mbfs 1 module-mit

8/9/2019 Mbfs 1 Module-mit

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MERCHANT BANKING AND

FINANCIAL SERVICES


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MODULE 1 (8 Hours)

Bank and Banking

Permissible banking activities-

Types of banks in India-

Role of RBI as a regulator-

Banker and customer- Types of relationship between bank and customer

Bank`s obligation to customers

Types of accounts and customers-

Types of lending-

charging of securities

Banks and technology- Various IT products and services-

International banking services


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MODULE 2 (6 Hours)

Insurance service- Need and importance Life and non life insurance-

Players in life and non life insurance-

Essentials of insurance contracts-

Risk appraisal and selection-

Life and non life insurance products including unit linked plans


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MODULE 3 (8 Hours)

Merchant Banking-

SEBI guidelines for merchant bankers

Issue Management

Equity issues

Rights issues

Debenture issues

Book building

Private Placements

Pre & Post issues activities

Raising capital from International markets: ADRs, GDRs , ECB etc.


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MODULE 4 (8 Hours)

Lease and Hire purchase-

Meaning and Types of leasing

Legislative frameworks

Matters on Depreciation and Tax

Problems on leasing

HirePurchasing- Concepts and features

Tax and Depreciation implications

Problems on Hire Purchasing.


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MODULE 5 (4 Hours)

Credit rating and Securitization of debts

Definition and meaning-

Process of credit rating of financial instruments-

Rating methodology-

Rating agencies

Rating symbols of different companies Securitization of debt-

Meaning-

Features-

Special Purpose Vehicle-

Pass Through Certificate & mechanism

Benefits of Securitization

Issues in Securitization


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MODULE 6 (7 Hours)

Depository Service and Mutual funds: -

Depositary services-

Role of depositories and their services

Advantages of depository system NSDL and CDSL-

Depository participants and their role-

Stock Broking Services including SEBI guidelines

Mutual Funds Structure of Mutual Funds-Types Mutual Funds

Advantages of mutual funds

Exchange Traded Funds

Hedge funds-

Regulations on mutual funds

Accounting aspects Performance Evaluation.


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MODULE 7 (10 Hours)

Money Market Instruments

Treasury Bill Commercial bill

Commercial paper

Certificate of deposit

REPO/Reverse REPO

Call money- Notice money

Term money

Credit card

Bill discounting

Factoring

Forfaiting

Consumer finance

Reverse mortgage service


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MODULE 8 (5 Hours)

Marketing ofFinancial Services

Conceptual framework

Distribution

Pricing

Promotion

Attracting & retaining customers

Segmentation

Positioning Development and launching of new products

Behavioral profile of customers.


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RECOMMENDED BOOKS:

1. Financial ServicesM.Y.Khan TMH

2. Merchant Banking J.C.Verma

3. Financial Services & Systems S.G.Guruswamy Thomson

Learning

REFERENCE BOOKS:1. Indian Financial SystemM.Y. Khan TMH

2. Financial Services Gorden & Nataraju HPH

3. Indian Financial System Pathak - Pearson Education.

4. Merchant Banking Principles and Practice : H.R,Machiraju New

Age International

5. Financial Institutions and Markets L.M.Bhole TMH6. Financial Markets & InstitutionsS.G. GuruswamyThomson

Learning

7. Services Marketing --S.M.Jha HPH

8. Indian Financial System Machiraju Vikas

9. Merchant banking and financial services N. Mohan Excel books


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INSURANCE


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MODULE 2 (6 Hours)

Insurance service- Need and importance Life and non life insurance-

Players in life and non life insurance-

Essentials of insurance contracts-

Risk appraisal and selection-

Life and non life insurance products including unit linked plans


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History

Insurance existed in mutual protection form in the Aryan tribes some

3000 years back.

The word Bima was derived from the Persian word Bim meaning

Fear and Bima means expense to get rid of fear.

Traders in olden times devised a system of contract in which, the

supplier of the capital for business would agree to cancel the loan if the

trader was robbed of his goods.

