“CUSTOMER BEHAVIOR FOR LIFE INSURANCE, GENERAL INSURANCE & MUTUAL FUNDS”
PREFACE I have a great pleasure on doing my research work and in preparing this report on topic assigned to me “customer behavior for life insurance, general insurance &mutual funds� This project has been extremely updated in the light of evidence collected from the market. A proper formatting of this report is done and over all lay out of an entire has been improved for making all the information provided clear and accessible.
It is a matter of great satisfaction for the research point of view that this project has been in a short period of time.
In the end of the report, I have come out with the findings and suggestions as recommend to the problem that I feel the company facing today in the market. Beside this I had also tried to include all available information in this report and arranged, systematic manner.
ACKNOWLEDGEMENT I would like to take this opportunity to thanks all those who have helped me
tremendously during the course of the
project. This project report is a result of endless effort & immense degree of oil by many great minds. I would like to thank all those people who graciously helped me by sharing their valuable time, experience & knowledge. I would like to express heartiest thanks to XYZ who have given me this beautiful opportunity to work with their organization and helped me at each step with their experience. I would like to thank all my friends and the entire team of pinnacle wealth management. I would like to thank XYZ director of XYZ College and XYZ (HOD) who provided me this opportunity.
XYZ
TABLE OF CONTENT PREFACE
2
ACKNOWLEDGEMENT
3
COMPANY CERTIFICATE
4
COLLEGE CERTIFICATE
5
CHAPTER-1 INTRODUCTION TO THE STUDY
8-58
OBJECTIVE OF THE STUDY
59
SCOPE
60
SIGNIFICANCE
61-62
METHODOLOGY
63-66
LIMITATIONS
67 CHAPTER-2
INTRODUCTION TO THE ORGANISATION
68
HISTORY
69-73
ORGANISATION STRUCTURE
74-76
PRODUCT PROFILE
77-85 86-
FINANCIAL STATUS
89
CHAPTER-3 THEORETICAL FRAMEWORK OF THE STUDY
90-105
CHAPTER-4 CLASSIFICATION, ANALYSIS AND INTERPRETATION OF DATA COLLECTED ACCORDING TO THE TOPIC ASSIGNED
106-118
CONCLUSION
119
SUGGESTIONS
120
APPENDIX
121
BIBLIOGRAPHY
122
CHAPTER-1 INTRODUCTION TO THE STUDY 1.
OBJECTIVE
2.
SCOPE
3.
SIGNIFICANCE
4.
METHODOLOGY
5.
LIMITATION
INTRODUCTION
My project work is to understand the level of awareness in regards to the Life Insurance, General Insurance and Mutual Funds but before we move I would like to give a glance about my project. Actually what is insurance? Insurance is not necessarily an investment from which one expects to get one’s money back, nor, it is gambling. A gambler takes, while insurance offers protection against risks that already exit. Insurance is a way to share risk with others.
Insurance is the device of shifting the risks to the qualified agencies or persons known as Insurers. It’s a contract between two parties by which one of them agrees to index the other against a loss which may accrue to the other on the happening of some event. With a view to protecting person from various risks viz; death, medical claims, accident etc an insurance company is framed by raising initial capital from the shareholders.
With new era of 21st century people want to get money with easy steps but due to the risk factor involved in the investment it is not a easy task. So here we come to understand what is mutual funds and how it protect the investors from risk. Mutual funds can give investors access to emerging markets A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, shortterm money market instruments, and/or other securities. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually Yet, the insurance and mutual funds companies are in growtth stage but the level of awareness is still low that’s we come to know from this project work. Therefore, from this project report we are trying to give details about customer behavior for LIFE INSURANCE, GENERAL INSURANCE & MUTUAL FUNDS. So, it was a golden opportunity for me to work for an organization and to get a deep knowledge about the insurance sector.
HISTORY OF INSURANCE The insurance sector in India dates back to 1818, when Oriental Life Insurance Company like Bombay life Assurance Company, in 1823 and Tritons Insurance Company, for General Insurance, in 1850 were incorporated. Insurance ACT was passed in 1928 but it was subsequently reviewed and comprehensive legislation was enacted in 1938. The nationalization of life insurance business took place in 1956 when 245 Indian and Foreign insurance societies were first merged and then nationalized. It paved the way towards the establishment of life insurance Corporation (LIC) and since then it has enjoyed a monopoly over the life insurance business in India. General Insurance business. Subsequently in 1973, non-life insurance business was nationalized and the General Insurance Business (Nationalization) ACT, 1972 was promulgated. The General Insurance Corporation (GIC) in its present form was incorporated in 1972 and maintains a very strong hold over the non-life insurance business in India. Due to concerns of relatively low spread of insurance in the country. The efficient and quality functioning of the Public Sector Insurance Companies. The untapped potential for mobilizing long-term contractual savings funds for infrastructure.
The (Congress) government set up Insurance set u an Insurance Reforms committee in April 1993. The committee submitted its report in January 1994, recommended a phased program of liberalization, and called for private sector entry and restructuring of the LIC and GIC .
Insurance Sector The practice of insurance in the world is quite old infect. How ever, life insurance business, as it is known today, is a much later development. It evolved from the great transformation in life, which began with the decline of the agrarian society in the western countries in the 19 th century. Industrialization with its cities, factories, cash economy and an urban ‘saving’ class set the stage for life insurance as a large – scale national institution. It can truly be that life insurance is a product of modern industry. Growth of life insurance Company in any country will illustrate introduced modern life insurance business didn’t make much headway. The business started taking its deeper roots only when in the late 19 th century ‘India’ insurance companies appeared on the scenes and started accepting ‘India’ lies freely on the same terms as European lives in India. The growth of India life insurance business continued to remain restricted till the Swedish movement gathered momentum. The business passed through the period of ups and downs with the political and economic situation in the country.
Nationalization Even during days of the freedom struggle there was occasional demand for nationalization of life insurance industry. The demand naturally gathers mare momentum after independence. Mismanagement had lead to liquidation of as many as 25 life insurance companies in the decade after independence. Another 25 insurance companies had during the same period so frittered away their resources that their business had to be transferred to other companies. All these cost financial losses and consequent suffering to several policyholders who had entrusted their hard earned saving to the care of the company management. This misuse of power, position and privilege by these companies in the private sector was one of the most compelling reasons that influenced the decision of the government of India to nationalize the life insurance industry in 1956. The life insurance industry in India had to be geared up for raising resources for execution national programs. One of the objectives of the national plans was to build a pay welfare state. It was therefore, essential that benefits of life insurance were made available to every family in the country and that the business should be conducted with utmost economy by the management acting in a spirit of trusteeship to enable maximization of the people’s saving that could be analyzed through the life insurance into the development programs.
