PROJECT REPORT

ON

“PERFORMANCE ANALYSIS OF ULIP FUNDS WITH

SPECIAL REFERENCE TO LIC”

Submitted in partial fulfillment of Bachelor of Business

Administration Rashtrasant Tukdoji Maharaj
Nagpur University, Nagpur

Submitted by
DIPANSHOO S. SHENDE

Guidance by
MS. ABHILASHA GEDAM

Dr. Ambedkar Institute of Management Studies & Research,

Deeksha Bhoomi,Nagpur-440012
(2009-2010)

2
 ACKNOWLEDGEMENT

“Words have never expressed human sentiments. This only an attempt to express my deep
gratitude which comes from my heart.”

It is a great pleasure for me to express my deep feeling of gratitude to my respected guide

Ms. Abhilasha Gedam, Lecturer, DAIMSR, for her great encouragement & unfailing
support which provided needed morale & confidence to carry on my work.

I am grateful to the Dr. Sujit Metre, Director of Dr. Ambedkar Institute of

Management Studies & Research, Nagpur for making all facilities available for my
work.

It is with profound gratitude that I wish to express my indebtedness to

Mr. Nirzar.Kulkarni (Coordinator, DAIMSR) for his invaluable guidance & supervision
for completion of this project work. “Thank you, Sir” for all you have done.

Last but not least I am thankful to my colleagues, friends & other faculties for their direct &
indirect help for completion of this work.

_______________________
DIPANSHOO S. SHENDE

3
 DECLARATION

I, Dipanshoo Suresh Shende hereby declare that the project entitled

“PERFORMANCE ANALYSIS OF ULIP FUNDS WITH SPECIAL REFERENCE
TO LIC” is the outcome of my own research work based on personal study during
academic session 2009- 2010 and has not been submitted previously for award of any
degree or diploma to this university or any other university.

_______________________
DIPANSHOO S. SHENDE

4
 CERTIFICATE

This is to certify that Mr. Dipanshoo S. Shende has satisfactorily completed the Project
work entitled “Performance Analysis Of ULIP Funds With Special Reference To LIC”
in not less than one academic session. This also certify that this Project work is the result of
the candidate’s own work and is of sufficiently high standard to warrant its presentation for
the BACHELOR OF BUSINESS ADMINISTRATION programme.

To the best of my knowledge this project or its part has not been submitted to this university
or any other university for any Degree/Diploma.

________________________
MS. ABHILASHA GEDAM
Guide

Internal Examiner External Examiner

Director

Place:
Date:

5
 CONTENT

SR.NO. CHAPTER PAGE NO.

1 INTRODUCTION TO TOPIC 6-28

2 COMPANY PROFILE 29-33

3 PRODUCT RANGE OF LIC 34-42

4 RESEARCH 43-46
MEHFODOLOGY

5 PRIMARY DATA ANALYSIS 47-52

6 OBSERVATIONS 53-54

7 LIMITATIONS 55-56

8 ANNEXURE 57-60

9 BIBLIOGRAPHY 61-62

6
 CHAPTER 1

INTRODUCTION TO TOPIC

7
 INTRODUCTION

In the commercial arena, the choice of an effective strategy is perhaps the most
important and the toughest decision to take. The decision to select among the grand
strategies and deciding upon which strategy will best meet the enterprises objectives is
rendered complex by multiple considerations. The same is also true with the insurance
companies in India who are constantly revamping their strategies and coming out with
innovative options to stay in the competition. There were days when Life Insurance
Corporation of India (LIC) was the only insurance company available to people in India and
where people synonymed Insurance to LIC. Also since it was a Public Sector Undertaking
(PSU) it has a great support from people. But now times have changed a lot of private
players have entered into the fray. There have been a lot of Indian companies collaborating
with foreign insurance giants like ICICI Prudential, Bajaj Allianz etc who have already
made their presence felt in the Indian Insurance industry.

Even though LIC is still the market leader with more than over 60% of the market
share, the private players are giving it a tough time. Since the last decade the market share
of LIC had fallen down by about more than 20%.

The new private players have started offering a variety of unlimited schemes right
from insurance plans for a 30 day old baby to that of a 70 year old senior citizen. Also the
private companies have started creating the importance and need of insurance in today’s life
They have started positioning their brand sand are marketing their products in such a
way the people have started feeling the need of security in their lives.

Taking into account the huge population and growing per capita income besides
several other driving factors, a huge opportunity is in store for the insurance companies in
India. According to the latest research findings, nearly 80% of Indian population are
without life insurance cover while health insurance and non-life insurance continues to
be below international standards. And this part of the population is also subjected to

8
weak social security and pension systems with hardly any old age income security. As per
independent surveys, insurance in India is primarily used as a means to improve personal
finances and for income tax planning; Indians have a tendency to invest in properties and
gold followed by bank deposits. They selectively invest in shares also but the percentage is
very small (4-5%). This in itself is an indicator that growth potential for the insurance sector
is immense. It's a business growing at the rate of 15-20% per annum and presently is of the
order of around more than $55 billion.

India is a vast market for life insurance that is directly proportional to the growth in
premiums and an increase in life density. With the entry of private sector players backed by
foreign expertise, Indian insurance market has become more vibrant.

