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Presentation on Basics of Insurance Client Metlife

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  • Welcome the Participants to the session.
    Introduce your self and have a round of introduction for the participants
    List down the expectations of the participants and then begin the session .
  • Risk Profile: Conservative – Guaranteed returns in non-par products, Moderate – participative plans, Aggressive – Higher exposure in equity in VUL plans
  • Explain the origin of Insurance.
    The earliest references to insurance have been found in Babylonia, with the Greeks and the Romans. The use of insurance appeared in the account of North Italian Merchant banks that then dominated the international trade in Europe at that time.
    Point out the fact that
    The oldest form of Insurance was marine insurance where ships and the cargo were insured against perils such as pirates, storms, mutiny and wars.
    First Indian Insurance Company was Bombay Mutual Life Society Limited established in the year1870
  • In general, the term insurance refers to providing cover for an event that might happen while assurance is the provision of cover for an event that is certain to happen for e.g.: death.
    Life assurance is different from insurance, and will always result in a payment.
  • The concept of The Law of Large Numbers is akin to the business of a commercial bank wherein the bank depositors do not come to withdraw their funds all at the same time. Thus ensuring the liquidity of the bank and surplus funds being lent to borrowers on a higher margin.
  • To explain Anti-Selection:
    The adverse impact on an insurer when risks are selected that have a higher chance of loss than that contemplated by the applicable insurance rate. Also known as adverse selection. The selection of such risks is adverse because the rate is inadequate.
  • The Concept of Indemnity applies only to General Insurance Contracts.
  • 36 times of monthly expenses is prescribed only as a reserve for a period of 3 years for the family which has faced the unfortunate event.
    A person may choose to provide for more than 3 years of expenses as reserve for this purpose, but this would have to be supported by his individual financial comfort.
  • Transcript

    • 1. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. An Introduction to Insurance
    • 2. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. How often do I want to pay? Annual. Semi-Annual, Quarterly, Monthly and Payroll Savings Program How often do I want to pay? Annual. Semi-Annual, Quarterly, Monthly and Payroll Savings Program How long do I want to pay? Single Limited PPT Regular How long do I want to pay? Single Limited PPT Regular When do I need the money? 5 years to legacy (upto age 100) When do I need the money? 5 years to legacy (upto age 100) What are my Needs? Protection Accumulation Retirement What are my Needs? Protection Accumulation Retirement How much risk can I take? Conservative Moderate Aggressive How much risk can I take? Conservative Moderate Aggressive MetLife product portfolio offers many choices to create an affordable & customized solution for the client CUSTOMER
    • 3. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Objectives  Understanding the concept of  Insurance  Risk  Risk Sharing  Applying law of large numbers to insurance  Appreciating Role of Insurance
    • 4. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. History Of Insurance  Early insurance goes backto the Egyptian times.  Around 3000 BC, Chinese merchants dispersed theirshipments among several vessels to avoid the possibility of damage or loss.  Insurance in the modern formoriginated in the Mediterranean during 13th and the 14th century.
    • 5. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Insurance in its Present Form  Today, there is insurance formany aspects of daily living:  Business,  Auto,  Health,  Life,  Travel.  Each of these categories include sub-categories, branching off into numerous divisions.
    • 6. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Insurance & Assurance  Insurance is a method of making good the loss that might occurfroma mishap orsuch event.  Assurance is a method of providing fora loss of income that might occuras an outcome of events such as premature death, disability, disease and old age.
    • 7. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Classification of Insurance Life Insurance Insures Life of individuals  Protection against  Death  Disability &  Disease Non – Life Insurance Insures assets  Protection against  Theft  Fire  Loss In Transit  Accidents  Illness in case of Live stock
    • 8. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Life Insurance – the role it plays.  Life Insurance helps planning for:  Protection in case of an eventuality  Children’s education and future settlement  Retirement Corpus Creation  Estate Planning  And in the process provides for  Security & Stability  Tax benefit  Wealth Creation
    • 9. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Need of Life Insurance in Businesses  A business generally proposes forlife insurance:  To ensure financial stability in the event of death of key person (employee of the Body Corporate) , Partner (in case of a partnership insurance)  To provide benefits for its employees (Employee Benefit Insurance Schemes or Group Insurance)
    • 10. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Business of Insurance  Insurance companies  bring together people with common risks  collect contributions (premium) from them  compensate those who suffer from that group
    • 11. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Principles of Insurance  Insurance is based on two principles  A - Risk transference  Also called ‘pooling’, involves the transfer of risk from the individual to a pool of the insurance company’s policyholders. The insurance company charges a fee, the premium (or part thereof), for accepting the risk and ‘pools’ the premiums from a group of policyholders into a general fund, to pay off the death/survival benefits under the contract.
