SUMMER INTERNSHIP PROJECT

With Prudent Corporate Advisory

Services ltd

Comparison of Kotak Mahindra

ULIP with other private
Insurance players
ACKNOWLEDGEMENT

Successfully accomplished project work and the completion of this report

have been made possible by the significant contributions of many people.

First and foremost I would like to express my deepest gratitude to

MR.DEEPAK JAGTAP, Branch Head (Alternate Channel) Prudent Corporate
Advisory Services ltd. For his valuable time and advice in making of this
project. Without his support and guidance the completion of this project
would not have been possible.

The faculty members of B.V..I.M.I.T who provided me with valuable

insights into the completion of this project. Especially, my mentor
Dr.GOVIND SHINDE , who extended his guidance and support for bringing
out this report in best possible way.

I thank my institute B.V.I.M.I.T for providing me a platform to work with

leading business house in India .I also thankful to my batch mates who
have helped me in getting acquainted with various aspects during this
project.

Finally I’m thankful to Prudent Corporate Advisory Services ltd for

providing me the opportunity to work for my project and gaining
knowledge about the Kotak Mahindra Life insurance & the ULIP in
general.

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Table of contents

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SNo. TOPIC PAGE NO.

1 Introduction of Insurance 5

2 Principles of Insurance 5

3 Functions of Insurance 6

4 Types of Insurance 8

5 Insurance sector in India 15

6 Important parts/features of ULIPS 16

7 Children Plans 22

8 Family Plans 25

9 Statement of Problem 29

10 Findings and Analysis 30

11 Recommendations 39

12 References 40

13 Appendix 41

Insurance
Insurance is basically sharing of losses. In Law and economics, insurance
is a form of risk management primarily used to hedge against the risk of

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a contingent loss. Insurance is defined as the equitable transfer of the
risk of a potential loss, from one entity to another, in exchange for a
premium. Insurer, in economics, is the company that sells the insurance.
Insurance rate is a factor used to determine the amount, called the
premium, to be charged for a certain amount of insurance coverage.
Risk management, the practice of appraising and controlling risk, has
evolved as a discrete field of study and practice.

Principles of insurance

1. A large number of homogeneous exposure units. The vast

majority of insurance policies are provided for individual members
of very large classes.

2. Definite Loss. The event that gives rise to the loss that is subject
to insurance should, at least in principle, take place at a known
time, in a known place, and from a known cause

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

should be fortuitous, or at least outside the control of the
beneficiary of the insurance. The loss should be ‘pure,’ in the sense
that it results from an event for which there is only the opportunity
for cost.

4. Large Loss. The size of the loss must be meaningful from the
perspective of the insured. Insurance premiums need to cover both
the expected cost of losses, plus the cost of issuing and
administering the policy, adjusting losses, and supplying the capital
needed to reasonably assure that the insurer will be able to pay
claims.

5. Affordable Premium. If the likelihood of an insured event is so

high, or the cost of the event so large, that the resulting premium
is large relative to the amount of protection offered

6. Calculable Loss. There are two elements that must be at least

estimatable, if not formally calculable: the probability of loss, and
the attendant cost.

7. Limited risk of catastrophically large losses. The essential risk

is often aggregation. If the same event can cause losses to
numerous policyholders of the same insurer, the ability of that
insurer to issue policies becomes constrained, not by factors
surrounding the individual characteristics of a given policyholder,

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 but by the factors surrounding the sum of all policyholders so
exposed.

FUNCTIONS OF INSURANCE

1. Primary function
2. Secondary functions
3. Other functions

Primary functions
1. Provide Protection - The primary function of insurance is to
provide protection against future risk, accidents and uncertainty.
Insurance cannot check the happening of the risk, but can certainly
provide for the losses of risk. Insurance is actually a protection
against economic loss, by sharing the risk with others.
2. Collective bearing of risk - Insurance is a device to share the
financial loss of few among many others. Insurance is a mean by
which few losses are shared among larger number of people. All the
insured contribute the premiums towards a fund and out of which
the persons exposed to a particular risk is paid.
3. Assessment of risk - Insurance determines the probable volume
of risk by evaluating various factors that give rise to risk. Risk is the
basis for determining the premium rate also.
4. Provide Certainty - Insurance is a device, which helps to change
from uncertainty to certainty. Insurance is device whereby the
uncertain risks may be made more certain.

Secondary functions
1. Prevention of Losses - Insurance cautions individuals and
businessmen to adopt suitable device to prevent unfortunate
consequences of risk by observing safety instructions; installation of
automatic sparkler or alarm systems, etc. Prevention of losses
cause lesser payment to the assured by the insurer and this will
encourage for more savings by way of premium. Reduced rate of
premiums stimulate for more business and better protection to the
insured.
2. Small capital to cover larger risks - Insurance relieves the
businessmen from security investments, by paying small amount of
premium against larger risks and uncertainty.
3. Contributes towards the development of larger industries -
Insurance provides development opportunity to those larger
industries having more risks in their setting up. Even the financial
institutions may be prepared to give credit to sick industrial units
which have insured their assets including plant and machinery

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 Other functions

1. Means of savings and investment - Insurance serves as savings

and investment, insurance is a compulsory way of savings and it
restricts the unnecessary expenses by the insured's For the
purpose of availing income-tax exemptions also, people invest in
insurance.
2. Source of earning foreign exchange - Insurance is an
international business. The country can earn foreign exchange by
way of issue of marine insurance policies and various other ways.
3. Risk Free trade - Insurance promotes exports insurance, which
makes the foreign trade risk free with the help of different types of
policies under marine insurance cover.

