ULIPs

A Summer Training Project Report on

ULIP FUND PERFORMANCE IN INDIA

(HDFC STANDARD LIFE INSURANCE COMPANY LIMITED)

Submitted in partial fulfillment of the requirements for the award of the
degree of Bachelor of Business Administration (BBA) programme of Guru
Gobind Singh Indraprastha University, Delhi.

Submitted To: Submitted by:
Ms. Ankita Popli Niharika Verma
Enrollment No.:06412201710


Delhi College of Advanced Studies
B-7,Shanker Garden, Vikaspuri
New Delhi – 110018

DECLARATION
I, hereby declare that the Summer Training Project Report, entitled “ULIP FUND
PERFORMANCE IN INDIA”, is an authentic work carried out by me at HDFC
STANDARD LIFE INSURANCE. It has not been submitted earlier for award of any degree
or diploma to any institute or university.


Place: New Delhi Candidate’s signature
Date: Niharika Verma
Enroll.No.: 06412201710

Countersigned

Name : Ms. Ankita Popli
supervisor
Delhi College of Advanced Studies



ACKNOWLEDGEMENT
It is my pleasure to be indebted to various people, who directly or indirectly contributed in
the development of this work and who influenced my thinking, behaviour and acts during the
course of study.
I express my sincere gratitude to ………………………………….the worthy Director of
Delhi College of Advanced Studies, for providing me an opportunity to undergo summer
training of doing this project under his leadership.
I am thankful to Mr. Nitin of HDFC SLICS for his support, cooperation and motivation
provided to me during the training for constant inspiration, presence and blessings at HDFC
SLIC.
I also extend my sincere indebtedness to Ms. Ankita Popli who provided her valuable
suggestion and precious time in accomplishing my project.
I also take the opportunity to express my sincere gratitude to each and every person, who
directly or indirectly helped me throughout the project and without anyone of them this
project would not have been possible.
The immense learning from this project would be indelible forever.




Niharika Verma

EXECUTIVE SUMMARY
HDFC Standard Life insurance is the oldest life insurance company in the world. It is the
largest insurer in the UK and is the 28
th
largest company in the world. In India, the company
is marketing life insurance products and unit linked investment plans. From my research at
HDFC SLIC, I found that the company has a lot of competition from other private insurers
like ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces competition from LIC. To
compete effectively HDFC SLIC could launch cheaper and more reasonable products with
small premiums and short policy terms (the number of year?s premium is to be paid). The
ideal premium would be between Rs. 5000 – Rs. 25000 and an ideal policy term would be 10
– 20 years.
HDFC must advertise regularly and create brand value for its products and services. Most of
its competitors like Aviva, ICICI, Max, Reliance and LIC use television advertisements to
promote their products. The Indian consumer has a false perception about insurance – they
feel that it would not benefit them if they do not live through the policy term. Nowadays
however, most policies are unit linked plans where a customer is benefited even if their death
does not occur during the policy term. This message should be conveyed to potential
customers so that they readily invest in insurance.
Family responsibilities and high returns are the two main reasons people invest in insurance.
Optimum returns of 16 – 20 % must be provided to consumers to keep them interested in
purchasing insurance.
Every new recruit is provided with extensive training on unit linked funds, financial
instruments and the products of HDFC. This training enables an advisor/sales manager to

market the policies better. HDFC was ranked 13 in the Best Places to Work survey. The
company should try to create awareness about itself in India. In the global market it is
already very popular. With an improvement in the sales techniques used, a fair bit of
advertising and modifications to the existing product portfolio, HDFC would be all set to
capture the insurance market in India as it has around the globe.











TABLE OF CONTENTS
S.No. Topic Page No

1 Certificate

2 Declaration

3 Acknowledgement

4 Executive Summary

5 List of Tables

6 List of Abbreviations

7 List of symbols

8 List of figures

9 Chapter-1: Introduction
? Overview of Industry as a whole
? Profile of the organization
? History of the Organization
? Problems of the Organization
? Competitor?s Analysis
? Objectives of the study
? Scope of the study
? Methodology


10 Chapter-2: Conceptual Framework

11 Chapter-3: Summary and Conclusion
? Results of the study
? Limitations
? Suggestions and Recommendations

12 Bibliography


LIST OF TABLES
Table No. Title Page No.
1 Ulip v/s. Traditional policy
2 Ulip v/s. Mutual Fund
3 Comparision of ulip with other investment
modules



LIST OF SYMBOLS

Table No. Titles Page No.
% percentage
i.e That is
@ At the rate
$ Dollar
p.a Per annum

LIST OF ABBREVIATIONS
S No

Abbreviated
Name
Full Name
1 MWP Married women?s property act
2 HDFC Housing development finance
corporation
3 HDFC SLIC Housing development finance
corporation standard life insurance
company


4 HDFC AMC Housing development finance
corporation asset management
company
5 IRDA Insurance regulatory and
development authority
6 PF Provident fund
7 FY Five year
8 EPI Effective premium income
9 CR Crores
10 PLC Policy
11 NAV Net asset value
12 ULIP Unit link insurance plan
13 ATP Automatic transfered plan
14 SIP Systematic investment plan
15 MF Mutual fund
16 BSLI Birla sun life insurance
17 ATLAS Agency training licensing and
servicing system

18 EDGE Enterprise driving growth and
excellence
19 ROI Rate of interest
20 MAX. Maximum
21 MIN. Minimum
22 Yrs. Years

LIST OF FIGURES
Figure No. Titles Page No.
1 NAV

2 Structure of ulip






CHAPTER-I
INTRODUCTION

Overview of the Industry:
Insurance is a contract providing for payment of a sum of money to the person assured or
failing him to the person entitled to receive the same on the happening of certain event.
Uncertainty of death is inherent in human life. It is this risk, which gives rise to the necessity
for some form of protection against the financial loss arising from death. Insurance
substitutes this uncertainty by certainty.
The objective of insurance is normally to provide;
a) Family protection and/or
b) Provision for old age
c) Protection against risks
Why insurance?
Insurance cover is essential because it provides the following benefits:
? A lump sum payment to the nominees at the time of the death of the policy holder.
? A regular payment to the nominees in the event of the death of the policy holder.
? Tax benefits, as premiums paid reduce the liability of tax
? Relieves economic hardships in the family on the uneventful death of the sole income
holder
? Inculcates the habit of savings
? Superior to an ordinary savings plan as it provides full protection against risk of death

? Encourages and forces compulsory savings unlike other saving instruments wherein
the saved money can be easily withdrawn
? Provides loan to tie over a temporary difficult phase and is also acceptable as security
for a commercial loan
? Hedges risk against uncertainty
? For a policy taken under the MWP Act( married women?s property act), a trust is
created for wife and children as beneficiaries
? Based on the concept of sharing of losses, the society will be benefited as catastrophic
losses are spread globally.
Need for insurance
The need for life insurance comes from the need to safeguard the family. Today insurance
has become even more important due to the disintegration of the prevalent joint family
system, a system in which a number of generation co- existed in harmony, and a system in
which a sense of financial security was always there as they were more earning members.
Times have changed and the nuclear family has emerged. Apart from other pitfalls of a
nuclear family, a high sense of insecurity is observed in it today besides, the family has
shrunk. Needs are increasing with time and fulfillment of these needs is a big question mark.
How will we be able to satisfy all those needs? Better lifestyle, good education, long desired
house. But again- we just cannot fritter away all our earnings; we need to save a part of it for
the future too- a wise decision. This is where insurance helps us. Ambitions etc are some the
reasons why insurance have gained importance and where insurance plays a successful role.













