COMPARATIVE STUDY OF HDFC SLIC, BAJAJ

ALLIANZ, BIRLA SUN LIFE AND LIC

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS

FOR THE AWARD OF THE DEGREE OF M.B.A

SUBMITTED BY:

ASAF ALI

UNDER SUPERVISION OF: UNDER GUIDANCE OF

MR. SANCHIT SACHDEVA MRS. VEERA LAKSHMI

SALES DEVELOPMENT MANAGER ASST. PROF MBA DEPT

HDFC SLIC COER SCHOOL OF MGT

UTTRAKHAND TECHNICAL UNIVERSITY, DEHRADUN

SESSION 2007-2009

1

TO WHOM IT MAY CONCERN

This is to certify that aforesaid candidate of MASTER OF BUSINESS

ADMINISTRATION (MBA) of the COER SCHOOL OF MANAGEMENT

(COER-SM), have satisfactorily completed dissertation project on the topic “” as per

rules of UTTRAKHAND TECHNICAL UNIVERSITY, DEHRADUN in

academic session 2007-2009.

His performance was satisfactory during development of the project.

Project Guide

(Mrs. Veera Lakshmi)

COER-SM

Dated:

ASAF ALI

2

CANDIDATE’S DECLARATION

I, Asaf Ali, a bonafide student of MBA at the COER School of Management,

Roorkee, hereby declare that I have undergone the Summer Training at HDFC SLIC

LTD under the supervision of Mr. Sanchit Sachdeva.

I also declare that the present project report is based on the above summer

training and is my original work. The content of this project report has not

been submitted to any other university or institutes either in part or in full for

the award of any degree, diploma or fellowship.

(Signature)

Name: Asaf Ali

Roll No: 07060500016

Place: Roorkee

Date:

3

ACKNOWLEDGEMENT

I would like to take this opportunity to thank all those who have helped me

tremendously during the course of the project.

My heartiest thanks are due to many persons for assistance in this project to

present state. The profound gratitude to our teachers especially;

Mrs. Veera Lakshmi for being my guide throughout the completion of

this project.

Mr. Hridesh Chauhan, Branch Manager of HDFC Standard Life

Insurance Corporation, Roorkee for clarifying the problems which I

encountered during the preparation of this project.

I would also like to thank Mr. Sanchit Sachdeva, Sales development Manager,

for guiding me throughout my project. I also extend my gratitude to other

SDM's and my friends who have helped me directly or indirectly to complete

my project.

I also acknowledge the Knowledge that I have gained during the preparation of

this project.

ASAF ALI

4

CONTENT

1. INTRODUCTION 6

2. EXECUTIVE SUMMARY 7

3. OBJECTIVE OF THE STUDY 8

4. COMPANY PROFILES 9-13

5. DEPARTMENT OVERVIEW 15-17

6. INSURANCE FUNCTION 18-20

7. SOME TERMS ABOUT ULIP PLANS 21-23

8. PRODUCT PROFILE 24-44

9. TAXATION BENEFIT 45-48

10.COMPARATIVE STUDY OF DIFFERENT FIRMS 48-51

11.RESEARCH METHODOLOGY 52-54

12. CONCLUSION & RECOMMENDATION 55

13. BIBILOGRAPHY 56

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INTRODUCTION

The project started with class room sessions involving lectures and interactions

with the mentors Mr. Sanchit Sachdeva (SDM) and Mr. Hridesh Chauhan

(BM). They explained all the plans available with HDFC SLIC in detail and

the pension plan comparison of BIRLA SUN LIFE, BAJAJ ALLIANZ & LIC.

The classroom also involved role plays and games. The role plays and games

involved students being asked to play the roles of customers or clients and that

of a person trying to persuade the customer to go in for a plan with HDFC

SLIC.

These class room lectures and role-plays helped me to gain a substantial

understanding of the plans. This in turn helped me to effectively explain these

plans to people whom I meet or took appointment to meet.

The connect of life insurance has undergone several changes over the years

and what has myriad array of attractive options apart from the basic of life

cover. Life insurance schemes also offer tax benefits. In today’s scenario life

insurance solves the three objectives.

1. Security

2. Saving

3. Tax Benefit.

\6

EXECUTIVE SUMMARY

This project is based upon the fact & figure gathered from the websites about the

plans of the firm.

In the first part of the report there are some plans which are frequently sold by

HDFC SLIC in the market, and then comparative study of pension plan of

different firm namely BIRLA SUN LIFE, BAJAJ ALLIANZ and LIC is there

.

In the last part of the project I have given some of the findings and conclusion

about the life insurance market and what is the potential of the market. In the

end I have give all the sources from which I have collected all the information.

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OBJECTIVE OF STUDY

1. Comparative study of HDFC SLIC, BIRLA SUN LIFE, BAJAJ ALLIANZ and LIC.

2. To analyze the pension plan on the basis of features offered.

3. To observe working of various departments of the organization.

.

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COMPANY PROFILE

HDFC LIMITED

HDFC was incorporated in 1977 with the primary objective of meeting a social

need – that of promoting home ownership by providing long-term finance to

households for their housing needs. HDFC was promoted with an initial share

capital of Rs. 100 million.

Business Objectives

The primary objective of HDFC is to enhance residential housing stock in the

country through the provision of housing finance in a systematic and

professional manner, and to promote home ownership. Another objective is to

increase the flow of resources to the housing sector by integrating the housing

finance sector with the overall domestic financial markets.

Organizational Goals

HDFC’s main goals are to

a) Develop close relationships with individual households,

b) Maintain its position as the premier housing finance institution in the

country,

c) Transform ideas into viable and creative solutions,

d) Provide consistently high returns to shareholders,

e) To grow through diversification by leveraging off the existing client base.

