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CONTENTS

Introduction to insurance

Introduction to life insurance

Review of literature

Company profile

Plans of BLSI & ULIP

Comparison analysis

conclusion

PG.NO

INTRODUCTION TO INSURANCE

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 19th January, 1956 nationalizing 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 societies
245 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
17th 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.

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 28 general insurance companies including the ECGC and
Agriculture Insurance Corporation of India and 24 life insurance companies
operating in the country.
The insurance sector is a colossal one and is growing at a speedy rate of 1520%. Together with banking services, insurance services add about 7% to the
countrys GDP. A well-developed and evolved insurance sector is a boon for
economic development as it provides long- term funds for infrastructure
development at the same time strengthening the risk taking ability of the country
FUNCTION OF INSURANCE
The functions of Insurance can be bifurcated into three parts:
1. Primary Functions
2. Secondary Functions
3. Other Functions
The primary functions of insurance include the following:

Provide Protection
The primary function of insurance is to provide protection against future risk,
accidents and uncertainty. Insurance cannot check the happening of the risk, but
can certainly provide for the losses of risk.
Collective bearing of risk
Insurance is a mean by which few losses are shared among larger number of
people. All the insured contribute the premiums towards a fund and out of which
the persons
Exposed to a particular risk is paid.
Assessment of risk
Insurance determines the probable volume of risk by evaluating various factors that
give rise to risk. Risk is the basis for determining the premium rate also.
Provide Certainty
Insurance is a device, which helps to change from uncertainty to certainty.
Insurance is device whereby the uncertain risks may be made more certain.
Research and publicity
Insurers also spend money in research and publicity in creating risk consciousness
amongst which has a far reaching effect on reduction in national waste.
The secondary functions of insurance include the following:
Prevention of Losses
Prevention of losses causes lesser payment to the assured by the insurer and this
will encourage for more savings by way of premium. Reduced rate of premiums
stimulate for more business and better protection to the insured.
Small capital to cover larger risks
Insurance relieves the businessmen from security investments, by paying small
amount of premium against larger risks and uncertainty.
Contributes towards the development of larger industries
Insurance provides development opportunity to those larger industries having more
risks in their setting up. Even the financial institutions may be prepared to give
credit to sick industrial units which have insured their assets including plant and
machinery.

If improves efficiency
The insurance eliminates worries and miseries of loans at death and destruction of
property. The carefree person can devote his body and soul together for better
achievement. It improves not only his efficiency, but the efficiencies of the masses
are also advanced.
It helps economic progress
The insurance by protecting the society from huge losses of damage, destruction
and death, provides an initiative to work hard for the betterment of the masses. The
next factor of economic progress. The capital is also immensely provided by the
masses. The property, the valuable assets, the man, the machine and the society
cannot lose much at the disaster.
The other functions of insurance include the following:
Means of savings and investment
Insurance serves as savings and investment, insurance is a compulsory way of
savings and it restricts the unnecessary expenses by the insured's For the purpose
of availing income-tax exemptions also, people invest in insurance.
Source of earning foreign exchange
Insurance is an international business. The country can earn foreign exchange by
way of issue of marine insurance policies and various other ways.
Risk Free trade
Insurance promotes exports insurance, which makes the foreign trade risk free with
the help of different types of policies under marine insurance cover.
PURPOSE OF INSURANCE
1.
Insurance spreads the economic burden of losses by using funds
contributed by members of the group to pay for them. Thus, it is a loss
spreading device.
.The fundamental purpose of insurance however is neither the spreading nor
the prevention of losses. Rather, it is reduction of the uncertainty which is
caused by awareness of the possibility of loss.
3.
An insurance scheme provides certainty for the individual members of
the group by averaging loss costs. The contribution made by the individual to
the group is assumed, on the basis of predictions, to be his share of losses
suffered by the group.

In exchange for this contribution, he is assured that the group will assume
any losses that involve him. He transfers his risk to the group and averages
his loss costs, thus substituting certainty for uncertainty. He pays a certain
premium instead of facing the uncertainty of the possibility of large loss.
PRINCIPLE OF INSURANCE
Principles of Co-operation.
Insurance is co-operative device. If one person is providing for his own losses, it
cannot be strictly insurance because in insurance, the loss is shared by a group of
persons who are willing to co-operate. It is the duty and responsibility of the
insurer to obtain adequate funds from the members of the society to pay them at
the happening of the insured risk. Thus, the shares of loss took the form of
premium. Today, all the insured
give a premium to join the scheme of insurance. Thus, the insured are co-operating
to share the loss of an individual be payment of a premium in advance.
Principles of Probability
The loss in the shape of premium can be distributed only on the basis of theory of
probability. The chances of loss are estimated in advance to affix the amount of
premium. Since the degree of loss depends upon various factors, the affecting
factors are analyzed before determining the amount of loss. With the help of this
principle, the uncertainty of loss is converted into certainty. The insurer will have
not to suffer loss as well have to gain windfall. Therefore, the insurer has to charge
only so much of amount which is adequate to meet the loss. The probability tells
what the chances of loss are and what will be the amount of losses.
The insurance, on the basis of past experience, present conditions and future
prospects, fixes the amount of premium. Without premium, no-operation is
possible and the premium cannot be calculated without the help of theory of
probability, and consequently no insurance is possible. So, these two principles are
the two main legs of insurance.

INTRODUCTION TO LIFE INSURANCE

What is a life insurance policy?

