1.

INTRODUCTION TO PROJECT
1.1 INTRODUCTION OF ULIP A unit-linked insurance plan (ULIP) is a type of life insurance where the cash value of a policy varies according to the current net asset value of the underlying investment assets. It allows protection and flexibility in investment, which are not present in other types of life insurance such as whole life policies. The premium paid is used to purchase units in investment assets chosen by the policyholder. ULIP came into play in the 1960s and is popular in many countries in the world. In 1971 the Unit Trust of India offered the Unit Linked Insurance Plan. Out of insurance premium a small part of contribution was utilized for providing life cover and balance invested in units. As times progressed the plans were also successfully mapped along with life insurance need to retirement planning. In today's times, ULIP provides solutions for insurance planning, financial needs, and many types of financial planning including childrens marriage planning. In India investments in ULIP are covered under Section 80C of IT Act. However, the concept of having an investment and insurance by the same instrument was challenged by the market regulator SEBI which took up the matter to the Supreme Court of India .The Indian government brought down curtains on the two-month long tussle between the regulators by ruling that Unitlinked Insurance Products (Ulips) will be governed by the Insurance Regulatory and Development Authority (IRDA) On 21ST December, 2005 in India. The main intent of the guidelines was to ensure that they lead to greater transparency and understanding of these products among the insured, especially since the investment risk is borne by the policyholder. 1.2 OBJECTIVES OF PROJECT To understand the concept of ULIP. To identify the scheme preference of investors.

 To show the wide range of investment options available in ULIP by explaining its various schemes. To know how ULIP are differ from Traditional plans means how they give better returns than traditional plan. Gather and analyze the future aspirations of the customers with respect to the ULIPs. 1.3 THE SCOPE OF RESEARCH Researcher found the following scopes: To study the awareness among customers related to ULIP. Future prospect of ULIP. Importance of ULIP. 1.4 LIMITATION OF PROJECT STUDY Researcher found the following limitations: Many people are not aware and dont have any idea about ULIPs. The study is limited area only. Sample size taken is small and may not be sufficient to predict the results with 100% accuracy. Time was not sufficient to research. 1.5 METHODOLOGY OF THE STUDY The collection of data refers to a planned gathering of information relevant to the subject matter of the study from the units under investigation the method of collection of data depends mainly upon the nature, objective and scope of the inquiry on one hand and available of resources and time on the other hand. Data may be classified into primary and secondary data, depending upon the nature and mode of collection. Mainly the data is collected from: 1. Primary data 2. Secondary data
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1) Primary data: Primary data is collected from the prospective customers, agents and the staff of SBI. And the collection of the data through interaction with various respondents. 2) Secondary data: Secondary data collected from the published magazines and websites to collect the data. The secondary data is collected from the following sources. Business magazines Journals Company broachers and books Published books Website

2. INTRODUCTION OF INSURANCE
Insurance is a tool by which fatalities of a small number are compensated out of funds (premium payment) collected from plenteous. Insurance is a safeguard against uncertain events that may occur in the future. It is an arrangement where the losses experienced by a few are extended over several who are exposed to similar risks. It is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premium to provide security for the purpose. Loss is paid out of the premium collected from people and the insurance companies act as trustees to the amount so collected. These companies have proposal forms which are filled to give details of insurance required. Depending upon the answers in the proposal from insurance companies assess the risk and decide on the premium. Insurance companies are risk bearers. They underwrite the risk in return for an insurance premium. the function of insurance is to provide protection, prevent losses, capital formation etc. hence insurance can be defined as a tool in which a sum of money as a premium is paid by the insured in consideration of the insurers bearing the risk of paying a large sum .it may also be defined as a contract wherein one party (insurer) agrees to pay the other party (insured) or his beneficiary, a certain sum upon a given contingency against which insurance is required. Insurance industry commands massive funds through sales of insurance products to large number of clients. Insurers also create liabilities and commit themselves to compensate for losses occurring to the policyholders on future date. It also plays an important role in process of capital formation. 2.1 HISTORY OF INSURANCE SECTOR The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta Some of the

importantgmilestonesgingtheglifeginsurancegbusinessgingIndiagare:-

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurancegbusiness.

1928: The Indian Insurance Companies Act enacted to enable the government to collect
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statisticalginformationgaboutgbothglifegandgnon-lifeginsurancegbusinesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protectinggtheginterestsgofgtheginsuringgpublic.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India are:-

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of generalginsurancegbusiness.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conductgforgensuringgfairgconductgandgsoundgbusinessgpractices.

1968: The Insurance Act amended to regulate investments and set minimum solvency margins andgthegTariffgAdvisorygCommitteegsetgup.

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1 st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance CompanygLtd.gGICgincorporatedgasgagcompany.

2.2 PRINCIPLES OF INSURANCE 1. A large number of homogeneous exposure units: The vast majority of insurance policies are provided for individual members of very large classes. 2. Definite Loss: The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. 3. Accidental Loss: The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be pure, in the sense that it results from an event for which there is only the opportunity for cost. 4. Large Loss: The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. 5. Affordable Premium: If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered 6. Calculable Loss: There are two elements that must be at least estimatable, if not formally calculable: the probability of loss, and the attendant cost. 7. Limited risk of catastrophically large losses: The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed.

2.3 FUNCTIONS OF INSURANCE 1. Primary function 2. Secondary functions 3. Other functions Primary functions:1.lProvide Protection: The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others. 2.lCollective bearing of risk: Insurance is a device to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. 3.lAssessment of risk: Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also. 4.lProvide Certainty: Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain. Secondary functions:1.lPrevention of Losses: Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc. Prevention of losses cause lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and better protection to the insured.

2.lSmall capital to cover larger risks: Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. 3.lContributes towards the development of larger industries: Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.

