CHAPTER - 1

INTRODUCTION OF INSURANCE

1. What is Insurance.

2. History of Insurance.

3. Important of Insurance.

4. Features of Insurance.

5. Principle.

6. Type of Insurance.

1. WHAT IS INSURANCE.

Insurance is the equitable transfer of the risk of a loss, from one entity to another in

exchange for payment. It is a form of risk management primarily used to hedge against the

risk of a contingent, uncertain loss.

According to study texts of The Chartered Insurance Institute, there are the

following categories of risk:

1. Financial risks which means that the risk must have financial measurement.

2. Pure risks which means that the risk must be real and not related to gambling.

3. Particular risks which means that these risks are not widespread in their effect, for

example such as earthquake risk for the region prone to it.

It is commonly accepted that only financial, pure and particular risks are insurable. An

insurer, or insurance carrier, is a company selling the insurance; the insured, or policyholder,

is the person or entity buying the insurance policy. The amount of money to be charged for a

certain amount of insurance coverage is called the premium. Risk management, the practice

of appraising and controlling risk, has evolved as a discrete field of study and practice.

The transaction involves the insured assuming a guaranteed and known relatively

small loss in the form of payment to the insurer in exchange for the insurer's promise to

compensate (indemnify) the insured in the case of a financial (personal) loss. The insured

receives a contract, called the insurance policy, which details the conditions and

circumstances under which the insured will be financially compensated.

2. HISTORY OF INSURANCE

Found in organizations

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

coverage, was established in Calcutta in 1818 by Bipin Behari Dasgupta and others. Its

primary target market was the Europeans based in India, and it charged Indians heftier

premiums.[3] The Bombay Mutual Life Assurance Society, formed in 1870, was the first

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

included

Postal Life Insurance (PLI) was introduced on 1 February 1884

Bharat Insurance Company (1896)

United India (1906)

National Indian (1906)

National Insurance (1906)

Co-operative Assurance (1906)

Hindustan Co-operatives (1907)

Indian Mercantile

General Assurance

Swadeshi Life (later Bombay Life)

Sahyadri Insurance (Merged into LIC, 1986)

The first 150 years were marked mostly by turbulent economic conditions. It

witnessed, India's First War of Independence, adverse effects of the World War I and World

War II on the economy of India, and in between them the period of world wide economic

crises triggered by the Great depression. The first half of the 20th century also saw a

heightened struggle for India's independence. The aggregate effect of these events led to a

high rate of and liquidation of life insurance companies in India. This had adversely affected

the faith of the general public in the utility of obtaining life cover.

Nationalisation in 1955

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

private insurance agencies. In the ensuing investigations, one of India's wealthiest

businessmen, Sachin Devkekar, owner of the Times of India newspaper, was sent to prison

for two years.

Eventually, the Parliament of India passed the Life Insurance of India Act on June

19, 1956 creating the Life Insurance Corporation of India, which started operating in

September of that year. It consolidated the life insurance business of 245 private life insurers

and other entities offering life insurance services, this consisted of 154 life insurance

companies 16 foreign companies and 75 provident companies. The nationalisation of the life

insurance business in India was a result of the Industrial Policy Resolution of 1956, which

had created a policy framework for extending state control over at least seventeen sectors of

the economy, including the life insurance.

Growth as a Monopoly

From its creation, the Life Insurance Corporation of India, which commanded a monopoly of

soliciting and selling life insurance in India, created huge surpluses, and by 2006 was

contributing around 7% of India's (GDP) Gross Domestic Product.

The Corporation, which started its business with around 300 offices, 5.7 million policies and

a corpus of INR 45.9 crores (US$ 92 million as per the 1959 exchange rate of roughly  5 for

US$1), had grown to 25,000 servicing around 350 million policies and a corpus of over 

800000 crore (US$130 billion) by the end of the 20th century.

Liberalisation post 2000s

In August 2000, the Indian Government embarked on a program to liberalise the Insurance

Sector and opened it up for the private sector. Ironically, LIC emerged as a beneficiary from

this process with robust performance, albeit on a base substantially higher than the private

sector.

In 2013 the First Year Premium Compound Annual Growth Rate (CAGR) was

24.53% while Total Life Premium CAGR was 19.28% matching the growth of the life

insurance industry and also outperforming general economic growth.

3. IMPORTANT OF INSURANCE.

Human beings, his family and properties are always exposed to different kinds of risks. Risk

involve the losses. Insurance is a tool which reduces the cost of loss or effect of loss caused

by variety of risk. It accumulates funds to meet individual losses. It is not device to prevent

unwanted event of happening or cause of loss but protects them against that loss by

compensating which as lost. The role and importance of insurance are discussed as follows:

 1.Insurance provides security:

Insurance provides safety and security against the loss on a particular event.

Life insurance provides security against death and old age sufferings. Fire insurance protects

against loss due to fire while Marine insurance provides protection and safety against loss of

ship and cargo. For personal accident and sickness insurance financial protection is given

when the individual is unable to earn. In other insurance too, this security is provided against

the loss at a given contingency.

2. Insurance reduces business risk or losses:

In Business, commerce and industry, huge properties are employed.

Because of slight negligence, the property may be turned in to ashes. A person may not be

sure of his life, health and cannot continue the business up to the longer period to support his

dependents. By the help of insurance, he can be sure of his earning, because the insurance

company will pay a fixed amount at the time of death, damage by fire, theft, accident and

other perils.

3. Insurance provides peace of mind:

Insurance removes the tensions, fears, anxiety, frustrate or weaken of the

human mind associated with the future uncertainty. By providing financial position and

promise to compensate losses arise out from various risk, it provides peace of mind and

stimulates more and better work performance of an individual.

4. Life insurance encourages saving:

The insured has an obligation to pay premium regularly and cannot be

withdrawn easily before the expiry of the term of policy. Life insurance encourages the habit

of regular and systematic saving through premium and after a certain period, it would be a

part of necessary saving of the insured person.

5. Insurance accelerates the economic growth of the country:

To develop the economic growth of the country, insurance provides strong

hand and mind, with protection against loss of property and capital to produce more wealth. It

provides protection against different kinds of loss caused by risk. It accumulates the capital

from the insured and utilizes for the development of country. Thus, the insurance meets all

the requirements for the economic growth of a country.

6. Insurance provides credit facilities:

The insured person can get loan by pledging insurance policy and the

interest will not exceed the cash value of policy charged by insurer. In case of death of

insured person, the policy can be utilized for setting of the loan with interest. Business person

can take loan on the basis of insurance documents from the bank also.

7. Insurance helps to reduce inflation:

Inflation created from oversupply of money and on less production entities.

Insurance can help to reduce the inflationary pressure in two ways. Firstly, it collects money

as an amount of premium which controls over supply of money and secondly, it provides

sufficient funds for increase production entities. Thus, it reduces the impact of inflation.

8. Insurance makes security and welfare of employees:

The security and welfare of employees is the responsibility of employer.

These security and welfare are easily met by life insurance, accident and sickness benefit and

pension which are generally provided by group insurance. The premium for group insurance

is normally paid by the employer. Insurance is the simple method for employer to fulfill their

responsibility. Due to these benefits, employee will devote their maximum capacities to

complete their job.

