SYMBIOSIS LAW SCHOOL,HYDERABAD

A Comparative Analysis of ULIP of Bajaj Allianz Life

Insurance Co. Ltd with Mutual Fund

NAME PRN
Sayyan Rabeez 17010324147
Rohan Pothineni 17010324146

Under Guidance of:

Mr. Srinivas Methuku

 DECLARATION

We, do hereby declare that this project work entitled “A Comparative

Analysis of ULIP of Bajaj Allianz Life Insurance Co. Ltd with Mutual
Fund” is an outcome of our study

We also declare that this report has not been submitted by us fully or
partially for the award of any degree, diploma, title, recognition or any other
fellowship of any other university before.

Place: Hyderabad

Date: 20-08-2017 SAYYAN RABEEZ

ROHAN POTHINENI
 ACKNOWLEDGEMENT

Initially, let me thank the almighty God for guiding me all through the
project work.

I express my deep and sincere gratitude to MR.SRINIVAS METHUKU

Faculty guide for providing the necessary assistance for the project
SL.NO CONTENT

1 INTRODUCTION

2 OBJECTIVES

3 LIMITATION

4 Industry Profile

5 Unit Linked Insurance Policy (ULIP)

6 Comparison of ULIP vs MUTUAL FUND

7 CONCLUSION AND RECOMMENDATION

8 BIBLIOGRAPHY
 INTRODUCTION

To make comparison of ULIP plans with Mutual funds in Bajaj Allianz Life Insurance
Co. Ltd. and to Create awareness about Unit Linked Insurance Plan (ULIP) Benefits. The
overall goal of this project was to create awareness about investments. The Above
problem arises because every life insurance company has their products having different
positive and negative aspects.

Life Insurance is booming sector in today’s economy. So the responsibilities of the

insurance companies have been increased as compare to the past. Because in past people
were taking insurance policies for protection tool only. In present scenario insurance
sector is providing more services with the basic life insurance. Bajaj Allianz Life
Insurance has number of products, which gives the right way to save the money and earn
good profit by inve1sted premium. Today people want more services and more return on
their investment. So this insurance company is providing more value – added services
with the basic insurance operation.

By doing this type of study in this Insurance sector and looking at the vast scope and
opportunity to study this booming field of Life Insurance and the growing awareness
among the public regarding insuring their life through Life insurance policies as well as
the growing contribution of Insurance in GDP of country with the number of private
players making entrance in this booming industry of Insurance.

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.
 OBJECTIVES

 To understand the reason for which customers prefer ULIP as one of the best
insurance investment mode rather than Mutual fund.

 To find the significance difference between customers of different income with

that of investment mode.

 To Compare Investment Options of customers in ULIPs and Mutual Funds.

LIMITATIONS

 The middle class people do not know basic concept of ULIP so creating
awareness is a big challenge for me.

 The findings of my research is from a small sample size.

 Narrow minded thinking of middle class people as investment is not their cup of
tea.

 Many customers are thinking that investment in share market is very risky. As
ULIP and Mutual fund both are related to share market.
 INDUSTRY PROFILE

TOP 10 LIFE INSURANCE COMPANIES IN INDIA

LIC (Life Insurance Corporation of India) still remains the largest life insurance company
accounting for 64% market share. Its share, however, has dropped from 74% a year
before, mainly owing to entry of private players with innovative products and better sales
force.

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company
in India. It experienced growth of 58% in new business premium, accounting for increase
in market share to 8.93% in 2007-08 from 6.97% in 2006-07.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share
went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after
LIC) in number of policies sold in 2007-08, with total market share of 7.36%.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked
6th in 2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-
08, an increase of 87% over last year.

Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market
share went up to 2.96% from 1.23% a year back. It now ranks 5th in new business
premium and 4th in number of new policies sold in 2007-08.

HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in FY2007-08,
registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th
among the insurance companies and 5th amongst the private players.

Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to
2.11% in 2007-08.

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new
business generated was Rs 641.83 crore as against Rs 387.51 crore.