Profile of the Industry:
HDFC Standard Life, one of India's leading private life insurance companies, offers a range
of individual and group insurance solutions. It is a joint venture between Housing
Development Finance Corporation Limited (HDFC), India's leading housing finance
institution and Standard Life plc, the leading provider of financial services in the United
Kingdom.

HDFC Standard Life's Product portfolio comprises solutions, which meet various customer
needs such as Protection, Pension, Savings, Investment, and Health. Customers have the
added advantage of customizing the Plans, by adding optional benefits called riders, at a
nominal price. The company currently has 25 retail and 4 group products in its port folio,
along with five optional rider benefits catering to the savings, investment, protection and
retirement needs of customers.
HDFC Standard Life continues to have one of the widest reaches among new insurance
companies through a network of 595 offices serving over 700 cities and towns across the
country. The company has also increased its depth in existing markets with a strong base of
more than 2,007,000 Financial Consultants.
Housing Development Finance Corporation Limited is India's leading housing finance
institution with a customer base of over 3.3 million. Standard Life plc is a leading provider
of financial services from the United Kingdom, with a worldwide customer base of over 6.5
million.
Both the promoters are well known for their ethical dealings and financial strength, and are
both committed to the long term future of the Indian life insurance industry.
Range of Solutions
HDFC SL offers a range of flexible insurance solutions, including retail and corporate
products that can be tailored to meet specific customer needs.

HDFC SL corporate solutions have been designed to offer complete flexibility, combined
with a competitive charging structure. These corporate solutions include products such as
Group Term Insurance, Gratuity, Leave Encashment and Superannuation. These affordable
plans can provide valuable benefits for employees, while reducing long-term costs for the
employer.
For retail customers, HDFC SL has a wide range of protection and investment products to
choose from.
HDFC SL Fund Management / Investment Policy
Security of investment is critical in the insurance business, and this is even more pertinent
for corporate business. HDFC SL follows a stringent three tier process for managing client's
investments. An investment committee drafts and continuously reviews its investment
policies. This committee is assisted and advised by the portfolio management services of
HDFC Asset Management Company. This advice is based on comprehensive guidelines for
the portfolio asset class of each fund. The investment committee reviews the
recommendations of HDFC AMC and decides to invest or divest.
The HDFC SL investment committee has drafted policy guidelines, which focus on value
investing, asset liability management, long term investment horizon and risk mapping. We
focus on every client and individual member and his / her risk appetite and investment
preferences.
HDFC SL has further adopted various best practices towards its investment strategies,
keeping in mind the twin objective of wealth creation and safety of funds, in the best interest

of policyholders. Regular internal and statutory audits ensure the efficacy and safety of
processes being followed.
INVESTMENT PROCESS
Fund Management Structure
HDFC SL has a strong 16-member investment team with relevant experience in the areas of
accounting, funds management and dealing. Work experience of the team ranges from 3 to
10 years. The investment team comprises individuals who are experts in managing areas of
market research, dealing, back office and mid office functions. HDFC SL also has access to a
panel of 40 top research and brokerage firms who assist HDFC SL with sector specific
research and feedback.
HDFC SL has an Investment Committee that has drafted an investment policy in compliance
with IRDA Investment Regulations. All investment decisions are made by this committee
after due consideration of the overall policy and taking view of information provided by the
in-house Research team.
HDFC SL follows a 3-tier process for managing the investments of its policyholders.
At the first level is the Investment Committee, which drafts and continuously reviews the
Investment Policy. The Investment Committee is also responsible for HDFC SL's long term
Investment Strategy, Key decisions on Strategic asset allocation, Decisions on overall
Investment guidelines and setting performance benchmarks and limits.

The second level is the HDFC SL core investment team, which has been given the mandate
to assist and advice the Investment Committee through detailed research and
recommendations. Their recommendations are based on the comprehensive guidelines
created for the portfolio asset classes for each fund. The HDFC SL Investment team also
refers the Investment committee sector specific recommendations to a panel of 40
empanelled research and brokerage firms, from the equity and debt markets.
The Investment team acquires detailed research and analysis from these empanelled experts,
on sector weightages, specific company weightages within sectors, market views, macro and
micro economic views based upon which it makes independent recommendations to the
Investment Committee.
The third and final level is where the Investment Committee reviews the recommendations
of the HDFC SL Investment Team and takes an unbiased decision for i nvestment or
divestiture.
HDFC SL recognizes that the funds we manage represent the aspirations and dreams of our
clients. We acknowledge that the Trustees, in their fiduciary capacity, have shared their
responsibility of securing a comfortable retirement for the members to us. Keeping these
factors in mind, the HDFC SL fund strategy is based on 2 simple tenets:
? Safety of the funds
? Wealth creation
Based on these two guiding principles, the HDFC SL Investment Committee has drafted each
Fund's policy guidelines that are focused on:

Primarily Value Investing - This will ensure that the assets invested in are fundamentally
strong and poised to deliver consistent returns in the form of dividend yield and capital
appreciation over a period of time.
Long Term Investment Horizon - Given the nature of the maturity requirements, the assets
selected have a longer maturity profile to coincide with the time when the member retires.
Risk Mapping - HDFC SL has created 6 fund options, Liquid, Stable, Sovereign, Secure,
Defensive and Balanced. These funds vary from completely risk averse to aggressive in their
composition. Trustees can choose one particular or a mix of these funds and match their
investments in accordance to their risk appetite.
Switching - In a marked to market product, option to divert funds in extreme situations helps
to not only book profits, but also to prevent losses.
Special Investment Tools:
Every client has its own risk appetite and investment preference. HDFC SL uses special
investment tools that help every corporate on a group level to create a portfolio that they are
comfortable with. One such tool is :
? Liability Profiling
The age and salary data of the Client is studied in detail. Based on categorization of this
data, an appropriate fund can be selected. This is based on the perceived risk that each
category is capable of bearing according to their age profile. HDFC SL offers this service to
the trustees on a group level.

