1. ACKNOWLEDMENT 2. EXCUTIVE SUMMARY 3. PREFACE 4. INTRODUCTION TO THE TOPIC 5. HISTORY OF INSURANCE IN INDIA 6. LIC LIFE INSURANCE CORPORATION OF INDIA • OBJECTIVE • VISION AND MISSION • WHAT IS PANSION PLAN • TYPE OF PENSION PLAN JEEVAN NIDHI JEEVAN AKSHAY NEW JEEVAN DHARA NEW JEEWAN SURAKSH
7. ICICI PRODENTIAL • COMPANY PROFILE • VISION AND VALUES • VARIOUS RETIRMENT SOLUTION
8. ULIP (UNIT LIKED INSURANCE PLANE)
• WHAT IS ULIP • RETIRMENT PLAN IN ULIP • WHEN ULIP WORK BEST
9. RESEARCH SECTION • RESEARCH PROBLEM • RESEARCH METHOLOGY • HYPOTHESIS
WHY PENSION PLAN OFFER BEST RETIREMENT SOLUTION PENSION PLAN IS RISE ON INSURANCE COMPANY PORTFOLIO 10. COMPARITIVE ANALYSIS AND INTERPRETATION 11. FINDINGS 12. RECOMMANDATION 13. CONCLUSION 14. BIBLIOGRAPHY
ACKNOWLEDGEMENT Every time, I have come across an acknowledgement page in report or book. I used to think that it is merely an obligation on the part of the writer to thank all those associated with his work. But today I am delighted in writing my acknowledgement to all those who have helped me in this project a learning experience. I am sure I could not have been able to do it so well without their support.
I am highly grateful and express my sincere gratitude to Dr. Ajay Kumar Garg (Director), Miss Deepali Kapoor (Project Guide), who guided me so well before the beginning of the project.
Its goes without saying that I really appreciate the commitment of Teerthankar Mahaveer Institute of Management & Technology, Moradabad Faculty who has prepared us to do every project successfully. This is definitely the training we get at T.M.I.M.T. Moradabad that makes a project a wonderful learning experience and not merely a mandatory assignment. I am grateful to our Miss. Sonia Gupta (Course Co-Coordinator) Mr. Manoj Gupta (Internet lab Incharge), Mr. Sanjeev Gupta (Librarian). I am grateful
to Mr. Anand Joshi who had arranged for all of us to go through a complete project right there in the campus.
Last but not least thanks to the ALMIGHTY GOD because nothing is possible without his blessing. And I would like to thank my family members for their continuous, patience, encouragement, support and blessings that enabled me to make this project a success.
With Regards, Manish Chauhan, M.B.A. IIIrd Sem. Roll No. 0714870041
The objective of the project was to study and evaluate present market share of two leading insurance company LIC and ICICI PRUDENTIAL.
To complete the project the study has been conducted which based on the secondary data which is collected through the various books, magazine, journal and websites.
The main purpose of the study to know that how and what manner people attract towards the company and how they decide which one should be chosen.
Finding and recommendation made on the basis of survey most depicts on the point that insurance plan and policies should be more customer centric ,as many customer are not aware about the policies and plan and are not able to decide which policies or plan is better for them. so that they can give proper knowledge to the customers. Frequent change of customers should not be done on the routes.
INTRODUCTION TO THE TOPIC A. RESEARCH OBJECTIVE B. INTRODUCTION TO THE TOPIC
To establish an interface between the policy/plans makers and policy takers, that how and in what manners they show there reaction towards policy and plan. Through the study we try to study and analysis the different pension plans of the two company LIC and ICICI PRUDENTIAL . How people choose the suitable pension plan for them from LIC.
We also want to know that how and in what manners the different pension plan attract different age and salary group.
INTRODUCTION TO THE TOPIC Introduction seeks to introduce the readers to the backgrounds of the study, people involved in the research scope of the study. It is a brief rationale as why we did our study on â€œComparative Study On Pension Of Leading Life Insurance Company ( LIC and ICICI Prudential) .
Background and People Involved In India LIC and ICICI Prudential are the leading Insurance Company. LIC is from government sector and whereas ICICI prudential is a joint venture of ICICI Bank of India and prudential Insurance of U.K. Mainly pension is provided by the government to its employees. But there is a large no as people who work with private sector industry, after the retirement the first thing which worry them is how they survive and how theirs needs and requirements fulfilled?
Scope as the Study To know and understand the different pensions plans as policy as two leading insurance company in insurance sector by study and analysis that how and in what manner they attract the customers of different age and salary groups.
INSURANCE IN INDIA
INSURANCE IN INDIA:Insurance is a federal subject in India and has a history dating back to 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP.. The Insurance sector in India has gone through a number of phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up the insurance sector by allowing private companies to solicit insurance and also allowing FDI up to 26%. Ever since, the Indian insurance sector is considered as a booming market with every other global insurance company wanting to have a lion's share. Currently, the largest life insurance company in India is still owned by the government.
History of Insurance in India Insurance in India has its history dating back till 1818, when Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the needs of European community. Pre-independent era in India saw discrimination among the life of foreigners and Indians with higher premiums being charged for the latter. It was only in the year 1870, Bombay
Mutual Life Assurance Society, the first Indian insurance company covered Indian lives at normal rates. At the dawn of the twentieth century, insurance companies started mushrooming up. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. However, the disparage still existed as discrimination between Indian and foreign companies. The oldest existing insurance company in India is National Insurance Company Ltd, which was founded in 1906 and is doing business even today. The Insurance industry earlier consisted of only two state insurers: Life Insurers i.e. Life Insurance Corporation of India (LIC) and General Insurers i.e. General Insurance Corporation of India (GIC). GIC had four subsidiary companies. With effect from December 2000, these subsidiaries have been de-linked from parent company and made as independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.
Related Acts:The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. It is governed by a number of acts, with the first one being the Insurance Act, 1938.
The Insurance Act, 1938 The Insurance Act, 1938 was the first legislation governing all forms of insurance to provide strict state control over insurance business.
Life Insurance Corporation Act, 1956 Even though the first legislation was enacted in 1938, it was only in 19 January 1956, that life insurance in India was completely nationalized, through a Government ordinance; the Life Insurance Corporation Act, 1956 effective from 1.9.1956 was enacted in the same year to, inter-alia, form LIFE INSURANCE CORPORATION after nationalization of the 245 companies into one entity. There were 245 insurance companies of both Indian and foreign origin in 1956. Nationalization was accomplished by the govt. acquisition of the management of the companies. The Life Insurance Corporation of India was created on 1 September, 1956, as a result and has grown to be the largest insurance company in India as of 2006.
General Insurance Business (Nationalization) Act, 1972 The General Insurance Business (Nationalization) Act, 1972 was enacted to nationalize the 100 odd general insurance companies and subsequently merging them into four companies. All the companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance, and United India Insurance which were headquartered in each of the four metropolitan cities.
