Brief History of Insurance

TYPES OF LIFE INSURANCE PRODUCTS
Brief History of Insurance in India In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular.
1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies.
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In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.
The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business. An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.
The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices. In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then. In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general insurance business was nationalized with effect from 1 st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973.
This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector.The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein , among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies be allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.
RECOMMENDATION MADE BY THE COMMMITTEE
Following the recommendations of the Malhotra Committee report
In 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.
The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders interests.
In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002. Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country.
The insurance sector is a colossal one and is growing at a speedy rate of 1520%. Together with banking services, insurance services add about 7% to the countrys GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.
Some of the important milestones in the life insurance business in India are: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning. 1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies are taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
WHAT IS INSURANCE Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. . It can also be defined as the equitable transfer of risk of potential loss, from one entity to another, in exchange for a premium and duty of care. It is a contract between the Insured and the Insurer. An insurer is a company selling the insurance; the insured, or policyholder, is the person or entity buying the insurance policy. The amount to be charged for a certain amount of insurance coverage is called the premium. Insurance companies collect premiums to provide for the protection of Risk management, the practice of appraising and controlling risk has evolved as a discrete field of study and practice. The transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate (indemnify) the insured in the case of a financial (personal) loss. The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated.
KNOW ABOUT INSURANCE (AN LIC PERSPECTIVE)

Life insurance in India made its debut well over 100 years ago. In our country, which is one of the most populated in the world, the prominence of insurance is not as widely understood, as it ought to be. What follows is an attempt to acquaint readers with some of the concepts of life insurance, with special reference to LIC.
It should, however, be clearly understood that the following content is by no means an exhaustive description of the terms and conditions of an LIC policy or its benefits or privileges
For more details, please contact our branch or divisional office. Any LIC Agent will be glad to help you choose the life insurance plan to meet your needs and render policy servicing.
WHAT IS LIFE INSURANCE?

Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. It is a contract between the policy taker and a life insurance company wherein the company provides the beneficiary with a pre-determined amount in case of the policy holders death during the contract term. The primary purpose of life insurance is therefore protection of the family in the event of death. The contract is valid for payment of the insured amount during:

The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if it occurs earlier.
Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the bread winner. By and large, life insurance is civilisation's partial solution to the problems caused by death.
Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: 1) That of dying prematurely leaving a dependent family to fend for itself. 2) That of living till old age without visible means of support.The advantage for the policy owner is "peace of mind", in knowing that the death of the insured person will not result in financial hardship for loved ones.
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Importance of having a Life Insurance
How are you benefited?

Guaranteed protection for your family Financial security at old age. Earlier a policy is purchased, higher the investment value.
How is our economy benefited?

Encourages individuals to undertake new and riskier ventures Provides protection of standard of living of citizens
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INDIAN INSURANCE MARKET

The insurance industry in India consists of 51 insurance companies of which 24 are in life insurance business and 27 are non-life insurance companies. In addition there is one national re-insurer, namely, General Insurance Corporation of India. Other stakeholders in Indian Insurance market include Agents (Individual and Corporate), Brokers, Surveyors and Third Party Administrators servicing Health Insurance claims.
Life Insurance Business Performance: 2010-11 2009-10 First Year Premium (Rs in Crores) Policies (in Lakhs) Number of Death Claims settled (Individual & Group Policies) (in Lakhs) Number of Claims settled within 30 days (Individual) (in Lakhs) Number of Claims settled within 30 days (Group) (in Lakhs) 1,26,381 1,09,894 482 12.34 8.13 4.21 532 10.31 7.26 3.05
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CURRENT STATISTIC
1)
Life insurance sector in India This has been the fastest growing sector in India since 2000 as Government allowed Private players and FDI up to 26%
2)
Life insurance companies have witnessed a nominal growth of 4% in first three quarters of financial year 2012-13 on year-on-year basis.
3)
The total premium collection from the individual segment for 24 life insurers stood at Rs 40,688 crores during April-December 2012, compared with Rs 39,131 crores in corresponding period last year.
4)
Public sector insurer, Life Insurance Corporation of India (LIC) witnessed a growth of 11.3% in retail segment with collection of Rs 28,017 crores during April-December 2012, against Rs 25,174 crores in the same period last year.
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On the other hand, private sector life insurers witnessed a negative growth of 9.2% in individual segment with premium collection of Rs 12,671 crores in April-December 2012 period as against Rs 13,957 crores in the same period previous year.
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REASONS FOR EXPANSION

