Introduction To Insurance

Insurance is as old as civilization. It has been developing from the family form

of insurance to mutual associations, stock exchange securities and again to state

owned organizations. ‘Yogakshema’ has been the oldest term of insurance used in the

rigveda for some kind of insurance. The concept of formal insurance originated in the

12th century in the form of protection against financial loss to the seafarers involved

in foreign trade. Growing economic uncertainties caused not only by multiplicity of

social, cultural, ethnic and political factors but also natural calamities necessitated

invention Dan development of avenues capable of providing economic security to the

bereaved family in the event of loss of breadwinner. And thus began life insurance.

With the development of social security and the welfare status of the societies, the

business of life insurance assumed multidimensional.

Insurance may be described as a social device to reduce or eliminate risk of

loss to life. Under the plan of insurance, a large number of people associate

themselves by sharing risks attached to individuals. The risks, which can be insured

against death, accidents and also with health. Any risk contingent upon these may be

insured against at a premium commensurate with the risk involved. Thus collective

bearing of life risk is insurance.

In today’s uncertain and hectic life, every individual is seeking some

protection against the risk. The solution is prevailing in the market from last 55 years,

but it never been so crucial before a paradigm shift has been made by private players

and this is supported by the figure of only 23% penetration in last 55 years. Now this

penetration is going upward as new competitive private players are coming. There is

immense potential in the Indian market for all the players as 77% market is to be

tapped.

1

ABSTRACT: Insurance is an Rs.400 billion business in India and yet its

spread in the country is relatively thin. Insurance as a concept has not been able to

make headway in India. Presently LIC enjoys a monopoly in life insurance business

while GIC enjoys it in general insurance business. There have been very little options

before the consumers to decide the insurer. A successful passage of the IRA Bill have

clear the way of private sector operators in collaboration with their overseas partner.

It is likely to bring in a more professional and focused approach. Moreover the

foreign players would bring sophisticated actuarial techniques with them, which

would facilitate the insurer to effectively price the product. It is very important that

trained marketing professionals who are able to communicate specific features of the

policy should sell the policy. In the next millennium all these activities would play a

crucial role in the overall development and maturity of the insurance industry

General definition:

In the words of John Magee, “Insurance is a plan by which large number of

people associate themselves and transfer to the shoulders of all, risks that attach to

individuals.”

2

The History of Insurance

The roots of insurance might be traced to Babylonia, where traders were

encouraged to assume the risks of the caravan trade through loans that were repaid

(with interest) only after the goods had arrived safely- a practice resembling bottomry

and given legal force in the Code of Hammurabi (c.2100 B.C.). The Phoenicians and

the Greeks applied a similar system to their sea borne commerce. The Romans used

burial clubs as a form of life insurance, providing funeral expenses for members and

later payments to the survivors.

With the growth of towns and trade in Europe, the medieval guilds undertook

to protect their members from loss by fire and shipwreck, to ransom them from

captivity by pirates, and to provide decent burial and support in sickness and poverty.

By the middle of the 14th cent., as evidenced by the earliest known insurance contract

(Genoa, 1347), marine insurance was practically universal among the maritime

nations of Europe.

In London, Lloyd’s Coffee House (1688) was a place where merchants, ship

owners, and underwriters met to transact business. By the end of the 18th century.

Lloyd’s had progressed into one of the first modern insurance companies.

In 1963 the astronomer Edmond Halley constructed the first mortality table,

based on the statistical laws of mortality and compound interest. The table, corrected

(1756) by Joseph Dodson, made it possible to scale the premium rate to age;

previously they had been the same for all ages.

Insurance developed rapidly with the growth of British commerce in the 17th

and 18th century. Prior to the formation of corporations devoted solely to the business

of writing insurance, policies were signed by a number of individuals, each of whom

wrote his name and the amount of risk he was assuming underneath the insurance

proposal, hence the term underwriter. The first stock companies to engage in

3

insurance were chartered in England in 1720, and in 1735, the first insurance

company in the American colonies was founded at Charleston, S.C. Fire insurance

corporations were formed in New York City (1787) and in Philadelphia (1794).

The Presbyterian Synod of Philadelphia sponsored (1759) the first life

insurance corporation in America, for the benefit of Presbyterian and their

dependents. After 1840, with the decline of religious prejudice against the practice,

life insurance entered a boom period. In the 1830s the practice of classifying risks

was begun.

The New York fire of 1835 called attention to the need for adequate reserves

to meet unexpectedly large losses; Massachusetts was the first state to require by law

(1837) to maintain such reserves. The great Chicago fire (1871) emphasized the

costly nature of fires in structurally modern cities.

Reinsurance, whereby losses are distributed among many companies, was

devised to meet such situations and is now common in other lines if insurance.

The Workmen’s Compensation Act of 1897 in Britain required employers to

insure their employees against industrial accidents. Public liability insurance, fostered

by legislation, made its appearance in the 1880s; it major importance with the advent

of the automobile.

In the 19th century, many friendly or benefit societies were founded to insure

the life and health of their members, and many fraternal orders were created to

provide low-cost, members-only insurance. Fraternal orders continue to provide

insurance coverage, as do most labor organizations. Many employers sponsor group

insurance policies for their employees; such policies generally include not only life

insurance, but sickness and accident benefit and old-age pensions, and the employees

usually contributed a certain percentage of the premium.

4

Since the late 19th century, there has been a growing tendency for the state to

enter the field if insurance, especially with respect to safeguarding workers against

sickness and disability, either temporary or permanent, destitute old age, and

unemployment.

The U.S. government has also experimented with various types of crop

insurance a landmark in this field being the Federal Crop Insurance Act of 1938. In

world War-2 the government provided life insurance for members of the armed

forces; since then it has provided other forms of insurance such as pensions for

veterans and for government employees.

5

History of Insurance Sector in India

The insurance sector in India dates back to 1818, when Oriental Life

insurance company was incorporated a Calcutta. Thereafter few companies like

Bombay Life Assurance Company, in 1983 and Triton Insurance Company for

general insurance in 1850 were incorporated and comprehensive legislation was

enacted in 1983.

The nationalization of life insurance business took place in 1956 when 245

Indian and foreign insurance provident societies were first merge and then

nationalized. It paved the way towards establishment of Life Insurance Corporation

and since than it has enjoyed a monopoly over the life insurance business in India.

General insurance followed the suit and in 1968 the insurance act was amended to

allow for social control over the general insurance business. Subsequently in 1973

non life insurance business was nationalized and the general insurance corporation in

its present form was incorporated in 1972 and maintains the very strong hold over the

non life insurance business in India. Due to concerns of:

a) Relatively low spread of insurance in the country,

b) The efficient and quality functioning of the public sector insurance

companies

c) The untapped potential for mobilizing long-term contractual saving funds

for infrastructure.

The Congress government set up as insurance reforms committee in April

1993. The committee submitted its report in January 1994, recommended a phased

program of liberalization, and called for private sector entry and restructuring of the

LIC and GIC. The United Front government moved an insurance bill but it did not

pass. The BJP government moved an insurance bill again in 1998, which had also to

6

be referred back to a select committee of parliament. But now the parliament has

given a nod to the insurance Regulatory and Development Authority

(IRDA) bill with some changes in the original structure.

The insurance scenario in India over the years

Post 1999: Prior to 1972:

Many insurance companies 107 companies

After 1972 nationalized setup with five companies

A comparison across countries shows that India is ranked 27th in mobilization

savings in the form of insurance. Also, investment of insurance funds is skewed in

India. Over 80 percent of insurance funds are invested in public sector, primarily in

government and government-backed securities. Note that this skew-ness is mainly the

result of investment rules established by the government.

The Indian insurance market is set up to touch USD 25 billion by 2010, on the

assumption for a 7 percent real annual growth 1 GDP. At the moment, thanks to the

state monopoly in the sector, India is ranked 23rd in terms of annual premium

collection and a merger 0.34 percent share. Out of one billion people in India, only 35

million people are covered by insurance. The industry today is characterized because

of absence of competition by high premiums and low returns. Life insurance funds

constitute approximately 10 percent of gross household saving in financial assets in

India. Moreover, India’s Life insurance premium as a percentage of GDP is just 1.4

percent. The state corporation has tapped only 22 percent of the insurable population

so far.

7

Role of Insurance in India`s future

1. Insurance would assist businesses to operate with less volatility and risk of failure

and provide for greater financial and societal stability from the growth pangs of

an estimated growth rate over 8 % in GDP

2. Government has arranged for disaster management and for funds . NGOs and

public institutions assist with fund raising and relief assistance. Besides

government provides for social security programs. There is considerable impact

upon government in these respects. Insurance substantially steps in to provide

these services. The effect would be to reduce the strain on the tax payer and assist

in efficient allocation of societal resources

3. Facilitates trade, business and commerce by flexible adaptation to changing risk

needs particularly of the burgeoning Services sector .

4. Like any other financial institution insurance companies generate savings from

the insurance sector within the economy and make available the same in well

directed areas of the economy deserving investments ; a sector with potential for

business as is the case with Indian insurance provides incentive to develop it all

the more faster

5. It enables risk to be managed more efficiently through risk pricing and risk

transfers and this is an area which provides unlimited opportunities in the Indian

context for consulting, broking and education in the post-privatisation phase with

newer employment opportunities

6. The insurance industry of its own accord is interested in loss minimisation. Its

expertise in understanding losses assists it to share the experience across the

economy thus enabling better loss control and preservation of national assets

7. In its risk pricing and investment decisions the insurance industry sets the tone for

investment by others in the economy. Informed assessment by the insurance

companies thus signals allocation of resources by others contributing to efficiency

8

in allocation. In India visibility of LIC and GIC have been dwarfed by

government’s actions and other high profile institutions like ICICI, IDBI and UTI.

Of late AIG is visible in the media and its investment announcements are being

followed keenly by institutional investors in India. ING Savings Trust and Zurich

are active in asset management and are being keenly followed by retail investors.

Dr.Skipper`s seven parameters goes a long way in asserting an active future for insurance

in the Indian economy.

India has reasonably well developed accounting, legal and supervisory institutions. These

support the requirements of the insurance market very well.Other support services are

expected to readily adapt to the new conditions of the emerging market.

INDUSTRY DETAIL IN INDIA

The story of insurance sector started year back in 1818 when the Oriental Life

insurance company was established in Calcutta. Subsequently the nationalization of

the insurance took place in 1956 when life insurance in India was established and

then GIC was nationalized in 1973. The existing potential for insurance market

prevailing in India is very high. Moreover the Indian middle class customers are like

the hot pie for the insurance company to grab. The study of privatization is traced,

which is the current story. It started way back in 1993 when the Malhotra Committee

was established on insurance sector reforms and deregulation set-up and ended in

February 20000 when the privatization of insurance bill was passed in the budget

session. The objective of privatization is to increase competition and provide good

quality products to the customer.

The IRDA has thus given stringent guidelines for the private companies,

banks and insurance agents. The financial aspects of insurance business have also

included. The financial details regarding the revenue recognition of the GIC and their

apportionment of expenses are also covered.

The economic value for a human life arises out of its relation to other lives.

Whenever continuance of life is financially valuable to other, either to family

9

dependents, business associates or educational and philanthropic situation the need of

life insurance is present.

Lets us consider a family of our four, which consists of man, a woman and

their two children. The earning member of the family works hard to get the money

flowing to meet the requirements of his family. They have plans to constructs their

own house in the next two years. Everything is going as per plan.

The various events, which can upset these plans, are:

• Burglary

• Death Accidental Permanent Disability

• Sickness

• Critical Illness

All these events are fortuitous in nature, i.e. they are out of control of the

family and more in the hands of destiny. Further, all these events can actually erode

the wealth of the family. In the order to reduce the element of risk to which this

family may be subjected and to safeguard their wealth or economic value, insurance

should be taken. Insurance ensures protection of economic value of assets. Assets are

insured against the risk of being destroyed or made non-functional due to any

accidental occurrence. There are two different branches of insurance-Life and Non-

Life insurance. While Life Insurance insures the life of a person, Non-Life insurance

insures everything else; in the above situation Life of a person will be covered under

Life insurance whereas Jewelry will be covered under Non-Life insurance.

The Life Insurance Scenario in India

Population: More than 1 Billion

Economy: 5th largest in the world in terms of Purchasing Power Parity (PPP)

GDP growth Rate: Over 6% per year on an average for the last decade

Savings Rate: Around 26% of GDP

Estimated middle class population: 300 Million

Insured population: 70 million only

10

Since 1956, with the nationalization of insurance industry, the state-run Life

Insurance Corporation of India (LIC) has held the monopoly in that country's life

insurance sector. General Insurance Corporation of India (GIC), with its four

subsidiaries, was its counterpart in the casualty sector. Over time, taking advantage of

its monopoly and virtual prerogative in establishing premiums, LIC has evolved into

a monolith. With around 600,000 agents in every nook and corner of the vast country,

it has created an enviable brand name, particularly among the rural population of the

country. It has around $40 billion as its life fund and is a strong player in the financial

sector. However, on the qualitative side, it has very little to take pride in. And there

lies the potential for foreign players to challenge this behemoth.

