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A Report

On
To Study the Marketing Strategies of ULIPs
And
Mutual Fund
With Special Emphasis on

Reliance Life Insurance Company Ltd.

Submitted to Lovely Professional University


(In partial fulfillment of the
Requirements for the award of Degree of
Master of Business Administration)

Submitted by:
Ankit Malhotra
Registration No. 10810844

LOVELY SCHOOL OF BUSINESS


LOVELY PROFESSIONAL UNIVERSITY
PHAGWARA (2009)

1
A Report
On
To Study the Marketing Strategies of ULIPs
And
Mutual Fund
With Special Emphasis on

Reliance Life Insurance Company Ltd.

Submitted to Lovely Professional University


(In partial fulfillment of the
Requirements for the award of Degree of
Master of Business Administration)

Submitted To:
Mr. Kanwal Gurleen
Faculty Guide
Submitted by:
Ankit Malhotra
Registration No. 10810844
Roll no. 1804A05

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DECLARATION

I, ANKIT MALHOTRA, hereby declare that the project entitled “Study Of Marketing
Strategies Linked With ULIPs and Mutual Fund”, submitted to Lovely School of
Business, LPU in partial fulfillment of the requirements of MBA program is a bona fide
record of the original work carried out by me, under the guidance and supervision of my
project guide Mr. Kanwal Gurleen, LSB

I hereby declare that this project is the result of my efforts and I have not received any
unprecedented help.

And also I hereby declare that I have not submitted the project report to any other
university for the award of any degree or diploma.

Name of the candidate Registration No.

Ankit Malhotra 10810844

Place: Lovely School Of Business


Date: 16th August, 2009 Signature

ANKIT MALHOTRA

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ACKNOWLEDGMENT

Say a word of gratitude and splendor-


In a moment it is gone,
But there are a hundred ripples
Circling on & on & on
………………………..”

The completion of this project gives me an opportunity to convey our regards to all
those who helped me to reach a stage where I have the confidence to launch my
career in the competitive world of management.

Living in this society we cannot imagine of doing some research work without
getting cooperation from other member of society. I take this opportunity to express
my heart felt gratitude to MR. SUMIT MEHTA, SALES MANAGER, RELIANCE
LIFE INSURANCE COMPANY (RLIC) for providing this opportunity to complete
my summer training RILC. His guidance gave me an opportunity to understand the
market and made me in tune with corporate world. His team of efficient colleagues
extended full support and cooperation to me.

I am also thankful to my faculty guide Mr. KANWAL GURLEEN who provided me


with the most needed guidance, suggestions and support to make this project a
wonderful reality. I had an opportunity to share freely every kind of idea and
thought during my project. I am obliged by him for providing me every kind of
information, helpfulness and co-operation and about all providing me some
moments out of his precious time.

Besides all this, I am thankful to all of them who helped me directly or indirectly
during my project from all the corners of my heart .Thanks to almighty for always
being there.
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Table of Contents
Acknowledgement i

Abstract 6

1. Introduction 7
• About the Company 7
• Project Objective 9
• Limitations 10
• Proposed Methodology 11

2. Main Text 13
• Insurance 13
• Life Insurance 14
• Why Life Insurance? 15
• Tax Implications 17
• Investments 18
• Mutual Fund Industry 21
• Mid – Cap funds flavor of the season 24
• Unit Linked Insurance Plans 25
• Traditional Insurance Vs. ULIPs 26
• Are ULIPs similar to Mutual Funds 27
• Why do Insurers prefer ULIPs 28
• Mutual Fund Vs ULIPs 28
• 5 steps to select the right ULIP 30
• Industry Dynamics 32
• Market Segments 34
• Marketing mix for ULIPs 35
• Analysis and Interpretation 49
• Demographics 70

3. Recommendations and Conclusion 72


4. Annexure 63
5. Reference 77

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ABSTRACT

The project is the study of Marketing strategies of ULIPs and Mutual Funds with special
Emphasis on Reliance life, ULIP products.

ULIPs and mutual Funds both are the flavor the season, Both the form of Investments
growing more than 40% annually. There were days when people used to think that Life
Insurance is like a financial tool with low returns and attached with few death or other
benefits. But, these assumptions are the thing of the past now; Insurance is being seen as
the premier Investment Avenue. With the impeccable growth in the equity market and
investors’ growing confidence in the market is seeing both the industries grow
immensely. Unlike other Investments these two forms of Investments are giving High
return with relatively low risk of loosing money in the long term investments.

The analysis of both forms of Investments would be based on the primary data collection
through a questionnaire method and secondary data collection. The results from the
analysis would help us to know key differences between both forms of Investments.
Thus, will also help in carving out ways to market Mutual Funds and ULIPs differently.

During the training programme we came to know about the various insurance aspects.
We came across the various market trends and the change from the previous situation to
the present scenario. At present undergoing the product training has given us an insight of
the schemes of Reliance Life Insurance and their differences from other policies. I have
done the 4-P Analysis with the help of qualitative and quantitative tools of the market
survey.

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INTRODUCTION

ABOUT THE COMPANY


RELIANCE LIFE INSURANCE COMPANY

Mission of the organization:


We aim to be the top new life insurance company in the market. This does not just mean
being the largest or the most productive company in the market, rather it is a combination
of several things like-
1) Customer service of the highest order.
2) Value for money for customers.
3) Professionalism in carrying out business.
4) Innovative products to cater to different needs of different customers.
5) Use of technology to improve service standards.
6) Increasing market share.

Values of the organization:


1) SECURITY: Providing long term financial security to our policy holders will be our
constant endeavor. We will be do this by offering Life insurance and pension products.
2) TRUST: We appreciate the trust placed by our policy holders in us. Hence, we will
aim to manage their investments very carefully and live up to this trust.
3) INNOVATION: Recognizing the different needs of our customers, we will be
offering a range of innovative products to meet these needs.
Our mission is to be the best new life insurance company in India and these are the values
that will guide us in this.

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Reliance Life Insurance

Reliance Life Insurance, a part of the Reliance Anil Dhirubhai Ambani Group is one of
India's fastest growing life insurance company and among the top 4 private sector life
insurers. Reliance Life Insurance has a pan India presence and a range of products
catering to individual as well as corporate needs. Reliance Life Insurance has 1,145
branches and over 142,000 agents. It offers 35 products covering savings, protection &
investment requirements. Reliance Life Insurance will endeavor to attain a leadership
position in the market over the next few years, by further expanding and strengthening its
distribution network and offering a diverse array of products to suit the varied and
specific needs of individual customers.

Company’s success story in the recent past

• RLIC closed the last financial year with a New Business Premium of Rs 3513
Crores.

• For 3 successive years, since inception, the Company has been amongst the fastest
growing Companies in the Life Insurance Industry achieving a growth rate of
28% in the last financial year against a market growth of -6%. In the Individual
Business segment, the company achieved a growth rate of 59% in terms of WRP
against the private industry growth of 1%.

• Reliance Life has been one of the fastest gainers in market share growing from
1.9% amongst private players in Mar'06 to 10.3% as of Mar'09. This has resulted
in the Company growing to becoming the 4th largest private player in just two
years starting at position of 11.

• The Company has been the fastest company to reach the 3 million policy mark
and was the 3rd largest private insurer in terms of Policy count in 2008-09

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• Reliance Life has accomplished a large distribution ramp-up in the Industry in a
short span of time by opening 1145 branches in just over 2 year.

• RLIC continues to be amongst the foremost Life Insurance companies in India to


be certified ISO 9001:2000 for all the processes.

• Awarded the Jamnalal Bajaj Uchit Vyavahar Puraskar 2007- Certificate of


Merit in the Financial Services category by Council for Fair Business Practices
(CFBP).

• The Company has also won the DL Shah Quality Council of India
Commendation Award in the services category in feb 2008 for its work on
promoting 'self help channels for service'

PROJECT OBJECTIVE
The objective is to gain in-depth knowledge in the field of financial instruments, the
products and services being offered by RELIANCE LIFE INSURANCE and its
competitors and have an insight of the insurance policies and mutual funds. The project is
focused on ULIPs only, so after getting the required knowledge about the market
potential of ULIPs and mutual funds, that analysis will be utilized in the market and will
help in selling various products on offer, thus enhancing the marketing skills through
active interaction with customers. This project highlights the uniqueness of products
being offered by RELIANCE LIFE and its impact on customers and also narrates the
secrets to the success of RELIANCE LIFE INSURANCE since its inception.

RESEARCH OBJECTIVE
The research which will be based on the primary and secondary data, these data
will again be used for the quantitative as well as qualitative analysis.
• The primary objective of the research is to help RLIC to device a marketing
strategy to market ULIPs differently than Mutual Funds.
• It will also serve the purpose of understanding the investment pattern of the
investor based on some parameters-

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Demographic , Economic and on family cycle.
• It will also help to assess the need to create about the ULIPs in the market.

