ulip plans and pension plans of bajaj allinz life insurance

7/30/2019 ulip plans and pension plans of bajaj allinz life insurance

1/92

ASUMMER TRAINING REPORT

ON

COMPARITIVE STUDY OFCONVENTIONAL PENSION PLAN AND

UNIT LINKED PENSIONPLANS (ULPP s)

Kurukshetra University, Kurukshetra in the Partial Fulfillment forthe Degree of Master in Business Administration

(SESSION 2011-13)- MBA

Under Supervision of : Submitted By:Mr. GAGNISH DUGGAL NISHA SHARMABRANCH MANAGER UNI. ROLL

KURUKSHETRA INSTITUTE OF TECHNOLOGYAND MANAGEMENT

(KURUKSHETRA UNIVERSITY, KURUKSHETRA)


2/92

DECLARATION

I Nisha Sharma Roll No. 2911942 MBA (3 rd Semester) of the

Kurukshetra Institute of Technology and Management , Kurukshetra

hereby declare that the Summer Training Report entitled Comparitive

Study of Conventional Pension Plan And Unit Link Pension Plan is an

original work and the same has not been submitted to any other Institute for

the award of any other degree.

A seminar presentation of the Training Report was made on and the

suggestions as approved by the faculty were duly incorporated.

NISHA SHARMA

MBA- 3 rd sem.

Roll No. 2911942


3/92

ACKNOWLEDGEMENT

With a great sense of gratitude and indebtedness, I am very much thankful to Mr.

RANJEET VERMA head of the department of our institute for allowing me to do this

project.

I specially thank to Mr.Pawan Dhankhar for their help to complete my project

successfully.

I would also like to thank Mr.Gagnish Duggal my summer training guide for making us

understand how to apply theoretical knowledge to real life situations. He trained us with the

functioning of life insurance business. His teaching, support and guidance were of immense

importance in completion of my summer training project.

Finally, I wish to express my thanks from core of my heart to my parents, and my

friends for their help and co-operation for conducting this study.

NISHA SHARMA

2911942

MBA


4/92

INDEX

Topic

Executive summary Introduction

Insurance in India

Introduction of BAJAJ ALLIANZ

Statement of objective

Research Methodology

Introduction of the subject

Analysis & Interpretation

Findings & Suggestions

Annexure

9.1 Questionnaire

9.2 Bibliography


5/92

EXECUTIVE SUMMARY

This project has been undertaken with the purpose to differentiate

between conventional pension plan and unit linked pension plan in such a

way that potential individual to earn regular income in their golden years.

Planning for retirement is an important exercise for any individual.

For it is this exercise, which can help the individual spend his golden years

in peace and comfort.

A retirement plan from a life insurance company helps an individual

insure his life for a specified amount. At the same time, it helps him to

accumulate a corpous, which he receives at the time of retirement.

There are two types of pension plan.

Conventional pension plan

Unit linked pension plan

While a conventional pension plan invest a major portion of the

premium money in bonds and government securities that gives less return.

With a personal pension plan, individual have to pay a regular amount

usually every month or a lump sum to the pension provider who will invest

it on your behalf and on the vesting date, full maturity amount received by

the individual. Entire maturity amount treated as tax free in the hands of

receiver. Whereas unit linked pension plan can play an important role in the

retirement planning exercise. Unit linked pension plan invested in units of

the investment funds of your choice, based on the prevailing unit price.

There are various fund choices in unit linked pension plans like growth

funds, equity managed fund which gives higher return as compare to


6/92

conventional plan. On vesting date, the individual can withdraw only up to

1/3 rd of the maturity amount and remaining 2/3 rd amount has to be invested

in annuity. In unit linked pension plan up to 1/3 rd of the maturity amount, if

withdrawn, is treated as tax-free. Pension received on the remaining 2/3 rd

amount is taxed as per the individual tax slab.

Conclusion:

After the comprehensive study we can conclude that unit linked

pension plan is a better plan that helps individuals plan effectively for their

retirement.

The primary aspect which differ conventional pension plan with unit

linked pension plan is that conventional plan invest a major portion of their

money in government securities, bonds and money market instruments

whereas unit linked invest funds of your choices that gives better returns as

compare to conventional pension plans.

On maturity unit linked pension plan provides a regular source of

income by way of annuity

There are various options available for individual on unit linked

pension plan.

Lifetime annuity without return of purchase price. Annuity for life with the return of purchase price.

Lifetime annuity guaranteed for a certain no. Of years. Joint life/last survivor annuity.


7/92

-


8/92


9/92

I NSURANCE SECTOR IN I NDI A

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 two centuries.

A BRIEF HISTORY OF THE INSURANCE SECTOR

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:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate

the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to

collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act withthe objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers 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.


10/92

INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee headed by former Finance Secretary and RBI

Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and

recommend its future direction.

The Malhotra committee was set up with the objective of complementing the reforms

initiated in the financial sector.

The reforms were aimed at creating a more efficient and competitive financial

system suitable for the requirements of the economy keeping in mind the structural

changes currently underway and recognising that insurance is an important part of theoverall financial system where it was necessary to address the need for similar

reforms

In 1994, the committee submitted the report and some of the key

recommendations included:

I) STRUCTURE

Government stake in the insurance Companies to be brought down to 50% Government should take over the holdings of GIC and its subsidiaries so that

these subsidiaries can act as independent corporations.

All the insurance companies should be given greater freedom to operate

II) COMPETITION

Private Companies with a minimum paid up capital of Rs.1bn should be

allowed to enter the industry. No Company should deal in both Life and General Insurance through a single

entity.

Foreign companies may be allowed to enter the industry in collaboration with

the domestic companies.


11/92

Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in

III) REGULATORY BODY

The Insurance Act should be changed An Insurance Regulatory body should be set up Controller of Insurance (Currently a part from the Finance Ministry) should be

made independent

IV) INVESTMENTS

Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%

GIC and its subsidiaries are not to hold more than 5% in any company (There

current holdings to be brought down to this level over a period of time)

V) CUSTOMER SERVICE

LIC should pay interest on delays in payments beyond 30 days Insurance companies must be encouraged to set up unit linked pension plans Computerisation of operations and updating of technology to be carried out in the

Insurance industry

The committee emphasized that in order to improve the customer services and

increase the coverage of the insurance industry should be opened up to competition. Butat the same time, the committee felt the need to exercise caution as any failure on the part

of new players could ruin the public confidence in the industry.


12/92

Hence, it was decided to allow competition in a limited way by stipulating the

minimum capital requirement of Rs.100 crores. The committee felt the need to provide

greater autonomy to insurance companies in order to improve their performance and

enable them to act as independent companies with economic motives. For this purpose, it

had proposed setting up an independent regulatory body.

THE I NSURANCE REGUL ATORY AND DEVELOPMEN T AUTHORI TY (I RDA)

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill

in Parliament in December 1999.

The IRDA since its incorporation as a statutory body in April 2000 hasfastidiously stuck to its schedule of framing regulations and registering the private

sector insurance companies.

The other decisions taken simultaneously to provide the supporting systems to the

insurance sector and in particular the life insurance companies was the launch of

the IRDA s online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured that

the insurance companies would have a trained workforce of insurance agents in

place to sell their products, which are expected to be introduced by early next

year.

Since being set up as an independent statutory body the IRDA has put in a

framework of globally compatible regulations. In the private sector 12 life

insurance and 6 general insurance companies have been registered.

I NSURANCE COM PANI ES I N I NDI A

AVIVA BAJAJ ALLIANZ BIRLA SUN LIFE HDFC STANDARD LIFE


13/92

ICICI PRU ING VYSYA LIFE INSURANCE CORPORATION

MAX LIFE INSURANCE METLIFE INDIA OM KOTAK MAHINDRA RELIANCE LIFE INSURANCE SBI LIFE INSURANCE


14/92

CHAPTER-1

Introduction of BAJAJ ALLIANZ Vision of BAJAJ ALLIANZ Values of BAJAJ ALLIANZ


15/92


16/92

Introduction To The Company

About Bajaj Group

Bajaj Auto Ltd, the flagship company of the Rs. 8000 crore Bajaj group is the largest

manufacturer of two-wheelers and three-wheelers in India and one of the largest in the

world.