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10

HDFC STANDARD LIFE

The Partnership:

HDFC is an organization that strives for excellence, with the twin objectives of

enhancing customer satisfaction and shareholder value”

HDFC and Standard Life first came together for a possible joint venture, to

enter the Life Insurance market, in January 1995. At the outset it was clear that

both companies shared similar values and beliefs and a strong relationship

quickly formed. In October 1995 the companies signed a 3 year joint venture

agreement.

Around this time Standard Life purchased a 5% stake in HDFC, further

strengthening the relationship. The next three years were filled with

uncertainty, due to changes in government and ongoing delays in getting the

IRDA (Insurance Regulatory and Development authority) Act passed in

parliament.

Despite this both companies remained firmly committed to the venture.

In October 1998, the joint venture agreement was renewed and additional

resource made available. Around this time Standard Life purchased 2% of

Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also

started to use the services of the HDFC Treasury department to advise them

upon their investments in India.

Towards the end of 1999, the opening of the market looked very promising and

both companies agreed the time was right to move the operation to the next

level. Therefore, in January 2000 an expert team from the UK joined a hand

picked team from HDFC to form the core project team, based in Mumbai.

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Around this time Standard Life purchased a further 5% stake in HDFC and a

5% stake in HDFC Bank. In a further development Standard Life agreed to

participate in the Asset Management Company promoted by HDFC to enter the

mutual fund market. The Mutual Fund was launched on 20th July 2000.

The company was incorporated on 14th August 2000 under the name: HDFC

Standard Life Insurance Company Limited.

Their ambition from as far back as October 1995 was to be the first private

company to re-enter the life insurance market in India. On the 23rd of October

2000, this ambition was realized when HDFC Standard Life was the only life

company to be granted a certificate of registration.

HDFC are the main shareholders in HDFC Standard Life, with 81.6%, while

Standard Life owns 18.4%. HDFC and Standard Life have a long and close

relationship built upon shared values and trust. The ambition of HDFC

Standard Life is to mirror the success of the parent companies and be the

yardstick by which all other insurance companies in India are measured.

HDFC Standard Life Insurance Company has been signed on by Blue Star to

provide insurance cover to its 1,805 employees across India and overseas.

HDFC Standard Life Insurance is one of the leading players in the group

insurance segment of the life insurance business. Its group business has grown

significantly since inception and now covers over 25,000 lives, across the

entire industry spectrum including software, FMCG, pharmaceuticals, banking,

consultancy, BPOs, retailing, and consumer electronics

HDFC STANDARD LIFE

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MISSION:-

HDFC Standard Life aims to be the top new life insurance company in the

market.

This does not just mean being the largest or the most productive company in

the market, rather it is a combination of several things like:

Customer service of the highest order

Value for money for customers

Professionalism in carrying out business

Innovative products to cater to different needs of different customers

Use of technology to improve service standard

Increasing market share

VALUES:-

1. SECURITY: Providing long term financial security to its policy holders

will be the company’s constant endeavor. It will do this by offering life

insurance and pension products.

2. TRUST: HDFC Standard Life appreciates the trust placed by its policy

holders in it. Hence, it will aim to manage their investments very

carefully and live up to this trust.

3. INNOVATION: Recognizing the different needs of its customers, it

will be offering a range of innovative products to meet these needs. The

company’s mission is to be the best new life insurance company in India

and these are the values that will guide it in this

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Why HDFC Standard Life?

There are many reasons why one may choose HDFC Standard Life Insurance

Company Ltd. as your partner in meeting your insurance needs:

a) Innovative products to meet your needs.

b) Efficient customer service team.

c) Good financial track record of both parents – HDFC and Standard Life.

d) Certified Financial Consultants to advise you.

e) Professional approach in managing your investments.

f) Income Tax benefits for our insurance products.

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FINANCE DEPARTMENT AT HDFC STANDARD LIFE

The finance department of HDFC Standard Life Insurance is headed by the

General Manager (Finance), who reports to the MD and CEO. There are four

other departments under the Finance Departments. These are:

1. Accounts Department

2. Actuary Department

3. Investment Department

4. Underwriting Department

The Accounts Department:

The Accounts Department functions like any other Accounts department. It is

concerned with the disbursement of salaries, reimbursements, incentives,

commissions to agents. It also handles the payments due to other agencies with

which the Company interacts, viz. event management companies etc. The work

of an Accounts department assumes much importance in an insurance

company because it has to be able to pay the claims arising time to time.

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The Actuary Department:

The Actuary Department is the “Pricing Department” of an insurance

company. It must be understood that the basic premise on which the insurance

companies work is “use the corpus of policy holders for disbursement for any

claim”. Based on this principle, this department decides the amount of

premium to be charged from a client for a particular policy. This is normally

done with the help of Mortality Tables, which can either be prepared by the

company itself, or the company can use the existing tables available for its use.

The IRDA (Insurance Regulation Development Authority) has prescribed the

use of the mortality tables used by LIC for all other companies.

The Actuary Department is also responsible for Asset-Liability Management of

the insurance company. It must ensure that the Solvency margin (Assets-

Liabilities) must be at least Rs 50 crores, as prescribed by IRDA. 95% of the

surplus above this has to be distributed to the investors a bonus. HDFC

Standard Life has till now declared three bonuses to its policyholders

The Investment Department:

The Investment Department is responsible for the investment of the money of

the investors. Since the basic reason for the investors investing their money in

Life Insurance is security, IRDA has put certain regulations on such companies

for investments so that the money of investors is safe.

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These guidelines are:

1. not less than 50% of the corpus will be invested in Government Securities

(G-Sec)

2. Up to15% of the corpus will be invested in infrastructure, social and rural

sectors.

3. Not less than 20% can be invested in government and other equities.

4. Remaining 15% can be invested in “unapproved” equities.

Till recent time, HDFC has not been investing in equities. But now it has

decided to follow the footsteps of its Joint-Venture partner Standard Life,

which invests around 75% of its corpus in equities. The Investment

Department is also responsible for calculating the returns of the investment to

the investors. Here also the insurance companies are bound by regulations and

guidelines. According to IRDA, the returns have to be in the range of 6 %-9 %.

