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  • 5. ACKNOWLEDGEMENTEvery time, I have come across an acknowledgement page in report or book.I used to think that it is merely an obligation on the part of the writer tothank all those associated with his work. But today I am delighted in writingmy acknowledgement to all those who have helped me in this project alearning experience. I am sure I could not have been able to do it so wellwithout their support.I am highly grateful and express my sincere gratitude to Dr. Ajay KumarGarg (Director), Miss Deepali Kapoor (Project Guide), who guided me sowell before the beginning of the project. Its goes without saying that I really appreciate the commitment ofTeerthankar Mahaveer Institute of Management & Technology, MoradabadFaculty who has prepared us to do every project successfully. This isdefinitely the training we get at T.M.I.M.T. Moradabad that makes a projecta wonderful learning experience and not merely a mandatory assignment. Iam grateful to our Miss. Sonia Gupta (Course Co-Coordinator) Mr. ManojGupta (Internet lab Incharge), Mr. Sanjeev Gupta (Librarian). I am grateful
  • 6. to Mr. Anand Joshi who had arranged for all of us to go through a completeproject right there in the campus. Last but not least thanks to the ALMIGHTY GOD because nothing ispossible without his blessing. And I would like to thank my family membersfor their continuous, patience, encouragement, support and blessings thatenabled me to make this project a success.With Regards,Manish Chauhan,M.B.A. IIIrd Sem.Roll No. 0714870041
  • 7. EXECUTIVE SUMMARY Executive summary
  • 8. The objective of the project was to study and evaluate present market shareof two leading insurance company LIC and ICICI PRUDENTIAL.To complete the project the study has been conducted which based on thesecondary data which is collected through the various books, magazine,journal and websites.The main purpose of the study to know that how and what manner peopleattract towards the company and how they decide which one should bechosen.Finding and recommendation made on the basis of survey most depicts onthe point that insurance plan and policies should be more customer centric,as many customer are not aware about the policies and plan and are not ableto decide which policies or plan is better for them. so that they can giveproper knowledge to the customers. Frequent change of customers shouldnot be done on the routes.
  • 9. PREFACE
  • 11. 1) To establish an interface between the policy/plans makers and policy takers, that how and in what manners they show there reaction towards policy and plan. Through the study we try to study and analysis the different pension plans of the two company LIC and ICICI PRUDENTIAL . How people choose the suitable pension plan for them from LIC.2) We also want to know that how and in what manners the different pension plan attract different age and salary group.INTRODUCTION TO THE TOPIC
  • 12. Introduction seeks to introduce the readers to the backgrounds of the study,people involved in the research scope of the study. It is a brief rationale aswhy we did our study on “Comparative Study On Pension Of LeadingLife Insurance Company ( LIC and ICICI Prudential) .Background and People InvolvedIn India LIC and ICICI Prudential are the leading Insurance Company. LICis from government sector and whereas ICICI prudential is a joint venture ofICICI Bank of India and prudential Insurance of U.K.Mainly pension is provided by the government to its employees. But there isa large no as people who work with private sector industry, after theretirement the first thing which worry them is how they survive and howtheirs needs and requirements fulfilled?Scope as the StudyTo know and understand the different pensions plans as policy as twoleading insurance company in insurance sector by study and analysisthat how and in what manner they attract the customers of differentage and salary groups.
  • 14. INSURANCE IN INDIA:-Insurance is a federal subject in India and has a history dating back to 1818.Life and general insurance in India is still a nascent sector with hugepotential for various global players with the life insurance premiumsaccounting to 2.5% of the countrys GDP while general insurance premiumsto 0.65% of Indias GDP.[1]. The Insurance sector in India has gone through anumber of phases and changes, particularly in the recent years when theGovt. of India in 1999 opened up the insurance sector by allowing privatecompanies to solicit insurance and also allowing FDI up to 26%. Ever since,the Indian insurance sector is considered as a booming market with everyother global insurance company wanting to have a lions share. Currently,the largest life insurance company in India is still owned by the government.History of Insurance in IndiaInsurance in India has its history dating back till 1818, when Oriental LifeInsurance Company was started by Europeans in Kolkata to cater to theneeds of European community. Pre-independent era in India sawdiscrimination among the life of foreigners and Indians with higherpremiums being charged for the latter. It was only in the year 1870, Bombay
  • 15. Mutual Life Assurance Society, the first Indian insurance company coveredIndian lives at normal rates.At the dawn of the twentieth century, insurance companies startedmushrooming up. In the year 1912, the Life Insurance Companies Act, andthe Provident Fund Act were passed to regulate the insurance business. TheLife Insurance Companies Act, 1912 made it necessary that the premiumrate tables and periodical valuations of companies should be certified by anactuary. However, the disparage still existed as discrimination betweenIndian and foreign companies. The oldest existing insurance company inIndia is National Insurance Company Ltd, which was founded in 1906 and isdoing business even today. The Insurance industry earlier consisted of onlytwo state insurers: Life Insurers i.e. Life Insurance Corporation of India(LIC) and General Insurers i.e. General Insurance Corporation of India(GIC). GIC had four subsidiary companies.With effect from December 2000, these subsidiaries have been de-linkedfrom parent company and made as independent insurance companies:Oriental Insurance Company Limited, New India Assurance CompanyLimited, National Insurance Company Limited and United India InsuranceCompany Limited.
  • 16. Related Acts:-The insurance sector went through a full circle of phases from beingunregulated to completely regulated and then currently being partlyderegulated. It is governed by a number of acts, with the first one being theInsurance Act, 1938.The Insurance Act, 1938The Insurance Act, 1938 was the first legislation governing all forms ofinsurance to provide strict state control over insurance business.Life Insurance Corporation Act, 1956Even though the first legislation was enacted in 1938, it was only in 19January 1956, that life insurance in India was completely nationalized,through a Government ordinance; the Life Insurance Corporation Act, 1956effective from 1.9.1956 was enacted in the same year to, inter-alia, formLIFE INSURANCE CORPORATION after nationalization of the 245companies into one entity. There were 245 insurance companies of bothIndian and foreign origin in 1956. Nationalization was accomplished by thegovt. acquisition of the management of the companies. The Life InsuranceCorporation of India was created on 1 September, 1956, as a result and hasgrown to be the largest insurance company in India as of 2006.[2]
  • 17. General Insurance Business (Nationalization) Act, 1972The General Insurance Business (Nationalization) Act, 1972 was enacted tonationalize the 100 odd general insurance companies and subsequentlymerging them into four companies. All the companies were amalgamatedinto National Insurance, New India Assurance, Oriental Insurance, andUnited India Insurance which were headquartered in each of the fourmetropolitan cities.[3]Insurance Regulatory and Development Authority (IRDA)Act, 1999Till 1999, there were not any private insurance companies in Indianinsurance sector. The Govt. of India, then introduced the InsuranceRegulatory and Development Authority Act in 1999, thereby de-regulatingthe insurance sector and allowing private companies into the insurance.Further, foreign investment was also allowed and capped at 26% holding inthe Indian insurance companies. In recent years many private players enteredin the Insurance sector of India. Companies with equal strength competingin the Indian insurance market. Currently, in India only 2 million people(0.2 % of total population of 1 billion), are covered under Mediclaim,whereas in developed nations like USA about 75 % of the total populationare covered under some insurance scheme. With more and more privateplayers in the sector this scenario may change at a rapid pace.
