1

A STUDY ON INVESTORS PERCEPTION

TOWARDS THE INSURANCE POLICY
OF ING VYSYA BANK

ING Vysya Bank Limited

Bank
Address: KR Rd, 7th Block, Banashankari,
Bengaluru, Karnataka 560070

Phone: 1800 420 9900

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TABLE OF CONTENTS
CHAPTER TITLE
1 INTRODUCTION
2 INDUSTRY PROFILE & COMPANY
PROFILE
3 REVIEW OF LITERATURE
4 RESEARCH METHODOLOGY
NEED OF THE STUDY
OBJECTIVES OF THE STUDY
LIMITATIONS OF THE STUDY
RESEARCH DESIGN
5 DATA ANALYSIS &
INTERPRETATIOIN
6 FINDINGS, RECOMMENDATIONS
& CONCLUSION
7 QUESTIONNAIRE &
BIBLIOGRAPHY
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ABSTRACT
In India, Life Insurance sector plays a major role in savings of a
person. There are many players in life insurance sector and LIC is the
leading as it has roots in India from more than 50 years. To purchase any
thing in this world a customer has his/her own choice of preferences.
The project study of ING Vysya unit linked as a part of financial
planning.

The aim of study is to examining a clients personal situation,

financial resources, financial objectives and financial problems in a
comprehensive manner, monitoring the plan performance to take
corrective action as necessary to assure that results match the plan
projections. So this study is also intended to find whether people are
aware of ING Vysya Life Insurance.

The method of study is market research with structured

questionnaire consisting of multiple choice questions. The sample is 100
collected from persons having Life Insurance Policy.

The Private Insurance companies are also able to create brand

value and trust in customers. So they have only 42% (approx.) market
share in Life insurance sector.
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CHAPTER 1
INTRODUCTION
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What is Life Insurance?

Insurance is a contract between two parties where by one party
called insurer undertakes in exchange for a fixed sum called premiums, to
pay the other party called insured a fixed amount of money on the
happening of a certain event.
Insurance is a protection against financial loss arising on the
happening of an unexpected event. Insurance companies collect premium
to provide for this protection. A loss is paid out of the premiums collected
from the insuring public and the insurance companies act as trustees to
the amount collected.
For example, in a life policy, by paying a premium to the insurer,
the family of the insured person receives a fixed compensation on the
death of the insured.
Similarly, in car insurance, in the event of the car meeting with an
accident, the insured receives the compensation to the extent of damage.

Why should you take Insurance?

Insurance is designed to safeguard oneself and ones family against

possible losses on account of risks and perils. It provides financial
compensation for the losses suffered due to the happening of any
unforeseen event.
By taking life insurance a person can have peace of mind and need
not worry about the financial consequences in case of any untimely death.
Certain insurance contracts are also made compulsory by
legislation. For example, motor vehicles act 1988 stipulates that a person
driving a vehicle in a public place should hold a valid insurance policy
covering act risks. Another example of compulsory insurance pertains
to the environmental protection act, wherein a person using or carrying
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hazardous substances (as defined in the act) must hold a valid public
liability (act) policy.

Who provides Insurance?

In India, prior to liberalization insurance protection was made

available through public sector insurance companies, namely, life
insurance Corporation of India (LIC) and the four subsidiaries of General
Insurance Corporation of India (GIC).
By the passing of the IRDA Bill, the Insurance sector has been
opened up for private companies to carry on Insurance business.
Insurance contracts are based on good faith i.e. the details
furnished by the proposals are accepted in good faith and this will form
the basis of the contract.
Types of Life Insurance Policies:
Term Life Insurance
Endowment Insurance
Whole Life Insurance

Term Life Insurance:

Term Life Insurance furnishes protection for a limited number of

years ate the end of which the policy expires. The face amount of the
policy is payable only if the insureds death occurs during the stipulated
term, and nothing is paid in case of survival. Term product prices are
more easily compared than prices of other life products as term policies
are usually simpler than other policies.

Types of Term Life Insurance:

Level Face Amount
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Non-Level Face Amount

Endowment Life Insurance:

Endowment policies, promises not only to pay the policy face

amount on the death of the insured during fixed term of years, but also to
pay the full face amount at the end of the term if the insured survives the
term.
Types of Endowment Policies:
Single Premium Endowment Policy
Semi Endowment Policy
Modified Endowment Policy

Whole Life Insurance:

Whole life insurance is intended to provide insurance protection

over ones entire life time. I t provides the payment of the face amount
upon the insureds death regardless of when death occurs. It is insurance
for the whole of the life.
Types of whole life Insurance:
Ordinary Life Insurance.
Limited Payment whole Life Insurance
Current Assumption whole Life Insurance
Unit-Linked Life Insurance.
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CHAPTER 2
INDUSTRY PROFILE
&
COMPANY PROFILE
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INDUSTRY PROFILE:

History of Insurance in India

In India, insurance has a deep-rooted history. It finds mention in

the writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and
Kautilya ( Arthasastra ). The writings talk in terms of pooling of
resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern
day insurance. Ancient Indian history has preserved the earliest traces of
insurance in the form of marine trade loans and carriers contracts.
Insurance in India has evolved over time heavily drawing from other
countries, England in particular.

