INTRODUCTION OF INSURANCE

Introduction of Insurance:
It’s a promise of compensation for specific potential future losses in exchange for
a periodic payment. Insurance is designed to protect the financial well-being of an
individual, company or other entity in the case of unexpected loss. Some forms of
insurance are required by law, while others are optional. Agreeing to the terms of
an insurance policy creates a contract between the insured and the insurer. In
exchange for payments from the insured (called premiums), the insurer agrees to
pay the policy holder a sum of money upon the occurrence of a specific event. In
most cases, the policy holder pays part of the loss (called the deductible), and the
insurer pays the rest.

Examples include car insurance, health insurance, disability insurance, life

insurance, and business insurance.

DEFINITION OF INSURANCE:

1. financial protection against loss or harm:

an arrangement by which a company gives customers financial protection against

loss or harm such as theft or illness in return for payment premium

2. money paid by insurance company:

the sum of money that an insurance company pays or agrees to pay if a specific
undesirable event occurs

1
3. premium:

The payment made to obtain insurance

My car insurance has gone up again.

4. insurance business:

the commercial business of providing insurance

5. means of protection:

an act, measure, or provision that gives protection against an undesirable event or

risk
provided a map as insurance against getting lost

OTHER DEFINITIONS OF INSURANCE:

 A contract in which one party agrees to compensate another party for any
losses or damages caused by risks identified in the contract in exchange for
the payment of a lump sum or periodic amounts of money to the first party.
www.dreamsintorealty.biz/index.cfm/fuseaction/terms.list/letter/I/contentid/
BD03506D-9E28-4661-95C36DCFB79ED020

 Insurance, in law and economics, is a form of risk management primarily

used to hedge against the risk of a contingent loss. Insurance is defined as
the equitable transfer of the risk of a potential loss, from one entity to

2
 another, in exchange for a premium. ...
en.wikipedia.org/wiki/Insurance

 Promise of reimbursement in the case of loss; paid to people or companies

so concerned about hazards that they have made prepayments to a...
 Policy: written contract or certificate of insurance; "you should
have read the small print on your policy."
 Indemnity: protection against future loss.
wordnet.princeton.edu/perl/webwn

 Protection against loss. The insured sacrifices a small certain loss (the
premium) for protection against a large uncertain loss (e.g. an accident fire
or death). The insurance company assumes the risk by employing the law of
large numbers and the principle of risk spreading.
www.bizadvisor.org/

 A system to protect persons against the risks of financial loss by transferring

the risks to a large group who share the financial losses
www.millerandzois.com/Maryland-Insurance-Glossary.html

 A side agreement when someone is all-in for a player in a pot to put up

money that guarantees a payoff of a set amount in case the opponent wins
the pot.
www.homepokertourney.com/poker-glossary.htm

 A contract that provides compensation for specific losses in exchange for a

periodic payment. An individual contract is known as an insurance policy,
and the periodic payment is known as an insurance premium.
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TYPES OF INSURANCE:

1. Life insurance:

3
 It provides finances to the family of the policyholder.

2. Non-life insurance:

A contract in which one party agrees to pay for

another party's financial loss resulting from a specified event (for example, a
collision, theft, or storm damage).It covers all risk related to materialistic things
used in our life.

BENEFITS OF INSURANCE:

The existence of a sound insurance market is an

essential component of any successful economy and the proof of this can be seen
in the many parts of the world.

The main benefits of insurance are:

• It provides financial protection in any mishap.

• It provides peace of mind.
• It enables loss control.
• It is source of investments of funds.
• It is a source of invisible earnings.

INSURANCE COMPANIES:

Insurance companies are financial intermediaries

that, for a price, will make a payment if an insured event occurs.

TYPES OF INSURANCE COMPANIES:

There are two types of insurance companies:

1) LIFE INSURANCE COMPANIES:

The principal event that the Life Insurance Company insures against is death.
Upon the death of a policyholder a life company agrees to make either a lump-sum
payment or a series of payments to the beneficiary of the policy. Life Insurance
protection is not, the only financial is product sold by these companies; a major

4
portion of the business of life companies is the area of providing retirement
benefits.

2) PROPERTY AND CASUALTY INSURANCE COMPANIES:

Property and
casualty insurance companies insure against wide variety of occurrences. The
under noted perils can be covered under the property casualty insurance:

1. Fire
2. Atmospheric disturbances
3. Earthquake
4. Riot strike damages
5. Explosion
6. Other damages
7. Theft
8.
HISTORY OF INSURANCE:

You may argue that history since long ago. Some

historians take the route of insurance back to roman times. However, insurance in
its modern from came into existence about half of this millennium around coastal
towns of Venice and Geneva. Trades in those cities go to far areas to do trade in.
Sea ships did the shipment of goods. In the seas and oceans there remain a constant
danger of unfriendly weather and looters. Thus during the voyage there is a risks
for goods as well as for life.

The traders in those cities devised the methods of insurance to help their families
in case of any misfortune happens. As time passed this method was started being
used for all types of accidents.

HISTORY OF INSURANCE COMPANIES IN PAKISTAN:

At the time of
independence in 1947, Pakistan had 77 Insurance Companies out of which 7 were
local and 70 were foreign resident companies. There was neither reinsurance nor a
public sector at that time. This situation remains till 1952. In 1952, the
Government of Pakistan established Pakistan Insurance Corporation as a
reinsurance company and asked all the insurance companies to cede 10% of all

5
their business to Pakistan Insurance Corporation. For these reasons, in addition to
other factor, 40 of these foreign companies wound up their business and left
Pakistan. In 1993, there were 57 insurance companies in the private sector and
three in the public sector.

Up till now there are 10 foreign resident insurance companies, 47 local (national)
insurance companies and 3 public sector insurance concerns.

Insurance industry in Pakistan is dominated by a small number of players. Then

top three insurance companies of the country control more 50% of the total
Premium paid. The biggest market in Pakistan is of “accident insurance” which
accounts for 37% of the total insurance business. The second most popular
category is “fire insurance” which claims another 37%. The remaining 26%
business is accounted for by marine business. Adamjee Insurance is the outright
winner in each of the three categories. The second largest insurance company in
each of the sectors is EFU.

Review of life insurance with Non-life insurance

The insurance industry plays an important role in the financial system by providing
indemnification of financial risk in the economy and also serves as an institutional
investor for both capital and money market instruments.
Like many other developing countries, the size of Pakistan’s insurance industry is
relatively small in proportion to its GDP. Table 1 shows the penetration of
insurance as a ratio of gross premiums to GDP. The total size of insurance
business in various countries depends on the nature of insurance markets,
regulatory environment, accounting procedures and financial development.
Moreover, the demand for insurance depends on real disposable income of the
prospective policyholder, the individual’s preference about the need for financial
security, economic environment, interest rates, and inflation and insurance
premium rates. Furthermore, cultural and religious aspects of a country may also
affect the development of insurance business. The insurance markets in developing

6
countries are characterized as suppliers of insurance services as supply usually
exceeds demand in these economies. In case of Pakistan where 67.5 percent of the
population lives in rural areas and given the low per capita income, the insurance
industry has not been able to create sizeable demand for its services.

Insurance Penetration in CY2010

Gross premiums as percentage of GDP at market prices

Countries Total Non-life life

USA 8.8 4.3 4.5
Brazil 2.1 1.8 0.4
UK 15.8 3.1 12.7
China 1.8 0.7 1.1
India 2.3 0.6 1.8
Malaysia 3.7 1.6 2.1
Indonesia 1.2 0.6 0.5
Pakistan* 0.5 0.3 0.2

Structure of Insurance Industry:

The insurance market in Pakistan is broadly categorized in two main classes, life
insurance and non-life insurance. Moreover, the country has one reinsurance
company that carries out reinsurance activities and further spreads the risks. The
insurance market is highly concentrated in urban areas and many insurance
companies are subsidiaries of large industrial groups that were created mainly to
reduce the outflow of funds in the form of premiums, to manage the risks of these
industries and to generate profits out of it. At present there are 54 insurance
7
companies out of which 49 companies offer non-life insurance and 5 offer life
insurance services Table.2. The non-life insurance industry also includes six
companies that also provide health insurance coverage.
Assets Structure of Insurance Companies

Total Assets
(Rs. In Million)

2005 132,017.1

2006 149,448.6

2007 169,821.4

2008 193,117.6

2009 217,685.4

Structure of Life Insurance fund

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 Life Fund

(Rs. In Million)

2005 122,775.2

2006 137,958.8

2007 156,737.3

2008 177,459.1

2009 199,445.3

Composition of Investments and Investment

9
Investment Income
(Net of InvestmentExpenses)
(Rs. In Million)

2005 13,105.5

2006 14,923.8

2007 17,505.2

2008 19,134.6

2009 21,544.7

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Total Premium Income:

(Rs. In Million)

2005 13,820.1

2006 15,991.6

2007 18,716.7

2008 22,695.3

2009 28,366.9

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12
Total Income

(Rs. In Million)

2005 26,925.6

2006 30,915.4

2007 36,221.9

2008 41,829.9

2009 49,911.6

13
Investment Portfolio

(Rs. In Million)

2005 124,983.7

2006 142,158.8

2007 161,965.8

2008 182,874.2

2009 205,804.2

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Premium Income - Group Life
(Rs. In Million)

2005 2,560.1

2006 2,879.6

2007 2,809.6

2008 3,543.2

2009 3,513.7

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 Board of directors

Mr. Kamal Afsar Chairman

Mr. Bashir Ahmed Director
Mr. Sharbat A. Changazi Director
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Mrs. Spenta Kandawalla Director
Mr. Ch. Javaid Hussain Director
Mr. Syed Hur Riahi Gardezi Director
Additional secretary Director
Ministry of Commerce, Govt. of Pakistan
Secretary Board
Mr.Shahid Aziz Khan
Company’s management
Executive directors:
Mr. Javaid khan edba@statelife.com.pk
Mr. Ijaz Ahmed edpgs@statelife.com.pk
Mr. Syed Arshad Ali edphs@statelife.com.pk
Ms. Nargis Ghaloo edmkt@statelife.com.pk
Divisional Heads:
Mr. Ansar Hussain (GM) dhinv@statelife.com.pk
Investment
Mr.Sohail Hashmi (GM) dhpgs@statelife.com.pk
Personnel & General Service

Mr.Sher Ali Khan (GM) dhiae@statelife.com.pk

Internal Audit & Evaluation
Mr. Akber Ali Hussain (DGM) dhra@statelife.com.pk
Research & Analysis
Mr. Nasir Javed Khan (DGM) dhre@statelife.com.pk
Real Estate

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Mr. Khizar Hayat Aamir (DGM) dhba@statelife.com.pk
Budget & Accounts
Mr. Saleem Khaliq (DGM) dhcd@statelife.com.pk
Computer
Mr. Manzoor Ahmed (DGM) dhmkt@statelife.com.pk
Marketing
Mr. Shahrukh Sabzwari (DGM) dhact@statelife.com.pk
Actuarial
Mr. Nadeem Bessey (DGM) dhgp@statelife.com.pk
Group & Pension
Mr. Latif A. Chaudhry (DGM) dhlaw@statelife.com.pk
Law
Mr. M. Saeed Khan (DGM) dhphs@statelife.com.pk
Policy Holder Services

Regional chiefs
Mr. Muhammad Aslam Sabir rccentral@statelife.com.pk
General Manager
Central Region Lahore

Raja Zafar Ali Shan rcnorth@statelife.com.pk

Deputy General Manager
Northern Region Islamabad

Ch. Madad Ali Anjum rcmultan@statelife.com.pk

Deputy General Manager
Multan Region Multan

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Mr. M. Ahmed Amjad (Acting) rcsouth@statelife.com.pk
Deputy General Manager
Southern Region Karachi

Branches network
1. Central Region
2. Multan Region
3. Southern Region
4. Northern Region

Central Region:
Gujranwala zone
Lahore zone
Faisalabad zone
Sialkot zone
Sargodha zone

Multan Region:
Rahim yar khan zone
Sahiwal zone
Multan zone
Bahawalpur zone
Dera Gazi khan zone

Southern Region:
Karachi zone
Hyderabad zone

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Mirpur khas zone
Sukkhar zone
Karachi zone (central)
Karachi zone (south)
Quetta zone
Larkana zone

Northern Region:
Islamabad zone
Rawalpindi zone
Peshawar zone
Swat zone

MARKETING:

Around the world, people and organizations are faced with the task of selling their
goods and services to new and existing customers. The whole process of
persuading others that they need and want what you can sell them has developed
into a business discipline known as MARKETING.

Bu interacting with the people or organizations that they serve, mergers can
understand more easily what their customers want, and such understanding
provides a strong platform for selling them goods and services. Marketing goes
beyond mere interaction with customers, or beyond simply understanding them. it
uses the knowledge gained from that interaction and understanding to provide
solutions to customers' requirements and, thus, generate business.
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DEFINITION OF MARKETING:

 A social and managerial process whereby individuals and groups obtain

what they need and want through creating exchanging value with others.

 The achievement of corporate goals through meeting and exceeding

customer needs better than the competition.

 Marketing is the management process responsible for identifying,

anticipating and satisfying customers' requirements.

DEVELOPING THE MARKETING MIX:

Once the company has decided on its overall marketing strategy, it is ready to
begin planning the details of the marketing mix, one of the major concepts in
modern marketing.

DEFINITIONS OF MARKETING MIX:

 The set of controllable tactical marketing tools-product, price, place and

promotion- that the firm blends to produce the response it wants in the target
market.
EXPLANATION:

The marketing mix consists of everything the firm can do to influence the demand
for its products. The many possibilities can be collected into four groups of
variables known as the "four Ps": product, price, place and promotion.

 PRODUCT:
It means the goods and services combination the company offers to the target
market. For marketing purposes, PRODUCT is a generic term that includes
services. In broad definition, as organization's products are the physical or actual
items or services it is offering to the market. Products and services are often
modified, redesigned, repackaged or discontinued during the life of organization.

