A

Project report
On

Insurance as a good Investment option and

Its distribution strategy of kotak

A project report submitted in partial fulfillment of the

Requirements of

MASTER OF BUSINESS ADMINISTRATION

1
 PREFACE
To be successful, one needs to be a good learner and being an MBA student helps one
to develop a relational thinking and thereby oneself from a normal human being in to a
disciplined and dedicated professional. A learning attitude will sharpen your knowledge and
skills in a particular field, which in turn help to achieve and attain the desired goals and heights
in one‟s career. When any subject is taught theoretically in class is known as Academics‟ but
when it is studied with the subject applicability in known as „professional Education‟.

I am the student of the MBA, FINANCE a professional degree course. In the current
perspective we know that no knowledge is complete without knowing the practical aspect of it.
To be a perfectionist, a person needs to know both, the theoretical as well as the practical side of
the job he is assigned to do.

Generally it is seen a theoretically perfect person becomes tied when he come across
the practical hazards and is able to overcome them successfully. This takes him away from the
goal. Looking to this entire practical training is must and being an MBA student I am well aware
of the importance of undergoing a practical training in an organization.

I hope that this training and project report satisfies the object requirement and also provides a
“Practical Study” of an industry at MBA level.

2
 Table of contents

S r . No . Content P a g e No .

1 I NT RO D UC T I O N 7

2 C O MP A N Y P RO F I L E 9

3 I NV E S T ME NT I N T RO D UC T I O N 21

4 I NV E S T ME NT O PT I O N S 23

5 I NS U RE NC E 51

6 C L AS I FI CA T I O N O F I NS U RE NC E 53

7 K O T AK L I FE IN S U RA N CE PRO D U CT S 66

8 F I N DI NG S 84

9 C O N CL US I O N A N D RE CO ME N D A T I O NS 86

10 L I MI T AT I O NS O F T H E S T U DY 87

11 B I B L I O G R A PH Y 89

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 INTRODUCTION

Life insurance is a form of insurance that pays monetary proceeds upon the death of
the insured covered in the policy. Essentially, a life insurance policy is a contract between the
named insured and the insurance company wherein the insurance company agrees to pay an
agreed upon sum of money to the insured's named beneficiary so long as the insured's premiums
are current.
With a large population and the untapped market area of this population insurance
happens to be a very big opportunity in India. Today it stands as a business growing at the rate of
15-20% annually. Together with banking services, it adds about 7 percent to the country‟s GDP.
In spite of all this growth statistics of the penetration of the insurance in the country is very poor.
Nearly 80% of Indian populations are without life insurance cover and the health insurance. This
is an indicator that growth potential for the insurance sector is immense in India.
It was due to this immense growth that the regulations were introduced in the
insurance sector and in continuation “Malhotra Committee” was constituted by the government
in 1993 to examine the various aspects of the industry. The key element of the reform process
was participation of overseas insurance companies with 26% capital. Creating a more
competitive financial system suitable for the requirements of the economy was the main idea
behind this reform.
Since then the insurance industry has gone through many changes. The
liberalization of the industry the insurance industry has never looked back and today stand as one
of the most competitive and exploring industry in India. The entry of the private players and the
increased use of the new distribution are in the limelight today. The use of new distribution
techniques and the IT tools has increased the scope of the industry in the longer run.
Insurance is the business of providing protection against financial aspects of risk,
such as those to property, life health and legal liability. It is one method of a greater concept
known as risk management –which is the need to mange uncertainty on account of exposure to
loss, injury, disadvantage or destruction.

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 The business of insurance is related to the protection of the economic values of
assets. Every asset has a value. The asset would have been created through the efforts of the
owner. The asset is valuable to the owner, because he expects to get some benefit from it. The
benefit may be an income or in some other form.
In India, insurance began in 1818 with life insurance being transacted by an English
company. The first insurance company was the Bombay mutual assurance society ltd, formed in
1870 in Mumbai. Insurance helps to reduce the consequences of adverse situation. Insurance is
the method of spreading and transfer of risk. The fortunate many who are exposed to some or
similar risk shares loss of the unfortunate. Insurance does not protect the assets but only
compensates the economic or financial loss.
In insurance the insured makes payment called “premiums” to an insurer, and in
return is able to claim a payment from the insurer if the insured suffers a defined type of loss.
This relationship is usually drawn up in a formal legal contract.
Insurance companies also earn investment profits, because they have the use of the
premium money from the time they receive it until the time they need it to pay claims. This
money is called the float. When the investments of float are successful they may earn large
profits, even if the insurance company pays out in claims every penny received as premiums. In
fact, most insurance companies pay out more money than they receive in premiums. The excess
amount that they pay to policyholders is the cost of float. An insurance company will profit if
they invest the money at a greater return than their cost of float.

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 COMPANY PROFILE

Kotak Mahindra Group

A legacy built over 2 decades

Kotak Mahindra is one of India's leading banking and financial services organizations,
offering a wide range of financial services that encompass every sphere of life. From commercial
banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group
caters to the diverse financial needs of individuals and corporate sector.

The group has a net worth of over Rs. 100.6 billion and has a distribution network of
branches, franchisees, representative offices and satellite offices across cities and towns in India,
and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore servicing
around 8 million customer accounts.

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  Our Story

Milestones that have shaped the Kotak Mahindra Group, since 1986 Since the inception
of the erstwhile Kotak Mahindra Finance Limited in 1985, it has been a steady and confident
journey leading to growth and success. The milestones of Kotak Mahindra's growth story are
listed below by year.

2009  Kotak Mahindra Bank Ltd. opened a representative office in Dubai

 Entered Ahmedabad Commodity Exchange as anchor investor.

2008  Launched a Pension Fund under the New Pension System.

2006  Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital Company
and Kotak Securities.

2005

 Kotak Group realigned joint venture in Ford Credit; their stake in Kotak Mahindra Prime
was bought out (formerly known as Kotak Mahindra Primus Ltd) and Kotak group‟s
stake in Ford credit Kotak Mahindra was sold.
 Launched a real estate fund.

2004  Launched India Growth Fund, a private equity fund.

2003  Kotak Mahindra Finance Ltd. converted into a commercial bank - the first Indian
company to do so.

2001  Matrix sold to Friday Corporation.

 Launched Insurance Services.

2000  Kotak Mahindra tied up with Old Mutual plc. for the Life Insurance business.
 Kotak Securities launched its on-line broking site.
 Commencement of private equity activity through setting up of Kotak Mahindra
Venture Capital Fund.

1994  Kotak Securities Ltd. was incorporated

1992  Entered the Funds Syndication sector

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1991  The Investment Banking Division was started. Took over FICOM, one of India's
largest financial retail marketing networks

1990  The Auto Finance division was started

1987  Kotak Mahindra Finance Ltd entered the Lease and Hire Purchase market

1986  Kotak Mahindra Finance Ltd started the activity of Bill Discounting

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  Brief History

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance
Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &
Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's
when the company changed its name to Kotak Mahindra Finance Limited.

9
Our Businesses
Multiple businesses. One brand.

Kotak Mahindra is one of India's leading banking and financial services groups,
offering a wide range of financial services that encompass every sphere of life.

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  Senior Management

Core Kotak Mahindra Group team

Mr. Uday S. Kotak

Executive Vice Chairman & Managing Director

Mr. Uday Kotak, B.Com, MMS (Masters in Management Studies), aged 50 years, is the
Executive Vice-Chairman and Managing Director of the Bank, and its principal founder and
promoter. Mr. Kotak is an alumnus of Jamnalal Bajaj Institute of Management Studies.

In 1985, when he was still in his early twenties, Mr Kotak thought of setting up a bank when
private Indian banks were not even seen in the game. First Kotak Capital Management Finance
Ltd (which later became Kotak Mahindra Finance Ltd), and then with Kotak Mahindra Finance
Ltd, Kotak became the first non-banking finance company in India's corporate history to be
converted into a bank. Over the years, Kotak Mahindra Group grew into several areas like stock
broking and investment banking to car finance, life insurance and mutual funds.

Among the many awards to Mr Kotak's credit are the CNBC TV18 Innovator of the Year Award
in 2006 and the Ernst & Young Entrepreneur of the Year Award in 2003. He was featured as one
of the Global Leaders for Tomorrow at the World Economic Forum's annual meet at Davos in
1996. He was also featured among the Top Financial Leaders for the 21st Century by Euromoney
magazine. Most recently, he was named as CNBC TV18 India Business Leader of the Year
2008.

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 Kotak Mahindra Bank

The Bank caters to the myriad needs of Resident Individuals, NRIs and Businesses.

Established in 1985, the Kotak Mahindra group has been one of India's most reputed
financial conglomerates. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship
company was given the license to carry on banking business by the Reserve Bank of India (RBI).
This approval created banking history since Kotak Mahindra Finance Ltd. is the first non-
banking finance company in India to convert itself in to a bank as Kotak Mahindra Bank Ltd.
Today, Kotak is one of the fastest growing bank and among the most admired financial
institutions in India.

 Their Reach

Kotak Mahindra Bank has over 245 branches and a customer base of over 8 lakhs. Spread all
over India, not just in the metros but in Tier II cities and rural India as well, they are redefining
the reach and power of banking.

