INTRODUCTION OF LIFE INSURANCE

Insurance: An Introduction

Insurance business is related with securities of monetary value of assets. Every asset has a value

for its owner because its owner earns something by using it. This earning may be in monetary

terms or may not be. For example a factory owner or a cow owner can earn money by selling

their respective production. And a car owner gets facility of easy travelling, the car using cannot

return into monetary term. But if a car owner using his car as a taxi then he can earn in monetary

term.

Every asset has a fix time period in which only they can be productive. After end of their fixed

age they will get expire and they will not be productive. The owners of assets know about that

thing and therefore he arranges things by which he can earn after expiry of his current assets. But

there are chances that the assets can expire before their respective age. This can be happen by

accidents or any natural calamities. If assets expire before their life end time than it can be

inversely affect their owner and other persons also who are the beneficial of these assets.

Insurance is such a system by which the bad results of such type of accidents and natural

calamities can be reduced. Insurance is not securing the assets and also it cannot stop any kind of

natural calamities or accidents. It only can reduce the burden of loss on their owners and other

beneficially.

Logically the Insurance procedure is easy. The people who have the same type of risk are getting

together and decide among themselves that if any one member gets loss than the other entire

member will divide it equally. For example the all persons who transport goods by ship have the

risk related to marine like pirates and bad weather etc. But the persons who are the owner of

factories they are not having any risk from the marine but they are having different risk like fire

earthquake theft etc…

General definition:

In the words of John Magee, "Insurance is a plan by which large number of people associate and

transfer to the shoulders of all risks that attach to individuals."

Fundamental definition:

In the words of D.S. Hansell, "Insurance is accumulated contributions of all parties participating

in the scheme.”.

Why do you need Insurance cover?

Insurance will help provide protection to investors from certain or uncertain risks. Certain risk

includes events like death, retirement, pension, education, marriage, etc. Uncertain risk includes

events like theft.

A human life is also an income-generating asset. This asset also can be lost through unexpectedly

early death or made non-functional through sickness and disability caused by accident. Accident

may or may not happen. Death will happen, but the timing is uncertain. If it happens around the

time of retirement, when it could be expected that the income will normally cease or the person

could have made some other arrangement to meet the continuing needs. But if it happens much

earlier when the alternative arrangements are not in place, insurance is necessary to help those

dependent on income.

In case of a human being, he may have made arrangements for his need after his retirement.

These would have been made on the basis of some expectations like he may live for another 15

years or that his children will look after him. If any of these expectations would become

inadequate and there could be difficulties. Living too long can be as much a problem as dying

too young. These are risks, which need to be safeguard against thorough insurance.

HISTORY OF INSURANCE

Insurance business is started by marine business. All businessmen were gathered at

Llyod’s coffee house of London and decided that if their goods, which were transported

by ship, will damage, than all member will equally divide this loss. this loss can be

happen by many reasons like by pirates, bad weather etc…

The first insurance policy was issued in the year 1583 in England. In India an English

European company and Albert Company started the insurance business. These companies

were doing life insurance.

The Bombay mutual assurance society ltd was the first Indian insurance company, which

was established in 1870. Then in 1874 the oriental life assurance company, in 1896 the

bharat, in 1897 the empire of India came into existence.

In 1956 life insurance was nationalized and life insurance Corporation of India came into

existence. At that time 170 companies and 75 provident fund societies were running

business of life insurance in India.

Some of the important milestones in the life insurance business in India are

1912: the Indian life assurance company’s act enacted as the first statute to regulate the life

insurance business.

1928: the Indian insurance companies act to enable the government to collect statistical

information about both life & non-life insurance business.

1938: earlier legislation consolidation & amended to buy the insurance act with the objective of

protecting the interests of the insuring public.

1956: 245 Indians & foreign insurers and provident societies taken over by the central

government nationalized. LIC formed by the act of parliament viz. lic act, 1956 with a capital

contribution of Rs. 5 crore from the government of India.

