Study of Life Insurance and Its Policy
Study of Life Insurance and Its Policy
UNIVERSITY OF MUMBAI
PROJECT TITLEs
SUBMITTED BY:
ROLL NO.1617322
T.Y.B.B.I- SEMESTER VI
PROJECT GUIDE
YEAR OF SUBMISSION
2018-2019
STUDY OF LIFE INSURANCE AND ITS POLICY
CERTIFICATE
I, Prof Loveena Atwal, hereby certify that Ms. Pearl Jude Alexander from
TYBBI of Lala Lajpatrai College Of Commerce And Economic has successfully
completed this Research
_________________________ ___________________________
__________________________ ____________________________
DECLARTION
EXECUTIVE SUMMARY
Someone has greatly said that practical knowledge is far better than classroom teaching.
During this project I fully realized this and come to know about the present real
world of Insurance sector. It includes all the activities involved in providing insurance
products to the final customers.
I am pleased to know about the consumers’ wants and competitors activities in the real world
of Insurance. The subject of my study is to analyse the present insurance sector and
products offered by LIC by applying various tools like cold calling and through direct interaction
with customer’s. I have also done research on the growth of private life insurance companies.
The report contains first of all brief introduction about the company.
Then it contains the current status of private insurance companies and foreign insurance
companies in India. I also put forward recommendations of the consumers and
conclusions that will help LIC to provide consumer satisfactory services in the insurance
sector
STUDY OF LIFE INSURANCE AND ITS POLICY
STUDY OF LIFE INSURANCE AND ITS POLICY
RESEARCH OBJECTIVE
1. The report gives the brief background of the sector and proceeds to highlight the
short comings of the existing setup and players
2. The benefits of liberalized sectors are enumerated.
3. The report also tried to identify the market potential for insurance products and
strategy that can be employed to exploit the same
4. The stress is also given on knowing the awareness level of general public
RESEARCH METHDOLOGY
To conduct the market research first of all it necessary to create a research design
RESEARCH DESIGN:
1. EXPLORATORY
2. DESCRIPTIVE
PRIMARY DATA
SECONDARY DATA:
Secondary data is one which already exists and is collected from the published sources.
The sources from which the secondary data was collected are:
CHAPTER 1
1.1 INTRODUCTION
“The Business of Insurance is related to the protection of the economic values of the
assets”. Every human being has the tendency to save to protect him from risks or events
of future. Insurance is one form of savings where in people try to assure themselves
against risks or uncertainties of future. It is assurance against risks or events or losses.
People can save their earnings either in the form gold, fixed assets like property or in
banking and insurances. All the savings of people of a country account for gross
domestic savings. In India, although savings rate is high but people prefer to invest
either in gold or fixed assets so that they can make money out of it. Hence insurance
sector is still untapped in India
Uncertainty is the fundamental fact of life. This uncertainty leads to fear of risk in our
life. Fear of risk can be satisfied by taking all precautions to avoid risk. Inspite of all
precautions, accident occurs. So, Insurance is one of the best techniques to face this
uncertainty. It is important to understand that risk is the part of any person’s life. So,
Life Insurance is a tool which safeguards an individual’s life with benefits. There are
many life insurance companies in India, but LIC plays a major role in this field. So, the
researchers have chosen this topic to study the growth pattern and to observe the role
of LIC in Life Insurance Industry.
The paper is based on secondary data which is analyzed by statistical tools like
percentage & growth rate. The findings reveals that LIC should strived to increase its
business by adopting new marketing strategies & by issuing more & more policies in
order to retain its market share in the competitive scenario as well as it should make
advertisement to promote & aware about its policies to the consumers.
STUDY OF LIFE INSURANCE AND ITS POLICY
Life policies are legal contracts and the terms of the contract describe the limitations of
the insured events. Specific exclusions are often written into the Contract to limit the
liability of the insurer; common examples are claims relating to suicide, fraud, war, riot,
and civil commotion. Modern life insurance bears Some similarity to the asset
management industry[1] and life insurers have Diversified their products into retirement
products such as annuities. Life-based contracts tend to fall into two major categories:
Protection policies – designed to provide a benefit, typically a lump sum payment, in the
event of a specified occurrence. A common form—more common in years past—of a
protection policy design is term insurance. Investment policies – the main objective of
these policies is to facilitate the growth of capital by regular or single premiums.
Common forms (in the U.S.) are whole life, universal life, and variable
life policies.typically pays a premium, either regularly or as one lump sum. Other
expenses, such as funeral expenses, can also be included in the benefits.Life policies are
legal contracts and the terms of the contract describe the limitations of the insured events.