LIMITATIONS OF THE PROJECT


Off Field:

• The promotional activities conducted by our marketing team are limited to the
territory of Jammu.
• The task of generating leads is only limited for the “ Reliance Secure Child Unit
Linked Plans.”
• The use of questionnaire in the data collection activities leads to many
discrepancy in the information given.
The customers are reluctant to reveal their personal details in the Questionnaire.
• Data on Mutual Fund market will be based on the secondary data.

On Field:

• Lack of the acceptance of the private players in the insurance industry is the major
problem faced while undergoing this project.

PROPOSED METHODOLOGY
The project would be implemented through active interaction with clients, fulfillment of
company objectives and utilizing management skills in the market. The knowledge
gained through various training sessions would be put into effective use in the
marketplace and the feedback would be brought down in the report.

• Use questionnaire method to generate leads.


• Identify potential customers through interaction.
• Shortlist a group of potential customers and fix up an appointment with them.

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• Use references from existing customers and friends to tap the market.
• Focus on the benefits of the host product and its features.
• For studying the consumer investment behavior feedback will be taken directly
from the customers.
• For analyzing the competitor marketing strategies secondary data as well as
primary data will be used.
• Mutual Fund market study will be based on the secondary data as well as primary
data from the company.
• Suggest the host company to improve their product keeping in mind the customers
preferences.

Methodology of the project presentation:

• I have brought forward a competitive analysis of the ULIPs market and evaluate
the strategies used by RLIC.
• Through, 4P’s of marketing, I have highlighted the leadership factors which helps
RLIC increasing its position.
This has been utilized to bring forward the Marketing mix of ULIPs.
• Used primary data (received through customer feedback) and secondary data
(reference materials) to analyze the marketing strategies utilized.
• Analyze customer needs, trends and complains through feedback received.
• Identified the limitations and suggested improving methodologies.
• And finally, identifying various factors which differentiate the marketing
strategies followed by major ULIPs and Mutual Fund players.

Value added to the company:

• With the activity of filling of the questionnaire from the household and the
corporate people we are trying to generate prospect customers out of the
suspect customers. This will definitely help the company to increase its
market share.

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• This activity will also create brand awareness among the customers.
• The comparative analysis of Mutual Fund against ULIPs will help the host
company to frame out the future marketing strategies.
• The inputs from the project may help the company to carry out local
promotional campaigns and open various avenues to reach out to the
customers.
• The inputs from the project may also be utilized for the future studies.

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MAIN TEXT

INSURANCE

“Security and constant search for security has always been the unending endeavors of
human race since the dawn of civilization. Right from the Stone Age man to the
modern IT personality, the search for security has brought out innovative ideas .One
such off shoot is the business concept of Insurance”

OVERVIEW

With largest number of life insurance policies in force in the world, Insurance happens to
be a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent
annually and presently is of the order of Rs 450 billion. Together with banking services,
it adds about 7 per cent to the country’s GDP. Gross premium collection is nearly 2 per
cent of GDP and funds available with LIC for investments are 8 per cent of GDP.

Yet, nearly 80 per cent of Indian population is without life insurance cover, health
insurance and non-life insurance continue to be below international standards. And this
part of the population is also subject to weak social security and pension systems with
hardly any old age income security. This it is an indicator that growth potential for the
insurance sector is immense.

PRESENT SCENARIO

The Government of India liberalized the insurance sector in March 2000 with the passage
of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry
restrictions for private players and allowing foreign players to enter the market with some
limits on direct foreign ownership. Under the current guidelines, there is a 26 percent
equity cap for foreign partners in an insurance company. There is a proposal to increase

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this limit to 49 percent. Premium rates of most general insurance policies come under the
purview of the government appointed Tariff Advisory Committee.

LIFE INSURANCE

What is life insurance?

Broadly defined, insurance is contracted coverage whereby one party undertakes to


indemnify, or guarantee, another against loss by a specified contingency or peril. The
world’s oldest insurance market, Lloyd's of London was formed 300 years ago. Queen
Elizabeth I introduced the Insurance Act, stating the intention to ensure "that the loss
lightened easily on many rather than heavily on few."

Traditionally, Life insurance was defined as follows:

Life insurance is a contract binding a life insurance company to compensate a beneficiary


for the death of a person insured. If the insured dies the company will provide cash
payment to the beneficiary. Life insurance is used to protect the economic value of a
human life with regards to those who may be financially dependent upon it.

However with changing times, insurance has become one of the most significant tools of
investment. Today life insurance provides a wide range of services and is an effective
hedge against premature death, disability or loss of income earning capability.

Broadly speaking, a well-planned customized life insurance policy should be able to


provide the policyholder or the beneficiary thereto with the following:

1) Final expenses resulting from death:

2) Guaranteed maintenance of lifestyle

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3) Replacement of income:

4) Mortgage or liquidation payments:

5) Costs of education (dependants):

6) Estate and other taxes:

7) Continuity & security of interests:

WHY LIFE INSURANCE?

The need for life insurance comes from the need to safeguard one’s 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 generations co-existed in harmony, a
system in which a sense of financial security was always there as there 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 could one be able to satisfy all those needs? Better lifestyle, good education, desired
house, decent marriage of children etc. But again one just cannot fritter away all his/her
earnings. One needs to save a part of it for the future too - a wise decision.

This is where the need for life insurance arises.

Factors such as fewer numbers of earning members, stress, pollution, increased


competition, higher ambitions etc are some of the reasons why insurance has gained
importance and where insurance plays a successful role. Insurance provides a sense of
security to the income earner as also to the family. Buying insurance frees the individual
from unnecessary financial burden that can otherwise make him spend sleepless nights.
The individual has a sense of consolation that he has something to fall back on.

From the very beginning of one’s life, to his retirement age insurance can take care of all
his needs. Insurance is a must also because of the uncertain future adversities of life.

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Accidents, illnesses, disability etc are facts of life, which can be extremely devastating.
Other than the

hospitalization, medication bills these may run up it’s the aftermath of the incident, the
physical well being of the individual that has to be taken into consideration. Will the
individual be in a position to earn as before? A pertinent question. But what if he is not?
Disability can be taken care of by insurance. Your family will not have to go through the
grind due to your present inability.

Moreover, retirement, an age when every individual has almost fulfilled his
responsibilities and looks forward to relaxing can be painful if not planned properly. The
increasing inflation and taxes also have to be considered? An insurance policy will
definitely take care of these and a lot more.

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It would be empirical to establish a relation with the Maslow’s hierarchy. This would also
explain why India is a good hunting ground for multinational Life insurance companies.
It is an observed fact that a majority of the population of India belongs to the middle
Class income group (lower mid class, mid class and upper mid class). This also means
that their incomes are just enough to afford them a comfortable life style. This in turn
means that their Physiological needs have been satisfied.Now, we see that a majority of
the population of India is heading towards the second level of Maslow’s hierarchy i.e.
towards fulfilling their safety and security needs. There can be no better product than
insurance for them.

Life insurance is today one of the most lucrative businesses in the world. To gain a better
understanding into the working of the same, we need to first understand the concepts of
Life insurance. The three concepts that we shall look into are:

TAX IMPLICATIONS

• Deductions under section 80 C (investment): This is the section that has replaced
the erstwhile Section 88 and includes items like provident fund contribution,
investment in public provident fund, payment of insurance premium, investment
in equity-linked savings scheme etc. These are the investments that were eligible
for a rebate earlier, but will now qualify for a deduction. A rebate involves the
reduction of a particular amount from the tax to be paid while a deduction means
that the amount will be subtracted from the income of the individual before
calculating tax. Please refer to the shaded box for further knowledge.

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INVESTMENTS

Type of
Yields Perspective
Investments
Bank Deposits Banks offer liquidity but if you place your
and Govt of India 4 to 5.5% funds in the Bonds you can be locked in for
Bonds the term applied for.
Stock Markets, Your Principle amount
Offers great liquidity, but you have to be
ULIPs and can double or shrink in a
constantly monitoring the same.
Mutual Funds matter of days.
Long term investment, coupled with
Returns of 8 to 11% benefits on enhancing liquidity through rent
Commercial Real P.A., along with a steady discounting, planning your future income
Estate income flow to plan your inflows. Escalations in the prices in the
future investments. market can make your asset grow
notionally.
Mostly bought for future self usage, good
Residential Real chances of growth in the price of the real
Returns of 4 to 6% p.a.
Estate estate over a period of time, safest
investment as per the Indian mind set.

