Mars Science Laboratory Mission Project Science Integration Group (PSIG) Final Report June 6, 2003.
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SUMMER TRAINING REPORT
(MBA-035)
CUSTOMER BEHAVIOR FOR LIFE INSURANCE,
GENERAL INSURANCE & MUTUAL FUNDS
Submitted By:
NAME- DEEPAK SINGH
ROLL NO.-0843670009
MBA III rd Semester
2008-2010
In partial fulfillment of the requirement for MBA Degree
Programme of Uttar Pradesh Technical University,Lucknow.
K.P.COLLEGE OF MANAGEMENT
ETMADPUR,AGRA
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I would like to take this opportunity to thanks all those who have helped me
tremendously during the course of the project.
This project report is a result of endless effort & immense degree of oil by
many great minds.
I would like to thank all those people who graciously helped me by sharing
their valuable time, experience & knowledge. I would like to express
heartiest thanks to Mr.Shalabh Srivastva and Shakil Ratyeea who have
given me this beautiful opportunity to work with their organization and
helped me at each step with their experience.
I would like to thank all my friends and the entire team of pinnacle wealth
management.
I would like to thank MR. Rakesh Chandra director of KP college of
management and Miss Jyoti (HOD) who provided me this opportunity.
DEEPAK SINGH
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COMPANY CERTIFICATE
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COLLEGE CERTIFICATE
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TABLE OF CONTENT
PREFACE 2
ACKNOWLEDGEMENT 3
COMPANY CERTIFICATE 4
COLLEGE CERTIFICATE 5
CHAPTER-1
INTRODUCTION TO THE STUDY 8-58
OBJECTIVE OF THE STUDY 59
SCOPE 60
SIGNIFICANCE 61-62
METHODOLOGY 63-66
LIMITATIONS 67
CHAPTER-2
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INTRODUCTION TO THE ORGANISATION 68
HISTORY 69-73
ORGANISATION STRUCTURE 74-76
PRODUCT PROFILE 77-85
FINANCIAL STATUS 86-89
CHAPTER-3
THEORETICAL FRAMEWORK OF THE STUDY 90-105
CHAPTER-4
CLASSIFICATION, ANALYSIS AND INTERPRETATION OF DATA COLLECTED
ACCORDING TO THE TOPIC ASSIGNED 106-118
CONCLUSION 119
SUGGESTIONS 120
APPENDIX 121
BIBLIOGRAPHY 122
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CHAPTER-1
INTRODUCTION
TO THE STUDY
1. OBJECTIVE
2. SCOPE
3. SIGNIFICANCE
4. METHODOLOGY
5. LIMITATION
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INTRODUCTION
My project work is to understand the level of awareness in regards to the
Life Insurance, General Insurance and Mutual Funds but before we move I
would like to give a glance about my project. Actually what is insurance?
Insurance is not necessarily an investment from which one expects to get
ones money back, nor, it is gambling. A gambler takes, while insurance
offers protection against risks that already exit. Insurance is a way to share
risk with others.
Insurance is the device of shifting the risks to the qualified agencies or
persons known as Insurers. Its a contract between two parties by which one
of them agrees to index the other against a loss which may accrue to the
other on the happening of some event. With a view to protecting person
from various risks viz; death, medical claims, accident etc an insurance
company is framed by raising initial capital from the shareholders.
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With new era of 21st century people want to get money with easy steps but
due to the risk factor involved in the investment it is not a easy task. So here
we come to understand what is mutual funds and how it protect the
investors from risk.
Mutual funds can give investors access to emerging markets A mutual fund
is a professionally managed type of collective investment scheme that pools
money from many investors and invests it in stocks, bonds, short-term
money market instruments, and/or other securities. The mutual fund will
have a fund manager that trades the pooled money on a regular basis. The
net proceeds or losses are then typically distributed to the investors
annually
Yet, the insurance and mutual funds companies are in growtth stage but the
level of awareness is still low thats we come to know from this project work.
Therefore, from this project report we are trying to give details about
customer behavior for LIFE INSURANCE, GENERAL INSURANCE &
MUTUAL FUNDS. So, it was a golden opportunity for me to work for an
organization and to get a deep knowledge about the insurance sector.
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HISTORY OF INSURANCE
The insurance sector in India dates back to 1818, when Oriental Life
Insurance Company like Bombay life Assurance Company, in 1823 and
Tritons Insurance Company, for General Insurance, in 1850 were
incorporated. Insurance ACT was passed in 1928 but it was subsequently
reviewed and comprehensive legislation was enacted in 1938.
The nationalization of life insurance business took place in 1956 when 245
Indian and Foreign insurance societies were first merged and then
nationalized. It paved the way towards the establishment of life insurance
Corporation (LIC) and since then it has enjoyed a monopoly over the life
insurance business in India. General Insurance business. Subsequently in
1973, non-life insurance business was nationalized and the General
Insurance Business (Nationalization) ACT, 1972 was promulgated. The
General Insurance Corporation (GIC) in its present form was incorporated in
1972 and maintains a very strong hold over the non-life insurance business
in India. Due to concerns of relatively low spread of insurance in the
country.
The efficient and quality functioning of the Public Sector Insurance
Companies.
The untapped potential for mobilizing long-term contractual savings funds
for infrastructure.
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The (Congress) government set up Insurance set u an Insurance Reforms
committee in April 1993. The committee submitted its report in January
1994, recommended a phased program of liberalization, and called for
private sector entry and restructuring of the LIC and GIC.
Insurance Sector
The practice of insurance in the world is quite old infect. How ever, life
insurance business, as it is known today, is a much later development. It
evolved from the great transformation in life, which began with the decline of
the agrarian society in the western countries in the 19th century.
Industrialization with its cities, factories, cash economy and an urban
saving class set the stage for life insurance as a large scale national
institution. It can truly be that life insurance is a product of modern industry.
Growth of life insurance Company in any country will illustrate introduced
modern life insurance business didnt make much headway. The business
started taking its deeper roots only when in the late 19th century India
insurance companies appeared on the scenes and started accepting India
lies freely on the same terms as European lives in India. The growth of India
life insurance business continued to remain restricted till the Swedish
movement gathered momentum. The business passed through the period of
ups and downs with the political and economic situation in the country.
Nationalization
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Even during days of the freedom struggle there was occasional demand for
nationalization of life insurance industry. The demand naturally gathers
mare momentum after independence. Mismanagement had lead to
liquidation of as many as 25 life insurance companies in the decade after
independence. Another 25 insurance companies had during the same
period so frittered away their resources that their business had to be
transferred to other companies. All these cost financial losses and
consequent suffering to several policyholders who had entrusted their hard
earned saving to the care of the company management. This misuse of
power, position and privilege by these companies in the private sector was
one of the most compelling reasons that influenced the decision of the
government of India to nationalize the life insurance industry in 1956. The
life insurance industry in India had to be geared up for raising resources for
execution national programs. One of the objectives of the national plans
was to build a pay welfare state. It was therefore, essential that benefits of
life insurance were made available to every family in the country and that
the business should be conducted with utmost economy by the
management acting in a spirit of trusteeship to enable maximization of the
peoples saving that could be analyzed through the life insurance into the
development programs.
Objectives of nationalization:
The decision of the Government of India to nationalize life insurance
industry was implemented by the passage of the life insurance Corporation
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Act, 1956, by Parliament. The objectives of nationalization of life insurance
industry that emerged out of the discussion and speeches in the parliament
in the time passage of the act were:
Spread of message of life insurance as far and wide as possible reaching
out beyond the more advanced urban areas well into hitherto neglected
areas.
