Chapter 1

Abstract
Objective
Review of literature
Introduction
1
ABSTRACT
In India, Life Insurance sector plays a major role in savings of a
person !here are many players in life insurance sector and LIC is the
leading as it has roots in India from more than "# years !o purchase any
thing in this world a customer has his$her own choice of preferences
!he project study of I%& 'ysya unit lin(ed as a part of financial
planning
!he aim of study is to e)amining a client*s personal situation,
financial resources, financial objectives and financial problems in a
comprehensive manner, monitoring the plan performance to ta(e
corrective action as necessary to assure that results match the plan
projections +o this study is also intended to find whether people are
aware of I%& 'ysya Life Insurance
!he method of study is mar(et research with structured
,uestionnaire consisting of multiple choice ,uestions !he sample is 1##
collected from persons having Life Insurance -olicy
!he -rivate Insurance companies are also able to create brand
value and trust in customers +o they have only ./0 1appro)2 mar(et
share in Life insurance sector
/
OBJECTIVE
3)amining a client*s personal situation, financial resources,
financial objectives and financial problems in a comprehensive
manner
4eveloping an impartial, integrated plan to utili5e the resources to
meet objectives and solve problems, ta(ing the steps to implement
that plan once approved by the client
6onitoring the plan performance to ta(e corrective action as
necessary to assure that results match the plan projections
!o find out how best an 7nit Lin(ed -lan can become a necessary
part of the financial planning for the individuals
!o chec( that among the price of the premium, benefits of policy,
brand name the company has, which is more preferred by a person
to ta(e insurance policy
8
REVIEW OF LITERATURE
Marketing Research:
6ar(eting research is defined as the 9+ystematic design,
collection, analysis, and reporting of data and findings relevant to a
specific mar(eting situation facing the company According to 3+O6AR
the world association of opinion and mar(et research professionals
A company can hire the services of a mar(eting research firm or
conduct research in creative and affordable ways such as:
3ngaging professors or students to design and conduct studies
6any large companies hire summer trainees from management
institutions for cost effective mar(et research year after year
Awarding live projects to 6;A students as part of their course
wor( is also a common practice
6onitoring published information and actions systematically !his
may be done by e)amining news papers, web sites, and industry
reports and by visiting competitive outlets
3ffective mar(eting research involves five steps !hey are:
+tep 1: define the problem and the research objectives
+tep /: collect the information
+tep 8: analy5e the information
+tep .: present the findings
+tep ": ma(e the decision
.
INTRODUCTION
ABOUT LIFE INSURANCE
What is Lie Ins!rance"
9Insurance is a contract between two parties where by one party
called insurer underta(es in e)change for a fi)ed sum called premiums, to
pay the other party called 9insured< a fi)ed amount of money on the
happening of a certain event<
Insurance is a protection against financial loss arising on the
happening of an une)pected event Insurance companies collect premium
to provide for this protection A loss is paid out of the premiums collected
from the insuring public and the insurance companies act as trustees to
the amount collected
=or e)ample, in a life policy, by paying a premium to the insurer,
the family of the insured person receives a fi)ed compensation on the
death of the insured
+imilarly, in car insurance, in the event of the car meeting with an
accident, the insured receives the compensation to the e)tent of damage
Wh# sh$!%& #$! take Ins!rance"
Insurance is designed to safeguard oneself and one*s family against
possible losses on account of ris(s and perils It provides financial
compensation for the losses suffered due to the happening of any
unforeseen event
;y ta(ing life insurance a person can have peace of mind and need
not worry about the financial conse,uences in case of any untimely death
Certain insurance contracts are also made compulsory by
legislation =or e)ample, motor vehicles act 1>?? stipulates that a person
"
driving a vehicle in a public place should hold a valid insurance policy
covering 9act< ris(s Another e)ample of compulsory insurance pertains
to the environmental protection act, wherein a person using or carrying
ha5ardous substances 1as defined in the act2 must hold a valid public
liability 1act2 policy
Wh$ 'r$(i&es Ins!rance"
In India, prior to liberali5ation insurance protection was made
available through public sector insurance companies, namely, life
insurance Corporation of India 1LIC2 and the four subsidiaries of &eneral
Insurance Corporation of India 1&IC2
;y the passing of the IR4A ;ill, the Insurance sector has been
opened up for private companies to carry on Insurance business
Insurance contracts are based on good faith ie the details
furnished by the proposals are accepted in good faith and this will form
the basis of the contract
T#'es $ Lie Ins!rance )$%icies:
!erm Life Insurance
3ndowment Insurance
@hole Life Insurance
Ter* Lie Ins!rance:
!erm Life Insurance furnishes protection for a limited number of
years ate the end of which the policy e)pires !he face amount of the
policy is payable only if the insured*s death occurs during the stipulated
term, and nothing is paid in case of survival !erm product prices are
more easily compared than prices of other life products as term policies
are usually simpler than other policies
A
!ypes of !erm Life Insurance:
Level =ace Amount
%onBLevel =ace Amount
En&$+*ent Lie Ins!rance:
3ndowment policies, promises not only to pay the policy face
amount on the death of the insured during fi)ed term of years, but also to
pay the full face amount at the end of the term if the insured survives the
term
!ypes of 3ndowment -olicies:
+ingle -remium 3ndowment -olicy
+emi 3ndowment -olicy
6odified 3ndowment -olicy
Wh$%e Lie Ins!rance:
@hole life insurance is intended to provide insurance protection
over one*s entire life time I t provides the payment of the face amount
upon the insured*s death regardless of when death occurs It is insurance
for the whole of the life
!ypes of whole life Insurance:
Ordinary Life Insurance
Limited -ayment whole Life Insurance
Current Assumption whole Life Insurance
7nitBLin(ed Life Insurance
C
Chapter /
IR4A
7nit Lin(ed -lan
=inancial -lanning
?
C$*'$siti$n $ A!th$rit# !n&er IRDA Act, -...
