A PROJECT REPORT ON “ A COMPARATIVE STUDY OF ULIP PLANS OFFERED BY IIC CIC ICII PR PRUD UDEN ENT TIAL COMPANIES”
AND AN D
OTHE HER R
LIF IFE E
INS NSU URA RAN NCE
Submitted To: PUNJAB TECHNICAL UNIVERSITY, JALANDHAR
FOR THE PARTIAL FULFILLMENT OF THE AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION
(Session 2008-10)
UNDER UND ER GUIDAN GU IDANCE CE OF :
Mrs. Sukhmeet kaur
SUBMITTED BY;
Dixit Kumar Roll No. : 80906317020 SVIET Contact no. - 09017076571
SWAMI VIVEKNAND INSTITUTE OF ENGINEERING AND TECHNOLOGY PUNJAB TECHNICAL UNIVERSITY, JALANDHAR
Preface MBA is a stepping-stone to the Management carrier and to develop good Managers is nece necess ssar ary y that that the the theo theore reti tica call must must be supp supple leme ment nt with with expo exposu sure re to the the real real environment. Theoretical Theoretical knowledge just provides the base and it’s not sufficient to produce a good Manager that’s why the practical knowledge is needed. Therefore the Research Project is an essential requirement for the student of MBA. This research project not only helps the students to utilize his skills properly and learn field realities but also provides a chance to the organization to find out talent among the building Managers in the very beginning. In accordance with the requirement of MBA course I have done my research project on the topic “COMPARATIVE STUDY OF ULIP PLANS OFFERED BY ICICI PUDENTIAL PUDENTIAL AND OTHE OTHER R LIFE INSURANCE COMPANIES” COMPANIES” with special
reference to ICICI Prudential.
2
Certificate by the Faculty Guide
GUIDE’S CERTIFICATE
This is to certify that Mr. /Ms. __________________bearing the Reg. No. ____________ currently undergoing IVth Semester MBA in Swami Vivekanand Vivekanand Institute of Engineering Engineering and Technology Technology affiliated to Punjab Tech Techni nica call Univ Univer ersi sity ty,, Jala Jaland ndha harr he carr carrie ied d ou outt a proje roject ct on “ A COMPARATIVE STUDY OF ULIP PLANS OFFERED BY ICICI PRUDENTIAL AND OTHER OTHER LIFE LIFE INSURA INSURANCE NCE COMPAN COMPANIES IES ” un unde derr my gu guid idan ance ce and and
supervision and the work done by her is original and outcome of her sincere efforts.
Mrs. Sukhmeet Kaur Date: ----------
(PROJECT GUIDE)
3
INDEX
I. PREFACE II. II. CERT CERTIF IFIC ICAT ATE E III. III. EXE EXECU CUTI TIVE VE SU SUMM MMAR ARY Y IV. IV. LITE LITERA RATU TURE RE REV REVIE IEW W
Sr.no Chapter-1
Title INTRODUCTION
Introduction - basics of insurance
Need of life of insurance
Roles of insurance
Types of life insurance
Chapter-2
INDUSTY PROFILE
Chapter-3
COMPANY PROFILE
Chapter-4
RESEARCH METHODOLOGY
Chapter-5
COMPARATIVE STUDY
Chapter-6
DATA ANALYSIS & INTERPRETATIONS
Chapter-7
LIMITATIONS
(i)
RECOMMENDATIONS
(ii)
CONCLUSION
(iii) (iv)
BIBLIOGRAPHY ANNEXURE
4
5
Literature Review How a company does announced a name change especially when the old name was well known? How does the company explain itself to constituents who may have known the company quite well in an earlier incarnation but may be struggling to figure out what the new organization stands for? How can the company create a new image while retaining the strengths of the old one? And what role might corporate advertising play in all this? Corporate advertising can tell a story about a company as a whole, large organizations may need to use corporate ads to simplify their image in the minds of key constituents and to show what unifies the company, despite the geographical spread and variety of its businesses. We can very well understand the concept of corporate advertising by taking the example of ICICI Prudential communication. When Company first began operations, the task was to present the visiting card of the company to the public at large and build credibility and stature and to give the consumer the confidence that ''here is a company that can be trusted to invest funds with.'' This required a corporate campaign - to establish the brand, build awareness and give the brand a larger-than-life image. The advertising idea, which was encapsulated in symbols of protection from the initial print campaign, culminated in the corporate film where sindhoor was used as an endearing and lasting symbol of protection. Once the corporate image and brand identity were established, and as the company expanded and its product range grew, the next phase of communication was to give the consumer a rational and tangible reason to buy - first of all insurance and secondly from ICICI Prudential Life. This was tackled through product-specific advertising, such as for ICICI Pru Smart Kid, retirement solutions or LifeTime.
Key Summery
Create a good citizen image through consistent & dedicated effort.
Convey the organizations commitment to the concerned publics as well as to the masses & eliminate prejudices, if any held by opinion leaders in particular & by the public in general.
6
Boost both employee management relation & employee morale enabling all
Members of the internal public to discover a new vitality.
EXECUTIVE SUMMARY
Title of the project: Study ULIP in current market scenario/ Study customer response towards ULIP
Objectives:
Working of the unit linked insurance plans
Swot analysis of the product
Comparative study of the competition
Study tax planning solutions available in the market
Study asset allocation through insurance plans
Market interface
Comparative analysis done on:
Life insurance corporation
HDFC Stan Life
Birla Sun Life
Bajaj Allianz
Research Methodology: 7
Primary data collected by personally visiting these leading insurance players. Eg: LIC, Max New York Life Insurance, Bajaj Alliance, Birla Sunlife, HDFC Stan life.
Data Collection:
Primary data collected through direct intrection with customer.
Sample size 100 people.
Secondary database from different magazines.
First and foremost, accumulating information from newspapers , Journals, Magazines, and company webside.
Secondly, taking a sample size and doing a market survey by filling up questionnaires from customers to find out what different companies are offering in the ULIP section and how are they similar/different from ICICI PRUD PRUDEN ENTI TIAL AL produ products cts.. Also Also keepin keeping g a track track and takin taking g down down the the feedb feedback ack regar regardin ding g percep percepti tion, on, attit attitude ude,, taste taste and and prefe preferen rences ces of the customer.
Thirdl Thirdly, y, analyz analyzing ing the data collecte collected. d. Compari Comparing ng the ULIP ULIP products products offered by other insurance players.
Critical analysis of consumer perception; their choice and preferences. Eventually, deciding on how to familiarize ULIP products in the market and what all safeguards need to be taken while approaching the customers.
8
CHAPTER-1
9
INTRODUCTION TO INSURANCE
LIFE
INSURANCE
GENERAL
Insurance is a system to alleviate financial losses by transferring risk of loss from one entity to another.
‘Insurance’ is basically a sharing device. The losses to assets resulting from natural calamities calamities like fire, flood, earthquake, earthquake, accidents, etc. are met out of the common pool contr contrib ibute uted d by large large number number of person personss who who are expose exposed d to simil similar ar risks risks.. Th This is contribution of many is used to pay the losses suffered by unfortunate few. However the basic principle is that loss should occur as a result of natural calamities or unexpected events which are beyond the human control. Secondly insured person should not make any gains out of insurance. It is natural to think of insurance of physical assets such as motor car insurance or fire insurance but often we forget that creator of all these assets is the human being whose
efforts have gone a long way in building up the assets. In that sense, human life is a unique income generating assets. Unlike the physical assets, which decrease in value with passage of time, the individual becomes more experienced and more matured as he advances in age. This raises his earning capacity and the purpose of life insurance 10
is to protect the income in the event of his premature death. The individual himself also needs financial security for the old age or on his becoming becoming permanently disabled when his income will stop. Insurance also has an element of savings in certain cases. How insurance works?
Suppose there are 1000 persons all aged 35 years and healthy lives. They are insured for one year against the risk of death. Each person is insured for Rs. 50,000. If the past experience indicated that 4 out of 1000 persons, at this age are expected to die during the year, expected amount of death claim to be paid to the family of four persons would come to Rs. 2,00,000. The contribution contribution to be paid by each of the 1000 persons will come to Rs. 200 per year. Thus, all the 1000 persons share loss caused to the 4 unfortunate families. 996 persons who survived till one year have not lost anything as they secured peace of mind and a feeling of security of their family. While insurance cannot prevent accidents or premature death, it can help protect the family of the decreased against the loss of income caused by the death of the main breadwi breadwinner nner.. In return return for specifi specified ed paymen payments, ts, insuranc insurancee will will provide provide protecti protection on against the incidence of an uncertain event- such as premature premature death. The business of insurance company called insurer is to bring together persons who are exposed to similar risks, collect contribution (premium) from them on some equitable basis and pay the losses (claims) to the unfortunate few who suffer. Classification of Insurance
Insurance business can be divided into two broad categories, life and non-life. Life insurance is concerned with making provision for a specific event happing to the individual, such as death whereas non life (or general insurance) is more commonly concerned with the provision for a specific event which affects a property, such as fire, flood, theft etc. In this course we will only cover life insurance. So, let us now move on to the definition of life insurance.
