Introduction

LIFE INSURANCE

MEANING:
Life insurance is a contract providing for payment of a sum of money to the person
assured or, failing him, to the person entitled to receive the same, on the happening of
a certain event.
A family is generally dependent for its food, clothing and shelter on the income
brought by the family’s breadwinner. The family is secure so long as this breadwinner
is alive and is capable of earning his income. A sudden death (or inability) may leave
this family in a financially difficult situation. Uncertainty of death is inherent in
human life. This uncertainty makes it necessary to have some protection against the
financial loss arising from death. And life insurance exactly offers this kind of
protection.

ORIGIN:
The idea of insurance had emanated from out of the needs and desires of people to
cover the likely losses to be suffered during a person’s lifetime. Insurance was
initially restricted to cover items other than for a person’s life. Today insurance covers
almost everything.
Life insurance had commenced under framework of societies formed for purpose of
giving service to the members in case of sickness, unemployment and premature
deaths. Following a death, the need for immediate finance was felt to have a “Decent
funeral”. Over a period of time, the financial loss due to the demise of the bread-
earner was extended to cover future needs too.
In the Indian context, the Aryans had perceived the idea of community insurance
more than 3000 years ago, as would be evident from the “Reeg Veda”, in which the
word “Yogakshema” was meant to suggest some form of communities had existed to
help out family of the deceased in building a house, protecting the widow and also
marrying off the girls.

BRIEF HISTORY OF INSURANCE:

The business of insurance started with marine business. The first policy providing
temporary life assurance cover for a period of 12 months was issued as early as 1583
A.D. in England. In India, Insurance began in 1870 with life insurance being
transacted by an English company, the European and the Albert. The first Indian
Insurance Company was the Bombay Mutual Assurance Society Ltd, formed in
1870. That was followed by the Oriental Life Assurance Co. in 1874, the Bharat in
1896 and the Empire of India in 1897.

By the year 1956, when the life insurance business was nationalized and the Life
Insurance Corporation of India (LIC) was formed on 1st September 1956, there
were 170 companies and 75 provident fund societies transacting life insurance
business in India. By 31.03.2002, eleven new insurers had been registered and had
begun to transact life insurance business in India.

NEED FOR INSURANCE:

When we consider some form of general insurance contracts like fire insurance, it
presupposes the paramount need to have a protection through insurance. But it is not
so simple to define financial loss following the loss of human life. In life insurance,
the concept of indemnity is applied with some modifications. The concept of Human
Life Value (HLV) helps us in determining the sum for which a person needs life
insurance.

PRINCIPLES OF LIFE INSURANCE:

Life insurance policy is an evidence of contract between the insurer and the policy
holder. Like any other contract, the policy has the following essential elements :

Offer and acceptance :

The proposal form is the other letter by the proposer and the insurer accepts it.

Consideration

The proposer pays the premium to receive the reciprocal benefit of the claim
money.
 Capacity to contract :

The proposer has to fulfill certain eligibility conditions, e.g., he must be a major.

Consensus “ad idem” :

The proposer has to understand the implication of the plan, premium, etc. and the
insurer must be equipped with all the necessary information regarding the
proposer, so that there is no ambiguity regarding the terms of the contract.

Legality of the object or purpose :

The motive should be insurance in the true sense of the term and it should not
have any element of wager or gambling.

Capability of performance :

The agent will have to have the ability to perform well.

Intention to create legal relationship :

Besides the general essentials of a valid contract, insurance involves two

additional principles. They are -

(a)Principle of utmost good faith.

(b)Principle of Insurable Interest

ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT:

For Economic Development, investments are necessary. Investments are made

out of savings. A Life Insurance company is a major instrument for the
mobilization of savings of people, particularly from the middle and lower income
groups. These savings are channeled into investments for Economic Growth.

A Life Insurance Company will have large funds. These amounts are collected by
 way of premiums. Every premium represents a risk that is covered by that
premium. In effect, therefore, these vast amounts represent pooling of risks. The
funds are collected and held in trust for the benefit of the policyholders. The
management of Life Insurance Companies are required to keep this aspect in mind
and make all its decisions in ways that benefit the community. This applies also to
its investments. Their investments benefit the society at large. All good Life
Insurance Companies have huge funds, accumulated through the payments of
small amounts of premium of individuals. These funds are invested in ways that
contribute substantially for the economic development of the countries in which
they do business.

Apart from investments, business and trade benefit through insurance. Without
insurance, trade and commerce will find it difficult to face the impact of major
perils like fire, earthquake, floods, etc. Financiers, like banks, would collapse if
the factory, financed by it, is reduced to ashes by a terrible fire. Insurers cover also
the loss to financiers, if their debtors default.

ROLE OF INSURANCE IN SOCIAL SECURITY:

When the breadwinner of a family dies, to that extent, the family’s income dies.

The economic condition of the family is affected, unless other arrangement comes
into being to restore the situation.

Life insurance provides such an alternate arrangement.

The lower strata create a cost on the society -

(a) Subsidies and doles and so on, and

(b) Larger growth in population.

LIFE INSURANCE AND OTHER INVESTMENTS:

Most investment options make our money work harder, but they are not substitutes to
life insurance. Because only a life insurance policy gives us both, risk cover as well
as returns on savings.
Needless to say, savings through life insurance guarantee full protection against the
risk of death of the insured. It also allows long-term savings to be made in a relatively
painless manner because of the low and convenient installments or premiums.
Moreover, it encourages “forced thrift” which means the insured is made to pay his
premiums and save his money which he might not do in the regular course of life.
Should we require loans, say for building a house, they are easily obtained against an
Insurance Policy. Amongst the most known benefits of life insurance is the saving
on taxes.

So, a life Insurance Policy is an ideal tool to gain security and ensure savings.

PURPOSE OF INSURANCE:
Insurance is income protection investment. The person you name as your
beneficiary will receive proceeds from an insurance company. Insurance policies are
always an intelligent decision while investing your hard-earned money. More than a
tax saving instrument or an interest earning investment, an insurance policy is a
guarantee that your loved ones would not have any financial difficulties in case any
unfortunate incident happens to you. Insurance policies with high premium and low
risk cover are similar to deposits and bonds.

RISKS INVOLVED:

Most insurance policies carry relatively small risk because insurance companies are
usually stable and are heavily regulated by government. In “CASH VALUE” policies
you are allowed to invest your policy in stock, bond or money market funds. In
these types of policies the value of your insurance depends on the performance of
those funds.

STRENGHTS:

Insurance provides an excellent peace of mind in case unfortunate incident

happens to you.
Insurance policies are a relatively low risk investment.
Insurance provides tax deferred savings and capital appreciation.

WEAKNESS:
 Cash value funds can fluctuate depending on what the financial markets are doing.
provides nominal income as it is less risky.

