Abstract
The objective of risk management is not to prohibit or prevent risk taking activity, but to ensure that the risks are consciously taken with full knowledge, clear purpose and thorough understanding so that it can be measured and mitigated. It also prevents an institution from suffering unacceptable loss causing it to fail or materially damage its competitive position. Balancing risk and return is not an easy task as risk is subjective and not quantifiable whereas return is objective and measurable. This paper includes both qualitative and quantitative research. The former uses a survey, face-to-face discussions and telephonic interviews on study sample which helped to decipher the demographics and the financial needs of the clientele. The latter uses empirical data sources to gauge the risks associated with a unit-linked insurance plan (ULIP), wealthsurance equity growth fund of IDBI federal life insurance based on risk parameters. A regression analysis is performed on the 5 year monthly historical data of portfolio returns of wealthsurance equity growth fund of IDBI federal life insurance and market returns. The findings suggest that the portfolio returns are almost independent of market returns thereby involving a high amount of risk for the fund managers to take to provide better returns. To conclude, if insurance industry has to do well in India, it has to reconfigure and change the way it has done business over the last 20 years.
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