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Project Report Feasibility of Insurance Plans ICICI Prudential A report submitted to Delhi Business School, New Delhi as a part fulfillment of MBA + Post Graduate Program (Industry Integrated) in Entrepreneurship & Business Submitted to: Director Academics Submitted by: Delhi Business School XXXXXXXX New Delhi XXXXXXXX XXXXXXXX 1 st Semester
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Page 1: Feasibility of Insurance Plans with reference to ICICI Prudential

Project Report

Feasibility of Insurance Plans

ICICI Prudential

A report submitted to Delhi Business School, New Delhi

as a part fulfillment of

MBA + Post Graduate Program (Industry Integrated) in Entrepreneurship &

Business

Submitted to:

Director Academics Submitted by:

Delhi Business School XXXXXXXX

New Delhi XXXXXXXX

XXXXXXXX

1st Semester

Punjab Technical University

Internal Guide:

Faculty:

Delhi Business School

New Delhi

Page 2: Feasibility of Insurance Plans with reference to ICICI Prudential

Certificate

This is to certify that the summer training was done on submitted to Delhi

Business School, New Delhi by XXXXX in partial fulfillment of the

requirement for the award of degree of MBA + Post Graduate Program in

Entrepreneurship & Business, is a bonafide work carried out by him/her

under my supervision and guidance. This work has not been submitted

anywhere else for any other degree/diploma. The original work was carried

during the period of two months starting from 15th May 2008 to 15th July

2008 in the ICICI Prudential at its Dilshad Garden Branch.

Name of the Guide:

Address:

Page 3: Feasibility of Insurance Plans with reference to ICICI Prudential

ACKNOWLEDGEMENT

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

NARULA and Mr. MUKUL BHARTIYA under whose guidance and

enlightening path for finding navigation I was able to complete this report.

I also take this opportunity to thank them for wholehearted support they

gave me in understanding the importance of this project.

At last I would like to thank all those direct and indirect support which made

me to complete this project successfully.

Page 4: Feasibility of Insurance Plans with reference to ICICI Prudential

Report Content

1. Meaning of Insurance

2. History of Insurance

3. Purpose and Need of Insurance

4. Insurance Plans at a glance

5. Governing Body of Insurance Sector

6. Various Terms Involved in Insurance Sector

7. Documents used in Insurance

8. ICICI Prudential - The company

9. Promoters of ICICI Prudential

10.Vision & Values of ICICI Prudential

11.Insurance Product of ICICI Prudential

12.Edge of ICICI Prudential over others

13.Competitors of ICICI Prudential

14.Bibliography

Page 5: Feasibility of Insurance Plans with reference to ICICI Prudential

Insurance

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

other person in case of loss of certain material thing or on happening of

certain events which may cause loss to the party getting insurance.

History of Insurance

Insurance has been known to exit in some form or other since 3000 BC. The

Chinese traders, traveling treacherous river rapids would distribute their

goods among several vessels, so that the loss from any one vessel being lost

would be partial and shared, not total.

In India, insurance began in 1818 with life insurance being transacted by

English Co. The Oriental Life insurance company Ltd. The first Indian

insurance company was the Bombay mutual Assurance society Ltd. formed

in 1870 in Mumbai. This was followed by Bharat insurance co. in 1896 in

Delhi, the empire of India in 1897 in Mumbai, the united India in Chennai,

the national, the national Indian and Hindustan cooperative in Kolkata.

Later were established the Cooperative Assurance in Lahore, The Bombay

life, the Indian mercantile, the new India and the Jupiter in Mumbai and the

lakshmi in New Delhi. These were all Indian companies started as a result of

swadeshi movement in the early 1900s.By the year 1956, there were 170

companies and 75 provident fund societies transecting life insurance

business in India

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Purpose and need of insurance

Assets were insured, because they were likely to be destroyed before the

expected lifetime through accidental occurrence. Such accidental

occurrences are called perils. Fire, floods, lighting earthquakes etc are called

perils .If such perils can cause damage to the asset, we say that the asset is

exposed to the risk .Perils are the events. Risks are the consequential

Losses. The risk only means that there is a possibility of damage.

Insurance Plans- At a glance

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

Unit Linked Insurance Product

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

1. Flexibility 1. Flexibility to choose Sum Assured. 2. Flexibility to choose premium amount. 3. Option to change level of Premium /Sum Assured even after the

plan has started. 4. Flexibility to change asset allocation by switching between

funds 2. Transparency

1. Charges in the plan & net amount invested are known to the customer

2. Convenience of tracking one’s investment performance on a daily basis.

3. Liquidity

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1. Option to withdraw money after few years (comfort required in case of exigency)

2. Low minimum tenure. 3. Partial / Systematic withdrawal allowed

4. Fund Options 1. A choice of funds (ranging from equity, debt, cash or a

combination) 2. Option to choose your fund mix based on desired asset

allocation

Traditional Plans

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

1. Steady Investment 1. Major chunk of investible funds are in debt instruments 2. Steady and almost assured returns over the long term

2. Features 1. Death benefit is Sum Assured + guaranteed & vested bonus 2. Helps in asset creation as they are for a long tenure 3. Premium to Sum Assured ratios are fixed for each plan and age. 4. Generally withdrawals are not allowed before maturity

Differences

ULIPS Traditional plans

The premium in excess of risk cover

is invested as desired by the

policyholders.

The investment return may vary

according to the market movement

and the investment risk is entirely

borne by the policyholder.

All the premiums go into a common

fund and are invested at the insurers’

discretion.

There are two categories of benefits –

guaranteed and none guaranteed. For

guaranteed return, the investment risk

is born by the insurers. However,

Page 8: Feasibility of Insurance Plans with reference to ICICI Prudential

Withdrawals are allowed. Loss, if any

Depends on NAV loans are not

allowed.

There are no bonuses except loyalty

bonus in some cases.

The amount of the premium used for

insurance coverage other charges and

the purchase of units is unbundled

and transparent.

Benefits are variable.

Loss is likely.

Gains likely depending on market

movements

non-guaranteed benefits such as

bonuses depend on the performance

of the insurer.

Surrenders are allowed but at a loss.

Loans may be provided.

For participating policies bonuses are

paid.

The premium amount used for

insurance coverage other charges and

investment are bundled up and not

known.

Benefits are pre determined

Loss is unlikely.

Gains unlikely except through

bonuses.

IRDA Guidelines regarding ULIP Products

The IRDA has issued various guidelines on various matters related to ULIP.

Some of these are:

Surrender benefit only after third policy anniversary

First partial withdrawal only after third policy anniversary

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SA can be reduced up to the extent of partial withdrawals during

second year prior to death and after age 60.

Lock in period for each top up amount ,for partial withdrawals except

during last three years of contract

Death benefits to be guaranteed

Maturity benefits may be guaranteed, at levels reasonable in relation

to current and long term interest rates scenario

Policy to become paid up ,if there is default in premium after three

years

Opportunity to be given to revive lapsed policy

Auto cover facility allowed for full SA for limited period

No auto cover facility allowed if at least three years premium is not

paid

If policy is not revived ,surrender value to be paid at the end of the

third policy anniversary or end of the revival period whichever is later

No risk cover after policy term

Ways of calculating various charges are stipulated

Governing Body of Insurance Sector:

Insurance act, 1938

The insurance Act 1938,which came into effect from 1st July 1938, and was

amended in1950 and later in 1999,is the principal enactment relating to the

business of insurance in India .The act contains provisions regarding

licensing of agents and their remunerations, prohibition of rebates ,and

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protection of policy holders interests. It also has provisions placing limits on

the expenses of insurers, use of funds and patterns of investments,

maintaining solvency levels, and constitution of insurance Association and

insurance councils and the tariff Advisory committee for general insurance.

