25905054 Summer Project Final

7/29/2019 25905054 Summer Project Final

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A

TRAINING PROJECT

A COMPARATIVE STUDY ON TRADITIONAL PRODUCTS & UNIT LINKED

PRODUCTS OF SBI LIFE

SUBMITTED IN THE PARTIAL FULFILLMENT OF

BACHELOR OF BUSINES ADMISTRATION

(2010-2013)

KURUKSHETRA UNIVERSITY, KURUKSHETRA

Under The Guidance of: Submitted By:

Mr. Parveen Bhaskar KAPIL KHURANAABSM BBA (2010-2013)S D I M T,Jagadhri

S. D INSTITUTE OF MANAGEMENT & TECHNOLOGY

Huda Road, Jagadhri 135003 (Yamuna Nagar)

Haryana

Affiliated To

KURUKSHETRA UNIVERSITY, KURUKSHETRA


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DECLARATION

I hereby declare that the dissertation entitled A COMPARATIVE STUDY ON

TRADITIONAL PRODUCTS & UNIT LINKED PRODUCTS of SBI LIFE is

submitted for the Degree of Bachelor of Business Administration is my original work and

the dissertation has not formed the basis for the award of any degree, diploma,

associateship, fellowship or similar other titles. It has not been submitted to any other

University or Institution for the award of any degree or diploma.

KAPIL KHURANA


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ACKNOWLEDGMENT

It gives me tremendous pleasure in acknowledging the valuable assistance

extended to me by various personalities in the successful completion of this report. As a

part of curriculum for BBA, I have undertaken project study on the topic A

COMPARATIVE STUDY ON TRADITIONAL PRODUCTS & UNIT LINKED

PRODUCTS " I sincerely acknowledge my indebtedness & gratitude to all those who

have helped me for completing this project work with their guidance, information and

encouragement.

I would also like to express deep sense of gratitude to Dr. Shelly Gupta Director of

(S.D.I.M.T ) JAGADHRI . It express my sincere gratitude to HOD Mrs. Rekha Rathor.

I would like to thank my esteemed guide Ms. Jaya Kaushik Faculty of B.B.A. (SDIMT)

for his guidance, sustained support and valuable time in helping me to complete my

project.


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PREFACE

For a management student theoretical knowledge as well as practical orientation exposes

oneself to experiences, one can again be mastering it is best possible time.

The title of my project is : "A Comparative Study on Traditional products & Unit

Linked products of SBI LIFE"

During this project report I have tried my best to gain some valuable knowledge &

experience & also tried to give some valuable suggestion to the organization.


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EXECUTIVE SUMMARY

This is a project report on the topic "Comparative Study on Traditional Products and

Unit Linked Products of SBI Life."

SBI Life insurance company was established in the year 2001 with a commitment to

expand and reshape the life insurance industry in India. The company was amongst the

first private sector insurance companies to begin operations after receiving control from

IRDA.

The company has wide range of products and has driven its growth across a cross-

section of people and cities. SBI Life is a joint venture between State Bank of India and

Cardiff SA of France. SBI Bank has 74% stake in the company and Cardiff has 26 %. By

the time company has crossed the 3 million policy milestones with a premium income of

1075 crores and a total sum assured of more than 54000 crores. Today, the company has

established itself as the No. 1 private life insurer in the country and voted Indias most

trusted private life insurance brand.

Purpose:The purpose of this report was to analyze and compare the Traditional and Unit Linked

products of SBI Life. We intend to give overview of Insurance with its distinctness and

needs which includes the background of the organization, problems of the organization,

methodology, and specific findings with suggestions.

First Chapter, of this report introduction and scope of the project is given. Also the

rationale of study is given with some points that offers favorable climate.

Second Chapter Industry profile, need of insurance, evolution of insurance, benefits,

privatization, existing private insurance players, returns, key challenges future

opportunities Of the industry is given


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Third Chapter covers the background of the company; it also includes the products

classification of the company with its comparison to the traditional products.

Fourth Chapter covers the research methodology used to achieve objectives of the

project.

Fifth Chapter consists of Data analysis and Interpretation related to customer survey.

Sixth Chapter consists of findings which are drawn on the basis of data interpreted in

the previous chapter and limitation of the study. The main findings were:

1. Maximum of people preferred unit linked plan because of the following reason:

Short Term: It is the best feature of unit-linked plan, which was not

present in traditional plan. For example: In the unit linked plan here are

two products like. Unit plus - II.

In the Unit Plus: There is no maturity date. Any Time after three year of

commencement one can make partial or complete withdrawals as no

penalty.

Unit Plus II: Other paying the premium for 4 years one can withdrawal

whole money with interest after 4 yearns

Flexibility (Investment Option)

In the Unit Linked plans there are more flexibilities.

One can increase his death benefit.

Flexible Contribution: One can Increase or decrease has annual

contribution. The max. Decrease in contribution can be up to 20% of the

Initial contribution.


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2. LIC and SBI are the two most known brands in the market.

3. Through the study it was found that the main purpose of buying insurance is

Investment.

Seventh Chapter consist of suggestions & Limitations

All the company should come out of a Unit Linked product that should aid every

section of the society.

The advisors should be made aware and educated so that they can extend their

services not only in terms of collection of premium cheques from the policy

holders but also to educate them about the insurance and the latest Non

Traditional products.

The company should target the lower segment customers also


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CONTENTS

CHAPTER 1 Introduction

1.1 Title.. 1

1.2 Rationale of study. 1

1.3 Significance of the study. 1

1.4 Scope of the study 2

CHAPTER 2 - Industry profile

2.1 Introduction to insurance.. 3

2.2 Key Challenges 10

CHAPTER 3 - Organization profile

3.1 Background of company.. 12

3.2 Product.. 15

3.3 Product comparison. 17

CHAPTER 4 - Research Methodology

4.1 Title. 29

4.2Limitation.

4.3 Research Design.. 29

4.4 Sample Design. 29

4.5 Sources of Data 29

CHAPTER 5 - Data Analysis & Interpretation


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5.1 Charts. 30

CHAPTER 6 - Findings

CHAPTER 7 - Suggestions

APPENDIX

Chapter 1


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INTRODUCTION

INTRODUCTION

1.1 Title

"A Comparative study on Traditional products V/S Unit Linked Products of

SBI Life

1.2 Rationale of study

To put into practice the tool and technique learned theoretically in the class room.

To have practical exposure to the field and face the ground reality

To understand the real insurance world

1.3 Significance of the Study

Following is the significance felt by the Researcher while doing this

Project.


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TO THE RESEARCHER

It provided an opportunity to understand the importance of various factor such as

type of policy, term of policy, sum assured amount etc. for the sale of life

insurance products.

It gave a chance to use the conceptual knowledge in actual environment in

preparing the researcher to use the knowledge in his future endeavors.

It gave an insight on the Topic like policies awareness, policies preference, and

type of investment plan, which were of prime importance from the marketing

point of view.

It helped in assessing the factors, which influence the buying behavior and

defining the layer itself.

TO THE COMPANY

The study provided the present status of the company and its products in the

market.

The study provided the base for further assessment and comparative analysis

of company's product against other company's products.

It provided the information about the weakness and strengths of the company.

1.4 Scope of the study


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The study was conducted among the clients of SBI Life Insurance Co. Ltd.,

Saharanpur. The study was conducted from 16st June to 16th July 2012.

Chapter 2

INDUSTRY PROFILE


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INDUSTRY PROFILE

2.1 Indian Insurance Industry - Introduction

India is the largest democracy in the world having a population more than one billion.

It is 5th largest in the world in terms of Purchasing Power Parity (PPP). India's GDP

growth rate is over 6 percent per year on average for the last decade and saving rate is

around 26 percent of GDP.

Through India's economic development, it becomes the most lucrative insurance

markets in the world. Before the year 1999 there were monopoly of state run Life

Insurance Corporation of Indian (LIC) in life insurance sector and General Insurance

Corporation of India (GIC) with its four subsidiaries in general sector. In the wake of

reform process and passing Insurance Regulatory Development Act (IRMA) through

Indian Parliament in 1999, Indian Insurance was opened for private companies.

INDUSTRY PROFILE OF LIFE INSURANCE

Insurance is an Rs.400 billion business in India, and together with banking services adds

about 7% to Indias GDP. Gross premium collection is about 2% of GDP and has been

growing by 15-20% per annum. India also has the highest number of life insurance

policies in force in the world and total investible funds with the LIC are almost 8% of

GDP .Yet more than three-fourth of Indias insurable population has no life insurance or

pension cover. Health insurance of any kind is negligible and other forms of non life

insurance are much below international standards.