? Corporate Segment
Employee benefit packages provided by Indian companies can be broadly divided into
insurance benefits, such as life or disability insurance, and retirement benefits, such as
Gratuity, Provident and Superannuation. Gratuity and Provident Fund benefits are mandatory
for all companies, but all other benefits are offered on a voluntary basis.
Indian companies are progressively moving towards providing more appropriate
compensation packages and benefit programs for employees. Increasingly, companies are
finding that life insurance and employer funded retirement benefits are on the wish list of
every prospective employee. While life insurance companies are currently not permitted to
manage Provident Fund arrangements in India, all other insurance and retirement benefit
products are offered by HDFC SL.
? Market trend
Prior to the liberalization in 1999, the nationalized insurance companies dominated the
industry. The life insurance company was concentrating on the retail savings related policies
such as money back and endowment products while the most popular product by far in
employee benefit insurance in India has been the Group Personal accident policy. This has
been mainly because of the requirement of the Workmens compensation Act, which requires
any company employing workmen to pay compensation in the eventuality of death or
disability (permanent or temporary) due to an accident. This product also comes priced at
significantly lower levels as this covers only the accidental risk.


With the advent of multinationals and other private companies, the trend started changing.
People were taking up high-pressure jobs, which meant that health became a major concern
in employee welfare. It was evident that death due to health reasons was becoming more
prevalent and that this risk was not covered by something as basic as the accident policy.
Also there was an increasing role played by insurance companies in managing providing for
retirement benefits such as Gratuity & Superannuation, which were beginning to be seen as
an integral part of the employee benefit package.

Broadly, the employee benefit solutions provided by Insurance companies can be divided
into insurance benefits and retirement benefits. Of all these benefits, only Gratuity is a
mandatory benefit and the Accident insurance is taken to cover for the Workmens
Compensation Act. The rest are all voluntary benefits offered by organizations. Other than
life Insurance, retirement benefits, such as Gratuity, Superannuation and Leave-encashment,
are all provided by life insurance companies. Most of these schemes today are offered in a
new platform called the unit-linked platform that enables trustees of these funds to generate
more realistic market linked returns and also enjoy the transparency and flexibility of their
investments.
The focus in Indian industry is therefore shifting to in-depth research on employee
requirements in order to design appropriate compensation packages and employee benefit
programs. Increasingly, companies are finding that life insurance, and employer funded
retirement benefits are on the wish list of every prospective employee. The recently
introduced competition in the Indian insurance sector has ensured that they can now extend
benefits specific to their employees needs.

Typical benefit plan
A typical benefit plan for a multinational in India would include Gratuity & PF, which are
mandatory benefits, where benefits are defined as per the statute and other voluntary benefits
such as encashment of leave, a Superannuation benefit where 15% of monthly wages are
contributed into a fund for purchase of pension on retirement and a life cover that is typically
3 to 5 times the annual emoluments.
HDFC Standard Life Insurance offers the most comprehensive range in Group Insurance
Solutions. These include:
Group Unit Linked Plans for Retirement Benefit Fund Management:
? Group Gratuity
? Defined Contribution Superannuation
? Defined Benefit Superannuation
? Group Leave Encashment
? Annuities
Group Insurance:
? Group Term Insurance (Vanilla Plan)
? Group Term Insurance with optional riders
? Group Term Insurance to cover housing/vehicle loans provided by the employer
? Group Term Insurance with Experience Discount (Profit Share)
Group Term Insurance:

Group Insurance is a one year renewable term insurance plan. There is one master policy
issued covering all members of the group. The Sum assured is payable on death (either due to
natural causes or accidents and excludes suicide cover in the first year of coverage). The Sum
assured benefits could vary from company to company depending on the benefit structure
they would like to offer to their employees. Benefit level:
? sum insured based on salary multiple
? Graded cover
? Where the sum insured is fixed for a specific grade / designation
? Uniform cover for all employees
Optional riders:
The most popular riders are Accidental & Critical Illness
1. Additional Accidental Death Benefit
This benefit provides for the payment of an additional (over and above the basic sum
assured) amount on death as a result of an accident. Death must occur within 90 days of the
event of the accident. The additional amount payable would be a percentage of the basic sum
assured. The allowable percentages are 50% and 100%.
2. Total Permanent Disability
This benefit provides for the acceleration of the basic sum assured as a result of total
permanent disability due to an accident. Total permanent disability is defined as disability,
resulting from an accident, such that there is neither at the time of disability or at any time
thereafter, any work, occupation or profession that the Scheme Member can ever be capable

of doing or following to, earn or obtain wages, compensation or profit, as a result of the
accidental injury.
3. Total Permanent and Partial Disability Benefit
This benefit provides for the acceleration of the basic sum assured as a result of total
permanent disability or an additional amount on specified injuries to body parts of the
member caused due to an accident.
4. Critical Illness Benefit
This benefit provides for the additional amount as a result of the diagnosis of one of the
critical illnesses mentioned below. The life assured must be alive till the end of the survival
period to be able to claim under this benefit. The additional amount payable would be 50% of
the basic sum assured on the main policy. The critical illnesses that are cover under this
benefit are:
(i) cancer
(ii) coronary artery by pass
(iii) heart attack
(iv) kidney/renal failure
(v) major organ transplant (as recipient)
(vi) stroke
Key Features of the HDFC Standard Life Group Term Insurance plan:
Our product has been designed to offer innovative features and a high degree of
customization. These are:
Convenient medical procedures: The members do not need to undergo any medical

examination up to the 'Free Cover Limit'. This limit is dependant upon the sum assured and
the size of the group.
Flexibility for members to join or leave: Flexibility for new members of the group to join
or outgoing members of the group to leave the scheme during the policy term
Premium options: Premium can be borne by employer or employee or both in some agreed
proportion
Size of group: Minimum size is 10 members. There is no upper limit.
Flexible cover: The amount of cover can be constant for all members or vary on the basis of
their grade or salary.
Amount of sum assured: The minimum sum assured is Rs.10,000 per person and there is no
pre-defined cap on the maximum cover extended for each member
Limited exclusion: Only exclusion for main benefit is suicide in the first year.
Globally valid: Resident Indians are covered for the risk whilst travelling anywhere in the
world news
Highlights of Financial Year 2008-09
HDFC Standard Life Declares Results for FY 2008-09; Total Premium Income grows by
15%; Renewal Premium Income increases by 34%
May 5, 2009, Mumbai: HDFC Standard Life, one of India's leading private life insurance
companies, declared its annual results for the financial year ending March 31, 2009. The
company generated Total Premium Income of Rs. 5564.69 crores in FY2008-09 registering a
year-on-year growth of 15%. The growth was primarily driven by the company's structured
sales processes based on customer needs and their assessments, wide range of product

