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CHAPTER NO: - 1 INSURANCE
1.1 Introduction
Insurance = collective bearing of risk
Insurance is nothing but a system of spreading the risk of one onto the shoulders of many.
While it becomes somewhat impossible for a man to bear by himself 100% loss to his
own property or interest arising out of an unforeseen contingency, insurance is a method or
process which distributes the burden of the loss on a number of persons within the group
formed for this particular purpose.
Basic human trait is too adverse to the idea of risk taking. Insurance, whether life or non-life
provides people with a reasonable degree of security and assurance that they will be
protected in the event of a calamity or failure of any sort.
Insurance may be described as a social device to reduce or eliminate risk of loss to life and
property. 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, include fire, the
perils of sea. Death and accidents and burglary. Any risk contingent upon these, may be
insured against at a premium commensurate with the risk involved. Thus collective bearing
of risk is insurance.
Insurance Indemnifies Assets & Income
Every asset has a value and generates income to its owner. There is a normally
expected Life-time for the asset during which time it is expected to perform. If the asset gets
lost earlier, being destroyed or made non-functional through an accident or other unfortunate
event the owner is prejudiced. Insurance helps to reduce CONSEQUENCES of such adverse
circumstances which are called risks.
Insurance is the science of spreading of the risk
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It is the system of spreading the losses of an individual over a group of individuals
insurance is a method of sharing of financial losses of a few from a common fund formed out
of contribution of the many who are equally exposed to the same loss. What is uncertainty
for an individual becomes a certainty for a group. This is the basis of all insurance
operations. Thus insurance convert uncertainties to certainty.
1.2Definition
The definition of insurance can be made from two points:
Functional definition.
Contractual definition.
Functional definition
Insurance is a co-operative device to spread the loss caused by a particular risk over a
number of persons who are exposed to it and who agree to insure themselves against the risk.
General definition
Insurance has been defined to be that in which a sum of money as a premium is paid in
consideration of the insurers incurring the risk of paying a large sum upon a given
contingency. In the words of John Magee, insurance is a plan by themselves which large
number of people associate and transfer to the shoulders of all, risks that attach to
individuals.
Fundamental Definition
In the words of D.S. Hansell, Insurance accumulated contributions of all parties
participating in the scheme.
Contractual definition
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In the words of justice Tindall, Insurance is a contract in which a sum of money is paid to
the assured as consideration of insurers incurring the risk of paying a large sum upon a given
contingency.
1.3 Functions of Insurance
The functions of Insurance can be bifurcated into three parts:
1. Primary Functions
2. Secondary Functions
3. Other Functions
The primary functions of insurance include the following:
Provide protection
The primary function of insurance is to provide protection against future risk, accidents and
uncertainty. Insurance cannot check the happening of the risk,but can certainly provide for
the losses of risk.
Collective bearing of risk
Insurance is a mean by which few losses are shared among larger number of people. All the
insured contribute the premiums towards a fund and out of which the persons exposed to a
particular risk is paid.
Assessment of risk
Insurance determines the probable volume of risk by evaluating various factors that give rise
to risk. Risk is the basis for determining the premium rate also.
Provide Certainty
Insurance is a device, which helps to change from uncertainty to certainty. Insurance is
device whereby the uncertain risks may be made more certain.
Research and publicity
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Insurers also spend money in research and publicity in creating risk consciousness amongst
which has a far reaching effect on reduction in national waste.
The secondary functions of insurance include the following:
Prevention of losses
Prevention of losses causes lesser payment to the assured by the insurer and this will
encourage for more savings by way of premium. Reduced rate of premiums stimulate for
more business and better protection to the insured.
Small capital to cover larger risks
Insurance relieves the businessmen from security investments, by paying small amount of
premium against larger risks and uncertainty.
Contributes towards the development of larger industries
Insurance provides development opportunity to those larger industries having more risks in
their setting up. Even the financial institutions may be prepared to give credit to sick
industrial units which have insured their assets including plant and machinery.
It improves efficiency
The insurance eliminates worries and miseries of loans at death and destruction of property.
The carefree person can devote his body and soul together for better achievement. It
improves not only his efficiency, but the efficiencies of the masses are also advanced.
It helps economic progress
The insurance by protecting the society from huge losses of damage, destruction and death,
provides an initiative to work hard for the betterment of the masses. The next factor of
economic progress the capital is also immensely provided by the masses. The property, the
valuable assets, the machine and the society cannot lose much at the disaster.
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The other functions of insurance include the following:
Means of savings and investment
Insurance serves as savings and investment, insurance is a compulsory way of savings and it
restricts the unnecessary expenses by the insureds for the purpose of availing income-tax
exemptions also, people invest in insurance.
Source of earning foreign exchange
Insurance is an international business. The country can earn foreign exchange by way of
issue of marine insurance policies and various other ways.
Risk free trade
Insurance promotes exports insurance, which makes the foreign trade risk free with the help
of different types of policies under marine insurance cover.
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1.4 Categories o f Insurance
The following major categories are important
GENERAL INSURANCE CORPORATION:
HEALTH MEDICAL GENERAL
MUTUAL FUND RETURN &
RISK COVERAGE PARTIALLY
GIC
(GENERAL INSURANCE CORPORATION)
1. LIFE INSURANCE CORPORATION:
LIFE
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1. LIFE 2. HEALTH MEDICAL 3. GENERAL
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TERM INSURANCE ENDOWMENT WHOLE LIFE
PENSION/ ANNUITY CONTRACTS
WITH PROFITS OR WITHOUT PROFITS
FOR FIXED AMOUNTS ON MATURITY
(LIC)
(LIFE INSURANCE CORPORATION)
Various types of life insurance policies:-
Endowment policies: This type of policy covers risk for a specified period, and at
the end of the maturity sum assured is paid back to policyholder with the bonuses
during the term of the policy.
Money back policies: This type of policy is for periodic payments of partial survival
benefits during the term of the policy as long as the policy holder is alive.
Group insurance: This type of insurance offers life insurance protection under
group policies to various groups such as employers-employees, professionals, co-
operatives etc it also provides insurance coverage for people in certain approved
occupations at the lowest possible premium cost. Term life insurance policies: This type of insurance covers risk only during the
selected term period. If the policy holder survives the term, risk cover comes to an
end. These types of policies are for those people who are unable to pay larger
premium required for endowment and whole life policies. No surrender, loan or paid
up values are in such policies.
Whole life insurance policies: This type of policy runs as long as the policyholder is
alive and is covered for the entire life of the policyholder. In this policy the insured
amount and the bonus is payable only to nominee on the death of policy holder.
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Joint life insurance policies: These policies are similar to endowment policies in
maturity benefits and risk cover, but joint life policies cover two lives simultaneously
such as married couples. Sum assured is payable on the first death and again on the
death of survival during the term of the policy.
Pension plan: A pension plan or annuity is an investment over a certain number of
years but does not provide any life insurance cover. It offers a guaranteed income
either for a life or certain period.
Unit linked insurance plan: ULIP is a kind of insurance plan which provides life
cover as well as return on premium paid over a certain period of time. The investment
is denoted as units and represented by the value called as net asset value (NAV).
1.5 Functioning of Insurance Industry:
Insurers business model:
Profit = earned premium + investment income - incurred loss - underwriting expenses
Insurers make money in two ways: (1) through underwriting, the processes by which insurers
select the risks to insure and decide how much in premiums to charge for accepting those
risks and (2) by investing the premiums they collect from insured.
The most difficult aspect of the insurance business is the underwriting of policies. Using a
wide assortment of data, insurers predict the likelihood that a claim will be made against their
policies and price products accordingly. To this end, insurers useactuarial scienceto quantify
the risks they are willing to assume and the premium they will charge to assume them. Data
is analyzed to fairly accurately project the rate of future claims based on a given risk.
Actuarial science uses statistics andprobability to analyze the risks associated with the range
of perils covered, and these scientific principles are used to determine an insurer's overall
exposure. Upon termination of a given policy, the amount of premium collected and the
investment gains thereon minus the amount paid out in claims is the insurer's underwritingprofiton that policy.