    • 12. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Principles of Insurance  Insurance is based on two principles  B - The Law of Large Numbers  Basically relies on the principle that the larger the pool, the more predictable the amount of losses will be in a given period. Since not all members of the pool are of the same age or in the same health condition, we can assume not all of them will be making a claim at the same time.
    • 13. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Concept of Risk, Peril and Loss  Riskis defined as the possibility of adverse results flowing fromany occurrence.  Riskexists when there is uncertainty about the future.  Riskis the chance of loss, and peril is the direct cause of the loss. Fore.g.: if a house burns down, then fire is the peril, the damage incurred because of the peril (fire) is loss.
    • 14. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Types of Risk  Pure Risk  Pure risk involves no possibility of gain, either a loss occurs or no loss occurs e.g. disability and death  Speculative Risk  Speculative risk involves three possible outcomes – loss, gain, no change e.g. stocks Only pure risks can be insured
    • 15. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. RiskManagement  Identifying and assessing the financial risk  Eliminating orreducing exposure by:  Accepting the risk (Standard Policy Rates)  Controlling the risk (Loading with extra premium)  Avoiding the risk (Decline, Postponement of policy)  Transferring the risk (Reinsurance)  Avoiding Anti-Selection by Robust Underwriting
    • 16. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Insurance and RiskManagement Prospect proposes for Insurance Insurerassess degree of risk Prospect pays premiums as perStandard Rates Insureraccepts riskand issues policy Insureraccepts risk conditionally and issues policy Prospect pays extra premiums as per assessed risk Insureravoids riskby declining or postponing the policy All Issued policies sent forReinsurance as perthe Insurers reinsurance norms
    • 17. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Characteristics of Insurable Risk  In orderfora riskto be considered as insurable, it must have certain characteristics:  The loss must occur by chance  The loss must be definite  The loss must be significant  The loss rate must be predictable  The loss must not be catastrophic to the insurer
    • 18. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Concept of indemnity  Indemnity: To make good the loss  Any insurance is designed to compensate a policyholderfora loss suffered, by the payment of money, repair, replacement, orreinstatement.
    • 19. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Life Insurance & Indemnity  Human Life cannot be valued, therefore Life insurance is not a contract of indemnity.  On the otherhand, plans which provide medical reimbursements fall underthe purview of contract of indemnity.
    • 20. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Assessing Adequacy of Life Insurance Cover  Two Schools of Thought  Concept of Human Life Value (HLV)  Temporary and Permanent Protection
    • 21. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Assessing Adequacy of Life Insurance Cover  Concept of Human Life Value (HLV)  HLV is the present value of the total income of the individual, which is lost to the family in the event of his untimely death.
    • 22. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. Assessing Adequacy of Life Insurance Cover  Temporary and Permanent Protection  Temporary Protection as the word suggests is protection for temporary obligations and liabilities. For e.g.: a housing loan obligation of 20 lakhs for 20 years would require a temporary protection of at least 20 lakhs for a term of 20 years.  Permanent Protection as the word suggests is protection for the individual from the present age to 100 years. This means that the individual is covered all through his/ her life span. The extent of permanent protection as a thumb rule is prescribed at 36 times the monthly living expenses of the household excluding rent and other fixed EMI outgoes.
    • 23. MetLife India Insurance Company Pvt. Ltd. ForInternal Use Only. So, What is Insurance ?  Nobody wakes up in the morning to buy Insurance.  It needs to be SOLD.  There is latent need forInsurance in each individual.  It just needs to be unraveled forhim by GOOD Financial Advice.