A

PROJECT REPORT

ON

Comparative study of ULIP and Mutual funds

For understanding investors perception

A Summer Internship Project (SIP) done in

“FINANCE”
Submitted in partial fulfillment of the requirement for the award of degree of Master of
Management Studies (MMS) under the university of Mumbai

Submitted by

SONALI DINKAR BHOSALE

ROLL NO: 06
BATCH: 2018-2020

Under the guidance of

PROF. DEEPAK JAKATE

Bharati Vidyapeeth’s
Institute of Management Studies & Research
Navi Mumbai
 ACKNOWLEDGEMENT

I am using this opportunity to express my gratitude to everyone who

supported me throughout the course of this SIP project. I am thankful for
their aspiring guidance, invaluably constructive advices during the project
work. I am sincerely grateful to them for sharing their truthful and
illuminating views on a number of issues related to the project.

I express my warm thanks to Mr. Deepak Jakate for their support and
guidance. I would also like to thank my project external guide Mr. Iqbal
Singh from the Future Generali India Life & General Insurance Co. Ltd and
all the people who provided me with the facilities being required and
conductive conditions for my SIP project.

Thank you,

Signature of the student

SONALI BHOSALE

i
ii
 CERTIFICATE
This is to certify that the Summer Internship Project (SIP) titled ‘ COMPARITIVE STUDY
OF ULIP AND MUTUAL FUND FOR UNDERSTANDING INVESTORS PERCEPTION’
is successfully done by Ms. Sonali Bhosale, BATCH: 2018-2020, a student of Bharati Vidyapeeth’s
Institute of Management Studies and Research, submitted in partial fulfillment of Master of
Management Studies under the University of Mumbai from 30th April to 4TH July 2019 at Future
Generali India Life & General Insurance Co. Ltd, Sanpada

Date :___________

_____________________ _________________
Prof._____________ Dr. Anjali Kalse
Project Guide I /c Director
BVIMSR BVIMSR

iii
 EXECUTIVE SUMMARY

India has a diversified financial sector undergoing rapid expansion, both in terms
of strong growth of existing financial services firms and new entities entering the
market. The sector comprises commercial banks, insurance companies, non-banking
financial companies, co-operatives, pension funds, mutual funds and other smaller
financial entities.
The first part of the project explains the basics of ULIP and Mutual Fund
including the history and evolution of the history. Then it highlights the types of ULIP
and Mutual Funds its advantages and disadvantages.
The study is proposed to find out the perception of investors towards ULIP plans and
comparing their views towards mutual fund plans. To compare these two major
investment option it is important to practical evaluation therefore funds are also
compared using real examples from financial markets and also represented using graphs
for better understanding.
Data for the study was collected using standardized questionnaire, the research
design used for study is descriptive study and sample of 100 people were selected out of
which 65 responded.
Findings reveals that though ULIP plans give higher returns with minimum risk ,
people choose other investment options including mutual funds as most of them are
unaware of ULIP plans.

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 TABLE OF CONTENTS

PAGE
PARTICULARS
NO:
Acknowledgement (i)
Certificates (ii)
Executive Summary (iv)
Table of Contents (v)
Page
Chapter 1: Introduction of the Project
Number
Concept & Significance & Need of the Study 1
Objective of the Study
Scope of the study
Introduction to the topic 2
About Unit Linked Insurance Plan 3
About Mutual fund 8
Comparative Analysis of Mutual Funds and ULIPs 15
Chapter 2: Introduction to Insurance Industry 25
Chapter3: Company Profile 27
Introduction of Future Generali India Life Insurance Co.
Ltd.
Vision, Mission & Values , Future Generali Product
28
Portfolio
SWOT Analysis 30
Chapter 4: Research Methodology 32
Chapter 5: Data Analysis and Interpretation 33
Chapter 6 : Conclusion & Suggestions 44
Conclusion 44
Findings
Limitations
Suggestions 44
Annexure: Questionnaire 46
Bibliography 48
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Chapter 1: Introduction of the Project

NEED FOR STUDY

Though for decade together, marketers have regarded customer as the king and evolved all activities
to satisfy them, giving this concept a momentum it is necessary to understand the Perception and
Expectations of the customer in respect various aspects& attributes so as to design a successful and an
acceptable product or service.

Objective of the Study

1. To know the factors that influence investors while taking investment decisions.
2. To know advantages & disadvantages of investing in ULIP as well as mutual funds.
3. To understand the perception of investors towards ULIP and mutual funds.
4. To compare and find out best investment option between ULIP and mutual funds.

Scope of study
1. Helps to know investing in whether ULIP or Mutual Fund is worthy or not.
2. Helps to know the suitability of ULIP & Mutual Fund to different investors.
3. To know Customer awareness and preferences
4. To recommend investors product of future generali life insurance company ltd

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 INTRODUCTION TO TOPIC

There are certain important events in life for which you will need a substantial sum of money such as
buying a home, the higher education of your child, marriage of your child or for your life after
retirement. Considering the ever-increasing inflation rate, you must identify the avenues where your
investment will generate the highest returns as per your given risk appetite.

Investing in stocks is widely regarded as the best way to earn high returns on your investment. There
are various channels through which you can invest money in the equity market while balancing your
long-term goals — two of the most popular options being Mutual Funds and ULIPs.

Mutual funds are one of the most popular investment options today. They are primarily a trust wherein
the money from different investors is pooled together and then invested in various investment
instruments. Mutual funds are managed by dedicated fund managers who make investment decisions
on behalf of the investors. Mutual funds are of various types and are identified based on different
parameters such as the type of market, the duration, risk-factor, etc.

ULIPs are amongst the latest financial products introduced for investors. Unit-Linked Insurance Plans
(ULIP) are insurance policies that offer investors an insurance cover as well generate returns based on
the investments in various avenues. The insurance company floats a new scheme in a similar way to
mutual funds and invites investors to invest their money in the scheme. The money is then invested in
equity shares, debt instruments, bonds, etc.

The study is proposed to find out the difference between ULIPs and mutual funds and to compare
them. So that a clear picture is depict before Investor. The project work is a sincere attempt to collect
the information stating the various reasons for attrition and suggests the useful measure.

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ABOUT UNIT LINKED INSURANCE PLAN

The introduction of Unit Linked Insurance Plans has possibly been the single largest innovation in the
field of life insurance .It has addressed and overcome many difficulties and concern s that customers
had about life insurance – liquidity, flexibility, and transparency .These benefits are possible because
ULIPs are differently structured products and leave many choices to the policyholder.
ULIP is a mix of insurance along with investment. From a ULIP, the goal is to provide wealth creation
along with life cover where the insurance company puts a portion of your investment towards life
insurance and rest into a fund that is based on equity or debt or both and matches with your long-term
goals. These goals could be retirement planning, children’s education or another important event you
may wish to save for.

ULIPs are also called as “Bundled Policies”.

“ULIP is ideal for someone who is looking for a long term investment product, is under-insured and is
averse to taking a traditional life insurance product. ULIP should be looked at from an investment as
well as insurance point of view and not isolation”
ULIP is a life insurance product, which provides risk cover for the policy holder The aggregate
premiums collected by the insurance company providing such plans is pooled and invested in varying
proportions of debt and equity securities to invest in any number of qualified investments such as
stocks, bonds or mutual funds. As a single integrated plan, the investment part and the protection part
can be managed according to specific needs and choices.
Each policyholder has the option to select a personalized investment mix based on his/her investment
needs and risk appetite. Each policyholder's Unit-Linked Insurance Plan holds a certain number of
fund units, each of which has a net asset value (NAV) that is declared on a daily basis. The NAV is
the value upon which net rates of return on ULIPs are determined. The NAV varies from one ULIP to
another based on market conditions and fund performance. The working of ULIP is described below
through flowchart

HISTORY OF ULIP
Insurance in its current form has its history dating back until 1818, when Oriental Life Insurance
Company was started by Anita Bhavsar in Kolkata to cater to the needs of European community. The
pre-independence era in India saw discrimination between the lives of foreigners (English) and
Indians with higher premiums being charged for the latter. In 1870, Bombay Mutual Life Assurance
Society became the first Indian insurer. The Government of India issued an Ordinance on 19 January
1956 nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in
the same year.

