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Code No : 01713A Comparative Study of Investment
Plan of ICICI Prudential Life
Insurance, Life Insurance with Other
Companies
By
Mahi Uddin “Shams”
1
A project report submitted in partial fulfillment of the
requirements for the degree of Master of Business
Administration of Sikkim Manipal University, INDIA
Sikkim Manipal University of Health, Medical and Technological Sciences Distance Education Wing Syndicate house, Manipal - 576104I here by declare that the project entitled
A Comparative Study of Investment
Plan of ICICI Prudential Life
Insurance, Life Insurance with Other
Companies
Submitted in partial fulfillment of the requirements for the degree
of Masters of Business Administration to Sikkim Manipal
2
University, INDIA, is my original work and not submitted for
the award of any other degree, diploma, fellowship, or any
other similar title or prizes.
Place : Delhi Mahi Uddin “Shams”
Date : Reg. No : 510738565
The project report of
Mahi Uddin “Shams”
A Comparative Study of Investment
Plan of ICICI Prudential Life
Insurance, Life Insurance with Other
Companies
3
is approved and is acceptable in quality and form.
Internal Examiner External Examiners
This is to certify that the project report entitled
A Comparative Study of Investment
Plan of ICICI Prudential Life
Insurance, Life Insurance with Other
Companies
4
submitted in partial fulfillment of the requirements for the degree
of Masters of Business Administration to Sikkim Manipal
University of Health ,Medical and Technological Sciences
Mahi Uddin “Shams”Has worked under my supervision and guidance and that no
part of this report has been submitted for the award of any
other degree, diploma, fellowship or other similar titles or
prizes and that the work has not been published in any journal
or magazine.
Reg. No : 510738565 Certified
(Guide’s name)
Abstract
An operational definition of the insurance is:
The benefit provided by a particular kind of indemnity contract, called an
insurance policy;
That is issued by one of several kinds of legal entities (stock insurance company,
mutual insurance company, reciprocal, or Lloyd's syndicate, for example), any of
which may be called an insurer;
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The business of insurance is related to the protection of the economic values of
assets.
The life insurance business deals with risks relating to life of human beings.
The objective of this project was to compare the investment plan of ICICI Prudential
Life Insurance with other competitive companies. While doing the comparison I have
studied the investment plans ICICI Prudential Life Insurance and that of the other
competitive companies. I have also compared the market status of the company in respect
of the other competitive companies.
I would like to thank my mentor who provided me the guidance for understanding the
investment plans, which will give me lots of experience and help me in future.
Acknowledgement
I hereby express my gratitude to faculties & Apar India Institute
of Management AND TECHNOLOGY for giving me this
opportunity to work on this project and for helping me and providing timely
guidance in all matters related to my project.
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I am thankful to Mr. Ram Pujan Sharma (Financial Planning
Manager, ICICI Prudential Life Insurance) for providing me with an
opportunity to work in this organization. I also thank him for his valuable
inputs in my project and for also giving me an insight into the actual
working of the company.
I express my indebtedness and gratitude to my company project guide
Mr. LALIT TYAGI (Unit Manager, ICICI Prudential life Insurance) for his
constant support and encouragement throughout the execution of the project,
without him this project would not have been possible.
(MAHI UDDIN “SHAMS”)
Index
S.NO CONTENTS PAGE NO.
1. Introduction 8
2. Objectives Of Research 27
3. Research Methodology 27
4. Literature Review 29
5. Industry profile 36
-SWOT analysis of Insurance sector 42
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6. Company profile 48
-Fact Sheet 48
-Distribution 49
-Promoters 49
-Management Team 50
-Products 56
7. Data analysis 83
-On the basis of company share in
market
84
-On the basis of investment plan of
other companies
95
8. Conclusion 102
9. Recommendation 103
10. Annexure 108
11. Bibliography 115
Introduction
What Is Insurance
The business of insurance is related to the protection of the economic values of the asset.
Every asset has a value. The asset would have been created through the efforts of the
owner. The asset is valuable to the owner, because he expects to get some benefits from
it. The benefit may be an income or something else. It is a benefit because it meets some
of his needs. In case of factory or a cow, the product generated by is sold and income is
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generated. In case of a motor car, it provides comfort and convenience in transportation.
There is no direct income.
Every asset is expected to last for a certain period of time during which it will perform.
After that, the benefit may not be available. There is a life-time for a machine in a factory
or a cow or a motor car. None of them will last for ever. The owner is aware of this and
he can so manage his affairs by the end of that period or life-time, a substitute is made
available. Thus, he makes sure that the value or income is not lost. However, asset may
get lost earlier. An accident or some other unfortunate event may destroy it or make it
non-functional. In that case, the owner and those deriving benefits there from, would be
deprived of the benefit and the planned substitute would not have been ready. There is an
adverse or unpleasant situation. Insurance is a mechanism that helps to reduce the effect
of such adverse situations.
What is Life Insurance?
Life insurance ensures that your family will receive financial support in your absence.
Put simply, life insurance provides your family with a sum of money should something
happen to you. It protects your family from financial crises.
In addition to serving as a protective cover, life insurance acts as a flexible money-
saving scheme, which empowers you to accumulate wealth-to buy a new car, get your
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children married and even retire comfortably.
Life insurance also triples up as an ideal tax-saving scheme.
Brief History Of Insurance
The business of insurance started with marine business. Traders, who used to gather in
the Lloyd’s coffee house in London, agreed to share the losses to occur because of pirates
who robbed on the high seas or because of bad weather spoiling the goods or sinking the
ship. The first insurance was issued in 1583 in England. In India, insurance began in 1870
with life insurance being transacted by an English company, the European and the Albert.
The first Indian insurance company was the Bombay Mutual Assurance Society Ltd,
formed in 1870. This was followed by the Oriental Life Assurance Co. in 1874, the
Bharat in 1896 and the Empire of India in 1897.
Later, the Hindustan Co operative was formed in Calcutta, the United India in Madras,
the Bombay Life in Bombay, the National in Calcutta, the New India in Bombay, the
Jupiter in Bombay and the Lakshmi in New Delhi. These were all Indian companies,
started as a result of the swadeshi movement in the early 1900’s. By the year 1956, when
the life insurance business was nationalised and the Life Insurance Corporation of India
(LIC) was formed on 1st September 1956, there were 170 companies and 75 provident
fund societies transacting life insurance business in India. After the amendments to the
relevant laws in 1999, the L.I.C. did not have the exclusive privilege of doing life
insurance business in India. By the 31.3.2002, eleven new insurers had been registered
and had begun to transact life insurance business in India.
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Purpose And Need Of Insurance
Assets are insured, because they are likely to be destroyed, through accidental
occurrences. Such possible occurrences are called perils. Fire, floods, breakdowns,
lightning, earthquakes, etc, are perils. If such perils can cause damage to the asset, we say
that the asset is exposed to that risk. Perils are the events. Risks are the consequential
losses or the damages. The risk to an owner of a building, because of the peril of an
earthquake, may be a few lakhs or a few crores of rupees, depending on the cost of the
building and the contents in it.
The risk only means that there is a possibility of loss or damage. The damage may or may
not happen. Insurance is done against the contingency that it may happen. There has to be
an uncertainty about the risk. Insurance is relevant only if there are uncertainties. If there
is no uncertainty about the occurrence of an event, it cannot be insured against. In the
case of an human being, death is certain, but the time of death is uncertain. In the case of
a person who is terminally ill, the time of death is not uncertain, though not exactly
known. He cannot be insured.
Insurance does not protect the asset. It does not prevent its loss due to the peril. The peril
cannot be avoided through the insurance. The peril can sometimes be avoided, through
better safety and damage control management. Insurance only tries to reduce the impact
of the risk on the owner of the asset and those who depend on that asset. It only
compensates the losses – and that too, not fully.
Only economic consequences can be insured. If the loss is not financial, insurance may
not be possible. Examples of non-economic losses are love and affection of parents,
leadership of managers, sentimental attachments to family heirlooms, innovative and
creative abilities, etc.
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How Insurance Works
The mechanism of insurance is very simple. People who are exposed to the same risks
come together and agreed that, if any one of them suffers a loss, the others will share the
loss and make good to that person who lost. All people who send goods by ship are
exposed to the same risks which are related to water damage, ship sinking, piracy, etc.
Those owing factories are not exposed to these risks, but they are exposed to different
type of risks like, fire, hailstorms, earthquakes, lightning, burglary, etc. Like this different
type of risks can be identified and separate groups made, including those exposed to such
risks. By this method the heavy loss that any one of them may suffer (all of them may not
suffer such losses at the same time) is divided into bearable small losses by all. In other
words, the risk is spread among the community and the likely big impact on one is
reduced to smaller manageable impacts on all.
If a jumbo Jet with more than 350 passenger crashes, the loss would run into several
crores of rupees. No airline would be able to bear such a loss. It is unlikely that many
Jumbo Jets will crash at the same time. If 100 airline companies flying Jumbo Jets, come
together into the insurance pool, whenever one of the Jumbo Jets in the pool crashes, the
loss to be borne by each airline would come down to a few lakhs of rupees. Thus,
insurance is a business of ‘sharing’.
There are certain principles, which make it possible for insurance to remain a fair
arrangement. The first is that it is difficult for any one individual to bear the
consequences of the risks that he is exposed to. It will become bearable when the
community shares the burden. The second is that the peril should occur in an accidental
manner. Nobody should be in a position to make the risk happen. In other words, none in
the group should set fire to his assets and asks others to share the costs of damage. This
would be taking the unfair advantage of an arrangement put into place to protect people
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from the risks they are exposed to. The occurrence has to be random, accidental, and not
the deliberate creation of the insured person.
The manner in which the loss is to be shared can be determined before-hand. It may be
proportional to the risk that each person is exposed to. This would be indicative of the
benefit he would receive if the peril befell him. The share could be collected from the
members after the loss has occurred or the likely shares may be collected in advance, at
the time of admission to the group. Insurance companies collect in advance and create a
fund from which the losses are paid.
The collection to be made from each person in advance is determined on assumptions.
While it may not be possible to tell beforehand, which person will suffer, it may be
possible to tell, on the basis of past experiences, how many persons, on an average, may
suffer losses. The following example explains the above concept of insurance:
Example:
In a village, there are 400 houses, each valued at Rs.20, 000. Every year, on the average,
4 houses get burnt, resulting into a total loss of Rs.80, 000. If all the 400 owners come
together and contribute Rs.200 each, the common fund would be Rs.80000. This is
enough to pay Rs.20000 to each of the 4 owners whose hoses got burnt. Thus, the risk of
4 owners is spread over 400 house owners of the village.
The Human Asset
A human being is an income generating asset. One’s manual labour, professional skills
and business acumen are the assets. This asset can also be lost through unexpectedly
early death or through sickness and disabilities caused by accidents. Accidents may or
may not happen. Death will happen, but the timing is uncertain. If it happens around the
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time of one’s retirement, when it could be expected that the income will normally cease,
the person concerned could have made some other arrangements to meet the continuing
needs. But if it happens much earlier when the alternate arrangements are not in place,
there can be losses to the person and dependents. Insurance is necessary to help those
dependent on the income.
A person, who may have arrangements for his needs after his retirement, also would need
insurance. This is because the arrangements would have been made on the basis of some
expectations like, likely to live for another 15 years, or that children will look after him.
If any of these expectations do not become true, the original arrangement would become
inadequate and there could be difficulties. Living too long can be as much a problem as
dying too young. Both are risks, which need to be safeguarding against. Insurance takes
care.
The Business Of Insurance
Insurance companies are called insurers. The business of insurance is to:-
a) bring together persons with common insurance interests (sharing the same risks)
b) collect the share or contribution (called premium) from all of them and,
c) Pay out compensation (called claims) to those who suffer.
The premium is determined on the same lines as indicated in the example above, but with
some further refinements.
In India, insurance business is classified primarily as life and non-life or general. Life
insurance includes all risks related to the lives of human beings and general insurance
covers the rest. General insurance has three classifications viz. , Fire (dealing with all fire
related risks), Marine (dealing with all transport related risks and ships) and
Miscellaneous (dealing with all others like liability, fidelity, motor, crop, personal
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accident, etc.). Personal accident and sickness insurance, which are related to human
beings, is classified as ‘non-life’ in India, but is classified as ‘life’, in many other
countries. What is ‘Non-life’ in India is termed as ‘Property and Casualty’ in some other
countries.
The insurer is in the position of a trustee as it is managing the common fund, for and on
behalf of the community of policyholders. It has to ensure that nobody is allowed to take
undue advantage of the arrangement. That means that the management of the insurance
business requires care to prevent entry (into the group) of people whose risks are not of
the same kind as well as paying claims on losses that are not accidental. The decision to
allow entry is the process of underwriting of risk. Underwriting includes assessing the
risk, which means, making an evaluation of how much is the exposure to the risk. The
premium to be charged depends on this assessment of the risk. Both underwriting and
claim settlements have to be done with great care.
Role Of Insurance In Economic Development
As we know for economic development, investments are necessary. Investments are
made out of savings. A life insurance company is a major instrument for the mobilization
of savings of the people, particularly from the middle and the lower income groups.
These savings are channeled into investments for economic growth.
All good life insurance companies have huge funds, accumulated through the payments
of small amounts of premia of individuals. These funds are invested in ways that
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contribute substantially for the economic development of the countries in which they do
business. The private insurers in India are new and had not built up funds in 2002. But
now they are also capable to contribute to the country’s economic development.
Types Of Insurance
I. Classification on the basis of nature of business
i) Life Insurance
Life insurance may be defined as a contract in which the insurer, in consideration of a
certain premium, either in a lump sum or by other periodical payments, agrees to pay to
the assured, or to the person for whose benefit the policy is taken, the assured sum of
money / on the happening of a specified event contingent on the human life.
A contract of life insurance, as in other forms of insurance, requires that the assured must
have at the time of the contract an insurable interest in his half upon which the insurance
is effected. In a contract of life insurance, unlike other insurance interest has only to be
proved at the date of the contract, and not necessarily present at the time when the policy
falls due.
