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1
A Summer Internship Project Report on
UNDERWRITING IN RELIANCE LIFE INSURANCE
Submitted in partial fulfillment of the requirements for the degree of
Post Graduate Diploma in Management (Finance)
By
ADIL KHAN
(Roll No. B-2-F-03)
Under the guidance of
Ms. DEEKSHA JOHRI
Assistant Professor ISBS, PUNE
A Study Conducted for Reliance Life Insurance Company limited
At
Indira School of Business Studies,
Tathawade, Pune 411033
(2012-14)
2
ACKNOWLEDGEMENT
I am very much obliged and indebted to Mr. Ashish Sharma, Branch Service Manager – Operations
of Reliance Life Insurance Company Limited, Jaipur (Rajasthan Head Office) for his approval and
valuable suggestions to take up the project.
I express my deep sense of gratitude to entire operation team of Reliance Life Insurance Company
Limited, Jaipur (Rajasthan Head Office), for there valuable suggestions, consistent help during my
project work.
I also express my deep Sense of gratitude to Ms. Deeksha Johri, Assistant professor Indira School
of Business Studies, for his consistent encouragement and guidance.
3
Executive Summary
This project is about study of underwriting process in Reliance Life Insurance Company Limited. The
Basic purpose for doing the project is to analyze the process of Underwriting in the company So that
we can understand the Underwriting process of Life Insurance Company. Underwriting Process help
Insurance Company to minimize their Risk.
Industry/Company Overview:
In India, Insurance sector contributes approx. 7.6% to the GDP.
The sector of life insurance has witnessed immense growth in the past few years. Today, it is second
only to banks for mobilized savings and forms a formidable part of the capital market.
RELIANCE LIFE INSURANCE COMPANY LIMITED is a Part of RELIANCE CAPITAL
COMPANY Under ANIL DHIRUBHAI AMBANI GROUP (ADAG).
Reliance Capital is one of India is leading private sector financial services companies, and ranks
among the top three private sector financial services and banking companies, in terms of net worth.
Nippon Life Insurance Company acquired 26% interest in equity share capital of the Company
effective October 7, 2011 subsequent to receipt of all regulatory approval.
Nippon Life Insurance, also called Nissay, is Japan's largest private life insurer with revenues of Rs
346,834 cr. (US$ 80 Billion) and profits of over Rs 12,199 cr. (US$ 3 billion). The Company has over
14 million policies in Japan, offers a wide range of products, including individual and group life and
annuity policies through various distribution channels and mainly uses face-to-face sales channel for
its traditional insurance products. The company primarily operated in North America, Europe and Asia
and headquartered in Osaka, Japan. It is ranked 81st in Global Fortune 500 firms in 2011.
4
Objectives:
To study the life Insurance market in India
To study Underwriting in Reliance Life Insurance Company Limited.
To understand how an Insurance Company Minimize risk.
Research Methodology:
The Sources of Data collection in this project is Secondary Data. Sources of Secondary data collection
were Company‘s Article of Underwriting and Various articles on Underwriting and Life Insurance and
from IRDA website.
The research was both analytical and descriptive. In case of analytical research, the researcher already
has all the facts or information available to them and they make a critical evaluation of that
information for finding the solution (S) to certain problem.
Descriptive research is that exploration of the existing certain phenomena. In this Research I have
collected data from company and then analysis it.
Data Analysis:
The Data analysis and interpretation mainly involves the analytical study of various charts of
underwriting Process like Non-medical limit, KYC & AML requirement etc.
Conclusion:
The conclusion that has drawn from the entire project is that the underwriting process in Insurance
sector helps to minimize the Risk for the company.
5
Limitation:
The data available has taken from an Article of Reliance Life Insurance Company Limited.
“Underwriting guideline” Time Constraint was also one of the limitations.
6
TABLE OF CONTENT:
S. No. Contents Pg. No.
1. Introduction 8
2. Industry / Company overview 12
3. Review of Literature/ Theoretical Background 24
4. Objectives 42
5. Research Methodology 44
6. Data Analysis, Results and Interpretation 47
7. Conclusions 68
8. Limitations of the Project 70
9. Bibliography 72
10. Abbreviations
74
7
LIST OF TABLES:
S. No. Details Page No.
1 Financial Questionnaire 30
2 Standard or nonstandard Age proof table 32
3 Non Medical limit
Under Band 1
Under Band 2
33
34
4 Test Category Levels 35
5 Abbreviations of test category 35
6 Confidential Report countersignature limits table 36
7 Interpretation of Risk Profile 37
8 Customer Risk Profile 38
9 Product Risk Profile 38
10 AML & KYC – Risk Indicator Matrix 39
11 Photo Id Proof 39
12 A table show that in low risk transaction which kind of document
consider as ID proof, Address proof and Income proof
40
13 A table show that in High risk transaction which kind of document
consider as ID proof, Address proof and Income proof
41
8
Chapter – 1
Introduction
9
Introduction:
The topic of the project is ―Underwriting process‖ in ―Reliance Life Insurance Company Limited‖ The
basic reason for doing the project is to understand the concept of Underwriting in Reliance Life
Insurance Company Limited.
Definition of 'Insurance Underwriting'
Insurance Underwriting is a financial process that evaluates the risks of insuring a particular person or
asset and uses that information to set premium pricing for insurance policies.
Underwriting Process minimize risk for the company. The underwriter checks various factors on
application form, and based on those factors risk is determined. Here are some factors that
underwriters typically look at:
A person‟s age: As far as life insurance cover is concerned, a person‘s age is an important
consideration.
Genetic medical history: if customer has a long history of serious illness such as cancer or heart
problems in his family, then the underwriters may assess his risk as high.
Current health conditions: If Customer is in good health, he obviously stands to be assessed as a
lower risk than someone is who has some illness or who has undergone serious surgeries in the past.