UNIT LINKED INSURANCE PLANS (ULIPs):

A Unit Linked Insurance Plan (ULIP) 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
insured person’s untimely death, his nominees would normally receive an amount that
is the higher of the sum assured or the value of the units (investments).
Unit-Linked Life Insurance products are those where the benefits are expressed in
terms of number of units and Unit Price. They can be viewed as a combination of
Insurance and Mutual Funds. The number of units, which the customer would get
depends on the unit price when he pays his premium. The daily Unit Price is based on
the market value of the underlying assets ( equities, bonds, government securities, etc)
and computed from the NET ASSET VALUE (NAV)
ULIPs also offer flexibility. For instance, a policyholder can ask the insurance
company to liquidate units in his account to meet the mortality charges if he is unable
to pay any premium installment. This eats into his savings, but ensures that the policy
will continue to cover his life.

ULIPs ( key features) :

Premiums paid can be single, regular or variable. The payment period too can be
regular or variable. The risk cover can be increased or decreased.
As in all insurance policies, the risk change (mortality rate) varies with age.
The maturity benefit is not typically a fixed amount and the maturity period can be
advanced or extended.
Investments can be made in gilt funds, balanced funds, money market funds,
growth funds or bonds.
The policy holder can switch between schemes, for instance, balanced to debt or
gilt to equity, etc.
 The maturity benefit is the Net Asset Value (NAV) of the units.
The costs in ULIP are higher because there is a life insurance component in it as
well, in addition to the investment component.
Insurance companies have the discrete to decide on their investment portfolios.
They are simple, clear, and easy to understand.
Lead to an efficient utilization of capital.
ULIP products are exempted from tax and they provide life insurance.
Provides capital appreciation.
Investor gets an option to choose among debt, balanced and equity funds.
Objective / purpose of investing in ULIPs:

Investment in ULIP by the investors is mainly for tax relief (33%) and returns
(30%). Investors in the age group of 21-30 mainly invest for tax relief and returns. It
is same even for the investors in the age group of 41-55. Most of the salaried people
invest in ULIP for the purpose of returns and as a tool for tax relief and benefits.
Investing in ULIP as a purpose of liquidity investment is same for professionals,
salaried and also for business people. Investors’ whose monthly income is less than
Rs.10,000 are not interested in investing in ULIP, this may be because of other
investment that they have already made. Investors’ monthly income between
Rs.20,001 and Rs.30,000 has equal importance for returns, protection for dependents
and tax relief.

Insurance Sector Reforms:

The Insurance Sector in India has gone through the process of reforms during 1990s
and in the current decade. The reforms are based on the recommendations of different
committees especially Malhotra Committee. Accordingly the Insurance Regulatory
Development Authority (IRDA) was set up as a statutory body in April 2000. This
body is vested with the framing of regulations and registering the private sector
insurance companies. The insurance sector was opened up to the private sector in
August 2000. As a result some Indian and Foreign private companies have entered the
insurance business and have been in the process of building up their empire. There are
about 14 general insurance and 21 life insurance companies operating in the
current private sector category.
Some of the private Life Insurance Companies in India are listed
below:

Life Insurance Companies

Aviva Life Insurance

Bajaj Allianz Life Insurance

Birla Sun-Life Insurance

HDFC Standard Life Insurance

ING Vysya Life Insurance

Max New York Life Insurance

MetLife Insurance

Om Kotak Mahindra Life Insurance

Life Insurance Corporation

Reliance Life Insurance

Sahara India Life Insurance

SBI Life Insurance

TATA AIG Life Insurance

MUTUAL FUND:

“A Mutual Fund is an actively managed investment company that collects money

from individuals and institutions, which share a common financial goal. A mutual
fund raises money from investors to invest in stocks, bonds, and other securities. It is
a package made up of several individual investments”.

A mutual fund is a type of investment vehicle where investors pool their money in
order to allow each investor participate in a portfolio of securities. The individual
investor doesn't actually own each security but instead, he owns shares of the mutual
fund. The main benefit of a mutual fund is that it provides a way for the investor to
achieve diversification in his investments without having to invest a lot of money.

The first mutual fund was the Massachusetts Investors Trust introduced in 1924. At
the end of its first year, the fund had 200 investors with $63,600 in assets. At the end
of 1995, the fund grew to 73,500 investors with assets totaling $1.8 billion! Now
there are over 7000 different mutual funds available for you to choose from.

Mutual funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. But the biggest advantage to
mutual funds is diversification, by minimizing risk & maximizing returns.

Diversification:

Diversification is nothing but spreading out your money across available or

different types of investments. By choosing to diversify respective investment
holdings reduces risk tremendously up to certain extent.

The most basic level of diversification is to buy multiple stocks rather than just one
stock. Mutual funds are set up to buy many stocks. Beyond that, you can diversify
even more by purchasing different kinds of stocks, then adding bonds, then
international, and so on.
Basics of Mutual Funds:

Most Mutual Funds invest in one or more of the three major financial asset classes:

Stocks:

Stocks represent shares of ownership in a public company. Examples of public

companies include Reliance, ONGC and Infosys. Stocks are considered to be the most
common owned investment traded on the market.

Bonds:

Bonds are basically the money which you lend to the government or a company, and
in return you can receive interest on your invested amount, which is back over
predetermined amounts of time. Bonds are considered to be the most common
lending investment traded on the market.

There are many other types of investments other than stocks and bonds (including
annuities, real estate, and precious metals), but the majority of mutual funds invest in
stocks and/or bonds.

Money Market Instruments:

Money Market Instruments are short-term debt securities issued by governments,

corporations, banks or other financial institutions. They typically must be repaid
within one year, often in 90 days or less. With such short maturity periods, prices of
money market instruments are generally more stable than prices of long-term debt
securities. However money market securities pay less interest than long-term bonds.
Treasury Bills and Certificate of Deposits (CDs) are two commonly used money
market instruments.

NET ASSET VALUE:

The performance of a particular scheme of a mutual fund is denoted by Net Asset
Value (NAV).
Mutual Funds invest the money collected from the investors in securities markets.
In simple words, Net Asset Value is the market value of the securities held by the
scheme. Since market value of securities changes every day, NAV of a scheme also
varies on day-to-day basis. The NAV per unit is the market value of the securities
of a scheme divided by the total number of units of the scheme on any
particular date.

For example, if the market value of securities of a mutual fund scheme is Rs.200
lakhs and the mutual fund has issued 10 lakhs units of Rs.10 each to the investors,
then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the
mutual funds on a regular basis-daily or weekly depending on the type of the scheme.

SELECTION OF A MUTUAL FUND:

Unfortunately, there's no one size fits all strategy when it comes to any type of
investing. You need to take into consideration what your needs are and what your
future financial goals are. When choosing a mutual fund you should first get a
prospectus then, call the fund company. In many cases, the prospectus is available
right on the company's website. Mutual fund investors would be well advised to
consider the fund prospectus, the fund manager, and the current market conditions.
Never rely on last year's top performers.

Hence, mutual funds are a way for investors to diversify their risk and still benefit
from professional money management. The prospectus identifies key information
about the mutual fund including its operating boundaries and its costs. The fund
manager operates within those boundaries and is important in order to achieve good
results within those boundaries.