Types of Insurance

1. Automobile insurance, known in the UK as motor

insurance, is probably the most common form of insurance and

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 may cover both legal liability claims against the driver and loss of
or damage to the insured's vehicle itself.
2. Aviation insurance- insures against hull, spares,
deductible, hull war and liability risks.
3. Boiler insurance- (also known as boiler and machinery
insurance or equipment breakdown insurance) insures against
accidental physical damage to equipment or machinery.
4. Builder's risk insurance- insures against the risk of
physical loss or damage to property during construction. Builder's
risk insurance is typically written on an "all risk" basis covering
damage due to any cause (including the negligence of the insured)
not otherwise expressly excluded.
5. Business insurance- can be any kind of insurance that
protects businesses against risks. Some principal subtypes of
business insurance are (a) the various kinds of professional liability
insurance, also called professional indemnity insurance, which are
discussed below under that name; and (b) the business owners
policy (BOP), which bundles into one policy many of the kinds of
coverage that a business owner needs, in a way analogous to how
homeowners insurance bundles the coverage’s that a homeowner
needs.
6. Casualty insurance- insures against accidents, not
necessarily tied to any specific property.
7. Credit insurance- repays some or all of a loan back when
certain things happen to the borrower such as unemployment,
disability, or death. Mortgage insurance (which see below) is a
form of credit insurance, although the name credit insurance more
often is used to refer to policies that cover other kinds of debt.

8. Crime insurance insures the policyholder against losses

arising from the criminal acts of third parties. For example, a
company can obtain crime insurance to cover losses arising from
theft or embezzlement.
9. Crop insurance "Farmers use crop insurance to reduce or
manage various risks associated with growing crops. Such risks
include crop loss or damage caused by weather, hail, drought, frost
damage, insects, or disease, for instance.
10. Defense Base Act Workers' compensation or DBA Insurance:
Insurance provides coverage for civilian workers hired by the
government to perform contracts outside the US and Canada. DBA
is required for all US citizens, US residents, US Green Card holders,
and all employees or subcontractors hired on overseas government
contracts. Depending on the country, Foreign Nationals must also

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 be covered under DBA. This coverage typically includes expenses
related to medical treatment and loss of wages, as well as disability
and death benefits.
11. Directors and officers liability insurance protects an
organization (usually a corporation) from costs associated with
litigation resulting from mistakes incurred by directors and officers
for which they are liable. In the industry, it is usually called "D&O"
for short.
12. Disability insurance policies provide financial support in the
event the policyholder is unable to work because of disabling illness
or injury. It provides monthly support to help pay such obligations
as mortgages and credit cards.
a. Total permanent disability insurance provides benefits when a
person is permanently disabled and can no longer work in
their profession, often taken as an adjunct to life insurance.
13. Errors and omissions insurance: See "Professional liability
insurance" under "Liability insurance".
14. Expatriate insurance provides individuals and organizations
operating outside of their home country with protection for
automobiles, property, health, liability and business pursuits.
15. Financial loss insurance protects individuals and companies
against various financial risks. For example, a business might
purchase cover to protect it from loss of sales if a fire in a factory
prevented it from carrying out its business for a time. Insurance
might also cover the failure of a creditor to pay money it owes to
the insured. This type of insurance is frequently referred to as
"business interruption insurance." Fidelity bonds and surety bonds
are included in this category, although these products provide a
benefit to a third party (the "obligee") in the event the insured
party (usually referred to as the "obligor") fails to perform its
obligations under a contract with the obligee.
16. Health insurance policies will often cover the cost of private
medical treatments if the National Health Service in the UK (NHS)
or other publicly-funded health programs do not pay for them. It
will often result in quicker health care where better facilities are
available.
17. Liability insurance is a very broad superset that covers legal
claims against the insured. Many types of insurance include an
aspect of liability coverage. For example, a homeowner's insurance
policy will normally include liability coverage which protects the
insured in the event of a claim brought by someone who slips and
falls on the property; automobile insurance also includes an aspect
of liability insurance that indemnifies against the harm that a