A household name in India, bajaj auto has a strong brand image & brand loyalty

synonymous with quality & customer focus.

A strong Indian brand- hamara bajaj

One of the largest 2 & 3 wheeler manufacturer in the world

21 million vehicles on the roads across the globe

Managing funds of over rs 4000 cr.

Bajaj auto finance one of the largest auto finance cos. In India

Rs. 4,744 cr. Turnover & profits of 538 cr. In 2002-03

It has joined hands with allianz to provide the Indian consumers with a distinct

option in terms of life insurance products.

As a promoter of bajaj allianz life insurance co. Ltd., bajaj auto has the following to offer

Financial strength and stability to support the insurance business.

A strong brand-equity.

A good market reputation as a world class organization.

An extensive distribution network.

Adequate experience of running a large organization.

About allianz

Allianz group is one of the world's leading insurers and financial services

providers.


17/92

Founded in 1890 in Berlin, allianz is now present in over 70 countries with almost

174,000 employees. At the top of the international group is the holding company, allianz

with its head office in Munich.

Allianz group provides its more than 60 million customers worldwide with a

comprehensive range of services in the areas of

Property and casualty insurance,

Life and health insurance,

Asset management and banking.

Allianz ag- a global financial powerhouse

Worldwide 2nd by gross written premiums - Rs.4,46,654 cr.

3rd largest assets under management & largest amongst insurance cos. a sum of rs.51,96,959 cr.

12th largest corporation in the world

49.8 % of global business from life insurance

Established in 1890, 110 yrs of insurance expertise

70 countries, 173,750 employees worldwide

About bajaj allianz life insurance ltd.

Bajaj allianz life insurance company has developed insurance solutions that cater

to every segment and age-income profiles. For companies it provides comprehensive

'employee benefit solutions' (group term life, Edli, gratuity, superannuation, key man

insurance and more); for the individual invest gain (a unique life insurance plan where

sustenance of income is combined in the same plan that also pays a lump sum), cash gain

(money back), child gain (children's plan), risk care (pure term), lifetime care (whole

life), term care (term with return of premium), swarna vishranti (retirement plan),

protector (mortgage term insurance plan), unit gain (unit linked plan), unit gain single

premium, unit gain plus, unit gain plus sp, lifelong gain plan, unit gain single pension &

unit gain easy pension plans.


18/92

Bajaj allianz has launched a complete set of need-based products to cater to each

varied needs of the customer. Currently bajaj allianz has a product portfolio of 26

products and more need-based products are in the pipeline.

To Be The First Choice Insurer For Customers

To Be The Preferred Employer For Staff In The Insurance Industry.

To Be The Number One Insurer For Creating Shareholder Value

(1.1) portfolio of the company

At bajaj allianz customer delight is their guiding principles. Ensuring world-classsolution by offering customized product with transparent benefits supported by the best

technology is their business philosophy. According to Mr. Amar, Mr. Sinha. The

company has used innovative marketing as well as pricing strategies and their premium

chart would be much lower than the other player in the market. Company has launched

various products in the market with most competitive premium among all player


19/92

ORGANISATION STRUCTURE

Rahul bajajchairman

Madhur bajajVice chairman Rajiv bajaj

MD

Sanjeev bajajExecutive director

K SrinivasVice President (Human

S Ravikumar Vice President (Business

Kevin P D'saVice President (Finance)

N H HingoraniVice President

C P TripathiVice PresidentRakesh Sharma

CEO (International

R C MaheshwariCEO (CommercialVehicles

S Sridhar Ceo(2wh)Pardeep shrisvastava

Presedent(engiee) Abrahim josephVice present(r&d)

Ranjeet guptaVice

BOARD OFDIRECTOR
http://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kshrinivas#kshrinivashttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sravikumar#sravikumarhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kevin#kevinhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#cptripathi#cptripathihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sharma#sharmahttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#rcmaheshwari#rcmaheshwarihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sharma#sharmahttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#cptripathi#cptripathihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#nhhingorani#nhhingoranihttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kevin#kevinhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#sravikumar#sravikumarhttp://www.bajajauto.com/1024/aboutbajaj/profile.asp#kshrinivas#kshrinivas


20/92

What is risk?

It is a condition in which more than one outcome is possible. People take

decisions based on perceptions of risk, not necessarily on the actual risk. Risk is a state of

nature, where as uncertainty is a state of mind. This uncertainty arises from risk. If

something is certain not to occur or certain to occur, there is no risk. Most activities and

events in life, however involve risk we cannot be certain of their outcomes. Except for

some recreational activities, humans generally prefer less risk to more risk. Or we are risk

averse. Risk aversion causes us to undertake actions to minimize uncertainty. Insurance is

one of the most important tool to reduce uncertainty.

What are individual risks?

Individuals are exposed to Property, liability and personal losses. Personal loss

exposures arise from the possibilities of death, incapacity, illness or injury, retirement,

and unemployment. These losses are associated with families and businesses.

What is risk management?

Risk management is most often associated with attempts to manage those risksthat entail the possibility of economic harm. From a financial viewpoint, harm is a

reduction in the economic value of an individual. The economic value of an individual is

the value today of its expected future cash flows. This value today is derived by taking

the present [discounted] value of the difference between expected future inflows and

outflows. We discount future cash flows because money has time value; i.e., we prefer a

rupee today to the same rupee next year after all, if we invested the rupee today, we

[hopefully] would have more than a rupee next year. Thus the purpose of risk

management is to contribute to the maximization of the economic value of an individual

where value is defined as the discounted value of expected future cash flows. Risk

management contributes to economic value by reducing economic harm. The risk

management process follows the classical three-step approach to problem solving and

involves


21/92

Problem Specification Problem Analysis Problem Decision-making

Once exposures have been identified and measured, the various means of managing risk

should be considered and decisions should be made about the optimum strategy in light

of individual objectives. The two fundamental ways of dealing with these losses are

Risk control

Risk finance

Risk Control tools include avoidance, reduction and prevention of risk,

Risk Finance tools include risk retention, risk transfer, and risk sharing Risk

management decision has to be taken on the basis of evaluation of risk manag e

Why is risk to be managed?

This risk management is a revolutionary idea that defines the boundary between

modern times and the past. Because we are vulnerable to more risks than our ancestors

risk management is more important today than in the past. The physical and economic

security formerly provided by the tribe or extended family diminishes with

industrialization. Our income-dependent, wealth-acquiring lifestyles render us and our

families more vulnerable to environmental and societal changes over which we have no

control. Now more formalized means are required for mitigating the adverse

consequences of untimely death, unemployment, loss of health, old age, law suits and

destruction of our property.

Essence of risk management

The Essence of risk management lies in maximizing the areas where we have

some control over the outcome while minimizing the areas where we have absolutely no

control over the outcome.


22/92

Role of life insurance in risk management.

Life Insurance is a contingent claim contract on the pool s assets.

Life insurance is a contract for payment of a sum of money to the person assured

(or failing him/her, to the person entitled to receive the same) on the happening of

the event insured against

Life Insurance comes to the timely aid of the family in the unfortunate event of

the death or total permanent disability of the bread winner. By and large, life

insurance is civilization s partial sol ution to financial uncertainties caused by

untimely death.

Life Insurance substitutes certainty for uncertainty

Life Insurance involves activities and services that are intimately connected withall divisions of economics referred to. The outstanding and distinctive mission of

life insurance is risk -bearing and risk elimination in our economic affairs.

Life insurance is an attractive financial instrument in an individual s portfolio that

provides an assurance of security element alternatives in the light of cost benefit

analysis.