Definition of Life Insurance
11
Accord According ing to the U.S. U.S. Life Life Offi Office ce Manag Managem ement ent Assoc Associa iati tion on Inc. Inc. (LOM (LOMA) A),, life life insurance is defined as follows: ‘Life insurance provides a sum of money if the person who is insured dies whilst the policy is in effect”.
NEED FOR LIFE INSURANCE
Risks and uncertainties are part of life's great adventure -- accident, illness, theft, natural disaster - they're all built into the workings of the Universe, waiting to happen. Insurance then is man's answer to the vagaries of life. If you cannot beat man-made and natural calamities, well, at least be prepared for them and their aftermath. Insurance is a contract between two parties - the insurer (the insurance company) and the insured (the person or entity seeking the cover) - wherein the insurer agrees to pay the insured for financial losses arising out of any unforeseen events in return for a regular payment of "premium". These unforeseen events are defined as "risk " and that is why insurance is called a risk cover. Hence, insurance is essentially the means to financially compensate for losses that life throws at people - corporate and otherwise. The principle of insurance works on the concept of a large number of people exposed to a similar risk making a contribution to a common fund. Those who suffer losses due to the occurrence of these events are compensated for them from this fund.
12
ROLE OF LIFE INSURANCE Life Insurance As An Investment: -
Insurance is an attractive attractive option for investment. investment. While most people recognize recognize the risk hedging and tax saving potential of insurance, many are not aware of its advantages as an investment option as well. Insurance products yield more compared to regular investment options, and this is besides the added incentives offered by insurers. You cannot compare an insurance product with other investment schemes for the simple reason that it offers financial protection from risks, something that is missing in non-insurance products. In fact, the premium you pay for an insurance policy is an investment against risk. Thus, before comparing with other schemes, you must accept that a part of the total amount invested in life insurance goes towards providing for the risk cover, while the rest is used for savings. In life insurance, unlike non-life products, you get maturity benefits on survival at the end of the term. In other words, if you take a life insurance policy for 20 years and survive the term, the amount invested as premium in the policy will come back to you with added returns. In the unfortunate event of death within the tenure of the policy, the family of the deceased will receive the sum assured. Now, let us compare insurance as an investment options. If you invest Rs 10,000 in PPF, your money grows to Rs 10,950 at 9.5 per cent interest over a year. But in this case, the access to your funds will be limited. One can withdraw 50 per cent of the initial deposit only after 4 years. Thee same Th same amou amount nt of Rs 10,0 10,000 00 can can give give you an insu insura ranc ncee cove coverr of up to approximately Rs 5-12 lakh (depending upon the plan, age and medical condition of the life life insur insured, ed, etc) etc) and and this this amoun amountt can can becom becomee imme immedia diatel tely y avail availabl ablee to the nominee of the policyholder on death. Thus insurance is a unique investment avenue that delivers sound returns in addition to protection.
TYPES OF LIFE INSURANCE PLANS 13
Life Insurance Plans:
Under Life insurance plans, ICICI Prudential offers plans under the following major need categories: Education Insurance Plans Wealth Creation Plans Premium Guarantee plans Protection Plans
Education Insurance Plans
One of your most important responsibilities as a parent is to ensure that your child gets the best possible education that can be provided. ICICI Prudential offers a wide portfolio of education insurance plans that are designed to provide peace of mind to you, as a parent, that your child's education will be secure. These plans ensure that money is made available at the crucial junctures in a child's education - Class X, Class XII, graduation and post-graduation - to fund crucial commitments for the child's future. Importantly, education insurance plans ensure that in the unfortunate event of the death of a parent, the child's education continues unhampered. Under the education insurance plans platform, ICICI Prudential brings the following products to you. Please click on the product name to know more about the plans.
Plan Name
Plan Type
SmartKid New Unit-linked Regular Premium
Unit Linked
SmartKid New Unit-linked Single Premium
Unit Linked
SmartKid Regular Premium
Traditional
Wealth Creation Plans Wealth Creation Plans give the customer the dual benefit of protection along with the potentially higher returns of market-linked instruments. The most important benefit of 14
ULIPs is the flexibility they give the customer in choosing the premium amount and also choosing the underlying fund in which this money is to be invested. Wealth creation plans also offer the customer more liquidity options as compared to traditional plans. As such, ULIPs are ideal for customers who want the protection of a life cover to be allied to the returns of market linked instrument – giving them an unmatched combination of benefits. Under the wealth creation platform, ICICI Prudential brings the following products to you. Please click on the product name to know more about the plans.
Plan Name
Plan Type
LifeTime Super LifeLink Super PremierLife Gold LifeTime Plus
Unit Linked Unit Linked Unit Linked Unit Linked
Premium Guarantee Plans
The latest addition to the life insurance product portfolio of ICICI Prudential is the Premium Guarantee plan - InvestShield Life New. Premium Guarantee plans are the ideal insurance-cum-investment option for customers who want to enjoy the potentially higher returns of a market linked instrument, but without taking any market risk. Under the Premium Guarantee Plans platform, ICICI Prudential brings to you the following products:
Plan Name
Plan Type
InvestShield Life New InvestShield CashBak
Unit Linked Unit Linked
15
Protection Plans
The sole objective of these plans, as their name indicates, is to serve the protection needs of the customer and by doing so, safeguard one’s family from the financial implications of unfortunate circumstances than one cannot foresee. Under the Protection Plans platform, ICICI Prudential brings to you the following products:
Plan Name
LifeGuard Save'n'Protect CashBak Home Assure
Plan Type
Traditional Traditional Traditional Traditional
THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA)
16
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 Apri Aprill 200 2000 0 has fasti fastidi dious ously ly stuck stuck to its sched schedule ule of frami framing ng regul regulat ation ionss and 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.
17
WHY PRIVATE INSURANCE?
•
All All the the priv privat atee com compani panies es have have a lock lock in peri period od of 3 yrs yrs henc hencee no
disinvestments possible. •
Minimum net worth of 500 Cr required for acquiring license with a minimum
paid up capital of 100 Cr in their insurance venture. •
Commitment to increase the paid up capital manifold in next five years.
•
Re insurance for all its policies worth more than 5 lakhs. Reinsurance partners,
best and the largest in the world – general cologne and Swiss reinsurance. •
Audit of accounts by at least 2 independent approved auditors each year.
•
Products and pricing are cleared by IRDA, which looks into the financial
visibility of the product and the financial implication. •
IRDA is now proposing a Pvt. Policy Protection fund.
•
Funds to be invested in only regulated and controlled areas with close to
80%being pumped into only gilts thereby assuring safety of funds.
18
CHAPTER-2
19
INDUSTRY PROFILE Background In 1912, the Indian Indian life insurance insurance compani companies es Act was passed . This This was the first comprehensive comprehensive legislation legislation in India to regulate the business business of insurance. insurance. it had been observed that the provisions of Indian Company’s Act did not meet the purpose. A further legislation legislation was passed in 1928, But a comprehensive legislation legislation was passed in 1938. The amendments in the act were made in 1956 when insurance was nationalized and LIC and GIC were formed. Life insurance business was nationalized with effect from 19 January 1956 and 256 companies were merged. Insurance Act was further amended in 1999 and IRDA was formed in view of the circumstances arising out of opening up of insurance industry in 2000.IRDA authority to protect the interest of the holders of insurance policies, to regulate , promote and ensure the working of all companies. As we enter into the new millennium, economies economies of the world over are getting redefined and remodeled with the new mindsets, new technologies, new riles and new directions. directions. Financial sector reforms received top priority ever since the Govt. of India initiated the process of economic liberalization. These reforms are extending the horizons of the financial services sector and have been transforming our capital markets , banking and financial services industries. In the last four decades , after nationalization of the insurance industry , certain socio-economic objectives were achieved through public ownership of the insurance business. Yet, market oriented dynamism was missing as evidenced by the lack of product product innovati innovations, ons, high premium premium rates rates and limited limited use of informa informatio tion n technology. 20
The insurance sector reforms have encouraged Blue-Bloods of Indian corporate sector TATA,I TATA,ICIC CICI,H I,HDFC DFC,BI ,BIRLA RLA,SB ,SBI,R I,REL ELIAN IANCE, CE,KOT KOTAK AK etc to tie up with with world’s world’s largest insurance majors to capture slice of the country’s potential insurance market. This has brought abuzz activities in insurance business. New players are wooing the customer with promises of better services and customized products. The LIC and GIC are countering the competition on the strength of their track records, distribution networks and so on. This new scenario will witness financially sound and experienced players transforming the industry with best products in service and product development , operational operational efficiency, efficiency, marketing capability, service plus and tech-savvy orientation. orientation. As a result, the insurance business can become global with e-business applications. It is awkward business playing value figures on people’s lives. It is almost as awkward as selling the likelihood of an event people do not want crossing their minds . in India, India, it is rather rather a shrub. For this this reason alone alone life insurance insurance is no ordinary ordinary market. Under the pressure of competitors differentiate their offerings, insurers no longer sell life insurance as a product that meets a basic need , many of them sell though the appeal of a wide variety of add on benefits ranging from tax saving to investment return, sometimes pitying more emphasis on these basic benefits. This Th is assu assume mess sign signif ific ican ance ce beca becaus usee Indi Indiaa is witn witnes essi sing ng fore foreig ign n competition in this sector after a long monopoly period. There is consensus on success becoming becoming a function of market strategy. So far the market has been shaped by LIC . it is only recently that private insurers with 74:26 joint ventures between Indian and foreign companies companies have been formed under the watch of IRDA. ICICI prudential, HDFC slandered life and Max Max New New York Life Life were were first first off the block, block, foll followe owed d by
Kotak Kotak 21
Mahindra, Royal Sundram,TATA Aig,Birla Sunlife,SBI Life and ING Vyasa which were started later. Sudden burst of competition itself is a unique occurrence. The Indian market distinguishes itself in other ways too, most notably in the areas of consumer perception and investment option. So it is worth which will the market move and what could be the winning strategies. strategies. Basic premise is clear that “life insurance is a specialized business ”.