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 crashing car can cause to others' lives, health, or property. The
protection offered by a liability insurance policy is twofold: a legal
defense in the event of a lawsuit commenced against the
policyholder and indemnification (payment on behalf of the
insured) with respect to a settlement or court verdict. Liability
policies typically cover only the negligence of the insured, and will
not apply to results of willful or intentional acts by the insured.
a. Environmental liability insurance protects the insured from
bodily injury, property damage and cleanup costs as a result
of the dispersal, release or escape of pollutants.
b. Professional liability insurance also called professional
indemnity insurance, protects professional practitioners such
as architects, lawyers, doctors, and accountants against
potential negligence claims made by their patients/clients.
Professional liability insurance may take on different names
depending on the profession. For example, professional
liability insurance in reference to the medical profession may
be called malpractice insurance. Notaries public may take out
errors and omissions insurance (E&O). Other potential E&O
policyholders include, for example, real estate brokers, home
inspectors, appraisers, and website developers.
18. Life insurance provides a monetary benefit to a decedent's family
or other designated beneficiary, and may specifically provide for
burial, funeral and other final expenses. Life insurance policies
often allow the option of having the proceeds paid to the
beneficiary either in a lump sum cash payment or an annuity.
a. Annuities provide a stream of payments and are generally
classified as insurance because they are issued by insurance
companies and regulated as insurance and require the same
kinds of actuarial and investment management expertise that
life insurance requires. Annuities and pensions that pay a
benefit for life are sometimes regarded as insurance against
the possibility that a retiree will outlive his or her financial
resources. In that sense, they are the complement of life
insurance and, from an underwriting perspective, are the
mirror image of life insurance.
19. Locked funds insurance is a little-known hybrid insurance policy
jointly issued by governments and banks. It is used to protect
public funds from tamper by unauthorized parties. In special cases,
a government may authorize its use in protecting semi-private
funds which are liable to tamper. The terms of this type of
insurance are usually very strict. Therefore it is used only in
extreme cases where maximum security of funds is required.

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20. Marine insurance and marine cargo insurance cover the loss or
damage of ships at sea or on inland waterways, and of the cargo
that may be on them. When the owner of the cargo and the carrier
are separate corporations, marine cargo insurance typically
compensates the owner of cargo for losses sustained from fire,
shipwreck, etc., but excludes losses that can be recovered from the
carrier or the carrier's insurance. Many marine insurance
underwriters will include "time element" coverage in such policies,
which extends the indemnity to cover loss of profit and other
business expenses attributable to the delay caused by a covered
loss.
21. Mortgage insurance insures the lender against default by the
borrower.
22. National Insurance is the UK's version of social insurance.
23. No-fault insurance is a type of insurance policy (typically
automobile insurance) where insured are indemnified by their own
insurer regardless of fault in the incident.
24. Nuclear incident insurance covers damages resulting from an
incident involving radioactive materials and is generally arranged at
the national level. (For the United States, see the Price-Anderson
Nuclear Industries Indemnity Act.)
25. Pet insurance insures pets against accidents and illnesses - some
companies cover routine/wellness care and burial, as well.
26. Political risk insurance can be taken out by businesses with
operations in countries in which there is a risk that revolution or
other political conditions will result in a loss.
27. Pollution Insurance. First-party coverage for contamination of
insured property either by external or on-site sources. Coverage for
liability to third parties arising from contamination of air, water, or
land due to the sudden and accidental release of hazardous
materials from the insured site. The policy usually covers the costs
of cleanup and may include coverage for releases from
underground storage tanks. Intentional acts are specifically
excluded
28. Property insurance provides protection against risks to property,
such as fire, theft or weather damage. This includes specialized
forms of insurance such as fire insurance, flood insurance,
earthquake insurance, home insurance, inland marine insurance or
boiler insurance.
29. Purchase insurance is aimed at providing protection on the
products people purchase. Purchase insurance can cover individual
purchase protection, warranties, guarantees, care plans and even

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 mobile phone insurance. Such insurance is normally very limited in
the scope of problems that are covered by the policy.
30. Retrospectively Rated Insurance is a method of establishing a
premium on large commercial accounts. The final premium is based
on the insured's actual loss experience during the policy term,
sometimes subject to a minimum and maximum premium, with the
final premium determined by a formula. Under this plan, the
current year's premium is based partially (or wholly) on the current
year's losses, although the premium adjustments may take months
or years beyond the current year's expiration date. The rating
formula is guaranteed in the insurance contract. Formula:
retrospective premium = converted loss + basic premium × tax
multiplier. Numerous variations of this formula have been
developed and are in use.
31. Social insurance can be many things to many people in many
countries. But a summary of its essence is that it is a collection of
insurance coverage’s (including components of life insurance,
disability income insurance, unemployment insurance, health
insurance, and others), plus retirement savings, that mandates
participation by all citizens. By forcing everyone in society to be a
policyholder and pay premiums, it ensures that everyone can
become a claimant when or if he/she needs to. Along the way this
inevitably becomes related to other concepts such as the justice
system and the welfare state. This is a large, complicated topic that
engenders tremendous debate, which can be further studied in the
following articles (and others):
a. Social welfare provision
b. Social security
c. Social safety net
d. National Insurance
e. Social Security (United States)
f. Social Security debate (United States)
32. Terrorism insurance provides protection against any loss or
damage caused by terrorist activities.
33. Title insurance provides a guarantee that title to real property is
vested in the purchaser and/or mortgagee, free and clear of liens
or encumbrances. It is usually issued in conjunction with a search
of the public records performed at the time of a real estate
transaction.
34. Travel insurance is an insurance cover taken by those who travel
abroad, which covers certain losses such as medical expenses, lost
of personal belongings, travel delay, personal liabilities, etc.

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 35. Workers' compensation insurance replaces all or part of a
worker's wages lost and accompanying medical expense incurred
because of a job-related injury.

