Chapter-I

Introduction 1.1 Background information

Insurance is a contract between two parties where by one party (the insurer) agree in consideration of

money (the premium) paid to them by another party (the insured) to indemnify against of loss and or

damage as a result of an accident. A person or a company or people insures one's life or properties

against such uncertain risk and also for the safely and security of financial loses that may occur in

futures.

Insurance is a plan by which large number of people associate themselves and transfer to the shoulders

of all risks that attach to individuals. Another word   Insurance is a cooperative device to spread the loss

caused by a particular risk over a number of persons, who are exposed to it and who agree to insure

themselves against the risk. Insurance is a contract by which one party, for compensation called

premium assumes particular risk of the other party and promises to pay to him/his nominee a certain

sum of money on a specified contingency.

According to the Commission on Insurance Terminology of the American Risk and Insurance

Association, “Insurance is the pooling of fortuitous losses by transfers of such risks to insurers, who

agree to indemnity insured of such losses, to provide other pecuniary benefits on their occurrence, or to

render services connected with the risk.”

Thus, insurance is a contract. The contract is an agreement between the insured on one hand and insures

on the other hand, where by the insured pay the premium in consideration of which the insurer to agrees

to make good the financial loss suffered by the insured in the events of the insured property sustaining

loss or damage due to insured perils (risk).

Life Insurance is the key to good financial planning. On one hand, it safeguards your money and on the

other, ensures its growth, thus providing you with complete financial well being. Life Insurance can be

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termed as an agreement between the policy owner and the insurer, where the insurer for a consideration

agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or

other event, such as terminal illness, critical illness or maturity of the policy.

Insurance is actually the fuel, allowing the powerful countries (like USA) economic engine to keep

running! It not only provides you protection, but lends security to all and everybody near you. The

amounts, paid per month in insurance, keeps the economy floating, ensuring that banks have enough

moving cash to keep business and industries running up. Insurance is simply a mutual interest between

you and the bank. You get back complete recovery plan and coverage in case of any misfortune, natural

or man brought.

 Life insurance pays off if you die; protecting those who depend on the contribution of your earning and

disability. Insurance replace parts of your income if you are unable to work due to accident or illness.

The importance of life insurance can be clear from the following points: 

The concept of life insurance develops the habit of financial saving and makes the people conscious

about their future life and keeps him and his family financially safe from the disaster created by the

financial crisis due to various reasons

  It reduces the unnecessary expenses that may be incurred on the luxurious thing to the health like wine,

smoking, which help to strength insured and his family's financial aspect. Insurance is an extra source of

income which the insured gets the lump sum amount in future.

Life insurance business helps to maintain economic balance by stopping money inflection by providing

loan to the government because a big life insurance fund is accumulated from the amount as premium.

Collected premium is invested in the task of social welfare like building, roads, drinking water and

electricity by the government.

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 Thus, the importance of life insurance is growing day by day and it is taken as a medium of freeing the

insured and his depended family from the economic crisis. It has become successful to gain popularity in

insurance business.

In Nepal the history of insurance is not much old as comparison to the other countries like USA, UK,

and others. In Nepal the insurance company is first established in 1947 A.D named Nepal insurance

company limited by Nepal bank limited as its subsidiary company. Before that the Indian insurance

company handles the work of insurance in Nepal. After that the second insurance company was the

Oriental insurance company from India. And in 1968 A.D the Rastriya Bema sansthan was established

also known as Bema Samiti or insurance board as a sole authority to regulate the insurance activity

within Nepal. In Nepal there are all together 25 insurance companies including life and non-life

insurance companies. Among them 9 are life insurance and 17 are non life insurance and rastriya bema

sansthan is both life and non life insurance companies.

1.2 Objectives of the project work

The main objective of the study was to gather the information about the insurance facility provided by

the Nepal life insurance company limited. Beside this there are other purposes which are given below.