The nature of your occupation: The nature of occupation can also have a significant impact on
applicant‘s life insurance premiums. Generally, people who have jobs such as office jobs are regarded
as lower risk in terms of premature deaths.
10
Significance of the project:
Significance of project arises because of the importance of Underwriting in Insurance Company.
Inadequate Underwriting can lead to-
Loss of reputation of brand
Distortion of firm‘s profit
Non-achieving of firms target profit.
Stagnation of business growth.
Scope of the Project:
The scope of the project was mainly on-
HUMAN LIFE VALUE
FINANCIAL EVIDENCE
ACCEPTABLE AGE PROOF
NON-MEDICAL LIMITS
CONFIDENTIAL REPORT
KYC & AML REQUIREMENT
Time frame For The Project:
The study and analysis of Project was completed within a period of 2 months (45 working days).
11
Sailent Contribution of the Project:
The sailent contribution of the project will help to understand, how an insurance company use this
underwriting process to minimize the risk.
Outline of the Project:
The broad outline of the project are-
Introduction to the industry
Introduction to the company
Underwriting Guidelines
Data analysis and interpretation
12
Chapter – 2
Industry And Company Overview
13
Industry Overview:
Life Insurance is the fastest growing sector in India since 2000 as Government allowed Private
players and FDI up to 26% and recently Cabinet approved a proposal to increase it to 49%. Life
Insurance in India was nationalized by incorporating Life Insurance Corporation (LIC) in 1956. All
private life insurance companies at that time were taken over by LIC.
In 1993, the Government of India appointed R.N. Malhotra Committee to lay down a road map for
privatization of the life insurance sector.
While the committee submitted its report in 1994, it took another six years before the enabling
legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and legislating
the Insurance Regulatory and Development Authority Act of 2000. The same year the newly
appointed insurance regulator - Insurance Regulatory and Development Authority IRDA—started
issuing licenses to private life insurers.
The life insurance sector controls:
More than Rs. 33,633 cr. of deployed capital
Over Rs. 1,618,544 cr. of managed assets
Investments in infrastructure exceeding Rs. 2, 20,866 cr.
Another indication of the sector's growth is its infrastructural strength.
Today the life insurance sector comprises of:
Over 11,082 branches
More than 23.45 lakh agents
2.48 lakh direct employees and growing significantly
34 cr. In-force policies
14
Company Overview
Full name Reliance Life Insurance Co Ltd
Parent Company Reliance Capital ltd.
Status Listed
Legal Form: Other non-liability limited
Category NBFC
Sector Insurance and finance
Tagline/ Slogan Answer only 7 simple questions
USP Brand Reliance as its foundation
Financial Auditors Pathak H D & Associates (2010)
Legal Address H Block, 1st Floor, Dhirubhai Ambani Knowledge City, ; Navi
Mumbai; Maharashtra ; 400710.
15
Reliance Life Insurance Company Limited (Reliance Life Insurance) is a part of Reliance Capital
Ltd. of the Reliance Anil Dhirubhai Ambani Group. Reliance Capital is one of India‘s leading private
sector financial services companies, and ranks among the top three private sector financial services
and banking companies, in terms of net worth.
Nippon Life Insurance Company acquired 26% interest in equity share capital of the Company
effective October 7, 2011 subsequent to receipt of all regulatory approval.
Nippon Life Insurance, also called Nissay, is Japan's largest private life insurer with revenues of Rs
346,834 cr. (US$ 80 Billion) and profits of over Rs 12,199 crore (US$ 3 billion). The Company has
over 14 million policies in Japan, offers a wide range of products, including individual and group life
and annuity policies through various distribution channels and mainly uses face-to-face sales channel
for its traditional insurance products. The company primarily operated in North America, Europe and
Asia and it‘s headquartered in Osaka, Japan. It is ranked 81st in Global Fortune 500 firms in 2011.
Reliance Life Insurance offers products that fulfill savings and protection needs. Their aim is to
emerge as a transnational Life Insurer of global scale and standard.
Reliance Life insurance
Joint venture
Nippon Life insurance
16
Vision & Mission of Company
Vision
―Empowering everyone live their dreams.‖
Mission
―Create unmatched value for everyone through dependable, effective, transparent and profitable life
insurance and pension plans.‖
Goal
Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:
Emerge as transnational Life Insurer of global scale and standard
Create best value for Customers, Shareholders and all Stake holders
Achieve impeccable reputation and credentials through best business practices
17
Achievements of Company:
Largest Private Life Insurance in terms of Number of Policies for two consecutive
years as of 31 March 2012.
A wide network of 1230 branches and 1, 50, 000 advisors and over 9 million policies.
RLIC continues to be amongst the foremost Life Insurance companies in India to be
certified ISO 9008:2001
Winner of ―Best Non-Urban Coverage‖ Award at Indian Insurance Awards 2011.
RLIC‘s Boundaries for Books Campaign won the 'Silver' at the Indian Digital Media
Awards (IDMA) 2012, under Best Integrated Campaign – Social Cause and Best Use
of Social Network – Social Cause.
Amongst the top 3 Most Trusted Service Brands in the Insurance category as per the
Brand Equity‗s ‗Most Trusted Service Brands 2011‘ Survey.
18
Leadership team of Company:
Board of directors:
Satya Pal Talwar, Independent Director
Satya Pal is an Independent Director of Reliance Life Insurance Company Limited. He holds an
experience of more than 35 years in operations and policy formulation.
Rajendra Chitale, Independent Director
Rajendra is an independent Director at Reliance Life Insurance Company Limited.
Rajendra is the Managing Partner of M/s. M.P. Chitale & Associates, India‘s leading financial
boutique specialist with converging expertise in financial structuring, legal, tax and regulatory advice,
Government of Maharashtra.
Upendra Joshi, Independent Director
Upendra is an Independent Director of Reliance Life Insurance Company Limited.
