A comparative study of ulip plans of reliance life insurance with mutual funds

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A comparative study of ulip plans of reliance life insurance with mutual funds

  1. 1. Projectsformba.blogspot.com SUMMER TRANING PROJECT A COMPARATIVE STUDY OF ULIP PLANS OF RELIANCE LIFE INSURANCE WITH MUTUAL FUNDS UNDERTAKEN AT RELIANCE LIFE INSURANCE COMPANY LTD Submitted at partial fulfillment of the award of the Degree of BACHELOR OF BUSINESS ADMINISTRATION (2008-2010) Submitted to: Submitted by: Prof. Asim Sahore Xyz B.B.A – 5th Semester (xyz)Projectsformba.blogspot.com
  2. 2. Projectsformba.blogspot.com DECLARATION I, XYZ Enrollment No.-0xyz Class BBA, 5TH semester (Morning) of TECNIA INSTITUTE OF ADVANCED STUDIES, Delhi hereby declare that the Summer Training report entitled COMPARATIVE STUDY OF ULIP PLANS OF RELIANCE LIFE INSURANCE WITH MUTUAL FUNDS is an original work and the same has not been submitted to any other institute for the award of any other degree. A seminar Presentation of the summer training report was made on and the Suggestions as approved by the faculty were duly incorporated. Signature of Researcher Countersigned Signature of Faculty GuideProjectsformba.blogspot.com
  3. 3. Projectsformba.blogspot.com ACKNOWLEDGEMENT First of all I would like to thank the Management of Reliance Life Insurance Company Ltd. for giving me the opportunity to do my two-month Project Training in their esteemed organization. I am highly obliged to Mr.Nimit Verma (Business Development Manager) for granting me to undertake my training at Connaught Place Branch(Zonal office). I express my Thanks to all Sales and Operation Managers under whose able guidance and direction, I was able to give shape to my training. Their constant review and excellent suggestions throughout the project are highly commendable. My heartfelt Thanks go to all the executives who helped me gain knowledge about the actual working and the processes involved in various departments.Projectsformba.blogspot.com
  4. 4. Projectsformba.blogspot.com PREFACE The liberalization of the Indian insurance sector has been the subject of much heated debate for some years. The policy makers where in the catch 22 situation wherein for one they wanted competition, development and growth of this insurance sector which is extremely essential for channeling the investments in to the infrastructure sector. At the other end the policy makers had the fears that the insurance premia, which are substantial, would seep out of the country; and wanted to have a cautious approach of opening for foreign participation in the sector.As one of the rare occurrences the entire debate was put on the back burner and the IRDA saw the day of the light thanks to the maturing polity emerging consensus among factions of different political parties. Though some changes and some restrictive clauses as regards to the foreign participation were included the IRDA has opened the doors for the private entry into insurance. Whether the insurer is old or new, private or public, expanding the market will present multitude of challenges and opportunities. But the key issues, possible trends, opportunities and challenges that insurance sector will have still remains under the realms of the possibilities and speculation. What is the likely impact of opening up India’s insurance sector? The large scale of operations, public sector bureaucracies and cumbersome procedures hampers nationalized insurers. Therefore, potential private entrants expect to score in the areas of customer service, speed and flexibility. They point out that their entry will mean better products and choice for the consumer. The critics counter that the benefit will be slim, because new players will concentrate on affluent, urban customers as foreign banks did until recently. This seems to be a logical strategy. Start-Projectsformba.blogspot.com
  5. 5. Projectsformba.blogspot.com up costs-such as those of setting up a conventional distribution network-are large and high-end niches offer better returns. However, the middle-market segment too has great potential. Since insurance is a volumes game. Therefore, private insurers would be best served by a middle-market approach, targeting customer segments that are currently untapped.Projectsformba.blogspot.com
  6. 6. Projectsformba.blogspot.com TABLE OF CONTENT • CHAPTER- 1 Research problem and procedure  Company profile  Industry profile  Introduction  Scope of the study  Objectives of the study • CHAPTER- 2 Review of literature • CHAPTER-3 Current scenario • CHAPTER -4 Research methodology  Research instrument  Limitation of the study  Data analysis & interpretationProjectsformba.blogspot.com
  7. 7. Projectsformba.blogspot.com • CHAPTER-5 DISCUSSION &FINDINGS OF THE STUDY  Discussion of the result  Findings of the result  Suggestion and recommendations  Annexure  BibliographyProjectsformba.blogspot.com
  8. 8. Projectsformba.blogspot.com ABBREVIATIONS • ADB---Accidental Death Benefit • CAGR---Cumulative average growth return • CI---Critical Illness • FC – Financial Consultant • FMC----Fund management charges • HDFC—Housing Development Finance Corporation • SDM----Sales Development Manager • IRDA—Insurance Regulatory And Development authority • NAV----Net asset value • NOP--- No. of Policy • RLIC--- Reliance Life Insurance Co. LTD. • SBI--- State Bank of India • ULIP--- Unit linked Insurance plan • USP----Unique selling prepositionProjectsformba.blogspot.com
  9. 9. Projectsformba.blogspot.comProjectsformba.blogspot.com
  10. 10. Projectsformba.blogspot.com CHAPTER – I RESEARCH PROBLEM AND PURPOSEProjectsformba.blogspot.com
  11. 11. Projectsformba.blogspot.com RESEARCH PROBLEM AND PURPOSE THE HISTORY OF INDIAN INSURANCE INDUSTRY Life Insurance In 1818 the British established the first insurance company in India in Calcutta, the Oriental Life Insurance Company. First attempts at regulation of the industry were made with the introduction of the Indian Life Assurance Companies Act in 1912. A number of amendments to this Act were made until the Insurance Act was drawn up in 1938. Noteworthy features in the Act were the power given to the Government to collect statistical information about the insured and the high level of protection the Act gave to the public through regulation and control. When the Act was changed in 1950, this meant far reaching changes in the industry. The extra requirements included a statutory requirement of a certain level of equity capital, a ceiling on share holdings in such companies to prevent dominant control (to protect the public from any adversarial policies from one single party), stricter control on investments and, generally, much tighter control. In 1956, the market contained 154 Indian and 16 foreign life insurance companies. Business was heavily concentrated in urban areas and targeted the higher echelons of society. “Unethical practices adopted by some of the players against the interests of the consumers” then led the Indian government to nationalize the industry. In September 1956, nationalization was completed, merging all these companies into the so-called Life Insurance Corporation (LIC). It was felt that “nationalization has lent the industry fairness, solidity, growth and reach.” Some of the important milestones in the life insurance business in India are:Projectsformba.blogspot.com
  12. 12. Projectsformba.blogspot.com 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 to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: The market contained 154 Indian and 16 foreign life insurance companies.General Insurance The General Insurance industry in India dates back to the Industrial Revolution and the subsequent increase in trade across the oceans in the 17th century. As for Life Insurance, the British brought General Insurance to India, and a similar path was followed in the development of this industry. A number of private companies were in existence for years and years until, in 1971, the Indian Government decided that the public interest would be served by nationalizing the industry, merging all the 107 companies into four companies, depending on the sort of business transacted (Marine, Fire, Miscellaneous). These were the National Insurance Company Ltd., the Oriental Insurance Company Ltd., the New India Assurance Company Ltd., and the United India Insurance Company Ltd. located in Calcutta, New Delhi, Bombay and Madras respectively. The General Insurance Corporation (GIC) was set up in 1972 as a ‘holding’ company, having these four companies as its subsidiaries.Projectsformba.blogspot.com
