SUMMER TRAINING PROJECT REPORT

(M.B.A 035)

“Comparative Study of Customer

Behaviors towards LIFE INSURANCE,

MUTUAL FUND & EQUITY MARKET”

Submitted in partial fulfillment of the requirement for

MBA Degree Programme

Of Ut tar Pradesh Technica l Univers i ty, Lucknow

By

Swati Gupta

ROLL NO.-0806770068

MBA-III Semester

(2008-2010)

1

Hindustan Institute of Management & Computer Studies,

Farah, Mathura, (U.P)

Acknowledgement

“Knowledge is an experience gained in life, it is the choicest possession, which should not be

shelved but should be happily shared with others”.

Planning and motivation are two key factors in making any activity a success. Goal is a result of a

group effort rather than individual effort. It has been same in the case of this report. The operation

and support of many individual has made this project a success.

As we know that the employees are the foundation of an organization and the whole of the

organization is depended on the employees.

In preparation of this report by me, I feel great pleasure because it gives me extensive practical

knowledge in my career. I get idea about Indian financial Industry by this project.

I would like to express my sincere gratitude to my project guide MR.SHALABH SRIVASTAVA

( Senior Branch Manager of Pinnacle Wealth management Channel Partner of Kotak Life Insurance) &

MR. SHAKEEL RATEEYA For valuable inspiration and guidance provided me throughout the course

of this project. They have patient and critically gone the subject matter.

I would like to take opportunity to express my gratitude towards all of them who have contributed

directly or indirectly in my project work.

I also thank (Kotak Mahindra Old Mutual Life Insurance ltd.) for providing me the opportunity to

work for this project which was an excellent learning experience for me.

Regard,

Swati Gupta,

2

HIMCS, Farah, Mathura. (U.P)

Declaration

I, Swati Gupta, Student of MBA III Semester, Hindustan Institute of Management & Computer

Studies Mathura, hereby solemnly declare that the Summer Training Project Report titled

“Comparative study of Consumer behavior towards Life Insurance, Mutual Fund & Equity

Market” is my own original work and has not been submitted to any other University or institute for

the award of any degree or diploma.

PLACE: - Agra

DATE: 28 /10/2009

Name of Student: Swati Gupta

Roll NO.0806770068

3

Preface

The Harder You Work…… The Luckier You Get.

In this era of globalization as a marketer it is essential to know the pulse of the consumer and the

market trends. Thus it is essential not only to have theoretical knowledge but also to have the feel of

the market as well.

It was a privilege for us to work in a reputed organization- Kotak Mahindra Old Mutual Life

Insurance Ltd. This has given us an opportunity to work in a truly professional environment where

team work score over individual effort, where there is a helpful atmosphere.

A well planned, properly executed and evaluated training helps a lot in inoculating good work culture.

It provides linkage between student and industry in order to develop the awareness of individual

approach to problem solving based on the broad understanding of plant machinery, process and mode

of operation of individual organization. The project on “Comparative study of customer behavior

towards life insurance, mutual fund & equity market” has been made to facilitate effective

understanding about the marketing aspects.

The project training has provided me an opportunity to gain practical experience, which has helped

me to increase my sphere of knowledge to a greater extent. I have tried to summarize all our

experience and knowledge acquired up till now, in this report. This project is a keen effort to obtain

the expected results and fulfill all the information required.

At the end annexure and bibliography are given for effective understanding.

I am grateful to Kotak Mahindra Old Mutual Life Insurance Ltd for providing required support.

I have tried to present this report to the best of my capabilitity .In case of any errors kindly pardon me.

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Thank you for your interest in my project report.

Swati Gupta

TABLE OF CONTENT

CONTENTS PAGE

Abstract 6-7

Introduction 8-22

Financial market

About Insurance Market

Insurance Sector Reforms 23-24

IRDA 25-26

COMPANY PROFILE 30-40

History, Group Structure

Mission, Vision& Values

Management

Concept of Human Life Value 41

Kotak Products-KSAP 45-49

Mutual Fund 50-61

Equity Market 62-73

Objective of the study 74

Research Methodology 75

Data Analysis 83-87

Findings 88

SWOT Analysis 90-92

Conclusion 93

References 94

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Appendix 95-100

ABSTRACT

The basic objective of any financial services company would be to provide an absolute tailor made

products and services to the customer and to retain them into the organization, but to retain a particular

customer is not easy because customer expectations change by time and it becomes a tough job for the

companies to curb the needs of their customers

This research is conducted to understand the customer’s perception towards mutual fund. Till

yesterday people are having very less knowledge for mutual funds because of brokerage companies in

India have not made efforts to expand the market

Customer satisfaction is a measure of how products and services supplied by a company can meet the

customer’s expectations.

Customer satisfaction is still one of the single strongest predictors of customer retention. It’s

considerably more expensive to attract new customers than it is to keep old ones happy. In a climate

of decreasing brand loyalties, understanding customer service and measuring customer satisfaction are

very crucial.

There is obviously a strong link between customer satisfaction and customer retention. Customer's

perception of Service and Quality of product will determine the success of the product or service in the

market.

With better understanding of customers' perceptions, companies can determine the actions required to

meet the customers' needs. They can identify their own strengths and weaknesses, where they stand in

comparison to their competitors, chart out path future progress and improvement. Customer

satisfaction measurement helps to promote an increased focus on customer outcomes and stimulate

improvements in the work practices and processes used within the company.

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Customer expectations are the customer-defined attributes of your product or service you must meet or

exceed to achieve customer satisfaction.1

There are many reasons why customer expectations are likely to change over time. Process

improvements, advent of new technology, changes in customer's priorities, improved quality of service

provided by competitors are just a few examples.

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Introduction

Financial market:

Financial market is a mechanism that allows people to easily buy and sell (trade)

Financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural

goods), and other fungible items of value at low transaction cost and at prices that reflect the efficient

market hypothesis. Financial markets have evolved significantly over several hundred years and are

undergoing constant innovation to improve liquidity.

India Financial Market promotes the savings of the economy, providing an effective channel for

transmitting the financial policies. It is a well-developed, competitive, efficient and integrated

financial sector. There are large numbers of buyers and sellers of the financial product, the prices are

fixed by the market forces of demand and supply within the Indian Financial Market.

Financial markets facilitate –

The raising of capital (in the capital markets);

The transfer of risk (in the derivatives markets);

International trade (in the currency markets)

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Types of financial markets-

The financial markets can be divided into different subtypes:

Capital markets which consist of:

Stock markets, which provide financing through the issuance of shares or common stock, and

enable the subsequent trading thereof.

Bond markets, which provide financing through the issuance of bonds, and enable the

subsequent trading thereof.

Commodity markets, which facilitate the trading of commodities.

Money markets, which provide short term debt financing and investment.

Derivatives markets, which provide instruments for the management of financial risk.

Futures markets, which provide standardized contracts for trading products at some future

date.

Insurance markets, which facilitate the redistribution of various risks.

Foreign exchange markets, which facilitate the trading of foreign exchange

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The Financial Market in India focuses on these features:

Real-time India Financial Indices – BSE 30 Index, Sector Indexes, Stock Quotes, Sensex

Charts, Bond prices, Foreign Exchange, Rupee Dollar Chart

Indian Financial Market news

Stock News – Bombay Stock Exchange, BSE Sensex 30 closing index, S&P CNX-Nifty NSE,

stock quotes, company information, issues on market capitalization, corporate earning

statements, Indian Business Directory

Fixed Income – Corporate Bond Prices, Corporate Debt details, Debt trading activities,

Interest Rates, Money Market, Government Securities, Public Sector Debt, External Debt

Service

Foreign Investment – Foreign Debt Database composed by BIS, IMF, OECD,& World Bank,

Investments in India & Abroad

Global Equity Indexes – Dow Jones Global indexes, Morgan Stanley Equity Indexes

Currency Indexes – FX & Gold Chart Plotter, J. P. Morgan Currency Indexes

National and Global Market Relations

Mutual Funds

Insurance

Loans

Forex and Bullion

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The following table illustrates where financial markets fit in the relationship between lenders

and borrowers:

Relationship between lenders and borrowers

LendersFinancial

Intermediaries

Financial

MarketsBorrowers

Individuals

Companies

Banks

Insurance Companies

Pension Funds

Mutual Funds

Interbank

Stock Exchange

Money Market

Bond Market

Foreign Exchange

Individuals

Companies

Central

Government

Municipalities

Public Corporations

From all those financial market, I did detailed study about Insurance market, Stock market, and mutual

fund market because mostly people usually invest their money in these markets.

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Insurance Market

Insurance may be defines as social device to protect the economic value of the Life and other assets.

Under the plan of Insurance a group of people are brought together and their share of money is pooled

to manage the loss suffered by any of them.

In its basic form is defined as “ A contract between two parties whereby one party called Insurance

insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a

fixed amount of money on the happening of a certain event."

Insurance, in law and economics, is a form of risk management primarily used to hedge against the

risk of potential financial loss. Insurance is defined as the equitable transfer of the risk of a potential

loss, from one entity to another, in exchange for a premium and duty of care

In simple terms it is a contract between the person who buys Insurance and an Insurance company who

sold the Policy. By entering into contract the Insurance Company agrees to pay the Policy holder or

his family members a predetermined sum of money in case of any unfortunate event for a

predetermined fixed sum payable which is in normal term called Insurance Premiums.

Insurance is basically a protection against a financial loss which can arise on the happening of an

unexpected event. Insurance companies collect premiums to provide for this protection. By paying a

very small sum of money a person can safeguard himself and his family financially from an

unfortunate event.