TYPES OF MUTUAL FUND SCHEMES IN INDIA:

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

1.Open - Ended Schemes:

An open-end fund is one that is available for subscription all through the year. These
do

not have a fixed maturity. Investors can conveniently buy and sell units at Net Asse

Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

2. Close - Ended Schemes:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to
15 years. The fund is open for subscription only during a specified period. Investors
can invest in the scheme at the time of the initial public issue and thereafter they can
buy or sell the units of the scheme on the stock exchanges where they are listed. In
order to provide an exit route to the investors, some close-ended funds give an option
of selling back the units to the Mutual Fund through periodic repurchase at NAV
related prices. SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor.

3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and
close-ended schemes. The units may be traded on the stock exchange or may be open
for sale or redemption during pre-determined intervals at NAV related prices.

Overview of existing schemes existed in mutual fund category: by

nature

1. Equity Funds:

These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund manager’s
outlook on different stocks. The Equity Funds are sub-classified depending upon their
investment objective, as follows:
 Diversified Equity Funds

Mid-Cap Funds

Sector Specific Funds

Tax Savings Funds

Equity investments are meant for a longer time horizon, thus Equity funds rank high
on the risk-return matrix.

2. Debt funds:

The objective of these Funds is to invest in debt papers. Government authorities,

private companies, banks and financial institutions are some of the major issuers of
debt papers. By investing in debt instruments, these funds ensure low risk and provide
stable income to the investors. Debt funds are further classified as:

Gilt Funds:
Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are
associated with Interest Rate risk. These schemes are safer as they invest in papers
backed by Government.

Income Funds:
Invest a major portion into various debt instruments such as bonds, corporate
debentures and Government securities.

Short Term Plans (STPs):

Meant for investment horizon for three to six months. These funds primarily invest
in short term papers like Certificate of Deposits (CDs) and Commercial Papers
(CPs). Some portion of the corpus is also invested in corporate debentures.

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

3. Balanced funds:

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

Objective of investing in Mutual Funds:

Most of the investors’ purpose of investing in mutual fund is because it is

professionally managed (34%). Investors’ main objective here is to get returns.
Investors in the age group of 41-55 invest with the objective of good returns and also
for tax relief. Post Graduates invest in Mutual Funds because they are professionally

managed and have good returns (17%). Investment in Mutual Fund as a liquidity
instrument is very less among investors. Graduates invest in Mutual Funds because
the funds are professionally managed and have good returns (14%).

An investor can choose the fund on various criteria according to his

investment objective. A few of them are:

Thorough analysis of fund performance of schemes over the last few years
managed by the fund house and its consistent return in the volatile market.

The fund house should be professional, with efficient management and

administration.

The corpus fund is holding in its scheme over the period of time.

Proper adequacies of disclosures have to seen and also make a note of any hidden
charges carried by them.

The price at which you can enter/exit (i.e. entry load / exit load) the scheme and
its impact on overall return.

RISK RETURN:
Mutual funds, like securities investments, are subject to market risks and there is no
guarantee against loss in the Scheme or that the Scheme’s objectives will be achieved.
As with any investment in securities, the NAV of the Units issued under the Scheme
can go up or down depending on various factors and forces affecting capital markets.

TYPES OF RETURNS:
There are three ways, where the total returns provided by mutual funds can be
enjoyed by investors:

Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the form of a
distribution

If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.

If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares.

Pros (advantages) of Investing in Mutual Funds:

Professional Management :
The basic advantage of funds is that, they are professional managed, by well
qualified professional. Investors purchase funds because they do not have the time
or the expertise to manage their own portfolio. A mutual fund is considered to be
relatively less expensive way to make and monitor their investments.

Diversification :
Purchasing units in a mutual fund instead of buying individual stocks or bonds,
the investors risk is spread out and minimized up to certain extent. The idea
behind diversification is to invest in a large number of assets so that a loss in any
particular investment is minimized by gains in others.

Economies of Scale :
 Mutual fund buy and sell large amounts of securities at a time, thus help to
reducing transaction costs, and help to bring down the average cost of the unit for
their investors.

Liquidity :
Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.

Simplicity :
Investment in mutual fund is considered to be easy, compare to other available
instruments in the market, and the minimum investment is small.

Cons (disadvantages) of Investing in Mutual Funds:

Professional Management :
Some funds doesn’t perform in neither the market, as their management is not
dynamic enough to explore the available opportunity in the market, thus many
investors debate over whether or not the so-called professionals are any better than
mutual fund or investor himself, for picking up stocks.

Costs :
The biggest source of AMC income is generally from the entry & exit load which
they charge from investors, at the time of purchase. The mutual fund industries are
thus charging extra cost under layers of jargon.

Dilution :
Because funds have small holdings across different companies, high returns from
a few investments often don't make much difference on the overall return.
Dilution is also the result of a successful fund getting too big. When money pours
into funds that have had strong success, the manager often has trouble finding a
good investment for all the new money.

Taxes :
When making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a
capital-gain tax is triggered, which affects how profitable the individual is from
 the sale. It might have been more advantageous for the individual to defer the
capital gains liability.

Regulating Authorities of Mutual Funds:

To protect the interest of the investors, Securities and Exchange Board of India
(SEBI) formulates policies and regulates the mutual funds. It notified regulations in
1993 (fully revised in 1996) and issues guidelines from time to time. MF either
promoted by public or by private sector entities including one promoted by foreign
entities is governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by

making investments in various types of securities. Custodian, registered with SEBI,
holds the securities of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or
board of trustees must be independent. The Association of Mutual Funds in India
(AMFI) reassures the investors in units of mutual funds that the mutual funds
function within the strict regulatory framework. Its objective is to increase public
awareness of the mutual fund industry.

AMFI also is engaged in upgrading professional standards and in promoting

best industry practices in diverse areas such as valuation, disclosure, transparency etc.
 INDUSTRY PROFILE
INTRODUCTION:

The Insurance sector in India governed by Insurance Act, 1938, The Life Insurance
Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972
Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related
acts. With such a large population and the untapped market area of this population
insurance happens to be a very big opportunity in India. Today it stands as a business
growing at the rate of 15 - 20% annually. Together with banking services, it adds
about 7% to the country’s GDP. In spite of all this growth the statistics of the
penetration of the insurance in the country is very poor. Nearly 80% of Indian
populations are without Life Insurance cover and the Health Insurance. This is an
indicator that growth potential for the insurance sector is immense in India. It was due
to this immense growth that the regulations were introduced in the insurance sector
and in continuation “Malhotra Committee” was constituted by the Government in
1993 to examine the various aspects of the industry. The key element of the reform
process was participation of overseas insurance companies with 26% capital. Creating
a more efficient and competitive financial system suitable for the requirements of the
economy was the main idea behind this reform.

Since then the insurance industry has gone through many sea changes. The
competition LIC started facing from these companies were threatening to the
existence of LIC. Since the liberalization of the industry the insurance industry has
never looked back and today stand as the one of the most competitive and exploring
industry in India. The entry of the private players and the increased use of the new
distribution are in the limelight today. The use of new distribution techniques and the
IT tools has increased the scope of the industry in the longer run.

