Internship Report Submitted

In Partial fulfillment of the two years post graduate

diploma in business administration
A Dissertation submitted to Standard Chartered Bank

By
SHIVANK SHARMA
2K81/BFS/21
Session : 08-10

YEAR: 2009

ASIA-PACIFIC INSTITUTE OF MANAGEMENT

3, 4 Institutional Area, Jasola, New Delhi - 110025

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2
 Table of Contents

1. Acknowledgement 3

2. Declaration 4

3. Certificate 5

4 .Certificate of ateendance 6

5. ExecutiveSummary 7

6. Objectives 8

7. Research Methodology 10

8. Limitations 12

9. Industry Profile 13

10. Company profile 16

11. Empirical analysis 19

12. Findings and Suggestion 27

13. Comparitive analysis 39

14. Conclusion and Recommendations 51

15. Appendix 53

16. Questionnaire 55

17. References 57

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 ACKNOWLEDGEMENT

I would like to thank to Mr.Dashrath Renwan assistant Manager of Standard

Chartered Bank, Gurgoan for the moral support, encouragement and
generous assistance.

I express my heartfelt gratitude towards my Director Dr. D.K Banerjee I

wish to thank him for the constructive criticism, continuous encouragement
and guidance provided by him time to time during the course of studies. This
project would not have been possible without his help.

A heartfelt thanks to the many respondents surveyed whose ideas; critical

insights and suggestions have been invaluable in the preparation of this
report.

I would also like to thank malay milind , my friends, colleagues and well-
wisher who directly or indirectly helped me in the project.

Last but by no means the least I would like to convey my special thanks to
Mr. Aushutosh, Manager of SCB, Gurgoan for giving valuable guidance and
encouragement to work on this project.

Shivank Sharma
2k81/BFS/21

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 DECLARATION

I hereby declare that the project report titled “COMPARATIVE ANALYSIS OF

ULIPS PLANS AND MUTUAL FUNDS”at Standard Chartered Bank is my own

work and has been carried out under the able guidance of Mr. Dashrath Renwan,

Assistant manager, Sales liability Deptt., Standard Chartered Bank, Gurgaon and

Prof. Prof. Ambrien Ahmed, Faculty, Asia-Pacific Institute of Management, New

Delhi. All care has been taken to keep this report error free and I sincerely regret

for any unintended discrepancies that might have crept into this report. I shall be

highly obliged if errors (if any) be brought to my attention.

Thank You.

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 CERTIFICATE

This is to certify that the project entitled “A COMPARATIVE ANALYSIS

OF ULIPS PLANS AND MUTUAL FUNDS at Standard Chartered Bank”

is the bonafide work carried out by Mr.SHIVANK SHARMA , student

of PGDM (BFS), Asia Pacific Institute of Management, Delhi, during
the year 08-10, in partial fulfillment of the requirements for the award
of the PGDM, and that the project has not formed the basis for the
award previously of any degree, diploma, associate ship, fellowship or
any other similar title.

Signature of the Guide:

Dr. TULIKA CHANDRA

Place: Delhi

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 Certificate of Attendance

This is to certify that Mr.Shivank sharma , who was engaged in the summer project

in our organization, has been regular & punctual. He has attended the training from

____________ to ______________.

Signature of mentor

Mr.Dashrath Renwa
Ass.manager
Standard charted bank

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EXECUTIVE SUMMARY

“A comparative study of ULIP plans and mutual funds.” an analysis to be done be by

Shivank sharma

Total Investment scenario is changing, in past people were not interested in investment
because there were no good options available for investment. Now there are many
options available for investment like life Insurance, Mutual fund, Equity market, Real
asset, etc.

Today people want more services and more return on their investment. So most of the
insurance companies are providing more value – added services with the basic insurance
operation

Another option for investment available in India is Mutual Fund. Mutual Funds are
providing good returns. So while investing people tend more to words mutual fund as
they are providing more returns than Insurance also, with a good investment portfolio.
Mutual fund companies are providing more liquidity.

The project was taken to know about, what are the main aspects in Insurance Company,
and its USP (Unique Selling Preposition).Which gives it highest business and customers.
Customers always prefer to invest in a good option and in a company, which is market
leader.

After survey and analysis I came to know that most of the people go for ULIP insurance
policies to cover the risk of life, and invest it in a good Portfolio but there is big portion
of customers have taken the policies to save the taxes. Moreover, people are aware about
the tax benefits they get for insurance policies. Therefore, while investing in any
Investment option investor checks whether his money is safe or not, Mutual funds
provides good returns but investments are directly exposed to risk. As in ULIP, returns
are related to stock market but they are having some insurance benefit and IRDA
regulates the investment.

Many people are getting the tax benefits in ULIP. In Mutual Fund, they have to invest
their money in tax saving funds to get the tax benefit. Now a day’s people want good
returns without any efforts the plans like Automatic Investment plan are providing good
Benefit & returns to investors.

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To make comparison of products of Private life Insurance companies with Bajaj Alliance
Insurance Co. Ltd. (Standard Charted Bank has collaboration with Bajaj Alliance
Insurance Co.) and to create awareness about Unit Linked Insurance Plan (ULIP)
Benefits, Comparison of ULIP products of private Life Insurance companies and how to
create awareness about ULIP. The overall goal of this project was to create awareness
about investments. The Above problem arises because every life insurance company has
their products having different positive and negative aspects.

Life Insurance is booming sector in today’s economy. Therefore, the responsibilities of

the insurance companies have been increased as compare to the past. Because in past
people were taking insurance policies for protection tool only.

In present scenario, insurance sector is providing more services with the basic life
insurance. Bajaj Alliance has number of products, which gives the right way to save the
money and earn good profit by invested premium. Today people want more services and
more return on their investment. Therefore, this insurance company is providing more
value – added services with the basic insurance operation.

The project was taken to know about, what that point is in any Insurance company that is
unique selling point (USP) which gives it highest business and customer always like to
invest with that company which gives the company a position of a leader in market.

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

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then, invested in capital market
instruments such as shares, debentures and other securities.
The income earned through these investments and the capital appreciations realized are
shared by its unit holders in proportion to the number of units owned by them.

Thus, a Mutual Fund is the most suitable investment for the common person as it offers
an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.

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 \
Objectives
 To Compare Investment Options available.

 To find out the preference for ULIP Plan with Different mutual fund plans
available.

 To find out the USP of Standard Charted, in Delhi & Gurgoan market.

 To suggest a strategy to SCB for creating awareness about ULIP and getting a
competitive advantage over other investment options.

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Research design/Methodology

Research design can be defined as the plan and structure of enquiry formulated in order
to obtain answers to research questions on business on business aspects. Research design
can be understood as that which gives the blueprint for collection, measurement and
analysis of business data. The research plan constitutes the overall program of the
business research process. The planning process includes the framework of the entire
research process, starting from developing hypothesis to the final evaluation of collected
data.

Research design is essential because it facilitates the smooth flow of various research
results can be obtained with minimum utilization of time, money and effort. Therefore, it
can be said that design is highly essential for planning research activities. If research
design is not properly prepared, it will jeopardize the whole research process and will not
meet its purpose.