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An insurer's underwriting performance is measured in its combined ratio. The loss ratio
(incurred losses and loss-adjustment expenses divided by net earned premium) is added to
the expense ratio (underwriting expenses divided by net premium written) to determine the
company's combined ratio. The combined ratio is a reflection of the company's overall
underwriting profitability. A combined ratio of less than 100 percent indicates underwriting
profitability, while anything over 100 indicates an underwriting loss.
Insurance companies also earn investment profits on float. Float or available reserve is
the amount of money, at hand at any given moment that an insurer has collected in insurance
premiums but has not been paid out in claims. Insurers start investing insurance premiums as
soon as they are collected and continue to earn interest on them until claims are paid out.
Naturally, the float method is difficult to carry out in an economically depressed period.
Bear markets do cause insurers to shift away from investments and to toughen up their
underwriting standards. So a poor economy generally means high insurance premiums. This
tendency to swing between profitable and unprofitable periods over time is commonly known
as the "underwriting" orinsurance cycle.
Finally, claims and loss handling is the materialized utility of insurance. In managing the
claims-handling function, insurers seek to balance the elements of customer satisfaction,
administrative handling expenses, and claims overpayment leakages.
Investment management:
Investment operations are often considered incidental to the business of insurance, and have
traditionally viewed as secondary to underwriting. In the past risk management was the most
important part of business, whereas today the focus has shifted to fund management.
Investment income is a large component of insurance revenues, skilful and careful
management of funds. Insurance is a business of large numbers and generates huge amount
of funds over time. These funds arise out of policyholder funds in the case of life insurance,
and technical and free reserves in the non-life segments. Time lag between the procurement
of premium and the payment of claim provides an interval during which the funds can be
deployed to generate income. Insurance companies are among the largest institutional
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investors in the world. Assets managed by insurance companies are estimated to account for
over 40% of the worlds top ten asset managers.
Returns on investments influence the premium rates and bonuses and hence investment
income will continue to be an important component of insurance company profits. In life
insurance, benefits from insurance profits accrue directly to policy holders when it is passed
on to him in the form of a bonus. In non life insurance the benefits are indirect and mostly by
the creation of an investment portfolio. Investment income has to compensate for
underwriting results which are increasingly under pressure. In the case of insurance, the
difference between revenue and the expenses is known as operating surplus.
Revenue = premium.
Expenses = sum of claims + commission payable on procurement of business +
operating expenses.
Operating surplus = revenue-expenses.
Net investment income includes income from trading in and holding stock market securities
including government securities, special deposits with the central government, loans to
several public utilities and service providers in state government.
Insurance premium collected is converted in a pool of fund then divided in to four expenses.
To pay the expenses of the management.
To pay agency commission.
To pay for the claims.
Surplus money will be invested in govt. securities.
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Requirements of an insurance risk
Insurance normally insure only pure risks .However, not all pure risk is insurable
.certain requirements usually must be fulfilled before a pure risk can be privately insured
.From the view point of the insurer, there are ideally six requirement of an insurable risk
There must be a large number of exposure units
The loss must be accidental and unintentional.
The loss must be determinable and measurable.
The loss should not be catastrophic.
The chance of loss must be calculable.
The premium must be economically feasible
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CHAPTER NO: - 2 LIFE INSURANCE
2.1 Meaning & Role
Life insurance is a contract under which the insurer (Insurance Company) in consideration of
a premium paid undertakes to pay a fixed sum of money on the death of the insured or on the
expiry of a specified period of time whichever is earlier. In case of life insurance, the
payment for life insurance policy is certain. The Event insured against is sure to happen only
the time of its happening is not known. So life insurance is known as Life Assurance. The
subject matter of insurance is life of human being. Life insurance provides risk coverage to
the life of a person. On death of the person insurance offers protection against loss of income
and compensate the titleholders of the policy.
Life insurance products fundamentally provide for
a. Risk Cover
b. Investment
c. Health Cover
ROLES OF LIFE INSURANCE:
Life insurance as an investment: - Insurance products yield more than any other
investment instruments and it also provides added incentives or bonus offered by
insurance companies.
Life insurance as risk cover: - Insurance is all about risk cover and protection of
life. Insurance provides a unique sense of security that no other form of invest can
provide.
Life insurance as tax planning: - Insurance serves as an excellent tax saving
mechanism too.
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2.2 Need for Life Insurance
The above definition captures the original, basic, and intention of life insurance: i.e. to
provide for ones family and perhaps others in the event of death, especially premature death.
Originally, policies were to provide for short periods of time, covering temporary risk
situations, such as sea voyages. As life insurance becomes more established, it was realized
what a useful tool it was for a number of situation including:
Temporary needs/ threats:
The original purpose of life insurance remains an important element, namely
providing for replacement of income on death etc.
Regular Savings:
Providing for ones family and oneself, as a medium to long-term exercise (through a
series of regular payment of premiums). This has become more relevant in recent times as
people seek financial independence from their family.
Investment:
Put simply, the building up of savings while safeguarding it from the ravages of
inflation. Unlike regular saving products, investment products are traditionally lump sum
investments, where the individual makes a one-time payment.
Retirement:
Provision for ones own later years become increasing necessary, especially in a
changing culture and social environment. One can buy a suitable insurance policy, which will
provide periodical payments in ones old age. This simple example illustrates the impact
premature death can have on a family, where the main earner has no life cover.
A simple life insurance policy (term assurance) could have provided Mr. Atuls family with a
lump sum that could have been invested to provide an income equal to all or part of his
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income. We will discuss how to analyze the need for life cover and the value of life later in
the course.
2.3 Benefits from Life Insurance
It is superior to a traditional saving vehicles:
As well as providing a secure vehicle to build up saving s etc, its provides peace of
mind to the policyholder. In the event of untimely death, of say the main earner in the family,
the policy will pay out of the guaranteed sum assured, which is likely to be significant more
than the total premiums paid. With more traditional savings vehicles, such as fixed deposits,
the only return would be the amount invested plus any interest accrued.
It encourages saving and forces thrift:
Once an insurance contract has been entered into, the insured has an obligation to
continue paying premiums, until the end of the term of the policy, otherwise the policy will
lapse. In other words, it becomes compulsory for the insured to save regularly and spend
wisely. In contrast savings held in a deposit account can be accessed or stopped easily.
It provides easy settlement and protection against creditors:
Once a person is appointed for receiving the benefits (nomination) or a transfer of
rights is made (assignment), a claim under the life insurance contract can be settled easily. In
addition, creditors have no rights to any monies paid out by the insurer, where the policy is
written under trust. Under the Married Womens Property Act (M.W.Act), the money
available from the policy forms a kind of trust, which creditors cannot claim on.
It helps to achieve the purpose of the Life Assured:
If someone receives a large sum of money, it is possible that they may spend the
money unwisely or in a speculative way. To overcome this, the person taking the policy can
instruct the insurer that the claim amount is given in installments. For example, if the total
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amount to be received by the dependents is Rs. 2, 00,000 say Rs.50, 000 can be taken out as a
lump sum and the balance paid out in smaller installments, say Rs. 5,000 per month.
It can be enchased and facilitates borrowing:
Some contracts may allow the policy can be surrendered for a cash amount, if a
policyholder is not in a position to pay the premium. A loan, against certain policies, can be
taken for a temporary period to tide over the difficulty; some lending institutions will accept
a life insurance policy as collateral for a personal or commercial loan.
Tax Relief:
The policyholders obtain Income Tax rebates by paying the insurance premium. The
specified forms of saving which enjoy a tax rebate, under section 88 of the Income Tax Act,
include Life Insurance Premiums and contributions to a recognized Provident Fund etc.
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CHAPTER NO :- 3 PENSION PLAN
3.1 Need for Pension Plan
Pension Plans are Individual Plans that gaze into your future and foresee financial stability
during your old age. These policies are most suited for senior citizens and those planning a
secure future, so that you never give up on the best things in life.
Pension plan is nothing but the retirement plan, it has to be decided on why, when and
how to start a retirement planning.