The Underwriting Department

This department is responsible for taking the decision on whether to insure a

person or not. For this it must take into account the risk premium associated,

the reinsurance opportunities etc. normally, there are charts available with the

people of this department on the basis of which they can come to a viable

decision.

Underwriting is done on the basis of two grounds:

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· Financial Grounds: here the underwriters decide on the worth of the person

by taking into account his tax returns of the last three years. On this basis they

are able to assess the premium paying ability of that person and accordingly

take a decision.

· Medical Grounds: each new customer is required to undergo a

comprehensive medical test, which determines the person’s general health. On

the basis of this report, the underwriters decide upon the premium to be

charged from customer.

Functions of Insurance

The functions of Insurance can be bifurcated into three parts:

1. Primary Functions

2. Secondary Functions

3. Other Functions

The primary functions of insurance include the following:

1) Provide Protection - The primary function of insurance is to provide

protection against future risk, accidents and uncertainty. Insurance cannot

check the happening of the risk, but can certainly provide for the losses of risk.

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Insurance is actually a protection against economic loss, by sharing the risk

with others.

2) Collective bearing of risk - Insurance is a device to share the financial loss

of few among many others. Insurance is a mean by which few losses are shared

among larger number of people. All the insured contribute the premiums

towards a fund and out of which the persons exposed to a particular risk is

paid.

3) Assessment of risk - Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk. Risk is the basis for

determining the premium rate also

4) Provide Certainty - Insurance is a device, which helps to change from

uncertainty to certainty. Insurance is device whereby the uncertain risks may

be made more certain.

The secondary functions of insurance include the following:

1) Prevention of Losses - Insurance cautions individuals and businessmen to

adopt suitable device to prevent unfortunate consequences of risk by observing

safety instructions; installation of automatic sparkler or alarm systems, etc.

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Prevention of losses causes lesser payment to the assured by the insurer and

this will encourage for more savings by way of premium. Reduced rate of

premiums stimulate for more business and better protection to the insured.

2) Small capital to cover larger risks - Insurance relieves the businessmen

from security investments, by paying small amount of premium against larger

risks and uncertainty.

3) Contributes towards the development of larger industries - Insurance

provides development opportunity to those larger industries having more risks

in their setting up. Even the financial institutions may be prepared to give

credit to sick industrial units which have insured their assets including plant

and machinery.

The other functions of insurance include the following:

1) Means of savings and investment - Insurance serves as savings and

investment, insurance is a compulsory way of savings and it restricts the

unnecessary expenses by the insured's For the purpose of availing income-tax

exemptions also, people invest in insurance.

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2) Source of earning foreign exchange - Insurance is an international

business. The country can earn foreign exchange by way of issue of marine

insurance policies and various other ways.

3) Risk Free trade - Insurance promotes exports insurance, which makes the

foreign trade risk free with the help of different types of policies under marine

insurance cover

SOME TERMS ABOUT ULIP PLANS

Fund Management

The crux of the entire product is the returns that this product can generate and

this is dictated by the management of the fund. There is no great value in doing

well in all other aspects of the product delivery if the fund does not perform

well.

The insurance company has two options with regards to the management of the

fund i.e. external and internal. External funds usually have a proven track

record that could be used as a significant marketing too. In India many of the

insurance companies, which are apart of the larger financial services groups,

already have a sister fund Management Company and they could bank on their

performance. For others, they would usually be having an in-house investment

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team and this could be extended to management of the funds too. The expenses

and hence the cost should be kept in mind as by nature the unit linked

insurance product is a very transparent product and hence this would become a

significant selling point in the long run.

Charges and Expenses

There are different charges that can be levied by the insurance companies,

some of the more common ones are:

1) Initial charges

2) Annual charges

3) Investment charges

4) Morality charges

5) Surrender charges

Initial charges

Initial charges are applied at the time of setting up the policy; this could be in

the form of a bind offer spread and also in the form of allocation of units

known as the allocation factor. It is also possible to be levying a per member

level charge.

Annual charges

The annual charges can either be fixed or can be linked to the size of the fund.

It could also be linked to the number of members in the scheme. This charge is

usually taken to cover the maintenance expenses of the insurer.

Investment charges 22

A fund management charge is levied to take care of the fund management

expenses depending upon whether the fund is managed internally or externally.

Mortality charges

It is possible to have an insurance element built into the super annuation

contract and in case of a gratuity there would be an element of insurance the

degree and the form could differ from company to company.

The insurance premium can be taken as a part of the gratuity contract of it can

be administered outside this but packaged to look as if it is a whole some

product offering gratuity and insurance to the employees of the organization.

Surrender Charges

The surrender charges can be used in multiple ways. It could be used as a way

of recouping the initial outlay of the insurer in case the company decides to

withdraw in the early years of the contract or it could be used as a deterrent for

the company to shift the service provider at any point of the contract. Usually

the surrender charges/ penalty would decrease over a period of time and would

be expressed as a percentage of the fund.

Administration

The unit –linked policies are significantly complex to administer and also

would need a very highly technically trained customer service department to

handle enquiries. Much of the administer the policy, As the allocation of units

would be time dependent it is extremely important to have a very robust

system that can take care of allocation, de allocation and reallocation of units. 23

It is essential to have a system that would be able to talk/ interact with other

systems to capture the unit price details, to give outputs to accounting

packages, report generators etc.

INDIVIDUAL PRODUCTS:

 Each of us leads a unique life and so has unique needs. HDFC Standard Life

offers a range of products and invites you to choose the one that suits you best.