The trader who borrowed the capital paid an extra sum (a premium) for

this kind of protection over and above the usual interest. As for the

lender, collecting these premiums from many traders made it possiblefor him to absorb the losses of the unfortunate few, who really suffered

the loss.


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The first insurance policy was issued in England in 1583.

Insurance primarily creates counterpart of the risk, which is

security.

Insurance is a co-operative device to spread the loss causedby a particular risk over a number of persons who are exposedto it and it does not reduce the risk nor alters probability of

risk but it only reduces/spreads financial losses.


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In Financial sense:

Insurance is a social service in which a group of individuals (insured) transfer risk to another

party (insurer) in order to combine loss experience, which permits statistical prediction of losses

and provides for payment of losses from funds contributed (premiums) by all members who

transferred risk.

LEGAL SENSE:

Insurance is a contractual arrangement whereby one party agrees to compensate another party

for losses. The legal definition spells out the legal rights, duties and obligations of all the parties

to the contract.

Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another,

in exchange for payment.


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An insurer is a company selling the insurance;

an insured or policyholder is the person or entity buying the insurance policy.

The insurance rate is a factor used to determine the amount to be charged for a certain

amount of insurance coverage, called the premium.


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Characteristics of Insurance

The basic characteristics of insurance are:

1. Pooling of losses.

2. Payment of fortuitous losses.

3. Risk Transfer.

4. Indemnification.


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Pooling of Losses

Pooling is spreading of losses incurred by the few over the

entire group, so that in the process average loss is

substituted for actual loss. Pooling implies:

1. Sharing of losses by the entire group

2. Prediction of future losses with some accuracy based on the

Law of Large Numbers.


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Payment of Fortuitous Losses

A fortuitous loss is one that is unforeseen & unexpected and

occurs as a result of chance. The loss must be accidental.


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Risk Transfer

Risk Transfer means that a pure risk is transferred from the

insured to the insurer who typically is in a stronger financial

position to pay the loss than the insured.


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Indemnification

Indemnification means that the insured is restored to his or

her approximate financial position prior to the occurrence

of the loss.


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Benefits of insurance

1. Reimbursement for losses

2. Reduction in tension & fear

3. Avenue for investment (attractive return)4. Prevention of losses

5. Credit multiplication


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Principles of Insurance

Following are the distinctive characteristics and legal

doctrines applying to insurance contract.

1. Principle of Indemnity

2. Principle of Insurable Interest3. Principle of Subrogation

4. Principle of Utmost Good Faith

5. Principle of Proximate Cause

6. Principle of Contribution


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PrinciplePrinciple ofof IndemnityIndemnity

Indemnity means the insured should be placed in the same

financial position after as before the incurred loss.

The insured should not profit from an insurance transaction. Any departure from this rule should be on the side of under

compensation.


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There are two exceptions to the rule.

1. Life Insurance: Because the economic value of human life cannot be

measured precisely before death, life insurance cannot be the contract

of indemnity. A person could not be put in exactly the same financialposition occupied before death because that position includes unknown

future income. However insurance companies take care in over

insurance as it creates an unacceptable moral hazard for life insurers,

who do not want their insured worth dead more than alive.


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2. Replacement Cost Insurance: This insurance is written when the insurerpromises to pay an amount equal to the full cost of repairing orreplacing the property without deduction or depreciation.

The principle of indemnity has two main purposes:

1. To prevent the insured property from a loss.

2. To reduce moral hazard.


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PrinciplePrinciple ofof InsurableInsurable InterestInterest

If people could insure property or life in which they had no financial

interest, insurance would become gambling.

