INSURANCE AN INTRODUCTION

Insurance may be described as a social device to ensure protection of economic value

of life and other assets. Under the plan of insurance, a large number of people
associate themselves by sharing risks attached to individuals. The risks, which can be
insured against, include fire, the perils of sea, death and accidents and burglary. Any
risk contingent upon these, may be insured against at a premium commensurate with
the risk involved. Thus collective bearing of risk is insurance.
Insurance is a contract whereby, in return for the payment of premium by the insured,
the insurers pay the financial losses suffered by the insured as a result of the
occurrence of unforeseen events. The term "risk" is used to describe the possibility of
adverse results flowing from any occurrence or the accidental happenings, which
produce a monetary loss.
Insurance is a pool in which a large number of people exposed to a similar risk make
contributions to a common fund out of which the losses suffered by the unfortunate few,
due to accidental events, are made good. The sharing of risk among large groups of
people is the basis of insurance. The losses of an individual are distributed over a group
of individuals.
Definitions:
General definition:
In the words of John Magee, Insurance is a plan by themselves which large
number of people associate and transfer to the shoulders of all, risks that
attach to individuals.

Fundamental definition:
In the words of D.S. Hansell, Insurance accumulated contributions of all parties
participating in the scheme.

Contractual definition: In the words of justice Tindall, Insurance is a contract in which

a sum of money is paid to the assured as consideration of insurers incurring the risk of
paying a large sum upon a given contingency.
Characteristics of insurance

Sharing of risks

Cooperative device

Evaluation of risk

Payment on happening of a special event

The amount of payment depends on the nature of losses incurred.

The success of insurance business depends on the large number of

people

insured against similar risk.

Insurance is a plan, which spreads the risk and losses of few people among a large
number of people.

The insurance is a plan in which the insured transfers his risk on the insurer.

Insurance is a legal contract which is based upon certain principles of insurance

which includes, utmost good faith, insurable interest, contribution, indemnity, causas
proxima, subrogation, etc.

The scope of insurance is much wider and extensive.

Functions of insurance:
Primary functions:
1. Provide protection:- Insurance cannot check the happening of the risk, but can
provide for the losses of risk.
2. Collective bearing of risk: - Insurance is a device to share the financial losses of few
among many others.

3. Assessment of risk: - Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk.
4. Provide certainty: - Insurance is a device, which helps to change from uncertainty to
certainty.
Secondary functions:
1. Prevention of losses: - Insurance cautions businessman and individuals to adopt
suitable device to prevent unfortunate consequences of risk by observing safety
instructions.
2. Small capital to cover large risks: - Insurance relives the businessman from security
investment, by paying small amount of insurance against larger risks and
uncertainty.
3. Contributes towards development of larger industries.
Other Function:
Means of savings and investment:
Insurance companies are business houses. The product they sell is financial protection.
To succeed and survive, they must cover their costs, which

include payments to cover the losses of policyholders, as well as sales and

administrative expenses, taxes and dividends.
Insurance companies have two sources of income for covering these costs:
premiums and investment income. The premiums are collected on a regular basis
and invested in Government Bonds, Gilt, stocks, mutual funds, real estates and other
conservative avenues. However, investment income depends on market conditions,
interest rates, economy etc. and varies from year to year. Because of the uncertainty
associated with the investment income, insurance companies must generate enough
income from premiums to cover the bulk of their expenses.
The risk becomes insurable if the following requirements are complied with:

The insured must suffer financial loss if the risk operates.

The loss must be measurable in money,

The object of the insurance contract must be legal.

The insurer should have sufficient knowledge about the risks he accepts.

Fundamentals of Insurance
The fundamental Principles of the Insurance are as follows:

Insurable Interest: Insurable interest means the legal right to insure. Insurable
Interest is a must and only then the insurance contract is enforceable at law. This
principle differentiates a Contract of insurance from wager. Lack of insurable interest
renders the contract null and void. For Insurable Interest to exist there must be
Property, Rights, Interest, Life or

Liability; this must be insured and the Insured should have a legally recognizable
relationship thereto. The Insured should be benefited by the safety of the property or
is prejudiced by its loss. Insurable Interest may arise in the following manner:
1. Ownership: Absolute ownership entitles the owner to insure the property. This is
the commonest method whereby Insurable Interest arises.
2. Partial Interest is also insurable e.g. a mortgagee. A creditor can also insure the
life of his debtor but only to the extent of his loan.
3. Administrators and executors i.e. officials appointed by a court of law to take
care of a property may also insure the property.
4. Relationship does not automatically constitute insurable interest. The only
relationship recognized by law for this purpose is the one between a husband and
wife.
5. An employer can insure his employee under a Personal Accident Policy as he
has insurable interest in them.

Proximate cause: Generally, the claims are payable under insurance policies if they
arise out of events which are proximately caused by the insured perils. In other
words, the proximate cause of the event has to be peril covered by the policy, so as
to constitute a valid claim.

Contribution: An insured may have several insurance on the same subject matter. If
he recovers his loss under all these insurance, he will obviously make a profit out of
loss. This will be an infringement of the principle of indemnity. Common Law has,
therefore, evolved the doctrine of contribution whereby the insured is prevented from
recovering more than his loss, despite his having several insurance on the subject
matter.