1.Globalisation, Deregulation and privatisation In India Life Insurance sector was dominated by LIC until the turn of the Global Century. Thrown tremendous opportunities enabling rapid growth of private sector insurance companies and entry of private banks into the Insurance Sector. 2.Joint ventures Some of the major companies are in the expansion mode and are entering into joint venture deals with the local insurers in an attempt to increase the global market share. 3. Awareness and better advertising Awareness about Insurance in India has been growing with the entry of Global Players in the market.4.Introduction of innovative products. The private companies are coming out with better products which are more beneficial to the customer. EXAMPLE- ULIPs or the Unit Linked Investment Plans
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MAJOR PLAYERS IN LIFE INSURANCE SECTOR

Life Insurers in the Public Sector 1. Life Insurance Corporation of India Life Insurers in the Private Sector 1.ICICI Prudential Life Insurance Company Ltd.Largest player in the market Two faces 2.ICICI Prudential Life Insurance Company 3. ICICI Lombard General Insurance Company Limited. ICICI Prudential Life Insurance is a 74:26 joint venture between ICICI Bank India Ltd. and Prudential PLC based in UK.
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OTHER PLAYERS 1) Om Kotak Mahindra Life Insurance Co. Ltd. 2) Birla Sun Life Insurance Company Ltd. 3) SBI Life Insurance Company Limited. 4) ING Vysya Life Insurance Company Private Limited 5) Allianz Bajaj Life Insurance Company Ltd. 6) MetLife India Insurance Company Pvt. Ltd. 7) AMP SANMAR Assurance Company Ltd. 8) Dabur CGU Life Insurance Company Pvt. Ltd. 9) Tata AIG Life Insurance Company Ltd. 10) 11) HDFC Standard Life Insurance Company Ltd. Max New York Life Insurance Co. Ltd.
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MARKET SHARE OF LIFE INSURANCE COMPANIES IN INDIA IN 2011-2012
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Life Insurance Vs. Other Savings
Contract Of insurance : A contract of insurance is a contract of utmost good faith technically known as uberrima fides. The doctrine of disclosing all material facts is embodied in this important principle, which applies to all forms of insurance.
At the time of taking a policy, policyholder should ensure that all questions in the proposal form are correctly answered. Any misrepresentation, non-disclosure or fraud in any document leading to the acceptance of the risk would render the insurance contract null and void. Protection: Savings through life insurance guarantee full protection against risk of death of the saver. Also, in case of demise, life insurance assures payment of the entire amount assured (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.
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Aid To Thrift: Life insurance encourages 'thrift'. It allows long-term savings since payments can be made effortlessly because of the 'easy instalment' facility built into the scheme. (Premium payment for insurance is either monthly, quarterly, half yearly Or yearly). For example: The Salary Saving Scheme popularly known as SSS, provides a convenient method of paying premium each month by deduction from one's salary. In this case the employer directly pays the deducted premium to LIC. The Salary Saving Scheme is ideal for any institution or establishment subject to specified terms and conditions. Liquidity: In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan. Tax Relief : Life Insurance is the best way to enjoy tax deductions on income tax and wealth tax. This is available for amounts paid by way of premium for life insurance subject to income tax rates in force. Assesses can also avail of provisions in the law for tax relief. In such cases the assured in
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effect pays a lower premium for insurance than otherwise.
Money When You Need It: A policy that has a suitable insurance plan or a combination of different plans can be effectively used to meet certain monetary needs that may arise from time-to-time. Children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time can be less stressful with the help of these policies. Alternatively, policy money can be made available at the time of one's retirement from service and used for any specific purpose, such as, purchase of a house or for other investments. Also, loans are granted to policyholders for house building or for purchase of flats (subject to certain conditions).
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Who Can Buy A Policy? Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself and those in whom he/she has insurable interest. Policies can also be taken, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, certain factors such as the policyholders state of health, the proponent's income and other relevant factors are considered by the corporation.
1) Insurance For Women Prior to nationalisation (1956), many private insurance companies would offer insurance to female lives with some extra premium or on restrictive conditions. However, after nationalisation of life insurance, the terms under which life insurance is granted to female lives have been reviewed from time-to-time.At present, women who work and earn an income are treated at par with men. In other cases, a restrictive clause is imposed, only if the age of the female is up to 30 years and if she does not have an income attracting Income Tax. 3)Medical And Non-Medical schemes Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance
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and also to avoid inconvenience, LIC has been extending insurance cover without any medical examination, subject to certain conditions. 3) With Profit And Without Profit Plans An insurance policy can be 'with' or 'without' profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable along with the contracted amount.In 'without' profit plan the contracted amount is paid without any addition. The premium rate charged for a 'with' profit policy is therefore higher than for a 'without' profit policy. 4) Keyman Insurance Keyman insurance is taken by a business firm on the life of key employee(s) to protect the firm against financial losses, which may occur due to the premature demise of the Keyman.
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DETAILS OF AN INSURANCE CONTRACT