Till the constitution of the IRDA by the IRDA act 1999, in the controller of

insurance was responsible for the administration of the insurance act .since

1999, the IRDA has replaced the controller of insurance. The insurance act

vests the IRDA with power to

Register insurance companies and also cancel their registrations

Monitor and certify the soundness of the terms of life insurance

business

Make regulations relating to the conduct of the business of insurance

Inspect documents of insurers

Appoint additional directors ,issue directions

Take over the management of an insurer and appoint administrators

Adjudicate on disputes between insurers and intermediaries or

between intermediaries

Decide on disputes relating to settlement of claims of amounts not

exceeding Rs.2000

By the end of December 2006, the IRDA had issued more then 25

regulations and also issued several guidelines to insurers on a verity of

matters.

Insurance regulatory and development authority

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This act passed in December 1999, provided for the establishment of the

IRDA to the interest of policyholders of insurance policies to regulate,

promote and ensure orderly growth of the insurance industry and for matters

connected therewith or incidental thereto. It also sought to amend the

insurance act, 1938 the life insurance corporation act 1956 and the general

insurance business act, 1972

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

consisting of not more then 25 persons to represent the interest of commerce,

industry, transport, agriculture, consumer forums, surveyors, agents

intermediaries, organizations engaged in safety and loss prevention, research

bodies and employees associations in the insurance sector. It replaces the

controller of insurance to administer the provisions of the insurance act. That

includes registrations, licensing and laying down regulations for the proper

conduct of the business and the protection of the interests of policyholders.

OMBUDSMAN

The governing body of the Insurance Council is authorized by law to appoint

Ombudsmen for the insurance industry. The function of the Ombudsmen is

to resolve complaints in respect of disputes between policyholders and

insurers in cost effective, efficient and impartial manner.

The complaints to the Ombudsmen may relate to partial or total repudiation

of claims any dispute regarding premium paid or payable in terms of the

policy any dispute on the legal construction of the policy relating to claims

delay in settlement of claims non-issue of any insurance document to

customers after receipt of premium.

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The Ombudsman acts as counsel and mediator in matters within its terms of

reference. It has no right to summon witnesses. It is not a judicial authority.

It has to make its decision on the basis of documents submitted to it. The

complainant and the insurer are allowed to make personal submissions. But

lawyers are not permitted to argue the case.

Complaints to the Ombudsman lie only when the insurer had rejected the

complaint or no reply was received within one month of the complaint or the

reply was not satisfactory.

The Ombudsman is expected to make a recommendation within one month

from the date of receipt of complaint. if the complainant accepts this

recommendations, the insurer has to comply within 15 days and inform the

ombudsman accordingly, if the complainant does not accept the

ombudsman’s recommendation, the ombudsman shall pass an award in

writing, stating the amount awarded which shall not be in access of what is

necessary to cover the loss which is suffered by the complainant as a direct

consequences of the insured peril or for an amount not exceeding

RS.2000000, which ever is lower. The award has to be passed within three

months. The complainant has to intimate his acceptance of award within one

month by a letter of acceptance to the insurer and the insurer has to comply

within 15 days and inform the ombudsman. If the complainant does not

intimate acceptance, the award can not be implemented.

Various Terms Involved in Insurance Sector

Caution

Prospects have to be advised always that

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(1) Investments are subject to market risks.

(2) Past performance may not be guide to future performance.

(3) Name given to the various funds options offered under ULIPs do not in

any way indicate the quality of these funds or their future prospects or

returns.

(4) The NAV of the fund may go up and down and the insurer will not be

responsible for the same.

(5) All benefits are subject to tax laws and charges specified by the insurer.

The prospects related to linked insurance plans carry a statutory warning

which says that, unless clearly marked as guaranteed the benefits are not

guaranteed and that the figures of assumed investment returns shown in the

illustrations are not upper or lower limits of what may be got back ,as they

depend on number of factors including future investment performance.

The details mentioned earlier regarding the terms and conditions of these

unit link policies are not applicable in all such policies. Insurers add or

subtract some facilities in order to differentiate their plan in from those of

other insurers. Agents must check with their insurers the details of the plans

on offer.

Claims

A claim is the demand that the insurer should redeem the promise made in

the contract. The insurer has than to perform his part of the contract or settle

the claim, after satisfying him that all the conditions and requirements for

settlement of claim have been complied with. In particular, he should check

Page 14: Feasibility of Insurance Plans with reference to ICICI Prudential

Whether insured event has taken place.

What are the obligations assumed under the contact, which are

required to be performed? These may be payment of bonus, payment

of sum assured in installments waiver of future premiums etc.

Whether the policyholder has performed his part.

Who are the persons entitled to demand performance? Nomination

assignment, income tax notice prohibitory orders, official assignee’s

notice-are all relevant.

Maturity claims

Under endowment type of policies, the SA is to be paid when term of the

policy is over. The date on which the term is complete, is the date of

maturity and the settlement of SA on that date is the maturity claim. The

amount payable on maturity is the SA less and debts like loan and interest or

outstanding premiums. To this bonuses would be added, if it is a with profit

policy.

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

normally sends intimations to the insured in advance. Before paying the

payment, the insurer has to satisfy that:

There are no assignment

The identity of the policy holder is proved

The age stands admitted

The premiums are all paid

The original policy is handed in

The discharge voucher is duly completed.

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The insurer is expected to make payment on maturity date. Post dated

cheques are duly sent to the insured in advance by the insurer, provided the

discharge form is duly received with signature by the company. If the policy

holder dies before the date of maturity, the post dated maturity will be

cancelled by the insurer and a claim by death will be preceded.

Some times the original policy is reported to be lost; caution is to be

exercised to ensure that there is no attempt to defraud. It could have been

pledged elsewhere for a loan. However, if the loss seems to be genuine, it is

possible to settle the claim based on indemnity and an advertisement in the

newspapers, as precaution.

Under MWP act policies, the proceeds of the policy will be paid to the

trustees. If there is no trustee, the official trustee will step in. but if the

beneficiaries are major and competent to contract, payment can be made

directly to them without the intervention of trustees. The policyholder is not

required to sign the discharge form.

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

the assignment is conditional, reverting to the policyholder on the date of

maturity the payment will be made to the policy holder on the date of

maturity. It will be prudent however to check that the assignee has no

outstanding claims.

Some maturity claims may be payable after the date of maturity, but later not

as lump sum; but in installments. While the decision to settle may be taken

on maturity, the settlement process will continue for few years.

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Survival benefit payments

A survival benefit is paid on money beck policy before the date of maturity.

The procedure will be similar as the payment of the maturity claims. Action

will be initiated by the insurer and post dated cheques will be sent by him in

advance to the policyholder.

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

indemnity, as may be done in the cases of maturity. The reason is that when

maturity claims are paid no further obligations are left after that. However,

the policy does not cease to exist after the survival benefits. A duplicate may

be asked for, on which endorsement will be made regarding the settlement of

the survival benefits.

If the life assured dies after the date when survival benefit was due, but

before it is settled, the death claim will be paid to the nominee. But whether

the death claim can be paid to the nominee is not beyond doubt. Some

insurers have taken the view that this is permissible. Another view is that the

survival benefit, already having become due is a debt to the deceased

policyholder and not a claim under the policy and therefore, payable to the

heirs and not to the nominee. This would particularly be so, if the

policyholder has already signed the discharge voucher. There is no doubt

however, if the death occurred before the due date of survival, even if the

discharge voucher had been signed. It is a death claim payable to the

nominee and there is no survival benefit at all.

DEATH CLAIM

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The procedures in settling a death claim are more complex then settling in

maturity claims. This is mainly because, the facts relating to death have to

be established and the identities of the claimants have to be studied. The

death claim action begins with an intimation being received in the insurer’s

office. The intimation may be sent by the nominee assignee employer or by

the relative of the deceased policyholder. These intimations may have very

littlie information; other then the policy number, the name of the life assured

and date of death.

The office need not wait till the intimation of the claim is received. Obituary

columns, or newspaper reports in case of accidents or air crashes may give

information and the claim action can be initiated. However, care has to be

taken to insure that the identity of the deceased is established. A name is not

enough to establish identity.

The following will be necessary before a death claim can settled

Policy document

Deeds of assignment

Proof of age

Certificate of death

Legal evidence of title if the policy is not assigned or nominated

Form of discharge executed and witnessed.