INVESTMENT OPTIONS

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Product Liquidity Volatility RETURN RETURNS LOCK IN PERIOD
YR

RBI BBonds Low Nil 6.50% Non taxable 5 yrs

PPF Low Nil 8% Taxable 15 yrs


Bank F D’s Medium Nil 5% Taxable 1 yr

NSC Low Nil 8% Taxable 6 yrs


Gilt Funds High High 8-11% Taxable Nil

Income funds High Low 6-9% Taxable Nil

Liquid funds High Nil 4-5% Taxable Nil

MIP funds High Medium 8-12% Taxable Nil

Equity funds High High 15-20% Taxable Nil

ELSS Low High 15-20% Taxable 3 yrs


IFS Bonds Low Nil 5.50% Taxable 3 yrs

Pension Plan Low Low 5% Maturity tax free, Till one attains age of
annuity taxable 50

P.O.MIS Low Market 8% Maturity tax free, Till one attains the
driven annuity taxable age of 50

Child Plan Low Market Maturity tax free 3 yrs


market linked driven

25-40%
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THE MUTUAL FUND INDUSTRY

The genesis of the mutual fund industry in India can be traced back to 1964 with the
setting up of the Unit Trust of India (UTI) by the Government of India. Since then UTI
has grown to be a dominant player in the industry. UTI is governed by a special
legislation, the Unit Trust of India Act, 1963.

What is a Mutual Fund?

Understanding Mutual funds is easy as it's such a simple concept: a mutual fund is a
company that pools the money of many investors -- its sareholders -- to invest in a variety
of different securities. Investments may be in stocks, bonds, money market securities or
some combination of these. Those securities are professionally managed on behalf of the
shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any
profits when the securities are sold, but subject to any losses in value as well.

For the individual investor, mutual funds provide the benefit of having someone else
manage your investments and diversify your money over many different securities that
may not be available or affordable to you otherwise. Today, minimum investment
requirements on many funds are low enough that even the smallest investor can get
started in mutual funds.

Why invest in Mutual Funds?

Investing in mutual has various benefits which makes it an ideal investment avenue.
Following are some of the primary benefits.

1. Professional investment management


2. Diversification
3. Low Cost
4. Convenience and Flexibility
5. Liquidity

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6. Transparency
7. Variety

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of a mutual fund

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RECURRING EXPENSES

Apart from loads, mutual funds also charge some other expenses, such as:

• Investment Management & Advisory Fees:


As the name suggests, this is meant to remunerate the asset management company for
managing the investor's money.

• Trustee Fees:
These are fees payable to the trustees for managing the trust.

• Custodian Fees:

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These are paid by the fund to its custodians, the organization which handles the
possession of the securities invested in by the fund.

• Registrar and Transfer Agents Charges:


The fees payable to the registrar and the transfer agents for handling all formalities
related to the transfer of units and other related operations.

• Broker/Dealer Remuneration, Audit Fees, Cost of Funds Transfer, Cost of


providing a/c statements, Cost of Statutory Advertisements.

MID CAP FUNDS – FLAVOUR OF THE SEASON

If you invested in mid cap funds a couple of months back, you have already made a neat
packet. Those who did not are actively considering making an investment now. Your
investment advisor/bank have probably been showing you a lot of numbers on why you
should invest in these funds. They may be right. But do you know what you are getting
into?

What are mid-cap funds?


These are mutual fund schemes, which invest in small/medium-sized companies. There is
no standard definition for classifying companies as small or medium. Generally
companies with a market capitalization or market value (no. of shares * market price of a
share) of up to Rs 5 bn (Rs 500 crores) are classified as small. Those companies that have
a market capitalization between Rs 5 bn and Rs 10 bn (Rs 1,000 crores) are
classified as medium sized.

Benefits of investing in small/mid-sized companies

Small/mid sized companies tend to be under researched thus giving you an opportunity to
invest in a company that is yet to be identified by the market i.e. while you may have 200
analysts covering Hindustan Lever, you will probably have few (or maybe none)
covering stocks like Matrix Laboratories (in year 2000). So if you spot an opportunity
you can purchase shares in the company at relatively attractive valuations.
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Such companies offer higher growth potential going forward and therefore an opportunity
to benefit from higher than average valuations.

Risks involved in investing in small/mid-sized companies:

Since such companies are under researched there is a greater chance that you may miss
factoring in some ‘reasons not to buy’. And even after investing in such companies,
regular information is hard to come by.

The chance of manipulation or fraud in such companies is higher as risk control measures
tend to be neglected or not up to the mark (not that the larger peers are free from it!).

Finally, shares of such companies tend to be illiquid and therefore in case the fund
manager needs to sell the stock, he may either not be able to do so, or he would be able to
do so only after a significant erosion in price.

Our view on mid cap funds:


Obviously the mid cap rally has excited the retail investor enough to wonder if there is
something in it for him as well. The good news is that an equity investment based on
sound fundamentals (or a sound investment approach in the case of mid cap fund) bought
with a long-term investment time-frame (at least 3-5 years) stands a good chance of
delivering value to the investor.

UNIT LINKED INSURANCE PLANS (ULIP)

Unit-linked insurance plans, ULIPs, are distinct from the more familiar ‘with profits’
policies sold for decades by the Life Insurance Corporation. ‘With profits’ policies are
called so because investment gains (profits) are distributed to policyholders in the form of
a bonus announced every year. ULIPs also serve the same function of providing
insurance protection against death and provision of long-term savings, but they are

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structured differently.

In ‘with profits’ policies, the insurance company credits the premium to a common pool
called the ‘life fund,’ after setting aside funds for the risk premium on life insurance and
management expenses.
Every year, the insurer calculates how much has to be paid to settle death and maturity
claims. The surplus in the life fund left after meeting these liabilities is credited to
policyholders’ accounts in the form of a bonus. In a ULIP too, the insurer deducts
charges towards life insurance (mortality charges), administration charges and fund
management charges. The rest of the premium is used to invest in a fund that invests
money in stocks or bonds.

The policyholder’s share in the fund is represented by the number of units. The value of
the unit is determined by the total value of all the investments made by the fund divided
by the number of units.
If the insurance company offers a range of funds, the insured can direct the company to
invest in the fund of his choice. Insurers usually offer three choices — an equity (growth)
fund, balanced fund and a fund which invests in bonds. In both ‘with profits’ policies as
well as unit-linked policies, a large part of the first year premium goes towards paying the
agents’ commissions.

TRADITIONAL INSURANCE Vs ULIPs

The two strong arguments in favour of unit-linked plans are that —

The investor knows exactly what is happening to his money and,

It allows the investor to choose the assets into which he wants his funds invested.

A traditional ‘with profits,’ on the other hand, is a black box and a policyholder has little
knowledge of what is happening. An investor in a ULIP knows how much he is paying

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towards mortality, management and administration charges. He also knows where the
insurance company has invested the money. The investor gets exactly the same returns
that the fund earns, but he also bears the investment risk.

The transparency makes the product more 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 lose money in a bad year. In that sense they are safer.

ULIPs also offer flexibility. For instance, a policyholder can ask the insurance company
to liquidate units in his account to meet the mortality charges if he is unable to pay any
premium installment.

This eats into his savings, but ensures that the policy will continue to cover his life.

ARE ULIPS SIMILAR TO MUTUAL FUNDS

In structure, yes; in objective, no. Because of the high first-year charges, mutual funds are
a better option if you have a five-year horizon.

But if you have a horizon of 10 years or more, then ULIPs have an edge. To explain this
further a ULIP has high first-year charges towards acquisition (including agents’
commissions).
As a result, they find it difficult to outperform mutual funds in the first five years. But in
the long-term, ULIP managers have several advantages over mutual fund managers.

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Since policyholder premiums come at regular intervals, investments can be planned out
more evenly. Mutual fund managers cannot take a similar long-term view because they
have bulk investors who can move money in and out of schemes at short notice.

WHY DO INSURERS PREFER ULIPS

Insurers love ULIPs for several reasons. Most important of all, insurers can sell these
policies with less capital of their own than what would be required if they sold traditional
policies. In traditional ‘with profits’ policies, the insurance company bears the investment
risk to the extent of the assured amount. In ULIPs, the policyholder bears most of the
investment risk. Since ULIPs are devised to mobilize savings, they give insurance
companies an opportunity to get a large chunk of the asset management business, which
has been traditionally dominated by mutual funds.

HOW MUTUAL FUND IS DIFFERENT FROM ULIPS?

ULIPS are similar to mutual funds. They, however, differ on three key parameters —
returns, taxation and charges.

1) Returns

Returns on savings-oriented insurance products are lower than other non-insurance


products. The Ulips are no different. They have not performed as well as the mutual
funds in the growth and balanced categories.