  • 18. General Insurance Business (Nationalization) Act, 1972The General National Insurance, New India Assurance, OrientalInsurance, United India Insurance which were headquartered in each ofthe four metropolitan cities.[3]LIC:- LIFE INSURANCE CORPRATION OFINDIA )
  • 20. BRIEF HISTORY OF LIFE INSURANCE CORPORATION (LIC)Bharat Insurance Company (1896) was also one of such companies inspiredby nationalism. The Swadeshi movement of 1905-1907 gave rise to moreinsurance companies. The United India in Madras, National Indian andNational Insurance in Calcutta and the Co-operative Assurance at Lahorewere established in 1906. In 1907, Hindustan Co-operative InsuranceCompany took its birth in one of the rooms of the Jorasanko, house of thegreat poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, GeneralAssurance and Swadeshi Life (later Bombay Life) were some of thecompanies established during the same period. Prior to 1912 India had nolegislation to regulate insurance business. In the year 1912, the LifeInsurance Companies Act, and the Provident Fund Act were passed. The LifeInsurance Companies Act, 1912 made it necessary that the premium ratetables and periodical valuations of companies should be certified by anactuary. But the Act discriminated between foreign and Indian companies onmany accounts, putting the Indian companies at a disadvantage.The first two decades of the twentieth century saw lot of growth in insurance
  • 21. business. From 44 companies with total business-in-force as Rs.22.44 crore,it rose to 176 companies with total business-in-force as Rs.298 crore in1938. During the mushrooming of insurance companies many financiallyunsound concerns were also floated which failed miserably. The InsuranceAct 1938 was the first legislation governing not only life insurance but alsonon-life insurance to provide strict state control over insurance business. Thedemand for nationalization of life insurance industry was made repeatedly inthe past but it gathered momentum in 1944 when a bill to amend the LifeInsurance Act 1938 was introduced in the Legislative Assembly. However, itwas much later on the 19th of January, 1956, that life insurance in India wasnationalized. About 154 Indian insurance companies, 16 non-Indiancompanies and 75 provident were operating in India at the time ofnationalization. Nationalization was accomplished in two stages; initially themanagement of the companies was taken over by means of an Ordinance,and later, the ownership too by means of a comprehensive bill. TheParliament of India passed the Life Insurance Corporation Act on the 19th ofJune 1956, and the Life Insurance Corporation of India was created on 1stSeptember, 1956, with the objective of spreading life insurance much morewidely and in particular to the rural areas with a view to reach all insurablepersons in the country, providing them adequate financial cover at areasonable cost.LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart
  • 22. from its corporate office in the year 1956. Since life insurance contracts arelong term contracts and during the currency of the policy it requires a varietyof services need was felt in the later years to expand the operations and placea branch office at each district headquarter. re-organization of LIC tookplace and large numbers of new branch offices were opened. As a result ofre-organization servicing functions were transferred to the branches, andbranches were made accounting units. It worked wonders with theperformance of the corporation. It may be seen that from about 200.00crores of New Business in 1957 the corporation crossed 1000.00 crores onlyin the year 1969-70, and it took another 10 years for LIC to cross 2000.00crore mark of new business. But with re-organization happening in the earlyeighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured onnew policies.Today LIC functions with 2048 fully computerized branch offices, 100divisional offices, 7 zonal offices and the corporate office. LIC’s Wide AreaNetwork covers 100 divisional offices and connects all the branches througha Metro Area Network. LIC has tied up with some Banks and Serviceproviders to offer on-line premium collection facility in selected cities. LIC’sECS and ATM premium payment facility is an addition to customerconvenience. Apart from on-line Kiosks and IVRS, Info Centers have beencommissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad,Kolkata, New Delhi, Pune and many other cities. With a vision of providing
  • 23. easy access to its policyholders, LIC has launched its SATELLITESAMPARK offices. The satellite offices are smaller, leaner and closer to thecustomer. The digitalized records of the satellite offices will facilitateanywhere servicing and many other conveniences in the future.LIC continues to be the dominant life insurer even in the liberalized scenarioof Indian insurance and is moving fast on a new growth trajectory surpassingits own past records. LIC has issued over one crore policies during thecurrent year. It has crossed the milestone of issuing 1,01,32,955 new policiesby 15th Oct, 2005, posting a healthy growth rate of 16.67% over thecorresponding period of the previous year.From then to now, LIC has crossed many milestones and has setunprecedented performance records in various aspects of life insurancebusiness. The same motives which inspired our forefathers to bringinsurance into existence in this country inspire us at LIC to take thismessage of protection to light the lamps of security in as many homes aspossible and to help the people in providing security to their families.
  • 24. Life Insurance Corporation of IndiaSome AreasThe traditional life insurance business for the LIC has been a littlemore than a savings policy. Term life (where the insurance companypays a predetermined amount if the policyholder dies within a giventime but it pays nothing if the policyholder does not die) hasaccounted for less than 2% Life Insurance.Corporation of IndiaSome Areas of Future GrowthLife InsuranceThe traditional life insurance business for the LIC has been a little more thana savings policy of the insurance premium of the LIC (Mitra and Nayak,2001). For the new life insurance companies, term life policies would be themain line of business.Health InsuranceHealth insurance expenditure in India is roughly 6% of GDP, much higherthan most other countries with the same level of economic development. Ofthat, 4.7% is private and the rest is public. What is even more striking is that4.5% are out of pocket expenditure (Berman, 1996). There has been an
  • 25. almost total failure of the public health care system in India. This creates anopportunity for the new insurance companies.Thus, private insurance companies will be able to sell health insurance to avast number of families who would like to have health care cover but do nothave it.PensionThe pension system in India is in its infancy. There are generally three formsof plans: provident funds, gratuities and pension funds. Most of the pensionschemes are confined to government employees (and some largecompanies). The vast majority of workers are in the informal sector. As aresult, most workers do not have any retirement benefits to fall back on afterretirement. Total assets of all the pension plans in India amount to less thanUSD 40 billion.Therefore, there is a huge scope for the development of pension funds inIndia. The finance minister of India has repeatedly asserted that a LatinAmerican style reform of the privatized pension system in India would bewelcome (Roy, 1997). Given all the pros and cons, it is not clear whethersuch a wholesale privatization would really benefit India or not (Sinha,2000).
  • 26. OBJECTIVES OF LIC• Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost.• Maximize mobilization of peoples savings by making insurance- linked savings adequately attractive.• Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return.• Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders.
  • 27. • Act as trustees of the insured public in their individual and collective capacities.• Meet the various life insurance needs of the community that would arise in the changing social and economic environment.• achievement of Corporate Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.• Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards the achievement of the goal.
  • 28. VISION AND MISSION VisionTo be the best Housing Finance Company in the country. Mission Provide secured housing finance at affordable cost, maximizing shareholders value with higher customer sensitivity. Values Fair and Transparent Business Practices. Transformation to a Knowledge Organization. Higher Autonomy in Operations. Instilling a sense of Ownership amongst Employees.
  • 29. PENSION: - A BRIEF INTRODUCTIONWhat Is PensionThe pension system in India is in its infancy. There are generally three formsof plans: provident funds, gratuities and pension funds. Most of the pensionschemes are confined to government employees (and some largecompanies). The vast majority of workers are in the informal sector. As aresult, most workers do not have any retirement benefits to fall back on afterretirement. Total assets of all the pension plans in India amount to less thanUSD 40 billion.Therefore, there is a huge scope for the development of pension funds inIndia. The finance minister of India has repeatedly asserted that a LatinAmerican style reform of the privatized pension system in India would bewelcome (Roy, 1997). Given all the pros and cons, it is not clear whethersuch a wholesale privatization would really benefit India or not (Sinha,2000).
  • 31. Introduction to the Pension Plans of LIC.Pension plan are Individual Plans that gaze into your future and foresee financialstability during your old age. These policies are most suited for senior citizens andthose planning a secure future, so that you never give up on the best things in life. • Jeevan Nidhi • Jeevan Akshay-VI • New Jeevan Dhara-I • New Jeevan Suraksha-I
  • 32. Jeevan NidhiLICs JEEVAN NIDHI is a with profits Deferred Annuity (Pension) plan. Onsurvival of the policyholder beyond term of the policy the accumulatedamount (i.e. Sum Assured + Guaranteed Additions + Bonuses) is used togenerate a pension (annuity) for the policyholder. The plan also provides arisk cover during the deferment period. The USP of the plan being thepension can commence at 40 years. The premiums paid are exempt underSection 80CCC of Income Tax Act.Salient Features:a . Guaranteed Additions: Guaranteed Additions @ Rs.50/- per thousandSum assured for each completed year, for the first five years.b. Participation in profits: The policy shall participate in profits of theCorporation from the 6th year onwards and shall be entitled to receivebonuses declared as per the experience of the Corporation.c. Benefit On Vesting: 1. Option to commute up to 1/3rd of the amount available on vesting, which shall include the Sum Assured under the Basic Plan together with accrued Guaranteed Additions, simple Reversionary Bonuses and Terminal Bonus, if any.
