Life Insurance in India

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LIFE INSURANCE IN INDIA

CHAPTER 1

INTRODUCTION TO

INSURANCE

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INTRODUCTION:

Basics of Insurance:

Meaning of Insurance:

Insurance provides financial protection against a loss arising out of happening of an uncertain

event. A person can avail this protection by paying premium to an insurance company.

A pool is created through contributions made by persons seeking to protect themselves from

common risk. Premium is collected by insurance companies which also act as trustee to the pool.

Any loss to the insured in case of happening of an uncertain event is paid out of this pool.

Insurance works on the basic principle of risk-sharing. A great advantage of insurance is that it

spreads the risk of a few people over a large group of people exposed to risk of similar type.

Definition

Insurance is a contract between two parties whereby one party agrees to undertake the risk of

another in exchange for consideration known as premium and promises to pay a fixed sum of

money to the other party on happening of an uncertain event (death) or after the expiry of a

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certain period in case of life insurance or to indemnify the other party on happening of an

uncertain event in case of general insurance.

The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is

covered is known as the 'insured' or 'assured'.

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Concept of Insurance / How Insurance Works?

The concept behind insurance is that a group of people exposed to similar risk come together and

make contributions towards formation of a pool of funds. In case a person actually suffers a loss

on account of such risk, he is compensated out of the same pool of funds. Contribution to the

pool is made by a group of people sharing common risks and collected by the insurance

companies in the form of premiums.

Let’s take some examples to understand how insurance actually works:

Example 1 & 2:

SUPPOSE

Houses in a village = 1000

Value of 1 House = Rs. 40,000/-

Houses burning in a yr = 5

Total annual loss due to fire = Rs. 2, 00,000/-

Contribution of each house owner = Rs. 300/- SUPPOSE

Number of Persons = 5000

Age and Physical condition = 50 years & Healthy

Number of persons dying in a yr = 50

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Economic value of loss suffered by family of each dying person Rs. 1, 00,000/-

Total annual loss due to deaths = Rs.50, 00,000/-

Contribution per person = Rs. 1,200/-

UNDERLYING ASSUMPTION:

All 1000 house owners are exposed to a common risk, i.e. fire UNDERLYING ASSUMPTION

All 5000 persons are exposed to common risk, i.e. death

PROCEDURE:

All owners contribute Rs. 300/- each as premium to the pool of funds

Total value of the fund = Rs. 3, 00,000 (i.e. 1000 houses * Rs. 300)

5 houses get burnt during the year

Insurance company pays Rs. 40,000/- out of the pool to all 5 house owners whose house got

burnt PROCEDURE

Everybody contributes Rs. 1200/- each as premium to the pool of funds

Total value of the fund = Rs. 60, 00,000 (i.e. 5000 persons * Rs. 1,200)

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50 persons die in a year on an average

Insurance company pays Rs. 1, 00,000/- out of the pool to the family members of all 50 persons

dying in a year

EFFECT OF INSURANCE:

Risk of 5 house owners is spread over 1000 house owners in the village, thus reducing the

burden on any one of the owners. EFFECT OF INSURANCE

Risk of 50 persons is spread over 5000 people, thus reducing the burden on any one person.

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CHAPTER 2

HISTORY OF INSURANCE

IN INDIA

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HISTORY OF INSURANCE IN INDIA:

Insurance is a subject listed in the concurrent list in the Seventh Schedule to the Constitution of

India where both centre and states can legislate. The insurance sector has gone through a number

of phases and changes. Since 1999, when the government opened up the insurance sector by

allowing private companies to solicit insurance and also allowing foreign direct investment of up

to 26%, the insurance sector has been a booming market. However, the largest life-insurance

company in India is still owned by the government.

Ref: IRDA/GEN/06/2007 Date: 12-07-2007

In India, insurance has a deep-rootedhistory. It finds mention in the writings of Manu

(Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings talk in

terms of pooling of resources that could be re-distributed in times of calamities such as fire,

floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient

Indian history has preserved the earliest traces of insurance in the form of marine trade loans and

carriers’ contracts. Insurance in India has evolved over time heavily drawing from other

countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the Oriental

Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the

Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870

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saw the enactment of the British Insurance Act and in the last three decades of the nineteenth

century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in

the Bombay Residency. This era, however, was dominated by foreign insurance offices which

did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and

London Globe Insurance and the Indian offices were up for hard competition from the foreign

companies.

In 1914, the Government of India started publishing returns of Insurance Companies in India.

The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life

business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to

collect statistical information about both life and non-life business transacted in India by Indian

and foreign insurers including provident insurance societies. In 1938, with a view to protecting

the interest of the Insurance public, the earlier legislation was consolidated and amended by the

Insurance Act, 1938 with comprehensive provisions for effective control over the activities of

insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a

large number of insurance companies and the level of competition was high. There were also

allegations of unfair trade practices. The Government of India, therefore, decided to nationalize

insurance business.

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An Ordinance was issued on 19 th January, 1956 nationalizing the Life Insurance sector and

Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian,

16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The

LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

The history of general insurance dates back to the Industrial Revolution in the west and the

consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a

legacy of British occupation. General Insurance in India has its roots in the establishment of

Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian

Mercantile Insurance Ltd was set up. This was the first company to transact all classes of general

insurance business.

1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of

India. The General Insurance Council framed a code of conduct for ensuring fair conduct and

sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency

margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalization) Act, general

insurance business was nationalized with effect from 1st January, 1973. 107 insurers were

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amalgamated and grouped into four companies, namely National Insurance Company Ltd., the

New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India

Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a

company in 1971 and it commence business on January 1sst 1973.

This millennium has seen insurance come a full circle in a journey extending to nearly 200

years. The process of re-opening of the sector had begun in the early 1990s and the last decade

and more has seen it been opened up substantially. In 1993, the Government set up a committee

under the chairmanship of R.N. Malhotra, former Governor of RBI, to propose recommendations

for reforms in the insurance sector.

The objective was to complement the reforms initiated in the financial sector

The committee submitted its report in 1994 wherein, among other things, it recommended that

the private sector be permitted to enter the insurance industry. They stated that foreign

companies are allowed to enter by floating Indian companies, preferably a joint venture with

Indian partners.

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Following the recommendations of the Malhotra Committee report, in 1999, the Insurance

Regulatory and Development Authority (IRDA) was constituted as an autonomous body to

regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in

April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance

customer satisfaction through increased consumer choice and lower premiums, while ensuring

the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application for

registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the

power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000

onwards framed various regulations ranging from registration of companies for carrying on

insurance business to protection of policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India were

restructured as independent companies and at the same time GIC was converted into a national

re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.

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The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938

and has from 2000 onwards framed various regulations ranging from registration of companies

for carrying on insurance business to protection of policyholders’ interests.

Today there are 24 general insurance companies including the ECGC and Agriculture

Insurance Corporation of India and 23 life insurance companies operating in the country.

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together

with banking services, insurance services add about 7% to the country’s GDP. A well-developed

and evolved insurance sector is a boon for economic development as it provides long- term funds

for infrastructure development at the same time strengthening the risk taking ability of the

country.

