1

CHAPTER - 1
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INTRODUCTION
The growth of the life insurance industry is synonymous with the development of a
country as it ensures social security, better standard of living and healthy and prosperous
future. The Indian insurance industry which is the 10th largest in the world initially took off
with the entry of private players from the year 2000 onwards. But of late the insurance
industry in India is experiencing a slowdown which is visible from the fall in insurance
density and insurance penetration. This is a major cause of concern because fewer people are
buying insurance which is a driver for improving the standard of living. Infact the growth in
the number of branches opened by the insurers is coming down which clearly indicates that
the insurance industry is on the back foot. ULIPs once the favourite among the insurers,
intermediaries and the customers has steadily lost its foot hold and seem to have fallen out of
favour with all the stakeholders. During the year 2010 there was a tussle between IRDA and
SEBI regarding the purview of the functioning of ULIPs. Thus this study aims to look into
the performance of ULIP schemes of the various insurers to determine the returns generated
and to analyse their performance characteristics. Hence the study is aptly titled A study on
the performance of ULIP schemes from the investors point of view

Performance Evaluation of ULIPS and Financial Planning of IDBI Federal

Life Insurance Co Ltd. is a joint-venture of IDBI Bank, India's premier development
and commercial bank, Federal Bank, one of India's leading private sector banks and Ages, a
multinational insurance giant based out of Europe. In this venture, IDBI Bank owns 48%
equity while Federal Bank and Ages own 26% equity each. Having started in March 2008, in
just five months of inception, IDBI Federal became one of the fastest growing new insurance
companies by garnering Rs.100 Cr in premiums. Through a continuous process of innovation
in product and service delivery IDBI Federal aims to deliver world-class wealth management,
protection and retirement solutions that provide value and convenience to the Indian
customer. The company offers its services through a vast nationwide network 2,308 partner
bank branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors
and partners. Achieved break even with in a period of five years (2005-2010) with an amount
of 96crores.
3

Sponsors of IDBI Federal life insurance Company limited

IDBI Bank Ltd. continues to be, since its inception, India's premier industrial
development bank. It came into being as on July 01, 1964 to support India's industrial
backbone. Today, it is amongst India's foremost commercial banks, with a wide range of
innovative products and services, serving retail and corporate customers in all corners of the
country. The Bank offers its customers an extensive range of diversified services including
project finance, term lending, working capital facilities, lease finance, venture capital, loan
syndication, corporate advisory services and legal and technical advisory services to its
corporate clients as well as mortgages and personal loans to its retail clients. As part of its
development activities, IDBI Bank has been instrumental in sponsoring the development of
key institutions involved in India's financial sector - National Stock Exchange of India
Limited (NSE) and National Securities Depository Ltd, SHCIL (Stock Holding Corporation
of India Ltd), CARE (Credit Analysis and Research Ltd).

In India, prior to liberalization insurance protection was made available through

public sector insurance companies, namely, life insurance Corporation of India (LIC) and the
four subsidiaries of General Insurance Corporation of India (GIC). By the passing of the
IRDA Bill, the Insurance sector has been opened up for private companies to carry on
Insurance business. Insurance contracts are based on good faith i.e. the details furnished by
the proposals are accepted in good faith and this will form the basis of the contract.

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

Unit-Linked Life Insurance plan is also known as non traditional plan. Most insurers
in the year 2004 have started offering at least a few unit-linked plans. Unit-linked life
insurance products are those where the benefits are expressed in terms of number of units
and unit price. They can be viewed as a combination of insurance and mutual funds.
4

The number of units that a customer would get would depend on the unit price when
he pays his premium. The daily unit price is based on the market value of the underlying
assets (equities, bonds, government securities, et cetera) and computed from the net asset
value.The advantage of unit-linked plans is that they are simple, clear, and easy to
understand. Being transparent the policyholder gets the entire upside on the performance of
his fund. Besides all the advantages they offer to the customers, unit-linked plans also lead to
an efficient utilization of capital.

ULIP's usually have following charges built into it

a) Up-front Charges
b) Mortality Charges (Charges for providing the risk cover for life)
c) Administrative Charges
d) Fund Management Charges

Mutual Funds have the following charges

a) Up-front charges (Marketing, Advertising, distributors fee etc.)
b) Fund Management Charges (expenses for managing your fund)

ABOUT FINANCIAL PLAN

In general usage, a financial plan can be a budget, a plan for spending and saving
future income. This plan allocates future income to various types of expenses, such as rent or
utilities, and also reserves some income for short-term and long-term savings. A financial
plan can also be an investment plan, which allocates savings to various assets or projects
expected to produce future income, such as a new business or product line, shares in an
existing business, or real estate.

In business, a financial plan can refer to the three primary financial statements
(balance sheet, income statement, and cash flow statement) created within a business plan.
5

NEED FOR THE STUDY

Today in India there is 1. 32 billion population (according to 2016 census) and more than
50% of INDIAs current population is below the age of 25 and over65% below the age of 35
only 18% people have Life Insurance Policy very less contribution to economy when
compared with other countries having 75 to 80%.A customer will have his/her own choice of
preferences to purchase a product. The preferences may be as quality, quantity, price, and
brand name, additional features from other products and long term services, guarantee,
warranty. For different products and services the preferences will be different base on time,
situation, and need. But finally what the customer needs is value of the money he/she
paid for the product i.e. enough returns (services, benefits) by using the product.
The case is same even in the insurance sector also.

There are various factors which influence and customer prefers in taking an Insurance policy.
Factors are premium of policy, benefits of the policy, flexible payment options, brand name
the company have in market. So among the above factors which one is preferred more by the
customer is to be analyzed.

This project will tell us how well the investment in insurance is piercing that to in insurance
plan like unit linked insurance plan (ULIPS Invest) & Perception of investment plan of
customers towards insurance and performance of ulip products. The Study is about the
financial plan of individuals from the customer point of view.
6

Scope of study

Scope of project is explanatory and descriptive study. This survey helps us to know
what benefits are looked by the consumer in Insurance Product and awareness of IDBI
Federal Life Insurance. Exiting customers of other companies also showing interest to
invest in IDBI Federal Life Insurance. This includes how a customer gets attracted
towards the products and what makes a brand highly significant over their
competitive brand. This project will tell us how well the investment in
insurance is piercing that to in insurance plan like unit linked insurance plan
(ULIPS) & Perception of investment plan of customers towards insurance.
Performance of ULIP products comparatively with previous years. Study is
about the financial plan of individuals from the customer point of view.
7

Objectives of the study

To study the theoretical aspects performance evaluation of ULIPs.

To know about the customer awareness on various insurance policies.

To study customer perception about the ULIPs.

To suggest measures if necessary for the better performance of the ULIPs.

RESEARCH METHODOLOGY
8

Research Design
Research design is the arrangement for conditioned for data collection and
analysis of data in a manner that aims to combine relevance to research purpose with
economy in procedure. It is a plan for the conduct of formal investigation. It is blue print that
is followed in completing study. The research conducted by me is a descriptive research
because study is focused on fact investigation in a well-structured form and is based on
primary data and secondary data. (Questionnaire and interview)

Sampling Frame:

There are 17lacks IDBI customers holders in this location among those the
customers who have invested in any of the plans.
Sampling Size

There are 100 customers mapped to us in the city including home town which
served as our sample size.
Sampling Procedure

It was a randomly area sampling method that attempts to obtain the sample of
convenient.
Data collection

Data collection-is a term used to describe a process of preparing and collecting-data,

for example, as part of a-process improvement-or similar project. The purpose of data
collection is to obtain information to keep on record, to make decisions about important
issues, or to pass information on to others. Data are primarily collected to provide
information regarding a specific topic.
Present Findings- usually involves some form of sorting analysis and/or presentation.
Prior to any data collection, pre-collection activity is one of the most crucial steps in the
process. It is often discovered too late that the value of their interview information is
discounted as a consequence of poor sampling of both questions and informants and poor
elicitation techniques.
After pre-collection activity is fully completed, data collection in the field, whether by
interviewing or other methods, can be carried out in a structured, systematic and scientific
9

way. A formal data collection process is necessary as it ensures that data gathered are both
defined and accurate and that subsequent decisions based on arguments embodied in the
findings are valid.-The process provides both a baseline from which to measure from and in
certain cases a target on what to improve.
Other main types of collection include census, sample survey, and administrative by-
product and each with their respective advantages and disadvantages. A sample survey is a
data collection method that includes only part of the total population and has advantages,
such as cost and time and disadvantages, such as accuracy and detail. Administrative by-
product data are collected as a byproduct of an organization's day-to-day operations and has
advantages, such as accuracy, time simplicity and disadvantages, such as no flexibility and
lack of control.
Data collection-is a term used to describe a process of preparing and collecting-data.
The purpose of data collection is to obtain information to keep on record, to make decisions
about important issues, to pass information on to others. Here pre-collection of data,
collection of data and present findings of data are found. In the pre collection of data, the
rough sketch of the information is found and actual data is collected and is analyzed.