Exploratory Studies

Exploratory research was carried out to make problem suited to more investigation that is
precise or to frame a working hypothesis from an operational perspective. Exploratory
studies help in understanding and assessing the critical issues of problems. It is not used
in case where a definite result is desired. However, the study results are used for
subsequent research to attain conclusive results for a particular problem situation.
Exploratory studies are conducted for three main reasons, to analyze a problem situation,
to evaluate alternatives and to discover new ideas.

Research hypothesis

If a hypothesized relationship or prediction has to be tested by scientific methods, it is

called research hypothesis. A research hypothesis is one that links an independent
variable to a dependent variable. It should generally contain one dependent and one
independent variable.

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Method of Data collection
Data can be collected in different ways from the subject of study. One method is to
observe subjects on certain parameters, which is called observation studies. In such
studies, the subjects (respondents) by asking them questions through a questionnaire.
Here the researcher can adopt either method based on the study that needs to be
conducted. For instance, if research has to be done on the traffic flow at a particular
junction, then the observation method is best. On the other hand, if consumer preferences
about a new product are to be estimated, then a questionnaire for obtaining consumer
responses is the best method.

The stepwise methodology that was used is:

o Sampling – The population that was taken as a sample included some customers
of standard charted bank.
o Secondary Research
o Survey research was done through
 personal interviews
 interactions with bank’s customer
Questionnaires was designed to conduct interview
o Preparation and tabulation of data
o Data Analysis

The information thus obtained from the survey was used to discover the potential
segment for generating new business for the organisation and thereby devise strategies to
generate new business from the potential segment.

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 Limitations

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

 The findings of sample survey cannot be generalized to the entire population, as

the sample is not representative. As there is no set criterion for selecting the
sample, there is a scope for the research being influenced by the bias of the
researcher.

 Narrow-minded thinking of middle class people as investment is not their cup of

tea.

 Many customers are thinking that investment in share market is very risky. As
ULIP and Mutual fund both, are related to share market.

 A general preference to LIC and UTI over private players.

 Hesitations on the part of respondents to disclose financial information.

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Banking Industry profile

Overview
Banking Industry has revolutionized the transaction and financial services system
worldwide. Development in technology, banking services has been availed to the
customers at all times, even after the normal banking hours, on a 24x7 basis. Now a days,
almost all the banks, especially the multinational ones, provide their customers with
Online Banking facility.

Current Scenario

The industry is currently in a transition phase. On the one hand, the PSBs, which are the
mainstay of the Indian Banking system, are in the process of shedding their flab in terms
of excessive work force, excessive Non Performing Assets (NPA) and excessive
governmental equity, while on the other hand the private sector banks are consolidating
themselves through mergers and acquisitions.

Industry segments
Banks in India can be categorized into non-scheduled banks and scheduled banks.
Scheduled banks constitute of commercial banks and co-operative banks. The Public
Sector Banks (PSBs), which are the foundation of the Indian Banking system account for
more than 78 per cent of total banking industry asset. On the other hand the Private
Sector Banks are leaders in Internet banking, mobile banking, phone banking, ATMs. As
far as foreign banks are concerned, they are likely to succeed in India.

Indusland Bank was the first private bank to be set up in India. IDBI, ING Vyasa Bank,
SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd etc are some Private
Sector Banks. Banks from the Public Sector include Punjab National bank, Vijaya Bank,
UCO Bank, Oriental Bank, Allahabad Bank, Andhra Bank etc.
Standard Charted Bank, ABN-AMRO Bank, American Express Bank Ltd; Citibank etc
are some foreign banks operating in India.

2. Market Dynamics

2.1 Market Overview

The banking industry in India seems to be unaffected from the global financial crises,
which started from U.S in the last quarter of 2008. Despite the fallout and nationalization
of banks across developed economies, banks in India seems to be on the strong
fundamental base and seems to be well insulated from the financial turbulence emerging

14
from the western economies. The Indian banking industry is well placed as compare to
their banking industries western counterparts, which are depending upon government
bailout and stimulus packages.
The Indian banking industry is currently termed as strong, having weathered the global
economic slowdown and showing good numbers with strong support flowing in from the
Reserve Bank of India (RBI) measures.
Taking into account all banks in India, there are overall 56,640 branches or offices,
893,356 employees and 27,088 ATMs. Public sector banks made up a large chunk of the
infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of all
ATMs.

2. Trend Analysis

1. Indian Banks Eyeing International Markets

Indian banks have started to deploy their excess funds in the overseas market, as returns
from short-term overseas instruments are at least 150-200 points higher than that of
domestic instruments.

2. Declining NPA Ratio

The reduction in the non-performing assets (NPAs) of the Indian banking sector had been
accompanied by an actual decline in the accretion of fresh NPAs during the last three
years. this improvement was due to higher profits resulting from securities trading in the
last three financial years, as well as on account of a positive macro-economic
environment coupled with the slew of regulatory and supervisory initiatives designed to
improve the recovery climate.

3. Increasing Number of Mergers

Indians banks are not big enough to compete with the other bigger banks of the world. To
compete with those banks, India needs at least seven banks like the State bank of India
(SBI) in terms of the size. According to a survey conducted by The Federation of Indian
Chamber of Commerce and Industries (FICCI), a merger of some Indian banks to form
bigger banks is necessary to remain in the global competition.
India is slowly but surely moving from a regime of 'large number of small banks' to
'small number of large banks'

3. Major Issues & Implications

 Face of Global Banking is undergoing a transition- Technology explosion,
Sophisticated risk management systems and growing competition have brought forth
several challenges as well as opportunities. Banks need to perform a SWOT analysis of
emerging scenario to take advantage of changing state of affairs.
 Ownership of Foreign Banks
Foreign bank entrants into emerging markets are usually thought to improve the condition
and performance of acquired institutions, and more generally to enhance local financial
stability.

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  Outsourcing by Banks
Outsourcing is one of the biggest buzzwords in business, and banks are not immune to its
charms either. However, with banks handling sensitive financial issues, outsourcing is not
that easy in this sector. The primary barrier to outsourcing in banks is security, especially
since banking operations are a sensitive area. Moreover, PSU banks seem to suffer more
from this phobia, as compared to private banks
The banking industry in India seems to be unaffected from the global financial crises that
started from U.S in the last quarter of 2008. Despite the fallout and nationalization of
banks across developed economies, banks in India seems to be on the strong fundamental
base and seems to be well insulated from the financial turbulence emerging from the
western economies. The Indian banking industry is well placed as compare to their
banking industries western counterparts that are depending upon government bailout and
stimulus packages.

The strong economic growth in the past, low defaulter ratio, absence of complex financial
products, regular intervention by central bank, proactive adjustment of monetary policy
and so called close banking culture has favored the banking industry in India in recent
global financial turmoil.

Although there will no impact on the Indian banking system similar to that in west but the
banks in India will adopt for more of defensive approach in credit disbursal in coming
period. In order to safe guard their interest; banks will follow stringent norms for credit
disbursal. There will be more focus on analyzing borrower financial health rather than
capability.

