6.14 Name of Insurer Category Life Insurance Corporation of India Reliance Life Insurance HDFC Standard Life Insurance MetLife India Insurance SBI Life ICICI Prudential

NO.OF PEOPLES % 12 6 5 7 2 3

34.2857143 17.1428571 14.2857143 20 5.71428571 8.57142857


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Fig: 6.18 Name of Insurer

From which company you have got insured? ICICI Prudential 9% SBI Life 6%

MetLife India Insurance 20%

Life Insurance Corporation of India 34%

HDFC Standard Life Insurance 14%

Reliance Life Insurance 17%

Interpretation: Most of the people are still like to prefer LIC to invest their money as they consider it safe and reliable. Private insurance companies should focus on giving good services and attractive offers so as to increase their credibility and brand image.

Q. 12 How much return you are expecting from your ULIP? 10-15%

15-20%

20-30%

30 +

Table: 6.15 Expectations of Return from ULIPs CATEGORY NO.OF PEOPLES % 10-15% 15-20% 20-30% 30 +

11 31.42857 18 51.42857 5 14.28571 1 2.857143


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Fig: 6.19 Expectations of Return from ULIPs

How much return you are expecting from ULIP? 30 + 3% 20-30% 14%

10-15% 31%

15-20% 52%

Interpretation: Majority of the persons are expecting their return between 15 to 20 %. People wants more and more return from their investments, so companies should focus on those plans which gives high return to the customers.

Q. 13 Which of the following factors will influence you the most while purchasing the Insurance plan? Name and reputation of the company RETURN Tax Savings Risk covered Agent Table: 6.16 Factors influencing in purchasing the Insurance Plan CATEGORY NO.OF PEOPLES % Name and reputation of the co. RETURN Tax Savings Risk covered Agent

18 14 8

6 4

36 28 16 12 8


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Fig: 6.20 Factors influencing in purchasing the Insurance Plan

Factors will influence the most while purchasing the Insurance plan? Risk covered 12%

Agent 8% Name and reputation of the co. 36%

Tax Savings 16%

RETURN 28%

Interpretation: More persons are influenced by the name and reputation of the company than the return, so companies should increase their credibility among the customers.

Q. 14 Do you think ULIP is a risky investment? Very Risky Risky Less Risky Safe Very Safe Don’t Know Table: 6.17 Riskiness of ULIPs CATEGORY NO.OF PEOPLES Very Risky

Risky Less Risky Safe Very Safe Don’t Know

12 15 9

7 4 3

% 24 30 18 14 8 6


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Fig: 6.21 Riskiness of ULIPs

Do you think ULIP is a risky investment? Very Safe 8%

Don’t Know 6%

Very Risky 24%

Safe 14%

Less Risky 18%

Risky 30%

Interpretation: More than fifty percent people consider ULIP as a risky investment as their money is invested in stock market.

Q. 15 Do you have any plan to buy ULIP plans in near future? Table: 6.18 Number of People plans to buy ULIPs CATEGORY NO.OF PEOPLES % Yes 16 32 No 34 68 Fig: 6.22 Number of People plans to buy ULIPs

Do you have any plan to buy ULIP plans in near future?

Yes 32% No 68%


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Interpretation: Majority of the persons are not interested in buying ULIPs as they consider it a risky investment. The companies should increase the transparency about the working of ULIPs, criterion of return and other options so as to attract more and more customers.

Q. 16 If you are not taking any ULIP plans, please tell us the reasons why? We couldn’t afford. We don’t see any benefit with the system. We don’t want insurance. We don’t understand how ULIP works. We are not too much aware of ULIP plans.

Table: 6.19 Reasons of not purchasing ULIPs CATEGORY NO.OF % PEOPLES We couldn’t afford.

9

18

We don’t see any benefit with the system.

10

20

We don’t want insurance.

11

22

We don’t understand how ULIP works.

12

24

We are not too much aware of ULIP plans.

8

16


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Fig: 6.23 Reasons of not purchasing ULIPs

Reasons of not purchasing ULIPs

We are not too much aware of ULIP plans. 16%

We couldn’t afford. 18%

We don’t understand how ULIP works. 24%

We don’t see any benefit with the system. 20% We don’t want insurance. 22%

Interpretation: About fifty percent of persons who says “we don’t see any benefit”, and those who are not much aware of ULIP and with their working can be the potential customers for the life insurance companies. So, company should focus on these customers.