1) Contract terms 2) Exclusions 3) Costs and insurability 4) Risk calculator 5) Risks covered CONTRACT TERMS: There is no minimum premium amount for a policy. The premium can be paid monthly/quarterly/half yearly/yearly premium/life insurance rate, which depends on the amount insured. The company pays the full insurance amount 1.Death of the individual 2. The expiry of the policy (which ever is earlier). The policy taker is eligible for tax rebate under Section 80 C of the Income Tax Act. The insured event must be based upon the lives of the people named in the policy. It includes death due to serious illness or unforeseen incident
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The contract excludes claims relating to1. Fraud. 2. War. 3. Riot. 4. Civil commotion. 5. Suicide.
COSTS, INSURABILITY, AND UNDERWRITING
The insurance company fixes the price of a policy with the intention of making profit. The cost of insurance is determined using mortality tables calculated by actuaries. It is possible to derive life expectancy estimates from these mortality assumptions. Such estimates can be important in taxation regulation.
FACTORS INSURANCE COMPANIES CONSIDER:
No history of cardiovascular disease, stroke, diabetes, cancer or alcohol/drugs. No flying as a private pilot, or in aviation for two years prior to applying for policy. Having an average, untreated blood pressure that doesn't exceed 150/90. Having a cholesterol level that doesn't exceed 260.
RISK CALCULATOR
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RISKS COVERED BY LIFE INSURANCE
The only risk covered by life insurance is that of death. MISCONCEPTION-It is a common misconception that if a person covered by a life insurance policy suffers a loss in form of an accident or ill health , he is liable to receive claim from the insurance company but that is not true. Claim can be received in case of a loss, only in the form of death. For example- If Mr. X, who is covered by a life insurance policy, suffers a major heart attack but does not die, he or his family is not liable to receive claim from the insurance company to pay for the hospital charges etc. But if Mr. X dies due to the heart attack, his family is liable to receive claim from the insurance company.
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LIFE INSURANCE AS AN PRODUCT (TYPES OF LIFE INSURANCE)

