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Introduction To Insurance
Insurance is as old as civilization. It has been developing from the family form
of insurance to mutual associations, stock exchange securities and again to state
owned organizations. ‘Yogakshema’ has been the oldest term of insurance used in the
rigveda for some kind of insurance. The concept of formal insurance originated in the
12th century in the form of protection against financial loss to the seafarers involved
in foreign trade. Growing economic uncertainties caused not only by multiplicity of
social, cultural, ethnic and political factors but also natural calamities necessitated
invention Dan development of avenues capable of providing economic security to the
bereaved family in the event of loss of breadwinner. And thus began life insurance.
With the development of social security and the welfare status of the societies, the
business of life insurance assumed multidimensional.
Insurance may be described as a social device to reduce or eliminate risk of
loss to life. 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 death, accidents and also with health. Any risk contingent upon these may be
insured against at a premium commensurate with the risk involved. Thus collective
bearing of life risk is insurance.
In today’s uncertain and hectic life, every individual is seeking some
protection against the risk. The solution is prevailing in the market from last 55 years,
but it never been so crucial before a paradigm shift has been made by private players
and this is supported by the figure of only 23% penetration in last 55 years. Now this
penetration is going upward as new competitive private players are coming. There is
immense potential in the Indian market for all the players as 77% market is to be
tapped.
1
ABSTRACT: Insurance is an Rs.400 billion business in India and yet its
spread in the country is relatively thin. Insurance as a concept has not been able to
make headway in India. Presently LIC enjoys a monopoly in life insurance business
while GIC enjoys it in general insurance business. There have been very little options
before the consumers to decide the insurer. A successful passage of the IRA Bill have
clear the way of private sector operators in collaboration with their overseas partner.
It is likely to bring in a more professional and focused approach. Moreover the
foreign players would bring sophisticated actuarial techniques with them, which
would facilitate the insurer to effectively price the product. It is very important that
trained marketing professionals who are able to communicate specific features of the
policy should sell the policy. In the next millennium all these activities would play a
crucial role in the overall development and maturity of the insurance industry
General definition:
In the words of John Magee, “Insurance is a plan by which large number of
people associate themselves and transfer to the shoulders of all, risks that attach to
individuals.”
2
The History of Insurance
The roots of insurance might be traced to Babylonia, where traders were
encouraged to assume the risks of the caravan trade through loans that were repaid
(with interest) only after the goods had arrived safely- a practice resembling bottomry
and given legal force in the Code of Hammurabi (c.2100 B.C.). The Phoenicians and
the Greeks applied a similar system to their sea borne commerce. The Romans used
burial clubs as a form of life insurance, providing funeral expenses for members and
later payments to the survivors.
With the growth of towns and trade in Europe, the medieval guilds undertook
to protect their members from loss by fire and shipwreck, to ransom them from
captivity by pirates, and to provide decent burial and support in sickness and poverty.
By the middle of the 14th cent., as evidenced by the earliest known insurance contract
(Genoa, 1347), marine insurance was practically universal among the maritime
nations of Europe.
In London, Lloyd’s Coffee House (1688) was a place where merchants, ship
owners, and underwriters met to transact business. By the end of the 18th century.
Lloyd’s had progressed into one of the first modern insurance companies.
In 1963 the astronomer Edmond Halley constructed the first mortality table,
based on the statistical laws of mortality and compound interest. The table, corrected
(1756) by Joseph Dodson, made it possible to scale the premium rate to age;
previously they had been the same for all ages.
Insurance developed rapidly with the growth of British commerce in the 17th
and 18th century. Prior to the formation of corporations devoted solely to the business
of writing insurance, policies were signed by a number of individuals, each of whom
wrote his name and the amount of risk he was assuming underneath the insurance
proposal, hence the term underwriter. The first stock companies to engage in
3
insurance were chartered in England in 1720, and in 1735, the first insurance
company in the American colonies was founded at Charleston, S.C. Fire insurance
corporations were formed in New York City (1787) and in Philadelphia (1794).
The Presbyterian Synod of Philadelphia sponsored (1759) the first life
insurance corporation in America, for the benefit of Presbyterian and their
dependents. After 1840, with the decline of religious prejudice against the practice,
life insurance entered a boom period. In the 1830s the practice of classifying risks
was begun.
The New York fire of 1835 called attention to the need for adequate reserves
to meet unexpectedly large losses; Massachusetts was the first state to require by law
(1837) to maintain such reserves. The great Chicago fire (1871) emphasized the
costly nature of fires in structurally modern cities.
Reinsurance, whereby losses are distributed among many companies, was
devised to meet such situations and is now common in other lines if insurance.
The Workmen’s Compensation Act of 1897 in Britain required employers to
insure their employees against industrial accidents. Public liability insurance, fostered
by legislation, made its appearance in the 1880s; it major importance with the advent
of the automobile.
In the 19th century, many friendly or benefit societies were founded to insure
the life and health of their members, and many fraternal orders were created to
provide low-cost, members-only insurance. Fraternal orders continue to provide
insurance coverage, as do most labor organizations. Many employers sponsor group
insurance policies for their employees; such policies generally include not only life
insurance, but sickness and accident benefit and old-age pensions, and the employees
usually contributed a certain percentage of the premium.
4
Since the late 19th century, there has been a growing tendency for the state to
enter the field if insurance, especially with respect to safeguarding workers against
sickness and disability, either temporary or permanent, destitute old age, and
unemployment.
The U.S. government has also experimented with various types of crop
insurance a landmark in this field being the Federal Crop Insurance Act of 1938. In
world War-2 the government provided life insurance for members of the armed
forces; since then it has provided other forms of insurance such as pensions for
veterans and for government employees.
5
History of Insurance Sector in India
The insurance sector in India dates back to 1818, when Oriental Life
insurance company was incorporated a Calcutta. Thereafter few companies like
Bombay Life Assurance Company, in 1983 and Triton Insurance Company for
general insurance in 1850 were incorporated and comprehensive legislation was
enacted in 1983.
The nationalization of life insurance business took place in 1956 when 245
Indian and foreign insurance provident societies were first merge and then
nationalized. It paved the way towards establishment of Life Insurance Corporation
and since than it has enjoyed a monopoly over the life insurance business in India.
General insurance followed the suit and in 1968 the insurance act was amended to
allow for social control over the general insurance business. Subsequently in 1973
non life insurance business was nationalized and the general insurance corporation in
its present form was incorporated in 1972 and maintains the very strong hold over the
non life insurance business in India. Due to concerns of:
a) Relatively low spread of insurance in the country,
b) The efficient and quality functioning of the public sector insurance
companies
c) The untapped potential for mobilizing long-term contractual saving funds
for infrastructure.
The Congress government set up as insurance reforms committee in April
1993. The committee submitted its report in January 1994, recommended a phased
program of liberalization, and called for private sector entry and restructuring of the
LIC and GIC. The United Front government moved an insurance bill but it did not
pass. The BJP government moved an insurance bill again in 1998, which had also to
6
be referred back to a select committee of parliament. But now the parliament has
given a nod to the insurance Regulatory and Development Authority
(IRDA) bill with some changes in the original structure.
The insurance scenario in India over the years
Post 1999: Prior to 1972:
Many insurance companies 107 companies
After 1972 nationalized setup with five companies
A comparison across countries shows that India is ranked 27th in mobilization
savings in the form of insurance. Also, investment of insurance funds is skewed in
India. Over 80 percent of insurance funds are invested in public sector, primarily in
government and government-backed securities. Note that this skew-ness is mainly the
result of investment rules established by the government.
The Indian insurance market is set up to touch USD 25 billion by 2010, on the
assumption for a 7 percent real annual growth 1 GDP. At the moment, thanks to the
state monopoly in the sector, India is ranked 23rd in terms of annual premium
collection and a merger 0.34 percent share. Out of one billion people in India, only 35
million people are covered by insurance. The industry today is characterized because
of absence of competition by high premiums and low returns. Life insurance funds
constitute approximately 10 percent of gross household saving in financial assets in
India. Moreover, India’s Life insurance premium as a percentage of GDP is just 1.4
percent. The state corporation has tapped only 22 percent of the insurable population
so far.
7
Role of Insurance in India`s future
1. Insurance would assist businesses to operate with less volatility and risk of failure
and provide for greater financial and societal stability from the growth pangs of
an estimated growth rate over 8 % in GDP
2. Government has arranged for disaster management and for funds . NGOs and
public institutions assist with fund raising and relief assistance. Besides
government provides for social security programs. There is considerable impact
upon government in these respects. Insurance substantially steps in to provide
these services. The effect would be to reduce the strain on the tax payer and assist
in efficient allocation of societal resources
3. Facilitates trade, business and commerce by flexible adaptation to changing risk
needs particularly of the burgeoning Services sector .
4. Like any other financial institution insurance companies generate savings from
the insurance sector within the economy and make available the same in well
directed areas of the economy deserving investments ; a sector with potential for
business as is the case with Indian insurance provides incentive to develop it all
the more faster
5. It enables risk to be managed more efficiently through risk pricing and risk
transfers and this is an area which provides unlimited opportunities in the Indian
context for consulting, broking and education in the post-privatisation phase with
newer employment opportunities
6. The insurance industry of its own accord is interested in loss minimisation. Its
expertise in understanding losses assists it to share the experience across the
economy thus enabling better loss control and preservation of national assets
7. In its risk pricing and investment decisions the insurance industry sets the tone for
investment by others in the economy. Informed assessment by the insurance
companies thus signals allocation of resources by others contributing to efficiency
8
in allocation. In India visibility of LIC and GIC have been dwarfed by
government’s actions and other high profile institutions like ICICI, IDBI and UTI.
Of late AIG is visible in the media and its investment announcements are being
followed keenly by institutional investors in India. ING Savings Trust and Zurich
are active in asset management and are being keenly followed by retail investors.
Dr.Skipper`s seven parameters goes a long way in asserting an active future for insurance
in the Indian economy.
India has reasonably well developed accounting, legal and supervisory institutions. These
support the requirements of the insurance market very well.Other support services are
expected to readily adapt to the new conditions of the emerging market.
INDUSTRY DETAIL IN INDIA
The story of insurance sector started year back in 1818 when the Oriental Life
insurance company was established in Calcutta. Subsequently the nationalization of
the insurance took place in 1956 when life insurance in India was established and
then GIC was nationalized in 1973. The existing potential for insurance market
prevailing in India is very high. Moreover the Indian middle class customers are like
the hot pie for the insurance company to grab. The study of privatization is traced,
which is the current story. It started way back in 1993 when the Malhotra Committee
was established on insurance sector reforms and deregulation set-up and ended in
February 20000 when the privatization of insurance bill was passed in the budget
session. The objective of privatization is to increase competition and provide good
quality products to the customer.
The IRDA has thus given stringent guidelines for the private companies,
banks and insurance agents. The financial aspects of insurance business have also
included. The financial details regarding the revenue recognition of the GIC and their
apportionment of expenses are also covered.
The economic value for a human life arises out of its relation to other lives.
Whenever continuance of life is financially valuable to other, either to family
9
dependents, business associates or educational and philanthropic situation the need of
life insurance is present.
Lets us consider a family of our four, which consists of man, a woman and
their two children. The earning member of the family works hard to get the money
flowing to meet the requirements of his family. They have plans to constructs their
own house in the next two years. Everything is going as per plan.
The various events, which can upset these plans, are:
• Burglary
• Death Accidental Permanent Disability
• Sickness
• Critical Illness
All these events are fortuitous in nature, i.e. they are out of control of the
family and more in the hands of destiny. Further, all these events can actually erode
the wealth of the family. In the order to reduce the element of risk to which this
family may be subjected and to safeguard their wealth or economic value, insurance
should be taken. Insurance ensures protection of economic value of assets. Assets are
insured against the risk of being destroyed or made non-functional due to any
accidental occurrence. There are two different branches of insurance-Life and Non-
Life insurance. While Life Insurance insures the life of a person, Non-Life insurance
insures everything else; in the above situation Life of a person will be covered under
Life insurance whereas Jewelry will be covered under Non-Life insurance.
