A

PROJECT REPORT
ON
“UNIT LINKED INSURANCE PLAN ”
AT
“ICICI BANK”
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
AWARD
OF
MASTER OF BUSINESS ADMINISTRATION

FROM
OSMANIA UNIVERSITY

SUBMITTED BY
TATIPALLI HARSHINI
HALL TICKET NO: 1170-19-672-068
UNDER THE GUIDANCE
MS. V.RADHIKA
ASSISTANT PROFESSOR

R.G KEDIA COLLEGE OF COMMERCE

CHADERGHAT, ESAMIA BAZAR, HYDERABAD
AFFILATED TO OSMANIA UNIVERSITY, HYDERABAD
BATCH 2019-2021

1
2
3
 DECLARATION

I hereby declare that this project report entitled “UNIT LINKED INSURANCE PLAN ”

submitted by me to the Department of Business Management, OSMANIA UNIVERSITY,

Hyderabad, is a bonafide work undertaken by me and it is not submitted to any other

University or Institution for the award of any degree / diploma certificate or published any

time before.

Date:

Place: Hyderabad

TATIPALLI HARSHINI

HALL TICKET NO: 1170-19-672-068

4
 ACKNOWLEDGEMENT

I am very grateful to the management of our college for giving us an opportunity and
encouragement in completing this project.

It give me immense pleasure to express my gratitude to our Director Prof. D.V.G.

KRISHNA who gave us an opportunity in completing this project.

I deeply express my profound gratitude and wholehearted thanks to our beloved Principal
Dr. R. Lakshmi and internal guide Ms. V. RADHIKA who has provided us the necessary
facilities, guidance and endless encouragement which helped soundly in completing our
project work within time.

I express my sincere gratitude to ICICI BANK for its kind acceptance in providing us
project successfully and providing us with encouraging guidance throughout.

I also express my gratitude to our lecturers, non-teaching staff, friends and my parents who
have directly or indirectly helped us to complete our project successfully.

TATIPALLI HARSHINI
HALL TICKET NO: 1170-19-672-068

5
 ABSTRACT

A ULIP is basically a combination of insurance as well as investment. A part of the

premium paid is utilized to provide insurance cover to the policy holder while the
remaining portion is invested in various equity and debt schemes. The money
collected by the insurance provider is utilized to form a pool of funds that is used to
invest in various market instruments (debt and equity) in varying proportions just
the way it is done for mutual funds. Policy holders have the option of selecting the
type of funds (debt or equity) or a mix of both based on their investment need and
appetite. Just the way it is for mutual funds, ULIP policy holders are also allotted
units and each unit has a net asset value (NAV) that is declared on a daily basis.
The NAV is the value based on which the net rate of returns on ULIPs are
determined. The NAV varies from one ULIP to another based on market conditions
and the fund’s performance.

6
 TABLE OF CONTENTS

SL NO Description Page No

Introduction 1-7

Need of the study

Objectives of the study

CHAPTER-1
Scope of the study

Research Methodology

Limitations of the study

CHAPTER-2 Review of Literature 8-14

Industry profile 15-36

CHAPTER-3
Company profile

CHAPTER-4 Theoretical framework 37-47

CHAPTER-5 Data Analysis and Interpretations 48-62

Findings 63-67

Suggestions
CHAPTER-6
Conclusion

Bibliography 68-69

7
CHAPTER – I

INTRODUCTION

8
INTRODUCTION

A ULIP is basically a combination of insurance as well as investment. A part of

the premium paid is utilized to provide insurance cover to the policy holder
while the remaining portion is invested in various equity and debt schemes. The
money collected by the insurance provider is utilized to form a pool of funds
that is used to invest in various market instruments (debt and equity) in varying
proportions just the way it is done for mutual funds. Policy holders have the
option of selecting the type of funds (debt or equity) or a mix of both based on
their investment need and appetite. Just the way it is for mutual funds, ULIP
policy holders are also allotted units and each unit has a net asset value (NAV)
that is declared on a daily basis. The NAV is the value based on which the net
rate of returns on ULIPs are determined. The NAV varies from one ULIP to
another based on market conditions and the fund’s performance.

With over 300 million life policies in force, substantial premiums and double-
digit growth in both segments (life and non-life), India’s insurance sector is
poised to mark incredible pace of progress in the years to come. Liberalization
in the sector led to the entry of foreign players with significant capital
commitments and growth aspirations in the Indian insurance arena. Low
penetration, availability of a wide variety of products (like unit-linked
insurance products, whole life, maximum net asset value (NAV) guarantee etc)
and government incentives are the key drivers that would give great impetus to
the industry.

9
NEED OF THE STUDY

In the present scenario, the most sought after insurance plans are the Unit
Linked insurance Plans (ULIPs). It is a combination of risk cover and
investment. ULIPs have gained high acceptance due to it having attractive
features like flexibility, transparency, liquidity and a vast variety of fund
options. Unit linked plans are suitable for all customer profiles; however as a
general belief the risk averse investors tend to choose traditional plans and an
informed customer prefers a ULIP.

ULIPs offer the kind of flexibility by combining the benefits of an insurance

policy and a market-linked investment. 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.,ULIPs are structured in such a
way that the protection element and the savings element are distinguishable, and
hence managed according to your specific needs.

In this way, the ULIP plan offers unprecedented flexibility and transparency.
So with many players around for a company to really be successful it has to
really be very efficient on all fronts. It has to constantly adapt to the changing
consumer preferences with a lot of new innovations and implementing new
technology to try to differentiate from the lot. The present study compares the
position of ULIP Products offered by ICICI Life compared to the major
competitors in the industry.

10
OBJECTIVES OF THE STUDY

● To study the IRDA guidelines with respect to ULIP’s

● To study the concept and working mechanism of ULIP in ICICI

● To study the investors perception regarding investment in ULIP

● To know the factors that influence investors while making investment decisions.

● To know the customers awareness about ULIP’s & mutual funds.

● To compare the investment in ULIP’s plan with the mutual funds.

11
SCOPE OF THE STUDY

This study is all about the inception of the concept of Unit Linked Insurance
Policies and its working mechanism. This study also aims to make a study of
the Unit Linked Insurance Plans (ULIPs) of ICICI Life Insurance Company
with that of some major players like ICICI Prudential Life Insurance and
AVIVA Life Insurance Company and also to study the consumer perception
towards various insurance products. The study also aims to discuss in detail the
various positioning strategies adopted by ICICI Life in general.

12
RESEARCH METHODOLOGY

Research design or research methodology is the procedure of collecting,

analyzing and interpreting the data to diagnose the problem and react to the
opportunity in such a way where the costs can be minimized and the desired
level of accuracy can be achieved to arrive at a particular conclusion.

SOURCES OF DATA

Two types of data are used for the study viz., primary and secondary data.
Primary data is defined as data that is collected from original sources for a
specific purpose. Secondary data is data collected from indirect sources.

Primary Data

The study is conducted by using questionnaires.

Secondary Data

Secondary data collected from the internet, company brochures, product

brochures, the company website, newspaper articles, text books etc.

13
STATISTICAL TOOL

Tables are used for the analysis of the collected data. The data is also neatly
presented with the help of graphs, bar diagrams and pie charts. Percentages and
averages are used to represent the data.

SAMPLE SIZE

The samples referred to only Hyderabad City with 100 respondents.

PERIOD OF STUDY:

The period of study is for 45 days.

LIMITATIONS :

1. Some of the respondents were reluctant to share the investment information.

2. Time and resources constrained in collecting the data.
3. The study is conducted in Hyderabad city only.

14
 CHAPTER – II

REVIEW OF LITERATURE

15
K. Hanumantha Rao , T. Gopi (*2013) Investor Perception towards Unit Linked
Insurance Plan a Select Study on UTI Mutual Fund The foundation of life insurance is
the recognition of the value of a human life and the possibility of indemnification for
the loss of that value. Mutual fund industry has gained importance after the
liberalization policy of the Government, but the function of Unit Trust of India (UTI)
marked the evolution of the Indian mutual fund industry in 1963. With the
privatization of the insurance sector, many companies emerged with unit linked
insurance plans (ULIP), but long before this UTI has come into play with ULIP-1971
with an objective of returns through growth. ULIPs are such schemes that provide a
combination of benefits of life insurance and diversified investment. With high
competition existing among these companies and advancement of information
technology, customers are able to know information from all corners and also have
many choices to invest at their behest. Organizations have to move to provide
innovative services to attract the customers. The present study includes data collection
through questionnaires and also personal interviews of the customers to know how
they perceive UTI-ULIP. Chi-square has been applied to find the product validation as
a better option for investment there being many avenues for investment. Concepts are
described. Suggestions are made at the end for improving the perception level of the
customers, and changes that may be made to make unit linked insurance plans a
better alternative.

Khurana (2009) made a comparative analysis of performance of ULIPs of

private
sector companies and found that there is no significant difference between the
performances of pension funds-growth of selected insurance companies.

Babu, Chiranjeevi and Rao (2009) found that in spite of various investment
opportunities, ULIPs have gained more reputation among the investors. Hence
his study focused on assessing the significant relation between demographic
features and ULIPs feature and level of investment in ULIP.

16
Rao (2003) performed the evaluation of mutual funds in a bear market and his
results suggest that most mutual funds have given excess returns over expected
return.

Dash, Lalremtluangi, Atwal and Thapar (2007) the researchers tried to find
out rate of return given by different insurance policies and the effect of
mortality and he found that different returns are given by different insurance
policies and the mortality does not affect return.

Devasenathipathi, Saleendran and Shanmugasundaram (2008) found that due to

changes in LPG policies, preferences of people are changing. Therefore a wide
range of ULIPs products is being offered to customers according to their preferences.