As is typical with monopolies, the premium rates charged by LIC are among

the highest in the world, and its track record in customer service can, at best, be called

shabby. With a huge unionized, rigid workforce mostly in the clerical category, LIC

runs the risk of high fixed cost, which will be the deciding factor in productivity in

the competitive scenario. While boasting full-scale automation of its operation, the

truth is that its technology is outdated. The new players, with the state-of-the-art

technology under their belt, will be in an advantageous position. 80% of LIC's

business is procured by 20% of its ill-trained agent force. The foreign player, with the

domestic partner's strong brand value, can test the unconventional distribution

channels like brokers, the Internet, the banking distribution system, etc. Although

foreign players may be tempted to keep their operation in the big cities for the

'creamy layer' of the society, the real market lies in rural India, which accounts for the

lion's share of LIC's present business. The foreign player must learn to adapt to Indian

realities. The well-publicized failures of world famous consumer goods companies

like Electrolux, Whirlpool, Reebok, Nike etc. to gauge the Indian psyche and

sentiments demonstrate the concept. They failed in the areas of realistic pricing,

product promotion and reaching to the consumer. The foreign companies need to

know the "ground realities" to the details.

Basic Principle of Insurance

11

The people who drive within the city and the people who drive in the

highways are grouped differently for risk classification. This stem from fundamental

principal underlying insurance that is, it has to be popular and fair.

Therefore people exposed to the same kind of risk are pooled together. People

facing the same risk make contribution to common fund. The assumption is that the

contribution to a common fund. The assumption is that the contribution made,

represents equal liability of risk happening to any of the individual based on part

experiences of the average number of people who suffer losses. Then incase, any

individual who is a part of pool suffers a loss, he is compensated from the common

fund.

How big is the insurance market?

Insurance is a Rs.400 billion business in India, and together with banking

services adds about 7% to India’s GDP. Gross premium collection is about 2% of

GDP and has been growing by 15-20% per annum. India also has the highest number

of life insurance policies in force in the world, and total invested funds with the LIC

are almost 8% of GDP. Yet more than three-fourths of India’s insurable population

has no life insurance or pension cover. Health insurance of any kind is negligible and

other forms of non-life insurance are much below international standards.

a) To tap the vast insurance potential and to mobilize long-term savings we need

reforms which include revitalizing and restructuring of the public sector

companies, and opening up the sector to private players. A statutory body need to

be made to regulate the market and promote a healthy market structure. Insurance

Regulatory Authority (IRA) is one such body, which checks on these tendencies.

IRA role comprises of following three functions:

(a) Protection of consumer’s interest.

(b) To ensure financial soundness and solvency of the insurance industry,

and

12

(c) To ensure healthy groth of the insurance market.

Three Questions about Insurance Liberalization

Why open up the Insurance Industry?

An insurance policy protects the buyer at some cost against the financial loss

arising from a specified risk. Different situations and different people require a

different mix of risk-cost combinations. Insurance companies provide these by

offering schemes of different kinds.

Unfortunately the concept of insurance is not popular in our country. As per

the latest estimates, the total premium income generated by life and general insurance

in India is estimated at around a meagre 1.95% of GDP. However India’s share of

world insurance market has shown an increase of 10% from 0.31% in 1996-97 to

0.34% in 1997-98. India’s market share in the life insurance business showed a real

growth of 11% thereby outperforming the global average of 7.7%. Non-life business

grew by 3.1% against global average of 0.20%. In India insurance spending per capita

was among the lowest in the world at $7.6 compared to $7 in the previous year.

Amongst the emerging economies, India is one of the least insured countries but the

potential for further growth is phenomenal, as a significant portion of its population is

in services and the life expectancy has also increased over the years.

The nationalized insurance industry has not offered consumers a variety of

products. Opening of the sector to private firms will foster competition, innovation,

and variety of products. It would also generate greater awareness on the need for

buying insurance as a service and not merely for tax exemption, which is currently

done. On the demand side, a strong correlation between demand for insurance and per

capita income level suggests that high economic growth can spur growth in demand

13

for insurance. Also there exists a strong correlation between insurance density and

social indicators such as literacy. With social development, insurance demand will

grow.

Three key, questions that impinge on liberalization of insurance business in

India. Are: why liberalize, what market structure to have finally, what role for

regulator

What should be the market structure?

In this section, we analyze the question whether there should be unlimited

private entry insurance markets or whether only a few players are allowed to operate.

This question hinges around the issue of "adverse selection" described

below. Individuals buying an insurance contract pay a price (called the

"premium") to the insurance company and the insurance company in turn provides

compensation if a specified event occurs. By making such contractual arrangements

with a large number of individuals and organizations the insurance company can

spread the risk. This gives insurance its "social" character in the sense that it entails

pooling of individual risks. The price of insurance i.e., the premium is based on

average risk. This premium is too high for people who perceive themselves to be in a

low risk category. If the insurer cannot accurately determine the risk category of

every customer and prices insurance on the basis of average risk, he stands to lose all

the low risk customers. This in turn increases the average risk, which means premium

have to be revised upwards, which in turn drives away even more customers and so

on. This is known as the problem of "adverse selection". Adverse selection problem

arises when a seller of insurance cannot distinguish between the buyer's type i.e.,

whether the buyer is a low risk or a high type. In the extreme case, it may lead to the

complete breakdown of insurance market.

Another phenomenon, the problem of "moral hazard" in selling insurance,

arises when the unobservable action. Of buyer aggravates the risk for which insurance

is bought. For example, when an insured car driver exercises less caution in driving,

14

compared to how he would have driven in the absence of insurance, it exemplifies

moral hazard.

Given these problems, unbridled competition among large number of firms is

considered detrimental for the insurance industry. Furthermore, even the limited

competition in insurance needs to be regulated. Insurance companies can differentiate

among various risk types if there is a wide difference in risk profile of the buyers

insuring against the strong insurers. It also called for keeping life insurance separate

from the general insurance. It suggested the regulation of insurance intermediaries by

IRA and the introduction of brokers for better ‘professionalisation'.

The Insurance Potential

The main reason why the leading insurance companies in the world and the

leading corporate group in India have shown a keen interest in the insurance sector, is

the vast potential for future business. Restricted, as the market has been, through the

operations of the two monopolies (LIC and GIC), it is generally felt that the sector

can grow exponentially if it is opened up. The decade 1987-97 has witnessed a

compounded growth rate of marginally more than 10% in life insurance business. LIC

predicts for itself that its business has potential to grow by 16.27% p.a. in a decade

1997-2007 (LIC, 1997). If we take a look at insurance coverage index for the age

group of 20-59 years a considerable gap between India and other countries in Asia an

be observed. In this scenario, naturally insurance companies see a vast potential.

INDIVIDUAL LIFE INSURANCE COVERAGE INDEX,1994

Country(No. of policies per 100 persons)

Indonesia 2.0

Philippines 5.6

India 12.4

Thailand 14.7

15

Source: Charted Financial Analyst May 1999. (Insurance in Asia: The financial times,

quoted from Tillinghast study)

The Present State Of Affairs

YearSu Sum assured and bonus

(Rs. Crore)

No. of policies (lacs) Premium

income(Rs. Crore) 1992-93

178120 566.79 7146.24 1993-94

208619 608.73 8758.19 1994-95

254572 655.29 10384.91 1995-96

295758 709.60 12093.63 1996-97

344619 777.50 14499.50

Source: Charted Financial Analyst May 1999.

16

Source: Charted Financial Analyst May 1999.

Source: Charted Financial Analyst May 1999. (Associated Market Quest)

Why allow entry to private players?

The choice between public and private might amount to choosing between the

lesser of two evils. An insurance contract is a "promise to pay" contingent on a

specified event. In the case of insurance and banking, smooth functioning of business

depends heavily on the continuation of the trust and confidence that people place on

the solvency of these financial institutions. Insurance products are of little value to

consumers if they cannot trust the company to keep its promise. Furthermore, banking

and insurance sectors are vulnerable to the "bank run" syndrome, wherein even one

insolvency can trigger panic among consumers leading to a widespread and complete

breakdown. This implies the need for a public regulator, and not public provision of

insurance. Indeed in India, insurance was in the private sector for a long time prior to

independence. The Life Insurance Corporation of India (LIC) was formed in 1956,

when the Government of India brought together over two hundred odd private life

insurers and provident societies, under one nationalized monopoly corporation, in the

Group Insurance and superannuation

No. of Schemes No. of Members

Group

Insurance

Superannuation Group

Insurance

Superannuation

1992-93 59128 3040 212.54 2.69 43086.83

1993-94 64426 3314 227.31 3.14 46742.95

1994-95 71726 3642 241.88 3.54 51034.71

1995-96 75592 3977 246.49 4.19 64651.54

1996-97 78372 4349 238.97 5.54 64606.60

17

wake of several bankruptcies and malpractice’s'. Another important justification for

Nationalization was to raise the much-needed funds for rapid industrialization and

self-reliance in heavy industries, especially since the country had chosen the path of

state planning for development. Insurance provided the means to mobilize household

savings on a large scale. LIC's stated mission was of mobilizing savings for the

development of the country and also conducting business in the spirit of

1. 1 A comprehensive historical account of Life insurance business in India and LIC

in particular is provided in LIC (1970) and LIC (1991) respectively.

2. 2 This latter emphasis on trusteeship was relevant then, in light of major

insolvencies and fraudulent practices of so many private insurance companies

prior to 1956.

Trusteeship

The non-life insurance business was nationalized in 1972 with the formation

of General Insurance Corporation (GIC). Thus the fact that insurance is a state

monopoly in India is an artifact of recent history the rationale for which needs to be

examined in the context of liberalization of the financial sector. If traditional

infrastructure and "semi-public goods" industries such as banking, airlines, telecom,

power, and even postal services (courier) have significant, private sector presence,

continuing a state monopoly in provision of insurance is indefensible. This is not to

deny that there are some valid grounds for being cautious about private sector entry.

Some of these concerns are:

(a) That there would be a tendency of private companies to "skim" the

markets; thus private players would concentrate on the lucrative mainly urban

segment leaving the unprofitable segment to the incumbent LIC.

(b) That without adequate regulation, the funds generated may not be

deployed in sectors (which yield long-term social benefits), such as infrastructure and

public goods; similar without regulation, private firms may renege on their social

sector investment obligations. Meeting these concerns requires a strong regulatory

18

body. Another commonly expressed fear is that there would be massive job losses in

the industry as a whole due to computerization. This however does not seem to be

corroborated by the countries' experience'.

Moreover, apart from consideration based on theoretical principles alone,

there is sufficient evidence that suggests that introduction of private players in

insurance can only lead to greater benefits to consumers. This can be seen from the

fact that the spread in insurance in India is low compared to international

benchmarks. The two convention measures of the spread of insurance are penetration

and density. The former measure (premiums per unit) of GDP, and the latter,

premiums per capita. Less than 7% of the, population in India has life insurance

cover. In Singapore, around 45 per cent of the people are covered and in Japan, this is

close to 100 per cent. In the US, over 81 per cent the households have insurance

cover. India has the biggest life insurance sector in the world if we go by the number

of policies sold, but the number of policies sold per 10 persons is very low.

The demand for insurance is likely to increase with rising per-capita incomes,

rising literacy rates and increase of the service sector, as has been seen from the

example of several other developing countries. In fact, opening up of the insurance

sector is an integral part of the liberalization process being pursued by many

developing countries. After Korean and Taiwanese insurance sectors were liberalized,

the Korean market has grown three times faster than GDP and in Taiwan the rate of

growth has been almost 4 times that of its GDP. Philippines opened up its insurance

sector in 1992. There are several other factors that call for private sector presence.

Firstly, a state monopoly has little incentive to innovate or offer a wider range of

products. This can be seen by a lack of certain products from ll.’s portfolio, and lack

of extensive risk categorization in several GIC products, such as health insurance. In

fact, it seems reasonable to conclude that many people buy life insurance just for the

tax benefits, since almost 35 per cent of the life insurance business is in March, the

month of financial closing. This suggests that insurance needs to be sold more

vigorously. More competition in this business will spur firms to offer several new

products, and more complex and extensive risk categorization. The system of selling

19

insurance through commission agents needs a better incentive structure, which a state

monopoly tends to stifle. For example LIC pays out only 5 per cent of its income as

commissions, whereas this share in Singapore is 16 per cent, and in Malaysia it is

close to 20 percent.

