Insurance as an Investment - For Merge

7/29/2019 Insurance as an Investment - For Merge

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Insurance as

an investment


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T.Y.B B I INSURANCE AS AN INVESTMENT

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HYPOTHESISOBJECTIVE OF THE STUDY

Objectives of a project tell us why project has been taken under study. It

helps us to know more about the topic that is being undertaken and helps us to

explore future prospects of the topic.

The various research objectives of the study are:

To study the Insurance facilities offered by the Insurancecompanies to its customers.

To study as to how much Insurance has penetrated in the mindsof the customers.

To explore the future prospects of Insurance. To study the benefits that are provided to the individual under

Insurance.

PURPOSE OF THE STUDY

The main purpose of this study to get an overview of the Insurance sector in the

Indian economy and study as to how it has helped as an investments in the minds

of customers.

The aim of this project is to develop a insurance as an investment tocustomers.


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Create a Insurance system that is easily accessible by customers from thecomfort of their homes, offices etc.

Reduce the flow of human traffic and long queues at Insurance offices. Promote efficient and effective Insurance for the companies by focusing on

those services that still require physical presence to the public.

IMPORTANCE OF THE STUDY

This will cover the benefits derived in using Insurance and its fundamental.

INSURANCE HOW IS IT INVESTMENT? Many consumers today are turning

to the ease and convenience of Insurance to take care of their financial needs and

future events. To know the customer perception of the study.


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RESEARCH AND METHODOLOGYDATA COLLECTION

Primary data: -Primary data are those which are collected fresh and for the first time and

thus happen to be original in chapters. I have collected my data through phone

calling and through direct communication with respondents in one form or another

or through personal interviews. Through observation method I was able to record

the natural behavior of the group. Sometimes I verify the truth of statements made

by informants in the context of a questionnaire or a schedule.

Secondary data :-Data are those data which are being already collected by someone else and

which have already been passed through the statistical process. I have collected my

published date form Internet and the books, magazines and newspapers.
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EXECUTIVE SUMMARYThis is an study to attempt the insurance sector in India has completed all

the facets of competition from being an open competitive market to being

nationalized and then getting back to the form of a liberalized market once again.

India Life Insurance sector came into existence with the nationalization of Life

Insurance Corporation (LIC) in 1956. At that time, all private companies were

taken over by LIC.

The IT in insurance sector is an important key factor. Through the online

insurance it possible to insurance companies to compete in the competition world.

It is the one of the requirement of modern business world.

Anyone that uses a computer and has internet services will find that online

insurance companies are packed with many benefits. There are hundreds of

insurance companies that have online websites that allows their customers conduct

all of the business they need to stay insured.

The Internet is a powerful tool for the savvy online consumer. We can

review products, compare prices, research companies and purchase almost

anything. It takes a lot of work and may take several years to become a successful

online insurance agent.


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INTRODUCTION

In one form or another, we all own insurance. Whether it's auto, medical,

liability, disability or life, insurance serves as an excellent risk-management and

wealth-preservation tool. Having the right kind of insurance is a critical component

of any good financial plan. While most of us own insurance, many of us don't

understand what it is or how it works. In this tutorial, we'll review the basics of

insurance and how it works, then take you through the main types of insurance out

there. (To read more about insurance, see our Special Insurance Feature.)


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INSURANCE:

Insurance is a form of risk management in which the insured transfers the

cost of potential loss to another entity in exchange for monetary compensation

known as the premium. (For background reading, see The History Of Insurance In

Investopedia.comthe resource for investing and personal finance education.

INVESTMENT :

Investment is the commitment of money or capital to purchase financial

instruments or other assets in order to gain profitable returns in the form of interest,

income, or appreciation of the value of the instrument. Investment is related to

saving or deferring consumption.

An investment involves the choice by an individual or an organization such

as a pension fund, after some analysis or thought, to place or lend money in a

vehicle, instrument or asset, such as property, commodity, stock, bond, financial

derivatives (e.g. futures or options), or the foreign asset denominated in foreign

currency, that has certain level of risk and provides the possibility of generating

returns over a period of time. When an asset is bought or a given amount of money

is invested in the bank, there is anticipation that some return will be received from

the investment in the future.

Investment is a term frequently used in the fields of economics, business

management and finance. It can mean savings alone, or savings made through

delayed consumption. Investment can be divided into different types according to

various theories and principles.


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BRIEF HISTORY OF INSURANCEThe story of insurance is probably as old as the story of mankind. The same

instinct that prompts modern businessmen today to secure themselves against loss

and disaster existed in primitive men also. They too sought to avert the evil

consequences of fire and flood and loss of life and were willing to make some sort

of sacrifice in order to achieve security. Though the concept of insurance is largely

a development of the recent past, particularly after the industrial era past few

centuriesyet its beginnings date back almost 6000 years.

With the establishment of Oriental Life Insurance Company in Kollata, Life

Insurance in its modern form came to India from England in the year 1818.


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Important milestones in the Indian life insurance business

1912: The Indian Life Assurance Companies Act enacted as the first statute to

regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to

collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with

the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the

central government and nationalised. LIC formed by an Act of Parliament, viz. LIC

Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to

the Triton Insurance Company Ltd., the first general insurance company

established in the year 1850 in Calcutta by the British.

Important milestones in the Indian generalinsurance business

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all

classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India,

frames a code of conduct for ensuring fair conduct and sound business practices.


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1968: The Insurance Act amended to regulate investments and set minimum

solvency margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the

general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the National

Insurance Company Ltd., the New India Assurance Company Ltd., the

Oriental Insurance Company Ltd. and the United India Insurance Company

Ltd. GIC incorporated as a company.


