Insurance Perspectives 2013

7/29/2019 Insurance Perspectives 2013

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Insurance Perspectives & Practices

in INDIA

DEFINING INSURANCE

A Contract (Agreement as per LAW) between the

INSURER (The Insurance Company) and the INSURED(Customer), wherein the Insurer Promises to pay a

Lump sum on the happening of an Event.

The consideration for payment is only of theinsurer.


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Types of Insurance

Insurance in India can be classified into two

broad categories:

LIFE INSURANCE

NON-LIFE OR GENERAL INSURANCE


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What is Life Insurance?

LIFE INSURANCE

Life Insurance is intended to mitigate the adverse

financial consequences that may follow because a

person does not live long enoughor because helives long enough.

Every possible adverse consequence which

constitutes a life risk that requires to be taken care

of, constitutes a need for Life Insurance.


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Basis of Insurance Plans

LIFE INSURANCE plans can be broadly divided into 2types :

PURE TERM INSURANCE PLAN- Only Death Benefit-NoSurvival Benefit

If the Insured does not die within the plan period nobenefit is paid to the insured.

PURE ENDOWMENT PLAN- Only Survival Benefit- No deathBenefit

If the Insured dies within the specified period no benefitis paid.

All the insurance plans like Money Back or Children'sPlans you might have heard of, fall in between thesetwo, namely Pure Term Insurance & Pure Endowment.


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General Insurance or Non Life Insurance

Health Insurance-Mediclaim, Cashless Hospitalization policy

Vehicle Insurance-Against Accidental Damage, Theft, Third PartInjury

Fire Insurance-Commercial

Shop Insurance-Against Fire, Robbery, Vandalism, Floods, Act ofTerrorism, Natural Perils, etc.

Home /Property Insurance-Against Fire, Robbery, Vandalism, Floods,Act of Terrorism, Natural Perils, etc.

Liability Insurance

Marine Insurance

Ornamental Insurance, etc

Rural Insurance-Crop Insurance

Social Insurance

Projects and Engineering Insurance

Cow or cattle insurance


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Major Players in India Today

LIFE INSURANCE COMPANIES

Life Insurance Corporation

ICICI Prudential Life Insurance

Bajaj Allianz

Metlife Insurance Max New York Life

Aviva

OM Kotak Mahindra

TATA AIG

HDFC Standard

Birla Sunlife

Bharti-Axa Life Insurance

GENERAL INSURANCE COMPANIES

New India Assurance

National Insurance Company Ltd

Oriental Life Insurance

United India Insurance

Tata AIG

IFFKO-Tokio

Bajaj Allianz General Insurance

ICICI Lombard General Insurance

Cholamandalam


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WHAT ARE THE ADVANTAGES OF LIFE INSURANCE?

FOR A SMALL PREMIUM, A PERSON CAN PROVIDE FOR HIS FAMILYs daily needs CHILDRENS EDUCATION, CHILDRENS MARRIAGE, ETC

IN THE EVENT OF HIS UNTIMELY DEATH.

Typically A PERSON CANNOT AMASS THE AMOUNTREQUIRED THRU HIS LIFES EARNINGS!

IT TAKES CARE OF CRITICAL ILLNESSES DURING ONEsLIFETIME, DISMEMEBERMENT THRU AN ACCIDENT OR

PERMANENT TOTAL DISABILITY BECAUSE OF ANACCIDENT OR DISEASE.

LI CAN HELP IN BUILDING A TIDY ANNUITY AFTERRETIREMENT.


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LIFE Insurance Real Life EXAMPLE

Mr & Mrs. X live in in a 3 BHK apartment in BBSR with their 2 kids Master Y and Miss Z.

Mr.Xs salary or monthly income is Rs.50K PM. Mrs.X is a home maker.

Rent=Rs.10K PM

School Expenses=Rs.15K PM HH Expenses=Rs.10K PM

Other miscellaneous=Rs.5K PM

Total=Rs.40K PM, Savings=Rs.10K PM or Rs.120K PA.

MR.X BUYS A TERM PLAN

PREMIUM: RS.10,000/- PA

SUM ASSURED: RS.50 LAKHS

MR.XS AGE: 30 YEARS

TERM: 40 YEARS

For an annual premium of Rs.10K or monthly premium of Rs.833/- or Rs.27/- daily Mr.X would get aninsurance of Rs.50Lakhs or Rs.0.5 crores. Not Bad! Huh! Then why doesnt everyone buy it?