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company
reported growth of 80%, moving from the 11th position to 9th. It captured a market share
of 1.19% in 2007-08. Aviva Life Insurance Company India Ltd ranking dropped to 10th
in 2007-08 from 9th last year. It has presence in more than 3,000 locations
across India via 221 branches and close to 40 banc assurance partnerships. Aviva Life
Insurance plans to increase its capital base by Rs 344 crore.

MARKET SHARE OF VARIOUS LIFE INSURANCE COMPANIES

IN INDIA

Here is the market share of various Life Insurance Companies in India at the end of
FY2008.

Company Name Market Share (in %)

LIC 48.1%

ICICI Prudential 13.7%

Bajaj Allianz 10.3%

SBI Life 6.2%

HDFC Standard 4.1%

Birla Sunlife 3.4%

Reliance Life 3.4%

Max New York 2.4%

OM Kotak 1.9%

AVIVA 1.8%

BOOMING INSURANCE MARKET IN INDIA

With a huge population base and large untapped market, insurance industry is a big
opportunity area in India for national as well as foreign investors. India is the fifth largest
life insurance market in the emerging insurance economies globally and is growing at 32-
34% annually. This impressive growth in the market has been driven by liberalization,
with new players significantly enhancing product awareness and promoting consumer
education and information. The strong growth potential of the country has also made
international players to look at the Indian insurance market. Moreover, saturation of
insurance markets in many developed economies has made the Indian market more
attractive for international insurance players

This research report will help the client to analyze the leading-edge opportunities critical
to the success of insurance industry in India. Based on this analysis, the report gives a
future forecast of the market that is intended as a rough guide to the direction in which
the market is likely to move.
Total life insurance premium in India is projected to grow Rs 1,230,000 Crore by 2010-
11.

 Total non-life insurance premium is expected to increase at a CAGR of 25% for

the period spanning from 2008-09 to 2010-11.

 With the entry of several low-cost airlines, along with fleet expansion by existing
ones and increasing corporate aircraft ownership, the Indian aviation insurance
market is all set to boom in a big way in coming years.

 Home insurance segment is set to achieve a 100% growth as financial institutions

have made home insurance obligatory for housing loan approvals.

COMPANY PROFILE
Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance
Company and Bajaj Finserv.
Allianz SE is a leading insurance conglomerate globally and one of the largest asset
managers in the world,managing assets worth over a Trillion(Over INR 55,00,000
Crores).Allianz SE has over 115 years of financial experience and is present in over 70
countries around the world.
At Bajaj Allianz Life Insurance, customer delight is the guiding principle. Their business
philosophy is to ensure excellent insurance and investment solutions by offering
customized products, supported by the best technology.

UNIT LINKED INSURANCE POLICY (ULIP)

A unit linked insurance policy is one in which the customer is provided with a life
insurance cover and the premium paid is invested in either debt or equity products or a
combination of the two. In other words, it enables the buyer to secure some protection for
his family in the event of his untimely death and at the same time provides him an
opportunity to earn a return on his premium paid. In the event of the insured person's
untimely death, his nominees would normally receive an amount that is the higher of the
sum assured (insurance cover) or the value of the units (investments).However, there are
some schemes in which the policyholder receives the sum assured plus the value of the
investments.

Every insurance company has four to five ULIPs with varying investment options,
charges and conditions for withdrawals and surrender. Moreover, schemes have been
tailored to suit different customer profiles and, in that sense, offer a great deal of choice.

The advantage of ULIP is that since the investments are made for long periods, the
chances of earning a decent return are high.

Just as in the case of mutual funds, buyers who are risk averse can buy into debt schemes
while those who have an appetite for risk can opt for balanced or equity schemes.
However, the charges paid in these schemes in terms of the entry load, administrative
fees, underwriting fees, buying and selling charges and asset management charges are
fairly high and vary from insurer to insurer in the quantum as also in the manner in which
they are charged.

Tax benefits
The premiums paid for ULIPs are eligible for tax rebates under section 80 which allows a
a maximum of Rs. 1,00,000 premiums paid for taxable income below Rs 8,50,000 and
Proceeds from ULIPs are tax-free under section 10(10D) unlike those from a mutual fund
which attract short term capital gains tax.