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FUNDAMENTALS OF INSURANCE

How does insurance work? Insurance works by pooling risk.What does this

mean? It simply means that a Investopedia.com the resource for investing and

personal finance education.

large group of people who want to insure against a particular loss pay their

premiums into what we will call the insurance bucket, or pool. Because the number

of insured individuals is so large, insurance companies can use statistical analysis

to project what their actual losses will be within the given class. They know that

not all insured individuals will suffer losses at the same time or at all. This allows

the insurance companies to operate profitably and at the same time pay for claims

that may arise. For instance, most people have auto insurance but only a few

actually get into an accident. You pay for the probability of the loss and for the

protection that you will be paid for losses in the event they occur.

RISKS :


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Life is full of risks - some are preventable or can at least be minimized,

some are avoidable and some are completely unforeseeable. What's important to

know about risk when thinking about insurance is the type of risk, the effect of that

risk, the cost of the risk and what you can do to mitigate the risk. Let's take the

example of driving a car. (For more insight on the concept of risk, seeDetermining

Risk And The Risk Pyramid.) Type of risk: Bodily injury, total loss of vehicle,

having to fix your car The effect: Spending time in the hospital, having to rent a

car and having to make car payments for a car that no longer exists The costs: Can

range from small to very large Mitigating risk: Not driving at all (risk avoidance),

becoming a safe driver (you still have to contend with other drivers), or

transferring the risk to someone else (insurance) Let's explore this concept of risk

management (or mitigation) principles a little deeper and look at how you may

apply them. The basic risk management tools indicate that risks that could bring

financial losses and whose severity cannot be reduced should be transferred. You

should also consider the relationship between the cost of risk transfer and the value

of transferring that risk.

RISK CONTROL :

There are two ways that risks can be controlled. You can avoid the risk

altogether, or you can choose to reduce your risk.

RISK FINANCING :

If you decide to retain your risk exposures, then you can either transfer that

risk (ie. to an insurance company), or you retain that risk either voluntarily (ie. you

identify and accept the risk) or involuntarily (you identify the risk, but no


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Investopedia.com the resource for investing and personal finance education

insurance is available).

RISK SHARING :

Finally, you may also decide to share risk. For example, a business owner

may decide that while he is willing to assume the risk of a new venture, he may

want to share the risk with other owners by incorporating his business. So, back to

our driving example. If you could get rid of the risk altogether, there would be no

need for insurance. The only way this might happen in this case would be to avoid

driving altogether. Also, if the cost of the loss or the effect of the loss is reasonableto you, then you may not need insurance. For risks that involve a high severity of

loss and a low frequency of loss, then risk transference (ie. insurance) is probably

the most appropriate protection technique. Insurance is appropriate if the loss will

cause you or your loved ones a significant financial loss or inconvenience. Do keep

in mind that in some instances, you are required to purchase insurance (i.e. if

operating a motor vehicle). For risks that are of low loss severity but high loss

frequency, the most suitable method is either retention or reduction because the

cost to transfer (or insure) the risk might be costly. In other words, some damages

are so inexpensive that it's worth taking the risk of having to pay for them yourself,

rather than forking extra money over to the insurance company each month.

THE RISK MANAGEMENT PROCESS:

After you have determined that you would like to insure against a loss, the

next step is to seek out insurance coverage. Here you have many options available

to you but it's always best to shop around. You can go directly to the insurer


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through an agent, who can bind the policy. The process of binding a policy is

simply a written acknowledgement identifying the main components of your

insurance contract. It is intended to provide temporary insurance protection to the

consumer pending a formal policy being issued by the insurance company. It

should be noted that agents work exclusively for the insurance company. There are

two types of agents:

1. Captive Agents: Captive agents represent a single insurance company and are

required to only do business with that one company.

2. Independent Agent: Independent agents represent multiple companies and

work on behalf of the client (not the insurance company) to find the most

appropriate policy.


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WHAT IS INVESTMENT ?

Investment is the commitment of money or capital to purchase financial

instruments or other assets in order to gain profitable returns in the form of interest,

income, or appreciation of the value of the instrument. Investment is related tosaving or deferring consumption.

An investment involves the choice by an individual or an organization

such as a pension fund, after some analysis or thought, to place or lend money in a

vehicle, instrument or asset, such as property, commodity, stock, bond, financial

derivatives (e.g. futures or options), or the foreign asset denominated in foreign

currency, that has certain level of risk and provides the possibility of generating

returns over a period of time. When an asset is bought or a given amount of money


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is invested in the bank, there is anticipation that some return will be received from

the investment in the future.

Investment is a term frequently used in the fields of economics, business

management and finance. It can mean savings alone, or savings made through

delayed consumption. Investment can be divided into different types according to

various theories and principles.

While dealing with the various options of investment, the defining terms of

investment need to be kept in mind.

INVESTMENT IN TERMS OF ECONOMICS :

According to economic theories, investment is defined as the per-unit

production of goods, which have not been consumed, but will however, be used for

the purpose of future production. Examples of this type of investments are

tangible goods like construction of a factory or bridge and intangible goods like 6

months of on-the-job training. In terms of national production and income, Gross

Domestic Product (GDP) has an essential constituent, known as gross investment.


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INVESTMENT IN TERMS OF BUSINESS MANAGEMENT:

According to business management theories, investment refers to tangible

assets like machinery and equipments and buildings and intangible assets like

copyrights or patents and goodwill. The decision forinvestment is also known as

capital budgeting decision, which is regarded as one of the key decisions.

INVESTMENT IN TERMS OF FINANCE:

In finance, investment refers to the purchasing of securities or other

financial assets from the capital market. It also means buying money market or real

properties with high market liquidity. Some examples are gold, silver, real

properties, and precious items. Financial investments are in stocks, bonds, and

other types of security investments. Indirect financial investments can also be

done with the help of mediators or third parties, such as pension funds, mutual

funds, commercial banks, and insurance companies.