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To tab the vast insurance potential and to mobilize long term savings we need reforms

which include revitalizing and restructuring of the public sector companies, and opening

of the public sector companies, and opening up the sector to private players. A statutory

body needs to be made to regulate the market and promote a healthy market structure.

Insurance Regulatory Development Authority (IRA) is one such body, which checks on

these tendencies. IRDA role comprises of following three functions:

Protection of consumers interest

To ensure financial soundness and solvency of the insurance industry and to

ensure healthy growth of the insurance market.

www.irdaindia.com

What is Insurance?

Insurance is a contract between two parties whereby one party called insurer

undertakes in exchange for a fixed sum called premiums, to pay the other party onhappening of a certain event.

Insurance is a protection against a financial loss arising on the happening of an

unexpected event. Insurance Companies collect premium to provide for this

protection. A loss is paid out of this premium collected from the insuring public. The

insurance company acts as a trustee to the amount collected through premium.

In addition to serving as a protective cover, life insurance acts as a flexible money-

saving scheme, which empowers you to accumulate wealth-to buy a new car, get your

children married and even retire comfortably.


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Insurance is generally classified in three main categories, (i) Life Insurance, (ii)

Health Insurance and (iii) General Insurance.

To get insurance an individual or an organization can approach to an insurance

company directly, through Insurance Agent of the concerned company or through

Intermediaries

Benefits of Insurance

Insurance is the instrument of Security, saving and peace of mind. It provides several

benefits by paying a small amount of premium to an insurance company as:

Safeguards oneself and one's family for future requirements.

Peace of mind in case of financial loss.

Encourage saving.

Tax rebate.

Protection from the claim made by creditors.

Security against a personal loan, housing loan or other types of loan.

Provide a protection cover to industries, agriculture, women and child.

In this economic reform process the Insurance Companies will boost the

socioeconomic development process. The huge amount of funds that will be at the

disposal of Insurance Companies will be directed as desired avenues like housing, safe

drinking water, electricity, primary education and infrastructure. The growth of the debt

market will also get a boost. Above all the policyholders will get better pricing of

products from competitive insurance companies.

Life insurance is universally acknowledged to be an institution, which eliminates

'risk' and provides the timely aid to the family in the unfortunate event of death of the

breadwinner.


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Life Insurance is a contract for payment of a sum of money to the person assured

(or nominee) on the happening of the event insured against. The contract provides for the

payment of premium periodically to the Insurance Company by the assured. The contract

provides for the payment of an amount on the date of maturity or at specified dates at

periodic intervals or at unfortunate death, if it occurs earlier.

There are some benefits of life Insurance as:

Protection: Life Insurance guarantees full protection against risk of death of the assured.

In case of death, full sum assured is payable.

Long Term Saving: Life insurance encourages long term saving. By paying a small

premium in easy installments for a long period a handsome saving can be achieved.

Liquidity: Loan can be obtained against a policy assured whenever required.

Tax Benefit: Tax relief in income tax and wealth tax can be availed on the premium paid

for Life Insurance.

By the year 1956, 154 Indian insurance, 16 non-Indian insurance and 75 provident

societies were carrying on Life insurance business in India. On 1st September 1956 all

the Insurance Companies were nationalized. On September 1956, Indian Parliament

passed LIC Act and the state run Life Insurance Corporation of India (LIC) has held the

monopoly in countries life insurance sector.

In the year 1999, the Insurance Regulatory Development Act (IRMA) was passed

in Indian Parliament. By this act a door was open for private companies with foreign

equity Life Insurance. By this act an Indian promoter can invest either wholly in, an

insurance venture or team up with a foreign insurer, with a cap of 26 percent of equity for


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a foreign partner. Now as per the latest Finance Bill this Investment of FDI can go up to

49 Percent.

PRIVATE PLAYERS' INITIATIVES

List of Private Life Insurance Companies

Insurance Industry in the year 2000-2001 had 16 new entrants, (Foreign players

entering the Indian Insurance sector with their Indian partners)

Life Insurance List:

S.N.

Registration

No. Date of Reg. Name of the Company

1 101 23/10/2000 HDFC Standard Life Insurance Company Ltd.

2 104 15/11/2000 Max New York Life Insurance Co. Ltd.

3 105 24/11/2000 ICICI Prudential Life Insurance Company Ltd.

4 107 10/01/2001 Om Kotak Mahindra Life Insurance Co. Ltd.

5 109 31/01/2001 Birla Sum Life Insurance Company Ltd.

6 110 12/02/2001 Tata Aig Life Insurance Company Ltd.

7 111 30/03/2001 SBI Life Insurance Company Ltd.

8 114 02/08/2001 ING Vysya Life Insurance Company Pvt. Ltd.

9 116 03/08/2001 Allianz Bajaj Life Insurance Company Ltd.

10 117 06/08/2001 Metlife Indian Insurance Company Pvt. Ltd.

HISTORY:


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Life Insurance in its present form came to Indian from the United Kingdom with

the establishment of a British firm Oriental Life Insurance Company in Calcutta in 1818

followed by Bombay Life Assurance Company 1823. The Indian

Life Assurance Companies Act. 1912 was the first statutory measure to regulate life

Insurance business.

In the 1938, earlier legislation was consolidated and amended by the Insurance

Act. 1938, with comprehensive provision aimed at exercising effective control over the

activities of insurers of the insuring public. The main concern was to protect the interests

The Act was amended in 1950 resulting in far-reaching changes in the insurance

sector. By 1956, 154 Indian insurers. 16 foreign insurers and 75 provident societies were

carrying on life insurance business in the country.

In January 1956, in keeping with the then prevailing political and economical

philosophy of socialism, 245 Indian and foreign insurance and provident societies

operating in Indian were taken over by the Central Government by an Act of Parliament,

the Life insurance Corporation Act 1956. The LIC, with a capital of Rs. 5 crores was set

up September that year.

Privatization in 1990s

As part of the wide - ranging economic reforms initiated in 1991, a committee

headed by Mr. R. N. Malhotra examined the structure of the insurance sector. The

committee's recommendations to open up the sector to private sector participation were

implemented by the Government in 2000. The key element in the reform process was the

participation of overseas insurance companies, through restricted to 26 percent of the

capital.


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With the Insurance Regulatory and Development Authority Act, 1999 (IRDA)

formally coming into force, the insurance industry was opened up for private sector

participation.

The main objective of setting up the IRDA was to project the interests of

Policyholders and to regulate, promote and ensured orderly development of the insurance

industry.

Over four decades the industry has been a State monopoly. Till date the LIC has

insured over 120 million individuals and has a vast sales network of over 7 lakh

insurance agents. The industry is witnessing an upsurge in consumer awareness, building

immense and unavoidable pressure among the players.

Within the short time since the opening up several insurance companies have been

licensed by the IRDA. The list of insurance as on data is given in Table-I.

Indian is a market of mainly small policies. The average annual life premium is

less than the equivalent of $ 100 Indian is also marked by a very low insurance

penetration rate. Although no authentic statistics is available, a rough estimate is that only

20 percent of the insurable population is insured.

Business models

At present the new entrants are experimenting with different strategies to

penetrate the market by developing multiple channel distribution models. It is, however,

recognized that for a long time to come agency domination will be a feature of this

market. Other channels such as banks, dedicated distribution through alliances and e-

trade will take time to make a sizable impact. It is the general perception that life

insurance will continue to be sold through face-to-face contract for quite a while.


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Today after nearly fifty years, the insurance sector is a buyers market where there

consumer has the choice to select from a variety of insurance, products and services,

some of the early movers adopted by private insurers can be discussed here.

Distribution modes:

Most new entrants are targeting the Indian middle class segment estimated at over

250 million persons.

High focus on direct selling: The preferred route is the agency network. The

agency channel constitutes 90-95 percent of the market.

Alliances with banks: Insurance is using branch networks to sell insurance

products. This enables insurers to leverage on low distribution costs by

using existing networks. Insurers are also targeting bank employee as per

prospective customers and agents to market products.

Non- Bank Alliances: These are tie-ups with non-governmental organizations

(NGOs) mainly to tap the rural market. This would enable insurers to ensureIRDA Compliance with respect do rural coverage.

