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HDFC STANDARD LIFE INSURANCE1
SIVA SIVANI INSTITUTE OF
MANAGEMENT
A
REPORT
ON
HDFC STANDARD LFIE
INSURANCE
SUBMITTED TOSUBMITTED BY
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HDFC STANDARD LIFE INSURANCE2
Mr.B.S.Rao Sir PriyanshuSaxena
Roll No: B2-18
ARIHANT CLUBHOUSE
PGDM BIFAAS
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HDFC STANDARD LIFE INSURANCE3
CONTENTS
Priyanshu Saxena-Aspirant Club House
Introduction 3Characteristics of Insurance 3Insurance industry classification 4Origin and Development of Insurance
Insurance in the World
Insurance in India
5
6Important milestones in life insurance business in
India
7
Insurance Sector Reforms 8Scenario after Malhotra Committee Report 10
Company Profile 11Span of Organization 13Performance of the company 16Key strengths 17Market Share of top 10 insurance companies 18Plans offered by HDFC
Individual Products
Group Products
Social Products
20
20
21
21Introduction to Unit Linked Funds 24Tax Benefits 26Questionnaire asked to HDFC 27Recommendations 28
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HDFC STANDARD LIFE INSURANCE4
INTRODUCTION
General Definition
In the words of John Magee, Insurance is a plan by themselves which
large number of people associate and transfer to the shoulders of all,
risks that attach to individuals.
Fundamental Definition
In the words of D.S. Hansell, Insurance accumulated contributions of all
parties participating in the scheme.
Contractual DefinitionIn the words of justice Tindall, Insurance is a contract in which a sum of
money is paid to the assured as consideration of insurers incurring the
risk of paying a large sum upon a given contingency.
CHARACTERISTICS OF INSURANCE
Sharing of risks
Cooperative device
Evaluation of risk
Payment on happening of a special event
The amount of payment depends on the nature of losses
incurred.
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HDFC STANDARD LIFE INSURANCE5
INSURANCE INDUSTRY: CLASSIFICATION
Fire Insurance Marine Insurance Mediclaim
Motor Vehicle
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INSURANC
LIFE INSURANCE GENERAL
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HDFC STANDARD LIFE INSURANCE6
ORIGIN AND DEVELOPMENT OF INSURANCE
Insurance in the World
Insurance in the modern form originated in the Mediterranean
during 13/14th century. The earliest references to insurance have been found in
Babylonia, the Greeks and the Romans.
The use of insurance appeared in the account of North Italian
merchant banks who then dominated the international trade in
Europe at that time. Marine insurance is the oldest form of insurance followed by life
insurance and fire insurance. The patterns that have been used in
England followed in other countries also in these kinds of
insurance. BABYLONIA the place where insurance was done firstly by traders
to cover the risks of the caravan trade through loans that were
repaid with interest only after the goods had arrived safely. The first life insurance policy was issued on 18 th June 1583, on the
life of William Gibbons for a period of 12 months.
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HDFC STANDARD LIFE INSURANCE7
Insurance in India
The Britishers opened general insurance in India around
the year 1700. The first company, known as the Sun Insurance Office Ltd.
was set up in Calcutta in the year 1710. Insurance companies like Bombay Insurance Company Ltd
was established in 1793.
In 1818 it was conceived as a means to provide for English
Widows . The Bombay Mutual Life Insurance Society started its
business in 1870 . It was the first company to charge same premium for both Indian
and non-Indian lives. The Oriental Assurance Company was established in 1880 . Till the end of nineteenth century insurance business was
almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of
the Life Insurance Companies Act of 1912 and the
provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in
India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the
Insurance Act of 1938 that provided strict State Control over
insurance business.
The insurance business grew at a faster pace after independence.
The Government of India in 1956 , brought together over 240
private life insurers and provident societies under one
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HDFC STANDARD LIFE INSURANCE8
nationalized monopoly corporation and Life Insurance
Corporation (LIC) was born.
Nationalization was justified on the grounds that it would create
much needed funds for rapid industrialization.