Q. 17 What steps do you suggested to the companies to make their ULIP plans more popular? Give more advertisements. Arrange more workshops. Arrange more seminars. Reduce charges. Create awareness through advisors.


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Table: 6.20 Suggestions to make ULIPs more popular CATEGORY NO.OF PEOPLES % 18 Give more advertisements. 36 8 Arrange more workshops. 16 Arrange more seminars. 7 14 11 Reduce charges. 22 Create awareness through advisors.

6

12

Fig: 6.24 Suggestions to make ULIPs more popular

What steps do you suggested to the companies to make their ULIP plans more popular?

Create awareness through advisors. 12% Reduce charges. 22%

Arrange more seminars. 14%

Give more advertisements. 36%

Arrange more workshops. 16%

Interpretation: From the mind of the customers, the insurance companies should focus on giving the advertisements, should reduce the charges and create more and more awareness among the customers through advisors, seminars, workshops.


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Q. 18 What is your source of information for taking a insurance plan? Agents Friends Family Own research Table: 6.21 Source of taking Insurance CATEGORY NO.OF PEOPLES % Agents Friends Family Own research

18 14 8

6

36 28 16 12

Fig: 6.25 Source of taking Insurance

Source of information for taking a insurance?

Own research 13% Agents 39%

Family 17%

Friends 31%

Interpretation: Most of the people purchase their policy by influencing from agents or friends. Companies should focus on increasing their base of large advisors so as to cover more and more people from different areas.


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Q. 19 According to you, Insurance policies are for? Necessity for protection security Imposition of a burden of expenses A compulsory tool for tax saving Good Investment Option Wastage of Money Table: 6.22 Views about Insurance Policy CATEGORY NO.OF % PEOPLES Necessity for protection security

18

36

Imposition of a burden of expenses

8

16

7

14

15

30

2

4

A compulsory tool for tax saving Good Investment Option Wastage of Money

Fig: 6.26 Views about Insurance Policy Wastage of Money 4%

Insurance policies are for?

Good Investment Option 30%

Necessity for protection security 36%

A compulsory tool for tax saving 14%


Imposition of a burden of expenses 16%

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Interpretation: About two third of the people think that insurance is a good investment option and it is a necessity for protection. About one-seventh percent people thinks that it is a compulsory tool for tax saving.

Q. 20 Are you aware of the charge FMC? Table: 6.23 Awareness of FMC CATEGORY NO.OF PEOPLES

%

Yes No

62 38

31 19

Fig: 6.27 Awareness of FMC

Are you aware of the charge FMC?

No 38% Yes 62%

Interpretation: More than one third of the people are not aware of the Fund Management Charges. There should be a transparency about the various charges among the customers.

Q. 21 Do you agree that Insurance products are susceptible to very low risk when compared to the other options for investment? Yes No


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Table: 6.24 Riskiness of Insurance Products % CATEGORY NO.OF PEOPLES Yes No

46 54

23 27

Fig: 6.28 Riskiness of Insurance Products

Do you agree that Insurance products are susceptible to very low risk investment?

Yes 46%

No 54%

Interpretation: Majority of the persons believe that the insurance products are susceptible to low risk as compared to the other investment options like stock markets, mutual funds etc.

Q. 22 Name three insurance companies that come to your mind: Table: 6.25 Name of Popular Companies Category NO.OF PEOPLES Life Insurance Corporation of India Reliance Life Insurance HDFC Standard Life Insurance MetLife India Insurance SBI Life ICICI Prudential

20 6 4 5 8 7

% 57.142857 17.142857 11.428571 14.285714 22.857143 20


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Fig: 6.29 Name of Popular Companies

Name three insurance companies that come to your mind:

ICICI Prudential 14% Life Insurance Corporation of India 40%

SBI Life 16%

MetLife India Insurance 10%

Reliance Life Insurance 12%

HDFC Standard Life Insurance 8%

Interpretation: LIC is still the very popular company in the minds of the customers; other insurance companies like SBI Life, ICICI Prudential, Reliance Life, and MetLife are also becoming popular these days.

Q. 23 With the different variety of schemes and unbelievable plans offered by MetLife India Insurance Company Ltd., Do you think MetLife India is one of the best? Yes No Table: 6.26 Views about MetLife Company CATEGORY NO.OF % PEOPLES Yes No

8 42

16 84


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Fig: 6.30 Views about MetLife Company

Do you think MetLife India is one of the best?