For Example if a person buys a Life Insurance Policy by paying a premium to the Insurance company

, the family members of insured person receive a fixed compensation in case of any unfortunate event

like death. There are different kinds of Insurance Products available such as Life Insurance, Vehicle

Insurance, Home Insurance, Travel Insurance, Health or Med claim Insurance etc.

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Characteristics of Insurance

1. Sharing of Risk

2. Cooperative device

4. Payment on event of happening of any special event

5. The amount of payment depends on the size and type of loss.

6. The success of Insurance business depends on the law of large number of people insured against

similar risk.

7. Insurance is a business which spreads the loss and the risk of few people in the large Number of

people.

8. The insurance is a plan in which insured transfer his risk to insurer.

9. Insurance is a legal contract.

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ORIGINE OF INSURANCE

Almost 4,500 years ago, in the ancient land of Babylonia, traders used to bear risk of the

caravan trade by giving loans that had to be later repaid with interest when the goods arrived safely. In

2100 BC, the Code of Hammurabi granted legal status to the practice. That, perhaps, was how

insurance made its beginning.

Life insurance had its origins in ancient Rome, where citizens formed burial clubs that would meet the

funeral expenses of its members as well as help survivors by making some payments.

As European civilization progressed, its social institutions and welfare practices also got more and

more refined. With the discovery of new lands, sea routes and the consequent growth in trade,

medieval guilds took it upon themselves to protect their member traders from loss on account of fire,

shipwrecks and the like.

Brief History of the Insurance Sector in India

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. 

The story of insurance is probably as old as the story of mankind. The same instinct that

prompts modern businessmen today to secure themselves against loss and disaster existed in primitive

men also. They too sought to avert the evil consequences of fire and flood and loss of life and were

willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is

largely a development of the recent past, particularly after the industrial era – past few centuries – yet

its beginnings date back almost 6000 years.

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Life Insurance in its modern form came to India from England in the year 1818. Oriental Life

Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian

Soil. All the insurance companies established during that period were brought up with the purpose of

looking after the needs of European community and these companies were not insuring Indian natives.

However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance

companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and

heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded

the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal

rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into

existence to carry the message of insurance and social security through insurance to various sectors of

society. Bharat Insurance Company (1896) was also one of such companies inspired by nationalism.

The Swadeshi movement of 1905-1907 gave rise to more insurance companies. The United India in

Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore

were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of

the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian

Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies

established during the same period. Prior to 1912 India had no legislation to regulate insurance

business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were

passed. The Life Insurance Companies Act 1912 made it necessary that the premium rate tables and

periodical valuations of companies should be certified by an actuary. But the Act discriminated

between foreign and Indian companies on many accounts, putting the Indian companies at a

disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance business.

From 44 companies with total business-in-force as Rs.22.44 Crore, it rose to 176 companies with total

business-in-force as Rs.298 Crore in 1938. During the mushrooming of insurance companies many

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financially unsound concerns were also floated which failed miserably. The Insurance Act 1938 was

the first legislation governing not only life insurance but also non-life insurance to provide strict state

control over insurance business. The demand for nationalization of life insurance industry was made

repeatedly in the past but it gathered momentum in 1944 when a bill to amend the Life Insurance Act

1938 was introduced in the Legislative Assembly. However, it was much later on the 19th of January

1956 that life insurance in India was nationalized. About 154 Indian insurance companies, 16 non-

Indian companies and 75 provident were operating in India at the time of nationalization.

Nationalization was accomplished in two stages; initially the management of the companies was taken

over by means of an Ordinance, and later, the ownership too by means of a comprehensive bill. The

Parliament of India passed the Life Insurance Corporation Act on the 19th of June 1956, and the Life

Insurance Corporation of India was created on 1st September, 1956, with the objective of spreading

life insurance much more widely and in particular to the rural areas with a view to reach all insurable

persons in the country, providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate

office in the year 1956. Since life insurance contracts are long-term contracts and during the currency

of the policy it requires a variety of services need was felt in the later years to expand the operations

and place a branch office at each district headquarter. Re-organization of LIC took place and large

numbers of new branch offices were opened. As a result of re-organization servicing functions were

transferred to the branches, and branches were made accounting units. It worked wonders with the

performance of the corporation. It may be seen that from about 200.00 Crore of New Business in 1957

the corporation crossed 1000.00 Crore only in the year 1969-70, and it took another 10 years for LIC

to cross 2000.00 Crore mark of new business. But with re-organization happening in the early eighties,

by 1985-86 LIC had already crossed 7000.00 Crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices, 7

zonal offices and the corporate office. LIC’s Wide Area Network covers 100 divisional offices and

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connects all the branches through a Metro Area Network. LIC has tied up with some Banks and

Service providers to offer on-line premium collection facility in selected cities. LIC’s ECS and ATM

premium payment facility is an addition to customer convenience. Apart from on-line Kiosks and

IVRS, Info Centers have been commissioned at Mumbai, Ahmadabad, Bangalore, Chennai,

Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision of providing easy access to

its policyholders, LIC has launched its SATELLITE SAMPARK offices. The satellite offices are

smaller, leaner and closer to the customer. The digitalized records of the satellite offices will facilitate

anywhere servicing and many other conveniences in the future.

From then to now, LIC has crossed many milestones and has set unprecedented performance

records in various aspects of life insurance business. The same motives which inspired our forefathers

to bring insurance into existence in this country inspire us at LIC to take this message of protection to

light the lamps of security in as many homes as possible and to help the people in providing security to

their families.

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Some of the important milestones in the life insurance business in

India are

1850 Non life insurance debuts with triton insurance company. 1870 Bombay mutual life

assurance society is the first Indian owned life insurer

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 taken over by the central government

and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution

of Rs. 5 Crore from the Government of India. The General insurance business in India, on the other

hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company

established in the year 1850 in Calcutta by the British. Some of the important 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. 

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 genera insurance

business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into

four companies’

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KINDS OF INSURANCE

Insurance is divided in two basic zones:-

1. General Insurance.

2. Life Insurance.

General Insurance

Insurance of the non life assets are called general insurance, this includes loss of asset against water,

fire, earthquake etc. With the detarrification in the Indian Market in General Insurance the monopoly

of the general Insurance public sector’s companies has been broken. With the entrance of the new

private player market innovative technique has been introduced to capture the mark 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 ratable 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 underinsuring the property by 50%). This concept is quite often not

understood by most insured.

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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, Workmen’s Compensation

Policy etc offer cover against legal liabilities that may arise under the respective statutes— Motor

Vehicles Act, The Workmen’s Compensation Act etc. Some of the covers such as the foregoing

(Motor Third Party and Workmen’s 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.

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 one’s

property, which one might have acquired from one’s hard earned income. A loss or damage to one’s

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.

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Life Insurance

What Is 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 provides protection against financial loss resulting from death. It is an insurance

company's promise to pay a beneficiary a specific amount of money When an insured dies in exchange

for timely payment of premiums. The primary Purpose of life insurance is therefore protection of the

family in the event of death.

Insurance is also seen as a tool to plan effectively for future years, your retirement, and for your

children's future needs. Today, the market offers insurance plans that not just cover your life and

but at the same time grow your wealth too.

What Is It Intended To Do?

Life insurance offers security in the event of the insured’s death. Life insurance Offers financial

protection to survivors. It provides dependents with the necessary Funds to settle financial obligations

and to cover the loss of income created by the Insured’s death. Life insurance policies are usually

purchased with a specific Intention in mind - to protect a mortgage or an estate, to provide for

educational Costs, for retirement or for charity, etc.

Why is Life Insurance Necessary?

People carry life insurance for many reasons. Among the most common are to pay Off a mortgage, or

personal debts (car loan, credit cards…), educational costs for Young children, for beneficiaries to be

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able to maintain their current standard of living, for child care, for immediate financial needs, and

medical or funeral costs.

How Might Life Insurance Needs Change Over Time?

If an individual has finished raising their family, has paid off their mortgage and No longer has major

financial obligations, then their life insurance needs will be Lower than when they were younger. An

individual may choose to no longer carry their insurance or to reduce their coverage amount to a level

just sufficient to ensure that their survivors have enough money to pay final expenses (burial,

Medical, estate taxes…).

How Does Life Insurance Work?

All aspects of life involve risk, e.g., fire, theft, auto accidents, injury. Insurance provides a means of

transferring the financial consequences of certain risks from the individual to an insurance company.

When an individual buys life insurance, they are grouped together with other people who are similar

in age, sex, and health. Actuaries calculate how many people in each group are likely to dyeing

period of time. The more deaths there are in a group, the more money will be needed to pay death

claims, and therefore, more money will have to be collected as premiums.

Since younger people are less likely to die than older people,

Insurance premiums are generally lower at younger ages. Each year, the insured Pays the insurance

company for their insurance policy. This money is called a Premium. The insured also informs the

insurance company who should get the Insurance money if they (the insured) die. This is a called

designating a Beneficiary. If the insured dies while their policy is active, the insurance company will

pay the beneficiaries the insurance money. Insurance companies can do this because only a small

number of people die each year, while many more people pay those premiums. The “risk” of death is

spread out among many people in order to prevent a financial loss to the beneficiaries of the few who

will die.

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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

recognizing that insurance is an important part of the overall 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 recommendation 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 single entity foreign companies

may be allowed to enter the industry in collaboration with the domestic companies.

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 each state.

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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

Computerization 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. But at 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.

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.

