A Project Report On

A PROJECT REPORT ON

“COMPARITIVE STUDY OF DIFFERENT INVESTMENT AVENUES WITH ULIP OF ICICI PRUDENTIAL LIFE INSURANCE COM. LTD.” WITH SPECIAL REFFERANCE TO

ICICI PRUDENTIAL LIC Ltd. KOLHAPUR. SUBMITTED TO

MAGNUS SCHOOL OF BUSINESS, KOLHAPUR (ICFAI UNIVERCITY. DHEHARADHUN). IN PARTIAL FULFILLMENT OF THE DEGREE COURSE

M.B.A. - MASTER OF BUSINESS ADMINISTRATION BY

MISS. SWATI SHIVAJI KHOT. 2007-2009 Faculty Guide:

Company

Guide:

PROF.PRAJAKTA KALAMKAR

Mr.SANGRAM KULKARNI AGENCY MANAGER

5

Magnus School of Business Kolhapur. MBA 07-09

(Approved by Institute of Chartered Financial Analyst of India University Deharadhun)

CERTIFICAT E This is to certify that MISS. SWATI SHIVAJI KHOT.of MBA second Semester has successfully completed her SIP (SUMMER

INTERNSHIP PROGRAMM)

2007-2008 for the period of

one & half months from July 15th to August 31st 2008.

Project Guide Date: ____________

6

Director

DECLARATION I hereby declare that the project entitled

“COMPARITIVE STUDY OF DIFFERENT INVESTMENT AVENUE WITH ULIP PLAN”

Submitted in partial fulfillment of the requirement for the degree of

Master of Business Administration (MBA)

To ICFAI University, Deharadun

Is my original work and is not submitted to any other degree, diploma, fellowship or other similar title or prizes. The project has been individually carried out as a part of Major Con-Current Project and is meant for academic purpose only. SWA TI KHOT.

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ACKNOWLEDGEMENT I present this work with liberal obligation to the under mentioned with full acceptance of its limitations. It was great privilege for me to undergo my project work in “ICICI Prudential ltd, Kolhapur”. I am highly obliged to Mr. Sangram Kulkarni (Agency Manager) for granting me permission to do the project and giving me valuable guidance during the project. I would like to express my sincere thanks to center head Lt.col.(Retd) B. V. Jugulkar,Business head Mr. Viren Bhirdi, academic head Prof. Sumedh Ghare & my project guide Prof. Prajakta Kalamkar a from MAGNUS for his inspiring guidance, invaluable co-operation through out the project work, it is because of his encouragement which led to improvement and completion in project work and other staff member of MBA department and my friends who in spite of their busy schedule were always ready to share with me pearls of wisdom from their vast experience. My Sincere thanks to all those who have helped me directly or indirectly in immemorial ways for making this project report success. Place: Kolhapur

Date:

8

(SWATI KHOT)

Contents

No 1

Titles Chapter 1

Page no. 1 to 15

Executive summary Introduction Literature review 2

Chapter 2

16 to 35

Introduction about company Company Profile Organization Chart Objectives of the Study and methodology 3

Chapter 3

36 to 59

Conceptual background Result and Discussion with charts and Graphs 4

Chapter 4

60 to 70

Findings & Suggestions Appendix- Questionnaire Coding sheet Bibliography

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CHAPT ER 1

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INTRODUCTION TO THE PROJECT

As a part of M.B.A. curriculum every student has to undergo the summer internship project (S.I.P.) for 45 days.

This project was completed with ICICI PRUDENTIAL LIFE INSURANCE COMPANY LTD. KOLHAPUR for the duration of 45 days. In this the researcher has accomplished the project work under the title “COMPARISON OF DIFFERENT INVESTMENT AVENUES WITH ULIP OF ICICI PRUDENTIAL LIC Ltd...”

The study is mainly focused on the understanding of different investment avenues & ULIP of ICICI PRUDENTIAL. The objective of the study indicates to compare insurance with other investment avenue.

BRIEF HISTORY OF INSURANCE SECTOR IN INDIA

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The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost 190 years. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are 1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938 - Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956 - 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957 - General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968 - The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 1075 insurers amalgamated and grouped into four companies’ viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company. INTRODUCTION OF INSURANCE

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Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. An insurer is a company selling the insurance. The insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice. Principles of insurance Commercially insurable risks typically share seven common characteristics. 1. A large number of homogeneous exposure units: The vast majority of

insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004. The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units.

2. Definite Loss: The event that gives rise to the loss that is subject to insurance

should, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable.

3. Accidental Loss: The event that constitutes the trigger of a claim should be

fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.