A life insurance policy provides financial protection to our family in the
unfortunate event of your death. At a basic level, it involves paying small sums
each month (called premiums) to cover the risk of our untimely demise during the
tenure of the policy. In such an event, our family (or the beneficiaries we have
named in the policy) will receive a lump sum amount. In case we live till the
maturity of the policy, depending on the type of life insurance policy we have
opted for, we will receive returns the policy may have earned over the years.
Today, there are many variations to this basic theme, and insurance policies cater to
a wide variety of needs.
What are the various types of life insurance policies?
Given below are the basic types of life insurance policies. All other life insurance
policies are built around these basic insurance policies by combination of various
other features.
Term Insurance Policy

A term insurance policy is a pure risk cover policy that protects the person
insured for a specific period of time. In such type of a life insurance policy, a
fixed sum of money called the sum assured is paid to the beneficiaries (family)
if the policyholder expires within the policy term. For instance, if a person
buys a Rs 2 lakh policy for 15 years, his family is entitled to the sum of Rs 2
lakh if he dies within that 15-year period.

If the policy holder survives the 15-year period, the premiums paid are not
returned back. The advantage, apart from the financial security for an
individuals family is that the premiums paid are exempt from tax.

These insurance policies are designed to provide 100 per cent risk cover and
hence they do not have any additional charges other than the basic ones. This
makes premiums paid under such life insurance policies the lowest in the life
insurance category.

Whole Life Policy

A whole life policy covers a policyholder against death, throughout his life
term. The advantage that an individual gets when he / she opts for a whole life
policy is that the validity of this life insurance policy is not defined and hence
the individual enjoys the life cover throughout his or her life.

Under this life insurance policy, the policyholder pays regular premiums
until his death, upon which the corpus is paid to the family. The policy does
not expire till the time any unfortunate event occurs with the individual.

Increasingly, whole life policies are being combined with other insurance
products to address a variety of needs such as retirement planning, etc.

Premiums paid under the whole life policies are tax exempt.

Endowment Policy

Combining risk cover with financial savings, endowment policies are among
the popular life insurance policies.

Policy holders benefit in two ways from a pure endowment insurance policy.
In case of death during the tenure, the beneficiary gets the sum assured. If the
individual survives the policy tenure, he gets back the premiums paid with
other investment returns and benefits like bonuses.

In addition to the basic policy, insurers offer various benefits such as double
endowment and marriage/ education endowment plans.

The concept of providing the customers with better returns has been gaining
importance in recent times. Hence, insurance companies have been coming out
with new and better ULIP versions of endowment policies. Under such life
insurance policies the customers are also provided with an option of investing
their premiums into the markets, depending on their risk appetite, using
various fund options provided by the insurer, these life insurance policies help
the customer profit from rising markets.

The premiums paid and the returns accumulated through pure endowment
policies and their ULIP variants are tax exempt.

Money Back Policy

This life insurance policy is favoured by many people because it gives

periodic payments during the term of policy. In other words, a portion of the
sum assured is paid out at regular intervals. If the policy holder survives the
term, he gets the balance sum assured.

In case of death during the policy term, the beneficiary gets the full sum
assured.

New ULIP versions of money back policies are also being offered by various
life insurers.

The premiums paid and the returns accumulated though a money back
policy or its ULIP variants are tax exempt.

ULIPs

ULIPs are market-linked life insurance products that provide a combination

of life cover and wealth creation options.

A part of the amount that people invest in a ULIP goes toward providing life
cover, while the rest is invested in the equity and debt instruments for
maximising returns. .

ULIPs provide the flexibility of choosing from a variety of fund options

depending on the customers risk appetite. One can opt from aggressive funds
(invested largely in the equity market with the objective of high capital
appreciation) to conservative funds (invested in debt markets, cash, bank
deposits and other instruments, with the aim of preserving capital while
providing steady returns).

ULIPs can be useful for achieving various long-term financial goals such as
planning for retirement, childs education, marriage etc.

Annuities and Pension

In these types of life insurance policies, the insurer agrees to pay the
insured a stipulated sum of money periodically. The purpose of an annuity is to
protect against financial risks as well as provide money in the formof pension
at regular intervals.
How does insurance work?

Insurance works by pooling risk.What does this mean? It simply means that a large
group of people who want to insure against a particular loss pay their premiums
into what we will call the insurance bucket, or pool. Because the number of insured
individuals is so large, insurance companies can use statistical analysis to project
what their actual losses will be within the given class. They know that not all
insured individuals will suffer losses at the same time or at all. This allows the
insurance companies to operate profitably and at the same time pay for claims that
may arise. For instance, most people have auto insurance but only a few actually
get into an accident. You pay for the probability of the loss and for the protection
that you will be paid for losses in the event they occur.
Risks
Life is full of risks - some are preventable or can at least be minimized, some are
avoidable and some are completely unforeseeable. What's important to know about
risk when thinking about insurance is the type of risk, the effect of that risk, the

cost of the risk and what you can do to mitigate the risk. Let's take the example of
driving a car.
Type of risk: Bodily injury, total loss of vehicle, having to fix your car
The effect: Spending time in the hospital, having to rent a car and having to make
car payments for a car that no longer exists
The costs: Can range from small to very large
Mitigating risk: Not driving at all (risk avoidance), becoming a safe driver (we still
have to contend with other drivers), or transferring the risk to someone else
(insurance)
Let's explore this concept of risk management (or mitigation) principles a little
deeper and look at how you may apply them. The basic risk management tools
indicate that risks that could bring financial losses and whose severity cannot be
reduced should be transferred. You should also consider the relationship between
the cost of risk transfer and the value of transferring that risk.