Private sector presence will also mean that the current investment norms,

which tie up almost 75 per cent of insurance funds in low yielding government

securities, will have to go. This will result in more proactive and market oriented

investment of funds. This needs to be tempered by prudential regulation to ensure

solvency'. Of course, this also implies that cross-subsidizing across policyholders of

different types that is seen both in life and non-life insurance will diminish. Since

public sector firms are required to sell subsidized insurance to weaker sections of

society, a separate subsidy mechanism will have to be designed. The India

Infrastructure Report (GOI, 1996) estimates that the funds required in the next two

decades are more than Rupees 4000 billion.

Finally, private sector entry into insurance might be simply a fiscal necessity.

Since large scale funds form long term contractual savings need to be mobilized,

especially for investment in infrastructures the option of not having more (private)

players in the insurance sector is too costly.

Effects of international players in domestic market:

1. The new entrants cannot compete with the state owned LIC on price alone. Due to

its size, LIC operates at very low costs and their premium on policies that offer

pure protection are on a par with comparable scheme across the globe. What the

new insurance companies will probably offer is higher returns than the annualized

9-10% one can hope the earn from LIC’s policies. These will put pressure on LIC

to offer more effective returns.

2. Consumers can also expect product innovations. For instance, at present, LIC

provides cover for permanent disability and what the new companies could offer

is temporary disability insurance as well.

20

3. Apart from the basic tern insurance, most insurance product worldwide are sold as

long term investment opportunities with the protection component being clearly

spelt out in the scheme.

4. LIC’s policies are not flexible according to customer needs. New entrants have

planned to offer universal life and variable life insurance products that allow the

holder flexibility in deciding how his premium are split between protection and

savings. New products would also enable product combination that allows greater

customization.

5. Private insurers would compete furiously on the service platform. These would

not only include faster claims settlement and other after sales service but their

agents would be trained in pre-sales interaction to usher in a customer-oriented

approach. They would be better known for assisting clients in financial planning.

6. Foreign companies would also use superior software (like APEX) that will give

them an edge over the in-house LIC software. This technology will help private

insurers in product development and customizing products to suit individual

needs.

7. The foreign players will probably introduce a lot of innovation and competition

on surrender value. LIC pays surrender value only after three years but private

insurance companies are likely to offer sops by way of better and timely surrender

value to clients.

8. Access to insurance too will probably become more wide spread. Role of

intermediaries would decrease and sale of insurance through direct channels and

banks would increase. Simple products like term insurance might be sold through

the telephone or direct mail to high net worth clients.

9. In reaction to foreign player’s strategies one might expect domestic players to

react and drop its premium and upgrade its services.

21

Companies must have two wings

Indian Company/ Group Foreign Collaborator

ICICI Prudential

Kotak Mahindra Old Mutual

Bajaj Allianz Holding, Germany

Sundaram Finance Winterthur

SBI Alliance Capital

SPIC Metlife

20th century Canada life

Tata Group American Investment Group, USA

Birla Group Sun life, Canada

Hindustan Times Commercial Union, UK

Ranbaxy Cigma, USA

HDFC Standard life, UK

Bombay Dyeing General Accident, UK

DCM Shriram Royal Sum Alliance, UK

Dabur Group Liberty Mutual Fund, USA

Max Newyork life

Godrej J. Rothschild, UK

Sanmar group Glo, Australia

22

Cholamandalam Gurdian Royal Exchange, UK

ITC Eagle star, UK

S K Modi Group Legal and General, Australia

S K Modi Group QBE, Australia

Vysya Bank ING Insurance

ILFS CIGNA

Role of Insurance Companies

Insurance companies have a distribution network for selling life insurance

products and with a little additional input such as the training the same sales force can

sell pensions quickly and adequately. Product packaging could take away the

complexities of pension regulators and tax treatment by packaging in such a way that

the employee only has to sign on the form at the bottom. Pension funds require

copious records and the insurance company can handle all such record keeping. Apart

from simplification of product packaging, insurance companies are able to offer

pension with a life insurance cover with the employee benefit needs attached so that

he employer can buy from the same source. And when the person retires the employer

will be able to pay the benefits and the annuities that have accrued during the persons

working lifetime.

23

History of ICICI

The Industrial Credit and Investment Corporation of India Limited

(ICICI) was incorporated in 1955, at the initiative of the World Bank, the

Government of India and representatives of Indian industry, with the objective of

creating a development financial institution for providing medium-term and long-

term project financing to Indian businesses. Mr.A.Ramaswami Mudaliar elected as

the first Chairman of ICICI Limited. ICICI emerges as the major source of foreign

currency loans to Indian industry. Besides funding from the World Bank and other

multi-lateral agencies, ICICI also among the first Indian companies to raise funds

from International markets.

In 1956 ICICI declared its first Dividend at 3.5%.

In 1958 Mr.G.L.Mehta was appointed the 2nd Chairman of ICICI Ltd.

In 1960 ICICI building at 163, Backbay Reclamation was inaugurated.

In 1961The first West German loan of DM 5 million from Kredianstalt was

obtained by ICICI.

In 1967 ICICI made its first debenture issue for Rs.6 crore, which was

oversubscribed.

In 1969First two regional offices in Calcutta and Madras were opened.

In 1972 it became the Second entity in India to set-up merchant banking

services. Mr. H. T. Parekh appointed as the third Chairman of ICICI.

24

In 1977 ICICI sponsors the formation of Housing Development Finance

Corporation. Managed its first equity public issue.

In 1978 Mr. James Raj appointed as the fourth Chairman of ICICI.

In 1979 Mr.Siddharth Mehta appointed as the fifth Chairman of ICICI.

In 1982 became the first ever-Indian borrower to raise European Currency

Units. ICICI commences leasing business.

In 1984 Mr. S. Nadkarni appointed as the sixth Chairman of ICICI.

In 1985 Mr.N.Vaghul appointed as the seventh Chairman and Managing

Director of ICICI.

In 1986 ICICI became the first Indian Institution to receive ADB Loans.

ICICI along with UTI set up Credit Rating Information Services of India Limited,

(CRISIL) India's first professional credit rating agency. ICICI promotes Shipping

Credit and Investment Company of India Limited. (SCICI). The Corporation made a

public issue of Swiss Franc 75 million in Switzerland, the first public issue by any

Indian equity in the Swiss Capital Market.

In 1987 ICICI signed a loan agreement for Sterling Pound 10 million with

Commonwealth Development Corporation (CDC), the first loan by CDC for

financing projects in India.

In 1988 ICICI promotes TDICI - India's first venture capital company.

In 1993 ICICI sets-up ICICI Securities and Finance Company Limited in joint

venture with J. P. Morgan. ICICI sets up ICICI Asset Management Company. ICICI

sets up ICICI Bank.

In 1994 ICICI becomes the first company in the Indian financial sector to

raise GDR.

In 1996 ICICI announces merger with SCICI. Mr.K.V.Kamath appointed the

Managing Director and CEO of ICICI Ltd. ICICI was the first intermediary to move

away from single prime rate to three-tier prime rates structure and introduced yield-

curve based pricing.

In 1997 The name "The Industrial Credit and Investment Corporation of India

Limited " was changed to "ICICI Limited". ICICI announces takeover of ITC Classic

25

Finance. Introduced the new logo symbolizing a common corporate identity for the

ICICI Group.

In 1998 ICICI announces takeover of Anagram Finance. ICICI launches retail

finance - car loans, house loans and loans for consumer durables.

In 1999 ICICI becomes the first Indian Company to list on the NYSE through

an issue of American Depositary Shares. ICICI Bank becomes the first commercial

bank from India to list its stock on NYSE.

In 2000 ICICI Bank announces merger with Bank of Madura. The Boards of

ICICI Ltd and ICICI Bank approved the merger of ICICI with ICICI Bank.

1n 2001 Moodys' assign higher than sovereign rating to ICICI.

In 2002 Merger of ICICI Limited, ICICI Capital Services Ltd and ICICI

Personal Financial Services Limited with ICICI Bank.

COMPANY PROFILE

ICICI and Prudential came together in 1993 to form Prudential ICICI Asset

Management Company, which has today emerged as one of the leading mutual funds

in India. The two companies bring together two of the strongest financial service

brands in Asia, known for the professionalism, excellent quality of service and long

term commitment to us. Riding on the success of this relationship, the tow companies

joined hands once more in 2000, to form ICICI Prudential Life Insurance, with a

commitment to provide leading-edge life insurance solutions.

ICICI Bank has 74% stake in the company, and Prudential plc has 26%

ICICI Prudential Life Insurance Company is a joint venture between ICICI

Bank, a premier financial powerhouse and Prudential plc, a leading international

financial services group headquartered in the United Kingdom. ICICI Prudential was

amongst the first private sector insurance companies to begin operation in December

2000 after receiving approval from Insurance Regulatory development Authority

(IRDA)

26

ICICI Bank:

ICICI Bank (NYSE: IBN) is the largest private sector bank in the country with

an asset base of over INR 1000 Billion. The bank offers a broad spectrum of financial

services to individuals and companies including deposit accounts, commercial

banking, mortgages car loans, corporate and trade finance, credit and debit cards and

other banking services. ICICI Bank today services a growing customer base of more

than 5 million customer accounts and 5 million bondholder accounts across the

country thought a multi-channel access network. This includes over 400 branches and

extension counters, 120 retail centers, 1005 ATMs, call centers and internet banking.

For the year ended March 31, 2002, ICICI Bank posted a net profit of INR 2.58

billion. ICICI Prudential clocks growth of 170% in H1 of FY04

Salient Features

• One of the largest private sector bank and financial institution in India.

• Founded in 1955 by the Government of India and the World Bank.

• Today ICICI is in every field of finance-banking, project finance, e-commerce,

venture capital, InfoTech retail finance, portfolio management, mutual funds, life

insurance, and general insurance,.

• Financial for the year 2003-2004were :

• ICICI Prudential in 4 new bank assurance tie-ups

• ICICI Prudential first private life insurer to cross Rs 10,000 crore sum assured

Premium income soars to Rs. 184 crore; buoyed by unit-linked products

• in the period April-September 2003, clocking a growth of 170% over premium

income of Rs 68 crore in the corresponding period of the previous year (Apr-Sept

2002)

• ICICI Prudential issued nearly 114,000 policies during the period, compared to

77,183 policies during the same period last year.

27

• The company has also shown an impressive sequential growth of 65 per cent in

Q2 (Jul-Sep '03) over Q1 (Apr-Jun '03). It gathered Rs. 114 crore of premium in

Q2 and Rs. 69 crore in Q1 (in WAPI terms

• Net worth in excess of 9000 crores.

• Assets in excess of 73400 crores +.

• Better than sovereign rating (Moody’s)

• ICICI has always been ahead in providing the clients with quality services and

products. People feel proud to do business with ICICI.

• First Indian company to be listed on New York Stock Exchange.

• Trusted by million of Indian’s over the years

Salient Features of Prudential

• Prudential was founded in 1848 and from since it remained a pioneer insurance

service provider.

• Presence in UK and throughout Asia.

• One of the largest Insurance Company in the UK.

• Investor deposit base in U.K. alone exceeds Rs 53200 crores

• Has over US $270 billion under management.

• 4th largest life insurance company in terms of revenues in the world.

• Already established as one of the biggest mutual fund companies in India

(Prudential ICICI AMC).

• Solid reputation builds over 150 years.

• Over 75 years of experience in Asia.

• Operating in 11 countries in South East Asia.

• A truly global brand.

“One-stop shop for all financial requirements of an investor.”

28

29

Vision:

To make ICICI Prudential the dominant Life and Pension player built on trust by

world-class people and service.

This we hope to achieve by:-

• Understanding the need of customers and offering them superior products and

service.

• Leveraging technology to service customers quickly, efficiently and

conveniently.

• Developing and implementing superior risk management and investment

strategies to offer sustainable and stable returns to our policyholders.

• Providing an enabling environment to foster growth and learning for our

employees.

• And above all, building transparency in all our dealing.

The success of the company will be founded in its unflinching commitment to

5 core value—Integrity, Customer First, boundary less, Ownership and Passion. Each

of the values describes what the company stands for, the qualities of our people and

the way we work. We do believe that we are on the threshold of an exciting new

opportunity, where we can play a significant role in redefining and reshaping the

sector.

Given the quality of our parentage and the commitment of our team, there are

no limits to our growth.

30

COMPANY ANALYSIS

ICICI Prudential Life Insurance Company has mopped up a premium income

of Rs 348 core for the year ended march 31, 2003, reflecting a 200 percent growth

over the corresponding period last year. It has sold 2, 46,827 policies during the year,

against one-lakh policies sold in fiscal 2002.

