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Life and general insurance in India is still a nascent sector with huge
potential for various global players with the life insurance premiums
accounting to 2.5% of the country's GDP while general insurance premiums
to 0.65% of India's GDP.[1]. The Insurance sector in India has gone through a
number of phases and changes, particularly in the recent years when the
Govt. of India in 1999 opened up the insurance sector by allowing private
companies to solicit insurance and also allowing FDI up to 26%. Ever since,
the Indian insurance sector is considered as a booming market with every
other global insurance company wanting to have a lion's share. Currently,
the largest life insurance company in India is still owned by the government.
Mutual Life Assurance Society, the first Indian insurance company covered
Indian lives at normal rates.
At the dawn of the twentieth century, insurance companies started
mushrooming up. In the year 1912, the Life Insurance Companies Act, and
the Provident Fund Act were passed to regulate the insurance business. The
Life Insurance Companies Act, 1912 made it necessary that the premium
rate tables and periodical valuations of companies should be certified by an
actuary. However, the disparage still existed as discrimination between
Indian and foreign companies. The oldest existing insurance company in
India is National Insurance Company Ltd, which was founded in 1906 and is
doing business even today. The Insurance industry earlier consisted of only
two state insurers: Life Insurers i.e. Life Insurance Corporation of India
(LIC) and General Insurers i.e. General Insurance Corporation of India
(GIC). GIC had four subsidiary companies.
With effect from December 2000, these subsidiaries have been de-linked
from parent company and made as independent insurance companies:
Oriental Insurance Company Limited, New India Assurance Company
Related Acts:The insurance sector went through a full circle of phases from being
unregulated to completely regulated and then currently being partly
deregulated. It is governed by a number of acts, with the first one being the
Insurance Act, 1938.
are covered under some insurance scheme. With more and more private
players in the sector this scenario may change at a rapid pace.
A.COMPANY PROFILE OF
LIC
B.OBJECTIVE
C.VISION AND MISSION
D.WHAT IS PENSION PLAN
Bharat Insurance Company (1896) was also one of such companies inspired
by nationalism. The Swadeshi movement of 1905-1907 gave rise to more
insurance companies. The United India in Madras, National Indian and
National Insurance in Calcutta and the Co-operative Assurance at Lahore
were established in 1906. In 1907, Hindustan Co-operative Insurance
Company took its birth in one of the rooms of the Jorasanko, house of the
great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General
Assurance and Swadeshi Life (later Bombay Life) were some of the
companies established during the same period. Prior to 1912 India had no
legislation to regulate insurance business. In the year 1912, the Life
Insurance Companies Act, and the Provident Fund Act were passed. The
Life Insurance Companies Act, 1912 made it necessary that the premium
rate tables and periodical valuations of companies should be certified by an
actuary. But the Act discriminated between foreign and Indian companies on
many accounts, putting the Indian companies at a disadvantage.
The first two decades of the twentieth century saw lot of growth in insurance
business. From 44 companies with total business-in-force as Rs.22.44 crore,
it rose to 176 companies with total business-in-force as Rs.298 crore in
1938. During the mushrooming of insurance companies many financially
unsound concerns were also floated which failed miserably. The Insurance
Act 1938 was the first legislation governing not only life insurance but also
non-life insurance to provide strict state control over insurance business. The
demand for nationalization of life insurance industry was made repeatedly in
the past but it gathered momentum in 1944 when a bill to amend the Life
Insurance Act 1938 was introduced in the Legislative Assembly. However, it
was much later on the 19th of January, 1956, that life insurance in India was
nationalized. About 154 Indian insurance companies, 16 non-Indian
companies and 75 provident were operating in India at the time of
nationalization. Nationalization was accomplished in two stages; initially the
management of the companies was taken over by means of an Ordinance,
and later, the ownership too by means of a comprehensive bill. The
Parliament of India passed the Life Insurance Corporation Act on the 19th of
June 1956, and the Life Insurance Corporation of India was created on 1st
September, 1956, with the objective of spreading life insurance much more
widely and in particular to the rural areas with a view to reach all insurable
persons in the country, providing them adequate financial cover at a
reasonable cost.
LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart
from its corporate office in the year 1956. Since life insurance contracts are
long term contracts and during the currency of the policy it requires a variety
of services need was felt in the later years to expand the operations and place
a branch office at each district headquarter. re-organization of LIC took
place and large numbers of new branch offices were opened. As a result of
re-organization servicing functions were transferred to the branches, and
branches were made accounting units. It worked wonders with the
performance of the corporation. It may be seen that from about 200.00
crores of New Business in 1957 the corporation crossed 1000.00 crores only
in the year 1969-70, and it took another 10 years for LIC to cross 2000.00
crore mark of new business. But with re-organization happening in the early
eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on
new policies.
Today LIC functions with 2048 fully computerized branch offices, 100
divisional offices, 7 zonal offices and the corporate office. LICs Wide Area
Network covers 100 divisional offices and connects all the branches through
a Metro Area Network. LIC has tied up with some Banks and Service
providers to offer on-line premium collection facility in selected cities.
LICs ECS and ATM premium payment facility is an addition to customer
convenience. Apart from on-line Kiosks and IVRS, Info Centers have been
commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad,
Kolkata, New Delhi, Pune and many other cities. With a vision of providing
easy access to its policyholders, LIC has launched its SATELLITE
SAMPARK offices. The satellite offices are smaller, leaner and closer to the
customer. The digitalized records of the satellite offices will facilitate
anywhere servicing and many other conveniences in the future.
LIC continues to be the dominant life insurer even in the liberalized scenario
of Indian insurance and is moving fast on a new growth trajectory surpassing
its own past records. LIC has issued over one crore policies during the
current year. It has crossed the milestone of issuing 1,01,32,955 new policies
by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the
corresponding period of the previous year.
From then to now, LIC has crossed many milestones and has set
unprecedented performance records in various aspects of life insurance
business. The same motives which inspired our forefathers to bring
insurance into existence in this country inspire us at LIC to take this message
of protection to light the lamps of security in as many homes as possible and
to help the people in providing security to their families.
Corporation of India
Some Areas of Future Growth
Life Insurance
The traditional life insurance business for the LIC has been a little more than
a savings policy of the insurance premium of the LIC (Mitra and Nayak,
2001). For the new life insurance companies, term life policies would be the
main line of business.
Health Insurance
Health insurance expenditure in India is roughly 6% of GDP, much higher
than most other countries with the same level of economic development. Of
that, 4.7% is private and the rest is public. What is even more striking is that
4.5% are out of pocket expenditure (Berman, 1996). There has been an
almost total failure of the public health care system in India. This creates an
opportunity for the new insurance companies.
Thus, private insurance companies will be able to sell health insurance to a
vast number of families who would like to have health care cover but do not
have it.
Pension
The pension system in India is in its infancy. There are generally three forms
of plans: provident funds, gratuities and pension funds. Most of the pension
schemes are confined to government employees (and some large
companies). The vast majority of workers are in the informal sector. As a
result, most workers do not have any retirement benefits to fall back on after
retirement. Total assets of all the pension plans in India amount to less than
USD 40 billion.
Therefore, there is a huge scope for the development of pension funds in
India. The finance minister of India has repeatedly asserted that a Latin
American style reform of the privatized pension system in India would be
welcome (Roy, 1997). Given all the pros and cons, it is not clear whether
such a wholesale privatization would really benefit India or not (Sinha,
2000).
OBJECTIVES OF LIC
Spread Life Insurance widely and in particular to the rural areas and to
the socially and economically backward classes with a view to
reaching all insurable persons in the country and providing them
adequate financial cover against death at a reasonable cost.
Maximize mobilization of people's savings by making insurancelinked savings adequately attractive.
Bear in mind, in the investment of funds, the primary obligation to its
policyholders, whose money it holds in trust, without losing sight of
the interest of the community as a whole; the funds to be deployed to
the best advantage of the investors as well as the community as a
whole, keeping in view national priorities and obligations of attractive
return.
Conduct business with utmost economy and with the full realization
that the moneys belong to the policyholders.
Vision
To be the best Housing Finance Company in the country.
Mission
Provide secured housing finance at
affordable cost, maximizing shareholders
value with higher customer sensitivity.
Values
Fair and Transparent Business Practices.
Transformation to a Knowledge Organization.
Higher Autonomy in Operations.
Instilling a sense of Ownership amongst Employees.
Jeevan Nidhi
Jeevan Akshay-VI
New Jeevan Dhara-I
New Jeevan Suraksha-I
Jeevan Nidhi
LIC's JEEVAN NIDHI is a with profits Deferred Annuity (Pension) plan.