Other functions:-

1.lMeans of savings and investment: Insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing income-tax exemptions also, people invest in insurance. 2. Source of earning foreign exchange: Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways. 3.lRisk Free trade: Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover.

3. CONCEPT OF ULIP
3.1 INTRODUCTION OF ULIP Unit linked insurance plan (ULIP )is the Product Innovation of the conventional Insurance product. With the decline in the popularity of traditional Insurance products & changing Investor needs in terms of life protection, periodicity, returns & liquidity, it was need of the hour to have an Instrument that offers all these features bundled into one. ULIP is life insurance solution that provides for the benefits of protection and flexibility in investment. The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV). The policy value at any time varies according to the value of the underlying assets at the time. ULIPs attempt to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. ULIPs work on the premise that there is class of investors who regularly invest their savings in products like fixed deposits (FDs), coupon-bearing bonds, debt funds, diversified equity funds and stocks. There is another class of individuals who take insurance to provide for their family in case of an eventuality. So typically both these categories of individuals (which also overlap to a large extent) have a portfolio of investments as well as life insurance. ULIP as a product combines both these products (investments and life insurance) into a single product. This saves the investor/insurance-seeker the hassles of managing and tracking a portfolio of products. Presently there are 200 plus ULIP Schemes in the market. ULIPs offer a variety of options to the individual depending on his risk profile. For instance, an individual with an above-average risk appetite can choose a ULIP option that invests upto 60% of premium in equities. Likewise, an individual with a lower risk appetite can select a ULIP that invests up to 20% of premium in equities. 3.2 DEFINITION A type of insurance vehicle in which the policyholder purchases units at their net asset values and also makes contributions toward another investment vehicle. Unit linked insurance
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plans allow for the coverage of an insurance policy, and provide the option to invest in any number of qualified investments, such as stock, bonds or mutual funds. 3.3 CONCEPT OF ULIP Unit linked insurance plan (ULIP) is a life insurance solution that provides the client with the benefits of protection and flexibility in investment. It is a solution which provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time . The investment is denoted as unit and is represented by the value that it has attained called as Net Asset Value (NAV).

UNIT LINKED INSURANCE POLICIES

UNITS IN FUNDS

UNDERLYING INVESTMENT

ULIP came into play in 1960s and became very popular in Western Europe and America. The reason that is attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility which it offers to the clients. As time progressed the plans were also successfully mapped along with life insurance needs to retirement planning. In todays times ULIP provides solution for all the needs of a client like insurance planning, financial needs, financial planning for childrens future and retirement planning.

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3.4 STRUCTURE OF ULIP

PREMIUM

LESS CHARGE

LIFE COVER INVESTMENT REPRESENTED AS UNITS

3.5 ADVANTAGES AND DISADVANTAGES OF ULIP ADVANTAGES OF ULIP The advantages of ulip are given below: 1.lFlexibility: ULIPs offer a complete selection of high, medium and low risk investment options under the same policy. You can choose an appropriate policy according to your risk taking appetite, coupled with the opportunity to switch between fund options without any additional expense for specified number of switches. ULIPs provide the flexibility to choose the sum assured and investment ratio in the annual targeted premium. It also offers the flexibility of one time increase in investment portfolio, through top-ups to avail investment opportunity offered by external environment or own income flows. 2.lTransparency: The charge structure, value of investment and expected IRR based on 6% and 10% rate of
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returns, for the complete tenure of the policy are shared with you before you buy a product. Similarly, the annual account statement, quarterly investment portfolio and daily NAV reporting, ensures that you are aware of the status of your investment portfolio at all times. Most companies publish latest NAVs on their respective websites on a daily basis. 3.lLiquidity: To cope with unforeseen circumstances, ULIPs offer the benefit of partial withdrawal; wherein after 5 years you can withdraw funds from our Unit Linked account, retaining only the stipulated minimum amount. 4.lRegularlsavings: ULIPs help you inculcate a regular saving habit. Also, the average unit costs tend to be lower than one time investment. 5.lMultiplelbenefits: ULIP is an outstanding solution for risk cover, long term investments with the benefit of various investment opportunities, coupled with tax benefits. 6.lSpreadloflrisk: ULIPS are ideal for those investors who wish to avail the benefit of market linked growth without actually participating in the stock market, with the added benefit of risk-cover. DISADVANTAGES OF ULIP Ulip have their following drawbacks: 1.Flexibility: This can act a disadvantage since the person may use the withdrawal and may not end up building a huge corpus. 2.Initially heavy costs: You pay around 15-20% for the first year and then around 5%for the next two year
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3.6 TYPES OF ULIP

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.

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3.7 COMPARISION OF ULIP WITH TRADITIONAL PLAN Unit Linked Insurance Product:

ULIPs have gained high acceptance due to attractive features they offer. These include: Flexibility o Flexibility to choose Sum Assured. o Flexibility to choose premium amount. o Option to change level of Premium /Sum Assured even after the plan has started. o Flexibility to change asset allocation by switching between funds Transparency o Charges in the plan & net amount invested are known to the customer o Convenience of tracking ones investment performance on a daily basis. Liquidity o Option to withdraw money after few years (comfort required in case of exigency) o Low minimum tenure. o Partial / Systematic withdrawal allowed Fund Options o A choice of funds (ranging from equity, debt, cash or a combination) o Option to choose your fund mix based on desired asset allocation Traditional Plans : These are the oldest types of plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are: Steady Investment o Major chunk of investible funds are in debt instruments o Steady and almost assured returns over the long term Features o Death benefit is Sum Assured + guaranteed & vested bonus o Helps in asset creation as they are for a long tenure
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o Premium to Sum Assured ratios are fixed for each plan and age. o Generally withdrawals are not allowed before maturity.