22
LIFE INSURERS 1.
BAJAJ ALLIANZ LIFE INSURANCE CO.LTD.
2.
BIRLA SUNLIFE INSURANCE CO. LTD.
3.
HDFC STANDARD LIFE INSURANCE CO. LTD.
4.
ICICI PRUDENTIAL LIFE INSURANCE CO. LTD.
5.
ING VYSYA LIFE INSURANCE CO.PVT.LTD.
6.
LIFE INSURANCE CORPORATION OF INDIA.
7.
MAX NEWYORK LIFE INSURANCE CO. LTD.
8.
METLIFE INDIA INSURANCE CO. PVT.LTD.
9.
KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE CO. LTD.
10 .
SBI LIFE INSURANCE CO.LTD.
11 .
TATA AIG LIFE INSURANCE CO.LTD.
12 .
AVIVA LIFE INSURANCE CO. LTD.
13 .
SAHARA LIFE INSURANCE CO. LTD.
23
Life Insurance Companies ICICI Prudential Life Insurance Company Limited
ICICI Prudential Life Insurance Company Limited was incorporated on July 20,2000.The authorized capital of the company is Rs 2300 million and the paid up capital is Rs 1500 million. The Company is joint of ICICI (74%) and Prudential plc UK (26%) The company was granted certificate of registration for carrying out life insurance business, by the insurance regulatory and development Authority on November 24,2000.it commenced commercial operations on December 19, 2000,becoming one of the first few private sector players to enter the liberalized arena. ICICI Prude Prudenti ntial al coll collect ected ed Rs.1 Rs.1584 584 corer corerss as their their premi premium um durin during g 200 2004-0 4-05 5 & the market share of ICICI pru. as per their premium is 5.63% as a whole but in the pvt .co .ICICI hold 40% of market share. ING VYSYA LIFE INSURANCE COMPANY PVT. LTD.
ING Vysya Life Insurance is a joint venture between three pioneers, ING Insurance Vysya Bank. ING Group:
Over the last 150 years, ING Group has grown to become one of the
largest life insurance organizations in the world. Today it touches the lives of over 50 millions people across 65 countries. It offers a range of financial services including insurance, pensions, banking and asset management. In the year 2000,total assets of the group stood at over INR 28,42000 corers.
24
KOTAK MAHINDRA LIFE INSURANCE COMPANY LTD.
Kotak Mahindra life Insurance Company Limited Limited is a joint venture between Kotak Mahindra Finance Ltd and Old Mutual. Kotak Mahindra Finance Ltd.
Kotak Mahindra is one of the India’s leading financial institutions, offering complete financial solution that encompasses every sphere of life. From Banking, to stock Broking, to Mutual Funds, to Life Insurance, to Investment Investment Banking, the company caters to the financial needs of individuals and corporates. Old Mutual
Old Mutual, a company with over 157 years of experience in life insurance business, has the largest financial services business in South Africa, throu through gh its its life life assur assuranc ance, e, asset asset manag managem ement ent,, bankin banking g and and gener general al insura insurance nce operations. Being listed in London Stock Exchange and included in FTSE 100 list of companies, old Mutual’s assets under management are worth $208 billion.
Tata AIG Life Insurance Company: Tata AIG General Insurance Company Ltd and Tata AIG Life Insurance Company Ltd (collectively “Tata AIG”) are joint venture companies between the Tata group India’s most trusted industrial house and American International International grouping (AIG), the leading U.S based international insurance and financial services organization. Both promoters have a deep and abiding interest in India’s Insurance sector. Prior to nationalization, nationalization, the Tanta’s pioneered private insurance in India when Sir Dorab Tata set up new India assurance in 1919.By 1973,when General Insurance was nationalized the Tata company had a global presence with 56 overseas offices. Aig too has always 25
considered the Indian insurance sector to be of significance. The AIG companies entered India in 1954 and had offices in several Indian cities prior to nationalization. HDFC –Standard Life: HDFC Standard Life Insurance company is a joint venture between India’s
largest housing finance provider, HDFC and Europe’s largest mutual life assurance compa company ny Th Thee Stan Standar dard d Life Life Assur Assuranc ancee Comp Company any (UK). (UK). HDFC HDFC Stand Standard ard Life Life Insurance Company Limited is the first private sector life insurance company to be granted a license. Standard Life, UK, found in 1825. The UK insurance industry for 175 years by combining sound financial judgment with integrity and reliability. It is the largest mutual life company in Europe and has total assets of Rs.5,50,000 crore sit is one of the very few insurance companies companies in the world to have ‘AAA’ rating from two of the leading international credit rating agencies, Moody and Standard and Poor’s. Standard Life was recently voted ‘company of the decade’ in UK by the independent Brokers called IFAs. LIFE INSURANCE CORPORATION OF INDIA (LIC)
The Life Insurance Corporation (LIC) was established about 49 (in1956) years ago with a view to provide an insurance cover against against various risks in life .A mono monoli lith th then then,, the the corp corpor orat atio ion, n, enjo enjoye yed d a mono monopo poly ly stat status us and and beco become me synonymous with life insurance.Its main asset is its staff strength of 1.24 lakhs employees and 2048 branches and over six-lakh agency force. LIC has hundred divisional offices and has established extensive training facilities at all levels .At the apex, is the Management Management Development Institute, Seven Zonal Training centers and 35 Sales Training Centers.
26
At the industry level, along with the Government and GIC, it has helped established the National Insurance Academy. It presently transacts individual life insurance busines businesses, ses, group group insuran insurance ce business businesses, es, social social securit security y schemes schemes and pensions pensions,, grants housing loans through its subsidiary; and markets saving and investment products through its mutual fund. It payoff about Rs 6000 crore annually to 5.6 million million policyholders. policyholders. Market share of LIC which is 82.3%.By 82.3%.By the LIC 1.09 crores po poli licie ciess has been been sold sold that that was was in the 2004-05 2004-05 & the the tota totall premi premium um that are collected by LIC in 2004-05 was Rs.9007 crores.
ALLIANZ BAZAZ LIFE INSURANCE COMPANY
Allianz AG with over 110 years of experience in over 70 countries and Bajaj Auto, trusted for over 55 years in the Indian market ,together are committed to offering financial solutions. Characterized by global presence with a local focus and driven by customer orientation to establish high earnings potential and financial strength, Allianz Bajaj Life Insurance Co Ltd was incorporated on 12th March 2001.The company received the insurance regulatory and development Authority (IRDA) Certificate of Registration on 3rd August 2001 to conduct Life Insurance business in India. India. The Market Market share of Bajaj Bajaj Allianz Allianz in 2003-04 2003-04 was .95% which which has been increases in 2004-05 and it is know 2.03% which depicts the financial position of the co.
27
CHAPTER-3
28
COMPANY PROFILE
Overview India’s Number One private life insurer, ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank-one of India’s foremost financial services companies-and Prudential plc- a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 20.60 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%.
We began our operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide team comprises of over 580 offices, over 234,000 advisors; and 22 bancassurance partners.
ICICI Prudential was the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India’s Most Trusted Private Life Insurer, by The Economic Times – AC Nielsen ORG Marg survey of ‘Most Trusted Brands’. As we grow our distribution, product range and customer base, we continue to tirelessly uphold our commitment to deliver worldclass financial solutions to customers all over India.
29
Vision & Values Our vision:
To make ICICI Prudential the dominant Life and Pensions player built on trust by world-class people and service. This we hope to achieve by: Understanding the needs of customers and offering them superior products and service Leveraging technology to service customers quickly, efficiently and conveniently Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders Providing an enabling environment to foster growth and learning for our employees And above all, building transparency transparency in all our dealings.