Objectives of nationalization:
The decision of the Government of India to nationalize life insurance industry was implemented by the passage of the life insurance Corporation Act, 1956, by Parliament. The objectives of nationalization of life insurance industry that emerged out of the discussion and speeches in the parliament in the time passage of the act were: Spread of message of life insurance as far and wide as possible reaching out beyond the more advanced urban areas well into hitherto neglected areas. Effective mobilization of the people’s savings. Complete security to policyholders. Prompt and efficient services to the policyholders. Conducting of the business with the utmost economy and with the full realization that the money. Belonged to the policyholders. Investment of funds in such a way as to secure maximum yield consistent with safety of capital. Economic premium rates. Development of a dynamic and vigorous organization under a management conducted in sprit of Trusteeship. Formulation of scheme of insurance to suit different section of the community.
How big is the insurance market?
Insurance is a Rs.400 billion business in India, and together with banking services adds about 7% to India's Gap. Gross premium collection is about 2% of Gap and has been growing by 15-20% per annum. India also has the highest number of life insurance policies in force in the world, and total investible funds with the LIC are almost 8% of GDP. Yet more than threefourths of India's insurable population has no life insurance or pension cover. Health insurance of any kind is negligible and other forms of non-life insurance are much below international standards.
Indian Scenario : Unfortunately the concept of insurance is not popular in our country .As per the latest estimates, the total premium income generated by life and general insurance in India is estimated at around a meager 1.95% of GDP. However India's share of world insurance market has shown an increase of 10% from 0.31% in 2004-2005 to 0.34% in 2005-2006 India's market share in the life insurance business showed a real growth of 11 % thereby out performing the global average of 7.7% Non-life business grew by 3.1% against global average of 0.20%. In India insurance spending per capita was among the lowest in the world at $7.6 compared to $7 in the previous year. Amongst the emerging economies, India is one of the least insured countries but the potential for further growth is phenomenal, as a significant
portion of its population is in services and the life expectancy has also increased over the years.
Need for insurance:
Modern life insurance caters to multiple needs for insurance, which can be broadly classified as under: Cash and income needs on an immediately following death. Family income needs. Income needs of a widow on the death of her husband. Cash and income needs of a husband on the death of his wife. Retirement income needs. Education needs. Business needs
Classification of insurance business: The insurance is broadly classified as: 1 .Life insurance business
2. Non-life insurance business
Life insurance business:
It is the business of effecting contracts of insurances upon human life including any contract whereby the payment of money is assured on death or on the happening of any contingency to the dependent on human life and any contract which is subject to the payment of premiums for a term and shall be deemed to include: The granting disability and double and triple indemnity accident benefits, if so provided in the contract of insurance. The granting of annuities of human life. The granting of super-annuation allowance and annuities payable out of any fund applicable solely to the relief and maintenance of the person engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons.
Non life insurance business : Conventional classification of insurance business: 1. Fire insurance 2. Marine insurance
3. Miscellaneous insurance (accident)
Modern classification of general insurance 1. Insurance of person 2. Insurance of property 3. Insurance of interest 4. Insurance of liability
Life Insurance: Life insurance can be defined as “life insurance provides a sum of money if the person who is insured dies while the policy is in effect�. Life insurance is not for the person who passes away, it for those who survive. It is the responsibility of every bread earner to guard against the events that could affect the family in the unfortunate circumstance of his / her demise. Thus, having a life insurance policy is very vital. Before going for a life insurance policy it is imperative that you know about various types of life insurance policies.
Major among them are:
Whole Life Policy Term Life Policy Money-back Policy Joint Life Policy Group Insurance Policy Loan Cover Term Assurance Policy Pension Plan or Annuities Unit Linked Insurance Plan Endowment Policy
Why Do People Need Life Insurance ?
Risks and uncertainties are part of life's great adventure -- accident, illness, theft, natural disaster - they're all built into the working of the Universe, waiting to happen. Insurance then is man's answer to the vagaries of life. If you cannot beat man-made and natural calamities, well, at least be prepared for them and their aftermath. Insurance is a contract between two parties - the insurer (the insurance company) and the insured (the person or entity seeking the cover) - wherein the insurer agrees to pay the insured for financial losses arising out of any unforeseen events in return for a regular payment of "premium". These unforeseen events are defined as "risk" and that is why insurance is called a risk cover. Hence, insurance is essentially the means to financially compensate for losses that life throws at people - corporate and otherwise.
Types of Plans…..
•
Conventional
•
ULIP
Conventional:-
Conventional plans are those plans in which returns are known and are fixed. Example: - Children’s Plan. In this plan the customer has knows how much return he will get after maturity or any miss happening occurs. Here risk is low and returns are also low, because it is not dependent on the market risk and is a rigid policy. It is seen that people also invest less in such type of policies as returns are less and there is a compulsion attached is of compulsory premium submission till the policy matures. Illustration: Premium for 10 yrs is 20000 20000+20000+20000+20000+20000+20000+20000+20000+20000+20000 = 2lks Return described was 2.5 times So the customer will get approx 5 lkhs after deducting all charges.
Insurance is always of the parent and beneficiary is the child. There are 2 types of loss that occurs on any type of miss happening i.e. emotional loss and monetary loss company can’t full fill emotional loss but can help in monetary loss by giving the 2lks Rs. At the miss happening and will give the rest premium by its own and will give the bonus at maturity again to the child.
ULIP
ULIP stands for UNIT LINK INSURANCE PLAN. As it is said higher risk higher return
Some of the important milestones in the life insurance business in India are: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.
General Insurance
Insurance other than ‘Life Insurance’ falls under the category of General Insurance. General Insurance comprises of insurance of property against fire, burglary etc, personal insurance such as Accident and Health Insurance, and liability insurance which covers legal liabilities. There are also other covers such as Errors and Omissions insurance for professionals, credit insurance etc. Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and inundation, earthquake and so on. There are products that cover property against burglary, theft etc. The nonlife companies also offer policies covering machinery against breakdown, there are policies that cover the hull of ships and so on. A Marine Cargo policy
covers goods in transit including by sea, air and road. Further,
insurance of motor vehicles against damages and theft forms a major chunk of non-life insurance business. In respect of insurance of property, it is important that the cover is taken for the actual value of the property to avoid being imposed a penalty should there be a claim. Where a property is undervalued for the purposes of insurance, the insured will have to bear a rateable proportion of the loss. For instance if the value of a property is Rs.100 and it is insured for Rs.50/-, in the event of a loss to the extent of say Rs.50/-, the maximum claim amount payable would be Rs.25/- ( 50% of the loss being borne by
the insured for underinsuring the property by 50% ). This concept is quite often not understood by most insureds. Personal insurance covers include policies for Accident, Health etc. Products offering Personal Accident cover are benefit policies. Health insurance covers offered by non-life insurers are mainly hospitalization covers either on reimbursement or cashless basis. The cashless service is offered through Third Party Administrators who have arrangements with various service providers, i.e., hospitals. The Third Party Administrators also provide service for reimbursement claims. Sometimes the insurers themselves process reimbursement claims. Accident and health insurance policies are available for individuals as well as groups. A group could be a group of employees of an organization or holders of credit cards or deposit holders in a bank etc. Normally when a group is covered, insurers offer group discounts. Liability insurance covers such as Motor Third Party Liability Insurance, Workmen’s Compensation Policy etc offer cover against legal liabilities that may arise under the respective statutes— Motor Vehicles Act, The Workmen’s Compensation Act etc. Some of the covers such as the foregoing (Motor Third Party and Workmen’s Compensation policy ) are compulsory by statute. Liability Insurance not compulsory by statute is also gaining popularity these days. Many industries insure against Public liability. There are liability covers available for Products as well.