Data collection techniques

Data Collection is an important aspect of any type of research study. Inaccurate data
collection can impact the results of a study and ultimately lead to invalid results. Data
collection methods for impact evaluation vary along a continuum. At the one end of this
continuum are quantitative methods and at the other end of the continuum are Qualitative
methods for data collection.
There are many methods in data collection like quantitative, qualitative, Questionnaire,
interviews
There are mainly two ways of getting the data Primary and Secondary.

Primary data

The data which is gathered by meeting people and asking them questions. Such
information/data is called as Primary data.
Secondary-data
10

It is the data collected by someone other than the user. Common sources of secondary
data for-social science-include-censuses, organizational records and data collected through
qualitative methodologies or-qualitative research.-Primary data, by contrast, are collected by
the investigator conducting the research.
Secondary data analysis saves time that would otherwise be spent collecting data and,
particularly in the case of-quantitative data, provides larger and higher-quality-databases-that
would be unfeasible for any individual researcher to collect on their own. In addition,
analysts of social and economic change consider secondary data essential, since it is
impossible to conduct a new survey that can adequately capture past change and/or
developments.
Sample Frame : Visakhapatnam, Hyderabad, kharagpur and Odisha
Sample Size : 100 Insurance customers

Sample size is the number of observations used for calculating estimates of a given
population. Sample sizes reduce expenses and time by allowing researchers to estimate
information about a whole population without having to survey each member of the
population.
Data Source : SURVEY
Instrument : Questionnaire
Method used : Convenience sampling

Limitations of the study

11

The study is based on the data collected from the people having life insurance policy
only.

The time period for the study is limited.

In study of a unit linked plan as a part of financial planning and customer preference
in taking life insurance policy, price of the policy is majorly considered because
money is major constraint for each and every person.

Price other policy is considered as a single parameter to carry out the study.
12

CHAPTER - 2

INDUSTRY PROFILE
13

IDBI Federal Life Insurance Co Ltd. is a joint-venture of IDBI Bank, India's premier
development and commercial bank, Federal Bank, one of India's leading private sector banks
and Ageas, a multinational insurance giant based out of Europe. In this venture, IDBI Bank
owns 48% equity while Federal Bank and Ageas own 26% equity each. Having started in
March 2008, in just five months of inception, IDBI Federal became one of the fastest
growing new insurance companies by garnering Rs.100 Cr in premiums. Through a
continuous process of innovation in product and service delivery IDBI Federal aims to
deliver world-class wealth management, protection and retirement solutions that provide
value and convenience to the Indian customer. The company offers its services through a vast
nationwide network 2,308 partner bank branches of IDBI Bank and Federal Bank in addition
to a sizeable network of advisors and partners. Achieved break even with in a period of five
years (2005-2010) with an amount of 96crores.

Sponsors of IDBI Federal life insurance Company limited

IDBI Bank Ltd. continues to be, since its inception, India's premier industrial
development bank. It came into being as on July 01, 1964 to support India's industrial
backbone. Today, it is amongst India's foremost commercial banks, with a wide range of
innovative products and services, serving retail and corporate customers in all corners of the
country. The Bank offers its customers an extensive range of diversified services including
project finance, term lending, working capital facilities, lease finance, venture capital, loan
syndication, corporate advisory services and legal and technical advisory services to its
corporate clients as well as mortgages and personal loans to its retail clients. As part of its
development activities, IDBI Bank has been instrumental in sponsoring the development of
key institutions involved in India's financial sector - National Stock Exchange of India
Limited (NSE) and National Securities Depository Ltd, SHCIL (Stock Holding Corporation
of India Ltd), CARE (Credit Analysis and Research Ltd).
14

Federal Bank is one of India's leading private sector banks, with dominant presence in the
state of Kerala. It has a strong network of over Spread across India. The bank provides over
four million retail customers with a wide variety of financial products. Federal Bank is one of
the first Large Indian banks to have an entirely automated and interconnected Branch
network.

In addition to interconnected branches and ATMs, the Bank has a wide range of services like
Internet Banking, Mobile Banking, Tele Banking, and Any Where Banking, debit cards,
online bill payment And call center facilities to offer round the clock banking convenience to
its customers. The Bank has been a pioneer in providing innovative Technological solutions
to its customers and the Bank has won several Awards and recommendations.

Ageas is an international insurance group with a heritage spanning more than 180 years.
Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate
its business activities in Europe and Asia, which together make up the largest share of the
global insurance market. These are grouped around four segments: Belgium, United
Kingdom, Continental Europe and Asia and served through a combination of wholly owned
subsidiaries and partnerships with strong financial institutions and key distributors around the
world. Ageas operates successful partnerships in Belgium, UK, Luxembourg, Italy, Portugal,
Turkey, China, Malaysia, India and Thailand and has subsidiaries in France, Hong Kong and
UK. Ageas is the market leader in Belgium for individual life and employee benefits, as well
as a leading non-life player through AG Insurance. In the UK, Ageas has a strong presence as
the fourth largest player in private car insurance.
15

HISTORY OF IDBI FEDERAL LIFE INSURANCE COMPANY

2006: IDBI Bank, Federal Bank and Belgian-Dutch insurance major Fortis Insurance
International NV signed a MoU to start a life insurance company

2008: IDBI Fortis Life Insurance Co. Ltd., which started its operations in March 2008

2008: IDBI Fortis opens its second branch in Andhra Pradesh in Vijayawada

2009: IDBI Fortis launches Retiresurance Pension Plan

2009: IDBI Fortis Life Insurance uses an interactive application to help users easily
calculate their taxes

2009: IDBI Fortis Life Insurance introduces financial inclusion plan in rural Orissa

2009: IDBI Fortis launches Termsurance Protection Plan

2009: IDBI Fortis redefines endowment & money back with Incomesurance

2009: IDBI Fortis to open 65 more branches; raise headcount by 1,000

2010: IDBI Fortis now renamed as IDBI Federal Life Insurance Company

PERFORMANCE OF IDBI FEDERAL LIFE INSURANCE COMPANY

November 2007 -Joint venture agreement signed

December 2007 -License received from IRDA
March 2008 - First policy sold
August 2008 - fastest Rs. 100cr premium collected.
February 2009 - breaks mould with wealthsurance cup ( Sri Lanka)
March 2010 - AUM crossed Rs. 1000cr. Mark
August 2010 -IDBI FORTIS becomes IDBI Federal Life insurance.
November2012 - achieves MASTER BRAND status.
March 2013 - break even & maiden profit declares.
March 2014 - declares Rs.80cr. profit, continues the profitable trajectory.
March 2015 - IDBI Federal reported a profit of Rs.155cr. at the end of the
financial year
2014-15 against Rs.80cr. declared last year.
16

ACHIEVEMENTS OF IDBI FEDERAL LIFE INSURANCE COMPANY

Market share increased

from 1.07% in FY 13-15 to
1.39% in FY14-15 for total
new business premium
Having
among private playerscommerced
operations in 2008, IDBI
Federal achieved breakeven
within just 5 years.
Solvency ratio
th
13 is sound at
month 507% against
persistency for minimum
FY14-15 is one regulations
of the best in requirement of
industry at 70%. 150% for FY14-
15.
17

About History of Insurance in India

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

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

In 1914, the Government of India started publishing returns of Insurance Companies in

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

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

An Ordinance was issued on 19 th January, 1956 nationalizing the Life Insurance sector and
Life Insurance Corporation came into existence in the same year. The LIC absorbed 154
18

Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreign

insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was
reopened to the private sector.

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

1957 saw the formation of the General Insurance Council, a wing of the Insurance
Association of India. The General Insurance Council framed a code of conduct for ensuring
fair conduct and sound business practices.

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

In 1972 with the passing of the General Insurance Business (Nationalization) Act, general
insurance business was nationalized with effect from 1st January, 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance Company Ltd.,

the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United
India Insurance Company Ltd. The General Insurance Corporation of India was incorporated
as a company in 1971 and it commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending to nearly 200
years. The process of re-opening of the sector had begun in the early 1990s and the last
decade and more has seen it been opened up substantially. In 1993, the Government set up a
committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose
recommendations for reforms in the insurance sector. The objective was to complement the
reforms initiated in the financial sector. The committee submitted its report in 1994 wherein,
among other things, it recommended that the private sector be permitted to enter the
insurance industry. They stated that foreign companies are allowed to enter by floating Indian
companies, preferably a joint venture with Indian partners.
19

Following the recommendations of the Malhotra Committee report, in 1999, the

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

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

In December, 2000, the subsidiaries of the General Insurance Corporation of India

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

Today there are 24 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 24 life insurance companies operating in the country.

