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A Study on customer perception of ULIP of Bajaj Allianz Life Insurance Co.

Ltd with
Mutual Fund
A Project Report submitted to the SRM University in partial fulfilment of the requirements
for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted by
Jim John Thomas (Reg No. 3511220017)

Under the guidance of


Mrs. Mary Auxilia, Asst Prof (Internal Guide)
Mr. Jibu Varghese, HR (T&D) (External Guide)

SRM RAMAPURAM B-SCHOOL


SRM University
Ramapuram Campus, Chennai 89.
May 2014

Company Certificate

DECLARATION

I, Jim John Thomas, hereby declare that the project Report, entitled A Study on customer
perception of ULIP of Bajaj Allianz Life Insurance Co. Ltd with Mutual Fund
submitted to the SRM University in partial fulfilment of the requirements for the award of
the Degree of Master of Business Administration is a record of original work undergone by
me during the period 03.3.2014 to 30.4.2014 under the supervision and guidance of (Mrs.
Mary Auxilia, Asst Prof) SRM RAMAPURAM B-SCHOOL, SRM University, Ramapuram
Campus and it has not formed the basis for the award of any Degree/Fellowship or other
similar title to any candidate of any University.

Place: Chennai 89

Signature of the Student

Date:

SRM RAMAPURAM B-SCHOOL


SRM UNIVERSITY
Ramapuram Campus
Certificate
This is to certify that the project Report entitled A Study on customer perception
of ULIP of Bajaj Allianz Life Insurance Co. Ltd with Mutual Fund, in partial fulfilment
of the requirements for the award of the Degree of Master of Business Administration is a
record of original work undergone by Jim John Thomas (Reg.No 3511220017 ) during the
year 2012-2014 of his study in SRM RAMAPURAM B-SCHOOL, SRM University,
Ramapuram Campus under my supervision and the report has not formed the basis for the
award of any Degree/Fellowship or other similar title to any candidate of any University.
Place: Chennai 89
Date:

Signature of Guide
(Mrs. Mary Auxilia, Asst Prof)
SRM RAMAPURAM B-SCHOOL
SRM University
Ramapuram Campus
Chennai 89.

Countersigned

Head of the Department


Dr. C. Sundar M.B.A., M.Phil., Ph.D.
Professor & Head

Submitted to SRM RAMAPURAM B-SCHOOL, SRM UNIVERSITY (Ramapuram


Campus) for the examination held on_______________

INTERNAL EXAMINER

EXTERNAL EXAMINER

ACKNOWLEDGEMENT

I am extremely thankful to our Chancellor, SRM University, for his invaluable


support. I wish to express my profound gratitude to my venerable Chairman, SRM
University, Ramapuram, for kind permission to undergo project work successfully. I express
my heartfelt thanks to our Dean & Vice Principal, SRM University, Ramapuram Campus
who provided all facilities for carrying out this project.
I immensely thank our Head of the department, for his valuable suggestions and
guidance for the completion of project work. I express my sincere thanks to my Project
Guide (Mrs. Mary Auxilia, Asst Prof) for guiding me throughout the work. I thank God
Almighty for showering his perennial blessing on me for giving me the courage to pursue this
project work successfully.

Jim John Thomas (Reg.No 3511220017)

SRM RAMAPURAM B-SCHOOL


SRM UNIVERSITY

Table of contents
Chapter 1 Introduction
1.1 Outline of the project
1.1.1 Need and importance of the study
1.1.2 Scope of the study
1.1.3 Problem definition
1.1.4 Objectives of the study
1.1.5 Research methodology
-Research Design
-Sampling Design
-Population
-Sample size
-Sampling Method
-Pilot Study
-Sources of Data
-Data collection Method
-Primary Data
-Secondary Data
-Tools for analysis
1.1.6 Limitations of the study
1.1.7 chapterisation
1.2 Industry profile
1.3 company profile
1.4 Product profile
6

CHAPTER II
Review of literature
CHAPTER III Data analysis and interpretation
Tables, charts with inference
Statistical tools

CHAPTER IV
Summary and Conclusion
4.1 Findings
4.2 Suggestions
4.3 Conclusion
APPENDICES
REFERENCES/ BIBILIOGRAPHY

LIST OF TABLES
TABLE NO

TITLE

PAGE NO

Comparison of customers based on their Gender

52

Comparison based on their Marital Status

53

Comparison based on their Age

54

Comparison based on their Occupation

55

Comparison based on their Annual Income

56

Sources that help in Investment Decision making

57

Factors that influence investment decisions

58

Generally preferred investment avenues

59

Best life insurance company survey

60

10

Bajaj Allianz product ratings

61

11

Customer preference of ULIPs

62

12

Is insurance the attraction in a ULIP

63

13

Customer preference of Mutual Funds

64

14

Customer thoughts about risks in ULIP vs MFs

65

15

Customer thoughts about advantages in ULIP vs MFs

66

16

Importance of safety factor in ULIP investments

67

17

Importance of liquidity factor in ULIP investments

68

18

Importance of rate of return in ULIP investments

69

19

Importance of tax savings in ULIP investments

70

20

Effect of Past schemes performance on ULIP

71

investment decisions

21

Influence of ads in investment decisions of ULIPS

72

22

Importance of safety factor in MF investments

73

23

Importance of liquidity factor in MF investments

74

24

Importance of rate of return in MF investments

75

25

Importance of tax savings in MF investments

76

26

Effect of Past schemes performance on MF

77

investment decisions
27

Influence of ads in investment decisions of MFs

78

28

Customer willingness to re-invest in Bajaj Allianz

79

LIST OF CHARTS
TABLE NO

TITLE

PAGE NO

Comparison of customers based on their Gender

52

Comparison based on their Marital Status

53

Comparison based on their Age

54

Comparison based on their Occupation

55

Comparison based on their Annual Income

56

Sources that help in Investment Decision making

57

Factors that influence investment decisions

58

Generally preferred investment avenues

59

Best life insurance company survey

60

10

Bajaj Allianz product ratings

61

11

Customer preference of ULIPs

62

12

Is insurance the attraction in a ULIP

63

13

Customer preference of Mutual Funds

64

14

Customer thoughts about risks in ULIP vs MFs

65

15

Customer thoughts about advantages in ULIP vs MFs

66

16

Importance of safety factor in ULIP investments

67

17

Importance of liquidity factor in ULIP investments

68

18

Importance of rate of return in ULIP investments

69

19

Importance of tax savings in ULIP investments

70

20

Effect of Past schemes performance on ULIP

71

investment decisions
21

Influence of ads in investment decisions of ULIPS

10

22

Importance of safety factor in MF investments

72

23

Importance of liquidity factor in MF investments

73

24

Importance of rate of return in MF investments

74

25

Importance of tax savings in MF investments

75

26

Effect of Past schemes performance on MF

76

investment decisions
27

Influence of ads in investment decisions of MFs

77

28

Customer willingness to re-invest in Bajaj Allianz

78
79

11

CHAPTER I
INTRODUCTION

12

To make comparison of ULIP plans with Mutual funds in Bajaj Allianz Life Insurance Co.
Ltd. and to Create awareness about Unit Linked Insurance Plan (ULIP) Benefits. The overall
goal of this project was to create awareness about investments. The Above problem arises
because every life insurance company has their products having different positive and
negative aspects.

Life Insurance is booming sector in todays economy. So the responsibilities of the insurance
companies have been increased as compare to the past. Because in past people were taking
insurance policies for protection tool only. In present scenario insurance sector is providing
more services with the basic life insurance. Bajaj Allianz Life Insurance has number of
products, which gives the right way to save the money and earn good profit by invested
premium. Today people want more services and more return on their investment. So this
insurance company is providing more value added services with the basic insurance
operation.

By doing this type of study in this Insurance sector and looking at the vast scope and
opportunity to study this booming field of Life Insurance and the growing awareness among
the public regarding insuring their life through Life insurance policies as well as the growing
contribution of Insurance in GDP of country with the number of private players making
entrance in this booming industry of Insurance.

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.
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1.1 OUTLINE OF THE PROJECT:


Total Investment scenario is changing, in past people were not interested in investment
because there were no good options available for investment. Now there are many options
available for investment like life Insurance, Mutual fund, Equity market, Real estate, etc.
Today people want more services and more return on their investment. So, most of the
insurance companies are providing more value added services with the basic insurance
operation.
Another option for investment available is Mutual Fund. Mutual Funds are providing good
returns. So while investing people tend more towards mutual fund as they are providing more
returns than Insurance also, with a good investment portfolio. Mutual fund companies
provide better liquidity.
After survey and analysis I came to know that most of the people go for ULIP insurance
policies to cover the risk of life, and invest it in a good Portfolio but there is also a big portion
of customers who have taken the policies to save the taxes. And people are aware about the
tax benefits they get along with their insurance policies. While investing in any Investment
option, the investor checks whether his money is safe or not. Therefore they should know
that, while mutual fund provides good returns, the investments are directly exposed to risk.
But in case of a ULIP, the returns are related to stock market but they have some insurance
benefit and also the IRDA regulates the investment. Many people are getting the tax benefits
in ULIP. In Mutual Fund they have to invest their money in tax saving funds to get the tax
benefit.