Competition in this market is increasing with companies’ continuous effort to lure

the customers with new product offerings. However, the market share of private insurance
companies remains low in the 25-35% range. Even to this day, Life Insurance Corporation
(LIC) of India dominates Indian insurance sector. The heavy hand of government still
dominates the market, with price controls, limits on ownership, and other restraints. They
private players are still in their initial days and would take some more time to capture a
good market share. At present they are coming up with new and innovative ideas.

Since the last decade the life insurance industry in India has been growing very fast
and many new companies have entered this business insurance. The Indian life insurance
industry has recorded a robust growth of more than 16 per cent for the nine-month period
which ended on December 31, 2008.It is expected to grow at an amazing rate of 20 per cent
this year Also in the present scenario the most sought after insurance plans are the Unit
Linked insurance Plans (ULIPs).

A ULIP is a life insurance policy which provides a combination of risk cover

and investment. ULIPs have gained high acceptance due to attractive features they offer
like flexibility, transparency, liquidity and a vast variety of fund option. Unit linked plans

9
are suitable for all customer profiles; however as a general belief the risk averse investors
tend to choose traditional plans and an informed customer prefers a ULIP. ULIPs offer the
kind of flexibility that no insurance product can. ULIPs essentially combine the benefits of
an insurance policy and a market-linked investment. Investors can select a ULIP with an
equity-debt combination that is in line with their risk profile. A risk-taking investor would
typically select one with a high equity component, while a risk-averse investor would opt
for a debt-heavy one. Simply put, ULIPs are structured in such a way that the protection
element and the savings element are distinguishable, and hence managed according to
your specific needs. In this way, the ULIP plan offers unprecedented flexibility and
transparency.
So with many players around for a company to really be successful it has to
really be very efficient on all fronts. It has to constantly adapt to the changing consumer
preferences with a lot of new innovations and implementing new technology try to
different from the lot. Especially if it is a new player in the market the company has to
really work very hard to get into the completion and stay afloat.

10
 INDUSTRY PROFILE

INSURANCE

Insurance may be described as a social device to reduce or eliminate risk of loss to

life and property. Under the plan of insurance, a large number of people associate
themselves by sharing risks attached to individuals. The risks which can be insured against
include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon
these, may be insured against at a premium commensurate with the risk involved. Thus collective
bearing of risk is insurance.

CHARACTERISTICS OF INSURANCE

1. Sharing of risks
2. Cooperative device
3. Evaluation of risk
4. Payment on happening of a special event
5. The amount of payment depends on the nature of losses incurred.

HISTORY OF INDIAN INSURANCE:

History of Insurance in India can be broadly bifurcated into three eras:

a. Pre Nationalization
b. Nationalization and
c. Post Nationalization

The story of insurance is probably as old as the story of mankind. The same instinct
that prompts modern businessmen today to secure themselves against loss and disaster
existed in primitive men also. They too sought to avert the evil consequences of fire and

11
flood and loss of life and were willing to make some sort of sacrifice in order to achieve
security. Though the concept of insurance is largely a development of the recent past,
particularly after the industrial era – past few centuries – yet its beginnings date back almost
6000 years.

Life Insurance in its modern form came to India from England in the year 1818.
Oriental Life Insurance Company started by Europeans in Calcutta was the first life
insurance company on Indian Soil. All the insurance companies established during that
period were brought up with the purpose of looking after the needs of European community
and these companies were not insuring Indian natives. However, later with the efforts of
eminent people like Babu Muttylal Seal, the foreign life insurance companies started
insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy
extra premiums were being charged on them. Bombay Mutual Life Assurance Society
heralded the birth of first Indian life insurance company in the year 1870, and covered
Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives,
insurance companies came into existence to carry the message of insurance and social
security through insurance to various sectors of society. Prior to 1912 India had no
legislation to regulate insurance business. In the year 1912, the Life Insurance Companies
Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912
made it necessary that the premium rate tables and periodical valuations of companies
should be certified by an actuary. But the Act discriminated between foreign and Indian
companies on many accounts, putting the Indian companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance
business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176
companies with total business-in-force as Rs.298 crore in 1938. The Insurance Act 1938
was the first legislation governing not only life insurance but also non-life insurance to
provide strict state control over insurance business. The demand for nationalization of life
insurance industry was made repeatedly in the past but it gathered momentum in 1944 when
a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January, 1956, that life insurance in India was
nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75

12
provident were operating in India at the time of nationalization. The Parliament of India
passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance
Corporation of India was created on 1st September, 1956, with the objective of spreading
life insurance much more widely and in particular to the rural areas with a view to reach all
insurable persons in the country, providing them adequate financial cover at a reasonable
cost.

13
 INSURANCE MARKET - PRESENT

The insurance sector was opened up for private participation a decade back. For
years now, the private players are active in the liberalized environment. The insurance
market has witnessed dynamic changes, which include presence of a fairly number of
insurers both life, and non-life segment. Most of the private insurance companies have
formed joint venture partnering well-recognized foreign players across the globe.

