Introduction to Life Insurance in India

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Introduction to Life Insurance in India


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Index1. Know the Indian Life Insurance Industry

2. Understand the Benefits of Insurance 07

3. Understand Risk in the context of Insurance 10

01

1.1 The Journey so Far 02

1.2 Current Environment 04

1.3 Powering Future Growth 06

2.1 The need for Insurance 08

2.2 The Benefits of Insurance 09

2.3 Common Insurance Terms 09

3.1 Definition of Risk 11

3.2 Classification of Risks 11


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4. Know the various Types of Insurance 13

5. Know about the various Distribution Channels 22

6. The Lifecycle of an Insurance Policy 27

7. Get an overview of the Insurance Sales Process 29

4.1 Life Insurance 14

4.2 Non-life or General Insurance 14

4.3 Types of Life Insurance 15

4.3.1 Individual/Group Policies 15

4.3.2 Need Based Classification 15

4.3.3 Traditional and Non-Traditional Policies 16

4.3.4 Premium Paying Term 17

4.3.5 Others 17

4.4 Group Insurance 17

4.5 Lifetime Product Mapping for Insurance 19

5.1 Need for Distribution Channels 23

5.2 The different Distribution Channels 23

5.3 Typical challenges faced by the Distribution 26

Channels

7.1 Steps involved in the Sales Process 30


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8. Insurance Underwriting 31

9. Claims Management 34

10. Know the Insurance Regulator and its Role 37

11. Life Insurance Industry SWOT 40

12. Summary 43

8.1 Defining Underwriting 32

8.2 Role of an Underwriter 32

8.3 Underwriting Objectives 32

8.4 Risks in Insurance Business 33

9.1 Claims Definition 35

9.2 Role of the Insurer in Claims Management 35

9.3 Role of the Insured in Claims Management 35

9.4 Types of Claims 35

9.5 Premature Claims 35

9.6 Maturity Benefits 36

10.1 Insurance Act 1938 and its Provisions 38

10.2 What are the provisions of the 38

Insurance Act?

10.3 What is the need to Regulate the 38

Insurance Industry?

10.4 What are the responsibilities of the IRDA? 39


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Learning Objectives

1. Understand the journey and construct of the 4. Gain an appreciation of the main activities

Life Insurance Industry in India thus far undertaken by an insurer

2. Understand t he different types of life 5. Understand the positives and the challenges

insurance produc ts and how they are faced by the Insurance industry

beneficial for a customer

6. Understand the ecosystem within which an3. Understand the typical Insurance Policy insurer functions including the Regulator,

Lifecycle Reinsurers etc.


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Know the Indian Life Insurance Industry

1.1 The Journey so Far

1.2 Current Environment

1.3 Powering Future Growth


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Life Insurance Industry Background

1.1 The Journey so Far and World War II. The worldwide economic crises

triggered by the Great Depression had its toll onThe journey of the life insurance industry through the Indian life industry as well. As the Indianthe ages, across continents is fascinating. The

society engaged in a bitter struggle in the first halfindustry which began in a small way, evolved to of the 20th century for political independence, thebecome a significant part of the financial services economy badly suffered leading to manybusinesses over time. World over, life insurance bankruptcies and liquidation of life insurancecompanies are counted among the Fortune 500 companies. All this lowered the public confidencelist, making them one of the mightiest forces to and their perception of life insurance as anreckon with. essential step towards financial protection.

Nationalization of the industry restored to a greatLife insurance as a model of risk management is

extent the faith in the industry. The liberalization innearly as old as the Banking industry, or, perhaps

2000 triggered the second wave of growth,even older. Begun as a community effort, it

making way for the Indian life insurance market totransformed into a sound business model

be considered among the top 10 in the world.over centuries and across continents, adapting

itself to the winds of social, economic and

behavioral changes.

The life insurance industry in India is about two

centuries old. However the first 150 years were

marked mostly by turbulent economic conditions.

The industry weathered Indias first war of

independence as well as the crippling impact on

the society and the economy due to World War I

Introduction to Life Insurance in India | 0

World over, life insurance companies

are counted among the fortune 500 list


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Historical Perspective

The Oriental Life Insurance Company, the first corporate entity in India offering Lifeinsurance coverage was set up in Calcutta in 1818 by Bipin Behari Dasgupta and others.Europeans in India were its primary target market and it charged Indians veryhigh premiums.

Year

The Bombay Mutual Life Assurance Society formed in 1870 was the firstInsurance provider.

Other Insurance companies established in the pre-independence era included Bharat

Insurance Company (1896), United India (1906), National Indian (1906), NationalInsurance (1906), Co-operative Assurance (1906), Hindustan Co-operatives (1907),Indian Mercantile, General Assurance, Swadeshi Life (later Bombay Life).

1818

1870

1896 -

1906

The Life Insurance Act and the Provident Fund Act were passed in 1912, providing thefirst regulatory mechanisms in the life insurance industry

1912

The Indian Insurance Companies Act of 1928 authorized the government to obtainstatistical information from companies operating in both life and non-lifeinsurance areas.

1928

The subsequent Insurance Act of 1938 brought stricter state control over an industrythat had seen several financially unsound ventures fail. A bill was also introduced in thelegislative assembly in 1944 to nationalize the insurance industry

1938

The Insurance Act of 1938 was enacted which was the first comprehensive legislationand is still operational as of now

1938

In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by owners ofprivate insurance companies. Eventually, the Parliament passed the Life Insurance ofIndia Act on 19th June 1956, and the Life Insurance Corporation of India was created on1st September 1956, by consolidating the life insurance business of 245 private lifeinsurers and other entities offering life insurance services. Nationalization of the lifeinsurance business in India was a result of the Industrial Policy Resolution of 1956, whichhad created a policy framework for extending state control over at least 17 sectors of theeconomy including life insurance.

1955-56

The General Insurance Business (Nationalization) Act was passed and the state ownedGeneral Insurance Corporation of India was set up with four subsidiary companies, New

India Assurance, National Insurance, Oriental Insurance and United India InsuranceCompanies which became Government owned after amalgamation with various privatesector General Insurance Companies.

1972

The process of economic liberalization initiated by P.V. Narasimha Rao Governmentextended to financial reforms under the leadership of the then Finance MinisterManmohan Singh.

1991

Malhotra Committee was set up to recommend the way forward for the reforms neededin the insurance sector

1993



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Year Historical Perspective

The Insurance Regulatory and Development Authority Bill was passed in the Parliament

The Insurance Regulatory and Development Authority (IRDA) was setup

ICICI Prudential and HDFC Standard Life were the first two private sector life insurancecompanies licensed by IRDA in December, 2000.