MR.X MEETS WITH AN ACCIDENT AND DIES ON THE SPOT..GULP!

Widow X get Rs.50Lakhs and puts it in a FD at the current rate of 8.5% PA.

Family s income =Rs.35, 415

Rent for 3BHK=Rs.10K PM

Kids SE=Rs.15K PM

Total HHE=Rs.10K PM

Expenses=Rs35K, Savings=Rs.415 /-PM or


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Why Life Insurance is so TOUGH to sell? Personal Opinion People in India are ignorant. Its reasonable to expect ignorant people not to buya life saver or

a family saver (at a nominal cost )and save their loved ones from utter ruin or destruction!!!

Insurance sales persons do not know how to sell insurance. They go into begging mode rather than

solemn advice while speaking to customers, so customers do not take them seriously and play

around with them.

Qualification for selling insurance in Metros is 12th Class Pass. Rural areas is 10th Pass.

95% People in India are superstitious fools-Justice Katju.

Most insurance policies require medical check which is done free of costyet people are not

inclined to the right thing. People in India are v.concerned that if they purchase insurance from an agent, the agent will get a

commission (which incidentally is the agents income)!!!

Indian customers are convinced that the agent selling LI is cheating by earning a

commission!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! And Indians (the most virtuous race under sun will not stoop

to buy insurance from cheats!!!!!

Other Indians philosophize jabjaan hi na rahi, to is rupiyon ka kya faida. You selfish pig think

about your widow and children!!! Do you expect your wife to become a whore and kids beggars on

the mean streets!!!

LIC screwed up the scene for 40 years by making widows and others run around for justifiable

claims.

LIC has secret reserves of Rs.25000 crores from unclaimed insurance.


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How much Insurance do you have or need?

As per a thumb rule, if your age is between: 0-35 20 times annual income

36-50 15 times annual Income

Above 50 years 10 times annual income

This question can also be answered with thehelp of the following 2 approaches

Human Life Value Concept

Capital Needs Analysis


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HUMAN LIFE VALUE CONCEPT

WHAT IS HUMAN LIFE WORTH? UNLIMITED.

FOR PRACTICAL PURPOSES:

THUMB RULE FOR LIFE INSURANCE:

LIFE INSURANCE COVER:

UPTO 35 YEARS 20 TIMES ANNUAL INCOME

36-50 YEARS - 15 TIMES ANNUAL INCOME

ABOVE 50 YEARS - 10 TIMES AI

EXAMPLE

PRESENT ANNUAL INCOME = Rs. 120,000

PERSONAL ANNUAL EXPENSES =Rs. 36000

PI PE =Rs.84,000

BALANCE IS THE PERSONS CONTRIBUTION TO HIS FAMILY

ASSUMING THE PERSONS AGE AS 40 YEARS; SERVICE LEFT 20 YEARS

HLV = 84,000 X 20 years =Rs.16, 80,000-Amount of Insurance.

Problem:

Age = 25

Retirement age = 60 years

PI = 100000

PE=25,000

WHAT IS THE PERSONS HLV AND WHAT AMT OF LIFE INSURANCE SHOULD HE

TAKE?

ANS = 26,25,000

THIS CONCEPT WAS NOT ACCEPTED AS DEATH, DISABILITY AND SERVICE AREUNCERTAIN.


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CAPITAL NEEDS ANALYSIS

INCOME FAMILY - DREAMS

PROSPECTS BACKGROUND

AGE=44 YEARS, WIFE=40, SON=10 YEARS, DAUGHTER=8 YEARS MONTHLY HOUSEHOLD EXPENSESRs.5000

ANNUAL EXP =Rs.60,000

Sons education fund =4 LAKHS

Daughters Marriage Expenses =4 lakhs

Savings /Assets FD in Bank-2 lakhs

Jewelry-1 lakh

One 2 wheeler

One single storey house

Interest rate on FD 6% for 2 lakhs=12000 pa

Annual expenses=60,000 12,000 =Rs.48,000

Capital Needs= Annual Expenses times service left+ Sons Edun+ Daughters

Marriage=Rs.48,000 X 16 years=8 lakhs+ 4 lakhs+4 Lakhs = 16 Lakhs

Insurance required = 16 Lakhs


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TYPES OF L. INSURANCE POLICIES