There are general insurance products that are in the nature of package policies offering a combination of the covers mentioned above. For instance, there are package policies available for householders, shop keepers and also for professionals such as doctors, chartered accountants etc. Apart from offering standard covers, insurers also offer customized or tailor-made ones. Suitable general Insurance covers are necessary for every family. It is important to protect one’s property, which one might have acquired from one’s hard earned income. A loss or damage to one’s property can leave one shattered. Losses created by catastrophes such as the tsunami, earthquakes, cyclones etc have left many homeless and penniless. Such losses can be devastating but insurance could help mitigate them. Property can be covered, so also the people against Personal Accident. A Health Insurance policy can provide financial relief to a person undergoing medical treatment whether due to a disease or an injury.
Industries also need to protect themselves by obtaining insurance covers to protect their building, machinery, stocks etc. They need to cover their
liabilities as well. Financiers insist on insurance. So, most industries or businesses that are financed by banks and other institutions do obtain covers. But are they obtaining the right covers? And are they insuring adequately are questions that need to be given some thought. Also organizations or industries that are self-financed should ensure that they are protected by insurance. Most general insurance covers are annual contracts. However, there are few products that are long-term. It is important for proposers to read and understand the terms and conditions of a policy before they enter into an insurance contract. The proposal form needs to be filled in completely and correctly by a proposer to ensure that the cover is adequate and the right one.
Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to regulate investments and
set
minimum solvency margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd. the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
History of mutual funds Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21, 1924, and, after one year, it had 200 shareholders and $392,000 in assets. The entire industry, which included a few closedend funds represented less than $10 million in 1924.
The stock market crash of 1929 hindered the growth of mutual funds. In response to the stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the U.S. Securities and Exchange Commission (SEC) and provide prospective investors with a prospectus that contains required disclosures about the fund, the securities themselves, and fund manager. The SEC helped draft the Investment Company Act of 1940, which sets forth the guidelines with which all SEC-registered funds today must comply.
With renewed confidence in the stock market, mutual funds began to blossom. By the end of the 1960s, there were approximately 270 funds with $48 billion in assets. The first retail index fund, First Index Investment Trust, was formed in 1976 and headed by John Bogle, who conceptualized many of the key tenets of the industry in his 1951 senior thesis at Princeton
University It is now called the Vanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100 billion in assets.
A key factor in mutual-fund growth was the 1975 change in the Internal Revenue Code allowing individuals to open individual retirement accounts (IRAs). Even people already enrolled in corporate pension plans could contribute a limited amount (at the time, up to $2,000 a year). Mutual funds are now popular in employer-sponsored "defined-contribution" retirement plans such as (401(k)s) and 403(b)s as well as IRAs including Roth IRAs.
As of October 2007, there are 8,015 mutual funds that belong to the Investment Company Institute (ICI), a national trade association of investment companies in the United States, with combined assets of $12.356 trillion. In early 2008, the worldwide value of all mutual funds totaled more than $26 trillion.
Usage of mutual funds
Since the Investment Company Act of 1940, a mutual fund is one of three basic types of investment companies available in the United States.
Mutual funds can invest in many kinds of securities. The most common are cash instruments, stock, and bonds, but there are hundreds of subcategories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (e.g., high-yield junk bonds or investment-grade corporate bonds), type of issuers (e.g., government agencies, corporations, or municipalities), or maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily foreign securities (international funds).
Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts cash flows into and out of the fund by investors, as well as the future performance of investments appropriate for the fund and chooses those which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered under an advisory contract with a management company, which may hire or fire fund managers.
Mutual funds are subject to a special set of regulatory, accounting, and tax rules. In the U.S., unlike most other types of business entities, they are not taxed on their income as long as they distribute 90% of it to their shareholders and the funds meet certain diversification requirements in the Internal Revenue Code. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are tax-free to the shareholder. Taxable distributions can be either ordinary income or capital gains, depending on how the fund earned those distributions. Net losses are not distributed or passed through to fund investors.
Mutual Funds – Concept
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:
Mutual Fund Operation Flow Chart
TYPES OF MUTUAL FUNDS
Mutual fund schemes may be classified on the basis of its structure and its investment objective :1. By Structure: 2. By Investment Objective:
By structure ;-
a) Open-ended Funds An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
b) Closed-ended Funds A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.
c) Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.
2. by Investment Objective: a) Equity Oriented Schemes These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short term.
b) Debt Based Schemes These schemes, also commonly called Income Schemes, invest in debt securities such as corporate bonds, debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.
c) Hybrid Schemes
These schemes are commonly known as balanced schemes. These schemes invest in both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long-term orientation.
d) 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.
e) 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.
History of the Indian Mutual Fund Industry 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 the. The history of mutual funds in India can be broadly divided into four distinct phases
First Phase – 1964-87 Unit Trust of India (UTI) was established on 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 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. 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
Fourth Phase – since February 2003 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 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.
BENEFITS OF INVESTING IN MUTUAL FUNDS 1. Professional Management Mutual
Funds
provide
the
services
of
experienced
and
skilled
professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
2.Diversification Mutual Funds invest in a number of companies across a broad crosssection of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.
3. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
4. Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.
5. Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.
6. Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.
7.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.
8. Tax Benefits
The taxman has, over the years, been more or less kind to mutual funds! With laws varying from time to time, the overall objective has been to encourage the growth of the mutual funds industry. Currently, a variety of tax laws apply to mutual funds, which are broadly listed below:
1) Capital Gains Units of mutual fund schemes held for a period more than 12 months are treated as long-term capital assets. In such cases, the unit-holder has the option to pay capital gains tax at either 20 % (with indexation) or 10 % without indexation.
2) Tax Deducted at Source (TDS) For any income credited or paid by a fund, no tax is deducted or withheld at source. The relevant sections in the Income Tax Act governing this provision are Section 194K and 196A.
3) Wealth Tax
Mutual fund units are not currently treated as assets under Section 2 of the Wealth
Tax
Act
and
are
therefore
not
liable
to
tax.
4) Income from units Any income received from units of the schemes of a mutual fund specified under section 23 (D) is exempt under Section 10 (33) of the Act. While section 10(23D) exempts income of specified mutual funds from tax (which currently includes all mutual funds operating in India), Section 10(33) exempts income from funds in the hands of the unit-holders. However, this does not mean that there is no tax at all on income distributions by mutual funds.
5) Income Distribution Tax As per prevailing tax laws, income distributed by schemes other than openend equity schemes is subject to tax at 20 % (plus surcharge of 10 %). For this purpose, equity schemes have been defined to be those schemes that have more than 50 % of their assets in the form of equity. Open-end equity schemes have been left out of the purview of this distribution tax for a period of three years beginning from April 1999.
