lifeinsuranceproducts-101128113206-phpapp02 (1).pptx
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lifeinsuranceproducts-101128113206-phpapp02 (1).pptx
- 2. Introduction- Need for products āDifferent people want different benefits and different mixes of benefits .ā Philip Kotler
- 3. What is a product ? ā A product a market is anything that can be offered to for attention, acquisition , use or consumption and that might satisfy a need or want .ā Philip Kotler
- 4. Introduction ā«Companies may possess variety product mix ā«Half of profits of all US Fortune companies came from products that did not exist ten years ago. ā«Companies introducenew products to tap existing clients and explore new segments
- 5. Why is there a need for new products ? ā«Changes in tastes of customers ā«Intense competition ā«Change in economic/social environment ā«Increase in purchasing power ā«Failure of old products/ recently products - actual product may launched not have properly designed, incorrectly positioned, been poorly advertised, greater competition.
- 6. Insurance products ā«Are described as UNSOUGHT consumergoods by Kotler. ā There are consumer goods that a customer does not know or knows about but does not normally think of buying. Classic examples are life insurance.ā ā« Unsought goodsrequire lot of advertising, personal selling and marketing efforts. ā«Life insurance is seldom bought, always sold .
- 7. Life Insurance Products of IRDA before ā«All products require launch, designed by approval actuaries. ā«Individual (including pension ) and group products ā«Products may be packaged/ straight-jacketed (ātake it or leave it ā) - could work only in monopoly environment ā«Non-packaged -f lexibility āwith riders/add-ons - available with competition by private players ā«One single product cannot suit all customers ā«Indian consumer is curious and demanding
- 8. Features of any life insurance product ā«Who can be insured ? ā«What can be the sum assured ? ā«Under what events would SA be payable ? ā«How/when would the SA be payable ? ā«Term of the policy - minimax ā«Age at entry ā«Premium payment modes ā«Any additional benefits like riders ? ā«Conditions/exclusions under each policy
- 9. Basic elements of life basic products ā« Life insurance business based on two instincts ā fear and greed ā«Term insurance takes care of fear of death ā« Pure endowment fulfills the greed for money ā«TI & PE are basic elements in every life insurance plan ā«Called the basic building blocks in all LI product design. Every company has different products to suit the need of every customer.
- 10. Contdā¦. ā«PE (savings only) seldom issued by insurance companies as a separate policy ā«TI has always been one of the product range of each LI company ā«A TI policy is a contract that provides life cover for a limitednumber of years, the face value of the policy being payable only when death occurs and nothing in case of survival
- 11. Features of term insurance ā«Can be issued for a short period of short, fixed terms. feature is itās low cost āhigh ā«Most important value. ā«Suitable for budget-conscious individuals who are looking for family protection against financial liabilities like loan, loss of income
- 12. Contdā¦.. ā«Employers can cover life of employees ā«Best form of collateral security against housing/education loan ā«No risk coverage beyond specified term ā«Conditions/flexibility may vary between companies ā«Unsuitable for those interested in maturity benefits, except premium-back cases
- 13. Contdā¦.. ā«May have renewable or convertible features ā«Some with fixed terms of 5-10 years have built-in automatic renewal feature, whereby at end of each fixed period, automatic renewal takes place. Premium increases with each renewal. ā«Restrictions may be placed by each company on the number of such renewals/maximum age for such renewals.
- 14. Contdā¦. ā«Convertible feature allows policy owner to have the option to exchange his term policy for a permanent policy, viz Whole life or Endowment policy without having to producefurtherevidence of insurability. ā«Good for young people fresh into careers.
- 15. Endowment Plans ā«This plan offers ā«Combination of PE & TI. face value plus accumulated bonuses on maturity & death. ā«May have single or regular premium paying modes of riders like ā«Several companies may offer choice AB/PDB ā«Suitable when life coveralong with medium term to long term savings needed.
- 16. Contdā¦.. ā«Not suitable for those looking for f lexibility to meet future lifestyle changes ā«Income/occupation may prevent policyholder from taking this plan. ā«Loans can be taken. ā«PH wants guaranteed MC/DC ā« Interest sensitive product - life insurance products give low returns & due to inflation, money value gets reduced long āterm.
- 17. Contdā¦. ā«Insurers try to add additional benefits like loyalty / guaranteed additions. ā«Allowing periodic returns of a portion of face value ā money back plans - risk , growth, liquidity. ā«Endowment plans allow people to SAVE, building a corpus for old age. ā«EI is decreasing TI & increasing investment (saving accumulation ). ā«Traditional & unit-linked plans offered.