On survival of the policyholder beyond term of the policy the accumulated
amount (i.e. Sum Assured + Guaranteed Additions + Bonuses) is used to
generate a pension (annuity) for the policyholder. The plan also provides a
risk cover during the deferment period. The USP of the plan being the
pension can commence at 40 years. The premiums paid are exempt under
Section 80CCC of Income Tax Act.
Salient Features:
a . Guaranteed Additions: Guaranteed Additions @ Rs.50/- per thousand
Sum assured for each completed year, for the first five years.
b. Participation in profits: The policy shall participate in profits of the
Corporation from the 6th year onwards and shall be entitled to receive
bonuses declared as per the experience of the Corporation.
c. Benefit On Vesting:
1. Option to commute up to 1/3rd of the amount available on vesting,
which shall include the Sum Assured under the Basic Plan together with
accrued Guaranteed Additions, simple Reversionary Bonuses and
Terminal Bonus, if any.
1. Annuity for life: The annuity is paid to the life assured as long as he/she
is alive.
2. Annuity Guaranteed for certain periods: The annuity is paid to the life
assured for periods of 5 or 10 or 15 or 20 years as chosen by him/her,
whether or not he/she survives that period. After the chosen period, the
annuity is paid to the life assured as long as he/she is alive3. Annuity with
return of purchase price on death: The annuity is paid to the life assured
as long as he/she is alive. On the death of the life assured, the purchase price
of the annuity is paid as death benefit. The purchase price includes the Sum
Assured under the Basic Plan, the accrued Guaranteed Additions and any
accrued
bonuses,
excluding
the
commuted
value,
if
any.
5. Joint Life Last Survivor Annuity: The annuity is paid to the life assured
as long as he/she is alive. On death of the life assured, 50% of the annuity is
payable to the nominated spouse as long as the spouse is alive.
6. Death Benefit on death before annuity vests: On the death of the Life
Assured during the deferment period of the policy, i.e. before the annuity
vests, an amount equal to the Sum Assured under the Basic plan along with
the accrued Guaranteed Additions, simple Reversionary Bonuses and
Terminal Bonus, if any, will be paid in a lump sum to the appointed
nominee, provided the policy is in force for full Sum Assured. Nominee will
also have the option to purchase an annuity with this amount.
Jeevan Akshay VI
Introduction:
It is an Immediate Annuity plan, which can be purchased by paying a lump
sum amount. The plan provides for annuity payments of a stated amount
throughout the life time of the annuitant. Various options are available for
the type and mode of payment of annuities.
Options Available:
The following options are available under the plan
Type of Annuity:
You may choose any one. Once chosen, the option cannot be altered.
Mode:
Salient features:
Mode
Monthly
Quarterly
Half-yearly
Yearly
Minimum Annuity
Rs. 500 per month
Rs. 1000 per quarter
Rs. 2000 per half year
Rs.3000 per year
Annuity Rate:
Amount of annuity payable at yearly intervals which can be purchased for
Rs. 1 lakh under different options is as under:
Age last
birthday
40
45
50
55
60
65
70
75
7510
7770
8140
8650
9350
10410
12080
14510
( ii ) (15 years
certain)
7440
7660
7950
8330
8790
9330
9830
10220
( iii ) ( iv ) ( v ) ( vi )
6930 5610 7310 7120
6960 5890 7500 7240
7000 6280 7760 7420
7050 6810 8130 7670
7110 7530 8640 8030
7180 8590 9400 8570
7260 10220 10560 9370
7360 12590 12240 10590
Paid-up value:
The policy does not acquire any paid-up value.
Surrender Value :
No surrender value will be available under the policy.
Loan :
No loan will be available under the policy.
Section 41 of Insurance Act 1938 :
provided that
Product summary:
These are Deferred Annuity plans that allow the policyholder to make
provision for regular income after the selected term.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through
Salary deduction, as opted by you, throughout the term of the policy or till
earlier death. Alternatively, the premium may be paid in one lump sum
(single premium).
Tax Benefits:
Tax relief under Section 80ccc is available on premiums paid under New
Jeevan Suraksha I (Table No.147). The premiums paid under New Jeevan
Dhara I (Table No.148) qualify for tax relief under Section 88.
Bonuses:
These are with-profit plans and participate in the profits of the Corporations
annuity / pension business. Policies get a share of the profits in the form of
bonuses. Simple Reversionary Bonuses are declared per thousand Sum
Assured annually at the end of each financial year. Once declared, they
form part of the guaranteed benefits of the plan. Final (Additional) Bonuses
may also be payable provided policy has run for a certain minimum period.