Point of difference Investment Transparency in costs Flexibility in payment Assured Bonus Assured Sum on survival Option to increase investment/premium

ULIP Market related (May be stock market or debt market) Yes Yes No No Yes

Traditional Policy IRDA? Determined investments No No Yes Yes No

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4. INVESTMENT OF ULIP IN MARKET

4.1 HOW TO CHOOSE ULIP The wide range of ULIPs available in the market might make it difficult for a consumer to choose the correct ULIP. However, follow a few simple steps choosing the right ULIP can be a smooth process. 1.lFocuslonlrequirementslandlrisklprofile: Identify a plan that is best suited for keeping in mind risk appetite. In case have a high-risk appetite, opt for a more aggressive fund option (an option that invests higher percentage in equities) and vice versa.

2.lUnderstandlthelpeculiaritiesloflthelplan: Understand all the charges levied on the product over its tenure, not just the initial charges. A complete charge structure would include the initial charges, the fixed administrative charges, fund management charges and mortality charges.

3.lExaminelthelperformanceloflthelplan: Compare the performance of the plan with benchmark indices like BSE Sensex or Nifty in the past two or three years to get a better idea about the performance. Ensure that you can easily get information about your NAV when you need it. Thoroughly understand the flexibility and redemption conditions of an ULIP.

4.lUnderstandlthelchargeslleviedlonlthelproduct: Understand all the charges levied on the product over its tenure, not just the initial charges. A complete charge structure would include the initial charges, the fixed administrative charges, the fund management charges and mortality charges.

5.lComparelULIPlproductslofldifferentlinsurancelcompanies: Compare products of different insurance companies in terms of premium payments, cost structure, performance of the scheme (equity as well as debt schemes), additional facilities such
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as top-up premium and free switch between different fund options, flexibility in terms of increasing or decreasing protection, reporting structure and flexibility in redemption.

6.lKnowlaboutlthelCompany: Last but not least, insure with a brand can trust to honor its commitment and service in accordance to requirements.

4.2 GET THE MOST OUT OF YOUR ULIP In the process of deciding which ULIP to invest in; or a unit linked insurance policy to secure important financial goals there are some key principles which should govern any decision related to ULIPs. Adhering to these key principles will allow you to make optimum utilization of your ULIP.

1.Appropriate Life Cover:

Unit Linked Insurance (ULIP) plans are designed to help to meet financial goals by ensuring the value of investments, or nominee sum assured, which is the life cover of policy. To make sure that ULIP is truly working to assure goal, choose a life cover that provides family with adequate finances and hence security even in absence, so that important life goals of family are always secured.

Let us take the example of a 35-year-old man with 2 young children. He could begin with a sum assured of Rs 5 lakh. As the children grow and thereby the financial liabilities increase, he might want to increase the level of protection, which can be done by increasing his sum assured. 2. Right Fund Option: Unit-Linked Insurance Plans (ULIPs) come with an in-built range of fund options to choose from ranging from aggressive funds (primarily invested in equities with the general aim of capital appreciation) to conservative funds (invested in cash, bank deposits, and money market

17

instruments with the aim of capital preservation) so that to invest money in line with market outlook, time horizon, and investment preferences and needs. If there have a high risk appetite, should opt for a more aggressive investment option, and vice versa.

Additionally also have the advantage of switching fund options to make investments work in tandem with the market. These days, various ULIPs also offer the options of life stage funds which keep dynamically altering themselves without having to do any monitoring. 3. Long Term Investment: Unit-Linked Insurance Plans (ULIPs) are meant to guarantee financial goals over the longterm. As a short term investment tool, they will not give considerable return on investments, because of a product cost structure which is higher in the initial years. However, overall charge structure for the term comes down substantially over a long period of time thus allowing greater allocation of premium in the chosen funds. Also in long term investment in ULIPs are less affected by temporary market fluctuations since data shows that over a long-term, market linked investments not only yield very attractive returns, but also have the least downside to them. To get the best out of your ULIP, you should remain invested in the ULIP for the long-term of at least 8-10 years. This way, investment will truly experience the power of compounding and thereby create greater wealth to fulfill important goals. 4. Know the Charges: Unit-Linked Insurance Plans (ULIPs) are designed to meet two of the most important financial needs: protection and investment. Both these benefits have some charges attached to them; important charges to know about before purchasing a ULIP are:

Premium Allocation charge Policy Administration charge Mortality charge

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Fund Management charge

The important thing to note about ULIPs is that the overall charge structure in the long term comes down substantially, thus allowing greater allocation of premium to chosen fund, thereby leading to wealth creation. It may be noted that insurers have the right to revise the fees and charges over a period of time. 5. Know the Features: Unit-Linked Insurance Plans (ULIPs) offer a variety of features and benefits that no other single financial instrument does. Most ULIPs are rich in features such as top up, switch between funds, increase or decrease the protection level during the term of the policy, cover continuance option, surrender options & range of riders which can be attached to the main policy to provide added protection. As with all other products, the exact features of a Unit Linked Insurance Policy differ from one product to another.

Always insist on seeing the brochure so that customer can make right choices of ULIP to secure goals be it retirement planning, planning for your childrens education, or wealth creation.

4.3 CHARGES UNDER ULIP

1. Contribution related charges: These are the charges that are represented as a percentage of the regular or single contribution paid. In case of a regular contribution plan, it is usually high in the first year to pay for the distribution cost. This charge pays for the issuance and for distribution commissions. These charges are running for the policy. 2. Administrative charges: These are charges that are levied for the administration of the policy and the related cost of administration of the insurance company, itself. They are more related to the cost like IT, operational, etc cost of continuing the policy.