1818 saw the advent of life insurance business in India with the
establishment of the Oriental Life Insurance Company in Calcutta. This
Company however failed in 1834. In 1829, the Madras Equitable had
begun transacting life insurance business in the Madras Presidency. 1870
saw the enactment of the British Insurance Act and in the last three
decades of the nineteenth century, the Bombay Mutual (1871), Oriental
(1874) and Empire of India (1897) were started in the Bombay
Residency. This era, however, was dominated by foreign insurance
offices which did good business in India, namely Albert Life Assurance,
Royal Insurance, Liverpool and London Globe Insurance and the Indian
offices were up for hard competition from the foreign companies.
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In 1914, the Government of India started publishing returns of

Insurance Companies in India. The Indian Life Assurance Companies
Act, 1912 was the first statutory measure to regulate life business. In
1928, the Indian Insurance Companies Act was enacted to enable the
Government to collect statistical information about both life and non-life
business transacted in India by Indian and foreign insurers including
provident insurance societies. In 1938, with a view to protecting the
interest of the Insurance public, the earlier legislation was consolidated
and amended by the Insurance Act, 1938 with comprehensive provisions
for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal

Agencies. However, there were a large number of insurance companies
and the level of competition was high. There were also allegations of
unfair trade practices. The Government of India, therefore, decided to
nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the

Life Insurance sector and Life Insurance Corporation came into existence
in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as
also 75 provident societies245 Indian and foreign insurers in all. The
LIC had monopoly till the late 90s when the Insurance sector was
reopened to the private sector.

The history of general insurance dates back to the Industrial

Revolution in the west and the consequent growth of sea-faring trade and
commerce in the 17th century. It came to India as a legacy of British
occupation. General Insurance in India has its roots in the establishment
of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the
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British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This
was the first company to transact all classes of general insurance
business.
1957 saw the formation of the General Insurance Council, a wing of the
Insurance Associaton of India. The General Insurance Council framed a
code of conduct for ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments

and set minimum solvency margins. The Tariff Advisory Committee was
also set up then.

In 1972 with the passing of the General Insurance Business

(Nationalisation) Act, general insurance business was nationalized with
effect from 1st January, 1973. 107 insurers were amalgamated and
grouped into four companies, namely National Insurance Company Ltd.,
the New India Assurance Company Ltd., the Oriental Insurance Company
Ltd and the United India Insurance Company Ltd. The General Insurance
Corporation of India was incorporated as a company in 1971 and it
commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey

extending to nearly 200 years. The process of re-opening of the sector
had begun in the early 1990s and the last decade and more has seen it
been opened up substantially. In 1993, the Government set up a
committee under the chairmanship of RN Malhotra, former Governor of
RBI, to propose recommendations for reforms in the insurance sector.The
objective was to complement the reforms initiated in the financial
sector. The committee submitted its report in 1994 wherein , among other
things, it recommended that the private sector be permitted to enter the
insurance industry. They stated that foreign companies be allowed to
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enter by floating Indian companies, preferably a joint venture with Indian

partners.
Following the recommendations of the Malhotra Committee report,
in 1999, the Insurance Regulatory and Development Authority (IRDA)
was constituted as an autonomous body to regulate and develop the
insurance industry. The IRDA was incorporated as a statutory body in
April, 2000. The key objectives of the IRDA include promotion of
competition so as to enhance customer satisfaction through increased
consumer choice and lower premiums, while ensuring the financial
security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation
for application for registrations. Foreign companies were allowed
ownership of up to 26%. The Authority has the power to frame
regulations under Section 114A of the Insurance Act, 1938 and has from
2000 onwards framed various regulations ranging from registration of
companies for carrying on insurance business to protection of
policyholders interests.

In December, 2000, the subsidiaries of the General Insurance

Corporation of India were restructured as independent companies and at
the same time GIC was converted into a national re-insurer. Parliament
passed a bill de-linking the four subsidiaries from GIC in July, 2002.

Today there are 14 general insurance companies including the

ECGC and Agriculture Insurance Corporation of India and 14 life
insurance companies operating in the country.
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COMPANY PROFILE:

ING Vysya Life entered the private life insurance industry in India
in September 2001, and has established itself as a distinctive life
insurance brand with an innovative, attractive and customer-friendly
portfolio ranging from protection, savings, retirement and investment
plans; which it sells through a unique tool - The Life Maker.

ING Vysya Life is headquartered in Bangalore, and is a part of the

ING group. The ING group is a 150-year-old global financial institution
of Dutch origin offering banking, insurance and asset management to
over 60 million private, corporate and institutional clients in 50 countries.
We are the world's Largest Financial Services Group and the world's
Largest Life Insurance Provider.

ING Group has wide and deep experience in setting up companies

in new markets, which require substantial investments underlining ING's
long-term commitment. In the last 20 years, ING Group has established
successful life insurance companies in 15 countries contributing to the
development of insurance services in these countries successfully.
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Management Team
Board of Directors (as on January 18, 2008)
Mr. Rajan Raheja Chairman of the Board
Mr. Kshitij Jain Managing Director & C.E.O.