Retail financial service Distributors: This involves the tie-ups with NBFCs to

act as corporate agents, and also enabled insurers to cross sell with other financial

services.

With the entry of private insurers, the market is already seeing a wide array of products.

Insurers today are not merely looking at offering the basic life insurance solution, but

offering products with a combination of benefits (riders) which could be bundled

/customized to suit an individual's need. Insurance is also being promoted as a sound

long-terms investment option. In terms of returns insurance products today offer a


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competitive 7-9 percent. Besides returns when really increases the appeal of insurance is

the benefit of life protection from insurance product along with health cover benefits. The

tax benefits are also attractive.

While the plain individual insurance (whole life, term etc.) will remain popular, sale of

new products such as single premium, unit-linked, retirement product, money back and

annuity are set to rise. With Parliament passing the Insurance Amendment Bill, Non-

profit Products are likely to become increasingly prevalent.

1: Insurers as on Date

Company Foreign

Shareholder

Major Local

Shareholder

Business of local

Shareholder

Bajaj Allianz

Life

Allianz Bajaj Auto Auto Manufacture

AMP Sanmar AMP Sanmar Diversified ConglomerateBirla Sun Life Sun Life of

Canada

Birla Global

Finance

Diversified Conglomerate

Medical & Consumer

Dabur AVIVA AVIVA Dabur Products

HDFC

Standard Life

Standard Life HDFC Investment and Finance

ICICI

Prudential Life

Prudential (U.K) ICICI Investment and Finance

ING Vysya

Life

ING Vysya Bank Bank and other investors

Max New

York Life

New York Life Max India Diversified Conglomerate

Met Life India Met Life Bank Pallonji

Group

Conglomerate

OM Kotak Old Mutual Kotak Mahindra Investment and Finance


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Mahindra

SBI Life Cardif SBI Bank

TATA AIG

Life

AIG TATA Diversified Conglomerate

Private Companies returns are as follows of their business:

II: Last Year Returns

Returns based on ULIP plans (equity):

Private Insurers Returns

SBI Life Horizon Equity 115.7

HDFC Life Growth 82.1

Bajaj Allianz UGP Equity Plan 73.1

OM Kotak Aggressive 71.5

ICICI Pru Life Link Max 69.2

Met Life Multiplier 67.8

Reliance Life Equity 64.4

AVIVA Save Guard Growth 60.0

LIC Bima Plus 47.6


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Max New York Life Ins. Growth 45.4

Birla Sun Life Growth 32.3

2.2 Key Challenges faced by Private Insurers:

The key challenges, which all private insurers will face in the coming months, are

in the areas of product innovation, managing investment, distribution, customer's service

and expense control. Some of these are briefly discussed here:

Life insurance in India has traditionally been distributed through the agency

channel. The limiting factor for private insurances will be the extensive and expensive

distribution structure required for reaching through the segment.

Distribution will be a key determinant success for all insurance companies. The

new entrants cannot expect to match the extensive distribution network of LIC (of over 7

Lakh agents). Of these only a small proportion is meaningfully productive. Since there

were no requirements relating to training and passing of examination. Both of which are

now required, requirement was in inexpensive and rather casual. The LIC did not mind

even if a large part of its agency force remained inactive and / or unproductive. This is

not the case now.

Agents have to be trained for 100 hours and they have to pass an examination. It

is estimated that by the time an agent is licensed and becomes productive, about Rs.


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15000 to Rs. 20000 would have been incurred by the insurer. Because of this insurers

cannot afford to have many non-productive and this will strengthen the market.

The alternative channels such as banks and other institutions are slowly emerging.

It is to hope that a variety of channels will emerge in due course as result of liberalization

of this sector.

Intermediaries and direct marketing

Though the agency channel will definitely remain as the dominant distribution

channel, alternative channels like corporate agencies, brokers and Bane assurance will

play a meaningful role in distribution. Private insurers are also engaging in direct

marketing to high net worth individuals through channels like work site marketing a

relatively inexpensive and easy launch potential distribution charmed

New entrants will constantly explore avenues to increase the number of

distribution channels through a variety of distribution patterns, given the customer

profile.

Rural and Social Insurance

As per the IRDA regulations all insurers have an obligation to fulfill in the rural

and social sectors. This obligation is expressed as a percentage of total policy sales in the

rural sector and number of lives insured in the socially weaker sections of society to the

total.


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The rural obligations are to sell specific percentages of policies to the rural sector

5 percent in first year, 7.5 percent in second year and up to 15 percent in fifth year. In the

social sector, insurers are required to insure a specific of lives 5000 in first year, 7500 in

second and up to 20000 lives in fifth year and beyond.

In these areas, local partnerships established by private players matter. Some of them

have roped in the village or panchayat heads to comply with the rural obligations. Some

private insurers have tied up with non-government organization (NGOs) to satisfy the

social obligation.

It is expected that these rigorous requirements will help increase insurance

penetration and provided the much-need insurance protection to the segments that

constitute a large percentage of the population. In short, it is expected that insurance will

gradually cease to be more urban phenomenon.

Customer service

In this competitive scenario, a key difference in gaining a winning edge is the

customer service provided by the insurers, be it, in terms of quality of advice given by the

distribution channels (advisors, banks) or policy processing to settlement of claims.

For the first time in four decades the customer is really the focus and companies

are vying with one another to perform to very transparent and tight benchmarks of

service.

It is significant that the IRDA has brought out regulations that prescribe service

standards and parameters. These policyholders protection regulations are comprehensive

they ensure transparency and accuracy; fix responsibility on insurance companies for

several areas involving customer service etc. This piece of legislation is seen as a

landmark in India.

Role of Technology


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In the present competitive environment technology will play a definite role in

achieving a competitive edge. Technology will play an increasing role in aiding Design

and administering of insurance products as well as in building and maintaining long term

customer relationships.

Future opportunities

Opening up of the pension sector: Considerable discussions have taken place on

this subject, only 11 percent of the working population is protected by some form of

retirement benefits. It is learnt that a detailed proposal is before the Government to open

up the pension sector. Providing coverage through a national pension scheme is

challenging but it is necessary, particularly for the non-salaried or self employed

workforce and those engaged in agriculture. The life insurance industry has come alive.

Awareness has increased and it is being expected that the market will grow fast. In five

years one will be looking at an annual premium income of Rs. 100,000 Crores in the life

insurance sector. Life insurance will, at long last attain its rightful place in the economy.


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Chapter 3

ORGANIZATION PROFILE

ORGANIZATION PROFILE

3.1 Background / History of the company


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SBI Life Insurance Company Ltd. was established in 2001 with a commitment to

expand and reshape the life insurance industry in India. The company was amongst the

first private sector insurance companies to begin operations after receiving approval from

Insurance Regulatory Development Authority (IRDA), and in the time since, has taken

several steps towards its realizing its goal.

The company's wide range of products distribution strengths and powerful brand

has driven its growth across a cross-section of people and cities. By the time company

has crossed the 3 Million Policy milestones with a premium income of 1075 crores and

total sum assured of more than 54000 crores. Today, the company has established itself

as the No. I Private life insurer in the country and it is the single largest group policy

seller among private players and above all SBI Life is the first private insurer to report

profit.

Vision

Our vision:

To be the dominant life and Pensions player built on trust by world-class people

and service.

This we hope to achieve by:

Understanding the needs of customers and offering them superior products and

service.

Leveraging technology to service customers quickly, efficiently and conveniently.

Developing and implementing superior risk management and investment

strategies to offer sustainable and stable returns to our policyholders.

Providing an enabling environment to foster growth and learning for our

employees.

And above all, building transparency in all our dealings.


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The success of the company will be founded in its unflinching commitment to 5 core

values - Trust & reliability, Ambitious, Innovation, Dynamic and Excellence. Each of the

values describes what the company stands for, the qualities of our people and the way

they work.

PARTNERS

SBI Life Insurance Co Ltd. Is a joint venture between State Bank of India and

Cardiff of France. The two companies bring together two of the Strongest financial

service brands in the country, known for their professionalism, excellent quality of

service and long term commitment to you. Riding on the success of this relationship, the

two companies joined hands in 2001, to form SBI Life Insurance Company Ltd., with a

commitment to provide leading edge life insurance solutions.