POINTS TO REMEMBER ABOUT ULIP

First-year charges: Usually, a minimum of 15 per cent. However, high premiums attract
lower charges and vice versa. Charges can be as high as 70 per cent if the scheme affords
a lot of flexibility. Subsequent charges: Usually lower than first-year charges. However,
some insurers charge higher fees in the initial years and lower them significantly in the
subsequent years.

Administration charges: This ranges between Rs 15 per month to Rs 60 per month and
is levied by cancellation of units and also depends on the nature of the scheme.

Risk charges: The charges are broadly comparable across insurers.

Asset management fees: Fund management charges vary from 0.6 per cent to 0.75 per
cent for a money market fund, and around 1.5 per cent for an equity-oriented scheme.
Fund management expenses and the brokerage are built into the daily net asset value.

Switching charges: Some insurers allow four free switches in every year but link it to a
minimum amount. Others allow just one free switch in each year and charge Rs 100 for
every subsequent switch. Some insurers don't charge anything.

Top-ups: Usually attracts 1 per cent of the top-up amount. Top-up normally goes directly
into your investment account (units) unless you specifically ask for an increase in the risk
cover.

Surrender value of units: Insurers levy certain charges if the policy is surrendered
prematurely. This levy varies between insurers and could be around 75 per cent in the
first year, 60 per cent in the second year, 40 per cent in the third year and nil after the
fourth year.

Fund performance: You could check out the performance of similar schemes (balanced
with balanced; equity with equity) across insurance companies.
Look at NAV performance over a period of at least two to three years. This can only give
you some indication about the credibility of the fund manager because past performance
is no guarantee to future returns, especially in insurance products where the emphasis is
on long-term performance (10 years or more).

Since insurance is a product, which entails a long-term commitment on the part of the
insurer, it is important not to go only by the features or the cost advantages of schemes
but by the parentage of the insurer as well.

Comparing schemes based on costs is a fairly complex exercise. As a rule, the higher the
initial years' expenses the longer it takes for the policy to outperform its peers with low
initial years' costs and slightly higher subsequent year expenses.

HOW DOES ULIP WORK

Sara is a thirty-year old who wants a product that will give him market-linked returns as
well as a life cover. He wants to invest Rs 50,000 a year for 10 years in an equity-based
scheme. Based on this premium, the sum assured works out to Rs 532,000, the exact
amount of premium being Rs 50,032.
Based on the current NAV of the plan that Sara chooses to invest in, he is allotted units in
the scheme. Then, units equivalent to the charges are deducted from his portfolio.
The charges in the first year include a 14 per cent sales charge, an administration charge
(7 per cent for the first Rs 20,000 and 3 per cent for the remaining Rs 30,000) and
underwriting charges, which are deducted monthly.
Besides, mortality charges or the charges for the life cover are also deducted. For the
remaining nine years a 3.5 per cent sales charge and an administrative charge of 4 per
cent (for the first Rs 20,000 and 2 per cent for the remaining Rs 30,000) are levied in
addition to mortality charges.
Fund management fee of 1.5 per cent (equity) and brokerage are also charged. This cost
is built into the calculation of net asset value.
On maturity - that is, after 10 years - Sara would receive the sum assured of Rs 532,000
or the market value of the units whichever is higher.
Assuming the growth rate in the market value of the units to be 6 per cent per annum Sara
would receive Rs 581,500; assuming the growth rate in the market value of the units to be
10 per cent, Sara would receive Rs 7,24,400.
In case of Sara's untimely death at the end of the ninth year, his beneficiaries would
receive the sum assured of Rs 532,000 or the market value of the units whichever is
higher. Assuming the growth rate in the market value of units is 6 per cent per annum, the
value of investment would be Rs 510,200.
However, his family will get Rs 532,000 as it is the sum assured.
Assuming a growth rate of 10 per cent per annum, the value of units at the end of the
ninth year would be Rs 621,900. Hence, the beneficiaries would get Rs 621,900.