The report “Indian Banking Sector Forecast to 2012” contains comprehensive research
and rational analysis on various segments, like assets size, income level and number of
cardholders, in the Indian banking industry. It also analyzes the current performance and
key market trends, and helps clients to understand various products available in the
market and their future scope.

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Company profile

Standard Charted Bank

Summary

Type Public

Founded 1853

Headquarters London, England, UK

Key people E. Mervyn Davies CBE, Chairman & Peter Sands, Chief Executive

Industry Banking

Products Financial Services

Revenue $16,378 million (2008)

Operating income $4,568 million (2008)

Net income $3,511 million (2008)

Employees 73,000 (2008)

Website www.standardchartered.com or www.sc.com

Business Overview

In its unique position as an international bank with strong franchise, Standard Chartered
combines an in-depth knowledge of local markets with global product expertise to offer
effective financial solutions. The bank capitalizes on its onshore presence across Asia,
Africa and the Middle East to offer customers convenient and reliable access to the
widest range of currency markets, to date local market information, country-specific
global risk management strategies, and customized capital raising and liquidity
management solutions.

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With 150 years of emerging market experience, they have in-depth understanding of the
local market is unrivaled by most other financial institutions, especially in the currencies
of Asia, the Middle East and Africa. Despite its British base, it has few customers in the
United Kingdom and 90% of its profits come from Asia, Africa, and the Middle East.

At the heart of their values lie diversity and inclusion. They are a fundamental part of
culture, and constitute a long-term priority in their aim to become the world's best
international bank.
History

The Standard Chartered Group was formed in 1969 through a merger of two banks: The
Standard Bank of British South Africa founded in 1863 and the Chartered Bank of
India, Australia and China, founded in 1853.

Both companies were keen to capitalize on the huge expansion of trade and to earn the
handsome profits to be made from financing the movement of goods from Europe to the
East and to Africa.

All was going well until 1986, when Lloyds Bank of the United Kingdom made a hostile
takeover bid for the Group. When the bid was defeated, Standard Chartered entered a
period of change. Provisions had to be made against third world debt exposure and loans
to corporations and entrepreneurs who could not meet their commitments. Standard
Chartered began a series of divestments notably in the United States and South Africa,
and entered into a number of asset sales.

From the early 1990s, Standard Chartered has focused on developing its strong franchises
in Asia, the Middle East and Africa using its operations in the United Kingdom and North
America to provide customers with a bridge between these markets. Secondly, it would
focus on consumer, corporate and institutional banking and on the provision of treasury
services - areas in which the Group had particular strength and expertise.

Standard Chartered Bank in India

In 1858, SCB established first branch opening in Kolkata – then the most important
commercial city in India and the centre of the jute and indigo trades. They have gone on
to become the largest international bank in India in terms of branch network and profits.

Today, they have many of the emerging Indian multinationals, amongst their clients and
are expanding our strategic and advisory capabilities to keep pace with their financial
needs and aspirations. Standard Chartered’s long presence in this key market has giving
us a deep understanding of the evolving needs of our clients.

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SCB have 90 branches in India, as well as a presence in Bangladesh, Nepal and Sri
Lanka. Standard Chartered is the most profitable among its peers for wholesale banking.

Mergers and acquisition

Some Recent Mergers and acquisition by SCB

1. On May 2008, Standard Chartered announces raising strategic stake in Vietnam's Asia
Commercial Bank to 15%
2. On Jan 2008, Standard Chartered to acquire South Korea's Yeahreum Mutual Savings
Bank
3. On Oct 2007, Standard Chartered First Bank Korea Ltd to acquire 80% stake in South
Korea's A Brain, a funds administration company
4. On Sep 2007, Standard Chartered signs agreement to buy American Express Bank, a
wholly owned subsidiary of American Express Company, with operations in 47 countries
5. On Aug 2007, Standard Chartered announces acquisition of 49% strategic stake in
India's UTI Securities, a leading local broking firm.
6. On Sep 2006, Acquisition of 95.37% Union Bank

In 2000, Standard Chartered acquired Grind lays Bank from ANZ Bank, increasing its
presence in private banking and further expanding its operations in India and Pakistan

Competitors

The competitors of SCB are A B N-Amro Bank N.V., Hong Kong & Shanghai Banking
Corpn. Ltd.(HSBC) and Citibank.

Income (total
Rs. Crore income net of Interest Provision PAT
Year : Mar 2008 P&E) income s

A B N-Amro Bank N.V. 51.87 58.79 85.66 59.45

Hong Kong & Shanghai
Banking Corpn. Ltd. 48.30 59.31 45.38 64.22
Citibank. 38.39 43.05 71.61 27.56
Standard Chartered Bank 38.01 32.39 -8.00 50.78

The standard charted have strong competition among these 3 foreign banks on terms of
getting best expertise and management team, extending their customer base, geographic
reach and broaden their product range.

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Financial analysis

Income Statement Analysis

Year 2008 2009 %change
operating income 13968 11067 26.21%
Net profit 7611 6232 22.13%

Chart 1

SCB’s income is increasing, considerably, in India, it is became it is able to respond to

market realities. SCB is being innovative and develop differentiating business models to
profitability, actively adopting acquisition as a mean to grow.

Balance Sheet Analysis

Year 2008 2009 %change

Net worth 22695 21552 5.30%

Total assets 435068 329305 32.12%

Total liabilities 412373 307753 33.99%

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Total debt 234008 179760 30.18%
Total advances 234356 196848 19.05%
Retained Earnings 1822 1406 29.59%
Market Performance
Year 2008 2009 %change
closing price as on 31st Dec 875 1844 -52.55%
market capitalization 12333 25992 -52.55%
beta 1.2 1.34 -10.45%
book value per share 1570 1479 6.15%
Dividend per share 61.32 79.32 -22.34%

NOTE: - ALL FIGURES ARE IN $

The retained earnings have increased from last year, by 29.59%.
The operating profit and net profit had increased from last by 26.21% and 22.13% respectively.
Although, year 2008 is considered as a financially bad year comparatively to year2007, still SCB
is able to expand its business and operations in India, its just because of their mergers and
acquisition and able to manage their operations in better way.
SCB’s beta value had decreased from last year; it means this bank is considered less risky to
invest as compared to other bank.
There is growth opportunity to these developing countries. SCB have been able to establish an
outstanding record in terms of innovation, growth and value creation. SCB is able to respond to
changing market realities that helped them to remain profitable in yr 2008.

Historical price performance chart of SCB

Chart 2
Closing price
In $

Year
--- STANDARD CHARTERED PLC ORD USD0.50
FTSE 100
Price as on 31 march 2009 was 882$

Standard Chartered is listed on the London Stock Exchange and the Hong Kong Stock
Exchange and is a constituent of the FTSE 100 Index. Its largest shareholder is Temasek
Holdings.

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In year 2008, the stock market performance was not good due to financial crisis across
the globe, hence SCB share price drop to at least 50%.

