Financial Market Research
Life Insurance
Life Insurance
• Life insurance is a contract between an
insured (insurance policy holder) and an
insurer or assurer, wher...
LIFE INSURANCE
History of life insurance:-History of insurance refers to the development of a
modern business in insurance...
• The first methods of transferring or distributing risk
were practiced by Chinese and Babylonian traders as
long ago as t...
Achaemenian monarchs were the first to insure their people and
made it official by registering the insuring process in gov...
• The Greeks and Romans introduced the origins of health
and life insurance c. 600 BC when they created guilds
called "ben...
Insurance as we know it today can be traced to
the Great Fire of London, which in 1666
devoured 13,200 houses. In the afte...
American History
Benjamin Franklin helped to popularize and make
standard the practice of insurance, particularly
Property...
Health Insurance in US
Accident insurance was first offered in the
United States by the Franklin Health
Assurance Company ...
Regulations & Regulatory Body
• Insurance Act, 1938
• Insurance Ordinance, 2000
• Department of Insurance, in April 1948 -...
Continued…
– Investigation into the affairs of
• Insurance companies
• Issuance of directives under the Law
– Inspection o...
MAIN OBJECTIVES OF
THE INSURANCE ORDINANCE, 2000
• The new insurance law has the following objectives:
• To correct the ex...
MAIN FEATURES OF
INSURANCE ORDINANCE, 2000
• The Ordinance provides for regulation of Insurance Industry by an
autonomous ...
Continued…
• Provision has been made for the constitution of an Insurance
Tribunal, which shall have, civil as well as cri...
The Different Types of Insurance
• Life Insurance
– The risks that are covered by life insurance are:
• Premature Death
• ...
Continued…
• General Insurance
– The risks that are covered by general insurance are:
• Property Loss
• Liability arising ...
Insurance Companies in Pakistan
• Public sector
–
–
–
–

National Insurance Corporation
Pakistan Reinsurance Company Ltd.
...
Continued…
• Incorporated abroad
– ACE Insurance Aid Pacific Ltd.
– CGU Assurance Company Ltd.
– New Hampshire Insurance C...
Sources of funds

• The sources of funds in life insurance is
premium .
Premium
• An insurance premium is the amount of
money charged by a company for active
coverage.

• Premium paid in advance...
Premium (cont.)
• The sum a person pays in premiums, also
referred to as the rate, is determined by several
factors, inclu...
Premium(cont.)
• And the amount can change over time.
• If insurance premiums are not paid, the policy
is typically consid...
Premium (cont.)
• Premium is paid in all type of insurance.
•
•
•
•
•

For example:
Life insurance.
Health insurance.
Car ...
How the premium rate calculated
• The rate is calculated or sets by the company
on the basis of
– Age
– Gender
– Health
– ...
Uses of Funds
• Equities and unit trusts
– Investors purchase a share in the trust in the form of a
‘unit’
– The trustee p...
Benefits of Life Insurance
• Risk Cover
Life today is full of uncertainties; in this scenario
Life Insurance ensures that ...
• Planning for life stage needs
– Life Insurance not only provides for financial support
in the event of untimely death bu...
• Protection against rising health expenses
– Life Insurers through riders or stand alone health
insurance plans offer the...
• Builds the habit of thrift
– Life Insurance is a long-term contract where as
policyholder, you have to pay a fixed amoun...
• Assured income through annuities
– Life Insurance is one of the best instruments for
retirement planning. The money save...
• Protection plus savings over a long term
– Since traditional policies are viewed both by the
distributors as well as the...
Growth through dividends
• Traditional policies offer an opportunity to
participate in the economic growth without
taking ...
Facility of loans without affecting the
policy benefits
• Policyholders have the option of taking loan
against the policy....
Tax Benefits
• Insurance plans provide attractive tax-benefits
for both at the time of entry and exit under
most of the pl...
Requirements of Life Insurance
REQUIRMENTS FOR LIFE
INSURANCE
• For a Life Insurance Policy First you have to
decide a nomination, God Forbid In case of
...
REQUIRMENTS FOR LIFE
INSURANCE
• NIC Copies of both the Policy holder and
nominee is needed at the time of buying the
poli...
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Life Insurance

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A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.