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4. Large Loss. The size of the loss must be meaningful from the perspective of the

insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.

5. Affordable Premium: If the likelihood of an insured event is so high, or the cost

of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. 6.Calculable Loss: There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim. 6. Limited risk of catastrophically large losses: The essential risk is often

aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, about 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer’s appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coastlines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsures can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance, it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared

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among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

MARKETING Marketing is a social process by which individuals & groups obtain what they need & want through creating, offering & freely exchanging products & services of value with each others. For a managerial definition marketing has often been described as “the art of selling products” but people are surprised when they here that the most imp. Part of marketing is not selling! Selling is only tip of the marketing iceberg. A marketer can rarely satisfy everyone in a market. Not everyone likes the same things. Therefore marketers start by dividing up the market. They identify profile distinct groups of buyers who might prefer or require varying product & services mixes. Examining demographic, psycho graphic & behavioral differences among buyers can identify market segments. The marketer then decides which segments present the greatest opportunity which is its target markets. For each chosen target market, the firm develops a market offering. The offering is positioned in the minds of the target buyers as delivering some central benefits. A market segment consists of a group of customers who share a similar set of wants. Marketing is invariably connected with insight of research into consumer behaviors. What a consumer needs, wants, prefers & where does they live, their income & mode of spending, how they make purchase decision etc. are important for decision making. Marketing decides the channel of availability of the distributors, salesmen’s compensation, training & placement also. Marketing is concerned with advertising & promotion. It decides the mode of advertising program as well as sales promotion methods. Thus, marketing tries to define right type of product in the terms of company’s objective & attempts to make it available for the right place with the right promotion. All function attempts too perform in terms of consumers, to whom these activated are aimed. This is described as “consumer orientation”

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CHAPT ER 2 16

COMPANY PROFILE ICICI Bank ICICI Bank is India's second-largest bank. The Bank has a network of about 573 branches and extension counters and over 2,000 ATMs. ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution. ICICI was formed in 1955 at initiative of the World Bank, Government of India and representatives of Indian industry. The objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services 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 become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. In 2001, ICICI bank acquired Bank of Madura Limited. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Canada and Russia, branches in Singapore and Bahrain and representative offices in the United States, China, United Arab Emirates, Bangladesh and South Africa. Today, ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management.

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PRUDENTIAL Established in London in 1848, Prudential p/c, through its business in the UK and Europe, the US and Asia, provides retail financial services, product to more than 16 million customers and over US$300 billion in funds under management. Prudential has brought to market an integrated range of financial services, products that includes life assurance, pension, mutual funds, banking, investment management and general insurance. In Asia, prudential is the leading European life insurance company with a vast network of 24 life and mutual fund operation in 12 countries – China, Hong kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan and Vietnam.

Prudential is 157-year-old company (founded in year 1848) It is one of the largest Insurance companies in the U.K. It has operations in 80 countries spread over Europe, Asia and America. In Asia its U.K’s largest life insurance company, having its operations in 15 countries-thus having a good experience in the Asian Market.  Prudential Asia has AAA rating from standard and Poor’s for the financial strength of its core life fund.  Prudential’s fund management arm is one of U.K’s largest investment mangers with over US$230 under management.    

 Prudential ICICI mutual fund has emerged as one of India’s largest mutual

funds; the corpus of the fund is over Rs.6000 crores.  In 1999 the Asian Banker’s Association for record collections under the Resurgent India Bonds Scheme awarded the Asian Banking Award it.  Prudential employs over 25,000 staff around world.  It offers financial services like Insurance, banking mutual funds pensions and insurance.  Prudential has expanded its operations in Europe through strategic alliances with other leading insurance companies in Europe.  It has a vast network of 22 life and mutual fund operations in Asia  Prudential is particularly noted for pioneering unit-linked products in Singapore, Malaysia and Indonesia.  Prudential is the first UK insurer to list its services on a mobile phone network using the latest WAP technology.

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ICICI PRUDENTIAL LIFE INSURANCE COMPANY ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank - one of India's foremost financial services companies-and prudential plc - a leading international financial services group headquartered in the United Kingdom. Total capital infusion stands at Rs. 42.72 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%. We began our operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide team comprises of over 2000 branches (inclusive of 1,074 micro-offices), over 274,500 advisors; and 20 banc assurance partners. ICICI Prudential was the first life insurer in India to receive a National Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. As we grow our distribution, product range and customer base, we continue to tirelessly uphold our commitment to deliver world-class financial solutions to customers all over India.