Standard Chartered India offers expertise and services in the following areas:

 Trade finance
 Commodity trade finance
 Cash management
 Custody
 Foreign exchange
 Debt capital markets
 Corporate finance
 Supply chain finance

To meet the diverse needs of today’s customers, Standard Chartered also offers a broad
range of Foreign Exchange Products and Services:

 Money Market Products

 Interest Rate and Cross Currency Derivatives
 Foreign Exchange, Forwards and Swaps
 Non-Deliverable Forwards and Exotic Options
 Money Market Funds
 Online Electronic Trading Services
 Global FX and Economic Research

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Comparative Analysis of ULIP v/s Mutual Fund
Mutual Funds

A mutual fund is nothing more than a collection of stocks and/or bonds. It brings together
a group of people and invests their money in stocks, bonds, and other securities. Each
investor owns shares, which represent a portion of the holdings of the fund.

The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellect ate with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling.

Reasons to invest in mutual fund:

1) Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all of the income it receives over the year to fund owners in the form of a
distribution.
2) If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
3) If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. Then, they can sell their mutual fund shares for a profit.

Types of mutual funds

Most funds have a particular strategy they focus on when investing. For instance, some
invest only in Blue Chip companies that are more established and are relatively low risk.
On the other hand, some focus on high-risk start up companies that have the potential for
double and triple digit growth. Finding a mutual fund that fits the investor investment
criteria and style is important.

Types of mutual funds are:

a) Value stocks- Stocks from firms, with relative low Price to Earning (P/E) Ratio,
usually pay good dividends. The investor is looking for income rather than capital
gains.

b) Growth stock- Stocks from firms with higher low Price to Earning (P/E) Ratio
usually pay small dividends. The investor is looking for capital gains rather than
income.

23
c) Based on company size, large, mid, and small cap- Stocks from firms with
various asset levels such as over $2 Billion for large; in between $2 and $1 Billion
for mid and below $1 Billion for small.

d) Income stock- The investor is looking for income, which usually come from
dividends or interest. These stocks are from firms, which pay relative high
dividends. This fund may include bonds, which pay high dividends. This fund is
much like the value stock fund, but accepts a little more risk and is not limited to
stocks.

e) Index funds- The securities in this fund are the same as in an Index fund such as
the Dow Jones Average or Standard and Poor's. The number and ratios or
securities are maintained by the fund manager to mimic the Index fund it is
following.

f) Stock market sector- The securities in this fund are chosen from a particular
marked sector such as aerospace, retail, utilities, etc.

g) Defensive stock- The securities in this fund are chosen from a stock that usually
is not impacted by economic down turns.

h) International- Stocks from international firms.

i) Balanced funds- The investor may wish to balance his risk between various
sectors such as asset size, income or growth. Therefore, the fund is a balance
between various attributes desired.

j) Tax efficient- Aims to minimize tax bills, such as keeping turnover levels low or
shying away from companies that provide dividends, which are regular payouts in
cash or stock that, are taxable in the year that they are received. These funds still
shoot for solid returns; they just want less of them showing up on the tax returns.

k) Convertible- Bonds or Preferred stock- that may be converted into common

stock.

l) Mutual funds of mutual funds- This funds that specializes in buying shares in
other mutual funds rather than individual securities.

m) Closed end - This fund has a fixed number of shares. The value of the shares
fluctuates with the market, but fund manager has less influence because the price
of the underlining owned securities has greater influence.

24
 n) Exchange traded funds (ETFs) - Baskets of securities that track highly
recognized indexes. Similar to mutual funds, except that they trade the same way
that a stock trades, on a stock exchange.

Major Mutual Fund Companies in India

 ABN AMRO Mutual Fund

 Birla Sun Life Mutual Fund
 HDFC Mutual Fund
 HSBC Mutual Fund
 Prudential ICICI Mutual Fund
 State Bank of India Mutual Fund
 Unit Trust of India Mutual Fund
 Reliance Mutual Fund
 Standard Chartered Mutual Fund

Advantages of Mutual Funds:

• Professional Management - The primary advantage of funds is the professional

management of investor’s money. Investors purchase funds because they do not have the
time or the expertise to manage their own portfolios. A mutual fund is a relatively
inexpensive way for a small investor to get a full-time manager to make and monitor
investments.

• Diversification - By owning shares in a mutual fund instead of owning individual

stocks or bonds, the risk is spread out. The idea behind diversification is to invest in a
large number of assets so that a loss in any particular investment is minimized by gains in
others. Large mutual funds typically own hundreds of different stocks in many different
industries. It would not be possible for an investor to build this kind of a portfolio with a
small amount of money.

• Economies of Scale - Because a mutual fund buys and sells large amounts of securities
at a time, its transaction costs are lower than what an individual would pay for securities
transactions.

• Liquidity - Just like an individual stock, a mutual fund allows investor to request that
the shares can be converted into cash at any time.

• Simplicity - Buying a mutual fund is easy. Any bank has its own line of mutual funds,
and the minimum investment is small. Most companies also have automatic purchase
plans on a monthly basis.

25
ULIP, Unit Linked Insurance Policy

In earlier days, insurance was bought primarily for tax purposes and very few people
actually bothered about life cover as such. LIC was the only player and offered money
back policies, endowment policies and few single premium policies like Bima Nivesh.
However, as an asset class it was not considered as an option.

Now the scenario has completely changed, there are many private players and many new
options have come up. One among these new products is ULIPs that are hugely popular
and sold as an attractive asset with insurance/retirement benefit.

Insurers have developed plans that combine the benefits of life insurance as well as
giving various options of participating in the growth of capital market. Such plans are
called ULIP.

Unit Linked Insurance Plan is a life insurance policy that provides a combination of life
insurance protection and investment. ULIP is a most famous and safe way of investment
in current scenario.

In the event of the insured person’s premature death, his nominees would normally
receive an amount that is higher of the sum assured or the value of the units. However,
the policyholder receives the sum assured plus the value of the investments in some
schemes.

Every insurance company has four to five ULIPs with varying investment options,
charges and conditions for withdrawals and surrender. Moreover, schemes have been
tailored to suit different customer profiles and, in that sense, offer a great deal of choice.
The charges paid in these schemes in terms of entry load, administrative fees,
underwriting fees, buying and selling charges and asset management charges are high and
vary from insurer to insurer in the quantum and in manner in which they are charged.
Some of the other features offered by insurers along with ULIPs are the following. Not
all insurers offer these.

 The policyholder can pay additional premium for investment at any time.

 Partial or total withdrawal is allowed. Sometimes there are conditions attached.

Some insurers, not all, charge a redemption fee in such cases.

 These policies will not entitled to any bonus

 There is no annual bonus, but there may be a loyalty bonus paid at the end

26
Types of Funds do ULIP Offer

Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile
and time horizons. Different funds have different risk profiles. The potential for returns
also varies from fund to fund.
The following are some of the common types of funds available along with an indication
of their risk characteristics.

