Life Insurance MBA Project at ING Vysya

8/11/2019 Life Insurance MBA Project at ING Vysya

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Chapter 1Abstract

Objective

Review of literature

Introduction

1



ABSTRACT

In India, Life Insurance sector plays a major role in savings of a

person !here are many players in life insurance sector and LIC is theleading as it has roots in India from more than "# years !o purchase any

thing in this world a customer has his$her own choice of preferences

!he project study of I%& 'ysya unit lin(ed as a part of financial

planning

!he aim of study is to e)amining a client*s personal situation,

financial resources, financial objectives and financial problems in a

comprehensive manner, monitoring the plan performance to ta(e

corrective action as necessary to assure that results match the plan

projections +o this study is also intended to find whether people are

aware of I%& 'ysya Life Insurance

!he method of study is mar(et research with structured

uestionnaire consisting of multiple choice uestions !he sample is 1##

collected from persons having Life Insurance -olicy

!he -rivate Insurance companies are also able to create brand

value and trust in customers +o they have only ./0 appro)2 mar(et

share in Life insurance sector

/



OBJECTIVE

• 3)amining a client*s personal situation, financial resources,

financial objectives and financial problems in a comprehensive

manner

• 4eveloping an impartial, integrated plan to utili5e the resources to

meet objectives and solve problems, ta(ing the steps to implement

that plan once approved by the client

• 6onitoring the plan performance to ta(e corrective action as

necessary to assure that results match the plan projections

• !o find out how best an 7nit Lin(ed -lan can become a necessary

part of the financial planning for the individuals

• !o chec( that among the price of the premium, benefits of policy,

brand name the company has, which is more preferred by a person

to ta(e insurance policy

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REVIEW OF LITERATURE

Marketing Research:

6ar(eting research is defined as the 9+ystematic design,

collection, analysis, and reporting of data and findings relevant to a

specific mar(eting situation facing the company According to 3+O6AR

the world association of opinion and mar(et research professionals

A company can hire the services of a mar(eting research firm or

conduct research in creative and affordable ways such as:

• 3ngaging professors or students to design and conduct studies

6any large companies hire summer trainees from management

institutions for cost effective mar(et research year after year

Awarding live projects to 6;A students as part of their course

wor( is also a common practice

• 6onitoring published information and actions systematically !his

may be done by e)amining news papers, web sites, and industry

reports and by visiting competitive outlets

3ffective mar(eting research involves five steps !hey are:

• +tep 1: define the problem and the research objectives

• +tep /: collect the information

• +tep 8: analy5e the information

• +tep .: present the findings

• +tep ": ma(e the decision

.



INTRODUCTION

ABOUT LIFE INSURANCE

What is Lie Ins!rance"

9Insurance is a contract between two parties where by one party

called insurer underta(es in e)change for a fi)ed sum called premiums, to

pay the other party called 9insured< a fi)ed amount of money on the

happening of a certain event<

Insurance is a protection against financial loss arising on the

happening of an une)pected event Insurance companies collect premium

to provide for this protection A loss is paid out of the premiums collected

from the insuring public and the insurance companies act as trustees to

the amount collected

=or e)ample, in a life policy, by paying a premium to the insurer,

the family of the insured person receives a fi)ed compensation on the

death of the insured

+imilarly, in car insurance, in the event of the car meeting with an

accident, the insured receives the compensation to the e)tent of damage

Wh# sh$!%& #$! take Ins!rance"

Insurance is designed to safeguard oneself and one*s family against

possible losses on account of ris(s and perils It provides financial

compensation for the losses suffered due to the happening of any

unforeseen event

;y ta(ing life insurance a person can have peace of mind and need

not worry about the financial conseuences in case of any untimely death

Certain insurance contracts are also made compulsory by

legislation =or e)ample, motor vehicles act 1>?? stipulates that a person

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driving a vehicle in a public place should hold a valid insurance policy

covering 9act< ris(s Another e)ample of compulsory insurance pertains

to the environmental protection act, wherein a person using or carrying

ha5ardous substances as defined in the act2 must hold a valid public

liability act2 policy

Wh$ 'r$(i&es Ins!rance"

In India, prior to liberali5ation insurance protection was made

available through public sector insurance companies, namely, life

insurance Corporation of India LIC2 and the four subsidiaries of &eneral

Insurance Corporation of India &IC2

;y the passing of the IR4A ;ill, the Insurance sector has been

opened up for private companies to carry on Insurance business

Insurance contracts are based on good faith ie the details

furnished by the proposals are accepted in good faith and this will form

the basis of the contract

T#'es $ Lie Ins!rance )$%icies:

• !erm Life Insurance

• 3ndowment Insurance

• @hole Life Insurance

Ter* Lie Ins!rance:

!erm Life Insurance furnishes protection for a limited number of

years ate the end of which the policy e)pires !he face amount of the

policy is payable only if the insured*s death occurs during the stipulated

term, and nothing is paid in case of survival !erm product prices are

more easily compared than prices of other life products as term policies

are usually simpler than other policies



!ypes of !erm Life Insurance:

• Level =ace Amount

• %onBLevel =ace Amount

En&$+*ent Lie Ins!rance:

3ndowment policies, promises not only to pay the policy face

amount on the death of the insured during fi)ed term of years, but also to

pay the full face amount at the end of the term if the insured survives the

term

!ypes of 3ndowment -olicies:

• +ingle -remium 3ndowment -olicy

• +emi 3ndowment -olicy

• 6odified 3ndowment -olicy

Wh$%e Lie Ins!rance:

@hole life insurance is intended to provide insurance protection

over one*s entire life time I t provides the payment of the face amount

upon the insured*s death regardless of when death occurs It is insurance

for the whole of the life

!ypes of whole life Insurance:

• Ordinary Life Insurance

• Limited -ayment whole Life Insurance

• Current Assumption whole Life Insurance

• 7nitBLin(ed Life Insurance



Chapter /IR4A

7nit Lin(ed -lan

=inancial -lanning

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C$*'$siti$n $ A!th$rit# !n&er IRDA Act, -...