The success of the company will be founded in its unflinching commitment to 5 core values – Integrity, Customer First, Boundary less, Ownership and Passion. Each of the values describe what the company stands for, the qualities of our people and the way we work. We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to our growth. Our values :
Every member of the ICICI Prudential team is committed to 5 core values: Integrity, Customer First, Boundary less, Ownership, and Passion. These values shine forth in all we do, and have become the keystones of our success.
The ICICI Prudential edge comes from our commitment to our customers, in all that we do – be it product development, distribution, the sales process or servicing. Here’s a peek into what makes us leaders. 30
1. Our products have been developed after a clear and thorough understanding of customers’ needs. It is this research that helps us develop Education plans that offer the ideal way to truly guarantee your child’s education, Retirement solutions that are a hedge against inflation and yet promise a fixed income after you retire, or Health insurance that arms you with the funds you might need to recover from a dreaded disease. 2. Having the right products is the first step, but it’s equally important to ensure that our customers can access them easily and quickly. To this end, ICICI Prudential has an advisor base across the length and breadth of the country, and also partners with leading banks, corporate agents and brokers to distribute our products 3. Robust risk management and underwriting practices form the core of our business. With clear guidelines in place, we ensure equitable costing of risks, and thereby ensure a smooth and hassle-free claims process. 4. Entrusted with helping our customers meet their long-term goals, we adopt an investment philosophy that aims to achieve risk adjusted returns over the long-term. 5. Last but definitely not the least, our 16,000 plus strong team is given the opportunity to learn and grow, every day in a multitude of ways. We believe this keeps them engaged and enthusiastic, so that they can deliver on our promise to cover you, at every step in life.
Promoters ICICI Bank
ICICI Bank (NYSE:IBN) is India’s second largest bank and largest private sector bank with
over 50 years presence in financial services and with assets of over Rs 3446.58 bn (USD 79 billion) as on March 31, 2007. The Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its 31pecialized subsidiaries in the areas of investment banking, life and non-life insurance, private equity and asset management. ICICI Bank is a leading player in the retail banking market and services its large customer base through a network of over 950 branches and extension counters, 3300 ATMs, call centers and internet banking (www.icicibank.com) 31
to ensure that customers have access to its services at all times. Prudential Plc
Established in London in 1848, Prudential plc, through its businesses in the UK and Europe, the US and Asia, provides retail financial services products and services to more than 20 million customers, policyholder and unit holders and manages over £251 billion of funds worldwide (as of 31 December 2006). In Asia, Prudential is the leading European life insurance company with life operations in China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, Vietnam. Prudential is the second largest retail fund manager for Asian sourced assets ex-Japan as at June 2006. Its fund management business has expanded into a total of ten markets : China, Hong Kong, India, Japan, Korea, Malaysia, Singapore, Taiwan, Vietnam and United Arab Emirates.
Sheet
THE Company
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential's capital stands at Rs. 20.60 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. As of March 31, 2007, the company garnered Rs. 4,843 crore of weighted retail + group new business premiums and wrote over 1.96 million retail policies. The company has assets held to the tune of over Rs. 15,000 crore. ICICI Prudential is also the only private life insurer in India to receive a National 32
Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. The AAA (Ind) rating is the highest rating, and is a clear assurance of ICICI Prudential's ability to meet its obligations to customers at the time of maturity or claims. For the past six years, ICICI Prudential has retained its position as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life. To know more about the company, please visit Distribution
ICICI Prudential has one of the largest distribution networks amongst private life insurers in India. As of March 31, 2007 the company has over 580 offices across the country and over 234,000 advisors. The company has over 22 bancassurnace partners, having tie-ups with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank, Idukki District Co-operative Bank, Jalgaon Peoples Co-operative Bank, Shamrao Vithal Co-op Bank, Ernakulam Bank, 9 Bank of India sponsored Regional Rural Banks (RRBs), Sangli Urban Co-operative Bank, Baramati Co-operative Bank, Ballia Kshetriya Gramin Bank, The Haryana State Co-operative Bank. Flexible Rider Options
ICICI Pru Life offers flexible riders, which can be added to the basic policy at a marginal cost, depending on the specific needs of the customer.
1. Accident & disability benefit: If death occurs as the result of
an accident during the term of the policy, the beneficiary receives an additional amount equal to the rider sum assured under the policy. If an accident results in total and permanent disability, 10% of rider sum assured will be paid each year, from the end of the 1st year after the disability date for the remainder of the base policy term or 10 years, whichever is lesser. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit. 2. Critical Illness Benefit: protects the insured against financial
loss in the event of 9 specified critical illnesses. illnesses. Benefits are 33
payable to the insured for medical expenses prior to death. 3. Waiver of Premium: In case of total and permanent disability
due to an accident, the future premiums continue continue to be paid by the company till the time of maturity. This rider is available with LifeTime Super, LifeTime Super Pension and CashPlus.
About the Promoters ICICI Bank (NYSE:IBN) is India's second largest bank and largest private sector
bank with over 50 years presence in financial services and with assets of over Rs 3446.58 bn (USD 79 billion) as on March 31, 2007. The Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, private equity and asset management. ICICI Bank is a leading player in the retail banking market and services its large customer base through a network of over 950 branches and extension counters, 3300 ATMs, call centers and internet banking www.iciciprulife.com to ensure that customers have access to its services at all times. Established in London in 1848, Prudential plc, through its businesses in the UK and Europe, the US and Asia, provides retail financial services products and services to more than 20 million customers, policyholder and unit holders and manages over £251 billion of funds worldwide (as of 31 December 2006). In Asia, Prudential is the leading
European life insurance company with life operations in China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, Vietnam. Prudential is the second largest retail fund manager for Asian sourced assets ex-Japan as at June 2006. Its fund management business has expanded into a total of ten markets : China, Hong Kong, India, Japan, Korea, Malaysia, Singapore, Taiwan, Vietnam and United Arab Emirates. The ICICI Prudential Life Insurance Company Limited Management team comprises reputed people from the finance industry both from India and abroad. 34
Ms. Shikha Sharma, Managing Director & CEO Mr. N. S. Kannan, Executive Director Mr. Bhargav Dasgupta, Dasgupta , Executive Director Ms. Anita Pai, Pai , EVP – Customer Service & Technology Mr. Azim Mithani, Chief Actuary Mr. Puneet Nanda, Nanda, Chief Investments Officer Mr. Binayak Dutta, Dutta , Chief – Sales and distribution
Mr. N. S. Kannan Executive Director ICICI Prudential Life Insurance Company Limited
N. S. Kannan joined ICICI Prudential Life Insurance Company Ltd as Executive Director in August 2005, where he has overall responsibility for sales, marketing, investments, group business and business intelligence. Prior to joining ICICI Prudential, Kannan was the Chief Financial Officer and Treasurer of ICICI Bank Limited where he was responsible for investor relations and for the finance, performance management, accounts, taxation, risk management, secretarial and credit middle office functions. The treasury operations of ICICI Bank include Balance Sheet Management and Asset and Liability Management. ICICI Bank is the second largest bank in India with an asset base of about US$ 55 billion. The bank is listed on Indian national stock exchanges and the New York stock exchange. Kannan joined ICICI group in 1991 as a project officer. During his tenure at ICICI group, he has handled project finance operations, infrastructure financing, structured finance and treasury operations. Prior to his current assignment, he has headed the Telecom & Transportation group and Structured Finance group of the bank.Kannan is a postgraduate in management from the Indian Institute of Management, Bangalore with a gold medal for best all-round performance. He is also a Chartered Financial Analyst from the Institute of Chartered Financial Analysts of India and an Honours graduate in Mechanical Engineering. His work experience includes 3 years years of industrial experience with a large engineering group in India. 35
SWOT ANALYSIS OF ICICI PRUDENTIAL STRENGTHS
•
ICICI PRUDEN PRUDENTIAL TIAL is the largest private player in the insurance industry in India, with a market share of around 36% amongst the private players.
•
ICICI PRUDENTIAL PRUDENTIAL has deposited a paid up capital of Rs. 925 crores with IRDA IRDA as a caut cautio ion n depo deposi sit, t, the the high highes estt amon amongs gstt all all the the life life insu insura ranc ncee companies in India whereas LIC has deposited only 60 crores so far.
•
ICICI PRUDENTIAL is the first life insurance company to offer ECS debit facility.
•
ICIC ICICII PRUD PRUDEN ENTI TIAL AL is the first first compan company y to intro introduc ducee unit unit linke linked d life life insurance and pension products. Presently the maximum numbers of ranges are under ULIP like life insurance, investment as well as pension plans.
•
Its Vent Venture ure funds funds manag managem ement ent co. Ltd Ltd is India’ India’ss large largest st ventur venturee capit capital al company.
•
PRODUCTS:
Flexibility to switch your fund value at your own discretion 4 times a year Viz Maximiser, Protector, Balancer, Preserver. Preserver.
Greater transparency- policyholder knows what is happening to his money and where the company has invested the money.
Liqu Liquidi idity ty optio option: n: you you can make make parti partial al or comple complete te withd withdraw rawal alss anytime after 3 years.
Life insurance plans are eligible for deduction under Sec. 80C.