STUDY OF LIFE INSURANCE AND ITS POLICY
Specific exclusions are often written into the contract to limit the liability of the insurer;
common examples are claims relating to suicide, fraud, war, riot, and civil
commotion.Modern life insurance bears some similarity to the asset
management industry[1] and life insurers have diversified their products into retirement
products such as annuities.[2]
History
The Oriental Life Insurance Company, the first company in India offering life insurance
coverage, was established in Kolkata in 1818 by "Anita Bhavsar" and others. Its primary
target market was the Europeans based in India, and it charged Indians heftier
premiums. Surendranath Tagorehad founded Hindusthan Insurance Society, which later
became Life Insurance Corporation
Nationalisation in 1956
The Parliament of India passed the Life Insurance of India Act on 19 June 1956 creating
the Life Insurance Corporation of India, which started operating in September of that
year. It consolidated the business of 245 private life insurers and other entities offering
life insurance services; this consisted of 154 life insurance companies, 16 foreign
companies and 75 provident companies. The nationalisation of the life insurance business
in India was a result of the Industrial Policy Resolution of 1956, which had created a
policy framework for extending state control over at least 17 sectors of the economy,
including life insurance.
In 2013 the first year premium compound annual growth rate (CAGR) was 24.53% while
total life premium CAGR was 19.28% matching the growth of the life insurance industry
and outperforming general economic growth.
STUDY OF LIFE INSURANCE AND ITS POLICY
2 1956-1961 ₹184 Cr
3 1961-1966 ₹285 Cr
4 1969-1974 ₹1,530 Cr
5 1974-1979 ₹2,942 Cr
6 1980-1985 ₹7,140 Cr
7 1985-1990 ₹12,969 Cr
8 1992-1997 ₹56,097 Cr
9 1997-2002 ₹1,70,929 Cr
10 2002-2007 ₹3,94,779 Cr
11 2007-2012 ₹7,04,151 Cr
12 2012-2017 ₹14,23,055 Cr
13 2017-2022 ₹3,82,479 Cr
STUDY OF LIFE INSURANCE AND ITS POLICY
Operation
Today LIC functions with 2048 fully computerized branch offices, 8 zonal offices,
around 113 divisional offices, 2,048 branches and 1408 satellite offices and the Central
Office;[12] it also has 54 customer zones and 25 metro-area service hubs located in
different cities and towns of India. It also has a network of 1,537,064 individual agents,
342 Corporate Agents, 109 Referral Agents, 114 Brokers and 42 Banks for soliciting life
insurance business from the public.
Now LIC also has the 1899 branches of IDBI bank at its disposal thus it can carry out its
insurance business through these branches of the bank.
Solgan
LIC's slogan yogakshemam vahaamyaham is in Sanskrit which loosely translates into
English as "Your welfare is our responsibility". This is derived from ancient Hindu text,
the Bhagavad Gita's 9th chapter, 22nd verse The slogan can be seen in the logo, written
in Devanagari script. This line means "I carry what they lack, and I preserve what they
have" (refers to Krishna speaking to Arjuna), when taken in context of the entire verse
The Economic Times Brand Equity Survey 2012 rated LIC as the No. 6 Most Trusted
Service Brand of India.
From the year 2006, LIC has been continuously winning the Readers' Digest Trusted
brand award.
Voted India's Most Trusted brand in the BFSI category according to the Brand Trust
Report for 4 continuous years - 2011-2014 according to the Brand Trust Report
STUDY OF LIFE INSURANCE AND ITS POLICY
INTIATIVES
c. The compensation will be made in certain definite sum, i.e., the loss or the policy
amount which ever may be
Life has always been an uncertain thing. To be secure against unpleasant possibilities,
always requires the utmost resourcefulness and foresight on the part of man. To pray or
to pay for protection is the spirit of the humanity.
STUDY OF LIFE INSURANCE AND ITS POLICY
Man has been accustomed to pray God for protection and security from time
immemorial. In modern days Insurance Companies want him to pay for protection and
security. The insurance man says "God helps those who help themselves"; probably he is
correct. Too many people in this country are not in employment; and work for too many
no longer guarantees income security. Several millions are part-time, self employed and
low-earning workers living under pitiable circumstances where there is no security cover
against risk. Further the inherent changing employment risks, the prospect of continual
change in the work place with its attendant threats of unemployment and low pay
especially after the adoption of New Economic Policy and the imminent lifecycle risks - a
new source of insecurity which includes the changing demands of family life, separation,
divorce and elderly dependents are It is within this background life insurance policy has
been introduced by the insurance companies covering risks at various levels. Life
insurance coverage is against disablement or in the event of death of the insured,
economic support for the dependents. It is a measure of social security to livelihood for
the insured or 3 dependents. This is to make the right to life meaningful, worth living
and right to livelihood a means for sustenance. Therefore, it goes without saying that an
appropriate life insurance policy within the paying capacity and means of the insured to
pay premium is one of the social security measures envisaged under the Indian
Constitution. Hence, right to social security, protection of the family, economic
empowerment to the poor and disadvantaged are integral part of the right to life and
dignity of the person guaranteed in the constitution. Man finds his security in income
(money) which enables him to buy food, clothing, shelter and other necessities of life.