  • 33. 2 . Annuity as per the option selected: Annuity on the balance amount if commutation is exercised, otherwise annuity on the full amount.d. Annuity Options:On vesting, the annuity instalment, mode of annuity payment and type ofannuity which shall be made available to the Life Assured (Annuitant) /Nominee will depend upon the then prevailing Immediate Annuity plan ofthe Life Insurance Corporation of India and its terms and conditions.Currently the following options are available under LIC’s immediateannuities:1. Annuity for life: The annuity is paid to the life assured as long as he/sheis alive.2. Annuity Guaranteed for certain periods: The annuity is paid to the lifeassured for periods of 5 or 10 or 15 or 20 years as chosen by him/her,whether or not he/she survives that period. After the chosen period, theannuity is paid to the life assured as long as he/she is alive3. Annuity withreturn of purchase price on death: The annuity is paid to the life assuredas long as he/she is alive. On the death of the life assured, the purchase priceof the annuity is paid as death benefit. The purchase price includes the Sum
  • 34. Assured under the Basic Plan, the accrued Guaranteed Additions and anyaccrued bonuses, excluding the commuted value, if any.4. Increasing annuity: The annuity is paid to the life assured as long ashe/she is alive. The amount of annuity increases every year at a simple rateof 3% per annum.5. Joint Life Last Survivor Annuity: The annuity is paid to the life assuredas long as he/she is alive. On death of the life assured, 50% of the annuity ispayable to the nominated spouse as long as the spouse is alive.6. Death Benefit on death before annuity vests: On the death of the LifeAssured during the deferment period of the policy, i.e. before the annuityvests, an amount equal to the Sum Assured under the Basic plan along withthe accrued Guaranteed Additions, simple Reversionary Bonuses andTerminal Bonus, if any, will be paid in a lump sum to the appointednominee, provided the policy is in force for full Sum Assured. Nominee willalso have the option to purchase an annuity with this amount.
  • 35. Jeevan Akshay VIIntroduction:It is an Immediate Annuity plan, which can be purchased by paying a lumpsum amount. The plan provides for annuity payments of a stated amountthroughout the life time of the annuitant. Various options are available forthe type and mode of payment of annuities.Options Available:The following options are available under the planType of Annuity: • Annuity payable for life at a uniform rate. • Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as the annuitant is alive. • Annuity for life with return of purchase price on death of the annuitant. • Annuity payable for life increasing at a simple rate of 3% p.a. • Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant. • Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
  • 36. You may choose any one. Once chosen, the option cannot be altered.Mode: • Annuity may be paid either at monthly, quarterly, half yearly or yearly intervals. You may opt any mode of payment of Annuity.Salient features: • Premium is to be paid in a lump sum. • Minimum purchase price : Rs.50,000/= or such amount which may secure a minimum annuity as under: Mode Minimum Annuity Monthly Rs. 500 per month Quarterly Rs. 1000 per quarter Half-yearly Rs. 2000 per half year Yearly Rs.3000 per year • No medical examination is required under the plan. • No maximum limits for purchase price, annuity etc. • Minimum age at entry 40 years last birthday and Maximum age at entry 79 years last birthday. • Age proof necessary.
  • 37. Annuity Rate:Amount of annuity payable at yearly intervals which can be purchased forRs. 1 lakh under different options is as under: Age last Yearly annuity amount under option birthday ( ii ) (15 years (i) ( iii ) ( iv ) ( v ) ( vi ) certain) 40 7510 7440 6930 5610 7310 7120 45 7770 7660 6960 5890 7500 7240 50 8140 7950 7000 6280 7760 7420 55 8650 8330 7050 6810 8130 7670 60 9350 8790 7110 7530 8640 8030 65 10410 9330 7180 8590 9400 8570 70 12080 9830 7260 10220 10560 9370 75 14510 10220 7360 12590 12240 10590Incentives for high purchase price:If your purchase price is Rs. 1.50 lakh or more, you will receive higheramount of annuity due to available incentives.Cooling-off periodIf you are not satisfied with the “Terms and Conditions” of the policy, youmay return the policy to us within 15 days from the date of receipt of thePolicy Bond. On receipt of the policy we shall cancel the same and theamount of premium deposited by you shall be refunded to you afterdeducting the charges for stamp duty.
  • 38. Paid-up value:The policy does not acquire any paid-up value.Surrender Value :No surrender value will be available under the policy.Loan :No loan will be available under the policy.Section 41 of Insurance Act 1938 : • No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer: provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub-section if at the time of such acceptance the
  • 39. insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer.Any person making default in complying with the provisions of this sectionshall be punishable with fine which may extend to five hundred rupees.
  • 40. New Jeevan Dhara-IProduct summary:These are Deferred Annuity plans that allow the policyholder to makeprovision for regular income after the selected term.Premiums:Premiums are payable yearly, half-yearly, quarterly, monthly or throughSalary deduction, as opted by you, throughout the term of the policy or tillearlier death. Alternatively, the premium may be paid in one lump sum(single premium).Tax Benefits:Tax relief under Section 80ccc is available on premiums paid under NewJeevan Suraksha I (Table No.147). The premiums paid under New JeevanDhara I (Table No.148) qualify for tax relief under Section 88.Bonuses:These are with-profit plans and participate in the profits of the Corporation’sannuity / pension business. Policies get a share of the profits in the form ofbonuses. Simple Reversionary Bonuses are declared per thousand SumAssured annually at the end of each financial year. Once declared, they form
  • 41. part of the guaranteed benefits of the plan. Final (Additional) Bonuses mayalso be payable provided policy has run for a certain minimum period.
  • 42. New Jeevan Suraksha -IProduct summary:These are Deferred Annuity plans that allow the policyholder to makeprovision for regular income after the selected term.Premiums:Premiums are payable yearly, half-yearly, quarterly, monthly or throughSalary deduction, as opted by you, throughout the term of the policy or tillearlier death. Alternatively, the premium may be paid in one lump sum(single premium)Tax Benefits:Tax relief under Section 80ccc is available on premiums paid under NewJeevan Suraksha I (Table No.147). The premiums paid under New JeevanDhara I (Table No.148) qualify for tax relief under Section 88.
  • 43. Bonuses:These are with-profit plans and participate in the profits of the Corporation’sannuity / pension business. Policies get a share of the profits in the form ofbonuses. Simple Reversionary Bonuses are declared per thousand SumAssured annually at the end of each financial year. Once declared, they formpart of the guaranteed benefits of the plan. Final (Additional) Bonuses mayalso be payable provided policy has run for a certain minimum period.
  • 45. HISTORY OF ICICI PRUDENTIALICICI Prudential is a joint venture between ICICI Bank and Prudentialplc engaged in the business of life insurance in India. ICICIPrudential is the largest private insurance company and second largestinsurance in India after LIC. ICICI Prudential Life Insurance Companyis a joint venture between ICICI Bank, a premier financial powerhouse,and Prudential plc, a leading international financial services groupheadquartered in the United Kingdom. ICICI Prudential was amongst thefirst private sector insurance companies to begin operations inDecember 2000 after receiving approval from Insurance RegulatoryDevelopment Authority (IRDA).ICICI Prudential Lifes capital stands at
  • 46. Rs. 37.72 billion (as on March, 2008) with ICICI Bank and Prudentialplc holding 74% and 26% stake respectively. For the year ended March31, 2008, the company garnered Retail New Business Weighted premium ofRs. 6,684 crores, registering a growth of 68% over the last year andhas underwritten nearly 3 million retail policies during the period.The company has assets held over Rs. 30,000 crore as on April 30,2008.ICICI Prudential Life is also the only private life insurer inIndia to receive a National Insurer Financial Strength rating of AAA(Ind) from Fitch ratings. The AAA (Ind) rating is the highest rating,and is a clear assurance of ICICI Prudentials ability to meet itsobligations to customers at the time of maturity or claims.For thepast seven years, ICICI Prudential Life has retained its leadershipposition in the life insurance industry with a wide range of flexibleproducts that meet the needs of the Indian customer at every step inlife.
