A REPORT

ON

INVESTMENT IN INSURANCE SECTOR AND TAX SAVING

By

SAURAV SHARMA

A0101918286

IDBI FEDERAL LIFE INSURANCE

DELHI

i
 A REPORT

ON

INVESTMENT IN INSURANCE SECTOR AND TAX SAVING

By

SAURAV SHARMA

A0101918286

At

IDBI FEDERAL LIFE INSURANCE

DELHI

Project report is to be submitted for the partial fulfilment

Of MBA program of

AMITY BUSINESS SCHOOL

Date of submission: Company guide:

Mr. Ezad ahmed

ii
 AUTHORIZATION

This is to certify that the project entitled “STUDY of INVESTMENT IN INSURANCE SECTOR &
TAX SAVING” is submitted in partial fulfilment of the requirement of MBA Program of Amity
business school, noida‟ and is a record of the bonafide work carried out by SAURAV
SHARMA of Amity business school, noida at IDBI Federal Life Insurance Company.

i
 ACKNOWLEDGEMENT

I would like to gratefully acknowledge the contribution of all the people who took active part
and provided valuable support to me during the course of this project. To begin with, I would
like to offer my sincere thanks to Mr.Manas Das, Branch Manager, at IDBI FEDERAL, for
giving me the opportunity to do my summer training with Organization. Without his
guidance, support and valuable suggestions during the internship, the project would not have
been progressed.

I convey my heartful affection to the entire training staff of IDBI FEDERAL for their co-
operation and willingness to answer all my queries, and provide valuable assistance. I also
sincerely thanks to Faculty (amity business school) who provided valuable suggestions and
guided me on the exact requisites.

I thank all my co-workers for giving their valuable time and all the necessary inputs that
helped me complete my data collection during the course of my project.

EXECUTIVE SUMMARY

ii
STUDENT INFORMATION
Name: Saurav Sharma
College: Amity business school ,noida
Enrolment no: A0101918286
Email id: [email protected]

ORGANIZATION DESCRIPTION

Industry: Life insurance

Name: IDBI FEDERAL LIFE INSURANCE CO.

Concept : IDBI FEDERAL is a private sector organization founded in 2008.

Type of organization: Joint venture

Website : www.idbifederal.com

Address: 903, Aggarwal corporate heights, Pitampura , Delhi

PROJECT DETAILS:

Title: Planning investment in insurance sector & tax saving

Objective:
 To understand various insurance policies offered by companies to plan investment.
 Offering suitable plans according to client.
 To study investment pattern of investors on different products.
 Tax benefits of insurance compared to other products in market.

Background:
 Studied about life insurance sector and various products provided by company to the
clients.
 Sales method- how to sell the products. Comparison of different products and factors
affecting investment decision of investors.
 For this purpose a survey was conducted through questionnaire method.
 The project will give a practical exposure and make us to understand the investment
avenues and factors affecting investment.

iii
Methodology:

 Primary data is collected through questionnaire. The questionnaire was shared to all
income and age group people, out of which most were prospecting clients of IDBI
FEDERAL.

 Sample size is 50.

 The responses were collected and analysed through Google spread sheets with the
help of excel tools and charts.

The study has been undertaken to analyse the investment pattern of investors. The main
reason behind the survey was the income level, occupation and risk covering nature of Indian
society. The number of investors investing in equity market is very less as compared to
insurance and mutual funds.

This study has been undertaken in IDBI FEDERAL LIFE INSURANCE CO. which works in
the area of insurance.

The project contains investor’s preference as well as factors affecting decision on various
investment avenue. Most of the investors are the prospecting client of IDBI federal. The
study includes responses of investors of different age group, income level and occupation and
analysis has been done on the basis of this classification.

The finding relates to the preference of Investment Avenue by each age group and income
level. The importance of insurance in all the social eco classification and its benefits over
other products can be clearly seen from the responses of the study.

This study gives idea of investor’s perception and knowledge over different investment
option available in the economy and investment as the important tool for the economy and
their future.

ABSTRACT

iv
 In recent years, Indian economy has proven to be decisive in terms of foreign and domestic
investments. Indian investments have been predicted as the driving force towards country's
attainment of self- sustained growth by rapid industrialization. The most existing form of
investments in India have been FDI, investment by NRI’s, mutual funds and insurance.
Thus, the report deals with planning investment in insurance sector and how to save tax
through it. The study will allow learning about the insurance industry, insurance policies,
taxation. The study will help to learn the practical procedures followed by the organization.

This Summer Internship Project Report is prepared to put light on investment planning in
insurance at IDBI FEDERAL to save tax with best on time returns and analyze its
effectiveness. This project report includes Need and Purpose of insurance, sources of
effective tax planning ,awareness among people about various products ,understanding
clients need and offer best product according to the risk and investment.

Abstract of the work done:

 Study of insurance and life insurance terminologies.

 Appeared for IC33 Exam by IRDAI.
 Study of various insurance policies their needs and benefits.
 Meeting clients and offering them product of their need to help in tax rebates.
 Conducting survey to study the investment pattern in India.
 Benefits of insurance over other products in market

TABLE OF CONTENTS

v
Authorisation i

Acknowledgement ii

Executive iii

Abstract v

1. CHAPTER 1 -Introduction
1

1.1. Introduction to insurance 2

1.2. Introduction about the company 5

1.3. Details of the company 7

1.4. Vision, mission and values 8

1.41 Vision 8

1.42 Mission 8

1.43 Values 8

1.44 Excellence 8

1.45 Honesty 8

1.5. Product range of IDBI FEDERAL 9

1.51 Endownment plan 10

1.52 Wealth plan 12

1.6. Size of the company 12

1.7. Organisational structure 12

1.8. Present leadership 13

1.9. Objectives of study 14

1.10. Source of data 14

1.11. Limitations 14

1.12. Methodology 14

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2. CHAPTER 2 15

2.1. What is investment 16

2.11. Features of investment plans 17

2.12. Golden rules for all investors 17

2.13. Where can one invest 18

2.13.1 Features of aveneues 18

2.2. Financial planning 19

2.21. Types of financial planning 19

2.21.1. Cash planning 19

2.21.2. Retirement planning 20

2.21.3. Estate planning 20

2.21.4. Tax planning 20

2.21.5. Investment planning 20

2.3. Variety of products for investment 21

2.4. Taxation 22

2.41. Direct tax 22

2.42. Indirect tax 23

2.43. Benefits of tax 23

2.44. Penalty for not paying taxes 24

2.5. Tax Slab for 2016-17 24

2.6. Tax deduction sections 26

2.7. Cases 27

3. CHAPTER 3- swot 29

3.1. Swot analysis 30

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 3.2. Swot analysis of IDBI federal 30

3.21. Strength 30

3.22. Weakness 31

3.23. Opportunity 31

3.24. Threats 31

3.3. Michael Porter’s five force swot analysis 32

4. CHAPTER 4 -Data collection and representation 35

4.1. Data collection 36

4.2. Data representation 36

4.21. Occupation of investors 36

4.22. Percentage of income investors’ invest according to occupation 37

4.23. Investment preference of investors according to occupation 38

4.24. Percentage of income various age groups invests 39

4.25. Investment preference among various age groups 40

4.26. Priority factor for investing for different age group 41

4.27. Frequency of investment according to age groups 42

4.28. Percentage of income investors of various income levels invests 42

4.29. Investment Preference according to income level of investors 44

4.30. Advantage of investing in insurance according to various age group 45

4.31. How many people know about insurance policies? 46

4.32. How many investors know about IDBI FEDERAL? 47

4.33. What do investors of different age group and occupation looks for before
investing in a particular scheme 48

4.34. Where do investors look to compare performance of various insurance policy49

4.35. Can insurance be viewed as risk free investment 50

viii
 4.36. Investors invests in insurance because of which factors 51

4.37. Rating of various investment avenues 52

4.4. Findings 54

4.5. Suggestions 55

4.6. Conclusion 56

Annexure 57

1. Questionnaire 57

2. Performa of IDBI federal 60

Reference 64

ix
x
 CHAPTER 1
INTRODUCTION

1
ORGANISATION PROFILE:

IDBI Federal Life Insurance is one of India’s growing life insurance companies and offers a
diverse range of wealth management, protection and retirement solutions to individual and
corporate customers.

IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier
development and commercial bank, Federal Bank, one of India’s leading private sector banks
and Ageas, a multinational insurance giant based out of Europe.

