A Comparative Analysis of ULIP of Bajaj Allianz Life Insurance Co. Ltd with Mutual Fund

A Comparative Analysis of ULIP of Bajaj Allianz Life Insurance Co. Ltd with Mutual Fund MINI PROJECT REPORT

Submitted by RAJEEV JOSEPH REG.NO:08BA020 1st Year MBA KARUNYA UNIVERSITY

Under the guidance of Ms. P.M. ANUSHIA LECTURER

KARUNYA SCHOOL OF MANAGEMENT KARUNYA UNIVERSITY COIMBATORE – 641114

Karunya School of Management, Coimbatore 1

2008-2010

DECLARATION

I, Rajeev Joseph, do hereby declare that this project work entitled “A Comparative Analysis of ULIP of Bajaj Allianz Life Insurance Co. Ltd with Mutual Fund� is an outcome of my study and is submitted in partial fulfillment of the requirement for the award of the degree of Master of Business Administration, Karunya University.

I also declare that this report has not been submitted by me fully or partially for the award of any degree, diploma, title, recognition or any other fellowship of any other university before.

Place: Changanacherry Date: 21-06-2009

RAJEEV JOSEPH

Karunya School of Management, Coimbatore 2

ACKNOWLEDGEMENT

Initially, let me thank the almighty God for guiding me all through the project work.

I express my deep and sincere gratitude to Ms. P.M. Anushia, Faculty guide for providing the necessary assistance for the project.

I sincerely acknowledge my gratitude to Mr. Justin Paul, Branch Manager of Bajaj Allianz Life Insurance Company Ltd, Changanacherry branch and Mr. Biju Sebastian ,Sales Manager for giving me an opportunity to do this project.

I also owe my sincere thanks to all the staff in Bajaj Allianz Life Insurance Company Ltd, Changanacherry branch, and the faculties of the Department of Business Administration, KARUNYA UNIVERSITY for their valuable guidance and suggestion in the preparation of this report and completing the same successfully.

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CHAPTER 1

CONTENT

PAGE No:

Executive Summary

1

Introduction

2

Objectives

3

Limitation

3

2

Indian Insurance Industry

4

3

Industry Profile

11

Unit Linked Insurance Policy (ULIP)

15

Mutual Fund

22

Data Interpretation and Analysis

41

Findings and Suggestion

71

Conclusion and Recommendations

73

Bibliography

74

4

Karunya School of Management, Coimbatore 4

5

Annexture

78

EXECUTIVE SUMMARY

“A comparative Analysis of ULIP plans of Bajaj Allianz Life Insurance with mutual funds in Changanacherry Branch” an analysis to be done be by Rajeev Joseph, student(MBA) of Karunya University, Coimbatore.

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

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

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

The project was taken to know about, what are the main aspects in Bajaj Allianz Life Insurance Company, and its USP (Unique Selling Preposition).Which gives it highest business and

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customers. Customers always prefer to invest in a good option and in a company which is market leader.

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

Many people are getting the tax benefits in ULIP. In Mutual Fund they have to invest their money in tax saving funds to get the tax benefit.

INTRODUCTION To make comparison of ULIP plans with Mutual funds in Bajaj Allianz Life Insurance Co. Ltd. and to Create awareness about Unit Linked Insurance Plan (ULIP) Benefits. The overall goal of this project was to create awareness about investments. The Above problem arises because every life insurance company has their products having different positive and negative aspects.

Life Insurance is booming sector in today’s economy. So the responsibilities of the insurance companies have been increased as compare to the past. Because in past people were taking insurance policies for protection tool only. In present scenario insurance sector is providing more services with the basic life insurance. Bajaj Allianz Life Insurance has number of products, which gives the right way to save the money and earn good profit by invested premium. Today people want more services and more return on their investment. So this insurance company is providing more value – added services with the basic insurance operation.

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

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

OBJECTIVES ✔ To understand the reason for which customers prefer ULIP as one of the best insurance

investment mode rather than Mutual fund. ✔ To find the significance difference between customers of different income with that of

investment mode.

✔ To Compare Investment Options of customers in ULIPs and Mutual Funds.

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LIMITATIONS ✔

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

✔

The findings of my research is from a small sample size.

✔

Narrow minded thinking of middle class people as investment is not their cup of tea.

✔

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

✔

A general preference to LIC and SBI over private players.

✔

Hesitations on the part of respondents to disclose financial information.

INDIAN INSURANCE INDUSTRY The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered more riskier for coverage.

The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies.Insurance regulation

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formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State lead planning and development.The (non-life) insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, OrientalInsurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).The general insurance business was nationalized after the promulgation of General Insurance Business (Nationalizations) Act, 1972.

The post-nationalization general insurance business was undertaken by the General Insurance Corporation of India (GIC) and its 4 subsidiaries: Oriental Insurance Company Limited; New India Assurance Company Limited; National Insurance Company Limited; and United India Insurance Company Limited.

Some of the important milestones in the life insurance business in India are: 1850: Non life insurance debuts with triton insurance company.

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1870: :Bombay mutual life assurance society is the first Indian owned life insurer 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928 : :The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. 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

general insurance of India.

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1957 : General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.

1968 : The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

1972 : The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st 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 Company Ltd. GIC incorporated as a company.

1993: Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector.

1997 : Insurance regulator IRDA set up.

2000: IRDA starts giving licenses to private insurers:Kotak Life Insurance ,ICICI potential and HDFC standard Life insurance are the first private insurers to sell a policy.

2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed to sell insurance plans.

INSURANCE MARKET –PRESENT

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The insurance sector was opened up for private participation seven years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and non-life segment. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe.

LIFE INSURANCE COMPANIES Sl. No.

Insurer

Foreign Partners

1

HDFC Standard Life Insurance Co. Ltd.

Standard Life Assurance, UK

2

Standard Life Assurance, UK

New York Life, USA

3

ICICI-Prudential Life Insurance Co. Ltd.

Prudential , UK

4

Om Kotak Life Insurance Co. Ltd.

Old Mutual, South Africa

5

Birla Sun Life Insurance Co. Ltd.

Sun Life, Canada

6

Tata-AIG Life Insurance Co. Ltd.

American International Assurance Co., USA

7

SBI Life Insurance Co. Ltd.

BNP Paribas Assurance SA, France

8

ING Vysya Life Insurance Co. Ltd.

ING Insurance International B.V., Netherlands

9

Allianz Bajaj Life Insurance Co. Ltd.

Allianz, Germany

10

Metlife India Insurance Co. Ltd.

Metlife International Holdings Ltd., USA

11

Reliance Life Insurance Co. Ltd.

12

AVIVA

13

Sahara Life Insurance Co. Ltd.

14

Shriram Life Insurance Co. Ltd.

Aviva International Holdings Ltd., UK

Sanlam, South Africa

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15

Bharti AXA Life Insurance Co. Ltd.

AXA Holdings, France

16

Future Generali India Life Insurance Pantaloon Retail Ltd.; Sain Marketing Company Ltd Network Pvt. Ltd. (SMNPL), Generali, Italy

17

IDBI Fortis Life Insurance Company Ltd. Fortis, Netherlands

18

Canara HSBC OBC Life Insurance HSBC, UK Company Ltd.

19

Aegon Religare Life Insurance Company Religare, Netherlands Ltd.

20

DLF Pramerica Life Insurance Co. Ltd.

21

Life Insurance Corporation of India

Prudential of America, USA

TOP 10 LIFE INSURANCE COMPANIES IN INDIA LIC (Life Insurance Corporation of India) still remains the largest life insurance company accounting for 64% market share. Its share, however, has dropped from 74% a year before, mainly owing to entry of private players with innovative products and better sales force.

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India. It experienced growth of 58% in new business premium, accounting for increase in market share to 8.93% in 2007-08 from 6.97% in 2006-07.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in number of policies sold in 2007-08, with total market share of 7.36%.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked 6th in 2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an increase of 87% over last year.

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Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market share went up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium and 4th in number of new policies sold in 2007-08.

HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08, registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th among the insurance companies and 5th amongst the private players.

Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in 2007-08.

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported growth of 80%, moving from the 11th position to 9th. It captured a market share of 1.19% in 2007-08. Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th last year. It has presence in more than 3,000 locations across India via 221 branches and close to 40 banc assurance partnerships. Aviva Life Insurance plans to increase its capital base by Rs 344 crore.

MARKET SHARE OF VARIOUS LIFE INSURANCE COMPANIES IN INDIA Here is the market share of various Life Insurance Companies in India at the end of FY2008.