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Life Insurance

  1. 1. Financial Market Research Life Insurance
  2. 2. Life Insurance • Life insurance is a contract between an insured (insurance policy holder) and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") in exchange for a premium, upon the death of the insured person.
  3. 3. LIFE INSURANCE History of life insurance:-History of insurance refers to the development of a modern business in insurance against risks, especially regarding ships, cargo, and buildings ("property" and "fire"), death ("life" insurance), automobile accidents ("auto"), and the cost of medical treatment (health insurance).
  4. 4. • The first methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rdand 2nd millennia BC, respectively • A thousand years later, the inhabitants of Rhodes created the 'general average', which allowed groups of merchants to pay to insure their goods being shipped together. The collected premiums would be used to reimburse any merchant whose goods were jettisoned during transport, whether to storm or sinkage.
  5. 5. Achaemenian monarchs were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Nouruz (beginning of the Persian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.
  6. 6. • The Greeks and Romans introduced the origins of health and life insurance c. 600 BC when they created guilds called "benevolent societies" which cared for the families of deceased members, as well as paying funeral expenses of members. • Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. The first known insurance contract dates from Genoa in 1347, and in the next century maritime insurance developed widely and premiums were intuitively varied with risks.
  7. 7. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.
  8. 8. American History Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly Property insurance to spread the risk of loss from fire, in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses.
  9. 9. Health Insurance in US Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the US by 1866, but the industry consolidated rapidly soon thereafter.
  10. 10. Regulations & Regulatory Body • Insurance Act, 1938 • Insurance Ordinance, 2000 • Department of Insurance, in April 1948 - Ministry of Commerce: – Registration and regulation – Examination of • Annual accounts, • Actuarial reports, • Solvency margins to • Re-insurance arrangements, • Level of management expenses, • Premium rates and terms • Conditions of policies of insurance companies.
  11. 11. Continued… – Investigation into the affairs of • Insurance companies • Issuance of directives under the Law – Inspection of the record of the • Companies • Insurance intermediaries – Approvals and permissions under the powers conferred under the Insurance Law – Appointment of administrators to replace board of directors and to make applications to the Courts for winding up.
  12. 12. MAIN OBJECTIVES OF THE INSURANCE ORDINANCE, 2000 • The new insurance law has the following objectives: • To correct the existing defects and strengthen the regulatory system of insurance. • To replace the existing Department of Insurance with a new regulatory authority . • To improve the capitalization and administration of insurance industry • To improve and strengthen the financial soundness of insurance companies • To introduce market conduct provisions. • To gradually liberalize and make reinsurance arrangements more effective. • To establish the institution of Insurance Ombudsman.
  13. 13. MAIN FEATURES OF INSURANCE ORDINANCE, 2000 • The Ordinance provides for regulation of Insurance Industry by an autonomous body i.e. the Commission replacing the institution of Controller, Department of Insurance. • The insurance business has been bifurcated into two main divisions: – Life Insurance Business. – Non-Life Insurance Business. • New Capital requirements for life insurance and non-life insurance companies have been raised from – Rs. 100 million to Rs. 150 million – Rs. 40 million to Rs. 80 million. • The minimum solvency margin has been made into a floating rate. • Enforcement of the insurance law has been made more effective. • Detailed provisions have been made to prevent insurers from indulging in practices prejudicial to the interest of policyholders. • Provision have been made for the institution of an Insurance Ombudsman
  14. 14. Continued… • Provision has been made for the constitution of an Insurance Tribunal, which shall have, civil as well as criminal jurisdiction. • Special provisions have been made for the establishment of a Small Disputes Resolution Committee for speedy settlement of minor claims. • Penal provisions for contravention of the insurance law have been made stricter. • Reinsurance arrangements have been strengthened and rules would be made for reinsurance arrangements even outside Pakistan. • Life insurance business companies are required to maintain separate funds for separate classes of their business. • Adequate disclosure requirements by insurance companies have been prescribed for purposes of reporting to the regulator.
  15. 15. The Different Types of Insurance • Life Insurance – The risks that are covered by life insurance are: • Premature Death • Income during retirement • Illness – The main products of life insurance Include: • • • • • • • Whole life Endowment Term Investment linked Life annuity plan Medical and health General Insurance
  16. 16. Continued… • General Insurance – The risks that are covered by general insurance are: • Property Loss • Liability arising from damage caused by yourself to a third party • Accidental death or injury – The main products of General Insurance Includes: • Motor Insurance • Fire / house owners / Householders insurance • Personal accident insurance • Medical and Health insurance • Travel insurance