As per the section . of IR4A ActD 1>>>, Insurance Regulatory and

4evelopment Authority IR4A, which was constituted by an act of

parliament2 specify the composition of Authority

!he Authority is a ten member team consisting of

a2 a ChairmanE

b2 five wholeBtime membersE

c2 four partBtime members,

D!ties, )$+ers an& F!ncti$ns $ IRDA

+ection 1. of IR4A Act, 1>>> lays down the duties, powers andfunctions of IR4A

12 +ubject to the provisions of this Act and any other law for the time

being in force, the Authority shall have the duty to regulate,

promote and ensure orderly growth of the insurance business and

reBinsurance business

/2 @ithout prejudice to the generality of the provisions contained in

subBsection 12, the powers and functions of the Authority shall

include, B

a2 issue to the applicant a certificate of registration, renew, modify,

withdraw, suspend or cancel such registrationE

b2 protection of the interests of the policy holders in matters

concerning assigning of policy, nomination by policy holders,

>



insurable interest, settlement of insurance claim, surrender value of

policy and other terms and conditions of contracts of insuranceE

c2 specifying reuisite ualifications, code of conduct and practical

training for intermediary or insurance intermediaries and agentsE

d2 specifying the code of conduct for surveyors and loss assessorsE

e2 promoting efficiency in the conduct of insurance businessE

f2 promoting and regulating professional organi5ations connected

with the insurance and reBinsurance businessE

g2 levying fees and other charges for carrying out the purposes of this

ActE

h2 calling for information from, underta(ing inspection of, conducting

enuiries and investigations including audit of the insurers,

intermediaries, insurance intermediaries and other organi5ations

connected with the insurance businessE

i2 control and regulation of the rates, advantages, terms and

conditions that may be offered by insurers in respect of general

insurance business not so controlled and regulated by the !ariff

Advisory Committee under section .7 of the Insurance Act,

1>8?E

j2 specifying the form and manner in which boo(s of account shall be

maintained and statement of accounts shall be rendered by insurers

and other insurance intermediariesE(2 regulating investment of funds by insurance companiesE

l2 regulating maintenance of margin of solvencyE

m2 adjudication of disputes between insurers and intermediaries or

insurance intermediariesE

n2 supervising the functioning of the !ariff Advisory CommitteeE

1#



o2 specifying the percentage of premium income of the insurer to

finance schemes for promoting and regulating professional

organi5ations referred to in clause f2E

p2 specifying the percentage of life insurance business and general

insurance business to be underta(en by the insurer in the rural or

social sectorE

2 e)ercising such other powers as may be prescribedE

11



ABOUT UNIT LIN/ )LAN

6ost insurers in the year /##. have started offering at least a few

unitBlin(ed plans 7nitBlin(ed life insurance products are those where the

benefits are e)pressed in terms of number of units and unit price !hey

can be viewed as a combination of insurance and mutual funds

!he number of units that a customer would get would depend on

the unit price when he pays his premium !he daily unit price is based on

the mar(et value of the underlying assets euities, bonds, governmentsecurities, et cetera2 and computed from the net asset value

!he advantage of unitBlin(ed plans is that they are simple, clear,

and easy to understand ;eing transparent the policyholder gets the entire

upside on the performance of his fund ;esides all the advantages they

offer to the customers, unitBlin(ed plans also lead to an efficient

utili5ation of capital

7nitBlin(ed products are e)empted from ta) and they provide life

insurance Investors welcome these products as they provide capital

appreciation even as the yields on government securities have fallen

below per cent, which has made the insurers slash payouts

According to the IR4A, a company offering unitBlin(ed plans must

give the investor an option to choose among debt, balanced and euity

funds If you opt for a unitBlin(ed endowment policy, you can choose to

invest your premiums in debt, balanced or euity plans

If you choose a debt plan, the majority of your premiums will get

invested in debt securities li(e gilts and bonds If you choose euity, then

a major portion of your premiums will be invested in the euity mar(et

1/



!he plan you choose would depend on your ris( profile and your

investment need

!he ideal time to buy a unitBlin(ed plan is when one can e)pectlongBterm growth ahead !his is especially so if one also believes that

current mar(et values stoc( valuations2 are relatively low

+o if you are opting for a plan that invests primarily in euity, the

bu55ing mar(et could lead to windfall returns Fowever, should the bu55

die down, investors could be left stung

If one invests in a unitBlin(ed pension plan early on, say when one

is /", one can afford to ta(e the ris( associated with euities, at least in

the planDs initial stages Fowever, as one approaches retirement the

uantum of returns should be subordinated to capital preservation At this

stage, investing in a plan that has an euity tilt may not be a good idea

Considering that unitBlin(ed plans are relatively new launches,

their short history does not permit an assessment of how they will

perform in different phases of the stoc( mar(et 3ven if one views

insurance as a longBterm commitment, investments based on performance

over such a short time span may not be appropriate

7nitBlin(ed life insurance offers the interesting option of

combining protection and ta) advantages of life insurance with the

attractive prospects of investing in euities

A unitBlin(ed plan wor(s on a minimum premium basis and not on

a sum assured one Gou decide the amount you can contribute at regular

intervals 7LI- offers you insurance cover till your insurance needs are

fulfilled, beyond that it becomes an investment avenue

18



0$+ the# c$*'are"

!o e)plain how 7LI- wor(s we will compare F4=C 7LI-

3ndowment plan with F4=C 3ndowment plan

)re*i!*

In case of: 7LI-, you pay a minimum premium of Rs 1#,### per

annum irrespective of age and term of the policy -remiums levels can be

either reduced or increased if premiums have been paid regularly for

three years and the unit fund value is at least Rs 1",### !he fle)ibility of increasing premium contributions in an e)isting account helps

policyholders manage their cash flows

In normal$traditional endowment plans the premium is calculated

on the basis of age and the term and the amount you pay, as premium

remains the same for the full term !he minimum premium is Rs 1,"##

annually

S!* ass!re&

!he sum assured depends on your age and the cover you ta(e in

case of 7LI- 4epending on your age at entry, you may choose between 8

levels of cover B low, medium or high

In the traditional plan, the sum assured is calculated by age and

term of the policy to which premium factor is applied

T$'1!'s

Apart from your regular contributions, in case of 7LI-, you can

also ma(e additional payments to increase the savings component !hese

1.