PERSONAL FINANCE& REAL ESTATE:

According to personal finance theories, an investment is the implementation

of money for buying shares, mutual funds or assets with capital risk . According to


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real estate theories, investment is referred to as money utilized for buying property

for the purpose of ownership or leasing. This also involves capital risk.

COMMERCIAL REAL ESTATE:

Commercial real estate involves a real estate investment in properties for

commercial purposes such as renting

RESIDENTIAL REAL ESTATE:

This is the most basic type of real estate investment, which involves buying

houses as real estate properties.


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INSURANCE WHICH ACT AS INVESTMENT


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Pension :

A pension is a fixed sum paid regularly to a person, typically, given

following a retirement from service.[1] Pensions should not be confused with

severance pay; the former is paid in regular installments, while the latter is paid in

one lump sum.

The terms retirement plan or superannuation refer to a pension granted upon

retirement.[2]Retirement plans may be set up by employers, insurance companies,

the government or other institutions such as employer associations or trade unions.

Called retirement plans in the United States, they are commonly known as pension

schemes in the United Kingdom and Ireland and superannuation plans or super[3]in

Australia and New Zealand. Retirement pensions are typically in the form of a

guaranteed life annuity, thus insuring against the riskoflongevity.

A pension created by an employer for the benefit of an employee is

commonly referred to as an occupational or employer pension. Labor unions, the
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government, or other organizations may also fund pensions. Occupational pensions

are a form of deferred compensation, usually advantageous to employee and

employer for tax reasons. Many pensions also contain an additional insurance

aspect, since they often will pay benefits to survivors or disabled beneficiaries.

Other vehicles (certain lotterypayouts, for example, or an annuity) may provide a

similar stream of payments.

The common use of the term pension is to describe the payments a person receives

upon retirement, usually under pre-determined legal and/or contractual terms. A

recipient of a retirement pension is known as a pensioneror retiree.

Types of pensions

EMPLOYMENT-BASED PENSIONS (RETIREMENT PLANS)

A retirement plan is an arrangement to provide people with an income during

retirement when they are no longer earning a steady income from employment.

Often retirement plans require both the employer and employee to contribute

money to a fund during their employment in order to receive defined benefits upon

retirement. It is a tax deferred savings vehicle that allows for the tax-free

accumulation of a fund for later use as a retirement income. Funding can be

provided in other ways, such as from labor unions, government agencies, or self-

funded schemes. Pension plans are therefore a form of "deferred compensation". A

SSAS is a type of employment-based Pension in the UK.
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SOCIAL AND STATE PENSIONS

Many countries have created funds for their citizens and residents to provide

income when they retire (or in some cases become disabled). Typically thisrequires payments throughout the citizen's working life in order to qualify for

benefits later on. A basic state pension is a "contribution based" benefit, and

depends on an individual's contribution history. For examples, see National

Insurance in the UK, or Social Security in the USA. Many countries have also put

in place a "social pension". These are regular, tax-funded non-contributory cash

transfers paid to older people. Over 80 countries have social pensions.[4] Examples

are the Old Age Grant in South Africa and the Universal Superannuation scheme in

New Zealand.

DISABILITY PENSIONS

Some pension plans will provide for members in the event they suffer a disability.

This may take the form of early entry into a retirement plan for a disabled member

below the normal retirement age.

BENEFITS

Retirement plans may be classified as defined benefit or defined contribution

according to how the benefits are determined.[4]A defined benefit plan guarantees

a certain payout at retirement, according to a fixed formula which usually depends

on the member's salary and the number of years' membership in the plan. A

defined contribution plan will provide a payout at retirement that is dependent
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upon the amount of money contributed and the performance of the investment

vehicles utilized.

Some types of retirement plans, such as cash balance plans, combine features of

both defined benefit and defined contribution plans. They are often referred to as

hybrid plans. Such plan designs have become increasingly popular in the US since

the 1990s. Examples include Cash Balance and Pension Equity plans.

DEFINED BENEFIT PLANS

Main article: Defined benefit pension plan

A traditional defined benefit (DB) plan is a plan in which the benefit on retirement

is determined by a set formula, rather than depending on investment returns. In the

US, 26 U.S.C. 414(j) specifies a defined benefit plan to be any pension plan that

is not a defined contribution plan (see below) where a defined contribution plan is

any plan with individual accounts. A traditional pension plan that defines a benefit

for an employee upon that employee's retirement is a defined benefit plan.
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Traditionally, retirement plans have been administered by institutions which exist

specifically for that purpose, by large businesses, or, for government workers, by

the government itself. A traditional form of defined benefit plan is the final salary

plan, under which the pension paid is equal to the number of years worked,

multiplied by the member's salary at retirement, multiplied by a factor known as

the accrual rate. The final accrued amount is available as a monthly pension or a

lump sum, but usually monthly.

The benefit in a defined benefit pension plan is determined by a formula that can

incorporate the employee's pay, years of employment, age at retirement, and other

factors. A simple example is a Dollars Times Service plan design that provides a

certain amount per month based on the time an employee works for a company.

For example, a plan offering $100 a month per year of service would provide

$3,000 per month to a retiree with 30 years of service. While this type of plan is

popular among unionized workers, Final Average Pay (FAP) remains the most

common type of defined benefit plan offered in the United States. In FAP plans,

the average salary over the final years of an employee's career determines thebenefit amount.