9. Other Importance   of Insurance :

a) Insurance helps to promote foreign trade providing protection again trade risk.

b) Insurance increases business efficiency eliminating the loss of damage, destruction, or

disappearance of property of goods.

c) Insurance protects the social wealth providing protection against social evil.

4. FEATURES OF INSURANCE.

The insurance has the following features which are, generally, observed in case of life,

marine, fire and general insurances.

1.Sharing of Risk:

Insurance is a device to share the financial losses which might befall on an

individual or his family on the happening of a specified event. The event may be death of a

bread-winner to the family in the case of life insurance, marine-perils in marine insurance,

fire in fire insurance and other certain events in general insurance, e.g., theft in burglary

insurance, accident in motor insurance, etc. The loss arising nom these events if insured are

shared by all the insured in the form of premium.

2. Co-operative Device:

The most important feature of every insurance plan is the co-operation of

large number of persons who, in effect, agree to share the financial loss arising due to a

particular risk which is insured. Such a group of persons may be brought together voluntarily

or through publicity or through solicitation of the agents. An insurer would be unable to

compensate all the losses from his own capital. So, by insuring or underwriting a large

number of persons, he is able to pay the amount of loss. Like all cooperative devices, there is

no compulsion here on anybody to purchase the insurance policy.

3. Value of Risk:

The risk is evaluated before insuring to charge the amount of share of an

insured, herein called, consideration or premium. There are several methods of evaluation of

risks. If there is expectation of more loss, higher premium may be charged. So, the

probability of loss is calculated at the time of insurance.

4. Payment at Contingency:

The payment is made at a certain contingency insured. If the contingency

occurs, payment is made. Since the life insurance contract is a contract of certainty, because

the contingency, the death or the expiry of term, will certainly occur, the payment is certain.

In other insurance contracts, the contingency is the fire or the marine perils etc., may or may

not occur. So, if the contingency occurs, payment is made, otherwise no amount is given to

the policy-holder.

Similarly, in certain types of life policies, payment is not certain due to uncertainty of a

particular contingency within a particular period. For example, in term-insurance then,

payment is made only when death of the assured occurs within the specified term, may be

one or two years. Similarly, in Pure Endowment payment is made only at the survival of the

insured at the expiry of the period.

5. Amount of Payment:

The amount of payment depends upon the value of loss occurred due to the

particular insured risk provided insurance is there up to that amount. In life insurance, the

purpose is not to make good the financial loss suffered. The insurer promises to pay a fixed

sum on the happening of an event. If the event or the contingency takes place, the payment

does fall due if the policy is valid and in force at the time of the event, like property

insurance, the dependents will not be required to prove the occurring of loss and the amount

of loss. It is immaterial in life insurance what was the amount of loss at the time of

contingency. But in the property and general insurances, the amount of loss as well as the

happening of loss, are required to be proved.

6. Large Number of Insured Persons:

To spread the loss immediately, smoothly and cheaply, large number of

persons should be insured. The co-operation of a small number of persons may also be

insurance but it will be limited to smaller area. The cost of insurance to each member may be

higher. So, it may be unmarketable. Therefore, to make the insurance cheaper, it is essential

to insure large number of persons or property because the lesser would be cost of insurance

and so, the lower would be premium. In past years, tariff associations or mutual fire insurance

associations were found to share the loss at cheaper rate. In order to function successfully, the

insurance should be joined by a large number of persons.

7. Insurance is not a gambling:

The insurance serves indirectly to increase the productivity of the

community by eliminating worry and increasing initiative. The uncertainty is changed into

certainty by insuring property and life because the insurer promises to pay a definite sum at

damage or death. From a family and business point of view all lives possess an economic

value which may at any time be snuffed out by death, and it is as reasonable to ensure against

the loss of this value as it is to protect oneself against the loss of property. In the absence of

insurance, the property owners could at best practice only some form of self-insurance, which

may not give him absolute certainty.

Similarly, in absence of life insurance, saving requires time; but death may occur at

any time and the property, and family may remain unprotected. Thus, the family is protected

against losses on death and damage with the help of insurance. From the company's point of

view, the life insurance is essentially non-speculative; in fact, no other business operates with

greater certainties. From the insured point of view, too, insurance is also the antithesis of

gambling. Nothing is more uncertain than life and life insurance offers the only sure method

of changing that uncertainty into certainty.

8. Insurance is not Charity:

Charity is given without consideration but insurance is not possible without

premium. It provides security and safety to an individual and to the society although it is a

kind of business because in consideration of premium it guarantees the payment of loss. It is

a profession because it provides adequate sources at the time of disasters only by charging a

nominal premium for the service.

5. PRINCIPLE.

Insurance involves pooling funds from many insured entities (known as exposures) to pay for

the losses that some may incur. The insured entities are therefore protected from risk for a

fee, with the fee being dependent upon the frequency and severity of the event occurring. In

order to be an insurable risk, the risk insured against must meet certain characteristics.

Insurance as a financial intermediary is a commercial enterprise and a major part of the

financial services industry, but individual entities can also self-insure through saving money

for possible future losses.

Insurability

Risk which can be insured by private companies typically shares seven common

characteristics:

1.Large Number Of Similar Exposure Units:

Since insurance operates through pooling resources, the majority of insurance

policies are provided for individual members of large classes, allowing insurers to benefit

from the law of large numbers in which predicted losses are similar to the actual losses.

Exceptions include Lloyd's of London, which is famous for insuring the life or health of

actors, sports figures, and other famous individuals. However, all exposures will have

particular differences, which may lead to different premium rates.

2.Definite Loss:

The loss takes place at a known time, in a known place, and from a known

cause. The classic example is death of an insured person on a life insurance policy. Fire,

automobile accidents, and worker injuries may all easily meet this criterion. Other types of

losses may only be definite in theory. Occupational disease, for instance, may involve

prolonged exposure to injurious conditions where no specific time, place, or cause is

identifiable. Ideally, the time, place, and cause of a loss should be clear enough that a

reasonable person, with sufficient information, could objectively verify all three elements.

3.Accidental Loss:

The event that constitutes the trigger of a claim should be fortuitous, or at

least outside the control of the beneficiary of the insurance. The loss should be pure, in the

sense that it results from an event for which there is only the opportunity for cost. Events that

contain speculative elements, such as ordinary business risks or even purchasing a lottery

ticket, are generally not considered insurable.

4.Large Loss:

The size of the loss must be meaningful from the perspective of the insured.

Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing

and administering the policy, adjusting losses, and supplying the capital needed to reasonably

assure that the insurer will be able to pay claims. For small losses, these latter costs may be

several times the size of the expected cost of losses. There is hardly any point in paying such

costs unless the protection offered has real value to a buyer.

5.Affordable Premium:

If the likelihood of an insured event is so high, or the cost of the event so

large, that the resulting premium is large relative to the amount of protection offered, then it

is not likely that the insurance will be purchased, even if on offer. Furthermore, as the

accounting profession formally recognizes in financial accounting standards, the premium

cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If

there is no such chance of loss, then the transaction may have the form of insurance, but not

the substance.

6.Calculable Loss:

There are two elements that must be at least estimable, if not formally

calculable: the probability of loss, and the attendant cost. Probability of loss is generally an

empirical exercise, while cost has more to do with the ability of a reasonable person in

possession of a copy of the insurance policy and a proof of loss associated with a claim

presented under that policy to make a reasonably definite and objective evaluation of the

amount of the loss recoverable as a result of the claim.