Korivi and BS (2009) examined that mutual funds offered customer-tailor

products to suit investors' requirements. So insurance companies also offered
ULIPs which is an insurance product with an investment fund wrapped around
it

Karuna (2009) highlighted on ‘Relevance of ULIPs as a good investment tool’

to observe traditional life insurance plans offered by LIC took care of only the
insurance needs of people. However, with the ever changing demands of
customers a new product called ULIP was launched which combines the
benefits of insurance, investment and tax benefits. The author observed that
ULIPs were better suited to investors who have 15-20 years as their time
horizon to spread the expense over the longer period and reap the benefits.

Divya Y. Lakhani (2011) had conducted a research study to identify the

relation between returns and Sensex, investors’ preference for ULIP and
17
Equity, growth and penetration of ICICI Prudential and the performance of
some of its ULIP schemes. The major finding of this study was that the NAV
for equity based fund options moves in tandem with Sensex while for debt
based fund options it is not much affected by the movement of Sensex

18
Udayan Samajpati (2012) enhanced the performance evaluation of ULIPs is
carried out through Risk-Return Analysis, Treynor’s Ratio, Sharpe’s Ratio and
Jensen’s Measures. The schemes selected for study were ICICI Life Stage
RP- Maximiser (Growth) Fund, Bajaj Allianz New Family Gain-Equity Index
Fund II and ING High Life Plus-Growth Fund. The results of performance
measures suggested that all the three ULIPs schemes have outperformed the
market. Among the three schemes ING Vysya ULIP was the best performer.

Agarwal (2010), ULIP helps to manage the risk return profile. With the double
advantage of
insurance product from the available range of life insurance policies. With a
higher rate of return, ULIPs give tough competition to traditional insurance
products like endowment plans and money back plans. The basic reason for
opting for policies other than the term insurance is ensuring the highest
maturity value for invested sum besides mortality benefits. In maturity value
the important factors to be considered is the internal rate of return on
investment. IRDA has fixed 6% and 10% as the assumed rate of return for
projecting future benefits. The general rule for Debt-Equity portfolio
management in ULIPs is that you should go conservative by increasing
investment in debt when the markets are at their highest, very unstable and
likely to start falling any time, vice versa when the markets are very low and
depressed.

Lubos Pastor and Robert F. Stambaugh (2008) in their paper titled “Are
stocks really less volatile in the long run?” find that stocks are more volatile
over long horizons. For a 30-year time horizon, it was found that return
variance per year was 21 to 53% higher than the variance at a one year time
horizon.

19
Achintya Mandal (2008-09) in his paper, “Overview of Indian Insurance
market in the post-liberalization era – growing challenges and opportunities
and the Fight for FDI”. The opening up of the insurance sector in 2000 allowed
private players into the market. The foreign players could also enter the market
with a limit of 26% on direct ownership. The aggressive marketing strategies

20
adopted by the private and foreign players have expanded the market for
insurance. As a result of this even though the share of PSUs is larger than their
private counterparts, the percentage of market share is coming down.

Karuna K (2009) in her article appearing in ‘Insurance Chronicle’ titled

‘Relevance of ULIPs as a good investment tool’ observes that traditional life
insurance plans offered by LIC took care of only the insurance needs of people.
However, with the ever changing demands of customers a new product
called ULIP was launched which combines the benefits of insurance,
investment and tax benefits. It observed that ULIPs are better suited to
investors who have 15-20 years as their time horizon. This helps to spread the
expense over the longer period and reap the benefits.

De Bondt and Thaler (2005) while investigating the possible psychological

basis for investor behavior, argue that mean reversion in stock prices is an
evidence of investor overreaction where investors over emphasize recent firm
performance in forming future expectations.

Dipak Mondal (2010) says that the minimum sum assured (life cover) in
ULIPS is five times and most policies offer covers between 5-10 times the
annual premiums which have been the signaling factor for the investors.

Shanmugham (2000) conducted a survey of 201 individual investors to study

the information sourcing by investors, their perceptions of various investment
strategy dimensions and the factors motivating share investment decisions,
and reports that among the various factors, psychological and sociological
factors dominated the economic factors in share investment decisions.

21
Madhusudhan V Jambodekar (1996) conducted a study to assess the
awareness of investors, to identify the information sources influencing the
buying decision and the factors influencing the choice of a particular fund. The
study reveals among other things that income schemes and open ended schemes
are more preferred than growth schemes and close ended schemes

22
during the then prevalent market conditions. Investors look for safety of
principal, liquidity and capital appreciation in the order of importance; the
newspapers and magazines are the first source of information through which
investors get to know about schemes and investor service is a major
differentiating factor in the selection of mutual fund schemes.

Amar ranu (2010), leading financial conglomerate says that other market
related products lag behind ULIPs return by a larger margin in the long term
which confirms that investment in ULIPs are an ideal investment vehicle for
wealth creation in the long run. ULIP score over other products in terms of
returns and additional benefits such as insurance cover. ULIPs are covered
under sec 80(C), 10 (D) of IT Act, hence tax benefits up to a maximum of Rs.1,
00,000 investment can be claimed in these plans.

Sanjay Mathew, (2010) says that the changes made by IRDA on ULIP
includes the top up premium. IRDA said adding all limited premium ULIPs,
other than single premium products, shall have premium paying terms of at
five years. The premium has also gone up to 10 times of the year premium
compared to existing 5 times. All ULIP pension or annuity products will offer a
minimum guaranteed return of 4.5% per annum or as specified by the IRDA
from time to time.

Sujit Sikidar and Amrit Pal Singh (2006) carried out a survey with an
objective to understand the behavioral aspects of the investors of the North
Eastern region towards equity and mutual funds investment portfolio. The
survey revealed that the salaried and self employed formed the major investors
in ULIPS primarily due to tax concessions. UTI and SBI schemes were popular
in that part of the country then and other funds had not proved to be a big hit
during the time when the survey was done.

23
Syama Sunder (2008) conducted a survey to get an insight into the mutual
fund operations of private institutions with special reference to Kothari Pioneer.
The survey revealed that awareness about the ULIPS concept was poor during
that time in small cities like Visakhapatnam. Agents play a vital

24
role in spreading the ULIPs culture; open end schemes were much preferred
then, age and income are the two important determinants in the selection of the
fund/scheme; brand image and return are the prime considerations while
investing in any fund.

25
 CHAPTER-III

INDUSTRY PROFILE

&

COMPANY PROFILE

26
INDUSTRY PROFILE

A bank is a financial institution that accepts deposits and channels those

deposits into lending activities. Banks primarily provide financial services to
customers while enriching investors. Government restrictions on financial
activities by banks vary over time and location. Banks are important players in
financial markets and offer services such as investment funds and loans. In
some countries such as Germany, banks have historically owned major stakes
in industrial corporations while in other countries such as the United States
banks are prohibited from owning non-financial companies. In Japan, banks are
usually the nexus of a cross-share holding entity known as the keiretsu. In
France, bancassurance is prevalent, as most banks offer insurance
services (and now real estate services) to their clients.

Introduction
India’s banking sector is constantly growing. Since the turn of the century, there
has been a noticeable upsurge in transactions through ATMs, and also internet
and mobile banking.
Following the passing of the Banking Laws (Amendment) Bill by the Indian
Parliament in 2012, the landscape of the banking industry began to change. The
bill allows the Reserve Bank of India (RBI) to make final guidelines on issuing
new licenses, which could lead to a bigger number of banks in the country.
Some banks have already received licences from the government, and the RBI's
new norms will provide incentives to banks to spot bad loans and take requisite
action to keep rogue borrowers in check.
Over the next decade, the banking sector is projected to create up to two
million new jobs, driven by the efforts of the RBI and the Government of India to
integrate financial services into rural areas. Also, the traditional way of
operations will slowly give way to modern technology.

27
Market size
Total banking assets in India touched US$ 1.8 trillion in FY13 and are
anticipated to cross US$ 28.5 trillion in FY25.
Bank deposits have grown at a compound annual growth rate (CAGR) of 21.2
per cent over FY 06–13. Total deposits in FY13 were US$ 1,274.3 billion.
Total banking sector credit is anticipated to grow at a CAGR of 18.1 per cent
(in terms of INR) to reach US$ 2.4 trillion by 2017.
In FY14, private sector lenders witnessed discernable growth in credit cards
and personal loan businesses. ICICI Bank witnessed 141.6 per cent growth in
personal loan disbursement in FY14, as per a report by Emkay Global Financial
Services. Axis Bank's personal loan business also rose 49.8 percent and its
credit card business expanded by 31.1 per cent.
Investments
Bengaluru-based software services exporter Mphasis Ltd has bagged a five-
year contract from Punjab National Bank (PNB) to set up the bank’s contact
centres in Mangalore and Noida (UP). Mphasis will provide support for all
banking products and services, including deposits operations, lending
services, banking processes, internet banking, and account and card-related
services. The company will also offer services in multiple languages.
Microfinance companies have committed to setting up at least 30 million bank
accounts within a year through tie-ups with banks, as part of the Indian
government’s financial inclusion plan. The commitment was made at a
meeting of representatives of 25 large microfinance companies and banks and
government representatives, which included financial services secretary Mr GS
Sandhu.
Export-Import Bank of India (Exim Bank) will increase its focus on supporting
project exports from India to South Asia, Africa and Latin America, as per Mr
Yaduvendra Mathur, Chairman and MD, Exim Bank. The bank has moved up
the value chain by supporting project exports so that India earns foreign
exchange. In 2012–13, Exim Bank lent support to 85 project export contracts