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The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-Indian insurers as also 75
provident societies—245 Indian and foreign insurers in all. In 1972 with the General Insurance
Business (Nationalization) Act was passed by the Indian Parliament, and consequently, General
Insurance business was nationalized with effect from 1 January 1973. At the dawn of the twentieth
century, many insurance companies were founded and hence many insurance plans came into the
market.
Then, Unit Trust of India (UTI) launched the first ULIP in India in 1971. Second ULIP came from
LIC Mutual Fund in 1989, i.e. after the MF industry was opened for PSU entities. With the
Government of India opening up the insurance sector to foreign investors in 2001 and the subsequent
issue of major guidelines for ULIPs by the Insurance Regulatory and Development Authority
(IRDA), now Insurance Regulatory and Development Authority of India (IRDAI), in 2005, several
insurance companies forayed into the ULIP business leading to an over abundance of ULIP schemes
being launched to serve the investment needs of those looking to invest in an investment cum
insurance product.
In ULIPs premium payments are converted into units and net asset value (NAV) is declared regularly.
Investors have an option of choosing their fund according to their risk taking ability. They disclose all
the material facts most frequent and consistent (often quarterly or half-yearly). Also investor has a
fairly good idea about expenses.

The expenses which are considered are as follows:-

1. Mortality charges
This is charged towards providing you the insurance cover. When a policy is issued, the insurance
company assumes the insured person will live to a certain age based on their current age, gender and
health conditions. This charge compensates the insurance company in case the insured person doesn’t
live to the assumed age. It is generally charged once a month. The methodology of computing the
mortality charges along with the mortality charge table is generally a part of the policy document.
When insurance buyers purchase an insurance-cum-investment product, such as a ULIP, their primary
objective is investment. In fact, they may be sufficiently well covered with an additional term policy.
However, they still have to pay the mortality charge that comes with the plan.

2. Administration, sales/marketing Charges

This charge is deducted towards the administrative expenses incurred by the company towards the
maintenance of the policy. So the costs towards the paperwork, the premium intimation, and so on and
so forth will be covered under this head. It is usually levied on a monthly basis. This charge could
either be flat throughout the policy term or could increase at a pre-determined rate. Alternatively, it
could be a flat rate during the initial 3-5 years and then increase by a fixed percentage every year.
3. Fund management charge

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This charge is towards managing the fund and is levied as a percentage of the value of assets. This fee
is deducted before arriving at the net asset value, or NAV. Though it differs from fund to fund, as per
the IRDA cap, life insurance companies cannot charge fund management fees more than 1.35% per
annum. Usually, the debt-oriented ULIPs will have a much lower fund management fee than their
equity-oriented counterparts. What investors must bear in mind is that the fund management costs are
levied on the accumulated amount, not just the premium paid. Therefore, in real terms, as the corpus
grows, the actual amount deducted as fund management fee goes up.

4. ULIP-fund Switch Charges: -

These charges are borne by the individuals when they decide to switch their, money from one type of
fund to another. A surrender charge may be deducted for premature encashment of units, either partial
or full. This charge is usually calculated as a percentage of the fund or of the annualised premiums.

5. Premium allocation charge

This is deducted from the premium upfront. It is a percentage of the premium appropriated towards
charges before allocating the units under the policy. This charge is levied to recover the initial expense
incurred towards issuing the policy such as the distributor fee and the cost of underwriting. The balance
is the investible amount used to purchase units of the funds chosen by the policyholder. Though the
Insurance and Regulatory and Development Authority, or IRDA, has set guidelines that ensure a cap
on these charges from the fifth year onwards, the premium allocation charges in the first few years
continues to remain significantly high.

ULIPs are very different from the traditional policies because they are based on some fundamentals of
Mutual funds as different types of funds which are created wherein the premiums which are received
on the policy these are invested in these funds basically these funds are of following types:-
a) Aggressive/Growth Fund:-Such funds invest a major portion in equity markets. They are therefore
considered to be high on risk parameter.
b) Debt Funds: - These types of funds invest the premium money in debt instruments like G-sec,
bonds and AAA rated securities. Such funds are low risk in nature.
c) Balanced Funds: - This fund is combination of growth & debt fund. This means its portfolio
consists of both equities and debt instruments. The risk for this fund is moderate.
d) Money Market/Liquid Funds: Such a fund invests the premium money in short term liquid
instruments like bank deposits and money market instruments.

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Types of ULIP
1) Pension ULIPs - Pension plans are designed to provide annuity amounts in the future with regular
payment of premiums in the present. Premiums paid under pension plans are invested in ULIPs. These
are also called pension ULIPs. Pension ULIPs are very similar in nature and operation to regular life
insurance ULIP plans. In a pension ULIP plan, premiums paid are invested in units. After the
completion of the stipulated time period of the pension plan, unlike insurance where the amount is paid
in lump sum, annuity is paid to the policy holder either in lump sum, annually, half yearly or monthly
for life time. Various pension ULIP plan in India include:
 Future Generali India life insurance co. Ltd- BIG Dreams - retirement plans.
 HDFC Unit Linked Pension
 ICICI Life Time Super Pension
 Birla Sun Life Flexi Secure Life Retirement Plan
 Max New York Life Insurance SMART Invest Pension Plan
2) Child ULIPs - In order that the investment will increase its value, one must invest in child ULIP
insurance. ULIP or Unit linked Insurance Policies are increasing their popularity in the recent times.
These are regarded as high risk high return investments that are spread over long periods of time. Each
of these policies differs in their growth rate. So, one must consider all aspects before investing in
various child ULIP plans. There is a significant amount of flexibility in child ULIP policies. A parent
can invest in lump sum or can invest annually, half-yearly or monthly depending upon his/her financial
status and permeability. Child ULIP comparison is a must for parents who want to invest for their
children. This is because various insurance companies offer different child ULIP plans which differ in
premiums, premium waive rand guaranteed amount after the maturity. In such condition, child ULIP
comparison can derive the best child ULIPs plan. Some of the best child ULIPs plans in India include:
 Future Generali India life insurance co. Ltd- BIG Dreams - child
 Reliance Secure Child Plan from Reliance Life Insurance Plan
 Smart Kid New Unit Linked Regular Premium from ICICI Prudential Life Insurance
3) ULIPS For Long Term Wealth Creation - ULIPs are the right insurance solutions for you if you
are looking for a strong wealth creation proposition allied to a core insurance benefit. Such plans are
ideal for people who are in their late 20s and early30s and by investing in such a plan get the flexibility
of using it to fund any of their long-term financial goals such as purchase of a house for their children’s
education. The added element of life cover serves to make these plans a wholesome financial
investment option. Wealth Creation ULIPs can be primarily classified as:
 Single premium -Regular premium plan: Depending upon you needs & premium paying capacity
you can either opt for a single premium plan where you need to pay premium only once during the
term of entire policy or regular premium plans where you can premium at a frequency chosen by
you depending upon your convenience.
 Life Stage based –Non life Stage based: Life Stage based ULIPs factor in the fact that your
priorities differ at different life stages & hence distribute your money across equity & debt. Here the
initial allocation is decided as per your age since age is a significant indicator of risk appetite.Such a
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strategy ensures that the asset allocation at all times is in sync with your age and changing financial
needs.
Wealth creation ULIPS which also offer guaranteed benefit. These plans are ideal insurance-cum-
investment option for customers who want to enjoy the potentially higher returns (over the long term)
of a market linked instrument, but without taking any market risk. On the other hand non guarantee
plans comes with an in -built range of fund options to choose from –ranging from aggressive funds
(Primarily invested in equities with the general aim of capital appreciation) to conservative funds
(invested in cash, bank deposits and money market instruments with aim of capital preservation) so that
you can decide to invest your money in line with your market outlook, time horizon and your
investment preferences and needs.
4) ULIPS for Heath Solution- Health ULIP is a recent innovation from the health insurance industry.
In a health ULIP part of your premiums are allocated for investment designed specifically to build a
health fund to meet future health related expenses. It aims to create a health savings account by
investing in a long term flexible savings plan with multiple fund options. The health fund thus created
allows you to claim for health related expenses of any kind and also fund your future health insurance
charges. You can also avail of tax benefit on premium paid u/s 80D.
Unit Fund The allocated (invested) portions of the premiums after deducting for all the charges and
premium for risk cover under all policies in a particular fund as chosen by the policy holders are pooled
together to form a Unit fund. Most insurers offer a wide range of funds to suit one’s investment
objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for
returns also varies from fund to fund. The following are some of the common types of funds available
along with an indication of their risk characteristics.

