Insurance

CHAPTER -1
INTRODUCTION
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INTRODUCTION TO THE INSURANCE INDUSTRY Insurance Industry Overview With largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. Its a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7 per cent to the countrys GDP. Gross premium collection is nearly 2 per cent of GDP and funds available with LIC for investments are 8 per cent of GDP. Yet, nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subject to weak social security and pension systems with hardly any old age income security. This itself is an indicator that growth potential for the insurance sector is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and at
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the same time strengthens the risk taking ability. It is estimated that over the next ten years India would require investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country. Insurance is a federal subject in India. There are two legislations that govern the sector- The Insurance Act- 1938 and the IRDA Act- 1999. The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. Historical Perspective The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non-Indian lives as Indian lives were considered more riskier for coverage.
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The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to the Triton (Tital) Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.
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The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalised monopoly corporation and Life
Insurance Corporation (LIC) was born. Nationalisation was justified on the grounds that it would create much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State lead planning and development.The (non-life) insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organised trade and industry in large cities. The general insurance industry was nationalised in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC). Important milestones in the life insurance business in India: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
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1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India. Important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
1972: The general insurance business in India nationalised through The General Insurance Business (Nationalisation) Act, 1972 with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies- the National Insurance Company Limited, the New India Assurance Company Limited, the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company. Insurance Sector Reforms In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its future direction.The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included:
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i)Structure Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. ii)Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state. iii)Regulatory Body The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance- a part of the Finance Ministry- should be made independent.
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iv)Investments Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any
company (there current holdings to be brought down to this level over a period of time) v)Customer Service LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerisation of operations and updating of technology to be carried out in the insurance industry.
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INTRODUCTION TO THE SUBJECT

WHAT ARE MUTUAL FUNDS? Mutual funds is the 'safety of the principal' guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. Insurance is a provision against risk and it is a device with which man tries to protect himself from risk in life. The advantages of investing in a Mutual Fund are:
Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value.
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Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell.
Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud.
Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash.
Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet.
Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index
Transparency Flexibility
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Choice of schemes Tax benefits Well regulated
Drawbacks of Mutual Funds:

Mutual funds have their drawbacks and may not be for everyone:
No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.
Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.
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Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.
Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.
WHAT ARE ULIPS?

The recent development in the financial innovation is Unit Link Insurance Policy (ULIP), which covers the concept of mutual fund and insurance. A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two. In other words, it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. In the
event of the insured person's untimely death, his nominees would normally receive an amount that is the higher of the sum assured or the value of the units (investments). To put it simply, ULIP attempts to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. It saves the investor/insurance-seeker the hassles of managing and tracking a portfolio or products. ADVANTAGES OF INVESTING IN ULIPs:During the previous financial year (2006-07), most investors would have interacted with their investment advisors and agents for tax-planning. And there's a fair chance that unit linked insurance plans featured prominently in the advisor's recommendation. In recent times, few investment avenues (especially in the taxsaving space) can claim to match ULIPs in terms of their sheer popularity. ULIPs essentially combine the benefits of an insurance policy and a market-linked investment. A certain proportion of the premium paid is invested in market-linked instruments like equities and bonds (in line with the stated mandate) and the balance is used to provide for the expenses incurred on providing the investor with an insurance cover. Like most other products in the tax-saving segment, ULIPs are
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also designed to achieve the twin objectives of tax benefits and capital appreciation. With this elementary understanding of ULIPs, we shall now try and explore what is it about ULIPs that makes them so popular with investment advisors and investors alike. The attractive agency commission An advisor selling a ULIP is likely to pocket a commission in the range of 30.00 per cent of the premium paid in the first few years. Conversely, an investment in a tax-saving mutual fund (which offers the same tax benefits under Section 80C of the Income Tax Act) would fetch him an upfront commission of 2.00-2.50 per cent of the investment value. Also the commission in the following years (known as trail commission) amounts to about 5.00 per cent for ULIP investments vis-a-vis around 0.70 per cent in case of mutual funds. The attractive commissions on ULIPs compared to other avenues like mutual funds and term plans certainly works as a major incentive for the advisor. It is not difficult to understand why an advisor would hard sell ULIPs to every prospective insurance seeker regardless of whether ULIPs are suited to meet the latter's needs.
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In India, insurance is sold, not bought Traditionally, insurance has been bought for tax-saving, rather than from the perspective of insuring oneself. Hence, the 'insurance' aspect typically takes a backseat. Furthermore, awareness among investors in terms of insurance products tends to be low. Most rely solely on their insurance agent for recommendations. We have already discussed why an insurance agent is likely to recommend a ULIP on priority. For most individuals, a term plan should be the first product to feature in their insurance portfolios; investment-linked products like endowment and ULIPs can be bought as and when the need arises. Term plans provide the insured's nominees with the sum assured if an eventuality occurs during the term of the policy. There are no maturity benefits; hence if the insured were to survive the policy term, he would not get anything. Sadly, buying term plans is never considered because of the mindset - "I have paid money (premium) towards the insurance policy, so I should get a return". Advisors under the pretext of allaying investors' apprehensions of not getting any returns on maturity offer products like ULIPs. Such products with their promise of providing returns, easily catch the fancy of most investors.
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The stock market performance in the recent past The sustained bull run in the equity markets over the past few years has resulted in most market-linked investments witnessing considerable growth. This has worked in favour of ULIPs as well. But one must take note of the fact that nearly all the ULIPs in the market are of recent origin and they have not yet been tested over a prolonged bear phase. Retail investors tend to get carried away by recent performances without realising that there is no guarantee that a similar performance will be sustained in the future.
The advisor on his part tends to underplay the recent origin of ULIPs and instead utilises their performance as a selling proposition. Flexibility offered by ULIPs ULIPs aren't popular just for the wrong reasons. Rest assured, they have their positives as well. ULIPs offer the kind of flexibility that no insurance product can. For example, investors can select a ULIP with an equity-debt combination that is in line with their risk profile. A risk-taking investor would typically select one with a high equity component, while a risk-averse investor would opt for a debt-heavy one.
Also ULIP investors have the opportunity to 'manage' their monies. When equity markets seem overheated, investors can shift their corpus into a debt-oriented portfolio, and in the process insulate it from volatility in the equity markets. Similar changes can be incorporated when the investor's risk profile undergoes a change. Then there are advantages like the top-up facility (which is like a one-time premium payment) that can be used to gainfully utilise surplus monies. Another reason for buying a ULIP is the benefit it offers, by bundling insurance with an investment product. Thus for anyone who wants to avoid the hassle of taking care of numerous kinds of investment and life insurance products, ULIPs can be a good option. Although ULIPs may have become popular for more 'wrong' reasons than 'right' ones, the segment does have its fair share of positives. Investors on their part need to ensure that they invest in a ULIP for the right reasons, after becoming fully aware of the consequences of the investment. In other words, they need to block all the noise and make an informed investment decision based on their risk profile and investment objectives.
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Key Negatives:
Complex Structures: More complex the product higher is the associated cost proves to be true as ULIPs typically have a lot of hidden costs associated which no sales man will tell you.
High associated costs: Although ULIPs sound like a good idea to start with, one feels the pinch after a couple of years when the high costs associated with such structured products become more apparent.
Tax advantage turns into disadvantage: The tax benefit cease to exist when an individual wants to get out of a ULIP before three years i.e any contribution made towards the policy during the financial year (in which the plan is terminated) is not eligible for a deduction under section 80C; not to mention the deductions that have already been taken in the previous years would be added back as the income of the individual in that particular year of policy termination.
Highly illiquid: Switch over between ULIPs of different insurance companies is not possible in case their performances are below par making them highly illiquid and restrictive in nature; not in case of mutual funds.
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Death benefit: In case of ULIPs, policy holders gets either the sum assured or the value of the units she holds, whichever greater in case of death. In case of mutual funds, terms insurance, one avails the benefits of both; fund value and the sum assured in case of death. In case an insurance company offers both the benefits, it is very likely that the premium allocation charges will be higher than usual.
What Should You Do Instead? Investment in diversified mutual funds to avail investment benefit Avail term insurance to insure oneself. Why term insurance A term insurance allows an individual to take higher amount of cover with lower premiums No premium allocation costs; simply pay for taking life cover Why equity funds High liquidity as switching between schemes of different fund houses becomes easy
Less upfront costs Investing in index funds for long time frames proves to be a prudent option due to low cost structures and index linked returns. Assume annual premium of Rs. 1 lac; age =24, sum assured =Rs. 10 lac ULIPs vis--vis Mutual Funds & Term Insurance Policy term ULIP cost Mortality costs Rs. 13,820 Rs. 21,120 Rs.32,420 Total cost incurred in ULIP Rs. 71,320 Rs. 98,620 Rs.1,29,920 Mutual funds cost Rs. 22,500 Rs.33,750 Rs.45,000 Term loan premium Rs. 31,000 Rs.46,500 Rs.62,000
10 years 15 years 20 years
Rs. 57,500 Rs. 77,500 Rs. 97,500
The above charges are excluding the administration fees and fund management charges(1.0%-4.0%) in case of ULIPs. In case of mutual funds provide investors the option to invest in Liquid funds Debt or bond funds
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Balanced funds Equity funds Investing in debt and liquid funds proves to be a bad idea for the long term as capital appreciation is very low barely beating inflation.
CONCLUSION
Large upfront costs, highly illiquid nature and difficult exit option make ULIPs a faulty insurance product Instead, availing a pure term plan suffices ones insurance need A minimum cover of 10*(Annual salary) should be taken as anything below that proves to be quite inadequate For long term investments, it is best that one avail a diversified equity fund or an index fund
Policy holders get the benefit of both; capital appreciation and sum assured in case of death in a term insurance + mutual fund.
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Some relevant important aspects

