Life insurance

Saji Paul

Life insurance

Distribution Channels

Tied agency

Alternate channels

Remuneration Provisions

Regulations Assignment

Sales illustration Assignment

Life insurance

Life insurance

Innovation- business drivers

Distributor demands

Competition pressures

Regulatorychanges

Customer expectations

Life insurance

Distribution channels

Traditional tied agency system

Why alternate channels?

Growth, improvement, convenience..

Competition

Cost

Good governance GMOOT

Life insurance

Tied agency

Principal – agency relationship

Face to face, smiling, reassuring

Brand ambassador of the insurer

Network and prestige

A provider of other services

Traditional and professional

Life insurance

Tied agency

Expensive channel

Margin crunch - competition

Cheaper options – social media?

Mis-selling?

Advisory capacity

Life insurance

Alternate channels

Micro insurance

Telemarketing

Shop assurance- Phil/

Mall assurance S Korea –thru TESCO

Virtual marketing thru’ kiosks, mobiles etc.

Bancassurance

Broker

On-line buy / direct marketing

Social media

Takaful

Life insurance

Work on

Strategies for marketing LI thru’ Social Media – by 1st August

Individual - handwritten A4 sheets

Life insurance

RegulationsWhy

Objective

Process

Control

Life insurance

Some of IRDA's functions include:To regulate, ensure and promote the orderly growth of the insurance businessTo prescribe regulations on the investment of funds by insurance companiesTo regulate the maintenance of the margin of solvencyTo adjudicate the disputes between insurers and intermediaries To supervise the functioning of the Tariff Advisory Committee

Life insurance

Tied agency / Corporate agent

Qualifications

Training

Competency - knowledge

providing required services

Code of conduct

Life insurance

Regulations:Agents regulationsBrokers regulationsCorporate agentsBancassurance agentsHealth insurance

Non linked/Linked insurance productsStandard proposal forms for Life insurance…

Life insurance

Structure

Short title and commencement

Definitions

Applicability

Chapters

Life insurance

As per Insurance Act, 1938, The insurance companies are allowed to pay a maximum commission of 40 per cent of the first year’s premium, 7.5 per cent of the second year’s premium and 5 per cent from there on. The commission paid is limited to 2 per cent in case of single premium policies. In case of pension plans, the commission is limited to 7.5 per cent of the first year’s premium and 2 per cent there on. Currently most of the policies are very much paying these kind of commissions

Life insurance

Commission on pension products

S P - 2%, Non SP 7.5% on FYPand 2% on RP

Other products SP 2%

Life insurance

Premium pmt term

F Y 2nd & 3rd Year Subsequent years

5 15 7.5 5

6 18 7.5 5

7 21 7.5 5

8 24 7.5 5

9 27 7.5 5

10 30 7.5 5

11 33 7.5 5

12 years or more 35 7.5 5

Commission rates – non pension and non –single plans

Life insurance

Sales Illustration

Life insurance

Sales Illustration1)Every insurer carrying on life insurance business shall provide official illustrations to customers directly or through their licensed agents and intermediaries for all products.

(2) All illustrations shall be prepared in consultation with theAppointed Actuary and be authorized for use by the Board of Directors of the Company and, that the illustrations shallbe clear and fair to enable a customer to make an informeddecision.

Life insurance

(3) There should be 2 views on rate of return on investments of funds (the rate) that are illustrated – a higher rate and a lower rate. The rates to be used are as set by the Life Insurance Council from time to time and all the Life Insurance Companies shall use the same rates. All charges in respect of fund management and policy charges are to be deducted from the gross investment return assumption. For the avoidance of doubt this means that illustrations based on higher and lower rates of return should show a projected fund value after all charges associated with the policy and investment of funds have been deducted. No Insurer carrying life insurance business shall issue illustrations in any other way.

Life insurance

(4) All illustrations shall be reviewed at least once a year in the month of April. The Life Insurance Council may, if required by the IRDA, set a higher and lower projection of interest rates more frequently than annually. The initial rates to be used in projections are 10% p. a. and 6 % p. a.

Life insurance

(5) All the insurers carrying on life insurance business shall be free to use a lower illustrative rate than that is fixed if it so desires. However, under no circumstance, higher rates than those set by the Life Insurance Council shall be used.

(6) Standard common language be employed vis-à-vis statutory warning on all illustrations. The following phrase must appear on the front page of illustrations in the same font size as the rest of the text: “Some benefits are guaranteed and some benefits are variable with returns based on the future performance of your Insurer carrying on life insurance business.

Life insurance

If your policy offers guaranteed returns then these will be clearly marked “guaranteed” in the illustration table on this page. If your policy offers variable returns then the illustrations on this page will show two different rates of assumed future investment returns. These assumed rates of return are not guaranteed and they are not the upper or lower limits of what you might get back, as the value of your policy is dependent on a number of factors including future investment performance.”

Life insurance

(7) The process of issuing illustrations shall be controlled in such a manner that customers are provided illustrations that are authorized by Appointed Actuary and approved by the Board of Directors of the Company.

(8) All policy, fund management and other policy charges payable by customers shall be included explicitly within the illustration tables.

(9) Indicated within the illustration shall be the Company’s policy on surrender values. A Company may show illustrative surrender values if it wishes and should indicate whether or not guaranteed.

Life insurance

Sales Illustration1)Provide illustration. 2) Clear and fair information to customer for an informed decision, in

consultation with the AA, duly authorised by the Board.3) It should contain 2 rates, as determined from time to time by LI C 4) Review periodically, at least annually if not specified by L I C5) Lower rates can be given, but no higher rate be given.6)Standard common language, font size and mandatory info.7) Control by AA & BOD8)All charges to be disclosed9)Surrender values, if any to be indicated.

Life insurance

Treating Customers Fairly (TCF) norms

Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.

Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale

Life insurance

TCF would also ensure –Where consumers receive advice, the advice is suitable and takes

account of their circumstances.

Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.

Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

Life insurance

Life insurance

Saji Paul