Subrogation: The principle of indemnity seeks to prevent the insured from making
profit out of loss. However, it may so happen that that the insured may recover his
loss under his policy and he may also have rights against third parties. If, after the
insurance claim is settled, the insured is allowed to enforce his rights against third
parties and to retain whatever damages he receives from them, he will certainly
make a profit and the principle of indemnity will be infringed.
Common Law has therefore, evolved the doctrine of subrogation as corollary to the
principle of indemnity. Subrogation may be defined as the transfer of rights and
remedies of the insured to the insurers who have indemnified the insured in respect
of the loss. The Common Law right of subrogation is implied an all contracts on
indemnity, as it arises only after payment of loss.

Utmost Good Faith: In all General Insurance contracts we know that a property or
interest or liability or life is offered for insurance and the insured has to take
decisions on the acceptance of the proposal. If he decides to accept the proposal a
premium commensurate with the risk has to be charged. To enable him to take
necessary decision in this regard, the insurer must have certain facts about the risk
offered. These facts influence the judgment of the insurer in deciding about the

acceptance or otherwise of the risk and the rate of premium to be charged, if

accepted. Such facts are known as material facts.
Nature of Insurance Contracts
When the insured pays the premium and the insurers accept the risks, the contract of
insurance is concluded. The policy issued by the insurers is the evidence of the
contract. The contract of insurance, like any other contract, for

example a contract for the sale of goods, is subject to the general law of contract as
embodied in the Indian Contract Act,1872.
According to this Act, a contract must have certain essential features in order to make it
legally valid and enforceable. The following are the essential elements:
a) Offer and acceptance: Usually, the offer is made by the proposer, and acceptance
made by the insurer.
b) Consideration: This means that the contract must involve some mutual benefit to the
parties. The premium is the consideration from the insured and the promise to indemnity
is the consideration from the insurers.
c) Agreement between the parties: Both the parties should agree to the same thing in
the same sense.
d) Capacity of the parties: Both the parties to the contract must legally competent to
enter into the contract. For example, minors cannot enter into insurance contracts.
e) Legality: The object of the contract must be legal and the contract should not violate
any legal requirements. E.g. no insurance can be had for smuggled goods.
Risk
Reasonable or not, risks are inescapable in business. Every business venture is
something of a gamble, because the possibility of loss is as real as the prospects for
profits. And even though managers do everything possible to ensure that their business
succeeds, they cannot guard against every conceivable form of risk.

Pure Risk versus Speculative Risk

Pure Risk: Events representing the kind of risk that no business can predict or
escape, known as Pure Risk, it is the threat of a loss without the possibility of gain.
In other words, a disaster such as avalanche or fire is costly for the business it
strikes, but the fact that no disaster occurs contributes nothing to a firm's profit.

Speculative Risk: It is the type of risk that offers the prospect of making profit - and
prompts people to go into business in the first place. Every business accepts the
possibility of losing money in order to make money.

Approaches to Risk Management

Risk Management is the process of reducing the threat of loss due to uncontrollable
events. Steps in selecting a risk management approach:

To identify all the things those can possibly go wrong.

To consider the probability that an event will occur.

Techniques of Risk Management are:

1. Avoiding the Risk: When a company avoids risk, it eliminates the possibility that a
particular event will occur. To avoid the possibility of a suit, for example, not to produce
any products -which would, of course, eliminate both the threats of a lawsuit and the
opportunity to profit. With rare exceptions, avoiding risk entirely is extremely difficult.
2. Reducing Risk: A more practical approach is to reduce the risk by taking precautions.
Risk reduction is an important element in most companies' approach to risk
management. Typical precautions include putting safety locks on doors to prevent
robberies, installing overhead sprinklers to minimize fire damage, and periodic checking
motor vehicles to prevent accidents.
3. Assuming risk: Many companies draw on current revenues or set aside a
"Contingency Fund" to cover unexpected losses. Setting aside money on regular basis
could be cheaper than purchasing insurance. Moreover, the company can earn interest
on the reserved cash. Such assumption of risk is also called self-insurance or risk
retention.

4. Transferring the risk: Most companies still rely on outside insurance firms for financial
protection against catastrophic losses. In buying insurance, companies transfer the risk
of loss to an insurance firm, which agrees to pay for certain types of losses. In
exchange, the insurance firm collects a fee known as a premium.
Insurable and Uninsurable Risks:
Insurable risks: An insurable risk - one that an insurable company will cover - Generally
meets the following requirements. The peril insured against must not be under the
control of the Insured. This means, of course that insurer do not pay for losses that are
intentionally caused by an insured, caused at the Insured's direction, or caused with the
insured's collusion. For example, a fire insurance policy excludes loss caused by the
Insureds own arson. It does, however, include loss caused by an employee's arson.
Losses must be calculable, and the cost of insuring must be economically feasible. To
operate profitably, insurance companies must have data on the frequency of losses
caused by a given peril. If this information covers a long period of time and is based on
a large number of cases, Insurance companies can usually predict quite accurately how
many losses will occur in the future. For example, the insurance companies to fix up the
rate of premium of Personal Accident Insurance may use the information of the number
of people who will die each year in India in accidents. The peril must be unlikely to affect
all insured simultaneously. Unless an insurance company spreads its coverage over
large geographic areas or a broad population base or different classes of Insurance, a
single disaster might force it to pay out all its policies at once. The possible loss must be
financially serious to the Insured. An Insurance company could not afford the paperwork
involved in handling numerous small claims of a few Rupees each. As a result, many
policies have a clause specifying that the insurance company will pay only that part of a
loss greater than an amount - the deductible or excess - stated in the policy. The excess
represents small losses that the Insured has to absorb.