Life is a roller coaster ride and is full of twists and turns. You cannot take
anything for granted in life. Insurance policies are a safeguard against the
uncertainties of life. Insurance is system by which the losses suffered by a few are
spread over many, exposed to similar risks. Insurance is a protection against financial
loss arising on the happening of an unexpected event. Insurance policy helps in not
only mitigating risks but also provides a financial cushion against adverse financial
burdens suffered.
What Is Insurance?

Insurance is a contract between two parties, the insurer or the insurance company, and
the insured, the person seeking the cover. Within this contract, the insurer agrees to
pay the insurer for financial losses arising out of any unforeseen events or risk in
return for a regular payment of premium. Thus, these insurance plans are also called
as a Risk Cover Plans, which means to financially compensate for losses that occur
uncertainly through accident, illness, theft, natural disaster. As you can not fight
against these man-made and natural calamities, so at least be prepared for them and
their aftermath by taking insurance policies.

Insurance - Kind of Investment:

Insurance is an attractive option for investment but most people are not aware of its
advantages as an investment option. Remember that first and foremost, insurance is
about risk cover and protection. By buying life insurance, you buy peace of mind.
Insurance also serves as an excellent tax saving mechanism. The Government of India
has offered tax incentives to life insurance products in order to facilitate the flow of
funds into productive assets.

Types of Insurance

Insurance policies cover the risk of life as well as other assets and valuables, such as,
home, automobiles, jewelry et al. On the basis of the risk they cover, insurance
policies can be classified into two categories: Life Insurance and General Insurance.
As the term suggests, Life Insurance covers the risk involved in a person's life, while
General Insurance provides financial protection against unforeseen events, like
accident, flood, earthquake, disease, etc.

Insurance Regulatory & Development Authority:

Insurance Regulatory & Development Authority is regulatory and development

authority under Government of India in order to protect the interests of the
policyholders and to regulate, promote and ensure orderly growth of the insurance
industry. It is basically a ten members' team comprising of a Chairman, five full time
members and four part-time members, all appointed by Government of India. This
organization came into being in 1999 after the bill of IRDA was passed in the Indian
parliament.

Powers and Functions

of IRDA

It issues the applicants in insurance arena, a certificate of registration as well

as renewal, modification, withdrawal, suspension or cancellation of such
registrations.

It protects the interests of the policy holders in any insurance company in the
matters related to the assignment of policy, nomination by policy holders,
insurable interest, and resolution of insurance claim, submission value of policy
and other terms and proposals in the contract.

It also specifies obligatory credentials, code of conduct and practical

instructions for mediator as well as the insurance company. Apart from this, it also
defines the code of conduct for the surveyors and loss assessors involved with the
 insurance business.

One of the major functions of IRDA includes endorsing competence in the

insurance business. Apart from this, upholding and regulating professional
organizations in insurance and re-insurance business is also a major duty of
IRDA.

IRDA is also entitled to for asking information, undertaking inspection and

investigating the audit of the insurers, mediators, insurance intermediaries and
other organizations related to the insurance sector.

It is also concerned with the regulation of the rates, profits, provisions and
conditions that may be offered by insurers in respect of general insurance business
if it is not controlled or regulated by the Tariff Advisory Committee.

It is also entitled to supervise the functioning of the Tariff Advisory

Committee.

IRDA specifies the terms and pattern in which books of accounts are to be
maintained and statement of accounts shall be provided by insurers and other
insurance mediators.

It also regulates investment of funds by insurance companies as well as the

maintenance of margin of solvency.

It is also empowered to be involved in the arbitration of disagreements

between insurers and intermediaries or insurance intermediaries.

It is meant to specify the proportion of premium income of the insurer to

finance policies.

IRDA also specifies the share of life insurance business and general insurance
business to be accepted by the insurer in the rural or social sector.

Impact of IRDA on Indian Insurance Sector:

The creation of IRDA has brought revolutionary changes in the Insurance sector. In
last 10 years of its establishment the insurance sector has seen tremendous growth.
When IRDA came into being; only players in the insurance industry were Life
Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC), however in last decade 23 new players have emerged in the filed of insurance.
The IRDA also successfully deals with any discrepancy in the insurance sector.

HISTORY OF INSURANCE SECTOR:

The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again.

Tracing the developments in the Indian insurance sector reveals the 360- degree turn
witnessed over a period of almost 190 years.

The business of life insurance in India its existing form started in India in the year
1818 with the establishment of the oriental Life Insurance Company in Calcutta.

The business of Life Insurance in India in its existing form started in India in the year
1818 with the establishment of the oriental Life Insurance Company in Calcutta.
Some of the important milestones in the Life Insurance Business in India are given in
the table 1.

Table 1: Milestone’s in the Life Insurance Business in India:

Year Milestone’s in Life Insurance Business in India

1912 The Indian Life Insurance Companies Act enacted as the first statue
to regulate the Life Insurance Business

1928 The Indian Life Insurance Companies Act enacted to enable the
government to collect statistical information about both Life and
Non-life insurance business.

1938 Earlier legislation consolidated and amended by the Insurance Act

with the objective of protecting the interest of the insuring public.

1956 245 Indian and foreign insures and provident societies taken over
 by the central government and Nationalized. LIC formed by an act
of parliament, viz. LIC Act, 1956 with a capital contribution of Rs.
5 crore from the government of India.

The General Insurance Business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd. The first general insurance company established in
the year 1850 in Calcutta by the British.

Some of the important Milestone’s in the general insurance business in India are
given in the table 2.

Table 2: Milestone’s in the general insurance business in India

Year Milestone’s in the general insurance business in India

1907 The Indian Mercantile Insurance Ltd. set up the first company to transact all classes
general insurance business.

1957 General Insurance Council, a wing of the Insurance Association of India, frames a co
of conduct for ensuring fair conduct and sound business practices.

1968 The Insurance Act amended to regulate investments and set minimum solven
margins and the Tariff Advisory Committee set up.

1972 The General Insurance Business (Nationalization) Act, 1972 nationalized the gener
insurance business in India which effect from 1st January 1973. 107 insur
amalgamated and grouped into four companies viz. the National Insurance Compan
Ltd. The New India Assurance Company Ltd. The oriental Insurance Company Lt
And the United India Insurance Company Ltd. GIC incorporated as a company.

History of insurance in India:

Insurance has a long history in India. Life Insurance in its current form was
introduced in 1818 when Oriental Life Insurance Company began its operation in
India. Triton insurance company limited was the first General Insurance company to
have established in India in 1850, whose share were mainly held by the British. The
first General insurance company to be set up by an Indian was Indian Mercantile
insurance company limited which was established in 1907. There emerged many a
player on the Indian scene thereafter.

The General Insurance 3 Business was nationalized after the promulgation of

General Insurance Business (Nationalization) Act, 1972. The General Insurance
Corporation of India and its 4 subsidiaries undertook the post-nationalization general
insurance business:

1. Oriental Insurance Company Limited.

2. New India Assurance Company limited.
3. National Insurance Company Limited.
4. United India Insurance Company Limited.