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3. Fund management charges: These are the charges for buying and selling debt and equity. These are the charges are adjusted in NAV itself. 4. Mortality charges: This covers the cost of providing life protection for the insured and may be paid once at the start of the policy for a recurrent manner for example this charges levied to provide the insurance cover under the plan. Normally these charges are one year charges as per the age of the holder. 5. Rider charges: Rider charges are similar in nature to the mortality charges as they are levied to pay for the other protection benefits that the policy holder has chosen for- like the critical illness benefit or the accident benefited. 6. Surrender charges: When the policy holder decides to surrender the policy or partially withdraw some of the units for cash, a surrender charge may be apply. Surrender charges are used to cover initial expenses that have been incurred by the company but not yet recovered from the policyholder yet. 7. Bid offer charges: In ULIP specifically certain insurers might create a difference in the price at which they sell the unit and the price at which they buy the units. Investors contributions are used to buy units in the investment fund at the offer price and are sold when benefits are required at the bid price. The difference between the offer and bid prices Is known as the bid-offer spread", this is used to cover expenses when setting up the policy. 8. Transactional specific charges: These charges are levied when the client does some specific transaction like changing funds topping up the investment component or withdrawals.

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4.4 HISTORY OF ULIP

ULIP came into play in 1960 and is popular in many countries in the world today. In 1971 the Unit Trust of India offered the Unit Linked Insurance Plan. Out of insurance premium a small part of contribution was utilised for providing life cover and blance invested in units.

Unit linked guidelines notified by IRDA on 21st December, 2005 in India. The main intent of the guidelines was to ensure that they lead to greater transparency and understanding of these products among the insured, especially since the investment risk is borne by the policyholder.

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5. REGULATION OF ULIP IN INDIA

5.1 REGULATORY CHANGES RELATED TO UNIT LINKED INSURANCE PRODUCTS (ULIPs) INTRODUTION IRDA has, from time to time, taken various initiatives for protecting the interests of policyholders by bringing out Regulations, Guidelines, Circulars etc applicable to insurers and intermediaries covering the various stages in the lifecycle of an insurance product, commencing from solicitation, sale, policy servicing, to claims servicing and grievance redressal. With expansion of the insurance sector and more and more innovative insurance products, in particular the Unit Linked Insurance Products coming into the life insurance market, IRDA has been sensitive to the changing scenario and the challenges that go with it. In particular, IRDA has been conscious of how these changes have been impacting the policyholder and has taken several steps to bring in changes in the regulatory framework to address various concerns of the policyholder. IRDA had stipulated that insurers must provide the prospect/policyholder all relevant information regarding amounts deducted towards various charges for each policy year so that the prospect could take an informed decision. Insurers were required to provide Benefit Illustrations giving two scenarios of interest rates, 6% and 10% respectively. The prospect was required to sign on the illustration while signing the proposal form. This was done to ensure transparency and proper disclosures by the insurers. It is necessary to demystify complex products and ensure that proper product disclosures are made to the prospect/policyholder. Towards this end, IRDA has already come out with an exposure draft on need to issue Key Features Documents. Responses received by the Authority are under examination and the initiative will be taken forward further. Similarly, Needs Analysis is another initiative identified by IRDA as a step in curbing wrong advice and mis-selling. An exposure draft on this requirement is already
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circulated and responses are coming in. Whilst on mis-selling, IRDA has identified Distance Marketing as yet another area of concern and draft guidelines in this regard have been put up as an exposure note for all stakeholders to respond to. Mention must be made of what is perhaps the most important step that the Authority has taken keeping in view the interests of policyholders. IRDA set up an exclusive Consumer Affairs Department that focuses on consumer related issues and initiatives including grievance redressal and consumer education through Insurance Awareness Campaigns. With a view to creating a central repository of industry-wide insurance grievance data and facilitating monitoring of disposal of grievances by insurers, IRDA is on the verge of implementing the Integrated Grievance Management System (IGMS). IGMS will not only help monitor the redress systems of insurers but also create a gateway for policyholders to register complaints with insurance companies first and if need be escalate them to the IRDA Grievance Cells. The Consumer Affairs department goes beyond facilitation and works towards taking grievances to their logical end by calling for explanations where required, carrying out enquiries and inspections etc. It is proposed to make the institution of the Insurance Ombudsman handle all types of complaints including those relating to policy sale and servicing rather than just restricting it to claims. IRDA is also shortly making its Call Centre operational for policyholders to lodge their grievances and also seek their status over phone/e-mail. Further, keeping in view the need for efficient functioning of the insurance sector for protecting the interests of policyholders, it is necessary to have reliable, timely and accurate data relating to insurance. In order to ensure that proper data is collected, processed and disseminated in the manner required, IRDA has set up an independent body, namely the Insurance Information Bureau (IIB). The IIB has started functioning and has already made good progress. RECENT REGULATORY INITIATIVES More recently, IRDA has taken a holistic view of the features of ULIPs and addressed issues impacting the policyholders including the way such products are sold/bought;

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how ULIPs can be better financial instruments for providing risk coverage; how sale by unlicensed personnel and several other malpractices existing in this market may be curbed by plugging legal loopholes and tightening of the regulatory ambit; legal mandate to initiate direct penal action against Corporate Agents etc. IRDA therefore initiated exposure drafts covering these areas and received considerable feedback from various stakeholders on the issues put forth. The issues were then presented to and discussed with the members of the Insurance Advisory Committee as well as the members of the Board of the Authority. The following regulatory initiatives have been approved by the Authority during the Board meeting on 31.05.10. Distribution channel related changes: 1. IRDA has amended the IRDA (Insurance Advertisements and Disclosure) Regulations to remove any scope for the involvement of unlicensed personnel/entities in the sale of insurance products. 2. IRDA has amended the IRDA (Licensing of Corporate Agents) Regulations to further tighten the Code of Conduct of corporate agents to ensure that the prospect does not deal with any unlicensed person. The Regulations have also been amended to ensure that there is no scope for any kind of remuneration other than commission where sale has been affected. This measure will reduce the expenses of the insurer, thereby lowering premiums to be paid by the policyholder. 3. Regulations for referrals: IRDA has also addressed the issue of Referrals by bringing out separate Regulations leaving no scope for misuse of the system. Companies which wish to share their database of customers with insurers would need to get approval from IRDA after having conformed to the requirements as laid down in the Regulations. Further, there are restrictions on the business activities of the referral company to ensure that there is no misuse of the system. For instance, the referral company shall not be in any business of

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extending loans and advances or accepting deposits etc though there are exceptions such as for Regional Rural Banks, Co-operative banks etc. The Regulations cast obligations on the referral company as well as the insurer including submission of data as and when called for by the Authority.