General Nature of Investments Risk Category

Description
Equity Funds Primarily invested in company stocks with Medium to High
the general aim of capital appreciation

Income, Fixed Invested in corporate bonds, government Medium

Interest and Bond securities and other fixed income
Funds instruments
Cash Funds Sometimes known as Money Market Low
Funds — invested in cash, bank deposits
and money market instruments
Balanced Funds Combining equity investment with fixed Medium
interest instruments

Depending upon the performance of the unit linked fund chosen, the policyholder may
achieve gains or losses on the investments made. The past returns of a fund are not
necessarily indicative of the future performance of the fund.

Charges, fees and deductions in a ULIP

ULIPs offered by different insurers have varying charge structures. Broadly, the different
types of fees and charges are given below. However, it may be noted that insurers have
the right to revise fees and charges over a period.

1. Premium Allocation Charge

This is a percentage of the premium appropriated towards charges before allocating the
units under the policy. This charge normally includes initial and renewal expenses apart
from commission expenses.

2. Mortality Charges
These are charges to provide for the cost of insurance coverage under the plan. Mortality
charges depend on number of factors such as age, amount of coverage, state of health etc

27
3. Fund Management Fees
These are fees levied for management of the fund and are deducted before arriving at the
Net Asset Value (NAV).

4. Policy/ Administration Charges

These are the fees for administration of the plan and levied by cancellation of units. This
could be flat throughout the policy term or vary at a pre-determined rate.

5. Surrender Charges
A surrender charge may be deducted for premature partial or full encashment of units
wherever applicable, as mentioned in the policy conditions.

6. Fund Switching Charge

Generally, a limited number of fund switches may be allowed each year without charge,
with subsequent switches, subject to a charge.

7. Service Tax Deductions

Before allotment of the units, the applicable service tax is deducted from the risk portion
of the premium.

Premium used to purchase units

The full amount of premium paid is not allocated to purchase units. Insurers allot units on
the portion of the premium remaining after providing for various charges, fees and
deductions. However, the quantum of premium used to purchase units varies from
product to product.
The total monetary value of the units allocated is invariably less than the amount of
premium paid because the charges are first deduct from the premium collected and the
remaining amount is used for allocating units.

One has “SWITCH” option in a policy from one fund to another provided the feature is
available in the product. While a specified number of switches are generally effected free
of cost, a fee is charged for switches made beyond the specified number.

The Insurer provides information related to investments to the policyholder and obliged
to send an annual report, covering the fund performance during previous financial year in
relation to the economic scenario, market developments etc. that should include fund
performance analysis, investment portfolio of the fund, investment strategies and risk
control measures adopted.

28
Major Insurance Companies in India offering ULIP

 Bajaj Allianz Life

 ICICI Prudential Life Insurance
 HDFC Standard Life
 Aviva Life Insurance
 MetLife India Life Insurance

Reason to invest in ULIP

(1) There are special Unit Link products packaged for specific needs like child education
and marriage or retirement etc. These products do offer complete solution otherwise is
difficult to manage financial goals by other investment avenues like mutual fund or
equity. Unit Link Product takes another step and insures other events that can act as
hurdle for the specific goal.

(2) For a long-term, regular investment, ULIP should be always preferred over MF. The
reason are
(a) Its difficult to maintain regularity through MF
(b) In a down market its easy to switch in ULIP that selling and buying MF
(c) MF investment strategy are comparatively for short term
(d) Regulation for investment in ULIP are strict

(3) ULIP does provide other facilities like changing the life cover as required. This not
only takes care that investor increase his own life cover as and when liability increases
and don’t have to buy another product but also that when the liability decrease, he don’t
had to pay extra for the insurance.

29
Empirical Study
ULIPs v/s Traditional ‘With Profit’ Policies

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

In ‘with profits’ policies, the insurance company credits the premium to a common pool
called the ‘life fund,’ after setting aside funds for the risk premium on life insurance and
management expenses. Every year, the insurer calculates how much has to be paid to
settle death and maturity claims. The surplus in the life fund left after meeting these
liabilities is credited to policyholders’ accounts in the form of a bonus.

In a ULIP too, the insurer deducts charges towards life insurance (mortality charges),
administration charges and fund management charges. The rest of the premium is used to
invest in a fund that invests money in stocks or bonds. The number of units represents the
policyholder’s share in the fund. The value of the unit is determined by the total value of
all the investments made by the fund divided by the number of units. If the insurance
company offers a range of funds, the insured can direct the company to invest in the fund
of his choice. Insurers usually offer three choices — an equity (growth) fund, balanced
fund and a fund that invests in bonds.

The strong arguments in favors of unit-linked plans are that — the investor knows exactly
what is happening to his money and two; it allows the investor to choose the assets into
which he wants his funds invested. An investor in a ULIP knows how much he is paying
towards mortality, management and administration charges. He also knows where the
insurance company has invested 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.

A traditional ‘with profits,’ on the other hand, is a black box and a policyholder has little
knowledge of what is happening. Traditional ‘with profits’ policies too invest in the
market and generate the same returns prevailing in the market. However, 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.

30
As IRDA is a regulating authority for Insurance, so it has its total control over the
business of all Insurance companies. On July 1, 2006, the IRDA introduced revised ULIP
guidelines. The following are the provisions of the latest guidelines:

1. Term/Tenure
The ULIP client must have the option to choose a term/tenure.
If no term is defined, then the term will be defined as '70 minus the age of the client'. For
example if the client is, opting for ULIP at the age of 30 then the policy term would be 40
years. The ULIP must have a minimum tenure of 5 years.

2. Sum Assured
On the same lines, now clients can associate with a sum assured. The minimum sum
assured is calculated as:
(Term/2 * Annual Premium) or (5 * Annual Premium) whichever is higher.
There is no clarity with regards to the maximum sum assured.
The sum assured is treated as sacred under the new guidelines; it cannot be reduced at
any point during the term of the policy except under certain conditions - like a partial
withdrawal within two years of death or all partial withdrawals after 60 years of age. This
way the client is at ease about the sum assured at his disposal.

3. Premium payments
If less than first 3 years premiums are paid, the life cover will lapse and policy will be
terminated by paying the surrender value. However, if at least first 3 years premiums
have been paid, then the life cover would have to continue at the option of the client.

4. Surrender value
The surrender value would be payable only after completion of 3 policy years.

5. Top-ups
Insurance companies can accept top-ups only if the client has paid regular premiums till
date. If the top-up amount exceeds 25% of total basic regular premiums paid till date,
then the client has to be given a certain percentage of sum assured on the excess amount.
Top-ups have a lock-in of 3 years

6. Partial withdrawals
The client can make partial withdrawals only after 3 policy years.

7. Settlement
The client has the option to claim the amount accumulated in his account after maturity
of the term of the policy upto a maximum of 5 years. For instance, if the ULIP matures
on January 1, 2007, the client has the option to claim the ULIP monies till as late as
December 31, 2012. However, life cover will not be available during the extended period.

31
8. Loans
No loans will be granted under the new ULIP.

9. Charges
The insurance company must state the ULIP charges explicitly. They must also give the
method of deduction of charges.

10. Benefit Illustrations

The client must necessarily sign on the sales benefit illustrations. These illustrations are
shown to the client by the agent to give him an idea about the returns on his policy.
Agents are bound by guidelines to show illustrations based on an optimistic estimate of
10% and a conservative estimate of 6%. Now clients will have to sign on these
illustrations, because agents were violating these guidelines and projecting higher returns.