 Their Offerings

They cater to the myriad needs of Resident Individuals, NRIs and Businesses. Offering complete
financial solutions for infinite needs of all individual & non-individual customers depending on
the customer's need - delivered through a state of the art technology platform. Investment
products like Mutual Funds, Life Insurance, retailing of gold coins and bars etc are also offered.
The Bank follows a mix of both open and closed architecture for distribution of the investment
products. All this is backed by strong, in-house research on Mutual Funds.

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Kotak Mahindra Old Mutual Life Insurance Ltd

Kotak Mahindra Old Mutual Life Insurance Ltd is a joint venture between Kotak
Mahindra Bank Ltd., its affiliates and Old Mutual. A company that combines its international
strengths and local advantages to offer its customers a wide range of innovative life insurance
products, helping them in taking important financial decisions at every stage in life and stay
financially independent. The company is one of the fastest growing insurance companies in India
and has shown remarkable growth since its inception in 2001. Kotak Life Insurance employs
around 5,565 people in its various businesses and has 197 branches across 141 cities.

Old Mutual
Old Mutual is an international savings and wealth management company based in
the UK. Originating in South Africa in 1845, it is among the top 100 largest companies in the
FTSE100. The group has a balanced portfolio of businesses offering Asset Management, Life
Assurance, Banking and General Insurance Services in over 40 countries, with a focus on South
Africa, Europe and the United States, and a growing presence in Asia Pacific. Old Mutual
employs approximately 54,000 employees worldwide with its primary listing on the London,
secondary listing on the Johannesburg stock exchanges as well as in Namibia, Malawi and
Zimbabwe.

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 Management Overview

Kotak Life Insurance work as a team and have a flat management structure. The top
management has many years of experience which has helped guide the company into a position
of leadership.

 Mr. Gaurang Shah - Director


 Mr. Pankaj Desai - Managing Director

 Mr. G Muralidhar - Chief Operating Officer

 Mr. Subhasish Ghosh - Sr. VP, Financial Institutions Group

 Mr. Sugata Dutta - Head Human Resources

 Ms. Elizabeth Venkataraman - Senior Vice President Marketing

 Mr. Andrew Cartwright - Appointed Actuary

 Mr. Suresh Agarwal - Head of Alternate channel

 Mr. Shekhar Bhandari - Head of Tied channel

 Mr. Anand Dewan - Head Business Impact Group (BIG)

 Mr. Sandip Shrikhande - Head of Group Business

 Mr. Dhiresh Rustogi - Chief Technology Officer

 Mr. Sudhakar Shanbag - Chief Investment Officer

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 CONTACT

KOTAK MAHINDRA BANK

ALKAPURI BRANCH,
GF / PANORAMA COMPLEX,
R.C. DUTT ROAD,
BARODA – 390007, INDIA

Registered Office

Kotak Mahindra Bank Ltd,

36-38A, Nariman Bhavan,

227 Nariman Point,
Mumbai - 400 021

Kotak Life Insurance

9th floor, Godrej Coliseum,

Behind Everard Nagar,
Sion [E], Mumbai - 400 022
Tel : +9122 6621 5999
Fax : +9122 6621 5757, 5858

Customer Service Centre

Kotak Mahindra Old Mutual Life Insurance Ltd.

Kotak Infiniti, 21, Infinity Park, 5th Floor, Zone II,
Off Western Express Highway,
General A K Vaidya Marg,
Malad [E], Mumbai - 400 097
Toll Free : 1800 209 8800
clientservicedesk@kotak.com

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  Vision and Mission

“Kotak Mahindra Old Mutual Life Insurance Limited “

 An uncommon bond.

 Strengthened by a common vision.

Apart from common beliefs, values and objectives we believe in the vision of a better
tomorrow. It is this deep veneer of faith that has brought us together and fortified our

bond

 The Global Indian financial services brand

Our Customers will enjoy the benefits of dealing with a global Indian brand that
best understands their needs and delivers customized pragmatic solutions across multiple
platforms. We will be a world class Indian financial services group. Our technology and
best practices will be benchmarked along international lines while our understanding of
customers will be uniquely Indian. We will be more than a repository of our customers'
savings. We, the Group, will be a single window to every financial service in a
customer's universe.

 The most preferred employer in financial services

A culture of empowerment and a spirit of enterprise attracts bright minds with an

entrepreneurial streak to join us and stay with us. Working with a home-grown,
professionally-managed company, which has partnerships with international leaders,
gives our people a perspective that is universal as well as unique.

 The most trusted financial services company

We will create an ethos of trust across all our constituents. Adhering to high
standards of compliance and corporate governance will be an integral part of building
trust.

 Value Creation

Value Creation rather than size alone will be our business driver.

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Why Kotak Life Insurance?

Kotak Mahindra Old Mutual Life Insurance is a joint venture between Kotak Mahindra
Bank Ltd. along with its affiliates and Old Mutual plc. Kotak Mahindra Old Mutual Life
Insurance is one of the fastest growing insurance companies in India and has shown remarkable
growth since its inception in 2001. Kotak Mahindra believes in offering its customers a lifetime
of value.
A commitment that has made it a leading financial services group with, employing
around 10,800 people in its various businesses and has a distribution network of branches,
franchisees, representative offices and satellite offices across 300 cities and towns in India and
offices in New York, London, Dubai, Mauritius and Singapore. The Group services around 2.6
million customer accounts.

 Our Strengths

 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.

 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

 Innovativeness - Known for being an innovator in providing world-class pragmatic

financial solutions, with a constant focus on customization and flexibility

 Unrelenting Customer Focus - A highly committed sales force, with customer

satisfaction as the key driving force - a major differentiator

 Transparency in Services - Daily declaration of fund performances, regular

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

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 INTRODUCTION TO PROJECT

What is Investment ?

Money we earn is partly spent and rest saved for meeting future expenses. Instead of
keeping the savings idle we like to use savings in order to get return on it in the future. This is
called Investment.

Savings form an important part of the economy of any nation. With savings are
invested in many forms of investment options available, the money acts as the driver for growth
of the country. Indian financial scene too presents a plethora of avenues to the investors.

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Why Invest ?

 Earn Return on idle resources

 Generate sum of money for specified goal in life
 Make provision for uncertain future
 To meet the cost of inflation

We, Indians work hard for our entire life to earn our living. Out of that we save some
part in a hope that it will be used for our future to make it happy and reliable. These savings are
generally invested with a hope to get good returns from it. So, this invested money earns us
profit in a regular course. These profit margins depend upon the different investment options
available in the market. Below are mentioned some of the basic and most opted for investment
options to suit all financial situations.

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 INVESTMENT OPTIONS

We can divide investment options in two categories. They are mainly, real investments and
financial investments. Real investments include investments made to buy house, car or
machinery which are real assets. Financial investments include investing funds in buying some
shares, mutual funds or bonds which are financial assets.

In a more generalized form there are the below mentioned investment options available.

 PERSONAL INVESTMENTS:

These are a type of financial investments wherein we can save our money as savings in a
bank and get interest on the invested amount. These are very general form of investments.

 STOCK MARKET INVESTMENTS:

In these form of investments we can invest our money in stocks and earn profits or make
losses depending on the stock's performance in the market. It is a complex form of
investment wherein we are continuously required to keep an eye on the market
performance.

 REAL ESTATE INVESTMENTS:

These are a type of property investments wherein we can invest our money in buying a
house or a piece of land. We can use the real estate for personal residential or commercial
use or can rent or lease it for commercial or residential purposes. Here we get a good
profit margin and at the same time our assets are increased.

 BUSINESS INVESTMENTS:

We can invest our money in our own business instead of investing it with some other
source. This is a good method of investing our money and at the same time setting
something for ourselves.

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 There are mainly five investment options, which are considered to be as most popular
and most effective investment options available in the current market scenario. In general, almost
95-98% people do invest in these, since the Expected Rate of Return is much higher than any
other investment options, irrespective of the amount of risk is very high in some of the cases.
These investment options are:

Options for Retail Investor

 Equity
 Debt
 Mutual Funds
 Fixed Deposits with Banks
 Post office schemes
 Gold
 Real Estate
 Insurance

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 FIXED DEPOSITS

This investment option is most popular and safest option available in the market. With
almost every working people invest in fixed deposits; this investment option leads the chart of
four investment options because of its safety and popularity. Though the amount of return is
much lesser than the other three options, this option heads the table as it has almost no risk of
losing the invested amount. Also, it is the oldest among the other three, so the trust factor of
people is very high.

There are mainly three types of fixed deposits available in the market, namely, viz.

1. Fixed deposits offered by Banks

2. Fixed deposits offered by Post Offices
3. Company fixed deposits

Now, we‟ll see these three fixed deposit schemes in details.

1. Fixed deposits offered by Banks:

Considered as the safest of all options, banks have been the roots of the financial
systems in India. Promoted as the means of social development, banks in India have indeed
played an important role in not only urban areas, but also in rural upliftment. For an ordinary
person though, banks have acted as the safest avenue wherein a person deposits money and
earns interest on it. The two main modes of investment in banks, savings accounts and fixed
deposits have been effectively used by one and all.