PLAN BENEFIT

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Savings Plans

Endowment Assurance Plan

Unit Linked Endowment Plan

Children’s Plan

Money Back Plan

Unit Linked Young Star Plan

Life Insurance with Savings

Life Insurance & Savings with choice

of investment funds

Financial Security for your child

Financial security for your child with

choice of investment funds

Life Insurance with Savings

Investment Plans

Single Premium Whole of Life Plan Investment with Life Insurance

Protection Plans

Term Assurance Plan

Loan Cover Term Assurance Plan

Life Insurance customized for home

loans

Life Insurance at an affordable price

Retirement Plans

Personal pension plan

Unit Linked Pension Plan

Savings for retirement

Retirement Savings with a choice of

investment funds

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Endowment Assurance Plan

Endowment assurance plan is a participating (with profits) insurance plan that

offers the following features:

     Provides financial support to the family by way of a lump sum payment in

case of the unfortunate death of the life assured within the term of the policy.

    provides a lump sum payment to the life assured on survival up to maturity

This plan is with profits saving plan and is well suited for saving money for

your long term financial goals. This plan also helps provide for the needs of

your family in your absence by paying out a lump sum in the event of your

unfortunate death during the term of the policy.

Optional benefits

You can add the following optional benefits to customise your policy to suit

your needs:

Critical Illness (CI) Benefit provides an amount, equal to the sum

assured chosen under this optional benefit, on diagnosis of any one of

the 6 common critical illnesses(1). The sum assured is payable if you

survive for 30 days after the date of the claim. Once such a claim has

been met, no further Critical Illness Benefit is payable. However, your

basic policy continues even after we pay a claim On this benefit.

   Additional Term Benefit (ATB) provides an additional amount

equal to the sum assured chosen under this optional benefit, in case of

your unfortunate death.

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Accidental Death Benefit (ADB) provides an additional amount,

equal to the sum assured chosen under this optional benefit, in case of

your unfortunate death:

-due to an accident and within 60 days of an accident.

Waiver Of Premium (WOP) Benefit waives the premium for you in

case you become totally disabled. The waiver is applicable during the

period of total disability.

This plan can be taken on a single life basis or a joint life (first claim)

basis.

Eligibility

This plan can be taken as a single life basis or a joint life (first claim) basis.

The eligibility ages are as follows:

Basic

Policy

Basic policy with optional benefits

CI ATB ADB WOP

Min. age of entry 12 18 18 18 18

Max. age of entry 60 5 60 55 50

Max. age of expiry 75 70 75 65 60

Minimum term: 10 years Maximum term: 30 years

Tax Benefits 27

Tax benefits described in Section 88, Section 80D and Section 10 (10D) of the

income Tax Act are applicable.

Applicable to premium paid for CI and WOP

Payment options

you have the choice of paying your premium either in yearly, half-yearly or

quarterly modes, depending on your convenience

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Unit Linked Endowment Plan:

The unit linked endowment plan is an insurance policy that is designed to pay

a lump sum on maturity or on earlier death. The Unit Linked Endowment Plan

also gives the option of additional protection against the six common critical

illnesses, as well as additional protection if death is as the result of an accident.

Your premiums are invested in units of the investment fund of your choice,

based on the prevailing unit price. On maturity you receive the value of your

units. On death (or critical illness, if chosen) you receive the greater of the

value of your units and your selected basic sum assured.

Premiums

Premiums can be paid either quarterly, half-yearly or annually, throughout the

term of the policy. The minimum premium amount is Rs. 10,000 each year.

Premiums can be paid by cash, cheque or demand draft.

Benefits

There are 4 different options available to choose from:

1. Life Option

On death within the policy term, the greater of the Sum Assured and the

value of the unit-linked fund will be paid to your nominee.

On survival to the end of the policy term the value of the unit linked

fund will be paid to you.

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2. Life and Health Option

On death or earlier diagnosis of any one of six common critical illnesses

within the policy term, the greater of the Sum Assured and the value of

the unit-linked fund will be paid to your nominee.

On survival to the end of the policy term the value of the unit-linked

fund will be paid to you.

“The illnesses covered under this option are cancer, coronary artery

by pass graft surgery, heart attack, kidney failure, major organ

transplant (as recipient) and stroke”.

3. Extra Life Option

This option pays the same benefits as the Life Option but, should death

occur within the policy term as the result of an accident, an extra benefit

equal to the Sum Assured will be paid.

4. Extra Life and Health Option

This option pays the same benefits as the Life and Health Option but,

should death occur within the policy term as the result of an accident, an

extra benefit equal to the Sum Assured will be paid.

Levels of protection

Depending on your age at entry, you may choose between 3 levels of cover –

Low, Medium or High. For each level the Sum Assured is based on the amount

of premium you pay each year.

The Sum Assured can not be changed during the term of the contract.

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Age at entryLevels of cover

Low Medium High

18 to 40 5XPremium 10XPremium 20XPremium

41 to 50 5XPremium 10XPremium

Over 51 5XPremium

Eligibility

The age and term limits for taking out a Unit Linked Endowment Plan

are: (years)

Minimum

term

Maximum

term

Minimum

age at entry

Maximu

m age at

entry

Maximum

age at

expiry

Life 1010 30 18 60 75

Life and

health 10 30 18 5 65

Extra life10 30 18 55 70

Extra life

and health 10 30 18 55 65

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The alteration of premium, surrendering of the policy, conditions on stopping

of payment of premiums and charges are the same as that of the unit linked

pensions plan.

Tax Benefits

Tax benefits under section 88 and section 10 (10D) of the income tax act are

applicable.

Surrendering the policy

The policyholder can surrender the policy at any point of time during the

contract term. The amount payable will be the unitised fund value after

applying additional surrender charges mentioned below.

Accessing money?

You can make lump sum withdrawals from you funds provided the fund

balance after withdrawal and charges does not fall below the Sum Assured.

The minimum withdrawal amount is Rs. 10,000.