Unit linked insurance plans (ULIP) are all set to pose serious competition to mutual funds. ULIPs provide all the benefits of that of a mutual fund and top it up with an insurance cover. All ULIP schemes are required to disclose their NAVs on a daily basis just like their mutual fund counterparts. Insurance companies also send regular bulletin to all their investors updating them on the investments. In case of a mutual fund if one has to change the asset allocation, the scheme or a fund by itself has to be changed whereas a single ULIP might have five options in one and the investor sticks to the same life insurance. Also most insurance companies do not charge the investor for shifting plans. ULIP also offers the inherent feature of systematic investment plan (SIP) as the policyholder pays the premiums over the period of the policy except in case of single premium plan where the premium is paid at one stance. The policyholder has an option to make small investments by way of paying monthly premiums instead of yearly at one stroke. Investment in ULIP by way of SIP helps to offset the volatility of the market and turn it into an advantage for the investors. This avoids investing too much when the market is high and too little when market is
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low. ULIP aim at maintaining long-term portfolio and a systematic investment in ULIP acts as an additional risk-mitigating tool. ULIP is one such product, which takes care of multiple needs. It offers flexibility, has a risk cover and provides long-term investment opportunity. Thus it saves the hassle of investing in multiple products to take care of different needs. According to Vijay Sinha, asst director - agency, Tata AIG Life Insurance, "ULIP is ideal for someone who is looking for a long-term investment product, is under-insured and is averse to taking a traditional life insurance product. ULIP should be looked at from both an investment as well as insurance point of view and not in isolation." Investors, however, argue on the high expenses that a ULIP deducts. An industry insider contends, "An investor invests in an ULIP with a 15-20 year horizon. The hit of high expenses is only in the initial phase and the effect evens out over the period. Also the cost of selling insurance is higher than selling a mutual fund." In case of ULIP the costs go down in the later years, whereas, in case of mutual funds the investor, especially in case of equity funds, is charged a load every time either at the point of entry or exit. Despite the seemingly comparable structures there are certain factors that bring about certain advantages to ULIP investors over mutual funds. It is rightly said that short term is full of mysteries and uncertainties. Even
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past trends of equity markets have well proven the same. But since insurance plans are the long-term contracts, the investment decisions are made with long-term horizons. The main advantage which unit-linked plans enjoy vis- -vis mutual funds is that in the case of the latter, the fund manager is not subject to high redemption pressure. This probable redemption pressure restricts the mutual funds to take relatively long-term positions even in fundamentally sound and prospective escalating companies. Due to uncertain and huge redemption stress, several times the mutual funds take a big hit on the portfolio by selling off certain securities kept for long term. This places the ULIP category in a better position as compared to mutual funds. Under ULIP, since the objective behind management of the portfolio is fairly long term, the churning ratio is very low as compared to mutual funds. ULIP places itself in a better position in case of life cycle management of the portfolio. Though, ULIP as an investment avenue are closest to mutual funds in terms of their structure and functioning. Since both the avenue meet different needs, comparing the products offered by them would be inappropriate. ULIP is essentially a long-term commitment between the policyholder and the insurance company and mutual funds are built to cater to the relatively short-term need of the investor. The investments are made with a shorter-term duration profile
when compared to ULIPs. The seemingly similar structure of both of them makes it vital for investors to be aware of the fine distinctions in both offerings and make informed decisions. Today, many individuals are adding ULIP to their portfolio to generate wealth and protection over the long term.
ULIPS VS MUTUAL FUNDS-THE BATTLE ENDS :The long-standing debate over the suitability of Unit Linked Insurance Plan (ULIP) and mutual funds is set to come to an end as the recent announcements by the Insurance Regulatory and Development Authority (IRDA) clearly demarcates the playing field. The insurance industry is buoyant as it views the new guidelines as an endorsement of the fact that ULIPs, as an investment tool, have become important enough for the regulators to sit up and take notice. Industry players are unanimous that the growth of the overall industry in the future will be led by ULIPs. As per Irdas new guidelines, which came into effect on July 1, there has to be a minimum lock-in period of three years for ULIPs and a minimum term of at least five years. Further, the death benefit payable or sum assured under the single-premium product has to be at least 125% of the single premium paid.
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The new guidelines will stop ULIPs from being positioned as short-term investment products, and they will look less like mutual funds and more like insurance policies. The new move is expected to derail the robust growth of ULIPs in the country somewhat which till now have banked on their flexible investment mandate to lure investors. New ULIPs now come with a minimum term value of five years, whereas in the case of mutual funds ELSS, there is a lock-in period of just three years. If an investor decides to withdraw money from ULIP after three years, the amount depends on the surrender value given by the insurance company. Ideally ULIPs are considered for investors who want to put money in an investment product that earns them decent returns by investing the funds in the market. Such plans also provide life cover and tax efficiency. As per the new guidelines, no loans can be granted under ULIP schemes. Further, insurance advisors who sell ULIPs have to be given separate training before they are authorised to sell them. Also, advertisements have to clearly bring out the fact that ULIPs are different from traditional insurance products. In the wake of the new guidelines, insurance companies are busy re-positioning ULIPs and the message is not to view these products as short-term investment to
reap windfalls from market fluctuations. The guidelines therefore are unlikely to dampen the growth for companies that are already focussing on products with a medium to long-term cover, though the guidelines surely take away some flexibility from a customer. The new guidelines are intended to enhance transparency levels and provide better understanding of the product to prospective investors, and if applied in principle, ULIPs will remain as attractive as they were earlier. However, the new guidelines by Irda, which allows insurance companies to accept new policies, fund switches, withdrawals and surrender requests upto 4.15 p.m, well after the market closes, has sparked a controversy. What this translates into is that an investor can switch from liquid fund to an equity fund at the end of the market hours, with the complete knowledge of how the markets have transpired during the day and gain any arbitrage opportunity thereof. To stop the investor from taking any such advantage mutual funds companies have to shut shop a good half an hour before the market closes. Mutual funds are essentially short to medium term products. The liquidity that these products offer is valuable for investors. ULIPs, in contrast, are now positioned as long-term products and going ahead, there will be separate playing
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fields for ULIPS and MFs, with the product differentiation between them becoming more pronounced. ULIPs now do not seek to replace mutual funds, they offer protection against the risk of dying too early, and also help people save for retirement. Insurance has to be an integral part of ones wealth management portfolio. Further, exposure of Indian households to capital markets is limited. ULIPs and mutual funds are, therefore, not likely to cannibalise each other in the long run. While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and structure, the first and foremost purpose of insurance is and will always be protection. The value that it provides cannot be downplayed or underestimated. As an instrument of protection, insurance provides benefits that no investment can offer. It is important for an investor to understand his financial goals and horizon of investment in order to make an informed investment decision. The decision to invest in either a mutual fund or a ULIP should depend on the time period of investment, individual financial .
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Unit-linked insurance plans (ULIPs) have become something of a rage with their 'promise' of market-linked returns combined with the dual benefit of insuring your life from eventualities. To put it simply, ULIPs attempt to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. ULIPs work on the premise that there is class of investors who regularly invest their savings in products like fixed deposits (FDs), coupon-bearing bonds, debt funds, diversified equity funds and stocks. There is another class of individuals who take insurance to provide for their family in case of an eventuality. So typically both these categories of individuals (which also overlap to a large extent) have a portfolio of investments as well as life insurance. ULIP as a product combines both these products (investments and life insurance) into a single product. This saves the investor/insurance-seeker the hassles of managing and tracking a portfolio of products. . So should investors opt for ULIPs? First and foremost, investors need to understand that a ULIP is a bundled product of their investments and their insurance proceeds. So if you have a ULIP invested in equities, you are exposing your life insurance monies as well as your investable surplus to the vagaries of equity markets. While it is fine and even sensible to let your investable assets get an equity flavour, the same cannot be said about your life
insurance monies, which to a large extent should be sacred. The volatility in equity markets can disturb the calmest of minds and the last thing you want to see is your nest egg being eroded by the latest slide in equity markets. Abhishek Bhatia elaborates, A ULIP policyholder has the option to invest in a variety of funds, depending on his risk profile. If one does not have the appetite to invest in equity, they can choose a debt or balanced fund. However, the structure of a ULIP takes care of quite a bit of the uncertainty in the markets. Insurance companies understand the need to give insurance-seekers the flexibility to rethink their investment strategy in view of market histrionics. There is an option for the insurance-seeker to switch to another plan with a lower or zero equity component to stem the loss in a falling equity market. Abhishek points out, The switch option allows customers to switch between fund options, thereby making adjustments to any perceived risks. ICICI Pru allows policyholders to make this switch four times a year at no cost, with Rs 100 at every additional switch after that. HDFC Standard Life allows policyholders to make as many switches as they like. However, for investors to make the right switch they need to track markets actively and be well-informed, which is actually the job of the investment advisor/consultant.
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ULIPs are suitable for individuals who are already adequately insured and are reasonably well-informed and savvy to take active investment decisions by using the switch option that is provided to a ULIP policyholder. Also policyholders with regular endowment plans who are not satisfied with the 4-6% returns can consider taking a ULIP with a lower equity component. It is best if insuranceseekers tread the middle path and choose balanced plans (with about 50-60% equity component). Ideally they need to avoid taking the aggressive 100% equity ULIP, which could needlessly expose their assets to market volatility. So if insurances-seekers/investors play their cards right, they can make this marriage work.
Is investment in ULIPs a risky option?

