Table of Contents :
EXECUTIVE SUMMARY
ABSTRACT OF THE WORK TILL THAT DATE
INTRODUCTION
ABOUT MUTUAL FUNDS
HISTORY OF MUTUAL FUNDS
ABOUT INSURANCE
HISTORY OF INSURANCE
TABLE OF CONTENTS
INTRODUCTION
EXECUTIVE SUMMARY
ABSTRACT OF THE WORK TILL THAT DATE
ABOUT SBI LIFE INSURANCE COMPANY
DIFFERENCE BETWEEN MUTUAL FUNDS AND INSURANCE
ABOUT COMPETITORS
ABOUT ANNANAGAR(AREA OF PROJECT)
MAIN TEXT
Objectives
Sampling design
Research design
Data collection
SPSS Output
Analysis from SPSS Output
Data analysis
Findings
Limitations
Recommendations
BIBLIOGRAPHY
Acknowledgement
I would like to thank my faculty guide Gopi Chander who not only served as a supervisor but also guided and encouraged me in doing this project.
I would also like to thank my company guide Mr V.Sathish Kumar for giving me the directions and encouraging me in doing this project
I would also like to thank Mr Gopal Branch Manager of SBI Life Insurance company for giving their sincere support and guidance to me in doing this project
Date April 22, 2008
Place Annanagar (Chennai)
Executive Summary
This report was basically undertaken to find out the consumer preference for mutual funds(Reasons for them to prefer mutual funds) and insurance(Reasons for the people to prefer insurance) in anna nagar. Before doing this project I did a thorough study about mutual funds and insurance.
The basic objective of the research was to find: -
· Consumer Preference for mutual funds
o Advantages of investing in mutual funds
o Disadvantages of investing in mutual funds
o Consumer perception towards mutual funds
· Consumer Preference for insurance
o Advantages of investing in insurance
o Disadvantage of investing in insurance
o Consumer perception towards insurance
· Reasons for migrating from mutual funds to insurance and vice versa
ABSTRACT OF THE WORK TILL THAT DATE:
DATE / WORK DONE22nd feb -29th feb / · Classes conducted regarding insurance products
· Brief introduction about the SBI Life insurance company
· Training given to me regarding selling
1st March – 8th March / · Lead generation done in annanagar , saidapet
· Collecting details regarding the various other insurance companies and putting the details in a excel sheet to get the summarized form
· Conducted field activities in Arihant flat, meeting
professionals in the marketing the insurance products
· I also met my faculty guide Mr Gopi Chander for getting feedbacks about my work
8th March – 15th March / · Discussed about my project to my Unit Manager and submitted my Initial Information Report to my Faculty Guide
· Sold one UNIT PLUS 2 policy for a premium of Rs 50,000
· Got permission for conducting field activity near Odyssey Shop to target a bulk of people for insurance.
· Lead generation done in T Nagar and I got a permission to present about the various insurance schemes available in SBI Life Insurance to the people in a MVS training institute
· Also did a follow up of leads generated in the previous week and tried to fix up an appointment with the customers
· On Friday I met my Faculty Guide for getting feebacks
15th March – 22nd March / · Project was given to me from SBI headquarters.
· My project title “Consumer Preference of Mutual Funds Vs Insurance”
· I also discussed about my project to faculty guide and I got few tips in preparing questionnaire for my project
· Did field activities in
a) Valluvar kottam
b) T Nagar
c) Century Plaza
· I also did a follow up of leads that I generated in the last weeks
· Finished one UNIT PLUS 2 policy for 25000
22nd March to 29th March / · My questionnaire for the project is approved by Mr Gopi Chander
· Did field work in Odyssey shop and I did the lead generation
· I started working on my project and first I targeted people in Annanagar East
1st April to 8th April / · Survey for my project done in Annanagar East in all shopping complexes, consultancy, and a few residential areas
8th April to 15th April / · Survey for my project is done with the people in Annanagar West and Shenoy Nagar to do the market research
· Started collected some secondary data for interim report
· I also discussed about interim report both with my company guide and faculty guide for getting better quality
15th April to 30th April / · Did surveys regarding my project in Annanagar and collected primary data for secondary data analysis
1st May to 15th May / · Did data analysis of my primary data and started preparing my final report
INTRODUCTION:
This project was basically taken to find out the consumer preference of mutual funds (Reasons for them to prefer mutual funds) and insurance (Reasons for preferring insurance).
Before starting this project I did a thorough study about the mutual funds ,Insurance and their classification
Mutual funds:
Mutual funds is defined as a method of joint investment by pooling money from many investors and investing them in shares, funds, short term financial institutions etc. The value of mutual fund is calculated as NAV of the company. It is calculated on daily basis
NAV=Market Value of Investment + Current Assets-Current Liabilities/ Number of Outstanding Units
Mutual funds can be classified based on maturity value, investment, other equity related funds
Based on maturity mutual fund is classified as
a) Open ended funds(No maturity period)
b) Closed ended funds(Maturity period varies from 3 months to 15 yrs
Based on investment mutual fund is classified as
a) Equity or Growth fund
b) Debt fund
c) Balanced fund
d) Money market fund
Based on other equity funds mutual fund is classified as
a) Tax savings schemes
a. Earnings Linked Savings Scheme(ELSS)
b. Earnings Linked Pension Scheme(ELPS)
b) Sectoral Schemes
It includes investing in IT sector, Banks and other government / non-government institutions
c) Index schemes
HISTORY OF MUTUAL FUNDS :The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases
· First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
· Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.
· Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.
· Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
The graph indicates the growth of assets over the years.
GROWTH IN ASSETS UNDER MANAGEMENT
Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.
Brief History Of Insurance Sector In India
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again.Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost 190 years.
The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in India are:
1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938 - Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956 - 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.
1957 - General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.
1968 - The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973.
107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
Indian Life Insurance Industry Overview
All life insurance companies in India have to comply with the strict regulations laid out by Insurance Regulatory and Development Authority of India (IRDA). Therefore there is no risk in going in for private insurance players. In terms of being rated for financial strength like international players, only ICICI Prudential is rated by Fitch India at National Insurer Financial Strength Rating of AAA(Ind) with stable outlook indicating the highest claims paying ability rating.
Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far the largest player in the market. Among the private sector players, ICICI Prudential Life Insurance(JV between ICICI Bank and Prudential PLC)is the largest followed by Bajaj Allianz Life Insurance Company Limited (JV between Bajaj Group and Allianz). The private companies are coming out with better products which are more beneficial to the customer. Among such products are the ULIPs or the Unit Linked Investment Plans which offer both life cover as well as scope for savings or investment options as the customer desires.Further, these type of plans are subject to a minimum lock-in period of three years to prevent misuse of the significant tax benefits offered to such plans under the Income Tax Act. Hence, comparison of such products with mutual funds would be erroneous.
Commission / Intermediation fees
· The maximum commission limits as per statutory provisions are:
Agency commission for retail life insurance business:
§ 35 - 40% for 1st year premium if the premium paying term is more than 20 years