What is ULIP?Unit Linked Insurance Policies (ULIP) was first offered in the United States in

1976, (after being developed and sold successfully in The Netherlands, England, and

Canada) in the name of Variable Life Insurance. Basically it was a type of whole life

insurance whose values may vary directly with the performance of a set of earmarked

investments. Now many markets are offering these ULIPs in children plans (ICICI Smart

Kid policy) endowment and retirement plans (LIC S Forty Plus policy) also. These plans

give an option to the investor to choose between three fund options debt, equity, and

balanced. In these products, premiums can be paid quarterly, half yearly or yearly. Out of

the premium amounts, deductions will be made towards

Initial administrative charges

Investment management charges (there will be an extra charge if the policyholder

utilizes the switch over (from equity to debt or debt to balance) option


23/92

Annual administration charges

Risk cover

and the balance will be invested in a selected fund (debt or equity or balance).

Insurance Companies charge anywhere between 20 -35 percent as upfront charges

for their unit-linked plans. So, every time you make your premium payment, only a

part of it is actually invested in the fund of your choice.

n case of death during the premium paying term or the term of the policy, the sum

assured (Rs.1 Lakh in example) or value of policy fund, whichever is higher, is paid to

the beneficiaries. In case of survival up to maturity, the value of the fund is paid out. The

returns on that day (maturity or death) on the plan depend upon the performance of the market, be it equity or debt . So if the fund value falls below amount invested on

that day, the policyholder will receive a lesser amount. Hence one can see that the risk

here is transferred to the policyholder as nothing is guaranteed.

Unit-linked plans are essentially similar to mutual fund products wherein the

premium is invested in various funds in keeping with policyholders risk appetite .

However, the difference in a mutual fund investment is that the money is virtually

at call by the customer. In case of unit-linked insurance plans, it is impossible to

predict whether the market will be in an upswing on the day of the policyholder s

death or on maturity. The Net Asset Value (NAV) will reflect the underlying value of

assets, which in turn is dependent on the movement of the Sensex.

An Evaluation of ULIP Policies

Market-linked returns have become the norm today. This is the reason whyinsurance companies launch unit-linked plans in different avatars. Important segments of

the consumer market no longer consider life insurers as competing only with other life

insurers. In an effort to gain market power and thereby to protect or enhance profitability

the issue of product development and innovation, including pricing and marketing


24/92

innovation, is all the more important with the continued convergence among financial

service competitors.

If we observe the trend of ULIPS in insurance market, after the insurance sector is

opened, private players, came up with aggressive marketing strategies to establish their

presence. And the public sector has, in its turn, redrawn its priorities. It is quietly being

carried out at LIC. Till last year, we used to do our budgeting for individual plans. But

from the beginning of this year we are doing it at the cumulative level, says Ashok Shah,

Zonal Manager (North Zone), LIC in a Ficc-organized insurance seminar in October last

year. This new exercise has helped us in prioritizing the sales of individual plans

according to the market needs, he adds. Accordingly, as already discussed the Buoyant

growth in these plans may be due to Risin g stock market Enticed by the Bull Run, policyholders are putting in more

than the actual yearly premium as they top up the investment portion of their risk

policies.

Falling interest rates ( The last five years saw interest rates fall dramatically by 400

basis points).

Wider pro duct offerings by the insurers (ex. Endowment plan, pension plans etc).

Benefits:

A Unit linked plan providing an opportunity for the discerning investor to benefit

from the returns available in the Capital Market without going for direct

investment in the capital market

Unlike traditional products where investment details and various charges are kept

under wraps, ULIPs project all these information upfront.

But when we think the risk management part of ULIP Policies the following

questions will arise.

Linking the market to the death benefit one s family gets:

Linking death benefits to the market returns may end up in ambiguity which is in

the negation of Life insurance purpose. The purpose of Life insurance is to substitute

certainty for uncertainty. For Eg. If an individual aged 35, middle class employee who


25/92

purchased ULIP Policy were to die when the index is at 5,000, his family stands to get

Rs.5 lakh. But if were to die when the index is at 8,000, his family will get Rs.8 lakhs.

A very sharp rise in the sensex is not a common phenomenon and since 1992, a rise of

more than 250 points has happened only 13 times. A list prepared by Economic Times

based on the difference between the current close and the previous close reveals that out

of these 13 times rise in sensex, seven rises in the sensex of more than 250 points had

taken place in 1992 during the Harshad Mehata bull run (that had taken the Sensex above

the 4000 point mark for the first time in history). Hence in the long run, returns in the

stock market are likely to settle in the range of five to six per cent. Even the traditional

insurance market offers conservative yearly return of 5-6 per cent year after year for long

years or for next 20 years.In this scenario the risks in ULIP Policies may be listed out like this.

The chances of dying in an index downturn

Is it possible to replace the economic value of an individual to their dependants

with these policies?

Is it appropriate for a 35 year old middle class man to bet his last penny on the

direction of the market?

Is it prudent to link the money an individual want to leave behind for family to the

whims and fancies of stock market mechanics?

What is the position of maturity value if the policy matures at the time of break

out of scams like Harshad Mehta and Ketan Parekh.

Is it appropriate to consider Insurance as a means to make big bucks?

The possibility of falling equity markets and the effect of it on future sales for

insurance companies.

What is the credibility of banks and insurance companies with their customers

when they receive low returns on maturity or death? Even if there is guaranteed Sum assured what about the cost of the product and

bearish trend in the stock market?


26/92


27/92

Key achievements:

Races past gross written premium of over rs. 1001 crore, with growth of over

357% over previous year s Gross written premium of rs. 219 crores

First year premium of rs 860 crore a 380% growth over last year s fiscal year

premium of rs 179 cr.

Rocketed to no. 2 position as against no 6 at the end of last financial year amongst

pvt. life insurance cos., with a clear lead of rs 240 crore

Fastest growing insurance company with 380% growth

Market share jumps almost 4 times from 0.95 % to 3.39 % amongst all life

insurance cos.

Increased its product portfolio from 7 to 19 simple and flexible products

Launched complete suite of employee benefit solutions (group products for

corporate)

The bajaj allianz difference Business strategy aligned to clients' needs and trends in Indian and global

economy / industry

Internationally experienced core team, majority with local background

Fast, decentralized decision making

Long-term commitment to market and clients

Trust

At bajaj allianz, we realize that you seek an insurer whom you can trust. Bajaj

auto limited is trusted name for over 55 years in the Indian market and allianz ag has over

110 years of global experience in financial services. Together we are committed to

provide you with time tested and trusted financial solutions that provide you all the

security you need for your investments. And more..

Underwriting philosophy

Our underwriting philosophy focuses on :

Understanding the customer's needs


28/92

Underwriting what we understand

Meeting the customer's requirements

Ensuring optimal coverage at lowest cost

Claims philosophy

The bajaj allianz team follows a service that aims at taking the anxiety out of

claims processing. We pride ourselves on a friendly and open approach. Company

focused towards providing customer a hassle free and speedy claims processing.

Company s claims philosophy is to :

Be flexible and settle fast

Ensure no claim file to be seen by more than 3 people

Check processes regularly against the global allianz opex (operational excellence)

methodology sold over 1 million since inception.

Customer orientation

At bajaj allianz, our guiding principles are customer service and client

satisfaction. All our efforts are directed towards understanding the culture, social

environment and individual insurance requirements - so that we can cater to all your

varied needs.

Experienced and expert servicing team

A team of experienced people who understand Indian risks and are supported by

the necessary international expertise required to analyze and assess them drives us.

Service engineers located in every major city.

Superior technology

In order to ensure speedy and accurate processing of customer needs, we have

established world-class technology, with renowned insurance software, which networks

all our offices and intermediaries


29/92

Using the web, policies can be issued from any office across the country for retail

products.

Unique, user friendly software developed to make the process of issue of policies

and claims settlement simpler (e.g. online insurance of marine policy certificate).

