TITLE – Comparative study and analysis of ULIP schemes at ICICI

Prudential Ltd.

INTRODUCTION
Unit Linked Insurance Plan (ULIP) commonly known as a composition of Investment and Life
Insurance provides an opportunity to earn a non-taxable income and transfer the financial
risk at the same time. Basically, ULIP offered by various insurance companies gives investors
benefit of both insurance and investment under a single integrated plan under which
initially units are allotted to the customers, and on daily basis NAV (Net Asset Value) is
calculated. This insurance product always is vulnerable with ups and downs in the capital
market and if there is volatility in the equity market or decline in interest rates; the NAV of
the fund is impacted and may show a rise or fall. Generally, ULIPs are not guaranteed unless
it is any guaranteed plan from life insurer. So, there is always a risk which is borne by
policyholder. Moreover, there is a long list of charges taken from life insurers in order to
maintain funds in comparison to insurance policies. In frequently changing business
environment, life insurers also have stiff competition. A high value, satisfied, profitable
customer is the main objective of Life Insurers and different companies have their unique
way to approach their objectives.

Notwithstanding the risk factor, it is the dual benefit of insurance and investment along with
flexibilities that make ULIPs an attractive investment. Flexibility in ULIPs refers to the
flexibility in switching of funds, managed through different types of risk. The premium
amount paid in ULIPs is invested in debt, equity and infrastructure bonds, which translate
into substantial returns over a period of time.

Dual Benefit:
A ULIP is both an insurance policy and an investment. The policy specifies a death benefit -
the amount the nominee will be paid if the policyholder passes away during the term of the
ULIP. In addition, if the policy holder survives the term of the ULIP, he can also get the
maturity value of the ULIP. This will be the amount generated by the ULIP investments in
equity and/or debt. The investment component comes into play where the policyholder is
typically allowed to choose ULIP funds and asset classes to generate these returns.

Problem Statement:

More often than not, identifying the factors that affect a customer’s decision to
buy an insurance product are beset with challenges. As insurance is a way to manage risk
whereas, ULIPs are not risk-free investments, there is an element of contention whether to
avoid risk or to accept risk. In response, companies offer different risk options to manage
funds.
The study focusses on analysing and comparing ULIP plans offered by ICICI Prudential.
Scope of study:
For the purpose of defining scope of the project, it is relevant to understand that ULIPs are
best classified on the basis of purpose they serve. First category can be ULIPs for retirement
which accumulates a corpus amount and are used to get annuities after retirement. The
second category comprises ULIPs for wealth creation which multiplies wealth over a period
of time. Likewise, third and fourth type of ULIPs can be for children’s education and health
benefits respectively. The current study is focussed on ULIPs at ICICI Prudential.

Research objective:

 Comparison of ULIPs would help investors and company to understand the

company’s present market standing.
 Help investors to select plans where returns are higher.
 Help to understand the financial performance of various schemes and help the
company come out with better portfolio for ULIPs.
Research questions:

 What charges are tagged to the ULIP scheme? Initially ULIP plans suffered from
insufficient perception due to high premium allocation charges of approx. 20%. IRDA
then imposed a cap with a fee of 1.35% p.a. paid in terms of allocation, admin,
switching, surrender charges etc.
 How many free fund switches, cost per switch and flexibility of switch does the ULIP
plan offer? Every investor’s risk appetite changes with time and the ULIP scheme
should offer flexibility to the investor to switch funds to accommodate the increase
in his risk appetite.

DATA COLLECTION
Sources of data:
Secondary data – Websites, Annual reports, Articles, Consultancy reports.

DATA ANALYSIS TECHNIQUES

Qualitative analysis through tabulation using Microsoft office.
Quantitative analysis through correlation and regression, where applicable.