BORD OF DIRECTOR The ICICI Prudential Life Insurance Company Limited Board comprises reputed people from the finance industry both from India and abroad. Mr. K.V. Kamath, Chairman Ms. Kalpana Morparia, Vice Chairperson Ms. Chanda Kochhar, Director Mr. Barry Stowe, Director Mr. H.T. Phong, Director Prof. Marti G. Subrahmanyam, Director Mr. Mahesh Prasad Modi, Director Ms. Rama Bijapurkar, Director Mr. Keki Dadiseth, Director Ms. Shikha Sharma, Managing Director Mr. N.S. Kannan, Executive Director Mr. Bhargav Dasgupta, Executive Director

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MANEGMENT TEAM The ICICI Prudential Life Insurance Company Limited Management team comprises reputed people from the finance industry both from India and abroad. Ms. Shikha Sharma , Managing Director & CEO Mr. N. S. Kannan , Executive Director Mr. Bhargav Dasgupta , Executive Director Ms. Anita Pai , Executive Vice President – Customer Service & Technology Dr. Avijit Chatterjee, Appointed Actuary Mr. Puneet Nanda , Executive Vice President & Chief Investment Officer

COMPANY VISION

Understanding the needs of customers, offering them superior products, service Leveraging technology to service customers quickly, efficiently, conveniently .Developing, implementing superior risk management, and investment strategies to offer sustainable and stable returns to our policyholders .Providing an enabling environment to foster growth and learning for our employees and above all, building transparency in all our dealings The success of the company will be founded in its unflinching commitment to 5 core values – 1) 2) 3) 4) 5)

Integrity, Customer First, Boundary less, Ownership Passion.

Each of the values describes what the company stands for, the qualities of our people and the way we work.

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We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to our growth. STRUCTURE OF ICICI PRUDENTIAL LIC Ltd. KOLHAPUR BRANCH

SALES MANAGER

UNIT MANAGER

SENIOR AGENCY MANAGER AGENCY MANAGER

ADVISOR

ADVISOR

ADVISOR

ADVISOR AUM

ADVISOR

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AUM

WORKING OF THE BRANCH Nature of work of various personnel: Sales Manager Mr. Vijay Joshi, sales manager, is managing the Kolhapur branch. Under him there are 22 unit managers are working. The sales manager oversees the branch in terms of sales & administration. The sales function includes achievement of sales targets of the branch with respect to premium income for a new business in a month, renewal premium, number of policies sourced, activisation of the advisors & also driving various contests. Sales manager also has important task of manpower developed, through motivation, guidance & being a role model for the unit managers. Unit Manager The unit manager manages the team of 25 financial advisors, whom he recruits over a period of time from his known circle or through cold calls. The unit manager has responsibility to complete sales targets, which is set out in a monthly gold-sheet. He has to also motivate his team for better performance. Advisors are independent financial consultants who work on commission basis. They sell policies to clients as per companies rule & regulations. They complete all documentation part & submit cases to the ‘operational department’ for further processing. As per current insurance norms Insurance advisor Advisors are independent financial consultants who work on commission basis. They sell policies to clients as per companies rule & regulations. They complete all documentation part & submit cases to the ‘operational department’ for further processing. As per current insurance norms. Financial advisors are licensed & have authority to business as per IRDA rules & regulations. OPERATIONS DEPARTMENT All administrative matters pertaining to the branch & it’s business are being looked after the ‘operational department ‘. They also perform the important function of looking after policy administration like issuances of premium receipt, forwarding

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proposal forms to the central operation at Mumbai. Sending renewal premium, reminders, lapsed policy reminder, collection of premium of new business thought cheques & cash & depositing the amount in bank

OBJECTIVES OF THE STUDY •

To understand the different investment avenues.

•

To understand the insurance concept deeply.

•

To study the ULIP plans of ICICI LIC.

•

Find out the advantages & disadvantages of different investment avenues & ULIP plans.

•

To compare different investment avenues with ULIP plans.

SCOPE OF THE STUDY



Scope of the study extends to Kolhapur city.



Insurance industry study was taken as a market research.



The study involved comparison of ULIP plan with other investment

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avenues.

 The aim is to understand the investment which is best suited you to achieve your goals.



How the goals can be achieved through insurance.

LIMITATIONS OF THE STUDY

1. TIME FACTOR: The time allotted for doing the project was a limiting factor. 2. LACK OF DATA DUE TO CONFIDENTIAL NATURE: It was difficult to collect all information as & when necessary for the purpose of the study. 3. LACK OF SUPPORT: It was difficult to do survey due to lack of support of people.

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METHODOLOGY ADOPTED

DATA SOURCES

PRIMARY DATA

SECONDARY DATA

DATA CLLECTION TECHNIQUES:

The data collection for this study was obtained from primary & secondary sources.

