A REPORT ON A Comparative Study and Analysis of Unit Linked Insurance Plans (ULIPs)-An IDBI FORTIS Perspective

BY ADITYA S. MHATRE ROLL NUMBER:103

GUIDED BY : DEVANSHI ZAVERI

ACKNOWLEDGEMENTS I would like to express my sincere gratitude to my project guide Ms. Devanshi Zaveri , professor at Rohidas Patil Institute of Management Studies, Coimbatore for guiding me throughout my Forth semester final and research project. Her encouragement, time and effort are greatly appreciated. I would like to thank all the respondents who offered their opinions and suggestions and sometimes critical views throughout the survey which made me constantly update myself come out with a successful project.

TABLE OF CONTENTS
ACKNOWLEDGEMENTS ................................................................................................................2 ABSRACT ..........................................................................................................................................4 INTRODUCTION ..............................................................................................................................5 PURPOSE ..........................................................................................................................................7 SCOPE OF THE STUDY ..................................................................................................................7 OBJECTIVES OF THE PROJECT ...................................................................................................7 LIMITATIONS OF THE STUDY ....................................................................................................7 SOURCES OF DATA .......................................................................................................................8 INSURANCE ....................................................................................................................................9 CHARACTERISTICS OF INSURANCE ........................................................................................9 HISTORY OF INDIAN INSURANCE ............................................................................................9 INSURANCE MARKET - PRESENT .............................................................................................10 CAPITAL REQUIREMENTS AND FOREIGN PARTICIPATION ..............................................11 LIFE INSURANCE .........................................................................................................................12 COMPANY PROFILE ....................................................................................................................15 ABOUT IDBI FORTIS ....................................................................................................................15 PRODUCT RANGE OF IDBI FORTIS ..........................................................................................17 UNIT LINKED INSURANCE PLANS...........................................................................................18 STRUCTURE OF ULIPs ................................................................................................................19 TYPES OF FUNDS UNDER ULIPs ..............................................................................................21 ADVANTAGES OF ULIPS ...........................................................................................................22 FACTORS INFLUENCING THE BUYING OF UNIT LINKEDINSURANCE PLAN (ULIP)...23 UNIT LINKED INSURANCE PLANS (ULIPs) OF DIFFERENT COMPANIES .......................24 IDBI FORTIS LIFE INSURANCE COMPANY ...........................................................................24 COMPARITIVE SECONDARY DATA ANALYISIS ..................................................................25 TATA AIG LIFE INSURANCE COMPANY ...............................................................................25 BAJAJ ALLIANZ LIFE INSURANCE COMPANY ......................................................................27 LIFE INSURANCE CORPORTAION (LIC) OF INDIA ...............................................................29 HDFC STANDARD LIFE INSURANCE COMPANY .................................................................31 ICICI PRUDENTIAL LIFE INSURANCE COMPANY ...............................................................33 PRIMARY DATA ANALYSIS ......................................................................................................38 MERITS AND DE-MERITS OF IDBI FORTIS LIFE INSURANCE COMPANY.......................48 POSITIONING .................................................................................................................................50 POSITIONING STRATEGIES.........................................................................................................50 POSITIONING STRATEGIES OF IDBI FORTIS ..........................................................................50 FINDINGS ........................................................................................................................................53 RECOMMENDATIONS .................................................................................................................54 ANNEXURE - I (QUESTIONNAIRE) ...........................................................................................56 ANNEXURE - II (FACTOR ANALYSIS OUTPUT [SPSS]).......................................................57

ABSRACT The project aims to make a detailed study of Unit Linked Insurance Plans (ULIPs) in the Indian context, a comparative analysis of ULIPs of some well known selected companies and in the process identify the strengths and weaknesses of IDBI FORTIS. The different selected companies apart from IDBI FORTIS on which the project is entirely focused are namely: a. ICICI PRUDENTIAL b. BAJAJ ALLIANZ c. TATA AIG LIFE d. LIFE INSURANCE CORPORATION OF INDIA e. HDFC STANDARD LIFE The comparative study is primarily based in terms of the various benefits offered viz. Death Benefits, Health benefits, Maturity Benefits, financial benefits & other benefits. The various parameters taken into consideration were flexibility, transparency, liquidity and the number of funds options available. The project consists of a detailed analysis of the comparison of various ULIPs of IDBI FORTIS with that of the selected major players in the market. The results of the project have been an outcome of a detailed analysis of collected secondary data and well supported by analysis of primary data collected through a survey in the Mumbai. The project required me to design a questionnaire and conduct a primary survey. The survey was mainly conducted to study the consumer perception, opinion and awareness of various insurance products. The number of respondents targeted was 133.The sample of respondents included was carefully selected targeting respondents from all age groups. Also the preferences of the respondents towards these selected insurance companies have been noted and the reasons analyzed. The data gathered from the primary survey was coded in a statistical tool called as Statistical Package for Social Science (SPSS) for analysis and to find various factors that affect an investor decisions while choosing an investment option in this vast market. Finally we interpreted the results of the project by combining both the primary and the secondary data analyses then identified the areas where the company is really strong and the areas where it needs to have a second look. We have also found out the amount to which each of the selected companies was affected due to the market slow down in the last one year The project also involved a complete study of the positioning strategies adopted by IBDI FORTIS in general. This includes a detailed study of the various advertising strategies as well. The sole objective of this study was to understand the strategies being adopted by the company to counter the highly efficient stronger players in the market and survive with success. Finally after a detailed study we have found out the merits and demerits of the IDBI FORTIS and based on those we have given some recommendations to the company in areas where the company to has to really work on. The Project helped me enhance my knowledge on various technicalities of the Indian insurance industry and gave me a broader prospective of various investment opportunities available in the market. Marketing concepts learnt in the classroom were implemented in a real life environment.

INTRODUCTION In the commercial arena, the choice of an effective strategy is perhaps the most important and the toughest decision to take. The decision to select among the grand strategies and deciding upon which strategy will best meet the enterprises objectives is rendered complex by multiple considerations. The same is also true with the insurance companies in India who are constantly revamping their strategies and coming out with innovative options to stay in the competition. There were days when Life Insurance Corporation of India (LIC) was the only insurance company available to people in India and where people synonymised Insurance to LIC. Also since it was a Public Sector Undertaking (PSU) it has a great support from people. But now times have changed a lot of private players have entered into the fray. There have been a lot of Indian companies collaborating with foreign insurance giants like ICICI Prudential, Bajaj Allianz etc who have already made their presence felt in the Indian Insurance industry. Even though LIC is still the market leader with more than over 60% of the market share, the private players are giving it a tough time. Since the last decade the market share of LIC had fallen down by about more than 20%. The new private players have started offering a variety of unlimited schemes right from insurance plans for a 30 day old baby to that of a 70 year old senior citizen. Also the private companies have started creating the importance and need of insurance in todays life. They have started positioning their brands and are marketing their products in such a way the people have started feeling the need of security in their lives. Taking into account the huge population and growing per capita income besides several other driving factors, a huge opportunity is in store for the insurance companies in India. According to the latest research findings, nearly 80% of Indian population are without life insurance cover while health insurance and non-life insurance continues to be below international standards. And this part of the population is also subjected to weak social security and pension systems with hardly any old age income security. As per our findings, insurance in India is primarily used as a means to improve personal finances and for income tax planning; Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small (4-5%). This in itself is an indicator that growth potential for the insurance sector is immense. It's a business growing at the rate of 15-20% per annum and presently is of the order of around more than $55 billion. India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with companies continuous effort to lure the customers with new product offerings. However, the market share of private insurance companies remains low in the 25-35% range. Even to this day, Life Insurance Corporation (LIC) of India dominates
5

Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints. They private players are still in their initial days and would take some more time to capture a good market share. At present they are coming up with new and innovative ideas. Since the last decade the life insurance industry in India has been growing very fast and many new companies have entered this business insurance. The Indian life insurance industry has recorded a robust growth of more than 16 per cent for the nine-month period which ended on December 31, 2011.It is expected to grow at an amazing rate of 20 per cent this year Also in the present scenario the most sought after insurance plans are the Unit Linked insurance Plans (ULIPs). A ULIP is a life insurance policy which provides a combination of risk cover and investment. ULIPs have gained high acceptance due to attractive features they offer like flexibility, transparency, liquidity and a vast variety of fund option. Unit linked plans are suitable for all customer profiles; however as a general belief the risk averse investors tend to choose traditional plans and an informed customer prefers a ULIP. ULIPs offer the kind of flexibility that no insurance product can. ULIPs essentially combine the benefits of an insurance policy and a market-linked investment. Investors can select a ULIP with an equity-debt combination that is in line with their risk profile. A risk-taking investor would typically select one with a high equity component, while a risk-averse investor would opt for a debt-heavy one. Simply put, ULIPs are structured in such a way that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency. So with many players around for a company to really be successful it has to really be very efficient on all fronts. It has to constantly adapt to the changing consumer preferences with a lot of new innovations and implementing new technology try to different from the lot. Especially if it is a new player in the market the company has to really work very hard to get into the completion and stay afloat.

PURPOSE The project is being done as a part of final year project of 4th semester of RPIMSBHAYANDAR. The completion of the project is a partial fulfillment requirement for being awarded the Masters in Management Studies (MMS) degree from the Mumbai University. SCOPE OF THE STUDY This study aims to make a comparative study of the Unit Linked Insurance Plans (ULIPs) of IDBI FORTIS Life Insurance Company with that of some major selected players in the Indian insurance market and study the consumer perception towards various insurance products. The comparative analysis is based on the empirical data collected from the Mumbai city. The study also aims to discuss in detail the various positioning strategies adopted by IDBI FORTIS in general. OBJECTIVES OF THE PROJECT a. To compare the Unit Linked Insurance Plans (ULIPs) of IDBI FORTIS with that of some other selected companies. b. To identify the strengths and weaknesses of IDBI FORTIS and suggest areas where it could focus more and improve upon. c. To study the consumer perception towards various insurance products. d. To study in detail the positioning strategies of brand IDBI FORTIS in general. LIMITATIONS OF THE STUDY a. The study is confined only to a small segment of the entire population due to monetary and time constraints and hence the results are applicable only to the city of Mumbai. b. b. The scope of the project is limited to conceptual and marketing aspects of Life Insurance Companies and doesnt include Claim Settlement and the underwriting part of the operations which are equally important aspect of learning. c. c. It is not always possible to evaluate companies under similar parameters since many companies deal with various businesses thus clubbing all the companies on the same parameters is not always possible.

SOURCES OF DATA In the data collection method, we have collected both primary and secondary data to meet our objectives Primary Data The primary data was collected by a survey based on the questionnaire. It was formulated on the basis of information carefully gathered by me about the various mindsets of the people. This questionnaire was mainly formulated to target the common man to see his perception and awareness of various investment options available. The number of respondents targeted was around 150 and the survey was confined to Mumbai city. Secondary Data The secondary data was collected directly from the companies and their websites and internet surveys. Also a lot of similar research studies and journals have been referred to. During the course of the project some official studies on the products of Tata-AIG and HDFC standard Life have been referred to. Also the books on Marketing Management by Philip Kotler and that of Marketing Research by Naresh Malhotra were referred to gain a deeper insight on positioning strategies and marketing research techniques. A lot of groundwork has also been done by studying the vast range insurance products before taking up this research.

INSURANCE Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks which can be insured against include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance. CHARACTERISTICS OF INSURANCE 1. Sharing of risks 2. Cooperative device 3. Evaluation of risk 4. Payment on happening of a special event 5. The amount of payment depends on the nature of losses incurred. HISTORY OF INDIAN INSURANCE Insurance has a long history in India. Life Insurance in its current form was introduced in 1818 when Oriental Life Insurance Company began its operations in India. General Insurance was however a comparatively late entrant in 1850 when Triton Insurance company set up its base in Kolkata. History of Insurance in India can be broadly bifurcated into three eras: a. Pre Nationalization b. Nationalization and c. Post Nationalization Life Insurance was the first to be nationalized in 1956. Consolidating the operations of various insurance companies formed Life Insurance Corporation of India. General Insurance followed suit and was nationalized in 1973. General Insurance Corporation of India was set up as the controlling body with New India, United India, National and Oriental as its subsidiaries. The process of opening up the insurance sector was initiated against the background of Economic Reform process, which commenced from 1991. For this purpose Malhotra Committee was formed during this year who submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was passed in 1999. Resultantly Indian Insurance was opened for private companies and Private Insurance Company effectively started operations from 2001. (Source: www.irdaindia.org)

INSURANCE MARKET - PRESENT The insurance sector was opened up for private participation a decade back. For years now, the private players are active in the liberalized environment. The insurance market has witnessed dynamic changes, which include presence of a fairly large number of insurers both life, and nonlife segment. Most of the private insurance companies have formed joint venture partnering wellrecognized foreign players across the globe. The Indian life insurance market generated total revenues of $41.36 billion in 2011, thus Representing a compound annual growth rate (CAGR) of 11.84% for the period spanning 20072011. Life insurance market had a growth of $22.46 billion within a period of 7 years with a growth rate of 118.24%. Estimated life premiums rose to INR 1,470,800 million ($36.77 billion) in 2010 from INR 1,301,540 million ($32.54billion) in 2009. We envisage that life premiums in 2013 will be $65.96 billion, a growth larger than they were in 2011. The performance of the market is forecast to accelerate, with an anticipated CAGR of 9.78% for the four-year period 2011-2015 expected to drive the market to a value of $65.96 billion by the end of 2015. There would be a growth of $24.6 billion i.e. 59.48% in the next 4 years. Non-life premiums in India were $6.53 billion in 2011. Gross written premium (GWP) in the Indian non-life insurance market reached a value of $5.75 billion in 2010, this representing an annual growth of 13.55% for the period spanning 2010-2011. Estimated non-life premiums rose from INR230 billion ($5.75 billion) in 2010 to INR261 billion ($6.53 billion) in 2011. We anticipate that non-life premiums will grow by a CAGR of 9.40% between 2011-2015. We are looking for non-life premiums to rise by $405 million over the five years to the end of 2015 with a growth rate of 62.02%. 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, according to "Booming Insurance Market in India (2012-2015).