Risk Control
There are two ways that risks can be controlled. We can avoid the risk altogether,
or we can choose to reduce your risk.
Risk Financing
If we decide to retain our risk exposures, then we can either transfer that risk (ie. to
an insurance company), or we retain that risk either voluntarily (ie. we identify and
accept the risk) or involuntarily (we identify the risk, but no insurance is
available).
Risk Sharing
Finally, we may also decide to share risk. For example, a business owner may
decide that while he is willing to assume the risk of a new venture, he may want to
share the risk with other owners by incorporating his business.
So, back to our driving example. If we could get rid of the risk altogether, there
would be no need for insurance. The only way this might happen in this case would
be to avoid driving altogether. Also, if the cost of the loss or the effect of the loss is

reasonable to us, then we may not need insurance.

For risks that involve a high severity of loss and a low frequency of loss, then risk
transference (ie. insurance) is probably the most appropriate protection technique.
Insurance is appropriate if the loss will cause us or our loved ones a significant
financial loss or inconvenience. Do keep in mind that in some instances, we are
required to purchase insurance (i.e. if operating a motor vehicle). For risks that are
of low loss severity but high loss frequency, the most suitable method is either
retention or reduction because the cost to transfer (or insure) the risk might be
costly. In other words, some damages are so inexpensive that it's worth taking the
risk of having to pay for them yourself, rather than forking extra money over to the
insurance company each month.
The Risk Management Process
After you have determined that you would like to insure against a loss, the next
step is to seek out insurance coverage. Here we have many options available to you
but it's always best to shop around. We can go directly to the insurer through an
agent, who can bind the policy. The process of binding a policy is simply a written
acknowledgement identifying the main components of our insurance contract. It is
intended to provide temporary insurance protection to the consumer pending a
formal policy being issued by the insurance company. It should be noted that
agents work exclusively for the insurance company.
There are two types of agents:
1. Captive Agents: Captive agents represent a single insurance company and
are required to only do business with that one company.

2. Independent Agent: Independent agents represent multiple companies and

work on behalf of the client (not the insurance company) to find the most
appropriate policy.

Underwriting
Underwriting is the process of evaluating the risk to be insured. This is done by the
insurer when determining how likely it is that the loss will occur, how much the
loss could be and then using this information to determine how much you should

pay to insure against the risk. The underwriting process will enable the insurer to
determine what applicants meet their approval standards. For example, an
insurance company might only accept applicants that they estimate will have actual
loss experiences that are comparable to the expected loss experience factored into
the company's premium fees. Depending on the type of insurance product you are
buying, the underwriting process may examine your health records, driving
history, insurable interest etc.
The concept of "insurable interest" stems from the idea that insurance is meant to
protect and compensate for losses for an individual or individuals who may be
adversely affected by a specific loss. Insurance is not meant to be a profit center for
the policy's beneficiary. People are considered to have an insurable interest on their
lives, the life of their spouses (possibly domestic partners) and dependents.
Business partnersmay also have an insurable interest on each other and businesses
can have an insurable interest in the lives of their employees, especially any key
employees.
Insurance Contract
The insurance contract is a legal document that spells out the coverage, features,
conditions and limitations of an insurance policy. It is critical that we read the
contract and ask questions if we don't understand the coverage. We don't want to
pay for the insurance and then find out that what we thought was covered isn't
included
Insurance terminology:
Bound: Once the insurance has been accepted and is in place, it is called "bound".
The process of being bound is called the binding process.
Insurer: A person or company that accepts the risk of loss and compensates the
insured in the event of loss in exchange for a premium or payment. This is usually
an insurance company.
Insured: The person or company transferring the risk of loss to a third party
through a contractual agreement (insurance policy). This is the person or entity
who will be compensated for loss by an insurer under the terms of the insurance
contract.
Insurance Rider/Endorsement: An attachment to an insurance policy that alters
the policy's coverage or terms.

Insurance Umbrella Policy: When insurance coverage is insufficient, an umbrella

policy may be purchased to cover losses above the limit of an underlying policy or
policies, such as homeowners and auto insurance. While it applies to losses over
the dollar amount in the underlying policies, terms of coverage are sometimes
broader than those of underlying policies.
Insurable Interest: In order to insure something or someone, the insured must
provide proof that the loss will have a genuine economic impact in the event the
loss occurs. Without an insurable interest, insurers will not cover the loss. It is
worth noting that for property insurance policies, an insurable interest must exist
during the underwriting process and at the time of loss. However, unlike with
property insurance, with life insurance, an insurable interest must exist at the time
of purchase only.
FUNDAMENTAL PRINCIPLES OF INSURANCE
Some useful terms in Insurance:
A) INDEMNITY
A contract of insurance contained in a fire, marine, burglary or any other policy
excepting life assurance and personal accident and sickness insurance) is a contract
of indemnity. This means that the insured, in case of loss against which the policy
has been issued, shall be paid the actual amount of loss not exceeding the amount
of the policy, i.e. he shall be fully indemnified. The object of every contract of
insurance is to place the insured in the same financial position, as nearly as
possible, after the loss, as if his loss had not taken place at all. It would be against
public policy to allow an insured to make a profit out of his loss or damage.
B) UTMOST GOOD FAITH
Since insurance shifts risk from one party to another, it is essential that there must
be utmost good faith and mutual confidence between the insured and the insurer. In

a contract of insurance the insured knows more about the subject matter of the
contract than the insurer. Consequently, he is duty bound to disclose accurately all
material facts and nothing should be withheld or concealed. Any fact is material,
which goes to the root of the contract of insurance and has a bearing on the risk
involved. It is only when the insurer knows the whole truth that he is in a position
to judge
(a) Whether he should accept the risk and
(b) What premium he should charge.
If that were so, the insured might be tempted to bring about the event insured
against in order to get money.
C) Insurable Interest - A contract of insurance affected without insurable interest
is void. It means that the insured must have an actual pecuniary interest and not a
mere
anxiety or sentimental interest in the subject matter of the insurance. The insured
must be so situated with regard to the thing insured that he would have benefit by
its existence and loss from its destruction. The owner of a ship run a risk of losing
his ship, the charterer of the ship runs a risk of losing his freight and the owner of
the cargo incurs the risk of losing his goods and profit. So, all these persons have
something at stake and all of them have insurable interest. It is the existence of
insurable interest in a contract of insurance, which distinguishes it from a mere
watering agreement.
D) Causa Proxima - The rule of causa proxima means that the cause of the loss
must be proximate or immediate and not remote. If the proximate cause of the loss

is a peril insured against, the insured can recover. When a loss has been brought
about by two or
more causes, the question arises as to which is the causa proxima, although the
result could not have happened without the remote cause. But if the loss is brought
about by any cause attributable to the misconduct of the insured, the insurer is not
liable.