Company Name

Market Share (in %)

LIC

48.1%

ICICI Prudential

13.7%

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Bajaj Allianz

10.3%

SBI Life

6.2%

HDFC Standard

4.1%

Birla Sunlife

3.4%

Reliance Life

3.4%

Max New York

2.4%

OM Kotak

1.9%

AVIVA

1.8%

Tata AIG

1.5%

MetLife

1.4%

ING Vysya

1.2%

Shriram Life

0.3%

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Bharti Axa Life

0.2%

BOOMING INSURANCE MARKET IN INDIA With a huge population base and large untapped market, insurance industry is a big opportunity area in India for national as well as foreign investors. India is the fifth largest life insurance market in the emerging insurance economies globally and is growing at 32-34% annually. This impressive growth in the market has been driven by liberalization, with new players significantly enhancing product awareness and promoting consumer education and information. The strong growth potential of the country has also made international players to look at the Indian insurance market. Moreover, saturation of insurance markets in many developed economies has made the Indian market more attractive for international insurance players This research report will help the client to analyze the leading-edge opportunities critical to the success of insurance industry in India. Based on this analysis, the report gives a future forecast of the market that is intended as a rough guide to the direction in which the market is likely to move.

Total life insurance premium in India is projected to grow Rs 1,230,000 Crore by 2010-11. •

Total non-life insurance premium is expected to increase at a CAGR of 25% for the period spanning from 2008-09 to 2010-11.

•

With the entry of several low-cost airlines, along with fleet expansion by existing ones and increasing corporate aircraft ownership, the Indian aviation insurance market is all set to boom in a big way in coming years.

•

Home insurance segment is set to achieve a 100% growth as financial institutions have made home insurance obligatory for housing loan approvals.

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•

Health insurance is poised to become the second largest business for non-life insurers after motor insurance in next three years.

•

A booming life insurance market has propelled the Indian life insurance agents into the ‘top 10 country list’ in terms of membership to the Million Dollar Round Table (MDRT) — an exclusive club for the highest performing life insurance agents.

COMPANY PROFILE Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance Company and Bajaj Finserv.

Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in the world,managing assets worth over a Trillion(Over INR 55,00,000 Crores).Allianz SE has over 115 years of financial experience and is present in over 70 countries around the world.

At Bajaj Allianz Life Insurance, customer delight is the guiding principle. Their business philosophy is to ensure excellent insurance and investment solutions by offering customized products, supported by the best technology.

VISION To be the first choice insurer for customers To be the preferred employer for staff in the insurance industry.

To be the number one insurer for creating shareholder value.

MISSION As a responsible, customer focused market leader, we will strive to understand the insurance needs of the consumers and translate it into affordable products that deliver value for money.

Accelerated Growth Karunya School of Management, Coimbatore 17

Fiscal Year

No. of policies sold

New Business in FY

2001-2002(6 mths)

21,37

Rs.

2002-2003

1,15,965

Rs. 63.3 cr.

2003-2004

1,86,443

Rs. 180 cr.

2004-2005

2,88,189

Rs. 857 cr.

2005-2006

7,81,685

Rs. 2,717 cr.

2006-2007

20,79,217

Rs. 4,302 cr.

2007-2008

37,44,742

Rs. 6,674 cr.

7 cr.

Bajaj Allianz General Insurance received the Insurance Regulatory and Development Authority (IRDA) certificate of Registration on 2nd May, 2001 to conduct General Insurance business (including Health Insurance business) in India. The Company has an authorized and paid up capital of Rs 110 crores. Bajaj Finserv Limited holds 74% and the remaining 26% is held by Allianz, SE. As on 31st March 2009, Bajaj Allianz General Insurance maintained its premier position in the industry by achieving growth as well as profitability. The company garnered a premium income of Rs. 2866 crore, achieving a growth of 11 % over the last year. Bajaj Allianz has made a profit before tax of Rs. 149.8 crore and has become the only private insurer to cross the Rs.100 crore mark in profit before tax in the last two years. The profit after tax was Rs.95 crores, which is also the highest by any private insurer. The company ranked second (after LIC) in number of policies sold in 2007-08, with total market share of 7.36%.

RESULTS FOR CURRENT FY TILL 31ST DECEMBER 2008 The Gross Written Premiums (GWP) for the nine months ended on 31st Dec 2008, is Rs 6726 crores as compared to Rs 5219 crores in the corresponding period of the previous year - growth of 29%. New Business premium for the nine months ended on 31st Dec 2008 is Rs. 3003 crores as compared to Rs. 3780 crores in the corresponding period of previous year.

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Commission on new business premium, which was 27% during nine months ended on 31st Dec 2007, came down to 20% during the current period.

Operating expenses came down to 20% of GWP for the current period of nine months ended on 31st Dec 2008 as compared to 26% for the corresponding period of previous year.

The Company posted a profit of Rs 364 lacs for the period ended 31st Dec 2008 as compared to a profit of Rs 5358 lacs in the corresponding period of the previous year. The policyholder surplus is Rs 15514 lacs (corresponding period of previous year Rs 18681 lacs) and the shareholders’ loss stands at Rs 15150 lacs (corresponding period of previous year: Rs 13323 lacs).

Number of policies underwritten during the nine months ended 31st Dec 2008 were 18,08,495 (corresponding period of the previous year 23,62,496). Policies in force as on 31 st Dec 2008 is around 70 lacs. The company ranked second (after LIC) in number of policies sold in 2007-08, with total market share of 7.36%.

The share capital (including share premium) is Rs. 1211 crores as on 31st December 2008. The solvency as on 31 st Dec 2008 stands at 261% (required solvency is 150%). During the period ended 31st Dec 2008, no additional capital has been infused. Despite challenging environment, the company has been able to not only reduce commission but also operating expenses. The solvency margin of the company continues to be very strong.

As on 31st Dec 2008, the Company employed on roll 22,129 staff as against 20,764 staff at 31st March 2008.The Company operates out of 1,138 offices as on 31 Dec 2008.

Karunya School of Management, Coimbatore 19

PRODUCTS PROFILE Unit Linked Plan ✔ New family gain ✔ New unit gain plus ✔ New unit gain premier Traditional plan ✔ Invest gain ✔ Cash gain ✔ Child gain Retirement Solutions ✔ Swarna visranthi ✔ New unit gain easy pension plus

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Health Plan ✔ Care first ✔ Health care Term Plan ✔ Risk care ✔ Term care

UNIT LINKED INSURANCE POLICY (ULIP)

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UNIT LINKED INSURANCE POLICY (ULIP) A unit linked insurance policy is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two. In other words, it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. In the event of the insured person's untimely death, his nominees would normally receive an amount that is the higher of the sum assured (insurance cover) or the value of the units (investments).However, there are some schemes in which the policyholder receives the sum assured plus the value of the investments.

Every insurance company has four to five ULIPs with varying investment options, charges and conditions for withdrawals and surrender. Moreover, schemes have been tailored to suit different customer profiles and, in that sense, offer a great deal of choice.

The advantage of ULIP is that since the investments are made for long periods, the chances of earning a decent return are high.

Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes while those who have an appetite for risk can opt for balanced or equity schemes. However, the charges paid in these schemes in terms of the entry load, administrative fees, underwriting fees,

Karunya School of Management, Coimbatore 22

buying and selling charges and asset management charges are fairly high and vary from insurer to insurer in the quantum as also in the manner in which they are charged.

Tax benefits The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows a a maximum of Rs. 1,00,000 premiums paid for taxable income below Rs 8,50,000 and Proceeds from ULIPs are tax-free under section 10(10D) unlike those from a mutual fund which attract short term capital gains tax.

Key features Premiums paid can be single, regular or variable. The payment period too can be regular or variable. The risk cover (insurance cover) can be increased or decreased.As in all insurance policies, the risk charge (mortality rate) varies with age. However, for an individual the risk charge is always based on the age of the policyholder in the year of commencement of the policy. These charges are normally deducted on a monthly basis from the unit value. For instance, if there is an increase in the value of units due to market conditions, the sum at risk (sum assured less the value of investments) reduces and so the risk charges are lower. The maturity benefit is not typically a fixed amount and the maturity period can be advanced (early withdrawal) or extended.

Investments can be made in gilt funds (government securities), balanced funds (part debt, part equity), money-market funds; growth funds (equities) or bonds (corporate bonds).

The policyholder can switch between schemes (for instance, balanced to debt or gilt to equity).

The investment risk is transferred to the policyholder.The maturity benefit is the net asset value of the units. The value would be high or low depending on the market conditions during the period of the policy and the performance of the fund manager.