Working Mechanism of Insurance

The mechanism of insurance is very simple. People who are exposed to the same risks

come together and agree that, if any one of them suffers a loss, the others will share the loss and

make good to the person who lost. All people who send goods by ship are exposed to the same

risks, which are related to water damage, ship sinding, piracy, etc, Those owning factories are

not exposed to these to these risks, but they are exposed to different kind of risks like, fire,

hailstorms, earthquakes, lighting, burglary, etc. Like this, different kinds of risks can be

identified and separate groups made, including those exposed to such risks. By this method, the

heavy loss that any one of them may suffer is divided into bearable small losses by all.

In other words, the risk is spread among the community and the likely big impact on one is

reduced to smaller manageable impact on all. There are certain principles, which make it

possible for insurance to remain a fair arrangement. The first is that it is difficult for any one

individual to bear the consequences of the risks that he is exposed to. It will become bearable

when the community shares the burden. The second is that the peril should occur in an accidental

manner. Nobody should be in position to make the risk happen. The occurrence has to be

random, accidental, and not the deliberate creation of the insured person.

Functioning of Insurance

Insurance cautions individuals and businessmen to adopt suitable device to prevent

unfortunate consequences of risk by observing safety instructions; installation of

automatic sparkler, etc. Prevention of losses causes lesser payment to the assured by the

insurer and this will encourage for more savings by way of premium.

Insurance is a device, which helps to change from uncertainty to certainty. Insurance is

device whereby the uncertain risks may be made more certain.

Insurance cannot check the happening of the risk, but can certainly provide for the losses

of risk. Insurance is actually a protection against economic loss, by sharing the risk with

others.

List of Life Insurance Companies operating in India and

Their foreign Partners

LIFE INSURANCE COMPANY FOREIGN PARTNERS

Life Insurance Corporation of India Public sector unit.

Bajaj Allianz Life Insurance Company Ltd. Allianz SE

HDFC Standard Life Insurance Company Ltd. The Standard Life Assurance Company,UK

ICICI Prudential Life Insurance Company Ltd.

Prudential plc,

ING Vysya Life Insurance Company Private Limited

----

Future Generali Life Insurance Generali Group, Italy

Birla Sun life ------

Max New York Life Insurance Company Limited

New York Life International

Met Life Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors

Kotak Mahindra Life Insurance Ltd. Old Mutual PLC.

SBI Life Insurance BNP Paribas Assurance

Tata AIG Life Insurance Company Ltd. American International Group, Inc.

Reliance Life Insurance Company Limited ---

Aviva Life Insurance Dabur

Bharti Axa Life Insurance Axa

Sahara Life Insurance Wholly Indian owned Pvt.Co.

Shriram Life Insurance Company Ltd. SUNLAM,South Africa

MARKET SHARE OF L.I.C AND PRIVATE PLAYERS

Market share New Business Premium January (FY08)

INSURERS MARKET SHARE (%)

ICICI Prudential 10.2

Bajaj Allianz 7.1

SBI Life 5.4

Reliance Life 3.4

HDFC Standard 3

Birla Sun life 1.7

Kotak Life 1.2

Tata AIG 1

Met life 1

Aviva 0.9

Max Newyork 0.9

ING Vysya 0.5

Bharti Axa Life 0.2

Sahara Life 0.2

Shriram Life 0.1

2001-02 2002-03 2003-04 2004-05 2005-06

LIC 98% 94% 87% 78% 71%

Private Players 2% 6% 13% 22% 29%

LIC 63.1

COMPANY OVERVIEW

Kotak Mahindra Group

The Kotak Mahindra Group, established in 1986, is one of India's leading financial

institutions. The group has a net worth of around Rs.20 billion and employs 6,000 people

in its various businesses. In 2005 the Kotak Mahindra Group realigned a joint venture in

Ford Credit; bought Kotak Mahindra Prime (formerly known as Kotak Mahindra Primus

limited), sold Ford Credit Kotak Mahindra and launched a real estate fund.

Kotak Mahindra offers financial solutions ranging from commercial banking to stock

broking, mutual funds, life insurance and investment banking. It is also involved in car

finance, securities and investment banking.

Kotak Mahindra has main offices in Mumbai and New Delhi and has a distribution

network of branches, franchisees, representative offices and satellite offices across 216

cities and towns in India. It also has offices in New York, London, Dubai and Mauritius.

