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INDUSTRY PROFILE
Meaning Of Insurance:
Insurance is a form of risk-management which spreads risk of many people in exchange
for Small payments from each. Specifically, insurance transfers some type of risk
(accident, theft, natural disaster, illness, etc) from one person or group to a more
financially-sound entity in exchange for a payment (also known as a premium).
Premiums are often annual or monthly, but depending on the type of insurance they can
be at other intervals.
India insurance is a booming industry, with several national and international players
Competing to excel. With several reforms and policy regulations, the Indian insurance
sector has witnessed tremendous growth in the recent past.
Historical Perspective
Insurance in India has its history dating back till 1818 started by Anita Bhavsar, when
Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the
needs of European community. Pre-independent era in India saw discrimination among
the life of foreigners and Indians with higher premiums being charged for the latter. It
was only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian
insurance company covered Indian lives at normal rates. The Oriental Assurance
Company was established in 1880. The General insurance business in India, on the other
hand, can trace its roots to Triton Insurance Company Limited, the first general insurance
company established in the year 1850 In Calcutta by the British. Till the end of the
nineteenth century insurance business was almost entirely in the hands of overseas
companies.
Insurance regulation formally began in India with the passing of the Life Insurance
Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the
1920's and 1930's violated insurance business in India. By 1938 there were 176 insurance
companies. The first comprehensive legislation was introduced with the Insurance Act of
1938 that provided strict State Control over the insurance business. The insurance
business grew at a faster pace after independence. Indian companies strengthened their
hold on this business but despite the growth that was witnessed, insurance remained an
urban phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and
provident societies under one nationalized monopoly corporation and Life Insurance
Corporation (LIC) was born. Nationalization was justified on the grounds that it would
create the much needed funds for rapid industrialization. This was in conformity with the
Government's chosen path of State led planning and development. The non-life insurance
business continued to thrive with the private sector till 1972. Their operations were
restricted To organized trade and industry in large cities. The general insurance industry
was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped
into four companies- National Insurance Company, New India Assurance Company,
Oriental Insurance Company and United India Insurance Company.
KEY MILESTONES
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the
life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers along with provident societies were taken over by
the government and nationalized. LIC was formed by an Act of Parliament- LIC Act
1956- with a capital contribution of Rs. 5 crore from the Government of India
making them more appropriate and effective for the Indian market. The recommendations
of the committee put stress on offering operational autonomy to the insurance service
providers and also suggested forming an independent regulatory body.
The Insurance Regulatory and Development Authority Act of 1999 brought about several
crucial policy changes in the insurance sector of India. It led to the formation of the
Insurance Regulatory and Development Authority (IRDA) in 2000. The goals of the
IRDA are to safeguard the interests of insurance policyholders, as well as to initiate
different policy measures to help sustain growth in the Indian insurance sector.
LIC
48.1%
ICICI Prudential
13.7 %
Bajaj Allianz
10.3%
SBI Life
6.2%
4.1%
3.4%
Reliance Life
3.4%
2.4%
OM Kotak
1.9%
AVIVA
1.8%
Tata AIG
1.5%
Met Life
1.4%
CHAPTER 2
COMPANY PROFILE
HDFC Standard Life Insurance Company Ltd.
HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since
emerged as the largest residential mortgage finance institution in the country. The
Corporation has had a series of share issues raising its capital to Rs. 119 crores. The gross
premium income for the year ending March 31, 2007 stood at Rs. 2, 856 crores and new
business premium income at Rs. 1,624 crores. The company has covered over 8, 77,000
lives year ending March 31, 2007.
HDFC operates through almost 450 locations throughout the country with its corporate
head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE,
with service associates in Kuwait, Oman and Qatar.
HDFC is the largest Housing Company in India for the last 27 years.
The company was incorporated on 14th August 2000 under the name of HDFC Standard
Life Insurance Company Limited. Their ambition from the beginning was to be the first
private company to re-enter the life insurance market in India. On the 23rd of October
2000, this ambition was realized when HDFC Standard Life was the first life company to
be granted a certificate of registration.HDFC are the main shareholders in HDFC
Standard Life, with 81.4%, while Standard Life owns 18.6%. HDFC Standard Life
Insurance Company Ltd. is one of Indias leading private life insurance companies, which
offers a range of individual and group insurance solutions. It is a joint venture between
Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading
housing finance institution and one of the subsidiaries of Standard Life plc, leading
providers of financial services in the United Kingdom.
CORPORATE OFFICE
HDFC Standard Life Insurance Company Ltd.
Trade Star, 2nd Floor, A Wing,
Junction of Kondivita and
M. V. Road, Andheri-Kurla Road,
Andheri (East), Mumbai - 400 059.
Tel. No. : 022-6751 6666
Fax No. : 022-2822 2414
Email: response@hdfcinsurance.com
Website: www.hdfcinsurance.com
AUDITORS
Haribhakti & Co.
Chartered Accountants
Kalyaniwalla & Mistry
Chartered Accountants
BANKERS
HDFC Bank Ltd.
Union Bank of India
Indian Bank
The Saraswat Co-op. Bank Ltd.
Federal Bank
State Bank of India
State Bank of Travancore
State Bank of Indore
REGISTERED OFFICE
Ramon House, H. T. Parekh Marg,
169, Backbay Reclamation,
Church gate, Mumbai 400 020.