However, today the interest rate structure in the country is headed southwards,
keeping in line with global trends. With the banks offering just above in their fixed deposits
for one year, the yields have come down substantially in recent times. Add to this,
inflammatory pressure in the economy and we have a position where the savings are not
earning. The inflation is creeping up almost 8% at times, this means the value of money
saved goes down instead of going up. This effectively mars any chance of gaining
investments from the banks.

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 Banks in India can be categorized into non-scheduled banks and scheduled banks.
Scheduled banks constitute of commercial banks and co-operative banks. There are about 67,000
branches of Scheduled banks spread across India. During the first phase of financial reforms,
there was a nationalization of 14 major banks in 1969.

As far as the present scenario is concerned the banking industry is in a transition

phase. The Public Sector Banks (PSBs), which are the foundation of the Indian Banking system
account for more than 78 per cent of total banking industry assets.

On the other hand the Private Sector Banks in India is witnessing immense progress.
They are leaders in Internet banking, mobile banking, phone banking, ATMs. On the other hand
the Public Sector Banks are still facing the problem of unhappy employees. There has been a
decrease of 20 percent in the employee strength of the private sector in the wake of the
Voluntary Retirement Schemes (VRS).

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List of the banks and their fixed deposit rates : with effect from 19-Jan-2011

BANK NAME INTEREST RATE FOR DURATION

State Bank of India 9 500, 1000 days

HDFC Bank 9 2 years 16 days
ICICI Bank 9 590, 790, 990 days
Canara Bank 8.6 1000 days
Kotak bank 9.42 700 days
Punjab National Bank 8.5 5-10 years
Axis Bank 9 15-18 months
Indian Bank 9 555 days
IDBI Bank 9 500-1099 days
Federal Bank 9.3 1-2 years
Bank of India 8.5 1-2 years
Bank of Baroda 8.6 444 Days
Indian Overseas Bank 9 555 days
City Union Bank 9.25 444 days
South Indian Bank 8.75 1-2 years
Corporation Bank 8.5 1 year
Karnataka Bank 9 3-5 years
Union Bank of India 9.15 1100 days
Oriental Bank of Commerce 8.75 1000 days
State Bank of Travancore 9.1 1000 days
Dena Bank 8.5 1-3 years
Andhra Bank 8.6 3 years
Central Bank of India 7.85 7 years above
City Bank 8 1 year above
HSBC 8.5 731 days
Syndicate Bank 8.5 1-5 years
UCO Bank 8.25 2-3 years
Vijaya Bank 8.5 1-3 years
Dhanalaxmi Bank 8.5 400 days
State Bank of Mysore 9.05 500, 909 days
Karur Vysya Bank 9.5 500 days

 Additional 0.5% will be available for senior citizens.

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2. Fixed deposits offered by Post Offices:

Just like banks, post offices in India have a wide network. Spread across the nation,
they offer financial assistance as well as serving the basic requirements of communication.
Among all saving options, Post office schemes have been offering the highest rates. Added to it
is the fact that the investments are safe with the department being a Government of India entity.
So the two basic and most sought features, those of return safety and quantum of returns were
being handsomely taken care of.

Though certainly current market position is not the most efficient systems in terms of
service standards and liquidity; these have still managed to attract the attention of small, retail
investors. However with the government investing its intention of reducing the interest rates in
small savings options, this avenue is expected to lose some of the investors. Public Provident
Funds act as options to save for the post retirement period for most people and have been
considered good option largely due to the fact that returns were higher than most other options
and also helped people gain from tax benefits under various sections. This option too is likely to
lose some of its sheen on account of reduction in the rates offered.

25
3. Company fixed deposits:

Another oft-used route to invest has been the fixed deposit schemes floated by
companies. Companies have used fixed deposit schemes as a means of mobilizing funds for their
options and have paid interest on them. The safer a company is rated, the lesser the return offered
has been the thumb rule.

However, there are several potential roadblocks are there.

 Firstly, of all the danger of financial positions of the company not being understood by
the investor lurks. The investors rely on intermediaries who more often than not, don‟t
reveal the entire truth.

 Secondly, liquidity is a major problem with the amount being received months after the
due dates. Premature redemption is generally not entertained without cuts in the returns
offered and though they present a reasonable option to counter interest rate risk
(especially when the economy is headed for a low interest regime), the safety of amount
has been found lacking. Many cases like the Kuber Group and DCM Group fiascoes have
resulted in low confidence in this option.

26
 STOCK MARKET

Now let us look at the Indian Stock Market in details.

The Indian Stock Market is also the other name for Indian Equity Market or Indian
Share Market. The forces of the market depend on the monsoons, global funding flowing into
equities in the market and the performance of various companies. The market of equities is
transacted on the basis of two major stock indices, National Stock Exchange of India Ltd. (NSE)
and The Bombay Stock Exchange (BSE), the trading being carried on in a dematerialized form.
The physical stocks are in liquid form and cannot be sold by the investors in any market.

The equity indexes are correlated beyond the boundaries of different countries with
their exposure to common calamities like monsoon which would affect both India and
Bangladesh or trade integration policies and close connection with the foreign investors. From
1995 onwards, both in terms of trade integration and FIIs India has made an advance.

Indian Equity Market at present is a lucrative field for the investors and investing
in Indian stocks are profitable for not only the long and medium-term investors, but also the
position traders, short-term swing traders and also very short term intra-day traders. In terms of
market capitalization, there are over 2500 companies in the BSE chart list with the Reliance
Industries Limited at the top. The SENSEX today has rose from 1000 levels to 8000 levels
providing a profitable business to all those who had been investing in the Indian Equity Market.
There are about 22 stock exchanges in India which regulates the market trends of different
stocks. Generally the bigger companies are listed with the NSE and the BSE, but there is the
OTCEI or the Over the Counter Exchange of India, which lists the medium and small sized
companies.

In the Indian market scenario, the large FMCG companies reached the top line with
a double-digit growth, with their shares being attractive for investing in the Indian stock market.
Such companies like the Tata Tea, Britannia, to name a few, have been providing a bustling
business for the Indian share market. Other leading houses offering equally beneficial stocks for
investing in Indian Equity Market, of the SENSEX chart are the two-wheeler and three-wheeler
maker Bajaj Auto and second largest software exporter Infosys Technologies.

Thus, the growing financial capital markets of India being encouraged by domestic
and foreign investments is becoming a profitable business more with each day. If all the
economic parameters are unchanged Indian Equity Market will be conducive for the growth of
private equities and this will lead to an overall improvement in the Indian economy.
Now apart from all these, the first question that comes in our mind is,

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Why do so many people invest in shares?

Simply put, you want to invest in order to create wealth. While investing is
relatively painless, its rewards are plentiful. To understand why you need to invest, you need to
realize that you lose when you just save and do not invest. That is because the value of the rupee
decreases every year due to inflation. Historically shares have outperformed all the other
investment instruments and given the maximum returns in the long run. In the twenty-five year
period of 1980-2005 while the other instruments have barely managed to generate returns at a
rate higher than the inflation rate (7.10%), on an average shares have given returns of about 17%
in a year and that does not even take into account the dividend income from them. Were we to
factor in the dividend income as well, the shares would have given even higher returns during the
same period.

[Inflation: general rise in prices and wages caused by an increase in the money supply and
demand for goods, and resulting in a fall in the value of money. Inflation occurs when most
prices rise by some degree across the economy.]

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Investment options Returns per annum
Stock market 17%
Bank fixed deposits 9%
Gold 5.7%

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Advantages of investing in shares:

There are lots of advantages of investment in share market. Some of these are:

 Dividend income:

investments in shares are attractive as much for the appreciation in the share
prices as for the dividends their companies pay out.

 Tax advantages:

shares appear as the best investment option if you also consider the unbeatable
tax benefits that they offer. First, the dividend income is tax-free in the hands of
investors. Second, you are required to pay only a 10% short term capital gains tax on the
profits made from investments in shares, if you book your profits within a year of making
the purchase. Third, you don't need to pay any long-term capital gains tax on the profits if
you sell the shares after holding them for a period of one year. The capital gains tax rate
is much higher for other investment instruments: a 30% short-term capital gains tax
(assuming that you fall in the 30% tax bracket) and a 10% long-term capital gains tax.

 Easy liquidity:

shares can also be made liquid anytime from anywhere (on sharekhan.com you
can sell a share at the click of a mouse from anywhere in the world) and the gains can be
realized in just two working days. Considering the high returns, the tax advantages and
the highly liquid nature, shares are the best investment option to create wealth.

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How people earn from the investment in shares?

Shares can give us returns in two forms.

A. Appreciation in share prices:

You buy shares with the belief that their price will increase and that
when this happens you will be able to sell off your shares and earn profit. For
example, if you bought a share for Rs100 three years ago and it is Rs500 today,
then you have earned Rs400 in three years.

B. Dividend:

when a company makes profits, it can choose to share part of its profits
with its shareholders by paying out dividend. This dividend is paid as a
percentage of the face value of the share. For example, a company may declare a
dividend of 25%. Then if the face value of its share is Rs10 you will get Rs2.50
for every share you own of that company, irrespective of the market price. In
itself this might not be much, but over a longer period of time or if you have a lot
of shares, you could earn quite a bit from the dividend itself. The best thing about
dividends is that they are tax-free in the hands of investors. Dividend yield stocks
are known to give returns higher than fixed deposits [dividend yield = (dividend
per share / market price of the share) x 100].