ULIP STRUCTURE RELATED CHANGES 1. Lock in period increased to five years: IRDA has increased the lock-in period for all Unit Linked Products from three years to five years, including top-up premiums, thereby making them long term financial instruments which basically provide risk protection. 2. Level Paying Premiums: Further, all regular premium /limited premium ULIPs shall have uniform/level paying premiums. Any additional payments shall be treated as single premium for the purpose of insurance cover. 3. Even Distribution of Charges: Charges on ULIPs are mandated to be evenly distributed during the lock in period, to ensure that high front ending of expenses is eliminated. 4. Minimum Premium Paying Term Of Five Years: All limited premium unit linked insurance products, other than single premium products shall have premium paying term of at least five years. 5. Increase In Risk Component: Further, all unit linked products, other than pension and annuity products shall provide a mortality cover or a health cover thereby increasing the risk cover component in such products.

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(i) The minimum mortality cover should be as follows: Minimum Sum assured for age at entry of below 45 years Single Premium (SP) contracts: 125 percent of single premium. Regular Premium (RP) including limited premium paying (LPP) contracts: 10 times the annualized premiums or (0.5 X T X annualized premium) whichever is higher. At no Minimum Sum assured for age at entry of 45 years and above Single Premium (SP) contracts: 110 percent of single premium Regular Premium (RP) including limited premium paying (LPP) contracts: 7 times the annualized premiums or (0.25 X T X annualized premium) whichever is higher. At no time the death benefit shall be less than 105

time the death benefit shall be less than percent of the total premiums (including top105 percent of the total premiums (including top-ups) paid. (In case of whole life contracts, term (T) shall be taken as 70 minus age at entry) (ii)The minimum health cover per annum should be as follows: Minimum annual health cover for age at entry of below 45 years Regular Premium (RP) contracts: 5 times the annualized premiums or Rs. 100,000 per annum whichever is higher, At no time the annual health cover shall be less At no time the annual health cover shall than 105 percent of the total premiums paid be less than 105 percent of the total premiums paid. 6. Minimal Guaranteed Return For Pension Products: As regards pension products, all ULIP pension/annuity products shall offer a minimum guaranteed return of 4.5% per annum or as specified by IRDA from
26

ups) paid.

Minimum annual health cover for age at entry of 45 years and above Regular Premium (RP) contracts: 5times the annualized premiums or Rs. 75,000 per annum whichever is higher.

time to time. This will protect the life time savings for the pensioners, from any adverse fluctuations at the time of maturity. 7. Rationalisation Of Cap On Charges: With a view to smoothening the cap on charges, the capping been rationalized to ensure that the difference in yield is capped from the 5th year onwards. This will not only reduce the overall charges on these products, but also smoothen the charge structure for the policyholder.

DISCONTINUANCE OF CHARGES: IRDA has also addressed the issue of discontinuance of charges for surrender of ULIPs. The IRDA (Treatment of Discontinued Linked Insurance Policies) Regulations brought out by IRDA in this regard ensure that policyholders do not get overcharged when they wish to discontinue their policies for any emergency cash requirement. The Regulations stipulate that an insurer shall recover only the incurred acquisition costs in the event of discontinuance of policy and that these charges are not excessive. The discontinuance charges have been capped both as percentage of fund value and premium and also in absolute value. The Regulations also clearly define the Grace Period for different modes of premium payment. Upon discontinuance of a policy, a policyholder shall be entitled to exercise an option of either reviving the policy or completely withdrawing from the policy without any risk cover. Further, the regulations also enable IRDA to order refund of discontinuance charges in case they are found excessive on enquiry. These regulations are applicable to all new ULIP products approved by IRDA after these regulations are notified.

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6. SBI ULIP

6.1 STATE BANK O OF INDIA SBI Life Insurance Company Ltd has been launched SBI Life Smart Ulip plan.Smart ULIP is a hybrid of premium security and guaranteed returns plan.This plan is available for a limited time. SBI Life Insurance is a joint venture between State Bank of India and BNP Paribas Assurance. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%. SBI Life Insurance has an authorized capital of Rs. 2000 crore and a paid up capital of Rs 1000 crore. SBI Life Smart ULIP is the perfect answer to customer needs, and will give not only guarantee on selected net assets over the first seven years, but also provides the added attraction to participate in the market on its head. This is an investment cum insurance plan for market returns. SBI Life manage the investment, by giving maximum room for growth while protecting investments against adverse market conditions. The plan also provides a convenient shorter premium paying term allows customers to pay premiums for a limited period of either three or five years, and use the tax benefits u / s 80 C and 10 (10 D) of the income tax law. 6.2 VISION, MISSION AND VALUES VISION To be the most Preferred ULIP. SBI Life Insurance Company Ltd. manages the activities of SBI unit linked insurance product in India. The ULIPs organization offers a variety of schemes to Indian customers. SBI Life Insurance has several offices located across the country of India. The corporate head office of SBI life Insurance is situated in Mumbai.