BOARD OF DIRECTORS
Mr. Deepak S. Parekh
Chairman
Directors
Sir Alexander M. Crombie
Mr. Keki M. Mistry
Ms. Marcia D. Campbell
Ms. Renu Sud Karnad
Mr. Norman K. Skeoch
Mr. Gautam R. Divan
Mr. Ranjan K. Pant
Mr. Ravi Narain
Mr. Gerald E. Grimstone
Alternate to Sir Alexander M. Crombie
Mr. Michael G. Connarty
Alternate to Mr. Norman K. Skeoch
SNAPSHOT-I
SNAPSHOT-II
Loan Approvals
(Up to Mar 2009)
Loan Disbursements
(Up to Dec. 2007)
Rs.669 billion
(US $ 15.20 bn)
2.5 million.
ABBREVIATIONS
1.
2.
3.
4.
5.
6.
GROUP COMPANIES
HDFC Bank: World Class Indian Bank- among the top private banks in India.
HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.
Intel net Global: BOP services for international customers
CIBIL: Credit information services bureau.
HDFC Chubb: Upcoming Private companies in the field of General Insurance.
STANDARD LIFE
Standard Life is Europes largest mutual life assurance company. Standard Life, which
has been in the life insurance business for the past 175 years is a modern company
surviving quite a few changes since selling its first policy in 1825. The company
expanded in the 19th century from kits original Edinburgh premises, opening offices in
other towns and acquitting other similar businesses.
Standard Life Currently has assets exceeding over 70 billion under its management and
has the distinction of being accorded AAA rating consequently for the six years by
Standard and Poor.
SNAPSHOT
JOINT VENTURE
HDFC Standard Life Insurance Company Limited was one of the first companies to be
granted license by the IRDA to operate in life insurance sector. Reach of the JV player is
highly rated and been conferred with many awards. HDFC is rated AAA by both
CRISIL and ICRA. Similarly, Standard Life is rated AAA both by Moodys and
Standard and Poors. These reflect the efficiency with which HDFC and Standard Life
manage their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. Respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 14 th August 2000.
HDFC is the majority stakeholder in the insurance JV with 81.4 %stale and Standard: of
as a staple pf 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture.
HDFC Standard Life Insurance Company Ltd. Is one of Indias leading Private Life
Insurance Companies., which offers a range of individual and group insurance solutions.
It is a joint venture between Housing Development Finance Corporation Limited (HDFC
Ltd.) Indias leading housing finance institution and the Standard Life Assurance
Company, a leading provider of financial services from the United Kingdom. Both the
promoters are well known for their ethical dealings and financial strength and are thus
committed to being a long-term player in the life insurance industry- all important factors
to consider when choosing your insurer.
BUSINESS GROWTH
Track Record so far
The gross premium income of HDFC, for the year ending March 31, 2007 stood at Rs. 2,
856 crores and new business premium income at Rs. 1,624 crores.
The company has covered over 8, 77,000 lives year ending March 31, 2007. Company
also declared our 5th consecutive bonus in as many years for our with profit
policyholders.
VISION STATEMENT
The most successful and admired life insurance company, which means that we
are the most trusted company, the easiest to deal with, offer the vest values for
money, and easiest the standards in the industry, In short, The most obvious
MISSION STATEMENT
To reach out an influence our target customer so as to provide them. World class
Competitive insurance solution .HDFCSLIC focuses long term strategy".
VALUES
Value that we observe while work
Integrity
Innovation
Customer centric
Team work
Protection Plans
HDFC Term Assurance Plan.
HDFC Loan Cover Term Assurance Plan.
HDFC Home Loan Protection Plan.
Children's Plans
HDFC Children's Plan.
HDFC Unit Linked Young Star II.
HDFC Unit Linked Young Star plus II.
HDFC Unit Linked Young Star Champion.
Retirement Plans
HDFC Personal Pension Plan.
HDFC Unit Linked Pension II.
HDFC Unit Linked Pension Maximiser II.
HDFC Immediate Annuity.
Rural Products
HDFC Garmin Bima Mitra Yojana.
HDFC Bima Bachat Yojana.
HDFC Development Insurance Plan.
Health Plans
HDFC Critical Care Plan.
HDFC Surgi Care Plan.
Group Plans
Group Term Insurance Plan.
Group Variable Term Insurance Plan.
Group Unit Linked Plan - Gratuity.
Group Unit Linked Plan Superannuation.
Group Unit Linked Plan - Leave Encashment.
INFRASTRUCTURAL FACILITIES:
All the branches of HDFC SLIC are well furnished with a good dcor which
induces a suitable work environment.
The branches are computerized and all transactions of insurance policies are done
with ease of operation.
There is an accessible intranet facility which caters to the needs of the employees
in communicating with peers, superiors and subordinates and to exchange
valuable information.
There is a database maintained of all the people involved in the insurance process
from the financial consultant to the customers for easy communication and reach.
The branches are located in the heart of every locality and thus a customer will
not find it difficult to visit the nearest branch.
Chairman
The design of an organization at structure is a critical task of the top management of an
organization. It is the selection of whole organization. It refers to organizational
arrangement and relationships. It prescribes formal relationship among various positions
and attitudes. Arrangement about reporting relationship, how an organization members
are all part of organization structure.
ICICI PRUDENTIAL
ICICI Prudential Life Insurance Company is a joint venture between ICICI bank, a
premier financial powerhouse and prudential plc. A leading international financial service
group headquartered in the United Kingdom. ICICI prudential was amongst the first
private sector insurance company to being operations in December 2000 after receiving
approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential
equity base 74% and 26% stake respectively. In the period April-December 2004, the
company earned Rs. Billion of new business premium for a total sum assured of over Rs
73.6 billion and wrote nearly 345000 policies.
The company has a network of over 50000 advisor; as well as 7 bank assurance tie-ups.
Today, ICICI Prudential has emerged as the No -1 Private Life insured in the country.
With a wide range of flexible products that meet the needs of the customer at every step
in life.