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What are the expenses during transaction?

Every share transaction attracts some tax or the other. Some of the main expenses are as follows.

A. Capital gains tax

If you purchase a share and sell it at a price higher than the purchase
price and if this sale is within a year of the purchase, then a 10% capital gains tax
is levied on the profit that you make. For example, if you bought a share for
Rs100 on January 1, 2005 and sold it for Rs150 on July 1, 2005, then you have to
pay a tax of 10% on the Rs50 profit that you make. If you sell after a year of
purchase, there is no tax on the long-term gains.

B. Securities transaction tax

Securities transaction tax (STT) is levied by the government on every

transaction you do on a stock exchange. You don‟t have to pay this separately; it‟s
collected by your broker. As per the Union Budget 2005 the STT will be 0.10%
on delivery-based transactions and 0.02% on intra-day transactions.

C. Brokerage

Brokers get a commission on every trade that they do for you. This
commission varies from broker to broker; at sharekhan.com the brokerage is 0.5%
for delivery-based transactions and 0.10% for intraday transactions. On the
brokerage amount you are required to pay a service tax to the government (to be
collected by the broker). The brokerage varies depending on the service that the
broker provides you. Some brokers, such as Sharekhan, offer its clients regular
updates on companies, multiple means to transact and customer service support.

D. Depository fees

Since most of the shares exist in a dematerialized form, every time you
buy or sell shares the transactions are being noted by your DP. The DPs normally
levy a charge which is an annual charge or a charge on each transaction.

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Risks --- the only Disadvantage in investing in shares

There are two types of risk associated with this kind of investment

1. company specific risk

2. market risk

 Set of risks that deals with a company and its sector are referred to as company specific
risk.

Examples of company specific risk: bad management, bad marketing strategies, sector
disturbances that have an impact on industry etc.

 External factors (economic, global factors) that affect the market as a whole are referred
to as market risk.

Examples of market risk: political instability, high inflation, rupee depreciation, rising interest
rates, global incidents like wars and disasters that throttle the nation's economy etc.

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How company specific risk can be identified?

With careful scrutiny and proper homework, it might be easy to identify and be
forewarned of the risks a company may be carrying. Specifically check out for the mergers and
acquisitions that do not have a real synergy or are a nightmare after reconciliation (A O L - Time
Warner, Hewlett Packard-Compaq).

Also is suspicious of diversifications that do not really add value to a company's core
offering. A third kind of risk would be with the companies that have bet their stakes on a single
product offering and are high on debt. Likewise companies that depend on research could be
prone to higher risk, if the research doesn't come to fruition.

How to identify sector driven risk?

If steel prices rise, auto companies get affected. If low cost Chinese products invade
the country's market, then local fast moving consumer goods companies might find no takers for
their products. The changing nature of the industry itself may lead to dipping stock prices; a print
publication may see revenue loss if everyone moves to reading on the Internet.

How to predict market risk?

It is difficult to predict market risks. The only thing we can say here is that start
noticing all the small signs early. If the election results are feared to lead to a fall in the stock
market, notice the signals beforehand. Read Sebi's bulletins and track companies whose shares
prices are very volatile.

How people can minimize their risk and maximize their return?

Buy when stocks are falling, sell when these are rising. This works well when you are a long-
term investor and there is an extended bear or Bull Run. Don't try to second guess or predict that
the market will fall today and rise tomorrow. Even seasoned investors cannot do that!

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2. Don't try to guess the market's favorites

Your instincts might tell you that pharma or technology stocks are hot due to certain
policies or events, but remember millions of investors have already guessed that and bought
these stocks. The prices of these stocks would therefore be at a higher level when you buy them.
Instead focus on the long term and don't get swayed by short-term events.

3. Aim for the long haul

Short-term investing is prone to higher risks. When investing in stocks, aim to get good
returns after a period of three to five years at the minimum. Also churn your portfolio
periodically and based on the progress that a company makes in a quarter or in six months,
decide whether to hold the stock or get out of it.

4. Avoid hot tips

You may have overheard some news about a stock or your friend may advise that a
particular stock is all geared to move up. Avoid such tips like the plague and your investments
will remain safe.

5. Blue-chips are safe bets

Blue-chip companies are there because they have done well in the past and have a high
market capitalization. It is a likely guess that they will maintain their track record and give you
higher returns even in future. Therefore invest in companies that have a good track record.

6. Slow and steady stream of investments

Set aside a certain portion of your earnings every month and invest that sum in shares
irrespective of the market conditions. This way, over a period of time you can amass a
substantial number of shares of the stocks in your portfolio.

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7. Think portfolio

Don't put all your earnings in a single stock. Try to have a diverse portfolio of stocks.
This way even if one stock doesn't do well, you are still well protected. Also invest across
sectors, since any problem in one sector would affect all stocks in the sector. As a thumb rule, if
you have investments of up to Rs50, 000 invest in two to three stocks. For about Rs150, 000
invest in three to five stocks, for around Rs500, 000 have five to seven stocks and around ten
stocks for higher amounts.

8. Don’t invest all your savings

Always maintain a core set of reserves. You should never touch these reserves for
investing, so that even in the worst case you still have some money. Typically these reserves
should be your salary of about six months.

9. Be level-headed

Invest wisely, don't get swayed by rumors and allow Sharekhan to be your guide at all
times. Investment success won't happen overnight, so avoid overreacting to short term market
swings.

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 Mutual funds

Mutual Funds are essentially investment vehicles where people with similar
investment objective come together to pool their money and then invest accordingly.
Each unit of any scheme represents the proportion of pool owned by the unit holder
(investor).

Mutual Funds in India are financial instruments. These funds are collective investments
which gather money from different investors to invest in stocks, short-term money market
financial instruments, bonds and other securities and distribute the proceeds as dividends. The
Mutual Funds in India are handled by Fund Managers, also referred as the portfolio managers.
The Securities Exchange Board of India regulates the Mutual Funds In India. The share value of
the Mutual Funds in India is known as net asset value per share (NAV). The NAV is calculated
on the total amount of the Mutual Funds in India, by dividing it with the number of shares issued
and outstanding shares on daily basis.

MUTUAL FUNDS IN INDIA – ADVANTAGES:

 The Mutual Funds in India offer flexibility by means of dividend reinvestment,

systematic investment plans and systematic withdrawal plans.
 These funds are available in small units, so they are affordable to the small investors.
 The fees charged for to the custodial, brokerage and others services are very low in case
of Mutual Funds in India.
 These funds have the option of redeeming or withdrawing money at any point of time.
 The Mutual Funds in India have low risk as it is managed professionally.

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Like most developed and developing countries the mutual fund cult has been catching on in
India. The important reasons for this interesting occurrence are:

 Mutual funds make it easy and less costly for investors to satisfy their need for capital
growth, income and/or income preservation.
 Mutual fund brings the benefits of diversification and money management to the
individual investor, providing an opportunity for financial success that was once available
only to a select few.

Understanding Mutual funds is easy as it's such a straightforward concept. A mutual

fund is a company that pools the money of many investors, its shareholders to invest in a variety
of different securities.

Investments may be in stocks, bonds, money market securities or some combination of these.
For the individual investor, mutual funds propose the benefit of having someone else manage
your investments and diversify your money over many different securities that may not be
available or affordable to you otherwise. A mutual fund, by its very nature, is diversified -- its
assets are invested in many different securities. Beyond that, there are many different types of
mutual funds with different objectives and levels of growth potential, furthering your odds to
diversify.

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Benefits of MF

Investing in mutual has various benefits, which makes it an ideal investment avenue.

Professional investment management :

One of the primary benefits of mutual funds is that an investor has access to
professional management. A good investment manager is certainly worth the fees you will pay.
Good mutual fund managers with an excellent research team can do a better job of monitoring
the companies they have chosen to invest in than you can, unless you have time to spend on
researching the companies you select for your portfolio. That is because Mutual funds hire full-
time, high-level investment professionals. Funds can afford to do so as they manage large pools
of money. The managers have real-time access to crucial market information and are able to
execute trades on the largest and most cost-effective scale. When you buy a mutual fund, the
primary asset you are buying is the manager, who will be controlling which assets are chosen to
meet the funds' stated investment objectives.

Diversification :

A crucial element in investing is asset allocation. It plays a very big part in the success of
any portfolio. However, small investors do not have enough money to properly allocate their
assets. By pooling your funds with others, you can quickly benefit from greater diversification.
Mutual funds invest in a broad range of securities. This limits investment risk by reducing the
effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit
from diversification techniques usually available only to investors wealthy enough to buy
significant positions in a wide variety of securities.

Low Cost :

A mutual fund let's you participate in a diversified portfolio for as little as Rs.5, 000, and
sometimes less.

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Convenience and Flexibility :

Investing in mutual funds has its own convenience. While you own just one security
rather than many, you still enjoy the benefits of a diversified portfolio and a wide range of
services. Fund managers decide what securities to trade collect the interest payments and see that
your dividends on portfolio securities are received and your rights exercised. It also uses the
services of a high quality custodian and registrar. Another big advantage is that you can move
your funds easily from one fund to another within a mutual fund family.

Liquidity :

In open-ended schemes, you can get your money back promptly at net asset value related
prices.