As per the section . of IR4A ActD 1>>>, Insurance Regulatory and
4evelopment Authority 1IR4A, which was constituted by an act of
parliament2 specify the composition of Authority
!he Authority is a ten member team consisting of
1a2 a ChairmanE
1b2 five wholeBtime membersE
1c2 four partBtime members,
D!ties, )$+ers an& F!ncti$ns $ IRDA
+ection 1. of IR4A Act, 1>>> lays down the duties, powers and
functions of IR4A
12 +ubject to the provisions of this Act and any other law for the time
being in force, the Authority shall have the duty to regulate,
promote and ensure orderly growth of the insurance business and
reBinsurance business
/2 @ithout prejudice to the generality of the provisions contained in
subBsection 112, the powers and functions of the Authority shall
include, B
a2 issue to the applicant a certificate of registration, renew, modify,
withdraw, suspend or cancel such registrationE
b2 protection of the interests of the policy holders in matters
concerning assigning of policy, nomination by policy holders,
>
insurable interest, settlement of insurance claim, surrender value of
policy and other terms and conditions of contracts of insuranceE
c2 specifying re,uisite ,ualifications, code of conduct and practical
training for intermediary or insurance intermediaries and agentsE
d2 specifying the code of conduct for surveyors and loss assessorsE
e2 promoting efficiency in the conduct of insurance businessE
f2 promoting and regulating professional organi5ations connected
with the insurance and reBinsurance businessE
g2 levying fees and other charges for carrying out the purposes of this
ActE
h2 calling for information from, underta(ing inspection of, conducting
en,uiries and investigations including audit of the insurers,
intermediaries, insurance intermediaries and other organi5ations
connected with the insurance businessE
i2 control and regulation of the rates, advantages, terms and
conditions that may be offered by insurers in respect of general
insurance business not so controlled and regulated by the !ariff
Advisory Committee under section A.7 of the Insurance Act,
1>8?E
j2 specifying the form and manner in which boo(s of account shall be
maintained and statement of accounts shall be rendered by insurers
and other insurance intermediariesE
(2 regulating investment of funds by insurance companiesE
l2 regulating maintenance of margin of solvencyE
m2 adjudication of disputes between insurers and intermediaries or
insurance intermediariesE
n2 supervising the functioning of the !ariff Advisory CommitteeE
1#
o2 specifying the percentage of premium income of the insurer to
finance schemes for promoting and regulating professional
organi5ations referred to in clause 1f2E
p2 specifying the percentage of life insurance business and general
insurance business to be underta(en by the insurer in the rural or
social sectorE
,2 e)ercising such other powers as may be prescribedE
11
ABOUT UNIT LIN/ )LAN
6ost insurers in the year /##. have started offering at least a few
unitBlin(ed plans 7nitBlin(ed life insurance products are those where the
benefits are e)pressed in terms of number of units and unit price !hey
can be viewed as a combination of insurance and mutual funds
!he number of units that a customer would get would depend on
the unit price when he pays his premium !he daily unit price is based on
the mar(et value of the underlying assets 1e,uities, bonds, government
securities, et cetera2 and computed from the net asset value
!he advantage of unitBlin(ed plans is that they are simple, clear,
and easy to understand ;eing transparent the policyholder gets the entire
upside on the performance of his fund ;esides all the advantages they
offer to the customers, unitBlin(ed plans also lead to an efficient
utili5ation of capital
7nitBlin(ed products are e)empted from ta) and they provide life
insurance Investors welcome these products as they provide capital
appreciation even as the yields on government securities have fallen
below A per cent, which has made the insurers slash payouts
According to the IR4A, a company offering unitBlin(ed plans must
give the investor an option to choose among debt, balanced and e,uity
funds If you opt for a unitBlin(ed endowment policy, you can choose to
invest your premiums in debt, balanced or e,uity plans
If you choose a debt plan, the majority of your premiums will get
invested in debt securities li(e gilts and bonds If you choose e,uity, then
a major portion of your premiums will be invested in the e,uity mar(et
1/
!he plan you choose would depend on your ris( profile and your
investment need
!he ideal time to buy a unitBlin(ed plan is when one can e)pect
longBterm growth ahead !his is especially so if one also believes that
current mar(et values 1stoc( valuations2 are relatively low
+o if you are opting for a plan that invests primarily in e,uity, the
bu55ing mar(et could lead to windfall returns Fowever, should the bu55
die down, investors could be left stung
If one invests in a unitBlin(ed pension plan early on, say when one
is /", one can afford to ta(e the ris( associated with e,uities, at least in
the planDs initial stages Fowever, as one approaches retirement the
,uantum of returns should be subordinated to capital preservation At this
stage, investing in a plan that has an e,uity tilt may not be a good idea
Considering that unitBlin(ed plans are relatively new launches,
their short history does not permit an assessment of how they will
perform in different phases of the stoc( mar(et 3ven if one views
insurance as a longBterm commitment, investments based on performance
over such a short time span may not be appropriate
7nitBlin(ed life insurance offers the interesting option of
combining protection and ta) advantages of life insurance with the
attractive prospects of investing in e,uities
A unitBlin(ed plan wor(s on a minimum premium basis and not on
a sum assured one Gou decide the amount you can contribute at regular
intervals 7LI- offers you insurance cover till your insurance needs are
fulfilled, beyond that it becomes an investment avenue
18
0$+ the# c$*'are"
!o e)plain how 7LI- wor(s we will compare F4=C 7LI-
3ndowment plan with F4=C 3ndowment plan
)re*i!*
In case of: 7LI-, you pay a minimum premium of Rs 1#,### per
annum irrespective of age and term of the policy -remiums 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 1",### !he fle)ibility of
increasing premium contributions in an e)isting account helps
policyholders manage their cash flows
In normal$traditional endowment plans the premium is calculated
on the basis of age and the term and the amount you pay, as premium
remains the same for the full term !he minimum premium is Rs 1,"##
annually
S!* ass!re&
!he sum assured depends on your age and the cover you ta(e in
case of 7LI- 4epending on your age at entry, you may choose between 8
levels of cover B low, medium or high
In the traditional plan, the sum assured is calculated by age and
term of the policy to which premium factor is applied
T$'1!'s
Apart from your regular contributions, in case of 7LI-, you can
also ma(e additional payments to increase the savings component !hese
1.