Insurance Regulatory and Development Authority (IRDA) Act, 1999 Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of India, then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies into the insurance. Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance companies. In recent years many private players entered in the Insurance sector of India. Companies with equal strength competing in the Indian insurance market. Currently, in India only 2 million people (0.2 % of total population of 1 billion), are covered under Mediclaim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. With more and more private players in the sector this scenario may change at a rapid pace.
General Insurance Business (Nationalization) Act, 1972 The General National Insurance, New India Assurance, Oriental Insurance, United India Insurance which were headquartered in each of the four metropolitan cities.LIC:INDIA )
LIFE INSURANCE CORPRATION OF
A.COMPANY PROFILE OF LIC B.OBJECTIVE C.VISION AND MISSION D.WHAT IS PENSION PLAN
BRIEF HISTORY OF LIFE INSURANCE CORPORATION (LIC)
Bharat Insurance Company (1896) was also one of such companies inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage. The first two decades of the twentieth century saw lot of growth in insurance
business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance companies many financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was the first legislation governing not only life insurance but also non-life insurance to provide strict state control over insurance business. The demand for nationalization of life insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January, 1956, that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were operating in India at the time of nationalization. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart
from its corporate office in the year 1956. Since life insurance contracts are long term contracts and during the currency of the policy it requires a variety of services need was felt in the later years to expand the operations and place a branch office at each district headquarter. re-organization of LIC took place and large numbers of new branch offices were opened. As a result of re-organization servicing functions were transferred to the branches, and branches were made accounting units. It worked wonders with the performance of the corporation. It may be seen that from about 200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But with re-organization happening in the early eighties, by 1985-86 LIC had already crossed 7000.00 crore Sum Assured on new policies. Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7 zonal offices and the corporate office. LICâ€™s Wide Area Network covers 100 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities. LICâ€™s ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and IVRS, Info Centers have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing
easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate anywhere servicing and many other conveniences in the future. LIC continues to be the dominant life insurer even in the liberalized scenario of Indian insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has issued over one crore policies during the current year. It has crossed the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the corresponding period of the previous year. From then to now, LIC has crossed many milestones and has set unprecedented performance records in various aspects of life insurance business. The same motives which inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take this message of protection to light the lamps of security in as many homes as possible and to help the people in providing security to their families.
Life Insurance Corporation of India Some Areas The traditional life insurance business for the LIC has been a little more than a savings policy. Term life (where the insurance company pays a predetermined amount if the policyholder dies within a given time but it pays nothing if the policyholder does not die) has accounted for less than 2% Life Insurance.
Corporation of India Some Areas of Future Growth Life Insurance The traditional life insurance business for the LIC has been a little more than a savings policy of the insurance premium of the LIC (Mitra and Nayak, 2001). For the new life insurance companies, term life policies would be the main line of business. Health Insurance Health insurance expenditure in India is roughly 6% of GDP, much higher than most other countries with the same level of economic development. Of that, 4.7% is private and the rest is public. What is even more striking is that 4.5% are out of pocket expenditure (Berman, 1996). There has been an
almost total failure of the public health care system in India. This creates an opportunity for the new insurance companies. Thus, private insurance companies will be able to sell health insurance to a vast number of families who would like to have health care cover but do not have it.
Pension The pension system in India is in its infancy. There are generally three forms of plans: provident funds, gratuities and pension funds. Most of the pension schemes are confined to government employees (and some large companies). The vast majority of workers are in the informal sector. As a result, most workers do not have any retirement benefits to fall back on after retirement. Total assets of all the pension plans in India amount to less than USD 40 billion. Therefore, there is a huge scope for the development of pension funds in India. The finance minister of India has repeatedly asserted that a Latin American style reform of the privatized pension system in India would be welcome (Roy, 1997). Given all the pros and cons, it is not clear whether such a wholesale privatization would really benefit India or not (Sinha, 2000).
OBJECTIVES OF LIC • Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. • Maximize mobilization of people's savings by making insurancelinked savings adequately attractive. • Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. • Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders.
• Act as trustees of the insured public in their individual and collective capacities. • Meet the various life insurance needs of the community that would arise in the changing social and economic environment. • achievement of Corporate Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy. • Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards the achievement of the goal.
VISION AND MISSION
Vision To be the best Housing Finance Company in the country.
Mission Provide secured housing finance at affordable cost, maximizing shareholders value with higher customer sensitivity.
Values Fair and Transparent Business Practices. Transformation to a Knowledge Organization. Higher Autonomy in Operations. Instilling a sense of Ownership amongst Employees.
PENSION: - A BRIEF INTRODUCTION What Is Pension The pension system in India is in its infancy. There are generally three forms of plans: provident funds, gratuities and pension funds. Most of the pension schemes are confined to government employees (and some large companies). The vast majority of workers are in the informal sector. As a result, most workers do not have any retirement benefits to fall back on after retirement. Total assets of all the pension plans in India amount to less than USD 40 billion. Therefore, there is a huge scope for the development of pension funds in India. The finance minister of India has repeatedly asserted that a Latin American style reform of the privatized pension system in India would be welcome (Roy, 1997). Given all the pros and cons, it is not clear whether such a wholesale privatization would really benefit India or not (Sinha, 2000).
PENSION PLAN OF LIC:• JEEVAN NIDHI • JEEVAN AKSHAY-VI • JEEVAN DHARA-I • NEW JEEVAN SURAKSHA-I
Introduction to the Pension Plans of LIC. Pension plan are Individual Plans that gaze into your future and foresee financial stability during your old age. These policies are most suited for senior citizens and those planning a secure future, so that you never give up on the best things in life.
• Jeevan Nidhi • Jeevan Akshay-VI • New Jeevan Dhara-I • New Jeevan Suraksha-I
Jeevan Nidhi LIC's JEEVAN NIDHI is a with profits Deferred Annuity (Pension) plan. On survival of the policyholder beyond term of the policy the accumulated amount (i.e. Sum Assured + Guaranteed Additions + Bonuses) is used to generate a pension (annuity) for the policyholder. The plan also provides a risk cover during the deferment period. The USP of the plan being the pension can commence at 40 years. The premiums paid are exempt under Section 80CCC of Income Tax Act. Salient Features: a . Guaranteed Additions: Guaranteed Additions @ Rs.50/- per thousand Sum assured for each completed year, for the first five years. b. Participation in profits: The policy shall participate in profits of the Corporation from the 6th year onwards and shall be entitled to receive bonuses declared as per the experience of the Corporation. c. Benefit On Vesting: 1. Option to commute up to 1/3rd of the amount available on vesting, which shall include the Sum Assured under the Basic Plan together with accrued Guaranteed Additions, simple Reversionary Bonuses and Terminal Bonus, if any.
2 . Annuity as per the option selected: Annuity on the balance amount if commutation is exercised, otherwise annuity on the full amount. d. Annuity Options: On vesting, the annuity instalment, mode of annuity payment and type of annuity which shall be made available to the Life Assured (Annuitant) / Nominee will depend upon the then prevailing Immediate Annuity plan of the Life Insurance Corporation of India and its terms and conditions.