  • 47. Vision & ValuesTo be the dominant Life, Health and Pensions player built on trust by world-class people and service.This we hope to achieve by: • Understanding the needs of customers and offering them superior products and service. • Leveraging technology to service customers quickly, efficiently and conveniently. • Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders. • Providing an enabling environment to foster growth and learning for our employees. • And above all, building transparency in all our dealings.The success of the company will be founded in its unflinching commitmentto 5 core values -- Integrity, Customer First, Boundary less, Ownership andPassion. Each of the values describes what the company stands for, thequalities of our people and the way we work.
  • 48. We do believe that we are on the threshold of an exciting new opportunity,where we can play a significant role in redefining and reshaping the sector.Given the quality of our parentage and the commitment of our team, thereare no limits to our growth.
  • 49. How to plan for retirement?5 simple steps to arrive at an ideal retirement planStep 1: Decide how much income you require to live comfortably in yourpost-retirement years. Remember to take into account aspects like increasedmedical costs, vacations and gifts for family, but reduce costs like childrenseducation and rent, if you own your home. Use our easy Inflation IndexCalculator to calculate the impact of inflation.Step 2: Determine how much you need to save regularly, starting today.Use our Retirement Calculator to determine how large a kitty you will needand how much you need to save each year.Step 3: Select the right retirement plan that enables you to meet your post-retirement requirements. Preferably invest in market-linked plans, which canprovide you with potentially higher returns in the long run. Our Life StageProfiler will help you select the plan that meets your criteriaStep 4: Start saving now so you have time on your side and can enjoy thepower of compounding. Use our simple Power of Compounding Calculator.Step 5: Systematically invest a fixed amount every month for your post-retirement years.
  • 50. Why is retirement planning important?Retire from work. Not from life.A retirement plan is an assurance that you will continue to earn a satisfyingincome and enjoy a comfortable lifestyle, even when you are no longerworking. To understand why an increasing number of individuals havealready started planning for their retirement, and why you should too, readon.Independence is the new way of life: An increasing number of youngIndian professionals are moving away from the traditional joint familystructure. Since support no longer comes easily, parents have realized theneed to provide for themselves during their retirement years.Costs set to soar: Skyrocketing costs throw even a well-salaried person offbalance. With rates rising everyday, you can imagine how high they will bewhen you are ready to retire. A retirement plan provides you with a steadyincome every month, to arm you in the face of rising costs.To understand how inflation can impact your monthly expenses, use ourspecial tool, the Inflation Index calculator.
  • 51. Non-earning retirement phase is now longer: Only 4% of India workingpopulation- mostly government employees – are covered by pensions. Theremaining 96% comprises self-employed and salaried professionals who donot have a formal, mandated provision for pensions.ICICI Prudential offers two key retirement plans, LifeLink Super Pensionand LifeTime Super Pension - flexible income cum insurance plans thatensure you meet all your retirement requirements. So you can retirepeacefully from work, but not from life.
  • 52. Retirement SolutionsTo cater to the needs of a customer looking for retirement planning, ICICIPrudential presents a wide array of products. These products have beendesigned to take into account the diverse set of needs that characterizeindividual customers. Plan Name Plan Type LifeStage Pension Unit Linked PremierLife Pension Unit Linked LifeTime Super Pension Unit Linked LifeLink Super Pension Unit Linked ForeverLife Traditional Immediate Annuity Traditional
  • 53. Why Life Stage PensionRetirement time is the time to live your dream, dream that you have beenputting off as you never had the time for it. But your retirement dream has acost attached to it. We call this your retirement number.To help you achieve your retirement number ICICI Prudential presents toyou, LifeStage Pension.One of the most distinguishing features of this policy is that it has nopremium allocation charge for regular premiums which means 100% of yourmoney is invested. What’s more, the policy provides you with a uniquelifecycle-based strategy that continuously re-distributes your money acrossvarious asset classes based on your life stage and risk tolerance, eventuallyproviding you with a customized retirement solution.Invest today to attain your retirement number and fulfill your dream
  • 54. Why Premier Life PensionYou have strived hard to achieve your dreams and have attained the bestcomforts life could offer. After having reached this enviable and secureposition, wouldn’t you like to continue living life on your own terms evenafter retirement? If you think so, then you need a retirement solution thatnot only suits your needs but also lets you retire RICH.To help you achieve this, ICICI Prudential Life Insurancepresents PremierLife Pension Plan- a limited premium paying, unit-linkedpension policy designed for preferred customers like you.This unique policy helps you customize your investments by allowing you todecrease your premium contributions as well as allowing you to boost yourinvestment kitty by making top-ups at any time. Once you arrive at yourretirement age the accumulated value of your policy provides you with aregular income (pension) for life
  • 55. Why LifeTime Super Pension PlanICICI Prudentials LifeTime Super Pension policy is especially designed tohelp you systematically save towards a joyful and satisfying retirement.LifeTime Super Pension Plan is a cost-effective pension plan that deliversgreat valuein the long run. A regular-premium unit-linked pension policy, LifeTimeSuper Pension ensures you earn a fixed income, for your entire lifeafter retirement. So you can relax and live moments that truly matter..
  • 56. Why LifeLink Super PensionICICI Prudentials LifeLink Super Pension Plan has been especiallytailored for individuals who would much rather make a lump-suminvestment than pay premiums at regular intervals for their retirementplanning. A cost-effective single premium unit-linked pension policy,LifeLink Super Pension Plan provides potentially higher returns thatensure your golden years are secure and peaceful.Invest in LifeLink Super Pension Plan today and watch your moneymultiply every month, right up to the day you retire. Receive an assuredincome from your retirement day, for the rest of your life. Read more aboutthe features and benefits of this plan.
  • 57. Why ForeverLifeICICI Prudentials ForeverLife is a complete insurance cum pension planthat performs two crucial roles: it acts as a protective cover while you earnfor your retirement, and provides you with regular pensions once youretire.
  • 58. Why Immediate AnnuitySecurity and comfort during retirement is a top priority for everyone. Itforms the central aspect of a dream that everyone hopes to achieve andrealize at some point or the other during his or her life as a senior citizen.If you fear that youve missed the bus as far as retirement planning isconcerned, there is no reason to despair. With ICICI Prudentials SinglePremium Product, you can start earning an annuity income immediatelyafter paying the premium. Whats more, the annuity income is guaranteed forlife which means that the insurance company pays you and your spouse (asthe case maybe) a guaranteed pension till you live.
  • 59. Tax Benefits on Insurance and PensionLife insurance and retirement plans are effective ways to save taxes whendoing your year end tax planning.To assist you in tax planning, the tax breaks that are available under ourvarious insurance and pension policies are described below:Our life insurance plans are eligible for tax deduction under Sec. 80C. 1. Our Pension plans are eligible for a tax deduction under Sec. 80CCC. 2. Our health insurance plans/riders are eligible for tax deduction under Sec. 80D. 3. The proceeds or withdrawals of our life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section.Invest in ICICI Prudential Life insurance and retirement plans and avail ofthese tax planning services to save tax at your year end tax planning!
