Sbi - Pension_plan

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CHAPTER NO: - 1 INSURANCE

1.1 Introduction

Insurance = collective bearing of risk

Insurance is nothing but a system of spreading the risk of one onto the shoulders of many.

While it becomes somewhat impossible for a man to bear by himself 100% loss to his

own property or interest arising out of an unforeseen contingency, insurance is a method or

process which distributes the burden of the loss on a number of persons within the group

formed for this particular purpose.

Basic human trait is too adverse to the idea of risk taking. Insurance, whether life or non-life

provides people with a reasonable degree of security and assurance that they will be

protected in the event of a calamity or failure of any sort.

Insurance may be described as a social device to reduce or eliminate risk of loss to life and

property. Under the plan of insurance, a large number of people associate themselves by

sharing risks attached to individuals. The risks, which can be insured against, include fire, the

perils of sea. Death and accidents and burglary. Any risk contingent upon these, may be

insured against at a premium commensurate with the risk involved. Thus collective bearing

of risk is insurance.

Insurance Indemnifies Assets & Income

Every asset has a value and generates income to its owner. There is a normally

expected Life-time for the asset during which time it is expected to perform. If the asset gets

lost earlier, being destroyed or made non-functional through an accident or other unfortunate

event the owner is prejudiced. Insurance helps to reduce CONSEQUENCES of such adverse

circumstances which are called risks.

Insurance is the science of spreading of the risk

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It is the system of spreading the losses of an individual over a group of individuals

insurance is a method of sharing of financial losses of a few from a common fund formed out

of contribution of the many who are equally exposed to the same loss. What is uncertainty

for an individual becomes a certainty for a group. This is the basis of all insurance

operations. Thus insurance convert uncertainties to certainty.

1.2Definition

The definition of insurance can be made from two points:

Functional definition.

Contractual definition.

Functional definition

Insurance is a co-operative device to spread the loss caused by a particular risk over a

number of persons who are exposed to it and who agree to insure themselves against the risk.

General definition

Insurance has been defined to be that in which a sum of money as a premium is paid in

consideration of the insurers incurring the risk of paying a large sum upon a given

contingency. In the words of John Magee, insurance is a plan by themselves which large

number of people associate and transfer to the shoulders of all, risks that attach to

individuals.

Fundamental Definition

In the words of D.S. Hansell, Insurance accumulated contributions of all parties

participating in the scheme.

Contractual definition

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In the words of justice Tindall, Insurance is a contract in which a sum of money is paid to

the assured as consideration of insurers incurring the risk of paying a large sum upon a given

contingency.

1.3 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:

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.

Collective bearing of risk

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.

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.

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.

Research and publicity

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Insurers also spend money in research and publicity in creating risk consciousness amongst

which has a far reaching effect on reduction in national waste.

The secondary functions of insurance include the following:

Prevention of losses

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.

Small capital to cover larger risks

Insurance relieves the businessmen from security investments, by paying small amount of

premium against larger risks and uncertainty.

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.

It improves efficiency

The insurance eliminates worries and miseries of loans at death and destruction of property.

The carefree person can devote his body and soul together for better achievement. It

improves not only his efficiency, but the efficiencies of the masses are also advanced.

It helps economic progress

The insurance by protecting the society from huge losses of damage, destruction and death,

provides an initiative to work hard for the betterment of the masses. The next factor of

economic progress the capital is also immensely provided by the masses. The property, the

valuable assets, the machine and the society cannot lose much at the disaster.

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The other functions of insurance include the following:

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 insureds for the purpose of availing income-tax

exemptions also, people invest in insurance.

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.

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.

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1.4 Categories o f Insurance

The following major categories are important

GENERAL INSURANCE CORPORATION:

HEALTH MEDICAL GENERAL

MUTUAL FUND RETURN &

RISK COVERAGE PARTIALLY

GIC

(GENERAL INSURANCE CORPORATION)

1. LIFE INSURANCE CORPORATION:

LIFE

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TERM INSURANCE ENDOWMENT WHOLE LIFE

PENSION/ ANNUITY CONTRACTS

WITH PROFITS OR WITHOUT PROFITS

FOR FIXED AMOUNTS ON MATURITY

(LIC)

(LIFE INSURANCE CORPORATION)

Various types of life insurance policies:-

Endowment policies: This type of policy covers risk for a specified period, and at

the end of the maturity sum assured is paid back to policyholder with the bonuses

during the term of the policy.

Money back policies: This type of policy is for periodic payments of partial survival

benefits during the term of the policy as long as the policy holder is alive.

Group insurance: This type of insurance offers life insurance protection under

group policies to various groups such as employers-employees, professionals, co-

operatives etc it also provides insurance coverage for people in certain approved

occupations at the lowest possible premium cost. Term life insurance policies: This type of insurance covers risk only during the

selected term period. If the policy holder survives the term, risk cover comes to an

end. These types of policies are for those people who are unable to pay larger

premium required for endowment and whole life policies. No surrender, loan or paid

up values are in such policies.

Whole life insurance policies: This type of policy runs as long as the policyholder is

alive and is covered for the entire life of the policyholder. In this policy the insured

amount and the bonus is payable only to nominee on the death of policy holder.

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Joint life insurance policies: These policies are similar to endowment policies in

maturity benefits and risk cover, but joint life policies cover two lives simultaneously

such as married couples. Sum assured is payable on the first death and again on the

death of survival during the term of the policy.

Pension plan: A pension plan or annuity is an investment over a certain number of

years but does not provide any life insurance cover. It offers a guaranteed income

either for a life or certain period.

Unit linked insurance plan: ULIP is a kind of insurance plan which provides life

cover as well as return on premium paid over a certain period of time. The investment

is denoted as units and represented by the value called as net asset value (NAV).

1.5 Functioning of Insurance Industry:

Insurers business model:

Profit = earned premium + investment income - incurred loss - underwriting expenses

Insurers make money in two ways: (1) through underwriting, the processes by which insurers

select the risks to insure and decide how much in premiums to charge for accepting those

risks and (2) by investing the premiums they collect from insured.

The most difficult aspect of the insurance business is the underwriting of policies. Using a

wide assortment of data, insurers predict the likelihood that a claim will be made against their

policies and price products accordingly. To this end, insurers useactuarial scienceto quantify

the risks they are willing to assume and the premium they will charge to assume them. Data

is analyzed to fairly accurately project the rate of future claims based on a given risk.

Actuarial science uses statistics andprobability to analyze the risks associated with the range

of perils covered, and these scientific principles are used to determine an insurer's overall

exposure. Upon termination of a given policy, the amount of premium collected and the

investment gains thereon minus the amount paid out in claims is the insurer's underwritingprofiton that policy.

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An insurer's underwriting performance is measured in its combined ratio. The loss ratio

(incurred losses and loss-adjustment expenses divided by net earned premium) is added to

the expense ratio (underwriting expenses divided by net premium written) to determine the

company's combined ratio. The combined ratio is a reflection of the company's overall

underwriting profitability. A combined ratio of less than 100 percent indicates underwriting

profitability, while anything over 100 indicates an underwriting loss.

Insurance companies also earn investment profits on float. Float or available reserve is

the amount of money, at hand at any given moment that an insurer has collected in insurance

premiums but has not been paid out in claims. Insurers start investing insurance premiums as

soon as they are collected and continue to earn interest on them until claims are paid out.

Naturally, the float method is difficult to carry out in an economically depressed period.

Bear markets do cause insurers to shift away from investments and to toughen up their

underwriting standards. So a poor economy generally means high insurance premiums. This

tendency to swing between profitable and unprofitable periods over time is commonly known

as the "underwriting" orinsurance cycle.

Finally, claims and loss handling is the materialized utility of insurance. In managing the

claims-handling function, insurers seek to balance the elements of customer satisfaction,

administrative handling expenses, and claims overpayment leakages.