6) Section 80-C
The investment in mutual funds designated as Equity Linked Laving Scheme (ELSS) qualifies for rebate under Section 80-C. The maximum amount that can be invested in these schemes is Rs.10,000, therefore the maximum tax benefit available works out to Rs.2000. Apart from ELSS schemes, the benefit of Section 80-C is also available in select schemes of some funds such as UTI ULIP, KP Pension Plan etc
DISADVANTAGES OF MUTUAL FUNDS 1. The Wisdom of Professional Management.
That's right, this is not an advantage. The average mutual fund manager is no better at picking stocks than the average nonprofessional, but charges fees as though she is.
2. No Control. Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of somebody else's car.
3. Dilution. Mutual funds generally have such small holdings of so many different stocks that insanely great performance by a fund's top holdings still doesn't make much of a difference in a mutual fund's total performance.
4. Buried Costs. Many mutual funds specialize in burying their costs and in hiring salesmen who do not make those costs clear to their clients.
IRDA (Insurance Regulatory and Development Authority) Composition of Authority under IRDA Act, 1999
The authority is a ten member team consisting of:
(a) A Chairman. (b) Five
whole-time
members.
(c) Four
part-time
members.
(All appointed As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority
by the Government of India)
Duties, Powers and Functions of IRDA
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA. (a)
Subject to the provisions of this Act and any other law for the time
being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.
(b) protection of the interests of the policy holders in matters concerning assigning of policy,
nomination by policy holders, insurable interest,
settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; (c) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;
(d) Specifying the code of conduct for surveyors and loss assessors;
(e) Promoting efficiency in the conduct of insurance business; (f)Promoting and regulating professional organizations connected with the insurance and
re-insurance business;
(g) Levying fees and other charges for carrying out the purposes of this Act; (h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business;
(i) control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section
64U
of
the
Insurance
Act,
193(4of1938);
Here in this section we have covered major financial regulatory bodies in India's financial market. Securities and Exchange Board of India (SEBI) National Stock Exchange Bombay Stock Exchange (BSE) Reserve Bank of India Major Financial Institutions in India Foreign Investment Promotion Board
SEBI (Securities and Exchange Board of India)
ESTABLISHMENT OF SEBI The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.
PREAMBLE The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as “…..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”
Definitions (1) In this Act, unless the context otherwise requires, (a) "Board" means the Securities and Exchange Board of India established under section 3; (b) "Chairman" means the Chairman of the Board;
Management of the Board
.
The Board shall consist of the following members, namely:(a) A Chairman; (b) Two members from amongst the officials of the Ministry of the Central
Government dealing with Finance and administration of the
Companies Act, 1956(1 of 1956); (c) One member from amongst the officials of the Reserve Bank; (d) Five other members of whom at least three shall be the whole-time members to be appointed by the central Government.
POWERS AND FUNCTIONS OF THE BOARD
Functions of Đ° Board (1) Subject to the provisions of this Act, it shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.
(2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for (a) Regulating the business in stock exchanges and any other securities markets; (b) Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, bankers to an issue, trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisers and such other intermediaries who may be associated with securities markets in any manner; (BA) registering and regulating the working of the depositories, participants, custodians of securities, foreign institutional investors, credit rating agencies and such other intermediaries as the Board may, by notification, specify in this behalf;
(c) Registering and regulating the working of venture capital funds and collective investment schemes, including mutual funds; (d) Promoting and regulating self-regulatory organizations; (e) Prohibiting fraudulent and unfair trade practices relating to securities markets;
(f) Promoting investors' education and training of intermediaries of securities markets; (g) Prohibiting insider trading in securities;
OBJECTIVE The primary objective of my study is to gain through practical experience, a sound appreciation and understanding of the theoretical principle learned in two semester in MBA. My objective is oriented towards developing the skills, knowledge and attitude needed to make an effective start as a member of the management profession. Apart from these basic objectives some other objectives of my study are listed below: To understand the awareness level of potential customer in regards to life insurance, general insurance and mutual funds by directly interacting with them. To provide the requisite information to the potential customer about the investment. To understand the purchasing behavior of the people towards the insurance and mutual funds. To educate the people about the insurance and mutual funds. To keep a sharp look in the market to understand the behavior of competitor.
So from the above listed objective I got opportunity to interact with customer and to understand their behavior.
SCOPE The scope of this project work is very wide, interacting with People helps me
a lot to learn about the awareness level of customers towards mutual funds
and insurance and helps me to understand their decision making process of
investing in insurance and mutual funds. It also gave me opportunity to visit
different people who make me familiar with the market of investment. It also
helps me to learn how to behave in market as well as helps me to behave in
front of customers. Interacting with different people with different opinion and
views helps me to learn the human purchasing behavior in regards to life
insurance and mutual funds and the data collected from these sources helps
to interpret the awareness level of potential customers.
SIGNIFICANCE From my point of view every study work always gives something rather than
nothing. So I had listed some of the significance apart from number of the
advantages.
Understanding real life situations in organization and their related
environment and accelerating the learning process of how his/her
knowledge could be used in realistic way.
Understanding the formal and informal relationship in an organization
as well as in a market.
To understand the behavior of potential customer with different views
and opinion towards the investment.
Learn to adopt our self in the changing market.
To recognize the need and demand of the customer.
Developed the personality with continuous learning.
Got the market exposure.
Explore the new strengths and their development.
Learned how to formulate the corporate strategies and their
implementation.
RESEARCH METHODOLOGY
Since every project begins with the search of information, because it is vital
source to interpret and to understand the need and demand of the product.
To understand the customer in an emphatic manner we need to understand
their behavior and that can be achieved by doing a research and to carry out
the research a methodology is needed.
Research methodology is a way to systematically solve the research problem. it may be understood as a science of studying how research is done scientifically .when we talk about research methodology we not only talk of the research methods but also consider the logic behind the methods we use in the context of our research study and explain why we are using a particular method or technique and why we are not using others so that research results are capable of being evaluated either by the researcher himself or by others.
Data’s are the useful information or any forms of document designed in a systematic and standardize manner which are used for some further
proceedings. One of the important tools for conducting marketing research is the availability of necessary and useful data. Some time the data are available readily in one form or the other and some time the data are collected afresh. The sources of Data fall under two categories, Primary Source and Secondary Sources.
SOURCES OF DATA
PRIMARY DATA: The data which is collected by the researcher
himself is called primary data. it is fresh data.
SECONDARY DATA: The data obtained through published or written sources collected through other sources than the researcher himself is called secondary data.
PRIMARY DATA:
ďƒź Direct interaction with customers
ďƒź Telecommunication
questionnaire
SECONDARY DATA:
Magazines
journals
internet
company’s handouts
This project is basically based on primary data which I gathered from the direct
verbal
interaction
with
SAMPLING SIZE -100 RESPONDENTS
SAMPLING AREA – AGRA
DATA COLLECTION
the
potential
customers.
For the purpose of this project, a questionnaire was designed to collect data.
The questions were structured for general information. Questionnaire is one of
the good methodology which I had used
to collect
requisite information
about my project work.
DATA ANALYSIS TECHNIQUE
a. Simple average
b. Tabulation
LIMITATIONS
Besides number of advantages this project also have some limitation, some of them are listed below.