Total sum assured increase more than six fold to Rs. 6,005 crore .

ICICI Prudential has corned about 40 per cent of the private sector insurance market,

which today accounts for 10 per cent of incremental sales of the entire industry.

ICIC Prudential chief marketing officer Saugato Gupta attributed the growth

in performance to its distribution ramp-up the ICICI brand, its customer-centric focus

and its product portfolio. ‘People believe in the ICICI brand and with our distribution

happening correspondingly, it had helped increase sales, ‘said Gupta.

The private insurer doubled its reach to 25 towns from 12 cities last year. The

company’s strategy to push need-based selling ands tackle the concept of under-

insurance in the country further helped it push up the average tickle size with the

average sum assured crossing Rs 2 lakh.

‘Our average premium today is Rs 11,500-12000 against Rs 8000-9000 last

year,’ said Gupta. This, he said, is about 40 per cent higher than the industry average

premium. Majority of the 1-2lakh policies sold by ICICI prudential in the last quarter

of fiscal 2003 were pension and unit-linked plans, said Gupta.

Pension products today accounts for 25 per cent of its total sales, giving ICICI

Prudential an overall industry share of 23-25 per cent.

31

“Customer are not buying pension products solely to save on tax as our

average ticket size is about Rs 120000, said Gupta. Under section 80CCC of the

income Tax Act, investment in pension plans up to Rs 10,000 offer taxpayers a direct

deduction from one’s taxable income.

Gupta added that even as the company has moved to smaller towns and cities,

‘our ticket size continues to be above the industry average’. This is despite ICICI

Prudential continuing to be a mass player and not a niche player unlike some of its

counterparts.

32

33

LIFE INSURANCE

Why Life Insurance?

We all hope to live a full life till a ripe old age. To do the very last for our

parents and watch our children stand on their own feet. But what if fate cuts life

short? Who would pay for our children’s education? Their marriage? Ensure life’s

continuity for them. Why not plan for life’s adversities? What if a sudden disability or

illness puts us out of action if we were unable to attend office for a while? Who

would take care of all the medical expenses? Who would pay the mounting household

bill? Should these adversities occur, are we equipped to face the situation? Where

would we get the money to face the crisis? Would life continue smoothly for our

children? Why not plan to protect and provide for them? Since we have no control

over life’s ebbs and flows, why not do something over which we do have control.

Do we need life insurance?

Life is most valuable asset. This is easily proved f we were to assign a

monetary value to life. This value depends on income-earning potential or Human

Life Value. Our income supports our family. Helps them to get the most out of life.

Month after month, year, we and our dependents live the best way we can using the

money we earn. This money enables our household to run smoothly, our children to

go to college, take care of the medical bills, our vacations and help maintain our life

style. On the basis of our income or earning potential, we can calculate our Human

Life Value. A simple rule of thumb to compute it is as follows: multiply our present’s

annual income by the number of years until we plan to retire.

Protecting Our Most Valuable Asset

If something were to happen to us, here are a few possible ways of dealing

with the financial implications:

1) Draw from our savings: but how long would the funds last? A lifetime of

savings could be used up in few months.

34

2) Borrow from others: who will lend us the money? Even family and friends

can only help to an extent. And anyway, this would only be a short-term solution.

3) Sell our assets: what price will we get for our assets? Would we like to sell

our home? Our car?

4) Transfer the risk to an insurance company.

This recommends that we have to transfer the risk to an insurance company.

It’s cheaper, safer and smarter in the long run. If we insure the risk our money

outflow is actually miniscule. For the sake of illustration, an annual premium payout

of approx. Rs25 for 15 years guarantees our family will receive Rs1000-if something

happens to we in that period. A smaller sum is payable for transferring the risk of

disability. Another advantage of transferring the risk is that we remove the

uncertainty. So do take steps to protect our most valuable assets, our Life!

How Much Insurance Do We Need?

Once we have decided to buy insurance the pertinent question is how much to

insure for? This calculation depends on our yearly income our estimated expenses and

our existing assets.

What If We Already Have Life Insurance?

They say “Change is only constant in the world”. We have to adjust to life’s

changes. And accordingly provide for protection of our family and make provisions

for unforeseen circumstances. The amount of protection and provision we require

depends on our life stage. You should re-evaluated our needs for protection and make

provision whenever there is a;

Change in our life stage

While our protection needs may be comparatively less when we re single, they increase

when we have children. Re-evaluated our insurance needs at the following life stages:

• Our marriage

• The birth of child

35

• Schooling of child

• College education of child

• Marriage of child

• Retirement

Change in our life needs:

Our provision needs may suddenly increase should such a circumstance happen:

• Taking care of an ailing child

• Taking care of an aged relative

• Fighting an illness

• Buying a bigger house, etc.

Change in our lifestyle

Insurance needs change with changes in our lifestyle. We may like to increase our cover

when there has been a steady rise in our income, or we have received a sudden windfall

and we can put it aside as tax-deferred savings for retirement.

Insurance: especially for customers

When we are young and just starting out, there’s a lot we have to put together. Get

married, get a house, get it furnished, start a family… these may or may not currently be

some of our life needs. But then as time goes by we changes… and so do our needs! At

ICICI Prudential we understand that different people have their own sets of needs at

various stages of their lives. That’s why we offer a choice of solutions…depending on

whether we are a young individual planning for the years ahead or an established

professional planning for our retirement.

36

PRODUCTS DETAILS

• Saving Plans

• Protection Plans

• Child Plans

• Retirement Plans

• Investment Plans

• Group Plans

• Add-on Benefits

Savings Plans:-

Most endowment policies are a good way of saving for the future. A policy can be

designed to make your savings grow and have them available to you at the end of a fixed

number of years. Or, a policy could provide you with an income every three or four

years.

You can browse through these policies to find one that best suits your needs:

• SecurePlus - an insurance plan that gives added protection savings and multiple

options, all in one!

• CashPlus - an insurance plan that gives added protection savings, multiple

options, plus the power of liquidity.

• LifeTime II - a complete market-linked insurance plan that adapts itself to your

changing protection and investment needs, throughout a lifetime.

• Save'n' Protect - a traditional endowment savings plan that offers both high

returns and protection.

• CashBak - an endowment savings plan that allows you to get back substantial

survival benefits without having to wait till the maturity date.

37

Depending on your particular needs, Savings Plans could allow you to do one or

more of the following:

• Plan For Tangibles: buy that fashionable car, that huge refrigerator, etc.

• Plan For A Cosy Nest: by facilitating the purchase of those homes you have

always dreamt of.

• Plan For Milestones: ensure a good education for your children, children's

wedding, etc.

• Save on Deferred Taxes: because the interest income and maturity benefits of

the Policy are tax exempt.

• Lifestyle Planning: maintain your lifestyle - even if your income was to reduce

in the future.

• Legacy Creation: buy property, invest in shares, bonds, etc. for your children or

grandchildren.

Attain Greater Heights: ensure that your children's education continues undisrupted.

ICICI Pru LifeTime

Suitability

• This policy is a long-term market linked total protection plan. The plans

offer protections for life at the same time allows the policyholder to get

market linked returns. It is a single product combining the benefits of both

an investment product and insurance plan. This apart, the product offers a

lot of flexibility.

Salient Features

• Death benefit will be a multiple of premium paid.

• Premium paid will be invested in the fund chosen (growth, balanced or

income fund)* after deducting mortality charges and administrative

expenses.

• Policy holder has the option to vary the amount of insurance protection

vis-à-vis investment while maintaining the same premium.

38

• The returns depend on the plan chosen- growth, balanced and income and

one can switch from one fund to another depending on the financial

priorities. Once in a year switching is done free of cost.

• Benefits can be enhanced by adding Accident & Disability Benefit, Major

Surgical Assistance, Critical Illness benefits at a nominal extra premium.

• Entry into the plan will be based on the Unit Value applicable on the date

of policy issue. The amount of premium towards death benefit decreases

with the increase in the value of the units.

• One has the flexibility to increase the death benefit by 25% subject to a

maximum of Rs.250, 000 once in three years without any underwriting.

Death benefit can be increased beyond this limit with underwriting.

• Apart from the above the policy holder can increase the death benefit at

different stages of life such as Marriage, birth of first child and birth of

second child. This is irrespective of when the last increase was done.

• One can decrease the death benefit in the multiple of Rs.100, 000.

However a minimum death benefit of Rs.100, 000 has to be maintained.

• Policy holder has the option to increase the investment by the way of top

ups with a lump sum payment at any time

• If after at least 3 years payments are made and then unable to pay the

subsequent premiums, the cover under the policy will continue and the

premiums towards the life cover and riders will be debited from the unit

fund.

Growth Plan

• If high growth is your priority this is the plan for you. You can enjoy long-

term capital appreciation from a portfolio that is invested primarily in

equity and equity-related securities.

Income Plan

• If on the other hand your priority is steady returns, you can opt for the

Income Plan. Here you can accumulate a steady income at a low risk

across a medium to long term period.

39

Balanced Plan

• If you prefer a balance of growth and steady returns choose our Balanced

Plan. This would ensure that your portfolio is invested in equity and

equity-linked securities as well as in fixed income securities.

Benefits On Death

• In the event of death of the policyholder, beneficiaries will be paid the

higher of death benefit and value of the units.

On survival

• There is no maturity period and policy holder has the option to withdraw

units under the plan at anytime after the policy has been in force for three

years.

Riders

Accident & disability benefit

• Waiver of future premiums

• 10% of SA each year for 10 years in case of permanent total disability

• Additional SA, if death is due to an accident while travelling as a

passenger in train or bus.

Critical illness benefit

• 9 medical conditions are covered. On admission of a claim, full SA + GA

+ VB is paid and policy contract terminates with all riders ceased. Claim

under this rider is not admissible during first six months of the policy.

Major Surgical Assistance

• 43 surgical procedures are covered

1. Major Surgical Procedure - 50% of SA

2. Intermediate Surgical Procedure - 30% of SA

3. Minor Surgical Procedure - 20% of SA

• Claims can be made for more than one surgical procedure, subject to a

maximum of 50% of SA, claim under this rider is not allowed during first

6 months of the policy

40

Other Conditions

• Minimum age at entry: 0 years

• Maximum age at entry: 60 years (completed years)

• Minimum premium : Rs.18,000 per annum

• Minimum sum assured under riders : Rs.100,000

• Maximum Sum assured under riders : Rs.10,00,000

41

Child Plans

As a responsible parent, you will always ensure a hassle-free, successful life for

your child. However, life is full of uncertainties and even the best laid plans can go

wrong. Here's how you can give your child a 100% safe and assured tomorrow, whatever

the uncertainties. Smart Kid Child Plans are designed to provide flexibility and to

safeguard your child's future education and lifestyle, taking all possibilities into account.

Presenting SmartKid Child Plan. Leave nothing to chance

Smart Kid

As parents, your biggest concern is that of securing the future of your child. In today's

world, with ever increasing competition, escalating cost of education and uncertain

financial markets, it is very important to plan for your child's future.

Presenting SmartKid - a plan which gives your child the freedom to pursue their

dreams, the strength to face challenges, the guarantee to live life to its fullest…

whatever be the uncertainty.

What is SmartKid?

It is a plan that provides guaranteed benefits to your child along with life insurance

cover. SmartKid is so designed that it provides money at all the critical milestones in

his/her life, whatever are the uncertainties.

Who can purchase this policy?

Parents (between 20-60 years) with children in the age group of 0-12 years can

purchase this policy. You have the flexibility to choose the exact age of the child

(between 22 to 25 years), at which the policy is to mature.

42

Imagine that you are 32 years old and your child is 5 years old and you want the

product to mature when he/she is 22 years old. You also have the option to choose

between two structures of payout of benefits.Structure 1:

At the end of

Child's Age

% of Sum Assured

Needs met

10th year of policy

(Term-7)

15 years

20% of SA*

Extra tuition, preparation for professional courses, change of school or college.

12th year of policy

(Term-5)

17 years

25% of SA*

Join a professional college or graduation college.

15th year of policy

(Term-2)

20 years

25% of SA*

Higher studies or post graduation

17th year of policy (Term)

22 years

30% of SA*

+Guaranteed Additions + Vested Bonus

43

Structure 2:

At the end of Child's Age that is while the maturity period is near % of Sum Assured

Needs met

13th year of policy

(Term-4)

18 years

25% of SA*

Extra tuition, preparation for professional courses, change of school or college.

14th year of policy

(Term-3)

19 years

20% of SA*

Join a professional college or graduation college.

