A TRAINING PROJECT A COMPARATIVE STUDY ON TRADITIONAL PRODUCTS & UNIT LINKED PRODUCTS OF SBI LIFE

SUBMITTED IN THE

PARTIAL FULFILLMENT OF

BACHELOR OF BUSINES ADMISTRATION (2010-2013) KURUKSHETRA UNIVERSITY, KURUKSHETRA

Under The Guidance of: Mr. Parveen Bhaskar ABSM

Submitted By: KAPIL KHURANA BBA (2010-2013) S D I M T,Jagadhri

S. D INSTITUTE OF MANAGEMENT & TECHNOLOGY Huda Road, Jagadhri 135003 (Yamuna Nagar) Haryana Affiliated To KURUKSHETRA UNIVERSITY, KURUKSHETRA

DECLARATION

I hereby declare that the dissertation entitled A COMPARATIVE STUDY ON TRADITIONAL PRODUCTS & UNIT LINKED PRODUCTS of SBI LIFE is submitted for the Degree of Bachelor of Business Administration is my original work and the dissertation has not formed the basis for the award of any degree, diploma, associateship, fellowship or similar other titles. It has not been submitted to any other University or Institution for the award of any degree or diploma.

KAPIL KHURANA

ACKNOWLEDGMENT
It gives me tremendous pleasure in acknowledging the valuable assistance extended to me by various personalities in the successful completion of this report. As a part of curriculum for BBA, I have undertaken project study on the topic A COMPARATIVE STUDY ON TRADITIONAL PRODUCTS & UNIT LINKED PRODUCTS " I sincerely acknowledge my indebtedness & gratitude to all those who have helped me for completing this project work with their guidance, information and encouragement. I would also like to express deep sense of gratitude to Dr. Shelly Gupta Director of (S.D.I.M.T ) JAGADHRI . It express my sincere gratitude to HOD Mrs. Rekha Rathor. I would like to thank my esteemed guide Ms. Jaya Kaushik Faculty of B.B.A. (SDIMT) for his guidance, sustained support and valuable time in helping me to complete my project.

PREFACE
For a management student theoretical knowledge as well as practical orientation exposes oneself to experiences, one can again be mastering it is best possible time. The title of my project is : "A Comparative Study on Traditional products & Unit

Linked products of SBI LIFE" During this project report I have tried my best to gain some valuable knowledge & experience & also tried to give some valuable suggestion to the organization.

EXECUTIVE SUMMARY
This is a project report on the topic "Comparative Study on Traditional Products and Unit Linked Products of SBI Life." SBI Life insurance company was established in the year 2001 with a commitment to expand and reshape the life insurance industry in India. The company was amongst the first private sector insurance companies to begin operations after receiving control from IRDA. The company has wide range of products and has driven its growth across a crosssection of people and cities. SBI Life is a joint venture between State Bank of India and Cardiff SA of France. SBI Bank has 74% stake in the company and Cardiff has 26 %. By the time company has crossed the 3 million policy milestones with a premium income of 1075 crores and a total sum assured of more than 54000 crores. Today, the company has established itself as the No. 1 private life insurer in the country and voted Indias most trusted private life insurance brand. Purpose: The purpose of this report was to analyze and compare the Traditional and Unit Linked products of SBI Life. We intend to give overview of Insurance with its distinctness and needs which includes the background of the organization, problems of the organization, methodology, and specific findings with suggestions. First Chapter, of this report introduction and scope of the project is given. Also the rationale of study is given with some points that offers favorable climate. Second Chapter Industry profile, need of insurance, evolution of insurance, benefits, privatization, existing private insurance players, returns, key challenges future opportunities Of the industry is given

Third Chapter covers the background of the company; it also includes the products classification of the company with its comparison to the traditional products. Fourth Chapter covers the research methodology used to achieve objectives of the project. Fifth Chapter consists of Data analysis and Interpretation related to customer survey. Sixth Chapter consists of findings which are drawn on the basis of data interpreted in the previous chapter and limitation of the study. The main findings were: 1. Maximum of people preferred unit linked plan because of the following reason: Short Term: It is the best feature of unit-linked plan, which was not present in traditional plan. For example: In the unit linked plan here are two products like. Unit plus - II. In the Unit Plus: There is no maturity date. Any Time after three year of commencement one can make partial or complete withdrawals as no penalty. Unit Plus II: Other paying the premium for 4 years one can withdrawal whole money with interest after 4 yearns Flexibility (Investment Option) In the Unit Linked plans there are more flexibilities. One can increase his death benefit. Flexible Contribution: One can Increase or decrease has annual contribution. The max. Decrease in contribution can be up to 20% of the Initial contribution.

2. 3.

LIC and SBI are the two most known brands in the market. Through the study it was found that the main purpose of buying insurance is Investment.

Seventh Chapter consist of suggestions & Limitations All the company should come out of a Unit Linked product that should aid every section of the society. The advisors should be made aware and educated so that they can extend their services not only in terms of collection of premium cheques from the policy holders but also to educate them about the insurance and the latest Non Traditional products. The company should target the lower segment customers also

CONTENTS

CHAPTER 1 Introduction 1.1 Title.. 1.3 Significance of the study. 1.4 Scope of the study CHAPTER 2 - Industry profile 2.1 Introduction to insurance.. 2.2 Key Challenges CHAPTER 3 - Organization profile 3.1 Background of company.. 3.3 Product comparison. CHAPTER 4 - Research Methodology 4.1 Title. 4.2Limitation. 4.3 Research Design.. 4.4 Sample Design. 4.5 Sources of Data 29 29 29 29 12 17 3 10 1 1 2

1.2 Rationale of study. 1

3.2 Product.. 15

CHAPTER 5 - Data Analysis & Interpretation

5.1 Charts. CHAPTER 6 - Findings CHAPTER 7 - Suggestions APPENDIX

30

Chapter 1

INTRODUCTION

INTRODUCTION 1.1 Title "A Comparative study on Traditional products V/S Unit Linked Products of SBI Life 1.2 1.3 Rationale of study To put into practice the tool and technique learned theoretically in the class room. To have practical exposure to the field and face the ground reality To understand the real insurance world Significance of the Study Following is the significance felt by the Researcher while doing this Project.

TO THE RESEARCHER It provided an opportunity to understand the importance of various factor such as type of policy, term of policy, sum assured amount etc. for the sale of life insurance products. It gave a chance to use the conceptual knowledge in actual environment in preparing the researcher to use the knowledge in his future endeavors. It gave an insight on the Topic like policies awareness, policies preference, and type of investment plan, which were of prime importance from the marketing point of view. It helped in assessing the factors, which influence the buying behavior and defining the layer itself.

TO THE COMPANY The study provided the present status of the company and its products in the

market. The study provided the base for further assessment and comparative analysis

of company's product against other company's products. 1.4 It provided the information about the weakness and strengths of the company. Scope of the study

The study was conducted among the clients of SBI Life Insurance Co. Ltd., Saharanpur. The study was conducted from 16st June to 16th July 2012.

Chapter 2 INDUSTRY PROFILE

INDUSTRY PROFILE

2.1

Indian Insurance Industry - Introduction India is the largest democracy in the world having a population more than one billion. It is 5th largest in the world in terms of Purchasing Power Parity (PPP). India's GDP growth rate is over 6 percent per year on average for the last decade and saving rate is around 26 percent of GDP. Through India's economic development, it becomes the most lucrative insurance markets in the world. Before the year 1999 there were monopoly of state run Life Insurance Corporation of Indian (LIC) in life insurance sector and General Insurance Corporation of India (GIC) with its four subsidiaries in general sector. In the wake of reform process and passing Insurance Regulatory Development Act (IRMA) through Indian Parliament in 1999, Indian Insurance was opened for private companies.

INDUSTRY PROFILE OF LIFE INSURANCE Insurance is an Rs.400 billion business in India, and together with banking services adds about 7% to Indias GDP. Gross premium collection is about 2% of GDP and has been growing by 15-20% per annum. India also has the highest number of life insurance policies in force in the world and total investible funds with the LIC are almost 8% of GDP .Yet more than three-fourth of Indias insurable population has no life insurance or pension cover. Health insurance of any kind is negligible and other forms of non life insurance are much below international standards.