  • 60. ULIPs : An IntroductionMost importantly, what are ULIPs? Here, you will find all the informationyou need to set your mind at ease about how to invest in ULIPs, and whichULIP is right for you.ULIPs are a category of goal-based financial solutions that combine thesafety of insurance protection with wealth creation opportunities. In ULIPs,a part of the investment goes towards providing you life cover. The residualportion of the ULIP is invested in a fund which in turn invests in stocks orbonds; the value of investments alters with the performance of theunderlying fund opted by you.Simply put, ULIPs are structured in such that the protection element and thesavings element are distinguishable, and hence managed according to yourspecific needs. In this way, the ULIP plan offers unprecedented flexibilityand transparency.Working of ULIPsIt is critical that you understand how your money gets invested once youpurchase a ULIP:
  • 61. When you decide the amount of premium to be paid and the amount of lifecover you want from the ULIP, the insurer deducts some portion of theULIP premium upfront. This portion is known as the Premium Allocationcharge, and varies from product to product. The rest of the premium isinvested in the fund or mixture of funds chosen by you. Mortality chargesand ULIP administration charges are thereafter deducted on a periodic(mostly monthly) basis by cancellation of units, whereas the ULIP fundmanagement charges are adjusted from NAV on a daily basis.Since the fund of your choice has an underlying investment – either inequity or debt or a combination of the two – your fund value will reflect theperformance of the underlying asset classes. At the time of maturity of yourplan, you are entitled to receive the fund value as at the time of maturity. Thepie-chart below illustrates the split of your ULIP premium:
  • 63. Types of ULIPsOne of the big advantages that a ULIP offers is that whatever be yourspecific financial objective, chances are that there is a ULIP which is justright for you. The figure below gives a general guide to the different goalsthat people have at various age-groups and thus, various life-stages.Depending on your specific life-stage and the corresponding goal, there is aULIP which can help you plan for it.
  • 64. PLANNING ULIPS FOR RETIREMENTRetirement is the end of active employment and brings with it the cessationof regular income. Today an increasing number of people have statedplanning for their retirement for below mentioned reasons • Almost 96% of the working population has no formal provisions for retirement • With the growing nuclearisation of family structure, traditional support system of the younger earning members – is no longer available • Developments in the healthcare space has lead to an increase in life expectancy • Cost of living is increasing at an alarming ratePension plans from insurance companies ensure that regular, disciplinedsavings in such plans can accumulate over a period of time to provide asteady income post-retirement. Usually all retirement plans have twodistinctive phases
  • 65. • The accumulation phase when you are saving and investing during your learning years to build up a retirement corpus and • The withdrawal phase when you actually reap the benefits of your investment as your annuity payouts beginIn a typical pension plan you have the flexibility to make a lump sumpayment or a regular contribution every year during your earning years. Yourmoney is then invested in funds of your choice. You can opt to receive theannuity at any time after vesting age (age at which you become eligible forpension chosen by you at the inception of the plan).Most of the Unit linked pension plans also come with a wide range ofannuity options which gives you choice in structuring the post-retirementbenefit pay-outs. Also at the time of vesting you can make a lump sum tax-exempted withdrawal of up to 33 per cent of the accumulated corpus.In a retirement plan the earlier you begin the greater you gain postretirement due to the power of compounding.Let us take an example of Gaurav & Hari. Both of them want to retire at theage of 60. Gaurav starts investing Rs. 10,000 every year from the age of 25till the time that he retires. In all, he would have invested Rs. 350,000. If his
  • 66. investments were to earn 7% return every year, at the time of his retirement,Gaurav will have a retirement corpus of Rs. 13, 82,368.Now, Hari starts investing 10 years later (i.e. at the age of 35) and in order tomake up for the lost time, invests Rs.15,000 every year (which is 50% morethan Gaurav’s annual investment). So, by the time of his retirement, hewould have invested Rs. 3,75,000. And assuming the same annual return of7%, he will end up with a retirement corpus of Rs 9, 48,735.So, you see how despite setting aside more than 50% of Gaurav’s annualcontribution, Hari ends up with a retirement corpus which is almost a thirdlesser than Gaurav’s. That is the power of compounding.Which is why, it is never too early to invest in a ULIP for retirementplanning
  • 67. Tax Benefits of ulipULIPs are an efficient tax saving instrument too .The tax benefits that youcan avail in case you invest in ULIPs are described below: • Life insurance plans are eligible for deduction under Sec. 80C • Pension plans are eligible for a deduction under Sec. 80CCC • Health insurance plans and critical illness riders are eligible for deduction under Sec. 80DThe maturity proceeds or withdrawals of life insurance policies are exemptunder Sec 10(10D), subject to norms prescribed in that section.
  • 68. ULIP s FAQ (FREQUENTLY ASKED QUESTION )Q1. What is a Unit Linked Fund?Unit Linked Fund is a pool of the premiums paid by the policyholders whichis invested in a portfolio of assets to achieve the fund(s) objective. The priceof each unit in a fund depends on how the investments in the fund wouldperform. The fund is managed by the insurance companies.Q2. What is a Fund Value and how is it calculated?Fund Value is the product of the total number of units under the policy andthe NAV. The fund value for the purpose of claims, surrenders or any otherclause stated shall be calculated on the basis of NAV.Q3. What do I get at the end of my policy term?The benefit received at the end of policy term is termed as maturity benefit.The policyholder is entitled to receive fund value as maturity benefit.Q4. What will my family receive if something happens to me?In the unfortunate event of death during the term of the policy, the personappointed as nominee shall receive the higher of sum assured or the fundvalue. There are also certain ULIPs in market which give sum of Fund value& sum assured as death benefit.
  • 69. Q5. Is investment return guaranteed in ULIPs?Investment returns from ULIP may not be guaranteed.” In unit linkedproducts/policies, the investment risk in investment portfolio is borne bythe policy holder”. Depending upon the performance of the unit linkedfund(s) chosen; the policy holder may achieve gains or losses on his/herinvestments. It should also be noted that the past returns of a fund are notnecessarily indicative of the future performance of the fund.Q6. Can I change / switch my asset allocation?Yes, you can change the investment pattern by moving from one fund toother fund (s) amongst the funds offered under a particular product. Such achange between funds is termed as a Switch. There will be a flat chargelevied for any switch over and above the free switches.Q7. Can I partially withdraw from my policy?Yes, you can encash / withdraw a part of the fund anytime after completionof three years, subject to surrender charges as applicable to each individualplan.
  • 70. Q8. Can I foreclose my policy? Are there any charges applicable?Yes, you can foreclose your policy by surrendering the policy. Surrendermeans terminating the contract once and for all. On surrender, the surrendervalue is payable to you which is Fund Value less the surrender charge.Surrender Charge means a charge levied on the fund value at the time ofsurrender of the policy.
  • 72. RESEARCH PROBLEM1) To establish an interface between the policy/plans makers and policy takers, that how and in what manners they show there reaction towards policy and plan. Through the study we try to study and analysis the different pension plans of the different company. How people choose the suitable pension plan for them from LIC.2) We also want to know that how and in what manners the different pension plan attract different age and salary group.
  • 73. HYPOTHESISHypothesis is couched in terms of the particular independent and dependentvariables that are going to be used in study. Research hypothesis are specifictestable prediction made about the independent and dependent variables inthe study.As data is not originally collected for use in the research project underconsideration, but rather for use some other project, by some other person interms of secondary data. Usually the literature review has given background material thatjustifies the particular hypothesis that is to be tested.There exists two type of hypothesis that is to be : Null hypothesis Alternate hypothesis • In null hypothesis we assume that LIC pension plan work over the other private insurance plan like ICICI prudential. • Alternate hypothesis if our assumption that the LIC pension plan work over the other private company pension plan go wrong, alternate hypothesis exists. It proves that ICICI prudential plan has greater share.
  • 74. RESEARCH METHODOLOGYRESEARCH:- “Research is an organized and systematic way of finding answersto question”. “Research is an enquiry or examination to discover newinformation or relationship and to extent and to verify existing knowledge”. Redman & Mory define research as a “systematized effort togain new knowledge.”Methodology is define as 1. “The analysis of the principle of methods, rules, and postulates employed by a discipline” or 2. “The development of methods, to be applied within a discipline” 3. “A particular procedure or set of procedure.”