F) Mitigation of Loss - In the event of some mishap to the insured property, the
insured must take all necessary steps to mitigate or minimize the loss, just as any
prudent person would do in those circumstances. If he does not do so, the insurer
can avoid the payment of loss attributable to his negligence. But it must be
remembered that though the insured is bound to do his best for his insurer, he is,
not bound to do so at the risk of his life.
G) Subrogation - The doctrine of subrogation is a corollary to the principle of
indemnity and applies only to fire and marine insurance. According to it, when an
insured has received full indemnity in respect of his loss, all rights and remedies
which he has against
Third person will pass on to the insurer and will be exercised for his benefit until
he (the insurer) recoups the amount he has paid under the policy. It must be
clarified here that the
Insurers right of subrogation arises only when he has paid for the loss for which
he is liable under the policy and this right extends only to the rights and remedies
available to the insured in respect of the thing to which the contract of insurance
relates.

H) Contribution - Where there are two or more insurance on one risk, the
principle of contribution comes into play. The aim of contribution is to distribute
the actual amount of loss among the different insurers who are liable for the same
risk under different policies in respect of the same subject matter. Any one insurer
may pay to the insured the full amount of the loss covered by the policy and then
become entitled to contribution from his co-insurers in proportion to the amount
which each has undertaken to pay in case of loss of the same subject-matter.
In other words, the right of contribution arises when
1) There are different policies, which relate to the same subject matter
2) The policies cover the same peril which caused the loss, and
3) All the policies are in force at the time of the loss, and
4) One of the insurers has paid to the insured more than his share of the loss.
Policy is a form of security for the person who insures his life and his family. Life
insurance policies have helped trade and other economic activities to flourish in a
great manner. It has generated lots of job opportunities. It is looked upon as a
lucrative career option. Life insurance companies have also entered the
international business

MAJOR PLAYERS OF INDIA IN INSURANCE

Reliance Life Insurance is a part of the Reliance group. It is one of the partners
of Reliance Capital Ltd which is a Anil Dhirubhai Ambani Group. Reliance Capital

is one India's most dominant private sector financial services companies. They
offer insurance products which help you with savings as well as give you
protection.
Canara HSBC Life is a joint venture of Canara Bank, HSBC Insurance (Asia
pacific) & Oriental bank of Commerce. The Company got its approval from IRDA
in June 2008 and from that commencing its business. They have more than 4100
branches all over India.

DLF pramerica Life Insurance Company Ltd. is a joint venture between DLF
Limited & Prudential International Insurance Holdings Limited. DLF Pramerica
believes in delivering a secure & enrich life to there customers.

MetLife One of the fastest growing insurance company in India is MetLife. The
company started its operations in between 2000-2001. They have a range of
various products to offer.

ICICI Prudential ICICI Bank with Prudential plc, both well known & strong
financial institutions came together in December 2000 to form an insurance
company - ICICI Prudential Life Insurance.

Max New York Life Max Indias leading multi business corporation & New York
Life joined there hands in 2000.The company started there operations in 2001. The
company is involved in Life & health products.
Bajaj Allianz Bajaj who are into iron & steel, finance, insurance & etc and
Allianz who provides financial services when came together they formed Bajaj
Allianz Life Insurance Company.
Bharti AXA Bharti AXA Life Insurance is a joint venture between Bharti & AXA.
The company started its functionality in December 2006 and they always believe
to be a strong financial institute.
HDFC Standard Life HDFC Standard Life Insurance is a joint venture between
Housing Development Finance Corporation Limited & a Group of Standard Life
Plc.The Company started commencing its business in December 2000.
AEGON Religare AEGON Religare Life Insurance Company Ltd is a joint
venture with AEGON, Religare and Bennett, Coleman & Company a part of Times
Group. AEGON Religare Life Insurance company was launched in July 2008.
Kotak Mahindra A joint venture of Kotak Mahindra group & Old Mutual plc is
known as Kotak Mahindra Old Mutual Funds. The Company started commencing
its business in 2001. The company aim is to help customers in making there
financial decisions.
Future Generali Life Future Generali is a joint venture between Future Group of
India & Italy based Generali Group.Future Generali in India is into both Life &

Non Life businesses in India. The company wants to provide a financial security to
all.
SBI Life SBI Life Insurance Company Limited is a joint venture between State
Bank of India and BNP Paribas Assurance. It is present in more than 41 countries
across the world. SBI Life offers a variety of plans in life insurance and pension.
Shriram Life Shriram Life Insurance Company is a joint venture between Shriram
Group and Sanlam Group.Shriram Group is one of Indias most esteemed financial
services & Sanlam Group is one of the largest life insurance providers of South
Africa.
TATA AIG The TATA Group and American International Group Inc together
formed Tata AIG Life Insurance Co. Ltd.Tata Group holds 74% stake in the
insurance venture with AIG holding the balance 26%. They started their operations
in April 2001
Aviva Aviva, one of UK's largest insurance company and world's 5th largest
insurance group. It was one of the first international insurance company to set up
its office in India in the year 1995. They introduced the concept of banc assurance
in India.
IDBI Fortis IDBI Fortis Life Insurance Co. Ltd is a joint venture between three
financial institutes; they are IDBI Bank, Federal Bank and Fortis. They introduced
there plans in March 2008. IDBI owns 48% equity while Federal Bank and Fortis
own 26% equity each.