To tab the vast insurance potential and to mobilize long term savings we need reforms which include revitalizing and restructuring of the public sector companies, and opening of the public sector companies, and opening up the sector to private players. A statutory body needs to be made to regulate the market and promote a healthy market structure. Insurance Regulatory Development Authority (IRA) is one such body, which checks on these tendencies. IRDA role comprises of following three functions: Protection of consumers interest To ensure financial soundness and solvency of the insurance industry and to ensure healthy growth of the insurance market.

www.irdaindia.com

What is Insurance? Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party on happening of a certain event. Insurance is a protection against a financial loss arising on the happening of an unexpected event. Insurance Companies collect premium to provide for this protection. A loss is paid out of this premium collected from the insuring public. The insurance company acts as a trustee to the amount collected through premium. In addition to serving as a protective cover, life insurance acts as a flexible moneysaving scheme, which empowers you to accumulate wealth-to buy a new car, get your children married and even retire comfortably.

Insurance is generally classified in three main categories, (i) Life Insurance, (ii) Health Insurance and (iii) General Insurance. To get insurance an individual or an organization can approach to an insurance company directly, through Insurance Agent of the concerned company or through Intermediaries Benefits of Insurance Insurance is the instrument of Security, saving and peace of mind. It provides several benefits by paying a small amount of premium to an insurance company as: Safeguards oneself and one's family for future requirements. Peace of mind in case of financial loss. Encourage saving. Tax rebate. Protection from the claim made by creditors. Security against a personal loan, housing loan or other types of loan. Provide a protection cover to industries, agriculture, women and child.

In this economic reform process the Insurance Companies will boost the socioeconomic development process. The huge amount of funds that will be at the disposal of Insurance Companies will be directed as desired avenues like housing, safe drinking water, electricity, primary education and infrastructure. The growth of the debt market will also get a boost. Above all the policyholders will get better pricing of products from competitive insurance companies. Life insurance is universally acknowledged to be an institution, which eliminates 'risk' and provides the timely aid to the family in the unfortunate event of death of the breadwinner.

Life Insurance is a contract for payment of a sum of money to the person assured (or nominee) on the happening of the event insured against. The contract provides for the payment of premium periodically to the Insurance Company by the assured. The contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier. There are some benefits of life Insurance as: Protection: Life Insurance guarantees full protection against risk of death of the assured. In case of death, full sum assured is payable. Long Term Saving: Life insurance encourages long term saving. By paying a small premium in easy installments for a long period a handsome saving can be achieved. Liquidity: Loan can be obtained against a policy assured whenever required.

Tax Benefit: Tax relief in income tax and wealth tax can be availed on the premium paid for Life Insurance. By the year 1956, 154 Indian insurance, 16 non-Indian insurance and 75 provident societies were carrying on Life insurance business in India. On 1st September 1956 all the Insurance Companies were nationalized. On September 1956, Indian Parliament passed LIC Act and the state run Life Insurance Corporation of India (LIC) has held the monopoly in countries life insurance sector. In the year 1999, the Insurance Regulatory Development Act (IRMA) was passed in Indian Parliament. By this act a door was open for private companies with foreign equity Life Insurance. By this act an Indian promoter can invest either wholly in, an insurance venture or team up with a foreign insurer, with a cap of 26 percent of equity for

a foreign partner. Now as per the latest Finance Bill this Investment of FDI can go up to 49 Percent.

PRIVATE PLAYERS' INITIATIVES List of Private Life Insurance Companies Insurance Industry in the year 2000-2001 had 16 new entrants, (Foreign players entering the Indian Insurance sector with their Indian partners) Life Insurance List:

Registration S.N. 1 2 3 4 5 6 7 8 9 10 No. 101 104 105 107 109 110 111 114 116 117 Date of Reg. 23/10/2000 15/11/2000 24/11/2000 10/01/2001 31/01/2001 12/02/2001 30/03/2001 02/08/2001 03/08/2001 06/08/2001 Name of the Company HDFC Standard Life Insurance Company Ltd. Max New York Life Insurance Co. Ltd. ICICI Prudential Life Insurance Company Ltd. Om Kotak Mahindra Life Insurance Co. Ltd. Birla Sum Life Insurance Company Ltd. Tata Aig Life Insurance Company Ltd. SBI Life Insurance Company Ltd. ING Vysya Life Insurance Company Pvt. Ltd. Allianz Bajaj Life Insurance Company Ltd. Metlife Indian Insurance Company Pvt. Ltd.

HISTORY:

Life Insurance in its present form came to Indian from the United Kingdom with the establishment of a British firm Oriental Life Insurance Company in Calcutta in 1818 followed by Bombay Life Assurance Company 1823. The Indian Life Assurance Companies Act. 1912 was the first statutory measure to regulate life Insurance business. In the 1938, earlier legislation was consolidated and amended by the Insurance Act. 1938, with comprehensive provision aimed at exercising effective control over the activities of insurers of the insuring public. The main concern was to protect the interests The Act was amended in 1950 resulting in far-reaching changes in the insurance sector. By 1956, 154 Indian insurers. 16 foreign insurers and 75 provident societies were carrying on life insurance business in the country. In January 1956, in keeping with the then prevailing political and economical philosophy of socialism, 245 Indian and foreign insurance and provident societies operating in Indian were taken over by the Central Government by an Act of Parliament, the Life insurance Corporation Act 1956. The LIC, with a capital of Rs. 5 crores was set up September that year. Privatization in 1990s As part of the wide - ranging economic reforms initiated in 1991, a committee headed by Mr. R. N. Malhotra examined the structure of the insurance sector. The committee's recommendations to open up the sector to private sector participation were implemented by the Government in 2000. The key element in the reform process was the participation of overseas insurance companies, through restricted to 26 percent of the capital.

With the Insurance Regulatory and Development Authority Act, 1999 (IRDA) formally coming into force, the insurance industry was opened up for private sector participation. The main objective of setting up the IRDA was to project the interests of Policyholders and to regulate, promote and ensured orderly development of the insurance industry. Over four decades the industry has been a State monopoly. Till date the LIC has insured over 120 million individuals and has a vast sales network of over 7 lakh insurance agents. The industry is witnessing an upsurge in consumer awareness, building immense and unavoidable pressure among the players.

Within the short time since the opening up several insurance companies have been licensed by the IRDA. The list of insurance as on data is given in Table-I. Indian is a market of mainly small policies. The average annual life premium is less than the equivalent of $ 100 Indian is also marked by a very low insurance penetration rate. Although no authentic statistics is available, a rough estimate is that only 20 percent of the insurable population is insured. Business models At present the new entrants are experimenting with different strategies to penetrate the market by developing multiple channel distribution models. It is, however, recognized that for a long time to come agency domination will be a feature of this market. Other channels such as banks, dedicated distribution through alliances and etrade will take time to make a sizable impact. It is the general perception that life insurance will continue to be sold through face-to-face contract for quite a while.

Today after nearly fifty years, the insurance sector is a buyers market where there consumer has the choice to select from a variety of insurance, products and services, some of the early movers adopted by private insurers can be discussed here. Distribution modes: Most new entrants are targeting the Indian middle class segment estimated at over 250 million persons. High focus on direct selling: The preferred route is the agency network. The agency channel constitutes 90-95 percent of the market. Alliances with banks: Insurance is using branch networks to sell insurance products. This enables insurers to leverage on low distribution costs by using existing networks. Insurers are also targeting bank employee as per prospective customers and agents to market products. Non- Bank Alliances: These are tie-ups with non-governmental organizations (NGOs) mainly to tap the rural market. This would enable insurers to ensure IRDA Compliance with respect do rural coverage. Retail financial service Distributors: This involves the tie-ups with NBFCs to act as corporate agents, and also enabled insurers to cross sell with other financial services.

With the entry of private insurers, the market is already seeing a wide array of products. Insurers today are not merely looking at offering the basic life insurance solution, but offering products with a combination of benefits (riders) which could be bundled /customized to suit an individual's need. Insurance is also being promoted as a sound long-terms investment option. In terms of returns insurance products today offer a

competitive 7-9 percent. Besides returns when really increases the appeal of insurance is the benefit of life protection from insurance product along with health cover benefits. The tax benefits are also attractive. While the plain individual insurance (whole life, term etc.) will remain popular, sale of new products such as single premium, unit-linked, retirement product, money back and annuity are set to rise. With Parliament passing the Insurance Amendment Bill, Nonprofit Products are likely to become increasingly prevalent.