A person can assure in his own life and every part of it, and can insure for any sum
whatsoever, as he likes. Similarly, a wife has an insurable interest in her husband and
vice-versa. However, mere natural love and affection is not sufficient to constitute an
insurable interest. It must be shown that the person affecting an assurance on the life of
another is so related to that other person as to have a claim for support. For example, a
sister has an insurable interest in the life of a brother who supports her.
A person not related to the other can have insurable interest on that other person. For
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example, a creditor has insurable interest in the life of his debtor to the extent of the debt.
A creditor can insure the life of his debtor up to the amount of the debt, at the time of
issue of the policy.
An employee has an insurable interest in the life of the employer arising out of
contractual obligation to employ him for a stipulated period at fixed salary. Similarly,
from an employer to the employer, who is bound by the contract to serve for a certain
period of time.
However, mere natural love and affection is not sufficient to constitute an insurable
interest. It must be shown that the person affecting an assurance on the life of another is
so related to that other person as to have a claim for support. For example, a sister has an
insurable interest in the life of a brother who supports her.
ii) Fire Insurance
Fire insurance is a contract to indemnity the insured for distribution of or damage to
property caused by fire. The insurer undertakes to pay the amount of the insured's is loss
subject to the maximum amount stated in the policy. Fire insurance is essentially a
contract of indemnity, not against accident, but against loss caused by accident, ft is
becoming very common in fire insurance policies to insert a condition, called the average
clause, by which the insured is called upon to bear a portion of the loss himself. The main
object of this clause is to check under-insurance and to encourage for full insurance. It
impress upon the property-owner for the need of having his property accurately valued
before insurance.
Regarding insurable interest, the insured must have insurable interest in the subject
matter both at the time of affecting the policy and at the time of loss. The risk in fire
insurance policy commences from the moment of cover note, or the deposit receipt, or the
interim protection is issued, and continues for the term covered by the contract of
insurance. It may even date back; if the parties so intend. The rate of premium varies to
the degree of hazard or risk involved.
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iii) Marine insurance
A contract of marine insurance is an agreement whereby the insurer undertakes to
indemnity the assured in a manner and to the extent thereby agreed, against marine
losses, that is, the losses incidental to marine adventure. There is a marine adventure
when any insurable property is exposed to marine perils; Marine perils also known as
perils of the seas, means the perils consequent on, or incidental to, the navigation of the
sea or the perils of the seas, such as fire, war perils, pirates, rovers, thieves; captures.
Jettisons, barratry and any other perils which are either of the like kind or may be
designed by the policy.
There are different types of marine policies known by different names according to the
manner of their execution or the risk they cover. They are: Voyage policy, time policy,
valued policy, unvalued policy, floating policy, wager or honour policy.
iv) Social insurance
Social insurance has been developed to provide economic security to weaker sections of
the society who are unable to pay the premium for adequate insurance Pension plans,
disability benefits, unemployment benefits; sickness insurance, etc. are the various forms
of social insurance.
v) Miscellaneous Insurance
The process of fast development in the society gave rise to a number of risks or hazards.
To provide security against such hazards, many other types of insurance also have been
developed. The important among them are:
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(i) Vehicle insurance on buses, trucks motorcycles, etc.,
(ii) Personal accident insurance (by pacing an annual premium of Rs 12/- Policy worth
Rs. 12000/- can be insured.)
(iii) Burglary insurance - (against theft, decoity etc.)
(iv) Legal liability insurance (insurance whereby the assured is liable to pay the damages
to property or to compensate the loss of personal injury or death.)
(v) Crop insurance (crops are insured against losses due to heavy rain and floods,
cyclone, draughts, crop diseases, etc.)
(vi) Cattle insurance — (Insurance for indemnity against the loss of cattle’s from various
kinds of disease)
In addition to the above, insurance policies are available against crime, medical
insurance, bullock cart insurance, jewelry insurance, cycle rickshaw insurance, radio –
T.V. insurance, etc.
II. Classification From Risk Point Of View
From risk point of view, insurance can be classified into four categories:
i) Personal insurance
ii) Property insurance
iii) Liability insurance
iv) Fidelity guarantee insurance
A brief description of each is given below:
i) Personal insurance
Personal insurance refers the loss to life by accident, or sickness to individual which is
covered by the policy. The insurer undertakes to pay the sum insured on the happening of
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certain event or on maturity of the period of insurance. The insurable sum is determined
at the time of effecting the policy and includes life insurance, accident insurance, and
sickness insurance. Life insurance contains the element of investment and protection,
while the accidental, sickness or health insurance contains the element of indemnity only.
ii) Property insurance
Contract of property insurance is a contract of indemnity. Proof by the assured of loss is
an essential element of property insurance. "The policies of insurance against burglary,
home-breaking or theft etc. fall under this category. The assured is required to protect the
insured property. After the loss has taken place, the assured usually required to notify the
police as to losses.
iii) Liability insurance
Liability insurance is the major field of General insurance whereby the insurer promises
to pay the damage of property or to compensate the tosses to a third party. The amount of
compensation is paid directly to third party. The fields of liability insurance include
workmen compensation insurance/ third party motor insurance, professional indemnity
insurance and third party liability insurance etc. In liability insurance, there may be
various reasons for the arising of liability; viz., accident of a worker at the workplace,
defective goods, explosion in the factory during the process of production, formation of
poisonous gas within the factory, due to the uses of chemicals and other such substances
in the manufacturing process.
iv) Fidelity guarantee insurance
In this type of insurance, the insurer undertakes to indemnify the assured (employer) in
consideration of certain premium, for losses arising out of fraud, or embezzlement on the
part of the employees. This kind of insurance is frequently adopted as a precautionary
measure in cases where new and untrained employees are given positions of trust and
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confidence.
Some Insurance Terms
Premium: The payment made by the insured, as consideration for the grant of the
insurance is known as Premium. The premium may be payable annually or at shorter
intervals of time & may be payable throughout the period of the policy or only for a fixed
term, depending upon the conditions in the policy.
Premium Earned & Premium Written: Premium earned is the amount of
premiums earned by the risk covered by an insurer during a period.
Premium written is the amount customers are required to pay for policies written during
the year. The two differ because of the timing of premium payments. For example if:
• An insurance policy that runs from the 1st July 2005 to the 30th June
2006.
• The premium is Rs.10,000.
• The insurance company has a December year-end.
Then, as the policy runs for six months of this year and six months of next, half the risk is
taken in the current year and half next year. Therefore the premium earned is Rs.5,000 for
2005 and Rs.5,000 for 2006. However as the cover is agreed during 2005, the gross
premium written is Rs.10,000 for 2005.
Claims: A claim occurs when a policy falls due for payment. In case of life insurance
business, it will arise either on death or on maturity of policy i.e. on the expiry of the
specified term of years. In case of general insurance business, a claim arises only when
the loss occurs or the liability arises.
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Premium Deficiency: Premium deficiency is recognised if the ultimate amount of
expected net claim costs, related expenses and maintenance costs exceeds the sum of
related premium carried forward to the subsequent accounting period as the reserve for
unexpired risk. Premium deficiency is calculated by line of business. The Company
considers maintenance costs as relevant costs incurred for ensuring claim handling
operations.
Catastrophe Reserve: This reserve shall be created in accordance with norms if any,
prescribed by authority. Investment of funds out of Catastrophe reserve shall be made in
accordance with prescription of the authority.
Fair Value Change: Fair Value Change account represents unrealised gains or losses
in respect of investments outstanding at the close of the year. The balance in the account
is considered as component of shareholders' funds though not available for distribution as
dividend.
Claims incurred: Claims incurred shall comprise claims paid, specific claims
settlement cost wherever applicable & change in the outstanding provision for claims at
the year-end.
Diminution in the value of investments: Diminution in the value of investments
is the reduction in value of investments.
Deferred Taxes: The deferred taxes assets and liabilities arise due to timing
differences.
Annuity: A recurring payment, which may be constant or may increase, usually made
until the death of the person receiving the annuity. An annuity can also be paid to 2
people. In this case, the payment ceases on death of second person.
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Annuity Certain: Annuity, which makes payments for a specified period of time
regardless of whether the annuitant is alive or dead during that period.
Policyholder’s Surplus: The amount by which an insurance company’s assets
exceed its liabilities, as reported in its annual statement. For a stock insurer, the
policyholder’s surplus is the sum of its capital & surplus; for a mutual insurer, the
policyholder’s surplus equals the company’s surplus.
Shareholders’ and Policyholders’ Fund: The Shareholders’ Fund comprises of
Share Capital, General Reserve and Capital Reserve. The Policyholders’ Fund comprises
of Technical Reserves and Provision for Outstanding Claims.
Ceded Reinsurance: The amount of insurance transferred from a ceding insurer to a
reinsurer.
Ceding Insurer: An original or primary insurer that purchases reinsurance; in so
doing, the primary insurer cedes part of its business to the reinsurer.
Reinsurance: Risk transferred from one insurer to another; a contract whereby the
assuming insurer (reinsurer) agrees to indemnify the ceding insurer (cedent) for all or part
of the claim liabilities under policies issued by the ceding insurer, which pays the
reinsurer a premium in return. By ceding some of its business, an insurer may write more
business within its reserve or surplus requirements. Assuming insurers may cede risks to
other reinsurers, which is called retrocession. The two basic types of reinsurance are
facultative, involving the transfer of individual risks, and treaty, involving the transfer of
all risks in a class of business. The ceding insurer usually remains liable for policy
claims, and the reinsurer must indemnify the cedent. In the less common assumption
reinsurance, the reinsurer becomes directly liable for claims settlement.
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Retrocession: reinsurance of reinsurance. Example: Company “B” has accepted
reinsurance from Company “A”, and then obtains for itself, on such business assumed,
reinsurance from Company “C”. This secondary reinsurance is called a Retrocession. The
transaction whereby a reinsurer cedes to another reinsurer all or part of the reinsurance it
has previously assumed.
Advantages of Life Insurance
Life insurance has no competition from any other business. Many people think that life
insurance is an investment or a means of saving. This is not a correct view. When a
person saves, the amount of funds available at any time is equal to the amount of money
set aside in the past, plus interest. This is so in a fixed deposit in the bank, in national
savings certificates, in mutual funds and all other savings instruments. If the money is
invested in buying shares and stocks, there is the risk of the money being lost in the
fluctuations of the stock market. Even if there is no loss, the available money at any time
is the amount invested plus appreciation. In life insurance, however, the fund available is
not the total of the savings already made (premiums paid), but the amount one wished to
have at the end of the savings period (which is the next 20 or 30 years). The final fund is
secured from the very beginning. One is paying for it later, out of the savings. One has to
pay for it only as long as one lives or for a lesser period if so chosen. There is no other
scheme which provides this kind of benefit. Therefore, life insurance has no substitute.
Even so, a comparison with other forms of savings will show that life insurance has the
following advantages:
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In the event of death the settlement is easy. The heirs can collect the money
quicker, because of the facility of nomination and assignment. The facility of
nomination is now available for some bank accounts.
There is a certain amount of compulsion to go through the plan of savings. In
other forms, if one changes the original plan of savings, there is no loss. In
insurance, there is a loss.
There are tax benefits, both in income tax and in capital gains.
Marketability and liquidity are better. A life insurance policy is property and can
be transferred or mortgaged. Loans can be raised against the policy.
It enhances the existing standards of living.
It helps people live financially solvent lives.
Life insurance is a way of life.
Key Benefits of Life Insurance
Life insurance, especially tailored to meet your financial needs
Need for Life Insurance
Today, there is no shortage of investment options for a person to choose from. Modern day
investments include gold, property, fixed income instruments, mutual funds and of course, life
insurance. Given the plethora of choices, it becomes imperative to make the right choice when
investing your hard-earned money. Life insurance is a unique investment that helps you to meet
your dual needs - saving for life's important goals, and protecting your assets.
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Let us look at these unique benefits of life insurance in detail.
Asset Protection
From an investor's point of view, an investment can play two roles - asset appreciation or asset
protection. While most financial instruments have the underlying benefit of asset appreciation,
life insurance is unique in that it gives the customer the reassurance of asset protection, along
with a strong element of asset appreciation.
The core benefit of life insurance is that the financial interests of one’s family remain protected
from circumstances such as loss of income due to critical illness or death of the policyholder.
Simultaneously, insurance products also have a strong inbuilt wealth creation proposition. The
customer therefore benefits on two counts and life insurance occupies a unique space in the
landscape of investment options available to a customer.
Goal based savings
Each of us has some goals in life for which we need to save. For a young, newly married couple,
it could be buying a house. Once, they decide to start a family, the goal changes to planning for
the education or marriage of their children. As one grows older, planning for one's retirement
will begin to take precedence.
Clearly, as your life stage and therefore your financial goals change, the instrument in which you
invest should offer corresponding benefits pertinent to the new life stage.
Life insurance is the only investment option that offers specific products tailormade for
different life stages. It thus ensures that the benefits offered to the customer reflect the needs of
the customer at that particular life stage, and hence ensures that the financial goals of that life
stage are met.
26
The table below gives a general guide to the plans that are appropriate for different life stages.
Life Stage
Primary Need Life Insurance Product
Young & Single Asset creation Wealth creation plans
Young & Just
marriedAsset creation & protection
Wealth creation and mortgage protection
plans
Married with kidsChildren's education, Asset
creation and protection
Education insurance, mortgage
protection & wealth creation plans
Middle aged with
grown up kids
Planning for retirement & asset
protection
Retirement solutions & mortgage
protection
Across all life-stagesHealth plans Health Insurance
Objectives Of Research
The objectives of research are as follows:-
To study the investment plans offered by ICICI.
To study the investment plans offered by other competitive companies like
HDFC, ING Vyasa, Reliance Life Insurance etc.
27
To carry out comparison of insurance investment plan of ICICI Prudential Life
Insurance with other companies.
To compare the market share of ICICI with respect to other private players.
Research Methodology
Research comprises defining and redefining problems, formulating hypothesis or
suggested solution collecting, organizing and evaluating data, making deductions and
reaching conclusion and at last carefully testing the conclusion to determine whether they
fit the formulating hypothesis.