Yes 16%

No 84%

Interpretation: Only 16 % people think that the MetLife India is one of the best Insurance Company. The company should focus on increasing the more and more satisfied customers so as to increase the credibility and brand image among the customers.

SUMMARY People generally invest their money in government deposits and bank deposits, and it is being proved by the research work, as they consider it more reliable as compared to private companies though they agreed that the services offered by private companies are better. Major reason of their investment is to save tax, and they want higher returns on their money, yet 50 % people are not satisfied with their current investments, due to many reasons like, they are not getting as much return as they expected and they are not satisfied with the services and/or reliability of the investment company. ULIPs are slowly gaining acceptance due to attractive features they offer. ULIPs provide the flexibility in investment, transparency, liquidity and various fund options. But people are not fully aware of the various features and characteristics of Unit Linked Insurance Plan (ULIPs), and they prefer savings and protection plan rather than pension and child plan. Most people look for the company’s brand name/image and the amount of return they will get while investing in the Insurance company.


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Chapter 7 LIMITATIONS OF THE STUDY

1. TIME FACTOR: •

The time allotted for doing the project was a limiting factor.

2. LACK OF DATA DUE TO CONFIDENTIAL NATURE: •

It was difficult to collect all information as & when necessary for the purpose of the study.

3. LACK OF SUPPORT: •

It was difficult to do survey due to lack of support of people.

4. LIMITED AREA: •

The area of study is chosen as per the convenience and it is limited to Delhi region.

5. TECHNIQUE USED: •

Only Percentage method has been used in the study to analyse the responses given by respondents.


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Chapter 8 FINDINGS AND CONCLUSION 8.1 COMPARISION OF ULIPs WITH TRADITIONAL PLANS Unit Linked Insurance Plan:

ULIPs have gained high acceptance due to attractive features they offer. These include:

Flexibility o Flexibility to choose Sum Assured. o Flexibility to choose premium amount. o Option to change level of Premium /Sum Assured even after the plan has started. o Flexibility to change asset allocation by switching between funds

Transparency o Charges in the plan & net amount invested are known to the customer o Convenience of tracking one’s investment performance on a daily basis.

Liquidity o Option to withdraw money after few years (comfort required in case of exigency) o Low minimum tenure. o Partial / Systematic withdrawal allowed

Fund Options o A choice of funds (ranging from equity, debt, cash or a combination) o Option to choose your fund mix based on desired asset allocation

Traditional Plans : These are the oldest types of plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are:


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Steady Investment o Major chunk of investible funds are in debt instruments o Steady and almost assured returns over the long term

Features o Death benefit is Sum Assured + guaranteed & vested bonus o Helps in asset creation as they are for a long tenure o Premium to Sum Assured ratios are fixed for each plan and age. o Generally withdrawals are not allowed before maturity.

Table: 8.1 Comparison of ULIPs and Traditional Policy Point of difference

ULIP Market related (May be

Investment

stock market or debt market)

Traditional Policy IRDA ? Determined investments

Transparency in costs

Yes

No

Flexibility in payment

Yes

No

Assured Bonus

No

Yes

Assured Sum on survival

No

Yes

Yes

No

Option to increase investment/premium

ULIPs are better than traditional policies in following respects:

Until a couple of years ago, when ULIPs were a rare commodity, nobody knew how life insurance companies charged policyholders for expenses. And nobody seemed to want to know either, and then came the ULIPs with good intentions to make policyholders aware of how much they would pay as expenses. But that move backfired. Policyholders were taken aback by the high amount of fees that ULIPs charged.


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While the charge structure on ULIPs is something that is open to debate, the issue is that ULIPs alone cannot be isolated. Traditional policies too charge high administrative and management expenses. In ULIPs, the first year charges range from 20-70%, one does not know how much traditional policies charge.

This can have a bearing on returns as well. A ULIP may charge you upfront but thereafter, all the returns on the fund are yours while a traditional policy may charge less but share a smaller portion of returns with you.

So if you were substituting a traditional endowment with a ULIP, you would be better off with the latter since you would know your charges and your returns. Traditional policies are advisable where: •

The objective is only Risk cover and not savings, thus cost of insurance is minimum.

Unit Linked products are advisable where: •

The intention is to provide security with a purpose.

•

The purpose is to make the savings grow at a better rate seeking the best solution.