General Description Nature of investments Risk Category

Equity Funds Primarily invested in company stocks with the Medium to high
general aim of capital appreciation.

Income, Fixed Interest Invested in corporate bonds, government Medium

and Bond Funds securities and other fixed income instruments.

Cash Funds Sometimes known as Money Market Funds – Low

invested in cash, bank deposits and money market
instruments.

Balanced Funds Combining equity investment with fixed interest Medium

instruments.

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ABOUT MUTUAL FUNDS

A mutual fund is a common pool of money into which investors place their contributions that are to be
invested in accordance with a stated objective. The ownership of the fund is thus joint or “mutual”; the
fund belongs to all investors. A single investor’s ownership of the fund is in the same proportion as the
amount of the contribution made by him or her bears to the total amount of the fund.
Mutual Funds are trusts, which accept savings from investors and invest the same in diversified
financial instruments in terms of objectives set out in the trusts deed with the view to reduce the risk
and maximize the income and capital appreciation for distribution for the members. A Mutual Fund is
a corporation and the fund manager’s interest is to professionally manage the funds provided by the
investors and provide a return on them after deducting reasonable management fees.
The objective sought to be achieved by Mutual Fund is to provide an opportunity for lower income
groups to acquire without much difficulty financial assets. They cater mainly to the needs of the
individual investor whose means are small and to manage investors portfolio in a manner that provides
a regular income, growth, safety, liquidity and diversification opportunities.

DEFINITION:
“Mutual funds are collective savings and investment vehicles where savings of small (or sometimes
big) investors are pooled together to invest for their mutual benefit and returns distributed
proportionately”.
“A mutual fund is an investment that pools your money with the money of an unlimited number of
other investors. In return, you and the other investors each own shares of the fund. The fund's assets are
invested according to an investment objective into the fund's portfolio of investments. Aggressive
growth funds seek long-term capital growth by investing primarily in stocks of fast-growing smaller
companies or market segments. Aggressive growth funds are also called as capital appreciation funds.”

HISTORY OF MUTUAL FUND INDUSTRY IN INDIA

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India
can be broadly divided into four distinct phases
 First Phase - 1964-1987
Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve
Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India
(IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched

8
by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under
management.
 Second Phase - 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and Life
Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual
Fund was the first non-UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund
(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry
had assets under management of Rs. 47,004 crores.
 Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry,
giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first
Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be
registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was
the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up
funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of
January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of
India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds.
 Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into
two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under
management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the assets of US
64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of
India, functioning under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI
and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had
in March 2000 more than Rs. 76,000 crores of assets under management and with the setting up of a
UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking
place among different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth.

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The Asset Management Companies:
The role of an Asset Management Company (AMC) is to act as the investment manager of the Trust
under the board supervision and the guidance of the Trustees. The AMC is required to be approved and
registered with SEBI as an AMC. The AMC of a Mutual Fund must have a net worth of at least Rs. 10
Crores at all times. Directors of the AMC, both independent and non-independent, should have
adequate professional expertise in financial services and should be individuals of high morale standing,
a condition also applicable to other key personnel of the AMC. The AMC cannot act as a Trustee of
any other Mutual Fund. Besides its role as a fund manager, it may undertake specified activities such
as advisory services and financial consulting, provided these activities are run independent of one
another and the AMC’s resources (such as personnel, systems etc.) are properly segregated by the
activity. The AMC must always act in the interest of the unit-holders and reports to the trustees with
respect to its activities.

Regulatory structure of mutual funds in India:-

Mutual funds are regulated primarily by Securities and Exchange Board of India (SEBI). In
1996, SEBI formulated the Mutual Fund Regulation. SEBI is also the apex regulator of capital markets
and its intermediaries. Issuance and trading of capital market instruments also comes under the
purview of SEBI. Along with SEBI, mutual funds are regulated by RBI, Companies Act, Stock
exchange, Indian Trust Act and Ministry of Finance. RBI acts as a regulator of Sponsors of bank-
sponsored mutual funds, especially in case of funds offering guaranteed returns. In order to provide a
guaranteed returns scheme, mutual fund needs to take approval from RBI. The Ministry of Finance
acts as supervisor of RBI and SEBI and appellate authority under SEBI regulations. Mutual funds can
appeal to Ministry of finance on the SEBI rulings.

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Indian mutual fund industry follows a 3-tier structure as shown here:

SPONSER TRUST AMC

 Sponsors
Sponsors are the individuals or entity who initiates the process of formation of a mutual fund.
For registration of a mutual fund, the Sponsor approaches SEBI. Not everyone can start a
mutual fund. SEBI grants permission to start a mutual fund only to a person of integrity,
having sound track record and reputation, having significant experience in the financial sector,
a certain minimum net worth etc. Sponsors are the main people behind the mutual fund
formation.
 Trust
Once SEBI is satisfied with the credentials and eligibility of the proposed Sponsors, the
Sponsors then establish a Trust under the Indian Trusts Act, 1882. Trustees are the
individuals/entity authorized to act on behalf of the Trust. Contracts are entered into in the
name of the Trustees. Once the Trust is created, it is registered with SEBI, after which, this
Trust is known as the mutual fund. Trustees have a significant role in ensuring that the mutual
fund complies with all the regulations and protects the interest of the investors.
 Asset Management Company (AMC) The Trustees then appoint the AMC, which is
established as a legal entity, to manage the investor's (unit holder's) money. The AMC handles
the day to day operations and money management. In return for this money management on
behalf of the mutual fund, the AMC is paid a fee for the services provided. This fee is borne by
the investors and is deducted from the money being managed. Also in all its investment
decisions, AMCs are required to exercise due diligence and care.

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TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. Being a collection of many stocks, an investors can go for
picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from.
It is easier to think of mutual funds in categories, mentioned below.

BY NATURE
1. Equity Fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the fund
may vary different for different schemes and the fund manager’s outlook on different stocks. The
Equity Funds are sub-classified depending upon their investment objective, as follows:
 Diversified Equity Funds
 Mid-Cap Funds
 Sector Specific Funds
 Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return
matrix.

2. Debt Funds:
The objective of these Funds is to invest in debt papers. Government authorities, private companies,
banks and financial institutions are some of the major issuers of debt papers. By investing in debt
instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are
further classified as:
 Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated with
Interest Rate risk. These schemes are safer as they invest in papers backed by Government.
 Income Funds: Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.
 MIPs: Invests maximum of their total corpus in debt instruments while they take minimum
exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly
high on the risk-return matrix when compared with other debt schemes.
 Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds
primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers
(CPs). Some portion of the corpus is also invested in corporate debentures.

12
 Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and
preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-
bank call money market, CPs and CDs. These funds are meant for short-term cash management of
corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes
rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual
funds.

3. Balanced Funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and
fixed income securities, which are in line with pre-defined investment objective of the scheme. These
schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the
debt part provides stability in returns.

BY INVESTMENT OBJECTIVE:
 Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these schemes is to provide
capital appreciation over medium to long term. These schemes normally invest a major part of
their fund in equities and are willing to bear short-term decline in value for possible future
appreciation.
 Income Schemes:
Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular
and steady income to investors. These schemes generally invest in fixed income securities such as
bonds and corporate debentures. Capital appreciation in such schemes may be limited.
 Balanced Schemes:
Balanced Schemes aim to provide both growth and income by periodically distributing a part of
the income and capital gains they earn. These schemes invest in both shares and fixed income
securities, in the proportion indicated in their offer documents (normally 50:50).
 Money Market Schemes:
Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer, short-term instruments, such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.
 Load Funds:
A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell
units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to
2%. It could be worth paying the load, if the fund has a good performance history.
 No-Load Funds:
A No-Load Fund is one that does not charge a commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is
that the entire corpus is put to work

13
OTHER SCHEMES
 Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time.
Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme
(ELSS) are eligible for rebate.
 Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex
or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the
index. The percentage of each stock to the total holding will be identical to the stocks index
weightage. And hence, the returns from such schemes would be more or less equivalent to those
of the Index.
 Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors or industries as
specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of
the respective sectors/industries. While these funds may give higher returns, they are more risky
compared to diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time.