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1.1.1 NEED AND IMPORTANCE OF THE STUDY:


As a responsible, customer focused market leader, Bajaj Allianz will have to strive in
understanding the investment needs of the consumers and translate them into affordable
products that deliver value for money. This study will help them choose the best existing
services and apply in their products.
The study first tries to research about the main features of Bajaj Allianz Life Insurance
Company, and its USP (Unique Selling Preposition), which gives them their highest business
and customers. Customers always prefer to invest in a good option and in a company which is
the market leader. Then a comparative analysis of the two investment avenues viz. ULIP and
mutual fund is done to see which of them is preferred and the best performer.
This study is significant to the company as it looks into the minute details of customer
preferences and expectations. This would help the company to develop. The analysis is done
on the performance of the two types of investment within the same theme or sector and
reason out why one performs better than the other.

1.1.2 SCOPE OF STUDY:


Similar studies on this line may be conducted to compare the efficiency of public and private
investment or asset management companies in other countries. During the course of the
study, the main focus was to compare the performance of ULIPs with mutual funds. Since
different companies come out with similar products within the same sector, it becomes
crucial for the company to constantly evaluate where it stands with regards to their
customers goodwill, so as to survive the competition and provide maximum capital
appreciation or return. Other than the market, the performance of the firm depends on the
kind of strategy adopted by the fund managers of the company.

15

1.1.3 PROBLEM DEFINITION:

The study compares customer preferences among the two investment avenues:
ULIPs and Mutual Funds.

This research aims to measure the popularity of the brand Bajaj Allianz and its
appeal to the customers.

The study also aims to measure the existing services being offered and will
look at avenues of development to increase the market share of the company.

1.1.4 OBJECTIVES OF THE STUDY:

To understand the reason why customers prefer ULIP as one of the best insurance
investment mode as compared to a mutual fund.

To find the investment preferences of customers from different income levels, age,
sex, etc. in order to arrive at a pattern.

To Compare Investment Options of customers in ULIPs and Mutual Funds.

1.1.5 RESEARCH METHODOLOGY:

Research Statement:
The research statement studied is entitled, A study on customer perception of ULIP of
Bajaj Allianz Life Insurance Co. Ltd with Mutual Fund.

16

Type of Research: Descriptive Research


The major purpose of descriptive research, as the term implies, is to describe characteristics
of a population or phenomenon. Descriptive research seeks to determine the answers to who,
what, when, where, and how questions. Descriptive research often helps segment and target
markets.
-Sampling Design
-Population:

1,00,000

-Sample size:

100

-Sampling Method:

Simple Random Sampling

-Pilot Study:

A Pilot study of 10 samples were collected through

secondary sources
-Sources of Data
-Data collection Method
-Primary Data: Questionnaire
-Secondary Data:

Published material and annual reports of mutual fund companies.

Other published material of mutual funds.

-Tools for analysis:


* Std. Deviation
* Pearson Correlation
* Comparitive Study

17

1.1.6 LIMITATIONS OF THE STUDY:

The middle class people do not know basic concept of ULIP so creating awareness is
a big challenge.

The findings of my research are from a small sample size.

Narrow minded thought of middle class people about investment.

Customers misconceptions about share market can affect this study.

A general preference to LIC and SBI over private players.

Hesitations on the part of respondents to disclose financial information.

1.1.7 Chapterization:
Chapter 1 Introduction

Conceptual Framework

Industry/Company Profile

Problem Formulation

Scope of the Study

Chapter 2 Literature Review


Chapter 3 Objectives and Research Methodology

Objectives of the study

Research Design

Sampling Framework

Chapter 4 Data Analysis and Interpretation


Chapter 5 Findings of the Study
Chapter 6 Conclusions and Recommendations

Recommendations

Conclusions

Limitation of the study

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1.2 INDUSTRY PROFILE:


The history of life insurance in India dates back to 1818 when it was conceived as a means to
provide for English Widows. Interestingly in those days a higher premium was charged for
Indian lives than the non-Indian lives as Indian lives were considered more riskier for
coverage. The Bombay Mutual Life Insurance Society started its business in 1870. It was the
first company to charge same premium for both Indian and non-Indian lives. The Oriental
Assurance Company was established in 1880. The General insurance business in India, on the
other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first
general insurance company established in the year 1850 in Calcutta by the British. Till the
end of nineteenth century insurance business was almost entirely in the hands of overseas
companies.Insurance regulation formally began in India with the passing of the Life
Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during
20's and 30's sullied insurance business in India. By 1938 there were 176 insurance
companies. The first comprehensive legislation was introduced with the Insurance Act of
1938 that provided strict State Control over insurance business. The insurance business grew
at a faster pace after independence. Indian companies strengthened their hold on this business
but despite the growth that was witnessed, insurance remained an urban phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and
provident societies under one nationalized monopoly corporation and Life Insurance
Corporation (LIC) was born. Nationalization was justified on the grounds that it would create
much needed funds for rapid industrialization. This was in conformity with the Government's
chosen path of State lead planning and development.The (non-life) insurance business
continued to thrive with the private sector till 1972. Their operations were restricted to
organized trade and industry in large cities. The general insurance industry was nationalized
in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companiesNational Insurance Company, New India Assurance Company, OrientalInsurance Company
and United India Insurance Company. These were subsidiaries of the General Insurance
Company (GIC).The general insurance business was nationalized after the promulgation of
General Insurance Business (Nationalizations) Act, 1972. The post-nationalization general
insurance business was undertaken by the General

19

Insurance Corporation of India (GIC) and its 4 subsidiaries:


Oriental Insurance Company Limited; New India Assurance Company Limited; National
Insurance Company Limited; and United India Insurance Company Limited.
Some of the important milestones in the life insurance business in India are:
1850:
Non life insurance debuts with triton insurance company.
1870:
:Bombay mutual life assurance society is the first Indian owned life insurer
1912:
The Indian Life Assurance Companies Act enacted as the first statute to regulate the life
insurance business.
1928 :
:The Indian Insurance Companies Act enacted to enable the government to collect statistical
information about both life and non-life insurance businesses.
1938:
Earlier legislation consolidated and amended to by the Insurance Act with the objective of
protecting the interests of the insuring public.
1956:
245 Indian and foreign insurers and provident societies taken over by the central government
and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital
contribution of Rs. 5 Crore from the Government of India. The General insurance business in
India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first
general insurance company established in the year 1850 in Calcutta by the British.

20

Some of the important milestones in the general insurance business in India are:
1907:
The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of
general insurance of India.
1957 :
General Insurance Council, a wing of the Insurance Association of India, frames a code of
conduct for ensuring fair conduct and sound business practices.
1968 :
The Insurance Act amended to regulate investments and set minimum solvency margins
and the Tariff Advisory Committee set up.
1972 :
The General Insurance Business (Nationalization) Act, 1972 nationalized the general
insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and
grouped into four companies viz. the National Insurance Company Ltd., the New India
Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India
Insurance Company Ltd. GIC incorporated as a company.
1993: Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N.
Malhotra- was formed to evaluate the Indian insurance industry and recommend its future
direction. The Malhotra committee was set up with the objective of complementing the
reforms initiated in the financial sector.
1997 : Insurance regulator IRDA set up.
2000: IRDA starts giving licenses to private insurers:Kotak Life Insurance ,ICICI potential
and HDFC standard Life insurance are the first private insurers to sell a policy.
2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed to
sell insurance plans.

21

INSURANCE MARKET PRESENT


The insurance sector was opened up for private participation seven years ago. For years
now, the private players are active in the liberalized environment. The insurance market have
witnessed dynamic changes which includes presence of a fairly large number of insurers both
life and non-life segment. Most of the private insurance companies have formed joint venture
partnering well recognized foreign players across the globe.
TOP 10 LIFE INSURANCE COMPANIES IN INDIA
LIC (Life Insurance Corporation of India) still remains the largest life insurance company
accounting for 64% market share. Its share, however, has dropped from 74% a year before,
mainly owing to entry of private players with innovative products and better sales force.
ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India.
It experienced growth of 58% in new business premium, accounting for increase in market
share to 8.93% in 2007-08 from 6.97% in 2006-07.
Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share went
up to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in
number of policies sold in 2007-08, with total market share of 7.36%.
SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked 6th
in 2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an
increase of 87% over last year.
Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market share
went up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium and 4th
in number of new policies sold in 2007-08.
HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08,
registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th among
the insurance companies and 5th amongst the private players.
Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to
2.11% in 2007-08.
Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new
business generated was Rs 641.83 crore as against Rs 387.51 crore.

22

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported
growth of 80%, moving from the 11th position to 9th. It captured a market share of 1.19% in
2007-08. Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from
9th last year. It has presence in more than 3,000 locations across India via 221 branches and
close to 40 banc assurance partnerships. Aviva Life Insurance plans to increase its capital
base by Rs 344 crore.
BOOMING INSURANCE MARKET IN INDIA
With a huge population base and large untapped market, insurance industry is a big
opportunity area in India for national as well as foreign investors. India is the fifth largest life
insurance market in the emerging insurance economies globally and is growing at 32-34%
annually. This impressive growth in the market has been driven by liberalization, with new
players significantly enhancing product awareness and promoting consumer education and
information. The strong growth potential of the country has also made international players to
look at the Indian insurance market. Moreover, saturation of insurance markets in many
developed economies has made the Indian market more attractive for international insurance
players

This research report will help the client to analyze the leading-edge opportunities critical to
the success of insurance industry in India. Based on this analysis, the report gives a future
forecast of the market that is intended as a rough guide to the direction in which the market is
likely

to

move.

