Project Report

Feasibility of Insurance Plans

ICICI Prudential

A report submitted to Delhi Business School, New Delhi

as a part fulfillment of
MBA + Post Graduate Program (Industry Integrated) in Entrepreneurship &
Business

Submitted to:
Director Academics Submitted by:
Delhi Business School XXXXXXXX
New Delhi XXXXXXXX
XXXXXXXX
1st Semester
Punjab Technical University
Internal Guide:
Faculty:
Delhi Business School
New Delhi
Certificate

This is to certify that the summer training was done on submitted to Delhi
Business School, New Delhi by XXXXX in partial fulfillment of the
requirement for the award of degree of MBA + Post Graduate Program in
Entrepreneurship & Business, is a bonafide work carried out by him/her
under my supervision and guidance. This work has not been submitted
anywhere else for any other degree/diploma. The original work was carried
during the period of two months starting from 15th May 2008 to 15th July
2008 in the ICICI Prudential at its Dilshad Garden Branch.

Name of the Guide:

Address:
 ACKNOWLEDGEMENT

This gives me immense pleasure to thank my Training Head Mr. ANKIT

NARULA and Mr. MUKUL BHARTIYA under whose guidance and
enlightening path for finding navigation I was able to complete this report.

I also take this opportunity to thank them for wholehearted support they
gave me in understanding the importance of this project.

At last I would like to thank all those direct and indirect support which made
me to complete this project successfully.
Report Content

1. Meaning of Insurance
2. History of Insurance
3. Purpose and Need of Insurance
4. Insurance Plans at a glance
5. Governing Body of Insurance Sector
6. Various Terms Involved in Insurance Sector
7. Documents used in Insurance
8. ICICI Prudential - The company
9. Promoters of ICICI Prudential
10.Vision & Values of ICICI Prudential
11.Insurance Product of ICICI Prudential
12.Edge of ICICI Prudential over others
13.Competitors of ICICI Prudential
14.Bibliography
Insurance

Insurance is a guarantee given by one person to other for supporting the

other person in case of loss of certain material thing or on happening of
certain events which may cause loss to the party getting insurance.

History of Insurance

Insurance has been known to exit in some form or other since 3000 BC. The
Chinese traders, traveling treacherous river rapids would distribute their
goods among several vessels, so that the loss from any one vessel being lost
would be partial and shared, not total.
In India, insurance began in 1818 with life insurance being transacted by
English Co. The Oriental Life insurance company Ltd. The first Indian
insurance company was the Bombay mutual Assurance society Ltd. formed
in 1870 in Mumbai. This was followed by Bharat insurance co. in 1896 in
Delhi, the empire of India in 1897 in Mumbai, the united India in Chennai,
the national, the national Indian and Hindustan cooperative in Kolkata.
Later were established the Cooperative Assurance in Lahore, The Bombay
life, the Indian mercantile, the new India and the Jupiter in Mumbai and the
lakshmi in New Delhi. These were all Indian companies started as a result of
swadeshi movement in the early 1900s.By the year 1956, there were 170
companies and 75 provident fund societies transecting life insurance
business in India
Purpose and need of insurance

Assets were insured, because they were likely to be destroyed before the
expected lifetime through accidental occurrence. Such accidental
occurrences are called perils. Fire, floods, lighting earthquakes etc are called
perils .If such perils can cause damage to the asset, we say that the asset is
exposed to the risk .Perils are the events. Risks are the consequential
Losses. The risk only means that there is a possibility of damage.

Insurance Plans- At a glance

Broadly, insurance plans can be distinctly divided into ULIPs and traditional
plans. A brief detail of both segments:

Unit Linked Insurance Product

ULIPs have gained high acceptance due to attractive features they offer.
These include:

1. Flexibility
1. Flexibility to choose Sum Assured.
2. Flexibility to choose premium amount.
3. Option to change level of Premium /Sum Assured even after the
plan has started.
4. Flexibility to change asset allocation by switching between
funds
2. Transparency
1. Charges in the plan & net amount invested are known to the
customer
2. Convenience of tracking one’s investment performance on a
daily basis.
3. Liquidity
 1. Option to withdraw money after few years (comfort required in
case of exigency)
2. Low minimum tenure.
3. Partial / Systematic withdrawal allowed
4. Fund Options
1. A choice of funds (ranging from equity, debt, cash or a
combination)
2. Option to choose your fund mix based on desired asset
allocation

Traditional Plans
These are the oldest types of plans available. These plans cater to customers
with a low risk appetite. Some of the common features of traditional plans
are:

1. Steady Investment
1. Major chunk of investible funds are in debt instruments
2. Steady and almost assured returns over the long term
2. Features
1. Death benefit is Sum Assured + guaranteed & vested bonus
2. Helps in asset creation as they are for a long tenure
3. Premium to Sum Assured ratios are fixed for each plan and age.
4. Generally withdrawals are not allowed before maturity

Differences
ULIPS Traditional plans

The premium in excess of risk cover All the premiums go into a common
is invested as desired by the fund and are invested at the insurers’
policyholders. discretion.

The investment return may vary There are two categories of benefits –
according to the market movement guaranteed and none guaranteed. For
and the investment risk is entirely guaranteed return, the investment risk
borne by the policyholder. is born by the insurers. However,
 non-guaranteed benefits such as
bonuses depend on the performance
of the insurer.

Withdrawals are allowed. Loss, if any Surrenders are allowed but at a loss.
Depends on NAV loans are not Loans may be provided.
allowed.

There are no bonuses except loyalty For participating policies bonuses are
bonus in some cases. paid.

The amount of the premium used for The premium amount used for
insurance coverage other charges and insurance coverage other charges and
the purchase of units is unbundled investment are bundled up and not
and transparent. known.

Benefits are variable. Benefits are pre determined

Loss is likely. Loss is unlikely.
Gains likely depending on market Gains unlikely except through
movements bonuses.

IRDA Guidelines regarding ULIP Products

The IRDA has issued various guidelines on various matters related to ULIP.
Some of these are:
♦ Surrender benefit only after third policy anniversary
♦ First partial withdrawal only after third policy anniversary
 ♦ SA can be reduced up to the extent of partial withdrawals during
second year prior to death and after age 60.
♦ Lock in period for each top up amount ,for partial withdrawals except
during last three years of contract
♦ Death benefits to be guaranteed
♦ Maturity benefits may be guaranteed, at levels reasonable in relation
to current and long term interest rates scenario
♦ Policy to become paid up ,if there is default in premium after three
years
♦ Opportunity to be given to revive lapsed policy
♦ Auto cover facility allowed for full SA for limited period
♦ No auto cover facility allowed if at least three years premium is not
paid
♦ If policy is not revived ,surrender value to be paid at the end of the
third policy anniversary or end of the revival period whichever is later
♦ No risk cover after policy term
♦ Ways of calculating various charges are stipulated

Governing Body of Insurance Sector:

Insurance act, 1938

The insurance Act 1938,which came into effect from 1st July 1938, and was
amended in1950 and later in 1999,is the principal enactment relating to the
business of insurance in India .The act contains provisions regarding
licensing of agents and their remunerations, prohibition of rebates ,and
protection of policy holders interests. It also has provisions placing limits on
the expenses of insurers, use of funds and patterns of investments,
maintaining solvency levels, and constitution of insurance Association and
insurance councils and the tariff Advisory committee for general insurance.

Till the constitution of the IRDA by the IRDA act 1999, in the controller of
insurance was responsible for the administration of the insurance act .since
1999, the IRDA has replaced the controller of insurance. The insurance act
vests the IRDA with power to
 Register insurance companies and also cancel their registrations
 Monitor and certify the soundness of the terms of life insurance
business
 Make regulations relating to the conduct of the business of insurance
 Inspect documents of insurers
 Appoint additional directors ,issue directions
 Take over the management of an insurer and appoint administrators
 Adjudicate on disputes between insurers and intermediaries or
between intermediaries
 Decide on disputes relating to settlement of claims of amounts not
exceeding Rs.2000
By the end of December 2006, the IRDA had issued more then 25
regulations and also issued several guidelines to insurers on a verity of
matters.