Mr. N.N. Joshi Director

Mr. Satish Raheja Director

Mr. Rajesh Kapadia Director

Mr. S.B. Ganguly Director

Mr. Ron Van Oijen Director

Senior Management Team

Kshitij Jain Managing Director & C.E.O.

Amit Gupta Director; Marketing &

Communication.
Hemamalini Ramakrishnan Appointed Actuary & Chief
Investment Risk Officer (CIRO)
Marco Fredriks Financial Controller
Rahul Agarwal Customer Services & Risk
T K Uthappa Sales, Tied Agency
Y V D V Prasad Business Development

Partners :

a. ING Group
b. Exide Industries Limited
c. Gujarat Ambuja Cements Limited.
d. Enams Group

CHAPTER -3
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REVIEW OF LITERATURE

Composition of Authority under IRDA Act, 1999

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As per the section 4 of IRDA Act' 1999, Insurance Regulatory and

Development Authority (IRDA, which was constituted by an act of
parliament) specify the composition of Authority

The Authority is a ten member team consisting of

(a) a Chairman;
(b) five whole-time members;
(c) four part-time members,

Duties, Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and
functions of IRDA.

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
re-insurance 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 policy holders,
insurable interest, settlement of insurance claim, surrender value of
policy and other terms and conditions of contracts of insurance;
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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;
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) 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;
o) specifying the percentage of premium income of the insurer to
finance schemes for promoting and regulating professional
organizations referred to in clause (f);
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p) specifying the percentage of life insurance business and general

insurance business to be undertaken by the insurer in the rural or
social sector;
q) exercising such other powers as may be prescribed;

ABOUT UNIT LINK PLAN

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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 need.
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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
buzzing market could lead to windfall returns. However, should the buzz
die down, investors could be left stung.

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.

Unit-linked life insurance offers the interesting option of

combining protection and tax advantages of life insurance with the
attractive prospects of investing in equities.

A unit-linked plan works on a minimum premium basis and not on

a sum assured one. You decide the amount you can contribute at regular
intervals. ULIP offers you insurance cover till your insurance needs are
fulfilled, beyond that it becomes an investment avenue.

How they compare?

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To explain how ULIP works we will compare HDFC ULIP

Endowment plan with HDFC Endowment plan.

Premium

In case of: ULIP, you pay a minimum premium of Rs 10,000 per

annum irrespective of age and term of the policy. Premiums levels can be
either reduced or increased if premiums have been paid regularly for
three years and the unit fund value is at least Rs 15,000. The flexibility of
increasing premium contributions in an existing account helps
policyholders manage their cash flows.

In normal/traditional endowment plans the premium is calculated

on the basis of age and the term and the amount you pay, as premium
remains the same for the full term. The minimum premium is Rs 1,500
annually.

Sum assured

The sum assured depends on your age and the cover you take in
case of ULIP. Depending on your age at entry, you may choose between 3
levels of cover - low, medium or high.

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

term of the policy to which premium factor is applied.

Top-ups

Apart from your regular contributions, in case of ULIP, you can

also make additional payments to increase the savings component. These
top-ups do not affect the sum assured. Normal endowment policy does
not offer you these benefits.
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Investment

You choose the fund where you want to invest your money. HDFC
offers a choice of five funds - liquid, defensive, secure managed, secure
defensive and growth. The Liquid Fund is the least risky with investments
in bank deposits and short-term money market instruments. Growth Fund
is the riskiest with an investment of up to 100% in equities.

In traditional insurance plans your money is invested keeping in

view the IRDA specification i.e. minimum 85% in debt with the balance
in equities.

Charges ?

As is the case with unit-linked plans, this plan, too, imposes

charges, on both the funds invested by the policyholder and by
cancellation of units. These charges vary depending on the kind of
premium payment option chosen (single or regular).

Other charges include a fund management charge of 0.80% of the

fund value per annum, apart from a flat fee of Rs 15 per month deducted
by cancellation of units

In case of ULIP, for the first 2 years the investment content rate is
73% of the premium and for the remaining years 99%. Risk cover
charges (for death sum assured, critical illness, accidental death) are
charged for canceling units on each monthly charge date, based on the
person's age at that time.

In traditional plans, the charges are not disclosed. There is an

annual fee of Rs. 150 for regular premium policies and Rs 300 for single
premium ones.
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Returns

In case of ULIP, in an eventuality you receive the sum assured or

fund value whichever is higher and on maturity the fund value. In normal
endowment plan, in either case you receive the same benefit i.e. the sum
assured and vested bonus.

In case you stop paying premiums?

If this is in the first 3 years then in case of ULIP, on cancellation of

the policy before paying regular premium for 3 years, there is a charge of
25% of the outstanding premiums due during this 3-year period. In case
of normal endowment the policy lapses and nothing is paid back

If you stop paying premiums after 3 years, in ULIP you have the
option to make policy paid up, provided the policy has accumulated
sufficient policy value. At present this amount is Rs 15,000. If the fund
value of a paid up policy falls below Rs 15,000 then the policy is
cancelled and the fund value is returned to you. The risk cover continues
for the sum assured even though the policy has reached the paid up status.

In traditional plan the policy becomes a paid up policy.

Medicals

In both the plans the norms for medicals are similar i.e. medicals
are compulsory.

Why Do You Need Life Insurance?