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CHAPTER 3

PURPOSE AND NEED OF

INSURANCE

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PURPOSE AND NEED OF INSURANCE

The business of insurance is related to the protection of the economic value of assets. Every asset

has value. The asset would have been created through the efforts of the owner, in the expectation

that, either through the income generated there from or some other output, some of his needs

would be met. In the case of a factory or a cow, the production is sold and income generated. In

the case of a motorcar, it provides comfort and convenience in transportation. There is no direct

income. There is normally expected life time for the asset during which time it is expected to

perform. The owner, aware of this, can so manage his affairs that by the end of that life time, a

substitute is made available to ensure that the value or income is not lost.

However, if the assert gets lost earlier, being destroyed or made non functional, through an

accident or other unfortunate event, the owner and those deriving benefits there from suffer.

Insurance is mechanism that helps to reduce such adverse consequences.

Assets are insured, because they are likely to be destroyed or made non-functional through an

accidental occurrence. Such possible occurrences are called perils. Fire, floods, breakdowns,

lightning, earthquakes, etc, are perils. The damage that these perils may cause the asset, is the

risk.

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The risk only means that there is possibility of loss or damage. It may or may not happen. There

has to be uncertainty about the risk. Insurance is done against the contingency that it may

happen. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the

occurrence of an event, it cannot be insured against.

There are other meanings of the term ‘risk’. To the ordinary man in the street risk means

exposure to danger. In insurance practice risk is also used to refer to the peril or loss producing

event. For example, it is said that fire insurance covers the risks of fire, explosion, cyclone, flood

etc. again, it is used to refer to the property covered by insurance.

For example, a timber construction is considered to be a bad risk for fire insurance purpose.

Here the term risk refers to the subject matter of insurance.

Conceptually the mechanism of insurance is very simple. People who are exposed to the same

risks come together and agree that, if any one of the members suffers a loss, the others will share

the loss and make good to the person who lost. All people who send goods by ship are exposed

to the same risk related to water damage, ship sinking, piracy, etc. those owning factories are not

exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms,

earthquakes, lightening, burglary, etc. like this, different kinds of risks can be identified and

separate groups, made including those exposed to such risks. By this method, the risk is spread

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among the community and the likely big impact on one is reduced to smaller manageable

impacts on all.

The manner in which the loss is to be shared can be determined beforehand. It may be

proportional to the likely loss that each person is likely to suffer, which is indicative of the

benefit he would receive if the peril befell him. The share could be collected from the members

after the loss has occurred or the likely shares may be collected in advance, at the time of

admission to the group. Insurance companies collect in advance and create a fund from which the

losses are paid.

A human life is also an income generating asset. This asset also can be lost through unexpectedly

early death or made non-functional through sickness and disabilities caused by accidents.

Accidents may or may not happen. Death will happen, but the timing is uncertain. If it happens

around the time of one’s retirement, when it could be expected that the income will normally

cease, the person concerned could have made some other arrangements to meet the continuing

needs. But if it happens much earlier when the alternate arrangements are not in place, insurance

is necessary to help those dependent on the income.

In the case of a human being, he may have made arrangements for his needs after his retirement.

Those would have been made on the basis of some expectations like he may live for another 15

years, or that his children will look after him. If any, of these expectations do not become true,

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the original arrangement would become inadequate and there could be difficulties. Living too

long can be as much a problem as dying too young. These are risks which need to be safeguarded

against. Insurance takes care.

Insurance does not protect the asset. It does not prevent it loss due to the peril. The peril cannot

be avoided through insurance. The peril can sometimes be avoided through better safety and

damage control management. Insurance only tries to reduce the impact of the risk on the owner

of the asset and those who depend on that asset. It compensates, may not be fully, the losses.

Only economic or financial losses can be compensated.

The concept of insurance has been extended beyond the coverage of tangible assets. Exporters

run the risk of the importers in the other country defaulting as well as losses due to sudden

changes in currency exchange rates, economic policies or political disturbances. These risks are

now insured. Doctors run the risk of being charged with negligence and subsequent liability for

damages. The amounts in question can be fairly large, beyond the capacity of individuals to bear.

These are insured.

Thus, insurance is extended to intangibles. In some countries, the voice of a singer or the legs of

a dancer may be insured; even through the advantages of spread may not be available in these

cases.

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Satisfaction of economic needs requires generation of income from some source. If the property,

which is the source of such income, is lost fully or partially, permanently or temporarily, the

income too would stop. The purpose of insurance is to safeguard against such misfortunes by

making good the losses of the unfortunate few, through the help of the fortunate many, who were

exposed to the same risk but saved from the misfortune. Thus the essence of insurance is to share

losses and substitute certainty by uncertainty

There are certain basic principles which make it possible for insurance to remain popular and a

fair arrangement. The first is the fact that people are exposed to risks and that the consequences

of such risks are difficult for anyone individuals to bear. It becomes bearable when the

community shares the burden.

The second is that no one person should be in a position to make the risk happen. In other

words, none in the group should set fire to his assets and ask others to share the costs of damage.

This would be taking unfair advantage of as arrangement put into place to protect people from

the risks they are exposed to. The occurrence has to be random, accidental and not the deliberate

creation of the insured person.

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Insurance Education Society:

National Insurance Academy, Pune is apex education and capacity builder institute in India and

only one in Africa and Asia. NIA was founded as Ministry of Finance initiative with capital

support from the then public insurance companies, both Life (LIC) and Non-Life (GIC, National,

Oriental, and United New India). NIA has 32 acre campus&30+ faculty member imparting

training, conducting research and providing consulting services in insurance sector. NIA run 2

year PGDM (Insurance) to mould youth in insurance specialization.

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CHAPTER 4

ACTS OF INSURANCE

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ACTS OF INSURANCE

The insurance sector went through a full circle of phases from being unregulated to completely

regulate and then currently being partly deregulated. It is governed by a number of acts.

The Insurance Act of 1938 [1] was the first legislation governing all forms of insurance to

provide strict state control over insurance business.

Life insurance in India was completely nationalized on January 19, 1956, through the Life

Insurance Corporation Act. All 245 insurance companies operating then in the country were

merged into one entity, the Life Insurance Corporation of India.

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The General Insurance Business Act of 1972 was enacted to nationalize the about 100 general

insurance companies then and subsequently merging them into four companies. All the

companies were amalgamated into National Insurance, New India Assurance, Oriental Insurance

and United India Insurance, which were headquartered in each of the four metropolitan cities.

Until 1999, there were not any private insurance companies in India. The government then

introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-

regulating the insurance sector and allowing private companies. Furthermore, foreign investment

was also allowed and capped at 26% holding in the Indian insurance companies.

In 2006, the Actuaries Act was passed by parliament to give the profession statutory status on

par with Chartered Accountants, Notaries, Cost Works Accountants, Advocates, Architects and

Company Secretaries.

A minimum capital of US$ 20 million (Rs.100 Crore) is required by legislation to set up an

insurance business.

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INDUSTRY STRUCTURE OF INSURANCE:

Currently India is a US$ 41 billion industry. Currently, in India only two million people (0.2 %

of the total population of 1 billion) are covered under Medi claim, whereas in developed nations

like USA about 75 % of the total population is covered under some insurance scheme. With

more and more private companies in the sector, the situation may change soon.

Specialization:

ECGC, ESIC and AIC provide insurance services for niche markets. So, their scope is limited by

legislation but enjoy special powers.

INSURANCE AS A SOCIAL SECURITY TOOL:

Feb 17th, 2010.