Effective mobilization of the peoples savings.
Complete security to policyholders.
Prompt and efficient services to the policyholders.
Conducting of the business with the utmost economy and with the full
realization that the money. Belonged to the policyholders.
Investment of funds in such a way as to secure maximum yield
consistent with safety of capital.
Economic premium rates.
Development of a dynamic and vigorous organization under a
management conducted in sprit of Trusteeship.
Formulation of scheme of insurance to suit different section of the
community.
How big is the insurance market?
Insurance is a Rs.400 billion business in India, and together with banking
services adds about 7% to India's Gap. Gross premium collection is about
2% of Gap and has been growing by 15-20% per annum. India also has the
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highest number of life insurance policies in force in the world, and total
investible funds with the LIC are almost 8% of GDP. Yet more than three-
fourths of India's insurable population has no life insurance or pension
cover. Health insurance of any kind is negligible and other forms of non-life
insurance are much below international standards.
Indian Scenario :
Unfortunately the concept of insurance is not popular in our country .As per
the latest estimates, the total premium income generated by life and general
insurance in India is estimated at around a meager 1.95% of GDP. However
India's share of world insurance market has shown an increase of 10% from
0.31% in 2004-2005 to 0.34% in 2005-2006 India's market share in the life
insurance business showed a real growth of 11 % thereby out performing
the global average of 7.7% Non-life business grew by 3.1% against global
average of 0.20%. In India insurance spending per capita was among the
lowest in the world at $7.6 compared to $7 in the previous year. Amongst
the emerging economies, India is one of the least insured countries but the
potential for further growth is phenomenal, as a significant portion of its
population is in services and the life expectancy has also increased over the
years.
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It is the business of effecting contracts of insurances upon human life
including any contract whereby the payment of money is assured on death
or on the happening of any contingency to the dependent on human life and
any contract which is subject to the payment of premiums for a term and
shall be deemed to include:
The granting disability and double and triple indemnity accident benefits, if
so provided in the contract of insurance.
The granting of annuities of human life. The granting of super-annuation
allowance and annuities payable out of any fund applicable solely to the
relief and maintenance of the person engaged or who have been engaged
in any particular profession, trade or employment or of the dependents of
such persons.
Non life insurance business :
Conventional classification of insurance business:
1. Fire insurance
2. Marine insurance
3. Miscellaneous insurance (accident)
Modern classification of general insurance
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1. Insurance of person
2. Insurance of property
3. Insurance of interest
4. Insurance of liability
Life Insurance:
Life insurance can be defined as life insurance provides a sum of money if
the person who is insured dies while the policy is in effect.
Life insurance is not for the person who passes away, it for those who
survive. It is the responsibility of every bread earner to guard against the
events that could affect the family in the unfortunate circumstance of his /
her demise. Thus, having a life insurance policy is very vital. Before going
for a life insurance policy it is imperative that you know about various types
of life insurance policies.
Major among them are:
Whole Life Policy
Term Life Policy
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Money-back Policy
Joint Life Policy
Group Insurance Policy
Loan Cover Term Assurance Policy
Pension Plan or Annuities
Unit Linked Insurance Plan
Endowment Policy
Why Do People Need Life Insurance ?
Risks and uncertainties are part of life's great adventure -- accident,
illness, theft, natural disaster - they're all built into the working of the
Universe, waiting to happen.
Insurance then is man's answer to the vagaries of life. If you cannot
beat man-made and natural calamities, well, at least be prepared for
them and their aftermath.
Insurance is a contract between two parties - the insurer (the
insurance company) and the insured (the person or entity seeking the
cover) - wherein the insurer agrees to pay the insured for financial
losses arising out of any unforeseen events in return for a regular
payment of "premium".
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These unforeseen events are defined as "risk" and that is why
insurance is called a risk cover.
Hence, insurance is essentially the means to financially compensate
for losses that life throws at people - corporate and otherwise.
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Types of Plans..
y Conventional
y ULIP
Conventional:-
Conventional plans are those plans in which returns are known and are
fixed. Example: - Childrens Plan. In this plan the customer has knows how
much return he will get after maturity or any miss happening occurs. Here
risk is low and returns are also low, because it is not dependent on the
market risk and is a rigid policy.
It is seen that people also invest less in such type of policies as
returns are less and there is a compulsion attached is of compulsory
premium submission till the policy matures.
Illustration: -
Premium for 10 yrs is 20000
20000+20000+20000+20000+20000+20000+20000+20000+20000+20000=
2lks
Return described was 2.5 times
So the customer will get approx 5 lkhs after deducting all charges.
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Insurance is always of the parent and beneficiary is the child. There
are 2 types of loss that occurs on any type of miss happening i.e. emotional
loss and monetary loss company cant full fill emotional loss but can help in
monetary loss by giving the 2lks Rs. At the miss happening and will give the
rest premium by its own and will give the bonus at maturity again to the
child.
ULIP
ULIP stands for UNIT LINK INSURANCE PLAN. As it is said higher risk
higher return
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Some of the important milestones in the life
insurance business in India are:
1818: Oriental Life Insurance Company, the first life insurance company on
Indian soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance
company started its business.
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
with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are 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
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roots to the Triton Insurance Company Ltd., the first general insurance
company established in the year 1850 in Calcutta by the British.
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General Insurance
Insurance other than Life Insurance falls under the category of General
Insurance. General Insurance comprises of insurance of property against
fire, burglary etc, personal insurance such as Accident and Health
Insurance, and liability insurance which covers legal liabilities. There are
also other covers such as Errors and Omissions insurance for professionals,
credit insurance etc.
Non-life insurance companies have products that cover property against
Fire and allied perils, flood storm and inundation, earthquake and so on.
There are products that cover property against burglary, theft etc. The non-
life companies also offer policies covering machinery against breakdown,
there are policies that cover the hull of ships and so on. A Marine Cargo
policy covers goods in transit including by sea, air and road. Further,
insurance of motor vehicles against damages and theft forms a major chunk
of non-life insurance business.
In respect of insurance of property, it is important that the cover is taken for
the actual value of the property to avoid being imposed a penalty should
there be a claim. Where a property is undervalued for the purposes of
insurance, the insured will have to bear a rateable proportion of the loss. For
instance if the value of a property is Rs.100 and it is insured for Rs.50/-, in
the event of a loss to the extent of say Rs.50/-, the maximum claim amount
payable would be Rs.25/- ( 50% of the loss being borne by the insured for
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underinsuring the property by 50% ). This concept is quite often not
understood by most insureds.
Personal insurance covers include policies for Accident, Health etc.
Products offering Personal Accident cover are benefit policies. Health
insurance covers offered by non-life insurers are mainly hospitalization
covers either on reimbursement or cashless basis. The cashless service is
offered through Third Party Administrators who have arrangements with
various service providers, i.e., hospitals. The Third Party Administrators also
provide service for reimbursement claims. Sometimes the insurers
themselves process reimbursement claims.
Accident and health insurance policies are available for individuals as well
as groups. A group could be a group of employees of an organization or
holders of credit cards or deposit holders in a bank etc. Normally when a
group is covered, insurers offer group discounts.
Liability insurance covers such as Motor Third Party Liability Insurance,
Workmens Compensation Policy etc offer cover against legal liabilities that
may arise under the respective statutes Motor Vehicles Act, The
Workmens Compensation Act etc. Some of the covers such as the
foregoing (Motor Third Party and Workmens Compensation policy ) are
compulsory by statute. Liability Insurance not compulsory by statute is also
gaining popularity these days. Many industries insure against Public liability.