14
COMPARISION OF MUTUAL FUNDS WITH ULIP
ULIPs versus mutual funds debate is more than a decade old. Both vie for the same pie of retail
investors who want to grow wealth over the long-term and seek market-linked returns. Over the years,
the fortunes of both financial instruments have fluctuated due to market swings and regulations.

Individual Comparisons
 Advantages of Mutual Funds
If mutual funds are emerging as the favourite investment vehicle, it is because of the many advantages
they have over other forms and the avenues of investing, particularly for the investor who has limited
resources available in terms of capital and the ability to carry out detailed research and market
monitoring. The following are the major advantages offered by mutual funds to all investors:

1. Portfolio Diversification:
Each investor in the fund is a part owner of all the fund’s assets, thus enabling him to hold a
diversified investment portfolio even with a small amount of investment that would otherwise require
big capital.
2. Professional Management:
Even if an investor has a big amount of capital available to him, he benefits from the professional
management skills brought in by the fund in the management of the investor’s portfolio. The
investment management skills, along with the needed research into available investment options,
ensure a much better return than what an investor can manage on his own. Few investors have the skill
and resources of their own to succeed in today’s fast moving, global and sophisticated markets.
3. Reduction/Diversification of Risk:
When an investor invests directly, all the risk of potential loss is his own, whether he places a deposit
with a company or a bank, or he buys a share or debenture on his own or in any other from. While
investing in the pool of funds with investors, the potential losses are also shared with other investors.
The risk reduction is one of the most important benefits of a collective investment vehicle like the
mutual fund.
4. Reduction of Transaction Costs:
What is true for risk is also true for the transaction cost. The investor bears all the costs of investing
such as brokerage or custody of securities. When going through a fund, he has the benefit of economies
of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors.
5. Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When they invest in
the units of a fund, they can generally cash their investments any time, by selling their units to the fund

15
if open-ended, or selling them in the market if the fund is close-end. Liquidity of investment is clearly a
big benefit.
6. Convenience and Flexibility:
Mutual fund management companies offer many investor services that a direct market investor cannot
get. Investors can easily transfer their holding from one scheme to the other; get updated market
information and so on.
7. Tax Benefits:
Any income distributed after March 31, 2002 will be subject to tax in the assessment of all unit holders.
However, as a measure of concession to Unit holders of open-ended equity- oriented funds, income
distributions for the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%.In case
of Individuals and Hindu Undivided Families a deduction up to Rs. 9,000 from the Total Income will
be admissible in respect of income from investments specified in Section 80L, including income from
Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.
8. Choice of Schemes:
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
9. Well Regulated:
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations
designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored
by SEBI.
10. Transparency:
You get regular information on the value of your investment in addition to disclosure on the specific
investments made by your scheme, the proportion invested in each class of assets and the fund
manager's investment strategy and outlook.

 DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS

1. No Control over Costs:
An investor in a mutual fund has no control of the overall costs of investing. The investor pays
investment management fees as long as he remains with the fund, albeit in return for the professional
management and research. Fees are payable even if the value of his investments is declining. A mutual
fund investor also pays fund distribution costs, which he would not incur in direct investing. However,
this shortcoming only means that there is a cost to obtain the mutual fund services.
2. No Tailor-Made Portfolio:
Investors who invest on their own can build their own portfolios of shares and bonds and
other securities. Investing through fund means he delegates this decision to the fund managers. The
very high net-worth individuals or large corporate investors may find this to be a constraint in

16
achieving their objectives. However, most mutual fund managers help investors overcome this
constraint by offering families of funds- a large number of different schemes- within their own
management company. An investor can choose from different investment plans and constructs a
portfolio to his choice.
3. Managing a Portfolio of Funds:
Availability of a large number of funds can actually mean too much choice for the investor. He may
again need advice on how to select a fund to achieve his objectives, quite similar to the situation when
he has individual shares or bonds to select.
4. The Wisdom of Professional Management:
The average mutual fund manager is no better at picking stocks than the average nonprofessional, but
charges fees.
5. No Control:
Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of somebody
else's car.
6. Dilution:
Mutual funds generally have such small holdings of so many different stocks that even a great
performance by a fund's top holdings still doesn't make much of a difference in a mutual fund's total
performance.
7. Buried Costs:
Many mutual funds specialize in burying their costs and in hiring salesmen who do not make those
costs clear to their clients.

 ADVANTAGES OF ULIP

1. Insurance cover plus saving

ULIPs serve the purpose of providing life insurance combined with savings at market-linked returns.
To that extent, ULIPS can be termed as a two-in-one plan in terms of giving an individual the twin
benefits of life insurance plus savings.
2. Multiple investment options
ULIPS offer a lot more variety than traditional life insurance plans. So, there are multiple options at the
individual’s disposal. ULIPS generally come in three broad variants:
 Aggressive ULIPs (which can typically invest 80%-100% in equities, balance in debt)
 Balanced ULIPs (can typically invest around 40%-60% in equities)
 Conservative ULIPS (can typically invest up to 20% in equities)

17
Although this is how the ULIP options are generally designed, the exact debt/equity allocations may
vary across insurance companies. Individuals can opt for a variant based on their risk profile.
3. Flexibility
The flexibility with which individuals can switch between the ULIP variants to capitalize on
investment opportunities across the equity and debt markets is what distinguishes it from other
instruments. Some insurance companies allow a certain number of ‘free’ switches. Switching also
helps individuals on another front. They can shift from an Aggressive to a Balanced or a Conservative
ULIP as they approach retirement. This is a reflection of the change in their risk appetite as they grow
older.
4. Works like an SIP
Rupee cost-averaging is another important benefit associated with ULIPs. With an SIP, individuals
invest their monies regularly over time intervals of a month/quarter and don’t have to worry about the
timing of the stock markets.

 Disadvantages of Unit Linked Insurance Plans

1. No Standardization
All the costs are levied in ways that do not lend to standardization. If one company calculates
administration cost by a formula, another levies a flat rate. If one company allows a range of the sum
assured (SA), another allows only a multiple of the premium. There was also the problem of a varying
cost structure with age

2. Lack of flexibility in life cover

ULIP is known to be more flexible in nature than the traditional plans and on most counts, they are.
However, some insurance companies do not allow the individual to fix the life cover that he needs.
These rely on a multiplier that is fixed by the insurer.
3. Overstatement of the yield
Insurance companies work on illustrations. They are allowed to show you how much your annual
premium will be worth if it grew at 10 per cent per annum. But there are costs, so each company also
gives a post-cost return at the 10per cent illustration, calling it the yield. Some companies were not
including the mortality cost while calculating the yield. This amounts to overstating the yield.
4. Internally Made Sale Illustration
During the process of collecting information, it was found that the sales benefit illustration shown was
not conforming to the Insurance Regulatory and Development Authority (IRDA) format. In many
locations 30 per cent return illustrations are still rampant.

18
5. No Benchmark Return
To talk about returns without pegging them to a benchmark is misleading the customer. Though most
companies use Sensex, BSE or the Nifty as the benchmark or the measuring rod of performance, some
companies are not using any benchmark at all.
6. Early Exit Option
The ULIP product works over the long term. The earlier the exit, the worse off is the investor since he
ends up redeeming a high-front-load product and is then encouraged to move into another higher cost
product at that stage. An early exit also takes away the benefit of compounding from insured.

19
Comparative Analysis of Mutual Funds and ULIPs within themselves :

Structure
MF- A MF collects money from the public and invests in equity, debt or a combination of both, as per
a pre specified investment objective. Investors are offered units depending on the value of their
investment, on a pro rata basis. Equity funds invest pre dominantly in the stock market to generate
growth by way of capital appreciation for investors, whereas debt funds invest in fixed income
securities such as bonds, debentures, government securities, reverse repos, etc. A balanced fund
invests partly in both equity and debt. A mutual fund scheme can be open-ended (no defined time
period) or close-ended (three years or five years).
ULIP- Although the investment proportion of a ULIP is structured like a mutual fund, the prime
objective of this product is insurance and capital appreciation. Accordingly, a part of the premium
paid to the company is allocated towards life insurance cover, administrative charges and
management fees. The rest is invested in market-linked instruments like stocks, corporate bonds and
government securities, depending on the asset allocation plan. Most ULIPs offer policy holders a
choice of plans, namely equity oriented, debt oriented and balanced, too. You will get units only for
the amount invested and not on the full premium amount paid. You can switch from one plan to
another, a specified number of times. The value of units of both ULIPs and MFs are calculated and
declared on a daily basis at their market worth and called the Net Asset Value (NAV) of the
investment fund. Investors can gauge whether their investment has appreciated or depreciated
according to NAV movement.

