project pradeep sen

8/3/2019 Project Pradeep Sen

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SUBMITTED BY

MR. PRADEEP SEN

PCL 1

(2010-2011)

Acknowledgements

The project is a golden opportunity for learning and self development. I

consider myself very lucky and honored to have so many wonderful people lead me

through in completion of this project.

My grateful thanks to DhruvDubey, Area Manager ,LIC.who in spite

of being extraordinarily busy with his duties, took time out to hear, guide and keep me on

the correct path. I do not know where I would have been without her/him. A humble

Thank you Sir.


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Ms. Manoj Bhadale, Manager Training, BHARI AXA LIFE

INSURANCE. Monitored my progress and arranged all facilities to make life easier. I

choose this moment to acknowledge his contribution gratefully.

History of insurance in India

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ),Yagnavalkya (Dharmasastra) and Kautilya ( Arthasastra). The writings talk in terms of pooling ofresources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. Thiswas probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest tracesof insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved overtime heavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the Oriental LifeInsurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable hadbegun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the BritishInsurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental(1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, wasdominated by foreign insurance offices which did good business in India, namely Albert Life Assurance,Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard

competition from the foreign companies.

In 1914, the Government of India started publishing returns of Insurance Companies in India. The IndianLife Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, theIndian Insurance Companies Act was enacted to enable the Government to collect statistical informationabout both life and non-life business transacted in India by Indian and foreign insurers including provident

insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlierlegislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions foreffective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a largenumber of insurance companies and the level of competition was high. There were also allegations of unfairtrade practices. The Government of India, therefore, decided to nationalize insurance business.

An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and LifeInsurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indianinsurers as also 75 provident societies245 Indian and foreign insurers in all. The LIC had monopoly tillthe late 90s when the Insurance sector was reopened to the private sector.

The history of general insurancedates back to the Industrial Revolution in the west and the consequent

growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of Britishoccupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd.,in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. Thiswas the first company to transact all classes of general insurance business. 1957 saw the formation of the

General Insurance Council, a wing of the Insurance Associaton of India. The General Insurance Councilframed a code of conduct for ensuring fair conduct and sound business practices.


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The History of Insurance Worldwide:

The roots of insurance might be traced to Babylonia, where traders were encouraged to assumethe risks of the caravan trade through loans that were repaid (with interest) only after the goodshad arrived safelya practice resembling bottomry and given legal force in the Code of

Hammurabi (c.2100 B.C.). The Phoenicians and the Greeks applied a similar system to theirseaborne commerce. The Romans used burial clubs as a form of life insurance, providing funeralexpenses for members and later payments to the survivors. With the growth of towns and trade inEurope, the medieval guilds undertook to protecttheir members from loss by fire and shipwreck, to ransom them from captivity by pirates, and toprovide decent burial and support in sickness and poverty. By the middle of the 14

thcent., as

evidenced by the earliest known insurance contract (Genoa, 1347), marine insurance was

practically universal among the maritime nations of Europe. In London,Lloyd's Coffee House (1688) was a place where merchants, ship-owners, and underwriters met totransact business. By the end of the 18th cent. Lloyd's had progressed into one of the first moderninsurance companies. In 1693 the astronomer Edmond Halley constructed thefirst mortality table, based on the statistical laws of mortality and compound interest. The table,corrected (1756) by Joseph Dodson, made it possible to scale the premium rate to age; previouslythe rate had been the same for all ages. Insurance developed rapidly with the growth of British

commerce in the 17th and 18th cent. Prior to the formation of corporations devoted solely to thebusiness of writing insurance, policies were signed by a number of individuals, each of whomwrote his name and the amount of risk he was assuming underneath the insurance proposal,hence the termunderwriter. The first stock companies to engage in insurance were chartered in England in 1720,and in 1735, the f irst insurance company in the American colonies was founded at Charleston,S.C. Fire insurance corporations were formed in New York City (1787) and in Philadelphia (1794).The Presbyterian Synod of Philadelphia sponsored (1759) the first life insurance corporation inAmerica, for the benefit of Presbyterian ministers and their dependents. After 1840, with thedecline of religious prejudice against the practice, life insurance entered a boom period. In the1830s the practice of classifying risks was begun.

The New York fire of 1835 called attention to the need for adequate reserves to meetunexpectedly large losses; Massachusetts was the first state to require companies by law (1837)

to maintain such reserves. The great Chicago fire (1871) emphasized the costly nature of fires instructurally dense modern cities. Reinsurance, whereby losses are distributed among manycompanies, was devised to meet such situations and is now common in other lines of insurance.

The Workmens Compensation Act of 1897 in Britain required employers to insure theiremployees against industrial accidents. Public liabilityInsurance, fostered by legislation, made its appearance in the 1880s; it attained major importancewith the advent of the automobile.


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Principles

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

an insurable risk. Insurance 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 share 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 whichpredicted 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


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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, couldobjectively 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 thecapital 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, it is not likely that the insurance will be purchased, even if on offer. Further,

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 significantloss to the insurer. If there is no such chance of loss, 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.

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. Insurable interest the insured typically must directly suffer from the loss. Insurable


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of a contract, called an insurance policy. Generally, an insurance contract includes, at a

minimum, the following elements: identification of participating parties (the insurer, the

insured, the beneficiaries), the premium, the period of coverage, the particular loss event

covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in

the event of a loss), and exclusions (events not covered). An insured is thus said to be"indemnified" against the loss covered in the policy.

When insured parties experience a loss for a specified peril, the coverage entitles the

policyholder to make a claim against the insurer for the covered amount of loss as specified

by the policy. The fee paid by the insured to the insurer for assuming the risk is called the

premium. Insurance premiums from many insureds are used to fund accounts reserved for

later payment of claims in theory for a relatively few claimants and for overhead costs.

So long as an insurer maintains adequate funds set aside for anticipated losses (called

reserves), the remaining margin is an insurer's profit.

Effects

Insurance can have various effects on society through the way that it changes who bears the

cost of losses and damage. On one hand it can increase fraud, on the other it can help

societies and individuals prepare for catastrophes and mitigate the effects of catastrophes on

both households and societies.