STUDY OF LIFE INSURANCE AND ITS POLICY
A person has to earn income not only for himself but also for his dependents, viz., wife
and children. He has to provide legally for his family needs, and so he has to keep aside
something regularly for a rainy day and for his old age. This fundamental need for
security for self and dependents proved to be the mother of invention of the institution
of life insurance.
Insurers also create liabilities and commit themselves to compensate for losses
occurring to the policyholders on future date. It also plays an important role in process
of capital formation.
a) Risk sharing and risk transfer: Insurance is used to share the financial losses that
might occur to an individual or is family on the happening of specified events. The loss
arising from such events are shared by all the insured in the form of premium.
b) Risk assessment in advance: Insurance companies are risk bearers. They assess the
risk before insuring to charge the amount of premium.
This increased availability of credit helps people buy homes and cars. Insurance also
provides the capital that communities need to quickly rebuild and recover economically
from natural disasters, such as tornadoes or hurricanes. Insurance itself has become a
significant economic force in most industrialized countries. Employers buy insurance to
cover their employees against work-related injuries and health problems. Because it
makes business operations safer, insurance encourages businesses to make economic
transactions, which benefits the economies of countries. In addition, millions of people
work for insurance companies and related businesses. In 1996 more than 2.4 million
people worked in the insurance industry in the United States and Canada. Insurance as
an investment that offers a lot more in terms of returns, risk cover & as also that
tax concessions & added bonuses Not all effects of insurance are positive ones. The
possibility of earning insurance payments motivates some people to attempt to cause
damage or losses. Without the possibility of collecting insurance benefits, for instance,
no one would think of arson, the will ful destruction of property by fire, as a potential
source of money.
1. 7 ADVANTAGES OF LIFE INSURANCE
1. In the event of death, the settlement is easy. The heirs can collect the moneys
quicker, because of the facility of nomination and assignment. The facility of nomination
is now available for some bank accounts.
3. Certain cannot claim the life insurance moneys. They can be protected against
attachments by courts.
STUDY OF LIFE INSURANCE AND ITS POLICY
4. There are tax benefits, both in income tax and in capital gains.
5. Marketability and liquidity are better. A life insurance policy is property and can be
transferred or mortgaged. Loans can be raised against the policy.
6. Life insurance is not only the best possible way for family protection. There is no
other way.
7. Insurance is the only way to safeguard against the unpredictable risks of the future. It
is unavoidable.
8. The terms of life are hard. The terms of insurance are easy.
9. The value of human life is far greater than the value of property. Only insurance can
preserve it.
10. Life insurance is not surpassed by many other savings or investment instrument, in
terms of security, marketability, stability of value or liquidity.
11. Insurance, including life insurance, is essential for the conservation of many
businesses, just as it is in the preservation of homes.
STUDY OF LIFE INSURANCE AND ITS POLICY
1.8 SEMANTICS
3. Whole life policy: It is the policy under which the amount of policy will be paid only on
death of the insured. Premiums may be payable throughout the life or for a limited
period.
4. Endowment policy: Endowment policies entitle the insured to receive the amount of
the policy on his reaching a certain age and premiums also stops. If death occurs earlier,
amount of the policy will be paid at that time and payment of premium will also stop at
that time.
6. Reinsurance: It refers to placing a part of the risk by an insurer with another insurer.
The object is to reduce the possible loss to be borne by the original insurer, who pays
premiums at the ordinary rates to the reinsurer. Reinsure must pay commission to the
original insurer.
The growth of Life Insurance in concrete terms could be said to being during the first
two decades of twentieth century when most of the major companies were founded.
They grew in terms of rise in the number of companies, in terms of number of policies
and sum assured as well as total life fund. Indian Insurance Year Book, published for the
first time in 1914, gives the figure of the total business-in -force as 22.44 crore which
grew to Rs. 298 crore in 1938.In 1914, there were only 44companies transacting
insurance business in India, and during the next 25 years their number rose to 176. The
total progress on all the primary heads, viz. life fund (Rs. 50.50 crore), premium income
(Rs. 10.50 crore) and new business (Rs. 43.30 crore) indicate that Indian Insurance
Business had been making a definite headway during this years. The inter-war - years
thus saw rapid growth life insurance in India.