The Life Insurance Scenario in India
Population: More than 1 Billion
Economy: 5th largest in the world in terms of Purchasing Power Parity (PPP)
GDP growth Rate: Over 6% per year on an average for the last decade
Savings Rate: Around 26% of GDP
Estimated middle class population: 300 Million
Insured population: 70 million only
10
Since 1956, with the nationalization of insurance industry, the state-run Life
Insurance Corporation of India (LIC) has held the monopoly in that country's life
insurance sector. General Insurance Corporation of India (GIC), with its four
subsidiaries, was its counterpart in the casualty sector. Over time, taking advantage of
its monopoly and virtual prerogative in establishing premiums, LIC has evolved into
a monolith. With around 600,000 agents in every nook and corner of the vast country,
it has created an enviable brand name, particularly among the rural population of the
country. It has around $40 billion as its life fund and is a strong player in the financial
sector. However, on the qualitative side, it has very little to take pride in. And there
lies the potential for foreign players to challenge this behemoth.
As is typical with monopolies, the premium rates charged by LIC are among
the highest in the world, and its track record in customer service can, at best, be called
shabby. With a huge unionized, rigid workforce mostly in the clerical category, LIC
runs the risk of high fixed cost, which will be the deciding factor in productivity in
the competitive scenario. While boasting full-scale automation of its operation, the
truth is that its technology is outdated. The new players, with the state-of-the-art
technology under their belt, will be in an advantageous position. 80% of LIC's
business is procured by 20% of its ill-trained agent force. The foreign player, with the
domestic partner's strong brand value, can test the unconventional distribution
channels like brokers, the Internet, the banking distribution system, etc. Although
foreign players may be tempted to keep their operation in the big cities for the
'creamy layer' of the society, the real market lies in rural India, which accounts for the
lion's share of LIC's present business. The foreign player must learn to adapt to Indian
realities. The well-publicized failures of world famous consumer goods companies
like Electrolux, Whirlpool, Reebok, Nike etc. to gauge the Indian psyche and
sentiments demonstrate the concept. They failed in the areas of realistic pricing,
product promotion and reaching to the consumer. The foreign companies need to
know the "ground realities" to the details.
Basic Principle of Insurance
11
The people who drive within the city and the people who drive in the
highways are grouped differently for risk classification. This stem from fundamental
principal underlying insurance that is, it has to be popular and fair.
Therefore people exposed to the same kind of risk are pooled together. People
facing the same risk make contribution to common fund. The assumption is that the
contribution to a common fund. The assumption is that the contribution made,
represents equal liability of risk happening to any of the individual based on part
experiences of the average number of people who suffer losses. Then incase, any
individual who is a part of pool suffers a loss, he is compensated from the common
fund.
How big is the insurance market?
Insurance is a Rs.400 billion business in India, and together with banking
services adds about 7% to India’s GDP. Gross premium collection is about 2% of
GDP and has been growing by 15-20% per annum. India also has the highest number
of life insurance policies in force in the world, and total invested funds with the LIC
are almost 8% of GDP. Yet more than three-fourths of India’s insurable population
has no life insurance or pension cover. Health insurance of any kind is negligible and
other forms of non-life insurance are much below international standards.
a) To tap the vast insurance potential and to mobilize long-term savings we need
reforms which include revitalizing and restructuring of the public sector
companies, and opening up the sector to private players. A statutory body need to
be made to regulate the market and promote a healthy market structure. Insurance
Regulatory Authority (IRA) is one such body, which checks on these tendencies.
IRA role comprises of following three functions:
(a) Protection of consumer’s interest.
(b) To ensure financial soundness and solvency of the insurance industry,
and
12
(c) To ensure healthy groth of the insurance market.
Three Questions about Insurance Liberalization
Why open up the Insurance Industry?
An insurance policy protects the buyer at some cost against the financial loss
arising from a specified risk. Different situations and different people require a
different mix of risk-cost combinations. Insurance companies provide these by
offering schemes of different kinds.
Unfortunately the concept of insurance is not popular in our country. As per
the latest estimates, the total premium income generated by life and general insurance
in India is estimated at around a meagre 1.95% of GDP. However India’s share of
world insurance market has shown an increase of 10% from 0.31% in 1996-97 to
0.34% in 1997-98. India’s market share in the life insurance business showed a real
growth of 11% thereby outperforming the global average of 7.7%. Non-life business
grew by 3.1% against global average of 0.20%. In India insurance spending per capita
was among the lowest in the world at $7.6 compared to $7 in the previous year.
Amongst the emerging economies, India is one of the least insured countries but the
potential for further growth is phenomenal, as a significant portion of its population is
in services and the life expectancy has also increased over the years.
The nationalized insurance industry has not offered consumers a variety of
products. Opening of the sector to private firms will foster competition, innovation,
and variety of products. It would also generate greater awareness on the need for
buying insurance as a service and not merely for tax exemption, which is currently
done. On the demand side, a strong correlation between demand for insurance and per
capita income level suggests that high economic growth can spur growth in demand
13
for insurance. Also there exists a strong correlation between insurance density and
social indicators such as literacy. With social development, insurance demand will
grow.
Three key, questions that impinge on liberalization of insurance business in
India. Are: why liberalize, what market structure to have finally, what role for
regulator
What should be the market structure?
In this section, we analyze the question whether there should be unlimited
private entry insurance markets or whether only a few players are allowed to operate.
This question hinges around the issue of "adverse selection" described
below. Individuals buying an insurance contract pay a price (called the
"premium") to the insurance company and the insurance company in turn provides
compensation if a specified event occurs. By making such contractual arrangements
with a large number of individuals and organizations the insurance company can
spread the risk. This gives insurance its "social" character in the sense that it entails
pooling of individual risks. The price of insurance i.e., the premium is based on
average risk. This premium is too high for people who perceive themselves to be in a
low risk category. If the insurer cannot accurately determine the risk category of
every customer and prices insurance on the basis of average risk, he stands to lose all
the low risk customers. This in turn increases the average risk, which means premium
have to be revised upwards, which in turn drives away even more customers and so
on. This is known as the problem of "adverse selection". Adverse selection problem
arises when a seller of insurance cannot distinguish between the buyer's type i.e.,
whether the buyer is a low risk or a high type. In the extreme case, it may lead to the
complete breakdown of insurance market.
Another phenomenon, the problem of "moral hazard" in selling insurance,
arises when the unobservable action. Of buyer aggravates the risk for which insurance
is bought. For example, when an insured car driver exercises less caution in driving,
14
compared to how he would have driven in the absence of insurance, it exemplifies
moral hazard.
Given these problems, unbridled competition among large number of firms is
considered detrimental for the insurance industry. Furthermore, even the limited
competition in insurance needs to be regulated. Insurance companies can differentiate
among various risk types if there is a wide difference in risk profile of the buyers
insuring against the strong insurers. It also called for keeping life insurance separate
from the general insurance. It suggested the regulation of insurance intermediaries by
IRA and the introduction of brokers for better ‘professionalisation'.
The Insurance Potential
The main reason why the leading insurance companies in the world and the
leading corporate group in India have shown a keen interest in the insurance sector, is
the vast potential for future business. Restricted, as the market has been, through the
operations of the two monopolies (LIC and GIC), it is generally felt that the sector
can grow exponentially if it is opened up. The decade 1987-97 has witnessed a
compounded growth rate of marginally more than 10% in life insurance business. LIC
predicts for itself that its business has potential to grow by 16.27% p.a. in a decade
1997-2007 (LIC, 1997). If we take a look at insurance coverage index for the age
group of 20-59 years a considerable gap between India and other countries in Asia an
be observed. In this scenario, naturally insurance companies see a vast potential.
INDIVIDUAL LIFE INSURANCE COVERAGE INDEX,1994
Country(No. of policies per 100 persons)
Indonesia 2.0
Philippines 5.6
India 12.4
Thailand 14.7
15
Source: Charted Financial Analyst May 1999. (Insurance in Asia: The financial times,
quoted from Tillinghast study)
The Present State Of Affairs
YearSu Sum assured and bonus
(Rs. Crore)
No. of policies (lacs) Premium
income(Rs. Crore) 1992-93
178120 566.79 7146.24 1993-94
208619 608.73 8758.19 1994-95
254572 655.29 10384.91 1995-96
295758 709.60 12093.63 1996-97
344619 777.50 14499.50
Source: Charted Financial Analyst May 1999.
16
Source: Charted Financial Analyst May 1999.
Source: Charted Financial Analyst May 1999. (Associated Market Quest)
Why allow entry to private players?
The choice between public and private might amount to choosing between the
lesser of two evils. An insurance contract is a "promise to pay" contingent on a
specified event. In the case of insurance and banking, smooth functioning of business
depends heavily on the continuation of the trust and confidence that people place on
the solvency of these financial institutions. Insurance products are of little value to
consumers if they cannot trust the company to keep its promise. Furthermore, banking
and insurance sectors are vulnerable to the "bank run" syndrome, wherein even one
insolvency can trigger panic among consumers leading to a widespread and complete
breakdown. This implies the need for a public regulator, and not public provision of
insurance. Indeed in India, insurance was in the private sector for a long time prior to
independence. The Life Insurance Corporation of India (LIC) was formed in 1956,
when the Government of India brought together over two hundred odd private life
insurers and provident societies, under one nationalized monopoly corporation, in the
Group Insurance and superannuation
No. of Schemes No. of Members
Group
Insurance
Superannuation Group
Insurance
Superannuation
1992-93 59128 3040 212.54 2.69 43086.83
1993-94 64426 3314 227.31 3.14 46742.95
1994-95 71726 3642 241.88 3.54 51034.71
1995-96 75592 3977 246.49 4.19 64651.54
1996-97 78372 4349 238.97 5.54 64606.60
17
wake of several bankruptcies and malpractice’s'. Another important justification for
Nationalization was to raise the much-needed funds for rapid industrialization and
self-reliance in heavy industries, especially since the country had chosen the path of
state planning for development. Insurance provided the means to mobilize household
savings on a large scale. LIC's stated mission was of mobilizing savings for the
development of the country and also conducting business in the spirit of
1. 1 A comprehensive historical account of Life insurance business in India and LIC
in particular is provided in LIC (1970) and LIC (1991) respectively.
2. 2 This latter emphasis on trusteeship was relevant then, in light of major
insolvencies and fraudulent practices of so many private insurance companies
prior to 1956.
Trusteeship
The non-life insurance business was nationalized in 1972 with the formation
of General Insurance Corporation (GIC). Thus the fact that insurance is a state
monopoly in India is an artifact of recent history the rationale for which needs to be
examined in the context of liberalization of the financial sector. If traditional
infrastructure and "semi-public goods" industries such as banking, airlines, telecom,
power, and even postal services (courier) have significant, private sector presence,
continuing a state monopoly in provision of insurance is indefensible. This is not to
deny that there are some valid grounds for being cautious about private sector entry.
Some of these concerns are:
(a) That there would be a tendency of private companies to "skim" the
markets; thus private players would concentrate on the lucrative mainly urban
segment leaving the unprofitable segment to the incumbent LIC.
(b) That without adequate regulation, the funds generated may not be
deployed in sectors (which yield long-term social benefits), such as infrastructure and
public goods; similar without regulation, private firms may renege on their social
sector investment obligations. Meeting these concerns requires a strong regulatory
18
body. Another commonly expressed fear is that there would be massive job losses in
the industry as a whole due to computerization. This however does not seem to be
corroborated by the countries' experience'.
Moreover, apart from consideration based on theoretical principles alone,
there is sufficient evidence that suggests that introduction of private players in
insurance can only lead to greater benefits to consumers. This can be seen from the
fact that the spread in insurance in India is low compared to international
benchmarks. The two convention measures of the spread of insurance are penetration
and density. The former measure (premiums per unit) of GDP, and the latter,
premiums per capita. Less than 7% of the, population in India has life insurance
cover. In Singapore, around 45 per cent of the people are covered and in Japan, this is
close to 100 per cent. In the US, over 81 per cent the households have insurance
cover. India has the biggest life insurance sector in the world if we go by the number
of policies sold, but the number of policies sold per 10 persons is very low.
The demand for insurance is likely to increase with rising per-capita incomes,
rising literacy rates and increase of the service sector, as has been seen from the
example of several other developing countries. In fact, opening up of the insurance
sector is an integral part of the liberalization process being pursued by many
developing countries. After Korean and Taiwanese insurance sectors were liberalized,
the Korean market has grown three times faster than GDP and in Taiwan the rate of
growth has been almost 4 times that of its GDP. Philippines opened up its insurance
sector in 1992. There are several other factors that call for private sector presence.