Equity/Balanced options:

Ulips growth funds follow a conservative investment style even if they are not subject to
a regulatory cap as in the case of non-market linked plans.

Debt options:

Returns on insurance debt funds were on a par with mutual fund debt options.

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Mutual funds offer you a variety of fund management styles. You can opt for a sector
fund, mid-cap fund, index fund or blue chip fund according to your preference and view
on the market. The investment choice in the Ulips is limited, at present. Moreover, the
presence of a life risk element in the plan, limits the scope for aggressive investment
styles. Mutual funds have offered superior returns to the Ulips

2) Taxation

The popularity of insurance plans is prima facie due to the tax benefits given. The Ulips
are considered attractive as withdrawals from the plan are exempted from tax sec
10,10(D). There is a catch though. In any year, if your premiums (including top ups)
exceed 20 per cent of the sum assured (SA) or the fund value, you will not be eligible for
the tax exemption on withdrawal. Most Ulips give you the option to contribute additional
funds to your chosen investment fund. See that your premiums (including top ups) do not
exceed 20 per cent of your SA at any point of time; else you would lose the tax benefits
on withdrawal.

Mutual funds too offer tax efficiency if you opt for a dividend option. Dividends paid by
mutual funds are tax-free in the hands of investors.

Fine Print

In case of Ulips, the nominee on death will get the higher of the value of the units (the
value of the investments made by the insurance company) or the sum assured (less
withdrawals). This is one big reason why we suggest you drop it. Only some companies
like LIC spells out clearly that in case of death you will get the sum assured plus the
value of the unit's value. If you have taken a combined accident cover, then the death
benefit is doubled the sum assured. This clause is necessary if you are considering buying
an ULIP policy for the purpose of a risk cover plus investment. And LIC's Bima Plus
definitely scores on this account. Another fine print is that unlike regular policies which
lapse upon non-payment of premium, ULIPs can run on as long as there is money in the
policyholders investment account. Compare this in case of term policy if the policy were
to lapse you at least get a surrender value, while here it is likely that you will get almost
28
nothing at end if you are unable to pay the premium and don't surrender the policy. In
cases where you have invested in, say, ULIPs, and the plan is terminated before its
maturity period of five years, then no rebate that will be allowed for the year in which the
plan has been terminated. Further, even rebates allowed in earlier years will stand
withdrawn, and tax for such earlier years will be payable in the year in which the plan is
terminated.

5 STEPS TO SELECT THE RIGHT ULIP

Here’s a 5-step investment strategy that will guide investors in the selection process and
enable them to choose the right unit-linkedinsurance plans (ULIPs).

How to select the right ULIP

For a product capable of adding significant value to investors' portfolios, ULIPs have far
too many critics. We at Express Life have interacted with a number of investors who
were very disillusioned with their ULIPs investments; often the disappointment stemmed
from poor and inappropriate selection.

We present a 5-step investment strategy that will guide investors in the selection process
and enable them to choose the right ULIP.

1. Understand the concept of ULIPs

Do as much homework as possible before investing in an ULIP. This way you will be
fully aware of what you are getting into and make an informed decision.

More importantly, it will ensure that you are not faced with any unpleasant surprises at a
later stage. Our experience suggests that investors on most occasions fail to realize what
they are getting into and unscrupulous agents should get a lot of 'credit' for the same.

29
Gather information on ULIPs, the various options available and understand their
working. Read ULIP-related information available on financial Web sites, newspapers
and sales literature circulated by insurance companies.

2. Focus on your need and risk profile

Identify a plan that is best suited for you (in terms of allocation of money between equity
and debt instruments). Your risk appetite should be the deciding criterion in choosing the
plan. As a result if you have a high risk appetite, then an aggressive investment option
with a higher equity component is likely to be more suited. Similarly your existing
investment portfolio and the equity-debt allocation therein also need to be given due
importance before selecting a plan. Opting for a plan that is lop-sided in favor of equities,
only with the objective of clocking attractive returns can and does spell disaster in most
cases.

3. Compare ULIP products from various insurance companies

Compare products offered by various insurance companies on parameters like expenses,


premium payments and performance among others. For example, information on
premium payments will help you get a better picture of the minimum outlay since ULIPs
work on premium payments as opposed to sum assured in the case of conventional
insurance products.

Compare the ULIPs' performance i.e. find out how the debt, equity and balanced schemes
are performing; also study the portfolios of various plans. Expenses are a significant
factor in ULIPs, hence an assessment on this parameter is warranted as well.

Enquire about the top-up facility offered by ULIPs i.e. additional lump sum investments
which can be made to enhance the policy's savings portion. This option enables
policyholders to increase the premium amounts, thereby providing presenting an
opportunity to gainfully invest any surplus funds available.

30
Find out about the number of times you can make free switches (i.e. change the asset
allocation of your ULIP account) from one investment plan to another. Some insurance
companies offer multiple free switches every year while others do so only after the
completion of a stipulated period.

4. Go for an experienced insurance advisor

Select an advisor who is not only conversant with the functioning of debt and equity
markets, but also independent and unbiased. Ask for references of clients he has serviced
earlier and cross-check his service standards.

When your agent recommends a ULIP from a given company, put forth some product-
related questions to test him and also ask him why the products from other insurers
should not be considered. Insurance advice at all times must be unbiased and
independent; also your agent must be willing to inform you about the pros and cons of
buying a particular plan. His job should not be restricted to doing paper work like filling
forms and delivering receipts; instead he should keep track of your plan and offer you
advice on a regular basis.

5. Does your ULIP offer a minimum guarantee?

In a market-linked product, protecting the investment's downside can be a huge


advantage. Find out if the ULIP you are considering offers a minimum guarantee and
what costs have to be borne for the same.

INDUSTRY DYNAMICS

Four key drivers will shape the industry in the years ahead - competitive activity,
evolution of the distribution channels, growth of the pension sector and the necessity
of moving away from guaranteed products.

The entry of new players has brought in an increased product range including insurance
and pension products and therefore more choices for the customer. There has also been a

31
significant improvement in the level of customer service by the existing player on
account of the high level of service from new companies. All of this has benefited the
customer.

The changed regulatory and competitive environment will lead to significant changes in
the retail distribution channels. Unlike other financial products, insurance is a complex
product and one which plays a key role in the long term financial well being of a
customer. Before the agents can advise their clients on which insurance solution is most
appropriate for them, they will have to understand the financial standing of their
customer, his financial commitments, his risk profile, etc. It is for this very reason that, as
per IRDA, all agents need to undergo some mandatory training before being allowed to
sell a life insurance product. The 100-hour training pre-licensing covers the technical
aspects of insurance and the selling/advisory skills required to be an agent.

The key to success is in providing insurance/pension solutions and not standardized


insurance/pension products. New channels like corporate agents and brokers are expected
to emerge in a big way. This will also include banks and this will lead to a significant
increase in the width of distribution of insurance and pension products. Channels like
internet and telephone are likely to emerge as information disseminating channels and as
servicing channels rather than sales oriented channels. The rural obligations of all
insurance companies will also drive the evolution of a rural delivery channel.

The third key driver will be the pension plans.

There will be a lot of innovation on this front for both type of pension products i.e.
products for individuals and products for groups. In the absence of a national safety net, it
is important that individuals are encouraged to provide for their retirement income. Given
the low percentage of people covered today and the social changes like breakdown of the
joint family system and increasing life spans of people, this is very important. While all
the uncovered working force will not come under coverage immediately, the percentage

32
of people covered will certainly go up. The pension market is expected to grow at a faster
rate than the life insurance market over the next few years at a rate of 25-30% compared
to the life insurance market’s growth rates of 18-20%.

Pre-1991 it would have been possible to predict interest rates with a fair degree of
certainty, as they were administered rates. However, today it is difficult to say what
interest rates will be in the next six months, let alone over the next 20 to 30 years of the
life of the policy. In this scenario, giving guarantees will be difficult as well as risky for
any insurance company. In the recent past we have had several instances of banks and
institutions going back on their promise of guaranteed returns and thereby leaving the
small investor high and dry. Hence companies such as ours have chosen not to assure
guaranteed returns as offering guaranteed returns in the long term is not a very viable
option.

MARKET SEGMENTS

The life insurance and pension business has two distinct customers segments - individuals
and corporate.

In case of the retail business for individuals, the 4 sub-segments are - protection,
investment, savings and pension. Apart from the existing leader LIC, new companies
such as Reliance Life, HDFC Standard Life, TATA AIG, ICICI Prudential and more will
seek to be present across all the segments of the market.