PRIMARY DATA: It is the first hand information collected directly from customer. The primary data are those, which are collective fresh & for the first time and this happen to be original in character. Primary data is gathered for a specific research project. Primary data are collected by:

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1. SAMPLE SIZE : The total samples for this study is of 500 customers. 2. SAMPLE AREA:

No particular area is given for this study. 3. QUESTIONNAIRE: It is a set of definite questions formed to collect the required facts or opinions from others. While preparing questionnaire the attention was given at the objective. 4. SURVEY METHOD: The survey method is used to collect the required information from the sample size. It is a direct form of investigation involving face-to-face communication and feedback.

B) SECONDARY DATA

It was collected from various insurance book & reports of ICICI prudential. The secondary data are those which have already been collected by someone else & which have been already trough the statistical process & useful to present study.

Secondary data was collected from

1. Internal sources 2. Libraries 3. Magazines

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4. Internet

CHAPT ER 3 27

CONCEPTUAL BACKGROUND DIFFERENT INVESTMENT AVENUES

Mutual fund Mutual funds can give investors access to emerging markets A mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks, bonds, short-term money market instruments, and/or other securities. The fund manager, also known as portfolio manager, invests and trades the fund's underlying securities, realizing capital gains or losses and passing any proceeds to the individual investors. Currently, the worldwide value of all mutual funds totals more than $26 trillion. Since 1940, there have been three basic types of investment companies in the United States: open-end funds, also known in the US as mutual funds; unit investment trusts (UITs); and closed-end funds. Similar funds also operate in Canada. However, in the rest of the world, mutual fund is used as a generic term for various types of collective investment vehicles, such as unit trusts, open-ended investment companies (OEICs), unitized insurance funds, and undertakings for collective investments in transferable securities (UCITS). Since the Investment Company Act of 1940, a mutual fund is one of three basic types of investment companies available in the United States.

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Mutual funds can invest in many kinds of securities. The most common are cash instruments, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (e.g., high-yield junk bonds or investment-grade corporate bonds), type of issuers (e.g., government agencies, corporations, or municipalities), or maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily foreign securities (international funds).

Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts cash flows into and out of the fund by investors, as well as the future performance of investments appropriate for the fund and chooses those which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered under an advisory contract with a management company, which may hire or fire fund managers.

Mutual funds are subject to a special set of regulatory, accounting, and tax rules. In the U.S., unlike most other types of business entities, they are not taxed on their income as long as they distribute 90% of it to their shareholders and the funds meet certain diversification requirements in the Internal Revenue Code. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are tax-free to the shareholder. Taxable distributions can be either ordinary income or capital gains, depending on how the fund earned those distributions. Net losses are not distributed or passed through to fund investors.

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2. Market share Total equity capital of a company is divided into equal units of small Denominations, each called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share. Thus, the company then is said to have 20,00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights. TYPES OF SHARES Equity Shares: An equity share, commonly referred to as ordinary share, represents the form of fractional ownership in a business venture. Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio to those already held, at a price. For e.g. a 2:3 rights issue at Rs. 125, would entitle a shareholder to receive 2 shares for every 3 shares held at a price of Rs. 125 per share. Bonus Shares: Shares issued by the companies to their shareholders free of cost based on the number of shares the shareholder owns. Preference shares: Owners of these kinds of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus. But in the event of liquidation, their claims rank below the claims of the company’s creditors, bond holders/debenture holders.

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Cumulative Preference Shares: A type of preference shares on which dividend accumulates if remained unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares. Cumulative Convertible Preference Shares: A type of preference shares where the dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.

3. Fixed Deposits A fixed deposit is meant for those investors who want to deposit a lump sum of money for a fixed period; say for a minimum period of 15 days to five years and above, thereby earning a higher rate of interest in return. Investor gets a lump sum (principal + interest) at the maturity of the deposit. Bank fixed deposits are one of the most common savings scheme open to an average investor. Fixed deposits also give a higher rate of interest than a savings bank account. The facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan) facility on the amount deposited, premature withdrawal before maturity period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks are subject to control of the Reserve Bank of India.

Features: •

Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India (RBI) with regard to several policy and operational parameters.

•

The banks are free to offer varying interests in fixed deposits of different maturities

.

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•

Interest is compounded once a quarter, leading to a somewhat higher effective rate.

•

The minimum deposit amount varies with each bank. It can range from as low as Rs. 100 to an unlimited amount with some banks. Deposits can be

made in multiples of Rs. 100/-.