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Thats a common question. Why would you need Insurance? Simply put,
Life brings with it many surprises, some pleasant and some not so and a
Life Insurance Plan ensures that you are better prepared to face
uncertainties. How? In a number of ways:

Protection

You need life insurance to be there and protect the people you love,
making sure that your family has a means to look after itself after you are
gone. It is a thoughtful business concept designed to protect the economic
value of a human life for the benefit of those financially dependent on
him. Thats a good reason.
Suppose you are suffering an injury that keeps you away from earning?
Would you like to be a financial burden on your family, already losing out
on your salary? With a life insurance policy, you are protected. Your
family is protected.

Retirement

Life insurance makes sure that you have regular income after you retire
and also helps you maintain your standard of living. It can ensure that
your post-retirement years are spent in peace and comfort.

Savings and Investments

Insurance is a means to Save and Invest. Your periodic premiums are like
Savings and you are assured of a lump sum amount on maturity. A policy
can come in really handy at the time of your childs education or
marriage! Besides, it can be used as supplemental retirement income!

Tax Benefits
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Life insurance is one of the best tax saving options today. Your tax can be
saved twice on a life insurance policy-once when you pay your premiums
and once when you receive maturity benefits. Money saved is money
earned!

Unit linked insurance plans are transforming into mutual

funds. Which is better for you?
Unit linked insurance or mutual fund?
Which should you get, when both potentially do very similar things. A
mutual fund is a simple asset management company that pools investors'
money and invests it with a view to maximising returns. A unit linked
plan is an insurance product that can be used as a mutual fund vehicle and
give market linked returns with almost nil protection or it can build in
protection along with market linked returns. Assuming that we are
comparing mutual funds with unit linked insurance plans with minimal
protection, which is better? The answer to this lies in costs that the two
charge and the tax breaks available. And here lies the problem. Mutual
fund costs are simple, transparent and standardised and insurance costs
are like a noodle soup.

What are these costs?

Ever tried to pick a noodle out of soup with a fork? Working out costs of
insurance is a similar exercise, just when you think you have it, it slips
away. Costs vary across companies, across products in the same company
and within the product, across premium cut-offs, categories, tenures and
riders.
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Mutual fund costs, on the other hand, are simple, transparent and
common across product categories. Front end or entry loads (the upfront
deduction to take care of the distribution costs of a mutual fund) and exit
loads have a total common limit of 7 per cent of the the net asset value
(NAV), though the industry norm in equity is 2 per cent entry load today.
Annual fees that a fund can charge is restricted to a maximum of 2.5 per
cent per year (this rate is according to slabs and reduces as the fund size
increases). There are no other charges. However, there is no tax rebate on
a fund and though capital gains are exempt from tax for a year, its future
is uncertain.

Insurance costs and benefits

Because of the complexity of the insurance product and the cost
differentiation we cannot tell you which product is the least cost. It
depends on what you buy. However, we will give a handle with which to
open the door to understanding unit linked costs. You will know what to
ask the agent and how to compare costs.

A unit linked product will have costs across five sub-heads:

1. Upfront costs. This is a percentage of your first premium that is

deducted before the money is deployed. These costs can continue over
the life of the product or terminate in a few years.
2. Regular charges. These include the annual asset management
charges for managing your money and could include a per month
charge towards the insurance part of the policy.
3. Switching costs. To switch, from one scheme within a plan to
another, may carry a charge.
4. Exit costs. If you exit before a certain time period you may pay a
heavy charge for that.
 27

5. Other administration costs. Some periodic costs can be loaded

under this head as well.

On the plus side insurance gets tax breaks. Insurance premium

gives you a tax rebate and the insurance lump sums are tax free

Rush for unit-linked schemes

Om Kotak Mahindra Life Insurance has grossed Rs 25-50 lakh (Rs
2.5-5 million) from high net worth individuals for its unit-linked offering
-- Kotak Safe Investment Plan.

ICICI Prudential Life has seen an 88 per cent surge in the top-ups
to its unit-linked policies in the second quarter. And Birla Sun Life
Insurance has seen a 157 per cent growth in its unit-linked plans.

What does this mean? Leveraging the current bull run, cash-rich
policyholders are investing more than their annual premiums in unit-
linked insurance plans, thereby topping up the investment portion of the
policy.

"There has been a surge in interest by high net worth individuals in

investment-related risk products," says Abhay Aima, HDFC Bank country
head, private banking.

Unit-linked plans are similar to mutual fund schemes, where the

premium is invested in various funds in keeping with policyholders' risk
appetite.

Some players allow for topping up the premium without affecting

the sum assured (value of the base policy), allowing policyholders to
purchase more units.
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Unlike traditional insurance products, unit-linked plans offer

transparency in returns in terms of net asset value and flexibility in
investment options in debt, equity and a mix of both.

"Some people are buying because of the bull run. But the growth is
largely due to the transparency and flexibility of the product," she adds

High net worth individuals would like to protect themselves from

the market volatility and unit-linked plans offer a safety net unlike other
investment products, he adds.

Even state insurer, the Life Insurance Corporation of India, has an

unit-linked pension plan in the offing.

