A Study of Unit Linked Insurance Plans of ICICI Prudential Life Insurance By
Divya Y. Lakhani, Assistant Professor
Dr. Vikhe Patil Foundation’s Pravara Centre for Management Research and Development, Pune
Over the past years Unit Linked Insurance Plans (ULIP) had emerged as a major player in savings mobilization. Investors had showed keen interest by subscribing to ULIP schemes anticipating higher returns. However with the global recessionary trend the performance of ULIP had been drastically affected. The BSE Sensex which had shot up to 21000 points came crashing down and stood at 8335 points on12th March 2009 and had greatly affected the Net Asset Value (NAV) across all the plans of various companies. The objective of this paper is to study the relation between returns and Sensex, investors’ preference for ULIP and Equity, growth and penetration of ICICI Prudential and the performance of some of its ULIP schemes. The hypotheses guiding this study are:
1) Ho = Fluctuations in stock market do not adversely affect the NAV of ULIP 2) Ho = Income of the investors does not affect the fund option selected by the investors. 3) Ho = Age does not affect the preference for type of insurance (traditional or unit – linked) selected by the investors. The major finding of this study is that the NAV for equity based fund options moves in tandem with Sensex while for debt based fund options it is not much affected by the movement of Sensex.
Keywords: ULIP, risk-return, Net Asset Value, Sensex
A Study of Unit Linked Insurance Plans of ICICI Prudential Life Insurance
Human life is subject to risks of death and disability due to natural and accidental causes. When human life is lost or a person is disabled permanently or temporarily, there is a loss of income to the household. The family is put to hardship. Sometimes, survival itself is at stake for the dependants. Risks are unpredictable. Death/disability may occur when one least expects it. An individual can protect himself or herself against such contingencies through life insurance. Life insurance is insurance on human beings. Though Human life cannot be valued, a monetary sum could be determined which is based on loss of income in future years. Hence in life insurance, the Sum Assured (or the amount guaranteed to be paid in the event of a loss) is by way of a ‘benefit’ in the case of life insurance. Life insurance products provide a definite amount of money to the dependants of the insured in case the life insured dies during his active income earning period or becomes disabled on account of an accident causing reduction/complete loss in his income earnings.
Unit Linked Insurance Plans (ULIP)
ULIP are a category of goal-based financial solutions that combine the safety of insurance protection with wealth creation opportunities. In ULIPs a part of the investment goes towards providing you life cover. The residual portion of the ULIP is invested in a fund which in turn is invested in stocks or bonds; the value of such investments alters with the performance of the underlying fund chosen by the policyholder. The dynamics of the capital market have a direct bearing on the performance of ULIP. Thus, in ULIPs the investment risk is generally borne by the investor.
Statement of Problem
ULIP is of recent origin. Over the last few years ULIP have emerged as major players in savings mobilization. Investors have been showing keen interest by subscribing to various ULIP Schemes anticipating higher returns and capital gains.
The year 2008 had witnessed the global recessionary trend, whereby the performance of ULIP had been drastically affected. The BSE Sensex which shot up to 21000 points came crashing down and stood at 8335 points(12th March 2009) and had greatly affected the Net Asset Value (NAV) across all the plans of various financial institutions.
There is a relationship of ULIP returns to the general economic...