BAJAJ ALLIANZ:
A household name in India teams up with a global conglomerate Bajaj Auto Ltd, the
flagship company of the Rs. 8000 corers Bajaj group is the largest manufacturer of twowheelers and three-wheelers in Indian and one of the largest in the world.
A household name in India, Bajaj Auto has a strong brand image and locality
synonymous with quality and customer focus. With over 15000 employees, the company
is a Rs. 4000 crores auto giant. It is the largest 2/3 wheelers manufactured in India and
the 4th in the world .AAA rated by crises, Bajaj auto has in an operation for over 55 years.
It has joined hands with Allianz to provide the Indian consumer with a distance option in
term of life insurance products. As a promoter of Bajaj Allianz Life Insurance Co. Ltd.
Bajaj auto has following to offer-
A Strong brand-equity.
Investment returns:
Investment returns and business growth provided by HDFC is validated by Bajaj Capital
report. HDFC pacify the need of invertors up to healthy level and make the strong
relationship with them.
Financial Background and Experience:
HDFC existing in the market since 1977. It has a very handsome experience in the field
of finance because it completely involved in finance Sector only where as the others are
running in many other field also like Reliance (Petroleum, Textile, Telecom etc.).
Ethics and Values:
HDFC is an ethical and cultural organization which prevents the false selling and
prohibits the false commitment to the customer.
Sales Force:
Properly trend licensed and Educated People are the strength of the company. So that
they could give the best customer service. Huge branch network HDFC is having 450
branches in all over the country.
Online accessibility:
It makes the process faster and makes the customer to do transactions throughout the
world from internet which keep in touch with his investments.
AREA OF OPERATION
HDFC SLIC has been operating all over India 8 incredible years and still going strong, It
has literally made the mark with footprints over 600 cities & towns in India . The growth
engine is driven by more than 16,000 committed employees who take pride in working
for HDFC Standard Life, a distribution channel with over 2,00,000 customer centric
financial consultants and equally strong channel partners in private and public sector
banking.
Received 2008 CIO Bold 100 and CIO Security Awards in Sept, 2008.
Unit Linked Savings Plan Tops Mint Best TV Ads Survey in March, 2008.
Sar Utha Ke Jiyo Among Indias 60 Glorious Advertising Moments in Jan, 2008.
HDFC Standard Life has received the Diamond EDGE Award 2009 for its mobile
workforce portal - Consultant Corner. EDGE - Enterprises Driving Growth and
Excellence (using IT) is an initiative by the ,Network Computing magazine to
identify, recognize, and honor end-user companies in India that have
demonstrated the best use of technology to solve a business problem, improve
business competitiveness, and deliver quantifiable ROI to stakeholders.
Life insurance is a mechanism for pooling the resources by issuing policy to the
investors and investing funds in securities in accordance with objectives as disclosed in
offer document. Investments in securities are spread among a wide cross-section of
industries and sectors thus the risk is reduced. Diversification reduces the risk because
all stocks may not move in the same direction in the same proportion at same time.
Hence through diversification the insurance company earns return through their
investment and which is passed back to the investors. This is just like a LIFE CYCLE
which repeats in nature.
CHAPTER-3
MCKENSYS 7 S FRAME WORK
They're all interdependent, so if you fail to pay proper attention to one of them, this
may affect all others as well. On top of that, the relative importance of each factor may
vary over time.
STRATEGY:
It is the plan or course of action in allocating resources to achieve identified goals
over time.
Strategies Employed to achieve the target are as follows:
Telecalling.
Contacting the person directly (interview).
Collect references.
STRUCTURE:
The way people & work/ tasks are organized. For proper utilization of the
Structure the following steps can be followed in HDFC SLIC.
SYSTEMS:
All the processes & information flows that links the organization together.
Approval process.
Planning/budgeting system.
SHARED VALUES:
These are the core values of the company that are evidenced in the corporate
culture & the general work ethic. The values followed by HDFC SLIC are:
Integrity
Innovation
Customer centric
People Care One for all and all for one
Team work
Joy and Simplicity
STYLE:
The way the managers behave.
Sales officer is reporting to resident manager or sales manager in turn the
resident manger is reporting to regional manager in turn he /she reports to zonal
manger in turn he /she reports to general manager sales and marketing in turn
he /she reports to chief executive officer (CEO).
STAFF&SKILLS:
The employees & their general capabilities.
Human Resource Development at HDFC SLIC has been an integral part of the
Company since its inception. It has had a significant strategic role in the
Company's growth process and continues to do so. It is a function that has
contributed to the bottom line of the Company profiling system for its employees.
Proper HR management processes is used to develop new managers who can lead
the organization.
.
CHAPTER-4
SWOT ANALYSIS
STRENGTH
WEAKNESS
TEAM WORK.
BEST COST TO CUSTOMERS.
SKILLED MANPOWER.
HIGH QUALITY PRODUCTS OR
SERVICES.
APPROPROATE FINANCIAL
RESOURCES.
OPPURTUNITIES
A DEVELOPING MARKET.
THE FIRM FACING REPAID
GROWTH IN MARKETS.
SECOND MONOPOLY PLAYER IN
THE MARKET
A MARKET VACATED BY IN
INEFFECTIVE COMPETITOR.
THREATS
A LOCAL COMPETITORS IN
HOME MARKET.
PRICE
WARE
WITH
COMPETITORS.
TAXATION ON THE PRODUCT
AND SERVICE.
COMPETITORS HAVE SUPERIOR
ACCESS TO CHANNELS OF
DISTRIBUTION.