Life insurance may be divided into two basic classes:
1. temporary and 2. permanent; Or the following subclasses: a. Term b. Universal c. Whole life d. Endowment life insurance. e. ULIP f. Money-back policy & g. Pension policy
a) Term insurance Term assurance provides life insurance coverage for a specified term. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else.
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There are three key factors to beconsidered in term insurance: 1. Face amount (protection or death benefit), 2. Premium to be paid (cost to the insured), and 3. Length of coverage (term). Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. Common types of term insurance include level, annual renewable and mortgage insurance. Level term policy features a premium fixed for a period longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long-term planning and asset management as premiums remain constant year to year, allowing for long-term budgeting. At the end of the term, some policies contain a renewal or conversion option. With guaranteed renewal, the insurance company guarantees it will issue a policy of an equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Some companies however do not
guarantee renewal, and require proof of insurability at the time of renewal.
Renewal that requires proof of insurability often includes a conversion option that allows the insured to convert the term policy to a permanent one, possibly compelling the applicant to agree to higher premiums. Renewal and conversion options can be very important when selecting
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a policy.
Annual renewable term is a one-year policy, but the insurance company guarantees it will issue a policy of an equal or lesser amount regardless of the insurability of the applicant, and with a premium set for the applicant's age at that time. Another common type of term insurance is mortgage life insurance, which usually involves a level-premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner's property, such that any outstanding amount on the applicant's mortgage will be paid should the applicant die. A policy holder insures his life for a specified term. If he dies before that specified term is up (with the exception of suicide), his estate or named beneficiary receives a payout. If he does not die before the term is up, he receives nothing. However, in some European countries (notably Serbia), insurance policy is such that the policy holder receives the amount he has insured himself to, or the amount he has paid to the insurance company in total. Suicide used to be excluded from all insurance policies. However, after a number of court judgments, many insurers began awarding payouts in the event of suicide (except for cases where it can be demonstrated that the insured committed suicide solely to access the policy payout). Generally, if an insured person commits suicide within the first two policy years, the insurer will simply return the premiums paid as a compromise. After this period, the full death benefit may be paid in the event of suicide.
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b) Whole life coverage
Whole life insurance provides lifetime death benefit coverage for a level premium in most cases. Premiums are much higher than term insurance at younger ages, but as term insurance premiums rise with age at each renewal, the cumulative value of all premiums paid across a life time are roughly equal if policies are maintained until average life expectancy. Part of the insurance contract stipulates that the policyholder is entitled to a cash value reserve, which is part of the policy and guaranteed by the company. This cash value can be accessed at any time through policy loans and are received income tax free. Policy loans are available until the insured's death. If there are any unpaid loans upon death, the insurer subtracts the loan amount from the death benefit and pays the remainder to the beneficiary named in the policy. While the marketing divisions of some life insurance companies often explain whole life as a "death benefit with a savings component", this distinction is artificial according to life insurance actuaries Albert E. Easton and Timothy F. Harris.The cash value reserve builds up against the death benefit of the policy and reduces the net amount at risk. The net amount at risk is the amount the insurer must pay to the beneficiary should the insured die before the policy has accumulated an amount equal to the death benefit. It is the difference between the current cash value amount and the total death benefit amount. Because of this
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relationship between the cash value and death benefit, it may be more accurate to describe the policy as a single, indivisible product, as no actual separation of the cash value and death benefit is possible. The insurer is actually setting aside money as a cash reserve to pay the future death benefit claim. This suggests that the cash value is technically part of the death benefit, which is "earned" as cash over time. The lack of separation between the cash value and death benefit also explains why insurers do not pay both the death benefit and the cash value to the beneficiary. The advantages of whole life insurance are guaranteed death benefits, guaranteed cash values, fixed, predictable annual premiums and mortality and expense charges that will not reduce the cash value of the policy. The disadvantages of whole life are inflexibility of premiums and the fact that the internal rate of return in the policy may not be competitive with other savings alternatives. Riders are available that can allow one to increase the death benefit by paying additional premium. One such rider is a paid-up additions rider. The death benefit can also be increased through the use of policy dividends, though these dividends cannot be guaranteed and may be higher or lower than historical rates over time. According to internal documents from some life insurance companies, like Massachusetts Mutual, the internal rate of return and dividend payment realized by the policyholder is often a function of when the policyholder buys the policy and how long that policy remains in force. Dividends paid on a whole life policy can be utilized in many ways. First, if "paid-up additions" is elected, dividends will purchase additional death benefit which will increase the death benefit of the policy to the named