Having commenced operations in 2008, IDBI Federal was able to achieve breakeven within
just 5 years; the Company’s passion for innovation and growth helped it achieve this feat.

Through a nationwide network of 2,754 branches of IDBI Bank and Federal Bank, and a
sizeable network of advisors and partners, IDBI Federal Life Insurance has achieved presence
across the length and breadth of the country. As on December 31, 2014, the company has
issued nearly 6.8 lakhs policies with a sum assured of over Rs. 39,425 crores. IDBI Federal
Life Insurance has total assets under management of 4,041 crores and a robust capital base of
over 800 crores, as on December 31, 2014.

1.1 INTRODUCTION TO INSURANCE

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.

2
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.

Life Insurance Corporation of India Birth

An Ordinance was issued on 19th January, 1956 nationalizing 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 societies—245 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.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency
margins. The Tariff Advisory Committee was also set up then.

IRDA and opening of life insurance business in India

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 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 5

3
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. Today 23 life insurance
companies operating in the country, including LIC a Public sector Company and 22 other
Private Sector Life Insurance Companies competing with LIC for Life Insurance Business
from the Customers in India.

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together
with banking services, insurance services add about 7% to the country’s Gross Domestic
Product(GDP). A well-developed and evolved insurance sector is a boon for economic
development as it provides long- term funds for infrastructure development at the same time
strengthening the risk taking ability of the country.

Role of IRDA

IRDA’s primary function is to protect consumer interests. This means ensuring proper
disclosure, keeping prices affordable but also insisting on mandatory products, and most
importantly making sure that the consumers get paid by insurers.Further,ensuring the
solvency of insurers. Growth of insurance business entails better education and production to
customers, creating better incentives for agents and intermediaries. It has evolved guidelines
on the entry and functions of such intermediaries. Licensing of such agents and brokers are
required to check their indulgence in activities such as twisting, fraudulent practices, rebating
and misappropriation of funds.

Market Structure

The market structure for insurance markets shall be tested as to see whether it be monopoly
(state or regulated) or should there be unlimited private entry or should there only be a few
regulated players. Keeping in view the recommendations of insurance reforms committee that
a limited number of high capital private companies be licensed, and no firm be allowed to
operate both in 6 life and non-life insurance.

Role of Information Technology

The Business of selling life insurance requires assessing the profile of the customer and
assigning the right policy. This process is facilitated by a database and is completely driven
by information technology. If it uses this network of database to offer their products, it would
have utilized this vastly underutilized capacity.

4
Creating Insurance awareness

It is the need of hour to create insurance awareness among the general public. It will require a
whole lot of efforts on the supply and distribution side.

Innovative Products

Insurance companies should offer innovative products to tap huge amount of resources for the
developmental activities. In developed economies, insurance products are sold. Focus of
insurance industries is changing towards providing a mix of both protection/risk cover and
long term investment opportunities.

1.2 INTRODUCTION ABOUT THE COMPANY

IDBI Federal Life Insurance is one of India’s growing life insurance companies and offers a
diverse range of wealth management, protection and retirement solutions to individual and
corporate customers.

IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier
development and commercial bank, Federal Bank, one of India’s leading private sector banks
and Ageas, a multinational insurance giant based out of Europe.

Having commenced operations in 2008, IDBI Federal was able to achieve breakeven within
just 5 years; the Company’s passion for innovation and growth helped it achieve this feat.

Through a nationwide network of 2,754 branches of IDBI Bank and Federal Bank, and a
sizeable network of advisors and partners, IDBI Federal Life Insurance has achieved presence
across the length and breadth of the country. As on December 31, 2014, the company has
issued nearly 6.8 lakhs policies with a sum assured of over Rs. 39,425 crores. IDBI Federal
Life Insurance has total assets under management of 4,041 crores and a robust capital base of
over 800 crores, as on December 31, 2014.

IDBI Bank Ltd. continues to be, since its inception, India’s premier industrial development
bank. It came into being as on July 01, 1964 to support India’s industrial backbone. Today, it
is amongst India’s foremost commercial banks, with a wide range of innovative products and
services, serving retail and corporate customers in all corners of the country from 1459
branches and 2727 ATMs. The Bank offers its customers an extensive range of diversified
services including project finance, term lending, working capital facilities, lease finance,
venture capital, loan syndication, corporate advisory services and legal and technical advisory

5
services to its corporate clients as well as mortgages and personal loans to its retail clients. As
part of its development activities, IDBI Bank has been instrumental in sponsoring the
development of key institutions involved in India’s financial sector – National Stock
Exchange of India Limited (NSE) and National Securities Depository Ltd, SHCIL (Stock
Holding Corporation of India Ltd), CARE (Credit Analysis and Research Ltd).

Federal Bank is one of India’s leading private sector banks, with a dominant presence in the
state of Kerala. It has a strong network of over 1,214 branches and 1,435 ATMs spread across
India. The bank provides over four million retail customers with a wide variety of financial
products. Federal Bank is one of the first large Indian banks to have an entirely automated
and interconnected branch network. In addition to interconnected branches and ATMs, the
Bank has a wide range of services like Internet Banking, Mobile Banking, Tele Banking, Any
Where Banking, debit cards, online bill payment and call centre facilities to offer round the
clock banking convenience to its customers. The Bank has been a pioneer in providing
innovative technological solutions to its customers and the Bank has won several awards and
recommendations.

Ageas is an international insurance group with a heritage spanning 190 years. Ranked among
the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business
activities in Europe and Asia, which together make up the largest share of the global
insurance market. These are grouped around four segments: Belgium, United Kingdom,
Continental Europe and Asia and served through a combination of wholly owned subsidiaries
and partnerships with strong financial institutions and key distributors around the world.
Ageas operates successful partnerships in Belgium, the UK, Luxembourg, Italy, Portugal,
Turkey, China, Malaysia, India and Thailand and has subsidiaries in France, Hong Kong and
the UK. Ageas is the market leader in Belgium for individual life and employee benefits, as
well as a leading Non-Life player through AG Insurance. In the UK, Ageas is the sixth largest
Non-Life insurer with a number 3 position in cars insured and has a strong presence in the
over 50’s market. Ageas employs more than 13,000 people in the consolidated entities and
over 30,000 in the non-consolidated partnerships, and has annual inflows of more than EUR
23billion.

6
1.21 Company Description

Table 1.2

Name of the company IDBI FEDERAL LIFE INSURANCE CO.

Address 903 Aggarwal corporate heights,

Pitampura ,Delhi

Telephone no 9811904644

Email [email protected]

Website www.idbifederal.com

Type of organisation Joint venture

Corporate office address 1st floor,tradeview,oasis complex,kamala

city,P.B marg,lower
parel(W),Mumbai,India

Area of operation Finance & marketing

Functional area Life insurance

1.3 DETAILS OF THE COMPANY

 IDBI Federal commenced operations in 2008.

 IDBI Federal was able to achieve breakeven within just 5 years; the Company’s
passion for innovation and growth helped it achieve this feat.

Through a nationwide network of 2, 964 branches of IDBI Bank and Federal Bank,
and a sizeable network of advisors and partners, IDBI Federal Life Insurance has
achieved presence across the length and breadth of the country.

 As on March 31, 2015, the company has issued nearly 7.88 lakh policies with a sum
assured of over Rs. 41,856 crore.

 IDBI Federal Life Insurance has total assets under management of 4,087 crore and a
robust capital base of over 800 crores, as on March 31, 2015.

7
1.4 VISION , MISSION AND VALUES

1.41 VISION

To be the leading provider of wealth management, protection and retirement solutions that
meets the needs of our customers and adds value to their lives.

1.42 MISSION

To continually strive to enhance customer experience through innovative product offerings,

dedicated relationship management and superior service delivery while striving to interact
with our customers in the most convenient and cost effective manner. To be transparent in the
way we deal with our customers and to act with integrity. To invest in and build quality
human capital in order to achieve our mission.

1.43 VALUES

Transparency: Crystal Clear communication to our partners and Stakeholders. Value to

Customers: A product and service offering in which customers perceive value. Rock Solid
and Delivery on Promise: This translates into being financially strong, operationally robust
and having clarity in claims. Customer-friendly: Advice and support in working with
customers and partners. Profit to Stakeholders: Balance the interests of customers, partners,
employees, shareholders and the community at large.

1.44 EXCELLENCE

"In every aspect of work ranging from the in-house training institute to the detailed Personal
Insurance Plan. IDBI Federal is focused on achieving the highest standards of quality in
every aspect of their business".