TERM LI WHOLE LIFE LI

MONEY BACK LI

PENSION PLANS

CHILDREN PLANS

ENDOWMENT PLANS


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2 MODES OF LIFE INSURANCE AVAILABLE IN INDIA

TRADITIONAL Sold more in rural areas SUM ASSURED + BONUS MODEL

BONUS IS DECLARED BY A COMPANY

DIFFERS FROM COMPANY TO COMPANY

SOLD THRU AGENTS

UNIT LINKED LIFE INSURANCE PLANSSold morein Urban areas

DIRECT AGENT/ADVISOR/CONSULTANT

SALES/BROKERAGE BANCASSSURANCE

INTERNET


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3 MUST BUY INSURANCE PLANS for every intelligent &

productive individuals in Indiain the world!!!

TERM LIFE PLANPROVIDING SAFETY N SECURITY TO AFAMILY IN THE EVENT OF DEATH OF THE SOLE EARNING MEMBER

PENSION PLAN PROVIDING INCOME FOR LIVING TOO LONG. A STEADY INCOME WHEN A PERSON RETIRES.

TAKES CARE OF INFLATION

WHOLE LIFE PLANWITH ALL RIDER BENEFITS ANDSAVINGS


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Whole Life Plan-ULIP

This is an endowment Life Insurance plan which

comes with Rider Benefits which are optional. Riders

are additional benefits which any individual can opt for,

at a marginal extra cost. These riders can be chosen at

the time of submitting the proposal or at the beginning.

The Riders in a whole life plan are: Accidental Death & Dismemberment(AD&D)

Critical Illness and Permanent Total Disability(CI&PTD)

Hospital Cash Benefit


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Accidental Death & Dismemberment

(ADD)

ADD is coverage from risk of death ordismemberment due to an ACCIDENT

Amount payable is Twice the Sum assured in casedeath results from an accident.

The complete Sum Assured shall be paid in caseof DISMEMEBERMENT

Dismemberment means partial disabilityresulting from an accident, i.e. losing one hand,losing both hands, losing legs, losing eyesight,etc.

Maximum Payable Under this Rider is Rs.50 Lakhs


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Critical Illness and Permanent Total

Disability (CIPTD) Coverage against contracting a critical illness or becoming totally or

permanently disabled due to a disease or accident.

Can be claimed at the time of diagnosis of any of the categorizedcritical illnesses as mentioned in the brochure by the insurancecompany.

Advantage is that a person does not need to be hospitalized inorder to claim the SA, rather a diagnosis by a professional medicalexaminer certifying the existence of an illness is required.

SA shall also be paid if the persons capability to work is impairedi.e. when he becomes Permanently unable to carry out his normalduties.

Maximum amount payable under this RIDER is 20 Lakhs


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Hospital Cash Benefit

The company will make fixed cash payments

for each day of hospitalization.

Cash of Rs.1000 for General Ward and Rs.3000

for ICU per day.

Claim paid on production of bills of number of

days stay in the hospital.

Maximum claim entertained is Rs.540,000/-.


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TERM Insurance Plan

Only death benefit, No survival benefit.

For a relatively small amount you can take a

large insurance coverage.

You can take a term of 40 years or upto age of

70 whichever is earlier


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Pension Insurance Plan

Only survival benefit, no death benefit.

The earlier you take a pension plan the less

shall be the amount of premium you pay.

AP: Rs.10,000

Term 40 Years

Total premium paid=Rs.4lakhs Fund Value:Rs.1.2 crores


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ASSIGNMENT-2

1 Page write-up on History of Insurance in

India

1 page write-up on All types of Life Insurance

Plans

1 page write-up on All types of General

Insurance Plans

1 page write-up on IRDA, vision,

responsibilities, actions


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Assignment-2 Output

Every student shall submit the write-ups to

the PGP coordinator by 31st of January 2013

by 5.15PM.

No assignments shall be accepted after the

deadline.


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Danke..More will be revealedin Feb 2013

Insurance Perspectives 2013

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