The promotion of new life insurance companies continued to be almost a craze and
insurance companies mushroomed. In this period, 176 insurance companies were
formed and many of them failed. Thus unhealthy growth was harmful to the interest of
the policy holders and insurance business in India. Feeling concerned about it, the All
India Life Assurance Offices 'Association urged upon the Government in 1932 to
undertake the insurance legislation to Compulsorily register all Life Insurance
companies.
Compel foreign companies doing business in India to keep sufficient funds in India
securities
STUDY OF LIFE INSURANCE AND ITS POLICY
CHAPTER 2
2.1 INTRODUCTION TO LIC.
LIC is the largest state-owned insurance group in India, and also the country's
largest investor? It is fully owned by the Government of India. It also funds close
to 24.6% of the Indian Government's expenses. It has assets estimated of 13.25
trillion (US$264.34 billion). It was founded in 1956 with the merger of 243
insurance companies and provident societies. Headquartered in Mumbai, financial
and commercial capital of India, the Life Insurance Corporation of India currently
has 8 tonal Offices and 113 divisional offices located in different parts of India,
around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25
Metro Area Service Hubs and a number of Satellite Offices located in different
cities and towns of India and has a network of 13,37,064 individual agents, 242
Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011)
for soliciting life insurance business from the public.
The contract is valid for payment of the insured amount during:
The date of maturity, or
Specified dates at periodic intervals, or
Unfortunate death, if it occurs earlier.
Among other things, the contract also provides for the payment of premium
periodically to the corporation by the policyholder. Life Insurance is universally
acknowledged to be an institution, which eliminates „risk‟, substituting certainty
for uncertainty and comes to the timely aid of the family in the unfortunate event
of death of the breadwinner
The slogan of LIC is "Yogakshemam Vahamyaham" - Your welfare is our
responsibility
STUDY OF LIFE INSURANCE AND ITS POLICY
2 .2 B A CK G R O UN D O F S T U D Y
“Life Insurance is a contract for payment of a sum of money to the person assured on the
happening of the event insured against”. Usually the insurance contract provides for the
Payment of an amount on the date of maturity or at specified dates at periodic intervals
or at unfortunate death if it occurs earlier. Obviously, there is a price to be paid for this
Benefit. Among other things the contracts also provides for the payment of premiums, by
the assured.
Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.
Involve all people working in the Corporation to the best of their capability in
furthering the interests of the insured public by providing efficient service with
courtesy.
STUDY OF LIFE INSURANCE AND ITS POLICY
Government should take over the holdings of GIC and its subsidiaries
so that these subsidiaries can act as independent corporations All the
insurance companies should be given greater freedom to operate.
II) COMPETITION
Private Companies with a minimum paid up capital of Rs.1bn should
be allowed to enter the sector.
No Company should deal in both Life and General Insurance through a
single entity.
7
Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
STUDY OF LIFE INSURANCE AND ITS POLICY
V) CUSTOMER SERVICE
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked
pension plans.
Computerization of operations and updating of technology to be carried
out in the insurance industry.
The committee emphasized that in order to improve the customer
services and increase the coverage of insurance policies, industry should be
opened up to competition. But at the same time, the committee felt the need
8
to exercise caution as any failure on the part of new players could ruin the
public confidence in the industry. Hence, it was decided to allow competition
STUDY OF LIFE INSURANCE AND ITS POLICY
↓
ZONAL OFFICES (8)
↓
DIVISIONAL OFFICES (113)
↓
BRANCH OFFICES (2048)
↓
SATTELITE OFFICES (1169)
STUDY OF LIFE INSURANCE AND ITS POLICY
NETWORK OF LIC
All Life Insurance Corporation branches in the country would be interconnected under
Metro Area Network (MAN) inaugurated here on Thursday.
Speaking at the function, K Vaidyalingam, LIC southern zonal manager, said about 1500
branches would be getting covered under MAN in which the premium amount of the
policy holder could be remitted in any branch. Besides, the policy holder gets his status
report, policy position, revival and quotation from the network. In every one hour the
system got upgraded, he said.
In southern region there are about 10 lakh new policy holders with a business of Rs 6500
crore. About settlement of claims, 92 per cent of policies were settled on or before
maturity, he said, adding, LIC was in a better position and 100 per cent connectivity was
taking place.
Kottayam stood third in premium collection during the period between April to August
2002, the first being Kozhikode and Thiruvananthapuram in second position in southern
region.