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 realise that financing
all this will most likely depend partly on your personal savings? Because personal savingsand 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
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rising costs of medical expenses retirement mean 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 Rupees will 10,000/- amount to after some
years:
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 10000annually from the age of 25 to 34 years and Situation B is when you save the same annual
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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 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.
This is the reason why people go for pension plan (Annuities).
3.2 Tax Benefits Related To Pension Plans:
Section Brief of Section Income Tax Act Overview
10 (10D)
For Life Insurance
benefits as
Maturity/
Claims/Bonuses
Any sum received by a policyholder under a life
insurance policy (including bonus declared on the
insurance policy) is exempt from tax. # Death Claims
are tax Free. # However, any sum received under Key
person Insurance policy is not exempt from tax and is
taxable.
10 (23 AAB)For Pension
Schemes
Income from pension fund set up by any life insurance
company under a pension scheme, which the controller
of insurance approves, is exempt from income tax.
80 CCCFor Pension
Schemes
A policy holder is allowed deduction under from his
total income of an amount not exceeding Rs. 1,00,000/-
80 C
For Life Insurance
premiums paid
Section which gives eligibility to a taxpayer for
deduction from total gross income on the life insurance
premium paid. Other investments defined by govt. of
India also come under this section.
80CCEFor Overall
Deduction Limit
The aggregate amount of deduction u/s 80CCC, and
section 80CCD shall not, in any case exceed one lac
rupees.
10(10A)(iii)For Pension
Schemes
Exemption in respect of commutation of pension
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3.3 Products of Pension Plans
There are various types of Pension plans, where there are two types of products, they
are:
1. INDIVIDUAL PRODUCTS
2. GROUP PRODUCTS
1. INDIVIDUAL PRODUCTS:
ANNUITIES
Annuities are a form of pension in which an insurance company makes a series of periodic
payments to a person (annuitant) or his or her dependents over a number of years (term), in
return for the money paid to the insurance company either in a lump sum or in installments.
Annuities start where life insurance ends. It is called the reverse of life insurance. Annuity
stops on death of a person, whereas theoretically, life insurance starts on death of the assured.
Annuities are of two types:-
Immediate Annuity: -
Immediate Annuity begins at once or immediately on expiry of the designated period.
Immediate Annuity is purchased with a single premium called purchase price. The type of
annuity is typically purchased when a person reaches retirement age and has a lump sum to
invest.
If the person buying the annuity dies during the term, his legal heirs or nominees get the
remaining installments of the annuity.
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Deferred Annuity: -
Under a deferred annuity plan, the annuity payments to annuitant commence at some
specified time or specified age of the annuitant. This type of annuity can be funded either by
a single payment or a series payment or a series of regular payments.
The annuity payment starts after the lapses of a selected period called deferment period.
2. GROUP PRODUCTS:
An insurance policy taken out by an individual is a case of individual insurance. In such a
case, the risk covered is on an individual life. The premium payable is decided individually
for each policyholder depending on various factors such as age, health etc.
Group insurance is a plan of insurance which covers a similar or homogeneous group of
individuals under a single policy called a Master Policy.
The party with whom the insurer enters into a contract may be an employer, a labour union or
a voluntary association.
The individuals covered in the Group Insurance Scheme are not parties to contract. The
amount and the terms of insurance are negotiated by the group policyholder only.
Group products of pension are:
a. Group gratuity scheme:
Gratuity is a contribution made by the company towards pension benefits of an employee. It
is available to an employee on:
Retirement
Cessation of service
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Event of death
Gratuity is a non-contributory fund in which only the employer gives money.
Gratuity payment as such does not come under the purview of insurance business.
However, group insurance is linked with gratuity and the scheme marketed by life insurance
companies is called Group Gratuity-cum-Life Assurance scheme.
The payment of gratuity is compulsory under the payment of gratuity Act, 1972. The
employer may pay gratuity to his employees
As and when it falls due out of his revenues.
Out of internal reserves
Out of a trust set up for the purpose of administering the funds itself.
Out of a trust and the trustee may opt for a scheme of insurance with the insurance
with the insurance company.
The group gratuity scheme with an insurance company enables the employers to
provide for larger gratuity payment for employees who die in service.
b. Group superannuation
Superannuation is a contribution made by the company towards pension benefits of
an employee. It is available to an employee on-
Attainment of a certain age.
Retirement
Cessation of service
Event of death
The employer can pay the pension benefits as and when they fall due or he can set up
a trust fund for provision of pension. The trustees can enter into a Group Superannuation
with the insurance company, whereby the responsibility of administering and managing the
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fund is passed on to the insurance company. A Group
Insurance Scheme can be arranged along with the
superannuation scheme, whereby the pension
benefits can be much higher even in the case of
premature death.
Under the Income Tax Act, Superannuation contributions by the employer are tax-
exempt up to 15 % of the annual salary. And a superannuation fund may either be self-
managed or a life insurance company could manage it. Not many employees are yet enrolled
in such schemes.
c. Group Annuity Schemes
Annuity taken for a group is known as a Group Annuity Scheme. Under such
schemes, employers who manage their own superannuation or pension schemes can purchase
annuities from the insurance companies as and when they have to release the pensions to the
employees. After purchase, the Annuities will be paid directly by the insurance companies to
the pensioners.
CHAPTER NO: - 4 COMPANY PROFILE
4 . SBI & SBI Life Insurance
SBI Life Insurance, Indias largest private life insurance, is a joint venture between State
Bank of India and BNP Paribas Assurance SBI owns 74% of the total capital and BNP
Paribas Assurance the remaining 26%. SBI Life Insurance has an authorized capital of Rs.
2,000 crore and a paid up capital of Rs 1,000 crores.
BNP Paribas Assurance is the insurance arm of BNP Paribas - Euro Zones leading Bank.
BNP Paribas, part of the worlds top 10 groups of banks by market value and part of Europe
top 3 banking companies, is one of the oldest foreign banks with a presence in India dating
back to 1860. BNP Paribas Assurance is the fourth largest life insurance company in France,
and a worldwide leader in Creditor insurance products offering protection to over 50 million
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clients. BNP Paribas Assurance operates in 41 countries mainly through the banassurance
and partnership model.
SBI Life Insurances mission is to emerge as the leading company offering a comprehensive
range of Life Insurance and pension products at competitive prices, ensuring high standards
of customer service and world class operating efficiency.
SBI Life has a unique multi-distribution model encompassing Banc assurance, Agency and
Corporate Solutions. Agency Channel, comprising of the most productive force of over
68,000 Insurance Advisors, offers door to door insurance solutions to customers.
SBI Lifes Key Accomplishments:
Bagged the coveted personal finance award-Outlook Money NDTV Profit best Life
Insurer 2008.
Globally topped at the prestigious MDRT 09, in terms of number of Million Dollar
Round Table (MDRT) members.
First life insurer to receive CRISILs highest financial rating AAA/Stable. ICRA too
has assigned iAAA rating indicating highest claims paying ability to SBI Life
Insurance.
Retains ISO 9001:2000 certificate for superior claim settlement process.
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CHAPTER NO: - 5 COMPARISON BETWEEN
DIFFERENT PENSION PRODUCTS OF AXIS BANK
AND SBI
5.1Axis Bank Pension Products
Axis bank offers the Insurance products of Met Life Insurance Company Ltd., in which the
pension plan products are
Individual Products:
i. Met Growth
ii. Met Advantage Plus
In these policies, the investment risk in investment portfolio is borne by the policy holder.
Met Growth:
It is specially designed to provide financial security for your future requirements. This plan
allows you to start planning immediately by ensuring the safety of your first year premiums.
It also helps create your retirement fund faster by giving you 100% allocation from the
second year onwards, coupled with attractive loyalty additions into your fund.
Met Advantage Plus:
As the name suggests, it comes with many advantages. You can choose from eight annuity
options, two life cover options and get tax benefits under Section 80 C and 10 (10 A). You
can buy the plan without any hassles and invest more as you approach retirement by using
the top-up functionality. All in all, its a plan which works harder for you when you stop
working. For one, it ensures that you lead a comfortable lifestyle post retirement.