Insurance regulatory and development authority

This act passed in December 1999, provided for the establishment of the
IRDA to the interest of policyholders of insurance policies to regulate,
promote and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto. It also sought to amend the
insurance act, 1938 the life insurance corporation act 1956 and the general
insurance business act, 1972

The IRDA is a corporate body .it is advised by an advisory committee

consisting of not more then 25 persons to represent the interest of commerce,
industry, transport, agriculture, consumer forums, surveyors, agents
intermediaries, organizations engaged in safety and loss prevention, research
bodies and employees associations in the insurance sector. It replaces the
controller of insurance to administer the provisions of the insurance act. That
includes registrations, licensing and laying down regulations for the proper
conduct of the business and the protection of the interests of policyholders.

OMBUDSMAN
The governing body of the Insurance Council is authorized by law to appoint
Ombudsmen for the insurance industry. The function of the Ombudsmen is
to resolve complaints in respect of disputes between policyholders and
insurers in cost effective, efficient and impartial manner.
The complaints to the Ombudsmen may relate to partial or total repudiation
of claims any dispute regarding premium paid or payable in terms of the
policy any dispute on the legal construction of the policy relating to claims
delay in settlement of claims non-issue of any insurance document to
customers after receipt of premium.
The Ombudsman acts as counsel and mediator in matters within its terms of
reference. It has no right to summon witnesses. It is not a judicial authority.
It has to make its decision on the basis of documents submitted to it. The
complainant and the insurer are allowed to make personal submissions. But
lawyers are not permitted to argue the case.
Complaints to the Ombudsman lie only when the insurer had rejected the
complaint or no reply was received within one month of the complaint or the
reply was not satisfactory.
The Ombudsman is expected to make a recommendation within one month
from the date of receipt of complaint. if the complainant accepts this
recommendations, the insurer has to comply within 15 days and inform the
ombudsman accordingly, if the complainant does not accept the
ombudsman’s recommendation, the ombudsman shall pass an award in
writing, stating the amount awarded which shall not be in access of what is
necessary to cover the loss which is suffered by the complainant as a direct
consequences of the insured peril or for an amount not exceeding
RS.2000000, which ever is lower. The award has to be passed within three
months. The complainant has to intimate his acceptance of award within one
month by a letter of acceptance to the insurer and the insurer has to comply
within 15 days and inform the ombudsman. If the complainant does not
intimate acceptance, the award can not be implemented.

Various Terms Involved in Insurance Sector

Caution
Prospects have to be advised always that
(1) Investments are subject to market risks.
(2) Past performance may not be guide to future performance.
(3) Name given to the various funds options offered under ULIPs do not in
any way indicate the quality of these funds or their future prospects or
returns.
(4) The NAV of the fund may go up and down and the insurer will not be
responsible for the same.
(5) All benefits are subject to tax laws and charges specified by the insurer.

The prospects related to linked insurance plans carry a statutory warning

which says that, unless clearly marked as guaranteed the benefits are not
guaranteed and that the figures of assumed investment returns shown in the
illustrations are not upper or lower limits of what may be got back ,as they
depend on number of factors including future investment performance.

The details mentioned earlier regarding the terms and conditions of these
unit link policies are not applicable in all such policies. Insurers add or
subtract some facilities in order to differentiate their plan in from those of
other insurers. Agents must check with their insurers the details of the plans
on offer.

Claims
A claim is the demand that the insurer should redeem the promise made in
the contract. The insurer has than to perform his part of the contract or settle
the claim, after satisfying him that all the conditions and requirements for
settlement of claim have been complied with. In particular, he should check
 • Whether insured event has taken place.
• What are the obligations assumed under the contact, which are
required to be performed? These may be payment of bonus, payment
of sum assured in installments waiver of future premiums etc.
• Whether the policyholder has performed his part.
• Who are the persons entitled to demand performance? Nomination
assignment, income tax notice prohibitory orders, official assignee’s
notice-are all relevant.

Maturity claims
Under endowment type of policies, the SA is to be paid when term of the
policy is over. The date on which the term is complete, is the date of
maturity and the settlement of SA on that date is the maturity claim. The
amount payable on maturity is the SA less and debts like loan and interest or
outstanding premiums. To this bonuses would be added, if it is a with profit
policy.

Action on maturity claims is normally, initiated by the insurer. The insurer

normally sends intimations to the insured in advance. Before paying the
payment, the insurer has to satisfy that:
 There are no assignment
 The identity of the policy holder is proved
 The age stands admitted
 The premiums are all paid
 The original policy is handed in
 The discharge voucher is duly completed.
The insurer is expected to make payment on maturity date. Post dated
cheques are duly sent to the insured in advance by the insurer, provided the
discharge form is duly received with signature by the company. If the policy
holder dies before the date of maturity, the post dated maturity will be
cancelled by the insurer and a claim by death will be preceded.
Some times the original policy is reported to be lost; caution is to be
exercised to ensure that there is no attempt to defraud. It could have been
pledged elsewhere for a loan. However, if the loss seems to be genuine, it is
possible to settle the claim based on indemnity and an advertisement in the
newspapers, as precaution.

Under MWP act policies, the proceeds of the policy will be paid to the
trustees. If there is no trustee, the official trustee will step in. but if the
beneficiaries are major and competent to contract, payment can be made
directly to them without the intervention of trustees. The policyholder is not
required to sign the discharge form.

In case of absolute assignment, the payment will be made to the assignee. If

the assignment is conditional, reverting to the policyholder on the date of
maturity the payment will be made to the policy holder on the date of
maturity. It will be prudent however to check that the assignee has no
outstanding claims.

Some maturity claims may be payable after the date of maturity, but later not
as lump sum; but in installments. While the decision to settle may be taken
on maturity, the settlement process will continue for few years.
Survival benefit payments
A survival benefit is paid on money beck policy before the date of maturity.
The procedure will be similar as the payment of the maturity claims. Action
will be initiated by the insurer and post dated cheques will be sent by him in
advance to the policyholder.

If the policy is reported to be lost, insurers are likely to settle based on

indemnity, as may be done in the cases of maturity. The reason is that when
maturity claims are paid no further obligations are left after that. However,
the policy does not cease to exist after the survival benefits. A duplicate may
be asked for, on which endorsement will be made regarding the settlement of
the survival benefits.

If the life assured dies after the date when survival benefit was due, but
before it is settled, the death claim will be paid to the nominee. But whether
the death claim can be paid to the nominee is not beyond doubt. Some
insurers have taken the view that this is permissible. Another view is that the
survival benefit, already having become due is a debt to the deceased
policyholder and not a claim under the policy and therefore, payable to the
heirs and not to the nominee. This would particularly be so, if the
policyholder has already signed the discharge voucher. There is no doubt
however, if the death occurred before the due date of survival, even if the
discharge voucher had been signed. It is a death claim payable to the
nominee and there is no survival benefit at all.

DEATH CLAIM
The procedures in settling a death claim are more complex then settling in
maturity claims. This is mainly because, the facts relating to death have to
be established and the identities of the claimants have to be studied. The
death claim action begins with an intimation being received in the insurer’s
office. The intimation may be sent by the nominee assignee employer or by
the relative of the deceased policyholder. These intimations may have very
littlie information; other then the policy number, the name of the life assured
and date of death.

The office need not wait till the intimation of the claim is received. Obituary
columns, or newspaper reports in case of accidents or air crashes may give
information and the claim action can be initiated. However, care has to be
taken to insure that the identity of the deceased is established. A name is not
enough to establish identity.

The following will be necessary before a death claim can settled

♦ Policy document
♦ Deeds of assignment
♦ Proof of age
♦ Certificate of death
♦ Legal evidence of title if the policy is not assigned or nominated
♦ Form of discharge executed and witnessed.
If the claim has occurred within three years from the commencement of
policy or, from a revival, following additional requirements may be called
for, in order to verify the possibility of suppression of material facts at the
time of proposal /revival
 Statement from the last medical attendant giving details of last illness
and treatment
 Statement from the hospital, if the deceased had been admitted to a
hospital
 Statement from the person who have attended last rites and had seen
the dead body
 Statement from the employer, if the deceased was employed ,showing
details of leave

If the life assured has unnatural death such as accident suicide or unknown
causes, police inquest report, panchnama, chemical examiner’s report post
mortem report .coroner’s report etc. would also be looked into. Depending
on preliminary data, a special enquiry can be made.