Firstly, a state monopoly has little incentive to innovate or offer a wider range of
products. This can be seen by a lack of certain products from ll.’s portfolio, and lack
of extensive risk categorization in several GIC products, such as health insurance. In
fact, it seems reasonable to conclude that many people buy life insurance just for the
tax benefits, since almost 35 per cent of the life insurance business is in March, the
month of financial closing. This suggests that insurance needs to be sold more
vigorously. More competition in this business will spur firms to offer several new
products, and more complex and extensive risk categorization. The system of selling
19
insurance through commission agents needs a better incentive structure, which a state
monopoly tends to stifle. For example LIC pays out only 5 per cent of its income as
commissions, whereas this share in Singapore is 16 per cent, and in Malaysia it is
close to 20 percent.
Private sector presence will also mean that the current investment norms,
which tie up almost 75 per cent of insurance funds in low yielding government
securities, will have to go. This will result in more proactive and market oriented
investment of funds. This needs to be tempered by prudential regulation to ensure
solvency'. Of course, this also implies that cross-subsidizing across policyholders of
different types that is seen both in life and non-life insurance will diminish. Since
public sector firms are required to sell subsidized insurance to weaker sections of
society, a separate subsidy mechanism will have to be designed. The India
Infrastructure Report (GOI, 1996) estimates that the funds required in the next two
decades are more than Rupees 4000 billion.
Finally, private sector entry into insurance might be simply a fiscal necessity.
Since large scale funds form long term contractual savings need to be mobilized,
especially for investment in infrastructures the option of not having more (private)
players in the insurance sector is too costly.
Effects of international players in domestic market:
1. The new entrants cannot compete with the state owned LIC on price alone. Due to
its size, LIC operates at very low costs and their premium on policies that offer
pure protection are on a par with comparable scheme across the globe. What the
new insurance companies will probably offer is higher returns than the annualized
9-10% one can hope the earn from LIC’s policies. These will put pressure on LIC
to offer more effective returns.
2. Consumers can also expect product innovations. For instance, at present, LIC
provides cover for permanent disability and what the new companies could offer
is temporary disability insurance as well.
20
3. Apart from the basic tern insurance, most insurance product worldwide are sold as
long term investment opportunities with the protection component being clearly
spelt out in the scheme.
4. LIC’s policies are not flexible according to customer needs. New entrants have
planned to offer universal life and variable life insurance products that allow the
holder flexibility in deciding how his premium are split between protection and
savings. New products would also enable product combination that allows greater
customization.
5. Private insurers would compete furiously on the service platform. These would
not only include faster claims settlement and other after sales service but their
agents would be trained in pre-sales interaction to usher in a customer-oriented
approach. They would be better known for assisting clients in financial planning.
6. Foreign companies would also use superior software (like APEX) that will give
them an edge over the in-house LIC software. This technology will help private
insurers in product development and customizing products to suit individual
needs.
7. The foreign players will probably introduce a lot of innovation and competition
on surrender value. LIC pays surrender value only after three years but private
insurance companies are likely to offer sops by way of better and timely surrender
value to clients.
8. Access to insurance too will probably become more wide spread. Role of
intermediaries would decrease and sale of insurance through direct channels and
banks would increase. Simple products like term insurance might be sold through
the telephone or direct mail to high net worth clients.
9. In reaction to foreign player’s strategies one might expect domestic players to
react and drop its premium and upgrade its services.
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Companies must have two wings
Indian Company/ Group Foreign Collaborator
ICICI Prudential
Kotak Mahindra Old Mutual
Bajaj Allianz Holding, Germany
Sundaram Finance Winterthur
SBI Alliance Capital
SPIC Metlife
20th century Canada life
Tata Group American Investment Group, USA
Birla Group Sun life, Canada
Hindustan Times Commercial Union, UK
Ranbaxy Cigma, USA
HDFC Standard life, UK
Bombay Dyeing General Accident, UK
DCM Shriram Royal Sum Alliance, UK
Dabur Group Liberty Mutual Fund, USA
Max Newyork life
Godrej J. Rothschild, UK
Sanmar group Glo, Australia
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Cholamandalam Gurdian Royal Exchange, UK
ITC Eagle star, UK
S K Modi Group Legal and General, Australia
S K Modi Group QBE, Australia
Vysya Bank ING Insurance
ILFS CIGNA
Role of Insurance Companies
Insurance companies have a distribution network for selling life insurance
products and with a little additional input such as the training the same sales force can
sell pensions quickly and adequately. Product packaging could take away the
complexities of pension regulators and tax treatment by packaging in such a way that
the employee only has to sign on the form at the bottom. Pension funds require
copious records and the insurance company can handle all such record keeping. Apart
from simplification of product packaging, insurance companies are able to offer
pension with a life insurance cover with the employee benefit needs attached so that
he employer can buy from the same source. And when the person retires the employer
will be able to pay the benefits and the annuities that have accrued during the persons
working lifetime.
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History of ICICI
The Industrial Credit and Investment Corporation of India Limited
(ICICI) was incorporated in 1955, at the initiative of the World Bank, the
Government of India and representatives of Indian industry, with the objective of
creating a development financial institution for providing medium-term and long-
term project financing to Indian businesses. Mr.A.Ramaswami Mudaliar elected as
the first Chairman of ICICI Limited. ICICI emerges as the major source of foreign
currency loans to Indian industry. Besides funding from the World Bank and other
multi-lateral agencies, ICICI also among the first Indian companies to raise funds
from International markets.
In 1956 ICICI declared its first Dividend at 3.5%.
In 1958 Mr.G.L.Mehta was appointed the 2nd Chairman of ICICI Ltd.
In 1960 ICICI building at 163, Backbay Reclamation was inaugurated.
In 1961The first West German loan of DM 5 million from Kredianstalt was
obtained by ICICI.
In 1967 ICICI made its first debenture issue for Rs.6 crore, which was
oversubscribed.
In 1969First two regional offices in Calcutta and Madras were opened.
In 1972 it became the Second entity in India to set-up merchant banking
services. Mr. H. T. Parekh appointed as the third Chairman of ICICI.
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In 1977 ICICI sponsors the formation of Housing Development Finance
Corporation. Managed its first equity public issue.
In 1978 Mr. James Raj appointed as the fourth Chairman of ICICI.
In 1979 Mr.Siddharth Mehta appointed as the fifth Chairman of ICICI.
In 1982 became the first ever-Indian borrower to raise European Currency
Units. ICICI commences leasing business.
In 1984 Mr. S. Nadkarni appointed as the sixth Chairman of ICICI.
In 1985 Mr.N.Vaghul appointed as the seventh Chairman and Managing
Director of ICICI.
In 1986 ICICI became the first Indian Institution to receive ADB Loans.
ICICI along with UTI set up Credit Rating Information Services of India Limited,
(CRISIL) India's first professional credit rating agency. ICICI promotes Shipping
Credit and Investment Company of India Limited. (SCICI). The Corporation made a
public issue of Swiss Franc 75 million in Switzerland, the first public issue by any
Indian equity in the Swiss Capital Market.
In 1987 ICICI signed a loan agreement for Sterling Pound 10 million with
Commonwealth Development Corporation (CDC), the first loan by CDC for
financing projects in India.
In 1988 ICICI promotes TDICI - India's first venture capital company.
In 1993 ICICI sets-up ICICI Securities and Finance Company Limited in joint
venture with J. P. Morgan. ICICI sets up ICICI Asset Management Company. ICICI
sets up ICICI Bank.
In 1994 ICICI becomes the first company in the Indian financial sector to
raise GDR.
In 1996 ICICI announces merger with SCICI. Mr.K.V.Kamath appointed the
Managing Director and CEO of ICICI Ltd. ICICI was the first intermediary to move
away from single prime rate to three-tier prime rates structure and introduced yield-
curve based pricing.
In 1997 The name "The Industrial Credit and Investment Corporation of India
Limited " was changed to "ICICI Limited". ICICI announces takeover of ITC Classic
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Finance. Introduced the new logo symbolizing a common corporate identity for the
ICICI Group.
In 1998 ICICI announces takeover of Anagram Finance. ICICI launches retail
finance - car loans, house loans and loans for consumer durables.
In 1999 ICICI becomes the first Indian Company to list on the NYSE through
an issue of American Depositary Shares. ICICI Bank becomes the first commercial
bank from India to list its stock on NYSE.
In 2000 ICICI Bank announces merger with Bank of Madura. The Boards of
ICICI Ltd and ICICI Bank approved the merger of ICICI with ICICI Bank.
1n 2001 Moodys' assign higher than sovereign rating to ICICI.
In 2002 Merger of ICICI Limited, ICICI Capital Services Ltd and ICICI
Personal Financial Services Limited with ICICI Bank.
COMPANY PROFILE
ICICI and Prudential came together in 1993 to form Prudential ICICI Asset
Management Company, which has today emerged as one of the leading mutual funds
in India. The two companies bring together two of the strongest financial service
brands in Asia, known for the professionalism, excellent quality of service and long
term commitment to us. Riding on the success of this relationship, the tow companies
joined hands once more in 2000, to form ICICI Prudential Life Insurance, with a
commitment to provide leading-edge life insurance solutions.
ICICI Bank has 74% stake in the company, and Prudential plc has 26%
ICICI Prudential Life Insurance Company is a joint venture between ICICI
Bank, a premier financial powerhouse and Prudential plc, a leading international
financial services group headquartered in the United Kingdom. ICICI Prudential was
amongst the first private sector insurance companies to begin operation in December
2000 after receiving approval from Insurance Regulatory development Authority
(IRDA)
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ICICI Bank:
ICICI Bank (NYSE: IBN) is the largest private sector bank in the country with
an asset base of over INR 1000 Billion. The bank offers a broad spectrum of financial
services to individuals and companies including deposit accounts, commercial
banking, mortgages car loans, corporate and trade finance, credit and debit cards and
other banking services. ICICI Bank today services a growing customer base of more
than 5 million customer accounts and 5 million bondholder accounts across the
country thought a multi-channel access network. This includes over 400 branches and
extension counters, 120 retail centers, 1005 ATMs, call centers and internet banking.
For the year ended March 31, 2002, ICICI Bank posted a net profit of INR 2.58
billion. ICICI Prudential clocks growth of 170% in H1 of FY04
Salient Features
• One of the largest private sector bank and financial institution in India.
• Founded in 1955 by the Government of India and the World Bank.
• Today ICICI is in every field of finance-banking, project finance, e-commerce,
venture capital, InfoTech retail finance, portfolio management, mutual funds, life
insurance, and general insurance,.
• Financial for the year 2003-2004were :
• ICICI Prudential in 4 new bank assurance tie-ups
• ICICI Prudential first private life insurer to cross Rs 10,000 crore sum assured
Premium income soars to Rs. 184 crore; buoyed by unit-linked products
• in the period April-September 2003, clocking a growth of 170% over premium
income of Rs 68 crore in the corresponding period of the previous year (Apr-Sept
2002)
• ICICI Prudential issued nearly 114,000 policies during the period, compared to
77,183 policies during the same period last year.
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• The company has also shown an impressive sequential growth of 65 per cent in
Q2 (Jul-Sep '03) over Q1 (Apr-Jun '03). It gathered Rs. 114 crore of premium in
Q2 and Rs. 69 crore in Q1 (in WAPI terms
• Net worth in excess of 9000 crores.
• Assets in excess of 73400 crores +.
• Better than sovereign rating (Moody’s)
• ICICI has always been ahead in providing the clients with quality services and
products. People feel proud to do business with ICICI.
• First Indian company to be listed on New York Stock Exchange.
• Trusted by million of Indian’s over the years
Salient Features of Prudential
• Prudential was founded in 1848 and from since it remained a pioneer insurance
service provider.
• Presence in UK and throughout Asia.
• One of the largest Insurance Company in the UK.
• Investor deposit base in U.K. alone exceeds Rs 53200 crores
• Has over US $270 billion under management.
• 4th largest life insurance company in terms of revenues in the world.
• Already established as one of the biggest mutual fund companies in India
(Prudential ICICI AMC).
• Solid reputation builds over 150 years.
• Over 75 years of experience in Asia.
• Operating in 11 countries in South East Asia.
• A truly global brand.
“One-stop shop for all financial requirements of an investor.”
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Vision:
To make ICICI Prudential the dominant Life and Pension player built on trust by
world-class people and service.
This we hope to achieve by:-
• Understanding the need of customers and offering them superior products and
service.
• Leveraging technology to service customers quickly, efficiently and
conveniently.
• Developing and implementing superior risk management and investment
strategies to offer sustainable and stable returns to our policyholders.