Sahara The Sahara Pariwar stepped into the insurance business by launching
Sahara India Life Insurance Co. Ltd. They received the IRDA license in February
2004 and started their operations in October 2004. They are the first solely owned
private sector insurance company in India.
ING VYSYA ING Life was established in 2001 as a joint venture between ING
Insurance International B.V. (INGI), ING Vysya Bank Limited and GMR
Industries Limited. At present, INGI, Exide Industries Limited, Ambuja Cement
Ltd, Enam Group are the joint venture partners.
Star Union Star Union Dai-ichi Life Insurance Co.Ltd. is formed by three various
financial institutions. Bank of India, Union Bank of India and Dai-ichi Mutual Life
Insurance Company This firm was incorporated in the year 2007 and got their
IRDA license on the 26th Dec 2008

Birla Sun Life Insurance Company Limited is a joint venture between The
Aditya Birla Group, one of the largest business houses in India and Sun Life

Financial Inc., a leading international financial services organisation. The local

knowledge of the Aditya Birla Group combined with the expertise of Sun Life
Financial Inc., offers a formidable protection for your future.
The Aditya Birla Group has a turnover of close to Rs. 119000 crores, with a market
capitalisation of Rs. 133875 crores (as on 31st March 2008). It has over 100,000
employees across all its units worldwide. It is led by its Chairman - Mr. Kumar
Mangalam Birla. Some of its key companies are Hindalco, Grasim and Aditya
Birla Nuvo.

Sun Life Financial

Sun Life Financial Inc. is a leading international financial services organisation
providing a diverse range of wealth accumulation and protection products and
services to individuals and corporate customers. Tracing its roots back to 1865,
Sun Life Financial and its partners today have operations in key markets
worldwide, including Canada, the United States, the United Kingdom, Hong Kong,
the Philippines, Japan, Indonesia, India, China and Bermuda. As of 31 March
2008, the Sun Life Financial group of companies had total assets under
management of US$ 343 billion
Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and
Philippine (PSE) stock exchanges under ticker symbol "SLF".

Brands Of Aditya Birla Group

Birla Sun Life Insurance (BSLI) has been operating for 9 years. It has contributed
significantly to the growth and development of the life insurance industry in India.
It pioneered the launch of Unit Linked Life Insurance plans amongst the private
players in India. It was the first player in the industry to sell its policies through the
Bancassurance route and through the Internet. It was the first private sector player
to introduce a Pure Term plan in the Indian market. BSLI has covered more than 2
million lives since it commenced operations. And its customer base is is spread
across more than 1500 towns and cities in India. The company has a capital base of
Rs. 1274.5 crores as on 31st March 2008.
With an experience of over 9 years, BSLI has contributed significantly to the
growth and development of the life insurance industry in India and currently ranks
amongst the top 5 private life insurance companies in the country.

Known for its innovation and creating industry benchmarks, BSLI has several
firsts to its credit. It was the first Indian Insurance Company to introduce Free
Look Period and the same was made mandatory by IRDA for all other life
insurance companies. Additionally, BSLI pioneered the launch of Unit Linked Life
Insurance plans amongst the private players in India. To establish credibility and
further transparency, BSLI also enjoys the prestige to be the originator of practice
to disclose portfolio on monthly basis. These category development initiatives have
helped BSLI be closer to its policy holders expectations, which gets further
accentuated by the complete bouquet of insurance products (viz. pure term plan,
life stage products, health plan and retirement plan) that the company offers.
Add to this, the extensive reach through its network of 600 branches and 1,75, 000
empanelled advisors. This impressive combination of domain expertise, product
range, reach and ears on ground, helped BSLI cover more than 2 million lives
since it commenced operations and establish a customer base spread across more
than 1500 towns and cities in India. To ensure that our customers have an
impeccable experience, BSLI has ensured that it has lowest outstanding claims
ratio of 0.00% for FY 2008-09. Additionally, BSLI has the best Turn around Time
according to LOMA on all claims Parameters. Such services are well supported by
sound financials that the Company has. The AUM of BSLI stood at Rs. 8165 crs
as on February 28, 2009, while as on March 31, 2009, the company has a robust
capital base of Rs. 2000 crs.
Achievements of BSLI
1st to introduce ULIP fund options.
1st to launch illustrations so that customers understand the products better
before they buy.
1st to issue NAVs of funds for better transparency.
1st to disclose portfolio on a monthly basis.

 1st to introduce Free Look Period and the same was made mandatory by
IRDA for all other Life Insurance Companies.

SWOT Analysis
STRENGTH:
Multi-channel distribution and one of the largest distribution networks in India.
Implementing Six-Sigma process.
Customer centric products and services.
Superior investment and risk management framework .
Company has maximum number of MDRT as well as good number of HNI
advisors.
Training process of the company is very strong.
Different plan for different peoples.
According to the change in surrounding environment like changes in
customer requirement.
WEAKNESS:
Company does not penetrate on the rural market at a time.
There is no plan for the low income group.
Fees for the advisor is high than the other company.
OPPORTUNITY:
Insurance market is very big, where company can expand its horizon in
insurance industry. Though good investment and insurance it is easy to top Indian
customers.
The huge insurance market (77%) is left so company has opportunity to
expand our products.