SBI Bank has 74% stake in the company, and Cardiff pie has 26%.with the

Authorized capital of Rs. 500 cr.* With a paid up capital of Rs. 350 cr.*

SBI Bank

SBI is a household name, and it stands as the last word for security and financial

protection in the country. SBIs illustrious background dates back to the year 1806 when

it started business as a presidency bank in the name of Bank of Bengal. Over the years, it

has learnt to combine the best of banking practices handed down from the imperial

management with the dynamic ways of doing banking in modern India.

Today, it has a branch network of over 9039 branches, an aggregate deposit base

of nearly Rs. 3, 19,619 crores and a total balance sheet size of Rs. 4, 07,815 crores.

Together with 7 Associate Banks, SBI commands about 30% of the market share

banking. SBI is the strongest and most profitable bank in the country as it has the tangible

net worth of Rs. 20,231 crores as at March 2004, and it earned net profit of Rs. 3681


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crores for the fiscal ending that date. SBI is only bank in India permitted to hold more

than 50% of equity in the insurance joint venture.

Cardif

Cardif is the wholly owned subsidiary of BNP Paribas, which is the leading bank

in Europe. BNP is one of the oldest foreign banks in India with a presence dating back to

1860. It has 9 branches in major metros in the country

Cardif is a personal insurance Company founded in 1973. As multi-partner, multi-

country specialist, Cardif markets a complete array of individual and collective savings,

pensions and insurance protection products to private clients and companies. In 2001,

Cardif sales amounted to 3.9 billion euros, of which 48% was generated outside France.

Cardif has operations in 28 countries and has more than 150 institutional partners

throughout the world . In France, over 65% of life insurance business is done through

banks and financial institutions countries in France, and the trend is rapidly catching up

in other countries.

THE COMPANY

SBI Life Insurance is a joint venture between the State Bank of India and Cardiff

SA of France. SBI Life Insurance is registered with and authorized capital of RS. 500

crore and a paid up capital of Rs. 350 crore. SBI owns 74% of the total capital and

Cardiff the remaining 26%

SBI Life Insurances mission is to emerge as a leading company offering a

comprehensive range of Life Insurance and Pension products at competitive prices,

ensuring high standards of customer service and world class operating efficiency.

The company plans to make the insurance buying process quick, simple and based on

well - informed judgment. In 2004, SBI Life Insurance became the first company

amongst private insurance players to cover 30 lakh lives.


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DISTRIBUTION

SBI Life has one of the largest distribution networks amongst private life insurers

in India, having commenced operations in 69 cities and towns in India.

Some of the Major Cities are: Ahmedabad, Banglore, Chandigarh, Chennai,

Coimbatore, Gurgaon, Hyderabad, Indore, Jaipur, Kochi, Kolkata, Lucknow, Ludhiana,

Madurai, Manglore, Meerut, Mumbai, Nagpur, Nasik, Noida, NewDelhi, Pune and

Vadodara.

The company has the largest number of banc assurance tie-ups, having

agreements with SBI Bank, South Indian Bank, Bank of India, Bank, and Punjab &

Maharashtra Co-operative Bank, as well as some corporate agents. It has also tied up with

organizations like Dhan for distribution of Salaam Zindagi, a policy for the socially and

economically underprivileged section of society.

SBI Life has recruited and trained over 36,500 insurance agents to interface with

and advise customers, and has the highest number amongst private life insurers on the

renowned Million Dollar Round Table (MDRT) (550 in the year 2004-2005). Further, it

leverages its state-of-the-art IT infrastructure to provide superior quality of service to

customers.

3.2 PRODUCTS

Insurance Solutions for individuals


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SBI Life Insurance offers a range of innovative, customer-centric products that meet the

needs of customers at every life stage. Its 26 products can be enhanced with up to 4

riders, to create a customized solution for each policyholder.

Savings Solutions

SBI Life Sudarshan is a traditional endowment savings plan that offers life

protection along with adequate returns.

SBI Life Scholar II is an anticipated endowment policy ideal for meeting

milestone expenses like a child's marriage, expenses for a child's higher education

or purchase of an asset.

SBI Life Money Back is also a traditional plan that offers life cover with cash

inflow at regular intervals. It is a participating plan in order to meet your financial

obligations at crucial junctures.

Protection Solutions

SBI Life Shield is a protection plan, which offers life cover at very tow cost. It is

available in 3 Options - level term assurance, level term assurance with return of

premium and single premium.

Child Solutions


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SBI Life Scholar II provides guaranteed educational benefits to a child along

with fife insurance cover for the parent who purchases the policy. The policy is designed

to provide money at important milestones in the child's life.

Unit-linked Solutions

SBI Life Unit Plus II is a Single & Regular premium Unit Linked Insurance

Plan, which combines life insurance cover with the opportunity to stay, invested in the

stock market.

SBI Life Horizon II offers customers the flexibility and control to customize the

policy to meet the changing needs at different life stages. It is safe and hassle free way to

get high returns and with a unique feature of Automatic Asset Allocation.

Retirement Solutions

SBI Life Long Pensions is a retirement product targeted at individuals in their

thirties because everyone needs to accumulate enough savings to meet old age needs, and

look for a reliable and enduring pension payment arrangement.

Flexible Rider Options

SBI Life offers 3 flexible riders, which can be added to the basic policy at a

marginal cost, depending on the specific needs of the customer.

1. Accident & disability benefit: If death occurs as the result of an accident during

the term of the policy, the beneficiary receives an additional amount equal to the sum

assured under the policy. If the death occurs while traveling in an authorized mass

transport vehicle, the beneficiary will be entitled to twice the sum assured as additional

benefit.

2. Level Term Cover: This rider provides the option to increase the risk cover. The

cover may be increased for an additional amount up to a maximum of the existing basic

sum assured on your policy.


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3. Critical Illness Benefit: Protects the insured against financial toss in the event of

9 specified critical illnesses. Benefits are payable to the insured for medical expenses

prior to death.

Portfolio Details of SBI Life as on December 2006

Horizon / Unit Plus Bond Fund Portfolio Details as on 31st December06

0.00%

10.00%

20.00%

30.00%

40.00%50.00%

60.00%

70.00%

Government

Securities

Corporate Debt

Money Market &

Other Instruments

Portfolio Horizon / Unit Plus Bond Fund as on 31/12/06

Government Securities 9.66%

Corporate Debt 28.48%

Money Market & Other Instruments 61.86%


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3.3 Product Comparison

I. TYPES OF ORDINARY LIFE INSURANCE (TRADITIONAL PRODUCTS)

Permanent Type of Contracts

Typical permanent type policies are Whole Life policy and Endowment policy.

These policies are regarded as savings instruments.

Whole Life Insurance

The sum assured is payable on the death of the assured whenever it occurs.

Premiums are payable throughout the life of the assured or, more normally, until-

retirement of the assured at 60 or 65. Although premiums may cease at say age 60 the

policy remains in force and the policy would provide the benefits for the dependents on

the death of the policyholder as and when it occurs. While the policy under which

premium are payable throughout life is called the whole life whole term policy, the

policies where premium paying term is limited are called payment whole life policies.

Endowment Insurance:

The endowment Insurance policy is taken for a certain number of years say, 15,

20, 25 or 30 years. The sum assured is payable in the event of death within the term of

the policy. However, the sum assured will also be payable if the life assured survives the

stipulated term, until the 'maturity date'. Endowment assurance is often used to cover a

house mortgage. The premium will be higher than a level or decreasing term assurance

policy but the entire loan amount can be paid out of the policy proceeds on completion of

the policy term, or on the death of the policyholder occurring earlier.

There are Anticipated Endowment or Money Back policies under which certain

agreed proportion of the sum assured will be payable at an interval of three, four or five

years and the remaining sum assured along with the accrued bonuses on the full sums

assured, will be payable on the maturity date of the policy. Further, the full sum assured


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together with the accrued bonuses till date would be payable in the event of the

policyholder dying during the currency of the policy.

Pure Endowment insurance provides for payment of the sum assured on the

policyholder surviving to the maturity date the premiums paid with or without interest,

would be paid to the dependents, if the assured dies earlier. For the same amount of

cover, the endowment has the highest premium, because the life insurance company is

guaranteed to pay out the sum assured at a given date, or before it, if the person dies. The

whole life policy also guarantees payment of the sum assured but only at the time of the

assured death as and when it occurs. The time lag between the commencement of the

policy and the date of death is on an average likely to be longer and as such the premium

for whole life policy is lower than that for endowment.