CHAPTER-5
HIGHLIGHTS OF FINANCIAL YEAR 2008-09
CHAPTER-6
LEARNING EXPERIENCE
The organizational study has given us a good corporate exposure & a great
learning experience. We were able to learn some of the theoretical aspects which
are applied in the day to day activities of the organization and those are as
follows:
Stress management.
Organization Behavior.
Investment alternatives.
Financial management.
We attended various discussions and meetings with the Channel development
manager (CDM) on behalf of the company.
We had been appointed as a FINANCIAL CONSULTANT (F.C).
We had given a target to appoint 5 people as financial consultants for which each
appointment I would earn RS 1300/- as commission.
We wrote I.R.D.A (insurance regulatory development authority) exam.
We learnt how to motivate the people and make use of the benefits of the
organization.
We have obtained all the information and explanations which, to the best of my
knowledge and belief were necessary for the purposes of my project and have
found them to be satisfactory.
CHAPTER-1
A STUDY ON UNIT LINK INSURANCE PLAN (ULIP)
AS AN INVESTMENT ALTERNATIVE
INTRODUCTION TO ULIP:
In India, ULIP insurance policies are on the top in the popularity chart because it offers
more Benefits than traditional life insurance plans. There are many benefits are available
such as higher returns on investment, partial withdrawal, flexibility to choose life cover,
wider fund options, top up facility, free switches, tax benefits, etc.
If you are looking for long term investment and better returns, ULIP is a right option to
achieve your goal. But, you may find difficulties while purchasing the ULIP, because
there are single and regular premium option. You have to choose the right option for you.
In single premium ULIP, you need to pay a single payment and you will enjoy the
benefits
throughout the policy term. In case of regular premium, you need to pay premium on
regular basis, it can be paid by annual, half annual, quarterly and monthly mode.
In terms of investment, both products offer similar options like equity, debt and liquid.
Under regular premium option you may ask for commitment to pay more. But, under
single premium product nobody will ask you to pay more as a matter of commitment.
In the initial years of ULIP, single premium product offer better returns than regular
premium product. But, its balance power shifts down latter. But this is not in effect, the
product is sold very aggressively due to IRDA norms. Regular premium ULIP products
are also good in various factors such as affordability, tax benefit and large return.
There are also ULIP charges to consider than single and regular premium. It is also
important to take an overview of different charges are under ULIP plans. It includes
premium allocation charge, risk cover charges, policy administration charges, fund
management charges, service tax charge, miscellaneous charge, etc.
At the end, ULIP is a good mixture of life cover and investment. But don't buy it for
investment purpose only, there are another good options available for the investment.
Unit
Linked insurance plan (ULIP) is a life insurance solution that provides the client with the
benefits of protection and flexibility in investment.
WHAT IS ULIP?
ULIP stands for Unit Linked Insurance Plans. As we know that insurance is for protecting
our life from the any uncertain events like death or accident. The purpose of the normal
insurance plan is just protecting the life but not ensuring any savings for the future. Many
people wanted plan which gives protection also gives the returns for their investment. So,
insurance companies come up with the ULIP plan where the premium about is invested in
the share market and returns better income on the maturity period.
Unit-linked insurance plans, ULIPs, are distinct from the more familiar with profits
policies sold for decades by the Life Insurance Corporation. With profits policies are
called so because investment gains (profits) are distributed to policyholders in the form of
a bonus announced every year. ULIPs also serve the same function of providing
insurance protection against death and provision of long-term savings, but they are
structured differently. In with profits policies, the insurance company credits the
premium to a common pool called the life fund, after setting aside funds for the risk
premium on life insurance and management expenses.
Every year, the insurer calculates how much has to be paid to settle death and maturity
claims. The surplus in the life fund left after meeting these liabilities is credited to
policyholders accounts in the form of a bonus. In a ULIP too, the insurer deducts charges
towards life insurance (mortality charges), administration charges and fund management
charges. The rest of the premium is used to invest in a fund that invests money in stocks
or
bonds. The policyholders share in the fund is represented by the number of units.
The value of the unit is determined by the total value of all the investments made by the
fund divided by the number of units. If the insurance company offers a range of funds,
the insured can direct the company to invest in the fund of his choice. Insurers usually
offer three choices an equity (growth) fund, balanced fund and a fund which invests in
bonds.
In both with profits policies as well as unit-linked policies, a large part of the first year
premium goes towards paying the agents commissions.
Traditional with profits policies to invest in the market and generate the same returns
prevailing in the market. But here the insurance company evens out returns to ensure that
policyholders do not lose money in a bad year. In that sense they are safer. ULIPs also
offer flexibility. For instance, a policyholder can ask the insurance company to liquidate
units in his account to meet the mortality charges if he is unable to pay any premium
installment. This eats into his savings, but ensures that the policy will continue to cover
his
life.
5. Rider charges
Rider charges are similar in nature to the mortality charges as they are levied to pay for
the
other protection benefits that the policy holder has chosen for- like the critical illness
benefit Or the accident benefit, etc.
6. Surrender Charges
When the policy holder decides to surrender the policy or partially withdraw some of the
units for cash, a surrender charge may apply. Surrender charges are used to cover initial
expenses that have been incurred by the company but not yet recovered from the
policyholder yet.
7. Bid offer Charges
In ULIP specifically certain insurers might create a difference in the price at which they
sell the unit and the price at which they buy the units. Investors contribution are used to
buy units in the investment fund at the offer price and are sold when benefits are required
at the bid price. The difference between the offer and bid prices Is known as the bidoffer spread", this is used to cover expenses when setting up the policy.
8. Transactional specific Charges
These charges are levied when the client does some specific transaction like changing
funds, Topping up the investment component or withdrawals.
markets, but also independent and unbiased. Ask for references of clients he has serviced
earlier and Cross-check his service standards. When your agent recommends a ULIP
from a given company, put forth some product-related questions to test him and also ask
him why the products from other insurers should not be considered.