  13. 13. Projectsformba.blogspot.com Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalize the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.Projectsformba.blogspot.com
  14. 14. Projectsformba.blogspot.com 1) COMPANY PROFILE OF RELIANCE LIFE INSURANCE Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the Reliance – Anil Dhirubhai Ambani Group. The company acquired 100 percent shareholding in AMP Sanmar Life Insurance Company in August 2005. Taking over AMP Sanmar Life provided Reliance Life Insurance a readymade infrastructure and a portfolio. AMP Sanmar Life Insurance was a joint venture between AMP, Australia and the Sanmar Group. Headquartered in Chennai, AMP Sanmar had over 90 offices across the country, 9,000 agents, and more than 900 employees. Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the Reliance – Anil Dhirubhai Ambani Group (ADAG). Reliance Life Insurance is another step forward for Reliance Capital Limited to offer need based Life Insurance solutions to individuals and Corporate. Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial servicescompanies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other financial services.Whatever your career goal, Reliance Life Insurance is a company big enough for your dreams. We, along with the other businesses of Reliance Capital, enjoy a strong position in the financial services category. And this may be the place where you can have the career you always wanted. RELIANCE LIFE INSURANCE HISTORY Projectsformba.blogspot.com
  15. 15. Projectsformba.blogspot.com 1966- Birth of Reliance first Textile Mill at Naroda. 1971-72: Launch of Only Vimal Brand. 1977- Launch of first IPO for general public start at trend. 1985- Total asset cross 1000 cr. 1992- Twin IPOs receive 1 million applications. 1993- Sales cross 4000cr, becomes largest Pvt. Sector Co. in India 1997- First corporate in Asia to issue 50 and 100 yrs bond in US Debt Market. 1998- Total Asset cross 35000cr, Revenues Cross 14000cr. 2000- Group profit 2500cr, revenues 20000cr, and Total assets 50000cr 2000- Reliance communications plans announced 2001- Group revenues cross 60,000cr, largest business group in India. 2003- Controlling stake in BSES (Reliance Energy), largest mobile service in India. 2005-ADA group formed AMP Sanmar acquired and renamed Reliance Life Insurance Corporation (RLIC) 2006-07 RLIC ranked 6th at 930 cr. Sep 07- became the 1st company to cross 1 million policy mark in 2 years of operations. 2007- RLIC became only became the 2nd national insurance company to get ISO 9001- 2000 2007-08 RLIC jumps to 4th position with 2750cr. 2008- Crosses 2 million policies. 2008- RELIANCE MUTUAL FUNDS becomes 1st Asset Management Company (AMC) to cross Rs.1,00,000 Crore. 2008- RELIANCE COMMUNICATIONS crosses 50 million customers. 2008-09 A total of more than 2000 branches on anvil in the fiscal year. 2009-10 become the top third insurance company in India CORPORATE OBJECTIVE  At Reliance Life Insurance, we strongly believe that as life is different at every stage, life insurance must offer flexibility and choice to go with that stage. We are fully prepared and committed to guide you on insurance products and services through our well-trained advisors, backed by competent marketing and customer services, in the best possible way.  It is our aim to become one of the top private life insurance companies in India and to become a cornerstone of RLI integrated financial services business in India. CORPORATE MISSION• “To set the standard in helping our customers manage their financial future”. Projectsformba.blogspot.com
  16. 16. Projectsformba.blogspot.com BELOW ARE FEW OF THE PLANS THAT ARE OFFERED BY RELIANCE LIFE INSURANCE INSURANCE PLANS AVAILABLE 1. Products (Individual Plans) Savings (Endowment) 2. Reliance Endowment Plan (Formerly Divya Shree) 3. Reliance Special Endowment Plan (Formerly Subha Shree) 4. Reliance Cash Flow Plan (Formerly Dhana Shree) 5. Reliance Child Plan (formerly Yuva Shree) 6. Reliance Whole Life Plan (formerly Nithya Shree) Pensions 7. Reliance Golden Years Plan (Formerly Bhagya Shree) Investments 8. Reliance Market Return Plan (Formerly Kanaka Shree) 9. Risk / ProtectionProjectsformba.blogspot.com
  17. 17. Projectsformba.blogspot.com 10. Reliance Term Plan (Formerly Raksha Shree) Products (Group / Corporate Plans) 11. Risk (Protection) Reliance Group Term Assurance Policy (formerly Group Term Assurance Policy) Reliance EDLI Scheme (formerly EDLI Scheme) 12. Pensions a. Reliance Group Gratuity Policy (formerly Group Gratuity Policy) b. Reliance Group Superannuation Policy (formerly Group Superannuation Policy) 13. Reliance Money Guarantee Plan Industry Profile 2.1 Life Insurance players1. Max New York Life Insurance Company Ltd.2. ICICI Prudential Life Insurance Company Ltd.3. Bajaj Allianz Life Insurance Company Ltd.4. HDFC Life Insurance Company Ltd.5. Reliance Life Insurance Company Ltd. Projectsformba.blogspot.com
  18. 18. Projectsformba.blogspot.com6. SBI Life Insurance Ltd.7. Aviva Life Insurance Company Ltd. The practice of insurance in the world is quite old infect. How ever, life insurance business, as it is known today, is a much later development. It evolved from the great transformation in life, which began with the decline of the agrarian society in the western countries in the 19th century. Industrialization with its cities, factories, cash economy and an urban ‘saving’ class set the stage for life insurance as a large – scale national institution. It can truly be that life insurance is a product of modern industry. Growth of life insurance Company in any country will illustrate introduced modern life insurance business didn’t make much headway. The business started taking its deeper roots only when in the late 19th century ‘India’ insurance companies appeared on the scenes and started accepting ‘India’ lies freely on the same terms as European lives in India. The growth of India life insurance business continued to remain restricted till the Swedish movement gathered momentum. The business passed through the period of ups and downs with the political and economic situation in the country. Introduction To make comparison of products of Private life Insurance companies with Reliance Life Insurance Co. Ltd. and to Create awareness about Unit Linked Insurance Plan (ULIP) Benefits. Comparison of ULIP products of private Life Insurance companies and how to create awareness about ULIP The overall goal of this project was to create awareness about investments. The Above problem arises because every life insurance company has their products having different positive and negative aspects. Life Insurance is booming sector in today’s economy. So the responsibilities of the insurance companies have been increased as compare to the past. Because in past people were taking insurance policies for protection tool only. In present scenario insurance sector is providing more services with Projectsformba.blogspot.com
  19. 19. Projectsformba.blogspot.com the basic life insurance. Reliance Life Insurance has number of products, which gives the right way to save the money and earn good profit by invested premium. Today people want more services and more return on their investment. So this insurance company is providing more value – added services with the basic insurance operation. The project was taken to know about, what that point is in any Insurance company that is Unique selling point (USP) which gives it highest business and customer always like to invest with that company which gives the company a position of a leader in market. By doing this type of study in this Insurance sector and looking at the vast scope and opportunity to study this booming field of Life Insurance and the growing awareness among the public regarding insuring their life through Life insurance policies as well as the growing contribution of Insurance in GDP of country with the number of private players making entrance in this booming industry of Insurance. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. SCOPE OF STUDY The scope of the study refers to the job that to know about the activities of the organization. The study means that the analysis of the products of the company on which he/she has to focus. During the summer training the volunteer need to find out the corporate strategies of the running company and the mile stone which the company has covered during its journey. In the summer training, it is necessary for the student that he /she involve with the experience guys to get the knowledge about the company. That is how the company has got the success, Or if it is going in the loss, why.Projectsformba.blogspot.com