Investment management:

Investment operations are often considered incidental to the business of insurance, and have

traditionally viewed as secondary to underwriting. In the past risk management was the most

important part of business, whereas today the focus has shifted to fund management.

Investment income is a large component of insurance revenues, skilful and careful

management of funds. Insurance is a business of large numbers and generates huge amount

of funds over time. These funds arise out of policyholder funds in the case of life insurance,

and technical and free reserves in the non-life segments. Time lag between the procurement

of premium and the payment of claim provides an interval during which the funds can be

deployed to generate income. Insurance companies are among the largest institutional

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investors in the world. Assets managed by insurance companies are estimated to account for

over 40% of the worlds top ten asset managers.

Returns on investments influence the premium rates and bonuses and hence investment

income will continue to be an important component of insurance company profits. In life

insurance, benefits from insurance profits accrue directly to policy holders when it is passed

on to him in the form of a bonus. In non life insurance the benefits are indirect and mostly by

the creation of an investment portfolio. Investment income has to compensate for

underwriting results which are increasingly under pressure. In the case of insurance, the

difference between revenue and the expenses is known as operating surplus.

Revenue = premium.

Expenses = sum of claims + commission payable on procurement of business +

operating expenses.

Operating surplus = revenue-expenses.

Net investment income includes income from trading in and holding stock market securities

including government securities, special deposits with the central government, loans to

several public utilities and service providers in state government.

Insurance premium collected is converted in a pool of fund then divided in to four expenses.

To pay the expenses of the management.

To pay agency commission.

To pay for the claims.

Surplus money will be invested in govt. securities.

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Requirements of an insurance risk

Insurance normally insure only pure risks .However, not all pure risk is insurable

.certain requirements usually must be fulfilled before a pure risk can be privately insured

.From the view point of the insurer, there are ideally six requirement of an insurable risk

There must be a large number of exposure units

The loss must be accidental and unintentional.

The loss must be determinable and measurable.

The loss should not be catastrophic.

The chance of loss must be calculable.

The premium must be economically feasible

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CHAPTER NO: - 2 LIFE INSURANCE

2.1 Meaning & Role

Life insurance is a contract under which the insurer (Insurance Company) in consideration of

a premium paid undertakes to pay a fixed sum of money on the death of the insured or on the

expiry of a specified period of time whichever is earlier. In case of life insurance, the

payment for life insurance policy is certain. The Event insured against is sure to happen only

the time of its happening is not known. So life insurance is known as Life Assurance. The

subject matter of insurance is life of human being. Life insurance provides risk coverage to

the life of a person. On death of the person insurance offers protection against loss of income

and compensate the titleholders of the policy.

Life insurance products fundamentally provide for

a. Risk Cover

b. Investment

c. Health Cover

ROLES OF LIFE INSURANCE:

Life insurance as an investment: - Insurance products yield more than any other

investment instruments and it also provides added incentives or bonus offered by

insurance companies.

Life insurance as risk cover: - Insurance is all about risk cover and protection of

life. Insurance provides a unique sense of security that no other form of invest can

provide.

Life insurance as tax planning: - Insurance serves as an excellent tax saving

mechanism too.

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2.2 Need for Life Insurance

The above definition captures the original, basic, and intention of life insurance: i.e. to

provide for ones family and perhaps others in the event of death, especially premature death.

Originally, policies were to provide for short periods of time, covering temporary risk

situations, such as sea voyages. As life insurance becomes more established, it was realized

what a useful tool it was for a number of situation including:

Temporary needs/ threats:

The original purpose of life insurance remains an important element, namely

providing for replacement of income on death etc.

Regular Savings:

Providing for ones family and oneself, as a medium to long-term exercise (through a

series of regular payment of premiums). This has become more relevant in recent times as

people seek financial independence from their family.

Investment:

Put simply, the building up of savings while safeguarding it from the ravages of

inflation. Unlike regular saving products, investment products are traditionally lump sum

investments, where the individual makes a one-time payment.

Retirement:

Provision for ones own later years become increasing necessary, especially in a

changing culture and social environment. One can buy a suitable insurance policy, which will

provide periodical payments in ones old age. This simple example illustrates the impact

premature death can have on a family, where the main earner has no life cover.

A simple life insurance policy (term assurance) could have provided Mr. Atuls family with a

lump sum that could have been invested to provide an income equal to all or part of his

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income. We will discuss how to analyze the need for life cover and the value of life later in

the course.

2.3 Benefits from Life Insurance

It is superior to a traditional saving vehicles:

As well as providing a secure vehicle to build up saving s etc, its provides peace of

mind to the policyholder. In the event of untimely death, of say the main earner in the family,

the policy will pay out of the guaranteed sum assured, which is likely to be significant more

than the total premiums paid. With more traditional savings vehicles, such as fixed deposits,

the only return would be the amount invested plus any interest accrued.

It encourages saving and forces thrift:

Once an insurance contract has been entered into, the insured has an obligation to

continue paying premiums, until the end of the term of the policy, otherwise the policy will

lapse. In other words, it becomes compulsory for the insured to save regularly and spend

wisely. In contrast savings held in a deposit account can be accessed or stopped easily.

It provides easy settlement and protection against creditors:

Once a person is appointed for receiving the benefits (nomination) or a transfer of

rights is made (assignment), a claim under the life insurance contract can be settled easily. In

addition, creditors have no rights to any monies paid out by the insurer, where the policy is

written under trust. Under the Married Womens Property Act (M.W.Act), the money

available from the policy forms a kind of trust, which creditors cannot claim on.

It helps to achieve the purpose of the Life Assured:

If someone receives a large sum of money, it is possible that they may spend the

money unwisely or in a speculative way. To overcome this, the person taking the policy can

instruct the insurer that the claim amount is given in installments. For example, if the total

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amount to be received by the dependents is Rs. 2, 00,000 say Rs.50, 000 can be taken out as a

lump sum and the balance paid out in smaller installments, say Rs. 5,000 per month.

It can be enchased and facilitates borrowing:

Some contracts may allow the policy can be surrendered for a cash amount, if a

policyholder is not in a position to pay the premium. A loan, against certain policies, can be

taken for a temporary period to tide over the difficulty; some lending institutions will accept

a life insurance policy as collateral for a personal or commercial loan.

Tax Relief:

The policyholders obtain Income Tax rebates by paying the insurance premium. The

specified forms of saving which enjoy a tax rebate, under section 88 of the Income Tax Act,

include Life Insurance Premiums and contributions to a recognized Provident Fund etc.

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CHAPTER NO :- 3 PENSION PLAN

3.1 Need for Pension Plan

Pension Plans are Individual Plans that gaze into your future and foresee financial stability

during your old age. These policies are most suited for senior citizens and those planning a

secure future, so that you never give up on the best things in life.

Pension plan is nothing but the retirement plan, it has to be decided on why, when and

how to start a retirement planning.

Most of you picture yourselves enjoying the fruits of labor after retirement, going on your

dream vacation, or helping your children's career take wing. But do you realise that financing

all this will most likely depend partly on your personal savings? Because personal savingsand investments represent a significant source of retirement income for many people, you can

never save too much.

Currently, you are at a stage where you are juggling many roles, as nurturing parents, dutiful

caregivers to elders, supportive life partners, while trying to maintain a career. It is too easy

to get carried away handling and solving the day-to-day problems to not look into your

retirement needs. It may also seem too far away to be of concern. But a look at the issues

below will make the need for some strategic planning at this stage amply clear.