1999

2000

2000

2000-10

A total of 22 new private sector life insurance companies were set up including IndiaFirstLife Insurance in November, 2009

April, 2010 saw the unprecedented regulatory battles between Securities ExchangeBoard of India (SEBI) and IRDA with SEBI banning 14 private life insurance companies onthe plea that they were selling collective insurance schemes not approved by SEBI

2010

As a result of the dispute, a spate of regulations has been initiated by IRDA to tighten itscontrol over the industry. The Government brought in an Ordinance in June 2010 toreemphasize the supervisory and regulatory scope of IRDA and the Securities andInsurance Laws (Amendment and Validation) Act 2010 was passed by the parliament toreplace the ULIPs Ordinance issued in June 2010

June Dec 2010

1.2 Current Environment

India is now the worlds 10th largest life insurance

market. Its motivating to know that its only life

insurance and not other sectors of the BFSI

(Banking and Financial Services Industry) that has

achieved this distinction. Neither Banking nor

Mutual Funds, which have a longer history of

operating in a liberalized environment, have

accomplished this merit.

As of February 2013, there are 24 life insurance The Indian Life Insurance Industry collected new

players in the market. Most private insurance business premium of 114,233 Crore in FY12. Life

companies are joint ventures with recognized Insurance Corporation, a public sector entity, is

foreign players across the globe. As per current the largest life insurance player with a marketFDI (Foreign Direct Investment) norms, foreign share of 71.3% in FY12. We, IndiaFirst Life

companies can hold upto 26% of equity stake in an Insurance, the 23rd player to enter the Indian Life

Indian Insurance Company. Insurance Industry, collected 982 Crore of new

business premium in FY12.



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1 Aegon Religare 208 79,394 95,479

2 Aviva 800 180,130 -745,386

3 Bajaj Allianz 2,714 1,053,351 11,506,154

4 Bharti Axa Life 224 98,286 134,806

5 Birla Sunlife 1,926 847,691 1,867,543

6 Canara HSBC OBC 692 71,671 199,181

7 DLF Pramerica 103 69,926 85,051

8 Edelweiss 11 6,596 17,375

9 Future Generali 344 167,882 266,419

10 HDFC Standard 3,833 815,155 2,244,056

11 ICICI Prudential 5,079 1,029,068 3,460,523

12 IDBI Fortis Life 311 84,732 420,946

13 IndiaFirst 982 114,957 1,456,362

14 ING Vysya 638 233,800 234,181

15 Kotak Mahindra Old Mutual 1,164 208,233 2,931,848

16 Max New York 1,908 572,371 3,342,912

17 Met Life 1,075 203,154 1,377,649

18 Reliance Life 1,809 1,094,026 2,761,622

19 Sahara Life 71 70,887 70,887

20 SBI Life 6,527 881,928 2,087,611

21 Shriram Life 396 131,266 1,084,557

22 Star Union Dai-ichi @ 965 150,996 612,348

23 Tata AIG 940 276,521 802,424

Private Total 32,718 8,442,021 36,314,548

24 LIC 81,514 35,750,763 73,606,865

Grand Total 114,233 44,192,784 109,921,413

S.

No.Insurer

Total New

Business

Premium

(INR Crore)

No. of

Policies

(Individual)

No. of

Lives

(Group +

Individual)



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1.3 Powering Future Growth

Over the last decade, growth in the life insurance

industry has been spurred by insurance

companies launching innovative products,

experimenting with different distribution

channels, and using wide-spread publicity

and promotional campaigns to market their

products. All these efforts have increased the

relevance of life insurance and made it more

accessible to customers.

Thus with multiple avenues of sustainable growth,But, after a decade of vibrant growth the industryand given that out of 1.2 billion lives 2/3rd is stillis at the cross roads now. High costs, defectiveuninsured, the industry has strong prospects todistribution models, high employee turnover,push itself out of the recent slowdown and regainlackluster customer delight etc, remain areas ofits former sheen.concern in the future. Further, unlike banking, the

industry did not develop standard industry

protocols and processes to provide a uniform

customer experience.

However with some radical thinking, a few pathbreaking moves and re-look at the available

opportunities on hand, the industry will be able to

overcome the obstacles in the path of its

development and create larger value for all.

Increasing penetration in micro insurance, health

insurance, pension, group insurance and going

global are the answers. With rural India becoming

a powerful engine of economic growth, insuring

the rural and urban poor is becoming a viable

business proposition.


Out of 1.2 billion lives 2/3rd lives are

still uninsured


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Understand the Benefits of Insurance

2.1 The need for Insurance

2.2 The Benefits of Insurance

2.3 Common Insurance Terms


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Understand the Benefits of Insurance

2.1 The need for Insurance Similarly, a family which is dependent on one

member to earn their livelihood may face aWe buy insurance because it protects the

difficult situation if that member of the family iseconomic value of an asset. An asset is valuable

permanently disabled or dies in an accident.because it provides some sort of benefit to us. This

Insurance, therefore, is a mechanism thatbenefit could be in any form (income, stability,

helps reduce the adverse effects of thesefacilities etc).

difficult situations. It promises to pay us, theEvery asset is expected to sustain through a

owner/ the beneficiary, of the asset a certain sumcertain period of time. We, as asset owners, are

if a loss occurs.

aware of this typical lifetime and plan our activities Insurance enables any person who suffers a loss oraccordingly. However, sometimes, due to

accident to be compensated for the effects of his/unforeseen and unfortunate events, the asset may

her misfortune. The payments provided are from abe lost before its expected time period. This may

common fund of money contributed by us, thecause losses and inconvenience to us.

holders of the individual insurance policies. InFor example: Anand owns a building and is using

other words, individual risks are pooled andthe space in this building to manufacture soaps.

shared, with each policyholder/customer makingHe runs the risk that the building and the

a contribution to the common fund. With poolingmachinery used for manufacturing could be

of risks an insurance company pools the premiumdamaged in an earthquake, flood, or a fire. This can

collected from several individuals to insure themcause huge disruptions in his income.

against similar risks.Insurance, therefore, is a business of sharing; it

makes an unbearable loss bearable.

Insurance is defined as a contract that assures the insured a sum of money in case of any

untoward incident.


Insurance enables any person who suffers

a loss to be compensated for the

effects of his misfortune


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2.2 The Benefits of Insurance

Social Security

Economic Development

Apart from protecting the value of an asset,

insurance also works as an effective tool for social

security and economic development.

When a family loses an earning member, it loses

its income. If this income is not compensated, the

family may get pushed into a lower economicclass.

The country requires investments for its economicUnder a socialistic system, the responsibility ofgrowth. All life insurance companies have hugesocial security is placed on the Statefunds accumulated through the payments of small(government). However, in a capitalistic system, itamounts of premia of customers. These funds areis partly borne by the State and partly by thethen invested by the insurers on behalf ofindividual. The society also provides certaincustomers. Therefore, insurers help mobilize theinstruments that can be used to secure this aim,savings of customers and channel them asinsurance is one of them.investments for economic growth.

As per the regulations governing the insuranceThe countrys business and trade also benefitsbusiness in India, insurance companies, are

from insurance. Without insurance, trade andobliged to extend the benefits of insurance tocommerce may find it difficult to face the impacteconomically weaker sections of the society.of major perils like fire, earthquake, and floods

among others.