Total life insurance premium in India is projected to grow Rs 1,230,000 Crore by 2010-11.

Total non-life insurance premium is expected to increase at a CAGR of 25% for the
period spanning from 2008-09 to 2010-11.

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

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


have made home insurance obligatory for housing loan approvals.

Health insurance is poised to become the second largest business for non-life insurers
after motor insurance in next three years.
23

1.3 COMPANY PROFILE:


Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance
Company and Bajaj Finserv.
Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers
in the world,managing assets worth over a Trillion(Over INR 55,00,000 Crores).Allianz SE
has over 115 years of financial experience and is present in over 70 countries around the
world.
At Bajaj Allianz Life Insurance, customer delight is the guiding principle. Their business
philosophy is to ensure excellent insurance and investment solutions by offering customized
products, supported by the best technology.
VISION
To be the first choice insurer for customers
To be the preferred employer for staff in the insurance industry.
To be the number one insurer for creating shareholder value.
MISSION
As a responsible, customer focused market leader, we will strive to understand the insurance
needs of the consumers and translate it into affordable products that deliver value for money.
Bajaj Allianz General Insurance received the Insurance Regulatory and Development
Authority (IRDA) certificate of Registration on 2nd May, 2001 to conduct General Insurance
business (including Health Insurance business) in India. The Company has an authorized and
paid up capital of Rs 110 crores. Bajaj Finserv Limited holds 74% and the remaining 26% is
held by Allianz, SE.
The company garnered a premium income of Rs. 2866 crore, achieving a growth of 11 %
over the last year. Bajaj Allianz has made a profit before tax of Rs. 149.8 crore and has
become the only private insurer to cross the Rs.100 crore mark in profit before tax in the last
two years. The profit after tax was Rs.95 crores, which is also the highest by any private
insurer. The company ranked second (after LIC) in number of policies sold in 2007-08, with
total market share of 7.36%.

24

1.4 PRODUCT PROFILE:

Unit linked insurance policy (ULIP)


A unit linked insurance policy is one in which the customer is provided with a life insurance
cover and the premium paid is invested in either debt or equity products or a combination of
the two. In other words, it enables the buyer to secure some protection for his family in the
event of his untimely death and at the same time provides him an opportunity to earn a return
on his premium paid. In the event of the insured person's untimely death, his nominees would
normally receive an amount that is the higher of the sum assured (insurance cover) or the
value of the units (investments).However, there are some schemes in which the policyholder
receives the sum assured plus the value of the investments.
Every insurance company has four to five ULIPs with varying investment options, charges
and conditions for withdrawals and surrender. Moreover, schemes have been tailored to suit
different customer profiles and, in that sense, offer a great deal of choice.
The advantage of ULIP is that since the investments are made for long periods, the chances
of earning a decent return are high.
Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes
while those who have an appetite for risk can opt for balanced or equity schemes. However,
the charges paid in these schemes in terms of the entry load, administrative fees, underwriting
fees, buying and selling charges and asset management charges are fairly high and vary from
insurer to insurer in the quantum as also in the manner in which they are charged.
Tax benefits
The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows a a
maximum of

Rs. 1,00,000 premiums paid for taxable income below Rs 8,50,000 and

Proceeds from ULIPs are tax-free under section 10(10D) unlike those from a mutual fund
which attract short term capital gains tax.

Key features
Premiums paid can be single, regular or variable. The payment period too can be regular or
variable. The risk cover (insurance cover) can be increased or decreased.As in all insurance
policies, the risk charge (mortality rate) varies with age. However, for an individual the risk
25

charge is always based on the age of the policyholder in the year of commencement of the
policy. These charges are normally deducted on a monthly basis from the unit value. For
instance, if there is an increase in the value of units due to market conditions, the sum at risk
(sum assured less the value of investments) reduces and so the risk charges are lower. The
maturity benefit is not typically a fixed amount and the maturity period can be advanced
(early withdrawal) or extended.
Investments can be made in gilt funds (government securities), balanced funds (part debt, part
equity), money-market funds; growth funds (equities) or bonds (corporate bonds).
The policyholder can switch between schemes (for instance, balanced to debt or gilt to
equity). The investment risk is transferred to the policyholder.The maturity benefit is the net
asset value of the units. The value would be high or low depending on the market conditions
during the period of the policy and the performance of the fund manager.
Thus there is no capital protection on maturity unless the scheme specially provides for it.
There could be policies that allow the policyholder to remain invested beyond the maturity
period in the event of the maturity value not being satisfactory.
POINTS TO REMEMBER ABOUT ULIP
First-year charges: Usually, a minimum of 15 per cent. However, high premiums attract
lower charges and vice versa. Charges can be as high as 70 per cent if the scheme affords a
lot of flexibility. Subsequent charges: Usually lower than first-year charges. However, some
insurers charge higher fees in the initial years and lower them significantly in the subsequent
years.
Administration charges: This ranges between Rs 15 per month to Rs 60 per month and is
levied by cancellation of units and also depends on the nature of the scheme.
Risk charges: The charges are broadly comparable across insurers.
Asset management fees: Fund management charges vary from 0.6 per cent to 0.75 per cent
for a money market fund, and around 1.5 per cent for an equity-oriented scheme. Fund
management expenses and the brokerage are built into the daily net asset value.
Switching charges: Some insurers allow four free switches in every year but link it to a
minimum amount. Others allow just one free switch in each year and charge Rs 100 for every
subsequent switch. Some insurers don't charge anything.

26

Top-ups: Usually attracts 1 per cent of the top-up amount. Top-up normally goes directly
into your investment account (units) unless you specifically ask for an increase in the risk
cover.
Surrender value of units: Insurers levy certain charges if the policy is surrendered
prematurely. This levy varies between insurers and could be around 75 per cent in the first
year, 60 per cent in the second year, 40 per cent in the third year and nil after the fourth year.
Fund performance: You could check out the performance of similar schemes (balanced with
balanced; equity with equity) across insurance companies.
Look at NAV performance over a period of at least two to three years. This can only give you
some indication about the credibility of the fund manager because past performance is no
guarantee to future returns, especially in insurance products where the emphasis is on longterm performance (10 years or more).
Since insurance is a product, which entails a long-term commitment on the part of the insurer,
it is important not to go only by the features or the cost advantages of schemes but by the
parentage of the insurer as well.
Comparing schemes based on costs is a fairly complex exercise. As a rule, the higher the
initial years' expenses the longer it takes for the policy to outperform its peers with low initial
years' costs and slightly higher subsequent year expenses.
Retire unhurt
Pension plans are essentially tailored to meet old age financial requirements. But there are
certain advantages in joining a pension plan.
First of all, contribution to pension funds upto Rs 10,000 is eligible for tax deduction under
section 80CCC. In other words, your pension contribution will get deducted from your
taxable income.
So if you are in the top tax bracket, liable to pay to a 30.6 per cent tax, then your tax savings
will be that much.
All life insurance companies offer pension products - both conventional and unit-linked. In
both cases you pay a certain premium amount for a specified length of time.
Usually, the minimum entry age is 18 years and the maximum age is 60 years. You can
choose to pay the premium for five to 30 years. When the policy matures, you receive onethird of the value of the accumulated amount as a lump-sum payment.
27

For the remaining, you can buy annuities either from the existing insurer or any other insurer.
While in a conventional scheme, your money is managed through the insurer's pooled
investment account and you are entitled to bonuses every year, in a ULIP you receive the
value of the investment in your individual account.
In a ULIP you have the flexibility to choose between a conservative scheme or an aggressive
scheme with high allocation to equities. Pension policy imposes huge penalties for early
termination.

HOW DOES ULIP WORK


Sara is a thirty-year old who wants a product that will give him market-linked returns as well
as a life cover. He wants to invest Rs 50,000 a year for 10 years in an equity-based scheme.
Based on this premium, the sum assured works out to Rs 532,000, the exact amount of
premium being Rs 50,032.
Based on the current NAV of the plan that Sara chooses to invest in, he is allotted units in the
scheme. Then, units equivalent to the charges are deducted from his portfolio.
The charges in the first year include a 14 per cent sales charge, an administration charge (7
per cent for the first Rs 20,000 and 3 per cent for the remaining Rs 30,000) and underwriting
charges, which are deducted monthly.
Besides, mortality charges or the charges for the life cover are also deducted. For the
remaining nine years a 3.5 per cent sales charge and an administrative charge of 4 per cent
(for the first Rs 20,000 and 2 per cent for the remaining Rs 30,000) are levied in addition to
mortality charges.
Fund management fee of 1.5 per cent (equity) and brokerage are also charged. This cost is
built into the calculation of net asset value.
On maturity - that is, after 10 years - Sara would receive the sum assured of Rs 532,000 or
the market value of the units whichever is higher.
Assuming the growth rate in the market value of the units to be 6 per cent per annum Sara
would receive Rs 581,500; assuming the growth rate in the market value of the units to be 10
per cent, Sara would receive Rs 7,24,400.
In case of Sara's untimely death at the end of the ninth year, his beneficiaries would receive
the sum assured of Rs 532,000 or the market value of the units whichever is higher.
28

Assuming the growth rate in the market value of units is 6 per cent per annum, the value of
investment would be Rs 510,200.
However, his family will get Rs 532,000 as it is the sum assured.
Assuming a growth rate of 10 per cent per annum, the value of units at the end of the ninth
year would be Rs 621,900. Hence, the beneficiaries would get Rs 621,900.
ADVANTAGES OF ULIP

Can easily rebalance your risk between equity and debt without any tax implications.