7.Limited Risk Of Catastrophically Large Losses:

Insurable losses are ideally  independent and non-catastrophic, meaning that

the losses do not happen all at once and individual losses are not severe enough to bankrupt

the insurer; insurers may prefer to limit their exposure to a loss from a single event to some

small portion of their capital base. Capital constrains insurers' ability to sell earthquake

insurance as well as wind insurance in hurricane zones. In the US, flood risk is insured by the

federal government. In commercial fire insurance, it is possible to find single properties

whose total exposed value is well in excess of any individual insurer's capital constraint. Such

properties are generally shared among several insurers, or are insured by a single insurer who

syndicates the risk into the reinsurance market.

Legal

When a company insures an individual entity, there are basic legal requirements. Several

commonly cited legal principles of insurance include:

1.Indemnity: The insurance company indemnifies, or compensates, the insured in the case of

certain losses only up to the insured's interest.

2.Benefit insurance: As it is stated in the study books of The Chartered Insurance Institute, the

insurance company doesn't have the right of recovery from the party who caused the injury

and is to compensate the Insured regardless of the fact that Insured had already sued the

negligent party for the damages (for example, personal accident insurance)

3.Insurable interest: The insured typically must directly suffer from the loss. Insurable interest must

exist whether property insurance or insurance on a person is involved. The concept requires

that the insured have a "stake" in the loss or damage to the life or property insured. What that

"stake" is will be determined by the kind of insurance involved and the nature of the property

ownership or relationship between the persons. The requirement of an insurable interest is

what distinguishes insurance from gambling.

4.Utmost good faith : The insured and the insurer are bound by a good faith bond of honesty and

fairness. Material facts must be disclosed.

5.Contribution: Insurers which have similar obligations to the insured contribute in the

indemnification, according to some method.

6.Subrogation: The insurance company acquires legal rights to pursue recoveries on behalf of

the insured; for example, the insurer may sue those liable for the insured's loss. The Insurers

can waive their subrogation rights by using the special clauses.

7.Causa proximal, or   proximate cause : The cause of loss (the peril) must be covered under the insuring agreement of

the policy, and the dominant cause must not be excluded.

8.Mitigation: In case of any loss or casualty, the asset owner must attempt to keep loss to a

minimum, as if the asset was not insured.

Indemnification

To "indemnify" means to make whole again, or to be reinstated to the position that one was

in, to the extent possible, prior to the happening of a specified event or peril.

Accordingly, life insurance is generally not considered to be indemnity insurance, but rather

"contingent" insurance (i.e., a claim arises on the occurrence of a specified event). There are

generally three types of insurance contracts that seek to indemnify an insured:

1. A "reimbursement" policy, and

2. A"pay on behalf" or "on behalf of policy, and

3. An "indemnification" policy.

From an insured's standpoint, the result is usually the same: the insurer pays the loss and

claims expenses. If the Insured has a "reimbursement" policy, the insured can be required to

pay for a loss and then be "reimbursed" by the insurance carrier for the loss and out of pocket

costs including, with the permission of the insurer, claim expenses.

6. TYPES OF INSURANCE

Insurance, which is based on a contract, may be broadly classified into the following types.

Insurance occupies an important place in the modern world because the risk, which can be

insured, have increased in number and extent owing to the growing complexity of the present

day economic system. It plays a vital role in the life of every citizen and has developed on an

enormous scale leading to the evolution of many different types of insurance. In fact, now a

day almost any risk can be made the subject matter of contract of insurance. The different

types of insurance have come about by practice within insurance companies, and by the

influence of legislation controlling the transacting of insurance business. Broadly, insurance

may be classified into the following categories:

(a) Life Insurance:

Life insurance is different from various insurance in the sense that the subject

matter of insurance is the life of human being. The insurer will pay the full amount of

insurance at the death or at the expiry of the period. At present life insurance enjoy maximum

scope because each and every person required the insurance. This insurance provide

protection to the family at the premature death or gives adequate amount at the old age when

earning capacities are reduce.

(b) Fire Insurance:

Fire insurance cover risk of fire. In the absent of fire insurance, the fire waste will

increase not only to the individual but to the society as well. With the help of fire insurance,

the losses, arising due to fire are compensated and the society is not losing much. The

individual is protected from the loss accrued by the fire. The fire insurance not only protects

the loss but it also provide certain consequential losses also.

(c) Marine Insurance:

Marine insurance provide protection again loss of marine perils. The marine perils

are collision with rock, or ship attacks by enemies, fire and capture by pirates etc. These

perils cause damage, destruction or disappearance of the ship and cargo and non-payment of

freight. So, marine insurance insures sip cargo and freight.

(d) Social Insurance:

The social insurance is to provide protection to the weaker section of he

society who are unable to pay the premium for adequate insurance. Pension plan, disability

benefits, unemployment benefits, sickness insurance and industrial insurance are the various

form of social insurance.

(e) Miscellaneous Insurance:

The property, goods, machines, furniture, automobile, valuable goods etc.

can be insured against the damage or destruction due to accident or disappearance dye to

theft. There are different forms of insurance for each type of the said property whereby not

only property insurance exists but liability insurance and personal injuries are also insured.

(f) General Insurance:

The general insurance include liability insurance, property insurance and

other form of insurance. Fire and marine insurance comes under property insurance. Liability

insurance include motor, thief, fidelity and machine insurance is fidelity insurance whereby

the insurer compensates the loss to the insured when he is under the liability of payment to

the third party.

(g) Health Insurance:

Health insurance is insurance that pays for medical expenses . It is

sometimes used more broadly to include insurance covering disability or long-term nursing or

custodial care needs. It may be provided through a government-sponsored social insurance

program, or from private insurance companies. In each case, the covered groups or

individuals pay premiums or taxes to help protect themselves from high or unexpected

healthcare expenses. Similar benefits paying for medical expenses may also be provided

through social welfare programs funded by the government. By estimating the overall risk of

healthcare expenses, a routine finance structure can be developed, ensuring that money is

available to pay for the healthcare benefits specified in the insurance agreement.

(h) Auto Insurance:

All insurance provides protection to consumers by covering certain risks and

promising to pay for financial losses caused by these risks. Auto insurance is one of the most

used types of personal insurance. Most states require that you purchase some kind of

insurance coverage to drive legally in the state. Auto insurance can be divided into two basic

coverage areas: liability and property damage.

CHAPTER – 2

INDUSTRIAL PROFILE

1. What is LIC.

2. History of LIC.

3. Insurance Market.

4. Present Structure of Insurance Industry In India.

5. Related Acts.

6. Life Insurance Product.

1. WHAT IS LIC

Life Insurance Corporation of India (LIC)  is the largest insurance group and investment

company in India. Its a state-owned where Government of India has 100% stake. LIC also

funds close to 24.6% of the Indian Government's expenses. It was founded in 1956 with the

merger of 243 insurance companies and provident societies. Headquartered in Mumbai,

financial and commercial capital of India, the Life Insurance Corporation of India currently

has 8 zonal Offices and 113 divisional offices located in different parts of India, around 3500

servicing offices including 2048 branches, 54 Customer Zones, 25 Metro Area Service Hubs

and a number of Satellite Offices located in different cities and towns of India and has a

network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98

Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public.