Averaging salary over a number of years means that the calculation is averaging

different dollars. For example, if salary is averaged over five years, and retirement

is in 2009, then salary in 2004 dollars is averaged with salary in 2005 dollars, etc.,

with 2004 dollars being worth more than the dollars of succeeding years. The

pension is then paid in first year of retirement dollars, in this example 2009 dollars,

with the lowest value of any dollars in the calculation. Thus inflation in the salary
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averaging years has a considerable impact on purchasing power and cost, both

being reduced equally by inflation

This effect of inflation can be eliminated by converting salaries in the averaging

years to first year of retirement dollars, and then averaging.

In the United Kingdom, benefits are typically indexed for inflation (known as

Retail Prices Index (RPI)) as required by law for registered pension plans.[5]

Inflation during an employee's retirement affects the purchasing power of the

pension; the higher the inflation rate, the lower the purchasing power of a fixed

annual pension. This effect can be mitigated by providing annual increases to thepension at the rate of inflation (usually capped, for instance at 5% in any given

year). This method is advantageous for the employee since it stabilizes the

purchasing power of pensions to some extent.

If the pension plan allows for early retirement, payments are often reduced to

recognize that the retirees will receive the payouts for longer periods of time. In the

United States, under the Employee Retirement Income Security Act of 1974, any

reduction factor less than or equal to the actuarial early retirement reduction factor

is acceptable.[6]

Many DB plans include early retirement provisions to encourage employees to

retire early, before the attainment of normal retirement age (usually age 65).

Companies would rather hire younger employees at lower wages. Some of those

provisions come in the form of additional temporary or supplemental benefits,

which are payable to a certain age, usually before attaining normal retirement age.
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FUNDING

Defined benefit plans may be either funded or unfunded.

In an unfunded defined benefit pension, no assets are set aside and the benefits are

paid for by the employer or other pension sponsor as and when they are paid.

Pension arrangements provided by the state in most countries in the world are

unfunded, with benefits paid directly from current workers' contributions and

taxes. This method of financing is known as Pay-as-you-go (PAYGO or PAYG).[8]

The social security systems of many European countries are unfunded[citation needed],

having benefits paid directly out of current taxes and social security contributions,

although several countries have hybrid systems which are partially funded. Spain

set up the Social Security Reserve Fund and France set up the Pensions Reserve

Fund; in Canada the wage-based retirement plan (CPP) is funded, with assets

managed by the CPP Investment Board while the U.S. Social Security system is

funded by investment in special U.S. Treasury Bonds.

In a funded plan, contributions from the employer, and sometimes also from plan

members, are invested in a fund towards meeting the benefits. The future returns

on the investments, and the future benefits to be paid, are not known in advance, so

there is no guarantee that a given level of contributions will be enough to meet the

benefits. Typically, the contributions to be paid are regularly reviewed in a

valuation of the plan's assets and liabilities, carried out by an actuary to ensure that

the pension fund will meet future payment obligations. This means that in adefined benefit pension, investment risk and investment rewards are typically

assumed by the sponsor/employer and not by the individual. If a plan is not well-
http://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-7http://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-7http://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-7http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/CPP_Investment_Boardhttp://en.wikipedia.org/wiki/Social_Security_%28United_States%29http://en.wikipedia.org/wiki/Actuaryhttp://en.wikipedia.org/wiki/Actuaryhttp://en.wikipedia.org/wiki/Social_Security_%28United_States%29http://en.wikipedia.org/wiki/CPP_Investment_Boardhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-7


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funded, the plan sponsor may not have the financial resources to continue funding

the plan. In many countries, such as the USA, the UK and Australia, most private

defined benefit plans are funded[citation needed], because governments there provide tax

incentives to funded plans (in Australia they are mandatory). In the United States,

non-church-based private employers must pay an insurance-type premium to the

Pension Benefit Guaranty Corporation, a government agency whose role is to

encourage the continuation and maintenance of voluntary private pension plans

and provide timely and uninterrupted payment of pension benefits.

CRITICISMS

Traditional defined benefit plan designs (because of their typically flat accrual rate

and the decreasing time for interest discounting as people get closer to retirement

age) tend to exhibit a J-shaped accrual pattern of benefits, where the present value

of benefits grows quite slowly early in an employee's career and accelerates

significantly in mid-career: in other words it costs more to fund the pension for

older employees than for younger ones (an "age bias"). Defined benefit pensions

tend to be less portable than defined contribution plans, even if the plan allows a

lump sum cash benefit at termination. Most plans, however, pay their benefits as

an annuity, so retirees do not bear the risk of low investment returns on

contributions or of outliving their retirement income. The open-ended nature of

these risks to the employer is the reason given by many employers for switching

from defined benefit to defined contribution plans over recent years. The risks tothe employer can sometimes be mitigated by discretionary elements in the benefit

structure, for instance in the rate of increase granted on accrued pensions, both

before and after retirement.
http://en.wikipedia.org/wiki/Superannuation_in_Australiahttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporationhttp://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporationhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Superannuation_in_Australia


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The age bias, reducedportability and open ended risk make defined benefit

plans better suited to large employers with less mobile workforces, such as the

public sector (which has open-ended support from taxpayers). This coupled with a

lack of foresight on the employers part means a large proportion of the workforce

are kept in the dark over future investment schemes.