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Thus there is no capital protection on maturity unless the scheme specially provides for it. There could be policies that allow the policyholder to remain invested beyond the maturity period in the event of the maturity value not being satisfactory.

POINTS TO REMEMBER ABOUT ULIP First-year charges: Usually, a minimum of 15 per cent. However, high premiums attract lower charges and vice versa. Charges can be as high as 70 per cent if the scheme affords a lot of flexibility. Subsequent charges: Usually lower than first-year charges. However, some insurers charge higher fees in the initial years and lower them significantly in the subsequent years.

Administration charges: This ranges between Rs 15 per month to Rs 60 per month and is levied by cancellation of units and also depends on the nature of the scheme.

Risk charges: The charges are broadly comparable across insurers.

Asset management fees: Fund management charges vary from 0.6 per cent to 0.75 per cent for a money market fund, and around 1.5 per cent for an equity-oriented scheme. Fund management expenses and the brokerage are built into the daily net asset value.

Switching charges: Some insurers allow four free switches in every year but link it to a minimum amount. Others allow just one free switch in each year and charge Rs 100 for every subsequent switch. Some insurers don't charge anything.

Top-ups: Usually attracts 1 per cent of the top-up amount. Top-up normally goes directly into your investment account (units) unless you specifically ask for an increase in the risk cover.

Surrender value of units: Insurers levy certain charges if the policy is surrendered prematurely.

This levy varies between insurers and could be around 75 per cent in the first year, 60 per cent in the second year, 40 per cent in the third year and nil after the fourth year.

Fund performance: You could check out the performance of similar schemes (balanced with balanced; equity with equity) across insurance companies.

Look at NAV performance over a period of at least two to three years. This can only give you some indication about the credibility of the fund manager because past performance is no

Karunya School of Management, Coimbatore 24

guarantee to future returns, especially in insurance products where the emphasis is on long-term performance (10 years or more).

Since insurance is a product, which entails a long-term commitment on the part of the insurer, it is important not to go only by the features or the cost advantages of schemes but by the parentage of the insurer as well.

Comparing schemes based on costs is a fairly complex exercise. As a rule, the higher the initial years' expenses the longer it takes for the policy to outperform its peers with low initial years' costs and slightly higher subsequent year expenses.

Retire unhurt Pension plans are essentially tailored to meet old age financial requirements. But there are certain advantages in joining a pension plan.

First of all, contribution to pension funds upto Rs 10,000 is eligible for tax deduction under section 80CCC. In other words, your pension contribution will get deducted from your taxable income.

So if you are in the top tax bracket, liable to pay to a 30.6 per cent tax, then your tax savings will be that much.

All life insurance companies offer pension products - both conventional and unit-linked. In both cases you pay a certain premium amount for a specified length of time.

Usually, the minimum entry age is 18 years and the maximum age is 60 years. You can choose to pay the premium for five to 30 years. When the policy matures, you receive one-third of the value of the accumulated amount as a lump-sum payment.

For the remaining, you can buy annuities either from the existing insurer or any other insurer.

While in a conventional scheme, your money is managed through the insurer's pooled investment account and you are entitled to bonuses every year, in a ULIP you receive the value of the investment in your individual account.

Karunya School of Management, Coimbatore 25

In a ULIP you have the flexibility to choose between a conservative scheme or an aggressive scheme with high allocation to equities. Pension policy imposes huge penalties for early termination.

HOW DOES ULIP WORK Sara is a thirty-year old who wants a product that will give him market-linked returns as well as a life cover. He wants to invest Rs 50,000 a year for 10 years in an equity-based scheme. Based on this premium, the sum assured works out to Rs 532,000, the exact amount of premium being Rs 50,032.

Based on the current NAV of the plan that Sara chooses to invest in, he is allotted units in the scheme. Then, units equivalent to the charges are deducted from his portfolio.

The charges in the first year include a 14 per cent sales charge, an administration charge (7 per cent for the first Rs 20,000 and 3 per cent for the remaining Rs 30,000) and underwriting charges, which are deducted monthly.

Besides, mortality charges or the charges for the life cover are also deducted. For the remaining nine years a 3.5 per cent sales charge and an administrative charge of 4 per cent (for the first Rs 20,000 and 2 per cent for the remaining Rs 30,000) are levied in addition to mortality charges.

Fund management fee of 1.5 per cent (equity) and brokerage are also charged. This cost is built into the calculation of net asset value.

On maturity - that is, after 10 years - Sara would receive the sum assured of Rs 532,000 or the market value of the units whichever is higher.

Assuming the growth rate in the market value of the units to be 6 per cent per annum Sara would receive Rs 581,500; assuming the growth rate in the market value of the units to be 10 per cent, Sara would receive Rs 7,24,400.

In case of Sara's untimely death at the end of the ninth year, his beneficiaries would receive the sum assured of Rs 532,000 or the market value of the units whichever is higher. Assuming the growth rate in the market value of units is 6 per cent per annum, the value of investment would be Rs 510,200.

However, his family will get Rs 532,000 as it is the sum assured.

Assuming a growth rate of 10 per cent per annum, the value of units at the end of the ninth year would be Rs 621,900. Hence, the beneficiaries would get Rs 621,900.

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ADVANTAGES OF ULIP •

Can easily rebalance your risk between equity and debt without any tax implications.

•

Best suited for medium risk taking individuals who wish to invest in equity and debt funds (at least 40% or higher exposure to debt). No additional tax burden for those investing mainly in debt unlike in MFs.

RISKS ASSOCIATED WITH ULIPS ULIPS as the name suggests are directly linked with the investments made by the insured.

Though he does not have a direct say in this but he does offer his choice in the form of investment.

With stock markets soaring high a few months back, ULIPs were offering a good rate of return, but now with a sudden downfall of the stocks, ULIPs are bound to become negative investments.

At present, a policy-holder cannot understand the growth of his investments vis-à-vis other funds in the market, since there is no benchmark to measure one fund against the other. Usually a policy-holder could ask his investment in a ULIP to be, for example, 55 per cent in equity and 45 per cent in debt. These components can be mixed according to his risk-taking ability. An investor, therefore, would have to look at quarterly statements, where the fund would be compared with benchmarks. However, this may not be a true representation of the NAV, as the ULIP could be a mix of debt, liquid and equity investments.

Karunya School of Management, Coimbatore 27

The reality is that most of the ULIPs take more than 5 years to break even. Policies where the costs are 65 per cent and upwards have not even recovered the principal despite the strongest bull market we have ever witnessed.

MUTUAL FUND

Karunya School of Management, Coimbatore 28

INTRODUCTION OF MUTUAL FUNDS: A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund.

Mutual funds are one of the best investments ever created because they are very cost efficient and very easy to invest in (you don't have to figure out which stocks or bonds to buy).

By pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification.

ACCORDING TO AMFI (ASSOCIATION OF MUTUAL FUND OF INDIA): A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them.

Karunya School of Management, Coimbatore 29

Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund.

CHARACTERISTICS OF A MUTUAL FUND:

•

Investors own the mutual fund.

•

Professional managers manage the affairs for a fee.

•

The funds are invested in a portfolio of marketable

•

Securities, reflecting the investment objective.

•

Value of the portfolio and investors’ holdings, alters with

•

Change in market value of investments.

ADVANTAGES OF MUTUAL FUNDS:

Karunya School of Management, Coimbatore 30

The advantages of investing in a Mutual Fund are: 1. Professional Management: You avail of the services of experienced and skilled professionals who are backed by a dedicated investment research team which analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

2. Diversification: Mutual Funds invest in a number of companies across a broad cross section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion.You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

3. Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

4. Return Potential: Over a medium to longterm, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

5. LowCosts: Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

6. Liquidity: In open-ended schemes, you can get your money back promptly at AssetValue (NAV) related prices from the Mutual Fund itself.With close-ended schemes, you can sell your units on a stock exchange at the prevailing market price or avail of the facility of repurchase through Mutual Funds at NAV related prices which some close-ended and interval schemes offer you periodically.

7. Transparency: You get regular information on the value of your investment in addition to

Karunya School of Management, Coimbatore 31

disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager’s investment strategy and outlook.

8. Flexibility: Through features such as Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP) and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

9. Choice of Schemes: Mutual Funds offer a variety of schemes to suit your varying needs over a lifetime.

10. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.The operations of Mutual Funds are regularly monitored by SEBI.

DISADVANTAGES OF MUTUAL FUNDS:

· No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio.

Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

· Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.