The Indian life insurance market generated total revenues of $41.36 billion in 2007,
thus representing a compound annual growth rate (CAGR) of 11.84% for the period
spanning 2000-2007. Life insurance market had a growth of $22.46 billion within a period
of 7 years with a growth rate of 118.24%. Estimated life premiums rose to INR 1,470,800
million ($36.77 billion) in 2006 from INR 1,301,540 million ($32.54billion) in 2005. We
envisage that life premiums in 2011 will be $65.96 billion, a growth larger than they were in
2007. The performance of the market is forecast to accelerate, with an anticipated
CAGR of 9.78% for the four-year period 2007-2011 expected to drive the market to a
value of $65.96 billion by the end of 2011. There would be a growth of $24.6 billion i.e.
59.48% in the next 4 years.

Non-life premiums in India were $6.53 billion in 2007. Gross written premium
(GWP) in the Indian non-life insurance market reached a value of $5.75 billion in 2006, this
representing an annual growth of 13.55% for the period spanning 2006-2007. Estimated
non-life premiums rose from INR230 billion ($5.75 billion) in 2006 to INR261 billion
($6.53 billion) in 2007.

We anticipate that non-life premiums will grow by a CAGR of 9.40% between

2007-2011. We are looking for non-life premiums to rise by $405 million over the five
years to the end of 2011 with a growth rate of 62.02%.
With a huge population base and large untapped market, insurance industry is a big

14
opportunity area in India for national as well as foreign investors. India is the fifth largest
life insurance market in the emerging insurance economies globally and is growing at 32-
34% annually. This impressive growth in the market has been driven by liberalization,
with new players significantly enhancing product awareness and promoting consumer
education and information. The strong growth potential of the country has also made
international players to look at the Indian insurance market.

Moreover, saturation of insurance markets in many developed economies has made

the Indian market more attractive for international insurance players, according to
"Booming Insurance Market in India (2008-2011):

 Total life insurance premium in India is projected to grow Rs 1,230,000 crore

by 2010-11.

 Total non-life insurance premium is expected to increase at a CAGR of 25%

for the period spanning from 2008-09 to 2010-11.
 With the entry of several low-cost airlines, along with fleet expansion by
existing ones and increasing corporate aircraft ownership, the Indian aviation
insurance market is all set to boom in a big way in coming years.

 Home insurance segment is set to achieve a 100% growth as financial

institutions have made home insurance obligatory for housing loan approvals.

 Health insurance is poised to become the second largest business for non-life
insurers after motor insurance in next three years.

 A booming life insurance market has propelled the Indian life insurance agents
into the top 10 country list in terms of membership to the Million Dollar Round
Table (MDRT)

(Source:http://www.marketsmonitor.com/Report/IM588_related.htm)

15
CAPITAL REQUIREMENTS AND FOREIGN PARTICIPATION:

Minimum capital requirement for direct life and Non-life Insurance Company is
INR1000 million and that for Reinsurance Company is INR2000 million. A maximum 26%
foreign equity stake is allowed in direct insurance and reinsurance companies. In the 2004-
05 budget, the Government proposed for increasing the foreign equity stake to 49%.

(Source: www.irdaindia.org)

16
 LIFE INSURANCE

It is evident from its very name it deals with insurance of human life. Life Insurance
Corporation of India- a public sector undertaking has the monopoly in this sector since its
nationalization.

In our wordily life, whenever there is uncertainty, there is an involvement of risk.

The instinct for security against such risk is one of the basic motivating forces
determining human attitudes. As a squeal to this quest for Security, the concept of
insurance must have been born. The urge to provide insurance or protection against the
loss of life & property must have prompted people to make some sort of sacrifice
willingly in order to achieve security through COLLECTIVE CO-OPER TION in this sense
story of insurance is probably as old as the story of mankind.

All life insurance companies in India have to comply with the strict regulations laid
out by Insurance Regulatory and Development Authority of India (IRDA). Therefore there is no
risk in going in for private insurance players. In terms of being rated for financial strength
like international players, only ICICI Prudential is rated by Fitch India at National Insurer
Financial Strength Rating of AAA (Ind) with stable outlook indicating the highest
claims paying ability rating.

Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far
the largest player in the market. Among the private sector players, ICICI Prudential Life
Insurance (JV between ICICI Bank and Prudential PLC)is the largest followed by Bajaj
Allianz Life Insurance Company Limited (JV between Bajaj Group and Allianz).

The private companies are coming out with better products which are more
beneficial to the customer. Among such products are the ULIPs or the Unit Linked
Insurance Plans which offer both life cover as well as scope for savings or investment

17
options as the customer desires. Further, these types of plans are subject to a minimum
lock-in period of three years to prevent misuse of the significant tax benefits offered to
such plans under the Income Tax Act. Unlike the mutual fund product that has a very
simple cost structure, ULIPs carry a greater number of costs (administration and
mortality), in addition to the others. So comparing ULIPs with mutual funds is erroneous.

18
 PRESENT STRUCTURE OF INSURANCE INDUSTRY IN INDIA

 Life Insurance Corporation of India – Fully owned by government.