1. Regular disclosure of detailed ULIP portfolios. This is a problem with the

industry; for all their talk on being just like (or even better than) mutual funds,
ULIP portfolios are nowhere near their mutual fund counterparts in frequency as
well as in transparency.
2. On the same lines, other data points like portfolio turnover ratios need to be
mentioned clearly, so clients have an idea on whether the fund manager is
investing or punting.
3. ULIPs need to mention their investment mandate, is it going to aim for aggressive
capital appreciation or steady growth.
4. Exposure to a stock/sector in a ULIP portfolio must be defined. Diversified equity
funds have a limit to how much they can invest in a stock/sector. Investment
guidelines for ULIPs must also be crystallized.
Our interaction with insurance companies indicates that there is little clarity on this
front; we believe that since ULIPs invest so heavily in stock markets they must have
very clear-cut inversions in terms of their structure term guidelines.

32
Comparison of ULIP Vs Mutual Fund

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual
funds in terms of their structure and functioning. As is the insurance company and a net
asset value allot units the case with mutual funds, investors in ULIPs (NAV) is declared
for the same on a daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to
the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds
and debt funds to name a few. Generally, ULIPs can be termed as mutual fund schemes
with an insurance component.

However, it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs.
Despite the seemingly comparable structures, there are various factors wherein the two
differ.

1) Insurance
ULIPs provide you with insurance cover, whereas, MFs do not provide you with
insurance cover. However, the insurance cover is not free. Mortality charges are deducted
from the investment.

2) Entry Load
ULIPs generally come with a huge entry load. For different schemes, this can vary
between 5 to 40% of the first year’s premium.
MFs have a small entry load of a maximum of 2.5%, which can also be waved off if
investors apply directly.

3) Maturity
ULIPs generally come with a maturity of 5 to 20 years. That whatever money investor
had put in, most of it will be locked-in until the maturity.
Tax saving MF comes with a lock-in period of 3 years; Other MFs do not have a lock-in
period. Again, MFs have advantage over ULIPs. ULIPs do allow you to take money out
prematurely but they also put penalties for doing that.

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

33
Some insurance companies do declare their portfolios on a monthly/quarterly basis.
However, the lack of transparency in ULIP investments could be a cause for concern
considering that the amount invested in insurance policies is essentially meant to provide
for contingencies and for long-term needs like retirement; regular portfolio disclosures on
the other hand can enable investors to make timely investment decisions.

5) Compulsion of Investing
ULIPs would generally make investor pay at least first three premiums.
MFs do not have any compulsion on future investments.
If investor had invested in a MF this year, and in the next year he do not have enough
income or money to do investments he can decide not to make any investments. In
addition, if he notices that, the MF that he had invested in is not giving good returns as
compared to some other Funds scheme; he can decide to invest in some other MF.

6) Tax Saving
Both the ELSS and ULIP come under 80C and can save tax. Returns in the both form of
investments are tax-free.

7) Market exposure
ULIPs give you both moderate and aggressive exposure to equity market
Debt and Liquid MF let invest with low risk, but do not give tax benefit. ULIPs need not
be aggressive in equity exposure. That is ULIPs need not keep more that 60% of their
funds in equity market. ULIPS also allow changing the equity market exposure. Thus, it
can help investor’s time the market and still give the tax savings.
If a MF has a less than 60% exposure to equity market, the returns from it are not tax-
free. Thus, investors do not get to take a conservative stand on returns.

8) Flexibility of time of redemption

ULIP will be redeemed on maturing. Premature redemption is allowed with some penalty.
In MF, Premature redemption is not allowed. For a open-ended scheme one can redeem
the MF anytime after maturity. This is mainly useful if the market is down at the maturity
time of the investment. In case of ELSS, one can wait until the market comes up again
and then redeem them. ULIP scheme will not allow investor to wait.

Thus, according to my opinion:-

1) If one wishes to take a aggressive exposure to equity market, go ahead any buy MF.
ULIP won’t be able to give you similar returns.

2) If one is not a disciplined enough to make regular investments and need a whip to
make investment, then, invest in ULIP.

3) If one wants to take a low exposure to equity market and still get tax-free returns,
invest in ULIP but make sure that funds are invested is conservative fund.

34
4) If one, want Insurance cover and good return on investment. I would suggest that
investment in MFs and take a term plan is a better option.

Case Analysis

ULIP Pension Plan Vs Mutual Fund

With respect to retirement planning, given below is my analysis on the options available
to the investor.
Let us look at the given set of variables first.
1.The client’s age is 38 years and he would like to retire 22 years hence i.e. at
the age of 60 years
2.The client would like to invest an amount of Rs 10, 00,000 each year for
three years. In total, he will invest an amount of Rs 30 lakh over 3 years.
3. The client has been suggested a single premium plan of Rs 10 lakh with
additional ‘top-ups’ worth Rs 10 lakh p.a. (per annum) for the following two
years. In all, the client would be paying Rs 30 lakh over the 3-yr period.
4. The client has a high-risk appetite and would like to remain invested in
equities throughout the tenure of the pension plan.
5. The client has a well-diversified portfolio including mutual funds and
stocks.
Based on the information, I had worked out a likely retirement solution for the
investor.

Let us first look at how investments in the unit linked pension plan (ULPP)-
Pension plan: Preparing for the future
Investment One-time Admn. Fund MgtInvestment Net maturity
amt (Rs) charge (%) Charges (Rs) Charges (%) Tenure (Yrs) Value (Rs)
1,000,000 2.50 180 0.80 22
18,400,000
1,000,000 2.50 180 0.80 21
1,000,000 1.00 180 0.80 20

Administration charges are subject to 5.00% inflation per annum.

Investments in unit linked pension plan (ULPP)

If the client decides to buy the pension plan, then he would be paying Rs1,000,000 in the
first year. Since this is a single premium plan, one-time charges on the same are 2.50%
(i.e. in the first year). In other words, Rs 25,000 would be deducted from the client’s
single premium amount and the remaining amount (i.e. Rs 975,000) would be invested in
the 100% equity ULPP option. This amount will remain invested for the entire 22-yr
tenure.

The charges for any additional top-ups in the second year too would be to the tune of

35
.50%. Similar to the first year, Rs 25,000 would be deducted from the second year’s top-
up amount. So Rs 975,000 would be invested over 21 years.
One-time charges for any top-ups from the third year onwards fall to 1% for the year.
Therefore, only Rs 10,000 (i.e. 1% of Rs 1,000,000) would be deducted and the
remaining amount would be invested. The third year amount (Rs 990,000) will remain
invested for a 20-yr period (i.e. time to maturity).

Fund management charges (FMC) for managing equities in the given ULPP are 0.80%
p.a. Administration charges are assumed to be Rs 180 p.a. (increasing at an assumed
inflation rate of 5.00%).

As can be seen from the table above, assuming a compounded growth rate (CAGR) of
10% p.a. over a 22-Yr tenure, the client’s investments will grow to approximately Rs
18,400,000.