To exam different types of insurance policies provided by NLIC

To analyze the types of insurance facilities

To exam the features of different types of insurance

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1.3 Reviews of related studies

Teus Mourik (2003) conducted a research about “Market risks of insurance companies”. The main

objective of this study was analyzing the market risks that were suffered by the insurance

companies. In his study he had carried out describing the market risks bear by the insurance

companies of the Netherland. Due to globalization, high pressure to increase transparency and

comparability of results and developments in banking supervision (Basel 2), there is currently much

discussion in the world on the way solvency requirements for insurance companies can be

harmonized by prescribing a ‘standardized model’ for them. Market risks are one of the major risk

types that affect the insurance business. This paper, firstly, provides a description of the character of

the market risks that insurers are subject to. Secondly, it proposes a reasonably simple approach for

constructing a standardized approach for a corresponding solvency requirement. In the following

we assume full knowledge of the composition of the replicating asset portfolio, the way its actual

market value can be calculates/approximated and consequently, the way the sensitivity of this

market value to changing assets yields can be measured. In that case we can calculate the asset yield

sensitivity of the difference between the market value of the available assets, on the other hand, and

the market value of the replicating asset portfolio, on the other hand, within a certain time

frame(one year).

In this section we therefore focus in market risks of type II, that is the ‘mismatch risks’. 9 solvency

requirements for market risks should be as independent as possible of any specific asset allocation,

since dependencies on this will make the methodology less transparent. Moreover, it may create

opportunities to ‘manipulate’ the resulting solvency requirement. However, it looks reasonable to

always allocate fixed interest securities to the liabilities and derivatives to options embedded in the

liabilities. Additionally, we believe it is fair to ignore the so-called’free assets’, that is a portfolio

of assets with a market value equal to the difference between the total surplus and the ‘locked-in’

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surplus required to cover any risks other than market risks. Sections 5.2 and 5.3 are directed to

calculated a solvency requirement for all market risks, while section 5.4 deals with calculating a

discount for free assets.

The major finding of this report indicates that market risks are of two types.

• In measuring market risks both assets and liabilities must be valued at their actual ‘market

values’. The market value of the liabilities can be approximated by using the concept of the

‘replicating asset portfolio’, defined as follows: the replicating asset portfolio (only) replicates the

liability cash flows that are (‘risk’) adjusted for the systematic non-financial risks, while volatility

due to diversifiable non-financial risks (for instance, volatility risk as a consequences of mortality)

is fully ignored.

• We believe that the liability cash flows/replicating asset portfolio should be valued by

discounting the cash flows by the risk-free spot yields. Supervisors should calculate and prescribe

these rates in order to prevent different sopt yields.

• Market risks basically comprise two types, namely I. Risks due to uncertainty of the composition

of the replicating asset portfolio, resulting in uncertainty of its market value (and therefore of its

sensitivity to changes of asset yields).

Carol Pryor, Andrew Cohen, Jeffery Prottas (2007) conducted a research about “The illusion of

coverage”. The main objectives of the study was to analyze how healthy insurance fails people

when they get sick. The findings in this report are based on in-depth telephone interviews with 45

people in seven states: Califonia, Florida, Illinois, Massachusetts, Missouri, New York, and Ohio.

In order to participate, interviewees had to meet two criteria: they had to have 1) accrued debt

resulting from the purchase of medically-related goods or services, and 2) had private health

insurance-either through employer-sponsored coverage or through individual purchase_ when they

began accruing medical debt (although their insurance status may have changed since that time).

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We included people with medical debt from all sources, such as hospitals, doctors, dentists,

prescription medications, ambulance services, and laboratories. We considered debt medically-

related if it resulted from the purchase of these goods and services, even if the debt had been

converted to other forms, such as credit card dtebt or loans. We used accrued medical debt as a

criterion for participation in the study because it is a clear indicator of financial problem resulting

from unaffordable medical bills. Of course, many people may experience medical bills problems

even if they have not yet resulted in medical debt.

The major finding of this report is to find out the problem about the failure of the health insurance

when the people get sick. With health care costs and the number of people without insurance rising

out of control, health care analysts and state and federal policy- makers are again focusing on ways

to repair our health care system. Some of the proposals that have been offered are based on

theoretical notions of what ails our system and what will fix it-people do not pay enough of their

medical costs to become informed consumers, state mandates require insurers to provide too much

coverage, people should be allowed to purchase only the health insurance they need. However,

serious proposals should be based not only on theory but on the real experiences of real people.