Returns: The rate of interest for Bank Fixed Deposits varies between 4 and 11 % depending on the maturity period (duration) of the FD and the amount invested. Interest rate also varies between each bank. A Bank FD does not provide regular interest income, but a lump-sum amount on its maturity. Some banks have facility to pay interest every quarter or every month, but the interest paid may be at a discounted rate in case of monthly interest. The Interest payable on Fixed Deposit can also be transferred to Savings Bank or Current Account of the customer. The deposit period can vary from 15, 30 or 45 days to 3, 6 months, 1 year, and 1.5 years to 10 years.

Duration

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Interest rate (%) per annum

15-30 days

4 -7 %

30-45 days

5-8 %

46-90 days

6-8 %

91-180 days

6.5-9.5 %

181-365 days

7-9.5 %

1-1.5 years

8.5-10.25 %

1.5-2 years

8.5-10.5 %

2-3 years

9-10.5 %

3-5 years

9.5-10.5 %

5 years

9.5-11 %

Advantages: •

Bank deposits are the safest investment after Post office savings because all bank deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of India.

•

It is possible to get loans up to75- 90% of the deposit amount from banks against fixed deposit receipts.

•

The interest charged will be 2% more than the rate of interest earned by the deposit.

•

With effect from A.Y. 1998-99, investment on bank deposits, along with other specified incomes, is exempt from income tax up to a limit of Rs.12, 000/- under Section 80L. Also, from A.Y. 1993-94, bank deposits are totally exempt from wealth tax.

•

The 1995 Finance Bill Proposals introduced tax deduction at source (TDS) on fixed deposits on interest incomes of Rs.5000/- and above per annum.

4. Real Estate

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Real estate is a legal term (in some jurisdictions, notably in the USA, United Kingdom, Canada, and Australia) that encompasses land along with anything permanently affixed to the land, such as buildings, specifically property that is stationary, or fixed in location. Real estate law is the body of regulations and legal codes which pertain to such matters under a particular jurisdiction. Real estate is often considered synonymous with real property (also sometimes called realty), in contrast with personal property (also sometimes called chattel or personality under chattel law or personal property law). However, in some situations the term "real estate" refers to the land and fixtures together, as distinguished from "real property," referring to ownership rights of the land itself. The terms real estate and real property are used primarily in common law, while civil law jurisdictions refer instead to immovable property. In the real estate we have covered the following aspects: Home, Land, Gold.

5. Life Insurance

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Life Insurance is insurance for you and your family's peace of mind. Life is a policy that people buy from a life insurance company, which can be the basis of protection and financial stability after one's death. Its function is to help beneficiaries financially after the owner of the policy dies. It can also be a form of savings in the long run if you purchase a plan, which offers the option of contributing regularly. Additionally, a little known function of life insurance is that it can be tied in with a person's pension plan. A person can make contributions to a pension that is funded by a life insurance company. These are considered private pension arrangements. In addition, you should also make a list of what you feel needs to be protected in your family's way of life. With a life insurance policy in place, you can: • • • • • • •

provide security for your family protect your home mortgage take care of your estate planning needs look at other retirement savings/income vehicles

Types of Insurance Any risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "perils". An insurance policy will set out in details which perils are covered by the policy and which are not. Below are (non-exhaustive) lists of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set forth below. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). 1. Business Insurance Business Insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and (b) the business owners policy (BOP), which bundles into one policy many of the kinds of coverage that a business owner needs, in a way analogous to how homeowners insurance bundles the coverage that a homeowner needs. 2. Health Almost all developed countries have government-supplied insurance for health.

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Health insurance policies will often cover the cost of private medical treatments if the National Health Service in the United Kingdom (NHS) or other publicly-funded health programs do not pay for them. It will often result in quicker health care where better facilities are available. Dental insurance, like medical insurance, is coverage for individuals to protect them against dental costs. In the U.S., dental insurance is often part of an employer's benefits package, along with health insurance. Most countries rely on public funding to ensure that all citizens have universal access to health care . 3. Disability •

•

• •

Disability insurance policies provide financial support in the event the policyholder is unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgages and credit cards. Total permanent disability insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance. Disability overhead insurance allows business owners to cover the overhead expenses of their business while they are unable to work. Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred because of a job-related injury.

4. Casualty Casualty insurance insures against accidents, not necessarily tied to any specific property. •

•

Crime insurance is a form of casualty insurance that covers the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement. Political risk insurance is a form of casualty insurance that can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.

5. Life Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for income to an insured person's family, 36

burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance. Certain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed. In many countries, such as the U.S. and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death. In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.