10

Total life insurance premium in India is projected to grow Rs 1,230,000 crore by 201516. Total non-life insurance premium is expected to increase at a CAGR of 25% for the period spanning from 2012-13 to 2014-15. 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. Health insurance is poised to become the second largest business for non-life insurers after motor insurance in next three years. A booming life insurance market has propelled the Indian life insurance agents into the top 10 country list in terms of membership to the Million Dollar Round Table (MDRT) an exclusive club for the highest performing life insurance agents. (Source: http://www.marketsmonitor.com)

CAPITAL REQUIREMENTS AND FOREIGN PARTICIPATION Minimum capital requirement for direct life and Non-life Insurance company is INR1000 million and that for reinsurance company is INR2000 million. A maximum 26% foreign equity stake is allowed in direct insurance and reinsurance companies. In the 2004-05 budgets, the Government proposed for increasing the foreign equity stake to 49%. (Source: www.irdaindia.org)

11

LIFE INSURANCE As is evident from its very name, it deals with insurance of human life. Life insurance corporation of India- a public sector undertaking has the monopoly in this sector since its nationalization. In our wordily life, whenever there is uncertainty, there is an involvement of risk. The instinct for security against such risk is one of the basic motivating forces determining human attitudes. As a squeal to this quest for Security, the concept of insurance must have been born. The urge to provide insurance or protection against the loss of life & property must have prompted people to make some sort of sacrifice willingly in order to achieve security through COLLECTIVE COOPERATION, in this sense; story of insurance is probably as old as the story of mankind. All life insurance companies in India have to comply with the strict regulations laid out by Insurance Regulatory and Development Authority of India (IRDA). Therefore there is no risk in going in for private insurance players. In terms of being rated for financial strength like international players, only ICICI Prudential is rated by Fitch India at National Insurer Financial Strength Rating of AAA (Ind) with stable outlook indicating the highest claims paying ability rating.

Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far the largest player in the market. Among the private sector players, ICICI Prudential Life Insurance(JV between ICICI Bank and Prudential PLC)is the largest followed by Bajaj Allianz Life Insurance Company Limited

12

The private companies are coming out with better products which are more beneficial to the customer. Among such products are the ULIPs or the Unit Linked Insurance Plans which offer both life cover as well as scope for savings or investment options as the customer desires. Further, these types of plans are subject to a minimum lock-in period of three years to prevent misuse of the significant tax benefits offered to such plans under the Income Tax Act. Unlike the mutual fund product that has a very simple cost structure, ULIPs carry a greater number of costs (administration and mortality), in addition to the others. So comparing ULIPs with mutual funds is erroneous.

Right now there are a total twenty two life insurance companies operating in India, of which one (Life Insurance Corporation) is a Public Sector Undertaking and the remaining twenty are all private sector enterprises. (Source: www.irdaindia.org)

List of life insurance companies in India

13

14

COMPANY PROFILE ABOUT IDBI FORTIS

IDBI Fortis Life Insurance Co Ltd is a joint venture between three leading financial conglomerates Indias premier development and commercial bank, IDBI Bank, one of Indias leading private sector banks, Federal Bank and Europes banking and insurance giant, Fortis, each of which enjoys a significant status in their respective business segments. In this venture, IDBI Bank owns 48% equity while Federal Bank and Fortis own 26% equity each. IDBI Fortis launched its first set of products across India in March 2008, after receiving the requisite approvals from the Insurance Regulatory Development Authority (IRDA). The company offers its services through a vast nationwide network across the branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners. At IDBI Fortis, people endeavor to deliver products that provide value and convenience to the customer. Through a continuous process of innovation in product and service delivery the company intends to deliver world-class wealth management, protection and retirement solutions to Indian customers IDBI Ltd. continues to be, since its inception, Indias premier industrial development bank. Created in 1956 to support Indias industrial backbone, IDBI has since evolved into a powerhouse of industrial and retail finance. Today, it is amongst Indias foremost commercial banks, with a wide range of innovative products and services, serving retail and corporate customers in all corners of the country from over 954 branches and more than 1200 ATMs. The Bank offers its customers an extensive range of diversified services including project financing, term lending, working capital facilities, lease finance, venture capital, loan syndication, corporate advisory services and legal and technical advisory services to its corporate clients as well as mortgages and personal loans to its retail clients. As part of its development activities, IDBI has been instrumental in sponsoring the development of key institutions involved in Indias financial sector such as the Securities and Exchange Board of India (SEBI), National Stock Exchange of India Limited (NSE) and National Securities Depository Ltd. Federal Bank is one of Indias leading private sector banks, with a national network and dominant presence in the state of Kerala. It has a strong network of over 550 branches and 450 ATMs spread across India. The bank provides over four million retail customers with a wide variety of financial products. Federal Bank is one of the first large Indian banks to have an entirely automated and interconnected branch network. They operate on the core banking platform and are RTGS/ NEFT enabled through which the Bank offers state-of-the-art technology enabled products and services.

15

In addition to interconnected branches and ATMs, the Bank has a wide range of services like Internet Banking, Mobile Banking, Tele Banking, Any Where Banking, debit cards, co-branded credit cards, online bill payment and call centre facilities to offer round the clock banking convenience to its customers. The Bank has been a pioneer in providing innovative technological solutions to its customers and the Bank has won several awards and recommendations.

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

MISSION To continually strive to enhance customer experience through innovative product offerings, dedicated relationship management and superior service delivery while striving to interact with our customers in the most convenient and cost effective manner. To be transparent in the way we deal with our customers and to act with integrity. To invest in and build quality human capital in order to achieve the mission.

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

16

PRODUCT RANGE OF IDBI FORTIS IDBI Fortis offers a variety of products targeting every customer right from a 3 month child to a 70 year senior citizen. All the products have been classified majorly under four plans namely Wealthsurance Homesurance Bondsurance Retiresurance

WEALTHSURANCE The Wealthsurance Foundation Plan enables the customer to save and build wealth to meet your financial goals. However, unlike other investment alternatives, it also enables him to achieve his wealth goals even in the event of unexpected death, accidents, disablement or serious illness. The Wealthsurance Foundation Plan can ensure that his plans for wealth creation are achieved by protecting that plan with insurance benefits.

HOMESURANCE The Homesurance Protection Plan is a reducing term plan, which provides insurance cover equal to the outstanding balance of your home loan. In the unfortunate event of death of the home loan borrower, the insurance cover enables repayment of the home loan liability.

BONDSURANCE Bondsurance is a single premium plan which allows you to make a one-time investment and get a guaranteed amount on maturity. You can choose a maturity period of 5 or 10 years for your investment. At the end of the chosen period, you will receive a guaranteed maturity amount. Besides the guaranteed maturity amount, Bondsurance also provides a life insurance cover. In case of death before the maturity date, a Death Benefit which is also guaranteed will be paid. Thus you can get life insurance cover, while earning an assured return on your investment.