 Postal Life Insurance
Private players:
1. Bajaj Allianz Life Insurance Co. Ltd.
2. Birla Sun Life Insurance Co. Ltd. (BSIL)
3. HDFC Prudential Life Insurance Co. Ltd. (HDFC STANDARD LIFE)
4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)
5. ING Vyasa Life Insurance Co. Ltd. (ING VYASA)
6. Max New York Life Insurance Co. Ltd. (MNYL)
7. Met Life India Insurance Co. Ltd. (METLIFE)
8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd.
9. SBI Life Insurance Co. Ltd. (SBI Life)
10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)
11. AMP Sanmar Assurance Co. Ltd. (AMP SANMAR)
12. Aviva Life Insurance Co. Ltd. (AVIVA)
13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)
14. PNB Life Insurance
15. Reliance Life Insurance
16. Bharati Axa Life Insurance

19
 6%
2% 1%
2% LIC
3%
ICICI Prudential
3%
Bajaj Allianz
3%
SBI Life
Reliance
7%
HDFC Standard Life
Birla Sun Life
Max Newyork Life
9% 64%
Kotak Mahindra
Others

(Source: As per a report published in 2008 by Ms Pinky Walia-Financial Advisor)

20
 RELATED ACTS

The insurance sector went through a full circle of phases from being unregulated to be
completely regulated and now being partially deregulated. It is governed by number of
acts, with the first one being the Insurance Act, 1938.

The Insurance Act, 1938

The Insurance Act, 1938 was the first legislation governing all insurance titles to provide
strict state over insurance business.

Life Insurance Corporation Act, 1956

Even though the first legislation was enacted in 1938, it was only on 19th January, 1956,
that life insurance in India was completely nationalized through the Life Insurance
Corporation Act, 1956. There were 245 insurance companies of both Indian and foreign
origin companies in 1956. The government acquiring the companies accomplished
nationalization. The Life Insurance Corporation of India was then formed on 1st
September, 1956.

General Insurance Business (Nationalization) ACT, 1972

The general insurance business (nationalization) Act, 1972 was enacted to nationalize the
100 odd general insurance companies by merging them to form four different companies
named National Insurance, New India Assurance, Oriental Insurance and United India
Insurance headquartered in each of the four metropolitan cities of India.

21
Insurance Regulatory and Development Authority (IRDA) Act, 1999
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in
April 2000 has fastidiously stuck to its schedule of framing regulations and registering the
private sector insurance companies.

The other decision taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of the
IRDA's online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured that the
insurance companies would have a trained workforce of insurance agents in place to sell
their products, which are expected to be introduced by early next year. Since being set up
as an independent statutory body the IRDA has put in a framework of globally compatible
regulations. In the private sector 12 life insurance and 6 general insurance companies have
been registered.

22
 LIFE INSURANCE PRODUCTS

Life insurance products are broadly classified into two categories:

A) Traditional products which includes:

1. Term loan: It provides death risk cover for a specified term

only. Every policy does not result into a claim.
2. Whole life insurance: Here the sum assured is paid on
death whenever it occurs. The premium in this will be higher compared to term plan.
3. Endowment plan: It provides for the payment of the sum
assured at the end of the specified term or on early death. A money back plan, where
survival benefits become payable at definite interval, is also the variant of endowment
plan.
4. Annuities: They are the series of periodic payments to the
annuities for life or for a specified period. Annuities can be immediate (where the
payment of annuity is immediate) or deferred (where the payment of annuity
commences after a specific period).

B) Non- traditional products:

Due to inflexibility of life insurance products, which results into high liquation,
inconvenience in sticking to premium payment regimen, lack of transparency, etc.
insurance company have come out with non-traditional products mainly in the form of
unit linked products, which have borrowed several beneficial features of mutual funds.

23
 UNIT-LINKED INSURANCE PLANS (ULIP)

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

ULIPs are a category of goal-based financial solutions that combine the safety of
insurance protection with wealth creation opportunities. In ULIPs, a part of the investment
goes towards providing a life cover. The residual portion of the ULIP is invested in a fund
which in turn investing stocks or bonds; the value of investments alters with the
performance of the underlying fund opted by the customer.

Simply put, ULIPs are structured in such that the protection element and the
savings element are distinguishable, and hence managed according to your specific
needs. In this way, the ULIP plan offers unprecedented flexibility and transparency.
ULIPs came into play in 1960s and became very popular in Western Europe and
America. The reason that is attributed to the wide spread popularity of ULIP is because of
the transparency and the flexibility which it offers to the clients.

As time progressed the plans were also successfully mapped along with life
insurance needs to retirement planning in today’s times ULIP provides solution for all the
needs of a client like insurance planning financial needs financial planning for children’s
future and retirement planning

The number of units represents the policyholder’s share in the fund. The value of
the unit is determined by the total value of all the investments made by the fund divided
by the number of units.

24
 If the insurance company offers a range of funds, the insured can direct the
company to invest in the fund of his choice. Insurers usually offer three choices — an
equity (growth) fund, balanced fund and a fund, which invests in bonds.

STRUCTURE OF ULIPs
ULIPs offered by different insurers have varying charge structures. Broadly the
different types of fees and charges are given below. However the insurers have the right to
revise or cancel the fees and charges over a period of time.

Charges, Fees and Deductions in ULIP

 Premium Allocation Charge

This is a premium-based charge. After deducting this charge from premiums, the
remainder is invested to buy units. The Allocation charges are guaranteed for the
entire duration of policy term.

 Mortality Charge
The Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the
Fund Value pertaining to regular premiums). It will be deducted by monthly
cancellation of units from the accumulation unit account. The Mortality Charge
shall remain guaranteed throughout the policy term.