topBups do not affect the sum assured %ormal endowment policy does

not offer you these benefits

In(est*ent

Gou choose the fund where you want to invest your money F4=C

offers a choice of five funds B liuid, defensive, secure managed, secure

defensive and growth !he Liuid =und is the least ris(y with investments

in ban( deposits and shortBterm money mar(et instruments &rowth =und

is the ris(iest with an investment of up to 1##0 in euities

In traditional insurance plans your money is invested (eeping in

view the IR4A specification ie minimum ?"0 in debt with the balance

in euities

Charges "

As is the case with unitBlin(ed plans, this plan, too, imposescharges, on both the funds invested by the policyholder and by

cancellation of units !hese charges vary depending on the (ind of

premium payment option chosen single or regular2

Other charges include a fund management charge of #?#0 of the

fund value per annum, apart from a flat fee of Rs 1" per month deducted

by cancellation of units

In case of 7LI-, for the first / years the investment content rate is

80 of the premium and for the remaining years >>0 Ris( cover

charges for death sum assured, critical illness, accidental death2 are

charged for canceling units on each monthly charge date, based on the

personDs age at that time

1"



In traditional plans, the charges are not disclosed !here is an

annual fee of Rs 1"# for regular premium policies and Rs 8## for single

premium ones

Ret!rns

In case of 7LI-, in an eventuality you receive the sum assured or

fund value whichever is higher and on maturity the fund value In normal

endowment plan, in either case you receive the same benefit ie the sum

assured and vested bonus

In case #$! st$' 'a#ing 're*i!*s"

If this is in the first 8 years then in case of 7LI-, on cancellation of

the policy before paying regular premium for 8 years, there is a charge of

/"0 of the outstanding premiums due during this 8Byear period In case

of normal endowment the policy lapses and nothing is paid bac(

If you stop paying premiums after 8 years, in 7LI- you have the

option to ma(e policy paid up, provided the policy has accumulated

sufficient policy value At present this amount is Rs 1",### If the fund

value of a paid up policy falls below Rs 1",### then the policy is

cancelled and the fund value is returned to you !he ris( cover continues

for the sum assured even though the policy has reached the paid up status

In traditional plan the policy becomes a paid up policy

Me&ica%s

In both the plans the norms for medicals are similar ie medicals

are compulsory

1



Wh# D$ 2$! Nee& Lie Ins!rance"

!hat*s a common uestion @hy would you need InsuranceH +imply put,

Life brings with it many surprises, some pleasant and some not so and a

Life Insurance -lan ensures that you are better prepared to face

uncertainties FowH In a number of ways:

)r$tecti$n

Gou need life insurance to be there and protect the people you love,

ma(ing sure that your family has a means to loo( after itself after you are

gone It is a thoughtful business concept designed to protect the economic

value of a human life for the benefit of those financially dependent on

him !hat*s a good reason

+uppose you are suffering an injury that (eeps you away from earningH

@ould you li(e to be a financial burden on your family, already losing out

on your salaryH @ith a life insurance policy, you are protected Gour

family is protected

Retire*ent

Life insurance ma(es sure that you have regular income after you retire

and also helps you maintain your standard of living It can ensure that

your postBretirement years are spent in peace and comfort

Sa(ings an& In(est*ents

Insurance is a means to +ave and Invest Gour periodic premiums are li(e

+avings and you are assured of a lump sum amount on maturity A policy

can come in really handy at the time of your child*s education or

marriage ;esides, it can be used as supplemental retirement income

Ta3 Beneits

1



Life insurance is one of the best ta) saving options today Gour ta) can be

saved twice on a life insurance policyBonce when you pay your premiums

and once when you receive maturity benefits 6oney saved is money

earned

Unit linked insurance plans are transforming into mutual

funds. Which is better for you?

Unit %inke& ins!rance $r *!t!a% !n&"

@hich should you get, when both potentially do very similar things A

mutual fund is a simple asset management company that pools investorsD

money and invests it with a view to ma)imising returns A unit lin(ed

plan is an insurance product that can be used as a mutual fund vehicle and

give mar(et lin(ed returns with almost nil protection or it can build in

protection along with mar(et lin(ed returns Assuming that we are

comparing mutual funds with unit lin(ed insurance plans with minimal

protection, which is betterH !he answer to this lies in costs that the two

charge and the ta) brea(s available And here lies the problem 6utual

fund costs are simple, transparent and standardised and insurance costs

are li(e a noodle soup

What are these c$sts"

3ver tried to pic( a noodle out of soup with a for(H @or(ing out costs of

insurance is a similar e)ercise, just when you thin( you have it, it slips

away Costs vary across companies, across products in the same company

and within the product, across premium cutBoffs, categories, tenures and

riders

1?



6utual fund costs, on the other hand, are simple, transparent and

common across product categories =ront end or entry loads the upfront

deduction to ta(e care of the distribution costs of a mutual fund2 and e)it

loads have a total common limit of per cent of the the net asset value

%A'2, though the industry norm in euity is / per cent entry load today

Annual fees that a fund can charge is restricted to a ma)imum of /" per

cent per year this rate is according to slabs and reduces as the fund si5e

increases2 !here are no other charges Fowever, there is no ta) rebate on

a fund and though capital gains are e)empt from ta) for a year, its future

is uncertain

Insurance costs and benefits

;ecause of the comple)ity of the insurance product and the cost

differentiation we cannot tell you which product is the least cost It

depends on what you buy Fowever, we will give a handle with which to

open the door to understanding unit lin(ed costs Gou will (now what to

as( the agent and how to compare costs

A !nit %inke& 'r$&!ct +i%% ha(e c$sts acr$ss i(e s!41hea&s:

-5 U'r$nt c$sts5 !his is a percentage of your first premium that is

deducted before the money is deployed !hese costs can continue over

the life of the product or terminate in a few years

/ Reg!%ar charges5 !hese include the annual asset management

charges for managing your money and could include a per month

charge towards the insurance part of the policy

8 S+itching c$sts5 !o switch, from one scheme within a plan to

another, may carry a charge

. E3it c$sts5 If you e)it before a certain time period you may pay a

heavy charge for that

1>



" Other a&*inistrati$n c$sts5 +ome periodic costs can be loaded

under this head as well

On the plus side insurance gets ta) brea(s Insurance premiumgives you a ta) rebate and the insurance lump sums are ta) free