1: Insurers as on Date Company Bajaj Foreign Major Shareholder Bajaj Auto Sanmar of Birla Finance Dabur HDFC ICICI Vysya Bank Max India Bank Local Business of local

Shareholder Allianz Allianz AMP Sun Life Canada AVIVA Standard Life Prudential (U.K)

Shareholder Auto Manufacture

Life AMP Sanmar Birla Sun Life Dabur AVIVA HDFC Standard Life ICICI

Diversified Conglomerate Global Diversified Conglomerate Medical & Consumer Products Investment and Finance Investment and Finance Bank and other investors Diversified Conglomerate Pallonji Conglomerate Investment and Finance

Prudential Life ING Vysya ING Life Max New New York Life Met Life

York Life Met Life India OM

Kotak Old Mutual

Group Kotak Mahindra

Mahindra SBI Life Cardif TATA AIG AIG Life

SBI TATA

Bank Diversified Conglomerate

Private Companies returns are as follows of their business: II: Last Year Returns Returns based on ULIP plans (equity): Private Insurers SBI Life Horizon Equity HDFC Life Growth Bajaj Allianz UGP Equity Plan OM Kotak Aggressive ICICI Pru Life Link Max Met Life Multiplier Reliance Life Equity AVIVA Save Guard Growth LIC Bima Plus Returns 115.7 82.1 73.1 71.5 69.2 67.8 64.4 60.0 47.6

Max New York Life Ins. Growth Birla Sun Life Growth

45.4 32.3

2.2

Key Challenges faced by Private Insurers: The key challenges, which all private insurers will face in the coming months, are

in the areas of product innovation, managing investment, distribution, customer's service and expense control. Some of these are briefly discussed here: Life insurance in India has traditionally been distributed through the agency channel. The limiting factor for private insurances will be the extensive and expensive distribution structure required for reaching through the segment. Distribution will be a key determinant success for all insurance companies. The new entrants cannot expect to match the extensive distribution network of LIC (of over 7 Lakh agents). Of these only a small proportion is meaningfully productive. Since there were no requirements relating to training and passing of examination. Both of which are now required, requirement was in inexpensive and rather casual. The LIC did not mind even if a large part of its agency force remained inactive and / or unproductive. This is not the case now. Agents have to be trained for 100 hours and they have to pass an examination. It is estimated that by the time an agent is licensed and becomes productive, about Rs.

15000 to Rs. 20000 would have been incurred by the insurer. Because of this insurers cannot afford to have many non-productive and this will strengthen the market. The alternative channels such as banks and other institutions are slowly emerging. It is to hope that a variety of channels will emerge in due course as result of liberalization of this sector.

Intermediaries and direct marketing Though the agency channel will definitely remain as the dominant distribution channel, alternative channels like corporate agencies, brokers and Bane assurance will play a meaningful role in distribution. Private insurers are also engaging in direct marketing to high net worth individuals through channels like work site marketing a relatively inexpensive and easy launch potential distribution charmed New entrants will constantly explore avenues to increase the number of distribution channels through a variety of distribution patterns, given the customer profile.

Rural and Social Insurance As per the IRDA regulations all insurers have an obligation to fulfill in the rural and social sectors. This obligation is expressed as a percentage of total policy sales in the rural sector and number of lives insured in the socially weaker sections of society to the total.

The rural obligations are to sell specific percentages of policies to the rural sector 5 percent in first year, 7.5 percent in second year and up to 15 percent in fifth year. In the social sector, insurers are required to insure a specific of lives 5000 in first year, 7500 in second and up to 20000 lives in fifth year and beyond. In these areas, local partnerships established by private players matter. Some of them have roped in the village or panchayat heads to comply with the rural obligations. Some private insurers have tied up with non-government organization (NGOs) to satisfy the social obligation. It is expected that these rigorous requirements will help increase insurance penetration and provided the much-need insurance protection to the segments that constitute a large percentage of the population. In short, it is expected that insurance will gradually cease to be more urban phenomenon. Customer service In this competitive scenario, a key difference in gaining a winning edge is the customer service provided by the insurers, be it, in terms of quality of advice given by the distribution channels (advisors, banks) or policy processing to settlement of claims. For the first time in four decades the customer is really the focus and companies are vying with one another to perform to very transparent and tight benchmarks of service. It is significant that the IRDA has brought out regulations that prescribe service standards and parameters. These policyholders protection regulations are comprehensive they ensure transparency and accuracy; fix responsibility on insurance companies for several areas involving customer service etc. This piece of legislation is seen as a landmark in India. Role of Technology

In the present competitive environment technology will play a definite role in achieving a competitive edge. Technology will play an increasing role in aiding Design and administering of insurance products as well as in building and maintaining long term customer relationships.

Future opportunities Opening up of the pension sector: Considerable discussions have taken place on this subject, only 11 percent of the working population is protected by some form of retirement benefits. It is learnt that a detailed proposal is before the Government to open up the pension sector. Providing coverage through a national pension scheme is challenging but it is necessary, particularly for the non-salaried or self employed workforce and those engaged in agriculture. The life insurance industry has come alive. Awareness has increased and it is being expected that the market will grow fast. In five years one will be looking at an annual premium income of Rs. 100,000 Crores in the life insurance sector. Life insurance will, at long last attain its rightful place in the economy.

Chapter 3 ORGANIZATION PROFILE

ORGANIZATION PROFILE 3.1 Background / History of the company

SBI Life Insurance Company Ltd. was established in 2001 with a commitment to expand and reshape the life insurance industry in India. The company was amongst the first private sector insurance companies to begin operations after receiving approval from Insurance Regulatory Development Authority (IRDA), and in the time since, has taken several steps towards its realizing its goal. The company's wide range of products distribution strengths and powerful brand has driven its growth across a cross-section of people and cities. By the time company has crossed the 3 Million Policy milestones with a premium income of 1075 crores and total sum assured of more than 54000 crores. Today, the company has established itself as the No. I Private life insurer in the country and it is the single largest group policy seller among private players and above all SBI Life is the first private insurer to report profit. Vision Our vision: To be the dominant life and Pensions player built on trust by world-class people and service. This we hope to achieve by: Understanding the needs of customers and offering them superior products and service. Leveraging technology to service customers quickly, efficiently and conveniently. Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders. Providing an enabling environment to foster growth and learning for our employees. And above all, building transparency in all our dealings.

The success of the company will be founded in its unflinching commitment to 5 core values - Trust & reliability, Ambitious, Innovation, Dynamic and Excellence. Each of the values describes what the company stands for, the qualities of our people and the way they work. PARTNERS SBI Life Insurance Co Ltd. Is a joint venture between State Bank of India and Cardiff of France. The two companies bring together two of the Strongest financial service brands in the country, known for their professionalism, excellent quality of service and long term commitment to you. Riding on the success of this relationship, the two companies joined hands in 2001, to form SBI Life Insurance Company Ltd., with a commitment to provide leading edge life insurance solutions. SBI Bank has 74% stake in the company, and Cardiff pie has 26%.with the Authorized capital of Rs. 500 cr.* With a paid up capital of Rs. 350 cr.* SBI Bank SBI is a household name, and it stands as the last word for security and financial protection in the country. SBIs illustrious background dates back to the year 1806 when it started business as a presidency bank in the name of Bank of Bengal. Over the years, it has learnt to combine the best of banking practices handed down from the imperial management with the dynamic ways of doing banking in modern India. Today, it has a branch network of over 9039 branches, an aggregate deposit base of nearly Rs. 3, 19,619 crores and a total balance sheet size of Rs. 4, 07,815 crores. Together with 7 Associate Banks, SBI commands about 30% of the market share banking. SBI is the strongest and most profitable bank in the country as it has the tangible net worth of Rs. 20,231 crores as at March 2004, and it earned net profit of Rs. 3681