Today, thanks to a healthier lifestyle and advances in medicine, the average Indian lives

longer. This makes the challenge of accumulating enough money for retirement even more

difficult, since it may have to last longer. Also, with the falling interest rate scenario and the

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rising costs of medical expenses retirement mean monetary uncertainty for most of us. More

so, because there is also the ever-persistent evil of inflation, which erodes your purchasing

power. The graph below illustrates how much Rupees will 10,000/- amount to after some

years:

Therefore, the message is simple - no matter whether you are 30 or 50, you should start

planning early to have a healthy retirement kitty. (See graph below for an illustration)

As can be seen the cost of delaying is high. Situation A is when you are saving Rs 10000annually from the age of 25 to 34 years and Situation B is when you save the same annual

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amount from the age of 35 to 59 years. As can be seen in the example, even after investing

your money for a 2.5 times longer duration, the maturity value in the second case is much

lesser (the figures are based on a hypothetical interest rate of 10%). The longer your money

is allowed to grow at a compounded rate, the more dramatic will the difference be eventually.

Therefore, the message is simple - Put Time On Your Side and Start Early.

This is the reason why people go for pension plan (Annuities).

3.2 Tax Benefits Related To Pension Plans:

Section Brief of Section Income Tax Act Overview

10 (10D)

For Life Insurance

benefits as

Maturity/

Claims/Bonuses

Any sum received by a policyholder under a life

insurance policy (including bonus declared on the

insurance policy) is exempt from tax. # Death Claims

are tax Free. # However, any sum received under Key

person Insurance policy is not exempt from tax and is

taxable.

10 (23 AAB)For Pension

Schemes

Income from pension fund set up by any life insurance

company under a pension scheme, which the controller

of insurance approves, is exempt from income tax.

80 CCCFor Pension

Schemes

A policy holder is allowed deduction under from his

total income of an amount not exceeding Rs. 1,00,000/-

80 C

For Life Insurance

premiums paid

Section which gives eligibility to a taxpayer for

deduction from total gross income on the life insurance

premium paid. Other investments defined by govt. of

India also come under this section.

80CCEFor Overall

Deduction Limit

The aggregate amount of deduction u/s 80CCC, and

section 80CCD shall not, in any case exceed one lac

rupees.

10(10A)(iii)For Pension

Schemes

Exemption in respect of commutation of pension

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3.3 Products of Pension Plans

There are various types of Pension plans, where there are two types of products, they

are:

1. INDIVIDUAL PRODUCTS

2. GROUP PRODUCTS

1. INDIVIDUAL PRODUCTS:

ANNUITIES

Annuities are a form of pension in which an insurance company makes a series of periodic

payments to a person (annuitant) or his or her dependents over a number of years (term), in

return for the money paid to the insurance company either in a lump sum or in installments.

Annuities start where life insurance ends. It is called the reverse of life insurance. Annuity

stops on death of a person, whereas theoretically, life insurance starts on death of the assured.

Annuities are of two types:-

Immediate Annuity: -

Immediate Annuity begins at once or immediately on expiry of the designated period.

Immediate Annuity is purchased with a single premium called purchase price. The type of

annuity is typically purchased when a person reaches retirement age and has a lump sum to

invest.

If the person buying the annuity dies during the term, his legal heirs or nominees get the

remaining installments of the annuity.

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Deferred Annuity: -

Under a deferred annuity plan, the annuity payments to annuitant commence at some

specified time or specified age of the annuitant. This type of annuity can be funded either by

a single payment or a series payment or a series of regular payments.

The annuity payment starts after the lapses of a selected period called deferment period.

2. GROUP PRODUCTS:

An insurance policy taken out by an individual is a case of individual insurance. In such a

case, the risk covered is on an individual life. The premium payable is decided individually

for each policyholder depending on various factors such as age, health etc.

Group insurance is a plan of insurance which covers a similar or homogeneous group of

individuals under a single policy called a Master Policy.

The party with whom the insurer enters into a contract may be an employer, a labour union or

a voluntary association.

The individuals covered in the Group Insurance Scheme are not parties to contract. The

amount and the terms of insurance are negotiated by the group policyholder only.

Group products of pension are:

a. Group gratuity scheme:

Gratuity is a contribution made by the company towards pension benefits of an employee. It

is available to an employee on:

Retirement

Cessation of service

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Event of death

Gratuity is a non-contributory fund in which only the employer gives money.

Gratuity payment as such does not come under the purview of insurance business.

However, group insurance is linked with gratuity and the scheme marketed by life insurance

companies is called Group Gratuity-cum-Life Assurance scheme.

The payment of gratuity is compulsory under the payment of gratuity Act, 1972. The

employer may pay gratuity to his employees

As and when it falls due out of his revenues.

Out of internal reserves

Out of a trust set up for the purpose of administering the funds itself.

Out of a trust and the trustee may opt for a scheme of insurance with the insurance

with the insurance company.

The group gratuity scheme with an insurance company enables the employers to

provide for larger gratuity payment for employees who die in service.

b. Group superannuation

Superannuation is a contribution made by the company towards pension benefits of

an employee. It is available to an employee on-

Attainment of a certain age.

Retirement

Cessation of service

Event of death

The employer can pay the pension benefits as and when they fall due or he can set up

a trust fund for provision of pension. The trustees can enter into a Group Superannuation

with the insurance company, whereby the responsibility of administering and managing the

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fund is passed on to the insurance company. A Group

Insurance Scheme can be arranged along with the

superannuation scheme, whereby the pension

benefits can be much higher even in the case of

premature death.

Under the Income Tax Act, Superannuation contributions by the employer are tax-

exempt up to 15 % of the annual salary. And a superannuation fund may either be self-

managed or a life insurance company could manage it. Not many employees are yet enrolled

in such schemes.

c. Group Annuity Schemes

Annuity taken for a group is known as a Group Annuity Scheme. Under such

schemes, employers who manage their own superannuation or pension schemes can purchase

annuities from the insurance companies as and when they have to release the pensions to the

employees. After purchase, the Annuities will be paid directly by the insurance companies to

the pensioners.

CHAPTER NO: - 4 COMPANY PROFILE

4 . SBI & SBI Life Insurance

SBI Life Insurance, Indias largest private life insurance, is a joint venture between State

Bank of India and BNP Paribas Assurance SBI owns 74% of the total capital and BNP

Paribas Assurance the remaining 26%. SBI Life Insurance has an authorized capital of Rs.

2,000 crore and a paid up capital of Rs 1,000 crores.

BNP Paribas Assurance is the insurance arm of BNP Paribas - Euro Zones leading Bank.

BNP Paribas, part of the worlds top 10 groups of banks by market value and part of Europe

top 3 banking companies, is one of the oldest foreign banks with a presence in India dating

back to 1860. BNP Paribas Assurance is the fourth largest life insurance company in France,

and a worldwide leader in Creditor insurance products offering protection to over 50 million

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clients. BNP Paribas Assurance operates in 41 countries mainly through the banassurance

and partnership model.

SBI Life Insurances mission is to emerge as the leading company offering a comprehensive

range of Life Insurance and pension products at competitive prices, ensuring high standards

of customer service and world class operating efficiency.

SBI Life has a unique multi-distribution model encompassing Banc assurance, Agency and

Corporate Solutions. Agency Channel, comprising of the most productive force of over

68,000 Insurance Advisors, offers door to door insurance solutions to customers.

SBI Lifes Key Accomplishments:

Bagged the coveted personal finance award-Outlook Money NDTV Profit best Life

Insurer 2008.

Globally topped at the prestigious MDRT 09, in terms of number of Million Dollar

Round Table (MDRT) members.

First life insurer to receive CRISILs highest financial rating AAA/Stable. ICRA too

has assigned iAAA rating indicating highest claims paying ability to SBI Life

Insurance.

Retains ISO 9001:2000 certificate for superior claim settlement process.

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CHAPTER NO: - 5 COMPARISON BETWEEN

DIFFERENT PENSION PRODUCTS OF AXIS BANK

AND SBI

5.1Axis Bank Pension Products

Axis bank offers the Insurance products of Met Life Insurance Company Ltd., in which the

pension plan products are

Individual Products:

i. Met Growth

ii. Met Advantage Plus

In these policies, the investment risk in investment portfolio is borne by the policy holder.