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Children's Plan

Children’s Plan is designed to provide a lump sum to the child at maturity. It

also provides financial security to the child in the future, even in case of the

insured parent’s unfortunate death during the policy term. Children’s Plan

receives simple reversionary bonuses, which are usually added annually. This

is a flexible plan with three options for you to choose from, depending on your

requirements. The details of these options are explained in the next section.

Options

You will have the choice of 3 options at the start of the policy.

Option On the death of the insured

parent during the policy

term

On maturity

Maturity

Benefit Plan

Future premium waived and

the policy continues till

maturity.

Accelerated

Benefit plan

Sum assured + bonuses paid

and the policy stops.

On the survival of the

insured parent to the

maturity date, sum assured

+ bonuses paid.

Double

Benefit plan

Sum assured paid, future

premiums waived, and the

policy continues till

maturity.

Sum assured + bonuses

paid.

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Tax Benefits

The premiums you pay will be eligible for tax relief under Section 88 of the

Income Tax Act, 1961. The benefits received under the policy are eligible for

tax relief under Section 100 (10D) of the income tax act, 1961.

Eligibility

The eligibility ages for the life assured under the plan are as follows:

Minimum Age of Entry 18 years

Maximum Age of Entry 60 years

Maximum Age of Maturity 75 years

Term of policy

Min. Term: 10 years Max. Term: 25 years

Payment options

You have the choice of paying the premium either in yearly, half-yearly or

quarterly modes, depending on your convenience

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35

Unit Linked Young Star Plan

 

HDFC Unit Linked Young Star Plan is designed to provide a lump sum to the

child at maturity. It also provides financial security to the child in the future,

even in case of the insured parent's unfortunate death during the policy term.

The Unit Linked Young Star Plan also gives the option of additional protection

against the six common critical illnesses.

Your premiums are invested in units of the investment funds of your choice,

based on the prevailing unit prices. On maturity the value of the units will be

paid. On death (or critical illness, if chosen) the selected basic sum assured is

paid, and the policy continues until maturity. Following a valid death or critical

illness claim, we will pay the future premiums (at the level originally chosen at

inception) into your policy, as and when they would have fallen due.

Premiums

You agree to pay a level premium regularly, either quarterly, half-yearly or

annually, throughout the term of the policy. The minimum premium amount is

Rs. 10,000 each year.

Premiums can be paid by cash, cheque or demand draft.

Benefits

There are 2 different options available:

1. Life Option

This option consists of a Maturity Benefit and a Death Benefit.

The Maturity Benefit will pay the value of the unit-linked fund at the end

of the policy term.

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The Death Benefit will pay the basic Sum Assured on death of the life

assured during the policy term. Following payment of this benefit, no

further premiums are due from the policyholder.

Following a valid death claim, we will pay future premiums on your

behalf, as and when they become due. The level of premium will be that

chosen by you at inception of the policy.

2. Life and Health Option

This option consists of a Maturity Benefit, a Death Benefit and an

Extra Health Benefit.

The Maturity Benefit will pay the value of the unit-linked fund at the

end of the policy term.

The Death Benefit will pay the basic Sum Assured on death of the life

assured during the policy term. Following payment of this benefit, no

further premiums are due from the policyholder and the Extra Health

Benefit will lapse without value.

The Extra Health Benefit will pay the basic sum assured on diagnosis of

any one of six critical illnesses during the policy term. Following

payment of this benefit, no further premiums are due from the

policyholder and the Death Benefit will lapse without value. The

illnesses covered under this benefit are cancer, coronary artery by pass

graft surgery, heart attack, kidney failure, major organ transplant (as

recipient) and stroke.

Following a valid death or critical illness claim, we will pay future

premiums on your behalf, as and when they become due. The level of

premium will be that chosen by you at inception of the policy.

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Eligibility

The age and term limits for taking out a Unit Linked Young Star Plan are:

(Years)

Minimum

Term

Maximum

Term

Minimum

Age at

Entry

Maximum

Age at

Entry

Maximum

Age at

Expiry

Life

Option

10 25 18 60 75

Life and

Health

Option

10 25 18 55 65

Surrendering the policy

The policyholder can surrender the policy at any point of time during the

contract term. The amount payable will be the unitised fund value after

applying additional surrender charges mentioned below.

Accessing money

You can make lump sum withdrawals from you funds provided the fund

balance after withdrawal and charges does not fall below Rs. 15,000. The

minimum withdrawal amount is Rs. 10,000.

38

39

Money Back Plan

It is a participating (with profits) insurance plan that offers the following

features:

 Payment of cash lump sum, each of which is a proportion of the basic sum

assured, at 5-year intervals during the term of the policy. (Please refer to the

table given below.)

 on survival up to maturity, a payment equal to the basic sum assured plus

any bonus additions less the cash lump sums paid earlier is provided.

In case of the unfortunate death of the life assured within the term of the

policy, the basic sum assured plus any bonus additions is provided. This is over

and above the earlier payouts.

This plan helps you plan for future anticipated expenses by paying periodic

cash lump sum to you at regular intervals. This plan also helps provide for the

needs of your family in your absence by paying them the basic sum assured

plus any bonus additions in the event of your unfortunate death during the term

of the policy.

Benefits

You can add the following optional benefits to customise your policy to suit

your needs:

40

Critical Illness (CI) Benefit provides an amount, equal to the sum

assured chosen under this optional benefit, on diagnosis of any one of

the 6 common critical illnesses. The sum assured is payable if you

survive for 30 days after the date of the claim. Once such a claim has

been met, no further Critical Illness Benefit is payable. However, your

basic policy continues even after we pay a claim on this benefit.

Additional Term Benefit (ATB) provides an additional amount, equal

to the sum assured chosen under this optional benefit, in case of your

unfortunate death.

\

Accidental Death Benefit (ADB) provides an additional amount equal

to the basic sum assured in case you die:

- due to an accident, and

- within 90 days of the accident.

Waiver Of Premium (WOP) Benefit waives the premium for you in

case you become totally disabled. The waiver is applicable during the

period of total disability.