•

It is a market linked investment where the premium paid is invested in funds

•

Different options are available, like 100% Equity, Balanced, Debt, Liquid etc and according to the fund selected, the risks and returns vary.

•

The costs are upfront and are transparent, the investment made is known to the investor (As he is the one who decides where his money should be invested).

•

There is a greater flexibility in terms of premium payments ie. A premium holiday is possible.

•

You can also invest surplus money by way of top ups which will increase your investment in the fund and thereby provide a push to returns as well.

•

There is no assured Sum on survival, the higher of the Sum Assured or Fund Value is paid at the maturity or incase of death.


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8.2 Comparison of ULIP with other Investment Modules Table: 8.2 Comparison of ULIPs with Other Investment Modules OTHER INSTRU MENT

RATE OF RETURN

TIME PERIOD

RISK

MIN. INVEST MENT

NSC PPF ELSS

8% 8% Market return

6years 15years 3years

No No Risky

100 500

ULIP

Market return

5years

FD MUTU AL FUND

9.50% Market Return

5years Open Ended

Risky Modul e No High

STOCK

Variable

No time Very frame high

MAX INVEST MENT

TAX FREE RETURN

TAX BENE FIT

No limit 70000 500 No limit

No Yes Yes

Yes Yes Yes

500 No limit

Yes

Yes

10000 No limit 500 No limit

No Capital gain @10% for time less than 1year

Yes Only in ELSS Funds

Variable

Capital No gain @10% for time less than 1 year

No limit

8.3 CONCLUSION People generally invest their money in government deposits and bank deposits, and it is being proved by the research work, as they consider it more reliable as compared to private companies though they agreed that the services offered by private companies are better. Major reason of their investment is to save tax, and they want higher returns on their money, yet 50 % people are not satisfied with their current investments, due to many reasons like, they are not getting as much return as they expected and they are not satisfied with the services and/or reliability of the investment company.


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ULIPs are slowly gaining acceptance due to attractive features they offer. ULIPs provide the flexibility in investment, transparency, liquidity and various fund options. But people are not fully aware of the various features and characteristics of Unit Linked Insurance Plan (ULIPs), and they prefer savings and protection plan rather than pension and child plan. Most people look for the company’s brand name/image and the amount of return they will get while investing in the Insurance company. The company should emphasis on advertisements to promote their products; should increase the advisor’s commission and launch various attractive schemes so as to motivate them; currently MetLife offers services from around 600 locations across India, so the company should focus on opening up of new offices so as to make it more accessible. Currently most of the ULIP plans demands high premiums (min Rs. 40,000), they should launch some products with similar feature but with low initial premium. Administration charges should be reduced, currently it is up to 40% of premium, so as to compete with other investment avenues like Mutual Funds, NSS, etc. Market surveys should be conducted regularly to know about customer demands and changing needs; and should be regular training for the employees.


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Chapter 9 RECOMMENDATIONS

1. Emphasis on advertisement: Company should emphasis on insurance plan advertisement, because at present company’s main focus on recruiting financial advisors. 2. Increase in commission: Company should also change the commission structure of F.A., because in initial year commission is very high as compare to remaining year. So F.A. does not focus on remaining year and many policies lapsed. 3. Making MetLife more accessible: Here I mean that as 80% of the population of India is rural therefore MetLife must have their branches in important towns so it not only this will increase the awareness among people more over it will help the company to acquire local market and cater to their needs effectively. 4. There should be a product with similar features and low initial premium: A product like Met Gold Plus is suitable for all but the initial premium is on the higher side, therefore the company should derive a product with similar features but with low initial premium so that it is affordable to normal service class. 5. Administration charges should be low as in comparison with mutual funds, national saving certificate (N.S.C), etc.: The Company should lessen down the administration charges so that this product can have an edge over other investment modules like N.S.C, P.P.F etc. 6. Market surveys should be conducted regularly so that to know about customer demands and changing needs: The Company should know about the customers changing needs and demands by conducting market surveys which are helpful in innovating a product which suits the customer’s requirements. 7. There should be Training batches on weekends: It is advised that the company should have training batches for the already serving class on weekends, so that the willing candidates can opt it as a part time business opportunity. Comparative Analysis of ULIPs with Traditional Plans

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Bibliography

Books and Journals:

1. Sharma, D. D., Marketing Research, Principles, Applications and Cases: Sultan Chand & Sons, 2004 2. IC-33, Life Insurance, By Insurance Institute of India 3. MetLife Sales Kit, By MetLife India Insurance Co. Ltd.