Best suited for medium risk taking individuals who wish to invest in equity and debt
funds (at least 40% or higher exposure to debt). No additional tax burden for those
investing mainly in debt unlike in MFs.

RISKS ASSOCIATED WITH ULIPS


ULIPS as the name suggests are directly linked with the investments made by the insured.
Though he does not have a direct say in this but he does offer his choice in the form of
investment.
With stock markets soaring high a few months back, ULIPs were offering a good rate of
return, but now with a sudden downfall of the stocks, ULIPs are bound to become negative
investments.
At present, a policy-holder cannot understand the growth of his investments vis--vis other
funds in the market, since there is no benchmark to measure one fund against the other.
Usually a policy-holder could ask his investment in a ULIP to be, for example, 55 per cent in
equity and 45 per cent in debt. These components can be mixed according to his risk-taking
ability. An investor, therefore, would have to look at quarterly statements, where the fund
would be compared with benchmarks. However, this may not be a true representation of the
NAV, as the ULIP could be a mix of debt, liquid and equity investments.

29

Mutual Fund:
INTRODUCTION TO MUTUAL FUNDS:
A mutual fund is simply a financial intermediary that allows a group of investors to pool their
money together with a predetermined investment objective. The mutual fund will have a fund
manager who is responsible for investing the pooled money into specific securities (usually
stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of
the

mutual

fund

and

become

shareholder

of

the

fund.

Mutual funds are one of the best investments ever created because they are very cost efficient
and very easy to invest in (you don't have to figure out which stocks or bonds to buy).
By pooling money together in a mutual fund, investors can purchase stocks or bonds with
much lower trading costs than if they tried to do it on their own. But the biggest advantage to
mutual funds is diversification.
ACCORDING TO AMFI (ASSOCIATION OF MUTUAL FUND OF INDIA):
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 appreciation realized is 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.

30

CHARACTERISTICS OF A MUTUAL FUND:

Investors own the mutual fund.

Professional managers manage the affairs for a fee.

The funds are invested in a portfolio of marketable

Securities, reflecting the investment objective.

Value of the portfolio and investors holdings, alters with

Change in market value of investments.

ADVANTAGES OF MUTUAL FUNDS:

The advantages of investing in a Mutual Fund are:

1. Professional Management: You avail of the services of experienced and skilled


professionals who are backed by a dedicated investment research team which analyses the
performance and prospects of companies and selects suitable investments to achieve the
objectives of the scheme.
2. Diversification: Mutual Funds invest in a number of companies across a broad cross
section of industries and sectors. This diversification reduces the risk because seldom do all
stocks decline at the same time and in the same proportion.You achieve this diversification
through a Mutual Fund with far less money than you can do on your own.
3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps
you avoid many problems such as bad deliveries, delayed payments and unnecessary follow
up with brokers and companies. Mutual Funds save your time and make investing easy and
convenient.

31

4. Return Potential: Over a medium to longterm, Mutual Funds have the potential to provide
a higher return as they invest in a diversified basket of selected securities.
5. LowCosts: Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in brokerage, custodial
and other fees translate into lower costs for investors.
6. Liquidity: In open-ended schemes, you can get your money back promptly at AssetValue
(NAV) related prices from the Mutual Fund itself.With close-ended schemes, you can sell
your units on a stock exchange at the prevailing market price or avail of the facility of
repurchase through Mutual Funds at NAV related prices which some close-ended and interval
schemes offer you periodically.
7. Transparency: You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion invested in each
class of assets and the fund managers investment strategy and outlook.
8. Flexibility: Through features such as Systematic Investment Plans (SIP), Systematic
Withdrawal Plans (SWP) and dividend reinvestment plans, you can systematically invest or
withdraw funds according to your needs and convenience.
9. Choice of Schemes: Mutual Funds offer a variety of schemes to suit your varying needs
over a lifetime.
10. Well Regulated: All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors.The operations
of Mutual Funds are regularly monitored by SEBI.

32

DISADVANTAGES OF MUTUAL FUNDS:

No Guarantees: No investment is risk free. If the entire stock market declines in value, the
value of mutual fund shares will go down as well, no matter how balanced the portfolio.
Investors encounter fewer risks when they invest in mutual funds than when they buy and sell
stocks on their own. However, anyone who invests through a mutual fund runs the risk of
losing money.
Fees and commissions: All funds charge administrative fees to cover their day-to-day
expenses. Some funds also charge sales commissions or "loads" to compensate brokers,
financial consultants, or financial planners. Even if you don't use a broker or other financial
adviser, you will pay a sales commission if you buy shares in a Load Fund.
Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to
70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you
will pay taxes on the income you receive, even if you reinvest the money you made.
Management risk: When you invest in a mutual fund, you depend on the fund's manager to
make the right decisions regarding the fund's portfolio. If the manager does not perform as
well as you had hoped, you might not make as much money on your investment as you
expected. Of course, if you invest in Index Funds, you forego management risk, because
these funds do not employ managers.
A measurement of an option position or premium in relation to the underlying instrument. In
mutual fund also there is certain amount of risk-return factor associated according to the
investment option these are as follows,

RISK

RETURN

Equity

High

High

Balanced

Medium

Medium

Debt

Low

Low

33

TYPES OF MUTUAL FUNDS:


I. Closed-end or Open-end
Open-end Funds: An open-end fund is one that has units available for sale and repurchase at
all time. An investor can buy or redeem units from the fund itself at a price based on the Net
Asset Value (NAV) per unit.
Close-end Funds: A close ended fund makes a one-time sale of a fixed number of unit. It
does not allow investors to buy or redeem units directly from the funds. However, to provide
liquidity to investors many closed-end funds get themselves listed on stock exchange. Funds
do offer buy-back of funds/units thus offering another avenue for liquidity to closed-end
fund investor.
II. Load vs. No Load: Marketing of a new mutual fund scheme involves initial expense.
These expenses may be recovered from the investors in different ways at different times.
Three usual ways in which a funds sales expenses may be recovered from the investors are:
1. At the time of investors entry into the fund/scheme, by deducting a specific amount from
his initial contribution: front-end or entry load.
2. By charging the fund/scheme with a fixed amount each year, during the stated number of
years: deferred load.
3. At the time of the investors exit from the fund/scheme, by deducting a specific amount
from the redemption proceeds payable to the investor: back end or exit load These charges
made by the fund managers to the investors to cover distribution/sales/marketing expenses
are often called loads. Funds that charge front-end, back-end or deferred loads are called
load funds. Funds that make no such charges or loads for sales expenses are called no-load
funds.
In India, SEBI has defined a load as the one-time fee payable by the investor to allow the
fund to meet initial issue expenses including brokers/agents/distributors commissions,
advertising and marketing expenses.
A load funds declared NAV does not include load charges

34

III. Tax-exempt vs. Non-Tax exempt Funds: Generally, when a fund invests in tax-exempt
securities, it is called a tax-exempt fund. In India, after the 1999 Union Government Budget,
all of the dividend income received from any of the mutual funds is tax-free in the hands of
the investors. However, funds other than Equity Funds have to pay a distribution tax, before
distributing income to investors. In other words, equity mutual fund schemes are tax-exempt
investment avenues, while other funds are taxable for distributable income.

Different types of mutual fund


Types of Mutual Fund:
Once we have reviewed the fund classes, we are ready to discuss more specific fund types.
Funds are generally distinguished from each other by their investment objectives and types of
securities they invest in.
A. Broad Fund Types by Nature of Investments
Mutual funds may invest in equities, bonds or other fixed income securities, or short-term
money market securities. So we have Equity, Bonds and Money Market Funds. All of them
invest in financial assets. But there are funds that invest in physical assets. For example, we
may have Gold or other Precious Metal Funds, or Real Estate Funds.

B. Broad Fund Types by Investment Objective


Investors and hence the mutual funds pursue different objectives while investing. Thus,
Growth Funds invest for medium to long term capital appreciation.
Income Funds invest to generate regular income, and less for capital appreciation.
Value Funds invest in equities that are considered under-valued today, whose value will be
unlocked in the future.