  • 75. Research design The framework of conducting research is known as research design. “Research design is the plan, structure, and strategy of investigation conceived so as to obtain answers to research question and to control variance.”Types of research Design:-There are three types of Research Design:- 1. Exploratory Research Design: - The major emphasis in exploratory Research Design is on discovery of ideas and insights. 2. Descriptive Research Design: - The descriptive Research Design study is typically concerned with determining the frequency with which something occurs or the relationship between two variables. 3. Causal Research Design: - A Causal Research Design is concerned with determining cause and effect relationship. 4. For the study, Descriptive Research Design was undertaken as it draws the opinion of employees/workers on specific aspect
  • 76. Why pension plans offer the best retirement solutionsMohan Shahs father Prakash retired last year from Central Bank of India.During his 29 years of service, he failed to opt for any pension scheme. Andbeing the sole earning member, Prakash retired with little savings. The littlethat was there in his bank account was used up last December to pay for hissecond daughter’s wedding.Today, he and his wife live with Mohan and are forced to rely on theirchildren for financial support. But for how long? Having turned 60 lastmonth, and looking at the mortality tables, Mohan’s father has probablyanother 15 to 20 years left. Added to daily expenses, in January this year,Mohan’s mother was diagnosed with diabetes and has to take insulinregularly.This means medical expenses for Mohan. Health and medical costs haveincreased manifold and will quadruple over the next 10 years. This is anadditional expense for Mohan, as doctor’s visits become a regular feature asone ages. It’s not just medical costs alone. Even daily expenses like food,petrol and transportation end up costing more. A kilo of potatoes used to costjust Rs 1.50 some time back. Today, a kilo costs Rs 8, and if inflation rises atthe annual rate of five to six per cent, 10 years from now potatoes could cost
  • 77. Rs 43 a kilo! Petrol prices have equally shot up from Rs 17 a litre 10 yearsback to Rs 34-35 plus today, and could well rise to Rs 60 a litre 10 yearsfrom now. Enter pension, to reduce tension. Pension is all about insuringoneself financially against the risk of living too long. It is about fundmanagement, long-term savings, protection and annuity income. Moreover,investment in pension plans offers taxpayers a direct tax deduction of Rs10,000 from one’s taxable income under Section 80 CCC (1) of the IncomeTax Act. Unlike Section 88, the tax benefits under this section are availableto persons in all income brackets. Even for those eligible to save tax underSection 88, the saving on an investment of Rs 10,000 is higher in the case ofpension plans. The tax saved is Rs 3,150, whereas under Section 88 a Rs10,000 investment yields a maximum tax rebate of Rs 2,000. However, onedoesn’t invest in pension schemes only for tax savings. Considering the highcost of living and falling interest rates, people ought to be saving far morethan Rs 10,000 a year if they wish to retain their present lifestyles. Take theLife Insurance Corporation’s (LIC) Jeevan Suraksha pension plan. A 30-year-old paying Rs 10,238 every year for a term of 20 years will be entitledto a pension of just Rs 14,200 per month on retiring at the age of 50. LICassumes an annual bonus rate of Rs 65 per Rs 1,000. This is purely anillustration, which could vary depending on interest rates and investmentstrategies. A pension plan also allows a policyholder to withdraw a certainpercentage of the accumulated funds on retirement to take care of some large
  • 78. expenses. Most of the private players - ICICI Prudential, HDFC StandardLife, Tata AIG and Aviva Life - have followed in the LIC’s footsteps andoffer a maximum withdrawal of 25 per cent of the accumulated corpus at thetime of retirement. OM Kotak Mahindra Life is the only one to offer amaximum withdrawal of 33 per cent of the accumulated amount.After withdrawal, policyholders have to buy an annuity plan from thebalance amount that will provide them with a monthly pension till they bid afinal goodbye. By taking an open market option, customers can, on maturity,buy an annuity product from any life insurance company. Should apolicyholder die within the accumulating period, most life insurers returnpremium with interest, subject to a maximum of sum assured, plusaccumulated bonuses to date, say officials with HDFC Standard Life.It is not easy to decide today how much annuity one should take 20 yearslater. That’s a decision best left to be made at the time of retirement.Customers can choose from various annuity options available, includingoptions like annuity for husband and wife, annuity with annual increment,annuity with return of purchase price and more. During the accumulationphase, a customer can only decide how much he/she can contribute andafford to put aside for post-retirement needs, says Tata AIG Life InsuranceCompany managing director Ian Watts. Looking at the inflation rate and
  • 79. increasing post-retirement costs in terms of healthcare needs, this means oneshould ideally save longer and more if one wishes to preserve one’s existinglifestyle. A few ballpark numbers will help you figure out how much youshould save in your circumstances. If you save Rs 10,000 every year for aperiod of 30 years under LIC’s Jeevan Suraksha, you can expect a pension ofRs 9,290 per month on retirement after withdrawing Rs 3.93 lakh onretirement.Should you not opt to withdraw a part of the accumulated corpus, you canexpect a monthly pension of Rs 12,388 based on LIC’s current indicativecalculations. A lot, however, depends on interest rates at the point ofretirement. A warning is in order, though: The incentive to save more thanRs 10,000 is low because the balance has to come from post-tax income.On the other hand, if you do save more and entitle yourself to higherpension, that pension income will be taxed again as normal income. So, it’s adouble whammy — double taxation of pension savings and pension income.Yet, Mohan, learning from his father’s failure to save for post-retirementlife, signed his first pay cheque away towards the purchase of an ICICIPrudential pension plan. He plans to religiously put aside Rs 20,000 everyyear to get himself a worthwhile pension and in the hope that the
  • 80. government will increase the tax deduction in the years to come. Meanwhile,his life gets covered during the savings/ accumulation period. ICICIPrudential also offers a health cover and guarantees capital protection duringthe accumulation phase. To be sure, pension plans are not the only availableinstruments in the market today for long-term savings. During theaccumulation phase, one could opt for mutual funds, the government’s tax-free bonds, the public provident fund, or government securities. But there isno tax exemption or inherent life cover in mutual funds; in the case of PPF,you get section 88 benefits for incomes up to Rs 5 lakh, but not above. Theinterest is, however, tax-free. Some infrastructure bonds also offer Section88 benefits.HOW MUCH PENSION?In retirement planning, one needs to calculate backward to figure out howmuch one should invest - with or without tax breaks. First, ask yourselfwhen you wish to retire. Then, what kind of income do you need to maintainyour present standard of living. If you think you need Rs 10,000 a month(pre-tax) if you were to retire today, assuming a six per cent inflation rate,you would need Rs 17,908 after 10 years, Rs 23,965 after 15, and Rs 32,071after 20 years. If you assume a more benign inflation rate of, say, four per
  • 81. cent, the required amounts would be Rs 14,802, Rs 18,009 and Rs 21,911after 10, 15 and 20 years of saving. You will then need to talk to yourpension plan advisor and figure out what you need to put away every year toachieve your targeted pension income. We have to, of course, assume thattaxation will be indexed to inflation - in which case your post-tax income 20years from now will be similar in real terms to what it is today for a pensionincome of Rs 10,000 per month.