Among the retail products for individuals, pure risk protection products have been
introduced by some of the new life insurance companies in the market. As these products
have no savings component to it, the premiums are very low compared to other products.
Investment products provide long term investment growth and insurance cover. This
segment is growing rapidly. Savings products like Endowments and Money-Backs
provide a combination of protection and investment benefits. The last segment of pension

33
includes products that are aimed at offering customers an income during their retirement
years.

In case of the group business, there are three sub-segments - protection, statutory
savings and pension. Group insurance products are taken to provide low cost life
insurance cover to a group of people. Group insurance can be taken to provide low cost
life insurance cover as part of employee benefit packages to motivate employees or to
cover the housing or vehicle loan given by employer to employee. It can also be used as a
substitute for the statutory EDLI subject to approval by the Regional Provident Fund
Commissioner. The statutory savings segment essentially comprises of the gratuity
products for companies. The pension segment will include products like group
superannuation, which will enable a company to benefit from the actuarial, investment
and operational expertise of a specialist company to manage its superannuation funds.
Source: CII Insurance Committee Report 1999.

MARKETING MIX OF ULIP PRODUCT

Product:

The development of flexible products to suit individual requirements is what will


differentiate the winners. The key to success is in providing insurance solutions, not
standardized insurance products. The concept of riders/optional benefits has already
been a huge innovation brought about by the new players, which has led to
customization of products for individual needs. However, companies may differentiate
themselves on the basis of product segments that they choose to focus on and excel in.

Before discussing the details of the ULIP products , Let us discuss about the IRDA
guidelines and regulations about ULIPs.

34
IRDA Guidelines for ULIPs

For better understanding of Unit-linked life insurance products (ULIPs) by intending


investors/policyholders, the Insurance Regulatory and Development Authority (Irda) has
put forth detailed guidelines for companies selling these. There has to now be a minimum
lock-in period of three years and all insurance companies selling ULIPs need to provide
for reasonable insurance cover, with a linkage to the premium payment during the term of
the contract, along with availability of the greater part of the targeted sum at the longer
end.
Further, the basic features of the life insurance contract should highlight its long-term
nature. The language used should remain simple and be transparent enough in all aspects
of the product terms and conditions. Further, a standard method should be adopted, across
the industry, on computation of net asset value (NAV).

For better understanding of the complexities of ULIPs, the insurance companies should
provide separate training to all agents/intermediaries before they are authorized to sell
ULIPs. Also, periodical in-house refresher training to those involved in soliciting
business. Insurance companies are being asked to follow a uniform practice for rounding
off the unit prices.

Regarding disclosure norms, IRDA has asked all life insurers to explicitly give
information using the same print font regarding the definition of all applicable charges,
method of appropriation of these charges and the quantum of charges levied. And the
limit up to which the insurer reserves the right to increase charges, subject to prior
clearance of the authority. No statement of opinion as to the performance of the fund
shall be made anywhere.

35
Basics of the Product design

Unit Price

Unit Price of a fund is set by dividing the value of the assets in the fund at the valuation
time by the numbers of units created in the fund, the resulting price is rounded of to the
nearest Re. 0.0001. The value of the assets in the market or fair value of the fund’s
investments plus current assets ( included accrued income ) less current liabilities and
provisions ( including accrued expenses ). These prices are published on the regular basis
on different newspapers, magazines etc.

These unit prices are subject to change with the change in market conditions. The return
on the policy is subject to the changing unit price.

Ex :- Reliance Total Investment Plan :- 55.5462


Reliance Endowment Plan :- 36.0994

The Unit Price determines the No. of units bought. The Unit Prices of RLIC is the
highest in the market right now. So, a question comes in our mind if the higher Unit price
is a pricey bet?

Is Low NAV Cheap?

Is a fund with a low NAV a better investment option than a fund with a higher NAV?
Since you can buy more units when the NAV is low, isn't it cheaper? Should mutual fund
schemes with a higher NAV be avoided? These are questions, which trouble many first
time investors in mutual funds.

The answer to these questions is that - it is irrelevant how high or low the NAV of a fund
is. The amount of your investment remaining unchanged, between two funds with

36
identical portfolios, a low NAV would mean a higher number of units held and
consequently a high NAV would mean lower number of units held.

But under both circumstances the product of the number of units and the applicable
NAV, which is the value of your investment, would be identical. Thus it is the stocks in a
portfolio that determine returns from a fund, the value of the NAV being immaterial.

When one sells those units, the return will be the same as that of another scheme, which
has performed similarly. The 'cost' of a scheme in terms of its NAV has nothing to do
with returns. What you want to buy in a scheme is its performance. The only instance
where a higher NAV may adversely affect you is where a dividend has to be received.
This happens because a scheme with a higher NAV will result in a fewer number of units
and as dividends are paid out on face value, higher NAV will result in lower absolute
dividends due to the smaller number of units. But even here, total returns will remain the
same.

So from whichever angle you see it, the NAV makes no difference to returns. Mutual
fund schemes have to be judged on their performance. And the simplest way to do
this is to compare returns over similar periods.

Lock-in Period

IRDA has set the guidelines of the ULIPs to have a lock-in period of three year. It is
mainly because Insurance plans are viewed as a long term investments with significant
tax advantages. Therefore for the first three tears of the plan, one normally cannot
surrender the plan or withdraw any portion of the funds from it. If one stop the regular
commitment before three years have passed ones life cover will cease and funds will be
held in suspense after deduction of surrender charges. These funds will be paid out only
at end of the third year or the end of the revival period of 2 yrs. Which ever is later.

37
Fund options

ULIPs products offer different fund options to the Investors to enhance their returns as
well as hedge their risk from the market vulnerability. It helps to balance the Risk and
Returns, making investment choice with different fund options.

The fund in the ULIP products are invested in the forms of market:-

Debt Market, Money Market and Equity Market.

Debt Market :- Govt. securities & Bonds.

Money Market :- Bank Deposits.

Equity Market :- Share Market.

Ex:- RLIC provide six different option.:-

• The potential for higher but more variable returns over the term of policy.
• More stable returns with lower long- term potential.

TAX BENEFITS

Eligibility for Tax Benefits under section 80c and section 10(10D) of the income Tax
act , 1961.

• Under sec 80 c, one can save up to Rs. 33,660 from tax each yr. as premiums upto
Rs. 1, 00,000. are allowed as a deduction from ones taxable income.
• Under sec 10 (10D), the benefits one receive from ones policy are completely tax
free subject to the exclusions.

TERM of the POLICY

38
IRDA has set up the guidelines for minimum maturity term of the Policy in a quest to
maintain the essence of ULIPs as the long term Investment instrument. So, it is minimum
of 10 yrs period, after this period the Investor can reap the maturity value.

In case of any eventuality in between the term of the policy, the sum assured would be
paid to the beneficiary and the other benefits will accompany as per the policy norms.

RIDER BENEFITS

Additional benefits other than the normal Insurance benefits are being given in the ULIP
products. This actually enhances the flexibility and attractiveness of the ULIP products.

Ex:- Reliance Life Insurance provide Death Benefit & Death Benefit + critical illness
benefit.

Price

Price is a relevant differentiator only in two segments - pure term insurance and in
pure annuities. Here too, service delivery and financial strength will need to be present
at a minimum acceptable level for price to be a relevant differentiator. In case of savings
oriented products, long term returns generated will be more relevant than just the price of
the product. A focus on generating good investment performance and keeping a tight
control on costs will help in generating good long-term maturity value for customers.
Norms have been laid down on all of these by IRDA and adhering to these while
delivering good returns will be a challenge.

• Premium Payments :-
Amount paid for the insurance.
For RLIC ULIP products minimum premium payment is Rs. 10,000 annually,
5000 half yearly or quarterly and for half-yearly it is 1500.
Premium Top-ups option is available in the policy with some extra charges.

39
• Charges :-

Premium allocation charge – This is the premium based charge. After deducting
the remainder is invested in buying the units.
Ex- For RLIC ULIPs the premium allocation rates for the first two years is 30%
each and rest of the term is 1% each.

Fund Management Charges- In the long term, the key to building great maturity
value is a low FMC. EX- RLIC has uniform fund management charges of .80%
p.a. of the fund’s value which is lowest in the industry.

Surrender Charges- This is the charge which is applicable when policy is


surrendered. It is equal to the 30% of the difference between the regular premiums
expected and received in the first 2 yr, of the contract.

• Other Charges :-
Policy Administration charges – For RLIC ULIP products the charge is Rs. 20
per month, which is lowest in the industry.

Mortality and Risk Benefit Charges – It is the charge for providing a person with
the Death and Critical Illness cover. The amount of charge taken each month
depends on the age.

Switching Charges – The charge applicable to the investor when he is switching


between different options given by the company.
For RLIC ULIP products 24 switches in a financial yr is absolutely free, which is
the most unique in the industry.