Insurance advice at all times must be unbiased and independent; also your agent
must be willing to inform you about the pros and cons of buying a particular plan. His job
should not be restricted to doing paper work like filling forms and delivering receipts;
instead he should keep track of your plan and offer you advice on a regular basis.
In structure, yes; in objective, no. Because of the high first-year charges, mutual funds are
a better option if you have a five-year horizon. But if you have a horizon of 10 years or
more, then ULIPs have an edge. To explain this further a ULIP has high first-year charges
towards acquisition (including agents commissions).
As a result, they find it difficult to outperform mutual funds in the first five years. But in
the long-term, ULIP managers have several advantages over mutual fund managers.
Since policyholder premiums come at regular intervals, investments can be planned out
more evenly. Mutual fund managers cannot take a similar long-term view because they
have bulk investors who can move money in and out of schemes at short notice.
Insurers love ULIPs for several reasons. Most important of all, insurers can sell these
policies with less capital of their own than what would be required if they sold traditional
policies. In traditional with profits policies, the insurance company bears the investment
risk to the extent of the assured amount. In ULIPs, the policyholder bears most of the
investment risk. Since ULIPs are devised to mobilize savings, they give insurance
companies an opportunity to get a large chunk of the asset management business, which
has been traditionally dominated by mutual funds.
ADVANTAGE
1. The accretion to the fund invested can be checked on daily basis unlike the traditional
Policies.
2. There is lot more flexibility like partial withdrawal, switching, redirection, early
withdrawal, Sum Assured reduction, top up contribution, etc.
3. Charges are transparent in nature, with the latest AML guidelines insisting on common
nomenclature of charges for all insurance companies.
4. The customer can time the market by exercising switch options and make
the most when markets are zooming or choose to be conservative when
markets are falling. Its thus win-win situation
5. He gets a life cover at a nominal cost unlike mutual funds,
6. Almost all companies provide riders like accidental death and
disability/dismemberment
riders, critical illness rider, hospital cash benefit rider, income loss rider, etc
7. Stages in one life like education of children, marriage, and retirement needs
can be soundly planned by the help of ULIPs.
8. Tax advantages are also offered by the ULIPs.
DISADVANTAGES
1. Investors find it difficult to understand the nuances of capital market and
therefore go by the herd mentality. i.e., they invest because their friends and
family is investing without understanding how ULIPS are designed.
2. ULIPS are attractive for risk taking people and less attractive for risk adverse people.
3. Some consider taking term insurance and a mutual fund as a combination to
This option of modifying premium payments at ones convenience clearly give ULIP an
edge over Mutual Funds.
2. The cost factor for altering Asset Allocation
In Mutual Funds, shifting the corpus into a debt from the same fund house will involve an
exit load and/or entry load. On the other hand, in a ULIP, the option to invest across asset
classes as per your convenience is very cost-effective Most insurance companies allow
shifting the investments across various plans/asset classes either at a nominal or no cost.
This can prove to be very useful. For example, in a bull market when the ULIP investors
equity component has appreciated, he can book profits by simply transferring the
requisite amount to a debt oriented plan.
3. Tax Benefits
ULIPs qualify for tax benefits under Section 80C of the Income Tax Act. This holds
good
for any kind of plan chosen by the investor. In Mutual Funds, only investments in taxsaving funds (also referred to as equity-linked savings schemes) are eligible for Section
80C benefits.
The objective of this plan is not ensuring capital protection by investing in very
Low risk investments like the cash and call money markets. However, the returns
generated may also be on the lower side due to the investment pattern. At inception,
investments up to 20% can be allocated to this fund.
FUND TYPE
Maximiser
Balancer
Protector
Preserver
POTENTIAL
RISK /REWARD
ASSET MIX
Equity& Related securities:
Max 100%
Debt, Money market & Cash:
Max 25%
High
Moderate
Debt Instruments,
Money market & Cash: Max
100%:
Low
Capital
preservation
values (stock valuations) are relatively low. So if you are opting for a plan that
invests primarily in equity, the buzzing market could lead to windfall returns.
However, should the buzz die down, investors could be left stung.
If one invests in a unit-linked pension plan early on, say when one is 25, one
can afford to take the risk associated with equities, at least in the plan's initial
stages. However, as one approaches retirement the quantum of returns should
be subordinated to capital preservation. At this stage, investing in a plan that
has an equity tilt may not be a good idea.
Considering that unit-linked plans are relatively new launches, their short
history does not permit an assessment of how they will perform in different
phases of the stock market. Even if one views insurance as a long-term
commitment, investments based on performance over such a short time span
may not be appropriate.
ULIPs offer variety than traditional life insurance plans. So there are multiple
options at the individual's disposal. ULIPs generally come in three broad variants
Aggressive ULIPs (which invest 80%-100% in equities, balance in debt)
Balanced ULIPs (invest around 40%-60% in equities)
being advocated by the mutual fund industry. With an SIP, individuals invest their monies
regularly over time intervals of a month/quarter and don't have to worry about `timing'
the
stock markets. These are not benefits peculiar to mutual funds. Not many realize that
ULIPs also tend to do the same, albeit on a quarterly/half-yearly basis. As a matter of
fact,
even the annual premium in a ULIP works on the rupee cost-averaging principle.
Once you have analyzed your needs as per above classification, you need to
then ascertain important factors such as type of cover, insurance amount as
per one's income, life stage and dependents. It is difficult to arrive at all these
Figures yourself. Our financial consultants can help you with all analysis to offer
a customized solution by doing a thorough need analysis. So contact financial
consultants to help you choose the right plan for you. Your insurance need will
change as your life does, from starting to work to enjoying your golden years
and all the stages in between. Each one of these stages may pose a different
insurance need/cover for you. In this section, we have drawn up the basic life
stages and help you analyze various insurance needs accordingly.