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GROUP PRODUCTS
Axis bank dont provide with the Group Insurance Schemes of MetLife Insurance Co.
5.2 SBI Life Pension Products
SBI & SBI Life Insurance:
SBI Life Insurance is a joint venture between the State Bank of India and BNP Paribas
Assurance. State Bank of India enjoys the largest banking franchise in India. Along with its 7
Associate Banks, BNP Paribas Assurance is the insurance arm of BNP Paribas - Euro Zones
leading Bank. BNP Paribas, part of the worlds top 10 group of banks by market value and
part of Europe top 3 banking companies, is one of the oldest foreign banks.
SBI has its own Life insurance products, in which they offer the following pension plan
products:
Individual Products
i. SBI Life - Horizon II Pension (ULIP)
ii. SBI Life - Unit Plus II Pension plan (ULIP)
iii. SBI Life - Immediate Annuity
iv. SBI Life Lifelong pension
In the policies SBI Life - Horizon II Pension, SBI Life - Unit Plus II Pension plan, the
investment risk in investment portfolio is borne by the policy holder.
i. SBI Life - Horizon II Pension
SBI Life - Horizon II Pension is a safe and a hassle free way to get high returns! SBI Life
- Horizon II Pension comes with the unique feature of Automatic Asset Allocation by means
of which you truly, dont need to be an expert to grow your money!
ii. SBI Life - Unit Plus II Pension plan
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SBI Life - Unit Plus II Pension is a non participating single or regular premium unit
linked insurance plan, which helps to build up a kitty retirement to take care of post
retirement needs.
SBI Life - Unit Plus II Pension plan makes sure that you have regular income after you retire
and also helps you to maintain your standard of living.
This is a unit linked pension plan wherein the policyholder chooses an investment period
from 5 to 52 years for a vesting age between 50 to 70 years. You can choose to pay either
single premium or pay regular premium for the entire policy term. Your contributions are
invested into 5 fund options as per your choice.
iii. SBI Life - Immediate Annuity
This product provides annuity payments immediately from payment of purchase price. It
has been specially designed to cater to the annuity needs of our existing policyholders (SBI
Life - Lifelong Pensions, SBI Life - Horizon II Pension, SBI Life - Unit Plus II Pension) at
the vesting age.
iv. SBI Life Lifelong pension
This plan helps to satisfy your needs after retirement. Although retired you still have the
finance to fulfill your desires. It is a regular pension product.
GROUP PRODUCTS
Axis bank dont provide with the Group Insurance Schemes of MetLife Insurance Co.
The group insurance schemes which provides various benefits as stated in the previous
chapters of this report, the SBI has also taken measures to satisfy the customers needs by
introducing Group Insurance Schemes.
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SBI life group solutions offer an integrated basket of employee benefit plans. It caters to both
statutory as well as voluntary needs of the employees.
SBI Life Insurance has seven Group Insurance pension schemes.
i. SBI Life CapAssure Gratuity Scheme
ii. SBI Life CapAssure Superannuation Scheme
iii. SBI Life CapAssure Leave Encashment Scheme
iv. SBI Life Dhanrashi
v. SBI Life Swarna Jeevan
vi. SBI Life Swarna Ganga
vii.SBI Life Kalyan ULIPTM
Kalyan ULIPTM: It is a non-participating; unit linked Group Insurance Scheme. It is truly
unique with its variety of features that benefit not only the master policyholder but also to
each Group Member.
INVESTMENT PHILOSOPHY FOR NON-LINKED PENSION PLANS:
SBI Lifes Investment Management Objective stands on stability and growth of the portfolio.
Our investment Management Framework works with safety and transparency in mind.
The safety you deserve:
All investment made by SBI Life are monitored by an in-house Investment Sub
Committee and reviewed on semi-annual basis by the Board.
Our investment operations are periodic supervision by IRDA.
The transparency you look for:
Disclosure of portfolio composition at regular intervals with details of contributions
received, interest credited, settlements made, and balances as on renewal date.
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The actual performance as well as the holdings are shared on the 31st of March every
year and can be made available at any time on request.
Fund Performance for the Year
Gross Returns declared on SBIs Non-Linked
Gratuity and Group Pension Funds
Financial YearGross Returns
Declared
2005-06 12.30%
2004-05 11.67%
2003-04 13.00%
The following article based on SBI Life Insurances Group Insurance Schemes can give
us the idea about performance of these plans in the market as a whole. It was published
in the Business Standard on September 30, 2007.
Currently managing a portfolio of whopping 6 million lives, SBI Life is set to
maintain its leadership in Group Lives coverage. So far this financial year, SBI Life has
already covered more than 8 lacs group lives with an additional 2.5 lacs lives through
individual policies. SBI Life is now the fastest growing life insurance company, with New
Premiums growing at a scorching 264% (YTD) basis, from Rs. 275 crores to 1000 crores and
Total Premiums keeping pace, growing at 211% from Rs. 370 crores to Rs. 1150 crores. A
strong growth across all its channels namely Bancassurance, Agency Channel and Group
Corporate is the major attributing factor for SBI Lifes exponential business growth.
While sharing its aggressive plans, SBI Life also announced the infusion of additionalfresh capital of Rs. 75 crores to take its capital base up to its authorized share capital limit of
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Rs. 500 crores. Speaking on the occasion, Mr. S. Krishnamurthy, MD and CEO, SBI Life
Insurance said, The additional capital has been injected to maintain stipulated solvency
margins for the exponential new business growth and expanding branch network
He added, This growth has come primarily on account of our multi-channel business
model coupled with a balanced mix of savings and protection products. SBI Life currently
has the largest and most robust Bancassurance network complimenting the most productive
and active Insurance Advisor force of Agency Channel in the country.
SBI Life today also unveiled the new Horizon II Pension Product, a unit linked
pension product aimed at offering greater retirement security to investors and retirees alike. It
offers investors the opportunity for long-term capital appreciation through exposure to themarkets and investment expertise of SBI Life.
The uniqueness of the product stems from the proprietary Automatic Asset Allocation
(AAA), an algorithm-based active investment allocation mechanism, which is currently
offered exclusively by SBI Life in India. This IT based system developed by testing over
5000 potential scenarios in the Indian equity & bond markets, determines the optimal risk
return combination. Higher exposure to equities for the initial years, followed by increasing
exposure to debt and money markets as the pension plan nears maturity, is automatically
allocated by the AAA mechanism, to ensure better returns for investors.
Speaking at the event, Mr. Pier-Paolo Dipaola, Dy. CEO, SBI Life Insurance said,
The unique Automatic Asset Allocation feature makes Horizon II Pension an ideal
retirement solution for many evolving Indian investors who do neither have the time nor the
expertise to make fund allocation decisions on an on-going basis.
He added, Today with disintegration of joint family system, increasing life
expectancy rate, rising medical costs and lack of social security system, the need for
retirement planning is very acute for the Indian investors. The Horizon II Pension provides
Indian investors with the required long-term benefits of exposure to equity markets, while
empowering them to lead the desired lifestyle post-retirement.
The uniqueness of Horizon II Pension is a combination of Systematic Investment
Planning concept with periodical automatic relocation of assets based on the plan option and
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remaining term to maturity. In a certain way, policyholders retirement funds benefits from
markets returns during the initial years while ensuring safety at the time of maturity.
The other attractive feature of Horizon II Pension is the availability of optional life
cover. In addition, the maximum premium allocation charge for the first year is capped at Rs.
60,000, for second and third year - Rs.40000 and from fourth year to tenth year - Rs.10000
making Horizon II Pension a lucrative low-charge investment option for High Net worth
Individual (HNI) investors. The premium allocation charges, top up allocation charges are
surrender charges are zero from 11th year onwards.
Horizon and new ULIP guidelines compliant Horizon II enjoy a strong patronage of more
than 90,000 customers.