CONCEPT OF ULIP

37

MEANING OF ULIP (unit link insurance product) For the generation of insurance seekers who thrived on insurance policies with assured returns issued by a single public sector enterprise, unit-linked insurance plans are a revelation. Traditionally insurance products have been associated with attractive returns coupled with tax benefits. The returns part was often so compelling that insurance products competed with investment products for a place in the investor’s portfolio. Perhaps insurance policies then were symbolic of the times when high interest rates and the absence of a rational risk-return trade-off were the norms. The subsequent softening of interest rates introduced a degree a much-needed rationality to insurance products like endowment plans; attractive returns at low risk became a thing of the past. The same period also coincided with an upturn in equity markets and the emergence of a new breed of market-linked insurance products like ULIPs. While in conventional insurance products the insurance component takes precedence over the savings component, the opposite holds true for ULIPs. More importantly ULIPs (powered by the presence of a large number of variants) offer investors the opportunity to select a product which matches their risk profile; for example an individual with a high risk appetite can shun traditional endowment plans (which invest about 85% of their funds in the debt instruments) in favor of a ULIP which invests its entire corpus in equities. In traditional insurance products, the sum assured is the corner stone; in ULIPs premium payments is the key component. ULIPs are remarkably alike to mutual funds in terms of their structure and functioning; premium payments made are converted into units and a net asset value (NAV) is declared for the same. Investors have the choice of enhancing their insurance cover, modifying premium payments and even opting for a distinct asset allocation than the one they originally opted for. Also if an unforeseen eventuality were to occur, in case of traditional products, the sum assured is paid along with accumulated bonuses; conversely in ULIPs, the insured is paid either the sum assured or corpus amount whichever is higher. Insurance seekers have never been exposed to this kind of flexibility in traditional insurance products and it would be fair to say that ULIPs represent the new face of insurance. While few would dispute the value-add that ULIPs can provide to one’s insurance portfolio and financial planning; the same is not without its flipside.

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For the uninitiated, understanding the functioning of ULIPs can be quite a handful! The presence of what seem to be relatively higher expenses, rigidly defined insurance and investment components and the impact of markets on the corpus clearly make ULIPs a complex proposition. Traditionally the insurance seeker’s role was a passive one restricted to making premium payments; ULIPs require greater participation from both the insured and the insurance advisor.

Unit Linked Insurance Product ULIPs have gained high acceptance due to attractive features they offer. These include: 1. Flexibility 1. Flexibility to choose Sum Assured. 2. Flexibility to choose premium amount. 3. Option to change level of Premium /Sum Assured even after the plan has started. 4. Flexibility to change asset allocation by switching between funds.

2. Transparency 1. Charges in the plan & net amount invested are known to the customer. 2. Convenience of tracking one’s investment performance on a daily basis.

3. Liquidity 1. Option to withdraw money after few years (comfort required in case of exigency). 2. Low minimum tenure. 3. Partial / Systematic withdrawal allowed

4. Fund Options 1. A choice of funds (ranging from equity, debt, cash or a combination). 2. Option to choose your fund mix based on desired asset allocation.

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Traditional Plans These are the oldest types of plans available. These plans cater to customers with a low risk appetite. Some of the common features of traditional plans are: 1. Steady Investment 1. Major chunk of investible funds are in debt instruments. 2. Steady and almost assured returns over the long term.

2. Features 1. Death benefit is Sum Assured + guaranteed & vested bonus. 2. Helps in asset creation as they are for a long tenure. 3. Premium to Sum Assured ratios are fixed for each plan and age. 4. Generally withdrawals are not allowed before maturity.

ULIP OF ICICI PRUDENTIAL LIC 1 Smart Kid Features and benefits of Smart Kid

40

Smart Kid New Unit-linked Regular Premium Smart Kid New Unit-linked Regular Premium is a unit-linked plan, which enables you and your child to accumulate wealth by virtue of the performance of the underlying market-linked instrument. Take a look at the features of the plan: Premium: The minimum premium to be invested is Rs. 12,000 per annum. After deducting premium allocation charges from the premium, the remaining amount will be invested in a fund of your choice. Sum Assured: The minimum Sum Assured that the policyholder can opt for is Term * Annual Premium/2, subject to a minimum of Rs 1 Lac Policy term: The term of the policy will be calculated as the difference between your child's current age and the age of your child when the policy matures. Mortality, Policy Administration charges: These and other charges will be deducted from the units in the fund.