portfolio and diverse distribution network.
Mr. Paresh Parasnis, Principal Officer and Executive Director, said, "The financial year
2008-09 was a defining year with the unfolding of several unexpected events - sharp
correction in financial markets and a spread of recessionary trends. These events also had an
impact on the Indian life insurance industry. We are happy that our new policies issued grew
by 16% over the last year. However, given the uncertainty in the overall scenario, customers
have reduced their annual premium commitment on new policies. At the same time, existing
policies continued to be in force reflected in our renewal premium, which posted a healthy
growth of 34%."
In line with overall market conditions, growth in Effective Premium Income (EPI) in respect
of retail business increased by 5%, growing from Rs. 2,425 crores in 2007-08 to Rs. 2,552
crores in 2008-09. HDFC Standard Life tracks its New Business Premium on the basis of
Effective Premium Income (EPI). EPI is calculated by giving only a 10% value to a Single
Premium policy and is an internationally accepted indicator of an insurance company's
performance.
HDFC Standard Life maintained its healthy pipeline of products last year by launching 11
products apart from slashing the premium rates of its Term Assurance Plan premium rates by
about 25% across different age bands. "Our entry into the health insurance market last year
with the launch of two products : SurgiCare and Critical Care was a significant move in line
with our business objective. The low penetration of health insurance in India gives us a
tremendous opportunity to provide quality health insurance. Our health products along our
complete range of life insurance and pensions portfolio meet almost every aspect of an
individual's requirements," Mr. Parasnis added.

Highlights of Financial Year 2007-08
? Total Premium Income is up by 15% at Rs. 5564.69 crores as against Rs. 4858.56
crores in FY 2007-08.
? Renewal premium collected increased to Rs. 2913.58 crores from Rs. 2173.19 crores
in the previous year, registering a growth of 34%.
? Effective Premium Income (EPI) in respect of retail business increased by 5%,
growing from Rs 2,425 crores in 2007-08 to 2,552 crores in 2008-09.
? Alternate Channels, including bancassurance, contributed about 47% to the Effective
Premium Income (EPI).
? A well balanced product portfolio with pension comprising over 40% children plans
around 25% and the remaining constituting protection and savings plans,
? Total assets under management increased to Rs. 10,595 crores, registering a growth of
21% over FY2007-08.
? Assets under management for the Group business have increased to Rs. 1075 crores,
registering a growth of 12% over FY2007-08.
? Company products and services are now available through a network of 595 offices
serving over 700 cities and towns across the country. This is further complemented by
corporate agency relationships with public, private and cooperative banks.
? Strength of Financial Consultants reported year-on-year growth of 43% to over
2,07,000 in FY 2008-09 compared to 1,45,000 last financial year.
? The sum assured in-force for 2008-09 was Rs. 57,158 crores as compared to Rs.
45,743 crores for the previous year.




History of the Industry:
HDFC STANDARD LIFE is one of India?s leading private life insurance companies, which
offers a range of individual and group insurance solutions. It is a joint venture between
Housing Development Finance Corporation Limited (HDFC), India?s leading housing
finance institution and STANDARD LIFE, a leading provider of financial services in the
United Kingdom.
HDFC STANDARD LIFE?S product portfolio comprises solutions, which meet various
customer needs such as protection, pension, savings, investments and health.
HDFC Incorporated in 1977 with a share capital of Rs. 10 Cr. HDFC has since emerged as
the largest residential mortgage finance institution in the country. The corporation has had a
series of issued raising its capital to Rs. 119 Cr. The gross premium income for the year
ending March 31, 2009 stood at Rs. 5,564.69 Cr. The company during the current year
registered a positive growth of 14.53%. The sum assured in force for the current year was Rs.
57,158 Cr. as compared to Rs. 45,753 Cr. for the previous year.
HDFC operates through almost a network of 595 cities serving over 720 cities and towns
across the country. The company has increased its depth in existing markets with a strong
base of more than 207,000 financial consultants, having its head quarters in Mumbai. HDFC

also has an international office in Dubai, UAE with service associates in Kuwait, Oman and
Qatar. HDFC is the largest housing company in India for the last 33 years.
HDFC standard life was one of the first private companies to get license and allowed to do
business in the insurance sector. HDFC is RATED „AAA? by CRISIL and ICRA. Similarly
STANDARD LIFE is rated „AAA? by MOODY?S AND STANADARD AND POOR?S. This
reflects the efficiency with HDFC and STANDARD LIFE manages their asset base of Rs.
15000 Cr. and Rs. 600000 Cr. respectively.
HDFC STANDARD LIFE was incorporated on 14
th
August 2000. HDFC is the majority
stakeholder in insurance JV with 76% staple and STANDARD LIFE of as a staple of 24%.
Mr. Amitabh Chaudhary is the MD and CEO of the venture.
Since inception, HDFC SL is continuously among the top three private players which has
performed up to the mark as par the consumer satisfaction









Competitive Information:
LIFE INSURANCE CORPORATION OF INDIA (LIC)
LIC has an excellent money back policy which provides for periodic payments of partial
survival benefits as long as the policy holder is alive. 20% of the sum assured is payable after
5, 10, 15 and 20 years and the balance 40% is payable at the 20
th
year along with accrued
bonus. (www.lic.com)For a 25 years term, 15% of the sum assured becomes payable after 5,
10, 15and 20 years and the balance 40% plus the accrued bonus becomes payable at the 25
th

year. An important feature of these types of policies is that in the event of the death of the
policy holder at any time within the policy term the death claim comprises of full sum
assured without deducting any of the survival benefit amounts which have already been paid.
The bonus is also calculated on the full sum assured .HDFC SLIC does not have a money
back policy. It could offer a money back plan and capture some porti on of this market. While
marketing insurance products I found that many customers wanted to purchase these
plans.LIC offers 66 different plans; plans are formulated for specific occasions –whole life
plans, term assurance plans, money back plan for women, child plans, plans for the
handicapped individuals, endowment assurance plans, plans for high worth individuals,
pension plans, unit linked plans, special plans, social security schemes – diversified portfolio
of products. HDFC SLIC could diversify its product portfolio. It could add more plans for
high worth individuals and women.