Chapter 3
INDUSTRY PROFILE
3.1 Origin of Life Insurance
Life Assurance was born in England when the first policy providing temporary cover for
a period of 12 months was issued as easy as 1583 A.D. The Amicable Society started
granting fluctuating sum on death since 1705 and a fix sum since 1757, With the
development of mortality tables, the life Assurance acquired a scientific character. The
Equitable Society founded in 1762 was the first Society established on scientific basis.
3.2 ORIGIN OF LIFE ASSURANCE IN INDIA
In India, after failure of two British companies, the European and the Albert in 1870,
which attempted writing business on Indian lives, first Indian Life Assurance Society was
formed in the same year called Bombay Mutual Assurance Society Ltd. It was followed
by the Oriental Life Assurance Company Limited in 1874, Bharat in 1896 and Empire of
India in 1897. The Idea of insurance was born out of a desire of the people to share loss
of an individual by many. Originally it restricted to forms other than life assurance. It
started with Marine Insurance, where the losses on account of perils of sea were shared
by all who were engaged in trade. Reference to some forms of insurance, is found in the
codes of Hammurabi, Manu (Manav Dharma Shastra). The word `Yogakshema is used
in the Rig Veda suggesting that some form of community insurance was practiced by
the Aryans in India over 3000 years ago. In India during Buddhist period burial societies
existed which were mutual in their character and used to help a family by building a
house, protecting the widow, marrying the girls.

The Swadeshi Movement of 1905 provided impetus to the formation of several

companies such as the `Hindustan Cooperative, the `United India, the `Bombay Life,
the `National. Further in the wake of freedom movement number of companies such as
the `New India, the `Jupiter the `Lakshmi emerged.

The Government began to exercise a certain measure of control on Insurance business

by passing the `Insurance Act in 1912. For controlling investment of funds, expenditure
and management, a comprehensive Act was passed known as `The Insurance Act
1938. For controlling the affairs, the office of Controller of Insurance was established.
The act was extensively amended in 1950.
In the year 1955, approximately 170 Insurance Offices and 80 Provident Fund Societies
had been registered for transacting Life Assurance business in India. There were,
however, no full guarantees to the policyholders. The concept of trusteeship was
lacking. Many insurance companies went into liquidation. There were malpractices in
insurance business. For achieving the following purposes it was felt necessary to
nationalize the insurance business in India. To provide security to the policyholders
(i) To utilize the funds for nation-building activities.
(ii) To avoid cut throat competition
(iii) To abolish mal-practices
(iv) To spread the insurance message to the rural areas.
The first step in this direction was taken by the Government of India by issuing the Life
Insurance (the Emergency provisions) Ordinance, 1956 on 19 th January, 1956. The then
Finance Minister, Shri C. D. Deshmukh mentioned the purpose of nationalisation as
reaching the goal of socialistic pattern of society, rendering genuine service to the
people in the rural area. The Life Insurance

Corporation Act (Act XXXI of 1956) was passed by the Parliament in June 1956 which
came in force on 1st July 1956. The Life Insurance Corporation of India came into
existence on 1st September 1956.
3.3 INSURANCE SECTOR REFORMS
Having looked at the insurance sector, let us look at the efforts made by the government
to make the industry more dynamic and customer friendly. To begin with, the Malhotra

committee was set up with the objective of suggesting changes that would achieve the
much required dynamism.
The Malhotra Committee Report
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend
its future direction. In 1994, the committee submitted the report and gave the following
recommendations:
Structure

Government stake in the insurance Companies to be brought down to 50%

Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent-corporations

All the insurance companies should be given greater freedom to operate

Market Regulations:

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to

enter the industry

No Company should deal in both Life and General Insurance through a single entity

Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies

Postal Life Insurance should be allowed to operate in the rural market

Only one State Level Life Insurance Company should be allowed to operate in each
state

Regulatory Body

The Insurance Act should be changed

An Insurance Regulatory body should be set up

Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent

Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced

from 75% to 50%

GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time)

Customer Service

LIC should pay interest on delays in payments beyond 30 days

Insurance companies must be encouraged to set up unit linked pension plans

Computerization of operations and updating of technology to be carried out in the

insurance industry

Overall, the committee strongly felt that in order to improve the customer services and
increase the coverage of the insurance industry should be opened up to competition.
But at the same time, the committee felt the need to exercise caution as any failure on
the part of new players could ruin the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by stipulating the minimum
capital requirement of Rs.1 bn. This amount is not very high for foreign firms, as it
translates to only about US$25 million. Further, to date it is unclear
whether equity should be payable in one go or should be brought in as installments.
Also, the foreign equity participation was to be restricted to only 40%.
The committee felt the need to provide greater autonomy to insurance companies in
order to improve their performance and enable them to act as independent companies

with economic motives. For this purpose, it had proposed setting up an independent
regulatory body.
The industry and analysts find that there is lack of clarity in the following areas:

Though coverage of rural areas was to be made compulsory, it raises the question
as to who would subsidies the rural policies as they would be difficult to service and
hence costs will go up.