The United Nations Declaration of Human Rights 1948 provides that “Everyone has a right to a

standard of living adequate for the health and well being of himself and his family, including

food, clothing, housing and medical care and necessary social services and the right to security in

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the event of unemployment, sickness, disability, widowhood or other lack of livelihood in

circumstances beyond his control.

When the bread winner dies, to that extent the family’s income dies. The economic condition of

the family is affected, unless other arrangements come into being to restore the situation. Life

insurance provides such an alternate arrangement. If this did not happen, another family would

be pushed into the lower strata of society. The lower strata create a cost on society. Life

insurance helps to reduce such costs. In this sense, the life insurance business is complimentary

to the state’s efforts in social management

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As per the law and the directions of the regulatory authorities, insurance companies in country

are obliged to extend insurance benefits to economically weaker sections of the society in the

unorganized sector.

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CHAPTER 5

WHAT IS LIFE

INSURANCE?

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WHAT IS LIFE INSURANCE?

Life insurance is an agreement between you and the life insurance company. You agree to make

certain payments to the insurance company. The insurance company agrees to pay a sum of

money to a person of your choosing if you die.

How life insurance works?

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In life insurance there are four roles: the life insurance company, the policy owner, the insured

individual, and the beneficiary. (Technically, the last three roles can all be filled by the same

person. Also, a single policy may cover more than one insured and may have more than one

beneficiary.)

The life insurance company pledges to pay a death benefit to the policy's beneficiary upon the

death of the insured, so long as the policy is in force at the time of death. The policy owner is

responsible for paying premiums in order to maintain the policy in force.

The purposes of life insurance:

The most common purpose of life insurance is to protect the finances of one’s family or friends

in case of a wage-earner's death, but that's not its only use. Life insurance can be used:

*. To hire childcare to replace a home-maker's contribution

*. For estate protection

*. For mortgage protection

*. To fund a retirement

*. To protect a business against the loss of a key employee

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*. As an employment benefit.

For further detail, see “Many purposes of life insurance.”

Types of life insurance:

Life insurance is understood best by dividing all types of life insurance into three categories:

term life insurance, whole life insurance, and universal life insurance.

Term life insurance requires fixed payments on a fixed schedule and provides coverage for a

fixed duration (e.g. 10 years). The policy only pays a death benefit if the insured individual dies

before the policy expires.

Whole life insurance requires fixed payments on a fixed schedule. These policies guarantee

coverage up to a certain age (usually 100 years of age). These policies guarantee a death benefit,

so even if the insured individual outlives the policy, a death benefit will still be paid. These

policies carry cash value, which means that they can be liquidated.

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Universal life insurance allows payments of any amount at any time (up to certain government-

stipulated maximums). Coverage from these policies can be maintained indefinitely. These

policies carry cash value, which means that they can be liquidated.

Choosing the right life insurance policy:

Three questions present difficulty foremost life insurance buyers:

1. How big of a death benefit do I need?

2. How long do I need coverage?

3. Where should I buy life insurance?

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* How to shop for life insurance?

1. Most people need a death benefit as large as 8 to 12 times their annual income. To fine-

tune this estimate, use an online life insurance calculator.

2. Wage-earners need coverage for at least as long as they expect to be gainfully employed.

Homemakers need coverage for at least as long as there are dependents that need care in

the home (children, invalids,etc.).

3. Look for an independent agent/agency those contracts with 20 or more reputable life

insurance companies. For signs to help you recognize good agencies and good life

insurance companies, see “How-to choose a life insurance agency “and" How to choose a

life insurance carrier ."

The process of buying life insurance:

Most purchases are as simple as finding the right merchant and paying him or her, but buying life

insurance is a longer process because insurance companies face a different risk (cost) for each

person they insure. Here are the steps a life insurance buyer typically undertakes (we can work

out an alternative in some cases):

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1. Compare life insurance quotes from various insurers. You can compare from many insurers at

once by using an online quote at an independent agency.

2. Complete an application. Our custom at Wholesale Insurance is to fill out the application for

you, gathering the necessary information through a phone conversation. Then we send you the

paperwork to review and sign.

3. Undergo a medical exam. The insurance company collects data about your mortality risk by

sending a medical examiner to your home or office, free of charge.

4. Wait for underwriting. For most applications, the insurer requires several weeks to collect and

evaluate data from your physician and perhaps other sources of information. This step is

bypassed for guaranteed issue life insurance.

5. Accept an offer. If the insurer is willing to accept your risk, it will send you an offer. To put

your contract in force, sign the offer and return it with your first premium payment. Until you do

so, there is never an obligation to buy.

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Elements of a life insurance policy:

Need detail on a specific aspect of a life insurance policy?

*. Cash value — an interest-bearing savings account included in permanent life insurance

policies.

*. Death benefit — a payment or series of payments made to a life insurance policy's

beneficiaries upon the death of the policy's insured individual(s).

*. Health class — an insurer's evaluation of an individual's health. This datum is used to

calculate the individual's mortality risk.

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*. Premium — A payment from the policy owner to the insurance company.

*. Quotes — Life insurance quotes are price estimates made before the application process.

*. Rate — the price required to maintain a life insurance policy.

*. Rate class — (see health class)

*. Riders — you can add features to your policy by attaching a document called a "rider."

*. Taxes — Life insurance is generally free of income tax.

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CHAPTER 6

TYPES OF LIFE

INSURANCE PRODUCTS

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TYPES OF LIFE INSURANCE PRODUCTS:

Term Assurance

Whole of Life Assurance

Endowment Assurance

Annuities

- Fixed Annuities

- Variable Annuities

Non Traditional Covers

Types of Life Insurance Products (Term Assurance):

Based on the benefit patterns the traditional Life Insurance products can be categorized into the

following types:

Term Insurance

Whole Life Insurance

Endowment Insurance

Annuities.

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Term Insurance provides for life insurance protection for the selected term (period of years)

only. In case the person (whose life is insured) dies during the term, the benefits are payable

under the policy and in case of his survival till the end of the selected term the policy normally

expires without any benefit becoming payable. Term insurance may be regarded as temporary

insurance and is more nearly comparable with "Property & Casualty insurance" contracts than

the other forms of Life insurance contracts.

Whole of Life Assurance:

As the name suggests, the whole life insurance policies are intended to provide Life Insurance

protection over one's lifetime. The essence of whole life insurance is that it provides for payment

of the assured amount upon the insured's death regardless of when it occurs. Under these

policies, the payment of the assured sum is a certainty in contrast to the term insurance contracts.

Only the time of payment of the assured sum is an uncertainty.

Whole life policies can be either participating type or non-participating type. Participating type

policies are those which are entitled to a share in the distributable surplus (profits) of the Life

Insurance Company, whereby the cash value of the policy can go up, with the announcement of

bonus / dividend. Non-participating policies have the same benefit throughout the life of the

policy.

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There can be the following types of whole life policies:

1. Ordinary Whole Life Insurance

2. Limited Payment Whole Life Insurance

3. Convertible Whole Life Insurance

Endowment Insurance:

These are the most commonly sold policies. These policies assure that the benefits under the

policy will be paid on the death of the life insured during the selected term or on his survival to

the end of the term. Hence the assured benefits are payable either on the date of maturity or on

death of the life insured, if earlier.