ICICI PRUDENTIAL
ICICI Prudential is a stiff competitor for HDFC SLIC. The company is a merger between
ICICI Bank which is the biggest private bank in India and Prudential Plc which is a global
life insurance company.
The company has an investment plan which is market related – Invest Shield Life. In this
plan even if the market falls, the premium will be returned to investors. It is a guaranteed
plan which ensures the company carefully invests your money. The stock market
performance of ICICI Prudential is much better than HDFC SLIC. The returns on the growth
fund were 46.28%compared to the 42.70% offered by HDFC SLIC. Customers are attracted
by higher returns and this is a plus point for Prudential. The company is very well advertised.
The advertisements are showcased in movies, television, newspapers, magazines, bill boards,
radio etc. The company has an excellent brand ambassador – Mr. Amitabh Bacchan. His
promotion of the company builds trust and faith in the minds of our people. However the
charges are very high in the plans offered by ICICI Prudential. It is 35% during the first year,
15% in the next year and 3% from the third year onwards. Also a higher minimum premium
of Rs. 8000 is charged. Hence the policies are not accessible to the lower strata of the
society.
BIRLA SUN LIFE
Birla Sun Life Insurance Company Limited is a joint venture between TheAditya Birla
Group, one of the largest business houses in India and Sun Li fe Financial Inc., a leading
international financial services organization. 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 close to Rs. 33000 crores with a market

capitalization of Rs. 53400 crores (as on 31st March 2007). It has over 72000employees
across all its units worldwide. It is led by its Chairman - Mr. Kumar Mangalam Birla. Some
of the key organizations within the group are Hindalcoand Grasim.
Sun Life Financial Inc. 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. It had assets under management of over
US$343 billion, as on 31st March 2007. The company is a leading player in the life insurance
market in Canada. Being a customer centric company, BSLI has invested heavily in
technology to build world class processing capabilities. BSLI has covered more than a
million lives since inception and its customer base is spread across more than1000 towns and
cities in India. All this has assisted the company in cementing its place amongst the leaders
in the industry in terms of new business premium income. The company has a capital base of
520 crores as on 31
st
July, 2007.Its Flexi Life Line Plan offers life long insurance cover till
the policy holder is100 years of age. There are guaranteed returns of 3% p.a. net of policy
charges after every 5 years from the eleventh policy year onwards. However the charges are
very high. The initial charges for the first year are 65%.Hence the fund value is greatly
reduced.



BAJAJ ALLIANZ
Bajaj Allianz is a joint venture between Allianz AG with over 110 years of experience in
over 70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55 years in the

Indian market. Together they are committed to offering you financial solutions that provide
all the security you need for your family and yourself. Bajaj Allianz is the number one
private life insurer for the year 2005 – 2006. It is leading by 78 crores. It has experienced a
whopping growth of 216% in the last financial year. The company has sold 13, 00,000
policies and is backed by 550 offices across India. It offers travel insurance, motor insurance,
home insurance, health and corporate insurance. The mortality charges are lower than HDFC
SLIC. The entry age could be zero years which allow even new born babies to be insured.
TATA AIG
Tata Aig is a joint venture between the Tata group and American International Group Inc. In
one of the plans the company offers hospital cash benefit wherein it will pay Rs. 2500 per
day in case of hospitalization and Rs.12.5lakhs in case the person suffers from any critical
illness. Annual premium is much less (about Rs. 6712) to avail such a good benefit. Charges
are relatively low compared to HDFC SLIC for some policies. The company offers high
coverage plans at low cost. There is a plan even for a policy term of 1 year. Your family can
continue to enjoy their current lifestyle even in the case of something happening to you.
These plans are very flexible and HDFC SLIC could adopt this idea of insuring individuals
for short periods of time. For example; there is a family of four. The only earning member is
the father. He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is
able to repay the loan with his current salary in 15 years. The problem arises if something
were to happen to him within these fifteen years. Not only will the family face the emotional
and financial loss of their father but they will also have to repay the home loan or risk being
homeless.




















Problems of the Industry:
? Large amount of competition (18 players in the market).
? Other brands are well advertised and have higher recall value.
? LIC is considered a safer option.

? Face competition from banks and mutual funds.
? High premium policies are difficult to market.
? Incorrect perception about insurance.
? Customers get defensive if you could call.
? Short term plans are available only at large premium.
? Some prospects have already invested and are not interested in further investment.
? Consumers don?t want to undertake medical examination.







Objectives of the study:
The main objective of my project is to make known to all people how the ULIPs managed by
the insurance company. Besides this main objective, my project has the following objectives-

? To understand how an investor can make a balance between the risk and return
of his/her chosen portfolio.

? To analyze the factors that should be taken into consideration by an investor
while choosing a particular portfolio under an ULIP.
? To understand investors risk taking appetite.
? To understand asset allocations of insurance company.
? To understand the average return given by the each portfolio and how much
having volatility is there among the securities of a particular portfolio.



Scope of the Study:
The scope of the study of this project how ULIP funds are managed and operate in the
capital market by the insurance company (HDFC Standard life insurance Company).
Though most of the people are attracted towards the ULIP products because of getting
more fund value than what they initially invested in the company, but sometimes they
lost their believes on the insurance company when they get lesser amount. The main
reason of this conflict between the insurance company and the investors is that the
investors do not have sufficient knowledge about ULIP fund performance in the capital
market.
An investor can get maximum appreciation in his/her investment only when he/she
properly manages money in the appropriate funds. For this purpose the investors should
have minimum knowledge about in which companies shares are managed under one
portfolio and how these included companies perform in the capital market as a whole.
Unless and until the investors do not know how their portfolios perform and managed in
the capital market, they may invest their money in wrong funds which leads to
depreciation of their fund value and all of these finally lead to humors among the
prospective customers that the investments in the ULIPs give lesser returns. This may
make a huge negative impact in the insurance industry in near future.




Methodology:

The data for the study is collected from:
Secondary source:
Secondary data means data that are already available i.e. they refer to the data which have
already been collected and analysed by someone else. When the researcher utilizes secondary
data, then he has to look in to various sources from where he can obtain them. In this case he
is certainly not confronted with the problems that are usually associated with the collection
of original data. Secondary data may either be published data or unpublished data.
The secondary source has been collected through the following source:
? Booklets on ulips
? Broachers of the company
? Insurance magazines
? Insurance books
? Internet