15th year of policy

(Term-2)

20 years

20% of SA*

Graduation

16th year of policy (Term-1)

21 years

20% of SA*

Graduation

17th year of policy (Term)

22 years

20% of SA* + Guaranteed Additions + Vested Bonus

44

Sum Assured

The plan provides with a guaranteed addition (GA) of 3.5% compounded annually for

the first 4 years of the plan and bonuses thereafter (Vested bonuses) applicable as per

the performance of the company.

Why should you buy SmartKid?

Because SmartKid ensures that you have total peace of mind as far as your child's future

is concerned.

In the event of death of the Life Assured:

• Sum Assured of the plan is paid immediately - assists the family in meeting the

unforeseen expenses incurred because of the unfortunate loss.

• Waiver of Premium - no future premium are payable, thereby ensuring that your

family is not burdened financially.

• Educational benefits, guaranteed - which means that the future of the child

remains secure.

Thus, there will be no financial obstacle in realizing the dream which the parent or

child had.

What are add-on options that you will have with SmartKid?

With SmartKid you have the option of taking two add-ons –

• Income Benefit Rider

• Accident and Disability Benefit Rider

• Accident Benefit Rider

What are the options for premium payment?

Mode of payment: Monthly, half-yearly and yearly.

45

Specifics about SmartKid?

*Minimum premium: Rs. 8,400/- per year

*Sum Assured: From Rs.100,000/- to Rs.3,000,000/-

*Maximum limit under Income Benefit Rider: Rs.1,000,000/-

* Maximum limit under Accident and Disability Benefit Rider: Rs.1,000,000/-

How can I pay my premiums?

You can opt for the yearly, half - yearly & monthly mode of premium payment. The

monthly mode is only available through ECS (Electronic Clearing Service)

What tax benefits will you get?

Tax benefits are available under Sec 88 and Section 10 (10D), as per the prevailing

Income Tax laws.

Free Look period

Under the free look period, you now have the flexibility to review your policy. If,

during this period, you wish to return your policy after reviewing the terms and

conditions, you may do the same, by returning the original policy certificate, the

policy document and a letter stating the reasons for the return. Please note that these

must reach our Customer Service Desk within 15 days from the date of receipt of

the policy at your end.

We shall refund the premium paid by you, after deducting certain charges. These

charges include a proportionate risk premium for the period of cover, the stamp duty

on the policy and/ or any expenses borne by the Company on the medical

examination.

46

Retirement Plan

Most of you picture yourselves enjoying the fruits of labor after retirement, going

on your dream vacation, or helping your children's career take wing. But do you realize

that financing all this will most likely depend partly on your personal savings? Because

personal savings and investments represent a significant source of retirement income for

many people, you can never save too much.

Currently, you are at a stage where you are juggling many roles, as nurturing

parents, dutiful caregivers to elders, supportive life partners, while trying to maintain a

career. It is too easy to get carried away handling and solving the day-to-day problems to

not look into your retirement needs. It may also seem too far away to be of concern. But a

look at the issues below will make the need for some strategic planning at this stage

amply clear.

Today, thanks to a healthier lifestyle and advances in medicine, the average

Indian lives longer. This makes the challenge of accumulating enough money for

retirement even more difficult, since it may have to last longer. Also, with the falling

interest rate scenario and the rising costs of medical expenses retirement means monetary

uncertainty for most of us. More so, because there is also the ever-persistent evil of

inflation, which erodes your purchasing power. The graph below illustrates how much

will Rupees 10,000/- amount to after some years:

47

Therefore, the message is simple - no matter whether you are 30 or 50, you should start

planning early to have a healthy retirement kitty. (See graph below for an illustration)

As can be seen the cost of delaying is high. Situation A is when you are saving Rs 10000

annually from the age of 25 to 34 years and Situation B is when you save the same annual

amount from the age of 35 to 59 years. As can be seen in the example, even after

investing your money for a 2.5 times longer duration, the maturity value in the second

case is much lesser (the figures are based on a hypothetical interest rate of 10%). The

48

longer your money is allowed to grow at a compounded rate, the more dramatic will the

difference be eventually.

Therefore, the message is simple –

Put Time On Your Side and Start Early .

We, at ICICI Prudential Life Insurance believe in the philosophy of providing meaningful

and comprehensive insurance solutions to plan your retirement. Our insurance solutions

are the most optimal tools to plan your retirement because they give you Safety,

Liquidity, Tax benefits, Health cover and Life protection and thus ensure that you are

comprehensively covered.

ICICI Prudential presents Retirement Solutions that combine the best of investment and

insurance. These solutions are developed to ensure your peace of mind for the years to

come. Solutions that give you the power to maintain your lifestyle needs for as long as

you live.

1. ForeverLife :- A regular premium deferred pension plan that helps you save for

your retirement while providing you with life insurance protection.

Depending on your specific needs our Retirement Solutions give you the:

• Power to choose the retirement date

• Power to increase your investments

• Power to choose the protection level

• Power to invest in a plan based on your priorities

• Power to receive your pension in 5 different ways

• Power to choose your annuity provider

• Power to add-on flexible riders at a nominal extra premium#

49

ForeverLife (Deferred Pension)

Life expectancy has been rising rapidly and today, you can now expect to live

much longer than your earlier generations. For you, this increase will mean a longer

retirement life, stretching into a couple of decades. So, it is more critical than ever to plan

adequately and wisely for those incremental retirement years, keeping in mind that your

expenses will spiral upward, your cost of living will increase and inflation will be ever

present. Therefore, you need a plan that ensures safety, risk cover, income security and

regular returns for your post- retirement years.

ICICI Prudential Life Insurance presents ForeverLife - a comprehensive

retirement solution that is developed keeping in mind your various capabilities and needs,

with respect to your retirement planning. We make sure you can plan well when you can

and maintain your lifestyle for a lifetime. So, whether you are 30 or 60 we have just the

right retirement plan for you.

Life cover benefits

ForeverLife Pension Plan provides life cover during the deferment phase. In the

unfortunate event of your death, your spouse has the option to receive the sum assured

with guaranteed additions and vested bonuses (if any) as a lumpsum or get an annuity

that would provide a regular income for life.

Power to choose the retirement date

You can choose the vesting age between 50 to 70 years. You have the flexibility to

postpone the vesting from the originally chosen vesting date up to a maximum of 70

years of age. This option can be exercised once at the time of vesting. During the

postponed period, your accumulated amount will earn interest as determined by the

company from time to time. There will be no life cover or premiums paid during this

period.

50

What are the entry conditions?

• You should be between 20 and 60 years of age.

• Minimum sum assured is Rs. 50,000.

• Minimum term is 5 years and the maximum is 30 years.

• Minimum premium is Rs.6,000.

What is the exit option?

ForeverLife Pension Plan acquires a surrender value after premiums for 3 policy years

are fully paid. A surrender value is payable if you wish to withdraw after 3 years.

Annuity Options

How does the annuity work?

• Your accumulated value would start paying you regular income in the form of an

annuity, at a frequency chosen by you. This income can be received monthly,

quarterly, half-yearly or annually.

• You have the option of selecting a guaranteed annuity rate period of either 5 or 7

years.

• The amount of annuity is fixed for a guaranteed annuity rate period and will be

recalculated at intervals of every guaranteed period, based on the then prevailing

annuity rates.

• On commencement, and at the end of every guaranteed period, the amount of

annuity payable for the next guaranteed number of years and the Residual

Purchase Price (which will be available for calculation of the annuity rate at the

end of the guaranteed annuity period), on survival, will be guaranteed.

• Once the policy holder is 75 years of age, the annuity will be fixed for life and not

reviewed thereafter.

• At the time of reset of the annuity, you have an Open Market Option, which

would enable you to get your annuity from any other annuity provider, should our

51

rates not be as competitive. However, there will be a charge of 1% of the residual

purchase price, should you choose this option (Please do refer to the 'Power to

choose your annuity provider' section).

Power to receive your pension in FIVE different ways

On vesting, you have the flexibility to choose from five different annuity options:

1. Life Annuity: Annuity for life.

2. Life Annuity with Return of Purchase Price: Life Annuity for the annuitant with

the return of the purchase price to the beneficiary

3. Life Annuity Guaranteed for 5, 10, 15 years: Guaranteed Annuity is paid for the

chosen term (5/10/15 years) and after that, the annuity continues as long as the

annuitant is alive.

4. Joint Life, Last Survivor with Return of Purchase Price: In this case, the annuity is

first paid to the annuitant. After the death of the annuitant, the spouse starts

getting a pension, which is an amount that is equal to the annuity paid to the

annuitant. After the death of the last survivor, the purchase price is returned to the

beneficiary.

5. Joint Life, Last Survivor without Return of Purchase Price: In this case, the

annuity is first paid to the annuitant. After the death of the annuitant, the spouse

starts getting a pension, which is an amount that is equal to the annuity paid to the

annuitant.

Power to choose your annuity provider

This option offers you the flexibility to buy a pension from any other insurer of your

choice, at the time of vesting. So, you have the freedom to take the best offer available in

the market.

Tax benefits available with ForeverLife

Tax benefit u/s 80CCC(1): Upto Rs10, 000 deducted from your taxable income.

52

Power to add-on flexible riders at a nominal extra premium

For protection to your family against any unfortunate health hazards or eventuality we

offer you the following add-on benefits/riders with this plan

• Critical Illness Rider

• Major Surgical Assistance Rider

• Accident and Disability Benefit Rider

• Accident Benefit Rider

A sound pension system should aim at providing:

Institutional infrastructure through which individual can prepare for old age while

they are in the labor force, i.e. an efficient fully funded pension system.

A firm foundation for meeting the increasing demands for old age security.

Easy accessibility by all segments of the population.

“Long term and continual savings” which achieve their maximum growth

potential (rather than “interrupted or “disjointed” growth).

Security for all, through responsible behavior of financial institutions engaged in

pension business and through a range of schemes.

Secure and decent income on retirement through appropriate incentives. If large

part of the program is to remain voluntary, appropriate “disincentives” might be

considered for non-participation versus relying on incentives exclusively.

Informed and responsible participation by all the key stakeholders i.e. government

the private fund managers and the individuals.

A record keeping/ administration and investment system that encourages

compensation and full disclosure.

HOW CAN INSURANCE DRIVE PENSION REFORMS

53

A pension reform has attracted enormous interest not just in the developing world.

This gains importance on account of the wide-ranging social implication that pension

reforms can deliver and the impact it can have on the structure of financial markets.

Aging population, lower mortality rates, dynamic and offer-unpredictable interest

rate markets have all combined to make the business of managing pension difficult.

Developing countries face a bigger challenge. Typically this country laces a social

security framework. Having largely depended on the extended families and other

informal means to provide old age social security.

The problem is further compounded by the absence of vibrant financial market,

which can provide instruments and investment opportunities for the investment for

long term contractual savings. This circular logic can lead to virtuous cycle if the

pension system is reformed in a sustainable manner. Long-term investment by the

pension funds can provide much needed resources for the infrastructure and other

long gestation projects. Insurance companies can play a critical role in this process of

reforms. Countries, which have implemented pension reform, have witnessed a sharp

rise in gross output. While the increase in GDP can not be directly attributed to

development of a private pension system, never the less there are sue linkages due to

the introduction of private pension. The obvious link between pension reforms and

the GDP growth is through the accumulation of savings. However a greater savings

level only begins to appear years after the introduction of pension reforms.

At the beginning of the pension reforms, costs of the pension system are high and

the apparent benefits not easily identifiable. As long term savings grow structural

changes become more evident. In a country like India with a high rate of savings, the

economic impact will be more dissembled with the wide spread social security and

deployment of resource in building much required infrastructure. Another significant

factor affecting savings level is the decreased in the extent of budgetary support for

government managed pension funds. This causes indirect financial effects in the

economic as a result of more efficient use of capital. New financial institutions

54

appears, offering new instruments, making financial markets more competitive and

ultimately lowering the cost of funds.

Important Stage

While the specific form of pension reforms depends on the social and economic

characteristic of the country, insurance companies have typically played a significant

role in the evaluation of pension reforms in many countries.

Accumulation Stage

A pension programmed is characterized by two distinct stages. The first is

accumulation stage wherein the pension fund receives contributions from the

participants. At this stage the expertise required is in the areas of assets gathering and

fund management. The skills required are wide spread distribution of points of

presence and sustained investment management performance.

Government and regulatory agencies can play a key role in disseminating

information and postal savings system can act as a conduit for gathering contributions

into pension system. The use of technology lower costs associated with the asset

gathering and data maintenance process. Although the burden of investor education is

usually shared by the industry, it is important that individual players are encouraged

to undertake investor awareness campaigns.

Government and regulatory agencies can play a key role in disseminating

information and educating investors. While there can be no guarantees on minimum

fund performance, investor risk can be mitigated through carefully drafted regulations

and investment guidelines. It is also essential to communicate the risk inherent in

different assets classes with investors in a clear and comprehensive manner.