Premiums:
Premiums are payable yearly, half-yearly, quarterly, monthly or through
Salary deduction, as opted by you, throughout the term of the policy or till
earlier death. Alternatively, the premium may be paid in one lump sum
(single premium)
Tax Benefits:
Tax relief under Section 80ccc is available on premiums paid under New
Jeevan Suraksha I (Table No.147). The premiums paid under New Jeevan
Dhara I (Table No.148) qualify for tax relief under Section 88.
Bonuses:
These are with-profit plans and participate in the profits of the Corporations
annuity / pension business. Policies get a share of the profits in the form of
bonuses. Simple Reversionary Bonuses are declared per thousand Sum
Assured annually at the end of each financial year. Once declared, they
form part of the guaranteed benefits of the plan. Final (Additional) Bonuses
may also be payable provided policy has run for a certain minimum period.
ICICI PRUDENTIAL
HISTORY OF ICICI PRUDENTIAL
VISION AND VALUES
VARIOUS RETIREMENT SOLUTION
private sector
insurance
companies to
begin
operations in
Rs. 37.72 billion (as on March, 2008) with ICICI Bank and Prudential
plc holding 74% and 26% stake respectively. For the year ended March
31, 2008, the company garnered Retail New Business Weighted premium of
Rs. 6,684 crores, registering a growth of 68% over the last year and
has underwritten nearly 3 million retail policies during the period.
The company has assets held over Rs. 30,000 crore as on April 30,
2008.ICICI Prudential Life is also the only private life insurer in
India to receive a National Insurer Financial Strength rating of AAA
(Ind) from Fitch ratings. The AAA (Ind) rating is the highest rating,
and is a clear assurance of ICICI Prudential's ability to meet its
obligations to customers at the time of maturity or claims.For the
past seven years, ICICI Prudential Life has retained its leadership
position in the life insurance industry with a wide range of flexible
products that meet the needs of the Indian customer at every step in
life.
Costs set to soar: Skyrocketing costs throw even a well-salaried person off
balance. With rates rising everyday, you can imagine how high they will be
when you are ready to retire. A retirement plan provides you with a steady
income every month, to arm you in the face of rising costs.
To understand how inflation can impact your monthly expenses, use our
special tool, the Inflation Index calculator.
ICICI Prudential offers two key retirement plans, LifeLink Super Pension
and LifeTime Super Pension - flexible income cum insurance plans that
ensure you meet all your retirement requirements. So you can retire
peacefully from work, but not from life.
Retirement Solutions
To cater to the needs of a customer looking for retirement planning, ICICI
Prudential presents a wide array of products. These products have been
designed to take into account the diverse set of needs that characterize
individual customers.
Plan Name
Plan Type
LifeStage Pension
Unit Linked
PremierLife Pension
Unit Linked
Unit Linked
Unit Linked
ForeverLife
Traditional
Immediate Annuity
Traditional
This unique policy helps you customize your investments by allowing you to
decrease your premium contributions as well as allowing you to boost your
investment kitty by making top-ups at any time. Once you arrive at your
retirement age the accumulated value of your policy provides you with a
regular income (pension) for life
Invest in LifeLink Super Pension Plan today and watch your money
multiply every month, right up to the day you retire. Receive an assured
income from your retirement day, for the rest of your life. Read more about
the features and benefits of this plan.
Why ForeverLife
ICICI Prudential's ForeverLife is a complete insurance cum pension plan
that performs two crucial roles: it acts as a protective cover while you earn
for your retirement, and provides you with regular pensions once you
retire.
If you fear that you've missed the bus as far as retirement planning is
concerned, there is no reason to despair. With ICICI Prudential's Single
Premium Product, you can start earning an annuity income immediately after
paying the premium. What's more, the annuity income is guaranteed for life
which means that the insurance company pays you and your spouse (as the
case maybe) a guaranteed pension till you live.
To assist you in tax planning, the tax breaks that are available under our
various insurance and pension policies are described below:
Our life insurance plans are eligible for tax deduction under Sec. 80C.
1. Our Pension plans are eligible for a tax deduction under Sec. 80CCC.
2. Our health insurance plans/riders are eligible for tax deduction under
Sec. 80D.
3. The proceeds or withdrawals of our life insurance policies are exempt
under Sec 10(10D), subject to norms prescribed in that section.