The manipulation of things, concepts, or symbols for the purpose of generalizing to
extend, correct or verify knowledge, whether that knowledge aids in construction of
theory or in the practice of art.
The research methodology used in this project is comparative research.
Comparative Research
Comparative research, simply put, is the act of comparing two or more things with a view
to discovering something about one or all of the things being compared. This technique
often utilizes multiple disciplines in one study.
I have used this as this includes the comparison of different plans with respect to
investment plan of ICICI Prudential Life Insurance.
28
Data source: Data collection is a technique through which data can be collected
within minimum cost and with greater reliability.
Data can be collected from two sources:
1) Primary data
2) Secondary data
The data collected for my project is only from secondary data from the Unit Manager and
the websites of corresponding companies.
Sampling plan
Sampling technique: simple random sampling
In statistics, a simple random sample is a group of subjects (a sample) chosen from a
larger group (a population). Each subject from the population is chosen randomly and
entirely by chance, such that each subject has the same probability of being chosen at any
stage during the sampling process. This process and technique is known as Simple
Random Sampling.
In this project we have taken the population size of 12 companies.
The sample size selected is 6.
Literature Review
29
With over a billion people, India is fast becoming a global economic power. With a
relatively youthful population, India will become an attractive insurance market over the
next decades. This review examines the Indian insurance industry. It starts by examining
the details of the regulatory regime that existed before independence. This is important
because the culmination of the Insurance Act of 1938 became the backbone of the current
legislation in place. It highlights the importance of the rural sector – where the majority
of the Indians still live. It shows how the recent privatization is playing out in the market.
Based on recent economic estimates, the review provides projections of segments of the
market for 2025.
An Analysis of the Evolution of Insurance in
India
India had the nineteenth largest insurance market in the world in 2003. Strong economic
growth in the last decade combined with a population of over a billion makes it one of the
potentially largest markets in the future. Insurance in India has gone through two radical
transformations. Before 1956, insurance was private with minimal government
intervention. In 1956, life insurance was nationalized and a monopoly was created. In
1972, general insurance was nationalized as well (endnote 1). But, unlike life insurance, a
different structure was created for the industry. One holding company was formed with
four subsidiaries. As a part of the general opening up of the economy after 1992, a
Government appointed committee recommended that private companies should be
allowed to operate. It took six years to implement the recommendation. Private sector
was allowed into insurance business in 2000. However, foreign ownership was restricted.
No more than 26% of any company can be foreign-owned.
In what follows, we examine the insurance industry in India through different regulatory
regimes. A totally regulation free regime ended in 1912 with the introduction of
regulation of life insurance. A comprehensive regulatory scheme came into place in 1938.
30
This was disabled through nationalization. But, the Insurance Act of 1938 became
relevant again in 2000 with deregulation. With a strong hint of sustained growth of the
economy in the recent past, the Indian market is likely to grow substantially over the next
few decades.
Insurance business was conducted in India without any specific regulation for the
insurance business. They were subject to Indian Companies Act (1866). After the start of
the “Be Indian Buy Indian Movement” (called Swadeshi Movement) in 1905, indigenous
enterprises sprang up in many industries. Not surprisingly, the Movement also touched
the insurance industry leading to the formation of dozens of life insurance companies
along with provident fund companies (provident fund companies are pension funds). In
1912, two sets of legislation were passed: the Indian Life Assurance Companies Act and
the Provident Insurance Societies Act. There are several striking features of these
legislations. First, they were the first legislations in India that particularly targeted the
insurance sector. Second, they left general insurance business out of it. The government
did not feel the necessity to regulate general insurance. Third, they restricted activities of
the Indian insurers but not the foreign insurers even though the model used was the
British Act of 1909.
One holding company was formed with four subsidiaries. As a part of the
general opening up of the economy after 1992, a Government appointed committee
recommended that private companies should be allowed to operate. It took six years to
implement the recommendation. Private sector was allowed into insurance business in
2000. However, foreign ownership was restricted. No more than 26% of any company
can be foreign-owned.
Comprehensive insurance legislation covering both life and non-life business did
not materialize for the next twenty-six years. During the first phase of these years, Great
Britain entered World War I. This event disrupted all legislative initiatives. Later, Indians
demanded freedom from the British. As a concession, India was granted “home rule”
31
through the Government of India Act of 1935. It provided for Legislative Assemblies for
provincial governments as well as for the central government. But supreme authority of
promulgated laws still stayed with the British Crown.
The only significant legislative change before the Insurance Act of 1938, was
Act XX of 1928. It enabled the Government of India to collect information of
(1) Indian insurance companies operating in India,
(2) Foreign insurance companies operating in India and
(3) Indian insurance companies operating in foreign countries.
The last two elements were missing from the 1912 Insurance Act. Information thus
collected allows us to compare the average size face value of Indian insurance companies
against their foreign counterparts. In 1928, the average policy value of an Indian
company was 619 US dollars against 1,150 US dollars for foreign companies (Source:
Indian Insurance Commissioner’s Report, 1929, p. 23).
Foreign insurance companies were doing well during that period. In 1938, the average
size of the policy sold by Indian companies has fallen to 532 US dollars (in
32
Comparison with 619 US dollars in 1928) and that of foreign companies had risen
somewhat to 1, 188 US dollars (in 1928, the average size was 1,150 US dollars).
The Birth of the Insurance Act, 1938
In 1937, the Government of India set up a consultative committee. Mr. Sushil C.
Sen, a well known solicitor of Calcutta, was appointed the chair of the committee.
He consulted a wide range of interested parties including the industry. It was
debated in the Legislative Assembly. Finally, in 1938, the Insurance Act was
passed. This piece of legislation was the first comprehensive one in India. It
covered both life and general insurance companies. It clearly defined what would
come under the life insurance business, the fire insurance business and so on (see
Appendix 1). It covered deposits, supervision of insurance companies,
investments, commissions of agents, directors appointed by the policyholders
among others. This piece of legislation lost significance after nationalization. Life
insurance was nationalized in 1956 and general insurance in 1972 respectively.
With the privatization in the late Twentieth Century, it has returned as the
backbone of the current legislation of insurance companies. All legislative
changes are enumerated in Table.
When the market was opened again to private participation in 1999, the earlier
Insurance Act of 1938 was reinstated as the backbone of the current legislation of
insurance companies, as the Insurance Regulatory and Development Authority
Act of 1999 was superimposed on the 1938 Insurance Act. This revival of the Act
has created a
33
messy problem. The Insurance Act of 1938 explicitly forbade financial services
from the activities permitted by insurance companies.
By 1956, there were 154 Indian life insurance companies. There were 16 non-
Indian insurance companies and 75 provident societies were issuing life insurance
policies. Most of these policies were centered in the cities (especially around big
cities like Bombay, Calcutta, Delhi and Madras).
34
Milestones of Insurance Regulations in the 20 th Century
Year Significant Regulatory Event
1912 The Indian Life Insurance Company Act
1928 Indian Insurance Companies Act
1938 The Insurance Act: Comprehensive Act to regulate insurance business in India
1956 Nationalization of life insurance business in India with a monopoly awarded to the
Life Insurance Corporation of India
1972 Nationalization of general insurance business in India with the formation of a
holding company General Insurance Corporation
1993 Setting up of Malhotra Committee
1994 Recommendations of Malhotra Committee published
1995 Setting up of Mukherjee Committee
1996 Setting up of (interim) Insurance Regulatory Authority (IRA) Recommendations
of the IRA
1997 Mukherjee Committee Report submitted but not made public
1997 The Government gives greater autonomy to Life Insurance Corporation, General
Insurance Corporation and its subsidiaries with regard to the restructuring of
boards and flexibility in investment norms aimed at channeling funds to the
infrastructure sector
1998 The cabinet decides to allow 40% foreign equity in private insurance companies-
26% to foreign companies and 14% to Non-resident Indians and Foreign
Institutional Investors
1999 The Standing Committee headed by Murali Deora decides that foreign equity in
private insurance should be limited to 26%. The IRA bill is renamed the Insurance
Regulatory and Development Authority Bill
1999 Cabinet clears Insurance Regulatory and Development Authority Bill
2000 President gives Assent to the Insurance Regulatory and Development Authority
Bill
Investment Regimes
Investment regimes in insurance in India have always had quantitative restrictions.
Current legal requirements are explained in Table 2 for life business. At least half of the
investment has to be either directly in government securities (bonds) or for infrastructure
investments (which also take the form of government bonds). These investment options
are “safe” as they are fully backed by the government. Of course, it also means they earn
the lowest rate of return in the Indian market. The government (both at the federal and
state levels) has used insurance business as a way of raising capital. Unfortunately, much
of it has been spent on consumption expenditure leading to substantial increase in
governmentdebt.
Investment Regulation of Life Business
Type of Investment Percentage
I Government Securities 25%,
II Government Securities or other approved securities
(including (I) above)
Not less than 50%,
III Approved Investments as specified in Schedule I
Infrastructure and Social Sector
Explanation: For the purpose of this requirement, Infrastructure
and Social Sector shall have the meaning as given in regulation
2(h) of Insurance Regulatory and Development Authority
(Registration of Indian Insurance Companies) Regulations, 2000
and as defined in the Insurance Regulatory and Development
Authority (Obligations of Insurers to Rural and Social Sector)
Regulations, 2000 respectively
Not less than 15%
Others to be governed by Exposure/ Prudential Norms specified in
Regulation 5
Not exceeding 20%
IV Other than in Approved Investments to be governed by
Exposure/ Prudential Norms specified in Regulation 5
Not exceeding 15%
Source: Gazette of India Extraordinary Part III Section 4. Insurance Regulatory and
Development Authority (Investment) Regulations, 2000
Industry Profile
With an annual growth rate of 15-20% and the largest number of life insurance policies in
force, the potential of the Indian insurance industry is huge. Total value of the Indian
insurance market (2004-05) is estimated at Rs. 450 billion (US$10 billion). According to
government sources, the insurance and banking services’ contribution to the country's
gross domestic product (GDP) is 7% out of which the gross premium collection forms a
significant part. The funds available with the state-owned Life Insurance Corporation
(LIC) for investments are 8% of GDP.
Till date, only 20% of the total insurable population of India is covered under various life
insurance schemes, the penetration rates of health and other non-life insurances in India is
also well below the international level. These facts indicate the of immense growth
potential of the insurance sector.
The year 1999 saw a revolution in the Indian insurance sector, as major structural
changes took place with the ending of government monopoly and 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.
Though, the existing rule says that a foreign partner can hold 26% equity in an insurance
company, a proposal to increase this limit to 49% is pending with the government. Since
opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have
poured into the Indian market and 21 private companies have been granted licenses.
Innovative products, smart marketing, and aggressive distribution have enabled fledgling
private insurance companies to sign up Indian customers faster than anyone expected.
Indians, who had always seen life insurance as a tax saving device, are now suddenly
turning to the private sector and snapping up the new innovative products on offer.
The life insurance industry in India grew by an impressive 36%, with premium income
from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff
competition from private insurers. This report, “Indian Insurance Industry: New Avenues
for Growth 2012”, finds that the market share of the state behemoth, LIC, has clocked
21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in
2004-05. But this was still not enough to arrest the fall in its market share, as private
players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in
2003-04.
Though the total volume of LIC's business increased in the last fiscal year (2004-2005)
compared to the previous one, its market share came down from 87.04 to 78.07%. The 14
private insurers increased their market share from about 13% to about 22% in a year's
time. The figures for the first two months of the fiscal year 2005-06 also speak of the
growing share of the private insurers. The share of LIC for this period has further come
down to 75 percent, while the private players have grabbed over 24 percent.
There are presently 12 general insurance companies with four public sector companies
and eight private insurers. According to estimates, private insurance companies
collectively have a 10% share of the non-life insurance market.
Private Player of Life Insurance
1. ICICI Prudential Life Insurance
2. HDFC Standard Life
3. SBI Life Insurance
4. Birla Sunlife
5. Bajaj Allianz Life
6. Aviva Life Insurance
7. Kotak Mahindra Life Insurance
8. Tata AIG Life
9. Reliance Life Insurance Company Limited (formerly known as AMP
Sanmar LIC)
10. ING Vyasya Life Insurance
11. Metlife India Life Insurance
12. Max New York Life Insurance
13. Shriram Life Insurance
14. Bharti AXA Life Insurance Company Limited
Types of Insurance on The Basis of Business Point of View:
i) Life Insurance
ii) General Insurance
i) Life Insurance:
Life Insurance is universally acknowledged to be an institution which eliminates 'risk'
and provides the timely aid to the family in the unfortunate event of death of the
breadwinner.
Life Insurance is a contract for payment of a sum of money to the person assured (or
nominee) on the happening of the event insured against. The contract provides for the
payment of premium periodically to the Insurance Company by the assured.
The contract provides for the payment of an amount on the date of maturity or at
specified dates at periodic intervals or at unfortunate death, if it occurs earlier.
ii) General Insurance:
General insurance business refers to fire, marine, and miscellaneous insurance business
whether carried on singly or in combination with one or more of them, but does not
include capital redemption business and annuity certain business. [According to Sec. 3(g)
of the General Insurance business (Nationalization) Act, 1972].
Features of Indian General Insurance Market:
1) Low market penetration.
2) Ever-growing middle class component in population.
3) Growth of consumer movement with an increasing demand for better insurance
products.
4) Inadequate application of information technology for business.
5) Adequate fillip from the Government in the form of tax incentives to the insured, etc.
6) India is one of the least insured countries but the potential for further growth is
phenomenal.
7) Rates of claim settlement were earlier in India the highest in the world, 70 per cent in
general insurance, compared to around 40 per cent internationally.
8) Non-life premium has a 0.71 per cent share of GDP.
9) General Insurers (Private Companies) have earned around Rs.1000-cr income.
10) Half of the current demand for comes from the corporate segment.
Benefits of General Insurance:
1) Insurance is the instrument of Security, saving and peace of mind. It provides
several benefits by paying a small amount of premium to an insurance company.
2) Safeguards one’s assets.
3) Peace of mind-in case of financial loss.