Bajaj allianz unit gain plan

The thumb rule for buying insurance is that your insurance needs are minimal in

your early earning years, increase with added responsibilities (marriage, children, loans

etc.) And taper off by the time you retire. It is difficult to find a single insurance plan that

can take care of all your changing requirements in life additional protection, more

money to invest, sudden requirement of cash or a steady post-retirement income.With bajaj allianz unit gain, you can invest in one life insurance plan that can take

care of all your changing requirements throughout your life. This plan has been designed

to provide you with maximum flexibility, so that you do not have to worry about your

changing needs.

These are very good plan for those who want protection (especially) for their

family because happiness and security for our family is all that we want. However, the

uncertainties of life often worry you. Unfortunate events can make you are no longer

around. Life insurance can help ease many of those worries. It ensures that your loved

ones are adequately provided for and that their future is secure, no matter what the

uncertainty.

Bajaj allianz unit gain offers the unique option of combining the protection of life

insurance with the attractive prospects of investing in securities. You can choose the

investment funds you want to invest your money, providing you with an opportunity to

have a direct stake in the performance of the financial markets. You also benefit from

attractive tax advantages and can protect your loved ones against unfortunate events.

The bajaj allianz unit gain plan

The bajaj allianz unit gain comes with a host of features to allow you to have the

best of all worlds protection and investment with flexibility like never before. Some of

the key features of this plan are:


30/92

Guaranteed death benefit

Choice of 6 investment funds with flexible investment management: you can

change funds at any time.

Attractive investment alternative to fixed-interest securities Provision for full/partial withdrawals any time after three full years premiums are

paid.

Unmatched flexibility to match your changing needs.

How does the plan work?

The premiums paid are invested in a fund/funds of your choice (depending on the

allocation rate) & units are allocated depending on the price of units for the fund/funds.The value of your policy is the total value of units that you hold in the fund/funds. The

insurance cover charges are deducted through monthly cancellation of units. The fund

administration charge and fund management charge are priced in the unit value.

Minimum sum assured = 5 times the annual premium.

Maximum sum assured = y times the annual premium where y will be as per the

following table:

Age group 0 30 31 35 36 40 41 45 46 55 56 60

Y 125 105 75 55 30 20

Table no (1.1) (maximum sum assured)

Benefits and conditions What tax benefits are available for this plan? The plan offers tax benefits under

section 80c and article10(10d) at 1961 .

What additional feature does this plan offer you? You can avail of the accident

and disability benefit under this plan.

What are your entry conditions for lifeguard level term assurance? Your age at

entry should be between 18 years and 50 years. The minimum term is 5 years and

the maximum term is 25 years, which is subject to a maximum of 65 years of

age. The minimum premium for the product is rs. 10000 per annum.


31/92

Bajaj Allianz unit gain easy pension plan

With Bajaj allianz, you can take control of your future and ensure a retirement

you can look forward to. There are two packages to choose from:

Unit gain easy pension regular premium

Unit gain easy pension single premium

What are the benefits available?

The plan works in two parts - the deferment period and the annuity period. During

the deferment period, the plan builds up the funds required to purchase the

immediate annuity. The deferment period ends at the vesting date. You are free to

choose your age of retirement (vesting date) between 45 and 70 years. The

benefits on vesting date (the date you choose to retire)

The account value as on the vesting date will be used to purchase an immediate

annuity. The immediate annuity will be purchased at rates prevailing at that point

of time. Option to take lump sum: you have the option to take up to 1/3rd of the

account value on the vesting date as a lump sum. This amount would be tax free

in your hand, as per current tax laws. The balance amount will be used to purchase an immediate annuity.

Open market option:

`You have the option to purchase an immediate annuity from bajaj Allianz or

from any other company. If the immediate annuity is purchased from bajaj Allianz, the

amount available for purchase of the annuity will be marked up by 2%.

The minimum installment of annuity from bajaj allianz is rs. 1000/-. The annuity

frequency may be changed to make each installment more than the minimum

requirement. If it still below the minimum, the account value may be utilized to purchase

an immediate annuity from any other company in the open market as per your choice, or

paid in lump sum, if permissible, subject to the prevailing tax laws.

Annuity options:

You will be able to choose from all immediate annuity products offered by bajaj allianz


32/92

Life insurance at the vesting date. The annuity products currently available are:

Annuity for life

Annuity for life with 5, 10 or 15 years certain payout

Annuity for life with return of capital

You also have the open market option to purchase immediate annuity.

How does the bajaj allianz unit gain easy pension plan work?

The premiums paid are invested in a fund/funds of your choice (depending on the

allocation rate) & units are allocated depending on the price of units for the fund/ funds.

The value of your policy is the total value of units that you hold in the fund/ funds. The

administration charges are deducted through cancellation of units. The fund managementcharge is priced in the unit value.

Value of units: the unit price of each fund will be the unit value calculated as per the

following formula.

Important details of the bajaj allianz unit gain easy pension plan

Minimum Maximum

Age at entry 18 65

Deferment period 5 40

Age at vesting 45 70

Table no (1.2) (details of plan)

Payment mode

For your convenience, we have provided 4 premium payment modes that can be

single, yearly, half-yearly, and quarterly. We also offer a monthly premium payment

mode with salary deduction schemes. In addition, you also have the option to pay top-upsto increase your investments. The minimum single premium is rs. 10,000/-. For regular

premium, the minimum premium is rs. 10,000/- for the annual mode, rs. 5,000/- for half

yearly, rs. 5,000/- for quarterly, and rs. 1,000/- for the monthly mode. The minimum top-

up premium is rs. 5,000/-.


33/92

Full withdrawals

Unit gain easy pension offers you the flexibility of full withdrawals by

surrendering units. For single premium plan full withdrawals are allowed anytime after

the payment of the single premium. For regular premium plan full withdrawal is allowed

after 3 full years regular premiums (including top ups) are paid. The surrenders are paid

out at the value of units, and there is no surrender penalty on full withdrawals after 3 full

years regular premiums (including top ups) are paid.

Free look period

Within 15 days from the date of receipt of the policy, you have the option to

review the terms and conditions and return the policy, if you disagree to any of the terms

& conditions, stating the reasons for your objections. You will be entitled to a refund,

which will be the lower of:

The premium paid less the insurer s costs of issuing the policy and the policy

documents (including but not limited to stamp fee charges), or

The value of units, less the insurer s costs of issuing the policy and the policy

documents (including but not limited to stamp fee charges).

Termination of the policy The policy will terminate on occurrence of any of the following:

The units in the policy are fully surrendered

The account value becomes rs 100/- or less

The account value is not sufficient to support deduction of units for a period of

three months.


34/92

Tax benefits

Death benefit is tax-free. The 1/3rd lump sum that can be taken on the vesting

date is Also tax-free. Premiums paid are eligible for tax relief under sec. 80 cc (1) or sec

88 of it act. In case of change in any tax laws relevant to the policyholder or the fund

performance, the same will be applied as per regulations prevailing at that point of time

Unit gain plus gold:

With Bajaj Allianz unit gain plus gold we have formulated a unique combination

of protection and prospectus of attractive returns with investment in various mix of

securities to make a perfect plan to last you a lifetime of prosperity and happiness.

Key features of this plan are:

1. Guaranteed life cover, with a flexibility to choose insurance cover according to

your changing Needs.

2. Presenting a unique investment Asset Allocation Fund where in you have not to

worry to switch funds in case market condition charges rather experienced fund

managers will monitor the mix of Assets in the fund and will manage the mix in

such situations to maximize returns.

3. If you want to manage the mix of assets for your policy on your own, you have

the choice of 5 other investments funds with complete flexibility to switch money

from one fund to other to manage your investment better

4. Flexibility of partial withdraw at any time after three years from commencement

of the policy provided three full years premium are paid.

5. A host of optional additional rider benefits which include assurance to your

family with family income benefit and waiver of premium benefits.