STAGE 1
Young and SingleAn important Stage where one lays down the foundation of a successful life ahead. Take
advantage of the time and power of compounding to ensure that you build up your
dreams. Start saving early;
Youre Needs 1 Save for a home and wedding.
2 Tax Planning.
3 Save for Golden years.
STAGE 2
Just Married - Marriage brings about a significant change. New dreams and new
opportunities also bring in additional responsibilities. While both of you look forward to
a happy and secure life, it is equally important to ensure that eventualities don't come in
the way of shaping your
dreams.
Youre Needs 1 Planning for home/securing your home loan liability
2 Save for vacation
3 Save for your first child
STAGE 3
Proud Parents - Once you have children, your need for life insurance is even more. You
need to protect your family from an untoward incident. Ensure your protection umbrella
takes into
Account the future cost of securing your child's dream. You will want life to go on for
your loved ones, and having enough life insurance is a way to help ensure that.
Your needs 1 Provide for children's education.
2 Safeguarding family against loan liabilities.
3 Savings for post-retirement.
STAGE 4
Planning for Retirement - While you are busy climbing the ladder of success today, it is
important for you to take time and plan for your life after retirement. Having an early
start for retirement planning can make a significant difference to your savings. Think
about your golden years even before you have reached them. The Key is to think ahead
and plan well using your time and money.
Your needs 1 Provide for regular income post retirement.
2 Provide for regular income post retirement.
3 Lead a secure, independent and comfortable life style in your retirement year.
POINTS OF PARITY
FUNDS AVAILABLE WITH ULIP PLANS
Generally all life insurance companies have three types of fund which are Equity fund,
Debt fund and Balance fund. These funds have different risk profile. Equity fund has high
risk but it gives high return, Debt fund has low risk so it gives low return and balanced
fund is combination of both Equity and Debt fund so risk is medium and return is also
low.
experience do they have? Are there adequate controls? Importantly, look at how easily
you can access information about your fund's performance when you need it -- are their
daily NAVs? Is the portfolio disclosed regularly?
FEATURES:
Most ULIPs are rich in features such as allowing one to top-up or switch between funds,
increase or decrease the protection level, or premium holidays. Carefully understand the
conditions and charges associated with each of these. For instance, is there
A minimum amount that must be switched? Is there a charge on the same? Must you go
through medical underwriting if you want to increase the sum assured?
COMPANY:
Last but not least, insure with a brand you can trust to honor its commitment and service
you according to your requirements.
First and foremost, investors need to understand that a ULIP is a bundled product of their
investments and their insurance proceeds. Since privatization in 2000 and the
introduction of ULIPs as a life insurance product category, the overall insurance
penetration in the country has grown from around 2% to 4%. Today, more than 70 per
cent of the new business premium for life insurers comes from Ulips.
All Ulips have several funds in which your money can be put to work, much like a
mutual
fund. Assuming that you choose the growth or the equity plan, ask for the NAV
performance for the last two years at least. Choose three with the highest performance
track record vis-a-vis the benchmark. Now choose the best performing policy in terms of
returns with the lowest cost.
Here's a 5-step investment strategy that will guide investors in the selection process and
enable them to choose the right unit-linked insurance plans (ULIPs).
But before we get there, let's understand what ULIPs are all about?
For the generation of insurance seekers who thrived on insurance policies with assured
returns issued by a single public sector enterprise, unit-linked insurance plans are a
revelation.
Traditionally insurance products have been associated with attractive returns coupled
with tax benefits. The returns part was often so compelling that insurance products
competed with investment products for a place in the investor's portfolio. Perhaps
insurance policies then were symbolic of the times when high interest rates and the
absence of a rational risk-return trade-off were the norms.
The subsequent softening of interest rates introduced a degree a much-needed rationality
to insurance products like endowment plans; attractive returns at low risk became a thing
of the past. The same period also coincided with an upturn in equity markets and the
emergence of a new breed of market-linked insurance products like ULIPs.
Unit linked insurance plan (ULIP) of HDFC standard life to know the investment pattern
in insurance market. Because there are lots of insurance companies offering a number of
insurance policies with different schemes and benefits these policies have to frame
considering interest and preferences of the different kinds of people. The insurance
companies has to know which type of the policies can satisfy the needs and preferences
of the different people in the society, so that the investor can invest his/ her savings in
those policies which are most suitable & beneficial.
To study the growth pattern and reasons for growth of INSURANCE (ULIP)
market in India.
Type of Study:
The study at HDFC SLIC is a combination of analytical and practical study. It is based on
data collected from records of the company and is administered to various departmental
heads connected with Fund Management.
Types of Data:
Primary Data:
This data was collected from discussions and interactions with our respective
mentor by:
Observation method.
Interviewing method.
Through questionnaires.
2. Secondary Data:
Secondary data means data that are already available that is
they refer to the data which have already been collected and
analyzed by someone else. The sources of secondary data can be
given as under.
1: PLANNING OF THE SURVEY:Preplanning is sine-guenon for any kind of survey. Their must be some preliminary
Preparation. first and foremost we decided the topics to works on and then prepared some
question related to the topic considering every possible point of view .finally, we framed
the questionnaire and we used simple words and easy sentences to be fairly
understood.
2:-OBJECTIVE OF THE SURVEY:The objective of any survey is to study the opinion of the respondent about the chosen
items. The opinions are drawn in the form of answer given to the set of question in the
questionnaire.