CHAPTER-II

CONCEPTUAL FRAMEWORK
Introduction:
The introduction of unit linked insurance plans (ULIPs) is possibly, the single largest
innovation in the field of life insurance in the past several decades. In a swoop, it has
addressed and overcome several concerns that customers had about life insurance –
liquidity, flexibility and transparency and the lack thereof. These benefits are possible because
ULIPs ar e di fferent l y st ruct ured pr oduct s and l eave many choi ces t o
t he pol i c yhol de r s . Br oa dl y s p e a ki n g, ULI Ps a r e be s t s ui t e d f or t hos e
who ha ve a c onc e pt ua l unde r s t a nd i ng of f i na nc i a l ma r ke t s a nd a r e
ge nui n e l y l ooki n g f or a flexible, long term savings – cum - insurance solution.
What is a Unit Linked Insurance Plan?
A ULIP is a linked insurance plan where the characteristics of insurance and Mutual
Fund are combined. An allocated portion of fund amount goes into insurance and the
remaining into asset class.
Ulip features:
Unit linked insurance plan (ULIP) is life insurance solution that provides for the
benefits of protection and flexibility in investment. The investment is denoted as
uni t s and i s represent ed by t he val ue t hat i t has at t ai ned cal l ed as Net Asset
Val ue(NAV). The policy value at any time varies according to the value of the
underlying assets at the time. ULIP provides multiple benefit to the consumer, the benefits
include:
? Life protection

? Investment and savings
? Flexibility
? Adjustable life cover
? Investment options
? Transparency
? Options to take additional cover against death due to accident
? Disability
Unit linked Insurance plan provides insurance protection against the risk of death combined with
a provision for long term investment in the equity market, which are structured differently.
ULIPS are basically an investment type of plan, wherein the Life assured decides the quantum of
contribution which he can set aside on a regular basis towards premium. He also has the
flexibility to decide the risk cover, i.e the Sum Assured for his policy.
Unit Linked Insurance Plans (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 & debt instruments for maximizing returns.
? They 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, child?s education, marriage etc. 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).



Fig.no-1: Net Asset Value
ULIP 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.
UNDERLYING
INVESTMENT
UNIT LINKED
INSURANCE
POLICIES
UNITS IN
FUNDS

PREMIUMPR
EPREMIUM
MIUM
Structure of Ulip:








Fig.no-2: Structure of Ulips



Benefits of Unit Linked Plan:
ULIP distinguishes itself through the multiple benefits that it provides to the consumer. The
plan is a one stop solution providing
1. Life protection
LESS CHARGES
INVESTMENT
REPRESENTED AS
UNITS
LIFE COVER

2. Investment and Savings
a. Market linked fund based on risk profile
b. Switch option
c. Premium redirection
d. Automatic transfer plan (ATP)
3. Flexibility of cover continuance
4. Transparency
5. Extra protection with riders
a. Death due to accident
b. Disability
c. Critical illness
6. Liquidity
a. During the term partial withdrawals
b. At Maturity
7. Tax planning
Charges under ULIP:
Contribution related charges:

These are the charges that are represented as a percentage of the regular or singlecontribution
paid. In case of a regular contribution plan, it is usually high in the firstyear to pay for the
distribution cost. These charges pay for the issuance and for distribution commissions. These
charges are running for the policy.
Administrative charges:
These are charges that are levied for the administration of the policy and the relatedcost of
administration of the insurance company, itself. They are more related to thecost like IT,
operational, etc cost of continuing the policy.
Fund management charges:
These are the charges for buying and selling debt and equity. These are the chargesare
adjusted in NAV itself.
Mortality charges:
This covers the cost of providing life protection for the insured and may be paid onceat the
start of the policy for a recurrent manner for example this charges levied to provide the
insurance cover under the plan. Normally these charges are one year charges as per the age
of the holder.

Rider charges:

Rider charges are similar in nature to the mortality charges as they are levied to pay for the
other protection benefits that the policy holder has chosen for- like the critical illness benefit
or the accident benefit, etc.
Surrender charges:
When the policy holder decides to surrender the policy or partially withdraw some of the
units for cash, a surrender charge may be apply. Surrender charges are used to cover initial
expenses that have been incurred by the company but not yet recovered from the
policyholder yet.
Bid offer charges:
In ULIP specifically certain insurers might create a difference in the price at which they sell
the unit and the price at which they buy the units. Investor?s contribution is used to buy units
in the investment fund at the offer price and is sold when benefits are required at the bid
price. The difference between the offer and bid prices is known as the “bid-offer spread", this
is used to cover expenses when setting up the policy.
Transactional specific charges:
These charges are levied when the client does some specific transaction like changing funds,
topping up the investment component or withdrawals.


Steps to select the right ULIP:

Unit linked Insurance Plans (ULIPs) were seen as a “wonder product” that simultaneously
fulfilled an individual?s needs for investment and insurance.
? Understand the concept of ULIP
? Focus on your requirement and risk profile
? Compare ULIPs of different insurance companies
? Go for an experienced insurance advisor.
? Does your ULIP offer a minimum guarantee?
Comparison of ULIPs with Traditional plans
Unit Linked Insurance Product:
ULIPs have gained high acceptance due to attractive features they offer. These include:
? Flexibility
? Flexibility to choose Sum Assured.
? Flexibility to choose premium amount.
? Option to change level of Premium /Sum Assured even after the
plan has started.
? Flexibility to change asset allocation by switching between funds
? Transparency
? Charges in the plan & net amount invested are known to the customer

? Convenience of tracking one?s investment performance on a
daily basis.
? Liquidity
? Option to withdraw money after few years (comfort required in
case of exigency)
? Low minimum tenure.
? Partial / Systematic withdrawal allowed
? Fund Options
? A choice of funds (ranging from equity, debt, cash or a
combination)
? Option to choose your fund mix based on desired asset
allocation


Traditional Plans :
These are the oldest types of plans available. These plans cater to customers with a low risk
appetite. Some of the common features of traditional plans are:


? Steady Investment
? Major chunk of investible funds are in debt instruments
? Steady and almost assured returns over the long term
? Features
? Death benefit is Sum Assured + guaranteed & vested bonus
? Helps in asset creation as they are for a long tenure
? Premium to Sum Assured ratios are fixed for each plan and age.
? Generally withdrawals are not allowed before maturity.