35

C. Broad Fund Types by Risk Profile


The nature of a funds portfolio and its investment objective imply different levels of risk
undertaken. Funds are therefore often grouped in order of risk. Thus, Equity Funds have a
greater risk of capital loss than a Debt Fund that seeks to protect the capital while looking for
income. Money Market Funds are exposed to less risk than even the For internal use by
Training Department of Prudential ICICI Mutual Fund Bond Funds, since they invest in
short-term fixed income securities, as compared to longer-term portfolios of Bond Funds.
Money Market Funds: Lowest rung in the order of risk level, Money Market Funds invest
in securities of a short-term nature, which generally means securities of less than one-year
maturity.
Gilt Funds: Gilts are government securities with medium to long-term maturities, typically
of over one year (under one-year instruments being money market securities).
Debt Funds (or Income Funds): Next in the order of risk level, we have the general
category Debt Funds. Debt funds invest in debt instruments issued not only by governments,
but also by private companies, banks and financial institutions and other entities such as
infrastructure companies/utilities.
Diversifies Debt Funds: A debt fund that invests in all available types of debt securities,
issued by entities across all industries and sectors is a properly diversified debt fund. A
diversified debt fund is less risky than a narrow-focus fund that invests in debt securities of a
particular sector or industry.
Focused Debt Funds: Some debt funds have a narrow focus, with less diversification in its
investment. Examples include sector, specialized and offshore debt funds. Other examples of
focused funds include those that invest only in Corporate Debentures and Bonds or only in
Tax Free Infrastructure or Municipal Bonds.
High yield Debt Funds: There are funds which seek to obtain higher interest rates by
investing in debt instruments that are considered below investment grade. e.g. Junk Bond
Funds.
Assured Return Funds an Indian Variant: The SEBI permits only those funds whose
sponsors have adequate net-worth to offer assurance of return. For e.g. MIPs. Investors have
some lock-in period.
36

Fixed Term Plan Series Another Indian Variant: These are essentially closed-end.
These plans do not generally offer guaranteed returns. This scheme is for short-term investors
who otherwise place money as fixed term bank deposits or inter corporate bonds.
Equity Fund: As investors move from Debt Fund category to Equity Funds,
they face increased risk level.

No guarantee returns

High potential for growth of capital

Types of Equity Fund


a) Aggressive Growth Fund

Maximum capital appreciation

Invests in less researched or speculative shares.

Very volatile & riskier.

b) Growth Fund

Growth fund invest in companies whose earnings are expected to

Rise above average rate. e.g. Technology Fund

Capital appreciation in 3 5 years

Less volatile then aggressive growth fund.

c) Specialty Fund
They invest in companies that meet predefined criteria.
i) Sector Funds

Technology Fund

Pharmaceutical Fund

FMCG Fund

ii) Offshore Funds


Invest in equities in one or more foreign countries.
37

iii) Small-Cap equity Funds


Invest in shares of companies with relative lower market capital.
d) Diversified Equity Funds
A fund that seeks to invest only in equities, except for a very small portion in liquid money
market securities, bur is not focused on any one or few sectors or shares, may be termed a
diversified equity fund. While exposed to all equity price risks, diversified equity funds seek
to reduce the sector or stock specific risks through diversification.
i) Equity Linked Savings Schemes: An Indian Variant
Investment in these schemes entitles the investor to claim an income tax rebate, but usually
has a lock-in period before the end of which funds cannot be withdrawn.
e) Equity Index Funds
An index fund tracks the performance of a specific stock market index. The objective is to
match the performance of the stock market by tracking an index that represents the overall
market. The funds invest in share that constitute the index and in the same proportion on the
index.
f) Value Funds
Value Funds try to seek out fundamentally sound companies whose shares are currently
under-prices in the market. Value Funds will add only those shares to their portfolios that are
selling at low price-earnings ratios, low market to book value ratios and are undervalued by
other yardsticks. Fund concentrate on future growth prospect having good potential.
g) Equity Income Funds
There are equity funds that can be designed to give the investor a high level of current
income along with some steady capital appreciation, investing mainly in shares of companies
with high dividend yields.

Hybrid Funds Quasi Equity/Quasi Debt: Many mutual funds mix these (money
market, debt and equity) different types of securities in their portfolios. Such funds
are termed hybrid funds as they have a dual equity/bond focus.

38

Commodity Funds: While all of the debt/equity/money market funds invest in


financial assets, the mutual fund vehicle is suited for investment in any other- for
examples- physical assets.

Real Estate Funds: Specialized Real Estate Funds would invest in Real Estate
directly, or may fund real estate developers, or lend to them, or buy shares of housing
finance companies or may even buy their securities assets.

Following are the different products and services Offered by Mutual Fund Companies

Open ended schemes

Close ended schemes

Growth/Equity oriented Schemes

Income/Debt oriented Schemes

Balanced Funds

Money market or liquid funds

Gilt Funds

Index Funds

Exchange Traded Funds

Sectoral Funds

Thematic Funds

Commodity Funds

Real Estate Funds

Tax Saving Funds

Hybrid Funds

39

There are several ways for investment and disinvestments in mutual funds such as :

Systematic Investment Plans (SIPs)

Value Averaging

Systematic Transfer Plans (STPs)

Systematic Withdrawal Plans(SWPs)

Automatic Reinvestment Plans.

Open ended fund


In an open-ended fund, sale and repurchase of units happen on a continuous basis, at
NAV related prices, from the fund itself.
The corpus of open-ended funds, therefore, changes every day.

Close ended fund


A closed-end fund offers units for sale only in the NFO. It is then listed in the market.
Investors wanting to buy or sell the units have to do so in the stock markets. Usually
closed-end funds sell at a discount to NAV.
The corpus of a closed-end fund remains unchanged.

Growth fund
Provide capital appreciation over the medium to long-term

Investor who does not require periodic income distribution can choose the option,
where the incomes earned are retained in the investment portfolio and allowed to
grow, rather than being distributed to investors.

Investors with longer investment horizons and limited requirements for income
choose this option.

The return to the investor who chooses a growth option is the rate at which his
initial investment has grown over a period for which he has invested in the fund.

The investor choosing this option will vary the NAV with the value of the
investments portfolio , while the no. of units held with remains constant.

40

Income fund
Provide regular and steady income to investor

Balanced fund
Provide both growth and regular income.

Money market fund


Provide easy liquidity, regular income and preserve the income

Tax saving scheme


offer tax rebeats to the under specific provisions of the Indian income tax laws
Investment made under some schemes are allowed as deduction U/S 88 of the income
tax act .

Automatic Reinvestment Plans


Reinvestment of amount of dividend made by fund in the same fund.
In this option, the no. of units held by the investor will change with every

reinvestment.
The value of units will be similar to that under the dividend option
There are four types of plans as follows

Lump sum Investment


It is one time investment..
Investors can invest particular amount one time for fixed time of period.

Systematic Investment Plans( SIP) For regular investment


SIP is investing a fixed sum periodically in a disciplined manner for long term.
It gives benefit of Rupee Cost averaging.
In SIP monthly minimum Rs.500 or Rs.100 are invested.
Interest is calculating compoundly.
Many SIP gives insurance benefits.

41

VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the


investor flexibility with respect to the amount and frequency of investment.
In VAP, investor has to impose voluntary self discipline.

Systematic Withdrawal Plan ( SWP) For regular income


The lump sum amount is invested for one time and then fixed percent amount is
withdraw monthly.
Remaining amount will grow continuously.
This plan is suitable for retired person, because it gives regular income.

Systematic Transfer Plan ( STP)


Transfer on a periodic basis a specified amount from one scheme to another within the
same fund family.
It gives option to the investor if the current fund performance in not satisfactory.

Dividend option

Investors will receive dividends from the mutual fund , as an and when
dividends are declared.

Dividends are paid in the form of warrants or are directly credited to the
investors bank accounts.

In normal dividend plan , periodicity of dividends is left to the fund managers,


the timing of the dividend payout is decided by fund manager.

Mutual funds provide the option of receiving dividends at pre-determined


frequencies,wich can vary from daily,weekly,monthly,quarterly,half-yearly and
annual. Investors can choose the frequency of dividend distribution that suits
their requirements.

Investors choosing this option have a fixed no. of units invested in the fund and
earned incomes on this investment.

The NAV of this investors holding will vary with changes in the value of
portfolio and the impact of the proportion of income earned by the fund to what
is actually distributed as dividend.

42

REGULATORS IN INDIA

SEBI - The capital markets regulators also regulates the mutual funds in India. SEBI
requires all mutual funds to be registered with them. SEBI issues guidelines for all
mutual funds operations - investment, accounts, expenses etc.

RBI as supervisor of banks owned mutual funds - As banks in India came under the
regulatory jurisdiction of RBI, bank owned funds to be under supervision of RBI and
SEBI.

RBI as supervisor of Money Market Mutual Funds - RBI has supervisory


responsibility over all entities that operate in the money markets. Hence in the past
Money Market Mutual Funds scheme of Mutual funds had to be abide by policies laid
down by RBI.

Recently, it has been decided that Money Market Mutual Funds of registered mutual funds
will be regulated by SEBI through SEBI (Mutual Fund) Regulations 1996.

COMPARISON OF ULIP VS MUTUAL FUND

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds
in terms of their structure and functioning. As is the cases with mutual funds, investors in
ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared
for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to the
ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt
funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with
an insurance component.
However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs
43

1. Mode of investment/ investment amounts


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

2. Expenses
In mutual fund investments, expenses charged for various activities like fund management,
sales and marketing, administration among others are subject to pre-determined upper limits
as prescribed by the Securities and Exchange Board of India.
For example equity-oriented funds can charge their investors a maximum of 2.5% per annum
on a recurring basis for all their expenses; any expense above the prescribed limit is borne by
the fund house and not the investors.

44

Similarly funds also charge their investors entry and exit loads (in most cases, either is
applicable). Entry loads are charged at the timing of making an investment while the exit load
is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with no
upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and
Development Authority. This explains the complex and at times 'unwieldy' expense structures
on ULIP offerings. The only restraint placed is that insurers are required to notify the
regulator of all the expenses that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher expenses translate
into lower amounts being invested and a smaller corpus being accumulated.

3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis,
albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where
their monies are being invested and how they have been managed by studying the portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios. During
our
interactions with leading insurers we came across divergent views on this issue.