Has the recent performance of the stock market left you with a regretful feeling for not being a part of the soaring market? Do you have a flavour for the market but also want some wise investment at the same time? If yes, then Unit Linked Insurance Plans (ULIP) is the answer. ULIPs also known as investment plans is a perfect package that comes with insurance coverage and investment options. So that leaves you with the opportunity of investing in equities. But you do need to keep in mind that the investments in stocks are subject to the vagaries of the
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market. The volatility in equity markets can keep you uneasy and disturbed since you wouldn't like to see your reserve being affected. You need to know your risk appetite and then make a choice accordingly by choosing an appropriate fund. ULIPs offer you the option to invest in anyone of the four funds. If you are not inclined to take a lot of risk then you can certainly invest in secured or balanced fund. However the best part of having an investment plan is that you can switch from one fund to another, which you find less risky. For example if Patil has invested in growth fund and has found that the investment in this particular fund is going to fall then he does have the choice of switching over to another fund which he finds safer, it could be a growth, balanced or any other fund. For example if you choose LIC's 'Jeevan Plus', the policyholder has to choose any one from the four funds, which are Bond, Secured, Balanced and Growth funds. Within a given policy year, four switches are allowed free of charge. After the completion of one year, Rs.100 is charged for per switching of the fund. Two factors considered responsible for the advent of ULIPs are firstly- the entry of private insurance companies in the insurance sector and the second factor being the decline of assured returns on endowment plans..
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Private players proved their innovation with the introduction of ULIPs. The performance of these plans has also been quite impressive with the recent figures revealing that the private insurers have acquired a business of Rs 4,768 crore whereas LIC managed to obtain Rs 2,758.6 crore. The performance of stock market especially in the last few months has made ULIPS all the more popular. It is the only option that lets you to be a part of the stock market and at the same time offers insurance cover. It is like the best of two things clubbed into one. And honestly things couldn't get any better when we bring its other features into the limelight. An innovative aspect of ULIPs is the 'top-up' facility. A top-up is a one-time additional investment that is paid apart from the annual premium of the policy. This feature works well when you have a surplus that you are looking to invest in a market-linked avenue. ULIPs also have the facility that allows you to skip premiums if you have paid your premiums regularly for the first three years. For instance, if you have paid your premiums dutifully for the first three years then you have missed out the payment of fourth year's premium then the insurance company will make the necessary adjustments from your investment surplus and will make sure that the policy remains active. But it is always advisable to pay the premiums regularly to avoid troubles. Such facilities are not available with any other policy.
This makes it a differentiating factor when compared to policies like endowment, term or money back policies. Another important feature is that ULIPs disclose their portfolios regularly. This gives you an idea of how the money is being managed. Another important aspect is its 'liquidity' factor. Since ULIP investments are NAV-based it is possible to withdraw a portion of your investments before maturity. It is possible only after the completion of the lock-in period. Such facility is not available with in a traditional endowment policy. With ULIPs one can also avail the tax benefits which is offered under Section 80C. This is subject to a maximum limit of Rs 1,00,000. Investment plans are particularly for those looking for security with an inclination for the share market. To make it easier to choose, LIC offers 'Future Plus' and 'Jeevan Plus' which are unit linked plans. The idea of having insurance and investment conveniently rolled into one product looks alluring enough and saves the common investor the time and effort to consider different options. However, an investor may build a customized solution for himself separating insurance from his investment needs. This may require some
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effort, which may be worth taking. A few factors which may influence the decision may be as follows: In the case of ULIP, the insurance company deducts charges towards life insurance cover(mortality charges), administration charges and fund management charges from the premium paid by the investor. The balance amount left is used to be invested in stocks or bonds or a combination of the two. All premiums paid are eligible for tax break under Sec 88 and come under a lock-in of three years. The administrative charges levied by the insurance company are quite high during the first few years of the policy. This acts as a dampener as the returns are affected due to lower levels of funds available for investment, and extra cautious approach by the insurance company towards investing doesnt help either. Whereas, MF comparable administrative charges are very less and they invest their entire holdings in equities quite aggressively in favourable times, thus allowing the portfolio to appreciate rapidly. Traditionally, ULIP have been found to invest in large cap / blue chip companies. The higher administrative charges during the initial years erode the returns and make it less attractive when compared to a mutual fund investment for a similar period. ULIPs are not as liquid as mutual funds. The redemption process takes
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more time as compared to a mutual fund. If one intends to redeem after the lock-in period of three years, he would be at a loss because of higher initial administrative charges. Portfolio disclosure is another area where MF score over ULIPs and though leading insurance companies do disclose their portfolio on a regular basis, the competitive pressure in the mutual funds industry lead to higher disclosures and investors know exactly where there money is being invested. Although ULIPs offer certain benefits, which MFs are unable to provide for, for example certain ULIPs with a capital guarantee. This product protects individuals from a potential market slide. In case of a market slide, the insurance company purports to at least return the premia paid by the individual. This is unlike investments in a mutual fund scheme where you are partner to both profits as well as losses incurred by the scheme. Switch in/out from different asset classes is also allowed at no extra cost, and investor can conveniently transfer his investments form an equity scheme to a debt or balanced scheme. The investment amount that an investor pays can also be altered as per his wishes during anytime in between his maturity period. But, ULIPs come at a higher premium than their plain vanilla counterparts and coupled with high expenses in the initial years, make it an
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expensive proposition and the returns as of now from ULIP products do not live upto the expectations Thus it is better to keep insurance and investment needs separate and investors should not look to marry the two. The best part about keeping one's investment needs and insurance needs apart is that both work towards their respective goals separately and effectively. Therefore, in case of an eventuality, the individual's nominees would stand to get not only the sum assured from the term plan but also the amount that has been invested in a mutual fund.
ULIP VS MUTUAL FUNDS-WHOS BETTER

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in terms of their structure and functioning. As is the case with mutual funds, investors in ULIPs are allotted units by the insurance company and a net asset value (NAV) is declared for the same on a daily basis. Similarly ULIP investors have the option of investing across various schemes similar to the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance component.
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However it should not be construed that barring the insurance element there is nothing differentiating mutual funds from ULIPs.
How ULIPs can make you RICH!

Despite the seemingly comparable structures there are various factors wherein the two differ. In this article we evaluate the two avenues on certain common parameters and find out how they measure up. 1. Mode of investment/ investment amounts Mutual fund investors have the option of either making lump sum investments or investing using the systematic investment plan (SIP) route which entails commitments over longer time horizons. The minimum investment amounts are laid out by the fund house. ULIP investors also have the choice of investing in a lump sum (single premium) or using the conventional route, i.e. making premium payments on an annual, half-
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yearly, quarterly or monthly basis. In ULIPs, determining the premium paid is often the starting point for the investment activity. This is in stark contrast to conventional insurance plans where the sum assured is the starting point and premiums to be paid are determined thereafter. ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure. For example an individual with access to surplus funds can enhance the contribution thereby ensuring that his surplus funds are gainfully invested; conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). The freedom to modify premium payments at one's convenience clearly gives ULIP investors an edge over their mutual fund counterparts. 2. Expenses In mutual fund investments, expenses charged for various activities like fund management, sales and marketing, administration among others are subject to predetermined upper limits as prescribed by the Securities and Exchange Board of India.
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For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund house and not the investors. Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable). Entry loads are charged at the timing of making an investment while the exit load is charged at the time of sale. Insurance companies have a free hand in levying expenses on their ULIP products with no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority. This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only restraint placed is that insurers are required to notify the regulator of all the expenses that will be charged on their ULIP offerings. Expenses can have far-reaching consequences on investors since higher expenses translate into lower amounts being invested and a smaller corpus being accumulated. ULIP-related expenses have been dealt with in detail in the article "Understanding ULIP expenses". 3. Portfolio disclosure
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Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit most fund houses do so on a monthly basis. Investors get the opportunity to see where their monies are being invested and how they have been managed by studying the portfolio. There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our interactions with leading insurers we came across divergent views on this issue. While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory, the other believes that there is no legal obligation to do so and that insurers are required to disclose their portfolios only on demand. Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the lack of transparency in ULIP investments could be a cause for concern considering that the amount invested in insurance policies is essentially meant to provide for contingencies and for long-term needs like retirement; regular portfolio disclosures on the other hand can enable investors to make timely investment decisions.
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ULIPs vs Mutual Funds ULIPs Determined investor Investment amounts and Mutual Funds theMinimum investment beamounts are determined by the fund house Upper limits for expenses to set investors by the
by can
modified as well
No upper limits, expenseschargeable determined Expenses by thehave been
insurance company
regulator Quarterly disclosures are
Portfolio disclosure Not mandatory* mandatory Modifying asset Generally permitted forEntry/exit loads have to be
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allocation
free or at a nominal cost
borne by the investor Section 80C benefits are only on
Section 80C benefits areavailable
available on all ULIPinvestments in tax-saving Tax benefits investments funds
* There is lack of consensus on whether ULIPs are required to disclose their portfolios. While some insurers claim that disclosing portfolios on a quarterly basis is mandatory, others state that there is no legal obligation to do so.
4. Flexibility in altering the asset allocation: As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely comparable. For example plans that invest their entire corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt instruments (debt funds) can be found in both ULIPs and mutual funds. If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the same fund house, he could have to bear an exit load and/or entry load. On the other hand most insurance companies permit their ULIP inventors to shift investments across various plans/asset classes either at a nominal or no cost
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(usually, a couple of switches are allowed free of charge every year and a cost has to be borne for additional switches). Effectively the ULIP investor is given the option to invest across asset classes as per his convenience in a cost-effective manner. This can prove to be very useful for investors, for example in a bull market when the ULIP investor's equity component has appreciated, he can book profits by simply transferring the requisite amount to a debt-oriented plan. 5. Tax benefits ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds good, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual funds domain, only investments in tax-saving funds (also referred to as equity-linked savings schemes) are eligible for Section 80C benefits. Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example diversified equity funds, balanced funds), if the investments are held for a period over 12 months, the gains are tax free; conversely investments sold within a 12-month period attract short-term capital gains tax @ 10%.
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Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term capital gain is taxed at the investor's marginal tax rate. Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both offerings and make informed decisions.
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CHAPTER -2
RESEARCH DESIGN
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A. TITLE OF THE STUDY