Term Insurance

Term Insurance is temporary contracts, which provide basic death risk cover. This

is the cheapest form of life insurances, since as the description suggests, it is only for a

certain period of time and the policy money is payable on death during the term of the

policy. On expiry, the policy has no value. Normally, the policyholder does not receive

any benefit on survival to the end of the stipulated term but he will have enjoyed the

protection for death occurring during the policy period. The whole life policy in effect is

a term insurance policy without the limitation of a period. In India, return of premiums is

allowed in the event of survival of the policyholder to the end of the term. No doubt, a

higher premium would be payable to cover the additional survival benefit.

Life Annuity

When a person has a reasonably large sum of money and wants to provide an

income for him after he retires or at some other time, he can approach a life insurance

company and purchase an annuity. Life annuity involves payment of a certain agreed

amount annually or more frequently on survival of the life annuitant. Premium may be


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payable in the form of a single premium or annual premium prior to the date of

commencement or vesting date of the annuity. An annuity is a method by which a person

can receive a yearly sum, an annuity, in return for payment to an insurance company of a

sum of money. This is not life assurance but it is dealt with by life insurance companies

and is based on actuarial principles just like life assurance.

Joint Life Insurances or Annuities

Life insurances or annuity may be issued to two or more lives such that the

assurance/ annuity would be payable on death of one or more lives insured or say break

up of the joint life status], or in case of annuities, on death of the survivor. Sometimes the

joint life policy can provide payment on the death of each of the two joint lives like in the

Jeevan Saathi policy in India. These policies could also be endowment type where the

sum assured is payable on death during the period selected or on survival to the end of

the period selected.

II. NON TRADITIONAL PRODUCTS (UNIT LINKED PRODUCTS) SBI

Life

Unit Plus II

II Product Benefits and features:

1. Introduction:

SBI Life Unit plus II is an addition to the insurance products offered by SBI Life

insurance Company Ltd. This product however, being an insurance product gives the

customer a tot of flexibility on the Life cover and also gives the customer a lot over the

value of investment that can be generated by the product.


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Thus, this product works as a long-term market-linked total protection of life,

health and wealth.

The design of the product is such that it works as a one stop wholesome financial

solution for the customers for their lifetime, a product that gives the customer the control

and flexibility to use it according to differing needs at their different life stages with

different human life values.

Life time is:

A regular premium product that has the option of the yearly, Half-Yearly and

Monthly modes of premium.

An insurance product that works in the form of units, which are issued to the

policyholder depending upon the Unit value and the investment done in the form

of premium.

An insurance product where all the three riders are attached namely, ADBR and

CIBR.

An insurance product where the Death benefit is a multiple of the Annual

Premium paid.

An insurance product with no maturity value, at any time the value of units is

what is the value of the product.

The features and benefits of the product that would be helpful in understanding the

positioning strategy of the product.

1. Benefits:

Death benefit:


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Death Benefit would be a multiple of the yearly premium. The policyholder has

the flexibility to choose the death benefit. The maximum limits of death benefit can be

found out Mom a table that gives the multiples for different combination of age and life

cover/riders opted by the policyholder. In case of death of the policyholder gets higher of

death Benefit and the value the units.

Withdrawal:

The withdrawal of the units would be at the unit value on the pricing date

following the receipt of the withdrawal request. The value of withdrawal reduces the

Death Benefit by the same amount.

Withdrawals are not allowed in the first three policy years, after which there can

be partial or full withdrawal of the units.

2. Flexibility Options

Increase in Death Benefit

The policyholder has the flexibility to increase the death benefit by 25% subject

to a maximum of Rs. 250,000 every time. This can be done every third year, without

further underwriting. The death benefit can also be increased beyond this limit with

underwriting. This can be done for a maximum of three times.

The product also provides flexibility to increase the death benefit at different stages in

life on marriage, birth of first child and birth of second child. The can be irrespective of

when the last increase was done. This feature helps in planning for long term

financial needs at important points in the life stage.


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Decrease in death benefit

The policyholder has the option of decreasing the Death Benefit in the multiples

of Rs. 1, 00,000. However a minimum residual death benefit of

Rs.1, 00,000 will have to be maintained.

Premium Holiday

In case the policyholder discontinues the payment of the premium, the Death

benefit and the Riders Benefits cover would continue.

Choice of fund

There are four fund options available to the policy holders. The policyholder has

the flexibility of investing in all the three funds in the proportion he wishes, in one single

policy. Following are the three fund options.

PLAN PLAN OBJECTIVE RISK INVESTMENT

PATTERN

Growth Steady returns over a long term. Moderate Debt instruments : Max

100%

Money Market and cash :

Max 60%

Balanced Balance of capital appreciation

and steady returns over a long

term.

Average Debt, Money market and

cash : Max 60%

Equity and equity related

security : Max 60%


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Equity High growth and capital

appreciation over a long term.

High Equity and equity related

security : Max 100 %

Debt, Money Market and

cash : Nil

Bond Securing money by avoiding risk. Normal Govt. Security + Debenture

= 100%

Cash + Call Market = 20%

Switch between the Funds

The Policyholder would have the control to direct his investments depending

upon the market conditions by switching the money between the funds. Four frees witch

is allowed each policy year. A switching charge of 1% of the value of the units switched

would be levied after the policyholder has exercised the free switch.

Top-Ups

If the Regular Premiums are paid up to date Single Premium Top-Ups can be

made. Top-Ups give the flexibility to the policyholder of increasing the value of his

investments over a long term. Top-ups can be done at a cost of 1% of the top-up

premium.

There would be no increase in the Death Benefit with the Top-Up, but the life

cover calculations would take into account the increase in the value of the Unit Fund

because of the Single Premium Top-Up.

3. Charges

Initial administrative charges

1st Year 25% of the Premium


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2nd Year 7.5% of the Premium

3rd Year 5% of the Premium

Insurance charges

This charge is basically towards the mortality and the riders. These are deducted

by the cancellation of units on a monthly basis. The mortality charges are charged on the

Life Cover, Which is the difference between the Death Benefit and the value of the units.

Annual Fund Management Charges

This is 1% of the value of units, which will be charged by adjusting the unit value

of the units accordingly.

Annual Administrative Charges

This is 1.25% of the value of units, which will be charged by adjusting the unit

value of the units accordingly.

4. Riders

All the four riders are available with this product, namely-Accident Benefit,

Permanent Disability, Major Surgical Rider and Critical Illness Rider.

The sum Assured are as follows:

Minimum SA under any Rider: Rs. 1, 00, 000

Maximum SA under any Rider: Rs. 10, 00,000

Additionally the amount of rider benefit cannot exceed the death benefit.

5. Eligibility Conditions.

Age Limits

Minimum

Age of Entry

0 Years (Risk only commences from age 7 only)


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Maximum

Age of Entry

65 Years

Premium

Frequency

Yearly, Half - Yearly and Monthly

MinimumPremium

Rs. 24000 (Yearly), Rs. 12000 (Half- Yearly) and Rs.2000(Monthly)

Comparison Between Traditional & Unit Link Plans

Traditional Plan Unit Link (Modern) Plan

1. Endowment Plan 1. Endowment Plan

2. Anticipated Endowment 2. Anticipated Endowment

3. Term Plan 3. Term Plan

Traditional Unit Link

1.Customer decide Term

2. Customer Decide Sum assured

3. As per Customers age and term and

S.A. premium will be calculated

4. Boundation: Premium to be paid same

throughout the year (Can't decrease or

Increase)

1. Customer is Free for Term (No

Boundation to decide term)

2. Customer is free for select sum assured

3. Customer is free to select premium

(doesn't bounded with S.A. or term)

4. No Boundation for premium payment

term.


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5. No Transparency of Term.

6. Returns are going down day by day.

7. No Freedom for Investment rm

allocation.

5. Fully Transparent (Charges maturity)

6. Returns are based on stock Market as

well debenture for Govt. securities.

7. Customer is Free to Switch his money

from Stock market to debenture on Govt.

Security.

SBI Life Unit Plus II

Competitive Positioning

Life time as compared to a whole life plan

A person's protection needs follows a cycle depending on the life stage. It

increases over time and then decreases. Lifetime offers the flexibility to

increases the protection as and when required. When one's protection needs

decreases over time one can decrease the death benefit and more money can be

allocated towards savings.

The Lifetime policy as compared to a whole life policy is more transport. The

customer is aware of all the charges up front and also is aware of how his money

is invested and how it grows over time. He has the option to choose the fund into

which the money is invested. Also he has the option to switch between funds as


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and when risk profile changes. In the case of whole life policy, the policyholder is

unaware of how the money is invested. There is no choice of funds available.