Term Meaning

The individual (customer) who is covered by the insurance policy

The company that covers the insured and promises to make good the lossfaced by him/her in return of a consideration

The amount of money that needs to be paid to the insurance provider to keepthe policy in good standing

The minimum amount payable to the dependants on the death of the life assured

The individual(s) eligible to receive the life insurance proceeds upon the deathof the insured

Insured/Assured

Insurer

Premium

Sum Assured

Beneficiary

Claims Notification to the insurance company from the insured (customer) requestingfor the payment due under the terms of the policy

2.3 Common insurance terms


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Understand Risk in the context of Insurance

3.1 Definition of Risk

3.2 Classification of Risks


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3.1 Definition of Risk 3.2 Classification of Risks

The word risk can be used in several different Risks can be classified in the following ways -

contexts. In insurance, risk is applied to certain Based on the extent of damage that is likely toassets that can be insured, such as a human life, a be causedhouse, a car, etc. There is no single definition of

Critical or catastrophic risks are those thatrisk because of the different contexts in which it

could lead to bankruptcy of the owner or thecan be used. Here are some of the definitions

customerof risk -

Important risks may not spell doom, but may Risk is the chance of damage or lossrequire a long recovery time

Risk is doubt concerning the outcome of a Unimportant risks are temporary illness

situationor accidents

Risk is something or someone considered to be

Financial and non-financial risksa potential hazard

In life insurance the word risk is used to describe Dynamic and static risks

the possibility of an unfavourable event occurring, Critical or catastrophic risks are those that

for example untimely death or an unforeseencould lead to bankruptcy of the owner or the

disability. Insurance cannot prevent thecustomer

occurrence of these risks, but it can reduce their

Dynamic risks are caused by perils that haveimpact should they occur. Life insurance mainlya national consequence, such as inflation,deals with two risks premature death and livingcalamities, technology, and politicaltoo long. The other risks relating to human life areupheaval among othersmostly covered under non-life insurance.

However, life insurance companies offer Static risks are perils that have no

additional benefits or riders along with life consequence on the national economy such

insurance plans to cover the following risks as a fire, theft, or misappropriation

death or disability due to accidents, illness and Fundamental and particular risksunemployment.

Fundamental risks are those that affect

a large population such as a train or

plane crash Particular risks affect only specific individuals

Pure and speculative risks

Pure risks are in the nature of an Act of God!

Speculative risks are in the nature of betting

or gambling. Here, the risk is to some extent

under the control of the individual concerned


In insurance, risk is applied to

certain assets that can be insured


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Human Asset

Trustee

Insurance of Intangibles

The Business of Insurance

Reinsurance

We, human beings are an income generating

asset. Our value as an asset can be measured by

considering the income that is generated by us.

The risks in the case of a human asset relate to -

Early death

Living too long

Disabilities

Sickness

Unemployment

The insurers also act as trustees as they are

managing the common fund, on behalf of theInsurance is extended to intangibles. In some community of policyholders. As trustees, theycountries, the voice of a singer or the legs of a have to ensure that individuals dont take unduedancer can be insured. These are assets that advantage of the arrangement.produce income and provide a living to the

Consequently, the management needs to ensureowners. The object insured is intangible, but it is

that individuals with different risks are notlinked to a financial loss, and therefore becomes

included in the same group. This group also

insurable. cannot include individuals who are paying claims

on losses that are accidental. This decision to

allow entry into a specified group involves theThe insurance companies, are called insurers. The

process of undertaking of risk.business of insurance comprises of sharing. It

spreads losses of an individual over a group of

individuals who are exposed to similar risks. Thus,As insurance companies, are taking risks they

the business of insurance is to -have to pay claims as and when they occur, and

Bring individuals together with common also they cant be sure of when a claim will occurinsurance interests and how big it will be.

Collect the share of contribution from all these Insurers, normally are financially strong, to be able

individuals to pay claims, but there are limits. An event like a

Pay compensations to individuals who suffer tsunami or a hurricane may generate claims

from risks amounting to crores of rupees. They need to

protect themselves from such situations byTherefore, the premium for insurance is based onreinsuring risk with other insurers.expectations of the losses. These expectations are

based on studies of occurrences in the past and In India, the General Insurance Corporation of

the use of statistical principles. India is the national reinsurer.



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Know the various Types of Insurance

4.1 Life Insurance

4.2 Non-life or General Insurance

4.3 Types of Life Insurance

4.3.1 Individual/Group Policies

4.3.2 Need Based Classification

4.3.3 Traditional and Non-Traditional Policies

4.3.4 Premium Paying Term

4.3.5 Others

4.4 Group Insurance

4.5 Lifetime Product Mapping for Insurance


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Know the various Types of Insurance

4.1 Life Insurance

4.2 Non-life or General Insurance

end of the savings period. The final fund is secured

from the very beginning.Life insurance is an insurance cover taken for a

A comparison with other forms of savings displayshuman life. In life insurance, the insured

that life insurance has the following advantages -(customer) agrees to pay a set premium for a

certain number of years to the insurer (us). In the event of death, the settlement is easy

Payouts by us, the insurer happen as and when because of the facility of nomination and

either of these two events occurs - assignment

Agreed number of years lapse, or at Maturity There is a certain amount of compulsion to go

through the plan of savings Unfortunate death of the insured

Creditors cannot claim the life insuranceSome individuals believe that life insurance is an

moneyinvestment or a means of saving. This is not

accurate. When an individual saves, the amount of There are tax benefits

funds available at any time is equal to the amount Marketability and liquidity is betterof money saved in the past, plus the interest.

In life insurance, however, the fund available is not

the total of the savings already made but the General insurance is an insurance cover on a non-

amount that the individual wishes to have at the life asset. In this case, the insured needs to renew

the policy every year. Payouts happen if the event

insured against occurs. For example: If an insured

vehicle meets with an accident, an insured factory

catches fire; insured machinery breaks down

among others.

There are two basic types of insurance, namely Life Insurance and Non-life or General

Insurance.


Life insurance is an insurance cover

taken for a human life


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4.3 Types of Life Insurance

Need Based Classification

Individual/Group Policies

products Individual products are sold to a single

policyholder, while group insurance covers aThere are a number of life insurance plans

group of individuals usually members of aavailable in the market that suit different needs of

common society or employer among others.the customer. Life Insurance policies can be

classified in the following ways -

1. Individual/Group Policies Individual products can be further classified on the

2. Need of Customer basis of the Need of the individual. These needs

could be the need for financial security, or the need3. Traditional and Non Traditional Policiesto increase wealth through investments, or the

4. Participating and Non Participating Policiesneed to provide for financial security in case of any

5. Premium Paying Termsmajor health related expenses or the need to

provide for post retirement years. Insurance has a

solution/product to serve each of these needs asLife insurance products at the broadest level can

detailed below -be categorized into individual and group insurance

Need Policies Benefits

Financial Security P u re P ro t e c ti o n

P o l i c i e s / T e r m

Insurance Policies

Term insurance offers financial cover equivalent to

the face amount of the policy. This amount is

provided to the policyholders (customers) family in

case he dies during the policy period.