A systematized study requires proper planning and implementation of the same. So this research design includes an outline of the study which was conducted at Max New York Life Insurance Co. Ltd., Bangalore. The design of the study contains information stating the statement of the problem, objectives of the study, need for the study, scope of the study, significance of the study, research methodology, and the sources of the data, tools and techniques of data collection, plan of analysis, limitations of the study and operational definitions of the concept.
Keeping in view the above condition, a study title - Unit Linked Insurance Plans (ULIPs) vs. Mutual Funds is chosen. The purpose behind such a title is to find out as to which of the two is better and which is more beneficial in the long run. The main purpose behind this study is to provide investors an idea before investing their savings into any unit linked insurance policy or mutual funds or in any other investment alternative for that matter. The title therefore covers every aspect of this research study.
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B. STATEMENT OF THE PROBLEM

Every person wants to invest his hard earned money in such a manner that it results in safety and liquidity of his funds. He also wants a fair rate of return on his invested funds. But selecting a right alternative for investment is very necessary otherwise it will result in the loss of funds invested by the investor. It will be detrimental to the interest of the investor. Therefore it is essential for any investor to take proper analysis of the investment alternative before committing his funds.
C. OBJECTIVE OF THE STUDY

The specific objectives of the study are as follows. Primary: To provide investors a detailed knowledge of ULIPs and Mutual Funds. To point out various differences between ULIPs and Mutual Funds. To find out which is better to invest in the long run and which will fetch higher returns. To understand the perception of people towards Max New York Life Insurance Co. Ltd.
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Secondary: To create awareness among people about various ULIPs and MFs. To create an awareness among people about the companys products. To measure consumer satisfaction towards Max New York Life Insurance Co. Ltd. and suggest ways to improve it. To study the expectation of people towards the companys products. To study the advertisement effectiveness. To educate people on various investment alternatives.
D. SCOPE OF THE STUDY

As a part of fulfill their requirement of the B.B.M. degree of the Bangalore University this project was undertaken for a specific period. It is an exercise that is well planned into the curriculum giving their researcher a valuable opportunity to experiment and exhibit the recently acquired management skills. The scope of the study is to provide the investors in depth knowledge about Ulips and Mutual funds and also help them decide which is more beneficial in the long run. The study is
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also based to change the perception of customers towards Max New York Life Insurance Co. Ltd.
E. LIMITATIONS OF THE STUDY

Study restricted to Bangalore City only.
Some of the major aspects of difference were not let out free and reliable information was not available.
Some of the information was confidential which was only available for the company and the employees. So much information was not revealed outside for the general public.
The time span for the study was short and hence only major aspects are considered. Information provided by the respondents in terms of their income levels could not be accurate as people are not very open when it comes to financial matters. Reserved nature and availability of the respondents amidst their busy schedule did not permit for a detailed study. Accuracy of findings depends on the truth and accuracy of the data given by the respondents.
The time available for the interview was very much limited and most of the respondents seemed to be very busy with their jobs.
The survey was limited only to a small geographical area of Bangalore city. Different opinions about the respondents causing the compilation of the data difficult.
F.METHODOLOGY OF THE STUDY
1.TYPES OF RESEARCH The research carried out in this study is descriptive in nature. 2. METHOD OF ANALYSIS An analytical research was carried out first to gain insight and proper understanding of the ULIPs and Mutual Funds. This was done through the questionnaire and personal interaction with the employees of Max New York Life Insurance Co. Ltd. This was followed by a comparative study analysis. Several graphs and tables were prepared for a better analysis of service provided by them towards the investment banking.
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Michael Porters Five Forces Analysis Of Life Insurance Industry With respect to Max New York Life Insurance Co. Ltd. Diagram of Porter's 5 Forces With respect to Life Insurance Industry
SUPPLIER POWER
Importance of volume to supplier (Group Insurance) Switching costs of firms in the industry (customer poaching) Presence of substitute Threat of forward integration Cost relative to total contract of
Purchase of services in industry
BARRIERS TO ENTRY Absolute cost advantages Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution
THREAT OF SUBSTITUTES Switching costs Buyer inclination to substitute Price-performance
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BUYER POWER Buyer information Brand identity Price sensitivity(Insurance charges) Threat of backward integration Product differentiation Substitutes available Buyers' incentives
DEGREE OF RIVALRY Exit barriers Industry concentration Fixed costs/Value added Industry growth Intermittent overcapacity Product differences Switching costs Brand identity Diversity of rivals Corporate stakes
Buyers/Customers Power:For any finance company or insurance company, it has impact of the following, on the buyers front, Consolidation among Insurance Brokers/corporate agents Restrictions on Bancassurance
New foray- teleassurance (AXA-Bharti-Airtel)
Suppliers Power-
The suppliers in the insurance industry can be, shareholders, Actuaries, Investment Bankers, Asset Management Company, Bancassurance partners, Teleassurance partners, Corporate agents, e.t.c The major problem faced by insurance industry is, war for poaching the actuaries, and get the requisite expertise in assessing the risk. Actuaries are being poached by Consulting Firms, so retaining actuaries is another challenge.
Rivalry among Competitors
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For Bajaj Allianz Life Insurance there are 14 competitors, among which ICICI Prudential, S.B.I Life, Birla Sun Life, are giving a cut throat competition. There is a dirty competition in the life insurance business; still it has a very huge untapped market for it. This market is refreshed by innovations in the products offered by large number of insurance companies. After introduction of innovative products life cycle of the industry gets refreshed. One of the best innovations in the insurance industry is ULIP plan. Mergers are Changing the Face of Competition and are leading to high competition and innovative introductions of financial products.
Threat of New Entrants
Threat of new entrants will always be there in this ever growing Insurance Industry. Concept of insurance is completely changed from Saving Products to Investment Products to Risky Investment Products. In this scenario, it is possible to introduce more innovative products, as the market is being mature to make risky investment, which gives high returns. Regulations Might Allow Entry of New Ventures
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(Awaiting joint ventures to come in life insurance history Pantaloon and Ranbaxy, BANK of Baroda (BoB) plans to foray into life insurance business through the joint venture route, Apollo Hospitals plans to foray into insurance business through the joint venture route).
Threat of Substitutes
Products such as Mutual funds, retail stock trading, banks fixed deposits, gilt funds, National Savings Certificate, R.B.I bonds, e.t.c
Rivalry The intensity of rivalry is influenced by the following industry characteristics: 1. A larger number of firms- There are 15 players now in Life Insurance Industry, Major Life insurance Companies in India are:

Aviva Life Insurance Bajaj Allianz Birla S un Life Insurance HDFC Standard Life Insurance
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ICICI Prudential ING Vysya Kotak Mahindra LIC Max New York Life Insurance Metlife India Insurance Reliance Life Insurance SBI Life Insurance Shriram Life Insurance Tata AIG Life Insurance
Larger number of firms- Increases rivalry because more firms must Compete for the same customers and resources. The rivalry intensifies If the firms have similar market share, leading to a struggle for market Leadership.
Cut Throat Competition - causes firms to fight for market share. Bajaj Allianz has 26% Market share. In a growing market, firms are able to improve revenues simply because of the expanding market. 3. High fixed costs result in an economy of scale effect that increases
Rivalry. Insurance is a business which needs high Initial Capital, When total costs are mostly fixed costs except cost on sales force.
Low switching costs increases rivalry. In an Insurance Industry Customer has a large basket of Products to choose from, offered by number of companies. When a customer can freely switch from one product to another there is a greater struggle to capture customers. However Bajaj Allianz has products which are suitable to all the financial needs of customer and are customized products, so that customer should not have to switch to another product of different company.
Low levels of product differentiation is associated with higher levels Of rivalry. Brand identification, on the other hand, tends to constrain Rivalry. ICICI Prudential and S.B.I Life are giving intense competition on the basis of their established brands backed by their banking services and network.
High exit barriers place a high cost on abandoning the product. Insurance is a business which has High exit barriers that cause a firm to remain in an industry, even when the venture is not profitable. A common exit barrier is asset specificity.
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Industry Shakeout. A growing market and the potential for high profits Induces new firms to enter a market and incumbent firms to increase Production. A point is reached where the industry becomes crowded With competitors, and demand cannot support the new entrants and the Resulting increased supply. The industry may become crowded if its Growth rate slows and the market becomes saturated, creating a Situation of excess capacity with too many goods chasing too few Buyers. A shakeout ensues, with intense competition, price wars, and Company failures. o If there are a larger number of competitors, a shakeout is Inevitable o Surviving rivals will have to grow faster than the market o Eventual losers will have a negative cash flow if they attempt to Grow o All except the two largest rivals will be losers o The definition of what constitutes the "market" is strategically important.
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Whatever the merits of this rule for stable markets, it is clear that
Market stability and changes in supply and demand affect rivalry. Cyclical demand tends to create cutthroat competition.
G. RESEARCH INSTRUMENTS
The study was done based on the collection of primary and secondary data. Primary Data:Primary data was collected with the use of questionnaire and personal interactions with the company employees. Secondary Data:Secondary data was collected by Referring several books on insurance industry. Referring brochures of the company to get a detailed knowledge about ULIPs and Mutual Funds. Referring several related books and previous projects from college library. Referring from fact sheets, brochures, journals, reference books etc.
Referring articles, reports and magazines related to ULIPs and Mutual Funds. Referring various websites. Visiting libraries.
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CHAPTER -3
COMPANY PROFILE
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ABOUT MAX NEW YORK LIFE INSURANCE CO. LTD.

Max New York Life Insurance Company Ltd. is a joint venture between New York Life; a Fortune 100 company and Max India Limited; one of India's leading multibusiness corporations. The company has positioned itself on the quality platform. In line with its vision to be the Most Admired Life Insurance Company in India, it has developed a strong corporate governance model based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself as a Trusted Life Insurance Specialist through a quality approach to business. Incorporated in 2000, Max New York Life started commercial operation in 2001. In line with its values of financial responsibility, Max New York Life has adopted prudent financial practices to ensure safety of policyholder's funds. The Company's paid up is Rs. 1,782 crore. Having set a Best in Class Agency Distribution Model in place, the company is spearheading a major thrust into additional distribution channels to further grow its business. The company has multi-channel distribution that includes the agency distribution, partnership distribution, bancassurance, distribution focused on
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emerging markets and alliance marketing through employed sales force. The company currently has 33 bancassurance relationships, 14 corporate agency tie-ups and direct sales force at 14 locations. Max New York Life has put in place a unique hub and spoke model of distribution to deepen rural penetration. The company has 133 (13 hub office, 120 spoke offices) offices dedicated to emerging markets in Punjab and Haryana. Max New York Life offers a suite of flexible products. It now has 36 products covering both life and health insurance and 8 riders that can be customized to over 800 combinations enabling customers to choose the policy that best fits their need. Besides this, the company offers 6 products and 7 riders in group insurance business. The company currently has more than 15,626 employees.
Promoters
Max New York Life Insurance Company Ltd. is a joint venture between New York Life, a Fortune 100 company and Max India Limited, one of India's leading multi-business corporations. Since its inception in 2000, the organization has progressed and positioned itself on the quality platform. In line with its vision to be the most admired life insurance company in India, it has developed a strong corporate governance model based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself as a
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trusted life insurance service provider through a quality approach to business.
Founded in 1985, Max India Limited is a Public Limited company listed on the NSE and BSE of India with over 26,000 shareholders. Today, Max India Limited is a multi-business corporate, driven by the spirit of Enterprise, focused on Knowledge, People and Service oriented businesses of: Healthcare (Max Healthcare) Life Insurance (Max New York Life Insurance) Clinical Research (Neeman Medical International)
Max also maintains Interests in: Specialty Plastic Products for the packaging industry (Max Speciality Products) Healthcare Staffing (Max Health Staff) Prominent shareholders are Mr Analjit Singh and a leading private equity firm, Warburg Pincus which accounts for 28.7% of the total shareholding. The balance shareholding is held by the public and Institutional Investors.
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Till 1999, The Companys Main Interests and Partnerships were the following: Business Bulk Active Pharmaceuticals Electronic Component Distribution Mobile Telephony V-SAT Communications Plating Chemicals
Information Technology
Partners DSM Gist Brocades Motorola, USA Avnet Inc., USA Hutchison Telecom Ltd. Hong Kong Comsat Investment Inc., USA & Lockheed Martin, USA Atotech, Germany
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Mind Crossing, USA In 2000, the Company reinvented and restructured itself to focus on the businesses of Life under the them, LifeOur Focus. Max New York Life Insurance, founded as a Joint Venture between Max India Limited and New York Life, a Fortune 100 company, is one of the leading private life insurers in India. Max Healthcare, a subsidiary of Max India Limited is Indias first provider of comprehensive, standardized, seamless, and integrated world-class healthcare services. Neeman Medical International (NMI) is an International Clinical Research provider operating across three locations spanning North America, Asia and Latin America. Each location is backed by comprehensive infrastructure and highly skilled and experienced personnel.
New York Life Insurance Company, a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States and one of the largest life insurers in the world. Headquartered in New York City, New York Lifes family of companies offer life insurance, annuities
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and long-term care insurance. New York Life Investment Management LLC provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds. The mission of New York Life is to maintain its superior 'financial strength', adhere to the highest standards of 'integrity' and demonstrate 'humanity' by treating its customers, agents and employees with compassion, consideration and respect. New York Life is one of the largest and strongest life insurance companies in the world with more than USD$215 billion assets under management and has received among the highest ratings for financial strength from the life insurance industry's principal rating agencies: A.M. Best (AA+), Standard & Poor's (AA+), Moody's (Aa1), Fitch (AAA). According to Moody's, "New York Life's rating reflects the company's good quality investment portfolio, ample liquidity, and sound capitalization, as well as the good growth potential of its international business. As a leader in the insurance industry, New York Life continues to bring to its operations new management concepts, advanced technologies, new distribution and training systems and innovative insurance products.
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Vision of Max New York Life Insurance Co. Ltd.: To become the most admired life insurance company in India. Mission of Max New York Life Insurance Co. Ltd.: Become one of the top quartile life insurance companies in India Be a national player Be the brand of first choice Be the employer of choice Become principal of choice for agents.
BOARD OF DIRECTORS:Mr. Analjit Singh Chairman, Max India Limited Mr. Anuroop (Tony) Singh
Vice Chairman, Max New York Life Insurance Mr. Rajesh Sud CEO & Managing Director, Max New York Life Insurance Mr. Rajit Mehta Executive Director & Chief Operating Officer, Max New York Life Insurance Mr. John Harrison Director, Max New York Life Insurance Mr. Richard Mucci Director, Max New York Life Insurance Dr. S. S. Baijal Director, Max New York Life Insurance Dr. Omkar Goswami Director, Max New York Life Insurance Mr. Rajesh Khanna Director, Max New York Life Insurance
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MANAGEMENT TEAM:
Rajesh Sud Managing Director and CEO, Max New York Life Rajit Mehta Chief Operating Officer Anil Mehta Senior Director - New Markets SBU Sunil Kakar Senior Director & Chief Financial Officer Ajay Seth Senior Director- Legal & Compliance Debashis Sarkar Senior director n chief marketing officer John Poole Appointed Actuary
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ORGANISATION STRUCTURE
National Head
Regional Head Senior Area Manager Area Manager Deputy Area Manager Relationship Manager Corporate Agents Franchisee Sr. Insurance Sales Executive Brokers
Jr. Insurance Sales Executive DEPUTY AREA MANAGER SR.SALE S MANAG ERS SALES AND OPERATI ONS SUPPORT
BRANCH SUPERVISIO RS
TRAINE R
BRANCH MANAG ERRRS
ICS
CSRS
ICS
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COMPETITORS:
Aviva Life Insurance Bajaj Allianz Birla Sun Life Insurance HDFC Standard Life Insurance ICICI Prudential ING Vysya Kotak Mahindra LIC Metlife India Insurance Reliance Life Insurance SBI Life Insurance Shriram Life Insurance Tata AIG Life Insurance
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CHAPTER - 4
DATA ANALYSIS AND INTERPRETATION
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DATA ANALYSIS AND INTERPRETATION