  20. 20. Projectsformba.blogspot.com In my training period I have found that the reliance group is the biggest group in Indian companies. I felt that I could have learnt more in the Reliance Life Insurance co. Limited. Reliance Life Insurance co. limited is the part of the Reliance Capital Limited which is a growing company in the financial products. Reliance Anil Dhirubhai Ambani group is also deals in communication, energy, natural resources, media, and entertainment, healthcare and infrastructure. Objectives • To Compare Investment Options. • To find out the preference for Reliance Life Insurance ULIP Plan with Different mutual fund plans • To find out the USP of Reliance life insurance. • To suggest a strategy to RLIC for creating awareness about ULIP and getting an competitive advantage over other investment optionsProjectsformba.blogspot.com
  21. 21. Projectsformba.blogspot.com CHAPTER – II REVIEW OF LITERATURE Review of LiteratureSunayna Khurana (2008) analyzed the customer preference in life insurance industry in India. She hadanalyzed the customer preference regarding plans and company, their purpose of buying insurancepolicies, satisfaction level and their future plans for the new insurance policy.Mr. K B S Kumar edited the book ‘Insurance customer service’ of ICFAI University press; it includes thechapters like ‘Tracking customer satisfaction’ by Mr Tom moormam. Projectsformba.blogspot.com
  22. 22. Projectsformba.blogspot.comU Jawaharlal and Nikhil Pareek analyzed ‘the customer service in Life Insurance’ In Insurance Chronical(April 2004) he had analyzed the different services of Life Insurance players in India.Narayan Krishnamurthy in Outlook money (Sep 15, 2003) article analyzed the situational need ofInsurance at different situations and steps of life in his article ‘AT every step of Life…’.Navasiyam et al. (2006) analyzed the socioeconomic factors that are responsible for taking life insurancepolicies and examined the preferences of the policyholders towards various types of policies of LIC.From the analysis, it was found that factors such as age, educational level and sex of the policyholders areinsignificant. However, income level, occupation and family size are significant while deciding on aninsurance policy. From the analysis, it is inferred that respondents belonging to the age group of 31 to 40years are much interested in taking a life insurance policy.MFs have attracted a lot of attention and kindled the interest of both academic and practitionercommunities. Compared to the developed markets, very few studies on MFs are done in India. Thisliterature review reveals investor behavior studies. The researches on mutual funds have been extremelyskewed in terms of geographical coverage, most focused to developed countries like us.Tamal Datta chaudhuri, Jayanta Kumar seal, edited the book named ‘Mutual Funds Industry’ it includesempirical study made by Navdeep agrwal and Mohit Gupta titled ‘performance of mutual fund inIndia: an empirical study’.Mary Rowland written ‘The New Common sense Guide to mutual funds’ it includes the guidelineswhile investing in mutual fund. How should one invest in mutual fund and when what step should betaken in a situation by a investor.Gupta LC (1993) conducted a household investor survey with the objective to provide data on investorpreferences on MFs and other financial asset. Projectsformba.blogspot.com
  23. 23. Projectsformba.blogspot.comRaja Rajan (1997,1998) high lightened segmentation of investors on the basis of their characteristics,investment size, and the relationship between stage in life cycle of the investors and their investmentpattern. Projectsformba.blogspot.com
  24. 24. Projectsformba.blogspot.com CHAPTER - III CURRENT SCENARIO CURRENT SCENARIO: The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and non-life segment. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe. There are now 29 insurance companies operating in the Indian market – 14 private life insurers, nine private non-life insurers and six public sector companies. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario.Projectsformba.blogspot.com
  25. 25. Projectsformba.blogspot.com There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion. There are opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60 receive pensions. The IRDA has issued the first licence for a standalone health company in the country as many more players wait to enter. The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase. The deepening of the health database over time will also allow players to develop and price products for larger segments of society. State Insurers Continue To Dominate: There may be room for many more players in a large underinsured market like India with a population of over one billion. But the reality is that the intense competition in the last five years has made it difficult for new entrants to keep pace with the leaders and thereby failing to make any impact in the market. Also as the private sector controls over 26.18% of the life insurance market and over 26.53% of the non-life market, the public sector companies still call the shots. The country’s largest life insurer, Life Insurance Corporation of India (LIC), had a share of 74.82% in new business premium income in November 2005. Similarly, the four public-sector non-life insurers – New India Assurance, National Insurance, Oriental Insurance and United India Insurance – had a combined market share of 73.47% as of October 2005. ICICI Prudential Life Insurance Company continues to lead the private sector with a 7.26% market share in terms of fresh premium, whereas ICICI Lombard General Insurance Company is the leader among the private non-life players with a 8.11% market share. ICICI Lombard has focused on growing the market for general insurance products and increasing penetration within existing customers through product innovation and distribution. Reaching Out To Customers: No doubt, the customer profile in the insurance industry is changing with the introduction of large number of divergent intermediaries such as brokers, corporate agents, and bancassurance. The industry now deals with customers who know what they want and when, and are more demanding in terms of better service and speedier responses. With the industry all set to move to a detariffed regime by 2007, there will be considerable improvement in customer service levels, product innovation and newer standards of underwriting. Intense Competition: In a de-tariffed environment, competition will manifest itself in prices, products, underwriting criteria, innovative sales methods and creditworthiness. Insurance companies will vie with each other to capture market share through better pricing and client segmentation. The battle has so far been fought in the big urban cities, but in the next few years, increased competition will drive insurers to rural and semi-urban markets.Projectsformba.blogspot.com
  26. 26. Projectsformba.blogspot.com Global Standards: While the world is eyeing India for growth and expansion, Indian companies are becoming increasingly world class. Take the case of LIC, which has set its sight on becoming a major global player following a Rs280-crore investment from the Indian government. The company now operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal and will soon start operations in Saudi Arabia. It also plans to venture into the African and Asia-Pacific regions in 2006. The year 2005 was a testing phase for the general insurance industry with a series of catastrophes hitting the Indian sub-continent. However, with robust reinsurance programmes in place, insurers have successfully managed to tide over the crisis without any adverse impact on their balance sheets. With life insurance premiums being just 2.5% of GDP and general insurance premiums being 0.65% of GDP, the opportunities in the Indian market place is immense. The next five years will be challenging but those that can build scale and market share will survive and prosper.Projectsformba.blogspot.com
  27. 27. Projectsformba.blogspot.com CHAPTER- IV RESEARCH METHODOLOGY Research design/Methodology Research design can be defined as the plan and structure of enquiry formulated in order to obtain answers to research questions on business on business aspects. Research design can be understood as that which gives the blueprint for collection, measurement and analysis of business data. The research plan constitutes the overall program of the business research process. The planning process includes the framework of the entire research process, starting from developing hypothesis to the final evaluation of collected data. Research design is essential because it facilitates the smooth flow of various research results can be obtained with minimum utilization of time, money and effort. Therefore it can be said that design isProjectsformba.blogspot.com