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The Insurance Regulatory and Development Authority

(IRDA):

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 has fastidiously

stuck to its schedule of framing regulations and registering the private sector insurance companies.

The other decision 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.

With the Insurance Regulatory and Development Act, the focus shifted to the following:

* The Insurance Regulatory and Development Authority (IRDA) should give priority to health

insurance while issuing certificates of registration;

* Policyholders' funds will be invested in the social sector and infrastructure. The percentage may

be specified by the IRDA and such regulations will apply to all insurers operating in the country;

* Insurers will be expected to undertake a certain percentage of business in the rural or social sector

and provide policies to persons residing in rural areas, workers in the unorganized and informal

economically back

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In case the insurers fail to meet the social sector obligation a fine of Rs.2.5 mn.Would be imposed the

first time. Subsequent failures would result in cancellation of licensees.

ROLE OF IRDA

Section 14 of IRFDA Act, 1999 lays down the duties, powers & functions of IRDA.

Subject to the provisions of the Act & any other law for the time being in force, the Authority

shall have the duty to regulate, promote & ensure orderly growth of the insurance business &

re-insurance business.

The power & functions of the Authority shall include:

1. Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such

registration.

2. Protection of the interests of the policy holders, insurable interest, settlement of insurance claim,

surrender value of policy & other terms & conditions of contracts of insurance.

3. Specifying requisite qualifications, code of conduct, & practical training for intermediary or

insurance intermediaries & agents;

4. Specifying the code of conduct for surveyors & loss assessors

5. Promoting & regulating organizations connected with the insurance & re-insurance business;

6. Calling for information from, undertaking inspection of, conducting enquiries & investigations

including audit of the insurers, intermediaries, insurance intermediaries & other organizations

connected with the insurance businnes;

7. Control & regulations of the rates, advantages, terms & conditions that may be offered by insurer in

respect of general insurance business not so controlled & regulated by the Tariff Advisory

Committee under the section 64U of the Insurance Act, 1938 (4 of 1938);

8. Specifying the firm & manner in which books of account shall be maintained & statement of

accounts shall be rendered by insures & other insurance intermediaries;

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9. Regulating maintenance of margin of solvency;

10. Adjudications of disputes between insurers & intermediaries or insurance intermediaries;

ROLE OF LIFE INSURANCE:

► Role 1: Life insurance as "Investment":

Insurance is an attractive option for investment. While most people recognize the risk hedging and tax

saving potential of insurance, many are not aware of its advantages as an investment option as well.

Insurance products yield more compared to regular investment options, and this is besides the added

incentives offered by insurers. You cannot compare an insurance product with other investment

schemes for the simple reason that it offers financial protection from risks, something that is missing

in non-insurance products. In fact, the premium you pay for an insurance policy is an investment

against risk.

Thus, before comparing with other schemes, you must accept that a part of the total amount invested in

life insurance goes towards providing for the risk cover, while the rest is used for savings. In life

insurance, unlike non-life products, you get maturity benefits on survival at the end of the term. In

other words, if you take a life insurance policy for 20 years and survive the term, the amount invested

as premium in the policy will come back to you with added returns. In the unfortunate event of death

within the tenure of the policy, the family of the deceased will receive the sum assured. Thus insurance

is a unique investment avenue that delivers sound returns in addition to protection.

► Role 2: Life insurance as "Risk cover”:

First and foremost, insurance is about risk cover and protection - financial protection, to be more

precise - to help outlast life's unpredictable losses. Designed to safeguard against losses suffered on

27

account of any unforeseen event, insurance provides you with that unique sense of security that no

other form of investment provides. By buying life insurance, you buy peace of mind and are prepared

to face any financial demand that would hit the family in case of an untimely demise.

Insurance also provides a safeguard in the case of accidents or a drop in income after retirement. An

accident or disability can be devastating, and an insurance policy can lend timely support to the family

in such times. It also comes as a great help when you retire, in case no untoward incident happens

during the term of the policy.

With the entry of private sector players in insurance, you have a wide range of products and services

to choose from. Further, many of these can be further customized to fit individual/group specific

needs. Considering the amount you have to pay now, it's worth buying some extra sleep.

► Role 3: Life insurance as "Tax planning"

Insurance serves as an excellent tax saving mechanism too. The Government of India has offered tax

incentives to life insurance products in order to facilitate the flow of funds into productive assets.

Under Section 88 of Income Tax Act 1961, an individual is entitled to a rebate of 20 per cent on the

annual premium payable on his/her life and life of his/her children or adult children.

The rebate is deductible from tax payable by the individual or a Hindu Undivided Family. This rebate

is can be availed up to a maximum of Rs 12,000 on payment of yearly premium of Rs 60,000. By

paying Rs 60,000 a year, you can buy anything upwards of Rs 10 lakh in sum assured. (Depending

upon the age of the insured and term of the policy) This means that you get Rs 12,000 tax benefit. The

rebate is deductible from the tax payable by an individual or a Hindu Undivided Family.

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.

28

Turnover of Insurance Market :( 000’crores )

Insurance Year

2001-02

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

LIC 11422 11165 12282 12558 15003 27103 27144

Private

Insurance

company

180 662 2085 4357 7500 15932 29268

This data shows that when private company enter in this insurance sector more people trust on

them year after year and previous year turnover of private company beats the turnover of L.I.C due to

better dealing with customer and customer satisfy more for private insurance company.

Market Share

Insurance 01-02 02-03 03-04 04-05 05-06 06-07 07-08

LIC 98% 94% 85% 74% 66% 63% 48%

Private

Life

Insurance

2% 6% 15% 26% 34% 37% 52%

The data shows that how well the market share of private Life Insurance increases when entered

into Insurance Market and rapidly captures the Insurance market of LIC; this is done because of

certain reasons behind the growth of Private Insurance market like-

Better Products

Variety of Products

Transparency in Products

Better Funds

Better Performance29

Flexibility in nature

Education for more educated persons.

KOTAK GROUP

Profile:

Stock broking businesses in the UK. Kotak Group was established in 1985.

Kotak Mahindra group is one of India’s 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. 

Kotak has a group net worth of around Rs.1, 400

Crore and currently employs over 2,000 dedicated employees in its various businesses. With a

presence in about 50 locations in India and offices in New York, London, Dubai and Mauritius,

the group currently services a customer base of over 5, 00,000.

The group has international partnerships with Goldman Sachs (one of the world's

largest investment banks and brokerage firms), Ford Credit (one of the world's largest dedicated

30

automobile financiers) and Old Mutual (a large insurance, banking and asset management

conglomerate).

31

32

Using Brand name KOTAK and its effect can be seen as previously Kotak Life Insurance

needed a name Old Mutual with its name but now people Kotak by the name of Kotak only not

by the name of OM Kotak.

KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LTD .

Kotak Mahindra Old Mutual Life Insurance ltd is the SECOND LIFE

INSURANCE Company who achieves its “BREAKEVEN POINT”.

KOTAK MAHINDRA OLD MUTAL PLC KOTAK LIFE

33

BANK INSURANCE

( 74% ) ( 26% ) ( 100% )

OM Kotak Mahindra Life Insurance Company Limited (OMKM) is a joint venture between

Kotak Mahindra Finance Ltd., and Old Mutual plc aims to help customers take important

financial decisions at every stage in life by offering them a wide range of innovative life

insurance products, to make them financially independent. Jeene Ki Azaadi.

Kotak Mahindra Bank is the parent company of the group.

Kotak Group entered into the life insurance business in 2001.

Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture between

Kotak Mahindra Bank Ltd. (76%) and Old Mutual plc. (24%)

Old Mutual plc.Is a world-Class international financial services company. It

Was established in South Africa before 160 years.

OLD MUTUAL is the largest financial services business in South Africa, through its life

insurance, asset management, banking and general insurance operations. The company serves

4 million life insurance policyholders and employs over 13 000 South Africans in its local

operations.

In the USA, OLD MUTUAL is one of the top ten fixed annuity busineses offering an array of

specialist asset management skills through its 23 asset management businesses. The company’s

US Life business recorded sales of $4 billion at the end of 2002.

Operations in the United Kingdom are focused on wealth management,through Gerrard as one

of the leading private client The OLD MUTUAL Group has the ability to cater for a variety of

Consumer segments and offers a comprehensive and innovative range of Products for all

income groups.

TURNOVER OF KOTAK LIFE INSURANCE IN 2008-2009 is 1,400 Crores.34

In this TIDE CHANNEL contributes 500 Crores and

ALTERNATE CHANNEL contributes 900 Crores.

Old Mutual Plc:-

Old Mutual was established more than 150 years ago. Old mutual plc, Is a world-class international

financial service company. It owns the largest companies in the following areas in South Africa.

They are:

1. Life Insurance Company

2. Asset Management Company

3. Bank

4. Non-life insurance company

It has been developed into an International financial services group whose activities are focused on

asset gathering and asset management. The Old Mutual Group offers a diverse range of financial

services in three principal geographies: South Africa, the United States and the United Kingdom. The

company is listed on the London Stock Exchange with a market capitalization of approximately $6

billion and is a member of the elite FTSE 100 index. In the 2003 rankings of the World's 500 largest

corporations by Fortune magazine, Old Mutual climbed 87 places to position number 366 and was also

listed as the 14th largest insurance company in the world.

Old Mutual is the largest financial services business in South Africa, through its life insurance, asset

management, banking and general insurance operations. The company serves 4 million life insurance

policyholders and employs over 13 000 South Africans in its local operations. In the USA, Old Mutual

is one of the top ten fixed annuity businesses offering an array of specialist asset management skills

through its 23 asset management businesses. The company’s US Life business recorded sales of $4

billion at the end of 2002.