1.45 HONESTY

"Is the heart of the Life Insurance business? IDBI Federal believes that above all, Life
Insurance is based on trust. Transparency, Dependability and Integrity will form the
cornerstones of the IDBI Fortis experience."

1.5 PRODUCT RANGE OF IDBI FEDERAL

8
 IDBI FEDERAL offers insurance products for almost all type of requirements of the society.

The products of IDBI are:

IDBI
PRODUCTS

ENDOWMENT PLANS ULIP PLANS

INCOMESURANCE
WEALTHSURANCE WEALTHSURANCE
GROWTH PLAN FUND PLAN

CHILDSURANCE

WHOLE
LIFESURANCE

LIFESURANCE
SAVINGS

1.51 ENDOWMENT PLAN

9
Life insurance policy that pays the assured sum (face amount) on a fixed date or upon
the death of the insured, whichever comes earlier.

Table 1.5

ELIGIBILITY INCOMESURANCE CHILDSURANCE WHOLE LIFESURANCE

CRITERION LIFESURANCE SAVINGS

at entry Age Min. 10 years Min. 18 years (1 Min. 18 years Min.18 years
month child)

Max. 50 years Max. 50 years (18 Max.55(without Max.55 years

years child) ADB)

53 (with ADB)

Maturity Max. 64 years Min. 28 years Min. 30 years Max.75 years

Age
Max. 75 years Max.75 years

Policy term 14 years Min. 10 years Min.10 years

Max. 25years Max.25 years

Premium 7 years Regular payment- Min. 12 years Min- 5 years

payment equal to policy
term term Max.30years Max.- equal to
policy term
Limited payment-
5 years less than
policy term.

10
ELIGIBILITY INCOMESURANCE CHILDSURANCE WHOLE LIFESURANCE
CRITERION LIFESURANCE SAVIINGS

Premium Min. Rs37500 Min. Rs21000 Min. Rs25000 Min. Rs21000

Max. no limit Max. no limit Max. no limit Max. no limit

Premium Annual Annual/ Annual/ Annual/half

payment monthly/quarterly/ monthly/quarterly yearly/quarterly/m
mode half yearly / half yearly onthly

Sum assured Depends on age Subject t Depends on age Depends on age,

at entry and premium payment
Guaranteed annual premium paymentand policy term
payouts. term

Benefits (i) Life cover (i)guaranteed (i)Life cover (i)bonuses to boost

annual payouts your savings.
(ii)critical illness (ii)Rebate on sum
benefit (ii)immediate assured (ii) flexibility to
payout of lump choose PT &PPT.
(iii)tax benefit under sum in case of (iii)Loan
sec 80c & sec your unfortunate available 85% of (iii) two tax
10(10D) death. surrender value benefits

(iv)guaranteed annual (iii) waiver of (iv)2 tax rebate-

payouts future premiums 80 c-on
premium.10(10D)
(iv)loan facility -on
claim/maturity/wi
(v)two tax benefits thdrawals

11
1.52 WEALTHSURANCE PLANS
IDBI Federal Wealthsurane Plan is a simple unit linked plan that helps you to wealth creation
with ease.
 Policy term – 10 years, 15 years, 20 years
 Premium paying term- 10 years & in multiple of 5 thereafter
 Premium – min. Rs 50,000 p.a – max. no limit
 Premium mode – annual
 Financial protection against uncertainty- life cover
 Easy access to your investments through partial withdrawals
 Tax benefit
 You can invest at your own or leave it to fund managers to manage your funds.

1.6 SIZE OF THE COMPANY

1.61 IN TERMS OF TURNOVER

As on March 31, 2015, the company has issued nearly 7.88 lakh policies with a sum assured
of over Rs. 41,856 crore. IDBI Federal Life Insurance has total assets under management of
4,087 crore and a robust capital base of over 800 crores, as on March 31, 2015.

1.62 IN TERMS OF MANPOWER

In terms of manpower IDBI FEDERAL has nearly 2000 on roll and approx. 10,000 agents.

1.7 ORGANISATIONAL STRUCTURE

12
The organization structure of IDBI Federal is Line organization in nature. There is vertical
flow of authority and responsibility. Authority flows from top to downwards and
responsibility from down to upwards. Each manager has its own department and employees
under him, who are responsible only to him. Each management has equal rights.

1.8 PRESENT LEADERSHIP

Every company needs a man who can show a right path to its company to grow and to take
right decisions on right time. Those men are called leaders. Company always works because
of some leading and experienced leaders. These leaders took a company from a small to a
very big level. These help the company to grow by their decision, plan, and strategies. The
present leaders of the IDBI Federal are listed below.

Table 1.8

CEO Mr. Vignesh Sahane

CDO Mr. Ashley Kenedy

Zonal Head Mr. Puneet Arora

Regional Head Mr. Maha Patara

Branch Manager Mr. Manas Das

13
Senior Agency Manager Miss Kanika Chadha

Operations Head Miss Shilpa Gupta

H.R. Mr. Varun Singhi

1.9 OBJECTIVES OF STUDY

 To understand various insurance policies offered by company to plan investment.

 Suggesting plan according to clients’ requirement.
 To study investment pattern of investors on different products.
 Tax rebate sections and tax benefits of insurance compared to other products in
market.
 To analyse investment decision of different social class investors (in terms of age,
income & occupation)

1.10 SOURCE OF DATA

 PRIMARY DATA- A questionnaire was prepared and the primary data was
selected through survey.
 SECONDARY DATA- Company website, IRDAI website, Internet
and books.

1.11 LIMITATIONS
 The study of investment pattern analysis has been limited to only 50 investors.
 Economy and industries are so wide that it is difficult to cover all the factors
influencing the investor.
 The study has been limited to only 50 investors out of which most of them are
potential clients of IDBI FEDERAL.

14
1.12 METHODOLOGY:

 The analysis of data collection is completed and presented systematically with the use
of Microsoft excel and Ms-word.
 A survey will be conducted to assess preference of insurance for tax saving over
other products based on questionnaire.

CHAPTER 2
LITERATURE REVIEW

15
2.1 WHAT IS INVESTMENT?

Investment is the employment of funds on assets with the aim of earning income. Investment
means putting your money to work to earn more money or simply speaking it is sacrificing of
money-today for future returns. It benefita both society and economy.

Investment is one of the successful way to make financial provisions for the future,where
most of the conditions are uncertain and unpredictable.With well planned investment one can
get the satisfaction of safety in life.

Initially people use to save money for future which was considered as safest way of making
money stable.

All investments have risk, whether stock ,capital ,banking,financial sector,real estate,gold etc.
The degree of risk can vary depending on the features of assests,onvestment instruments
,mode of investment ,time period or the insurer of the security etc.

Elements of Investments-

 risk and return

 time

 rewards

Reasons to invest-

 To earn returns

 To protect and increase capital

 To have money for important events in future

 Tax savings

 Income

16
Investment is a serious subject that has a major impact on individuals future well being.
Everyone makes investments. Even if the individual does not select stock, investments are
still made through pension plan, and employee saving programme or through purchase of life
insurance or a home or by some other mode of investment like investing in Real Estate
(Property) or in Banks or in saving schemes of post offices. Each investment has common
characteristics such as potential return and the risk you must bear. The future is uncertain, and
you must determine how much risk you are willing to bear since higher return is associated
with accepting more risk.

The key to a successful financial plan is to keep apart a larger amount of savings and invest it
intelligently, by using a longer period of time. The turnover rate in investments should exceed
the inflation rate and cover taxes as well as allow you to earn an amount that compensates the
risks taken.

2.11 FEATURES OF AN INVESTMENT PLAN

In choosing specific investment plan ,investors will need definite idea about the features
,their investment plan possess. The features should be consistent with the investors’ general
objective and should afford them all the advantages and conveniences.

The following are the suggested features from which many successful investors decide their
investment plans.

 Safety of principal-the investor to be certain of safety of principal, should carefully

review the economy and industry trends before investing in particular plan. To ensure
safety of principal ,the investor should consider diversification of assets

 Liquidity –even investors requires a little liquidity in his investment to meet

emergencies. Liquidity will be ensured if the investor buys a proportion of readily
saleable securities out of his total portfolio. He may therefore keep a small amount of
cash, FD or units which can be made liquid investments. Real estate cannot be made
liquid immediately.

 Income stability- there should be stability in income before investing in any plan. It
is important to see that income is adequate after taxes.