Numerous surveys have clearly documented that, in fact, many uninsured and insured people face

un affordable medical bills and crushing medical debt that undermines both their health and their

long term security. This report has attempted to put a face on these numbers. It has tried to show

the often devastating eI ects of medical debt on individuals and families who thought they were

secure because they were insured, but found out that their insurance did not protect them when

they needed care. As we look for ways to decrease the number of uninsured, we should not replace

one problem with another. People need coverage, not the illusion of coverage. We must gurantee

that they have access to quality, al ordable insurance that provides real protection when they are

most in need.

1.4 Research methodology

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1.4.1 Research design.

The research study attempt to analyze the various types of insurance facility provided by the Nepal life

insurance company limited. Hence a qualitative research design was used. Being an observation study it

collects data and information and analyze in their natural work setting.

1.4.2 Data collection procedure.

The report was based on both primary and secondary data so both methods were used to gather the data

and information. For collecting the primary data various method such as questionnaire, observation and

interview were used and for collecting secondary data the observation method is also used from the

books and through the help of internet.

1.4.3 Data analysis procedure.

The collected data were analyzed, edited, processed and presented by using the various methods such as

tabulation and diagrammatic presentation.

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CHAPTER II

DATA ANALYSIS AND ANALYSIS

2.1 Examine different types of insurance policies provided by NLIC and its feature

The Nepal life insurance has 9 types of insurance policies which are mentioned below.

Surakshit Jeevan Beema Yojana

It is an endowment plan. It can be taken by anyone in the age group between the ages of 11 years to 60

years. The maximum age on maturity is 65 years. Under this plan the insured amount (Sum Assured)

with bonus is payable at the end of the specified period or on death of the life assured before expiry of

the term. This is the most popular insurance plan. By selecting the term judiciously, one can provide for

old age and get risk cover for the selected term.

Features of Surakshit Jeevan Beema Yojana:

a. It can be taken by anyone in the age group between the age of 11 years to 60 years.

b. Maximum age on maturity is 65 years.

c. Under this plan loan up to 90% of the surrender value after the policy has completed two years

term.

d. Minimum Sum Assured is Rs.25, 000/- and Maximum Sum Assured depends upon the income

source of life to be assured.

e. Premium can be paid Yearly, Half-Yearly and Quarterly basis.

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Keta-Keti Jeevan Bema (Shiksha and Vivah)

Every parent spurns dreams for better education marriage and successful life for their off springs. In this

context, Nepal Life Insurance Company for the first time in the Insurance Industry of the country

launched a product with the sole aim of providing a tool of having risk coverage of life of child and

making future provision for the education, marriage and financial support for the wards of aspiring

parents. The salient features of plan are:

a. Policy can be issued on the life of just-born child till age of eleven, proposed by either of the

parent.

b. The risk on the life of child to start after completion of 7 years of age of child, if his her age is

below 7.

c. In case of child who has completed his age 8 or 9 the risk shall commence from age 10.

d. Minimum Sum Assured Rs. 100000 and maximum Rs. 1000000.

e. The term of this policy is 19 minus age of child at commencement of policy.

f. Maturity age 19 year of child(fixed)

g. The policy vests in the child at 18 years of age.

h. Policy premium frequency: Either yearly, Half Yearly or quarterly with certain conditions.

i. Premium waiver Benefit available on the life of proposer (either of parent only) with extra

payment.

j. Surrender as per condition but no loan available.

k. No accident benefit available on the life of child.

l. Policy participates in profits.

Jeevan Laxmi - Triple Benefit Scheme with Bonus

The plan is the Triple Benefit Endowment Plan with Bonus payable on the following terms:

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a. Basic Sum Assured with bonus payable on maturity

b. Two times of Basic Sum Assured with proportionate final bonus payable on normal death under

in force policy within policy term.

c. Three times of Basic Sum Assured with proportionate bonus payable in case of accidental death

under in force policy within policy term.

d. Minimum Sum Assured is Rs. 50,000 and maximum Rs. 100,000

e. Minimum entry age is 16 yrs and maximum entry age is 50 yrs

f. Minimum term is 7 yrs and maximum term is 25 yrs or maximum age of 60 yrs which ever is

earlier.