"We have received a lot of interest from individuals and corporates

for such a product." Today, LIC is aggressively positioning its earlier
unit-linked plan -- Bima Plus hoping it will account for five per cent of
the total business

Mutual Fund
A mutual fund is a company that brings together money from many
people and invests it in stocks, bonds or other assets. The combined
holdings of stocks, bonds or other assets the fund owns are known as its
portfolio. Each investor in the fund owns shares, which represent a part of
these holdings.

Ulips comparison.with mutual fund

When it comes to comparison of ULIP it has to be with a pure insurance

plan along with investments, why? Because a ULIP or Unit Linked
Insurance Plan is a combination of Insurance and Investment and
therefore the comparison has to be made with a pure insurance cover and
 29

investments in Mutual fund. It all boils down to the charges and the actual
amount invested in the market.
ULIP's usually have following charges built into it :

a) Up-front Charges
b) Mortality Charges ( Charges for providing the risk cover for life)
c) Administrative Charges
d) Fund Management Charges

Mutual Fund's have the following charges :

a) Up-front charges ( Marketing, Advertising, distributors fee etc.)
b) Fund Management Charges ( expenses for managing your fund)

Term Insurance have the following charges :

a) Yearly premium ( for risk cover)
b) Service charges

ABOUT FINANCIAL PLAN

In general usage, a financial plan can be a budget, a plan for

spending and saving future income. This plan allocates future income to
various types of expenses, such as rent or utilities, and also reserves some
income for short-term and long-term savings. A financial plan can also be
an investment plan, which allocates savings to various assets or projects
expected to produce future income, such as a new business or product
line, shares in an existing business, or real estate.
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In business, a financial plan can refer to the three primary financial

statements (balance sheet, income statement, and cash flow statement)
created within a business plan. Financial forecast or financial plan can
also refer to an annual projection of income and expenses for a company,
division or department. A financial plan can also be an estimation of cash
needs and a decision on how to raise the cash, such as through borrowing
or issuing additional shares in a company.

While a financial plan refers to estimating future income, expenses

and assets, a financing plan or finance plan usually refers to the means
by which cash will be acquired to cover future expenses, for instance
through earning, borrowing or using saved cash.

What is financial planning

Financial planning is the process of meeting your life goals through

the proper management of your finances. Life goals can include buying a
home, saving for your child's education or planning for retirement.

The financial planning process as described by CFP Board, consists

of six steps that help you take a "big picture" look at where you are
financially. Using these six steps, you can work out where you are now,
what you may need in the future and what you must do to reach your
goals.

The process involves gathering relevant financial information,

setting life goals, examining your current financial status and coming up
with a strategy or plan for how you can meet your goals given your
current situation and future plans.
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The Benefits of Financial Planning

Financial planning provides direction and meaning to your

financial decisions. It allows you to understand how each financial
decision you make affects other areas of your finances. For example,
buying a particular investment product might help you pay off your
mortgage faster or it might delay your retirement significantly. By
viewing each financial decision as part of a whole, you can consider its
short and long-term effects on your life goals. You can also adapt more
easily to life changes and feel more secure that your goals are on track.

Financial planning process consists of the following six steps

1. Establishing and defining the client-planner relationship.

The financial planner should clearly explain or document the services
to be provided to you and define both his and your responsibilities.
The planner should explain fully how he will be paid and by whom.
You and the planner should agree on how long the professional
relationship should last and on how decisions will be made.
2. Gathering client data, including goals.
The financial planner should ask for information about your financial
situation. You and the planner should mutually define your personal
and financial goals, understand your time frame for results and
discuss, if relevant, how you feel about risk. The financial planner
should gather all the necessary documents before giving you the
advice you need.
3. Analyzing and evaluating your financial status.
The financial planner should analyze your information to assess your
current situation and determine what you must do to meet your goals.
 32

Depending on what services you have asked for, this could include
analyzing your assets, liabilities and cash flow, current insurance
coverage, investments or tax strategies.
4. Developing and presenting financial planning recommendations
and/or alternatives.
The financial planner should offer financial planning
recommendations that address your goals, based on the information
you provide. The planner should go over the recommendations with
you to help you understand them so that you can make informed
decisions. The planner should also listen to your concerns and revise
the recommendations as appropriate.
5. Implementing the financial planning recommendations.

You and the planner should agree on how the recommendations will
be carried out. The planner may carry out the recommendations or
serve as your "coach," coordinating the whole process with you and
other professionals such as attorneys or stockbrokers.

6. Monitoring the financial planning recommendations.

You and the planner should agree on who will monitor your progress
towards your goals. If the planner is in charge of the process, she
should report to you periodically to review your situation and adjust
the recommendations, if needed, as your life changes.

Fundamentals of Financial Planning

What Is It?

Financial planning is the process of solving financial problems and

achieving financial goals by developing and implementing a personalized
 33

"game plan." In order to be effective this "plan" must take into

consideration an individuals overall picture. It must be:

coordinated
comprehensive
continuous

Financial planning is like all other phases of life; it involves choices

Spend now or save for later?

Pay off existing bills or increase retirement savings?
Focus savings dollars on short term or long term goals?

A true financial plan does not focus one aspect or product, but instead
seeks to take all areas of planning into consideration when making
financial decisions.

What is Included?
Cash Flow Management

This aspect of planning deals with the day to day allocation of

income; and its effective use in paying for current living expenses
and in accumulating assets which will be used in meeting financial
goals.