The proceeds proceeds or withdra withdrawal walss of life life insuranc insurancee policie policiess are exempt under Sec 10(10D), subject to norms prescribed in that section.
Riders are provided to give the policyholder the additional protection at marginal cost- Accident and Disability rider, Critical Illness Rider, Accidental benefit rider. 36
Loan against the policy
: After the policy has acquired a surrender value one can avail loan against the policy. WEAKNESSES •
Industry in nascent stage.
•
Rural areas still not covered.
•
Not very well known among the Indian population.
•
Lack of credibility in the public because ICICI being a private player.
•
Premiums are high as compared to its competitors.
•
Very few branches in the country.
•
PRODUCTS:
The policy doesn’t have the surrender option before the 3rd year.
Plan do not offer any guarantee or assured return
The product profile is not very comprehensive.
Mortality, Mortality, management and administrative administrative charges are sky-scraping sky-scraping as compared to its competitors.
OPPORTUNITIES
•
Liberalization of Indian economy.
•
As the industry is growing the whole market is virgin.
•
The whole private sector is open to be tapped even though the competition competition is fierce from government owned insurance companies.
•
It’s a volume business that is even if the company has few good corporates the turnover ceases to increase by manifold.
•
PRODUCTS:
Preserver fund looks good due to comfortable liquidity in the economy and there is little chance of any hike in short-term rates by RBI.
37
Fina Finance nce minis ministe terr unv unveil eiled ed a bud budget get-fa -favor vorin ing g consum consumer er spendi spending, ng, boosting demand and therefore higher economic growth
THREATS
•
The Govt. players will become aggressive thus growth is going to be tough.
•
Entry of other new players is not ruled out
•
Apprehension towards ICICI PRUDENTIAL being a private life insurance company.
•
We expect the industry to rationalize rationalize in future that is mergers and acquisitions will will happen happen which which will will impa impact ct the indus industr try y and ICIC ICICII PRUD PRUDEN ENTI TIAL AL fortunes.
•
PRODUCTS:
Past performance of these plans is not indicative of the future performance of the plan
The sum invested in the funds is subject to market risks and there can can be no assu assura ranc ncee that that the the obje object ctiv ivee of the the plan planss will will be achieved.
All benefits payable under the policy are subject to the tax laws and other financial enactment, as they exist from time to time
38
MEANING OF ULIP
A policy, which provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time. ULIP is life insurance solution that provides for the benefits of protection and flexibility in investment. investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV).
Unit linked insurance plans
Units in funds
Underlying investment
Contribution A ULIP structure looks like as follows:
Less charge
Investment represented as units
Life cover
39
FEATURES OF ULIP ULIP distinguishes itself through the multiple benefits that it provides to the consumer. The plan is a one-stop solution providing:
· Life protection · Investment and Savings · Flexibility - Adjustable Life Cover - Investment Options · Transparency · Options to take additional cover against - Death due to accident - Disability - Critical Illness - Surgeries · Liquidity · Tax planning
The two strong arguments in favour of unit-linked plans are: •
Firstly, the investor knows exactly what is happening to his money
•
Secondly it allows the investor to choose the assets into which he wants his funds invested.
An investor in a ULIP knows how much he is paying towards mortality, management and administration charges. He also knows where the insurance company has invested his money. The investor gets exactly the same returns that the fund earns but he also bears the investment investment risk. The transparency makes the product more competitive. competitive. So if you are willing to bear the investment risks in order to generate a higher return on your retirement funds ULIPs are for you. Traditional ‘with profits’ policies too invest in the market and generate the same returns prevailing in the market. But here the insurance company evens out returns to ensure that policyholders do not hold money in a bad year. In that sense they are safer. ULIPs also offer flexibility. For instance a policyholder can ask 40
the insurance company to liquidate units in his account to meet to mortality charges if he is unable to pay any premium installment. This eats into savings but ensures that the policy will continue to cover his life. ULIP came into play in the 1960s and became very popular in Western Europe and Americas. The reason that is attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility which it offers. Unit- linked plans are a contemporary contemporary product: transparent and flexible. flexible. Individuals have greater control over their their inves investm tment ents. s. Th Thee pop popul ulari arity ty of ULIP ULIPS S stem stemss from from the the fact fact that that they they offer offer custome customers rs “integr “integrated ated financi financial al solutio solutions ns with with a transpa transparent rent charge charge structu structure”. re”. In today’s today’s times, times, ULIP ULIP provides provides solutio solutions ns for insuranc insurancee planning planning,, financi financial al needs, needs, financial planning for children’s future and retirement planning. Unit-linked insurance plans (ULIPs) have become something of a rage with their 'promise' of market-linked returns combined with the dual benefit of insuring your life from eventualities. Why do insurers prefer ULIPs?
Insurers love ULIPs for several reasons. Most important of all, insurers can sell these policies with lesser capital of their own than what would be required if they sold traditional policies. In traditional ‘with profits’ policies policies the insurance company bears the investment risk to the extent of insured amount. In ULIPs the policyholder bears most of the investment investment risk. Since ULIPs are designed to mobilize mobilize savings, they give insur insuranc ancee compan companie iess an opp opport ortuni unity ty to get a large large chunk chunk of asset asset manag managem ement ent business which has been traditionally traditionally dominated by mutual funds. ULIPs are suitable for individuals who are already adequately adequately insured and are reasonably well-informed well-informed and savvy to take active investment decisions by using the `switch option' that is provided to a ULIP policyholder. Also policyholders with regular endowment plans who are not satisfied with the 4-6% returns can consider taking a ULIP with a lower equity component. It is best if insurance-seekers tread the middle path and choose balanced plans (with about 50-60% equity component). Ideally they need to avoid taking the aggressive 100% equity ULIP, which could needlessly expose their assets to market volatility. So if insurancesseekers/investors play their cards right, they can make this marriage work.
41
WORKING OF UNIT LINKED INSURANCE PLANS UNIT LINKED PLANS SUPER SMART KID SmartKid offers an exclusive choice of 3 education insurance plans: SmartKid New Unit-linked Regular Premium, SmartKid New Unit-linked Single Premium and SmartKid Regular Premium. Take a look at the features and benefits of each plan:
1. SmartKid New Unit-linked Regular Premium SmartKid New Unit-linked Regular Premium is a unit-linked plan, which enables you and your child to accumulate wealth by virtue of the performance of the underlying market-linked instrument. Take a look at the features of the plan: Premium: The minimum premium to be invested is Rs. 10,000 per annum. After deducting premium allocation charges from the premium, the remaining amount will be invested in a fund of your choice. Sum Assured: The minimum Sum Assured that the policyholder can opt for is Term * Annual Premium/2, subject to a minimum of Rs 1 Lac Policy term: The term of the policy will be calculated as the difference between your child's current age and the age of your child when the policy matures. Mortality, Policy Administration charges: These and other charges will be deducted from the units in the fund.
2. SmartKid New Unit-linked Single Premium SmartKid New Unit-linked Single Premium works in much the same way as SmartKid New Unit-linked Regular Premium policy mentioned above. The only different feature is the premium amount-you will be required to pay only a single premium, which starts at as low as Rs. 50,000. Additional Features and Benefits Common to All 3 Plans
Regular payouts: As your child approaches key educational milestones such as 12th
standard or graduation exams, he or she will receive regular payouts, guaranteeing he or she continues to study, no matter what the circumstance. Death Benefit: Your child will receive the Sum Assured immediately, should something happen to you. ICICI Prudential will pay the remaining premiums, ensuring your child continues to receive policy benefits, as always. Income Benefit Rider: You can choose to add the benefits of this rider to your child's education plan. Should you depart before your son's or daughter's education is
42
complete, you child will receive 10% of Rider Sum Assured, for the balance term of the policy. Add-on riders: 'Accidental Death and Disability Rider' and 'Waiver of Premium Rider' ensure your child stays doubly protected, at all times. You can choose to add these to your child's education policy. Tax benefits: Premiums you pay for a SmartKid policy are eligible for tax savings [u/s 80(C)]. Maturity and death benefits are eligible for tax exemptions [u/s 10(10D)].
3. SmartKid Regular Premium Flexible investment option: Choose the amount of premium with which you wish to safeguard your child's education. Flexible policy tenure: The tenure of the plan will be calculated as the difference between your child's current age and his or her age at which the policy matures. Flexible premium options: The premium will be calculated based on 3 factors: Sum Assured, policy tenure and your age. Guaranteed bonus: A guaranteed bonus of 3.5% per annum is declared for the first 4 premium paying years plus an annual vested bonus declared in subsequent years.
LifeLink Super
Well-deserved financial incentives, rewarding business profits and even ancestral money are precious amounts that you should invest immediately so they earn you potentially higher returns in the long run. Invest in ICICI Prudential's LifeLink Super policy-a single-premium unit-linked policy
that works best for investors who have in mind long-term financial goals, such as the education of a child or the purchase of a larger home. Apart from the potentially higher returns that you can earn, LifeLink Super insures your family against misfortunes with its protective insurance cover. Read more about the features and benefits of this plan, right away.