Towards the end of 2000, the relation ceased to exist and the four companies are at
present, operating as independent companies.

The Life Insurance Corporation (LIC) was established on 1-09-1956 and had
been the sole corporation to write the life insurance business in India.

The Indian insurance industry saw a new sun when the Insurance Regulatory
and Development Authority (IRDA) invited the applications for registration as insures
in August 2000. With the liberalization and opening up the sector to private players,
the industry has presented promising prospects for the coming future. The transition
has also resulted into introduction of ample opportunities for the professional
including chartered Accountants.

The Indian life and non-life insurance business accounted for merely 0.42
percent of the world’s life and non- life business in 1997. The life insurance industry
registered 51 percent growth in 2003-2004, significantly adding to the now globally
visible glow of our economy.

Insurance Market-Present:

The insurance sector was opened up for private participations four years ago. For
years now, the private players are active in the liberalized environment. The insurance
market have witnessed dynamic charges which includes presence of a fairly large
number of insures both life and non-life segment. Most of the private insurance
companies have formed joint venture partnering well recognized foreign players
across the globe.

There are now 29 insurance companies operating in the Indian market 14

private insurers, nine private non life insurers and six public sector companies. With
many more joint venture in the offing, the insurance industry in India today stands at a
crossroads as competition intensifies and companies prepare survival strategies in a
detariffed scenario.

There is pressure from both within the country and outside on the Government
to increase the Foreign Direct Investment (FDI) limit from the current 26% to 49%,
which would help JV partners to bring in funds for expansion.

There are opportunities in the pensions sector where regulations are being
framed. Less than 10% of Indians above the age of receive pensions. The IRDA has
issued the first license for a standalone health company in the country as many more
players wait to enter. The health insurance sector has tremendous growth potential,
and as it matures and new it matures and new players enter, product innovation and
enhancement will increase. The depending of the health database over time will also
allow players to develop and price products for larger segment of society.

State Insurers Continue To Dominate:

There may be room for many more players in a charge under insured market like
India with a population of over one billion. But the reality is that the intense
competition in the last five years has made it difficult for new entrants to keep pace
with the leaders and there by failing to make any impact in the market.

Also as the private sector control over 26.18% of the life insurance market and
over 26.53% of the non - life market, the public sector companies still call the shots.

The country’s largest life insurer, Life Insurance Corporation of India (LIC), had a
share of 74.82% in the new business premium income in November 2005.

Similarly, the four public- sector non-life insures – New India Assurance,
National Insurance, oriental Insurance and United India Insurance – had a combined
market share of 73.47% as of October 2005. ICICI Prudential Life Insurance
Company continues to lead the private sector with a 7.26% market share in terms of
fresh premium, whereas ICICI Lombard General Insurance Company is the leader
among the private non-life players with an 8.11% market share. ICICI Lombard has
focused on growing the market for general insurance products and increasing
penetration within existing customers through product innovation and distribution.

Reaching out to customers:

No doubt, the customer profile in the insurance industry is changing with the
introduction of large number of divergent intermediaries such as broker, corporate
agent and bank assurance.

The industry now deals with customers who knows what they want and when,
and are more demanding in terms of better service and speedier responses With the
industry all set to move to a detariffed regime by 2007, there will be considerable
improvement in customer service level, product innovation and newer standards of
under writing

Intense competition:

In a de-tariffed environment, competition will manifest itself in prices, products,

underwriting criteria, innovative sales and credit worthiness. Insurance company will
vie with each other to capture market share through batter pricing and client
segmentation.

The battle has so far been fought in the big urban cities, but in the next few
years, increase competition will drive insurers to rural and semi-urban markets.

Global standards:

While the world is eyeing India for growth and expansion, Indian company are
becoming increasingly world class. Take the case of LIC, which has set its site on
becoming a major global player following a 280–crore investment from the Indian
government. The company now operates in Mauritius, Fiji, the UK, Sri Lanka, and
Nepal and will soon start operation in Saudi Arabia. It also plans to venture into the
African and Asia-Pacific regions in 2006.

The year 2005 was a testing phase for the general insurance industry with a
series of catastrophes hitting the Indian sub-continent.

However, with robust reinsurance programme in place, insurers have

successfully managed to tide over the crisis without any adverse impact on their
balance sheets.

With life insurance premiums are being just 2.5% of GDP and general
insurance premiums being 0.65% of GDP. The opportunity in the Indian market place
is immense. The next 5 year will be challenging but those that can build scale and
market share will.

COMPANY PROFILE

INTRODUCTION:

Established on 14th August 2000, HDFC Standard Life Insurance Co. Ltd. is a joint
venture between Housing Development Finance Corporation Limited (HDFC
Limited) - India's leading housing finance institution, and a Group Company of the
Standard Life Plc, UK. The Company is one of leading private insurance companies,
offering a range of individual and group insurance solutions, in India. Being a joint
venture of top financial services groups, HDFC Standard Life has adequate financial
expertise to manage long-term investments safely and resourcefully.

HDFC Standard Life Insurance offers a range of individual and group solutions,
which can be easily personalized to specific needs. Its group solutions have been
planned to offer complete flexibility, together with a low charging structure. As of 31
December, 2008, the Company's new business premium income stood at Rs. 1,839.70
Crores; it has covered over 812,811 lives so far.

The partnership:

HDFC Standard Life first came together for a possible joint venture, enter the Life
Insurance market, in January 1995. It was clear from the outset that both companies
shared similar value and beliefs and a strong relationship quickly formed. In October
1995 the companies signed a 3 years joint venture agreement.

Around this time Standard Life purchased a 5% stake in HDFC, further strengthening
the relationship.

The next three years were filled with uncertainty ,due to changes in government and
ongoing delays in getting the IRDA (Insurance Regulatory and Development
authority) Act passed in parliament. Despite this both companies remained firmly
committed to the venture.

In October 1998, the joint venture agreement was renewed and additional resource
made available. Around this time Standard Life purchased 2% of Infrastructure
Development Finance Company Ltd. (IDFC). Standard Life also started to use the
service of the HDFC Treasury department to advise them upon their investments in
India.

Towards the end of 1999, the opening of the market looked very promising and both
companies agreed the time was right to move the operation to the next level.
Therefore, in January 2000 an expert team from the UK joined a hand picked team
from HDFC to form the core project team, based in Mumbai.

Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake
in HDFC Bank.

In a further development Standard Life agreed to participate in the Asset Management

company promoted by HDFC to enter the mutual fund market. The Mutual Fund was
launched on 20th July 2000.
Vision, Mission & Values of HDFC Standard Life Insurance
Ltd.

Vision:

'The most successful and admired life insurance company, which means that we are
the most trusted company, the easiest to deal with, offer the best value for money, and
set the standards in the industry'.

'The most obvious choice for all'.

Mission:

To be the top new life insurance company in the market.