2.12 GOLDEN RULE FOR ALL THE INVESTORS

 Invest early

 Invest regularly

17
  Invest for long term and short term

One need to invest for

 Earn returns on your idle resources

 Generate a specific sum of money for a specific goal in life.

 To meet the cost of inflation

2.13 WHERE CAN ONE INVEST?

 Securities Market:
1. Money Market
2. Bond Market
3. Mortgage Market
4. Stock Marke
5. Foreign Exchange Market
6. Derivatives Securities Market

 Depository Institutions:
1. Commercial Banks

 Other Financial Institutions:

2. Insurance Companies
3. Securities firms and investment banks
4. Mutual funds
5. Finance companies
6. Pension funds

2.13.1 Features of investment avenues:

Table2.1

PARTICULARS RISK RETURNS CAPITAL LIQUIDITY/ TAX

APPERICIATION BENEFIT
MARKETABILITY

EQUITY HIGH LOW HIGH HIGH HIGH

SHARES

DEBENTURES LOW HIGH VERY LOW VERY LOW NIL

18
 BANK LOW LOW NIL HIGH NIL
DEPOSITS

FD NIL LOW NIL MODERATE LOW

INSURANCE NIL MODERATE LOW LOW HIGH

2.2 FINANCIAL PLANNING

Financial planning is the process in which a client’s current and future needs that may arise
are carefully considered and evaluated and his individual risk profile and income are assessed
,to chart out a road map for meeting various anticipated /unforeseen needs through
recommending appropriate financial products.

Elements of financial planning includes:

 Investing –allocating assests based on one’s risk taking appetite.

 Risk management

 Retirement planning

 Tax and estate planning

 Financing one’s needs

2.21 FINANCIAL PLANNING –TYPES

The various types of financial planning exercises that an individual may need to do are

 Cash planning

 Investment planning

 Insurance planning

 Retirement planning

 Estate planning

 Tax planning

19
2.21.1 Cash planning-

Managing cash flows has two purposes.

I. One needs to manage income and expenditures flow including establishing and
maintaining a reserve of liquid assets to meet unanticipates or emergency needs.

II. Secondly one needs to systematically create and maintain a surplus of cash for capital
investments.

II.21.2 Retirement planning-

It is the process to determine the amount of money that an individual needs to meet
his needs post retirement and deciding on various retirement options for meeting these
needs.

II.21.3 Estate planning-

It is a plan for the devolution and transfer of one’s estate after one’s demise. There are
various processes like nomination and assignment or preparation of a will.the basic
idea is to ensure that one’s property and assets are smoothly distributed and utilised
according to one’s wish after one is no more.

II.21.4 Tax planning-

Finally tax planning is done to determine how to gain maximum tax benefit from
existing tax laws and for planning of income, expenses and investments taking full
advantage of tax breaks. It involves making strategies to reduce, time or shift either
current or future income tax liabilities. One must note that the purpose here is to
minimise and not evade taxes.

Life insurance agents may be often required by clients and prospective customers to
advise them not only about meeting their insurance needs but also support in meeting
their other financial needs as well.

II.21.5 Investment planning-

There is no right way to invest.it may vary from individual to individual.

Investment planning is the process of determining the most suitable investment and
asset allocation strategies based on an individual’s risk taking appetite,financial goals
and time horizon to meet those goals.

INVESTMENT PARAMETERS-

20
 1. Risk tolerance: a measure of how much risk someone is willing to take in
purchasing an investment

2. Time horizon: amount of time available to attain a financial objective. The

time horizon affects the investment vehicles used to attain the goal. The
longer the time horizon, the less concern is there about short term liability.
One can invest in long term ,less liquid assests that earn a higher return.

3. Liquidity: individuals whose capacity to invest is limited or whose income

and expenditure flows are uncertain or who are investing for meeting a
particular personal or business expenditure may be concerned with liquidity
or ability to convert investment into cash without loss of value.

4. Marketability: the ease with which an asset can be bought or sold.

5. Diversification : the extent to which one seeks to diversify or spread th

investment to reduce the risk.

6. Tax consideration: investments confer certain income tax benfits and one
may like to consider the post-tax returns of various investments.

2.3 VARIETY OF PRODUCTS FOR INVESTMENT

There are variety of products for investment ,the selection of which depends on the above
parameters. The actual selection would depend on the individuals’ expectations about risk and
return.

 Fixed deposits of banks/corporates - (FD) are a financial instrument provided by

banks which provides investors with a higher rate of interest than a regular savings
account, until the given maturity date. It may or may not require the creation of a
separate account. The defining criteria for a fixed deposit are that the money cannot
be withdrawn from the FD as compared to a recurring deposit or a demand
deposit before maturity. The interest rate varies between 4 and 11 per cent. the tenure
of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years

 Small saving schemes of post office-National Savings Certificates, popularly

known as NSC, is an Indian Government Savings Bond, primarily used for small
savings and income tax saving investments in India. It is part of the postal savings
system of Indian Postal Service (India Post).

These can be purchased from any Post Office in India by an adult (either in his/her
own name or on behalf of a minor), a minor, a trust, and two adults jointly. These are

21
 issued for five and ten year maturity and can be pledged to banks as collateral for
availing loans. The holder gets the tax benefit under Section 80C of Income Tax Act,

 Public issues of shares- a part or portion of a larger amount which is divided among
a number of people, or to which a number of people contribute. The capital of a
company is divided into shares. Each share forms a unit of ownership and is offered
for sale so as to raise capital for the company.

 Debentures or other securities-A debenture is a type of debt instrument that is not

secured by physical assets or collateral. Debentures are backed only by the general
creditworthiness and reputation of the issuer. Both corporations and governments
frequently issue this type of bond to secure capital.

 Mutual funds-A mutual fund is a professionally managed investment fund that pools
money from many investors to purchase securities. While there is no legal definition
of the term "mutual fund", it is most commonly applied to so-called open-end
investment companies, which are collective investment vehicles that are regulated and
sold to the general public on a daily basis

 Insurance policies- A financial risk management tool in which the insured transfers a
risk of potential financial loss to the insurance company that mitigates it in exchange
for monetary compensation known as the premium.

2.4 TAXATION

Taxation refers to the act of a taxing authority actually levying tax. Taxation as a term
applies to all types of taxes, from income to gift to estate taxes. It is usually referred to as an
act; any revenue collected is usually called "taxes."

Taxes are the government’s way of earning an income which can then be used for various
projects that the government needs to indulge in to help boost the country’s economy or its
people. Taxes in India are decided on by the central and state governments with local
governments, such as municipalities, also deciding on smaller taxes that can be levied within
their jurisdiction. It must, however, be remembered that the government cannot impose any
tax that it wishes to. All the taxes imposed by the government must be laws.

Types of Taxes:
Taxes are of two distinct types, direct and indirect taxes. The difference comes in the way
these taxes are implemented. Some are paid directly by you, such as the dreaded income tax,

22
wealth tax, corporate tax etc. while others are indirect taxes, such as the value added tax,
service tax, sales tax, etc.
2.41 DIRECT TAX :
Direct tax, as stated earlier, are taxes that are paid directly by you. These taxes are levied
directly on an entity or an individual and cannot be transferred onto anyone else. One of the
bodies that overlooks these direct taxes is the Central Board of Direct Taxes (CBDT) which is
a part of the Department of Revenue. It has, to help it with its duties, the support of various
acts that govern various aspects of direct taxes. Some of these acts are:

 Income Tax Act

 Wealth Tax Act
 Gift Tax
 Expenditure Tax.
 Interest Tax Act

2.42 INDIRECT TAX:

By definition, indirect taxes are those taxes that are levied on goods or services. They differ
from direct taxes because they are not levied on a person who pays them directly to the
government; they are instead levied on products and are collected by an intermediary, the
person selling the product. The most common examples of indirect tax can be VAT (Value
Added Tax), Taxes on Imported Goods, Sales Tax, etc. These taxes are levied by adding them
to the price of the service or product which tends to push the cost of the product up.

Examples of Direct Taxes:

These are some of the direct taxes that you pay

 Income Tax
 Capital Gains Tax
 Securities Transaction Tax
 Perquisite Tax
 Corporate Tax
 Wealth Tax
 Sales Tax
 Service Tax
 Value Added Tax
 Custom duty

 Excise Duty

2.43 BENEFITS OF TAX

23
Even though most people are always at odds with the idea of taxation, there are some
advantages to taxes, the least of which is that it provides the government the resources
it needs for economic development. Some of the other benefits of taxes are:
 It encourages savings and investments because if a person invests in certain
instruments, then the amount invested is reduced from their taxable income thus
bringing down the tax they have to pay. This investment is subject to certain limits
that are detailed in the IT Act.
 Paying taxes means that you have to file your tax returns which in turn means that
when you apply for a home loan for that home loan, it’s easier to get it because
one of the things many banks require is proof that you have been filing taxes
regularly.