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MISSION To emerge as the leading company offering a comprehensive range of life insurance and pension products at competitive prices, ensuring high standards of customer satisfaction and world class operating efficiency, and become a model life insurance company in India in the post liberalizationlperiod. VALUES Trustworthiness Ambition Innovation Dynamism Excellence

6.3 CORPORATE OFFICE ADDRESS SBI Life Insurance Co. Ltd, 2nd Floor, Turner Morrison Bldg, G. N. Vaidya Marg, Fort, Mumbai 400 023. NAME AND ADDRESS OF REGISTRAR Shri. Rajkumar Raina Head- Client Relationship SBI Life Insurance Co. Ltd. Central Processing Centre Kapas Bhavan, Plot 3A, Sector -10, CBD Belapur, Navi Mumbai 400614 Tel: 022- 66456241 Email: rajkumar.raina@sbilife.co.in

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6.4 DIRECTORS SBI Life Insurance Co. Ltd. 1. Shri.Geethanjali Deokar, Deputy Manager 2. Shri.Parag Gautam,Regional Manager 3. Shri.Pankaj Parashar,Assistant Manager 4. Shri,Raj bahadur, Agency Manager 6.5 PRODUCTS OF SBI LIFE INSURANCE

1. SBI Life - Smart Performer

Introduction: The equity market may have its ups and downs, but you now have a protective shield that will safeguard your investments, while providing upside potential. SBI Life brings you Smart Performer, a unique Unit Linked, Non Participating insurance product that offers you the twin benefits of Higher than the Highest of the daily NAV Guarantee and the prospect of market upside. Whats more, it also allows you to protect your gains through Automatic Rebalancing facility and offers you a choice of Single and Limited Premium Payment options.

Key Features: Guarantee at maturity based on 5% Higher than Highest Guaranteed NAV during the first seven years or prevailing NAV at Maturity, whichever is higher, subject to conditions#. Enjoy the best of both worlds - Guarantee only or Guarantee and Market Upside through our unique Plan offerings - Secure Plan and Secure N Grow Plan respectively Automatic Rebalancing to Lock-in your gains Convenience through single premium (SP) or 5 year Premium Paying Term (PPT) Life Insurance coverage with minimum Sum Assured of 10 times or 7 times of your

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Annualised Premium (AP), based on your age. Liquidity through Partial Withdrawal(s) Option to customize the product with Accidental Death Benefit Attractive Tax benefits under the Income Tax Act, 1961, subject to conditions
**

Product Snapshot: Age at Entry* Age at Maturity Premium Payment Term Minimum Limited Premium Amounts (X 100) Min: 9 years Max: 75 years SP or 5 years Yearly Half-yearly Quarterly Monthly Rs 60,000 No limits Rs 50,000 Rs 44,000 Rs 36,000 Rs 20,000 Max: 65years

Minimum Single Premium (X 100) Maximum Limited/Single Premium Amounts Policy Term Premium Modes Sum Assured

10 years from the start of the subscription period. Single / Yearly / Half-yearly / Quarterly / Monthly Age/PPT For 5 yr PPT For SP

Minimum Maximum Minimum Maximum Below 45 Yrs Between 45yrs & 60yrs 61 yrs and above Plan Options 10 * AP 7 * AP 20*AP 20*AP 1.25*SP 1.25*SP 5*SP 5*SP

7 * AP

7 * AP

1.25*SP

1.25*SP

2 Plan Options: 1. Secure Plan - All your funds would be invested in the Daily Protect Fund 2. Secure N Grow Plan - 80% of your funds would be invested in the Daily Protect Fund and 20% would be invested in the Index Fund
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Benefits: 1. Maturity Benefit: On completion of Policy Term, Maturity Value will be paid.

Maturity value for the Daily Protect Fund will be calculated based on NAV which is higher of:

Prevailing NAV as on date of Maturity OR Higher than Highest Guaranteed NAV: There will be an increment of 5%
to the Highest NAV achieved during the first seven years under the Daily Protect Fund. 2. Death Benefit: Higher of the Fund Value or Sum Assured## is payable; subject to a minimum of 105% of the total premiums paid## at the time of death. The death benefit is payable only for inforce policies. 1. Accidental Death Benefit Option: Accidental Death Benefit: Provides additional death benefit if the death occursoasoaoresultoofoanoaccident.

2. SBI Life - Unit Plus Super

Introduction: SBI Life Unit Plus Super is a flexible non participating Unit linked insurance Plan, specially designed to meet your changing requirements at various stages of life. With a wide array of funds, riders and other options, this product gives you the complete freedom to fulfill all your investment and insurance needs. And thats not all; we now also offer you guaranteed additions and choice of payment options, giving you far superior value.

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Key Features:

Guaranteed Additions# of up to 75% of one annual regular premium on a

regular premium policy, for a 30 year policy term, subject to the Policy being in force till the maturity date.

No Policy Administration fee for first 5 years for Regular and Limited
Premium Paying Term (LPPT) plans, thereby boosting your fund value

No Premium Allocation Charge from 11th year onwards Guaranteed Additions starting as early as 10th policy year onwards Enhanced investment opportunity through 9 varied Fund Options
including P/E Managed Fund, Index Fund & Top 300 Fund

Option to pay Regular/Limited/ Single Premium; Switch or Redirect your

premiums

Flexible product with an option to increase/decrease your Sum Assured

from 6th year onwards

Life Insurance coverage, with minimum Sum Assured, based on your age Liquidity through Partial Withdrawals. Option to customize the product with a wide range of riders: SBI Life Criti Care 13 Rider (UIN: 111A018V01), SBI Life - Accidental Death Benefit Linked Rider (UIN: 111A019V01), SBI Life - Premium Payor Waiver Benefit Rider (UIN: 111A017V01) and SBI Life - Income Sustainer Rider (UIN: 111A020V01).