Insurance can influence the probability of losses through moral hazard, insurance fraud, and

preventive steps by the insurance company. Insurance scholars have typically used morale

hazard to refer to the increased loss due to unintentional carelessness and moral hazard to

refer to increased risk due to intentional carelessness or indifference. Insurers attempt to

address carelessness through inspections, policy provisions requiring certain types of

maintenance, and possible discounts for loss mitigation efforts. While in theory insurers

could encourage investment in loss reduction, some commentators have argued that in

practice insurers had historically not aggressively pursued loss control measures - particularly

to prevent disaster losses such as hurricanes - because of concerns over rate reductions and

legal battles. However, since about 1996 insurers began to take a more active role in loss

mitigation, such as through building codes.

Insurers' business model

Underwriting and investing

The business model is to collect more in premium and investment income than is paid out in

losses, and to also offer a competitive price which consumers will accept. Profit can be

reduced to a simple equation: Profit = earned premium + investment income - incurred loss -

underwriting expenses.


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Insurers make money in two ways:

1. Through underwriting, the process by which insurers select the risks to insure and

decide how much in premiums to charge for accepting those risks;

2. By investing the premiums they collect from insured parties.

The most complicated aspect of the insurance business is the actuarial science of ratemaking

(price-setting) of policies, which uses statistics and probability to approximate the rate of

future claims based on a given risk. After producing rates, the insurer will use discretion to

reject or accept risks through the underwriting process.

At the most basic level, initial ratemaking involves looking at the frequency and severity of

insured perils and the expected average payout resulting from these perils. Thereafter an

insurance company will collect historical loss data, bring the loss data to present value, and

compare these prior losses to the premium collected in order to assess rate adequacy. Loss

ratios and expense loads are also used. Rating for different risk characteristics involves at the

most basic level comparing the losses with "loss relativities" - a policy with twice as many

losses would therefore be charged twice as much. More complex multivariate analyses are

sometimes used when multiple characteristics are involved and a univariate analysis could

produce confounded results. Other statistical methods may be used in assessing the

probability of future losses.

Upon termination of a given policy, the amount of premium collected and the investment

gains thereon, minus the amount paid out in claims, is the insurer'sunderwriting profit on that

policy. Underwriting performance is measured by something called the "combined

ratio" which is the ratio of expenses/losses to premiums. A combined ratio of less than 100

percent indicates an underwriting profit, while anything over 100 indicates an underwriting

loss. A company with a combined ratio over 100% may nevertheless remain profitable due to

investment earnings.

Insurance companies earn investment profits on "float". Float, or available reserve, is the

amount of money on hand at any given moment that an insurer has collected in insurance

premiums but has not paid out in claims. Insurers start investing insurance premiums as soon

as they are collected and continue to earn interest or other income on them until claims are

paid out. The Association of British Insurers (gathering 400 insurance companies and 94% ofUK insurance services) has almost 20% of the investments in the London Stock Exchange.

In the United States, the underwriting loss of property and casualty insurance companies was

$142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4

billion, as the result of float. Some insurance industry insiders, most notably Hank

Greenberg, do not believe that it is forever possible to sustain a profit from float without an


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underwriting profit as well, but this opinion is not universally held.

Naturally, the float method is difficult to carry out in an economically depressed period. Bear

markets do cause insurers to shift away from investments and to toughen up their

underwriting standards, so a poor economy generally means high insurance premiums. This

tendency to swing between profitable and unprofitable periods over time is commonly knownas the underwriting, or insurance, cycle.

Claims

Claims and loss handling is the materialized utility of insurance; it is the actual "product"

paid for. Claims may be filed by insureds directly with the insurer or through brokers or

agents. The insurer may require that the claim be filed on its own proprietary forms, or may

accept claims on a standard industry form, such as those produced by ACORD.

Insurance company claims departments employ a large number of claims adjusters supported

by a staff of records management and data entry clerks. Incoming claims are classified basedon severity and are assigned to adjusters whose settlement authority varies with their

knowledge and experience. The adjuster undertakes an investigation of each claim, usually in

close cooperation with the insured, determines if coverage is available under the terms of the

insurance contract, and if so, the reasonable monetary value of the claim, and authorizes

payment.

The policyholder may hire their own public adjuster to negotiate the settlement with the

insurance company on their behalf. For policies that are complicated, where claims may be

complex, the insured may take out a separate insurance policy add on, called loss recovery

insurance, which covers the cost of a public adjuster in the case of a claim.

Adjusting liability insurance claims is particularly difficult because there is a third party

involved, the plaintiff, who is under no contractual obligation to cooperate with the insurer

and may in fact regard the insurer as a deep pocket. The adjuster must obtain legal counsel

for the insured (either inside "house" counsel or outside "panel" counsel), monitor litigation

that may take years to complete, and appear in person or over the telephone with settlement

authority at a mandatory settlement conference when requested by the judge.

If a claims adjuster suspects under-insurance, the condition of average may come into play to

limit the insurance company's exposure.

In managing the claims handling function, insurers seek to balance the elements of customer

satisfaction, administrative handling expenses, and claims overpayment leakages. As part of

this balancing act, fraudulent insurance practices are a major business risk that must be

managed and overcome. Disputes between insurers and insureds over the validity of claims or

claims handling practices occasionally escalate into litigation (see insurance bad faith).


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Marketing

Insurers will often use insurance agents to initially market or underwrite their customers.

Agents can be captive, meaning they write only for one company, or independent, meaning

that they can issue policies from several companies. Commissions to agents represent a

significant portion of an insurance cost and insurers that sell policies directly via mass

marketing campaigns can offer lower prices. The existence and success of companies using

insurance agents (with higher prices) is likely due to improved and personalized service

Acrosstheworld

Global insurance premiums grew by 2.7% in inflation-adjusted terms in 2010 to $4.3 trillion,

climbing abovepre-crisis levels. The return to growth and record premiums generated during

the year followed two years of decline in real terms. Life insurance premiums increased by

3.2% in 2010 and non-life premiums by 2.1%. While industrialised countries saw an increase

in premiums of around 1.4%, insurance markets in emerging economies saw rapid expansion

with 11% growth in premium income. The global insurance industry was sufficiently

capitalised to withstand the financial crisis of 2008 and 2009 and most insurance companies

restored their capital to pre-crisis levels by the end of 2010. With the continuation of the

gradual recovery of the global economy, it is likely the insurance industry will continue to see

growth in premium income both in industrialised countries and emerging markets in 2011.