While one school of thought believes that disclosing portfolios on a quarterly basis is
mandatory, the other believes that there is no legal obligation to do so and that insurers are
required to disclose their portfolios only on demand.

45

Some insurance companies do declare their portfolios on a monthly/quarterly basis. However


the lack of transparency in ULIP investments could be a cause for concern considering that
the amount invested in insurance policies is essentially meant to provide for contingencies
and for long-term needs like retirement; regular portfolio disclosures on the other hand can
enable investors to make timely investment decisions.

4. Flexibility in altering the asset allocation


As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are
largely
comparable. For example plans that invest their entire corpus in equities (diversified equity
funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing
only in debt instruments (debt funds) can be found in both ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt
from the same fund house, he could have to bear an exit load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to shift investments
across various plans/asset classes either at a nominal or no cost (usually, a couple of switches
are allowed free of charge every year and a cost has to be borne for additional switches).
Effectively the ULIP investor is given the option to invest across asset classes as per his
convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when the ULIP
investor's equity component has appreciated, he can book profits by simply transferring the
requisite amount to a debt-oriented plan.

46

5. Tax benefits

ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This
holds good, irrespective of the nature of the plan chosen by the investor. On the other hand in
the mutual funds domain, only investments in tax-saving funds (also referred to as equitylinked savings schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example
diversified equity funds, balanced funds), if the investments are held for a period over 12
months, the gains are tax free; conversely investments sold within a 12-month period attract
short-term capital gains tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term
capital gain is taxed at the investor's marginal tax rate.
Despite the seemingly similar structures evidently both mutual funds and ULIPs have their
unique set of advantages to offer. As always, it is vital for investors to be aware of the
nuances in both offerings and make informed decisions.

47

CHAPTER II
REVIEW OF LITERATURE

Mr.Madhu T, made a study on ULIPs hold edge over mutual funds.The findings shows
that

distributors would push unit linked insurance plans (ULIPs) to earn better

commission. ULIPs offer attractive frontend commissions to agents. However, independent


financial advisors believe that though there is a possibility of some distributors favoring
ULIPs in the short term, the new directive would be beneficial for both the industry and
investors in the long run.(Mr.Madhu T, The Economic Times,June2009).
Mr.Deepak Shenoy ,in his article Comparing ULIP returns to Mutual Funds, he reveals
that, over the last three years, their growth mutual fund has given better returns than the
"MAXIMISER" option of their ULIPs.(Deepak Shenoy, The Indian Investors Blog, August
2006).

Mr.Murthaza and Sony, in their article An Overview on ULIP, This article is an initiative from
Bajaj Allianz to create better understanding of ULIPs and its benefits so that investors can
avail maximum returns from their investments.

Mr.Bernz Jayma P, made a study on Mutual Fund disadvantages. He suggested that ,If
you're new to stock market investing you may have heard that mutual funds would be a good
way for you to get started. That's actually good advice, but mutual funds have their own
pitfalls to watch out for.

48

CHAPTER III
DATA ANALYSIS AND INTERPRETATION
(A) Comparison of customers based on their Gender:

Gender
Cumulative
Frequency Percent Valid Percent
Valid

Percent

Male

74.0

74.0

74.0

74.0

Female

26.0

26.0

26.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
The above graph shows that, out of 100 customers, 74% of the respondents are male policy
holders and the rest 26% are female policy holders.

49

(B) Comparison based on their Marital Status:

Marital
Cumulative
Frequency Percent Valid Percent
Valid Married
Unmarried
Total

Percent

66.0

66.0

66.0

66.0

34.0

34.0

34.0

100.0

100.0

100.0

100.0

INTERPRETATION:
From a sample of 100 customers, 66% of the policy holders are unmarried and the rest 34%
of the policy holders are married.

50

(C) Comparison based on their Age:


Age
Cumulative
Frequency
Valid

Percent

Valid Percent

Percent

20-30

12.0

12.0

12.0

12.0

30-40

28.0

28.0

28.0

40.0

40-50

34.0

34.0

34.0

74.0

50-60

22.0

22.0

22.0

96.0

60-70

4.0

4.0

4.0

100.0

Total

100.0

100.0

100.0

INTERPRETATION:
The graph shows that majority of the sample respondents were in the age group of 40-50 yrs
ie,34%, 12% were in the age group of 20-30 yrs & 28% of them were 30-40 yrs, 22% were in
the age group of 50-60 yrs and 4% were in the age group of 60-70 yrs.
51

(D) Occupation:
Occupation
Cumulative
Frequency Percent Valid Percent
Valid Government

Percent

36.0

36.0

36.0

36.0

Private service

28.0

28.0

28.0

64.0

Business

22.0

22.0

22.0

86.0

NRIs

6.0

6.0

6.0

92.0

Others

8.0

8.0

8.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
The graph shows that majority of the policy holders are working in the Government sector
i.e.36% , 28% of them are engaged in Private service, 22% of them are business field, 6% of
them are NRIs and 8% of them are engaged other works.
52

(E) Annual Income:


Annual income

Frequency Percent
Valid Below 2

Valid

Cumulative

Percent

Percent

38.0

38.0

38.0

38.0

2-4 lakhs

46.0

46.0

46.0

84.0

4-6 lakhs

12.0

12.0

12.0

96.0

6-8 lakhs

4.0

4.0

4.0

100.0

100.0

100.0

100.0

lakhs

Total

INTERPRETATION:
The graph shows that 46% of the policy holders get a salary of 2-4 lakhs, 38% of the policy
holders get a salary of below 2 lakhs, 12% of the policy holders get a salary of 4-6 lakhs, 3 of
the policy holders get a salary below 2 lakhs and 4% of them above 6-8 lakhs.
53

(i)

Sources that help in Investment Decision making:


Sources that helps you in making the investment decisions.
Cumulative
Frequency Percent Valid Percent
Valid Financial

Percent

10.0

10.0

10.0

10.0

4.0

4.0

4.0

14.0

Brokers/Agent

54.0

54.0

54.0

68.0

Friends

26.0

26.0

26.0

94.0

6.0

6.0

6.0

100.0

100.0

100.0

100.0

journal
Television

Consultants
Total

INTERPRETATION:
From the sample of 100 customers, 54% of the customers are strongly agree that the agents or
brokers helps them to make investment decision, 26% of the customers point out their friends
take part in the investment decision. And 10% customers reveal that the financial journals
help them, Remaining 6% is from consultants, and 4% selects television as the source.
54

(ii)

Factors that influence investment decisions:


Factors that influence your investment decisions in a particular company.
Cumulative
Frequency
Valid

Attractive schemes
Tax benefits
High reputation
Rate of return
Variety of products
Total

Percent

Valid Percent

Percent

4.0

4.0

4.0

4.0

54.0

54.0

54.0

58.0

6.0

6.0

6.0

64.0

28.0

28.0

28.0

92.0

8.0

8.0

8.0

100.0

100.0

100.0

100.0

INTERPRETATION:
54% customers agree that the tax benefit is influence them to buy policy ,28% looks the rate of
return what they will earn, variety of products from the company attracts 8% customers, and high
reputation of the company attracts 6% of the customers, and remaining 4% pointing out the
attractive schemes.

55

(iii)

Generally preferred investment avenues:


You generally like to invest money.
Cumulative
Frequency Percent Valid Percent

Valid Insurance

Percent

26.0

26.0

26.0

26.0

Stock market

2.0

2.0

2.0

28.0

Mutual fund

12.0

12.0

12.0

40.0

Bank deposit

56.0

56.0

56.0

96.0

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Both insurance and


mutual fund
Total

INTERPRETATION:
From a sample of 100 customers, 56% of the customers invest money in bank deposit, 26% in
insurance sector,12% in mutual fund, then 4% in both insurance and mutual fund and
remaining 2% in stock market.
56

(iv)

Best life insurance company survey:


According to you who among the following life insurance companies is
best.
Cumulative
Frequency Percent Valid Percent

Valid Bajaj Allianz

Percent

54.0

54.0

54.0

54.0

10.0

10.0

10.0

64.0

Tata AIG

8.0

8.0

8.0

72.0

Aviva Life

6.0

6.0

6.0

78.0

22.0

22.0

22.0

100.0

100.0

100.0

100.0

HDFC Standard
life

SBI Life
Total

INTERPRETATION:
From a sample of 100 customers, 54% customers select Bajaj Allianz is the best insurance
company, and 22% customers choose SBI Life, 10% select HDFC, 8% for Tata AIG and
remaining 6% stands for Aviva Life Insurance Company.
57

(v)

Bajaj Allianz product ratings:


How would you rate our products.
Cumulative
Frequency Percent Valid Percent
Valid Excellent

Percent

4.0

4.0

4.0

4.0

Good

74.0

74.0

74.0

78.0

Fair

18.0

18.0

18.0

96.0

Poor

4.0

4.0

4.0

100.0

Total

100.0

100.0

100.0

INTERPRETATION:
From a sample of 100 customers,74% customers thinks that the products offered by Bajaj
Allianz Life insurance co. is good,4% thinks its excellent,18% of them select Bajaj Allianz
products are fair, and remaining 4% not satisfied with our products.
58

(vi)

Customer preference of ULIPs:

I would like to invest money in ULIP.


Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

4.0

4.0

4.0

4.0

Agree

66.0

66.0

66.0

70.0

Neutral

16.0

16.0

16.0

86.0

Disagree

10.0

10.0

10.0

96.0

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Strongly disagree
Total

INTERPRETATION:
From a sample of 100 customers, 66% agree, 4% of them strongly supporting that fact, and
16% has no opinion about it. And 4% strongly disagreed; remaining 10% also disagree with
investment in ULIP.
59

(vii)

Is insurance the attraction in a ULIP:


Reason for choosing ULIPs because of insurance coverage.
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

28.0

28.0

28.0

28.0

Agree

64.0

64.0

64.0

92.0

Neutral

4.0

4.0

4.0

96.0

Disagree

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers, 64% of the customers agree, 28% of them strongly support
it, 4% customers didnt say anything, and remaining 4% disagree with that fact. So we can
see that most of the Customers choose ULIP because of insurance coverage.

60

(viii) Customer preference of Mutual Funds:


I would like to invest money in mutual funds.
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

6.0

6.0

6.0

6.0

Agree

26.0

26.0

26.0

32.0

Neutral

28.0

28.0

28.0

60.0

Dsagree

36.0

36.0

36.0

96.0

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Strongly disagree
Total

INTERPRETATION:
From a sample of 100 customers,26% of the customers agree with that fact,6% of the
customers strongly support it,and 28% customers have no idea about it.And remaining 10%
disagreed,out of this 10%, 4% strongly disagreed with it.
61

(ix)

Customer thoughts about risks in ULIP vs MFs:


Mutual funds are more risky than ULIP products.
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

34.0

34.0

34.0

34.0

Agree

54.0

54.0

54.0

88.0

Neutral

8.0

8.0

8.0

96.0

disagree

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers,54% of the customers thinks that mutual funds are more
risky than ULIP products,34% strongly agree with this statement.8% customers have no
opinion about it,and remaining 4% disagree with it.
62

(x)

Customer thoughts about advantages in ULIP vs MFs:


ulip has advantage over mutual funds.
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

24.0

24.0

24.0

24.0

Agree

62.0

62.0

62.0

86.0

Neutral

10.0

10.0

10.0

96.0

Disagree

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
62% of the customers agree with ULIP have advantage over mutual fund statement.24%
customers strongly agree with this fact. And 4% of customers are not supporting the
statement. And remaining 10% have no opinion about it.
63

(xi)

Importance of safety factor in ULIP investments:


Safety
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

8.0

8.0

8.0

8.0

Agree

52.0

52.0

52.0

60.0

Neutral

4.0

4.0

4.0

64.0

Disagree

30.0

30.0

30.0

94.0

6.0

6.0

6.0

100.0

100.0

100.0

100.0

Strongly disagree
Total

INTERPRETATION:
From a sample of 100 customers,52% customers agree,8% strongly agree,30% customers
were disagree with that fact,6% strongly disagree, and remaining 4% have no opinion about
safety factor is important in the investment of ULIP.
64

(xii)

Importance of liquidity factor in ULIP investments:


Liquidity
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

6.0

6.0

6.0

6.0

Agree

10.0

10.0

10.0

16.0

Neutral

10.0

10.0

10.0

26.0

Disagree

60.0

60.0

60.0

86.0

Strongly disagree

14.0

14.0

14.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers, majority of the customers disagree i.e. 60%, 14% strongly
disagree with that fact. And 6% strongly agree,10% agree,and remaining 10% neither agree
nor disagree with that statement.
65

(xiii) Importance of rate of return in ULIP investments:


Rate of return
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

12.0

12.0

12.0

12.0

Agree

42.0

42.0

42.0

54.0

Neutral

6.0

6.0

6.0

60.0

Disagree

24.0

24.0

24.0

84.0

Strongly disagree

16.0

16.0

16.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers, majority of the customers agree i.e. 42%, 12% strongly
agree with that fact. And 24% disagree,16% strongly disagree, and remaining 6% neither
agree nor disagree with that statement.

66

(xiv)

Importance of tax savings in ULIP investments:


Tax savings
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

12.0

12.0

12.0

12.0

Agree

42.0

42.0

42.0

54.0

Neutral

10.0

10.0

10.0

64.0

Disagree

32.0

32.0

32.0

96.0

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Strongly disagree
Total

INTERPRETATION:
From a sample of 100 customers, majority of the customers agree i.e. 42%, 12% strongly
agree with that fact. And 32% disagree,4% strongly disagree, and remaining 10% neither
agree nor disagree with that statement

67

(xv)

Effect of Past schemes performance on ULIP investment decisions:


past scheme's performance
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

16.0

16.0

16.0

16.0

Agree

16.0

16.0

16.0

32.0

Neutral

14.0

14.0

14.0

46.0

Disagree

46.0

46.0

46.0

92.0

8.0

8.0

8.0

100.0

100.0

100.0

100.0

Strongly disagree
Total

INTERPRETATION:
From a sample of 100 customers, majority of the customers disagree i.e. 46%, 8% strongly
disagree with that fact. And 16% strongly agree,16% agree, and remaining 14% neither agree
nor disagree with that statement.

68

(xvi)

Influence of ads in investment decisions of ULIPS:


Advertisement
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

18.0

18.0

18.0

18.0

Agree

22.0

22.0

22.0

40.0

Neutral

38.0

38.0

38.0

78.0

Disagree

10.0

10.0

10.0

88.0

Strongly disagree

12.0

12.0

12.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers, 22%agree, 18% strongly agree with that fact. And 10%
disagree, 12% strongly disagree, and remaining 38% neither agree nor disagree with that
statement.

69

(xvii) Importance of safety factor in MF investments:


Safety
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

4.0

4.0

4.0

4.0

Agree

8.0

8.0

8.0

12.0

Neutral

16.0

16.0

16.0

28.0

Disagree

60.0

60.0

60.0

88.0

Strongly disagree

12.0

12.0

12.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers,8% customers agree,4% strongly agree,60% customers were
disagree with that fact 12% strongly disagree, and remaining 16% have no opinion about
safety factor is important in the investment of mutual fund.

70

(xviii) Importance of liquidity factor in MF investments:


Liquidity
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

14.0

14.0

14.0

14.0

Agree

38.0

38.0

38.0

52.0

Neutral

30.0

30.0

30.0

82.0

Disagree

12.0

12.0

12.0

94.0

6.0

6.0

6.0

100.0

100.0

100.0

100.0

Strongly disagree
Total

INTERPRETATION:
From a sample of 100 customers, majority of the customers agree i.e. 38%, 14% strongly
agree with that fact. And 12% disagree,6% strongly disagree, and remaining 30% neither
agree nor disagree with that statement.
71

(xix)

Importance of rate of return in MF investments:


Rate of return
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

4.0

4.0

4.0

4.0

Agree

14.0

14.0

14.0

18.0

Neutral

42.0

42.0

42.0

60.0

Disagree

30.0

30.0

30.0

90.0

Strongly disagree

10.0

10.0

10.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers, 30% disagree, 10% strongly disagree with that fact. And
14% agree,4% strongly agree, and remaining 42% neither agree nor disagree with that
statement.

72

(xx)

Importance of tax savings in MF investments:


Tax savings
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

6.0

6.0

6.0

Agree

12.0

12.0

18.0

Neutral

23

46.0

46.0

64.0

Disagree

12

24.0

24.0

88.0

12.0

12.0

100.0

50

100.0

100.0

Strongly disagree
Total

INTERPRETATION:
From a sample of 100 customers, 24% disagree, 12% strongly disagree with that fact. And
12% agree,6% strongly agree, and remaining 46% neither agree nor disagree with that
statement.
73

(xxi)

Effect of Past schemes performance on MF investment decisions:


past scheme's performance
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

12.0

12.0

12.0

Agree

22

44.0

44.0

56.0

Neutral

15

30.0

30.0

86.0

Disagree

14.0

14.0

100.0

50

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers, 44% agree, 12% strongly agree with that fact. And 14%
disagree, and remaining 30% neither agree nor disagree with that statement.

74

(xxii) Influence of ads in investment decisions of MFs:


Advertisement
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

8.0

8.0

8.0

8.0

Agree

32.0

32.0

32.0

40.0

Neutral

48.0

48.0

48.0

88.0

Disagree

8.0

8.0

8.0

96.0

Strongly disagree

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
From a sample of 100 customers, 8% strongly agree,32% agree with that fact. And 8%
strongly disagree,4% disagree, and remaining 24% neither agree nor disagree with that
statement.

75

(xxiii) Customer willingness to re-invest in Bajaj Allianz:


Reinvestment in the same company again
Cumulative
Frequency Percent Valid Percent

Percent

Valid Strongly agree

46.0

46.0

46.0

46.0

Agree

30.0

30.0

30.0

76.0

Neutral

12.0

12.0

12.0

88.0

Disagree

8.0

8.0

8.0

96.0

Strongly disagree

4.0

4.0

4.0

100.0

100.0

100.0

100.0

Total

INTERPRETATION:
46% of the customers express their satisfaction level with Bajaj Allianz service. They
Strongly agree with the statement, 30% customers also agree with it. And 12% have neutral
situation. And remaining 12% not satisfied with Bajaj Allianz.

76

HYPOTHESIS-1
H0: There is no relationship between investment of ULIP and Insurance coverage.
H1: There is relationship between investment of ULIP and insurance coverage.
CORRELATIONS
Correlations
Reason for
choosing
ULIPs

I would like to invest

I would like to

because of

invest money

insurance

in ULIP.

coverage.