Karunya School of Management, Coimbatore 32

路 Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

路 Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

A measurement of an option position or premium in relation to the underlying instrument. In mutual fund also there is certain amount of risk-return factor associated according to the investment option these are as follows, RISK

RETURN

Equity

High

High

Balanced

Medium

Medium

Debt

Low

Low

TYPES OF MUTUAL FUNDS: I. Closed-end or Open-end Open-end Funds: An open-end fund is one that has units available for sale and repurchase at all time. An investor can buy or redeem units from the fund itself at a price based on the Net Asset Value (NAV) per unit.

Close-end Funds: A close ended fund makes a one-time sale of a fixed number of unit. It does not allow investors to buy or redeem units directly from the funds. However, to provide liquidity

Karunya School of Management, Coimbatore 33

to investors many closed-end funds get themselves listed on stock exchange. Funds do offer “buy-back of funds/units” thus offering another avenue for liquidity to closed-end fund investor.

II. Load vs. No Load: Marketing of a new mutual fund scheme involves initial expense.

These expenses may be recovered from the investors in different ways at different times. Three usual ways in which a fund’s sales expenses may be recovered from the investors are: 1. At the time of investor’s entry into the fund/scheme, by deducting a specific amount from his initial contribution: front-end or entry load.

2. By charging the fund/scheme with a fixed amount each year, during the stated number of years: deferred load.

3. At the time of the investor’s exit from the fund/scheme, by deducting a specific amount from the redemption proceeds payable to the investor: back end or exit load These charges made by the fund managers to the investors to cover distribution/sales/marketing expenses are often called “loads”. Funds that charge front-end, back-end or deferred loads are called load funds. Funds that make no such charges or loads for sales expenses are called no-load funds.

In India, SEBI has defined a “load” as the one-time fee payable by the investor to allow the fund to meet initial issue expenses including brokers’/agents’/distributors’ commissions, advertising and marketing expenses.

A load fund’s declared NAV does not include load charges

III. Tax-exempt vs. Non-Tax exempt Funds: Generally, when a fund invests in taxexempt securities, it is called a tax-exempt fund. In India, after the 1999 Union Government Budget, all of the dividend income received from any of the mutual funds is tax-free in the hands of the investors. However, funds other than Equity Funds have to pay a distribution tax, before distributing income to investors. In other words, equity mutual fund schemes are tax-exempt investment avenues, while other funds are taxable for distributable income.

Karunya School of Management, Coimbatore 34

Different types of mutual fund

Types of Mutual Fund: Once we have reviewed the fund classes, we are ready to discuss more specific fund types.

Funds are generally distinguished from each other by their investment objectives and types of securities they invest in.

A. Broad Fund Types by Nature of Investments Mutual funds may invest in equities, bonds or other fixed income securities, or short-term money market securities. So we have Equity, Bonds and Money Market Funds. All of them invest in financial assets. But there are funds that invest in physical assets. For example, we may have Gold or other Precious Metal Funds, or Real Estate Funds.

B. Broad Fund Types by Investment Objective Investors and hence the mutual funds pursue different objectives while investing. Thus, Growth Funds invest for medium to long term capital appreciation.

Income Funds invest to generate regular income, and less for capital appreciation.

Value Funds invest in equities that are considered under-valued today, whose value will be unlocked in the future.

C. Broad Fund Types by Risk Profile The nature of a fund’s portfolio and its investment objective imply different levels of risk undertaken. Funds are therefore often grouped in order of risk. Thus, Equity Funds have a greater risk of capital loss than a Debt Fund that seeks to protect the capital while looking for

Karunya School of Management, Coimbatore 35

income. Money Market Funds are exposed to less risk than even the For internal use by Training Department of Prudential ICICI Mutual Fund Bond Funds, since they invest in short-term fixed income securities, as compared to longer-term portfolios of Bond Funds.

Money Market Funds: Lowest rung in the order of risk level, Money Market Funds invest in securities of a short-term nature, which generally means securities of less than one-year maturity.

Gilt Funds: Gilts are government securities with medium to long-term maturities, typically of over one year (under one-year instruments being money market securities).

Debt Funds (or Income Funds): Next in the order of risk level, we have the general category Debt Funds. Debt funds invest in debt instruments issued not only by governments, but also by private companies, banks and financial institutions and other entities such as infrastructure companies/utilities.

Diversifies Debt Funds: A debt fund that invests in all available types of debt securities, issued by entities across all industries and sectors is a properly diversified debt fund. A diversified debt fund is less risky than a narrow-focus fund that invests in debt securities of a particular sector or industry.

Focused Debt Funds: Some debt funds have a narrow focus, with less diversification in its investment. Examples include sector, specialized and offshore debt funds. Other examples of focused funds include those that invest only in Corporate Debentures and Bonds or only in Tax Free Infrastructure or Municipal Bonds.

High yield Debt Funds: There are funds which seek to obtain higher interest rates by investing in debt instruments that are considered “below investment grade�. e.g. Junk Bond Funds.

Assured Return Funds – an Indian Variant: The SEBI permits only those funds whose sponsors have adequate net-worth to offer assurance of return. For e.g. MIPs. Investors have some lock-in period.

Karunya School of Management, Coimbatore 36

Fixed Term Plan Series – Another Indian Variant: These are essentially closed-end. These plans do not generally offer guaranteed returns. This scheme is for short-term investors who otherwise place money as fixed term bank deposits or inter corporate bonds.

Equity Fund: As investors move from Debt Fund category to Equity Funds, they face increased risk level.

•

No guarantee returns

•

High potential for growth of capital

Types of Equity Fund a) Aggressive Growth Fund •

Maximum capital appreciation

•

Invests in less researched or speculative shares.

•

Very volatile & riskier.

b) Growth Fund •

Growth fund invest in companies whose earnings are expected to

•

Rise above average rate. e.g. Technology Fund

•

Capital appreciation in 3 – 5 years

•

Less volatile then aggressive growth fund.

c) Specialty Fund They invest in companies that meet predefined criteria. i) Sector Funds •

Technology Fund

Karunya School of Management, Coimbatore 37

•

Pharmaceutical Fund

•

FMCG Fund

ii) Offshore Funds Invest in equities in one or more foreign countries. iii) Small-Cap equity Funds Invest in shares of companies with relative lower market capital. d) Diversified Equity Funds A fund that seeks to invest only in equities, except for a very small portion in liquid money market securities, bur is not focused on any one or few sectors or shares, may be termed a diversified equity fund. While exposed to all equity price risks, diversified equity funds seek to reduce the sector or stock specific risks through diversification. i) Equity Linked Savings Schemes: An Indian Variant Investment in these schemes entitles the investor to claim an income tax rebate, but usually has a lock-in period before the end of which funds cannot be withdrawn. e) Equity Index Funds An index fund tracks the performance of a specific stock market index. The objective is to match the performance of the stock market by tracking an index that represents the overall market. The funds invest in share that constitute the index and in the same proportion on the index. f) Value Funds Value Funds try to seek out fundamentally sound companies whose shares are currently underprices in the market. Value Funds will add only those shares to their portfolios that are selling at low price-earnings ratios, low market to book value ratios and are undervalued by other yardsticks. Fund concentrate on future growth prospect having good potential.

Karunya School of Management, Coimbatore 38

g) Equity Income Funds There are equity funds that can be designed to give the investor a high level of current income along with some steady capital appreciation, investing mainly in shares of companies with high dividend yields.

•

Hybrid Funds – Quasi Equity/Quasi Debt: Many mutual funds mix these (money market, debt and equity) different types of securities in their portfolios. Such funds are termed “hybrid funds” as they have a dual equity/bond focus.

•

Commodity Funds: While all of the debt/equity/money market funds invest in financial assets, the mutual fund vehicle is suited for investment in any other- for examplesphysical assets.

•

Real Estate Funds: Specialized Real Estate Funds would invest in Real Estate directly, or may fund real estate developers, or lend to them, or buy shares of housing finance companies or may even buy their securities assets.

Following are the different products and services Offered by Mutual Fund Companies •

Open ended schemes

•

Close ended schemes

•

Growth/Equity oriented Schemes

•

Income/Debt oriented Schemes

•

Balanced Funds

•

Money market or liquid funds

Karunya School of Management, Coimbatore 39

•

Gilt Funds

•

Index Funds

•

Exchange Traded Funds

•

Sectoral Funds

•

Thematic Funds

•

Commodity Funds

•

Real Estate Funds

•

Tax Saving Funds

•

Hybrid Funds

There are several ways for investment and disinvestments in mutual funds such as : •

Systematic Investment Plans (SIPs)

•

Value Averaging

•

Systematic Transfer Plans (STPs)

•

Systematic Withdrawal Plans(SWPs)

•

Automatic Reinvestment Plans.

