Life Insurance

Plans of Insurance
• Objectives
– Provision in case of death
– Provision in case of old age
• Term Assurance
– Level Face Amount Policy
• Increasing Premium
• Level Premium
– Non Level face Amount Policy
• Pure Endowment
• Double Endowment
• New Jana Raksha Plan : for agriculturists, lower income groups
• Special Endowment plans: for film artists, professionals.
• Individual and Group policies
• With Profit and Without Profit Policies.
 Different Types of Insurance
Products
• Whole Life Products
• Convertible Term Insurance Plan
• Interest Sensitive Products
• Combination Plans
– Money Back Policy
• Annuities
• Insurance Products for Females, Children etc.
• Options, Guarantees and Riders
 Computation of Premiums
• Step 1: Find out tabular premium i.e premium
quoted in published premium rates for a Sum Assured Rebate as
given age nearer birthday for the relevant reduction
plan. This premium is per thousand sum from T.P
assured.
• Step 2: Deduct adjustment for large sum per
assured and mode of payment. in monthly thousand
mode 5% extra will be increased in tabular S.A
rate except salary saving scheme (SSS)
policies.
• Step 3: Find out balance premium
• Step 4: Multiply this balance by sum assured. Rs. 25,000 -49000 Rs.1
• Step 5: Add (a) Accident extra if allowed
a) Health Extra, if charged Rs. 50,000-99999 Rs.1.5
b) Occupation extra, if charged Rs. 100, 000 plus Rs.2
c) any other extras, such as premium waiver
• Step 6: Get Annual Premium Mode of Payment Rebate
• Step 7: Divide by 2 or 4 or 12 to get yearly,
half-yearly or quarterly premium respectively.
Yearly 3%
Half Yearly 1.5%
 Paid-Up, Surrender & Loans
• Life Insurance is a contract.
• Purpose- Security against economic loss of death.
• Consideration- payment of premiums.
• Policy lapses- money is forfeited.
• Non-forfeiture clause applies, if three years premiums are paid.
• Policy acquires paid up value after three years
• Paid up formula = sum assured upon term X no. of premiums paid.
• Entitlement of bonus after 5 years on paid-up policy.
• Policy can be surrendered for cash value.
• Surrender value is discounted value.
• Surrender value goes on increasing.
• Loans granted on surrender value.
• Loans may be repaid or not.
• Interest is payable at stipulated rate becomes compounding after 6 months.
• Non payment of loans and interest attracts foreclosure.
 Some relevant points
• A policy acquires paid up value, surrender
value and loan value after 3 years
premiums have been paid.
• If the policy is not run for three years,
money paid is forfeited.
• When the loan and/ or interest is not paid
back, the accumulated liability exceeds
surrender value. Hence foreclosure.
 Formulae for Calculating Paid-up
value/ S.V/ Loan Etc.
• Paid Up Value = S.A X no. of years premiums paid Bonus
per’000
No. of years Premiums Payable + if any
• Surrender value = Paid- up value X S.V Factor
100
• Loan = S.V x 90 if policy is in force
100

= S.V x 85 if policy is not in force

100
 Extra Premiums
• Extra premium to get double coverage in
case of death by accident.
• Income benefit riders
 Group Insurance and Pension
Plans
• Risks of individual lives are not assessed.
• Safeguards by insurer
– Minimum 25 persons
– Group should already be in existence.
– No choice of coverage among individual members.
– The amount of coverage per individual is determined
by a formula or a schedule.
• Advantages
– Low cost of insurance
– Adjustments to be made on yearly basis.
– Administration is easy.
 Group Insurance- EDLI and Non-
EDLI
• Employee’s Deposit Linked Insurance
Scheme is applicable to all establishments
contributing EPF.
• Insurance cover to an employee linked to
his balance in PF Account subject to
maximum of a specified amount.
• CPF Commissioner may exempt an
employer from EDLI, if he opts group
insurance scheme of LIC.
 Group Gratuity Scheme/Group
Superannuation Schemes
• Payment of gratuity is compulsory.
• Employer may decide to pay gratuity to its
employees
– Out of his revenues
– By creating an internal reserve
– By setting up a trust.
– By setting up a trust and trustees may opt for
an insurance with insurance company.
 Group Savings Linked Insurance
Scheme
• Graded life insurance cover
• Out of contribution received from
employees, a portion is utilised for
insurance cover and balance for savings.
• The savings contribution is returned with
interest at the time of retirement.
• In case of death during service the
insurance + savings+ interest is paid.
Marketing Life and Health
Insurance

Marketing
Channels

Marketing Direct Financial

Intermediaries Response Institutions

Customers
 Marketing Intermediaries

Marketing
Intermediaries

Agency Non Agency

Building Building

Multiple Line Independent

Career Producer
Exclusive Home Service Salaried Brokerage Property and
Agency Groups
Agency Causality Agents

Branch
Office System

General
Agency System
 Marketing General Insurance

Distribution
Systems

Independent Exclusive Multiple

Direct
Agency Agency Direct Writer Distribution
Response System
System System Systems
 Product Development
• Conversion From Idea to Reality (from: Allen D Booth and
Robert D Shapiro, “ The Product Development Programme for Insurance Companies” SOA Part
9L Study Note)
Check Stages Actions
Points
1. Strategic Fit
2. Marketability Check In Markets & Distribution Systems
Existing & Potential
3 Design Clarification Marketing, Financial , Administration
Investment
4. Design Refinement Develop rates, values, forms, systems,
reinsurance and other required items
5. Product Implementation Lock in forms, systems and
procedures, print forms and sales
material, file, do final pricing, begin
selling
6. Results Monitoring Field/ public reception, sales results,
assumption met?