The topic of the present survey is
THE STUDY ON ULIP AS AN INVESTMENT ALTERNATIVE
LIMITATIONS OF STUDY:
1. Lack of financial assistance caused the study to be limited over a confined area.
2. Lack of awareness among people about insurance as an investment product remained
the cause for not getting proper responses from some of the people.
3. As the Unit Linked plans are market dependent and have certain amount of risk
associated with them, people do not easily trust them.
4. Aggressive sales strategy of Public insurance players may cause inconvenience
to some people. Thus they do not furnish correct information in the
Questionnaire filled by them.
5. The project was constrained by time limit of two months.
6. Mindset of people may vary depending upon their age, gender, income etc.
7. Getting appointment from the concern person was very difficult.
8. Respondents were very busy in their schedule. So it was very less time taken in every
Questionnaire response by them.
9. The sample size is restricted within Bangalore. So we cannot generalize the result of
the
universe.
10. The information revealed by the respondents may be biased. Some of the respondents
were not willing to disclose certain facts. This may have affected the accuracy of the
data.
CHAPTER-2
ANALYSIS AND INTERPRETATION
2.1 Age group of surveyed respondents
Table: 1
AGE GROUP
NO OF RESPONDENTS
PERCENTAGE
18-25 Years
26-35 Years
36-49 Years
Above 50 years
Total
26
10
10
4
50
52%
20%
20%
8%
100%
INTERPRETATION:
From the chart above we find that 26 of the respondents fall in the age group
of 18 25 years, 10 fall in the age group of 26 35 years, 10 fall in the
age group of 36 49 years and 4 fall in age group of above 50 years.
Therefore most of the respondents are relatively young (below 30 years of
age). These individuals could be induced to purchase insurance plans on the
basis of its tax saving nature and as an investment opportunity with high returns.
NO OF RESPONDENTS
STUDENT
10
HOUSE WIFE
WORKING PROFESSIONAL
14
BUSS/SELF-EMPLOYED
GOVT.EMPLOYEE
10
INTERPRETATION:
Above chart shows that the 28% respondents are working professional can put their
money as investment and tax savings, 16% are house wife will invest their money for the
family responsibility, 20% students work as financial consultants and invest their funds
for building there career, 20% are government employees who plan their investments as
pension schemes and finally 16% are business and self employed who are in least who
ultimately look for high returns.
40
NO
10
INTERPRETATION:
This graph shows that out of total 50 respondents only 40 or 80% respondents
Know ULIPs. Rest all dont know about ULIPs so there is a very big scope for life
insurance companies to cover these people. So in future business of life insurance will
grow further.
2.4 PREMIUM
INSURANCE
(P.A)
PAID
BY
INDIVIDUALS
TABEL: 4
PREMIUM PAID (RS)
NO OF RESPONDENTS
Rs. 5000-Rs.15000
24
Rs.15001-Rs.50000
12
FOR
LIFE
Rs.50001-Rs.80000
Rs.80001-Rs.100000
INTERPRETATION:
From the chart above we find that, 48% of the respondents surveyed pay an
Annual premium less than Rs. 15000 towards life insurance. 24% of them pay an annual
premium less than Rs. 50000 and 8% pay less than Rs. 80000. Hence we can safely say
that HDFC SLIC would be able to capture the market better if it introduced
products/plans where the minimum premium starts at Rs. 5000 per annum. Only 8% of
the respondents pay more than Rs. 100000 as premium and most products sold by HDFC
SLIC have Rs.12000 as the minimum annual premium amount. They should introduce
more products like Easy Life Plus and Safe Guard where the minimum premium is
Rs.6000 p.a. and Rs. 12000 p.a. respectively. This would definitely increase their market
share as more Individuals would be able to afford the policies/plans offered.
TYPE OF PLAN
NO OF RESPONDENTS
Life insurance
10
10
Total
50
INTERPRETATION:
From the chart given above we can clearly see that 10 or 20 % of the respondents
hold life insurance plans and 24 or 48% of the respondents hold life insurance cum
investments plans. If the policy holder dies during the policy term the nominee gets the
death benefit that is, sum assured and accumulated bonus. On survival the policy holder
receives the survival benefit with a bonus, 6 or 12% hold pensions plans so that they can
led the life after retirement and finally 10 or 20% of respondents hold tax savings plans
NO OF RESPONDENTS
< Rs.6000
Rs.6001-Rs.10000
14
Rs.10001-Rs.25000
14
Rs.25001-Rs.50000
Rs.50000-Rs.100000
INTERPRETATION:
From the graph above, we can clearly see that 16% of the respondents would
Be willing to spend < Rs. 6001 for life insurance. 28 % would be willing to spend
between Rs. 6001 Rs. 10000 per annum. Only 28% would be willing to spend
Rs.10001- Rs. 25000 p.a premium. We could say that the maximum premium payable by
most consumers is less than Rs. 25000 p.a. HDFC SLIC is facing with a large amount of
competition. There are 18 insurance companies in India inclusive of LIC. Hence to
capture a larger part of the market the company could introduce more reasonable plans
with lesser premium payable per annum.
NO OF RESPONDENTS
3-5 YEARS
22
10-15 YEARS
10
16-20 YEARS
21-30 YEARS
INTERPRETATION:
From the chart given above it can be seen that 22 or 44% of the respondents prefer a
PARAMETER
NO OF RESPONDENTS
ADVERTISEMENTS
HIGH RETURN
28
FAMILY RESPONSIBILITY
TOTAL
50
INTERPRETATION:
From the chart above it can be seen that 12% of the respondents purchase life
insurance to secure their families, 56% take life insurance to get high returns,
16% purchase insurance on the advice of their friends and 16% purchase
insurance because of the influence of advertisements. The main purpose of insurance is to
cover the financial or economic loss. But now days this trend is changing. Along with
protection (life cover), a savings With the introduction of the new unit linked plans in the
market is playing major role.