All optional benefits must be selected at the outset of your plan.

Eligibility

This plan can be taken on a single life basis or a joint life (first claim) basis.

The eligibility ages are as follows:

Basic

Policy

Basic policy with optional benefits

CI ATB ADB WOP

41

Min. age of entry 12 18 18 18 18

Max. age of entry 60 5 60 55 50

Max. age of expiry 75 70 75 65 60

PAYMENT OPTIONS

You have the choice of paying your premium either in yearly, half-yearly or

quarterly modes, depending on your convenience

42

SINGLE PREMIUM WHOLE LIFE INSURANCE

Single Premium Whole of Life Insurance Plan is well suited to meet your long

term investment needs. This participating (with profits) plan offers you the

following

Benefits:

A sound investment:

Your money will be invested in our With Profits fund. The fund aims to

provide secure and stable long term growth. Normally, we will declare a

compound reversionary bonus for your policy every year and add it to your

policy on its anniversary. In addition, on death, surrender or on the guaranteed

dates, a terminal bonus might be payable. You pay a single premium and the

policy will pay you a lump sum.

Flexibility of term:

Even after choosing your policy, you can decide on the policy term. For 4

weeks after any one of the 10th, 15th, 20th and subsequent five-year

anniversaries, you can choose to receive the sum assured plus any attaching

bonuses, in full. Once the money has been received, your policy will cease.

43

Surrender value:

You can terminate the policy any time, after it has been in force for at least 6

months, and receive a surrender value.

In case of unfortunate death:

Your nominee gets the sum assured secured by your premium, plus any

attaching bonuses.

No medical requirements:

We do not require you to undergo any medical test for this plan.

Eligibility

You can buy the product on a single life basis.

Tax benefits

Tax benefits under Section 88 of the income Tax Act are applicable on

premiums up to 20% of the sum assured.

Payment options

A single premium can be paid by cash, cheque or demand draft.

44

Minimum age at entry : 18 years

Maximum age at entry : 70 years

PENSION PLAN

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

income for life from retirement, with an option to take the lump sum

elsewhere to buy the annuity, provide it is permitted by the prevailing

regulations.

Your commitment. You agree to pay a single premium or level premiums

with installments due every quarter half-year or year throughout the

deferment period of the policy, after which you will start receiving your

pension.

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

for life from retirement. It does this by accumulating a national lump sum

on retirement, comprising of sum assured plus any attaching bonus.

Can I take the national lump sum as cash on retirement?

Subject to the prevailing legislation and regulations, part of this can be taken as

a lump sum and the rest used to buy an immediate annuity.

Mode of premium

You can pay either a single premium or pay premiums is quarterly half yearly

or annual form by cheque, in cash or by bank drafts.

45

Eligibility

The age and term limits for looking out a personal pension plan area:

Minimum

Term

Maximum

Term

Maximu

m Age

Maximu

m Age of

entry

Minimum

age of

Retirement

Maximum

age of

Retiremen

t

RP SP RP SP RP SP

10 5 40 15 18 35 60 50 70

What if I need money?

Loans

There is no facility for loans against this contract.

Tax benefits

Tax benefits described in Section 80 CC of the income tax act are applicable

(up to Rs. 10,000)

46

47

Unit Linked Pension Plan

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

designed to provide a retirement income for life.

Your premiums are invested in units of the investment fund of your choice,

based on the prevailing unit price. On vesting the value of your units will be

used to buy your retirement benefits.

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

lump sum of Rs 1000.

Premiums

You agree to pay level premiums regularly, either quarterly, half-yearly or

annually, throughout the term of the policy or a single premium at the start of

the policy. The minimum premium amount for regular premium mode is Rs.

10,000 each year and for single premium, it is Rs. 25,000.

To facilitate increased investment, we allow additional single premium top-ups

at any time. The minimum single premium top-up is Rs. 5,000.

Premiums can be paid by cash, cheque or demand draft.

Benefits

At the chosen vesting date, the unitised fund value will be available to secure

pension benefits. Subject to the prevailing regulations, part of this value can be

taken in the form of a cash lump sum and the rest converted to an annuity at

the rate then offered by HDFC Standard Life. Alternatively, if it is permitted

by the prevailing regulations, the proceeds net of any cash lump sum can be

used to buy an annuity with any other insurance company who will accept such

business. The current maximum limit for any cash lump sum is one-third of the

unitised fund value on vesting.

48

On death the unitised fund value will be paid along with a cash lump sum of

Rs. 1,000. The beneficiary may use the proceeds to purchase pension benefits

for the surviving spouse.

Your basic benefits will be paid by cheque.

Eligibility

The age and term limits for taking out a Unit Linked Pension Plan are:

(Years)

Minimu

m Term

Maximu

m TermMinimu

m Age of

Entry

Maximu

m Age of

Entry

Minimu

m Age of

Vesting

Maximu

m Age of

Vesting

Regular

Premiu

m

Version

10 40 18 60 50 70

Single

Premiu

m

Version

5 40 18 65 50 70

49

TAXATION

TAX BENEFITS OF INSURANCE AND PENSION PLAN.

Life insurance and retirement plans are effective ways of saving taxes. The tax

breaks that are available under various insurance and pension policies are

described below:

1. Life insurance plans are eligible for deduction under Sec. 80C.

2. Pension plans are eligible for a deduction under Sec. 80CCC.

3. Health riders are eligible for deduction under Sec. 80D.

4. The proceeds or withdrawals of life insurance policies are exempt

under Sec 10(10D), subject to norms prescribed in that section.

Tax Rates for Individuals

The rates of income tax for FY 2005-06 are as follows:

Total Income (Rs.)