28
worth Rs 24,255 crore (US$ 3.96 billion) secured by 47 companies in 23
countries.
Government Initiatives
The RBI has given banks greater flexibility to refinance current long-gestation
project loans worth Rs 1,000 crore (US$ 163.42 million) and more, and has
allowed partial buyout of such loans by other financial institutions as standard
practice. The earlier stipulation was that buyers should purchase at least 50 per
cent of the loan from the existing banks. Now, they get as low as 25
percent of the loan value and the loan will still be treated as ‘standard’.
The RBI has also relaxed norms for mortgage guarantee companies (MGC)
enabling these firms to use contingency reserves to cover for the losses suffered
by the mortgage guarantee holders, without the approval of the apex bank.
However, such a measure can only be initiated if there is no single
option left to recoup the losses.
SBI is planning to launch a contact-less or tap-and-go card facility to make
payments in India. Contactless payment is a technology that has been adopted
in several countries, including Australia, Canada and the UK, where customers
can simply tap or wave their card over a reader at a point-of-sale terminal,
which reads the card and allows transactions.
SBI and its five associate banks also plan to empower account holders at the
bottom of the social pyramid with a customer call facility. The proposed facility
will help customers get an update on available balance, last five
transactions and cheque book request on their mobile phones.
Road Ahead
India is yet to tap into the potential of mobile banking and digital financial
services. Forty-seven per cent of the populace have bank accounts, of which
half lie dormant due to reliance on cash transactions, as per a report. Still, the
industry holds a lot of promise.
India's banking sector could become the fifth largest banking sector in the
world by 2020 and the third largest by 2025. These days, Indian banks are
turning their focus to servicing clients and enhancing their technology

29
infrastructure, which can help improve customer experience as well as give
banks a competitive edge.
Exchange Rate Used: INR 1 = US$ 0.0163 as on October 28, 2014

30
The level of government regulation of the banking industry varies widely, with
countries such as Iceland, having relatively light regulation of the banking
sector, and countries such as China having a wide variety of regulations but no
systematic process that can be followed typical of a communist system.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in
Siena, Italy, which has been operating continuously since 1472.

History

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during
the Renaissance by Jewish Florentine bankers, who used to make their
transactions above a desk covered by a green tablecloth. However, there are
traces of banking activity even in ancient times, which indicates that the word
'bank' might not necessarily come from the word 'banco'.

In fact, the word traces its origins back to the Ancient Roman Empire, where
moneylenders would set up their stalls in the middle of enclosed courtyards
called marcella on a long bench called a bancu from which the words banco
and bank are derived. As a moneychanger, the merchant at the bancu did not so
much invest money as merely convert the foreign currency into the only legal
tender in Rome—that of the Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver

drachm coin from ancient Hellenic colony Trapezius on the Black Sea, modern

31
Trabzon, c. 350–325 BC, presented in the British Museum in London. The
coin shows a banker's table laden with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza means both a table and a

bank.

Traditional banking activities

Banks act as payment agents by conducting checking or current accounts for

customers, paying cheques drawn by customers on the bank, and collecting
cheques deposited to customers' current accounts. Banks also enable customer
payments via other payment methods such as telegraphic transfer, EFTPOS,
and ATM.

Banks borrow money by accepting funds deposited on current accounts, by

accepting term deposits, and by issuing debt securities such as banknotes and
bonds. Banks lend money by making advances to customers on current
accounts, by making installment loans, and by investing in marketable debt
securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks
that provide payment services such as remittance companies are not normally
considered an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and
lend most funds to households and non-financial businesses, but non-bank
lenders provide a significant and in many cases adequate substitute for bank
loans, and money market funds, cash management trusts and other non-bank
financial institutions in many cases provide an adequate substitute to banks for
lending savings to.
32
Entry regulation

Currently in most jurisdictions commercial banks are regulated by government

entities and require a special bank license to operate.

Usually the definition of the business of banking for the purposes of regulation
is extended to include acceptance of deposits, even if they are not repayable to
the customer's order—although money lending, by itself, is generally not
included in the definition.

Unlike most other regulated industries, the regulator is typically also a

participant in the market, i.e. a government-owned (central) bank. Central
banks also typically have a monopoly on the business of issuing banknotes.
However, in some countries this is not the case. In the UK, for example, the
Financial Services Authority licences banks, and some commercial banks
(such as the Bank of Scotland) issue their own banknotes in addition to those
issued by the Bank of England, the UK government's central bank.

33
Accounting for bank accounts

Bank statements are accounting records produced by banks under the various
accounting standards of the world. Under GAAP and IFRS there are two kinds
of accounts: debit and credit. Credit accounts are Revenue, Equity and
Liabilities. Debit Accounts are Assets and Expenses. This means you credit a
credit account to increase its balance, and you debit a debit account to
decrease its balance.

This also means you debit your savings account every time you deposit money
into it (and the account is normally in deficit), while you credit your credit card
account every time you spend money from it (and the account is normally in
credit).

However, if you read your bank statement, it will say the opposite—that you
credit your account when you deposit money, and you debit it when you
withdraw funds. If you have cash in your account, you have a positive (or
credit) balance; if you are overdrawn, you have a negative (or deficit) balance.

The reason for this is that the bank, and not you, has produced the bank
statement. Your savings might be your assets, but the bank liability so they are
credit accounts (which should have a positive balance). Conversely, your loans
are your liabilities but the bank’s assets, so they are debit accounts (which
should also have a positive balance). Where bank transactions, balances,
credits and debits are discussed below,

they are done so from the viewpoint of the account holder—which is

traditionally what most people are used to seeing.

Economic functions

34
 1. issue of money, in the form of banknotes and current accounts subject to
cheque or payment at the customer's order. These claims on banks can act as
money because they are negotiable and/or repayable on demand, and hence
valued at par. They are effectively transferable by mere delivery, in the case of
banknotes, or by drawing a cheque that the payee may bank or cash.
2. netting and settlement of payments – banks act as both collection and paying
agents for customers, participating in interbank clearing and settlement
systems to collect, present, be presented with, and pay payment
instruments. This enables banks to economise on reserves held for settlement
of payments, since inward and outward payments offset each other. It also
enables the offsetting of payment flows between geographical areas, reducing
the cost of settlement between them.
3. credit intermediation – banks borrow and lend back-to-back on their own
account as middle men.
4. credit quality improvement – banks lend money to ordinary commercial and
personal borrowers (ordinary credit quality), but are high quality borrowers.
The improvement comes from diversification of the bank's assets and capital
which provides a buffer to absorb losses without defaulting on its obligations.
However, banknotes and deposits are generally unsecured; if the bank gets
into difficulty and pledges assets as security, to raise the funding it needs to
continue to operate, this puts the note holders and depositors in an
economically subordinated position.

5. maturity transformation – banks borrow more on demand debt and short term
debt, but provide more long term loans. In other words, they borrow short and
lend long. With a stronger credit quality than most other borrowers, banks
can do this by aggregating issues (e.g. accepting deposits and issuing
banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes),
maintaining reserves of cash, investing in marketable securities that can be
readily converted to cash if needed, and raising replacement funding as needed
from various sources (e.g. wholesale cash markets and securities markets).

Law of banking

35
Banking law is based on a contractual analysis of the relationship between the
bank (defined above) and the customer—defined as any entity for which
the bank agrees to conduct an account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the
customer; when the account is overdrawn, the customer owes the balance to the
bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to
the credit of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from
the customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's
account as the customer's agent, and to credit the proceeds to the
customer's account.
5. The bank has a right to combine the customer's accounts, since each account
is just an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the
extent that the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's
account—unless the customer consents, there is a public duty to disclose, the
bank's interests require it, or the law demands it.

8. The bank must not close a customer's account without reasonable notice,
since cheques are outstanding in the ordinary course of business for
several days.

These implied contractual terms may be modified by express agreement

between the customer and the bank. The statutes and regulations in force within
a particular jurisdiction may also modify the above terms and/or create new

36
rights, obligations or limitations relevant to the bank-customer
relationship.

Some types of financial institution, such as building societies and credit

unions, may be partly or wholly exempt from bank licence requirements, and
therefore regulated under separate rules.

The requirements for the issue of a bank licence vary between jurisdictions but
typically include:

1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors,
and/or senior officers
4. Approval of the bank's business plan as being sufficiently prudent and
plausible.

Types of banks

Banks' activities can be divided into retail banking, dealing directly with
individuals and small businesses; business banking, providing services to mid
-market business; corporate banking, directed at large business entities;
private banking, providing wealth management services to high net worth
individuals and families; and investment banking, relating to activities on the
financial markets. Most banks are profit-making, private enterprises. However,
some are owned by the government, or are non-profit organizations.Central
banks are normally government-owned and charged with quasi- regulatory
responsibilities, such as supervising commercial banks, or controlling
the cash interest rate. They generally provide liquidity to the banking system
and act as the lender of last resort in event of a crisis.

37
Types of retail banks

● Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress
required that banks only engage in banking activities, whereas investment
banks were limited to capital market activities. Since the two no longer have
to be under separate ownership, some use the term "commercial bank" to
refer to a bank or a division of a bank that mostly deals with deposits and
loans from corporations or large businesses.
● Community Banks: locally operated financial institutions that empower
employees to make local decisions to serve their customers and the partners.
● Community development banks: regulated banks that provide financial
services and credit to under-served markets or populations.
● Postal savings banks: savings banks associated with national postal systems.
● Private banks: banks that manage the assets of high net worth individuals.
● Offshore banks: banks located in jurisdictions with low taxation and
regulation. Many offshore banks are essentially private banks.
● Savings bank: in Europe, savings banks take their roots in the 19th or
sometimes even 18th century. Their original objective was to provide easily
accessible savings products to all strata of the population. In some countries,
savings banks were created on public initiative; in others, socially
committed individuals created foundations to put in place the necessary
infrastructure. Nowadays, European savings banks have kept their focus on
retail banking: payments, savings products, credits and insurances for
individuals or small and medium-sized

enterprises. Apart from this retail focus, they also differ from
commercial banks by their broadly decentralised distribution network,
providing local and regional outreach—and by their socially responsible
approach to business and society.
● Building societies and Landesbanks: institutions that conduct retail banking.