40
Partial withdrawal Charge – For RLIC 6 partial withdrawal in a financial Year is
free additional partial withdrawal request will be charged Rs. 250 per request.

Revival Charge – A charge of Rs. 250 is applicable for revival to cover for
administrative expenses.

Misc. Charges –

Advertising and promotion:

The level of demand is latent and will have to be activated considerably. The market
needs to be developed. Greater awareness of insurance and the need to have it as a
protection tool rather than as a tax planning measure needs to be appreciated by the
Indian people. Various communication tools including advertising, direct marketing and
road shows will contribute to all this and different companies will take different
approaches on these.

• Promotion Mix :- The Promotion budget of the total company should be divided
on the 5 different promotional tools –

Advertising

Sales Promotion

Direct Marketing

Public Relations

Sales Force

Advertising: - This is the most visible form of promotional strategy linked with any
company. So, for the insurance companies as well the two forms of advertising-
41
Print advertising Electronic advertising

 It helps in Brand Building and also helps in positioning.


 Helps in enhancing visibility.
 Also enhances brand retention.

Print Advertising: - Newspaper, Magazines and Billboard advertising etc.

 With the marketing of insurance products, print advertising has become an


ominous choice.
 With the growing no .of business magazines and newspapers around the investors
keep themselves informed regarding the financial developments.

Electronic Advertising: - Television, radio, Internet, cell phones.

 A new form of advertising has also come up, which is to associate your brand or
company with a movie to enhance the recall.

Ex:-RLIC has linked its advertisements with latest Hollywood Blockbuster


Spiderman 3.

 Growing number of internet users in India has made it extremely convenient to


advertise with the “pop up” advertising.
 The increase in the use of cell phones making the cost of advertising less, this has
been a new frontier for advertising, through sms etc.

Qualities with Advertising

 Public Presentation
 Pervasiveness
 Amplified Expressiveness

42
 Impersonality

Sales Promotion.

It creates a stronger and quicker response.


Different Activities are being undertaken by RLIC for promotional.
 Ex:- Contests , sponsor events , activity at local park etc.

Three distinctive features:-


 Communication: - It gives information and attracts attention of the
customer.
 Incentive: - All the charges has been fixed by the IRDA so, giving
discounts and other monetary benefits is mot worth a choice.
 Invitation

Direct Marketing:- It has several forms , Direct Mail , telemarketing ,


electronic marketing. Direct marketing when used along with the Personal
selling, then it would give a huge productivity.
For the marketing of the insurance products direct customer interaction is
necessary.
Three characteristics:-
 Non Public.
 Customized
 Up to Date.

Personal Selling

43
For, selling the financial product like Insurance, personal selling plays the most
important role on the block.
For the personal selling purpose two forms of factors are there:-
 Agency:- Ex- RLIC appoints Financial Consultants for selling the products.
 Direct sales Agent:- Sales force of the company.

It helps to build up buyers’ Preference, Conviction and Action.


Three major qualities:-
 Personal Confrontation
 Personal cultivation
 Personal Response

Public Relations and Publicity


With the financial product like the insurance it is very essential to incorporate
public and publicity. It helps to increase the awareness about the products like
ULIPs.
Three qualities:-
 High credibility
 Off Guard

 Dramatization
Ex:- For enhancing the awareness about in the minds of investors it is necessary with the
company to furnish out articles with different newspapers and Magazines to keep them
informed. It also helps to educate them about the basic properties of the product.

Distribution:

44
Different companies may however choose different channels and different geographies
to focus on. The channel options are - tied agency force, corporate agents and brokers
and this is an area where different companies will make different choices. Many
companies like Reliance Life are focusing on all channels whereas companies like Max
New York Life are focusing on the tied agency force only. Customer interface will be a
key challenge for life insurance companies and includes every that interaction that the
customer has with the company, such as sales, new business underwriting, policy
servicing, premium payments, claim processing and so on. Technology can play a crucial
role in delivering the highest standards of service set by the company and it will be
imperative for any serious player to excel in all of these.

Channels of Marketing for Reliance life

1. Agency- Insurance companies recruit agents who sell the products directly to
the customers.

The agents are certified from IRDA as they have to undergo a certificate exam
conducted by IRDA after a stipulated training given by the company.

Reliance Life Insurance Company terms its agents as Certified Financial


Consultants.

Benefits given by RLIC :-

 Formal training of 100 hr is given by the company at no extra cost.


This online training covers the exhaustive study of Insurance. Able
trainers are appointed by the company for the classroom training.

 Proper product training is given by the company after the successful


completion of the exam.

 All facilities are provided to them by the company required for


generating business for the company.
45
 It has got a foolproof intranet facility where the consultant can check
the status of the Policy logged in as well as his commission status.

 Proper consultant corners are in place in every RLIC offices.

Reliance life takes extreme care in selecting the candidates for the
Financial consultant.

 RLIC has set the minimum educational requirements for itself which
is better than the minimum guidelines set by IRDA.

 Proper product training about ULIPs before actual selling actually


helps in checking the mis-selling of the ULIP products.

 Able support of sales managers helps in generating quality business


for the company.

(2) Direct Sales Agent:-

RLIC has a team of able Sales managers who are properly trained and well
informed to carry out the business for the company.

(3) Bank assurance:- RLIC has a tie up with three banks from where the
customers of these banks has an access to all the products of Reliance Life. The
three banks are :-

 HDFC Bank

 Bank Of Baroda

 Indian Bank

This channel of sales for the Insurance sector is slated to give major chunk of its
sales in the future.

46
It is because bank has the access to the large customer database who can well be
the prospective customers for the Company.

Moreover, It is not cost effective for the insurance companies to expand in every
nook and corner of the country and socially the rural sector, so to expand in the
new frontiers or territory it is effective to have the tie ups with different banks.

(4) Through Financial Intermediaries: - Wealth management companies like:-


Reliance Money, Unicon ,Reliance Capital Services are selling different
Insurance products of different companies. These are like channel partners for the
company.

47
ANALYSIS AND INTERPRETATION ON THE BASIS OF THE
QUESTIONNAIRE.

(1) Chart showing number of respondents having life cover?

DO YOU HAVE ANY LIFE-INSURANCE COVER


Yes 148
No 32
Planning To 20
200

Analysis:-

 No. of respondents who have the insurance are far more in Number.

Interpretation:-

 Life insurance as a financial product has become a necessity in today’s


scenario. In this fast paced scenario the sense of security is the key factor
in the Insurance sector.

48
DO U HAVE ANY LIFE INSURANCE COVER

160
140
120
No of 100 148
80 Series1
Respondents
60
40 32
20
0
Yes No

(2) Chart showing the no. of respondents who have done Investment?

MADE ANY INVESTMENTS TILL NOW


Yes 156
No 6
Planning To 38
200
Analysis:-

 Through the chart it is clear that investment is made by most of the


respondents.

 Remaining of them are planning to have investments.

Interpretation:-

 Savings have become the necessity of the age. With the growing income
of the younger population and growing need to have security in the future.

 The short term as well as long term investment is growing.

 The salaried class is also channelizing their small income into investments
to generate returns.

49
MADE ANY INVESTMENTS TILL NOW

38, 19%

6, 3% Yes
No
Planning To

156, 78%

(3) Awareness about ULIPs and Mutual Fund

AWARENESS About ULIPs


Yes 82
Would like to know 73
No 45
200
Analysis:-

 In this chart this has been shown that only 82 respondents out of 200 know
about ULIP products.

 But, Almost equal no. of respondents have showed their interest in knowing
about ULIPs in Future.

Interpretation:-

 ULIPs are the new insurance product in the offing. So, there is a very little
awareness about ULIPs.

 A keen interest in ULIPs have been shown by all the strata of the

which we have taken.

50
 It is a new product altogether so; awareness needs to be generated for the product.
It could be done through different data sources like, Newspapers, Magazines,
internet etc.

AWARENESS ABOUT ULIPs

45, 23%
82, 40% Yes
Would like to know
No
73, 37%

(4) The Chart shows awareness regarding the mutual Fund?

AWARENESS About MUTUAL


FUNDS
Yes 113
No 52
Would like to know 35
200

Analysis:-

 Awareness about mutual Funds is much more than ULIPs.

 Many of the respondents were keen to know about the product as well.

Interpretation:-

 More awareness regarding Mutual Funds than ULIPs is a clear indication that
the Investors have seen Mutual Fund short run high return generator.

 The awareness of Mutual Fund is much more than ULIPs which indicates that
Mutual Fund being the old product has generated huge response in the
respondents.