SBI Life has rapidly expanded its operations this year to strengthen its unique multi-
distribution network. The company now is leveraging the 14,500-strong SBI Group branch
network from where SBI Life products are currently available. SBI Life also has increased its
own branch network from 68 branches as March, 2006 to 95 as on December, 2006. While
the number of Life Insurance Advisors recruitment has gone up by more than double from
8000 as on March, 2006 to 18,525 as on December, 2006. The two other channels of Group
Insurance & Credit Life have also been showing significant growth.
The above article and the number of pension plans offered by both the companies can give us
the idea that SBI Life insurance is on a growth stage and planning for future expansion for
the promotion of life insurance products.
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5.3 Comparison Between Unit Linked Pension Plans Of MetLife & SBI
Life
Unit linked business which is driving the growth of premiums over the last 2-3 years. While
the private players have taken the lead in this segment, LIC has also made strong strides in
the sale of ULIPs during the last three years. Despite the growing popularity of ULIPs it
remains a fact that thepolicy holders rely heavily on the advice rendered by the distributors.
The complicated design of the policies makes them less aware of the product features and
chances of mis-selling by agents are high. To protect the interest of the customers,IRDA hastaken the following initiatives.
Issuance of comprehensive ULIP guidelines in 2005 which mandate minimum risk
cover, three year lock-in, usage of simple language, proper disclosures, standard
method of computing NAV etc.
Insurers to make projections of return as per the guidelines of Life Insurance Council.
To ensure transparency, IRDA has directed the insurers to list all charges that the
policyholder has to bear along with the amount available for investment in each year
specific to each policy.
IRDA has also stipulated that policyholders would have to sign a document stating
that they have understood the terms and conditions of the policy before concluding
the sale.
The customer can also use 15 days free look period in case he is not satisfied with the
terms and conditions of the policy.
To remove complexity in unit linked products IRDA has advised the insurers to phase
out some of the actuarially funded ULIPs.
Worldwide, Unit linked products have been seen as attractive- in view of the flexibility and
investment options they offer to the customers and the capital efficiency to the companies.
After the market crash of 2001, customers started looking for more security and guarantees in
the unit linked products. Adding guarantees to unit linked products has been common in
Europe, North America and Japan. The unit linked market though new in Asia is growing
steadily in countries like Korea, Taiwan and South East Asia. Variable Annuity products are
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slowly emerging in these markets and from the customer point of view are quite attractive,
especially when they provide guarantees on pension savings.
In India, the long-standing debate over the suitability of Unit Linked Insurance Plan (ULIP)
and mutual funds can be resolved better with a proper understanding of the need of the
investor. Mutual funds are essentially short to medium term products. ULIPs, in contrast, are
positioned as long-term products with an element of life cover. It is pertinent to note that
exposure of Indian households to capital markets is limited. It is important for an investor to
understand his financial goals and horizon of investment in order to make an informed
investment decision.
With respect to retirement planning, set of variables considered are:
The clients age is 38 years and he would like to retire 22 years hence i.e. at the age
of 60 years
The client would like to invest an amount of Rs 1,000,000 (Rs.1 m) each year for
three years. In total, he will invest an amount of Rs 3 m over 3 years.
The client has been suggested a single premium plan of Rs.1 m with additional top-
ups worth Rs 1 m p.a. (per annum) for the following two years. In all, the client
would be paying Rs 3 m over the 3-yr period.
The client has a high-risk appetite and would like to remain invested in equities
throughout the tenure of the pension plan.
The client has a well-diversified portfolio including mutual funds and stocks.
Based on the information, investments in the unit linked pension plan (ULPP):
Pension plan: Preparing for the future
Investment
amt (Rs)
One-time
charge (%)
Admn.
Charges (Rs)*
Fund Mngt
Charges (%)
Investment
Tenure (Yrs)
Net maturity
Value (Rs)
1,000,000 2.50 180 0.80 22 18,400,000
1,000,000 2.50 180 0.80 21
1,000,000 1.00 180 0.80 20
*Administration charges are subject to 5.00% inflation per annum.
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Investments in unit linked pension plan (ULPP): If the client decides to buy the pension
plan, then he would be paying Rs 1,000,000 in the first year. Since this is a single premium
plan, one-time charges on the same are 2.50% (i.e. in the first year). In other words, Rs
25,000 would be deducted from the clients single premium amount and the remaining
amount (i.e. Rs 975,000) would be invested in the 100% equity ULPP option. This amount
will remain invested for the entire 22-yr tenure.
The charges for any additional top-ups in the second year too would be to the tune of 2.50%.
Similar to the first year, Rs 25,000 would be deducted from the second years top-up amount.
So Rs 975,000 would be invested over 21 years.
One-time charges for any top-ups from the third year onwards fall to 1% for the year.Therefore, only Rs 10,000 (i.e. 1% of Rs 1,000,000) would be deducted and the remaining
amount would be invested. The third year amount (Rs 990,000) will remain invested for a
20-yr period (i.e. time to maturity).
Fund management charges (FMC) for managing equities in the given ULPP are 0.80% p.a.
Administration charges are assumed to be Rs 180 p.a. (increasing at an assumed inflation rate
of 5.00%).
As can be seen from the table above, assuming a compounded growth rate (CAGR) of 10%
p.a. over 22-Year tenure, the clients investments will grow to approximately Rs 18,400,000.
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CHAPTER NO: - 6 MET GROWTH & SBI LIFE
6.1 Met Growth & SBI LIFE Horizon II Pension Plan
Company
NameMet Growth SBI LIFE Life Long Pension
Maturity
Benefit
On maturity fund value is payable
including guaranteed loyalty
additions (as applicable)
Settlement option: withdraw fund
value in installments within 5
years (without life insurance
cover), in case of death the fund
value as on the date shall be paid
& the termination of policy.
No partial withdrawals
No loyalty additions
No top-up premiums
At Vesting age commute up
to 1/3 of the vesting benefit
and balance can opt for
annuity purchase.
Use 100% of the vesting
benefit to buy annuity for
desired frequency.
Death
Benefit
Different benefits for the unfortunate
event of death during the coverage
term the nominee/beneficiary will
receive:
If the death if the person
insured occurs before
attainment of age 7.
If the death of person insured
occurs before the attainment
of age 60.
If the death of person insured
occurs or after the attainmentof age 60.
Option 1 (Pure Pension Plan) -
Fund Value is Payable.
Option 2 (Pension with Life Cover)
Fund Value + Sum Assured is
payable. Death After Vesting Age -
Benefits depends upon Annuity
Option Chosen.
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Min. - Max.
Entry Age
(In yrs.)
0 60 years
(3 months to be completed)
18 - 60 Years
Min.-Max.
Age at
vesting
18 75 years 50 - 70 Years
Min.
Premium
P.A. (In Rs.)
Minimum Annual Premium Rs.12000 12000 - No Limit
Premium
Mode
Regular Premium:
Yearly
Half-Yearly
Quarterly
Monthly
Yearly
Half-Yearly
Quarterly
Monthly
Premium
Increment
Option
Special
Addition
Options
Guarantee loyalty additions @ 2 % of
average value at the end of 20th year
& every 5 years thereafter.NA
Policy
Surrender
Option (After completion of 3 Policy Year) (After completion of 3 Policy Year)
Open
Market
Option
Premium
Top-up
option
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Cover
Continuance
Option
Premium
Re-Direction
Facility
Fund
Switching
Option
Rider
AvailabilityNA NA
Tax-Benefits U/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)
Responding a query on unit linked insurance plan (ULIP), Mr. Roy chairman and
managing director of SBI Life Insurance, felt in the initial years that an ideal model for
insurance would be a balanced mix of market related and traditional products. Stressing the
importance of ULIP, Mr. Roy said that there was a huge need for retirement solution in the
country. He felt that ULIP was best suited for retirement solutions. "Our ULIP product
covers 64 per cent of the total premium income," he added.
MetLife crosses 1-m policies mark
New Delhi, Nov 30
MetLife India Insurance Company Limited (MetLife) has announced that it has crossed the
one million mark in life insurance policies issued. The total number of lives insured by the
company now stands at two million (including the group business). "It is indeed a moment of
pride for us at MetLife to achieve the 1 million mark. This achievement gains all the more
significance keeping in view the tumultuous 2008 that the financial sector witnessed," Mr
Rajesh Relan, Managing Director, MetLife India, said in a statement here today. MetLife
started its operations in India in the year 2002.