Endowment policies assist in providing for the payment of a lump sum amount for a specific

purpose, say, provision for retirement, meeting the needs of the child etc. The money required

for the purpose will be built up whether the person is alive till that date or not. Like whole life

insurance policies, endowment policies can also be of participating and non-participating types.

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Annuities:

An annuity is a series of periodic payments. An annuity contract is an insurance policy, under

which the annuity provider (insurer) agrees to pay the purchaser of annuity (annuitant) a series of

regular periodical payments for a fixed period or during someone's life time.

Classification of Annuities: Annuities can be classified on the basis of

The number of lives covered

Single

Joint

The beginning of the payment of annuity

Immediate annuity

Deferred annuity

Method of premium payment

Single premium

Regular installment

Non Traditional Covers

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Universal Life Insurance (ULI) is another non-traditional type of Life Insurance introduced in

the United States in the year 1979, which had an adjustable face value (insurance coverage),

floating interest rates based on market conditions and unbundling of savings and protection

elements of Life Insurance. After paying an initial minimum premium, policy owners may

thereafter pay whatever amount and at whatever times they wish, or even skip premium

payments, provided the cash value will cover policy charges. Similarly they had the option to

raise or reduce the face value of the Insurance policy.

For increasing the insurance coverage proof of continued insurability was insisted. Under this

type of policy (ULI), the policyholder pays an initial premium, which should not be less than a

minimum for the given face value and the attained age of the Life to be insured. From this

premium payment, the mortality charge for the first period and the expenses charges will be

deducted and the balance will be the policy's cash value. To this cash value a certain interest

(depending upon the rate of interest prevailing in the market) will be credited at the end of the

period.

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WHAT DOES PREMIUM MEAN?

1. The total cost of an option.

2. The difference between the higher prices paid for a fixed-income security and the security's

face amount at issue.

3. The specified amount of payment required periodically by an insurer to provide coverage

under a given insurance plan for a defined period of time. The premium is paid by the insured

party to the insurer, and primarily compensates the insurer for bearing the risk of a payout should

the insurance agreement's coverage be required.

Investopedia explains Premium:

1. The premium of an option is basically the sum of the option's intrinsic and time value. It is

important to note that volatility also affects the premium.

2. If a fixed-income security (bond) is purchased at a premium, existing interest rates are lower

than the coupon rate. Investors pay a premium for an investment that will return an amount

greater than existing interest rates.

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3. A common example of an insurance premium comes from auto insurance. A vehicle owner

can insure the value of his or her vehicle against loss resulting from accident, theft and other

potential problems. The owner usually pays a fixed premium amount in exchange for the

insurance company's guarantee to cover any economic losses incurred under the scope of the

agreement.

WHAT IS REINSURANCE?

The practice of insurers transferring portions of risk portfolios to other parties by some form of

agreement in order to reduce the likelihood of having to pay a large obligation resulting from an

insurance claim.

The intent of reinsurance is for an insurance company to reduce the risks associated with

underwritten policies by spreading risks across alternative institutions.

Also known as "insurance for insurers" or "stop-loss insurance".

Reinsurance is a form of insurance. A reinsurance contract is,Legally an insurance contract. The

reinsurer agrees to indemnify,

The decant insurer for a specified share of specified types of insurance.

Claims paid by the cadent for a single insurance policy,

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Or for a specified set of policies. The terminology used is that,The reinsurer assumes the liability

ceded on the subject policies.

The session, or share of claims to be paid by the reinsurer, maybe defined on a proportional share

basis (a specified percentage,Of each claim) or on an excess basis.

The nature and purpose of insurance is to reduce the financial, Cost to individuals, corporations,

and other entities arising, From the potential occurrence of specified contingent events.

An,insurance company sells insurance policies guarantying that the,insurer will indemnify the

policyholders for part of the financial,losses stemming from these contingent events. The pooling

of,liabilities by the insurer makes the total losses more predictable,than is the case for each

individual insured, thereby reducing,the risk relative to the whole. Insurance enables individuals,

corporations,and other entities to perform riskier operations. This,increases innovation,

competition, and efficiency in a capitalistic,marketplace..

Investopedia explains Reinsurance:

Overall, the reinsurance company receives pieces ofa larger potential obligation in exchange for

some of the money the original insurer received to accept the obligation.

The party that diversifies its insurance portfolio is known as the ceding party. The party that

accepts a portion of the potential obligation in exchange for a share of the insurance premium is

known as the reinsurer.

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The intent of reinsurance is for an insurance company to reduce the risks associated with

underwritten policies by spreading risks across alternative institutions.

WHAT DOES INSURANCE CLAIMS MEANS?

A formal request to an insurance company asking for a payment based on the terms of the

insurance policy. Insurance claims are reviewed by the company for their validity and then paid

out to the insured or requesting party (on behalf of the insured) once approved.

Investopedia explains Insurance Claim:

Insurance claims cover everything from death benefits on life insurance policies to routine health

exams at your local doctor. In many cases, claims are filed by third parties on behalf of the

insured person, but usually only the person(s) listed on the policy is entitled to claims payment.

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CHAPTER 7

INSURANCE COMPANIES

IN INDIA

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INSURANCE COMPANIES IN INDIA:

List of insurance companies in India:

IRDA controls all the Insurance business in India. They are setting structure and boundaries for

the insurance companies to act upon. Starting from licensing to approving the products, IRDA

directs the companies in India. They also protect customer interests in the country.

Insurance Institute of India:

As per current guidelines issued by IRDA, Insurance Companies are not permitted to invest in

Indian Depository Receipts (IDR), while they are permitted to invest in Equity shares/ Bonds/

Debentures. IRDA needs to remove this disparity to open up investment opportunity by INS

Companies and thereby also enhance the liquidity of IDRs (Contributed by Sanjay Banka, FCA

FCS)

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LIST OF THE COMPANIES IN INDIA:

In India, Insurance is a national matter, in which life and general insurance is yet a booming

sector with huge possibilities for different global companies, as life insurance premiums account

to 2.5% and general insurance premiums account to 0.65% of India's GDP.

The Indian Insurance sector has gone through several phases and changes, especially after 1999,

when the Govt. of India opened up the insurance sector for private companies to solicit

insurance, allowing FDI up to 26%. Since then, the Insurance sector in India is considered as a

flourishing market amongst global insurance companies. However, the largest life insurance

company in India is still owned by the government.

The history of Insurance in India dates back to 1818, when Oriental Life Insurance Company

was established by Europeans in Kolkata to cater to their requirements. Nevertheless, there was

discrimination among the life of foreigners and Indians, as higher premiums were charged from

the latter. In 1870, Indians took a sigh of relief when Bombay Mutual Life Assurance Society,

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the first Indian insurance company covered Indian lives at normal rates. Onset of the 20th

century brought a drastic change in the Insurance sector.

In 1912, the Govt. of India passed two acts - the Life Insurance Companies Act, and the

Provident Fund Act - to regulate the insurance business. National Insurance Company Ltd,

founded in 1906, is the oldest existing insurance company in India. Earlier, the Insurance sector

had only two state insurers - Life Insurers i.e. Life Insurance Corporation of India (LIC), and

General Insurers i.e. General Insurance Corporation of India (GIC).In December 2000, these

subsidiaries were de-linked from parent company and were declared independent insurance

companies: Oriental Insurance Company Limited, New India Assurance Company Limited,

National Insurance Company Limited and United India Insurance Company Limited.