ďƒź Poor participation of the customer. ďƒź Low awareness level.
Less number of potential customers. Frequent adaptation based on market condition is very tuff. Risk factor. Perception of the customer is negative. Customers are not agreed quickly. Fear of fraud or insolvency in the customer mind. Sometime the scheme offered by the company didn’t meet the customer expectations. Expectation on ROI (return on investment) is very high.
CHAPTER-2 INTRODUCTION TO ORGANISATION 1.
HISTORY
2.
ORGANISATION STRUCTURE
3.
PRODUCT PROFILE
4.
FINANCIAL STATUS
HISTORY OF THE COMPANY
The Kotak Mahindra group is a financial organization established in 1985 in India. It was previously known as the Kotak Mahindra Finance Limited, a non-banking financial organization. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). Kotak Mahindra Finance Ltd. is the first company in the Indian banking history to convert to a bank. The group has a net worth of over Rs. 6,523 crore and has a distribution network of branches, franchisees, representative offices and satellite offices across cities and towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group services around 6.2 million customer accounts.
The bank is headed by K.M. Gherda Kotak Mahindra is one of India's leading financial organizations, offering a wide range of financial services that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to
investment banking, the group caters to the diverse financial needs of individuals and corporate.
Kotak Mahindra Old Mutual Life Insurance Ltd.
Kotak Mahindra Old Mutual Life Insurance is a 74:26 joint venture between Kotak Mahindra Bank Ltd. and Old Mutual plc. Kotak Mahindra Old Mutual Life Insurance is one of the fastest growing insurance companies in India and has shown remarkable growth since its inception in 2001.
About Kotak Mahindra Group ‘THINK INVESTMENTS.THINK KOTAK’
Kotak Mahindra group is one of India’s leading banking and financial services organizations, with offerings across personal financial services; commercial banking; corporate and investment banking and markets; stock broking; asset management and life insurance. The Kotak Group employs around 20,000 people and has over 1,350 offices across 370 cities and towns in India. Kotak also has offices in London, New York, San Francisco, Singapore, Dubai and Mauritius.
About Old Mutual Plc
Old Mutual plc is an international savings and wealth management company based in the UK. Originating in South Africa in 1845, it is among the top 50 largest companies in the FTSE100. The group has a balanced portfolio of businesses offering Asset Management, Life Assurance, Banking and General Insurance Services in over 40 countries, with a focus on South Africa, Europe and the United States, and a growing presence in Asia Pacific. Old Mutual plc employs approximately 53,000 employees worldwide and is listed on the London and Johannesburg stock exchanges.
Company’s Vision and Mission Mission: The Company focuses on the needs of their customers and creates confidence, trust and loyalty by offering a wide range of innovative insurance
solutions.
Strengthened by their commitment to professional management, company ensures the continued growth and advancement of their employees.
Vision: Kotak Life Insurance has a deep rooted commitment to improve the quality of life of its customers, employees and stakeholders. They aim at improving the long term value in their relationship by continuous innovation and improvements. They do this by their three-prong effort which strives to make Kotak Life Insurance a corporate with values.
Increase Customer Value Kotak Life Insurance has gone to the heart of its customer's requirements and developed products which are unique and serve the customer needs perfectly. It builts a relationship of mutual trust and benefit to serve the Indian customer. At Kotak Life Insurance the customer always comes first.
Cohesive Work Environment It forms long-term partnership with its employees by offering them an invigorating work experience. It not only demand loyalty, sincerity and values but also give it back in equal measures. Kotak Life Insurance will like to offer its employees space to grow, innovate and build a long-term career.
Work with Honors Kotak Life Insurance delivers everyday services in the marketplace with the high sense of duty and commitment. Their employees strive to build the long-term value for all those come in contact with Kotak Life Insurance. Their consumers, distributors, employees, shareholders and the nation have their commitment that it will uphold the values of trust, integrity and a Sense of Honors in every thought, act and deed in order to positively contribute to individual, society and nation growth.
ORGANISATION STRUCTURE
CHANNEL MARKETING
Distribution Network of Individual Life Insurance Business in India
CURRENT AUTHORITIES OF KOTAK LIFE INSURANCE
MANAGING DIRECTOR: - MR. GAURANG SHAH
CFO :- G. MURALIDHAR
VICE-PRESIDENT
TRAINING
AND
MANAGEMENT DEVELOPMENT: - MR. ARUN PATIL
VICE PRESIDENT HR: - MR. SUGATA DUTTA
VICE-PRESIDENTS DISTRIBUTION
DISTRIBUTION DEVELOPMENT
AND
PLANNING: - MR. KAMLESH VORA
APPOINTED ACTUARY: - JOHN BRYCE PRODUCT PROFILE
Protection Plans
Kotak Loan Protection Plan Kotak Loan Protection Plan is a protection plan that helps share the burden of your loan.
Kotak Term/Preferred Term Plan
The Kotak Term/Preferred Term Plan is a pure risk cover plan that provides you with a high level of protection at nominal costs.
Kotak Eternal Life Plans Kotak Eternal Life Plans are participating whole life plans that provide enhanced protection till the golden age of 99.
Savings & Investment Plans
Kotak Platinum Advantage Plus You've lived life on your own terms; always done what you've believed in. You are used to having the luxury of choice and the power to control.
Kotak Smart Advantage
Kotak Smart Advantage is an intelligent unit-linked plan that is based upon the idea of regular savings and systematic accumulation of wealth in the long term.
Kotak Safe Investment Plan Kotak Safe Investment plan is the ideal investment plan for you with its unique “Seal of Guarantee� offer that not just gives you the best of bull markets but also eliminates any capital loss in falling markets.
Kotak Flexi Plan Kotak flexi plan offers you an ideal market-linked investment plan that helps you create your own financial future by offering you the flexibility and control over your money. Kotak Platinum Advantage Plan Kotak Platinum Advantage Plan features capital protection, embedded investment advice, life cover and aggressive market linked growth options.
Kotak Easy Growth Plan
Kotak Easy Growth plan, a single premium investment plan that generates value for you for whole life as well as provides protection to your family in case of unforeseen events.
Kotak Capital Multiplier Plan The Kotak Capital Multiplier Plan is the only plan of its kind that allows you to enjoy returns even beyond maturity.
Kotak Money Back Plan This plan offers the key benefit of cash lump sums at periodic intervals of five years ensuring that you are able to meet any of your financial obligations.
Kotak Endowment Plan Kotak Endowment Plan is a participating endowment plan that provides you an avenue for long term regular investments to accumulate a lump sum on maturity.
Kotak Premium Return Plan
The premium Return Plan will get you the dual benefit of a risk cover and savings, with minimal paperwork and procedures.
Kotak Sukhi Jeevan Plan Sukhi Jeevan is a long-term savings and protection plan that keeps pace with your changing needs at every step of life.
Kotak Gramin Bima Yojana
Kotak Surakshit Jeevan Kotak Surakshit Jeevan, an enhanced protection and long-term savings plan, makes sure your family remains financially independent even if you are not around.