•

Open ended fund In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related prices, from the fund itself.

The corpus of open-ended funds, therefore, changes every day.

Karunya School of Management, Coimbatore 40

•

Close ended fund A closed-end fund offers units for sale only in the NFO. It is then listed in the market.

Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end funds sell at a discount to NAV. The corpus of a closed-end fund remains unchanged.

•

Growth fund Provide capital appreciation over the medium to long-term • Investor who does not require periodic income distribution can choose the option, where the incomes earned are retained in the investment portfolio and allowed to grow, rather than being distributed to investors.

• Investors with longer investment horizons and limited requirements for income choose this option.

• The return to the investor who chooses a growth option is the rate at which his initial investment has grown over a period for which he has invested in the fund.

• The investor choosing this option will vary the NAV with the value of the investments portfolio , while the no. of units held with remains constant.

•

Income fund Provide regular and steady income to investor

•

Balanced fund Provide both growth and regular income.

•

Money market fund Provide easy liquidity, regular income and preserve the income

•

Tax saving scheme offer tax rebeats to the under specific provisions of the Indian income tax laws Investment made under some schemes are allowed as deduction U/S 88 of the income tax act .

•

Automatic Reinvestment Plans

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Reinvestment of amount of dividend made by fund in the same fund.

In this option, the no. of units held by the investor will change with every reinvestment.

The value of units will be similar to that under the dividend option There are four types of plans as follows •

Lump sum Investment It is one time investment..

Investors can invest particular amount one time for fixed time of period.

•

Systematic Investment Plans( SIP) – For regular investment

SIP is investing a fixed sum periodically in a disciplined manner for long term.

It gives benefit of Rupee Cost averaging.

In SIP monthly minimum Rs.500 or Rs.100 are invested.

Interest is calculating compoundly.

Many SIP gives insurance benefits.

VAP is modified version of SIP. It is Voluntary Accumulation Plan. It allows the investor flexibility with respect to the amount and frequency of investment.

In VAP, investor has to impose voluntary self discipline.

•

Systematic Withdrawal Plan ( SWP) – For regular income The lump sum amount is invested for one time and then fixed percent amount is withdraw monthly.

Remaining amount will grow continuously.

This plan is suitable for retired person, because it gives regular income.

•

Systematic Transfer Plan ( STP) – Transfer on a periodic basis a specified amount from one scheme to another within the same fund family.

It gives option to the investor if the current fund performance in not satisfactory.

•

Dividend option

Karunya School of Management, Coimbatore 42

•

Investors will receive dividends from the mutual fund , as an and when dividends are declared.

•

Dividends are paid in the form of warrants or are directly credited to the investor’s bank accounts.

•

In normal dividend plan , periodicity of dividends is left to the fund managers, the timing of the dividend payout is decided by fund manager.

•

Mutual funds provide the option of receiving dividends at pre-determined frequencies,wich can vary from daily,weekly,monthly,quarterly,half-yearly and annual.

Investors can choose the frequency of dividend distribution that suits their requirements.

•

Investors choosing this option have a fixed no. of units invested in the fund and earned incomes on this investment.

•

The NAV of this investors holding will vary with changes in the value of portfolio and the impact of the proportion of income earned by the fund to what is actually distributed as dividend.

REGULATORS IN INDIA •

SEBI - The capital markets regulators also regulates the mutual funds in India. SEBI requires all mutual funds to be registered with them. SEBI issues guidelines for all mutual funds operations - investment, accounts, expenses etc.

•

RBI as supervisor of banks owned mutual funds - As banks in India came under the regulatory jurisdiction of RBI, bank owned funds to be under supervision of RBI and SEBI.

•

RBI as supervisor of Money Market Mutual Funds - RBI has supervisory responsibility over all entities that operate in the money markets. Hence in the past Money Market Mutual Funds scheme of Mutual funds had to be abide by policies laid down by RBI.

Recently, it has been decided that Money Market Mutual Funds of registered mutual funds will be regulated by SEBI through SEBI (Mutual Fund) Regulations 1996.

Karunya School of Management, Coimbatore 43

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

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

However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs

1. Mode of investment/ investment amounts Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity.

This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter.

Karunya School of Management, Coimbatore 44

ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure.

For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). The freedom to modify premium payments at one's onvenience clearly gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to pre-determined upper limits as prescribed by the Securities and Exchange Board of India.

For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated.

3. Portfolio disclosure

Karunya School of Management, Coimbatore 45

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

There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our interactions with leading insurers we came across divergent views on this issue.

While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand.

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

4. Flexibility in altering the asset allocation As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load.

On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches).

Karunya School of Management, Coimbatore 46

Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when the ULIP investor's equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan.

5. Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds good, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits.

Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain is taxed at the investor's marginal tax rate.

Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and make informed decisions.

Karunya School of Management, Coimbatore 47

REVIEW OF LITERATURE

Mr.Madhu T, made a study on ‘ULIPs hold edge over mutual funds’.The findings shows that distributors would push unit linked insurance plans (ULIPs) to earn better commission . ULIPs offer attractive frontend commissions to agents. However, independent financial advisors believe that though there is a possibility of some distributors favoring ULIPs in the short term, the new directive would be beneficial for both the industry and investors in the long run.(Mr.Madhu T, The Economic Times,June2009).

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Mr.Deepak Shenoy ,in his article ‘Comparing ULIP returns to Mutual Funds’, he reveals that, over the last three years, their growth mutual fund has given better returns than the "MAXIMISER" option of their ULIPs.(Deepak Shenoy, The Indian Investor’s Blog, August 2006).

Mr.Murthaza and Sony, in their article ‘An Overview on ULIP’, This article is an initiative from Bajaj Allianz to create better understanding of ULIPs and its benefits so that investors can avail maximum returns from their investments.

Mr.Bernz Jayma P, made a study on ‘Mutual Fund disadvantages’. He suggested that ,’If you're new to stock market investing you may have heard that mutual funds would be a good way for you to get started. That's actually good advice, but mutual funds have their own pitfalls to watch out for.’

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DATA INTERPRETATION AND ANALYSIS

(A) Gender:

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Gender Cumulative Frequency Valid

Percent

Valid Percent

Percent

Male

37

74.0

74.0

74.0

Female

13

26.0

26.0

100.0

Total

50

100.0

100.0

INTERPRETATION :

Karunya School of Management, Coimbatore 51

The above graph shows that , out of 50 customers, 74% of the respondents are male policy holders and the rest 26% are female policy holders.

(B) Marital Status: Marital Cumulative Frequency Valid

Percent

Valid Percent

Percent

Married

33

66.0

66.0

66.0

Unmarried

17

34.0

34.0

100.0

Total

50

100.0

100.0

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INTERPRETATION : From a sample of 50 customers, 66% of the policy holders are unmarried and the rest 34% of the policy holders are married.

(C) Age:

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Age Cumulative Frequency Valid

Percent

Valid Percent

Percent

20-30

6

12.0

12.0

12.0

30-40

14

28.0

28.0

40.0

40-50

17

34.0

34.0

74.0

50-60

11

22.0

22.0

96.0

60-70

2

4.0

4.0

100.0

Total

50

100.0

100.0

INTERPRETATION :

Karunya School of Management, Coimbatore 54

The graph shows that majority of the sample respondents were in the age group of 40-50 yrs ie,34%, 12% were in the age group of 20-30 yrs & 28% of them were 30-40 yrs, 22% were in the age group of 50-60 yrs and 4% were in the age group of 60-70 yrs.

(D) Occupation: Occupation Cumulative Frequency Valid

Percent

Valid Percent

Percent

Government

18

36.0

36.0

36.0

Private service

14

28.0

28.0

64.0

Business

11

22.0

22.0

86.0

NRIs

3

6.0

6.0

92.0

Others

4

8.0

8.0

100.0

50

100.0

100.0

Total

Karunya School of Management, Coimbatore 55

INTERPRETATION : The graph shows that majority of the policy holders are working in the Government sector i.e.36% , 28% of them are engaged in Private service, 22% of them are business field, 6% of them are NRIs and 8% of them are engaged other works.