The premium amount collected in 2001 was Rs.74,000 crore through 2.32 crore new
policies by 8.2 lakh agents. LIC has introduced a new group insurance scheme for
Corporation Bank deposit holders.
STUDY OF LIFE INSURANCE AND ITS POLICY
LIC has been one of the pioneers in using the leverage of Information
Technology in servicing and in its business for the convenience of its
policyholders. Data pertaining to almost 10 crores policies is stored on
computer at LIC. Over the years, the LIC has gone in for relevant and
appropriate technology.
Information Kiosks:
LIC has set up 150 Interactive Touch Screen based Multimedia KIOSKS in its prime
locations in metros and some major cities for dissemination of information to the general
public on its products and services. These KIOSKS are able to provide policy
details and accept premium payments.
Info Centres:
LIC has also set up 8 call centres, manned by skilled employees, to provide the
policyholders with information about its products, policy services, branch addresses and
other organizational information.
Satellite Offices:
With a vision of providing easy access to its policyholders, LIC has launched over 1000
satellite offices. These satellite offices, which are attached to the respective parent
branches, are basically an extension of the large parent branches for rendering quick
services to policy holders processing of new proposal and collection of renewal premium
are the main functions of these offices, at present.
Direct Marketing:
STUDY OF LIFE INSURANCE AND ITS POLICY
LIC has started a new channel “Direct Marketing” to explore the new age marketing
through digital campaigning and online marketing generating business leads. Initially
operations were started at six centers, i.e. Banglore, Delhi, Ernakulam, Hyderabad,
Kolkatta, & 23 Mumbai. This has reached to 22 units as on 31.03.2010. Now, buying
an LIC policy is just a click away for a prospective buyer. A visit to LIC’s portal &
registration of details thereon makes it possible for him to get the professional advice/
desired service within a few hours .
Opportunities:
A state monopoly has little incentive to innovative or offers a wide range of products.
It can be seen by a lack of certain products from LIC's portfolio. More competition in this
business will spur firms to offer several new products and more complex and extensive
risk categorization. It would also result in better customer services and help improve the
variety and price of insurance products.
STUDY OF LIFE INSURANCE AND ITS POLICY
The entry of new players would speed up the spread of both life and general insurance.
Spread of insurance will be measured in terms of insurance penetration and measure of
density.
With the entry of private players, it is expected that insurance business roughly 400
billion rupees per year now, more than 20 per cent per year even leaving aside the
relatively under developed sectors.
More importantly, it will also ensure a great mobilization of funds that can
be utilized for purpose of infrastructure development that was a factor
considered for globalizations of insurance.
With allowing of holding of equity shares by foreign company either itself or through
its subsidiary company or nominee not exceeding 26% of paid up capital of Indian
partners will be operated resulting into supplementing domestic savings and increasing
economic progress of nation.
It has been estimated that insurance sector growth more than 3 times the growth of
economy in India. So business or domestic firms will attempt to invest in insurance
sector. Moreover, growth of insurance business in India is 13 times the growth insurance
in developed countries. So it isnatural, that foreign companies would be fostering a very
strong desire to invest something in Indian insurance business.
The existing insurer, LIC, have created a large group of dissatisfied customers due to
the poor quality of service. Hence there will be shift of large number of customers from
LIC to the private insurers.
LIC may face problem of surrender of a large number of policies, as new insurers will
woo them by offer of innovative products at lower prices.
The corporate clients under group schemes and salary savings schemes
may shift their loyalty from LIC to the private insurers.
There is a likelihood of exit of young dynamic managers from LIC to the private
insurer, as they will get higher package of remuneration.
STUDY OF LIFE INSURANCE AND ITS POLICY
LIC has overstaffing and with the introduction of full computerization, a large number
of the employees will be surplus. However they cannot be retrenched. Hence the
operating costs of LIC will not be reduced. This will be a disadvantage in the competitive
market, as the new insurers will operate with lean office and high technology to reduce
the operating costs.
LIC has more than to 60 products which are outdated in the present context as they are
not suitable to the changing needs of the customers. Not only that they are not competent
enough to complete with the new products offered by foreign companies in the market.
Reaching the consumer expectations on par with foreign companies such as better
yield and much improved quality of service particularly in the area of settlement of
claims, issue of new policies, transfer of the policies and revival of policies in the
liberalized market is very difficult to LIC.
The market very soon will be flooded by a large number of products by fairly large
number of insurers operating in the Indian market. Even with limited range of products
offered by LIC the consumers are confused in the market. Their confusion will further
increase in the face for large number of products in the market. The existing level of
awareness of the consumers for insurance products is very low. It is so because only 62%
of the Indian population is literate and less than 10% educated. Even the educated
consumers are ignorant about the various products of the insurance.