For an organization in the service sector, the product might be an insurance policy,
or the efficient and accurate drafting of a legal document.

21
In STATE LIFE INSURANCE CORPORATION OF PAKISTAN, its products
which are available for its customers are in three categories i.e;

Individual life plans, group life plans & policies for gulf, are given below;

1. INDIVIDUAL LIFE PLANS:

Under individual life plans, there are 14 policies that are:

A. Whole Life Assurance

B. Endowment Assurance
C. Sadabahar Plan
D. Anticipated Endowment Assurance
E. Shad Abad Assurance
F. Jeevan Sathi Assurance
G. Child Education &Marriage Assurance
H. Child Protection Assurance
I. Sunehri Policy
J. Shehnai Policy
K. Optional Maturity Endowment
L. Nigehban Plan
M. Muhafaz plus Assurance
N. Supplementary Covers

2. GROUP LIFE & PENSION PLAN:

Under group life and pension plan, there are 7 plans. These are:

1. Term Insurance Scheme

2. Provident Fund Insurance Scheme
3. House Building & Parquets Insurance Scheme
4. Pay Continuation Scheme
5. Group Endowment Insurance Scheme
6. Group Pension Scheme
7. Private Education

3. INSURANCE PLANS FOR GULF COUNTRIES:

Nine plans are available for Gulf that are:

a) Whole Life Assurance

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 b) Endowment Assurance
c) Anticipated Endowment Assurance
d) Shad Abad Assurance
e) Jeevan Sathi Assurance
f) Child Education & Marriage Assurance
g) Child Protection Assurance Wealth Builder Plan
h) Supplementary Covers
 PRICE:
Price is the amount of money customers have to pay to obtain the products. It
comprises the recommended or actual price of the product or service in the market.

STATE LIFE INSURANCE CORPORATION OF PAKISTAN comprises

different price of products from its customers.

Premium or price can be charged in the following ways;

a. Yearly
b. Half Yearly
c. Quarterly
d. Monthly

 Rate of interests and premium rate is calculated

 Rate Of premium depends upon the age of a person. If the age is
higher, then more rates will be charge and if age is low then low rate
will be charge. Rate also depends upon the maturity period
 Check age and term, then find factor and multiply with sum assured.
In this way, premium is calculated.
 If life proposed has hazardous working, then this section charges O/E
Occupational Extra.
 The premium, which is charged by the underwriter, is from 4-7 Rs.
and it is the normal rate. E.g. 5Rs. * Sum Assured = rider premium.

Different tables are used for calculating the rate of premium.

 PLACE:
It includes the company activities that make the product available to target
customers. Place is sometimes regarded as a misleading name for this part of
marketing mix. It means the distribution channels for the products & services and
23
describes the locations and ways in which the buyer experiences it. For a hard
product, 'place' may be a retail outlet or a mail- order catalogue, while for an
accountancy practice, 'place' may be its own premises, its website or its client's
office.

STATE LIFE INSURANCE CORPORATION has;

 Four Regional Offices,

 Twenty-Six Zonal Offices,
 A few Sub-Zonal Offices,
 111 Sector Offices, and
 A network of 461 Area Offices across the country for Individual Life
Insurance.

 PROMOTION:

Promotion means activities that communicate the merits of the products and
persuade target customers to buy it. Promotion is the collective word covering all
communications with existing and potential customers. It includes advertising,
personal selling, public relations, sponsorship, trade exhibitions, direct mail and
website advertising. The image the company creates through its promotional
activities can also influence a wider audience, for instance shareholders, journalists
and, of course, its own staff.

STATE LIFE INSURANCE COMPANY OF PAKISTAN promotes its sales by;

 Change advertising
 Change personnel selling activities
 Review and improve communications with customers
 Change the way service is delivered
 Change service levels by segment

Management Hierarchy of New Business Department.

Assistant
general
24
manager
 Manager

UNDERWRTTING
Policy ISSUUE

Deputy
Deputy
Manager Manager

Assistant Assistant
Manager Manager

Staff Staff

New Business:
It is one of the most effective means of generating personal savings with coverage
of life risk. The main function is risk management and to collect the premium at
early stages.

The main function of this department is as follow:

25
 • Receiving the proposal form from policy holder by market.

• An underwriting of these proposal forms and evaluate that which proposal

form is acceptable and which are not, if acceptable on what premium.

• Issuance policy documents an evidence of contract.

There are different sub- sections which perform different functions related to new
business as mentioned below:

 Proposal section

 Under writing department

In this department following are included:

1. Panel of doctors

2. Duplication section

3. Premium calculation section

 Policy issue section

We discuss in detail about sections. We will see different plans which are
available for policy holder. Some of them are given below.

Procedure of new business:

Marketing force is expected to place business with complete disclosure of facts.
In marketing force all people are related to field work and they all are on contract
bases. These people go to clients by themselves and they convince the people to
purchase policy. Then sales rap fills proposal form for that customer. Then
proposal form comes in new business for the allotment of proposal number where
proposal number for a particular customer is allotted. Then process of underwriting

26
is done. If the customer fulfills the requirements of underwriting then further
process continues otherwise request is rejected and underwriter suggests some
other alternative. If underwriter accepts the proposal then calculation for premium
is done. After the calculations of premium the policy number is allotted and policy
bond is issued to the customer.

Proposal section:
Now policy comes on counter of proposal section. At counter data is feed in
computer for record to avoid any fraud or misrepresentation. At counter serial
numbers is issued and also do entry in proposal register and then number is
allotted to life proposed.

If any case is N.T.U. (NOT TAKEN UP) due to any incomplete requirement in
proposal form then he has to complete it within one week. If he will not come
back within 3 months then his case will be cancelled and if he now wants to
apply again he has to submit a new case.

After completing all requirements life proposed has to submit a fee at cash
counter in case of Non-medical case. In case of medical no fee will be
submitted.

• Under writing department:

When an insurance company receives any application then the company will
evaluate the application to determine the degree of risk represented by the
proposed insured. After assessing the risk company can establish the
premium amount to charge the applicant. This assessment of risk is done by
under writers.

What is under writing?

Is also called “selection of risk”, is the
process of assessing and classifying the degree of risk that proposed insured
represents under writing occurs in all types of insurance, but the factors
that influence the process of risk selection change with types of insurance
involved.
27
 Underwriters will evaluate the case at different bases but main are four.

1. Financial bases

2. Medical bases

3. Legal bases

4. Occupational bases

 Financial bases:

The life insurance office has to strive to see that the insurance protection
sought by an applicant has a realistic relationship to his financial needs and
status. The possibility of over insurance beyond the financial standing of
applicant and his legitimate need, have to be checked. The column related to
occupation ownership of land and sales representative’s confidential report
helps in arriving at an estimable figure of income of applicant.

 Medical bases:

The medical angle or aspect include the build of the applicant, that is height
weight etc., his past medical history, family history, history of accident and
any present ailments/impairments.

 Legal bases:

An appraisal of this aspect of risk would enable the life insurance office to
determine whether or not the contract to be entered into would have legal basis
and effects. For example, a contract which would have no legal value is issuing
an insurance policy to minor where the proposal form and declaration relating
to health has not been countersigned by an adult as propose.

 Occupational bases:

The rate of insurance premium for life and supplementary contracts differ from
occupation to occupation depending upon the degree of hazard or extra hazard
involved. There are certain occupations on the bases of which applicants would

28
 be denied certain supplementary contracts. The story does not end here because
there are certain occupations such as stunt performance where office would
decline to issue even simple life insurance policy much less to allow
supp.accidental contracts.

• Now we will see in detail that what aspects under writer will consider in
the proposal form and what is there importance while evaluating the
cases.

First of all we divide the policy holder in 3 broader aspects.

• Male

• Female

• Juvenile(children)

And then it is classified in more specified way.

• Medical

• Non-medical

• Financial

Medical Underwriting:
In medical underwriting proposer should be taken for
medical examination only to the authorized examiner in the proposer’s own
locality and it should be taken out only at doctor’s clinic. Medical examiner is
instructed to forward the report when completed, direct to concerned underwriting
department of corporation.

There are certain tests which are necessary for medical examination. Which are
following?

a) MR…..Medical report by an authorized examiner with appropriate limit.

b) PUR…..Pathological Urinalysis report.

c) ECG…..Electro cardiogram at rest.

29
 d) Ex-ECG….Electro cardiogram after exercise with double master’s exercise
test on Swiss RE pattern.

e) BS….Blood studies (ESR, CBC, FBS, HB) Cholesterol, Blood Urea.

f) HIV…..Human Immune Deficiency Virus Antibody test.

A standard Medical report and PUR remain in force for six months and all other
tests remain in force for one year.

In case of certain proposals, depending upon the age ,sum assured and adverse
features in the family history, personal history or medical history may be
necessary in additional to the usual routine medical report. Underwriter has
discretion to call for such tests or other additional tests.

Non-Medical Underwriting:

In non medical underwriting, policy holder submits the fee, and underwriters
assess the standard life. But if there is any discrepancy in proposal form then they
can call any documents or tests. And if life is sub-standard then they can charge
extra mortality according to age of policy holder or it can be differed for three
months.

Financial underwriting:

While underwriting a proposal, underwriter has to take into consideration the

Amount of Insurance payable on death of assured in comparison with the possible
Loss of Income which could otherwise be suffered y the legal heirs on death of life
assured.

There are certain rules for financial underwriting which are given below.

Annual premium of present proposal and previous policies should not be more
than 20% of proponent’s annual income.

30
AIB cover should not be more than three times of proponent’s annual income and
should be according to sum assured.

It is preferred to have documentary evidence of financial worth in all cases

exceeding five lacks ,included sum assured+ FIB+AIB+RPR+TSAR of previous
policies. However, if the concerned sales manager completes the agent’s report on
proposal form, then the documentary evidence of income may not be insisted
unless,

1) The total sum assured is up to 10lacs and the sales manager’s confidential
report on prescribed Performa duly verified by the area manager is
submitted.

2) Where TSAR exceeds 10 lacks but below 25 lacks, the area manager should
give separate confidential report on prescribed Performa duly verified by the
sector head.

3) Where TSAR is between 25 lacks and 50 laces. The sector head should give
confidential report duly verified by the zonal head on prescribed Performa;

4) Where TSAR is over fifty laces, all other due requirements including
following are to be furnished;

a. Independent confidential report, duly verified by the zonal head.

b. Swiss Re financial questionnaire form

c. Direct evidence of income or financial worth justifying the cover

applied for.

Insurance of Female lives:

Insurance will be available to female lives as per following categorization:

31
Category A:

Those with independent and self-earned income from employment in government

departments, schools, colleges, universities, multi-national companies, banks, and
well established private firms or by practicing as qualifier lawyer, qualified
medical practitioner, qualified accountant or owner of business should be treated at
par with males. Qualifications must normally be substantiated with proof of
vocation.

Category B:

Those with independent earned income from business as sleeping partners, from
land, investments, shares, or services in private un-regulated, on-recognized small
organizations. No restriction to plan of insurance, supplementary contracts and
sum assured will apply. However, qualifications must normally to be substantiated
with proof of source of income. Health requirements to be treated at par with
males up to 2 lacks sum at risk. Medical report tests shall apply beyond 2 lacks
sum at risk.

Category C:

Housewives and others with no independent earned income, ladies having

unsteady source of income from vocation like tailoring, handicrafts, milk selling,
animals and birds breeding, tutoring , etc,. Fall under this category. Full medical
report, sales manager report shall be required and sum at risk will be restricted to
200,000/= without any rider except in case of housewives in table 19 where
following provisions shall apply.

32
 a) House-wives at least metric: Treat at par with males without any rider. Full
medical report by a lady doctor and other tests as applicable and proof of
education are required.

b) Under-Metric (including illiterates) house-wives: policies without any rider

on female lives may be entertained provided medical on female life is
conducted by a lady doctor and sales managers satisfactory report is
submitted. In case of illiterate proponent, sector head’s separate satisfactory
moral hazard exclusion report will be required.

Category D:

Females who don’t fall under any category from A to C are not insurable and their
proposals should be declined.

Calculation section:

In calculation section calculation premium is done. Premium can be paid in the

following ways;
Yearly
Half Yearly
Quarterly
Monthly
Rate of interests and premium rate is calculated.
Rate Of premium depends upon the age of a person. If the age is higher,
then more rates will be charge and if age is low then low rate will be charge.
Rate also depends upon the maturity period
Different tables are used for calculating the rate of premium.
Most commonly used tables are;

33
 Table 03
Table 05
Table 07
Table 12
Table 18
Table 19
Policy issue department:

After completing the process of under writing policy

will send in policy issue department. Here data is entered in computer which is
called Punching. After punching different riders and preambles are attached with
contract. In case of surrender schedule is also attached with it. In policy issue
department all data is also recorded in policy issue register which has following
format:

Format of policy register:

Then two types of stamps are also embossed on it.

 Revenue stamp

 Insurance stamp

34
 After embossing stamps policy is completed and one copy of this policy bond is
send to policy holder and one is send to PHS department for providing future
services to policy holder

The medical form contains the same particulars as the non-medical form, the only
difference in medical form is:
“MEDICAL EXAMINAR’S CONFIDENTIAL REPORT TO THE
CORPORATION”
Its particulars are:

How long have you known the insured?

National Identity Card Co.
Mark of Identification
Policy No. Proposal Sum Policy Fee Premiu Mode Agent Table
No. assured m Balance & term
Date
Specie the It will It is the Total It will be The It shoes It shoes the It shoes
date when remain the identifica amount added in amount whether commission the
the policy same tion of of the the paid by the of field term &
No. is throughout previous policy premium the payment worker period
allotted the record client is yearly,
maturity half
period yearly,
quarterly
or
monthly

Measurements
Height -------------Meter ------------- cm
Weight ------------ kg
Chest Full Inspiration & Expiration
Abdomen at umbilicus
35
 Pulse At rest
 Rate per minute
 Irregularities (No. & Type)
Blood Pressure
 Systolic
 Diastolic 5th phase (one cessation of sound)
There are three headings to answer this:

 Lying down
 Sitting Down
 Standing
And last head under D is:

 Instrument Used
Any Heart Murmur
Is there any sign of past or present disease of the following type?
1. Respiratory.
2. Digestive.
3. Genital-Urinary.
4. Cardio Vascular.
5. Glandular.
6. Nervous System.
7. Brain.
8. Bones & Joints.