• Providing an enabling environment to foster growth and learning for our
employees.
• And above all, building transparency in all our dealing.
The success of the company will be founded in its unflinching commitment to
5 core value—Integrity, Customer First, boundary less, Ownership and Passion. Each
of the values describes what the company stands for, the qualities of our people and
the way we work. We do believe that we are on the threshold of an exciting new
opportunity, where we can play a significant role in redefining and reshaping the
sector.
Given the quality of our parentage and the commitment of our team, there are
no limits to our growth.
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COMPANY ANALYSIS
ICICI Prudential Life Insurance Company has mopped up a premium income
of Rs 348 core for the year ended march 31, 2003, reflecting a 200 percent growth
over the corresponding period last year. It has sold 2, 46,827 policies during the year,
against one-lakh policies sold in fiscal 2002.
Total sum assured increase more than six fold to Rs. 6,005 crore .
ICICI Prudential has corned about 40 per cent of the private sector insurance market,
which today accounts for 10 per cent of incremental sales of the entire industry.
ICIC Prudential chief marketing officer Saugato Gupta attributed the growth
in performance to its distribution ramp-up the ICICI brand, its customer-centric focus
and its product portfolio. ‘People believe in the ICICI brand and with our distribution
happening correspondingly, it had helped increase sales, ‘said Gupta.
The private insurer doubled its reach to 25 towns from 12 cities last year. The
company’s strategy to push need-based selling ands tackle the concept of under-
insurance in the country further helped it push up the average tickle size with the
average sum assured crossing Rs 2 lakh.
‘Our average premium today is Rs 11,500-12000 against Rs 8000-9000 last
year,’ said Gupta. This, he said, is about 40 per cent higher than the industry average
premium. Majority of the 1-2lakh policies sold by ICICI prudential in the last quarter
of fiscal 2003 were pension and unit-linked plans, said Gupta.
Pension products today accounts for 25 per cent of its total sales, giving ICICI
Prudential an overall industry share of 23-25 per cent.
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“Customer are not buying pension products solely to save on tax as our
average ticket size is about Rs 120000, said Gupta. Under section 80CCC of the
income Tax Act, investment in pension plans up to Rs 10,000 offer taxpayers a direct
deduction from one’s taxable income.
Gupta added that even as the company has moved to smaller towns and cities,
‘our ticket size continues to be above the industry average’. This is despite ICICI
Prudential continuing to be a mass player and not a niche player unlike some of its
counterparts.
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LIFE INSURANCE
Why Life Insurance?
We all hope to live a full life till a ripe old age. To do the very last for our
parents and watch our children stand on their own feet. But what if fate cuts life
short? Who would pay for our children’s education? Their marriage? Ensure life’s
continuity for them. Why not plan for life’s adversities? What if a sudden disability or
illness puts us out of action if we were unable to attend office for a while? Who
would take care of all the medical expenses? Who would pay the mounting household
bill? Should these adversities occur, are we equipped to face the situation? Where
would we get the money to face the crisis? Would life continue smoothly for our
children? Why not plan to protect and provide for them? Since we have no control
over life’s ebbs and flows, why not do something over which we do have control.
Do we need life insurance?
Life is most valuable asset. This is easily proved f we were to assign a
monetary value to life. This value depends on income-earning potential or Human
Life Value. Our income supports our family. Helps them to get the most out of life.
Month after month, year, we and our dependents live the best way we can using the
money we earn. This money enables our household to run smoothly, our children to
go to college, take care of the medical bills, our vacations and help maintain our life
style. On the basis of our income or earning potential, we can calculate our Human
Life Value. A simple rule of thumb to compute it is as follows: multiply our present’s
annual income by the number of years until we plan to retire.
Protecting Our Most Valuable Asset
If something were to happen to us, here are a few possible ways of dealing
with the financial implications:
1) Draw from our savings: but how long would the funds last? A lifetime of
savings could be used up in few months.
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2) Borrow from others: who will lend us the money? Even family and friends
can only help to an extent. And anyway, this would only be a short-term solution.
3) Sell our assets: what price will we get for our assets? Would we like to sell
our home? Our car?
4) Transfer the risk to an insurance company.
This recommends that we have to transfer the risk to an insurance company.
It’s cheaper, safer and smarter in the long run. If we insure the risk our money
outflow is actually miniscule. For the sake of illustration, an annual premium payout
of approx. Rs25 for 15 years guarantees our family will receive Rs1000-if something
happens to we in that period. A smaller sum is payable for transferring the risk of
disability. Another advantage of transferring the risk is that we remove the
uncertainty. So do take steps to protect our most valuable assets, our Life!
How Much Insurance Do We Need?
Once we have decided to buy insurance the pertinent question is how much to
insure for? This calculation depends on our yearly income our estimated expenses and
our existing assets.
What If We Already Have Life Insurance?
They say “Change is only constant in the world”. We have to adjust to life’s
changes. And accordingly provide for protection of our family and make provisions
for unforeseen circumstances. The amount of protection and provision we require
depends on our life stage. You should re-evaluated our needs for protection and make
provision whenever there is a;
Change in our life stage
While our protection needs may be comparatively less when we re single, they increase
when we have children. Re-evaluated our insurance needs at the following life stages:
• Our marriage
• The birth of child
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• Schooling of child
• College education of child
• Marriage of child
• Retirement
Change in our life needs:
Our provision needs may suddenly increase should such a circumstance happen:
• Taking care of an ailing child
• Taking care of an aged relative
• Fighting an illness
• Buying a bigger house, etc.
Change in our lifestyle
Insurance needs change with changes in our lifestyle. We may like to increase our cover
when there has been a steady rise in our income, or we have received a sudden windfall
and we can put it aside as tax-deferred savings for retirement.
Insurance: especially for customers
When we are young and just starting out, there’s a lot we have to put together. Get
married, get a house, get it furnished, start a family… these may or may not currently be
some of our life needs. But then as time goes by we changes… and so do our needs! At
ICICI Prudential we understand that different people have their own sets of needs at
various stages of their lives. That’s why we offer a choice of solutions…depending on
whether we are a young individual planning for the years ahead or an established
professional planning for our retirement.
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PRODUCTS DETAILS
• Saving Plans
• Protection Plans
• Child Plans
• Retirement Plans
• Investment Plans
• Group Plans
• Add-on Benefits
Savings Plans:-
Most endowment policies are a good way of saving for the future. A policy can be
designed to make your savings grow and have them available to you at the end of a fixed
number of years. Or, a policy could provide you with an income every three or four
years.
You can browse through these policies to find one that best suits your needs:
• SecurePlus - an insurance plan that gives added protection savings and multiple
options, all in one!
• CashPlus - an insurance plan that gives added protection savings, multiple
options, plus the power of liquidity.
• LifeTime II - a complete market-linked insurance plan that adapts itself to your
changing protection and investment needs, throughout a lifetime.
• Save'n' Protect - a traditional endowment savings plan that offers both high
returns and protection.
• CashBak - an endowment savings plan that allows you to get back substantial
survival benefits without having to wait till the maturity date.
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Depending on your particular needs, Savings Plans could allow you to do one or
more of the following:
• Plan For Tangibles: buy that fashionable car, that huge refrigerator, etc.
• Plan For A Cosy Nest: by facilitating the purchase of those homes you have
always dreamt of.
• Plan For Milestones: ensure a good education for your children, children's
wedding, etc.
• Save on Deferred Taxes: because the interest income and maturity benefits of
the Policy are tax exempt.
• Lifestyle Planning: maintain your lifestyle - even if your income was to reduce
in the future.
• Legacy Creation: buy property, invest in shares, bonds, etc. for your children or
grandchildren.
Attain Greater Heights: ensure that your children's education continues undisrupted.
ICICI Pru LifeTime
Suitability
• This policy is a long-term market linked total protection plan. The plans
offer protections for life at the same time allows the policyholder to get
market linked returns. It is a single product combining the benefits of both
an investment product and insurance plan. This apart, the product offers a
lot of flexibility.
Salient Features
• Death benefit will be a multiple of premium paid.
• Premium paid will be invested in the fund chosen (growth, balanced or
income fund)* after deducting mortality charges and administrative
expenses.
• Policy holder has the option to vary the amount of insurance protection
vis-à-vis investment while maintaining the same premium.
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• The returns depend on the plan chosen- growth, balanced and income and
one can switch from one fund to another depending on the financial
priorities. Once in a year switching is done free of cost.
• Benefits can be enhanced by adding Accident & Disability Benefit, Major
Surgical Assistance, Critical Illness benefits at a nominal extra premium.
• Entry into the plan will be based on the Unit Value applicable on the date
of policy issue. The amount of premium towards death benefit decreases
with the increase in the value of the units.
• One has the flexibility to increase the death benefit by 25% subject to a
maximum of Rs.250, 000 once in three years without any underwriting.
Death benefit can be increased beyond this limit with underwriting.
• Apart from the above the policy holder can increase the death benefit at
different stages of life such as Marriage, birth of first child and birth of
second child. This is irrespective of when the last increase was done.
• One can decrease the death benefit in the multiple of Rs.100, 000.
However a minimum death benefit of Rs.100, 000 has to be maintained.
• Policy holder has the option to increase the investment by the way of top
ups with a lump sum payment at any time
• If after at least 3 years payments are made and then unable to pay the
subsequent premiums, the cover under the policy will continue and the
premiums towards the life cover and riders will be debited from the unit
fund.
Growth Plan
• If high growth is your priority this is the plan for you. You can enjoy long-
term capital appreciation from a portfolio that is invested primarily in
equity and equity-related securities.
Income Plan
• If on the other hand your priority is steady returns, you can opt for the
Income Plan. Here you can accumulate a steady income at a low risk
across a medium to long term period.
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Balanced Plan
• If you prefer a balance of growth and steady returns choose our Balanced
Plan. This would ensure that your portfolio is invested in equity and
equity-linked securities as well as in fixed income securities.
Benefits On Death
• In the event of death of the policyholder, beneficiaries will be paid the
higher of death benefit and value of the units.
On survival
• There is no maturity period and policy holder has the option to withdraw
units under the plan at anytime after the policy has been in force for three
years.
Riders
Accident & disability benefit
• Waiver of future premiums
• 10% of SA each year for 10 years in case of permanent total disability
• Additional SA, if death is due to an accident while travelling as a
passenger in train or bus.
Critical illness benefit
• 9 medical conditions are covered. On admission of a claim, full SA + GA
+ VB is paid and policy contract terminates with all riders ceased. Claim
under this rider is not admissible during first six months of the policy.
Major Surgical Assistance
• 43 surgical procedures are covered
1. Major Surgical Procedure - 50% of SA
2. Intermediate Surgical Procedure - 30% of SA
3. Minor Surgical Procedure - 20% of SA
• Claims can be made for more than one surgical procedure, subject to a
maximum of 50% of SA, claim under this rider is not allowed during first
6 months of the policy
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Other Conditions
• Minimum age at entry: 0 years
• Maximum age at entry: 60 years (completed years)
• Minimum premium : Rs.18,000 per annum
• Minimum sum assured under riders : Rs.100,000
• Maximum Sum assured under riders : Rs.10,00,000
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Child Plans
As a responsible parent, you will always ensure a hassle-free, successful life for
your child. However, life is full of uncertainties and even the best laid plans can go
wrong. Here's how you can give your child a 100% safe and assured tomorrow, whatever
the uncertainties. Smart Kid Child Plans are designed to provide flexibility and to
safeguard your child's future education and lifestyle, taking all possibilities into account.
Presenting SmartKid Child Plan. Leave nothing to chance
Smart Kid
As parents, your biggest concern is that of securing the future of your child. In today's
world, with ever increasing competition, escalating cost of education and uncertain
financial markets, it is very important to plan for your child's future.
Presenting SmartKid - a plan which gives your child the freedom to pursue their
dreams, the strength to face challenges, the guarantee to live life to its fullest…
whatever be the uncertainty.
What is SmartKid?
It is a plan that provides guaranteed benefits to your child along with life insurance
cover. SmartKid is so designed that it provides money at all the critical milestones in
his/her life, whatever are the uncertainties.
Who can purchase this policy?
Parents (between 20-60 years) with children in the age group of 0-12 years can
purchase this policy. You have the flexibility to choose the exact age of the child
(between 22 to 25 years), at which the policy is to mature.