4) Encourage saving.
5) Tax rebate.
6) Protection from the claim made by creditors.
7) Security against a personal loan, housing loan or other types of loan.
Products of General Insurance
The Assurance Company Ltd. and the United India Insurance Company. The
Government of India subscribed to the capital of GIC. GIC, in turn, subscribed to the
capital of the four companies. All the four companies are government companies
registered under the Companies Act. GIC is into the reinsurance business whereas its
subsidiaries are into the insurance of Non Life products.
Product Range
i) Motor Insurance: Motor insurance is mandatory for all vehicles in India. There are
two types of motor insurance
• Third Party- only insures the party (parties) other than the owner in an incident.
• Comprehensive- that insures the owner as well as the third party involved. The premium
for motor Vehicles is decided on the value of the vehicle and location where it is to be
registered. The premium for heavy commercial vehicle is decided on the value of the
vehicle and gross laden weight.
ii) Property Insurance: Property insurance covers land, building and the contents of the
building.
iii) Burglary: Burglary insurance covers all losses arisen out of burglary committed in
one’s premises.
iv) Fire Insurance: Fire Insurance is a Comprehensive policy. This policy besides
covering loss on account of fire also covers loss on account of the following Earthquake,
Riots, Strikes, Malicious intent, Floods.
v) Health Insurance: Health insurance polices ensure guarding ones health against any
calamities that may cause long term harm to his/her life and can hamper ones earning
available for ability for a lifetime. These health policies are individuals and groups.
vi) Liability Insurance: This policy indemnifies the Directors or Officers or other
professionals against loss arising from claims made against them by reason of any
wrongful Act in their Official capacity.
vii) Marine Insurance
• Cargo in transit
• Cargo declaration Policy
• Marine Hull Insurance: Inland vessels ocean going vessels, fishing & sailing vessels,
freight at risk, construction of ships, voyage insurance of various vessels, ship breaking,
insurance Awaiting break up, Insurance Oil & Energy in respect of onshore & offshore
risks including construction risk.
viii) Travel Policy: Any tourist may die or loss their baggage’s, passport etc. while
traveling. Travel policies are designed to care of all the problems that generally occur
while traveling.
ix) Business policy: A Business policy covers the risks of loss of business goods, plant
and machinery etc.
x) Other General Policy: Apart from other main general Insurance there are several
others
General polices and more are going to introduce, such as:
• Bhagyashree Child Welfare Policy-covers girl child in the age group of 0 to 18 years.
• Raj Rajeshwari Mahila Kalyan Vojans.
• Crop Insurance Scheme.
• Jald Rahat Yojana.
SWOT Analysis of Insurance Sector
Strengths:
Consumer Grievance Redressal
The Insurers have to face the redressal of the consumers, grievances for deficiency in
products and services. The Insurance Regulatory Development Authority (IRDA), the
regulatory body has already appointed Ombudsman for looking into the grievances of the
policyholders. His judgment will be binding on the insurers. Further under Consumer
Protection Act, 1986, the consumer courts are operating at the district, state and national
levels. This is a major strength from the consumer point of view as they could easily fight
for their rights.
Rural customers are a must
As per the regulator IRDA, all the companies incorporated should at least do 5% of its
business in the rural parts of the country. If not, the regulator would not allow the
company to function anywhere within the country. So this is a great advantage for not
only the rural population but also the newly formed companies since most of the revenue
could be earned from the rural India.
Channels
Insurance companies are getting savvy. Enhanced marketing thus is crucial. Already,
many companies have full operation capabilities over a 12-hour period. Facilities such as
customer service center are already into 24-hour mode. These will provide services such
as motor vehicle recovery. Technology also plays an important role in the market.
Weakness :
New insurers
The new insurers will have to invest a minimum capital of Rs. 100 crores. The normal
gestation period is of 5 years. The generation of profit normally starts in the sixth year.
Hence the new insurers have to lock up their capital for at least 5 years.
Outdated products
Today, LIC has more than 60 products and GIC has more than 180 products to offer in
the market. But most of them are outdated, as they are not suitable to the needs of the
consumers. Hence old as well as new insurers have to offer innovative products to the
consumers and bringing more products would require good amount of capital investment.
Opportunities:
Vast country
India is a vast country with more than 5, 76,000 villages having a population of at least
500-600 per village. The companies could recognize the fact that if it takes the whole
zilla as one, it would consist a population more than 5000-10000. One zilla could give
them a good amount of business. The company could have this opportunity and tap it and
reap revenues.
Job opportunities
Since the sector has opened up, many new companies have already started its operation
and few are just about to begin, Major areas of employment in this sector are the agents.
A company can appoint any number of agents anywhere within the country on
commission basis. Moreover, the professional staff and the peons and clerks’
appointment also increase. Thus this sector has tremendous scope on employment.
Threats:
Lack of awareness
Very soon the market will be flooded by a large number of products by a fairly large
number of insurers operating in the Indian market. Even with limited range of products
offered by LIC and GIC, there is chaos as far as the consumers are concerned. Their
confusion will further increase in the face of a large number of products in the market.
The existing level of awareness of the consumers for insurance products is very low. This
is because only 62% of the population of India is literate and only 10% are well educated.
Even the educated consumers are ignorant about the various products of insurance. With
new companies coming in the market, the products would be comparatively more, which
would again create confusion in the minds of the customers so as to which policy best
suits the needs.
Insurance Regulatory And Development Authority Act, 1999
(IRDA)
Indian parliament passed IRDA in the year 1999. It is headed by the chairmen. It was
setup on interim IRDA for monitoring &controlling of the insurance business. IRDA was
sole authority responsible for awarding of licenses. There is no restriction for new
licenses & no composite licenses for life & non life business. IRDA has some restriction
for new licenses such like new player should commence its business within 15-18 month.
Shares are not allowed to transfer without approval.
This Act was passed by Parliament in December 1999 and it received presidential
assent in January 2000. This Act provides for the establishment of the Authority to
protect the interest of holders of insurance policies, to regulate, promote and ensure
orderly growth of insurance industry and for matters connected therewith or incidental
thereto. It amended the Insurance Act, 1938, which has been noted above. It also
amended the Life Insurance Corporation Act, 1956 and the General Insurance
Business (Nationalization) Act, 1972, thus opening up the insurance sector to private
participation.
Under this Act, an authority called IRDA has been established. This is a corporate body
established for the purpose and objects as set out in the explanation to the title. The
“Authority" replaces "Controller" under Insurance Act 1938. The first schedule amends
Insurance Act 1938. It states that if "Authority" is superseded by the Central
Government, the "Controller of Insurance" may be appointed till such time as
“Authority" is reconstituted.
In line with the economic reforms that were ushered in India in early nineties, the
Government set up a Committee on Reforms (popularly called the Malhotra Committee)
in April 1993 to suggest reforms in the insurance sector. The Committee recommended
throwing open the sector to private players to usher in competition and bring more choice
to the consumer. The objective was to improve the penetration of insurance as a
percentage of GDP, which remains low in India even compared to some developing
countries in Asia. Reforms were initiated with the passage of Insurance Regulatory and
Development Authority (IRDA) Bill in 1999. IRDA was set up as an independent
regulatory authority, which has put in place regulations in line with global norms. So far
in the private sector, 12 life insurance companies and 9 general insurance companies have
been registered.
Bottlenecks Government Regulations
• The IRDA bill proposes tough solvency margins for private insurance firms,
a 26% cap on foreign equity and a minimum capital of Rs 100crores for
life and general insurance and Rs 200crores for reinsurance firms section 27A
of insurance Act stipulates that LIC is required to invest 75% of its
accretions through a controlled fund in mandated government securities LIC
may invest the remaining 25% in private corporate sector, construction and
acquisition of immovable assets besides sanctioning of loans to policy holder.
• These stipulations imposed on the insurance companies had resulted in lack of
flexibility in the optimization of risk and profit portfolio. If this inflexibility
continues the insurance companies will have very little leverage to earn more
on their investments and they might not be able to offer as flexible products as
offered abroad.
• The government might provide more autonomy to ;insurance companies by
allowing them to invest 50% of their funds as per their own discretions.
• Recently RBI has issued stiff guidelines which had death a severe blow to the
plans of banks and financial institutions to enter the insurance sector. It says that
non performing assets ( NPA) levels of the prospective l players will have to
be 1% point lower than the industry average (presently 7.5%).
• RBI has also stipulated that all prospective entrants need to have a net worth of
Rs 500crores. These guidelines have made it virtually impossible for many banks
to get into the insurance business. Also banks and FI who are planning to enter
the business cannot float subsidiaries for insurance.
• RBI has taken too much caution to make sure that the news sector does not
experience the kind of ups and downs that the non bank financial sector has
experienced in the recent past. They had to rethink about these guidelines if
India strong banks and financial institutions have to enter the new business.
The insurance employees union is offering stiff resistance to any private entry.
Company Profile
PROFILE OF ICICI Prudential Life Insurance Company
Fact sheet
The Company
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a
premier financial powerhouse, and Prudential plc, a leading international financial
services group headquartered in the United Kingdom. ICICI Prudential was amongst the
first private sector insurance companies to begin operations in December 2000 after
receiving approval from Insurance Regulatory Development Authority (IRDA).
ICICI Prudential Life's capital stands at Rs. 42.72 billion (as of June 30, 2008) with
ICICI Bank and Prudential plc holding 74% and 26% stake respectively. For the
quarter ended June 30, 2008, the company garnered Retail Weighted New Business
Premium of Rs. 1,174 crores as against Rs 810 crores for the quarter ended June 30,
2007, thereby posting a growth of 45% and has underwritten over 6 lakh policies over
this period. The company has assets held over Rs. 30,600 crore as on August 31, 2008.
ICICI Prudential Life is also the only private life insurer in India to receive a National
Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. The AAA (Ind)
rating is the highest rating, and is a clear assurance of ICICI Prudential's ability to
meet its obligations to customers at the time of maturity or claims.
For the past seven years, ICICI Prudential Life has retained its leadership position in the
life insurance industry with a wide range of flexible products that meet the needs of the
Indian customer at every step in life.
Distribution
ICICI Prudential Life has one of the largest distribution networks amongst private life
insurers in India. It has a strong presence across India with over 2000 branches
(includung 1,095 micro-offices) and an advisor base of over 261,000 (as on August 31,
2008).
The company has 24 bancassurance partners having tie-ups with ICICI Bank, Bank of India, South Indian Bank, Shamrao Vitthal Co-Op Bank, Jalgaon Peoples Co-op Bank, Ernakulam District Co-op Bank, Idukki District Co-op Bank, Ratnagiri Sindhudurg Gramin Bank, Solapur Gramin Bank, Wainganga Kshetriya Gramin Bank, Aryawart Gramin Bank, Jharkhand Gramin Bank, Narmada Malwa Gramin Bank, Baitarani Gramya Bank, Ratnagiri District Central Co-op Bank, Seva Vikas Co-op Bank, Sangli Urban Co-Operative Bank, Baramati Co-operative Bank, Ballia Kshetriya Co-Operative Bank, The Haryana State Co-Operative Bank, Renuka Nagrik Sahakari Bank, Amanath Co-Operative Bank, Arvind Sahakari Bank, Bhandara Urban Co Operative Bank
Promoters
ICICI Bank
ICICI Bank Limited (NYSE:IBN) is India's largest private sector bank and the second
largest bank in the country, with consolidated total assets of $121 billion as of September
30 , 2008. ICICI Bank’s subsidiaries include India’s leading private sector insurance
companies and among its largest securities brokerage firms, mutual funds and private
equity firms. ICICI Bank’s presence currently spans 19 countries, including India.
Prudential Plc
Established in London in 1848, Prudential plc, through its businesses in the UK, Europe, US, Asia and the Middle East, provides retail financial services products and services to more than 21 million customers, policyholder and unit holders and manages over £256 billion of funds worldwide (as of June 30, 2008). In Asia, Prudential is the leading Europe-based life insurer with life operations in China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, and Vietnam. Prudential is one of the largest asset management companies in terms of overall assets sourced in Asia ex-japan, with £34.3 billion funds under management (as of June 30, 2008) and operations in ten markets including China, Hong Kong, India, Japan, Korea, Malaysia, Singapore, Taiwan, Vietnam and United Arab Emirates
Management Team
The ICICI Prudential Life Insurance Company Limited Management team comprises reputed
people from the finance industry both from India and abroad.
Ms. Shikha Sharma , Managing Director & CEO
Mr. N. S. Kannan , Executive Director
Mr. Bhargav Dasgupta , Executive Director
Ms. Anita Pai , Executive Vice President – Customer Service & Technology
Dr. Avijit Chatterjee , Appointed Actuary
Mr. Puneet Nanda , Executive Vice President & Chief Investment Officer
Board of Director
The ICICI Prudential Life Insurance Company Limited Board comprises reputed people from the finance industry both from India and abroad.
Mr. K.V. Kamath, Chairman
Ms. Chanda Kochhar, Director
Mr. Barry Stowe, Director
Mr. Adrian O’Connor, Director
Prof. Marti G. Subrahmanyam, Director
Mr. Mahesh Prasad Modi, Director
Ms. Rama Bijapurkar, Director
Mr. Keki Dadiseth, Director
Ms. Shikha Sharma, Managing Director
Mr. N.S. Kannan, Executive Director
Mr. Bhargav Dasgupta, Executive Director
ICICI Prudential Market Share Rises To 43%
New Delhi, January 17: : ICICI Prudential Life Insurance hiked its market share to 42.72 per cent in the October-November period last year, up from 37.92 per cent in first quarter and 38.85 per cent in the second quarter of the current fiscal.
Its total share of the Rs 439.2-crore premium collected by private players during the April-November period stood at 39.66 per cent. Its aggregate estimated premium income amounted to Rs 174.2 crore as at the end of November. According to ICICI officials, while the premium mop-up by private companies in April-June 2002 was about Rs 117 crore, the corresponding figures for the July-September and October-November periods were Rs 201.3 crore and Rs 120.8 crore. Out of this, ICICI’s premium income stood at Rs 44.4 crore, Rs 78.2 crore and Rs 51.6 crore, respectively.