crores for the fiscal ending that date. SBI is only bank in India permitted to hold more than 50% of equity in the insurance joint venture. Cardif Cardif is the wholly owned subsidiary of BNP Paribas, which is the leading bank in Europe. BNP is one of the oldest foreign banks in India with a presence dating back to 1860. It has 9 branches in major metros in the country Cardif is a personal insurance Company founded in 1973. As multi-partner, multicountry specialist, Cardif markets a complete array of individual and collective savings, pensions and insurance protection products to private clients and companies. In 2001, Cardif sales amounted to 3.9 billion euros, of which 48% was generated outside France. Cardif has operations in 28 countries and has more than 150 institutional partners throughout the world . In France, over 65% of life insurance business is done through banks and financial institutions countries in France, and the trend is rapidly catching up in other countries. THE COMPANY SBI Life Insurance is a joint venture between the State Bank of India and Cardiff SA of France. SBI Life Insurance is registered with and authorized capital of RS. 500 crore and a paid up capital of Rs. 350 crore. SBI owns 74% of the total capital and Cardiff the remaining 26% SBI Life Insurances mission is to emerge as a leading company offering a comprehensive range of Life Insurance and Pension products at competitive prices, ensuring high standards of customer service and world class operating efficiency. The company plans to make the insurance buying process quick, simple and based on well - informed judgment. In 2004, SBI Life Insurance became the first company amongst private insurance players to cover 30 lakh lives.

DISTRIBUTION SBI Life has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 69 cities and towns in India. Some of the Major Cities are: Ahmedabad, Banglore, Chandigarh, Chennai, Coimbatore, Gurgaon, Hyderabad, Indore, Jaipur, Kochi, Kolkata, Lucknow, Ludhiana, Madurai, Manglore, Meerut, Mumbai, Nagpur, Nasik, Noida, NewDelhi, Pune and Vadodara. The company has the largest number of banc assurance tie-ups, having agreements with SBI Bank, South Indian Bank, Bank of India, Bank, and Punjab & Maharashtra Co-operative Bank, as well as some corporate agents. It has also tied up with organizations like Dhan for distribution of Salaam Zindagi, a policy for the socially and economically underprivileged section of society. SBI Life has recruited and trained over 36,500 insurance agents to interface with and advise customers, and has the highest number amongst private life insurers on the renowned Million Dollar Round Table (MDRT) (550 in the year 2004-2005). Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers.

3.2

PRODUCTS

Insurance Solutions for individuals

SBI Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its 26 products can be enhanced with up to 4 riders, to create a customized solution for each policyholder. Savings Solutions SBI Life Sudarshan is a traditional endowment savings plan that offers life protection along with adequate returns. SBI Life Scholar II or purchase of an asset. SBI Life Money Back is also a traditional plan that offers life cover with cash inflow at regular intervals. It is a participating plan in order to meet your financial obligations at crucial junctures. is an anticipated endowment policy ideal for meeting

milestone expenses like a child's marriage, expenses for a child's higher education

Protection Solutions SBI Life Shield is a protection plan, which offers life cover at very tow cost. It is available in 3 Options - level term assurance, level term assurance with return of premium and single premium. Child Solutions

SBI Life Scholar II provides guaranteed educational benefits to a child along with fife insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the child's life. Unit-linked Solutions SBI Life Unit Plus II is a Single & Regular premium Unit Linked Insurance Plan, which combines life insurance cover with the opportunity to stay, invested in the stock market. SBI Life Horizon II offers customers the flexibility and control to customize the policy to meet the changing needs at different life stages. It is safe and hassle free way to get high returns and with a unique feature of Automatic Asset Allocation. Retirement Solutions SBI Life Long Pensions is a retirement product targeted at individuals in their thirties because everyone needs to accumulate enough savings to meet old age needs, and look for a reliable and enduring pension payment arrangement. Flexible Rider Options SBI Life offers 3 flexible riders, which can be added to the basic policy at a marginal cost, depending on the specific needs of the customer. 1. Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit. 2. Level Term Cover: This rider provides the option to increase the risk cover. The cover may be increased for an additional amount up to a maximum of the existing basic sum assured on your policy.

3.

Critical Illness Benefit: Protects the insured against financial toss in the event of

9 specified critical illnesses. Benefits are payable to the insured for medical expenses prior to death. Portfolio Details of SBI Life as on December 2006 Horizon / Unit Plus Bond Fund Portfolio Details as on 31st December06

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Money Market & Other Instruments Government Securities Corporate Debt

Portfolio Horizon / Unit Plus Bond Fund as on 31/12/06 Government Securities Corporate Debt Money Market & Other Instruments

9.66% 28.48% 61.86%

3.3 Product Comparison I. TYPES OF ORDINARY LIFE INSURANCE (TRADITIONAL PRODUCTS) Permanent Type of Contracts Typical permanent type policies are Whole Life policy and Endowment policy. These policies are regarded as savings instruments. Whole Life Insurance The sum assured is payable on the death of the assured whenever it occurs. Premiums are payable throughout the life of the assured or, more normally, untilretirement of the assured at 60 or 65. Although premiums may cease at say age 60 the policy remains in force and the policy would provide the benefits for the dependents on the death of the policyholder as and when it occurs. While the policy under which premium are payable throughout life is called the whole life whole term policy, the policies where premium paying term is limited are called payment whole life policies. Endowment Insurance: The endowment Insurance policy is taken for a certain number of years say, 15, 20, 25 or 30 years. The sum assured is payable in the event of death within the term of the policy. However, the sum assured will also be payable if the life assured survives the stipulated term, until the 'maturity date'. Endowment assurance is often used to cover a house mortgage. The premium will be higher than a level or decreasing term assurance policy but the entire loan amount can be paid out of the policy proceeds on completion of the policy term, or on the death of the policyholder occurring earlier. There are Anticipated Endowment or Money Back policies under which certain agreed proportion of the sum assured will be payable at an interval of three, four or five years and the remaining sum assured along with the accrued bonuses on the full sums assured, will be payable on the maturity date of the policy. Further, the full sum assured

together with the accrued bonuses till date would be payable in the event of the policyholder dying during the currency of the policy. Pure Endowment insurance provides for payment of the sum assured on the policyholder surviving to the maturity date the premiums paid with or without interest, would be paid to the dependents, if the assured dies earlier. For the same amount of cover, the endowment has the highest premium, because the life insurance company is guaranteed to pay out the sum assured at a given date, or before it, if the person dies. The whole life policy also guarantees payment of the sum assured but only at the time of the assured death as and when it occurs. The time lag between the commencement of the policy and the date of death is on an average likely to be longer and as such the premium for whole life policy is lower than that for endowment. Term Insurance Term Insurance is temporary contracts, which provide basic death risk cover. This is the cheapest form of life insurances, since as the description suggests, it is only for a certain period of time and the policy money is payable on death during the term of the policy. On expiry, the policy has no value. Normally, the policyholder does not receive any benefit on survival to the end of the stipulated term but he will have enjoyed the protection for death occurring during the policy period. The whole life policy in effect is a term insurance policy without the limitation of a period. In India, return of premiums is allowed in the event of survival of the policyholder to the end of the term. No doubt, a higher premium would be payable to cover the additional survival benefit. Life Annuity When a person has a reasonably large sum of money and wants to provide an income for him after he retires or at some other time, he can approach a life insurance company and purchase an annuity. Life annuity involves payment of a certain agreed amount annually or more frequently on survival of the life annuitant. Premium may be

payable in the form of a single premium or annual premium prior to the date of commencement or vesting date of the annuity. An annuity is a method by which a person can receive a yearly sum, an annuity, in return for payment to an insurance company of a sum of money. This is not life assurance but it is dealt with by life insurance companies and is based on actuarial principles just like life assurance. Joint Life Insurances or Annuities Life insurances or annuity may be issued to two or more lives such that the assurance/ annuity would be payable on death of one or more lives insured or say break up of the joint life status], or in case of annuities, on death of the survivor. Sometimes the joint life policy can provide payment on the death of each of the two joint lives like in the Jeevan Saathi policy in India. These policies could also be endowment type where the sum assured is payable on death during the period selected or on survival to the end of the period selected.

II.