Analysis is the means of computation of certain indices or measure along with searching pattern of relationship that exist among the data.
Interpretation refers to the method of drawing inference from the collected facts on analytical or experimental study. Infact it is a search for broader meaning of search finding. Interpretation is the device through which the factors that seems to explain what has been observed by the researcher in the course of the study can be better understood and it also provides a theoretical conception , which can be served as a guideline for further research.
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SOURCES OF AWARENESS
TABLE NO. 1: SOURCES OF AWARENESS ABOUT MAX NEW YORK LIFE INSURANCE CO. LTD. Particulars Advertisement Customers opinion Friends or relatives Other sources Total No. Of respondents 62 11 20 7 100 Percentage 62% 11% 20% 7% 100%
ANALYSIS OF THE TABLE:From the table it can be well analyzed that 62% of the customers have come to know about Max New York Life Insurance Co. Ltd. through advertisement while 11% have come to know through customers opinion. Friends or relatives have informed 20% of the customers and 7% of the customers have come to know through other sources. INFERENCE:This is clear that most of the people have come to know about the company through advertisement. From the sample of 100 respondents 62% of the customers have heard about the company through advertisement. Friends or relatives comes next -20%.
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CHART NO. 1: SOURCES OF AWARENESS ABOUT MAX NEW YORK LIFE INSURANCE CO. LTD.
70 60
PERCENTAGE
50 40 30 20 10 0 Advertisement (62%) Customers opinion(11%) Friends or Relatives(20%) other sources(7%)
SOURCES
OPINION ABOUT MAX NEW YORK LIFE INSURANCE CO. LTD.
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TABLE NO. 2: OPINION ABOUT MAX NEW YORK LIFE INSURANCE CO. LTD
Particulars Very Good Good Average Bad Total
No. of respondents 36 32 27 05 100
Percentage 36% 32% 27% 05% 100%
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ANALYSIS OF THE TABLE:From the table it can be easily inferred that the company is a very good company as 36% of the people feel so. According to 32 % of the customers the company is a good company while 27% are of the opinion that it is an average company.5% of the customers feel that the company is not a good company and therefore they ranked it as bad company. INFERENCE:It is clear from the sample that MAX NEW YORK LIFE INSURANCE CO. LTD. is a very good company as this is the opinion of about 36% of the respondents.
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CHAR 2:OP T INIONABOUTMAXNEW YOR L EINS K IF URAN CO. L CE TD.
5 %
27 %
36%
VeryGood Good Averag e B ad
3 2%
OPINION ABOUT THE BEST INSURANCE COMPANY

TABLE NO. 3:- OPINION ABOUT THE BEST INSURANCE COMPANY Particulars Max New York Life LIC Bajaj Allianz ICICI Prudential Others Total No. of respondents 25 30 22 18 05 100 Percentage 25% 30% 22% 18% 05% 100%
ANALYSIS OF THE TABLE:According to 30% of the customers LIC is the best insurance company. But when it comes to private players Max New York Life stands ahead with 25% of the customers considering it to be the best company. Bajaj Allianz stands to be the third best company with 22% of the customers considering it as the best insurance company while 18% of the customers feel that ICICI Prudential is the best insurance company. 5% of the customers named other companies as the best one. INFERENCE:No doubt customers regard LIC as the best company among other insurance companies but considering private players Max New York Life stands the best in the eyes of customers.
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CHART 3: OPINION ABOUT THE BEST INSURANCE COMPANY
30 25 20 PE CE AGE 15 R NT 10 5 0 Ma N York x ew Life(25% ) LIC(30% ) B AJAJ ICICI O thers ) (5% Allia (22% Prudentia nz ) l(18% ) CO MPAN N Y AME
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PREFERENCE OVER VARIOUS INVESTMENT ALTERNATIVES
TABLE 4: PREFERENCE OVER VARIOUS INVESTMENT ALTERNATIVES Particulars Shares &Debentures Insurance Mutual funds Bonds Others Total No. of respondents 14 42 15 17 12 100 Percentage 14% 42% 15% 17% 12% 100%
ANALYSIS OF THE TABLE:It can be clearly analysed from the table that majority of the customers prefer insurance sector more as an investment alternative. 42% of the customers prefer insurance compared to other investment alternatives. After insurance 17% of the people prefer to invest in Bonds. While 15% say that they would prefer investing in Mutual Funds. According to 14 % of the people shares &debentures are perfect investment alternative and 12% of the people consider others as a better investment alternative. INFERENCE:It can be clearly identified that Insurance is the most preferred investment alternative as 42% of the people prefer insurance over other investment alternative.
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CHART 4: PREFERENCE OVER VARIOUS INVESTMENT ALTERNATIVE
50 P ENTAGE ERC 40 30 20 10 0 shares &debentures(14% ) Insurance(42% Mutual F ) unds(15% ) Bonds(17% ) O thers(12% )
INVES TMENT A TERNATIVES L
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KNOWLEDGE OF ANY UNIT LINKED INSURANCE PLAN
TABLE NO. 5:KNOWLEDGE OF ANY UNIT LINKED INSURANCE PLAN
Particulars YES NO Total
No. of respondents 47 53 100
Percentage 47% 53% 100%
ANALYSIS OF THE TABLE:From the table above it can be analysed that most of the people dont have knowledge about various unit linked insurance plans and that is why they are not able to know its benefits in the long run, about 53% of the people dont know any unit linked plan. Only 47% of the total population knows about unit linked insurance plan.
INFERENCE:It is very clear that there is need to educate people on various unit linked insurance plans as only 47% of the people know about them and 53% are still unaware about these.
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CHART 5: KNOWLEDGE OF ANY UNIT LINKED INSURANCE PLAN
60 50 P R E AGE E C NT 40 30 20 10 0 YS E (47% ) NO(53% ) OP INION
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KNOWLEDGE ABOUT MUTUAL FUNDS
TABLE NO. 6 KNOWLEDGE ABOUT MUTUAL FUNDS
Particulars YES NO Total
No. of respondents 56 44 100
Percentage 56% 44% 100%
ANALYSIS OF THE TABLE:This is can be clearly analysed from the table above that 56% of the people know about one or the other mutual funds. There are only 44% of the people who dont know about mutual funds. But the people still are not very sure of investing in mutual funds. INFERENCE:From the table it can be easily seen that people know more about mutual funds as 56% of the people say yes to it. But inspite of this people dont invest much in mutual funds.
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CHART 6: KNOWLEDGE ABOUT MUTUAL FUNDS
60 50 40
PER CENTAGE 30
20 10 0 YS E (56% NO(44% ) )
OPINION
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PERCENTAGE OF ULIPS OR MUTUAL FUND HOLDERS
TABLE NO.7: PERCENTAGE OF ULIPS OR MUTUAL FUND HOLDERS Particulars ULIPS MUTUAL FUNDS Total No. of respondents 53 47 100 Percentage 53% 47% 100%
ANALYSIS OF THE TABLE:It is very clear from the table that the percentage of customers holding ULIPS is more compared to MUTUAL FUNDS. 53% of the customers are holding ULIPS while only 43% customers have their investment in MUTUAL FUNDS. INFERENCE:From the above table we can understand that people prefer ULIPS more than Mutual Funds.
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CHART 7: PERCENTAGE OF ULIPS OR MUTUAL FUND HOLDERS
60 50 PER CENTAGE 40 30 20 10 0 ULIPS (53% ) MUTUAL F UND (43% S ) OPINION
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PERCENTAGE OF MAX NEW YORK LIFE POLICY HOLDERS
TABLE NO. 8: PERCENTAGE OF MAX NEW YORK LIFE POLICY HOLDERS Particulars YES NO Total No. of respondents 49 51 100 Percentage 49% 51% 100%
ANALYSIS OF THE TABLE:This is very clear that 49% of the customers have policies in MAX NEW YORK LIFE. But according to the table we can see that 51% of the customers have policies in other companies. INFERENCE:From the table it can be well understood that MAX NEW YORK LIFE has 49% of the customers having their policy which is a good indicator as 51% have policies with several other insurance companies.
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CHART 8: PERCENTAGE OF MAX NEW YORK LIFE POLICY HOLDERS
51 50.5 50 P RC NT E E AGE 49.5 49 48.5 48 YE (49% S ) No(51% ) NO. OFH DE OL RS
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MAIN CAPTURING AREAS OF MAX NEW YORK LIFE

TABLE NO.9- MAIN CAPTURING AREAS OF MAX NEW YORK LIFE Particulars Urban Semi Urban Rural Total No. of respondents 33 37 30 100 Percentage 33% 37% 30% 100%
ANALYSIS OF THE TABLE:According to 37% MAX NEW YORK LIFEs main capturing area is semi-urban, while 33% of the customers feel its main capturing area is urban.30% of the customers consider its main capturing area to be rural. INFERENCE:From the above table we can say that Max New York Lifes main capturing area is semi-urban as 37% of the customers hold this view.
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CHART-9: MAIN CAPTURING AREAS OF MAX NEW YORK LIFE
40 35 30 25 PER ENTAGE 20 C 15 10 5 0 UR AN(33% B ) S EMI UR BAN(37% ) R AL UR (30% )
MAR ET S TOR K EC
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MOST POPULAR INSURANCE PLAN OF MAX NEW YORK LIFE
TABLE NO. 10: MOST POPULAR INSURANCE PLAN OF MAX NEW YORK LIFE
Particulars Life Insurance Child plan Health Solution Retirement Plan Total
Percentage 43% 27% 11% 19% 100%
ANALYSIS OF THE TABLE:According to the table we can consider that 43% of the respondents have life insurance plan, 27% have child plan, 11 % health solution plan, and 19% of the respondents have retirement plan with Max New York Life. INFERENCE:From the above table it can be well analysed that Life Insurance plan is the most popular plan of Max New York Life Insurance Co. Ltd. and 43% of the respondents have this plan.
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CHART 10: MOST POPULAR INSURANCE PLAN OF MAX NEW YORK LIFE
5 0 4 0
P ENTAGE ERC
3 0 2 0 1 0 0 L ife C hildPla 7 ) n(2 % H lth ea R etirem ent Insurance(4 % 3 ) S olution(1 % 1 0 Plan(1 % 9 )