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beneficiary. Since this additional death benefit generates cash value, it also increases the cash value of the policy.
Another alternative is to opt in for 'reduced premiums' on some policies. This reduces the owed premiums by the non-guaranteed dividends amount. A third option allows the owner to take the dividends as they are paid out (although some policies provide other/different/less options than these - it depends on the company for some cases). A final option is to invest the dividends in the insurance company's general or separate account.
c) Universal life coverage
Universal life insurance (UL) is a relatively new insurance product, intended to combine permanent insurance coverage with greater flexibility in premium payment, along with the potential for greater growth of cash values. There are several types of universal life insurance policies which include interest sensitive (also known as "traditional fixed universal life insurance"), variable universal life (VUL), guaranteed death benefit, andequity indexed universal life insurance. A universal life insurance policy includes a cash value. Premiums increase the cash values, but the cost of insurance (along with any other charges assessed by the insurance company) reduces cash values. However, with the exception of VUL, interest is paid at a rate specified by the company, further increasing cash values. With VUL, cash values will be and flow relative to the performance of the investment sub-
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accounts the policy owner has chosen. The surrender value of the policy is the amount payable to the policy owner after applicable surrender charges, if any.
Universal life insurance addresses the perceived disadvantages of whole life namely that premiums and death benefit are fixed. With universal life, both the premiums and death benefit are flexible. Except with regards to guaranteed death benefit universal life, this flexibility comes with the disadvantage of reduced guarantees. Depending on how interest is credited, the internal rate of return can be higher as it moves with prevailing interest rates (interest-sensitive) or the financial markets (equity indexed universal life and variable universal life). Mortality costs and administrative charges are known, and cash value may be considered more easily attainable because the owner can discontinue premiums if the cash value allows this. Flexible death benefit means the policy owner can choose to decrease the death benefit. The death benefit could also be increased by the policy owner, but that would typically require the insured to go through a new underwriting. Another feature of flexible death benefit is the ability to choose from option A or option B death benefits, and to change those options during the life of the insured. Option A is often referred to as a level death benefit. Generally speaking, the death benefit will remain level for the life of the insured and premiums are expected to be lower than policies with an Option B death benefit. Option B pays the face amount plus the cash value. If cash values grow over time, so would the death benefit which is payable to the insured's beneficiaries. If cash values decline, the death benefit would also
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decline. Presumably, option B death benefit policies would require higher premiums than option A policies.
d) ENDOWMENTS POLICY An endowment policy is a life insurance contract designed to pay a lump sum after a specified term (on its 'maturity') or on earlier death. Endowment policy typical maturities are 10, 15 or 20 years up to a certain age limit. Some policies also pay out in the case of critical illness. Policies are typically traditional with-profits or unit-linked (including those with unitised with-profits funds).Endowments can be cashed in early (or surrendered) and the holder then receives the surrender value which is determined by the insurance company depending on how long the policy has been running and how much has been paid into it.
Traditional With Profits Endowments There is an amount guaranteed to be paid out called the sum assured and this can be increased on the basis of investment performance through the addition of periodic (for example annual) bonuses. Regular bonuses (sometimes referred to as reversionary bonuses) are guaranteed at maturity and a further non-guarantee bonus may be paid at the end known as a terminal bonus. During adverse investment conditions, the encashment value or surrender value may be reduced by a 'Market Value Reduction' or MVR (It is sometime referred to as a market value adjustment but this is a term in decline through pressure
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from the Financial Services Authority to use clearer terms).