STUDY OF LIFE INSURANCE AND ITS POLICY
The insurers will have to face an acute problem of the redressal of the consumers,
grievances for deficiency in products and services.
Increasing awareness will bring number of legal cases filled by the consumers against
insurers is likely to increase substantially in future.
Major challenges in canalizing the growth of insurance sector are product innovation,
distribution network, investment management, customer service and education.
STUDY OF LIFE INSURANCE AND ITS POLICY
CURRENT STATUS
Over its existence of around 50 years, Life Insurance Corporation of India, which
commanded a monopoly of soliciting and selling life insurance in India, created huge
surpluses, and contributed around 7 % of India's GDP in 2006.
The Corporation, which started its business with around 300 offices, 5.6 million policies
and a corpus of INR 459 million, has grown to 2,048 offices servicing around 180 million
policies and a corpus of over INR 3.4 trillion.
The organization now comprises 2048 branches, 100 divisional offices and 8 zonal
offices, and employs over 1 million agents. It also operates in 12 other countries,
primarily to cater to the needs of Non Resident Indians.
With the change in the India's economic philosophy from the early 1990s, and the
subsequent relaxation of state control over several sectors of the economy, the
monopolistic position of the Life Insurance Corporation of India was diluted, and it has
had to compete with a number of other corporate entities, Indian as well as transnational
Life Insurance brands.
In the financial year 2006-07 Life Insurance Corporation of India's number of policy
holders are said to have crossed a whopping 200 million (fourth in terms of population of
the countries of the world)
STUDY OF LIFE INSURANCE AND ITS POLICY
1) As a Govt of India owned Company, LIC is 51 + years old in the field of life
insurance and money management. LIC's Life Fund size as on day is more than Rs
5 Lakh Thousand Crores.
2) Any LIC policyholder or the nominee will vouch for the best claims settlement
from LIC. Perhaps, this is the only institution where you as a policyholder are
virtually chased till such time your claim cheques is handed over to you!
3) LIC has won `NDTV Profit Leadership Award 2007 under Life Insurance
Category', `Outlook Money Award 2007 as the best Life Insurer', `CNBC Awaaz
Consumer Award 2007 as the best Life Insurance Company', `Golden Peacock
Award for excellence in Corporate Governance 2007', `Web 18 Genius of the Web
Award 2007 and many more'.
4) LIC adjudged No.1 Trusted Service Brand for the 4th successive year by ET Brand
Equity Survey.
5) LIC has been adjudged Superbrand India for 2004-06 and Reader's Digest `Trusted
Brand' Asia 2007.
6) This is the only corporation that is catering to more than 190 million satisfied
policyholders in India and abroad.
7) This is one of the very few institutions that pays ex-gratia interest on pending
maturity claims!
8) More than 2050 LIC branches all over India are connected together to serve you.
You can pay your premium anywhere in the country.
9) During its long existence, LIC has kept on updating its portfolio by bringing in
new plans depending on public requirement. More than 50 of them are most
popular and can be customized to meet any of your requirements. LIC ULIPs have
STUDY OF LIFE INSURANCE AND ITS POLICY
become extremely popular due to the returns they offer. Money Plus- latest LIC
Unit Linked Plan is a case in point.
10) All LIC Plans come with Sovereign Guarantee i.e., Govt of India Guarantee
regarding repayment. Infact, as of now, only LIC plans enjoy this Govt Guarantee.
Beneficiary for this Sovereign Guarantee is you and you alone as the policyholder/
would-be policyholder.
11) All LIC plans are characterized by low premium, high life insurance
coverage and a vast package of benefits offered by them. Add to this package,
section 80C benefit and section 10(10D) benefit on the maturity proceeds, you will
find investment on LIC plans one of the most coveted investment options available
to you.
12) Premium paid under Key-Man Insurance plan is a recognized business
expense under section 37(I) of the Income-Tax Act. For companies making profits,
this is a very good incentive indeed.
13) Through Employer-Employee Insurance scheme, you can recognize the
worth of your most valuable employees whose absence you can ill afford to lose.
14) Entire contribution to LIC Group Gratuity Scheme is a recognized business
expense in the hands of the employer. In addition, through this scheme, the
employer can transfer his gratuity liability to the corporation and fund the same
under cash accumulation scheme. The most popular among all the companies.
15) LIC is declaring quite an impressive bonus (profits) on all its with-profits
policies every year. Extra attraction under LIC Bonus is (a) it is calculated every
year on the insured amount and not on the premium paid and (b) entire bonus
received along with insured amount either by you on maturity of your policy(ies)
or by your nominee in your absence during the currency of your policy(ies) is free
from income-tax under section 10(10D) of the Income-tax Act.
