Life insurance provides financial security and protection from uncertainty. It helps compensate for the economic loss caused by death or disability through a system where many pool resources to help the few who experience a loss. While no monetary amount can replace a person, life insurance provides funds to dependents to help adjust to changed circumstances. It is an important risk management mechanism for individuals and families to maintain their standard of living when faced with life's uncertainties like death.

1. LIFE
INSURANCE

2. “SECURITY CAN BE THOUGHT OF
AS PEACE OF MIND AND FREEDOM
FROM UNCERTAINTY. INSECURITY
IMPLIES FEELINGS OF DOUBT, FEAR
& APPREHENSION. SECURITY IS
MEASURED BY THE PROBABILITY
THAT MAN’S NEEDS WILL BE
SATISFIED.”
S.S. HUEBNER

3. Introduction
• Man’s historical obsession with security
leading to concept of insurance
• Need for insurance due to presence of
risk & uncertainty in life
• Only certainty in life is uncertainty,
taxes & death
• It can never repair/replace a loss since
it is impossible to put a price on grief,
trauma and loss of a beloved one (LI)

4. Contd…..
• Monetary value offered by insurance
helps in adjusting to new circumstances
• Hence insurance is a risk- management
mechanism which seeks to compensate
loss of economic value of assets.
• Insurance relevant only in case of loss
• Protection required because assets face
accidental occurences called PERILS.

5. Contd…..
• Perils are earthquakes, accidents, theft,
death, fire, floods.
• Perils cause loss.
• Loss that perils cause is called RISK
NO UNCERTAINTY, NO RISK AND SO
NO INSURANCE

6. Life Insurance
• Modern concepts of insurance started
with marine insurance
• Joint family system was best form of
life insurance since ancient times
• Uncertainty & lack of security coupled
with break-up of joint family system
created need for LI
• Risks faced are DEATH, DISEASE,
DISABILITY

7. Contd…..
• Study of life insurance deals with risks
of dying early and living too long
• First life insurance office in India
opened by Bombay Mutual in 1870
• Insurance business nationalised in 1956
to form LIC, amalgamating 245 companies.
• LIC dominant market player till date
• IRDA act passed in 1999, opening
insurance sector

8. Contd…..
• Global players tied up with Indian
partners in 26:74 participation to form
joint venture companies….MaxNewYork
life, TataAig, BirlaSunlife etc
• Competition has benefited customer/pub
• Strategies were tech-savvy orientation,
product innovation, expanded distribution
channels, operational efficiency and
improved service to drive retention

9. Contd…..
• Great potential for life insurance in
India since premia is 4% of GDP.
• Increase in disposable income and
increased purchasing power of people.
• Greater spread and awareness campaigns
by companies with catchy slogans
• Availability of different distribution
channels like bancassurance, alternate
channels, agency,e-insurance, mallassurance

10. 7 A’s of life insurance
Agent
Actuary
Administrator
Asset-manager
Accountant
Auditor
Adjuster

11. Economic Death
• Economic death of breadwinner.
• Loss of chosen standard of living
• Needs like a decent life, good education
for children, own house, marriage,
healthcare, financial independence &
stability in old age …….all fulfilled by
breadwinner
• Greatest burden is empty purse. To rely
on children difficult/impossible

12. Contd…
• Death, disability, old age lead to
ECONOMIC DEATH of individual ,i.e
stoppage of regular income
• Most important asset of breadwinner –
INCOME –PRODUCING ABILITY
• Protection through life insurance may
save an individual/his dependents from
misery.LI gives certainty & cash flow.

13. Economic principles of
life insurance
• Basic economic principle of life insurance
is that RISK SUFFERED BY FEW IS
SPREAD OVER A LARGE NUMBER OF
PERSONS WHO FACE SAME RISK.
• Fund is created where those who face
similar risk will each contribute small
sum, out of which assistance is given to
those suffering consequences of an
economic death.

14. Mathematical principle
• SPREADING OF RISKS IS
ECONOMIC PRINCIPLE OF LIFE INS.
• How much each person contributes,
depending on several factors, is PREMIUM
• Process of fixing premium is done by
Mathematical principles

15. Legal principles
• When several people contribute to the
fund, it is necessary to establish
relationship between each individual and
the fund within provisions of law.
• Relevant laws of the land have to be
abided to establish legally acceptable
understanding, relationships & mutual
responsibilities. Law of contract.
• This is done through legal principles

16. Risks to economic
security
• Economic security relates to man’s
needs or wants
• These are never static
• Threat of not being fulfilled
• Satisfaction of these wants depends on
financial position of person, his
decision-making & economic scenario.
• Hence risk related to satisfaction of
one’s needs.

17. Risks to stability &
solutions
• For single individual - disease/disability
• For family man- disease,death,disability
• These threats can be solved by …..
Social security schemes of govt, which
is existent in India only for BPL people
Group insurance, available only in
organised sector
Individual efforts.

18. HENCE……….
“NOTHING MORE
UNCERTAIN THAN
LIFE AND NOTHING
MORE CERTAIN THAN
LIFE INSURANCE.”

19. ECONOMIC USES OF
LIFE INSURANCE
• Provides financial security to family
• A potent instrument for savings
• Makes dreams come true
• Collateral security for housing/education
loan
• Provides financial independence in old age
• Creditors can insure debtors for
recovery of loans after death of latter

20. Contd….
• Partners can insure each other’s lives
to the extent of capital invested in
firm.In case of death of partner, to
meet danger of withdrawal of capital
by legal heirs.
• Employers can buy group insurance as
part of employee welfare program to
boost productivity
• Key man insurance

21. Advantages of life
insurance
• Life insurance creates an estate –
amount paid to legal heirs is thrifges
determined at beginning of policy
• LI encourages thrift
• LI policies cannot be attached by court
or income tax.
• Can be assigned for personal loans
• No stamp duty required in case of TP
as a result of assignment

22. Contd….
• Payments are tax-free
• Premium paid gets IT exemption
• Safe and profitable investment with
regulatory presence
• Different types of duration to suit
different ages
• Claim payments are generally hassle-free
• LI companies are largest institutional
investors.

23. Contd….
• LI is a long-term contract. Lock-in
period is long. Funds generated are used
for housing, power, social security, water
supply, transport ,i.e infrastructure
development of country.

24. THANK
YOU !