38
 ● Ethical banks: banks that prioritize the transparency of all operations and
make only what they consider to be socially-responsible investments.
● Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

● Investment banks "underwrite" (guarantee the sale of) stock and bond issues,

trade for their own accounts, make markets, and advise corporations on
capital market activities such as mergers and acquisitions.
● Merchant banks were traditionally banks which engaged in trade finance. The
modern definition, however, refers to banks which provide capital to firms in
the form of shares rather than loans. Unlike venture capital firms, they tend not
to invest in new companies.
Both combined
● Universal banks, more commonly known as financial services
companies, engage in several of these activities. These big banks are very
diversified groups that, among other services, also distribute insurance—
hence the term bancassurance, a portmanteau word combining "banque
or bank" and "assurance", signifying that both banking and insurance are
provided by the same corporate entity.

Other types of banks

● Islamic banks adhere to the concepts of Islamic law. This form of banking
revolves around several well-established principles based on Islamic canons.
All banking activities must avoid interest, a concept that is forbidden in Islam.
Instead, the bank earns profit (markup) and fees on the financing facilities that
it extends to customers.

39
 COMPANY PROFILE

ICICI Bank is India's largest private sector bank with total assets of Rs. 5,946.42
billion (US$ 99 billion) at March 31, 2014 and profit after tax Rs.
98.10 billion (US$ 1,637 million) for the year ended March 31, 2014.ICICI Bank
currently has a network of 3,839 Branches and 11,943 ATMs across India.
History
1955
The Industrial Credit and Investment Corporation of India Limited (ICICI)
incorporated at the initiative of the World Bank, the Government of India and
representatives of Indian industry, with the objective of creating a
development financial institution for providing medium-term and long-term
project financing to Indian businesses. Mr.A.Ramaswami Mudaliar was elected
as the first Chairman of ICICI Limited.
ICICI emerges as the major source of foreign currency loans to Indian industry.
Besides funding from the World Bank and other multilateral agencies, ICICI
was also among the first Indian companies to raise funds from international
markets.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial institution, and was its wholly-owned subsidiary. ICICI's shareholding
in ICICI Bank was reduced to 46% through a public offering of shares in India
in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in
fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-
stock amalgamation in fiscal 2001, and secondary market sales by ICICI to
institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955
at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a
development financial institution for providing medium-term and long-term
project financing to Indian businesses.

40
In the 1990s, ICICI transformed its business from a development financial
institution offering only project finance to a diversified financial services

41
group offering a wide variety of products and services, both directly and
through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI
became the first Indian company and the first bank or financial institution from
non-Japan Asia to be listed on the NYSE.
After consideration of various corporate structuring alternatives in the context
of the emerging competitive scenario in the Indian banking industry, and the
move towards universal banking, the managements of ICICI and ICICI Bank
formed the view that the merger of ICICI with ICICI Bank would be the
optimal strategic alternative for both entities, and would create the optimal legal
structure for the ICICI group's universal banking strategy. The merger would
enhance value for ICICI shareholders through the merged entity's access to
low-cost deposits, greater opportunities for earning fee-based income and the
ability to participate in the payments system and provide transaction-banking
services. The merger would enhance value for ICICI Bank shareholders
through a large capital base and scale of operations, seamless access to
ICICI's strong corporate relationships built up over five decades, entry into
new business segments, higher market share in various business segments,
particularly fee-based services, and access to the vast talent pool of ICICI and
its subsidiaries.
In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI
Personal Financial Services Limited and ICICI Capital Services Limited, with
ICICI Bank. The merger was approved by shareholders of ICICI and ICICI
Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March
2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of
India in April 2002. Consequent to the merger, the ICICI group's
financing and banking operations, both wholesale and retail, have been
integrated into a single entity.

42
 ICICI Group Companies
ICICI Group

http://www.icicigroupcompanies.com
ICICI Prudential AMC &
Trust
http://www.icicipruamc.com
ICICI Prudential Life Insurance
Company
http://www.iciciprulife.com/public/defa ICICI Venture

ult.htm http://www.iciciventure.com

ICICI Securities ICICI Direct

http://www.icicisecurities.com http://www.icicidirect.com

ICICI Lombard General ..............................................

Insurance Company
http://www.icicilombard.com Mr. M.S. Ramachandran

..............................................

Dr. Tushaar Shah

Board of Directors ..............................................

Mr. K. V. Kamath, Chairman

Mr. V. K. Sharma

..............................................
..............................................

Mr. Dileep Choksi

Mr. V. Sridar

..............................................
..............................................

Mr. Homi R. Khusrokhan

28
ICICI Foundation
http://www.icicifoundation.org

Disha Financial Counselling

http://www.icicifoundation.org

Mr. Alok Tandon

Ms. Chanda Kochhar,

Managing Director &
CEO
...........................................
Mr. N. S. Kannan,
Executive Director
...........................................
Mr. K.
Ramkumar,
Executive
Director
...........................................
Mr. Rajiv Sabharwal,
Executive Director

29
 Awards - 2014 ICICI Bank

● Ms. Chanda Kochhar received an honorary Doctor of Laws from Carleton University,
Canada. The university conferred this award on Ms. Kochhar in recognition of her pioneering
work in the financial sector, effective leadership in a time of economic crisis and support for
engaged business practices.
● Ms Chanda Kochhar featured in The Telegraph (UK) list of '11 most important women in
finance'.
● ICICI Bank has been recognised as one of the 'Top Companies for Leaders' in India in a study
conducted by Aon Hewitt.
● IDRBT has given awards to ICICI Bank in the categories of 'Social Media and Mobile
Banking' and' Business Intelligence Initiatives'.
● ICICI Bank won the award for the Best Bank - Global Business Development (Private
Sector) in the Dun & Bradstreet - Polaris Financial Technology Banking Awards 2014.
● ICICI Bank was awarded the Certificate of Recognition as one of the Top 5 Companies in
Corporate Governance in the 14th ICSI (The Institute of Company Secretaries of India)
National Awards for Corporate Governance.
● ICICI Bank has been honoured as The Best Service Provider - Risk Management, India at
The Asset Triple A Transaction Banking, Treasury, Trade and Risk Management Awards
2014.
● Mr Rakesh Jha has been ranked as the Best CFO in India at the 14th Annual Finance Asia's
Best Managed Companies Poll.
● ICICI Bank has won The Corporate Treasurer Awards 2013 in the categories of 'Best Cash
Management Bank in India' & 'Best Trade Finance Bank in India'.
● ICICI Bank has been awarded the 'Best Retail Bank in India', 'Best Microfinance
Business' and Best Retail Banking Branch Innovation' under the 'Excellence in Retail
Financial Services awards 2014' by The Asian Banker.
● Ms Chanda Kochhar, MD & CEO, ICICI Bank, has been named among Fortune's 50 most
powerful women in business for the fourth consecutive year.
● Ms. Chanda Kochhar, MD and CEO received the 'Mumbai Women Of The Decade' award

30
by ASSOCHAM.

ICICI Bank, India’s largest private sector bank, today announced the launch of
India’s only credit card with a unique transparent design and a distinctive look. The
‘ICICI Bank Coral American Express Credit Card’ is the latest addition to the
Bank’s exclusive ‘Gemstone Collection’ of credit cards.

Speaking at the launch, Mr. Rajiv Sabharwal, Executive Director, ICICI Bank said,
"At ICICI Bank, it is our constant endeavour to deliver innovative, powerful and
distinctive value propositions to our discerning customers. We are delighted to launch
the ‘ICICI Bank Coral American Express Credit Card’, the only card in the country
with a youthful, transparent design. Aimed at providing significant lifestyle benefits, this
card re-affirms our commitment to bring forth innovative services to our customers.
We are also introducing a host of exciting privileges including an introductory
extended credit period offer and bonus reward points on online transactions. We
believe this card will be yet another compelling addition to our Gemstone collection
of credit cards."

Ms. Siew Choo Ng, Senior Vice President, Head of Global Network Partnerships,
Asia, American Express International, Inc. said, "We are delighted to have
further strengthened our long and cherished relationship with ICICI Bank with the
launch of the new ICICI Bank Coral American Express Credit Card. Designed to
appeal to value seeking customers, the Card reinforces our constant endeavor to
provide differentiated products and services to our customers. The Card offers a wide
array of exclusive privileges and features including additional PAYBACK points on
online spend and an innovative transparent design. At American Express, we always
strive to work closely with our partners to develop the most relevant and compelling
products for our valued card members."

31
Mr. Sanjay Rishi, President, South Asia, American Express, said, “This launch
marks a further strengthening of the relationship between ICICI Bank and American
Express. We already partner with ICICI Bank on customer loyalty programs, insurance
services, retail banking services as well as initiatives to expand card accepting
merchants. The launch

32
 of the ICICI Bank Coral American Express Card combines the strengths and
capabilities of both organizations to offer an exciting new payment choice to
customers.

The ICICI Bank Coral American Express® Credit Card offers a wide range of
attractive benefits to its card members:

● Extended Credit Period; a unique proposition offering card members ability to carry over the
retail purchase balances in first two billing statements by simply paying the minimum amount
due. No interest shall be charged in such cases and the total amount due shall be payable as
per the third billing statement. TnC apply, for complete details please visit
www.icicibank.com.
● 4 PAYBACK points per Rs.100 spent on dining, groceries and at supermarkets, 3
PAYBACK points per Rs.100 of online spends and 2 PAYBACK points per Rs.100 on other
spends
● Complimentary movie tickets with 'buy one get one free' offer
● on www.bookmyshow.com
● Complimentary visits to Altitude lounges at Mumbai and Delhi airports
● Minimum 15% discount on dining bills at leading restaurants across India with the ICICI
Bank ‘Culinary Treats’ programme
● No fuel surcharge on fuel transactions at HPCL fuel stations

OVERVIEW ICICI Group

ICICI Group offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its
specialised group companies and subsidiaries in the areas of personal banking,
investment banking, life and general insurance, venture capital and asset
management. With a strong customer focus, the ICICI Group Companies have
maintained and enhanced their leadership positions in their respective sectors.