35

Operations in the United Kingdom are focused on wealth management, through Gerrard as one of the

leading private client stock broking businesses in the UK.

The Old Mutual Group has the ability to cater for a variety of consumer segments and offers a

comprehensive and innovative range of products for all income groups.

A 26%-74% Joint venture between Old Mutual plc and KotaK Mahindra Bank Ltd.

Started operations May 2001

209% growth in premium income (year ending March 2005)

Presence in 55 cities across the country.

More than 1,60,000 policies issue (year ending March 2005)

More than 7000 Life Advisors ( year ending March 2005)

Over 1000 professional employees (year ending March 2005)

44 branches in 31 cities.

7500 life advisors.

1000employees of very good quality.

Ranks 2nd in terms of average premium per policy.

Ranks 4th in total advertising awareness.

First year premium income

2001-02: 7Crores

2002-03: 35Crores

2003-04: 125Crores

2005-06: 373Crores

2006-07: 396Crores

36

2007-08: 614 Crores

Mission

“At Kotak Life Insurance, we aim to help customers take important financial decisions at every stage

in life by offering them a wide range of innovative life insurance products, to make them financially

independent.”

Vision & Values

Our Vision:-

Kotak Life Insurance has a deep rooted commitment to improve the quality of life of its customers,

employees and stakeholders. We aim at improving the long term value in our relationship by

continuous innovation and improvements. We do this by our 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. We built a relationship of mutual trust and

benefit to serve the Indian customer. At Kotak Life Insurance the customer always comes first.

 Cohesive Work Environment: -

37

We form long-term partnership with our employees by offering them an invigorating work

experience. We 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 Honor: -

Kotak Life Insurance delivers everyday services in the marketplace with the high sense of duty and

commitment. Our employees strive to build the long-term value for all those come in contact with

Kotak Life Insurance. Our consumers, distributors, employees, shareholders and the nation have our

commitment that we will uphold the values of trust, integrity and a Sense of Honor in every thought,

act and deed in order to positively contribute to individual, society and nation growth.

Our values:-

Every member of the Kotak Group team is committed to 5 core values: Integrity, Customer First,

Boundary less, Ownership, and Passion. These values shine forth in all we do, and have become the

keystones of our success.

38

AREAS WHERE KMOM OFFICE LOCATED:-

MANAGEMENT

39

We at Kotak Life Insurance work as a team and have a flat management structure. Our top

management has many years of experience which has helped guide the company into a position of

leadership.

40

41

CONCEPT OF HUMAN LIFE VALUES

Generally speaking , one can estimate the extent of life insurance by calculating one’s

“HUMAN LIFE VALUE” (HLV) .This is the net present value of one’s future earnings.

Put simply,it is the amount that a person’s family would permanently lose,should anything unfortunate

happen to that person.

As a thumb rule, a 30 year old should insure oneself for about 8 ties his or her annual income. At

35,this is about 6 times.Of course,the exact amount must be adjusted acording to the number of

dependents ,existing investments and one’s life stage.

For instance,if at 30, a person has two children and parents to provide for, the amount of insurance

should also be higher.

You can calculate your Human life value by multiplying your current annual income with the number

of years remaining for your retirement-

Let’s assume that you are 30 years old and you earn Rs.4,00,000 per annnum.Now, if your retirement

age is 55 you have 25 years to go before retirement. So your Human Life value is (25 X 4,00,000)=

100,00,000 (One crore Rupees)

So, your Present Human Life Value is ONE CRORE RUPEES,provided you stay healthy.

If you take factors like Inflation and Increase in Income over a eriod of time into Accont, your Human

Life Value is a lot more.

INSURANCE SOLUTION FOR INDIVIDUALS42

Kotak Life Insurance offers a range of innovative, customer-centric products that meet the needs of

customers at every life stage. Its products can be enhanced with up to 4 riders, to create a customized

Solution for each policyholder.

Protection

Helping you to grow and protect

your wealth.

Savings & Investments

Manage today for a better

tomorrow.

Retirement

The road to retirement, Make it easy

Child

Plan a good future for your child.

Protection Plans

Kotak Loan Protection Plan

Kotak Term/Preferred Term Plan

Kotak Eternal Life Plans

Retirement Plans

Kotak Secure Retirement Plan

Kotak Retirement Income (Unit Linked)

Kotak Long Life Secure Plus

Kotak Long Life Wealth Plus

Kotak Retirement Income Plan

Savings & Investment Plans

43

Kotak Platinum Advantage Plus

Kotak Smart Advantage

Kotak Safe Investment Plan

Kotak Flexi Plan

Kotak Platinum Advantage Plan

Kotak Easy Growth Plan

Kotak Capital Multiplier Plan

Kotak Money Back Plan

Kotak Endowment Plan

Kotak Premium Return Plan

Kotak Sukhi Jeevan Plan

Group Plans

Kotak Group Shield

Kotak Group Assure

Kotak Term Grouplan

Kotak Gratuity Grouplan

Kotak Superannuation Grouplan

Kotak Credit-Term Grouplan

Kotak Complete Cover Grouplan

Rural Plans

Kotak Gramin Bima Yojana

44

Child Plans

Kotak Head start Child Plans

Kotak Child Advantage Plan

In all these above product the Best product of Kotak life insurance is KOTAK SMART

ADVANTAGE PLAN (KSAP)

In our summer training program we found that there is positive response towards this product by the

customers because this product has many beneficial features:-

KOTAK SMART ADVANTAGE PLAN (KSAP)

Make every rupee work for your happiness45

Every step in your life brings with it new learnings. You are determined to make the best of it, so that

you can look forward to a great future. How you shape your Tomorrow depends greatly on how you

build on your today.

Kotak Life Insurance introduces Kotak Smart Advantage offering you a smart solution to put your

savings to work today for a brighter tomorrow. It is a market linked plan with 100%1 premium

allocations helping you 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 FEATURES:-

Guaranteed returns of up to 275% of your first year premium at maturity.

Assured bonus additions at regular intervals during the policy term to enhance your fund value.

100% allocation of your premiums from second year onwards.

Unique fund offering you the maximum opportunity for growth and choice for your investment

needs.

Maximum protection for your loved ones to choose from.

INSURANCE:-

Life Cover (Financial Protection for loved ones).

46

Tax Benefit under Sec 80(c) (total premium paid will be deducted from annual income for

I.T.R).

Tax Benefit under sec 10 (10) d (100% tax free returns).

The Assured Addition Advantage is a powerful combination of two benefits:

A. Fixed Advantage Benefit (FAB):-

The Fixed Advantage benefit is an assured value guaranteed at the end of your premium

Payment term. This benefit is calculated as a percentage of your first year premium depending on the

premium payment term chosen, provided your policy is in force and all premiums are fully paid up to

date.

Premium Payment Term3

Premium Payment Term

3 or 5 year 10 years 15 years 20 years 25 years 30 years

FAB (as a

percentage of First

Year Premium)

100% 110% 135% 175% 225% 275%

B. Dynamic Advantage Benefit (DAB):-

47

The Dynamic Advantage benefit is an assured bonus addition credited to your fund value at the end of

every 10th, 15th, 20th, 25th and 30th policy year. This benefit will be calculated as a percentage of the

average value of funds in the three years preceding the benefit allocation, provided your policy is in

force and all premiums are fully paid up to date.

At The End Of policy Year

10 yr 15 yr 29 yr 25 yr 30 yr

DAB (as a percentage of

average fund

value in the last three years)

1.10% 1.35% 1.75% 2.25% 2.75%

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% 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.

Eligibility – A Ready Reckoner

.

Entry Age: - Min – 0 years; Max – 65 years

48

Maturity Age: - Min – 18 years; Max – 75 years

Policy Term: - Regular – 10 / 15 / 20 / 25 / 30 years

For Minors, minimum term – 10 years

Premium Payment Term (PPT):- Regular – Full Policy Term

Limited Premium Payment – 3 or 5 years

Minimum Premium: - Regular PPT – Rs.10,000 p.a.

Limited PPT – Rs. 36,000 p.a.

Basic Sum Assured: - Min – 5 x Annual premium

Max – Any multiple of premium

DFF vs. NIFTY

49

MUTUAL FUND

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

50

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 Mutual Fund industry in India started in 1963 with the formation of Unit Trust of India,

The flow chart below describes broadly the working of a Mutual Fund .

A Mutual Fund is a body corporate registered with the Securities and Exchange Board of

India (SEBI) that pools up the money from individual/corporate investors and invests the same on

behalf of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money

Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to

indirectly take a position in a basket of assets.

Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing

funds in securities in accordance with objectives as disclosed in offer document. Investments in

securities are spread among a wide cross-section of industries and sectors thus the risk is reduced.

51

Diversification reduces the risk because all stocks may not move in the same direction in the same

proportion at same time. Investors of mutual funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The mutual funds

normally come out with a number of schemes with different investment objectives which are

launched from time to time. A Mutual Fund is required to be registered with Securities Exchange

Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

ORGANISATION OF A MUTUAL FUND:

There are many entities involved and the diagram below illustrates the organizational set up of

a Mutual Fund:

Mutual Funds diversify their risk by holding a portfolio of instead of only one asset. This is because

by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one

asset. By creating a portfolio of a variety of assets, this risk is substantially reduced.

52

Mutual Fund investments are not totally risk free. In fact, investing in Mutual Funds contains the

same risk as investing in the markets, the only difference being that due to professional management

of funds the controllable risks are substantially reduced. A very important risk involved in Mutual

Fund investments is the market risk. However, the company specific risks are largely eliminated due

to professional fund management.