2. History of LIC

A Social Security Fund (SSF) administered by the LIC was set up in 1989- 90 to meet

the insurance requirements of the weaker and vulnerable sections of the society. As on 31

March 1999, about 49 lakh people belonging to 24 occupational groups/areas have been

covered under various social security group schemes financed from the SSF. Under these

schemes people in the age group of 18-60 years are covered for a sum of Rs 5,000 on death

due to natural causes, and Rs25,000 on death caused by accident. While the SSF subsidies 50

per cent of the premium, the beneficiary has to pay the remaining 50 per cent.

Under Landless Agricultural Laborers Group Insurance Scheme (LALGI) in operation

since 1987, the heads of the families in the age group of 18 to 60 years and not appearing as a

land holder in the revenue records and not having inheritable right in agricultural land are

eligible to be covered for an insurance cover of Rs 2,000 payable only on death before 60

years. Upto 1 April 1990, it was operated by LIC on behalf of the Central government which

used to reimburse to LIC the premium payable by the beneficiaries. However, with effect

from 1 April 1990 the entire premium payable by the beneficiaries is being met out of the

SSF. At present, about 1.2 crore landless agricultural laborers are covered under the Scheme.

During 1998-99, 47,122 claims were settled. All over the country, the Integrated Rural

Development Programme (IRDP) beneficiaries between the age group of 18 to 60 years are

covered under a Group Life Insurance Scheme being operated by the LIC for which the entire

premium is paid by the Central government. An amount of Rs 5,000 is payable to the

beneficiary in case of normal death and Rs 10,000 in case of accidental death. During 1998-

99, 5,896 claims were settled.

The Rural Group Life Insurance Scheme (RGLIS), announced on 15 August 1995, is

a group insurance scheme which provides a life cover of Rs 5,000 for persons in rural areas.

The premium payable is Rs 60 per year for those who enroll up to the age of 40 years and Rs

70 per year for those who enroll beyond40 years and up to 50 years. The entry age is

restricted to 20 years (minimum) and 50years (maximum). Deaths occurring after 60 years

are not covered. Nor is there any saving element in the Scheme. There are two types of

scheme: (i) General Scheme - for persons between the age 20 and 50 years where premiums

are to be paid by the members in full and (ii) Subsidized Scheme - for persons between the

age of 20 and 50 years who belong to a household below- poverty line.

Only one member of such a household is eligible under the scheme where 50 per cent

of the premium is shared by the Central government and State government in equal

proportions. Intermediate Level Panchayats are designated as the nodal agencies for its

implementation. LIC provides incentives to village level workers of Rs six for enrolment of a

new member and Rs three on renewal of insurance cover for an existing member in the

subsequent year. From 15 August 1997 to 14 August 1998, 3,09,252 persons were enrolled

and 73,925 persons renewed their membership. Among them 2,98,917 and 70,183 persons

were under subsidised category respectively 5,047 claims were settled up to 31 March 1999.

3. INSURANCE MARKET

The insurance industry of India consists of 51 insurance companies of which 24

are in life insurance business and 27 are non-life insurers. Among the life insurers, Life

Insurance Corporation (LIC) is the sole public sector company. Apart from that, among the

non-life insurers there are six public sector insurers. In addition to these, there is sole national

re-insurer, namely, General Insurance Corporation of India. Other stakeholders in Indian

Insurance market include Agents (Individual and Corporate), Brokers, Surveyors and Third

Party Administrators servicing Health Insurance claims.

Out of 27 non-life insurance companies, 4 private sector insurers are registered to

underwrite policies exclusively in Health, Personal Accident and Travel insurance segments.

They are Star Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance

Company Ltd, Max Bupa Health Insurance Company Ltd and Religare Health Insurance

Company Ltd. There sre two more specialised insurers belonging to public sector, namely,

Export Credit Guarantee Corporation of India for Credit Insurance and Agriculture Insurance

Company Ltd for Crop Insurance

Insurance penetration. of India i.e. Premium collected by Indian insurers is

4.10% of GDP in FY 2011-12. Per capita premium underwritten i.e. insurance density in

India during FY 2011-12 is US$ 59.0. Here are some performance highlights of the Indian

insurance industry.

Life Insurance Business Performance:

  2011-12   2010-11  

 public sector

private sector

public sector

private sector

Premium Underwritten  202889.28 84182.83 203473.4 88165.24

New Policies Issued 357.51 84.42 370.38 111.14

Number of Offices 3455 7712 3371 8175

Benefits Paid 117497 35635 111274 31232

Individual Death Claims 731336 122864 739502 112032

Individual Death Claims Amount Paid 6559.51 1849.23 6093.14 1502.1

Group Death Claims 244314 158093 233908 202293

Group Death Claims Amount Paid 1586.75 794.99 1393.51 666.31

Claim Settlement Ratio 97.42 89.34 97.03 86.04

Non-Life Insurance Business Performance:

  2011-12   2010-11    Public Sector Private Sector Public Sector Private Sector

Premium Underwritten (Rs in Crores) 30560.74 22315.03 25151.85 17424.63

New Policies Issued(in Lakhs) 528.41 329.3 505.76 287.65

Number of Offices 5354 1696 4911 1749

Net Incurred Claims * (Rs in Crores) 6563 4614 6689 3932

Incurred Claim Ratio 89.22 88.22 97.03 86.71

Number of Claims Reported 12721 82790 2844 2430

Claims Resolved During the Year 11110 82741 2100 2300

Percent Resolved 0.873359013 0.999408141 0.738396624 0.946502058

3. PRESENT STRUCTURE OF INSURANCE INDUSTRY IN

INDIA

 

Life Insurance Corporation of India - Fully owned by government.

Postal Life Insurance

Private players:

1. Bajaj Allianz Life Insurance Co. Ltd.

2. Birla Sun Life Insurance Co. Ltd. (BSIL)

3. HDFC Prudential Life Insurance Co. Ltd. (HDFC Standard Life)

4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU)

5. ING VYASA Life Insurance Co. Ltd. (ING VYASA)

6. Max New York Life Insurance Co. Ltd. (MNYL)

7. Met Life India Insurance Co. Ltd. (METLIFE)

8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd

9. SBI Life Insurance Co. Ltd. (SBI Life)

10. TATA AIG Life Insurance Co. Ltd. (TATA AIG)

11. AMP Sanmar Assurance Co. Ltd. (AMP SANMAR)

12. Aviva Life Insurance Co. Ltd. (AVIVA)

13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)

14. PNB Life Insurance

15. Reliance Life Insurance

16.Bharati Axa Life Insurance

5. RELAYED ACT

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

completely regulated and now being partially deregulated. It is governed by number of acts, with the first

one being the Insurance Act, 1938.

The Insurance Act, 1938

The Insurance Act, 1938 was the first legislation governing all insurance titles to provide strict

state over insurance business.

Life Insurance Corporation Act, 1956

Even though the first legislation was enacted in 1938, it was only on 19thJanuary, 1956, that life

insurance in India was completely nationalized through the Life Insurance Corporation Act,

1956. There were 245insurance companies of both Indian and foreign origin companies

in1956. The government acquiring the companies accomplished nationalization. The Life

Insurance Corporation of India was then formed on 1stSeptember, 1956.