Transparency :

Regulations for mutual funds have made the industry very transparent. You can track
the investments that have been made on your behalf and the specific investments made by the
mutual fund scheme to see where your money is going. In addition to this, you get regular
information on the value of your investment.

Variety :

There is no shortage of variety when investing in mutual funds. You can find a mutual
fund that matches just about any investing strategy you select. There are funds that focus on
blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds. The greatest challenge
can be sorting through the variety and picking the best for you.

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Mutual fund risks

Having understood the basics of mutual funds the next step is to build a successful
investment portfolio. Before you can begin to build a portfolio, one should understand some
other elements of mutual fund investing and how they can affect the potential value of your
investments over the years. The first thing that has to be kept in mind is that when you invest in
mutual funds, there is no guarantee that you will end up with more money when you withdraw
your investment than what you started out with.
That is the potential of loss is always there. Even so, the opportunity for investment growth that
is possible through investments in mutual funds far exceeds that concern for most investors.
Here'swhy.

At the cornerstone of investing is the basic principal that the greater the risk you take,
the greater the potential reward. Risk then, refers to the volatility -- the up and down activity in
the markets and individual issues that occurs constantly over time. This volatility can be caused
by a number of factors -- interest rate changes, inflation or general economic conditions. It is this
variability, uncertainty and potential for loss, that causes investors to worry. We all fear the
possibility that a stock we invest in will fall substantially. Different types of mutual funds have
different levels of volatility or potential price change, and those with the greater chance of losing
value are also the funds that can produce the greater returns for you over time. You might find it
helpful to remember that all financial investments will fluctuate. There are very few perfectly
safe havens and those simply don't pay enough to beat inflation over the long run.

41
Number of available options:
 Diversification
 Professional Management
 Potential of returns
 Liquidity

Besides these important features, mutual funds also offer several other key traits.
Important among them are:

Well Regulated
Transparency
Flexible, Affordable and a Low Cost affair

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Structure of the Indian mutual fund industry

The Indian mutual fund industry is dominated by the Unit Trust of India, which has a
total corpus of Rs. 700bn collected from more than 20 million investors. The UTI has many
schemes in all categories i.e. equity, balanced, income etc with something open ended and some
being closed ended. The unit scheme 1964 commonly referred to as US 64, which is a balanced
fund, is the biggest scheme with a corpus of about Rs. 200bn. UTI was floated by financial
institution and is govern by a special act of parliament. Most of its investors believe that the UTI
is government owned and controlled, which, while legally uncorrected, is true for all practical
purposes.

Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by nationalized
banks and smaller private sector players. Many nationalized banks got into the mutual fund
business in the early nineties and got off to a good start due to the stock market boom prevailing
them. These banks did not really understand the mutual fund business and they just viewed it as
another kind of banking activity. Few hired specialized staff and generally chose to transfer staff
from the parent organizations. The performance of most of the schemes floated by these funds
was not good. Some schemes had offered guaranteed returns and their parent organizations had
to bail out these AMCs by paying large amounts of money as the difference between the
guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have
not been to retain staff, float new schemes etc, and it is doubtful whether, barring a few
exceptions, they have serious plans of continuing the activity in a major way.

The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices such as
new product innovation, sharp

Improvement in service standards and disclosure, usage of technology, broker

education and support etc. In fact, they have forced the industry to upgrade itself and service
levels of organizations like UTI have improved dramatically in the last few years in response to
the competition provided by these.

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Schemes of a Mutual Fund

• The asset management company shall launch no scheme unless the trustees approve such
scheme and a copy of the offer document has been filed with the Board.

• Every mutual fund shall along with the offer document of each scheme pay filing fees.

• The offer document shall contain disclosures which are adequate in order to enable the
investors to make informed investment decision including the disclosure on maximum
investments proposed to be made by the scheme in the listed securities of the group companies of
the sponsor A close-ended scheme shall be fully redeemed at the end of the maturity period.
“Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution”.

Rules Regarding Advertisements:

• The offer document and advertisement materials shall not be misleading or contain any
statement or opinion, which are incorrect or false.

Investment Objectives and Valuation Policies:

• The price at which the units may be subscribed or sold and the price at which such units may at
any time be repurchased by the mutual fund shall be made an available to the investors.

Restrictions on Investments:

• A mutual fund scheme shall not invest more than 15% of its NAV in debt instrument issued by
a single issuer, which are rated not below investment grade by a credit rating agency authorized
to carry out such activity under the Act. Such investment limit may be extended to 20% of the
NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset
Management Company.

• A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments
issued by a single issuer and the total investment in such instruments shall not exceed 25% of the
NAV of the scheme. All such investments shall be made with the prior approval of the Board of
Trustees and the Board of Asset Management Company.

• No mutual fund under all its schemes should own more than ten percent of any company‟s paid
up capital carrying voting rights.

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INSURANCE

45
Introduction to insurance

The business of insurance is related to the protection of the economic values of the
assets. Every asset has a value. The asset would have been created through the efforts of the
owner. The asset is valuable to the owner, because he expects some benefits from it. It is a
benefit because it meets some of his needs. But every asset is expected to last for a certain period
of time during which it will provide the benefits. After that the benefit may not be available. The
owner is aware of this and he can so manage his affairs that by the end of that period or life-time,
a substitute made available. Thus he makes sure that the benefit isn‟t lost. Here comes the
thought of insurance.

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 HISTORY OF INSURANCE INDUSTRY

In some sense we can say that insurance appeared simultaneously with appearance of
human society. In earlier economies, we can see insurance in the form of people helping each
other. For example, if a house is burnt, the members of the community help build a new one.
Should the same thing happen to one‟s neighbour, the other neighbors must come to help?
Otherwise, neighbors will not receive help in the future.

Insurance in the modern sense, started as a methods of transferring or distributing risk

were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC,
respectively. Chinese merchants traveling treacherous river rapids would redistribute their cargo
across many vessels to limit the loss due to any single vessel‟s capsizing. The Babylonians
developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and
practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his
shipment, he would pay the lender an additional sum in exchange for the lender‟s guarantee to
cancel the loan should the shipment be stolen.

Greek monarchs were the first to insure their people and made it official by registering
the insuring process in governmental notary offices. They invented the concept of the „general
average‟. Merchants whose goods were being shipped together would pay a proportionally
divided premium which would be used to reimburse any merchant whose goods were jettisoned
during storm or sinking of the vessel in the sea.

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD
when they organized guilds called “benevolent societies” which cared for the families and paid
funeral expenses of members upon death. Guilds in the middle Ages served a similar purpose.
Before insurance was established in the late 17th century, “friendly societies” existed in England,
in which people donated amounts of money to a general sum that could be used for emergencies.

47
 Separate insurance contracts (i.e., insurance policies not bundled with loans or other
kinds of contracts) were invented in Greeks rulers in the 14th century, as were insurance pools
backed by pledges of landed estates. These new insurance contracts allowed insurance to be
separated from investment, a separation of roles that first proved useful in marine insurance.
Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties
developed. Insurance as we know it today can be traced to the Great Fire of London, which in
1666 A.D devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an
office to insure buildings. In 1680, he established England‟s first fire insurance company, “The
Fire Office,” to insure brick and frame homes.

The first insurance company in the United States underwrote fire insurance and was
formed in Charles Town (modern-day Charleston), South Carolina, in 1732.

48
 Introduction to insurance industry in India

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu
( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk
in terms of pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient
Indian history has preserved the earliest traces of insurance in the form of marine trade loans and
carriers‟ contracts. Insurance in India has evolved over time heavily drawing from other
countries, England in particular.

Marine insurance is the oldest type of insurance and one of the earliest records of a
marine policy relates to a Mediterranean voyage in 1347. This was followed by life insurance
some 300 years later. Fire insurance, however, did not begin until after the Great fire of London
in 1666. In India all the three insurance developed as under:

 Fire Insurance
 Marin insurance
 Life Insurance

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 CLASSIFICATION OF INSURANCE

The insurance industry in India can broadly classify in two parts. They are.

1) Non-life (general) insurance.

2) Life insurance.

 General Insurance

Insurance other than „Life Insurance‟ falls under the category of General Insurance.
General Insurance comprises of insurance of property against fire, burglary etc, personal
insurance such as Accident and Health Insurance, and liability insurance which covers legal
liabilities. There are also other covers such as Errors and Omissions insurance for professionals,
credit insurance etc.

Non-life insurance companies have products that cover property against Fire and allied
perils, flood storm and inundation, earthquake and so on. There are products that cover property
against burglary, theft etc. The non-life companies also offer policies covering machinery against
breakdown,there are policies that cover the hull of ships and so on. A Marine Cargo policy
covers goods in transit including by sea, air and road. Further, insurance of motor vehicles
against damages and theft forms a major chunk of non-life insurance business.

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  Life Insurance

Life Insurance is a contract between you and a life insurance company, which provides
your beneficiary with a pre-determined amount in case of your death during the contract term.
Buying insurance is extremely useful if you are the principal earning member in the family. In
case of your unfortunate premature demise, your family can remain financially secure because of
the life insurance policy that you have purchased. The primary purpose of life insurance is
therefore protection of the family in the event of death. Today, insurance is also seen as a tool to
plan effectively for your 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.