Investment I n v e s t m e n t c u m

Protection Policies

The main objective for investment policies is to

facilitate capital growth.

Investment policies could also be tailored to ensure

money is available at a specific time and for a

specific requirement such as Child Policies.

Child Policies helps you save and invest a certain

amount for a period of time that can then be used for

your childs future education marriage etc.

Provide for any

m a j o r H e a l t h

Related Expenses

Health Policies Health Policies provider an insurance cover that pays

for your medical expenses.

Provide for Post

Retirement Years

Retirement Policies These policies are used as a financial planning tool to

save for post retirement, or to provide financial

stability. In the event of an unfortunate accident or

death, the insured is able to ensure the required

expenses for his/ her family.



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Traditional and Non-Traditional Policies

Traditional policies are those where insurance

companies offer a guaranteed maturity benefit.

Thus, the investment risk in the policy is borne by

the Insurance Company. Insurance companies

need to ensure stable returns for these policies by

restricting investments to low risk assets. An

annual bonus for policyholders is also declared for

these policies by the company. Traditional policies

are typically of 3 types, viz -

Policy Benefits

Whole Life Policy A typical whole life policy runs as long as the policyholder is alive. In other

words, the risk is covered for the entire life of the policyholder.

The policy monies and the bonus are payable only to the nominee of the

beneficiary upon the death of the policyholder. The policyholder is not entitled

to any money during his or her lifetime, i.e. there is no survival benefit.

Endowment Policy Endowment policies cover the risk for a specified period. At the end of the

specified period, the sum assured is paid back to the policyholder along with the

entire bonus accumulated during the term of the policy.

Typically, an individuals responsibility for the financial protection of the family

reduces significantly after their children are independently settled. The focus

then shifts to managing a smaller family - perhaps the individual and his/her

spouse - after retirement. The endowment amount, which is the original sum

assured and the accumulated bonus received at this time comes handy.

Customers can either use the endowment amount for buying an annuity policy

to generate a monthly pension for the rest of their life, or put it in any other

suitable investment of their choice. This is the major benefit of an endowment

policy over a whole life one.

Money Back Policy Unlike ordinary endowment insurance plans where the survival benefits are

payable only at the end of the endowment period, money back policies provide

periodic payments of partial survival benefits during the term of the policy, as

long as the policyholder is alive.



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Traditional policies could be participating or non-

participating plans. In participating plans, the Single Pay: Herein the individual pays the entire

insurer provides an additional bonus over and policy premium upfront in one installment

above the guaranteed amount. These bonuses Regular Pay: Herein the individual pays thecome from the surplus generated from the policy premium at regular intervals as chosenparticipating funds. These are typically declared by him, viz. monthly, quarterly, half yearly oras a percentage of the sum assured, and once yearly for the entire duration of the policydeclared they become guaranteed. period

In non-participating plans, the benefits are Limited Pay: Herein the individual paysdefined at the time of the buying of the policy, and the policy premium for a limited duration ofthe same does not change. time, and receives benefit at the end of the

policy period

Unit Linked Insurance Policies are non traditional

investment plans. A ULIP provides a combination

of risk cover and investment. A part of the A rider is an addition made to an insurance policy

premium paid is utilized to provide insurance referring to a circumstance not covered in the

cover to the policy holder while the remaining basic policy. The rider has three primary

portion is invested in various equity and debtconditions -

schemes (just like it is done for Mutual Funds). It is attached to the basic policy and becomes a

ULIP policy holders are allotted units and each unitpart of it. It is subject to the same general

has a net asset value (NAV) that is declared on aconditions of the policy

daily basis. Non Traditional plans are all non- It usually refers to a special circumstance that is

participating.not covered in the basic policy

It is paid for by an addition to the basic premium

The most common type of rider is the AccidentalFinally, individual insurance policies could also

Death Benefit Rider. This rider may provide for ahave differing payment terms such as -

double death benefit if death is due to an accident.

Group insurance is an insurance plan that provides

cover to a large number of individuals under a

single policy called the Master Policy.

The insurance contract is with the body that

represents the individuals, the employer, or the

associations. Because the contract is with the

Non Traditional Policies

Others

Riders

Premium Paying Term

4.4 Group Insurance


A rider is an addition made to an insurance

policy referring to a circumstance

not covered in the basic policy


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body, that body is the policyholder and the

individuals are beneficiaries. The premiums are

paid by the policyholder, who may or may not

collect the same from the individuals concerned. If

the individuals contribute, it may be full or partial

contributions.

Individuals covered under the master policy are

not parties to the contract. Originally group

insurance was confined to employer-employee

groups only. Since then the scheme has been

extended to cover different groups, provided they Premium under a group insurance policy will

are identifiable by homogenous common change from year to year. Premium may also

attributes, like profession, or membership of a change according to the mortality experience

cooperative society among others. of the group

Unlike other policies the group insurance policy

does not have a fixed term. It is a policy in

One Year Renewable Group Term Insuranceperpetuity, renewable every year and can be

S c h e m e : Member s ar e c over ed forterminated by either party at the end of any year.

specific amounts payable on their death withinThe terms and the coverage can be renegotiated at

one yearthe time of renewal.

Group Savings Linked Insurance Schemes:

Often offered to employers for the benefit of The group must not be formed for the the employees. Contributions from employees

purpose of taking advantage of the insurance are made up of two components, a part isscheme. The group must have some other used as premium towards a term insurancereason for bonding cover, and the other part goes into a group

Individual members will not be allowed to savings scheme

choose the amount of insurance cover; it Group Gratuity Schemes: Offered towill be determined by some criteria which employees and related to the gratuity of

are uniformly applied to all the members of employees. This scheme guarantees a certainthe group gratuity amount, which is more than what the

The inclusion of members in the scheme is rules provide. It also makes it easier to fund the

also a matter on which the members will have gratuity liability of the employer

no choice Group Superannuation Scheme: Related to

Individual lives are not separately assessed for payment of pensions to employees. This helps

risks. The underwriting or selection is of the employers administer the pension fund.

group as a whole Employers may fix the contribution they would

Group Insurance Schemes

Important requirements for Group Insurance



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make annually, usually as a percentage of makes life less meaningful. Within these two

salary. The benefit available to the employees goals, life moves from child birth, to education, to

would be equal to what the contribution can wedding, to a rising family, to consolidation, to

buy on the date of retirement. Employers may retirement and finally to death. At each life stage,

also purchase annuities from a life insurer as there is a legitimate role life companies can play

and when they have to release the pensions. through their products and specialized value

After the purchase, the annuities will be paid by added services which can be represented

the insurer directly to the pensioners through a lifetime product mapping for the

customer.The graph below displays an example of lifetime

product mapping -

Insurers touch two critical aspects dear to a

person health and wealth. One without the other,

4.5 Lifetime Product Mapping for

Insurance


Increase life cover,so that the newpartner con copewith any eventsthat may cut off