33
ICICI Bank is India's second-largest bank with total assets of Rs. 4,736.47 billion
(US$ 93 billion) at March 31, 2012 and profit after tax Rs. 64.65 billion (US$
1,271

34
million) for the year ended March 31, 2012. The Bank has a network of 2,791
branches and 10,021 ATMs in India, and has a presence in 19 countries, including
India.

ICICI Prudential Life Insurance is a joint venture between ICICI Bank, a premier
financial powerhouse, and Prudential plc, a leading international financial
services group headquartered in the United Kingdom. ICICI Prudential Life was
amongst the first private sector insurance companies to begin operations in December
2000 after receiving approval from Insurance Regulatory Development Authority
(IRDA). ICICI Prudential Life's capital stands at Rs. 47.91 billion (as of March 31,
2012) with ICICI Bank and Prudential plc holding 74% and 26% stake respectively.
For FY 2012, the company garnered Rs.140.22 billion of total premiums and has
underwritten over 13 million policies since inception. The company has assets held
over Rs. 707.71 billion as on March 31, 2012.

ICICI Lombard General Insurance Company, is a joint venture between ICICI

Bank Limited, India's second largest bank with consolidated total assets of over USD
91 billion at March 31, 2012 and Fairfax Financial Holdings Limited, a Canada based
USD
30 billion diversified financial services company engaged in general insurance,
reinsurance, insurance claims management and investment management.
ICICI Lombard GIC Ltd. is the largest private sector general insurance company in
India with a Gross Written Premium (GWP) of Rs. 5,358 crore for the year ended
March 31, 2012. The company issued over 76 lakh policies and settled over 44 lakh
claims and has a claim disposal ratio of 99% (percentage of claims settled against
claims reported) as on March 31, 2012.

ICICI Securities Ltd is the largest integrated securities firm covering the needs of
corporate and retail customers through investment banking, institutional broking, retail
broking and financial product distribution businesses. Among the many awards that

35
ICICI Securities has won, the noteworthy awards for 2012 were: Asia money
`Best Domestic Equity House for 2012; 'BSE IPF D&B Equity Broking Awards 2012'
under two categories:- Best Equity Broking House - Cash Segment and Largest E-
Broking House;

36
the Chief Learning Officer Award from World HRD Congress for Innovation in
Learning category. IDG India's CIO magazine has recognized ICICI Securities as a
recipient of CIO 100 award in 2009, 2010, 2011 and 2012. I-Sec won this awards 4
times in a row for which the CIO Hall of Fame award was additionally conferred in
2012. ICICI Securities Primary Dealership Limited (‘I-Sec PD’) is the largest primary
dealer in Government Securities. It is an acknowledged leader in the Indian fixed
income and money markets, with a strong franchise across the spectrum of interest
rate products and services - institutional sales and trading, resource
mobilisation, portfolio management services and research. One of the first entities to
be granted primary dealership license by RBI, I-Sec PD has made pioneering
contributions since inception to debt market development in India. I-Sec PD is also
credited with pioneering debt market research in India. It is one of the largest portfolio
managers in the country and amongst PDs, managing the largest AUM under
discretionary portfolio management.
I- Sec PD’s leadership position and research expertise have been consistently
recognised by domestic and international agencies. In recognition of our performance in the
Fixed Income market, we have received the following awards:

● “Best Domestic Bond House” in India - 2007, 2005, 2004, 2002 by Asia Money
● “Best Bond House” - 2009, 2007, 2006, 2005, 2004, 2001 by Finance Asia
● “Best Domestic Bond House” – 2009 by The Asset Magazine’s annual Triple A
Country Awards
● Ranked volume leader - by Greenwich Associates in 2010 Asian Fixed-Income
Investors Study. Ranked 5th in ‘Domestic Currency Asian Credit’ with market
share of 4.5%, Only Domestic entity to be ranked.
● “Best Debt House in India” – 2012 by EUROMONEY
ICICI Prudential Asset Management is the third largest mutual fund with average
asset under management of Rs. 688.16 billion and a market share ( mutual fund ) of
10.34% as on March 31, 2012. The Company manages a comprehensive range of
mutual fund schemes and portfolio management services to meet the varying
investment needs of its investors through117 branches and 196 CAMS official point
of transaction acceptance spread across the country.

37
ICICI Venture is one of the largest and most successful alternative asset managers in
India with funds under management of over US$ 2 billion. It has been a pioneer in the
Indian alternative asset industry since its establishment in 1988, having managed
several funds across various asset classes over multiple economic cycles. ICICI
Venture is a wholly owned subsidiary of ICICI Bank

GROUP PHILOSOPHY

As India transforms into a key player in the global economic arena, multiple
opportunities for the financial services sector have emerged. We, at ICICI Group, seek
to partner the country's growth and globalization through the delivery of world-class
financial services across all cross-sections of society.
From providing project and working capital finance to the buoyant manufacturing and
infrastructure sectors, meeting the foreign investment and treasury requirements of the
Indian corporate with increasing levels of international engagement, servicing the India
linked needs of the growing Indian diaspora, being a catalyst to the consumer finance
story to serving the financially under-served segments of the society, our technology
empowered solutions and distribution network have helped us touch millions of lives.

Vision:
To be the leading provider of financial services in India and a major global bank.

Mission:
We will leverage our people, technology, speed and financial capital to:

38
● be the banker of first choice for our customers by delivering high quality, world- class
products and services.
● expand the frontiers of our business globally.
● play a proactive role in the full realisation of India’s potential.

39
 ● maintain a healthy financial profile and diversify our earnings across businesses and
geographies.
● maintain high standards of governance and ethics.
● contribute positively to the various countries and markets in which we operate.
● create value for our stakeholders.

Towards Sustainable Development

As India's fastest growing financial services conglomerate, with deep moorings in the
Indian economy for over five decades, ICICI Group of companies have endeavored to
contribute to address the challenges posed to the community in multiple ways.

1) ICICI Foundation for Inclusive Growth: ICICI Foundation for Inclusive Growth (ICICI
Foundation) was founded by the ICICI Group in early 2008 to carry forward and build upon
its legacy of promoting inclusive growth. ICICI Foundation works within public systems and
specialised grassroots organisations to support developmental work in four identified focus
areas. We are committed to investing in long-term efforts to support inclusive growth through
effective interventions.
2) Disha Counselling: Disha Financial Counselling services are free to all in areas like
financial education, credit counselling and debt management.
3) Technology Finance Group: TFG's programmes are designed to assist industry and
institutions to undertake collaborative R&D and technology development projects.

4) Read to Lead campaign: ICICI Bank has pledged to educate 1,00,000 children through
the 'Read to Lead initiative. Because education today means a better life tomorrow.
5) Go Green. Each one for a better earth: ICICI Bank, is a responsible corporate
citizen and believes that every small 'green' step today would go a long way in building
a greener future and that each one of us can work towards a better earth. Go Green' is an
organisation-wide initiative that moves beyond moving ourselves, our processes and our

40
customers to cost efficient automated channels to building awareness and consciousness
of our environment, our nation and our society.

PERSONAL BANKING
Deposits
ICICI Bank offers a wide variety of Deposit Products to suit your requirements.
Convenience of networked branches/ ATMs and facility of E-channels like Internet
and Mobile Banking, Select any of our deposit products and provide your details
online and our representative will contact you.
Loans
ICICI Bank offers a wide variety of Loans Products to suit your requirements.
Coupled with convenience of networked branches/ ATMs and facility of E-channels
like Internet and Mobile Banking, ICICI Bank brings banking at your doorstep. Select
any of our loan products and provide your details online and our representative will
contact you for getting loans.
Cards
ICICI Bank offers a variety of cards to suit your different transactional needs. Our
range includes Credit Cards, Debit Cards and Prepaid cards. These cards
offer you convenience for your financial transactions like cash withdrawal, shopping
and travel. These cards are widely accepted both in India and abroad. Read on for
details and features of each.
Wealth Management
Wealth is the result of a recognized opportunity. We understand this and we work
with you to plan and manage your financial opportunities prudently. Not just that, we
also extend a host of services so you can remain focused on immediate objectives
while we take care of all your wealth management requirements.

41
CHAPTER - IV

THEORETICAL FRAMEWORK

42
 ULIPs

ULIPs A Unit Linked Insurance Plan (ULIP) is a product offered by insurance

companies that unlike a pure insurance policy gives investors the benefits of both
insurance and investment under a single integrated plan. The first ULIP was launched
in India in 1971 by Unit Trust of India (UTI). With the Government of India opening
up the insurance sector to foreign investors in 2001 and the subsequent issue of major
guidelines for ULIPs by the Insurance Regulatory and Development Authority
(IRDA) in 2005, several insurance companies forayed into the ULIP business leading
to an over abundance of ULIP schemes being launched to serve the investment needs
of those looking to invest in an investment cum insurance product.