1. How old does he/she look?

2. Is his/her appearance healthy?

36
 3. Any impairments of sight or hearing?
4. Any disease of gums or teeth?
5. Which teeth are missing?
6. Are dentures worn?
7. Any deformity, lameness or other physical defect?
8. Any hernia (Reducible or Irreducible).
Urine Analysis
Sp. Gravity ------------ Sugar --------------Albumen

Was urine passed in your clinic?

Female Section
Any sign of past or present disease of the breast?
Any sign of pregnancy?
Have past confinements resulted in complications?
Any sign of past or present disease of female reproductive organs etc.

Heart Section
To be completed in cases
1. Exercise Test. (Ten ascend on an ordinary chair)
a) Pulse.
b) Any Dyspnea of heart after exercise?
c) If there is a murmur, how did exercise affect if?
o No effect.
o Accentuated.
o Reduced or disappeared.
2. Other Particulars of murmur if any
a) Type, Systolic, Diastolic, Presystolic at, Apex, Base.

37
 b) Transmission, Axillia, Scapula, None.
c) Is it heard when breath is held?
o While Standing?
o While recumbent?
3. Other questions on heart
a) Any Hypertrophy?
b) Is heart Normal?
c) Apex located in ----------- interspaced ----------- cm.

To left of medisternal (midbody) line

Examiner’s remarks amplifying answer to any previous question or on any
other adverse feature.
 Examiner’s Signature & Seal with date, time, Address & Authorized
Limit Rs.

Non-Medical proposal form:

Around 4 lakh Sum Assured of age 40 is grouped in non-medical category.

Two sheets are attached with these forms

1. Policy brief sheet (for office use)

2. Underwriting sheet

In non-medical proposal form, proposed is required to give correct and truthful

answers of the question asked n the proposal form. It is also stated in the form that
any concealment of fact or untrue statement shall render the contract void able and
no benefit under the contract shall be paid.

38
It includes general information:

 Name
 N.I.C no.
 Father ‘s name
 Birth place
 Date of birth
 Sex
 Age proof
 Nationality
 Religion
 Address
 Occupation detail
 Monthly income
 Detail regarding other policies (if any)
 Plan
 Table
 Term
 Sum assured
 Details of riders (if any)
 Detail of usual medical attendant
 Nominee
It also includes Life proposal’s personal statement of health:

In this statement, medical examiner is required to ask all the question and record
the life proposed answers in own handwriting. These include the information

39
  Family history
 Height
 Weight
 Chest insp in cm
 Chest exp in cm
 Change of weight in past 12 months
 Average daily consumption of any kind of drugs
 Physical impairments (if any) etc

It also includes field agent confidential report.

40
 Management hierarchy of PHS department

Assistant General
Manager

Manager

ALTERATION O.R COUNTER

Deputy Manager Deputy Manager

Assistant Assistant
manager manager

Staff Staff

41
 Assistant General
Manager

Manager

SURRENDER DEPT. Loan DEPT.

Deputy Manager Deputy manager

Assistant
Assistant manager manager

Staff
Staff

42
 Assistant
General
Manager

Manager

Death claims sec. Maturity claim sec.

Deputy Deputy
Manager Manager

Assistant Assistant
Manager Manager

Executive
Staff
officer

43
Policy Holder Services department:

The main function of PHS department is to provide services to policy holder. The
Department is divided into following cells to provide better facilities to the
Policyholder.
The PHS contains the following sections,

1) Revival (Renewal) and Alteration Section.

2) Surrender & Policy loan Section.
3) Claim section.

a) Death claim.
b) AIB Claim.
c) Survival Benefit
d) Maturity claims
A. Revival & Alteration section:
The following functions are performed in this section:
 Change the amount of policy.
 Policy is stopped, premium is late and Policy Holder wants to renew his
policy.
 Alteration:
The following functions are performed in alteration section.
1. Transfer of policy
2. Change of nominee
3. Issuance of duplicate policy
4. Removal of occupation extra
44
 5. Removal of medical extra
6. Increase in sum assured
7. Increase in term of policy
8. Decrease in term
9. Change from without profit to with profit
10.Change of mode of payment
11.Paid up on request
12.Difference in age
13.Detachment of supplementary contract
14.Attachment of supplementary contract
15.Special revival or redating
16.Agency transfer
17.Assignment and reassignment
18.Change of plan

Late fee: if policy holder fails to submit the premium then 3 months grace
period is given to him. If the policyholder deposits the premium within the 90
days then its late fee will not be charged. After 90 days the PH will pay the
premium plus amount of late fee.

Single premium*10%*3/12

This formula is for grace period to give him waiver. From 10,000-15,000 late
fee is favorable for policy holder because then 50% waiver is given to them and
50% is chargeable. If late fee is 1000 then 50% waiver is given.

45
 If late fee is 2000 then 1000 will be waived and fee is above 4000 then 25%
will be deducted from that amount.
If policy is going to be mature within 3 months then no exemption will be
given.
In case of survival benefit ¼ of S.A will be given and its duration will be
divided by 3.

 Shifting of policy from one city to another city.

1. Transfer of policy :
i. For this purpose policyholder requests that he wants to transfer his policy
out of city.
ii. The policy would be shifted if policy has completed its two years
iii. Policy having no loan and if maturity is at least two years left.
iv. Policy can’t be shifted if any premium is short.
v. NOC (no objection certificate) is required.
vi. Then print out of the status of the policy in which all details are present
and copy is send to zone.

vii. Further loan and surrender department will check it for loan position.

Then advice is send to zone to change the policy. In last original file is
send to that zone for record keeping.
viii. In the last verification letter is send from central zone to other zone, and
one copy is send to management and one is to policy holder.
2. Change of nominee:

46
If nominee‘s death occurs then policy holder will send request to PHS department
for change of nominee. Then PHS department send “Re-nomination form” which
he has to fill and further documents are required.
1. NIC
2. NIC copy of nominee
3. Re-nominee from
After all documents received then in register they will change new
nominee.
Guardian ship: in case of minor if guardian is nominee then for changing
nominee same is the procedure.
3. Issuance of duplicate policy document:
When policy is prepared then one copy is also provided to PHS
department for duplication.
If policy holder need duplicate then he has to send request. If sum
assured is 50,000 then there is no need of newspaper aid.
If policy is above 50,000 then that aid is must.20-100 Rs. Affidavit is
required for mentioning that his policy is lost.
4. Removal of occupation extra:
This is depending upon policy holder’s business and age. If occupation is
hazardous then extra premium is charged. If afterwards he change his
occupation so he has to send request to PHS department and on his
request his extra premium is made at surrender value.
5. Removal of medical extra:
For removal of medical extra, in case of big amount all tests are required.
If any fault then M.E. is charged and if he becomes healthy ten he can
change his new premium. He has to pay only alteration f will charge.
6. Increase in sum assured:
47
If he has taken the policy of 100,000 S.A and he wants to increase his
S.A so he has to send request to department. PHS department will call
file from record room and check the status. If any premium is due so
policy holder has to pay it. If any medical is required then that is also
demanded and premium +late fee also charged.
7. Decrease in sum assured:
If policy holder wants to decrease his sum assured then the same will be
procedure but increase sum assured amount will not be refunded back to
him.
8. Increase in term:
First policy was 10 year term. Now policy holder wants to increase its
term for 20 year, for this purpose he has to give application. After
calculation his term will increased but due to small term more premium
was charged that more premium will not refunded back although now
premium is less.
If within 5 years he has done alteration in 2nd or 3rd year then first 3 year
premium will refund back to him but not of 1st year.
9. Decrease in term:
For decrease in term same is the procedure but extra remaining premium
will be taken from him.
10. Change from without profit to with profit:
If policy holder taken policy with profit and now he wants to convert it in
without profit then simple endorsement will be done. The only difference
will come in bonuses. (05) (555).
11. Change of mode of payment:
For changing mode of payment of policy different calculations will be
done on yearly, quarterly, or half yearly bases.
48
Yearly------ calculation will be done and add 100.
Half yearly------- .52 factors will be multiply*installments of premium
and 100 will be added.
Quarterly---------.27 factors will be calculated and 100 will added in it.
12. Change of A.N.F. option:
There are two options in policies which are issued.
• Automatic paid-up
• Automatic loan premium
If within one year he will not pay premium then after one month grace
period policy will lapse and this option is in both policies.
• Automatic paid-up:
If he has submit 3 or 4 premiums and now he has not submit up- coming
installment then benefit will be stop and it is lapsed. Now if he wants to
continue his policy then he has to submit late fee and other
requirments.25% deduction will be given to him in late fee.
• Automatic premium loan:
In this option if he has submitted 5-6 installments and then he has not
submitted any premium. Then automatically from his sum assured
premium will be paid till his sum assured will become less then his
installment. Afterward if he wants to continue then late fee will be
charged to him.25% exemption will not be given to him.
13. Difference in age:
If any difference in age then he has to give an application and on his
request new age calculation will be done and if his age is 40 years then
they can demand for medical or affidavit.
If age is more than 60 then extra premium will also charged.

49
14. Detachment of S.C:
Policy holder can detach supplementary contract any time but he has to
inform 1 month before from the due date of premium.
15. Attachment of S.C:
If policy holder wants to attach some supplementary contract with policy
then he will give application and it is send to under writing department
and they can demand any documents from him. Then under writing
department will decide that whether they will give him that contract or
not.
16. Special revival or re-dating:
After 1st installment which policies are lapsed so they can revive within 5
years? For this purpose application, original documents and NOC will be
required. Now new calculation will be done with new age and difference
on 1st installment will also calculate.

50
 “APPLICATION FOR REVIVAL OF POLICY (WITH MEDICAL
EXAMINATION)”

The particulars are as follow:

Firstly “Particulars of Insured” are as follows:

1. Policy No.
2. Name of insured in Full.
3. Father’s / Husband’s Name.
4. Mark of Identification.
5. N.I.C. No.
6. Present Occupation.
7. (a) Address for correspondence.
(b) Permanent residential address.

8. (a) Telephone Office: ---------------

Res: ---------------

(b) E-mail No. ---------------

(c) Fax No.

9. Average monthly income from all sources.

51
 “PERSONAL STATEMENT OF HEALTH”

(To be filled by the examining doctor by putting direct questions to the applicant)

The following questions are asked by the insured w.r.t. No., Age, State of Health,
Year of Death, Age at Death and Cause of Death.

10. Family History.

o Father.
o Mother.
o No. of Brother (s).
o No. of Sister (s).
o Wife / Husband.
o No. of Son (s).
o No. of Daughter (s).
11. State average daily consumption of:
12. State physical impairments, if any, such as defective eyesight, or hearing or
loss of limb etc.
13. When did illness or injury last keep you away from work?
State dates and describes illness or injury.

14. State dates and results of medical investigation undergone such as Blood,
Urine and other Laboratory tests, X-Rays, ECG’s and others. Also state who
did the investigations.

52
15. Do you now have or ever had Heart Disease, Diabetes, High Blood
Pressure, Stroke, T.B., Jaundice, Cancer, Nervous or Psychological Disorder
or other Liver, stomach and Renal Diseases? If so, specify with dates.
16. In your Family, is there a history of insanity suicide or any other disease,
listed in Question 15 above or does any of them have an infectious or
hereditary disease? If so specify.
17. Are you in good health? If not, describe the disease.
18. If Defense or Ex-Defense personnel, PIA Flight Crew or Plant Protection
Pilot, state latest medical category.
19. Have you ever been discharged on medical grounds from service /
employment? If so, give detail.
20. Are you presently engaged or intend to engage in any hazardous occupation
or pastime? If so, give detail.
21. Give details of each and every other policy or proposal including that
declined/pending/postponed/cancelled/not taken up/lapsed/paid-
up/surrender/accepted with extra premium/restrictions or modifications.
22. If female, state
i. Date of last delivery.
ii. Date of any miscarriages or caesareans (give reasons).
iii. Are you Pregnant?
iv. Any history of female disease?
v. LMP date.

Surrender Value Section

This deals the cases in which policyholder wants to finish policy before
maturity.

53
 Process of Surrendering the Policy:
1) First of all, the policyholder gives an application to surrender his policy.
2) Surrender section evaluates his policy.
3) If his policy fulfills the requirements then Calculations of actual amount and
bonuses are done.
4) Then policy file is sent to Audit department for checking.
5) Then Policy file is sent to B&A for further checking.
6) Then payment voucher is made by the PHS and again transferred to Audit and
B&A. Now in B&A cheque is prepared and given to customer.
Requirement to surrender the policy:
a) The policyholder should pay At least 2 premiums.
b) Policyholder should take the following documents

 Copy of NIC
 Payment receipt
 Original policy bond

B. Policy Loan Section:

It is a section of Policy Holder Services department. The purpose of this
section is to arrange the loans for the policyholders against their policy
bond.

Process of Getting Loan:

First of all loan form is issued to Policy Holder at Rs. 12.
54
2) The policyholder fills the form.
2) Loan section evaluates his policy.
3) If his policy fulfills the requirements then Calculations of loan is done against
his policy. The amount of loan is 80% of his paid premium. But if he has renewed
his policy then the loan will be 70% of his paid premium policy. In some special
cases, if policyholders requests then 90% loan is granted to PH against his paid
premium.
4) Then policy file is sent to Audit department for checking.
5) Then Policy file is sent to B&A for further checking.
6) Then payment voucher is made by the PHS and again transferred to Audit and
B&A. Now in B&A cheque is prepared and given to customer.