17

RETIRESURANCE Retiresurance is a pension plan without life cover that allows a longer policy term so that the customers investments can get the benefit of compounding. The customer has to choose any vesting age between 40-75 yrs. The vesting age chosen can also be postponed or preponed within the above range by informing the company 30 days in advance. It is especially for people who wish to lead a happy and prosperous life even after their retirement. (Source:www.idbifortis.com)

UNIT LINKED INSURANCE PLANS Unit linked insurance plan (ULIP) is a life insurance solution that provides the client with the benefits of protection and flexibility in investment. It is a solution which provides for life insurance where the policy value at any time varies according to the value of the underlying assets at the time. The investment is denoted as unit and is represented by the value that it has attained called as Net Asset Value (NAV). ULIPs are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs, a part of the investment goes towards providing a life cover. The residual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; the value of investments alters with the performance of the underlying fund opted by the customer. Simply put, ULIPs are structured in such that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency. ULIPs came into play in 1960s and became very popular in Western Europe and America. The reason that is attributed to the wide spread popularity of ULIP is because of the transparency and the flexibility which it offers to the clients.

As time progressed the plans were also successfully mapped along with life insurance needs to retirement planning .In todays times ULIP provides solution for all the needs of a client like insurance planning, financial needs, financial planning for childrens future and retirement planning.( Source:http://www.scribd.com/doc/7216240/Understand-ULIP-Insurance)

18

STRUCTURE OF ULIPs ULIPs offered by different insurers have varying charge structures. Broadly the different types of fees and charges are given below. However the insurers have the right to revise or cancel the fees and charges over a period of time Premium Allocation charges This is a percentage of the premium appropriated towards charges before allocating the units under the policy. This charge normally includes initial and renewal expenses apart from commission expenses.

Mortality Charges These are charges to provide for the cost of insurance coverage under the plan. Mortality charges depend on number of factors such as age, amount of coverage, state of health etc. Fund Management Charges These are fees levied for management of the fund(s) and are deducted before arriving at the Net Asset Value (NAV) . Policy/ Administration Charges These are the fees for administration of the plan and levied by cancellation of units. This could be flat throughout the policy term or vary at a pre-determined rate

19

Premium break -up under ULIPs

Surrender Charges A surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as mentioned in the policy conditions. Fund Switching Charge Generally a limited number of fund switches may be allowed each year without charge, with subsequent switches, subject to a charge. But now a days many insurers offer fund switching free of cost. Service Tax Deductions Before allotment of the units the applicable service tax is deducted from the risk portion of the premium.

20

TYPES OF FUNDS UNDER ULIPs Most insurers offer a wide range of funds to suit ones investment objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for returns also varies from fund to fund. The following are some of the common types of funds available along with an indication of their risk characteristics. (Source: www.irdaindia.org)

Types of funds under ULIPs

21

ADVANTAGES OF ULIPS ULIP distinguishes itself through the multiple benefits that it provides to the consumer. The plan is a one stop solution for everything the customers want. Unit Linked Insurance Plans (ULIPs) are different from traditional plans purely because, they are much more transparent, various charges are shared with the customer before the sale of the product, so as to enable the customer to make an informed decision. Customers have the flexibility to choose their life cover. Also the customers have the choice of multiple fund options based on their risk appetite, thereby enabling an investor to make the desired returns from the investment. The following are some of the advantages of Unit linked plans: a. Life protection b. Investment and Savings Market linked fund based on risk profile Switch option Premium redirection Automatic Transfer Plan(ATP) c. Tax Planning d. Flexibility of cover continuance e. Transparency f. Extra protection with riders Death due to accident Disability Critical illness g. Liquidity Partial withdrawals during the term At maturity h. Variable investment options i. Premium holiday j. Allow Top-ups

22

FACTORS INFLUENCING THE BUYING OF UNIT LINKEDINSURANCE PLAN (ULIPs) The degree of buying of ULIPs insurance varies from person to person. It depends upon many factors. The factors can be classified into personal, social, economic, psychological and company related variables. Age and experience of policyholder are personal factors, while the coeducation is a social factor. Economic factors include occupation, income and wealth, and the psychological factors consist of perception, satisfaction about the services rendered by insurance companies, the impact of advertisement and personal selling made by insurance companies on policyholders. The company related variables are the promotional efforts to sell the policies to prospective buyers. These include advertisement and personal selling too.

23

UNIT LINKED INSURANCE PLANS (ULIPs) OF DIFFERENT COMPANIES IDBI FORTIS LIFE INSURANCE COMPANY IDBI FORTIS different variety of schemes and a good range of ULIPs under the flagship banner Wealthsurance. There are a lot of other ULIPs under Bondsurance, Homesurance and Retiresurance but as our study is only confined to the study and comparative analysis of ULIPs under Wealthsurance we would just be discussing about the various plans under Wealthsurance. As discussed earlier the Wealthsurance Foundation Plan enables the customer to save and build wealth to meet your financial goals. However, unlike other investment alternatives, it also enables him to achieve his wealth goals even in the event of unexpected death, accidents, disablement or serious illness. The Wealthsurance Foundation Plan can ensure that his plans for wealth creation are achieved by protecting that plan with insurance benefits. Wealthsurance is one of its kind in India. The company offer 11 investment options and 8 protection benefits under the plan apart from tax benefits

Under Wealthsurance there are a lot of different funds available which are explained below:

As discussed earlier we would be comparing the Unit Linked Insurance Plans (ULIPs) of the companies selected initially with those of IDBI FORTIS and then make a detailed analysis. This analysis would be well supported by the primary data analysis and then the final results would be interpreted .So here first we would be listing out various ULIPs of the selected companies and their details. After that we make a detailed comparison with that of the plans under Wealthsurance of IDBI FORTIS and explain it. So following are the details of ULIPs of various companies and the comparative analyses.

24

COMPARITIVE SECONDARY DATA ANALYISIS TATA AIG LIFE INSURANCE COMPANY

TATA AIG OFFERS FOUR DIFFERENT TYES OF ULIPs

a. INVEST ASSURE CARE b. INVEST ASSURE FLEXI c. INVEST ASSURE II d. INVEST ASSURE EXTRA

ADBR-Accidental Death Benefit Rider, CIBR-Critical Illness Benefit Rider, NM-Not Mentioned
25

COMPARITIVE ANALYSIS 1. INVEST I. ASSURE CARE II.

III.

Through Wealthsurance a customer can even invest at the age of 65 where as in this product if the customer is beyond 45 years he will not be allowed to invest. Customer can keep his money invested till the age of 75 years and take benefit of the market performance whereas here the plan matures at the age of 65. In Wealthsurance Free partial withdrawal starts after completion of 3 years where as in this product the customer needs to wait for 5 completed years before he can do a withdrawal Wealthsurance has a Premium allocation charge of only 4% as against 50% allocation in this product Through Wealthsurance a customer can even invest at the age of 65 where as in this product if the customer is beyond 45 years he will not be allowed to invest. Customer can keep his money invested till the age of 75 years and take benefit of the market performance whereas here the plan matures at the age of 60. Wealthsurance has a Premium allocation charge of only 4% as against 40% allocation in this product Through Wealthsurance a customer can even invest at the age of 65 where as in this product if the customer is beyond 45 years he will not be allowed to invest. Customer can keep his money invested till the age of 75 years and take benefit of the market performance whereas here the plan matures at the age of 60. Min Entry age in Wealthsurance as 0 Years as against the Min Entry age of 15 Years In Wealthsurance the Min Premium amount is only Ten Thousand Rupees in comparison to Fifteen Thousand Rupees in this Product. Wealthsurance has a 4% allocation charge where as in this product the allocation charge is 16% Wealthsurance has different riders/protection Basket to choose from including Hospital cash benefit which gives money on a daily basis if hospitalized.