Invest in ICICI Prudential Life insurance and retirement plans and avail of
these tax planning services to save tax at your year end tax planning!
ULIPs : An Introduction
Most importantly, what are ULIPs? Here, you will find all the information
you need to set your mind at ease about how to invest in ULIPs, and which
ULIP is right for you.
Simply put, ULIPs are structured in such that the protection element and the
savings element are distinguishable, and hence managed according to your
specific needs. In this way, the ULIP plan offers unprecedented flexibility
and transparency.
Working of ULIPs
It is critical that you understand how your money gets invested once you
purchase a ULIP:
When you decide the amount of premium to be paid and the amount of life
cover you want from the ULIP, the insurer deducts some portion of the
ULIP premium upfront. This portion is known as the Premium Allocation
charge, and varies from product to product. The rest of the premium is
invested in the fund or mixture of funds chosen by you. Mortality charges
and ULIP administration charges are thereafter deducted on a periodic
(mostly monthly) basis by cancellation of units, whereas the ULIP fund
management charges are adjusted from NAV on a daily basis.
Since the fund of your choice has an underlying investment either in equity
or debt or a combination of the two your fund value will reflect the
performance of the underlying asset classes. At the time of maturity of your
plan, you are entitled to receive the fund value as at the time of maturity.
The pie-chart below illustrates the split of your ULIP premium:
TYPES OF ULIP
Types of ULIPs
One of the big advantages that a ULIP offers is that whatever be your
specific financial objective, chances are that there is a ULIP which is just
right for you. The figure below gives a general guide to the different goals
that people have at various age-groups and thus, various life-stages.
The accumulation phase when you are saving and investing during
your learning years to build up a retirement corpus and
The withdrawal phase when you actually reap the benefits of your
investment as your annuity payouts begin
In a typical pension plan you have the flexibility to make a lump sum
payment or a regular contribution every year during your earning years.
Your money is then invested in funds of your choice. You can opt to receive
the annuity at any time after vesting age (age at which you become eligible
for pension chosen by you at the inception of the plan).
Most of the Unit linked pension plans also come with a wide range of
annuity options which gives you choice in structuring the post-retirement
benefit pay-outs. Also at the time of vesting you can make a lump sum taxexempted withdrawal of up to 33 per cent of the accumulated corpus.
In a retirement plan the earlier you begin the greater you gain post
retirement due to the power of compounding.
Let us take an example of Gaurav & Hari. Both of them want to retire at the
age of 60. Gaurav starts investing Rs. 10,000 every year from the age of 25
till the time that he retires. In all, he would have invested Rs. 350,000. If his
investments were to earn 7% return every year, at the time of his retirement,
Gaurav will have a retirement corpus of Rs. 13, 82,368.
Now, Hari starts investing 10 years later (i.e. at the age of 35) and in order to
make up for the lost time, invests Rs.15,000 every year (which is 50% more
than Gauravs annual investment). So, by the time of his retirement, he
would have invested Rs. 3,75,000. And assuming the same annual return of
7%, he will end up with a retirement corpus of Rs 9, 48,735.
So, you see how despite setting aside more than 50% of Gauravs annual
contribution, Hari ends up with a retirement corpus which is almost a third
lesser than Gauravs. That is the power of compounding.
Life insurance plans are eligible for deduction under Sec. 80C
Health insurance plans and critical illness riders are eligible for
deduction under Sec. 80D
RESEARCH SECTION
A. RESEARCH OBJECTIVE
B. HYPOTHESIS
C. RESEARCH METHODOLOGY
RESEARCH PROBLEM
1)
2)
We also want to know that how and in what manners the different
pension plan attract different age and salary group.
HYPOTHESIS
Hypothesis is couched in terms of the particular independent and dependent
variables that are going to be used in study. Research hypothesis are specific
testable prediction made about the independent and dependent variables in
the study.
As data is not originally collected for use in the research project under
consideration, but rather for use some other project, by some other person in
terms of secondary data.
Usually the literature review has given background material that
justifies the particular hypothesis that is to be tested.
There exists two type of hypothesis that is to be :
Null hypothesis
Alternate hypothesis
In null hypothesis we assume that LIC pension plan work over the
other private insurance plan like ICICI prudential.
Alternate hypothesis if our assumption that the LIC pension plan work
over the other private company pension plan go wrong, alternate
hypothesis exists. It proves that ICICI prudential plan has greater
share.
RESEARCH METHODOLOGY
RESEARCH:Research is an organized and systematic way of finding answers
to question.