  28. 28. Projectsformba.blogspot.com highly essential for planning research activities. If research design is not properly prepared, it will jeopardize the whole research process and will not meet its purpose. Exploratory Studies Exploratory research is carried out to make problem suited to more precise investigation or to frame a working hypothesis from an operational perspective. Exploratory studies help in understanding and assessing the critical issues of problems. It is not used in case where a definite result is desired. However, the study results are used for subsequent research to attain conclusive results for a particular problem situation. Exploratory studies are conducted for three main reasons, to analyze a problem situation, to evaluate alternatives and to discover new ideas. Research hypothesis If a hypothesized relationship or prediction has to be tested by scientific methods, it is called research hypothesis. A research hypothesis is one that links an independent variable to a dependent variable. It should generally contain one dependent and one independent variable. Method of Data collection Data can be collected in different ways from the subject of study. One method is to observe subjects on certain parameters, which is called observation studies. In such studies, the subjects (respondents) by asking them questions through a questionnaire. Here the researcher can adopt either method based on the study that needs to be conducted. For instance, if research has to be done on the traffic flow at a particular junction, then the observation method is best. On the other hand, if consumer preferences about a new product are to be estimated, then a questionnaire for obtaining consumer responses is the best method. Research Design has been classified into four subsections they are:Projectsformba.blogspot.com
  29. 29. Projectsformba.blogspot.com 1. Sample selection and size; 2. Sampling procedure; 3. Data collection; and 4. Analytical tools Sample Selection and size The first step of research is sample selection, for which the respondents were consumers The total consumers covered were 400. The same numbers of questionnaires were distributed, but only 370 fully-completed questionnaires were received. Results are based on the response of these 370 respondents. Sampling procedure The consumers are selected by the convenience sampling method. The selection of units from the population based on their easy availability and accessibility to the researcher is known as convenience sampling. Convenience sampling can be used as a part of a preliminary research that forms a basis for conducting the detailed research. Convenience sampling is at its best in surveys dealing with an exploratory purpose for generating ideas and hypothesis. Steps in Sampling Procedure • Defining the target population • Specifying the sampling frame • Specifying the sampling Unit • Selection of the sampling method • Determination of sample size • Specifying the sampling plan • Selecting the sample LimitationsProjectsformba.blogspot.com
  30. 30. Projectsformba.blogspot.com  The middle class people do not know basic concept of ULIP so creating awareness is a big challenge for me.  The findings of sample survey cannot be generalized to the entire population, as the sample is not representative. As there is no set criterion for selecting the sample, there is a scope for the research being influenced by the bias of the researcher.  Narrow minded thinking of middle class people as investment is not their cup of tea.  Many customers are thinking that investment in share market is very risky. As ULIP and Mutual fund both are related to share market.  A general preference to LIC and UTI over private players.  Hesitations on the part of respondents to disclose financial information. Different Products offered by Reliance Life 1) Reliance Endowment Plan  Part of Reliance Group, can be trusted  High Returns and Life Security  More value for money 2) Reliance Cash Flow Plan  Liquidity/Life Insurance Protection/Growth  Life cover for full sum assured for full Policy term irrespective of Survival benefits paid already- Protection  Survival Benefits payable at the end of 4th year and every 3 years thereafter over the full policy term-Liquidity  Policy participates in profits. Bonus calculated on maturity or premature death. – Wealth appreciationProjectsformba.blogspot.com
  31. 31. Projectsformba.blogspot.com 3) Reliance Whole Life Plan  Long life cover up to 85 years or death  Option to extend cover up to 99 years  PPT 5 years to 40 years- wide options  PPT for selected term or death  Loans can be availed  Participates in profits throughout lifetime if premium is paid up to date 4) Reliance Child Plan  Providing for future goals of children-education or marriage  Lump sum payments at appropriate times-not related to age of child  Four regular guaranteed payments-last 4 years of policy term  On death of life assured, future premiums waived  Policy participates in Profits- simple bonus at end of policy term  Minimum policy term-5 years- we can get payment from 2nd year if wanted. 5) Reliance Total Investment Plan Series  that give you ‘Total Investment, Total Flexibility’  Invest as much as you want, anytime you want  7 Funds and 52 Free Switches every year  Easy Liquidity with Partial Withdrawals -absolutely free !  Charges as low as 1% for subsequent purchases  Tax Benefits 6) Reliance Automatic Investment Plan a. Ready Made Option b. Tailor Made Option c. Exchange OptionProjectsformba.blogspot.com
  32. 32. Projectsformba.blogspot.com d. Riders e. Tax Benefits f. Top up Payment g. Partial Withdrawals h. Switching Option i. Settlement Option j. Convenient Premium Payment OptionsAll Investments eligible for tax deduction under section 80C Fund Value completely tax exempt under section 10(10D) up to age 45 For the first time –3 New Fund Offers in the same plan Infrastructure Fund, Energy Fund, Mid-Cap Fund. Different Mutual Fund Companies 1) UTI mutual fund. 2) SBI Mutual fund. 3) Reliance Mutual fund. 4) ICICI Prudential Mutual Fund. 5) Kotak Mutual Fund. 6) Birla Sun Life Mutual Fund 7) HSBC Mutual Fund 8) HDFC Mutual Fund 9) ING Vysya Mutual Fund 10) Prudential ICICI Mutual Fund 11) Sahara Mutual Fund 12) Unit Trust of India Mutual Fund Projectsformba.blogspot.com
  33. 33. Projectsformba.blogspot.com 13) Standard Chartered Mutual Fund 14) Franklin Templeton India Mutual Fund 15) LIC Mutual Fund Mutual Fund Schemes/ Funds provided by Mutual fund CompaniesMutual fund means indirect investment in share market, mutual fund has following characteristics• It is a pool of money, collected from investors, invested according to certain investment objectives• The ownership of the fund is thus joint or mutual; the fund belongs to all investors.• Mutual Funds are also known as Financial Intermediaries• In India, Mutual Funds are constituted as Trust.• The investors share is denominated by ‘units’ whose value is called as Net Asset Value (NAV) which changes every day.• The investment portfolio is created according to the stated investment objectives of the fund.• The ownership is in the hands of the investors who have pooled in their funds.• It is managed by a team of investment professionals and other service providers.• An equity fund will invest in Equity shares, Preference Shares, Warrants etc.• A Debt Fund will invest in Debt Instruments only. Following are the different products and services Offered by Mutual Fund Companies • Open ended schemes • Close ended schemes • Growth/Equity oriented Schemes • Income/Debt oriented SchemesProjectsformba.blogspot.com
  34. 34. Projectsformba.blogspot.com • Balanced Funds • Money market or liquid funds • Gilt Funds • Index Funds • Exchange Traded Funds • Sectoral Funds • Thematic Funds • Commodity Funds • Real Estate Funds • Tax Saving Funds • Hybrid Funds There are several ways for investment and disinvestments in mutual funds such as : • Systematic Investment Plans (SIPs) • Value Averaging • Systematic Transfer Plans (STPs) • Systematic Withdrawal Plans(SWPs) • Automatic Reinvestment Plans. • Open Ended Fund In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related prices, from the fund itself. The corpus of open-ended funds, therefore, changes every day. • Close Ended Fund A closed-end fund offers units for sale only in the NFO. It is then listed in the market. Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end funds sell at a discount to NAV.Projectsformba.blogspot.com