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Imagine that you are 32 years old and your child is 5 years old and you want the
product to mature when he/she is 22 years old. You also have the option to choose
between two structures of payout of benefits.Structure 1:
At the end of
Child's Age
% of Sum Assured
Needs met
10th year of policy
(Term-7)
15 years
20% of SA*
Extra tuition, preparation for professional courses, change of school or college.
12th year of policy
(Term-5)
17 years
25% of SA*
Join a professional college or graduation college.
15th year of policy
(Term-2)
20 years
25% of SA*
Higher studies or post graduation
17th year of policy (Term)
22 years
30% of SA*
+Guaranteed Additions + Vested Bonus
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Structure 2:
At the end of Child's Age that is while the maturity period is near % of Sum Assured
Needs met
13th year of policy
(Term-4)
18 years
25% of SA*
Extra tuition, preparation for professional courses, change of school or college.
14th year of policy
(Term-3)
19 years
20% of SA*
Join a professional college or graduation college.
15th year of policy
(Term-2)
20 years
20% of SA*
Graduation
16th year of policy (Term-1)
21 years
20% of SA*
Graduation
17th year of policy (Term)
22 years
20% of SA* + Guaranteed Additions + Vested Bonus
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Sum Assured
The plan provides with a guaranteed addition (GA) of 3.5% compounded annually for
the first 4 years of the plan and bonuses thereafter (Vested bonuses) applicable as per
the performance of the company.
Why should you buy SmartKid?
Because SmartKid ensures that you have total peace of mind as far as your child's future
is concerned.
In the event of death of the Life Assured:
• Sum Assured of the plan is paid immediately - assists the family in meeting the
unforeseen expenses incurred because of the unfortunate loss.
• Waiver of Premium - no future premium are payable, thereby ensuring that your
family is not burdened financially.
• Educational benefits, guaranteed - which means that the future of the child
remains secure.
Thus, there will be no financial obstacle in realizing the dream which the parent or
child had.
What are add-on options that you will have with SmartKid?
With SmartKid you have the option of taking two add-ons –
• Income Benefit Rider
• Accident and Disability Benefit Rider
• Accident Benefit Rider
What are the options for premium payment?
Mode of payment: Monthly, half-yearly and yearly.
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Specifics about SmartKid?
*Minimum premium: Rs. 8,400/- per year
*Sum Assured: From Rs.100,000/- to Rs.3,000,000/-
*Maximum limit under Income Benefit Rider: Rs.1,000,000/-
* Maximum limit under Accident and Disability Benefit Rider: Rs.1,000,000/-
How can I pay my premiums?
You can opt for the yearly, half - yearly & monthly mode of premium payment. The
monthly mode is only available through ECS (Electronic Clearing Service)
What tax benefits will you get?
Tax benefits are available under Sec 88 and Section 10 (10D), as per the prevailing
Income Tax laws.
Free Look period
Under the free look period, you now have the flexibility to review your policy. If,
during this period, you wish to return your policy after reviewing the terms and
conditions, you may do the same, by returning the original policy certificate, the
policy document and a letter stating the reasons for the return. Please note that these
must reach our Customer Service Desk within 15 days from the date of receipt of
the policy at your end.
We shall refund the premium paid by you, after deducting certain charges. These
charges include a proportionate risk premium for the period of cover, the stamp duty
on the policy and/ or any expenses borne by the Company on the medical
examination.
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Retirement Plan
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 realize
that financing all this will most likely depend partly on your personal savings? Because
personal savings and 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 rising costs of medical expenses retirement means 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
will Rupees 10,000/- amount to after some years:
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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 10000
annually from the age of 25 to 34 years and Situation B is when you save the same annual
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
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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 .
We, at ICICI Prudential Life Insurance believe in the philosophy of providing meaningful
and comprehensive insurance solutions to plan your retirement. Our insurance solutions
are the most optimal tools to plan your retirement because they give you Safety,
Liquidity, Tax benefits, Health cover and Life protection and thus ensure that you are
comprehensively covered.
ICICI Prudential presents Retirement Solutions that combine the best of investment and
insurance. These solutions are developed to ensure your peace of mind for the years to
come. Solutions that give you the power to maintain your lifestyle needs for as long as
you live.
1. ForeverLife :- A regular premium deferred pension plan that helps you save for
your retirement while providing you with life insurance protection.
Depending on your specific needs our Retirement Solutions give you the:
• Power to choose the retirement date
• Power to increase your investments
• Power to choose the protection level
• Power to invest in a plan based on your priorities
• Power to receive your pension in 5 different ways
• Power to choose your annuity provider
• Power to add-on flexible riders at a nominal extra premium#
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ForeverLife (Deferred Pension)
Life expectancy has been rising rapidly and today, you can now expect to live
much longer than your earlier generations. For you, this increase will mean a longer
retirement life, stretching into a couple of decades. So, it is more critical than ever to plan
adequately and wisely for those incremental retirement years, keeping in mind that your
expenses will spiral upward, your cost of living will increase and inflation will be ever
present. Therefore, you need a plan that ensures safety, risk cover, income security and
regular returns for your post- retirement years.
ICICI Prudential Life Insurance presents ForeverLife - a comprehensive
retirement solution that is developed keeping in mind your various capabilities and needs,
with respect to your retirement planning. We make sure you can plan well when you can
and maintain your lifestyle for a lifetime. So, whether you are 30 or 60 we have just the
right retirement plan for you.
Life cover benefits
ForeverLife Pension Plan provides life cover during the deferment phase. In the
unfortunate event of your death, your spouse has the option to receive the sum assured
with guaranteed additions and vested bonuses (if any) as a lumpsum or get an annuity
that would provide a regular income for life.
Power to choose the retirement date
You can choose the vesting age between 50 to 70 years. You have the flexibility to
postpone the vesting from the originally chosen vesting date up to a maximum of 70
years of age. This option can be exercised once at the time of vesting. During the
postponed period, your accumulated amount will earn interest as determined by the
company from time to time. There will be no life cover or premiums paid during this
period.
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What are the entry conditions?
• You should be between 20 and 60 years of age.
• Minimum sum assured is Rs. 50,000.
• Minimum term is 5 years and the maximum is 30 years.
• Minimum premium is Rs.6,000.
What is the exit option?
ForeverLife Pension Plan acquires a surrender value after premiums for 3 policy years
are fully paid. A surrender value is payable if you wish to withdraw after 3 years.
Annuity Options
How does the annuity work?
• Your accumulated value would start paying you regular income in the form of an
annuity, at a frequency chosen by you. This income can be received monthly,
quarterly, half-yearly or annually.
• You have the option of selecting a guaranteed annuity rate period of either 5 or 7
years.
• The amount of annuity is fixed for a guaranteed annuity rate period and will be
recalculated at intervals of every guaranteed period, based on the then prevailing
annuity rates.
• On commencement, and at the end of every guaranteed period, the amount of
annuity payable for the next guaranteed number of years and the Residual
Purchase Price (which will be available for calculation of the annuity rate at the
end of the guaranteed annuity period), on survival, will be guaranteed.
• Once the policy holder is 75 years of age, the annuity will be fixed for life and not
reviewed thereafter.
• At the time of reset of the annuity, you have an Open Market Option, which
would enable you to get your annuity from any other annuity provider, should our
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rates not be as competitive. However, there will be a charge of 1% of the residual
purchase price, should you choose this option (Please do refer to the 'Power to
choose your annuity provider' section).
Power to receive your pension in FIVE different ways
On vesting, you have the flexibility to choose from five different annuity options:
1. Life Annuity: Annuity for life.
2. Life Annuity with Return of Purchase Price: Life Annuity for the annuitant with
the return of the purchase price to the beneficiary
3. Life Annuity Guaranteed for 5, 10, 15 years: Guaranteed Annuity is paid for the
chosen term (5/10/15 years) and after that, the annuity continues as long as the
annuitant is alive.
4. Joint Life, Last Survivor with Return of Purchase Price: In this case, the annuity is
first paid to the annuitant. After the death of the annuitant, the spouse starts
getting a pension, which is an amount that is equal to the annuity paid to the
annuitant. After the death of the last survivor, the purchase price is returned to the
beneficiary.
5. Joint Life, Last Survivor without Return of Purchase Price: In this case, the
annuity is first paid to the annuitant. After the death of the annuitant, the spouse
starts getting a pension, which is an amount that is equal to the annuity paid to the
annuitant.
Power to choose your annuity provider
This option offers you the flexibility to buy a pension from any other insurer of your
choice, at the time of vesting. So, you have the freedom to take the best offer available in
the market.
Tax benefits available with ForeverLife
Tax benefit u/s 80CCC(1): Upto Rs10, 000 deducted from your taxable income.
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Power to add-on flexible riders at a nominal extra premium
For protection to your family against any unfortunate health hazards or eventuality we
offer you the following add-on benefits/riders with this plan
• Critical Illness Rider
• Major Surgical Assistance Rider
• Accident and Disability Benefit Rider
• Accident Benefit Rider
A sound pension system should aim at providing:
Institutional infrastructure through which individual can prepare for old age while
they are in the labor force, i.e. an efficient fully funded pension system.
A firm foundation for meeting the increasing demands for old age security.
Easy accessibility by all segments of the population.
“Long term and continual savings” which achieve their maximum growth
potential (rather than “interrupted or “disjointed” growth).
Security for all, through responsible behavior of financial institutions engaged in
pension business and through a range of schemes.
Secure and decent income on retirement through appropriate incentives. If large
part of the program is to remain voluntary, appropriate “disincentives” might be
considered for non-participation versus relying on incentives exclusively.
Informed and responsible participation by all the key stakeholders i.e. government
the private fund managers and the individuals.
A record keeping/ administration and investment system that encourages
compensation and full disclosure.
HOW CAN INSURANCE DRIVE PENSION REFORMS
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A pension reform has attracted enormous interest not just in the developing world.
This gains importance on account of the wide-ranging social implication that pension
reforms can deliver and the impact it can have on the structure of financial markets.
Aging population, lower mortality rates, dynamic and offer-unpredictable interest
rate markets have all combined to make the business of managing pension difficult.
Developing countries face a bigger challenge. Typically this country laces a social
security framework. Having largely depended on the extended families and other
informal means to provide old age social security.
The problem is further compounded by the absence of vibrant financial market,
which can provide instruments and investment opportunities for the investment for
long term contractual savings. This circular logic can lead to virtuous cycle if the
pension system is reformed in a sustainable manner. Long-term investment by the
pension funds can provide much needed resources for the infrastructure and other
long gestation projects. Insurance companies can play a critical role in this process of
reforms. Countries, which have implemented pension reform, have witnessed a sharp
rise in gross output. While the increase in GDP can not be directly attributed to
development of a private pension system, never the less there are sue linkages due to
the introduction of private pension. The obvious link between pension reforms and
the GDP growth is through the accumulation of savings. However a greater savings
level only begins to appear years after the introduction of pension reforms.
At the beginning of the pension reforms, costs of the pension system are high and
the apparent benefits not easily identifiable. As long term savings grow structural
changes become more evident. In a country like India with a high rate of savings, the
economic impact will be more dissembled with the wide spread social security and
deployment of resource in building much required infrastructure. Another significant
factor affecting savings level is the decreased in the extent of budgetary support for
government managed pension funds. This causes indirect financial effects in the
economic as a result of more efficient use of capital. New financial institutions
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appears, offering new instruments, making financial markets more competitive and
ultimately lowering the cost of funds.
Important Stage
While the specific form of pension reforms depends on the social and economic
characteristic of the country, insurance companies have typically played a significant
role in the evaluation of pension reforms in many countries.
Accumulation Stage
A pension programmed is characterized by two distinct stages. The first is
accumulation stage wherein the pension fund receives contributions from the
participants. At this stage the expertise required is in the areas of assets gathering and
fund management. The skills required are wide spread distribution of points of
presence and sustained investment management performance.
Government and regulatory agencies can play a key role in disseminating
information and postal savings system can act as a conduit for gathering contributions
into pension system. The use of technology lower costs associated with the asset
gathering and data maintenance process. Although the burden of investor education is
usually shared by the industry, it is important that individual players are encouraged
to undertake investor awareness campaigns.
Government and regulatory agencies can play a key role in disseminating
information and educating investors. While there can be no guarantees on minimum
fund performance, investor risk can be mitigated through carefully drafted regulations
and investment guidelines. It is also essential to communicate the risk inherent in
different assets classes with investors in a clear and comprehensive manner.
Annuitization Stage
The second stage of pension system is the annuitization stage. The purpose of an
annuity is to safeguard against the eventually of living beyond one earning age.