The Kotak Mahindra Group was born as Kotak Capital Management Finance Limited.

Mr. Uday Kotak is the Executive Vice Chairman & Managing Director of the company.

This company was basically promoted by Uday Kotak, Sidney A. A. Pinto and Kotak &

Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and

that's when the company changed its name to Kotak Mahindra Finance Limited. At

present Mr.Uday Kotak is the Executive Vice Chairman & Managing Director of the

company. Since then it's been a steady and confident journey to growth and success.

SUCCESS LADDER OF KOTAK

Logo of Kotak…

The symbol of the infinite Ka reflects our global Indian personality; the ka is uniquely

Indian while its curve forms the infinity sign, which is universal. One of the basic tenets of

economists is that man’s needs are unlimited. The Infinite Ka symbolizes that we have

infinite number of ways to meet those needs.

KOTAK’S MISSION

We focus on the needs of our customers and create confidence, trust and loyalty by offering a

wide range of innovative insurance solutions.

Strengthened by our commitment to professional management, we ensure the continued growth

and advancement of our employees.

KOTAK’S VISION

Kotak Life Insurance has a deep rooted commitment to improve the quality of life of its

customers, employees and stakeholders. We aim at improving the long term value in our

relationship by continuous innovation and improvements. We do this by our three-prong effort

which strives to make Kotak Life Insurance a corporate with values.

Increase Customer Value

Kotak Life Insurance has gone to the heart of its customer's requirements and developed

products which are unique and serve the customer needs perfectly. We built a relationship of

mutual trust and benefit to serve the Indian customer. At Kotak Life Insurance the customer

always comes first.

Cohesive Work Environment

We form long-term partnership with our employees by offering them an invigorating work

experience. We not only demand loyalty, sincerity and values but also give it back in equal

measures. Kotak Life Insurance will like to offer its employees space to grow, innovate and build

a long-term career.

Work with Honour

Kotak Life Insurance delivers everyday services in the marketplace with the high sense of duty

and commitment. Our employees strive to build the long-term value for all those come in contact

with Kotak Life Insurance. Our consumers, distributors, employees, shareholders and the nation

have our commitment that we will uphold the values of trust, integrity and a Sense of Honour in

every thought, act and deed in order to positively contribute to individual, society and nation

growth.

Group Companies of Kotak

KOTAK MAHINDRA LIFE INSURANCE LTD.

KOTAK MAHINDRA BANK LTD.

KOTAK MAHINDRA CAPITAL COMPANY LTD.

KOTAK’S INTERNATIONAL BUSINESS

KOTAK MAHINDRA PRIME LTD.

KOTAK SECURITIES LTD.

KOTAK MAHINDRA ASSET MANAGEMENT COMPANY LTD.

Process Flow:

LIFE ADVISOR TAKE

YESNO

LA MARKETS

NOT AGREE TO TAKE POLICY

AGREE TO TAKE

LA TRIES TO SLOVE

DOUBT NOT

LA WILL COMPLETE ALL FORMALITY OF FORM AND

DOUBT CLEARED

AGENCTY/SALES MANAGER VERIFY IT AND MAKE HIS HER SIGNATURE

AUERIES

NO YES

PROCUDURE OF SUBNISSION OF FORM AND COLLECTION TO DEPARTMENT

MANAGER TRY TO SLOVE DOUBT

SOLVED NOT SOLVED

DEPOSITE RECEIPT IS GIVEN TO CLIENT AND PROCESS OF UNDERWRITING WILL

DECLARED AS STANDRD LIFE

NOT DECLARED AS STANDARD

ASK FOR EXTRA PREMIUM

ORGANIZATION STRUCTURE OF VAPI BRANCH

Branch Manager

Direct Unit of Sales Manager

Life Advisor

Area Sales Manager Direct Assistant Branch Manager

Sales Managers

Life Advisors

Operations Head Trainer Administrative Channel Marketing

KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE Ltd.

Kotak Mahindra Old Mutual Life Insurance Ltd. is a 74:26 joint venture between Kotak

Mahindra Bank ltd. (KMBL) and Old Mutual plc. At Kotak Life Insurance, the main aim is to

help customers take important financial decision at every stage in life by offering them a wide

range of innovative life insurance products, to make them financially independent.