  35. 35. Projectsformba.blogspot.com The corpus of a closed-end fund remains unchanged. • Growth fund Provide capital appreciation over the medium to long-term • Investor who does not require periodic income distribution can choose the option, where the incomes earned are retained in the investment portfolio and allowed to grow, rather than being distributed to investors. • Investors with longer investment horizons and limited requirements for income choose this option. • The return to the investor who chooses a growth option is the rate at which his initial investment has grown over a period for which he has invested in the fund. • The investor choosing this option will vary the NAV with the value of the investments portfolio , while the no. of units held with remains constant. • Income fund Provide regular and steady income to investor • Balanced fund Provide both growth and regular income. • Money market fund Provide easy liquidity, regular income and preserve the income • Tax saving scheme Offer tax rebates to the under specific provisions of the Indian income tax laws Investment made under some schemes are allowed as deduction U/S 88 of the income tax act. • Automatic Reinvestment Plans Reinvestment of amount of dividend made by fund in the same fund. In this option, the no. of units held by the investor will change with every reinvestment. The value of units will be similar to that under the dividend option There are four types of plans as followsProjectsformba.blogspot.com
  36. 36. Projectsformba.blogspot.com • Lump sum Investment It is one time investment.. Investors can invest particular amount one time for fixed time of period. • Systematic Investment Plans( SIP) – For Regular Investment SIP is investing a fixed sum periodically in a disciplined manner for long term. It gives benefit of Rupee Cost averaging. In SIP monthly minimum Rs.500 or Rs.100 are invested. Interest is calculating compounded. Many SIP gives insurance benefits. VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the investor flexibility with respect to the amount and frequency of investment. In VAP, investor has to impose voluntary self discipline. • Systematic Withdrawal Plan ( SWP) – For regular income The lump sum amount is invested for one time and then fixed percent amount is withdraw monthly. Remaining amount will grow continuously. This plan is suitable for retired person, because it gives regular income. • Systematic Transfer Plan ( STP) – Transfer on a periodic basis a specified amount from one scheme to another within the same fund family. It gives option to the investor if the current fund performance in not satisfactory.Projectsformba.blogspot.com
  37. 37. Projectsformba.blogspot.com • Dividend option • Investors will receive dividends from the mutual fund , as an and when dividends are declared. • Dividends are paid in the form of warrants or are directly credited to the investor’s bank accounts. • In normal dividend plan , periodicity of dividends is left to the fund managers, the timing of the dividend payout is decided by fund manager. • Mutual funds provide the option of receiving dividends at pre-determined frequencies,wich can vary from daily,weekly,monthly,quarterly,half-yearly and annual. Investors can choose the frequency of dividend distribution that suits their requirements. • Investors choosing this option have a fixed no. of units invested in the fund and earned incomes on this investment. • The NAV of this investors holding will vary with changes in the value of portfolio and the impact of the proportion of income earned by the fund to what is actually distributed as dividend. Unit linked Insurance plan In earlier days, insurance was bought primarily for tax purposes and very few people actually bothered about life cover as such. LIC was the only player and offered money back policies, endowment policies and few single premium policies like Bima Nivesh. However as an asset class it wasn’t considered as an option. Now the scenario has completely changed, there are lots of private players and many new options have come up. One among these new products is ULIPs which are hugely popular and sold as an attractive asset with insurance/retirement benefit. Insurers have developed plans that combine the benefits of life insurance as well as giving various options of participating in the growth of capital market. Such plans are called ULIP. Unit Linked Insurance Plan is a life insurance policy which provides a combination of life insurance protection and investment. ULIP is a most famous and safe way of investment in current scenario. In the event of the insured person’s untimely death, his nominees would normally receive an amount that is higher of the sum assured (insurance cover) or the value of the units (Investments). However,Projectsformba.blogspot.com
  38. 38. Projectsformba.blogspot.com there are some schemes in which the policy holder 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 charges paid in these schemes in terms of 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 and also in manner in which they are charged. Some of the other features offered by insurers along with ULIPs are the following. These are not offered by all insurers. they offered by RLIC only. • The policyholder can pay additional premium for investment at any time. • Partial or total withdrawal is allowed. Sometimes there are conditions attached. Some insurers, not all, charge a redemption fee in such cases. • These policies will not entitled to any bonus • There is no annual bonus, but there may be a loyalty bonus paid at the end Option of Funds Reliance Life Insurance offer policyholders a choice of funds in which their moneys may be invested like Equity Fund: In this type of fund, sometimes also called Growth Funds, there would be more investments in equities which are shares/ stocks traded in the stock market. Debt Fund: In this type of fund, also called bond Funds, the investments are primarily in government and government guaranteed securities and such safe debts and other high investment grade corporate bonds.Projectsformba.blogspot.com
  39. 39. Projectsformba.blogspot.com Money Market Funds: In this type of fund, sometimes also called Liquid Funds, the investment may be more in short term money market instruments such as treasury bills, commercial papers, etc. Balanced Fund: In this type of funds, the investments are in both equity as well as debts. Advantages of Unit Linked Insurance policies of Reliance The main three advantages of Unit Linked policies of reliance over Traditional Policies are  Choice • Freedom to choose Sum Assured of your choice for a given Premium. • Freedom to choose where your money should be invested. • Freedom to choose to withdraw your money according to your need.  Transparency • Knowledge of exactly how much money has been deducted and for What and exactly how much money has been invested? • Knowledge of the value of your investment on any given day.  Flexibility • Flexibility to increase my Sum Assured in the same policy at a later date without paying extra premium. • Flexibility to change your choice of investment at any time during the tenure of your policy The advantages of Mutual Fund Mutual fund In the current investment circumstances this is an option which has shown a mind boggling growth and it has become one of the most popular choices in recent times. This is the segment which is the main competitor for the unit linked insurance plans (ULIPS) of insurance companies.Projectsformba.blogspot.com
  40. 40. Projectsformba.blogspot.com Mutual fund is a common pool of money into which the investors place their contributions that are to be invested in accordance with the stated objective. A mutual fund is set up as a trust which supervises the function of an Asset Management Company (AMC) which manages the investments in mutual fund schemes. • Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value. • Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell. • Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud. • Liquidity: Its easy to get your money out of a mutual fund. Write a check, make a call, and youve got the cash. • Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet. • Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index The disadvantage of Mutual Fund• No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.• Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you dont use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.Projectsformba.blogspot.com