Advanced economies account for the bulk of global insurance. With premium income of

$1,620bn, Europe was the most important region in 2010, followed by North America

$1,409bn and Asia $1,161bn. Europe has however seen a decline in premium income during

the year in contrast to the growth seen in North America and Asia. The top four countries

generated more than a half of premiums. The US and Japan alone accounted for 40% of

world insurance, much higher than their 7% share of the global population. Emerging

economies accounted forover 85% of the worlds population but only around 15% of

premiums. Their markets are however growing at a quicker pace.

TYPES OF INSURANCE

Insurance can be termed as a form of risk management which is mainly used to protect anindividual against the risk of prospective financial loss, if any. Insurance can be used as a toolto shield an individual against potential risks like travel accidents, death, unemployment,


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theft, property destruction by natural calamities, fire mishaps etc.

Different types of insurance is used to cover different properties and assets such as vehicles,home, health care etc. Basically, an insurance policy can also be known as a protection net

which secures you from any financial losses in future.All you have to do is pay the insurance agencies a specified amount every month, known as

premium, so that they can take care of you by providing you financial back up in case of asudden health emergency or a fatal incident.

There are two ways for getting an insurance done.

One way is to visit an agent and consult him for the best option you can avail for yoursituation. And then, trust him/her for their suggestion on the type of insurance they feel isright for you.

The other way is to research and choose on your own, the type of insurance which will bebest suited for your situation. You should research the market as well as the net, to look forthe best insurance companies, and furthermore, the most suitable type of insurance that theyoffer.Also explore the various types of policies which are available to you in the market, and thencompare to decide which one to choose finally.

TheLoanBazaar.com offer our clients with various types of insurance schemes and policiessuch as health insurance, travel insurance, life insurance etc, to name a few. The detail aboutall these types of insurance offered by us is as follows:

Health Care Insurance

With such high medical and health care costs these days, its hard to even think about visitinga doctor. But what about an unexpected mishap or an unforeseen disability or attack, where

the potential medical bills could shoot up to a sky?W

here would you get so much moneyfrom?These are exactly the situations where you feel you had a security, something which couldcome to your rescue and save you from such financial crisis.While some companies do

provide its employees with health insurance, for others, this is a must.Especially for the aging couples, who have a comparatively more chances of needingemergency bill money. The health insurance does it all, so that they do not have to worry forthe huge payments at the last minute.A health insurance can cover all from a routine immunization to a major illness.


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Life Insurance

Loss of a family member is a catastrophe which glooms a familys life. But even more tragicis the death of a sole bread earner for the family, who then has to go through the pain of

losing their loved one, as well as the financial loss putting their survival in jeopardy.This financial hardship due to a sudden death of a family member or a disability resulting to aloss of job or inability to work can be avoided to a great extent by taking up a life insurance

policy.A Life insurance or disability insurance covers such losses and pays a family, compensationto restore the earnings lost by them due to a sudden death or disability.

The monthly premiums for a life insurance are generally based upon the age, health, andoccupation information of the applicant, in addition to the total benefits to be paid to him forhis policy.

Home Insurance

Real estate property and hard assets are subject to accidental risks like theft, destruction dueto natural disasters or fire accidents etc. with such huge investments gone into buying a realestate property like your home or office, the risk involved is a loss of large amount ofmoney.

Home and property insurance helps you in managing and protecting against these risks. Thecost of a real estate property and its insurance is mostly based upon the worth of the alreadyinsured hard assets and also the location in which the assets are situated.

Travel Insurance

This is intended to cover any of the financial or any other losses which were incurred by theinsured while traveling, be it nationally or internationally, such as mountain trekkers, cruisetravelers etc.

Auto Insurance

Any vehicle on road, no matter how safe its driver is, is bound to meet with an accident ortwo, which may leave it with just a few scratches, or crash it up totally. Most countries todayrequire you to have an auto insurance while on road in your vehicles.

If you have an accidental car crash, a total repair could cost you a fortune. On the other hand,

a little scratch on your Land Cruiser might also soar up your bills to a high.Whether or not you need an auto insurance mostly depends on the type of car you own.

If you have an expensive car and a little repair could wipe you out financially, you shouldvery well go in for a buying an all-inclusive and crash insurance which could protect youagainst any and every harm done to your vehicle.


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**Classification of Insurance

Classify in 3 different Types:-

1. Life Insurance. cover Life2. General Insurance.- Accidental , mediclaims etc comes under this .

3. Reinsurance For risk Company has to do this to safeguard there position.

Products i am taking two company LIC and BHARTI AXA life.

AND


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Bharti AXA life

INDIVIDUAL PLANS

Protectyour loved onesagainst financial contingenciesatnominal costs

You love your family and feel responsible towards them in every way. But life can be

uncertain and unforeseen contingencies can meet you anytime. At such times, life insurance

comes to your rescue. As someone who wants only the best for their family, we understand

your need to safeguard your family against any crisis. Our protection plans offer you high life

cover at nominal costs so that you can fulfill your responsibility with ease and your family

never has to face financial constraints.

y Bharti AXA Life Elite Secure- Pure Life Insurance cover at very competitive premiums.Option to cover your life till 75 years with a unique to age 75 years term

y Bharti AXA Life SecureConfident -A simple Life Insurance product .Option to enhanceprotection with the addition of Riders

y Bharti AXA Life Family Income Secure - Guaranteed Annual Income for your family in caseof any eventuality 100% return of premium at maturity

y Bharti AXA Life Protect Plus -Financial Protection for your family. Guaranteed Cash Backon maturity

y Bharti AXA Life Premium Waiver Rider- 100% of all future premiums under the base policyare waived and paid by the Company on death of the life insured under the rider.

*Wealth Creationwith Protection

Ensure your family's security as you maximise your savings

You can make your money work harder with our Wealth Creation with Protection plans.

These plans come with the double advantage of:

Complete peace of mind as your family is financially protected and

Good investment option that ensures long-term financial goals are met


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Whether it is a bigger home, a dream vacation or even a comfortable future, these life

insurance plans are the best solutions along with the surety of financial protection. Our life

insurance coverage plans include 'traditional' plans that give guaranteed money on maturity.

While, we also offer market-linked plans that give you the benefit of good market

performance to maximise your savings.