There are liability covers available for Products as well.
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There are general insurance products that are in the nature of package
policies offering a combination of the covers mentioned above. For instance,
there are package policies available for householders, shop keepers and
also for professionals such as doctors, chartered accountants etc. Apart
from offering standard covers, insurers also offer customized or tailor-made
ones.
Suitable general Insurance covers are necessary for every family. It is
important to protect ones property, which one might have acquired from
ones hard earned income. A loss or damage to ones property can leave
one shattered. Losses created by catastrophes such as the tsunami,
earthquakes, cyclones etc have left many homeless and penniless. Such
losses can be devastating but insurance could help mitigate them. Property
can be covered, so also the people against Personal Accident. A Health
Insurance policy can provide financial relief to a person undergoing medical
treatment whether due to a disease or an injury.
Industries also need to protect themselves by obtaining insurance covers to
protect their building, machinery, stocks etc. They need to cover their
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liabilities as well. Financiers insist on insurance. So, most industries or
businesses that are financed by banks and other institutions do obtain
covers. But are they obtaining the right covers? And are they insuring
adequately are questions that need to be given some thought. Also
organizations or industries that are self-financed should ensure that they are
protected by insurance.
Most general insurance covers are annual contracts. However, there are
few products that are long-term.
It is important for proposers to read and understand the terms and
conditions of a policy before they enter into an insurance contract. The
proposal form needs to be filled in completely and correctly by a proposer to
ensure that the cover is adequate and the right one.
Some of the important milestones in the general
insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first
company to transact all classes of general insurance business.
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1957: General Insurance Council, a wing of the Insurance Association of
India, frames a code of conduct for ensuring fair conduct and sound business
practices.
1968: The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) Act, 1972
nationalized the general insurance business in India with effect from 1st
January 1973. 107 insurers amalgamated and grouped into four companies
viz. the National Insurance Company Ltd., the New India Assurance
Company Ltd. the Oriental Insurance Company Ltd. and the United India
Insurance Company Ltd. GIC incorporated as a company.
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History of mutual funds
Massachusetts Investors Trust (now MFS Investment Management) was
founded on March 21, 1924, and, after one year, it had 200 shareholders
and $392,000 in assets. The entire industry, which included a few closed-
end funds represented less than $10 million in 1924.
The stock market crash of 1929 hindered the growth of mutual funds. In
response to the stock market crash, Congress passed the Securities Act of
1933 and the Securities Exchange Act of 1934. These laws require that a
fund be registered with the U.S. Securities and Exchange Commission
(SEC) and provide prospective investors with a prospectus that contains
required disclosures about the fund, the securities themselves, and fund
manager. The SEC helped draft the Investment Company Act of 1940,
which sets forth the guidelines with which all SEC-registered funds today
must comply.
With renewed confidence in the stock market, mutual funds began to
blossom. By the end of the 1960s, there were approximately 270 funds with
$48 billion in assets. The first retail index fund, First Index Investment Trust,
was formed in 1976 and headed by John Bogle, who conceptualized many
of the key tenets of the industry in his 1951 senior thesis at Princeton
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University It is now called the Vanguard 500 Index Fund and is one of the
world's largest mutual funds, with more than $100 billion in assets.
A key factor in mutual-fund growth was the 1975 change in the Internal
Revenue Code allowing individuals to open individual retirement accounts
(IRAs). Even people already enrolled in corporate pension plans could
contribute a limited amount (at the time, up to $2,000 a year). Mutual funds
are now popular in employer-sponsored "defined-contribution" retirement
plans such as (401(k)s) and 403(b)s as well as IRAs including Roth IRAs.
As of October 2007, there are 8,015 mutual funds that belong to the
Investment Company Institute (ICI), a national trade association of
investment companies in the United States, with combined assets of
$12.356 trillion. In early 2008, the worldwide value of all mutual funds
totaled more than $26 trillion.
Usage of mutual funds
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Since the Investment Company Act of 1940, a mutual fund is one of three
basic types of investment companies available in the United States.
Mutual funds can invest in many kinds of securities. The most common are
cash instruments, stock, and bonds, but there are hundreds of sub-
categories. Stock funds, for instance, can invest primarily in the shares of a
particular industry, such as technology or utilities. These are known as
sector funds. Bond funds can vary according to risk (e.g., high-yield junk
bonds or investment-grade corporate bonds), type of issuers (e.g.,
government agencies, corporations, or municipalities), or maturity of the
bonds (short- or long-term). Both stock and bond funds can invest in
primarily U.S. securities (domestic funds), both U.S. and foreign securities
(global funds), or primarily foreign securities (international funds).
Most mutual funds' investment portfolios are continually adjusted under the
supervision of a professional manager, who forecasts cash flows into and
out of the fund by investors, as well as the future performance of
investments appropriate for the fund and chooses those which he or she
believes will most closely match the fund's stated investment objective. A
mutual fund is administered under an advisory contract with a management
company, which may hire or fire fund managers.
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Mutual funds are subject to a special set of regulatory, accounting, and tax
rules. In the U.S., unlike most other types of business entities, they are not
taxed on their income as long as they distribute 90% of it to their
shareholders and the funds meet certain diversification requirements in the
Internal Revenue Code. Also, the type of income they earn is often
unchanged as it passes through to the shareholders. Mutual fund
distributions of tax-free municipal bond income are tax-free to the
shareholder. Taxable distributions can be either ordinary income or capital
gains, depending on how the fund earned those distributions. Net losses are
not distributed or passed through to fund investors.
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Mutual Funds Concept
A Mutual Fund is a trust that pools the savings of a number of
investors who share a common financial goal. The money thus collected is
then invested in capital market instruments such as shares, debentures and
other securities. The income earned through these investments and the
capital appreciations realized are shared by its unit holders in proportion to
the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively
low cost. The flow chart below describes broadly the working of a mutual
fund:
Mutual Fund Operation Flow Chart
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TYPES OF MUTUAL FUNDS
Mutual fund schemes may be classified on the basis
of its structure and its investment objective:-
1. By Structure:
2. By Investment Objective:
By structure ;-
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a) Open-ended Funds
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 Asset Value ("NAV") related prices. The key feature of
open-end schemes is liquidity.
b) Closed-ended Funds
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.
c) Interval Funds
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Interval funds combine the features of open-ended and close-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.
2. by Investment Objective:
a) Equity Oriented Schemes
These schemes, also commonly called Growth Schemes, seek to invest a
majority of their funds in equities and a small portion in money market
instruments. Such schemes have the potential to deliver superior returns
over the long term. However, because they invest in equities, these
schemes are exposed to fluctuations in value especially in the short term.
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b) Debt Based Schemes
These schemes, also commonly called Income Schemes, invest in debt
securities such as corporate bonds, debentures and government securities.
The prices of these schemes tend to be more stable compared with equity
schemes and most of the returns to the investors are generated through
dividends or steady capital appreciation. These schemes are ideal for
conservative investors or those not in a position to take higher equity risks,
such as retired individuals. However, as compared to the money market
schemes they do have a higher price fluctuation risk and compared to a Gilt
fund they have a higher credit risk.
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c) Hybrid Schemes
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These schemes are commonly known as balanced schemes. These
schemes invest in both equities as well as debt. By investing in a mix of this
nature, balanced schemes seek to attain the objective of income and
moderate capital appreciation and are ideal for investors with a
conservative, long-term orientation.
d) Load Funds
A Load Fund is one that charges a commission for entry or exit. That is,
each time you buy or sell units in the fund, a commission will be payable.