General Insurance Business (Nationalization) ACT, 1972

The general insurance business (nationalization) Act, 1972 was enacted to nationalize the 100

odd general insurance companies by merging them to form four different companies named National

Insurance, New India. Assurance, Oriental Insurance and United India Insurance headquartered in each of

the four metropolitan cities of India.

Insurance Regulatory and Development Authority (IRDA) Act, 1999

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill

in Parliament in December 1999. The IRDA since its incorporation as a statutory body in

April 2000 has fastidiously stuck to its schedule of framing regulations and registering

the private sector insurance companies. The other decision taken simultaneously to provide the

supporting systems to the insurance sector and in particular the life insurance

companies was the launch of the IRDA's online service for issue and renewal of

licenses to agents.

6. LIFE INSURANCE PRODUCT

Life insurance products are broadly classified into two categories:

A) Traditional products which includes:

1. Term loan:

It provides death risk cover for a specified term only. Every policy does not result into

a claim.

2. Whole life insurance:

Here the sum assured is paid on death whenever it occurs. The premium in this

will be higher compared to term plan.

3. Endowment plan:

It provides for the payment of the sum assured at the end of the specified term or on early

death. A money back plan, where survival benefits become payable at definite interval, is also the

variant of endowment plan.

4. Annuities:

They are the series of periodic payments to the annuities for life or for a specified period.

Annuities can be immediate (where the payment of annuity is immediate) or deferred (where the

payment of annuity commences after a specific period).

B) Non- traditional products:

Due to inflexibility of life insurance products,  which results into high liquation,

inconvenience in sticking to premium payment regimen, lack of transparency, etc. insurance

company have come out with non-traditional products mainly in the form of unit linked

products, which have borrowed several beneficial features of mutual funds.

JEEVAN SHREE – I

Product summary:

This is an Endowment Assurance plan offering the choice of many convenient premiums

paying terms. It provides financial protection against death throughout the term of plan with

the payment of maturity amount on survival to the end of the policy term.

Premiums:

Premiums are payable yearly, half-yearly, quarterly or through Salary deductions, as opted by

you, throughout the premium paying term or till earlier death. Alternatively premium may be

paid in one lump sum (Single premium).

Guaranteed Additions:

The policy provides for the Guaranteed Additions at the rate of Rs. 50/- per thousand Sum

Assured for each completed year for first five years of the policy. The Guaranteed Additions

are payable along with the Basic Sum Assured at the time of claim.

Bonuses:

The policy participates in the profits of the Corporation's life insurance business from the 6th

year onwards. It will get a share of the profits in the form of bonuses. Simple Reversionary

Bonuses will be declared per thousand Basic Sum Assured annually at the end of each

financial year. Once declared, they will form part of the guaranteed benefits of the plan.

BIMA BACHAT

What is Bima Bachat?

LIC’s Bima Bachat is a money-back policy which offers financial security and assurance to

the policy holder and his family. Bima Bachat requires the policy holder to pay only one

premium. The amount paid for the premium depends on the duration of the policy taken and

life insurance is available till the date of maturity.

Premium Payment

Single Premium

The sample premium rates are as under: -

Age Annual Premium per 1000 SA  9 12 15

15 716.4 771.35 80420 717.2 771.85 804.425 717.55 772.25 804.9530 718.45 773.35 806.135 721.05 775.75 808.5540 725.8 780.25 812.9545 734.1 787.6 819.650 746.6 797.9 828.9555 762.65 811.95 841.7560 784.8 831.3 859.3565 816.25 - -

Market plus – I

LIC Market Plus 1 is a unit linked pension plan wherein the pension is payable after a

specified period. Four types of investment Funds namely Bond, Secured, Balanced and

Growth Fund are offered. Though primarily a Pension product, the plan has many attractive

features and options which make it an ideal Retirement solution for the future.

The plan also allows a policy holder to switch from one type of fund to another up to four

times a year, free of charge.

Growth Fund:

Investment in Government / Government Guaranteed Securities / Corporate Debt--Not less

than 20%.

Short-term Investment such as money market Instruments (Including Govt. Securities &

Corporate Debt)--Not more than 60%.

Investment in Listed Equity Shares--Not less than 40% & Not more than 55%.

Objective of the fund for risk/return--Long term Capital growth - High risk

CHAPTER-3

CHILD PLAN

1. Introduction of Child Insurance Plan.

2. Structure of Child Plan.

3. Advantages of Child Plan.

4. Factors influencing to buy Child Plan.

5. Type of fund under Child Plan.

1. Introduction of Child Insurance Plan.

A life insurance child plan is aimed at securing the financial future of child. A life insurance

child plan like other life insurance plans is a combination of insurance and investment.

Usually, child plans are available in both forms- traditional endowment child plan and unit

linked child plan. There are guaranteed payout in traditional endowment child plan while

returns are market dependent in case of unit linked child plan. A child plan helps you in two

ways-

(a) Saving and accumulating amount over many years so that the amount can be used for child’s education or marriage

(b) In case of death of insured, there is substantial amount payout which can be used to ensure child’s future and it is not affected due to financial constraints.

While buying a child plan, one needs to take care that the returns are in tandem with the

rising costs. Additionally, the risk coverage is comprehensive. In the same regard, most child

plans have inbuilt waiver of premium feature which ensures that on death of insured, the plan

continues and payout is made as prescribed schedule. For increasing financial security of

child, you can go for riders like Accidental death, critical illness etc which can be added with

the base plan by paying a bit more premium.

2. STRUCTURE OF CHILD PLAN

Charges, Fees and Deductions in child plan

Premium Allocation Charge

This is  a premium-based charge. After deducting this charge from

premiums, the remainder is invested to buy units. The Allocation charges are guaranteed for the entire

duration of policy term.

Mortality Charge

The Mortality Charge will apply on the Sum at Risk  (SAR = Sum

Assured less the Fund Value pertaining to regular premiums). It will be deducted by monthly

cancellation of units from the accumulation unit account. The Mortality Charge shall remain

guaranteed throughout the policy term.

Fund Management Charge

1% p.a.  on With Profits Fund, 1% p.a. on Debt Fund, 1.25%

p.a. on Balanced Fund and 1.50% p.a. on Growth Fund. FMC will be applied on the fund

while calculating NAV on a daily basis. The maximum FMC any fund is 2% p.a. subject to prior

approval by the IRDA.

Policy Administration Charge

Rs. 60 per month, which will increase by 5% p.a. on the 1st of January

each year. PAC will be deducted monthly by cancellation of units from the accumulation unit

account. If premiums are discontinued, this charge would reduce to 60% of the charge applicable for

the premium paying policies

Surrender Charge

This is the charge that applies when the policy is surrendered. It is equal to 50% of

the difference between regular premiums expected and those paid in the first year of the contract.

Service Tax Deductions

12.36% service tax is applicable on the first premium of life insurance policy.

Current structure of investment in India regarding child investment

Traditional Insurance Plans 30%Unit Linked Plans 15%Children Mutual Funds 20%Diversified Equity Funds 10%Direct Equity 15%Commodities     10%

3. ADVANTAGES OF CHILD PLANS

Provide financial security:

You can be rest assured that your child lives on to see his dreams come

true even if you are no longer around.

Tax benefits :

Investment in children plans can enable you to enjoy tax benefits under

Sections 80C and 10 (10D) of the Income Tax Act, 1961.