This does not just mean being the largest or the most productive company in the
market, rather it is a combination of several things like – Customer service of the
highest order Value for money for customer professionalism in carrying out business.
Innovative products to cater to different need of different customers, Use of
technology to improve service standards Increasing market share.

Their mission is to be the best new life insurance company in India and these are the
values that will guide the country.

Values:

SECURITY: Providing long term financial security to our policy holders will be
our constant Endeavour. We will be do this by offering life insurance and
pension products.

TRUST: We appreciate the trust placed by our policy holders in us. Hence, we
will aim to manage their investments very carefully and live up to this trust.

INNOVATION: Recognizing the different needs of our customer, we will be

offering a range of innovative products to meet these needs.
Values that we observe while we work:

Integrity
Innovation
Customer centric
People Care “One for all and all for one”
Team work
Joy and Simplicity

Goals of the Company:

Emerge as transactional Life Insurer of global scale and standard.

Achieve impeccable reputation and credentials through best business practices.

Guiding Principles:

Customer Care and Satisfaction.

Corporate Governance.
Creativity and Innovation.
Competitiveness.

COMPETITORS:

Life Insurance Companies

Aviva Life Insurance

Bajaj Allianz Life Insurance

Birla Sun-Life Insurance

HDFC Standard Life Insurance

ING Vysya Life Insurance

Life Insurance Corporation

Max New York Life Insurance

MetLife Insurance

Om Kotak Mahindra Life Insurance

Reliance Life Insurance

Sahara India Life Insurance

SBI Life Insurance

TATA AIG Life Insurance

ORGANISATION STRUCTURE
 B.O.D

C.E.O

Chief Finance National Sales Chief

Officer Manager Administration
Officer

Zonal Finance Zonal Manager Zonal Administration

Manager Officer

Senior Branch Branch Manager Senior Branch

Supervisor Supervisor

Finance Officer Business Dept. Asst. Branch

Manager Supervisor

Finance Executive Sales Team Administrative

Manager Executive

Insurance
consultants

POLICIES AND PRODUCTS:

Given below is a comprehensive list of policies and products on offer by HDFC
Standard Life Insurance:

Protection Plans:

HDFC Term Assurance Plan

HDFC Loan Cover Term Assurance Plan
HDFC Home Loan Protection Plan

Children's Plans:

HDFC Children's Plan

HDFC Unit Linked Young Star II
HDFC Unit Linked Young Star Plus II
HDFC Unit Linked YoungStar Champion

Retirement Plans:

HDFC Personal Pension Plan

HDFC Unit Linked Pension II
HDFC Unit Linked Pension Maximiser II
HDFC Immediate Annuity

Savings & Investment Plans:

HDFC Unit Linked Endowment Plus II

HDFC SimpliLife
HDFC Unit Linked Endowment II
HDFC Unit Linked Enhanced Life Protection II
HDFC Unit Linked Wealth Maximiser Plus
HDFC Unit Linked Endowment Winner
HDFC Endowment Assurance Plan
HDFC Money Back Plan
HDFC Single Premium Whole of Life Insurance Plan
HDFC Assurance Plan
 HDFC Savings Assurance Plan

Health Plans:

HDFC Critical Care Plan

HDFC SurgiCare Plan

Group Plans:

Group Term Insurance Plan

Group Variable Term Insurance Plan
Group Unit Linked Plan - Gratuity
Group Unit Linked Plan - Superannuation
Group Unit Linked Plan - Leave Encashment

HDFC Standard Life believes that establishing a strong and ethical foundation is an
essential prerequisite for long-term sustainable growth. To ensure this, we have
concentrated our focus on expansion of branch network, organising an efficient and
well trained sales force, and setting up appropriate systems and processes with
optimum use of technology. As all these areas form the basic infrastructure for
establishing the highest possible customer service standards.

Our core values are drilled down to all levels of employees, as these are inviolable.
We continue to promote high integrity in business practices and shun short cuts and
unethical practices, as we wish to be perceived as an institution with high moral
standing. Since our inception in 2000, when the Indian insurance space was opened
for private participation, we have consistently focused on setting benchmarks in all
aspect on insurance business. Being the first private player to be registered with the
IRDA and the first to issue a policy on December 12, 2000, our differentiators are:

Strong Promoter:

HDFC Standard Life is a strong, financially secure business supported by two strong
and secure promoters – HDFC Ltd and Standard Life. HDFC Ltd’s excellent brand
strength emerges from its unrelenting focus on corporate governance, high standards
of ethics and clarity of vision. Standard Life is a strong, financially secure business
and a market leader in the UK Life & Pensions sector.

Preferred and Trusted Brand:

Our brand has managed to set a new standard in the Indian life insurance
communication space. We were the first private life insurer to break the ice using the
idea of self-respect instead of ‘death’ to convey our brand proposition (Sar Utha Ke
Jiyo). Today, we are one of the few brands that customers recognize, like and prefer
to do business. Moreover, our brand thought, Sar Utha Ke Jiyo, is the most recalled
campaign in its category.

Investment Philosophy:

We follow a conservative investment management philosophy to ensure that our

customer’s money is looked after well. The investment policies and actions are
regularly monitored by a formal Investment Committee comprising non-executive
directors and the Principal Officer & Executive Director.

As a life insurance company, we understand that customers have invested their

savings with us for the long term, with specific objectives in mind. Thus, our
investment focus is based on the primary objective of protecting and generating good,
consistent, and stable investment returns to match the investor’s long-term objective
and return expectations, irrespective of the market condition.

Need Based Selling Approach:

Despite the criticality of life insurance, sales in the industry have been characterized
by over reliance on tax benefits and limited advice-based selling. Our eight-step
structured sales process ‘Disha’ however, helps customers understand their latent
needs at the first instance itself without focusing on product features or tax benefits.
Need-based selling process, 'Disha', the first of its kinds in the industry, looks at the
whole financial picture. Customers see a plan not piecemeal product selling.

Risk Control Framework

HDFC Standard Life has fully implemented a risk control framework to ensure that
all types of risks (not just financial) are identified and measured. These are regularly
reported to the board and this ensures that the company management and board
members are fully aware of any risks and the actions taken to ensure they are
mitigated

Focus on Training

Training is an integral part of our business strategy. Almost all employees have
undergone training to enhance their technical skills or the softer behavioural skills to
be able to deliver the service standards that our company has set for itself. Besides the
mandatory training that Financial Consultants have to undergo prior to being licensed,
we have developed and implemented various training modules covering various
aspects including product knowledge, selling skills, objection handling skills and so
on.

Focus on Long term Value

HDFC Standard Life do not focus in the business of ramping up the topline only, but
to create maximisation of stakeholder's value. Today, we are extremely satisfied with
the base that we have created for the long-term success of this company.

Transperent Dealing

We are one of the few companies whose product details, pricing, clauses are clearly
communicated to help customers take the right decision.