If the claim has occurred within three years from the commencement of

policy or, from a revival, following additional requirements may be called

for, in order to verify the possibility of suppression of material facts at the

time of proposal /revival

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Statement from the last medical attendant giving details of last illness

and treatment

Statement from the hospital, if the deceased had been admitted to a

hospital

Statement from the person who have attended last rites and had seen

the dead body

Statement from the employer, if the deceased was employed ,showing

details of leave

If the life assured has unnatural death such as accident suicide or unknown

causes, police inquest report, panchnama, chemical examiner’s report post

mortem report .coroner’s report etc. would also be looked into. Depending

on preliminary data, a special enquiry can be made.

Claims arising within three years from commencement are looked at more

carefully, because it would be expected that after the underwriter’s scrutiny,

the life assured should have had a longer life span than three years. The

point to check would be whether there had been any suppression of material

facts. If the insurer is satisfied that there has been suppression, the claim will

be repudiated. That means that no claim will be paid.

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

underwriter makes a decision. An early death (within three 3 years) after

that, raises the same issue and will be looked in to more carefully. This need

not be done if the revival was done without reference to state of health.

Page 19: Feasibility of Insurance Plans with reference to ICICI Prudential

CLAIM CONCESSION

There situations when though the policy has lapsed and nothing is payable,

yet the insurer pays the death claim. For example, assume that in a 30year

old endowment policy the last premium is not paid and the policy is in state

of lapse in the last year if the life assured dies a few weeks ago of the

maturity date, it would be wrong to say that death claim is not payable .

There is practically no risk in the last year.

The LIC pays claim in full in the following circumstances after deducting

the outstanding premiums with interest. In both cases, the policy could have

been revived by just paying the arrears of premium and no proof of good

health would have been necessary.

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

of lapse

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

lapse

In cases where premiums are being advanced from surrender value, the

claim amount will be payable in full. The policy is, for all practical

purposes, in full force.

Presumption of death

Proof of death is essential. A death certificate issued by the municipal office

or similar local body is the acceptable proof of death. A certificate of burial

Page 20: Feasibility of Insurance Plans with reference to ICICI Prudential

or cremation can also be obtained. Statements from witnesses to the last rites

will be supporting evidence. In case of accidents, air crashes or on natural

calamities, the bodies may not be found. In such cases, insurers relay on

statements from the carriers or other authorities with relevant information. In

case of defence personnel, a certificate from the commanding officer of the

unit is to be obtained. If a court enquiry is ordered, its findings should be

obtained.

Some times a person is reported missing without any information about his

whereabouts. The Indian evidence act provides for presumption of death in

such cases, if he has not been heard of for seven years. If the nominee or

heirs claim that the life insured is missing and must be presumed to be dead,

insurers insist on a decree of from a competent court. It is necessary that the

premium should be paid until the court decrees presumption of death. The

insurer may also act on its own without a decree of court, if reasonably

strong circumstantial evidence exits to show that the life assured could not

have survived a fatal accident or hazard. Insurers may as a matter of

concession, waive premiums during the seven-year period.

PRECAUTIONS

As per the Indian lunacy act, if a person is mentally deranged, a court of law

is required to appoint a person to act as a guardian to manage the properties

of the lunatic. Where the assured or the person to sign the discharge form .If

the person has insured from the mental disorder, a medical certificate to that

effect, would be necessary. Any order from the court or other judicial

authority with reference to the policy money has to be respected. The insurer

does not have to contest the orders. It is for the claimants to do so.

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Sometimes the court orders may not be appropriate. For example, the policy

moneys under a MWP act policy cannot be attached against the debts of the

life assured. If a court or judicial tribunal passes an order of attachment, the

claimant must get that order vacated. The insurer may present the facts if

called upon to do so.

If the life assured has reported to have died before the maturity date, the

claim has to be treated as a death claim and processed accordingly.

However, if the assured has died after the date of maturity but before the

receipt is discharged, the claim is to be treated as a maturity claim and be

paid to the legal heirs. Death certificate and evidence of title would be

necessary.

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

control regulations.

If the policy belongs to Hindu Undivided Family then the payment will be

made to the karta of the HUF.

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

suspect. Investigations are required as in the case of early claim because

there is possibility of fraud. The plea of ‘time barred’ can be taken if the

reasons for the delay in making the claim are not fully satisfactory.

ACCIDENT AND DISABILITY BENEFITS

These benefits are conditional on conclusive evidence, that all the eligibility

conditions are satisfied and that the exclusions do not apply. The conditions

are that

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The accident must be caused due to external causes violent means not

self inflicted

The death must be a result of injuries caused by the accident

The death must occur within 120 days or such other period as may be

specified

The exclusions may be

International self injury, attempted suicide, insanity,

immorality, intoxication

Accident while engaged in civil aviation or aeronautics other

then as a passenger

Injuries resulting from riots, civil commotion etc.

Claim settlement would require the following documents as

evidences

First information report

Panchnama of accident site police report

Police report

Post mortem report

Chemical examiner’s report, in case of poisoning, drugs,

narcotics

Hospital reports if any

Critical illness claims

The benefits would be payable on satisfactory evidence, in the nature of

hospital and other medical reports, that the conditions of critically, waiting

period and illness are met.

Page 23: Feasibility of Insurance Plans with reference to ICICI Prudential

IRDA regulations

The IRDA regulations stipulate that

The insurer should ask for all the requirements in the case of a death

claim at one time and not piece meal

The decision to admit or to repudiate should be made within 30 days

of receipt of papers

If an investment is necessary, it should be completed within six month

Interest at 2%over the bank rate, will be payable for delays in setting

the death claims

Interest at the saving bank rate will be paid if the insurer is ready to

pay but the claimants are not ready to collect

Policy conditions

The policy states the obligations and rights of the policyholder, as well as

the terms and conditions of the policy. These could differ between insurers

and between plans of the same insurer.

AGE

The policy conditions provide that, if the age of the life assured is found

higher than the age stated in the proposal form, apart from any rights and

remedies available to the insurer, premium at the higher rate will have to be

paid from the commencement, with interest. This is largely redundant

nowadays, as the proof of age is provided with the proposal itself. Even

then, there could be an odd case of the proof of age being found to be false.

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In such cases, the insurer’s rights and remedies would include also the right

to declare the policy ab initio void, on the ground of suppression of material

facts. Age is important not only for calculation of premium but also for

underwriting of risk.

The following are usually accepted as proofs of age

Certified extract from the municipal records

Certificate of baptism

Certified extract from family Bible if it contains date of birth

Certified extract from service register of employer

Passport

Identity card issued by defence department in case of defence

personnel

Marriage certificate issued by roman catholic church

If none of these standard proofs of age are available, horoscopes, self

declaration by way of affidavit, elder’s declaration or certificate by village

panchayat may be accepted as proof of age. These are referred to as non-

standard proofs of age.

DAYS OF GRACE

The policy stipulates that the premium have to be paid in the insurer’s office

on the date specified therein. These dates are called due dates premium may

be paid by any of the normal modes of making payments, which include

cash, cheques, demand draft, postal order, money orders, bankers orders ,etc.

nowadays electronic means of payment are also available for example debit

cards and credit cards. The insurer has the option to decide whether the

collection charges should be collected from the policyholder.

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Premiums are required to be paid on the due dates mentioned on the policy.

Insurers however allowed a grace period for payment of premium. Payment

within the grace period is considered the payment on time. The grace period

would be one month for the entire year, but not less then 30 days. Some

insurers allowed this grace period even for monthly mode. In the case of

SSS, if the premium is deducted by the employer and there is a delay in

remitting the same in insurer’s office, the delay is usually condoned.

If the delays happen frequently, the SSS arrangement may be terminated.

If the premium is not paid within the days of grace, it is considered a default

and the policy is said to be lapsed. If the insured happens to die within the

days of grace and the premium has not been paid, the claim would be

admitted in full and the premium for the current year will be deducted from

the claim amount.