Company Profile
20

IDBI Federal Life Insurance Company is one of the fastest growing company. IDBI
Federal Life Insurance Corporation Limited is a joint-venture of IDBI Bank, Federal Bank,
one of Indias leading private sector banks, Indias premier development and commercial
bank and Ageas, a multinational insurance giant based out of Europe. IDBI Federal Life
Insurance commenced its operations from 2008. IDBI Federal Life insurance provides a
national wide network of 2754 branches. IDBI Federal Life Insurance company has issued
nearly 6.8 lakh policies. IDBI Federal Life Insurance main aim is to achieve build quality
human capital. Vighnesh Shahane is the CEO of IDBI Federal Life insurance company.
Federal bank is Indias leading company which has strong network of over 1435 ATMs and
1214 branches spread across India. Ageas is an international insurance company which is
ranked as top 20 insurance companies in Europe.

Main vision of IDBI Federal Life Insurance company is To be the leading provider of
protection, wealth management and retirement solutions that meets the needs of customers
and adds value to their lives.

IDBI Federal Life Insurance Customer login

The customer can login by visiting the company website www.idbifederal.com. In order to
register, the details to be filled which are given below

Policy Number

User ID

New Password

Confirm Password

Date of Birth

Email ID

Mobile No

For more details and information refer the following link attached below

IDBI Federal Life Insurance Customer login

IDBI Federal Life Insurance Online Payment

21

Following premium payment options are listed below

Pay through online

Pay through IDBI Bank Branch

Pay through Federal Bank

Pay through IDBI Federal Branch

Pay through Your Advisor

Pay through our Cheque Pick-up Facility

Pay through Standing Instructions Facility

Pay through ECS/Direct Debit Instructions Facility

In case of Paying Premium through online mode the following steps to be taken which are
explained below

Step 1: Enter the Date of Birth and Policy Number

Step 2: Select the payment Option either by Net banking mode or Credit card mode or by
Debit card mode

Step 3: Fill the necessary details for paying and submit the details

Step 4: Keep the receipt number and save or print the premium deposit for future reference

For more details and information you can refer the following link which is attached below

IDBI Federal Life Insurance Online payment

IDBI Federal Life Insurance Policy Status

The Policyholder can check his policy status at company website www.idbifederal.com.
The details to be filled to check policy status are listed below

Policy Number

Date of Birth of Insured

Email. I D etc
22

For more details and information refer the following link attached below

IDBI Federal Life Insurance Policy Status

IDBI Federal Life Insurance Premium Calculator

While buying the IDBI Federal life insurance policy the following details to be filled
by the customer to calculate the premium. Details to be filled are given below

Name

Type of Policy

Sum assured

Policy term etc

For more details and information refer the following link attached below

IDBI Federal Life Insurance Premium Calculator

IDBI Federal Life Insurance Corporate Office Address

Corporate Office Address

IDBI Federal Life Insurance Co Ltd,

1st Floor, Trade view,

Oasis Complex,

Kamala City, P.B. Marg,

Lower Parel (W),

Mumbai 400013, India

IDBI Federal Life Insurance Customer Care Number

Any doubts regarding this life insurance company, or any complaints then you can call
customer care number of IDBI Federal Life Insurance
23

CUSTOMER CARE NUMBERS:

1800 209 0502

022 2490 8109

Website: www.idbifederal.com

Email I.D: [email protected].

List of IDBI Federal Life insurance plans

Endowment Plan

About Insurance :

Insurance is a contract between insurance company and policyholder in which the insurance
company agrees to pay particular amount on the happening of certain events with a condition
that policyholder pay the premium regularly.
For example, If we take a car insurance policy, the insurance company agrees to pay the
repairing expenses when the car gets damaged in an accident.

Insurance classification
24

About Life Insurance :

A life insurance policy provides financial protection to the family in case of an unfortunate
event like death. At a basic level, it involves paying small premiums during the term of the
policy, your family will receive a lump sum amount in case of death of policyholder or at the
end of policy term.

There are five types of life insurance policies

1. Term Insurance plans

2. Endowment Insurance plans

3. Whole life insurance plans

4. Pension Plans

5. ULIPs
25

Tem Insurance plans

In Term insurance policy the life insurance company promises to pay a specified
amount (sum insured) if the insured dies during the term of the plan. If the life insured
survives the entire duration of the plan then nominee will not be entitled to anything, meaning
that there is no maturity benefit with such policies.

Endowment Insurance plans

An Endowment Insurance plan is a combination of term insurance and savings plan. It

offers death cover if the life insured dies during the term of the policy or survival benefit if
the life insured survives until the maturity of the policy.

Money Back Plans

Money Back Plans provides life coverage during the term of the policy and the
maturity benefits are paid in instalments by way of survival benefits in fixed interval of time.
In the event of death within the policy term, full sum assured without deducting any of the
survival benefit amounts will be paid as death benefits.
26

Whole Life insurance plan

Whole Life insurance plan is a type of life insurance which provides death cover if the
life insured dies during the term of the policy or after the term of the policy

Pension Plans

Pension Plans are retirement Plans for Financial stabilization of your old age. Pension
Plans are suitable for senior citizens and those who are planning for a secure future.

ULIPS

Ulips is an unit linked insurance policy. In ULIPs, a part of the investment goes
towards providing you life cover. The remaining portion of the ULIP is invested in market
stocks or bonds. In IDBI Federal Life Insurance Company limited wealhsurance comes under
ULIP.

Wealthsurance growth insurance plan (SP): it is a single premium unit linked plan that
helps you maximise returns on your investment, with a one time effort.

Wealthsurance growth insurance plan (RP): it is a regular premium unit linked plan
that gives you the freedom to build your wealth, exactly what you want.

Wealthsurance future star insurance plan: this plan helpful for childrens education,
marriage etc.

About General Insurance:

A General insurance policy provides financial protection to your property in case of

an unfortunate event like fire accident or any natural disasters. General insurance policies are
short term policies maximum of one or two years only. Initially you need to pay premium,
then you can receive financial help from the insurance company in case of an unfortunate
event.
27

Types of General insurance policies

1. Motor insurance

2. Fire/ House owners/ Householders insurance

3. Personal accident insurance

4. Medical and health insurance

5. Travel insurance

Motor Insurance
Motor insurance is an insurance policy for cars, trucks, two wheelers and other road
vehicles. Its primary objective is to provide protection against physical damage resulting
from traffic collisions, accidents and against legal problems.

Motor insurance in India covers for the loss or damage caused to the automobile or its parts
due to natural and man-made calamities. Click to get Motor insurance Related Policies.

House Insurance
28

Fire/ House owners/ Householders insurance

Fire/ House owners/ Householders insurance plan provides protection for property, domestic
appliances, electronic appliances and members in the house under a single policy. Click to get
House insurance Related Policies.

Health Insurance

Medical and health insurance

Health insurance is a type of insurance that covers the medical and surgical expenses
of an insured individual. Click to get Health insurance Related Policies.

Travel Insurance

Travel Insurance is a type of insurance that covers medical expenses, trip cancellation,
loss of baggage, flight accident and other losses incurred while travelling, either
internationally or within ones own country. Click to get Travel insurance Related Policies.

Personal accident insurance

Personal accident insurance is an annual policy which provides compensation in the

event of injuries, disability or death caused by violent, accidental, external and visible
events. Click to get Person accident insurance Related Policies.
29

GRAPHS SHOWING PERFORMANCE OF FUNDS

1MID CAP FUND
30
31

2: CAPITAL GURANTEED FUND

32
33

3: GURANTEE RETURN FUND

34
35

4: ASSET ALLOCATOR FUND (AGGRESSIVE)

36
37

CHAPTER - 3
38

THEORITICAL FRAMEWORK

In India, prior to liberalization insurance protection was made available through public sector
insurance companies, namely, life insurance Corporation of India (LIC) and the four
subsidiaries of General Insurance Corporation of India (GIC). By the passing of the IRDA
Bill, the Insurance sector has been opened up for private companies to carry on Insurance
business. Insurance contracts are based on good faith i.e. the details furnished by the
proposals are accepted in good faith and this will form the basis of the contract.