They cited Irda statistics saying the total premium income of the life sector was Rs 1,191 crore in April-June, 2002, and Rs 3,512.8 crore uptil September.
Performance Summary
Performance Summary as on October 31, 2008
Scheme Annualised Returns (3
years)
Annualised
Returns(Since
Inception)
Inception
Date
Preserver * 8.22% 7.19% 17May04
Protector @ 5.72% 7.60%16-
Nov01
Balancer # 8.20% 13.40%16-
Nov01
Maximiser $ 9.86% 21.27%16-
Nov01
Pension Preserver * 8.20% 7.08% 17May04
Pension Protector @ 6.01% 6.58% 31May02
Pension Balancer # 8.41% 13.48% 31May02
Pension Maximiser $
9.84% 22.97% 31May02
InvestShield Cash @ 6.70% 6.26%03-Jan-
05
InvestShield Life ^ 8.70% 8.53%03-Jan-
05
InvestShield Pension ^
8.50% 8.59%03-Jan-05
New Invest Shield # NA 4.91%21-
Aug06
Flexi Growth ** NA -11.40%20-
Mar07
Pension Flexi Growth **
NA -13.68%20-
Mar07
Flexi Balance ^^ NA -5.27%20-
Mar07
Pension Flexi Balance ^^
NA -2.24%20-
Mar07
Performance v/s Benchmark
Market Overview
Key Market Levels (as on October 31, 2008)
Key Rates CurrentOne Quarter
AgoOne year
Ago
WPI Inflation 10.68% 11.98% 3.07%
Ten Year Government Security (semi annual)
7.50% 9.32% 7.84%
5 year AAA rated Corporate Bond 11.60% 10.90% 9.20%
(annualised)
$-Re exchange rate 49.46 42.57 39.32
BSE 1004953.98
7488.48 10391.19
Awards & Recognitions
ICICI Prudential Life won the UK Trade & Investment India Business Awards 2008 in the Business Partnership Award-Large Company category
India's Most Customer Responsive Insurance Company . Avaya Global Connect - Economic Times. Customer Responsiveness Awards, 2007
Best Life Insurer 2003. Outlook Money Awards 2003 & 2004
Vision & Values
Our vision:
To be the dominant Life, Health and Pensions player built on trust by world-class people and service. This we hope to achieve by:
Understanding the needs of customers and offering them superior products and service
Leveraging technology to service customers quickly, efficiently and conveniently Developing and implementing superior risk management and investment
strategies to offer sustainable and stable returns to our policyholders Providing an enabling environment to foster growth and learning for our
employees And above all, building transparency in all our dealings
The success of the company will be founded in its unflinching commitment to 5 core values -- Integrity, Customer First, Boundaryless, Ownership and Passion. Each of the
values describe what the company stands for, the qualities of our people and the way we work. We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to our growth.
Our values :
Every member of the ICICI Prudential team is committed to 5 core values: Integrity, Customer First, Boundaryless, Ownership, and Passion. These values shine forth in all we do, and have become the keystones of our success.
Products
ICICI Prudential has a wide array of insurance plans that have been designed with the
philosophy that different individuals are bound to have differing insurance needs.
The ideal insurance plan is one that addresses the exact insurance needs of the individual
that will depend on the age and life stage of the individual apart from a host of other
factors.
Life Insurance India, Health Insurance, Retirement Solutions
Brochures
Cancer CareCancer Care PlusCashBakCrisis CoverDiabetes CareDiabetes AssureDiabetesCare ActiveForeverLifeHealthAssure Plus
Hospital CareImmediate AnnuityInvestShield CashBakInvestShield Life NewLifeGuardLifeLink Super PensionLifeLink SuperLifeStage RPLifeStage AssureLifeTime GoldLifeTime PlusLifeStage PensionLifeTime Super PensionMediAssurePremierLife GoldPremierLife PensionPure ProtectSmartKid New ULRPSmartKid New ULSPSmartKid RPSave'N'Protect
Life Insurance Plans
Life insurance products assure your family will receive financial support, even in your
absence. Put simply, when you buy insurance you provide your family with a sum of
money, should something happen to you. It thus permanently protects your family from
financial crises.
In addition to serving as a protective cover, when you buy insurance you create a flexible
money-saving scheme, which empowers you to accumulate wealth to buy a new car, get
your children educational solutions, and even retire comfortably.
Today, there is no shortage of investment options for a person to choose from. Given the
plethora of choices, it becomes imperative to make the right choice when investing your
hard-earned money, and online insurance is an ideal choice in today’s technology driven
world. Buying Life insurance online is a way to make a unique investment that helps you
to meet your dual needs - saving for life's important goals, and protecting your assets.
From an investor's point of view, an investment can play two roles - asset appreciation or
asset protection. While most financial instruments have the underlying benefit of asset
appreciation, buying life insurance online gets you the unique reassurance of asset
protection, along with a strong element of asset appreciation.
When you buy life insurance online the core benefit is that the financial interests of one’s
family remain protected from circumstances such as loss of income due to critical illness
or death of the policyholder. Simultaneously, buying life insurance online gives a strong
inbuilt wealth creation proposition. The customer therefore benefits on two counts and
online insurance products occupy a unique space in the landscape of investment options
available to a customer.
As your life stage and therefore your financial goals change, the instrument in which you
invest should offer corresponding benefits pertinent to the new life stage. Online
insurance products are the only investment option that offer specific products tailor-made
for different life stages. You are thus ensured that the benefits offered to the customer
reflect the needs of the customer at that particular life stage, and hence ensures that the
financial goals of that life stage are met.
On the basis of which life stage you are in and the corresponding insurance needs, ICICI
Prudential plans can be categorized into the following four types:
Education Insurance Plans
Wealth Creation Plans
Premium Guarantee plans
Protection Plans
HEALTH INSURANCE
Health insurance policies insure you against several illnesses and guarantee you stay
financially secure should you ever require treatment. They safeguard your peace of mind,
eliminate all worries about treatment expenses, and allow you to focus your energy on
more important things, like getting better. Let's learn more about the various types of
health insurance available, and what the best policy for you might be.
Health Insurance policies in India - An Overview
There are several health insurance or medical insurance plans in India. These can be
divided into the following categories based on the coverage offered:
Hospitalization Plans: These health insurance plans cover your expenses in case you
need to be hospitalized. Within this category, products may have different payout
structures and limits for various heads of expenditure. The hospitalisation coverage may
be reimbursement based plans or fixed benefit plans. These plans aim to cover the more
frequent medical expenses. Click to know about our hospitalisation insurance plan
(Hospital Care)
Critical Illness Plans: These health insurance plans provide you coverage against critical
illnesses such as heart attack, organ transplants, stroke, and kidney failure among others.
These plans aim to cover infrequent and higher ticket size medical expenses. Click to
know about our critical illness plans (Crisis Cover, Health Assure Plus)
Specific Conditions Coverage : These plans are designed specifically to offer health
insurance against certain complications due to diabetes or cancer. They may also include
features such as disease management programs which are specific to the condition
covered. Click to know more about our diabetes (Diabetes Care, Diabetes Care
Plus, Diabetes Assure) and cancer (Cancer Care, Cancer Care Plus) suite of products.
Health Solutions
Health Assure Plus : Health Assure is a regular premium plan which provides
long term cover against 6 critical illnesses by providing policyholder with
financial assistance, irrespective of the actual medical expenses. Health Assure
Plus offers the added advantage of an equivalent life insurance cover.
Cancer Care : is a regular premium plan that pays cash benefit on the diagnosis
as well as at different stages in the treatment of various cancer conditions.
Cancer Care Plus : is a wellness plan that includes all the benefits of Cancer Care
and also provides an additional benefit of free periodical cancer screenings.
Diabetes Care : Diabetes Care is a unique critical illness product specially
developed for individuals with Type 2 diabetes and pre-diabetes. It makes
payments on diagnosis on any of 6 diabetes related critical illnesses, and also
offers a coordinated care approach to managing the condition. Diabetes Care Plus
also offers life cover.
Diabetes Care Plus : is a unique insurance policy that provides an additional
benefit of life cover for Type 2 diabetics and pre-diabetics
Hospital Care : is a fixed benefit plan covering various stages of treatment -
hospitalisation, ICU, procedures & recuperating allowance. It covers a range of
medical conditions (900 surgeries) and has a long term guaranteed coverage upto
20 years.
Crisis Cover : is a 360-degree product that will provide long-term coverage
against 35 critical illnesses, total and permanent disability, and death.
MediAssure is a health insurance policy that provides assured insurability till age
75 years, assured coverage for accepted pre-existing illnesses after 2 years and an
assured price for 3 years.
Education Insurance Plans
One of your most important responsibilities as a parent is to ensure that your child gets
the best possible education that can be provided.
ICICI Prudential offers a wide portfolio of education insurance plans that are designed to
provide peace of mind to you, as a parent, that your child's education will be secure.
These plans ensure that money is made available at the crucial junctures in a child's
education - Class X, Class XII, graduation and post-graduation - to fund crucial
commitments for the child's future.
Importantly, education insurance plans ensure that in the unfortunate event of the death of
a parent, the child's education continues unhampered.
Under the education insurance plans platform, ICICI Prudential brings the following
products to you. Please click on the product name to know more about the plans.
Plan Name Plan Type
SmartKid New Unit-linked Unit Linked
Regular Premium Unit Linked
SmartKid NewUnit-linked
Single Premium Unit Linked
SmartKid Regular Premium Traditional
Savings & Wealth Creation Solutions
Save'n'Protect is a traditional endowment savings plan that offers life protection
along with adequate returns.
CashBak is an anticipated endowment policy ideal for meeting milestone
expenses like a child's marriage, expenses for a child's higher education or
purchase of an asset. It is available for terms of 15 and 20 years.
LifeTime Gold is a unit-linked plan that offers customers the flexibility and
control to customize the policy to meet the changing needs at different life stages.
It offers 7 fund options - Preserver, Protector, Balancer, Flexi Balanced
Multiplier, R.I.C.H and Flexi Growth.
LifeStage RP is unit linked plan that provides you with an option of lifecycle-
based portfolio strategy that continuously re-distributes your money across
various asset classes based on your life stage. This will help you achieve the right
Asset Allocation to meet your desired financial goals.
LifeLink Super is a single premium unit linked insurance plan which combines
life insurance cover with the opportunity to stay invested in the stock market.
Premier Life Gold is a limited premium paying plan specially structured for
long-term wealth creation.
InvestShield Life New is a unit linked plan that provides premium guarantee on
the invested premiums and ensures that the customer receives only the benefits of
fund appreciation without any of the risks of depreciation.
InvestShield Cashbak is a unit linked plan that provides premium guarantee on
the invested premiums along with flexible liquidity options.
LifeStage Assure a unit linked insurance plan that provide upto 450 % of first
year premium guarantee on maturity, with the additional advantage of a lifecycle
based portfolio strategy that allocates the investor’s money across various asset
classes based on his life stage and risk appetite.
Retirement Solutions
ForeverLife is a traditional retirement product that offers guaranteed returns for
the first 4 years and then declares bonuses annually.
LifeTime Super Pension is a regular premium unit linked pension plan that helps
one accumulate over the long term and offers 5 annuity options (life annuity, life
annuity with return of purchase price, joint life last survivor annuity with return of
purchase price, life annuity guaranteed for 5, 10 and 15 years & for life thereafter,
joint life, last survivor annuity without return of purchase price) at the time of
retirement.
LifeStage Pension is a regular premium unit linked pension plan that provides
you with a unique lifecycle-based strategy that continuously re-distributes your
money across various asset classes based on your life stage, eventually providing
you with a customized retirement solution.
LifeLink Super Pension is a single premium unit linked pension plan.
Immediate Annuity is a single premium annuity product that guarantees income
for life at the time of retirement. It offers the benefit of 5 payout options.
PremierLife Pension is a unique and convenient retirement solution with a
limited premium paying term of three or five years, to suit professionals and
businessmen, especially those who require more flexibility and customization
while planning their finances.
Premium Guarantee Plans
The latest addition to the life insurance product portfolio of ICICI Prudential is the
Premium Guarantee plan - InvestShield Life New. Premium Guarantee plans are the ideal
insurance-cum-investment option for customers who want to enjoy the potentially higher
returns of a market linked instrument, but without taking any market risk.
Under the Premium Guarantee Plans platform, ICICI Prudential brings to you the
following products:
Plan Name Plan Type
InvestShield Life New Unit Linked
InvestShield CashBak Unit Linked
Protection Solutions
LifeGuard is a protection plan, which offers life cover at low cost. It is available
in 3 options - level term assurance, level term assurance with return of premium
& single premium.
HomeAssure is a mortgage reducing term assurance plan designed specifically to
help customers cover their home loans in a simple and cost-effective manner.
Group Insurance Plans
One Sure Shot Way For An Employer To Retain His Team. Employees these days are
constantly on the prowl for "better opportunities". How then do you get them to focus on
your job and stay committed for long tenures?
Human Resource experts agree that employees work with utmost dedication when they
believe their organization truly cares about their wellbeing.
One way of showing your concern for your employees is to shoulder the two
responsibilities they worry about most: Security of and Savings for their families.
Group Insurance Plans from ICICI Prudential enable you to effortlessly provide your
employees with both, savings and security, so they can pass on the benefits to their loved
ones.
Your kind gesture to safeguard their family's future will undoubtedly serve as great
encouragement for your employees, and they will gladly offer you their whole-hearted
commitment. Top 3 Reasons Why You Should Invest In ICICI Prudential's Group
Insurance Plans With ICICI Prudential's Group Insurance Plans your employees get:
Incomparable financial benefits that guarantee their safety and financial stability.
Sound financial planning that empowers them to meet their changing financial
objectives.
Quality service initiatives and transparency across all operations.
Group Insurance Solutions
ICICI Prudential Life also offers Group Insurance Solutions for companies seeking to
enhance benefits to their employees.
• Group Gratuity Plan: ICICI Prudential Life's group gratuity plan helps employers
fund their statutory gratuity obligation in a scientific manner and also avail of tax benefits
as applicable to approved gratuity funds.