LITERATURE REVIEW
Lot of research has been done to compare traditional and unit linked insurance products by
researchers, economists and academicians.
(I)

AUTHOR: Dr. Nagarajan G [2013]

TITLE:

A STUDY ON PERFORMANCE OF UNIT-LINKED INSURANCE PLANS (ULIP) OFFERED BY INDIAN PRIVATE

INSURANCE COMPANIES

OBJECTIVES:

1. To compare ULIPs of different life insurers in terms of their focus.

2. To analyse and compare performance of ULIP products offered by the company vis-à-vis the
competitors.

METHODOLOGY:

Research has been conducted based on secondary data collected through different websites, annual
reports, magazines etc. Sampling has been done basis non-random judgmental sampling method.
Statistical tools like Ratios, ROR, Annualized ROR and correlation have been applied for data analysis.

CONCLUSION: The study outlines that performance of Reliance Health + Wealth Plan is better than
SBI, ICICI and Bajaj Allianz, but below that of PNB Met Smart One. It is notable that, the products
offered by PNB MetLife and Reliance Life Insurance are not affected by market conditions, and are
performing consistently. This shows the research effort put in by both the organizations in
developing new products for their customers offer good investment option for investors looking for
better returns. While the current study attempts to compare the products of five companies having
similar features, this can be further extended to study the portfolio of investment of various ULIPs
offered by other companies which would help organizations to fine tune their products.

GAP: Our study is based on analysing and comparing the ULIPs offered by ICICI Prudential, the
research study undertaken above compares ULIPs offered by at least five different companies.

(II)

AUTHOR: Dr. Jain O.P[2018]

TITLE: An empirical study on responses of ULIP Investors, with regard to switching between the ULIP
funds.

OBJECTIVES:

1. To identify awareness level among investors with regard to stock market & its association with
their expectations of returns, their reliability on the fund managers of the company or their own
interests in understanding & dealing with stock market fluctuations.

2. To know what makes the investors invest in ULIPs, its investment cum insurance benefits and
returns from the market.

3. To identify if there is an association between gender-based awareness or any awareness with

regard to education qualification & knowledge of ULIPs & related variables.
 4. Can ULIPs be considered as a sit-back & relax option or an option of investment that needs a
continuous treatment & attention?

5. Awareness among investors can help to enhance their basic knowledge of the stock market, or
lack of knowledge about switching option & other related activities will have little impact on their
attitude towards the stock market.

METHODOLOGY:

Primary data was collected using structured questionnaire through Google forms. Onsite visits to a
few life insurance offices were made & enquiries conducted on investors who have purchased ULIPs
with the aim to achieve worthy response for the research study.

CONCLUSION: The study reveals that 40% respondents keep themselves updated about market
fluctuations and only 36 % respondents are aware about the switching option. This shows that a
large population of common investors do not have adequate knowledge of market fluctuations and
they completely rely on the life insurer’s goodwill and fund manager’s skills. The researcher
concludes that common investors do not have knowledge about the relationship of Sensex and NAV
indices of Unit linked insurance plans.

GAP: While our study is based on the hypothesis that ULIP is an investment choice across different
age groups, the above research study concludes that ULIP is not preferred as an investment options
by all age groups. Likewise, our study also assumes that investors have knowledge about stock
market and switching fund option as opposed to the conclusions derived from the above research
study.

(III)

AUTHOR: Muhammed Thayyib.K. [2017]

TITLE: The importance of ULIP in insurance sector in India

OBJECTIVES:

1. This study aims to compare ULIP fund schemes and to ascertain whether the individual ULIP fund
scheme has outperformed or underperformed.

2. Whether the growth ULIP fund schemes are offering the advantages of diversification, market
timing and selectivity of securities to their investors.

3. To help investors by providing clarity to choose the best fund for their needs or in other words to
find out a fund which will give maximum return for minimum risk.

METHODOLOGY:

The study makes use of secondary data and excludes the entry and exit loads of the ULIP funds.

CONCLUSION: The study reveals that ULIP fund has become one of the important sources for
investing. The two-step process of choosing an asset allocation based on the information about
benchmark indexes and then choosing funds in each category may be one of the best approaches.
Estimates of future asset returns, risks and visibility on future asset exposures and benchmarks can
help in effective portfolio selection.
GAP: The scope of the above research is restricted to an overview of ULIP and its importance in the
insurance sector in general. In future it can extend to the study of ULIP fund schemes across various
companies. Our study covers ULIP schemes within ICICI Prudential.