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6.2 Met Growth & SBI Life Unit Linked II Pension plan
Company
NameMet Growth SBI LIFE LifeLong Pension
Maturity
Benefit
On maturity fund value is payable
including guaranteed loyalty
additions (as applicable)
Settlement option: withdraw fund
value in installments within 5 years
(without life insurance cover), in
case of death the fund value as on
the date shall be paid & the
termination of policy.
No partial withdrawals
No loyalty additions
No top-up premiums
At Vesting age commute up
to 1/3 of the vesting benefit
and balance can opt for
annuity purchase.
Use 100% of the vesting
benefit to buy annuity for
desired frequency.
Death
Benefit
Different benefits for the unfortunate
event of death during the coverage term
the nominee/beneficiary will receive:
If the death if the person
insured occurs before
attainment of age 7.
If the death of person insured
occurs before the attainment of
age 60.
If the death of person insured
occurs or after the attainment of
age 60.
Option 1 - Fund Value is Payable.
Option 2 - Fund Value or Sum
Assured whichever is Higher is
payable as death benefit.
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Min. - Max.
Entry Age
(In yrs.)
0 60 years
(3 months to be completed)
18 - 65 Years
Min.-Max.
Age at
vesting
18 75 years 50 - 70 Years
Min.
Premium
P.A. (In
Rs.)
Minimum Annual Premium Rs.12000Regular Premium 24000
Single Premium 25000
Single
Premium
Option
Regular Premium:
Yearly
Half-Yearly
Quarterly
Monthly
Premium
Mode
Single Premium
Yearly
Half-Yearly
Quarterly
Monthly
Premium
Increment
Option
Guarantee loyalty additions @ 2 % of
average value at the end of 20th year &
every 5 years thereafter.
Special
Addition
Options(After completion of 3 Policy Year)
Policy
Surrender
Option(After completion of 3 Policy Year) After completion of 3 Policy Year
Open
Market
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Option
Premium
DecreaseOption
Premium
Top-up
option
Cover
Continuanc
e Option
Premium
Re-
Direction
Facility
Fund
Switching
Option
Rider
AvailabilityNA
Accidental Death &
Permanent Disability Rider
Critical Illness Rider
Tax-
BenefitsU/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)
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6.3 Met Growth & SBI Life Lifelong Pension
Company
NameMet Growth SBI LIFE Life Long Pension
Maturity
Benefit
On maturity fund value is
payable including guaranteed
loyalty additions (as applicable)
Settlement option: withdraw
fund value in installments within
5 years (without life insurance
cover), in case of death the fund
value as on the date shall be paid
& the termination of policy.
No partial withdrawals
No loyalty additions
No top-up premiums
At Vesting age commute up to
1/3 of the vesting benefit and
balance can opt for annuity
purchase.
Use 100% of the vesting benefit
to buy annuity for desired
frequency.
Death Benefit
Different benefits for the unfortunate
event of death during the coverage
term the nominee/beneficiary will
receive:
If the death if the person
insured occurs before
attainment of age 7.
If the death of person insured
occurs before the attainment
of age 60.
If the death of person insured
occurs or after the attainmentof age 60.
Sum Assured + Pension Fund
Balance amount
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Min. - Max.
Entry Age (In
yrs.)
0 60 years
(3 months to be completed)
18 - 65 Years
Min.-Max. Age
at vesting18 75 years 50 - 70 Years
Min. Premium
P.A. (In Rs.)
Minimum Annual Premium
Rs.12000NA
Premium Mode
Regular premium:
Yearly
Half-Yearly
Quarterly
Monthly
Yearly
Half-Yearly
Quarterly
Monthly
Premium
Increment
Option
Special
Addition
Options
Guarantee loyalty additions @ 2 %
of average value at the end of 20 th
year & every 5 years thereafter.
Min. returns of 4%
Guarantee Per Annum.
Life Cover Option is
available.
Policy
Surrender
Option(After completion of 3 Policy Year) (After completion of 3 PolicyYear)
Open Market
Option
Premium
Decrease
Option
Premium Top-
up option
Cover
Continuance
Option
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Premium Re-
Direction
Facility
Fund
Switching
Option
Rider
AvailabilityNA NA
Tax-Benefits U/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)
On JUNE 13, 2007 published in the Business line
SBI Life announces 9% bonus on Lifelong Pensions schemes for 2006-07. Offers bonus
varying from 1.25 % to 2.75 % of effective Sum Assured for its various insurance
schemes.
SBI Life Insurance Company Ltd., one of the fastest growing leading private sector life
insurance company, had announced a total of 9 per cent bonus, comprising of simple annual
bonus of 5 per cent and guaranteed return of 4 per cent on all its in force Lifelong Pensions
policies for the period 2006-07.
All bonuses declared are a percentage of the effective Sum Assured, and not linked to the
premium component. Achievements of SBI Life during the Financial Year 200607
Net profit rose by 88% to Rs.3.83 crores for FY 06-07.
New Business Premium grew by 210% to Rs.2, 566.08 crores.
Built up a portfolio of over 64.9 lacs insured lives.
Ranked 3rd amongst its private peers in terms of new business premium income.
Whereas, MetLife has entered in the market during 2002 and have given tough competition
to SBI Life Insurance and all other insurance companies.
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Met Growth Hoe does the plan work?
44
First Year
Premium
Used to provide Guaranteed
Loyalty Addition on defined
Intervals / maturity
50% at the end of the
10th year
Up to 70% at the end
of the 15th yearPlu
s
Assured Loyalty Addition @ 2% of the
Average Fund Value of last 3 years.
At the end of
20th, 25th &30th year
Second year
premium
onwards
Allocated to different Funds
without any Allocation Charge
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6.4 Met Advantage Plus & SBI LIFE Horizon II Pension Plan
Company
NameMet Advantage Plus
SBI LIFE Horizon II Pension
Plan
Category
NameDeferment Annuity Plan Deferment Annuity Plan
Maturity
Benefit
At Vesting age commute up
to 1/3 of the vesting benefit
and balance can opt for
annuity purchase.
Use 100% of the vesting
benefit to buy annuity for
desired frequency.
At Vesting age commute up
to 1/3 of the vesting benefit
and balance can opt for
annuity purchase.
Use 100% of the vesting
benefit to buy annuity for
desired frequency.
Death Benefit
With Life Cover - During the
deferment period death benefit is
equal to 110% of value of Unit in the
unit account.
Without Life cover - During the
deferment period death benefit is
equal to 100% of value of Unit in the
unit account. If beneficiary is spouse,
can also avail option to buy annuity
also.
Option 1 (Pure Pension Plan) -
Fund Value is Payable.
Option 2 (Pension with Life
Cover)
Fund Value + Sum Assured is
payable. Death After Vesting Age -
Benefits depends upon Annuity
Option Chosen.
Min. - Max.
Entry Age (In
yrs.)
20 - 55 18 - 60 Years
Min.-Max.
Age at vesting
(In yrs.)
45 - 60 50 - 70 Years
Min. Premium
P.A. (In Rs.)
Regular Premium 10000 12000 - No Limit
Single Single Premium 100000 Rs.
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Premium
Option
Premium
Mode
Single Premium
Yearly
Half-Yearly
Quarterly
Monthly
Yearly
Half-Yearly
Quarterly
Monthly
Premium
Increment
Option
Special
Addition
Options
NA NA
Policy
Surrender
Option(After completion of 3 Policy Year) (After completion of 3 Policy Year)
Open Market
Option
Premium
Decrease
Option
Premium Top-
up option
Cover
Continuance
Option
Premium Re-
Direction
Facility
Fund
Switching
Option
Rider
AvailabilityNA NA
Tax-Benefits U/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)
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6.5 Met Advantage Plus & SBI LIFE Unit Plus II Pension
Company
NameMet Advantage Plus SBI LIFE Unit Plus II Pension
Category
NameDeferment Annuity Plan Deferment Annuity Plan
Maturity
Benefit
At Vesting age commute up
to 1/3 of the vesting benefit
and balance can opt for
annuity purchase.