Met Growth:

It is specially designed to provide financial security for your future requirements. This plan

allows you to start planning immediately by ensuring the safety of your first year premiums.

It also helps create your retirement fund faster by giving you 100% allocation from the

second year onwards, coupled with attractive loyalty additions into your fund.

Met Advantage Plus:

As the name suggests, it comes with many advantages. You can choose from eight annuity

options, two life cover options and get tax benefits under Section 80 C and 10 (10 A). You

can buy the plan without any hassles and invest more as you approach retirement by using

the top-up functionality. All in all, its a plan which works harder for you when you stop

working. For one, it ensures that you lead a comfortable lifestyle post retirement.

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GROUP PRODUCTS

Axis bank dont provide with the Group Insurance Schemes of MetLife Insurance Co.

5.2 SBI Life Pension Products

SBI & SBI Life Insurance:

SBI Life Insurance is a joint venture between the State Bank of India and BNP Paribas

Assurance. State Bank of India enjoys the largest banking franchise in India. Along with its 7

Associate Banks, BNP Paribas Assurance is the insurance arm of BNP Paribas - Euro Zones

leading Bank. BNP Paribas, part of the worlds top 10 group of banks by market value and

part of Europe top 3 banking companies, is one of the oldest foreign banks.

SBI has its own Life insurance products, in which they offer the following pension plan

products:

Individual Products

i. SBI Life - Horizon II Pension (ULIP)

ii. SBI Life - Unit Plus II Pension plan (ULIP)

iii. SBI Life - Immediate Annuity

iv. SBI Life Lifelong pension

In the policies SBI Life - Horizon II Pension, SBI Life - Unit Plus II Pension plan, the

investment risk in investment portfolio is borne by the policy holder.

i. SBI Life - Horizon II Pension

SBI Life - Horizon II Pension is a safe and a hassle free way to get high returns! SBI Life

- Horizon II Pension comes with the unique feature of Automatic Asset Allocation by means

of which you truly, dont need to be an expert to grow your money!

ii. SBI Life - Unit Plus II Pension plan

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SBI Life - Unit Plus II Pension is a non participating single or regular premium unit

linked insurance plan, which helps to build up a kitty retirement to take care of post

retirement needs.

SBI Life - Unit Plus II Pension plan makes sure that you have regular income after you retire

and also helps you to maintain your standard of living.

This is a unit linked pension plan wherein the policyholder chooses an investment period

from 5 to 52 years for a vesting age between 50 to 70 years. You can choose to pay either

single premium or pay regular premium for the entire policy term. Your contributions are

invested into 5 fund options as per your choice.

iii. SBI Life - Immediate Annuity

This product provides annuity payments immediately from payment of purchase price. It

has been specially designed to cater to the annuity needs of our existing policyholders (SBI

Life - Lifelong Pensions, SBI Life - Horizon II Pension, SBI Life - Unit Plus II Pension) at

the vesting age.

iv. SBI Life Lifelong pension

This plan helps to satisfy your needs after retirement. Although retired you still have the

finance to fulfill your desires. It is a regular pension product.

GROUP PRODUCTS

Axis bank dont provide with the Group Insurance Schemes of MetLife Insurance Co.

The group insurance schemes which provides various benefits as stated in the previous

chapters of this report, the SBI has also taken measures to satisfy the customers needs by

introducing Group Insurance Schemes.

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SBI life group solutions offer an integrated basket of employee benefit plans. It caters to both

statutory as well as voluntary needs of the employees.

SBI Life Insurance has seven Group Insurance pension schemes.

i. SBI Life CapAssure Gratuity Scheme

ii. SBI Life CapAssure Superannuation Scheme

iii. SBI Life CapAssure Leave Encashment Scheme

iv. SBI Life Dhanrashi

v. SBI Life Swarna Jeevan

vi. SBI Life Swarna Ganga

vii.SBI Life Kalyan ULIPTM

Kalyan ULIPTM: It is a non-participating; unit linked Group Insurance Scheme. It is truly

unique with its variety of features that benefit not only the master policyholder but also to

each Group Member.

INVESTMENT PHILOSOPHY FOR NON-LINKED PENSION PLANS:

SBI Lifes Investment Management Objective stands on stability and growth of the portfolio.

Our investment Management Framework works with safety and transparency in mind.

The safety you deserve:

All investment made by SBI Life are monitored by an in-house Investment Sub

Committee and reviewed on semi-annual basis by the Board.

Our investment operations are periodic supervision by IRDA.

The transparency you look for:

Disclosure of portfolio composition at regular intervals with details of contributions

received, interest credited, settlements made, and balances as on renewal date.

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The actual performance as well as the holdings are shared on the 31st of March every

year and can be made available at any time on request.

Fund Performance for the Year

Gross Returns declared on SBIs Non-Linked

Gratuity and Group Pension Funds

Financial YearGross Returns

Declared

2005-06 12.30%

2004-05 11.67%

2003-04 13.00%

The following article based on SBI Life Insurances Group Insurance Schemes can give

us the idea about performance of these plans in the market as a whole. It was published

in the Business Standard on September 30, 2007.

Currently managing a portfolio of whopping 6 million lives, SBI Life is set to

maintain its leadership in Group Lives coverage. So far this financial year, SBI Life has

already covered more than 8 lacs group lives with an additional 2.5 lacs lives through

individual policies. SBI Life is now the fastest growing life insurance company, with New

Premiums growing at a scorching 264% (YTD) basis, from Rs. 275 crores to 1000 crores and

Total Premiums keeping pace, growing at 211% from Rs. 370 crores to Rs. 1150 crores. A

strong growth across all its channels namely Bancassurance, Agency Channel and Group

Corporate is the major attributing factor for SBI Lifes exponential business growth.

While sharing its aggressive plans, SBI Life also announced the infusion of additionalfresh capital of Rs. 75 crores to take its capital base up to its authorized share capital limit of

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Rs. 500 crores. Speaking on the occasion, Mr. S. Krishnamurthy, MD and CEO, SBI Life

Insurance said, The additional capital has been injected to maintain stipulated solvency

margins for the exponential new business growth and expanding branch network

He added, This growth has come primarily on account of our multi-channel business

model coupled with a balanced mix of savings and protection products. SBI Life currently

has the largest and most robust Bancassurance network complimenting the most productive

and active Insurance Advisor force of Agency Channel in the country.

SBI Life today also unveiled the new Horizon II Pension Product, a unit linked

pension product aimed at offering greater retirement security to investors and retirees alike. It

offers investors the opportunity for long-term capital appreciation through exposure to themarkets and investment expertise of SBI Life.

The uniqueness of the product stems from the proprietary Automatic Asset Allocation

(AAA), an algorithm-based active investment allocation mechanism, which is currently

offered exclusively by SBI Life in India. This IT based system developed by testing over

5000 potential scenarios in the Indian equity & bond markets, determines the optimal risk

return combination. Higher exposure to equities for the initial years, followed by increasing

exposure to debt and money markets as the pension plan nears maturity, is automatically

allocated by the AAA mechanism, to ensure better returns for investors.

Speaking at the event, Mr. Pier-Paolo Dipaola, Dy. CEO, SBI Life Insurance said,

The unique Automatic Asset Allocation feature makes Horizon II Pension an ideal

retirement solution for many evolving Indian investors who do neither have the time nor the

expertise to make fund allocation decisions on an on-going basis.

He added, Today with disintegration of joint family system, increasing life

expectancy rate, rising medical costs and lack of social security system, the need for

retirement planning is very acute for the Indian investors. The Horizon II Pension provides

Indian investors with the required long-term benefits of exposure to equity markets, while

empowering them to lead the desired lifestyle post-retirement.