Typically entry and exit loads range from 1% to 2%. It could be worth paying
the load, if the fund has a good performance history.
e) No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit.
That is, no commission is payable on purchase or sale of units in the fund.
The advantage of a no load fund is that the entire corpus is put to work.
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History of the Indian Mutual Fund Industry
The mutual fund industry in India started in 1963 with the formation of Unit
Trust of India, at the initiative of the Government of India and Reserve Bank
the. The history of mutual funds in India can be broadly divided into four
distinct phases
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It
was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In 1978
UTI was de-linked from the RBI and the Industrial Development Bank of
India (IDBI) took over the regulatory and administrative control in place of
RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end
of 1988 UTI had Rs.6,700 crores of assets under management.
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Second Phase 1987-1993 (Entry of Public Sector
Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the first
non- UTI Mutual Fund established in June 1987 followed by Canbank
Mutual Fund (Dec
87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual
fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management
of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector
Funds)
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With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI were
to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector mutual fund registered
in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.
In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified
Undertaking of
Fourth Phase since February 2003
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
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several mergers and acquisitions. As at the end of January 2003, there
were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit
Trust of India with Rs.44,541 crores of assets under management was way
ahead of other mutual funds the Unit Trust of India with assets under
management of Rs.29,835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India,
functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual
Fund Regulations.
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BENEFITS OF INVESTING IN MUTUAL FUNDS
1. Professional Management
Mutual Funds provide the services of experienced and skilled professionals,
backed by a dedicated investment research team that analyses the
performance and prospects of companies and selects suitable investments
to achieve the objectives of the scheme.
2.Diversification
Mutual Funds invest in a number of companies across a broad cross-
section of industries and sectors. This diversification reduces the risk
because seldom do all stocks decline at the same time and in the same
proportion. You achieve this diversification through a Mutual Fund with far
less money than you can do on your own.
3. Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with
brokers and companies. Mutual Funds save your time and make investing
easy and convenient.
4. Return Potential
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Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.
5. Low Costs
Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.
6. Liquidity
In open-end schemes, the investor gets the money back promptly at net
asset value related prices from the Mutual Fund. In closed-end schemes,
the units can be sold on a stock exchange at the prevailing market price or
the investor can avail of the facility of direct repurchase at NAV related
prices by the Mutual Fund.
7.Transparency
You get regular information on the value of your investment in addition to
disclosure on the specific investments made by your scheme, the proportion
invested in each class of assets and the fund manager's investment
strategy and outlook.
8. Tax Benefits
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The taxman has, over the years, been more or less kind to mutual funds!
With laws varying from time to time, the overall objective has been to
encourage the growth of the mutual funds industry. Currently, a variety of
tax laws apply to mutual funds, which are broadly listed below:
1) Capital Gains
Units of mutual fund schemes held for a period more than 12 months are
treated as long-term capital assets. In such cases, the unit-holder has the
option to pay capital gains tax at either 20 % (with indexation) or 10 %
without indexation.
2) Tax Deducted at Source (TDS)
For any income credited or paid by a fund, no tax is deducted or withheld at
source. The relevant sections in the Income Tax Act governing this
provision are Section 194K and 196A.
3) Wealth Tax
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Mutual fund units are not currently treated as assets under Section 2 of the
Wealth Tax Act and are therefore not liable to tax.
4) Income from units
Any income received from units of the schemes of a mutual fund specified
under section 23 (D) is exempt under Section 10 (33) of the Act. While
section 10(23D) exempts income of specified mutual funds from tax (which
currently includes all mutual funds operating in India), Section 10(33)
exempts income from funds in the hands of the unit-holders. However, this
does not mean that there is no tax at all on income distributions by mutual
funds.
5) Income Distribution Tax
As per prevailing tax laws, income distributed by schemes other than open-
end equity schemes is subject to tax at 20 % (plus surcharge of 10 %). For
this purpose, equity schemes have been defined to be those schemes that
have more than 50 % of their assets in the form of equity. Open-end equity
schemes have been left out of the purview of this distribution tax for a period
of three years beginning from April 1999.
6) Section 80-C
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The investment in mutual funds designated as Equity Linked Laving
Scheme (ELSS) qualifies for rebate under Section 80-C. The maximum
amount that can be invested in these schemes is Rs.10,000, therefore the
maximum tax benefit available works out to Rs.2000. Apart from ELSS
schemes, the benefit of Section 80-C is also available in select schemes of
some funds such as UTI ULIP, KP Pension Plan etc
DISADVANTAGES OF MUTUAL FUNDS
1. The Wisdom of Professional Management.
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That's right, this is not an advantage. The average mutual fund manager is
no better at picking stocks than the average nonprofessional, but charges
fees as though she is.
2. No Control.
Unlike picking your own individual stocks, a mutual fund puts you in the
passenger seat of somebody else's car.
3. Dilution.
Mutual funds generally have such small holdings of so many different stocks
that insanely great performance by a fund's top holdings still doesn't make
much of a difference in a mutual fund's total performance.
4. Buried Costs.
Many mutual funds specialize in burying their costs and in hiring salesmen
who do not make those costs clear to their clients.
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IRDA
(Insurance Regulatoryand Development Authority)
Composition of Authority under IRDA Act, 1999
The authority is a ten member team consisting of:
(a) A Chairman.
(b) Five whole-time members.
(c) Four part-time members.
(All appointed As per the section 4 of IRDA Act' 1999, Insurance Regulatory
and Development Authority (IRDA, which was constituted by an act of
parliament) specify the composition of Authority
by the Government of India)
Duties, Powers and Functions of IRDA
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Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of
IRDA.
(a) Subject to the provisions of this Act and any other law for the time
being in force, the Authority shall have the duty to regulate, promote and
ensure orderly growth of the insurance business and re-insurance business.
(b) protection of the interests of the policy holders in matters concerning
assigning of policy, nomination by policy holders, insurable interest,
settlement of insurance claim, surrender value of policy and other terms and
conditions of contracts of insurance;
(c) Specifying requisite qualifications, code of conduct and practical training
for intermediary or insurance intermediaries and agents;
(d) Specifying the code of conduct for surveyors and loss assessors;
(e) Promoting efficiency in the conduct of insurance business;
(f)Promoting and regulating professional organizations connected with the
insurance and re-insurance business;
(g) Levying fees and other charges for carrying out the purposes of this Act;
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(h) calling for information from, undertaking inspection of, conducting
enquiries and investigations including audit of the insurers, intermediaries,
insurance intermediaries and other organizations connected with the
insurance business;
(i) control and regulation of the rates, advantages, terms and conditions
that may be offered by insurers in respect of general insurance business not
so controlled and regulated by the Tariff Advisory Committee under section
64U of the Insurance Act, 193(4of1938);
Here in this section we have covered major financial regulatory bodies in
India's financial market.
Securities and Exchange Board of India (SEBI)
National Stock Exchange
Bombay Stock Exchange (BSE)
Reserve Bank of India
Major Financial Institutions in India
Foreign Investment Promotion Board
SEBI
(Securities and Exchange Board of India)
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ESTABLISHMENT OF SEBI
The Securities and Exchange Board of India was established on April 12,
1992 in accordance with the provisions of the Securities and Exchange
Board of India Act, 1992.