Requirement for Granting the Loan:

 There should be at least 3 premiums paid by the policyholder.
 In loan form, there must be signature of policyholder.
 The policyholder must have its own bank account.
 In JEVAN SATHI Plan there must be a joint account for both of
husband and wife.
 Attestation of at least sales officer is required.
 Attested copy of NIC is also required.
 The premium payment mode must be yearly.
 An interest rate of 13% would be charged against the loan.

Options of getting loan:

There are two options for policyholder to getting loan. These are Option A and
Option B.

55
OPTION A:
If two installments are missing, then loan is not granted to
policyholder.
OPTION B:
If two installments are missing, then these installments are deducted
from the loan amount and remaining amount is granted to the policyholder.

D.CLAIM SECTION:
Maturity claims:
Maturity claims are payable at maturity date, mentioned in
policy document OR it could be calculated by adding term of policy in D.O.C. of
the policy.
STEPS:
Month wise master list is present that which policies are maturing. There
is record room in which all policy record is present. Two month advance policies
are call. On the recite of original file from record room match with file from
master list. Check the status of the policy. Is the policy is lapsed, auto surrender or
is enforced?
If policy is lapsed we issue a Regret letter.
If policy is Auto surrender computerized calculation and manually checked.
If policy is enforced then they create a JOURNAL VOUCHER which is
computerized and approved by competent authority. One copy is send to B&A
department and one is filed. And further process will remain continue at individual
level.

Survival benefit:

56
 It is a special type of bonus which a policy holder can avail in his life. On
his deposited amount he will take some benefit. It will due after 1/3 period of
policy and will be paid three “3” times in policy’s life. It is payable at specified
date. It is payable under these policies:
 Anticipated endowment (05)
 Family pension plan (12)

Steps:

On the recite of written request of special benefit from policy holder entry has
done in register. Original policy file is call from record room. Obtain policy status
from computer. Then payments are pay on S.A.so 25% .for example in 18n year
policy after 6 year he will get 25% of S.A.

Special bonus is also given which is bonus over bonus. If he will take S.B. after 2
years it will be at 25% of S.B. Match the signature of policy holder.

Requirements of survival payment:

 Original policy documents

 Copy of N.I.C.

 Discharge voucher.

Then further process will continue which is for payment of voucher and then
file send to Audit department. Audit department will verify the payable
amount and then this file send to B&N department for preparation of the
check. And finally cheque is dispatch to bank of policy holder.

57
A.I.B. Claims:

In case of accident, policyholder gives application to the claim

section. AIB section issue AIB form to the policyholder. Policyholder also
intimate to S.R which timely indicates that he has got the claim intimation. If he
(policyholder) is not able to timely intimate then within 90 days he has to inform
the department that he got an accident. After 90 days it will call “late intimation”.
After receiving the intimation from policyholder department will check policy that
has he A.I.B. claim and was the policy enforce or not? Then investigate by the
department about the reasoning of accident.

This checking is to about the nature of the injury or disability that is this cover in
policy or not? Disability depends on nature of accident. In case of temporary
disability indemnity will be paid for 52 weeks and he has still not recovered, then
in that case ANNUITY will start.10%p.a. of A.I.B. sum assured will be paid and
premium will waived for the period of this annuity.

Accidental Death Benefit (ADB):

This supplementary cover will provide for payment of an additional amount equal
to sum insured in the event of death by an accident as defined in the contract. On
payment of a modest premium, a handsome accidental coverage is obtained
through this supplementary cover. ADB is highly recommended for individuals
who travel daily through road transport.

The cover is available to lives between 5 and 55 years of ages. Maximum term of
this supplementary benefit is not allowed to exceed the premium paying term of
the basic policy, or 60 years of age of the life proposed whichever is earlier.

Death claims:
58
Claim which arises with the death of the insured policyholder is called death
claims. As the death happened of policyholder intimation from his nominee is send
to the department. They will check the policy status and call file from record room
and endorse DEATH CLAIM STEMP on file. Then they allot a claim number and
issue claim form with CONDOLENCE LATTER. Then they calculate the death
claims liability which is prepared in computer. On recite of claim papers attach
with original file and send to the Z.C.C. (ZONAL CLAIM COMMITTEE) for
approval of claim.

In death claim the point to be noted is that if death occurred within 3 years from
D.O.C. or from D.O.R. the case is send to the investigation department for
verification whether deceased was in good health at the time of policy revival.

File is send to the audit department after auditing ‘Discharge voucher’ is issued.
Then precede for the death claim payments by paying ‘Payment voucher’. Then
file is send to the B&A department and finally check is send to the bank of
claimant.

59
 Management hierarchy of Budget & Accounts Department

Assistant General
Manager

Commission & pay roll Ledger

Manager Manager

Assistant manager
(cash counter)
Assistant
Manager
Deputy
Assistant
Manage
Manager
r Staff Executive
Officer

Staff Staff
60
Staff
BUDGET AND ACCUNTS DEPARTMENT:

This Department maintains the records of all the cash transactions. It prepares
payroll for the regular employees. It also takes care of the fringe benefits such as
medical facilities provided to the office staff.

Commission that is paid to the SR, SO, SM are also calculated and paid through
this department. Payment on behalf of the other zones and preparation of bank
reconciliation statements are also function of this department.

The Principal Office sends Annual Budget to the department and the department is
responsible for proper utilization of cash disbursements. The department also send
budget forecast for new budget proposal.

SECTIONS IN B & A:

The Budget and Account Department is divided into sections. Each section has
some responsibility. The sections of B&A Department are:

 Cash Counter

 Banking cell & General ledger

I. Collection

II. Disbursement
61
  Commission

 Pay roll

Cash counter:

For the collection of cash, B&A department has a cash counter. When a
policyholder comes to pay his premium, they check whether the policyholder is
able to pay his premium or not by checking his policy status. If the policyholder
comes within 90 days after the due date, then he is considered as able to pay his
policy otherwise he is not able. If the policyholder comes after 90 days, then they
send him to the PHS Department. PHS Department charges the late fee. There are
different modes of cash collection. These modes are:

 By Cash

 By Check

 By Money Order

 By Draft

 By Pay Order

Types of accounts:

There are different accounts for cash collection, renewal of policy, for daily
collection. There are different codes are used in computer program for these
adjustments.

675------- for cheque submission

571------- for suspense account

62
573------ for outside policy premium

383------ for loan

Banking cell:

• Collection:

Premium of policy holder is collected at cash counter and then

all cash is deposited in bank. All cheque of PHS is also submitted at cash
counter. Then these all premiums, cheque and cash are sending to bank.
Then bank will send advice to insurance company after 2 or 4 days. Same
cheques are dishonor due to any reason. In DCS (daily collection statement)
they make a note of dishonors cheques. Bank form vouchers. Then they
inform to policy holder. Bank returns it with cheque return memo. Then
B&A Department form three copies of this memo. One copy is send to OR
counter, one is send to cash counter and third one is kept in department for
record. The cheques which are credited in DCS debit in dishonors notes with
reason of dishonor .After 3 months late fee is charged to policy holder if he
does not submit cash in bank for his dishonors cheque.

The advice which is send by bank is given below:

63
 By bank advice send to Insurance co. Cr.
Credit advice.
To-------------A/C------------ Date---------
We have credited you’re a/c under cheque no.
-------------- of---------------
Under silo shad no--------
Realized in OBC/Lading.
Rupee--------------------------------
Office-------- office-----------

Consolidated cheques:

Any policy holder who have more than one policies so he will make one cheque
and mentioned all his policy numbers for whom he wants to submit premium and
submit it at cash counter.

Codes:

Codes which are used in Reconciliation statements are as follow:

571-------------suspense a/c

696-------------late fee

99999--------consolidated cheques

Reconciliation statement should reconcile with general ledger. Local cheques,

outstation cheques, dishonor cheques, cash bank debit charges these all entries

64
should balance with each other. The method which is used to check the balance of
ledger is as follow:

Cash-cheques-dishonor cheques+ opening balance =general ledger

Cash dishonor=amount

Amount collection of J.L+ collection in ledger=amount

Amount opening balance=ledger collection

Disbursement:

Cheques which are issued and those are cashed so there adjustment is called
disbursement. Checks remain valid for 6 months.

For cash disbursement, first the voucher is prepared, signed and prepared by
authorized officer, for the person to whom the payment is made. This voucher is
audited in case of having the amount in excess of Rs. 10000. These vouchers are
punched (feeding) in the computer. Voucher listings are prepared. Errors and
omission are checked reconciled. After these the cash book is maintained, cheques
are prepared, and these cheques are sent to concerned party. Bank Statement is
prepared daily by the authorized banker regarding total collection and payments of
cheques i.e. realization of cheques. These banks Statements are punched into the
computer. The data in floppy regarding Cash Book and Bank Statements is sent to
Principal Office (PO) Karachi. Different ledgers are prepared in P.O. and these are
sent to different zones for further reconciliation. Errors and omissions are
corrected.

• Date Wise Total Lists of Cheques Enchased.

• List of Cheques Issued (Cash Book).

65
• List of Unmatched Cheques of Bank & Cash Book Files.

• Along with the above mentioned lists, a “Daily Cheques

Realization Report” is prepared.

• Cheques which are not cashed they are kept in OUTSTANDING

account. These cheques are kept in reserve for 2.1/2 year. If
policy holder come back to take its cheque then check is written
off in disbursement account otherwise written off in the same
head.

Different account has different codes under which these

disbursement entries are recorded. These are as given below

754-----------081AB Sales Representatives

755-----------081AC Sales Officers

Sales Managers

Area Managers

560-----------080AC Pay Roll

Employee Expenses

Exception list:

If any error occurs in issued checks then they are kept in

exception list.

Reserve codes which are figured in credit portion

532ZA---------560A/C

66
 532AB---------754A/C

532AA---------755A/C

Bank charges :

There are different bank charges which are also maintained in

ledger. These are stop payment, check photocopied.

Budget :

Budget is prepared annually. Proposed Budget is sent to Principal Office

consolidated all budget of all zone. The funds of different heads of proposed
budget are transferred to Zonal Office wholly or partially. It is assumed that each
year First Year Premium (FYP) is increased by 25%. From principle office
approved and allocated budget is sent to the zones keeping in view their previous
expenses and there estimation of budget.

Following are the main types of budget:

 Basic Salary Budget

 Over Time Budget

 Prize budget

 Repairing Budget

 Traveling Expense Budget

 Pension Budget

 Income Budget

 Claim Budget

67
  Commission Budget

 Admin. Expenses Budget

 Entertainment Budget

 News Paper Budget

Administration & Claim Budget is estimated by considering previous year actual

expenses. Zonal & Regional Offices have separate budgets. If the funds
transferred from PO Karachi are less than the proposed budget, additional funds
are acquired from PO whenever required. The Budget Register is maintained in
the department for employee/ party/ expense is debited and cash is credited. No
additional expense is made when the budget is in short.

Commission section:

The commission of agents is calculated by the Commission Section.

First Premium Receipt (FPR) is prepared by the New Business
Department and is sent to Commission Section to calculate the
commission of agents. This receipt is feed into the computer. And a
computer program separates the commission of each member i.e. Sales
Manager, Sales Officer, sales Representative. Person comes with cash
that is going to purchasing policy and all his personal details to cover
insurable risk. They take four prints, which are:

1. Policy Sheet

2. SR Payment List

3. SO Payment List

4. SM Payment List

68
The columns of policy sheet are:

• Date

• Policy No.

• Table & Term

• Mode

• Premium

• Code of Area Manager

• Code of Sales Manager

• Code of Sales Officer

• Code of Sales Representative

The columns of SR Payment List, SO Payment List and SM Payment

List are all same and they are given below:

• SR/SO/SM Code

• Name

• Premium

• Commission Rate

• Total commission

• Tax (10% on commission)

• Net Commission

The commission rates vary with the amount of FYP and term of the
policy. The commission rates are given in the table below,

69
Agents category COMMISSION RATES

First Year Second Year Third Year &

onwards

SR 35% 10% 5%

SO 15% 2% 1%

SM 8% 1% ½%

Further the tax is deducted @ 10% of commission from the

commission of agents. In commission section different types of loans
are given on fulfillment of certain requirements and targets to agents
i.e. Emergency Advance, Eid Advance, Conveyance Loan, and House
Building Loan.

Commission rates for S.R.

20—above years------13.5 %( exclude 10% tax)

15—19 year ------26.78 %( ----- ------ )

10—14 years -------23.63%

2.5% extra commission is paid to S.R. if he completes his quota

quarterly

Commission rate for S.O.:

20—above term-----13.50%

70
15—19 ---------------11.48%

10—14---------------10.13%

Commission rate for S.M.:

20—above term -------7.20%

15—19-------------------6.12%

10—14------------------5.40%

2% extra commission will be paid to S.M. if he completes its quota

quarterly and annually.

Procedure of commission payments:

Sales representative ledger for the month is formed in which all

details are present that how much amount they have to pay or recover
from agents.

Sales representatives are registered with SECP for validity to act as

insurance agents. So they don’t do any misconduct. If any intimation
letter is sent to S.A. or S.M of recovery from them then voucher is
formed in which payment which has to recover from him, his name,
and his code number, cheque number, are mentioned.

Commission manager check this voucher and in charge of commission

approved it which is ready to pay. Then it is sent to the check section
and they issue cheque number of whichever amount it is.

If more then 10-15000 amount cheque then it is approved by zonal

accountant. For additional precautionary measures more then 10,000-
15,000 amount cheque a letter is sent to bank to prevent to issue non-
authorized person. If person come with cheque to cash it they check

71
the letter record which is sent by state life. Cheque is signed by two
authorized officers to keep counter check. When voucher is formed it
is also entered in computer. Oracle and ERD systems are used in
computer customized input screen which automatically demand for
input.

For the month work their MONTHLY FIELD WORK STATEMENT is

formed with detail of their work performance. Bonus is paid to agents
on yearly bases.

PRIZE AND AWARD:

The prize & awards are given to field force who are achieved the highest FYP at
any time announced by SLIC.