Retirement Plans
Kotak Secure Retirement Plan
An ideal retirement solution is one that gives you complete flexibility and peace of mind, not only while you save for your retirement but also after you retire.
Kotak Retirement Income (Unit Linked) Kotak Retirement Income Plan is an ideal retirement solution that gives you complete flexibility and peace of mind, not only while you save for your retirement but also after you retire.
Kotak Long Life Secure Plus Kotak Long Life Secure Plus is a unit-linked plan that ensures your investment gives maximum protection to secure your family's future and their financial independence
Kotak Long Life Wealth Plus Kotak Long Life Wealth Plus is an intelligent investment plan that helps you builds your future net worth with power-packed features that actively monitor and manage your investment growth
Kotak Retirement Income Plan
The Kotak Retirement Income Plan is a savings plan designed to meet your post-retirement needs. It is a plan that gives you "Jeene ki azaadi".
Child Plans
Kotak Headstart Child Plans The headstart child plans are specially tailored, cost effective plans that aim to give your children the financial means to pursue his or her dreams
Kotak Child Advantage Plan The Kotak Child Advantage Plan is an investment plan designed to meet your child's future financial needs.
PLANS FOR GROUP
Kotak Group Shield Kotak Group Shield is a comprehensive solution that helps protect your customer’s assets and savings in the unfortunate event of death, illness or disability.
Kotak Group Assure Kotak Group Assure is a comprehensive solution that helps protect your customer’s assets and savings in the unfortunate event of death, illness or disability.
Kotak Term Grouplan Kotak Term Grouplan provides life cover for a group of employees, by paying a lump sum benefit to the beneficiary on the unfortunate death of an employee.
Kotak Gratuity Grouplan Gratuity management solution manages your gratuity liability effectively but also helps you release resources for your core business activities.
Kotak Superannuation Grouplan
Kotak Superannuation Grouplan (KSGP) is a uniquely flexible product that addresses the needs of both the employers and the employees.
Kotak Credit-Term Grouplan The Kotak Credit-Term Grouplan, is the right solution to your needs, protecting both your institution's and your customer's interest.
Kotak Complete Cover Grouplan Kotak Complete Cover Grouplan can provide your institution the required value-add to differentiate your products and make them more competitive.
FINANCIAL STATUS OF THE COMPANY
FINANCIAL RECORD
AMOUNT IN CRORE
YEAR
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
LIC
11422
11165
12282
12558
15003
27103
27144
PRIVATE INVETMENT COMPANIES
180
662
2085
4357
7500
15932
29268
TOTAL
11602
11827
14367
16915
22503
43035
56412
MARKET SHARE
YEAR
200102
200203
200304
200405
200506
200607
200708
LIC
98%
94%
85%
74%
66%
63%
48%
PRIVATE COMPANIES
2%
6%
15%
26%
34%
37%
52%
From the last year data it is clear that they had shown a tremendous growth in the year 2008 LIC and Private companies has been sold approximately 29 crore policies. Out of the total 28% policies has been sold out in rural areas.
Companies
April may-june quarter 1 2008
April may-june quarter 1 2009
% change
LIC
7524.56
9028
19.98%↑
Private companies
7524.54
5428
-27.86%↓
Major insurance companies
SBI life
1149
1073
-6.61%↓
Icici prudential
1590
807.07
-49.24%↓
Bajaj alliance
828
577
-30.31%↓
BSCL
502
440
-12.35%↓
HDFC
490
412.64
-15.79%↓
PERFORMANCE OF KOTAK DURING 2008-09 FINANCIAL YEAR KOTAK LI
1400 CRORE
TIDE AGENCY
500 CRORE
ALTERNATE CHANNEL
900 CRORE
CHAPTER-3
THEORETICAL FRAMEWORK OF THE STUDY
Theoretical framework of the study
During my training I had to find out customers awareness and their views towards Insurance in KOTAK LIFE INSURANCE During my training I had to face many problems as customers have no time to give me and listen to my words what I want to convey to them, they have less trust in Insurance Companies as compared to the LIC (Life Insurance Corporation). Introduction of new players in the market making the competition heated up. I tried my best to overcome these problems and do my job with utmost dedication and commitment. From the survey I conducted by getting feedback from the consumers I found that there are many offers, facilities and scheme launched by the other Insurance Company. There are certain customers who are happy and satisfied with the working performance of the company but skill a lot of benefits are to be received by the customers which can satisfy them.
LEARNED PRODUCT
ďƒź KOTAK SMART ADVANTAGE PLAN
Make every rupee work for your happineyss In this policy, the investment risk in the investment portfolio is borne by the policyholder. Why should we invest in Kotak smart advantage? Every step in our life brings with it newel earnings. We are determined to make the best of it, so that we can look forward to a great future. How we shape our tomorrow depends greatly on how we build on our today. Kotak Life Insurance introduces Kotak Smart Advantage, a great combination of investment with insurance, to put our savings to work today. It is a market linked plan with 100% premium allocations helping us to accumulate wealth systematically, over the long-term. Kotak Smart Advantage is a great combination of investment with insurance designed to enable you to make the best use of your hard-earned money that puts you right ahead
Key Highlights
•
Guaranteed returns of up to 275% of your first year premium at maturity.
•
Assured bonus additions at regular intervals during the policy term to enhance your fund value.
•
100% allocation of your premiums from second year onwards to maximize your earning potential.
•
A unique3 fund offering you the maximum Opportunity for growth.
•
Option to maximize protection your loved ones.
•
Tex Benefits to avail under 80 C and section 10 (10D) of the Income Tax Act, 1961.
How does this plan work? Kotak Smart Advantage optimizes the return on your premiums paid through a smart mix of assured additions and 100% premium allocation. Your first year’s premium contributes towards guaranteeing you an Assured Addition Advantage that boosts your fund value at regular intervals throughout the term of the policy. The Longer your premium paying term, the higher will be the value of the advantage. The Assured Addition Advantage is a powerful combination of two benefits:
A. Fixed Advantage
The Fixed Advantage benefit is an assured value guaranteed at the end of your premium payment term. This benefit is calculated as a percentage of your first year premium depending on the premium payment term chosen, provided your policy is in force and all premiums are fully paid up to date.
B. Dynamic Advantage The Dynamic Advantage benefit is an assured bonus addition credited to your fund value at the end of every 10th, 15th, 20th, 25th and 30th policy year. This benefit will be calculated as a percentage of the average value of funds in the three years preceding the benefit allocation, provided your policy is in force and all premiums are fully paid up to date.
The Assured Addition Advantage lets you enjoy the benefits of a fixed assurance and a dynamic benefit directly linked to your fund value, to help you tread comfortably and swiftly towards your goals. Further, the plan makes your money work smarter for you through 100%1 premium allocation in each policy year from second year Onwards, in the funds of your choice. On maturity of your policy, you will receive the Fund Value and the Fixed Advantage benefit, provided your premiums are always fully paid up to date. The Dynamic Advantage benefit would have already been credited in the Fund Value at the specified intervals to accumulate more for you at the end.