Upendra is a partner of the corporate and infrastructure team of Khaitan & Co. He has rich experience
in all aspects of law and documentation relating to infrastructure including power, oil & gas, telecom,
mining, ports, airports and project financing and has headed several large infrastructure related
matters.
19
Takeshi Furuichi, Non-Executive Director
Takeshi is a Non-Executive Director at Reliance Life Insurance Company Limited.
Takeshi is Representative Director & Senior Managing Executive Officer and Chief Investment
Officer (oversees the Investment and International Business) of Nippon Life Insurance Company,
Japan.
Soumen Ghosh, Non-Executive Director
Soumen is currently the Group President of Reliance Capital Limited and Non – Executive Director of
Reliance Life Insurance Company Limited.
Soumen has an experience of around 22 years in the areas of General Insurance and Life Insurance in
India and abroad.
Amit Bapna, Non-Executive Director
Amit is currently the Chief Financial Officer at Reliance Capital Limited and Non-Executive Director
of Reliance Life Insurance Company Limited.
20
Financial Facts:
Total Income
(Rs. „000)
PARTICURLAR March 2013 March 2012 March 2011 March 2010 March 2009
TOTAL INCOME 61,165,291 50,614,503 82,731,336 103,564,516 50,504,701
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
March, 2013 March, 2012 March, 2011 March, 2010 March, 2009
61,165,291
50,614,503
82,731,336
103,564,516
50,504,701
TOTAL INCOME
21
Surplus
(Rs. „000)
PARTICURLAR MARCH 2013 MARCH 2012 MARCH 2011 MARCH 2010 MARCH 2009
SURPLUS / (DEFICIT) 4,442,782 3,784,466 962,149 867,699 158,719
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
March, 2013 March, 2012 March, 2011 March, 2010 March, 2009
4,442,782
3,784,466
962,149 867,699
158,719
SURPLUS
22
Total Current Assets
(Rs. „000)
Particular MARCH 2013 MARCH 2012 MARCH 2011 MARCH 2010 MARCH 2009
Total Current Assets 6,329,210 4,941,020 4,778,622 6,332,983 5,815,326
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
March, 2013 March, 2012 March, 2011 March, 2010 March, 2009
6,329,210
4,941,020 4,778,622
6,332,983
5,815,326
Total Current Assets
23
SWOT Analysis:
Strength: Weakness:
Robust and Diverse Product portfolio.
Has network of 1252 offices and 165000
agents.
Strong Capital Base and strong brand
backing of Reliance.
Reliance Capital is one of India‘s leading
private sector financial services
companies, and ranks among the top 3
private sector financial services and
banking companies, in terms of net worth.
Controversies related to Reliance Capital
may have a negative impact
Low advertising as compared to
competitors.
Opportunity: Threats:
Opportunities in the newer semi-urban and
rural markets.
Earning Urban Youth looking for
investments.
Economic crisis and global financial
problems.
Entry of new NBFCs in the sector.
24
Chapter – 3
Review of literature & Theoretical Background:
25
Review of Literature:
Underwriting Guideline Vol. III Reliance life Insurance 2009.
This article published by Reliance life insurance company Limited, in year 2009. This article is all
about the Underwriting requirement or guideline in underwriting process. This article state about
medical, AML, KYC guideline and, Human life value, Sum assured value calculation in different
products.
Therefore, we can say that this article is the backbone for the Underwriter for underwriting process in
reliance life insurance.
I have also studies various IRDA and international journals related to Underwriting so that I can
understand it and explain it in my project.
26
Theoretical Background:
Underwriting In Life Insurance:
Underwriting is a financial process in life insurance that evaluates the risks of insuring a particular
person and uses that information to set premium pricing for insurance policies.
Underwriters use computer programs and actuarial data to determine the likelihood and magnitude of a
payout over the life of the policy. Higher-risk individuals and assets will have to pay more in
premiums to receive the same level of protection as a (perceived) lower-risk person or asset.
Factors in Underwriting
Age: Young people are given life insurance impromptu since probability of them living out the
complete term period is high.
Health Condition: Health individuals are accepted rapidly while others might have to undergo
medical tests. The test cost is generally borne by the insurer.
Income: More the income, more the cover we can get.
Health History: Any hereditary medical problems may lead to rejection of proposal.
Occupation: Hazardous occupation may lead to increase in premium.
Habits: Addictive habits like alcohol, drug abuse, and smoking will certainly result in higher
premium.
27
Underwriting lets the insurer evaluate risk otherwise; the acceptance of every policy could lead to
heavy losses as well as fraudulent cases. If the proposal is thoroughly investigated, there is low
probability of fraud cases and claims that are more genuine. Higher standards of underwriting usually
leads to higher claim settlement ratio.
Factors to be Consider for Underwriting:
1. HUMAN LIFE VALUE
2. FINANCIAL EVIDENCE
3. ACCEPTABLE AGE PROOF
4. NON-MEDICAL LIMITS
5. CONFIDENTIAL REPORT
6. KYC & AML REQUIREMENT
28
1. Human Life Value:
In Reliance Life Insurance for Calculation of Human Life Value simply known as Sum Assured
company use Online tools which provided in Company‘s website, all the sales person of the company
use that tools to calculation of human life value.
Calculation of Human Life Value Include below factors:
1. Age of Insurer
2. Income
3. Policy Tenure
4. Employment Risk
29
2. Financial Evidence:
If the Sum assured is more than Rs. 15,00,000 but less than 25,00,000 than RLI would require a
financial questionnaire signed by the life assured and attested by sales manager or equivalent and a
detailed financial justification from the BM / AM in case the financial questionnaire is not sufficient to
justify the sum proposed, RLI may call for income proof documents.
Above Rs. 25,00,000 RLI would require 2 years ITR or SARAL form or Form 16 of Form 16 A or
Salary Slip for 2 Months, CA Certificate Detailing Personal Assests and liabilities. Business Accounts
like 2 years P/L account and Balance Sheet.