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ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT:

For economic development, investments are necessary. Investments are made out of savings. A

life insurance company is a major instrument for the mobilization of savings of people,

particularly from the middle and lower income groups. These savings are channeled into

investments for economic growth.

An insurance company’s strength lies in the fact that huge amounts come by way of premiums.

Every premium represents a risk that is covered by that premium. In effect, therefore, these vast

amounts represent pooling of risks. The funds are collected and held in trust for the benefit of the

policy holders.

The management of insurance companies is required to keep this aspect in mind and make all its

decisions in ways that benefit the community. This applies also to its investments. This is why

successful insurance companies would not be found investing in speculative ventures. Their

investments benefit the society the society at large.

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The system of insurance provides numerous direct and indirect benefits to the individual and his

family as well as to industry and commerce and to the community and the nation as a whole.

Those who insure, both individuals and corporate, are directly benefited because they are

protected from the consequences of the loss that may be caused by the accident or fortuitous

event. Insurance, thus, in a sense protects the capital in industry and releases the capital for

further expansion and development of business and industry.

The very existence of risk that is, uncertainty concerning the future, isa severe handicap in

economic activities. Insurance removes the fear, worry and anxiety associated with this future

uncertainty and thus encourages free investment of capital in business enterprises and promotes

efficient use of existing resources. Thus insurance encourages commercial and industrial

development and there by contributes to a vigorous economy and increased national

productivity.

Present day organization of industry, commerce and trade depend entirely on insurance for their

operation, banks and financial institutions lend money to industrial and commercial undertakings

only on the basis of the collateral security of insurance. No bank or financial institution would

advance loans on property unless it is insured against loss or damage by insurable perils.

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Insurers are closely associated with several agencies and institutions engaged in fire loss

prevention, cargo loss prevention, industrial safety and road safety.

Before acceptance of a risk, insurers arrange survey and inspection of the property to be insured,

by qualified engineers and other experts. The object of these surveys is not only to assess the risk

for rating purposes but also to suggest and recommend to the insured, various improvements in

the risk, which will attract lower rates of premium and what is more important , reduce the loss

potential. For example, burglary surveyors make recommendation in regard to security measures

such as better locking system, appointment of Watchman, etc. Engineering surveys play a most

useful part in accident prevention as valuable technical advice is provided in respect of plant and

machinery.

Insurance ranks with export trade, shipping and banking services as earner of foreign exchange

to the country. It helps to earn foreign exchange and represent invisible exports.

Contributions of Insurance toGrowth and Development:

Insurance serves a number of valuable economic functions that are largely distinct from other

types of financial intermediaries. In order to highlight specifically the unique attributes of

insurance, it is worth focusing on those services that are not provided by other financial services

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providers, excluding for instance the contractual savings features of whole or universal life

products.

The indemnification and risk pooling properties of insurance facilitate commercial transactions

and the provision of credit by mitigating losses as well as the measurement and management of

non diversifiable risk more generally. Typically insurance contracts involve small periodic

payments in return for protection against uncertain, but potentially severe losses. Among other

things, this income smooth in effect helps to avoid excessive and costly bankruptcies and

facilitates lending to businesses. Most fundamentally, the availability of insurance enables risk

adverse individuals and entrepreneurs to undertake higher risk, higher return activities than they

would do in the absence of insurance, promoting higher productivity and growth.

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CHAPTER 8

LIFE INSURANCE

CORPORATION OF INDIA

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LIFE INSURANCE CORPORATION OF INDIA

(L.I.C)

Type:

Government-owned Corporation

Industry:

Insurance

Founded:

1 September 1956

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Headquarters:

Mumbai, India.

Key people:

D. K. Mehrotra, T.S.Vijayan( Chairman ), Thomas Mathew, Nihar Ranjan Guha, R Gopalan,

Yogesh Lohia, S. Sridhar, and A.K.Dasgupta (MD)

Products:

Life insurance.

Pensions.

Mutual funds.

Total assets:

13.25 trillion (US$ 295.48 billion)

Owner(s):

Government of India

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Employees:

115,966 (2010)

Subsidiaries:

LIC Housing Finance Limited

LIC Cards Services Limited

LIC Nomura Mutual Fund

LIC(Nepal)Ltd

LIC(Lanka)Ltd

LIC(International)BSC(C)

Website:

www.licindia.in

http://www.licindia.in/

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The Life Insurance Corporation of India (LIC) (Hindi: भारतीयजीवनबीमानिनगम ) is the largest state-

owned life insurance company 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$ 295.48 billion).

[1] It was founded in 1956 with the merger of 243 insurance companies and provident societies.

[2] Headquartered in Mumbai, financial and commercial capital of India,

[ 3 ] the Life Insurance Corporation of India currently has 8 zonal 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 slogan of LIC is "Zindagi ke saath bhi,Zindagi ke baad bhi" ( Hindi : ज़ि�न्दगीकेसाथभी,

ज़ि�न्दगीकेबादभी ) which means "during life and after life".

BASIC INTRODUCTION OF L.I.C.:

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Overview:

The largest life insurance company in India, Life Insurance Corporation is fully owned by the

government. It provides individual life insurance, group insurance and pension plans. Its

subsidiaries include Life Insurance Corporation of India International, LIC Nepal, LIC Lanka,

LIC Housing Finance and LICHFL Care Homes. It has over 12 million policy holders and over 9

lakh agents. It has underwritten more than 120 million policies.

LIC saw computers in 1964. Today the company is on the Internet and is utilizing Information

Technology in servicing its clients. It has bagged various award including Loyalty Awards 2008

in Insurance Sector, NDTV Profit Business Leadership Award – 2007, CNBC Awaaz Consumer

Awards 2007 and Outlook Money NDTV Profit Awards 2007.

LIC provides a rewarding career as sales agents. It offers world class training, freedom to work

and unmatched financial strength.

LIC of India:

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Is India's largest life insurance company.

Offers over 50 plans to cover your lifeat various stages.

Has over 12 million policy holders and over 9 lakh agents. It has underwritten more than 120

million policies.

Has a life fund to the tune of Rs 2,270,090 million (as on 31st March 2002)

Has 2,048 branch offices (all computerized) of which, over 1,500 are networked.

Company Overview:

Life Insurance Corporation of India offers life insurance products. Its products include children

plans, plans for handicapped dependents, endowment assurance policies, plans for high worth

individuals, money back plans, special money back plans for women, whole life plans, term

assurance plans, joint life plans, and decreasing term assurance to cover home loan repayment.

The company also offers pension plans, unit plans, special plans, and group schemes. Life

Insurance Corporation sells its products through authorized banks and service providers. The

company was founded in 1956 and is based in Mumbai, India with a representative office in

Singapore. It has operations in the Middle East, Mauritius, Fiji, and Nepal, as well as in London,

the United Kingdom.

Life Insurance Corporation of India:

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Life Insurance Corporation of India is the largest and oldest insurance company in India. LIC

had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate office

in the year 1956.

Life Insurance Corporation of India is the dominant life insurer even after the post liberalization

of life insurance in India. LIC has issued over one crore policies during 2007 itself. At present

Life Insurance Corporation of India functions with 2048 fully computerized branch offices, 100

divisional offices, 7 zonal offices and the corporate office.