The principle of insurable interest states the insured must be in a

position to lose financially if a loss occurs. Insurance contracts must be supported by an insurable interest for the

following reasons:

1. To prevent gambling

2. To reduce moral hazard.

3. To measure the amount of insured loss in the property insurance.


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PrinciplePrinciple ofof InsurableInsurable InterestInterest

Examples of Insurable Risk for Property and Liability Insurance:

a) Ownership of property can support an insurable interest.

b) Potential legal liability can also support insurable interest. Ex. a watch

repairer, a tailor, a dry-cleaner has an insurable interest in the property ofthe customer.

c) Secured creditors have insurable interest. A commercial bank or savings andloan institutions that lends money to buy a house has an insurable interestin the property.

d) Contractual right supports an insurable interest. Ex. A business firm that

contracts to purchase goods from abroad on the condition they arrive safelyin India has an insurable interest in the goods because of the loss of theprofits if merchandise does not arrive.


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PrinciplePrinciple ofof SubrogationSubrogation

Subrogation means substitution of the insurer in place of theinsured for the purpose of claiming indemnity from a third personfor a loss covered by insurance. The insurer is therefore entitled

to recover from a negligent third party any loss payment made tothe insured.

Subrogation does not apply if a loss payment is not made.However, to the extent that a loss payment is made, the insuredgives to the insurer legal rights to collect damages from thenegligent third party.


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Purpose of Subrogation: It has three basic principles:

1. Subrogation prevents the insured from collecting twice for thesame loss. The principle of indemnity would be violated becausethe insured would be profiting from a loss.

2. Subrogation is used to hold the guilty person responsible for theloss.

3. Subrogation helps to hold down the insurance rates. Subrogationrecoveries can be reflected in the rate making process, whichtends to hold rates below where they would be in the absence of

subrogation.


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Importance of Subrogation: There are five important corollaries of theprinciple of subrogation:

1. The general rule is that by exercising its subrogation rights, the insurer isentitled only to the amount it has paid under the policy. One commonly

held view is that the insured must be reimbursed in full for the loss; theinsurer is then entitled to any remaining balance up to the insurersinterest without the remaining going to the insured.

2. The insured cannot impair the insurers subrogation rights. The insuredcannot do anything after a loss that prejudices the insurers right toproceed against the negligent third party. If the insurers right tosubrogate against a loss is adversely affected, the insurers right to

collect from the insurer is forfeited.


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3. The insurer can waive its subrogation rights in the contract. The insurermay decide not to exercise its subrogation rights after a loss occurs. Thelegal expenses may exceed the possible recovery; a counter claimagainst the insured or insurer may be filed by the alleged wrong doer,

the insurer may wish to avoid the embarrassment to insured or theinsurer company may wish to maintain good relations.

4. Subrogation dos not apply to life insurance. Life insurance is not acontract of indemnity and subrogation has relevance only for contractsof indemnity.

5. The insurer cannot subrogate against its insured. If the insurer couldrecover a loss payment for a covered loss from an insured, the basic

purpose of purchasing the insurance would be defeated.


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PrinciplePrinciple ofof UtmostUtmost GoodGood FaithFaith

Insurance contract is based on the principle of utmost good faith-that is, a high degree of honesty is imposed on both parties to aninsurance contract than is imposed on parties to other contracts.

The principle of utmost good faith is supported by three legaldoctrines: representations, concealment and warranty.

Representations are statements made by the applicant forinsurance.

The legal significance of a representation is that the insurancecontract is voidable at the insurers option if the representation is

(a) material (b) false and (c) relied on by the insurer.


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Material means that if the insurer knew the true facts, the policywould not have been issued, or it would have been issued ondifferent terms.

False means that the statement is not true or is misleading. Reliance means that the insurer relies on the misrepresentation

in issuing the policy at a specified premium.

An innocent misrepresentation (not intentional) of material factmakes the contract voidable.


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Concealment

A concealment is intentional failure of the applicant forinsurance to reveal a material fact to the insurer.

To deny a claim based on concealment, insurer must proveto things:

1. The concealed fact was known by the insured to bematerial.

2. The insured intended to defraud the insurer.


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Warranty

A warranty is a statement of fact or promise made by the insured, whichis part of the insurance contract and must be true if the insurer is to beliable under the contract.