Enjoy better return:

The premiums you pay are invested into financial instruments, which are

actively managed by experts to allow you to earn more from the policy.

Provide for a higher financial security through 'riders' :

Riders let you enjoy more from the life insurance plan and will provide

additional financial security in the unfortunate event of your death or disability.

Option of placing the policy as collateral to raise a loan :

The plan makes you eligible for a loan after a lock-in period. Your policy will

be the collateral against the loan.

Create a bigger corpus for your child's future :

Timely investments can assure higher funds for your child's future, be it his/her

education or marriage.

4. FACTORS INFLUENCING TO CHILD PLANS

The degree of buying of ULIPs insurance varies from person to person. It depends upon many

factors. The factors can be classified into personal, social, economic, psychological and

company related variables.

a) Social Factor

Age and experience of policyholder are personal factors, while the co-education is a

social factor.

b) Economic Factor

Economic factors include occupation, income and wealth.

c) Psychological Factor

The psychological factors consist of perception, satisfaction about the services

rendered by insurance companies, the impact of advertisement and personal selling made by

insurance companies on policyholders.

d) Company Related Variable

The company related variables are the promotional efforts to sell the policies to prospective

buyers. These include advertisement and personal selling too.

5. TYPE OF CHILD PLANS

There are different type of child plans of LIC. They are Jeevan Kishore, Jeevan Anurag,

Marriage Endowment Or Educational Annuity Plan, Komal Jeevan, Jeevan Chhaya, Child

Fortune Plus, Child Career Plan, Lic Jeevan Ankur. The LIC insurance plan provides our

clients with much of opportunity to ensure there future among safe hands. The LIC insurance

plan acts according to the requirement of an individual and differs from person to person. The

LIC insurance plans are policies that take care of each of our clients by talking to them

individually and offer them the best possible option that is the most suitable one for them.

The LIC insurance plan promises to take care of all the needs and requirements of the clients

that join hands along with LIC insurance plan.

1) Jeevan Kishore :

                              To ensure good future of all child we are here with Jeevan Kishore (Children Plan). This life insurance plan is an Endowment Assurance Plan available for children of less than 12 years of age. The policy may be purchased by there guardian. The risk evolves after 2 years from the date of commencement of policy after the completion of 7 years of age of a child. The Premiums are payable yearly, half-yearly, quarterly or monthly throughout the tenure of the policy. The life assured gets a share of the profits gained by the LIC in the form of bonuses. Simple Bonuses are declared per thousand Sum Assured annually at the end of each year. Bonus is also received if policy runs for certain period.

Commencement Of Risk Cover :

The risk commences either after 2 years from the date of commencement of

policy or from the policy anniversary immediately following the completion of 7 years of age

of child, whichever is later.

Premiums:

Premiums are payable yearly, half-yearly, quarterly or monthly throughout the

term of the policy or till earlier death of child, or single premium.

Bonuses:

This is a with-profits plan and participates in the profits of the Corporation’s life

insurance business.  It gets a share of the profits in the form of bonuses. Simple Reversionary

Bonuses are declared per thousand Sum Assured annually at the end of each financial year. 

Once declared, they form part of the guaranteed benefits of the plan. A Final (Additional)

Bonus may also be payable provided policy has run for certain minimum period.

2) Jeevan Anurag:

LIC’s Jeevan Anurag (Children Plan) is basically a profits plan created to take care of the

educational requirement of children. This plan can be taken by a parent on his or her own life.

Benefits under the particular plan are payable at the prescribed durations irrespective of

whether the insurance survives to the end of the policy term. This plan also provides an

immediate payment of Basic amount on death of the Life Assured during the term of the

policy. The assured benefit that is regained is the Payment of 20%, 40% of the Basic Sum

Assured at the start of every year during last 3 years before maturity, at maturity of the Basic

Sum Assured along with reversionary bonuses and the Terminal bonus, if payable. It also

provides death facility to the life assured person with a Payment of an amount equal to Sum

Assured under the basic plan immediately on the death of the life assured. 

3)Marriage Endowment Or Educational Annuity Plan

We are offering a range of Marriage Endowment or Educational Annuity Plan (Children

Plan) to our clients. This insurance policy determines the Marriage Endowment Assurance

plan which provides benefit from the selected maturity date to meet the marriage or the

educational expense of the particular child. The premiums of this policy are payable yearly,

half-yearly, quarterly, monthly or through Salary deductions, as chose by the assurer. The

bonuses provided are in the profits of the corporation life insurances business the assurer gets

share of the profits in form of bonuses. Bonuses are declared per thousand Sum Assured

annually at the end of each financial year. It is also payable if the policy is of a certain

minimum term.

Premiums :

Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deductions,

as opted by you, throughout the term of the policy or earlier death.

Bonuses :

This is a with-profit plan and participates in the profits of the Corporation’s life insurance

business.  It gets a share of the profits in the form of bonuses. Simple Reversionary Bonuses

are declared per thousand Sum Assured annually at the end of each financial year.  Once

declared, they form part of the guaranteed benefits of the plan. Such bonuses are to be added

till maturity even if the life assured dies before the maturity date. Final (Additional) Bonus

may also be payable provided a policy is of a certain minimum term.

4) Komal Jeevan:

Komal Jeevan (Children Plan) as an insurance policy is a Children's Money Back Plan that

provides financial protection against death of the assured individual during the term of the

plan on payments regarding survival at specified duration. These can be purchased by their

guardian for a child aged 0 to 10 years. There risk involvement commences either after 2

years from the date of commencement of policy completing 7years of age. The premiums are

payable yearly, half-yearly, quarterly, monthly or through Salary deductions, as opted by the

assured individual till the child attains 18 years of age. The policy also provides Guaranteed

Additions at the rate of Rs.75 per thousand Sum Assured for each completed year. This

insurance policy covers up the profits of the Corporation’s life insurance business. There are

terminal bonuses payable along with death or maturity benefit. This plan can be purchased by

any of the parent or grandparent for a child aged 0 to 10 years.

Premiums:

Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary

deductions, as opted by you, up to the policy anniversary immediately after the life assured

(child) attains 18 years of age or till the earlier death of the life assured. Alternatively, the

premium may be paid in one lump sum (Single premium).

Guaranteed Additions:

The policy provides for the Guaranteed Additions at the rate of  Rs.75 per

thousand Sum Assured for each completed year. The Guaranteed Additions are payable at the

end of the term of the policy or earlier death of the Life Assured.

5) Child Future Plan:

This insurance policy states that it is specifically designed to meet the increasing educational,

marriage and other requirements of growing children. It provides risk cover on the life of a

child not only during the policy term but also during the time of extension that is 7 years after

the expiry of the policy. There are other determined option to be chosen that are Sum Assured

(S.A.), Maturity Age, Policy Term, Mode of Premium payment and Premium Waiver Benefit.

The payments of premiums are at yearly, half-yearly, quarterly or through Salary deductions

over the term of policy. It is mandatory to pay the premium for 6years or before 5 years of

policylapse.

Introduction:

This plan is specially designed to meet the increasing educational, marriage

and other needs of growing children. It provides the risk cover on the life of child not only

during the policy term but also during the extended term (i.e. 7 years after the expiry of

policy term).