/#



R!sh $r !nit1%inke& sche*es

Om Jota( 6ahindra Life Insurance has grossed Rs /"B"# la(h Rs

/"B" million2 from high net worth individuals for its unitBlin(ed offering

BB Jota( +afe Investment -lan

ICICI -rudential Life has seen an ?? per cent surge in the topBups

to its unitBlin(ed policies in the second uarter And ;irla +un Life

Insurance has seen a 1" per cent growth in its unitBlin(ed plans

@hat does this meanH Leveraging the current bull run, cashBrich

policyholders are investing more than their annual premiums in unitB

lin(ed insurance plans, thereby topping up the investment portion of the

policy

K!here has been a surge in interest by high net worth individuals in

investmentBrelated ris( products,K says Abhay Aima, F4=C ;an( country

head, private ban(ing

7nitBlin(ed plans are similar to mutual fund schemes, where the

premium is invested in various funds in (eeping with policyholdersD ris(

appetite

+ome players allow for topping up the premium without affecting

the sum assured value of the base policy2, allowing policyholders to purchase more units

7nli(e traditional insurance products, unitBlin(ed plans offer

transparency in returns in terms of net asset value and fle)ibility in

investment options in debt, euity and a mi) of both

K+ome people are buying because of the bull run ;ut the growth islargely due to the transparency and fle)ibility of the product,K she adds

/1



Figh net worth individuals would li(e to protect themselves from

the mar(et volatility and unitBlin(ed plans offer a safety net unli(e other

investment products, he adds

3ven state insurer, the Life Insurance Corporation of India, has an

unitBlin(ed pension plan in the offing

K@e have received a lot of interest from individuals and corporates

for such a productK !oday, LIC is aggressively positioning its earlier

unitBlin(ed plan BB ;ima -lus hoping it will account for five per cent of

the total business

M!t!a% F!n&

A mutual fund is a company that brings together money from many

people and invests it in stoc(s, bonds or other assets !he combined

holdings of stoc(s, bonds or other assets the fund owns are (nown as its

portfolio 3ach investor in the fund owns shares, which represent a part of

these holdings

U%i's c$*'aris$n6665+ith *!t!a% !n&666

@hen it comes to comparison of 7LI- it has to be with a pure insurance

plan along with investments, whyH ;ecause a 7LI- or 7nit Lin(ed

Insurance -lan is a combination of Insurance and Investment and

therefore the comparison has to be made with a pure insurance cover and

investments in 6utual fund It all boils down to the charges and the actual

amount invested in the mar(et

ULI)7s !s!a%%# ha(e $%%$+ing charges 4!i%t int$ it :

a2 7pBfront Charges

b2 6ortality Charges Charges for providing the ris( cover for life2

//



c2 Administrative Charges

d2 =und 6anagement Charges

M!t!a% F!n&7s ha(e the $%%$+ing charges :

a2 7pBfront charges 6ar(eting, Advertising, distributors fee etc2

b2 =und 6anagement Charges e)penses for managing your fund2

Ter* Ins!rance ha(e the $%%$+ing charges :

a2 Gearly premium for ris( cover2

b2 +ervice charges

/8



ABOUT FINANCIAL )LAN

In general usage, a inancia% '%an can be a budget, a plan for

spending and saving future income !his plan allocates future income to

various types of e)penses, such as rent or utilities, and also reserves some

income for shortBterm and longBterm savings A financial plan can also be

an investment plan, which allocates savings to various assets or projects

e)pected to produce future income, such as a new business or product

line, shares in an e)isting business, or real estate

In 4!siness, a financial plan can refer to the three primary financial

statements balance sheet, income statement, and cash flow statement2

created within a business plan Financia% $recast or financial plan can

also refer to an annual projection of income and e)penses for a company,

division or department A financial plan can also be an estimation of cash

needs and a decision on how to raise the cash, such as through borrowing

or issuing additional shares in a company

@hile a financial plan refers to estimating future income, e)penses

and assets, a inancing '%an or inance '%an usually refers to the means

by which cash will be acuired to cover future e)penses, for instance

through earning, borrowing or using saved cash

What is inancia% '%anning6

=inancial planning is the process of meeting your life goals through

the proper management of your finances Life goals can include buying a

home, saving for your childDs education or planning for retirement

/.



!he financial planning process as described by C=- ;oard, consists

of si) steps that help you ta(e a Kbig pictureK loo( at where you are

financially 7sing these si) steps, you can wor( out where you are now,

what you may need in the future and what you must do to reach your

goals

!he process involves gathering relevant financial information,

setting life goals, e)amining your current financial status and coming up

with a strategy or plan for how you can meet your goals given your

current situation and future plans

The Beneits $ Financia% )%anning

=inancial planning provides direction and meaning to your

financial decisions It allows you to understand how each financial

decision you ma(e affects other areas of your finances =or e)ample,

buying a particular investment product might help you pay off your

mortgage faster or it might delay your retirement significantly ;y

viewing each financial decision as part of a whole, you can consider its

short and longBterm effects on your life goals Gou can also adapt more

easily to life changes and feel more secure that your goals are on trac(

/"



Financia% '%anning 'r$cess c$nsists $ the $%%$+ing si3 ste's

1 Esta4%ishing an& &eining the c%ient1'%anner re%ati$nshi'5

!he financial planner should clearly e)plain or document the services

to be provided to you and define both his and your responsibilities

!he planner should e)plain fully how he will be paid and by whom

Gou and the planner should agree on how long the professional

relationship should last and on how decisions will be made

/ 8athering c%ient &ata, inc%!&ing g$a%s5

!he financial planner should as( for information about your financial

situation Gou and the planner should mutually define your personal

and financial goals, understand your time frame for results and

discuss, if relevant, how you feel about ris( !he financial planner

should gather all the necessary documents before giving you the

advice you need

8 Ana%#9ing an& e(a%!ating #$!r inancia% stat!s5

!he financial planner should analy5e your information to assess your

current situation and determine what you must do to meet your goals

4epending on what services you have as(ed for, this could include

analy5ing your assets, liabilities and cash flow, current insurance

coverage, investments or ta) strategies

. De(e%$'ing an& 'resenting inancia% '%anning rec$**en&ati$ns

an&$r a%ternati(es5

!he financial planner should offer financial planning

recommendations that address your goals, based on the information

you provide !he planner should go over the recommendations with

you to help you understand them so that you can ma(e informed

decisions !he planner should also listen to your concerns and revise

the recommendations as appropriate

/



;5 I*'%e*enting the inancia% '%anning rec$**en&ati$ns5

Gou and the planner should agree on how the recommendations will

be carried out !he planner may carry out the recommendations or

serve as your Kcoach,K coordinating the whole process with you and

other professionals such as attorneys or stoc(bro(ers

M$nit$ring the inancia% '%anning rec$**en&ati$ns5

Gou and the planner should agree on who will monitor your progress

towards your goals If the planner is in charge of the process, she

should report to you periodically to review your situation and adjust

the recommendations, if needed, as your life changes

F!n&a*enta%s $ Financia% )%anning

What Is It"