How does the plan work

Premiums paid by customers, net of premium allocation charge, are invested in

funds of your Choice and units are allocated depending on the unit price of the fund. The

value of your policy is the total value of units that you hold in the fund . The insurance


35/92

cover charges, policy administration charges and the additional rider benefits charges are

deducted through monthly cancellation of units fund management charges is priced in the

unit value.

BENEFITS

Death benefit:

On death occurring before the age of 7 years: the death benefit will be the fund

value as the date of receipt of intimation of date at the office.

On death after the age of 7 years and before the age of 60 years: the benefits

payable would be the sum assured less value of partial withdraw made in the last 24

months prior to the date of death or the fund value as on the date of receipt of intimation

of death at the company offices whichever is higher. The death benefit payable would be

calculated separately for regular premiums and top up premiums.

Maturity benefits:

On maturity the fund value in respect of regular premiums and top up premiums

will be paid

Surrender benefits:

The surrender value of the policy will be equal to the fund value less surrender

charges, if any. Any time after three years from the date of commencement of the policy,

provided due premiums for first three policy years have been paid, the policyholders will

have the option to avail of surrender benefits by complete surrender of units.

Additional rider benefits:

The following additional rider benefits in the form of rider can be availed at the

option of the policyholder.

UL Accidental death benefits rider UL Accidental permanent total/partial disability benefit rider. UL Critical illness benefits rider.


36/92

UL Hospital cash benefits rider

Free lock period:

Within 15 days from the date of receipt of the policy ,you have the option to

review the terms and conditions and return the policy, if you disagree to any term &

conditions, stating the reason for your objections. You will be entitled to a refund of the

premium paid, subject only to a deductions of a proportionate risk premium for the period

on cover and the expenses incurred on medical examination and stamp duty charges. The

return paid to you will also be reduced/increased by the amount of any reduction/increase

in the fund value.

Day of grace :

A grace period of 30 days for the yearly, half yearly and quarterly modes and of

15 days for the monthly modes is allowed under the policy, your policy remains in force

for all insurance covers, if any even if the due premiums are not paid during this period.

Revival of the policy: It is possible to revive a policy that has lapsed due to non-payment of premiums

within 2 years from such date of lapse. You have to give a written application to the

company to receive the policy with all due unpaid regular premiums. The revival will

effected subject to underwriting.

Tex benefits :

Premium paid and benefits received will be eligible for tax benefits as per

application tax laws.

Important details of Bajaj allianz unit gain plus gold:

Minimum age at entry 0 years risk commences at age 7. Minimum maturity age 18 years


37/92

Maximum maturity age 70 years Additional rider benefits 65 years for all riders expect UL wop.

Century plus

Bajaj Allianz Century plus offers, you a limited premium payment term option

and a unique combination of protection and prospectus with attractive returns. With

98% allocation in first 2 years and 100% thereafter, we ensure that your investment

income gets accelerated and you reap benefits from a plan that delivers prosperity and

happiness to you.

Features of the plan are Guaranteed life cover of sum assured plus fund value.

Take maximum advantage of booming markets today and get maximum

allocation on your funds from the 1 st year onwards.

Loyalty units to enhance your fund value every year from the sixth policy year.

If you want to manage the mix of assets for your policy on your own, you have a

choice of 5 investment funds to invest it.

Flexibility to partial withdraw at any time after 3 year from commencement of the policy provided 3 full premiums are paid.

At maturity, you can take your fund value at maturity date or periodic instalment

spread over a maximum period of 5.

A host of optional additional rider benefits which includes assurance to your

family with accidental death benefit and accidental permanent total/partial

disability benefit.


38/92


39/92


40/92

WHY?

Integrity is the bedrock on which the company and the expectations of the

customers and employees are built.

Integrity establishes the credibility of the person, define the character and

empowers one to do justice to the job.

Enables building confidence and trust, achieving transparency and laying a

strong foundation for a binding relationship.

Guiding principle for all walks of life .

INNOVATIONS

WHAT IS IT? Building a storehouse of treasures through experiences.

Looking at every product and process through fresh eyes everyday

WHY?

To exceed customer expectation and maximize customer retention.

To achieve competitive advantage.

To promote a growth and upgrade standards in the industry.

To foster creativity amongst employees and partners

To open a world of new possibilities.

CUSTOMER CENTRIC

WHAT IS IT?


41/92

Understanding his expectation by keeping him as the center point

Listen actively.

Understand customer need and deliver solutions.

Customer interest always supreme

WHY?

Reinforce brand loyalty by complete transparency.

Customer is the source of revenue for the company.

Customer is the reason for our existence.

Ensure that customer choose our company to do business with. Will contribute to customer retention

Customer goodwill alone can bring more business and more customers .


42/92

PEOPLE CARE

WHAT IS IT? Genuinely understanding the people we work with.

Guiding their development through training and support.

Helping them develop requisite skills to reach their true potential.

Know them on a personal front.

Create an environment of trust and openness.

WHY?

People are the most valuable asset of the company.

Motivate to individual to give his/ her best.

Job satisfaction.

TEAM WORK

WHAT IS IT?

Whole team makes the ownership of the deliverable.

Consult all involved, understand and arrive at a common objective.

Co-operate and support across departmental boundaries.

Identify strength and weaknesses accordingly allocate responsibility to

achieve common objective.

WHY?

Together every one achieves more.

It adds joy at work place.

Teamwork generates synergy and provides a focused approach.


43/92

CHAPTER-2 .

STATEMENT

OF

OBJECTIVE


44/92

STATEM ENT OF OBJECTI VE

The objective of study is the comparative analysis of ULPPS with traditional

pension plans in terms of returns, risk coverage, growth and liquidity; various factors that

are to be studied like income level and stock market, performance, age; risk bearing

capacity

The objective of this report is to find out the difference between Conventional Pension

Plans and Unit linked pension plans by comparing both of them. The main aim of this

research is to find out the truth which is hidden and which has not yet been discovered.

The truths that Unit linked pension plans are better than Conventional pension plan.

The main purpose of this study is to gain familiarity with a phenomenon and toachieve new insights to Unit linked pension plans against Conventional pension plan.

No doubt, after watching the ups and downs of the stock market take the idea of a

traditional pension might sound pretty good but now there is a new concept of Pension

plan i.e. Unit linked pension plan, they are the source of getting higher tax free returns

and are beneficial for long term investments. On the other hand they also provide

financial back up at the event of the death of policy holder.

CONSTRUCT

Comparative analysis of ULPPS and traditional Pension Plans .

INDEPENDENT VARIABLES

Stock market situations,income levels,age,risk bearing capacity,level of inflation in

economy.

Dependent VariablesDemand and sale of (ULPPS) performance of the company,


45/92

CHAPTER-3

RESEARCH

METHODOLOGY

So we should consider the following steps in research methodology:

Meaning of research Problem statement Research design Sample design Data collection Analysis and Interpretation of data


46/92


47/92

Meaning of Research

Research is defined as a scientific & systematic search for pertinent information

on a specific topic. Research is an art of scientif ic research.

PROBLEM STATEMENT

The research problems, in general, refers to some difficulty with a researcher

experience in the contest of either a particular or a theoretical situation and want to obtain

a salutation for same. The present project has been undertaken to do the Financial

Analysis at UCP.

RESEARCH DESIGN

A research is the arrangement of the conditions for the collections and analysis of

the data in a manner that aims to combine relevance to the research purpose with

economy in procedure. In fact, the research is design is the conceptual structure within

which research is conducted; it constitutes the blue print of the collection, measurementand analysis of the data. As search the design includes an outline of what the researcher

will do from writing the hypothesis and its operational implication to the final analysis of

data. 5


48/92

Research Design can be categorized as:

The present study is exploratory in nature, as it seeks to discover ideas and insight

to brig out new relationship. Research design is flexible enough to provide opportunity

for considering different aspects of problem under study. It helps in bringing into focus

some inherent weakness in enterprise regarding which in depth study can be conducted

by management. 5

SAMPLING DESIGN:

A sample design is a definite plan for obtaining a sample from the sampling

frame. It refers to the technique or the procedure that is adopted in selecting the sampling

units from which inferences about the population is drawn. Sampling design is

determined before the collection of the data.