6) Jeevan Chhaya:

This insurance policy publishes an Endowment Assurance plan that provides financial

protection against death throughout the whole tenure of the plan. The payment of the sum

assured is being immediately provided after the death. One fourth of the sum assured is

payable at the end of every last four years of the policy tenure whether he is dead or alive

within in policy term. The premiums are payable yearly, half-yearly, quarterly, monthly or

through salary deductions as opted by the assured individual throughout the term of the

policy. As per the bonuses are concerned it provides a share of the profits in the form of

bonuses. Bonuses will be added at the selected term or till death, Bonus may also be payable

provided the policy had matured a minimum period.

7) Child Fortune Plus:

 

This Insurance policy determines that the investment policy has risk involvement in

investment portfolios by the policy holders. LIC’s Child Fortune Plus is a unit linked plan

which offers you a necessary platform to meet your child’s educational and other required

needs. The insurance can be done for your child up to the age of 17years in case of single

premium policies or else 10 for regular premium insurance the policy will continue till the

child reaches the age of 25 yrs and the life assured attain the age of 75 years of nearest

birthday. The premiums are paid either in lump sum (single premium) or regularly

throughout policy term. The death benefit under the policy shall be the Sum Assured. For

regular premium policies, in case of death of the life assured during the term of the policy,

the plan also provides waiver for all future premiums. The wide ranges of funds offered are

the Unit Fund which is subjected to various charges and value of units which may increase

or decrease, depending on the Net Asset Value.

CHAPTER-4

PENSION PLANS

1. Pension Plans.2. Structure.3. Advantages Of Pension Plans.4. Factors Influencing To Buy Pension Plans.5. Types Of Pension Plans.

1. PENSION PLAN A pension is a fixed sum to be paid regularly to a person, typically following retirement from

service. There are many different types of pensions, including defined benefit plans, defined

contribution plans, as well as several others. Pensions should not be confused with severance

pay; the former is paid in regular installments, while the latter is paid in one lump sum.

The terms retirement plan and superannuation refer to a pension granted upon retirement of

the individual. Retirement plans may be set up by employers, insurance companies, the

government or other institutions such as employer associations or trade unions.

Called retirement plans in the United States, they are commonly known as pension

schemes in the United Kingdom and Ireland and superannuation plans in Australia and New

Zealand. Retirement pensions are typically in the form of a guaranteed life annuity, thus

insuring against the risk of longevity.

A pension created by an employer for the benefit of an employee is commonly referred to as

an occupational or employer pension. Labor unions, the government, or other organizations

may also fund pensions. Occupational pensions are a form of deferred compensation, usually

advantageous to employee and employer for tax reasons. Many pensions also contain an

additional insurance aspect, since they often will pay benefits to survivors or disabled

beneficiaries. Other vehicles may provide a similar stream of payments.

The common use of the term pension is to describe the payments a person receives upon

retirement, usually under pre-determined legal or contractual terms. A recipient of a

retirement pension is known as a pensioner or retiree.

More retirement saving scheme like provident and pension funds predominantly cover

workers in the organized sectors, constituting only about 10% of the aggregate workforce.

The majority of the workers around 90% of the working population is engaged in the

unorganized and as no access to any formal system of old age economic security. This

skewed coverage is further shrinking as informal work force is growing while the size of

formal workforce has reminded more or less strange.

2. STRUCTURE OF PENSION PLAN

India, like most other developing countries, does not have a universal social security system

to protect the elderly against economic deprivation. Perhaps, persistently high rates of

poverty and unemployment act as a deterrent to institute a pay-roll tax financed state pension

arrangement for each and every citizen attaining old age. Instead, India has adopted a pension

policy that largely hinges on financing through employer and employee participation. This

has however restricted the coverage to the organized sector workers - denying the vast

majority of the workforce in the unorganized sector access to formal channels of old age

economic support.

Notwithstanding the limited size and scope, India has a long tradition of pension and other

forms of formal old age income support system. The history of the Indian pension system

dates back to the colonial period of British-India. The Royal Commission on Civil

Establishments, in 1881, first awarded pension benefits to the government employees. The

Government of India Acts of 1919 and 1935 made further provisions. These schemes were

later consolidated and expanded to provide retirement benefits to the entire public sector

working population. Post independence, several provident funds were set up to extend

coverage among the private sector workers.

Today, major retirement schemes in India include provident fund, gratuity and pension

schemes. The first two schemes provide lump sum retirement benefit while the last one

makes payment in the form of monthly annuity. These schemes are characterized by the

following common features i.e. they are mandatory, occupation based, earnings related, and

have embedded insurance cover against disability and death. Table 1 elaborates salient

features of the major provident fund and pension schemes. The central government, states

and union territories provide pension benefits to the public employees. In addition, a large

number of public and local bodies and autonomous institutions run their own pension

schemes guaranteed by the government.

The central government alone administers separate pension programs for civil employees,

defense staff and workers in railways, post, and telecommunications departments. These

benefit programs are typically run on a pay-as-you-go, defined-benefit basis. The schemes are

non-contributory i.e. the workers do not contribute during their working lives. Instead, they

forego the employer’s contribution into their provident fund account. The entire pension

expenditure is charged in the annual revenue expenditure account of the government. Full

superannuation benefit is a monthly pension fixed at fifty percent of the average monthly

earnings during the last year of service. The pension is indexed to provide a real annuity to

the retirees. Public employees, in addition to their pension benefits are also covered under the

General Provident Fund (GPF) scheme. The GPF is a non-contributory program where only

workers themselves contribute a minimum of six percent of their monthly earnings. The

accumulation under the GPF account is returned to the worker in lump sum at the time of

retirement.

Private sector workers are less fortunate and until recently had access only to a provident

fund system for their old age income security. Provident Fund is a defined-contribution, fully

funded benefit program providing lump sum benefit at the time of retirement. The provident

fund system, consisting of the Employees’ Provident Fund (EPF) and a number of smaller

provident funds is the largest benefit program operating in India.3 Together, the schemes

provide retirement benefits to about 10 percent of the labor force. Workers (and private

employers) contribute between 10 - 12 percent of monthly earnings, to be returned to the

worker in a lump sum payment at retirement, including accumulated interest at a rate

currently set at 11 percent. In 1995, the government partially converted the EPF scheme and

introduced the Employees’ Pension Scheme (EPS).

It is paid to the workers who fulfill certain eligibility conditions like a minimum qualifying

service period of five years. It is equivalent to 15 days of final earnings for each years of

service completed subject to a maximum of Rs. 350,000. The cost of gratuity is entirely borne

by the employer. The criteria of eligibility varies, but generally the destitute, the poverty

stricken and the infirm aged 60 years and above are provided pension at rates ranging

between Rs. 30 and Rs. 100 per month. However, the combined coverage of these social

assistance schemes is insignificant and covers anywhere between 5 and 10 percent of the total

elderly population. In an effort to widen the reach of the social safety net for the aged poor,

the central government, in 1995, introduced a more comprehensive old age poverty

alleviation program called the National Old Age Pension (NOAP) under the aegis of the

National Social Assistance Programmer (NSAP). The scheme aims to provide monthly

pension to thirty percent of the poorest elderly.