NON TRADITIONAL PRODUCTS (UNIT LINKED PRODUCTS) SBI Life

Unit Plus II II Product Benefits and features: 1. Introduction: SBI Life Unit plus II is an addition to the insurance products offered by SBI Life insurance Company Ltd. This product however, being an insurance product gives the customer a tot of flexibility on the Life cover and also gives the customer a lot over the value of investment that can be generated by the product.

Thus, this product works as a long-term market-linked total protection of life, health and wealth. The design of the product is such that it works as a one stop wholesome financial solution for the customers for their lifetime, a product that gives the customer the control and flexibility to use it according to differing needs at their different life stages with different human life values. Life time is: A regular premium product that has the option of the yearly, Half-Yearly and Monthly modes of premium. An insurance product that works in the form of units, which are issued to the policyholder depending upon the Unit value and the investment done in the form of premium. An insurance product where all the three riders are attached namely, ADBR and CIBR. An insurance product where the Death benefit is a multiple of the Annual Premium paid. An insurance product with no maturity value, at any time the value of units is what is the value of the product.

The features and benefits of the product that would be helpful in understanding the positioning strategy of the product. 1. Benefits: Death benefit:

Death Benefit would be a multiple of the yearly premium. The policyholder has the flexibility to choose the death benefit. The maximum limits of death benefit can be found out Mom a table that gives the multiples for different combination of age and life cover/riders opted by the policyholder. In case of death of the policyholder gets higher of death Benefit and the value the units.

Withdrawal: The withdrawal of the units would be at the unit value on the pricing date

following the receipt of the withdrawal request. The value of withdrawal reduces the Death Benefit by the same amount. Withdrawals are not allowed in the first three policy years, after which there can be partial or full withdrawal of the units. 2. Flexibility Options Increase in Death Benefit The policyholder has the flexibility to increase the death benefit by 25% subject to a maximum of Rs. 250,000 every time. This can be done every third year, without further underwriting. The death benefit can also be increased beyond this limit with underwriting. This can be done for a maximum of three times. The product also provides flexibility to increase the death benefit at different stages in life on marriage, birth of first child and birth of second child. The can be irrespective of when the last increase was done. This feature helps in planning for long term financial needs at important points in the life stage.

Decrease in death benefit The policyholder has the option of decreasing the Death Benefit in the multiples

of Rs. 1, 00,000. However a minimum residual death benefit of Rs.1, 00,000 will have to be maintained. Premium Holiday In case the policyholder discontinues the payment of the premium, the Death benefit and the Riders Benefits cover would continue.

Choice of fund There are four fund options available to the policy holders. The policyholder has

the flexibility of investing in all the three funds in the proportion he wishes, in one single policy. Following are the three fund options. PLAN Growth PLAN OBJECTIVE Steady returns over a long term. RISK INVESTMENT

PATTERN Moderate Debt instruments : Max 100% Money Market and cash : Max 60% Debt, Money market and cash : Max 60% Equity and equity related security : Max 60%

Balanced Balance of capital appreciation Average and steady returns over a long term.

Equity

High

growth

and

capital High

Equity and equity related security : Max 100 % Debt, Money Market and cash : Nil Govt. Security + Debenture = 100% Cash + Call Market = 20%

appreciation over a long term.

Bond

Securing money by avoiding risk.

Normal

Switch between the Funds The Policyholder would have the control to direct his investments depending

upon the market conditions by switching the money between the funds. Four frees witch is allowed each policy year. A switching charge of 1% of the value of the units switched would be levied after the policyholder has exercised the free switch. Top-Ups If the Regular Premiums are paid up to date Single Premium Top-Ups can be made. Top-Ups give the flexibility to the policyholder of increasing the value of his investments over a long term. Top-ups can be done at a cost of 1% of the top-up premium. There would be no increase in the Death Benefit with the Top-Up, but the life cover calculations would take into account the increase in the value of the Unit Fund because of the Single Premium Top-Up.

3.

Charges Initial administrative charges 1st Year 25% of the Premium

2nd Year 3rd Year

7.5% of the Premium 5% of the Premium

Insurance charges This charge is basically towards the mortality and the riders. These are deducted

by the cancellation of units on a monthly basis. The mortality charges are charged on the Life Cover, Which is the difference between the Death Benefit and the value of the units. Annual Fund Management Charges This is 1% of the value of units, which will be charged by adjusting the unit value of the units accordingly. Annual Administrative Charges This is 1.25% of the value of units, which will be charged by adjusting the unit value of the units accordingly. 4. Riders All the four riders are available with this product, namely-Accident Benefit, Permanent Disability, Major Surgical Rider and Critical Illness Rider. The sum Assured are as follows: Minimum SA under any Rider: Rs. 1, 00, 000 Maximum SA under any Rider: Rs. 10, 00,000 Additionally the amount of rider benefit cannot exceed the death benefit. 5. Eligibility Conditions. Age Limits Minimum Age of Entry 0 Years (Risk only commences from age 7 only)

Maximum Age of Entry Premium Frequency Minimum Premium

65 Years Yearly, Half - Yearly and Monthly Rs. 24000 (Yearly), Rs. 12000 (Half- Yearly) and Rs.2000 (Monthly)

Comparison Between Traditional & Unit Link Plans Traditional Plan 1. Endowment Plan 2. Anticipated Endowment 3. Term Plan Unit Link (Modern) Plan 1. Endowment Plan 2. Anticipated Endowment 3. Term Plan

Traditional

Unit Link

1.Customer decide Term

1. Customer is Free for Term (No Boundation to decide term)

2. Customer Decide Sum assured

2. Customer is free for select sum assured

3. As per Customers age and term and 3. Customer is free to select premium S.A. premium will be calculated (doesn't bounded with S.A. or term)

4. Boundation: Premium to be paid same 4. No Boundation for premium payment throughout the year (Can't decrease or term. Increase)

5. No Transparency of Term.

5. Fully Transparent (Charges maturity) 6. Returns are based on stock Market as

6. Returns are going down day by day.

well debenture for Govt. securities. 7. Customer is Free to Switch his money

7.

No

Freedom

for

Investment

rm from Stock market to debenture on Govt. Security.

allocation.

SBI Life Unit Plus II Competitive Positioning Life time as compared to a whole life plan A person's protection needs follows a cycle depending on the life stage. It increases over time and then decreases. Lifetime offers the flexibility to increases the protection as and when required. When one's protection needs decreases over time one can decrease the death benefit and more money can be allocated towards savings. The Lifetime policy as compared to a whole life policy is more transport. The customer is aware of all the charges up front and also is aware of how his money is invested and how it grows over time. He has the option to choose the fund into which the money is invested. Also he has the option to switch between funds as

and when risk profile changes. In the case of whole life policy, the policyholder is unaware of how the money is invested. There is no choice of funds available. Lifetime policy has several health rider options. The premium paid is eligible under see 80D. These riders are available until age 65. The policyholder has the option to select the amount of rider benefit that he wants. Under the whole life policy the rider benefit is equal to the death benefit amount. At any point if one wants to increase ones savings, Lifetime policy offers the facility of top-up, which is not available with other policies. Like the whole life policy, Life time offers premium waiver benefit. So, if for some reason the policyholder is unable to pay the premium the amount will be recovered from the value of units and the policy will continue to remain in force. There are no surrender penalties. Anytime after 3 years you can make partial or complete withdrawals from your units. This can be exercised according to the needs.

Life time as compared to a Universal-Life Plan: We have a Universal Life Plan also in the market. It would be interesting to look at the features comparison of their plan and life time. The policy offers 4 Investment options Maximiser, Balancer, Protector and Preserver. Lifetime on the other hand allocates the entire amount after deduction of charges into fund chosen by the investor. The fund objective is clearly laid out and the details of the fund investment would be disclosed to the investor. The Life time policy is more transparent in that the charges are declared up front. Life time policy offers choice of all funds within the same policy. A person can switch between fund options. This is not possible in the Universal Life Plan. Should your needs change, you can increase or decrease your death benefits.

Like the Universal Life policy Lifetime offers premium waiver benefit. So it for some reason the policyholder is unable to pay the premium the amount will be recovered from the value of units and the policy will continue to remain in force.

There are no surrender penalties. Anytime after 3 years you can make partial or complete withdrawals from your units. This choice can be expressed according to the needs.