topBups do not affect the sum assured %ormal endowment policy does
not offer you these benefits
In(est*ent
Gou choose the fund where you want to invest your money F4=C
offers a choice of five funds B li,uid, defensive, secure managed, secure
defensive and growth !he Li,uid =und is the least ris(y with investments
in ban( deposits and shortBterm money mar(et instruments &rowth =und
is the ris(iest with an investment of up to 1##0 in e,uities
In traditional insurance plans your money is invested (eeping in
view the IR4A specification ie minimum ?"0 in debt with the balance
in e,uities
Charges "
As is the case with unitBlin(ed plans, this plan, too, imposes
charges, on both the funds invested by the policyholder and by
cancellation of units !hese charges vary depending on the (ind of
premium payment option chosen 1single or regular2
Other charges include a fund management charge of #?#0 of the
fund value per annum, apart from a flat fee of Rs 1" per month deducted
by cancellation of units
In case of 7LI-, for the first / years the investment content rate is
C80 of the premium and for the remaining years >>0 Ris( cover
charges 1for death sum assured, critical illness, accidental death2 are
charged for canceling units on each monthly charge date, based on the
personDs age at that time
1"
In traditional plans, the charges are not disclosed !here is an
annual fee of Rs 1"# for regular premium policies and Rs 8## for single
premium ones
Ret!rns
In case of 7LI-, 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 ie the sum
assured and vested bonus
In case #$! st$' 'a#ing 're*i!*s"
If this is in the first 8 years then in case of 7LI-, on cancellation of
the policy before paying regular premium for 8 years, there is a charge of
/"0 of the outstanding premiums due during this 8Byear period In case
of normal endowment the policy lapses and nothing is paid bac(
If you stop paying premiums after 8 years, in 7LI- you have the
option to ma(e policy paid up, provided the policy has accumulated
sufficient policy value At present this amount is Rs 1",### If the fund
value of a paid up policy falls below Rs 1",### then the policy is
cancelled and the fund value is returned to you !he ris( cover continues
for the sum assured even though the policy has reached the paid up status
In traditional plan the policy becomes a paid up policy
Me&ica%s
In both the plans the norms for medicals are similar ie medicals
are compulsory
1A
Wh# D$ 2$! Nee& Lie Ins!rance"
!hat*s a common ,uestion @hy would you need InsuranceH +imply put,
Life brings with it many surprises, some pleasant and some not so and a
Life Insurance -lan ensures that you are better prepared to face
uncertainties FowH In a number of ways:
)r$tecti$n
Gou need life insurance to be there and protect the people you love,
ma(ing sure that your family has a means to loo( 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 !hat*s a good reason
+uppose you are suffering an injury that (eeps you away from earningH
@ould you li(e to be a financial burden on your family, already losing out
on your salaryH @ith a life insurance policy, you are protected Gour
family is protected
Retire*ent
Life insurance ma(es sure that you have regular income after you retire
and also helps you maintain your standard of living It can ensure that
your postBretirement years are spent in peace and comfort
Sa(ings an& In(est*ents
Insurance is a means to +ave and Invest Gour periodic premiums are li(e
+avings and you are assured of a lump sum amount on maturity A policy
can come in really handy at the time of your child*s education or
marriageI ;esides, it can be used as supplemental retirement incomeI
Ta3 Beneits
1C
Life insurance is one of the best ta) saving options today Gour ta) can be
saved twice on a life insurance policyBonce when you pay your premiums
and once when you receive maturity benefits 6oney saved is money
earnedI
Unit linked insurance plans are transforming into mutual
funds. Which is better for you?
Unit %inke& ins!rance $r *!t!a% !n&"
@hich should you get, when both potentially do very similar things A
mutual fund is a simple asset management company that pools investorsD
money and invests it with a view to ma)imising returns A unit lin(ed
plan is an insurance product that can be used as a mutual fund vehicle and
give mar(et lin(ed returns with almost nil protection or it can build in
protection along with mar(et lin(ed returns Assuming that we are
comparing mutual funds with unit lin(ed insurance plans with minimal
protection, which is betterH !he answer to this lies in costs that the two
charge and the ta) brea(s available And here lies the problem 6utual
fund costs are simple, transparent and standardised and insurance costs
are li(e a noodle soup
What are these c$sts"
3ver tried to pic( a noodle out of soup with a for(H @or(ing out costs of
insurance is a similar e)ercise, just when you thin( you have it, it slips
away Costs vary across companies, across products in the same company
and within the product, across premium cutBoffs, categories, tenures and
riders
1?
6utual fund costs, on the other hand, are simple, transparent and
common across product categories =ront end or entry loads 1the upfront
deduction to ta(e care of the distribution costs of a mutual fund2 and e)it
loads have a total common limit of C per cent of the the net asset value
1%A'2, though the industry norm in e,uity is / per cent entry load today
Annual fees that a fund can charge is restricted to a ma)imum of /" per
cent per year 1this rate is according to slabs and reduces as the fund si5e
increases2 !here are no other charges Fowever, there is no ta) rebate on
a fund and though capital gains are e)empt from ta) for a year, its future
is uncertain
Insurance costs and benefits
;ecause of the comple)ity of the insurance product and the cost
differentiation we cannot tell you which product is the least cost It
depends on what you buy Fowever, we will give a handle with which to
open the door to understanding unit lin(ed costs Gou will (now what to
as( the agent and how to compare costs
A !nit %inke& 'r$&!ct +i%% ha(e c$sts acr$ss i(e s!41hea&s:
-5 U'r$nt c$sts5 !his is a percentage of your first premium that is
deducted before the money is deployed !hese costs can continue over
the life of the product or terminate in a few years
/ Reg!%ar charges5 !hese include the annual asset management
charges for managing your money and could include a per month
charge towards the insurance part of the policy
8 S+itching c$sts5 !o switch, from one scheme within a plan to
another, may carry a charge
. E3it c$sts5 If you e)it before a certain time period you may pay a
heavy charge for that
1>
" Other a&*inistrati$n c$sts5 +ome periodic costs can be loaded
under this head as well
On the plus side insurance gets ta) brea(s Insurance premium
gives you a ta) rebate and the insurance lump sums are ta) free
/#
R!sh $r !nit1%inke& sche*es
Om Jota( 6ahindra Life Insurance has grossed Rs /"B"# la(h 1Rs
/"B" million2 from high net worth individuals for its unitBlin(ed offering
BB Jota( +afe Investment -lan
ICICI -rudential Life has seen an ?? per cent surge in the topBups
to its unitBlin(ed policies in the second ,uarter And ;irla +un Life
Insurance has seen a 1"C per cent growth in its unitBlin(ed plans
@hat does this meanH Leveraging the current bull run, cashBrich
policyholders are investing more than their annual premiums in unitB
lin(ed insurance plans, thereby topping up the investment portion of the
policy
K!here has been a surge in interest by high net worth individuals in
investmentBrelated ris( products,K says Abhay Aima, F4=C ;an( country
head, private ban(ing
7nitBlin(ed plans are similar to mutual fund schemes, where the
premium is invested in various funds in (eeping with policyholdersD ris(
appetite
+ome players allow for topping up the premium without affecting
the sum assured 1value of the base policy2, allowing policyholders to