EID ADVANCE:

Previous year total earning of SR/SO/SM becomes entitlement.

EMERGENCY ADVANCE:

It is given to SO, SM on the basis of previous year earning on the renewal

premium. For SR previous 2 years earnings become entitlement of loan.

Payment and Pay Roll Section:

In B&A Department Salary of the employees is calculated. Different

allowances are offered to the employees. Loan facilities are available
for the employees. Tax is deducted from salary. A provision of
recoveries of the loan is made.

There are different modes of payment of salaries to employees.

 In cash
72
  In form of cheque

There are different cost centers and budget is allocated according

to their cost center.

Staff payments:

Salary to staff members is in form of advance for current month.1/3 r d

of salary is net payable to staff person.

If staff member wants to take 2 month advance salary then that is paid
in installments.

Leave Encashment:

There is also facility to staff members to take leave encashment. There

are 18 casual leaves are allowed to staff members. In which 36 are un-
earned. In this 24 days payment is paid to employee and remaining 12
days are treated as leave.

The calculation of leave encashment is done by following formula:

Total payable/30* 24days (according to days)

Followings are addition to the salary of the employees:

• Basic Pay.

• Special/ Technical Pay.

73
 • House Rent Allowance @ 40% and 75% of Basic Pay for staff
and officer respectively.

• Conveyance Allowance @ Rs.1250 and Rs. 500 p.m. for officer

& staff respectively.

• Car maintenance Allowance @ Rs 50, Rs, 165, Rs. 345 and Rs.
150 P.M. for AM/EO, Deputy Manger, Manger, and staff
respectively.

• Medical Allowance, 1150Rs.fix for all staff members.

• Tea Expenses @ Rs 535 p.m.

• Utility Allowance 800 Rs. of Basic Pay.

• News paper allowance 300.p.m.

• Education allowance is for maximum for four children’s and it is

475 Rs. p.m.

The deductions from salary are as follows:

• Provident Fund (PF) Contribution @ 1/12 t h of the Basic pay.

• Union Subscription @ Rs. 50 and Rs. 30 for officer & staff

respectively.

• Salary Advance Repayment (24 monthly installments).

• PF Loan Installment-2 (50 monthly installments).

• PF Loan Installment-1 (26 monthly installments).

• House Building Loan Installment.

• House Rent Installment (18 monthly installments)

74
 • 10% tax is also deducted if his basic salary is more then 3,000.

• Car loan is deducted for 12 months.

Loans:

Followings are the different types of loans, which can be availed by

employees of SLIC managed by salary section:

• Two Month Advance Salary.

• Loan-I against PF (3 Basic Pay).pf will be cut from staff loan.

More than 50 years if Pf will apply then it are non-refundable
and no interest rate will charge on pf loan.

• Loan-2 against Pf (12 Basic Pay or 90% of PF employee own

contribution, whichever is less).

• Car Loan @ Rs. 55000 and Rs. 150000 for staff & officer
respectively and 1/3 will be paid by employee and 3/4v paid by
state life. Car policy loan is paid in 60 installments for 5 years at
8% rate of interest.

• House Building Loan

 FOR STAFF

 FOR OFFICERS

1-8 grade payment is according to their salary.

45%gross salary*basic SALARY=AMOUNT OF LOAN

1-3 grade 150 at 8%interest rate.

4-8 grade 20 at 8% interest rate.

75
 8-omward grade from 30 basic salaries payment is made.

All loan payments are made from shareholders fund. Installment of

loan is according to services.min.2 years and maximum 16 year
services are required. In which employee will get payment of loan in 3
installments and when deduction of installment starts after one year
then 8% interest is charged for deferred years.

Service factor for installments:

Now installment depends on service years.

16 years---------- 180 installments

Loan amount*10.148per/month

2 years------------12 installments

Pay scale of officer’s category:

General Manager--------------------25595-1257-55763

Deputy General Manager----------22190-992-45998

Assistant Manager------------------18981-950-41781

Manager------------------------------17553-897-39081

Deputy Manager--------------------12467-850-32867

Assistant manager------------------10007-685-26447

Executive officer--------------------6939-496-18843

After preparation of salary payable (Addition & Deduction) the data is

punched (feeding) into the computer database. Different types of lists
are prepared such as total loan payment, recovery, allowances etc.
76
Management Hierarchy of Agency Department

Manager

Deputy
Manager

Assistant
Manager

Staff

77
AGENCY DEPARTMENT:

Service provided by the State life is intangible and therefore are not
acquired at the counter by the people, who need it, so it must be sold
them through persuasive method. Field force of state life plays an
effective role in selling of intangible products (Insurance Plans). In
order to maintain the record of the field force agency department was
established. The main function of this department includes
recruitment, promotion, and termination of the field force, allied and
medical facility for field force. This department is also responsible
for issuance and renewal of licenses to the field force.

Recruitment of field force:

There are two types of recruitment in field force category.

 Regular Sales representatives

 Stipend scheme

Appointment of Regular SR:

The Sales Representative (SR) is appointed by Agency department but

also appointed by SO/SM. The requirement and conditions for the
appointment of SR is as follows:

Minimum qualification is required metric and they shall be required to

complete Foundation course of 3 months duration.

Age at entry must not be less than 18 years.

There is no stipend is given to them. They received only commission

paid by SLIC.

78
Annual Quota for SR in every calendar year at least the minimum first
year premium income and second year persistency ratio should be
65%.

Application for the issuance of license is necessary and it is renewed

after 24 months from the date of expiry.

SR is not authorized to collect premium or any other money on behalf

of Corporation.

An application Form, along with license fee Rs.50, attested

photocopies of documents and Nomination Form is submitted to the
agency department. A code number is allotted at the submission of
application to SR and he can start working as agent of the SLIC of
Pakistan.

Appointment of SR under Stipend Scheme:

These sales representatives are appointed by that S.O who has

completed their quota of second year persistency ratio.

Minimum qualification is required Graduate ion and they shall be

required to complete Foundation course of 3 months duration.

Maximum age entry is 30 years.

SLIC pay them spend of rupee 6000/= every month although they work
or not.

If they complete their quota then other facilities will provided to them
and also commission along with their stipend.

There limit is for 2 years and in this duration maximum limit is rs.60,
000.

79
After every 3 months there performance is re-viewed .if he does not
complete his quota then 3 months grace period is given to them and
66% stipend is given to them.

If at the end of the year commission they (SR, SO, SM) earned then
any loss will be deducted from their commission.25% from their
commission and 25% will bear by SLIC.

If he wants to become a regular SR then within 15 days he can become

a regular SR.

PROMOTION

SR is promoted, upon fulfillment of certain terms and conditions and

on achievement of business targets, to SO. Similarly SO is promoted
to SM and SM to AM.

Criteria of promotion from SR TO SO

Two year working as SR:

Must have secured minimum Rs. 50,000 FYP during immediate

preceding two years, but in any one calendar year, the FYP should not
less than Rs. 25000.

There limit is for 1 year after they have to renew their license.

Must have at least 12 policies enforce on different lives.

Must have achieved a minimum Second Year Persistency of 70% in the

immediate preceding year

He must achieve minimum Renewal Persistency of 90% in the

immediate proceeding year.

80
 years Second year persistency ratio
requirement

1 s t year 65%

2 n d year 70%

3 r d year 75%

Renewal persistency:

He must complete his quota of 65% for renewal persistency.

For example:

FYP in 2006=487045

2 n d year persistency=77.25%

Renewal persistency=97.60%

65% of quota=325000

Renewal +SYP of 2006:925157+360247=1285404

6% of 1285404=55509

After inclusion=487045+55509=542554(quota
completed)

SR’s Commission:

81
 Basic commission rate :( with effect from 01.01.2002)

Basic commission as % of premium

Types of policies Premium paying First policy Second Third

period of policy year policy policy year
year

Policies other
than those a) 1 year 2.00% Nil Nil
specified in b) 2 year 4.00% 2.00% Nil
And, below c) 3 year 6.00% 5.00% 5.00%

d) 4 year 8.00% 5.00% 5.00%

e) 5 year 10.00% 5.00% 5.00%

f) 6 year 12.005 5.00% 5.00%

g) 7year 14.00% 5.00% 5.00%

h) 8 year 16.00% 5.00% 5.00%

i) 9 year 18.00% 5.00% 5.00%

a) At least 10 26.25% 10.00% 5.00%

year but less
than 15 years

b) At least 15

82
 years but less 29.75% 10.00% 5.00%
then 20 years

c) 20 years and
more
35.00% 10.00% 5.00%

Term insurance All premium paying 10.00% 10.00% 5.00%

policies periods

Annuities where a) 1 year 2.00% Nil Nil

immediate or b) 2 year or more 7.50% 2.00% 2.00%
differed

Criteria of promotion from SO TO SM

He should be working for minimum 2 years as SO.

Mush have secured minimum Rs.20,0000 FYP in the immediate

proceeding two calendar years, but the FYP in any one calendar year
must not be less than Rs. 60000;

Must have at least 80 policies in force in his/her organization;

Must have minimum Second Year Persistency of 70% in the immediate

proceeding year;

Must have minimum renewal persistency of 90% in the immediate

preceding year;

83
He must have minimum 4 productive SR.

Criteria of promotion from SM TO AM

Must have working at least for 3 years as SM;

Must have secured the following total FYP for category A&B:

A= Rs. 40, 00,000, B= Rs. 36, 00,000

And last year FYP must not be less than:

A= Rs. 20, 00,000, B= Rs. 15, 00,000

Number of policies in the last year must not be less than:

A= 200, B= 150

Must have minimum Second Year Persistency of 70% in the immediate

preceding year and minimum Second Year Persistency of 65% of the
previous year of the immediate preceding year;

Must have 20 productive SR in his control and each SR must have last
year FYP of Rs. 25000 each (As for A&B Category);

Minimum 2 SO should be qualified to SM;

Annual quota must have:

A= Rs. 30, 00,000, B= Rs. 18, 00,000

Where the persistency rate is less than 65% or greater than 75% then
unadjusted % cost is adjusted as follow:

I. Persistency less than 65%/adjusted % cost=unadjusted

cost*65% /actual persistency
84
II. Persistency greater than 75%/adjusted cost=unadjusted
cost*75%/actual persistency

TERMINATION & DEMOTION

Any agent of SLIC, who

behave negatively, violates the rules & regulation or indulge fraud or
mal-practice, can be terminated by the Zonal Head. Any agent who
fails to meet the annual quota of FYP is demoted to immediate lower
rank of the field force.

LICENSE

The license to work as agent for SLIC is issued by the

Controller of Insurance Karachi. At specific interval of time, a list of
the field force is transferred to controller of Insurance Karachi for
new and renewal of license. The list of license fee is given below:

= Rs. 50

SR (New License for 1st Year)

SR ( Renewal of License) = Rs. 150

SR (Renewal with late fee) = Rs. 250

SO/SM (Renewal of License) = Rs. 250

S/O SM ( Renewal with late fee) = Rs. 400

Facilities provided to SR, SO, SM, AM:

The Agency department is also involved in the following matters of Field Persons,

85
 Medical of field Persons.
 Rent
 Contest arrangement (Giving the prizes to those who make good business)
 Car rent is provided to AM and it is revised time to time, and this rent is
provided on following condition:
a) If car is hired by him for his use
b) If he use the car owned by him or his wife
c) If he uses the car which he has agreed to purchase from SLIC on
conditions that the agreed price will be paid by him in installments
and that under the agreement of purchase the title of car will be
transferred to him after the payment of all due installments.
d) If he purchase a car through bank loan, which is registered in his
name or his wife name and that of bank jointly.
 Furniture is also provided to SM or AM, on their demand while
keeping in a view heir FYP quota.
 There is list of slabs in which all details as stationary are present by
which we know how much quantity of stationary will be provided to
SM or SR.

86
Types of policy Premium paying Basic commission as percentage of
period of policy premium
First policy Second Third policy
 Conventions are arranged for field force. policy
year year
year

I. Policies a) 1 year 1.00% Nil Nil

other then
b) 2 year 2.00% 2.00% 1.00%
those
specified c) 3 year 3.00% 2.00% 1.00%

in d) 4 year 4.00% 2.00% 1.00%

II. And e) 5 year 5.00% 2.005 1.00%

III. below f) 6 year 6.00% 2.00% 1.00%

g) 7 year 7.00% 2.00% 1.00%

h) 8 year 8.00% 2.00% 1.00%

i) 9 year 9.00% 2.00% 1.00%

j) At least 10 11.25% 2.00% 1.00%

years but less
than 15 years
12.75% 2.00% 1.00%
k) At least 15
years but less
than 20 years 15.00% 2.00% 1.00%

l) 20 years and
more
All premium paying 5.00% 2.00% 1.00%
periods
1.00% Nil Nil
87
a) 1 year
3.75% 0.40% 0.40%
b) 2 year or
Bonuses provided to SR:

A. Productive bonus: If in a year the FYP received through a SR is at least

20% of his annual FYP quota, he will be paid a Productive Bonus of 2.1/2%
of FYP of that quarter. No productive bonus in rest of any quarter shall be
payable if the FYP received through the SR is less than 20% of his annual
FYP quota.

B. Additional productivity bonus:

If in any calendar year the SR complete the annual FYP quota and also
meets the second year persistency ratio requirements, he will be paid an

ADDITIONAL PRODUCTIVITY BONUS of 2⅟2 % of FYP of that quarter.

 One time cash compensation: if any SR is promoted to SO then

6000 is paid to SO and 8000 to SM under which SR was working.
This is one time in a year. From this 10% tax is also deducted.
Bonuses provided to SO:

1. Over riding commission to SO & SM:

This over ridding commission is for the second policy year and the third and later
policy years are applicable only to the premiums received in the calendar year in
respect of policies sold up to 31st December of last year.

2. Productivity bonus:

The same are the conditions for SO the only difference is percentage which
is paid on FYP quota.
88
3. Personal business:

SO shall be allowed to do personal business to the extent of 50% of his total

FYP production in the first year of his promotion as SO.