As against the ULPP given above, let us now analyze how investments in a mutual fund
would have worked out over a similar tenure.
How do mutual funds fare?
Investment Entry load Fund MgtInvestment Net maturity
amt (Rs) (%) Charges (%) Tenure (Yrs) Value (Rs)
1,000,000 2.25 2.00 22
1,000,000 2.25 2.00 21
15,240,000
1,000,000 2.25 2.00 20

Funds Mgt Charges is assumed 2.00% for the first 5 years, 1.75% for the next 5 years and
1.50% the remaining tenure.

Investments in a mutual fund

Similar to a ULPP, the client would invest Rs 1,000,000 p.a. for 3 years in a mutual fund
scheme. However, unlike a one-time initial charge associated with the ULPP above,
mutual funds usually have an entry/exit load on their schemes. Assuming an entry load of
2.25% for each of his three annual investments (of Rs 1,000,000), the net amount
invested would be drawn down by Rs 22,500 (i.e. 2.25% of Rs 1,000,000) each year for
the initial three years.

I had also assumed a decreasing FMC on the mutual fund schemes- the assumption here
is it would be 2.00% for the first 5 years, 1.75% for the next 5 years and 1.50% for the
remaining period thereafter. The ‘decreasing FMC’ assumption is because as the corpus
for a mutual fund scheme grows over a period, economies of scale come into play. This
helps the mutual fund spread its costs over a larger corpus, thereby reducing its overall
cost of managing the fund.

36
As with the ULPP, assuming a 10% rate of growth over a 22-yr period, the mutual fund
investments would have grown to approximately Rs 15,240,000. The corpus generated by
ULPP is higher than the mutual fund corpus by Rs 3,160,000 (i.e. 20.73%).

The reason why ULPP scores over mutual funds is because of a low FMC. The FMC on
the ULPP under review is 0.80% throughout the tenure as compared to the mutual fund
FMC, which is in the 1.50%-2.00% range. Over the long term, FMC makes a significant
impact by reducing the corpus available for investments. In other words, lower the FMC,
higher the investible surplus and vice-versa.
In our view therefore, the client would be better off investing his money in the ULPP.
However, analysis on pension plans versus mutual funds would be considered myopic if
deliberated only from the expenses point of view.

37
Findings and Suggestions

After survey, there are some findings and suggestions as follows. These findings and
suggestions are explained with the help of Following tables and Illustrations

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

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

o While investing any insurance company customer prefers for good branded
company like LIC and second preference is given to SBI life, as many people
perceive that SBI Life is a govt. owned company so people want security for their
investment.

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

o While survey I found that many all customers had already invested in ULIP and
Mutual Fund some people had invested in both options. 44% of people had
invested in Mutual Fund, 56% people had invested in ULIP, and 11% people had
invested in both the options.

o While investing in Mutual Fund the preference for the fund are changing as per
the age of the customer means the people from the age group of 25-40 who are
generating more income, they are risk takers and most of them preferring the
equity fund.

o As age is increasing the investment pattern moving to words more secured

options like balanced and debt funds. All age group people are tending to invest
in Tax saving funds to avail the tax deduction.

o While investing in mutual fund 80% investors preferring more to the returns the
mutual fund is providing and 60% for the Investment and Liquidity reasons.

38
o First reason or preference that why an investor is interested in ULIP is Investment
Purpose, and second is to its returns and after that they investing because they are
getting the tax benefit. Then again, some people are investing for pension
planning and security.

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

o As most of the people want the option that should provide security and good
returns and there is, only option available with good liquidity is ULIP of Bajaj
Alliance. 54% people had opted for ULIP as their future investment and 45% of
people opted for Mutual Fund. Therefore, we can find that there not so much
difference in these option.

o 62% of people given Best rating to the Bajaj Alliance Insurance ULIP, so from
this we can analyze that Bajaj Alliance Insurance is doing good but it is having
good potential in Market. To improve its market share they should improve the
awareness level of the common people.

o Innovative Products and good brand name are the main success factor for Bajaj
Alliance Insurance. 35% customers are attracted due to the Innovative products
offered by the Co. So if Bajaj Alliance wants to penetrate its market share they
should improve the should give more emphasis on marketing strategy, improving
the distribution channel etc.

39
Demographic Analysis

The Segmentation of sample as based on gender, age, family status, annual income,
occupation etc. the demographic profile is as follows

Table No.1 Demographic Profile

Frequency Percentage
Gender
Male 255 69%
Female 115 31%
Total 370 100%
Age
21-30 140 37%
31-40 80 22%
41-50 108 29%
More than 50 42 12%
Total (Approx.) 370 100%
Family Status
Married 214 58%
Single 156 42%
Total (Approx.) 370 100%
Annual Income ( lakhs)
Up to 1 lakh 128 35%
1-2 140 37%
2-3 44 12%
3-4 32 9%
More than 4 26 7%
Total (Approx.) 370 100%
Occupation
Civil servant 60 16%
Private Employee 48 13%
Self-Employed 32 8.5%
Businessman/women 102 28%
Farmer 32 8.5%
Others 96 26%
Total 370 100%

40
 Awareness about ULIP Insurance

Table No. 2 Awareness about ULIP

No. of Responses Awareness About ULIP

(No. of persons)
335 YES
35 NO
370 Total

Illustration No. 1 Awareness about ULIP

Interpretation

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

41
 Company preference for ULIP

Table No. 3 Company Preference

Responses Company Name

(No. of Persons)
155 Bajaj Allianz Life Insurance
80 SBI Life Insurance
55 Max New York Life insurance
45 HDFC life Insurance
35 Reliance Life Insurance

Illustration No.2 Company Preference

Interpretation

While investing any insurance company customer prefers for good branded company
Bajaj in India. Second preference is given to SBI life, as many people perceive that SBI
Life is a govt. owned company so people want security for their investment.

42
 Awareness about Mutual Fund?
Table No. 4 Awareness about Mutual Fund

Awareness About Mutual Fund No. of Responses

(No. of persons)
Yes 324
No 46
Total 370

Illustration No.3 Awareness about Mutual Fund

Interpretation

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

43
 Existing investors in ULIP and Mutual Fund
Table. 5 option in which already Invested

Sr. No. Investment option Responses

(No. of Persons)
1 Mutual Fund only 140
2 ULIP only 190
3 Both 40
Total 370

Illustration No. 4 Option in which already Invested

Interpretation

While survey I found that many all customers had already invested in ULIP and Mutual
Fund some people had invested in both options. 44% of people had invested in Mutual
Fund, 56% people had invested in ULIP, and 11% people had invested in both the
options.

44
 Fund Preference while investing in a Mutual Fund
Table No.6. Selection of Fund in MF

S.No. Name of the fund Responses Age

(No. of Persons)
1 Equity Fund 146 25-40

2 Debt Fund 27 50-65

3 Balanced Fund 40 40-50

4 Tax saving Fund 57 25-60

Illustration No.5 Selection of Fund in MF

Age of Investor
Interpretation

While investing in Mutual Fund the preference for the fund are changing as per the age of
the customer means the people from the age group of 25-40 who are generating more
income, they are risk takers and most of them preferring the equity fund. As age is
increasing the investment pattern moving to words more secured options like balanced
and debt funds. All age group people are tend to invest in Tax saving funds to avail the
tax deduction.