Tax Planning and Management

This area focuses on the understanding of and application of

federal and state income tax law, estate and inheritance taxes; and,
when possible, minimizing these taxes.

Risk Planning and Management

 34

This area of planning deals with the risk of losing life, income, or
property. It includes the use of insurance products and strategies.

Investment Planning and Management

Almost everyone has accumulation goals for which investments

must be made and managed. These could include buying a home;
planning for college; or providing for retirement.

Retirement Planning and Management

By far the most common accumulation goal is the ability to

become financially independent. Retirement strategies encompass
the understanding of the Social Security system; employer-
sponsored retirement plans; and personal savings accumulation
plans.

Estate Planning and Management

The final phase of planning is for the transfer of assets to our heirs
with minimization of taxes and other costs.

Why Plan?

Anyone who has financial challenges to solve or financial goals to

achieve needs financial planning. Financial Planning can help to achieve
both greater wealth and financial security. Inadequate or improper
planning can be financially disastrous. An uninsured loss can wipe out
accumulated wealth; insufficient savings for retirement can force a
reduced lifestyle and/or postponement of retirement; and improper tax
planning can result in higher than necessary taxes causing dollars to be
lost to an accumulation plan or to ones heirs.
 35

Why Do People Fail to Plan?

They may feel they do not have enough income or financial assets
to consider planning.
They may believe that they are too young/old to begin planning.
They may be reluctant to consider some of the less pleasant aspects
of planning such as thinking about death, disability, illness, etc.
They may believe that financial planning is too expensive
They may procastinate (The Number One Reason For Failure)

The Steps in Financial Planning

Identify Goals and Objectives

Gather the necessary data
Analyze present situation and consider alternatives
Develop strategies to achieve goals.
Implement the strategies
Review and Revise periodically
 36

CHAPTER 4

RESEARCH METHODOLOGY

NEED OF THE STUDY

 37

Today in India there is 110 crore population and only 8 crore

people have Life Insurance Policy. There are around 16 Life Insurance
companies operating in India. Among all the players in insurance market
in India, LIC is the leading one and have high market share in life
insurance sector. LIC is Public Sector Company and all other are private
sector companies. The reason behind the LIC having high market share, it
has its roots in India more than 50 years and brand name it created in
minds of customer. The people of India have more trust in LIC than any
other private insurance.
The reason why LIC have high market share is its flexible payment
options, benefits offered, low premium of policies and its relation and
coordination with all the public sector undertakings. But the private Life
Insurance companies are unable to grab the insurance market, because the
people do not have trust in private sector.
A customer will have his/her own choice of preferences to
purchase a product. The preferences may be as quality, quantity, price,
and brand name, additional features from other products and long term
services, guarantee, warranty. According to the choice preference and
need for the product only, the customer will purchase a particular product.
For different products and services the preferences will be different base
on time, situation, and need. But finally what the customer needs is value
of the money he/she paid for the product i.e. enough returns (services,
benefits) by using the product. The case is same even in the insurance
sector also.
There are various factors which influence and customer prefers in
taking an Insurance policy. Factors are premium of policy, benefits of the
policy, flexible payment options, brand name the company have in
market. So among the above factors which when is preferred more by the
customer is to be analyzed.
 38

The life insurance companies should market their products properly, and
make people aware of the company and its various policies, benefits.

OBJECTIVE OF THE STUDY

 39

Examining a clients personal situation, financial resources,

financial objectives and financial problems in a comprehensive
manner.
Developing an impartial, integrated plan to utilize the resources to
meet objectives and solve problems, taking the steps to implement
that plan once approved by the client.

Monitoring the plan performance to take corrective action as

necessary to assure that results match the plan projections.

To find out how best an Unit Linked Plan can become a necessary
part of the financial planning for the individuals.

To check that among the price of the premium, benefits of policy,

brand name the company has, which is more preferred by a person
to take insurance policy.
 40

LIMITATIONS OF THE STUDY

The research is limited with in BANGLORE city.

The data is collected from the people having life insurance policy
only.
The time period for the study is limited.
The statistical report presented in the project is of year 2004-2006
only. The updated report is not available.
In study of a unit linked plan as a part of financial planning and
customer preference in taking life insurance policy, price of the
policy is majorly considered because money is major constraint for
each and every person.
Only ING Vysya life insurance is chosen for analyzing the
awareness of the company and study of unit linked plan and even
for studying the promotional activities role in educating the people
about company.
 41

RESEARCH DESIGN

The sample size is 100.