purchase more units
7nli(e traditional insurance products, unitBlin(ed plans offer
transparency in returns in terms of net asset value and fle)ibility in
investment options in debt, e,uity and a mi) of both
K+ome people are buying because of the bull run ;ut the growth is
largely due to the transparency and fle)ibility of the product,K she adds
/1
Figh net worth individuals would li(e to protect themselves from
the mar(et volatility and unitBlin(ed plans offer a safety net unli(e other
investment products, he adds
3ven state insurer, the Life Insurance Corporation of India, has an
unitBlin(ed pension plan in the offing
K@e have received a lot of interest from individuals and corporates
for such a productK !oday, LIC is aggressively positioning its earlier
unitBlin(ed plan BB ;ima -lus hoping it will account for five per cent of
the total business
M!t!a% F!n&
A mutual fund is a company that brings together money from many
people and invests it in stoc(s, bonds or other assets !he combined
holdings of stoc(s, bonds or other assets the fund owns are (nown as its
portfolio 3ach investor in the fund owns shares, which represent a part of
these holdings
U%i's c$*'aris$n6665+ith *!t!a% !n&666
@hen it comes to comparison of 7LI- it has to be with a pure insurance
plan along with investments, whyH ;ecause a 7LI- or 7nit Lin(ed
Insurance -lan is a combination of Insurance and Investment and
therefore the comparison has to be made with a pure insurance cover and
investments in 6utual fund It all boils down to the charges and the actual
amount invested in the mar(et
ULI)7s !s!a%%# ha(e $%%$+ing charges 4!i%t int$ it :
a2 7pBfront Charges
b2 6ortality Charges 1 Charges for providing the ris( cover for life2
//
c2 Administrative Charges
d2 =und 6anagement Charges
M!t!a% F!n&7s ha(e the $%%$+ing charges :
a2 7pBfront charges 1 6ar(eting, Advertising, distributors fee etc2
b2 =und 6anagement Charges 1 e)penses for managing your fund2
Ter* Ins!rance ha(e the $%%$+ing charges :
a2 Gearly premium 1 for ris( cover2
b2 +ervice charges
/8
ABOUT FINANCIAL )LAN
In general usage, a inancia% '%an can be a budget, a plan for
spending and saving future income !his plan allocates future income to
various types of e)penses, such as rent or utilities, and also reserves some
income for shortBterm and longBterm savings A financial plan can also be
an investment plan, which allocates savings to various assets or projects
e)pected to produce future income, such as a new business or product
line, shares in an e)isting business, or real estate
In 4!siness, a financial plan can refer to the three primary financial
statements 1balance sheet, income statement, and cash flow statement2
created within a business plan Financia% $recast or financial plan can
also refer to an annual projection of income and e)penses 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
@hile a financial plan refers to estimating future income, e)penses
and assets, a inancing '%an or inance '%an usually refers to the means
by which cash will be ac,uired to cover future e)penses, for instance
through earning, borrowing or using saved cash
What is inancia% '%anning6
=inancial 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 childDs education or planning for retirement
/.
!he financial planning process as described by C=- ;oard, consists
of si) steps that help you ta(e a Kbig pictureK loo( at where you are
financially 7sing these si) steps, you can wor( out where you are now,
what you may need in the future and what you must do to reach your
goals
!he process involves gathering relevant financial information,
setting life goals, e)amining 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 Beneits $ Financia% )%anning
=inancial planning provides direction and meaning to your
financial decisions It allows you to understand how each financial
decision you ma(e affects other areas of your finances =or e)ample,
buying a particular investment product might help you pay off your
mortgage faster or it might delay your retirement significantly ;y
viewing each financial decision as part of a whole, you can consider its
short and longBterm effects on your life goals Gou can also adapt more
easily to life changes and feel more secure that your goals are on trac(
/"
Financia% '%anning 'r$cess c$nsists $ the $%%$+ing si3 ste's
1 Esta4%ishing an& &eining the c%ient1'%anner re%ati$nshi'5
!he financial planner should clearly e)plain or document the services
to be provided to you and define both his and your responsibilities
!he planner should e)plain fully how he will be paid and by whom
Gou and the planner should agree on how long the professional
relationship should last and on how decisions will be made
/ 8athering c%ient &ata, inc%!&ing g$a%s5
!he financial planner should as( for information about your financial
situation Gou 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 ris( !he financial planner
should gather all the necessary documents before giving you the
advice you need
8 Ana%#9ing an& e(a%!ating #$!r inancia% stat!s5
!he financial planner should analy5e your information to assess your
current situation and determine what you must do to meet your goals
4epending on what services you have as(ed for, this could include
analy5ing your assets, liabilities and cash flow, current insurance
coverage, investments or ta) strategies
. De(e%$'ing an& 'resenting inancia% '%anning rec$**en&ati$ns
an&:$r a%ternati(es5
!he financial planner should offer financial planning
recommendations that address your goals, based on the information
you provide !he planner should go over the recommendations with
you to help you understand them so that you can ma(e informed
decisions !he planner should also listen to your concerns and revise
the recommendations as appropriate
/A
;5 I*'%e*enting the inancia% '%anning rec$**en&ati$ns5
Gou and the planner should agree on how the recommendations will
be carried out !he planner may carry out the recommendations or
serve as your Kcoach,K coordinating the whole process with you and
other professionals such as attorneys or stoc(bro(ers
A M$nit$ring the inancia% '%anning rec$**en&ati$ns5
Gou 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
F!n&a*enta%s $ Financia% )%anning
What Is It"
=inancial planning is the process of solving financial problems and
achieving financial goals by developing and implementing a personali5ed
Kgame planK In order to be effective this KplanK must ta(e into
consideration an individual*s overall picture It must be:
coordinated
comprehensive
continuous
=inancial planning is li(e all other phases of lifeE it involves choices
S'en& n$+ $r sa(e $r %ater"
)a# $ e3isting 4i%%s $r increase retire*ent sa(ings"
F$c!s sa(ings &$%%ars $n sh$rt ter* $r %$ng ter* g$a%s"
/C
A true financial plan does not focus one aspect or product, but instead
see(s to ta(e all areas of planning into consideration when ma(ing
financial decisions
What is Inc%!&e&"
Cash =low 6anagement
!his aspect of planning deals with the day to day allocation of
incomeE and its effective use in paying for current living e)penses
and in accumulating assets which will be used in meeting financial
goals
!a) -lanning and 6anagement
!his area focuses on the understanding of and application of
federal and state income ta) law, estate and inheritance ta)esE and,
when possible, minimi5ing these ta)es
Ris( -lanning and 6anagement
!his area of planning deals with the ris( of losing life, income, or
property It includes the use of insurance products and strategies
Investment -lanning and 6anagement
Almost everyone has accumulation goals for which investments
must be made and managed !hese could include buying a homeE
planning for collegeE or providing for retirement
Retirement -lanning and 6anagement
;y far the most common accumulation goal is the ability to
become financially independent Retirement strategies encompass
/?