Ex. In exchange for reduced premium, the owner of a retail store maywarrant that an approved burglary and robbery alarm will beoperational at all times. The clause describing the warranty becomespart of the contract.

Warranty can be affirmative warranty (something has happened orexists) or something will happen (promissory warranty). The warrantiescan be written/expressed warranties or understood/implied warranties.


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PrinciplePrinciple ofof ProximateProximate CauseCause

The principle of proximate cause is based on the principle ofcause and effect.

Insurance companies will only make good the loss which hasoccurred due to insured peril and not otherwise.

Ex 1: Suppose Rakesh takes personal accident policy which doesnot cover for sickness. He met with an accident. He was injuredbut lay on the road for hours in that cold and rainy night beforesomebody came and transferred him to the hospital. He fell sickdue to pneumonia and lost his life.

The insurer will pay only the cost of hospitalization and nothingelse.


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PrinciplePrinciple ofof ProximateProximate CauseCause

Ex 2: In one ship, oranges and lemons were insured a cargoagainst collision of ship. The ship actually collided and inemergency was put into a port for repairs. For convenience ofrepairs, the cargo was unloaded and reloaded on the ship after

repairs. The fruits when reached the destination had beendestroyed.

Here, which is nearest cause of loss?

Collision or loading and unloading.

The perishable nature of the fruits and unloading-loading of

cargoes were the proximate causes. This was not insured andhence no damages were paid.


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PrinciplePrinciple ofof ContributionContribution

This refers to the sharing of the loss between co-insurers wheninsured takes multiple policies against one loss and one intent.

Principle of contribution says that the insurer paying the claim

has the right upon other insurers to pass or transfer part of hisburden.

Insurers will share the total loss ratably.

The right arises only after paying the insured for his loss.


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PrinciplePrinciple ofof ContributionContribution

Essentials of this principle are:

1. The insured should be same for all contracts.

2. The policies should cover the same peril, which caused the

loss.3. All protect the same interest of the same insured.

4. All policies should be in force when loss occurs.


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Consequences of Ignoring the Principles

People might take policies on non existing things

(Principle of Insurable Interest)

People may do double insurance and hide policies already taken.

( Principle of Indemnity)

A few dishonest policies will take huge claims from the insurance company andsuffering will be caused to many innocents.

(Principle of Insurable Interest and Principle of Indemnity)

People will insure anything and everything without insurable interest.


People will not guard/maintain their assets once insured.


Whole insurance system may crumble.


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Types Of Insurance

Types of Insurance

Life Insurance Non Life Insurance

General Insurance Misc. Insurance

Marine Insurance

Fire Insurance

Personal Accident

Insurance

Vehicle Insurance

Fidelity Guarantee

Insurance

Crop Insurance

Burglary Insurance

Flood Insurance

Endowment

Money back

pension

Women, girl child& Couple

Whole Life

Child Insurance

policy


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Life Insurance. Life insurance is a business proposition resting on the

combined operation of the law of mortality and

interest.

The first essential of life insurance is to fix the

amount of contribution to be made by each policyholder so that the fund should be adequate to meet

the whole of the claims.


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Life insurance or life assurance is a contract between the policy owner and the insurer,

where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence

of the insured individual's or individuals' death or other event, such as terminal illness or critical

illness.

In return, the policy owner agrees to pay a stipulated amount at regular intervals or in lump

sums.


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Life Insurance provides risk cover which no other investment option offers.

Following are the advantages ofLife Insurance:

It provides full protection against risk of death.

Encourages and forces compulsory savings as the saved money cannot be

withdrawn and premium has to be paid regularly.

Provides loan to tie over a temporary difficult phase and is also acceptable as

security for a commercial loan.

Provides tax benefits to policyholders.

Hedges risk against uncertainty.


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Module 2

How do Icompare life insurance policies?

There is such wide range of policies that it is natural that a person would feel lost in the

jargon. To make the right decision, compare the following features of different policies: Premium the amount of money you have to pay regularly to continue your insurance

coverage. The premium amount is depends on age, policy, premium payment options and

policy term.