PREAMBLE
The Preamble of the Securities and Exchange Board of India describes the
basic functions of the Securities and Exchange Board of India as
..to protect the interests of investors in securities and to promote the
development of, and to regulate the securities market and for matters
connected therewith or incidental thereto
Definitions
(1) In this Act, unless the context otherwise requires, -
(a) "Board" means the Securities and Exchange Board of India established
under section 3;
(b) "Chairman" means the Chairman of the Board;
Management of the Board
. The Board shall consist of the following members, namely:-
(a) A Chairman;
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(b) Two members from amongst the officials of the Ministry of the
Central Government dealing with Finance and administration of the
Companies Act, 1956(1 of 1956);
(c) One member from amongst the officials of the Reserve Bank;
(d) Five other members of whom at least three shall be the whole-time
members to be appointed by the central Government.
POWERS AND FUNCTIONS OF THE BOARD
Functions of Board
(1) Subject to the provisions of this Act, it shall be the duty of the Board to
protect the interests of investors in securities and to promote the
development of, and to regulate the securities market, by such measures as
it thinks fit.
(2) Without prejudice to the generality of the foregoing provisions, the
measures referred to therein may provide for -
(a) Regulating the business in stock exchanges and any other securities
markets;
(b) Registering and regulating the working of stock brokers, sub-brokers,
share transfer agents, bankers to an issue, trustees of trust deeds,
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registrars to an issue, merchant bankers, underwriters, portfolio managers,
investment advisers and such other intermediaries who may be associated
with securities markets in any manner;
(BA) registering and regulating the working of the depositories, participants,
custodians of securities, foreign institutional investors, credit rating agencies
and such other intermediaries as the Board may, by notification, specify in
this behalf;
(c) Registering and regulating the working of venture capital funds and
collective investment schemes, including mutual funds;
(d) Promoting and regulating self-regulatory organizations;
(e) Prohibiting fraudulent and unfair trade practices relating to securities markets;
(f) Promoting investors' education and training of intermediaries of securities
markets;
(g) Prohibiting insider trading in securities;
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OBJECTIVE
The primary objective of my study is to gain through practical experience, a
sound appreciation and understanding of the theoretical principle learned in
two semester in MBA. My objective is oriented towards developing the skills,
knowledge and attitude needed to make an effective start as a member of
the management profession.
Apart from these basic objectives some other objectives of my study are
listed below:
To understand the awareness level of potential customer in regards
to life insurance, general insurance and mutual funds by directly
interacting with them.
To provide the requisite information to the potential customer about
the investment.
To understand the purchasing behavior of the people towards the
insurance and mutual funds.
To educate the people about the insurance and mutual funds.
To keep a sharp look in the market to understand the behavior of
competitor.
So from the above listed objective I got opportunity to interact with
customer and to understand their behavior.
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SCOPE
The scope of this project work is very wide, interacting with People
helps me a lot to learn about the awareness level of customers
towards mutual funds and insurance and helps me to understand
their decision making process of investing in insurance and mutual
funds. It also gave me opportunity to visit different people who make
me familiar with the market of investment. It also helps me to learn
how to behave in market as well as helps me to behave in front of
customers. Interacting with different people with different opinion and
views helps me to learn the human purchasing behavior in regards to
life insurance and mutual funds and the data collected from these
sources helps to interpret the awareness level of potential customers.
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SIGNIFICANCE
From my point of view every study work always gives something
rather than nothing. So I had listed some of the significance apart from
number of the advantages.
Understanding real life situations in organization and their
related environment and accelerating the learning process of
how his/her knowledge could be used in realistic way.
Understanding the formal and informal relationship in an
organization as well as in a market.
To understand the behavior of potential customer with different
views and opinion towards the investment.
Learn to adopt our self in the changing market.
To recognize the need and demand of the customer.
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Developed the personality with continuous learning.
Got the market exposure.
Explore the new strengths and their development.
Learned how to formulate the corporate strategies and their
implementation.
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RESEARCH METHODOLOGY
Since every project begins with the search of information, because it
is vital source to interpret and to understand the need and demand of
the product.
To understand the customer in an emphatic manner we need to
understand their behavior and that can be achieved by doing a
research and to carry out the research a methodology is needed.
Research methodology is a way to systematically solve the research
problem. it may be understood as a science of studying how research is
done scientifically .when we talk about research methodology we not only
talk of the research methods but also consider the logic behind the methods
we use in the context of our research study and explain why we are using a
particular method or technique and why we are not using others so that
research results are capable of being evaluated either by the researcher
himself or by others.
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Datas are the useful information or any forms of document designed in a
systematic and standardize manner which are used for some further
proceedings. One of the important tools for conducting marketing research
is the availability of necessary and useful data. Some time the data are
available readily in one form or the other and some time the data are
collected afresh. The sources of Data fall under two categories, Primary
Source and Secondary Sources.
SOURCES OF DATA
PRIMARY DATA: The data which is collected by the researcher himself is
called primary data. it is fresh data.
SECONDARY DATA: The data obtained through published or written
sources collected through other sources than the researcher himself is
called secondary data.
PRIMARY DATA:
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Direct interaction with customers
Telecommunication
mail
questionnaire
SECONDARY DATA:
Magazines
journals
internet
companys handouts
This project is basically based on primary data which I gathered from
the direct verbal interaction with the potential customers.
SAMPLING SIZE -100 RESPONDENTS
SAMPLING AREA AGRA
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DATA COLLECTION
For the purpose of this project, a questionnaire was designed to
collect data. The questions were structured for general information.
Questionnaire is one of the good methodology which I had used to
collect requisite information about my project work.
DATA ANALYSIS TECHNIQUE
a.Simple average
b.Tabulation
LIMITATIONS
Besides number of advantages this project also have some
limitation, some of
them are listed below.
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Poor participation of the customer.
Low awareness level.
Less number of potential customers.
Frequent adaptation based on market condition is very tuff.
Risk factor.
Perception of the customer is negative.
Customers are not agreed quickly.
Fear of fraud or insolvency in the customer mind.
Sometime the scheme offered by the company didnt meet the
customer expectations.
Expectation on ROI (return on investment) is very high.
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CHAPTER-2
INTRODUCTION
TO
ORGANISATION
1. HISTORY
2. ORGANISATION STRUCTURE
3. PRODUCT PROFILE
4. FINANCIAL STATUS
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HISTORY OF THE COMPANY
The Kotak Mahindra group is a financial organization established in 1985 in
India. It was previously known as the Kotak Mahindra Finance Limited, a
non-banking financial organization. In February 2003, Kotak Mahindra
Finance Ltd, the group's flagship company was given the license to carry on
banking business by the Reserve Bank of India (RBI). Kotak Mahindra
Finance Ltd. is the first company in the Indian banking history to convert to a
bank.
The group has a net worth of over Rs. 6,523 crore and has a distribution
network of branches, franchisees, representative offices and satellite offices
across cities and towns in India and offices in New York, London, San
Francisco, Dubai, Mauritius and Singapore. The Group services around 6.2
million customer accounts.
The bank is headed by K.M. Gherda
Kotak Mahindra is one of India's leading financial organizations, offering a
wide range of financial services that encompass every sphere of life. From
commercial banking, to stock broking, to mutual funds, to life insurance, to
investment banking, the group caters to the diverse financial needs of
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individuals and corporate.
Kotak Mahindra Old Mutual Life Insurance Ltd.
Kotak Mahindra Old Mutual Life Insurance is a 74:26 joint venture between
Kotak Mahindra Bank Ltd. and Old Mutual plc. Kotak Mahindra Old Mutual
Life Insurance is one of the fastest growing insurance companies in India
and has shown remarkable growth since its inception in 2001.