Websites:

1. http://www.metlife.co.in/ 2. http://en.wikipedia.org/wiki/Insurance_in_India 3. http://business.mapsofindia.com/insurance/brief-history-of-insurancesector.html 4. http://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?pa ge=PageNo4&mid=2 5. http://www.marketsmonitor.com/Report/IM588_related.htm 6. www.irdaindia.org 7. http://www.metlife.co.in/MetLifeAboutUs_MetLifeIndia.aspx 8. http://www.indiainfoline.com/PersonalFinance/Insurance/ULIPPerformance.aspx 9. http://business.mapsofindia.com/insurance/metlife-insurance.html 10. http://www.financialexpress.com/news/investors-still-perplexed-aboutulips/607042/0


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ANNEXURE

Questionnaire

Dear Respondent, The questionnaire is designed to seek information for the execution of the research study. Confidentiality would be maintained. I shall be grateful if you kindly spare some of your valuable time to response to following:

General information: Respondent Name ______________________________

Gender:

Male

Female

Specific Information:

1. What is your Occupation?

Business

Agriculture

Employee

Professional

2. Do you make Investments?

Yes

No

3. If yes, then to which sector you will give preference while investing at present? Insurance Investment Plan

Bank Deposits

Mutual Fund

Govt. Deposits

Stock market

Gold

Real Estate

Others, Please Specify _ _ _ _ _ _ _ _ _


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4. What are the reasons to make Investments? Tax Saving

Return

Capital Appreciation

Secure investment

Life covers

Other

5. Are you satisfied with your Investment? Yes

No

6. Have you ever taken a Life Insurance Policy from any Company? Yes

No

7. In which sector do you prefer to invest your money? Private Sector

Government Sector

8. Do you think services provided by private sector will be better than public sector companies? Yes

No

9. Are private life insurance companies reliable for Investment? Yes

No

10. (a) Are you aware of Unit Linked Insurance Plans (ULIP)? Yes

(b) If Yes, are you

No

FULLY AWARE

LITTLE AWARE

UNAWARE

The working of ULIP Criteria for returns Different Plans Where your fund invested by insurer Switching Option


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11. (a) Have you ever invested in ULIP plans? Yes

No

(b) If yes, please specify Plan Name: Saving plan

Protection plan

Pension plan

Children’s plan

(c) What are the reasons for investment in ULIP? Life protection

Investment and Savings

Flexibility

Transparency

Liquidity

Tax planning

12. From which company you have got insured? Life Insurance Corporation of India Reliance Life Insurance HDFC Standard Life Insurance MetLife India Insurance SBI Life Any other, Please Specify _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

13. How much return you are expecting from your ULIP? 10-15%

15-20%

20-30%

30 +

14. Which of the following factors will influence you the most while purchasing the Insurance plan? Name and reputation of the company RETURN Tax Savings Risk covered Agent Others, Please specify _ _ _ _ _ _ _ _ _ _ _


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15. Do you think ULIP is a risky investment? Very Risky Risky Less Risky Safe Very Safe Don’t Know

16. Do you have any plan to buy ULIP plans in near future? Yes

No

17. If you are not taking any ULIP plans, please tell us the reasons why? We couldn’t afford. We don’t see any benefit with the system. We don’t want insurance. We don’t understand how ULIP works. We are not too much aware of ULIP plans.

18. What steps do you suggest to the companies to make their ULIP plans more popular?

Give more advertisements. Arrange more workshops. Arrange more seminars. Reduce charges. Create awareness through advisors. Others

………………………………………..

19. What is your source of information for taking an insurance plan? Agents Friends Family Own research


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20. According to you, Insurance policies are for? Necessity for protection security Imposition of a burden of expenses A compulsory tool for tax saving Good Investment Option Wastage of Money

21. Are you aware of the charge FMC? Yes No

22. Do you agree that Insurance products are susceptible to very low risk when compared to the other options for investment? Yes No Don’t know

23. Name three insurance companies that come to your mind: 1. _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2. _ _ _ _ _ _ _ _ _ _ _ _ _ _ 3. _ _ _ _ _ _ _ _ _ _ _ _ _ _

24. With the different variety of schemes and unbelievable plans offered by MetLife India Insurance Company Ltd., Do you think MetLife India is one of the best? Yes No Why? _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __________________________________________ __________________________________________


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Project-Comparative Analysis of ULIPs With Traditional Plans

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