The uniqueness of Horizon II Pension is a combination of Systematic Investment

Planning concept with periodical automatic relocation of assets based on the plan option and

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remaining term to maturity. In a certain way, policyholders retirement funds benefits from

markets returns during the initial years while ensuring safety at the time of maturity.

The other attractive feature of Horizon II Pension is the availability of optional life

cover. In addition, the maximum premium allocation charge for the first year is capped at Rs.

60,000, for second and third year - Rs.40000 and from fourth year to tenth year - Rs.10000

making Horizon II Pension a lucrative low-charge investment option for High Net worth

Individual (HNI) investors. The premium allocation charges, top up allocation charges are

surrender charges are zero from 11th year onwards.

Horizon and new ULIP guidelines compliant Horizon II enjoy a strong patronage of more

than 90,000 customers.

SBI Life has rapidly expanded its operations this year to strengthen its unique multi-

distribution network. The company now is leveraging the 14,500-strong SBI Group branch

network from where SBI Life products are currently available. SBI Life also has increased its

own branch network from 68 branches as March, 2006 to 95 as on December, 2006. While

the number of Life Insurance Advisors recruitment has gone up by more than double from

8000 as on March, 2006 to 18,525 as on December, 2006. The two other channels of Group

Insurance & Credit Life have also been showing significant growth.

The above article and the number of pension plans offered by both the companies can give us

the idea that SBI Life insurance is on a growth stage and planning for future expansion for

the promotion of life insurance products.

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5.3 Comparison Between Unit Linked Pension Plans Of MetLife & SBI

Life

Unit linked business which is driving the growth of premiums over the last 2-3 years. While

the private players have taken the lead in this segment, LIC has also made strong strides in

the sale of ULIPs during the last three years. Despite the growing popularity of ULIPs it

remains a fact that thepolicy holders rely heavily on the advice rendered by the distributors.

The complicated design of the policies makes them less aware of the product features and

chances of mis-selling by agents are high. To protect the interest of the customers,IRDA hastaken the following initiatives.

Issuance of comprehensive ULIP guidelines in 2005 which mandate minimum risk

cover, three year lock-in, usage of simple language, proper disclosures, standard

method of computing NAV etc.

Insurers to make projections of return as per the guidelines of Life Insurance Council.

To ensure transparency, IRDA has directed the insurers to list all charges that the

policyholder has to bear along with the amount available for investment in each year

specific to each policy.

IRDA has also stipulated that policyholders would have to sign a document stating

that they have understood the terms and conditions of the policy before concluding

the sale.

The customer can also use 15 days free look period in case he is not satisfied with the

terms and conditions of the policy.

To remove complexity in unit linked products IRDA has advised the insurers to phase

out some of the actuarially funded ULIPs.

Worldwide, Unit linked products have been seen as attractive- in view of the flexibility and

investment options they offer to the customers and the capital efficiency to the companies.

After the market crash of 2001, customers started looking for more security and guarantees in

the unit linked products. Adding guarantees to unit linked products has been common in

Europe, North America and Japan. The unit linked market though new in Asia is growing

steadily in countries like Korea, Taiwan and South East Asia. Variable Annuity products are

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slowly emerging in these markets and from the customer point of view are quite attractive,

especially when they provide guarantees on pension savings.

In India, the long-standing debate over the suitability of Unit Linked Insurance Plan (ULIP)

and mutual funds can be resolved better with a proper understanding of the need of the

investor. Mutual funds are essentially short to medium term products. ULIPs, in contrast, are

positioned as long-term products with an element of life cover. It is pertinent to note that

exposure of Indian households to capital markets is limited. It is important for an investor to

understand his financial goals and horizon of investment in order to make an informed

investment decision.

With respect to retirement planning, set of variables considered are:

The clients age is 38 years and he would like to retire 22 years hence i.e. at the age

of 60 years

The client would like to invest an amount of Rs 1,000,000 (Rs.1 m) each year for

three years. In total, he will invest an amount of Rs 3 m over 3 years.

The client has been suggested a single premium plan of Rs.1 m with additional top-

ups worth Rs 1 m p.a. (per annum) for the following two years. In all, the client

would be paying Rs 3 m over the 3-yr period.

The client has a high-risk appetite and would like to remain invested in equities

throughout the tenure of the pension plan.

The client has a well-diversified portfolio including mutual funds and stocks.

Based on the information, investments in the unit linked pension plan (ULPP):

Pension plan: Preparing for the future

Investment

amt (Rs)

One-time

charge (%)

Admn.

Charges (Rs)*

Fund Mngt

Charges (%)

Investment

Tenure (Yrs)

Net maturity

Value (Rs)

1,000,000 2.50 180 0.80 22 18,400,000

1,000,000 2.50 180 0.80 21

1,000,000 1.00 180 0.80 20

*Administration charges are subject to 5.00% inflation per annum.

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Investments in unit linked pension plan (ULPP): If the client decides to buy the pension

plan, then he would be paying Rs 1,000,000 in the first year. Since this is a single premium

plan, one-time charges on the same are 2.50% (i.e. in the first year). In other words, Rs

25,000 would be deducted from the clients single premium amount and the remaining

amount (i.e. Rs 975,000) would be invested in the 100% equity ULPP option. This amount

will remain invested for the entire 22-yr tenure.

The charges for any additional top-ups in the second year too would be to the tune of 2.50%.

Similar to the first year, Rs 25,000 would be deducted from the second years top-up amount.

So Rs 975,000 would be invested over 21 years.

One-time charges for any top-ups from the third year onwards fall to 1% for the year.Therefore, only Rs 10,000 (i.e. 1% of Rs 1,000,000) would be deducted and the remaining

amount would be invested. The third year amount (Rs 990,000) will remain invested for a

20-yr period (i.e. time to maturity).

Fund management charges (FMC) for managing equities in the given ULPP are 0.80% p.a.

Administration charges are assumed to be Rs 180 p.a. (increasing at an assumed inflation rate

of 5.00%).

As can be seen from the table above, assuming a compounded growth rate (CAGR) of 10%

p.a. over 22-Year tenure, the clients investments will grow to approximately Rs 18,400,000.

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CHAPTER NO: - 6 MET GROWTH & SBI LIFE

6.1 Met Growth & SBI LIFE Horizon II Pension Plan

Company

NameMet Growth SBI LIFE Life Long Pension

Maturity

Benefit

On maturity fund value is payable

including guaranteed loyalty

additions (as applicable)

Settlement option: withdraw fund

value in installments within 5

years (without life insurance

cover), in case of death the fund

value as on the date shall be paid

& the termination of policy.

No partial withdrawals

No loyalty additions

No top-up premiums

At Vesting age commute up

to 1/3 of the vesting benefit

and balance can opt for

annuity purchase.

Use 100% of the vesting

benefit to buy annuity for

desired frequency.

Death

Benefit

Different benefits for the unfortunate

event of death during the coverage

term the nominee/beneficiary will

receive:

If the death if the person

insured occurs before

attainment of age 7.

If the death of person insured

occurs before the attainment

of age 60.


occurs or after the attainmentof age 60.

Option 1 (Pure Pension Plan) -

Fund Value is Payable.

Option 2 (Pension with Life Cover)

Fund Value + Sum Assured is

payable. Death After Vesting Age -

Benefits depends upon Annuity

Option Chosen.

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Min. - Max.

Entry Age

(In yrs.)

0 60 years

(3 months to be completed)

18 - 60 Years

Min.-Max.

Age at

vesting

18 75 years 50 - 70 Years

Min.

Premium

P.A. (In Rs.)