Mutual Funds are not comparable products: Life time is positioned as along term wholesome financial product that takes care of the investment needs; insurance needs and provides protection against the health hazards. As compared to this the mutual funds are normally used as shortterm instruments where the investments turn around time is limited to maximum of 2-3 years. Life time provides death benefit as a multiple of the Annual premium. No Mutual funds provide life insurance. Not only this life time, also provides the flexibility to control the insurance and savings according to the needs of the individual at different life stages. Life stages are also attached with riders that cover the individual against the health hazards. This facility is not provided by the mutual funds. The proceeds from Life time is totally exempt from taxes where as the proceeds from a mutual fund attract capital Gains Tax, if any. In case of the death of the policyholder, greater of value of units or the Death Benefit is paid to the nominee. In case the markets are down, the family of the policyholder is secured, as they would get the Death Benefit, as the value of units may be less than the death benefit. In case of a mutual fund, the family only gets

the value as per the NAV. So even in a shorter term, Lifetime scores over the Mutual funds, if the policyholder dies and the markets are down.

SBI Life Horizon II Name of Product Initial requirements SBI Life Horizon II Proposal Form Proposer and Life assured Issue rules Min age at entry Max age at entry Min policy term Max policy term Min vesting age Max vesting age Min premium amount Min Death benefit Death benefit Premium payment modes Premium payments channels Premium payments periods Rating factor increase in death ACR Age proof

Deposit receipt Policy must be proposed on own life

14 Years 60 Years 10 Years 40 Years 45 Years 75 Years Rs. 12000/Zero Annual Premium X Term All All Up to original vesting date 1.0

cover with underwriting Rating factor for increase of NIL death cover with out underwriting (Automatic

Increase)

Riders allowed

Only When death benefit is chosen initially ADBR, CIBR (Stand-Alone). When initial death benefit is ZERO No rider is allowed neither at policy commencing nor at time of addition or increase of death benefit at a later date. ADBR and : NIL CIBT (Stand-Alone) : 1.0 When initial death benefit is NIL. UW as per current norms at the time of increase on addition of death benefit. When death benefit is chosen initially. Allowed as per current jet norms (Non-Medical scheme) Only full withdrawal is allowed for first 3 policy years no withdrawal is allowed. On withdrawal anytime after the completion of 3 years, the value of units is payable.

Rating for riders Non Medical Scheme

Surrender Value After 1 Year - 25% After 2 Years - 40% After 3 Years - 60% After 4 Years - 100% Extension of Deferment period

Postponement of original vesting date allowed on more than one occasion subject to Max age of 70 Years at postponed (new) vesting date. The Life Assured shall have the option to receive up to 33% of the value of units in lump sum and balance amount in the form of annuity Or To utilize entire value of units in the form of annuity The Life Assured can select any one of the following types of annuity 1. Life Annuity

Benefits

on

Vesting

date

(Original or Postponed)

2. Life Annuity with return of purchase Price 3. Joint Life Last Survivor with returns of Purchase Price 4. Life Annuity with Guaranteed period of 5/10/15 years.

Benefit Coverage Period

For type of annuity mentioned above 1. Life time of Annuitant 2. Life time of Annuitant 3. Joint Life Last Survivor of Annuitant and spouse 4. Life time or Guaranteed Period whichever is more

SBI Life Unit Plus II Name of Product Initial Requirements SBI Life UNIT PLUS II Proposal form ACR

 Proposer and life assured Issue rules Min age at entry Max age at entry Min policy term Max policy term Min vesting age Max vesting age Min premium amount Min Death benefit

Age proof Deposit receipt

Policy must be proposed on own life

18 Years 60 Years 5 Years 65 Years 45 Years 75 Years Rs. 24, 000/Two options available to the Life Assured 1. Nil Death Benefit (Can be equal '0') 2. Death Benefit equal to 105% of the Premium

Max Death benefit Premium payment modes Premium payment channels Rating factor for death Benefit Riders allowed Surrender value

105% of the Premium Single & Regular ALL NIL None Only full withdrawal is allowed For first policy year no withdrawal is allowed. On withdrawal anytime after the completion of first year, the value of units is payable.

Extension on vesting date (Original Postponement of original vesting date allowed on

or postponed)

more than one occasion subject to max age of 70 years at postponed (new) vesting date.

Benefits on vesting date (Original or The Life Assured shall have the option postponed) Benefit Coverage Period To receive up to 33% of the value of units in lump sum and balance amount in the form of annuity. For type of annuity mentioned above 1. Life time of Annuitant 2. Life time of Annuitant 3. Joint Life Last Survivor of Annuitant and spouse 4. Life time or Guaranteed Period whichever is Death Benefits Death before the original Vesting date More. If spouse has not attained age 50 last birthday on death of Life assured the spouse shall receive higher of Death benefit or value of units as a lump sum payment. If spouse has attained age 50 Last birthday on death assured Higher of death benefit or value of Units is payable. The spouse shall have the option To receive entire amount as lump sum payment Or To receive up to 33% of this amount as a lump sum payment and balance amount in the form of annuity. Or

To Utilize entire amount in the form of annuity. The spouse can select any one of the following types of annuity Death after original vesting date but before the postponed vesting date (during the deferment after the original vesting date) Life annuity Life Annuity with return of purchase Price Life Annuity with Guaranteed period of 5/10/15 years. If spouse has not attained age of Last birth on death of life assured The spouse shall receive higher of Death Benefit or value of units as a lump sum payment. If spouse has attained age of last birthday on death of life assured The spouse shall have the option To receive value of units as a lump sum payment Or To receive up to 33% of value of units as a lump sum payment and balance form of annuity Or To utilize entire value of units in the form of annuity The spouse can select any one of amount of in the

the following types of annuity 1. Life Annuity 2. Life annuity with return of Purchase Price 3. Life Annuity with Guaranteed period of 5/ 10 / 15 Years.

Investing in a Unit Linked Pension Plan would be better than Market- linked investment product Unit Plus II / Horizon II Market-linked instrument During deferment a tax No-Tax breaks would be provided advantage under Section 80 CCC (1) would be provided. Under the pension products In a mutual fund the returns are taxable in the hands of the returns that the company earns are not taxed, so more can be passed to the customer. Portfolio Equity Fund as on December 2006 Automobile & Ancillary 7.53% Ashok Leyland Ltd. 0.33% Bajaj Auto Ltd. 1.55% Mahindra & Mahindra Ltd. 1.28% Maruti Udyog Ltd. 2.55% Tata Motors Ltd. 1.81% Banking 12.11% Bank of India 2.07% H D F C Bank Ltd 3.40% the investor as dividends. during the investment phase.

Media Jagran Prakashan Ltd. Network Eighteen Ltd. Television Eighteen India Ltd. Wire and Wireless (India) Ltd Zee News Limited Zee Telefilms Ltd. Metals Hindalco Industries Ltd.

2.27% 0.06% 0.04% 0.39% 0.30% 0.05% 1.44% 4.27% 0.46%

Housing Development Finance 1.78% Corpn I C I C I Bank Ltd. Oriental Bank of Commerce Punjab National Bank Reliance Capital Ltd. Union Bank Of India Cement Associated Cement Cos. Ltd Gujarat Ambuja Cements Ltd. Electrical Equipment & Engineering A B B Ltd. Bharat Electronics Ltd. Bharat Heavy Electricals Ltd. Larsen & Toubro Ltd. Siemens Ltd. Suzlon Energy Ltd. FMCG Dabur India Ltd. Hindustan Lever Ltd. I T C Ltd. Information Technology H C L Technologies Ltd. I - flex Solutions Ltd. Infosys Technologies Ltd. Mphasis Ltd. Satyam Computer Services Ltd. Tata Consultancy Services Ltd. Wipro Ltd. 2.50% 0.38% 1.48% 0.20% 0.31% 3.79% 1.95% 1.84% 11.01% 0.71% 0.48% 2.61% 3.97% 1.53% 1.71% 5.85% 0.52% 2.16% 3.17% 22.04% 0.13% 1.21% 7.16% 1.68% 1.90% 5.63% 4.34%