A ULIP is basically a combination of insurance as well as investment. A part of the

premium paid is utilized to provide insurance cover to the policy holder while the
remaining portion is invested in various equity and debt schemes. The money
collected by the insurance provider is utilized to form a pool of funds that is used to
invest in various markets instruments (debt and equity) in varying proportions just the
way it is done for mutual funds. Policy holders have the option of selecting the type of
funds (debt or equity) or a mix of both based on their investment need and appetite.
Just the way it is for mutual funds, ULIP policy holders are also allotted units and each
unit has a net asset value (NAV) that is declared on a daily basis. The NAV is the
value based on which the net rate of returns on ULIPs are determined. The NAV
varies from one ULIP to another based on market conditions and the fund’s
performance. What types of funds do ULIP offer? Most insurers offer a wide range of
funds to suit one's investment objectives, risk profile and time horizons. Different
funds have different risk profiles. The potential for returns also varies from fund to
fund. The following are some of the common types of funds available along with an
indication of their risk characteristics

1) Equity Funds (Medium to High risk) - Primarily invested in company stocks with the

43
general aim of capital appreciation

44
2) Income, Fixed Interest and Bond Funds (Medium risk) - Invested in corporate bonds,
government securities and other fixed income instruments

3) Cash Funds (Low risk) - Sometimes known as Money Market Funds invested in cash,
bank deposits and money market instruments

4) Balanced Funds (Medium risk) - Combining equity investment with fixed interest
instruments

ADVANTAGES OF ULIP

Can easily rebalance your risk between equity and debt without any tax implications.
Best suited for medium risk taking individuals who wish to invest in equity and debt
funds (at least 40% or higher exposure to debt). No additional tax burden for those
investing mainly in debt unlike in MFs. RISKS ASSOCIATED WITH ULIPS ULIPs
as the name suggests are directly linked with the investments made by the insured.
Though he does not have a direct say in this, he does offer his choice in the form of
investment. With stock markets soaring high a few months back, ULIPs were offering
a good rate of return, but now with a sudden downfall of the stocks, ULIPs are
bound to become negative investments. At present, a policy-holder cannot
understand the growth of his investments vis-à-vis other funds in the market, since
there is no benchmark to measure one fund against the other. Usually a policy-holder
could ask his investment in a ULIP to be, for example, 55 per cent in equity and 45
per cent in debt. These components can be mixed according to his risk-taking ability.
An investor, therefore, would have to look at quarterly statements, where the fund
would be compared with benchmarks. However, this may not be a true representation
of the NAV, as the ULIP could be a mix of debt, liquid and equity investments. The
reality is that most of the ULIPs take more than 5 years to break even. Policies where

45
the costs are 65 per cent and upwards have not even recovered the principal despite
the strongest bull market we have ever witnessed

46
THE IMPACT It is paradoxical that the most sold financial product is also the one
with the most problems. ULIPs give you the best of both worlds by combining life
insurance and market-linked investments. They can help you create long-term wealth
through investments in equities. At least, that's the marketing peg. The reality is that
very few investors in ULIPs understand what they have bought. Most are unaware of
the high charges levied in the initial years. Nor do they realize what the agent is up to
when he says that they have to pay the premium only for a few years. On the face of
it, it seems this change will only result in higher returns for investors, but the impact
goes beyond this. To ensure that the difference is within the suggested cap, insurance
firms will be forced to offer long-term plans. The minimum sum assured has been
hiked from five times the annual premium to 10 times. While this means higher cover
for the policyholder, it also means higher mortality charges. However, keep in
mind that to qualify for tax deduction under the proposed Direct Taxes Code, the death
benefit needs to be 20 times the annual premium. The most important point is that the
new guidelines will ensure investors look at ULIPs as long- term products. The lock-
in period has been increased from three years to five years and the minimum premium
paying term has been increased to five years. No longer will investors exit after three
years, which has benefited the broker more than anyone else. This is likely to make
policyholders adopt a disciplined savings and investment strategy.

INTRODUCTION TO IRDA

The Insurance Regulatory and Development Authority (IRDA) is a national agency

run by the Government of India. IRDA is based in Hyderabad and was formed by an
act of Indian Parliament called IRDA Act of 1999. Considering some of the emerging
requirements of the Indian insurance industry, IRDA was amended in 2002. As stated
in the act, the mission of IRDA is "to protect the interests of the policyholders, to
regulate, promote and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto." Indian insurance industry is regulated by
the terms and conditions of the IRDA. Indian law has certain expectations from the

47
IRDA to perform in the Indian insurance industry. IRDA should protect the interest
of policyholders by

48
ensuring fair treatment by the insurance companies. The growth of insurance
companies in a speedy and orderly manner should be taken care of by the IRDA. It
should monitor and implement quality competence and fair dealing of the insurance
companies in the industry. IRDA should make sure that the insurers are providing
precise and correct information about the products offered by them for the insurance
customers. IRDA should also ensure speedy settlement of genuine claims of the
policyholders and prevent malpractices in the process of claims settlement. According
to the Section 14 of IRDA Act of 1999 there are certain duties, powers and functions
laid down for the IRDA and they are as follows: (1) Subject to the provisions of this
Act and any other law for the time being in force, the Authority shall have the duty to
regulate, promote and ensure orderly growth of the insurance business and reinsurance
business.
(2) Without prejudice to the generality of the provisions contained in sub-section (1),
the powers and functions of the Authority shall include, (a) Issue to the
applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such
registration
(b) protection of the interests of the policy holders in matters concerning assigning of policy,
nomination by policyholders, insurable interest, settlement of insurance claim, surrender value
of policy and other terms and conditions of contracts of insurance; (c) Specifying requisite
qualifications, code of conduct and practical training for intermediary or insurance
intermediaries and agents; (d) Specifying the code of conduct for surveyors and loss
assessors; (e) Promoting efficiency in the conduct of insurance business; (f) Promoting and
regulating professional organizations connected with the insurance and re- insurance
business; (g) Levying fees and other charges for carrying out the purposes of this Act; (h)
calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance intermediaries and
other organizations connected with the insurance business; (i) control and regulation of the
rates, advantages, terms and conditions that may be offered by insurers in respect of general
insurance business not so controlled and regulated by the Tariff Advisory Committee under
section 64U of the Insurance Act, 1938 (4 of 1938); (j) Specifying the form and manner in
which books of account shall be maintained and statement of accounts shall be rendered by
insurers and other insurance intermediaries; (k) Regulating investment of funds by insurance
companies; (l)

49
Regulating maintenance of margin of solvency; (m) Adjudication of disputes
between insurers and intermediaries or insurance intermediaries; (n) Supervising the
functioning of the Tariff Advisory Committee; Specifying the percentage of premium
income of the insurer to finance schemes for promoting and regulating professional
organizations referred to in clause (f); (p) Specifying the percentage of life insurance
business and general insurance business to be undertaken by the insurer in the rural or
social sector; and (q) Exercising such other powers as may be prescribed Insurance
Regulatory and Development Authority (IRDA) in India consists a Chairman and
some permanent and part time members in the administration. However, the
regulations are enacted under the guidance of a statutory advisory committee.

IRDA GUIDELINES FOR ULIP IRDA has, from time to time, taken various
initiatives for protecting the interests of policyholders by bringing out
Regulations, Guidelines, Circulars etc applicable to insurers and intermediaries
covering the various stages in the lifecycle of an insurance product, commencing
from solicitation, sale, policy servicing, to claims servicing and grievance redressal.
With expansion of the insurance sector and more and more innovative insurance
products, in particular the Unit Linked Insurance Products coming into the life
insurance market, IRDA has been sensitive to the changing scenario and the
challenges that go with it. In particular, IRDA has been conscious of how these
changes have been impacting the policyholder and has taken several steps to bring in
changes in the regulatory framework to address various concerns of the policyholder.
IRDA had stipulated that insurers must provide the prospect/policyholder all relevant
information regarding amounts deducted towards various charges for each policy year
so that the prospect could take an informed decision. Insurers were required to provide
Benefit Illustrations giving two scenarios of interest rates, 6% and 10%
respectively. The prospect was required to sign on the illustration while signing
the proposal form. This was done to ensure transparency and proper disclosures by the
insurers. It is necessary to demystify complex products and ensure that proper product
disclosures are made to the prospect/policyholder. Towards this end, IRDA has

50
already come out with an exposure draft on the need to issue Key Features
Documents. Responses received by the Authority are under examination and

51
the initiative will be taken forward further. Similarly, Needs Analysis is another initiative
identified by IRDA as a step in curbing wrong advice and miss-selling. An exposure
draft on this requirement is already circulated and responses are coming in. Whilst on
mis- selling, IRDA has identified Distance Marketing as yet another area of concern
and draft guidelines in this regard have been put up as an exposure note for all
stakeholders to respond to. Mention must be made of what is perhaps the most
important step that the Authority has taken keeping in view the interests of
policyholders. IRDA set up an exclusive Consumer Affairs Department that focuses
on consumer related issues and initiatives including grievance redressal and consumer
education through Insurance Awareness Campaigns. With a view to creating a central
repository of industry-wide insurance grievance data and facilitating monitoring of
disposal of grievances by insurers, IRDA is on the verge of implementing the
Integrated Grievance Management System (IGMS). IGMS will not only help monitor
the redress systems of insurers but also create a gateway for policyholders to register
complaints with insurance companies first and if need be escalate them to the IRDA
Grievance Cells. The Consumer Affairs department goes beyond facilitation and
works towards taking grievances to their logical end by calling for explanations where
required, carrying out enquiries and inspections etc. It is proposed to make the
institution of the Insurance Ombudsman handle all types of complaints including
those relating to policy sale and servicing rather than just restricting it to claims.
IRDA is also shortly making its Call Centre operational for policyholders to lodge
their grievances and also seek their status over phone/e-mail. Further, keeping in view
the need for efficient functioning of the insurance sector for protecting the interests of
policyholders, it is necessary to have reliable, timely and accurate data relating to
insurance. In order to ensure that proper data is collected, processed and disseminated
in the manner required, IRDA has set up an independent body, namely the Insurance
Information Bureau (IIB). The IIB has started functioning and has already made good
progress.

52
Investment in Mutual fund Vs Investment in ULIPS

Are unit-linked insurance plans good?

Most insurers in the year 2004 have started offering at least a few unit-linked plans. Unit

-linked life insurance products are those where the benefits are expressed in terms of
number of units and unit price. They can be viewed as a combination of insurance and
mutual funds.
The number of units that a customer would get would depend on the unit price when
he pays his premium. The daily unit price is based on the market value of the
underlying assets (equities, bonds, government securities, et cetera) and computed
from the net asset value.
The advantage of unit-linked plans is that they are simple, clear, and easy to understand.
Being transparent the policyholder gets the entire upside on the performance of his
fund. Besides all the advantages they offer to the customers, unit-linked plans also lead
to an efficient utilization of capital.