The IRDA opened up the market in August 2000 with the invitation for application for
registrations. Foreign companies were allowed ownership of up to 26%. The Authority has
the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from
2000 onwards framed various regulations ranging from registration of companies for carrying
on insurance business to protection of policyholders interests. In December, 2000, the
subsidiaries of the General Insurance Corporation of India were restructured as independent
companies and at the same time GIC was converted into a national re-insurer. Parliament
passed a bill de-linking the four subsidiaries from GIC in July, 2002. Today there are 14
general insurance companies including the ECGC and Agriculture Insurance Corporation of
India and 24 life insurance companies operating in the country.

Insurance means pooling of risk and is classified into two types:

a) Life insurance and b) Non-life insurance

Insurance is a contract between two parties where by one party called insurer
undertakes in exchange for a fixed sum called premiums, to pay the other party called
insured a fixed amount of money on the happening of a certain event.Insurance is
designed to safeguard oneself and ones family against possible losses on account of risks and
perils. It provides financial compensation for the losses suffered due to the happening of any
unforeseen event. By taking life insurance a person can have peace of mind and need not
worry about the financial consequences in case of any untimely death.

Types of Life Insurance Policies

Term Life Insurance

Endowment Insurance
39

Whole Life Insurance

Term Life Insurance

Term Life Insurance furnishes protection for a limited number of years ate the end of
which the policy expires. The face amount of the policy is payable only if the insureds death
occurs during the stipulated term, and nothing is paid in case of survival. Term product prices
are more easily compared than prices of other life products as term policies are usually
simpler than other policies

Types of Term Life Insurance:

Level Face Amount

Non-Level Face Amount

Endowment Life Insurance

Endowment policies, promises not only to pay the policy face amount on the death of
the insured during fixed term of years, but also to pay the full face amount at the end of the
term if the insured survives the term.

Types of Endowment Policies:

Single Premium Endowment Policy

Semi Endowment Policy
Modified Endowment Policy

Whole Life Insurance

Whole life insurance is intended to provide insurance protection over ones entire life
time. I t provides the payment of the face amount upon the insureds death regardless of when
death occurs. It is insurance for the whole of the life.

Types of whole life Insurance:

Ordinary Life Insurance.

40

Limited Payment whole Life Insurance

Current Assumption whole Life Insurance
Unit-Linked Life Insurance

THEORETICAL ASPECTS OF UNIT LINK PLAN

INTRODUCTION
The growth of the life insurance industry is synonymous with the development of a
country as it ensures social security, better standard of living and healthy and prosperous
future. The Indian insurance industry which is the 10th largest in the world initially took off
with the entry of private players from the year 2000 onwards. But of late the insurance
industry in India is experiencing a slowdown which is visible from the fall in insurance
density and insurance penetration. This is a major cause of concern because fewer people are
buying insurance which is a driver for improving the standard of living. Infact the growth in
the number of branches opened by the insurers is coming down which clearly indicates that
the insurance industry is on the back foot. ULIPs once the favourite among the insurers,
intermediaries and the customers has steadily lost its foot hold and seem to have fallen out of
favour with all the stakeholders. During the year 2010 there was a tussle between IRDA and
SEBI regarding the purview of the functioning of ULIPs. Thus this study aims to look into
the performance of ULIP schemes of the various insurers to determine the returns generated
and to analyse their performance characteristics. Hence the study is aptly titled A study on
the performance of ULIP schemes from the investors point of view

DEFINITION of 'Unit Linked Insurance Plan - ULIP'

A type of insurance vehicle in which the policyholder purchases units at their net asset
values and also makes contributions toward another investment vehicle. Unit linked insurance
plans allow for the coverage of an insurance policy, and provide the option to invest in any
number of qualified investments, such as stock, bonds or mutual funds.

History of ULIP

The first ULIP was launched in India in 1971 by Unit Trust of India (UTI).[1] With
the Government of India opening up the insurance sector to foreign investors in 2001[2] and
the subsequent issue of major guidelines for ULIPs by the Insurance Regulatory and
41

Development Authority (IRDA), now Insurance Regulatory and Development Authority of

India (IRDAI), in 2005,[3] several insurance companies forayed into the ULIP business
leading to an over abundance of ULIP schemes being launched to serve the investment needs
of those looking to invest in an investment cum insurance product.

Working Principle

A Unit Link Insurance Plan is basically a combination of insurance as well as

investment. A part of the premium paid is utilized to provide insurance cover to the policy
holder while the remaining portion is invested in various equity and debt schemes. The
money collected by the insurance provider is utilized to form a pool of fund that is used to
invest in various markets instruments (debt and equity) in varying proportions just the way it
is done for mutual funds. Policy holders have the option of selecting the type of funds (debt
or equity) or a mix of both based on their investment need and appetite. Just the way it is for
mutual funds, ULIP policy holders are also allotted units and each unit has a net asset value
(NAV) that is declared on a daily basis. The NAV is the value based on which the net rate of
returns on ULIPs are determined. The NAV varies from one ULIP to another based on market
conditions and the funds performance.

Features

ULIP policy holders can make use of features such as top-up facilities, switching between
various funds during the tenure of the policy, reduce or increase the level of protection,
options to surrender, additional riders to enhance coverage and returns as well as tax benefits.
42

Unit-Linked Life Insurance plan is also known as non traditional plan. Most insurers
in the year 2004 have started offering at least a few unit-linked plans. Unit-linked life
insurance products are those where the benefits are expressed in terms of number of units
and unit price. They can be viewed as a combination of insurance and mutual funds.

The number of units that a customer would get would depend on the unit price when
he pays his premium. The daily unit price is based on the market value of the underlying
assets (equities, bonds, government securities, et cetera) and computed from the net asset
value.

ABOUT UNIT LINK PLAN

Being transparent the policyholder gets the entire upside on the performance of his
fund. Besides all the advantages they offer to the customers, unit-linked plans also lead to an
efficient utilization of capital.

Unit-linked products are exempted from tax and they provide life insurance. Investors
welcome these products as they provide capital appreciation even as the yields on
government securities have fallen below 6 per cent, which has made the insurers slash
payouts.

According to the IRDA, a company offering unit-linked plans must give the investor
an option to choose among debt, balanced and equity funds. If you opt for a unit-linked
endowment policy, you can choose to invest your premiums in debt, balanced or equity plans.
If you choose a debt plan, the majority of your premiums will get invested in debt securities
like gilts and bonds. If you choose equity, then a major portion of your premiums will be
invested in the equity market. The plan you choose would depend on your risk profile and
your investment need. The ideal time to buy a unit-linked plan is when one can expect long-
term growth ahead. This is especially so if one also believes that current market values (stock
valuations) are relatively low.

So if you are opting for a plan that invests primarily in equity, the buzzing market could lead
to windfall returns. However, should the buzz die down, investors could be left stung. If one
invests in a unit-linked pension plan early on, say when one is 25, one can afford to take the
risk associated with equities, at least in the plan's initial stages. However, as one approaches
retirement the quantum of returns should be subordinated to capital preservation. At this
43

stage, investing in a plan that has an equity tilt may not be a good idea. Considering that unit-
linked plans are relatively new launches, their short history does not permit an assessment of
how they will perform in different phases of the stock market. Even if one views insurance as
a long-term commitment, investments based on performance over such a short time span may
not be appropriate.

Unit-linked life insurance offers the interesting option of combining protection and tax
advantages of life insurance with the attractive prospects of investing in equities. A unit-
linked plan works on a minimum premium basis and not on a sum assured one. You decide
the amount you can contribute at regular intervals. ULIP offers you insurance cover till your
insurance needs are fulfilled, beyond that it becomes an investment avenue. To explain how
ULIP works we will compare HDFC ULIP Endowment plan with HDFC Endowment plan

In case of ULIP, you pay a minimum premium of Rs 10,000 per annum irrespective of age
and term of the policy. Premium levels can be either reduced or increased if premiums have
been paid regularly for three years and the unit fund value is at least Rs 15,000. The
flexibility of increasing premium contributions in an existing account helps policyholders
manage their cash flows.

In normal/traditional endowment plans the premium is calculated on the basis of age and the
term and the amount you pay, as premium remains the same for the full term. The minimum
premium is Rs 1,500 annually.

Top-ups

Apart from your regular contributions, in case of ULIP, you can also make additional
payments to increase the savings component. These top-ups do not affect
the sum assured. Normal endowment policy does not offer you these benefits.

Investment

You choose the fund where you want to invest your money. HDFC offers a choice of
five funds - liquid, defensive, secure managed, secure defensive and growth. The Liquid Fund
is the least risky with investments in bank deposits and short-term money market instruments.
Growth Fund is the riskiest with an investment of up to 100% in equities.
44

In traditional insurance plans your money is invested keeping in view the IRDA
specification i.e. minimum 85% in debt with the balance in equities.