Sesa Goa Ltd. Sterlite Industries (India) Ltd. Tata Steel Ltd. Oil & Gas Oil & Natural Gas Corpn. Ltd. Power Jyoti Structures Ltd. N T P C Ltd. Reliance Energy Ltd. Tata Power Co. Ltd. Refinery & Petrochemicals Bharat Petroleum Corpn. Ltd. Hindustan Petroleum Corpn. Ltd. Reliance Industries Ltd. Telecommunications Bharti Airtel Ltd. Reliance Communications Ltd. Videsh Sanchar Nigam Ltd. Pharmaceuticals / Healthcare Aventis Pharma Ltd. Cipla Ltd. Glaxosmithkline Pharmaceuticals Ltd Sun Pharmaceutical Inds. Ltd. Others Cash Total

0.93% 1.59% 1.30% 3.29% 3.29% 3.09% 0.35% 0.66% 1.38% 0.70% 5.74% 0.65% 0.32% 4.77% 7.34% 4.80% 2.02% 0.52% 2.10% 0.08% 0.87% 0.39% 0.77% 7.16% 2.39% 100.00%

Portfolio Growth Fund as on December 2006 Automobile & Ancillary 6.76% Ashok Leyland Ltd. 0.35% Bajaj Auto Ltd. 1.25% Mahindra & Mahindra Ltd. 1.37% Maruti Udyog Ltd. 2.19% Tata Motors Ltd. 1.60% Banking 11.89% Bank of India 2.14%

Media Jagran Prakashan Ltd. Wire and Wireless (India) Ltd Zee News Limited Zee Telefilms Ltd. Metals Hindalco Industries Ltd. Sterlite Industries (India) Ltd.

1.40% 0.03% 0.23% 0.03% 1.11% 3.54% 0.87% 1.38%

H D F C Bank Ltd Housing Development Corpn I C I C I Bank Ltd. Oriental Bank of Commerce Punjab National Bank Reliance Capital Ltd. U T I Bank Ltd.

2.24% Finance 2.73% 2.03% 0.39% 1.19% 0.20% 0.48% 0.49% 3.58% 1.89% 1.69% & 12.97% 0.87% 1.07% 3.39% 3.73% 0.56% 2.07% 1.29% 6.21% 0.79% 2.39% 3.03% 18.82% 7.53% 1.76% 5.61%

Tata Steel Ltd. Oil & Gas Oil & Natural Gas Corpn. Ltd. Pharmaceuticals / Healthcare Cipla Ltd. Dr. Reddy'S Laboratories Ltd. Glaxosmithkline Pharmaceuticals Ltd Sun Pharmaceutical Inds. Ltd. Power Jyoti Structures Ltd. N T P C Ltd. Reliance Energy Ltd.

1.29% 3.83% 3.83% 3.47% 1.45% 1.14% 0.13% 0.75% 2.61% 0.33% 1.07% 0.51%

Union Bank Of India Cement Associated Cement Cos. Ltd Gujarat Ambuja Cements Ltd. Electrical Equipment Engineering A B B Ltd. Bharat Electronics Ltd. Bharat Heavy Electricals Ltd. Larsen & Toubro Ltd. Punj Lloyd Ltd. Siemens Ltd. Suzlon Energy Ltd. FMCG Dabur India Ltd. Hindustan Lever Ltd. I T C Ltd. Information Technology Infosys Technologies Ltd. Satyam Computer Services Ltd. Tata Consultancy Services Ltd.

Tata Power Co. Ltd. 0.69% Refinery & Petrochemicals 5.10% Hindustan Petroleum Corpn. 0.14% Ltd. Indian Petrochemicals Corpn. 0.35% Ltd. Reliance Industries Ltd. Telecommunications Bharti Airtel Ltd. Reliance Communications Ltd. Videsh Sanchar Nigam Ltd. Others Cash 4.62% 8.71% 4.67% 3.45% 0.60% 6.44% 4.67%

Chapter 4 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY A systematic approach is essential in any project work. An incorrect step, involves loss of time and energy. The increasingly complex nature of business and government has focused attention on the use of research in solving operational problems. The project has been divided into a number of procedural steps both the number of steps and the names are arbitrary, however the recognition of the sequence is essential. Planning and organizing are part of this systematic approach with a lot of emphasis given to the interdependence of various steps. 4.1 TITLE A Comparative study on Traditional and Unit Linked Products 4.2 RESEARCH DESIGN 1. Type of research - The type of research was Descriptive and Exploratory 2. Population - Of study was the existing customers of SBI Life Insurance 3. Data Collected - Primary data and Secondary data Company

4. Data collection techniques Primary Data - The data was collected through questionnaire and personal Secondary Data - Brochures and company advisor kit 5. Data collection site - The data collection site was Saharanpurr city 4.3 SAMPLE DESIGN Sampling procedure - Sampling procedure used in the project is Systematic Sampling. Sample size - 300 customers 4.4 SOURCES OF DATA Primary Data The bulk of the primary data was collected from existing customers of SBI Life. Through questionnaire and personal interview, schedule in Saharanpurr city. The interview schedule was created with the intention of comparing the traditional v/s unit linked products. The scheduled used for the purpose is given in the annexure. Secondary Data The secondary data began with the process of collecting general information from SBI Life through brochures and literature of the company. 1.5 Limitations of the study The study was restricted to theoretical ground only so it was difficult to draw the true interpretations of the study. The conclusion arrived at are based on a very less experience of interview

researcher in this field. Due to shortage of time & resources sample of whole Udaipur region could not be taken.

The conclusion arrived at are based on a very less experience of

researcher in this field.

Chapter 5 DATA ANALYSIS & INTERPRETATION

CHART 1 Q.1 Do you have any Insurance policy?

YES NO

267 33

300 250 200 150 100 50 0 Yes No Series1

INTERPRETATION : The question was asked to 300 persons and among them 267 replied positively CHART - 2

Q.2 In your opinion why Life Insurance is required?

Savings Investment Risk Covering/Protection

39 136 65

Future Planning

60

Savings

20%

13%
Investment

22%

45%

Risk Covering/Protect ion Future Planning

INTERPRETATION : The Graph shows that maximum persons buy insurance for the investment purpose and only 13% of the people buy insurance for savings.

CHART 3

Q.3 Which investment instrument do you choose while saving TAX?

Mutual Funds Life Insurance Post Office Bank Deposit

87 107 64 42

14% 21% 36%

29%

Mutual Funds Life Insurance

INTERPRETATION : The Graph Shows that most of the persons choose Life Insurance while saving TAX whereas only 14% of them choose to deposit in Bank. CHART 4 Q.4 If you want to take an insurance cover which company would you prefer ?

SBI Life Insurance Bajaj Allianz ICICI Prudential LIC Reliance Life

87 24 48 102 39

120 100 80 60 40 20 0

87 48 24

102

39

Seri

INTERPRETATION : The Graph shows that LIC and SBI Life Insurance are the company in which customers prefer to invest rather than any of the other companies. CHART 5

Q.5

Do you know insurance products offer investment also under ULIP policies?

YES NO

196 104

250 200 150 100 50 0 YES

INTERPRETATION: The above graph shows that out of the sample 196 people are aware that insurance products offer investment under ULIP polices rest 104 are still unaware. CHART - 6

196

104

Seri

NO

Q.6

In which type of policies you like to invest?

Traditional

67

ULIP

233

22%
Traditio nal

78%

INTERPRETATION : The Graph shows that 78% peoples like to invest in ULIP policies which show a very high percentage of market acceptance of these products and only 22% would like to invest in Traditional policies. CHART 7 Q.7 Have you ever gone for ULIP products with any of the company?

YES

136

NO

164

200 150 100 136 50 0 YES NO 164

Se

INTERPRETATION : The Graph shows that about 45% of the persons have invested in ULIP products. Investment in ULIP products are increasing day by day. CHART 8 Q.8 Normally when do you plan to invest for TAX saving? In the end of FY In the beginning of FY Anytime 105 54 45

Depends on the availability of funds

96

32%

In the end of FY

35%
In the beginning of FY

15%

18%

INTERPRETATION : The above graph shows that normally people plan to invest for TAX saving in the end of the financial year or on the availability of funds.

CHART 9

Q.9 Which term would you like to invest?

Short term

188

Long term

112

37%
Sho

63%

INTERPRETATION : The Graph shows that 63% of the people like to invest for Short term which is a very high percentage.