There is some confusion with respect to investments. Where should the funds be
invested? Currently 70% of the funds with LIC & GIC are invested in Government
securities. Would new entrants be allowed to invest in GOI securities?

The report also does not enumerate exit options available to the new entrants. In the
event of failure, there should be an arrangement made whereby the other
Companies pool in to bail the customers, who in all probability would be middle class
individuals.

3.4 POTENTIALITY OF INSURANCE IN INDIAN MARKET

Marketing inefficiency of general insurers has kept society in dark even when so many
personal as well as commercial lines of insurance covers are available for them.
Insurers have failed to identify the need of the individual risk factors and thereafter
selecting proper market segments and developing demand of these needs by adopting
proper marketing mix. There is great scope of commercial line of insurance as we are
developing at a very fast rate but the potentiality and scope of personal lines of
insurance is vast as this areas is still under-tapped. Product designing and pricing is
also simple and growth of this portfolio is guaranteed in this country which has a base of
over 100 crore population, where there are about 25 crore dwellings, 20 crore schools,
colleges and educational institutions and about 5 crore small and big shops.

But

despite this the Indian insurers share in personal line of business is very low or
negligible.
There are enormous growth opportunities to Indian as well as foreign insurers because
of such a huge base of population there is ample scope to introduce the new line of

covers as per the changing needs and to increase the per capita share of the insurance
by encouraging risk transfer by investing small portion of the savings of the individuals.
By opening up the sector far more opportunities has came up in insurance and
reinsurance market. After privatization of this sector presence of the foreign players has
also increased. Therefore the insurers, in time to come, will have to change their
attitude from selling of the product to marketing of the protection needs of the insured
and for this what is required is:

Effective product planning

Suitable pricing

Efficient promotion and physical distribution.

Proper physical evidence.

Good and well trained sales force.

Your Plans, Your Dreams & Their Future:

The Essence of Life Insurance
Your family counts on you every day for financial support: food, shelter, transportation,
education, and much more. You and your spouse have plans for your future and dreams
for your family: another child, a bigger home, a new business, college education, travel,
retirement Life insurance is all about making sure your family has adequate financial
resources to make those plans and dreams come true, if you were to die prematurely.
And just as your spouse and children (as beneficiaries) count on you, you count on your
spouse. That's why coverage for your spouse is also important. If he or she were to die
unexpectedly, you would feel similar financial strains. This is especially true today, with
so many "double income" families.

When Should Someone Invest?

The answer, of course, is right now! Since no one can tell when the best time to invest
is, it is whenever you have the money! One should first invest in any plans for which tax-

deductible contributions can be made because these types of savings reduce current
taxes. Then, any more surplus funds should be invested in a variable annuity, especially
in equities so as to get the maximum growth of the capital.
Insurance as a Safety Net
The function of insurance is to protect you against losses you can't afford. This is done
by transferring the risks of a person, business, or organization -- the "insured" -- to an
insurance company, or "insurer." The insurer then reimburses the insured for "covered"
losses

--

i.e.,

those

losses

it

pays

for

under

the

policy's

terms.

As the insurance consumer, you pay an amount of money, called a premium, to the
insurer to transfer the risk. The insurer pools all its premiums into a large fund, and
when a policyholder has a loss, the insurer draws funds from the pool to pay for the
loss. Life is full of unexpected events that can create large financial losses. For
example, whenever you drive, it is possible that you may have a costly accident. Risks
affect you by causing worry about potential loss and how to deal with the
consequences. Insurance reduces anxiety over a possible loss and absorbs the
financial brunt of its consequences. However, while insurance coverage is essential,
how much and what type of insurance people need differ with each individual. You must
decide how much risk you're willing to tolerate without insurance. For example, benefits
for disability policies typically begin after a waiting period of one to six months.
Therefore, you should ensure that you have some form of coverage or financial
resources before the policy period begin.

Where Can I Get Insurance?