TYPE OF COMPANY
NO OF RESPONDENTS
GOVT.OWNED
16
PUBLIC LTD CO
10
PRIVATE CO
16
FOREIGN CO
INTERPRETATION:
From the graph above we find that 32% of the respondents preferred to purchase
insurance from a government owned company and private company, 20% of the
respondents preferred to purchase insurance from a public limited company, and only
16% of the respondents preferred a foreign based company. Heavy advertising through
television, newspapers, magazines and radio is required.
NO OF RESPONDENTS
LESS THAN 5%
10%-20%
24
21%-30%
12
31%-40%
TABEL: 10
INTERPRETATION:
From the chart above it can clearly been seen that 8% of the respondents would like < 5%
returns, 48% would like returns between 10 20% and 24% would like returns of 21
30% on their investments. Therefore the average return on investment should be at least
10 30 %. Most consumers are willing to adapt to some amount of risk but still want
some guaranteed returns. Therefore the bulk of investment should be made in the
balanced fund with 50% debt and 50% equity. The returns on the Secure Fund are
guaranteed as these involve investment in government securities and the debt market. But
the returns on these instruments are low (8 10%). If the company invests in shares,
returns are higher (39%) but correspondingly risk Borne by the policy holder is also
higher. Therefore a good combination of the two instruments is often a wise choice.
CHAPTER-3
FINDINGS
There is a great future of the life insurance sector in India as 80% of the Indian
population is still without life cover and people are just now coming in response
to the awareness campaigns being carried out by almost all the insurance
companies.
We have found out that age plays a major role in deciding the investment patterns
of people as generally the younger class of people tend to take more risk and
invest in the older class of people.
Life insurance corporation (LIC) of India is still the undisputed market leader as
32% of the respondent surveyed owned a policy in it and it has also got a
tremendous rating of 3 out of 5 in the survey conducted.
All the products of HDFC SLIC are really very good and have an edge over most
of the products of other major life insurance companies as the plans offered by the
company are very flexible.
ULIP has its own brand equity in the insurance sector because most of the people
invest in Ulips for the tax and savings purpose.
Private companies have a great scope in insurance market cause majority of the
people like their savings to invest in private sector and as in the survey nearly
40% have invested in private owned companies.
HDFC SLIC have about 15-20 ULIPS plans staring from children plan to
retirement and pensions plans which has a wider scope for the investor to invest
their money according to their needs
RECOMMENDATIONS:
Bring out ULIPS policies with small premiums payable for short periods of time
Rs. 5000 Rs. 10000 per annum for 10 years.
Attract the youth of India with higher returns on investment as returns are the
HDFC SLIC could tap the rural markets with cheaper products and smaller policy
terms. There are individuals who are willing to pay small amounts as premium but
the plans do not accept premiums below a certain amount. It was usually found
that a large number of males were insured compared to females. Individuals
below the age of 30 (mostly male) were interested in investment plans. This was a
general conclusion drawn during prospecting clients.
HDFC Standard Life insurance should establish their Branches in Rural areas
where they can capture a good market.
The company faces a large amount of competition. To sustain itself it must
promote its products through advertising and improve its selling techniques.
Consumers must be aware of the new plans available at HDFC SLIC. The
medium of advertising used could be television since it is the most effective tool
to promote their products.
The edge of the ULIPs over the products like mutual funds and investment in
equities should be appropriately promoted and should be made known to the
people.
Customer should be informed beforehand about the fluctuating returns from the
market.
HDFC SLIC should introduce other additional ULIP products which give high
return, tax saving, accident benefits etc.
CONCULSIONS
There are still large number of people who do not invest their savings and keep
them idle.
Around 80% of the people consider ULIPs as a good area for investing their
funds.
Even being a late entrant in highly competitive insurance market HDFC SLIC is
well aware among the customers.
Tax planning is the major objective for the purchase of ULIPs followed by
Investment and Child education/pension plans.
In India people prefer to invest their funds for long terms especially for period
above 5 years.
The survey has shown that customers are quite concerned about their funds and
thus take financial consultants (F.C) advice before making investment.
Indian investors are conservative and invest in FDs and traditional plans.
There are majority of investors who are switching towards Mutual Funds and
ULIPs.
Safety returns and tax saving ability of a ULIP influence the decision making
ability of the customers.
CHAPTER-4
BIBILIOGRAPHY & REFERENCES
BOOKS REFERRED:
1. Kothari, C.R., Quantitative Techniques, 2nd edition, New Delhi, Vikas
Publishing House Pvt. Ltd. 1984.
2. Khan, M.Y., Financial services, 3rd edition, New Delhi, TATA McGraw Hill
Publishing Company Ltd., 2004.
3. Saunders, Anthony & Cornett, Millon, Marcia, Financial Markets and
Institutions-A Modern Perspective, 2nd edition (International edition), New York,
Mc Graw Hill/Irwin an imprint of the Mc Graw Hill Companies, Inc., 2003.
4. Peraswamy, P., Principles and Practices of Insurance, 1st edition,
Himalaya Publishing house 2003.
INTERNET SITES:
1. www.moneycontrol.com
2. www.indiacore.com
3. www.personalfn.com
4. www.myiris.com
5. www.thehindu.com
6. www.hdfcinsurance.com
7. www.icici.com
8. www.Bajajallianzlife.com
9. www.tata-aig-life.com
10. www.sbi-insurance.com
11. www.google.com
13. www.scribd.com
14. www.management pardise.com