Lifetime policy has several health rider options. The premium paid is eligible

under see 80D. These riders are available until age 65. The policyholder has the

option to select the amount of rider benefit that he wants. Under the whole life

policy the rider benefit is equal to the death benefit amount.

At any point if one wants to increase ones savings, Lifetime policy offers the

facility of top-up, which is not available with other policies.

Like the whole life policy, Life time offers premium waiver benefit. So, if for

some reason the policyholder is unable to pay the premium the amount will be

recovered from the value of units and the policy will continue to remain in force.

There are no surrender penalties. Anytime after 3 years you can make partial or

complete withdrawals from your units. This can be exercised according to the

needs.

Life time as compared to a Universal-Life Plan:

We have a Universal Life Plan also in the market. It would be interesting to look

at the features comparison of their plan and life time.

The policy offers 4 Investment options Maximiser, Balancer, Protector and

Preserver. Lifetime on the other hand allocates the entire amount after deduction

of charges into fund chosen by the investor. The fund objective is clearly laid out

and the details of the fund investment would be disclosed to the investor.

The Life time policy is more transparent in that the charges are declared up front.

Life time policy offers choice of all funds within the same policy. A person can

switch between fund options. This is not possible in the Universal Life Plan.

Should your needs change, you can increase or decrease your death benefits.


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Like the Universal Life policy Lifetime offers premium waiver benefit. So it for

some reason the policyholder is unable to pay the premium the amount will be

recovered from the value of units and the policy will continue to remain in force.

There are no surrender penalties. Anytime after 3 years you can make partial or

complete withdrawals from your units. This choice can be expressed according to

the needs.

Mutual Funds are not comparable products:

Life time is positioned as along term wholesome financial product that takes care

of the investment needs; insurance needs and provides protection against the

health hazards. As compared to this the mutual funds are normally used as short-

term instruments where the investments turn around time is limited to maximum

of 2-3 years.

Life time provides death benefit as a multiple of the Annual premium. No Mutual

funds provide life insurance. Not only this life time, also provides the flexibility

to control the insurance and savings according to the needs of the individual atdifferent life stages.

Life stages are also attached with riders that cover the individual against the

health hazards. This facility is not provided by the mutual funds.

The proceeds from Life time is totally exempt from taxes where as the proceeds

from a mutual fund attract capital Gains Tax, if any.

In case of the death of the policyholder, greater of value of units or the Death

Benefit is paid to the nominee. In case the markets are down, the family of the

policyholder is secured, as they would get the Death Benefit, as the value of units

may be less than the death benefit. In case of a mutual fund, the family only gets


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the value as per the NAV. So even in a shorter term, Lifetime scores over the

Mutual funds, if the policyholder dies and the markets are down.


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SBI Life Horizon II

Name of Product SBI Life Horizon II

Initial requirements Proposal Form

ACR

Age proof

Deposit receipt

Proposer and Life assured Policy must be proposed on own life

Issue rules

Min age at entry

Max age at entry

Min policy term

Max policy term

Min vesting age

Max vesting age

Min premium amount

Min Death benefit

Death benefit

14 Years

60 Years

10 Years

40 Years

45 Years

75 Years

Rs. 12000/-

Zero

Annual Premium X Term

Premium payment modes All

Premium payments channels All

Premium payments periods Up to original vesting dateRating factor increase in death

cover with underwriting

1.0

Rating factor for increase of

death cover with out

underwriting (Automatic

NIL


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Increase)

Riders allowed Only When death benefit is chosen initially ADBR, CIBR

(Stand-Alone).

When initial death benefit is ZERO

No rider is allowed neither at policy commencing nor at

time of addition or increase of death benefit at a later date.

Rating for riders ADBR and : NIL CIBT (Stand-Alone) : 1.0

Non Medical Scheme When initial death benefit is NIL. UW as per

current norms at the time of increase on addition of

death benefit.

When death benefit is chosen initially. Allowed as

per current jet norms (Non-Medical scheme)

Surrender Value

After 1 Year - 25%

After 2 Years - 40%

After 3 Years - 60%

After 4 Years - 100%

Only full withdrawal is allowed for first 3 policy years

no withdrawal is allowed. On withdrawal anytime after

the completion of 3 years, the value of units is payable.

Extension of Deferment period Postponement of original vesting date allowed on more

than one occasion subject to Max age of 70 Years at

postponed (new) vesting date.

Benefits on Vesting date

(Original or Postponed)

The Life Assured shall have the option to receive up to

33% of the value of units in lump sum and balance

amount in the form of annuity

Or

To utilize entire value of units in the form of annuity The

Life Assured can select any one of the following types of

annuity

1. Life Annuity


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2. Life Annuity with return of purchase Price

3. Joint Life Last Survivor with returns of

Purchase Price

4. Life Annuity with Guaranteed period of 5/10/15

years.

Benefit Coverage Period For type of annuity mentioned above

1. Life time of Annuitant


3. Joint Life Last Survivor of Annuitant

and spouse

4. Life time or Guaranteed Period

whichever is more

SBI Life Unit Plus II

Name of Product SBI Life UNIT PLUS II

Initial Requirements Proposal form

ACR


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Age proof

Deposit receipt

Proposer and life assured Policy must be proposed on own life

Issue rules

Min age at entry

Max age at entry

Min policy term

Max policy term

Min vesting age

Max vesting age

Min premium amount

Min Death benefit

Max Death benefit

18 Years

60 Years

5 Years

65 Years

45 Years

75 Years

Rs. 24, 000/-

Two options available to the Life Assured

1. Nil Death Benefit (Can be equal '0')

2. Death Benefit equal to 105% of the

Premium

105% of the Premium

Premium payment modes Single & Regular

Premium payment channels ALL

Rating factor for death Benefit NIL

Riders allowed None

Surrender value Only full withdrawal is allowed

For first policy year no withdrawal is allowed.

On withdrawal anytime after the completion of first

year, the value of units is payable.

Extension on vesting date (Original Postponement of original vesting date allowed on


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or postponed) more than one occasion subject to max age of 70

years at postponed (new) vesting date.

Benefits on vesting date (Original or

postponed)

The Life Assured shall have the option

To receive up to 33% of the value of units in lump

sum and balance amount in the form of annuity.

Benefit Coverage Period For type of annuity mentioned above



3. Joint Life Last Survivor of Annuitant and

spouse

4. Life time or Guaranteed Period whichever

is

More.

Death Benefits

Death before the original

Vesting date

If spouse has not attained age 50 last

birthday on death of Life assured the spouse

shall receive higher of Death benefit or

value of units as a lump sum payment.

If spouse has attained age 50 Last birthday

on death assured Higher of death benefit orvalue of

Units is payable.

The spouse shall have the option To receive

entire amount as lump sum payment

Or

To receive up to 33% of this amount as a lump sum

payment and balance amount in the form of

annuity.

Or


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To Utilize entire amount in the form of annuity.

The spouse can select any one of the following

types of annuity

Life annuity

Life Annuity with return of purchase Price

Life Annuity with Guaranteed period of

5/10/15 years.

Death after original vesting date but

before the postponed vesting date

(during the deferment after the

original vesting date)

If spouse has not attained age of Last birth

on death of life assured The spouse shall

receive higher of Death Benefit or value of

units as a lump sum payment.

If spouse has attained age of last birthday

on death of life assured The spouse shall

have the option

To receive value of units as a lump sum payment

Or

To receive up to 33% of value of units as a lump

sum payment and balance amount of in the

form of annuity

Or

To utilize entire value of units in the form

of annuity The spouse can select any one of


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the following types of annuity

1. Life Annuity

2. Life annuity with return of Purchase Price

3. Life Annuity with Guaranteed period of

5/ 10 / 15 Years.

Investing in a Unit Linked Pension Plan would be better than Market- linked

investment product

Unit Plus II / Horizon II Market-linked instrument

During deferment a tax

advantage under

Section 80 CCC (1) would be

provided.

No-Tax breaks would be provided

during the investment phase.

Under the pension products

the returnsthat the company earns are

not taxed, so

more can be passed to the

customer.

In a mutual fund the returns are taxable in the hands of

the investor as dividends.