2. INVEST ASSURE II

I. II.

III.

3. INVEST ASSURE EXTRA

I. II.

III.

IV.

4. INVEST ASSURE FLEXI

I.

II. III. IV.

26

BAJAJ ALLIANZ LIFE INSURANCE COMPANY

BAJAJ ALLAINZ OFFERS FIVE TYES OF ULIPs UNIT GAIN PLUS GOLD UNIT GAIN PREMIER CENTURY PLUS NEW UNIT GAIN PLUS PENSION GUARANTEE

ADBR-Accidental Death Benefit Rider, CIBR-Critical Illness Benefit Rider, NM-Not Mentioned, WOP-Waiver of Premium, FIB-Family Income Benefit, HCB-Hospital Cash Benefit, PDB-Permanent Disability Benefit

27

COMPARITIVE ANALYSIS UNIT GAIN PLUS GOLD Wealthsurance only has a allocation charge of only 4% in comparison to 15% in this product Max Entry age in Wealthsurance is 65 as against 60 of Unit Gain Gold Plus

CENTURY PLUS Wealthsurance has an Min Entry Age of 0 Years against this product where the entry age is 8 Years. Min Premium in Wealthsurance is only Ten Thousand Rupees in comparison to Twenty Five Thousand Rupees of this product. In Wealthsurance there is a choice of 5 riders where as in this product only one rider is available Wealthsurance only has a allocation charge of only 4% in comparison to 55% in this product Max Entry age in Wealthsurance is 65 as against 60 of Unit Gain Gold Plus

NEW UNIT GAIN PLUS

UNIT GAIN PREMIUM

Min Premium in Wealthsurance is only Ten Thousand Rupees in comparison to Fifty Thousand Rupees of this product. Max Entry age in Wealthsurance is 65 as against this product which has a cut of 60 years.

PENSION GUARANTEE

Wealthsurance can be customized for retirement planning. Customers can opt for a partial withdrawal without any charges post 3 years from his fund value and use the money as pension. There is no Tax/Charges on the money withdrawn/taken as pension

28

LIFE INSURANCE CORPORTAION (LIC) OF INDIA

LIC OFFERS THREE DIFFERENT TYPES OF ULIPS

a. MARKET PLUS b. PROFIT PLUS (RP & SP) c. FORTUNE PLUS

ADBR-Accidental Death Benefit Rider, CIBR-Critical Illness Benefit Rider (Source: www.licindia.com)

29

COMPARITIVE ANALYSIS 1. MARKET PLUS I. Premium allocation charge is 16.5% in this product where as Wealthsurance has a charge of Max 4%. In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge. There are no riders available in this product as against Wealthsurance has a host of riders to choose from. After 3 years we can go for unlimited partial withdrawals as against in this product there are no partial withdrawal available

II.

III.

IV.

2. PROFIT PLUS (RP & SP) I. Premium allocation charge is 15% min in this product where as Wealthsurance has a charge of Max 4%. In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge. There are no riders available in this product as against Wealthsurance has a host of riders to choose from.

II.

III.

3. FORTUNE PLUS I. Min Entry age in Wealthsurance is 0 years as against in this product it is 12 years Max entry age in Wealthsurance is 65 years as against in this product it is 60 years only.

II.

HDFC STANDARD LIFE INSURANCE COMPANY

30

HDFC STANDARD LIFE OFEERS FOUR DIFFERENT TYPES OF ULIPs i. ENDOWMENT PLUS II ii. ENHANCED LIFE PROTECTION II iii. UNIT LINKED PENSION RP iv. UNIT LINKED PENSION SP

ADBR-Accidental Death Benefit Rider, CIBR-Critical Illness Benefit Rider (www.hdfcstandardlife.com)

31

COMPARATIVE ANALYSIS ENOWMENT PLUS II I. II. III. Min Entry age in Wealthsurance is 0 years as against in this product it is 18 years Premium allocation charge is 40% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is 10000 as against this product.

ENHANCED LIFE PROTECTION II

I. II. III.

IV.

Min Entry age in Wealthsurance is 0 years as against in this product it is 18 years Premium allocation charge is 40% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is 10000 as against this product. Max entry age in this product is only 45 years where as in Wealthsurance it is 65 years In Wealthsurance after 3 years unlimited partial withdrawals are allowed where as in this product the customer needs to wait till the 5th year.

UNIT LINKED PENSION RP

I. II. III.

IV.

V.

There are no rider available in this product as against Wealthsurance has a host of riders to choose from. Allocation charge of 25% on this product and Wealthsurance has a 4% charge. Annuity is taxable where as all the funds in Wealthsurance is tax free. Wealthsurance can be customized to be a tax free retirement plan. Post 3 years customers can also do unlimited partial withdrawal whenever there is a need for money without being charged or taxed. Min Premium in Wealthsurance is 10000 as against this product.

UNIT LINKED PENSION SP

I. II. III.

IV.

There is no rider available in this product as against Wealthsurance has a host of riders to choose from. Allocation charge of 6% on this product and Wealthsurance has a 4% charge. Post 3 years customers can also do unlimited partial withdrawal whenever there is a need for money without being charged or taxed. Min Premium in Wealthsurance is 10000 as against this product.
32

ICICI PRUDENTIAL LIFE INSURANCE COMPANY ICICI PRUDENTIAL OFFERS ELEVEN DIFFERENT TYPES OF ULIPs

a. LIFE TIME GOLD b. LIFE LINK SUPER c. PREMIER LIFE GOLD d. LIFE TIME PLUS e. LIFE STAGE f. SMART KID CHILD PLAN g. LIFE TIME SUPER PENSION h. LIFE STAGE RP PRNSION i. LIFE STAGE RP j. LIFE STAGE ASSURE k. INVEST SHEILD LIFE NEW

33

34

COMPARATIVE ANALYSIS LIFE TIME GOLD I. Premium allocation charge is premium based in this product where as Wealthsurance has a charge of Max 4% and with higher premium the allocation charge decreases. II. Min Premium in Wealthsurance is only Rs.10000 as against in this product it is 20000 III. In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge LIFE LINK SUPER

I. II. III.

Premium allocation charge is 20% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is only Rs.10000 as against in this product it is 20000 In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge.

PREMIER LIFE GOLD

I. II.

Premium allocation charge is 12% in this product where as Wealthsurance has a charge of Max 4% There are no riders available in this product as against Wealthsurance has a host of riders to choose from.
35

III.

In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge

LIFE TIME PLUS

I. II. III.

Premium allocation charge is 25% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is only Rs.10000 as against in this product it is 20000 In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge.

LIFE STAGE RP

I. II. III. IV.

Premium allocation charge is 25% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is only Rs.10000 as against in this product it is 20000 In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge. There are only 2 riders available in this product as against Wealthsurance has a host of riders to choose from.

LIFE STAGE

I. II. III. IV.

Premium allocation charge is 25% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is only Rs.10000 as against in this product it is 20000 In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge. There are only 2 riders available in this product as against Wealthsurance has a host of riders to choose from.

