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Welcome to Webinar on Insurance. Financial Services. Banking Shares,Debentures,Bonds Mutual Funds Commodities Derivatives Insurance. Difference between Insurance and other Financial Services. Protection against risk or hazard Securing an amount or estate for your family Tax concessions - PowerPoint PPT Presentation
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Welcome to Webinar on Insurance
Financial Services
• Banking
• Shares,Debentures,Bonds
• Mutual Funds
• Commodities• Derivatives
• Insurance
Difference between Insurance and other Financial Services
• Protection against risk or hazard• Securing an amount or estate for your
family• Tax concessions• Social Security• Provide funds for the development of
nation
• Insurance is a contract whereby a certain sum of money is paid on the happening of a contingent event
• It is sharing of financial losses of a few out of the contribution of many who are exposed to the same loss
• It is spreading the loss of an individual over group of individuals
Need for Insurance
Protection of propertyCoverage against liabilitySavings with tax benefitsCapital formation for the countryLife is full of uncertain eventsCreation of Employment
What is Insurance
• Insurance is a contract whereby the insurer agrees to pay the insured a certain sum of money on the happening of a contingent event
• It is a method of sharing the financial losses of a few from a common fund formed out of many
• It is a contract of utmost good faith
Types of Insurance
• Life Insurance
• Health Insurance
• Pension
• Group Insurance
Types of Insurance• Non Life Insurance
–Marine Insurance
–Fire Insurance
–Auto Insurance
–Others
(Types of Insurance)• Marine Insurance
–Location Risks
–Handling Risks
–Operational Risks
–Risk of Human Element
–Act of God
(Types of Insurance)
• Fire Insurance
–Actual Ignition
–Damage of the property which was not in fire
–Under accidental circumstances
(Types of Insurance)
• Auto Insurance– Unlimited liability towards third party
injury– Unlimited liability towards the
passengers of vehicle– Damage to the vehicle and its
accessories– Employees using the vehicle of the
owner under Workmen compensation
Life Insurance Principles• Insurable Interest
• Utmost Good faith
• Moral Hazard
• Warranty
• Indemnity
• Subrogation
Concepts of Life Insurance• Insurer
• Insured
• Proposal
• Policy
• Premium
• Evidence (Policy Document)
Concepts of Life Insurance
• Sum Assured
• Proximate Loss
• Human Life Value
• Annuity
• Present value
Concepts of Life Insurance• Calculation of Human Life Value• A person aged 30 has Annual salary 2lacs• His personal expenses annually is 1lac• He give for the family 1lac• His earning span is 30 years, so the family
requires 30lacs(this is over a period of 30years)• Human Life value= 100000*1-(1/(1+i)^30)/i• I=present bank rate of interest so at 8% it will be
1lac*11.2578=1125780
Underwriting
• First Line Underwriter• Proposal - Name and Address - Age - Object of Insurance - Family History - Personal History - Declaration and Witness
Underwriting• Non Medical General -Basic Education, cap on limits of SA
• Non Medical Special - Employees of reputed companies• Professionals• Medical & Special Reports• Financial Underwriting• Acceptance & Communication
• Nomination
• Appointee
• Policy Document
• Clauses
• Green Channel or Across the Counter
• Cooling off
• Minor & Women Lives
Claims• What is a Claim
• Types of Claim
- Survival Benefit
- Maturity Claim
- Death Claim
- Annuity Claim
- Disability Claim
Claim
• Payment of Full Sum Assured
• Payment of Sum Assured in Installments
• Payment of Double Sum Assured
• Payment of partial Sum Assured
• Payment of Annuity for a specified period
• Payment of Annuity for a specified period and capital on the happening of contingent event
Claims
• Claimant Form
• Evidence of Burial
• Medical Attendant Report
• Police inquest report
• Claim investigation report
• Policy Document or indemnity
Plans
• Term Assurance
• Whole Life policies
• Endowment Policies
• Money Back Policies
• Children policies
• Marriage/Educational Policies
• Annuity Plans
Premium• What is Premium
• Mode of Premium
- Single
- Yearly
- Half Yearly
- Quarterly
- Monthly
Premiums• Factors Affecting Premiums - Mortality - Interest - Expenses - ProfitsTypes of PremiumsBasicAB Premiums,Rider Premiums,
Premiums
• Mortatlity Table Out of 1lac personsage30 1st
year2nd year
3rd year 4th year
1956
1999
Mortality1999
326
117
.00117
343
117
.00117
355
120
.00120
370
125
.00125
(Premiums)
• Person Aged 30 wants take a term assurance of Rs. 1lacs for 1 year
• Premium= Sum Assured * Mortality Rate for 1 year from the table
• Premium=100000*0.00117=Rs.117(1999)
• Premium=100000*0.00326=Rs.326(1956)
Premiums• Person aged 30 wants to take a term
assurance of Rs.100000 for 4 year• Premium for 1st year=
100000*0.00117=117• 2nd year 100000*0.00117=117• 3rd year 100000*0.00120=120• 4th year 100000*0.00125=125Uniform
premium=(117+117+120+125)/4=120
Premiums
• In the same example if it is made endowment that is Rs.100000 will be death cover for 4 years and 1lac will be paid on maturity at the end of 4 years
• Term Assurance Premium for 4 years=120
• Endowment premium = 100000/4 = 25000
• Total premium to be paid 25000+120=25120
Premiums
• Calculation with interest @6% the above example
• Term Assurance premium=120• Endowment premium = 25000/(1.06)^1• = 25000/(1.06)^2 • = 25000/(1.06)^3• = 25000/(1.06)^4• Total Endowment premium =21658• Net Premium=21658+120+21778
Premiums
• Expenses loading in premium
• First year premium
• Renewal premium
• Premium Related expenses
• Policy Related expenses
Premiums• Expenses Loading
We arrived at the premium rate for a person
Aged 30 for 1lac endowment as 21778
Cost of premium expenses=5%
Loading of expense =21778/0.95=22924
Cost of premium including expenses of premium=22924
Premiums
• Cost of expenses per policy
Average expenses per policy=Total Administrative cost/No of policies issued
Suppose 200000 policies issued and administrative cost =40000
Average cost per policy=200000/40000=5
Premiums
• Calculation of loading for the example of person aged 30 Sum Assured 1lac for 5 years endowment
• Premium with interest = 21778• Premium expense is 5%• Administrative expense per policy is Rs. 5
Premium+Interest+expense=(21778+5)/0.95=21929
Servicing Concepts
• Days of Grace
• Paid up Value: Sum Assured*No of years premium paid/Total premium payable
• Surrender Value
• Loans
• Revival
• Assignment
Bonus• What is Bonus• Why it arises• Types of Bonus - Reversionary Bonus - Guaranteed Additions - Loyalty Bonus - Compounded Guarantee Additions - Cash Bonus
Insurance Intermediary
• Agents
• Brokers
• Consultants
• Surveyors
• Corporate Agents
Your Voluntary Contribution• To enhance the service by improving bandwidth and improve the e-
learning methodology needs an investment, in case you feel this helps you, kindly contribute any amount to the below mentioned account.
• “Little drops of water make the mighty ocean”.• Expecting your support, it is absolutely voluntary and optional• Company : Softsmith Infotech Pvt Ltd.• Bank Name : HDFC Bank Ltd• Account Type : Current A/C• Account No : 05742320000031• Branch : Chennai - Kodambakkam - Tamilnadu• Cust ID : 25417385• Branch Code : 0574• When remitting kindly mention your name and course • You can also send DD to the above mentioned name in case direct
transfer is not possible. • Address is available at www.softsmith.com