51
AWARENESS ABOUT MUTUAL FUNDS

35, 18%
Yes
No
52, 26% 113, 56%
Would like to know

(5)Following chart shows the No of respondents who have invested in ULIPS?

HAVE YOU INVESTED IN ULIPs


Yes 40
No 123
Planning to 37
200
Analysis:-

 The no. of respondents who have invested in ULIPs are only 20 % of the
population.

 Almost 20 % are planning to buy the product in the near future.

 Large no. of respondents don’t look ULIP as a Insurance product.

Interpretation:-

 It is an interesting fact that those who have invested in ULIPs fall under the age
group of 30 – beyond.
It shows that most of them are married and they are looking forward to have a
long term Insurance cum Investment plan.
 It is a clear indication that the younger generation are not looking for long term
Investment.

52
INVESTMENT IN ULIPs BY THE RESPONDENTS

37, 19% 40, 20%


Yes
No
Planning to
123, 61%

(6)This chart shows the No. of respondents who have invested in mutual Funds.

HAVE YOU INVESTED IN MUTUAL


FUNDS
Yes 76
No 42
Planning to 82
200
Analysis :-

 Large No. have already invested in Mutual Funds.

 Many more are planning to Invest.

Inference:-

 Mutual Fund has been accepted as an Invested product.

 Young and working population are looking for Mutual Fund Investment.

53
INV EST M ENT IN M UT UA L FUNDS BY T HE
RESPONDENT S

82, 41% 76, 38% Y es


No
Planning to
42, 21%

(7)Investment Objective of the Population

INVESTMENT OBJECTIVE
CHILD FUTURE 25
SAVE TAX 65
PROTECTING FAMILY 30
RETIREMENT BENEFIT 22
RETURNS 58
200
Analysis:-

 The chart shows that maximum have selected Save Tax as their main aim of
their investment.

 Second Important reason is to have high returns.

 Next is protecting family.

Interpretation:-

 The primary objective of the Investment is save Tax. The young population is also
keen in saving tax.

54
 This is an edge for ULIP over Mutual Fund as ULIP give tax benefit under both
sec. 80c and 10 (10D).

 Mutual Fund only give returns on the ELSS schemes.

 But if we analyse reasons for investment in detail we can find that Mutual Fund
have all the benefits attached to it.

 The married people with child opt for ULIPs or traditional Insurance in general.

INVESTMENT OBJECTIVE

70
NO OF RESPONDENTS

60
50
40
65 Series1
30 58
20
25 30
10 22
0
IT
Y
E

S
EF
IL
R

RN
TU

TA

N
FA

BE

TU
FU

VE

RE
G

T
SA
D

EN
N
IL

TI
H

EM
C
C

TE

IR
O

ET
PR

(8)This chart shows the different forms of investment


55
FORMS OF INVESTMENT
MUTUAL FUND 56
EQUITY MARKET 43
ULIPs 35
FDs &OTHER BANKING SERVICES 20
TRADITIONAL INSURANCE PLANS 18
GOVT SECURITIES 15
BULLION &DERIVATIVE MARKET 13
200
Analysis:-

 The major form of the investment option opted for is Mutual Fund.

 Second one is for Equity and ULIPs are the third favourite.

Inference:-

 The most hot selling Investment option of the season is the Mutual Fund , the
preference to Mutual fund has been largely been given by the Young respondents
mainly below 30 yrs of age.

 The second most favored investment avenue has been voted as Equity Market.
This shows the clear indication of the young population i.e. High Risk and High
return.

 The ULIP is the on the promisingly third position, this shows the return appetite
of the older population as well. The risk averse population is slightly changing
their mindset.

 The product which is definitely taken a beating is the traditional Insurance Plans.
This also shows the growing impetus on the private insurance players.

 But, Mutual Fund still being the safe and secure bet with High returns and the
flavor of the season.

56
FORMS OF INVESTMENT

60
No. of respondents
50
40
30 56
20 43 35
10 20 18 15 13
0

FDs &OTHER

SECURITIES
TRADITIONAL

&DERIVATIVE
MARKET
MUTUAL

EQUITY

ULIPs

INSURANCE
BANKING
SERVICES
FUND

BULLION

MARKET
GOVT
PLANS

(9)The Chart shows the one, whom we want to consult before we normally invest.

Consultation before Investment


FAMILY 27
FRIEND 62
FINANCIAL ADVISOR 11
NEWSPAPER/MAGAZINE 88
FINANCIAL INSTITUTION 12
200
Analysis:-

 In the analysis we find out that the major source of consultation is the
Newspaper, Magazine and Other data sources like Internet.

 Next most common is to consult friend for the investment.

 Most depressing fact that the financial consultants are the least one to be
consulted.

Inference:-

 The emergence of newspaper, magazines, TV etc. shows the fact that the
growing awareness among the investors to know about different Investment
avenues. This keenness can be most commonly seen with the 30-35 yr of age
group who are actually serious Investors.

57
 The loosing faith on the financial consultant is a concern and leads to the fact
that they are not qualified enough to answer to the queries of the normal investor.

CONSULTATION BEFORE INVESTMENT

100
90
80
70
60
50
88
Series1
40
30 62
20
27
10 11 12
0

N
E
R
D

O
N
Y

SO
N

TI
ZI
IL

IE

U
A
M

VI
FR

IT
FA

AD

ST
/M

IN
L

R
IA

PE

L
C

IA
AN

C
SP

AN
N
FI

EW

N
FI
N

(10)This chart shows various factors associated before Investing through a


particular company..

FACTORS FOR INVESTMENT


BRAND VALUE 23
PAST RETURNS 121
PAST PERFORMANCE OF COMP 42
SERVICE FROM COMPANY 14
200
Analysis:-

 Major factor to be considered is the past returns of the company.

 Then it is the past performance of the company.

Inference:-

 Reliance Life stands as the top performing as well as the highest return generator
from the market. So, this factor has to be should always be highlighted.

58
FACTORS FOR INVESTMENT

14, 7% 23, 12% BRAND VALUE

42, 21% PAST RETURNS

PAST PERFORMANCE
OF COMP
SERVICE FROM
121, 60%
COMPANY

(11)The chart shows the awareness about the fund options linked with

KNOWLEDGE ABOUT FUND OPTIONS ULIPs


Yes 57
No 45
Can't Say 98
200

Analysis:-

 Nearly 50 % of the respondents don’t have any clue about the different fund
options attached to it.

 Those who have invested they only had an Idea about the different fund options.

Inference:-

 It can be inferred from the data that there is low awareness about the ULIP
products. Investors should be made aware of the fund options also let them
know that with the judicious mix of fund options they can hedge the risk and
enhance the returns.

59
 The current customers should be updated about the NAV of the fund and its
performance, and the switching benefits they can avail. This will increase the
loyality towards the company and will definitely lead to cross selling.

 The satisfied will definitely make their colleagues aware of the product and
would ultimately lead to increased business.

KNOWLEDGE ABOUT FUND OPTIONS ULIPs

57, 29%

98, 48% Yes


No
Can't Say

45, 23%

(12)This chart shows the knowledge of the respondents about the different fund
options linked with Mutual Fund…

KNOWLEDGE ABOUT FUND


OPTIONS MUTUAL FUNDS
Yes 118
No 60
60
Can't Say 22
200
Analysis:-

 Contrary to ULIPs many respondents know about the fund options with
Mutual Fund.

Inference:-

 The knowledge about the fund options shows the fact that Mutual Fund is far
more mature product than ULIPs. This also proves the fact that awareness of
ULIPs is much more higher.

 The different fund options like- sector specific fund , Mid – cap or low cap
funds are marketed in a way that many of us have an idea of the fund options
available.

KNOWLEDGE ABOUT FUND OPTIONS MUTUAL FUNDS

22, 11%

Yes
No
60, 30% Can't Say
118, 59%

(13)The chart shows the consideration lockin period of ULIP and Mutual Fund.

CONSIDERATION OF LOCKING
PERIOD ULIP’S

Yes 59
No 141
61
200

CONSIDERATION OF LOCKING
PERIOD MUTUAL FUNDS

Yes 122
No 78
200
Analysis:-

 Lock-in period is very important factor before Investing into Mutual Fund and
ULIPs.

Inference:-

 The lock-in of 3 yrs can be a positive aspect pitted against Mutual fund. With
only 3 yr lock in it is giving flexibility comparable to MFs and that too with a
Insurance cover.

CONSIDERATION OF LOCK-IN PERIOD ULIPs


141

No

Yes
59

0 20 40 60 80 100 120 140 160


No. Of Respondents

Series1

62
CONSIDERATION OF LOCK-IN PERIOD MUTUAL
FUNDS

No

78

122
Yes

0 20 40 60 80 100 120 140


No. of Respondents

Series1

(14)The chart helps to look out for those respondents who look out for insurance cover
in Mutual Fund

LOOKING INSURANCE COVER IN


MUTUAL FUND
Yes 58
No 142
200
Analysis:-

 Maximum respondents have opted for no Insurance in mutual fund.