About Kotak Mahindra Group
THINK INVESTMENTS.THINK KOTAK
Kotak Mahindra group is one of Indias leading banking and financial
services organizations, with offerings across personal financial services;
commercial banking; corporate and investment banking and markets; stock
broking; asset management and life insurance. The Kotak Group employs
around 20,000 people and has over 1,350 offices across 370 cities and
towns in India. Kotak also has offices in London, New York, San Francisco,
Singapore, Dubai and Mauritius.
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About Old Mutual Plc
Old Mutual plc is an international savings and wealth management company
based in the UK. Originating in South Africa in 1845, it is among the top 50
largest companies in the FTSE100. The group has a balanced portfolio of
businesses offering Asset Management, Life Assurance, Banking and
General Insurance Services in over 40 countries, with a focus on South
Africa, Europe and the United States, and a growing presence in Asia
Pacific. Old Mutual plc employs approximately 53,000 employees worldwide
and is listed on the London and Johannesburg stock exchanges.
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Companys Vision and Mission
Mission:
The Company focuses on the needs of their customers and creates
confidence, trust and loyalty by offering a wide range of innovative
insurance solutions.
Strengthened by their commitment to professional management,
company ensures the continued growth and advancement of their
employees.
Vision:
Kotak Life Insurance has a deep rooted commitment to improve the quality
of life of its customers, employees and stakeholders. They aim at improving
the long term value in their relationship by continuous innovation and
improvements. They do this by their three-prong effort which strives to make
Kotak Life Insurance a corporate with values.
Increase Customer Value
Kotak Life Insurance has gone to the heart of its customer's
requirements and developed products which are unique and serve the
customer needs perfectly. It builts a relationship of mutual trust and benefit
to serve the Indian customer. At Kotak Life Insurance the customer always
comes first.
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Cohesive Work Environment
It forms long-term partnership with its employees by offering them an
invigorating work experience. It not only demand loyalty, sincerity and
values but also give it back in equal measures. Kotak Life Insurance will like
to offer its employees space to grow, innovate and build a long-term career.
Work with Honors
Kotak Life Insurance delivers everyday services in the marketplace with
the high sense of duty and commitment. Their employees strive to build the
long-term value for all those come in contact with Kotak Life Insurance.
Their consumers, distributors, employees, shareholders and the nation have
their commitment that it will uphold the values of trust, integrity and a Sense
of Honors in every thought, act and deed in order to positively contribute to
individual, society and nation growth.
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ORGANISATION STRUCTURE
CHANNEL MARKETING
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Distribution Network of Individual Life Insurance Business in India
CURRENT AUTHORITIES OF KOTAK LIFE INSURANCE
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MANAGING DIRECTOR: - MR. GAURANG SHAH
CFO :- G. MURALIDHAR
VICE-PRESIDENT TRAINING AND
MANAGEMENT DEVELOPMENT: - MR. ARUN
PATIL
VICE PRESIDENT HR: - MR. SUGATA DUTTA
VICE-PRESIDENTS DISTRIBUTION
DISTRIBUTION DEVELOPMENT AND
PLANNING: - MR. KAMLESH VORA
APPOINTED ACTUARY: - JOHN BRYCE
PRODUCT PROFILE
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Protection Plans
Kotak Loan Protection Plan
Kotak Loan Protection Plan is a protection plan that helps share the burden
of your loan.
Kotak Term/Preferred Term Plan
The Kotak Term/Preferred Term Plan is a pure risk cover plan that provides
you with a high level of protection at nominal costs.
Kotak Eternal Life Plans
Kotak Eternal Life Plans are participating whole life plans that provide
enhanced protection till the golden age of 99.
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Savings & Investment Plans
Kotak Platinum Advantage Plus
You've lived life on your own terms; always done what you've believed in.
You are used to having the luxury of choice and the power to control.
Kotak Smart Advantage
Kotak Smart Advantage is an intelligent unit-linked plan that is based upon
the idea of regular savings and systematic accumulation of wealth in the
long term.
Kotak Safe Investment Plan
Kotak Safe Investment plan is the ideal investment plan for you with its
unique Seal of Guarantee offer that not just gives you the best of bull
markets but also eliminates any capital loss in falling markets.
Kotak Flexi Plan
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Kotak flexi plan offers you an ideal market-linked investment plan that helps
you create your own financial future by offering you the flexibility and control
over your money.
Kotak Platinum Advantage Plan
Kotak Platinum Advantage Plan features capital protection, embedded
investment advice, life cover and aggressive market linked growth options.
Kotak Easy Growth Plan
Kotak Easy Growth plan, a single premium investment plan that generates
value for you for whole life as well as provides protection to your family in
case of unforeseen events.
KotakC
apital Multiplier Plan
The Kotak Capital Multiplier Plan is the only plan of its kind that allows you
to enjoy returns even beyond maturity.
Kotak Money Back Plan
This plan offers the key benefit of cash lump sums at periodic intervals of
five years ensuring that you are able to meet any of your financial
obligations.
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Kotak Endowment Plan
Kotak Endowment Plan is a participating endowment plan that provides you
an avenue for long term regular investments to accumulate a lump sum on
maturity.
Kotak Premium Return Plan
The premium Return Plan will get you the dual benefit of a risk cover and
savings, with minimal paperwork and procedures.
Kotak Sukhi Jeevan Plan
Sukhi Jeevan is a long-term savings and protection plan that keeps pace
with your changing needs at every step of life.
Kotak Gramin Bima Yojana
Kotak Surakshit Jeevan
Kotak Surakshit Jeevan, an enhanced protection and long-term savings
plan, makes sure your family remains financially independent even if you
are not around.
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Retirement Plans
Kotak Secure Retirement Plan
An ideal retirement solution is one that gives you complete flexibility and
peace of mind, not only while you save for your retirement but also after you
retire.
Kotak Retirement Income (Unit Linked)
Kotak Retirement Income Plan is an ideal retirement solution that gives you
complete flexibility and peace of mind, not only while you save for your
retirement but also after you retire.
Kotak Long Life Secure Plus
Kotak Long Life Secure Plus is a unit-linked plan that ensures your
investment gives maximum protection to secure your family's future and
their financial independence
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Kotak Long Life Wealth Plus
Kotak Long Life Wealth Plus is an intelligent investment plan that helps you
builds your future net worth with power-packed features that actively monitor
and manage your investment growth
Kotak Retirement Income Plan
The Kotak Retirement Income Plan is a savings plan designed to meet your
post-retirement needs. It is a plan that gives you "Jeene ki azaadi".
Child Plans
Kotak Headstart Child Plans
The headstart child plans are specially tailored, cost effective plans that aim
to give your children the financial means to pursue his or her dreams
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Kotak Child Advantage Plan
The Kotak Child Advantage Plan is an investment plan designed to meet
your child's future financial needs.
PLANS FOR GROUP
Kotak Group Shield
Kotak Group Shield is a comprehensive solution that helps protect your
customers assets and savings in the unfortunate event of death, illness or
disability.
Kotak Group Assure
Kotak Group Assure is a comprehensive solution that helps protect your
customers assets and savings in the unfortunate event of death, illness or
disability.
Kotak Term Grouplan
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Kotak Term Grouplan provides life cover for a group of employees, by
paying a lump sum benefit to the beneficiary on the unfortunate death of an
employee.
Kotak Gratuity Grouplan
Gratuity management solution manages your gratuity liability effectively but
also helps you release resources for your core business activities.