Jeevan Sahara

The plan is specially designed Endowment product to cover the wide range of risk for our social

communities of Nepal:

a. The sum assured together with bonus is payable on maturity date and full sum assured again

payable on death of life assured after maturity.

b. In case of death before maturity date under in force policy, the sum assured and whatever bonus

declared is payable.

c. Basic Sum Assured is payable in case of death of the policy holder after maturity of policy term.

d. Minimum Sum Assured is Rs. 100,000 and no limit for Maximum Sum Assured depending upon

the income source of the proposer.

e. Minimum entry age is 16 yrs and maximum entry age is 65 yrs.

f. Minimum term is 5 yrs and maximum term is 54 yrs or maximum age of 70 yrs which ever is

earlier.

g. The mode of payment is either, yearly, half yearly or quarterly.

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Jeevan Sarathi Beema Yojana

Nepal Life has introduced a new kind of policy in Nepali market .It is a joint life policy. Under this plan

risk of both husband and wife is covered by paying single premium. Upon the death of spouse, amount

of sum assured is paid to alive husband or wife and remaining premium is waived.

Features of Jeevan Sarathi Beema Yojana:

a. It can be taken by anyone in the age group between the age of 18 years to 50 years.

b. Maximum age on maturity is 65 years.

c. Under this plan loan up to 90% of the surrender value after the policy has completed two years

term.

d. Minimum Sum Assured is Rs. 50,000/- and Maximum Sum Assured depends upon the income

source of life to be assured.

e. Premium can be paid Yearly, Half-Yearly and Quarterly basis.

Under this Plan Sum assured with Bonus is payable on the following terms:

a. If both husband and wife are alive, basic Sum assured with Bonus would be payable at the time

of maturity.

b. If anyone dies before the maturity date, Basic Sum Assured is paid. But policy remains in force

without paying the remaining premium and at the time of maturity, again Basic sum assured with

Bonus would be payable to the alive life to be assured.

c. If both of them die before the time of maturity Basic Sum Assured with Bonus would be payable

as per the Insurance Act 2049.

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Single Premium Endowment Policy (Saral Jeevan Beema Yojana)

Nepal Life Saral Jeevan Beema is one of the unique products in Nepali’s Insurance market. It is a Single

Premium Endowment Plan. Especially it has been designed for those customers, who want to pay the

Lump sum premium and be relief from premium payment on yearly basis.

Features of Single Premium Endowment Policy :

a. In this plan we have 5 & 10 years of Term.

b. Minimum S.A is 50,000/- and maximum S.A depends upon the income source of the life to be

assured.

c. Under this plan one can get loan up to 90% of the surrender value after the policy has run for a

minimum Two Years.

d. Riders are not applicable in this plan.

e. Under this plan Lump sum premium should be paid at the time of Insurance.

Under this Plan Sum assured is payable on the following terms :

a. Basic Sum Assured will be payable at the time of Death or Maturity Period which is earlier.

b. Under this plan in 5 Yrs Term either Death or in Maturity which is earlier, Sum Assured + 50

percent of Sum Assured would be payable .

c. Under this plan in 10Yrs. Term either Death or in Maturity whichever is earlier , Sum Assured +

100 percent of Sum Assured would be payable .

d. In this plan Agent Commission would be of Gross Premium.

New Term Life Insurance

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New Term Life Insurance is one of the unique products which make provision for the family of the

Assured in the event of early death .To cover high risk in low premium is the specialty of this product. If

a person has taken loan from Bank/Finance and insured under this plan the liability against his loan

would be borne by the related insurance company.

Features of New Term Life Insurance:

a. In this plan we have 5, 10,15,20,25 and 30 years of Term.

b. Minimum S.A is 1, 00,000/- and maximum S.A depends upon the income source of the life to be

assured.

c. Minimum entry age is 18 yrs and maximum entry age is 60 yrs.

d. The mode of payment is either yearly or half yearly.

e. 5% rebates on premium for above 1000000 Sum Assured.

f. Riders are not applicable in this plan.

Under this Plan Full Sum assured payable in case of Death of Life to be assured on inforce policy.