Claims arising within three years from commencement are looked at more
carefully, because it would be expected that after the underwriter’s scrutiny,
the life assured should have had a longer life span than three years. The
point to check would be whether there had been any suppression of material
facts. If the insurer is satisfied that there has been suppression, the claim will
be repudiated. That means that no claim will be paid.

When a policy is revived on the basis of evidence of good health, an

underwriter makes a decision. An early death (within three 3 years) after
that, raises the same issue and will be looked in to more carefully. This need
not be done if the revival was done without reference to state of health.
CLAIM CONCESSION
There situations when though the policy has lapsed and nothing is payable,
yet the insurer pays the death claim. For example, assume that in a 30year
old endowment policy the last premium is not paid and the policy is in state
of lapse in the last year if the life assured dies a few weeks ago of the
maturity date, it would be wrong to say that death claim is not payable .
There is practically no risk in the last year.

The LIC pays claim in full in the following circumstances after deducting
the outstanding premiums with interest. In both cases, the policy could have
been revived by just paying the arrears of premium and no proof of good
health would have been necessary.

After three years if the death claims arises within six months from the date
of lapse

After five years, if death claim arises within twelve months from the date of
lapse

In cases where premiums are being advanced from surrender value, the
claim amount will be payable in full. The policy is, for all practical
purposes, in full force.

Presumption of death
Proof of death is essential. A death certificate issued by the municipal office
or similar local body is the acceptable proof of death. A certificate of burial
or cremation can also be obtained. Statements from witnesses to the last rites
will be supporting evidence. In case of accidents, air crashes or on natural
calamities, the bodies may not be found. In such cases, insurers relay on
statements from the carriers or other authorities with relevant information. In
case of defence personnel, a certificate from the commanding officer of the
unit is to be obtained. If a court enquiry is ordered, its findings should be
obtained.

Some times a person is reported missing without any information about his
whereabouts. The Indian evidence act provides for presumption of death in
such cases, if he has not been heard of for seven years. If the nominee or
heirs claim that the life insured is missing and must be presumed to be dead,
insurers insist on a decree of from a competent court. It is necessary that the
premium should be paid until the court decrees presumption of death. The
insurer may also act on its own without a decree of court, if reasonably
strong circumstantial evidence exits to show that the life assured could not
have survived a fatal accident or hazard. Insurers may as a matter of
concession, waive premiums during the seven-year period.

PRECAUTIONS
As per the Indian lunacy act, if a person is mentally deranged, a court of law
is required to appoint a person to act as a guardian to manage the properties
of the lunatic. Where the assured or the person to sign the discharge form .If
the person has insured from the mental disorder, a medical certificate to that
effect, would be necessary. Any order from the court or other judicial
authority with reference to the policy money has to be respected. The insurer
does not have to contest the orders. It is for the claimants to do so.
Sometimes the court orders may not be appropriate. For example, the policy
moneys under a MWP act policy cannot be attached against the debts of the
life assured. If a court or judicial tribunal passes an order of attachment, the
claimant must get that order vacated. The insurer may present the facts if
called upon to do so.

If the life assured has reported to have died before the maturity date, the
claim has to be treated as a death claim and processed accordingly.
However, if the assured has died after the date of maturity but before the
receipt is discharged, the claim is to be treated as a maturity claim and be
paid to the legal heirs. Death certificate and evidence of title would be
necessary.

Payment of claim to non-residents is governed by the foreign exchange

control regulations.
If the policy belongs to Hindu Undivided Family then the payment will be
made to the karta of the HUF.

If the intimation is received after three years of death, there is reason to

suspect. Investigations are required as in the case of early claim because
there is possibility of fraud. The plea of ‘time barred’ can be taken if the
reasons for the delay in making the claim are not fully satisfactory.

ACCIDENT AND DISABILITY BENEFITS

These benefits are conditional on conclusive evidence, that all the eligibility
conditions are satisfied and that the exclusions do not apply. The conditions
are that
 The accident must be caused due to external causes violent means not
self inflicted
 The death must be a result of injuries caused by the accident
 The death must occur within 120 days or such other period as may be
specified

The exclusions may be

 International self injury, attempted suicide, insanity,
immorality, intoxication
 Accident while engaged in civil aviation or aeronautics other
then as a passenger
 Injuries resulting from riots, civil commotion etc.
 Claim settlement would require the following documents as
evidences
 First information report
 Panchnama of accident site police report
 Police report
 Post mortem report
 Chemical examiner’s report, in case of poisoning,
drugs, narcotics
 Hospital reports if any

Critical illness claims

The benefits would be payable on satisfactory evidence, in the nature of
hospital and other medical reports, that the conditions of critically, waiting
period and illness are met.

IRDA regulations
The IRDA regulations stipulate that
• The insurer should ask for all the requirements in the case of a death
claim at one time and not piece meal
• The decision to admit or to repudiate should be made within 30 days
of receipt of papers
• If an investment is necessary, it should be completed within six month
• Interest at 2%over the bank rate, will be payable for delays in setting
the death claims
• Interest at the saving bank rate will be paid if the insurer is ready to
pay but the claimants are not ready to collect

Policy conditions
The policy states the obligations and rights of the policyholder, as well as
the terms and conditions of the policy. These could differ between insurers
and between plans of the same insurer.

AGE
The policy conditions provide that, if the age of the life assured is found
higher than the age stated in the proposal form, apart from any rights and
remedies available to the insurer, premium at the higher rate will have to be
paid from the commencement, with interest. This is largely redundant
nowadays, as the proof of age is provided with the proposal itself. Even
then, there could be an odd case of the proof of age being found to be false.
In such cases, the insurer’s rights and remedies would include also the right
to declare the policy ab initio void, on the ground of suppression of material
facts. Age is important not only for calculation of premium but also for
underwriting of risk.

The following are usually accepted as proofs of age

• Certified extract from the municipal records
• Certificate of baptism
• Certified extract from family Bible if it contains date of birth
• Certified extract from service register of employer
• Passport
• Identity card issued by defence department in case of defence
personnel
• Marriage certificate issued by roman catholic church
If none of these standard proofs of age are available, horoscopes, self
declaration by way of affidavit, elder’s declaration or certificate by village
panchayat may be accepted as proof of age. These are referred to as non-
standard proofs of age.

DAYS OF GRACE
The policy stipulates that the premium have to be paid in the insurer’s office
on the date specified therein. These dates are called due dates premium may
be paid by any of the normal modes of making payments, which include
cash, cheques, demand draft, postal order, money orders, bankers orders ,etc.
nowadays electronic means of payment are also available for example debit
cards and credit cards. The insurer has the option to decide whether the
collection charges should be collected from the policyholder.

Premiums are required to be paid on the due dates mentioned on the policy.
Insurers however allowed a grace period for payment of premium. Payment
within the grace period is considered the payment on time. The grace period
would be one month for the entire year, but not less then 30 days. Some
insurers allowed this grace period even for monthly mode. In the case of
SSS, if the premium is deducted by the employer and there is a delay in
remitting the same in insurer’s office, the delay is usually condoned.
If the delays happen frequently, the SSS arrangement may be terminated.

If the premium is not paid within the days of grace, it is considered a default
and the policy is said to be lapsed. If the insured happens to die within the
days of grace and the premium has not been paid, the claim would be
admitted in full and the premium for the current year will be deducted from
the claim amount.

Strictly, the premium is deemed to have been paid only when the cash is
received in the insurer’s office. That means the cheque must be cleared and
proceeds credited into the insurers account. In practice, however the
premium is deemed to be paid when the cheque or demand draft is received.
The ‘RPR’ is issued subject to clearance. Sometimes the insurer may
consider that the premium has been paid, if there is proof that the
policyholder had sent the money, even if it had not been received in the
office. This may be necessary in case of death claims, where the death has
occurred before the premium reached the office. Such proof may be
available in the case of orders. The benefit is given to the policyholder
because the money towards payment of premium had left his hand and was
in transit.