Use 100% of the vesting
benefit to buy annuity for
desired frequency.
At Vesting age commute up
to 1/3 of the vesting benefit
and balance can opt for
annuity purchase.
Use 100% of the vesting
benefit to buy annuity for
desired frequency.
Death Benefit
With Life Cover - During the
deferment period death benefit is
equal to 110% of value of Unit in the
unit account.
Without Life cover - During the
deferment period death benefit is
equal to 100% of value of Unit in the
unit account. If beneficiary is spouse,
can also avail option to buy annuity
also.
Option 1 - Fund Value is Payable.
Option 2 - Fund Value or Sum
Assured whichever is Higher is
payable as death benefit.
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Min. - Max.
Entry Age (In
yrs.)
20 - 55 18 - 65 Years
Min.-Max.
Age at vesting
(In yrs.)
45 - 60 50 - 70 Years
Min. Premium
P.A. (In Rs.)Regular Premium 10000
Regular Premium 24000
Single Premium 25000
Single
Premium
Option
Single Premium 100000 Rs.
Premium
Mode
Single Premium
Yearly
Half-Yearly
Quarterly
Monthly
Single Premium
Yearly
Half-Yearly
Quarterly
Monthly
Premium
Increment
Option
Special
Addition
Options
NA NA
Policy
Surrender
OptionAfter completion of 3 Policy Year After completion of 3 Policy Year
Open Market
Option
Premium
Decrease
Option
Premium Top-
up option
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Cover
Continuance
Option
Premium Re-
Direction
Facility
Fund
Switching
Option
Rider
AvailabilityNA
Accidental Death &
Permanent Disability Rider
Critical Illness Rider
Tax-Benefits U/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)
6.6 Met Advantage Plus & SBI LIFE Life Long Pension
Company
NameMet Advantage Plus SBI LIFE LifeLong Pension
Category
NameDeferment Annuity Plan Deferment Annuity Plan
Maturity
Benefit
At Vesting age commute up to 1/3
of the vesting benefit and balance
can opt for annuity purchase.
Use 100% of the vesting benefit to
buy annuity for desired frequency.
At Vesting age commute up to
1/3 of the vesting benefit and
balance can opt for annuity
purchase.
Use 100% of the vesting benefit
to buy annuity for desired
frequency.
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Death
Benefit
With Life Cover - During the
deferment period death benefit is
equal to 110% of value of Unit in the
unit account.
Without Life cover - During the
deferment period death benefit is
equal to 100% of value of Unit in the
unit account. If beneficiary is spouse,
can also avail option to buy annuity
also.
Sum Assured + Pension Fund
Balance amount
Min. - Max.
Entry Age
(In yrs.)
20 - 55 18 - 65 Years
Min.-Max.
Age at
vesting (In
yrs.)
45 - 60 50 - 70 Years
Min.
Premium
P.A. (In Rs.)
Regular Premium 10000 NA
Single
Premium
Option
Single Premium 100000 Rs.
PremiumMode
Single Premium
Yearly
Half-Yearly
Quarterly
Monthly
Yearly
Half-Yearly
Quarterly
Monthly
Premium
Increment
Option
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Special
Addition
Options
NA
Min. returns of 4%
Guarantee Per Annum.
Life Cover Option is
available.
Policy
Surrender
Option (After completion of 3 Policy Year)(After completion of 3 Policy Year)
Open
Market
Option
Premium
Decrease
Option
Premium
Top-up
option
Cover
Continuance
OptionPremium
Re-Direction
Facility
Fund
Switching
Option
Rider
Availability
NA NA
Tax-Benefits U/s 80CCC & Sec. 10(10A)(3) U/s 80CCC & Sec. 10(10A)(3)
INTERPRETATION:
The products that has been compared in the above section are :
Met Advantage Plus SBI Life HorizonTM Pension
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Met Advantage Plus SBI Life LifeLong Pension
Met Advantage Plus SBI Life Unit Linked II Pension Plan
The Met advantage Plus, SBI Life HorizonTM Pension and SBI Life Unit Linked II Plan are
Unit linked pension plans (ULPP), and SBI Life LifeLong Pension is the traditional type of
pension plan.
From the above comparison we can say that, though MetLife has introduced only two
products i.e. Met Advantage Plus and Met growth. The feature of Met Advantage Plus has
mostly all the features which has taken into consideration all the financial needs of customers
and thus capturing the market gradually.
Apart from the Product features and benefits the comparison can be done on the charges that
get considered at the time of calculation. It has importance for the amount of premium. The
next section can help us on compare on that part. The given comparison is given on the
premium amount for pension plans: 1. Met advantage plus and 2. SBI Life HorizonTM
Pension.
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CHAPTER NO: - 7 COMPARISON ON CALCUALTION OF
PREMIUM
7.1 Charges for Metlife Insurance
a. Premium Allocation charge
Charges Current Maximum
Premium Related (on each premium)
Regular Premium
Year 1: 20%
Year 2 to 10: 2%
Year 11+ : 1%
25%
5%
5%
Single Premium 5% 5%
Top-up Premium 1% 5%
b. Fund Management Charge
Fund Option Current Maximum
Preserver 1.25% p.a. 2.50% p.a.
Protector 1.25% p.a. 2.50% p.a.
Moderator 1.50% p.a. 2.50% p.a.
Balancer 1.50% p.a. 2.50% p.a.
Accelerator 1.75% p.a. 2.50% p.a.
Virtue 1.75% p.a. 2.50% p.a.
Multiplier 1.75% p.a. 2.50% p.a.
c. Policy Administration Charge
Fixed per month: Current: Rs.25, Maximum: Rs. 75
d. Surrender Charge
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Policy year 4 5 6 & thereafter
% of First Year Regular/ Single
Premium4 2 0
e. Switching Charge
Minimum: Rs. 250 & Maximum: Rs. 500
f. Mortality Charge(Applicable only for option A)
Calculation:
Mortality Charge = (Sum at risk/1000) * Cost of Insurance (COI)
Where, Sum at risk = death benefit Fund value
Sample COI per 1000 sum at risk are:
Age 20 30 40
COI 0.108284 0.126830 0.222656
g. Miscellaneous charges:
The company may charge Rs. 250 for any material alteration in the contract.
Maximum: Rs. 500
In the year 2006-07, the SBI Life Insurance has introduced these two policies for
retirement planning i.e. SBI Life HorizonTM Pension, SBI Life Unit Linked II Pension Plan
which are unit linked insurance plans.
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7.2 Charges for SBI Life Insurance
a. Premium Allocation charge
Policy yearEntry charges as a percentage of the Annualized
premium/Rs. Amount
1 year 15%/Rs.60000*
Year 2 & 3 7.5% / Rs.40000*
Year 4 & 11 1.5% / Rs.10000*
Year 11 onwards Nil
Top-up (year 1 to year 10) 1.5% / Rs.10000*
Top-up (year 11 onwards) Nil
b. Policy Administration Charge
These charges are increased @ 2 p.a.Subject to a ceiling of Rs.300 per month.
c. Fund management charges
The annual fund management charges for each fund are as follows
Equity pension fund 1.5%
Bond pension fund 1%
Money market pension fund 0.25%
d. Surrender charge
Policy year Surrender charge
Year 4 - 10 1% of fund value
Year 11 onwards Nil
e. Mortality charge
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These are recovered on a monthly basis by way of cancellation of units. Rates are one
year renewable basis.
The premium allocation charges, top up allocation charges and surrender charges are
zero from 11th year onwards.
CONCLUSION:
We can conclude from the above stated data and analysis that MetLife Insurance Company is
charging more on premium and have less satisfactory options than the SBI Life Insurance
Products.
But it cannot be correctly be forecasted that SBI Life Insurance is giving more returns
than the MetLife Insurance Company. As the company is charging more on investment, it
may possible that they are providing more returns to the customers. This can be found out
from the small survey of 50 persons form different occupations age and background.