Term the number of years the policy is valid. The longer the term the lower the premium.

The policy term varies from a minimum of 5 years to a maximum 55 years.

Term of premium payment- the number of years you have to pay premium on your policy. Itmay be the same as the policy term or less. Some policies have the options wherein one can

select the premium payment term.

Sum Assured the amount received on death of the policyholder. A lot of policies offer a

larger amount of sum assured than other benefits .So, if you are concerned more about

leaving a bigger amount for your family for the same premium select a policy with more sum

assured

Bonus is declared as a proportion of the sum assured, by the insurance company each year

depending on the profit made by the company. It is paid only as a lump sum either on

maturity or to the family upon death.


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Maturity It is the amount of money you receive from the insurance company if you survive

the policy term.

Cover is also known as death benefit. It is the amount of money your nominee receivesfrom the insurance company upon your death. It is the sum assured plus the bonus.

Returns the amount of money realised at the end of the term of the policy calculated in

percentage terms every year. It can be compared to the rate of interest that you receive

from other investment.

Riders-Insurance companies offer some options in addition to the regular policy features for

a small increase in premium like personal accident benefit, waiver of premium rider etc.Thus, for a small increase a larger benefit can be obtained.

For e.g. you want to have a policy for 10 lakhs. This would mean a large premium however if

you buy a policy of 5 lakhs with a term rider which pays additional 5 lakhs in case you die in

the next 20 years would cost much less.

Therefore, for a given sum assured and term compare policies on the basis of these

parameters and choose a policy depending on your insurance objectives. risk coveror returns or both


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Factors to consider while taking insurance

How much insurance can you afford? What is your motive for taking insurance?

How much insurance you need?

How much insurance can you afford?

Low premium high cover

Cover for short term

Higher cover with high returns

L i hi h


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Low premium high cover

In case you are looking for a policy that is relatively inexpensive but provides a death benefit

that is guaranteed for life, it is advisable to select whole life policies or term policies. They

offer zero or low returns.

In Whole Life policies ,the Sum Assured is payable on death of the life assured and premiumsare payable throughout life.

It is available withthe following variations:

Option for maturity with or without profit

Facility of paying the premium for a limited period.

Single premium payment also possible

This policy provides just riskcover. Examples of some policies:

LIC

Jeevan Rekha

Whole Life Plan

MaxNew York Life

Whole Life Participating Policy (eligible for bonus)

Whole Life Non-Participating Policy (not eligible for bonus)



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Some people feel that when they grow old their number of dependants will reduce or they will

have sufficient wealth to meet the needs of their dependants.

Hence in such cases it is best to take a limited term policywhich would meet the short and

medium term needs of the individual.

These policies have a lower premium.

LICs Two Year Temporary Assurance Plan, Anmol Jeevan and

Max New York Lifes LevelTerm policyare some of the options



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Some people want more than risk cover from their policy.

They look upon it as another source of investment.

A lot ofInsurance products yield more compared to regular investment options, with the addedadvantages of providing incentives and risk cover.

Insurance companies provide a wide range of options and the individual has to select a policy

based on his risk appetite.

Some of them are

BAJAJALLIANZ

The Invest Gain Plan

The Unit Gain Plan

ICICI Prudential

InvestShield Life

InvestShield Cash

Lif I d t


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Life Insurance products

Jeevan Anurag

Komal Jeevan CDA Endowment Vesting At 21

Marriage Endowment Or

Educational Annuity Plan CDA Endowment Vesting At 18

Jeevan Kishore

Jeevan Chhaya

Child Career Plan

Child Future Plan

Child Fortune Plus

Jeevan Aadhar

Jeevan Vishwas


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The Endowment Assurance Policy

The Endowment Assurance Policy-Limited Payment

Jeevan Mitra(Double Cover Endowment Plan)

Jeevan Mitra(Triple Cover Endowment Plan)