Portfolio Equity Fund as on December 2006

Automobile & Ancillary 7.53% Media 2.27%

Ashok Leyland Ltd. 0.33% Jagran Prakashan Ltd. 0.06%

Bajaj Auto Ltd. 1.55% Network Eighteen Ltd. 0.04%Mahindra & Mahindra Ltd. 1.28% Television Eighteen India Ltd. 0.39%

Maruti Udyog Ltd. 2.55% Wire and Wireless (India) Ltd 0.30%

Tata Motors Ltd. 1.81% Zee News Limited 0.05%

Banking 12.11% Zee Telefilms Ltd. 1.44%

Bank of India 2.07% Metals 4.27%

H D F C Bank Ltd 3.40% Hindalco Industries Ltd. 0.46%


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Housing Development Finance

Corpn

1.78% Sesa Goa Ltd. 0.93%

I C I C I Bank Ltd. 2.50% Sterlite Industries (India) Ltd. 1.59%

Oriental Bank of Commerce 0.38% Tata Steel Ltd. 1.30%

Punjab National Bank 1.48% Oil & Gas 3.29%

Reliance Capital Ltd. 0.20% Oil & Natural Gas Corpn. Ltd. 3.29%

Union Bank Of India 0.31% Power 3.09%

Cement 3.79% Jyoti Structures Ltd. 0.35%

Associated Cement Cos. Ltd 1.95% N T P C Ltd. 0.66%

Gujarat Ambuja Cements Ltd. 1.84% Reliance Energy Ltd. 1.38%

Electrical Equipment &

Engineering

11.01% Tata Power Co. Ltd. 0.70%

A B B Ltd. 0.71% Refinery & Petrochemicals 5.74%

Bharat Electronics Ltd. 0.48% Bharat Petroleum Corpn. Ltd. 0.65%

Bharat Heavy Electricals Ltd. 2.61% Hindustan Petroleum Corpn. Ltd. 0.32%

Larsen & Toubro Ltd. 3.97% Reliance Industries Ltd. 4.77%Siemens Ltd. 1.53% Telecommunications 7.34%

Suzlon Energy Ltd. 1.71% Bharti Airtel Ltd. 4.80%

FMCG 5.85% Reliance Communications Ltd. 2.02%

Dabur India Ltd. 0.52% Videsh Sanchar Nigam Ltd. 0.52%

Hindustan Lever Ltd. 2.16% Pharmaceuticals / Healthcare 2.10%

I T C Ltd. 3.17% Aventis Pharma Ltd. 0.08%

Information Technology 22.04% Cipla Ltd. 0.87%

H C L Technologies Ltd. 0.13% Glaxosmithkline Pharmaceuticals

Ltd

0.39%

I - flex Solutions Ltd. 1.21% Sun Pharmaceutical Inds. Ltd. 0.77%Infosys Technologies Ltd. 7.16%

Mphasis Ltd. 1.68% Others 7.16%

Satyam Computer Services Ltd. 1.90%

Tata Consultancy Services Ltd. 5.63% Cash 2.39%

Wipro Ltd. 4.34%

Total 100.00%

Portfolio Growth Fund as on December 2006

Automobile & Ancillary 6.76% Media 1.40%

Ashok Leyland Ltd. 0.35% Jagran Prakashan Ltd. 0.03%Bajaj Auto Ltd. 1.25% Wire and Wireless (India) Ltd 0.23%

Mahindra & Mahindra Ltd. 1.37% Zee News Limited 0.03%

Maruti Udyog Ltd. 2.19% Zee Telefilms Ltd. 1.11%

Tata Motors Ltd. 1.60% Metals 3.54%

Banking 11.89% Hindalco Industries Ltd. 0.87%

Bank of India 2.14% Sterlite Industries (India) Ltd. 1.38%


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H D F C Bank Ltd 2.24% Tata Steel Ltd. 1.29%

Housing Development Finance

Corpn

2.73% Oil & Gas 3.83%

I C I C I Bank Ltd. 2.03% Oil & Natural Gas Corpn. Ltd. 3.83%

Oriental Bank of Commerce 0.39% Pharmaceuticals / Healthcare 3.47%

Punjab National Bank 1.19% Cipla Ltd. 1.45%

Reliance Capital Ltd. 0.20% Dr. Reddy'S Laboratories Ltd. 1.14%

U T I Bank Ltd. 0.48% Glaxosmithkline

Pharmaceuticals Ltd

0.13%

Union Bank Of India 0.49% Sun Pharmaceutical Inds. Ltd. 0.75%

Cement 3.58% Power 2.61%

Associated Cement Cos. Ltd 1.89% Jyoti Structures Ltd. 0.33%

Gujarat Ambuja Cements Ltd. 1.69% N T P C Ltd. 1.07%

Electrical Equipment &

Engineering

12.97% Reliance Energy Ltd. 0.51%

A B B Ltd. 0.87% Tata Power Co. Ltd. 0.69%

Bharat Electronics Ltd. 1.07% Refinery & Petrochemicals 5.10%

Bharat Heavy Electricals Ltd. 3.39% Hindustan Petroleum Corpn.

Ltd.

0.14%

Larsen & Toubro Ltd. 3.73% Indian Petrochemicals Corpn.

Ltd.

0.35%

Punj Lloyd Ltd. 0.56% Reliance Industries Ltd. 4.62%

Siemens Ltd. 2.07% Telecommunications 8.71%

Suzlon Energy Ltd. 1.29% Bharti Airtel Ltd. 4.67%

FMCG 6.21% Reliance Communications Ltd. 3.45%Dabur India Ltd. 0.79% Videsh Sanchar Nigam Ltd. 0.60%

Hindustan Lever Ltd. 2.39% Others 6.44%

I T C Ltd. 3.03%

Information Technology 18.82% Cash 4.67%

Infosys Technologies Ltd. 7.53%

Satyam Computer Services Ltd. 1.76%

Tata Consultancy Services Ltd. 5.61%


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Chapter 4

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY

A systematic approach is essential in any project work. An incorrect step, involves loss of

time and energy. The increasingly complex nature of business and government has

focused attention on the use of research in solving operational problems.

The project has been divided into a number of procedural steps both the number of steps

and the names are arbitrary, however the recognition of the sequence is essential.

Planning and organizing are part of this systematic approach with a lot of emphasis given

to the interdependence of various steps.

4.1 TITLE

A Comparative study on Traditional and Unit Linked Products

4.2 RESEARCH DESIGN

1. Type of research - The type of research was Descriptive and Exploratory

2. Population - Of study was the existing customers of SBI Life Insurance Company

3. Data Collected - Primary data and Secondary data


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4. Data collection techniques -

Primary Data - The data was collected through questionnaire and personal interview

Secondary Data - Brochures and company advisor kit

5. Data collection site - The data collection site was Saharanpurr city

4.3 SAMPLE DESIGN

Sampling procedure - Sampling procedure used in the project is Systematic

Sampling.

Sample size - 300 customers

4.4 SOURCES OF DATA

Primary Data

The bulk of the primary data was collected from existing customers of SBI Life.

Through questionnaire and personal interview, schedule in Saharanpurr city. The

interview schedule was created with the intention of comparing the traditional v/s unit

linked products. The scheduled used for the purpose is given in the annexure.

Secondary Data

The secondary data began with the process of collecting general information from SBI

Life through brochures and literature of the company.

1.5 Limitations of the study

The study was restricted to theoretical ground only so it was

difficult to draw the true interpretations of the study.

The conclusion arrived at are based on a very less experience of

researcher in this field.

Due to shortage of time & resources sample of whole Udaipur

region could not be taken.


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The conclusion arrived at are based on a very less experience of

researcher in this field.

Chapter 5

DATA ANALYSIS

&INTERPRETATION

CHART 1

Q.1 Do you have any Insurance policy?

YES 267

NO 33


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0

50

100

150

200

250

300

Yes No

Series1

INTERPRETATION :

The question was asked to 300 persons and among them 267 replied positively

CHART - 2

Q.2 In your opinion why Life Insurance is required?

Savings 39

Investment 136

Risk Covering/Protection 65


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Future Planning 60

13%

45%22%

20%

Savings

Investment

RiskCovering/Protection

Future Planning

INTERPRETATION :

The Graph shows that maximum persons buy insurance for the investment purpose and

only 13% of the people buy insurance for savings.

CHART 3

Q.3 Which investment instrument do you choose while saving TAX?