KOTAK MAHINDRA GROUP

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 Build-up of businesses

Today, Kotak Mahindra group is one of the well known brands in India.
Started in 1985, kotak mahindra group is enjoying a net worth of more
than Rs.30000 crore and a leading financial institution of India.

Kotak mahindra old mutual life insurance is a joint venture between

kotak Mahindra Bank ltd. it’s affiliates and Old mutual plc.

Insurance sector in India

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Insurance sector in India was opened for private players in 2001,
because of a huge proportion of India’s population was untapped by
Life Insurance corporation of India, well known by its name LIC.
Today we have more than 15 insurance layers in India, which are
competing for more and more business with approximately equal
benefits to policy holders, but with same benefits in different ways.
When we have so many options available, then it is very difficult for us
to select best plan, which can provide us best benefits. Today India’s
Insurance sector with banking sector is adding more than 7.5% to
country’s GDP. Out of all players LIC is enjoying more than 60%
business alone, but over the time LIC’s business has reduced in
percentage terms. Market share of various companies in India for 2007
is –

Rs. In crores
Insurer Till 2007 Till 2006 Market share in
percentage

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 LIC 55934.69 25645.19 74.18

Bajaj Allianz 4269.68 2715.62 5.66

HDFC standard life 1624.24 1028.94 2.15

ICICI PRU 5254.64 2638.38 6.97

Kotak OM 614.94 397.54 .816

Birla sun life 882.72 678.09 1.17

SBI life 2566.08 828.52 3.4

Tata AIG 642.35 463.49 .85

Aviva 724.03 407.54 .96

Max New York 920.34 443.27 1.22

Sahara Life 43.17 21.81 .057

Shriram Life 179.78 10.31 .238

Bharti Axa Life 7.77 0 .0103

Reliance Life 930.46 193.43 1.234

ING Vysya 467.44 284.07 .62

Met Life 344.09 142.63 .456

Important parts and features of ULIPs

Annual Premium ---- This is the amount that any proposer will have to
select for beginning of contract. Annual premium can vary from only Rs.

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10000/- to any amount, but most of the ULIP plans offer minimum
premium limit at Rs. 10000/- p.a.

Sum Assured--- Sum assured is the amount for which proposer/ insurer
want a risk cover. This can vary from minimum 5 times of annual
premium to- No. of term years*annual premium with different plans and
with different companies.

Funds available for allocation of premium to select from—Here we

have a lot of option available with us. Here one thing that matters is that
most of the companies and plans are investing in the same type of funds
but they are using different names for each and every fund.

If we broadly divide all these funds into different categories, then we can
classify these funds into these categories.

1. Dynamic money market-This is the most secure investment

place provided by most of the plans, but the only problem here is
that rate of return in money market is very low and may be it will
not be able to beat inflation. Another thing to keep in mind here is
that, we can’t invest in money for long run, because more and more
economy will grow, our needs will increase but because of low
return our overall purchasing power of money will keep on
decreasing day by day. Here companies invest our money in call
and money market.

2. Dynamic Bond, floating rate, gilt fund- here most of our money
will be invested in debt market and government securities, this fund
is somehow more conservative then money market fund, because
here rate of return is more than money market and it provide a
little protection against inflation. Here our more than 80% money
will be invested in debt market plus some money in money market
sometimes because of some downside trends in debt markets.

3. Dynamic floor- This fund provides us opportunity of earning a

higher rate of return by investing up to 75 per cent of our money in
stock market, but with that it also provide us a safe guard against
downside in stock market with option of investing in debt market up
to 100% and with another option of investing 20% money in call/
money market. Here one another thing to notice is that this plan I
more cautious than preceding two funds, but this fund provide
some real funds to policy holders.

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 4. Dynamic balanced- In this fund we invest our 30-60 % money in
stock market, rest of the money we can invest in debt market, this
fund is moderate than earlier plans because here it is compulsory
for us to kept our at least 30% money in stock market, which make
it more return offering and more risky fund, rest of the money can
be investing in debt and call money market according to demand
and market trends.

5. Dynamic/ aggressive growth fund- This fund is the most

aggressive and risky funds available with any company. Only
because of this fund Insurance companies offer a high rate of return
to its customers, because a sharp and acute watch on stock market
can help them earn a good amount of money. Allocation of money
in this fund can vary from 40-100% in stock market, with a safety
guard against adverse market trends by availability of option of
investing in money market and debt market as well.

Top ups- Top ups are the extra money except to our regular premiums.
This facility can be seen a as a addition benefit to both the parties plan
holder as well as insurance company. If plan is working more efficiently
then policy holder can earn a good return by adding his savings to his
policy and when ever he want that money he can take this money back.
On the other hand insurance which want more and more business, they
can invest this extra money can expand their business. As most of the
insurance companies charge 2% allocation charges on Top ups, this help
them in earning extra benefits for working more efficiently. Minimum limit
for top ups is Rs.5000/- with some exceptions.
Companies are also proving additional increase in sum assured which can
be vary from 125%- 500% of amount in Top ups exceeding 25% of
regular premiums paid till the date.

Premium changes- Companies are also providing option a change in

premium paid. Policy holders can increase amount of money, for which
minimum is kept Rs.5000/- by most of the companies.