30
Contract No: ______________________________________________________________________
Name of Life to be assured: __________________________________________________________
FINANCIAL QUESTIONNAIRE
(To be filled by life Assured and attested by Sales Manager or equivalent)
Personal Financial Information
Assessment
year
2010-2011
Assessment
year
2011-2012
Assessment
year
2012-2013
Salary Income
Business Income
Agriculture Income
Bonus/Dividend/Commission/Interest
Perquisites
Rental Income
Other Earned Income (Contract/Consultancy etc.)
TOTAL Rs.
31
PERSONAL FINANCIAL INNFORMATION (ASSETS & LIABILITIES)
ASSETS
(A) Cash Amount (Rs.)
Saving Bank Deposit
Current Deposit
Term Deposit (including Recurring Deposit)
NRE/NRO/NRNR Deposit
National Saving Certificate (NSC)
Provident Fund
Cash Certificates/Government Bonds
(B) Fixed Deposits
Bank Name Amount
Invested (Rs)
Maturity Amount
(Rs)
Rate of Interest Maturity Date
(C) Investments
Total Net Worth
Assets (A+B+C) - Liabilities (D) Total Rs.
Have you Declatred personal Bankrutcy in last five years Yes/No
If yes, please give details:
__________________________________________________________________________________
__________________________________________________________________________________
Signature of life Assured
Date:
Attested By
Sales Manager‟s (or Equivalent) name: ________________________________________________
Sales Manager‟s Code: ______________________________________________________________
Sales Manager‟s Signature: __________________________________________________________
32
3. Acceptable Age Proof:
One of the most difficult set of requirement involves the submission of adequate evidence of age as
required in all instances. We have reviewed the existing requirement including those currently utilized
by LIC and other private insurers and have developed the following revised guidelines.
STD. AGE PROOFS:
Birth Certificate certified from Municipality or other equivalent document.
Passport.
School/College Certificate with date of birth stated therein.
Domicile Certificate (Where age was admitted)
Employment Certificate government showing date of birth
Military Services record showing date of birth
Baptism Certificate
Marriage Certificate (Catholic only)
LIC policy provided age has been admitted on the basis of standard age proof and indicated
by evidence of age code on the policy document.
Income tax PAN card Showing date of birth/age
Driving License
(Extra Premium of RS. 1.50/1000 of SA will be charged for Non Standard age proof)
NON STD. AGE PROOF:
Voter‘s card (showing age)
Horoscope (not computerized)
Self-declaration which is on a stamp paper and notarized
Certificate issued by village Panchayat
Ration Card.
33
4. Non-Medical limits:
UNDER BAND 1 (Non std. age proof accepted)
(age : age last birthday)
BAND 1: For Non STD. AGE PROOFS
AGE AT ENTRY
SUM ASSURED Up to 18 18-35 36-45 46-50 51-55 56-65
Up to 50000 Nil Nil Nil Nil Nil Nil
50,001 –
1,00,000
Nil Nil Nil Nil Nil Level 2 plus
ECG
1,00,001 –
2,00,000
Nil Nil Nil Nil Level 2 plus
ECG
Level 2 plus
ECG
2,00,001 –
6,00,000
Nil Nil Nil Level 2 plus ECG Level 2 plus
ECG
Level 3 plus
ECG
6,00,001 –
10,00,000
Nil Nil Level 2 Level 3 plus ECG Level 3 plus
ECG
Level 4
10,00,001 –
15,00,000
Level 1 Level 2 Level 3 plus
ECG
Level 4 Level 4 Level 5
15,00,001 –
20,00,000
Level 1 Level 3 plus
HIV 1& 2
Level 4 plus
HIV 1& 2
Level 5 Level 5 Level 5
20,00,001 –
50,00,000
Level 1 Level 4 plus
HIV 1& 2
Level 5 Level 5 Level 5 Level 5
50,00,001 –
50,00,0000
Level 1 Level 4 plus
HIV 1& 2
Level 5 Level 5 Level 5 Level 5
Over
50,000,000
Level 1 Level 5 Level 5 Level 5 Level 5 Level 5
34
UNDER BAND 2 (Std. age proof accepted)
(Age: age Last Birthday)
BAND 2: For STD. AGE PROOFS
AGE AT ENTRY
SUM ASSURED Up to 18 18-35 36-45 46-50 51-55 56-65
Up to 50,000 Nil Nil Nil Nil Nil Nil
50,001 –
1,00,000
Nil Nil Nil Nil Nil Level 2
1,00,001-
2,00,000
Nil Nil Nil Nil Level 2 plus
ECG
Level 2 plus ECG
2,00,001-
6,00,000
Nil Nil Nil Level 2 plus
ECG
Level 2 plus
ECG
Level 3 plus ECG
6,00,001-
10,00,000
Nil Nil Nil Level 3 plus
ECG
Level 3 plus
ECG
Level 4
10,00,001-
15,00,000
Level 1 Nil Level 3 plus
ECG
Level 4 Level 4 Level 5
15,00,001-
20,00,000
Level 1 Level 3 plus
HIV 1& 2
Level 4 plus
HIV 1& 2
Level 5 Level 5 Level 5
20,00,001-
30,00,000
Level 1 Level 4 plus
HIV 1& 2 less
ECG
Level 5 Level 5 Level 5 Level 5
30,00,001-
50,00,000
Level 1 Level 4 plus
HIV 1 & 2
Level 5 Level 5 Level 5 Level 5
50,00,001-
50,00,0000
Level 1 Level 4 plus
HIV 1& 2
Level 5 Level 5 Level 5 Level 5
Over 50,00,0000 Level 1 Level 5 Level 5 Level 5 Level 5 Level 5
35
Across the board up to age, 65 non- medical limits are 50000.