Kotak Mahindra Old Mutual Life Insurance is one of the fastest growing insurance

companies in India and has shown remarkable growth since its inception in 2001.

Kotak Mahindra is one of India's leading financial institutions and offers a range of

financial services such as commercial banking, stock broking, mutual funds, life insurance, and

Operations Executive

investment banking.

Kotak Mahindra Old Mutual Life Insurance Ltd, a company offering Life Insurance

products, is one of India’s premier & growing insurance companies employing over 1000 people,

across various offices in India.

It’s main aim to achieve a balance between what people want as individuals and what the

organization expects of them.

The most talented people choose to join and stay with us because it offer opportunities like:

Deliver the best – working with the most talented colleagues.

Rapidly build skills, knowledge and experience.

Work in a challenging environment that constantly demands them to operate at the

edge of their ability.

Be recognized and rewarded for their achievement by accelerated career paths and

differentiated rewards.

Be a good corporate citizen.

OLD MUTUAL PLC.

Old Mutual Plc is a foreign partner of Kotak Life Insurance.

Old Mutual was established more than 150 years ago and has developed into an

International financial services group whose activities are focused on asset gathering and asset

management.

The Old Mutual Group offers a diverse range of financial services in three principal

geographies: South Africa, the United States and the United Kingdom. The company is listed on

the London Stock Exchange with a market capitalization of approximately $6 billion. In the 2003

rankings of the World's 500 largest corporations by Fortune magazine, Old Mutual climbed 87

places to position number 366 and was also listed as the 14th largest insurance company in the

world.

Old Mutual provides services in life insurance, asset management, banking and general

insurance operations. The company serves 4 million life insurance policyholders and employs

over 13000 South Africans in its local operations. It is a world-class international financial

services company with the Business spread -US –57%, Europe – 22%, SA – 18%, others – 3%

In the USA, Old Mutual is one of the top ten fixed annuity businesses offering an array of

specialist asset management skills through its 23 asset management businesses. The company’s

US Life business recorded sales of $4 billion at the end of 2002.

The Old Mutual Group has the ability to cater for a variety of consumer segments and

offers a comprehensive and innovative range of products for all income groups.

With this partnership Kotak life Insurance gains Domain Knowledge, better technology,

product Innovation, Global Perspective and Better Multi-channel Management.

For customers, this joint venture translates into a company that combines international

expertise with the understanding of the local market.

KMOM – The Partnership

KOTAK MAHINDRA BANK

OLD MUTUAL PLC.

Key People of Kotak Life Insurance

Progress and Success of Kotak Life Insurance

Mar ‘06 Mar ’ 07 Mar ‘ 08

Direct Presence (Cities)

31 51 90

Branch Network 46 82 140

Life Advisor Force 12000 25000 38000

TYPE OF LIFE INSURANCE

Managing Director of Kotak Mahindra Life Insurance.

Gaurang Shah

Chief Financial Officer and Company Secretary of Kotak Life Insurance

G. Murlidhar

Vice President -Sales and Development

Shekhar Bhandari

TERM INSURANCE

This type of insurance provides coverage gains death without any survival benefits. In

other words it does not have any investment components. The premium is therefore lower for

such policies.

a) Level term:-

The sum assured remains fixed throughout the tenure of the policy.

b) Decreasing term:-

The sum assured decreases over the term of the policy. These policies are usually used to

cover the loan amount on a house loan can be paid off.

c) Increasing term:-

The sum assured increases over the term of the policy and these policies are useful to meet the needs of dependants taking into account inflation.

d) Variable term:-

The sum assured varies over the term of the policy. This type of policy is useful for covering credit card balances in case of the death of the individual.

WHOLE LIFE INSURANCE

Whole life policies are policies that extend up to the life of the individual or 80-100 years

depending upon the insurer. The advantage of this policy is that they provide coverage in later

years when insurer would be hesitant to take out fresh policies on the life of the individual.