SMART KID CHILD PLAN

I. II. III.

Premium allocation charge is 20% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is only Rs.10000 as against in this product it is 12000 Wealthsurance can be beautifully customized to be a child plan by just adding wavier of premium.

LIFE TIME SUPER PENSION

I. II. III.

Premium payable in this product is Rs.75000 as against in Wealthsurance it is only Rs.10000 There are only two rider available in this product as against Wealthsurance has a host of riders to choose from. Allocation charge of 20% on this product and Wealthsurance has a 4% charge.
36

IV.

Annuity is taxable where as all the funds in Wealthsurance is tax free. Wealthsurance can be customized to be a tax free retirement plan. 4. Post 3 years customers can also do unlimited partial withdrawal whenever there is a need for money without being charged or taxed.

LIFE STAGE PR PENSION

I. II. III. IV.

Premium payable in this product is Rs.15000 as against in Wealthsurance it is only Rs.10000 There are only two rider available in this product as against Wealthsurance has a host of riders to choose from. Annuity is taxable where as all the funds in Wealthsurance is tax free. Wealthsurance can be customized to be a tax free retirement plan. Post 3 years customers can also do unlimited partial withdrawal whenever there is a need for money with being charged or taxed, absolutely free.

LIFE STAGE ASSURE

I.

II. III.

In Wealthsurance partial withdrawals are allowed right after 3 years where as in this product the customer cannot touch his funds till 7th year. First year premium is utilized towards Guaranteed additions and returned on maturity as a Guarantee. If you surrender the policy the GA component is not given to the customer and only the FV which gets accumulated from 2nd premium is returned after deducting surrender charges, where as in Wealthsurance there will not be any other charges apart from surrender charges that too if applicable

INVEST SHEILD LIFE NEW

I. II. III. IV. V.

Premium allocation charge is 20% in this product where as Wealthsurance has a charge of Max 4%. Min Premium in Wealthsurance is only Rs.10000 as against in this product it is 20000 In Wealthsurance there is unlimited switching redirection and partial withdrawal allowed absolutely free of charge. There are only 2 riders available in this product as against Wealthsurance has a host of riders to choose from. This product has no top up facility where as in Wealthsurance tops are allowed any time.

37

PRIMARY DATA ANALYSIS We have done a detailed survey in Mumbai city to understand and study the consumers responses. The primary data was collected through questionnaires. This questionnaire was mainly formulated to target the common man to see his perception and awareness of various investment options available. The sample size of the survey was 133.Out of these 89 were male and 45 were female. The sample of respondents was carefully selected covering people in all age groups and with different backgrounds and occupations. The analysis of these questionnaires gives us an insight about the mindset of people regarding various investments. We have also used factor analysis in SPSS to extract the prominent factors influencing the investments decisions of the customers .Customer preferences as to where they would like to invest have been studied . Also we come to know about the preferences given by customers towards various top life insurance companies and their reasons for it. Here we see that most of the customers invest regularly from quite some time but since the last few months their investments have come down due to recession and market slowdown. Following is the analysis of the primary data collected through questionnaires.

The sample included respondents from all the age groups out of which people in the age group 18-40 constituted around 70%.

number of respondants
60 50 40 30 20 10 0 18-30 31-40 41-50 >50 number of respondants

Break-up of respondents between different age groups

38

The sample of respondents was heterogeneous with people of various occupations right from government service to ones who were self employed. Out of these people who were working in private companies constituted round 65%.

number of respondants
90 80 70 60 50 40 30 20 10 0

number of respondants

Break-up of respondents by their occupations Also the customers preferences for different forms of savings have been carefully studied. The main savings instruments generally preferred by customers are bank deposits, fixed deposits, investments and post office schemes. Out of these Investments has been preferred by around 43% respondents and fixed deposits by around 27%.

number of respondants

bank deposit fixed deposit investments post office sschemes other

Break-up of respondents based on their preferences for various savings instruments

39

The various forms of investments generally preferred by customers have been identified as mutual funds, stocks and shares, insurance products and government bonds. Out of these around 35% preferred stocks and shares and around 20% preferred insurance products.

forms of investment
50 45 40 35 30 25 20 15 10 5 0

forms of investment

Break-up of respondents based on preferences for various forms of investment The main reason for people to invest in the insurance products was that they had the advantage of both life cover and tax benefits apart from other normal benefits. Talking about the frequency of investment around 45 respondents preferred investing once a year and another 25% preferred investing 2-3 times a year. It was also noticed that greater majority of respondents owned an insurance policy. Only 11% of the respondents did not own an insurance policy.

once in a year 2-3 times a year more than 3 times a year not investing(no idea) not interested

Break-down of respondents based on their frequencies of investment

40

own an insurance policy

own an insurance policy

118

15 yea no

Break-down of respondents who own/do not own an insurance policy

UNIT LINKED INSURANCE PLAN

no idea they are safe low risk moderate risk high risk plan 0 10 high risk plan 52 20 moderate risk 3 30 low risk 8 40 50 60 no idea 37

UNIT LINKED INSURANCE PLAN

they are safe 5

Break-down of respondents who rated risk involved in ULIPs

41

owns insurance policy

lic sbi life icici prudential max new york 2% 2% 5% idbi fortis birla sunlife 1% 1% 3% bajaj alience kotak mahindra hdfc standard life others

3%

7%

13%

63%

Break-down of respondents who own insurance policies in various life insurance companies Around 63% respondents felt that there was an amount of moderate to high risk involved with ULIPs. Around 63% of the respondents owned an insurance policy in LIC which clearly shows that LIC still continues to be the market leader in as it has been since the last 50 years or so in spite of the presence various powerful private players which are still finding hard to capture a major market share. Around 13%b respondents chose ICICI Prudential.

42

perception about the term welthsurance

perception about the term welthsurance

56

39 13 21

tax saving plan

saving plan with good reterns financial security and risk coverage

all the above

no idea

Break-down of respondents with different perceptions about the term WEALTHSURANCE

43

When we talk about making investment decisions around 45% respondents considered their own decision and another 40% respondents considered their familys opinion before making any important investment decision.

decision making
decision making

52

60

11 5 5 family opinion friends advice brokers advise own decision

any other

Break-up of respondents based on factors influencing their decision

future of idbi
100 90 80 70 60 50 40 30 20 10 0 idbi forties is one of the best 4 it has long way to go 35 dont know 94

future of idbi

Break-down respondents with various responses about the future of IDBI Fortis
44

Many people responded that they have no idea about IDBI Fortis or its various products under the umbrella wealthsurance.That is true as it is a new company it has a long way to go as responded by around 26% of the respondents. This could be due to the fact that IDBI FORTIS has a limited presence and it has just started its operations just more than a 3-4 years ago. We also have found out the age played an important role in deciding the investing patterns of the respondents .It was found out that people who were generally in between 18-30 had a higher tendency to invest quite frequently in a year. The following table and the figure below show us the results. Age No of Respondents % Average Frequency of investments per year 18-30 30-50 >50 total 49 70 14 133 36.84% 52.63% 10.52% 100% 2.105263158 1.537313433 1.461538462