the understanding of the +ocial +ecurity systemE employerB
sponsored retirement plansE and personal savings accumulation
plans
3state -lanning and 6anagement
!he final phase of planning is for the transfer of assets to our heirs
with minimi5ation of ta)es and other costs
Wh# )%an"
Anyone who has financial challenges to solve or financial goals to
achieve needs financial planning =inancial -lanning can help to achieve
both greater wealth and financial security Inade,uate or improper
planning can be financially disastrous An uninsured loss can wipe out
accumulated wealthE insufficient savings for retirement can force a
reduced lifestyle and$or postponement of retirementE and improper ta)
planning can result in higher than necessary ta)es causing dollars to be
lost to an accumulation plan or to one*s heirs
Wh# D$ )e$'%e Fai% t$ )%an"
!hey may feel they do not have enough income or financial assets
to consider planning
!hey may believe that they are too young$old to begin planning
!hey may be reluctant to consider some of the less pleasant aspects
of planning such as thin(ing about death, disability, illness, etc
!hey may believe that financial planning is too e)pensive
!hey may procastinate 1!he %umber One Reason =or =ailure2
/>
The Ste's in Financia% )%anning
Identify &oals and Objectives
&ather the necessary data
Analy5e present situation and consider alternatives
4evelop strategies to achieve goals
Implement the strategies
Review and Revise periodically
8#
Chapter 8
Company profile
Fistory of Insurance in India
6ethodology
Limitations
81
INDUSTR2 )ROFILE
I%& 'ysya Life entered the private life insurance industry in India
in +eptember /##1, and has established itself as a distinctive life
insurance brand with an innovative, attractive and customerBfriendly
portfolio ranging from protection, savings, retirement and investment
plansE which it sells through a uni,ue tool B !he Life 6a(er
I%& 'ysya Life is head,uartered in ;angalore, and is a part of the
I%& group !he I%& group is a 1"#ByearBold global financial institution
of 4utch origin offering ban(ing, insurance and asset management to
over A# million private, corporate and institutional clients in "# countries
@e are the worldDs Largest =inancial +ervices &roup and the worldDs
Largest Life Insurance -rovider
I%& &roup has wide and deep e)perience in setting up companies
in new mar(ets, which re,uire substantial investments underlining I%&Ds
longBterm commitment In the last /# years, I%& &roup has established
successful life insurance companies in 1" countries contributing to the
development of insurance services in these countries successfully
8/
Manage*ent Tea*
B$ar& $ Direct$rs <as $n Jan!ar# -=, >??=@
6r Rajan Raheja Chairman of the ;oard
6r Jshitij Lain 6anaging 4irector M C3O
6r %% Loshi 4irector
6r +atish Raheja 4irector
6r Rajesh Japadia 4irector
6r +; &anguly 4irector
6r Ron 'an Oijen 4irector
Seni$r Manage*ent Tea*
Jshitij Lain 6anaging 4irector M C3O
Amit &upta 4irectorE 6ar(eting M
Communication
Femamalini Rama(rishnan Appointed Actuary M Chief
Investment Ris( Officer 1CIRO2
6arco =redri(s =inancial Controller
Rahul Agarwal Customer +ervices M Ris(
! J 7thappa +ales, !ied Agency
G ' 4 ' -rasad ;usiness 4evelopment
)artners :
a I%& &roup
b 3)ide Industries Limited
c &ujarat Ambuja Cements Limited
d 3nams &roup
0ist$r# $ Ins!rance in In&ia
88
In India, insurance has a deepBrooted history It finds mention in
the writings of 6anu 1 Manusmrithi 2, Gagnaval(ya 1 Dharmasastra 2 and
Jautilya 1 Arthasastra 2 !he writings tal( in terms of pooling of
resources that could be reBdistributed in times of calamities such as fire,
floods, epidemics and famine !his was probably a preBcursor 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, 3ngland in particular

1?1? saw the a&(ent $ %ie ins!rance 4!siness in In&ia with the
establishment of the Oriental Life Insurance Company in Calcutta !his
Company however failed in 1?8. In 1?/>, the 6adras 3,uitable had
begun transacting life insurance business in the 6adras -residency 1?C#
saw the enactment of the ;ritish Insurance Act and in the last three
decades of the nineteenth century, the ;ombay 6utual 11?C12, Oriental
11?C.2 and 3mpire of India 11?>C2 were started in the ;ombay
Residency !his era, however, was dominated by foreign insurance
offices which did good business in India, namely Albert Life Assurance,
Royal Insurance, Liverpool and London &lobe Insurance and the Indian
offices were up for hard competition from the foreign companies

In 1>1., the &overnment of India started publishing returns of
Insurance Companies in India !he Indian Life Assurance Companies
Act, 1>1/ was the first statutory measure to regulate life business In
1>/?, the Indian Insurance Companies Act was enacted to enable the
&overnment to collect statistical information about both life and nonBlife
business transacted in India by Indian and foreign insurers including
8.