SM is not allowed to do his personal business not exceeding 25% of his

FYP production through his entire unit.

SM can also do business through direct bona fide SR’s not exceeding 50%
of the total premium through his entire unit.

Management Hierarchy of P&GS Department

Assistant General
Manager

89
Manager
Confidential cell medical stationary

Deputy Deputy Deputy

Manager Manager Manager

Assistant Assistant
Manager Assistant Manager
Manager

Staff
Staff
Staff

Personal & general services department:

It is key roll department for all other departments. The office & general matters are
dealt in P&GS Department. This department has the sole responsibility and
authority of the disciplinary action of the employees. Selection, recruitment,
termination of the employees is the main functions of the P&GS Department. This
department also deals in medical facility to the office employees, leaves and
similar other general services. The stationary used in different department is
maintained in this department. The daily correspondence is dispatched in this
department.

Sections in P&GS:

90
Followings are the main sections of this department:

 Personal section

I. Confidential

II. Retirement

 General services section

 Medical section

Personal section:

All the employee matters such as appointment,

promotion, demotion, transfer and allowances are dealt by personnel
section. All the employee matters such as appointment, promotion,
demotion, transfer and allowances are dealt by personnel section.
Annual Confidential Reports – ACR the employees are prepared, under
the supervision of this section, by the departmental heads

a) Confidential:

The main function of this section is related to

promotion of employees, preparation of their personal files regarding
their promotion and allowances which are given to them. Annual
Confidential Reports – ACR of employees are prepared, under the
supervision of this section, by the departmental heads.

b) Appointment:

For the appointment of the staff, an

advertisement is initiated in the Newspaper. Zonal Head is competent
authority for this appointment. This appointment also depends on the
business of the Zonal Office. The appointment of officers is done by
91
Principal office (PO) Karachi or Regional Office. Selection
Committee constituted by Zonal Head conducts test and interview.
After interviews principle offices appoint the employee.

c) Confidential report:

In this report annual performance of

all employees is present. In this report quality of work of employee,
his knowledge about his job, intelligence, his general attitude
attendance his cooperation with his colleagues and his health all
details are resent.

This report is justified by Deputy Manager.

Personal files:

In confidential section there are also personal files of every employee

are presenting which following details are present:

• Transfer orders

• Fixation sheet

• Basic training course (if any course has been done by him then
he also submit or attach his certificate.

• Annual increment letter

• Persistency

• Office order

• Circular letter

• Personal hiring

• Overdue installments
92
 • Letter of awareness

• Promotion letter

• Application form

• Recruitment of SR

• Business review report

• Completion of personal record certificate

• Charge report

d) Promotion:

For promotion of the employees, there ACR’s are

necessary and minimum three years are required to remain in one
cadre. Each year the employees are promoted by the criteria and
instructions set by PO Karachi. PO or Regional Office does
promotion of officers. Their personal files and on ACR bases PO
decides to whom they wants to promote.

Allowances:

There are different types of allowances which are providing to staff or

officers.

1. Education allowances

2. Conveyance allowances

3. Medical allowances

Education allowances:

93
Education allowances are provided to staff members. This is for 4
children and 475/=RS per month are given to employee every month
for one child. There are 3 types of Performa are for every child.

Conveyance allowances:

At this facility is also provided to staff employee that he can purchase

scooter or motor bike.150/=Rs are given to employee per month for
the maintenance and for other expenses of motor bike.

Medical allowances:

These are also provided to staff and officers both. But these are also
categorized into two:

• For married

• For un-married

Medical allowances for married employees are high as compare to un-

married.

e) Leave section:

There are nine types of leaves which are provided to employees:

1. Extra ordinary leaves

2. Leave of full pay

3. Leave on half-pay

4. Leave on medical base

5. Leave in casement

6. Leave not due

7. Maternity leave
94
8. Casual Leave

9. Ex-Pakistan leave

• EXTRA ORDINARY LEAVE:

This is a type of leave in which employee has avail all his

leaves which are allowed to him. Now if he wants to take
more leave then by giving application he can take leaves
but he will not be paid for that leaves.

• Leave of full pay:

In normal circumstances employee can take leave of 36

days. If he will not take that leaves in that year then the
leaves of same year will accumulated in the next year then
he can enchased them.

• Leave on half pay:

If employee wants to take the leave for one month and he

wants that his pay will also not deducted then he can take
leave on half pay. In this procedure he will be given the
half month salary.

• Leave on medical bases:

In case if employee wants to take medical leave he is

allowed 48 days in a year. If he wants to take leave then he
has to give an application to the deputy manager of his
department and on his confirmation he on leave.

• Leave Encashment:

95
 This is type of leave in which employee can in cashed his
leaves. He can get encashment of 24 days but for this
purpose there should be 216 vacations in your reserve then
he can in cash his leaves.

Suppose that there are 210 days then minus from 180 days,
and in 36 days 18 are paid. So it is necessary to come 16
days in a month, then 3 days will be credit will be provide
to him.

• Leave not due:

In this case if employee wants to take leave in case of

emergency and he has also availed his 36 leaves of a year
then he can take leave of more 36 days on behalf of New
Year. Then for the next year his vacations are deducted in
the same year.

• Maternity leave:

This facility is provided to female staff that in case of

pregnancy they can take maternity leave.

• Casual leaves:

Casual leaves are usually taken by employees in case

urgent work. Only 18 casual leaves are allowed to every
employee. If he avail it in a year then good if not then these
will not accumulate in next year and he cannot encased
these leaves.

• Ex-Pakistan leaves:

96
 These are leaves which are availed by employees in case if
they are going out of country for some training or for some
other purpose. If he will go outside the country then on his
seat any other person will take the charge, but when he will
come back so he can continue his work on his seat. Nothing
will be paid to him for these vacations.

f) Retirement:

There are 3 types of retirements:

• Retirement

• Pre-mature retirement

• Medical retirement

I. Retirement:

An employee is retired at the age of 60.If any employee’s job

tenure is going towards completion then a letter is issued by P & GS department.
At staff level this letter is issued before 16 months ago. While at officers level
letter is issued before 4 months, and then at the time of retirement PO issue their
retirement letters.

If any remaining settlement is still there then that is also settle by PO Pay roll
register is present in which detail of salaries is present. If any increment then that
is allowed on 3 things

• Basic pay

• House rent

97
 • House maintenance

Move-over letter is also issued by PO if any employee has to move over and
send back to the PO with increment.

II. Pre-mature retirement:

In pre-mature retirement at took place after the 25 years of services.

III. Medical retirement:

If any employee become disable due to any reason

then medical board decided that either he will be able to continue his job or
not. If he will discontinue then LPC (last pay) is given to him and it is issued
by pay roll section.

g) Pension:

After the retirement, an employee gets pension. There are three types of
retirement;

Superannuation retirement:

Pre-Mature Retirement:

Medical Retirement:

Superannuation retirement:

This occurs at the age of 60.Payroll section issues L.P.C(Last Paid Certificate).An
employee who renders more than 30 years of service qualifying for pension and
shall be allowed benefit to the extent of 2% of his gross pension for each extra year
beyond 30 years of such service subject to maximum of 10% of his gross pension.
The basic pay, special pays, technical pay, personal pay, indexed pay, increment
98
accrued during LPR will be considered as pay for calculation of pension. After 15
years, pension will be doubled. Commute 50% of pension and pay at the time of
retirement. After the retirement of employee, widow will get 50% of that pension.
After the death of widow, son and daughter under the age 21 will get that pension.
At the end of service of 30years, calculation formula of pension is;

=210/300 basic*210/300

Pre-Mature Retirement:

When an employee completes his minimum 25 years service if , he opt to retire,

called pre-mature retirement. In this type, formula of calculation of pension is;

=25*7*age factor

Medical Retirement:

If any employee suffers from any disease and cannot continue his service then,
Principal Office of State Life situated in Karachi decides the retirement of that
employee on the ground of medical.

Medical section:

All the hospitalization expenses are beard by SLIC provided that

these are incurred in approved hospital. There are different hospitals on
penal of state life, in which there employee can take treatment. At staff level
there is no slip is issued to them. They are given increments with their
salaries. But at officer level if they want to take treatment then P&GS issue
them slip which they submit in hospital and can take treatment. All billing
vouchers of doctors and employees are made and their entry is done in
register. The expenses of medicine are reimbursed. The reimbursement of

99
 medicine is not allowed to staff (Having grade 1 to 8) but they are given Rs.
600 p.a. in shape of salary as medical allowance.

Hospitals on panel:

There are different hospitals and labs and medical stores which are on the
panel of state life for providing the facility of medication to his employees.

These are following:

• Shahina Jamil hospital Abbaottabad

Labs on panel:

Abbaottabad Lab

In the case of emergency if employee goes to some other hospital other then the
hospital which are on panel then employee will provide the bill of treatment and
they are paid to them on approved rates. But this is allowed only for 1 time in a job
otherwise it will not be paid by state life.

Petty cash:

Petty cash is paid if the limit of bill is 500 Rs. but if it exceeds from 500
then voucher is formed by P&GS and then it is approved by head of
department. Then that voucher is submitted in B&A department which will
form check and that is cashed by employee from his bank.

Medical facilities to staff:

These facilities are provided to both staff and officers.

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 There are two categorize in staff level:

1. Married

2. Un -married

Staff:

• Married:

For married employees annually 5000 rupee is available to them. This is

only for consultation.

Outdoor treatment is given with their salaries.

This allowance is for married people are --------- 1100 monthly.

There is agreement between CBA and SLIC about these all the facilities
provided to employees. So the increment in the rate of these facilities is
depending upon the negotiation between CBA and SLIC.

All the test and hospitalization of employees and the dependants are paid by state
life. After discharge from hospital 3 day medicine will be free which is also given
by state life. If in case re hospitalization is necessary then re hospitalization letter
is issued by P&GS and submit this letter to referred hospital.

• Un-married:

Un-married employees are 3000 Rs. Annually provide to staff members.

This fee is provided to the employees for consultation.

Outdoor treatment is given with their salaries.

This allowance is for married people are --------- 800 monthly.

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 Its increase depends upon the negotiation between CBA & management.

If they required any tests from labs then Reference Slip is issued to staff,
and after billing it is send to state life. if any test is not available in approved
labs then he has to take special permission from state life’s doctors and
zonal head.

Officers:

They will not get anything with their salaries but if they need any
medication then that facility is provided to them and their dependants. Only
for parents medicine and test is not free, but hospitalization and checkup is
free for all of their dependants.300 Rs. given to every officer for
consultation. If parents have any source of income then there is no payment
or free hospitalization.

Re-hospitalization if required then letter is issued to them and they submit it

in referred hospital.

To every officer “officer medical book” is issued to them in which detail of

their dependents, diseases any medicines if prescribed by doctors, and
hospital name all are mentioned.

Before issuing medical book slip to officers he has t fill a ‘Performa’ in

which all details of his family dependants with their names are given.

Then they are issued a medical book.

If they required any tests from labs then Reference Slip is issued to them,
and after billing it is send to state life. If any test is not available in approved

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 labs then he has to take special permission from state life’s doctors and
zonal head.

Retired officers:

State life also provides facility to his retired officers for medication. This is
according to their last basic pay.

For example:

If employees last basic pay…………………..25,000

Now he is retired then ……………………….25,000/365=68.49

68.49*13 days of current month

Remaining days=168*68.49=11506

Now for the current year his remaining amount is 11506 Rs.

Now he can take once hospitalization and medication.

For the next year at is again for 25,000 rupee.

This facility is only for him and his for his wife only. In the case of his death
then no medical facility is provided to his wife.

Scale vise room facility:

4---11------------------------- private room.

11---manager---------------semi-private rooms

AGM & GM -----------------VIP room

Slip for retired officers:

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 Last basic pay/days of year=amount(per day)

Amount*remaining days of year ------------

-------=Rs

Limit of current year.

From next year his full basic pay is start for calculation of limit of current
month. Retired officers by himself can pay money for his medical then he
fill “medical expenses reimbursement form” and this form is approved by
doctors of state life and payment is given to person.

Procedure:

Different rates are charged by different doctors or hospitals and their bill
receipt is received after one month. After all the billing received from
doctors and employees then billing voucher are made and there entry has
been made in register. They are provided 10% discount on their rates. After
making entry in register bills are posted in ledgers of doctors and employees
separately for keeping their record maintain.

Discount:

There is also discount is provided to officers and staff which is about 50-
60%.
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 They are also provided 10% discount on their labs test. There are 100 labs
on the panel of state life. This 10% discount is not on medication but it is for
treatment.

On medical stores concession is also provided to employees at the rate of

5%.

Tax implication:

Taxes are also deducted by Government on these medical facility provided

to employees.

There are tax registers are prepared of all employees. On

Medical consultation------6%

Medical stores--------------3.5%

After deduction of tax NTN number is issued. If NTN number is not present
then 2% extra tax will be charged on the bills.

In case if employee has taken treatment from trust hospitals then no tax will
be charged on them because they give EXAMPTION CERTIFICATE to
Govt. after every year.

Special medical relief:

For employees’ scale 1—7 their parents’ sugar chart are also provided to
them. Special medical relief is also provided to the employees in their job
duration for 6 times only. This special relief is provided only in case of
treatment for special chronic diseases for which treatment is not possible
within the country.

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General services section:

This section provide different facilities t o its members which include,

furniture, repair, maintenance, purchase of assets, payment of electricity and
telephone bills, payment of residential bills, loan and advances provided to
employees etc.

Services provided:

This section provides different services to their employees regarding

services for providing facilities to them. Facilities which are provided to
field workers are also their duty.

Services provided to AM, SM, SO are based on their business targets. They
are not allowed to get cash in form of facility, but they can attain it when
their business targets are completed. Rent payment, carpet, furniture billing
all these types of facilities are provided to them. Agency department makes
the figures and then things are provided by P&GS and recovery is also done
by GS. In short buying, selling and providing all facilities to employees is
basic function the general service section.