STUDY OF LIFE INSURANCE AND ITS POLICY
16) On most of the LIC plans, you can borrow to take care of your immediate
monetary requirements. None of the policy benefits get affected as a result of
borrowal. Infact, policy loans offer one of the most attractive investment
opportunities.
17) You can pay your premium 3 years in advance at 5% discount. Chief
attractions of this advance payment of premium are (a) there is no possibility of
your overlooking your premium payment and getting your policy(ies) lapsed
wherever you are in the world and (b) you will be earning 5% tax-free interest on
the unutilized portion of the amount left with LIC after apportioning the regular
instalment.
18) Most of the LIC plans come with Riders to take care of Total and Permanent
Disablement due to Accident and some of the most dread diseases that may result
in loss of income.
19) LIC pension plans that guarantee your life pension are extremely popular.
You can park your hard earned money safely with the corporation and enjoy
pension as long as you are alive.
Due to these reasons and lot more, LIC should be your obvious choice for all your
life insurance requirements.
STUDY OF LIFE INSURANCE AND ITS POLICY
5. Whole Life Insurance – Life coverage to the life assured for whole life
6. Child’s Plan – For fulfilling your child’s life goals like education, marriage, etc.
A term plan provides death risk cover for a specified period. In case the life assured
passes away during the policy period, the life insurance company pays the death benefit
to the nominee. It is a pure risk cover plan that offers high coverage at low
premiums.There’s an option to add riders to widen up the coverage.The death benefit is
payable as lump sum, monthly payouts, or a combination of both.There’s no payout if the
life assured outlives the policy term. However, these days there are companies offering
Term Plans with Return of Premiums (TROPS), where insurance companies payback all
the paid premium amount in case the life assured outlives the term period. But, such
plans are costlier than the vanilla term insurance plan.
Example:An individual non-smoker male who is looking for a term life plan of Rs.1
crore cover, will cost him approximately Rs.6, 800 to Rs.10, 500 per year.
STUDY OF LIFE INSURANCE AND ITS POLICY
Example:
SUM ANNUAL
TERM FUND VALUE
ASSURED PREMIUM
Best known for: Long-term investment option with much more flexibility to invest.
STUDY OF LIFE INSURANCE AND ITS POLICY
Benefit of ULIP: Invest money as per your risk appetite. You have the option to invest
either in equity, debt or in hybrid funds through the life insurance company with
complete transparency.
3. Endowment Plans
Endowment plan is another type of life insurance plan, which is a combination of
insurance and saving. A certain amount is kept for life cover – insurance, while the rest is
invested by the life insurance company. In an endowment plan, if the life assured outlives
the policy term, the insurance company offers him the maturity benefit.
Moreover, Endowment Plans may offer bonuses periodically, which are paid either on
maturity or to the nominee under death claim. On death, the death benefit is payable to
the nominee. Endowment plans are also commonly known as traditional life insurance,
although, there is an investment component but the risk is lower than the other
investment products and so are the returns.
Example:
Best known for: Long-term saving option for people with much lower risk appetite for
investment.
Money back plans are also eligible to receive the bonuses declared by the company from
time to time. This way, policyholder can meet short-term financial goals.
Example:
ANNUAL
SUM PERIODIC MATURITY
TERM PREMIUM
ASSURED RETURNS BENEFIT
RANGE
A percentage
Accrued
of Sum
20 Rs.20,000 – bonuses/Guaranteed
Rs.5 lakh Assured paid
years Rs.25,000 Money Back +
on regular
Coverage
intervals
Best known for: Short-term investment product to meet short-term financial goals.
Benefit of Money Back Plan: Short-term financial planning and an opportunity to earn
returns on maturity.
the matured endowment coverage to the life insured. The premiums are higher as
compared to term plans. Whole life insurance plans also offer partial withdrawals after
completion of premium payment term.
SUM ASSURED
(WITH
PREMIUM ANNUAL
GUARANTEED MATURITY
PAYING PREMIUM
MATURITY BENEFIT
TERM RANGE
SUM
ASSURED)
Guaranteed
Sum Assured +
non-guaranteed
Rs.10,000-
20 years Rs.3 lakh bonus (if any) +
Rs.15,000
non-guaranteed
terminal bonus
(if any)
Benefit of Whole Life Plan: Lifelong protection to the insured and an opportunity to
leave behind a legacy for heirs.
6. Child Plan
Child plan helps to build corpus for child’s future growth. Child plans help to build funds
for child’s education and marriage. Most of the Child Plan provides annual installments
or one time payout after the age of 18 years.