(E) Annual Income:

Karunya School of Management, Coimbatore 56

Annual income Cumulative Frequency Valid

Percent

Valid Percent

Percent

Below 2 lakhs

19

38.0

38.0

38.0

2-4 lakhs

23

46.0

46.0

84.0

4-6 lakhs

6

12.0

12.0

96.0

6-8 lakhs

2

4.0

4.0

100.0

50

100.0

100.0

Total

INTERPRETATION :

Karunya School of Management, Coimbatore 57

The graph shows that 46% of the policy holders get a salary of 2-4 lakhs, 38% of the policy holders get a salary of below 2 lakhs, 12% of the policy holders get a salary of 4-6 lakhs, 3 of the policy holders get a salary below 2 lakhs and 4% of them above 6-8 lakhs.

1. Sources that helps you in making investment decision.

Sources that helps you in making the investment decisions.

Cumulative Frequency Valid

Percent

Valid Percent

Percent

Financial journal

5

10.0

10.0

10.0

Television

2

4.0

4.0

14.0

Brokers/Agent

27

54.0

54.0

68.0

Friends

13

26.0

26.0

94.0

3

6.0

6.0

100.0

50

100.0

100.0

Consultants Total

Karunya School of Management, Coimbatore 58

INTERPRETATION : From the sample of 50 customers, 54% of the customers are strongly agree that the agents or brokers helps them to make investment decision, 26% of the customers point out their friends take part in the investment decision. And 10% customers reveal that the financial journals helps them, Remaining 6% is from consultants, and 4% selects television as the source.

2. Factors that influence your investment decision in a particular company.

Karunya School of Management, Coimbatore 59

Factors that influence your investment decisions in a particular company.

Cumulative Frequency Valid

Attractive schemes Tax benefits High reputation Rate of return Variety of products Total

Percent

Valid Percent

Percent

2

4.0

4.0

4.0

27

54.0

54.0

58.0

3

6.0

6.0

64.0

14

28.0

28.0

92.0

4

8.0

8.0

100.0

50

100.0

100.0

INTERPRETATION : 54% customers agree that the tax benefit is influence them to buy policy ,28% looks the rate of return what they will earn, variety of products from the company attracts 8%

Karunya School of Management, Coimbatore 60

customers, and high reputation of the company attracts 6% of the customers, and remaining 4% pointing out the attractive schemes.

3. You generally like to invest money in.

You generally like to invest money.

Cumulative Frequency Valid

Insurance

Percent

Valid Percent

Percent

13

26.0

26.0

26.0

Stock market

1

2.0

2.0

28.0

Mutual fund

6

12.0

12.0

40.0

Bank deposit

28

56.0

56.0

96.0

2

4.0

4.0

100.0

50

100.0

100.0

Both insurance and mutual fund Total

Karunya School of Management, Coimbatore 61

INTERPRETATION : From a sample of 50 customers, 56% of the customers invest money in bank deposit, 26% in insurance sector,12% in mutual fund, then 4% in both insurance and mutual fund,and remaining 2% in stock market.

4. According to you who among the following life insurance company is best.

Karunya School of Management, Coimbatore 62

According to you who among the following life insurance companies is best.

Cumulative Frequency Valid

Bajaj Allianz

Percent

Valid Percent

Percent

27

54.0

54.0

54.0

HDFC Standard life

5

10.0

10.0

64.0

Tata AIG

4

8.0

8.0

72.0

Aviva Life

3

6.0

6.0

78.0

SBI Life

11

22.0

22.0

100.0

Total

50

100.0

100.0

INTERPRETATION :

Karunya School of Management, Coimbatore 63

From a sample of 50 customers,54% customers select Bajaj Allianz is the best insurance company, and 22% customers choose SBI Life,10%

select HDFC,8% for Tata AIG and

remaining 6% stands for Aviva life insurance company.

5. How would you rate our products.

How would you rate our products.

Cumulative Frequency Valid

Excellent

Percent

Valid Percent

Percent

2

4.0

4.0

4.0

37

74.0

74.0

78.0

Fair

9

18.0

18.0

96.0

Poor

2

4.0

4.0

100.0

Total

50

100.0

100.0

Good

Karunya School of Management, Coimbatore 64

INTERPRETATION : From a sample of 50 customers,74% customers thinks that the products offered by Bajaj Allianz Life insurance co. is good,4% thinks its excellent,18% of them select Bajaj Allianz products are fair, and remaining 4% not satisfied with our products.

6. I would like to invest money in ULIP.

Karunya School of Management, Coimbatore 65

I would like to invest money in ULIP. Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

2

4.0

4.0

4.0

Agree

33

66.0

66.0

70.0

Neutral

8

16.0

16.0

86.0

Disagree

5

10.0

10.0

96.0

Strongly disagree

2

4.0

4.0

100.0

50

100.0

100.0

Total

INTERPRETATION :

Karunya School of Management, Coimbatore 66

From a sample of 50 customers, 66% agree, 4% of them strongly supporting that fact, and 16% has no opinion about it. And 4% strongly disagreed, remaining 10% also disagree with investment in ULIP.

7. Reason for choosing ULIPs because of insurance coverage.

Reason for choosing ULIPs because of insurance coverage.

Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

14

28.0

28.0

28.0

Agree

32

64.0

64.0

92.0

Neutral

2

4.0

4.0

96.0

Disagree

2

4.0

4.0

100.0

50

100.0

100.0

Total

Karunya School of Management, Coimbatore 67

INTERPRETATION : From a sample of 50 customers, 64% of the customers agree, ,28% of them strongly support it,4% customers didn’t say anything, and remaining 4% disagree with that fact. So we can see that most of the Customers choose ULIP because of insurance coverage.

8. I would like to invest money in Mutual Funds.

Karunya School of Management, Coimbatore 68

I would like to invest money in mutual funds.

Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

3

6.0

6.0

6.0

Agree

13

26.0

26.0

32.0

Neutral

14

28.0

28.0

60.0

Dsagree

18

36.0

36.0

96.0

2

4.0

4.0

100.0

50

100.0

100.0

Strongly disagree Total

INTERPRETATION :

Karunya School of Management, Coimbatore 69

From a sample of 50 customers,26% of the customers agree with that fact,6% of the customers strongly support it,and 28% customers have no idea about it.And remaining 10% disagreed,out of this 10%, 4% strongly disagreed with it.

9. Mutual funds are more risky than ULIP products.

Mutual funds are more risky than ULIP products.

Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

17

34.0

34.0

34.0

Agree

27

54.0

54.0

88.0

Neutral

4

8.0

8.0

96.0

disagree

2

4.0

4.0

100.0

50

100.0

100.0

Total

Karunya School of Management, Coimbatore 70

INTERPRETATION : From a sample of 50 customers,54% of the customers thinks that mutual funds are more risky than ULIP products,34% strongly agree with this statement.8% customers have no opinion about it,and remaining 4% disagree with it.

10. ULIPs have advantage over Mutual funds.

Karunya School of Management, Coimbatore 71

ulip has advantage over mutual funds.

Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

12

24.0

24.0

24.0

Agree

31

62.0

62.0

86.0

Neutral

5

10.0

10.0

96.0

Disagree

2

4.0

4.0

100.0

50

100.0

100.0

Total

INTERPRETATION :

Karunya School of Management, Coimbatore 72

62% of the customers agree with ULIP have advantage over mutual fund statement.24% customers strongly agree with this fact. And 4% of customers not supporting the statement. And remaining 10% have no opinion about it.

11. Do you think the safety factor is important in your investment in ULIP. Safety Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

4

8.0

8.0

8.0

Agree

26

52.0

52.0

60.0

Neutral

2

4.0

4.0

64.0

15

30.0

30.0

94.0

3

6.0

6.0

100.0

50

100.0

100.0

Disagree Strongly disagree Total

Karunya School of Management, Coimbatore 73

INTERPRETATION : From a sample of 50 customers,52% customers agree,8% strongly agree,30% customers were disagree with that fact,6% strongly disagree, and remaining 4% have no opinion about safety factor is important in the investment of ULIP.

12. Do you think the Liquidity factor is important in your investment in ULIP.

Karunya School of Management, Coimbatore 74

Liquidity Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

3

6.0

6.0

6.0

Agree

5

10.0

10.0

16.0

Neutral

5

10.0

10.0

26.0

30

60.0

60.0

86.0

7

14.0

14.0

100.0

50

100.0

100.0

Disagree Strongly disagree Total

INTERPRETATION :

Karunya School of Management, Coimbatore 75

From a sample of 50 customers, majority of the customers disagree i.e. 60%, 14% strongly disagree with that fact. And 6% strongly agree,10% agree,and remaining 10% neither agree nor disagree with that statement.