- 18. Money back plans ā«Features of risk , growth & liquidity ā«Periodical cash outflow to PH ā«No loan granted under this plan ā«Suitable for those who need periodic cash f low to meet expenses, investments ā«Premium higher than regular endowment plan
- 19. Whole Life plans ā«Provides protection throughout life ā«Payment on death is certainty in contrast to TI. ā«An excellent way to give personās family financial protection throughout life and help them after his death. ā«An estate planning tool, tax-free returns ā«Ongoing & future family expenses
- 20. Types of whole life plans ā«Ordinary whole life - plain vanilla policies. Insured pays premium lifelong depending on his survival/death Certain maximum age fixed, treating as maturity claim if survival occurs. ā«Convertible endowment who need whole life -option to convert into after, say, 5 years. Helpful to people higher insurance , but temporarily cannot afford endowment plan
- 21. Childrenās Plans ā«Parent or guardian is proposer ā«Risk on life of child begins after child attains a specified age. ā«If age at commencement is 6 and specified age is 15, the gap of 9 years is deferrment period. ā«Date at which risk begins is deferred date. ā«No insurance cover during deferrment period ā if child dies, the premiums are refunded. ā«Risk begins automatically on deferred date without any medical test.
- 22. Contdā¦ā¦ ā«When risk commences , premium is low . ā«Title automatically passes to child on attaining 18 . ā«Process called vesting. ā«After vesting, policy becomes a contract between insurer and insured person. ā«Vesting cannot be less than 18. ā«Can be market-linked ā«Benefits for the child and traditional like premium waiver and payment of instalment claim in case of death of proposer ā useful for continuing education/expenses
- 23. Rural insurance ā«Several companies have primarily microinsurance term plans with refundof premia on survival. ā«Microinsurance (life) is protection of poor, rural people and their families against 3 Ds. ā«Microinsurance also deals with health and general insurance for the rural consumer
- 24. UNIT-LINKED INSURANCE PLANS ā«Combination of insurance & investment of choice ā«PH gets benefits from markets without keeping track of market movements or monitoring his investment portfolio ā«Ulips balance risk & return, investing premia in a variety of funds ā debt/equity/balanced ā«Amount invested is expressed in units. ā«Based on fund value, value of units vary. ā«Value of plan directly linked to value of fund. ā«On death, prior to maturity, PH paid SA or value of units whichever is greater
- 25. UNITS ā«Unit prices calculated regularly for each fund ā«UP = Total market value of assets plus current assets less current provisions / Total number of units on issue ā«Unit account can be enhanced by top-up premium ā«Switches from funds are allowed ā«Full value of unit account paid on maturity.
- 26. Investments ā«Choice of funds ā«Switch units between funds ā«Redirect investments to other funds ā«Vary premiums by making additional top-ups ā«Insurance desired must be specified from the beginning ā«SA to be selected after considering various charges ; larger SA , more premium goes for insurance & less for investment
- 27. NAV ā«NAV is the total value of the asset in the fund minus expenses paid/payable divided by number of units issued. ā«Issue value of a unit usually 10/- ā«NAV of a fund is indicator of value of the fund. ā«PH can find out value of his policy. ā« Insurer has to exhibit all charges ā Contribution related charges ā to cover running expenses one- time or of policy - commission/policy charges- regular depending on mode
- 28. Charges ā«Fund management fees - costs of buying/ selling once or various instruments for funds ā«Mortality charges ā risk cover ā paid recurring ā«Rider charges ā critical illness/AB ā«Switching charges - some companies may give free switches/year ā«Administration charges ā IT costs, operational costa, levied flat with option of increase yearly
- 29. FLOW -CHART OF A ULIP
- 30. Contribution Contribution Related Charge deducted Less 20% 20,000 - 4000= 16,000 Mortality & Rider Chargededucted 16,000 ā 750 = 15,250 For the age 30 ā mortality at 1.50/-per thousand 20,000/- Life Protection 500,000 The Client invests resultant in chosen funds 15,250/- invested in debt fund at a NAV of 16/- Invests in Funds debt/ equity or balanced UnitsAllocated 953.125 units allocated Fund Charges deducted Represented as NAV NA V of debt fund 16/- per unit
- 31. SUMMING UP ā« ULIP provides Life protection Investment Flexibility Transparency Rider options Liquidity Tax planning ā«HENCE , ULIPs act as a one-stop solution
- 32. THANK YOU