=inancial planning is the process of solving financial problems and

achieving financial goals by developing and implementing a personali5ed

Kgame planK In order to be effective this KplanK must ta(e into

consideration an individual*s overall picture It must be:

• coordinated

• comprehensive

• continuous

=inancial planning is li(e all other phases of lifeE it involves choices

S'en& n$+ $r sa(e $r %ater"

)a# $ e3isting 4i%%s $r increase retire*ent sa(ings"

F$c!s sa(ings &$%%ars $n sh$rt ter* $r %$ng ter* g$a%s"

/



A true financial plan does not focus one aspect or product, but instead

see(s to ta(e all areas of planning into consideration when ma(ing

financial decisions

What is Inc%!&e&"

• Cash =low 6anagement

!his aspect of planning deals with the day to day allocation of

incomeE and its effective use in paying for current living e)penses

and in accumulating assets which will be used in meeting financial

goals

• !a) -lanning and 6anagement

!his area focuses on the understanding of and application of

federal and state income ta) law, estate and inheritance ta)esE and,

when possible, minimi5ing these ta)es

• Ris( -lanning and 6anagement

!his area of planning deals with the ris( of losing life, income, or

property It includes the use of insurance products and strategies

• Investment -lanning and 6anagement

Almost everyone has accumulation goals for which investments

must be made and managed !hese could include buying a homeE

planning for collegeE or providing for retirement

• Retirement -lanning and 6anagement

;y far the most common accumulation goal is the ability to become financially independent Retirement strategies encompass

/?



the understanding of the +ocial +ecurity systemE employerB

sponsored retirement plansE and personal savings accumulation

plans

• 3state -lanning and 6anagement

!he final phase of planning is for the transfer of assets to our heirs

with minimi5ation of ta)es and other costs

Wh# )%an"

Anyone who has financial challenges to solve or financial goals to

achieve needs financial planning =inancial -lanning can help to achieve

both greater wealth and financial security Inadeuate or improper

planning can be financially disastrous An uninsured loss can wipe out

accumulated wealthE insufficient savings for retirement can force a

reduced lifestyle and$or postponement of retirementE and improper ta)

planning can result in higher than necessary ta)es causing dollars to be

lost to an accumulation plan or to one*s heirs

Wh# D$ )e$'%e Fai% t$ )%an"

• !hey may feel they do not have enough income or financial assets

to consider planning

• !hey may believe that they are too young$old to begin planning

• !hey may be reluctant to consider some of the less pleasant aspects

of planning such as thin(ing about death, disability, illness, etc

• !hey may believe that financial planning is too e)pensive

• !hey may procastinate !he %umber One Reason =or =ailure2

/>



The Ste's in Financia% )%anning

• Identify &oals and Objectives

• &ather the necessary data

• Analy5e present situation and consider alternatives

• 4evelop strategies to achieve goals

• Implement the strategies

• Review and Revise periodically

8#



Chapter 8Company profile

Fistory of Insurance in India

6ethodology

Limitations

81



INDUSTR2 )ROFILE

I%& 'ysya Life entered the private life insurance industry in Indiain +eptember /##1, and has established itself as a distinctive life

insurance brand with an innovative, attractive and customerBfriendly

portfolio ranging from protection, savings, retirement and investment

plansE which it sells through a uniue tool B !he Life 6a(er

I%& 'ysya Life is headuartered in ;angalore, and is a part of the

I%& group !he I%& group is a 1"#ByearBold global financial institution

of 4utch origin offering ban(ing, insurance and asset management to

over # million private, corporate and institutional clients in "# countries

@e are the worldDs Largest =inancial +ervices &roup and the worldDs

Largest Life Insurance -rovider

I%& &roup has wide and deep e)perience in setting up companies

in new mar(ets, which reuire substantial investments underlining I%&Ds

longBterm commitment In the last /# years, I%& &roup has established

successful life insurance companies in 1" countries contributing to the

development of insurance services in these countries successfully

8/



Manage*ent Tea*B$ar& $ Direct$rs <as $n Jan!ar# -=, >??=@

6r Rajan Raheja Chairman of the ;oard

6r Jshitij ain 6anaging 4irector M C3O

6r %% oshi 4irector

6r +atish Raheja 4irector

6r Rajesh Japadia 4irector

6r +; &anguly 4irector

6r Ron 'an Oijen 4irector

Seni$r Manage*ent Tea*Jshitij ain 6anaging 4irector M C3O

Amit &upta 4irectorE 6ar(eting M

Communication

Femamalini Rama(rishnan Appointed Actuary M Chief

Investment Ris( Officer CIRO2

6arco =redri(s =inancial Controller

Rahul Agarwal Customer +ervices M Ris(

! J 7thappa +ales, !ied Agency

G ' 4 ' -rasad ;usiness 4evelopment

)artners :

a I%& &roup

b 3)ide Industries Limited

c &ujarat Ambuja Cements Limited

d 3nams &roup

0ist$r# $ Ins!rance in In&ia

88



In India, insurance has a deepBrooted history It finds mention in

the writings of 6anu Manusmrithi 2, Gagnaval(ya Dharmasastra 2 and

Jautilya Arthasastra 2 !he writings tal( in terms of pooling of

resources that could be reBdistributed in times of calamities such as fire,

floods, epidemics and famine !his was probably a preBcursor to modern

day insurance Ancient Indian history has preserved the earliest traces of

insurance in the form of marine trade loans and carriers* contracts

Insurance in India has evolved over time heavily drawing from other

countries, 3ngland in particular

1?1? saw the a&(ent $ %ie ins!rance 4!siness in In&ia with the

establishment of the Oriental Life Insurance Company in Calcutta !his

Company however failed in 1?8. In 1?/>, the 6adras 3uitable had

begun transacting life insurance business in the 6adras -residency 1?#

saw the enactment of the ;ritish Insurance Act and in the last threedecades of the nineteenth century, the ;ombay 6utual 1?12, Oriental