THREATS:
OLD HABITS DIE HARD: Its still difficult task to win the
confidence of public towards private company.
The company is facing major threats from LIC-which is an only government
company.

SALES PROCEDURE IN BSLI

BSLI ensure that its policyholder get the best out of the policy offered to them by
their Advisors. Forthis, BSLI follows a set of procedure of selling Insurance to the
clients. The sales procedure can be diagrammatically represented as follows

1. Pitching the customer: The first and foremost thing is that, client should be
ready to purchase the Insurance plan. Insurance is not a very preferable product yet

in India. And, thus, co. has to be very vigilant. Advisors, at BSLI, maintain
relationships and make the most of their Goodwill. Insurance is a Relationship
oriented business. Keeping this in mind BSLI also initiated Bancassurance, Birla
Sun Life Insurance where Banks image of being loyal to the customers, plays a
major role in pitching the customer to buy Insurance. BSLI uses following routes
for distributing their Product to general public:
a. Direct Personal Contacts (through Advisors)
b. Bancassurance (through Banks)
c. Personal Relations (through co. employees)
d. Existing Policyholders.
2. Sales Illustration: BSLI is the first company to give demonstration of the fund
performance i.e. how a certain policy will perform or will give returns. BSLI
Advisors give sales illustration. Fund performance is shown on 6% and 10%
projections. If client find these projected returns suitable to his/her risk profile, he
go for purchasing the policy.
3. Proposal Form: Now as client is ready to get insured, advisor gives him the
proposal form and asks for all the documents required. Proposal form is a 4
page document that contains all the necessary information related to the
Insured and the Owner of the policy. Documents required along with the
proposal form are:
Date-Of-Birth Proof
Address & ID Proof
Income Certificate
Medical Certificates (only if Insurer is a senior citizen)
After Sales Service: Now after the Insurance is sold, follow-ups are required.
Advisor needs to maintain good relations with the policyholder. Insurance co. can
generate further business, only if, existing policyholders are satisfied with the
services being provided by the advisor of the co. Thus, BSLI keeps this in mind
and Business Development Executives continuously track the needs of the
policyholders. BSLI provides the policyholders with monthly updates of the fund
performance and also discloses the asset portfolio of the fund. This assists the
policyholders to manage their policy according to their risk profile. They can,

thus, change their fund allocation as well as the asset allocation in any fund,
chosen by them.

ULIP
ULIP stands for Unit Linked Insurance Plan. It provides for life
insurance where the policy value at any time varies according to the
value of the underlying assets at the time. ULIP is life insurance solution
that provides for the benefits of 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).
ULIP came into play in the 1960s and is popular in many countries in
the word. The reason that is attributed to the wide spread popularity of
ULIP is because of the transparency and the flexibility which it offers.
As times progressed the plans were also successfully mapped along
with life insurance need to retirement planning. In todays times, ULIP
provides solutions for insurance planning, financial needs, financial
planning for childrens future and retirement planning. These are
provided by the insurance companies or even banks.

When the stock markets are volatile and unpredictability becomes a

hindrance to encourage further investment, it leaves the customers

perplexed. To top it all if the debt market doesnt attract you because of
its low interest rate, investment may seem customary. However, lately
banks have been offering an 8% interest rate per annum for investors. A
reason good enough to invest in Fixed Deposits (FD). Whats more? The
investments in FDs qualify for tax benefits too under Section 80 C of the
Income Tax Act, 1961, provided the minimum tenure selected is five
years.
If the inclination to invest in stock market still persists but are still
skeptical, try via Unit Linked Insurance Plan (ULIP) route. It provides
cushion to those who are risk averse. ULIPs offer insurance protection
along with the option to invest in the stock market. The best part of
investing in stocks via ULIPs is that you can choose the funds suiting
your risk profile.
If you know that a particular fund is at its high and is performing well,
with the switch over option you can move to that fund. You can do that
when the fund in which you have invested is performing poorly or you
feel the returns are high in some other fund. The funds offered by ULIPs
give the investors an exposure to both high and low equity investments.
Based on your risk profile, make your pick.

Simple Explanation Of ULIPs

Suppose that you buy a ULIP when you are 30 years old. The sum
assured is Rs 5 lakh and the term is 20 years. The premium that you will
pay over a period of 20 years will work out to around Rs 25,000 to Rs
30,000 depending on the company you choose.
In a term policy, your premium will remain fixed throughout the term of
the policy. So that means, if you opt to invest in a mutual fund and buy a
term policy, the amount of investment and cost of insurance will not
change over a period of time. For a similar example as above, if the 30
year old were to take a term insurance policy for Rs 5 lakh, he would
end up paying anywhere between Rs 40,000 to Rs 50,000 as insurance
premium.
This vast difference in cost of insurance is mainly because of cost of
distribution and administration as also the margins of the insurer. In a
ULIP, costs and margins are recovered commonly between the
investment portion and the insurance portion. However, if you were to
buy a term policy and a mutual fund, the insurance company will
recover its costs of distribution and administration as well as margins.
The mutual fund would again recover the same costs from your
investment portion.

Flexibility
A ULIP will give you flexibility of increasing your life cover, while
maintaining the same premium. This is done by simply reducing your
investment allocation. So suppose you have a risk cover of Rs 5 lakh and
would like to increase it to Rs 6 lakh, you can still continue to pay the
same amount of premium. The only difference would be that the amount
deducted towards the risk cover would be more and therefore, the
amount invested would be less.
Says Puneet Nanda of ICICI Pru. Life Insurance, The reason why
ULIPs have become popular is because they offer huge amount of
flexibility during the course of the policy. You can vary your mix
between protection and savings or within savings, your fund mix.
If you have a term policy and would like to increase your life cover,
your only option would be to buy another term policy. This would mean
paying administration charges all over again.