A life insurance policy provides financial protection to your family in the unfortunate
event of your death. At a basic level, it involves paying small sums each month (called
premiums) to cover the risk of your untimely demise during the tenure of the policy. In such an
event, your family (or the beneficiaries you have named in the policy) will receive a lumpsum
amount. In case you live till the maturity of the policy, depending on the type of life insurance
policy you have opted for, you will receive returns the policy may have earned over the years.
Today, there are many variations to this basic theme, and insurance policies cater to a wide
variety of needs.

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Roles of Life insurance

 Risks and uncertainties are part of life's great adventure -- accident, illness, theft, natural
disaster - they're all built into the working of the Universe, waiting to happen.

 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 (read bonuses) 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.

Now, let us compare insurance as an investment options. If you invest Rs 10,000 in PPF,
your money grows to Rs 10,950 at 9.5 per cent interest over a year. But in this case, the access to
your funds will be limited. One can withdraw 50 per cent of the initial deposit only after 4 years.

The same amount of Rs 10,000 can give you an insurance cover of up to approximately
Rs 5-12 lakh (depending upon the plan, age and medical condition of the life insured, etc) and
this amount can become immediately available to the nominee of the policyholder on death.

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

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  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 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.

To provide such protection, insurance firms collect contributions from many people who
face the same risk. A loss claim is paid out of the total premium collected by the insurance
companies, who act as trustees to the monies.

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.

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  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 upto 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 a Rs 12,000 tax benefit. The rebate is deductible from the tax payable by an individual or
a Hindu Undivided Family.

54
Why do I need life insurance?

 Risks and uncertainties are part of life's great adventure -- accident, illness, theft, natural
disaster - they're all built into the working of the Universe, waiting to happen. Insurance
then is man's answer to the vagaries of life. If you cannot beat man-made and natural
calamities, well, at least be prepared for them and their aftermath. Insurance is a contract
between two parties - the insurer (the insurance company) and the insured (the person or
entity seeking the cover) - wherein the insurer agrees to pay the insured for financial
losses arising out of any unforeseen events in return for a regular payment of
"premium". These unforeseen events are defined as "risk" and that is why insurance is
called a risk cover. Hence, insurance is essentially the means to financially compensate
for losses that life throws at people - corporate and otherwise.

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VARIOUS TYPES OF LIFE INSURANCE POLICIES

Given below are the basic types of life insurance policies. All other life insurance policies are
built around these basic insurance policies by combination of various other features.

Term Insurance Policy

 A term insurance policy is a pure risk cover policy that protects the person insured for a
specific period of time. In such type of a life insurance policy, a fixed sum of money
called the Sum Assured is paid to the beneficiaries (family) if the policyholder expires
within the policy term. For instance, if a person buys a Rs 2 lakh policy for 15 years, his
family is entitled to the sum of Rs 2 Lakh if he dies within that 15-year period.
 If the policy holder survives the 15-year period, the premiums paid are not returned back.
The advantage, apart from the financial security for an individual‟s family is that the
premiums paid are exempt from tax.
 These insurance policies are designed to provide 100 per cent risk cover and hence they
do not have any additional charges other than the basic ones. This makes premiums paid
under such life insurance policies the lowest in the life insurance category.

Whole Life Policy

 A whole life policy covers a policyholder against death, throughout his life term. The
advantage that an individual gets when he / she opts for a whole life policy is that the
validity of this life insurance policy is not defined and hence the individual enjoys the life
cover throughout his or her life.
 Under this life insurance policy, the policyholder pays regular premiums until his death,
upon which the corpus is paid to the family. The policy does not expire till the time any
unfortunate event occurs with the individual.
 Increasingly, whole life policies are being combined with other insurance products to
address a variety of needs such as retirement planning, etc.
 Premiums paid under the whole life policies are tax exempt.

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Endowment Policy

 Combining risk cover with financial savings, endowment policies are among the popular
life insurance policies.
 Policy holders benefit in two ways from a pure endowment insurance policy. In case of
death during the tenure, the beneficiary gets the sum assured. If the individual survives
the policy tenure, he gets back the premiums paid with other investment returns and
benefits like bonuses.
 In addition to the basic policy, insurers offer various benefits such as double endowment
and marriage/ education endowment plans.
 In recent times, the concept of providing the customers with better returns has been
gaining importance. Hence, insurance companies have been coming out with new and
better ULIP versions of endowment policies. Under such life insurance policies the
customers are also provided with an option of investing their premiums into the markets,
depending on their risk appetite, using various fund options provided by the insurer, these
life insurance policies help the customer profit from rising markets.
 The premiums paid and the returns accumulated through pure endowment policies and
their ULIP variants are tax exempt.

Money Back Policy

 This life insurance policy is favored by many people because it gives periodic payments
during the term of policy. In other words, a portion of the sum assured is paid out at
regular intervals. If the policy holder survives the term, he gets the balance sum assured.
 In case of death during the policy term, the beneficiary gets the full sum assured.
 New ULIP versions of money back policies are also being offered by various life
insurers.
 The premiums paid and the returns accumulated though a money back policy or its ULIP
variants are tax exempt.

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ULIPS

 ULIPs are market-linked life insurance products that provide a combination of life cover
and wealth creation options.
 A part of the amount that people invest in a ULIP goes toward providing life cover, while
the rest is invested in the equity & debt instruments for maximizing returns.
 They provide the flexibility of choosing from a variety of fund options depending on the
customers risk appetite. One can opt from aggressive funds (invested largely in the equity
market with the objective of high capital appreciation) to conservative funds (invested in
debt markets, cash, bank deposits and other instruments, with the aim of preserving
capital while providing steady returns).
 ULIPs can be usefull for achieving various long term financial goals such as planning for
retirement, child‟s education, marriage etc.

Annuities and Pension

 In these types of life insurance policies, the insurer agrees to pay the insured a stipulated
sum of money periodically. The purpose of an annuity is to protect against financial risks
as well as provide money in the form of pension at regular intervals.

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 LIFE INSURANCE PLANS FOR INDIVIDUALS

A few years ago, most people bought life insurance plans to provide financial
protection to their family in the event of their untimely death. Today, life insurance plans have
become an important part of an individual's portfolio because it provides the dual benefit of risk
protection as well as wealth creation in the long term. Even though there is no shortage of
investment options to choose from, taking a life insurance plan depending on the life stage and
requirement is always a wise decision. At Kotak life insurance understand the change in needs
and priorities an individual experiences as he progresses through different life stages. Their
expertise in the field of investments has helped us design various life insurance plans aptly suited
for every life stage need, be it protection, retirement planning, saving for a child or wealth
creation. Life insurance plans do not necessarily correspond to an individual's age and are
generally tailored towards fulfilling particular needs that may arise at different stages in an
individual's life. To help you choose the right life insurance plan, we have listed the various life
stages explaining the reasons for buying insurance at every stage.

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 Life insurance plans for different Life Stages

Single Adults

The best time to start thinking about life insurance plans is when you are a single young working
professional; this is because, with life insurance, over a period of time, due to the power of
compounding, you reap much greater benefits. Additionally the part of the premium that goes
towards insuring your life is significantly low. Besides covering your life, these plans enable you
to reduce your income tax burden and help you save small sums at regular intervals for the
future.

Married (Without Children)

Securing your family from the start will keep you tension free from day one. As the liabilities
increase, so does your need for converting your savings into sizable corpus. In such times, saving
and investment based Unit Linked Life Insurance plans are the most suited for your needs. Such
investment plans provide a risk cover (or may add to the existing cover that you may have) as
well as provide wealth creation options that helps you build a sizable corpus over a period of
time, which goes a long way in securing your family's future

Married (With Children)

As your family grows and the number of dependents increases, it is always advisable to re-assess
the risk cover that you may need and plan accordingly. Additionally, as a parent, your priority is
to fulfill your child's dreams and aspirations. Providing a good education or even a modest
wedding has become an expensive proposition. You should plan for such milestones using a
good children's plan. These plans enable you to start building regular savings today to help you
secure your child's immediate and future needs even when you are not around.

Established Families

Our ability to earn for the rest of our lives decreases as we grow old. This leads to compromise in
our post retirement lifestyle. An early retirement is something one should start planning for at the
earliest, so that you don't experience any drop in the quality of lifestyle due to income
fluctuations. A retirement based life insurance plan is an assurance that you will continue to earn
a satisfying income and enjoy a comfortable lifestyle, even when you are no longer working.

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LIST OF INSURANCE COMPANIES IN INDIA

 Following is the list of all LIFE & GENERAL INSURANCE COMPANIES

granted permission by IRDA.