Strictly, the premium is deemed to have been paid only when the cash is

received in the insurer’s office. That means the cheque must be cleared and

proceeds credited into the insurers account. In practice, however the

premium is deemed to be paid when the cheque or demand draft is received.

The ‘RPR’ is issued subject to clearance. Sometimes the insurer may

consider that the premium has been paid, if there is proof that the

policyholder had sent the money, even if it had not been received in the

office. This may be necessary in case of death claims, where the death has

occurred before the premium reached the office. Such proof may be

available in the case of orders. The benefit is given to the policyholder

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because the money towards payment of premium had left his hand and was

in transit.

In India where the area is vast and the numbers of offices of the insurer are

not too many, arrangements are made with the banks for collection of

premium. Such collecting branches send a cheque for the consolidated

amount collected, along with the list of policies, to the specified office of the

insurer at specified intervals. Date of collection by the collecting bank is

considered the actual date of payment of premium.

LAPSE AND NON-FORFEITURE

In terms of the policy conditions, the obligation of the insurer to pay the SA

as stated their in is subject to the premium being paid on the due dates. A

payment within the days of grace period is deemed the payment made on the

due date. If the premium is not received by the insurer within the grace

period then it is assumed that there is a default from the side of the

policyholder. The insurer is entitled to say that the policy has ended. Such

termination is called lapse. No claims arise on the policy after a lapse, and

all premiums are forfeited.

In practice however, insurers do not forfeit all the premiums paid when the

policy lapses. The insurance act does not allow such forfeiture. The reason is

that every policy acquires a reserve because of (1) premiums in the early

years of policy being more then what are justified (2) the savings element in

the premium. It would not be fair to forfeit this reserve.

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The policy conditions provide various safeguards to policyholders, when

there is a premium default. These provisions are called non-forfeiture

provisions. There are various options. One of them is to return the amount to

the policyholder that represents the reserve. This amount is called the

surrender value or the cash value.

The insurance act requires that every policy shall have a guaranteed

surrender value, if at least three years premium have been paid. This

minimum has to be paid to the policyholder. This minimum has to be stated

as part of the policy conditions. Insurers actually pay more then the

guaranteed minimum.

Surrender value or cash value is made available normally when the policy

has remained in force for at least three years; this is so because in the first

year, most of the premium goes out in expenses. There is little left for

accumulation.

The other non-forfeiture options are

Making the policy paid up

Keeping the policy in force through premiums advanced from the

surrender value and

Providing term insurance cover from the surrender value

KEEPING POLICY IN FORCE

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The option of continuing the policy as in full force is made possible by

nationally advancing the premium as a loan from the surrender value.

This can continue as long as the total premiums, advanced is not more then

the surrender value. At the stage when the surrender value is not sufficient to

advance a full settlement of premium, the policy is finally determined and

any surrender value is left over is paid to the policyholder.

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

used to offer the benefit of automatic advance of premium. Its main

advantage is that the insurance cover is fully safeguarded and not reduced;

also the policyholder can pay the premium whenever he is in the position to

do so and the policy will continue to be in force. The interim failure to pay

will have no effect. If the policy is with ‘profits’ it will be entitled to bonus.

However, after some years, if the arrears are not paid and the surrender value

is exhausted, the sense of loss is much more, as little cash is available and

the benefit of cover remains notional and not real. That is why many insurers

prefer to offer paid up option. Some insurers in India offer the automatic

advance of premium option, provided the policyholder specifically asks for

it. Otherwise, the paid up conditions comes into operation. The LIC does not

offer it even as an option.

EXTENDED TERM INSURACE

The third option is of extended term insurance cover. Under this option, the

insurer converts the policy into a single –premium term insurance for the full

SA of the policy for such a period as the net surrender value will purchase,

at the insured age at the time of lapse of the policy. This is similar to the

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second, except the premium advanced from the surrender value is not the

premium due under the policy, but the premium necessary to provide a term

insurance cover equal to the SA. It has the same advantage, of securing

cover, as the second option of automatic advance of premium. The policy

may last for a longer period because the premium advanced is lower. But the

surrender value would not increase as in the second option, as the second

element of the premium is not being advanced

For the full Under the extended term the policy remains In full force SA for

a limited period instead of reduced paid up amount of insurance remaining

in force for the entire policy period as in the first option. Under the last to

options at some time, the amount payable will become zero. In the third

option even if the extended term continues till the original date of maturity,

the amount payable at maturity will not be the SA. At such times, there is

sense of having been “cheated”.

REVIVAL

When a policy lapses, it benefits neither the insurer nor the policyholder.

The insured losses the insurance risks cover for the full amount. It signifies a

reversal of the decision to arrange for the insurance cover and therefore,

exposes the policyholder to possible adverse circumstances it is also a

reflection on the agents’ efforts as it suggests that the policyholder had not

been fully convinced about the usefulness of the insurance plan.

The insurer also loses. The level premium is also based on the assumption

that barring death claims, the policies will run for the full term. The initial

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expenses incurred on proposals are high and the insurer can recover them,

only if the policies remain in full force. Normally people enjoying bad health

are more likely to keep the policy in force, while others with good health

may not value the continuance of policy. In that case, there is adverse

selection. This means that the insurer’s experience and liability is likely to

be greater than what was assumed, while fixing the cost of insurance.

Because lapsation affects both the parties adversely, and because lapsation is

not always intended by insured to happen, insurers make it possible for

lapsed policies to be brought beck into full force. This process is called

revival. Insurers have different schemes of revival; with a view to help,

policyholders revive lapsed policies on easy terms.

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

Arrears of outstanding premiums with interest

Proof of continued good health

A fee for reinstatement or revival, in the case of some insurers

Some insurers do not allow revival, if the policy has remained in lapsed

condition for more then five years. This is because of the possibility that the

arrears of premiums on such a policy would be too heavy and that it would

be better to take out a fresh policy.

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

lapse and according to the SA. Up to six months from the date of lapse, no

proof is necessary. Only the arrears of premium will do. This period of six

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months is extended to 12 months in the case of policies, which have been in

force for at least five years. If the policy is due to mature within a year, then

also only arrears of premium called for.

Where proof of good health is necessary, the nature of proof can be a simple

declaration or an elaborate medical examination with special reports. The

considerations are the same as in the case of fresh proposal for insurance. A

revival is effectively a decision to underwrite a risk, the risk being equal to

the original SA under the policy less the paid up value. The underwriter may

agree to revive as per the original policy terms or on modified terms or even

decline to revive.

This decision is made after examining the risk factors at the time of arrival,

which may have changed since the original policy was taken.

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

alternatives are offered by the LIC to suit the convenience of the

policyholder. Other insurers, in course of time may offer similar convenient

schemes, because revivals are in the interest of all concerned.

The special revival scheme is allowed if

The policy had not acquired any surrender value on the date of lapse

The period expired after lapse is not less then six months and not

more than three years

The policy had not been revived under this scheme before

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On revival under this scheme, there will be a new policy with the same plan

and term as the original policy but with the following changes.

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

duration of lapse, but not more then two years. If the original policy

commenced on 1.10.1999 and had lapsed on 1.1.2001, on revival on

1.7.2001the new date of commencement would be 1.4.2001, 1 year and six

months forward. If the revival was to be done on 1.4.2003, the new date will

be 1.10.2001 and not 1.1.2002.

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

commencement after revival.

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

commencement, age, premium, date of last installment of premium, and

maturity date. The difference between the old premium and the new

premium with interest thereon will have to be paid. The policyholder will be

required to pay the endorsement fee. The revival consideration, in monetary

terms, is quite low under the special revival scheme, as arrears of premium

will not be paid for the entire period of lapse.

Under the installment revival scheme, the policyholder will not be required

to pay the full arrears but only six monthly premiums two quarterly

premiums, one-half yearly premium or half of the yearly premium. The

balance of the arrears will be spread over the remaining due dates in the

policy year current on the date of revival, and two full policy years there

after. This scheme is made available if the policy cannot be revived, under

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the special revival scheme, where the premium is outstanding for more than

one year and no loan is outstanding.