Test Category Levels:
Level 1 MER
Level 2 MER, FBS, Total Cholesterol, GGT
Level 3 MER, FBS, TC, GGT, HDL, Trigs, SGOT, SGPT, Creatinine
Level 4 MER, FBS, TC, GGT,HDL, Trigs, SGOT, Creatinine, HBsAg, HbA1c, CBC,
ECG
Level 5 MER, FBS, TC, GGT, HDL, Trigs, SGOT, Creatinine, HBsAg, HbA1c,
CBC, H1V1 & 2, TMECG
Abbreviations
MER- Medical Exam Report
FBS- Fasting Blood Sugar
RUA- Routine Urine Analysis
ECG- Electro Cardiology
TMECG Treadmill Electro Cardiogram
CBC- Complete Blood count
Note:
MER includes urinalysis.
36
5. Confidential Report (Advisor/SM):
The Confidential Report is prepared by Human life value created tools on Reliance life Insurance
website, according to age, income, premium-paying capacity of customer.
This Report contains all the details about premium and sum assured.
This Report is attached with application form, signed by authorised person.
CR countersignature limits are as follows:
Authorised person to Sign CR Sum Assured
Insurance Advisor Up to 5,00,000
Sales Manager Up to 15,00,000
Branch Manager Up to 50,00,000
Area Manager Up to 1,00,00,000
Regional Manager Above 1,00,00,000
CR signed by SM is mandatory incase the premium is 1 00,000 and above.
37
6. KYC & AML Requirments:
KYC and AML documents depend upon the risk profile of product and customer, according that
underwriter asks for these documents.
Interpretation of Risk Profile as follow:
Interpretation of the Risk Profile
Single
Premium
Low Risk product and a low risk customer – Single Premium up to 4 lacs will
be low risk transaction.
High Risk product and low risk customer - Single Premium up to 3 lacs will
be low risk transaction.
All other single premium contributions would be low risk transactions if the
single premium is less than 1 lakh.
Regular
premium
Low Risk product and a low risk customer – Regular Premium up to 5 lacs
will be low risk transaction.
High Risk product and low risk customer - Regular Premium up to 4 lacs will
be low risk transaction.
All other single premium contributions would be low risk transactions if the
single premium is less than 3 lakh.
38
Customer Risk Profile as Follows:
Customer Risk Profile
High Risk
Customers
Person with varying income distribution (self-employed & businesspersons).
Person without standard address / ID proof
Jewelers – Dealers, Antique dealers, diamond traders, house wives, with high-
income subjects to their income declaration, unit linked products (including
pension‘s plans).
PEP (politically exposed person) means politicians from other countries more
than 1000000 receipts from nonprofit organization.
Low Risk
Customers
Salary holders including NRIs, Government servants, professionals,
customers who are farmers / iron worker economic strata.
Low risk Product: Regular premium products like pure medical/health
products catering to lower Economic strata.
Product risk Profiles as follows:
Product Risk Profile Low Risk High Risk
Term Y N
Term with return of premium Y N
Standalone Health Products Y N
ULIP N Y
Endowment Y N
Whole Life Y N
Pension N Y
Traditional Universal (ULIP) N Y
Rural Y N
39
This Matrix shows the KYC & AML Requirments according to above two tables:
AML & KYC – Risk Indicator Matrix
Risk
Indicator
Limits per
transactions or per
month or per year
Photograph Address
proof
ID Proof Income
Proof for
computed
annual
income
Accept cash –
Monthly for limits
from integrally
connected
customers
Low Risk 10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes
High Risk 10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes
Low Risk 50,001 to <= 99,999 Mandated Mandated Mandated Optional No
High Risk 50,001 to <= 99,999 Mandated Mandated Mandated Optional No
High Risk =/> 1.00.000 Mandated Mandated Mandated Mandated No
Low Risk <= 1,00,000 No Mandated Mandated No Yes
If annualized premium equal to or above 50,000, PAN card is a mandated document under the finance
Act, 2011.
A transaction that does not fall under the low risk transaction category is a High Risk transaction.
Foe Combo instances Single + Regular premium to be treated as a single: Low risk product + High-
risk customer to be treated as High Risk.
The Risk classification is needed because high-risk transaction require enhanced due diligence.
Photo
Id Proof
PAN Card, Passport, Voters Identity Card, driving License, SEM/GO/PA verification
Bank Certification/ Statement, provisional / Driving license, Employer‘s Certificate
Photograph certified by an insurance company Employee (ICE).
40
A table show that in low risk transaction which kind of document consider as ID proof, Address
proof and Income proof.
Transaction
Risk
ID Proof Address Proof + B22 Income Proof
Low
Risk
Transaction
Pan Card, Passport, Voters ID,
Driving License,
*SEM/GO/PA verification,
Bank certification, Photograph
certified by an insurance
company Employee (ICE),
Card issued by National Rural
Employment Gurantee Act
(NREGA), Employee
Certification, Adhar
Card/UID, Bihar Rajya
penchayat patra, identity card
issued in north east & bihar by
the state government .
Voters ID driving license, Passport,
Electricity bill/telephone bill /mobile bill
(6 months), Bank account statement (3
months), letter from , *SEM/GO/PA,
Property document – Copy of registered
lease agreement with rent receipts (6
months), pension payment order issued to
retired employee by govt./PSU dept. if
they contain the current address, Life
insurance policy, certificate from ward
officer/equivalent rank officer
maintaining election roll certifying
address of applicant, cast and domicile
certificate with address and photograph,
Bihar Rajya penchayat patra, Banker‘s
certification, Consumer gas connection
card/book/pipe gas bill (6 months),
Income Tax or wealth tax assessment
order, Post office saving pass book,
Certified village extension officer, Credit
card statement (3 month) , Mutual fund
statement (3 month), Adhar Card / UID,
Require Any one of these
income proof Document.