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Product Snapshot:

Age at Entry* Age at Maturity Policy Term

Min: 7 years 75 years

Max: 65 years

Min. Term: For Regular Premium (RP) -10 yrs, 15 to 30 years (both inclusive) For Limited Premium Payment Term (LPPT) - 10 yrs, 15 to 30 years (both inclusive) For Single Premium (SP) - 5 years Max. Term: For Regular/Limited/Single Premium Option 30 years

Premium Payment Term

For Regular Premium Same as Policy Term For Limited Premium Payment Term (LPPT) Policy Term 10 year 15-30 years PPT 5 or 8 years 5 or 8 or 10 years

For Single Premium Single Payment Premium Amount (X 100) Minimum For RP For LPPT For SP Premium Modes Sum Assured Single /Yearly Minimum: For Regular Premium (RP) & LPPT For Ages below 45 yrs : Higher of {10 * Annual Premium (AP) or (0.5 * Term * AP)} For Ages 45yrs & above: Higher of {7 * AP or (0.25 X Term X AP)} For Single Premium (SP) For Ages below 45 yrs: 1.25 * SP For Ages 45yrs & above: Fixed - 1.25 * SP Maximum: Rs. 30,000 Rs. 40,000 Rs. 65,000 Maximum Rs. 1,50,000 Rs. 1,50,000 Rs. 1,50,000

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Particulars Entry Age

For Regular Premium Below 45 yrs 20 * AP

For Limited Premium 45 yrs & above 15 * AP

For Single Premium Below 45 yrs 5 * SP

45 yrs & Below above 45 yrs 20 * AP 20 * AP

Sum Assured

Benefits: 1. Maturity Benefit: On completion of Policy Term, Fund Value will be paid. 2. Death Benefit: Higher of the Fund Value or Sum Assured## is payable; with a minimum of 105% of total basic premiums paid## till the time of death. 3. Rider Benefits:

Criti Care 13 Rider: Provides lump sum amount to take care of 13 Critical Illnesses which include Cancer, Coronary Artery Bypass Graft Surgery, Heart Attack, Heart Valve Surgery, Kidney Failure, Major Burns, Major Organ Transplant, Paralysis, Stroke, Surgery of Aorta, Coma, Motor Neurone Disease and Multiple Sclerosis.

Accidental Death Benefit Linked Rider: Provides additional death benefit if the death occurs as a result of an accident.

Premium Payor Waiver Benefit Rider: In the event of the death of the Proposer, the cover for the Life Assured under the base policy continues and the future premiums under the base policy, payable during the rider term, will be paid by the Company.

Income Sustainer Rider: Provides additional benefit in the case of death or in the case of Total & Permanent Disability due to Accident or Sickness, whichever is earlier. A 25% of income sustainer benefit sum assured is paid upfront and 1% of income sustainer benefit sum assured is paid monthly in arrears for 10 years or till the end of the base policy term (capped at a maximum of 30 years) whichever is higher.
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3. SBI Life - Saral Maha Anand

Introduction:

SBI

Life

Saral

Maha

Anand,

unit

linked

insurance

cum

savings

plan.

Getting a Life Insurance policy was never so easyNo medical examination, which means hassle-free coverage. Enjoy the power of liquidity through partial withdrawals. All these benefits at affordable costs, only for you.

Key Features:

No medical examination, Simple joining process#. Liquidity through Partial Withdrawals. Guaranteed Additions## of up to 30% of one annual premium, for a 20 year
policy term, subject to the Policy being in force till the maturity date.

Option to avail additional rider benefit under SBI Life - Accidental Death
Benefit Linked Rider (UIN: 111A019V01)

4 Fund options, to enjoy market related returns as per your risk appetite. Twin Benefit of Market linked returns & insurance cover.

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Product Snapshot:

Age at Entry ^ Max. Age at Maturity Policy Term Minimum Premium Amounts (x100) Maximum Premium Amounts (x100) Premium Modes Sum Assured

Minimum: 18 years 65 years

Maximum: 55 years

10 years / 15 years / 20 years Yearly Half-yearly Quarterly Monthly : Rs. 15,000/: Rs. 9,500/: Rs. 5,500/: Rs. 2,000/-

Yearly : Rs. 29,000/Half-yearly : Rs. 14,500/Quarterly : Rs. 7,200/Monthly : Rs. 2,400/Yearly / Half-yearly / Quarterly / Monthly Minimum: Age below 45 years : 10 AP

Age 45 years or above : 7 AP Maximum: 20 AP Partial Withdrawals Upto 15% of Fund Value can be withdrawn each year, from 6th year onwards, subject to conditions. One partial withdrawal is free in a policy year. Under Sec. 80C and Sec. 10(10D) of Income Tax Act,1961

Tax Benefits**

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Benefits: 1. Maturity Benefit: On completion of Policy Term, Fund Value will be paid.

2. Death Benefit: Higher of the Fund Value or Sum Assured* is payable; with a minimum of 105% of total basic premiums paid* till the time of death.

3. Rider Benefits: Accidental Death Benefit Linked Rider: Provides additional death benefit if the death occursoasoaoresultoofoanoaccident.

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39

7. DATA ANALYSIS
1) Insurance policy taken:

No 2%

Yes 98%

This analysis shows that about 98% of investors were already had insurance policy taken, even though a 2% of investors were not having insurance taken.

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2) Percentage of people interested in different policy:

Term plan 11% Children plan 16%

Pension plan 25%

Ulips 7%

Endowment plan 16% Money back plan 25%

This analysis shows that the approximately % of people interested in various policy. Pension and money back were more famous amongst customers of 30-40 years. Ulips were not that familiar and did not have good response.

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3) Percentage of people interested in knowing more from agent:

No 28%

Yes 72%

This analysis shows that large amount of customers were interested to know through agents what their policy were and what does it has.

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4) Percentage of people knowing use/importance of insurance:

No 6%

Yes 94%

This analysis shows that in this competitive world majority of people know the importance of insurance and its need in this very unpredictable world.

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5) Percentage of people facing problem due to service provided by insurers:

Yes 14%

No 86%

This analysis shows that the 14% of customers facing problems were very minute like calls dont get received or policy not reaching in time. Whereas others are satisfied with insurers.