Since insurance can be expensive, it makes sense to get more than one price quote for
coverage. At one time, we in India had no option but the nationalized insurance
companies like LIC, GIC, etc. Now several private players, often with foreign tie-ups, are
entering the fray. There are now several companies selling any one type of insurance,
each with its own price structures, coverage, and policy exclusions. To help consumers
choose among the various types of coverages, companies train sales representatives
in the technical points of their insurance products. Many representatives work for just

one insurance company. There are also brokers and independent agents -- selfemployed business people who sell insurance on commission for several insurers -who claim they can comparison shop to get the best coverages for consumers. Certain
banks also sell insurance.
What Type of Insurance Agent Should I Trust?
With multiple players in the life insurance field now, a choice should be first made
regarding the insurance company before choosing an agent. To determine a company's
willingness to pay claims, ask a policyholder who has filed several claims. Obviously,
the more claims an insurer has handled with no complaints, the more likely that the
company will provide you with good service. Barring LIC, the remaining players in life
insurance are still new in the field, so this kind of information will not be available for
another few years at the least. It remains to be seen how the newer players will perform
on the claims front, but given the regulatory framework and their strong parentage, their
performance should be comparable, if not better than LIC.
It is quite imperative that your insurance agent be competent and professional enough
to clearly understand your insurance requirements and suggest a
suitable scheme. Also, with insurance companies offering varying rate of commissions
on different schemes, there is a likelihood that a 'not-so-professional' agent may be
tempted to recommend a scheme which pays him a higher commission, though it may
not be very suitable for your needs. This is especially so in the case of LIC, sole
provider of life insurance in our country till recently, where the eligibility criteria are not
very rigorous and very often the level of knowledge and competence of the agents
leaves a lot to be desired. The new players seem to be much more stringent in
appointing agents and more committed in providing training to them. In today's context,
especially in case of LIC, it may be advisable to go in for an agent who comes
recommended from one of your friends, relatives or associates. Further, the agent
should be able to provide you with a comparison of multiple schemes and also explain
them in simple terms, so that you are are able to make an informed decision. In case an
agent is not inclined to spend the time and resources to provide you with relevant
information and solve your queries, it may be better to give a go-by to such a person

and start looking for a new agent. The market is becoming increasingly competitive and
it should not be a difficult task to find a good agent.
Life Insurance Players:

Bajaj Allianz General Insurance: Bajaj Allianz General Insurance Company Limited is
a joint venture between Bajaj Auto Limited and Allianz AG of Germany. Both enjoy a
reputation of expertise, stability and strength.

Birla Sun Life Insurance: The Aditya Birla Group contributes its knowledge of the
Indian market while Sun Life Financial contributes global expertise in the areas of
protection and wealth management.

HDFC Standard Life Insurance: HDFC and Standard Life have a long and close
relationship built upon shared values and trust. Providing long term financial security
to policy holders will be the constant endeavor.

ICICI Prudential Life Insurance: The Company was granted Certificate of

Registration for carrying out Life Insurance business, by the Insurance Regulatory
and Development Authority.

ING Vysya Life Insurance: ING, the worlds second largest life insurance company
together with Vysya Bank, one of Indias leading private sector banks, forms ING
Vysya Life Insurance.

Life Insurance Corporation (LIC): Life Insurance Corporation (LIC) has been one of
the pioneering organizations in India who introduced use of Information Technology
in their business.

MetLife India: The Metropolitan Life Insurance Company is the number one insurer
in the U.S. It is helping build financial independence for its customers.

Oriental Insurance: The Oriental Insurance Company Ltd. (OICL) is one of the
leading General Insurance companies in India and is a subsidiary of the General
Insurance Corporation (GIC) of India.

Royal Sundaram Alliance Insurance: Royal Sundaram marks the coming together of
Sundaram Finance, one of Indias most respected and trusted finance companies,
and Royal and Sun Alliance, one of the largest insurance groups in the world.

Tata AIG Insurance: Life insurance & general insurance for individuals & corporates
by Tata AIG. This site will guide you on how to capitalize on opportunities and protect
against uncertainties.

Chapter 4
LIFE INSURANCE PRODUCTS
4.1 WHOLE LIFE POLICY
These are low-cost insurance plans where the sum assured is payable on the death of
the insured
A typical whole life policy runs as long as the policyholder is alive. In other words, the
risk is covered for the entire life of the policyholder, which is why it is known as whole
life policies.
The policy money and the bonus are payable only to the nominee of the beneficiary
upon the death of the policyholder. The policyholder is not entitled to any money during
his or her own lifetime, i.e. there is no survival benefit.
Whole life policies are fairly rigid and inflexible and are suitable only in a few, very
specific cases.
Whole Life Policy can be a good initial policy to buy since its cost is very low. That is an
important consideration when one is just starting a career.
4.2 ENDOWMENT POLICY
Under these plans, the sum assured is pay-able on the maturity of the policy or in case
of death of the insured individual before maturity of the policy. Endowment policies
cover the risk for a specified period at the end of which the sum assured is paid back to
the policyholder along with the entire bonus accumulated during the term of the policy. It
is this feature - the payment of the endowment to the policyholder upon the completion
of the policys term -, which rightly accounts for the popularity of endowment policies.
The original sum assured and the accumulated bonus - received back comes handy
from the endowment can either be used for buying an annuity policy to generate a

monthly pension for the whole life, or put it in any other suitable investment of his
choice. As compared to whole life policies, the premium rates for endowment policies
are higher and the bonus rates are lower. On the plus side, these polices offer an