In India where the area is vast and the numbers of offices of the insurer are
not too many, arrangements are made with the banks for collection of
premium. Such collecting branches send a cheque for the consolidated
amount collected, along with the list of policies, to the specified office of the
insurer at specified intervals. Date of collection by the collecting bank is
considered the actual date of payment of premium.

LAPSE AND NON-FORFEITURE

In terms of the policy conditions, the obligation of the insurer to pay the SA
as stated their in is subject to the premium being paid on the due dates. A
payment within the days of grace period is deemed the payment made on the
due date. If the premium is not received by the insurer within the grace
period then it is assumed that there is a default from the side of the
policyholder. The insurer is entitled to say that the policy has ended. Such
termination is called lapse. No claims arise on the policy after a lapse, and
all premiums are forfeited.
In practice however, insurers do not forfeit all the premiums paid when the
policy lapses. The insurance act does not allow such forfeiture. The reason is
that every policy acquires a reserve because of (1) premiums in the early
years of policy being more then what are justified (2) the savings element in
the premium. It would not be fair to forfeit this reserve.

The policy conditions provide various safeguards to policyholders, when

there is a premium default. These provisions are called non-forfeiture
provisions. There are various options. One of them is to return the amount to
the policyholder that represents the reserve. This amount is called the
surrender value or the cash value.

The insurance act requires that every policy shall have a guaranteed
surrender value, if at least three years premium have been paid. This
minimum has to be paid to the policyholder. This minimum has to be stated
as part of the policy conditions. Insurers actually pay more then the
guaranteed minimum.

Surrender value or cash value is made available normally when the policy
has remained in force for at least three years; this is so because in the first
year, most of the premium goes out in expenses. There is little left for
accumulation.

The other non-forfeiture options are

• Making the policy paid up
• Keeping the policy in force through premiums advanced from the
surrender value and
• Providing term insurance cover from the surrender value
KEEPING POLICY IN FORCE
The option of continuing the policy as in full force is made possible by
nationally advancing the premium as a loan from the surrender value.
This can continue as long as the total premiums, advanced is not more then
the surrender value. At the stage when the surrender value is not sufficient to
advance a full settlement of premium, the policy is finally determined and
any surrender value is left over is paid to the policyholder.

Some insurers, prior to nationalization of the insurance business in India

used to offer the benefit of automatic advance of premium. Its main
advantage is that the insurance cover is fully safeguarded and not reduced;
also the policyholder can pay the premium whenever he is in the position to
do so and the policy will continue to be in force. The interim failure to pay
will have no effect. If the policy is with ‘profits’ it will be entitled to bonus.

However, after some years, if the arrears are not paid and the surrender value
is exhausted, the sense of loss is much more, as little cash is available and
the benefit of cover remains notional and not real. That is why many insurers
prefer to offer paid up option. Some insurers in India offer the automatic
advance of premium option, provided the policyholder specifically asks for
it. Otherwise, the paid up conditions comes into operation. The LIC does not
offer it even as an option.

EXTENDED TERM INSURACE

The third option is of extended term insurance cover. Under this option, the
insurer converts the policy into a single –premium term insurance for the full
SA of the policy for such a period as the net surrender value will purchase,
at the insured age at the time of lapse of the policy. This is similar to the
second, except the premium advanced from the surrender value is not the
premium due under the policy, but the premium necessary to provide a term
insurance cover equal to the SA. It has the same advantage, of securing
cover, as the second option of automatic advance of premium. The policy
may last for a longer period because the premium advanced is lower. But the
surrender value would not increase as in the second option, as the second
element of the premium is not being advanced

For the full Under the extended term the policy remains In full force SA for
a limited period instead of reduced paid up amount of insurance remaining
in force for the entire policy period as in the first option. Under the last to
options at some time, the amount payable will become zero. In the third
option even if the extended term continues till the original date of maturity,
the amount payable at maturity will not be the SA. At such times, there is
sense of having been “cheated”.

REVIVAL
When a policy lapses, it benefits neither the insurer nor the policyholder.
The insured losses the insurance risks cover for the full amount. It signifies a
reversal of the decision to arrange for the insurance cover and therefore,
exposes the policyholder to possible adverse circumstances it is also a
reflection on the agents’ efforts as it suggests that the policyholder had not
been fully convinced about the usefulness of the insurance plan.

The insurer also loses. The level premium is also based on the assumption
that barring death claims, the policies will run for the full term. The initial
expenses incurred on proposals are high and the insurer can recover them,
only if the policies remain in full force. Normally people enjoying bad health
are more likely to keep the policy in force, while others with good health
may not value the continuance of policy. In that case, there is adverse
selection. This means that the insurer’s experience and liability is likely to
be greater than what was assumed, while fixing the cost of insurance.

Because lapsation affects both the parties adversely, and because lapsation is
not always intended by insured to happen, insurers make it possible for
lapsed policies to be brought beck into full force. This process is called
revival. Insurers have different schemes of revival; with a view to help,
policyholders revive lapsed policies on easy terms.

For revival of policies, the following will normally be necessary.

 Arrears of outstanding premiums with interest

 Proof of continued good health
 A fee for reinstatement or revival, in the case of some insurers

Some insurers do not allow revival, if the policy has remained in lapsed
condition for more then five years. This is because of the possibility that the
arrears of premiums on such a policy would be too heavy and that it would
be better to take out a fresh policy.

The requirement of proof of good health varies according to the duration of

lapse and according to the SA. Up to six months from the date of lapse, no
proof is necessary. Only the arrears of premium will do. This period of six
months is extended to 12 months in the case of policies, which have been in
force for at least five years. If the policy is due to mature within a year, then
also only arrears of premium called for.

Where proof of good health is necessary, the nature of proof can be a simple
declaration or an elaborate medical examination with special reports. The
considerations are the same as in the case of fresh proposal for insurance. A
revival is effectively a decision to underwrite a risk, the risk being equal to
the original SA under the policy less the paid up value. The underwriter may
agree to revive as per the original policy terms or on modified terms or even
decline to revive.

This decision is made after examining the risk factors at the time of arrival,
which may have changed since the original policy was taken.

Subject to underwriter deciding that the revival can be done, various

alternatives are offered by the LIC to suit the convenience of the
policyholder. Other insurers, in course of time may offer similar convenient
schemes, because revivals are in the interest of all concerned.

The special revival scheme is allowed if

  The policy had not acquired any surrender value on the date of lapse
 The period expired after lapse is not less then six months and not
more than three years
 The policy had not been revived under this scheme before

On revival under this scheme, there will be a new policy with the same plan
and term as the original policy but with the following changes.

The date of commencement will be advanced by a period equal to the

duration of lapse, but not more then two years. If the original policy
commenced on 1.10.1999 and had lapsed on 1.1.2001, on revival on
1.7.2001the new date of commencement would be 1.4.2001, 1 year and six
months forward. If the revival was to be done on 1.4.2003, the new date will
be 1.10.2001 and not 1.1.2002.

Premium will be recalculated for the age corresponding to the date of

commencement after revival.

The original policy will be endorsed for changes in the date of

commencement, age, premium, date of last installment of premium, and
maturity date. The difference between the old premium and the new
premium with interest thereon will have to be paid. The policyholder will be
required to pay the endorsement fee. The revival consideration, in monetary
terms, is quite low under the special revival scheme, as arrears of premium
will not be paid for the entire period of lapse.
Under the installment revival scheme, the policyholder will not be required
to pay the full arrears but only six monthly premiums two quarterly
premiums, one-half yearly premium or half of the yearly premium. The
balance of the arrears will be spread over the remaining due dates in the
policy year current on the date of revival, and two full policy years there
after. This scheme is made available if the policy cannot be revived, under
the special revival scheme, where the premium is outstanding for more than
one year and no loan is outstanding.

Another scheme is offered is the loan cum revival scheme where under the
arrears required for revival are advanced out of the surrender value of the
policy as a loan under the policy. The policy will be revived immediately
and the loans have to be repaid like any other loan under insurance policies.
If the loan available under the policy is more than the amount required for
revival, the excess may be paid to the policyholder, on request.