Currently the following options are available under LICâ€™s immediate annuities:
1. Annuity for life: The annuity is paid to the life assured as long as he/she is alive. 2. Annuity Guaranteed for certain periods: The annuity is paid to the life assured for periods of 5 or 10 or 15 or 20 years as chosen by him/her, whether or not he/she survives that period. After the chosen period, the annuity is paid to the life assured as long as he/she is alive3. Annuity with return of purchase price on death: The annuity is paid to the life assured as long as he/she is alive. On the death of the life assured, the purchase price of the annuity is paid as death benefit. The purchase price includes the Sum
Assured under the Basic Plan, the accrued Guaranteed Additions and any accrued
4. Increasing annuity: The annuity is paid to the life assured as long as he/she is alive. The amount of annuity increases every year at a simple rate of 3% per annum.
5. Joint Life Last Survivor Annuity: The annuity is paid to the life assured as long as he/she is alive. On death of the life assured, 50% of the annuity is payable to the nominated spouse as long as the spouse is alive.
6. Death Benefit on death before annuity vests: On the death of the Life Assured during the deferment period of the policy, i.e. before the annuity vests, an amount equal to the Sum Assured under the Basic plan along with the accrued Guaranteed Additions, simple Reversionary Bonuses and Terminal Bonus, if any, will be paid in a lump sum to the appointed nominee, provided the policy is in force for full Sum Assured. Nominee will also have the option to purchase an annuity with this amount.
Jeevan Akshay VI Introduction: It is an Immediate Annuity plan, which can be purchased by paying a lump sum amount. The plan provides for annuity payments of a stated amount throughout the life time of the annuitant. Various options are available for the type and mode of payment of annuities.
Options Available: The following options are available under the plan Type of Annuity: •
Annuity payable for life at a uniform rate.
Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as the annuitant is alive.
Annuity for life with return of purchase price on death of the annuitant.
Annuity payable for life increasing at a simple rate of 3% p.a.
Annuity for life with a provision of 50% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
Annuity for life with a provision of 100% of the annuity payable to spouse during his/her lifetime on death of the annuitant.
You may choose any one. Once chosen, the option cannot be altered. Mode: •
Annuity may be paid either at monthly, quarterly, half yearly or yearly intervals. You may opt any mode of payment of Annuity.
Salient features: •
Premium is to be paid in a lump sum.
Minimum purchase price : Rs.50,000/= or such amount which may secure a minimum annuity as under:
Mode Minimum Annuity Monthly Rs. 500 per month Quarterly Rs. 1000 per quarter Half-yearly Rs. 2000 per half year Yearly Rs.3000 per year No medical examination is required under the plan.
No maximum limits for purchase price, annuity etc.
Minimum age at entry 40 years last birthday and Maximum age at entry 79 years last birthday.
Age proof necessary.
Annuity Rate: Amount of annuity payable at yearly intervals which can be purchased for Rs. 1 lakh under different options is as under: Age last birthday
Yearly annuity amount under option (i)
( ii ) (15 years certain)
( iii ) ( iv ) ( v ) ( vi )
6930 5610 7310 7120
6960 5890 7500 7240
7000 6280 7760 7420
7050 6810 8130 7670
7110 7530 8640 8030
7180 8590 9400 8570
7260 10220 10560 9370
7360 12590 12240 10590
Incentives for high purchase price: If your purchase price is Rs. 1.50 lakh or more, you will receive higher amount of annuity due to available incentives. Cooling-off period
If you are not satisfied with the “Terms and Conditions” of the policy, you may return the policy to us within 15 days from the date of receipt of the Policy Bond. On receipt of the policy we shall cancel the same and the amount of premium deposited by you shall be refunded to you after deducting the charges for stamp duty. Paid-up value: The policy does not acquire any paid-up value.
Surrender Value : No surrender value will be available under the policy. Loan : No loan will be available under the policy. Section 41 of Insurance Act 1938 : •
No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out or renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer:
acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub-section if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer. Any person making default in complying with the provisions of this section shall be punishable with fine which may extend to five hundred rupees.
New Jeevan Dhara-I
Product summary: These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term.
Premiums: Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deduction, as opted by you, throughout the term of the policy or till earlier death. Alternatively, the premium may be paid in one lump sum (single premium).
Tax Benefits: Tax relief under Section 80ccc is available on premiums paid under New Jeevan Suraksha I (Table No.147). The premiums paid under New Jeevan Dhara I (Table No.148) qualify for tax relief under Section 88.
Bonuses: These are with-profit plans and participate in the profits of the Corporationâ€™s annuity / pension business. Policies get a share of the profits in the form of bonuses. Simple Reversionary Bonuses are declared per thousand Sum Assured annually at the end of each financial year. Once declared, they
form part of the guaranteed benefits of the plan. Final (Additional) Bonuses may also be payable provided policy has run for a certain minimum period.
New Jeevan Suraksha -I Product summary: These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term.
Premiums: Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deduction, as opted by you, throughout the term of the policy or till earlier death. Alternatively, the premium may be paid in one lump sum (single premium)
Tax Benefits: Tax relief under Section 80ccc is available on premiums paid under New Jeevan Suraksha I (Table No.147). The premiums paid under New Jeevan Dhara I (Table No.148) qualify for tax relief under Section 88.
Bonuses: These are with-profit plans and participate in the profits of the Corporationâ€™s annuity / pension business. Policies get a share of the profits in the form of bonuses. Simple Reversionary Bonuses are declared per thousand Sum Assured annually at the end of each financial year. Once declared, they form part of the guaranteed benefits of the plan. Final (Additional) Bonuses may also be payable provided policy has run for a certain minimum period.
ICICI PRUDENTIAL • HISTORY OF ICICI PRUDENTIAL • VISION AND VALUES • VARIOUS RETIREMENT SOLUTION
HISTORY OF ICICI PRUDENTIAL ICICI Prudential is a joint venture between ICICI Bank and Prudential plc engaged in the business of life insurance in India. ICICI Prudential is the largest private insurance company and second largest insurance in India after LIC. ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first
December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA).ICICI Prudential Life's capital stands at
Rs. 37.72 billion (as on March, 2008) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. For the year ended March 31, 2008, the company garnered Retail New Business Weighted premium of Rs. 6,684 crores, registering a growth of 68% over the last year and has underwritten nearly 3 million retail policies during the period. The company has assets held over Rs. 30,000 crore as on April 30, 2008.ICICI Prudential Life is also the only private life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. The AAA (Ind) rating is the highest rating, and is a clear assurance of ICICI Prudential's ability to meet its obligations to customers at the time of maturity or claims.For the past seven years, ICICI Prudential Life has retained its leadership position in the life insurance industry with a wide range of flexible products that meet the needs of the Indian customer at every step in life.
Vision & Values To be the dominant Life, Health and Pensions player built on trust by worldclass people and service. This we hope to achieve by: • Understanding the needs of customers and offering them superior products and service. •
Leveraging technology to service customers quickly, efficiently and conveniently.
Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders.
Providing an enabling environment to foster growth and learning for our employees.
And above all, building transparency in all our dealings.
The success of the company will be founded in its unflinching commitment to 5 core values -- Integrity, Customer First, Boundary less, Ownership and Passion. Each of the values describes what the company stands for, the qualities of our people and the way we work.