Average frequency of investments among different age groups

Average Frequency of investments per year

2.5

2 FREQUENCY

1.5

0.5

0 Average Frequency of investments per year

18-30(young) 2.1

30-50(middle) 1.53

>50(old) 1.46

Average frequency of investments among different age groups

45

In order to find the relationship between the age of the respondents and their investment patterns, a chi-square test for independence of attributes was used and results of the test is shown in the following table: Factor Calculated 2 value 2.801856 Tabulated 2 value 7.814728 DF Significance

AGE

Significant at 5% level of significance

Age and Frequency of investment (Chi-Square table) It is noted from the above table that the calculated Chi-square value is less than the table value and the result is significant at 5% level. Hence, the null hypothesis the age of the respondents and frequency of investment holds good. From the above analysis it is concluded that there is a close relationship between the age of the respondents and their investment patterns We have also used factor analysis in SPSS (Statistical Package in Social Sciences) extract most prominent factors that considered by a consumer before making an investment decision. We had initially considered 28 factors which can influence a consumers investment decision and we have asked the customers to rate them according to their importance in the questionnaire So through the factor analysis the number of factors extracted was 9.KMO (Kaiser-Meyer-Olkin Measure of Sampling Adequacy) and Bartletts test of sphericity were used and for extraction principle component method had been used. About 75.68% of the information has been extracted through this test which shows that the results are reliable. The output of the factor analysis has been included in the annexure. Also we can see from below that the KMO coefficient is 0.702. The coefficient always lies between 0 and 1 and the requirement is that it should not be less than 0.50. So here we can say this is a good test.

46

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartletts test of Sphericity : Approx Chi-Square DF Sig KMO and Bartletts test of sphericity

.702

1363.096 378 .000

1. Rate of return 2 .Death benefits and lock in period 3. Present market scenario and tax benefits 4. Past performance of the company 5. Flexible investment options and the risk involved 6. Amount payable and the after investment service 7. Opinion of media, friends and acquaintances 8. Level of knowledge about investment 9 .Commercials associated with investments The prominent factors influencing the consumers investment decision

47

MERITS AND DE-MERITS OF IDBI FORTIS LIFE INSURANCE COMPANY We have already discussed the advantages of Wealthsurance products compared to the products of the other companies. There the advantages were specific to individual products. So here after the complete analysis of primary and secondary data we have the following merits and demerits of IDBI Fortis Life Insurance Company in general. Since IDBI Fortis is a new company not many demerits can be pointed out right now at this stage but we have tried our best here to point out some major ones. MERITS

1. When compared to the other selected insurance companies IDBI Fortis gives a min fixed Interest rate for monthly interest account and a min fixed NAV (Net Asset Value) for funds under Unit Linked Insurance Plans (ULIPs) at the time of maturity. So here in terms of market slowdown and recession the fund value will not come down below a specified limit which is not the case with the other companies. 2. 2. The Fund allocation charges and fund management charges are very low when compared to most of the other companies in the market. 3. The growth of the company has been tremendous in terms of the premiums collected and the variety of funds introduced. All this has been done in a very short span of time which indicates that there is a great future for IDBI Fortis. 4. IDBI Fortis offers funds almost to everyone right from a 3 month child to a 70 year old elderly person. The variety of funds offered is very vast. 5. The tie-up of the well known IDBI bank with Fortis International and Federal bank both of which are well established and good rated gives the company a greater scope for good growth in the future. 6. All the plans offered by the company especially under ULIPs are really flexible as there are no charges charged for switching and a customer can make use of the switching facility any number of times he wants to free of charge. Also the premiums payable can be decided by the customers themselves according to their feasibility and capacity. DEMERITS

1. IDBI Fortis has a limited presence right now so most of the people know nothing about the company. 2. With already around more than 20 private companies in the market it is really a mammoth task for IDBI Fortis to establish itself and move forward successfully as it is always difficult for any new company to capture the market very early. 3. Also with LIC still at the helm as the market leader it is really difficult for the company to move anywhere closer to it because LIC is the only public sector life insurance company and generally people would prefer a public company rather than a private company.
48

4. The company has to improve its distribution network as its reach to a common man is very limited .Also the number of agents working for the company is very less right now when compared to the other companies. 5. It is very difficult to convince the customers first because this is a new unknown company and secondly there are no part records which normally the customers consider seriously to show the companys performance. 6. Also the company has no funds like SBI Smart ULIPs of SBI, Tata-AIG life invest assure of Tata-AIG and Birla Sun life insurance platinum plans of Birla Sun life which offer the highest NAV observed during the entire policy term at the time of maturity of the fund which are really a great hit among the customers. 7. The variety of funds under IDBI FORTIS has to increase as competitors like ICICI Prudential have a larger and better variety of the same.

49

POSITIONING STRATEGIES OF IDBI FORTIS At present IDBI Fortis has its presence in 29 cities across India and it has 31 branches overall. Mumbai has got three branches. Following is the list of all the cities where the company is operating right now: AHMEDABAD BENGALURU CALICUT CHANDIGARH CHENNAI COIMBATORE DEHRADUN GOA GURGAON HYDERABAD INDORE JAIPUR KOCHI LUCKNOW LUDHIANA MANGALORE MUMBAI NAGPUR NASHIK NEW DELHI NOIDA PUNE RAJKOT SURAT THIRUVUNATHAP URAM UDAIPUR VARNASI VIJAYAWADA VISAKHAPATNAM

List of the cities with IDBI Fortis presence IDBI Fortis has positioned itself quite nicely by offering all the products under one single umbrella WEALTHSURANCE. The Wealthsurance Foundation Plan enables the customer to save and build wealth to meet his financial goals. However, unlike other investment alternatives, it also enables him to achieve his wealth goals even in the event of unexpected death, accidents, disablement or serious illness. Here under WEALTHSURANCE the company offers all various varieties of plans right from plans for a 3 month baby to plans for elderly people. Also in all its advertisement campaigns the company has been using the term WEALTHSURANCE extensively. The company has positioned itself in such way the customers started feeling that Wealthsurance is the solution for all problems. Some major strategies used by the company The name Wealthsurance is being marketed very effectively that too with the tag line investment chalta jaye, chahe kuchh ho jaye which means that the wealth creation continues no matter whatever happens. This concept is being well supported by a new commercial released by the company being aired on all major channels. The company has already created sensation by introducing the term Wealthsurance and now it wants to project Wealthsurance is the solution for any kind of problem in life insurance.

50

The company has also been promoting itself well especially since the past few months. It created ripples across India when it became the first insurance company ever to sponsor a major cricket tournament singlehandedly when it sponsored the Wealthsurance cup between India and Srilanka in Jan-Feb 2009.It made a right decision to do so because India is a cricket crazy country and there is nothing better than reaching to the people through cricket. Also the logo and pictures IDBI Fortis has been using in its advertisement campaigns through commercials and printed media have been really good. For example let us talk about the most common picture used i.e. that of a peeled orange with its peel by its side. The orange wouldnt grow if the peel hadnt protected it fruits from all sorts of dangers like birds worms etc. The same is with all fruits, nuts and grains or for the matter a human embryo. With this the company wants to say the best growth happens under a protective cover that just as nature has provided a protective shield for every fruit which projects the actual fruit and helps it grow IDBI Fortis acts as a protective shield for the investments the customers make and helps the best growth to happen. So with new innovative advertising strategies the company has been able to position itself as a new company with innovative products. All the punch lines used by the company easily attract the customers. Some of the advertising pictures used by the company are illustrated below with their taglines:

Protection Guaranteed

Your dreams and aspirations need money to fulfill. Make a promise to build wealth
51

A wealth building plan protected by insurance.