ďƒź
Wealth Maximization Avenue
This plan offers you 3 well-defined fund options to manage your capital according to your risk appetite over the term of the policy, Opportunities Fund ,Dynamic Floor Fund Dynamic Bond Fund
High Premium Allocation Kotak Smart Advantage Plan gives you 100% premium allocation for annual premium sizes equal to and above Rs.36,000, resulting in greater returns. Low premium allocation charges of up to 2% are charged for annual premiums below Rs.36,000. These charges reduce to 0% from the 11th year onwards.
Protection for your family (Death Benefit) In the unfortunate event of death within the term of the policy, your beneficiary would receive the sum assured or the fund value in the Main Account plus the Fixed Advantage Benefit, whichever is higher, plus the fund value in the Topup account. This plan offers you flexible life cover options to choose from for the same annual premium.
Tax Benefits Tax Benefits can be availed under section 80C and 10(10D) of Income Tax Act, 1961. Tax benefits are subject to change in tax laws.
IMPORTANT APPLICABLE DEDUCTIONS UNDER CHAPTER VI A OF TAXATION SECTION
80C
APPLICABLE DEDUCTIONS
Investment in saving scheme(initially allowed u/s 88) such as GPF/PPF/LIC/GIS/NSC/NABARD BOND/ELSS. Tuition fees of children & repayment of house loan principal, without any interim limit, max. to Rs. 1 lac, including bank FD for 5yrs or more.
80CCC
Premium amount deposited in pension scheme of Govt./Pvt. Insurance Co., max. up to Rs.100,000.00
80CCD
Contribution for assessee/employer in pension schemes of Central Govt. up to the limit of 10% of salary.
80CCE
Investment done u/s 80C, 80CCC & 80CCD combined should not be more than Rs. 1,00,000.00
80D
Premium paid for medical insurance for self husband/wife, or children maximum up to Rs. 15’000.00 & Additional Rs. 15,000.00 will be allowed for Medical Insurance for mother, father from FY 08-09 (but if age is > 65yrs, then max. up to Rs. 20,000.00).
80DD
Deduction of Rs.50,000.00 against expenses of insurance premium occurred on treatment of dependent disable ( ded. Applicable up to Rs. 75,000.00 in case of serious disability).
80E
Payment of interest of education loan taken for higher education of self, spouse or children; without any maximum limit of payment.
80G
Donation given in PM/CM relief fund, fully exempted.
80U
If assessee him/herself, if completely blind or physically or mentally disable permanently then deduction of Rs.50,000.00 is allowed.
Important Schemes/Heads for Investment/expenses
SCHEMES/HEADS FOR INVESTMENT/EXPENSES
Limit of invest. & Applicable u/s80C
Contribution of employee in GPF/CPF/PPF
MAX. 1.00 LACS
Investment against purchase of NSC, due interest on earlier
MAX. 1.00 LACS
purchased NSC (excluding interest of 6th year) Premium paid during the year in life insurance scheme of
Max. 1.00 LAC
Govt./Pvt. Insurance co., postal insurance & ULIP scheme . Repayment of housing loan (taken for purchase/ construction
MAX. 1.00 LACS
of house from approved institution) principal & necessary expenses as stamp duty, registration fees etc. Amount paid in the form of tuition fees of child studying in
MAX. 1.00 LACS
college, university, school or other educational institute (excluding development fee or donation fee) ded. Applicable up to 2 children only. Investment for 5 years & above in scheduled bank/ Post
MAX. 1.00 LACS
Office as fixed deposit. ELSS
MAX. 1.00 LACS
SR. CITIZEN Deposit scheme of Post Office
MAX. 1.00 LACS
ď ś
What can you gain by investing in Kotak Smart Advantage?
Smart investing is based on the fundamental idea of regular savings and the power of compounding, which is a great way to multiply your money. It makes small savings transform into jackpots if planned with a long-term vision and right investment fund options. Kotak Smart Advantage, with its power-packed and well-defined fund options, gives you unmatched benefits to maximise your earnings potential. Each of these funds is carefully crafted to suit your individual long-term needs.
You can distribute your investments across one or more funds based on your needs and goals, keeping in mind your time horizon and risk appetite.
ď ś
Eligibility – A Ready Reckoner
ULIP: Unit Linked Insurance Plan
“A Unit-linked Insurance Plan, or ULIP, is a bundled product that combines life insurance cover with investing.” OR “A ULIP is an investment-linked life insurance plan that combines investment and protection.”
ULIP
The premiums that you pay provide you not only with a life insurance cover, but a part of it gets invested in specific investment funds of your choice.
The funds are chosen in accordance to the amount of risk you are willing to take. Choices range between 0% Equity or Full Debt market related products to 100% Equity. As a policyholder, you can choose how you want to allocate your insurance premiums towards protection and investment. The insurance cover would include death benefit, disability & critical illness. The investment fund is divided into units of equal value. Prices of these units are published daily in newspapers, so you can easily track the value of your investments.
ULIP’s: How exactly they work
The costs of a ULIP are deducted from the premium that a policyholder pays. The premium paid by you, minus any charges to be deducted, is used to buy units in the fund selected by you at that day’s unit price. So, more units are added to your account each time you pay your policy premium. If the unit price is relatively high, you get lesser number of units & if the unit price is relatively low then you get more number of units.
The value of the fund depends on the unit price, which in turn is determined from the market value of the underlying assets.
Thus, the fund value is determined by multiplying the number of units with the price of the unit – (FUND VALUE = UNIT PRICE × NO.OF UNITS)
ULIP’s: How they differ from Tradit. Plan Ulips & endowment plans work differently. A typical endowment plan mixes Insurance & Investment & assures you a certain sum at the end of a given period (SA & Bonuses) In an endowment plan, the big change has been in the structuring in bonus payments. If it is accumulated & paid either on maturity of the policy or death of the insured person, it is reversionary bonus.
If the policy holder is allowed to encash it , it is called nonreversionary bonus.
The bonus depends on the performance of the company.
If the bonus is non-reversionary, some insurers offer other bonus payment choices. The advantage of a Ulip over Trad. Plans, is that the policy holder does not have to commit to a fixed level of cover or investment at the time of inception of policy.
ULIPS : TYPES •
There are 2 types of ULIPS available in the market –
•
Single Premium: a single lump sum premium A single lump sum premium payment is made. The death cover is
either 125% or 500% of your premium or anything between this The death benefit is the SA or the value of investment units at the time of claim whichever is high.
•
Regular Premium: monthly, quarterly, half yly, or annually.
The basic insurance cover in the event of death is usually a multiple of the annual premium .The death benefit payment will be the SA or the value of investment units at the time of claim, whichever is higher, or both.
HOW FLEXIBLE ARE ULIPS
The main feature of ULIPS is there flexibility.
These policies provide flexibility in life protection, investment & savings, adjustable life cover, fund options. Transparency in charges. These policies have options to take additional cover against death due to accident or disability or critical illness, & liquidity through partial withdrawals. You may vary the amount of your premium payments or cover according to your changing financial circumstances.