Defined benefit plans are sometimes criticized as being paternalistic as they enable

employers or plan trustees to make decisions about the type of benefits and family

structures and lifestyles of their employees. However they are typically more

valuable than defined contribution plans in most circumstances and for most

employees (mainly because the employer tends to pay higher contributions than

under defined contribution plans), so such criticism is rarely harsh.
http://en.wikipedia.org/wiki/Portability_%28social_security%29http://images.google.co.in/imgres?imgurl=http://blog.directorymaximizer.com/wp-content/uploads/2009/10/pic5.jpg&imgrefurl=http://www.squidoo.com/directorysubmissionreview&usg=__ufQybsWYS7Csn56qMSCvE0ES7sM=&h=300&w=400&sz=65&hl=en&start=91&um=1&itbs=1&tbnid=CAi8sO_spy_9eM:&tbnh=93&tbnw=124&prev=/images?q=CLAIM+SUBMISSION+THROUGH+ONLINE&start=80&um=1&hl=en&sa=N&ndsp=20&tbs=isch:1http://en.wikipedia.org/wiki/Portability_%28social_security%29


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The "cost" of a defined benefit plan is not easily calculated, and requires an actuary

or actuarial software. However, even with the best of tools, the cost of a defined

benefit plan will always be an estimate based on economic and financial

assumptions. These assumptions include the average retirement age and lifespan of

the employees, the returns to be earned by the pension plan's investments and any

additional taxes or levies, such as those required by the Pension Benefit Guaranty

Corporation in the U.S. So, for this arrangement, the benefit is relatively secure but

the contribution is uncertain even when estimated by a professional.

EXAMPLES

Many countries offer state-sponsored retirement benefits, beyond those provided

by employers, which are funded by payroll or other taxes. The United States Social

Security system is similar to a defined benefit pension arrangement, albeit one that

is constructed differently than a pension offered by a private employer.

Individuals that have worked in the UK and have paid certain levels of national

insurance deductions can expect an income from the state pension scheme after

their normal retirement. The state pension is currently divided into two parts: the

basic state pension, State Second [tier] Pension scheme called S2P. Individuals will

qualify for the basic state pension if they have completed sufficient years

contribution to their national insurance record. The S2P pension scheme is

earnings related and depends on earnings in each year as to how much an

individual can expect to receive. It is possible for an individual to forgo the S2Ppayment from the state, in lieu of a payment made to an appropriate pension
http://en.wikipedia.org/wiki/Payroll_taxhttp://en.wikipedia.org/wiki/Payroll_tax


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scheme of their choice, during their working life. For more details see UK pension

provision.

DEFINED CONTRIBUTION PLANS

Main article: Defined contribution plan

In a defined contribution plan, contributions are paid into an individual account for

each member. The contributions are invested, for example in the stock market, and

the returns on the investment (which may be positive or negative) are credited to

the individual's account. On retirement, the member's account is used to provide

retirement benefits, sometimes through the purchase of an annuity which then

provides a regular income. Defined contribution plans have become widespread all

over the world in recent years, and are now the dominant form of plan in the

private sector in many countries. For example, the number of defined benefit plans

in the US has been steadily declining, as more and more employers see pension

contributions as a large expense avoidable by disbanding the defined benefit plan

and instead offering a defined contribution plan.

Money contributed can either be from employee salary deferral or from employer

contributions. The portability of defined contribution pensions is legally no

different from the portability of defined benefit plans. However, because of the

cost of administration and ease of determining the plan sponsor's liability for

defined contribution plans (you do not need to pay an actuary to calculate the lump

sum equivalent that you do for defined benefit plans) in practice, defined

contribution plans have become generally portable.
http://en.wikipedia.org/wiki/UK_pension_provisionhttp://en.wikipedia.org/wiki/UK_pension_provisionhttp://en.wikipedia.org/wiki/Defined_contribution_planhttp://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Portability_%28social_security%29http://en.wikipedia.org/wiki/Defined_contribution_planhttp://en.wikipedia.org/wiki/UK_pension_provisionhttp://en.wikipedia.org/wiki/UK_pension_provision


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In a defined contribution plan, investment risk and investment rewards are

assumed by each individual/employee/retiree and not by the sponsor/employer. In

addition, participants do not necessarily purchase annuities with their savings upon

retirement, and bear the risk of outliving their assets. (In the United Kingdom, for

instance, it is a legal requirement to use the bulk of the fund to purchase an

annuity.)

The "cost" of a defined contribution plan is readily calculated, but the benefit from

a defined contribution plan depends upon the account balance at the time an

employee is looking to use the assets. So, for this arrangement, the contribution is

known but the benefit is unknown (until calculated).

EXAMPLES :

In the United States, the legal definition of a defined contribution plan is a

plan providing for an individual account for each participant, and for benefits

based solely on the amount contributed to the account, plus or minus income,

gains, expenses and losses allocated to the account (see 26 U.S.C. 414(i)).

Examples of defined contribution plans in the United States include Individual

Retirement Accounts (IRAs) and 401(k) plans. In such plans, the employee is

responsible, to one degree or another, for selecting the types ofinvestments toward

which the funds in the retirement plan are allocated. This may range from choosing

one of a small number of pre-determined mutual funds to selecting individual

stocks or othersecurities.

Most self-directed retirement plans are characterized by certain tax

advantages, and some provide for a portion of the employee's contributions to be
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largely borne by the plan sponsor. As with defined contribution designs, plan

benefits are expressed in the terms of a notional account balance, and are usually

paid as cash balances upon termination of employment. These features make them

more portable than traditional defined benefit plans and perhaps more attractive to

a more highly mobile workforce. Target benefit plans are defined contribution

plans made to match (or resemble) defined benefit plans.

CONTRASTING TYPES OF RETIREMENT PLANS

Advocates of defined contribution plans point out that each employee has the

ability to tailor the investment portfolio to his or her individual needs and financial

situation, including the choice of how much to contribute, if anything at all.

However, others state that these apparent advantages could also hinder some

workers who might not possess the financial savvy to choose the correct

investment vehicles or have the discipline to voluntarily contribute money to

retirement accounts. This debate parallels the discussion currently going on in the

U.S., where many Republican leaders favor transforming the Social Security

system, at least in part, to a self-directed investment plan.