Unit-linked products are exempted from tax and they provide life insurance. Investors
welcome these products as they provide capital appreciation even as the yields on
government securities have fallen below 6 per cent, which has made the insurers slash
payouts.
According to the IRDA, a company offering unit-linked plans must give the investor
an option to choose among debt, balanced and equity funds. If you opt for a unit-
linked endowment policy, you can choose to invest your premiums in debt, balanced or
equity plans.
If you choose a debt plan, the majority of your premiums will get invested in debt
securities like gilts and bonds. If you choose equity, then a major portion of your
premiums will be invested in the equity market. The plan you choose would depend
on your risk profile and your investment needs.

53
The ideal time to buy a unit-linked plan is when one can expect long-term growth
ahead. This is especially so if one also believes that current market values (stock
valuations) are relatively low. So if you are opting for a plan that invests primarily in
equity, the

54
 buzzing market could lead to windfall returns. However, should the buzz die
down, investors could be left strung.If one invests in a unit-linked pension plan early
on, say when one is 25, one can afford to take the risk associated with equities, at least
in the plan's initial stages. However, as one approaches retirement the quantum of
returns should be subordinated to capital preservation. At this stage, investing in a plan
that has an equity tilt may not be a good idea.Considering that unit-linked plans are
relatively new launches, their short history does not permit an assessment of how they
will perform in different phases of the stock market. Even if one views insurance as a
long-term commitment, investments based on performance over such a short time span
may not be appropriate.

Various ULIP plan provided by companies:

Protection-
Need for a sound income protection in case of your unfortunate demise.

Investment-
Need to ensure long-term real growth of your money.

Saving-
Save for the milestones and protect your savings too.

Pension-
Need to save for a comfortable life Post retirement.

Once you have analyzed your needs as per above classification, you need to
then ascertain important factors such as type of cover, insurance amount as per
one's income, life stage and dependents. It is difficult to arrive at all these figures
yourself. Our financial consultants can help you with all analysis to offer a customized

55
 solution by doing a thorough need analysis. So contact financial consultants to help
you choose the right plan for you. Your insurance need will change as your life does,
from starting to work to enjoying your golden years and all the stages in between.
Each one of these stages may pose a different insurance need/cover for you. In this
section, we have drawn up the basic life stages and help you analyze various
insurance needs accordingly.

POINTS OF PARITY
Funds available with ULIP Plans

General Description Nature of Investments Risk Category

Primarily invested in company

Equity Funds High
stocks with the general aim of capital appreciation

Income, Fixed Interest Invested in corporate bonds,

government securities and other fixed income Medium
and Bond Funds
instruments

Sometimes known as Money

Cash Funds Market Funds — invested in cash, bank deposits and Low
money market instruments

Combining equity investment

Balanced Funds Medium
with fixed interest instruments

56
Generally all life insurance companies have three types of fund which are Equity fund,
Debt fund and Balance fund. These funds have different risk profiles. Equity fund has
high risk but it gives high return, Debt fund has low risk so it gives low return and
balanced fund is combination of both Equity and Debt fund so risk is medium and
return is also low. Both ICICI LIC and Tata AIG LIC have 7 types of funds based on a
combination of Debt–Equity funds. These are liquid fund, stable managed fund,
secure managed fund, defensive managed fund, balanced managed fund, equity
managed fund, growth fund.
Indexation
You have the option to increase your regular premiums by an indexation rate at any
policy anniversary to protect the real value of your investment against inflation. The
rate of indexation will be in line with the increase in the WholeSale Price Index (or in
the event that this Index ceases to be published such another index as the Company
may select for this purpose). The base sum assured and sum assured of any attached
rider would also be increased by the corresponding indexation increase.

57
Charges, Fees and Deductions in ULIP

● Premium Allocation Charge

This is a premium-based charge. After deducting this charge from premiums,

the remainder is invested to buy units. The Allocation charges are guaranteed for the
entire duration of policy term.
● Mortality Charge

The Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the
Fund Value pertaining to regular premiums). It will be deducted by monthly
cancellation of units from the accumulation unit account. The Mortality Charge shall
remain guaranteed throughout the policy term.
● Fund Management Charge

1% p.a. on With Profits Fund, 1% p.a. on Debt Fund, 1.25% p.a. on Balanced Fund
and 1.50% p.a. on the Growth Fund. FMC will be applied to the fund while
calculating NAV on

a daily basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by
the IRDA.
● Policy Administration Charge

Rs. 60 per month, which will increase by 5% p.a. on the 1st of January each year.
PAC will be deducted monthly by cancellation of units from the accumulation unit
account. If premiums are discontinued, this charge would reduce to 60% of the
charge applicable for the premium paying policies
● Surrender Charge

This is the charge that applies when the policy is surrendered. It is equal to 50% of the
difference between regular premiums expected and those paid in the first year of the
contract.
● Service Tax Deductions

12.36% service tax is applicable on the first premium of life insurance policy.

Tax Benefits

58
Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act,
1961. Insurance is tax free up to Rs. 100000 per annum and the returns on investment
on maturity of the policy are also tax free.

59
 CHAPTER - V
DATA ANALYSIS AND
INTERPRETATIONS

60
1. what is your age?

Table 1: Age Of The Customers

S. No. Age No. of Respondents Percentage (%)

1 Less than 25 14 14%
2 25-35 58 58%
3 35-45 24 24%
4 45-55 2 2%
5 Greater than 55 2 2%
Total 100 100%
Source: Primary Data

Figure 1: Age Of The Customers

Source: Primary Data

Interpretation
The above graph illustrates the 58% of the respondents were in the age group of 25-35
years, while 24% of the respondents were aged between 35-45 years in the survey.

61
2. What is your profession?

Table 2: Consumers’ Profession

S.No. Profession No. of Respondents Percentage (%)

1 Student 4 4%
2 Government Employed 38 38%
3 Private Employed 36 36%
4 Business 22 22%
Total 100 100%
Source: Primary Data

Figure 2: Consumers’ Profession

Source: Primary Data

Interpretation

62
Of the total sample of 100 which is taken into consideration for sampling, the majority
of the consumers’ profession was government employed and private employed. In the
sample, 38 government employees and 36 privately employed people
actively participated in the survey.

63
3. Gender?

Table 3: Gender

S. No. Gender No. of Respondents Percentage (%)

1 Male 74 74%
2 Female 26 26%
Total 100 100%
Source: Primary Data

Figure 3: Gender

Source: Primary Data

Interpretation
Out of the total 100 samples chosen, 74% of the respondents are male and 26% of the
respondents are female.

64
4. What is your monthly income?

Table 4: Monthly Income Of Consumers

S.No. Option (in INR) No. of Respondents Percentage (%)

1 <=5,000 20 20%
2 5,000 – 10,000 36 36%
3 10,000 – 20,000 24 28%
4 Above 20,000 16 16%
Total 100 100%
Source: Primary Data

Figure 4: Monthly Income Of Consumers

Source: Primary Data

Interpretation

65
The above graph illustrates that 36 of the respondents are having a monthly income
ranging between INR 5,000 to 10,000, and 28 customers are having an income
between INR 10,000 to 20,000. Only16 customers, representing 16%, are having an
income over INR 20,000.

66
5. Do you know about United Linked Insurance Policies (ULIPs)?

Table 5: Customers Awareness On ULIPs

S. No. Option No. of Respondents Percentage (%)

1 Yes 84 84%
2 No 16 16%
Total 100 100%
Source: Primary Data

Figure 5: Customers Awareness On ULIPs

90

80

70

60

50
No of Respondents
40 Percentage

30

20

10

0
Yes No

Source: Primary Data

Interpretation
Of the 100 samples chosen for the survey, 84% of the respondents, representing
84 people, are younger and middle age group people who said that they were
affirmative and optimistic regarding their knowledge about the ULIP policies. Only
16% of the people do not know about ULIPs.

67
6. Preferred Investment Options

Table 6: Individual’s Preferred Investment Options

S.No. Type of Investment No. of Respondents Percentage (%)

1 Insurance 20 20%
2 ULIPs 26 26%
3 Mutual Funds 22 22%
4 Stock Market 16 16%
5 Government Bonds 16 16%
Total 100 100%
Source: Primary Data

Figure 6: Individual’s Preferred Investment Options

Source: Primary Data

Interpretation
The above graph indicates that 26% of the respondents, representing 26 people, prefer
to invest in insurance products, 22 people preferred investing in stocks, and 20 people
preferred investing in mutual funds. The main reason for people to invest in the
insurance products was that they had the advantage of both life cover and tax benefits
apart from other normal benefits.

68
7. Risk Associated With ULIPs

Table 7: Risk Associated With ULIPs

S.No. Option No. of Respondents Percentage (%)

1 High Risk 24 24%
2 Moderate Risk 44 44%
3 Low Risk 32 32%
Total 100 100%
Source: Primary Data

Figure 7: Risk Associated With ULIPs

Source: Primary Data

69
Interpretation
From the above graph, it is inferred that the majority of the respondents felt that there was
an amount of moderate to high risk involved with ULIPs. 44% felt that there is a
moderate risk involved when investing in ULIPs, while 32% said there is low risk.

70
8. What specifications do you consider the most while taking ULIPs?

Table 8: Customers Specifications Before Taking ULIPs

S.No. Option No. of Respondents Percentage (%)

1 Better Service 50 50%
2 Attractive Plans 20 20%
3 Better Returns 16 16%
4 Other 14 14%
Total 100 100%
Source: Primary Data

Figure 8: Customers Specifications Before Taking ULIPs

Param

Source: Primary Data

Interpretation
The above graph indicates that 50% of the total respondents are interested in taking
ULIPs if after sales services are good and better, followed by the attractive plans of
the company with 20 people preferring to opt before buying ULIP products.