Tenure:
MF- There is no minimum holding period for most mutual fund schemes, except in the case of tax
saving schemes (ELSS), which have a three-year lock-in period. Close ended funds, which have a
lock-in period, are either listed on the stock exchange or provide liquidity by accepting redemptions
at periodic time intervals (e.g. every three months or six months)

ULIP- These usually have a minimum tenure of 5 years and the maximum term depends on the age of
the investor. These are also subject to a lock-in period of three years before which an investor has no
access to the investment amount.

Expenses:
MF- Expenses such as fund management, sales and marketing, administration, etc., are charged
subject to predetermined upper limits as prescribed by the Securities and Exchange Board of India.
For example, equity oriented funds can charge their investors a maximum of 2.5 per cent per annum
on a recurring basis. Any expense above the prescribed limit is borne by the fund house and not
passed on to the investors. Mutual funds also charge their investors entry and/or exit loads. Entry
loads are charged at the time of making an investment while the exit load is charged at the time of
sale.
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ULIP- There is no maximum limits prescribed by the Insurance Regulatory and Development
Authority, as regards levy of expenses on ULIP products. However, the insurance company is
required to get the expense limit pre-approved from the Insurance Regulator. The expenses have to be
explicitly stated by the insurance company. The expenses charged by ULIPs are rather high and could
range between 5 to 65 per cent for the first year and then fall to 3 to 20 per cent in subsequent years.

Returns:
MF- Mutual funds usually give better returns on investment than ULIPs, since a larger portion of your
contribution is invested in securities. The returns vary with the investment pattern. For example debt
schemes are presently offering, on an average basis, annualized returns of 3 to 8 per cent, whereas
equity oriented schemes are presently offering returns in the range of 30 to 60 per cent per annum.

ULIP- ULIPs charge higher expenses as a percentage of your investment than MFs, the amount
available for investment reduces to that extent. Life insurance cover charges and other expenses are
factored into the ULIP premium. Since the base for investment is lower, the returns offered by ULIP
will mostly be lower than those on mutual fund schemes.

Returns of ULIPs, MFs are almost similar

Returns are as of 23 april. Returns of time period more than 1 year are annualised.

Options for receiving returns:

MF - Returns are available to investors in the form of dividends if the dividend option is chosen by
the investor. In the case of the growth option, these are in the form of capital appreciation.
ULIP- The return is in the form of capital appreciation and insurance cover in case of premature
death.

21
 Redemption procedure:
MF- The redemption amount is calculated by multiplying the NAV (minus exit load, if any) on the
date of redemption with the number of units redeemed. Mutual fund investments are highly liquid
(the redemption amount is received within 1 to 3 working days based on scheme type).
ULIP- In the case of ULIPs, you can redeem units under any of the following situations:

 Maturity: This is on the expiry/maturity date of the ULIP

 Surrender: If you surrender your policy, you receive the surrender value as stated in the policy, only
after the lock-in period of three years.
 Death: In the event of unfortunate demise of the investor, his nominee receives the sum assured or
the value of the units, whichever is higher. Partial Withdrawals: Some funds allow partial
withdrawal at periodic time intervals. Your units will stand reduced to that extent.
Suitability:
A mutual fund offers certain advantages in terms of cost, various types and sub-types of plans and
liquidity. ULIPs on the other hand, give you the flexibility to shift between various plans within the
insurance company, without high load cost and capital gains implications. Further, if you plan to
invest for the long term (more than 10 years), you could consider ULIPs as this vehicle would ensure
that your insurance needs are taken care of and you enjoy capital appreciation as well.

Tax-savings:
ULIPs allow you tax deductions, as per Section 80C of the Income Tax Act. Whatever money you
invest in a ULIP is deducted from your total taxable income. This then reduces the money you owe to
the government as income tax. Mutual funds, on the other hand, do not always help you reduce taxes.
Only ELSS or Equity-Linked Saving Schemes give you such tax deductions.

22
Comparative analysis of mutual fund and ULIP considering the recent
changes in the plans of government.

In mutual fund long-term capital gains (LTCG) tax for a holding period of more than a year was
zero. So when the government reintroduced LTCG tax on equity after almost 14 years, it was quite a
shocker. In 2018, the government announced a 10% tax on LTCG from equity (shares and mutual
funds), though LTCG up to ₹1 lac remains exempt.

The maturity returns from ULIPs are tax-free. The investment component in a ULIP works like a
mutual fund but it comes bundled with a tiny layer of insurance, which is why it is guided by different
tax rules. As per Section 10 (10D) of the Income-tax Act, if the sum assured in a life insurance policy
is at least 10 times the annual premium, then the proceeds are tax-free. So when you invest in an
equity fund in a ULIP, you pay no LTCG tax, but you pay a short-term capital gains tax of 15% in an
equity-oriented mutual fund if you redeem within a year and 10% LTCG tax if you redeem after a
year. But this is not the only point of discrimination that goes badly for a mutual fund.
The advantage has become even bigger after the new LTCG tax comes in from 1st April, 2018. As
many insurers have been quick to point out, while gains from balanced and equity funds will
betaxedat10%, incomefromULIPswillbecompletelytaxfree. The tax-free advantage of ULIPs extends
beyond equity funds to the fixed income space. ULIPs not only offer equity funds but also debt and
liquid fund options to investors. In this space, income from fixed deposits is taxed at the marginal rate
while LTCG from debt funds are taxed at 20% after indexation. However, gains from ULIPs are tax
free.
In the light of the proposed introduction, we can see the comparisons as follows:

 Where Unit-Linked Insurance Plans (ULIPs) score over mutual funds?

1. The maturity amount in ULIPs is exempt from tax. In case of mutual funds, the long-term
capital gains resulting from sale of equity mutual funds units is taxed at 10%.
2. Even if a investor hold his entire money in a debt ULIP fund, the maturity proceeds are still tax
free.
Whereas, in case of a debt mutual fund, he will have to pay long term capital gains tax at 20%
(after allowing for indexation).
3. If an investor wants to switch to another fund within the same ULIP, it does not give rise to
any tax liability towards him. For instance, he can shift from Aggressive Growth (equity) fund to
a conservative fund (debt) or vice-versa within the ULIP. There will not be any tax liability.

23
 However, in case of mutual fund, if switch from one fund to another, it is equivalent to redemption
from one fund and purchase in another fund. And redemption gives rise to both exit load and
capital gains tax implications.
4. Therefore, if an investor want to rebalance his portfolio, it is much easier to do in case of a
ULIP. Or rather, the cost of such rebalancing will be much lower in ULIPs.

 Where Unit-Linked Insurance Plans (ULIPs) struggle against mutual funds?

1. The performance of ULIP funds may be misleading
Mortality charges and policy administration charges are deducted by cancellation of units. In case of
mutual funds, the performance that one sees is net of all the charges (expenses) and the taxes has to
be paid.
2. An investor cannot exit an underperformer in ULIP
If one of the MF investments were under-performing; an investor would probably exit the investment
and invest the proceeds elsewhere.
In case of you have a choice of 4-5 ULIP funds from the same insurance company. However, those
are different types of funds This takes away his flexibility. One can always exit the ULIP and
purchase another. However, there are restrictions on when you can exit. Moreover, when an investor
invests in a new ULIP, the lock-in period starts again.
Whereas, in case of mutual funds, an investor could have simply sold his investments and shifted to
another fund and hence, exercise his flexibility.
3. The Fund Management Charges (FMC) may not be as low
One of the prominent arguments used by life insurance industry in favor of ULIPs is that ULIPs have
very low charges.
FMC in ULIPs is capped at 1.35% p.a. There is also a cap of difference between gross yield and net
yield.
At the same time, expense ratio in mutual funds can be as high as 2.5%-3% p.a. for an equity fund.
However, it is to be noted that it is not that the expense ratio is as high for all the funds. In case of
debt funds, one can expect the expense ratio to be lower. The expense ratio is further lower for direct
plans (in both equity and debt funds).
If we see, 1.35% p.a. may look like a good number for an equity fund. However, if the same FMC
were to be charged for say a liquid or a short-term bond fund, it is quite high. Moreover, these are not
the only charges that you incur (as we have seen above).
Hence, we can see ULIPs as well as Mutual funds; both have their pros and cons

24
Chapter 2 : Introduction To Insurance Industry

Introduction
The insurance industry of India consists of 57 insurance companies of which 24 are in life insurance
business and 33 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the
sole public sector company. Apart from that, among the non-life insurers there are six public sector
insurers. In addition to these, there is sole national re-insurer, namely, General Insurance Corporation
of India (GIC Re). Other stakeholders in Indian Insurance market include agents (individual and
corporate), brokers, surveyors and third party administrators servicing health insurance claims.