  41. 41. Projectsformba.blogspot.com• Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.• Management risk: When you invest in a mutual fund, you depend on the funds manager to make the right decisions regarding the funds portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers A measurement of an option position or premium in relation to the underlying instrument. In mutual fund also there is certain amount of risk-return factor associated according to the investment option these are as follows Table No.1 Risk and Return of Mutual Fund Risk Return Equity High High Balanced Medium Medium Debt Low Low Empirical Study ULIPs v/s Traditional ‘With Profit’ Policies 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. ULIPsProjectsformba.blogspot.com
  42. 42. Projectsformba.blogspot.com 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 policyholder’s 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. The strong arguments in favour of unit-linked plans are that — the investor knows exactly what is happening to his money and two , it allows the investor to choose the assets into which he wants his funds invested. An investor in a ULIP knows how much he is payings towards mortality, management and administration charges. He also knows where the insurance company has invested the money. The investor gets exactly the same returns that the fund earns, but he also bears the investment risk. The transparency makes the product more competitive. A traditional ‘with profits,’ on the other hand, is a black box and a policyholder has little knowledge of what is happening. Traditional ‘with profits’ policies too 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. As IRDA is a regulating authority for Insurance, so it has its total control over the business of all Insurance companies. On July 1, 2006, the IRDA introduced revised ULIP guidelines. The following are the provisions of the latest guidelines: 1. Term/TenureProjectsformba.blogspot.com
  43. 43. Projectsformba.blogspot.com The ULIP client must have the option to choose a term/tenure. If no term is defined, then the term will be defined as 70 minus the age of the client. For example if the client is opting for ULIP at the age of 30 then the policy term would be 40 years. The ULIP must have a minimum tenure of 5 years. 2. Sum Assured On the same lines, now there is a sum assured that clients can associate with. The minimum sum assured is calculated as: (Term/2 * Annual Premium) or (5 * Annual Premium) whichever is higher. There is no clarity with regards to the maximum sum assured. The sum assured is treated as sacred under the new guidelines; it cannot be reduced at any point during the term of the policy except under certain conditions - like a partial withdrawal within two years of death or all partial withdrawals after 60 years of age. This way the client is at ease with regards to the sum assured at his disposal. 3. Premium payments If less than first 3 years premiums are paid, the life cover will lapse and policy will be terminated by paying the surrender value. However, if at least first 3 years premiums have been paid, then the life cover would have to continue at the option of the client. 4. Surrender value The surrender value would be payable only after completion of 3 policy years. 5. Top-ups Insurance companies can accept top-ups only if the client has paid regular premiums till date. If the top-up amount exceeds 25% of total basic regular premiums paid till date, then the client has to be given a certain percentage of sum assured on the excess amount. Top-ups have a lock-in of 3 years (unless the top-up is made in the last 3 years of the policy).Projectsformba.blogspot.com
  44. 44. Projectsformba.blogspot.com 6.Partial withdrawals The client can make partial withdrawals only after 3 policy years. 7. Settlement The client has the option to claim the amount accumulated in his account after maturity of the term of the policy upto a maximum of 5 years. For instance, if the ULIP matures on January 1, 2007, the client has the option to claim the ULIP monies till as late as December 31, 2012. However, life cover will not be available during the extended period. 8. Loans No loans will be granted under the new ULIP. 9. Charges The insurance company must state the ULIP charges explicitly. They must also give the method of deduction of charges. 10. Benefit Illustrations The client must necessarily sign on the sales benefit illustrations. These illustrations are shown to the client by the agent to give him an idea about the returns on his policy. Agents are bound by guidelines to show illustrations based on an optimistic estimate of 10% and a conservative estimate of 6%. Now clients will have to sign on these illustrations, because agents were violating these guidelines and projecting higher returns. 1. Regular disclosure of detailed ULIP portfolios. This is a problem with the industry; for all their talk on being just like (or even better than) mutual funds, ULIP portfolios are nowhere near their mutual fund counterparts in frequency as well as in transparency. 2. On the same lines, other data points like portfolio turnover ratios need to be mentioned clearly so clients have an idea on whether the fund manager is investing or punting. 3. ULIPs (especially the aggressive options) need to mention their investment mandate, is it going to aim for aggressive capital appreciation or steady growth. In other words will it be managed aggressively or conservatively? Will it invest in large caps, mid caps or across both segments? Will it be managed with the growth style or the value style? 4. Exposure to a stock/sector in a ULIP portfolio must be defined. Diversified equity funds have a limit to how much they can invest in a stock/sector. Investment guidelines for ULIPs must also beProjectsformba.blogspot.com
  45. 45. Projectsformba.blogspot.com crystallised. Our interaction with insurance companies indicates that there is little clarity on this front; we believe that since ULIPs invest so heavily in stockmarkets they must have very clear-cut invesunds in terms of their structure tment guidelines. Comparison of ULIP Vs Mutual Fund on different issues as follows: Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. As is the cases with mutual funds, investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component. However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs 1. Mode of investment/ investment amounts Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house. ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity. This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter. ULIP investors also have the flexibility to alter the premium amounts during the policys tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP).Projectsformba.blogspot.com
  46. 46. Projectsformba.blogspot.com The freedom to modify premium payments at ones convenience clearly gives ULIP investors an edge over their mutual fund counterparts. Expenses In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India. For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors. Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times unwieldy expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. 3. Portfolio Disclosure Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio. There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our interactions with leading insurers we came across divergent views on this issue.Projectsformba.blogspot.com
  47. 47. Projectsformba.blogspot.com While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand. Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions. 4. Flexibility in altering the asset allocation As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load. On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches). Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. This can prove to be very useful for investors, for example in a bull market when the ULIP investors equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan. 5. Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds good, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual fundsProjectsformba.blogspot.com