Annuitization Stage

The second stage of pension system is the annuitization stage. The purpose of an

annuity is to safeguard against the eventually of living beyond one earning age.

55

Annuities are sold by insurance companies in exchange for a one-time payment of

lump sum amount. Annuities are therefore normally used to provide a regular income

after retirement and are financed with the current savings or with funds from the

accumulated balance of a defined contribution pension plan. Annuities can be

structured in various forms to meet the needs of individual avers. For instance,

annuity payments can be made with reference to two or more lives9 e.g. husband and

wife.) In pension system that rely on defined contribution plans, the importance of

annuities can not be overstate; governments in many countries have mandated that the

accumulated balance at retirement in an individual pension account be used to

purchase an annuity.

Annuities by their design have assumption of life expectancy and investment returns

embedded in their pricing and these two factors have a critical bearing on the success

of an annuity products have to insure against the cost of an improvement in longevity.

A good understanding of the actuarial profile population is therefore eccentric to the

pricing of annuity products. In India there is a death of qualified actuaries and the

introduction pension reforms must take note of this reality.

56

ANALYSIS OF PENSION PLAN PROVIDED BY OTHER COMPANIES AND

ICICI PRUDENTIAL LIFE INSURANCE

What picture have we envisioned for our self in old age? Do we see our sled working for

shorter number of hours? Standing in queues to pay those monthly bills we have more

free time on hand? Sitting in a rocking chair, pondering over the blessing of life? Or

utilizing that free time to do things which we always wanted to but couldn’t as work

substituted those yearlings.

Once we envisage what kind of life we would like to lead and what are the next steps is

to determining our financial needs for threat stage like-

• The number of depends we have to support

• Returns on our savings,

• Our spending power,

Expected inflation rate etc.

Receiving pension as no longer a virtue of government officials. Even we can arrange

for our pension and decide the age at which we want it start. No need to wait tills the

age of 58 years (when the pension of government officials starts).

To aid in this task are the various pension plan available in the market. Some of these

plan come as insurance over to take care of the uncertainties of life. For what’s life-

uncertainty the name.

These pension policies are savings-cum-annuity based. They allow we to save during

the deferment period and after the vesting age (when policy matures) that amount is

used to buy the annuity for our self. Life insurance Corporation’s (LIC) Jeevan dhara,

Jeevan Suraksha, ICICI’s Forever Life, Life Time Pension Plan, Life Link Pension

plan, HDFC’s Personal Plan, OM Kotak’s Retriment Income Plan are the pension’s

57

plans currently in the market. Some of them are also market-linked. However, LIC’s

Jeevan Akshay is pure pension products where annuity starts immediately.

Akshay, the minimum age at entry is 18 years onwards. This means that we can start

saving at and early age through these plans. Thew sooner we will start, the more

benefits we mare likely to reap. These plans can be bought by paying Single Premium

[SP] which gives lump sum amount, or Regular Premium [RP], which is paid, in the

form of installment spreads through the deferment period. If we nearing retirement,

we can buy SP plans over regular premium plan as early contributions let the power

of compounding yield higher returns. For Jeevan Akshay, the minimum age at entry

is 40 years; most of these policies gave we the flexibility of starting the annuity at our

convenience.

After the vesting age, we can take 25% or lump sum amount of the sum assured (SA)

knows as notational cash value (NCV)

Amount the various annuity options available, annuity with return of purchase price

in the death of the annuitant is good option as our spouse/ nominee will receive the

SA plus the annuity in cases our death. Currently, LIC’s Dhara, Suraksha, Akshay

and ICICI’s products provide this option. However, under ICICI joint annuity option

if we die our spouse will receive the annuity and if our spouse dies our children (last

survivor) will get the purchase price of the policy.

Now talking about riders, most of these plans come with riders and hence provide we

the benefits of insurance policies. Let us consider the term rider of LIC’s Surksha and

Dhara, where the policyholder is gets Term Assurance (availed by paying an extra

premium) sum assured and refunded of premium with 5% compounded interest per

annum. ICICI’s product providers accidental and disability benefit rider, major

surgical assistance rider and critical illness rider. It would be good to avail of accident

and disability benefit rider as it will give SA in case of accidental death wheeler

traveling in bus or train (Mass transport). Whereas Om Kotak’s plan comes with

58

accidental benefit whereby our nominee will receive an amount equal to SA (which

will not exceed more than Rs. 10 lacs.)

The amounts we invest in these plans are blocked for specific term (chosen by we).

Suppose if an immediate need for funds arise like a surfgery or hospitalization then

what will we do? Hence it is important to know the lock-in period of theses plans. For

LIC’s Jeevan Dhara and Surksha, the lock-in period is 2 years and we get 90% of the

premium paid. In case of ICICI’s Life Time and Life Link plan are market linked, we

will get the market value of units. So the amount we will be solely dependent on the

market forces prevalent at that time. This might work in our favors or against.

However, HDFC’s Personal Pension Plan has got no lock-in period. But the surrender

value will depend solely on company’s discretion.

The pension plans fall under section 80 CCC of the income tax act whereby we get a

rebate of 10000 while filing our tax returns if we buy an annuity plan. If we avail

make surgical assistance and critical illness rider of ICICI’s Life time plan then we

can claim tax benefits under section 80D.

What re market-linked plans? They can be termed as new-age solutions for those who

want to invest in stock market but within minimum risk. It is like keeping our cake

and having it too. They are flexible and we can invest an extra amount when the

market’s is bearish and add to our kitty. You struggle’s to make our life of our dreams

and achieve a lifestyle we crave for. Then why should we give if after a specific age?

One should always strive to make one’s life better.

59

CONCLUSION OF ANALYSIS

The life insurance can play key role in driving pension reforms by:

1) Addressing the risk managements issues arising out of ever increasing longevity

and volatility in the interest rate for the developing the annuity market;

2) Offering group pension to most of the 13mn salaried worker who do not have

access to any formal arrangement for building up retirement benefit and certain

informal sector occupation group.

3) Positioning the personal, as efficient instrument for managing the risk of living

long and providing for comfortable old age, which would be brought for its own

utility and not necessarily tax benefit.

4) Personal pension is an advice driven business and well-trained sales force can

play significant role in its proper positioning.

5) The government could thinks in term of combining PPf and the proposed define

contribution fully funded individual retirement account system for informal sector

so as to have a benefit of critical mass of assets under management right at the

beginning the pension regulator would evolve a structure for such a scheme and

regulate it. Any entity, which could create the specific structure, could be the

provider. Life insurance industry will have to see as to how it fits into the scheme.

60

CHALLENGES FACED BY THE INSURANCE SECTOR

The Indian insurance industry today needs to take a hard look at itself and do a reality

check. Riding on the wave of a 10 percent plus growth rate, with annual revenues

exceeding $8 billion, a penetration level of insurance at an abysmal 1.8 per cent, it is a

good story so far, both the general insurance and life insurance businesses have a lot to

cheer about, having created a market that reaches every corner of this country.

But the infusion of international experience with the opening up of the sector is expected

to give this story a new impetus, new products and new technologies. Global practices are

seen as the challengers to a great distribution advantage, a strong customer base and a

historical association with the business. The size of the cake and the customer will be the

beneficiary.

The infusion international experience with the opening up of the sector. Threat and

opportunity in equal measures, with enablers and roadblocks aplenty, call for a

pragmatics approach from a long-term perspective with an equal focus on strategy and

execution. The five Cs of success to face the challenges are:

1. CUSTOMER:

The Indian consumer is only going to become more savvy and demanding. We will move

from a seller’s to buyer’s, market offering the customer a luxury of choice hitherto,

unseen, moving the market to a commodity platform. Thus strong customers focus,

backed by research and technology-led service capability, will be the baseline for the

future. Sharp customer segmentation and evaluation of need based product will be the

call of the day. Customer’s relationship efforts will be come essential, calling for

investments in skill not available in the industry today.

61

2. COMMUNICATION:

The ability to effectively communicate with the customer will hold the key to future

effectiveness. Consistent, easy-to –understand and appealing communication will

determine who will ultimately hold the attention and the interest. With 320 million

customers out there, the key is to earn their trust and faith.

3. CHANNEL:

The ability to reach the customer, most effective and cost-efficient will determine

who stays ahead in this game. Speed and quality of execution on this front will

determine success of failure. The consumer will seek after convenience option like

kiosks, walk-in-centers, and the interest; we need not look far for precedents- PCO

booths are great examples.

4. CONTROLS:

The need to acquire customers will call for significantly higher investments in

infrastructure and technology, marketing and communication, further squeezing the

bottom line. Thus leeway to make errors in judgment on underwriting and claims can

prove to be far too expensive.

5. CREDIBILITY:

The confidence of the Indian customer is at low ebb and customer is at low ebb and

gaining his confidence calls for a focused effort to work on building credibility for us.

Guaranteeing returns of an order, which can be met, setting service expectations and

ensuring that the customer experience matches that under commitments and over

delivery, is what we will have to get used to.

• The task does look daunting. However the challenges are not in-mountable. It is a

journey towards a new era in the history of the Indian insurance industry. Social

62

commitments sectoral commitments are part of the need to play our role as an

industry, which has an obligation to the Indian consumer, along

63

COMPARISON

Comparison of products of LIC, ICICI, HDFC, SUN BIRLA , TATA-AIG.

Comparison of products on various parameters -

• Premium payments

• Insurance cover

• Maturity benefits and Rates of return

FEATURES ICICI LIFE TIME BIRLA CLASSIC LIFE

AGE 0 to 60 years 1 to 65 years

TERM 3 years 3 years

SUM ASSURED Min. prem *5Max. prem*10

Depends on premium

DEATH BENEFIT Higher of S.A Higher of S.A

WITHDRAWAL Partial or complete after 3yrs Partial or complete after 3yrs

PREMIUM Min. 18000 p.a Min 25000 p.a

INC. OR DEC. IN DEATH BENEFIT

Available Not Available

TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year 2 switch free in a year

ADMINISTRATION CHARGES

Rs. 60 a month Rs. 60 a month

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

Protector, builder and Enhancer- 1% Creator – 1.25%

RIDERS ADBR, CIBR, MSAR ADBR, CIBR

64

ANALYSIS:-

1. Here lock in period in both the companies is 3 yrs.2. In BIRLA SUNLIFE’S CLASSIC LIFE once the sum assured is fixed it cant be

increase or decreased while in ICICI PRUDENTIAL’S LIFE TIME the sum assured can be increased or decreased.

3. Number of withdrawal in BIRLA SUNLIFE is free for 2 times in a yr than it is chargeable while there are no charges in withdrawal in case of ICICI PRUDENTIAL.

4. Premium of ICICI PRUDENTIAL’S LIFE TIME is less than BIRLA SUNLIFE’S CLASSIC LIFE.

5. The Sum Assured in ICICI PRUDENTIAL’s LIFE TIME is not fixed but in BIRLA SUNLIFE’S CLASSIC LIFE is fixed at the time of issue of policy.

6. The top up charges of ICICI PRUDENTIAL is less than BIRLA SUNLIFE7. In LIFE TIME only 1 free switch is available while in CLASSIC LIFE 2 free

switches are available.8. In ICICI PRUDENTIAL there are 3 riders available while in BIRLA SUNLIFE

there are only 2 riders available.

65

FEATURES ICICI LIFE TIME HDFC LINKED

AGE 0 to 60 years 18 to 60 years

TERM 3 years 10 to 30 years

SUM ASSURED Min. prem *5Max. prem*10

Only 5, 10, 20 multiples of S.A

DEATH BENEFIT Higher of S.A Higher of S.A

WITHDRAWAL Partial or complete after 3yrs Partial after 3rd yr

PREMIUM Min. 18000 p.a Min 10000 p.a

INC. OR DEC. IN DEATH BENEFIT

Available Not Available

TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year 2 switch free in a year

ADMINISTRATION CHARGES

Rs. 60 a month Rs. 180 p.a

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

Balancer, Defensive, Safe, Liquid and Growth at 0.80%

RIDERS ADBR, CIBR, MSAR ABR, CIBR

ANALYSIS: -

1. Entry in LIFE TIME is to 0 to 60 while in HDFC LINKED it is 18 to 60 so you cannot take this policy for new born baby.

2. Minimum term in LIFE TIME is 3 years while in HDFC LINKED minimum is 10 and maximum is 30.

3. Sum Assured in LIFE TIME can be kept 5 to 10 times of the premium while in HDFC LINKED it is in multiples of 5, 10 or 20.

4. In LIFE TIME the policy holder can withdraw partial or full money after 3 years while in HDFC LINKED the policy holder can only withdraw partially.