• Group Superannuation Plan: ICICI Prudential Life offers a flexible market linked
scheme that provides substantial benefits to both employers and employees. Both defined
contribution (DC) and defined benefit (DB) schemes are offered to optimise returns for
members of the trust and rationalise cost. Members have the option of choosing from
various annuity options or opting for a partial commutation of the annuity at the time of
retirement.
• Group Immediate Annuities: ICICI Prudential Life realises the importance of prudent
retirement planning. With this in mind, we have developed a suite of annuity products
that not only give you an income for life but also provide you options to match your
needs. In addition to the annuities offered to existing superannuation customers, we offer
immediate annuities to superannuation funds not managed by us.
• Group Term Plan: ICICI Prudential Life's flexible group term solution helps provide
an affordable cover to members of a group. The cover could be uniform or based on
designation/rank or a multiple of salary. The benefit under the policy is paid to the
beneficiary nominated by the member on his/her death.
Flexible Rider Options
ICICI Prudential Life offers flexible riders, which can be added to the basic policy at a
marginal cost, depending on the specific needs of the customer.
1. Accident & disability benefit: If death occurs as the result of an accident during
the term of the policy, the beneficiary receives an additional amount equal to the
rider sum assured under the policy. If an accident results in total and permanent
disability, 10% of rider sum assured will be paid each year, from the end of the
1st year after the disability date for the remainder of the base policy term or 10
years, whichever is lesser. If the death occurs while travelling in an authorized
mass transport vehicle, the beneficiary will be entitled to twice the sum assured as
additional benefit.
2. Critical Illness Benefit: protects the insured against financial loss in the event of
9 specified critical illnesses. Benefits are payable to the insured for medical
expenses prior to death.
3. Waiver of Premium: In case of total and permanent disability due to an accident,
the future premiums continue to be paid by the company till the time of maturity.
This rider is available with SmartKid, LifeTime Plus, LifeTime Super and
LifeTime Super Pension.
4. Income benefit rider: In case of death of the life assured during the term of the
policy, 10% of the sum assured is paid annually to the nominee on each policy
anniversary till the maturity of the rider.
Types of Insurance Plans - Traditional or Unit Linked (ULIP: Unit Linked Insurance Plan)
Insurance Plans - At a glance
Broadly, insurance plans can be distinctly divided into ULIP (Unit Linked Insurance
Plans) and traditional plans. A brief detail of both segments:
ULIPs (Unit Linked Insurance Plans)
ULIPs, or Unit Linked Insurance Plans, have gained high acceptance due to the attractive
features they offer. Benefits include flexibility, Transparency, Liquidity, and Fund
Options.
Flexibility
A ULIP offers the customer an acute degree of flexibility: the flexibility to choose the
Sum Assured, and to choose the desired premium amount. ULIPs give the customer the
option of changing the level of Premium/Sum Assured even after the plan has started, and
the flexibility to change asset allocation by switching between funds with ease.
Transparency
ULIPS offer a high degree of transparency, where all charges in the plan as well as the
entire net amount invested is made known to the customer. ULIPs also offer the
convenience of tracking your investment performance on a day to day basis, so you can
decide instantly where you want your assets allocated.
Liquidity
A ULIP offers you the option of withdrawing money a few years into the plan, allowing
for the exigencies of life. Alternatively, a ULIP will also allow for partial/systematic
withdrawal should the need arise.
Fund Options
A ULIP will offer you a wide choice of funds, ranging through equity, debt, cash, or a
combination of the three. The customer is also afforded the option of choosing your fund
mix based on your desired asset allocation.
Traditional Plans
These are the oldest types of insurance plans available. These plans cater to customers
with a low risk appetite. Some of the common features of traditional plans are:
1. Steady Investment
1. Major chunk of investible funds are in debt instruments.
2. Steady and almost assured returns over the long term.
2. Features
1. Death benefit is Sum Assured + guaranteed & vested bonus.
2. Helps in asset creation as they are for a long tenure.
3. Premium to Sum Assured ratios are fixed for each plan and age.
4. Generally withdrawals are not allowed before maturity.
Section 80CCC
DEDUCTION IN RESPECT OF CONTRIBUTION TO CERTAIN PENSION
FUNDS.
(1) Where an assessee being an individual has in the previous year paid or deposited
any amount out of his income chargeable to tax to effect or keep in force a contract for
any annuity plan of Life Insurance Corporation of India for receiving pension from the
fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and
subject to, the provisions of this section, be allowed a deduction in the computation of his
total income, of the whole of the amount paid or deposited (excluding interest or bonus
accrued or credited to the assessee's account, if any) as does not exceed the amount of ten
thousand rupees in the previous year.
(2) Where any amount standing to the credit of the assessee in a fund, referred to in
sub-section (1) in respect of which a deduction has been allowed under sub-section (1),
together with the interest or bonus accrued or credited to the assessee's account, if any, is
received by the assessee or his nominee-
(a) On account of the surrender of the annuity plan whether in whole or in part, in
any previous year, or
(b) As pension received from the annuity plan, an amount equal to the whole of
the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the
assessee or his nominee, as the case may be, in that previous year in which such
withdrawal is made or, as the case may be, pension is received, and shall accordingly be
chargeable to tax as income of that previous year.
(3) Where any amount paid or deposited by the assessee has been taken into
account for the purposes of this section, a rebate with reference to such amount shall not
be allowed under section 88.
Section 80D
80D. Deduction in respect of medical insurance premia.
(1) In computing the total income of an assessee, there shall be deducted at the following
rates, such sum as is specified in sub-section (2) and paid by him by cheque in the previous year
out of his income chargeable to tax, namely:-
(i) in a case where such sum does not exceed in the aggregate ten thousand rupees, the
whole of such sum; and
(ii) in any other case, ten thousand rupees.
Provided that where the sum specified in sub-section (2) is paid to effect or to keep in
force an insurance on the health of the assesses, or his wife or her husband or dependent
parents or any member of the family in case the assessee is a Hindu undivided family,
and who is a senior citizen, the provisions of this section shall have effect as it for the
words "ten thousand rupees", the words "fifteen thousand rupees" had been substituted;
(2) The sum referred to in sub-section (1) shall be the following, namely:-
(a) where the assessee is an individual, any sum paid to effect or to keep in force an
insurance on the health of the assessee or on the health of the wife or husband, dependent parents
or dependent children of the assessee;
(b) where the assessee is a Hindu undivided family, any sum paid to effect or to keep in
force an insurance on the health of any member of the family:
(3) Provided that such insurance shall be in accordance with a scheme framed in this behalf
by-
(a) the General Insurance Corporation of India formed under section 9 of the General
Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central
Government in this behalf; or
(b) any other insurer and approved by the Insurance Regulatory and Development
Authority established under sub-section (1) of section 3 of the Insurance Regulatory and
Development Authority Act, 1999 (41 of 1999).
Explanation.-For the purpose of this section, "senior citizen" shall have the meaning assigned to
it in the Explanation to section 80DDB.
Section 80C
Up to a limit of Rs 1 lakh, the money that you invest in these products is deductible which means
that you don't have to pay income tax on it. Thus if you are in the 30 per cent tax bracket and you
invest the maximum allowed you save Rs 30,000 in taxes.
There are a wide range of investments you can make to claim the Section 80C benefit. To keep
things simple we will focus on two categories: Small savings schemes and ELSS (equity linked
savings schemes). Other 80C products include your provident fund, the repayment of principal
on your home loan and your life insurance premium.
Small savings schemes
These include the public provident fund (PPF) and National Savings Certificate (NSC). They
offer a return of around 8 to 8.5 per cent which is quite low compared to typical returns in equity
products. Furthermore, there is a relatively long lock-in period, 15 years for the PPF and 6
years for the NSC. Their main advantage is that they offer a guaranteed return unlike equity-
based products.
Equity linked savings schemes
These are basically mutual funds which are specially created to provide tax benefits. As with
regular mutual funds there is no guaranteed return and you can lose money in a period of falling
stock prices as has happened in the first half of 2008. However, ELSS usually provides a higher
return than small savings schemes and also a lower lock-in period of three years.
Examples of ELSS include Franklin India Taxshield and HDFC Taxsaver. As with regular
mutual funds, these schemes pursue a range of investment strategies: For instance, some may
focus on large cap stocks while others may focus on small and mid cap stocks. It makes sense to
invest in more than one scheme to diversify some of your risk.
Making a choice
How do you decide to allocate your Rs 1 lakh 80C limit? This will depend on your other
financial decisions; for example whether you have taken a home loan or purchased life
insurance. As to the decision between small savings schemes and ELSS two of the most
important factors are your attitude to risk and inflation.
As recent months have shown so clearly, stock markets are a lot riskier than small savings
schemes. However, the flip side is that riskier investments like stocks offer a higher rate of return
particularly over the long run. From the perspective of a young investor who may not need most
of her/his investment money till retirement it probably makes sense to tilt towards riskier assets.
The other important consideration when evaluating returns is to adjust for inflation.
In other words, if your investment generates a return of 8 per cent and inflation is 7 per cent, then
your inflation-adjusted return is only one per cent. When inflation moves into double digits you
are actually making a negative inflation-adjusted return, as is happening currently. This is a
fundamental problem with any investment product that offers a fixed return at a time of high and
rising inflation.
By contrast stocks are a better hedge against inflation especially in the long run. Though inflation
increases the costs of firms it also allows them to charge a higher price to their customers thereby
protecting profits to some extent. This in turn means that stock prices and equity-based products
can offer better protection from inflation over a number of years though not necessarily in the
short run.
What about the element of timing when it comes to equity schemes? For instance, stocks have
clearly taken a pounding in the last six months. However this doesn't necessarily mean it's a bad
time to invest in stocks; valuations in some companies look quite attractive now and over a three-
year horizon you could see decent returns.
From the point of view of the average investor it's probably best to take timing out of the picture
by following a systematic investment plan which means you invest a fixed amount every month.
Small savings schemes and ELSS each have their advantages and disadvantages. Based on your
investment strategy and particularly your attitude towards risk you have to choose how much to
invest in them as part of your Section 80C investments.
Explanation of Tax Benefits
Premiums paid for Life insurance - Deduction under Section 80C
1. Category of assesses allowed deduction: Individual assessee and Hindu
Undivided Family assessee.
2. Eligible Savings: Premiums paid or deposited by assessee to effect or to keep in
force insurance on the life of following persons:
o In case of individual assessee – Himself/Herself, spouse, children of such
individual
o In case of HUF assessee – any member
3. 20% limit: If the amount of premium paid in a financial year for a policy is in
excess of 20% of the actual capital sum assured, then deduction will be allowed
only for premiums upto 20% of the sum assured.
4. Limit on amount of deduction: Deduction will be restricted to investments upto
Rs 100,000 in savings specified under Section 80C (including life insurance
premiums). If any investments have been made under Section 80CCC and
80CCD, then the qualifying amount under Section 80C will stand reduced to that
extent.
Premiums paid for Pension plans - Section 80CCC
1. Permitted Deduction: Section 80CCC allows for deduction of premiums paid
under a pension plan. As per this Section, premiums paid upto Rs 10,000 (till FY
2005-06) & Rs. 1 Lakh (from FY 2006-07) by an individual is allowed as
deduction from his total income.
2. Disallowance: This benefit will be reversed if the policy lapses / is cancelled.
3. Limit: It may be noted that from FY2005-06, the limit of deduction under Section
80CCC will be part of the overall limit prescribed under Section 80CCE.
4. Receipt under Policy: Amounts received on surrender (whole/part) of annuity
plan, amounts received as Pension is taxed as income.
Premiums paid for medical insurance - Section 80D
1. Category of assesses allowed deduction: Individual assessee and Hindu
Undivided Family assessee.
2. Eligible premiums: Premiums paid by assessee by any mode other than cash out
of his taxable income to effect or to keep in force an insurance on the health of
following persons:
o In case of individual assessee – Himself/Herself, spouse, dependant
children and parents. The condition of dependency of parent has been
removed from FY 2008-09. In other words, even if the parent is
independent, the individual can pay the premia and claim the deduction.
o In case of HUF assessee – any member of HUF
3. Deduction and upper limit: The qualifying amounts under Section 80D for self,
spouse and dependent children is upto Rs. 15,000/- and additional deduction upto
Rs. 15,000/- for the parents (from FY 2008-09 onwards). However, a higher
amount of upto Rs 20,000/- is permitted if the person, for whose health insurance
the premium was paid, was aged 65 years or more at any time during the financial
year in which the premium was paid. Such amounts of premium paid would be
allowed as deduction from the total income of the assessee.
Overall deduction limit - Section 80CCE
A new Section 80CCE has been inserted from FY2005-06. As per this section, the
maximum amount of deduction that an assessee can claim under Sections 80C, 80CCC
and 80CCD will be limited to Rs 100,000.
Benefits under insurance policy - Section 10(10D)
As per Section 10(10D) of Income tax Act, 1961, any sum received under a life insurance
policy, including the sum allocated by way of bonus on such policy is exempt from tax.
However, this rule does not apply to following amounts:
sum received under Section 80DD(3), or
any sum received under a Keyman Insurance Policy, or
any sum received other than as death benefit under an insurance policy which has
been issued on or after April 1 2003 and if the premium paid in any of the years
during the term of the policy is more than 20% of the sum assured.
Tax Rates for Individuals
The rates of income-tax for FY 2008-09
Total Income (Rs.)
Rate of Tax
Senior
Citizen
Women below 65
years
Other
s
Upto Rs 150,000/- Nil Nil Nil
Above Rs 150,000/- to
180,000/-Nil Nil 10%
Above Rs 180,000/- to
225,000/-Nil 10% 10%
Above Rs 225,000 to Rs
300,00010% 10% 10%
Above Rs 300,000 to Rs
500,00020% 20% 20%
Above Rs 500,000/- 30% 30% 30%
Surcharge on Income Tax:
In case where the Total Income exceeds Rs 10,00,000, there would be a surcharge @
10%.Marginal relief is available to assessee whose income just exceeds Rs. 10,00,000.