  48. 48. Projectsformba.blogspot.com domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits. Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%. Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain is taxed at the investors marginal tax rate. Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and make informed decisions. 5.3 Some facts for the growth of mutual funds in India • 100% growth in the last 6 years. • Numbers of foreign AMC’s are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. • Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. • We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion. • B and C class cities are growing rapidly. Today most of the mutual funds are concentrating on the A class cities. Soon they will find scope in the growing cities.Projectsformba.blogspot.com
  49. 49. Projectsformba.blogspot.com • Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products. • SEBI allowing the MFs to launch commodity mutual funds. • Emphasis on better corporate governance. • Trying to curb the late trading practices. • Introduction of Financial Planners who can provide need based advice.Projectsformba.blogspot.com
  50. 50. Projectsformba.blogspot.com CHAPTER –V DISCUSSION & FINDINGS OF THE STUDY Findings and Suggestions After survey there are some findings and suggestions as follows. These findings and suggestions are explained with the help of Following tables and Illustrations  As insurance sector is growing rapidly so most of the life insurance players are selling ULIP plans. And the awareness about ULIP is growing most of the people knows the ULIP of life insurance. Since last 4-5 years the returns provided by ULIP were very good so people tend more to words ULIPProjectsformba.blogspot.com
  51. 51. Projectsformba.blogspot.com  Middle class people who are interested in investment but they are not aware of such options so more awareness should be there, as main target customer are the middle class people of delhi  While investing any insurance company customer prefers for good branded company Reliance is India’s one of the most famous and richest family. And second preference is given to SBI life as many people perceive that SBI Life is a govt. owned company so people want security for their investment.  As now till date people in India don’t wanted to invest in share market because then were thinking that it is a bad thing but as the awareness about Mutual fund is increasing as more and more private players are entering in the market. So awareness about MF is good and it can be improved.  While survey I found that many all customers had already invested in ULIP and Mutual Fund some people had invested in both options. 44% of people had invested in Mutual Fund and 56% people had invested in ULIP and 11% people had invested in both the options.  While investing in Mutual Fund the preference for the fund are changing as per the age of the customer means the people from the age group of 25-40 who are generating more income, they are risk takers and most of them preferring the equity fund.  As age is increasing the investment pattern moving to words more secured options like balanced and debt funds. All age group people are tend to invest in Tax saving funds to avail the tax deduction.  While investing in mutual fund 80% investors preferring more to the returns the mutual fund is providing and 60% for the Investment and Liquidity reasons.  First reason or preference that why an investor is interested in ULIP is Investment Purpose, and second is to its returns and after that they investing because they are getting the tax benefit. Then again there are some people who are investing for pension planning and security.  In future people will be more preferring to the security of their money means they want a secured option which should provide good returns. As ULIP are the option in which you can have the security also and good returns. The second choice of the investors is return of their money.Projectsformba.blogspot.com
  52. 52. Projectsformba.blogspot.com  As most of the people want the option which should provide security and good returns and there is only option available with good liquidity is ULIP of Reliance. 54% people had opted for ULIP as their future investment and 45% of people opted for Mutual Fund. So we can find that there not so much difference in these option.  62% of people given Best rating to the Reliance Life Insurance ULIP, so from this we can analyze that Reliance Life Insurance is doing good but it is having good potential in Market. To improve its market share they should improve the awareness level of the common people.  Innovative Products and good brand name are the main success factor for Reliance Life Insurance. 35% customers are attracted due to the Innovative products offered by RLIC. So if RLIC wants to penetrate its market share they should improve the should give more emphasis on marketing strategy, improving the distribution channel etc. Demographic Analysis The Segmentation of sample as on the basis of gender, age, family status, annual income, occupation etc. the demographic profile is as follows Table No.2 Demographic Profile Frequency PercentageProjectsformba.blogspot.com
  53. 53. Projectsformba.blogspot.com Gender Male 255 69% Female 115 31% Total 370 100% Age 21-30 140 37% 31-40 80 22% 41-50 108 29% More than 50 42 12% Total (Approx.) 370 100% Family Status Married 214 58% Single 156 42% Total (Approx.) 370 100% Annual Income ( lakhs) Up to 1 lakh 128 35% 1-2 140 37% 2-3 44 12% 3-4 32 9% More than 4 26 7% Total (Approx.) 370 100% Occupation Civil servant 60 16% Private Employee 48 13%Projectsformba.blogspot.com
  54. 54. Projectsformba.blogspot.com Self-Employed 32 8.5% Businessman/women 102 28% Farmer 32 8.5% Others 96 26% Total 370 100% • Awareness about ULIP Insurance Table No. 3 Awareness about ULIP No. of Responses Awareness About ULIP (No. of persons) 335 YES 35 NO 370 Total Illustration No. 1Awareness about ULIPProjectsformba.blogspot.com
  55. 55. Projectsformba.blogspot.com Awareness 35 Yes NO 335 Interpretation As insurance sector is growing rapidly so most of the life insurance players are selling ULIP plans. And the awareness about ULIP is growing most of the people knows the ULIP of life insurance. Since last 4-5 years the returns provided by ULIP were very good so people tend more to words ULIP.• Company preference for ULIP Table No.4 Company Preference Responses Company Name (No. of Persons) 155 Reliance Life Insurance 80 SBI Life Insurance Projectsformba.blogspot.com
  56. 56. Projectsformba.blogspot.com 55 Max New York Life insurance 45 HDFC life Insurance 35 Bajaj Allianz Life Insurance Illustration No.2 Company PreferenceProjectsformba.blogspot.com
  57. 57. Projectsformba.blogspot.com company Preference 9% 12% 42% Reliance Life SBI Life Max New York life 15% HDFC Life Bajaj Allianz life 22% Interpretation While Investing any insurance company customer is preferring for good branded company Reliance is Indians one of the most famous and richest family. And second preference is given to SBI life as many people perceive that SBI Life is a govt. owned company so people want security for their investment.• Awareness about Mutual Fund?Projectsformba.blogspot.com
  58. 58. Projectsformba.blogspot.com Table No. 5 Awareness about Mutual Fund Awareness About Mutual Fund No. of Responses (No. of persons) Yes 324 No 46 Total 370 Illustration No.3 Awareness about Mutual FundProjectsformba.blogspot.com
  59. 59. Projectsformba.blogspot.com Mutual Fund Awareness Yes No Interpretation As now till date people in India don’t wanted to invest in share market because then were thinking that it is a bad thing but as the awareness about Mutual fund is increasing as more and more private players are entering in the market. So awareness about MF is Good and it can be improved. Existing investors in ULIP and Mutual FundProjectsformba.blogspot.com
  60. 60. Projectsformba.blogspot.com Table. 6 option in which already Invested Sr. Investment option Responses No. (No. of Persons) 1 Mutual Fund 160 2 ULIP 210 Total 370 40 People had taken mutual fund and ULIP both. Illustration no. 4 Option in which already investedProjectsformba.blogspot.com
  61. 61. Projectsformba.blogspot.com Investment option 40 160 Mutual fund ULIP Common 210 Interpretation While survey I found that many all customers had already invested in ULIP and Mutual Fund some people had invested in both options. 44% of people had invested in Mutual Fund and 56% people had invested in ULIP and 11% people had invested in both the options.• Fund Preference while investing in a Mutual Fund Table No.7. Selection of Fund in MFProjectsformba.blogspot.com
  62. 62. Projectsformba.blogspot.com Sr.No. Name of the fund Responses Age (No. of Persons) 1 Equity Fund 146 25-40 2 Debt Fund 27 50-65 3 Balanced Fund 40 40-50 4 Tax saving Fund 57 25-60 Illustration No.5 Selection of Fund in MFProjectsformba.blogspot.com