As we say all services from joining of job to the retirement or even after
retirement are provided by GS.

• Appointment of staff………………………………….at zonal level

• Appointment of officers……………………………...at regional level.

• Job allocation of officers………………………………by departmental

head.

106
 Professional studies and training are encouraged and all these expenses are
bear by State life.

Purchasing of new assets:

For purchasing new assets is also done by P&GS. For this purpose
there is a organization called PPRA trough this committee tender
notice are loaded on here website for vendors. Then about 1 month is
given to vendors for their quotations. Then after one month vendor’s
list with their lowest rates are send to ZPC (for furniture) and to RPC
(regional procurement committee) for A/C, for computers, carpets and
other things.

After that ZPC send its recommendations to principle office and

finally purchase order is send to the vendors with list of field workers
who have qualified these facilities. So vendor will provide them with
their facilities.

They are also allotted with inventory numbers which are also recorded
in register which is called ASSET SCHEDULE and from that they
form required budget for the next year.

Depreciation rates:

Land lease and hold at depreciation rate

Electric installation--------- 10%

Office equipment----------10%

Furniture and fixture-------10%

Vehicle------------------------20%

Computers-------------------30%
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 Computer accessories---------30%

These depreciation rates are charged by auditors according to rules of

govt. these depreciation rates are get from assets schedules.

Schedule of lease hold:

In which

• Date of purchase

• Voucher number

• Item description

• Item location

• Purchase price

• Current depreciation

• Accumulated depreciation

• Written down value

• Assets codes

These all the details are present in it and theses are audited by auditors
and they send report to principle office.

Facilities provided to field workers:

Different facilities are providing to field workers. For this purpose first of all
application form is filled by field worker on the completion of his quota.
List from agency department in which all details of his business and his
entitlement are mentioned.

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Capital budget from PO. Is approved and then after approved budget
according to need of list field workers are provided facilities.

I. Rent: Rent is provided to field workers when they approved their rent
from agency department. Then at the rate of 4.34% general service
provides them rent. Rent agreement is between state life and land
lord.

They are categorized in three:

I. Category a

II. Category b

III. Category c

Category a: in this category entitlement limit is 15, 00 to 3,000 and

entitlement quota is from 56,000 to 25,000.

Category b: in this category entitlement limit is 1000 to 1500 and his

entitlement quota is from 37,000 to 50,000.

Category c: in this category entitlement is 1000 and entitlement quota is

from 31,000 to 25,000.

These categories are shown by their business. Then at the rate of 4.34%
general service provides them rent. Rent agreement is between state life and
land lord. After 3 years 25% rent increases which is provided to field
worker.

Procedure: For rent lead, ID card, rent Performa and site map is required.

109
 For rent approval the note is send to ZRC (zonal rent committee) for the
approval. Then they visit the site and if that site is suitable for the office then
he has given rent according to entitlement. If any person at the end of the
year became disqualified or he become fail to complete his quota then given
facilities taken back from him.

There are some persistency requirements which field workers have to fill.

AM-------------20,000 FYP

PERSISTENCY =75%

AM are divided into 3 categories. A, B AND C. and A is at highest

level who is provided with all the facilities. AM rent can increase or
decrease depending upon their business.

Category A=1000 RENT--------ZPC

Category B=3000 rent-----------ZPC

Above 3000=-----------------------PO

Salaries and allowances to AM:

A B C
Basic pay 12,467 12,467 12,467
House rent 40% 40% 40%
Conveyance CAR RENT 1,250 1,250
allowance
Utilities 10% 10% 10%

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 Group insurance:

FYP UPTO 20, lacks----------------------75,000

FYP up to 20 lacks and 40 lacks----------100,000

FYP up to 40 lacks and 50 lacks----------125,000

FYP up to 50 laces and 75 laces----------150,000

FYP up to 75 laces and 100 lacks---------175,000

FYP over the 100,000 lacks-------------200,000

Persistency bonus:

It is also given AM o achieving 70% persistency.

Bonus rate persistency Bonus rate

70% .20% 86% .36%
71% .21% 87% .37%
72% .22% 88% .38%
73% .23% 89% .39%
74% .24% 90% .40%
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75% .25% 91% .41%
76% .26% 92% .42%
77% .27% 93% .43%
78% .28% 94% .44%
79% .29% 95% .455
80% .30% 96% .46%
81% .31% 97% .47%
82% .32% 98% .48%
83% .33% 99% .495
84% .34% 100% .50%
85% .35% 100% .50%

Incentive bonus:

This bonus is also given too field workers. Basic rate is 1.5% of FYP.
Further .75% of FYP will be paid for any quarter in which at least 20% FYP
quota for the year is completed and it is payable quarterly.

If FYP is less than 20% of annual quota then this 0.75% is lost forever.

Loan & advances:

GS department also provide loans and advances to its employees.

At staff level they can take two month salary in advance.

2 gross salaries in case of emergency.

Recovery of advance in 20 installments and no interest will be applied.

At officer level thy can also take 2 month salary in advance.

They are also provided 2 gross salaries in case of emergency.

No deduction of Eid.

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After recovery of loan “recovery sheet” is come to P&GS department.
Budget is allocated from principle office so monthly recovery is added in
their budget register.

For taking two month salary in advance person should give an application
which is sanction by zonal in charge, zonal accountant and member officer
association. These all sanction that application and personnel section
prepared payment voucher and also done entries in manual register.
Schedules which are prepared have also record of employees to whom loan
is given.

After 6 installments officer can apply for new loan. But for new loan new
application has to fill.

House rent advance:

This facility is only for staff.

Six basic salaries

8% interest is charged.

Interest will be calculated at 8% markup.18 installments with breakup of

Eid.

Total monthly installments=amount/1000*59.673/monthly installment

per/00

Extra duty allowance:

For extra duty allowances are also provided in which 200 Rs. For cycle
stand charges are given.

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Management Hierarchy of internal Audit Depart

Assistant General
Manager

Deputy
Manager

Assistant
Manager

Staff

114
Audit Department:

This department plays a supervisory role of all the other departments by checking
and verification of all the working done by the departments according to the rules
and regulations provided by PO Karachi time to time. These rules and regulation
are provided to all the Zones throughout Pakistan in shape of circular. These
circulars are attached in the book, which is called “Key to PO Circular Volume”.
All working of the departments are verified according to this book. In this way,
the frauds, errors, and omissions are detected.

What is internal audit?

Management of any organization is responsible for ensuring that proper accounting

record is kept its assets are safeguarded. So to best discharge this responsibility
internal audit system is instituted to ensure that employees are working properly.
Due to this system organization can rely on its system for the production of the
reliable management information and financial accounts and to prevent errors,
fraud and loss of organization’s assets. Actually internal audit is a part of internal
control.

Definition:

Internal audit may be defined as whole system of control, financial and otherwise,
established by the management in order to carry on the business of the

115
organization in an orderly manner, safeguard its assets and secure, as far as
possible, the accuracy and reliability of its records.

Objects and scope of audit:

Internal audit is an independent appraisal function established within an

organization to examine and evaluate its activities as service to the organization.
The object of internal auditing furnishes them with analysis; appraisal,
recommendations, counsel and information’s concerning the activities are viewed.

Role of auditors:

Internal auditors should:

II. Review the system established to ensure compliance with those

policies, plans, procedures, laws and regulations which could have a
significant impact on operations and reports and should determine
whether the organization is in compliance.

III. Review the means of safeguarding assets and as appropriate, verify

the existence of such assets.

IV. Appraise the economy and efficiency with resources is employed.

Internal auditor should be independent of the activities they audit. Internal auditors
are independent when they can carry out work freely and objectively.

Objects of internal accounting control:

The system of internal accounting control is intended not only to maintain an

adequate method of processing accounting data but also to safeguard the
organization against possible financial loss due to fraud or error. The controls are
designed to ensure that;
116
 1. The organization receives and enters in its accounting record, all the income
or revenue to which it is entitled.

2. All expenditure is properly authorized.

3. All assets are properly recorded and safeguarded.

4. All liabilities are properly recorded and a provision is made for known or
expected losses.

5. The accounting records provide a reliable basis for the preparation of

accounts.

Principles of internal accounting controls:

Internal accounting can be controlled by two ways;

• Basic control: controls necessary for the completeness and

accuracy of the accounting records.

• Disciplines over basic control: those controls necessary for

the completeness and accuracy of the accounting records.

a. Super visionary control

b. Separation of duties

c. Custodial control

Types of audit:

Following are the two types of audit:

• Pre- Audit

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 • Post-Audit

Pre-audit:

When the audit is done before making payments, it is called Pre Audit. Pre audit is
conducted for all the big payments such as purchase of assets, payment at maturity
of policy, payment on death claim etc.

Post audit:

Audit conducted after making payments is called Post Audit. Post audit is
conducted for all day-to-day expenses such as traveling expenses, stationery etc.

Process of auditing department:

a. File is received from the concerned department.

b. To find the errors, Audit Department read the file thoroughly.

c. If there is no error in the file, then they send it to the concerned department
for the preparation of payment voucher.

d. Payment voucher is checked by the Audit Department.

e. If there is no error in the payment voucher, then cheque is prepared by the

B&A Department.

f. Then this cheque is given to the concerned person.

Sections in audit department:

Audit Department divides its whole structure into small section. These are:

• Loan

118
 • Surrender

• Death

• Accidental Injury Benefit

• Family Income Benefit

• Survival Benefit

• General Payments (Stationary, Bonuses, Salary etc.)

• Field Maters (Rent of AM Office, Contest etc.)

It is not necessary that the audit will be only about money, the audit of business
figures, audit of promotion files is also required.

Requirement of audit for loan:

a. Application Form

b. An attested copy of NIC of policyholder

c. Policy File

Requirement of audit for surrender:

a. Application Form

b. An attested copy of NIC of policyholder

c. Policy File

Requirement of audit for death claim:

a. Identification Form

119
 b. Claim Form

c. Death Certificate

d. An attested copy of NIC of nominee

e. Medical Certificate from Doctor

If Govt. employee or Pvt. Employee, then employee certificate.

Requirements for AIB:

a. Statement from Policyholder

b. Statement from Doctor

c. Two personal accidental claim forms

Requirement of audit for FIB:

a. Discharge Voucher

b. Existence Certificate

Requirement of audit for SB:

a. Application Form

b. An attested copy of NIC

c. Policy Document

120
Management hierarchy of computer department

Manager

Supredent

Senior Officer
Assistant

Pc Operator

Naib Qasid

121
Computer Department

Almost all the departments (i.e. NB, PHS, P&GS, and Cash Counter) are
interconnected by computer network. A separate computer section controls all the
activities of the departments. This computer network was established in 1995.

System:

By which we can access all departments. There are different functions which are
performed by IT department and it varies department to department.

Software used in network:

The software used in computer network both for back-end and front-end is Oracle.
SLIC has licensed this software from Oracle Corporation.

Description of computer network:

IBM does the entire networking and quotation they used in this computer network
is,

*32 terminals in different departments with one central computer.

*Mini computer 6000 Risk

*Operating system “AIX “.

122
*Ram 128 MB

*Hard Disk 11.2 GB.

*Coaxial Cable is used.

*Networking topology is Star-Bus.

Distribution:

In each floor one distribution box is there. In simple words distribution box is a
machine which takes the data from main server and distributes the data to different
printers and terminals.

Terminal and Password:

For security purpose, each user at each terminal has his unique password.
Password is the unique address to open the computer and start the working.

Monthly Report:

For each month different reports are prepared of the working of the different
department. These reports are sent to the concerned departments for
reconciliation. After reconciliation the data is transferred to the master file.
Master file is a file in which no change can be made in any way. After transferring
the data to Master files the data is copied in floppies and transferred to Principal
Office (PO) Karachi. In PO different ledgers are prepared and these are sent back
to Zones. Further checking of accounts (collection/ payments) is made and errors
are detected.

Backup Devices:

UPS

123
To avoid unexpected power failure “ultimate power supply device is install, which
provide electricity from 20 to 30 minutes. Its cost is Rs.200000.

System menu:

In computer system there is main menu in which different lists are distributed
according to working done by IT department. These are following:

• New business

• PHS

In PHS system following procedures is done.

Zone change, address changing, policy bill generation, auto- surrender posting,
table amendment process, summary of PHS.

• Receipting system

• Voucher entry system

1. Policy loan payment

2. Surrender voucher on request

3. Payment voucher

4. Commission voucher

5. Journal voucher

• Agency system

• Pay roll system

• Policy enquiry system

124
• Ct-31 ACNT list

• Policy print

• Claim voucher system

Management Hierarchy of HRD Department

Manager

Deputy
Manager

Office
Assistant

Staff

125
Human resource department:

This department imparts training to the needy appointed staff. It teaches them all
the rules and regulations, procedures, practices regarding the insurance job. It also
gives them different dimensions regarding the acquisition of new policies. Now
this department called as Human resource Department.

State life insurance training program:

Prior to nationalization of Life Insurance in Pakistan in 1972, very few
organizations had any system of training for the field force and office personnel.
Even those companies, which had any system of training programs, were in the
process of developing their own training material and related curricula. With the
nationalization of the Life Insurance in Pakistan, one of the major positive steps
taken for the field personnel was that training for the field personnel was made
compulsory for the first time. No agent could solicit Life Insurance business
without undergoing a basic training course of 5 days duration. Experienced
executives who had decades of practical experience of Life Insurance

Present Training Situations:

With the passage of time, besides the basic training programs new and
sophisticated training programs were introduced, specially designed and

126
introduced by Life Insurance Marketing Research Association and Life Office
Management in the United States. These programs soon became popular and
practical adaptability to local conditions. Now these have been adapted in Urdu
along with relevant material.

It is a proud achievement of State Life that training programs like Agent

Development Program (ADP), Marketing Orientation Program (MOP) and
Marketing Management Series (MMS) are being conducted in all the zones of the
Corporation through three Regional Academics at Karachi, Lahore and Rawalpindi
and training centers in all zones. In addition to this, holding of Training Seminars
of one day and two days duration is a regular feature.