5. In LIFE TIME there are 3 funds available while in HDFC LINKED there are 5 funds available.

6. In LIFE TIME the policy holder can increase or decrease the sum assured in later stages while in HDFC LINKED the policy holder cannot increase the sum assured in later stage.

7. 1 free switch available in LIFE TIME while in HDFC LINKED there are 2 free switches available.

8. There are 3 riders available in LIFE TIME while in HDFC LINKED there are only 2 riders available.

66

FEATURES ICICI LIFE TIME LIC BIMA PLUS

AGE 0 to 60 years 12 to 55 years

TERM 3 years 10 years

SUM ASSURED Min. prem *5Max. prem*10

MAX. 200000

DEATH BENEFIT Higher of S.A 1st 6 months – 30% of S.AAfter 6 months – 60%After 1 yr – S.A

WITHDRAWAL Partial or complete after 3yrs Premature after 1 yr.

PREMIUM Min. 18000 p.a Not Specified

INC. OR DEC. IN DEATH BENEFIT

Available Not Available

TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year No switch free at 2% charge

ADMINISTRATION CHARGES

Rs. 60 a month HIDDEN

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

Funds not shown but they charge 1%.

RIDERS ADBR, CIBR, MSAR ABR

ANALYSIS: -

1. The entry age in LIFE TIME is 0 to 60 years while in LIC BIMA PLUS it is 12 to 55 years so you cannot take this policy for a new born baby.

2. In LIC’S BIMA PLUS the term is fixed that is 10years while in LIFE TIME the term is not fixed one can decide its own term but minimum is 3 years.

3. In LIFE TIME one has an option to increase or decrease the Sum assured while in LIC BIMA PLUS one can keep maximum of Rs. 2, 00,000/- as Sum assured.

4. One can withdraw partial or complete fund in LIFE TIME after 3years while in LIC BIMA PLUS one can withdraw only a part of the fund not complete.

5. Minimum Premium of LIFE TIME is Rs. 18000/- while in LIC BIMA PLUS the premium is fixed as per the sum assured selected by the customer.

6. In LIFE TIME top up is available at lower charges than LIC BIMA PLUS.7. The administration charges in ICICI PRUDENTIAL are Rs. 60 per month while

in LIC it is not shown.8. The riders available in LIFE TIME are 3 while in BIMA PLUS there is only one

rider available.

67

FEATURES ICICI LIFE TIME TATA AIG – Invest Assure

AGE 0 to 60 years Varies with term chosen

TERM 3 years 15, 20 and 30 yrs.

SUM ASSURED Min. prem *5Max. prem*10

Varies with the age of insurer

DEATH BENEFIT Higher of S.A Higher of S.A

WITHDRAWAL Partial or complete after 3yrs Complete withdrawal after 6th yr.

PREMIUM Min. 18000 p.a Min 12000 p.a

INC. OR DEC. IN DEATH BENEFIT

Available Not Available

TOP-UP Available at 1% charge Available at 1.5% chargeSWITCH 1 switch free in a year 4 switch free in a year

ADMINISTRATION CHARGES

Rs. 60 a month Rs. 38 a month

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

Equity – 1.75%Growth – 1.60%Balanced – 1.40%Income- 1.25%Liquid – 0.90%

RIDERS ADBR, CIBR, MSAR Not Available.

ANALYSIS: -

1. In LIFE TIME the term available is 0 to 60 years while in TATA AIG INVEST ASSURE the term depends on term selected by the customer.

2. The Sum assured can be kept 5 or 10 times of the premium in LIFE TIME while in TATA AIG INVEST ASSURE the sum assured depends on the

3. Withdrawal benefit is available after 3 years while in TATA AIG INVEST ASSURE this benefit we can get after 6 years.

4. Minimum premium in case of LIFE TIME is 18000 p.a while in case of TATA AIG INVEST ASSURE it is 12000 p.a.

5. In LIFE TIME one can increase or decrease death benefit but this flexibility is not available in case of TATA AIG INVEST ASSURE.

6. Top up charge is less in LIFE TIME as compared to TATA AIG INVEST ASSURE

7. TATA AIG INVEST ASSURE has more investment options as compared to LIFE TIME

8. One can also attach riders in LIFE TIME but this one can not attach in case of TATA AIG INVEST ASSURE.

68

PENSION PLANS

FEATURES ICICI LIFE TIME PENSION

BIRLA FLEXI SECURE LIFE RETIREMENT

AGE 18 to 60 years 18 to 60 years

TERM 10 to 30 years 10 years

SUM ASSURED Minimum 100000 also zero death benefit available

Minimum 50000 also zero death benefit available

DEATH BENEFIT Sum Assured or Value of units at death

Sum Assured or Value of units at death

CHOICE OF ANNUITY 5 annuity options 2 annuity options

PREMIUM Min. 10000 p.a. Min. 5000 p.a.

INC. OR DEC. IN DEATH BENEFIT

Not available Available but once increased cannot be decreased

TOP-UP Available min. 5000 Available min. 10000SWITCH 4 switch free in a year 2 switch free in a year extra

switch at 0.5%ADMINISTRATION CHARGES

Rs. 20 a month Rs. 20 a month

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

Nourish, Growth and Enrich Charge is 2.25%.

RIDERS ADBR ADBR, CI

VESTING AGE 50 to 70 years 50,55,58,60,65 and 70 choose any one age

INC. OR DEC. IN PREM Available Not Available.

ANALYSIS : -

1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in BIRLA’S FLEXI SECURELIFE RETIREMENT this option is not available.

2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in BIRLA there are only 2 annuity options available.

3. In ICICI PRUDENTIAL one has flexibility in retirement age while in BIRLA the retirement age is decided at the time of policy .

4. In ICICI PRUDENTIAL there 4 switches are available while in BIRLA only 2 switches are available and extra swithches are chargeable.

5. In ICICI PRUDENTIAL each fund has its own charges while in BIRLA all the fund have equal charges.

69

FEATURES ICICI LIFE TIME PENSION

HDFC PERSONAL PENSION PLAN.

AGE 18 to 60 years 18 to 60 years

TERM 10 to 30 years 10 to 40 years

SUM ASSURED Minimum 100000 also zero death benefit available

Minimum 50000 also zero death benefit available

DEATH BENEFIT Sum Assured or Value of units at death

Sum Assured or Value of units at death

CHOICE OF ANNUITY 5 annuity options 2 annuity options

PREMIUM Min. 10000 p.a. Min. 10000 p.a.

INC. OR DEC. IN DEATH BENEFIT

Not available Available but once increased cannot be decreased

TOP-UP Available min. 5000 Not Available SWITCH 4 switch free in a year 2 switch free in a year .

ADMINISTRATION CHARGES

Rs. 20 a month Rs. 20 a month

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

Liquid, Defensive, Secure and Managed.

RIDERS ADBR Not Available

VESTING AGE 50 to 70 years 50 to 70 years.

INC. OR DEC. IN PREM Available Not Available.

ANALYSIS : -

1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in HDFC’S PERSONAL PENSION PLAN this option is not available.

2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in HDFC there are only 2 annuity options available.

3. In ICICI PRUDENTIAL one has flexibility in retirement age while in HDFC this option is not available.

4. In ICICI PRUDENTIAL there 4 switches are available while in HDFC only 2 switches are available and extra swithches are chargeable.

5. In ICICI PRUDENTIAL each fund has its own charges while in HDFC all the fund have equal charges.

70

FEATURES ICICI LIFE TIME PENSION

TATA-AIG NIRVANA PENSION.

AGE 18 to 60 years 18 to 55 years

TERM 10 to 30 years Min. 10

SUM ASSURED Minimum 100000 also zero death benefit available

Minimum 50000

DEATH BENEFIT Sum Assured or Value of units at death

Sum Assured or Value of units at death

CHOICE OF ANNUITY 5 annuity options 2 annuity options

PREMIUM Min. 10000 p.a. Min. 10000 p.a.

INC. OR DEC. IN DEATH BENEFIT

Not available Not available

TOP-UP Available min. 5000 Not Available SWITCH 4 switch free in a year 2 switch free in a year .

ADMINISTRATION CHARGES

Rs. 20 a month Rs. 20 a month

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

All funds are charged flat 0.80%.

RIDERS ADBR ABR, CIBR

VESTING AGE 50 to 70 years 50 to 65 years.

INC. OR DEC. IN PREM Available Not Available.

ANALYSIS : -

1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in TATA-AIG NIRVANA PENSION PLAN this option is not available.

2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in TATA-AIG there are only 2 annuity options available.

3. In ICICI PRUDENTIAL one has flexibility in retirement age while in TATA-AIG this option is not available.

4. In ICICI PRUDENTIAL there 4 switches are available while in TATA-AIG only 2 switches are available and extra swithches are chargeable.

5. In ICICI PRUDENTIAL each fund has its own charges while in TATA-AIG all the fund have equal charges.

6. In ICICI PRUDENTIAL the entry period is 18 to 60 while in TATA-AIG 18 to 55.

7. In ICICI PRUDENTIAL top up facility is available while in TATA-AIG this facility is not available.

71

FEATURES ICICI LIFE TIME PENSION

LIC JEEVAN SURAKSHA

AGE 18 to 60 years 18 to 65 years

TERM 10 to 30 years 10 to 35 years

SUM ASSURED Minimum 100000 also zero death benefit available

Minimum 50000

DEATH BENEFIT Sum Assured or Value of units at death

Sum Assured or Value of units at death

CHOICE OF ANNUITY 5 annuity options 4 annuity options

PREMIUM Min. 10000 p.a. Min. 2500 p.a.

INC. OR DEC. IN DEATH BENEFIT

Not available Not available

TOP-UP Available min. 5000 Not Available SWITCH 4 switch free in a year Not mentioned

ADMINISTRATION CHARGES

Rs. 20 a month HIDDEN

FUND MANG. CHARGE Protector- 0.75%Balancer- 1%Maximizer- 1.5%

Not mentioned

RIDERS ADBR Not Available

VESTING AGE 50 to 70 years 50 to 79 years.

INC. OR DEC. IN PREM Available Not Available.

ANALYSIS : -

1. In ICICI PRUDENTIAL LIFE TIME PENSION one can increase or decrease the premium payment as per the benefit one wants later while in LIC’S JEEVAN SURAKHSHA this option is not available.

2. In ICICI PRUDENTIAL one has 5 annuity options and also open market facility available while in LIC there are only 4 annuity options available, but in joint life survival option after death of the policy holder the spouse gets only 50% of the annuity that the the policy holder used to get while in ICICI PRUDENTIAL 100% is given.

3 In ICICI PRUDENTIAL one has flexibility in retirement age while in HDFC this option is not available.

4. In ICICI PRUDENTIAL there 4 switches are available while in LIC it is not mentioned they do the investment on their own not showing the customer.

5. In ICICI PRUDENTIAL the charges taken from the customer is shown and it is minimum while in LIC the charges are not shown as they charge high because of the commission they give it to the agents.

72

CHILD PLANS

FEATURES ICICI SMART KID Birla Sunlife My Child.AGE OF CHILD 0-12 years 1-17 years AGE OF FATHER 18 to 60 years Not Available

TERM 10 to 25 years but maturity is between 22 to 25 yrs

15, 20 or 25

SUM ASSURED 5 to 50 times of premium Minimum 50000

DEATH BENEFIT Sum Assured Sum Assured .

PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.

RIDERS ADBR, IBR, WOP WOP

LIFE ASSURED Parent Child.

FUND MANAGEMENT CHARGES

Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%

Protector, Builder and Enhancer all funds are charged flat 1.00%

SWITCH 4 free switches available 1 free switch available

TOP UP Available mini. 5000 Not available

DEATH OF PARENT Premium holiday and benefits are given to child.

No premium holiday and Plan continues as normal.

ANALYSIS : -

1. In ICICI PRUDENTIAL SMART KID there is no age restriction for any term selected while in BIRLA MY CHILD this option is not available.

2. In ICICI PRUDENTIAL The life of parent is covered while in BIRLA the life of child is covered.

3. In ICICI PRUDENTIAL after the death of father there is a premium holiday while in BIRLA there is no premium holiday and plan continues as normal.

4. In ICICI PRUDENTIAL there 4 switches are available while in BIRLA there is only 1 free switch available.

6. In ICICI PRUDENTIAL there is top up facility while in BIRLA this facility is not available.

7. In ICICI PRUDENTIAL after the death of father the benefits are immediately given to the child while in BIRLA this facility is not given.

73

FEATURES ICICI SMART KID HDFC AGE OF CHILD 0-12 years 1-12 years AGE OF FATHER 18 to 60 years 18 to 60 years

TERM 10 to 25 years but maturity is between 22 to 25 yrs

10 to 25

SUM ASSURED 5 to 50 times of premium Decided as per premium paid

DEATH BENEFIT Sum Assured Sum Assured.

PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.

RIDERS ADBR, IBR, WOP Not available

LIFE ASSURED Parent Parent

FUND MANAGEMENT CHARGES

Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%

Liquid, secure, defensive and managed. All charged same

SWITCH 4 free switches available 1 free switch available

TOP UP Available mini. 5000 Not available

DEATH OF PARENT Premium holiday and benefits are given to child.

As per the option selected by the policy holder.

ANALYSIS : -

1. In ICICI PRUDENTIAL SMART KID there is no age restriction in the term selected while in HDFC this option is not available.

2. In ICICI PRUDENTIAL the minimum premium is 8400 while in HDFC the premium is selected as per the sum assured selected.

3. In ICICI PRUDENTIAL there are 3 riders available while in HDFC there are no riders available.

4. In ICICI PRUDENTIAL there 4 switches are available while in HDFC there is only 1 free switch available.

5. In ICICI PRUDENTIAL there is top up facility while in HDFC this facility is not available.

74

FEATURES ICICI SMART KID TATA-AIG Junior MahalifeAGE OF CHILD 0-12 years 1-12 years AGE OF FATHER 18 to 60 years 18 to 50

TERM 10 to 25 years but maturity is between 22 to 25 yrs

12 years

SUM ASSURED 5 to 50 times of premium Minimum 50000

DEATH BENEFIT Sum Assured Sum Assured .

PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.

RIDERS ADBR, IBR, WOP WOP

LIFE ASSURED Parent Parent or Child.

FUND MANAGEMENT CHARGES

Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%

No funds available

SWITCH 4 free switches available Not available

TOP UP Available mini. 5000 Not available

DEATH OF PARENT Premium holiday and benefits are given to child.

No premium holiday and Plan continues as normal.

ANALYSIS : -

1. In ICICI PRUDENTIAL SMART KID the age entry for parents is 18 to 60 years while in TATA-AIG JUNIOR MAHA LIFE the age entry is 18 to 50 years.

2. In ICICI PRUDENTIAL The life of parent is covered while in TATA-AIG the life of child or parent is covered.

3. In ICICI PRUDENTIAL after the death of father there is a premium holiday while in TATA-AIG there is no premium holiday if the plan is taken for child risk cover.

4. In ICICI PRUDENTIAL there 4 switches are available while in TATA-AIG this facility is not available.

5. In ICICI PRUDENTIAL there is top up facility while in TATA-AIG this facility is not available.

6. In ICICI PRUDENTIAL after the death of father the benefits are immediately given to the child along with bonus till date while in TATA-AIG only the sum assured is paid.

75

FEATURES ICICI SMART KID LIC AGE OF CHILD 0-12 years 0-10 years AGE OF FATHER 18 to 60 years Not Available

TERM 10 to 25 years but maturity is between 22 to 25 yrs

26 years

SUM ASSURED 5 to 50 times of premium Min 1,00,000 max 25,00,000

DEATH BENEFIT Sum Assured Sum Assured .

PREMIUM Min. 8400 p. a. Decided as per the sum assured selected.

RIDERS ADBR, IBR, WOP Not Available

LIFE ASSURED Parent Child.

FUND MANAGEMENT CHARGES

Protector – 0.75%Balancer – 1.00%Maximizer – 1.50%

Not available

SWITCH 4 free switches available Not available

TOP UP Available mini. 5000 Not available

DEATH OF PARENT Premium holiday and benefits are given to child.

No premium holiday and Plan continues as normal.

ANALYSIS : -

1. In ICICI PRUDENTIAL SMART KID there is no age restriction in the term selected while in LIC this option is not available.

2. In ICICI PRUDENTIAL The life of parent is covered while in LIC the life of child is covered.

3. In ICICI PRUDENTIAL after the death of father there is a premium holiday while in LIC there is no premium holiday and plan continues as normal.

4. In ICICI PRUDENTIAL there 4 switches are available while in BIRLA this facility is not available in LIC.

5. In ICICI PRUDENTIAL there is top up facility while in LIC this facility is not available.

6. In ICICI PRUDENTIAL after the death of father the benefits are immediately given to the child while in LIC this facility is not given.

76

ADVANTAGES AND DISADVANTAGES OF

INSURANCE

Advantages

• Allows businesses, particularly small businesses, to take risks that will help

them compete in their market

• Frees up your funds for investment - if you self-insure, you'd have to keep

your funds liquid.

• Offers you better protection in the event of a lawsuit since insurance contracts

are standardized and use court-tested language

• Includes risk engineering and claims services in most cases, which can help

you reduce the frequency and severity of losses

• A lump sum payment to the nominees at the time of the death of the

policyholder.

• A regular payment to the nominees in the event of the death of the policy

holder.

• Tax benefits, as premiums paid reduce the liability of tax.

• Relieves economic hardships in the family on the uneventful death of the sole

income holder.

• Inculcates the habit of saving.

77

Disadvantages

• Continually rising premiums averaging 15%

• Complex and complicated plans, rates and banding

• Premiums (contributions) gain no investment for client and has little cost

control ability

• Premiums rise due to age increases, claims record and medical inflation,

averaging 10% above RPI inflation.

• No control of monies

• Increasing premiums are directly related to claims history and are reassessed

annually irrespective of previous years' performance

• Profits are retained by the insurance company with no ongoing advantages for

the client

• Inflexible pre-packaged plans creating increased administration resulting in

higher costs for your company

• Premiums are age banded

• Excess schemes artificially reduce premiums

• Insurance Premium Tax currently @ 5%

• Insurance levies currently @ 2%

• Insurance companies cannot claim back any V.A.T. inflating premiums.

78

Permanent (Cash Value) Insurance

The advantages of permanent insurance are:

1. You lock in a premium rate at whatever age you start the policy and the benefits

are guaranteed for as long as you live.

2. Your policy accumulates cash value that grows tax-deferred. The insurance

company in stocks, bonds, real estate, venture capital and other funds invests your

premiums, and you receive a return on your money in the form of annual

dividends, which increase your cash value.

3. You can tap that cash value while you are alive with low-cost loans. Any

outstanding loans will reduce your policy’s cash value by the amount of the loan.

Or you can withdraw the cash value, though you will have to pay income taxes on

those withdrawals. You can also convert your cash value into an annuity that will

provide fixed-income throughout your retirement years.

4. If you surrender your policy by discontinuing to pay premiums, you will receive

any accumulated cash value.

5. Dividends can be used to pay your premium in whole or in part.

6. Once you have passed the medical tests and have been issued a policy, your

policy cannot be cancelled for medical or any other reasons if you continue to pay

the premium.

The disadvantages of permanent insurance are:

1. It is far more expensive than term insurance. This means that you can usually

afford far less permanent coverage than you can afford term. If you start a

permanent policy and then must drop it because you cannot afford the premiums,

you will have lost a great deal of money.

79

2. Insurance companies invest your cash value quite conservatively so it is possible

that you could earn higher returns on your own if you are a skillful and

knowledgable investor.

3. The return you earn on your cash value is determined by current interest rates in

money markets. So if interest rates are high, your cash value will grow much

more quickly than if interest rates are low. Periodically, the insurance company

deducts its expenses and a mortality charge from your cash balance. The mortality

charge is the amount of money, based on a premium rate per thousands of dollars

of death benefits, required to provide you with life insurance. The company will

guarantee a minimum interest rate and a maximum mortality charge. Some will

also guarantee a maximum expense charge.

80

Conclusion

Facing the reality of a saturated home market, the insurance companies must look

outward and concentrate on the real growth economies like India and China. Since the

gestation period of the typical insurance business is around ten years, it is high time to

make their presence felt in India. The new players will have to prove their

creditworthiness. It will be a time consuming and difficult task to win customers away

from LIC and gain their trust. Their track record and brand value in overseas market will

not help them much in getting immediate brand recognition in India. Though they may

piggyback on the brand names of their local partner, in the long run, it is their persistent

track record and creditworthiness, which will matter. So, being among the first will be a

deciding factor in the success in this business. Already several companies have entered

into the market and a dozen companies have joined with foreign partners (see table). The

real growth in twenty-first century will come from the countries like India and China.

Delay may doom future efforts to stake a claim in these high potential markets.

81

Suggestions

• A change in the attitude of the population

Indians have always been wary of employing their hard-earned money in a

venture that will pay them on their death. Insurance has always been used as a

Tax saving tool. No more, no less. It is upto the insurers to educate the people to

secure/insure their future against any unknown calamity and make a shield around

their families and businesses.

• An open and transparent environment created under the IRDA.

The reason for this being on the top of our understanding is that when ever we

have seen any sector open up in India there are always grey areas and unsure

policies. These are not exactly what any player, be it Indian or foreign, looks for.

It creates an air of uncertainty in all the decision making process. Insurance as a

sector requires players who are strong financially and are willing to wait for

returns. Their confidence can be bolstered only if there is an open and a

transparent policy guidelines. This will also help the consumers feel safe that the

regulatory is an active one and cares to do everything possible to keep things

under control and help the insurance environment grow maturely.

• A well-established distribution network.

To cater to the largest democracy in the world is by no means a cakewalk.

Insurance profits are directly related to number of insured and this is in turn

related to the reach. The case in example is of the State Bank of India. The joint

ventures announced have a flavour of network being a critical decider. This is so

because as per the guidelines 15% of the policies written by the 5th financial year

will have to come from the rural area. The banks are the only ones who have that

reach.

• Trained professionals to build and sell the product.

It is said that the insurance agent is the best salesman in the world. He makes you

pay, regularly, an amount promising to pay back only on your death. Thus the

players will require an excellent sales team to sell their products in the now

competitive environment. The importance can be seen from the fact that a lot of

LIC/GIC personal are being poached by the new players.

• A more rationale approach to the investment criteria.

This is a very critical area as far as the government and the players are concerned.

The government as fixed up the investment pattern for the players to meet its

social obligations. The players feel that the compulsion is unjust and will affect

their return on investments. One may wonder then why is it that I have listed it as

success factor. The reason, my dear, is that it is in the larger interests of the

society. The more the people insured, the better the revenues, followed by better

security, followed by better morale and productivity. On a national level the

criteria's ensure that the money does not go out of the nation. We also need to

bear in mind that the insurers are here not for charity but for profits. So their

interest are also to be kept in mind.

• Encouragement of newer and better products and letting the hackneyed ones

die out. This will itself ensure the market grows. And that every class/society gets

a product that best suits them.

• A stringent accounting practice to prevent failures amongst the insurers.

Every insurer will have the hard-earned money of the masses. Any failure of the

insurer on account of unwarranted profligacy will cost the nation in general and

the insured in particular. To prevent any underhand workings of the insurer and to

prevent them from going bust, a stringent accounting practice is imperative.

• A level playing field at all stages of development in the sector for all the

players.

An unbiased environment is where the best comes out of the players. Their real

strength shines through. This is the beauty of capitalism that we are trying to

achieve in our customised manner. This will only help the industry grow and so

will the society.

• And last but not the least patience amongst the players and consumers to wait

for the pot of gold at the end of the rainbow.

OBJECTIVE

This project has helped us in getting some very useful insight about the

insurance sector. We have prepared this report with some specific objectives. The

objectives are as under.

• Understand the fundamentals of insurance.

• List the essential principles of Life Insurance like Insurable Interest, Utmost

Good Faith

• Identify the diverse customer requirements and identify the various Life

Insurance product, which have been developed from time to time to meet the

requirements

• Apply the correct rider, options and guarantees in order in order to offer a

comprehensive solution to the customer’s unique requirements

• Calculate the premium, bonuses and surrender value.

• Initiate the claim process and process the same for customers’ benefit.

• Appreciate the various legislative and regulatory matters which influence the

insurance business’

• Sell insurance policies professionally

• Create a positive impression in the minds of consumers towards the company

you represent

• Have need based approach towards selling

• Develop yourself personally while carrying out the functions of an agent

Our learning in Training

During our training we were with ICICI Prudential Life Insurance Co. Ltd. We got an opportunity to increase our knowledge by doing Presentation in companies like Cadila Pharmaceutical, Bhavani Industries, Shri Durga Engineering works etc., we also made presentations in some banks like Bank of Baroda Mithakali Branch, Central bank of India Kankaria Branch, Union Bank Navrangpura Branch etc. Backing this we also did direct selling to co-operate offices. By doing all these activities we understood the Bank assurance and Alliances. We understood the Products of ICICI Prudential Life Insurance Co. Ltd, and how to sell the insurance product. Also we learnt what a person thinks while investing in insurance and how does he analyze whole product of ICICI Prudential Life Insurance Co. Ltd. and takes decision.