If the policy is the money back kind of policy in which a survival kind of
payment is due, the said survival amount can be adjusted towards the
outstanding dues for revival. This is the survival cum revival scheme.

ASSIGNMENT
A life insurance policy is property. It represents rights. It is an actionable
claim as described in the transfer of the property act. 1882. a life insurance
policy forms part of the estate of the policyholder and can be sold,
mortgaged, charged gifted. One of the methods of transfer is the assignment.
An assignment transfers the rights, title and the interest of the assigner to the
assignee. Legal provisions for assignment of insurance policies are available
in almost all the countries. Section 38 of the insurance act 1938 states that
• The assignment can be done by an endorsement on the policy or by
the separate deed. When the assignment is made by an endorsement
on the policy itself, no stamp duty is necessary. Separate deeds have
to be stamped.
• It must be signed by the transferor or his dully authorized agent
• The signature must be attested by a witness
• The assignment is effective as soon as it is executed
• It must be sent to the insurer along with a notice
• The assignment is effective against the insurer only when the notice
is delivered to the insurer
• Where there is more than one instrument, the priority of claims shall
be determined by the order in which the notice are delivered to the
insurer

The person making the assignment should have the right or title to the
property in question. The assigner must be major and competent to contract.
An assignment involving a part of the policy moneys is considered bad in
low. An assignment once made cannot be cancelled or even altered in form,
by the assignor unless the assignee re-assigns the policy.

Assignments are two kinds, absolute and conditional. In cases, all rights,
title and interest of assignor in the policy pass to the assignee. The assignee
becomes the titleholder and can deal with the policy in any manner he likes.
He does not have to take the consent of the assignor. In a condition
assignment, however, the interest in the policy automatically reverts to the
assignor on the occurrence of the specified solution. For example, a
conditional assignment can provide for reversion when the assignee
predeceases the policyholder survive till the date of maturity.

When a policy is taken by the person on the life of another, the proposer is
the policyholder. All rights, interest title in the policy vest in him. The life
assured has no interest in the policy unless the proposer assigns the policy in
his favor. In case of children’s deferred assurance plans, the life assured can
assign the policy after the vesting date.

NOMINATION
Nomination is the simple way to ensure easy payment of policy moneys in
the case of death claim. As per section 39of the insurance act, 1938 the
holder of the policy on his own life may nominate the person or persons to
Whom the money secured by the policy is to be paid in the event of his
death. This can be made at the time of proposal or at any time during the
currency of the policy. A person having a policy on the life of another,
cannot effect a nomination.

A nomination can be changed by a policyholder by making another

endorsement on the policy. If space is not available on the policy for the
endorsement, nomination can be done on a separate piece of paper.

When a policy is assigned, the existing nomination is automatically

cancelled. The assignee not being the life assured cannot make a nomination.
When the policy is reassigned to the life assured, he will have to make a
fresh nomination.

A nomination gives the nominee only the right to receive the policy moneys
in the event of death of the life assured. A nominee does not have any right
to the whole of the claim. He only has the right to give a valid discharge but
has to hold the moneys on behalf of those entitled to it.

When a nominee is minor, an appointee should be appointed by the

policyholder. The appointee must affix his signature to the endorsement
either in the proposal form or on the text of the policy. The life assured has a
right to revoke the appointment of the appointee and appoint a fresh
appointee. The appointee losses his status when the nominee becomes a
major.

When the nominee is a minor and there is no appointee, the claim amount
under the policy cannot be paid to the guardian. It can be paid to the legal
heirs of the deceased life assured.

When the nominees are more than one the policy money are payable to them
jointly or to the survivor. No specific share for each nominee can be made.
To do so would be contrary to the provisions of act, however, nomination in
succession like payable to ‘A’ failing him to ‘B’.

While an assignment automatically cancels a nomination, an assignment

made in the favor of the insurer, in consideration for a loan granted against
the security of the policy, does not cancel the nomination.
If the nominee dies after the death of the life assured, but before the payment
of the death claim, the policy moneys would be part of the estate of the life
assured and would be paid to his representatives. The nomination continues
to be operative on the maturity of the policy, in respect of policies where the
maturity amount is payable in installments after the date of maturity, the
remaining installments can be paid to the nominee. But the nominee has no
right to commute future installments payable.

SURRENDERS AND LOANS

Surrender is a voluntary termination of the contract, by the policyholder. A
policyholder can surrender the life insurance policy before it becomes a
claim. Surrenders are not allowed unless the policy has run for a minimum
period, which may vary from three to seven years. The amount payable by
the insurer to the policyholder or surrender is called is called the surrender
value or the cash value. Surrender values are published and made known to
policyholders by some insurers either as part of the prospects or by mention
in the policy conditions. Some insurers prefer to announce a guaranteed
surrender value as required by the law, which may be given a percentage of
the premiums paid. The actual surrender value will be higher than the
guaranteed surrender value.

The surrender value is usually a percentage of premiums paid or the

percentage of the paid up value. The percentage increases as the duration of
the policy increases. The surrender value on a policy will be more after 15
years compared to the surrender value after 10 years. The percentage
decreases as the term of the policy increases.
In most of life insurance policies, insurers provide the facility of loans.
Loans are given up to 80% or 90%of the surrender value of the policy.
Interest is charged on the loans. They maybe repaid, in full or in part during
the currency of the policy or may remain as a debt on the policies monies
until the claim arises.

Policies, which do not acquire adequate surrender value, and policies where
there is provision for return of a portion of the SA at periodical intervals, are
not usually eligible for loan facility.

Foreclosure
As the name suggests, foreclosure means writing off or disclosure of current
policy before the date of maturity. When a loan is granted under a policy, the
life assured has a choice to pay the interest or allow it to accumulate to be
adjusted from the policy moneys payable when the claims arises. This is
possible if the premiums are paid regularly and the policy remains in force.
In case of paid up policies, the surrender value will not grow as fast as the
accumulated interest. The principal loan and accumulated interest could
become more then the surrender value at some time. In that case foreclosure
becomes necessary.

When it is decided to take foreclosure action, a notice may be issued to

policyholder calling for the payment of arrears of loan interest. If the interest
is not paid, the policy is foreclosed, which means surrendered to loan. The
foreclosure action is complete when taken into insurer’s office. The balance
surrenders value, if any after adjusting the principal loan and outstanding
loan interest, is paid to the policyholder, after obtaining the discharge
voucher.

It is possible to reinstate a foreclosed policy, before the policyholder has

returned the discharge voucher and collected the balance surrender value.
The procedures will be similar to revival, with evidence of good health also.
Instead of arrears of premium, the arrears of loan interest will have to be
paid.

On foreclosure, the nomination if any ceases to be operative. If life assured

dies before payment of the balance surrender value, the amount is not
payable to nominee, but only to get legal heirs of the deceased assured.

ALTERATIONS
Insurers allow alterations in the policies that have been issued. Some of the
alterations may be very simple, like change in address, change of mode in
payment of premium, or change in nomination. Some changes may be to
make a participating policy, none participating or vice versa or to break one
policy into two or more policies of smaller SAs. These may affect the
premiums due, but do not affect the risk of the insurer. Other request can be
for significant changes, like in the plan or term or both, changes in SA etc.
the governing principals followed in this matter is that alterations in these
existing policies may be allowed if the risk does not increase.

INDISPUTABILITY OF THE POLICY

If the proposer at the time of proposal has made any untrue or incorrect
statements either in the proposal form or in the personal statement or he has
not disclosed any material information, the policy contract become invalid.
It means that all the benefits under the policy ceases and all moneys paid
there under are forfeited. However, this penalty is subject to section 45 of
the act, 1938. Under this section, a policy, which has been in force for two
years, cannot be disputed on the ground of incorrect statement in the
proposal form and other documents, unless it is shown to be on a material
matter and fraudulently made. This provision is made to interest of
policyholders.

Documents used in Insurance

An insurance policy is a contract. The stakes in the insurance companies are
very large and those interested in the stakes, many. There could be disputes
involving the insurer and the insured or the insurer and the beneficiaries of
the policy or between the beneficiaries. The terms and conditions of the
policy will provide the grounds to decide the issues in the dispute. These
terms will relate to statements and actions at various times during the course
of the policy. These will have to be proved through documents.
Documentation therefore is important in the life insurance business.