Bharti AXA Life Child Plans - As a responsible parent you will never want to make anycompromises when it comes to your child. Wouldnt it be nice if you have a trusted friendwho takes care of all the finances for your child's growing dreams? Child plans, with a lifeinsurance company like ours, have been created to help you provide the best for your child'skey stages and help him secure a bright future.

y Bharti AXA Life Bright Stars EDGE - Double Protection Benefits for your loved ones - Sumassured Plus Fund value is paid in case something unfortunate were to happen to you

y Bharti AXA Life Future Champs -At crucial milestones of your childs life get assuredmoney-back through Guaranteed Pay Back Benefits amounting to 109% of promised SumAssured.Your childs future is secure incase of unfortunate death as future GuaranteedPayouts will be paid to the nominee

y

Bharti AXA Life Power Kid Insurance Plan -Flexibility to choose life insurance benefit.Provision of Education Allowance .Career Development Allowance. Future premiumpayments in case of death of the life

Bharti AXA Life Guaranteed Plans-

Maximiseyour gains fromthemarketwithoutthe fear of loss ofyourmoneyAt Bharti AXA Life we care for you and your hard-earned money. Thats why we present the

'Guarantee Plans'- an innovative way of protecting your investment and maximising your

gain from the market without losing any of your money. Our plans include an in-built

guarantee feature that ensures the minimum value of your investments remain intact. You cantherefore enjoy market ups but dont have to worry about market lows

Bharti AXA Life Save Confident -Premium payment for 12 years, while you can enjoybenefits for 15 years .Regular money back with guaranteed annual payments

y Bharti AXA Life TrueWealth- Double Guarantee: Highest daily NAV achieved during theTracking Period of the TrueWealth Fund is payable at maturity subject to a minimum

NAV Guarantee of Rs 12!!Bharti AXA Life Aajeevan Anand -Get guaranteed regular payouts of 25% of Sum Assuredevery 5 years, starting from the end of 10 thyear until you reach the age of 100 yearsLife Insurance cover until the age of 100 years

y Bharti AXA Life Monthly Income Plan -Guaranteed monthly income that helps fulfill yourloved ones desires while protecting them in case of an unfortunate event

Health


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y Bharti AXA Life Premier Protect Home Shield

HealthBharti AXA Life health plan helps you financially secure yourself against 6 critical illnesses

namely, cancer, heart attack, coronary artery by-pass surgery, kidney failure, stroke and lossof limbs.

y Bharti AXA Life Swasthya Sanjeevani

NAVS of funds from Bhart AXA life.

Fund SFIN FundUnit Price

(Rs.)

ULIF00919/05/2009BBUILDNPS1130 Build n Protect Fund SeriesOne

10.3556

ULIF02104/10/2010BTUREWLTHG130 TrueWealth Fund 8.9683

ULIF00708/12/2008EGROWTHOPR130 Growth Opportunities Fund 16.7601

ULIF00321/08/2006DSTDYMOENY130 Steady money Fund 14.4475

ULIF01107/12/2009LSAFEMONYP130 Safe Money Pension Fund 11.4555

ULIF00121/08/2006BSAVENGROW130 Savengrow money Fund 14.397

ULIF01007/07/2009LSAFEMONEY130 Safe Money Fund 11.4526

ULIF00814/12/2008EGRWTHOPRP130Growth OpportunitiesPension Fund

15.8816

ULIF00426/12/2007BSNGROWPEN130Save n Grow MoneyPension Fund

11.5323

ULIF00221/08/2006EGROWMONEY130 Grow money Fund 13.961

ULIF00626/12/2007DSTDYMONYP130 Steady Money Pension Fund 12.8346

ULIF01501/01/2010EGRMONYPLP130Grow Money Pension PlusFund

9.1974

ULIF01801/01/2010EGRWTHOPLP130Growth OpportunitiesPension Plus Fund

9.3758

ULIF01909/02/2010EBUILDINDA130 Build India Fund 8.4721

ULIF01704/01/2010EBUILDINDP130 Build India Pension Fund 7.8616

ULIF01214/12/2009EGROMONYPL130 Grow Money Plus Fund 9.2775


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ULIF01614/12/2009EGRWTHOPPL130Growth Opportunities PlusFund

9.0624

ULIF00526/12/2007EGROWMONYP130 Grow Money Pension Fund 7.8133

LIC

Products are mainly divided in 5 categories :-1. Insuarance Plans.

2. Pension Plans.3. Unit plans.

4. Special Plans.5.Withdrawn Plans.

*Insurance Plans

1. Jeevan Arogya

Introductions :Health has been a major concern on everybodys mind, including yours. In

these days of skyrocketing medical expenses, when a family member is ill, it is a traumatictime for the rest of the family. As a caring person, you do not want to let any unfortunate

incident to affect your plans for you and your family. So why let any medical emergencies

shatter your peace of mind.

LIC has launched LICs Jeevan Arogya, a unique non-linked Health Insurance plan which

provides health insurance cover against certain specified health risks and provides you with

timely support in case of medical emergencies and helps you and your family remain

financially independent in difficult times.

LICs Jeevan Arogya gives you:

Valuable financial protection in case of hospitalisation, surgery etc

Increasing Health cover every year

Lump sum benefit irrespective of actual medical costs

No claim benefit

Flexible benefit limit to choose from


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Flexible premium payment option

2. Endowment Plus

IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNEBY THE POLICYHOLDER

This is a unit linked Endowment plan which offers investment cum insurance cover during

the term of the policy. You can choose the level of insurance cover within the limits, which

will depend on the mode and level of premium you agree to pay. You have a choice of

investing your premiums in one of the four types of investment funds available. Premiums

paid after deduction of allocation charge will purchase units of the Fund type chosen. The

Unit Fund is subject to various charges and value of units may increase or decrease,

depending on the Net Asset Value (NAV).

Payment of Premiums: You may pay premiums regularly at yearly, half-yearly, quarterly ormonthly (through ECS mode only) intervals over the term of the policy. Alternatively, a

Single premium can be paid.

A grace period of 30 days will be allowed for payment of yearly or half-yearly or quarterly

premiums and 15 days for monthly (through ECS) premiums.

Eligibility Conditions And Other Restrictions:

(a) Minimum Age at entry - 7 (age last birthday)

(b) Maximum Age at entry - 60 years (age nearer birthday)

(c) Minimum Maturity Age - 18 years (completed)

(d) Maximum Maturity Age - 70 years (age nearer birthday)

(e) Policy Term - 10 to 20 years

(f) Minimum Premium -

Regular premium (other than monthly (ECS) mode): Rs. [20,000] p.a.