71
9. Which company’s ULIP products do you prefer in buying?

Table 9: Company Name

S.No. Company Name No. of Respondents Percentage (%)

1 LIC 38 38%
2 Tata AIG 12 12%
3 ICICI Life 16 16%
4 Bajaj Allianz 14 14%
5 ICICI Prudential 20 20%
Total 100 100%
Source: Primary Data

Figure 9:Company Name

ICICI

No. of

Source: Primary Data

Interpretation
The above graph indicates that around 38% of the respondents owned ULIP in LIC
which clearly shows that LIC still continues to be the market leader in as it has been
since the last 50 years or so in spite of the presence various powerful private players
which are still finding hard to capture a major market share. Around 16% of the
respondents chose ICICI Life.

72
10. Have you heard about the ULIPs of ICICI Life?

Table 10: Customers Hearing/Knowing Of ICICI Life’s ULIPs

S. No. Option No. of Respondents Percentage (%)

1 Yes 70 70%
2 No 30 30%
Total 100 100%
Source: Primary Data

Figure 10: Customers Hearing/Knowing Of ICICI Life’s ULIPs

Source: Primary Data

Interpretation
Out of the total 100 samples chosen, the respondents were asked about their knowing
of ULIP products of ICICI Life. 70 out of 100 that is 70% people responded that they
know about ICICI Life’s ULIPs products offered; 30% people said they do not about
the ULIP products of ICICI Life.

73
11. What is your opinion with respect to the ULIPs offered by ICICI Life?

Table 11: Customers Opinion On ICICI Life ULIPs

S.No. Option No. of Respondents Percentage (%)

1 Good 56 56%
2 Average 30 30%
3 Bad 14 14%
Total 100 100%
Source: Primary Data

Figure 11: Customers Opinion On ICICI Life ULIPs

Source: Primary Data

Interpretation
The above graph depicts that most of the customers are having a good opinion on
ICICI Life’s ULIPs. 56% of the respondents said that the ULIPs offered by the
company were good, while 30% of the people said it is average, and 14% said that it is
bad when returns and risk cover area consider.

74
12. Does the ICICI’s ULIPs meet your short term investment goals?

Table 12: ICICI Life – ULIPs Meet Short Term Investment Goals

S.No. Option No. of Respondents Percentage (%)

1 Yes 52 52%
2 No 48 48%
Total 100 100%
Source: Primary Data

Figure 12: ICICI Life – ULIPs Meet Short Term Investment Goals

Source: Primary Data

Interpretation
The above graph illustrates that the majority of the consumers feel that ICICI’s
ULIPs will allow them to meet their short term investment goals because. 52 of the
100 respondents thought that they meet their short term investment goals as the
premium amount per lakh on ULIPs products are low when compared to its
competitors, as well the performance (NAVs) of these remain comparatively stronger.

75
13. Does ICICI Life charge for when an ULIP is surrendered or partially withdrawn?

Table 13: Charges Done By ICICI Life When Surrendered Or Partially Withdrawn

S.No. Option No. of Respondents Percentage (%)

1 Yes 70 70%
2 No 30 30%
Total 100 100%
Source: Primary Data

Figure 13: Charges Done By ICICI Life When Surrendered Or Partially Withdrawn

Source: Primary Data

Interpretation
The above graph indicates that 70% of the respondents said that ICICI Life charge
some amount when an ULIP is surrendered or partially withdrawn. 30% said that the
company does not charge anything.

76
14. Do you require the opinion of your friends/colleagues before buying a ULIP product?
Table 14: Customers Option Of Asking Opinion Of Friends/Colleagues Before Buying

S.No. Option No. of Respondents Percentage (%)

1 Yes 20 20%
2 No 80 80%
Total 100 100%
Source: Primary Data

Figure 14: Customers Option Of Asking Opinion Of Friends/Colleagues Before Buying

Source: Primary Data

Interpretation
The above graph depicts that consumer preference towards friends/colleagues opinion
is only 20%. Remaining 80% of the persons are not interested in getting opinion from
their
friends/colleagues for buying a ULIP product.

77
 CHAPTER - VI

FINDINGS, SUGGESTIONS &

CONCLUSION

78
 FINDINGS

● There is a great future of the life insurance sector in India as 80% of the Indian
population is still without life cover and people are just now coming in response to the
awareness campaigns being carried out by almost all the insurance companies.

● We have found out that age plays a major role in deciding the investment patterns of
people as generally the younger class of people tend to take more risk and invest in
various instruments more frequently in a year( 2.10 times a year) when compared with
the older class of people(1.46 times a year).
● Life insurance Corporation (LIC) of India is the company to be least affected during
this market slowdown as NAV of its equity growth funds came down just by 23%
during this major recession.
● Life Insurance Corporation (LIC) of India is still the undisputed market leader as 63%
of the respondents surveyed owned a policy in it and it has also got a tremendous
rating of 4.2 out of 5 in the survey conducted.
● A good positive growth is being shown by ICICI Life and even though it is still over
one year old and has a long way to go it has already started working hard and is trying
to make competition much tougher.
● All the products of ICICI Life under Wealthinsurance are really very good and have
an edge over most of the products of other major life insurance companies as the
plans offered by the company are really very flexible.
● Of the total sample of 100 which is taken into consideration for sampling,
majority of consumer professionals were government employed and private employed
in sampling 38 government employees and 36 private employed people actively
participated in the survey.
● Individual Preferred Investment options indicate that 26% of respondents,
representing 26 people prefer to invest in insurance products, 22 people
preferred investing in stocks and 20 people preferred investing in mutual funds.

79
● The respondent felt that there was an amount of moderate to high risk involved with
ULIPs. 44% felt that there is a moderate risk involved when invested in ULIPs, while
32% said there is low risk.
● The respondents were asked about their knowing of ULIP products of ICICI Life. 70
out of 100 that is 70% of people responded that they know about ICICI Life’s ULIPS
Products offered.30% people said they do not know about the ULIP Products of ICICI
Life.
● Most of the customers are having a good opinion on ICICI Life’s ULIPs.56% of the
respondent said that the ULIPs offered by the company were good, while 30% of
people said it is average, and 14% said that it is bad when returns and risk
covered are considered.
● Charges done by ICICI Life indicates that 70% of the respondents said that ICICI Life
charges some amount when an ULIP is surrendered or partially withdrawn.30% said
that company does not charge anything.
● Out of the total 100 sampling chosen, 74% of the respondents are male and 26% of
the respondents are female.
● The survey conducted indicates that 58% of the respondents were in the age
group of 25-35 years, while 25% of the respondents were aged between
35- 45years.

80
 SUGGESTIONS

● Premium in ULIP policies should be affordable by keeping different client people in

mind.

● There are needs to potential clients through premium in semi urban and rural areas in
order to increase the market share.

● The company has to provide correct information about unit value and fund options in
the ULIP plan.

● There should be further relation surrendering the partial withdrawal of ULIPs.

● The company should constantly come out with innovative products as the competition
is very tough with around 22 companies fighting hard for the market share

● An insurance plan for mentally retarded and physically handicapped people. This
might be hard to digest but if at all plans like these are possible and really come out
then a good amount of Indian population would really be interested.

● To study the IRDA guidelines with respect to ULIPs. .

81
 CONCLUSION

ULIPS also known as UNBUNDLED, VARIABLE INSURANCE PLANS has

possibly been the single largest innovation in the field of life insurance in the past
several decades. It wasn’t too long back, when the good old endowment plan was
the preferred way to insure yourself against an eventuality and to set aside some
savings to meet one’s financial objectives. Then insurance was thrown open to the
private sector. The result was the launch of a wide variety of insurance plans, including
the ULIPs.Thus ULIPs are a simple combination of Term assurance and
investment. Synergy, flexibility, durable tax advantages, flexibility in debt- equity
ratio, top up facility, transparency, subjected to market conditions, capital
appreciation makes ULIPs structurally more effective for achieving long term
financial goals. There is no other investment avenue which provides double the
amount invested, in case of death due to accident or on death.
Therefore insurance has and should be a part of every person’s portfolio which
satisfies twin objectives of protection against risks & to increase your wealth. Putting
your money in the ULIP equity fund will give you a good return and capital
appreciation.
A comparative study on ULIP policies offered by ICICI life with that of its
competitors. Under this, analyzing the competition, scanning the marketing
environment, gathering market information and measuring market share towards ICICI
Life and to know the changes in the private insurance companies since last two years
by offering ULIP policies, as well as to collect the information about the
insurance taker and not insurance taker which becomes one of the marketing
opportunities to suggest to the company.

● The company could start using star personalities for their endorsements especially
cricket stars and film stars as India is a nation of crazy cricket and film followers and
there is nothing better than reaching to the hearts of people through cricket.

● The company should come out with some really outstanding cand out of the world
advertisements like the ones Vodafone has released which people find it hard to forget

82
 soon.

● The company should first promote the brand ICICI Life and create a positive
impression in the minds of the people. In today’s world it is really tough for the
customer to choose from among a vast list of insurance companies as almost all of
them offer the same plans .So the company has to be a bit different from others in
order to stand apart.

83
BIBLIOGRAPHY
 BIBLIOGRAPHY

REFERENCE BOOKS

❑ Leon G. Sehiffman on Consumer Behavior.

❑ Philip Kotler Marketing Management.
❑ Research Methodology-C.R.Kothari

WEB SITES

● http://www.ICICIlife.com/
● http://www.info2india.com/finance/insurance/index.html
● http://www.economywatch.com/world-industries/insurance/
● http://www.irda.gov.in
● http://www.ibef.org/industry/insurance_industry.aspx

Magazines:
Companies Brochures &
Manuals Business Today