FINANCING

There are various ways in which a pension may be financed.

This section requires expansion.
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Defined contribution pensions, by definition, are funded, as the "guarantee" made

to employees is that specified (defined) contributions will be made during an

individual's working life.

There are many ways to finance your pension and save for retirement. Pension

plans can be set up by your employer, matching your contribution each month, by

the state or personally through a pension scheme with a financial institution, such

as a bank or brokerage firm. Pension plans often come with a tax break depending

on the country and plan type.

For example Canadians have the option to open aRegistered Retirement SavingsPlan (RRSP), as well as a range of employee and state pension programs[9]. This

plan allows contributions to this account to be marked as un-taxable income and

remain un-taxed until withdrawal. Most countrys governments will provide advice

on pension schemes.
http://en.wikipedia.org/wiki/Registered_Retirement_Savings_Planhttp://en.wikipedia.org/wiki/Registered_Retirement_Savings_Planhttp://en.wikipedia.org/wiki/Registered_Retirement_Savings_Planhttp://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-8http://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-8http://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-8http://c/Documents%20and%20Settings/e_company/My%20Documents/New%20Folder/Pension.htm%23cite_note-8http://en.wikipedia.org/wiki/Registered_Retirement_Savings_Planhttp://en.wikipedia.org/wiki/Registered_Retirement_Savings_Plan


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TYPES OF INSURANCE AS AN INVESTMENT

VEHICLE INSURANCE :
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Coverage: An auto insurance policy typically covers you and your spouse,

relatives who live in your home and other licensed drivers to whom you give

permission to drive your car. The policy is "package protection", which

provides coverage for both bodily injury and property damage liability as

well as physical damage to your vehicle. This damage can include both that

caused by the collision and damage cause by things "other than collision",

such as flood, fire, wind, hail, etc. (For more insight, read Shopping For Car

Insurance.)

Common Types of Coverage: Auto insurance typically covers personalinjury (PIP), medical payments, uninsured motorist, underinsured motorist,

auto rental, emergency road assistance and other damages to your car not

caused by a collision such as flood, fire and vandalism. Other coverage is

available, too.

Deductible: The deductible is the amount that you will pay out of pocketwhen you file a claim. Typically, the higher the deductible, the lower your

premiums.

Insurance Rates: How much you pay will depends on many factors,including your driving record, the value of your vehicle, where you drive,

how much you drive, your marital status, your desired coverage, your age,

sex and even your credit history.


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HOME INSURANCE :

Our homes and their contents are our greatest assets. That is why it is so

imperative that we protect their value. Homeowners insurance helps us achieve

that goal. Let's break down the different concepts that encompass this area. (For

background reading, see Beginners' Guide To Homeowners Insurance.)

Coverage: Homeowners insurance typically covers the dwelling (thestructure), personal property and contents, and some forms of personal

liability. The policy may cover direct and consequential loss resulting from

damage to the property itself, loss or damage to personal property, and

liability for unintentional acts arising out of the non-business, non-

automobile activities of the insured and members of that insured's

household.

FLOOD INSURANCE :


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financially and put you and your family in debt for years. So what is health

insurance and how does it work? Health insurance is a type of insurance that pays

for medical expenses in exchange for premiums. The way it works is that you pay

your monthly or annual premium and the insurance policy contracts healthcare

providers and hospitals to provide benefits to its members at a discounted rate.

This is how hospitals and healthcare providers get listed in your insurance provider

booklet. They have agreed to provide you with healthcare at the specified cost.

These costs include medical exams, drugs and treatments referred to as "covered

services" in your insurance policy.

As with any type of insurance, there are exclusions and limitations. To know

what these are, you have to read your policy to find out what is covered and what

is not. If you elect to have a medical procedure done that is not covered by your

insurance, you will have to pay for that service

The range of coverage for expenses varies depending on the type of plan, as

will the restrictions. You can purchase the insurance directly from the insurance

company through an agent or through an independent broker but most people get

their insurance coverage through employer-sponsored programs.


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This insurance helps you to prevent the losses against theft, fire, burglary or

any natural calamity like Earthquake, Floods etc. based on the points mentioned in

the policy.DISABILITY INSURANCE:

Aside from health insurance, disability is a very critical type of insurance

individuals should consider having. When it comes to your personal finances, long-

term disability can have a devastating effect if you are not prepared. Think about

this: the probability of becoming at least temporarily disabled during your working

years is higher than the probability of dying during your working years. (For

related reading, see The Disability Insurance Policy: Now In English.) Disability

insurance can replace a portion of the salary you were making before you became

disabled and unable to work after a serious injury or illness. But before you seek

coverage, you should first understand the different types of disability definitions

used by insurers.

LONG-TERM CARE INSURANCE :


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Name From To

C. B. Bhave 18 February 2008 18 February 2011

M. Damodaran 18 February 2005 18 February 2008

G. N. Bajpai 20 February 2002 18 February 2005

D. R. Mehta 21 February 1995 20 February 2002

S. S. Nadkarni 17 January 1994 31 January 1995

G. V. Ramakrishna 24 August 1990 17 January 1994

Dr. S. A. Dave 12 April 1988 23 August 1990

FUNCTIONS AND RESPONSIBILITIES

SEBI has to be responsive to the needs of three groups, which constitute the

market:

the issuers of securities the investors the market intermediaries.

SEBI has three functions rolled into one body: quasi-legislative, quasi-judicial and

quasi-executive. It drafts regulations in its legislative capacity, it conducts

investigation and enforcement action in its executive function and it passes rulings

and orders in its judicial capacity. Though this makes it very powerful, there is an

appeals process to create accountability. There is a Securities Appellate Tribunalwhich is a three-member tribunal and is presently headed by a former Chief Justice
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of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to the

Supreme Court.