Regular premium (for monthly (ECS) mode): Rs. [1,750] p.m.

Single premium: Rs. [30,000]

(g) Maximum Premium -

Regular premium: Rs. [1,00,000] p.a.

Single premium: No Limit

(h) Sum Assured under the Basic Plan -


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Minimum Sum Assured:

Regular Premium policies: (Policy Term +1) times the annualized premium

Single Premium:

For age at entry of below 45 years: 1.25 times of the single premium

For age at entry of 45 years and above: 1.10 times of the single premium

Maximum Sum Assured:

Regular Premium policies:

30 times of the annualized premium if age at entry is upto 45 years

25 times of the annualized premium if age at entry is 46 to 60 years

Single Premium Policies:

If Critical Illness Benefit Rider is opted for:

5 times the Single premium if age at maturity is upto 55 years.

3 times the Single premium if age at maturity is 56 to 60 years.

If Critical Illness Benefit Rider is not opted for:

5 times the Single premium if age at maturity is upto 65 years.

3 times the Single premium if age at maturity is 66 to 70 years.

Where the minimum Sum Assured is not in the multiples of Rs. 5,000, it will be rounded off

to the next multiple of Rs. 5,000. Annualized Premiums shall be payable in multiple of Rs.

1,000 for other than ECS monthly. For monthly (ECS), the premium shall in multiples of Rs.

250/-.

3. Jeevan Anurag

LICs Jeevan ANURAG is a with profits plan specifically designed to take care of the

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

Benefits under the plan are payable at prespecified durations irrespective of whether the Life

Assured survives to the end of the policy term or dies during the term of the policy. In

addition, this plan also provides for an immediate payment of Basic Sum Assured amount on

death of the Life Assured during the term of the policy.

Assured Benefit

Payment of 20% of the Basic Sum Assured at the start of every year during last 3 policy years

before maturity. At maturity, 40% of the Basic Sum Assured along with reversionary bonuses

declared from time to time on full Sum Assured for the full term and the Terminal bonus, if


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any shall be payable. For example, if term of the policy is 20 years, 20% of the Sum assured

will be payable at the end of the 17th,18th, 19th year and 40% of the Sum Assured along with

the reversionary bonuses and the terminal bonus, if any, at the end of the 20th year.

Death Benefit

Payment of an amount equal to Sum Assured under the basic plan immediately on the deathof the life assured.

4. Komal Jeevan

Product summary:

This is a Children's Money Back Plan that provides financial protection against death during

the term of plan with periodic payments on survival at specified durations. This plan can bepurchased by any of the parent or grand parent for a child aged 0 to 10 years.

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, 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 theGuaranteed 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.

Loyalty Additions:

This is a with-profit plan and participates in the profits of the Corporations life insurance

business. It gets a share of the profits in the form of loyalty additions which are terminal

bonuses payable along with death or maturity benefit. Loyalty addition may be payable

depending on the experience of the Corporation

5. Marriage Endowment Or Educational Annuity Plan


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Product summary:

This is an Endowment Assurance plan that provides for benefits on or from the selected

maturity date to meet the Marriage/Educational expenses of the named child.

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:


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.

***Various Famous schemes are coming time to time from the LIC for different categories :-

1.The Endowment Assurance Policy

Moderate Premiums

High bonus

High liquidity

Savings oriented.

This policy not only makes provisions for the family of the Life Assured in event of his early

death but also assures a lump sum at a desired age. The lump sum can be reinvested to

provide an annuity during the remainder of his life or in any other way considered suitable at

that time.

Premiums are usually payable for the selected term of years or until death if it occurs during

the term period.

Suitable For:

Being an endowment assurance policy, this plan is apt for people of of all ages and social

groups who wish to protect their families from a financial setback that may occur owing to

their demise.


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The amount assured if not paid by reason of his death earlier will payable at the end of the

endowment term where it can be invested in an annuity provision for the rest of the

policyholder's life or in any other way he may think most suitable at that time.

Disability Benefit:

In case policy holder becomes totally and permanently disabled due to an accident beforereaching the age of 70 and the policy is in full force, he will not be required to pay further

premiums, (the Disability Benefit is available in respect of the first Rs.20,000 sum assured on

any one life) and the policy will continue to be in force.

Accident Benefit:

By paying a small extra premium of Rs.1 per Rs.1000/- sum assured per year he or his family

are entitled to the following benefits on death or permanent disability caused by accident.

Even students above the age of 18 years can avail of this benefit.

Premium Stoppage:

If payment of premiums ceases after at least THREE years' premiums have been paid , a free

paid-up policy for a reduced sum assured will be automatically secured provided the reduced

sum assured, exclusive of any attached bonus, is not less than Rs. 250/-. The reduced sum

assured will become payable on the event as stipulated in the policy.

Bonus:

Is there anything extra payable besides the sum assured at the time of claim settlement? Yes,

but only if it is a with profits policy. Every year the Life Insurance Corporation distributesits surplus among policyholder to with profits polices in the form of bonuses. Substantial

bonuses have been declared in the past after each valuation of policy liabilities.

2. Jeevan Shree-I

Product summary:

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

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:


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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 Corporations life insurance business from the 6thyear 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.

3. Money Backwith Profit

Unlike ordinary endowment insurance plans where the survival benefits are payable only at

the end of the endowment period, this scheme provides for periodic payments of partial

survival benefits as follows during the term of the policy, of course so long as the policyholder is alive.

In the case of a 20-year Money-Back Policy (Table 75), 20% of the sum assured becomes

payable each after 5, 10, 15 years, and the balance of 40% plus the accrued bonus become

payable at the 20th year.

For a Money-Back Policy of 25 years (Table 93), 15% of the sum assured becomes payable

each after 5, 10, 15 and 20 years, and the balance 40% plus the accrued bonus become

payable at the 25th year.

An important feature of this type of policies is that in the event of death at any time within

the policy term, the death claim comprises full sum assured without deducting any of the

survival benefit amounts, which have already been paid. Similarly, the bonus is also

calculated on the full sum assured.

4. Jeevan Bharathi - I

Introduction

LICs Jeevan Bharati-I is a plan exclusively for women. It is a with profit plan having

special features considering the needs of women. The plan also provides for Accident

Benefit, Critical Illness Benefit and Congenital Disability Benefit as optional Riders

1. SPECIAL FEATURES

1. Encashment of Survival Benefit as and when needed:

The policyholder at her option may avail the survival benefit any time on or after its due date.