 Fund Management Charge

1% p.a. on With Profits Fund, 1% p.a. on Debt Fund, 1.25% p.a. on Balanced
Fund and 1.50% p.a. on Growth Fund. FMC will be applied on the fund while
calculating NAV on a daily basis. The maximum FMC on any fund is 2% p.a.
subject to prior approval by the IRDA.

 Policy Administration Charge

Rs. 60 per month, which will increase by 5% p.a. on the 1st of January each year.
PAC will be deducted monthly by cancellation of units from the accumulation unit

25
 account. If premiums are discontinued, this charge would reduce to 60% of the
charge applicable for the premium paying policies

 Surrender Charge
This is the charge that applies when the policy is surrendered. It is equal to 50% of
the difference between regular premiums expected and those paid in the first year
of the contract.

 Service Tax Deductions

12.36% service tax is applicable on the first premium of life insurance policy.

Tax Benefits
Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act, 1961.
Insurance is tax free up to Rs. 100000 per annum and the returns on investment on
maturity of the policy are also tax free.

ULIPs Structure

A d min istra tio nF u n d ma n a g e m e n t

ch a rg e s c h a rg e s

M o rta lity ch a rg e s A d min istra tio n ch a rg e s

F u n d m a n a g e m e n t ch a rg e s
P re m iu m
M o rta lity c h a rg e s
a llo c a tio n c h a rg e s
P re miu m a llo ca tio n ch a rg e s
In ve stm e n t a m o u n t
In ve stme n t a m o u n t

Figure 3: Premium break -up under ULIPs

26
 ADVANTAGES OF ULIPS

ULIP distinguishes itself through the multiple benefits that it provides to the
consumer. The plan is a one stop solution for everything the customers want. Unit Linked
Insurance Plans (ULIPs)are different from traditional plans purely because, they are
much more transparent, various charges are shared with the customer before the sale of
the product, so as to enable the customer to make an informed decision.

Customers have the flexibility to choose their life cover. Also the customers have
the choice of multiple fund options based on their risk appetite, thereby enabling an
investor to make the desired returns from the investment.

The following are some of the advantages of Unit linked plans:

A. Life protection
B. Investment and Savings
 Market linked fund based on risk profile
 Switch option
 Premium redirection
 Automatic Transfer Plan(ATP)
C. Tax Planning
D. Flexibility of cover continuance
E. Transparency
F. Extra protection with riders
 Death due to accident
 Disability
 Critical illness
G. Liquidity
 Partial withdrawals during the term

27
  At maturity
H. Variable investment options
I. Premium holiday
J. Allow Top-ups

FACTORS INFLUENCING THE BUYING OF UNIT LINKEDINSURANCE PLAN

(ULIPs)

The degree of buying of ULIPs insurance varies from person to person. It depends
upon many factors. The factors can be classified into personal, social, economic,
psychological and company related variables. Age and experience of policyholder are
personal factors, while the co- education is a social factor. Economic factors include
occupation, income and wealth, and the psychological factors consist of perception,
satisfaction about the services rendered by insurance companies, the impact of
advertisement and personal selling made by insurance companies on policyholders. The
company related variables are the promotional efforts to sell the policies to prospective
buyers. These include advertisement and personal selling too.

28
TYPES OF FUNDS UNDER ULIPs

Most insurers offer a wide range of funds to suit one is investment objectives risk
profile and time horizons. Different funds have different risk profiles. The potential for
returns also varies from fund to fund. The following are some of the common types of
funds available along with an indication of their risk characteristics.

General Risk
Nature of Investments
Description Category

Primarily invested in
company
Equity Funds High
stocks with the general aim of
capital appreciation

Invested in corporate bonds,

Income, fixed Mediu
government securities and other
interest and Bond funds m
fixed income instruments

Sometimes known as Money

Cash Funds Market Funds — invested in cash, Low

bank deposits and money market
instruments
Combining equity
Mediu
Balanced Funds investment
m
with fixed interest instruments

29
 CHAPTER 2
COMPANY PROFILE

30
 COMPANY PROFILE

The Parliament of India passed the Life Insurance Corporation Act on the 19th of
June 1956, and the Life Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more widely and in particular to
the rural areas with a view to reach all insurable persons in the country, providing them
adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from
its corporate office in the year 1956. Since life insurance contracts are long-term contracts
and during the currency of the policy it requires a variety of services need was felt in the
later years to expand the operations and place a branch office at each district headquarter.
Re-organization of LIC took place and large numbers of new branch offices were opened.
As a result of re-organization servicing functions were transferred to the branches, and
branches were made accounting units. It worked wonders with the performance of the
corporation. It may be seen that from about 200.00 crores of New Business in 1957 the
corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years
for LIC to cross 2000.00 crore mark of new business. But with re-organization happening
in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on
new policies
.
Today LIC functions with 2048 fully computerized branch offices, 100 divisional
offices, 7 zonal offices and the corporate office. LIC’s Wide Area Network covers 100
divisional offices and connects all the branches through a Metro Area Network.
LIC continues to be the dominant life insurer even in the liberalized scenario of Indian
insurance and is moving fast on a new growth trajectory surpassing its own past records.
LIC has issued over one crore policies during the current year. It has crossed the milestone
of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of
16.67% over the corresponding period of the previous year.

