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.
• 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.
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).
• 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.
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.
• 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
• 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.
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.
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.
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
Regulations & Regulatory Body
• Insurance Act, 1938
• Insurance Ordinance, 2000
• Department of Insurance, in April 1948 - Ministry of
– 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.
– Investigation into the affairs of
• Insurance companies
• Issuance of directives under the Law
– Inspection of the record of the
• 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.
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
• To improve and strengthen the financial soundness of
• To introduce market conduct provisions.
• To gradually liberalize and make reinsurance arrangements
• To establish the institution of Insurance Ombudsman.
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
• Provision has been made for the constitution of an Insurance
Tribunal, which shall have, civil as well as criminal
• Special provisions have been made for the establishment of a
Small Disputes Resolution Committee for speedy settlement of
• 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
• 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.
The Different Types of Insurance
• Life Insurance
– The risks that are covered by life insurance are:
• Premature Death
• Income during retirement
– The main products of life insurance Include:
Life annuity plan
Medical and health
• General Insurance
– The risks that are covered by general insurance are:
• Property Loss
• Liability arising from damage caused by yourself to a
• 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
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.
• 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.
Sources of funds
• The sources of funds in life insurance is
• An insurance premium is the amount of
money charged by a company for active
• Premium paid in advance .
• 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.
• 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.
• Premium is paid in all type of insurance.
Home owners' insurance.
How the premium rate calculated
• The rate is calculated or sets by the company
on the basis of
– Area living in
Uses of Funds
• Equities and unit trusts
– Investors purchase a share in the trust in the form of a
– 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
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
• 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.
• 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.
• 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
• 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.
• 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.
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
Facility of loans without affecting the
• 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
• Insurance plans provide attractive tax-benefits
for both at the time of entry and exit under
most of the plans.
REQUIRMENTS FOR LIFE
• 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.
REQUIRMENTS FOR LIFE
• NIC Copies of both the Policy holder and
nominee is needed at the time of buying the
• Family Info is required at the time of the policy
• Age of Father, Mother, Brother and Sister If they
• 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.