TYPES OF RESEARCHDESIGN

EXPLORATORYRESEARCHDESIGN

DESCRIPTIVE&

DIAGNOSTICRESEARCH DESIGN

EXPERIMENTALRESEARCHDESIGN


49/92

Several decisions have to be taken in context to the decision about the appropriate sample

selection so that accurate data is obtained and efficient results are drawn.

DATA COLLECTION

After the research problem has been identified and selected the next step is to

gather the requisite data. While deciding about the method of data collection to be used

for the researcher should keep in mind two types of data VIZ. primary and secondary

TYPES OF DATA

PRIMARYDATA

SECONDRYDATA


50/92

PRIMARY DATA:

The primary data are those, which are collected afresh and for the first time, and

thus happened to be original in character. We can obtain primary data either through

observation or through direct communication with respondent in one form or another or

through personal interview. 3

SECONDARY DATA:-

The secondary data on the other hand, are those which have already been collected

by someone else and which have already been passed through the statistical processes.

When the researcher utilizes secondary data then he has to look into various sources from

where he can obtain them. For example Books, magazines, newspapers, Internet,

publications and reports etc. 3

In the present study I have made use of secondary data collected from their websiteand from their records.

METHODS OF PRIMARY DATA

OBSERVATIONMETHOD

QUESTIONNAIRE METHOD

INTERVIEWMETHOD

SCHEDULEMETHOD


51/92

RESEARCH M ETH ODOL OGY

A careful investigation or inquiry especially through search for new facts in any

branch of knowledge.

Research Methodology is a way to systematically solve the problem. It may

be understood as a science of studying how research is done scientifically.

Basic purpose of each and every research is to discover answers to questions

through the applications of procedures.

The process of research includes research design, which includes a conceptual

structure within which research could be conducted.

The function of research design is to provide for the collection of relevant evidence with

minimal expenditure of effort, time and money.In this report the research design applied is DESCRIPTIVE

It includes primary survey and the related facts and findings.

It describes the current state of the market and the preferences of Unit linked

pension plan over conventional pension plan.

It describes the relationship between conventional pension plan and Unit linked pension

plan along with the description as to how they are competing in the market.

RESEARCH M ETH ODOL OGY

Research Design : Descriptive

Population: General Public

Data: PRIMARY DATA through doing a survey to find out the best among two.

SECONDARY DATA by collecting useful information from journals,

Newspapers and web sites.

Sample size: 150 PEOPLE


52/92

CHAPTER-4

I NTRODUCTI ON OF CONVENTIONAL

PENSI ON PL ANS

AND

UNI T LI NKED PENSI ON

PLANS


53/92

Introduction to Pension Plans

Pension plans offered by life insurance companies help individuals plan

effectively for their retirement. For, it is pension plans that provide individuals with a

regular income in their golden years.

However, since the tax benefit on such plans is limited to Rs 10,000, investments

in such plans have been somewhat subdued. Apart from the tax benefits, it is important

that individuals evaluate pension plans from a retirement planning perspective.

Life insurance policies are valuable assets to mitigate the financial risk of untimely death.As such, every individual facing such a financial risk who can afford to pay for such a

protection must seriously consider purchasing some life insurance. In the current Indian

market, this choice is difficult on three counts:

Inherent complexity due to uncertainty and long time horizons.

The need to compare a plethora of different types of products from competing

insurance companies.

Most insurance policies bundle pure insurance with savings to offer composite

products.

A pension is a steady income given to a person (usually after retirement) .

Pensions are typically payments made in the form of a guaranteed annuity to a retired or

disabled employee. Some retirement plan (or superannuation) designs accumulate a cash

balance (through a variety of mechanisms) that a retiree can draw upon at retirement,

rather than promising annuity payments. These are often also called pensions. In either

case, a pension created by an employer for the benefit of an employee is commonly

referred to as an occupational or employer pension. Labor unions, the government, or

other organizations may also fund pensions.
http://en.wikipedia.org/wiki/Retirementhttp://en.wikipedia.org/wiki/Annuity_(financial_contracts)http://en.wikipedia.org/wiki/Retirement_planhttp://en.wikipedia.org/wiki/Retirement_planhttp://en.wikipedia.org/wiki/Annuity_(financial_contracts)http://en.wikipedia.org/wiki/Retirement


54/92

What are Pension Plans?

Simply put, pension plans (also referred to as retirement plans) are offered by

insurance companies to help individuals build a retirement corpus. On maturity this

corpus is invested for generating a regular income stream, which is referred to as pension

or annuity. Pension plans are distinct from life insurance plans, which are taken to cover

risk in case of an unfortunate event.

Pension Plan Details

Age (Yrs)

Sum

assured

(Rs) Tenure (Yrs)

Annual premium

(Rs)

Maturity

amt (@6%)

(Rs)

Maturity amt

(@10%) (Rs)

30 500,000 30 13,500 960,000 1,590,500

Actual rate of return (%) 5.10 7.80

Annuity amt (Rs) 71,500 118,500

The example given above is illustrative. It will differ across insurance companies.

Let us take an individual aged 30 years who wants to buy a pension plan with a sum

assured of Rs 500,000 for a 30-year tenure. The premium to be paid for the same is

approximately Rs 13,500. In case of an eventuality, the beneficiary will stand to get the

sum assured of Rs 500,000 plus the bonuses/additions, if any.

In case the individual survives the tenure, he will stand to benefit to the tune of

the maturity amount as indicated in the table below. Assuming that he buys an annuity for

life, the annual amount he would get as pension would be approximately Rs 71,500 (onRs 960,000) or Rs 118,500 (on Rs 15,90,500). The option of receiving

monthly/quarterly/half-yearly pension is available with most life insurance companies.

However, the returns shown at 6% and 10% are not calculated on the premium

paid. They are calculated after deducting expenses from the premium. The actual


55/92

compounded annual growth rate (CAGR) on the premium works out to approximately

5.10% (for the 6% figure) or 7.80% (for the 10% figure).

Conventional Pension Plan

Conventional pensions may be suitable if you're employed and not in a company

pension scheme, or as an addition to a company pension. You may also wish to set up a

personal pension if you are self-employed, or if you are not working but can afford to put

aside money for retirement.

How Personal Pension work?

The policy is basically a savings contract, which is designed to provide an income

for life from retirement. It does this by providing a notional lump sum on retirement,

comprising of sum assured plus any attaching bonus. Subject to the prevailing

regulations, part of this lump sum can be taken in form of cash and the rest converted to

an annuity at the market rate. Alternatively, if it is permitted by the prevailing

regulations, the notional lump sum can be used to buy an annuity with any of the

insurance company who will accept such business.

On earlier death after the first year, for Regular Premium policies all premiums paid to date will be returned with interest at 8% per annum, subject to a maximum of the

sum assured plus bonuses declared to date. For Single premiums, it is sum assured plus

bonuses declared to date. Normally, we will declare a reversionary bonus once a year.

Once added, it cannot be reduced.

Reversionary bonus will take the form of a simple addition to your policy benefits. In

addition, on maturity, a terminal bonus might be payable. On death, an interim bonus,

reflecting the period since the last addition of reversionary bonus, might also be payable.


56/92

Where Conventional pension plan invest?

Conventional pension plans invest a major portion of the premium monies in

bonds and government securities (G-Secs). That is why the returns are on the lower side.

And if one were to factor into the equation an annual inflation figure of approximately

5%-6% per annum, then the real return figures look even more unimpressive.

Riders available in conventional plan:

Critical Illness Rider: In the event of the Life Assured contracting a critical

illness, an additional payment equivalent to the Sum Assured under the rider

would be made. This cover is available up to a maximum of 65 years of age.