Jeevan Anand

New Janaraksha Plan

Jeevan Amrit

Jeevan Shree-I

Jeevan Pramukh

Two Year Temporary Assurance Policy

The Convertible Term Assurance Policy

Anmol Jeevan-I

Amulya Jeevan-I


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The Money Back Policy-20 Years

The Money Back Policy-25 Years

Jeevan Surabhi-15 Years



Bima Bachat

Jeevan Bharati - I

The Whole Life Policy

The Whole Life Policy- Limited Payment

The Whole Life Policy- Single Premium

Jeevan Anand

Jeevan Tarang


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Jeevan Saathi Plus

Jeevan Saathi


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O

Market Plus I

Jeevan Nidhi

Jeevan Akshay-VI

New Jeevan Dhara-I

New Jeevan Suraksha-I

Market Plus I

Profit Plus

Money Plus-I

Child Fortune Plus

Jeevan Saathi Plus


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O

New Bima Gold

Health Protection Plus

Bima Nivesh 2005

Jeevan Saral

Jeevan Madhur

Jeevan Mangal


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O

Group LIC's Superannuation Plus

Group Term Insurance Schemes

Group Insurance Scheme inLieu Of EDLI

Group Gr-atuity Scheme

Group Super Annuation Scheme

Group Savings Linked Insurance Scheme

Group Leave Encashment Scheme

Group Mortgage Redemption Assurance Scheme

Gratuity Plus

Group Critical Illness Rider

JanaShree Bima Yojana (JBY)

Shiksha Sahayog Yojana

Aam Admi Bima Yojana

Jeevan Nischay

Wealth Plus

Jeevan Aastha

Jeevan Varsha

Fortune Plus

Health Plus

LIFE INSURERS IN INDIA


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Bajaj Allianz Life Insurance Company Limited

Birla Sun Life Insurance Co. Ltd

HDFC Standard Life Insurance Co. Ltd

ICICI Prudential Life Insurance Co. Ltd

IndiaFirst Life Insurance Company Ltd ING Vysya Life Insurance Company Ltd.

Life Insurance Corporation of India

Max New York Life Insurance Co. Ltd

Met Life India Insurance Company Ltd.

Kotak Mahindra Old Mutual Life Insurance Limited

SBI Life Insurance Co. Ltd

Tata AIG Life Insurance Company Limited Reliance Life Insurance Company Limited.

Aviva Life Insurance Company India Limited

Sahara India Life Insurance Co, Ltd.

Shriram Life Insurance Co, Ltd.

Bharti AXA Life Insurance Company Ltd.

Future Generali India Life Insurance Company Limited IDBI Fortis Life Insurance Company Ltd.

Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.

Aegon Religare Life Insurance Company Limited

DLF Pramerica Life Insurance Company Limited

Star Union Dai-Ichi Life Insurance Company Limited

General Insurance


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General Insurance

General Insurance comprises of insurance of property against fire, burglary etc, personal

insurance such as Accident and Health Insurance, and liability insurance which covers legal

liabilities. There are also other covers such as Errors and Omissions insurance for

professionals, credit insurance etc.

Non-life insurance companies have products that cover property against Fire and allied

perils, flood storm and inundation, earthquake and so on.

There are products that cover property against burglary, theft etc.

The non-life companies also offer policies covering machinery against breakdown, there

are policies that cover the hull of ships and so on.

A Marine Cargo policy covers goods in transit including by sea, air and road.

In Short,

Insuring anything other than humanlife is called general insurance. Examples are insuring

property like house and belongings against fire and theft or vehicles against accidental

damage or theft. Injury due to accident or hospitalisation for illness and surgery can also be

insured. Your liabilities to others arising out of the law can also be insured and is compulsory

in some cases like motor third party insurance.