Kotak Superannuation Grouplan
Kotak Superannuation Grouplan (KSGP) is a uniquely flexible product that
addresses the needs of both the employers and the employees.
Kotak Credit-Term Grouplan
The Kotak Credit-Term Grouplan, is the right solution to your needs,
protecting both your institution's and your customer's interest.
Kotak Complete Cover Grouplan
Kotak Complete Cover Grouplan can provide your institution the required
value-add to differentiate your products and make them more competitive.
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FINANCIAL
STATUS OF THE
COMPANY
FINANCIAL RECORD AMOUNT INCRORE
YEAR 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-0
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LIC 11422 11165 12282 12558 15003 27103 27144
PRIVATEINVETMENTCOMPANIES
180 662 2085 4357 7500 15932 29268
TOTAL 11602 11827 14367 16915 22503 43035 56412
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MARKET SHARE
YEAR 2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
LIC 98% 94% 85% 74% 66% 63% 48%
PRIVATECOMPANIES
2% 6% 15% 26% 34% 37% 52%
From the last year data it is clear that they had shown a tremendous growth
in the year 2008 LIC and Private companies has been sold approximately
29 crore policies.
Out of the total 28% policies has been sold out in rural areas.
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Companies April may-junequarter 1 2008
April may-junequarter 1 2009
% change
LIC 7524.56 9028 19.98%
Privatecompanies
7524.54 5428 -27.86%
Major insurance companies
SBI life 1149 1073 -6.61%
Icici prudential 1590 807.07 -49.24%
Bajaj alliance 828 577 -30.31%
BSCL 502 440 -12.35%
HDFC 490 412.64 -15.79%
PERFORMANCE OF KOTAK DURING 2008-09 FINANCIAL YEAR
KOTAK LI 1400 CRORE
TIDE AGENCY 500 CRORE
ALTERNATE CHANNEL 900 CRORE
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CHAPTER-3
THEORETIC
AL FRAMEWORKOF THE STUDY
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Theoretical framework of the study
During my training I had to find out customers awareness and their views
towards Insurance in KOTAK LIFE INSURANCE
During my training I had to face many problems as customers have no time
to give me and listen to my words what I want to convey to them, they have
less trust in Insurance Companies as compared to the LIC (Life Insurance
Corporation). Introduction of new players in the market making the
competition heated up. I tried my best to overcome these problems and do
my job with utmost dedication and commitment.
From the survey I conducted by getting feedback from the consumers I
found that there are many offers, facilities and scheme launched by the
other Insurance Company. There are certain customers who are happy and
satisfied with the working performance of the company but skill a lot of
benefits are to be received by the customers which can satisfy them.
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LEARNED PRODUCT
KOTAK SMART ADVANTAGE PLAN
Make every rupee work for your happineyss
In this policy, the investment risk in the investment portfolio is borne by the
policyholder.
Why should we invest in Kotak smart advantage?
Every step in our life brings with it newel earnings. We are determined to
make the best of it, so that we can look forward to a great future. How we
shape our tomorrow depends greatly on how we build on our today.
Kotak Life Insurance introduces Kotak Smart Advantage, a great
combination of investment with insurance, to put our savings to work today.
It is a market linked plan with 100% premium allocations helping us to
accumulate wealth systematically, over the long-term. Kotak Smart
Advantage is a great combination of investment with insurance designed to
enable you to make the best use of your hard-earned money that puts you
right ahead
Key Highlights
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y Guaranteed returns of up to 275% of your first year premium at
maturity.
y Assured bonus additions at regular intervals during the policy term
to enhance your fund value.
y 100% allocation of your premiums from second year onwards to
maximize your earning potential.
y A unique3 fund offering you the maximum Opportunity for growth.
y Option to maximize protection your loved ones.
y Tex Benefits to avail under 80 C and section 10 (10D) of the Income
Tax Act, 1961.
How does this plan work?
Kotak Smart Advantage optimizes the return on your premiums paid through
a smart mix of assured additions and 100% premium allocation. Your first
years premium contributes towards guaranteeing you an Assured Addition
Advantage that boosts your fund value at regular intervals throughout the
term of the policy. The
Longer your premium paying term, the higher will be the value of the
advantage.
The Assured Addition Advantage is a powerful combination of two benefits:
A. Fixed Advantage
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The Assured Addition Advantage lets you enjoy the benefits of a fixed
assurance and a dynamic benefit directly linked to your fund value, to help
you tread comfortably and swiftly towards your goals.
Further, the plan makes your money work smarter for you through 100%1
premium allocation in each policy year from second year
Onwards, in the funds of your choice. On maturity of your policy, you will
receive the Fund Value and the Fixed Advantage benefit, provided your
premiums are always fully paid up to date. The Dynamic Advantage benefit
would have already been credited in the Fund Value at the specified
intervals to accumulate more for you at the end.
Wealth Maximization Avenue
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This plan offers you 3 well-defined fund options to manage your capital according
to your risk appetite over the term of the policy, Opportunities Fund ,Dynamic
Floor Fund Dynamic Bond Fund
High Premium Allocation
Kotak Smart Advantage Plan gives you 100% premium allocation for annual
premium sizes equal to and above Rs.36,000, resulting in greater returns.
Low premium allocation charges of up to 2% are charged for annual
premiums below Rs.36,000. These charges reduce to 0% from the 11th
year onwards.
Protection for your family (Death Benefit)
In the unfortunate event of death within the term of the policy, your
beneficiary would receive the sum assured or the fund value in the Main Account plus the Fixed Advantage Benefit, whichever is higher, plus the
fund value in the Top-up account. This plan offers you flexible life cover
options to choose from for the same annual premium.
Tax Benefits
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Tax Benefits can be availed under section 80C and 10(10D) of Income Tax
Act, 1961. Tax benefits are subject to change in tax laws.
IMPORTANT APPLICABLE DEDUCTIONS UNDER CHAPTER VI A OF
TAXATION
SECTION APPLICABLE DEDUCTIONS
80C Investment in saving scheme(initially allowed u/s 88) such as
GPF/PPF/LIC/GIS/NSC/NABARD BOND/ELSS. Tuition fees of
children & repayment of house loan principal, without any interim limit,
max. to Rs. 1 lac, including bank FD for 5yrs or more.
80CCC Premium amount deposited in pension scheme of Govt./Pvt. Insurance
Co., max. up to Rs.100,000.00
80CCD Contribution for assessee/employer in pension schemes of CentralGovt. up to the limit of 10% of salary.
80CCE Investment done u/s 80C, 80CCC & 80CCD combined should not be
more than Rs. 1,00,000.00
80D Premium paid for medical insurance for self husband/wife, or children
maximum up to Rs. 15000.00 & Additional Rs. 15,000.00 will be
allowed for Medical Insurance for mother, father from FY 08-09 (but if
age is > 65yrs, then max. up to Rs. 20,000.00).
80DD Deduction of Rs.50,000.00 against expenses of insurance premium
occurred on treatment of dependent disable ( ded. Applicable up to
Rs. 75,000.00 in case of serious disability).
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80E Payment of interest of education loan taken for higher education of
self, spouse or children; without any maximum limit of payment.
80G Donation given in PM/CM relief fund, fully exempted.
80U If assessee him/herself, if completely blind or physically or mentally
disable permanently then deduction of Rs.50,000.00 is allowed.
