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Insurance

types of insurance plans

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Insurance

  1. 1. History of Insurance in India • The Insurance Act,1938 was passed. Covered both Life and general insurance companies. • Life insurance nationalized in 1956. • General insurance was incorporated as company in 1972. • 107 insurers were amalgamated and grouped into 4 companies i.e. the oriental insurance co. ltd., national insurance co. ltd., the new India assurance co ltd., the united India insurance co. ltd.
  2. 2. History of Insurance in India • In 1993 a committee under the chairmanship of Malhotra was set up • In 1994 committee gave the report and recommended that private sector be permitted, foreign companies in joint venture with Indian partners.
  3. 3. History of Insurance in India • In 1999, IRDA Act (Insurance Regulatory and development authority) was passed • IRDA was constituted to regulate and develop the insurance industry. • In 2002 parliament passed a bill delinking the four subsidiaries from GIC.
  4. 4. Examples of Life Insurance Companies in India • Bajaj Allianz life insurance company ltd. • Birla sun life insurance co. ltd • HDFC Standard life insurance Co. ltd. • ICICI Prudential Life Insurance co. ltd. • ING Vysya life insurance co. ltd. • Life Insurance Corporation of India.
  5. 5.  LIC Fiji.  LIC Mauritius  LIC United Kingdom  LIC Bahrain  LIC (Nepal) Ltd  LIC (Lanka) Ltd  Saudi Indian Company for Co-op. Insurance  LIC Mauritius Ltd.
  6. 6. In the United States, the two largest life insurance companies, in terms of assets as of 2015 • Metlife • Prudential Financial. others • State Farm Insurance is the largest domestic commercial and personal lines insurer . • United Healthcare is the biggest health insurance and managed health care company.
  7. 7. Regulation of Insurance in India • The Insurance Act 1938. • The IRDA act,1999 • The Companies Act, 1956 for the companies carrying on insurance business • Indian Contract Act , 1872
  8. 8. Role of IRDA • Registering and regulating insurance companies • Protecting policyholders’ interests • Regulating and overseeing premium rates and terms of non-life insurance covers • Specifying financial reporting norms of insurance companies • Regulating investment of policyholders’ funds by insurance companies • Ensuring insurance coverage in rural areas and of vulnerable sections of society • Enforcement of discipline • Market conduct surveillance • Consumer education and assistance
  9. 9. types of life insurance policies • Term Insurance Policy • Whole Life Policy • Endowment Policy • ULIPs
  10. 10. Term Insurance Policy • A term insurance policy is a pure risk cover policy that protects the person insured for a specific period of time. In such type of a life insurance policy, a fixed sum of money called the sum assured is paid to the beneficiaries (family) if the policyholder expires within the policy term. • If the policy holder survives the 15-year period, the premiums paid are not returned back. The advantage, apart from the financial security for an individual’s family is that the premiums paid are exempt from tax • For instance, if a person buys a Rs 2 lakh policy for 15 years, his family is entitled to the sum of Rs 2 lakh if he dies within that 15-year period.
  11. 11. SBI Life - Grameen Bima Age* at entry Minimum: 18 years Maximum: 50 years PolicyTerm 5 years Total Premium Amount Minimum: Rs. 300** Maximum: Rs. 2000** Premium amounts will be in multiples of Rs. 100 Premium Frequency Single Sum Assured Minimum: Rs. 10,000 Maximum: Rs. 50,000^ Age Band Sum Assured 18 - 39 60 times Total premium paid 40 - 44 40 times Total premium paid 45 - 50 25 times Total premium paid
  12. 12. Key Highlights : Choose your premium, correspondingly your life insurance cover will be determined. Prompt Processing & Enrolment • No medical examination, acceptance would be based on satisfactory health declarations in the proposal form • Registration based on a simple form SBI Life - Grameen Bima
  13. 13. Benefits under the plan: Death Benefit • In the unfortunate event of death of the life assured during the policy term, the nominee will receive the Sum Assured. Maturity Benefit • There is no maturity benefit under this plan. SBI Life - Grameen Bima
  14. 14. whole life policy • A whole life policy covers a policyholder against death, throughout his life term. The advantage that an individual gets when he / she opts for a whole life policy is that the validity of this life insurance policy is not defined and hence the individual enjoys the life cover throughout his or her life. • Under this life insurance policy, the policyholder pays regular premiums until his death, upon which the corpus is paid to the family. The policy does not expire till the time any unfortunate event occurs with the individual. • Premiums paid under the whole life policies are tax exempt
  15. 15. Endowment Policy • Policy holders benefit in two ways from a pure endowment insurance policy. In case of death during the tenure, the beneficiary gets the sum assured. • If the individual survives the policy tenure, he gets back the premiums paid with other investment returns and benefits like bonuses