CA certified cash flow
statement + Bank Statement,
Income Tax Assessment order
or pension orders or Income
tax return or Employers,
certificate or salary slip last 3
months appointment letter or
current year Audited P & L
and balance sheet or
agriculture income certificate
or pass book/Agriculture land
details – Mandi recipits + 7/12
Extract of form 16, form 16 A
For NRI/PIO: valid indian
Passport, driving
license/Social security card
For NRI/ POI: permanent residence
certificate, copy of valid visa with address
or P.O. box no. valid indian passport/
Bank Account statement (3 month) with
address/ copy of registered lease
agreement with rent receipt (recent) /
Banker‘s Certification + B56
For NRI/PIO: Appointment
letter/ last 2 months salary
slips/ salary statement last 2
years audited B/S & P & L
Audited computation of
income , bank statement /CA
certified cash flow statement +
bank statement.
41
A table show that in High-risk transaction which kind of document consider as ID proof,
Address proof and Income proof
Transaction
Risk
ID Proof Address Proof + B22 Income Proof
High Risk
Transaction
(enhance
due
Diligence is
required)
Pan Card, Passport, Voters
ID, Driving License,
*SEM/GO/PA verification,
Bank certification, Card
issued by National Rural
Employment Gurantee Act
(NREGA), Employee
Certification, Adhar
Card/UID, Bihar Rajya
penchayat patra, identity card
issued in north east & bihar
by the state government .
Passport, Electricity bill/telephone
bill /mobile bill (6 months), Bank
account statement (3 months),
Property document – Copy of
registered lease agreement with
rent receipts (6 months), Banker‘s
Certification, Income Tax or
wealth tax assessment order, Credit
card statement (3 month) , Mutual
fund statement (3 month).
Require Any one of these income
proof Document.
Income Tax assessment order.
Income Tax return.
Audited companies account (latest).
Audited Firm‘s account and
company deed.
Agriculture income certificate.
Agriculture land details and income
assessment i.e.
(mandi receipt) = 7/12 extract or
bank statement
CA certificate disclosing income
details + Bank statement CA
certified cash flow statement + bank
statement or salary slip last 3
month.
For NRI/PIO: valid indian
Passport, driving
license/Social security card
For NRI/ POI: permanent
residence certificate, copy of valid
visa with address or P.O. box no.
valid indian passport/ Bank
Account statement (3 month) with
address/ lease agreement with rent
receipt (6 month) / Banker‘s
Certification.
For NRI/PIO: Appointment letter/
last 2 months salary slips/ salary
statement last 2 years audited B/S &
P & L Audited computation of
income , bank statement /CA
certified cash flow statement + bank
statement
42
Chapter – 4
Objectives:
43
Objectives:
To study the life Insurance market in India
To study Underwriting in Reliance Life Insurance Company Limited.
To understand how an Insurance Company Minimize risk.
44
Chapter – 5
Research Methodology
45
Research Methodology:
Research is original contribution to the existing stock of knowledge. The Objectives of Research is the
systematic and in-depth study or search for any particular topic, subject of area of investigation,
backed by the collection, compilation, presentation and interpretation of relevant details of data.
Methodology followed in this project is-
Collection of data
Type of data
Analysis of data
Interpretation of data
Collection of Data:
All the Data, which has been used in this project, is secondary data, which has been collected from
company‘s article and RBI website and some cases of new customers.
Types of the Research:
Analytical Research
Descriptive Research
Analytical Research: Analytical research is that research where the researcher already has all the facts of information
available to them and they make a critical evaluation of that information for finding the solution(S) to
46
certain problem. In the project, the information used is mainly company‘s guideline of Underwriting.
That information‘s were used to make analysis of the project.
Descriptive Research:
In this type of research, we already have all the facts of information available to us and we make a
critical evaluation of that information for finding the solution(S) to certain problem. In the project, the
information used is mainly company‘s guideline of Underwriting and some new business Cases. That
information‘s were used to make analysis of the project
47
Chapter – 6
Analysis and Interpretation:
48
Analysis and Interpretation:
For the purpose of analysis of underwriting process, I have use two different products of Reliance Life
Insurance, and with the help of that products and new business cases, I have analyses the plan as well
as underwriting process in company.
Interpretations are as follows:
49
Plan 1
Reliance Endowment Plan:
50
Reliance Endowment Plan:
Product Details & features:
Lifeasia Product Code DEP
Underwriting Requirments Std. age proof/ NSAP with age extra
AML guidelineas applicable
1) Endowment Plan is a Traditional Plan.
2) Minimum Sum Assured is 25,000.
3) Maximum sum assured for ages up to 12 years is 5 lakh
HUF Plan Allowed
Key man Not Allowed
Employer Employee Allowed
Partnership Not Allowed
Policy Term:
Minimum = 5 years Maximum = 35 years
Age at Entry:
Minimum = 5 year Maximum = 65 year
Age at Maturity:
Minimum = 18 years Maximum = 75 years
Sum Assured:
Minimum = Rs. 25000 (Regular
premium)
Maximum =
Entry age below 18 years – Rs. 500000
Entry age 18 years and above – No Limit.
51
CASE. 1
Details of Customer:
Sum Assured Rs. 500000
Entry Age 30 years
Policy Term 30 years
Annual Income Rs. 600000
Occupation Govt. job
52
1. Human Life Value:
For Calculation of human Life Value, Underwriter use online tools, which gives amount of human life
value in this case human life value is 5,00,000. So according to that his Premium is as follows:
Annual Premium 14,260
Half Yearly Premium 7,130
Quarterly Premium 3,565
Monthly premium 1,188.33
2. Financial Evidence:
His Sum Assured is 5,00,000 so there will be no financial evidence are required for the financial
evidence.