Diversified Product Portfolio

HDFC Standard Life’s wide and diversified product portfolio help individuals meet
their various needs, be it:

Protection: Need for a sound income protection in case of your unfortunate demise
 Investment: Need to ensure long-term real growth of your money
Savings: Save for the milestones and protect your savings too
Pension: Need to save for a comfortable life post retirement
Health: Cover for health related exigencies

NATURE OF INVESTMENT / RISK AND RETURN CATEGORY:

Equity funds:

Primary invested in company stock with a general aim of capital appreciation.

Risk and Return: Medium

Income, Fixed Interest and Bond Funds:

Invested in corporate bonds, Govt. securities and other fixed income instrument Risk
and Return: Medium

Cash Funds :

Some times known as money market funds invested in cash, Bank deposits and
money market instruments.

Risk and Return: Low

Balanced Funds:

Combining equity investment with fixed interest in the instrument.

Risk and Return: Medium

CHARGES OF HDFC STANDARD LIFE INSURANCE

COMPANY:

HDFC Standard Life Insurance follows the method of cancelling the units in order to
recover the charges. Some of the charges are:
 CHARGES:

PREMIUM ALLOCATION CHARGE:

This is a premium based charge, after deducting this charge from your premiums, the
reminders is invested to buy units. The table given below will help show how
percentage of premium will help to buy units. This % is called the allocation rate. The
allocation rates are guaranteed for the entire duration of the policy term.

Premium paid during years Allocation rate

1st & 2nd Year 3 rd Year

Regular Onwards onwards

premiums

Up to 1,99,999 70% 99%

Fro
m 2,00,000 to 4,99,999
80% 99%
Fro
m 500,000 to 9,99,999
85% 99%
Fro
m 10,00,000 to 19,99,999

Fro 90% 99%

m 20,00,000 to above

95% 99%

Single premium top ups 97.5% 99%

Fund management charge (FMC):

In the long term the key to build great maturity values is a low FMC. The daily unit
price already increase our low fund management charge of only o.8% per annum of
the funds value.

Surrender charge:

This is the charge we will apply when the policy is surrendered. It is equal to 30% of
the difference between the regular premiums expected and received in the first two
years of the contract.

Other charges:

The following is the set of other charges that we will take from your policy.

Charges Explanation

Policy administration A charge of Rs. 20 per month is charged to cover regular

administration costs. We take the charge by cancelling
charge
units proportionately from each of the funds you have
chosen.

Mortality and other risk Every month we make a charge for providing you with
benefit charges the death or critical illness cover in your policy. The
amount of the charge taken each month depends on your
age. We take the charge by cancelling units
proportionately from each of the funds you have chosen.

Switching charge 24 switches will be given free in a policy year and any
additional switch will be charged at Rs. 100 per switch.

Partial withdrawal 6 partial withdrawal requests will be free in a policy

year and any additional partial withdrawal requests will
Charge
be charged at Rs. 250 per request.

Revival charge A charge of Rs. 250 is for revival to cover for

administration expenses.

Miscellaneous charge This is a charge levied for any alterations within contract
like premium redirection or adhoc policy servicing, 12
 premium redirection requests will be free in a policy
year any premium redirection requests will be charge at
250 per request, 6 policy servicing requests will be free
in a policy year and any additional policy

Servicing requests will be charged at Rs.250 per

request.

Service tax and education is payable at the applicable rates on the mortality and other
risk benefit charges.

Alteration charges:

Current charges cannot be charged without prior approval from IRDA. The fund
management charge cannot exceed 2% per annum.

The surrender charge can be increased subject to a maximum of 10% of the fund
applicable for the first 3 years.

The policy administration charge can increase in line with inflation subject to a
maximum of 5% per annum over the period since inception.

The mortality charge rates and accidental death benefit charge rate are guaranteed for
full duration of your policy term and critical illness charge rates can be reviewed at
the end of every 3 years from date of launch of this product. And can be increased
subject to a maximum increase 200% of every rate.

The maximum switching charge allowed is Rs. 100 per switch increased in line with
inflation subject to a maximum of 5% per annum over period since inception.

We can charge up to Rs. 250 per request for premium redirection, partial withdrawal
and other adhoc policy servicing requests. We can increase this amount in line with
inflation subject to a maximum of 5% per annum over the period since inception.

Parentage
HDFC Limited

HDFC Limited, India’s premier housing finance institution has assisted more than
3.3 million families own a home, since its inception in 1977 across 2400 cities and
towns through its network of over 250 offices. It has international offices in Dubai,
London and Singapore with service associates in Saudi Arabia, Qatar, Kuwait and
Oman to assist NRI’s and PIO’s to own a home back in India. As of December 2008,
the total asset size has crossed more than Rs. 95,000 crores including the mortgage
loan assets of more than Rs. 82,800 crores. The corporation has a deposit base of Rs.
17,551 crores, earning the trust of more than 9,00,000 depositors. Customer Service
and satisfaction has been the mainstay of the organization. HDFC has set benchmarks
for the Indian housing finance industry. Recognition for the service to the sector has
come from several national and international entities including the World Bank that
has lauded HDFC as a model housing finance company for the developing countries.
HDFC has undertaken a lot of consultancies abroad assisting different countries
including Egypt, Maldives, and Bangladesh in the setting up of housing finance
companies.

Standard Life Group (Standard Life plc and its subsidiaries)

The Standard Life Group has been looking after the financial needs of customers for
over 180 years. It currently has a customer base of around 7 million people who rely
on the company for their insurance, pension, investment, banking and health-care
needs. Its investment manager currently administers £125 billion in assets. It is a
leading pensions provider in the UK, and is rated by Standard & Poor's as 'strong'
with a rating of A+ and as 'good' with a rating of A1 by Moody's. Standard Life was
awarded the 'Best Pension Provider' in 2004, 2005 and 2006 at the Money Marketing
Awards, and it was voted a 5 star life and pension’s provider at the Financial Adviser
Service Awards for the last 10 years running. The '5 Star' accolade has also been
awarded to Standard Life Investments for the last 10 years, and to Standard Life Bank
since its inception in 1998. Standard Life Bank was awarded the 'Best Flexible
Mortgage Lender' at the Mortgage Magazine Awards in 2006.
HDFCSL Milestone

Received the PCQuest Best IT Implementation Award 2008 for Consultant Corner,
the applications for its financial consultants, providing centralized control over a vast
geographical spread for key business units such as inventory, training, licensing, etc.

Received the 2008 CIO Bold 100 Award for its mobile workforce portal and
the Special 2008 CIO Security Award for a secure computing environment, including
identity management respectively.

Mr. Deepak M Satwalekar Awarded QIMPRO Gold Standard Award.

HDFCSL expanded its reach in the Bancassurance channel by arrangements with co-
operative banks in the rural areas.

Continued to increase its focus on quality service, by putting in place a robust

mechanism to capture ‘Voice of the Customer’ through service audits across its
offices. This was complemented by use of technology that enabled capture of all
interactions with customers across all touch points

Sar Utha Ke Jiyo was honoured as ‘Among India’s 60 Glorious Advertising

Moments. The advertisements of the company were ranked 6 th amongst ‘The 10 most
effective Advertisements’ in September 2007.