Research is an enquiry or examination to discover new
information or relationship and to extent and to verify existing knowledge.
Redman & Mory define research as a systematized effort to
gain new knowledge.
Methodology is define as
1. The analysis of the principle of methods, rules, and postulates
employed by a discipline or
2. The development of methods, to be applied within a discipline
3. A particular procedure or set of procedure.
Research design
The framework of conducting research is known as research design.
Research design is the plan, structure, and strategy of investigation
conceived so as to obtain answers to research question and to control
variance.
Types of research Design:There are three types of Research Design:1. Exploratory Research Design: - The major emphasis in exploratory
Research Design is on discovery of ideas and insights.
2. Descriptive Research Design: - The descriptive Research Design
study is typically concerned with determining the frequency with
which something occurs or the relationship between two variables.
3. Causal Research Design: - A Causal Research Design is concerned
with determining cause and effect relationship.
4. For the study, Descriptive Research Design was undertaken as it
draws the opinion of employees/workers on specific aspect
could cost Rs 43 a kilo! Petrol prices have equally shot up from Rs 17 a litre
10 years back to Rs 34-35 plus today, and could well rise to Rs 60 a litre 10
years from now. Enter pension, to reduce tension. Pension is all about
insuring oneself financially against the risk of living too long. It is about
fund management, long-term savings, protection and annuity income.
Moreover, investment in pension plans offers taxpayers a direct tax
deduction of Rs 10,000 from ones taxable income under Section 80 CCC
(1) of the Income Tax Act. Unlike Section 88, the tax benefits under this
section are available to persons in all income brackets. Even for those
eligible to save tax under Section 88, the saving on an investment of Rs
10,000 is higher in the case of pension plans. The tax saved is Rs 3,150,
whereas under Section 88 a Rs 10,000 investment yields a maximum tax
rebate of Rs 2,000. However, one doesnt invest in pension schemes only for
tax savings. Considering the high cost of living and falling interest rates,
people ought to be saving far more than Rs 10,000 a year if they wish to
retain their present lifestyles. Take the Life Insurance Corporations (LIC)
Jeevan Suraksha pension plan. A 30-year-old paying Rs 10,238 every year
for a term of 20 years will be entitled to a pension of just Rs 14,200 per
month on retiring at the age of 50. LIC assumes an annual bonus rate of Rs
65 per Rs 1,000. This is purely an illustration, which could vary depending
on interest rates and investment strategies. A pension plan also allows a
policyholder to withdraw a certain percentage of the accumulated funds on
retirement to take care of some large expenses. Most of the private players ICICI Prudential, HDFC Standard Life, Tata AIG and Aviva Life - have
followed in the LICs footsteps and offer a maximum withdrawal of 25 per
cent of the accumulated corpus at the time of retirement. OM Kotak
Mahindra Life is the only one to offer a maximum withdrawal of 33 per cent
of the accumulated amount.
After withdrawal, policyholders have to buy an annuity plan from the
balance amount that will provide them with a monthly pension till they bid a
final goodbye. By taking an open market option, customers can, on maturity,
buy an annuity product from any life insurance company. Should a
policyholder die within the accumulating period, most life insurers return
premium with interest, subject to a maximum of sum assured, plus
accumulated bonuses to date, say officials with HDFC Standard Life.
It is not easy to decide today how much annuity one should take 20 years
later. Thats a decision best left to be made at the time of retirement.
Customers can choose from various annuity options available, including
options like annuity for husband and wife, annuity with annual increment,
annuity with return of purchase price and more. During the accumulation
phase, a customer can only decide how much he/she can contribute and
afford to put aside for post-retirement needs, says Tata AIG Life Insurance
Company managing director Ian Watts. Looking at the inflation rate and
government will increase the tax deduction in the years to come. Meanwhile,
his life gets covered during the savings/ accumulation period. ICICI
Prudential also offers a health cover and guarantees capital protection during
the accumulation phase. To be sure, pension plans are not the only available
instruments in the market today for long-term savings. During the
accumulation phase, one could opt for mutual funds, the governments taxfree bonds, the public provident fund, or government securities. But there is
no tax exemption or inherent life cover in mutual funds; in the case of PPF,
you get section 88 benefits for incomes up to Rs 5 lakh, but not above. The
interest is, however, tax-free. Some infrastructure bonds also offer Section
88 benefits.