We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to our growth.
How to plan for retirement? 5 simple steps to arrive at an ideal retirement plan Step 1: Decide how much income you require to live comfortably in your post-retirement years. Remember to take into account aspects like increased medical costs, vacations and gifts for family, but reduce costs like children's education and rent, if you own your home. Use our easy Inflation Index Calculator to calculate the impact of inflation. Step 2: Determine how much you need to save regularly, starting today. Use our Retirement Calculator to determine how large a kitty you will need and how much you need to save each year. Step 3: Select the right retirement plan that enables you to meet your post-retirement requirements. Preferably invest in market-linked plans, which can provide you with potentially higher returns in the long run. Our Life Stage Profiler will help you select the plan that meets your criteria Step 4: Start saving now so you have time on your side and can enjoy the power of compounding. Use our simple Power of Compounding Calculator. Step 5: Systematically invest a fixed amount every month for your postretirement years.
Why is retirement planning important? Retire from work. Not from life. A retirement plan is an assurance that you will continue to earn a satisfying income and enjoy a comfortable lifestyle, even when you are no longer working. To understand why an increasing number of individuals have already started planning for their retirement, and why you should too, read on. Independence is the new way of life: An increasing number of young Indian professionals are moving away from the traditional joint family structure. Since support no longer comes easily, parents have realized the need to provide for themselves during their retirement years. Costs set to soar: Skyrocketing costs throw even a well-salaried person off balance. With rates rising everyday, you can imagine how high they will be when you are ready to retire. A retirement plan provides you with a steady income every month, to arm you in the face of rising costs. To understand how inflation can impact your monthly expenses, use our special tool, the Inflation Index calculator.
Non-earning retirement phase is now longer: Only 4% of India working population- mostly government employees â€“ are covered by pensions. The remaining 96% comprises self-employed and salaried professionals who do not have a formal, mandated provision for pensions. ICICI Prudential offers two key retirement plans, LifeLink Super Pension and LifeTime Super Pension - flexible income cum insurance plans that ensure you meet all your retirement requirements. So you can retire peacefully from work, but not from life.
Retirement Solutions To cater to the needs of a customer looking for retirement planning, ICICI Prudential presents a wide array of products. These products have been designed to take into account the diverse set of needs that characterize individual customers.
LifeTime Super Pension
LifeLink Super Pension
Why Life Stage Pension Retirement time is the time to live your dream, dream that you have been putting off as you never had the time for it. But your retirement dream has a cost attached to it. We call this your retirement number.
To help you achieve your retirement number ICICI Prudential presents to you, LifeStage Pension. One of the most distinguishing features of this policy is that it has no premium allocation charge for regular premiums which means 100% of your money is invested. Whatâ€™s more, the policy provides you with a unique lifecycle-based strategy that continuously re-distributes your money across various asset classes based on your life stage and risk tolerance, eventually providing you with a customized retirement solution. Invest today to attain your retirement number and fulfill your dream
Why Premier Life Pension You have strived hard to achieve your dreams and have attained the best comforts life could offer. After having reached this enviable and secure position, wouldnâ€™t you like to continue living life on your own terms even after retirement? If you think so, then you need a retirement solution that not only suits your needs but also lets you retire RICH.
To help you achieve this, ICICI Prudential Life Insurance presents PremierLife Pension Plan- a limited premium paying, unit-linked pension policy designed for preferred customers like you.
This unique policy helps you customize your investments by allowing you to decrease your premium contributions as well as allowing you to boost your investment kitty by making top-ups at any time. Once you arrive at your retirement age the accumulated value of your policy provides you with a regular income (pension) for life
Why LifeTime Super Pension Plan ICICI Prudential's LifeTime Super Pension policy is especially designed to help you systematically save towards a joyful and satisfying retirement.
LifeTime Super Pension Plan is a cost-effective pension plan that delivers great value in the long run. A regular-premium unit-linked pension policy, LifeTime Super Pension ensures you earn a fixed income, for your entire life after retirement. So you can relax and live moments that truly matter.
Why LifeLink Super Pension
ICICI Prudential's LifeLink Super Pension Plan has been especially tailored for individuals who would much rather make a lump-sum investment than pay premiums at regular intervals for their retirement planning. A cost-effective single premium unit-linked pension policy, LifeLink Super Pension Plan provides potentially higher returns that ensure your golden years are secure and peaceful. Invest in LifeLink Super Pension Plan today and watch your money multiply every month, right up to the day you retire. Receive an assured income from your retirement day, for the rest of your life. Read more about the features and benefits of this plan.
Why ForeverLife ICICI Prudential's ForeverLife is a complete insurance cum pension plan that performs two crucial roles: it acts as a protective cover while you earn for your retirement, and provides you with regular pensions once you retire.
Why Immediate Annuity
Security and comfort during retirement is a top priority for everyone. It forms the central aspect of a dream that everyone hopes to achieve and realize at some point or the other during his or her life as a senior citizen.
If you fear that you've missed the bus as far as retirement planning is concerned, there is no reason to despair. With ICICI Prudential's Single Premium Product, you can start earning an annuity income immediately after paying the premium. What's more, the annuity income is guaranteed for life which means that the insurance company pays you and your spouse (as the case maybe) a guaranteed pension till you live.
Tax Benefits on Insurance and Pension Life insurance and retirement plans are effective ways to save taxes when doing your year end tax planning.
To assist you in tax planning, the tax breaks that are available under our various insurance and pension policies are described below: Our life insurance plans are eligible for tax deduction under Sec. 80C. 1. Our Pension plans are eligible for a tax deduction under Sec. 80CCC. 2. Our health insurance plans/riders are eligible for tax deduction under Sec. 80D. 3. The proceeds or withdrawals of our life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section. Invest in ICICI Prudential Life insurance and retirement plans and avail of these tax planning services to save tax at your year end tax planning!
ULIPs : An Introduction Most importantly, what are ULIPs? Here, you will find all the information you need to set your mind at ease about how to invest in ULIPs, and which ULIP is right for you.
ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing you life cover. The residual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; the value of investments alters with the performance of the underlying fund opted by you.
Simply put, ULIPs are structured in such that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency. Working of ULIPs It is critical that you understand how your money gets invested once you purchase a ULIP:
When you decide the amount of premium to be paid and the amount of life cover you want from the ULIP, the insurer deducts some portion of the ULIP premium upfront. This portion is known as the Premium Allocation charge, and varies from product to product. The rest of the premium is invested in the fund or mixture of funds chosen by you. Mortality charges and ULIP administration charges are thereafter deducted on a periodic (mostly monthly) basis by cancellation of units, whereas the ULIP fund management charges are adjusted from NAV on a daily basis.
Since the fund of your choice has an underlying investment â€“ either in equity or debt or a combination of the two â€“ your fund value will reflect the performance of the underlying asset classes. At the time of maturity of your plan, you are entitled to receive the fund value as at the time of maturity. The pie-chart below illustrates the split of your ULIP premium:
TYPES OF ULIP
• ULIP FOR RETIREMENT PLANNING
Types of ULIPs One of the big advantages that a ULIP offers is that whatever be your specific financial objective, chances are that there is a ULIP which is just right for you. The figure below gives a general guide to the different goals that people have at various age-groups and thus, various life-stages.