CHART 10 Q.10 To what extent the company plays a role in selecting the policy?

Least Strong Very Strong

30 60 210

10% 20% 70%

Least

INTERPRETATION: The Graph shows that 70% believes that the company plays a very vital role in selecting the company to invest and 20% believes that it plays an important role and 10% believes that company doesnt play any major role.

Chapter -6 FINDINGS

FINDINGS As my objective was to compare the unit linked plan with Traditional plan. So, my Target population was the customers and financial advisors of SBI Life. I analyzed their mind set through questionnaire. For that I took the sample size of 300 customers and advisors and I found following results. I found that maximum of people preferred unit linked plan to invest in Insurance due to the life cover benefits and majority of people are shifting from traditional plans to unit linked plans because of the following reason: Short Term: It is the best feature of unit-linked plan, which was not present in traditional plan. For example: In the unit linked plan here are two products. Unit Plus II and Horizon II In the Unit Plus: There is no maturity date. Any Time after three year of commencement one can make partial or complete withdrawals with out penalty. Unit Plus II: After paying the premium for 4 years one can withdrawal whole money with interest after 4 years. Flexibility (Investment Option). In the Unit Linked plan there are more flexibilities like. (i) One can increase his death benefit.

Flexible Contribution: One can Increase or decrease his annual contribution. The max. Decrease in contribution can be up to 20% of the Initial contribution.

Transparency: One can always get to know the Charges, which are deducted from the Premium.

More Features: (a) Loan: One can obtain loan against policy. (b) Surrender values: The unit linked plan allowed surrender after 1 year's is paid. (c) Choice of top up: One can top up his investment any time when he has surplus funds. (d) Withdrawals (e) Switches: if at a later stage the financial priorities change, one can switch between the various investment options at any time. There is a provision of 4 free switches every policy year. LIC and SBI are the two most known brands in the market Through the study it was found that the main purpose of buying insurance is investment. contribution

Chapter 7 SUGGESTIONS

RECOMMENDATIONS / SUGGESTION In order to survive in this era of cut throat competition, it is very important for an organization to give the best to its customers and the most reasonable price. After going through the study on my project, I would like to come up with following recommendations:

All the company should come out of a Unit Linked product that should aid every section of the society.

The advisors should be made aware and educated so that they can extend their services not only in terms of collection of premium cheques from the policy holders but also to educate them about the insurance and the latest Non Traditional products.

The company should target the lower segment customers also

Which is Better, Unit-linked or Traditional? The two strong arguments in favour of unit-linked plans are, firstly, the investor knows exactly what is happening to his money and secondly, it allows the investor to choose the assets into which he wants his funds invested. A traditional with profits, on the other hand, is a black box and a policyholder has little knowledge of what is happening. An investor in a ULIP knows how much he is paying towards mortality, management and administration charges. He also knows where the insurance company has invested the money. The investor gets exactly the same returns that the fund earns, but he also bears

the investment risk. The transparency makes the product more competitive. So if you are willing to bear the investment risks in order to generate a higher return on your retirement funds, ULIPs are for you. Traditional with profits policies too invest in the market and generate the same returns prevailing in the market. But here the insurance company evens out returns to ensure that policyholders do not lose money in a bad year. In that sense they are safer. ULIPs also offer flexibility. For instance, a policyholder can ask the insurance company to liquidate units in his account to meet the mortality charges if he is unable to pay any premium installment. This eats into his savings, but ensures that the policy will continue to cover his life. Com parison betw een Return on ULIPs and Traditional Policies The return on the ULIPs till date has been on an average 11.45% and that on the conventional policies is 6% (both calculated on IRR basis). Thus, the return on the ULIPs outperforms the returns on the conventional policies. However, the returns on the Postal Life Insurance comes close to the returns on ULIPs i.e. 9.75% Dangers faced by traditional policies : The source of high returns for companies that dealt with traditional insurance products in the form of assured returns has drained out. It will thus be, very difficult for these companies to meet their contractual obligations. E.g. A person who invests Rs. 4000/- p.a. as premium in Jeevan Suraksha, a pension plan of LIC, at the age of 25 is promised an assured pension of 5500/- p.m. at the age of 55. The position looks as follows:

The cash outflow for the company is 13,20,000/- and the insurance company gets only 1,20,000/- (the readers should note that these are in paid till the last year and not at the initial stage). For this the company will have to earn a return @ 18% p.a. (compounded quarterly) which in todays market situation is very difficult.

The system is opaque. The insurer is not aware about where the amount is invested. The returns are lesser in longer term as compared to ULIP. ULIP allows flexibility to increase returns at higher risk or moderate returns at low risk depending on the risk appetite of the client. ULIP is an excellent mix of Insurance & Investments. except during the times of Great Depression.

The long term return (7 yrs & above) on any Equity Market in the world is double digit positive,

Perceived Dangers and Points to be kept in Mind While Investing in ULIP Investment and returns depend on the performance of the Markets which can get volatile, and therefore, risky. The initial cost of ULIP is high, thus making Mutual Funds a better investment opportunity than any insurance product. Converting the ULIPs to a Mutual Fund policy and marketing on these terms by some Private Sector Companies. The knowledge of the agent of ULIPs is sometimes limited and he is thus, is not in a position to explain to the client the risks and dangers associated with ULIPs. Large positions by the clients to Risky Fund.

CONCLUSION Insurance is still a selling product in country like India. It is the company who has to find the market and go to the prospect rather then the client directly approaching to the company. The opening up of the sector has also resulted in stiff competition as many private companies are entering in. So, it becomes very important to be the best out of the rest in the market. This company can achieve by offering value added services to the customers by giving them maximum benefits.

Company is trying to given more assured returns to the investors. Mostly products are based on the NAV or they are unit Linked. So awareness, knowledge and brand image of the product will be the first priority for the company. ULIPs are indeed a boon to the investors. However, the investors must keep the following points in mind while investing in ULIPs: Visit a professional Financial Planner to take a well-informed decision. Be well read and well informed. Dont take any insurance policy without riders. The bonus of managing your investment lies on the client, do not expect the company to take prudent decisions on your behalf. The risk taken must be inversely proportional to your age. Avoid herd mentality while taking decisions. Investing in ULIPs is not investing in Stock Market so dont get perturbed with short-term volatility. Always remain invested for a long term that is typically a time horizon of 7 years and above. Insurance is a matter of Prudent Investment, so exercise it

OBJECTIVES OF STUDY To know the factors influencing the customer decisions while purchasing insurance policies. To broadly study the insurance market. To know the awareness of traditional products and unit-linked products. Prevailing in the market.

APPENDIX

BIBLIOGRAPHY

Books Kothari C.R., Research Methodology, Methods and Techniques, New Delhi, New Age Publication Pvt.Ltd.(1985). Beri G.C., MARKETING Research, New Delhi, Tata Mc Graw Hill Publishing Company 2005. Sites : http//www.irdaindia.com http//www.insurance.co.in

Questionnaire SBI Life Insurance CO. LTD, 1st floor, Ragha Plaza, Opp. Parsvnath Plaza Court Road Saharanpur, Uttar Pradesh 247001 Personal Profile Name: Address: Sex: Age: Telephone No.: Mobile No.:

Q.1

Do you have any Insurance policy? A. Yes B. No

Q.2

In your opinion why Life Insurance is required? A. Savings C. Risk Covering/ Protection B. Investment D Future Planning

Q.3

Which investment instruments do you choose while saving TAX? A. Mutual Funds C. Post Office B. Life Insurance D. Bank Deposit

Q.4

If you want to take an insurance cover which company would you prefer? A. SBI Life insurance C. ICICI Prudential E. Reliance Life B Bajaj Allianz D. LIC

Q.5

Do you know insurance products offers investment also under ULIP policies? A. Yes B. No

Q.6

In which type of policies you like to invest? A. Traditional B. ULIP

Q.7

Have you ever gone for ULIP products with any of the company? A. Yes B. No

Q.8

Normally when do you plan to invest for Tax saving? A. In the end of FY C. Anytime B. In the beginning of FY D. Depends on availability of funds

Q.9

Which term would you like to invest? A. Short term B. Long term

Q.10

To what extent the company plays a role in selecting the policy? A. Least C. Very strong B. Strong