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively

and successively (e.g. the quick movement towards making the markets electronic

and paperless rolling settlement on T+2 basis). SEBI has been active in setting up

the regulations as required under law.

SEBI has also been instrumental in taking quick and effective steps in light of the

global meltdown and the Satyam fiasco. It had increased the extent and quantity of

disclosures to be made by Indian corporate promoters. More recently, in light ofthe global meltdown,it liberalised the takeover code to facilitate investments by

removing regulatory structures. In one such move, SEBI has increased the

application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at present

POWERS

For the discharge of its functions efficiently, SEBI has been invested with thenecessary powers which are:

1. to approve bylaws of stock exchanges.2. to require the stock exchange to amend their bylaws.3. inspect the books of accounts and call for periodical returns from recognised

stock exchanges.

4. inspect the books of accounts of a financial intermediaries.5. compel certain companies to list their shares in one or more stock

exchanges.
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6. levy fees and other charges on the intermediaries for performing itsfunctions.

7. grant licence to any person for the purpose of dealing in certain areas.8. delegate powers exercisable by it.

prosecute and judge directly the violation of certain provisions of the companies

Act.

The SEBI passed a stunning order of banning 14 life insurance companies

involved in serving ULIP products, on the ground that they were akin to mutual

funds and may need to obtain registration from SEBI to proceed further with it.

The 14 insurers among the list of companies banned by the SEBI from selling

ULIPs include as on

1. Aegon Religare Life Insurance Company Limited2. Aviva Life Insurance Company India Limited3. Bajaj Allianz Life Insurance Company Limited4. Bharti AXA Life Insurance Company Limited
http://www.sebi.gov.in/cmorder/ULIPOrder.pdfhttp://www.aegonreligare.com/http://www.avivaindia.com/http://www.bajajallianzlife.co.in/http://www.bharti-axalife.com/http://www.bharti-axalife.com/http://www.bajajallianzlife.co.in/http://www.avivaindia.com/http://www.aegonreligare.com/http://www.sebi.gov.in/cmorder/ULIPOrder.pdf


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5. Birla Sun Life Insurance Company Limited6. HDFC Standard Life Insurance Company Limited7. ICICI Prudential Life Insurance Company Limited8. ING Vyasa Life Insurance Company Limited9. Kotak Mahindra Old Mutual Life Insurance Limited10.Max New York Life Insurance Co. Limited11.Metlife India Insurance Company Limited12.Reliance Life Insurance Company Limited13.SBI Life Insurance Company Limited14.TATA AIG Life Insurance Company Limited

ULIP is saving-cum-investment product that offers the option of life cover along

with market liked returns. These products are increasingly gaining popularity

among the investors on account of its multi-purpose catering of life cover and

equity market linked returns both. Additionally, they also provide Tax savings, so

they could very called All-in-One Policies.

However, SEBIs contention is that ULIPs are not pure insurance products and

such products are coupled with investment products which fall under its purview of

regulation. The investment component of the ULIPs, which ultimately finds its

way into the equity markets, is in the nature of mutual funds which falls under the

jurisdiction of SEBIs governance.

However, the spat does not end over here. In a reaction to the SEBI order,IRDA retaliated on Saturday by invoking its power under section 34(1) of the

Insurance Act, directing insurance companies to disregard the order from SEBI and

proceed further with their business as usual.
http://www.birlasunlife.com/http://www.hdfcinsurance.com/http://www.hdfcinsurance.com/http://www.inglife.co.in/http://www.kotaklifeinsurance.com/http://www.maxnewyorklife.com/http://www.maxnewyorklife.com/http://www.maxnewyorklife.com/http://www.metlife.co.in/http://www.metlife.co.in/http://www.metlife.co.in/http://www.reliancelife.com/http://www.reliancelife.com/http://www.reliancelife.com/http://www.sbilife.co.in/http://www.sbilife.co.in/http://www.sbilife.co.in/http://www.tata-aig-life.com/http://www.tata-aig-life.com/http://www.tata-aig-life.com/http://www.tata-aig-life.com/http://www.sbilife.co.in/http://www.reliancelife.com/http://www.metlife.co.in/http://www.maxnewyorklife.com/http://www.kotaklifeinsurance.com/http://www.inglife.co.in/http://www.hdfcinsurance.com/http://www.hdfcinsurance.com/http://www.birlasunlife.com/


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As pointed out at the start of this post, the parent should come ahead and

resolve the issue if the fight is getting out of bounds among the two children. A

drama involving as important an issue of conflict as this requires a prompt

redressing from the highest quarters as the Finance Ministry or even the PMO,

where stakes of gullible public are involved due to no fault of their own.

MY VIEW:

The spat between the top two regulators is invoking a comical sequence of

events in front of the world regarding the misplacement and dichotomy aspect of

the Indian law. The tragic drama initially involved a ruling passed by SEBI

authorities under the SEBI Act. However, the same ruling has been subsequently

quashed by the IRDA under Insurance Act.

The spat between the SEBI and IRDA could adversely impact the interest of

policyholders and insurers if the uncertainty prevails for a longer period of time.

The coming week could pan out as a high voltage event if the regulators continue

to take potshots against each other and in the process sandwich the sentiments of

policyholders.


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SEBI V/S IRDAThere is merit in the argument that Unit Linked Insurance Plans (ULIPs)

from insurance companies are more investments than insurance products.

Therefore, the Securities and Exchange Board of India appears to be well within its

rights in seeking jurisdiction over these products. However it must be said SEBI

perhaps has pressed the trigger a little too soon instead of exploring the option of

further discussions for resolving its differences with the insurance regulator.