Riders- Policy holder also can opt for extra benefits like accidental and
disability benefit, critical illness benefit, waivers. These benefits are
provided by most of the companies, but there are also some companies
which are providing health care benefits as well. Here it is very important
to notice that riders can be availed by a person who is at least 18 year
old.

Partial withdrawal- In ULIPs companies are not providing loan facilities,

but the same facility is provided in traditional policies. But what about

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loan from our own, It means we can withdraw money from our fund
value, there are some restriction on withdrawal like , we can’t withdraw
money within first 3 years of our policy and in case of Insurer is a minor
then we can’t withdraw money till the minor reach the age of 18 years.
Another restriction on withdrawal is that we have to keep our fund value
at least equal to our first year’s premium amount, but there are some
companies which ask for a minimum balance of up to 150 % of first year
premium, but not more than that that in any case.

Premium redirection- We can redirect allocation of our premium

whenever we like, in this case most of the companies are asking for a
reallocation of amount minimum Rs. 5000/-.

Maturity age- most of the companies are proving this option with in the
range of 70- 75 years, but there are other option as well where we can
keep on our policy activate after that age limit.

Settlement options- Some companies are also offering option of buying

an annuity from that companies or any other company. Except to that
they are also providing of keeping their maturity value in the same
account upto five years, where they can withdraw their money on
monthly, quarterly, half-yearly, yearly basis for time frame chosen by
policy holder. Here all the charges like mortality charges, extra benefit
charges etc. Here another thing which is very necessary to mention is
that Risk will be borne by policy holder.

Allocation charges- Allocation charges are those charges which are

deducted from annual premium and rest of the money after charging
allocation charges will be available for investment in funds. Allocation is
one of the most important to keep in mind while buying an ULIP plan.

Surrender charges- ULIPs are considered to be a long term investment

option instead of a short term investment option. In earlier 2-3 years of
plan allocation charges charged are very high than the later stages. So
ULIP don’t provide any option of surrendering in first 3 years of the
contract. After competing 3 years most of the companies charge some
surrender charges, but in most of the cases after completing 6 years of
the contract surrender charges are ZERO.

Fund management charges- A low percentage of fund value as a fund

management charges is the key for higher returns in long run and this is
one of the most important area for income for the insurance companies.
If any fund has a fund value of Rs. 100 billion and if the company will
charge only 1% fund management charges then the company’s income

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will increase by 1 billion, enough for writing for most of the administration
charges.

Administration charges- This is the amount which insurance company

charge from fund value for earning their administration charges. These
charges vary from Rs. 20-60/- in various companies.

Death Benefit- Death benefit is another thing to keep in mind while

buying an insurance plan. Here is some silent features in some plans.

Mortality charges- Mortality charges are those charges which are

charged by insurance companies for protecting policy holder’s life. There
is not so much difference between mortality charges, so not a big thing to
worry about while buying an ULIP plan.

Grace period- Most of the companies are providing grace period of 15

days, but some others are also providing grace period up to 30 days.

Switching charges- Some companies are providing switching options 4-

6 free of cost in a policy year, but another thing for consideration here is
that when we are not aware of each and every thing about stocks, so it is
least possible that our decision of switching may not be the best one.
There will be a opportunity cost. More over in today’s time our economy
is not so unstable that we need to switch our funds each and every day.
So 4-6 free switching is enough in a policy year.

Lapses- Where the premiums for the first 3 years are not paid within the
grace period, the policy together with the rider benefits, shall lapse from
the due date of unpaid premiums.

Revival period- Any lapsed policy can be revived within 2 years of the
date of lapse by payment of arrears of premiums with interest and
collection charges. Revival charges and time duration for revival is
mostly equal in all the plans with every company.

Automatic cover maintenance- This is one another feature available,

where if any plan holder who is not able to pay further premium can opt
for this facility. The policy will be in charge, company will charge all the
expenses by selling units available in insurers account and the policy will
be in force till the date there is enough units in insurers account from
which company can charge all the charges applicable, the policy will be
closed and fund value will be returned to policy holder. Most of the
times, this facility is available only after regular payment of first three
premiums.

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Now after considering all of these facts, We can make a point of view that
for comparing ULIPs it is not compulsory to consider each and every
thing. There are only a few things which make all the difference between
ULIPs.

From all these differences some are company specific, and some others
are plan specific.

While comparing all these policies we can compare these policies we can
define our criteria for differentiation and comparison.

1. Policy holder’s point of view( whether policy is a child plan, pension

plan or life long)
2. Criteria undertaken for comparison
A. Allocation charges
B. Fund management charges
C. Surrender charges
D. Guaranteed maturity value
E. Death benefits
F. Policy Administration charges

CHILDREN PLANs
Children plan are those plans which are launched targeting young
couples and who have a lot of dreams for their children, but may be
their income will not allow them to fulfill their dreams after years

21
 down the line when their children actually want a adequate of lump
sum with them for the purpose of higher education, professional
qualification etc. As life is uncertain, these plans are launched
keeping in mind that, whether parents will be their or not, children
can fulfill their dreams.