The insurance business is a long-term one, lasting 30 or 40 years.

Transactions may be rare. If the premiums are paid without any default and
no changes in the nominations etc., are made the policy file may not be
opened until the claim arises after, may be thirty years. In the absence of
proper documentation, it may not be possible to know the dues and the rights
or even the identities of the persons concerned. The various documents
required in insurance business are as follows:

PROPOSAL FORMS
The first document in the insurance file is the proposal or the application for
insurance. It is usual to obtain the proposal in a standardized, printed form.
This is to be completed by the proposer in his own handwriting and signed
in the presence of a witness. Contract to be deemed valid, requires signatures
to authenticate through witnesses. The proposal form and the statements
therein are important as these statements form the basis of the life insurance
contract. If someone else has filled up the proposal form, the person filling
up the proposal form has to declare that he wrote the answers as dictated by
the proposer, that the questions were read out to him and that he had
understood the answers. If the proposer has answered the questions in a
different language there must be a declaration to the effect that the questions
were explained to him in his own language and the answers were written by
him only after understanding the questions fully. If the proposer is illiterate,
the left thumb impression has to be attested by a third party, who has to give
a declaration that the questions were explained to him and answers dictated
by him were recorded truthfully and were read out to him and were
understood by him. These procedures are important to make the proposer
responsible for the answer in the proposal, which become the basis of the
insurance contract. Otherwise, he may be able to claim later, that he did not
know what was written in the proposal, as somebody else written the
answer.
The proposal form contains a declaration at the end stating that all the
statement there in are true in every respect and that if any untrue averment
be contained there in, the insurer will be entitled to declare the contract as
null and void and forfeit the moneys already paid. The policy document also
refers to this declaration. This declaration makes the principal of utmost
good faith operational. The agent must draw the attention of the proposer to
this declaration and its importance and insure that there are no untrue
statements in the proposal.

The proposal form will contain information as to the name and address of
the proposer, name of the person to be insured, if different details of the
person to be insured like his occupation and date of birth details about the
insurance required like plan, term and sum assured, riders to be added details
about earlier proposal for insurance. The underwriter looks at these
particulars. If the address is care of somebody, clarification may be asked
for. There could he be a suspicion of moral hazard. The occupation of the
life to be assured would determine the need for occupation extras. The
manner in which the earlier proposals had been accepted does not bind the
underwriter, but provide some guidance. If the earlier policies are not
continuing, there could be doubts about the purpose of the present proposal.

Further particulars required along with the proposal, would include (a)
preferred mode of premium (b) whether the policy should be beck dated, to
get the benefit of the lower age and lower premium (c) employment
particulars to enable deductions and (d) nomination. If the policy is to be
issued under the marriage women property act, then the relevant forms have
to be filled up, stating the beneficiaries and the trustees. These details have
no bearing on the underwriting, but are necessary for preparing the policy
and for making the necessary administrative arrangements for servicing.

PERSONAL STATEMENT
The personal statement is to be completed along with the proposal. This asks
for particulars about the state of health of the person proposed to be insured,
his family history, medical consultation, and illness, absence from work due
to medical grounds, etc. If the proposal is to be considered as a non-medical
case, particulars will be required about the employer. If the person is a
female, additional questions will have to be answered. All these details are
used for underwriting purposes. The declaration at the end of the proposal
form applies to the statements in the personal statements as well. Incorrect
statements can nullify the contract.

If a medical examination is done, because of the standard rules of the insurer

or because the underwriter asks for it, the medical report and any other
special reports, become parts of the documentation.

Under the regulations issued by IRDA in April 2002, a copy of the proposal
is to be supplied to the policyholder within 30 days of the completion of the
contract. Some insurers attach photocopies of the proposal to the policy
itself.

The medical reports submitted by the agent or other officials of the insurer
are confidential and will not be made available to the proposer. Though the
data in those documents are taken in to account by the underwriter, they do
not form the basis of the contract. The proposer is not responsible for and is
not bound by the data in those documents.

First Premium Receipt

The underwriter’s decision on the proposal may be to accept at OR
otherwise. If it is accepted at OR, the policy can be commenced
immediately, provided the full premium has been paid along with the
proposal. The FPR will be issued. If the acceptance is not at OR, the
proposer has to agree to the modified terms of the policy. In addition, pay
the balance premium if any, before the FPR can be issued. The IRDA
regulations require that the decision on the proposal form should be made by
the insurer within 15 days.

The FPR is the evidence that the insurance contract has begun. The policy
document, which is the evidence of the contract, may be issued only after
some time. If the claim arises before the policy is issued, but after the FPR is
issued, the insurer is liable. Once the policy document is issued, that
becomes the proof that the cover has begun and that the first premium has
paid. The FPR becomes irrelevant.

The FPR will state that the proposal for insurance has accepted and that the
premium has been received. It will give the particulars of the policy, such as
policy number, date of commencement of risk, date of maturity, date of
payment of premium, premium amount, mode, name and address of the life
assured. The date on which the next premium is due is also stated.
The date of issue of FPR is the date on which the premium is adjusted in the
books of the insurer. Until then, the money remains deposits. This date is
effectively the date on which the liability of the insurer begins.

The FPR, and later the policy also may show another date as the date of
commencement. This would be an earlier date, chosen for the benefit of the
lower premium, corresponding to a lower age. An insurer agrees to such
requests for backdating, to a date within the financial year. The premium due
dates and the policy anniversary will be reckoned based on such back dated
date. This date of commencement is only notional, because there is no risk
cover till the date of the issue of the FPR. In the case of the policy, which is
backdated, the FPR may acknowledge more then one installment premium.
This depends on the extent of dating back and the mode of the premium.

Strictly, the issue of the FPR signifies the conclusion of the contract and it is
binding on both the parties. However the regulations issued by the IRDA,
provide that the policyholder has the option to withdraw from the contract
within 15 days of the issue of the policy. He will then be entitled to refund
of the premium paid, less cost of risk for the short period and expenses
towards medical examination and stamp duty. This period of 15 days is
called “the free lock in period” or “cooling off period”.

RENEWAL PREMIUM RECEIPT

When the policyholder pays the premiums due under the policy subsequent
to the issue of the FPR, RPR are issued. These RPR are important to prove
payments, as default can lead to termination of the contract. Disputes may
arise as to whether a particular payment has made or not. If such disputes are
raised at the time of the claim, the respective RPR will provide conclusive
evidence. The adjustments of such subsequent premiums do not constitute
conclusive evidence. This is because insurers do adjust later payments
leaving gaps for earlier defaults to be collected at the time of claim.

Renewal receipts are not issued in respect of policies under SSS. The
consolidated cheque received from the employer is adjusted as one
transaction. Individual policyholders do not get receipts. Salary slips would
show deduction of premium from salary. A certificate from the employer
about the deductions having been made and sent to the insurer should also
suffice.

Policyholders tend to argue that the SSS arrangement is between the insurer
and the employer and that he, the policyholder, is not responsible for any
default. This argument is not valid. The employer is not the agent of the
insurer. The insurer is providing a facility to its employees. The employer
will not have any control if the salary is not paid any time because of strike
or leave or termination of employment. The insurer may not be informed
about it. The employee has to make sure that the deductions are made, and if
not done for any reason, to arrange separately for payment.

Electronic system is being developed for payment of premium. These

include electronic clearing systems direct debit to the bank account or
payments through the internet.

POLICY DOCUMENT
The policy document is the most important document. It is the evidence of
the contract. It is prepared to reflect the terms of the contract. If the original
policy is lost it won’t affect the insurance contract. A duplicate policy will
be issued on request.

Pre-printed policy forms containing standard policy conditions and

schedules are used. Clauses and liens may be separately typed and pasted on
the policy document. The policy document is to be signed by the competent
authority and stamped, according to the Indian stamp act new technology
may enable insurers to avoid pre printed forms and print a policy every time,
with appropriate schedules and terms, including terms and clauses.