The idea of such a measure is to protect the investors who remain in the fund from others withdrawing funds with notional values that are, or risk being, in excess of the value of underlying assets at a time when stock markets are low. If an MVA applies an early surrender would be reduced according to the policies adopted by the funds managers at the time. Full endowments A full endowment is a with-profits endowment where the basic sum assured is equal to the death benefit at start of policy and, assuming growth, the final payout would be much higher than the sum assured. Low cost endowment (LCE) A low cost endowment is a combination of: an endowment where an estimated future growth rate will meet a target amount and a decreasing life insurance element to ensure that the target amount will be paid out as a minimum if death occurs (or a critical illness is diagnosed if included). The main purpose of a low cost endowment has been for endowment mortgages to pay off interest only mortgage at maturity or earlier death in favour of full endowment with the required premium would be much higher.
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Traded endowments Traded endowment policies (TEPs) or second hand endowment policies (SHEPs) are traditional with-profits endowments that have been sold to a new owner part way through their term. The TEP market enables buyers (investors) to buy unwanted endowment policies for more than the surrender value offered by the insurance company. Investors will pay more than the surrender value because the policy has greater value if it is kept in force than if it is terminated early. When a policy is sold, all beneficial rights on the policy are transferred to the new owner. The new owner takes on responsibility for future premium payments and collects the maturity value when the policy matures or the death benefit when the original life assured dies. Policyholders, who sell their policies, no longer benefit from the life cover and should consider whether to take out alternative cover. The TEP market deals exclusively with Traditional With Profits policies. The easiest way of determining whether an endowment policy is in this category is to check to see whether your policy document mentions units, indicating it is a Unitised With Profits or Unit Linked policy, if bonuses are in sterling and there is no mention of units then it is probably a traditional With Profits. The other types of policies Unit Linked and Unitised With Profits have a performance factor which is dependent directly on current investment market conditions.
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These are not tradable as the guarantees on the policy are much lower and there is no gap between the surrender value and the market value... Modified endowments (U.S.) Modified endowments were created in the Technical Corrections Act of 1988 (H.R 4333, S. 2238) in response to single-premium life (endowments) being used as tax shelters. The Act of 1988 established the 7-Pay Test, which is a stipulated premium that would create a guaranteed paid up policy within 7 years from policy inception. If premiums paid to the contract go beyond (i.e. are higher than) the premium amount stipulated than the contract has failed the 7-Pay Test and is reclassified as a Modified Endowment Contract. The following new tax rules apply to Modified Endowment Contracts: Distributions will switch from a First In First Out (FIFO) basis to a Last In First Out (LIFO) basis. This means that withdrawals will require the policy owner to withdraw taxable gain before withdrawing untaxable basis.Policy loans will be realized as ordinary income to the policy owner and could be subject to income taxes in the year the loan is made.Distributions (either withdrawals or loans) that go beyond the policy basis will be subject to a 10% penalty tax for policy owners under the age of 59.5 (this can be avoided by the use of a 72(v) distribution).Once a contract has violated the 7-Pay Test the reclassification to a Modified Endowment Contract is irrevocable. Transferring funds from a Modified Endowment Contract to a new life insurance policy via the 1035 exchange privilege will render the newly
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issued contract as Modified Endowment Contract as well.
ULIP: Financial solutions that combine the safety of insurance protection with wealth creation opportunities having unprecedented flexibility and transparency. In ULIPs, a part of the investment goes towards providing the life cover. The residual portion of the ULIP is invested in a fund which in turn invests in stocks or bonds; the value of investments alters with the performance of the underlying fund opted by policy taker. Simply put, ULIPs are structured in such that the protection element and the savings element are distinguishable, and hence managed according to your specific needs. In this way, the ULIP plan offers unprecedented flexibility and transparency.
Money-back Policies Money back policies are basically an extension of endowment plans wherein the policy holder receives a fixed amount at specific intervals throughout the duration of the policy. In the event of the unfortunate death of the policy holder, the full sum assured is paid to the beneficiaries. The terms again might slightly vary from one insurance company to another. Pension Policies Pension policies let individuals determine a fixed stream of income post retirement. This basically is a retirement planning investment scheme where the sum assured or the monthly pay-out after retirement
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entirely depends on the capital invested, the investment timeframe, and the age at which one wishes to retire. There are again several types of pension plans that cater to different investment needs. Now it is recognized as insurance product and being regulated by IRDA
PROCEDURES INVOLVED IN LIFE INSURANCE