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7.3 Unit Linked Pension Plans
FUND UPDATE, AS ON 30TH SEPTEMBER 09
PENSION PLANS AND RELATED FUNDS
FUND
NAME
Pension ProductsFUND
NAMEPension Products
SBI Life
-
Horizon II
Pension
SBI Life
-
Unit Plus II
Pension
Met
Advantage
Plus
Met Pension
(Par)
Equity
Optimiser-- Multiplier
Equity
PensionVirtue
Bond
Pension
Accelerato
r--
Money
Market
Pension
-- Balancer
Balanced
Pension-- Preserver
Growth
Pension-- Protector
Moderator
--
The above table provides you with the funds available for investment in respective
pension policies. According to the pension policies the insured have the option to choose the
funds and have the mobility to switch the funds as per the conditions of the policies.
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In the Unit Linked Pension Plan (ULPP), the insured can have access the market
conditions and NAV of the funds, risk involved in the funds and can take appropriate
decisions after studying all the aspects that has been covered under next section of this report.
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CHAPTER NO :- 8 FEATURES OF VARIOUS FUNDS
8.1 MetLife Insurance India
Unit-
linked
Fund
Asset Allocation Unit-Linked
Fund ObjectiveRisk Profile
Benchmark
and security
type
Assets Min Max
Multiplier Listed
equities
80% 100
%
To generate long
term capital
appreciation by
investing indiversified
equities
This fund
will exhibit
very high
risk andreturns and
will be prone
to market
fluctuations
Security type:
100% Equity
Benchmark
Index:
S&P CNX
NIFTY
Money
Market
Investment
0% 40%
Virtue Listed
equities
60% 100
%
To generate long
term capital
appreciation by
investing in
diversified
equities of
companies
promoting
healthy lifestyle
and enhancing
quality of life.
This fund
will have
very high
risk and
returns
profile and
will be prone
to market
fluctuations
Money
Market
Investment
0% 40%
Accelerato
r
Listed
equities
60% 95% To achieve capital
appreciation and
current income,
Higher risk
and returns,
investment
Security type:
80% EquityLong term
bonds
0% 60%
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through a
judicious mix of
investments in
equities, withlimited
investment in
fixed income
securities.
prone to
market
fluctuation
20% Debt
Benchmark
index:
S&P CNX
NIFTY
CRISIL
Composite
Bond Fund
Index
Short term
bonds
0% 35%
Money
market
investment
0% 40%
Govt.
securities
0% 40%
Infrastructu
ral sec.
0% 40%
Balancer Listed
equities
60% 95% To generate
capital
appreciation and
current income,
through a
judicious mix of
investment in
equities and fixed
income securities
Higher risk
and returns
with a fair
exposure to
equities
Security type:
50% Equity
50% Debt
Benchmark
index:
S&P CNX
NIFTY
CRISIL
Composite
Bond Fund
Index
Long term
bonds
0% 60%
Short term
bonds
0% 35%
Money
market
investment
0% 40%
Govt.
securities
0% 40%
Infrastructu
ral sec.
0% 40%
Preserver Govt.
securities
80% 100
%
To generate
income at a level
consistent with
preservation ofcapital, through
Very low
risk
Security type:
100% Debt
(GOI)
Money
market
investment
0% 40%
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investments in
securities issued
or guaranteed by
Central and StateGovernments
Benchmark
index:
ISEC Mi-BEX
Protector Govt.
securities
25% 90% To earn regular
income by
investing in high
quality fixed
income securities
Low risk and
is designed
for regular
income
Security type:
100% debt
Benchmark
index:
CRISIL
Composite
Bond Fund
Index
Long term
bonds
10% 60%
Short term
bonds
0% 45%
Money
Market
investment
0% 40%
Infrastructu
ral sec.
0% 60%
Moderator Listed
equities
60% 95% To generate
regular income by
investing in high
quality fixed
income securities
and to generate
capital
appreciation by
investing a
limited portion in
equity.
Medium risk
with a
limited
exposure to
equity.
Returns
expected to
be superior
to fixed
income
investment.
Security type:
20% Equity
80% Debt
Benchmark
index:
S&P CNX
NIFTY
CRISIL
CompositeBond Fund
Long term
bonds
0% 60%
Short term
bonds
0% 35%
Money
market
investment
0% 40%
Govt.
securities
0% 40%
Infrastructu
ral sec.
0% 40%
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Index
8.2 SBI LIFE INSURANCE
Unit
Linked
Fund
Asset AllocationUnit Linked Fund
objective
Risk
Profile
Security type
and
Benchmark
typeAsset Min Max
Equity
Optimiser
Equity &
related
instruments
60% 100% To deliver higher
returns through
equity investment
while maintainingan optimum
allocation pattern.
The fund has the
following class
allocation strategy.
High Security type:
Benchmark
index:
Nifty (80%)
LiquiFEX
(20%)
Debt &
Money
Market
Instruments
0% 40%
Equity
Pension
Equity &
related
instruments
80% 100% For long term
capital through
actively managed
investment in
equity and equity
related instruments.
High Security type:
Benchmark
index:
Nifty
Debt &
Money
Market
Instruments
0% 20%
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Bond
Pension
Debt
Instruments
60% 100% Safe and stable
returns through
asset allocation in
debt & moneymarket instruments
and active duration
management.
Low to
medium
Security type:
Benchmark
index:
CRISIL
CompBex
Money
Market
Investments
0% 40%
Money
Market
Pension
Debt
Instruments
0% 20% Low Security type:
Benchmark
index:
LiquiFEX
Money
Market
Investments
80% 100%
Growth
Pension
Equity &
related
instruments
40% 100% For long term
capital appreciation
through investment
primarily in equity
and equity related
instruments.
Medium
to high
Security type:
Benchmark
index:
Nifty (70%)
CompBex
(30%)
Debt &
Money
Market
Instruments
0% 60%
Balanced
Pension
Equity &
related
instruments
40% 60% Maintain a balance
between return and
safety through a
blend of equity,
fixed income and
money market
instruments.
Medium Security type:
Benchmark
index:
Nifty (50%)
Debt &
Money
Market
Instruments
40% 60%
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CompBex
(50%)
CHAPTER NO: - 9 DATA ANALYSIS AND RESULTS:
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1. Number of people of insured:
Number of persons Percentage
Insured 35 70%
Non-insured 15 30%
70%
30%
0 0
total number of persons
insured
non-insured
INTERPRETATION:
The Insurance Industry is growing day by day and has a wide scope to improve on its
design of product and features of the same. So that it can give benefit to the company with
greater profits and wealth with growth in economy as a whole.
2. Customer awareness about the product
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Number of persons Percentage
Advertisement 24 48%
Friends & relatives 20 40%
Direct selling agents 5 10%
others 1 2%
48%
40%
10%
2%
Total number of persons
Advertisement
Friends & relatives
Direct selling agents
others
INTERPRETATION:
The policyholders and potential insured persons are getting aware of the insurance
products from most of the advertisements & friends and relatives. Whereas, the Direct selling
agents has a significant impact on the market and they are successful.
3. Awareness of benefits of their policy:
Number of persons Percentage
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Yes 34 68%
No 16 32%
0
76%
24%
0
Sales
Yes
No
INTERPRETATION:
The survey analyses that there are in all 68% of people who are aware of the overall
benefits of policies, i.e. there are 32% of people who dont have any knowledge about
benefits offered by the company products, they dont have a correct combination of income
and their need of pension plans.
So, it can be negative side to insurance industry, and the insurance sector should have
to improve on that part. In case of unit linked pension plans, the most of the customers from
the backward classes and similar classes of society dont have much awareness of market
trends and growth. So, it can be difficult for them to choose a pension plan with their
financial needs. The insurers can help the customers for the same and can help to grow the
insurance business.
4. Opinion about the premiums paid:
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Number of persons Percentage
Very high 11 22%
high 14 28%
Moderate 16 32%
Low 5 10%
Very low 4 8%
22%
28%32%
10%8%
Number of persons
Very high
high
Moderate
Low
Very low
INTERPRETATION:
The premiums paid by insured is depend upon the sum assured of the