Another scheme is offered is the loan cum revival scheme where under the

arrears required for revival are advanced out of the surrender value of the

policy as a loan under the policy. The policy will be revived immediately

and the loans have to be repaid like any other loan under insurance policies.

If the loan available under the policy is more than the amount required for

revival, the excess may be paid to the policyholder, on request.

If the policy is the money back kind of policy in which a survival kind of

payment is due, the said survival amount can be adjusted towards the

outstanding dues for revival. This is the survival cum revival scheme.

ASSIGNMENT

A life insurance policy is property. It represents rights. It is an actionable

claim as described in the transfer of the property act. 1882. a life insurance

policy forms part of the estate of the policyholder and can be sold,

mortgaged, charged gifted. One of the methods of transfer is the assignment.

An assignment transfers the rights, title and the interest of the assigner to the

assignee. Legal provisions for assignment of insurance policies are available

in almost all the countries. Section 38 of the insurance act 1938 states that

The assignment can be done by an endorsement on the policy or by

the separate deed. When the assignment is made by an endorsement

on the policy itself, no stamp duty is necessary. Separate deeds have

to be stamped.

It must be signed by the transferor or his dully authorized agent

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The signature must be attested by a witness

The assignment is effective as soon as it is executed

It must be sent to the insurer along with a notice

The assignment is effective against the insurer only when the notice

is delivered to the insurer

Where there is more than one instrument, the priority of claims shall

be determined by the order in which the notice are delivered to the

insurer

The person making the assignment should have the right or title to the

property in question. The assigner must be major and competent to contract.

An assignment involving a part of the policy moneys is considered bad in

low. An assignment once made cannot be cancelled or even altered in form,

by the assignor unless the assignee re-assigns the policy.

Assignments are two kinds, absolute and conditional. In cases, all rights,

title and interest of assignor in the policy pass to the assignee. The assignee

becomes the titleholder and can deal with the policy in any manner he likes.

He does not have to take the consent of the assignor. In a condition

assignment, however, the interest in the policy automatically reverts to the

assignor on the occurrence of the specified solution. For example, a

conditional assignment can provide for reversion when the assignee

predeceases the policyholder survive till the date of maturity.

When a policy is taken by the person on the life of another, the proposer is

the policyholder. All rights, interest title in the policy vest in him. The life

assured has no interest in the policy unless the proposer assigns the policy in

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his favor. In case of children’s deferred assurance plans, the life assured can

assign the policy after the vesting date.

NOMINATION

Nomination is the simple way to ensure easy payment of policy moneys in

the case of death claim. As per section 39of the insurance act, 1938 the

holder of the policy on his own life may nominate the person or persons to

Whom the money secured by the policy is to be paid in the event of his

death. This can be made at the time of proposal or at any time during the

currency of the policy. A person having a policy on the life of another,

cannot effect a nomination.

A nomination can be changed by a policyholder by making another

endorsement on the policy. If space is not available on the policy for the

endorsement, nomination can be done on a separate piece of paper.

When a policy is assigned, the existing nomination is automatically

cancelled. The assignee not being the life assured cannot make a nomination.

When the policy is reassigned to the life assured, he will have to make a

fresh nomination.

A nomination gives the nominee only the right to receive the policy moneys

in the event of death of the life assured. A nominee does not have any right

to the whole of the claim. He only has the right to give a valid discharge but

has to hold the moneys on behalf of those entitled to it.

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

policyholder. The appointee must affix his signature to the endorsement

either in the proposal form or on the text of the policy. The life assured has a

right to revoke the appointment of the appointee and appoint a fresh

appointee. The appointee losses his status when the nominee becomes a

major.

When the nominee is a minor and there is no appointee, the claim amount

under the policy cannot be paid to the guardian. It can be paid to the legal

heirs of the deceased life assured.

When the nominees are more than one the policy money are payable to them

jointly or to the survivor. No specific share for each nominee can be made.

To do so would be contrary to the provisions of act, however, nomination in

succession like payable to ‘A’ failing him to ‘B’.

While an assignment automatically cancels a nomination, an assignment

made in the favor of the insurer, in consideration for a loan granted against

the security of the policy, does not cancel the nomination.

If the nominee dies after the death of the life assured, but before the payment

of the death claim, the policy moneys would be part of the estate of the life

assured and would be paid to his representatives. The nomination continues

to be operative on the maturity of the policy, in respect of policies where the

maturity amount is payable in installments after the date of maturity, the

remaining installments can be paid to the nominee. But the nominee has no

right to commute future installments payable.

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SURRENDERS AND LOANS

Surrender is a voluntary termination of the contract, by the policyholder. A

policyholder can surrender the life insurance policy before it becomes a

claim. Surrenders are not allowed unless the policy has run for a minimum

period, which may vary from three to seven years. The amount payable by

the insurer to the policyholder or surrender is called is called the surrender

value or the cash value. Surrender values are published and made known to

policyholders by some insurers either as part of the prospects or by mention

in the policy conditions. Some insurers prefer to announce a guaranteed

surrender value as required by the law, which may be given a percentage of

the premiums paid. The actual surrender value will be higher than the

guaranteed surrender value.

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

percentage of the paid up value. The percentage increases as the duration of

the policy increases. The surrender value on a policy will be more after 15

years compared to the surrender value after 10 years. The percentage

decreases as the term of the policy increases.

In most of life insurance policies, insurers provide the facility of loans.

Loans are given up to 80% or 90%of the surrender value of the policy.

Interest is charged on the loans. They maybe repaid, in full or in part during

the currency of the policy or may remain as a debt on the policies monies

until the claim arises.

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Policies, which do not acquire adequate surrender value, and policies where

there is provision for return of a portion of the SA at periodical intervals, are

not usually eligible for loan facility.

Foreclosure

As the name suggests, foreclosure means writing off or disclosure of current

policy before the date of maturity. When a loan is granted under a policy, the

life assured has a choice to pay the interest or allow it to accumulate to be

adjusted from the policy moneys payable when the claims arises. This is

possible if the premiums are paid regularly and the policy remains in force.

In case of paid up policies, the surrender value will not grow as fast as the

accumulated interest. The principal loan and accumulated interest could

become more then the surrender value at some time. In that case foreclosure

becomes necessary.

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

policyholder calling for the payment of arrears of loan interest. If the interest

is not paid, the policy is foreclosed, which means surrendered to loan. The

foreclosure action is complete when taken into insurer’s office. The balance

surrenders value, if any after adjusting the principal loan and outstanding

loan interest, is paid to the policyholder, after obtaining the discharge

voucher.

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

returned the discharge voucher and collected the balance surrender value.

The procedures will be similar to revival, with evidence of good health also.

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Instead of arrears of premium, the arrears of loan interest will have to be

paid.

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

dies before payment of the balance surrender value, the amount is not

payable to nominee, but only to get legal heirs of the deceased assured.

ALTERATIONS

Insurers allow alterations in the policies that have been issued. Some of the

alterations may be very simple, like change in address, change of mode in

payment of premium, or change in nomination. Some changes may be to

make a participating policy, none participating or vice versa or to break one

policy into two or more policies of smaller SAs. These may affect the

premiums due, but do not affect the risk of the insurer. Other request can be

for significant changes, like in the plan or term or both, changes in SA etc.

the governing principals followed in this matter is that alterations in these

existing policies may be allowed if the risk does not increase.

INDISPUTABILITY OF THE POLICY

If the proposer at the time of proposal has made any untrue or incorrect

statements either in the proposal form or in the personal statement or he has

not disclosed any material information, the policy contract become invalid.

It means that all the benefits under the policy ceases and all moneys paid

there under are forfeited. However, this penalty is subject to section 45 of

the act, 1938. Under this section, a policy, which has been in force for two

years, cannot be disputed on the ground of incorrect statement in the

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proposal form and other documents, unless it is shown to be on a material

matter and fraudulently made. This provision is made to interest of

policyholders.