Charges

As is the case with unit-linked plans, this plan, too, imposes charges, on both the
funds invested by the policyholder and by cancellation of units. These charges vary
depending on the kind of premium payment option chosen (single or regular).

Other charges include a fund management charge of 0.80% of the fund value per
annum, apart from a flat fee of Rs 15 per month deducted by cancellation of units

In case of ULIP, for the first 2 years the investment content rate is 73% of the
premium and for the remaining years 99%. Risk cover charges (for death sum assured,
critical illness, and accidental death) are charged for canceling units on each monthly charge
date, based on the person's age at that time.

In traditional plans, the charges are not disclosed. There is an annual fee of Rs. 150
for regular premium policies and Rs 300 for single premium ones.

Returns

In case of ULIP, in an eventuality you receive the sum assured or fund value whichever is
higher and on maturity the fund value, in normal endowment plan, in either case you receive
the same benefit i.e. the sum assured and vested bonus.

Need OF Life Insurance

Thats a common question. Why would you need Insurance? Simply put, Life brings
with it many surprises, some pleasant and some not so and a Life Insurance Plan ensures that
you are better prepared to face uncertainties. How? In a number of ways:

Protection
45

You need life insurance to be there and protect the people you love, making sure that your
family has a means to look after itself after you are gone. It is a thoughtful business concept
designed to protect the economic value of a human life for the benefit of those financially
dependent on him. Thats a good reason.

Suppose you are suffering with an injury that keeps you away from earning? Would you like
to be a financial burden on your family, already losing out on your salary? With a life
insurance policy, you are protected. Your family is protected.

Retirement

Life insurance makes sure that you have regular income after you retire and also helps
you maintain your standard of living. It can ensure that your post-retirement years are spent
in peace and comfort.

Savings and Investments

Insurance is a means to Save and Invest. Your periodic premiums are like Savings and
you are assured of a lump sum amount on maturity. A policy can come in really handy at the
time of your childs education or marriage! Besides, it can be used as supplemental retirement
income!

Tax Benefits

Life insurance is one of the best tax saving options today. Your tax can be saved twice
on a life insurance policy-once when you pay your premiums and once when you receive
maturity benefits. Money saved is money earned!

Unit linked insurance or mutual fund

when both potentially do very similar things. A mutual fund is a simple asset management
company that pools investors' money and invests it with a view to maximizing returns. A unit
linked plan is an insurance product that can be used as a mutual fund vehicle and give market
linked returns with almost nil protection or it can build in protection along with market linked
returns. Assuming that we are comparing mutual funds with unit linked insurance plans with
minimal protection, which is better? The answer to this lies in costs that the two charge and
the tax breaks available. And here lies the problem. Mutual fund costs are simple, transparent
and standardized and insurance costs are like a noodle soup.
46

ABOUT COSTS

Ever tried to pick a noodle out of soup with a fork? Working out costs of insurance is
a similar exercise, just when you think you have it, it slips away. Costs vary across
companies, across products in the same company and within the product, across premium
cut-offs, categories, tenures and riders.

Mutual fund costs, on the other hand, are simple, transparent and common across
product categories. Front end or entry loads (the upfront deduction to take care of the
distribution costs of a mutual fund) and exit loads have a total common limit of 7 per cent of
the net asset value (NAV), though the industry norm in equity is 2 per cent entry load today.
Annual fees that a fund can charge are restricted to a maximum of 2.5 per cent per year (this
rate is

According to slabs and reduces as the fund size increases. There are no other charges.
However, there is no tax rebate on a fund and though capital gains are exempt from tax for a
year, its future is uncertain. Insurance costs and benefits
Because of the complexity of the insurance product and the cost differentiation we cannot tell
you which product is the least cost. It depends on what you buy. However, we will give a
handle with which to open the door to understanding unit linked costs. You will know what to
ask the agent and how to compare costs.

A unit linked product will have costs across five sub-heads

1. Upfront costs. This is a percentage of your first premium that is deducted before the
money is deployed. These costs can continue over the life of the product or terminate in a
few years.
2. Regular charges. These include the annual asset management charges for managing
your money and could include a per month charge towards the insurance part of the
policy.
3. Switching costs. To switch, from one scheme within a plan to another, may carry a
charge.
4. Exit costs. If you exit before a certain time period you may pay a heavy charge for
that.
 47

5. Other administration costs. Some periodic costs can be loaded under this head as
well.

On the plus side insurance gets tax breaks. Insurance premium gives you a tax rebate
and the insurance lump sums are tax free. Unit-linked plans are similar to mutual fund
schemes, where the premium is invested in various funds in keeping with policyholders' risk
appetite. Some players allow for topping up the premium without affecting the sum assured
(value of the base policy), allowing policyholders to purchase more units.

Unlike traditional insurance products, unit-linked plans offer transparency in returns

in terms of net asset value and flexibility in investment options in debt, equity and a mix of
both."Some people are buying because of the Bull Run. But the growth is largely due to the
transparency and flexibility of the product," she adds

High net worth individuals would like to protect themselves from the market volatility
and unit-linked plans offer a safety net unlike other investment products, he adds. Even state
insurer, the Life Insurance Corporation of India, has a unit-linked pension plan in the offing.
"We have received a lot of interest from individuals and corporate for such a product." Today,
LIC is aggressively positioning its earlier unit-linked plan -- Bima Plus hoping it will account
for five per cent of the total business.

Mutual Fund

A mutual fund is a company that brings together money from many people and invests
it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the
fund owns are known as its portfolio. Each investor in the fund owns shares, which represent
a part of these holdings.

When it comes to comparison of ULIP it has to be with a pure insurance plan along
with investments, why? Because a ULIP or Unit Linked Insurance Plan is a combination of
Insurance and Investment and therefore the comparison has to be made with a pure insurance
cover and investments in Mutual fund. It all boils down to the charges and the actual amount
invested in the market.
 48

INVESTOPEDIA EXPLAINS 'Unit Linked Insurance Plan - ULIP'

A unit linked insurance plan acts just like a savings vehicle, but also has the benefits
of an insurance contract. When an investor purchases units in a ULIP, he or she is purchasing
units along with a larger number of investors, just like an investor would purchase units in a
mutual fund.

Different ULIPs offer different qualified investments. Be sure to read the plan's prospectus
before purchasing any ULIP.

About ULIP:

A unit-linked insurance plan (ULIP) is a type of life insurance where the cash value of a
policy varies according to the current net asset value of the underlying investment assets. It
allows protection and flexibility in investment, which are not present in other types of life
insurance such as whole life policies. The premium paid is used to purchase units in
investment assets chosen by the policyholder. Investments are made majorly in mutual funds
and risk-free instruments like government securities (gsecs) and AAA rated corporate paper.

ULIP was introduced in the 1960s and is famous in many countries around the world. In
India it is included under section 80c of the IT act.

Working of ULIPs

It is critical that we understand how our money gets invested once we purchase a ULIP-
When you decide the amount of premium to be paid and the amount of life cover you want
from the ULIP, the insurer deducts some portion of the ULIP premium upfront. This portion
is known as the Premium Allocation charge, and varies from product to product. The rest of
the premium is invested in the fund or mixture of funds chosen by you. Mortality charges and
ULIP administration charges are thereafter deducted on a periodic (mostly monthly) basis by
cancellation of units, whereas the ULIP fund management charges are adjusted from NAV on
a daily basis.

Since the fund of your choice has an underlying investment either in equity or debt or a
combination of the two your fund value will reflect the performance of the underlying asset
classes. At the time of maturity of your plan, you are entitled to receive the fund value as at
the time of maturity.
49

Types of ULIPs (according to investment:

Aggressive ULIPs which invest 80-100% in equity.

Balanced ULIPs which invest 40-60% in equity.

Conservative ULIPs which invest upto 20% in equity.

Type I ULIP

It gives the higher of the sum assured or fund value as death benefit. For example A holds a
type I ULIP that gives her a sum assured of Rs 5 lakh for an annual premium of Rs 50,000.

In case of death in the initial years of the policy, when the fund value is less than the sum
assured, the insurer will pay the agreed sum (which here is Rs 5 lakh) to As nominee.
However, from the time the funds value goes higher than the sum assured, the death benefit
will be the accumulated amount in the fund. This essentially means that post the initial years
of the policy, you cover the risk with the money you yourself have saved over the years.

Premium amount is lower for Type 1 ULIP compared to other ULIP types.

Type II ULIP

This plan pays the policy holder both benefits i.e. sum assured and fund value. For example ,
if A holds a type II ULIP, the insurer would have given As nominees both the sum assured
of Rs 5 lakh and the amount accumulated in the fund as on the date of death. For the added
risk the insurance company assumes under the type II policy, it charges the policy holder an
extra cost.