This survey helps us to know what benefits are looked by the
consumer in Insurance Product and awareness of ING Vysya Life
Insurance.
A structured questionnaire with multiple choice questions are given
to consumers of age group of 25-50.
The respondents are mostly corporate, professional, executives and
business men who like latest trends.
The source of primary data is questionnaire consisting of 10
questions.
The secondary data has been taken from internet and books related
to insurance, marketing, and finance.
Scope of project is explanatory and descriptive study.
 42

CHAPTER- 5
DATA ANALYSIS
&
INTERPRETATION
 43

1. Which company you have Life Insurance Policy?

POLICY IN AN INSURANCE COMPANY

Insurance No.of Policy % of policy holders
Company Holders
LIC 65 65%
ICICI 10 10%
ING Vysya 12 12%
HDFC 5 5%
Others 8 8%

Interpretation :

From the above sample graph and table, we can understand that
most people opt and have insurance in LIC 65%. The Insurance
Companies which people opt apart from LIC are ING Vysya-12%,
ICICI-10%, HDFC-5% and others-8%.
 44

2. Among various Insurance Companies, why did you chose the

above mentioned company?
Reason for choosing an Insurance Company
Reason %of Responses
Reputation 30%
Price of premium 12%
Benefits 42%
flexible premium
payment options 16%

Interpretation:

Here the reason for choosing a particular Insurance Company is

evaluated. Most people prefer an Insurance Company because of the
benefits of Policy offered by company. The next preference is given to
reputation the company has in the market.
The minimum importance is given to flexible payment options and price
of premium.
 45

3. Is premium price of policy within your budget or not?

within budget not within budget

Premium price 72 28

Interpretation:

Out of total 100 samples 72% responded that the price of premium they
paying towards Life Insurance is within their budget, and remaining 28%
said that premium price is not within their budget.
 46

4. Do you know about Unit Linked Life Insurance Plan?

Awareness of ULIP
Yes No
57 43

Interpretation:

Out of total 100 samples 57% responded that they know about ULIPS,
and remaining 43% said that they do not know about ULIPs.
 47

5. What is the best option of investment?

Best Option of Investment

No. of
Type of Investment Responses
Unit Linked Plan 14
Life Insurance 35
Mutual Fund 25
Share Market 26

Interpretation:

Out of 100 samples 35% of respondents believe that best option is

investing in Life Insurance, 26 % responded with share market, 25%
responded that Mutual Funds are best and 14% respondents are saying
ULIPS is the best option for investment.
 48

6. How much percentage of your salary are you saving monthly?

Annual Savings in Income

% of savings Respondents
10%-20% 60
20%-30% 25
30%-40% 10
40%-50% 5

Interpretation:

From the above chart, it is clear that out of 100 samples, 60 percent of
people are saving 10%-20% of their annual income, 25% of people are
saving 20%-30% , 10% people are saving 30%-40%, and remaining 5%
people are saving 40%-50% of their annual income.
 49

7. What is your expected price of premium of the policy?

Expected Premium per Annum

Premium Price No.of Respondents
less than
Rs.5000 22
Rs.5000-
Rs.10000 63
More than
Rs.10000 15

Interpretation:

Out of 100 samples, the expected price of premium per annum

is less than Rs. 5000 for 22% of people, Rs. 5000-Rs.10000 for
63% of people and more than Rs. 10000 for 15% people.
 50

8. Do you find advertisement of ING Vysya Life Insurance is

informative or attractive?

Ads of ING Vysya

No.of Responses
Informative 35
attractive 65

Interpretation:

Out of 100 samples 65% of people found that advertisement of

ING Vysya Life Insurance are attractive, and remaining 35%
found that they are informative.
 51

9. Which promotional media do you think is the best one to

make people educate about an Insurance Policy?

Best Advertisment
Type of
Promotional
Activity No. of Respondents
TV
advertisement 38
Hoardings 20
Paper
Advertisement 32
Banners 10

Interpretation:

Out of 100 sample 38% of people responded that TV

advertisement is the best way for making people aware of
insurance, 32% said that paper advertisement is better way, 20%
of people said that Hoarding are better, remaining 10% said
banners are helpful in making people aware of insurance.
 52

10. Do you suggest your colleagues, relatives or any of your

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

Suggesting an Insurance Company

yes no
No. of
respondents 88 12

Interpretation:

From the data and analysis it is found that 88% of people

suggested about insurance to their friends, colleagues and
relatives, and remaining 12% people are not suggested.
 53

CHAPTER 6
FINDINGS, RECOMMENDATIONS
& CONCLUSION
 54

FINDINGS

From the project study and interpretation the findings are as follows:

1) Our country India has a population of 117 crore and there are only
12 crore people have life insurance policy.

2) Out of 100 samples, 65% people have insurance policy in LIC and
remaining 35% people have insurance policy in other insurance
companies.

3) Most people have trust in LIC than any other insurance company
and still LIC holds huge market share in LIFE INSURANCE sector
in India.

4) 82% people are taking insurance policy only if it is within their

budget and have flexible payment options and remaining is taking
policy if it is not with the budget but due to benefits of policy and
reputation company has.

5) Among various factors 55% of people are looking for benefits of

policy, 25% people are looking for premium of policy and
remaining 20% people are looking for brand name of insurance
company.

6) Only 10% of people are saving 31% to 40% of their income, 20%
people are saving 21% to 30%, 70% people are saving 1% to 20%
of their income.
 55

7) As there are many new players in the Indian market, there is huge
competition among all insurance companies.

8) Only 65% people are aware of ING Vysya life insurance and 35%
people dont know about ING Vysya life insurance.

9) Mostly corporate people, professionals and business man are aware

of ING Vysya life insurance in India. Common man (middle class
and lower class) is not aware of ING Vysya life insurance.

10) 25% people gave response stating that advertisement of ING Vysya
life insurance are attractive and informative and 75% people
responded stating that ING Vysya life insurance advertisement are
not attractive and not informative.