Important milestones in the life Insurance business in
India
1912 : The Indian Life Assurance Companies Act enacted as
the first statute to regulate the life insurance
business.
1928: The Indian Insurance Companies Act enacted to
enable the government to collect statistical
information about both life and non-life insurance
businesses.
1938: Earlier legislation consolidated and amended to by
the Insurance Act with the objective of protecting
the interests of the insuring public.
1956: 245 Indian and Foreign insurers and provident
societies taken over by the central govt. and
nationalized. LIC formed by an Act of Parliament LICAct 1956- with a capital contribution of Rs. 5 Crores
from Govt. of India
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HDFC STANDARD LIFE INSURANCE9
INSURANCE SECTOR REFORMS
The Malhotra Committee Report
In 1993, Malhotra Committee, headed by former Finance Secretary and
RBI Governor R. N. Malhotra, was formed to evaluate the Indian
insurance industry and recommend its future direction. In 1994, the
committee submitted the report and gave the following
recommendations:
Structure Government stake in the insurance Companies to be brought down
to 50%.
Government should take over the holdings of GIC and its
subsidiaries so that these subsidiaries can act as independent
corporations.
All the insurance companies should be given greater freedom to
operate.
Competition Private Companies with a minimum paid up capital of Rs.1bn
should be allowed to enter the industry. No Company should deal in both Life and General Insurance
through a single entity.
Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies.
Postal Life Insurance should be allowed to operate in the rural
market.
Only one State Level Life Insurance Company should be allowed to
operate in each state.
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HDFC STANDARD LIFE INSURANCE10
Regulatory Body.
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry)
should be made independent.
Investments Mandatory Investments of LIC Life Fund in government securities
to be reduced from 75% to 50%
GIC and its subsidiaries are not to hold more than 5% in any
company (There current holdings to be brought down to this levelover a period of time)
Customer Service LIC should pay interest on delays in payments beyond 30 days
Insurance companies must be encouraged to set up unit linked
pension plans
Computerization of operations and updating of technology to becarried out in the insurance industry
Overall, the committee strongly felt that in order to improve the
customer services and increase the coverage of the insurance
industry should be opened up to competition.
But at the same time, the committee felt the need to exercise
caution as any failure on the part of new players could ruin the
public confidence in the industry.
Hence, it was decided to allow competition in a limited way by
stipulating the minimum capital requirement of Rs.1 billion. This amount
is not very high for foreign firms, as it translates to only about US$25
million. Further, to date it is unclear whether equity should be payable in
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HDFC STANDARD LIFE INSURANCE11
one go or should be brought in as installments. Also, the foreign equity
participation was to be restricted to only 40%.
The committee felt the need to provide greater autonomy to insurancecompanies in order to improve their performance and enable them to act
as independent companies with economic motives. For this purpose, it
had proposed setting up an independent regulatory body.
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Scenario after Malhotra Committee Report
The Government of India liberalised the insurance sector in March 2000
with the passage of the Insurance Regulatory and Development
Authority (IRDA) Bill, lifting all entry restrictions for private players and
allowing foreign players to enter the market with some limits on direct
foreign ownership. Under the current guidelines, there is a 26 percent
equity cap for foreign partners in an insurance company. There is a
proposal to increase this limit to 49 percent.
The opening up of the sector is likely to lead to greater spread anddeepening of insurance in India and this may also include restructuring
and revitalizing of the public sector companies. In the private sector 15
life insurance companies have been registered. A host of private
Insurance companies operating in life segments have started selling
their insurance policies since 2001. Table shows the current market
players in the life Insurance Industry (Source IRDA).
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COMPANY PROFILE
HDFC Standard Life Insurance Company Ltd
HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC
has since emerged as the largest residential mortgage finance
institution in the country The corporation has had a series of share
issues raising its capital to Rs. 119 crores.
HDFC Standard Life Insurance Company Limited was one of the first
companies to be granted license by the IRDA to operate in life
insurance sector. Reach of the JV player is highly rated and been
conferred with many awards. HDFC is rated AAA by both CRISIL and
ICRA. Similarly, Standard Life is rated AAA both by Moodys and
Standard and Poors. These reflect the efficiency with which HDFC and
Standard Life manage their asset
base of Rs. 15,000 Cr and Rs. 600,000 Cr.
Respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 14 th
August 2000. HDFC is the majority stakeholder in the insurance JV with
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HDFC STANDARD LIFE INSURANCE14
81.4 %stale and Standard of as a staple pf 18.6% Mr. Deepak
Satwalekar is the MD and CEO of the venture.
HDFC Standard Life Insurance Company Ltd. Is one of Indias leadingPrivate Life Insurance Companies., which offers a range of individual
and group insurance solutions. It is a joint venture between Housing
Development Finance Corporation Limited (HDFC Ltd.) Indias leading
housing finance institution and the Standard Life Assurance Company,
a leading provider of financial services from the United Kingdom.
Both the promoters are will known for their ethical dealings and
financial strength and are thus committed to being a long-term player
in the life insurance industry- all important factors to consider when
choosing your insurer.
HDFC is the largest housing Company in India for the last 27 years.
Besides the core business of mortgage HDFC has evolved into a
financial conglomerate with holdings In:
o HDFC Standard Life insurance Company- HDFC holds 78.07
%.
o HDFC Asset Management Company HDFC holds 50.1%
o HDFC Bank- HDFC holds 22.25%.
o Intelenet Global (Business Process Outsourcing) HDFC
holds 50%.
o HDFC Chubb General Insurance Company HDFC holds
74%.
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SPAN OF ORGANISATION
Mr. Deepak S Parekh is the Chairman of the Company. He is also
the Executive Chairman of Housing Development Finance Corporation
Limited (HDFC Limited). He joined HDFC Limited in a senior
management position in 1978. He was inducted as a whole-time
director of HDFC Limited in 1985 and was appointed as its Executive
Chairman in 1993. He is the Chief Executive Officer of HDFC Limited.
Mr. Parekh is a Fellow of the Institute of Chartered Accountants
(England & Wales).
Mr. Keki M Mistry joined the Board of Directors of the Company in
December, 2000. He is currently the Managing Director of HDFC
Limited. He joined HDFC Limited in 1981 and became an Executive
Director in 1993. He was appointed as its Managing Director in
November, 2000. Mr. Mistry is a Fellow of the Institute of Chartered
Accountants of India and a member of the Michigan Association of
Certified Public Accountants.
Mr. Alexander M Crombie joined the Board of Directors of the
Company in April, 2002. He has been with the Standard Life Group for
34 years holding various senior management positions. He was
appointed as the Group Chief Executive of the Standard Life Group in
March 2004. Mr. Crombie is a fellow of the Faculty of Actuaries in
Scotland.
Ms. Marcia D Campbell is currently the Group Operations Director
in the Standard Life group and is responsible for Group Operations, Asia
Pacific Development, Strategy & Planning, Corporate Responsibility and
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Shared Services Centre. Ms. Campbell joined the Board of Directors in
November 2005.
Mr. Keith N Skeoch is currently the Chief Executive in StandardLife Investments Limited and is responsible for overseeing Investment
Process & Chief Executive Officer Function. Prior to this, Mr. Skeoch was
working with M/s. James Capel & Co. holding the positions of UK
Economist, Chief Economist, Executive Director, Director of Controls
and Strategy HSBS Securities and Managing Director International
Equities. He was also responsible for Economic and Investment
Strategy research produced on a worldwide basis. Mr. Skeoch joined the
Board of Directors in November 2005.
Mr. Gautam R Divan is a practising Chartered Accountant and is a
Fellow of the Institute of Chartered Accountants of India. Mr. Divan was
the Former Chairman and Managing Committee Member of Midsnell
Group International, an International Association of Independent
Accounting Firms and has authored several papers of professional
interest. Mr. Divan has wide experience in auditing accounts of large
public limited companies and nationalised banks, financial and taxation
planning of individuals and limited companies and also has substantial
experience in structuring overseas investments to and from India.