IMPORTANT CHARACTERISTICS OF A MUTUAL FUND

A Mutual Fund actually belongs to the investors who have pooled their

Funds. The ownership of the mutual fund is in the hands of the Investors.

A Mutual Fund is managed by investment professional and other

Service providers, who earns a fee for their services, from the funds.

The pool of Funds is invested in a portfolio of marketable investments.

The value of the portfolio is updated every day.

The investor’s share in the fund is denominated by “units”. The value of the units changes

with change in the portfolio value, every day. The value of one unit of investment is called

net asset value (NAV).

The investment portfolio of the mutual fund is created according to The stated

Investment objectives of the Fund.

OBJECTIVES OF A MUTUAL FUND:

53

To provide an opportunity for lower income groups to acquire without much difficulty,

property in the form of shares.

To Cater mainly of the need of individual investors, whose means are small?

To manage investors portfolio that provides regular income, growth, Safety, liquidity, tax

advantage, professional management and diversification.

ADVANTAGES OF MUTUAL FUNDS:

Reduced Risk.

Diversified investment.

Botheration free investment.

Revolving type of investment (Reinvestment).

Selection and timings of investment.

Wide investment opportunities.

Investments care.

Tax benefits.

TYPES OF MUTUAL FUNDS:

1. OPEN-ENDED MUTUAL FUNDS:-

54

The holders of the shares in the Fund can resell them to the issuing Mutual Fund Company at the

time. They receive in turn the net assets value (NAV) of the shares at the time of re-sale. Such

Mutual Fund Companies place their funds in the secondary securities market. Open-end investment

companies can sell an unlimited number of Shares and thus keep going larger. The open-end Mutual

Fund Company Buys or sells their shares. These companies sell new shares NAV plus a Loading or

management fees and redeem shares at NAV.In other words, the target amount and the period both

are indefinite in such funds

2. CLOSED-ENDED MUTUAL FUNDS:-

A closed–end Fund is open for sale to investors for a specific period, after which further sales are

closed. Any further transaction for buying the units or repurchasing them, Happen in the secondary

markets, where closed end Funds are listed. Therefore new investors buy from the existing investors,

and existing investors can liquidate their units by selling them to other willing buyers. In a closed

end Funds, thus the pool of Funds can technically be kept constant. The asset management company

(AMC) however, can buy out the units from the investors, in the secondary markets, thus reducing

the amount of funds held by outside investors. The price at which units can be sold or redeemed

Depends on the market prices, which are fundamentally linked to the NAV. Investors in closed end

Funds receive either certificates or Depository receipts, for their holdings in a closed end mutual

Fund.

ORGANISATION AND MANAGEMENT OF MUTUAL FUNDS:-

In India Mutual Fund usually formed as trusts, three parties are generally involved viz.

Settler of the trust or the sponsoring organization.

55

The trust formed under the Indian trust act, 1982 or the trust company registered under the

Indian companies act, 1956

Fund mangers or The merchant-banking unit

Custodians.

MUTUAL FUNDS TRUST:-

Mutual fund trust is created by the sponsors under the Indian trust act, 1982

Which is the main body in the creation of Mutual Fund Trust?

The main functions of Mutual Fund trust are as follows:

Planning and formulating Mutual Funds schemes.

Seeking SEBI’s approval and authorization to these schemes.

Marketing the schemes for public subscription.

Seeking RBI approval in case NRI’s subscription to Mutual Fund is Invited

FUND MANAGERS (OR) THE ASSES MANAGEMENT COMPANY (AMC)

AMC has to discharge mainly three functions as under:

I. Taking investment decisions and making investments of the funds through market

dealer/brokers in the secondary market securities or directly in the primary capital market or

money market instruments

II. Realize fund position by taking account of all receivables and realizations, moving corporate

actions involving declaration of dividends,etc to compensate investors for their investments

in units; and

56

III. Maintaining proper accounting and information for pricing the units and arriving at net asset

value (NAV), the information about the listed schemes and the transactions of units in the

secondary market. AMC has to feed back the trustees about its fund management operations

and has to maintain a perfect information system.

CUSTODIANS OF MUTUAL FUNDS:-

Mutual funds run by the subsidiaries of the nationalized banks had their respective sponsor

banks as custodians like canara bank, SBI, PNB, etc. Foreign banks with higher degree of

automation in handling the securities have assumed the role of custodians for mutual funds.

With the establishment of stock Holding Corporation of India the work of custodian for mutual

funds is now being handled by it for various mutual funds. Besides, industrial investment trust

company acts as sub-custodian for stock Holding Corporation of India for domestic schemes of

UTI, BOI MF, LIC MF, etc

Fee structure:-

Custodian charges range between 0.15% to 0.20% on the net value of the customer’s holding

for custodian services space is one important factor which has fixed cost element.

RESPONSIBILITY OF CUSTODIANS:-

Receipt and delivery of securities

Holding of securities.

Collecting income

Holding and processing cost

Corporate actions etc

RATE OF RETURN ON MUTUAL FUNDS:-

An investor in mutual fund earns return from two sources:

Income from dividend paid by the mutual fund.

57

Capital gains arising out of selling the units at a price higher than the acquisition price

Formation and regulations:

1. Mutual funds are to be established in the form of trusts under the Indian trusts act and are to

be operated by separate asset management companies (AMC s)

2. AMC’s shall have a minimum Net worth of Rs. 5 Crores;

3. AMC’s and Trustees of Mutual Funds are to be two separate legal entities and that an AMC

or its affiliate cannot act as a manager in any other fund;

4. Mutual funds dealing exclusively with money market instruments are to be regulated by the

Reserve Bank Of India

5. Mutual fund dealing primarily in the capital market and also partly money market

instruments are to be regulated by the Securities Exchange Board Of India (SEBI)

6. All schemes floated by Mutual funds are to be registered with SEBI

MUTUAL FUND SCHEME TYPES:

Equity Diversified Schemes

These schemes mainly invest in equity. They seek to achieve long-term capital appreciation by

responding to the dynamically changing Indian economy by moving across sectors such as Lifestyle,

Pharma, Cyclical, Technology, etc.

Sector Schemes

58

These schemes focus on particular sector as IT, Banking, etc. They seek to generate long-term

capital appreciation by investing in equity and related securities of companies in that particular

sector.

Index Schemes

These schemes aim to provide returns that closely correspond to the return of a particular stock

market index such as BSE Sensex, NSE Nifty, etc. Such schemes invest in all the stocks comprising

the index in approximately the same weightage as they are given in that index.

Exchange Traded Funds (ETFs)

ETFs invest in stocks underlying a particular stock index like NSE Nifty or BSE Sensex. They are

similar to an index fund with one crucial difference. ETFs are listed and traded on a stock exchange.

In contrast, an index fund is bought and sold by the fund and its distributors.

Equity Tax Saving Schemes

These work on similar lines as diversified equity funds and seek to achieve long-term capital

appreciation by investing in the entire universe of stocks. The only difference between these funds

and equity-diversified funds is that they demand a lock-in of 3 years to gain tax benefits.

Dynamic Funds

These schemes alter their exposure to different asset classes based on the market scenario. Such

funds typically try to book profits when the markets are overvalued and remain fully invested in

equities when the markets are undervalued. This is suitable for investors who find it difficult to

decide when to quit from equity.

Balanced Schemes

59

These schemes seek to achieve long-term capital appreciation with stability of investment and

current income from a balanced portfolio of high quality equity and fixed-income securities.

Medium-Term Debt Schemes

These schemes have a portfolio of debt and money market instruments where the average maturity

of the underlying portfolio is in the range of five to seven years.

Short-Term Debt Schemes

These schemes have a portfolio of debt and money market instruments where the average maturity

of the underlying portfolio is in the range of one to two years.

Money Market Debt Schemes

These schemes invest in debt securities of a short-term nature, which generally means securities of

less than one-year maturity. The typical short-term interest-bearing instruments these funds invest in

Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank Call Money Market.

Medium-Term Gilt Schemes

These schemes invest in government securities. The average maturity of the securities in the scheme

is over three years.

Short-Term Gilt Schemes

These schemes invest in government securities. The securities invested in are of short to medium

term maturities.

Floating Rate Funds

They invest in debt securities with floating interest rates, which are generally linked to some

benchmark rate like MIBOR. Floating rate funds have a high relevance when interest rates are on the

rise helping investors to ride the interest rate rise.

Monthly Income Plans (MIPS)

60

These are basically debt schemes, which make marginal investments in the range of 10-25% in

equity to boost the scheme’s returns. MIP schemes are ideal for investors who seek slightly higher

return that pure long-term debt schemes at marginally higher risk.

RISKS ASSOCIATED WITH MUTUAL FUNDS:-

Investing in Mutual Funds, as with any security, does not come without risk. One of the most basic

economic principles is that risk and reward are directly correlated. In other words, the greater the

potential risk the greater the potential return. The types of risk commonly associated with Mutual

Funds are:

1) MARKET RISK

Market risk relates to the market value of a security in the future. Market prices fluctuate and are

susceptible to economic and financial trends, supply and demand, and many other factors that cannot

be precisely predicted or controlled.

2) POLITICAL RISK

Changes in the tax laws, trade regulations, administered prices, etc are some of the many political

factors that create market risk. Although collectively, as citizens, we have indirect control through

the power of our vote individually, as investors, we have virtually no control.