2. LIFE TIME GOLD Features and benefits of Lifetime Gold Flexible policy term: Decide for how long you want your policy. You can invest for a minimum of 10 years and a maximum of 75 years. 3 choices of premium payment: Opt to pay the premium on a monthly, bi-annual or an annual basis. 7 investment funds: Select among Flexi-Growth, R.I.C.H., Multiplier, Flexi-Balanced, Balancer, Protector, and Preserver, based on your financial goals and risk profile. Systematic withdrawal of money: Withdraw money in installments from the 4th year onwards. Maturity benefit: Receive the Fund Value when your policy matures. Death benefit: Your family receives the higher of Fund Value or Sum Assured should something happen to you.

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Switch benefit: Switch between funds anytime to adjust your portfolio, based on your goals and risk profiles. You can switch funds 4 times a year, at no cost. For subsequent switches, you will be required to pay a switch fee of Rs. 100.

3. LIFE TIME SUPER PENSION

ICICI Prudential's Lifetime Super Pension policy is especially designed to help you systematically save towards a joyful and satisfying retirement. Lifetime Super Pension Plan is a cost-effective pension plan that delivers great value in the long run. A regular-premium unit-linked pension policy, Lifetime Super Pension ensures you earn a fixed income, for your entire life after retirement. So you can relax and live moments that truly matter. Features and benefits of Lifetime Super Pension Plan 7 investment funds; Select among Flexi-Growth, R.I.C.H., Multiplier, FlexiBalanced, Balancer, Protector, and Preserver, based on your financial goals and risk profile. You can switch funds 4 times a year, at no cost. For subsequent switches you will be required to pay a switch fee of Rs. 100.

.

2 variations of Sums Assured: Opt for a Zero Sum Assured or a Sum Assured that can be chosen between a minimum of Rs. 1 lakh and maximum of the annual premium multiplied by the policy term. Tax benefits-Receive up to one-third of the accumulated value as a tax-free lump sum on your retirement day. Also enjoy tax benefits on the premiums you pay (under u/s 80 CCC) and tax exemptions on death benefits [under u/s 10 (10

42

CHAPT ER 4 ANALYSIS & INTERPRETATION

43

1. HOW MANY PEOPLE ARE INSURED

TOTAL YES NO

500 470 30

PERCENTAGE 94 6

INSURED

6% YES NO 94%

INTERPRETATION: From the graph we know that most of the people are insured. Total 98% people are insured & 2% people are not insured.

2.RATING OF ICICI PRUDENTIAL LIC

44

NO, OF RESPONDENT PERCENTAGE

POOR 40

AVERAGE 160

GOOD 200

EXCELLENT 100

TOTAL 500

8

32

40

20

100

INTERPRETATION: From the chart we know the rating of people about the ICICI PRUDENTIAL is overall good.

3.AWARENESS OF ICICI PRUDENTIAL LIC

AWARE

45

UNAWARE

TOTAL

NO. OF RESPONDENT

350

150

500

PERCENTAGE

70

30

100

INTERPRETATION: From the graph we know that out of the total people 70% people are aware & 30% people are unaware of ICICI PRUDENTIAL.

4.Which investment people prefer

TOTAL

SHOR T

MEDIUM LONG

500

100

150

250

percentage

20

30

50

46

500

20% SHORT MEDIUM

50%

LONG 30%

INTERPRETATION :

From the graph it is seen that most of the people prefer long term investment. From the total sample size 50% people prefer long term investment, 30% people prefer medium term investment, 20% people prefer short term investment.

5.INVESTMENT OF PEOPLE IN ULIP PLAN

47

TOTAL

YES

NO

500

150

350

PERCENTAGE

30

70

500

30% YES NO 70%

INTERPRETATION:

From the above chart it is seen that out of the total people only 30% people have investment in ULIP plan & 70% people do not have investment in ULIP plan.

6.WHO HAVE TAKEN THE ULIP PLAN OF ICICI PRUDENTIAL LIC

48

ICIC I

TOTAL

LIC

OTHERS

500

90

300

110

PERCENTAGE

18

60

22

500

18%

22%

ICICI LIC OTHERS 60%

INTERPRETATION: From the graph we know that only 18% people have taken the ULIP plan of ICICI PRUDENTIAL, 60% have taken the plan of LIC.

49

7.INVESTMENT OF PEOPLE IN DIFFERENT AVENUES.

NO. OF INVESTOR PERCENTAG E

FIXED DEPOSI T 320

REAL ESTAT E 340

MUTUA L FUND

SHARE S

INSURANC E

230

60

470

64

68

46

16

94

NO. OF INVESTOR 500 450 400 350 300 250 200 150 100 50 0

470 320

FIXED DEPOSIT

340

NO. OF INVESTOR

230 60 MUTUAL FUND

INSURANCE

INTERPRETATION: From the graph we see that mostly people have invested in the insurance sector. Very less people have invested in the share market.