  • 82. Pension plans rise in insurance co portfoliosCan I lead a comfortable life after my retirement? Thats a question an increasing number of people areasking themselves.And thats the reason why pension plans today contribute about 30% of theinsurance industrys total business . The industry is seeing a 20%-25 %annual growth in pension policies and a 50% growth in premium. "Theaverage premium for pension plans is higher ," says Amit Gupta, director formarketing in ING Vysya Life Insurance. At ING Life, pension plans used tocontribute 4%-5 % of business in 2006. But in 2008, thats grown to about10%. For Bharti AXA Life, the retirement product , which was launched inJanuary 2008, contributed 20% of the total premium in the year.Most private companies do not offer pensions, and employees are typicallydependent only on their provident fund for retirement financing, which inmost cases is insufficient to maintain current living standards. Thats the gappension plans are seeking to fill. "Pension plans are mainly targeted towards
  • 83. couples in the age group of 35 and 45 years. Couples at this age would havecompleted saving for their protection needs, would have children who areslightly older and would be now interested in planning for retirement ," saysGupta. Young couples are also beginning to plan for retirement, but this isstill a relatively small proportion and is largely seen in metros.Financial planners say it is best to start investing in a pension plan early inlife, like 25-35 years, in order to get a meaningful deferred annuity. As the gap reduces between the contribution period and the vesting periodthe pension amount becomes smaller.A global survey on retirement trends conducted by AXA in 2008 revealedthat the working population in India expects to have a better quality of life orat least maintain the current life standards postretirement."The survey covered 26 countries and Indians were the most optimistic. Theoptimism is not supported with financial planning, as 56% of the populationhadnt started preparing for retirement," says the survey. Insurancecompanies say major concerns among people in pension planning relates to
  • 84. deciding the right time to invest and choosing a plan that provides payoutbeyond a certain age.Companies are coming with products to cater to different needs. "We have aproduct that allows people to increase contribution to the retirement kitty,"says Shyamal Saxena, chief marketing officer of Bharti AXA.
  • 85. Did you say retirement is all about surviving on ameager pension?Banish the thought. With the market flush with different types of schemes,you need not walk into the twilight zone with empty pockets. In fact,retirement solutions are suddenly in demand with people becoming moreaware of the need to save for the sunset years. Particularly in a country likeIndia where, according to a survey by the Invest India EconomicFoundation, less than a sixth of those about to retire in the next 10 years arecovered by some form of pension, and only 2% of those not working ingovernment (where pensions are generous) being able to fund their retiredlives even if they cut expenses by half, the need for retirement plans isinevitable.Surprisingly, in sharp contrast to times when only traditional pension planswere available in the market, the entry of private insurance players haschanged the scenario, as also the profile of the products. Pension plans todayare more oriented towards the model of ULIPs (unit-linked insuranceproducts) because of their ability to provide better returns on the back ofrobust stock market performances, as is the norm abroad.
  • 86. Says Bert Paterson, managing director, Aviva India: “In the last 20-25 years,traditional products have taken a back seat in the developed markets. Nowmore than 80%-90% of people invest in unit-linked products for bothpensions and life insurance.”This, however, is not the case with India. Here, the majority of people stillrely on the traditional pension schemes such as PF and post office plans. Buttaking a cue from the developed world, new age insurance companies haveintroduced a whole range of unit-linked pension plans in the Indian markettoo, with their number growing by the day.Aviva India’s PensionPlus, ICICI Prudential’s LifeLink Super Pension andLifeTime Super Pension, TaTa AIG’s InvestAssure Gold, SBI Life’s HorizonII Pension and Reliance Golden Years Plan are some of them. Furthermore,as the insurance companies providing these plans have increased manifold,there are more product choices before investors than ever before.“Even within the ULIPs, investors have choices in terms of varying theirexposure to the equity markets by choosing an aggressive or dominantpension fund,” says Ashish Kapur, CEO, Invest Shoppe India Ltd, addingthat for instance, an aggressive pension scheme would invest up to 60% in
  • 87. equity and the rest in debt-oriented avenues, while the conservative planwould have a nominal exposure of 10-15% to equity.Conventional pension plans, on the other hand, invest a major portion of thepremium amount in bonds and government securities (G-Secs). That is whythe returns are on the lower side there, say investment experts. And if onewere to factor into the equation an annual inflation figure of approximately5%-6% per annum, then the real return figures look even moreunimpressive. As against this, unit-linked pension plans are said to be givingreturns of 25-40% in some cases.Better returns, however, are not the only reason for the growing popularityof ULIP products. “The reasons for the increasing popularity of ULIPs arethat they are flexible, transparent and provide value for money. What’smore, they can be suited to the needs of all types of customers, from the riskaverse to customers who seek higher returns with some downsiderisk,”informs Paterson.ICICI Prudential’s Life Time Pension Plan, for instance, allows one tochoose from three options – Income, Balanced and Growth. While theIncome fund is 100% invested in debt instruments, the Balanced and Growthoptions provide flexibility to allocate up to 40% and 90%. Likewise, Aviva’s
  • 88. PensionPlus comes with three fund options – Balanced, Growth and Secure.And the same is the case with most other plans. Thus, depending upon theirrisk appetite, the customers can choose which fund option to go for.“For a risk-averse customer, a Secure Fund or the Protector Fund isadvisable as most of the money is invested in government bonds. Forsomeone wanting returns and willing to take risks, a Growth fund is the bestwhere most of the money is invested in equities,” says Paterson.Thus, as against the conventional belief that ULIPs being market-linkedproducts are risky, it is possible to build in an element of guaranteed returnwithin the unit-link framework too. “The key point is that customers cantailor their investment strategy to suit their risk profile. Besides, theinvestment strategy is flexible and can be changed as the customer’s needsand circumstances change,” he adds.Besides, according to experts, unit-linked products have distinct advantagesover traditional ones. Firstly, they are transparent. A customer can track thevalue of his investments on a daily basis as the NAV is published in leading
  • 89. dailies and on the websites of the companies. Further, all charges on thepolicy are shown to the customer.Secondly, they are flexible. “Every insurance company has four to fiveULIPs with varying investment options, charges and conditions forwithdrawals and surrender. Moreover, schemes have been tailored to suitdifferent customer profiles and, in that sense, offer a great deal of choice,”says Kapur.Thirdly, ULIPs offer liquidity to the individual as he can withdraw moneyanytime he wishes to after the initial lock-in period without a surrendercharge. This is unlike conventional endowment plans where individuals tendto lose out on surrender charges on surrendering their policies.Other advantage are that since the investments are made for long periods, thechances of earning a decent return are high. Also, the premiums paid forULIPs are eligible for tax rebates under Section 80C which allows a taxdeduction of premiums paid within the overall ceiling of Rs 1 lakh. Further,proceeds from ULIPs are tax-free under section 10(10D), unlike those froma mutual fund which attract capital gains tax.
  • 90. This, however, doesn’t mean that one should opt for unit-linked productswithout taking any precaution.First, one should look at the various charges being levied by the insurebefore choosing a pension plan. One should also look at the fundperformance and avoid reacting impulsively. “Usually investors reactimpulsively to the volatile movements of the market and switch in betweenthe schemes. Since ULIPs are designed for long-term investment, one shouldwatch the performance over a period of time,” advises an SBI Life Insurancespokesperson.It also makes eminent sense to avoid putting all your eggs in one basket.“More so, since none of the private insurers has a performance track recordavailable for evaluation. Although LIC has been around for decades, it hasopted out of assuring returns as it did in the past. So spread your investmentover plans of more than one company, but not at the cost of your investmentobjective and risk profile,” advises Kapur.Also, a prudent factor while choosing a pension plan is that it shouldpreferably be a pure pension plan. Frills like life insurance cover andaccident or critical illness riders should preferably be avoided.