LIC connects all the branches through Metro Area Network. LIC in collaboration with some

Banks and Service providers offer on-line premium collection facility in selected cities. LIC also

has ECS and ATM premium payment facility which is an addition to the customer convenience.

There are on-line Kiosks and IVRS of Life Insurance Corporation of India. Information Centers

have been opened in big cities like Mumbai, Ahmadabad, Bangalore, Chennai, Hyderabad,

Kolkata, New Delhi, Pune and many other cities as well. For providing easy access to the

policyholders, LIC has launched Satellite Sampark offices. The digitalized records of the satellite

offices will provide many conveniences in the future.

Each and every individual has different insurance needs and requirements. LIC's Insurance plans

and policies cater to the need of every one. From different available options you can choose the

one that fulfills your requirement.

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Children Plans of LIC:

*. Jeevan Anurag

*. Komal Jeevan

*. Jeevan Kishore

*. Child Career Plan

*. Child Future Plan

*. Jeevan Chhaya Plans for Handicapped Dependent Persons of LIC

*. Jeevan Aadhar

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*. Jeevan Vishwas Endowment Assurance Plans of LIC

*. Jeevan Anand

*. Jeevan Amrit

*. Jeevan Mitra Money Back Plan of Life Insurance Corporation of India

*. Jeevan Surabhi

*. Bima Bachat Whole Life Plans of LIC

*. Amulya Jeevan

*. Anmol Jeevan Joint Life Plan of LIC

*. Jeevan Sathi.

HISTORY OF LIFE INSURANCE CORPORATION OF INDIA:

The Oriental Life Insurance Company, the first corporate entity in India offering life insurance

coverage, was established in Calcutta in 1818 by Bipin Bernard Dasgupta and others. Europeans

in India were its primary target market, and it charged Indians heftier premiums.

The Bombay Mutual Life Assurance Society, formed in 1870, was the first native insurance

provider. Other insurance companies established in the pre-independence era included

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Bharat Insurance Company (1896)

United India (1906)

National Indian (1906)

National Insurance (1906)

Co-operative Assurance (1906)

Hindustan Co-operatives (1907)

Indian Mercantile

General Assurance

Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic conditions. It witnessed, India's

First War of Independence, adverse effects of the World War I and World War II on the

economy of India, and in between them the period of worldwide economic crises triggered by the

Great depression. The first half of the 20th century also saw a heightened struggle for India's

independence. The aggregate effect of these events led to a high rate of bankruptcies and

liquidation of life insurance companies in India. This had adversely affected the faith of the

general public in the utility of obtaining life cover.

NATIONALIZATION OF L.I.C.:

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In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by owners of private

insurance companies. In the ensuing investigations, one of India's wealthiest businessmen, Ram

Kishan Dalmia , owner of the Times of India newspaper, was sent to prison for two years.

Eventually, the Parliament of India passed the Life Insurance of India Act on 1956-06-19, and

the Life Insurance Corporation of India was created on 1956-09-01, by consolidating the life

insurance business of 245 private life insurers and other entities offering life insurance services.

Nationalization 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 seventeen sectors of the economy, including the life insurance.

Insurance's Role in Financial Plan:

Insurance is one of life's necessities and probably the least-understood financial product.

Insurance reimburses people for covered losses in the event of an unfortunate occurrence such as

an illness, accident, or death. At the same time, it can encourage prevention and safety measures,

provide investment capital, lend money, and help to reduce anxiety for society at large.

As a mechanism against loss of income and a means of safeguarding assets, most Americans

have insurance in one form or another. These coverage's may include public coverage, such as

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disability insurance under Social Security, a health care policy from an employer, or personal

insurance to protect property such as computers, homes, and cars.

You may save money in your pension and other investments and have capital in your home. But

if you don’t know exactly what your life insurance policy covers or have only glanced at your

employer-provided health and disability insurance policies, you're neglecting an important aspect

of your financial plan.

Until something happens, such as a car accident, an illness, or the death of a loved one, paying

for insurance may seem like buying something you'll never use. But even if you never submit a

claim, insurance is an investment in your future, as important as pensions and personal

investments. Indeed, many financial planners argue that you should have an adequate insurance

safety net in place before considering investment strategies.

The function of insurance is to protect you against losses you can't afford. This is done by

transferring the risks of a person, business, or organization -- the "insured" -- to an insurance

company, or "insurer." The insurer then reimburses the insured for "covered" losses - i.e., those

losses it pays for under the policy's terms.

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As the insurance consumer, you pay an amount of money, called a premium, to the insurer to

transfer the risk. The insurer pools all its premiums into a large fund, and when a policyholder

has a loss, the insurer draws funds from the pool to pay for the loss.

Life is full of unexpected events that can create large financial losses. For example, whenever

you drive, it is possible that you may have a costly accident. Risks affect you by causing worry

about potential loss and how to deal with the consequences. Insurance reduces anxiety over a

possible loss and absorbs the financial brunt of its consequences.

However, while insurance coverage is essential, how much and what type of insurance people

need differ with each individual.

You must decide how much risk you're willing to tolerate without insurance. For example,

benefits for disability policies typically begin after a waiting period of one to six months.

Therefore, you should ensure that you have some form of coverage or financial resources before

the policyperiod begin.

LIC GOLDEN JUBILEE FOUNDATION:

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LIC as a responsible Corporate Citizen has been fulfilling its social responsibilities from time to

time. In fact, most of our investments are geared towards industrial growth, infrastructure growth

and national development.

We have been donating various amounts to social causes/community development in different

parts of the country. We have also been contributing to Prime Ministers’ National Relief Fund,

Chief Ministers’ Relief Funds of various states as also Rajiv Gandhi Foundation to help relief

measures in case of calamities such as Earthquake, Tsunami etc.

With a view to channelize our social responsibilities and give a formal shape to the same we

have formed a Public Trust named ‘LIC Golden Jubilee Foundation’.

The main objectives of the Golden Jubilee Foundation are:

Relief of poverty or distress.

Advancement of Education

Medical Relief

The advancement of any other object of general public utility.

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An important development in the role of corporate houses has been the increasing focus on their

corporate social responsibility. Corporate Social Responsibility is the continuing commitment by

business to behave ethically and contribute to economic development while improving the

quality of the workforce as well as of the local community and society at large.

The concept of corporate social responsibility (CSR) is not new to Indian companies. However,

what is new is the way it has caught on with Corporate in India and the direct involvement of

employees in implementation of these projects. Dedicated departments in many organizations are

looking into much more than just funding or getting involved in one-time projects.

CSR activities have their advantages. The benefits are in terms of building a positive image,

encouraging social involvement of employees, which in turn develops a sense of loyalty for the

organization. CSR activities help bond employees as a team with the organization, which, in turn

helps in creating a dedicated workforce that is proud of its employer.

However, one of the biggest advantages of such activities is the creating of an internal brand

among employees. Employees feel a sense of pride when they are involved in such activities.

Besides, with hectic work schedules, these activities help in de-stressing employees and create a

much involved and conscious person.

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The Foundation has been created with an initial corpus of Rs.50 Crore with the provision that

Rs.10 Crore will be infused every year for the next five years taking the total corpus to Rs.100

crore.