Depending on your specific life-stage and the corresponding goal, there is a ULIP which can help you plan for it.
PLANNING ULIPS FOR RETIREMENT Retirement is the end of active employment and brings with it the cessation of regular income. Today an increasing number of people have stated planning for their retirement for below mentioned reasons •
Almost 96% of the working population has no formal provisions for retirement
With the growing nuclearisation of family structure, traditional support system of the younger earning members – is no longer available
Developments in the healthcare space has lead to an increase in life expectancy
Cost of living is increasing at an alarming rate
Pension plans from insurance companies ensure that regular, disciplined savings in such plans can accumulate over a period of time to provide a steady income post-retirement. Usually all retirement plans have two distinctive phases
â€˘ The accumulation phase when you are saving and investing during your learning years to build up a retirement corpus and â€˘ The withdrawal phase when you actually reap the benefits of your investment as your annuity payouts begin
In a typical pension plan you have the flexibility to make a lump sum payment or a regular contribution every year during your earning years. Your money is then invested in funds of your choice. You can opt to receive the annuity at any time after vesting age (age at which you become eligible for pension chosen by you at the inception of the plan). Most of the Unit linked pension plans also come with a wide range of annuity options which gives you choice in structuring the post-retirement benefit pay-outs. Also at the time of vesting you can make a lump sum taxexempted withdrawal of up to 33 per cent of the accumulated corpus. In a retirement plan the earlier you begin the greater you gain post retirement due to the power of compounding. Let us take an example of Gaurav & Hari. Both of them want to retire at the age of 60. Gaurav starts investing Rs. 10,000 every year from the age of 25 till the time that he retires. In all, he would have invested Rs. 350,000. If his
investments were to earn 7% return every year, at the time of his retirement, Gaurav will have a retirement corpus of Rs. 13, 82,368.
Now, Hari starts investing 10 years later (i.e. at the age of 35) and in order to make up for the lost time, invests Rs.15,000 every year (which is 50% more than Gaurav’s annual investment). So, by the time of his retirement, he would have invested Rs. 3,75,000. And assuming the same annual return of 7%, he will end up with a retirement corpus of Rs 9, 48,735.
So, you see how despite setting aside more than 50% of Gaurav’s annual contribution, Hari ends up with a retirement corpus which is almost a third lesser than Gaurav’s. That is the power of compounding.
Which is why, it is never too early to invest in a ULIP for retirement planning
Tax Benefits of ulip ULIPs are an efficient tax saving instrument too .The tax benefits that you can avail in case you invest in ULIPs are described below: •
Life insurance plans are eligible for deduction under Sec. 80C
Pension plans are eligible for a deduction under Sec. 80CCC
Health insurance plans and critical illness riders are eligible for deduction under Sec. 80D
The maturity proceeds or withdrawals of life insurance policies are exempt under Sec 10(10D), subject to norms prescribed in that section.
ULIP s FAQ (FREQUENTLY ASKED QUESTION ) Q1. What is a Unit Linked Fund? Unit Linked Fund is a pool of the premiums paid by the policyholders which is invested in a portfolio of assets to achieve the fund(s) objective. The price of each unit in a fund depends on how the investments in the fund would perform. The fund is managed by the insurance companies. Q2. What is a Fund Value and how is it calculated? Fund Value is the product of the total number of units under the policy and the NAV. The fund value for the purpose of claims, surrenders or any other clause stated shall be calculated on the basis of NAV. Q3. What do I get at the end of my policy term? The benefit received at the end of policy term is termed as maturity benefit. The policyholder is entitled to receive fund value as maturity benefit. Q4. What will my family receive if something happens to me? In the unfortunate event of death during the term of the policy, the person appointed as nominee shall receive the higher of sum assured or the fund value. There are also certain ULIPs in market which give sum of Fund value & sum assured as death benefit.
Q5. Is investment return guaranteed in ULIPs? Investment returns from ULIP may not be guaranteed.â€? In unit linked products/policies, the investment risk in investment portfolio is borne by the policy holderâ€?. Depending upon the performance of the unit linked fund(s) chosen; the policy holder may achieve gains or losses on his/her investments. It should also be noted that the past returns of a fund are not necessarily indicative of the future performance of the fund.
Q6. Can I change / switch my asset allocation? Yes, you can change the investment pattern by moving from one fund to other fund (s) amongst the funds offered under a particular product. Such a change between funds is termed as a Switch. There will be a flat charge levied for any switch over and above the free switches.
Q7. Can I partially withdraw from my policy? Yes, you can encash / withdraw a part of the fund anytime after completion of three years, subject to surrender charges as applicable to each individual plan.
Q8. Can I foreclose my policy? Are there any charges applicable? Yes, you can foreclose your policy by surrendering the policy. Surrender means terminating the contract once and for all. On surrender, the surrender value is payable to you which is Fund Value less the surrender charge. Surrender Charge means a charge levied on the fund value at the time of surrender of the policy.
RESEARCH SECTION A. RESEARCH OBJECTIVE B. HYPOTHESIS C. RESEARCH METHODOLOGY
To establish an interface between the policy/plans makers and policy takers, that how and in what manners they show there reaction towards policy and plan. Through the study we try to study and analysis the different pension plans of the different company. How people choose the suitable pension plan for them from LIC.
We also want to know that how and in what manners the different pension plan attract different age and salary group.
HYPOTHESIS Hypothesis is couched in terms of the particular independent and dependent variables that are going to be used in study. Research hypothesis are specific testable prediction made about the independent and dependent variables in the study. As data is not originally collected for use in the research project under consideration, but rather for use some other project, by some other person in terms of secondary data. Usually the literature review has given background material that justifies the particular hypothesis that is to be tested. There exists two type of hypothesis that is to be : Null hypothesis Alternate hypothesis â€˘
In null hypothesis we assume that LIC pension plan work over the other private insurance plan like ICICI prudential.
Alternate hypothesis if our assumption that the LIC pension plan work over the other private company pension plan go wrong, alternate hypothesis exists. It proves that ICICI prudential plan has greater share.
RESEARCH METHODOLOGY RESEARCH:“Research is an organized and systematic way of finding answers to question”. “Research is an enquiry or examination to discover new information or relationship and to extent and to verify existing knowledge”. Redman & Mory define research as a “systematized effort to gain new knowledge.” Methodology is define as 1. “The analysis of the principle of methods, rules, and postulates employed by a discipline” or 2. “The development of methods, to be applied within a discipline” 3. “A particular procedure or set of procedure.”
Research design The framework of conducting research is known as research design. â€œResearch design is the plan, structure, and strategy of investigation conceived so as to obtain answers to research question and to control variance.â€?