2.44 PENALTY FOR NOT PAYING TAXES

 Each type of tax has its own penalties associated with it. These penalties can range
from fines to imprisonment depending on the severity of the crime. In some cases
the penalty could be that you will have to pay what is owed in taxes along with
additional sums as fine, which are decided upon by government officials.

 It is always advisable to pay taxes on time and always be aware of the taxes that
you, as a consumer, are liable to pay so that no-one can take you for a ride.

2.5 TAX SLAB FOR 2016-17

For Men Below 60 Years Of Age (table 2.51)

Income Tax Slab Income Tax Rate

Income upto Rs. 2,50,000 Nil

Income between Rs. 2,50,001 - Rs.

10% of Income exceeding Rs. 2,50,000
500,000

Income between Rs. 500,001 - Rs.

20% of Income exceeding Rs. 5,00,000
10,00,000

24
Income above Rs. 10,00,000 30% of Income exceeding Rs. 10,00,000

For Women Below 60 Years Of Age (Table 2.52)

Income Tax Slab Income Tax Rate

Income upto Rs. 2,50,000 Nil

Income between Rs. 2,50,001 - Rs.

10% of Income exceeding Rs. 2,50,000
500,000

Income between Rs. 500,001 - Rs.

20% of Income exceeding Rs. 5,00,000
10,00,000

Income above Rs. 10,00,000 30% of Income exceeding Rs. 10,00,000

For Senior Citizens (Age 60 years or more but less than 80 years) (Table 2.53)

Income Tax Slab Income Tax Rate

Income upto Rs. 3,00,000 Nil

Income between Rs. 3,00,001 - Rs. 500,000 10% of Income exceeding Rs. 3,00,000

Income between Rs. 500,001 - Rs.

20% of Income exceeding Rs. 5,00,000
10,00,000

Income above Rs. 10,00,000 30% of Income exceeding Rs. 10,00,000

25
For Senior Citizens (Age 80 years or more) (Table 2.54)

Income Tax Slab Income Tax Rate

Income upto Rs. 5,00,000 Nil

Income between Rs. 500,001 - Rs.

20% of Income exceeding Rs. 5,00,000
10,00,000

Income above Rs. 10,00,000 30% of Income exceeding Rs. 10,00,000

2.6 TAX DEDUCTION SECTIONS

Tax deduction helps in reducing your taxable income. It decreases your overall tax liabilities
and helps you save tax. However, depending on the type of tax deduction you claim, the
amount of deduction varies. You can claim tax deduction for amounts spent in tuition fees,
medical expenses and charitable contributions. Also, you can invest in various schemes such
as life insurance plans, retirement savings schemes, and national savings schemes etc. to get
tax deductions. The government of India offers tax exemptions for various expenses incurred
in different activities to encourage individuals and commercial institutions take part in
activities having social benefits.
A number of day-to-day expenditures qualify for deductions, with information about them
being crucial to help us save money. Tax deduction can be claimed on money spent for
education, medical expenses, charitable contributions, investments in insurance, retirement
schemes, etc. These deductions have been put in place to encourage members of the society
to participate in certain useful activities, helping everyone involved in the process.

 SECTION 80 C:
Section 80C of the Income Tax Act provides provisions for tax deductions on a number of
payments, with both individuals and Hindu Undivided Families eligible for these deductions.
Eligible taxpayers can claim deductions to the tune of Rs 1.5 lakh per year under Section

26
80C, with this amount being a combination of deductions available under Sections 80 C, 80
CCC and 80 CCD.
Some of the popular investments which are eligible for this tax deduction are mentioned
below.

 Payment made towards life insurance policies (for self, spouse or children).

 Payment made towards a superannuation/provident fund. Tuition fees paid to educate

a maximum of two children.

 Payments made towards construction or purchase of a residential property.

 Payments issued towards a fixed deposit with a minimum tenure of 5 years

This section provides for a number of additional deductions like investment in mutual funds,
senior citizens saving schemes, purchase of NABARD bonds, etc

 SECTION 10(10 D):

As per Section 10(10D) of the Income Tax Act, 1961, any sum received under a Life
Insurance Policy, including the sum allocated by way of bonus on such policy is exempt
from tax.

 However, this rule does not apply to following amounts sum received under Section
80DD(3).

 Any sum received under a Keyman Insurance Policy.

 any sum received other than as death benefit under an insurance policy which has
been issued on or after April 1, 2003 and if the premium paid in any of the years
during the term of the policy is more than 20% of the Actual Capital Sum Assured.

 Under the Finance Act 2012 the exemption under Sec 10 (10D), on benefits you
receive under life insurance policies issued on or after 1st April, 2012, shall be
available only if the premium payable in any of the years is not more than 10% of the
Sum Insured.

 However, the death benefit under your plan is always tax-free under sec 10(10d).

2.7 CASES
1. Mr. Prakash, 54 year old businessman, annual income up to 5 lakhs wanted to
invest his money for future promises.
Mr. Prakash cannot pay premium amount of more than Rs.20,000 as he have two

27
 children and both are students. So I offered him
LIFESURANCE SAVINGS PLAN to boost his savings for future.

 PT- 15 years, PPT- 10 years

 Premium Rs.21000 ,two tax benefit ,ASD benefit

 Additional bonuses after 6 years.

Mr. Prakash agreed and bought the policy with his wife as nominee.

2. Mr. Sameer 50, is a unmarried, real estate builder. His annual income is more than 5
lakhs. He do not want lifesurance as there is nobody in his life who will suffer from
his death. So I offered him our WEALTHSURANCE PLAN to accumulate his wealth.

 PT- 10 years, PPT- 10 years, premium, premium Rs.50,000 p.a.

 Two tax- benefits, life cover-7 times of premium.

 Net assest value will remain same till the end of policy term no matter where
you invest.

 Systematic allocator to help build wealth ease or you can choose to manage
your investments yourself.

 Partial withdrawals after 5 years for emergency.

Mr. Sameer is interested in this product and will invest with us very soon.

28
 CHAPTER 3
SWOT ANALYSIS

29
3 .1 SWOT ANALYSIS

SWOT, which stands for strengths, weaknesses, opportunities and threats, is an analytical
framework that can help your company face its greatest challenges and find its most
promising new markets. The method was created in the 1960s by business gurus Edmund P.
Learned, C. Roland Christensen, Kenneth Andrews and William D. Book in their book
"Business Policy, Text and Cases" (R.D. Irwin, 1969).

In a business context, SWOT analysis gives a full-circle perspective to a company that where
it stands. This analysis of a company helps him to improve from its weakness, fight with its
threats and grab the opportunities that come in their way. Through SWOT Analysis Company
will get tools and information which helps them in framing their financial goals and
objectives, on the basis of which strategies are made to accomplish these goals. So basically
SWOT includes strength, weakness, opportunities and threats of the company.

Taylor said, "It is impossible to accurately map out a small business's future without first
evaluating it from all angles, which includes an exhaustive look at all internal and external
resources and threats,"

3.2SWOT OF IDBI FEDERAL

3.21 STRENGTH
 Its brand name.
 Innovative insurance products. These product offer different attractive return.
 Has over 2,000 employee’s on-roll; over 9,309 agents.

30
 In F.Y 2015, the persistency level of IDBI Federal 70.07 for 13th month premium. It
stands at 6th position among 24 companies.
 In F.Y 2015, the persistency level of IDBI Federal 54.47for 61 st month premium. It
stands at 1st position among 24 companies.
 As on March 31, 2015, the company has issued nearly 7.88 lakh policies with a sum
assured of over Rs. 41,856 crore.
 The claim settlement ratio for F.Y 2014-2015 is 76%.

3.22 WEAKNESS

 Low publicity compared to other premium banks in the urban and rural areas.
 Customer service staff needs training due to changing human behavior.
 Product awareness is low in the market.
 Unable to retain its potential agents.
 Low customer confidence on the private players.
 Extremely low number of branches.

3.2 3 OPPORTUNITY

 Could extend to more to urban and rural areas.