If opted to avail later, increased survival benefit at the rate decided by the corporation from

time to time will be payable.


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2. Flexibility to pay premiums in advance:

The mode of premium payment is only yearly under this plan. However, policyholder may

pay the next yearly premium in advance in instalments (maximum upto 3 instalments) during

the year. If premiums are paid in advance a premium rebate may be allowed as may be

decided by the Corporation from time to time

3. Option to receive maturity proceeds in the form of an annuity: :

The policyholder shall have the option to receive the maturity proceeds in the form of

annuity. The rate of annuity will be based on the annuity rates prevalent at the time of

stipulated Date of Maturity.

4. Auto Cover: After two years premiums have been paid, whenever premium payment

is discontinued, the life cover for full sum assured will continue for 3 years from the due date

of first unpaid premium.

If death occurs during the Auto Cover period, then death benefit after deducting unpaid

premiums, with interest is payable along with the vested bonus, if any.

The auto cover shall not be available for rider benefits.

5. TheWhole Life Policy

This plan is mainly devised to create an estate for the heirs of the policyholder as the plan

basically provides for payment of sum assured plus bonuses on the death of the policyholder.However, considering the increased longevity of the Indian population, the Corporation has

amended the above provision, thereby providing for payment of sum assured plus bonuses in

the form of maturity claim on completion of age 80 years or on expiry of term of 40 years

from date of commencement of the policy whichever is later.

The premiums under the policy are payable up to age 80 years of the policyholder or for a

term of 35 years whichever is later.

If the payment of premium ceases after 3 years, a paid-up policy for such reduced sum

assured will be automatically secured provided the reduced sum assured exclusive of any

attached bonus is not less than Rs.250/-. Such reduced paid-up policy is not entitled to participate in the bonus declared thereafter but the bonuses already declared on the policy

will remain attach, provided the policy is converted in to a paid-up policy after the premiums

are paid for 5 years.

Suitable For:

This policy is suitable for people of all ages who wish to protect their families from financial

crises that may occur owing to the policyholders premature death.


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6. Two Year Temporary Assurance Policy

The Two Year Temporary Assurance policy is designed for the insuring public who requires

risk cover for a maximum of two years.

Under the Two Year Temporary Assurance policy a single premium is required to be paid at

the outset of the policy to cover the entire period of term.

The proposer is required to pay the medical examination fee. The proof of age must also

accompany the proposal.The policy issued will be only under the 'Without Profits' plan.The

policy is not entitled to any surrender value.

No loan will be granted against the Two Year Temporary Assurance policy.

Suitable For

The Two Year Temporary Assurance policy caters to the individuals who specifically requireinsurance cover against risk for a short period of two years, for instance persons who are

required to go on tours for instance for a year or so.

7. Jeevan Saathi

Product summary :

This is an Endowment Assurance Plan issued on the lives of husband and wife. The plan

provides financial protection against death of both the lives. It pays the maturity amount on

survival of one or both the lives to the end of the policy 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 till the first death of the lives covered,

whichever is earlier.

Bonuses :


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 date of maturity or the second death of the lives covered, whichever is earlier. Final

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

Pension Plans:-

Pension Plus


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IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE

BY THE POLICYHOLDER

LICs Pension Plus is a unit linked deferred pension plan, which provides you a minimum

guarantee on the gross premiums paid. The plan is without any life cover.

You have a choice of investing your premiums in one of the two types of investment funds

available. Premiums paid after deduction of allocation charge will purchase units of the Fund

type chosen. The Unit Fund is subject to various charges and value of units may increase or

decrease, depending on the Net Asset Value (NAV).

1. Payment of Premiums: You may pay premiums regularly at yearly, half-yearly or

quarterly or monthly (through ECS mode only) intervals over the term of the policy.

Alternatively, a Single premium can be paid.

A grace period of 30 days will be allowed for payment of yearly or half-yearly or quarterlypremiums and 15 days for monthly (through ECS) premiums.

2 . Eligibility Conditions And Other Restrictions:

a) Minimum Entry Age - 18 years (last birthday)

b) Maximum Entry Age - 75 years (nearest birthday)

c) Minimum Vesting Age - 40 years (completed)

d) Maximum Vesting Age - 85 years (nearest birthday)

e) Minimum Deferment Term - 10 years

f) Sum Assured - NIL

g) Minimum Premium -

Regular premium (other than monthly (ECS) mode) : Rs. [15,000] p.a.

Regular premium (for monthly (ECS) mode) : Rs. [1,500] p.m.


h) Maximum Premium -

Regular premium : Rs. [1,00,000] p.a.


Annualized Premiums shall be payable in multiple of Rs. 1,000 for other than ECS monthly.

For monthly (ECS), the premium shall be in multiples of Rs. 250/-.


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3. Unit Plans:-

Pension Plus


BY THE POLICYHOLDER

LICs Pension Plus is a unit linked deferred pension plan, which provides you a minimum

guarantee on the gross premiums paid. The plan is without any life cover.

You have a choice of investing your premiums in one of the two types of investment funds




1. Payment of Premiums: You may pay premiums regularly at yearly, half-yearly or

quarterly or monthly (through ECS mode only) intervals over the term of the policy.

Alternatively, a Single premium can be paid.

A grace period of 30 days will be allowed for payment of yearly or half-yearly or quarterly

premiums and 15 days for monthly (through ECS) premiums.

2 . Eligibility Conditions And Other Restrictions:

a) Minimum Entry Age - 18 years (last birthday)

b) Maximum Entry Age - 75 years (nearest birthday)

c) Minimum Vesting Age - 40 years (completed)

d) Maximum Vesting Age - 85 years (nearest birthday)

e) Minimum Deferment Term - 10 years

f) Sum Assured - NIL

g) Minimum Premium -

Regular premium (other than monthly (ECS) mode) : Rs. [15,000] p.a.


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Regular premium (for monthly (ECS) mode) : Rs. [1,500] p.m.


h) Maximum Premium -

Regular premium : Rs. [1,00,000] p.a.


Annualized Premiums shall be payable in multiple of Rs. 1,000 for other than ECS monthly.

For monthly (ECS), the premium shall be in multiples of Rs. 250/-.

2 Endowment Plus


BY THE POLICYHOLDER

This is a unit linked Endowment plan which offers investment cum insurance cover during

the term of the policy. You can choose the level of insurance cover within the limits, which

will depend on the mode and level of premium you agree to pay.