1?.2 and 3mpire of India 1?>2 were started in the ;ombay

Residency !his era, however, was dominated by foreign insurance

offices which did good business in India, namely Albert Life Assurance,

Royal Insurance, Liverpool and London &lobe Insurance and the Indian

offices were up for hard competition from the foreign companies

In 1>1., the &overnment of India started publishing returns of

Insurance Companies in India !he Indian Life Assurance Companies

Act, 1>1/ was the first statutory measure to regulate life business In

1>/?, the Indian Insurance Companies Act was enacted to enable the

&overnment to collect statistical information about both life and nonBlife

business transacted in India by Indian and foreign insurers including

8.



provident insurance societies In 1>8?, with a view to protecting the

interest of the Insurance public, the earlier legislation was consolidated

and amended by the Insurance Act, 1>8? with comprehensive provisions

for effective control over the activities of insurers

!he Insurance Amendment Act of 1>"# abolished -rincipal

Agencies Fowever, there were a large number of insurance companies

and the level of competition was high !here were also allegations of

unfair trade practices !he &overnment of India, therefore, decided to

nationali5e insurance business

An Ordinance was issued on 1>th anuary, 1>" nationalising the

Life Insurance sector and Life Insurance Corporation came into e)istence

in the same year !he LIC absorbed 1". Indian, 1 nonBIndian insurers as

also " provident societiesN/." Indian and foreign insurers in all !he

LIC had monopoly till the late >#s when the Insurance sector was

reopened to the private sector

!he hist$r# $ genera% ins!rance &ates bac( to the Industrial

Revolution in the west and the conseuent growth of seaBfaring trade and

commerce in the 1th century It came to India as a legacy of ;ritish

occupation &eneral Insurance in India has its roots in the establishment

of !riton Insurance Company Ltd, in the year 1?"# in Calcutta by the

;ritish In 1>#, the Indian 6ercantile Insurance Ltd, was set up !his

was the first company to transact all classes of general insurance

business

1>" saw the formation of the &eneral Insurance Council, a wing of the

Insurance Associaton of India !he &eneral Insurance Council framed a

code of conduct for ensuring fair conduct and sound business practices

8"



In 1>?, the Insurance Act was amended to regulate investments

and set minimum solvency margins !he !ariff Advisory Committee was

also set up then

In 1>/ with the passing of the &eneral Insurance ;usiness

%ationalisation2 Act, general insurance business was nationali5ed with

effect from 1st anuary, 1>8 1# insurers were amalgamated and

grouped into four companies, namely %ational Insurance Company Ltd,

the %ew India Assurance Company Ltd, the Oriental Insurance Company

Ltd and the 7nited India Insurance Company Ltd !he &eneral Insurance

Corporation of India was incorporated as a company in 1>1 and it

commence business on anuary 1sst 1>8

!his millennium has seen insurance come a full circle in a journey

e)tending to nearly /## years !he process of re1$'ening $ the sect$r

had begun in the early 1>>#s and the last decade and more has seen it

been opened up substantially In 1>>8, the &overnment set up a

committee under the chairmanship of R% 6alhotra, former &overnor of

R;I, to propose recommendations for reforms in the insurance sector!he

objective was to complement the reforms initiated in the financial

sector !he committee submitted its report in 1>>. wherein , among other

things, it recommended that the private sector be permitted to enter the

insurance industry !hey stated that foreign companies be allowed to

enter by floating Indian companies, preferably a joint venture with Indian

partners

=ollowing the recommendations of the 6alhotra Committee report,

in 1>>>, the Insurance Regulatory and 4evelopment Authority IR4A2

was constituted as an autonomous body to regulate and develop the

insurance industry !he IR4A was incorporated as a statutory body in

8



April, /### !he (ey objectives of the IR4A include promotion of

competition so as to enhance customer satisfaction through increased

consumer choice and lower premiums, while ensuring the financial

security of the insurance mar(et

!he IR4A opened up the mar(et in August /### with the invitation

for application for registrations =oreign companies were allowed

ownership of up to /0 !he Authority has the power to frame

regulations under +ection 11.A of the Insurance Act, 1>8? and has from

/### onwards framed various regulations ranging from registration of

companies for carrying on insurance business to protection of

policyholders* interests

In 4ecember, /###, the subsidiaries of the &eneral Insurance

Corporation of India were restructured as independent companies and at

the same time &IC was converted into a national reBinsurer -arliament

passed a bill deBlin(ing the four subsidiaries from &IC in uly, /##/

!oday there are 1. general insurance companies including the

3C&C and Agriculture Insurance Corporation of India and 1. life

insurance companies operating in the country

)ROBLEM AREA AND NEED FOR STUD2

8



!oday in India there is 11# crore population and only ? crore

people have Life Insurance -olicy !here are around 1 Life Insurance

companies operating in India Among all the players in insurance mar(et

in India, LIC is the leading one and have high mar(et share in life

insurance sector LIC is -ublic +ector Company and all other are private

sector companies !he reason behind the LIC having high mar(et share, it

has its roots in India more than "# years and brand name it created in

minds of customer !he people of India have more trust in LIC than any

other private insurance

!he reason why LIC have high mar(et share is its fle)ible payment

options, benefits offered, low premium of policies and its relation and

coordination with all the public sector underta(ings ;ut the private Life

Insurance companies are unable to grab the insurance mar(et, because the

people do not have trust in private sector

A customer will have his$her own choice of preferences to

purchase a product !he preferences may be as uality, uantity, price,

and brand name, additional features from other products and long term

services, guarantee, warranty According to the choice preference and

need for the product only, the customer will purchase a particular product

=or different products and services the preferences will be different base

on time, situation, and need ;ut finally what the customer needs is value

of the money he$she paid for the product ie enough returns services, benefits2 by using the product !he case is same even in the insurance

sector also

!here are various factors which influence and customer prefers in

ta(ing an Insurance policy =actors are premium of policy, benefits of the

policy, fle)ible payment options, brand name the company have in

mar(et +o among the above factors which when is preferred more by the

customer is to be analy5ed

8?