provident insurance societies In 1>8?, with a view to protecting the
interest of the Insurance public, the earlier legislation was consolidated
and amended by the Insurance Act, 1>8? with comprehensive provisions
for effective control over the activities of insurers
!he Insurance Amendment Act of 1>"# abolished -rincipal
Agencies Fowever, there were a large number of insurance companies
and the level of competition was high !here were also allegations of
unfair trade practices !he &overnment of India, therefore, decided to
nationali5e insurance business

An Ordinance was issued on 1>
th
Lanuary, 1>"A nationalising the
Life Insurance sector and Life Insurance Corporation came into e)istence
in the same year !he LIC absorbed 1". Indian, 1A nonBIndian insurers as
also C" provident societiesN/." Indian and foreign insurers in all !he
LIC had monopoly till the late >#s when the Insurance sector was
reopened to the private sector

!he hist$r# $ genera% ins!rance &ates bac( to the Industrial
Revolution in the west and the conse,uent growth of seaBfaring trade and
commerce in the 1C
th
century It came to India as a legacy of ;ritish
occupation &eneral Insurance in India has its roots in the establishment
of !riton Insurance Company Ltd, in the year 1?"# in Calcutta by the
;ritish In 1>#C, the Indian 6ercantile Insurance Ltd, was set up !his
was the first company to transact all classes of general insurance
business
1>"C saw the formation of the &eneral Insurance Council, a wing of the
Insurance Associaton of India !he &eneral Insurance Council framed a
code of conduct for ensuring fair conduct and sound business practices
8"
In 1>A?, the Insurance Act was amended to regulate investments
and set minimum solvency margins !he !ariff Advisory Committee was
also set up then
In 1>C/ with the passing of the &eneral Insurance ;usiness
1%ationalisation2 Act, general insurance business was nationali5ed with
effect from 1
st
Lanuary, 1>C8 1#C insurers were amalgamated and
grouped into four companies, namely %ational Insurance Company Ltd,
the %ew India Assurance Company Ltd, the Oriental Insurance Company
Ltd and the 7nited India Insurance Company Ltd !he &eneral Insurance
Corporation of India was incorporated as a company in 1>C1 and it
commence business on Lanuary 1sst 1>C8
!his millennium has seen insurance come a full circle in a journey
e)tending to nearly /## years !he process of re1$'ening $ the sect$r
had begun in the early 1>>#s and the last decade and more has seen it
been opened up substantially In 1>>8, the &overnment set up a
committee under the chairmanship of R% 6alhotra, former &overnor of
R;I, to propose recommendations for reforms in the insurance sector!he
objective was to complement the reforms initiated in the financial
sector !he committee submitted its report in 1>>. wherein , among other
things, it recommended that the private sector be permitted to enter the
insurance industry !hey stated that foreign companies be allowed to
enter by floating Indian companies, preferably a joint venture with Indian
partners
=ollowing the recommendations of the 6alhotra Committee report,
in 1>>>, the Insurance Regulatory and 4evelopment Authority 1IR4A2
was constituted as an autonomous body to regulate and develop the
insurance industry !he IR4A was incorporated as a statutory body in
8A
April, /### !he (ey objectives of the IR4A 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 mar(et
!he IR4A opened up the mar(et in August /### with the invitation
for application for registrations =oreign companies were allowed
ownership of up to /A0 !he Authority has the power to frame
regulations under +ection 11.A of the Insurance Act, 1>8? and has from
/### onwards framed various regulations ranging from registration of
companies for carrying on insurance business to protection of
policyholders* interests
In 4ecember, /###, the subsidiaries of the &eneral Insurance
Corporation of India were restructured as independent companies and at
the same time &IC was converted into a national reBinsurer -arliament
passed a bill deBlin(ing the four subsidiaries from &IC in Luly, /##/

!oday there are 1. general insurance companies including the
3C&C and Agriculture Insurance Corporation of India and 1. life
insurance companies operating in the country
)ROBLEM AREA AND NEED FOR STUD2
8C
!oday in India there is 11# crore population and only ? crore
people have Life Insurance -olicy !here are around 1A Life Insurance
companies operating in India Among all the players in insurance mar(et
in India, LIC is the leading one and have high mar(et share in life
insurance sector LIC is -ublic +ector Company and all other are private
sector companies !he reason behind the LIC having high mar(et share, it
has its roots in India more than "# years and brand name it created in
minds of customer !he people of India have more trust in LIC than any
other private insurance
!he reason why LIC have high mar(et share is its fle)ible payment
options, benefits offered, low premium of policies and its relation and
coordination with all the public sector underta(ings ;ut the private Life
Insurance companies are unable to grab the insurance mar(et, because the
people do not have trust in private sector
A customer will have his$her own choice of preferences to
purchase a product !he preferences may be as ,uality, ,uantity, price,
and brand name, additional features from other products and long term
services, guarantee, warranty According to the choice preference and
need for the product only, the customer will purchase a particular product
=or different products and services the preferences will be different base
on time, situation, and need ;ut finally what the customer needs is value
of the money he$she paid for the product ie enough returns 1services,
benefits2 by using the product !he case is same even in the insurance
sector also
!here are various factors which influence and customer prefers in
ta(ing an Insurance policy =actors are premium of policy, benefits of the
policy, fle)ible payment options, brand name the company have in
mar(et +o among the above factors which when is preferred more by the
customer is to be analy5ed
8?