Education Cess on Income Tax
Edcuation Cess @2% will be payable on the amount of income tax (including surcharge).
Secondary & Higher Education Cess on Income Tax
Additional Education Cess @1% will be payable on the amount of Income tax (Including surcharge).
Waiver of Premium Rider (WOP)
On total and permanent disability due to an accident, all future premiums for both the
base policy and rider(s) will be waived till the end of the term of the rider or death of the
life assured, if earlier.
Waiver of Premium rider is available with LifeTime Super,LifeTime Plus,LifeTime
Super Pension, Smart Kid New ULRP, Life Guard ROP, Life Guard WROP.
Premiums paid under this rider are eligible for tax benefits under Section 80C.
Tools Overview
Asset Allocator
Are you an aggressive investor who wants to ride the equity markets? Or are you more
conservative, comfortable investing in assured return products? Go through our Risk
Analyzer to find out what your asset allocation should be, keeping in mind your risk
capacity and your risk behavior.
Inflation Erosion index
Inflation can easily erode the corpus that we set aside for our post-retirement needs. This
erosion happens due to the fact that our corpus might not earn an interest that keeps pace
with rising costs.
To find out how inflation will impact your expenses in the future, use our inflation index
calculator to find out how your current expenses will grow in the future. You need to
enter your current expense figures in the Inflation Index Calculator, your expected rate of
inflation, and the no. of years in the future you will incur the expense.
Power of Compounding
The most powerful boost your money can get is time. Invested properly over a long
period of time, money can grow to many times its original amount - the longer the tenure
of investment, the greater will be the corpus amount.
The name of the game is to invest early and to invest regularly. To further gain an
understanding of this concept, try doing your own experiments with our Simple
Compounding Calculator.
Human Life Value Calculator
Investment in insurance is an essential requirement for one's financial planning to be
complete. However, the quantum of insurance that one needs is a function of one's
income, assets, liabilities and future goals.
Use the Life Value Calculator to find out how much insurance cover is needed by you.
Life Stage Profiler
The 'Wheel of Fortune' is an interactive game developed by ICICI Prudential to help you
chose the ideal insurance solution. Based on your responses to certain key questions, we
will recommend a suite of products that will address your financial and insurance needs.
Procedure to obtain life insurance
Filling up the proposal form
The first step in the process is to fill up the proposal form where in various kinds of
details the proposer furnishes. The form can be obtained from the LIC office or will be
available with insurance agent. The following details are furnished in the proposal form:
1) Name, address, nationality, occupation, nature of duties, name; and address of the
present employer, length of service, name and address of previous employer, if any,
length of previous service, etc.
2) Place of birth, date of birth, district, state, proof of age, etc.
3) Sum insured, period of premium payable (monthly, quarterly, half-yearly or yearly),
amount of first premium payable.
4) Objectives of insuring.
5) Name, age, and relationship of nominee, full address, height and weight.
6) Family history of parents, sisters and brothers.
7) Hereditary disease like diabetes, insanity, epilepsy, gout, asthma, tuberculosis, cancer,
leprosy, etc.
8) Any other disease, accident, operation, etc.
9) In the case of female adult proposer—further information regarding pregnancy,
maternity and disturbances indicative of trouble with the female generative organs.
The female proposer have to furnish further information relating to educational
qualification, average monthly income, source of income, marital status, husband's
name, his income, occupation, and his insurance policy, etc.
Declaration by the proponent
At the end, the proponent has to make a declaration that the statements given in
the proposal are correct to the best of his knowledge and no information is concealed.
The proposal is the basis of insurance contract when it is presented to the LIC.
Attachment of proof of age
Age proof is identified from the secondary school leaving certificate. Attested
copy of this certificate is attached with the proposal form for this purpose. Age proof is
also required to ascertain whether the proposer is a major or a minor. Moreover, age
proof is also needed for determining the premium rate.
Presentation of proposal to the agent
The agent, on receipt of the proposal check it thoroughly whether any important
information is left out without furnishing-. If anything is left out. he will get the same
furnished by the proposer.
In practice, it is noticed that the agent carries the proposal form and approaches the
prospective proposer and get the same furnished with his help.
Medical examination
The insurance agent arranges for the medical examination of the proposer.
Medical examination is conducted by the authorized medical practioner appointed by the
LIC. The doctor records his remarks in the proposal form at the place provided for this
purpose.
In the following cases/ medical examination is not needed:
1) Where the age of the male proposer is below 30 years, educated and remained in
employment for at least one year. Its sum assured is below Rs 40/000/-.
2) Where the proposer is a commissioned officer in Army service and below 45 years of
age. His health is in 'A' category and sum assured is below Rs. 50.000/-.
3) Where the proposer is a woman leading a first life category and passed high school or
equivalent, age is below 30 years and employed at least a period of one year. The a sum
assured is below Rs 40/000/-
4) An adult member below the age of 40 years and the sum assured is below Rs. 15/000.
5) In the case of re-insurance of a person who has already insured.
6)
Report by the Agent
After the medical report, the agent gives his confidential report with regard to
proposer's health condition, habits, family history source of income, etc. He gives his
report after verifying information furnished by the proposer. The agent also will state his
opinion regarding acceptance or rejection of the proposal.
Scrutiny of proposal by the branch office
On completion of all the above stated process, the proposal together with the medical
report and agent confidential report, etc. is submitted to the concerned branch office. The
branch office then arrange for verification in respect of:
1) Name and address of the proposer
2) Date of birth
3) Occupation
4) Insured sum
5) Nominee
6) Signature of the proposes
7) Family history
8) Medical report and agent's report
After the verification, if any short comings are noticed, the proposer is asked to complete
the same. If the proposal is found in order, the branch office takes the further steps in the
matter.
Depositing of premium
The branch office issues first premium notice to the proposer. On depositing the
premium money, the branch takes further steps in the matter.
Registration of proposal
On depositing the premium, the proposal is registered with the LIC, in the register
maintained for this purpose by recording important information about the policy; such as
the name of insured, sum insured, duration of the policy, risk, etc. At the time of
registration, a registration number is allotted incorporating the code number of the branch
where the proposal is registered. For example, if the registration No. 345678, 678 will be
the code number of the branch and 345 shall be the proposal number of that branch.
Sending the proposal to appropriate department
After the registration of the proposal, it is sent to the appropriate department. In
case the final authority is in the branch office, the proposal shall be sent to that officer in
the branch office. Otherwise, it is sent to the divisional office.
Taking final decision on the proposal
On completion of all these steps, the final decision taken by the authority in the
divisional office, on “Proposal Review Slip”, in view of acceptance of the propose
premium paid.
Issue of acceptance or request letter
If the proposal is accepted, the intimation regarding acceptance of the proposal is
sent to the proposer. Otherwise, a letter of regret is sent. Acceptance of the proposal is an
evidence of conclusion of insurance contract. From this date the risk commences.
Issue of insurance policy
Having completed all the required formalities/ the corporation prepares the
insurance policy and sends it to the insured. The overleaf of the policy contains all terms
and conditions of the policy along with the insured's name, address, sum assured, mode
of payment of premium, etc. The policy bear the sea' of the LIC and the signature of the
competent authority.
Data Analysis
Comparison of All The Life Insurance Companies on The
Basis Of:
Market Share
Premium Collected
No. Of Policies sold.
On The Basis of Market Share:
Following given is the percent share of market of various insurance companies:
Percent share of market
NAME OF THE PLAYER MARKET SHARE (%)
LIC 82.3
ICICI PRUDENTIAL 5.63
BIRLA SUNLIFE 2.56
BAJAJ ALLIANZ 2.03
SBI LIFE 1.80
HDFC STANDARDLIFE 1.36
TATA AIG 1.29
MAX NEW YORK 0.90
AVIVA 0.79
OM KOTAK MAHINDRA 0.51
ING VYASA 0.37
AMP SANMAR 0.26
METLIFE 0.21
Graph Showing Percent of Market Share
On the Basis of Premium Collected:
The life Insurance industry underwrote a premium of Rs.8,13,014.01 lakh during
the month of March 2005, taking the cumulative premium underwritten during the
current year 2004-05 to Rs.25,34,287.67 lakh. The #1 private Life Insurance
Company i.e. ICICI PRUDENTIAL LIFE INSURANCE contributed Rs.1,
58,408 (6.25 %) followed by Bajaj Allianz which contributed Rs.86, 001.80
lakh(3.39%).
Amount of premium collected by diff. companies
Name of the company Premium collected (2004-05)
Bajaj Allianz 86001.80
ING Vysya 28162.46
AMP Sanmar 9118.44
SBI Life 48293.56
Tata AIG 30022.07
HDFC Standard Life 48615.08
ICICI Prudential 158408.46
Birla Sun life 62128.31
AVIVA 19229.27
Kotak Mahindra 37475.21
Max New York 22469.01
Met Life 5603.71
Sahara Life 167.09
Graph Showing Percent of Premium Collected
On The Basis of No. of Policies Sold:
ICICI Prudential firmly holds the number one position by selling 614673 policies
in the year 2004-05 followed by Tata AIG (228894 policies).
No of policies sold by diff. companies
Name of the company Policies Sold in 2004-05
Bajaj Allianz 28819
ING Vysya 111141
AMP Sanmar 35268
SBI Life 129974
Tata AIG 228894
HDFC Standard Life 206320
ICICI Prudential 614673
Birla SunLife 198370
AVIVA 83209
Kotak Mahindra 63468
Max New York 216671
Met Life 46682
Sahara Life 10214
Graph Showing No. of Polices Sold By Diff. Companies
What Is Investment Plan?
Broadly, insurance plans can be distinctly divided into ULIPs (investment plan) and
traditional plans. A brief detail of both segments:
Unit Linked Insurance Product
Unit linked insurance products are also called investment plans.
A common objection to life insurance is that the returns are not good. Although life
insurance is not an investment and the criterion of return or yield is inappropriate, the
concern is real, particularly in the context of inflation. The sum assured, considered
adequate today, may have a much lower value on maturity, after say 20 or 25 years. This
applies to all types of savings and not only to life insurance. In the case of stocks, the
return or appreciation is looked upon as compensation for such losses.
The Unit Trust of India has Unit Linked Insurance Plan (1971). This plan is designed
for any resident of India between the ages of 12 and 55 planning to save between Rs.
6000 and Rs. 75000, to be contributed in half-yearly or annul installments over a period
of 10 or 15 years. Persons over 55 years can go in for a 10 year plan. No medical
examination is necessary. A small part of the contribution is utilized for providing life
cover and the balance is invested in units. In case the person dies before the end of the
plan period, the legal heirs will be entitled to the units to his credit and the amount of the
insurance cover.
Unit-Linked policies offered by L.I.C., under the brand name Bima Plus, is a plan of this
nature. It offered a choice of three funds (Secured, Balanced and Risk) with different risk
profiles, depending on the different patterns of investment in equities, debts and liquid
assets. The policyholder was allocated units, which were valued every week.
ULIPs have gained high acceptance due to attractive features they offer. These include.
1. Flexibility
1. Flexibility to choose Sum Assured.
2. Flexibility to choose premium amount.
3. Option to change level of Premium /Sum Assured even after the plan has
started.
4. Flexibility to change asset allocation by switching between funds
2. Transparency
1. Charges in the plan & net amount invested are known to the customer
2. Convenience of tracking one’s investment performance on a daily basis.
3. Liquidity
1. Option to withdraw money after few years (comfort required in case of
exigency)
2. Low minimum tenure.
3. Partial / Systematic withdrawal allowed
4. Fund Options
1. A choice of funds (ranging from equity, debt, cash or a combination)
2. Option to choose your fund mix based on desired asset allocation
ULIP Mania
These plans are also called “unbundled” were very popular the years when stock market
was booming. However when the reverse trend happened, the effects of loss of capital
could not be avoided. The security offered by the traditional insurance plans seemed
more attractive. Some plans offered a minimum guarantee (of return). But at the time of
falling interest rates, the floor (guaranteed) levels could not be sustained and the insurers
were compelled to replace existing plans with new ones that guarantee at lower levels.
This had happened in 2002 with some of the L.I.C.’s plan. Some of them that guaranteed
returns were withdrawn.
According to insurance advisors and investment experts, a casual approach towards
ULIPs could prove risky. “It’s an insurance product that provides a host of investment
options. Most financial experts have issues with its lack of transparency, and with the
huge deductions from the premium in the initial years. If you still want to go ahead, do so
—but go in with your eyes wide open,” says an investment expert.
Traditional Plans
These are the oldest types of plans available. These plans cater to customers with a low
risk appetite. Some of the common features of traditional plans are:
1. Steady Investment
1. Major chunk of investible funds are in debt instruments
2. Steady and almost assured returns over the long term
2. Features
1. Death benefit is Sum Assured + guaranteed & vested bonus
2. Helps in asset creation as they are for a long tenure
3. Premium to Sum Assured ratios are fixed for each plan and age.
4. Generally withdrawals are not allowed before maturity.
About life time super
Why LifeTime Super
As an individual who desires a lot from life-a car, a beautiful home and of course, the
comfort and contentment of your family-you would undoubtedly want to plan your
finances such that you can take care of all your requirements.
Invest in ICICI Prudential's LifeTime Super policy-a regular-premium unit-linked
policy, which offers potentially higher returns that systematically enable you to meet
your long-term financial objectives. In addition, LifeTime Super also provides the
protective benefit of an insurance cover, which keeps your family secure, always.
Lifetime Super At A Glance
Features And Benefits Of Lifetime Super
Flexible policy term: Decide for how long you want your policy. You can invest for a
minimum of 10 years and a maximum of 75 years.
3 choices of premium payment: Opt to pay the premium on a monthly, bi-annual or an
annual basis.
Minimum/Maximum Entry Age
Maximum Age at Policy Maturity
Minimum/Maximum Policy Term
Premium Payment Frequency
Minimum Premium
Minimum Sum Assured
Tax Benefit (8)
0 years to 65 years
75 years
10 years to 75 years
Monthly, half-yearly, yearly
Rs. 18,000 per annum
Annual Premium x Term/2. Subject to a
minimum of Rs. 1,00,000
Premium paid for the policy and critical
illness benefit rider will be eligible for tax
benefit under Sec. 80C and 80D
respectively. Any amount paid to you will
be eligible for tax benefits under Sec. 10
(10D) as per prevailing Income Tax laws.