―If the total insurance is more than 15,00,000 but less than 25,00,000 than Underwriter would require
a financial questionnaire signed by the life assured and attested by sales manager or equivalent and a
detailed financial justification from the BM/ AM. In case the financial questionnaire is not sufficient to
justify the sum proposed, they may call for income proof documents‖.
3. Acceptable Age Proof:
This Customer has these Age proof…
Pass port
PAN Card,
Driving License,
School / College Certificate with date of birth stated therein.
This comes under Standard age proof….
53
4. Non-medical limits:
His Entry Age: 30
His total Sum Assured: 5,00,000
(―Medical cheak up limits depends upon age proof‖)
This Customer has Standard Age proof like PAN Card, Driving License, School /College Certificate
with date of birth stated therein
So
AGE AT ENTRY
SUM ASSURED 18-35
2,00,001-6,00,000 Nil
(“Age: age at Last Birthday”)
His age is 30 year and sum assured is 5,00,000 so there will be no medical cheak up are required for
that.
5. Confidential Report:
In this case, customer‘s Sum assured is 5,00,000 so according to confidential Report table Insurance
advisors generate a report and attest that report and attach with application form.
54
6. KYC & AML Requirments:
In this case, customer‘s annual premium is 14260, and a govt. employee so premium coverage risk is
low.
AML – Risk Indicator Matrix – Annexure VIII
Risk
Indicator
Limits per
transactions or per
month or per year
Photograph Address
proof
ID Proof Income
Proof for
computed
annual
income
Accept cash –
Monthly for
limits from
integrally
connected
customers
Low
Risk
10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes
ID Proof Pan Card, Passport, Voters ID, Driving License, Adhar Card/UID
Address Proof Voters ID, driving license, Passport, Electricity bill/telephone bill /mobile bill (6
months), Bank account statement (3 months), Credit card statement (3 month) ,
Mutual fund statement (3 month), Adhar Card / UID,
Income Proof His annual income is 6,00,000 so there will be no financial evidence are required
for the financial evidence
55
CASE. 2
Details of Customer:
Sum Assured Rs. 3,00,000
Entry Age 40 years
Policy Term 20 years
Annual Income Rs. 5,00,000
Occupation Business
56
1. Human Life Value:
For Calculation of human Life Value, we use online tools, which give amount of human life value in
this case human life value is 3,00,000. Therefore, according to that premium is as follows:
Annual Premium 14817
Half Yearly Premium 7408.50
Quarterly Premium 3704.25
Monthly premium 1234.75
2. Financial Evidence:
His Sum Assured is 3,00,000, so there will be no financial evidence are required for the financial
evidence.
3. Acceptable Age Proof:
This Customer has these Age proof like…
Pass port
PAN Card,
Driving License,
School / College Certificate with date of birth stated therein.
This age proof comes under Standard age proof.
57
4. Non-medical limits:
His Entry Age: 40
His total Sum Assured: 3,00,000
(“Medical cheak up limits depends upon age proof”)
This Customer has Standard Age proof like PAN Card, Driving License, School /College Certificate
with date of birth stated therein.
So
AGE AT ENTRY
SUM ASSURED 36-45
2,00,001-6,00,000 Nil
(Age: age at Last Birthday)
His age is 40 year and sum assured is 3,00,000 so there will be no medical cheak up are required for
that.
5. Confidential Report:
In this case, customer‘s Sum assured is 3,00,000 so according to confidential Report table Insurance
advisors generate a report and attest that report and attach with application form.
58
6. KYC & AML Requirments:
In this case, customer‘s annual premium is 14,260, and a govt. employee so premium coverage risk is
low.
AML – Risk Indicator Matrix – Annexure VIII
Risk
Indicator
Limits per
transactions or per
month or per year
Photograph Address
proof
ID Proof Income
Proof for
computed
annual
income
Accept cash
– Monthly
for limits
from
integrally
connected
customers
High
Risk
10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes
ID Proof Pan Card, Passport, Voters ID, Driving License, Adhar Card/UID
Address Proof Voters ID, driving license, Passport, Electricity bill/telephone bill /mobile bill (6
months), Bank account statement (3 months), Credit card statement (3 month) ,
Mutual fund statement (3 month), Adhar Card / UID,
Income Proof His annual income is 5,00,000 so there will be no financial evidence are required
for the financial evidence
59
Plan: 2
Reliance Life Insurance Pay Five Plan:
60
Reliance Life Insurance Pay Five Plan:
Policy Term:
Fixed term of 10/15 years – If the age at entry is
up to 60 years.
Fixed term of 10 years – if the age at entry is above 60 years
Age at Entry:
Minimum = 7 year Maximum = 65 year
Age at Maturity:
Minimum = 17 years Maximum = 75 years
Premium Paying Term:
Fixed term of 5 years.
Frequency of payment:
Only annual mode is allowed.
Sum Assured:
Age at entry
(last birthday)
Maximum sum assured as multiple of annualized
premium
7 to 11 Rs. 5 lacs ( across all policies with Reliance life)
12 to 45 30
46 to 50 20
51 to 65 10
66 & above 7
61
Case : 3
Details of Customer:
Annual Income 18,00,000
Occupation Businessman
Entry Age (years) 46
Policy Term (years) 10
Sum Assured 30,00,000
62
1. Human Life Value:
For Calculation of human Life Value in this policy, Underwriter use online tools, which gives amount
of human life value in this case human life value is 30,00,000.
Customer is able to pay 1,50,000 per year as a premium.
Therefore, his Sum Assured will be.
1,50,000 * 20 = 30,00,000 (20 time of annualized premium.)
2. Financial Evidence:
Customer‘s total income is 18,00,000 so ―Financial Questionnaire‖ is required by the customer.
Therefore, the Underwriter requires ―Financial Questionnaire‖ signed by life assured and attested by
sales manager or equivalent and a detailed financial justification from the BM / AM.