  • 92. There are a total of 13 life insurance companies operating in India, of whichone is a Public Sector Undertaking and the balance 12 are Private SectorEnterprises.List of Companies are indicated below:- NAME OF THE LIFE INSURANCE COMPANY AND THE SHARE HOLDING PATTEN Name of the company Nature of Holding Allianz Bajaj Life Insurance Co Private Aviva Life Insurance Private Birla Sun Life Insurance Co Private HDFC Standard Life Insurance Co Private ICICI Prudential Life Insurance Co Private ING Vysya Life Insurance Co. Private Life Insurance Corporation of India Public Max New York Life Insurance Co. Private MetLife Insurance Co. Private Om Kotak Mahindra Life Insurance Private Reliance insurance Private SBI Life Insurance Co Private TATA- AIG Life Insurance Company Private
  • 93. MARKET SHARE OF INSURANCE COMPANY (%) Name of the Player Market share (%) LIFE INSURANCE CORPORATION OF INDIA 82.3 ICICI PRUDENTIAL 5.63 BIRLA SUN LIFE 2.56 BAJAJ ALLIANZ 2.03 SBI LIFE INSURANCE 1.80 HDFC STANDARD 1.36 TATA AIG 1.29 MAX NEW YARK 0.90 AVIVA 0.79 OM KOTAK MAHINDRA 0.51 ING VYSYA 0.37 MET LIFE 0.21PRESENT SCENARIO OF INSURANCE INDUSTRYIndia with about 200 million middle class household shows a huge untappedpotential for players in the insurance industry. Saturation of markets in manydeveloped economies has made the Indian market even more attractive forglobal insurance majors. The insurance sector in India has come to a position
  • 94. of very high potential and competitiveness in the market. Indians, havealwaysseen life insurance as a tax saving device, are now suddenly turning to theprivate sector that are providing them new products and variety for theirchoice.Consumers remain the most important centre of the insurance sector. Afterthe entry of the foreign players the industry is seeing a lot of competitionand thus improvement of the customer service in the industry.Computerization of operations and updating of technology has becomeimperative in the current scenario. Foreign players are bringing ininternational best practices in service through use of latest technologiesThe insurance agents still remain the main source through which insuranceproducts are sold. The concept is very well established in the country likeIndia but still the increasing use of other sources is imperative. At presentthe distribution channels that are available in the market are listed below. • Direct selling
  • 95. • Corporate agents • Group selling • Brokers and cooperative societies • Bank assuranceCustomers have tremendous choice from a large variety of products frompure term (risk) insurance to unit-linked investment products. Customers areoffered unbundled products with a variety of benefits as riders from whichthey can choose. More customers are buying products and services based ontheir true needs and not just traditional money back policies, which is notconsidered very appropriate for long-term protection and savings. There islots of saving and investment plans in the market. However, there are stillsome key new products yet to be introduced - e.g. health products.The rural consumer is now exhibiting an increasing propensity for insuranceproducts. A research conducted exhibited that the rural consumers arewilling to dole out anything between Rs 3,500 and Rs 2,900 as premiumeach year. In the insurance the awareness level for life insurance is thehighest in rural India, but the consumers are also aware about motor,accidents and cattle insurance. In a study conducted by MART the resultsshowed that nearly one third said that
  • 96. They had purchased some kind of insurance with the maximumPenetration skewed in favor of life insurance. The study also pointed ouThe private companies have huge task to play in creating awareness andCredibility among the rural populace. The perceived benefits of buying aLife policy range from security of income bulk return in future, daughtersMarriage, childrens education and good return on savings, in that order,The study adds.
  • 98. COMPRATIVE ANALYSIS OF ULIP PENSION PLAN OF LIC AND ICICI PRUDENTIL Profit Premier Life Plus(LIC) Gold(ICICI) PPT Single,3,4,5 3 or 5 year yearMinimum premium 20,000 for 1,00,000 for 3 single mode year 10,000 for 60,000 for 5 others yearMin. Entry age 0 years 0 yearMax. Entry Age 65 years. 69 year for term 3 year 65 year for term 5 year
  • 99. Minimum Policy 5 years 6 year for PPT Term 3 year 10 year for PPT 5 year Maximum Policy 20 years 30 years Term Partial Allowed after 3 Allowed after withdrawal years 3 years On death Higher of Sum Sum Assured or Assured or the fund value Policyholder’s whichever is Fund Value higherAllocation Charge:Profit plusUnder single premium mode it is only from 4.5 to5%.For PPT of 3 to 4 year in the first year it isbetween 9 to 10.5 % and 2.5% in the subsequentyears.For PPT of 5 year it is quite high. It chargesbetween 22.5 to 24 % in the first and 4% in thesubsequent years.The allocation charge depends on amount invested,higher for less investment amount.Premier Life Gold (ICICI)
  • 100. For 3 years PPT it charges 12 % in the first yearand 4% in the subsequent yearsFor 5 years PPT it charges 12% in first year,4% in2nd and 3rd year and 2% for remaining years.Mortality charges:Profit plusFor 25 year healthy male it comes to 1.42 Rs. Per1000 S.AWhich comes to Rs. 142 per 1 Lac?Premier Life Gold (ICICI)Here they charge separately for male and femaleFor 20 years male it is Rs. 1.33 per 1000 Rs. S.AFor 20 years female it is Rs. 1.26 per 1000 Rs. S.AFund management chargeBoth charges same fund management chargesIt is in the range of 0.75 % to 1.50 % Per annumand calculated on daily basis.Policy administration charge:LIC charge Rs. 60 per month in the first year andRs. 20 for the subsequent years.ICICI charge Rs 60 per month.Switching charges:Both charges in the same way,4 switches are free. Rs.100 for additional
  • 101. Switches.COMPRASION OF ICICI PRU’S FOREVER LIFE,LIC’SJEEVAN SURAKSHA AND HDFC’S STAINDARD LIFE. HDFCParticulars ICICI Pru Life LIC Standard Life Jeevan Suraksha- Personal PensionType Forever Life 1 PlanSum Assured/Notional Cash ValueMin. Rs. 50,000 Rs 50000 Rs.25,000Max. No Limit No Limit No Limit Accident & Disability Benefit, Critical Term AssuranceRiders Illness Benefit, Major No Rider available Option only Surgical Assistance, Level Term CoverMaturity Option to take 25% Option to take 25% Option to take 25% of corpus in of corpus in of corpus in lumpsum & balance lumpsum & balance lumpsum & balance 75% as an annuity/ 75% as an 75% as an annuity. Annuity on full annuity/Annuity on Annuity on full
  • 102. corpus. corpus/Annuity on full corpus. full corpus.Death (During Regular Income All premiums All Premiums paiddeferment) stream to spouse if (excluding term up to the date of the spouse is not assurance premium death accumulated alive a lumpsum and extra premium if at the rate of 8% p.a. amount is paid to the any) paid up to the compounded will be Nominees./Spouse date of death paid to the nominee has option to take accumulated at the or (Notional Cash 100% of Sum rate of 5% p.a. Option+Bonus + assured+bonuses+ compounded or at terminal bonus), +guaranteed such rate decided by whichever is lower additions (if death the LIC from time to after 7 years of the time will be paid to policy) the nomineeDeath (After Spouse/beneficiaries Spouse/beneficiaries Spouse/beneficiariesdeferment) benefits Depends benefits Depends benefits Depends upon Annuity option upon Annuity option upon Annuity option chosen chosen chosenSurrender guaranteed guaranteed guaranteed surrender value is surrender value is surrender value is payable after 3 payable after 2 payable after 3 years years premiums are years premiums are premiums are paid. paid paidOpen Market Available Not Available AvailableOptionLife Cover Available Not Available Not AvailablePostponement of Available Not Available Not Availablevesting age
  • 103. Spouse Pensionafter policy 100 % 50 % 50 %holder FINDINGS
  • 104. FINDINGS • People are not aware about the pension plan so insurance agent should make aware about the pension plan and its benefits. • Pension plan are so minimum in numbers so people not find pension plan according to their earning and requirements. • Pension is provided only to government employees and big company employees so pension plan in insurance company has bright future.
  • 106. RECOMMENDATION• We need to make people aware about the pension plan in rural and semi urban area about the pension plan and its benefits.• Insurance agent and advisors need to give only those plan which are fulfilling the requirement and needs in a best way.• Both LIC and ICICI PRUDENTIAL should make some pension plan for those who are nit economically sound, so they can also secure their future.• Insurance company should have some more plan in Pension category as they have in other category like Health and General insurance.
  • 107. • Pension plan should be more convenient; with the pension plan health plan should be provided because in the old age expenses on health related is increased. CONCLUSION
  • 109. BIBLIOGRAPHYWebsites:- ICICI ICICI prudential life insurance India LIC india.comBook Referred Research Methodology - C.R. Kothari