You have a choice of investing your premiums in one of the four types of investment funds




Comparisionand Risksand Gains

As the gain is that life is secured in the all the life insuarance . but in the investment fund like

ULIP it is very risk in the investment fund because for the higher return company is stock

market which is very risks because of the foreign instability and economic crises in US and

Europe . Now commodities , Currencies are very volatile , so Assest Management company

feels very risky in investment in this types of investment .

Recommendation Summary fora potential Customer .

As per my recommendation Investor should investment in Government based Insuarance

company plans because that is safe and very much transparent in their schemes . LIC is one

of the prominent player in India and various new tactics for markrting there products like :-


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Individual Agent:The individual agent has been the bedrock and the lynchpin in the marketing of insurance,especially life insurance. The professional agent has been the strongest link between the lifeinsurer and the customer. The professional agent has the onerous role of explaining the

concepts, terms and conditions, benefits and privileges of the insurance contract. He has toanalyze the financial requirements and risks faced by the customers and market insurance

plans suited to the needs and means of the customers. All insurance companies, and lifeinsurance companies in particular, have recognized the paramount importance of thischannel. The number of agents has grown at a spectacular rate. The total number of agents onthey roll is 11,03,047as on 31.03.2007 as against 10,52,283 as on 31.03.2006.

Corporate Agents:

The number of corporate agents has grown in recent years. Corporate agent is a conceptintroduced with a view to taking advantage of the

presence of a large number of entities with a sizeable client base, contacts and goodwillalready operating in the market.With multi locations and a network of people assisting them,

these entities have a different structure and purpose. Hence their existing network could beutilized to market insurance. The corporate agent could thus be defined as a person - meaninga firm or company formed under the Companies Act, 1956 or a banking company or aBank/RRB or a co-operative society registered under the Co-operative societies Act, 1912 ora panchayat or a NGO/MFI covered under the Coop Societies Act or a NBFC registered withRBI or any other institution. They assist greatly in the spread of insurance through the greaterreach of the institutions.

Brokers:

Brokers are permitted to sell products of more than one insurer. Brokers have been verypredominant in the non life arena. Large risks require quite sophisticated expertise. Brokershave played a very key role in this area both in selling products and in servicing of Insuranceclaims. Brokers have now also entered the Life Insurance market.Bancassurance:

Bancassurance is developing as an important channel in India. This isdue to the large reach and customer base of banks in both urban and rural areas in India. The

persistency rate in Bancassurance, due to the continuous contact with the client is better thanin other channels. The ease of payment of premium and the facility of maturity/claim

payments through the bank account make it a customer friendly channel

Referrals:

This is a new concept very similar to getting a prospecting list and leads toeffect sales with customers. It is evident that in addition to banks, there could be various otherentities which could act as a referral provider due to the large database of members/clients,like credit cardholders association members, society members etc. In short, such institutionscould share or market their database to provide leads to the intermediaries to sell insurance

products. The referral provider is not a licensed intermediary, but can be regulated by theinsurance Regulator, through approval ofthe terms of the agreement, between the insurer and the referral provider.


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Direct Marketing:

In the new technological environment, new innovative marketing systems have evolved. The

use of inter-net, web based sales, e- marketing, telecalling, mobile SMS have made giantstrides in reaching out to customers. This is an emerging channel which in future may growin size and proportion of sales. This channel requires active regulation which should be onissues of transparency, disclosure, privacy, contract, TRAI guidelines etc. It would benecessary to give full complete information through soft copies of proposal forms, schedules,

policies etc. New Business Brought in by All Channels of Distribution:

(1/4/2oo7 to 31/3/2008)(Individual Assurances)Policies( in lakh)Sum Assured

( in crore )First PremiumIncome (in crore)Composite 375.90 2, 75, 457.65 43,812.86Growth Rate -1.62 % -9.12 % 10.80%8Pension & Group Business & Social Security SchemesAchievement From 1.4.2007 to 31.03.2008Pension &Group SchemesGrowth Rate Social SecuritySchemesGrowthRate

No. of New Lives 153.71 lac 83% 113.67 lac 98%Premium Income(Rs. In Crore )10356.94 -9% 192.56 91%Business In Force as on 31.3.2008Policies (in crore ) Sum Assured( Rs. In crore)Individual Assurance 23.39 17, 28, 679Group Insurance (lives) 5.10` 3, 06, 711

Span of Organization

Today LIC functions with 2048 fully computerized branch offices, 100 divisional offices,7zonal offices and the corporate office. LICs wide are network covers 100 divisional officesand connects all the branches through a Metro Area Network. LIC has tied up with some

banks and service providers to offer on-line premium collection facility in selected cities.LICs ECS and ATM premium payment facility is an addition to customer convenience.Apart from on-line kiosks and IVRS, Info Centres have been commissioned at Mumbai,Ahmadabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other


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cities.With a vision of providing easy access to its policy holders, LIC has launchedSATELLITE SAMPARK OFFICES. The Satellite offices are smaller, leaner and closer to thecustomer. The digitalized records of the satellite offices will facilitate anywhere servicing andmany other conveniences in the future.Scope of Insuarance Sector in India.

Insurance in India has gone through two radical transformations. One holding company wasformed with four subsidiaries. As a part of the general opening up of the economy after 1992,a Government appointed committee recommended that private companies should be allowedto operate. It took six years to implement the recommendation. Private sector was allowedinto insurance business in 2000.

However, foreign ownership was restricted. No more than 26% of any company can beforeign-owned. A totally regulation free regime ended in 1912 with the introduction ofregulation of life insurance. A comprehensive regulatory scheme came into place in 1938.This was disabled through nationalization in what follows, we examine the insurance industryin Indiathrough different regulatory regimes. But, the Insurance Act of 1938 became relevant again

in 2000 with deregulation.With a strong hint of sustained growth of the economy in therecent past, the Indian market is likely to grow substantially over the next few decades.

The rest of the chapter is organized as follows. First, we study the evolution of insurancebusiness before nationalization. This is important because the denationalized structurebrought back to play important legal rules from 1938. Next we analyze the nationalized eraseparately for life and property casualty business as they were not nationalizedsimultaneously. Much of post-independence history of insurance in India was the history ofnationalized insurance. In the following section, we examine the new legal structureintroduced after the industry was denationalized in 2000. In the penultimate section, weexamine the current state of play and projected future of the industry.