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6) Percentage of people aware about:

Maturity benefits 13%

Premium 16%

Death benefits 14%

Tax deduction 15%

Benefits of policy 11%

Administration charges 9%

Risk element 10%

Terms & condition 12%

This analysis shows that some left the whole space blank or vice a versa, customers taking policy know majority the premium they pay or the sum of premium. Even the reason for taking insurance tax deduction is well known.

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7) Percentage of people aware about ULIP policy:

No 46%

Yes 54%

This analysis shows that 54% of people aware about ULIP policy and 46% of people did not aware about ULIP policy.

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8) Percentage of people thinking ULIP policy is:

Non-beneficial 38%

Beneficial 62%

This analysis shows that 62% of customers are getting beneficial of ULIP policies and 38% of customers are not getting non-beneficial about ULIP policies.

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9) Compared to other traditional policies is ULIP policy more:

Less risky 48% Riskier 52%

This analysis show that customer find that ULIP policy is more risky than other traditional polices.

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10) Percentage of people refers:

Gold 2%

Other investment 2% ULIP 42%

Mutual fund 54%

This analysis show that even though people knowing about ulip policies are taking mutual funds as option for investment or they opt for gold.

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8. FINDING, RECOMMENDATION AND CONCLUSION

8.1 FINDINGS Mainly people prefer pension plan, endowment plan, money back plan, children plan, term plan but the percentage of people invest in ULIP is low as compare to other plans. Mainly people prefer low growth safe return as compare to high growth some risky return. People mainly purchase life insurance policy for investment and then for tax-saving they give 2nd preference to protection. Many people did not aware about the premium, terms & conditions, risk elements, administration charges etc. While studying the Researcher find that, customer is not aware about ULIP policy because 54% of people aware about ULIP policy. While studying the Researcher finds that, 62% of people are thinking that ULIP policy is beneficial and other 38% of customer thinks that this policy is not beneficial for their investments. While studying the Researcher find that, customer think that ULIP policy is more risky than the other traditional policies which are less risky as compared to ULIP policy. While studying the Researcher find that, even though customer knows about ULIP policies are taking mutual funds as an option for investment still they opt for separately for mutual funds, gold and other investments.

8.2 RECOMMENDATION Create awareness about Unit Linked Insurance Plan. Even today the product awareness of ULIP policy is much less among its segmented people or potential customers .It should explore its distribution network to a more
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wider extent and make the customer understand the product in a more easier way through its agents to its customer. Advisors needed to be well aware of plans provided by other private players, not only of plans provided by LIC. So that they can provide valuable information to

customers, to switch them towards us instead of targeting only LIC only while discussion with customers. In case of (safe investment plan II), our policy administration charges are much more than other competitors throughout the period, which dont allow us to perform more efficiently and real growth of policy dont match with the growth rate for which we are known in the market, our policy administration charges are based on premium level. ULIP is a costly instrument if taken as a short term investment plan and hence for the benefit for the customer he should be made convinced for long term investment through agents so that people do not take it as a former plan and think being deceived by the company. The marketing of these products should be done by the sales person by visiting to different companies and inform the employees of their company during the lunch hour or breaks.

8.3 CONCLUSION
In India, insurance is generally considered as a tax-saving device instead of its other implied long-term financial benefits. Indian people are prone to investing in properties and gold followed by banks deposits. They selectively invest in shares also but the percentage is very small4.5%. Even to this day, Life insurance market has become more vibrant. Smashing all doubts over the decision to liberalize the industry, the overwhelming first year performance of the Indian insurance sector is test case of a massive success story of private players entering into the erstwhile state monopoly.

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BIBLIOGRAPHY

REPORTS, JOURNALS, NEWSPAPER, MAGAZIES:

1. Newsweek 2. Business Today 3. Business World

WEB SITES

www.moneycontrol.com www.insuranceview.com www.lifeinscouncil.org www.iba.ie www.statebankofindia.com www.outlookindia.com

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ANNEXURE
QUESTIONER FOR CUSTOMERS Instructions to respondents 1. Please answer all the questions, i.e. to the maximum extent possible. 2. Please be as accurate as possible in answering the questions. 3. If you do not know an answer or it does not apply to you please write, Not Applicable (NA). 4. Any suggestions will be welcomed and would be appreciated.

1. Do you have any insurance policy taken? Yes No

2. What kind of life insurance you are interested in? Pension plan Endowment plan Money back plan ULIPs Childrens plan Term plan

3. Would you like any insurance agent to provide you more information on your choice? Yes No

4. Do you know the use/importance of insurance? Yes No

5. Did you face any problems or consequences due to services provided by your insurer? Yes No
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6. Are you aware about? Premium rate Tax deductions Terms & conditions Risk element Administration charges Benefits of policy Death benefits Maturity benefit

7. Are you aware about ULIP policy? Yes No

8. What do you think about ULIP policy? Beneficial Nonbeneficial 9. Compared to other traditional policies are Ulips policies more? Riskier Lessrisky 10. What would you prefer for investment? Mutual fund Ulips

Personal Details: 1. Name:.. 2. Age: 18-25 Male 26-35 36-60 Female 60+

3. Gender:

Thank You So Much For Your Valuable Time and Responses!!!

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QUESTIONER FOR SBI ULIP 1. What is Unit Linked Insurance Plan? 2. What are the different ULIP plans provided by your Insurance company? 3. Among which of it is sold more or has more demand? 4. What was the reason for bringing such plans into market? 5. Are ULIP plans more beneficial/ profitable than other traditional plans? 6. Can you explain the procedure of how it works? 7. What are the benefits of these plans? 8. How do you confidence people to buy ULIP plans? 9. What kind of response is an ULIP plan getting or the performance of ULIP plans in market? 10. What kind of challenges or completion is faced during marketing of this product?

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