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INSURANCE

GeneralInsurance:

CommercialLine ofInsurance for:

Smalland tiny industries

(fire, burglary,cash, motor and miscellaneous)

Traders

(shopkeepers policy, dukan mitra policy, burglary etc)

Professional

(aviation, marine,, banker, stock exchange, doctors,

accountants,architects, sports etc)

Operationcovers

(fire, marine, workman, burglary, motor,neon sign,third party

lift, publicliability, industrialall risk)


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INSURANCE

GeneralInsurance:

PersonalLine ofInsurance for:

PropertyInsurance (House,Television etc)

Accident insurance (personalaccident, passenger flight etc.)

HealthInsurance (Mediclaim Insurance,cancer insurance,

videshyatra mitra policy)

LiabilityInsurance (Professional indemnity, doctors indemnity,

directors and officers legalliability)


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Key Factors for GeneralInsurance

While buying a particular general insurance, you need to analyze certain angles to make sure

that it would cater to your requirements to its fullest capacity. These angles or key factors

are:

A suitable product or service that matches your particular need

Cost of the insurance product

Flexibility of the product or services

Terms and policies of the product

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Benefits of GeneralInsurance

On availing general insurance, you can fight off financial losses against your assets and

belongings.

You can insure your as well as your family member's health by opting for personal accident

policies or medical insurance.

These policies prove hugely beneficial in case of sudden occurrence of any accidents.

O

General Insurance-Products:


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GeneralInsurance Products:

Health insurance

Motor Insurance

Personal accident

Group Medical Policy

Group Accident Policy

Shop Insurance

Stock insurance

Office insurance

Fire Insurance

Marine Insurance

Plant and Machinery Insurance

Flat Insurance

Society Insurance

NON-LIFE INSURERS:


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Bajaj Allianz General Insurance Co. Ltd. ICICI Lombard General Insurance Co. Ltd.

IFFCO Tokio General Insurance Co. Ltd. National Insurance Co.Ltd.

The New India Assurance Co. Ltd. The Oriental Insurance Co. Ltd.

Reliance General Insurance Co. Ltd. Royal Sundaram Alliance Insurance Co. Ltd

Tata AIG General Insurance Co. Ltd. United India Insurance Co. Ltd.

Cholamandalam MS General Insurance Co. Ltd.

HDFC ERGO General Insurance Co. Ltd.

Export Credit Guarantee Corporation of India Ltd.

Agriculture Insurance Co. of India Ltd.

Star Health and Allied Insurance Company Limited

Apollo DKV Insurance Company Limited

Future Generali India Insurance Company Limited

Universal Sompo General Insurance Co. Ltd.

Shriram General Insurance Company Limited

Bharti Axa General Insurance Company Limited

Raheja QBE General Insurance Company Limited

SBI General Insurance Company Limited

Max Bupa Health Insurance Company Limited

O

UnitLinked Insurance Plan (ULIP)


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( )

UnitLinked Insurance Plan (ULIP) provides for life insurance where the policy value

at any time varies according to the value of the underlying assets at the time.

ULIP is life insurance solution that provides for the benefits of protection andflexibility in investment.

The investment is denoted as units and is represented by the value that it has

attained called as Net Asset Value (NAV).

ULIP came into play in the 1960s and is popular in many countries in the world.

As times progressed the plans were also successfully mapped along with lifeinsurance need to retirement planning.

In today's times, ULIP provides solutions for insurance planning, financialneeds,

and manytypes of financial planning includingchildrens marriage planning.

Unit Linked Insurance Plan - is a financial product that offers you life insurance as

well as an investment like a mutual fund. Part of the premium you pay goes towards the sum assured (amount you get in a

life insurance policy) and the balance will be invested in whichever investments you

desire - equity, fixed-return or a mixture of both.

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In India investments in ULIP are covered under Section 80C of IT Act.

ULIPs also serve the same function of providing insurance protection against death

and provision of long-term savings, but they are structured differently. In a ULIP , the insurer deducts charges towards life insurance (mortality charges),

administration charges and fund management charges.

The rest of the premium is used to invest in a fund that invests money in stocks or

bonds.

The policyholders share in the fund is represented by the number of units.