Point of difference Ulip Traditional policy
Investment Market related(may be
stock market or debt
market)
IRDA? determined
investment
Transperancy in costs Yes No
Flexability in payment Yes No

Assured bonus No Yes
Assured sum or survival No Yes
Option to increase
investment /premium
Yes No
Table.no-1: ulip v/s. traditional policy.
Ulips better than traditional policies:
Until a couple of years ago, when ULIPs were a rare commodity, nobody knew how life
insurance companies charged policyholders for expenses. And nobody seemed to want to
know either. Then came the ULIPs with good intentions to make policyholders aware of how
much they would pay as expenses. But that move backfired. Policyholders were taken aback
by the high amount of fees that ULIPs charged. While the charge structure on ULIPs is
something that is open to debate, the issue is that ULIPs alone cannot be isolated. Traditional
policies too charge high administrative and management expenses. In ULIPs, the first year
charges range from20-70%, one does not know how much traditional policies charge. This
can have a bearing on returns as well. A ULIP may charge you upfront but thereafter, all the
returns on the fund are yours while a traditional policy may chargeless but share a smaller
portion of returns with you. So if you were substituting a traditional endowment with a
ULIP, you would be better off with the latter since you would know your charges and your
returns.
We recommend traditional policies:
Where the objective is only Risk cover and not savings and cost has to be minimum.
We recommend Unit Linked products where:

? The intention is to provide security for a goal.
? The purpose is to make the savings grow at a better rate seeking the best solut ion.
? It is a market linked investment where the premium paid is invested in funds
? Different options are available, like 100% Equity, Balanced, Debt, Liquid etc and
according to the fund selected, the risks and returns vary.
? The costs are upfront and are transparent, the investment made is known to the
investor (As he is the one who decides where his money should be invested).
? There is a greater flexibility in terms of premium payments ie. A premium holiday is
possible.
? You can also invest surplus money by way of top ups which will increase
your investment in the fund and thereby provide a push to returns as well.
? There is no assured Sum on survival, the higher of the Sum Assured or FundValue is
paid at the maturity or incase of death.



Unit Linked Insurance Plans VS Mutual Funds:
Differences between ULIPs and a Mutual Fund:
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds
in terms of their structure and functioning. As is the case with mutual funds, the insurance
company allots units investors in ulips and a net asset value (NAV) is declared for the same
on a daily basis

Similarly ULIP investor 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 constructed 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.
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 fund house lays out the minimum investment amounts .ULIP investors
also have the choice of investing in a lump sum (single premium) or using the conventional
route, i.e. making premium payment on an annual, half-yearly, quarterly or monthly basis. In
ULIPs, determine the premium paid is often the starting point for the investment activity.
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 UILP). The freedom to modify premium payments
at one?s convenience clearly gives UILP 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 predetermined 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 structure on UILP 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.

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
Ulips Mutual fund
Investment amount Determined by the investor
and can be modified as
well
Minimum investment
amounts are determined by
the fund houses
Expenses No upper limits expenses
determined by the
Upper limits for expenses
chargeable to investors

insurance companies have been set up by the
regulator
Portfolio disclosure Not mandatory Quarterly disclosures are
mandatory
Modifying assets
allocations
Generally permitted for
free or at a nominal costs
Entry/exit loads have to be
borne by the investors
Tax benefit See 80c benefits are
available on all ulips
investment
See 80c benefits are
available only on
investments in tax saving
Table.no-2: ULIPs v/s MUTUAL FUNDS
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 insures 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 in essentially meant to provide for contingencies and for long-term needs
like retirements; regular portfolio disclosures on the other hand can enable investors to make
timely investment decisions.
What makes ULIPs a total financial planning package?
? Potential for Superior returns by switching between Equity & Debt

? Anytime Liquidity
? No Long Term Commitments
? Flexible Insurance Cover
? 100% Tax Free Returns on Withdrawals & Maturity
Comparison of ULIP with other Investment Modules:
Other
instrument
Rate
of
return
Time
period
Risk Min.
investment
Max.
investment
Tax
free
return
Tax
benefit
NSC
8% 6 years No 100 No limit No Yes
PPF
8% 15
years
No 500 70000 Yes Yes
ELSS
Market
return
3 years Risky 500 No limit Yes Yes
ULIP
Market
return
5 years Risky
module
500 No limit Yes Yes
FD
9.5% 5 years No 10000 No limit No Yes

MUTUAL
FUND
Market
return
Open
ended
High 500 No limit Capital
gain
@10%
for
time
less
than 1
year
Only in
ELSS
funds
STOCK
Variable No
time
frame
Very
high
Variable No limit Capital
gain
@10%
for
time
less
than 1
year
No
Table.no-3:Compaison of ulip with other investment modules

ULIPs- Systematic Insurance cum Investment Plan
Any individual who has purchased a life insurance policy in the last year or so surely would
have a Unit Linked Insurance Plan (ULIP). ULIPs have been selling like Wonder Products in
the recent past and they are likely to continue to outsell their plain vanilla counterparts
going ahead. A ULIP is a market-linked insurance plan. The difference between a ULIP and

other insurance plans is the way in which the premium money is invested. Premium from,
say , an endowment plan, is invested primarily in risk-free instruments like government
securities (gsecs) and AAA rated corporate paper, while ULIP premiums can be invested in
stock markets in addition to corporate bonds and gsecs. So what else apart from this reason
makes ULIPs so attractive to the individual? Here, we have explored some reasons, which
have made ULIPs so irresistible.
Transparency:
However, ULIPs offer a transparent option for customers to plan their various life stage
needs through market-led investments as compared to traditional investment plans.
Insurance cover plus saving:
ULIPs serve the purpose of providing life insurance combined with savings at market -linked
returns. To that extent, ULIPs can be termed as a two-in-one plan in terms of giving an
individual the twin benefits of life insurance plus savings. This is unlike comparable
instruments like a mutual fund for instance, which does not offer a life cover .

Multiple investment options:
ULIPs offer variety than traditional life insurance plans. So there are multiple options at the
individual's disposal. ULIPs generally come in three broad variants:
• Aggressive ULIPs (which invest 80%-100% in equities, balance in debt)
• Balanced ULIPs (invest around 40%-60% in equities)
• Conservative ULIPs (invest upto 20% in equities)
Although this is how the ULIP options are generally designed, the exact debt/equity
allocations may vary across insurance companies. A ULIP policyholder has the option to

invest in a variety of funds, depending on his risk profile. If one does not have the appetite to
invest in equity, they can choose a debt or balanced fund.
Flexibility:
Individuals can switch between the ULIP variants outlined above to capitalize on investment
opportunities across the equity and debt markets. Some insurance companies allow a certain
number of free' switches. This is an important feature that allows the informed
individual/investor to benefit from the vagaries of stock/debt markets. For instance, when
stock markets were on the brink of 7,000 points (Sensex), the informed investor could have
shifted his assets from an Aggressive ULIP to a low-risk Conservative ULIP. Switching also
helps individuals on another front. They can shift from an Aggressive to a Balanced or a
Conservative ULIP as they approach retirement. This is a reflection of the change in their
risk appetite, as they grow older.
Works like a SIP:
Rupee cost-averaging is another important benefit associated with ULIPs. Individuals have
probably already heard of the Systematic Investment Plan (SIP), which is increasingly being
advocated by the mutual fund industry. With an SIP, individuals invest their monies
regularly over time intervals of a month/quarter and don't have to worry about `timing' the
stock markets. These are not benefits peculiar to mutual funds. Not many realise that ULIPs
also tend to do the same, albeit on a quarterly/half-yearly basis. As a matter of fact, even the
annual premium in a ULIP works on the rupee cost-averaging principle. An added benefit
with ULIPs is that individuals can also invest a one-time amount in the ULIP either to
benefit from opportunities in the stock markets or if they have an investible surplus in a