P ANS L
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KNOWLEDGE OF SALES MAN
TABLE NO. 11: KNOWLEDGE OF SALES MAN Particulars Excellent Good Average Poor Total No. of respondents 38 42 12 08 100 Percentage 38% 42% 12% 08% 100%
ANALYSIS OF THE TABLE:From the table it can be well analysed that 38% of the respondents believe that the knowledge of the Max New York Lifes Sales man is Excellent while 42% consider them of Good knowledge. As per 12% of the respondents they are of average knowledge and 8% of them consider the sales man of poor knowledge. INFERENCE:It can be well observed that people consider the sales man of Max New York Life of good knowledge. 42% of the respondents believe this.
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CHART- 11: KNOWLEDGE OS SALES MAN
45 40 35 30 25 PE C NT R E AGE 20 15 10 5 0
Ex cellent(38% Good(42% Averag ) ) e(12% )

R INGS AT
Poor(8% )
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SALES PERSONS ATTENTION TOWARDS YOUR NEEDS

TABLE NO. 12: SALES PERSONS ATTENTION TOWARDS YOUR NEEDS
Particulars Excellent Good Average Poor Total
Percentage 23% 42% 25% 10% 100%
ANALYSIS OF THE TABLE:According to 23% of the respondents the sales persons of Max New York Life excellently care about the needs of the customers and pay attention towards it. 42% believe they are good in it.25 % of the customers feel they are average in understanding their needs and 10 % respondents find them poor when the idea of understanding customers need comes. INFERENCE:From the table it is very clear that customers feel that the sales persons of Max New York Life pay good attention towards the needs of the customer and guide them accordingly. 42% of the respondents reported so.
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CHART 12: SALES PERSONS ATTENTION TOWARDS YOUR NEEDS
50 40 30 20 10 0 Excellent(23%) Good(42%) Average(25%) Poor(10%)
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SALES PERSONS COURTESY AND FRIENDLINESS
TABLE NO. 13: SALES PERSONS COURTESY AND FRIENDLINESS Particulars Excellent Good Average Poor Total No. of respondents 20 45 26 9 100 Percentage 20% 45% 26% 9% 100%
ANALYSIS OF THE TABLE:It can be analysed that majority of the respondents feel that the sales persons of Max New York Life are having courtesy and friendliness in them, 45 % feel so. As per 26% of the respondents they are average and 20 % of them feel they are excellent. Only 9% feel they are poor with regard to courtesy and friendliness. INFERENCE:It is very clear that people consider the sales man of Max New York Life friendly and possessing courtesy.
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CHART-13: SALES PERSONS COURTESY AND FRIENDLINESS
Poor 9%
Excellent 20%
Average 26%
Good 45%
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CAPABILITY OF SALES PERSON IN EXPLAINING THE FEATURES, ADVANTAGES AND BENEFITS OF VARIOUS PLANS
TABLE NO. 14- CAPABILITY OF SALES PERSON IN EXPLAINING THE FEATURES, ADVANTAGES AND BENEFITS OF VARIOUS PLANS Particulars Excellent Good Average Poor Total No. of respondents 23 48 20 9 100 Percentage 23% 48% 20% 9% 100%
ANALYISIS OF THE TABLE:From the table it can be considered that 23% of the respondents find the sales person of Max New York Life excellent in explaining the features, advantages and benefits of various plans to them while 48 % found them good in it.20% of the respondents feel they are average and 9% consider them poor in explaining the various plans. INFERENCE:It can be well analysed that people find the sales person of Max New York Life capable of explaining the features, advantages and benefits of various plans to them .
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CHART- 14- CAPABILITY OF SALES PERSON IN EXPLAINING THE FEATURES, ADVANTAGES AND BENEFITS OF VARIOUS PLANS
Poor(9% )
Ratings
Average(20% ) Good(48% ) Excellent(23% ) 0 10 20 30

Percentages
40
50
60
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SATISFIED WITH THE SERVICES PROVIDED BY MAX NEW YORK LIFE INSURANCE CO.LTD.
TABLE NO.15: SATISFIED WITH THE SERVICES PROVIDED BY MAX NEW YORK LIFE INSURANCE CO.LTD. Particulars Highly Satisfied Satisfied Neutral Dissatisfied Highly Dissatisfied Total ANALYSIS OF THE TABLE:From the above table it can easily be considered that 11% of the customers are highly are highly satisfied with the services provided by Max New York Life Insurance Co. LTD. It also signifies that around 51% of the customers are satisfied with the services provided. 17 % of the customers are neutrally satisfied with the services so provided. Around 13% of the people seems to be dissatisfied by the services provided while 8% are highly dissatisfied with the services provided by Max New York Life Insurance Co. Ltd. INFERENCE:From the samples it can be well analysed that 51% of the customers are satisfied with the services of Max New York Life Insurance Co. Ltd. No. of respondents 11 51 17 13 8 100 Percentage 11% 51% 17% 13% 8% 100%
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CHART-15: SATISFIED WITH THE SERVICES PROVIDED BY MAX NEW YORK LIFE INSURANCE CO.LTD.
Hig S hly atisfied(11% ) S tisfied(51% a ) Neutral(17% ) Hig hly Dissa tisfied(13% ) Dissa tisfied(8% )
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CHAPTER- 5 SUMMARY OF FINDINGS AND CONCLUSIONS
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A. OBJECTIVE OF THE STUDY

The specific objectives of the study are as follows. Primary: To provide investors a detailed knowledge of ULIPs and Mutual Funds. To point out various differences between ULIPs and Mutual Funds. To find out which is better to invest in the long run and which will fetch higher returns. To understand the perception of people towards Max New York Life Insurance Co. Ltd.
Secondary: To create awareness among people about various ULIPs and MFs. To create an awareness among people about the companys products. To measure consumer satisfaction towards Max New York Life Insurance Co. Ltd. and suggest ways to improve it. To study the expectation of people towards the companys products. To study the advertisement effectiveness. To educate people on various investment alternatives.
B. SCOPE OF THE STUDY