Minimum Annual Premium Rs.12000 12000 - No Limit

Premium

Mode

Regular Premium:

Yearly

Half-Yearly

Quarterly

Monthly

Yearly

Half-Yearly

Quarterly

Monthly

Premium

Increment

Option

Special

Addition

Options

Guarantee loyalty additions @ 2 % of

average value at the end of 20th year

& every 5 years thereafter.NA

Policy

Surrender

Option (After completion of 3 Policy Year) (After completion of 3 Policy Year)

Open

Market

Option

Premium

Top-up

option

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Cover

Continuance

Option

Premium

Re-Direction

Facility

Fund

Switching

Option

Rider

AvailabilityNA NA

Tax-Benefits U/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)

Responding a query on unit linked insurance plan (ULIP), Mr. Roy chairman and

managing director of SBI Life Insurance, felt in the initial years that an ideal model for

insurance would be a balanced mix of market related and traditional products. Stressing the

importance of ULIP, Mr. Roy said that there was a huge need for retirement solution in the

country. He felt that ULIP was best suited for retirement solutions. "Our ULIP product

covers 64 per cent of the total premium income," he added.

MetLife crosses 1-m policies mark

New Delhi, Nov 30

MetLife India Insurance Company Limited (MetLife) has announced that it has crossed the

one million mark in life insurance policies issued. The total number of lives insured by the

company now stands at two million (including the group business). "It is indeed a moment of

pride for us at MetLife to achieve the 1 million mark. This achievement gains all the more

significance keeping in view the tumultuous 2008 that the financial sector witnessed," Mr

Rajesh Relan, Managing Director, MetLife India, said in a statement here today. MetLife

started its operations in India in the year 2002.

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6.2 Met Growth & SBI Life Unit Linked II Pension plan

Company

NameMet Growth SBI LIFE LifeLong Pension

Maturity

Benefit

On maturity fund value is payable

including guaranteed loyalty

additions (as applicable)

Settlement option: withdraw fund

value in installments within 5 years

(without life insurance cover), in

case of death the fund value as on

the date shall be paid & the

termination of policy.



No top-up premiums




annuity purchase.



desired frequency.

Death

Benefit


event of death during the coverage term

the nominee/beneficiary will receive:





occurs before the attainment of

age 60.


occurs or after the attainment of

age 60.

Option 1 - Fund Value is Payable.

Option 2 - Fund Value or Sum

Assured whichever is Higher is

payable as death benefit.

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Min. - Max.

Entry Age

(In yrs.)

0 60 years


18 - 65 Years

Min.-Max.

Age at

vesting

18 75 years 50 - 70 Years

Min.

Premium

P.A. (In

Rs.)

Minimum Annual Premium Rs.12000Regular Premium 24000

Single Premium 25000

Single

Premium

Option

Regular Premium:

Yearly

Half-Yearly

Quarterly

Monthly

Premium

Mode

Single Premium

Yearly

Half-Yearly

Quarterly

Monthly

Premium

Increment

Option

Guarantee loyalty additions @ 2 % of

average value at the end of 20th year &

every 5 years thereafter.

Special

Addition

Options(After completion of 3 Policy Year)

Policy

Surrender

Option(After completion of 3 Policy Year) After completion of 3 Policy Year

Open

Market

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Option

Premium

DecreaseOption

Premium

Top-up

option

Cover

Continuanc

e Option

Premium

Re-

Direction

Facility

Fund

Switching

Option

Rider

AvailabilityNA

Accidental Death &

Permanent Disability Rider

Critical Illness Rider

Tax-

BenefitsU/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)

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6.3 Met Growth & SBI Life Lifelong Pension

Company

NameMet Growth SBI LIFE Life Long Pension

Maturity

Benefit

On maturity fund value is

payable including guaranteed

loyalty additions (as applicable)

Settlement option: withdraw

fund value in installments within

5 years (without life insurance

cover), in case of death the fund

value as on the date shall be paid

& the termination of policy.



No top-up premiums

At Vesting age commute up to

1/3 of the vesting benefit and

balance can opt for annuity

purchase.

Use 100% of the vesting benefit

to buy annuity for desired

frequency.

Death Benefit


event of death during the coverage

term the nominee/beneficiary will

receive:





occurs before the attainment

of age 60.


occurs or after the attainmentof age 60.

Sum Assured + Pension Fund

Balance amount

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Min. - Max.

Entry Age (In

yrs.)

0 60 years


18 - 65 Years

Min.-Max. Age

at vesting18 75 years 50 - 70 Years

Min. Premium

P.A. (In Rs.)

Minimum Annual Premium

Rs.12000NA

Premium Mode

Regular premium:

Yearly

Half-Yearly

Quarterly

Monthly

Yearly

Half-Yearly

Quarterly

Monthly

Premium

Increment

Option

Special

Addition

Options

Guarantee loyalty additions @ 2 %

of average value at the end of 20 th

year & every 5 years thereafter.

Min. returns of 4%

Guarantee Per Annum.

Life Cover Option is

available.

Policy

Surrender

Option(After completion of 3 Policy Year) (After completion of 3 PolicyYear)

Open Market

Option

Premium

Decrease

Option

Premium Top-

up option

Cover

Continuance

Option

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Premium Re-

Direction

Facility

Fund

Switching

Option

Rider

AvailabilityNA NA


On JUNE 13, 2007 published in the Business line

SBI Life announces 9% bonus on Lifelong Pensions schemes for 2006-07. Offers bonus

varying from 1.25 % to 2.75 % of effective Sum Assured for its various insurance

schemes.

SBI Life Insurance Company Ltd., one of the fastest growing leading private sector life

insurance company, had announced a total of 9 per cent bonus, comprising of simple annual

bonus of 5 per cent and guaranteed return of 4 per cent on all its in force Lifelong Pensions

policies for the period 2006-07.

All bonuses declared are a percentage of the effective Sum Assured, and not linked to the

premium component. Achievements of SBI Life during the Financial Year 200607

Net profit rose by 88% to Rs.3.83 crores for FY 06-07.

New Business Premium grew by 210% to Rs.2, 566.08 crores.

Built up a portfolio of over 64.9 lacs insured lives.

Ranked 3rd amongst its private peers in terms of new business premium income.

Whereas, MetLife has entered in the market during 2002 and have given tough competition

to SBI Life Insurance and all other insurance companies.

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Met Growth Hoe does the plan work?

44

First Year

Premium

Used to provide Guaranteed

Loyalty Addition on defined

Intervals / maturity

50% at the end of the

10th year

Up to 70% at the end

of the 15th yearPlu

s

Assured Loyalty Addition @ 2% of the

Average Fund Value of last 3 years.

At the end of

20th, 25th &30th year

Second year

premium

onwards

Allocated to different Funds

without any Allocation Charge


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6.4 Met Advantage Plus & SBI LIFE Horizon II Pension Plan

Company

NameMet Advantage Plus

SBI LIFE Horizon II Pension

Plan

Category

NameDeferment Annuity Plan Deferment Annuity Plan

Maturity

Benefit




annuity purchase.



desired frequency.




annuity purchase.



desired frequency.

Death Benefit

With Life Cover - During the

deferment period death benefit is

equal to 110% of value of Unit in the

unit account.

Without Life cover - During the



unit account. If beneficiary is spouse,

can also avail option to buy annuity

also.

Option 1 (Pure Pension Plan) -

Fund Value is Payable.

Option 2 (Pension with Life

Cover)

Fund Value + Sum Assured is

payable. Death After Vesting Age -

Benefits depends upon Annuity

Option Chosen.

Min. - Max.

Entry Age (In

yrs.)

20 - 55 18 - 60 Years

Min.-Max.

Age at vesting

(In yrs.)

45 - 60 50 - 70 Years

Min. Premium

P.A. (In Rs.)

Regular Premium 10000 12000 - No Limit

Single Single Premium 100000 Rs.