The preamble to the policy states that the proposal and the declaration
signed by the party form the basis of the contract. The operative clause lays
down the mutual obligation of the parties regarding payment of premiums
and payment of SA on the happening of the insured event and on production
of age proof and title of the claimant. The schedule gives all essential
particulars of the policy like dates of commencement on maturity, SA,
nominee, premiums special clauses, if any, riders, and exclusions or liens
etc. The terms and conditions will refer to the days of grace for payment of
premium, availability of loan, etc.

Instructions issued by the IRDA require that the policy information

statement should be issued with every policy, stating
 The facility available for mode and periodicity of payment of
premium
  Person or office to be contacted for any service or enquiry relating to
the policy
 Importance of intimating change of address of policyholder and
nominee
 Availability of mechanisms to address grievances
 Information on location of insurance ombudsman

ENDORSEMENT
In a pre-printed policy form, the standard policy conditions and privileges
are printed. If any of them need modification, in keeping with the terms of
acceptance, endorsements are attached to the policy. If a condition in the pre
–printed policy is not applicable, the same will be cancelled by rubber-
stamping the clause accordingly. If individual policies are printed by
computers, such endorsements and cancellation may be avoided.

During the currency of the policy, alterations may be affected, in age, plan
or term, SA, mode of premium payment, etc. separate endorsement will be
placed on and kept alone attached to the policy document, to indicate such
changes.

Nominations made subsequent to the issue of the policy are to be made on

the back of the policy itself as endorsements. Assignment can also be made
on the back of the policy document. If made on separate stamped deeds, then
these deeds as well as the notices issued to the insurer become important
document.
RENEWAL AND BONUS NOTICES
Reminders to policyholders regarding premiums due, are not important
document they have no significance after the premium is paid. Receipt of the
notice is also not essential for payment of premium. Similarly, bonus
intimation notices are also not important. The bonus data is updated in the
insurers file automatically. The policyholder will know about bonus
declarations through news items and advertisements in media, much earlier.
The IRDA has stipulated that once a year, the insurer should inform the
policyholder about the status of policy.

PROSPECTS
The IRDA regulations as amended in October 2002, stipulate that the
prospectus or brochure issued by the insurer, should explicitly state the
scope of benefits, conditions, warranties, entitlement, exceptions, right for
participation in bonus, etc. under each plan of insurance. If the right to
participate in bonus is deferred for some time after commencement of the
policy, the fact should be explicitly stated.

ICICI Prudential – The Company

ICICI Prudential Life Insurance Company is a joint venture between ICICI
Bank - one of India's foremost financial services companies-and Prudential
plc - a leading international financial services group headquartered in the
United Kingdom. Total capital infusion stands at Rs. 37.72 billion, with
ICICI Bank holding a stake of 74% and Prudential plc holding 26%.
ICICI Prudential began their operations in December 2000 after receiving
approval from Insurance Regulatory Development Authority (IRDA).
Today, its nation-wide team comprises of over 954 branches in addition to
1,015 micro-offices, over 296,000 advisors; and 21 bancassurance partners.

ICICI Prudential was the first life insurer in India to receive a National
Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three
years in a row, ICICI Prudential has been voted as India's Most Trusted
Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg
survey of 'Most Trusted Brands'. As the company grew its distribution,
product range and customer base, it continued to tirelessly uphold the
commitment to deliver world-class financial solutions to customers all over
India.

Promoters of ICICI Prudential Company

ICICI Ltd Bank – 74% stakeholder of ICICI Prudential

ICICI Ltd was established in 1955 by the World Bank, the Government of
India and the Indian Industry, to promote industrial development of India by
providing project and corporate finance to Indian industry.

Since inception, ICICI has grown from a development bank to a financial

conglomerate and has become one of the largest public financial institutions
in India. ICICI has financed all major sectors of the economy, covering
6,848 companies and 16,851 projects. In the fiscal year 2000-2001, ICICI
had disbursed a total of Rs 319.65 billion.

ICICI has now developed a whole range of activities to become a Universal

Bank. Some of ICICI's spectrum of activities include:
* Commercial Banking - ICICI Bank, India's first internet bank.
* Information Technology - ICICI Infotech, transaction processing, software
development
* Investment Banking - ICICI Securities, one of the key players in the Indian
Capital Markets
* Mutual Fund - Prudential ICICI AMC, leading private sector mutual fund
player in India
* Venture Capital - ICICI Venture, leading private equity investor with
focus on IT and HealthCare
* Retail Services - ICICI PFS, Marketing and Distribution of Retail Asset
Products
* Distribution - ICICI Capital, Distribution and Servicing of Retail Liability
Products
ICICI is listed on the Indian Stock Exchanges and on the New York Stock
Exchange (NYSE). On September 22, 1999, it became the first Indian
company to be listed on the NYSE (symbol: IC and IC.D). This has been
followed by the listing of ICICI Bank on NYSE (symbol: IBN) on March
28, 2000.

Prudential plc. – 26% stake holder of ICICI Prudential

Prudential plc was founded in 1848. Since then it has grown to become one
of the largest providers of a wide range of savings products for the
individual including life insurance, pensions, annuities, unit trusts and
personal banking. It has a presence in over 15 countries, and caters to the
financial needs of over 10 million customers. It manages assets of over US$
259 billion (Rupees 11, 39,600 crores approx.) as of December 31, 1999.
Prudential plc. had its presence in Asia for the past 75 years catering to over
1 million customers across 11 Asian countries.

Prudential is the largest life insurance company in the United Kingdom

(Source: S&P's UK Life Financial Digest, 1998). Asia has always been an
important region for Prudential and it has had a presence in Asia for over 75
years. In fact Prudential's first overseas operation was in India, way back in
1923 to establish Life and General Branch agencies.

In the US, Prudential owns Jackson National Life, one of the leading life
insurance companies. Prudential controls approximately 4% of all the listed
shares on the second largest stock exchange in the world, the London Stock
Exchange, making it one of the largest institutional investors in the UK.
Prudential is focused on the internet generation and is one of the first
financial service organizations to use the internet on a fully integrated basis.

In October 1998, Prudential launched a "branchless" bank based on the

internet. Unusually titled as "egg". The bank has in a short span of its
existence become a leading banking service provider in the UK. Infect in the
first six months of its existence it garnered over 5 billion (US$ 8 billion) in
deposits from over 500,000 customers.
Development of superior products and services that offer value for money
and security while producing superior financial returns enables Prudential to
maximize the value of its shareholder's investment and to establish lasting
relationships with customers and policy holders.

Vision & Values of ICICI Prudential Company

Vision
To be the dominant Life, Health and Pensions player built on trust by world-
class people and service. This we hope to achieve by:

• Understanding the needs of customers and offering them superior

products and service
• Leveraging technology to service customers quickly, efficiently and
conveniently
• Developing and implementing superior risk management and
investment strategies to offer sustainable and stable returns to our
policyholders
• Providing an enabling environment to foster growth and learning for
our employees
• And above all, building transparency in all our dealings

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

to 5 core values -- Integrity, Customer First, Boundary less, Ownership and
Passion. Each of the values describes what the company stands for, the
qualities of our people and the way we work.
We do believe that we are on the threshold of an exciting new opportunity,
where we can play a significant role in redefining and reshaping the sector.
Given the quality of our parentage and the commitment of our team, there
are no limits to our growth.

Values
Every member of the ICICI Prudential team is committed to 5 core values:
Integrity, Customer First, Boundary less, Ownership, and Passion. These
values shine forth in all we do, and have become the keystones of our
success.