The Foundation has been registered with the Charity Commissioner Mumbai and we have also

got exemption under Section 80G of Income Tax.

Divisions have been advised to send proposals that come under the purview of the objectives as

mentioned above.

The activities in the areas selected will be planned in a way that encourages maximum employee

participation and involvement.

An important development in the role of corporate houses has been the increasing focus on their

corporate social responsibility. Corporate Social Responsibility is the continuing commitment by

business to behave ethically and contribute to economic development while improving the

quality of the workforce as well as of the local community and society at large.

LIC is one of the largest families in India consisting of over 1 lac employees and 11 lac agents.

Our geographical spread and reach is pervasive. Our brand immediately evokes the feeling of

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trust. The Golden Jubilee Foundation would provide a great avenue of fulfilling our social

responsibility at the corporate level and our philanthropic needs at the individual level.

HOW L.I.C WORKS?

Many consumers wonder, what is term life insurance and how does term life insurance work?

For many, finding term life insurance information to answer these and other questions is a

challenge.

Term life insurance provides coverage for a pre-defined period of time, or "term." The amount of

the premiums can be fixed and remain unchanged for the duration of the term. While the length

of the term and other specifics vary, the death benefit in a term life policy can stay the same for

as long as 30 years. Term life coverage tends to be less expensive than whole or universal life

coverage and is favored by consumers who know they want life insurance only for a specified

period of time.

There are five main types of term life insurance:

*. Renewable

*. Level

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*. Decreasing

*. Convertible

*. Return of Premium

Renewable Term- A renewable term life insurance policy continues in force for a

specified term or terms, usually in increments of one or five years. It can be renewed

without the insured having to undergo a medical examination or provide other evidence

of good health or insurability each year. The premium for a renewable term policy

generally is based on the insured’s current or attained age.

Level Term- Level term life insurance policies provide a fixed amount of coverage with

premiums that remain stable over a certain period of time, usually in five- to 10-year

increments. Common durations for level term insurance include:

1) 10-year term

2)15-year term

3)20-year term

4)25-year term

5)30-year term

There are also policies that set the term to a specified age (usually 65).

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Decreasing Term- A decreasing term life insurance policy provides benefits that

gradually decrease in value over the term of the coverage. The monthly premiums will

remain the same, but the amount of coverage provided will go down in value. Many

policy holders use benefits from decreasing term insurance coverage to pay off

mortgages, which also tend to gradually decrease over time.

While the length of the term and other specifics vary, the death benefit in a term life

policy can stay the same for as long as 30 years. Term life coverage tends to be less

expensive than whole or universal life coverage and is favored by consumers who know

they want life insurance only for a specified period of time.

Convertible Term- Convertible term life insurance gives policyholders the right to

exchange their term policy for a permanent or cash-value policy, without a required

medical exam or other evidence of insurability

Many people purchase convertible term life insurance when they are younger, because

the premiums are cheaper than standard term life policies but the coverage generally is

the same

Later in life, convertible term policy holders may find the coverage is no longer enough

to adequately protect them, so they decide to convert their coverage and upgrade to a

permanent or cash-value term policy.

However, bear in mind that converting a term policy to a type of permanent life insurance

generally results in a higher monthly premium. Also, the amount of time allowed by

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carriers to convert policies is shorter than the duration of the term coverage, so be careful

not to let a conversion deadline pass.

Return of Premium (ROP)-In most types of term life insurance, if an insured has not

filed a claim by the time the policy term expires, there is no refund of monthly premiums

paid during the term. However, return of premium term life insurance gives back to

policyholders the amount of premiums paid at the end of the policy term, minus any

administrative charges, fees, or other costs.

Monthly premiums for return of premium insurance policies are often significantly higher

than for policies without the repayment feature and generally, insured parties are required

to keep the policy in force to the end of the term or forfeit the return of premium benefit

WHAT TYPE OF JOB LIC AGENTS PERFORM?

Most people have their first contact with an insurance company through an insurance sales agent.

These workers help individuals, families, and businesses select insurance policies that provide

the best protection for their lives, health, and property. Insurance sales agents who work

exclusively for one insurance company are referred to as captive agents.

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Independent insurance agents, or brokers, represent several companies and place insurance

policies for their clients with the company that offers the best rate and coverage. In either case,

agents prepare reports, maintain records, seek out new clients, and, in the event of a loss, help

policyholders settle their insurance claims. Increasingly, some are also offering their clients

financial analysis or advice on ways the clients can minimize risk.

Insurance sales agents, commonly referred to as “producers” in the insurance industry, sell one

or more types of insurance, such as property and casualty, life, health, disability, and long-term

care. Property and casualty insurance agents sell policies that protect individuals and businesses

from financial loss resulting from automobile accidents, fire, theft, storms, and other events that

can damage property.

Life insurance agents specialize in selling policies that pay beneficiaries when a policyholder

dies. Depending on the policyholder’s circumstances, a cash-value policy can be designed to

provide retirement income, funds for the education of children, or other benefits. Life insurance

agents also sell annuities that promise a retirement income.

For businesses, property and casualty insurance can also cover injured workers’ compensation,

product liability claims, or medical malpractice claims.

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Health insurance agents sell health insurance policies that cover the costs of medical care and

loss of income due to illness or injury. They also may sell dental insurance and short- and long-

term-disability insurance policies.

The growth of the Internet in the insurance industry is gradually altering the relationship between

agent and client. In the past, agents devoted much of their time to marketing and selling products

to new clients, a practice that is now changing. Increasingly, clients are obtaining insurance

quotes from a company’s Web site and then contacting the company directly to purchase

policies. This interaction gives the client a more active role in selecting a policy at the best price,

while reducing the amount of time agents spend actively seeking new clients. Because insurance

sales agents also obtain many new accounts through referrals, it is important that they maintain

regular contact with their clients to ensure that the clients’ financial needs are being met.

Developing a satisfied clientele that will recommend an agent’s services to other potential

customers is a key to success in this field.

Training

Our agents go through both generic and specific, professional programs that help them remain

well-informed and knowledgeable about the company’s products in the market. There is a further

focus on soft skills such as communication, managing long-term relationships and selling skills,

which are very relevant in a service-driven industry like life insurance.

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State of the art infrastructure training facilities coupled with an excellent faculty, guarantee an

exceptional learning environment. For agents who might be occupied with their daily

business/professional routines.

A 17-18 day training schedule covers the mandatory IRDA training requirements and LIC

product-training module. Revision session ensure that the candidates thoroughly understand the

course contents and are well prepared for the licensing examination. Theoretical training is

interspersed with practical appointment settings with potential customers, giving agents a feel of

how their business will work from the very first day.

All through, the Development Officer and the management provide continuous support to the

advisors in achieving independence towards garnering business.

Career

Career development is emphasized upon from the very day the agent joins the system. Though

individual meetings with his or her Development Officer, the agent can discuss various issues

related to business development and career enhancement. Expectations from the organization in

terms of chalking a career in the insurance industry are also discussed.

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Absorption into the management is another career enhancement option provided at LIC. This

program helps agents build a full time career as a Development Officer in the organization,

offering great potential for managing a team of agents and personal development.

Rewards and Recognition:

LIC agents are constantly recognized and rewarded for their performance. Numerous

competitions all year round promote healthy competition amongst agents and recognition for

their efforts. Depending on the level of business the agent achieves in a year, he or she can

become a member of various clubs such as the Corporate Club, the Chairman’s club, etc.