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Premium

Option

Premium

Mode

Single Premium

Yearly

Half-Yearly

Quarterly

Monthly

Yearly

Half-Yearly

Quarterly

Monthly

Premium

Increment

Option

Special

Addition

Options

NA NA

Policy

Surrender

Option(After completion of 3 Policy Year) (After completion of 3 Policy Year)

Open Market

Option

Premium

Decrease

Option

Premium Top-

up option

Cover

Continuance

Option

Premium Re-

Direction

Facility

Fund

Switching

Option

Rider

AvailabilityNA NA


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6.5 Met Advantage Plus & SBI LIFE Unit Plus II Pension

Company

NameMet Advantage Plus SBI LIFE Unit Plus II Pension

Category


Maturity

Benefit




annuity purchase.



desired frequency.




annuity purchase.



desired frequency.

Death Benefit




unit account.






also.

Option 1 - Fund Value is Payable.

Option 2 - Fund Value or Sum

Assured whichever is Higher is

payable as death benefit.

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Min. - Max.

Entry Age (In

yrs.)

20 - 55 18 - 65 Years

Min.-Max.

Age at vesting

(In yrs.)

45 - 60 50 - 70 Years

Min. Premium

P.A. (In Rs.)Regular Premium 10000

Regular Premium 24000

Single Premium 25000

Single

Premium

Option

Single Premium 100000 Rs.

Premium

Mode

Single Premium

Yearly

Half-Yearly

Quarterly

Monthly

Single Premium

Yearly

Half-Yearly

Quarterly

Monthly

Premium

Increment

Option

Special

Addition

Options

NA NA

Policy

Surrender

OptionAfter completion of 3 Policy Year After completion of 3 Policy Year

Open Market

Option

Premium

Decrease

Option

Premium Top-

up option

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Cover

Continuance

Option

Premium Re-

Direction

Facility

Fund

Switching

Option

Rider

AvailabilityNA

Accidental Death &

Permanent Disability Rider

Critical Illness Rider


6.6 Met Advantage Plus & SBI LIFE Life Long Pension

Company

NameMet Advantage Plus SBI LIFE LifeLong Pension

Category


Maturity

Benefit

At Vesting age commute up to 1/3

of the vesting benefit and balance

can opt for annuity purchase.

Use 100% of the vesting benefit to

buy annuity for desired frequency.

At Vesting age commute up to

1/3 of the vesting benefit and

balance can opt for annuity

purchase.

Use 100% of the vesting benefit

to buy annuity for desired

frequency.

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Death

Benefit




unit account.






also.

Sum Assured + Pension Fund

Balance amount

Min. - Max.

Entry Age

(In yrs.)

20 - 55 18 - 65 Years

Min.-Max.

Age at

vesting (In

yrs.)

45 - 60 50 - 70 Years

Min.

Premium

P.A. (In Rs.)

Regular Premium 10000 NA

Single

Premium

Option

Single Premium 100000 Rs.

PremiumMode

Single Premium

Yearly

Half-Yearly

Quarterly

Monthly

Yearly

Half-Yearly

Quarterly

Monthly

Premium

Increment

Option

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Special

Addition

Options

NA

Min. returns of 4%

Guarantee Per Annum.

Life Cover Option is

available.

Policy

Surrender

Option (After completion of 3 Policy Year)(After completion of 3 Policy Year)

Open

Market

Option

Premium

Decrease

Option

Premium

Top-up

option

Cover

Continuance

OptionPremium

Re-Direction

Facility

Fund

Switching

Option

Rider

Availability

NA NA


INTERPRETATION:

The products that has been compared in the above section are :

Met Advantage Plus SBI Life HorizonTM Pension

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Met Advantage Plus SBI Life LifeLong Pension

Met Advantage Plus SBI Life Unit Linked II Pension Plan

The Met advantage Plus, SBI Life HorizonTM Pension and SBI Life Unit Linked II Plan are

Unit linked pension plans (ULPP), and SBI Life LifeLong Pension is the traditional type of

pension plan.

From the above comparison we can say that, though MetLife has introduced only two

products i.e. Met Advantage Plus and Met growth. The feature of Met Advantage Plus has

mostly all the features which has taken into consideration all the financial needs of customers

and thus capturing the market gradually.

Apart from the Product features and benefits the comparison can be done on the charges that

get considered at the time of calculation. It has importance for the amount of premium. The

next section can help us on compare on that part. The given comparison is given on the

premium amount for pension plans: 1. Met advantage plus and 2. SBI Life HorizonTM

Pension.

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CHAPTER NO: - 7 COMPARISON ON CALCUALTION OF

PREMIUM

7.1 Charges for Metlife Insurance

a. Premium Allocation charge

Charges Current Maximum

Premium Related (on each premium)

Regular Premium

Year 1: 20%

Year 2 to 10: 2%

Year 11+ : 1%

25%

5%

5%

Single Premium 5% 5%

Top-up Premium 1% 5%

b. Fund Management Charge

Fund Option Current Maximum

Preserver 1.25% p.a. 2.50% p.a.

Protector 1.25% p.a. 2.50% p.a.

Moderator 1.50% p.a. 2.50% p.a.

Balancer 1.50% p.a. 2.50% p.a.

Accelerator 1.75% p.a. 2.50% p.a.

Virtue 1.75% p.a. 2.50% p.a.

Multiplier 1.75% p.a. 2.50% p.a.

c. Policy Administration Charge

Fixed per month: Current: Rs.25, Maximum: Rs. 75

d. Surrender Charge

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Policy year 4 5 6 & thereafter

% of First Year Regular/ Single

Premium4 2 0

e. Switching Charge

Minimum: Rs. 250 & Maximum: Rs. 500

f. Mortality Charge(Applicable only for option A)

Calculation:

Mortality Charge = (Sum at risk/1000) * Cost of Insurance (COI)

Where, Sum at risk = death benefit Fund value

Sample COI per 1000 sum at risk are:

Age 20 30 40

COI 0.108284 0.126830 0.222656

g. Miscellaneous charges:

The company may charge Rs. 250 for any material alteration in the contract.

Maximum: Rs. 500

In the year 2006-07, the SBI Life Insurance has introduced these two policies for

retirement planning i.e. SBI Life HorizonTM Pension, SBI Life Unit Linked II Pension Plan

which are unit linked insurance plans.

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7.2 Charges for SBI Life Insurance

a. Premium Allocation charge

Policy yearEntry charges as a percentage of the Annualized

premium/Rs. Amount

1 year 15%/Rs.60000*

Year 2 & 3 7.5% / Rs.40000*

Year 4 & 11 1.5% / Rs.10000*

Year 11 onwards Nil

Top-up (year 1 to year 10) 1.5% / Rs.10000*

Top-up (year 11 onwards) Nil

b. Policy Administration Charge

These charges are increased @ 2 p.a.Subject to a ceiling of Rs.300 per month.

c. Fund management charges

The annual fund management charges for each fund are as follows

Equity pension fund 1.5%

Bond pension fund 1%

Money market pension fund 0.25%

d. Surrender charge

Policy year Surrender charge

Year 4 - 10 1% of fund value

Year 11 onwards Nil

e. Mortality charge

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These are recovered on a monthly basis by way of cancellation of units. Rates are one

year renewable basis.

The premium allocation charges, top up allocation charges and surrender charges are

zero from 11th year onwards.

CONCLUSION:

We can conclude from the above stated data and analysis that MetLife Insurance Company is

charging more on premium and have less satisfactory options than the SBI Life Insurance

Products.

But it cannot be correctly be forecasted that SBI Life Insurance is giving more returns

than the MetLife Insurance Company. As the company is charging more on investment, it

may possible that they are providing more returns to the customers. This can be found out

from the small survey of 50 persons form different occupations age and background.