Claims for critical illnesses are not admitted for the first 6 months of the policy.

This benefit is available on the basis of the life assured surviving 28 days from

such diagnosis. Accident and Disability Benefit Rider : In case of accidental death, the nominee gets an

additional Sum Assured under this rider.

(a) In case of accidental death while travelling by mass surface transport, the

nominee will get twice the Sum Assured under the rider.

(b) In the event of total and permanent disability due to an accident, which impairs

one's capacity to earn, 10% of the Sum Assured is paid every year for 10 years.

Term Cover - Additional Protection for your family: You have the option to

include a Term Cover in your policy, which will provide an additional life

insurance protection at a nominal cost. This also ensures that the pension availableto spouse is further supplemented.

Family Income Benefit: You can select the unique Family Income Benefit from

Bajaj Allianz that ensures total financial protection for your loved ones. In case of

death or accidental total permanent disability, a guaranteed monthly income of


57/92

1% of the sum assured (12% per annum) is paid till the vesting date or at least for

a period of 10 years, whichever is higher. Moreover, all future premiums are

waived. This unique regular income benefit can act as an important supplement to

the pension available to the spouse in case of death mode may be changed to

make each installment more than the minimum requirement. If it is still below the

minimum, the Sum Assured + Accrued Bonuses would be paid.

Why returns in conventional plans is low ?

Because of not taking of the risk nature they invest in government securities and

bonds their returns are in the lower side. That is why the sale of conventional pension

plan is also low.

UNIT LINKED PENSION PLAN

The unit linked pension plan is basically an insurance contract, which is designed

to provide a retirement income for life.Your premiums are invested in units of the investment fund of your choice, based on the

prevailing unit price. On vesting the value of your units will be used to buy your

retirement benefits.

On earlier death, the beneficiary receives the value of your units plus a cash lump

sum of Rs. 1,000.

The amount of money that a person invested in a ULPP, and will end up with

during retirement depends on three factors - costs such as those for management and

administration, fund management performance and the market growth over the years.

Costs are important as they eat into your premium contribution before the

remainder can be invested. Thus, the lower the costs, the better the chances of higher

accumulation.


58/92

Various companies structure or spread the costs differently during the tenure of

their plan. The structuring may even differ with plans from the same company.

Out of the three factors, while fund management and market growth are

prospective in nature and beyond your control, you can research on the cost structure of

various ULPPs - information that the insurance advisor can give you - before you invest.

Given the cost structure, you can project the retirement corpus you will need at

the get at the end of the tenure. Since most of the ULPPs right now have a very short

track record, it makes sense to supplement it with the fund performance to find out

whether the company can really deliver on its projections (see Growth and Returns).

Considering plans with the highest equity exposure from six top life insurers (in

terms of their market share), we find that among plans with 100 per cent equity exposure,

HDFC Standard Life's plan comes right on top with the best projected value.

It has shown consistency in returns and has the maximum exposure to equities. Of

the two other companies providing plans with lower equity exposure, the choice is not a

clear one.

By now, it will be clear to you that in the future, you will have to do much more

than just take the easy route of investing in a pension plan to save taxes. You will have to

take an informed decision on the prospects.With the right amount of homework, you can

ensure that you get a lot of happiness out of the happy combination pension plans

provide:


59/92

Unit-Linked Pension Plans

Built-in Flexibility Age at Term/

Vesting (Yrs) Deferment (Yrs)

Available Plans Min. Max. Min. Max.

HDFC Standard life Unit Linked

Pension50 75 10 40

ICICI Pru. Life Time Super

Pension45 75 10 57

SBI Life Horizon II Pension 50 70 10 52

Met Advantage Plus 45 55 10 50

Aviva life Insurance-Pension

Plus40 70 5 70

Max Life insurance Life maker 50 70 5 52

Returns Annualized Projected Max. Equity

over 1-

year (%)

return(%)

corpus

(Rs) lakh Exposure (%)

HDFC Standard Life Unit-

Linked Pension36.46 39.2 51.38 100

ICICI Prudential Life Time

Super Pension38.06 40.08 45.38 100

SBI Life Horizon II Pension 46.61 132.44 46.39 100

Met Advantage Plus 38.44 38.25 45.92 100Aviva life Insurance - Pension

Plus16.75 24.59 44.42 60

Birla Sunlife Flexi Secure Life

Retirement Plan-II16.18 14.29 51.21 35


60/92

Why Unit linked pension plan good?

Most insurers in the year 2011 have started offering at least a few unit-linked

plans. 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 that a customer would get would depend 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, et cetera) and computed from

the net asset value.

The advantage of unit-linked plans is that they are simple, clear, and easy tounderstand. Being transparent the policyholder gets the entire upside on the performance

of his fund. Besides all the advantages they offer to the customers, unit-linked plans also

lead to an efficient utilisation of capital.

Unit-linked products are exempted from tax and they provide life insurance.

Investors welcome these products as they provide capital appreciation even as the yields

on government securities have fallen below 6 per cent, which has made the insurers slash

payouts.

According to the IRDA, a company offering unit- linked plans must give the

investor an option to choose among debt, balanced and equity funds.

If you choose a debt plan, the majority of your premiums will get invested in debt

securities like gilts and bonds. If you choose equity, then a major portion of your

premiums will be invested in the equity market. The plan you choose would depend on

your risk profile and your investment need.

The ideal time to buy a unit-linked plan is when one can expect long-term growth

ahead. This is especially so if one also believes that current market values (stock

valuations) are relatively low.

So if you are opting for a plan that invests primarily in equity, the buzzing market

could lead to windfall returns. However, should the buzz die down, investors could be

left stung.
http://www.personalfn.com/insurance/productarena/endowmentplan.htmlhttp://www.personalfn.com/insurance/productarena/endowmentplan.html


61/92

If one invests in a unit-linked pension plan early on, say when one is 25, one can

afford to take the risk associated with equities, at least in the plan's initial stages.

However, as one approaches retirement the quantum of returns should be subordinated to

capital preservation. At this stage, investing in a plan that has an equity tilt may not be a

good idea.

Considering that unit-linked plans are relatively new launches, their short history

does not permit an assessment of how they will perform in different phases of the stock

market. Even if one views insurance as a long-term commitment, investments based on

performance over such a short time span may be appropriate.

ADVANTAGES OF ULPP S

The advantage of unit-linked pension plans is that they are simple, clear, and easy

to understand.

Being transparent the policyholder gets the entire upside on the performance of

his fund. Besides all the advantages they offer to the customers, unit-linked plans also

lead to an efficient utilization of capital.

Unit-linked products are exempted from tax and they provide life insurance.

Investors welcome these products as they provide capital appreciation even as the yields

on government securities have fallen below 6 per cent, which has made the insurers slash

payouts.

According to the IRDA, a company offering unit-linked plans must give the

investor an option to choose among debt, balanced and equity funds. If you opt for a unit-

linked endowment policy, you can choose to invest your premiums in debt, balanced or

equity plans.
http://www.personalfn.com/insurance/productarena/pensionplan.htmlhttp://www.personalfn.com/insurance/productarena/pensionplan.html


62/92

If you choose a debt plan, the majority of your premiums will get invested in debt

securities like gilts and bonds. If you choose equity, then a major portion of your

premiums will be invested in the equity market. The plan you choose would depend on

your risk profile and your investment need. ULPP provides multiple benefits to the

consumer

The benefits include:

Investment and Savings

Flexibility

Investment Options

Transparency

Liquidity

Regular income

Tax planning


63/92

CHAPTER-5

ANALYSIS

AND

INTERPRETATION


64/92

CONVENTIONAL PENSION PLAN

ICICIPrudential(ForeverLife)

Tata AIG(Nirvana)

BajajAllianz(Swarna

Vishranti)

LIC(JeevanSuraksha/

JeevanDhara)

LIC(JeevanNidhi)

HDFCPersonalPension

Plan

Max NewYork Life(EasyLife)

SBI(LIFELONGPensions)

Kotak Mahindra(Retirement

incomeplan)

INGVys(Be

Yea

MINIMUMANNUALPREMIUM(RS)

6,000 - 5,000 2,500 3,000 2,400 2,500 3,000 4,000 5,000

MINIMUMCOVER (RS)

50,000 50,000 50,000 50,000 50,000 - - 25,000 - -

MIN-MAX.TENURE(YRS)

5 30 - 5 - 40 2 - 35 5 35 10 - 40 10 40 2-52 yrs for Pure Pension

plan; 5-52 yrsfor Pension

cum LifeCover plan.