31
From then to now, LIC has crossed many milestones and has set unprecedented
performance records in various aspects of life insurance business.

32
 BUSINESS OBJECTIVES

OBJECTIVES OF LIC

 Spread Life Insurance widely and in particular to the rural areas and to the
socially and economically backward classes with a view to reaching all insurable
persons in the country and providing them adequate financial cover against death
at a reasonable cost.
 Maximize mobilization of people's savings by making insurance-linked
savings adequately attractive.
 Bear in mind, in the investment of funds, the primary obligation to its
policyholders, whose money it holds in trust, without losing sight of the interest of
the community as a whole; the funds to be deployed to the best advantage of the
investors as well as the community as a whole, keeping in view national priorities
and obligations of attractive return.
 Conduct business with utmost economy and with the full realization that
the moneys belong to the policyholders.
 Act as trustees of the insured public in their individual and collective
capacities.
 Meet the various life insurance needs of the community that would arise in
the changing social and economic environment.
 Involve all people working in the Corporation to the best of their capability
in furthering the interests of the insured public by providing efficient service with
courtesy.
 Promote amongst all agents and employees of the Corporation a sense of
participation, pride and job satisfaction through discharge of their duties with
dedication towards achievement of Corporate Objective.

33
 MISSION/VISSION OF LIC

Mission:
"Explore and enhance the quality of life of people through financial security by providing
products and services of aspired attributes with competitive returns, and by rendering
resources for economic development."
Vision:
"A trans-nationally competitive financial conglomerate of significance to societies and
Pride of India."

34
 CHAPTER 3

PRODUCT RANGE OF LIC

35
 PRODUCT SEGMENTS OF LIC

Individual Products
Life Insurance Corporation realizes that not everyone has the same kind of needs. Keeping
this in mind, it has a varied range of products that you can choose from to suit all your
needs. These will help secure your future as well as the future of your family. These are:

 Profit Plus
 Market Plus-I
 Fortune Plus
 Money Plus-I
 Child Fortune Plus

 Profit Plus:

In this policy, the investment risk in investment portfolio is borne by the policy
holder.
It is a unit linked Endowment plan where the premium payment term (PPT) is
limited to single lump sum, or uniformly over 3, 4 or 5 years. You can choose the level of
cover within the limits, which will depend on whether the policy is a Single premium or
Limited premium contract, term chosen and on the level of premium you agree to pay.

Four types of investment Funds are offered. Premiums paid after allocation charge
will purchase units of the Fund type chosen. The Unit Fund is subject to various charges
and value of units may increase or decrease, depending on the Net Asset Value (NAV).

36
Market Plus –I:

In this policy, the investment risk in investment portfolio is borne by the policy holder.

This is a unit linked pension plan wherein the pension is payable after a specified
period. Four types of investment Funds namely Bond, Secured, Balanced and Growth
Fund are offered. Though primarily a Pension product, the plan has many attractive
features and options, which make it an ideal Retirement solution for the future.

 Fortune Plus

It is a unit linked assurance plan where premium payment term (PPT) is 5 years
and the premium payable in the first year will be 50% of total premium payable under the
policy. The level of cover will depend on the level of premium you agree to pay.

Four types of investment funds are offered. Premiums paid after allocation charge
will purchase units of the Fund type chosen. The Unit Fund is subject to various charges
and value of the units may increase or decrease, depending on the Net Asset Value
(NAV). The plan therefore serves the purpose of insurance-cum-investment.

 Money Plus-I

This is a unit linked Endowment plan with regular premium paying term, which
offers investment cum insurance during the term of the policy. You can choose the level
of cover within the limits, which will depend on the level of premium you agree to pay.

Four types of investment Funds are offered. Premiums paid after allocation charge
will purchase units of the Fund type chosen. The Unit Fund is subject to various charges
and value of units may increase or decrease, depending on the Net Asset Value (NAV).

37
  Child Fortune Plus

In this policy, the investment risk in investment portfolio is borne by the

policy holder.

All of us wish to ensure the best possible future for our children. With the cost of
education sky rocketing, it is all the more important that an early provision is made to
ensure that your loved ones get a good head start in life. LICs Child Fortune Plus is a total
solution to their education and other needs. The plan is a unit linked one offering the
prospects of long term capital appreciation.

38
GENERAL FEATURES OF THE VARIED PRODUCTS OF LIC

MARKET PLUS-I

Min entry age 18 yrs

Max entry age 70 yrs

Max Maturity age 75 yrs

Min premium 5000 RP

10000 Single Premium
Riders ADBR

Min premium payment term 5 yrs

PROFIT PLUS(RP&SP)

Min entry age 0 yrs

Max entry age 65 yrs

Max Maturity age 70,75 yrs

Min premium 1000 RP

20000 Single Premium
Riders ADBR, CIBR

Min premium payment term 3 yrs

39
 FORTUNE PLUS

Min entry age 12 yrs

Max entry age 60 yrs

Max Maturity age 65 yrs

Min premium 20000

Riders ADBR

Min premium payment term 5 yrs

MONEY PLUS-I

Min entry age 0 yrs

Max entry age 65 yrs

Max Maturity age 75 yrs

Min premium Rs.5,000

Riders ADBR, CIBR

Min premium payment term 5 yrs

40
 CHILD FORTUNE PLUS

Min entry age Less than17 yrs

Max entry age 17 yrs

Max Maturity 25 yrs of child or of the

age insured 75 yrs
Min premium Rs.10,000

Riders ADBR

Min premium payment term 5 yrs

ADBR-Accidental Death Benefit Rider, CIBR-Critical Illness Benefit Rider

(Source: www.licindia.com)