Health ininsurance product

Provision for ChildEducation andMarriage

Wealth Creation &Accumulation

Increase lifecover

Childrenseducation plan

Childrenmarriage plan

Add children toHealth Insuranceplan

Wealth creationand

accumulationplan

Annuity plans Health insurance Wealth creation &

accumulation /education plansfor grandchildren

Health insuranceneed

Tax minimizationRetirement Planing

Pension Products Health Insurance

Unmarried First Job Young Married Young Marriedwith Children

Middle Age

PreRetirement/Retired

Consumer Needs Products Catering to the Needs

Life insuranceplan

Wealth creation &accumulation plan

Regular Income Health Insurance Preservation of

Capital

IncomeProtection

Wealth Creation &Accumulation

Save for MedicalExpenses

Asset Acquisition Protection against

Disability Shortterm Needs

Customer Life - stage Mapping


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Customer Life StageProducts Catering to the

Customer Needs

Unmarried

First Job

Consumer Needs

Starting the very first job is an important stage in an individuals life as he

becomes independent and is able to start planning for his own future. With the

inflow of a regular income, the individual can start planning for luxuries such as

his first house, holidays, and a car among others.

However, at the same time he needs to ensure that he is preparing for the future

against any unforeseen events that may hamper his ability to keep earning at a

steady rate.

To meet his needs of asset acquisition, protection against disability and other

possible short term needs, we should recommend a life insurance plan and a

wealth creation and accumulation plan at this stage of life.

Asset acquisition

Protection against disability

Short term needs

Life insurance plan

Wealth creation and

accumulation plan

Young and Married Income protection

Wealth creation and accumulation

Save for medical expenses

Increase life cover, so that the new

partner can cope with any events

that may have an adverse effect

on the income flow

Health insurance products

We a lt h c re a ti on a n d

accumulation plan

As an individual begins a new phase of life, he also has added responsibilities of

providing for his spouse and securing their future. At this stage, he may feel the

need for income protection, saving for medical expenses, and wealth creation.

To serve these needs we could recommend increasing the existing life cover,

health insurance products and wealth accumulation plans.

Young Married

with Children

Provision for child education and

marriage

Wealth creation and accumulation

Increase life cover

Child plan

Add children to the health

insurance plan

Wealth c reat ion and

accumulation plan



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Customer Life StageProducts Catering to the

Customer NeedsConsumer Needs

With the addition of children to the family, the parents now need to plan for

their childrens future. Education and marriage are the two biggest expenses

that need to be taken care of for their children.

At this stage, the individual could find various child plans useful. He can also

add his children to the health insurance plan that he had purchased. The

individual could also increase his life cover and purchase other wealth creation

or accumulation plans.

Middle Age Health insurance need

Tax minimization

Retirement planning

Pension products

Health insurance

At this stage the individual has had long years of working with a steady income

flow, has provided for the childrens future, and has acquired assets that

he needs.

He now needs to start thinking about planning for retirement to ensure that he

is able to maintain a similar lifestyle after he stops working.

Thus it is ideal for the individual to buy a pensions plan that will help himsystematically save for post retirement. He also needs to ensure that his health

insurance coverage is substantial to support him/ her through possible old age

related ailments.

Pre-retirement/

Retired

Regular income

Health insurance

Preservation of capital

Annuity plan

Health insurance

Wealth creation and accumulation/

education plans for grandchildren

This is the time for the individual to relax. He has fulfilled most of his

commitments. His children are independent. It is now time for him to pursue

new interests, enjoy long holidays, and spend some quality time with his family.However, the individual may still continue to require a steady income. He can

ensure this, by purchasing an annuity plan from the pensions corpus that he

has built.

He may also consider starting a wealth accumulation plan for the benefit of his

grandchildren and maybe look at getting a further health insurance cover for

himself.



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Know about the various Distribution Channels

5.1 Need for Distribution Channels

5.2 The different Distribution Channels?

5.3 Typical Challenges faced by the

Distribution Channels


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Know about the various Distribution

Channels

5.1 Need for Distribution Channel

5.2 The different distribution channels?

Agency

Improve cost efficiency in distribution of

productsDistribution channels are required to -

Satisfy the needs of more demanding Increase insurance awareness and knowledge

customersamong individuals

Differentiate on the basis of customer service Increase insurance penetration in the country

Retain and attract new customers to expand

businessThere are various types of distribution channels

existing in India.

An insurance agent is someone who works on

behalf of the insurance company to sell products.

For decades, the agency model has been the only

distribution channel for life insurance in India.

Even today, a large proportion of the business is

carried out through the agency channel.

Insurance companies source their customers and deliver products to them with the help

of distribution partners/ channels. In India, the agency model has been the traditional

distribution channel. However, several new distribution channels are emerging that areaimed at specific target customers. These channels have their own unique features.

Distribution channels are licensed by the IRDA. To acquire a license to sell, agents have to

fulfill certain requirements such as minimum qualifications, practical training in

insurance subjects, clearing the insurance examination conducted by the Insurance

Institute of India (III) etc.


Distribution channels are licensed

by the IRDA


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Features of the Agency Channel

Potential CAs

Corporate Agents (CAs)

Bancassurance

whom they have a tie-up. They are authorized to

source policies for one insurance company only. They are off-roll employees for the company,

and are paid a commission for the sales they

make Institutions such as ITC who have a high

An agent is usually a good and convincingcustomer base in rural regions

salesperson and has access to good leads NGOs

Agents provide various pre sales and post sales Relatively new and untapped NBFCs

services to customers

Retailers

Corporate Agent is a concept introduced with a

The bancassurance channel was introduced inview to take advantage of the presence of a large

India when the insurance industry was opened upnumber of firms, corporations, banks, non-

for private players. In this model, an insurancebanking financial institutions (NBFCs), NGOs,

company, ties up with a bank and offers itscooperative societies and Panchayats who are in

products through the bank branches.constant contact with individuals.

Cas are corporate entities (usually NBFCs) that

source policies for an insurance company with

Banks act as CAs but without any risk participation. They enter into a servicelevel agreement with the insurance company.

Corporate Agency

Referral arrangements do not include banks acting as Cas. These arrangementsare used for sharing the banks database, providing physical infrastructure, anddisplaying publicity material in their branches.

ReferralArrangement

There could also exist a joint venture arrangement between the bank and theinsurance company.

Joint Venture

Features of Bancassurance therefore provide cost effective products to

customers. The bank staff sells a range of products

including insurance. They have multiple As products are being sold to the banks

responsibilities. It is therefore important customers, there is already a relationship that

that products be simple so that the staff can exists that can be further leveraged.

understand them easily and sell them Banks can provide their customers a widereffectively. range of services that may help to increase

Insurer can utilize the existing branch networks retention and meet expectations. It also offers

of the bank to sell its products. This offers an an opportunity to the banks to increase their fee

opportunity to have a lower cost model and based income.