LIFE INSURERS Websites

Public Sector

Life Insurance Corporation of India www.licindia.com

Private Sector
Allianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in
Birla Sun-Life Insurance Company Limited www.birlasunlife.com
HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com
ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com
ING Vysya Life Insurance Company Limited www.ingvysayalife.com
Max New York Life Insurance Co. Limited www.maxnewyorklife.com
MetLife Insurance Company Limited www.metlife.com
Om Kotak Mahindra Life Insurance Co. Ltd. www.omkotakmahnidra.com
SBI Life Insurance Company Limited www.sbilife.co.in
TATA AIG Life Insurance Company Limited www.tata-aig.com
AMP Sanmar Assurance Company Limited www.ampsanmar.com
Dabur CGU Life Insurance Co. Pvt. Limited www.avivaindia.com
Reliance Life Insurance Company Limited. www.reliancelife.com
Aviva Life Insurance Co. India Pvt. Ltd. www.avivaindia.com
Sahara India Life Insurance Co, Ltd. www.saharalife.com
Shriram Life Insurance Co, Ltd. www.shriramlife.com
Bharti AXA Life Insurance Company Ltd www.bharti-axalife.com
Future Generali Life Insurance Company Ltd. www.futuregenerli.in
IDBI Fortis Life Insurance Company Ltd. www.idbifortis.com
www.canarahsbclife.com

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Canara HSBC Oriental Bank of Commerce Life
Insurance Co. Ltd

AEGON Religare Life Insurance Company Limited www.aegonreligare.com

Star Union Dai-ichi Life Insurance Comp. Ltd. www.sudlife.in
DLF Pramerica Life Insurance Co. Ltd www.dlfpramerica.com

GENERAL INSURERS
Public Sector
National Insurance Company Limited www.nationalinsuranceindia.com
New India Assurance Company Limited www.niacl.com
Oriental Insurance Company Limited www.orientalinsurance.nic.in
United India Insurance Company Limited www.uiic.co.in
Private Sector
Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in
ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com
IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in
Reliance General Insurance Co. Limited www.ril.com
Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com
TATA AIG General Insurance Co. Limited www.tata-aig.com
Cholamandalam General Insurance Co. Ltd. www.cholainsurance.com
Export Credit Guarantee Corporation www.ecgcindia.com
HDFC Chubb General Insurance Co. Ltd.
REINSURER
General Insurance Corporation of India www.gicindia.com

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 KOTAK LIFE INSURENCE PLANS

About Life Insurance Plans

Protection Savings & Investments

Helping you to grow and protect Manage today for a better
your wealth. tomorrow.

Retirement Child
The road to retirement, Make it Plan a good future for your
easy child.

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 PROTECTION PLANS

Kotak e-Term/e-Preferred Term

Kotak Term/Preferred Term Plan
Cost effective pure term plans with an option to
The Kotak Term/Preferred Term Plan is a increase cover at important milestones in life.
pure risk cover plan that provides you with
a high level of protection at nominal costs.

Kotak Loan Protection Plan Kotak Eternal Life Plans

Kotak Loan Protection Plan is a protection Kotak Eternal Life Plans are participating
plan that helps share the burden of your whole life plans that provide enhanced
loan. protection till the golden age of 99.

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An Introduction to Protection Plans

Securing your family‟s wellbeing is one of the most important goals of life. Insurance
Protection plans help you secure your loved one‟s future against life‟s uncertainties and put them
on a safe track.

Your untimely death can cause a major setback to your family, both emotionally as well
as financially, especially if you are the sole breadwinner. With a term life insurance policy , you
can ensure your family‟s financial independence in case anything untoward happens to you.
Besides, term plans are cost-effective too, as they focus on providing only life cover and no
returns.

A Term life insurance policy, thus, sets you free from the worries of what will happen to
your loved ones in your absence, letting your family and you enjoy life with peace of mind.

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With protection plans you can give your family –

 Financial security.
 Emotional wellbeing.
 Freedom from the burden of debt.
 Guarantee of a life with dignity and self-respect.

Through term plans the biggest gift that you and your family receive is the freedom
from financial worries. A term plan enables you to give your family.

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  Financial security

Your untimely death may deprive your dependants of emotional security. But, your timely and
wise decision of choosing a term plan will surely not rob them of financial stability, even when
you are no longer around.

 A debt-free existence

You wouldn‟t want to burden your family with the responsibility of repaying your loans, should
anything unfortunate happen to you. Don‟t let misfortune snatch away your family‟s happiness.
In case of your untimely death, the benefits under your loan protection plan would be sufficient
enough for repaying your loans, including your home loan. With a home loan protection plan,
you can ensure that your family continues to own the house that you so fondly purchased for
them.

 Freedom to live your dreams

You wouldn‟t want anything to come in between your dear ones and their dreams. With term
plans in place, you can be assured that they continue to enjoy financial independence and live
their dreams, even if you are not around to support them. Enhanced protection through riders
Riders enhance your insurance cover and are optional benefits that you may add to your term
plan policy. You can avail of the following riders –

 Kotak Critical Illness Benefit

This rider lets you enjoy greater financial stability against chronic diseases such as heart
attacks, cancer, stroke, Coronary Artery By-pass Graft (CABG) surgery, kidney failure,
major organ transplants, paralysis, loss of limbs, aorta surgery, major burns, heart valve
surgery and blindness.
 Kotak Accidental Death Benefit
Opting for this rider can render enhanced financial security to your loved ones. In the
event of your unfortunate demise arising due to an accident during the term of the
insurance policy, an additional amount (Kotak Accidental Death Benefit Sum Assured) is
payable.
 Kotak Permanent Disability Benefit
This benefit provides basic sum assured to the life insured person in case he/she becomes
totally and permanently disabled due to an accident.

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  Tax benefits

Investment in life insurance plans can let you enjoy tax benefits under Section 80C and 10(10D)
of Income Tax Act, 1961. As per section 80C premium paid up to Rs 1 lakh (provided the
premium paid is less than or equal to 20 per cent of the sum assured on the policy) can be
deducted from your taxable income. Under section 10(10D), the life insurance proceeds
receivable does not attract any tax in the hands of the recipients.

Get more for less

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 Savings & Investment Plans

Growth Plans

 Your life insurance plan can also work as a growth plan

that helps you maximize wealth creation. In the recent times, life insurance products
have evolved beyond providing just 'risk protection'. Today, life insurance plans are
attractive options for creating wealth - an investment vehicle that can maximize returns.
Such investment plans give you competitive returns, besides added incentives like
bonuses. These growth plans provide the dual benefits of financial protection as a risk
cover and attractive returns over a long term.

 Growth plans for wealth creation & security

„In a life insurance based growth plan, a part of the premium goes towards providing the
risk cover, while the rest is invested in a mix of equity and debt, and the equity exposure
chosen depends on your risk appetite. Such investment plans also help the policy holder
to make profits in rising markets and move into safer options in case market falls.

 Our growth plans are excellent for people who want to invest in equities but have no
time to manage their investment portfolio

A lot of people want to invest in the equity market and benefit from rising markets, but
do not have the time or the knowledge to invest. Our life insurance based growth plans
allocate your funds judiciously with the aim to maximise returns from investments. The
funds available with these growth plans are actively managed by fund managers so that
your long-term savings are transformed into a significant corpus.

 Flexibility to choose between various funds depending on one’s risk appetite:

Depending upon your risk profile, needs, time horizon and market outlook, you can
choose from various funds options available with the market linked growth plans.

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 Kotak Single Invest Advantage
Kotak Platinum
Kotak Platinum is a unit linked investment plan with low
This plan offers you an
charges along with convenient premium payment options.
opportunity to invest just once
A great combination of 8 funds and loyalty additions, this
and there is no obligation to pay
plan helps you build substantial wealth for yourself.
any more premiums.

Kotak Ace Investment Kotak Wealth Insurance

This plan offers you a wide range of fund
options to suit your risk return profile and
convenient payment and withdrawal
options to make investing a breeze for you.
You also enjoy the shield of insurance to
protect your family from adversity.
Kotak Wealth Insurance, a unit linked life
insurance plan, is an investment plan( that
provides you with investment growth to take
care of your family's goals and comprehensive
protection to help your family and you meet
unplanned events head on.

Kotak Secure Invest Insurance Kotak Endowment Plan

Kotak Secure Invest Insurance, a unit linked life
insurance plan, is an investment plan that lets you
enjoy the upside of the market through exposure in
equities while safeguarding the downside by way
of Capital Guarantee
Kotak Endowment Plan is a
participating endowment plan that
provides you an avenue for long term
regular investments to accumulate a
lump sum on maturity.

Kotak Money Back Plan Kotak Surakshit Jeevan

This plan offers the key benefit of cash Kotak Surakshit Jeevan, an enhanced
lump sums at periodic intervals of five protection and long-term savings plan, makes
years ensuring that you are able to meet any sure your family remains financially
of your financial obligations independent even if you are not around

Kotak Premium Return Plan

The premium Return Plan, which is a savings plan, will get you the dual benefit of a risk
cover and savings, with minimal paperwork and procedures

 Kotak Gramin Bima Yojana

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Retirement Plans

In today's fast-paced world, retirement planning can no longer take a back seat. In
fact, the earlier you start your retirement planning, the better you can prepare for your golden
years. Retirement plans can ensure financial independence for you and your family even as you
enjoy a peaceful retired life of your dreams.

 Kotak Capital Multiplier Plan

The Kotak Capital Multiplier Plan is the only plan of its kind that allows you to enjoy returns
even beyond maturity.
 Kotak Retirement Income Plan

The Kotak Retirement Income Plan is a savings plan designed to meet your post-retirement
needs. It is a plan that gives you "Jeene ki azaadi".

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A sound retirement plan will enable you to:

 Retain financial independence.