PERFORMANCE OF ULIP FUNDS OF LIC

41
PRODUCT BASIC VALUE NET ASSET REPURCHASE SALE VALUE
(AS ON DATE OF VALUE VALUE
LAUNCH ) (AS ON 12 NOVEMBER, 2009)
TH

MARKET PLUS- DATE OF

I: LAUNCH

17.06.2008
BOND FUND 10 11.4720 11.4720 11.4720

SECURED FUND 10 11.7832 11.7832 11.7832

BALANCED FUND 10 11.9203 11.9203 11.9203

GROWTH FUND 10 12.8098 12.8098 12.8098

PROFIT PLUS: DATE OF

LAUNCH

23.08.2007
BOND FUND 10 12.5528 12.5528 12.5528

SECURED FUND 10 11.7868 11.7868 11.7868

BALANCED FUND 10 12.2553 12.2553 12.2553

GROWTH FUND 10 10.6895 10.6895 10.6895

FORTUNE PLUS: DATE OF

LAUNCH

23.08.2007
BOND FUND 10 12.2086 12.2086 12.2086

SECURED FUND 10 12.0740 12.0740 12.0740

BALANCED FUND 10 10.8677 10.8677 10.8677

GROWTH FUND 10 10.8518 10.8518 10.8518

42
Money plus-I: Date of
launch
22.05.2008
Bond fund 10 12.4177 12.4177 12.4177

Secured fund 10 13.8626 13.8626 13.8626

Balanced fund 10 13.6496 13.6496 13.6496

Growth fund 10 12.8678 12.8678 12.8678

Child fortune Date of

plus: launch
01.11.2008
Bond fund 10 10.6557 10.6557 10.6557

Secured fund 10 13.6108 13.6108 13.6108

Balanced fund 10 13.5517 13.5517 13.5517

Growth fund 10 13.5517 13.5517 13.5517

43
 CHAPTER 4

RESEARCH METHODOLOGY

44
SCOPE OF THE STUDY

This study aims to make a performance analysis of the Unit Linked Insurance Plans
(ULIPs) of LIFE INSURANCE CORPORATION OF INDIA in the Indian context, insurance market
and study the consumer perception towards various insurance products. The performance
analysis is based on the empirical data collected from the Nagpur city..

OBJECTIVES OF THE PROJECT

 To understand the insurance products at length.

 To understand Unit Linked Insurance Plans (ULIPs) of LIC.
 To analyse the performance selective Unit Linked Insurance Plans (ULIPs) of LIC.
 To study the consumer perception towards various insurance products.

45
 METHODOLOGY

The techniques used for data collection are:

a. Internet surveys and
b. Questionnaire method

The following methodology has been followed to achieve the objectives of the project.

Step: 1
Developing a right research design and timeline for the project.

Step: 2
Collecting Secondary data of the insurance Industry

Step: 3
Designing of the Questionnaire

Step: 4
Analysis of secondary data

Step: 5
Collection of primary data-Questionnaires and internet surveys

Step: 6
Analysis of primary data

Step: 7
Interpretation of the results

Step: 8
Preparation of the final report

SOURCES OF DATA

46
There are two types of data used. They are primary and secondary data. Primary data is
defined as data that is collected from original sources for a specific purpose. Secondary
data is data collected from indirect sources. (Source: Research Methodology, By C. R.
Kothari)

Primary Data:
The primary data was collected by a survey based on the questionnaire. It was formulated
on the basis of information carefully gathered by me about the various mindsets of the
people. This questionnaire was mainly formulated to target the common man to see his
perception and awareness of various investment options available.

Sample Size:
The sample size for the survey conducted was 50 respondents.

Sampling Technique:
Random sampling technique was used in the survey conducted.

Study Area:
The samples referred to were residing in Nagpur City.

Secondary Data;
The secondary data was collected directly from the companies and their websites and
internet surveys. Also a lot of similar research studies and journals have been referred to.

LITERATURE STUDY
Till today a lot of research has been done on the Indian insurance industry especially
the life insurance sector. The material for this study was collected from various internet
sites, journal sand books by various authors.

47
 CHAPTER 5

DATA ANALYSIS AND INTERPRETATION

48
 PRIMARY DATA ANALYSIS

We have done a detailed survey in Nagpur city to understand and study the
consumers’ responses. The primary data was collected through questionnaires. This
questionnaire was mainly formulated to target the common man to see his perception and
awareness of various investment options available. The sample size of the survey was 50.
Out of these 34 were male and 16 were female. The sample of respondents was carefully
selected covering people in all age groups and with different backgrounds and
occupations. The analysis of these questionnaires gives us an insight about the mindset of
people regarding various investments. Customer preferences as to where they would like
to invest have been studied. Also we come to know about the preferences given by
customers towards various top life insurance companies and their reasons for it.
Following is the analysis of the primary data collected through questionnaires.
(Please refer to annexure I)

The sample included respondents from all the age groups out of which people in
the age group 18-40 constituted around 70%.