Jeevan SAMBRIDHI

For the first time in Nepal, Nepal Life has introduced attractive Anticipated Life Insurance products with

whole period risk coverage on limited period premium payment. This insurance policy is introduced

especially for the situation of inflation and for the business purpose. Following table show the

insurance premium according to the insurance period.

Table 2.1.1 The insurance premium according to the insurance period

Term Premium payment term Pre-payment Bonds payment In case of death

within insurance

term

15 yrs 12 yrs After 4 years 30 % of sum Sum assured with

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assured after 15

years

bonus

After 8 years 30 % of sum

assured after 15

years

After 12 years 40 % of sum

assured after 15

years

20 yrs 16 yrs After 4 years 20 % of sum

assured after 15

years

Assured with

bonus

20 % of sum

assured after 20

years

40 % of sum

assured after 20

years

Nepal Life Jeevan Jyoti Plan

This plan is most popular form of life assurance. It makes provision for the family of the Assured in the

event of early death, as also assures a lump sum amount at a desired age. The amount assured, if not

paid by reason of earlier death, becomes payable at the end of the endowment term.

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If the payment of premiums is discontinued after at least three years’ premiums have been paid, a paid

up policy of an amount bearing the same proportion to the sum assured as the numbers of premiums

actually paid bears to the number stipulated for in the policy, will be automatically secured. Such

reduced paid up policy will not be entitled to participate in the profits declared thereafter

Features of Jeevan Jyoti:

Plan Name: Jeevan Jyoti Plan

Term Of returning of Sum Assured: After Maturity of the Policy or assurance early death.

Maximum Plan Term: 30 years

Minimum Plan Term: 10 Years

Entry Age Level: 11 Years

Maximum Age Level: 60 Years

Minimum Sum Assured: 50,000/-

Maximum Sum Assured: According to the income of the assurance.

Accidental Benefit: ADB/PWB/PTD Available for Age at entry 16 years and above.

Loan And Surrender: Policy being running for at least 1 year Single Premium mode and 3 years for

other mode.

2.1.2 Analyze the type of insurance facilities

Table 2.1.2.1 Maximum and minimum sum assured of different insurance policies

S.N Insurance policy Min. sum assured

(Rs)

Max. sum assured

1 Surakshit jeevan bema yojana 250000 Depending in

income

2 Keta- keti jeevan bema yojana 100000 1000000

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3 Jeevan laxmi 50000 100000

4 Jeevan sahara 100000 Depending on

income

5 Jeevan sarathi bema yojana 50000 ” ”

6 Saral jeevan bema yojana 50000 ” ”

7 New term life insurance 100000 ” ”

8 Jeevan Sambridhi 50000 ” ”

9 Nepal life jeevan jyoti plan 50000 ” ”

Note: - In the case of new term life insurance the maximum sum assured is not more then the

three times of the issued maximum sum assured.

Table 2.1.2.2 Minimum and maximum entry age of different insurance policies

S.N Types of insurance policy Min entry age (year) Max entry age

(year)

1 Surakshit jeevan bema yojana 11 60

2 Keta- keti jeevan bema yojana 1 11

3 Jeevan laxmi 16 50

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4 Jeevan sahara 16 65

5 Jeevan sarathi bema yojana 18 50

6 Saral jeevan bema yojana 17 60

7 New term life insurance 18 60

8 Jeevan Sambridhi 16 50

9 Nepal life jeevan jyoti plan 11 60

Table 2.1.2.3 Maximum maturity year of each insurance policy

S.N Types of insurance Max Maturity year

1 Surakshit jeevan bema yojana 65

2 Keta- keti jeevan bema yojana 18

3 Jeevan laxmi 60

4 Jeevan sahara 70

5 Jeevan sarathi bema yojana 65

6 Saral jeevan bema yojana 65

7 New term life insurance 65

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8 Jeevan Sambridhi 65

9 Nepal life jeevan jyoti plan 70

Here the maximum maturity year means the age of the person in which the insurance is matured.

For e.g. if the age of the person is 65 year then in that year his/her insurance policy is matured. At

that year he/she get his/her insurance sum assured back with premium.