Mr. Ranjan Pant is a global Management Consultant advising
CEO/Boards on Strategy and Change Management. Mr. Pant, until 2002
was a Partner & Vice-President at Bain & Company, Inc., Boston, wherehe led the worldwide Utility Practice. He was also Director, Corporate
Business Development at General Electric headquarters in Fairfield,
USA. Mr. Pant has an MBA from The Wharton School and BE (Honours)
from Birla Institute of Technology and Sciences.
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Mr. Ravi Narain is the Managing Director & CEO of National Stock
Exchange of India Limited. Mr. Ravi Narain was a member of the core
team to set-up the Securities & Exchange Board of India (SEBI) and is
also associated with various committees of SEBI and the Reserve Bankof India (RBI).
Mr. Deepak M Satwalekar is the Managing Director and CEO of
the Company since November, 2000. Prior to this, he was the Managing
Director of HDFC Limited since 1993. Mr. Satwalekar obtained a
Bachelors Degree in Technology from the Indian Institute of Technology,
Bombay and a Masters Degree in Business Administration from The
American University, Washington DC.
Ms. Renu S. Karnad is the Executive director of HDFC Limited, is a
graduate in law and holds a Master's degree in economics from Delhi
University. She has been employed with HDFC Limited since 1978 and
was appointed as the Executive Director in 2000. She is responsible for
overseeing all aspects of lending operations of HDFC Limited.
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Key Strengths of HDFC
Financial Expertise
As a joint venture of leading financial services groups, HDFC StandardLife has the financial expertise required to manage your long-terminvestments safely and efficiently.
Range of Solutions
We have a range of individual and group solutions, which can be easilycustomised to specific needs. Our group solutions have been designedto offer you complete flexibility combined with a low charging structure.
Track Record so farOur gross premium income, for the year ending March 31, 2008 stoodat Rs. 4,859 crores and new business premium income stood at Rs.2,685 crores.
The company has covered over 9,59,000 lives year ending March 31,2008.
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MARKET SHARE OF TOP 10 INSURANCE
COMPANIES:
LIC (Life Insurance Corporation of India) still remains the largestlife insurance company accounting for 64% market share. Its
share, however, has dropped from 74% a year before, mainly
owing to entry of private players with innovative products and
better sales force.
ICICI Prudential Life Insurance Co Ltd is the biggest private life
insurance company in India. It experienced growth of 58% in new
business premium, accounting for increase in market share to8.93% in 2007-08 from 6.97% in 2006-07.
Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52%
and its market share went up to 6.98% in 2007-08 form 5.66% in
2006-07. The company ranked second (after LIC) in number of
policies sold in 2007-08, with total market share of 7.36%. SBI Life Insurance Co Ltd in terms of new number of policies sold,
the company ranked 6th in 2007-08. New premium collection forthe company was Rs 4,792.66 crore in 2007-08, an increase of
87% over last year. Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76
crore and its market share went up to 2.96% from 1.23% a year
back. It now ranks 5th in new business premium and 4th in
number of new policies sold in 2007-08.
HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680
crore in FY2007-08, registering a year-on-year growth of 64%. Its
market share is 2.88% and it ranks 6 th among the insurance
companies and 5th amongst the private players. Birla Sun Life Insurance Co Ltd market share of the company
increased from 1.22% to 2.11% in 2007-08. The company moved
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to the 7th position in 2007-08 from 8the a year before, pushing
down Max New York Life insurance company.
Max New York Life Insurance Co Ltd has reported growth of 73%
in 2007-08. Total new business generated was Rs 641.83 crore asagainst Rs 387.51 crore. The company was pushed down to the
8th position from 7th in 2007-08.
Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08,
the company reported growth of 80%, moving from the 11th
position to 9th. It captured a market share of 1.19% in 2007-08.
Last year the company doubled its branch network to 150 from
74. Aviva Life Insurance Company India Ltd ranking dropped to 10th
in 2007-08 from 9th last year. It has presence in more than 3,000
locations across India via 221 branches and close to 40
bancassurance partnerships. Aviva Life Insurance plans to
increase its capital base by Rs 344 crore. With the fresh
investment, total paid-up capital of the insurer would go up to Rs
1,348.8 crore.