43
LifeLink Super at a glance
Minimum/Maximum Entry Age
0 years to 65 years
Maximum Age at Policy Maturity
70 years
Minimum Policy Term
5 years
Minimum Single Premium
Up to age 44: Rs. 25,000, age 45 and above: Rs. 50,000 Annual Premium x Term/2. Subject to a minimum of Rs. 1,00,000
Minimum Sum Assured Tax Benefit
Premium payment up to 20% of the Sum Assured is eligible for benefit under Sec. 80C. Any amount paid to you will be eligible for tax benefits under Sec. 10 (10D) exemption, if premium paid in any year does not exceed 20% of the Sum Assured.
Features and benefits of LifeLink Super 2 options of Sum Assured: Choose to receive either 125% or 500% of the single premium amount. Flexible policy term: Decide how long you wish to invest in this policy. You can invest for a minimum of 5 years and keep your investment growing for as long as you wish after that. Partial withdrawal of money: Withdraw funds in installments from the 4th year onwards.
Attractive premium allocation rates: Enjoy 100% allocation for premium amounts equal to or greater than Rs. 5 lacs. 6 investment funds: Select among Flexi-Growth, Maximiser, Flexi-Balanced, Balancer,
Protector, and Preserver, based on your financial goals and risk profile. Switch benefit: Switch between funds anytime to maximize on market movements. You can switch funds 4 times a year, at no cost. For subsequent switches, you will be required to pay a switch fee of Rs. 100.
44
Maturity benefit: Receive the Fund Value when your policy matures. Choose to take this value as a single lump-sum amount or in monthly, bi-annual or annual installments spread over 1 to 5 years. Death benefit: Your family receives the higher of Fund Value or Sum Assured should something happen to you.
Why LifeTime Super As an individual who desires a lot from life-a car, a beautiful home and of course, the comfort and contentment of your family-you would undoubtedly want to plan your finances such that you can take care of all your requirements. Invest in ICICI Prudential's LifeTime Super policy-a regular-premium unit-linked policy, which offers potentially higher returns that systematically enable you to meet your long-term financial objectives. In addition, LifeTime Super also provides the protective benefit of an insurance cover, which keeps your family secure, always. Read more about the features and benefits of this plan.
LifeTime Super at a glance
45
Minimum/Maximum Entry Age Maximum Age at Policy Maturity Minimum/Maximum Policy Term Premium Payment Frequency Minimum Premium Minimum Sum Assured Tax Benefit (8)
0 years to 65 years 75 years 10 years to 75 years Monthly, half-yearly, yearly Rs. 18,000 per annum Annual Premium x Term/2. Subject to a minimum of Rs. 1,00,000 Premium paid for the policy and critical illness benefit rider will be eligible for tax benefit under Sec. 80C and 80D respectively. Any amount paid to you will be eligible for tax benefits under Sec. 10 (10D) as per prevailing Income Tax laws.
Features and benefits of LifeTime Super Flexible policy term: Decide for how long you want your policy. You can invest for a minimum of 10 years and a maximum of 75 years. 3 choices of premium payment: Opt to pay the premium on a monthly, bi-annual or an annual basis. 6 investment funds: Select among Flexi-Growth, Maximiser, Flexi-Balanced, Balancer, Protector, and Preserver, based on your financial goals and risk profile. Systematic withdrawal of money: Withdraw money in installments from the 4th year onwards. Maturity benefit: Receive the Fund Value when your policy matures. Choose to take this value as a single lump-sum amount or in monthly, bi-annual or annual installments. Death benefit: Your family receives the higher of Fund Value or Sum Assured should something happen to you. Switch benefit: Switch between funds anytime to adjust your portfolio, based on your goals and risk profiles. You can switch funds 4 times a year, at no cost. For subsequent switches, you will be required to pay a switch fee of Rs. 100.
ROLE OF AN ADVISOR IN UNIT LINKED INVESTMENT PLANS
46
It is important for us to know that what is the role that an advisor will play. At ICICI Prudential, you are an advisor is to 1. Provide ongoing financial financial advice for for his/her his/her clients: clients: You are an advisor and and just like a lawyer or a doctor you advice the client about insurance and finance. 2. Identify future clients: clients: Life insurance insurance is is a business business of contacts an the advisor constantly need to know people so that his business expands. 3. Constantly Constantly make make appointment appointments: s: Just making contacts contacts will not be enough to develop a good life insurance business. 4. Advisor needs to to meet meet these contacts contacts and thus should should make make appointments appointments on constantly. 5. Conduct financial financial review meetings meetings with prospects/ prospects/ clients: clients: As an advisor it it is necessary to meet with client not only for the purpose of selling but also to review the need of the client and prospects. Many people would not be in for life insurance today but as time moves they can be requiring one. Similarly an existing client may also be in need of more insurance as responsibilities and liabilities increase. Close sale: Ultimately success is defined as sales. The advisor should lead each appointment towards a sale and close it effectively where in the client is happy on purchasing the insurance solution and feels satisfied with it.
CHAPTER-4
47
RESEARCH METHODOLOGY Research Methodology has many dimensions, it include not only research methods but also also considers the logic logic behind the methods methods used in the context of the study and explains why only a particular method of technique had been used so that research lend themselves to p[roper evaluations. Thus in a way it is a written game plan plan for conclu concludin ding g resea researc rch h there therefor foree in order order to solve solve resear research ch proble problem m it is necessary to design a research methodology for the problem as the same may differ from problem to problem. Research design is the conceptual structure within which the research is conducted. Its functions are to provide for the collection of relevant evidence with minimum expenditure expenditure of effort, time and money. But, how this can be achiev achieved ed depen depends ds on the the resear research ch purpo purpose. se. In my study study the resear research ch purpos purposee is
48
exploratory study i.e. to gain familiarity with phenomena or to achieve new insights in it. MARKET RESEARCH DESIGN : Descriptive type type DATA SOURCES
: Primary source
RESE RESEAR ARCH CH APPR APPROA OACH CH
: Surv Survey ey meth method od
RESEARCH INSTRUMENT
: Questionnaire
TYPE OF QUESTIONS
: Close-ended
SAMPLE SIZE
: 100 samples
MODE OF COLLECTING DATA: Respondents to be chosen randomly.
SAMPLE DESIGN:
Social phenomenon phenomenon being very vast, it becomes impossible to contact each and every individual individual of population population due to limitation of essential resources like time and money. Therefore, Therefore, the study is preferably narrowed down to a representative sample to make the study more manageable. Quota sampling sampling is adopted in the exploratory study. It is a non-probability study in which various insurance players are taken. SAMPLING UNIT:
The data can be collected from primary sources. The basic premises of my study are prim primar ary y data data but at the same same time time it is supple suppleme ment nted ed with with the the second secondar ary y data. data. Sampling unit is a unit which would be considered for the purpose of study to conduct the comparative study of the ICICI Prudential and other insurance companies with special reference to Unit Link Plans. SAMPLING SIZE:
It refers to the number of items to be selected from the universal, to constitute a sample. To commence the study various insurance players are taken.
HOW DID I GO ABOUT THE PROJECT:SAMPLE SIZE
A sample size of 100 customers was selected to do this project, which was random sampling keeping in mind the basic criteria.
49
FIELD WORK
The research was done for a period of 2 months in (students, government employee & other) ambala. I started with MY MARKET 100 and thereafter I used to give cold calls from the company’s database and if seemed interested I take along with me the representatives of the company for further information gathering. 1) Stu Thee quicke quickest st and the the most most econo economi mical cal way way for Study dy of Sec Secon ondar dary y Data: Data: Th researchers to find possible hypothesis is to take the advantage of the work done earlier and thus utilize their efforts. 2) In-depth Interviews: I used in-depth interviews because it attempts to influence respondents to talk freely about their subject of interest .A formal questionnaire was made and according to which the questions were asked to the respondents. Basic methods of collecting Primary Data:
1) Questionnaire Method: The questionnaire used by me for the purpose of data collection were of structured type (Non-disguised). 2) Contact Method: In order to derive information from the intended organization, it was elementary for me to search for a link which could enable me to conduct a research in that organization.
OBJECTIVE OF THE STUDY
The project undertaken by me as a part of my Summar Training of M.B.A.course is an effort made to study the ULIP policies and activities in ICICI PRUDENTIAL with special emphasis on unit linked products of the company. In this era of cut throat competition, any organization needs to select and retain the best talent. People selected should have positive attitude, ability to inspire others and must be dynamic.
50
The main objectives of this study are: •
Working of Unit linked Insurance Plans
•
SWOT analysis of the product sold
•
Comparative study with the competitor.
•
Study tax planning solutions available in the market.
•
Study asset allocation through insurance plans.
•
Market interphase.