endowment - representing a return on his premium payments payable to him in his own
lifetime when the policy comes to an end.
4.3 MONEY BACK POLICY
Unlike ordinary endowment insurance plans where the survival benefits are payable
only at the end of the endowment period, money back policies provide for periodic
payments of partial survival benefits during the term of the policy, of course so long as
the policy holder is alive.
An important feature of this type of policies is that in the event of death at any time
within the policy term, the death claim comprises full sum assured without deducting
any of the survival benefit amounts, which may have already been paid as money-back
components. Similarly, the bonus is also calculated on the full sum assured
Under money back policies premiums can be paid as per the insurance companys
policy. These could be quarterly, half yearly or annually. The premiums for these policies
are payable for the selected term of years, or till death if it occurs earlier.
By buying such policies one can receive income at regular intervals other than the risk
cover it provides. Also a good amount of bonus on the full sum assured is quite a good
bargain Individual before expiry of the policy

4.4 TERM POLICY:

Term policies; cover only the risk during the selected term period. If the policyholder
survives the term, the risk cover comes to an end.
A Term plan is designed to meet the needs of people who are initially unable to pay the
larger premium required for a whole life or an endowment assurance policy, but they
hope to be able to pay for such a policy in the near future.
No surrender, loan or paid-up values are granted under these policies because reserves
are not accumulated. If the premium is not paid with the days of grace, the policy will
lapse without acquiring a paid-up value.

However, a lapsed policy may be revived during the lifetime of the life assured but
before the expiry of the period of two years from the due date of the first unpaid
premium on the usual terms. Accident and / or Disability benefits are not granted on
policies under the Term plan.
4.5 ANNUITY (PENSION PLAN)
These plans provide for either immediate or deferred pension for life. The pension
payments are made till the death of the annuitant (per-son who has a pension plan)
unless the policy has provision of guaranteed period.
An annuity is an investment that one make, either in a single lump sum or through
installments paid over a certain number of years, in return for which one receive back a
specific sum every year, every half-year or every month, either for life or for a fixed
number of years.
After the death of the annuitant or after the fixed annuity period expires for annuity
payments, the invested annuity fund is refunded, perhaps along with a small addition,
calculated at that time.

Annuities differ from all the other forms of life insurance discussed so far in one
fundamental way - an annuity does not provide any life insurance cover but, instead,
offers a guaranteed income either for life or a certain period.
Typically annuities are bought to generate income during ones retired life, which is why
they are also called pension plans. Annuity premiums and payments are fixed with
reference to the duration of human life.
4.6 JOINT LIFE POLICY
Joint life policies are similar to endowment policies in as much as these policies also
offer maturity benefits to the policyholders, apart form covering the risks as all life
insurance policies.

But these are categorized separately as these cover two lives together thus offering a
unique advantage in some cases; notable, for a married couple or for partners in a
business firm.
Under a joint life policy the sum assured is payable on the first death and again on the
death of the survivor during the term of the policy. Vested bonuses would also be paid
besides the sum assured after the death of the survivor. If one or both the lives survive
to the maturity date, the sum assured as well as the vested bonuses are payable on the
maturity date.
The premiums payable cease on the first death or on the expiry of the selected term,
whichever is earlier.
Accident benefits equivalent to the sum assured are available under this plan on the first
death. However, if both lives are covered under Double Accident Benefit (DAB), the
surviving life is covered under DAB until the end of the policy year, in which the first life
dies under the cover of the policy.

These benefits are available with respect to both lives if

Both lives perish simultaneously owing to an accident. To avoid such an eventuality,

nomination is allowed under the policy OR

Both die within the specified period as a result of the same accident OR

The second life also dies in the same policy year as result of another accident. To avoid
such an eventuality, nomination is allowed under the policy.
Particularly for couples - Joint life policies provide dual-purpose income and risk
protection for both belonging to every income group and class of society.
Under a joint life plan though the premium payment stops after the first life's death,
bonuses continue to accrue on the basic Sum Assured till Maturity Date or till the death
of the second life, if earlier.
4.7 GROUP INSURANCE

Group Insurance offers life insurance protection under group policies to various groups
such as employer-employee, professionals, co-operatives, weaker sections of society
etc. It also provides insurance coverage to people under certain approved occupations
at the lowest possible premium cost. Besides providing insurance coverage, it also
offers group schemes to employers, which provide funding of gratuity and pension
liabilities of the employers Group insurance plans have low premiums. Such plans are
particularly beneficial to those for whom other regular policies are a costlier proposition.
Group insurance plans extend cover to large segments of the population including those
who cannot afford individual insurance. As such the premia one need to pay is
comparatively lower and at the same time one can avail of insurance benefits.

The main features of the schemes are low premium and simple insurability conditions.
Premiums are based upon age combination of members, occupation and working
conditions of the group.
A number of group insurance schemes have been designed for various groups. These
include employer-employee groups, associations of professionals (such as doctors,
lawyers, chartered accountants etc.), and members of cooperative banks, welfare
funds, credit societies and weaker sections of society. Creditor-Debtor groups are also
offered group insurance schemes. Group insurance schemes providing uniform cover
can be granted to outstanding loans. These groups are Members of primary housing
societies where housing loans are granted by State Apex housing societies, borrowers
granted loans by Institutional agencies in Public/Joint Sectors for housing purposes and
borrower members of cooperative societies/banks formed by employees of the same
employers
4.8 SPECIAL PLAN
Special plans are insurance policy plans available from the national insurance providers
to serve the needs of citizens that cannot be commonly classified or segregated. These
special plans are designed to satisfy needs ranging from debt-clearance in event of the
death of the insured to financial aid in the event of a medical mishap.