Most private companies do not offer pensions, and employees are typically
dependent only on their provident fund for retirement financing, which in
most cases is insufficient to maintain current living standards. That's the gap
pension plans are seeking to fill. "Pension plans are mainly targeted towards
couples in the age group of 35 and 45 years. Couples at this age would have
completed saving for their protection needs, would have children who are
slightly older and would be now interested in planning for retirement ," says
Gupta. Young couples are also beginning to plan for retirement, but this is
still a relatively small proportion and is largely seen in metros.
"The survey covered 26 countries and Indians were the most optimistic. The
optimism is not supported with financial planning, as 56% of the population
hadn't started preparing for retirement," says the survey. Insurance
companies say major concerns among people in pension planning relates to
deciding the right time to invest and choosing a plan that provides payout
beyond a certain age.
Companies are coming with products to cater to different needs. "We have a
product that allows people to increase contribution to the retirement kitty,"
says Shyamal Saxena, chief marketing officer of Bharti AXA.
stock
market
performances,
as
is
the
norm
abroad.
Says Bert Paterson, managing director, Aviva India: In the last 20-25 years,
traditional products have taken a back seat in the developed markets. Now
more than 80%-90% of people invest in unit-linked products for both
pensions and life insurance.
This, however, is not the case with India. Here, the majority of people still
rely on the traditional pension schemes such as PF and post office plans. But
taking a cue from the developed world, new age insurance companies have
introduced a whole range of unit-linked pension plans in the Indian market
too, with their number growing by the day.
Aviva Indias PensionPlus, ICICI Prudentials LifeLink Super Pension and
LifeTime Super Pension, TaTa AIGs InvestAssure Gold, SBI Lifes
Horizon II Pension and Reliance Golden Years Plan are some of them.
Furthermore, as the insurance companies providing these plans have
increased manifold, there are more product choices before investors than
ever before.
Even within the ULIPs, investors have choices in terms of varying their
exposure to the equity markets by choosing an aggressive or dominant
pension fund, says Ashish Kapur, CEO, Invest Shoppe India Ltd, adding
that for instance, an aggressive pension scheme would invest up to 60% in
equity and the rest in debt-oriented avenues, while the conservative plan
would have a nominal exposure of 10-15% to equity.
Conventional pension plans, on the other hand, invest a major portion of the
premium amount in bonds and government securities (G-Secs). That is why
the returns are on the lower side there, say investment experts. And if one
were to factor into the equation an annual inflation figure of approximately
5%-6% per annum, then the real return figures look even more
unimpressive. As against this, unit-linked pension plans are said to be giving
returns of 25-40% in some cases.
Better returns, however, are not the only reason for the growing popularity
of ULIP products. The reasons for the increasing popularity of ULIPs are
that they are flexible, transparent and provide value for money. Whats
more, they can be suited to the needs of all types of customers, from the risk
averse to customers who seek higher returns with some downside
risk,informs Paterson.
ICICI Prudentials Life Time Pension Plan, for instance, allows one to
choose from three options Income, Balanced and Growth. While the
Income fund is 100% invested in debt instruments, the Balanced and Growth
options provide flexibility to allocate up to 40% and 90%. Likewise, Avivas
PensionPlus comes with three fund options Balanced, Growth and Secure.
And the same is the case with most other plans. Thus, depending upon their
risk appetite, the customers can choose which fund option to go for.
dailies and on the websites of the companies. Further, all charges on the
policy are shown to the customer.
Secondly, they are flexible. 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,
says Kapur.
Other advantage are that since the investments are made for long periods, the
chances of earning a decent return are high. Also, the premiums paid for
ULIPs are eligible for tax rebates under Section 80C which allows a tax
deduction of premiums paid within the overall ceiling of Rs 1 lakh. Further,
proceeds from ULIPs are tax-free under section 10(10D), unlike those from
a mutual fund which attract capital gains tax.
This, however, doesnt mean that one should opt for unit-linked products
without taking any precaution.
First, one should look at the various charges being levied by the insure
before choosing a pension plan. One should also look at the fund
performance and avoid reacting impulsively. Usually investors react
impulsively to the volatile movements of the market and switch in between
the schemes. Since ULIPs are designed for long-term investment, one should
watch the performance over a period of time, advises an SBI Life Insurance
spokesperson.
It also makes eminent sense to avoid putting all your eggs in one basket.