CHAPTER-5
51
COMPARATIVE STUDY WITH THE COMPETITORS
LIST:
•
LifeTime Super Vs LIC BimaPlus 52
•
LifeTime Super Vs Birla SunLife Classic Life
•
LifeTime Super Super Vs HDFC HDFC Linked Linked
•
PremierLife Vs Bajaj Allianz Unitgain Plus
LIFETIME SUPER VS LIC BIMAPLUS
Features Age Term
LifeTime Super LIC BimaPlus 0 – 60 years 12 - 55 years Minimum premium payment term of
Sum Assured
3years 10 years Choose yo your su sum as assured, su subject to to Maximum limit upto Rs. 2 lakhs a mini minimu mum m sum sum assu assure red d of Rs. Rs. 1
Survival benefit
lakh Value of units (3rd year onwards)
Bid Value of the fund units 53
along with maturity bonus at 5% Death benefit
of the Sum Assured Higher of of Su Sum As Assured or or va value of of Death during the first 6 months units.
30% of SA + value of units, next 6 months - 60% of SA + value of units. Death after 1st year SA + value of uni units. Death during the 10th year - 105% of
With Withdra drawa wall benef benefit it
SA + value of units. Parti Partial al or compl complet etee withd withdraw rawals als are Prematur Prematuree withdra withdrawal wal allowed allowed available from the 3rd year onwards
after after one year year (afte (afterr apply applying ing bid-offer spread. Not specified
Contribution Flexible
Minimum: Rs. 18,000 p.a. Flexibility to increase or decrease in
contribution Inve Invest stme ment nt opti option onss
contribution Not available Maxi Maximi mise ser, r, Bala Balanc ncer er,, Prot Protec ecto torr &
Preserver. Increase / Decrease Available.
Balanced, Secured & Risk Not available
of death benefit Bonus units Top-up
Available Not Available. Available. Mi Minimum to top-up of of Rs Rs. Available (Charges: 1.5% of the 5000. Charges - 1% of top-up. top-up) 4 free free swit switch ches es a year, ear, with with the the No free
switches.
Co st
of
minimum switch amount being Rs. swit switch chin ing g is 2% of the the fund fund Switch Surren render der val value
2000. value. The pol policy wil will acqu acquiire a surr urrender nder Partial surrender up to 50% of valu valuee afte afterr 3 comp comple lete te prem premiu iumm- bid value of units allowed after 3 paying years. The surrender value is years
Initial Charge
fr o m
date
100% of the value of investments. commencement % Allocation of the premium Not Disclosed 18000- 49,999: 1st year - 80%; 2nd year - 92.5% ; 3rd year onwards 96%. 50000 and above: 1st year - 82%; 2nd year - 92.5%; 3rd year onwards -
Admin Charge
96%. None
Not applicable 54
of
Other Charges
Not applicable Not applicable The annual administrative and fund mana manage geme ment nt char charge ge is 2.25 2.25% % for for Maxi Maximi mise ser, r, 2.25 2.25% %
for for
Bala Balanc ncer er,,
Fund Management 1.50% 1.50% for for Prot Protect ector or & 0.75% 0.75% for Charges
Preserver.
1% of the fund per annum
IFETIME SUPER VS HDFC LINKED
Features Age Term
LifeTime Super HDFC Linked 0 - 60 years 18 - 60 years Minimum premium payment term of 10 - 30 years
Sum Assured
3years Choose yo your su sum as assured, su subject to to Only
5,10, 10,
20
(agege-based ased))
a mini minimu mum m sum sum assu assure red d of Rs. Rs. 1 mult multipl iples es are are allow allowed ed as Sum Sum Survival benefit Death benefit
lakh Assured. Value of units (3rd year onwards) Value of units Higher of of Su Sum As Assured or or va value of of Higher of Sum Assured or value
units. of units. With Withdra drawa wall benef benefit it Parti Partial al or compl complet etee withd withdraw rawals als are Part Partia iall with withdr draw awal al available from the 3rd year onwards
avai availa labl blee
from from the the 3rd 3rd year year onwa onward rds, s, provided that the Value of Units does does not not go bel below the Sum
Contribution Flexible
Assured. Minimum: Rs. 18,000 p.a. Minimum: Rs. 10,000 p.a. Flexibility to increase or decrease in Available
contribution Inve Invest stme ment nt opti option onss
contribution. Maxi Maximi mise ser, r, Bala Balanc ncer er,, Prot Protec ecto torr & 5 Preserver.
Fund und
Defensive
Optionsons-
Balance ncer,
Managed, 55
Safe
Managed, Liquid & Growth Not available
Increase / Decrease Available. of death benefit Bonus units Top-up
Available Not available Available. Mi Minimum to top-up of of Rs Rs. Available
Switch
5000. Charges - 1% of top-up. 4 fr free sw switches a ye year, wi with th the Switches Switches are free as of now. But minimum switch amount being Rs. the company reserves the right
Surren render der val value
2000. to put a charge on the switches. The pol policy wil will acqu acquiire a surr urrender nder The surrender charge is 25% of valu valuee afte afterr 3 comp comple lete te prem premiu iumm- 3 paying years.
Initial Charge
years ears
outs outsta tand ndin ing g
regu regula lar r
pre premi mium um.. No char charge gess afte afterr 3
years % Allocation of the premium Charges 18000- 49,999: 1st year - 80%; 2nd 1st yr-27%, 2nd yr- 27%, 3rd yr year - 92.5%; 3rd year onwards - onwards- 1% 96%. 50000 and above: 1st year - 82%; 2nd year - 92.5%; 3rd year onwards -
Admin Charge
96%. None
Admin charges of Rs.180 fixed
charge per annum. Other Charges Not applicable Not applicable Fund Management The annual administrative and fund Investment charge of 0.80% of Charges
mana manage geme ment nt char charge ge is 2.25 2.25% % for for the the Fund Fund Valu Valuee acro across ss all all the the Maxi Maximi mise ser, r, 2.25 2.25% %
for for
Bala Balanc ncer er,, funds.
1.50% 1.50% for for Prot Protect ector or & 0.75% 0.75% for Rider
Preserver. ADBR, CIBR & MSAR
ABR & CIBR
56
SUPER PREMIER LIFE VS BAJAJ ALLIANZ UNITGAIN PLUS
Features Age Term
Super Premier Life Bajaj Allianz Unitgain Plus 18 - 60 years 0 - 60 years Premium paying term of 3 years, 5 Minim Minimum um prem premium ium payme payment nt
Sum Assured
years, 7 years or 10 years. term of 3 years Sum As Assured mu multiple is is 1 - 2 5 ti times Mini Minimu mum m Sum Sum Assu Assure red d is 5
Survival benefit
the annual premium Value of units
times the premium paid. Anytime af after pa payment of of 3 full year's premiums.
Death benefit
Higher o f Su Sum As Assured d ec ecreased b y the amoun amountt of with withdra drawa wals ls made made or High Higher er of Sum Sum Assu Assure red d or
value of units. value of units With Withdra drawa wall benef benefit it Parti Partial al withd withdraw rawal alss are avail availabl ablee afte after r Partial or
complete
the 3rd policy year and after payment withdrawals are available after of
3
years'
pre premiums.
Complete ete the 3rd years contribution
withdrawals are available after the 1st year year Contribution Flexible contribution Inve Invest stme ment nt opti option onss
prem premiu ium. m.
Howe Howeve verr
surr surren ende der r
penalties will apply. Minimum: Rs. 60,000 p.a. Available Maxi Maximi mise ser, r,
Balan alance cer, r,
Prot Protec ecto torr
Preserver. Decre Decrease ase in death death Available.
Minimum: Rs. 10,000 p.a. Available & Equity Index Fund, Equity Plus Fund Fund,, Debt Debt Fund Fund,, Bala Balanc nced ed Fund, Cash Fund Available
benefit Bonus units Top-up
Available. Not available Available. Minimum top-up of Rs. Avai Availa lable ble.. Charg Chargee are 2% of
Switch Surrender value
5000. Charges - 1% of top-up. the top-up amount 4 free switches a year. Three free switches every year. The policy will acquire a surrender Withdrawals are only allowed value from the 1st year onwards.
after payment of 3 full year's 57
Initial Charges
% Allocation of the premium 3 year premium paying term
premiums % Allocation of the premium 1st year - 76%; 97% from year 2 onwards
Rs. Rs. 60.000 60.000 - Rs. 4,99,9 4,99,999: 99: 1st year year:: 87%; 2nd and 3rd year: 96% Rs. 5,00,000 and above: 1st year: 89%; 2nd and 3rd year: 96% 5, 7 and 10 year premium paying term Rs. Rs. 60.000 60.000 - Rs. 4,99,9 4,99,999: 99: 1st year year:: 88%; 2nd and 3rd year: 97%; 4th and 5th year: 98%;6th year onwards: 100% Rs. 5,00,000 and above: 1st year: 90%; 2nd and 3rd year: 97%; 4th and 5th Admi dmin Charge rge
year: 98%; 6th year onwards: 100% Admi dmin cha charge rge of Rs. 60 / month nth
Annua nnuall adm admin charg arges of Rs.