Special plans also provide financial assistance for handicapped dependants as well as
emergency surgery required if and when a medical condition arises. Since special plans
are designed for people with diverse and specific needs, the average citizen may not
necessarily need or use them. Yet, in the normal course of life, situations may arise
when one may need to provide for unplanned or unexpected contingencies and
mishaps.

COMPANY PROFILE
7.1 ABOUT MAX NEW YORK

Max New York Life Insurance Company Ltd . is a joint venture between New York
Life; a Fortune 100 company and Max India Limited; one of India's leading multibusiness corporations. The company has positioned Itself on the quality platform. In line
with its vision to be the Most Admired Life Insurance Company in India , it has
developed a strong corporate governance model based on the core values of excellence,
honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself
as a Trusted Life Insurance Specialist through a quality approach to business.
Incorporated in 2000, Max New York Life started commercial operation in 2001. In line
with its values of financial responsibility, Max New York Life has adopted prudent
financial practices to ensure safety of policyholder's funds. The Company's paid up is
Rs. 1,232 crore.
Having set a Best in Class Agency Distribution Model in place, the company is spearheading
a major thrust into additional distribution channels to further grow its business. The company
has multi-channel distribution that includes the agency distribution, partnership distribution,
bancassurance, distribution focused on emerging markets and alliance marketing through
employed sales force. The company currently has33 bancassurance relationships, 14
corporate agency tie-ups and direct sales force at 14 locations. Max New York Life has put
in place a unique hub and spoke model of distribution to deepen rural penetration. The company
has 39 (9 hub office 30 spoke offices) offices dedicated to emerging markets in Punjab and
Haryana. Max New York Life offers a suite of flexible products. It now has 38 products covering
both life and health insurance and 8 riders that can be customized to over 800 combinations
enabling customers to choose the policy that best fits their need. Besides this, the company
offers 6 products and 4 riders in group insurance business.
The company currently has more than 10,424 employees.
Promoters:
Max New York Life is a joint venture between Max India Ltd., one of Indias leading
multi-business corporate and New York life, a Fortune 100 company. Max New York Life
Insurance, incorporated in 2000, is one of Indias leading private life insurance
companies. The company offers both individual and group life insurance solutions. It
has established a wide distribution network across India. Through its wide network of
highly competent life insurance agent advisors and flexible product solutions, Max New
York life Insurance is creating a partnership for life with its customers in India.

Max India Ltd.

Founded in 1985, Max India Limited is a Public Limited company listed on the
NSE and BSE of India with over 26,000 shareholders. Today, Max India Limited
is a multi-business corporate, driven by the spirit of Enterprise, focused on
Knowledge, People and Service oriented businesses of:

Healthcare (Max Healthcare)

Life Insurance (Max New York Life Insurance)

Clinical Research (Neeman Medical International)

Max also Maintains Interests in:

Specialty Plastic Products for the packaging industry (Max Speciality

Products)

Healthcare Staffing (Max Health Staff)

Prominent shareholders are Mr Analjit Singh and a leading private equity firm,
Warburg Pincus which accounts for 28.7% of the total shareholding. The
balance shareholding is held by the public and Institutional Investors.
Till 1999, The Companys Main Interests and Partnerships were the
following:
Business

Bulk Active Pharmaceuticals

Electronic Component Distribution

Mobile Telephony

V-SAT Communications

Plating Chemicals

Information Technology

Partners

DSM Gist Brocades

Motorola, USA

Avnet Inc., USA

Hutchison Telecom Ltd. Hong Kong

Comsat Investment Inc., USA & Lockheed Martin, USA

Atotech, Germany

Mind Crossing, USA

In 2000, the Company reinvented and restructured itself to focus on the

businesses of Life under the them, LifeOur Focus.
Max New York Life Insurance, founded as a Joint Venture between Max India
Limited and New York Life, a Fortune 100 company, is one of the leading
private life insurers in India.
Max Healthcare, a subsidiary of Max India Limited is Indias first provider of
comprehensive, standardized, seamless, and integrated world-class healthcare
services.
Neeman Medical International (NMI) is an International Clinical Research
provider operating across three locations spanning North America, Asia and
Latin America. Each location is backed by comprehensive infrastructure and
highly skilled and experienced personnel.

New York Life LLC

New York Life Insurance Company,(www.newyorklife.com) a Fortune 100
company founded in 1845, is the largest mutual life insurance company in the
United States and one of the largest life insurers in the world. Headquartered in
New York City, New York Lifes family of companies offer life insurance,
annuities and long-term care insurance. New York Life Investment Management
LLC provides institutional asset management and retirement plan services.
Other New York Life affiliates provide an array of securities products and
services, as well as institutional and retail mutual funds.
The mission of New York Life is to maintain its superior 'financial strength',
adhere to the highest standards of 'integrity' and demonstrate 'humanity' by
treating its customers, agents and employees with compassion, consideration
and respect.