Table: 2.1.2.4 Maximum and minimum insurance term of the insurance policy

S.N Types of the insurance Min insur.

Term( year)

Max insur. Term

(year)

1 Surakshit jeevan bema yojana 5 50

2 Keta- keti jeevan bema yojana 8 18

3 Jeevan laxmi 7 25

4 Jeevan sahara 5 54

5 Jeevan sarathi bema yojana 15 30

6 Saral jeevan bema yojana 5 10

7 New term life insurance 5 30

8 Jeevan Sambridhi 15 20

9 Nepal life jeevan jyoti plan 10 30

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This table shows the minimum and maximum insurance terms of the insurance policies. That

means the period of each insurance policies.

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Figure 2.1.2.1 Maximum maturity period of policies.

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Figure 2.1.2.2 Minimum and maximum insurance terms of insurance policies.

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2.3 Major finding and discussion

After conducting the research study on the topic insurance facility provided by Nepal Life Insurance

Company limited the major fining are

The Nepal life insurance has 9 types of insurance policies.

Nepal life insurance is a life insurance not a non life insurance company.

It has bonus rate of Rs 56 to 71 per thousand.

It uses a advance technology and software to provide the insurance services.

The minimum entry age among the insurance policies is 1 year and maximum entry age is

60 year.

The NLIC has minimum sum assured is Rs 25000 of surakshit jeevan bema yojana.

In different insurance policies there are different types of bonus rate, maturity period and

insurance terms.

It is the first private life insurance company by investing the Nepalese only.

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CHAPTER III

SUMMARY AND CONCLUSION

3.1 Summary

Insurance company plays the vital role in the development of the country. The main function of

insurance is to estimate risk of individual life and non-life property. It means that loss of property, loss

of life, loss of fire etc. Insurance is legal contracts, which protect the citizen from the financial cast that

arises from consequences of losses of physical condition, material goods, damage etc. So that, insurance

companies become to emerge due to the necessity of people to protect themselves from the risk of loss

and life.

Nepal Life, established under the Company Act 2053 and Insurance Act 2049 as a public limited

company on 2058/01/21 (04/05/2001). Nepal The company has an authorized capital of Rs. 100 Crore.

Issued Capital of Rs 50 Crore and Paid-up Capital of Rs 37.5 Crore. As on poush 2067 the company has

insured 3, 65,562 under conventional policies worth Rs. 3707 Crore and 83,559 Foreign Expatriate

policies worth Rs. 4178 Crore. Out of the total premium collected the company has invested Rs. 635

Crore as per guidelines of Bema Samiti.

Nepal Life Insurance Company has total 9 types of insurance policies which help to insure the individual

of the Nepalese people. Nepal life insurance includes all types of insurance policies for all ages of

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people i.e. from child to birth. In these types of insurance they carry different rate of interest, maturity

period and insurance terms.

3.2 Conclusion

In the modern, age the insurance in most important part for our human society and human life or non-

human life. In the human life or non-human life, it has different mishaps and its risk. Insurance was

developed and effective means to be saved from loss and makes certain and fearless regarding the risks.

Where the insurance companies help to developed their country with the helps of insurance their trade,

commerce and industries. Thus, NLIC Ltd is one of the life insurance companies in Nepal. It is the first

life insurance company established by the private sector.

NLIC plays important role in the life of the individual. It provides the sense of security to the people.

NLIC completed its 11 year and during this period the performance of NLIC is good. During this period

it insured the 7, 18,991 persons and the total insurance premium becomes RS 1, 77,85,6100000. Until

now it collect Rs 11, 43, 0300000. And it invests Rs 10, 080000000. It provides the security to the

people in loss of their life. It provides the security to the future of the person, the family of the insured

person with the help of insurance policies.

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Reference

- Teus, Mourik (2003). Market risks of insurance companies. netherland : Morfy

Publication

- Carol Pryor, Andrew Cohen, Jeffery Prottas(2007). The Illusion of

coverage, USA: National Publication

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Appendices

Q.N 1) How many types of insurance you have?

Q.N 2) what is the maturity period for these types of insurance policy?

Q.N 3) what is the entry age of each insurance policy?

Q.N 4) what are the different insurance terms of each insurance policy?

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