CHAPTER-4 CLASSIFICATION, ANALYSIS AND INTERPRETATION OF DATA COLLECTED ACCORDING TO THE TOPIC ASSIGNED
CLASSIFICATION OF DATA
On the basis of data which I had collected from different sources and from different area I had classified data on the basis of some factors which are listed below 1. Income 2. Qualification 3. Occupation 4. Gender 5. Marital status 6. Age 7. Area 8. Earning source 9. Saving 10. Purpose of investment On the basis of our mentioned factors I had classified, analyze and interpret ate data, shown in diagrammatic form to make it easier to understand
1. WHAT IS YOUR INCOME (ANNUALLY IN RS) ? 1-150000 18
150000-250000 38
250000-350000 24
above350000 20
Interpretation As from the pie chart it is clear most of the people fall in the income group of 150000-250000.This income group belongs to the middle class family and they high urge to invest After this group income level of 250000350000 have their priority in the investment.
2. WHAT IS YOUR QUALIFICATION? 12th
Diploma
Graduate
Post graduate &above
32
8
41
19
Based on the 100 respondent
Interpretation On the basis of pie chart it is clear that 41% people are graduate who has shown knee interest in the investment. Yet there are 32% people who are 12th passed but they have very little knowledge about the investment market.19% people are post graduate & above are partially interested in investment.
3. OCCUPATION
Salaried class 65
Self employed 7
Business class 18
others 10
Interpretation As per the pie chart it is clear 71% people fall in salaried class and they their disposal income to invest.20% people come in business class, they have their high income to invest in a market to get better return on their investment.
4. GENDER Male 83
Female 17
Interpretation On the basis of pie chart it is clear there is dominance of male in the investment decision .
. 5. MARITAL STATUS Married 61
Unmarried 39
Interpretation As per the pie chart 61% people are married to whom I met. Out of these people almost 20% are interested to invest their money. However, on the other end out of 39% unmarried people only 5% are keen to invest in the market in form of Insurance & Funds.
6. AGE 18-25 years 33
25-40 years 78
40-55 years 34
Above 55 years 5
Interpretation From the pie chart it is clear that 53% people those fall in the age group of 25-40 years have shown high potential towards investment. After this the people of age group of 40-55 years have great interest to invest in Insurance & Funds Sector.
7.AREA Rural 28
Urban 72
Interpretation As per the pie chart it is clear that 72% people are from urban areas and remaining 28% people are from rural, reason for the low participation from the rural areas are illiteracy, unawareness and lack of information.
8.WHAT IS YOUR EARNING SOURCE? Salary 69
Business 14
Investment 9
Others 8
Interpretation As per the pie chart 74% people earn money through their salary and these people are potential customer for the investment and this helps him to get tax benefits. After that it is business class who wants to get ROI at higher rate.
9..WHAT % OF YOUR INCOME YOU SAVE? 0-15% 51
15-30% 41
30-40% 6
Above40% 2
Interpretation As per the pie chart 51% respondent save less than 15% of their total income these people have high urge to their saving in mutual funds & insurance to secure their future from any uncertainty.
10. PURPOSE OF INVESTMENT Saving for future 54
Wealth creation
Tax rebate
Diversification
38
5
3
Interpretation As per the pie chart it is clear that most of the people invest in the insurance or mutual funds because they want to save something for their bright future, very less people are interested in tax rebate from investment.
FINDINGS As we have seen from the pie charts that people have different need for the investment and different purpose given below is a chart showing percentage of people and their investment basis.
CONCLUSION Kotak life insurance is based on the vision that it should understand the need of customers and offer those superior products and services, leveraging technology to service customers quickly, efficiently and conveniently, developing and implementing superior strategies to offer sustainable and stable returns to our customers and providing an enabling environment to foster growth and learning for the employees. The awareness level of the customer for the kotak company and its products is said to be at moderate level though it is quickly picking up the speed for growth and development. From the analysis of various facts and figure collected it can be concluded that most of the people know about kotak and they are interested in investment schemes of the company. Investment decision are not so easy to make but due rapid changing environment it is vital need to invest in mutual funds and insurance to secure for the future uncertainty.
Though the awareness level of mutual funds and insurance is quite moderate but with the help immense advertisement and promotion people come to know the benefits of mutual funds and insurance.
SUGGESTIONS 1. Invest their money in the scheme according to the performance or fundamentally not on the brokers’ tips. 2. An investor should remember that it is the equity that brings the highest rate of return but through the long –term investment and not through short- term/speculative strategies. But there is high risk in the equities. If the people invest in mutual funds they will get good return in the long run as well as short run risk is very less in mutual fund. Investor should prefer fund rather than equities. 3. Company has to take necessary steps to keep customer updated regarding the technological up gradations in these facilities. 4. Provide help to the interested investors about the mutual funds and insurance. 5. Provide financial planning services. 6. Provide value added services to the investors to make them satisfied and happy. 7. Try to understand the behavior of customer & suggest them the best product according to their need.
APPENDIX
BIBLIOGRAPHY
1.
WEBSITES REFFERED:
www.moneyoutlook.com
www.insurance.ind.com
www.kotak.com
QESTIONNAIRE FOR INVESTORS
Dear Respondent,
Objective: This is being conducted to understand the investor’s preferences and they will keep strictly confidential.
Do you invest in insurance? 1. Yes 2. No
Do you invest in mutual funds? 1. Yes 2. No
Please Tick A. Which is of the following are preferred, where you invest in saving?
1. 2. 3. 4. 5. 6.
Mutual funds Shares Govt. bonds / PO Deposits Insurance Gold Real estate
B. Purpose of your investment? 1. Savings for future 2. Wealth creation/investment 3.Tax Rebate 4. Diversification
C. By what mean you trading in stock market? 1.Online 2.Through Broker/Sub broker D. Is fluctuation in stock market effect your investment plan? 1. Not at all 2. Little bit 3. Moderate 4. Very much
E. Do you have proper knowledge about the concept of mutual funds? 1. Yes
2. No 3. Partial, I would like to know more F. Do you have proper knowledge about the concept of insurance? 1. Yes 2. No 3. Partial, I would like to know more
G. Which is the best MF, Give Ranking. 1. LIC Mutual Fund 2. Kotak Mutual Fund 3. HDFC Mutual Fund 4. UTI Mutual Fund H. Why it is the best mutual fund Scheme? 1. High Return 2. Safety 3. Tax saving 4. Liquidity I. Which is the best mutual fund Scheme? 1. Equity 2. Debt 3. Balanced
4. Tax saving scheme
J. Rank these consultancy firms, as per your preference of (1-5 in descending order) 1. Bajaj capital 2 .India Bulls 3. Karvy 4. Kotak Securities 5. HSBC 6. Other (please specify )
K. Do you have any knowledge about financial planning? 1. Yes 2. No 3. Partial, I would like to know more
L. What is your earning source? 1. Salary 2. Business 3. Investment 4. Others………………………………..
M. What is your income (Annually in Rs.)? 1.1-150000 2. 15000-25000 3.25000-30000 4. Above 35000
N. What percentage of your income you save? 1.0-15% 2.15-30% 3.30-40% 4.Above 40%
O. Please comment on kotak life insurance………...........