Pearson Correlation

.729**

money in ULIP.
Sig. (2-tailed)

.000

N
Reason for choosing

Pearson Correlation

100

100

.729**

ULIPs because of
insurance coverage.

Sig. (2-tailed)

.000

100

100

**. Correlation is significant at the 0.01 level (2-tailed).

INTERPRETATION:
The above table shows that the reason for choosing ULIPs because of insurance coverage is
0.000 which shows that there is a relationship between investment of ULIP and insurance
coverage. We can choose alternate hypothesis because the significant value is less than
0.005.Hence it is very clear that most of the customers choosing ULIP product because which
provide insurance coverage over their investment. So we can conclude that most of the
customers prefer ULIP products than Mutual funds because of insurance coverage.
77

HYPOTHESIS-2

H0: There is no relationship between the investment pattern and annual income of the
customers.
H1: There is a relationship between the investment pattern and annual income of the
customers.
T-Test
Group Statistics
Annual
income
I would like to invest

Below 2 lakhs

Mean

Std.

Std. Error

Deviation

Mean

38

2.26

.806

.185

2.00

.000

.000

38

3.37

.955

.219

4.00

.000

.000

money in ULIP.
6-8 lakhs
I would like to invest

Below 2 lakhs

money in mutual funds.


6-8 lakhs

Independent Samples Test


t-test for
Levene's Test for Equality of

Equality of

Variances

Means

F
I would like to invest

Equal variances

money in ULIP.

assumed

Sig.
1.428

78

t
.247

.451

Equal variances not

1.424

assumed
I would like to invest

Equal variances

3.956

.061

-.914

money in mutual funds. assumed


Equal variances not

-2.882

assumed

Independent Samples Test


t-test for Equality of Means

Mean
df
I would like to invest

Equal variances

money in ULIP.

assumed
Equal variances not

Sig. (2-tailed)

Difference

19

.657

.263

18.000

.172

.263

19

.372

-.632

18.000

.010

-.632

assumed
I would like to invest

Equal variances

money in mutual funds. assumed


Equal variances not
assumed

79

INTERPRETATION:
The above table shows the significance value of the relationship between investment pattern
and annual income is 0.247 for ULIP and 0.061 for Mutual Funds. It shows that there is no
relationship between the investment pattern and annual income level of the customers. We
can choose Null hypothesis because the significant value is greater than 0.005.Hence it is
very clear that the income level does not take part in the investment decision. It may be
change the premium of the policy, but not the decision.

80

CHAPTER IV
SUMMARY AND CONCLUSION

4.1 FINDINGS:

After survey there are some findings as follows.

As insurance sector is growing rapidly so most of the life insurance players are selling
ULIP plans. And the awareness about ULIP is growing most of the people knows the
ULIP of life insurance. Since last 4-5 years the returns provided by ULIP were very
good so people tend more towards ULIP

Middle class people who are interested in investment but they are not aware of such
options so more awareness should be there, as main target customer are the middle
class peoples.

While investing any insurance company customer prefers for good branded company
Bajaj is Indias one of the most famous and richest family. And second preference is
given to SBI life as many people perceive that SBI Life is a govt. owned company so
people want security for their investment.

As now till date people in India dont wanted to invest in share market because then
were thinking that it is a bad thing but as the awareness about Mutual fund is
increasing as more and more private players are entering in the market. So awareness
about MF is not very good and it can be improved.

While survey I found that many all customers had already invested in ULIP and
Mutual Fund some people had invested in both options. 12% of people had invested
in Mutual Fund and 26% people had invested in ULIP and 4% people had invested in
both the options.

81

4.2 SUGGESTIONS:

While investing in mutual fund 44% of the customers looks their return,42%
customers observe the schemes performance in past years.

First reason or preference that why an investor is interested in ULIP is Investment


Purpose, and second is to its returns and after that they investing because they are
getting the tax benefit. Then again there are some people who are investing for
pension planning and security.

In future people will be more preferring to the security of their money means they
want a secured option which should provide good returns. As ULIP are the option in
which you can have the security also and good returns. The second choice of the
investors is return of their money.

54% of people given Best rating to the Bajaj Allianz Life Insurance ULIP, so from
this we can analyze that Bajaj Allianz Life Insurance is doing good but it is having
good potential in Market. To improve its market share they should improve the
awareness level of the common people.

Innovative Products and good brand name are the main success factor for Bajaj Allianz Life
Insurance. 6% customers are attracted due to the high reputation of the company. So if
BALIC wants to penetrate its market share they should improve the marketing strategy,
improving the distribution channel etc.

82

4.3 CONCLUSION AND RECOMMENDATIONS:


From above analysis and survey we can conclude as follows

Awareness of ULIP is increasing as more number of private players is entering in life


insurance industry.

Mutual Fund is also getting more and more famous in Indian market as many private
companies innovating new funds as the investors demand.

ULIP differentiate from Mutual fund in respect of Insurance cover.

Investors in Bajaj Allianz Life ULIP will be getting the advantage of life insurance
cover.

People are turning towards the ULIP as a good investment option but as ULIP is in its
starting phase so customers prefer only big brands.

Mutual fund is having good growth but many customers from rural areas dont have
any knowledge about Mutual fund. They think it is very risky.

Even investors from towns like Kottayam, Alleppey dont have that much of
Knowledge about fund selection they all are depend on Brokers.

People in such small towns are investing in only good branded companies as they
dont believe on other financial companies for taking ULIP.

There is a need for insurers to undertake a demand audit in order to understand what
the Policyholder wants and needs.

Deriving the right feedback from customers and bringing out innovative products
which cater to customer demands will go a long way in tapping the market potential
of the insurance and Mutual fund sector.

For Bajaj Allianz Life Insurance They should go for creating more awareness about
its ULIP as now also people are just investing because Bajaj is Indias most Known
and Favorite brand in past.

83

BIBLIOGRAPHY

REFERENCE:
1) Research Methodology, C.R Kothari, 2nd edition
2) Outlook Money, 15 May 2005, ULIP Mania.
3) The Business Line, 10 June 2007, Know all About ULIPS.

WEBSITE
www.irdaindia.gov
www.bajajallianzlife.co.in
www.quickmba.com
www.amfindia.com
www.mba.com
www.articlebase.com

84

QUESTIONNAIRE
PERSONEL INFORMATION
1. Name:
2. Gender:
(a) Male

(a) Female

3. Marital status:
(a) Married

(b) Unmarried

(a) 20-30

(b) 30-40

(c) 40-50

(d) 50-60

4. Age:

(e) 60-70
5. Occupation:
(a) Government

(b) Private Service

(c) Business

(d) NRIs

(e) Others
6. Annual Income:
(a) Below 2 lakhs

(b) 2-4 lakhs

(c) 4- 6 lakhs

(d) 6-8 lakhs

(e) Above 8 lakhs


1. Sources that helps you in making the investment decisions.
(a) Financial journal

(b) Television

(c) Brokers or agents

(d) Friends

(e) Consultants
85

2. Factors that influence your investment decisions in a particular company.


(a) Attractive schemes

(b) Tax benefits

(c) High reputation

(d) Rate of return

(e) Variety of products


3. You generally like to invest money.
(a) Insurance

(b) Stock Market

(c) Mutual Fund

(d) Bank deposits

(e) Both insurance and mutual fund


4. According to you who among the following Life Insurance
is best.
(a) BAJAJ ALLIANZ

(b) HDFC STANDARDLIFE

(c) TATA AIG

(d) AVIVA LIFE INSURANCE

(e) SBI LIFE


5. How would you rate our products?
(a) Excellent

(b) Good

(c) Fair

(d) Poor

(e) Very poor

6. I would like to invest money in ULIP.


(a) Strongly agree

(b) Agree

(c) Neutral

(d) Disagree

(e) Strongly disagree

86

companies

7. Reason for choosing ULIPs because of insurance coverage.


(a) Strongly agree

(b) Agree

(c) Neutral

(d) Disagree

(e) Strongly disagree

8. I would like to invest money in Mutual Funds.


(a) Strongly agree

(b) Agree

(c) Neutral

(d) Disagree

(e) Strongly disagree

9. Mutual funds are more risky than ULIP products.


(a) Strongly agree

(b) Agree

(c) Neutral

(d) Disagree

(e) Strongly disagree

10. ULIPs have advantage over Mutual funds.


(a) Strongly agree

(b) Agree

(c) Neutral

(d) Disagree

(e) Strongly disagree

87

Do you view following factors/sources of information important while investing in


ULIP.
Strongly

Agree

agree

Neutral

Disagree

Strongly
disagree

(11) Safety
(12) Liquidity
(13) Rate of Return
(14) Tax savings
(15) past schemes
Performance
(16) Rating of ULIP
by Agencies
(17)Advertisements

88

Do you view following factors/sources of information important while investing in


Mutual Funds.
Strongly

Agree

Neutral

agree

Disagree

Strongly
disagree

(11) Safety
(12) Liquidity
(13) Rate of Return
(14) Tax savings
(15) past schemes
Performance
(16) Rating of ULIP
by Agencies
(17)Advertisements

18. I would like to reinvest my funds in the same company again.


(a) Strongly Agree

(b) Agree

(c) Neutral

(d) Disagree

(e) Strongly disagree

89