particular year that they wish to put aside for the future. When you're buying a ULIP, make
sure you select one that works well for you. The important thing is to look for and
understand the nuances, which can considerably alter the way the product works for you.
Take the following into consideration:
Charges:
Understand all the charges levied on the product over its tenure, not just the initial charges. A
complete charge structure would include the initial charges, the fixed administrative charges,
the fund management charges, mortality charges and spreads, and that too, not only in the
first year but also through the term of the policy.
Fund Options and Management:
Understand the various fund options available to you and the fund management philosophy
and objectives of each of them. Examine the track record of the funds and how they are
performing in comparison to benchmarks. Who manages the funds and what experience do
they have? Are there adequate controls? Importantly, look at how easily you can access
information about your fund's performance when you need it --are their daily NAVs? Is the
portfolio disclosed regularly?
Features:
Most ULIPs are rich in features such as allowing one to top-up or switch between funds,
increase or decrease the protection level, or premium holidays. Carefully understand the
conditions and charges associated with each of these. For instance, is there a minimum
amount that must be switched? Is there a charge on the same? Must you go through medical
underwriting if you want to increase the sum assured?
Company:

Last but not least, insure with a brand you can trust to honour its commitment and service
you according to your requirements First and foremost, investors need to understand that a
ULIP is a bundled product of their investments and their insurance proceeds. Since
privatization in 2000 and the introduction of ULIPs as a life insurance product category, the
overall insurance penetration in the country has grown from around 2% to 4%. Today, more
than 70 per cent of the new business premium for life insurers comes from Ulips.
All Ulips have several funds in which your money can be put to work, much like a mutual
fund. Assuming that you choose the growth or the equity plan , ask for the NAV performance
for the last two years at least. Choose three with the highest performance track record vice -
a- versa the benchmark. Now choose the best performing policy in terms of returns with the
lowest cost.

CHAPTER-III
SUMMARY AND CONCLUSION
Results of the study
As ULIP?s are a long-term investment, the underlying funds are managed with
the philosophy of delivering long term risk adjusted returns. ULIPs are essentially long-term
instruments where an investor will systematically invest every year with a certain lock-in
period. ULIPs are a way of systematic investment as one pays premium on a monthly,
quarterly, bi-annual or annual basis. Mutual funds are more aggressive players. Equity
mutual funds have large exposure to equities including mid-cap stocks, technology stocks
and growth stocks. On the other hand, ULIPs, avoid such investments. Considering these

factors ULIP is considered a better alternative for good returns, irrespective of market levels.
Some of the points to be confronted before going in for ULIP plan include:
? It is prudent to make equity-oriented investments based on an established track record
of at least 3 yrs over different market cycles. Ulips do not fulfill this criterion.
? Insurance and savings are two different goals and it is better to address them
separately rather than bundle into a single product. A combination of a term plan and
a mutual fund could give better results over long term.
? If investment returns are one?s priority, one should compare alternative investment
products before locking in money.
? Tax advantages do work in favour of ULIPs, for debt-oriented funds. For equity-
oriented funds, equity-linked saving products, which enjoy tax advantages and
provide market-linked returns, are comparable.
? The expense structure of insurance products does significantly dent returns.
? ULIP,s cannot be compared with mutual funds, as their ideologies of investment
differ.
? The investment pattern of mutual funds and life insurance differs. Mutual funds are
more aggressive players.
? As per IRDA new guidelines, ULIPs , needs to have a minimum lock-in period of 3
yrs.
? Mutual funds are essentially short to medium term products. The liquidity that these
products offer is valuable for investors. ULIP?s, in contrast, are positioned as long-
term products and going ahead, there will be separate playing fields for ULIP?s and
MF?s, with the product differentiation between them becoming more pronounced.








Limitations of the Study
Every study has some limitations but the effectiveness of the project comes from how well
these limitations have been handled to bring out the result , which are pertinent and are
adding value to the already existing studies. This project also has some limitation but my
attempt would be to strive hard to overcome these limitation so that the results prove out be
prolific and useful to the organization. Some of these limitations are:
? The study is for a limited period of 45 days
? The study relies on secondary data.
? The data and figures shown are as given by the bank.
? The study does not attempt to analyze the insurance sector as a whole, but is limited
to ULIPs








Suggestions and Recommendations
? Equity mutual funds have large exposure to equities including mid-cap stocks ,
technology stocks and growth stocks. On the other hand, ULIPs avoid such
investments.
? As per the new guide lines, no loans can be granted under ULIP schemes. Further,
insurance advisors who sell ULIPs have to be given separate training before they are
authorized to sell them.
? Also, advertisements have to clearly bring out the fact that ULIPs are different from
traditional insurance products.
? An important factor one need to bear in mind with ULIPs is that, these area
combination of insurance and investment.
? A word of caution here while switching funds in ULIP plans since it is ones
protection cover that one would be tampering with, decision to switch needs to be
well thought out before exercising it.

? ULIPs now do not seek to replace mutual funds, they offer protection against the risk
of dying too early, and also help people save for retirement. Insurance has to be an
integral part of ones one?s wealth management portfolio.
? Further, exposure of Indian households to capital markets is limited. ULIPs and
mutual funds are, therefore, not likely to cannibalize each other in the long run.

? While ULIPs as an investment avenue is closest to mutual funds un terms of their
functioning and structure, the first and foremost purpose of insurance is and will
always be „protection?.
? Ideally ULIPs are considered for those classes of investors who want to put money in
a investment product that earns them returns by further investing the money in the
market, and at the same time ensure a life cover and tax efficiency.














BIBLIOGRAPHY
Books:
? Fisher, Thomas & Sriram, M.S, Zed and Dhaka Books, UK,2002
? Michael , J. MC cord , Micro finance, ND, 1999
Websites:
? http://www.licindia.comhttp://www.irdaindia.orghttp://www.financialexpress.c
omhttp://wealth.moneycontrol.comhttp://economictimes.indiatimes.com/Perso
nal-Finance/Insurance/Life-insurance-
industryhttp://www.marketsmonitor.comhttp://www.quickmba.com/marketing/
researchhttp://www.moneycontrol.com
? http://wealth.moneycontrol.com/http://www.moneycontrol.com/
? http://www.insurope.com/Countries/lc-India.asp - TOP
? http://search.eb.com-59.25 jpf.html.
? http://www.scribd.com/doc/55078301/3/Conceptual-and-theoretical-
framework


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