11) Out of 100 respondents, 38% stated that TV advertisements is the

best way for making people aware insurance company, 14% stated
that setting up of stalls is the better way, 10% stated that paper
advertisement is the better way, 5% stated that banners, pamphlets
is the better way and 33% people stated that personal setting is the
best way of making people aware and educate them about
insurance company and its policies.
 56

RECOMMENDATIONS

There is huge potential market for LIFE INSURANCE companies in

India as out of 110 crore population only 8 crore people are insured. The
insurance companies should educate people about insurance, its
importance, different policies, and benefits of policies.

The people opt for policy by taking into consideration price of premium
of policy, benefits of policy and least importance is given to brand name.
So the life insurance companies should look over the price of premium,
benefits of policy and even flexible payment options from the point of
untapped potential market in India.

The price of premium of a policy must be within the budget of common

man and life insurance companies should provide flexible payment
options. By doing so, the private insurance companies can surely capture
the untapped market along with creating brand name.

ING Vysya life insurance, it has huge past experience around the world.
But coming to Indian perspective its positioning is not properly done in
the customers mind. The advertisement of ING Vysya life insurance in
TV should contain briefly relevant message about its policy and benefits
of a policy. It should formulate strategies for attracting customers though
good promotional activities and informative ads, so that common man
can have an idea of what ING Vysya is offering in a policy.
 57

Though people generally to do the savings by various means, like Post

Office, Fixed Deposit, Mutual Fund, Gold, Real Estate, and Share Market
etc. This study focuses attention on the positive affect of Unit Linked
Plan as a part of Financial Planning.

The result of the study proves that ULIPS can enhance the individuals
savings through their market investments. The study highlights ULIPS as
a part of Tax Benefit for an individual. ING ULIPS products are good
when taken as long term investment plans
 58

CONCLUSION

From the project analysis and interpretation the conclusions are:

1) Most untapped insurance market in India contains mostly middle

class and lower class people.

2) The customers gives preference more to premium of policy and

benefits of the policy. Brand name and flexible payment options
are given less importance.

3) Even though the premium price is not within the customer budget,
if the benefits offered by policy are good customers is ready to take
the policy.

4) The customers want the premium price to be within the budget,

with good benefits.

5) The private insurance companies are unable to tap the untapped

insurance market certain strategies should be formulated to grab
the market.

6) Most customers feel that setting up of stalls at appropriate locations

and providing information regarding various policies and benefits
offered by the insurance company and create awareness about the
insurance company.
 59

7) ING has an international brand image by their world wide

advertisement like formula one race and many other sports events
still it need to implement more marketing advertisement to attract
the customers.

8) The present study is an attempt to find the unit linked plan as a part
of financial planning, moreover to determine whether the unit
linked plan would help the people to avail the tax benefit,
protection, and savings.
 60

CHAPTER 7
QUESTIONNAIRE
&
BIBLIOGRAPHY
 61

QUESTIONNAIRE

A study of Unit Linked Life Insurance plan as a part of financial

planning
Please fill the following details.

Name:
Age:
Gender:
Qualification:
Designation:
Salary:
Name of the Organization (Working):
Phone No.:
Email ID:

1. In which company you have Life Insurance Policy?

a) LIC [ ]
b) ING Vysya [ ]
c) HDFC [ ]
d) ICICI [ ]
e) Others [ ]

2. Among various insurance companies why did you chose the above
mentioned company
a) Due to reputation of the company [ ]
b) Due to Price of premium of policy [ ]
c) Due to benefit of the policy [ ]
d) Flexible premium payment options [ ]
3. Is the premium within your budget
 62

a) Yes [ ]
b) No [ ]

4. Do you know about Unit Linked Life Insurance Plan?

a) Yes [ ]
b) No [ ]

5. What is the best option of investment?

a) Unit Linked Plan [ ]
b) Life Insurance [ ]
c) Mutual Fund [ ]
d) Share Market [ ]

6. How much percentage of your salary are you saving monthly

a) 10%-20% [ ]
b) 20%-30% [ ]
c) 30%-40% [ ]
d) 40%-50% [ ]

7. what is your expected price of premium of the policy

a) Less than Rs.5000 [ ]
b) Rs.5000 to Rs.10000 [ ]
c) more than Rs.10000 [ ]

8. Do you find advertisement of ING Vysya life insurance are

informative and attractive
a) Informative [ ]
b) Attractive [ ]
 63

9. Which promotional media do you think is the best one to make

people educate about an insurance policy
a) TV advertisement [ ]
b) Hoardings [ ]
c) Paper advertisement [ ]
d) Banners [ ]

10.Did you suggest your colleagues, relatives or any of your friends

about which is the best company to opt for an insurance policy
a) Yes [ ]
b) No [ ]

If yes which company you suggested?

 64

BIBLIOGRAPHY

Websites:

www.google.com
www.ingVysyalife.com
www.irdaindia.com
www.bimaonline.com
www.marketresearch.com

Books:

Life & Health Insurance

By Kenneth Black Jr., Harlod D. Skipper Jr.
Marketing Management
By Phillip Kotler & Kevin Lane Keller
Financial Management
By Prasanna Chandra