63
Contract No: D6176706
Name of Life to be Assure: Jay Prakash Singh
FINANCIAL QUESTIONNAIRE
(To be filled by life Assured and attested by Sales Manager or equivalent)
Personal Financial Information
Assessment
year
2010-2011
Assessment
year
2011-2012
Assessment
year
2012-2013
Salary Income - - -
Business Income 17,50,000 17,00,000 17,60,000
Agriculture Income - - -
Bonus/Dividend/Commission/Interest - - 40,000
Perquisites - - -
Rental Income - - -
Other Earned Income (Contract/Consultancy etc.) - - -
TOTAL Rs. 17,50,000 17,00,000 18,00,000
64
PERSONAL FINANCIAL INNFORMATION (ASSETS & LIABILITIES)
ASSETS
(A) Cash Amount (Rs.)
Saving Bank Deposit 3,75,000
Current Deposit 4,50,000
Term Deposit (including Recurring Deposit) 10,00,000
NRE/NRO/NRNR Deposit -
National Saving Certificate (NSC) -
Provident Fund -
Cash Certificates/Government Bonds -
(B) Fixed Deposits
Bank Name Amount
Invested (Rs)
Maturity
Amount (Rs)
Rate of Interest Maturity Date
SBBJ, Bikaner 6,00,000 9,18,256 7.35% 1 June 2019
DENA Bank, Jaipur 4,00,000 6,42,313 7.00% 1 June 2020
(C) Investments 15,00,000 (in land)
(D) liabilities 4,00,000
Total Net Worth
Assets (A+B+C) - Liabilities (E) Total Rs = 39,25,000
(18,25,000+10,00,000+15,00,000-4,00,000) =39,25,000
Have you Declatred personal Bankrutcy in last five years Yes/No
If yes, please give details: _________________________________________________________
Signature of life Assured
Date:
Attested By
Sales Manager‟s (or Equivalent) name: _____________________________________________
Sales Manager‟s Code: ___________________________________________________________
Sales Manager‟s Signature: _______________________________________________________
65
3. Acceptable Age Proof:
This Customer has these Age proof like…
Pass port
PAN Card,
Driving License,
School / College Certificate with date of birth stated therein.
These comes under standard age proof
4. Non-medical limits:
His Entry Age: 46
His total Sum Assured: 30,00,000
(“Medical cheak up limits depends upon age proof”)
This Customer has Standard Age proof like PAN Card, Driving License, School /College Certificate
with date of birth stated therein.
So
AGE AT ENTRY
SUM ASSURED 46-50
20,00,001 – 50,00,000 Level 5
(Age: age at Last Birthday)
His age is 46 year and sum assured is 30,00,000 so there will be Level 5 medical cheak up are required
for that.
66
Test Category Levels:
Level 5 MER, FBS, TC, GGT, HDL, Trigs, SGOT, Creatinine, HBsAg, HbA1c, CBC,
H1V1 & 2, TMECG
Abbreviations
MER- Medical Exam Report
FBS- Fasting Blood Sugar
RUA- Routine Urine Analysis
ECG- Electro Cardiology
TMECG Treadmill Electro Cardiogram
CBC- Complete Blood count
Note:
MER includes urinalysis
5. Confidential Report:
In this case, customer‘s Sum assured is 30,00,000 so according to confidential Report table Branch
Manager generate a report and attest that report and attach with application form.
CR countersignature limits are as follows:
Branch Manager Up to 50,00,000
67
6. KYC & AML Requirments:
In this case, customer‘s annual premium is 1,50,000, and he is a Businessman so premium coverage
risk is high.
AML – Risk Indicator Matrix – Annexure VIII
Risk
Indicator
Limits per
transactions or per
month or per year
Photograph Address
proof
ID Proof Income
Proof for
computed
annual
income
Accept cash
– Monthly
for limits
from
integrally
connected
customers
High Risk =/> 1,00,000 Mandated Mandated Mandated Mandated No
ID Proof Pan Card, Passport, Voters ID, Driving License, Adhar Card/UID
Address Proof
Voters ID, driving license, Passport, Electricity bill/telephone bill /mobile bill (6
months), Bank account statement (3 months), Credit card statement (3 month) ,
Mutual fund statement (3 month), Adhar Card / UID,
Income Proof His annual income is 18,00,000 so there will be ―financial questionnaire‖ evidence
are required for the financial evidence
68
Chapter – 7
Conclusions:
69
Conclusions
I. Underwriting helps insurance companies to minimize their risk to insure someone.
II. Underwriting include various factors like Documentation, Medical Requirments, Human life
value etc.
III. Underwriting process change time to time to improve company‘s Risk management.
IV. KYC documentation set by governing authorities.
V. AML documentation set by governing authorities.
70
Chapter – 8
Limitation of the project:
71
Limitation of the project:
The data available was taken from company‘s article ―Underwriting Guideline‖ which changes time to
time. None of data is available on company‘s website so all of this data were collected from within the
company.
Project completion was restricted to 45 days.
72
Chapter 9
Bibliography:
73
Bibliography:
All the data taken for completing this project are taken from an article “Underwriting Guideline vol.
III” of Reliance Life Insurance company Ltd. Which contain all the details of underwriting process of
Reliance Life Insurance Company Ltd.
All the figures related to life insurance sector have taken from “Life Insurance Council” as on 18
May 2013.
All the Financial Facts has taken from company‘s annual Report.
74
Chapter 10
Abbreviations
75
Abbreviations:
S. No. Abbreviations
1 AML Anti-money launderings
2 KYC Know Your Customer
3 LA Life Assured
4 SA Sum Assured
5 SAP Standard Age Proof
6 NSAP Non Standard Age Proof
7 MER Medical Exam Report
8 FBS Fasting Blood Sugar
9 RUA Routine Urine Analysis
10 ECG Electro Cardiology
11 TMECG Treadmill Electro Cardiogram
12 CBC Complete Blood count