3) INFLATION RISK

61

Interest rate risk relates to future changes in interest rates. For instance, if an investor invests in a

long-term debt Mutual Fund scheme and interest rates increase, the NAV of the scheme will fall

because the scheme will be end up holding debt offering lower interest rates.

4) BUSINESS RISK

Business risk is the uncertainty concerning the future existence, stability, and profitability of the

issuer of the security. Business risk is inherent in all business ventures. The future financial stability

of a company cannot be predicted or guaranteed, nor can the price of its securities. Adverse changes

in business circumstances will reduce the market price of the company’s equity resulting in

proportionate fall in the NAV of the Mutual Fund scheme, which has invested in the equity of such a

company.

5) ECONOMIC RISK

Economic risk involves uncertainty in the economy, which, in turn, can have an adverse effect on a

company’s business. For instance, if monsoons fail in a year, equity stocks of agriculture-based

companies will fall and NAVs of Mutual Funds, which have invested in such stocks, will fall

proportionately.

62

EQUITY MARKET

Introduction

This publication reviews the reforms and other market developments in the securities market in India

during April 2003 to June 2004. As a result of the reforms/initiatives taken by the Government and the

Regulators, the market microstructure has been refined and modernized.

The investment choices for the investors have also broadened. The securities market moved from T+3

settlement period to T+2 rolling settlement with effect from April 1, 2003. Further, straight through

processing has been made mandatory for all institutional trades executed on the stock exchange. Real

time gross settlement has also been introduced by RBI to settle inter-bank transactions online at real

time mode. These reforms along with other market developments have been discussed in detail in the

following chapters. This chapter, however, takes a general review of the stock market developments.

These developments in the securities market provide the necessary impetus for growth and

development, and thereby strengthen the emerging market economy in India.

Products and Participants

Mobilization of savings from surplus savers to deficit savers is most efficiently carried out by the

securities market through a range of complex products called “securities”. The definition of securities

as per the SCRA, 1956 includes shares, bonds, scripts, stocks or other marketable securities of like

nature in or of any incorporate company or body corporate, government securities, derivatives of

securities, units of collective investment scheme, interest and rights in securities, security receipt or

any other instruments so declared by the central government.

63

The securities market has essentially three categories of participants, viz., the issuer of securities,

investors in securities and the intermediaries. The issuers are the borrowers or deficit savers, who issue

securities to raise funds. The investors, who are surplus savers, deploy their savings by subscribing to

these securities. The intermediaries are the agents who match the needs of users and suppliers of funds

for a commission. These intermediaries pack and unpack securities to help both the issuers and

investors to achieve their respective goals. There are a large variety and number of intermediaries

providing various services in the Indian securities market.

This process of mobilization of resources is carried out under the supervision and overview of the

regulators. The regulators develop fair market practices and regulate the conduct of issuers of

securities and the intermediaries. They are also in charge of protecting the interests of the investors.

The regulator ensures a high

service standard from the intermediaries and supply of quality securities and non-manipulated demand

for them in the market.

Market Segments

The securities market has two interdependent segments: the primary and the secondary market. The

primary market is the channel for creation of new securities. These securities are issued by public

limited companies or by government agencies. In the primary market the resources are mobilized

either through the public issue or through private placement route. It is a public issue if anybody and

everybody can subscribe for it, whereas if the issue is made available to a selected group of persons it

is termed as private placement.

There are two major types of issuers of securities, the corporate entities who issue mainly debt and

equity instruments and the government (central as well as state) who issue debt securities. These new

securities issued in the primary market are traded in the secondary market.

64

The secondary market enables participants who hold securities to adjust their holdings in response to

changes in their assessment of risks and returns. The secondary market operates through two mediums,

namely, the over-the-counter (OTC) market and the exchange-traded.

International Scenario

Following the implementation of reforms in the securities industry during the last decade, Indian stock

markets have graduated to a better position vis-à-vis the securities market in developed and emerging

markets. As may be seen from Table 1-2, India has a turnover ratio, which is comparable to the other

developed market, and also one of the highest in the emerging markets. At the end of 2003, Standard

and Poor’s (S&P) ranked India 17th in terms of market capitalization (19th in 2002), 16th in terms of

total value traded in stock exchanges (17th in 2002) and 6th in terms of turnover ratio (7th in 2002).

India has the number one ranking in terms of listed securities on the Exchanges followed by the USA.

These data, though quite impressive, do not reflect the full Indian market, as S&P (even other

international publications) does not cover the whole market. For example, India has more than 9000

listed companies at the end of March 2004, while S&P considers only 5,644 companies. If whole

market were taken into consideration, India’s position vis-à-vis other countries would be much better.

65

Dependence on Securities Market

Corporate Sector

The 1990s witnessed the emergence of the securities market as a major source of finance for trade and

industry in India. A growing number of companies have been accessing the securities market rather

than depending on loans from financial institutions (FIs)/banks. The corporate sector is increasingly

depending on external sources (domestic market borrowings and loans) for meeting its funding

requirements. According to CMIE data (Table 1-5), the share of capital market based instruments in

resources raised externally had been quite significant in the 1990s, however it declined to 21% in

2001-02. However, the year 2002-03 witnessed the erosion of the corporates to raise money from

capital market, which was mainly because of the subdued conditions prevalent in the primary and

secondary market Table 1-6 presents sector-wise shareholding pattern of companies listed on NSE. It

is observed that on an average the promoters hold more than 55% of total shares. Though the non-

promoter holding is about 44.9%, the public held only 17.7% and the institutional holdings (by FIIs,

MFs, FIs) accounted for 16.4%. There is not much significant difference in the shareholding pattern of

companies in different sectors.

Governments

Due to the increase in fiscal deficits of the Governments, their dependence on market borrowings to

finance fiscal deficits has also increased over the years (Table 1-5). During the year 1990-91,

66

Households

According to the RBI data, household sector accounted for 85.6% of gross domestic savings during

2002-03. They invested 41.5% of financial savings in deposits, 29.8% in insurance provident funds,

14.3% on small savings, and 5.9% in securities (out of which the investment in Gilts has been 4.3%),

including government securities and units of mutual funds during 2002-03 (Table 1-7). Thus the fixed

income bearing instruments are the most preferred assets of the

Household sector.

Functions of Securities Market

Securities Markets is a place where buyers and sellers of securities can enter into transactions to

purchase and sell shares, bonds, debentures etc.

Further, it performs an important role of enabling corporate, entrepreneurs to raise resources for their

companies and business

Ventures through public issues. Transfer of resources from those having idle resources (investors) to

others who have a need for them (corporate) is most efficiently achieved through the securities market.

Stated formally, securities markets provide channels for reallocation of savings to investments and

entrepreneurship.

Savings are linked to investments by a variety of intermediaries,

Through a range of financial products, called ‘Securities’.

The securities one can invest in.

Shares

Government Securities

Derivative products

Units of Mutual Funds etc., are some of the securities

investors in the securities market can invest in.67

PRIMARY MARKET

The primary market provides the channel for sale of new securities. Primary market provides

opportunity to issuers of securities; Government as well as corporate, to raise resources to meet their

requirements of investment and/or discharge some obligation. They may issue the securities at face

value, or at a discount/premium and these securities may take a variety of forms such as equity, debt

etc. They may issue the securities in domestic market and/or I international market.

Issue of Shares

Most companies are usually started privately by their promoter(s). However, the promoters’ capital

and the borrowings from banks and financial institutions may not be sufficient for setting up or

running the business over a long term. So companies invite the public to contribute towards the equity

and issue shares to individual investors. The way to invite share capital from the public is through a

‘Public Issue’. Simply stated, a public issue is an offer to the public to subscribe to the share capital of

a company. Once this is done, the company allots shares to the applicants as per the prescribed rules

and regulations laid down by SEBI.

Different kinds of issues

Primarily, issues can be classified as a Public, Rights or Preferential Issues (also known as private

placements). While public and rights issues involve a detailed procedure, private placements or

preferential issues are relatively simpler. The classification of issues is illustrated below:

Initial Public Offering (IPO ) 68

When an unlisted company makes either a fresh issue of securities or an offer for sale of its existing

securities or both for the first time to the public. This paves way for listing and trading of the issuer’s

securities.

A follow on public offering (Further Issue)

When an already listed company makes either a fresh issue of securities to the public or an offer for

sale to the public, through an offer document.

Rights Issue

When a listed company which proposes to issue fresh securities to its existing shareholders as on a

record date. The rights are normally offered in a particular ratio to the number of securities held prior

to the issue. This route is best suited for companies who would like to raise capital without diluting

stake of its existing shareholders.

Preferential issue

An issue of shares or of convertible securities by listed companies to a select group of persons under

Section 81 of the Companies Act, 1956 which is neither a rights issue nor a public issue. This is a

faster way for a company to raise equity capital.

The issuer company has to comply with the Companies Act and the requirements contained in the

Chapter pertaining to preferential allotment in SEBI guidelines which inter-alia include pricing,

disclosures in notice etc.

SECONDARY MARKET

69

Introduction

Secondary market refers to a market where securities are traded after being initially offered to the

public in the primary market and/or listed on the Stock Exchange. Majority of the trading is done in

the secondary market. Secondary market comprises of equity markets and the debt markets.

Role of the Secondary Market

For the general investor, the secondary market provides an efficient platform for trading of his

securities. For the management of the company, Secondary equity markets serve as a monitoring and

control conduit—by facilitating value-enhancing control activities, enabling implementation of

incentive-based management contracts, and aggregating information (via price discovery) that guides

management decisions.