  63. 63. Projectsformba.blogspot.com 146 160 T ax s av ing fund 140 B alanc ed 120 fund 100 De bt fund 80 57 60 40 E q u ity 27 F und 40 20 0 25-40 50-65 40-50 25-60 Age of Interpretation While investing in Mutual Fund the preference for the fund are changing as per the age of the customer means the people from the age group of 25-40 who are generating more income, they are risk takers and most of them preferring the equity fund. As age is increasing the investment pattern moving to words more secured options like balanced and debt funds. All age group people are tend to invest in Tax saving funds to avail the tax deduction.• Factors considering most to invest in Mutual Fund Projectsformba.blogspot.com
  64. 64. Projectsformba.blogspot.com Table 8. Reasons to invest in Mutual Fund Sr. Factors considered most while Responses No. investment 1 Only Investment 60 2 Good returns 80 3 Liquidity 60 Total 200 Illustration No. 6 Reasons to invest in Mutual Fund Sales 60 60 Only Investment Good Returns Liquiity 80InterpretationWhile investing in mutual fund 80% investors preferring more to the returns the mutual fund is providing and 60% for the Investment and Liquidity reasons.• Reasons to Invest In ULIP Projectsformba.blogspot.com
  65. 65. Projectsformba.blogspot.com Table 9. Factors considered while investing in ULIP Sr. Factors Considered Reponses No . (No. of Persons 1 Investment 70 2 security 40 3 Pension Planning 35 4 Good returns 65 5 Tax Relief 50 Total 250 Illustration No. 7 Factors considered while investing in ULIPProjectsformba.blogspot.com
  66. 66. Projectsformba.blogspot.com Factors While Investing in ULIP 80 70 70 65 60 50 50 40 40 35 30 20 10 0 Investment security pension planning good returns Tax Relief Interpretation First reason or preference that why an investor is interested in ULIP is Investment Purpose, and second is to its returns and after that they investing because they are getting the tax benefit. Then again there are some people who are investing for pension planning and security.• Factors to be Considered in future InvestmentProjectsformba.blogspot.com
  67. 67. Projectsformba.blogspot.com Table 10. factors to Considered for future Investment Sr. Factors Considered Responses No. (No. of Persons) 1 Returns 165 2 Security of Money 195 Total 370 Illustration No.8 factors to Considered for future InvestmentProjectsformba.blogspot.com
  68. 68. Projectsformba.blogspot.com Factors Considerable while Future Investment 200 195 190 185 180 175 170 165 160 155 150 Return Security Interpretation In future people will be more preferring to the security of their money means they want an secured option which should provide good returns. As ULIP are the option in which you can have the security also and good returns. The second choice of the investors is return of their money.• Most preferred way for investmentProjectsformba.blogspot.com
  69. 69. Projectsformba.blogspot.com Table11. Mutual fund or ULIP Sr.No. Investment Option Response (No. of Persons) 1 Mutual Fund 170 2 ULIP 200 Total 370 Illustration No. 9 Mutual fund or ULIPProjectsformba.blogspot.com
  70. 70. Projectsformba.blogspot.com Mutual Fund Or ULIP 205 200 195 190 185 180 175 170 165 160 155 ULIP Mutual Fund Interpretation As most of the people want the option which should provide security and good returns and there is only option available with good liquidity is ULIP of Reliance. 54% people had opted for ULIP as their future investment and 45% of people opted for Mutual Fund. So we can find that there not so much difference in these option.• Rating for Reliance life Insurance ULIPProjectsformba.blogspot.com
  71. 71. Projectsformba.blogspot.com Table 12. Rating for Reliance Life Insurance ULIP Sr. No. Ratings Response (No. of Persons) 1 Fair 30 2 Average 30 3 Good 80 4 Best 230 Illustration No. 10 Rating for Reliance Life Insurance ULIPProjectsformba.blogspot.com
  72. 72. Projectsformba.blogspot.com Ratings 250 200 150 100 Ratings 50 0 Fair Average Good Best Interpretation 62% of people given Best rating to the Reliance Life Insurance ULIP, so from this We can analyze that Reliance Life Insurance is doing good but it is having good potential in Market. To improve its market share they should improve the awareness level of the common people.Projectsformba.blogspot.com
  73. 73. Projectsformba.blogspot.com• Reasons to invest in RLIC Table 13. USP of Reliance Life Insurance Sr. Factors Responses N (No. of o. Persons) Innovative Products 1 110 2 Good returns 70 3 Good Brand Name 90 4 Good Marketing strategy 65 Illustration11. USP of Reliance Life Insurance Projectsformba.blogspot.com
  74. 74. Projectsformba.blogspot.com USP 65 110 INNovative Products Good Returns Good Brand Name 90 Good Marketing Strategy 70 Intepretation Innovative Products and good brand name are the main success factor for Reliance Life Insurance. 35% customers are attracted due to the Innovative products offered by RLIC. So if RLIC wants to penetrate its market share they should improve the should give more emphasis on marketing strategy, improving the distribution channel etc. 7. Conclusions and/or RecommendationsProjectsformba.blogspot.com
  75. 75. Projectsformba.blogspot.com From above analysis and survey we can conclude as follows  Awareness of ULIP is increasing as more number of private players are entering in life insurance industry.  Mutual Fund is also getting more and more famous in Indian market as many private companies innovating new funds as the investors demand.  ULIP differentiate from Mutual fund in respect of Insurance cover.  Investors in Reliance Life ULIP will be getting the advantage of life insurance cover.  ULIP and Mutual fund are providing same type of investment funds like, equity funds, debt funds, infrastructure fund, balanced fund etc.  In terms of expenses mutual funds are having low expenses as compared to ULIP of Reliance life insurance.  Mutual fund companies charging 1.5% to 2.5% as entry and exit load, Reliance life insurance are charging 25% yearly as asset allocation charges.  People are turning to words the ULIP as a good investment option but as ULIP is in its starting phase so customers are preferring only big brands.  Mutual fund is having good growth but many customers from rural areas don’t have any knowledge about Mutual fund.  Even investors from cities like delhi don’t have that much of Knowledge about fund selection they all are depend on Brokers.  People in delhi are investing in only good branded companies as they don’t believe on other financial companies for taking ULIP.Projectsformba.blogspot.com
  76. 76. Projectsformba.blogspot.com  There is a need for insurers to undertake a demand audit in order to understand what the policyholder wants and needs.  Deriving the right feedback from customers and bringing out innovative products which cater to customer demands will go a long way in tapping the market potential of the insurance and Mutual fund sector.  Mutual fund and ULIP insurance both are facing fierce competition; increasingly more organizations are seeking to enhance their demand in the market place.  For Reliance Life Insurance They should go for creating more awareness about its ULIP as now also people are just investing because Reliance is India’s most Known and Favorite brand in past.  RLIC should go for innovating more and more products and improving the distribution channels as per the area of sales. ANNEXURE QuestionnaireProjectsformba.blogspot.com
  77. 77. Projectsformba.blogspot.com Name of the Person __________________________________________ Address _______________________________________________ _______________________________________________ Phone N0. _______________________________________________ Occupation _______________________________________________ Age _______________________________________________ Education _______________________________________________ Average Annual Income 50000 -100000 100000 -200000 More than 200000 Q1) Do you know About ULIP Insurance? Yes No Q2) Do you have taken any ULIP insurance policy? Can you name it?Projectsformba.blogspot.com
  78. 78. Projectsformba.blogspot.com Yes No _____________________________________________ Q3) If yes, which company’s ULIP you have taken and why? _____________________________________________ For investment For Security For Pension planning For Good returns For Tax Relief only Q4) Do you know about Mutual fund? Yes No Q5) Do you have taken any Mutual Fund? Can you name it? Yes No Q6) If yes, which company’s Mutual Fund you have taken and why? ________________________________________________ For only Investment For Good returnsProjectsformba.blogspot.com

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