Important Schemes/Heads for Investment/expenses
SCHEMES/HEADS FOR INVESTMENT/EXPENSES Limit of invest. &
Applicable u/s80C
Contribution of employee in GPF/CPF/PPF MAX. 1.00 LACS
Investment against purchase of NSC, due interest on earlier
purchased NSC (excluding interest of 6th year)
MAX. 1.00 LACS
Premium paid during the year in life insurance scheme of
Govt./Pvt. Insurance co., postal insurance & ULIP scheme .
Max. 1.00 LAC
Repayment of housing loan (taken for purchase/ construction
of house from approved institution) principal & necessary
expenses as stamp duty, registration fees etc.
MAX. 1.00 LACS
Amount paid in the form of tuition fees of child studying in MAX. 1.00 LACS
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What can you gain by investing in Kotak Smart
Advantage?
Smart investing is based on the fundamental idea of regular savings and the
power of compounding, which is a great way to multiply your money. It
makes small savings transform into jackpots if planned with a long-term
vision and right investment fund options. Kotak Smart Advantage, with its
power-packed and well-defined fund options, gives you unmatched benefits
college, university, school or other educational institute
(excluding development fee or donation fee) ded. Applicable
up to 2 children only.
Investment for 5 years & above in scheduled bank/ PostOffice as fixed deposit.
MAX. 1.00 LACS
ELSS MAX. 1.00 LACS
SR. CITIZEN Deposit scheme of Post Office MAX. 1.00 LACS
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to maximise your earnings potential. Each of these funds is carefully crafted
to suit your individual long-term needs.
You can distribute your investments across one or more funds based on
your needs and goals, keeping in mind your time horizon and risk appetite.
Eligibility A Ready Reckoner
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ULIP: Unit Linked Insurance Plan
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A Unit-linked Insurance Plan, or ULIP, is a bundled product that combines
life insurance cover with investing.
OR
A ULIP is an investment-linked life insurance plan that combines
investment and protection.
ULIP
The premiums that you pay provide you not only with a life insurance
cover, but a part of it gets invested in specific investment funds of
your choice.
The funds are chosen in accordance to the amount of risk you are
willing to take.
Choices range between 0% Equity or Full Debt market related
products to 100% Equity.
As a policyholder, you can choose how you want to allocate your
insurance premiums towards protection and investment.
The insurance cover would include death benefit, disability & critical
illness.
The investment fund is divided into units of equal value.
Prices of these units are published daily in newspapers, so you can
easily track the value of your investments.
ULIPs: How exactly they work
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The costs of a ULIP are deducted from the premium that a
policyholder pays. The premium paid by you, minus any charges
to be deducted, is used to buy units in the fund selected by you at
that days unit price.
So, more units are added to your account each time you pay your
policy premium. If the unit price is relatively high, you get lesser
number of units & if the unit price is relatively low then you get
more number of units.
The value of the fund depends on the unit price, which in turn is
determined from the market value of the underlying assets.
Thus, the fund value is determined by multiplying the number of
units with the price of the unit
(FUND VALUE = UNIT PRICE NO.OF UNITS)
ULIPs: How they differ from Tradit. Plan
Ulips & endowment plans work differently. A typical endowment
plan mixes Insurance & Investment & assures you a certain sumat the end of a given period (SA & Bonuses)
In an endowment plan, the big change has been in the structuring
in bonus payments.
If it is accumulated & paid either on maturity of the policy or death
of the insured person, it is reversionary bonus.
If the policy holder is allowed to encash it , it is called non-
reversionary bonus.
The bonus depends on the performance of the company.
If the bonus is non-reversionary, some insurers offer other bonus
payment choices.
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The advantage of a Ulip over Trad. Plans, is that the policy holder
does not have to commit to a fixed level of cover or investment at
the time of inception of policy.
ULIPS : TYPES
There are 2 types of ULIPS available in the market
Single Premium: a single lump sum premium
A single lump sum premium payment is made. The death cover is
either 125% or 500% of your premium or anything between this The
death benefit is the SA or the value of investment units at the time of
claim whichever is high.
Regular Premium: monthly, quarterly, half yly, or annually.
The basic insurance cover in the event of death is usually a multiple of the
annual premium .The death benefit payment will be the SA or the value of
investment units at the time of claim, whichever is higher, or both.
HOW FLEXIBLE ARE ULIPS
The main feature of ULIPS is there flexibility.
These policies provide flexibility in life protection, investment &
savings, adjustable life cover, fund options.
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Transparency in charges.
These policies have options to take additional cover against death
due to accident or disability or critical illness, & liquidity through
partial withdrawals.
You may vary the amount of your premium payments or cover
according to your changing financial circumstances.
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CHAPTER-4
CLASSIFICATION, ANALYSIS
AND INTERPRETATION OF
DATA COLLECTED ACCORDING
TO THE TOPIC ASSIGNED
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1. WHAT IS YOUR INCOME (ANNUALLY IN RS) ?
1-150000 150000-250000 250000-350000 above350000
18 38 24 20
Interpretation
As from the pie chart it is clear most of the people fall in the income group
of 150000-250000.This income group belongs to the middle class family
and they high urge to invest After this group income level of 250000-350000
have their priority in the investment.
2. WHAT IS YOUR QUALIFICATION?
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12th Diploma Graduate Post graduate &above
32 8 41 19
Based on the 100 respondent
Interpretation
On the basis of pie chart it is clear that 41% people are graduate who has
shown knee interest in the investment. Yet there are 32% people who are
12th passed but they have very little knowledge about the investment
market.19% people are post graduate & above are partially interested in
investment.
3. OCCUPATION
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Salaried class Self employed Business class others
65 7 18 10
Interpretation
As per the pie chart it is clear 71% people fall in salaried class and they their
disposal income to invest.20% people come in business class, they have
their high income to invest in a market to get better return on their
investment.
4. GENDER
Male Female
83 17
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Interpretation
On the basis of pie chart it is clear there is dominance of male in the
investment decision .
.
5. MARITAL STATUS
Married Unmarried61 39
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Interpretation
As per the pie chart 61% people are married to whom I met. Out of these
people almost 20% are interested to invest their money. However, on the
other end out of 39% unmarried people only 5% are keen to invest in the
market in form of Insurance & Funds.
6. AGE
18-25 years 25-40 years 40-55 years Above 55 years33 78 34 5
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Interpretation
From the pie chart it is clear that 53% people those fall in the age group
of 25-40 years have shown high potential towards investment. After this
the people of age group of 40-55 years have great interest to invest in
Insurance & Funds Sector.
7.AREA
Rural Urban28 72
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Interpretation
As per the pie chart it is clear that 72% people are from urban areas and
remaining 28% people are from rural, reason for the low participation from
the rural areas are illiteracy, unawareness and lack of information.
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8.WHAT IS YOUR EARNING SOURCE?
Salary Business Investment Others69 14 9 8
Interpretation
As per the pie chart 74% people earn money through their salary and
these people are potential customer for the investment and this helps him
to get tax benefits. After that it is business class who wants to get ROI at
higher rate.
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9..WHAT % OF YOUR INCOME YOU SAVE?
0-15% 15-30% 30-40% Above40%51 41 6 2
Interpretation
As per the pie chart 51% respondent save less than 15% of their total
income these people have high urge to their saving in mutual funds &
insurance to secure their future from any uncertainty.
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10. PURPOSE OF INVESTMENT
Saving forfuture
Wealth creation Tax rebate Diversification
54 38 5 3
Interpretation
As per the pie chart it is clear that most of the people invest in the
insurance or mutual funds because they want to save something for their
bright future, very less people are interested in tax rebate from investment.
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