1) Nomination 2) Assignment or Transfer 3) Surrender ValueTrade Off Value (only applicable for ULIPs) 4) Settlement Of Claims 1.NOMINATION Definition-Itis the process of identifying a person to receive the policy money in the event of the death of the Policyholder. Basic FactsNomination is incorporated in the text of the policy at the time of its issue.Change of Nomination can be done by the Policyholder any time during the term of the Policy and any number of times by giving a notice. Further, Nomination can be removed any time by the Policyholder without giving prior notice to the NomineeNomination can be done only by a policyholder who is a MAJOR and on a policy on his own life. 2.ASSIGNMENT Definition It is transfer of rights, title and interest of the policy from one person to another Life insurance is a contract and is also a personal property. Hence, it can be transferred to another person.Basic terms38

assignor -The person who transfers his right assignee -The person to whom the right is transferredWhat happens after assignment? All rights, title and interest in respect of the property assigned are immediately transferred to the Assignee/s He or she becomes the owner/s of the policy subject to any lawful condition made in the assignment. TYPES OF ASSIGNMENTS Conditional AssignmentIt is also known as Collateral whereby on the happening of a specified event which does not depend on the will of the assignor, the assignment will be suspended or revoked wholly or in part.
Absolute AssignmentAll the rights, title and interest which the assignor has in the policy passes on to the assignee without reversion to the assignor or his estate in any event. Feature in a life insurance policy allowing a policy owner to freely assign (give, sell) a policy to another or institution. 3.Surrender Value It is the amount payable to the policyholder on terminating the contract of insurance. LIC has a condition that the policy holder can surrender only after three years of policy Surrender value is calculated as per company policy.
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Calculating the Surrender values Termination of contract before 3 years- surrender value =zero
Termination after 3 years1. Regular premium payment surrender value=30 % of premiums paid 2. Single premium policy surrender value=90%of premiums paid
Surrender of policy is not recommended because- 1.The surrender
value would always be proportionately low.2.Incase policy holder goes for another insurance plan, amount of premiums would be much higher due to advancement of age.Best strategy- Retention of earlier policies and continuation of all policies without allowing them to lapse.
4.Trade off valueIt is defined as the value of the units held by the policy holder. This concept arises when an insured individual holds a Unit Linked Insurance Policy .The risks are spread over a pool of investors who hold units. It is based upon unit funds- Unit funds are the allocated portions of the premiums after deducting for all the charges and premium for risk cover under all policies in a particular fund as chosen by the policy holders are pooled together to form a Unit fund. 5. Settlement of Claims:
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A Life Insurance Policy results into claim in the following situations: 1. on maturity of the policy i.e. completion of the term for which the insurance was taken. 2. on death of the life insured Settlement of claims on maturity The steps that a policyholder should follow to expedite the realization of his claim are as under: 1. In case intimation is not received The policyholder should contact the concerned Divisional Office and obtain a copy of the maturity intimation. 2.Policy Document
3. On receipt of the maturity intimation, the policyholder should send the original policy document along with the last receipt of insurance premium paid. 4.Age proof document
In case of death Claims in case of death
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What is the procedure to be followed in case of claim by death of the policyholder? The following are the main steps of the procedure for death claimsIntimation letter Content to be filled Submission of proof of death Submission of statements Submission of age proof Certificate of ownership Payment and discharge 1.Intimation letterNeeds to be sent by any of the following nominee assignee of the policy Nearest relative of deceased policy holder. 2.Contents of letterName of the life assured a statement that the life assured is dead; the date of death; the cause of death; the place of death; and policy number / s claimants relationship with the assured or his status (nominee, assignee, etc.).
3.Submission
Of Proof of Death TO be submitted is a certificate by Municipal Death Registry or by Public Record Office which maintains the records of births and deaths in the locality. 4.StatementsFrom the doctor who attended the deceased policyholders last illness. Of treatment in the hospital where the policyholder died. Of burial or cremation to be given by an independent person who attended the funeral and has seen the dead body. From the employer if the
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policyholder was in employment at the time of death. 5.Submission of Proof of Age Examples of age proofs-Horoscope Certificate of baptism ceremony among Christians Birth certificate High School Certificate 6. Certificate of Ownership. A. It is not requiredWhen the policy is validly assigned, or a nominee has been designated.
B. It is requiredWhen policy has not been validly assigned Corporation would then require legal evidence, such as-Succession Certificate Letters of Administration or Will.
7.Payment and Discharge: 1. All the previous mentioned formalities must be completed 2. The insurance company then issues a discharge form for completion 3. It is to be signed by the person entitled to receive policy money. The person might be either-the nominee, in case nomination was made under the policy; the assignee, in case the policy was validity and unconditionally assigned; the legal representative or successor. 4. Proceeds from the policy may be paid as a lump sum or as an
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annuity, which is paid over time in regular recurring payments for either a specified period or for a beneficiary's lifetime. Early death claims: Life insurance claim If death occurs in less than three years from the date of the policy, Requirements to make the claim: Policy Document Assignment / Re-assignment Deed, if any Age Proof Document Legal Evidence of Title Statement Certificates Of the Doctor who attended last the deceased policy holder Of treatment issued by the hospital authorities Of the employer if the deceased was an employee Of Identity and burial by a person who attended the funeral of Death
A PROMISING MARKET NEXT IS WHAT?....