Rate of tax

Senior

citizen

Women below

65 years

Others

Up to Rs 1, 10,000/-Nil Nil Nil

Above Rs 110,000/- to

125,000/-

Nil Nil 10%

Above Rs 125,000/- to

150,000/-

Nil 10% 10%

Above Rs 150,000/- to

250,000/-

20% 20% 20%

Above Rs 250,000/- 30% 30% 30%

50

Surcharge on Income Tax: In case where the Total Income exceeds

Rs 10, 00,000, there would be a surcharge @ 10%.

Education Cess on Income Tax: Education Cess @2% will be payable on the

amount of income tax (including surcharge).

Premiums paid for Life insurance - Deduction under Section 80C

1 Category of assesses allowed deduction: Individual assessee and Hindu

Undivided Family assessee.

2 Eligible Savings: Premiums paid or deposited by assessee to effect or to

keep in force insurance on the life of following persons:

In case of individual assessee – Himself/herself, spouse, children of such

individual

In case of HUF assessee – any member

3. 20% limit: If the amount of premium paid in a financial year for a policy is

in excess of 20% of the actual capital sum assured, then deduction will be

allowed only for premiums up to 20% of the sum assured.

4 Limit on amount of deduction: Deduction will be restricted to investments

of up to Rs 100,000 in savings specified under Section 80C (including life

insurance premiums). If any investments have been made under Section

80CCC and 80CCD, then the qualifying amount under Section 80C will stand

reduced to that extent.

5. Deduction limit: The amount of deduction will be equal to the amount by

which the income tax payable on such total income is in excess of the amount

by which the total income exceeds 100,000.

Premiums paid for Pension plans - Section 80CCC

51

1 Permitted Deduction: Section 80CCC allows for deduction of premiums

paid under a pension plan. As per this Section, a premium paid up to Rs 10,000

by an individual is allowed as deduction from his total income.

2 Disallowance: This benefit will be reversed if the policy lapses / is

cancelled.

3 Limit: It may be noted that from FY2005-06, the limit of deduction under

Section 80CCC will be part of the overall limit prescribed under Section

80CCE.

Premiums paid for medical insurance - Section 80D

I) Category of assessee allowed deduction: Individual assessee and Hindu

Undivided Family assessee.

II) Eligible premiums: Premiums paid by assessee by cheque out of his taxable

income to effect or to keep in force an insurance on the health of following

persons: In case of individual assessee – Himself/herself, spouse, dependant

children and dependant parents.

In case of HUF assessee – any member of HUF

III) Deduction and upper limit: The qualifying amounts under Section 80D is

up to Rs 10,000/-. However, a higher amount of up to Rs 15,000/- is permitted

if the person, for whose health insurance the premium was paid, was aged 65

years or more at any time during the financial year in which the premium was

paid. Such amounts of premium paid would be allowed as deduction from the

total income of the assessee.

Overall deduction limit - Section 80CCE

A new Section 80CCE is proposed to be inserted from FY2005-06. As per this

section, the maximum amount of deduction that an assessee can claim under

Sections 80C, 80CCC and 80CCD will be limited to Rs 100,000.

52

Benefits under insurance policy - Section 10(10D)

As per Section 10(10D) of Income tax Act, 1961, any sum received under a

life insurance policy, including the sum allocated by way of bonus on such

policy is exempt from tax. However, this rule does not apply to following

amounts:

Sum received under Section 80DD (3), or

Any sum received under a Key man Insurance Policy, or

Any sum received other than as death benefit under an insurance policy

which has been issued on or after April 1 2003 and if the premium paid in

any of the years during the term of the policy is more than 20% of the sum

assured.

Rebate in respect of Securities Transaction Tax (STT) paid

1 Section 88E has been introduced by Finance Act (No 2) of 2004.

2 As per the provisions, where total income of an assessee includes any income

under the head ‘Profits and Gains from Business or Profession’ arising from

taxable securities transactions, he shall be entitled to a deduction from the

income tax on such income.

3 Amount of deduction: Amount of STT paid in respect of taxable securities

transactions entered into in the course of business during that previous year

4 The deduction will be allowed if proof of payment of STT is furnished along

with the return. The proof has to be furnished as per the format prescribed by

Income Tax.

5 Maximum deductions shall be equal to the amount of income tax on above

income.

53

COMPARITIVE ANALYSIS

CONTENTS

1. HDFC PENSION-II VS BIRLA FLEXI SECURELIFE RETIREMENT

2. HDFC PENSION-II VS BAJAJ ALLIANZ UNIT GAIN

3. HDFC PENSION –II VS LIC BIMAPLUS

HDFC PENSION-II VS BIRLA FLEXI SECURE LIFE RETIREMENT

VS BAJAJ ALLIANZ UNIT GAIN VS LIC BIMAPLUS

Features

HDFC

PENSION

BIRLA Flexi Secure

Life Retirement

Allianz Bajaj

Unit gain LIC Bima Plus

Age 18 - 60 years 18 - 60 years 0 – 60 years 12 - 55 years

Term 10 - 30 years Minimum Term of

10 years

Choice rests with

the consumer

with a minimum

premium

payment term of

3 years

10 years

Sum Assured Only 5, 10, 20

(age-based)

multiples are

allowed as

Sum Assured.

Minimum Sum

Assured is Rs.

50,000. Zero Death

Benefit is also

available.

Minimum Sum

Assured is 5

times the

premium paid.

Maximum limit

up to Rs. 2

lakhs

54

Survival

benefit

Value of units

partly in cash

partly

converted to

annuity.

Unit Value is used to

purchase an annuity

Value of Fund at

Bid price

Bid Value of

the fund units

Death benefit Value of units,

no sum

assured is

given.

Value of units in this

case the Sum

Assured is zero.

Higher of Sum

Assured or value

of units.

Death during

the first 6

months - 30%

of SA + value

of units, next 6

months - 60%

of SA + value

of units. Death

after 1st year -

SA + value of

units. Death

during the 10th

year - 105% of

SA + value of

units.

Withdrawal

benefit

No Partial

withdrawals

are available.