There are three types of models for bancassurance


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Partner Banks and Insurers may have different organizational cultures andphilosophies. The vision and mission might also differ. These issues need to beaddressed

Cultural Integration

There should be a proper communication of the process and the benefits of thepartnership to the front end/ branch level staff so that they feel part of theentire system

Communication

Technological incompatibility between the insurer and the bank might lead tonon-delivery of promised service standards

TechnologicalIncompatibility

The MIS reporting should be simple and easy to understand with the flow ofreports being as per the service agreements

ManagementInformationSystem (MIS)Reporting

The bank staff needs to be adequately trained for them to be able to advisecustomers on the right products based on their requirements

Proper Training ofthe Bank Staff

Clearly defined roles and responsibilities must be providedClearly DefinedRoles andResponsibilities

Brokers

Worksite Marketing

E-sales

A broker acts as an intermediary between the

insurance companies and the insurance buyer or

customer.

Insurance brokers differ from agents. While

agents represent the insurance company, brokers

represent the customers.

Worksite marketing is the process of distributingdirectly to their employees at their worksite. Theindividual or group insurance products to

employer implements a payroll deduction plan toindividuals at their place of work on a voluntary,deduct the employees premium payments frompayroll deduction basis.their pay checks and submits the same to us.

Under a worksite marketing arrangement, the

insurer, approaches an employer to offer its

employees the opportunity to buy insurance E-sales refer to sales of insurance productscoverage at work. If the employer agrees, our sales through the internet. This channel for the sale ofrepresentative, i.e., you market the products insurance products is relatively new in India, but is



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fast catching up with more traditional methods. customers upfront. They can then help in

For some time, insurance companies have been forwarding only the right business to the

using online payment gateways to collect renewal company. Mis-selling is very common in the

premiums and their websites to solicit sales insurance industry. For example, sometimes

inquiries for their insurance products, but it was agents do not assess the needs of the customer

only late in 2009 that insurance companies in appropriately while recommending insurance

India introduced products that are exclusively sold products. In addition, sometimes agents or

via the internet. Because these online products are advisors misrepresent facts by promising

being sold directly to the end customer, with no unrealistic returns to customers, or even

intermediaries, insurance companies can sell provide incorrect information about product

these products much cheaper, as the intermediary features. As a result, the customer is unhappy

commissions are eliminated. and saddled with a product that does not meet

his/her immediate or future needs. These

scenarios need to be avoided in all

circumstances

The distribution channel may also focus moreAll distribution channels face the following key

on acquisition than on retention. According to achallenges -

recent study, it costs about five times more to Insurance knowledge is complex. It is the

attract a new customer than to retain anresponsibility of the distribution channel toexisting one. One may also fail to follow up anddevelop expertise and to provide customersthat could lead to the loss of a customerwith accurate insurance information

Insurance salespersons should be in a position

to advise the customers on the best available

choices in any given circumstance

The distribution channel should also be able to

perform the role of a primary underwriter. This

can be done by the salespeople, if they have

be.en trained to make an assessment of the

5.3 Typical Challenges faced by the

Distribution Channels


The distribution channel should

also be able to perform the role

of a primary underwriter


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The Lifecycle of an Insurance Policy


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There are various stages through which a typical

Insurance policy would pass. These are: Sometimes the customer may change his contact

information, or nominee for the policy, or the

customer may want to choose a different fundHerein the customer is explained the policy

option in the case of a ULIP, all of these requests offeatures and benefits by the insurance

the customer are serviced by the Insureragent/sales person and the customer agrees to

purchase the policy

Either at the end of policy term or due to theoccurrence of the said event, there maybe a claim

On purchase of the policy, the Underwriters,that arises, at that stage we pay the dues to the

who are the risk assessment team of the insurercustomer and the policy is closed

evaluate the policy to ascertain whether the risk

can be taken on The following chapters provide an overview of the

Sales, Underwriting and Claims stages of an

Insurance Policy.

If the Underwriters feel that the risk is fit to be

taken on, then the customer is accepted and the

life insurance policy is issued to the customer

4. Policy Servicing

1. Sale/Policy Login

5. Claims

2. Underwriting

3. Policy Issuance

Insurance Policy Lifecycle



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Get an overview of the Insurance Sales Process

7.1 Steps involved in the Sales Process


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SUSPECTING

PROSPECING

PROPOSING ASOLUTION

CLOSURE

Leading generation(Gathering names ofpotential customers)

Fixing appointments

Meeting the customer,Information gathering,financial planing andsolution offering

Concluding the sale andApplication form filling

7.1 Steps involved in the Sales Process


Sales Process Steps involved

Identify prospective customer(s)/ leads (could be through existing customer

relationship, customer referrals, walk-in customers or existing bank

customers for bancassurance etc)

Suspecting

Call the prospective customer and request for a meeting.Prospecting

Prepare yourself by gathering as much information about the prospect as

possible and understanding his profile

Meet the prospect as scheduled

Understand his specific requirements with respect to his overall financial plan

Propose a solution that meets his requirement

Proposing aSolution

Once the prospective customer is convinced, fill up the proposal form, collect

the first premium payment and close the sale

Medical examination may need to be organized, wherever necessary

The proposal form is then sent to the Central Processing Centre

Closure

Each stage of the sales process is extremely critical in finally closing the sale.


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Insurance Underwriting

8.1 Defining Underwriting

8.2 Role of an Underwriter

8.3 Underwriting Objectives

8.4 Risks in Insurance Business


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8.1 Defining Underwriting 8.2 Role of an Underwriter

Underwriting is the process through which the After you, collect the relevant information from

insurers take a decision to accept a risk on your customers, you send the proposal form and

predefined terms of agreement and a specified the other documents to the underwriting

premium. It is a process of identification, department.

assessment, selection, and classification of risks. An underwriter evaluates the risks and accepts or

The purpose of underwriting, therefore, is to declines your application. If your application is

spread the risk among a pool of insured customers accepted, the underwriter also determines the

in an equitable manner. This ensures profits for the appropriate premium amount.

customers and the insurer. Typically, a customer who presents a high degree

In such cases, risk is the possibility of an of risk pays a higher premium for his/ her

unfavourable deviation from a desired outcome. insurance coverage. This decision that an

underwriter takes for the customers insurance

coverage is referred to as an Underwriting

Decision. These decisions are very important for

the success of any insurance company.

8.3 Underwriting Objectives

The basic objectives of effective underwriting are to issue plans to the customers that are

The premium amount that is charged to customers for an insurance coverage

has to be calculated on factors that affect the plan costs. An underwriter

decides the premium amount based on his/her analysis of the risk that the

insured customer is presenting.

Equitable to the

Policyholder

Customers take the final decision whether to buy a plan or not. The plan is

referred to as undeliverable or not taken if the customer decides not to buy

that plan.