Some of these plans are

a. Headstart future protect(Kotak Mahindra OM)
b. Smart kid(ICICI prudential)
c. Children’s Dream plan(Birla Sun Life)
d. Child Gain( Bajaj Allianz)

Assumptions while comparing children plans provided by various

Insurers-
1. Growth rate is expected to be 20% through out the policy.
2. Other charges are considered with fund management charges and
expected to be approximately equal.
3. Annual Premium is considered to be same for a better comparison,
except Kotak OM and ICICI Pru, because these companies are
charging different allocation charges for different levels.
4. All companies are assumed to be equally proficient; they can offer
same levels of returns.
5. Fund management charges charged by various companies are
different, but for a better comparison we are charging same level of
charges. In long term fund management can make a lot of
difference in returns, but it is not feasible from a customer’s point
of view, because he may not be able to compare all the plans in the
best way.

Comparison of children plans provided by various

companies

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Particulars Kotak Mahindra OM ICICI Prudential Bajaj Allianz Birla Sun
/Features LIFE Insurance LIFE Insurance LIFE Insurance LIFE Insurance

1. On Death Sum Assured+ Sum assured+ Sum assured+ Sum assured+

Remaining premiums remaining premiums remaining remaining
will be added to fund will be paid by premiums will be premiums will be
value at the time of company on due paid by company paid by company
death dates on due dates on due dates
2. Premiums
taken for Rs. 25000/Rs. 15000 Rs. 25000/Rs. 15000 Rs. 25000 Rs. 25000
simplification ( because allocation ( because allocation
of calculation charges are different charges are different
for these premium for these premium
levels) levels)

3. Allocation 72% / 68% 80% / 79% 70% 100%

in first year
Less-charges 8% / 8% 8% / 8% 8% 8%
like fund
management, 64% / 60% 72% / 71% 62 92%
mortality
charges

4. Fund value 76.8% / 72% 86.4% / 85.2% 74.4% 110.4

after 1 year
5. Allocation 91% / 86% 95% / 95% 70 100
in 2nd year
167.8% / 158% 181.4% / 180.2% 144.4% 210.4%
6. charges 5% / 5% 5% / 5% 5% 5%

7. Fund value
after 2 years 194.4% / 183.6% 211.7% / 210.24% 167.2% 246.5%

8. Allocation 95% / 93% 95% / 95% 99% 100%

in 3rd year
289.4% / 276.6% 306.7% / 305.24% 266.2% 346.5%
9. Charges 5% / 5% 5% 5% 5% 5%
284.4% / 271.6% 301.7% / 300.24% 261.2% 340.5%
10. Fund
value after 3 341.3% / 325.92% 362 % / 360.3% 313,44% 419.8%
years
11. allocation 99% / 99% 95% / 95% 99% 100%
in fourth year
440.3% / 424.92% 457% / 455.3% 413.64% 511%
12. charges 5% / 5% 5% / 5% 5% 5%
435.3% / 419.92% 452% / 450.3% 408.64% 506%

23
13. fund 522.4% / 503.9% 542.4% / 540.4% 490.4 607.2%
value at the
end of 4 years

14.
Allocation for 99% / 99% 95% / 95% 99% 100
5th year

15. charges 8% / 8% 8% / 8% 8% 8%
613.4% / 594.9% 629.4% / 627.4% 581.4% 697.2%

What if Sum assured + fund Sum assured + future Sum assured + Sum assured+
Proposer value will increase premium will be paid future premium enhanced sum
will die by 1000% by company on it’s will be paid by assured+ maturity
during 5th own company on it’s continuation
year of own charges
the policy

If not-
16. fund value
736.1% / 713.9% 755.3% / 752.9% 697.7% 836.6%
at the end of
5th year

17. allocation
99% / 99% 98% / 98% 99% 100%
for 6th year
835.1% / 812.9% 864.8% / 862% 796.7% 936.6%
18. charges
10 % / 10 % 10% / 10% 10% 10%
825.1% / 802.9% 862.5% / 859.5% 786.7% 926.6%

19. fund value

990.12% / 963.5 1035% / 1031.4% 944% 1112%
at the end of
6th year

From the above table, we can assume that Birla Sun life is providing
maximum returns, but in the case of demise of proposer Kotak OM is the
most beneficiary for family of proposer.

FAMILY PLANs

24
These plans are more focused on future protection and savings. As these
plans are very different from children plans, because children plans are
considered to be long term plans or most of the times considered for a
fixed time period and some of the condition make it safe for Insurance
companies to make it minimum exit period, but on the other hand Family
Plans are more transaction based plans.
Charges are more in case of family plans, in comparison to children plans.
So it becomes more difficult for any Investor to decide which policy can
give him maximum benefits.

While comparing Family plans we are considering these charges as a base

of comparison –
I. Allocation charges
II. Fund management charges
III. Policy administration charges
IV. Death benefits
V. Growth rate-30%p.a.
VI. Charges as fund management charges and mortality
charges
VII. Policy administration are considered as a part of allocation
charges and adjusted as a part of allocation charges only.

Comparison of Family plans provided by various

Insurance companies.