Unlimited flexibility and choice

IDBI Fortis positions itself as one of the top insurance companies in India. It aspires to be in the top four in the next five years and in the top 3 in the next seven years from now.

Although the company has other products like Bondsurance, Homesurance and Retiresurance right now it is just focusing on Wealthsurance as it feels that the company needs to first capitalize on one particular product initially and latter on can diversify.

IDBI Fortis aims to position itself as an insurance company for all classes. As the premiums payable and the plans are flexible according to the customers choices every person right from a worker to a high class businessman can purchase a policy. The minimum premium payable per month is Rs.1000 which is very affordable by anyone.

52

FINDINGS

There is a great future of the life insurance sector in India as 80% of the Indian population is still without life cover and people are just now coming in response to the awareness campaigns being carried out by almost all the insurance companies. We have found out that age plays a major role in deciding the investment patterns of people as generally the younger class of people tend to take more risk and invest in various instruments more frequently in a year( 2.10 times a year) when compared with the older class of people(1.46 times a year). Life insurance Corporation (LIC) of India is the company to be least affected during this market slowdown as NAV of its equity growth funds came down just by 23% during this major recession. Life Insurance Corporation (LIC) of India is still the undisputed market leader as 63% of the respondents surveyed owned a policy in it and it has also got a tremendous rating of 4.2 out of 5 in the survey conducted. A good positive growth is being shown by IDBI FORTIS and even though it is still over one year old and has a long way to go it has already started working hard and is trying to make competition much tougher. All the products of IDBI FORTIS under Wealthsurance are really very good and have an edge over most of the products of other major life insurance companies as the plans offered by the company are really very flexible.

53

RECOMMENDATIONS

IDBI FORTIS has to improve its distribution network as its reach to a common man is very limited .Also the number of agents working for the company is very less right now when compared to the other companies

The company should constantly come out with innovative products as the competition is very tough with around 22 companies fighting hard for the market share. Some new innovative ideas have been suggested below.

a) An insurance plan for the unborn babies. The premium payment term could be for 6 months and it could start once the fetus is 3 months old inside the mothers womb. There could be various benefits under this plan for the customers like in case of a premature or a complicated birth the company would bear the expenses till the baby is healthy again through the insurance policy. Also there could be death benefits in case of the death of the baby inside the womb or at the time of delivery. This plan could really be successful as in India there are lot of premature child deaths and if the company comes out with a plan like this very tactfully with some implied conditions it would be the first Indian company to offer insurance to unborn babies. b) An insurance plan for mentally retarded and physically handicapped people. This might be hard to digest but if at all plans like these are possible and really come out then a good amount of Indian population would really be interested.

c) The company could also come out with a plan for both the husband and wife where automatically the wife gets insured along with her husband when her husband purchases the policy. This could also be the other way round. This could be called the combo family plan. In simple words it means buy one policy and get another free. No other company has done something like this till now.

As the company is a new company it has to really work hard to get itself promoted. The company could start sponsoring major events and conduct talk shows and seminars to get noticed. It could also take the help of NGOs. There are many people in India who still do not know about the concept of insurance.The company could take this as an opportunity by trying to create awareness.

The company could start using star personalities for their endorsements especially cricket stars and film stars as India is a nation of crazy cricket and film followers and there is nothing better than reaching to the hearts of people through cricket.

54

The company should come out with some really outstanding and out of the world advertisements like the ones Vodafone has released recently which people find it hard to forget soon.

The company should first promote the brand IDBI FORTIS and create a positive impression in the minds of the people. In todays world it is really tough for the customer to choose from among a vast list of insurance companies as almost all of them offer the same plans .So the company has to be a bit different from others in order to stand apart.

55

QUESTIONNAIRE (This questionnaire is only of the sake of some research work being done on insurance companies. Confidentiality would be maintained.) Name : _________________________________________________________________ Gender : Age Group: 18-30 Qualification: Post Graduate Occupation: Government Service Self Employed Your income range (per annum): Below 150000 150000-250000 250000-350000 Businessman Private Company Graduate 12th < 12th 31-40 41-50 >50 Male Female Contact no : _______________________________

Any Other (Please specify) ____________________

350000-450000 Your savings per year: Below 10000

More than 450000

10000-25000

25000-50000

50000-100000

More than 100000

You would prefer savings in which form? Bank deposits Post Office schemes Fixed deposits Investments

Any other (please specify) _________________________

What do you consider while making an investment decision? Familys opinion Your own decision Friends advice Brokers advice

Any other (please specify) _________________________

56

Your opinion about investment: Tax Saving Wealth creation Preferably you would like to invest in: Mutual funds Stocks and shares Insurance products Good returns Better future after retirement

Any other (please specify) _________________________

Govt. Bonds & securities How frequently do you invest? Once a year

Any other (please specify) _____________________

2-3 times a year

More than 3 times a year

Not investing (no idea)

Not interested

Do you agree that Insurance products are susceptible to very low risk when compared to the other options for investment? Yes No Dont know

What do you understand by the term Wealthsurance? A tax savings plan A savings plan with good returns A financial security and risk coverage for your family All the above I have no idea Name three insurance companies that come to your mind: 1. ___________________________________ 2. ___________________________________ 3. ___________________________________

Do you own an insurance policy? Yes No If yes in which company? ______________________

57

According to you what is the amount of risk involved in (ULIPs) Unit Linked Investment Plans? High risk They are Safe Moderate risk No Idea Low risk

58

(FACTOR ANALYSIS OUTPUT [SPSS])

59

Extraction Method: Principal Component Analysis.

60

Total Variance Explained

61

62

REFERENCES www.idbifortis.com www.hdfcstandardlife.com www.licindia.com www.bajajallianz.com www.iciciprulife.com www.tata-aig-life.com www.irdaindia.org http://www.scribd.com/doc/11005006/Insurance-Industry-Growth-Chart-Under-Drive-ofDemand-and-Value-Recommended20090121 http://www.scribd.com/doc/4996143/OVERVIEW-OF-INSURANCE-SECTOR-INDIA http://www.scribd.com/doc/7044410/ULIPs http://www.indiaprwire.com/pdf/pressrelease/200805079347.pdf http://www.scribd.com/doc/136703/Indian-Insurance-Changing-Trends-and-a-Fresh-Perspective http://www.scribd.com/doc/7216240/Understand-ULIP-Insurance http://www.financialexpress.com/search/news/ulips+flexible+to+the+core/

http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan002873.pdf http://wealth.moneycontrol.com/yourstartupkit/ulip/why-invest-in-ulips-/9051/0 http://economictimes.indiatimes.com/Personal-Finance/Insurance/Life-insurance-industrytargeting-20-pc-growth-in-FY-09/rssarticleshow/4095144.cms http://www.marketsmonitor.com/Report/IM588_related.htm http://www.marketsmonitor.com/Report/IM126.htm http://www.marketsmonitor.com/Report/IM126.htm

63