Market Size
Government's policy of insuring the uninsured has gradually pushed insurance penetration in the
country and proliferation of insurance schemes.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with Rs 4.58
trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion) from non-life
insurance. Overall insurance penetration (premiums as % of GDP) in India reached 3.69 per cent in
2017 from 2.71 per cent in 2001.
In FY19 (up to October 2018), premium from new life insurance business increased 3.66 per cent
year-on-year to Rs 1.09 trillion (US$ 15.46 billion). In FY19 (up to October 2018), gross direct
premiums of non-life insurers reached Rs 962.05 billion (US$ 13.71 billion), showing a year-on-year
growth rate of 12.40 percent.

Investments and Recent Developments

The following are some of the major investments and developments in the Indian insurance sector.
 As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo Munich Health
Insurance at a valuation of around Rs 2,600 crore (US$ 370.05 million).
 In October 2018, Indian e-commerce major Flipkart entered the insurance space in partnership
with Bajaj Allianz to offer mobile insurance.
 In August 2018, a consortium of WestBridge Capital, billionaire investor Mr Rakesh
Jhunjunwala announced that it would acquire India’s largest health insurer Star Health and
Allied Insurance in a deal estimated at around US$ 1 billion.
 In September 2018, HDFC Ergo launched ‘E@Secure’ a cyber insurance policy for
individuals.

25
  Insurance sector companies in India raised around Rs 434.3 billion (US$ 6.7 billion) through
public issues in 2017.
 In 2017, insurance sector in India saw 10 merger and acquisition (M&A) deals worth US$ 903
million.
 India's leading bourse Bombay Stock Exchange (BSE) will set up a joint venture with Ebix Inc
to build a robust insurance distribution network in the country through a new distribution
exchange platform.

Government Initiatives
The Government of India has taken a number of initiatives to boost the insurance industry. Some of
them are as follows:
 In September 2018, National Health Protection Scheme was launched under Ayushman Bharat
to provide coverage of up to Rs 500,000 (US$ 7,723) to more than 100 million vulnerable
families. The scheme is expected to increase penetration of health insurance in India from 34
per cent to 50 per cent.
 Over 47.9 million famers were benefitted under Pradhan Mantri Fasal Bima Yojana (PMFBY)
in 2017-18.
 The Insurance Regulatory and Development Authority of India (IRDAI) plans to issue
redesigned initial public offering (IPO) guidelines for insurance companies in India, which are
to looking to divest equity through the IPO route.
 IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1 (AT1) bonds that are
issued by banks to augment their tier 1 capital, in order to expand the pool of eligible investors
for the banks.

Road Ahead
The future looks promising for the life insurance industry with several changes in regulatory
framework which will lead to further change in the way the industry conducts its business and engages
with its customers.
The overall insurance industry is expected to reach US$ 280 billion by 2020. Life insurance industry in
the country is expected grow by 12-15 per cent annually for the next three to five years.
Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of Indian life
insurance.

26
CHAPTER – 3: COMPANY PROFILE

Introduction of Future Generali India Life Insurance Company Limited

Type Joint venture

Industry Insurance
Founded Sep 2007
Headquarters Mumbai, India
KG Krishnamoorthy Rao, MD &
Key people CEO
Products insurance,
Total assets Rs. 2,484 Crore (2017)
parent Future group and Generali group
Website http://general.futuregenerali.in/

Future Generali India Life Insurance Company Limited is a joint venture between three leading
groups: Future Group – A leading retailer in India, Generali Group- A global insurance group that
features among top 50* smartest companies in the world and Industrial Investment Trust Limited
(IITL) – A leading investment company.

At Future Generali India Life Insurance Company Limited, our mission is to actively protect and
enhance peoples’ lives. With operations spread across 104 branches and a complete range of simplified
solutions for the financial security of customers and enterprises, we aim to become the first choice by
delivering relevant and accessible insurance solutions.
Future Group operates some of India’s most popular retail chains like Central, Big Bazaar, Food
Bazaar, Home Town and eZone.
Generali is an independent, Italian Group, with a strong international presence. Established in 1831, it
is among the world’s leading insurers and it is present in over 60 countries with total premium income
exceeding €70 billion in 2016.

27
Industrial Investment Trust Limited (IITL) , was incorporated in the year 1933 as an investment
trust company. IITL sought to provide its shareholders an expert advice on investment portfolio
Future Generali India has been serving the customers by leveraging upon its global Insurance
expertise in diverse classes of products of Generali Group and the Indian retail game changers
Future Group.

Having firmly established its credentials in this segment and effectively leveraging on the skill
set of both its JV partners, Future Generali India has evolved to become a Total Insurance
Solutions Company.
*As per Fortune Global 500 Ranking (2017)
The Company was incorporated in September 2006 with the objective of catering to an under-insured
country and provide financial security to people. The company offers a comprehensive range of
products across savings, protection, and unit linked policies, retirement plans as well as group
products. The Company reaches out to customers through more than 17,000 advisors and FG Direct
channels across the country.
In a span of 9 years, the Company has presence in over 80 locations across the country. The Company
has sourced over 11 lakh policies since inception, and today insures over 450 marquee corporates in
India and internationally such as Cadbury, Coca-Cola, Intel, Philips, DuPont, Reebok, Jet Airways,
Morgan Stanley to name a few.

Registered Office: Future Generali India Insurance Company Limited. (Reg. No 132). CIN:
U66030MH2006PLC165287. Indiabulls Finance Centre, 6th Floor, Tower 3, Senapati Bapat
Marg, Elphinstone Road, Prabhadevi (W), Mumbai - 400 013.

 Vision, Mission & Values

Vision
Our vision is to actively protect and enhance people lives
 Actively: We play a proactive and leading role in improving people lives through insurance.
 Protect: We are dedicated towards managing and mitigating risks of individuals and institutions.
 Enhance: Generali is also committed to creating value.
 People: We deeply care about our customer and our employee lives and their future.
 Lives: Ultimately, we have an impact on the quality of people lives-wealth, safety, advice and
service are instrumental in improving a person chosen way of life in the long term.

28
Mission
Our mission is to be the first choice by delivering relevant and accessible insurance solutions
 First choice: Logical and natural action that acknowledges the best offer in the market based on
clear advantages and benefits.
 Delivering: We ensure achievement striving towards better performance.
 Relevant: Anticipating or fulfilling a real life need or opportunity, tailored to local and personal
needs and habits, perceived as valuable.
 Accessible: Simple and easy to find, understand and use; always available, at a competitive
value for money.
 Insurance solutions: We aim to offer and tailor a combination of protection, advice and service.

Values
Deliver on the promise
 We tie a long-term contract of mutual trust with our people, customers and stakeholders; all of
our work is about improving the lives of our customers.
 We commit with discipline and integrity to bringing this promise to life and making an impact
within a long lasting relationship.
Value our people
 We value our people, encourage diversity and invest in continuous learning and growth by
creating a transparent, cohesive and accessible working environment. Developing our people
will ensure our Company's long term future.
Live the community
 We are proud to belong to a global Group with strong, sustainable and long lasting relationships
in every market in which we operate. Our markets are our homes.

Future Generali Product Portfolio

Future Generali life insurance bring various life insurance product that are designed to cater to the
varying needs of the Indian consumer. These include future generali life insurance term plans, ULIP
plans, pension and retirement plans, investment plans and child plans.
Future Generali Distribution Network
Future Generali Life Insurance like all other insurance companies also follows various formats of
distribution network to sell the products in various markets. They also have a unique distribution
channel known as mall assurance.