!he life insurance companies should mar(et their products properly, and

ma(e people aware of the company and its various policies, benefits

Meth$& $ the St!&# In(estigati$n

• !he sample si5e is 1##

8>



• !his survey helps us to (now what benefits are loo(ed by the

consumer in Insurance -roduct and awareness of I%& 'ysya Life

Insurance

• A structured uestionnaire with multiple choice uestions are given

to consumers of age group of /"B"#

• !he respondents are mostly corporate, professional, e)ecutives and

business men who li(e latest trends

• !he source of primary data is uestionnaire consisting of 1#

uestions

• !he secondary data has been ta(en from internet and boo(s related

to insurance, mar(eting, and finance

• +cope of project is e)planatory and descriptive study

LIMITATIONS

The %i*itati$ns $ the st!&# are:

.#



• !he research is limited with in Fyderabad city

• !he data is collected from the people having life insurance policy

only

• !he time period for the study is limited

• !he statistical report presented in the project is of year /##.B/##

only !he updated report is not available

• In study of a unit lin(ed plan as a part of financial planning and

customer preference in ta(ing life insurance policy, price of the

policy is majorly considered because money is major constraint for

each and every person

• Only I%& 'ysya life insurance is chosen for analy5ing the

awareness of the company and study of unit lin(ed plan and even

for studying the promotional activities role in educating the people

about company

.1



Chapter .Analysis of 4ata

=indings

Recommendations

Conclusions

ANAL2SIS OF DATA

1 @hich company you have Life Insurance -olicyH

./



POLICY IN AN INSURANCE COMPANY

InsuranceCompany

No.of PolicyHolders

% of policy holders

LIC 65 65%

ICICI 10 10%ING Vysya 1 1%

H!"C 5 5%

#$hers %

Inter'retati$n :

=rom the above sample graph and table, we can understand that

most people opt and have insurance in LIC "0 !he InsuranceCompanies which people opt apart from LIC are I%& 'ysyaB1/0,

ICICIB1#0, F4=CB"0 and othersB?0

/ Among various Insurance Companies, why did you chose the

above mentioned companyH

Reas$n $r ch$$sing an Ins!rance C$*'an#

Reas$n 0of Responses

Reputation 8#0-rice of premium 1/0

.8



;enefits ./0

fle)ible premium

payment options 10

Inter'retati$n:

Fere the reason for choosing a particular Insurance Company is

evaluated 6ost people prefer an Insurance Company because of the

benefits of -olicy offered by company !he ne)t preference is given to

reputation the company has in the mar(et

!he minimum importance is given to fle)ible payment options and price

of premium

8 Is premium price of policy within your budget or notH

+ithin 4!&get n$t +ithin 4!&get

-remium price / /?

..



Inter'retati$n:

Out of total 1## samples /0 responded that the price of premium they

paying towards Life Insurance is within their budget, and remaining /?0

said that premium price is not within their budget

. 4o you (now about 7nit Lin(ed Life Insurance -lanH

Awareness of 7LI-

Ges %o

" .8

."





7nit Lin(ed -lan 1.

Life Insurance 8"

6utual =und /"

+hare 6ar(et /

Interpretation:

Out of 1## samples 8"0 of respondents believe that best option is

investing in Life Insurance, / 0 responded with share mar(et, /"0

responded that 6utual =unds are best and 1.0 respondents are saying

7LI-+ is the best option for investment

Fow much percentage of your salary are you saving monthlyH

Ann!a% Sa(ings in Inc$*e

$ sa(ings Res'$n&ents1#0B/#0 #

.





Rs"###

Rs"###B

Rs1#### 8

6ore than

Rs1#### 1"

Inter'retati$n:

Out of 1## samples, the e)pected price of premium per annum

is less than Rs "### for //0 of people, Rs "###BRs1#### for

80 of people and more than Rs 1#### for 1"0 people

? 4o you find advertisement of I%& 'ysya Life Insurance is

informative or attractiveH

Ads of I%& 'ysya %oof Responses

.>



Informative 8"

attractive "

Interpretation:

Out of 1## samples "0 of people found that advertisement of

I%& 'ysya Life Insurance are attractive, and remaining 8"0

found that they are informative

> @hich promotional media do you thin( is the best one to

ma(e people educate about an Insurance -olicyH

;est Advertisment!ype of %o of Respondents

"#



-romotional

Activity

!'

advertisement 8?

Foardings /#-aper

Advertisement 8/

;anners 1#

Interpretation:

Out of 1## sample 8?0 of people responded that !'

advertisement is the best way for ma(ing people aware of

insurance, 8/0 said that paper advertisement is better way, /#0

of people said that Foarding are better, remaining 1#0 said

banners are helpful in ma(ing people aware of insurance

1# 4o you suggest your colleagues, relatives or any of your

friends about which is the best company to opt for an Insurance

-olicyH

+uggesting an Insurance Companyyes no

"1



%o of

respondents ?? 1/

Interpretation:

=rom the data and analysis it is found that ??0 of people

suggested about insurance to their friends, colleagues and

relatives, and remaining 1/0 people are not suggested

FINDIN8S

=rom the project study and interpretation the findings are as follows:

"/



12 Our country India has a population of 11 crore and there are only

1/ crore people have life insurance policy

/2 Out of 1## samples, "0 people have insurance policy in LIC andremaining 8"0 people have insurance policy in other insurance

companies

82 6ost people have trust in LIC than any other insurance company

and still LIC holds huge mar(et share in LI=3 I%+7RA%C3 sector

in India

.2 ?/0 people are ta(ing insurance policy only if it is within their

budget and have fle)ible payment options and remaining is ta(ing

policy if it is not with the budget but due to benefits of policy and

reputation company has

"2 Among various factors ""0 of people are loo(ing for benefits of

policy, /"0 people are loo(ing for premium of policy and

remaining /#0 people are loo(ing for brand name of insurance

company

2 Only 1#0 of people are saving 810 to .#0 of their income, /#0

people are saving /10 to 8#0, #0 people are saving 10 to /#0

of their income

2 As there are many new players in the Indian mar(et, there is huge

competition among all insurance companies

?2 Only "0 people are aware of I%& 'ysya life insurance and 8"0

people don*t (now about I%& 'ysya life insurance

"8



>2 6ostly corporate people, professionals and business man are aware

of I%& 'ysya life insurance in India Common man middle class

and lower class2 is not aware of I%& 'ysya life insurance

1#2 /"0 people gave response stating that advertisement of I%& 'ysya

life insurance are attractive and informative and "0 people

responded stating that I%& 'ysya life insurance advertisement are

not attractive and not informative

112 Out of 1## respondents, 8?0 stated that !' advertisements is the

best way for ma(ing people aware insurance company, 1.0 stated

that setting up of stalls is the better way, 1#0 stated that paper

advertisement is the better way, "0 stated that banners, pamphlets

is the better way and 880 people stated that personal setting is the

best way of ma(ing people aware and educate them about

insurance company and its policies

RECOMMENDATIONS

".