 Could seek better customer deals.
 Could seek new acquisitions.
 New products and service.
 Favorable Government schemes

3.2 4 THREATS

 Big public sector insurance companies like Life Insurance Corporation (L IC) of
India, National Insurance Company Limited, Oriental Insurance Limited, New India
Assurance Company Limited and United India Insurance Company Limited. People
trust public sector more.
 Very high competition prevailing in the industry as there are 23 more private players.
 Rising cost of raw materials.
 Tax rate changes

31
3.3 MICHAEL PORTER’S FIVE FORCE FRAME WORK

1) THREAT OF NEW ENTRANTS

 The future of life Insurance sector can be changed by the active presence of
international players. But this can generate huge cost for the international players
as there are more specialized firm with low expense ratio and better economies of
scale.
 As there is a benefit of tax exemption which makes the industry more attractive.
 High level of competition in life insurance industry become giant player came
into the market.
 High profits in life insurance industry act as a magnet to attract more entrants or
firms outside the industry.
 But again due to potential market, private giants and international player try to
enter in to the market in the large scale with their proper homework with
customized and products too. An Indian private are well – developed and has
capacity to face challenges, foreign companies foresee good prospects for
new business by alliances and partnership with domestic outfits.

2) BARGAINING POWER OF THE BUYERS

 Now a day competition is increasing in the each and every sector, and as a
competition in the market increase the bargaining power of the buyer will get
increase. So buyers bargaining power is high.
 Buyers in this industry are very return oriented and it switches easily.
 The switching cost of buyer over brand or close substitute products: The life
insurance industry has the uniqueness of providing risk protection, which does
not have any substitute. Thus the switching cost has no place. As far as the
substitute products are concerned they are providing the service of saving and tax
benefits but still they lag in the risk coverage factor.
 If buyers buy insurance then switching cost become high.
 Buyers have a strong competitive force when they are able to exercise bargaining
leverage over premium, service or other terms of sale.

3) SUPPLIER BARGAINING POWER

 Insurance is tax exempted so that suppliers bargaining power increases.
 Suppliers then have a big incentive to protect and enhance their customer’s
competitiveness via reasonable premium, better service and ongoing advances in
the technology of the item supplied.
 Supplier’s ability to integrate forward: the private players can integrate forward
to increase the volumes of business by providing customized and tailor-
made policies whereas existing players whereas lack on this point.

32
  Brand identity: there is certainty among the minds of people in relation to
existence and payment of claims from the existing players whereas the solvency
of private players is not certain.

4) THREATS OF SUBSTITUTES
Life insurance sector can be featured in three factors. They are saving, risk and tax
benefit.
 SAVING:
As far as saving are concerned, people prefer to save in terms of fixed assets,
Jewellery, PPF, ERF etc. Most of customer saving their money in bank, post deposit.
Many customers invest their money in share market, mutual funds, and government
bonds.
If investments in insurance policies are made with the objective of tax benefits then
there are other investment avenues, which offer similar benefits
provided by this sector only. No other instrument provides assurance against risk.
 TAX BENEFIT:
There are various substitute of this feature of life insurance. Some of the substitute
which provides tax benefit is:
 PPF
 NSE
 POST OFFICE SECURITIES.
 INVESTMENT IN THE MUTIAL FUND.
 OTHER TAX SAVING INSTRUMENT.

Thus these are the substitute of the life insurance industry. But the core
competency of this sector is the risk protection providing capacity, which no other
sector can provide.

5) INTENSITY OF RIVALRY
 There is cut- thought competitions among rivals in life insurance industry.
 The insurance sector is showing high market growth rate, it reaches 14.5% in
2015. This leading growth increases a tough competition among one another to
achieve more.
 All the insurance companies deal in identical policies, as service levels offered
are similar. Hence, there is no product differentiation. Post-privatization, product
and service differentiation exist between public company-private companies
 Due to high competition, insurance companies use higher investment returns and
a variety of insurance investment product to try to lure in customers.
 Large companies prefer to take over or merge with other companies rather than to
spend money on market and advertise to people.

33
34
 CHAPTER 4
DATA COLLECTION & DATA PRESENTATION

4.1 DATA COLLECTION

PRIMARY DATA – data is collected through questionnaire prepared through Google docs.
and shared to all income and age group people, out of which most of them are
prospecting clients of IDBI FEDERAL

The sample size is 50.

35
The responses were collected and entered in Google spread sheets.

4.2 DATA ANALYSIS & INTERPRETATION

The primary data was than analysed and interpreted through various excel tools and charts.

4.21 OCCUPATION OF INVESTORS

Table 4.21

OCCUPATION RESPONDANTS

AGRICULTURE 2

GOVT. EMPLOYEE 4

PRIVATE FIRM EMPLOYEE 21

PROFESSIONAL 7

SELF EMPLOYED 16

Fig 4.21

36
INTERPRETATION- The survey was conducted among 50 people, out of which most were
private firm employee (21) and self employed (16).

4.22 PERCENTAGE OF INCOME INVESTOR INVESTS ACCORDING TO

OCCUPATION:

Table 4.22

OCCUPATION <10% 10-25% 25-40%

AGRICULTURE 2 - -

GOVT.EMPLOYEE - - 4

PRIVATE FIRM 5 7 9
EMPLOYEE

SELF EMPLOYED 3 4 8

PROFESSIONAL 2 1 4

37
 fig 4.22

INTERPRETATION- It can be seen that most of the investors are private firm employee
and self-employed .The investors investing 25-40% of their income are from private firms &
self-employed.

25 investors out of 50 invest about 25-40% of their income.

4.23 INVESTMENT PREFERENCE OF INVESTORS ACCORDING TO

OCCUPATION.

Table 4.23

OCCUPATION / REAL BANK GO INDURANCE MUTUAL SHARES/

INVESTMENTS ESTATE FD LD FUNDS DEBENTURES

AGRICULTURE - 2 - - - -

GOVT.EMPLOYEE - 1 1 2 - -

PRIVATE FIRM - 2 - 7 8 4
EMPLOYEE

SELF EMPLOYED 1 1 1 7 - 3

PROFESSIONAL - 1 - 3 1 -

38
 Fig 4.23

INTERPRETATION- Investors from private firm invest more in mutual funds & insurance.
Whereas self-employed, govt. employee & professionals prefer insurance over other
options.

Also people investing in shares/debentures are more from private sector. Agriculture sector
totally rely on fixed deposits.

4.24 PERCENTAGE OF INCOME VARIOUS AGE GROUPS INVESTS

Table 2.24

AGE GROUP <10% 10-25% 25-40%

20-30 8 4 8

30-40 3 6 6

40-50 - 2 7

ABOVE 50 1 - 4

39
 Fig 4.24

INTERPRETATION-

From the above table we can conclude that age group 20-30 invest more for future as
compared to higher age group, age group 20-30 invest 10-40% of their income.

Age group 20-30 covers all type of investors less than 10% ,10-25% and 25-40%.

4.25 INVESTMENT PREFERENCE AMONG VARIOUS AGE GROUPS

Table 4.25

INVESTMENT 20-30 30-40 40-50 ABOVE 50

AVENUES / AGE
GROUP

BANK FD 4 2 2 -

GOLD 1 - 1 -

INSURANCE 5 4 6 4

MUTUAL FUNDS 8 1 - -

REAL ESTATE 1 - 2 1

SHARES/DEBENTURES 1 5 1 -

40
 Fig 4.25

INTERPRETATION-

Lower age group people invest in mutual funds, insurance & FD’s. Whereas middle age
investors invest more in shares /debentures and insurance and higher age group give
importance to investment in insurance only. This shows awareness and importance of
insurance in among all age groups.

4.26 PRIORITY FACTOR FOR INVESTING TO VARIOUS AGE GROUPS

Table 4.26

PRIORITY 20-30 30-40 40-50 ABOVE 50

FACTOR/ AGE
GROUP

RETURN 10 3 1 1

LIQUIDITY - - 2 -

LOW RISK 1 1 4 -

MARKETABILITY - 1 - -

SAFETY 5 4 5 3

41
 Fig 4.26

INTERPRETATION-

From the above table we can conclude that lower age group looks for returns, tax saving &
safety.

Whereas higher age groups give priority to safety before investing.

4.27 FREQUENCY OF INVESTMENT ACCORDING TO AGE GROUP

Table 4.27

AGE GROUP / MONTHLY QUATERLY HALF ANNUALY

FREQUENCY YEARLY

20-30 - 13 3 4

30-40 2 2 2 6

40-50 2 - 5 6

ABOVE 50 - - 2 3

42
 Fig 4.27

INTERPRETATION-

From the above table we can conclude that lower age groups prefer to invest monthly than
any other mode. And age group above 30 invest mostly annualy and half yearly.