!he life insurance companies should mar(et their products properly, and
ma(e people aware of the company and its various policies, benefits
Meth$& $ the St!&# A In(estigati$n
!he sample si5e is 1##
8>
!his survey helps us to (now what benefits are loo(ed by the
consumer in Insurance -roduct and awareness of I%& 'ysya Life
Insurance
A structured ,uestionnaire with multiple choice ,uestions are given
to consumers of age group of /"B"#
!he respondents are mostly corporate, professional, e)ecutives and
business men who li(e latest trends
!he source of primary data is ,uestionnaire consisting of 1#
,uestions
!he secondary data has been ta(en from internet and boo(s related
to insurance, mar(eting, and finance
+cope of project is e)planatory and descriptive study
LIMITATIONS
The %i*itati$ns $ the st!&# are:
.#
!he research is limited with in Fyderabad city
!he data is collected from the people having life insurance policy
only
!he time period for the study is limited
!he statistical report presented in the project is of year /##.B/##A
only !he updated report is not available
In study of a unit lin(ed plan as a part of financial planning and
customer preference in ta(ing life insurance policy, price of the
policy is majorly considered because money is major constraint for
each and every person
Only I%& 'ysya life insurance is chosen for analy5ing the
awareness of the company and study of unit lin(ed plan and even
for studying the promotional activities role in educating the people
about company
.1
Chapter .
Analysis of 4ata
=indings
Recommendations
Conclusions
ANAL2SIS OF DATA
1 @hich company you have Life Insurance -olicyH
./
POLICY IN AN INSURANCE COMPANY
Insurance
Company
No.of Policy
Holders
% of policy holders
LIC 65 65%
ICICI 10 10%
ING Vysya 1 1%
H!"C 5 5%
#$hers % %%
Inter'retati$n :
=rom the above sample graph and table, we can understand that
most people opt and have insurance in LIC A"0 !he Insurance
Companies which people opt apart from LIC are I%& 'ysyaB1/0,
ICICIB1#0, F4=CB"0 and othersB?0
/ Among various Insurance Companies, why did you chose the
above mentioned companyH
Reas$n $r ch$$sing an Ins!rance C$*'an#
Reas$n 0of Responses
Reputation 8#0
-rice of premium 1/0
.8
;enefits ./0
fle)ible premium
payment options 1A0
Inter'retati$n:
Fere the reason for choosing a particular Insurance Company is
evaluated 6ost people prefer an Insurance Company because of the
benefits of -olicy offered by company !he ne)t preference is given to
reputation the company has in the mar(et
!he minimum importance is given to fle)ible payment options and price
of premium
8 Is premium price of policy within your budget or notH

+ithin 4!&get n$t +ithin 4!&get
-remium price C/ /?
..
Inter'retati$n:
Out of total 1## samples C/0 responded that the price of premium they
paying towards Life Insurance is within their budget, and remaining /?0
said that premium price is not within their budget
. 4o you (now about 7nit Lin(ed Life Insurance -lanH
Awareness of 7LI-
Ges %o
"C .8
."
Inter'retati$n:
Out of total 1## samples "C0 responded that they (now about 7LI-+,
and remaining .80 said that they do not (now about 7LI-s
" @hat is the best option of investmentH
;est Option of Investment
!ype of Investment
%o of
Responses
.A
7nit Lin(ed -lan 1.
Life Insurance 8"
6utual =und /"
+hare 6ar(et /A
Interpretation:
Out of 1## samples 8"0 of respondents believe that best option is
investing in Life Insurance, /A 0 responded with share mar(et, /"0
responded that 6utual =unds are best and 1.0 respondents are saying
7LI-+ is the best option for investment
A Fow much percentage of your salary are you saving monthlyH
Ann!a% Sa(ings in Inc$*e
B $ sa(ings Res'$n&ents
1#0B/#0 A#
.C
/#0B8#0 /"
8#0B.#0 1#
.#0B"#0 "
Interpretation:
=rom the above chart, it is clear that out of 1## samples, A# percent of
people are saving 1#0B/#0 of their annual income, /"0 of people are
saving /#0B8#0 , 1#0 people are saving 8#0B.#0, and remaining "0
people are saving .#0B"#0 of their annual income
C @hat is your e)pected price of premium of the policyH
3)pected -remium per Annum
-remium -rice %oof Respondents
less than //
.?
Rs"###
Rs"###B
Rs1#### A8
6ore than
Rs1#### 1"
Inter'retati$n:
Out of 1## samples, the e)pected price of premium per annum
is less than Rs "### for //0 of people, Rs "###BRs1#### for
A80 of people and more than Rs 1#### for 1"0 people
? 4o you find advertisement of I%& 'ysya Life Insurance is
informative or attractiveH
Ads of I%& 'ysya
%oof Responses
.>
Informative 8"
attractive A"
Interpretation:
Out of 1## samples A"0 of people found that advertisement of
I%& 'ysya Life Insurance are attractive, and remaining 8"0
found that they are informative
> @hich promotional media do you thin( is the best one to
ma(e people educate about an Insurance -olicyH
;est Advertisment
!ype of %o of Respondents
"#
-romotional
Activity
!'
advertisement 8?
Foardings /#
-aper
Advertisement 8/
;anners 1#
Interpretation:
Out of 1## sample 8?0 of people responded that !'
advertisement is the best way for ma(ing people aware of
insurance, 8/0 said that paper advertisement is better way, /#0
of people said that Foarding are better, remaining 1#0 said
banners are helpful in ma(ing people aware of insurance
1# 4o you suggest your colleagues, relatives or any of your
friends about which is the best company to opt for an Insurance
-olicyH
+uggesting an Insurance Company
yes no
"1
%o of
respondents ?? 1/
Interpretation:
=rom the data and analysis it is found that ??0 of people
suggested about insurance to their friends, colleagues and
relatives, and remaining 1/0 people are not suggested
FINDIN8S
=rom the project study and interpretation the findings are as follows:
"/
12 Our country India has a population of 11C crore and there are only
1/ crore people have life insurance policy
/2 Out of 1## samples, A"0 people have insurance policy in LIC and
remaining 8"0 people have insurance policy in other insurance
companies
82 6ost people have trust in LIC than any other insurance company
and still LIC holds huge mar(et share in LI=3 I%+7RA%C3 sector
in India
.2 ?/0 people are ta(ing insurance policy only if it is within their
budget and have fle)ible payment options and remaining is ta(ing
policy if it is not with the budget but due to benefits of policy and
reputation company has
"2 Among various factors ""0 of people are loo(ing for benefits of
policy, /"0 people are loo(ing for premium of policy and
remaining /#0 people are loo(ing for brand name of insurance
company
A2 Only 1#0 of people are saving 810 to .#0 of their income, /#0
people are saving /10 to 8#0, C#0 people are saving 10 to /#0
of their income
C2 As there are many new players in the Indian mar(et, there is huge
competition among all insurance companies
?2 Only A"0 people are aware of I%& 'ysya life insurance and 8"0
people don*t (now about I%& 'ysya life insurance
"8
>2 6ostly corporate people, professionals and business man are aware
of I%& 'ysya life insurance in India Common man 1middle class
and lower class2 is not aware of I%& 'ysya life insurance
1#2 /"0 people gave response stating that advertisement of I%& 'ysya
life insurance are attractive and informative and C"0 people
responded stating that I%& 'ysya life insurance advertisement are
not attractive and not informative
112 Out of 1## respondents, 8?0 stated that !' advertisements is the
best way for ma(ing people aware insurance company, 1.0 stated
that setting up of stalls is the better way, 1#0 stated that paper
advertisement is the better way, "0 stated that banners, pamphlets
is the better way and 880 people stated that personal setting is the
best way of ma(ing people aware and educate them about
insurance company and its policies
RECOMMENDATIONS
".