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SWOT Analysis :

Future Generali Life Insurance SWOT Analysis

Below is the Strengths, Weaknesses, and Opportunities & Threats (SWOT)

Analysis of Future Generali Life Insurance. Strengths are:

1. Known for its prudent investment management

Strengths 2. Wide range of policies

3. International expertise and reputation of Generali group

4. Aggressive Marketing
5. Generali group is present in over 68 countries with over 85,000
employees
6. Future group operates over 12 million square feet of retail space in 71
cities and towns and 65 rural locations
Here are the weaknesses in the Future Generali Life Insurance SWOT
Analysis:
1. Small branch base
Weaknesses
2. Low Marketing

3. Insurance companies have a poor image when it comes to payment of

dues

Following are the Opportunities in Future Generali

Opportunities Life Insurance SWOT Analysis:
1. Growing rural market
2. Earning Urban Youth
3. Cross selling through financial services such as
banking

The threats in the SWOT Analysis of Future

Generali Life Insurance are as mentioned:
Threats

1. Stringent Economic measures by Government

and RBI

2. Entry of new NBFCs in the sector

30
Future Generali Life Insurance Competitor:

Below are the competitors of Future Generali Life Insurance: ICICI Lombard, Bajaj Allianz, Reliance
Life Insurance HDFC ERGO

Future Generali Life Insurance STP

Segment-Personal and Institutional Insurance
Target Group-Urban and Rural Investors.
Positioning - Complete Insurance and financial solutions.

Future Generali Insurance Products

Health Insurance Plans
 Future Health Suraksha Individual.
 Future Health Suraksha Family.
 Future Criticare Plan.
 Accident Suraksha.
 Future Health Surplus.
 Future Hospicash.
Home Insurance Plan
 Home surksha
Travel Insurance Plans
 Future Travel Suraksha – Asia Travel.
 Future Travel Suraksha – Worldwide Travel.
 Future Travel Suraksha – Schengen Travel.
 Future Student Suraksha.
Motor Insurance Plans
 Two Wheeler Insurance.
 Car insurance plan

31
Chapter 4: RESEARCH METHODOLOGY

Type of research design is Descriptive research

Data Source:

This report is based on primary as well as secondary data. The study aims at finding out the attitude of
the investors towards ULIP and Mutual fund in Navi Mumbai. This study was based mainly on
primary sources. The primary data was collected from the investors with help of the questionnaire
which are supplied among the investors through Google forms.
The secondary data were collected from the books, records and journals. The essential data were
collected with the help of questionnaire.

Sample Size:

The sample size of our project is limited to 100 people only. Out of which only 65 people responded

Research Questions:
 Is there awareness about mutual funds or ULIP funds amongst people
 What are the various aspects of
 What are the investment avenues preferred
 Expectations of investors.

32
Chapter 5: Data Analysis and Interpretation

1. Which of the following investment options would you prefer?

3%
9% Bank fixed deposit
Postal savings
Shares and bonds
43%
24% Mutual funds
Insurances policies
other

13%
8%

Analysis: 43% of respondents have invested in bank deposits, 8% in Postal savings, 13% of
respondents in shares and bonds and 24% in mutual funds, 9% in Insurance Policy and 3% have
invested in other investment options.

2. Have you invested in the following? (If yes, go to Q no.4)

Other:
20%

Mutual funds
42%
Insurances
policies
38%

Analysis: According to the above table 42 % of the respondents have invested in Mutual Funds and 38
% respondents have invested in Insurance Policies, 20% have invested in both the Mutual Fund and
Insurance Policies.

33
3. What is the reason for not investing?

Non
respondents
10%

Uncertainty
Others 27%
18%

Not interested
in investment
1%
High cost
44%

Analysis: According to the above table 27%of the respondents are Uncertain to invest in. 44% of the
respondents think it is high cost and 1% of them are not interested in investments, 18% of respondents
have Invested in other investment.

4. Are you aware of ULIP concepts in Insurance?

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
yes no

Analysis: 43% are aware of ULIP concept and 57% are not aware of ULIP, This show that more than
half people are still not aware of Unit Linked Insurance Plan.

34
5. Do you hold Unit linked insurance plan?

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
yes no

Analysis: Only 31% of customers hold Unit Linked Insurance Plan and 69% do not hold Unit Linked
Insurance Plane

6. In which companies have you invested? (Insurance specifically)

22%

41%

26%
11%

LIC Future Generali India Others not invested

Analysis : According to survey 41% have invested in LIC India , 11% have invested in Future
Generali India, 26% in other insurance companies and 22% don’t hold any plans from insurance
companies.

35
7. What made you to go for that company?

13.30%
30%

30%

26.70%

Brand Name Service Better Policy Option Non Respondent

Analysis:According to survey 30% of investors go for investing due to brand name of the company,
26.70% investors go before services rendered by the companies and 30% prefer the companies with
better policy options.

8. What did you like about Unit Linked Insurance Plan?

19.40%

38.70%

17.70%

24.20%

Liquidity Withdrawal Flexibility Others

According to chart 38.7% prefer ULIP for liquidity, 24.2%liked ULIP plans due to
Analysis:
withdrawal option and 17.70% investors liked it because of its flexibility.

36
9. What extra benefits would you like to have along with life cover?

5.70%

32.40%
30%

32.40%

Family Income Benefit Critical Illness Benefit Returns Other

Analysis:According to chart 32.40% people expect to get family income benefit, similarly 32.4%
people expect to get critical investment benefit, 30% expect good returns and 5.70% have other
expectations.

10. What is your expectation from investment plan?

Security and Security

Easy Claim 17%
14%
Others
Maximum Sum 10%
Assured
0%
Easy Claim
12%
High Return
39%

Minimum
Premium
8%

Analysis: According to table 17% of respondents expect security, 39% expect high return and 8%
expect minimum premium, 12% expect easy claim and, 7% expect security and easy claim.

37
11. Are you aware of mutual funds concepts in Investment?

100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
yes no

Analysis: 89% of people are aware of mutual fund concept and 11% of people are not aware about
mutual fund concept

12. Do you think investing in Mutual Fund is worthy?

no responses
11%

no
21%

yes
68%

Analysis: 68% of thepeople find investing in Mutual funds worthy or profitable whereas 21% people
don’t prefer mutual funds for investment and 11% are not sure about it.

38
13. According to you why an individual should invest in Mutual Fund?

To have a faster
rate of growth
13%

To multiply
money
46%
Moderate
return with
minimum risk
41%

Analysis:46% of people think that mutual funds are good investment option for multiplying invested
money, 41% people think that it is better because it has moderate return with minimum risk. 13%
people think that mutual fund is good to have faster rate of growth.

14. How likely you recommend investment in ULIP?

Non-
Respondents
21% Definitely
Recommend
41%

Might Not
Recommend
38%

41% people strongly recommend investment in ULIP plans, 38% might not recommend
Analysis:
whereas 21% are not sure to give recommendation.

39
15. How likely you recommend investment in Mutual fund?

13.60%

25.40%
61%

Definitely recommend Might not recommend Non respondent

61% people strongly recommend investment in Mutual fund plans, 25.4% might not
Analysis:
recommend whereas 31.6% are not sure to give recommendation.

16. How do you rank Unit linked plan compared to Mutual Fund?

50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Good Satisfactory bad very bad no response

Analysis : According
to survey , 42.90% people think that ULIP is good investment avenue than Mutual
funds whereas 31.70% think it as satisfactory investment option 3.2% find it bad investment option ,
12.7% think ULIP is very bad option and 9.5% are not sure to give any recommendation.

40
Comparison of ULIP and mutual funds by taking Examples :
By practically comparing the returns of ULIP and mutual funds, the clear picture can be seen.
For comparison funds are selected randomly through secondary data and Mean standard deviation and
bet is calculated using Microsoft Excel. whereas,
Mean is the average returns of the fund. Higher the Mean Higher the average returns.
Standard Deviation value gives an idea about how volatile fund returns has been. Lower value
indicates more predictable performance.
Beta value gives idea about how fund performance compared to NIFTY in the market. Lower beta
implies the fund gives more predictable performance compared to similar funds in the market.
Note: Beta measures the risk of the market as a whole, while standard deviation measures the risk of
individual stocks.
Beta is calculated by comparing the returns with NIFTY returns.