Tax benefits for ULIPs

Initially the tax exempt was up to Rs 100000 but it is now deducted to Rs 50000 after the
introduction of Direct Tax Code (DTC).

Have something to add? Comment & Share!

You might also like:

LIC Samridhi Plus (PPT)

50

Everything you wanted to know about Child Insurance

Choosing the Right Life Insurance Plan

Whole Life Insurance

Unit Linked Insurance Plans (ULIP)

Unit linked insurance plan (ULIP) is life insurance solution that provides for the
benefits of risk protection and flexibility in investment. The investment is denoted as units
and is represented by the value that it has attained called as Net Asset Value (NAV). The
policy value at any time varies according to the value of the underlying assets at the time.

In a ULIP, the invested amount of the premiums after deducting for all the charges
and premium for risk cover under all policies in a particular fund as chosen by the policy
holders are pooled together to form a Unit fund. A Unit is the component of the Fund in a
Unit Linked Insurance Policy.

The returns in a ULIP depend upon the performance of the fund in the capital market.
ULIP investors have the option of investing across various schemes, i.e, diversified equity
funds, balanced funds, debt funds etc. It is important to remember that in a ULIP, the
investment risk is generally borne by the investor.

In a ULIP, investors have the choice of investing in a lump sum (single premium) or
making premium payments on an annual, half-yearly, quarterly or monthly basis. Investors
also have the flexibility to alter the premium amounts during the policy's tenure. For
example, if an individual has surplus funds, he can enhance the contribution in ULIP.
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). ULIP investors
can shift their investments across various plans/asset classes (diversified equity funds,
balanced funds, debt funds) either at a nominal or no cost.

ULIP's usually have following charges built into it

a)Up-front Charges
b) Mortality Charges (Charges for providing the risk cover for life)
c) Administrative Charges
51

d) Fund Management Charges

Mutual Funds have the following charges

a) Up-front charges (Marketing, Advertising, distributors fee etc.)
b) Fund Management Charges (expenses for managing your fund)

Term Insurance have the following charges

a) Yearly premium (for risk cover)
b) Service charges

Expenses Charged in a ULIP

Premium Allocation Charge

A percentage of the premium is appropriated towards charges initial and renewal

expenses apart from commission expenses before allocating the units under the policy.

Mortality Charges

These are charges for the cost of insurance coverage and depend on number of factors such as
age, amount of coverage, state of health etc.

Fund Management Fees

Fees levied for management of the fund and are deducted before arriving at the NAV.

Administration Charges

This is the charge for administration of the plan and is levied by cancellation of units.

Surrender Charges

Deducted for premature partial or full encashment of units.

Fund Switching Charge

Usually a limited number of fund switches are allowed each year without charge, with
subsequent switches, subject to a charge.
52

ABOUT FINANCIAL PLAN

In general usage, a financial plan can be a budget, a plan for spending and saving
future income. This plan allocates future income to various types of expenses, such as rent or
utilities, and also reserves some income for short-term and long-term savings. A financial
plan can also be an investment plan, which allocates savings to various assets or projects
expected to produce future income, such as a new business or product line, shares in an
existing business, or real estate.

In business, a financial plan can refer to the three primary financial statements
(balance sheet, income statement, and cash flow statement) created within a business plan.
Financial forecast or financial plan can also refer to an annual projection of income and
expenses for a company, division or department. A financial plan can also be an estimation of
cash needs and a decision on how to raise the cash, such as through borrowing or issuing
additional shares in a company.

While a financial plan refers to estimating future income, expenses and assets, a
financing plan or finance plan usually refers to the means by which cash will be acquired to
cover future expenses, for instance through earning, borrowing or using saved cash.

Financial planning

Financial planning is the process of meeting your life goals through the proper management
of your finances. Life goals can include buying a home, saving for your child's education or
planning for retirement.

The financial planning process as described by CFP Board consists of six steps that help you
take a "big picture" look at where you are financially. Using these six steps, you can work out
where you are now, what you may need in the future and what you must do to reach your
goals.

The process involves gathering relevant financial information, setting life goals, examining
your current financial status and coming up with a strategy or plan for how you can meet
your goals given your current situation and future plans.

The Benefits of Financial Planning

53

Financial planning provides direction and meaning to your financial decisions. It allows you
to understand how each financial decision you make affects other areas of your finances. For
example, buying a particular investment product might help you pay off your mortgage faster
or it might delay your retirement significantly. By viewing each financial decision as part of a
whole, you can consider its short and long-term effects on your lifegoals. You can also adapt
more easily to life changes and feel more secure that your goals are on track.

Financial planning process consists of the following six steps

1 Establishing and defining the client-planner relationship.

The financial planner should clearly explain or document the services to be provided to
you and define both his and your responsibilities. The planner should explain fully how
he will be paid and by whom. You and the planner should agree on how long the
professional relationship should last and on how decisions will be made.

2 Gathering client data, including goals.

The financial planner should ask for information about your financial situation. You and
the planner should mutually define your personal and financial goals, understand your
time frame for results and discuss, if relevant, how you feel about risk.

3 The Planner should gather all the necessary documents before giving you the advice you
need.

4 Analyzing and evaluating your financial status.

The financial planner should analyze your information to assess your current situation
and determine what you must do to meet your goals. Depending on what services you
have asked for, this could include analyzing your assets, liabilities and cash flow, current
insurance coverage, investments or tax strategies.
54

5 Developing and presenting financial planning recommendations and/or alternatives.

The financial planner should offer financial planning recommendations that address your
goals, based on the information you provide. The planner should go over the
recommendations with you to help you understand them so that you can make informed
decisions. The planner should also listen to your concerns and revise the
recommendations as appropriate.

6 Implementing the financial planning recommendations.

You and the planner should agree on how the recommendations will be carried out. The
planner may carry out the recommendations or serve as your "coach," coordinating the
whole process with you and other professionals such as attorneys or stockbrokers.

7 Monitoring the financial planning recommendations.

You and the planner should agree on who will monitor your progress towards your goals.
If the planner is in charge of the process, she should report to you periodically to review
your situation and adjust the recommendations, if needed, as your life changes.

Fundamentals of Financial Planning

Financial planning is the process of solving financial problems and achieving financial
goals by developing and implementing a personalized "game plan." In order to be effective
this "plan" must take into consideration an individuals overall picture. It must be:

Coordinated

Comprehensive

Continuous

Financial planning is like all other phases of life; it involves choices

55

A true financial plan does not focus one aspect or product, but instead seeks to take all
areas of planning into consideration when making financial decisions.

Includes

Cash Flow Management

This aspect of planning deals with the day to day allocation of income; and its effective
use in paying for current living expenses and in accumulating assets which will be used in
meeting financial goals.

Tax Planning and Management

This area focuses on the understanding of and application of federal and state income tax
law, estate and inheritance taxes; and, when possible, minimizing these taxes.

Risk Planning and Management

This area of planning deals with the risk of losing life, income, or property. It includes the
use of insurance products and strategies.

Investment Planning and Management

Almost everyone has accumulation goals for which investments must be made and
managed. These could include buying a home; planning for college; or providing for
retirement.

Retirement Planning and Management

By far the most common accumulation goal is the ability to become financially
independent. Retirement strategies encompass the understanding of the Social Security
system; employer-sponsored retirement plans; and personal savings accumulation plans.

Estate Planning and Management

The final phase of planning is for the transfer of assets to our heirs with minimization of
taxes and other costs.
56

Need of Plan

Anyone who has financial challenges to solve or financial goals to achieve needs
financial planning. Financial Planning can help to achieve both greater wealth and financial
security. Inadequate or improper planning can be financially disastrous. An uninsured loss
can wipe out accumulated wealth; insufficient savings for retirement can force a reduced
lifestyle and/or postponement of retirement; and improper tax planning can result in higher
than necessary taxes causing dollars to be lost to an accumulation plan or to ones heirs.

People Fail to Plan

They may feel they do not have enough income or financial assets to consider
planning.

They may believe that they are too young/old to begin planning.

They may be reluctant to consider some of the less pleasant aspects of planning such
as thinking about death, disability, illness, etc.

They may believe that financial planning is too expensive

They may procrastinate (The Number One Reason For Failure)

The Steps in Financial Planning

Identify Goals and Objectives

Gather the necessary data

Analyze present situation and consider alternatives

Develop strategies to achieve goals.