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PRODUCTS & SERVICES
The right investment strategies won't just help plan for a more
comfortable tomorrow -- they will help you get Sar Utha ke Jiyo . AtHDFC SLIC, life insurance plans are created keeping in mind the
changing needs of family. Its life insurance plans are designed to
provide you with flexible options that meet both protection and savings
needs. It offers a full range of transparent, flexible and value for money
products. HDFC SLIC products are modern and contemporary unitized
products that offer unique customer benefits like flexibility to choose
cover levels, indexation and partial withdrawals.
PLANS THAT ARE OFFERED BY HDFC STANDARDS LIFE
INSURANCE
INDIVIDUAL PRODUCTS
Protection Plans
A person can protect his family against the loss of his income or the
burden of a loan in the event of his unfortunate demise, disability or
sickness. These plans offer valuable peace of mind at a small price.
Protection range includes our Term Assurance Plan & Loan Cover Term
Assurance Plan
Investment Plans
HDFC SLICs Single Premium Whole of Life plan is well suited to meet
long term investment needs. This provides attractive long term returns
through regular bonuses.
Pension Plans
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Pension Plans help to secure financial independence even after
retirement. Pension range includes Personal Pension Plan , Unit Linked
Pension, Unit Linked Pension Plus .
Savings Plans
Savings Plans offer a flexible option to build savings for future needs
such as buying a dream home or fulfilling your childrens immediate
and future needs.
Endowment Assurance Plan Unit Linked Endowment Plus II Money
Back Unit Linked Enhanced Life Protection II Children's Plan Unit Linked
Young Star Plus II
GROUP PRODUCTS
HDFC Standard Life has the most comprehensive list of products for
progressive employers who wish to provide the best and most
innovative employee benefit solutions to their employees. It offers
different products for different needs of employers ranging from term
insurance plans for pure protection to voluntary plans such as
superannuation and leave encashment.
HDFC SLIC offers the following group products to esteemed corporate
clients:
Group Term Insurance
Group Variable Term Insurance
Group Unit-Linked Plan
An investment solution that provides funding vehicle to manage
corpuses with Gratuity , Defined Benefit or Defined ContributionSuperannuation or Leave Encashment schemes of your company
Also suitable for other employee benefit schemes such as salary saving
schemes and wealth management schemes
SOCIAL PRODUCT
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Development Insurance Plan
Development Insurance plan is an insurance plan which provides life
cover to members of a Development Agency for a term of one year. On
the death of any member of the group insured during the year of cover,a lump sum is paid to those member beneficiaries to help meet some
of the immediate financial needs following their loss.
Eligibility
Members of the development agency and their spouses with:
- Minimum age at the start of the policy 18 years last birthday
- Maximum age at the start of policy 50 years last birthday
Employees of the Development Agency are not eligible to join the
group. The group to be covered is only eligible if it contains more than
500 members.
Premium Payments
The premium to be paid will be quoted per member in the group
and will be the same for all members of the group.
The premium can only be paid by the Development Agency as a
single lump sum that includes all premiums for the group to be
covered. Cover will not start until the premium and all the
member information in our specified format has been received.
Benefits
On the death of each member covered by the policy during the year of cover a lump sum equal to the sum assured will be paid to their
beneficiaries or legal heirs. Where the death is as a result of an
accident, an additional lump sum will be paid equal to half the sum
assured. There are no benefits paid at the end of the year of cover and
there is no surrender value available at any time.
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The role of the Development Agency
Due to the nature of the groups covered, HDFC Standard Life will be
passing certain administrative tasks onto the Development Agency. Bypassing on these tasks the premium charged can be lower. These tasks
would include:
Submission of member data in a specified computer format
Collection of premiums from group members
Recording changes in the details of group members
Disbursement of claim payments and the mortality rebate (if any)
to group members These tasks would be in addition to the usual duties of a policyholder
such as:
Payment of premiums
Reporting of claims
Keeping policy holder information up to date
Training and support will be available to give guidance on how to
complete the tasks appropriately. Since these additional tasks willimpose a burden on the Development Agency, the Development
Agency may charge a Rs. 10 administration fee to their members.