45
 Factors considering most to invest in Mutual Fund

Table7. Reasons to invest in Mutual Fund

Sr. No. Factors considered most while investment Responses

1 Only Investment 60
2 Good returns 80
3 Liquidity 60
Total 200

Illustration No. 6 Reasons to invest in Mutual Fund

Interpretation

While investing in mutual fund 80% investors preferring more to the returns the mutual
fund is providing and 60% for the Investment and Liquidity reasons.

Reasons to Invest In ULIP

46
Table8. Factors considered while investing in ULIP

Sr. No. Factors Considered Reponses

(No. of Persons)
1 Investment 70
2 security 40
3 Pension Planning 35
4 Good returns 65
5 Tax Relief 50
Total 250

Illustration No. 7 Factors considered while investing in ULIP

Interpretation

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

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

Factors to be Considered in future Investment

47
Table9. Factors to Considered for future Investment

Sr. No. Factors Considered Responses

(No. of Persons)
1 Returns 165
2 Security of Money 195
Total 370

Illustration No.8 factors to Considered for future Investment

Interpretation

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

48
 Most preferred way for investment
Table10. Mutual fund or ULIP
Sr.No. Investment Option Response
(No. of Persons)
1 Mutual Fund 170
2 ULIP 200
Total 370

Illustration No. 9 Mutual fund or ULIP

Interpretation

As most of the people want the option that should provide security and good returns and
there is, only option available with good liquidity is ULIP of Reliance. 54% people had
opted for ULIP as their future investment and 45% of people opted for Mutual Fund.
Therefore, we can find that there not so much difference in these option.

Rating for Bajaj Alliance life Insurance ULIP

49
 Table 11. Rating for Bajaj Life Insurance ULIP

Sr. No. Ratings Response

(No. of Persons)
1 Fair 30
2 Average 30
3 Good 80
4 Best 230

Illustration No. 10 Rating for Reliance Life Insurance ULIP

Interpretation

62% of people given Best rating to the Bajaj Alliance Life Insurance ULIP, so from this
we can analyze that Bajaj Alliance Life Insurance is doing good but it is having good
potential in Market. To improve its market share they should improve the awareness level
of the common people.

Reasons to invest in RLIC

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Table12. USP of Reliance Life Insurance

Sr.No. Factors Responses

(No. of Persons)
1 Innovative Products 110
2 Good returns 70
3 Good Brand Name 90
4 Good Marketing strategy 65

Illustration11. USP of Reliance Life Insurance

Interpretation

Innovative Products and good brand name are the main success factor for Bajaj Alliance
Life Insurance. 35% customers are attracted due to the Innovative products offered by
this company. Therefore, if Bajaj Alliance wants to penetrate its market share they should
improve & give more emphasis on marketing strategy, improving the distribution channel
etc.

Conclusions and/or Recommendations

From above analysis and survey we can conclude as follows
 Awareness of ULIP is increasing as more number of private players is entering in
life insurance industry.

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

 ULIP differentiate from Mutual fund in respect of Insurance cover.

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

 ULIP and Mutual fund are providing same type of investment funds like, equity
funds, debt funds, infrastructure fund, balanced fund etc.

 In terms of expenses, mutual funds are having low expenses as compared to ULIP
of Bajaj Alliance life insurance.

 Mutual fund companies charging 1.5% to 2.5% as entry and exit load, Bajaj
Alliance insurance are charging 25% yearly as asset allocation charges.

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

 Mutual fund is having good growth but many customers from rural areas don’t
have any knowledge about Mutual fund.

 Even investors from metro cities like Delhi & Gurgoan do not have that much of
Knowledge about fund selection. For this, they all are depend on the Brokers.

 People are investing in only good branded companies as they don’t believe on
other financial companies for taking ULIP.

 There is a need for insurers to undertake a demand audit in order to understand

what the policyholder wants and needs.

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

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 Mutual fund and ULIP insurance both are facing fierce competition; increasingly
more organizations are seeking to enhance their demand in the market place.

 For Bajaj Alliance Insurance They should go for creating more awareness about
its ULIP as now also people are just investing because Bajaj is India’s most
Known and Favorite brand in past.

 Bajaj Alliance should go for innovating more and more products and improving
the distribution channels as per the area of sales.

Appendix
Computation

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Hypothesis testing

H 0 - People will not prefer investment in ULIP of Bajaj Alliance as Compared

to mutual fund.
H 1 - People will prefer investment in ULIP of Bajaj Alliance as Compared to
mutual fund.

The Sample size taken for this Hypothesis is 370. The preference of 370 will be
recorded and can be analyzed by ‘z’ test. Because sample size is more than 30
I have taken the response of 370 people. 210 persons had given positive
preference for Bajaj Alliance ULIP.

= 210 = 370 = 10

Sample size > 30

X 
Z= 

Z = 210-370/10 = -16
Level of significance = 5% i.e.1.96

-1.96 +1.96

Two tailed test

-16 falls in rejection region so Ho is rejected

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H0 is rejected and H1 is accepted then we can say that People will prefer
investment in ULIP of Bajaj Alliance as Compared to mutual fund

B) Questionnaire

ULIP or Mutual Fund

Name of the Person __________________________________________

Address _______________________________________________
_______________________________________________

Phone N0. _______________________________________________

Occupation _______________________________________________

Age _______________________________________________

Education _______________________________________________

Average Annual Income

50000 -100000

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100000 -200000
More than 200000

Q1) Do you know About ULIP Insurance?

Yes No

Q2) Do you have taken any ULIP insurance policy? Can you name it?

Yes No
_____________________________________________

Q3) If yes, which company’s ULIP you have taken and why?
_____________________________________________
For investment
For Security
For Pension planning
For Good returns
For Tax Relief only

Q4) Do you know about Mutual fund?

Yes No

Q5) Do you have taken any Mutual Fund? Can you name it?

Yes No

Q6) If yes, which company’s Mutual Fund you have taken and why?
________________________________________________
For only Investment
For Good returns
For Liquidity

Q7) which is the factor you consider the most while choosing any
Investment Option?
Returns Security of money

Q8) Whom Do you prefer first for investment.

ULIP Mutual Fund

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 Q9) How would you rate Reliance life insurance ULIP?
Fair Average Good Best

Q10) what is the Main Reason to Invest in RLIC ULIP?

Innovative Products
Good returns
Good Brand Name
Good Marketing strategy

References

 http://www.cob.ohio.edu/isms/upload/documents/541_633784569857030793_Cas
e_1_Ocean_Park.pdf APR 09
 http://economictimes.indiatimes.com/articleshow/3472711.cms MAY09
 http://www.valueresearchonline.com/story/h2_storyview.asp?str=100245 MAY
O9
 http://finance.indiamart.com/india_business_information/mutual_funds_industry.
html JUNE09
 THE ASIAN BANKER JOURNAL 2009 EDITION

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