Types of research Design:There are three types of Research Design:1. Exploratory Research Design: - The major emphasis in exploratory Research Design is on discovery of ideas and insights. 2. Descriptive Research Design: - The descriptive Research Design study is typically concerned with determining the frequency with which something occurs or the relationship between two variables. 3. Causal Research Design: - A Causal Research Design is concerned with determining cause and effect relationship. 4. For the study, Descriptive Research Design was undertaken as it draws the opinion of employees/workers on specific aspect
Why pension plans offer the best retirement solutions Mohan Shahs father Prakash retired last year from Central Bank of India. During his 29 years of service, he failed to opt for any pension scheme. And being the sole earning member, Prakash retired with little savings. The little that was there in his bank account was used up last December to pay for his second daughter’s wedding. Today, he and his wife live with Mohan and are forced to rely on their children for financial support. But for how long? Having turned 60 last month, and looking at the mortality tables, Mohan’s father has probably another 15 to 20 years left. Added to daily expenses, in January this year, Mohan’s mother was diagnosed with diabetes and has to take insulin regularly. This means medical expenses for Mohan. Health and medical costs have increased manifold and will quadruple over the next 10 years. This is an additional expense for Mohan, as doctor’s visits become a regular feature as one ages. It’s not just medical costs alone. Even daily expenses like food, petrol and transportation end up costing more. A kilo of potatoes used to cost just Rs 1.50 some time back. Today, a kilo costs Rs 8, and if inflation rises at the annual rate of five to six per cent, 10 years from now potatoes
could cost Rs 43 a kilo! Petrol prices have equally shot up from Rs 17 a litre 10 years back to Rs 34-35 plus today, and could well rise to Rs 60 a litre 10 years from now. Enter pension, to reduce tension. Pension is all about insuring oneself financially against the risk of living too long. It is about fund management, long-term savings, protection and annuity income. Moreover, investment in pension plans offers taxpayers a direct tax deduction of Rs 10,000 from one’s taxable income under Section 80 CCC (1) of the Income Tax Act. Unlike Section 88, the tax benefits under this section are available to persons in all income brackets. Even for those eligible to save tax under Section 88, the saving on an investment of Rs 10,000 is higher in the case of pension plans. The tax saved is Rs 3,150, whereas under Section 88 a Rs 10,000 investment yields a maximum tax rebate of Rs 2,000. However, one doesn’t invest in pension schemes only for tax savings. Considering the high cost of living and falling interest rates, people ought to be saving far more than Rs 10,000 a year if they wish to retain their present lifestyles. Take the Life Insurance Corporation’s (LIC) Jeevan Suraksha pension plan. A 30-year-old paying Rs 10,238 every year for a term of 20 years will be entitled to a pension of just Rs 14,200 per month on retiring at the age of 50. LIC assumes an annual bonus rate of Rs 65 per Rs 1,000. This is purely an illustration, which could vary depending on interest rates and investment strategies. A pension plan also allows a policyholder to withdraw a certain percentage of the accumulated funds on
retirement to take care of some large expenses. Most of the private players ICICI Prudential, HDFC Standard Life, Tata AIG and Aviva Life - have followed in the LICâ€™s footsteps and offer a maximum withdrawal of 25 per cent of the accumulated corpus at the time of retirement. OM Kotak Mahindra Life is the only one to offer a maximum withdrawal of 33 per cent of the accumulated amount. After withdrawal, policyholders have to buy an annuity plan from the balance amount that will provide them with a monthly pension till they bid a final goodbye. By taking an open market option, customers can, on maturity, buy an annuity product from any life insurance company. Should a policyholder die within the accumulating period, most life insurers return premium with interest, subject to a maximum of sum assured, plus accumulated bonuses to date, say officials with HDFC Standard Life. It is not easy to decide today how much annuity one should take 20 years later. Thatâ€™s a decision best left to be made at the time of retirement. Customers can choose from various annuity options available, including options like annuity for husband and wife, annuity with annual increment, annuity with return of purchase price and more. During the accumulation phase, a customer can only decide how much he/she can contribute and afford to put aside for post-retirement needs, says Tata AIG Life Insurance Company managing director Ian Watts. Looking at the inflation rate and
increasing post-retirement costs in terms of healthcare needs, this means one should ideally save longer and more if one wishes to preserve one’s existing lifestyle. A few ballpark numbers will help you figure out how much you should save in your circumstances. If you save Rs 10,000 every year for a period of 30 years under LIC’s Jeevan Suraksha, you can expect a pension of Rs 9,290 per month on retirement after withdrawing Rs 3.93 lakh on retirement. Should you not opt to withdraw a part of the accumulated corpus, you can expect a monthly pension of Rs 12,388 based on LIC’s current indicative calculations. A lot, however, depends on interest rates at the point of retirement. A warning is in order, though: The incentive to save more than Rs 10,000 is low because the balance has to come from post-tax income. On the other hand, if you do save more and entitle yourself to higher pension, that pension income will be taxed again as normal income. So, it’s a double whammy — double taxation of pension savings and pension income. Yet, Mohan, learning from his father’s failure to save for postretirement life, signed his first pay cheque away towards the purchase of an ICICI Prudential pension plan. He plans to religiously put aside Rs 20,000 every year to get himself a worthwhile pension and in the hope that the
government will increase the tax deduction in the years to come. Meanwhile, his life gets covered during the savings/ accumulation period. ICICI Prudential also offers a health cover and guarantees capital protection during the accumulation phase. To be sure, pension plans are not the only available instruments in the market today for long-term savings. During the accumulation phase, one could opt for mutual funds, the governmentâ€™s taxfree bonds, the public provident fund, or government securities. But there is no tax exemption or inherent life cover in mutual funds; in the case of PPF, you get section 88 benefits for incomes up to Rs 5 lakh, but not above. The interest is, however, tax-free. Some infrastructure bonds also offer Section 88 benefits.
HOW MUCH PENSION? In retirement planning, one needs to calculate backward to figure out how much one should invest - with or without tax breaks. First, ask yourself when you wish to retire. Then, what kind of income do you need to maintain your present standard of living. If you think you need Rs 10,000 a month (pre-tax) if you were to retire today, assuming a six per cent inflation rate, you would need Rs 17,908 after 10 years, Rs 23,965 after 15, and Rs 32,071 after 20 years. If you assume a more benign inflation rate of, say, four per
cent, the required amounts would be Rs 14,802, Rs 18,009 and Rs 21,911 after 10, 15 and 20 years of saving. You will then need to talk to your pension plan advisor and figure out what you need to put away every year to achieve your targeted pension income. We have to, of course, assume that taxation will be indexed to inflation - in which case your post-tax income 20 years from now will be similar in real terms to what it is today for a pension income of Rs 10,000 per month.
Pension plans rise in insurance co portfolios Can I lead a comfortable life after my retirement
? That's a question an increasing number of people are asking themselves. And that's the reason why pension plans today contribute about 30% of the insurance industry's total business . The industry is seeing a 20%-25 % annual growth in pension policies and a 50% growth in premium. "The average premium for pension plans is higher ," says Amit Gupta, director for marketing in ING Vysya Life Insurance. At ING Life, pension plans used to contribute 4%-5 % of business in 2006. But in 2008, that's grown to about 10%. For Bharti AXA Life, the retirement product , which was launched in January 2008, contributed 20% of the total premium in the year.