Age No of Respondents Percentage

18-30 19 38%

30-50 26 52%

>50 5 10%

Total 50 100%

49
 Figure 12: Break-up of respondents between different age groups

The sample of respondents was heterogeneous with people of various occupations right
from government service to ones who were self employed. Out of these people who were
working in private companies constituted round 65%.

Figure: Break-up of respondents by their occupations

Also the customers’ preferences for different forms of savings have been carefully studied
the main savings instruments generally preferred by customers are bank deposits, fixed

50
deposits, investments and post office schemes. Out of these Investments has been
preferred by around 43% respondents and fixed deposits by around 27%.
The various forms of investments generally preferred by customers have been identified
as mutual funds, stocks and shares, insurance products and government bonds. Out of
these around 35% preferred stocks and shares and around 20% preferred insurance
products.

Figure: Break-up of respondents based on their preferences for various savings

instruments

The various forms of investments generally preferred by customers have been identified
as mutual funds, stocks and shares, insurance products and government bonds. Out of
these around 35% preferred stocks and shares and around 20% preferred insurance
products.

51
 Figure: Break-up of respondents based on preferences for various forms of
investment

Figure: Break-down of respondents who own insurance policies in various life

insurance companies

52
Around 63% respondents felt that there was an amount of moderate to high risk involved
with ULIPs.

Figure: Break-down of respondents who rated risk involved in ULIPs

Around 63% of the respondents owned an insurance policy in LIC which clearly shows
that LIC still continues to be the market leader in as it has been since the last 50 years or
so in spite of the presence various powerful private players which are still finding hard to
capture a major market share. Around 13%b respondents chose ICICI Prudential.

Figure: Break-down of respondents who own insurance policies in various life

insurance companies

53
 CHAPTEZ 6

OBSERVATIONS

54
 OBSERVATIONS

 There is a great future of the life insurance sector in India as 80% of the Indian
population is still without life cover and people are just now coming in response to
the awareness campaigns being carried out by almost all the insurance companies.

 We have found out that age plays a major role in deciding the investment patterns
of
 people as generally the younger class of people tend to take more risk and
invest in various instruments more frequently, when compared with the older class
of people.

 Life insurance Corporation (LIC) of India is the company to be least affected

during this market slowdown as NAV of its equity growth funds came down just
by 23% during this major recession.

 Life Insurance Corporation (LIC) of India is still the undisputed market leader as
63% of the respondents surveyed owned a policy in it.

55
 CHAPTER 7

LIMITATIONS

56
 LIMITATIONS OF THE STUDY

 The study is confined only to a small segment of the entire population due to
monetary and time constraints and hence the results are applicable only to the
Nagpur city.

 The scope of the project is limited to conceptual aspects of Life Insurance

Companies and does not include all the ULIP as well as insurance products of LIC
part of the operations which are equally important aspect of learning
.
 It is not always possible to evaluate companies under similar parameters since
many aspects affect the company performance, companies deal with various
businesses thus clubbing all parameters is not always possible.

57
CHAPTER 8

ANNEXURE

58
 ANNEXURE

QUESTIONNAIRE

(This questionnaire is only for the sake of some research work being done on insurance
companies. Confidentiality would be maintained.)

Name (Optional): ____________________________________________________

Gender:

Male Female Contact no (Optional):________________________

Age Group:

18-30 31-40 41-50 >50

Qualification:

Post Graduate Graduate 12th < 12th

Occupation:

Government Service Businessman Private Company

Self Employed Any Other (Please specify)____________________

59
Your income range (per annum):

Below 150000 150000-250000 250000-350000

350000-450000 More than 450000

Your savings per year:

Below 10000 10000-25000 25000-50000

50000-100000 More than 100000

You would prefer savings in which form?

Bank deposits Fixed deposits Investments

Post Office schemes Any other (please specify) _________________________

Your opinion about investment:

Tax Saving Good returns Better future post retirement

Wealth creation Any other (please specify) _________________________

Preferably you would like to invest in:

Mutual funds Stocks and shares Insurance products

Govt. Bonds & securities Any other (please specify) _____________________

Do you agree that Insurance products are susceptible to very low risk when compared to
the other options for investment?

Yes No Don’t know

60
Name three insurance companies that come to your mind:

1. ___________________________________
2. ___________________________________
3. ___________________________________

Do you own an insurance policy?

Yes No

If yes in which company? ______________________

According to you what is the amount of risk involved in (ULIPs) Unit Linked Investment
Plans?

High risk Moderate risk They are Safe

Low risk No Idea

According to you which is the best insurance company and why?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

--------------THANK YOU SO MUCH FOR YOUR VALUABLE TIME------------------

61
 CHAPTER 9

BIBLIOGRAPHY

62
 REFERENCES

Websites:

http://www.licindia.com

http://www.irdaindia.org

http://www.financialexpress.com

http://wealth.moneycontrol.com

http://economictimes.indiatimes.com/Personal-Finance/Insurance/Life-insurance-industry

http://www.marketsmonitor.com

http://www.quickmba.com/marketing/research

http://www.moneycontrol.com

Books:

Marketing Research- Naresh Malhotra

Insurance Principles and Practices- M.N. Mishra

S. B.Mishra

63