4.28 PERCENTAGE OF INCOME INVESTOR INVESTS ACCORDING TO

VARIOUS INCOME LEVEL

Table 4.28

INCOME / % <10% 10-25% 25-40%

INVESTMENT

LESS THAN 1 LAKH 8 4 8

1 TO 2.5 LAKHS - 6 6

2.5 TO 5 LAKHS 3 2 7

ABOVE 5 LAKHS 1 - 4

43
 Fig 4.28

INTERPRETATION-
From the above table we can conclude that people with high income i.e, more than 5 lakhs
invests 25-40% of their income
So investment increases with increase in income level of people.

4.29 INVESTMENT PREFERENCE ACCORDING TO INCOME LEVEL OF

INVESTOR

Table 4.29

INVESTMENT LESS 1 TO 2.5 2.5 TO 5 MORE THAN 5

AVENUES/ THAN 1 LAKHS LAKHS LAKHS
INCOME LEVEL LAKH

FD 1 1 6 -

GOLD 1 - -- 1

INSURANCE - 1 9 9

MUTUAL - 6 3 -
FUNDS

REAL ESTATES 1 1 2 -

SHARES AND - 4 3 -
DEBENTURES

44
 Fig 4.29

INTERPRETATION- From the above table we can conclude that people with higher
income invest mostly in insurance. However they investment in real estate and mutual funds
as well. Higher the income more investment in insurance.

4.30 ADVANTAGE OF INVESTING IN INSURANCE ACCORDING TO VARIOUS

AGE GROUPS

Table 4.30

ADVANTAGE/ 20-30 30-40 40-50 ABOVE 50

AGE GROUP

CHOICE OF - - - 1
SCHEME

LOW RISK 2 2 6 2

RETUEN 4 - - -
POTENTIAL

SIMPLICITY - 1 - -

TAX BENEFITS 14 7 7 2

TRANSPARENCY - 1 - -

45
 Fig 4.30

INTERPRETATION- From the above we can conclude that all age group invest in
insurance mostly with a motive to safe tax & low level of risk.

4.31 HOW MANY PEOPLE KNOW ABOUT INSURANCE POLICIES

Table 4.31

YES 46

NO 4

46
 Fig 4.31

INTERPRETATION- From above we can say that 92% people are aware of insurance
policies but still the market coverage is very less.

4.32 HOW MANY INVESTORS KNOW ABOUT IDBI FEDERAL LIFE INSURANCE
CO. S’ PRODUCTS

Table 4.32

YES 19

NO 31

47
 Fig 4.32

INTERPRETATION- Out of total sample population only 38% investors are aware of IDBI
FEDERAL’S insurance policies.

4.33 WHAT DO INVESTORS OF VARIOUS AGE GROUP & OCCUPATION LOOKS

FOR BEFORE INVESTING IN A PARTICULAR SCHEME

Table 4.33
20-30 Expert advice Past performance Ratings (by IRDAI) Returns
Govt. employee - - - 1
Private firm
employee 3 4 1 5
Professional - 2 - 1
Self employed 1 - - 2
30-40
Govt. employee - 1 - 1
Private firm
employee 2 1 1 3
Self employed - 3 - -
40-50
Agriculture 1 - - 1
Govt. employee - - 1 -
Private firm
employee - - - 1
Professional 1 1
Self employed 5 2 - -
Above 50
Professional - - - 2
Self employed 1 1 1

48
 Fig 4.33

INTERPRETATION- among various age groups & occupation lower age group of all
groups looks for returns & past performance before investing in any policy. Whereas higher
age group of all occupation seeks expert advice before investing.

4.34 WHERE DO INVESTORS LOOK TO COMPARE PERFORMANCE OF

VARIOUS INSURANCE POLICIES

Table 4.34

SOURCE RESPONDANTS

FINANCIAL ADVISOR 21

FINANCIAL INSTITUITION 2

INTERNET 21

MAGZINE/NEWSPAPERS 2

TV CHANNELS 4

49
 Fig 4.34

INTERPRETATION- Investors compares various policies majorly through financial

consultants and internet.

4.35 CAN INSURANCE BE VIEWED AS RISK FREE INVESTMENT

Table 4.35

YES 34

NO 16

50
 Fig 4.35

INTERPRETATION- Investors considers insurance as risk free investment (68%).

However still 32% consider risk on investing in insurance.

4.36 INVESTOR INVESTS IN INSURANCE BECAUSE OF THESE FACTORS

Table 4.36

FACTORS RESPONDANTS

GIVES ASSURED RETURNS 17

BETTER TO INVEST IN INSURANCE 7

THAN SHARES

LESS CALCULATION THAN SHARE 5

MARKET

GOOD RETURNS WITH LOW RISK 5

TAX REBATE ON ENTRY & EXIT 12

SIMPLE TO INVEST & MONITOR 4

FUNDS

51
 Fig 4.36

INTERPRETATION- from the above table we can conclude that most investors invest in
insurance because it provides assured return and tax rebate on entry and exit.

4.37 RATING OF VARIOUS INVESTMENT AVENUES

Table 4.37

INVESTMENT AVENUES RESPONDANTS

BANK DEPOSITS 2

FD 12

GOLD 3

INSURANCE 18

MUTUAL FUNDS 3

REAL ESTATE 7

SHARES & DEBENTURES 4

52
 Fig 4.37

INTERPRETATION- investors consider insurance as the best for investment followed by

bank fixed deposits and real estate.

53
4.4 FINDINGS
 Income level of an investor is an important factor, which affects the financial planning
for an individual.

 50% of investors, invests around 25-40% of their income and most of them are private
firm employees.

 Lower age group invest more in mutual fund followed by FD & insurance while middle
age group invest more in shares/debentures other higher age group invest mostly in
insurance.

 The lower age group gives priority to returns and tax saving for investing in any policy.
They do not want life insurance they want saving investment policies. While higher age
group gives priority to safety & tax saving. This shows lower age group is more risk
taking.

 Internet, websites and financial advisors are important source for investors to learn about
investment avenues.

 High income level group invests more in insurance for tax benefits and also in mutual
funds & shares for higher returns.

 Middle & low income level groups invest in almost all the investment options in order to
save tax and to increase their funds.

 Lower age group looks for returns and past performance before investing, whereas
higher age group looks for expert advice & returns before investing in a particular
policy/plan.

 Less than 40% people know about IDBI FEDERAL and its products.

 Investors prefer insurance because it gives assured returns and tax saving.

 Investors consider insurance & FD as best investment avenues.

 68% investors consider insurance as risk free investment.

54
4.5 SUGGESTIONS
 It is suggested that investors’ decision should be based on their financial advisor or
agent.

 Risk & return should be evaluated before making any investment.

 IDBI should give preference to wealthnsurance plan as it gives life cover, tax benefits,
and assured net value to tap younger age group and also investor can choose where they
want to invest their funds.

 Lower age group investors, invests on monthly basis IDBI should come up with monthly
premium option and low premium plans to suit all pocket size.

 Investors decision is based on study of various source, IDBI should start giving
advertisements in newspapers and magazines to attract more clients.

 Client awareness and promotional program should be conducted.

 IDBI should update website frequently in order to give correct information to the
investors.

 They should come up with more branches of IDBI FEDERAL tin smaller towns and
uncovered rural segments.

 IDBI should target private firm employees as they invest in policies which give them tax
benefits.

55
4.6 CONCLUSION

The investor’s decisions are driven by various factors of economy. This study shows how
different factors and avenues have different return, risk and tax consideration while taking
investment decisions.

It is very difficult to come to a conclusion that how a particular product market is doing and
what is its future.

The study takes a random sample of 50 prospecting clients and investors which represents the
whole population of investors. This is limited to accurate results.

The study also draws important conclusion that the investors are keen to invest in long term
tax saving and low risk avenues and earns good returns on their investment. Investors are
aware of various factors affecting their investment plan and they do take advice from experts
and self-analyse various policies through internet.

This study will somehow help investor to decide the correct investment for their saving.

The analysis and interpretation of data clearly shows investors views on frequency of
investment, per cent of investment, factors affecting their decision and alternate available.

The study shows insurance as one of the beneficial investment product among other avenues
for different age groups, income level and occupation of investors.

ANNEXURE

56
1. QUESTIONNAIRE:

INVESTMENT AND SAVING PATTERN IN INDIA

This is survey is conducted to study the investment pattern of investors in India.