13. Do you think the Rate of return factor is important in your investment in ULIP. Rate of return Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

6

12.0

12.0

12.0

Agree

21

42.0

42.0

54.0

Neutral

3

6.0

6.0

60.0

12

24.0

24.0

84.0

8

16.0

16.0

100.0

50

100.0

100.0

Disagree Strongly disagree Total

Karunya School of Management, Coimbatore 76

INTERPRETATION : From a sample of 50 customers, majority of the customers agree i.e. 42%, 12% strongly agree with that fact. And 24% disagree,16% strongly disagree, and remaining 6% neither agree nor disagree with that statement

14. Do you think the Tax savings is influence your investment decision in ULIP.

Karunya School of Management, Coimbatore 77

Tax savings Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

6

12.0

12.0

12.0

Agree

21

42.0

42.0

54.0

Neutral

5

10.0

10.0

64.0

16

32.0

32.0

96.0

2

4.0

4.0

100.0

50

100.0

100.0

Disagree Strongly disagree Total

INTERPRETATION :

Karunya School of Management, Coimbatore 78

From a sample of 50 customers, majority of the customers agree i.e. 42%, 12% strongly agree with that fact. And 32% disagree,4% strongly disagree, and remaining 10% neither agree nor disagree with that statement

15. Past scheme’s performance influence your investment decision in ULIP. past scheme's performance Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

8

16.0

16.0

16.0

Agree

8

16.0

16.0

32.0

Neutral

7

14.0

14.0

46.0

23

46.0

46.0

92.0

4

8.0

8.0

100.0

50

100.0

100.0

Disagree Strongly disagree Total

Karunya School of Management, Coimbatore 79

INTERPRETATION : From a sample of 50 customers, majority of the customers disagree i.e. 46%, 8% strongly disagree with that fact. And 16% strongly agree,16% agree, and remaining 14% neither agree nor disagree with that statement

16. Advertisement influence the investment decision in ULIP.

Karunya School of Management, Coimbatore 80

Advertisement Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

9

18.0

18.0

18.0

Agree

11

22.0

22.0

40.0

Neutral

19

38.0

38.0

78.0

Disagree

5

10.0

10.0

88.0

Strongly disagree

6

12.0

12.0

100.0

50

100.0

100.0

Total

INTERPRETATION :

Karunya School of Management, Coimbatore 81

From a sample of 50 customers, 22%agree, 18% strongly agree with that fact. And 10% disagree,12% strongly disagree, and remaining 38% neither agree nor disagree with that statement.

17. Do you think the safety factor is important in your investment in mutual fund.

Safety Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

2

4.0

4.0

4.0

Agree

4

8.0

8.0

12.0

Neutral

8

16.0

16.0

28.0

30

60.0

60.0

88.0

6

12.0

12.0

100.0

50

100.0

100.0

Disagree Strongly disagree Total

Karunya School of Management, Coimbatore 82

INTERPRETATION : From a sample of 50 customers,8% customers agree,4% strongly agree,60% customers were disagree with that fact 12% strongly disagree, and remaining 16% have no opinion about safety factor is important in the investment of mutual fund.

18. Do you think the Liquidity factor is important in your investment in mutual fund.

Karunya School of Management, Coimbatore 83

Liquidity Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

7

14.0

14.0

14.0

Agree

19

38.0

38.0

52.0

Neutral

15

30.0

30.0

82.0

Disagree

6

12.0

12.0

94.0

Strongly disagree

3

6.0

6.0

100.0

50

100.0

100.0

Total

INTERPRETATION :

Karunya School of Management, Coimbatore 84

From a sample of 50 customers, majority of the customers agree i.e. 38%, 14% strongly agree with that fact. And 12% disagree,6% strongly disagree, and remaining 30% neither agree nor disagree with that statement.

19. Do you think the Rate of return factor is important in your investment in mutual fund.

Rate of return Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

2

4.0

4.0

4.0

Agree

7

14.0

14.0

18.0

Neutral

21

42.0

42.0

60.0

Disagree

15

30.0

30.0

90.0

5

10.0

10.0

100.0

50

100.0

100.0

Strongly disagree Total

Karunya School of Management, Coimbatore 85

INTERPRETATION : From a sample of 50 customers, 30% disagree, 10% strongly disagree with that fact. And 14% agree,4% strongly agree, and remaining 42% neither agree nor disagree with that statement.

20. Do you think the Tax savings is influence your investment decision in mutual fund.

Karunya School of Management, Coimbatore 86

Tax savings Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

3

6.0

6.0

6.0

Agree

6

12.0

12.0

18.0

Neutral

23

46.0

46.0

64.0

Disagree

12

24.0

24.0

88.0

6

12.0

12.0

100.0

50

100.0

100.0

Strongly disagree Total

INTERPRETATION :

Karunya School of Management, Coimbatore 87

From a sample of 50 customers, 24% disagree, 12% strongly disagree with that fact. And 12% agree,6% strongly agree, and remaining 46% neither agree nor disagree with that statement.

21. Past scheme’s performance influence your investment decision in mutual fund. past scheme's performance Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

6

12.0

12.0

12.0

Agree

22

44.0

44.0

56.0

Neutral

15

30.0

30.0

86.0

7

14.0

14.0

100.0

50

100.0

100.0

Disagree Total

Karunya School of Management, Coimbatore 88

INTERPRETATION : From a sample of 50 customers, 44% agree, 12% strongly agree with that fact. And 14% disagree, and remaining 30% neither agree nor disagree with that statement.

22. Advertisement influence the investment decision in mutual fund.

Karunya School of Management, Coimbatore 89

Advertisement Cumulative Frequency Valid

Strongly agree

Percent

Valid Percent

Percent

4

8.0

8.0

8.0

Agree

16

32.0

32.0

40.0

Neutral

24

48.0

48.0

88.0

Disagree

4

8.0

8.0

96.0

Strongly disagree

2

4.0

4.0

100.0

50

100.0

100.0

Total

INTERPRETATION : From a sample of 50 customers, 8% strongly agree,32% agree with that fact. And 8% strongly disagree,4% disagree, and remaining 24% neither agree nor disagree with that statement.

Karunya School of Management, Coimbatore 90

23. I would like to reinvest my funds in the same company again.

Reinvestment in the same company again Cumulative Frequency Valid

Percent

Valid Percent

Percent

Strongly agree

23

46.0

46.0

46.0

Agree

15

30.0

30.0

76.0

Neutral

6

12.0

12.0

88.0

Disagree

4

8.0

8.0

96.0

Strongly disagree

2

4.0

4.0

100.0

50

100.0

100.0

Total

Karunya School of Management, Coimbatore 91

INTERPRETATION : 46% of the customers express their satisfaction level with Bajaj Allianz service. They Strongly agree with the statement, 30% customers also agree with it. And 12% have neutral situation. And remaining 12% not satisfied with Bajaj Allianz.

HYPOTHESIS-1 H0: There is no relationship between investment of ULIP and Insurance coverage.

H1: There is relationship between investment of ULIP and insurance coverage.

CORRELATIONS

Correlations Reason for choosing ULIPs

I would like to invest money in ULIP.

Pearson Correlation

because of insurance

because of

invest money in

insurance

ULIP.

coverage.

1

Sig. (2-tailed) N

Reason for choosing ULIPs

I would like to

Pearson Correlation Sig. (2-tailed)

.729** .000

50

50

.729**

1

.000

coverage.

N

50

50

**. Correlation is significant at the 0.01 level (2-tailed).

Karunya School of Management, Coimbatore 92

INTERPRETATION:

The above table shows that the reason for choosing ULIPs because of insurance coverage is 0.000 which shows that there is a relationship between investment of ULIP and insurance coverage.We can choose alternate hypothesis because the significant value is less than 0.005.Hence it is very clear that most of the customers choosing ULIP product because which provide insurance coverage over their investment. So we can conclude that most of the customers prefer ULIP products than Mutual funds because of insurance coverage.

HYPOTHESIS-2 H0: There is no relationship between the investment pattern and annual income of the customers.

H1: There is a relationship between the investment pattern and annual income of the customers.

T-Test

Group Statistics Annuaincome I would like to invest money in ULIP. I would like to invest money in mutual funds.

Below 2 lakhs 6-8 lakhs Below 2 lakhs 6-8 lakhs

N

Mean

Std. Deviation

Std. Error Mean

19

2.26

.806

.185

2

2.00

.000

.000

19

3.37

.955

.219

2

4.00

.000

.000

Karunya School of Management, Coimbatore 93

Independent Samples Test Levene's Test for Equality of

t-test for Equality

Variances

of Means

F I would like to invest money

Equal variances assumed

Sig. 1.428

t .247

.451

in ULIP. Equal variances not assumed I would like to invest money

1.424

Equal variances assumed

3.956

.061

-.914

in mutual funds.