Documents used in Insurance

An insurance policy is a contract. The stakes in the insurance companies are

very large and those interested in the stakes, many. There could be disputes

involving the insurer and the insured or the insurer and the beneficiaries of

the policy or between the beneficiaries. The terms and conditions of the

policy will provide the grounds to decide the issues in the dispute. These

terms will relate to statements and actions at various times during the course

of the policy. These will have to be proved through documents.

Documentation therefore is important in the life insurance business.

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

Transactions may be rare. If the premiums are paid without any default and

no changes in the nominations etc., are made the policy file may not be

opened until the claim arises after, may be thirty years. In the absence of

proper documentation, it may not be possible to know the dues and the rights

or even the identities of the persons concerned. The various documents

required in insurance business are as follows:

PROPOSAL FORMS

The first document in the insurance file is the proposal or the application for

insurance. It is usual to obtain the proposal in a standardized, printed form.

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This is to be completed by the proposer in his own handwriting and signed

in the presence of a witness. Contract to be deemed valid, requires signatures

to authenticate through witnesses. The proposal form and the statements

therein are important as these statements form the basis of the life insurance

contract. If someone else has filled up the proposal form, the person filling

up the proposal form has to declare that he wrote the answers as dictated by

the proposer, that the questions were read out to him and that he had

understood the answers. If the proposer has answered the questions in a

different language there must be a declaration to the effect that the questions

were explained to him in his own language and the answers were written by

him only after understanding the questions fully. If the proposer is illiterate,

the left thumb impression has to be attested by a third party, who has to give

a declaration that the questions were explained to him and answers dictated

by him were recorded truthfully and were read out to him and were

understood by him. These procedures are important to make the proposer

responsible for the answer in the proposal, which become the basis of the

insurance contract. Otherwise, he may be able to claim later, that he did not

know what was written in the proposal, as somebody else written the

answer.

The proposal form contains a declaration at the end stating that all the

statement there in are true in every respect and that if any untrue averment

be contained there in, the insurer will be entitled to declare the contract as

null and void and forfeit the moneys already paid. The policy document also

refers to this declaration. This declaration makes the principal of utmost

good faith operational. The agent must draw the attention of the proposer to

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this declaration and its importance and insure that there are no untrue

statements in the proposal.

The proposal form will contain information as to the name and address of

the proposer, name of the person to be insured, if different details of the

person to be insured like his occupation and date of birth details about the

insurance required like plan, term and sum assured, riders to be added details

about earlier proposal for insurance. The underwriter looks at these

particulars. If the address is care of somebody, clarification may be asked

for. There could he be a suspicion of moral hazard. The occupation of the

life to be assured would determine the need for occupation extras. The

manner in which the earlier proposals had been accepted does not bind the

underwriter, but provide some guidance. If the earlier policies are not

continuing, there could be doubts about the purpose of the present proposal.

Further particulars required along with the proposal, would include (a)

preferred mode of premium (b) whether the policy should be beck dated, to

get the benefit of the lower age and lower premium (c) employment

particulars to enable deductions and (d) nomination. If the policy is to be

issued under the marriage women property act, then the relevant forms have

to be filled up, stating the beneficiaries and the trustees. These details have

no bearing on the underwriting, but are necessary for preparing the policy

and for making the necessary administrative arrangements for servicing.

PERSONAL STATEMENT

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The personal statement is to be completed along with the proposal. This asks

for particulars about the state of health of the person proposed to be insured,

his family history, medical consultation, and illness, absence from work due

to medical grounds, etc. If the proposal is to be considered as a non-medical

case, particulars will be required about the employer. If the person is a

female, additional questions will have to be answered. All these details are

used for underwriting purposes. The declaration at the end of the proposal

form applies to the statements in the personal statements as well. Incorrect

statements can nullify the contract.

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

or because the underwriter asks for it, the medical report and any other

special reports, become parts of the documentation.

Under the regulations issued by IRDA in April 2002, a copy of the proposal

is to be supplied to the policyholder within 30 days of the completion of the

contract. Some insurers attach photocopies of the proposal to the policy

itself.

The medical reports submitted by the agent or other officials of the insurer

are confidential and will not be made available to the proposer. Though the

data in those documents are taken in to account by the underwriter, they do

not form the basis of the contract. The proposer is not responsible for and is

not bound by the data in those documents.

First Premium Receipt

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The underwriter’s decision on the proposal may be to accept at OR

otherwise. If it is accepted at OR, the policy can be commenced

immediately, provided the full premium has been paid along with the

proposal. The FPR will be issued. If the acceptance is not at OR, the

proposer has to agree to the modified terms of the policy. In addition, pay

the balance premium if any, before the FPR can be issued. The IRDA

regulations require that the decision on the proposal form should be made by

the insurer within 15 days.

The FPR is the evidence that the insurance contract has begun. The policy

document, which is the evidence of the contract, may be issued only after

some time. If the claim arises before the policy is issued, but after the FPR is

issued, the insurer is liable. Once the policy document is issued, that

becomes the proof that the cover has begun and that the first premium has

paid. The FPR becomes irrelevant.

The FPR will state that the proposal for insurance has accepted and that the

premium has been received. It will give the particulars of the policy, such as

policy number, date of commencement of risk, date of maturity, date of

payment of premium, premium amount, mode, name and address of the life

assured. The date on which the next premium is due is also stated.

The date of issue of FPR is the date on which the premium is adjusted in the

books of the insurer. Until then, the money remains deposits. This date is

effectively the date on which the liability of the insurer begins.

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The FPR, and later the policy also may show another date as the date of

commencement. This would be an earlier date, chosen for the benefit of the

lower premium, corresponding to a lower age. An insurer agrees to such

requests for backdating, to a date within the financial year. The premium due

dates and the policy anniversary will be reckoned based on such back dated

date. This date of commencement is only notional, because there is no risk

cover till the date of the issue of the FPR. In the case of the policy, which is

backdated, the FPR may acknowledge more then one installment premium.

This depends on the extent of dating back and the mode of the premium.

Strictly, the issue of the FPR signifies the conclusion of the contract and it is

binding on both the parties. However the regulations issued by the IRDA,

provide that the policyholder has the option to withdraw from the contract

within 15 days of the issue of the policy. He will then be entitled to refund

of the premium paid, less cost of risk for the short period and expenses

towards medical examination and stamp duty. This period of 15 days is

called “the free lock in period” or “cooling off period”.

RENEWAL PREMIUM RECEIPT

When the policyholder pays the premiums due under the policy subsequent

to the issue of the FPR, RPR are issued. These RPR are important to prove

payments, as default can lead to termination of the contract. Disputes may

arise as to whether a particular payment has made or not. If such disputes are

raised at the time of the claim, the respective RPR will provide conclusive

evidence. The adjustments of such subsequent premiums do not constitute

conclusive evidence. This is because insurers do adjust later payments

leaving gaps for earlier defaults to be collected at the time of claim.

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Renewal receipts are not issued in respect of policies under SSS. The

consolidated cheque received from the employer is adjusted as one

transaction. Individual policyholders do not get receipts. Salary slips would

show deduction of premium from salary. A certificate from the employer

about the deductions having been made and sent to the insurer should also

suffice.

Policyholders tend to argue that the SSS arrangement is between the insurer

and the employer and that he, the policyholder, is not responsible for any

default. This argument is not valid. The employer is not the agent of the

insurer. The insurer is providing a facility to its employees. The employer

will not have any control if the salary is not paid any time because of strike

or leave or termination of employment. The insurer may not be informed

about it. The employee has to make sure that the deductions are made, and if

not done for any reason, to arrange separately for payment.

Electronic system is being developed for payment of premium. These

include electronic clearing systems direct debit to the bank account or

payments through the internet.

POLICY DOCUMENT

The policy document is the most important document. It is the evidence of

the contract. It is prepared to reflect the terms of the contract. If the original

policy is lost it won’t affect the insurance contract. A duplicate policy will

be issued on request.

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Pre-printed policy forms containing standard policy conditions and

schedules are used. Clauses and liens may be separately typed and pasted on

the policy document. The policy document is to be signed by the competent

authority and stamped, according to the Indian stamp act new technology

may enable insurers to avoid pre printed forms and print a policy every time,

with appropriate schedules and terms, including terms and clauses.