Deliverable by

the Agent

The underwriter has to determine an appropriate premium amount that is

acceptable to the customers and the insurer. Therefore, the premium amount

should also cover the risks that insurers are undertaking.Consequently, the decisions taken by the underwriter is crucial in the success of

the insurers business. If the underwriters risk projections that are based on

mortality are not correct, the insurer may lose large amounts of money.

Profitable to

the Company



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Basic Requirements for Acceptance of a Plan 8.4 Risks in Insurance Business

For a plan to be acceptable to a customer, it must The underwriter takes into account numerous

satisfy these three basic requirements - risks before taking an underwriting decision.

These risks may be - The plan must provide benefits that meet all the

customers needs

The insurance coverage provided must be

affordable to the customer

The premium amount charged for the coveragemust be competitive in the marketplace

The underwriter needs to consider the customers habits, personal and family

medical history

Medical Risks

The underwriter needs to examine the customers need to buy the insurance

coverage, the stability of his/her income, his/her persistence in paying the

premiums, and the net worth of the customer

Financial Risks

The underwriter takes into consideration the customers occupation, hobbies,

location of his/her residence, and some moral hazard elements

Personal Risks

Moral Hazards Moral Hazard Red Alerts

A moral hazard is a risk that insurers take in When the customer has no need of insurance

believing in the customers integrity and honesty. or no insurable interest

It cannot be measured like a physical hazard. A When the insurance is not appropriate withmoral hazard involves good faith, the customers respect to the customers incomereputation, his/her integrity, habits, standard of

When a customer wants a large insurance at anliving and income, among others.

advanced ageSome customers may have a tendency to hide or

When the customer refuses to disclose his/hermanipulate data or information while buying

previous insurance historyinsurance plans. Moral hazard is a required risk

that insurers need to take in their business.



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Claims Management

9.1 Claims Definition

9.2 Role of the Insurer in

Claims Management

9.3 Role of the Insured in

Claims Management

9.4 Types of Claims

9.5 Premature Claims

9.6 Maturity Benefits


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9.1 Claims Definition

9.2 Role of the Insurer in Claims

Management

9.3 Role of the Insured in Claims

Management 9.4 Types of Claims

9.5 Premature Claims

Death Claims

A claim on an insurance plan is the demand for

the fulfillment of a promise made by the insurer,

to the insured (customer), at the time of

finalizing the contract. If the customer has

fulfilled his/her part of the contract, then,

insurer is also obliged to do the same.

Identity, occupation, and incomeThe insurer must check -

Age and built The obligations under the contract

Health and habits If the age is admitted

Personal and family history Whether the event of contingency covered

Previous insurance details, if anyhas occurred

The purpose of applying for insurance If the cause of the death and date of death is

The underlying principle of insurance is that thespecified (in case of a death claim)claim will reinstate the insured in the same financial

Whether the claimant is the person who is position as he/she was prior to the claim. Thisentitled to the claim

indicates that the claimant cannot make a profit

with his/her claim.

The insured must -There are broadly two types of claims

Provide evidence of age Premature claims

Pay the premiums as stipulated Maturity claim/ benefits

Complete the proposal form by providing

information such as -

A premature claim is a claim made on an insurance

plan before the maturity of the plan. These claims

can be categorized under death claims and living

benefit claims.

Death claims are claims that are paid when an

insured individual suffers an untimely death. These


A claim is the demand for the

fulfillment of a promise


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cases need to be handled with utmost care and amount could either be a lump sum payment or a

responsibility because the fate of the deceaseds string of payments.

family is dependent on this claim. Death claim is For example, a customer buys IndiaFirst Young Indiaattached with the base plan and rider, if any. plan for a 10 year period. At the end of 10 years

A customer buys a life insurance plan to cover (maturity), the customer will receive a lump sum

his/ her family financially in case of his/ her amount that is the plan fund value.

untimely death.

This is therefore the most sensitive area for

Survival benefits are claims that are payable at pre-the insurer.defined intervals during the endowment term as

stipulated in the plan. These claims are payable out

of the reserves accumulated against the plan.

Basic sum assured (SA)

Any other benefits (if applicable) likeAnnuity payments refer to a string of payments

accidental death benefit, and waiver ofmade in favour of the annuitant after the annuity

premium among othersvesting date.

For example: A customer buys IndiaFirst YoungAn annuitant is an individual who is entitled to

India plan for a 10 year period. If the life insuredreceive benefits from an annuity.

(customer) dies in the fifth plan year, the For example, a customer buys a pension plan, atfollowing benefits will be paid to his/ her

maturity, he/ she will have the following options -nominee (child)

Take 1/3rd of the fund value (tax free) andLife Cover Benefit - Basic sum assured (SA) is

purchase an annuity with the remaining 2/3rdpaid immediately

either from IndiaFirst or from any other lifeWaiver of Premium Benefit - All future

insurance companypremiums are funded by us

Purchase an annuity with the entire lump sumMaturity Benefit - At maturity, the fund value is

payment either from IndiaFirst or from any otherpaid to the nominated child if he/she has

life insurance companyattained the age of 18 years. If the child is a minor,

Take the fund value (taxed as per income

the fund value at maturity is paid out to the tax rules)appointee

Maturity claim/ benefits are claims that are

made after the expiry of the term stipulated in

the plan. It is predominantly applicable to

endowment type of contracts. The maturity

Survival Benefits

Payment of a death claim will involve the

following components -

Annuity Payments

9.6 Maturity Benefits



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Know the Insurance Regulator and its Role

10.1 Insurance Act 1938

and its Provisions

10.2 What are the Provisions of

the Insurance Act?

10.3 What is the need to regulate

the Insurance Industry?

10.4 What are the Responsibilities

of the IRDA?


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The IRDA (Insurance Regulatory and subsequently amended in 1950 and, again, in 1999.

Development Authority) is a corporate body The Act includes the following provisions -

that has the responsibility of administering the Registration of our company and renewal

Insurance Act. Up until 1999 the Controller ofof registrations

I n s u r a n c e w a s r e s p o n s i b l e f o r t h e

administration of the Insurance Act. With the Capital and solvency margin requirements.IRDA Act 1999 being put in place, the

Investment of our assetsresponsibility was subsequently handed over to

the IRDA. The IRDA is guided by the Insurance Rural and social sector obligationsAdvisory Committee (consisting of not more

than 25 members). Assignment and transfer of policies and

nominations

Licensing of our agents and their remunerations

Prohibition of rebatesSince insurance is a contract between the insurer

and the insured, it is necessary that the Protection of our holders interests

formation and the execution of the contract

follow certain principles and guidelines. Also, Placing limits on our expenses

insurance products act as a social security net Constitution of Insurance Association,for the countrys population. Thus it is necessary

Insurance Council, and the Tariff Advisorythat it is made accessible to all strata of the

Committee for General Insurance among otherssociety. Keeping this in mind, the Insurance Act

1938 was formed.