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Annuities are sold by insurance companies in exchange for a one-time payment of
lump sum amount. Annuities are therefore normally used to provide a regular income
after retirement and are financed with the current savings or with funds from the
accumulated balance of a defined contribution pension plan. Annuities can be
structured in various forms to meet the needs of individual avers. For instance,
annuity payments can be made with reference to two or more lives9 e.g. husband and
wife.) In pension system that rely on defined contribution plans, the importance of
annuities can not be overstate; governments in many countries have mandated that the
accumulated balance at retirement in an individual pension account be used to
purchase an annuity.
Annuities by their design have assumption of life expectancy and investment returns
embedded in their pricing and these two factors have a critical bearing on the success
of an annuity products have to insure against the cost of an improvement in longevity.
A good understanding of the actuarial profile population is therefore eccentric to the
pricing of annuity products. In India there is a death of qualified actuaries and the
introduction pension reforms must take note of this reality.
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ANALYSIS OF PENSION PLAN PROVIDED BY OTHER COMPANIES AND
ICICI PRUDENTIAL LIFE INSURANCE
What picture have we envisioned for our self in old age? Do we see our sled working for
shorter number of hours? Standing in queues to pay those monthly bills we have more
free time on hand? Sitting in a rocking chair, pondering over the blessing of life? Or
utilizing that free time to do things which we always wanted to but couldn’t as work
substituted those yearlings.
Once we envisage what kind of life we would like to lead and what are the next steps is
to determining our financial needs for threat stage like-
• The number of depends we have to support
• Returns on our savings,
• Our spending power,
Expected inflation rate etc.
Receiving pension as no longer a virtue of government officials. Even we can arrange
for our pension and decide the age at which we want it start. No need to wait tills the
age of 58 years (when the pension of government officials starts).
To aid in this task are the various pension plan available in the market. Some of these
plan come as insurance over to take care of the uncertainties of life. For what’s life-
uncertainty the name.
These pension policies are savings-cum-annuity based. They allow we to save during
the deferment period and after the vesting age (when policy matures) that amount is
used to buy the annuity for our self. Life insurance Corporation’s (LIC) Jeevan dhara,
Jeevan Suraksha, ICICI’s Forever Life, Life Time Pension Plan, Life Link Pension
plan, HDFC’s Personal Plan, OM Kotak’s Retriment Income Plan are the pension’s
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plans currently in the market. Some of them are also market-linked. However, LIC’s
Jeevan Akshay is pure pension products where annuity starts immediately.
Akshay, the minimum age at entry is 18 years onwards. This means that we can start
saving at and early age through these plans. Thew sooner we will start, the more
benefits we mare likely to reap. These plans can be bought by paying Single Premium
[SP] which gives lump sum amount, or Regular Premium [RP], which is paid, in the
form of installment spreads through the deferment period. If we nearing retirement,
we can buy SP plans over regular premium plan as early contributions let the power
of compounding yield higher returns. For Jeevan Akshay, the minimum age at entry
is 40 years; most of these policies gave we the flexibility of starting the annuity at our
convenience.
After the vesting age, we can take 25% or lump sum amount of the sum assured (SA)
knows as notational cash value (NCV)
Amount the various annuity options available, annuity with return of purchase price
in the death of the annuitant is good option as our spouse/ nominee will receive the
SA plus the annuity in cases our death. Currently, LIC’s Dhara, Suraksha, Akshay
and ICICI’s products provide this option. However, under ICICI joint annuity option
if we die our spouse will receive the annuity and if our spouse dies our children (last
survivor) will get the purchase price of the policy.
Now talking about riders, most of these plans come with riders and hence provide we
the benefits of insurance policies. Let us consider the term rider of LIC’s Surksha and
Dhara, where the policyholder is gets Term Assurance (availed by paying an extra
premium) sum assured and refunded of premium with 5% compounded interest per
annum. ICICI’s product providers accidental and disability benefit rider, major
surgical assistance rider and critical illness rider. It would be good to avail of accident
and disability benefit rider as it will give SA in case of accidental death wheeler
traveling in bus or train (Mass transport). Whereas Om Kotak’s plan comes with
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accidental benefit whereby our nominee will receive an amount equal to SA (which
will not exceed more than Rs. 10 lacs.)
The amounts we invest in these plans are blocked for specific term (chosen by we).
Suppose if an immediate need for funds arise like a surfgery or hospitalization then
what will we do? Hence it is important to know the lock-in period of theses plans. For
LIC’s Jeevan Dhara and Surksha, the lock-in period is 2 years and we get 90% of the
premium paid. In case of ICICI’s Life Time and Life Link plan are market linked, we
will get the market value of units. So the amount we will be solely dependent on the
market forces prevalent at that time. This might work in our favors or against.
However, HDFC’s Personal Pension Plan has got no lock-in period. But the surrender
value will depend solely on company’s discretion.
The pension plans fall under section 80 CCC of the income tax act whereby we get a
rebate of 10000 while filing our tax returns if we buy an annuity plan. If we avail
make surgical assistance and critical illness rider of ICICI’s Life time plan then we
can claim tax benefits under section 80D.
What re market-linked plans? They can be termed as new-age solutions for those who
want to invest in stock market but within minimum risk. It is like keeping our cake
and having it too. They are flexible and we can invest an extra amount when the
market’s is bearish and add to our kitty. You struggle’s to make our life of our dreams
and achieve a lifestyle we crave for. Then why should we give if after a specific age?
One should always strive to make one’s life better.
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CONCLUSION OF ANALYSIS
The life insurance can play key role in driving pension reforms by:
1) Addressing the risk managements issues arising out of ever increasing longevity
and volatility in the interest rate for the developing the annuity market;
2) Offering group pension to most of the 13mn salaried worker who do not have
access to any formal arrangement for building up retirement benefit and certain
informal sector occupation group.
3) Positioning the personal, as efficient instrument for managing the risk of living
long and providing for comfortable old age, which would be brought for its own
utility and not necessarily tax benefit.
4) Personal pension is an advice driven business and well-trained sales force can
play significant role in its proper positioning.
5) The government could thinks in term of combining PPf and the proposed define
contribution fully funded individual retirement account system for informal sector
so as to have a benefit of critical mass of assets under management right at the
beginning the pension regulator would evolve a structure for such a scheme and
regulate it. Any entity, which could create the specific structure, could be the
provider. Life insurance industry will have to see as to how it fits into the scheme.
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CHALLENGES FACED BY THE INSURANCE SECTOR
The Indian insurance industry today needs to take a hard look at itself and do a reality
check. Riding on the wave of a 10 percent plus growth rate, with annual revenues
exceeding $8 billion, a penetration level of insurance at an abysmal 1.8 per cent, it is a
good story so far, both the general insurance and life insurance businesses have a lot to
cheer about, having created a market that reaches every corner of this country.
But the infusion of international experience with the opening up of the sector is expected
to give this story a new impetus, new products and new technologies. Global practices are
seen as the challengers to a great distribution advantage, a strong customer base and a
historical association with the business. The size of the cake and the customer will be the
beneficiary.
The infusion international experience with the opening up of the sector. Threat and
opportunity in equal measures, with enablers and roadblocks aplenty, call for a
pragmatics approach from a long-term perspective with an equal focus on strategy and
execution. The five Cs of success to face the challenges are:
1. CUSTOMER:
The Indian consumer is only going to become more savvy and demanding. We will move
from a seller’s to buyer’s, market offering the customer a luxury of choice hitherto,
unseen, moving the market to a commodity platform. Thus strong customers focus,
backed by research and technology-led service capability, will be the baseline for the
future. Sharp customer segmentation and evaluation of need based product will be the
call of the day. Customer’s relationship efforts will be come essential, calling for
investments in skill not available in the industry today.
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2. COMMUNICATION:
The ability to effectively communicate with the customer will hold the key to future
effectiveness. Consistent, easy-to –understand and appealing communication will
determine who will ultimately hold the attention and the interest. With 320 million
customers out there, the key is to earn their trust and faith.
3. CHANNEL:
The ability to reach the customer, most effective and cost-efficient will determine
who stays ahead in this game. Speed and quality of execution on this front will
determine success of failure. The consumer will seek after convenience option like
kiosks, walk-in-centers, and the interest; we need not look far for precedents- PCO
booths are great examples.
4. CONTROLS:
The need to acquire customers will call for significantly higher investments in
infrastructure and technology, marketing and communication, further squeezing the
bottom line. Thus leeway to make errors in judgment on underwriting and claims can
prove to be far too expensive.
5. CREDIBILITY:
The confidence of the Indian customer is at low ebb and customer is at low ebb and
gaining his confidence calls for a focused effort to work on building credibility for us.
Guaranteeing returns of an order, which can be met, setting service expectations and
ensuring that the customer experience matches that under commitments and over
delivery, is what we will have to get used to.
• The task does look daunting. However the challenges are not in-mountable. It is a
journey towards a new era in the history of the Indian insurance industry. Social
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commitments sectoral commitments are part of the need to play our role as an
industry, which has an obligation to the Indian consumer, along
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COMPARISON
Comparison of products of LIC, ICICI, HDFC, SUN BIRLA , TATA-AIG.
Comparison of products on various parameters -
• Premium payments
• Insurance cover
• Maturity benefits and Rates of return
FEATURES ICICI LIFE TIME BIRLA CLASSIC LIFE
AGE 0 to 60 years 1 to 65 years
TERM 3 years 3 years
SUM ASSURED Min. prem *5Max. prem*10
Depends on premium
DEATH BENEFIT Higher of S.A Higher of S.A
WITHDRAWAL Partial or complete after 3yrs Partial or complete after 3yrs
PREMIUM Min. 18000 p.a Min 25000 p.a
INC. OR DEC. IN DEATH BENEFIT
Available Not Available
TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year 2 switch free in a year
ADMINISTRATION CHARGES
Rs. 60 a month Rs. 60 a month
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
Protector, builder and Enhancer- 1% Creator – 1.25%
RIDERS ADBR, CIBR, MSAR ADBR, CIBR
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ANALYSIS:-
1. Here lock in period in both the companies is 3 yrs.2. In BIRLA SUNLIFE’S CLASSIC LIFE once the sum assured is fixed it cant be
increase or decreased while in ICICI PRUDENTIAL’S LIFE TIME the sum assured can be increased or decreased.
3. Number of withdrawal in BIRLA SUNLIFE is free for 2 times in a yr than it is chargeable while there are no charges in withdrawal in case of ICICI PRUDENTIAL.
4. Premium of ICICI PRUDENTIAL’S LIFE TIME is less than BIRLA SUNLIFE’S CLASSIC LIFE.
5. The Sum Assured in ICICI PRUDENTIAL’s LIFE TIME is not fixed but in BIRLA SUNLIFE’S CLASSIC LIFE is fixed at the time of issue of policy.
6. The top up charges of ICICI PRUDENTIAL is less than BIRLA SUNLIFE7. In LIFE TIME only 1 free switch is available while in CLASSIC LIFE 2 free
switches are available.8. In ICICI PRUDENTIAL there are 3 riders available while in BIRLA SUNLIFE
there are only 2 riders available.
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FEATURES ICICI LIFE TIME HDFC LINKED
AGE 0 to 60 years 18 to 60 years
TERM 3 years 10 to 30 years
SUM ASSURED Min. prem *5Max. prem*10
Only 5, 10, 20 multiples of S.A
DEATH BENEFIT Higher of S.A Higher of S.A
WITHDRAWAL Partial or complete after 3yrs Partial after 3rd yr
PREMIUM Min. 18000 p.a Min 10000 p.a
INC. OR DEC. IN DEATH BENEFIT
Available Not Available
TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year 2 switch free in a year
ADMINISTRATION CHARGES
Rs. 60 a month Rs. 180 p.a
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
Balancer, Defensive, Safe, Liquid and Growth at 0.80%
RIDERS ADBR, CIBR, MSAR ABR, CIBR
ANALYSIS: -
1. Entry in LIFE TIME is to 0 to 60 while in HDFC LINKED it is 18 to 60 so you cannot take this policy for new born baby.
2. Minimum term in LIFE TIME is 3 years while in HDFC LINKED minimum is 10 and maximum is 30.
3. Sum Assured in LIFE TIME can be kept 5 to 10 times of the premium while in HDFC LINKED it is in multiples of 5, 10 or 20.
4. In LIFE TIME the policy holder can withdraw partial or full money after 3 years while in HDFC LINKED the policy holder can only withdraw partially.