25
Particulars KOTAK OM ICICI PRU. BAJAJ ALLIANZ BIRLA SUN
/Features Safe Investment II LIFE

1. On Death Sum assured will Sum assured or fund Sum assured will be Sum assured or
be paid only after value which ever is paid only after fund value
completion of 5 higher. completion of 7 which ever is
years of policy, years of policy, higher.
before completion before completion
of 5 years only of 7 years only fund
fund value or value or premiums
premiums paid till paid till date will be
date will be paid(whichever is
paid(whichever is higher)
higher)

2. Premiums We can assume We can assume same We can assume We can assume
taken for same level of level of premiums for same level of same level of
simplification premiums for all all of the premiums for all of premiums for all
of calculation of the plans( Rs.20000) the of the
plans( Rs.20000) plans( Rs.20000) plans( Rs.20000
)

3. Allocation in 86% 80% 70%

first year 92%
Less-charges 7%
like admin 79%
charges
4. Fund 2% 2% 4%
management, 3%
mortality
charges 77% 78% 66%
89%
6. Fund value 100.1% 101.4% 85.8
after 1 year 115.7%
5. Allocation in 92.5% 92.5% 97%
2nd year 94%

6. charges 4% 4.8% 6%
188.6% 189.1% 176.8% 4%
7. Fund value 245.2 245.83% 228.84% 205.7%
after 2 years 267.4%

8. Allocation in 92.5 96% 97%

26
3rd year 94%

9. Charges 6% 8% 7.84%
327.7% 333.83% 319% 5.4%
10. Fund value 426% 444% 414.7% 356%
after 3 years 462.8%
11. allocation in 92.5% 96% 97%
fourth year 96%

12. charges 9% 13% 12.3%

509.5% 527% 499.4% 8.3%
13. fund value 662.35% 685% 649.2% 550.5%
at the end of 4 730.6%
years

14. Allocation 92.5% 100% 97%

for 5th year 96%

15. charges 14% 19.6% 17.9%

748.85% 765.4% 728.3% 12.6%
16. fund value 963.1% 995% 946.8% 814.0%
at the end of 5th 1058.2%
year

17. allocation 92.5% 96% 97%

for 6th year 96%

18. charges 16% 25.8% 25.1%

1039.6% 1065.2% 1018.7% 19%
1135.2%

19. fund value 1351.5% 1384.8% 1324.3%

at the end of 6th 1475.8%
year

1. When we will analyze above table for the first time then we can say
that BIRLA SUN LIFE is providing best benefits in comparison to other
companies, but this is not the only criteria to analyze performance of

27
 the other companies. Here we need to analyze all the facts very
closely for a better analysis. Some of these facts are as follows.

2. Birla sun life is charging a net charge of 1.44 % sum assured, it

means in the case of a sum assured of Rs. 10 lakh BSLI will charge a
policy administration charges equal to Rs.14400 from fund value, it
means up to 30-40% of premium paid. For simplification of calculation
I have not charged 30-40% of premium, because this can create a lot
of confusion for others, because then they will think these charges as
actual charges, here I have charged only 1.44% of fund value, so I
can say it as a hidden cost, which can manipulate all the calculation for
investors while investing there hard earned money. Yes may be this is
a small amount for a minimum sum assured, but in the case of high
Sum assured, this can effect adversely to any investor. In the case of
surrender of policy this will effect adversely to any investor. Low fund
management and high allocation charges will not be so many
beneficiaries for plan holder, but this charge will affect to every
investor for whole his life.
3. In case of other companies, ICICI is providing more gain than
KOTAK OM and BAJAJ ALLIANZ, but fund management charges are
very high in comparison to other companies, and as all of us know that
low fund management charges is key for higher rate of returns in long
term.
4. Riders (Additional benefits) provided by KOTAK OM is more than
provided by any other company. ICICI PRU is providing a few addition
benefits.

Statement of the problem

28
1. Lack of brand awareness of kotak Mahindra old mutual amongst the
people of Haryana
2. Lack of confidence among the consumers on private players making it
difficult for the company to establish itself
3. Existence of other private players and competitors in the market
before entering of kotak
4. Concern on the aspect of ULIP policy on account of higher risk
quotient
5. Few agent representatives make it difficult to explore new markets
and customers

FINDINGS & ANALYSIS

29
ULIPs are not very old products for insurance sector in India. Customers
are not well aware of ULIPs. Insurance advisors are representing ULIPs
as higher return products in addition to risk cover. They are providing
only positive parts of plans and hiding risk factors attached to plan. So it
is not beneficial to survey ULIP holders for finding out reliable statistics.
Life advisors who are key players between insurance company and
customers are more reliable than customer can provide some reliable
data.

While asking life advisors about a customer survey I have chosen a

sample size of 100, but out of these only 50 were able to provide some
statistics. While making survey I have tried to make personal contacts to
life advisors. For more information with reference from advisors I meet
personally, I used Telephone for collecting information needed.

Research methodology used- random sampling

Data collection method- interview & survey
Sample size- 50
Universe- Life advisors of private insurance companies
Tool of analysis- Microsoft Excel

30
 No. of years in Insurance sector

20%
less than 2 years

50% 2-5 years

30% more than 5 years

The company had started its operations at Hisar in Nov. 2006 itself.
Accordingly, it has been able to attract insurance advisors ranging from a
year to 5 years or more. With a 50% ratio having only less than 2 year
experience in insurance sector, the co. has a young population at its
disposal. However, with co. also having people with experience of more
than 5 years, the co. has a good scope of promoting its policies &
improving sales.