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Mutual Funds 87

Life Insurance 107

Post Office 64

Bank Deposit 42

29%

36%

21%

14%Mutual

Funds

Life

Insurance

INTERPRETATION :

The Graph Shows that most of the persons choose Life Insurance while saving TAX

whereas only 14% of them choose to deposit in Bank.

CHART 4

Q.4 If you want to take an insurance cover which company would you

prefer ?


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SBI Life Insurance 87

Bajaj Allianz 24

ICICI Prudential 48

LIC 102

Reliance Life 39

87

24

48

102

39

0

20

4060

80

100

120

Seri

INTERPRETATION :

The Graph shows that LIC and SBI Life Insurance are the company in which customers

prefer to invest rather than any of the other companies.

CHART 5

Q.5 Do you know insurance products offer investment also under ULIP

policies?


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YES 196

NO 104

196

104

0

50

100

150

200

250

YES NO

Seri

INTERPRETATION:

The above graph shows that out of the sample 196 people are aware that insurance

products offer investment under ULIP polices rest 104 are still unaware.

CHART - 6

Q.6 In which type of policies you like to invest?

Traditional 67


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ULIP 233

22%

78%

Traditio

nal

INTERPRETATION :

The Graph shows that 78% peoples like to invest in ULIP policies which show a very

high percentage of market acceptance of these products and only 22% would like to

invest in Traditional policies.

CHART 7

Q.7 Have you ever gone for ULIP products with any of the company?

YES 136


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NO 164

0

50

100

150

200

YES NO

136164 Se

INTERPRETATION :

The Graph shows that about 45% of the persons have invested in ULIP products.

Investment in ULIP products are increasing day by day.

CHART 8

Q.8 Normally when do you plan to invest for TAX saving?

In the end of FY 105

In the beginning of FY 54

Anytime 45


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Depends on the availability of funds 96

35%

18%15%

32%

In the endof FY

In thebeginning

of FY

INTERPRETATION :

The above graph shows that normally people plan to invest for TAX saving in the end of

the financial year or on the availability of funds.

CHART 9

Q.9 Which term would you like to invest?

Short term 188


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Long term 112

63%

37%Sho

INTERPRETATION :

The Graph shows that 63% of the people like to invest for Short term which is a very

high percentage.

CHART 10

Q.10 To what extent the company plays a role in selecting the policy?

Least 30

Strong 60

Very Strong 210


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10%

20%

70%

Least

INTERPRETATION:

The Graph shows that 70% believes that the company plays a very vital role in selecting

the company to invest and 20% believes that it plays an important role and 10% believes

that company doesnt play any major role.


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Chapter -6

FINDINGS

FINDINGS

As my objective was to compare the unit linked plan with Traditional plan. So,

my Target population was the customers and financial advisors of SBI Life. I analyzed

their mind set through questionnaire. For that I took the sample size of 300 customers and

advisors and I found following results.

I found that maximum of people preferred unit linked plan to invest in Insurance

due to the life cover benefits and majority of people are shifting from traditional

plans to unit linked plans because of the following reason: Short Term: It is the best feature of unit-linked plan, which was not present in

traditional plan. For example: In the unit linked plan here are two products. Unit

Plus II and Horizon II

In the Unit Plus: There is no maturity date. Any Time after three year of

commencement one can make partial or complete withdrawals with out penalty.

Unit Plus II: After paying the premium for 4 years one can withdrawal whole

money with interest after 4 years.

Flexibility (Investment Option).

In the Unit Linked plan there are more flexibilities like.

(i) One can increase his death benefit.


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Flexible Contribution: One can Increase or decrease his annual contribution. The

max. Decrease in contribution can be up to 20% of the Initial contribution.

Transparency: One can always get to know the Charges, which are deducted from the

Premium.

More Features:

(a) Loan: One can obtain loan against policy.

(b) Surrender values: The unit linked plan allowed surrender after 1 year's contribution

is paid.

(c) Choice of top up: One can top up his investment any time when he has surplus funds.

(d) Withdrawals

(e) Switches: if at a later stage the financial priorities change, one can switch between the

various investment options at any time. There is a provision of 4 free switches everypolicy year.

LIC and SBI are the two most known brands in the market

Through the study it was found that the main purpose of buying insurance is

investment.


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Chapter 7

SUGGESTIONS

RECOMMENDATIONS / SUGGESTION

In order to survive in this era of cut throat competition, it is very important for an

organization to give the best to its customers and the most reasonable price.

After going through the study on my project, I would like to come up with

following recommendations:


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All the company should come out of a Unit Linked product that should aid every

section of the society.

The advisors should be made aware and educated so that they can extend their

services not only in terms of collection of premium cheques from the policy

holders but also to educate them about the insurance and the latest Non

Traditional products.

The company should target the lower segment customers also

Which is Better, Unit-linked or Traditional?

The two strong arguments in favour of unit-linked plans are, firstly, the investor knows

exactly what is happening to his money and secondly, it allows the investor to choose the

assets into which he wants his funds invested. A traditional with profits, on the other

hand, is a black box and a policyholder has little knowledge of what is happening. An

investor in a ULIP knows how much he is paying towards mortality, management and

administration charges. He also knows where the insurance company has invested the

money. The investor gets exactly the same returns that the fund earns, but he also bears


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the investment risk.

The transparency makes the product more competitive. So if you are willing to bear the

investment risks in order to generate a higher return on your retirement funds, ULIPs are

for you.

Traditional with profits policies too invest in the market and generate the same returns

prevailing in the market. But here the insurance company evens out returns to ensure that

policyholders do not lose money in a bad year. In that sense they are safer.

ULIPs also offer flexibility. For instance, a policyholder can ask the insurance company

to liquidate units in his account to meet the mortality charges if he is unable to pay any

premium installment. This eats into his savings, but ensures that the policy will continue

to cover his life.

Comparison between Return on ULIPs and Tradi tional Pol ic ies

The return on the ULIPs till date has been on an average 11.45% and that on the

conventional policies is 6% (both calculated on IRR basis). Thus, the return on the ULIPs

outperforms the returns on the conventional policies. However, the returns on the Postal

Life Insurance comes close to the returns on ULIPs i.e. 9.75%

Dangers faced by traditional policies:

The source of high returns for companies that dealt with traditional insurance products in

the form of assured returns has drained out. It will thus be, very difficult for these

companies to meet their contractual obligations.

E.g. A person who invests Rs. 4000/- p.a. as premium in Jeevan Suraksha, a pension plan

of LIC, at the age of 25 is promised an assured pension of 5500/- p.m. at the age of 55.

The position looks as follows:


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The cash outflow for the company is 13,20,000/- and the insurance company gets only

1,20,000/- (the readers should note that these are in paid till the last year and not at the

initial stage). For this the company will have to earn a return @ 18% p.a. (compounded

quarterly) which in todays market situation is very difficult.

The system is opaque.

The insurer is not aware about where the amount is invested.

The returns are lesser in longer term as compared to ULIP.

ULIP allows flexibility to increase returns at higher risk or moderate returns at

low risk depending on the risk appetite of the client.

ULIP is an excellent mix of Insurance & Investments.

The long term return (7 yrs & above) on any Equity Market in the world is double digit

positive, except during the times of Great Depression.

Perceived Dangers and Points to be kept in Mind While Investing in

ULIP

Investment and returns depend on the performance of the Markets which can get

volatile, and therefore, risky.

The initial cost of ULIP is high, thus making Mutual Funds a better investment

opportunity than any insurance product.

Converting the ULIPs to a Mutual Fund policy and marketing on these terms by

some Private Sector Companies.

The knowledge of the agent of ULIPs is sometimes limited and he is thus, is not

in a position to explain to the client the risks and dangers associated with ULIPs.

Large positions by the clients to Risky Fund.


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CONCLUSION

Insurance is still a selling product in country like India. It is the company who has to find

the market and go to the prospect rather then the client directly approaching to the

company. The opening up of the sector has also resulted in stiff competition as many

private companies are entering in. So, it becomes very important to be the best out of the

rest in the market. This company can achieve by offering value added services to the

customers by giving them maximum benefits.


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Company is trying to given more assured returns to the investors. Mostly products are

based on the NAV or they are unit Linked. So awareness, knowledge and brand image of

the product will be the first priority for the company.

ULIPs are indeed a boon to the investors. However, the investors must keep the following

points in mind while investing in ULIPs:

Visit a professional Financial Planner to take a well-informed decision.

Be well read and well informed.

Dont take any insurance policy without riders.

The bonus of managing your investment lies on the c

25905054 Summer Project Final

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