STUDY OF LIFE INSURANCE AND ITS POLICY
In case of an unfortunate event, the insured parent passes away during the policy term -
immediate payment is payable by the insurance company. Some child plans waive off the
future premiums on death of the life insured and the policy continues till maturity.
ANNUAL
SUM PERIODIC MATURITY
TERM PREMIUM
ASSURED RETURNS BENEFIT
RANGE
Maturity
benefit +
Lump sum
guaranteed
20 payouts on
Rs.18 lakh Rs.1 lakh returns + non-
years regular
guaranteed
interval
accumulated
bonus (if any)
7. Retirement Plan
Retirement plan helps to build corpus for your retirement. Helping you to live
independently financially and without worries. Most of the child plans provide annual
installments or one time payout after the age of 60 years.In case of an unfortunate event,
life assured passes away during the policy term - immediate payment is payable to the
nominee by the insurance company. Death benefit will be higher of coverage or fund
value or 105% of premiums paid. Vesting Benefit will be payable if the life assured
survives the maturity age. In which case, payout will be fund value which has to be
utilized for buying an annuity.
Benefit of Retirement Plan: Helps in building corpus for retirement. This is just a
simplified guide to different types of life insurance policies.
CHARACTERISTICS OF INSURANCE:
Sharing of Risks
Insurance is a co-operative device to share the burden of risk, which may fall on
happening of some unforeseen events, such as the death of head of the family, or on
happening of marine perils or loss of by fire.
Co-operative Device
Insurance is a co-operative form of distributing a certain risk over a group of
persons who are exposed to it (Ghosh & Agarwal). A large number of persons share the
losses arising from a particular risk.
Evaluation of Risk
For the purpose of ascertaining the insurance premium, the volume of risk is
evaluated, which forms the basis of insurance contract.
Amount of payment
The amount of payment in indemnity insurance depends on the nature of losses
occurred, subject to a maximum of the sum insured. In life insurance, however, a fixed
amount is paid on the happening of some uncertain event or on the maturity of the policy.
Spreading of risk
STUDY OF LIFE INSURANCE AND ITS POLICY
Insurance is a plan, which spread the risks & losses of few people among a large
number of people. John Magee writes, ―Insurance is a plan by which large number of
people associates themselves & transfer to the shoulders of all, risks attached to
individuals.
Transfer of risk
Insurance is a plan in which the insured transfers his risk on the insurer. This
may be the reason that Mayerson observes, that insurance is a device to transfer some
economic losses to the insurer, and otherwise such losses would have been borne by the
insured themselves.
Ascertaining of losses
By taking a life insurance policy, one can ascertain his future losses in terms of
money. This is done by the insurer to determining the rate of premium, which is
calculated on the basis of maximum risks.
A contract
Insurance is a legal contract between the insurer & insured under which the insurer
promises to compensate the insured financially within the scope of insurance policy, &
the insured promises to pay a fixed rate of premium to the insurer.
FUNCTION OF INSURANCE :
PRIMARY FUNCTIONS –
i) Provide Protection
The primary function of insurance is to provide protection against future risk,
accidents and uncertainty. Insurance cannot check the happening of the risk, but can
certainly provide for the losses of risk. Professor Hopkins observes "Insurance is a
protection against economic loss, by sharing the risk with others.”
i) Prevention of losses
Insurance cautions individuals and businessmen to adopt suitable device to prevent
unfortunate consequences of risk by observing safety instructions; installation of
automatic sparkler or alarm systems, etc. Prevention of losses causes lesser payment to
the assured by the insurer and this will encourage for more savings by way of premium.
Reduced rate of premiums stimulate for more business and better protection to the
insured.
OTHER FUNCTIONS
CHAPTER. 4
SALES
20%
YES
NO
80%
CHOICES
6%
5%
11%
78%
Sales
11%
89%
1 TO 3 3 OR MORE
CHOICES
CHOICES
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
LIC KOTAK ICICI OTHERS
STUDY OF LIFE INSURANCE AND ITS POLICY
RESPONSES
0%
100%
YES NO
6. Is it customer friendly?
RESPONSES
0%
YES
NO
100%
STUDY OF LIFE INSURANCE AND ITS POLICY
RESPONSES
10%
5%
YES
NO
NOT ANSWERED
85%
STUDY OF LIFE INSURANCE AND ITS POLICY
CHAPTER 5
CONLUSION.
BIBLOGRAPHY.
www.licindia.in
www.scribd.com
www.coverfox.com
www.wikipedia.org .
REFERENCE.
8. Annual Reports of IRDA (Various Issues)
9. Annual Reports of LIC of India (Various Issues)
STUDY OF LIFE INSURANCE AND ITS POLICY
Annexure