ENDOWMENT INSURANCE

Endowment policies have a maturity date. On survival of the insured till the maturity

date, the sum assured is paid out. On death before maturity, the sum assured is paid out of the

nominees.

INVESTMENT LINKED INSURANCE

These policies provide a combination of investment and insurance. The premiums(less

sales charges) are invested in fund units. Some units may then be sold to pay for mortality

charges and other expenses. The premium can be increased at the option of the insured to

increase the investment portion. Similarly, the insured can withdraw amount based on the bid

price of the units which were purchased.

ANNUITIES

An annuity is a stream of regular, constant cash flows for a period. An annuity needs to be

purchased by paying premium as a lump-sum or over a period. The annuitants usually utilize the

annuity for their retirement needs.

Some of the types of annuities are:-

a) Single premium immediate annuity: By payment of a single premium, the annuity

commences immediately.

b) Term certain annuity: It provides regular payments for a specific period.

c) Guaranteed annuity: It provides regular payments for a long period as the annuitant is

alive or a pre-determined period, whichever is later.

d) Reversionary annuity: A payment starts on the death of another person.

e) Joint life annuity: It covers more than one annuitant and the payment stop when either

of the annuitants dies.

f) Joint-life and survivor annuity: It covers more than one annuitant and regular payments

will stop only if both annuitants die.

PRODUCT & OFFERINGS OF KOTAK LIFE INSURANCE

Life Insurance

Kotak Loan Protection Plan

Kotak Retirement Income Plan-Unit Linked ,with and without cover

Kotak Flexi Plan

Kotak Premium Return Plan

Kotak Easy Growth Plan

Kotak Safe Investment Plan

Kotak Capital Multiplier Plan

Kotak Retirement Income Plan

Kotak Term Plan

Kotak Preferred Term Plan-Regular and Single Premium

Kotak Child Advantage Plan

Kotak Endowment Plan

Kotak Money Back Plan

Garmin Bima Yojna

Kotak Term Group Plan

Kotak Credit Term Group Plan

Kotak Gratuity Group Plan

Kotak Superannuation Group Plan

Value Added Services- Critical Illness Rider, Accident Death Rider, Permanent

Disability Rider, Term Rider, Preferred Term Rider, Guardian Rider, Accidental

Disability Ride

KOTAK LIFE INSURANCE

Vapi Branch Profile

In Vapi, Kotak Life Insurance branch office is situated near by VIA hall at Vapi char rasta

which is the heart of the city. Since it is situated in the centre of the city, anyone can easily

approach to the office.

DEPARTMENTAL STUDY

There are three departments in Vapi branch of Kotak:-

Operations Department

Administration Department

Sales and Distribution Department

Operation Department

In Vapi Branch, Operations are handled by Pramod nair and Rachna agrawal.

Responsibilities:

This department takes care of receipts and payments of cash and cheques. All the

preliminary underwriting of policies is done here. Sales managers after filling up policy forms

give forms here for close scrutiny so that if any information is wrongly filled up or missing out

can be rectified. After scrutiny, policy forms are sent to Head office which is situated in Mumbai

for final underwriting and issuance of policy.

Any complaints regarding policies and if any customers do not get its policy on time, all such

matters are resolved here.

Administration Department:-

In Vapi Branch, Administration Department is handled by Swapna Joshi.

Responsibilities:

This department takes care of customers. It also acts like a reception department. All the

phone calls, queries are handled here. Dispatches of policy forms to the head office and to the

customers are done here. Attendance of the office staff is also maintained here.

Sales and Distribution Department:

Under sales and distribution, numerous sales manager works for the selling and

distribution of insurance products, Around 20 sales manager work in Kotak Branch. Mr.nirav

Shah is the Branch manager who is responsible for the efficient functioning of the branch and to

motivate the sales manager and life advisors to work in effective way. Under every sales

manager various life advisor works.

A sales manager has to meet up its targets of login up of policies and recruitment of

advisors. The more efficiently the sales manager works the more he get rewards and recognition

by the company. Every sales manager has to take care of the needs of the customers and also of

life advisors. His main task is to train the life advisor and motivate him so that he can bring

business to the company. Life advisor’s growth is the growth of the sales manager.