* Required

Your age group *

o 20-30
o 30-40
o 40-50
o Above 50

You belong to which of the following category *

o Govt. employee
o Private firm employee
o Agriculture
o Self employed
o Professional
o Other :

Your annual income? *

o less than 1 lakhs
o 1 to 2.5 lakhs
o 2.5 to 5 lakhs'
o Above 5 lakhs

What is the percentage of savings from your total income ? *

o less than 10%
o 10-25%
o 25-40%

Where do you invest your savings? *

o Insurance
o Shares/debentures
o Bank FD
o Gold
o Real estate
o Mutual funds

57
What are the factors to which you give priority when you invest?*
o Safety
o tax saving
o returns
o Liquidity
o marketability
o Low risk
o Other :

Do you know about insurance policies? *

o Yes
o No

In which company you hold or want to hold a insurance policy? *

Your answer
Are you aware of all IDBI life insurance products? *
o Yes
o No

How do you time your investments? *

o Monthly
o Quaterly
o Half yearly
o Annually

What advantage do you find when you invest in insurance policies? *

o Return potential
o Low risk
o Transparency
o Flexibility
o Choice of schemes
o Tax benefits
o Simplicity

What do you look before investing in a particular scheme? *

o Past performance(NAV)
o Ratings (by IRDAI)
o Expert advice
o Returns

58
Where do you gather information about the performance of different insurance policies? *
o Financial institutions
o Financial advisor
o TV channels
o Magzine/Newspaper
o Internet

You invest in insurance policy because- *

o Its better to invest in insurance than in shares
o provides tax rebate on entry and exit
o Gives assured returns
o provides high returns with low risk
o Less calculation is required before investing than share market
o very simple to invest and monitor funds

Can insurance be viewed as risk free investments? *

o No
o Yes

According to you, which one do you rate as the best investment instrument? *
o Insurance
o FD's
o Shares/debentures
o Gold
o Real estates
o mutual funds
o bank deposits

SUBMIT

59
2.PERFOMA OF IDBI FEDERAL:
BUSINESS OF THE CO.- THE KEY BUSINESS ASPECTS

Sl Company Source of
KPI Conceptual Guidance
No Information information
To be the leading
a. What is vision and mission of Company's
provider of wealth
the company? Website
mgmt.
b.Is the company a manufacturing
or trading enterprise or in the Service Industry
service industry?
c. If in service industry, what are
1 Investment and
the key services/provided by it to
Basics Wealth Plans
its customers?
d. Does the company sell directly
at the retail level or to other Retail Level
business enterprises?
e. Does the company market
Yes
under its own brand?
f. Give the organization chart of
the company.
a. What new products/services
were launched in the last one No
year?
b. What acquisitions / divestitures
No
happened in last one year ?
c.Current constitution of the Board
of Directors.
Company
2 d.Who is the MD or CEO of the
information Vignesh Shahane
company?
e.Who is the CFO of the company? Kedar Patki
f.Share holding pattern of the
company.
e.Has there been any change in
the Top Management in last one No
year?
Income Insurance Plan
Write the
Child Insurance Plan
names of the
Life Insurance Savings Plan Company's
3 main
Whole Life Insurance Plan Website
products of
the Company Wealthsurance Growth Insurance
Plan

60
 a.Name the main competitors of
LIC, ICICI Prudential
the company ?
Competitor b. Market size / share of
4
Overview competitors within industry ? 1-2% IDBI
72% LIC

a. Name the most important

N.A
What are the materials consumed in production
major inputs b. What is the Material cost as a %
N.A
in the of the sales/cost?
5
company's c. What is the manpower strength
N.A
product or of the company?
service d. What is the manpower cost as a
N.A
% of the total sales/ total lost ?
What is the
a. Segmentation
customer
6 b. Targeting Segmentation
profile of the
c. Positioning
company?
a. Office discipline - attendance,
What are the work place cleanliness, dress code, Attendance
main HR holidays
7
policies of the b. tools for performance such as
company? laptops, mobiles etc
c. Leave Rule
a. Does the company do stock
No
transfers to other states?
b. Does the company sell through
No
distributors?
c. Does the company sell through
No
What is the its own sales team?
company's d. How many sales persons are
8 sales and employed?
distribution e. What is the polciy of the
structure ? company in fixing the sale price?
f. Is there any incentive scheme for
sales team? Mention the key
features.
g. Name the taxes which your
company has to pay.

61
KEY PERFORMANCE OF THE CO. – THE KEY PERFORMANCE ASPECTS

Conceptual Source of
Sl No KPI 2015 2014 2013
Guidance information
Growth rate is one of the most important indicators of the company's
performance. It reflects the growth in the existing business of the
company over the previous year
Sales ( Rs '000) 4833800 3342032 1950450
% Gr ( Sales current
year over previous 44.6% 71.3%
At what rate year)
Taken from
1 company is Gross Income (Rs
Annual Report
growing? Cr)(excluding
extraordinary and 0 0 0
non related incomes)
in the year
% Gr ( Gross
income current year #DIV/0! #DIV/0!
over previous year)
Note : Operating margin is the most important indicator of the
profitability of a business. High Operating Margin reflects the following
aspects of performance: a. Industry dominance; b. Customer preference ;
c. R & D supremacy resulting in product quality above industry standard
& d. Technical supremacy due to processes, machines, skill etc
What is the OPERATING MARGIN is calculated as: Op Margin / Total operating
Operating income X 100
Margin of the Operating Margin = Total Operating Income - Direct Expenses
2 Co in the last
Gross Operating
three 1546929 711167 816086
Income
financial Taken from
Less: Direct cost 0 0 0
years Annual Report
Operating Margin
1546929 711167 816086
(Value in Rs '000)
Operating Margin -
% of total operating 100.0% 100.0% 100.0%
income
What has The most important indicator of profits earned before
been the Co's interest and tax. It is calculated as: (Earnings before
EBITA in the interest & tax / Total Operating Income X 100) % Taken from
3
last three Annual Report
financial
years
4 Mention the The key indicator in 1.93 1 0.12 Taken from
EPS or the performance of Annual Report
Earning Per the company to
Share show what has been
earned for the equity
shareholders or
owners of the
company. It is
calculated as: Profits

62
 After Tax / No of
Fully Paid Equity
Shares an is
represented as INR
value.
"Profit is an Opinion, Cash is Reality". The DSOs of a
company are the best indicator of its cash flow and
What are the liquidity. It is calculated as: Average Receivable les /
DSO or Days Annual Sales X 365 and is represented in number of Taken from
5
Sales days. A fall in DSO indicates improving liquidity. Annual Report
Outstanding

Source of
Documents Delhi & Haryana
including A) 4th Floor, IFCI Tower, 61, Nehru
Financial Place, New Delhi - 110019
Statements and [email protected] (Phone: 011-
Annual Reports 26235707, 26235708, 26235709)
- Registrar of B) For Physical Verification Of
Companies Documents :
(ON PAYMENT Plot No. 6,7 & 8,Basement, IICA
OF Campus, Sector-5, IMT-Manesar,
PRESCRIBED Gurgaon,
FEE WHICH IS Haryana. Phone : 124-2291520
NOMINAL)

63
 REFERENCES

 IDBI FEDERAL, Products modules and brochures: [Accessed on 3th

April 2016]
 IDBI FEDERAL,[online]
Available from: http://www.idbifederal.com/Pages/home.aspx [Accessed
on 4th April 2016]
 IDBI FEDERAL, [online]
Available from:
http://www.idbifederal.com/TaxBenefits/Pages/default.aspx
[Accessed on 6th April 2016]
 http://www.investmentz.com/insurance.aspx?
pagename=Companieshttp://www.investmentz.com/insurance.aspx?
pagename=Companies [Accessed on 6th April 2016]
 https://www.irdai.gov.in/ADMINCMS/cms/frmGeneral_NoYearList.asp
x?DF=insprdts&mid=27.1.1 [Accesses 6th April 2016]
 Dr .Shashidharan Kutty. IC33 Life insurance book.2015:financial
planning & taxation

 http://www.idbifederal.com/TaxBenefits/Pages/Insurance-Policy-
%E2%80%93-Sec-10(10D).aspx

 https://cleartax.in/Guide/Section80Deductions

 http://www.investopedia.com/terms/d/debenture.asp

 http://www.moneycontrol.com/glossary/insurance/what-are-the-tax-
benefits-applicable-to-me-if-i-invest-in-a-life-insurance-
policy_3884.html

64