Insurance players often take the stance that ULIPs should be exempt from SEBI's

purview because they are either contracts of insurance'' or bundled'' products

where the life cover is a vital and inseparable part of the structure. However, this

argument does not hold much water if one looks at how ULIPs are structured and

marketed today. Only a fraction of annual subscription paid by the investor goes to

secure his life cover; much of it goes into building a market-linked portfolio.

Mortality charges' (premium deducted for life cover) of some recently launched

ULIPs are as low as 2 per cent of the subscription. It follows that a good part of therisk associated with such ULIPs too is market-related and borne by the investor.

Then, it is their promise of market returns and not insurance cover (which can be

obtained at a far lower cost) that has made these plans a hit with retail investors.

That SEBI should have some measure of oversight over players managing

ULIPs is also desirable from a broader market perspective. At last count, insurance

companies managed more equity money and invested more in stocks than even

domestic mutual funds. If the insurance aspect of a ULIP cannot be separated from

the investment part, products with a sizeable investment component (say, over 51


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per cent of subscription) can perhaps register both with SEBI and the insurance

regulator. At stake, is not so much the issue of insurers offering investment-

oriented products being registered with SEBI. Rather it is one of streamlining

charges, disclosure of information relating to investment risks and commission

parity with distributors of mutual funds, so as to create a level playing field among

financial intermediaries.

Despite this, SEBI banning insurers from collecting additional

subscriptions on ULIPs that are already in force seems unduly harsh on retail

investors who run the risk of their policies facing a premature closure. SEBI has

not also helped its cause by singling out a few private insurers while allowing

others, especially those in the public sector, to continue to market these products.

In the event, the Centre-brokered compromise of restoring the status quo is the

only viable course of action although it is unfortunate that the Government has left

the matter to be decided by the Courts thus effectively abdicating its policy setting

role for these regulators.

SEBI versus IRDABattle Ensues over ULIPs

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Posted in Finance, Insurance, Investment, News, Stock Market.

Posted in Finance, Insurance, Investment, News. The ULIPs controversy that

started with the stock market regulator SEBI banning 14 Insurance companies from

issuing fresh ULIPs has drawn from fresh blood. Within 24 hours of this ban,
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WHY THERE IS A FIGHT?

SEBI manages all stock market related activities. They have power to

manage mutual funds and other investment schemes that invest in stock markets.

ULIPs are similar to mutual funds (investment in stock market) and some

part of insurance added to it. As ULIP are doing investment in share market, SEBI

should have a control over it and thats why SEBI is saying that insurers should

seek its approval for ULIP products.

IRDA is regulatory authority for insurance companies in India. As ULIP hasmore to do with Stock market investment and less with insurance part. Ideally

SEBI should also have say in regulation of ULIPs. The same was requested to
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IRDA by SEBI, but they refused to give them control, So Sebi has asked them to

stop selling Ulips, but IRDA has asked companies to continue selling the ULIPs.

SEBI has removed all entry loads on mutual fund investment, But insurance

agents are making lot of money in first 3-5 years of ULIP charging high entry load

on ULIP investment. Most of the ULIPs are mis-selled in India, saying that

investment have to be done only for 3-5 years, which is incorrect as if policy

holder does not continue this after that, he stands to loose.

This regulatory issue is turning into a battle of supremacy an outcome

wherein the consumer interest may be sidelined for the moment. IRDA seemsparticularly irritated as it may see this ban as an encroachment of its territory of

rightsperhaps ignoring the public good.

It may be noted that Insurance Business in India has been lacking efficiency.

The industry that was originally supposed to cover risks is selling investment

instruments many a times dependent upon stock market which bring in inherent

riskwhich is nearly opposite the whole philosophy of Insurance.

Barring the term plans which provides pure risk cover, rest of the insurance

policies have steep overheads and charges. Many policies including ULIP deduct

as much as 40% or more of the first year premium as charges.

India is a peculiar country which has a very poor ratio of premium to cover

which means that even though a lot of premium is being collected the coverprovided is very less. The primary reason for that is that a huge portion of the


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premium is diverted to investments and corresponding charges and load. Only a

small fraction of the premium goes into covering the actual risk.

These are major concerns that should ideally be addressed by IRDA, which has

acted very little in consumer interest. Insurance still ranks to be the no. 1 product

that is mis-sold making false claims and giving wrong product knowledge. In these

circumstances, it is obvious for the market regulator SEBI to take a note. SEBI has

made a great impact in the highly rigged mutual funds and stock markets, making

it far more transparent over the years

It is expected that with SEBI intervention, things would get better for thecommon man for whom Insurance is indispensable. It is high time that Insurance is

being sold as Insurance and Investment is being sold as Investment and that too

without leakage.

The government may be compelled to step in to resolve the issue as some

insurers are planning to approach the court.


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CONCLUSION

From the above project it is concluded that insurance which is

popularly known as protecting the saving the life of policy holder has no longer

remain the same today people like to take insurance which act as investment .Yes,

there are insurance which act as investment such as ULIP, annuity plan, pension

plan ect.Today the denand for such type of insurance is on a great height and like to invest

in such type of insurance. Which would help them in old aged for them pension

plan is suitable.Annuity plan is suitable for those people who want slow and steady

income for them it is unsuitable to invest.

Today people are investing in those insurance which act as an investment.

Investment in real estate and investment in share and debentures have became an

older concept, but instead insurance which act as investment are playing an

important role in todays senerio.


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BIBLIOGRAPHY

1) INVESTMENT IN INSURANCE - P.K Thomas2) GAIN OF INSURANCE - K.M Asif

3) FACTS OF INSURANCE - Z.K HusainWEBLIOGRAPHY

1) www.

2) www.

3) www.

4) www.
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