Theres more to the flexibility. With a ULIP you dont have fear that
your policy will lapse if you were unable to pay your premium. The cost
of insurance will be taken out of your existing investment to keep the

policy going. But if you fail to pay premium on your term policy, it will
lapse.

Expenses
If you were to look at the expenses of a ULIP as compared with the
expenses of a mutual fund, there is a difference. In a ULIP charges are
front loaded, which means, most of the charges are recovered within the
first few years. That is why it does not make sense to invest in a ULIP if
you are looking at a short term. Look at a mutual fund if you are looking
at a time horizon of 3-5 years. In the long term, charges of a ULIP even
out and compare well with a mutual fund.
So if you are looking for a long-term investment avenue with an
insurance cover that goes with it, then ULIP is the product for you and if
you are looking at a product that helps you focus purely on investment
and returns over a medium term, then go for a mutual fund. Experts say
the two products are different and ideally you should have both in your
portfolio.
As financial planners, we get queries from our clients on how to go
about managing their finances. We were recently faced with a rather

interesting query related to ULIPs. In this article we discuss the query

and our solution for the same.
Let us look at the information available,
The clients age is 38 years and he wants a life insurance cover for
Rs 5,000,000. He has an above-average risk appetite.
He has been recommended a ULIP (unit linked insurance plan) by
his insurance agent with a sum assured of Rs 5,000,000 till he
reaches the age of 84 years. This works out to the client being
insured for a tenure of 46 years (i.e. 84 - 38).
The premium paying term however is only ten years and the actual
premium he will have to pay per annum is approximately Rs
894,000.
The client has also been advised by his agent to consider investing his
premiums in the Aggressive (as has been defined by the insurance
company in question) option, which allows upto 35% exposure to
equities.
We have always maintained that ones interests would be best served if
he keeps his life insurance and investment needs distinct.

Given below is our solution based on the clients needs.

The insurance component To begin with, we knew from our interaction

with the client and based on the Human Life Value Calculations that he
is underinsured. An immediate action point for him would be to buy a
term plan. And considering his annual income, he would need to buy a
term plan for more than the sum assured recommended on the ULIP (i.e.
Rs. 5,000,000). Even if we were to consider his sum assured to be Rs
5,000,000 (as per the ULIP) for a term plan, the annual premium he
would have to shell out would be approximately Rs 30,000 per annum
for a 30-Yr period.
The investment component
Having taken care of the clients insurance needs, now lets shift our
focus to his investments. We took into consideration the clients current
financial portfolio. He had a sizable portion of his portfolio invested in
fixed income instruments like bonds and fixed deposits. Bearing this in
mind, our view was he did not need to have another debt-heavy (ULIP
with a 65% debt component) product in his portfolio. Instead what his
portfolio needed was a higher equity component; this would not only
balance his portfolio but also ensure that the portfolio reflects his true
risk profile.
It was also relevant that the client invest in equities since he was
considering his investments from a long-term (over 30 years) horizon.

This could be achieved by investing in equity-oriented mutual funds.

Mutual funds can offer several benefits:
Several studies have shown that over the long term, equities give a
higher return vis--vis fixed income instruments like bonds and
government securities. And given that the clients investment
horizon is of over 30 years, this is an ideal time frame to reap the
rewards of investing in equities. Also, over a 30-Yr period, a 100%
equity mutual fund is better geared to outperform a ULIP portfolio
with a 65% debt component.
ULIP tend to be expensive propositions (vis-a-vis mutual funds)
during the initial years. However, over longer time horizons, the
expenses balance out and ULIPs work out to be cheaper as
compared to mutual funds. However, even if the lower expenses of
a ULIP vis--vis that of a mutual fund scheme were to be
considered, the latter would still surface as the better option.
Several mutual funds also have a track record to boast of.
Personalfns recommended equity-oriented funds have a proven
track record extending over several years and across market cycles.
ULIPs do not have much of a track record to show for; in fact most
ULIPs are yet to experience a bear phase.

 Investing in a mutual fund portfolio will offer the benefit of

diversification to the client. The investor will reap the reward of
diversifying across several fund management styles. On the other
hand, by investing all his money in just one ULIP, the client would
be committing his entire corpus to just one style of investment.
This can prove to be quite risky over the long term.
You can make adjustments to your mutual fund portfolio. If you
believe you have made a wrong investment decision, you can
redeem your investment in a particular mutual fund and invest in
another one. Such adjustments are not entirely feasible in a ULIP.

The Tax Aspect

we also had to contend with Section 80C tax benefits. However, given
the clients annual income, the Section 80C tax benefits were being
taken care of by way of Employees Provident Fund (EPF) as well the
recommended term plan. The client therefore can invest in regular
diversified mutual funds and not necessarily in tax saving funds (ELSS).
As can be seen, term plans combined with mutual funds have the
potential to add considerable value to an investors portfolio. In our view
individuals should first ensure that they are adequately covered by
opting for a term plan. Then they can either opt for ULIPs for the

investment component or as we have shown, they can consider mutual

funds.
Unit Linked Insurance Policies (ULIPs) as an investment avenue are
closest to mutual funds in terms of their structure and functioning. As is
the cases with mutual funds, investors in ULIPs are allotted units by the
insurance company and a net asset value (NAV) is declared for the same
on a daily basis.
Similarly ULIP investors have the option of investing across various
schemes similar to the ones found in the mutual funds domain, i.e.
diversified equity funds, balanced funds and debt funds to name a few.
Generally speaking, ULIPs can be termed as mutual fund schemes with
an insurance component.
However it should not be construed that barring the insurance element
there is nothing differentiating mutual funds from ULIPs.
Despite the seemingly comparable structures there are various factors
wherein the two differ.
In this article we evaluate the two avenues on certain common
parameters and find out how they measure up.