20 Fund Management The annual investment charge is 1.50% 1.5% 1.5% p.a. p.a. for for a Eq Equi uity ty Plus Plus Charges
for Maxim Maximise iser, r, 1.00% 1.00% for Balan Balancer cer,, Fund, 1% p.a. for Equity Index 0.75% for Protector & Preserver.
Fund, Fund, No speci specific fic charge chargess in case of Balance Balanced d Fund, Fund, 0.7% p.a p.a.. for for Debt Debt Plus Plus Fund Fund and and 0.7% in case ase of Cash Plus
Rider
ADBR & CIBR
Fund. ABR, ADBR, CI & Hospital Cash Benefit
STUDY TAX PLANNING SOLUTIONS AVAILABLE IN THE MARKET TAX BENEFITS ON INSURANCE AND PENSION
58
Life insurance and retirement plans are effective ways of saving taxes. The tax breaks that are available under various insurance and pension policies are described below:
•
Life insurance plans are eligible for deduction under Sec. 80C
•
Pension plans are eligible for a deduction under Sec. 80CCC
•
•
Health riders are eligible for deduction under Sec. 80D The proceeds or withdrawals of life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section.
Tax Rates for Individuals
The rates of income tax for FY 2007-08 are as follows:
Total Income (Rs.)
Upto Rs 1,00,000/Above Rs 100,000/- to 145,000/Above Rs 145,000/- to 150,000/Above Rs 150,000/- to 195,000/Above Rs 195,000/- to 250,000/Above Rs 250,000/-
Rate of tax Seni Senior or citi citize zen n
Wome Women n belo below w 65 65
Others
Nil Nil Ni l Ni l 20% 30%
years Nil Nil 10% 20% 20% 30%
Nil 10 % 10 % 20 % 20 % 30 %
Surcharge on Income Tax: In case where the Total Income exceeds Rs 10,00,000,
there would be a surcharge @ 10%. Education Cess on Income Tax: Education Cess @2% will be payable on the
amount of income tax (including surcharge). Benefits under insurance policy - Section 10(10D)
As per Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy is exempt from tax. However, this rule does not apply to following amounts: Sum received under Section 80DD (3), or 59
Any sum received under a Keyman Insurance Policy, or Any sum received other than as death benefit under an insurance policy which has been issued on or after April 1 2003 and if the premium paid in any of the years during the term of the policy is more than 20% of the sum assured.
60
CHAPTER-6
61
DATA ANALYSIS & FINDINGS
1). Are you interested in products offered by the ICICI PRUDENTIAL?
Yes
61% No
Will think
22% 17%
17%
Yes No Will think
22% 61%
INTERPRETATION
The good thing is that atleast the corporates were quite eager to find out what ICICI PRUDENTIAL has to offer whereas the major 39 % of the corporates were not even interested in the products as they are quite satisfied by the LIC and they are not in breaking their long relationship with them. The private players will have to play a long battle in order to ensure that they are serious player in the market. Basically corporates think that its too early to invest in private companies as they have just entered the scene and they are unsure of the security they will have about their investment.
62
2). Are you satisfied with your present insurer?
YES
65% No
35%
35%
Yes No
65%
INTERPRETATION
Here is where the challenge is. Inevitably most of the players are very satisfied with their present insurer which makes it more tough for the private players to attract the corporates. corporates. The remaining 35 % are also not very dissatisfied by the services but they are just open to new avenues and are looking forward that private companies come with good offers so that they may shift to them. Thus private players will have to be very proactive and in this regard since LIC is the leader and ICICI PRUDENTIAL PRUDENTIAL is lagging behind its competitors in terms of competition.
3). Where would you like to insure if given chance?
63
LIC
-
60
ICICI
-
10
BAJAJ ALLIANZ
-
5
TATA AIG
-
15
SBI
-
8
KOTAK MAHINDRA
-
2
60
60 50
NO OF PEOPLE
40 30 15
20
10
8
5
2
10 0 LIC
SBI
TATA AIG
ICICI
BAJAJ
KOTAK M AHINDRA
COMPANIES INTERPRETATION
Thus we see that the companies are comfortable in having business with govt. owned companies as they feel its safe & secure to have business with them which is followed by SBI as it is the biggest bank and then followed by TATA AIG as the name TATA is associated with it which commands huge premium in the market . Whereas in the case of ICICI ICICI PRUDEN PRUDENTIA TIAL L the figures figures represen representt mediocr mediocree performa performance nce after after compelling and coxing the corporates and creating a strong impression whether they feel interested in doing business with the company.
4). What is people’s main concern while taking a insurance policy (ULIP)?
64
A) Secu Securi rity ty B) Retu Return rnss C) Tax rebate
40% 40% 28% 28% 32%
50% 40%
E 30% G A 20% %
Series
10% 0% SECU SECURITY RETU ETURNS
TAX REBATE
FACTOR
INTERPRETATION
People invest in insurance mainly because of security concern.
5). Are you aware of LifetimeSuper introduced introduced by ICICI Prudential limited?
65
Ye s
58% No
42%
80% L 80% P O60% E 60% P F 40% 40% O E 20% 20% G A % 0%
Series
YE S
NO
RESPONSE
INTERPRETATION
The awarenes awarenesss level level among among the corpora corporate te about about ICICI ICICI PRUDE PRUDENTI NTIAL AL offering offering services is very low and the company needs to work on it. Today is the world of marketing marketing thus it is recommended recommended that company should become more media friendly by adverti advertising sing more more through through televis television ion channels channels,, radio, radio, newspap newspapers, ers, magazin magazines, es, journals &editorials.
66
CHAPTER-7
67
LIMITATIONS
•
The geographical area was very much limited to residential area & so the results are not particularly reflection of the current behavior.
•
Biases and non-cooperation of the respondents.
•
Due to limited time period and constrained working hours for most of the respondents, the answers at times were vague enough to be ignored.
•
Most Most of the people people in India India take take their their polici policies es in the period period precee preceedi ding ng March(for tax saving purposes) & so the response to initial contacts were not all encouraging and that has been the primary reason in the inability to quantify the results large enough so as to reduce any relevant outcomes.
•
Most of the results that are spelt out have been of qualitative aspects.
•
People are not interested in giving personal opinion.
68
69
RECOMMENDATIONS
•
More emphasis should be on promotional activities.
•
Plenty of advertisement should be done through T.V, Newspaper and Radio as these media’s are having maximum recall value.
•
Total financial planning and advice should be given to every customer.
•
More business opportunity seminars should be conducted to make people aware of the offer given.
•
The company should quite frequently send their agent to the customer so that they should be aware of the latest offer.
•
The company should attempt to open more and more of its branches in the country so as to promote their product publicity.
70
71
CONCLUSION LIC enjoys credibility over other private players in the industry People look for security over returns in market linked plans .Lifetime is the most popular product among the people who are aware about ICICI Prudential’s products. People are now showing more interest in ULIP as compared to some of the traditional plans. ICICI PRUDENTIAL has to counter the distribution network of LIC .The product profile of ICICI PRUDENTIAL is not very comprehensive
72
73
BIBLOGRAPHY
•
www.iciciresearchcenter.org
•
www.tata-aig.com
•
www.iciciprulife.com
•
www.personalfn.com
74
75
ANNEXURE Do you have any life insurance policies? Yes
No
If Yes: Name of the Company
Name of the plan
_ _ _ __ _ _ _ _ __ __ _ _ _ _________________ ____________ _____
Annual Amount of premium _________________ ____________ _____ Term of plan
_________________ ____________ _____
1. Are you satisfied with present insurer? A) YES
2.
B) NO
Which are the main issues that you take into consideration while purchasing any life insurance policy? A) Security B) Returns C) Tax sav savin ing g D) Others Others please please specify__ specify______ _______ ___
3. Are you aware aware of Unit Unit Linked Linked Insurance Plans Plans offered offered by various various companies companies in India? A) ICICI
B) OM KOTAK MAHINDRA
C) TATA AIG
D) BAJAJ ALLIANZ
E) LIC
F) SBI
G) MAX NEW YORK
H) BIRLA SUNLIFE
76
4. Do you you know how a Unit Unit Linked Linked Insura Insurance nce Plan Plan works works?? A) YES
B) NO
5. Can you you please please highligh highlightt risk atta attached ched with with them them?? A) HIGH B) MODERATE C) LOW 6. What is your your percepti perception on about the the Unit link link insurance insurance plans, plans, are they they give you a sense of security? A) YES B) NO 7. Are Are you you awar awaree of Life Lifeti time me pens pensio ion n plan plan intr introd oduc uced ed by ICIC ICICII Prud Pruden enti tial al limited? A) YES B) NO 8. If you you are are given given a choic choice, e, which which one you you take: take: A) ICICI
B) OM KOTAK MAHINDRA
C) TATA AIG
D) BAJAJ ALLIANZ
E) LIC
F) SBI
9. What other other plans plans or flexibility flexibility you you expect expect from Insurance Insurance companies? companies? A) Fewer premiums B) More returns C) Complementary gifts 10. Are you interested interested in buying products of ICICI Prudential? Prudential? A) YES B) NO
77