5. In LIFE TIME there are 3 funds available while in HDFC LINKED there are 5 funds available.
6. In LIFE TIME the policy holder can increase or decrease the sum assured in later stages while in HDFC LINKED the policy holder cannot increase the sum assured in later stage.
7. 1 free switch available in LIFE TIME while in HDFC LINKED there are 2 free switches available.
8. There are 3 riders available in LIFE TIME while in HDFC LINKED there are only 2 riders available.
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FEATURES ICICI LIFE TIME LIC BIMA PLUS
AGE 0 to 60 years 12 to 55 years
TERM 3 years 10 years
SUM ASSURED Min. prem *5Max. prem*10
MAX. 200000
DEATH BENEFIT Higher of S.A 1st 6 months – 30% of S.AAfter 6 months – 60%After 1 yr – S.A
WITHDRAWAL Partial or complete after 3yrs Premature after 1 yr.
PREMIUM Min. 18000 p.a Not Specified
INC. OR DEC. IN DEATH BENEFIT
Available Not Available
TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year No switch free at 2% charge
ADMINISTRATION CHARGES
Rs. 60 a month HIDDEN
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
Funds not shown but they charge 1%.
RIDERS ADBR, CIBR, MSAR ABR
ANALYSIS: -
1. The entry age in LIFE TIME is 0 to 60 years while in LIC BIMA PLUS it is 12 to 55 years so you cannot take this policy for a new born baby.
2. In LIC’S BIMA PLUS the term is fixed that is 10years while in LIFE TIME the term is not fixed one can decide its own term but minimum is 3 years.
3. In LIFE TIME one has an option to increase or decrease the Sum assured while in LIC BIMA PLUS one can keep maximum of Rs. 2, 00,000/- as Sum assured.
4. One can withdraw partial or complete fund in LIFE TIME after 3years while in LIC BIMA PLUS one can withdraw only a part of the fund not complete.
5. Minimum Premium of LIFE TIME is Rs. 18000/- while in LIC BIMA PLUS the premium is fixed as per the sum assured selected by the customer.
6. In LIFE TIME top up is available at lower charges than LIC BIMA PLUS.7. The administration charges in ICICI PRUDENTIAL are Rs. 60 per month while
in LIC it is not shown.8. The riders available in LIFE TIME are 3 while in BIMA PLUS there is only one
rider available.
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FEATURES ICICI LIFE TIME TATA AIG – Invest Assure
AGE 0 to 60 years Varies with term chosen
TERM 3 years 15, 20 and 30 yrs.
SUM ASSURED Min. prem *5Max. prem*10
Varies with the age of insurer
DEATH BENEFIT Higher of S.A Higher of S.A
WITHDRAWAL Partial or complete after 3yrs Complete withdrawal after 6th yr.
PREMIUM Min. 18000 p.a Min 12000 p.a
INC. OR DEC. IN DEATH BENEFIT
Available Not Available
TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year 4 switch free in a year
ADMINISTRATION CHARGES
Rs. 60 a month Rs. 38 a month
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
Equity – 1.75%Growth – 1.60%Balanced – 1.40%Income- 1.25%Liquid – 0.90%
RIDERS ADBR, CIBR, MSAR Not Available.
ANALYSIS: -
1. In LIFE TIME the term available is 0 to 60 years while in TATA AIG INVEST ASSURE the term depends on term selected by the customer.
2. The Sum assured can be kept 5 or 10 times of the premium in LIFE TIME while in TATA AIG INVEST ASSURE the sum assured depends on the
3. Withdrawal benefit is available after 3 years while in TATA AIG INVEST ASSURE this benefit we can get after 6 years.
4. Minimum premium in case of LIFE TIME is 18000 p.a while in case of TATA AIG INVEST ASSURE it is 12000 p.a.
5. In LIFE TIME one can increase or decrease death benefit but this flexibility is not available in case of TATA AIG INVEST ASSURE.
6. Top up charge is less in LIFE TIME as compared to TATA AIG INVEST ASSURE
7. TATA AIG INVEST ASSURE has more investment options as compared to LIFE TIME
8. One can also attach riders in LIFE TIME but this one can not attach in case of TATA AIG INVEST ASSURE.
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PENSION PLANS
FEATURES ICICI LIFE TIME PENSION
BIRLA FLEXI SECURE LIFE RETIREMENT
AGE 18 to 60 years 18 to 60 years
TERM 10 to 30 years 10 years
SUM ASSURED Minimum 100000 also zero death benefit available
Minimum 50000 also zero death benefit available
DEATH BENEFIT Sum Assured or Value of units at death
Sum Assured or Value of units at death
CHOICE OF ANNUITY 5 annuity options 2 annuity options
PREMIUM Min. 10000 p.a. Min. 5000 p.a.
INC. OR DEC. IN DEATH BENEFIT
Not available Available but once increased cannot be decreased
TOP-UP Available min. 5000 Available min. 10000SWITCH 4 switch free in a year 2 switch free in a year extra
switch at 0.5%ADMINISTRATION CHARGES
Rs. 20 a month Rs. 20 a month
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
Nourish, Growth and Enrich Charge is 2.25%.
RIDERS ADBR ADBR, CI
VESTING AGE 50 to 70 years 50,55,58,60,65 and 70 choose any one age
INC. OR DEC. IN PREM Available Not Available.
ANALYSIS : -
1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in BIRLA’S FLEXI SECURELIFE RETIREMENT this option is not available.
2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in BIRLA there are only 2 annuity options available.
3. In ICICI PRUDENTIAL one has flexibility in retirement age while in BIRLA the retirement age is decided at the time of policy .
4. In ICICI PRUDENTIAL there 4 switches are available while in BIRLA only 2 switches are available and extra swithches are chargeable.
5. In ICICI PRUDENTIAL each fund has its own charges while in BIRLA all the fund have equal charges.
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FEATURES ICICI LIFE TIME PENSION
HDFC PERSONAL PENSION PLAN.
AGE 18 to 60 years 18 to 60 years
TERM 10 to 30 years 10 to 40 years
SUM ASSURED Minimum 100000 also zero death benefit available
Minimum 50000 also zero death benefit available
DEATH BENEFIT Sum Assured or Value of units at death
Sum Assured or Value of units at death
CHOICE OF ANNUITY 5 annuity options 2 annuity options
PREMIUM Min. 10000 p.a. Min. 10000 p.a.
INC. OR DEC. IN DEATH BENEFIT
Not available Available but once increased cannot be decreased
TOP-UP Available min. 5000 Not Available SWITCH 4 switch free in a year 2 switch free in a year .
ADMINISTRATION CHARGES
Rs. 20 a month Rs. 20 a month
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
Liquid, Defensive, Secure and Managed.
RIDERS ADBR Not Available
VESTING AGE 50 to 70 years 50 to 70 years.
INC. OR DEC. IN PREM Available Not Available.
ANALYSIS : -
1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in HDFC’S PERSONAL PENSION PLAN this option is not available.
2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in HDFC there are only 2 annuity options available.
3. In ICICI PRUDENTIAL one has flexibility in retirement age while in HDFC this option is not available.
4. In ICICI PRUDENTIAL there 4 switches are available while in HDFC only 2 switches are available and extra swithches are chargeable.
5. In ICICI PRUDENTIAL each fund has its own charges while in HDFC all the fund have equal charges.
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FEATURES ICICI LIFE TIME PENSION
TATA-AIG NIRVANA PENSION.
AGE 18 to 60 years 18 to 55 years
TERM 10 to 30 years Min. 10
SUM ASSURED Minimum 100000 also zero death benefit available
Minimum 50000
DEATH BENEFIT Sum Assured or Value of units at death
Sum Assured or Value of units at death
CHOICE OF ANNUITY 5 annuity options 2 annuity options
PREMIUM Min. 10000 p.a. Min. 10000 p.a.
INC. OR DEC. IN DEATH BENEFIT
Not available Not available
TOP-UP Available min. 5000 Not Available SWITCH 4 switch free in a year 2 switch free in a year .
ADMINISTRATION CHARGES
Rs. 20 a month Rs. 20 a month
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
All funds are charged flat 0.80%.
RIDERS ADBR ABR, CIBR
VESTING AGE 50 to 70 years 50 to 65 years.
INC. OR DEC. IN PREM Available Not Available.
ANALYSIS : -
1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in TATA-AIG NIRVANA PENSION PLAN this option is not available.
2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in TATA-AIG there are only 2 annuity options available.
3. In ICICI PRUDENTIAL one has flexibility in retirement age while in TATA-AIG this option is not available.
4. In ICICI PRUDENTIAL there 4 switches are available while in TATA-AIG only 2 switches are available and extra swithches are chargeable.
5. In ICICI PRUDENTIAL each fund has its own charges while in TATA-AIG all the fund have equal charges.
6. In ICICI PRUDENTIAL the entry period is 18 to 60 while in TATA-AIG 18 to 55.
7. In ICICI PRUDENTIAL top up facility is available while in TATA-AIG this facility is not available.
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FEATURES ICICI LIFE TIME PENSION
LIC JEEVAN SURAKSHA
AGE 18 to 60 years 18 to 65 years
TERM 10 to 30 years 10 to 35 years
SUM ASSURED Minimum 100000 also zero death benefit available
Minimum 50000
DEATH BENEFIT Sum Assured or Value of units at death
Sum Assured or Value of units at death
CHOICE OF ANNUITY 5 annuity options 4 annuity options
PREMIUM Min. 10000 p.a. Min. 2500 p.a.
INC. OR DEC. IN DEATH BENEFIT
Not available Not available
TOP-UP Available min. 5000 Not Available SWITCH 4 switch free in a year Not mentioned
ADMINISTRATION CHARGES
Rs. 20 a month HIDDEN
FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%
Not mentioned
RIDERS ADBR Not Available
VESTING AGE 50 to 70 years 50 to 79 years.
INC. OR DEC. IN PREM Available Not Available.
ANALYSIS : -
1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in LIC’S JEEVAN SURAKHSHA this option is not available.
2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in LIC there are only 4 annuity options available, but in joint life survival option after death of the policy holder the spouse gets only 50% of the annuity that the the policy holder used to get while in ICICI PRUDENTIAL 100% is given.
3 In ICICI PRUDENTIAL one has flexibility in retirement age while in HDFC this option is not available.
4. In ICICI PRUDENTIAL there 4 switches are available while in LIC it is not mentioned they do the investment on their own not showing the customer.
5. In ICICI PRUDENTIAL the charges taken from the customer is shown and it is minimum while in LIC the charges are not shown as they charge high because of the commission they give it to the agents.
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CHILD PLANS
FEATURES ICICI SMART KID Birla Sunlife My Child.AGE OF CHILD 0-12 years 1-17 years AGE OF FATHER 18 to 60 years Not Available
TERM 10 to 25 years but maturity is between 22 to 25 yrs
15, 20 or 25
SUM ASSURED 5 to 50 times of premium Minimum 50000
DEATH BENEFIT Sum Assured Sum Assured .
PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.
RIDERS ADBR, IBR, WOP WOP
LIFE ASSURED Parent Child.
FUND MANAGEMENT CHARGES
Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%
Protector, Builder and Enhancer all funds are charged flat 1.00%
SWITCH 4 free switches available 1 free switch available
TOP UP Available mini. 5000 Not available
DEATH OF PARENT Premium holiday and benefits are given to child.
No premium holiday and Plan continues as normal.
ANALYSIS : -
1. In ICICI PRUDENTIAL SMART KID there is no age restriction for any term selected while in BIRLA MY CHILD this option is not available.
2. In ICICI PRUDENTIAL The life of parent is covered while in BIRLA the life of child is covered.
3. In ICICI PRUDENTIAL after the death of father there is a premium holiday while in BIRLA there is no premium holiday and plan continues as normal.
4. In ICICI PRUDENTIAL there 4 switches are available while in BIRLA there is only 1 free switch available.
6. In ICICI PRUDENTIAL there is top up facility while in BIRLA this facility is not available.
7. In ICICI PRUDENTIAL after the death of father the benefits are immediately given to the child while in BIRLA this facility is not given.
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FEATURES ICICI SMART KID HDFC AGE OF CHILD 0-12 years 1-12 years AGE OF FATHER 18 to 60 years 18 to 60 years
TERM 10 to 25 years but maturity is between 22 to 25 yrs
10 to 25
SUM ASSURED 5 to 50 times of premium Decided as per premium paid
DEATH BENEFIT Sum Assured Sum Assured.
PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.
RIDERS ADBR, IBR, WOP Not available
LIFE ASSURED Parent Parent
FUND MANAGEMENT CHARGES
Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%
Liquid, secure, defensive and managed. All charged same
SWITCH 4 free switches available 1 free switch available
TOP UP Available mini. 5000 Not available
DEATH OF PARENT Premium holiday and benefits are given to child.
As per the option selected by the policy holder.
ANALYSIS : -
1. In ICICI PRUDENTIAL SMART KID there is no age restriction in the term selected while in HDFC this option is not available.
2. In ICICI PRUDENTIAL the minimum premium is 8400 while in HDFC the premium is selected as per the sum assured selected.
3. In ICICI PRUDENTIAL there are 3 riders available while in HDFC there are no riders available.
4. In ICICI PRUDENTIAL there 4 switches are available while in HDFC there is only 1 free switch available.
5. In ICICI PRUDENTIAL there is top up facility while in HDFC this facility is not available.
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FEATURES ICICI SMART KID TATA-AIG Junior MahalifeAGE OF CHILD 0-12 years 1-12 years AGE OF FATHER 18 to 60 years 18 to 50
TERM 10 to 25 years but maturity is between 22 to 25 yrs
12 years
SUM ASSURED 5 to 50 times of premium Minimum 50000
DEATH BENEFIT Sum Assured Sum Assured .
PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.
RIDERS ADBR, IBR, WOP WOP
LIFE ASSURED Parent Parent or Child.
FUND MANAGEMENT CHARGES
Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%
No funds available
SWITCH 4 free switches available Not available
TOP UP Available mini. 5000 Not available
DEATH OF PARENT Premium holiday and benefits are given to child.
No premium holiday and Plan continues as normal.
ANALYSIS : -
1. In ICICI PRUDENTIAL SMART KID the age entry for parents is 18 to 60 years while in TATA-AIG JUNIOR MAHA LIFE the age entry is 18 to 50 years.
2. In ICICI PRUDENTIAL The life of parent is covered while in TATA-AIG the life of child or parent is covered.
3. In ICICI PRUDENTIAL after the death of father there is a premium holiday while in TATA-AIG there is no premium holiday if the plan is taken for child risk cover.
4. In ICICI PRUDENTIAL there 4 switches are available while in TATA-AIG this facility is not available.
5. In ICICI PRUDENTIAL there is top up facility while in TATA-AIG this facility is not available.
6. In ICICI PRUDENTIAL after the death of father the benefits are immediately given to the child along with bonus till date while in TATA-AIG only the sum assured is paid.
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FEATURES ICICI SMART KID LIC AGE OF CHILD 0-12 years 0-10 years AGE OF FATHER 18 to 60 years Not Available
TERM 10 to 25 years but maturity is between 22 to 25 yrs
26 years
SUM ASSURED 5 to 50 times of premium Min 1,00,000 max 25,00,000
DEATH BENEFIT Sum Assured Sum Assured .
PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.
RIDERS ADBR, IBR, WOP Not Available
LIFE ASSURED Parent Child.
FUND MANAGEMENT CHARGES
Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%
Not available
SWITCH 4 free switches available Not available
TOP UP Available mini. 5000 Not available
DEATH OF PARENT Premium holiday and benefits are given to child.
No premium holiday and Plan continues as normal.
ANALYSIS : -
1. In ICICI PRUDENTIAL SMART KID there is no age restriction in the term selected while in LIC this option is not available.
2. In ICICI PRUDENTIAL The life of parent is covered while in LIC the life of child is covered.
3. In ICICI PRUDENTIAL after the death of father there is a premium holiday while in LIC there is no premium holiday and plan continues as normal.
4. In ICICI PRUDENTIAL there 4 switches are available while in BIRLA this facility is not available in LIC.
5. In ICICI PRUDENTIAL there is top up facility while in LIC this facility is not available.
6. In ICICI PRUDENTIAL after the death of father the benefits are immediately given to the child while in LIC this facility is not given.
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ADVANTAGES AND DISADVANTAGES OF
INSURANCE
Advantages
• Allows businesses, particularly small businesses, to take risks that will help
them compete in their market
• Frees up your funds for investment - if you self-insure, you'd have to keep
your funds liquid.
• Offers you better protection in the event of a lawsuit since insurance contracts
are standardized and use court-tested language
• Includes risk engineering and claims services in most cases, which can help
you reduce the frequency and severity of losses
• A lump sum payment to the nominees at the time of the death of the
policyholder.
• A regular payment to the nominees in the event of the death of the policy
holder.
• Tax benefits, as premiums paid reduce the liability of tax.
• Relieves economic hardships in the family on the uneventful death of the sole
income holder.
• Inculcates the habit of saving.
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Disadvantages
• Continually rising premiums averaging 15%
• Complex and complicated plans, rates and banding
• Premiums (contributions) gain no investment for client and has little cost
control ability
• Premiums rise due to age increases, claims record and medical inflation,
averaging 10% above RPI inflation.
• No control of monies
• Increasing premiums are directly related to claims history and are reassessed
annually irrespective of previous years' performance
• Profits are retained by the insurance company with no ongoing advantages for
the client
• Inflexible pre-packaged plans creating increased administration resulting in
higher costs for your company
• Premiums are age banded
• Excess schemes artificially reduce premiums
• Insurance Premium Tax currently @ 5%
• Insurance levies currently @ 2%
• Insurance companies cannot claim back any V.A.T. inflating premiums.
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Permanent (Cash Value) Insurance
The advantages of permanent insurance are:
1. You lock in a premium rate at whatever age you start the policy and the benefits
are guaranteed for as long as you live.
2. Your policy accumulates cash value that grows tax-deferred. The insurance
company in stocks, bonds, real estate, venture capital and other funds invests your
premiums, and you receive a return on your money in the form of annual
dividends, which increase your cash value.
3. You can tap that cash value while you are alive with low-cost loans. Any
outstanding loans will reduce your policy’s cash value by the amount of the loan.
Or you can withdraw the cash value, though you will have to pay income taxes on
those withdrawals. You can also convert your cash value into an annuity that will
provide fixed-income throughout your retirement years.
4. If you surrender your policy by discontinuing to pay premiums, you will receive
any accumulated cash value.
5. Dividends can be used to pay your premium in whole or in part.
6. Once you have passed the medical tests and have been issued a policy, your
policy cannot be cancelled for medical or any other reasons if you continue to pay
the premium.
The disadvantages of permanent insurance are:
1. It is far more expensive than term insurance. This means that you can usually
afford far less permanent coverage than you can afford term. If you start a
permanent policy and then must drop it because you cannot afford the premiums,
you will have lost a great deal of money.
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2. Insurance companies invest your cash value quite conservatively so it is possible
that you could earn higher returns on your own if you are a skillful and
knowledgable investor.
3. The return you earn on your cash value is determined by current interest rates in
money markets. So if interest rates are high, your cash value will grow much
more quickly than if interest rates are low. Periodically, the insurance company
deducts its expenses and a mortality charge from your cash balance. The mortality
charge is the amount of money, based on a premium rate per thousands of dollars
of death benefits, required to provide you with life insurance. The company will
guarantee a minimum interest rate and a maximum mortality charge. Some will
also guarantee a maximum expense charge.
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Conclusion
Facing the reality of a saturated home market, the insurance companies must look
outward and concentrate on the real growth economies like India and China. Since the
gestation period of the typical insurance business is around ten years, it is high time to
make their presence felt in India. The new players will have to prove their
creditworthiness. It will be a time consuming and difficult task to win customers away
from LIC and gain their trust. Their track record and brand value in overseas market will
not help them much in getting immediate brand recognition in India. Though they may
piggyback on the brand names of their local partner, in the long run, it is their persistent
track record and creditworthiness, which will matter. So, being among the first will be a
deciding factor in the success in this business. Already several companies have entered
into the market and a dozen companies have joined with foreign partners (see table). The
real growth in twenty-first century will come from the countries like India and China.
Delay may doom future efforts to stake a claim in these high potential markets.
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Suggestions
• A change in the attitude of the population
Indians have always been wary of employing their hard-earned money in a
venture that will pay them on their death. Insurance has always been used as a
Tax saving tool. No more, no less. It is upto the insurers to educate the people to
secure/insure their future against any unknown calamity and make a shield around
their families and businesses.
• An open and transparent environment created under the IRDA.
The reason for this being on the top of our understanding is that when ever we
have seen any sector open up in India there are always grey areas and unsure
policies. These are not exactly what any player, be it Indian or foreign, looks for.
It creates an air of uncertainty in all the decision making process. Insurance as a
sector requires players who are strong financially and are willing to wait for
returns. Their confidence can be bolstered only if there is an open and a
transparent policy guidelines. This will also help the consumers feel safe that the
regulatory is an active one and cares to do everything possible to keep things
under control and help the insurance environment grow maturely.
• A well-established distribution network.
To cater to the largest democracy in the world is by no means a cakewalk.
Insurance profits are directly related to number of insured and this is in turn
related to the reach. The case in example is of the State Bank of India. The joint
ventures announced have a flavour of network being a critical decider. This is so
because as per the guidelines 15% of the policies written by the 5th financial year
will have to come from the rural area. The banks are the only ones who have that
reach.
• Trained professionals to build and sell the product.
It is said that the insurance agent is the best salesman in the world. He makes you
pay, regularly, an amount promising to pay back only on your death. Thus the
players will require an excellent sales team to sell their products in the now
competitive environment. The importance can be seen from the fact that a lot of
LIC/GIC personal are being poached by the new players.
• A more rationale approach to the investment criteria.
This is a very critical area as far as the government and the players are concerned.
The government as fixed up the investment pattern for the players to meet its
social obligations. The players feel that the compulsion is unjust and will affect
their return on investments. One may wonder then why is it that I have listed it as
success factor. The reason, my dear, is that it is in the larger interests of the
society. The more the people insured, the better the revenues, followed by better
security, followed by better morale and productivity. On a national level the
criteria's ensure that the money does not go out of the nation. We also need to
bear in mind that the insurers are here not for charity but for profits. So their
interest are also to be kept in mind.
• Encouragement of newer and better products and letting the hackneyed ones
die out. This will itself ensure the market grows. And that every class/society gets
a product that best suits them.
• A stringent accounting practice to prevent failures amongst the insurers.
Every insurer will have the hard-earned money of the masses. Any failure of the
insurer on account of unwarranted profligacy will cost the nation in general and
the insured in particular. To prevent any underhand workings of the insurer and to
prevent them from going bust, a stringent accounting practice is imperative.
• A level playing field at all stages of development in the sector for all the
players.
An unbiased environment is where the best comes out of the players. Their real
strength shines through. This is the beauty of capitalism that we are trying to
achieve in our customised manner. This will only help the industry grow and so
will the society.
• And last but not the least patience amongst the players and consumers to wait
for the pot of gold at the end of the rainbow.
OBJECTIVE
This project has helped us in getting some very useful insight about the
insurance sector. We have prepared this report with some specific objectives. The
objectives are as under.
• Understand the fundamentals of insurance.
• List the essential principles of Life Insurance like Insurable Interest, Utmost
Good Faith
• Identify the diverse customer requirements and identify the various Life
Insurance product, which have been developed from time to time to meet the
requirements
• Apply the correct rider, options and guarantees in order in order to offer a
comprehensive solution to the customer’s unique requirements
• Calculate the premium, bonuses and surrender value.
• Initiate the claim process and process the same for customers’ benefit.
• Appreciate the various legislative and regulatory matters which influence the
insurance business’
• Sell insurance policies professionally
• Create a positive impression in the minds of consumers towards the company
you represent
• Have need based approach towards selling
• Develop yourself personally while carrying out the functions of an agent
Our learning in Training
During our training we were with ICICI Prudential Life Insurance Co. Ltd. We got an opportunity to increase our knowledge by doing Presentation in companies like Cadila Pharmaceutical, Bhavani Industries, Shri Durga Engineering works etc., we also made presentations in some banks like Bank of Baroda Mithakali Branch, Central bank of India Kankaria Branch, Union Bank Navrangpura Branch etc. Backing this we also did direct selling to co-operate offices. By doing all these activities we understood the Bank assurance and Alliances. We understood the Products of ICICI Prudential Life Insurance Co. Ltd, and how to sell the insurance product. Also we learnt what a person thinks while investing in insurance and how does he analyze whole product of ICICI Prudential Life Insurance Co. Ltd. and takes decision.
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