!here is huge potential mar(et for LI=3 I%+7RA%C3 companies in
India as out of 11# crore population only ? crore people are insured !he
insurance companies should educate people about insurance, its
importance, different policies, and benefits of policies
!he people opt for policy by ta(ing into consideration price of premium
of policy, benefits of policy and least importance is given to brand name
+o the life insurance companies should loo( over the price of premium,
benefits of policy and even fle)ible payment options from the point of
untapped potential mar(et in India
!he price of premium of a policy must be within the budget of common
man and life insurance companies should provide fle)ible payment
options ;y doing so, the private insurance companies can surely capture
the untapped mar(et along with creating brand name
I%& 'ysya life insurance, it has huge past e)perience around the world
;ut coming to Indian perspective its positioning is not properly done in
the customers mind !he advertisement of I%& 'ysya life insurance in
!' should contain briefly relevant message about its policy and benefits
of a policy It should formulate strategies for attracting customers though
good promotional activities and informative ads, so that common man
can have an idea of what I%& 'ysya is offering in a policy
!hough people generally to do the savings by various means, li(e -ost
Office, =i)ed 4eposit, 6utual =und, &old, Real 3state, and +hare 6ar(et
etc !his study focuses attention on the positive affect of 7nit Lin(ed
-lan as a part of =inancial -lanning
""
!he result of the study proves that 7LI-+ can enhance the individual*s
savings through their mar(et investments !he study highlights 7LI-+ as
a part of !a) ;enefit for an individual I%& 7LI-+ products are good
when ta(en as long term investment plans
CONCLUSIONS
=rom the project analysis and interpretation the conclusions are:
"A
12 6ost untapped insurance mar(et in India contains mostly middle
class and lower class people
/2 !he customers gives preference more to premium of policy and
benefits of the policy ;rand name and fle)ible payment options
are given less importance
82 3ven though the premium price is not within the customer budget,
if the benefits offered by policy are good customers is ready to ta(e
the policy
.2 !he customers want the premium price to be within the budget,
with good benefits
"2 !he private insurance companies are unable to tap the untapped
insurance mar(et certain strategies should be formulated to grab
the mar(et
A2 6ost 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
C2 I%& has an international brand image by their world wide
advertisement li(e formula one race and many other sports events
still it need to implement more mar(eting advertisement to attract
the customers
"C
?2 !he present study is an attempt to find the unit lin(ed plan as a part
of financial planning, moreover to determine whether the unit
lin(ed plan would help the people to avail the ta) benefit,
protection, and savings
Chapter "
"?
Ouestionnaire
;ibliography
CUESTIONNAIRE
A study of 7nit Lin(ed Life Insurance plan as a part of financial
planning
)%ease i%% the $%%$+ing &etai%s5
Na*e:
Age:
8en&er:
">
C!a%iicati$n:
Designati$n:
Sa%ar#:
Na*e $ the Organi9ati$n <W$rking@:
)h$ne N$5:
E*ai% ID:
1 In which company you have Life Insurance -olicyH
a2 LIC P Q
b2 I%& 'ysya P Q
c2 F4=C P Q
d2 ICICI P Q
e2 Others P Q
/ Among various insurance companies why did you chose the above
mentioned company
a2 4ue to reputation of the company P Q
b2 4ue to -rice of premium of policy P Q
c2 4ue to benefit of the policy P Q
d2 =le)ible premium payment options P Q
8 Is the premium within your budget
a2 Ges P Q
b2 %o P Q
. 4o you (now about 7nit Lin(ed Life Insurance -lanH
a2 Ges P Q
b2 %o P Q
" @hat is the best option of investmentH
a2 7nit Lin(ed -lan P Q
A#
b2 Life Insurance P Q
c2 6utual =und P Q
d2 +hare 6ar(et P Q
A Fow much percentage of your salary are you saving monthly
a2 1#0B/#0 P Q
b2 /#0B8#0 P Q
c2 8#0B.#0 P Q
d2 .#0B"#0 P Q
C what is your e)pected price of premium of the policy
a2 Less than Rs"### P Q
b2 Rs"### to Rs1#### P Q
c2 more than Rs1#### P Q
? 4o you find advertisement of I%& 'ysya life insurance are
informative and attractive
a2 Informative P Q
b2 Attractive P Q
> @hich promotional media do you thin( is the best one to ma(e
people educate about an insurance policy
a2 !' advertisement P Q
b2 Foardings P Q
c2 -aper advertisement P Q
d2 ;anners P Q
A1
1#4id you suggest your colleagues, relatives or any of your friends
about which is the best company to opt for an insurance policy
a2 Ges P Q
b2 %o P Q
If yes which company you suggestedH
BIBLIO8RA)02
@ebsites:
wwwgooglecom
wwwing'ysyalifecom
wwwirdaindiacom
wwwbimaonlinecom
A/
wwwmar(etresearchcom
;oo(s:
Life M Fealth Insurance
;y Jenneth ;lac( Lr, Farlod 4 +(ipper Lr
6ar(eting 6anagement
;y -hillip Jotler M Jevin Lane Jeller
=inancial 6anagement
;y -rasanna Chandra
A8