Most private companies do not offer pensions, and employees are typically dependent only on their provident fund for retirement financing, which in most cases is insufficient to maintain current living standards. That's the gap pension plans are seeking to fill. "Pension plans are mainly targeted towards
couples in the age group of 35 and 45 years. Couples at this age would have completed saving for their protection needs, would have children who are
slightly older and would be now interested in planning for retirement ," says Gupta. Young couples are also beginning to plan for retirement, but this is still a relatively small proportion and is largely seen in metros.
Financial planners say it is best to start investing in a pension plan early in life, like 25-35 years, in order to get a meaningful deferred annuity . As the gap reduces between the contribution period and the vesting period the pension amount becomes smaller. A global survey on retirement trends conducted by AXA in 2008 revealed that the working population in India expects to have a better quality of life or at least maintain the current life standards postretirement.
"The survey covered 26 countries and Indians were the most optimistic. The optimism is not supported with financial planning, as 56% of the population hadn't started preparing for retirement," says the survey. Insurance companies say major concerns among people in pension planning relates to
deciding the right time to invest and choosing a plan that provides payout beyond a certain age.
Companies are coming with products to cater to different needs. "We have a product that allows people to increase contribution to the retirement kitty," says Shyamal Saxena, chief marketing officer of Bharti AXA.
Did you say retirement is all about surviving on a meager pension? Banish the thought. With the market flush with different types of schemes, you need not walk into the twilight zone with empty pockets. In fact, retirement solutions are suddenly in demand with people becoming more aware of the need to save for the sunset years. Particularly in a country like India where, according to a survey by the Invest India Economic Foundation, less than a sixth of those about to retire in the next 10 years are covered by some form of pension, and only 2% of those not working in government (where pensions are generous) being able to fund their retired lives even if they cut expenses by half, the need for retirement plans is inevitable.
Surprisingly, in sharp contrast to times when only traditional pension plans were available in the market, the entry of private insurance players has changed the scenario, as also the profile of the products. Pension plans today are more oriented towards the model of ULIPs (unit-linked insurance products) because of their ability to provide better returns on the back of robust
Says Bert Paterson, managing director, Aviva India: “In the last 20-25 years, traditional products have taken a back seat in the developed markets. Now more than 80%-90% of people invest in unit-linked products for both pensions and life insurance.” This, however, is not the case with India. Here, the majority of people still rely on the traditional pension schemes such as PF and post office plans. But taking a cue from the developed world, new age insurance companies have introduced a whole range of unit-linked pension plans in the Indian market too, with their number growing by the day. Aviva India’s PensionPlus, ICICI Prudential’s LifeLink Super Pension and LifeTime Super Pension, TaTa AIG’s InvestAssure Gold, SBI Life’s Horizon II Pension and Reliance Golden Years Plan are some of them. Furthermore, as the insurance companies providing these plans have increased manifold, there are more product choices before investors than ever before. “Even within the ULIPs, investors have choices in terms of varying their exposure to the equity markets by choosing an aggressive or dominant pension fund,” says Ashish Kapur, CEO, Invest Shoppe India Ltd, adding that for instance, an aggressive pension scheme would invest up to 60% in
equity and the rest in debt-oriented avenues, while the conservative plan would have a nominal exposure of 10-15% to equity. Conventional pension plans, on the other hand, invest a major portion of the premium amount in bonds and government securities (G-Secs). That is why the returns are on the lower side there, say investment experts. And if one were to factor into the equation an annual inflation figure of approximately 5%-6% per annum, then the real return figures look even more unimpressive. As against this, unit-linked pension plans are said to be giving returns of 25-40% in some cases. Better returns, however, are not the only reason for the growing popularity of ULIP products. “The reasons for the increasing popularity of ULIPs are that they are flexible, transparent and provide value for money. What’s more, they can be suited to the needs of all types of customers, from the risk averse to customers who seek higher returns with some downside risk,”informs Paterson.
ICICI Prudential’s Life Time Pension Plan, for instance, allows one to choose from three options – Income, Balanced and Growth. While the Income fund is 100% invested in debt instruments, the Balanced and Growth options provide flexibility to allocate up to 40% and 90%. Likewise, Aviva’s
PensionPlus comes with three fund options – Balanced, Growth and Secure. And the same is the case with most other plans. Thus, depending upon their risk appetite, the customers can choose which fund option to go for.
“For a risk-averse customer, a Secure Fund or the Protector Fund is advisable as most of the money is invested in government bonds. For someone wanting returns and willing to take risks, a Growth fund is the best where most of the money is invested in equities,” says Paterson.
Thus, as against the conventional belief that ULIPs being market-linked products are risky, it is possible to build in an element of guaranteed return within the unit-link framework too. “The key point is that customers can tailor their investment strategy to suit their risk profile. Besides, the investment strategy is flexible and can be changed as the customer’s needs and circumstances change,” he adds.
Besides, according to experts, unit-linked products have distinct advantages over traditional ones. Firstly, they are transparent. A customer can track the value of his investments on a daily basis as the NAV is published in leading
dailies and on the websites of the companies. Further, all charges on the policy are shown to the customer.
Secondly, they are flexible. â€œEvery 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,â€? says Kapur.
Thirdly, ULIPs offer liquidity to the individual as he can withdraw money anytime he wishes to after the initial lock-in period without a surrender charge. This is unlike conventional endowment plans where individuals tend to lose out on surrender charges on surrendering their policies.
Other advantage are that since the investments are made for long periods, the chances of earning a decent return are high. Also, the premiums paid for ULIPs are eligible for tax rebates under Section 80C which allows a tax deduction of premiums paid within the overall ceiling of Rs 1 lakh. Further, proceeds from ULIPs are tax-free under section 10(10D), unlike those from a mutual fund which attract capital gains tax.
This, however, doesn’t mean that one should opt for unit-linked products without taking any precaution.
First, one should look at the various charges being levied by the insure before choosing a pension plan. One should also look at the fund performance and avoid reacting impulsively. “Usually investors react impulsively to the volatile movements of the market and switch in between the schemes. Since ULIPs are designed for long-term investment, one should watch the performance over a period of time,” advises an SBI Life Insurance spokesperson.
It also makes eminent sense to avoid putting all your eggs in one basket. “More so, since none of the private insurers has a performance track record available for evaluation. Although LIC has been around for decades, it has opted out of assuring returns as it did in the past. So spread your investment over plans of more than one company, but not at the cost of your investment objective and risk profile,” advises Kapur. Also, a prudent factor while choosing a pension plan is that it should preferably be a pure pension plan. Frills like life insurance cover and accident or critical illness riders should preferably be avoided.
COMPRATIVE ANALYSIS OF LIC AND ICICI PRUDENTIAL WITH OTHER INSURANCE COMPANY
There are a total of 13 life insurance companies operating in India, of which one is a Public Sector Undertaking and the balance 12 are Private Sector Enterprises. List of Companies are indicated below:-
NAME OF THE LIFE INSURANCE COMPANY AND THE SHARE HOLDING PATTEN Name of the company
Nature of Holding
Allianz Bajaj Life Insurance Co
Aviva Life Insurance
Birla Sun Life Insurance Co
HDFC Standard Life Insurance Co
ICICI Prudential Life Insurance Co
ING Vysya Life Insurance Co.