Implement the strategies

Review and Revise periodically

57
58

CHAPTER - 4

Data Analysis
 59

4.1 Status of Individuals having Insurance Policies

TABLE NO: 4.1

Responses No of people Percentage

GRAPH NO:
Yes 84 84% 4.1

No 16 16%

Total 100 100%

120

100
100
84
80

60 No of people
Percentage

40

20 16

0
Yes No Total

Interpretation:

The Behaviour of the customers thinking differs from person to person about
insurance particularly in ULIPs. In order to derive the investment plans that to particularly in
60

insurance especially in ULIPs by the customers and their performance evaluated by using
company product investment graphs.

The above table and graphs are represented the Respondents opinion on the source of
information clearly showing that 84% of the people having insurance policy and the
remaining 16% people does not having insurance policy. This happened due to awareness has
been created from long back on risk by the financial institutions and government is giving tax
deductions to encourage investments in this mode From the above table, we can understand
that most of the people having insurance policy means planning for future and the remaining
less number of People does not having insurance policy because of economic and financial
problems and some are not interested in this mode of investment according to responses on
survey done.
61

4.2 Having insurance policy in an insurance company

TABLE N0: 4.2

Insurance company No of Policy Holders Percentage

LIC 64 64%

ICICI 8 8%

IDBI FED LIF 14 14%

HDFC 6 6%

Others 8 8%

TOTAL 100 100%

GRAPH NO: 4.2

120
100
100

80
64
60
No of Policy Holders
40
Percentage

20 14
8 6 8

0
62

Interpretation:

The above table shows us about Having insurance policy in an insurance company.
It tries to analyze the policy holders through various insurance companies like LIC, ICICI,
IDBI FED LIF, HDFC and others.

From the above table, we can understand that most people opt and have insurance in
LIC is 64% because of trust due to longer existence in this field. The Insurance Companies
which people opt apart from LIC are IDBI Federal life-14% which is a newly started
company compared with LIC, ICICI-8% is a private organization, HDFC-6% is a foreign
organization and others-8% includes all, trust on these companies is less compared with LIC.
63

4.3 Reason for choosing Insurance Company

TABLE N0: 4.3

Responses No of Respondents Percentage

Reputation 13 13%

Price of premium 10 10%

Benefits 69 69%

flexible premium payment 8%

options 8

100%

Total 100

GRAPH NO : 4.3
64

120
100
100

80 69
60

40

20 13 10 8
No of Respondents
0
Percentage

Interpretation:

The above table tells about Reason for choosing an insurance company. It tries to analyze
the responses through 4 variables i.e. reputation, price of premium, benefits, flexible
premium payment options.

From the above table reason for choosing a particular Insurance Company is
evaluated. Most of the people prefer Insurance Company because of the benefits of Policy
offered by company (69%). The next preference is given to reputation the company had in the
market (13%). The minimum importance is given to price of premium and flexible payment
options i.e. (10%&8%).
65

4.4Annual Savings in Income

TABLE N0: 4.4

% of savings Respondents Percentage

10%-20% 54 54%

20%-30% 27 27%

30%-40% 11 11%

40%-50% 6 6%

Total 100 100%

GRAPH NO: 4.4

66

120

100
100

80

60 54 Respondents
Percentage
40
27

20
11
6
0
10%-20% 20%-30% 30%-40% 40%-50% Total

Interpretation:
The above table tells about Annual savings in income. It analyse the respondents
through 4 variable limits of saving i.e. 10%-20%, 20%-30%, 30%-40%& 40%-50%. From
the above table, it is clear that out of 100 samples, Most of people are saving optimum
because of more no of middle income groups i.e. 10%-20% of their annual income, 27% of
people are saving reasonable whose earnings are reasonable i.e. 20%-30%. 11% people are
saving good amount because of the income level is good i.e. 30%-40%, and remaining 6%
people are saving the best of their annual income i.e. Highly income groups who is less in
number whose part of savings is more from the study.
4.5 Best Option of Investment

TABLE N0: 4.5

Type of Investment No. of Respondents Percentage

Unit Linked Plan 16 16%

Life Insurance 41 41%

Mutual Fund 18 18%

Share Market 25 25%

Total 100 100%

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GRAPH NO: 4.5

120
100
100

80

60
41
40 No. of Respondents
25
16 18 Percentage
20

Interpretation:
The above table tells about Best option of investment. It analyze the respondents through
type of investment i.e. unit linked plan, Life insurance, Mutual fund & share market.
From the above table 41% of respondents believe that best option is investing in Life
Insurance because of guarantee in minimum return, 25 % responded with share market
expecting more return mostly youth, 18% responded that Mutual Funds are best based on
portfolio investment concept and 16% respondents are saying ULIPS is the best option for
investment comparatively very less because of long time period plans.
4.6 Know about Unit linked life insurance plan

TABLE N0: 4.6

Responses No of respondents Percentage

Yes 68 68%

No 32 32%

Total 100 100%

GRAPH NO: 4.6

68

120

100
100

80
68

60 No of respondents
Percentage
40 32

20

0
Yes No Total

Interpretation:

The above table shows pattern among two responses. This table is tabulated with no.
of respondents and their responses.

From the above table 68% responded that they know about ULIPS, and remaining
32% that they do not know about ULIPs because every company agents will start with these
products while introducing products which are less in sale and gives high commission both to
customers and agents compared with other insurance products. Commission means interest in
case of customer view, depends on market fluctuations. People of young aged ones on whom
no dependents mostly interested to invest.

4.7 Expected Premium per Annum by the investor

TABLE N0: 4.7

Premium Price No. of Respondents Percentage

less than Rs.5000 22 22%

Rs.5000-Rs.10000 63 63%

More than Rs.10000 15

69

15%

Total 100 100%

GRAPH NO: 4.7

120

100

80

60

40 Percentage
No. of Respondents
20

Interpretation:

The above table tells about Expected premium per annum by the investor. It analyze
the respondents through limits of premium price i.e. <Rs5000, Rs5000-Rs10000,
>Rs10000.From the above table, the expected price of premium per annum is less than Rs.
5000 for 22% of people, Rs. 5000-Rs.10000 for 63% of people and more than Rs. 10000 for
15% people based on the income levels. Mostly middle income groups are more; premium
between5k to 10k is economical to invest according in their view and expected return will be
comparatively low when compared with other investment types.
70

4.8 Premium price of the policy is within your budget

TABLE N0: 4.8

Responses Respondents Percentage

Within the budget 76 76%

Not within the budget 24 24%

Total 100 100%

GRAPH NO- 4.8

71

120

100
100

80 76

60 Respondents
Percentage
40
24
20

0
Within the budget Not within the budget Total

Interpretation:

The above table tells about Premium Price of the policy is within budget. It analyse the
respondents through variables within the budget and not within the budget.

From the above table 76% responded that the price of premium they paying towards
Life Insurance is within their budget due to, economic level of conditions, financial
conditions and remaining 24% said that premium price is not within their budget as their
economic condition.

4.9 Best Advertisement to make people educate about an insurance policy.

TABLE N0: 4.9

Responses No. of Respondents Percentage

TV advertisement 38 38%

Hoardings 20 20%

Paper 32%
Advertisement 32

Banners 10 10%

Total 100 100%

72

GRAPH NO: 4.9

120
100
100

80

60
40
40 34
20 No. of Respondents
20
6 Percentage
0

Interpretation:

The above table tells about Best advertisement to make people educate about an
insurance policy. It analyzes the no of respondents through response variables like TV
advertisement, Hoardings, Paper advertisement, Banners.

From the above table 40% of people responded that TV advertisement is the best way
for making people aware of insurance, 34% said that paper advertisement is better way, 20%
of people said that Hoarding are better, remaining 6% said banners are helpful in making
people aware of insurance. Electronic media and print media cover huge mass area in
communication of all more no of responses to TV advertisement followed by paper
advertisement.
73

4.10 Ads of IDBI federal life insurance are informative or attractive.

TABLE N0: 4.10

No of Respondents Percentage

Informative 38 38%

attractive 62 62%

Total 100 100%

74

GRAPH NO: 4.10

120

100
100

80

62
60 No of Respondents
Percentage
38
40

20

0
Informative attractive Total

Interpretation:

The above table tells about Ads of IDBI federal life insurance are informative or
attractive. It analyzes the no of respondents through response variables informative or
attractive.