Why do insurers prefer ULIPs?


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y p

Insurers love ULIPs for several reasons. Most important of all, insurers can sell

these policies with less capital of their own than what would be required if they

sold traditional policies.

In traditional with profits policies, the insurance company bears the investment

risk to the extent of the assured amount. In ULIPs, the policyholder bears most of

the investment risk.

Since ULIPs are devised to mobilise savings, they give insurance companies an

opportunity to get a large chunk of the asset management business, which has

been traditionally dominated by mutual funds.

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Unit linked insurance plan (ULIP) is life insurance solution that provides for the

benefits of risk protection and flexibility in investment.

The investment is denoted as units and is represented by the value that it has

attained called as Net Asset Value (NAV).

The policy value at any time varies according to the value of the underlying assets

at the time.

In a ULIP, the invested amount of the premiums after deducting for all the charges

and premium for risk cover under all policies in a particular fund as chosen by the

policy holders are pooled together to form a Unit fund.

A Unit is the component of the Fund in a Unit Linked Insurance Policy.


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The returns in a ULIP depend upon the performance of the fund in the capital market.

ULIP investors have the option of investing across various schemes, i.e, diversified equityfunds, balanced funds, debt funds etc.

In a ULIP, the investment risk is generally borne by the investor.

In a ULIP, investors have the choice of investing in a lump sum (single premium) or making

premium payments on an annual, half-yearly, quarterly or monthly basis.

Investors also have the flexibility to alter the premium amounts during the policy's tenure.

For example, if an individual has surplus funds, he can enhance the contribution in ULIP.

Conversely an individual faced with a liquidity crunch has the option of paying a lower

amount (the difference being adjusted in the accumulated value of his ULIP).

ULIP investors can shift their investments across various plans/asset classes (diversified

equity funds, balanced funds, debt funds) either at a nominal or no cost

Are ULIPs similar to mutual funds?


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In structure, yes; in objective, no. Because of the high first-year charges, mutual funds are a

better option if you have a five-year horizon.

But if you have a horizon of 10 years or more, then ULIPs have an edge. To explain thisfurther a ULIP has high first-year charges towards acquisition (including agents

commissions).

As a result, they find it difficult to outperform mutual funds in the first five years. But in the

long-term, ULIP managers have several advantages over mutual fund managers.

Since policyholder premiums come at regular intervals, investments can be planned out

more evenly.

Mutual fund managers cannot take a similar long-term view because they have bulk

investors who can move money in and out of schemes at short notice.

Reliance GeneralInsurance-Products


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For Individuals

HealthInsurance

Reliance Critical Illness

Reliance HealthWise

Individual Mediclaim

Motor Insurance

Two Wheeler Comprehensive

Private Car Comprehensive

Home Insurance

Reliance HomeProtect

Householder's Package

TravelInsurance

Individual & Family

Student

Asia

Schegen

Pravasi Bhartiya Bima

Accident Cover

Personal Accident Policy


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For Corporates

Fire Insurance

Std Fire & Spl Perils

Consequestial Loss

Industrial All Risks

EngineeringInsurance

Erection All Risks/Storage-cum-Erection Contractor's All Risks

Contractor's Plant & Machinery

Machinery Loss of Profits

Boiler & Pressure Plant

Electronic Equipment

Machinery Insurance

Marine Insurance

Marine Cargo


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LiabilityInsurance

Directors & Officers Liability

Workmen's Compensation

Professional Indemnity

Product Liability

Public Liability Insurance

Public Liability (Act)

Packages

Office Package

Commercial Care

Industry Care

Shopkeeper's Package

More Plans

Travel

Health

Accident

Misc

For SMEs

P t


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Property

Reliance Burglary & Housebreaking

Fire Insurance

Std Fire & Spl Perils

Packages

Office Package

Commercial Care

Industry Care

Shopkeeper's Package

Marine Insurance

Marine Cargo

Health

Group Mediclaim

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Engineering

Liability

Travel

Accident Cover

Misc


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