Regulating the insurance industry ensures -

Protection of customer interestsThe Insurance Act 1938 is the principal act that

governs the insurance business in India. It came Proper training of the salesperson so as to

into effect on 1st July, 1939 and was reduce mis-selling

A level playing field for all the insurance

players

P enetrat ion of insuranc e products by

mandating rural obligations for all companies

10.1 Insurance Act 1938 and its

provisions

10.3 What is the need to regulate the

insurance industry?10.2 What are the provisions of the

Insurance Act?


IRDA has the resposibility of

administering the Insurance Act.

It is guided by the Insurance

Advisory Committee


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10.4 What are the responsibilities of

the IRDA?

Operations and Monitoring of Performance

For insurance companies, the IRDA supervision

exists at the following stage

Structure and Registration

business. This includes approval for the

appointed CEO and Actuary

Registration of insurers and licensing of

insurance intermediaries Insurance companies need to have all our

Financial and regulatory supervision products approved by the IRDA before

introducing them into the market Control and regulation of the premium rates

IRDA regulates the investments made by us Protecting the customers interests

It regulates the extent of reinsurance required Specifying rural and social sector obligations

It regulates maintenance of solvency margins

It conducts on-site inspections periodically

Insurance companies need to undergo a

regulatory clearance process before

obtaining the license to start the insurance



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Life Insurance Industry SWOT


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Life Insurance Industry SWOT

An analysis of the current scenario of the Life Insurance Industry in India reveals the

following Strengths, Weaknesses, Opportunities and Threats:

Strengths

Weaknesses

The avai labi l i ty o f a large pool o f

mathematical, analytical, financial and IT High Savings Rate amongst Indianstalent and a large supply of cheap manpower

Indians have one of the highest savingscan make India the insurance back office hub

rate 35% of GDP. A part of these savingsof the world, transferring operational

flow into the Insurance sectorprocesses from UK and US

Favourable demographics of the Indian

economy

India has a large young population and its Poor market perception

dependency ratio is expected to fall to Conflict between an agents need to hard sell52% by 2015 and 48% by 2025. 50% of a product and the true customer need, nonthe Indian population is expectedto be standardization of products and processes toless than 50 years of age by 2020, deliver a uniform customer experience andtriggering a rapid growth of working recent regulatory changes that have made thepopulation which in turn will act environment more challenging have allas a catalyst for growth of the contributed towards a poor perception ofInsurance Industry the industry amongst customers and

Availability of large talent pool potential employees

Strong correlation with Market Volatility

Given that insurance also serves the benefit of

investment lead wealth creation, success of

the products and industry has a strong

correlation to fluctuations in the equity

market. Insurers however, can provide

options to customers that provide balanced

returns despite the volatile markets


Indians have one of the highest

savings rate - 35% of GDP


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Opportunities

Threat

Growing incomes and Increasing financial

literacy

With increase in income across the

country, Indian customers are also

becoming more conscious about their

financial choices and demanding a range

of instruments that will help them meet

their financial goals

Governments focus on Financial Inclusion

Government programs of financial Competition from other financial service

inclusion are making available guaranteedproviders such as Banks/Mutual Funds/Pension

minimum employment and a slew of ruralFunds/Hedge Funds etc.

development initiatives. These are I n i n te r na t i on a l m ar ke t s i ns u ra n ce

opening up windows of opportunity forcompanies are competing with hundreds of

basic financial services in the remoteother players such as Banks, Mutual Funds,

corners in India.Pension Funds, Hedge Funds and finance

Replicating the successful Bancassurancecompanies. In India too, this is slowly

Modelbecoming a reality. It is important that the

The Bancassurance model has done well in Indian life insurance companies realize thatIndia. This presents a potent ial every insurance as an investment and everyopportunity for the industry to pick investment is insurance, and thus broad baseprinciples and learnings from the their strategy and capabilities to competebancassurance model and apply them to a with a wider spectrumrange of different distribution channels to

improve performance of those



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Summary

Insurance is defined as a contract that Traditional products could also be either

assured the insured a sum of money in case participating or non-participating policies

of any untoward incident Non-traditional products are non-participating

Insurance is bought to protect the economic policies

value of an asset Unit linked insurance policies (ULIPs) are non-

Insurance also acts as an effective tool for participating policies

social security and economic development Insurance products could also defer by term of

The life insurance market in India is fairly premium payment which maybe single pay,

competitive with 24 players. Given the low regular pay or limited pay

penetration levels in the country this market Life insurance products cater to the changing

has huge potential to grow furtherinvestment and protection needs of the

There are two types of insurance customer as he moves from one life stage to

the next Life insurance an insurance cover taken

for a human life. Payout by the insurer Companies use a variety of distribution channelshappens when the agreed number of to expand their reach in the country and improve

years lapse or in case of the customer/ cost efficiencies. The different channels present

insureds unfortunate demise are agency, corporate agents, bancassurance,

brokers, worksite marketing etc. Non-life/ General insurance an insurance

cover taken on a non-life asset. For Bancassurance has got three different models,

example: fire insurance, car insurance, i.e., corporate agency, referral arrangements and

marine insurance, engineering insurance etc. joint venture

Life Insurance policies provide varied The key rationale behind a bancassurance model

benefits such as protection, investment, is its low cost effectiveness; the existing branch

retirement, health networks of the banks can be utilized to

distribute insurance products Investment products could be either

traditional products or non traditional They key success factors for the bancassurance

products model to be a winner includes cultural

integration between the banks and the Traditional products are further classified

insurance player, proper communication,into whole life policy, endowment policy and

technological compatibility, simple & easymoney back policy



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management information system, efficient Maturity claims/ benefits are claims that are

training to the bank staff and clearly defined made after the expiry of the plan term

roles & responsibilities The Insurance Regulatory & Development

The key steps involved in our sales process Authority (IRDA) is a regulatory body that

include suspecting or lead generation, oversees the life insurance and general

prospecting, proposing a solution and insu rance acti viti es of all insu rance

closure companies in India

Each stage of the sales process is extremely IRDA supervises insurance companies at thecritical in finally closing the sale and involves two stages

various people both from within our Structure and registration of the company

company as well as from our partner banks

O p er a ti o ns a nd m on i to r in g o f Underwriting is the process through which

performancewe take a decision to accept or reject a

specific application depending on the extent G i v en th e c u rr e nt so c i o- e c on o mi cof risk for a given sum of premium. It is a environment of the country, there are variousprocess of identification, assessment, strengths and opportunities that can beselection, and classification of risks involved leveraged to fuel growth of the industry, at

in the insurance business the same time there are weaknesses and

threats that need to be considered and An underwriter is the person who evaluates

effectively overcomethe risk being taken on by us and decides

whether to accept or decline an application

A claim on an insurance plan is the demand

for the fulfilment of a promise made by the

insurer to the insured (customer), at the time

of finalizing the contract

There are broadly two types of claims

premature clams and maturity claim/benefits

Premature claim is a claim made on an

insurance plan before the maturity of the plan

d b i d d d h l i

Introduction to Life Insurance in India

Documents

Transcript of Introduction to Life Insurance in India