9.Preference of the people about ICICI PRUDENTIAL’s plan.

50

SMART KID

PENSION

TOTAL

POLICYHOLDERS

LIFETIME GOLD 36

28

26

90

PERCENTAGE

40

32

28

100

INTERPRETATION From the graph we know that from the ULIP plan of ICICI PRUDENTIAL people mostly prefer life time gold plan.

FINDINGS & SUGGESTIONS FINDINGS 51

● ICICI PRUDENTIAL has got good market in kolhapur

● In the total survey I found that most of the people are insured but they don’t know the value of insurance.

● People are not much aware about ULIP plans of insurance.

● People want security of their money with high returns & interest area.

● Most of the people are like to invest in fixed deposit & post.

●Only few people have their investment in share market because the risk is more.

● There are some people who don’t believe on private companies.

● Most of the people have invested in real estate like in gold, home, land.

● Investment in mutual fund & insurance is less risky & we get good returns from it. ● ULIP plans of ICICI PRUDENTIAL are good.

● Investment in insurance is secure & beneficial than any investment avenue.

SUGGESTIONS

52

●People are not much aware about ULIP plans so the company should make them aware through advisors.

●They have opportunity to capture more rural area.

●To remain in No. 1 position & increase their market share company has to introduce innovative ideas with time factor.

●Company should give importance to after sales service.

●Advisor should give information about the charges people.

occurred on the plan to

ACHIEVEMENTS During 45 days project work the company guide did not give any target to me. I got IRDA license & after that I login 2 life insurance policies one is of smart kids & another is of pension plan & three are in process of life time gold.

CODING SHEET 53

BANK Capital returns Yes /no assured Installment payments No allowed Installment waived on No premature death Choice of selection of No amt. term, plan. Immediate loan Yes available Tax benefit Yes Safe from creditors Personal service available Rate of return Risk

No

POST

P.F.

GOLD

M.F.

SHARES

Yes

Yes

Yes

Yes

No

LIFE INSURANCE Yes

No

No

No

Yes

No

Yes

No

No

No

No

No

Yes

No

No

No

Yes

No

Yes

Yes

No

Yes

No

No

Yes

Yes

Yes

No

Yes

No

Yes

No

No

No

No

No

Yes

Yes /no

No

No

No

Yes

No

Yes

Low

Low

Low

Nil

Average

High

Average

Low

No

No

Low

Low

High

Low

COMPARISON OF DIFFERENT INVESTMEST AVANUES & ULIP OF ICICI PRUDENTIAL LIFE INSURANCE COM.

CUSTOMER DETAILS

54

NAME:

AGE:

QUALIFICATION: PROFESSION: FAMILY MEMBERS: ADDRESS: CONTACT NO:

LAND LINE: MOBILE:

1)What is your annual income? a) Below 1lakh b) 1-2 lakh c) 3-5 lakh d) Above 5 lakh 2) Do you have investment? Yes No 3)Which investment do you prefer? a) short term b) medium term c) long term 4)In which avenue you invest your money? d) Fixed deposit e) Shares f) Mutual fund g) Insurance h) Real estate 3) If the investment is in shares then in which type of company do you prefer & why? a) small cap b) mid cap c) large cap 4) If the investment is in mutual fund then what is the nature of investment? a) Diversification b) Sectorial c) Debt. & bonds 7)If you have invested your money in real estate then how does you have invested? a) land c) gold 55

b) home d) others

8) How many Rs. You have invested for fixed deposit & where? a) up to 50000 b) 50000- 100000 c) more than 1 lakh 9) How much returns you are getting from your investment? a) up to 5% b) 5-10% c) 10-20% d) above 20% 10) How much you are satisfied with your investment? a) Fully satisfied b) Satisfied c) Dissatisfied 11) Do you have ULIP plan? Yes

No

12) If yes, from which company you have taken the plan? a) LIC

b) ICICI

c) Bajaj Allianz

d) HDFC

e) ohers

13) Which benefits you are getting from this plan? a) Better returns

b) Tax benefit

c) Health benefit

d) Loan facility

14) Are you aware about ICICI prudential life insurance company? Yes

No

15) Have you taken any ULIP plan from ICICI prudential?

56

Yes

No

16) If yes, which plan you have taken & why? a) Pension plan b) Smart kid plan c) life time gold plan 17) How do you rate ICICI prudential? a) poor

b) average

c) good

d) best

18) Any suggestion?

BIBLIOGRAPHY

AUTHOR 57

NAME OF BOOK

1) Philip Koteler

2) Internet www.iciciprulife,com GOOGLE SEARCH

3) IRDA IC-33

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Marketing Management