6 investment funds: Select among Flexi-Growth, Maximiser, Flexi-Balanced, Balancer,
Protector, and Preserver, based on your financial goals and risk profile.
Systematic withdrawal of money: Withdraw money in installments from the 4th year
onwards.
Maturity benefit: Receive the Fund Value when your policy matures. Choose to take
this value as a single lump-sum amount or in monthly, bi-annual or annual installments.
Death benefit: Your family receives the higher of Fund Value or Sum Assured should
something happen to you.
Switch benefit: Switch between funds anytime to adjust your portfolio, based on your
goals and risk profiles. You can switch funds 4 times a year, at no cost. For subsequent
switches, you will be required to pay a switch fee of Rs. 100.
Investment plans of other companies with which comparison is
done
Bajaj Allianz New Unit Gain Plus
Bajaj Allianz New Unit Gain Super
Reliance Market Return Plan
ING High Value Plan
HDFC Unit Linked Endowment Plus
Met Smart Plus
LTS &Bajaj Allianz New Unit Gain Plus
Features LTS New Unit Gain Plus
Minimum annual
premium
Rs. 18000 pa Rs. 15000 pa
switches 4 switches free in a year &
Rs 100 is charged over 4
switches
3 switches free in a year
& Rs. 100 is charged over
3 switches
Policy administration
charges
No charge Rs. 240 pa
Surrender value At the end of year 3:- 98%
At the end of year 4:- 99%
At the end of year 5:- 100%
At the end of year3:100%
Additional allocation
of units
Every 4th year starting at
the end of 4th year @4%of
annual premium
Not applicable
Cover continuance
option
Applicable Not applicable
In the above comparison we have seen that life time super have advantage that it have
administration charges less, additional allocation of units, and cover continuance. And the
disadvantage of higher minimum premium and surrender value is less in first three years.
LTS &Bajaj Allianz New Unit Gain Super
Features LTS New Unit Gain Super
Minimum annual
premium
Rs. 18000 pa Rs. 25000 pa
Can choose different
options:
Silver –
25000<=AP<50000
gold –
50000<=AP<100000
diamond–
100000<=AP<500000
platinum –
AP>=500000&above
switches 4 switches free in a year &
Rs 100 is charged over 4
switches
3 switches free in a year &
Rs. 100 is charged over 3
switches
Policy admin charges No charge Rs. 50 pm
Cover continuance
option
Applicable Not applicable
Surrender value At the end of yr 3:-98%
At the end of yr 4:-99%
At the end of yr 5:-100%
At the end of yr 3:-90%
At the end of yr 4:-95%
At the end of yr 5:-100%
Additional allocation
of units
Every 4th year starting at
the end of 4th year @4%of
annual premium
Not applicable
Riders ADBR, CIBR, WOPR UL Accidental Death
benefit, UL accidental
permanent Total/Partial
disability, UL critical
illness, UL hospital cash
benefit
In the above comparison we have seen that life time super have advantage that it have
administration charges less, additional allocation of units, and cover continuance option,
higher surrender value. And the disadvantage of fewer riders option and have six fund
investment options.
LTS &Reliance Market Return Plan
Features LTS Reliance market return
plan
Minimum annual
premium
Rs. 18000 pa Rs. 10000 for regular
premium and Rs. 25000
for single premium
switches 4 switches free in a year
& Rs 100 is charged over
4 switches
1 switch free in a year &
Rs. 100 is charged over 3
switches
Policy admin charges No charge 2%
Surrender value At the end of year 3:98%
At the end of year 4:99%
At the end of yr5:100%
At the end of year 3:-
100%
Additional allocation of
units
Every 4th year starting at
the end of 4th year
@4%of annual premium
Not applicable
Choice of funds 6 fund option available 4 fund options
Cover continuance
option
Applicable Not applicable
In the above comparison we have seen that life time super have advantage that it have
administration charges less, additional allocation of units, and cover continuance option,
choice of fund options are more. And the disadvantage of higher minimum premium and
less surrender value.
LTS & ING High Value Plan
Features LTS ING High Value Plan
Minimum annual
premium
Rs. 18000 pa Rs. 50000 pa
switches 4 switches free in a year
& Rs 100 is charged over
4 switches
2 switches free in a year
& Rs. 100 is charged
over 2 switches
Policy administration
charges
No charge At inception: Rs.1000
fixed charges &
Rs.2/Rs.1000SA +Rs. 50
pm
Riders ADBR,CIBR,WOPR ADBR
Surrender value At the end of year 3:98%
At the end of year 4:99%
At the end of yr 5:100%
At the end of yr 3:97.5%
At the end of yr 4: 99%
At the end of yr 5: 100%
Additional allocation of
units
Every 4th year starting at
the end of 4th year
@4%of annual premium
Not applicable
Choice of funds 6 fund options 4 fund options
In the above comparison we have seen that life time super have advantage that it have
less minimum premium, more switching options, administration charges less, additional
allocation of units, choice of fund options are more and riders options are more.
LTS & HDFC Unit Linked Endowment Plus
Features LTS HDFC Unit Linked
Endowment Plus
Minimum annual
premium
Rs. 18000 pa Rs. 10000 pa
switches 4 switches free in a policy year
& Rs 100 is charged over 4
switches
24 switches free in a
policy year & Rs. 100
is charged over 24
switches
Policy admin charges No charge Rs. 20 pm
Surrender value At the end of year 3:98%
At the end of year 4:99%
At the end of yr 5:100%
At the end of year 3:-
100%
Miscellaneous
charges
None 6 free policy services
after that Rs. 250 is
charged.
Additional allocation
of units
Every 4th year starting at the
end of 4th year @4%of annual
premium
At the end of every
year units will be
increased by 0.1%
Fund management
charges
Flexigrowth/maximiser:2.25%
Balancer/flexi balancer:2.25%
Protector:1.5%preserver:0.75%
0.80%
In the above comparison we have seen that life time super have advantage that it have
less administration charges, miscellaneous charges are not in life time super. The
disadvantage is the minimum premium paid is more, switching option are less, low
surrender value in first three years and fund management charges are also high.
LTS & Met Smart Plus
Features LTS Met Smart Plus
Minimum annual
premium
Rs. 18000 pa Rs. 12000 pa
Cover continuance
option
Applicable Not applicable
Policy admin charges No charge Rs. 200 pa
Miscellaneous charge None Rs. 250 for any alteration
in the contract
Settlement period
option
Available upto a period
of 5 years
Not applicable
Additional allocation of
units
Every 4th year starting at
the end of 4th year
@4%of annual premium
Not applicable
Riders ADBR, CIBR, WOPR ADBR and Critical
Illness
In the above comparison we have seen that life time super have advantage that it have
less administration charges, additional allocation of units, no miscellaneous charges,
cover continuance option and riders options are more.
Conclusion
From the comparison done of LIFE TIME SUPER with other investment policy of other
companies we have seen that despite being the most selling investment plan of ICICI
Prudential Life Insurance it is facing the acute competition form competitors. The main
competition to this plan is given by HDFC Unit Linked Endowment Plus of HDFC
and ING High Value Plan of ING Vysya.
LIFE TIME SUPER have advantage of less minimum premium, less administration
charges, no miscellaneous charges, switching option are more and cover continuance
option is applicable (which is the important point in gaining the advantage over other
plans).
Recommendations
According to the comparison done we have seen that for gaining advantage over other
plans LIFE TIME SUPER should have
Less annual premium,
Riders option should be more,
It should have TOP-UP options as other companies are offering it and
Surrender value should be more in initial years also.
Future Possibilities
• Job opportunities are likely to increase manifold. The number of people working in
the insurance sector in India is roughly the same as in the UK with a population that is
1/7 India's; the US with a population 1/4 the size of India has nearly 4 times the number.
In the emerging markets, the picture is no less encouraging. In S Korea, the no. of full
time employees has more than doubled over a ten year period. Thailand added 50 % more
jobs in four years.
• The liberalization of the insurance sector promises several new jobs opportunities
for those employed in the finance sector who are equipped with degrees in finance.
Finance professionals who had witnessed a slump in the job market would be a much-
relieved lot to hear about the privatization of the insurance sector.
• Let us look into the type of jobs that will be created once the private players come
on the scene. Certainly, it won't be far different from the traditional streams in any other
industry. There will be demand for marketing specialists, finance experts, human
resource professionals, engineers from diverse streams like the petrochemical and power
sectors, systems professionals, statisticians and even medical professionals. Apart from
this, there will be high demand for professionals in the streams like Underwriting and
claims management and actuarial sciences.
• There could be a huge inflow of funds into the country. Given the industry's huge
requirement of start-up capital, the initial years after opening up are bound to see a strong
inflow of foreign capital. Moreover, given that the break-even, typically, comes much
later than in the case of other sectors, odds are those first remittances of dividend will not
happen before a good 10-15 years.
• In the areas of reinsurance, huge capacity is likely to be created with players like
Swiss Re and Munich Re keenly observing the unfolding saga of liberalization of
insurance industry in India. Not only the outward reinsurance will reduce, it is bound to
attract inward reinsurance from the neighboring countries and regions. If the regulator is
forward looking and legislature is supportive, this trend may well lead to the creation of a
Lloyds like market for the direct as well as reinsurance businesses.
• However, increased competition is very likely to result in rate reductions in certain
classes of business, but in those areas that have so far been cross subsidized; an increase
in rates may be possible. Overall, the rate reductions may outweigh the increases, thus
bringing down the re-insurance premium volume available.
• Apart from pure re-insurance activities, which is providing insurance protection, a
revolution will come in service related fields like training, seminars, workshops, know-
how transfer regarding risk assessment and rating, risk inspections, risk management and
devising new policy covers, etc. Also, with more players in the market, there will be
significant increase in advertising, brand building, and keen pricing not ridiculous pricing
and this will benefit whole lot of ancillary industries.
• Another effect of de-regulation will be that, projects, especially mega-projects
where one needs the capacities of the international re-insurance market, will get exposed
to international trends to an even greater extent than is the case today. This will affect
rates too. Areas like the personal lines segment, where we also expect to see substantial
growth as also new types of covers, would usually not be affected by international trends
in the same way as, there is much less need for global re-insurance support.
• Substantial shift in the distribution of insurance in India is likely to take place.
Many of these changes will echo international trends. Worldwide, insurance products
move along a continuum from pure service products to pure commodity products.
Initially, insurance is seen as a complex product with a high advice and service
component. Buyers prefer a face-to-face interaction and place a high premium on brand
names and reliability.
• As products become simpler and awareness increases, they become off-the-shelf,
commodity products. Sellers move to remote channels such as the telephone or direct
mail. Various intermediaries, not necessarily insurance companies, sell insurance. In the
UK for example, retailer Marks & Spencer now sells insurance products. In some
countries like Netherlands and Japan, insurance is marketed using post office's
distribution channels. At this point, buyers look for low price. Brand loyalty could shift
from the insurer to the seller.
• In other markets, notably Europe, this has resulted in banc assurance: banks
entering the insurance business. The Netherlands led with financial services firms
providing an entire range of products including bank accounts, motor, home and life
insurance, and pensions. Other European markets have followed suit. In France over half
of all life insurance sales are made through banks. In the UK, almost 95% of banks and
building societies are distributing insurance products today.
• In India too, banks hope to maximize expensive existing networks by selling a
range of products. Various seminars and conferences on banc assurance are taking place
and many bankers have clearly shown their inclination to enter insurance market by
leveraging their strengths in the areas of brand image, distribution network, and face to
face contact with the clients and telemarketing coupled with advanced information
technology systems. The mergers of Citibank with Travelers in USA and of Winterthur,
the largest Swiss Co. with Credit Suisse are recent examples of the phenomenon likely to
sweep India too.
• Insurers in India should also explore distribution through non-financial
organizations. For example, insurance for consumer items such as refrigerators can be
offered at the point of sale. This piggybacks on an existing distribution channel and
increases the likelihood of insurance sales. Alliances with manufacturers or retailers of
consumer goods will be possible. With increasing competition, they are wooing
customers with various incentives, of which insurance can be one.
• Another potential channel that reduces the need for an owned distribution network
is worksite marketing. Insurers will be able to market pensions, health insurance and even
other general covers through employers to their employees. These products may be
purchased by the employer or simply marketed at the workplace with the employer’s co-
operation.
• Worldwide interest in E-commerce and India's predominant position in information
technology and software development is also likely to be a major factor in the marketing
of insurance products in the immediate future. The internet account is increasing in
arithmetic progression and the trend has already been set by some of the leading insurers
and insurance brokers worldwide.
• Finally, some potential Indian entrants into insurance hope to ride their existing
distribution networks and customer bases. For example, financial organizations like
ICICI, HDFC or Kotak Mahindra intend to tap the thousands of customers who already
buy their deposits, consumer loans or housing finance. Other hopeful entrants anticipate
specific alliances such as with hospitals to provide health cover.
The huge life fund can be utilized for financing the infrastructure industry as well
as provide support to other industries in the country. Hence, the insurance industry is
likely to play a key role in changing the economic landscape of the country. However, the
success of the insurance industry will primarily depend upon meeting the rising
expectations of the consumer who will be the real king in the liberalized insurance market
in future.
Annexure
Brochure of Life Time Super
Bibliography
Books:
1. Khan M.Y.; Financial Services.
2. Mishra M.N; Insurance Principal & Practice.
3. L.M. Bhole; Financial Markets and Institutions.
Websites:
1. www.iciciprulife.com
2. www.financialexpress.com
3. www.insuranceguide.com
4. www.irdaindia.com
5. www. insuremagic.com
6. www.indiacore.com
8. www.researchandmarkets.com
9. www.ingvysyalife.com
10. www.hdfcinsurance.com
11. www.reliancelife.co.in
12. www.metlife.com
13. www.allianzbajaj.co.in
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