Inference:-

63
 This is the area from where ULIP should look at. The inference we can
generate from the fact that Mutual Fund is a pure Investment product and
investors don’t want to mix insurance with the MFs.

LOOKING FOR INSURANCE COVER IN M UTUAL


FUNDS

58, 29%

Yes
No
142, 71%

(15)The chart shows the response on the issue of tax benefit with Mutual Funds.

TAX BENEFIT IN MUTUAL FUND


YES 176
NO 24
200
Analysis:-

 Maximum respondents have opted for tax benefit with the Mutual Fund.

Inference:-

 The ELSS funds are actually in demand with small investor.

 ULIP can make the dent in the client base of mutual fund because it has the
tax benefit as well as the flexibility to be the perfect substitute of the ULIPs.

64
LOOKING FOR TAX BENEFITS IN M UTUAL
FUNDS

176

200
150
No of 24 Series1
100
Respondents
50
0
YES NO

(16)The Chart shows the Importance given by respondents to the Rating for the
Mutual Fund.

IMPORTANCE OF RATING FOR


MUTUAL FUNDS
Yes 157
No 43
200
Analysis:-

 It is clear from the chart that the investment on mutual fund is affected by the
ratings given by the rating agency as well.

Inference:-

65
 It should taken as a lesson to the ULIP and IRDA should also appoint a rating
agency to rank the different ULIP products in the market.

 It will give a better idea to the investor who is more flexible and help in taking
decision of investment.

IMPORTANCE OF RATINGS FOR MUTUAL


FUNDS

200

150
No Of
100 Series1
Respondents
50 157

43
0
Yes
No

(17)The chart shows awareness among the respondents about the Entry and Exit
charges about ULIPs and MFs

ARE YOU AWARE OF ENTRY LOAD &


EXIT LOAD IN
MUTUAL FUNDS AND ULIPs
YES 115
NO 85
200
Analysis:-

 This could be shown evidently from the data that those who have invested in
ULIP and Mutual Fund know about the charges.

66
Inference:-

 The initial charges associated with ULIPs and Mutual Fund are the major
factors due to which person is reluctant to invest in both the Financial product.

AWARENESS OF ENTRY LOAD IN MUTUAL


FUNDS AND ULIPs

85, 43% YES


115, 57% NO

67
DEMOGRAPHICS FOR THE STUDY

(1) Age- group table

AGE GROUP
NO OF RESPONDENTS

70
60
50
40 Series1
30 62
20 36 49
10 29 24
0
VE
5

30

0
-2

-5
-4
-

O
40
20

25

30

AB
&
50

AGE RANGE

(2) Gender

GENDER

58, 29%
MALE
FEMALE
142, 71%

68
(3) Occupation

OCCUPATION

46, 23% 30, 15%


STUDENT
SALARIED
SELF EMPLOYED
124, 62%

(4) Marital Status

69
MARITAL STATUS

49, 25%

MARRIED
SINGLE

151, 75%

RECOMMENDATION AND CONCLUSION

 Unit Linked Insurance Products are the new products on the block and the
awareness among the ULIP products is certainly lacking in the minds of the
general investor. So, ULIP awareness programme need to be run by the
company trough different sources like- Newspaper , Magazines , TV etc.

On the local level few activities need to be undertaken to enhance the people
awareness towards ULIPs.

 ULIP products are quite similar to Mutual Fund but it is not advisable to
market ULIP products directly against Mutual Fund. ULIPs should be
marketed as an Insurance Products with high returns and flexible instrument
which can be customized to suit a person’s risk and return appetite.

70
 ULIPs have got different fund options linked with it and a investor can switch
his funds to hedge his risk and enhance returns. But, many of the Investor who
have invested don’t have much knowledge so, they lack in utilizing the benefit
offered by the company. Company should try to undertake some contact
Programme to aware the customers. This will enhance the customer
interaction and will propel a new rapport between company and customers.

 For any Insurance company the agents of the company to sell its products are
like the face of the company. So, it is very essential for the company to keep
its consultants / Agents well informed about the new developments taking
place in the industry. This will enhance the trust of the prospective customers
and will ultimately benefit the company. Company can organize regular
training programmes and regular tests can be conducted.

 The biggest asset of the Mutual Fund is the diversified fund option with a
portfolio having a flexibility. ULIP companies should also try to figure out its
portfolio to its customer.

ANNEXTURE:

Questionnaire
This structured questionnaire will help us in understanding your needs. All information
you provide us will remain highly confidential, will not be disclosed in any form to any
other organization and will be used for no other purpose than to prepare a proposal.

Name_________________ Gender __________

Age / DOB _______________ Marital Status : M or F_____

If Married, Child: Y / N _______ Child’s Age _____________

71
Annual Income _____________ Profession _____________

Contact No. _______________ E-mail __________________________

(1) Do you have any Insurance cover ?


Yes No Planning To

(2) Have you made any investments till now?


Yes No Planning To

(3) Do you know about ULIPs?


Yes No Would Like To

If, Yes have you Invested in ULIPs?


Yes No Planning To

(4) Have you Invested in Mutual Funds ?


Yes No Planning To

(5) Why do you want to have Investments ?


Child Future Save Tax Protecting Family

Retirement Benefit Returns

(6) What Kind of Investments you want to make ?


Rate these Investment Options on the scale of 1-7
1- Being the Most Preferable.
7- Being the Least Preferable

72
Mutual Fund Traditional Insurance Plans
Equity Market Bullion & Derivative Market
ULIPs FDs & other Banking services
Govt. Securities

(7)Before planning your Investments whom do you consult?

Family Friend Financial Advisor


Newspaper/ Magazine or other Data source Financial Institutions

(6) Which factors among these would you consider before investing through any company?

Brand of the Financial Institution Past returns


Past Performance of the company Service from the company

(7) Which company have you Invested in?


Mutual Fund____________
ULIPs ______________

(10)Which Fund would you normally like to Invest into?

For Mutual Fund :-


Mid Cap Low Cap Blue chip
Govt. Bonds Sector funds Gild Fund

For ULIPs:-
Growth Fund Balanced Fund
Debt Fund

(11)Do you know about Entry-Load in the Mutual Funds and ULIPs?
73
Yes No

(12)Do you consider the portfolio before investing your money in the given fund
from The Company?

For Mutual Fund :-


Yes No Not Normally

For ULIPs :-
Yes No Not Normally

(13)Does it really matter to the ICRA grading for investing into mutual fund market?

Yes No

(14)Do You like to invest in an NFO ?

Yes No

(15)Do you look out for Insurance cover in the Mutual Funds Investment?
Yes No

(16)Do you look out for Tax Benefit in Mutual Funds Investments?
Yes No

(17)Do you consider the locking period before investing your money into Mutual Funds
Or ULIPs?

74
Yes No

REFERENCE

Websites referred:

www.reliancelife.com
www.mutualfundsindia.com
www.mutualfundas.com
www.personalfn.com
www.amfiindia.com
www.outlookmoney.com
www.indiainfoline.com
www.5paisa.com
www.iciciprudential.com
www.myiris.com
75
finance.yahoo.com

Books referred:

Mutual funds
SBI training manual by K.LSinghania
Personal tax planning: Raj Rathanam
Security Analysis by fisher and Jordan
Personal Financial Planning-ICFAI
Personal Financial Planning: Guardian University.
Insurance
Mutual Funds-ICFAI

MAGAZINES

Business World ( Feb. Month Issue)


Outlook Money
Business Today

EXECUTIVE SUMMARY

Hello, I am Ankit Malhotra a student of Class of 2010 at LSB, Phagwara. Prior to my


MBA, I completed my BBA from SPMR College of Commerce, Jammu, in the year
2008.

I did my SIP with Reliance Life Insurance Company PVT. LTD. from 1st July to 14th
Aug 2009.

I was assigned a task of Generating Leads for the Company and doing business for the
company, I have also been given responsibility of recruiting Financial Consultants for the
company.

76
Key Result Area:

 Study of the ULIP products of Reliance Life.


 Promoting awareness of the ULIP product among general Investors and procure
sales.
 To recruit the Financial Consultants.

Reporting:
 I reported to Branch Sales Manager, Mr. Sumit Mehta.
 In, the college I reported to Mr. Kanwal Gurleen.

Learning during SIP:

• Provided fair amount of corporate exposure.


• Helped in improving my communication skill.
• Provided me unique opportunity to have direct customer interaction.
• Intricacies of Insurance Business.

77