Nifty returns
Year Returns
1 4.8
2 8.84
3 11.86
5 10.97

Mutual fund plans

In below given table returns are mentioned of below given Mutual funds
1. Axis Blue-chip Fund - Direct Plan – Growth
2. HDFC Small Cap Fund - Growth
3. Reliance Growth Fund – Growth

Axis Bluechip HDFC Small Reliance

Fund - Direct Cap Fund - Growth Fund
Plan - Growth Growth - Growth
1 Year 3% -16% -6%
2 Year 12% 0% -2%
3 Year 14% 8% 6%
5 Year 13% 12% 10%
Mean 10.31% 0.98% 1.90%
Standard Deviation 4.54% 10.81% 6.52%
Beta 1.61% 3.86% 2.16%

41
Below given is graphical presentation for the same data
20%
15%
10% Axis Bluechip Fund -
Direct Plan - Growth
5%
HDFC Small Cap Fund -
0%
Growth
-5% 1 2 3 4
Reliance Growth Fund -
-10% Growth
-15%
-20%

From data it is observed that -

1. Mean of Axis bluechip fund is 10.31% Higher which means it gives higher average returns Where
reliance growth fund gives 1.90%, ranks second and HDFC Small Cap Fund which gives 0.98% ranks
third.
2. Standard deviation of HDFC small cap fund is 10.81% highest that means it has high volatility fund
whereas axis bluechip fund has lowest standard deviation i.e. 4.54% which means it has low volatility
compared to other two funds.
3. Beta value of HDFC small cap fund is 3.86%, which is higher than Axis Blue-chip Fund i.e. 1.61%
and Reliance Growth Fund 2.16% that means market risk of HDFC small cap fund is higher compared
to other two funds.

ULIP plans
In below given table returns are given of below mentioned ULIP Funds
1. HDFC Endowment Super - Balanced Managed Fund II
2. TATA AIA Individual Life – Growth
3. Future Freedom Plan - Future Secure

HDFC TATA AIA Future

Endowment Individual Freedom Plan
Super - Balanced Life - - Future
Managed Fund Growth Secure
II
1 Year 2.70% 2.70% 8.6%
2 Year 3.80% 5.50% 6.4%
3 Year 7.30% 9.50% 6.7%
5 Year 8.90% 10.20% 8.2%
Mean 5.68% 6.98% 7.48%
Standard Deviation 2.52% 3.05% 0.94%
Beta 0.80% 1.07% -0.18%

42
Below given is graphical presentation for the same data

12.00%

10.00% HDFC Endowment Super

- Balanced Managed
8.00% Fund II
TATA AIA Individual Life -
6.00%
Growth
4.00%
Future Freedom Plan -
2.00% Future Secure
0.00%
1 2 3 4

From data it is observed that -

1. Mean of Future Freedom Plan is 7.48% and higher that means it gives higher returns compared to
other funds, whereas HDFC Endowment Managed Fund stands second and has mean 5.68%, whereas
TATA AIA Individual Life – Growth fund has 6.98% mean.
2. Standard deviation of TATA AIA Individual Life Growth fund is 3.05% which is higher than other
2 funds where, Future Freedom Plan - Future Secure has lowest standard deviation 0.94%
And HDFC Endowment Managed Fund 2.52% stands second.
3. Beta value of Future Freedom Plan - Future Secure is the lowest i.e. -0.18% whereas HDFC
Endowment Managed Fund has beta 0.80% stands second and the highest beta 1.07% is of TATA AIA
Individual Life – Growth

Collectively:

 Mean of average returns of mutual fund investments is 4.40%, and 6.71% of ULIP funds
That means that ULIP funds give higher average returns than mutual funds
 Where. mean of standard deviation of ULIPs (2.17%) and mutual fund(7.29%) returns is calculated it was
found that mutual fund have more risk than ULIPs

Conclusion from above data :

1. Mutual funds seems to have more risk than ULIP

2. ULIP gives higher average returns than Mutual funds.
3. Future Generali’s future freedom plan – future secure gives higher returns than other selected plans.

43
Chapter 6 : Conclusion & Suggestions

CONCLUSION

In this study ULIP and Mutual Fund investment are compared on different parameters using
questionnaire method of survey. According to survey mutual fund investment is proved to be the better
investment option over ULIP, to investors on liquidity, taxability ease of choice risk factors, returns on
investment. But when compared and analyzed taking popular funds and plans it was found that ULIPs
also give better returns.

OVER ALL FACTS AND FINDINGS

 ULIPs, are positioned as long-term products and going ahead, there will be separate playing
fields for ULIPS and MFs, with the product differentiation between them becoming more
pronounced.
 ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and
structure, the first and foremost purpose of insurance is and will always be ‘protection’. The
value that it provides cannot be downplayed or underestimated. As an instrument of protection,
insurance provides benefits that no investment can offer.
 It is important for an investor to understand his financial goals and horizon of investment in
order to make an informed investment decision. The decision to invest in either a mutual fund
or a ULIP should depend on the time period of investment, individual financial goals as well as
risk taking appetite, and it’s about time the industry and customer realize it.
 Mutual funds are essentially short to medium term products. The liquidity that these products
offer is valuable for investors.
 Thus we can say that ULIPs are different from Mutual funds, and the basic difference between
the two is the Insurance cover i.e. protection. Also
 The ULIPs are for long term investments and Mutual Fund’s long as well as short term.

LIMITATIONS
 The time constraint was one of the major problems.
 The study is limited to the different schemes available under the mutual funds and ULIP
selected.
 The lack of information sources for the analysis part.
 Schemes preferred specifically from future generali are not taken into consideration because
there are various options available for ULIP plans

44
SUGGESTIONS
• Most of the respondents are not aware of Unit Linked Insurance Plans an investment option;
the awareness programmed for non-investor should be increased by different Medias like TV,
Magazines, & News Paper. Educate people by arranging a meeting or fair for investors and
explaining about how ULIP works because investors are not aware of ULIP a and investors do
not have the sufficient knowledge of the basic concepts of ULIP & about the operating of
ULIP.
• Complete information should be provided regularly to the advisors as well as to the investors to
keep them updated about the developments.
• Many of the investors say that they are ready to recommend about investment to friends, so the
company should approach the Investors through the distributors and explain about the
Insurance schemes.
• The schemes should be designed in such a way which would also suit to the pockets of the
lower and middle income groups for that the premium should be quite less so that even lower
class of people can invest in such policy.
• Term of the policy should be reduced.
• The premium amount should be reduced
• The charges should be revised if possible to make it affordable and attractive

45
Annexure:

Questionnaire:

1. Which of the following investment options would you prefer?

o Bank fixed deposit
o Postal savings
o Shares and bonds
o Mutual funds
o Insurances policies
o Other

2. Have you invested in the following? (if yes, go to Q no.4)

o Mutual funds
o Insurance policies
o None of above

3.What is the reason for not investing?

o Uncertainty
o High cost
o Not interested in investment
o Others
o Non respondents

4. Are you aware of ULIP concepts in Insurance?

o Yes
o No
o
5. Do you hold Unit linked insurance plan?
o Yes
o No

6. In which companies have you invested?

o LIC
o Future Generali India
o Others
o None of above
o
7. What made you to go for that company?
o Brand Name
o Service
o Better Policy Option
o Non Respondent

8. What did you like about Unit Linked Insurance Plan?

o Liquidity
o Withdrawal
o Flexibility
o Others
46
9. What extra benefits would you like to have along with life cover?
o Family Income Benefit
o Critical Illness Benefit
o Returns
o Others

10 What is your expectation from investment plan?

o Security
o High Return
o Minimum Premium
o Easy Claim
o Maximum Sum Assured
o Others
o Security and Easy Claim
11. Are you aware of mutual funds concepts in Investment ?
o Yes
o No

12. Do you think investing in Mutual Fund is worthy?

o yes
o No
o No response

13. According to you why an individual should invest in Mutual Fund?

o To multiply money
o Moderate return with minimum risk
o To have a faster rate of growth
o Other

14.How likely you recommend investment in ULIP ?

o Definitely Recommend
o Might Not Recommend
o Non-Respondents

15. How likely you recommend investment in Mutual fund ?

o Definitely recommend
o Might not recommend
o Non respondent

16.How do you rank Unit linked plan compared to Mutual Fund?

o Good
o Satisfactory
o bad
o very bad
o no response

47
Bibliography :

Websites

www.moneycontrol.com india
www.investing.com india
https://www.investopedia.com
https://www.mutualfundindia.com
https://cleartax.in/s/unit-link-insurance-plan-ulip

48