Three computer-training centers are also operating at Kasur, Shikarpur and Jhang
under the Prime Minister’s training program for semi rural communities.

For holding these courses and programs, the SLIC has developed a team of
dedicated and skilled professionalism trainers who performs their responsibilities
under directions of the Human Resource Development Division at the Principal
office Karachi.

Last year as many as 1700 training courses were held which catered to the training
needs of 22,000 participants. Some new training programs were also introduced on
topic like Commitment, Psychology of success, Trust, Productivity and
Motivation.

SLIC is contemplating to offer training opportunities to other institutions in near

future. For the current year, the Corporation has a target of 2000 training courses
catering to the need of some 25,000 participants. This year some innovative topics
both for field and for office were introduced. I.e. Office Management, Business
Communication, Synergy for Excellence, Scientific Planning and ISO 9000.
127
The Division also nominated 632 officials to renowned institutions like PIM,
NIPA and Petromen. One officer was nominated to attend a course in Tokyo,
Japan. Out of 1485 that appeared in the FLMI, 943 qualified different papers, 33
completed FLMI and 9 completed FLMI Masters.

The training to SR, SO, SM, AM (Field workers) and office employees is given.
The training is given for three weeks in a month throughout the year. For the
development and enhancement of marketing skills of the field & office employees,
different courses are offered in the department. This department has one manager
and one assistant manager with brilliant qualification and marketing skill. They
perform their job as regular trainers. Despite some trainers are hired outside the
Organization. The hired trainers are compensated @ Rs. 500 per day during the
training period.

Following are the main courses offered in the department:

One Week Basic Training Courses (BTC) for SR,

One Week Basic Training Course for Sales Officers and Sales managers.

27 Units Agent Development Program (ADP) of Life Insurance Marketing &

Research Association (LIMRA-USA).

17 Units Management Orientation Program (MOP) of LIMPRA (USA).

26 Week Study Course in Agency Management (SCAM) of LIMPRA (USA).

Marketing Management Series (MMS)

SLIC has 26 Training Centers throughout the country and 3 Training Academies in
Lahore, Rawalpindi, and Karachi.

128
FMD also provides the training to the employees of other department of state life,
such as people from PHS, NEW BUSINESS are also trained here.

Management Hierarchy of Marketing Department

Assistant general
Manager

Deputy
Manager

Office
Assistant

Staff

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Marketing department:

The prime responsibility of this department is to do and control the different

activities in order the capture the potential customer. This department controls the
activities of the channel members.

Basic purpose of marketing department

The main purpose of the marketing is to create awareness in the potential

customers. By advertisement and other promotional activities they can enhance
awareness in customers.

Advertisement:

Advertising mean any form of presentation and promotion of ideas, goods or

services by an identified sponsor on behalf of the organization or by organization
itself.

Importance of advertisement:

The many forms of advertising contribute uniquely to the overall promotion mix.
Advertising can reach masses of geographically dispersed buyers at a low cost per
exposure.

130
It allows the company to dramatize its products through the artful use of visuals,
print, sound, and color. On the one hand, advertising can be used to build up a low
term image for a product. On the other hand it can trigger sales of the organization.
It enables the seller to repeat a message many times, and it lets the buyers to
compare the messages of various competitors.

Advertising in SLIC:

In SLIC, two types of advertising campaigns are launched:

One is basically used for improving and enhancing the image of organization;

Other is used for the promotion of policies and Plan of SLIC.

Different types of media are used for the above mentioned advertising campaigns
which are as follows:

Print media:

Print Media includes the advertising launched in the Newspaper and Magazines.
Pakistan Times, The Nawa-I-Waqat, The Khabrain, The Nation and The Jang
provide this service. Ads are also published in magazines such as Pakistan & Gulf
Economist.

National level newspapers get ads of bigger size. These ads are of quarter paging
or 108 centimeters. Local Newspapers get ads of smaller size. These ads are given
through advertising agency.

Electronic media:

SLIC releases advertising in electronic media such as PTV and Radio. The main
objectives of this advertising are to create emotional feelings and personal

131
relationship of the families. The most popular ad “Aye Khuda Meray Abu
Salamat Rehenh” is released in PTV and Radio.

Outdoor media:

Outdoor Media includes Unipole Hoarding, Billboards, Neon Signs and

Televisions. Now the advertising through television is abolished due to road
accidents. The objective of this advertising is to create long term relationship with
customer and create image of the corporation in the eyes of clients.

Personal selling:

SLIC has a well-trained field force, which goes a long way in promoting the
corporate image of SLIC on one hand and product on the other hand.

Others:

Other media includes the private publication of SLIC such as pamphlets, Dairies,
Calendar & Brochures and Eid Cards that are distributed to clients by Zonal
Offices with the intention to create good image and relationship.

Advertising agencies for SLIC:

The advertising agencies working for SLIC are as follows:

• Time & Vision Advertising

• United Advertising

• Bond Adverting

• Oscar Advertising Agency

• Maxim Advertising Agency

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Advertising agencies working for cooperation are playing a vital role in the
promotional campaign of State Life. They help the corporation in allocating its
Promotional Budget among different media according to the needs of campaign.
Advertising agencies are also Help Corporation in getting for corporation’s ads on
TV, Radio and Print Media on the commission basis.

SWOT ANALYSIS

Swot stand for Strength, Weakness, Opportunities and Threats. The main aim of
this analysis is to identify the extent to which the current strategy of the
organization and its more specific changing taking place in the business
environment. The idea of SWOT analysis is to undertake a more structured
analysis so as to yield findings, which can contribute the formulation of strategy.
SWOT analysis of SLIC is as follows:

STRENGTHS

The following facts reflect the strengths of the State Life Insurance
 MARKET SHARE
SLIC has 90% Market Share in life insurance business in Pakistan. It
makes the corporation more reliable and profitable.

 EXCELLENT SET UP
SLIC is a large Life Insurance Company in Pakistan and have 27 Zonal
Offices and 5 Regional Offices throughout the country.

 Infrastructure
State Life Insurance Corporation is one of the oldest institutions of the country
with a huge setup spread all over the country. The Corporation has four regions
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 and twenty- six zones that provide basic facilities to the Corporation to
penetrate deeply in the insurance market.

 TRAINING ACADEMIES &TRAINING CENTERS

SLIC has 3 training Academies at Karachi, Lahore and Rawalpindi and 26 Training
Centers in zonal offices. In 1998, 1946 courses and seminars, ranging from Basic
Courses to advanced Programs like ADP, MOP and MMS of LIMRA (USA) had
conducted

 AUTHORISED CAPITAL
State Life Insurance Corporation has got the highest paid up capital in the
insurance sector. This fact makes the Corporation the richest Insurance
Corporation of the country.

 OVERNMNET SECURITY
State Life Insurance Corporation main strength is the security provided by the
Government to the policyholders. It makes the Corporation more reliable and
self-efficient for policyholders.

 Experience.
State Life Insurance Corporation has got an experience of almost 27 years in the life
insurance industry that makes it the more experienced Insurer in the country.
 ADVERTISING &SALES PROMOTION
During 1998, a new penal of four advertising agencies was selected.
Outdoor advertising such as installation of Unipole Hoarding display
of commercials in PTV is done and other publicity materials such as
Calendars, Stickers, Eid Cards, and Posters are produced to boost
business activities.
 Organization culture
State Life Insurance Corporation’s culture reflects devotion, motivation and
cooperation that act as an asset for the Corporation.
 MARKETING DIVISION

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 This division is backbone of SLIC. During 1998, 25486 young and
educated people were inducted as SR in the sale force, this raising its
strength to 256,814, inclusive of SO & SM.

 Sales Force
State Life Insurance Corporation has the biggest sales force in the Life
Insurance industry. It helps the organization to push its policies down to the
customers.

 Rate of Return
State Life Insurance Corporation gives highest rate of return. It also provides
bonuses to its policyholder i.e. Golden Jubilee Bonuses.

 GOODWILL
State Life Insurance Corporation is one the oldest Insurance Corporation in the
country with a history to support its corporate image. The goodwill created by
the Corporation acts as a barrier for the other to follow in the Insurance
industry.
 REAL ESTATE DIVISION (INVESTMENT PORTFOLIO)
SLIC has well-equipped and computerized Real Estate Division in
principal office (PO) Karachi supervised by highly qualified staff,
engineers and investment analysts.
 COMPUTERIZATION
About 2/3 working is computerized in SLIC. The Plan to computerize
total working is under review.
OTHERS

• PO conducts marketing survey to analyze environment and

develop new plans.
• Employees are fully devoted and highly paid workers as compare
to other organization.
• It has highest paid up capital.
• It is reinsured by Swiss Re (Insurance Company Switzerland).

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WEAKNESSES

 WORK OVERLOAD
We saw that in different departments that in some section employees are less to do
the work at time. Because capacity of work is more than the employee’s capacity.
Particularly in Policy Holder Services which deals with the policy Holders
 LESS JOB ROTATION
Job Rotation in state life is taking part in very rare cases. We saw that people
working in the same department don’t know the work of other person. By
increasing job rotation practice the skills of the employees can be sharpen.
 INCOMPETENT FIELD FORCE
In term of quantity, it is strength but in term of quality it is weakness.
Most workers are not highly educated. They are promoted by fulfilling
targets.
 UNDERWRITING
The under-writing process at initial level is based solely on judgmental
methods. It should be based on practical methods.

 BAD SERVICES
In many departments of state life services provided are not satisfactory for
customer. The departments where more improvements are required are,
 New Business.
 Policy Holder Serviced.
 Budget and Accounts.
In all above-mentioned departments there is no nameplate for a particular
section or a particular authority. New business department doesn’t provide
the medical facility for the new customer at the moment. We saw in PHS that
people were unaware to where they should go for their case. Internal office
setting and arrangement is not satisfactory as compare to its competitors.
 CENTRALIZED DECISION MAKING
Managerial decision-making is totally centralized in the PO Karachi;
Zonal Offices follow the instruction and rules & regulations provided
by PO. Sometimes decisions is taken by PO is not strategic and
adjustable in the local environment. For prosperity & survival of the
organization, decentralization (to some extent) is necessary.
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  INTERNAL DEPARTMENT INEFFICIENCY
• Underwriting process (in NB Department) takes longer time
period, which irritates the prospects.
• Loan section takes 10 days to process.
• Normally 1 to 2 months is required to surrender the policy and
take the Survival Benefit, which is not justified.

 SELECTION & RECRUITMENT

SR are selected and recruited by SO & SM irrespective of their
education and unique internal attributes.

 FEED BACK
The Corporation does not have any effective and efficient feed back
channel to disseminate sales force suggestions to upper management.
Further, organization has no well organize system for feed back
between office employees and manager, managers and Board of
Directors.
 Frauds
Frauds done by some deceives field workers who deteriorate the
good will & image of the organization.

OPPORTUNITIES

 PER - CAPITA PREMIUM

In Pakistan per capita premium payment is $1.5 and $1.7 only for life
& general insurance respectively. There is an opportunity to enhance
this nominal rate. In Japan per capita premium for life insurance is
$3810.
 POPULATION GROWTH RATE
In Pakistan, population growth rate is approximately 3%. It is a great
opportunity for insurance sector.

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  INUSRED POPULATION
In Pakistan 2% to 3% population is insured while rest of the
population provides opportunity to life insurers to enhance their
business.
 GOVERNMENT REGULATION
Section 10-B of Pakistan Commercial and Industrial Standing
Ordinance 1968 provides the compulsory insurance of all the
employees of the organization (whether private or govt. ). So it is a
great opportunity to SLIC.
 ENTRY BARRIERS
To enter in the insurance business huge investment is required.
Further 40% of premium is compulsory for the private insurers, to
cede to Government of Pakistan security purpose – creating the entry
barrier.

THREATS

 COMPETITORS
The existence of local and government insures such as EFU, CU, and
Metropolitan. ALICO etc. is threat to the survival of SLIC.
 POLITICAL INSTABILITY
Political instability looses the confidence of the policyholders.
Further rules and regulations of government are subject to change
creating threat to insurance business.
 FEAR OF WAR
The relationships of Pakistan with India are not satisfactory due to
Kashmir dispute. There is always a fear of war creating the threat to
corporation and policyholders.
 INVESTMENT CLIMATE
Due to the political instability and government changeover the
investment climates are not satisfactory in the country. So the return
from real estates and other activities is deteriorated.

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APPENDIX A

ABBREVIATIONS USED IN THE REPORT

ABR. USED FOR ABR. USED FOR

ADP Agent Development ADB Agent Development

Program Program

BTC Basic Training Course AIB Accidental Indemnity

Benefit

NB New Business AM Area Manager/Asst.

Manager.

AGM Assistant General ANF Auto Non-Forfeiture

Manager option

DM Deputy Manager B&A Budget and Account

Dept.

FYP First Year Premium DGM Deputy Gen. Manager

GB Gaga Byte FIB Family Income Benefit

GM General Manager HRDD Human Resource Dev.

Dept.

JV Journal Voucher LIMR Life Insurance

A Marketing & Research
Association

MMS Mgt. Orientation MOP Mgt. Orientation

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 Program Program

NDF National Development NB New Business

C Finance corp.

P&GS Personal & General NOC No Objection Certificate

Services Dept.

PHS Policy Holder Service B&A Budget & Accounts

dept.

PTD Partial Total Disability PICIC Pakistan Industrial

Credit & Investment
corporation

RO Regional Office PO Principal office

SB Survival Benefit PR Provisional receipt

SCA Study Course in Agency P&GS Personnel and General

M Management Services

SM Sale Manager SLIC State Life Insurance

Corporation

SR Sale Representative SO Sales Officer

TIR Term Insurance Rider SWP Special Waiver of

Premium

UPS Un Interrupted power TA Traveling Allowances

supply

G&P Group and Pension FYP First year premium.

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