New York Life is one of the largest and strongest life insurance companies in
the world with more than USD$215 billion assets under management and has
received among the highest ratings for financial strength from the life insurance
industry's principal rating agencies: A.M. Best (AA+), Standard & Poor's (AA+),
Moody's (Aa1), Fitch (AAA). According to Moody's, "New York Life's rating
reflects the company's good quality investment portfolio, ample liquidity, and
sound capitalization, as well as the good growth potential of its international
business.
As a leader in the insurance industry, New York Life continues to bring to its
operations new management concepts, advanced technologies, new
distribution and training systems and innovative insurance products.

Children Plans
Parenting is all about creating the right environment for your children to grow in. The
care & love that you shower on them must also be accompanied with the proper
planning for their future. Helping your child "win the battle of life" is the best gift that a
Parent can give to his child. Max New York Life with their children plans makes it
possible for you to achieve this dream of giving your child a happy and financially
secured future. Following are the products, which will provide financial support to your
children, while pursuing their dream careers, getting married, buying a home etc:

Children's Endowment to 18 (Par)

Children's Endowment to 24 (Par)
SMART Steps
SMART Steps Plus
SMART Steps Single Premium

Retirement Plans
People retire but needs don't. Max New York Life with their retirement plans
comes forward to support you in your old age and makes the unfulfilled dreams of
your life come true. Retirement is like a second life, where you can fulfill all your
dreams, which you have been pushing aside in your past because of lack of time.
Our retirement plans make sure that you maintain your comfortable lifestyle and
don't compromise with your wishes because of lack of financial resources in your
old age.
Easy Life Retirement (Par)
SMART Invest Pension

Health Plans
A very common saying - "Heath is Wealth", may have become old but it's true.
Diseases can grab anyone at anytime. So, you have to pre-plan in such a way
that you don't have any financial constraint at the time, when your loved ones are
in severe pain. Everybody believes that "prevention is better than cure" and adapt
strict diet plans, exercise daily for it as well but no matter how well you take care
of your self, diseases can grab you anytime. So, Max New York Life's Health
Plans have been designed to take into account the diverse set of needs at times
of an individual's ill health. These health plans provide you financial security at the
time of health treatments required.
LifeLine MediCash
LifeLine Wellness Plus
LifeLine MediCash Plus
LifeLine Safety Net
LifeLine Wellness

Savings Plans
It must be admitted that a certain degree of instability lies in every individual's life.
Foreseen and unforeseen needs can arrive at any point of time. Max New York
Life's savings plans will help you. Our dual benefits saving plans recognizes your
need for a complete all round financial protection and therefore provides you life
cover and helps in the growth of your money.
Money will fly soon, if not taken care of. Therefore, we offer you diverse savings
plans, which would undoubtedly suit your needs and your budget.
Whole Life Participating
Life Gain Plus 25 (Par)
20 year Endowment (Par)
Life Pay Money Back
Endowment to Age 60 (Par)
Life Gain Endowment
Life Gain Plus 20 (Par)
Life Partner

Rural Plans
Can anybody remember when the times were not hard and money not
scarce?
Max New York Life's Rural Plans have been tailored especially to meet all kinds
of requirements of rural customers or investors. The Hassle free procedures and
Low & affordable premiums, being the key features of rural plans, proves Max
New York Life exceptional in offering their incredible services to all the classes of
our society. The following Rural plans have been designed keeping in mind the
rural investors. So that they don't have to worry about the high premium rates and
complex application forms.
Easy Term Policy

What is Max Vijay

The Background
As human beings we all have dreams and aspirations, a desire to achieve and
go beyond. Go beyond the present, changing our lives and for some, changing
the lives of others too for the better. We are all firm believers in the hand of
destiny, however that doesnt deter us from trying, thankfully. Yet there are
those, who through the drudgeries and miseries of their everyday life,
sometimes feel trapped refusing to seek and explore an otherwise unexplored
path.
The Vision
Created with the vision to empower every Indian to secure his dreams, Max
Vijay is an honest endeavor to provide financial security to the under-served
masses by creating a life insurance product rooted in a deep understanding of
their financial needs.

So what is Max Vijay, a salutation, a victory path or an insurance policy?

Max Vijay is not just another life insurance policy of MNYL; Max Vijay is the
symbol of victory of the common man, a beacon for a better tomorrow. We
believe that true win for India lies in encouraging people to save their hard
earned money, a small contribution that would go on to change their future.
While the underlying reality remains that MoneyIt just slips through Max
Vijay initiative will empower people, provide hope and will offer insurance cum
saving solutions to the under-served packed in the form of an Insurance
Savings Box (Beema Gullak)
Max New York Life Insurance Company Limited proudly presents a unique
Life Insurance policy Max Vijay which is

About making better tomorrow possible

A Clear sight of goal - Fulfillment of dream

A belief in the path to achieve the goal, and

Vijay is the Triumph of human life