Difference between the Primary Market and the Secondary Market

In the primary market, securities are offered to public for subscription for the purpose of raising capital

or fund. Secondary market is an equity trading venue in which already existing/pre-issued securities

are traded among investors. Secondary market could be either auction or dealer market. While stock

exchange is the part of an auction market, Over-the-Counter (OTC) is a part of the dealer market.

70

Stock Exchange

Role of a Stock Exchange in buying and selling shares The stock exchanges in India, under the overall

supervision of the regulatory authority, the Securities and Exchange Board of India (SEBI), provide a

trading platform, where buyers and sellers can meet to transact in securities. The trading platform

provided by NSE is an electronic one and there is no need for buyers and sellers to meet at a physical

location to trade. They can trade through the computerized trading screens available with the NSE

trading members or the internet based trading facility provided by the trading members of

NSE.Demutualisation of stock exchanges Demutualisation refers to the legal structure of an exchange

whereby the ownership, the management and the trading rights at the exchange are segregated from

one another.

Bombay Stock Exchange (BSE)

Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly

known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is

the first stock exchange in the country to obtain permanent recognition in 1956 from the Government

of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-

eminent role in the development of the Indian capital market is widely recognized and its index,

SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a

demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956,

pursuant to the BSE (Corporatisation and Demutualization) Scheme, 2005 notified by the Securities

and Exchange Board of India (SEBI).With demutualization, the trading rights and ownership rights

have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest.

The Exchange is professionally managed under the overall direction of the Board of Directors. The

Board comprises eminent professionals, representatives of Trading Members and the Managing

71

Director of the Exchange. The Board is inclusive and is designed to benefit from the participation of

market intermediaries. In terms of organization structure, the Board formulates larger policy issues and

exercises over-all control. The committees constituted by the Board are broad-based. The day-to-day

operations of the Exchange are managed by the Managing Director and a management team of

professionals. The Exchange has a nation-wide reach with a presence in 417 cities and towns of India.

The systems and processes of the Exchange are designed to safeguard market integrity and enhance

transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed

robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt

instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietary system of

the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of

the Exchange are ISO 9001:2000 certified

72

SENSEX

Introduction

For the premier Stock Exchange that pioneered the stock broking activity in India, 128 years of

experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became

members of what today is called "The Stock Exchange, Mumbai" by paying a princely amount of Re1

since then, the country's capital markets have passed through both good and bad periods. The journey

in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure

the ups and downs in the Indian stock market. The Stock Exchange, Mumbai (BSE) in 1986 came out

with a stock index that subsequently became the barometer of the Indian stock market. SENSEX is not

only scientifically designed but also based on globally accepted construction and review methodology.

First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large,

liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100.

The index is widely reported in both domestic and international markets through print as well as

electronic media. The Index was initially calculated based on the "Full Market Capitalization"

methodology but was shifted to the free-float methodology with effect from September 1, 2003. The

"Free-float Market Capitalization" methodology of index construction is regarded as an industry best

practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the

Free-float methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded

to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time

series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has

over the years become one of the most prominent brands in the country. The growth of equity markets

in India has been phenomenal in the decade gone by. Right from early nineties the stock market

witnessed heightened activity in terms of various bull and bear runs.

73

National Stock Exchange (NSE)

The National Stock Exchange of India Limited has genesis in the report of the High Powered Study

Group on Establishment of New Stock Exchanges, which recommended promotion of a National

Stock Exchange by financial institutions (FIs) to provide access to investors from all across the

country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial

Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-

paying company other stock exchanges in the country. On its recognition as a stock exchange under

the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the

Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment

commenced operations in November 1994 and operations in Derivatives segment commenced in June

2000.

S&P CNX Nifty

S&P CNX Nifty is a well diversified 50 stock index accounting for 25 sectors of the economy. It is

used for a variety of purposes such as benchmarking fund portfolios, index based derivatives &

IndexFunds.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a

joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the

index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's

(S&P), who are world leaders in index services.

The average total traded value for the last six months of all Nifty stocks is approximately 49.8%

of the traded value of all stocks on the NSE

Nifty stocks represent about 56.5% of the total market capitalization as on March 31, 2006.

Impact cost of the S&P CNX Nifty for a portfolio size of Rs.5 million is 0.07%

74

Objective of the Study

To know the Consumer behavior towards financial products.

To create awareness of the brand among the customers who are not aware of the

Brand & its products-

Building a good relation with the customers.

.Understanding the customers to enable pitching the right

Set of products

Educating the customers about the Health wise Policy

(Most selling policy Of General Insurance) for them as

well as for their family

Analysis of Investment pattern of an individual

To know about the satisfaction of individual on financial products.

To know about various aspects regarding investments like whether people Prefer

Speculative market or they prefer secure market.

75

Research Methodology

Primary Sources:

Using structured questionnaire for the customer

Secondary Source:

Website

Books

Newspaper

Sample size:

Sample size for the survey is 100.

Nature of the Study:

The study undertaken is descriptive in nature, which tends to use data based on interaction

with the customers

Statistical Tools Used

The main statistical tools used for the collection and analyses of data in this project are:

Questionnaire

Pie Charts

Bar Diagrams

76

Limitations of study:

Due to the following unavoidable and uncontrollable factors the factors,the result might not be

accurate. Some of the problems faced while conducting the survey are as follows:-

Time and cost constraints were also there.

Chances of some biasness could not be eliminated.

A Samples size of fifty has been use due to time limitations.

A majority of respondents show lack of cooperation and are biased towards their own opinions.

My study is based on responses of client and guidance of corporation only, which may not give

a true picture.

Since the study involved a through analysis of the insurance market and relative study of

various players offering the similar products and that of similar, it required a dedicated labor in

term of both time and effort. Since the curriculum did not permit more time, the study had to

be very limited

77

Data Analysis

CUSTOMER PERCEPTION TOWARDS LIFE INSURANCE :-

INTERPRETATION

Of the sample size of 100 surveyed respondents 67% of the respondents are having Insurance

policy.

33% of the respondents are either not having any Insurance policy at present or their policy is

already matured.

And at present 100% of the respondents are with the view that Insurance is a tool to protect your

family.

78

DATA GIVES BENEFITS OF INSURANCE PERCEIVED BY

RESPONDENTS

INTERPRETATION

34% of the respondents believe that covering future uncertainty is the biggest benefit of an

insurance policy.

Whereas, 13% and 6% of them believe that the other benefits are Tax deduction and future

investments respectively.

34% of total are comprehensive Investment & risk coverage instrument.

79

From the survey it was found that amongst 100 respondents

a) 9% of the respondents are less than 25 years old.

b) 29% of the respondents are between 25 and 35 years of age.

c) 10% of the respondents are between 35 and 45 years of age.

d) 52% of the respondents are more than 45 years of age.

80

DATA SHOWS RESPONDENTS PERCEPTION ABOUT BEST FORM OF INVESTMENT

FOR SECURING THEIR FUTURE

NO. OF RESPONDENTS

SHARE (%)

Fixed Assets 75 75%

Bank deposits 11 11%

Jewellery 25 25%

Securities i.e. bonds, MFs 40. 40%

Shares 10 10%

Insurance 70 70%

INTERPRETATION

75.25% of the respondents as with the view that Fixed Assets is the best form of investment for

securing their future.

70.5% of the respondents are with the perception that Insurance is the best form of investment for

securing their future, which is one of the highest and this shows that insurance is an important key

for securing your future.

81

DATA SHOW RESPONDENT ACCORDING TO HIS PROFESSION

Interpretation:

From the above graph, mostly customers want to invest your money into the gold, they purchased

gold, according to customers, price of gold always increase and this is always profitable in future.

Youngsters and business men have interest in mutual fund; they like to take risk because they know

that, if risk is high then return may be high. 28% business men,16% government employees, 40%

youngsters, 20% private employees like to invest money into the mutual fund

82

% OF INVESTMENT PATTERN OF CONSUMER TOWARDS

DIFFERENT FINANCIAL PRODUCTS

% Investment pattern of Consumer

0

0.1

0.2

0.3

0.4

0.5

Financial Instrument

Investm

en

t p

att

ern

Series1

Series2

Insurance 45%

Mutual fund 25%

Equity Fund 30%

Interpretation:

According to my survey we analyze that customers are more interested towards investment in

insurance because it has more benefit than any other financial instrument like Mutual fund and

equity market because there is no risk and Tax benefit is also receive by customer.

83

QUALIFICATION OF THE RESPONDENTS.

PARTICUALR NO.OF.RESPONDENT PERCENTAGE

Graduate 52 52%

Post Graduate 29 29%

Diploma 8 8%

Other discipline 11 11%

TOTAL 100 100%

0

20

40

60

80

100

NO.OF.RESPONDENT

PERCENTAGE

Qualification of the Respondents

Graduate Post Graduate Diploma

Other discipline TOTAL

Interpretation: From the survey it was found that amongst 100 respondents

a) 52% of the respondents were graduate

b) 29% of the respondents were post graduate

c) 8% of the respondents were diploma

d) 10% of the respondents were other discipline

AVERAGE ANNUAL INCOME OF RESPONDENTS.

84

PARTICULARS NO.OF.RESPONDENT PERCENTAGE

Up to 1 lakh 33 33%

1 lakh - 3 lakh 43 43%

3 lakh - 5 lakh 20 20%

5 lakh & above 4 4%

TOTAL 100 100%

0

20

40

60

80

100

NO.OF.RESPONDENT

Average annual income of respondents.