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7.3 Unit Linked Pension Plans

FUND UPDATE, AS ON 30TH SEPTEMBER 09

PENSION PLANS AND RELATED FUNDS

FUND

NAME

Pension ProductsFUND

NAMEPension Products

SBI Life

-

Horizon II

Pension

SBI Life

-

Unit Plus II

Pension

Met

Advantage

Plus

Met Pension

(Par)

Equity

Optimiser-- Multiplier

Equity

PensionVirtue

Bond

Pension

Accelerato

r--

Money

Market

Pension

-- Balancer

Balanced

Pension-- Preserver

Growth

Pension-- Protector

Moderator

--

The above table provides you with the funds available for investment in respective

pension policies. According to the pension policies the insured have the option to choose the

funds and have the mobility to switch the funds as per the conditions of the policies.

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In the Unit Linked Pension Plan (ULPP), the insured can have access the market

conditions and NAV of the funds, risk involved in the funds and can take appropriate

decisions after studying all the aspects that has been covered under next section of this report.

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CHAPTER NO :- 8 FEATURES OF VARIOUS FUNDS

8.1 MetLife Insurance India

Unit-

linked

Fund

Asset Allocation Unit-Linked

Fund ObjectiveRisk Profile

Benchmark

and security

type

Assets Min Max

Multiplier Listed

equities

80% 100

%

To generate long

term capital

appreciation by

investing indiversified

equities

This fund

will exhibit

very high

risk andreturns and

will be prone

to market

fluctuations

Security type:

100% Equity

Benchmark

Index:

S&P CNX

NIFTY

Money

Market

Investment

0% 40%

Virtue Listed

equities

60% 100

%

To generate long

term capital

appreciation by

investing in

diversified

equities of

companies

promoting

healthy lifestyle

and enhancing

quality of life.

This fund

will have

very high

risk and

returns

profile and

will be prone

to market

fluctuations

Money

Market

Investment

0% 40%

Accelerato

r

Listed

equities

60% 95% To achieve capital

appreciation and

current income,

Higher risk

and returns,

investment

Security type:

80% EquityLong term

bonds

0% 60%

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through a

judicious mix of

investments in

equities, withlimited

investment in

fixed income

securities.

prone to

market

fluctuation

20% Debt

Benchmark

index:

S&P CNX

NIFTY

CRISIL

Composite

Bond Fund

Index

Short term

bonds

0% 35%

Money

market

investment

0% 40%

Govt.

securities

0% 40%

Infrastructu

ral sec.

0% 40%

Balancer Listed

equities

60% 95% To generate

capital

appreciation and

current income,

through a

judicious mix of

investment in

equities and fixed

income securities

Higher risk

and returns

with a fair

exposure to

equities

Security type:

50% Equity

50% Debt

Benchmark

index:

S&P CNX

NIFTY

CRISIL

Composite

Bond Fund

Index

Long term

bonds

0% 60%

Short term

bonds

0% 35%

Money

market

investment

0% 40%

Govt.

securities

0% 40%

Infrastructu

ral sec.

0% 40%

Preserver Govt.

securities

80% 100

%

To generate

income at a level

consistent with

preservation ofcapital, through

Very low

risk

Security type:

100% Debt

(GOI)

Money

market

investment

0% 40%

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investments in

securities issued

or guaranteed by

Central and StateGovernments

Benchmark

index:

ISEC Mi-BEX

Protector Govt.

securities

25% 90% To earn regular

income by

investing in high

quality fixed

income securities

Low risk and

is designed

for regular

income

Security type:

100% debt

Benchmark

index:

CRISIL

Composite

Bond Fund

Index

Long term

bonds

10% 60%

Short term

bonds

0% 45%

Money

Market

investment

0% 40%

Infrastructu

ral sec.

0% 60%

Moderator Listed

equities

60% 95% To generate

regular income by

investing in high

quality fixed

income securities

and to generate

capital

appreciation by

investing a

limited portion in

equity.

Medium risk

with a

limited

exposure to

equity.

Returns

expected to

be superior

to fixed

income

investment.

Security type:

20% Equity

80% Debt

Benchmark

index:

S&P CNX

NIFTY

CRISIL

CompositeBond Fund

Long term

bonds

0% 60%

Short term

bonds

0% 35%

Money

market

investment

0% 40%

Govt.

securities

0% 40%

Infrastructu

ral sec.

0% 40%

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Index

8.2 SBI LIFE INSURANCE

Unit

Linked

Fund

Asset AllocationUnit Linked Fund

objective

Risk

Profile

Security type

and

Benchmark

typeAsset Min Max

Equity

Optimiser

Equity &

related

instruments

60% 100% To deliver higher

returns through

equity investment

while maintainingan optimum

allocation pattern.

The fund has the

following class

allocation strategy.

High Security type:

Benchmark

index:

Nifty (80%)

LiquiFEX

(20%)

Debt &

Money

Market

Instruments

0% 40%

Equity

Pension

Equity &

related

instruments

80% 100% For long term

capital through

actively managed

investment in

equity and equity

related instruments.

High Security type:

Benchmark

index:

Nifty

Debt &

Money

Market

Instruments

0% 20%

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Bond

Pension

Debt

Instruments

60% 100% Safe and stable

returns through

asset allocation in

debt & moneymarket instruments

and active duration

management.

Low to

medium

Security type:

Benchmark

index:

CRISIL

CompBex

Money

Market

Investments

0% 40%

Money

Market

Pension

Debt

Instruments

0% 20% Low Security type:

Benchmark

index:

LiquiFEX

Money

Market

Investments

80% 100%

Growth

Pension

Equity &

related

instruments

40% 100% For long term

capital appreciation

through investment

primarily in equity

and equity related

instruments.

Medium

to high

Security type:

Benchmark

index:

Nifty (70%)

CompBex

(30%)

Debt &

Money

Market

Instruments

0% 60%

Balanced

Pension

Equity &

related

instruments

40% 60% Maintain a balance

between return and

safety through a

blend of equity,

fixed income and

money market

instruments.

Medium Security type:

Benchmark

index:

Nifty (50%)

Debt &

Money

Market

Instruments

40% 60%

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CompBex

(50%)

CHAPTER NO: - 9 DATA ANALYSIS AND RESULTS:

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1. Number of people of insured:

Number of persons Percentage

Insured 35 70%

Non-insured 15 30%

70%

30%

0 0

total number of persons

insured

non-insured

INTERPRETATION:

The Insurance Industry is growing day by day and has a wide scope to improve on its

design of product and features of the same. So that it can give benefit to the company with

greater profits and wealth with growth in economy as a whole.

2. Customer awareness about the product

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Advertisement 24 48%

Friends & relatives 20 40%

Direct selling agents 5 10%

others 1 2%

48%

40%

10%

2%

Total number of persons

Advertisement

Friends & relatives

Direct selling agents

others

INTERPRETATION:

The policyholders and potential insured persons are getting aware of the insurance

products from most of the advertisements & friends and relatives. Whereas, the Direct selling

agents has a significant impact on the market and they are successful.

3. Awareness of benefits of their policy:


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Yes 34 68%

No 16 32%

0

76%

24%

0

Sales

Yes

No

INTERPRETATION:

The survey analyses that there are in all 68% of people who are aware of the overall

benefits of policies, i.e. there are 32% of people who dont have any knowledge about

benefits offered by the company products, they dont have a correct combination of income

and their need of pension plans.

So, it can be negative side to insurance industry, and the insurance sector should have

to improve on that part. In case of unit linked pension plans, the most of the customers from

the backward classes and similar classes of society dont have much awareness of market

trends and growth. So, it can be difficult for them to choose a pension plan with their

financial needs. The insurers can help the customers for the same and can help to grow the

insurance business.

4. Opinion about the premiums paid:

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Very high 11 22%

high 14 28%

Moderate 16 32%

Low 5 10%

Very low 4 8%

22%

28%32%

10%8%

Number of persons

Very high

high

Moderate

Low

Very low

INTERPRETATION:

The premiums paid by insured is depend upon the sum assured of the

Date post:	06-Apr-2018
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