More so, since none of the private insurers has a performance track record
available for evaluation. Although LIC has been around for decades, it has
opted out of assuring returns as it did in the past. So spread your investment
over plans of more than one company, but not at the cost of your investment
objective and risk profile, advises Kapur.
Also, a prudent factor while choosing a pension plan is that it should
preferably be a pure pension plan. Frills like life insurance cover and
accident or critical illness riders should preferably be avoided.
Nature of Holding
Private
Private
Private
Private
Private
Private
Public
Private
Private
Private
Reliance insurance
Private
Private
Private
82.3
ICICI PRUDENTIAL
5.63
2.56
BAJAJ ALLIANZ
2.03
1.80
HDFC STANDARD
1.36
TATA AIG
1.29
0.90
AVIVA
0.79
OM KOTAK MAHINDRA
0.51
ING VYSYA
0.37
MET LIFE
0.21
India with about 200 million middle class household shows a huge untapped
potential for players in the insurance industry. Saturation of markets in many
developed economies has made the Indian market even more attractive for
global insurance majors. The insurance sector in India has come to a position
of very high potential and competitiveness in the market. Indians, have
always
seen life insurance as a tax saving device, are now suddenly turning to the
private sector that are providing them new products and variety for their
choice.
Consumers remain the most important centre of the insurance sector. After
the entry of the foreign players the industry is seeing a lot of competition
and thus improvement of the customer service in the industry.
Computerization of operations and updating of technology has become
imperative in the current scenario. Foreign players are bringing in
international best practices in service through use of latest technologies
The insurance agents still remain the main source through which insurance
products are sold. The concept is very well established in the country like
India but still the increasing use of other sources is imperative. At present
the distribution channels that are available in the market are listed below.
Direct selling
Corporate agents
Group selling
Profit
Plus(LIC)
Premier Life
Gold(ICICI)
PPT
Single,3,4,5
year
20,000 for
single mode
Minimum premium
Minimum Policy
Term
Maximum Policy
Term
Partial
10,000 for
others
0 years
65 years.
5 years
3 or 5 year
1,00,000 for 3
year
60,000 for 5
year
0 year
69 year for
term 3 year
65 year for
term 5 year
6 year for PPT
3 year
20 years
Allowed after 3
Allowed after 3
withdrawal
On death
years
Higher of Sum
Assured or the
Policyholders
Fund Value
years
Sum Assured or
fund value
whichever is
higher
Allocation Charge:
Profit plus
LIC
HDFC
Standard Life
Forever Life
Min.
Rs. 50,000
Rs 50000
Rs.25,000
Max.
No Limit
No Limit
No Limit
Term Assurance
Option only
No Rider available
All premiums
deferment)
stream to spouse if
(excluding term
up to the date of
alive a lumpsum
compounded will be
Nominees./Spouse
date of death
accumulated at the
or (Notional Cash
100% of Sum
rate of 5% p.a.
Option+Bonus +
assured+bonuses+
compounded or at
terminal bonus),
+guaranteed
policy)
the nominee
Death (After
deferment)
benefits Depends
benefits Depends
benefits Depends
Surrender
chosen
chosen
chosen
guaranteed
guaranteed
guaranteed
surrender value is
surrender value is
surrender value is
payable after 3
payable after 2
payable after 3
Open Market
Option
Life Cover
Postponement of
vesting age
paid
paid
paid.
Available
Not Available
Available
Available
Not Available
Not Available
Available
Not Available
Not Available
100 %
50 %
50 %
Spouse Pension
after policy
holder
FINDINGS
FINDINGS
People are not aware about the pension plan so insurance agent should
make aware about the pension plan and its benefits.
Pension plan are so minimum in numbers so people not find pension
plan according to their earning and requirements.
Pension is provided only to government employees and big company
employees so pension plan in insurance company has bright future.
RECOMMENDATIONS
RECOMMENDATION
We need to make people aware about the pension plan in rural and
semi urban area about the pension plan and its benefits.
Insurance agent and advisors need to give only those plan which are
fulfilling the requirement and needs in a best way.
Both LIC and ICICI PRUDENTIAL should make some pension plan
for those who are nit economically sound, so they can also secure
their future.
Pension plan should be more convenient; with the pension plan health
plan should be provided because in the old age expenses on health
related is increased.
CONCLUSION
BIBLOGRAPHY
BIBLIOGRAPHY
Websites:ICICI Prulife.com
ICICI prudential life insurance
wikipedia.com.
India housing.com.
LIC india.com
Book Referred
Research Methodology - C.R. Kothari