Up to 1 lakh

1 lakh - 3 lakh

3 lakh - 5 lakh

5 lakh & above

TOTAL

Interpretation : From the survey it was found that amongst 100 respondents

a) 33% of the respondents have an average annual income up to 1 lakh

b) 43% of the respondents have an average annual income from 1 lakh to 3 lakh

c) 20% of the respondents have an average annual income from 3 lakh to 5 lakh

d) 4% of the respondents have an average annual income above 5 lakh

85

Rank the company "KOTAK SECURITIES" according to the quality of service?

Frequency Percent

Valid

Percent Cumulative Percent

Valid Excellent 7 6.7 6.7 6.7

Very Good 13 12.5 12.5 19.2

Good 24 23.1 23.1 42.3

Average 52 50.0 50.0 92.3

Below

Average8 7.7 7.7 100.0

Total 104 100.0 100.0

Excellent Very Good Good Average Below Average

0

10

20

30

40

50

60

Fre

quency

713

24

52

8

Interpretation

Kotak Securities was viewed as a low quality service provider as a mere 20 people voted in favour of

this company as far as service offering was concerned.

FAMILY SIZE OF RESPONDENTS

86

PARTICULARS NO.OF.RESPONDENT PERCENTAGE

Below 5 members 50 50%

5 - 10 members 32 32%

Above 10 members 28 28%

TOTAL 100 100%

FAMILY SIZE

50%

32%

28%

below 5 members

5- 10 member

above 10 member

ANANLYSIS: From the survey it was found that amongst 100 respondents

a) 50% of the respondents are below 5 members.

b) 32% of the respondents are between 5 to 10 members.

c) 28% of the respondents are above 10 members.

REDEMPTION SATISFACTION OF THE CUSTOMERS

87

Satisfaction about Redemption facilities No of Investors

Yes 65

No 35

Chart-9

Interpretation

: Sixty five percent of the customers are happy with the redemption facilities of KMOM

Findings

88

Most of the people buy life insurance as just a tax benefit tool or as a life cover while only a

few of the respondent take it as a saving option. The reason for this is lack of knowledge of

insurance benefits among the people.

A Majority of the respondent buy insurance products because of the need reason while rest of

the respondents buy for the brand purpose.

A Majority of the people are satisfied by the incentives associated with their policies.

Most of the respondents are satisfied by the services offered by there insurance company while

some says that they are not satisfied by the services.

Most of the respondents want more Transparency from the side of the company

Total 100 respondents have been approached out of which 75 are the potential respondents w

Above 20% of respondents are shown interest for investment and financial plan

About 33.33% of respondents are not interest to give their personal records.

About 12.67% of respondents have already been covered by other insurance companies.

About 10% of respondents have given invalid records.

ho have shown interest for investment and finance plan

Suggestions:

89

In the light of the finding mentioned above, the following suggestions are offered to improve the

functioning of the Kotak Mahindra Life Insurance in terms of operating efficiency:

Advertising of the insurance product should be used to create awareness with brand identity.

Insurance should be popularized as the means of securing future rather than saving tax.

Information should be correctly communicated with their respective people for increasing

brand loyalty.

With the help of excellent services they can develop the position in front of customer. This is

one thing that private players can do.

The processing fees for becoming an advisor is Rs.1000.This should be borne by the company

as it acts as a deterrent in converting prospects into advisors.

Newspaper/Magazines and television are the most effective medium of advertising life

insurance. So they utilize these medium for popularity.

Insurance advisors should be well trained because they are the people who directly fulfill the

motive of concern.

90

STRENGTHS:

I. Financial Acumen - Holds a stable and diversified portfolio and has received some of the

highest ratings in financial strength from industry’s independent rating agencies.

II. Disciplined fund management - Years of experience in asset management, and a strong track

record in managing funds - backed by the acclaimed expertise of Old Mutual plc

III. Innovativeness - Known for being an innovator in providing world-class pragmatic financial

solutions, with a constant focus on customization and flexibility

IV. Unrelenting Customer Focus - A highly committed sales force, with customer satisfaction as

the key driving force - a major differentiator

V. Transparency in Services - Daily declaration of fund performances, regular performance

benchmarking, well regulated asset management, and monthly newsletter on market updates

WEAKNESSES:91

Industry in nascent stage.

Rural areas still not covered.

Not very known among Indian population.

Lack of credibility among the people because Kotak being a private player.

Premiums are high as compared to its competitors.

Very few branches in the country.

Products:

» The policy doesn’t have the surrender option before third year.

» Plan does not offer any guarantee or assured return.

» Product profile is not very comprehensive.

» Mortality, management and administrative charges are sky scrapping as compared to its

competitors.

OPPORTUNITIES:

Liberalization of Indian economy.

As the industry is growing the whole market is virgin.

The whole private sector is opened to be trapped even though the competition is fierce from

government owned insurance companies.

It’s a volume business that is even if the company has few good corporate the turnover cease to

increase by manifold.

92

THREATS

The government players will become aggressive thus growth is going to be tough.

Entry of other players is not ruled out.

Apprehension towards Kotak being a private life insurance company.

We expect the industry to rationalize in future that is mergers and acquisitions will happen,

which will impact the industry and Kotak life fortunes.

Products:

» Past performance of these plans is not indicative of the future performance of the plan.

» The sum invested in the funds is subject to market risks and there can be no assurance

that the objective of plan will be achieve

93

CONCLUSIONS

In the growing competitive world, as India’s financial sector is booming with 9% of GDP, savings and

investment sector at a rate of 32.4% & 33.8% respectively. So there is a need of financial planning for

each individual by choosing the right platform and product for investment purpose (basically in stock

market) involving high risk & high return.

During the data collected, it has been found that people have great awareness about various companies

but a lot more has to be done, especially by smaller companies like Kotak Life Insurance to establish

their market presence.

People are beginning to look beyond LIC for their insurance needs and are willing to trust private

players with their hard earned money.

People in general have been influenced by the marketing activities of insurance companies. A high

penetration of print, radio and TV ad campaigns over the years is beginning to have its impact now.

Another important trend was in terms of people viewing insurance as a tax saving and investment

instrument as much as protective one.

The general satisfaction levels among public with regards to policy and agents still requires

improvement. Here lies the opportunity for a relatively new comer like Kotak Life Insurance. LIC has

never been known for prompt service or customer oriented methods but Kotak Life Insurance can

build its reputation based on these factors.

There are very tough competitions among the private insurance companies on the level of new trend of

advertising to lull a major part of Customers.

Kotak is not left behind in the present race of advertisement

Kotak has vast market and very firm grip on its traditional customers and monopoly of life

insurance products.

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REFERENCES

BOOKS

Insurance Distribution (ICFAI publications)

Insurance Industry (ICFAI publications)

Study Guide- Principles and Practices of Life/ General Insurance by AIMA

WEBSITES

www.kotaklife.com

www.google.co.in

www.insurance.ind.com

www.irda.org

www.insuranceworld.com

www.findarticles.com

www.amfiindia.com

Questionnaire for customer95

Dear Sir/Madam,

I am a student of Hindustan Institute of Management and Computer studies ,Farah ,Mathura,

conducting a marketing survey on “Comparative study of Consumer Behavior towards life

Insurance ,Mutual fund And Equity Market”. I request you to fill this questionnaire & I assure that

this data will be used only for study purpose & it will be kept confidential.

1. Name _________________________________

2. Address _________________________________

_________________________________

Phone no. ___________________________________

Email._______________________________________

_________________________________

3. Age

a. Less than 25 c. 35-45

b. 25 – 35 d. 45 and above

4. Qualification

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a. Graduate c. Diploma

b. Postgraduate d. Other discipline

5. Occupation

a. Business c. Job holder

b. Professional d. Other

6. What is your average annual income?

a. Up to 1 lakh

b. 1 lakh to 3 lakh

c. 3 lakh to 5 lakh

d. 5 lakh and more

7. Your family size

a. Below 5 members

b. 5 – 10 members

c. Above 10 members

8. Do you want to invest your money into the given following sector?

a) Mutual fund

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b) Property

c) Gold

d) Shares

e) Insurance

9. Are you currently insured?

- Yes

- No

If yes, please give the details of company, plan, premium etc.

10. WHICH CO’S INSURANCE POLICY YOU PREFER THE MOST?

(RANK THEM)

a) LIC

b) ICICIPRUDENTIAL

c) SBI LIFE INSURANCE

d) ING VYSYA LIFE

e) RELIANCE LIFE INSURANCE

f) KOTAK LIFE INSURENCE

g) ANY OTHER ________ (Specify)

11. FOR HOW MANY YEARS DO YOU HAVE INSURANCE POLICY? (Please Tick)

a) <5Yrs b) 5-10 Yrs c) 10-15 Yrs d) Any Other______

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(Specify)

12. WHICH FEATURE OF YOUR POLICY ATTRACTED YOU TO BUY IT?

(RANK THEM)

a) LOW PREMIUM

b) LARGER RISK COVERANCE

c) MONEY BACK GUARNTEE

d) REPUTATION OF COMPANY

e) EASY ACCESS TO AGENTS

f) ANY OTHER _________ (Specify)

13. What is your main concern while taking an insurance policy ?

- Tax benefit

- Security

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- Investment/Savings

14. WHAT’S THE RIGHT AGE TO BUY INSURANCE?

a) AFTER 25 Yrs

b) AFTER 35 Yrs

c) AFTER 45 Yrs

d) ANYTIME

15. Does this policy satisfy your financial needs? (Please rate on the scale of 1 to 10

with 1 being least satisfied)

Your comments on Kotak Mahindra old mutual Life Insurance-

__________________________________________________________________

100

__________________________________________________________________

Thank you

Date: Signature

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