No Partial

withdrawals are

available

Partial or

complete

withdrawal at bid

price after 3rd

year

Premature

withdrawal

allowed after

one year (after

applying bid-

offer spread.

55

Contribution/

premium

Minimum: Rs.

10,000 p.a.

Minimum Rs. 5,000

p.a.

Minimum: Rs.

10,000 p.a.

Minimum Rs.

10,000 p.a

Flexible

contribution

Available Not available Only an increase

in contribution is

allowed

Not available

Investment

options

5 Fund

Options-

Balanced,

Defensive

Managed,

Safe

Managed,

Liquid &

Growth

Nourish, Growth and

Enrich

Equity Fund,

Debt Fund,

Balanced Fund,

Cash Fund

Balanced,

Secured & Risk

Surrender

Value

The surrender

charge is 25%

of 3 years of

regular

premium. No

charges after 3

years

Surrender is

available from the

1st year itself. In the

1st year surrender

charges are 75%, in

the 2nd year the

charges are 50%, in

the 3rd year the

charges are 25%..

A selling /

purchase price

spread of 5% will

be applicable

from the 3rd year

onwards

Partial

surrender up to

50% of bid

value of units

allowed after 3

years from date

of

commencement

Top-up Available with

a minimum

top-up of Rs

5,000 and

Available, with a

minimum top-up of

Rs. 10,000

Available Available

(Charges: 1.5%

of the top-up)

56

maximum of

20% of sum

assured.

Switch 24 Switches

are free.

2 free switches every

year. Every

additional switch

will be charged at

0.5% of the switch

amount.

Three free

switches every

policy year.

Subsequent

switches would

be charged @1%

of switch amount

or Rs. 100,

whichever is

higher.

No free

switches. Cost

of switching is

2% of the fund

value.

Initial Charge Charges Charges Charges

1st yr-27%,

2nd yr- 27%,

3rd yr

onwards- 1%

20% of the initial

premium in the 1st

year and 2% of the

premium from the

2nd year onwards.

1st year - 70%;

2nd year - 2%;

3rd year - 1%; No

charges from the

4th year onwards Not Disclosed

Admin Charge Admin

charges of

Rs.180 fixed

charge

Per annum.

Policy admin fee of

Rs. 20 per month

Annual admin

charges of 1.25%

p.a. of net assets

Not applicable

Fund

Management

Charges

Least in the

industry 0.8%

of the fund per

A fund based fee of

2.25 % p.a. of the

policy fund.

Annual

investment

charge of 1% p.a.

1% of the fund

per annum

57

annum of fund.

Bonus units Available Not Available Not Available Available

RESEARCH METHODOLOGY

STUDY

The present investigation is a descriptive type of study undertaken to estimate

the comparative study pension plan of HDFC SLIC, BIRLA SUN LIFE,

BAJAJ ALLIANZ, LIC.

SAMPLE SIZE

For the purpose of analysis a sample size of different companies were selected.

The sample size taken was 4.

SAMPLING METHOD

The sampling method used for the project was “Random Sampling”. This type

of sampling is also known as probability sampling where each and every item

in the population has an equal chance of inclusion in the sample and each one

of the possible samples. This procedure gives each item an equal probability of

being selected.

DATA COLLECTION

SECONDARY DATA

The secondary data was collected by referring through web sites, and the final

data was analyzed systematically to achieve the desired result.

58

DATA ANALYSIS AND INTERPRETATION

After analyzing the data above in the table we came to the following

interpretation. Interpretation has been done on the basis of the features

mentioned in the table.

1. AGE AND TERM OF POLICY : Since the minimum age is minimum in BAJAJ ALLIANZ and the term depends on the customer. The customer has probability of getting the maximum returns (all other things being equal). And HDFC is offering investment for maximum 30 years which is rated as second best in this feature.

2. SWITHCHES : After analyzing the feature the conclusion drawn is that HDFC is offering the most switches in the year.

3. CHARGES : The charges levied on the policy of the insurer is lowest in HDFC SLIC like FMC, PAC, but initial charge is second lowest which is also not bad in terms of investment.

4. WITHDRAWALS : Withdrawals not allowed in HDFC SLIC & BIRLA SUN LIFE because if withdrawals are there plan would not yield good return.

5. INVESTMENT OPTIONS : HDFC SLIC provides you the maximum funds for investment (Balanced fund, Defensive Managed fund, Safe Managed fund, Liquid fund & Growth fund). So HDFC SLIC provides you better portfolio to diversify your funds which reduces the risk and maximizes the return.

6. TOP UP : In HDFC SLIC the minimum top up is of RS 5000 with no charges levied but in others it is Rs 10000. Here we could see that people with low income can increase the premium with small amount.

7. BONUS UNIT : Only two firms are offering bonus unit to the customer and they are HDFC SLIC and LIC.

59

8. FLEXIBLE CONTRIBUTION : This feature is available in HDFC SLIC where a customer can increase or decrease its premium, but only Bajaj Allianz is offering an increase option only.

RECOMMENDATIONS

1. Premium allocation charge (initial charge) should be reduced to provide

customer with better return.

2. Policy administration charge should be reduced to gain more advantage

in the market.

3. Surrender charges should be reduced.

60

CONCLUSION

Based on comparative study HDFC SLIC is on the upper side in the private

life insurance companies in comparison to Birla sun life, Bajaj Allianz.

HDFC SLIC based on the comparative study has many advantage in this

segment of product like fund management charge, switches facility and

maximum number of investment funds in offering (i.e., 5 namely Balanced

fund, Defensive Managed fund, Safe Managed fund, Liquid fund & Growth

fund ) but the rest of the insurance player that is LIC, Birla sun life, Bajaj

Allianz are also not far behind HDFC SLIC.

BIBLOGRAPHY

WWW.HDFCINSURANCE.COM 61

www.irda.com

www.LICindia.com

www.birlasunlife.com

WWW.GOOGLE.COM

62