You toil hard all your life to achieve your dreams. Then, why would you want to be
dependent on someone else after you retire? Retirement planning becomes all the more
important in present times as you are likely to spend more time as a retiree – Life
expectancy is on a rise; however average number of employment years has not been
increasing correspondingly.

 Enjoy living the way you like

With the right planning, you can ensure that you enjoy the same lifestyle that you are
currently used to, even after you are no longer working.

 Pursue expensive hobbies/activities

Do you dream of pursuing your love for astronomy with a professional, high-end
telescope? Or perhaps you‟d like to indulge in the finer things of life, like tasting
exclusive wines, exploring exotic places. You probably dream of doing this when you
have the leisure – retirement plans can get you there.

 Ensure your family is not dependent on anyone in your absence

Being the family‟s primary breadwinner, you are rightly concerned about your family‟s
financial stability in your absence. Investing in a pension plan can ensure that your family
continues to remain financially independent and enjoy the same lifestyle that you both are
enjoying right now.

Putting aside some money every month in provident fund or fixed deposit is just not enough,
although it is a good start. You need sound insurance and pension plans to enjoy the retirement
of your dreams. Here‟s why you should consider retirement planning –

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  Increasing life expectancy
Average life expectancy in India has been increasing steadily over the decades.

The longer one lives, the more time he/she would be spending as a retiree. If you want
to maintain that expensive flat that you just invested in and keep those two cars well into your
retirement, you should seriously consider retirement planning.

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 Rising inflation
With inflation on the rise, your money's purchasing power is on a steady decline. It is
thus necessary to invest in a way that your buying capacity is in sync with the changing
times.

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  Escalating medical costs

Prices of medical services are increasing exponentially. Add to it the inflation effect and
you would realize that healthcare would eat up a sizeable chunk of your savings, especially in
those golden days? Your insurance plan can help you fund your medical expenses after
retirement

 Rising standard of living

You are probably enjoying the best in life right now and your professional life is
going great guns too. Rising income brings in higher standard of living, which you expect
to continue even when you are no longer working. You wouldn‟t want to return back to
the same standard of living that you were living when you just started off your career.
Investing in a good pension plan will ensure that you enjoy the good things in life well
into your retirement.

 Invest today, invest regularly, invest smartly

Invest early and see you money grow with the magic of compounding.
Compounding reinvests your returns so that they generate additional gain. The sooner
you start, the better it is. Investing small amounts at regular intervals over a period of
time in insurance plans is a smart way to build a bigger corpus for your retirement.

Invest today Invest after 10 years

Annual investment Rs 10000 Rs 20000
Age at which you begin investing 30 years 40 years
At age 50 years
Total investment Rs 200000 Rs 200000
Wealth built Rs 494000 Rs 313000
Difference of 57.83%

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Child Plans

Do you dream to give your child the freedom and choice to…

 Acquire an education of his/her choice?

 Opt for even a new-age career which demand a longer time to gain ground (or, which
take a longer time to get established)?
 Make key career or personal decisions without worrying about the money factor?
 Have a fairytale wedding?
 Fulfill all his wishes during childhood and teenage years?

Irrespective of the type of dream, you will surely agree that all dreams come with a
price tag. Add to it inflation and other financial commitments and you will realise that you need
nothing less than a fortune to ensure your child‟s bright future. Child insurance plans aim to do
exactly that by helping you create a financial corpus to meet your child‟s future needs.

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Why plan for your child's future needs?

 Life is uncertain and unpredictable

You never know what lies in the future. An untimely death can seriously
hamper your child's future. With children insurance plans, you can be rest
assured that there is financial support for your child in case of any eventuality.

 You don't want your child to let go of his dreams

Having the right amount of money at the right time is crucial. Lack of
finances at critical stages in your child's early life can put his/her career off-track.

 To battle inflation

Inflation can eat into your savings. A professional course that costs Rs 5
lakh today would cost more in the future.

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  To overcome the reducing power of the rupee

With inflation on the rise, your money's purchasing power is on a steady

decline. It is thus necessary to invest in a way that your buying capacity is in sync
with the changing times.

Over and above planning early,

 Invest with a goal

Setting financial goals is an important aspect of financial planning. Chalk out the
stages in your child's life; calculate when and how much money would be required at
each of this stage. Buy a child plan accordingly.

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 Earn real returns

You should take into account the rate of inflation while assessing your
investments. Even if you are enjoying a decent rate of return on your investments, it
would be futile if the inflation rate is higher than the returns. Real return is anything you
earn above inflation rate. Make a wise decision; choose an investment option that lets you
earn more than the prevailing inflation.

Real returns = Investment return – Inflation

 Invest regularly

Regular investment in children plans not only reduces your financial burden but
also helps you tide over market volatility. You get a chance to invest money, both in the
highs and lows of market, thus averaging out any volatility.

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 GROUP LIFE INSURANCE PLANS

As an employer, it is important to ensure that your employees are happy and satisfied
with their work. One visible sign that shows employee contentment is the time when they start
taking pride in working for the organization. Showing your employees that you care for their
well-being will not only help you retain them, but also improve productivity and in the long term
boost profits. Providing your employees with various group life insurance policies is one such
way of showing your employees that you truly care about them.

Kotak Group Shield

Kotak Group Assure
Kotak Group Shield is a comprehensive
Kotak Group Assure is a comprehensive
solution that helps protect your customer‟s
solution that helps protect your customer‟s
assets and savings in the unfortunate event of
assets and savings in the unfortunate event of
death, illness or disability.
death, illness or disability.

Kotak Term Group Plan Kotak Credit-Term Grouplan

Kotak Term Group Plan provides life cover for a The Kotak Credit-Term Grouplan, is the
group of employees, by paying a lump sum right solution to your needs, protecting
benefit to the beneficiary on the unfortunate both your institution's and your
death of an employee. customer's interest.

Kotak Complete Cover Grouplan Kotak Gratuity Grouplan

Kotak Complete Cover Grouplan
can provide your institution the
required value-add to differentiate
your products and make them more
competitive.
Gratuity is not just a statutory obligation but also a very
important tool today to retain and attract talented
employees. A comprehensive and effective gratuity plan
can reduce your business cost and corporate tax. At
Kotak Life Insurance, we understand this.

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 FINDINGS

 Therefore, we can easily see from the chart that majority of people like to invest in the
stock market, even though market situation is not so good and there is so much risk
available.

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 Now, if we see what % of people like to invest in which investment option in the
following pie chat, then,

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 Conclusions & Recommendations

Therefore from the survey, whatever I got, here is the gist of all of them:

 People are more inclined to invest in the stock market, irrespective of the market scenario
and the level of risk.

 Majority of the people wants higher return in short period of time that is why they prefer
to invest in stock markets and mutual funds rather than any other form of investments.

 People between ages 30-40 think about long term returns as well as higher return in short
period of time that is why they invest in stock market for short period of time and in
insurance for long term return.

 People between ages 18-24 don‟t have much money to invest and they can‟t take higher
risk, so they invest in mutual funds which are of moderate risk.

 People between ages 24-30 wants to be financially stable that is why they don‟t like to
take risk at all. So, they invest in the bank‟s fixed deposit scheme which has almost no
risk and lower return.

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 LIMITATIONS DURING THE STUDY

Some of the difficulties and limitations faced by me during my training are as follows:

 Lack of awareness among the people –

This is the biggest limitation found in this sector. Most of the people are not
aware about the importance and the necessity of the insurance in their life. They are not
aware how useful life insurance can be for their family members if something happens to
them.

 Perception of the people towards Insurance sector

People still consider insurance just as a Tax saving device. So today also there is
always a rush to buy an Insurance Policy only at the end of the financial year like
January, February and March making the other 9 months dry for this business.

 Insurance does not give good returns

Still today people think that Insurance does not give good returns. They are not
aware of the modern Unit Linked Insurance Plans which are offered by most of the
Private sector players. They are still under the perception that if they take Insurance they
will get only 5-6% returns which is not true nowadays. Nowadays most of the modern
Unit Linked Insurance Plans gives returns which are many times more than that of bank
Fixed deposits, National saving certificate, Post office deposits and Public provident
fund.

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 Lack of awareness about the earning opportunity in the Insurance sector

People still today are not aware about the earning opportunity that the Insurance
sector gives. After the privatization of the insurance sector many private giants have
entered the insurance sector. These private companies in order to beat the competition
and to increase their Insurance Advisors to increase their reach to the customers are
giving very high commission rates but people are not aware of that.

 Increased competition

Today the competition in the Insurance sector has became very stiff. Currently
there are 14 Life Insurance companies working in India including the LIC (life insurance
Corporation of India). Today each and every company is trying to increase their
Insurance Advisors so that they can increase their reach in the market. This situation has
created a scenario in which to recruit Life insurance Advisors and to sell life Insurance
Policy has became very very difficult.

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 BIBLIOGRAPHY
 Life insurance & modified endowments. By Christian J. DesRochers
 Insurance in India: changing policies and emerging opportunities
By P. S. Palande, R. S. Shah, M. L. Lunawat.
 Life Insurance in India: Opportunities, Challenges and Strategic Perspective
By H. Sadhak.
 IRDA
 www.kotak.com
 www.moneycontrol.com
 www.investsmartindia.com
 www.insurancejournal.com
 www.irdaindia.org
 Various bank‟s websites

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