!here is huge potential mar(et for LI=3 I%+7RA%C3 companies in

India as out of 11# crore population only ? crore people are insured !he

insurance companies should educate people about insurance, its

importance, different policies, and benefits of policies

!he people opt for policy by ta(ing into consideration price of premium

of policy, benefits of policy and least importance is given to brand name

+o the life insurance companies should loo( over the price of premium,

benefits of policy and even fle)ible payment options from the point of

untapped potential mar(et in India

!he price of premium of a policy must be within the budget of common

man and life insurance companies should provide fle)ible payment

options ;y doing so, the private insurance companies can surely capture

the untapped mar(et along with creating brand name

I%& 'ysya life insurance, it has huge past e)perience around the world

;ut coming to Indian perspective its positioning is not properly done in

the customers mind !he advertisement of I%& 'ysya life insurance in

!' should contain briefly relevant message about its policy and benefits

of a policy It should formulate strategies for attracting customers though

good promotional activities and informative ads, so that common man

can have an idea of what I%& 'ysya is offering in a policy

!hough people generally to do the savings by various means, li(e -ost

Office, =i)ed 4eposit, 6utual =und, &old, Real 3state, and +hare 6ar(et

etc !his study focuses attention on the positive affect of 7nit Lin(ed

-lan as a part of =inancial -lanning

""



!he result of the study proves that 7LI-+ can enhance the individual*s

savings through their mar(et investments !he study highlights 7LI-+ as

a part of !a) ;enefit for an individual I%& 7LI-+ products are good

when ta(en as long term investment plans

CONCLUSIONS

=rom the project analysis and interpretation the conclusions are:

"



12 6ost untapped insurance mar(et in India contains mostly middle

class and lower class people

/2 !he customers gives preference more to premium of policy and

benefits of the policy ;rand name and fle)ible payment options

are given less importance

82 3ven though the premium price is not within the customer budget,

if the benefits offered by policy are good customers is ready to ta(e

the policy

.2 !he customers want the premium price to be within the budget,

with good benefits

"2 !he private insurance companies are unable to tap the untapped

insurance mar(et certain strategies should be formulated to grab

the mar(et

2 6ost customers feel that setting up of stalls at appropriate locations

and providing information regarding various policies and benefits

offered by the insurance company and create awareness about the

insurance company

2 I%& has an international brand image by their world wide

advertisement li(e formula one race and many other sports events

still it need to implement more mar(eting advertisement to attract

the customers

"



?2 !he present study is an attempt to find the unit lin(ed plan as a part

of financial planning, moreover to determine whether the unit

lin(ed plan would help the people to avail the ta) benefit,

protection, and savings

Chapter "

"?



uestionnaire

;ibliography

UESTIONNAIRE

A study of 7nit Lin(ed Life Insurance plan as a part of financial

planning

)%ease i%% the $%%$+ing &etai%s5

Na*e:

Age:

8en&er:

">



!a%iicati$n:

Designati$n:

Sa%ar#:

Na*e $ the Organi9ati$n <W$rking@:

)h$ne N$5:

E*ai% ID:

1 In which company you have Life Insurance -olicyH

a2 LIC P Q

b2 I%& 'ysya P Q

c2 F4=C P Q

d2 ICICI P Q

e2 Others P Q

/ Among various insurance companies why did you chose the above

mentioned company

a2 4ue to reputation of the company P Q

b2 4ue to -rice of premium of policy P Q

c2 4ue to benefit of the policy P Q

d2 =le)ible premium payment options P Q

8 Is the premium within your budget

a2 Ges P Q

b2 %o P Q

. 4o you (now about 7nit Lin(ed Life Insurance -lanH

a2 Ges P Q

b2 %o P Q

" @hat is the best option of investmentH

a2 7nit Lin(ed -lan P Q

#



b2 Life Insurance P Q

c2 6utual =und P Q

d2 +hare 6ar(et P Q

Fow much percentage of your salary are you saving monthly

a2 1#0B/#0 P Q

b2 /#0B8#0 P Q

c2 8#0B.#0 P Q

d2 .#0B"#0 P Q

what is your e)pected price of premium of the policy

a2 Less than Rs"### P Q

b2 Rs"### to Rs1#### P Q

c2 more than Rs1#### P Q

? 4o you find advertisement of I%& 'ysya life insurance are

informative and attractive

a2 Informative P Q

b2 Attractive P Q

> @hich promotional media do you thin( is the best one to ma(e

people educate about an insurance policy

a2 !' advertisement P Q

b2 Foardings P Q

c2 -aper advertisement P Q

d2 ;anners P Q

1



1#4id you suggest your colleagues, relatives or any of your friends

about which is the best company to opt for an insurance policy

a2 Ges P Q

b2 %o P Q

If yes which company you suggestedH

BIBLIO8RA)02

@ebsites:

wwwgooglecom

wwwing'ysyalifecom

wwwirdaindiacom

wwwbimaonlinecom

/

http://www.google.com/

http://www.ingvysyalife.com/

http://www.irdaindia.com/

http://www.bimaonline.com/

http://www.google.com/

http://www.ingvysyalife.com/

http://www.irdaindia.com/

http://www.bimaonline.com/



wwwmar(etresearchcom

;oo(s:

Life M Fealth Insurance

;y Jenneth ;lac( r, Farlod 4 +(ipper r

6ar(eting 6anagement

;y -hillip Jotler M Jevin Lane Jeller

=inancial 6anagement

;y -rasanna Chandra

8

http://www.marketresearch.com/

http://www.marketresearch.com/

Life Insurance MBA Project at ING Vysya

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