Prohibition of rebates
Section 41 of the Insurance Act, 1938 states
No person shall allow or offer to allow, either directly or
indirectly, as an inducement to any person to take out or renewor continue an insurance in respect of any kind of risk relating to
lives or property in India, any rebate of the whole or part of the
commission payable or any rebate of the premium shown on the
policy, nor shall any person taking out or renewing or continuing
a policy accept any rebate, except such rebate as may be
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allowed in accordance with the published prospectus or tables of
the insurer
If any person fails to comply with sub regulation (previous point)
above, he shall be liable to payment of a fine which may extendto rupees five hundred
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INTROUCTION TO UNIT LINKED FUNDS
Unit linked plans are based on the component of the premium or the
contribution of the customer towards the plan. This contribution can be
in different modes like yearly, half yearly, quarterly and monthly. Unit
linked plans have multiple benefits like life protection, rider protection,
savings, transparency, investment choices, liquidity and planning for
taxes. These plans work like mutual funds. The premium is collected
from the policy holder. He is allotted a certain number of units based of
his contribution. The Net Asset Value is the value of each unit of the
fund. It is found by subtracting the charges and current liabilities fromthe current assets and investments and dividing this number by the
total number of outstanding units.
Let us take an example. There are 100 investors and each invests Rs.
10 in a fund. The total value of the fund is Rs. 1000 and each person is
allotted 1 unit of Rs 10. Now the money (Rs. 1000) is invested in the
debt or equity market. Suppose the fund value increased by 20%. As a
result the Rs. 1000 invested became Rs. 1200. Hence the value of
every investor is now Rs. 12 and not Rs. 10.
Parameters RBI Bonds Fixed
Deposits
Mutual Funds Unit linked
Safety High High Medium High
Liquidity None High High High
Returns Low Low High High
Life Cover 1 time
amount
1 time
amount
1 time
amount
10 times
Tax benefits Tax free Taxed Taxed Tax free
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We find that life insurance unit linked plans is a good area to invest
money in as it provides liquidity, safety, high returns, life cover and tax
benefits in a single plan. HDFC SLIC offers the option of indexation to
beat inflation. Risk is reduced to a large extent as the company invests
in a diversified portfolio of stocks.
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TAX BENEFITS
INCOME TAX
SECTION
GROSS ANNUAL
SALARY
HOW MUCH TAX
CAN YOU SAVE?
HDFC STANDARD
LIFE PLANS
Sec. 80C Across All
income Slabs
Upto Rs. 33,990
saved on
investment of
Rs. 1,00,000.
All the life
insurance plans.
Sec. 80 CCC Across all
income slabs.
Upto Rs. 33,990
saved on
Investment of
Rs.1,00,000.
All the pension
plans.
Sec. 80 D Across all
income slabs
Upto Rs. 3,399
saved on
Investment of
Rs. 10,000.
All the health
insurance riders
available with the
conventional plans.
TOTAL SAVINGSPOSSIBLE Rs37,389
Rs. 33,990 under Sec. 80C and under Sec. 80 CCC ,
Rs.3,399 under Sec. 80 D, calculated for a male with
gross annual income
exceeding Rs. 10,00,000.
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Sec. 10 (10)D Under Sec. 10(10D), the benefits you receive are
completely tax-free, subject to the conditions laid down
therein.
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QUESTIONAIRE asked to HDFC
EXISTENCE
HDFC came into existence somewhere around 38 yrs back, whereas hdfc slic came into existence just8 yrs back (i.e. on 14 th aug-2000).
Different channels of distribution of hdfc are
Sales.[ Retail selling , alternative channel , DST(directsales team) ]
Into retail selling involves selection FOR PROJECT TRAINEES.
Operations
HR
Agency support
Channel department.
Regional manager : Piyush
No of the employees
Presently 140 employees are working in the hdfc slic, Ranigunjbranch.
Different plans they issue for the customers
Pension plans***
Children plans
Endowment plan
Turnover of the HDFC
4 units-----4 business managers----HYD 1---750HYD 2---750
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