Life Insurance Corporation of India
Max New York Life Insurance Co.
MetLife Insurance Co.
Om Kotak Mahindra Life Insurance
SBI Life Insurance Co
TATA- AIG Life Insurance Company
MARKET SHARE OF INSURANCE COMPANY (%) Name of the Player
Market share (%)
LIFE INSURANCE CORPORATION OF INDIA
BIRLA SUN LIFE
SBI LIFE INSURANCE
MAX NEW YARK
OM KOTAK MAHINDRA
PRESENT SCENARIO OF INSURANCE INDUSTRY
India with about 200 million middle class household shows a huge untapped potential for players in the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. The insurance sector in India has come to a
position of very high potential and competitiveness in the market. Indians, have always
seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice. Consumers remain the most important centre of the insurance sector. After the entry of the foreign players the industry is seeing a lot of competition and thus improvement of the customer service in the industry. Computerization of operations and updating of technology has become imperative in the current scenario. Foreign players are bringing in international best practices in service through use of latest technologies
The insurance agents still remain the main source through which insurance products are sold. The concept is very well established in the country like India but still the increasing use of other sources is imperative. At present the distribution channels that are available in the market are listed below. â€˘ Direct selling
• Corporate agents • Group selling • Brokers and cooperative societies • Bank assurance
Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not just traditional money back policies, which is not considered very appropriate for long-term protection and savings. There is lots of saving and investment plans in the market. However, there are still some key new products yet to be introduced - e.g. health products.
The rural consumer is now exhibiting an increasing propensity for insurance products. A research conducted exhibited that the rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In the insurance the awareness level for life insurance is the highest in rural India, but the consumers are also aware about motor, accidents and cattle insurance. In a study conducted by MART the results showed that nearly one third said that
They had purchased some kind of insurance with the maximum Penetration skewed in favor of life insurance. The study also pointed ou The private companies have huge task to play in creating awareness and Credibility among the rural populace. The perceived benefits of buying a Life policy range from security of income bulk return in future, daughter's Marriage, children's education and good return on savings, in that order, The study adds.
COMPRATIVE ANALYSIS AND INTERPRETATION
COMPRATIVE ANALYSIS OF ULIP PENSION PLAN OF LIC AND ICICI PRUDENTIL
Premier Life Gold(ICICI)
3 or 5 year
20,000 for single mode 10,000 for others
1,00,000 for 3 year 60,000 for 5 year
Min. Entry age
Max. Entry Age
69 year for term 3 year 65 year for term 5 year
6 year for PPT 3 year 10 year for PPT 5 year
Allowed after 3 years
Allowed after 3 years
Higher of Sum Assured or the Policyholderâ€™s Fund Value
Sum Assured or fund value whichever is higher
Minimum Policy Term
Maximum Policy Term
Allocation Charge: Profit plus
Under single premium mode it is only from 4.5 to5 %. For PPT of 3 to 4 year in the first year it is between 9 to 10.5 % and 2.5% in the subsequent years. For PPT of 5 year it is quite high. It charges between 22.5 to 24 % in the first and 4% in the subsequent years. The allocation charge depends on amount invested, higher for less investment amount. Premier Life Gold (ICICI) For 3 years PPT it charges 12 % in the first year and 4% in the subsequent years
For 5 years PPT it charges 12% in first year,4% in 2 nd and 3rd year and 2% for remaining years. Mortality charges: Profit plus For 25 year healthy male it comes to 1.42 Rs. Per 1000 S.A Which comes to Rs. 142 per 1 Lac? Premier Life Gold (ICICI) Here they charge separately for male and female For 20 years male it is Rs. 1.33 per 1000 Rs. S.A
For 20 years female it is Rs. 1.26 per 1000 Rs. S.A Fund management charge Both charges same fund management charges It is in the range of 0.75 % to 1.50 % Per annum and calculated on daily basis. Policy administration charge: LIC charge Rs. 60 per month in the first year and Rs. 20 for the subsequent years. ICICI charge Rs 60 per month. Switching charges: Both charges in the same way, 4 switches are free. Rs.100 for additional Switches.
COMPRASION OF ICICI PRU’S FOREVER LIFE,LIC’S JEEVAN SURAKSHA AND HDFC’S STAINDARD LIFE.
Particulars ICICI Pru Life
HDFC Standard Life
Jeevan Suraksha- Personal Pension 1 Plan Sum Assured/Notional Cash Value Type
No Limit No Limit Accident & Disability Benefit, Critical
Illness Benefit, Major Surgical Assistance,
Level Term Cover Option to take 25% of corpus in lumpsum & balance 75% as an annuity/ Annuity on full corpus.
Death (During Regular Income
Term Assurance Option only
Option to take 25% of corpus in lumpsum & balance 75% as an annuity/Annuity on full corpus. All premiums
Rs.25,000 No Limit
No Rider available
Option to take 25% of corpus in lumpsum & balance 75% as an annuity. Annuity on full corpus/Annuity on full corpus. All Premiums paid
stream to spouse if
up to the date of
the spouse is not
assurance premium death accumulated
alive a lumpsum
and extra premium if at the rate of 8% p.a.
amount is paid to the any) paid up to the
compounded will be
date of death
paid to the nominee
has option to take
accumulated at the
or (Notional Cash
100% of Sum
rate of 5% p.a.
compounded or at
such rate decided by whichever is lower
additions (if death
the LIC from time to
after 7 years of the
time will be paid to
Spouse/beneficiaries Spouse/beneficiaries Spouse/beneficiaries
upon Annuity option upon Annuity option upon Annuity option Surrender
surrender value is
surrender value is
surrender value is
payable after 3
payable after 2
payable after 3 years
years premiums are years premiums are premiums are paid. Open Market Option Life Cover Postponement of vesting age
Spouse Pension after policy holder
FINDINGS â€˘ People are not aware about the pension plan so insurance agent should make aware about the pension plan and its benefits. â€˘ Pension plan are so minimum in numbers so people not find pension plan according to their earning and requirements. â€˘ Pension is provided only to government employees and big company employees so pension plan in insurance company has bright future.
RECOMMENDATION • We need to make people aware about the pension plan in rural and semi urban area about the pension plan and its benefits.
• Insurance agent and advisors need to give only those plan which are fulfilling the requirement and needs in a best way.
• Both LIC and ICICI PRUDENTIAL should make some pension plan for those who are nit economically sound, so they can also secure their future.
• Insurance company should have some more plan in Pension category as they have in other category like Health and General insurance.
Pension plan should be more convenient; with the pension plan health plan should be provided because in the old age expenses on health related is increased.
BIBLIOGRAPHY Websites:ICICI Prulife.com ICICI prudential life insurance wikipedia.com. India housing.com. LIC india.com
Book Referred Research Methodology - C.R. Kothari