From the above table 62% of people found that advertisement of IDBI Federal Life
Insurance are attractive, and remaining 38% found that they are informative because of
lengthy browsers with decorative columns as insurance products need lengthy explanation of
product difficult to produce whole information on brochure make it attractive to create
interest and enthusiasm among viewers further to consult company representatives.
75

CHAPTER -5

SUMMARY
In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (
Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk
in terms of pooling of resources that could be re-distributed in times of calamities such as
fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance.
Ancient Indian history has preserved the earliest traces of insurance in the form of marine
trade loans and carriers contracts. Insurance in India has evolved over time heavily drawing
from other countries, England in particular. 1818 saw the advent of life insurance business
76

in India with the establishment of the Oriental Life Insurance Company in Calcutta. This
Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life
insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance
Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871),
Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era,
however, was dominated by foreign insurance offices which did good business in India,
namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and
the Indian offices were up for hard competition from the foreign companies.
In 1914, the Government of India started publishing returns of Insurance Companies in
India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to
regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the
Government to collect statistical information about both life and non-life business transacted
in India by Indian and foreign insurers including provident insurance societies. In 1938, with
a view to protecting the interest of the Insurance public, the earlier legislation was
consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for
effective control over the activities of insurers. The Insurance Amendment Act of 1950
abolished Principal Agencies. However, there were a large number of insurance companies
and the level of competition was high. There were also allegations of unfair trade practices.
The Government of India, therefore, decided to nationalize insurance business. An Ordinance
was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance
Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-
Indian insurers as also 75 provident societies245 Indian and foreign insurers in all. The
LIC had monopoly till the late 90s when the Insurance sector was reopened to the private
sector.

The growth of the life insurance industry is synonymous with the development of a country
as it ensures social security, better standard of living and healthy and prosperous future. The
Indian insurance industry which is the 10th largest in the world initially took off with the
entry of private players from the year 2000 onwards. But of late the insurance industry in
India is experiencing a slowdown which is visible from the fall in insurance density and
insurance penetration. This is a major cause of concern because fewer people are buying
insurance which is a driver for improving the standard of living. Infact the growth in the
number of branches opened by the insurers is coming down which clearly indicates that the
insurance industry is on the back foot. ULIPs once the favourite among the insurers,
77

intermediaries and the customers has steadily lost its foot hold and seem to have fallen out of
favour with all the stakeholders. During the year 2010 there was a tussle between IRDA and
SEBI regarding the purview of the functioning of ULIPs. Thus this study aims to look into
the performance of ULIP schemes of the various insurers to determine the returns generated
and to analyse their performance characteristics. Hence the study is aptly titled A study on
the performance of ULIP schemes from the investors point of view.

The first ULIP was launched in India in 1971 by Unit Trust of India (UTI).[1] With
the Government of India opening up the insurance sector to foreign investors in 2001[2] and
the subsequent issue of major guidelines for ULIPs by the Insurance Regulatory and
Development Authority (IRDA), now Insurance Regulatory and Development Authority of
India (IRDAI), in 2005,[3] several insurance companies forayed into the ULIP business
leading to an over abundance of ULIP schemes being launched to serve the investment needs
of those looking to invest in an investment cum insurance product.

Costs of unit linked products:

Upfront costs: This is a percentage of your first premium that is deducted before the money
is deployed. These costs can continue over the life of the product or terminate in a few years.
Regular charges: These include the annual asset management charges for managing your
money and could include a per month charge towards the insurance part of the policy.

Switching costs: To switch, from one scheme within a plan to another, may carry a charge.
Exit costs: If you exit before a certain time period you may pay a heavy charge for that.
Other administration costs: Some periodic costs can be loaded under this head as well.

On the plus side insurance gets tax breaks. Insurance premium gives you a tax rebate and the
insurance lump sums are tax free. Unit-linked plans are similar to mutual fund schemes,
where the premium is invested in various funds in keeping with policyholders' risk appetite.
Some players allow for topping up the premium without affecting the sum assured (value of
the base policy), allowing policyholders to purchase more units. Unlike traditional insurance
products, unit-linked plans offer transparency in returns in terms of net asset value and
flexibility in investment options in debt, equity and a mix of both."Some people are buying
because of the bull run. But the growth is largely due to the transparency and flexibility of the
product," she adds High net worth individuals would like to protect themselves from the
78

market volatility and unit-linked plans offer a safety net unlike other investment products, he
adds. Even state insurer, the Life Insurance Corporation of India, has a unit-linked pension
plan in the offing."We have received a lot of interest from individuals and corporates for such
a product." Today, LIC is aggressively positioning its earlier unit-linked plan -- Bima Plus
hoping it will account for five per cent of the total business

Financial planning is the process of meeting your life goals through the proper management
of your finances. Life goals can include buying a home, saving for your child's education or
planning for retirement. The financial planning process as described by CFP Board consists
of six steps that help you take a "big picture" look at where you are financially. Using these
six steps, you can work out where you are now, what you may need in the future and what
you must do to reach your goals. The process involves gathering relevant financial
information, setting life goals, examining your current financial status and coming up with a
strategy or plan for how you can meet your goals given your current situation and future
plans.

Financial planning provides direction and meaning to your financial decisions. It allows you
to understand how each financial decision you make affects other areas of your finances. For
example, buying a particular investment product might help you pay off your mortgage faster
or it might delay your retirement significantly. By viewing each financial decision as part of a
whole, you can consider its short and long-term effects on your life goals. You can also adapt
more easily to life changes and feel more secure that your goals are on track.

FINDINGS

84 respondents have insurance policies and 16 are not having insurance policies.
Savings in insurance sector comparatively increased from the past and awareness on
insurance also has been increasing.

Government is giving tax deductions to encourage investment even then some people
are not interested to invest in ULIPs. The results are stating that 64 respondents are
79

opting LIC and 14 respondents opting IDBI Federal company limited, ICICI-
8HDFC- 6 and rest of 6 opted in other companies.

69% respondents chosen benefits of the policy offered and 13% is for reputation of
the company to invest.

Mostly middle income group are saving 10 20% of their annual income that is 54 %.

Most of the respondents are chosen life insurance is best option to invest and 16%
respondents opted unit linked plan is good to invest.

68% respondents aware of ULIP and mostly people are showing interest to invest in
public insurance companies even all insurance companies are under control of
Insurance Regulation Development Authority.

63% People are ready to invest if the premium of policy is between 5000 to 10000 per
annum.

76%responded that the price of the premium is in their budget due to economic level
of condition, family life cycle, economic condition rest all said premium price is nit fit
into their budget.

As there are many new players in the Indian market, there is huge competition among
all insurance companies. Most of the opinions are that TV advertisement and paper
advertisement are the best way to introduce a product of the company.

Mostly corporate people, professionals and business man are aware of IDBI Federal
life insurance in India and 62% of the people found that advertisements of IDBI
Federal Life are attractive.

SUGGESTIONS

There is huge potential market for LIFE INSURANCE companies in India as out of
1.32 billion population, only 18% people are insured. The insurance companies
should educate people about insurance, its importance, different policies, and benefits
of policies.
80

The people opt for policy by taking into consideration price of premium of policy,
benefits of policy and least importance is given to brand name. So the life insurance
companies should look over the price of premium, benefits of policy and even flexible
payment options from the point of untapped potential market in India.

The price of premium of a policy must be within the budget of common man and life
insurance companies should provide flexible payment options. By doing so, the
private insurance companies can surely capture the untapped market along with
creating brand name.

Though people generally to do the savings by various means, like Post Office, Fixed
Deposit, Mutual Fund, Gold, Real Estate, and Share Market etc. This study focuses
attention on the positive affect of Unit Linked Plan as a part of Financial Planning.

The result of the study proves that ULIPS can enhance the individuals savings
through their market investments. The study highlights ULIPS as a part of Tax Benefit
for an individual. ULIP products are good when taken as long term investment plans.

Based on the taste of customer it is better to design policy. Presently most of the
peoples opinion is that they are ready to invest if there is increase in return factor and
decrease the risk cover in the insurance product, based on the survey conducted.

Conducting seminars and by giving advertisement will increase awareness in the

public may leads to get good market for insurance particularly in unit linked insurance
plan.

CONCLUSION

Most untapped insurance market in India contains mostly middle class and lower class
people. The customer gives preference more to premium of policy and benefits of the policy.
Brand name and flexible payment options are given less importance. Even though the
premium price is not within the customer budget, if the benefits offered by policy are good,
customers are ready to take the policy. The customers want the premium price to be within
the budget, with good benefits.
81

The private insurance companies are unable to tap the untapped insurance market certain
strategies should be formulated to grab the market. Most customers feel that setting up of
stalls at appropriate locations and providing information regarding various policies and
benefits offered by the insurance company and create awareness about the insurance
company. IDBI has an international brand image because of its formation by passing an act in
the Parliamentary house to help industries in INDIA after independence.

The present study is an attempt to find the unit linked plan as a part of financial planning and
performance evolution moreover to determine whether the unit linked plan would help the
people to avail the tax benefit, protection, and savings.