31
 Awareness of Insurance plans

aware of some
17% plans
33%
aware of many
plans
50% aware of all plans

The survey brought out the interesting aspect of 50% people having
awareness of many plans but only 17% having a sound knowledge of all
the plans available in the market. However, one-third of the people
surveyed were only aware of a few plans.

32
 Purpose of buying an Insurance plan

20%
wealth creation
child education
53%
27% future protection

The aspect of future protection ranks topmost for taking insurance

policies followed by child education, with wealth creation being given the
least importance as people have better avenues available for investment
& growth of money. With promotion of insurance policies being done to
highlight the aspect of future protection & security, it is not surprising
that people taking policies for that purpose only.

33
 Current & potential customers

40%
Rural Areas
Urban Areas
60%

In a place like hissar, customers are more into the rural segment. With
60% identified in the rural segment the scope for potential in insurance
business seems to be large. Here urban area does not include any big
cities, but only cities with more than population more than 50000.

34
 level of return & risk

13% Low risk, low

return
Avg. risk, avg.
50% return
37%
High risk, high
return

As ULIPs are risk-return policies, people have varied needs for taking risk
& getting a return. Here, the customers seem more interested in taking
ULIP policies having high risk & high return. Only a few people seem to be
taking ULIP for low return. Also, more than one-third having avg. risk-
return perspective.

35
 Age level of Proposer

Less than 25
years

13% 7% 25-30 years

13%
30-40 years
27%
40% 40-45 years

More than 45
years

The age of people going in for a insurance plan are mostly the married
people having children. This is brought forward in the survey with people
of 30-40 years & 40-45 years are the ones going in a majority. With
people in age group around 25 to 30 years less in numbers for taking a
ULIP plan.

36
 Customers level of income

17% Less than 1 lac

30% 1 lac - 2 lac
2 lac - 3 lac
20%
3 lac - 5 lac
20% 13%
More than 5 lac

There is also persons with a little and uncertain level of income, most of
the household, who are dependent on agriculture income, have limited
resources, and because of a few acres of land and another reason is joint
family. Yes, we can accept that now there is not so much trend of joint
families in rural India as well, but parents(Karta) of family does not to
any member to live alone ill the time all the member of the family are got
settled. On the other hand, most of the people are dependent on self
employment in agriculture sector, so their income is uncertain and their
expenses are increasing day be day, which are not in the same proportion
to increase in their income. They also want protection for their families,
so they opt for ULIPs and buy ULIPs with a little premium amount. But
there are also service persons, who are earning a fixed income, but not
so much that they can fulfill dreams of their children’s dream 10 years
down the line. Persons with higher level of income who are well aware of
market trends and want to adopt a good life style, but bank savings don’t
allow them to beat Inflation only. So they go for ULIPs because of
protection and good returns. Higher level of income society chose for
insurance plans, for

1. saving of income tax

2. higher rate of return

37
Recommendations -
1. In the case of children Plans, headstart is the best plan, especially
in the case of death of the proposer, but if there is no case of
demise of the proposer than headstart plan is lacking behind some
how behind other companies and the one of the reason behind this
is allocation charges in the earlier years of the policy. What we can
do here is that we can increase our fund management charges by
some basic points up to (.2-.3%). This will help us in attracting
because after that also, we will be charging low fund management
charges.

2. Here one thing for compensation of loss of earlier earnings to

company, we can offer a low rate of incentives to our
representatives(advisors) and we can compensate them with
additional incentives from the earnings on later years of policy from
increased fund management charges, by that way each party can
enjoy high rates of return.

3. In case of (safe investment plan II), our policy administration

charges are much more than other competitors through out the
period, which don’t allow us to perform more efficiently and real
growth of policy don’t match with the growth rate for which we are
known in the market, our policy administration charges are based
on premium level.

4. Here we can’t do the same thing as we can do with children plan,

but here also we can fix these charges as a percentage of fund
value, with this type of charges our policy holder can be attracted
more and more towards this plan, and they will be ready to higher
premiums as well with us.

5. Our advisors needed to be well aware of plans provided by other

private players, not only of plans provided by LIC. So that they can
provide valuable information to customers, to switch them towards
us instead of targeting only LIC only while discussion with
customers.

38
6. Brand matters a lot, Yes we are well known brand, but our presence
in Rural is not so much by the name of Kotak, we are known by
name Mahindra, so here we can play a game. We can advise our
advisors to represent the name Mahindra and kotak instead of
kotak and mahindra, because most of times we focus only on what
we say at the first place. In the case of other companies, all of
them are using their brand name, like ICICI, HDFC, BAJAJ, BIRLA at
the first place.

7. For big cities where our presence by name KOTAK is more, we can
use the same name KOTAK Mahindra.

39
References-
www.kotaklifeinsurance.com
www.birlasunlife.com
www.iciciprulife.com
www.bimaonline.com
www.bajajallianz.com
www.hdfclifeinsurance.com
www.wikipedia.com
www.investopedia.com

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