The preamble to the policy states that the proposal and the declaration

signed by the party form the basis of the contract. The operative clause lays

down the mutual obligation of the parties regarding payment of premiums

and payment of SA on the happening of the insured event and on production

of age proof and title of the claimant. The schedule gives all essential

particulars of the policy like dates of commencement on maturity, SA,

nominee, premiums special clauses, if any, riders, and exclusions or liens

etc. The terms and conditions will refer to the days of grace for payment of

premium, availability of loan, etc.

Instructions issued by the IRDA require that the policy information

statement should be issued with every policy, stating

The facility available for mode and periodicity of payment of

premium

Person or office to be contacted for any service or enquiry relating to

the policy

Importance of intimating change of address of policyholder and

nominee

Availability of mechanisms to address grievances

Information on location of insurance ombudsman

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ENDORSEMENT

In a pre-printed policy form, the standard policy conditions and privileges

are printed. If any of them need modification, in keeping with the terms of

acceptance, endorsements are attached to the policy. If a condition in the pre

–printed policy is not applicable, the same will be cancelled by rubber-

stamping the clause accordingly. If individual policies are printed by

computers, such endorsements and cancellation may be avoided.

During the currency of the policy, alterations may be affected, in age, plan

or term, SA, mode of premium payment, etc. separate endorsement will be

placed on and kept alone attached to the policy document, to indicate such

changes.

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

the back of the policy itself as endorsements. Assignment can also be made

on the back of the policy document. If made on separate stamped deeds, then

these deeds as well as the notices issued to the insurer become important

document.

RENEWAL AND BONUS NOTICES

Reminders to policyholders regarding premiums due, are not important

document they have no significance after the premium is paid. Receipt of the

notice is also not essential for payment of premium. Similarly, bonus

intimation notices are also not important. The bonus data is updated in the

insurers file automatically. The policyholder will know about bonus

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declarations through news items and advertisements in media, much earlier.

The IRDA has stipulated that once a year, the insurer should inform the

policyholder about the status of policy.

PROSPECTS

The IRDA regulations as amended in October 2002, stipulate that the

prospectus or brochure issued by the insurer, should explicitly state the

scope of benefits, conditions, warranties, entitlement, exceptions, right for

participation in bonus, etc. under each plan of insurance. If the right to

participate in bonus is deferred for some time after commencement of the

policy, the fact should be explicitly stated.

ICICI Prudential – The Company

ICICI Prudential Life Insurance Company is a joint venture between ICICI

Bank - one of India's foremost financial services companies-and Prudential

plc - a leading international financial services group headquartered in the

United Kingdom. Total capital infusion stands at Rs. 37.72 billion, with

ICICI Bank holding a stake of 74% and Prudential plc holding 26%.

 

ICICI Prudential began their operations in December 2000 after receiving

approval from Insurance Regulatory Development Authority (IRDA).

Today, its nation-wide team comprises of over 954 branches in addition to

1,015 micro-offices, over 296,000 advisors; and 21 bancassurance partners.

 

ICICI Prudential was the first life insurer in India to receive a National

Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. For three

years in a row, ICICI Prudential has been voted as India's Most Trusted

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Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg

survey of 'Most Trusted Brands'. As the company grew its distribution,

product range and customer base, it continued to tirelessly uphold the

commitment to deliver world-class financial solutions to customers all over

India.

Promoters of ICICI Prudential Company

ICICI Ltd Bank – 74% stakeholder of ICICI Prudential

ICICI Ltd was established in 1955 by the World Bank, the Government of

India and the Indian Industry, to promote industrial development of India by

providing project and corporate finance to Indian industry.

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

conglomerate and has become one of the largest public financial institutions

in India. ICICI has financed all major sectors of the economy, covering

6,848 companies and 16,851 projects. In the fiscal year 2000-2001, ICICI

had disbursed a total of Rs 319.65 billion.

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

Bank. Some of ICICI's spectrum of activities include: 

* Commercial Banking - ICICI Bank, India's first internet bank. 

* Information Technology - ICICI Infotech, transaction processing, software

development 

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* Investment Banking - ICICI Securities, one of the key players in the Indian

Capital Markets 

* Mutual Fund - Prudential ICICI AMC, leading private sector mutual fund

player in India 

* Venture Capital - ICICI Venture, leading private equity investor with

focus on IT and HealthCare 

* Retail Services - ICICI PFS, Marketing and Distribution of Retail Asset

Products 

* Distribution - ICICI Capital, Distribution and Servicing of Retail Liability

Products 

ICICI is listed on the Indian Stock Exchanges and on the New York Stock

Exchange (NYSE). On September 22, 1999, it became the first Indian

company to be listed on the NYSE (symbol: IC and IC.D). This has been

followed by the listing of ICICI Bank on NYSE (symbol: IBN) on March

28, 2000.

Prudential plc. – 26% stake holder of ICICI Prudential

Prudential plc was founded in 1848. Since then it has grown to become one

of the largest providers of a wide range of savings products for the

individual including life insurance, pensions, annuities, unit trusts and

personal banking. It has a presence in over 15 countries, and caters to the

financial needs of over 10 million customers. It manages assets of over US$

259 billion (Rupees 11, 39,600 crores approx.) as of December 31, 1999.

Prudential plc. had its presence in Asia for the past 75 years catering to over

1 million customers across 11 Asian countries. 

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Prudential is the largest life insurance company in the United Kingdom

(Source: S&P's UK Life Financial Digest, 1998). Asia has always been an

important region for Prudential and it has had a presence in Asia for over 75

years. In fact Prudential's first overseas operation was in India, way back in

1923 to establish Life and General Branch agencies.

In the US, Prudential owns Jackson National Life, one of the leading life

insurance companies. Prudential controls approximately 4% of all the listed

shares on the second largest stock exchange in the world, the London Stock

Exchange, making it one of the largest institutional investors in the UK.

Prudential is focused on the internet generation and is one of the first

financial service organizations to use the internet on a fully integrated basis. 

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

internet. Unusually titled as "egg". The bank has in a short span of its

existence become a leading banking service provider in the UK. Infect in the

first six months of its existence it garnered over 5 billion (US$ 8 billion) in

deposits from over 500,000 customers.  

Development of superior products and services that offer value for money

and security while producing superior financial returns enables Prudential to

maximize the value of its shareholder's investment and to establish lasting

relationships with customers and policy holders.

Vision & Values of ICICI Prudential Company

Vision

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To be the dominant Life, Health and Pensions player built on trust by world-

class people and service. This we hope to achieve by:

Understanding the needs of customers and offering them superior

products and service

Leveraging technology to service customers quickly, efficiently and

conveniently

Developing and implementing superior risk management and

investment strategies to offer sustainable and stable returns to our

policyholders

Providing an enabling environment to foster growth and learning for

our employees 

And above all, building transparency in all our dealings

 

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

to 5 core values -- Integrity, Customer First, Boundary less, Ownership and

Passion. Each of the values describes what the company stands for, the

qualities of our people and the way we work.

 

We do believe that we are on the threshold of an exciting new opportunity,

where we can play a significant role in redefining and reshaping the sector.

Given the quality of our parentage and the commitment of our team, there

are no limits to our growth.

Values

Page 54: Feasibility of Insurance Plans with reference to ICICI Prudential

Every member of the ICICI Prudential team is committed to 5 core values:

Integrity, Customer First, Boundary less, Ownership, and Passion. These

values shine forth in all we do, and have become the keystones of our

success.

Insurance Products of the ICICI Prudential

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

1. Insurance Solution for Individual2. Group Insurance Solutions

Insurance Solutions for Individuals

 

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

centric products that meet the needs of customers at every life stage. Its

products can be enhanced with up to 4 riders, to create a customized solution

for each policyholder.

 

Savings & Wealth Creation Solutions

1. Save'n'Protect is a traditional endowment savings plan that offers life

protection along with adequate returns.

2. CashBak is an anticipated endowment policy ideal for meeting

milestone expenses like a child's marriage, expenses for a child's

higher education or purchase of an asset. It is available for terms of 15

and 20 years.