  16. 16. ULIP • ULIPs are market-linked life insurance products that provide a combination of life cover and wealth creation options. • A part of the amount that people invest in a ULIP goes toward providing life cover, while the rest is invested in the equity and debt instruments for maximising returns. . • ULIPs provide the flexibility of choosing from a variety of fund options depending on the customers risk appetite. One can opt from aggressive funds (invested largely in the equity market with the objective of high capital appreciation) to conservative funds (invested in debt markets, cash, bank deposits and other instruments, with the aim of preserving capital while providing steady returns). • ULIPs can be useful for achieving various long-term financial goals such as planning for retirement, child’s education, marriage etc.
  17. 17. example • For example you buy a ULIP for annual premium of Rs 30,000 for 20 years. The plan will give him a cover of Rs 3 lakh (10 times the annual premium). After charges are deducted, say Rs 5,000, the amount left (Rs 25,000) is invested in a fund. Suppose the fund has NAV of Rs 10. So you will get 2500 units(25,000/10) of the fund. If fund NAV increases value of your fund also increases. So If after an year, the NAV is Rs 11, then your fund value will Rs 27,500(2500 units x Rs 11
  18. 18. Types of ULIP • Aggressive ULIP’s which invest 80-100% in equity. • Balanced ULIP’s which invest 40-60% in equity. • Conservative ULIP’s which invest upto 20% in equity.
  19. 19. ULIP 1 • It gives the higher of the sum assured or fund value as death benefit. For example ‘A’ holds a type I ULIP that gives her a sum assured of Rs 5 lakh for an annual premium of Rs 50,000. • In case of death in the initial years of the policy, when the fund value is less than the sum assured, the insurer will pay the agreed sum (which here is Rs 5 lakh) to A’s nominee. However, from the time the fund’s value goes higher than the sum assured, the death benefit will be the accumulated amount in the fund. This essentially means that post the initial years of the policy, you cover the risk with the money you yourself have saved over the years.
  20. 20. ULIP II • This plan pays the policy holder both benefits i.e. sum assured and fund value. For example , if ‘A‘ holds a type II ULIP, the insurer would have given A’s nominees both the sum assured of Rs 5 lakh and the amount accumulated in the fund as on the date of death. For the added risk the insurance company assumes under the type II policy, it charges the policy holder an extra cost.
  21. 21. What are charges associated with ULIP? • Premium Allocation Charges: These charges are deducted upfront from the premium paid by the client. These charges account for the initial expenses incurred by the company in issuing the policy • Policy Administration Charges: These charges are deducted on a monthly basis to recover the expenses incurred by the insurer on servicing and maintaining the life insurance policy like paperwork etc. They could be flat throughout the policy term or vary at a pre- determined rate. • Fund Management Charges: A portion of the ULIP premium, depending on the fund chosen, is invested either in equities or debt(bonds, money market instruments etc) or combination of these. Managing these investments incurs a fund management charge (FMC).
  22. 22. ULIPs from HDFC Life • ULIPs for Children: HDFC SL YoungStar Super Premium • ULIPs for Savings & Investment: HDFC SL ProGrowth Super II • HDFC SL ProGrowth Flexi • HDFC Life ProGrowth Plus • HDFC Life Invest Wise Plan • HDFC SL Crest • HDFC Life Click2Invest - ULIP
  23. 23. ULIP Controversy • Between 2005 -2008 Ulips were the most sold financial product. Due to higher commissions many agents sold it aggressively during 2005- 2008, when the stock market was rising consistently. Distributors lured gullible investors by not revealing the high charges( In some cases, the charges were as high as 80% of the first year’s premium) and showcasing only the returns offered by ULIPs. • Stock market Crash of 2008 led many to surrender their ULIPS and then they found out that high premium allocation and surrender charges had eaten away whatever was left of their investments. This led to complaints of ULIPS. In 2010, the Insurance Regulatory and Development Authority of India(IRDA)(after tussle with the Securities Exchange Board of India(SEBI) capped charges at 3% of gross yield for policies with term of up to 10 years and 2.25% for those with term of more than 10 years. This forced insurers to cut commissions.The charges were fixed at this rate because it was the average cost charged by competing products such as mutual funds. With no incentive left for distributors, Ulip sales plunged.
  24. 24. REFORMS • The compulsory 3 year lock in of the Ulip has been increased to 5 years. • If policy holder is below 45 years of age he gets death benefits 10 times the annual premium paid . If above 45 years of age the death benefits is 7 times the premium paid each year.
  25. 25. Indian Insurance in the global scenario • In life insurance business, India is ranked 11th among the 88 countries, for which data is published by Swiss Re. India’s share in global life insurance market was 2.00 per cent during 2013. • the share of Indian non-life insurance premium in global non- life insurance premium was small at 0.66 per cent and India ranks 21st in global non-life insurance markets
  26. 26. Registered insurers in India • At the end of March 2014, there are 53 insurance companies operating in India; of which 24 are in the life insurance business and 28 are in non-life insurance business. In addition, GIC is the sole national reinsurer. • Of the 53 companies presently in operation, eight are in the public sector - two are specialized insurers, namely ECGC and AIC, one in life insurance namely LIC, four in non-life insurance and one in reinsurance. The remaining forty five companies are in the private sector.

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