***Some Facts in Insuarance Sector

Insurance Act, 1938In 1938, with a view to protect the interest of insuring public, earlie legislation(1928) wasconsolidated and amended by the Insurance Act, 1938 with comprehensive provisions fordetailed and effective control over the activities of insurer. For the first time in the history ofinsurance in India, the whole business was brought under a unified system of controland its structure strengthened by statutory regulations.Weaker elements were weeded out;indiscriminate promotion was checked and speculative insurance was eliminated. The best

proof the soundness of the law was the effective check on large scale liquidations which hadmarred the name of insurance in the thirties. In due course, various amendments weremade in the Indian Insurance Act 1938 in subsequent years to improve the regulatorymechanism. The Act of 1938, which in many respects codified and modernized the lawsrelating to insurance in the country, suggest the same noteworthy changes in regulation andorganization of business. It was considerable step forward in the direction to envelopall forms of insurance.

Malhotra Committee


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In 1993, the first step towards insurance sector reforms was initiated with the formation ofMalhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra.The committee was formed to evaluate the Indian insurance industry and recommend itsfuture direction with the objective of complementing the reforms initiated in the financial

sector.Key Recommendations of Malhotra Committee Structure

Government stake in the insurance Companies to be brought down to 50%.

Government should take over the holdings of GIC and its subsidiaries so that thesesubsidiaries can act as independent corporations.

All the insurance companies should be given greater freedom to operate.Competition Private Companies with a minimum paid up capital of Rs.1billion should be

allowed to enter the industry. No Company should deal in both Life and General Insurance through a single

Entity.

Foreign companies may be allowed to enter the industry in collaboration withthe domestic companies.

Postal Life Insurance should be allowed to operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in

each state. Regulatory Body The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance should be made independent.

Investments Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company.

Customer Service LIC should pay interest on delays in payments beyond 30 days Insurance companies must be encouraged to set up unit linked pension plans. Computerisation of operations and updating of technology to be carried out in

the insurance industry.

Malhotra Committee also proposed setting up an independent regulatory body TheInsurance Regulatory and Development Authority (IRDA) to provide greater autonomy toinsurance companies in order to improve their performance and enable them to act asindependent companies with economic motives. Insurance sector in India was liberalized inMarch 2000 with the passage of the Insurance Regulatory and Development Authority(IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players toenter the market with some limits on direct

foreign ownership. There is a 26 percent equity cap for foreign partners in an insurancecompany. There is a proposal to increase this limit to 49 percent. The opening up of theinsurance sector has led to rapid growth of the sector. Presently, there are 16 life insurancecompanies and 15 non-life insurance companies in the market. The potential for growth ofinsurance industry in India is immense as nearly 80 per cent of Indian population is withoutlife insurance cover while health insurance and non-life insurance continues to be well belowinternational standards.


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Regulator Of Insurance Industry In India: IRDA

The Insurance Regulatory and Development Act of 1999 were set out as follows. To providefor the establishment of an Authority to protect the interests of holders of insurance policies,

to regulate, promote and ensure orderly growth of the insurance industry and for mattersconnected therewith or incidental thereto and further to amend the Insurance Act,1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business(Nationalization) Act, 1972. The Act effectively reinstituted the Insurance Act of 1938 with(marginal) modifications.

Whatever was not explicitly mentioned in the 1999 Act referred back to the 1938 Act?

(1) It specified the creation and functioning of an Insurance Advisory Committee that sets outrules and regulation.(2) It stipulates the role of the Appointed Actuary. He/she has to be a Fellow of theActuarial Society of India. For life insurers the Appointed Actuary has to be an internal

company employee, but he or she may be an external consultant if the company happens tobe a non-life insurance company. The Appointed Actuary would be responsible for reportingto the Insurance Regulatory and Development Authority a detailed account ofthe company.(3) Under the Actuarial Report and Abstract, pricing of products have to be given in detail.It also requires details of the basic assumptions for valuation. There are prescribed forms thathave to be filled out by the Appointed Actuary including specific formulas for calculatingsolvency ratios.(4) It stipulates the requirements for an agent. For example, insurance agents should have atleast a high school diploma along with training of 100 hours from a recognized institution.(5) Under Assets, Liabilities, and Solvency Margin of Insurers, the Insurance Regulatory

and Development Authority has set up strict guidelines on asset and liability management ofthe insurance companies along with solvency margin requirements. Initial margins are sethigh (compared with developed countries). The margins vary with the lines of business.

Life insurers have to observe the solvency ratio, defined as the ratio of the amount ofavailable solvency margin to the amount of required solvency margin: (a) the requiredsolvency margin is based on mathematical reserves and sum at risk, and the assets of the

policyholders fund; (b) the available solvency margin is the excess of the value of assetsover the value of life insurance liabilities and other liabilities of policyholders andShareholders funds.

(6) It sets the reinsurance requirement for (general) insurance business. For all general

insurance, a compulsory cession of 20% regardless of line of business to the GeneralInsurance Corporation, the designated national reinsurer was stipulated.(7) Under the Registration of Indian Insurance Companies, it sets out details of registrationof an insurance company along with renewal requirements. For renewal, it stipulates a fee ofone-fifth of one percent of total gross premium written direct by an insurer in India during thefinancial year preceding the year. It seeks to give detailed background for each of thefollowing key personnel: Chief Executive, Chief Marketing Officer, Appointed Actuary,Chief Investment Officer, Chief of Internal Audit and Chief Finance Officer. Details of sales


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force, activities in rural business and projected values of each line of business are alsorequired.

(8) Under Insurance Advertisements and Disclosure, details of insurance advertisement in

physical and electronic media has to be detailed with the Insurance Regulatory andDevelopment Authority. The advertisements have to comply with the regulation prescribed in

section 41 of the Insurance Act, 1938. The Act of 1938 says, No person shall allow or offerto allow, either directly or indirectly, as an inducement to any person to take out orrenew or continue an insurance in respect of any kind of risk relating to lives or property inIndia, any rebate of the whole or part of the commission payable or any rebate of the

premium shown on the policy, nor shall any person taking out or renewing or continuing apolicy accept any rebate, except such rebate as may be allowed in accordance with thepublished prospectus or tables of the insurer.

(9) All insurers are required to provide some coverage for the rural sector. It is called theObligations of Insurers to Rural Social Sectors

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