3. LifeTime Gold & LifeTime Plus are unit-linked plans that offer

customers the flexibility and control to customize the policy to meet

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the changing needs at different life stages. Each offer 6 fund options -

Preserver, Protector, Balancer, Maximiser, Flexi Growth and Flexi

Balanced.

4. LifeLink Super is a single premium unit linked insurance plan which

combines life insurance cover with the opportunity to stay invested in

the stock market.

5. Premier Life Gold is a limited premium paying plan specially

structured for long-term wealth creation.

6. InvestShield Life New is a unit linked plan that provides premium

guarantee on the invested premiums and ensures that the customer

receives only the benefits of fund appreciation without any of the risks

of depreciation.

7. InvestShield Cashbak is a unit linked plan that provides premium

guarantee on the invested premiums along with flexible liquidity

options.

8. LifeStage RP is a unique and powerful wealth creation insurance

solution, which combines the benefits of automatic asset allocation

and quarterly rebalancing along with increased protection.

Protection Solutions

1. LifeGuard is a protection plan, which offers life cover at low cost. It

is available in 3 options - level term assurance, level term assurance

with return of premium & single premium.

2. HomeAssure is a mortgage reducing term assurance plan designed

specifically to help customers cover their home loans in a simple and

cost-effective manner.

 

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Education insurance plans

1. Education insurance under the Smart Kid brand provides guaranteed

educational benefits to a child along with life insurance cover for the

parent who purchases the policy. The policy is designed to provide

money at important milestones in the child's life. Smart Kid plans are

also available in unit-linked form - both single premium and regular

premium.

 

Retirement Solutions

1. Forever Life is a traditional retirement product that offers guaranteed

returns for the first 4 years and then declares bonuses annually.

2. LifeTime Super Pension is a regular premium unit linked pension

plan that helps one accumulate over the long term and offers 5 annuity

options (life annuity, life annuity with return of purchase price, joint

life last survivor annuity with return of purchase price, life annuity

guaranteed for 5, 10 and 15 years & for life thereafter, joint life, last

survivor annuity without return of purchase price) at the time of

retirement.

3. LifeLink Super Pension is a single premium unit linked pension

plan.

4. Immediate Annuity is a single premium annuity product that

guarantees income for life at the time of retirement. It offers the

benefit of 5 payout options.

5. PremierLife Pension is a unique and convenient retirement solution

with a limited premium paying term of three or five years, to suit

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professionals and businessmen, especially those who require more

flexibility and customization while planning their finances.

 

Health Solutions

1. Health Assure Plus: Health Assure is a regular premium plan which

provides long term cover against 6 critical illnesses by providing

policyholder with financial assistance, irrespective of the actual

medical expenses. Health Assure Plus offers the added advantage of

an equivalent life insurance cover.

2. Cancer Care: is a regular premium plan that pays cash benefit on the

diagnosis as well as at different stages in the treatment of various

cancer conditions.

3. Cancer Care Plus: is a wellness plan that includes all the benefits of

Cancer Care and also provides an additional benefit of free periodical

cancer screenings.

4. Diabetes Care: Diabetes Care is a unique critical illness product

specially developed for individuals with Type 2 diabetes and pre-

diabetes. It makes payments on diagnosis on any of 6 diabetes related

critical illnesses, and also offers a coordinated care approach to

managing the condition. Diabetes Care Plus also offers life cover.

5. Diabetes Care Plus: is a unique insurance policy that provides an

additional benefit of life cover for Type 2 diabetics and pre-diabetics

6. Hospital Care: is a fixed benefit plan covering various stages of

treatment - hospitalization, ICU, procedures & recuperating

allowance. It covers a range of medical conditions (900 surgeries) and

has long term guaranteed coverage up to 20 years.

Page 58: Feasibility of Insurance Plans with reference to ICICI Prudential

7. Crisis Cover: is a 360-degree product that will provide long-term

coverage against 35 critical illnesses, total and permanent disability,

and death.

Group Insurance Solutions

 

ICICI Prudential Life also offers Group Insurance Solutions for companies

seeking to enhance benefits to their employees.

 

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

helps employers fund their statutory gratuity obligation in a scientific

manner. The plan can also be customized to structure schemes that

can provide benefits beyond the statutory obligations.

 

2. Group Superannuation Plan: ICICI Prudential Life offers both

defined contribution (DC) and defined benefit (DB) superannuation

schemes to optimize returns for the members of the trust and

rationalize the cost. Members have the option of choosing from

various annuity options or opting for a partial commutation of the

annuity at the time of retirement.

 

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

existing superannuation customers, we offer immediate annuities to

superannuation funds not managed by us.

 

Page 59: Feasibility of Insurance Plans with reference to ICICI Prudential

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

solution helps provide affordable cover to members of a group. The

cover could be uniform or based on designation/rank or a multiple of

salary. The benefit under the policy is paid to the beneficiary

nominated by the member on his/her death.

 

 

Flexible Rider Options

 

ICICI Prudential Life offers flexible riders, which can be added to the basic

policy at a marginal cost, depending on the specific needs of the customer.

 

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

accident during the term of the policy, the beneficiary receives an

additional amount equal to the rider sum assured under the policy. If

an accident results in total and permanent disability, 10% of rider sum

assured will be paid each year, from the end of the 1st year after the

disability date for the remainder of the base policy term or 10 years,

whichever is lesser. If the death occurs while travelling in an

authorized mass transport vehicle, the beneficiary will be entitled to

twice the sum assured as additional benefit.

2. Critical Illness Benefit: protects the insured against financial loss in

the event of 9 specified critical illnesses. Benefits are payable to the

insured for medical expenses prior to death.

3. Waiver of Premium: In case of total and permanent disability due to

an accident, the future premiums continue to be paid by the company

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till the time of maturity. This rider is available with Smart Kid,

LifeTime Plus, LifeTime Super and LifeTime Super Pension.

4. Income benefit rider: In case of death of the life assured during the

term of the policy, 10% of the sum assured is paid annually to the

nominee on each policy anniversary till the maturity of the rider.

Edge of ICICI Prudential

The ICICI Prudential edge comes from our commitment to our customers, in

all that we do - be it product development, distribution, the sales process or

servicing. Here's a peek into what makes us leaders.

 

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

understanding of customers' needs. It is this research that helps us develop

Education plans that offer the ideal way to truly guarantee your child's

education, Retirement solutions that are a hedge against inflation and yet

promise a fixed income after you retire, or Health insurance that arms you

with the funds you might need to recover from a dreaded disease.

 

2. Having the right products is the first step, but it's equally important to

ensure that our customers can access them easily and quickly. To this end,

ICICI Prudential has an advisor base across the length and breadth of the

country, and also partners with leading banks, corporate agents and brokers

to distribute our products.

 

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

ICICI Prudential business. With clear guidelines in place, we ensure

equitable costing of risks, and thereby ensure a smooth and hassle-free

claims process.

 

4. Entrusted with helping the customers meet their long-term goals, they

adopt an investment philosophy that aims to achieve risk adjusted returns

over the long-term.

 

5. Last but definitely not the least, ICICI Prudential 28,000 plus strong team

is given the opportunity to learn and grow, every day in a multitude of ways.

This belief keeps them engaged and enthusiastic, so that they can deliver on

promises to cover people, at every step in life.

Competitors of ICICI Prudential

ING Vysya Life Insurance

Life Insurance Corporation of India

Max New York Life Insurance Company Ltd

HDFC Standard Life Insurance Company Limited

OM Kotak Mahindra Life Insurance Company Ltd.

SBI Life Insurance Company Limited

Tata AIG Life Insurance Company

Birla Sun Life Insurance Company Limited

Page 62: Feasibility of Insurance Plans with reference to ICICI Prudential

MetLife India Insurance Company Pvt. Ltd.

Bibliography

Www.prudential.co.uk

Www.iciciprulife.com

Www.insure2bsecure.com/insure/information

IC 33 Life Insurance author S. Balachandran

Brochure of ICICI Prudential