5 - 30 5 -

MIN/MAXAGE ATENTRY(YRS)

20-60 18-55 18-65 18-65 yrs(for JeevanDhara);18-70 (for JeevanSuraksha)

18-65 18-60 20-60 18-65 yrs for Pure Pension

plan; 18-60for Pensioncum lifecover plan.

18-60 18-

MIN-MAXVESTINGAGE (YRS)

50-70 50-65 45-70 50-79 40-75 50-70 50-70 50-70 45-65 45-70

RIDERSAVAILABLE

Criticalillness rider,Accident anddisability

benefit rider

Termrider,Criticalillnessrider,Accidentrider

Termcover,Criticalillnesscover,Hospitalcash

benefit,Accident

benefit,Familyincome

benefit

Termassurancerider,Criticalillnessrider

Accidentaldeath anddisability

benefitrider,Termassurancerider,Criticalillnessrider

No No No Term /PreferredTerm rider,Accidental

benefit rider,Criticalillness rider,Permanentdisabilityrider, Lifeguardianrider,Accidentaldisabilityguardianrider

TerRid

LIFE COVER AVAILABLE

Yes - Yes Yes Yes - - Yes Yes -

Conventional pension plans invest a major portion of the premium monies in

bonds and government securities (G-Secs). That is why the returns are on the lower side.

And if one were to factor into the equation an annual inflation figure of approximately


65/92

5%-6% per annum, then the real return figures look even more unimpressive.This is

where unit linked insurance plans (ULIPs) can play an important role in the retirement

planning exercise. ULIPs have a mandate to also invest a portion of the premium in the

stock market apart from bonds and G-Secs. Studies have shown that from a long-term

perspective, equities are equipped to give a higher return other fixed income instruments

like bonds and G-Secs. And since retirement planning is a long-term exercise, individuals

would do well to consider investing a portion of their retirement money in pension

ULIPs.

Pension ULIPs: How they fare

ICICIPrudential(LifetimePension II)

HDFCStandardLife(UnitLinkedPensionPlan)

Birla SunLife(FlexiSecureLife II)

LIC(FuturePlus)

BajajAllianz(UnitGaineasyPension)

Max NewYork Life(LifeMaker PensionPlan)

MetLife(MetAdvantage)

ULIP FUNDOPTIONS

PensionMaximiser II (Growth),PensionBalancer II(Balanced),PensionProtector II(Income),Preserver

Growthfund,Equitymanagedfund,Balancedfund,Defensive fund,Securefund,Liquidfund

Nourish,Growth,Enrich

Bondfund,Incomefund,Balancedfund,Growthfund

Equityindex

pensionfund, Equity

plus pensionfund, EquityMidCap

plus pensionfund, Debt

plus pensionfund,Balanced

plus pensionfund, Cash

plus pensionfund

Growthfund,Balancedfund,Conservative fund,Securefund

Multiplier,Accelerator,Balancer,Moderator , Protector,Preserver

ALLOCATIONTO EQUITIES Upto 100%in pensionmaximiser-II; upto 40%in pension

balancer-II;nil inProtector II& Preserver

100% ingrowthfund; 60-100% inequitymanagedfund; 30-60% in

balanced

Upto35% inEnrich;upto 20%inGrowth;upto 10%in Enrich

Bondfund: NIL;Incomefund: Notmorethan20%;Balanced

Equityindex pensionfund: atleast 85% instocks

primarilyfrom NSE

Nifty Index;

20-70% inGrowthfund; 10-40% inBalancedfund; 0-15% inConservative fund;

Multiplier:100%;Accelerator: upto80%;Balancer:upto 50%;Moderator : upto


66/92

fund; 15-30% indefensivemanagedfund; nilin securemanaged& liquidfund

fund: Notmorethan30%;Growthfund: Notmorethan 60%

Equity plus pensionfund: atleast 85%;EquityMidCap

plus pensionfund: atleast 50% inmidcapstocks; Debt

plus pensionfund: NIL;Balanced

plus pensionfund: 30%-50% inequity indexfund and50%-70% indebt plusfund; Cash

plus pensionfund: NIL

NIL inSecurefund

20%;Protector andPreserver:

NIL

MINIMUMPREMIUM(RS)

10,000 10,000 5,000 5,000 10,000 10,000 10,000

LIFE COVER

OPTIONAVAILABLE

Yes No Yes Yes No No Yes

HOW IS SUMASSUREDCALCULATED

Option 1:Zero sumassured.Pureaccumulation. Option 2:Sumassured =annualcontributionX tenure.

Sumassured =Rs 1,000

plus thefundvalue.

10 timestheregular

premiumamount.

5-20times theannualised

premium

Zero sumassured.Pureaccumulation.

Sumassured =value of units in the

policy.

110% of the valueof units inthe unitaccount.

MIN/MAXAGE ATENTRY (YRS)

Option 1:18-65.Option 2:18-60

18-60 18-65 18-65 18-65 18-60 20-55

MIN-MAXVESTINGAGE (YRS)

45-75 50-70 50-70 40-75 45-70 50-70 45-65


67/92

INITIALYEARS'EXPENSES

17%-22% infirst yr.12%-15%for secondyr.(Exact

percentagedependsupon theannual

premiumamt).

8.50%-22% for years 1and 2.(Exact

percentagedependsupon theannual

premiumamt).

21% for the firstyear.

8%-13%for years1 and 2.(Exact

percentagedependsupon the

premiumamount).*

15% for thefirst year.

20% inyear 1;10% inyear 2.

20% inyear 1. 2%for years 2to 10.

FUNDMANAGEME

NT CHARGES

Maximiser II- 1.5%;

balancer-1.0%;

protector II& preserver-0.75%

0.80% 1% Bondfund andIncomefund:

1%;Balancedfund:1.25%;Growthfund:1.50%

EquityMidCap

plus andEquity plus

pensionfunds:1.5%;Equityindex

pensionfund: 1%;Debt plus

pensionfund andCash plus

pension

fund:0.70%;Balanced

plus pensionfund: Asapplicableoncomponentfunds

1.25% for Growthfund;1.10% for

Balancedfund;0.90% for Conservative andSecurefund

Multiplier andAccelerator: 1.75%;

Balancer andModerator : 1.50%;Protector andPreserver:1.25%.

Having said that, it is also important that investments in ULIPs are made after

considering expenses like fund management charges since this will impact returns over the long-term. Also, don't lose sight of your overall equity allocation.

For example, if the individual has already invested a significant amount of his

money in stocks and equity funds, then he might be better off investing in a conventional

pension plan from a diversification perspective.


68/92

ULIPs other important benefits like liquidity. You can withdraw money from a

ULIP to meet emergencies. Also, you can invest surplus money (i.e. top-ups) over and

above the premium amount.

Some insurers have launched capital guarantee ULIPs. Such products aim to

guarantee the premiums paid by the individuals (net of expenses) plus the bonus declared,

on maturity. Individuals, who fear 'loss of capital' in a ULIP, will find such products

attractive.

However, capital guarantee ULIPs have lower equity exposure which could

dampen returns for the aggressive investor.


69/92

DIFFERENCE BETWEEN CONVENTIONAL PENSION INS PLANS

AND UNIT LINKED PENSION PLANS

There

ulip plans and pension plans of bajaj allinz life insurance

Documents