  17. 17. Insurance Companies in Pakistan • Public sector – – – – National Insurance Corporation Pakistan Reinsurance Company Ltd. Postal Life Insurance State Life Insurance Corporation Ltd. • Private sector – Incorporated in Pakistan • • • • • Adamjee Insurance Company Ltd. Agro General Insurance Company Ltd. Allianz EFU Health Insurance Company Ltd. Alpha Insurance Company Ltd. American Life Insurance Company Ltd.
  18. 18. Continued… • Incorporated abroad – ACE Insurance Aid Pacific Ltd. – CGU Assurance Company Ltd. – New Hampshire Insurance Company Ltd. – New Zealand Insurance Company Ltd. – Royal & Sun Alliance Assurance plc.
  19. 19. Sources of funds • The sources of funds in life insurance is premium .
  20. 20. Premium • An insurance premium is the amount of money charged by a company for active coverage. • Premium paid in advance .
  21. 21. Premium (cont.) • The sum a person pays in premiums, also referred to as the rate, is determined by several factors, including age, health, and the area a person lives in. • People pay these rates annually or in smaller payments over the course of the year.
  22. 22. Premium(cont.) • And the amount can change over time. • If insurance premiums are not paid, the policy is typically considered void. • Companies will not honor claims against it.
  23. 23. Premium (cont.) • Premium is paid in all type of insurance. • • • • • For example: Life insurance. Health insurance. Car insurance. Home owners' insurance.
  24. 24. How the premium rate calculated • The rate is calculated or sets by the company on the basis of – Age – Gender – Health – Area living in
  25. 25. Uses of Funds • Equities and unit trusts – Investors purchase a share in the trust in the form of a ‘unit’ – The trustee pools the funds received from investors and invests them • Long-term securities – Those investments which are more than a year • Invested overseas – Can be invested outside the country
  26. 26. Benefits of Life Insurance • Risk Cover Life today is full of uncertainties; in this scenario Life Insurance ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event.
  27. 27. • Planning for life stage needs – Life Insurance not only provides for financial support in the event of untimely death but also acts as a long term investment. You can meet your goals, be it your children's education, their marriage, building your dream home or planning a relaxed retired life, according to your life stage and risk appetite. Traditional life insurance policies i.e. traditional endowment plans, offer in-built guarantees and defined maturity benefits through variety of product options such as Money Back, Guaranteed Cash Values, Guaranteed Maturity Values.
  28. 28. • Protection against rising health expenses – Life Insurers through riders or stand alone health insurance plans offer the benefits of protection against critical diseases and hospitalization expenses. This benefit has assumed critical importance given the increasing incidence of lifestyle diseases and escalating medical costs.
  29. 29. • Builds the habit of thrift – Life Insurance is a long-term contract where as policyholder, you have to pay a fixed amount at a defined periodicity. This builds the habit of longterm savings. Regular savings over a long period ensures that a decent corpus is built to meet financial needs at various stage
  30. 30. • Assured income through annuities – Life Insurance is one of the best instruments for retirement planning. The money saved during the earning life span is utilized to provide a steady source of income during the retired phase of life.
  31. 31. • Protection plus savings over a long term – Since traditional policies are viewed both by the distributors as well as the customers as a long term commitment; these policies help the policyholders meet the dual need of protection and long term wealth creation efficiently.
  32. 32. Growth through dividends • Traditional policies offer an opportunity to participate in the economic growth without taking the investment risk. The investment income is distributed among the policyholders through annual announcement of dividends/bonus.
  33. 33. Facility of loans without affecting the policy benefits • Policyholders have the option of taking loan against the policy. This helps you meet your unplanned life stage needs without adversely affecting the benefits of the policy they have bought.
  34. 34. Tax Benefits • Insurance plans provide attractive tax-benefits for both at the time of entry and exit under most of the plans.
  35. 35. Requirements of Life Insurance
  36. 36. REQUIRMENTS FOR LIFE INSURANCE • For a Life Insurance Policy First you have to decide a nomination, God Forbid In case of Death of the Policy Holder, the money will be given to the nominee. • A person should mention the diseases from which he is suffering from. • Not in case of all the diseases the policy is allowed to be issued. • According to the company’s policies, the maximum age of the policy holder is decided. Till what age he can buy the policy.
  37. 37. REQUIRMENTS FOR LIFE INSURANCE • NIC Copies of both the Policy holder and nominee is needed at the time of buying the policy. • Family Info is required at the time of the policy purchase. • Age of Father, Mother, Brother and Sister If they are alive. • If Dead then the age of the death is required. • Weight and waist of the policy buyer is required to check he is n0t over weight.

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