Received the PCQuest Best IT Implementation Award 2007 for Wonders, its path-
breaking implementation of an enterprise-wide workflow system. In addition the
company also bagged the EMC storage award for being the most innovative users of
storage and storage management.

Pension Plan Tops Mint’s Survey of Best TV Ads.

HDFC Standard Life’s advertising created high awareness for the brand and bagged 2
silver and 1 bronze awards at the ADFEST 2007 National Awards organised by the
Advertising Agencies Association of India (AAAI). The 3 awards are the highest won
by any single brand in the financial services business (including banking, mutual
fund, insurance and other financial services).

Ranked 29th most trusted Indian Brands amongst the Top 50 Service Brands of 2006
according to a study conducted by the Brand Equity – Economic Times, the leading
business publication of India.

Research design

INTRODUCTION:

A Research Design is a logical and systematic plan prepared for directing a research
study. It specifies the objectives of the study, the methodology and the techniques to
be adopted for achieving the objectives. It constitutes the blueprint for the
collection, measurement and analysis of data. It is “the plan, structure, and strategy of
investigation conceived so as to obtain answers to research questions’. A research
design is the program that guides the investigator in the process of collecting,
analyzing and interpreting observation. It provides a systematic plan of procedure for
the researcher to follow. It is indispensable for a research project.

STATEMENT OF THE PROBLEM:

To ascertain the performance of the different ‘Unit Linked Insurance Plans’ of the
company based on the various NAV (Net Asset Value) schemes and also to find out
the factors which exert a strong influence on the changes in NAV.

TITLE OF THE STUDY:

“Comparative analysis of various NAV (Net Asset Value) schemes of HDFC

STANDARD LIFE for the past three (3) years and the factors influencing the
changes in NAV”.

SCOPE OF THE STUDY:

The study basically tries to identify the various investment break-ups for the
different ‘Unit Linked Insurance Plans’ of the company. It will clearly show the
different investment funds available with the company for the investors to make an
investment on the same.

The study will also help an investor to direct his investments in the company’s unit
linked funds, which offer investments of different types such as Fixed Income (eg.
Government securities, Company debentures, etc.) and, equities (i.e. shares) which
range from potentially high-risk-high-return to potentially low-risk-low-return to
match the investors’ risk taking ability.
 The study will reflect the portfolio break-up of the different funds of the
company. It will also develop a comparative analysis of the various NAV schemes
and hence, offer suggestions to the investors for directing their investment which
would fetch them with maximum yield.

OBJECTIVES OF THE STUDY:

To portray the exact principles and role of insurance in the current scenario.
To study the different life insurance plans of the company.
To analyze the investment break-ups in the various schemes of the company.
To generate an analysis of the various NAV schemes of the company with respect to
the available plans.
To examine the different factors which exert a strong influence on the changes in
NAV.

OPERATIONAL DEFINITIONS:

INSURANCE:

“It is a contract providing for payment of a sum of money to the person assured or,
failing him, to the person entitled to receive the same, on the happening of a certain
event”.

MUTUAL FUND:

“A Mutual Fund is an actively managed investment company that collects money

from individuals and institutions, which share a common financial goal. A mutual
fund raises money from investors to invest in stocks, bonds, and other securities. It is
a package made up of several individual investments”.

NET ASSET VALUE (NAV) :

“The NAV is simply a measure of the current dollar value of one share of a mutual
fund. It is the fund’s assets minus its liabilities divided by the number of outstanding
shares, calculated at the end of each business day”.

According to the Securities Exchange Board of India (SEBI),

NET ASSETS OF SCHEME

NAV =
NUMBER OF OUTSTANDING UNITS

The performance of a particular scheme of a mutual fund is determined by its net

asset value.

SOURCES:

The sources of data may be classified into:

(a) Primary Sources.

(b) Secondary Sources.

PRIMARY SOURCES:

Primary Sources are original sources from which the researcher directly collects data
that have not been previously collected. Primary data are first-hand information
collected through various methods such as observation, interviewing, etc.

Here, the primary data is collected as follows:

(a) Interview with the Sales Manager.
(b) Discussions with other personnel such as advisors and trainers.

SECONDARY SOURCES:

These are sources containing data which have been collected and compiled for
another purpose. The secondary sources consists of readily available compendia and
already compiled statistical statements and reports whose data may be used by
researchers for their studies. These data are not collected directly as in case of primary
sources.

Here, the secondary data is obtained from:

Brochures.
Different books on mutual funds and insurance.
Internal circulatory documents of the company.
Website of the company.

METHODOLOGY:

‘Methodology refers to a set of methods and principles used to perform a particular

activity’.

Here, an analytical study is done. i.e., analysis is being done on the different unit
linked insurance plans of the company by studying its various NAV schemes. Here,
the main aim of the research is to analyze the NAV schemes of the company for the
past three years (i.e.,2006, 2007& 2008) on a quarterly basis and hence, study the
factors which exert a strong influence on the changes in NAV.

Primary and Secondary data gathering methods are used for the purpose of the
research.

TOOLS FOR DATA:

The analysis is done with the help of statistical tools, tables and graphs like Bar
Diagrams and Pie Charts.

LIMITATIONS OF THE STUDY:

Findings of the study are only confined to HDFC STANDARD Life Insurance
Company Ltd.
 The analysis and interpretation part of the study is based only on the internal
reports of the Company.

The study is limited to the extent of available data only.

CHAPTER SCHEME:

1. INTRODUCTION

Life Insurance: meaning, origin, history, need, principles, role in economic

development & social security, life insurance and other investments, purpose,
risks involved, strengths & weaknesses.

Unit Linked Insurance Plans: meaning, key features, objective of investing in

ULIPs, Insurance sector reforms, listing of private Life Insurance Companies in
India.

Mutual Funds: meaning, diversification, components, selection of a Mutual

Fund, types of Mutual Fund schemes, risk return, meaning of Net Asset Value or
NAV, pros & cons of investing in Mutual Funds, regulating authorities of Mutual
Funds.

2. INDUSTRY PROFILE

3. COMPANY PROFILE

4. RESEARCH DESIGN

Introduction, Statement of the problem, Title of the study, Scope of the study,
Objectives of the study, Operational definitions of Insurance, Mutual Fund & Net
Asset Value or NAV, Sources of data, Methodology, Tools for data, Limitations of
the Study.
5. ANALYSIS & INTERPRETATION

The data collected for the past three (3) years has been tabulated on a quarterly basis
and an analysis has been drawn based on the various Net Asset Values of the different
Investment Funds with respect to the available Units Linked Insurance Plans of the
company. Also, a brief description of the factors influencing the changes in NAV is
given at the end of this part.

6. FINDINGS

This chapter consists of the summary of findings.

7. SUGGESTIONS

This chapter consists of the suggestions that have been made for the improvement of
overall performance of the company.

8. CONCLUSION

This chapter of the study where a conclusion has been drawn based on the findings of
this report.

9. BIBLIOGRAPHY

10. ANNEXURE