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum
investments or investing using the systematic investment plan (SIP)
route which entails commitments over longer time horizons. The
minimum investment amounts are laid out by the fund house.
ULIP investors also have the choice of investing in a lump sum (single
premium) or using the conventional route, i.e. making premium
payments on an annual, half-yearly, quarterly or monthly basis. In
ULIPs, determining the premium paid is often the starting point for the
investment activity.
This is in stark contrast to conventional insurance plans where the sum
assured is the starting point and premiums to be paid are determined
thereafter.
ULIP investors also have the flexibility to alter the premium amounts
during the policy's tenure. For example an individual with access to
surplus funds can enhance the contribution thereby ensuring that his
surplus funds are gainfully invested; conversely an individual faced with
a liquidity crunch has the option of paying a lower amount (the
difference being adjusted in the accumulated value of his ULIP). The
freedom to modify premium payments at one's convenience clearly
gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses

In mutual fund investments, expenses charged for various activities like

fund management, sales and marketing, administration among others are
subject to pre-determined upper limits as prescribed by the Securities
and Exchange Board of India.
For example equity-oriented funds can charge their investors a
maximum of 2.5% per annum on a recurring basis for all their expenses;
any expense above the prescribed limit is borne by the fund house and
not the investors.
Similarly funds also charge their investors entry and exit loads (in most
cases, either is applicable). Entry loads are charged at the timing of
making an investment while the exit load is charged at the time of sale.
Insurance companies have a free hand in levying expenses on their ULIP
products with no upper limits being prescribed by the regulator, i.e. the
Insurance Regulatory and Development Authority. This explains the
complex and at times 'unwieldy' expense structures on ULIP offerings.
The only restraint placed is that insurers are required to notify the
regulator of all the expenses that will be charged on their ULIP
offerings.
Expenses can have far-reaching consequences on investors since higher
expenses translate into lower amounts being invested and a smaller

corpus being accumulated. ULIP-related expenses have been dealt with

in detail in the article "Understanding ULIP expenses".

3. Portfolio Disclosure
Mutual fund houses are required to statutorily declare their portfolios on
a quarterly basis, albeit most fund houses do so on a monthly basis.
Investors get the opportunity to see where their monies are being
invested and how they have been managed by studying the portfolio.
There is lack of consensus on whether ULIPs are required to disclose
their portfolios. During our interactions with leading insurers we came
across divergent views on this issue.
While one school of thought believes that disclosing portfolios on a
quarterly basis is mandatory, the other believes that there is no legal
obligation to do so and that insurers are required to disclose their
portfolios only on demand.
Some insurance companies do declare their portfolios on a
monthly/quarterly basis. However the lack of transparency in ULIP
investments could be a cause for concern considering that the amount
invested in insurance policies is essentially meant to provide for
contingencies and for long-term needs like retirement; regular portfolio

disclosures on the other hand can enable investors to make timely

investment decisions.

4. Flexibility in Altering Asset Solution

As was stated earlier, offerings in both the mutual funds segment and
ULIPs segment are largely comparable. For example plans that invest
their entire corpus in equities (diversified equity funds), a 60:40
allotment in equity and debt instruments (balanced funds) and those
investing only in debt instruments (debt funds) can be found in both
ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his
corpus into a debt from the same fund house, he could have to bear an
exit load and/or entry load.
On the other hand most insurance companies permit their ULIP
inventors to shift investments across various plans/asset classes either at
a nominal or no cost (usually, a couple of switches are allowed free of
charge every year and a cost has to be borne for additional switches).
Effectively the ULIP investor is given the option to invest across asset
classes as per his convenience in a cost-effective manner.
This can prove to be very useful for investors, for example in a bull
market when the ULIP investor's equity component has appreciated, he

can book profits by simply transferring the requisite amount to a debtoriented plan.

5. Tax Benefits

ULIP investments qualify for deductions under Section 80C of the

Income Tax Act. This holds well, irrespective of the nature of the plan
chosen by the investor. On the other hand in the mutual funds domain,
only investments in tax-saving funds (also referred to as equity-linked
savings schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented
funds (for example diversified equity funds, balanced funds), if the
investments are held for a period over 12 months, the gains are tax free;
conversely investments sold within a 12-month period attract short-term
capital gains tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @
10%, while a short-term capital gain is taxed at the investor's marginal
tax rate.
4. Despite the seemingly similar structures evidently

both mutual funds and ULIPs have their unique set of

advantages to offer. As always, it is vital for investors

to be aware of the nuances in both offerings and

make informed decisions.

5.

Who can invest in ULIPs?

6. It is open to any resident of India who is above 18

years of age. Individuals less than 55 years and 6
months of age can join the plan for 10 years and
those less than 50 years and 6 months for 15 years
contributing 1/10th and 1/15th of the target amount
every year, respectively.

7.

But still here are some basic

differences
8.

ULIPs

Mutual funds
Investment amounts-

Determined by the

Minimum investment

investor and can be

amounts are

modified as well.

determined by the
fund house.

Expenses

No upper limits,

Upper limits for

expenses determined

expenses chargeable

by the insurance

to investors have been

company

set by the regulator

Quarterly disclosures

Portfolio disclosure

Not mandatory*

are mandatory

Generally permitted

Entry/exit loads have

Modifying asset

for free or at a

to be borne by the

allocation

nominal cost

investor
Section 80C benefits

Tax benefits

Section 80C benefits

are available only on

are available on all

investments in tax-

ULIP investments

saving funds