Equal variances not assumed

-2.882

Independent Samples Test t-test for Equality of Means

df I would like to invest money

Equal variances assumed

Sig. (2-tailed)

Mean Difference

19

.657

.263

18.000

.172

.263

19

.372

-.632

18.000

.010

-.632

in ULIP. Equal variances not assumed I would like to invest money

Equal variances assumed

in mutual funds.

Equal variances not assumed

Karunya School of Management, Coimbatore 94

INTERPRETATION:

The above table shows the significance value of the relationship between investment pattern and annual income is 0.247 for ULIP and 0.061 for Mutual Funds.Which shows that there is no relationship between the investment pattern and annual income level of the customers.We can choose Null hypothesis because the significant value is greater than 0.005.Hence it is very clear that the income level does not take part in the investment decision.It may be change the premium of the policy,but not the decision.

FINDINGS AND SUGGESTIONS After survey there are some findings and suggestions as follows. ✔ As insurance sector is growing rapidly so most of the life insurance players are selling

ULIP plans. And the awareness about ULIP is growing most of the people knows the ULIP of life insurance. Since last 4-5 years the returns provided by ULIP were very good so people tend more towords ULIP ✔ Middle class people who are interested in investment but they are not aware of such

options so more awareness should be there, as main target customer are the middle class peoples. ✔ While investing any insurance company customer prefers for good branded company

Bajaj is India’s one of the most famous and richest family. And second preference is

Karunya School of Management, Coimbatore 95

given to SBI life as many people perceive that SBI Life is a govt. owned company so people want security for their investment. ✔ As now till date people in India don’t wanted to invest in share market because then were

thinking that it is a bad thing but as the awareness about Mutual fund is increasing as more and more private players are entering in the market. So awareness about MF is not very good and it can be improved. ✔ While survey I found that many all customers had already invested in ULIP and Mutual

Fund some people had invested in both options. 12% of people had invested in Mutual Fund and 26% people had invested in ULIP and 4% people had invested in both the options. ✔ While investing in mutual fund 44% of the customers looks their return,42% customers

observe the scheme’s performance in past years. ✔ First reason or preference that why an investor is interested in ULIP is Investment Purpose, and second is to its returns and after that they investing because they are getting the tax benefit. Then again there are some people who are investing for pension planning and security. ✔ In future people will be more preferring to the security of their money means they want a

secured option which should provide good returns. As ULIP are the option in which you can have the security also and good returns. The second choice of the investors is return of their money. ✔ 54% of people given Best rating to the Bajaj Allianz Life Insurance ULIP, so from this

we can analyze that Bajaj Allianz Life Insurance is doing good but it is having good potential in Market. To improve its market share they should improve the awareness level of the common people. ✔ Innovative Products and good brand name are the main success factor for Bajaj Allianz

Life Insurance. 6% customers are attracted due to the high reputation of the company. So if BALIC wants to penetrate its market share they should improve the marketing strategy, improving the distribution channel etc.

Karunya School of Management, Coimbatore 96

CONCLUSION AND/OR RECOMMENDATIONS From above analysis and survey we can conclude as follows ✔ Awareness of ULIP is increasing as more number of private players are entering in life insurance industry. ✔ Mutual Fund is also getting more and more famous in Indian market as many private companies innovating new funds as the investors demand.

Karunya School of Management, Coimbatore 97

✔ ULIP differentiate from Mutual fund in respect of Insurance cover. ✔ Investors in Bajaj Allianz Life ULIP will be getting the advantage of life insurance cover. ✔ People are turning towords the ULIP as a good investment option but as ULIP is in its starting phase so customers are preferring only big brands. ✔ Mutual fund is having good growth but many customers from rural areas don’t have any knowledge about Mutual fund.They think it is very risky. ✔ Even investors from cities like Changanacherry don’t have that much of Knowledge about fund selection they all are depend on Brokers. ✔ People in Changanacherry are investing in only good branded companies as they don’t believe on other financial companies for taking ULIP. ✔ There is a need for insurers to undertake a demand audit in order to understand what the policyholder wants and needs. ✔ Deriving the right feedback from customers and bringing out innovative products which cater to customer demands will go a long way in tapping the market potential of the insurance and Mutual fund sector. ✔ For Bajaj Allianz Life Insurance They should go for creating more awareness about its

ULIP as now also people are just investing because Bajaj is India’s most Known and Favorite brand in past. ✔ Bajaj Allianz should go for innovating more and more products and improving the

distribution channels as per the area of sales.

BIBLIOGRAPHY

Karunya School of Management, Coimbatore 98

REFERENCE:

Research Methodology, C.R Kothari, 2nd edition

1)

2) Outlook Money, 15 May 2005, “ULIP Mania”.

3) The Business Line, 10 June 2007, “Know all About ULIPS”.

WEBSITE

www.irdaindia.gov www.bajajallianzlife.co.in www.quickmba.com www.amfindia.com www.mba.com www.articlebase.com

QUESTIONNAIRE

Karunya School of Management, Coimbatore 99

I am RAJEEV JOSEPH student of Karunya School of Management, Coimbatore doing a project on “A COMPARATIVE STUDY OF ULIP PLANS OF BAJAJ ALLIANZ LIFE INSURANCE WITH MUTUAL FUNDS” and this questionnaire is a part of the project and the information collected through this questionnaire would be used only for academic purposes and strictly confidential

PERSONNAL INFORMATION

1. Name: 2. Gender: (a) Male

(a) Female

3. Marital status: (a) Married

(b) Unmarried

4. Age: (a) 20-30

(b) 30-40

(c) 40-50

(d) 50-60

(e) 60-70 5. Occupation: (a) Government

(b) Private Service

(c) Business

(d) NRIs

(e) Others 6. Annual Income: (a) Below 2 lakhs (c) 4- 6 lakhs

(b) 2-4 lakhs (d) 6-8 lakhs

Karunya School of Management, Coimbatore 100

(e) Above 8 lakhs

1. Sources that helps you in making the investment decisions. (a) Financial journal Television

(b)

(c) Brokers or agents Friends

(d)

(e) Consultants 2. Factors that influence your investment decisions in a particular company. (a) Attractive schemes benefits

(b) Tax

(c) High reputation return

(d) Rate of

(e) Variety of products 3. You generally like to invest money. (a) Insurance Market

(b) Stock

(c) Mutual Fund deposits

(d) Bank

(e) Both insurance and mutual fund

Karunya School of Management, Coimbatore 101

4. According to you who among the following Life Insurance companies is best. (a) BAJAJ ALLIANZ STANDARDLIFE (c) TATA AIG INSURANCE

(b) HDFC (d) AVIVA LIFE

(e) SBI LIFE 5. How would you rate our products. (a) Excellent

(b) Good

(c) Fair

(d)

Poor (e) Very poor

6. I Would like to invest money in ULIP. (a) Strongly agree (c) Neutral Disagree

(b) Agree (d)

(e) Strongly disagree 7. Reason for choosing ULIPs because of insurance coverage. (a) Strongly agree

(b) Agree

Karunya School of Management, Coimbatore 102

(c) Neutral Disagree

(d)

(e) Strongly disagree 8. I would like to invest money in Mutual Funds. (a) Strongly agree

(b) Agree

(c) Neutral Disagree

(d)

(e) Strongly disagree 9. Mutual funds are more risky than ULIP products. (a) Strongly agree

(b) Agree

(c) Neutral Disagree

(d)

(e) Strongly disagree 10. ULIPs have advantage over Mutual funds. (a) Strongly agree

(b) Agree

(c) Neutral Disagree

(d)

(e) Strongly disagree Do you view following factors/sources of information important while investing in ULIP. Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Karunya School of Management, Coimbatore 103

(11) Safety (12) Liquidity (13) Rate of Return (14) Tax savings (15) past scheme’s Performance (16) Rating of ULIP by Agencies (17)Advertisem ents

Do you view following factors/sources of information important while investing in Mutual Funds.

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

(11) Safety (12) Liquidity (13) Rate of Return (14) Tax savings

Karunya School of Management, Coimbatore 104

(15) past scheme’s Performance (16) Rating of ULIP by Agencies (17)Advertisem ents

18. I would like to reinvest my funds in the same company again. (a) Strongly Agree (c) Neutral Disagree

(b) Agree (d)

(e) Strongly disagree

Karunya School of Management, Coimbatore 105