Life insurance market in semi-urban and rural territories is expected to rise to US$ 20 Billion mark in the upcoming four years from the existing value of less than US$ five Billion Vast untapped potential barely 6% of Indias insurable population is insured Indian insurance industry is slated to touch $ 25 bn by 2010 assuming 7% GDP growth More job opportunities in the insurance sector
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Life insurance sector in rural india Only 8-10% rural households are covered under life insurance schemes and remaining 90% can be targeted for new innovative insurance schemes.
Future of rural life insurance offers tremendous growth opportunities for insurance companies insurers should develop viable and cost-effective distribution channels; Nearly 20% of all farmers in rural India own a Kissan Credit cards.
The 25-30 million credit cards offer a huge data base and opportunity for insurance companies. Hiring insurance agents provides job opportunities Example-Rural Postal Life Insurance Scheme Aim-To gives protection to the rural people for any eventuality. Contents The new policy will be of Rs. of 1,00,000/- of sum assured .Person has to contribute only Rs. 1.25 per month or Rs.15/- per year as
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premium.
KEY BENEFITS OF LIFE INSURANCE. Life insurance, especially tailored to meet your financial needs Need for Life Insurance Today, there is no shortage of investment options for a person to choose from. Modern day investments include gold, property, fixed income instruments, mutual funds and of course, life insurance. Given
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the plethora of choices, it becomes imperative to make the right choice when investing your hard-earned money. Life insurance is a unique investment that helps you to meet your dual needs - saving for life's important goals, and protecting your assets. Let us look at these unique benefits of life insurance in detail. Asset Protection From an investor's point of view, an investment can play two roles asset appreciation or asset protection. While most financial instruments have the underlying benefit of asset appreciation, life insurance is unique in that it gives the customer the reassurance of asset protection, along with a strong element of asset appreciation.The core benefit of life insurance is that the financial interests of ones family remain protected from circumstances such as loss of income due to critical illness or death of the policyholder. Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The customer therefore benefits on two counts and life insurance occupies a unique space in the landscape of investment options available to a customer. Goal based savings Each of us has some goals in life for which we need to save. For a young, newly married couple, it could be buying a house. Once, they decide to start a family, the goal changes to planning for the education or marriage of their children. As one grows older, planning for one's retirement will begin to take precedence. Clearly, as your life stage and therefore your financial goals change,
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the instrument in which you invest should offer corresponding benefits pertinent to the new life stage. Life insurance is the only investment option that offers specific products tailor made for different life stages. It thus ensures that the benefits offered to the customer reflect the needs of the customer at that particular life stage, and hence ensures that the financial goals of that life stage are met.
The table below gives a general guide to the plans that are appropriate for different life stages. Life Stage Young Single Young & Primary Need Asset creation creation Life Insurance Product Wealth creation plans & Wealth creation and
& Asset
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Just married protection Children's Married with education, kids creation protection Middle aged Planning with up kids Across life-stages all for Asset and mortgage protection plans Education insurance,
mortgage protection & wealth creation plans
grown retirement & asset protection Health plans
Retirement
solutions &
mortgage protection
Health Insurance
Life Insurance is an effective tool to save tax
CRITICISM Although some aspects of the application process (such as underwriting and insurable interest provisions) make it difficult, life insurance policies have been used in cases of exploitation and fraud.
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Incompetent Personnel and facilities in the industry Some companies are interested in making huge profits rather than helping the general public with insurance. In the process they hire unskilled people and provide poor infrastructural facilities. Murder and exploitation In the case of life insurance, there is a motivation to purchase a life insurance policy, particularly if the face value is substantial, and then kill the insured. Delay in settlement of claims
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CONCLUSION Though there has been progress in sale of policies, lack of awareness of life insurance still exists. One should purchase a policy at the earliest because of i. ii. lower premiums ii.higher returns
Despite a few of its disadvantages purchase of a life insurance policy is a smart move especially because the insurance sector is germinating in India.
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BIBLIOGRAPHY
WEB REFERENCE 1) http://www.licindia.in/individual_plans.htm 2) http://www.lifeinsexpo.com/life-insurance-advantages.html 3) http://www.hdfclife.com/Products/SavingsPlans/Savings-investment-Plans.aspx
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TYPES OF LIFE INSURANCE PRODUCTS

TYPES OF LIFE INSURANCE PRODUCTS

TYPES OF LIFE INSURANCE PRODUCTS

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RECOMMENDATION MADE BY THE COMMMITTEE

Following the recommendations of the Malhotra Committee report

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KNOW ABOUT INSURANCE (AN LIC PERSPECTIVE)

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WHAT IS LIFE INSURANCE?

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Importance of having a Life Insurance

How are you benefited?

How is our economy benefited?

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INDIAN INSURANCE MARKET

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REASONS FOR EXPANSION

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MAJOR PLAYERS IN LIFE INSURANCE SECTOR

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MARKET SHARE OF LIFE INSURANCE COMPANIES IN INDIA IN 2011-2012

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Life Insurance Vs. Other Savings

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DETAILS OF AN INSURANCE CONTRACT

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RISKS COVERED BY LIFE INSURANCE

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LIFE INSURANCE AS AN PRODUCT (TYPES OF LIFE INSURANCE)

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b) Whole life coverage

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c) Universal life coverage

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PROCEDURES INVOLVED IN LIFE INSURANCE

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Surrender of policy is not recommended because- 1.The surrender

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In case of death Claims in case of death

TYPES OF LIFE INSURANCE PRODUCTS