Each of these clubs have specific performance criteria for qualification and members of these

clubs are entitled to attend seminars held at exotic international and domestic locations each

year. Advisors can also qualify for the renowned MDRT (Million Dollar Round Table), an

exclusive international insurance advisors club.

Insurance Sales Agents - Significant Points:

Despite slower-than-average growth, job opportunities should be good for college graduates and

persons with proven sales ability or success in other occupations.

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Successful agents often have high earnings, but many who assume agent jobs fail to earn enough

from commissions to meet their income goals and eventually transfer to other careers.

In addition to offering insurance policies, agents are beginning to sell more financial products,

such as mutual funds, retirement funds, NSC’s, etc.

CURRENT STATUS OF L.I.C:

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LIC building, at Connaught Place, New Delhi, designed by Charles Correa, 1986.

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 (US$ 92 million as per the 1959 exchange rate of roughly Rs. 5 for a

US $ [ 4 ] , has grown to 25000 servicing around 350 million policies and a corpus of over 8

trillion ( US$ 178.4 billion) .

CHAPTER 9

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POLICY’S OF L.I.C

ALL POLICY PRODUCTS OF L.I.C:

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LIC POLICY LIST:

Jeevan Anand Lic Policy

Jeevan Anurag Lic Policy

Jeevan Kishore Lic Policy

Jeevan Chhaya Lic Policy

Jeevan Saral Lic Policy

Jeevan Mitra 2 Lic Policy

Jeevan Mitra 3 Lic Policy

Jeevan Tarang Lic Policy

Komal Jeevan Lic Policy

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Market Plus I Lic Policy

Child Career Plan Lic Policy

Child Future Plan Lic Policy

Jeevan Bharati Lic Policy

Money Plus-I Lic Policy

New Bima Gold Lic Policy

Amulya Jeevan-I Lic Policy

Group Insurance Lic Policy

Bima Bachat Lic Policy

Bima Nivesh Lic Policy

Money Back Policy-20

Money Back Policy-25

LIFE INSURANCE POLICY LIST:

1. Aam Admi Bima Yojana lic policy

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2. Amulya Jeevan-I lic policy

3. Anmol Jeevan-I lic policy

4. Bima Bachat lic policy

5. Bima Nivesh 2005 lic policy

6. CDA Endowment Vesting At 18 lic policy

7. CDA Endowment Vesting At 21 lic policy

8. Child Career Plan lic policy

9. Child Future Plan lic policy

10. Educational Annuity Plan lic policy11. Fortune Plus lic policy

12. Gratuity Plus lic policy

13. Group Critical Illness Riderlic policy

14. Group Gratuity Scheme lic policy

15. Group Insurance Scheme in Lieu Of EDLI lic policy

16. Group Leave Encashment Schemelic policy

17. Group Mortgage Redemption Assurance Scheme lic policy

18. Group Savings Linked Insurance Scheme lic policy

19. Group Super Annuation Scheme licpolicy

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20. Group Term Insurance Schemes licpolicy

21. Health Plus lic policy

22. JanaShree Bima Yojana (JBY) lic policy

23. Jeevan Aadhar lic policy

24. Jeevan Akshay-V lic policy

25. Jeevan Amrit lic policy

26. Jeevan Anand lic policy

27. Jeevan Anurag lic policy

28. Jeevan Bharati lic policy

29. Jeevan Kishore Jeevan Chhaya lic policy

30. Jeevan Madhur lic policy

31. Jeevan Mitra(Double CoverEndowment Plan) lic policy

32. Jeevan Mitra(Triple CoverEndowment Plan) lic policy

33. Jeevan Nidhi lic policy

34. Jeevan Pramukh lic policy

35. Jeevan Saathi lic policy

36. Jeevan Saral lic policy

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37. Jeevan Shree-I lic policy

38. Jeevan Surabhi-15 Years lic policy



41. Jeevan Tarang lic policy

42. Jeevan Vishwas lic policy

43. Komal Jeevan lic policy

44. Market Plus I lic policy

45. Marriage Endowment lic policy

46. Money Plus-I lic policy

47. Mortgage Redemption lic policy

48. New Bima Gold lic policy

49. New Janaraksha Plan lic policy

50. New Jeevan Dhara-I lic policy

51. New Jeevan Suraksha-I lic policy

52. Profit Plus lic policy

53. Shiksha Sahayog Yojana lic policy

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54. The Convertible Term Assurance Policy lic policy

55. The Endowment Assurance Policy lic policy

56. The Endowment Assurance

57. Policy-Limited Payment lic policy

58. The Money Back Policy-20 Years lic policy

59. The Money Back Policy-25 Years lic policy

60. The Whole Life Policy lic policy

61. The Whole Life Policy- Limited Payment lic policy

62. The Whole Life Policy- Single.

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CONCLUSION

CONCLUSION:

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Through the study of the topic “Investment made by LIC of India in share market through

different ULIP Plans”, I came to following conclusion.

1) The ULIP Plans of LIC of India are flexible for investors point of view.

2) LIC’s ULIP Plans like Fortune Plus, Profit Plus, Money Plus – I and Market Plus – I have

Diversified Portfolio as far as investment is concerned.

3) LIC of India invest all the money of the investors through ULIP Plans through different funds

in the blue chip companies mostly.

4) LIC of India manages to give consistent rate of return to the investor who invest their money

in LIC.

5) LIC of India invest investors money mostly in stocks like Reliance Industries Ltd., ITC Ltd.,

Tata Consultancy Services Ltd., Hindustan Lever Ltd., Tata Motors Ltd., Mahindra and

Mahindra Ltd., Tata Steel Ltd., ACC Ltd. through the ULIP Plans Growth Fund mostly.

6) LIC of India also invest investors money in Government Guaranteed Securities, Corporate

Debt., Short Term Investments like, Money Market Instruments.

7) The NAV of the LIC of India ULIP Plans are increasing consistently as compared to the

Private Insurance Companies.

8) That’s why LIC of India promises to give the Maximum return to the investment made by the

investors.

9) The Portfolio of every customer has been determinated by the LIC of India and also the risk

profile of every investors also determined.

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10) LIC of India also invest their money in Infrastructural, Water Supply Projects which helps to

Economic Development of Country.

11) LIC’s Insurance Product like Unit Linked, Endowment Plan, Savings Plan and Pension Plans

are better as compare to Private Insurance Companies.

12) Public trust on LIC because LIC is the Market Leader and also No. 1 Financial Institutions in

India.

13) LIC gives better return on Investment due to Expert Fund Manager.

14) LIC also provides better and faster service to their customer as compare to Private Insurance

Companies.

15) LIC also invest in small cap and mid cap companies.16) Sometimes due to volatility in Share

Market the performance and rate of returns of ULIP Plans Secured Fund, Balanced Fund and

Growth Fund are affected.

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BIBLIOGRAPHY

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BIBLIOGRAPHY:

WEBSITES:-

Irdaonline.com

Bimaonline.com

Insurancefinder.com

Economictimes.com

Indiainfoline.com

MAGAZINES

The Insurance Journal

Intelligent Investor

Business Today

NEWSPAPERS

Economic Times

Hindu Business Line

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Life Insurance in India

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