INSURANCE ADVISORY

Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period (in case of life insurance) or to indemnify the other party on happening of an uncertain event (in case of general insurance).

Definition of Insurance

The underlying concept behind insurance is sharing of risks by pooling of funds. Groups of people sharing similar risk come together and make contribution towards a pool and the money so collected is used towards compensating for any losses suffered by members of the pool.

When the pool is managed by the individuals it is called mutual insurance and when it is managed by a company it is called life/general insurance.

How Insurance Works

The first life insurance company to operate in India -the Oriental Life Insurance Company was established in 1818 in Calcutta. The first Indian insurance company, the Bombay Mutual Life Assurance Society started Its operations in1871. In 1956 the Indian life insurance industry was made up of 154 domestic life insurers, 16 foreign life insurers and 75 provident funds, and was still governed by the Insurance Act of 1938. They all got Nationalized in this year!!! There are 24 Life Insurance companies in India and all of them are a JV with global Insurance companies. There are 27 Non- Life Insurance companies in India.

History of Insurance Industry in India

Structure of Insurance Industry

Fire

Property

Engineering Insurance Marine , Motor, Burglary Insurance etc.

Non Life Insurance Industry Life

MEdiclaim
Personal Personal Accident Policy Employee Liability Liability Public Laibility

 General

Insurance Industry The Process

Assessment

Identification

Coverage

Underwriting
Information

Offers

Obtaining detailed information on the

Familiarising with the business and underwriting

Rendering advice on appropriate insurance

Providing requisite underwriting information

Submitting quotations received from insurer/s for

client's
business and risk management philosophy

information
to be explained to the insurer and others.

cover and
terms

for assessing
and pricing along with terms and conditions.

consideration
by the client

NonLife -The Process

Progress Reports Acting promptly on instructions from clients and providing him written acknowledge ments and progress reports.

Premium Payment Assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938)

Risk Management Providing services related to insurance consultancy and risk management .

Claim Negotiation Technical negotiation with insurers on claims and claim related issues

Claim records

Maintaining proper records of claims

The Process

Term Plan - As the name implies, these policies are issued for a term or a period of time and if the death of the assured occurs during the term of the policy, the policy pays the sum assured. If the insured lives beyond the period stated in the policy, no payment under the policy is envisaged. The term insurance provides pure death protection and does not have any savings element as some other insurance policies do. Endowment Plans - The sum assured is payable on the death of the assured or after a fixed period of years whichever occurs first. This type of policy combines the advantage of security or protection for the family in the event of the assureds premature death and /or facilitates retirement by paying out a lump sum amount at an age agreed upon, should the assured continue to live up to that age. Whole Life Insurance - The oldest and the purest form of life assurance is Whole Life insurance. The premium is paid by the assured throughout the life time of the assured and the sum assured is paid to the beneficiary on the death of the assured. This policy satisfies the original intention of life insurance which is to provide security to dependants on the death of the assured, Under this type of policy the beneficiary named in the policy is paid the benefits under the policy on the death of the assured. The payment under the policy is assured and this policy does not have an end date.

Life Insurance Products

Children Policy These can be Fixed Term (Marriage) endowment, Educational Annuity Assurance, Childrens deferred assurance Annuities - Annuity: Annuity is the periodical payment made by the insurer to the assured, in consideration for the capital payment or lumpsum payment received by them. For capital payment received, the insurer agrees to pay the annuitant an agreed amount of money periodically throughout life. The purpose is the opposite of life insurance, where the payment is made on the death of the assured.

Life Insurance Products (Cont.)

Advantages of Life Insuarnce

Risk Cover Planning for life stage needs Protection against rising health expenses Builds the habit of thrift Safe and profitable long-term investment Assured income through annuities Protection plus savings over a long term Growth through dividends Facility of loans without affecting the policy benefits Tax Benefits Mortgage Redemption

Advantages of Life Insuarnce

An Endowment policy would look like this for a 25 yrs old Tenure : 30 yrs Yearly premium : 31,000 Sum Assured : 10 Lacs Maturity amount : 23.1 Lacs ( this you get when you survive full tenure , It includes the sum insured + Bonus accrued) What is the interest earned on this investment ? 31,000 per year for 30 years becomes 23,10,000 . Annuity formula is : Maturity value = Amount paid per year * [ {(1+r)^n - 1}/r ] * (1+r) Here n = 30 years and r = rate of interest earned Putting all these values 23,10,000 = 31,000 * [{(1+r)^30 -1}/r] * (1+r) The value of r which satisfies this equation is 5.4 . Which means that the interest earned by the investment in Endowment policy is mere 5.4%

How much does your trusted Endowment policy returns???

Ulips How much has changed??

Premium allocation charge A charge deducted before making an investment from your premium. Mortality charge A charge levied for insurance protection provided for death and certain other expenses. Policy administration charge A charge for the expenses other than those covered by premium allocation and fund management charges. Fund management charge An expenses for managing your funds. Surrender Charge A fee levied on premature cancellation of the policy.. Switching Charge A charge levied on switching from one fund to another offered within the product.

Different Charges for Ulips

Endowment Polciy after 1st October 2013!!!