As a part of fulfill their requirement of the B.B.M. degree of the Bangalore University this project was undertaken for a specific period. It is an exercise that is well planned into the curriculum giving their researcher a valuable opportunity to experiment and exhibit the recently acquired management skills. The scope of the study is to provide the investors depth knowledge about Ulips and Mutual funds and also help them decide which is more beneficial in the long run. The study is also based to change the perception of customers towards Max New York Life Insurance Co. Ltd.
C.FINDINGS
Majority of the customers have heard about MAX NEW YORK LIFE INSURANCE CO.LTD through advertisements. Majority of the customers rank MAX NEW YORK LIFE INSURANCE CO.LTD as a very good company.
MAX NEW YORK LIFE INSURANCE CO.LTD is the 2nd most preferred company in the Insurance Sector.
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Most of the people give their first preference for investment in Insurance domain. Majority of customers are not aware about various Unit Linked Insurance Plans (ULIP) offered by the insurance companies. Majority of the customers know about mutual funds but do not prefer investing in it. Most of the customers have their investment in one or the other unit linked insurance plans. Most of the people have policies in MAX NEW YORK LIFE INSURANCE CO.LTD. MAX NEW YORK LIFE INSURANCE CO.LTD is preferred more in semiurban area. Most of the customers are satisfied with the services provided by MAX NEW YORK LIFE INSURANCE CO.LTD.
Most of the customers hold a good opinion about the company and consider it as a respectful company.
D. CONCLUSIONS
The study was conducted to make people aware about the benefits of investing in ULIPS and Mutual Funds and also to guide them as to which is beneficial for them in the long run. The study was conducted on a sample of 100 customers of Max New York Life and few others. A questionnaire was prepared to know in detail about the customers preference in the area of investment, knowledge about ULIPS and Mutual Funds, holdings in ULIPS and Mutual funds etc.The questionnaire was also aimed to know about customers view about Max New York Life Insurance Co.Ltd. Based on the questionnaire , data was collected and analysed and it was found that customers are partially knowing about various Ulip plans. It was also found that inspite of knowing about Mutual Funds they do not prefer investing in them. Apart from this, it was found that customers are generally satisfied. However some areas of dissatisfaction is also identified. Recommendations were provided to the customers to educate them about the benefits of investing in ULIPS and Mutual Funds. The aim of the study was to make it more realistic and suggestive, but it does not claim that the findings and suggestions in the reports are perfect and finally the study may be used as a foundation or basement for further study.
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CHAPTER-6
RECOMMENDATIO NS AND SUGGESTIONS
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RECOMMENDATIONS AND SUGGESTIONS Relatively speaking: ULIPs and Mutual Funds ALTHOUGH BOTH MUTUAL FUNDS AND ULIPs HAVE BEEN POPULAR FOR SOME TIME NOW, DUE TO CERTAIN SIMILARITIES BETWEEN THE TWO, THERE ARE STILL SOME GREY AREAS IN THE MINDS OF INVESTORS WITH RESPECT TO THESE INVESTMENT VEHICLES. HERES A LOOK AT HOW THEY STACK UP AGAINST EACH OTHER TO GIVE AN IDEA ABOUT WHICH COULD BE MORE SUITABLE FOR YOU...
Objective : MF: Mutual Funds are known for their good returns and variety of investment choices, including tax saving schemes called ELSS.
Insurance Policies
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ULIP: Popular for its triple benefit, this offers life cover, capital appreciation and income tax benefits. Structure: MF: An MF collects money from the public and invests in equity, debt or a combination of both, as per a perspective investment objective. Investors are offered units depending on the value of their investment, on a pro rata basis. Equity funds invest predominantly in the stock market to generate growth by the way of capital appreciation for investors, whereas debt funds invest in fixed income securities such as bonds, debentures, government securities reverse repos, etc. A balanced fund invests partly in both equity and debt. A mutual fund scheme an be open- ended (no defined time period) or close-ended (three years or five years). ULIP: Although the investment proportion of a ulip is structured like a mutual fund, the prime objective of this product is insurance and capital appreciation. Accordingly, a part of the premium paid to the company is allocated towards life insurance cover, administrative charges and management fees. The rest is invested in market linked instruments like stocks, corporate bonds and government securities, depending on the asset allocation plan. Most ULIPs offer policy holders a choice of plans, namely equity oriented and balanced, too. You will get units
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only for the amount invested and not on the full premium amount paid. You can switch from one plan to another, a specified number of times. The value of units of both ULIPs and MFs are calculated and declared on a daily basis at their market worth and called the Net Asset Value (NAV) of the investment fund. Investors can gauge whether their investment has appreciated or depreciated according to the NAV movement. Tenure: MF: there is no minimum holding period for most mutual fund schemes, except in the case of tax saving schemes (ELSS) , which have a three-year lock in period. Close ended funds, which have a lock in period, are either listed on the stock exchange or provide liquidity by accepting redemptions at periodic time intervals ( eg. Every three months or six months) ULIP: these usually have a minimum tenure of 5 years and the maximum term depends on the age of the investor. These are also subject to a lock in period of three years before which an investor has no access to the investment amount. EXPENSES: MF: expenses such as fund management, sales and marketing, administration, etc., are charged subject to predetermined upper limits as prescribed by the securities
and exchange board of india. For example, equity oriented funds can charge their investors a maximum of 2.5 percent per annum on a recuriing basis. Any expense above the prescribed limit is borne by the fund house and not passed on to the investors. Mutual funds also charge their investors entry and or exit loads. Entry loads are charged at the time of making an investment while the exit load is charged at the time of sale. ULIP: there are no maximum limits prescribed by the insurance regulatory and development authority, as regards levy of expenses on ULIP products. However, the insurance company is required to get the expense limit preapproved from the insurance regulator. The expenses have to be explicitly stated by the insurance company. The expenses charged by ULIPs are rather high and could range
between 5 to 65 percent for the first year and then fall to 3 to 20 percent in subsequent years. RETURNS: MF: mutual funds usually give better returns on investment than ULIPs since a larger portion of your contribution is invested in securities. The returns vary with the investment pattern. For example debt schemes are presently offering, on an average basis, annualized returns of 3 to8 percent, whereas equity oriented schemes are presently offering returns in the range of 30 to 60 percent per annum.
ULIP: ULIPs charge higher expenses as a percentage of your investment than MFs the amount available for investment reduces to that extent. Life insurance cover charges and other expenses are factored into the ULIP premium. Since the base for investment is lower, the returns offered by ULIP will mostly be lower than those on mutual fund schemes. Options for receiving returns: MF: returns are available to investors in the form of dividends if the dividend option is chosen by the investor. In the case of the growth option these are in the form of capital appreciation. ULIP: the return is in the form of capital appreciation and insurance cover in case of premature death. Redemption procedure: MF: the redemption amount is calculated by multiplying the NAV (minus exit load, if any) on the date of redemption with the number of units redeemed. Mutual fund investments are highly liquid (the redemption amount is received with in 1to3 working days based on scheme type) ULIP: in the case of ULIPs, you can redeem units under any of the following situations:
MATURITY: this is on the expiry/ maturity date of the ULIP. Surrender: if you surrender your policy, you receive the surrender value as stated in the policy, only after the lock in period of three years. Death: in the event of unfortunate demise of the investor, his nominee receives the sum assured or the value of the units, whichever is higher. Partial Withdrawals: some funds allow partial withdrawal at periodic time intervals. Your units will stand reduced to that extent. Suitability: A mutual fund offers certain advantages in terms of cost, various types and sub types of plans and liquidity. ULIPs on the other hand, give you the flexibility to shift between various plans with in the insurance company, without high load cost and capital gains implications. Further, if you plan to invest for the long term ( more than 10 years), you could consider ULIPs as this vehicle would ensure that your insurance needs are taken care of and you enjoy capital appreciation as well.
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SUGGESTIONS TO THE COMPANY:After analyzing the response and opinion of the customers with great care the following suggestions have been drawn. Implementation of the same may lead to great satisfaction of the needs of the customer, educating them on various plans and thereby increasing the market share of the company. Keeping these in mind following suggestions are drawn which will help the company to provide more advanced services to the customers:1. Focus must be made towards the promotion of various plans , explaining the various features and benefits to the customers. 2. Most of the people dont know about ULIPS , the company must focus on this and thus educate the customers on various ULIP plans .Also the company should highlight the unknown products to the customers. 3. Max New York Life must open its branches in all districts as majority of the people in these places dont have much knowledge about either ULIPS or Mutual funds. 4. The board of directors must pay heed to the complaints of the customer and also focus from time to time on providing information to the customers.
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5. The company should encourage the sales team in guiding the customers for the selection of right option. 6. Most of the people in the rural sector are unaware of the products of Max New York Life, many of them dont even know about the company therefore there is a need to make people aware of the products and company. This can be done through extensive advertisement, and activities.
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APPENDICES AND ANNEXURES
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-:QUESTIONNAIRE:PART-A 1. RESPONDENTS DETAILS: NAME: ADDRESS: CONTACT NO.: AGE: OCCUPATION: 2. INCOME LEVEL: Below 3000 7000-9000 3. RESIDENTIAL AREA: Urban Semi- Urban PART-B 4. Are you aware of Max New York Life in insurance sector? Yes No Rural 3000-5000 9000 &above 5000-7000
5. If yes , you have heard it through? Advertisement Friends or Relatives Customers opinion Other Sources
6. What is your opinion about Max New York Life? V. Good Good Average Poor
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7. Which company do you consider the best in insurance sector? Max New York Life ICICI Prudential LIC Others Bajaj Allianz
8. Which investment alternative do you prefer? Shares & Debenture Bonds Insurance Others Mutual Funds
9. Do you know about any Unit linked Insurance plan? Yes No
10.Do you know about any Mutual Fund? Yes 11.Which do you have ? ULIP Mutual Fund No
12.Do you have any policy with Max New York Life? Yes No
13.Which is Max New York Lifes main capturing area? Urban Semi-urban Rural
14.Which plan of Max New York Life do you have? Life Insurance Retirement Plan 15.What do you feel about the knowledge of MNYLs Sales man? Excellent Good Average Poor Child Plan Health solution
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16.How was the sales mans attention towards your needs? Excellent Good Average Poor
17.How was the sales mans courtesy and friendliness? Excellent Good Average Poor
18.How was the sales man in explaining the features, advantages and benefits of various plans? Excellent Good Average Poor
19.Are you satisfied with the services provided by Max New York Life? Highly Satisfied Dissatisfied Satisfied Neutral
Highly Dissatisfied
20. Suggestions to improve Max New York Lifes Services? .
Thank you for co-operation.
Date:
Signature:
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BIBLIOGRAPHY
Text Books Referred:GARDEN CITY COLLEGE Page 127
1. Kothari C.R. Research Methodology, New Age Publishers-2nd Edition-2004 2. Kotler Philip, Marketing Management, Pearson Edition 11th Edition-2006 3. Gupta Shashi K., Finance & Market Services-1st edition-2007 4. Singh Preeti, Portfolio Management-1st edition-2007 Web sites Referred:www.maxnewyorklife.com www.google.co.in www.personalfn.com www.indiamart.com www.moneyonline.com
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CHAPTER -1

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INTRODUCTION TO THE SUBJECT

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Choice of schemes Tax benefits Well regulated

Drawbacks of Mutual Funds:

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WHAT ARE ULIPS?

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10 years 15 years 20 years

Rs. 57,500 Rs. 77,500 Rs. 97,500

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Some relevant important aspects

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Is investment in ULIPs a risky option?

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ULIP VS MUTUAL FUNDS-WHOS BETTER

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How ULIPs can make you RICH!

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No upper limits, expenseschargeable determined Expenses by thehave been

regulator Quarterly disclosures are

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free or at a nominal cost

borne by the investor Section 80C benefits are only on

Section 80C benefits areavailable

available on all ULIPinvestments in tax-saving Tax benefits investments funds

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A. TITLE OF THE STUDY

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B. STATEMENT OF THE PROBLEM

C. OBJECTIVE OF THE STUDY

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D. SCOPE OF THE STUDY

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