ADVANTAGES OF ULIP

 Can easily rebalance your risk between equity and debt without any tax
implications.

 Best suited for medium risk taking individuals who wish to invest in equity and
debt funds (at least 40% or higher exposure to debt). No additional tax burden for
those investing mainly in debt unlike in MFs.

RISKS ASSOCIATED WITH ULIPS

ULIPS as the name suggests are directly linked with the investments made by the
insured. Though he does not have a direct say in this but he does offer his choice in the
form of investment.

With stock markets soaring high a few months back, ULIPs were offering a good rate of
return, but now with a sudden downfall of the stocks, ULIPs are bound to become
negative investments.

At present, a policy-holder cannot understand the growth of his investments vis-à-vis

other funds in the market, since there is no benchmark to measure one fund against the
other. Usually a policy-holder could ask his investment in a ULIP to be, for example, 55
per cent in equity and 45 per cent in debt. These components can be mixed according to
his risk-taking ability. An investor, therefore, would have to look at quarterly statements,
where the fund would be compared with benchmarks. However, this may not be a true
representation of the NAV, as the ULIP could be a mix of debt, liquid and equity
investments

COMPARISON OF ULIP VS MUTUAL FUND

Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual
funds in terms of their structure and functioning. As is the cases with mutual funds,
investors in ULIPs are allotted units by the insurance company and a net asset value
(NAV) is declared for the same on a daily basis.
Similarly ULIP investors have the option of investing across various schemes similar to
the ones found in the mutual funds domain, i.e. diversified equity funds, balanced funds
and debt funds to name a few. Generally speaking, ULIPs can be termed as mutual fund
schemes with an insurance component.
However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or
investing using the systematic investment plan (SIP) route which entails commitments
over longer time horizons. The minimum investment amounts are laid out by the fund
house.
ULIP investors also have the choice of investing in a lump sum (single premium) or using
the
conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or
monthly basis. In ULIPs, determining the premium paid is often the starting point for the
investment activity.
This is in stark contrast to conventional insurance plans where the sum assured is the
starting point and premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the policy's
tenure.

2. Expenses
In mutual fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject to pre-
determined upper limits as prescribed by the Securities and Exchange Board of India.
For example equity-oriented funds can charge their investors a maximum of 2.5% per
annum on a recurring basis for all their expenses; any expense above the prescribed limit
is borne by the fund house and not the investors.

Insurance companies have a free hand in levying expenses on their ULIP products with
no upper limits being prescribed by the regulator, i.e. the Insurance Regulatory and
Development Authority. This explains the complex and at times 'unwieldy' expense
structures on ULIP offerings. The only restraint placed is that insurers are required to
notify the regulator of all the expenses that will be charged on their ULIP offerings.

3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis,
albeit most fund houses do so on a monthly basis. Investors get the opportunity to see
where their monies are being invested and how they have been managed by studying the
portfolio.

There is lack of consensus on whether ULIPs are required to disclose their portfolios.
During our
interactions with leading insurers we came across divergent views on this issue.

4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are
largely
comparable. For example plans that invest their entire corpus in equities (diversified
equity funds), a 60:40 allotment in equity and debt instruments (balanced funds) and
those investing only in debt instruments (debt funds) can be found in both ULIPs and
mutual funds.

CONCLUSION AND/OR RECOMMENDATIONS

From above analysis and survey we can conclude as follows

 Awareness of ULIP is increasing as more number of private players are entering

in life insurance industry.

 Mutual Fund is also getting more and more famous in Indian market as many
private companies innovating new funds as the investors demand.

 ULIP differentiate from Mutual fund in respect of Insurance cover.

 Investors in Bajaj Allianz Life ULIP will be getting the advantage of life
insurance cover.

 People are turning towords the ULIP as a good investment option but as ULIP is
in its starting phase so customers are preferring only big brands.
 BIBLIOGRAPHY

WEBSITE:

www.irdaindia.gov

www.bajajallianzlife.co.in

www.amfindia.com

www.articlebase.com