Insurance Products of the ICICI Prudential

Broadly talking the products of the company can be classified as:

1. Insurance Solution for Individual

2. Group Insurance Solutions

Insurance Solutions for Individuals

ICICI Prudential Life Insurance offers a range of innovative, customer-

centric products that meet the needs of customers at every life stage. Its
products can be enhanced with up to 4 riders, to create a customized solution
for each policyholder.
Savings & Wealth Creation Solutions
1. Save'n'Protect is a traditional endowment savings plan that offers life
protection along with adequate returns.
2. CashBak is an anticipated endowment policy ideal for meeting
milestone expenses like a child's marriage, expenses for a child's
higher education or purchase of an asset. It is available for terms of 15
and 20 years.
3. LifeTime Gold & LifeTime Plus are unit-linked plans that offer
customers the flexibility and control to customize the policy to meet
the changing needs at different life stages. Each offer 6 fund options -
Preserver, Protector, Balancer, Maximiser, Flexi Growth and Flexi
Balanced.
4. LifeLink Super is a single premium unit linked insurance plan which
combines life insurance cover with the opportunity to stay invested in
the stock market.
5. Premier Life Gold is a limited premium paying plan specially
structured for long-term wealth creation.
6. InvestShield Life New is a unit linked plan that provides premium
guarantee on the invested premiums and ensures that the customer
receives only the benefits of fund appreciation without any of the risks
of depreciation.
7. InvestShield Cashbak is a unit linked plan that provides premium
guarantee on the invested premiums along with flexible liquidity
options.
8. LifeStage RP is a unique and powerful wealth creation insurance
solution, which combines the benefits of automatic asset allocation
and quarterly rebalancing along with increased protection.
Protection Solutions
1. LifeGuard is a protection plan, which offers life cover at low cost. It
is available in 3 options - level term assurance, level term assurance
with return of premium & single premium.
2. HomeAssure is a mortgage reducing term assurance plan designed
specifically to help customers cover their home loans in a simple and
cost-effective manner.

Education insurance plans

1. Education insurance under the Smart Kid brand provides guaranteed
educational benefits to a child along with life insurance cover for the
parent who purchases the policy. The policy is designed to provide
money at important milestones in the child's life. Smart Kid plans are
also available in unit-linked form - both single premium and regular
premium.

Retirement Solutions
1. Forever Life is a traditional retirement product that offers guaranteed
returns for the first 4 years and then declares bonuses annually.
2. LifeTime Super Pension is a regular premium unit linked pension
plan that helps one accumulate over the long term and offers 5 annuity
options (life annuity, life annuity with return of purchase price, joint
life last survivor annuity with return of purchase price, life annuity
guaranteed for 5, 10 and 15 years & for life thereafter, joint life, last
 survivor annuity without return of purchase price) at the time of
retirement.
3. LifeLink Super Pension is a single premium unit linked pension
plan.
4. Immediate Annuity is a single premium annuity product that
guarantees income for life at the time of retirement. It offers the
benefit of 5 payout options.
5. PremierLife Pension is a unique and convenient retirement solution
with a limited premium paying term of three or five years, to suit
professionals and businessmen, especially those who require more
flexibility and customization while planning their finances.

Health Solutions
1. Health Assure Plus: Health Assure is a regular premium plan which
provides long term cover against 6 critical illnesses by providing
policyholder with financial assistance, irrespective of the actual
medical expenses. Health Assure Plus offers the added advantage of
an equivalent life insurance cover.
2. Cancer Care: is a regular premium plan that pays cash benefit on the
diagnosis as well as at different stages in the treatment of various
cancer conditions.
3. Cancer Care Plus: is a wellness plan that includes all the benefits of
Cancer Care and also provides an additional benefit of free periodical
cancer screenings.
4. Diabetes Care: Diabetes Care is a unique critical illness product
specially developed for individuals with Type 2 diabetes and pre-
diabetes. It makes payments on diagnosis on any of 6 diabetes related
 critical illnesses, and also offers a coordinated care approach to
managing the condition. Diabetes Care Plus also offers life cover.
5. Diabetes Care Plus: is a unique insurance policy that provides an
additional benefit of life cover for Type 2 diabetics and pre-diabetics
6. Hospital Care: is a fixed benefit plan covering various stages of
treatment - hospitalization, ICU, procedures & recuperating
allowance. It covers a range of medical conditions (900 surgeries) and
has long term guaranteed coverage up to 20 years.
7. Crisis Cover: is a 360-degree product that will provide long-term
coverage against 35 critical illnesses, total and permanent disability,
and death.

Group Insurance Solutions

ICICI Prudential Life also offers Group Insurance Solutions for companies
seeking to enhance benefits to their employees.

1. Group Gratuity Plan: ICICI Prudential Life's group gratuity plan

helps employers fund their statutory gratuity obligation in a scientific
manner. The plan can also be customized to structure schemes that
can provide benefits beyond the statutory obligations.

2. Group Superannuation Plan: ICICI Prudential Life offers both

defined contribution (DC) and defined benefit (DB) superannuation
schemes to optimize returns for the members of the trust and
rationalize the cost. Members have the option of choosing from
 various annuity options or opting for a partial commutation of the
annuity at the time of retirement.

3. Group Immediate Annuities: In addition to the annuities offered to

existing superannuation customers, we offer immediate annuities to
superannuation funds not managed by us.

4. Group Term Plan: ICICI Prudential Life's flexible group term

solution helps provide affordable cover to members of a group. The
cover could be uniform or based on designation/rank or a multiple of
salary. The benefit under the policy is paid to the beneficiary
nominated by the member on his/her death.

Flexible Rider Options

ICICI Prudential Life offers flexible riders, which can be added to the basic
policy at a marginal cost, depending on the specific needs of the customer.

1. Accident & disability benefit: If death occurs as the result of an

accident during the term of the policy, the beneficiary receives an
additional amount equal to the rider sum assured under the policy. If
an accident results in total and permanent disability, 10% of rider sum
assured will be paid each year, from the end of the 1st year after the
disability date for the remainder of the base policy term or 10 years,
whichever is lesser. If the death occurs while travelling in an
 authorized mass transport vehicle, the beneficiary will be entitled to
twice the sum assured as additional benefit.
2. Critical Illness Benefit: protects the insured against financial loss in
the event of 9 specified critical illnesses. Benefits are payable to the
insured for medical expenses prior to death.
3. Waiver of Premium: In case of total and permanent disability due to
an accident, the future premiums continue to be paid by the company
till the time of maturity. This rider is available with Smart Kid,
LifeTime Plus, LifeTime Super and LifeTime Super Pension.
4. Income benefit rider: In case of death of the life assured during the
term of the policy, 10% of the sum assured is paid annually to the
nominee on each policy anniversary till the maturity of the rider.

Edge of ICICI Prudential

The ICICI Prudential edge comes from our commitment to our customers, in
all that we do - be it product development, distribution, the sales process or
servicing. Here's a peek into what makes us leaders.

1. The products have been developed after a clear and thorough

understanding of customers' needs. It is this research that helps us develop
Education plans that offer the ideal way to truly guarantee your child's
education, Retirement solutions that are a hedge against inflation and yet
promise a fixed income after you retire, or Health insurance that arms you
with the funds you might need to recover from a dreaded disease.
2. Having the right products is the first step, but it's equally important to
ensure that our customers can access them easily and quickly. To this end,
ICICI Prudential has an advisor base across the length and breadth of the
country, and also partners with leading banks, corporate agents and brokers
to distribute our products.

3. Robust risk management and underwriting practices form the core of

ICICI Prudential business. With clear guidelines in place, we ensure
equitable costing of risks, and thereby ensure a smooth and hassle-free
claims process.

4. Entrusted with helping the customers meet their long-term goals, they
adopt an investment philosophy that aims to achieve risk adjusted returns
over the long-term.

5. Last but definitely not the least, ICICI Prudential 28,000 plus strong team
is given the opportunity to learn and grow, every day in a multitude of ways.
This belief keeps them engaged and enthusiastic, so that they can deliver on
promises to cover people, at every step in life.

Competitors of ICICI Prudential

 ING Vysya Life Insurance
 Life Insurance Corporation of India
 Max New York Life Insurance Company Ltd
 HDFC Standard Life Insurance Company Limited
 OM Kotak Mahindra Life Insurance Company Ltd.
  SBI Life Insurance Company Limited
 Tata AIG Life Insurance Company
 Birla Sun Life Insurance Company Limited
 MetLife India Insurance Company Pvt. Ltd.

Bibliography
• Www.prudential.co.uk
• Www.iciciprulife.com
• Www.insure2bsecure.com/insure/information
• IC 33 Life Insurance author S. Balachandran
• Brochure of ICICI Prudential