3. ADVANTAGES OF PENSION PLANS

a) Grace Period:

A grace period of 30 days will be available for payment of yearly, half-

yearly or quarterly premiums and 15 days for monthly premiums.

 b) 15 – days Cooling-off period:

If policyholder is not satisfied with the “Terms and Conditions” of the

policy, he/she may return the policy to us within 15 days.

c) Paid-up Value:

The policy will acquire paid-up value after at least 3 full year’s premiums

have been paid.

d) Guaranteed Surrender Value:

Before the annuity vests, the policy can be surrendered at any time after

the completion of 3 policy years. For a regular premium policy, the Guaranteed Surrender

value is available provided 3 years’ premiums are paid, and it is 30% of the premiums paid

excluding premiums paid in the first year. For a Single Premium policy, the Guaranteed

Surrender Value available after completion of 3 policy years is 90% of the Single

Premium. Any extra premiums and premiums for Term Assurance Rider Option, Critical

Illness Rider option and Accident Benefit, if any will be excluded.

e) Revival: 

The policyholder can revive his lapsed policy by paying arrears of premium

together with interest within a period of five years from the date of first unpaid premium

subject to satisfactory evidence of health. The rate of interest for this purpose will be decided

by the Corporation from time to time. The present rate of interest is 9% pa.

f) Options :

Accidental Death and Disability Benefit:

In case of death due to accident (within 180 days) an additional amount equal to the Accident

Benefit Sum assured will be payable. In case of Total and Permanent disability arising due to

accident an amount equal to accident benefit sum assured will be payable over a period of 10

years in monthly instalments. However, the payment of accident benefit will be subject to an

overall limit of Rs.25 lakh under all policies of the Life Assured with the Corporation taken

together.

a) Minimum age at entry: 18 years (completed)b) Maximum age at entry: 65 yearsc) Minimum age at vesting: 40 years

d) Maximum age at vesting 75 years

e) Policy terms:

6 to 35 years under Single Premium policies and 5 to 35 years under Regular Premium policies

f) Modes of premium payment:Yearly, Half-yearly, Quarterly, SSS & Single Premium

g) Sums Assured allowed:

Rs.50,000/- and in multiples of Rs.5,000/- thereafter, with no upper limit.

h) Minimum Annual Premium: Rs.3,000/-i) Minimum Single premium: Rs.10,000/-

4. FACTORS INFLUENCING TO BUY PENSION PLANS.

The factors can be classified into personal, social, economic, psychological and company related

variables.

A) Social Factor

Age and experience of policyholder are personal factors, while the co-education

is a social factor.

B) Economic Factor

Economic factors include occupation, income and wealth.

C) Psychological Factor

The psychological factors consist of perception, satisfaction about the services

rendered by insurance companies, the impact of advertisement and personal selling made by

insurance companies on policyholders.

D) Company Related Variable

The company related variables are the promotional efforts to sell the policies to prospective

buyers. These include advertisement and personal selling too.

5. TYPES OF PENSION PLANS

Pension Plans are Individual Plans that gaze into your future and foresee financial stability

during your old age. These policies are most suited for senior citizens and those planning a

secure future, so that you never give up on the best things in life.

PENSION PLAN

Jeeven Akshay - VI LIC’S New Jeeven Nidhi

I) Jeeven Akshay – VI:

Introduction:  It is an Immediate Annuity plan, which can be purchased by paying a lump sum

amount. The plan provides for annuity payments of a stated amount throughout the life time

of the annuitant. Various options are available for the type and mode of payment of annuities.

Options Available:

The following options are available under the plan

Type of Annuity:o Annuity payable for life at a uniform rate.

o Annuity payable for 5, 10, 15 or 20 years certain and thereafter as long as the

annuitant is alive.

o Annuity for life with return of purchase price on death of the annuitant.

o Annuity payable for life increasing at a simple rate of 3% p.a.

o Annuity for life with a provision of 50% of the annuity payable to spouse

during his/her lifetime on death of the annuitant.

o Annuity for life with a provision of 100% of the annuity payable to spouse

during his/her lifetime on death of the annuitant.

o Annuity for life with a provision of 100% of the annuity payable to spouse

during his/ her life time on death of annuitant. The purchase price will be

returned on the death of last survivor.

Mode:

Annuity may be paid either at monthly, quarterly, half yearly or yearly intervals. You may opt any mode of payment of Annuity.

Salient features:

Premium is to be paid in a lump sum. Minimum purchase price :

Rs.100,000/- for all distribution channels except online. Rs.150,000/- for on line sale.

No medical examination is required under the plan. No maximum limits for purchase price, annuity etc. Minimum allowed age at entry is 30 years (completed) and Maximum

allowed age at entry is 85 years (completed). Age proof necessary.

Annuity Rate:

Amount of annuity payable at yearly intervals which can be purchased for Rs. 1 lakh under different options is as under:

Birthday  (i) (ii) (iii) (iv) (v) (vi) (vii)30 7190 7160 6890 5250 7080 6970 686040 7510 7440 6930 5610 7310 7120 689050 8140 7950 7000 6280 7760 7420 693060 9350 8790 7110 7530 8640 8030 701070 12080 9830 7260 10220 10560 9370 713080 17880 10440 7480 15890 14600 12340 7290

Incentives for high purchase pric:

If your purchase price is Rs. 2.50 lakh or more, you will receive higher amount of annuity due to available incentives. In addition of this, for policies sold online, a rebate of 1% by way of increase in the annuity rate shall also be available.

Service Tax: 

Service tax, if any, shall be as per the Service Tax Laws and at the rate of service tax as applicable from time to time. The amount of service tax as per the prevailing rates shall be payable by the policyholder along with the purchase price.

Paid-up value: The policy does not acquire any paid-up value.

II) LIC’S New Jeeven Nidhi:

LIC’s New Jeevan Nidhi Plan is a conventional with profits pension plan with a combination

of protection and saving features. This plan provides for death cover during the deferment

period and offers annuity on survival to the date of vesting.

a. Benefit on Vesting:  Provided the policy is in full force, on vesting an amount equal to

the Basic Sum Assured along with accrued Guaranteed Additions, vested Simple

Reversionary bonuses and Final Additional bonus, if any, shall be made available to the Life

Assured.

b. Death Benefit:

Death during first five policy years: Provided the policy is in full force, Basic Sum Assured

along with accrued Guaranteed Addition shall be paid as lump sum or in the form of an

annuity or partly in lump sum and balance in the form of an annuity to the nominee. 

Death after first five policy years: Provided the policy is in full force, Basic Sum Assured

along with accrued Guaranteed Addition, Simple Reversionary and Final Additional Bonus,

if any, shall be paid as lump sum or in the form of an annuity or partly in lump sum and

balance in the form of an annuity to the nominee.

In any case, provided all due premiums have been paid, the total death benefit at any time

shall not be less than 105% of the total premiums paid (excluding taxes, extra premium and

rider premium, if any).

c. Guaranteed Additions :  

The policy provides for Guaranteed Additions @ Rs.50/- per thousand Basic

Sum Assured for each completed year, for the first five years.

d. Participation in profits :  Provided the policy is in full force, depending upon the Corporation’s experience

the policies shall participate in profits from 6th year onwards for a Simple Reversionary

Bonus at such rate and on such terms as may be declared by the Corporation.

CHAPTER – 6

OBJECTIVE AND SCOPE OF STUDY

1. Objective of the study.

2. Scope of the study.

1. OBJECTIVE OF THE STUDY.