2. Introduction- Need for products
“Different people want different benefits and
different mixes of benefits .”
Philip Kotler

3. What is a product ?
“ A product is anything that can be offered to
a market for attention, acquisition , use or
consumption and that might satisfy a need or
want .”
Philip Kotler

4. Introduction
 Companies may possess variety product mix
 Half of profits of all US Fortune companies
came from products that did not exist ten years
ago.
 Companies introduce new products to tap
existing clients and explore new segments

5. Why is there a need for new
products ?
 Changes in tastes of customers
 Intense competition
 Change in economic/social environment
 Increase in purchasing power
 Failure of old products/ recently launched
products - actual product may not have
been properly designed, incorrectly positioned,
poorly advertised, greater competition.

6. Insurance products
 Are described as UNSOUGHT consumer goods
by Kotler.
“ 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.”
 Unsought goods require lot of advertising,
personal selling and marketing efforts.
 Life insurance is seldom bought, always sold .

7. Life Insurance Products
 All products require approval of IRDA before
launch, designed by actuaries.
 Individual (including pension ) and group products
 Products may be packaged/ straight-jacketed
(“take it or leave it “) - could work only in
monopoly environment
 Non-packaged -flexibility –with riders/add-ons -
available with competition by private players
 One single product cannot suit all customers
 Indian consumer is curious and demanding

8. Features of any life insurance
product
 Who can be insured ?
 What can be the sum assured ?
 Under what events would SA be payable ?
 How/when would the SA be payable ?
 Term of the policy - minimax
 Age at entry
 Premium payment modes
 Any additional benefits like riders ?
 Conditions/exclusions under each policy

9. Basic elements of life
products
 Life insurance business based on two basic
instincts – fear and greed
 Term insurance takes care of fear of death
 Pure endowment fulfills the greed for money
 TI & PE are basic elements in every life insurance
plan
 Called the basic building blocks in all LI product
design. Every company has different products to
suit the need of every customer.

10. Contd….
 PE (savings only) seldom issued by insurance
companies as a separate policy
 TI has always been one of the product range of
each LI company
 A TI policy is a contract that provides life cover
for a limited number 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
 Can be issued for a short period of short, fixed
terms.
 Most important feature is it’s low cost –high
value.
 Suitable for budget-conscious individuals who are
looking for family protection against financial
liabilities like loan, loss of income

12. Contd…..
 Employers can cover life of employees
 Best form of collateral security against
housing/education loan
 No risk coverage beyond specified term
 Conditions/flexibility may vary between companies
 Unsuitable for those interested in maturity
benefits, except premium-back cases

13. Contd…..
 May have renewable or convertible features
 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.
 Restrictions may be placed by each company on
the number of such renewals/maximum age for
such renewals.

14. Contd….
 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 produce further evidence
of insurability.
 Good for young people fresh into careers.

15. Endowment Plans
 Combination of PE & TI.
 This plan offers face value plus accumulated
bonuses on maturity & death.
 May have single or regular premium paying
modes
 Several companies may offer choice of riders like
AB/PDB
 Suitable when life cover along with medium term
to long term savings needed.

16. Contd…..
 Not suitable for those looking for flexibility to
meet future lifestyle changes
 Income/occupation may prevent policyholder from
taking this plan.
 Loans can be taken.
 PH wants guaranteed MC/DC
 Interest sensitive product - life insurance products
give low returns & due to inflation, money value
gets reduced long –term.

17. Contd….
 Insurers try to add additional benefits like loyalty
/ guaranteed additions.
 Allowing periodic returns of a portion of face
value – money back plans - risk , growth, liquidity.
 Endowment plans allow people to SAVE, building
a corpus for old age.
 EI is decreasing TI & increasing investment
(saving accumulation ).
 Traditional & unit-linked plans offered.

18. Money back plans
 Features of risk , growth & liquidity
 Periodical cash outflow to PH
 No loan granted under this plan
 Suitable for those who need periodic cash flow to
meet expenses, investments
 Premium higher than regular endowment plan

19. Whole Life plans
 Provides protection throughout life
 Payment on death is certainty in contrast to TI.
 An excellent way to give person’s family financial
protection throughout life and help them after his
death.
 An estate planning tool, tax-free returns
 Ongoing & future family expenses

20. Types of whole life plans
 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.
 Convertible whole life -option to convert into
endowment after, say, 5 years. Helpful to people
who need higher insurance , but temporarily
cannot afford endowment plan

21. Children’s Plans
 Parent or guardian is proposer
 Risk on life of child begins after child attains a
specified age.
 If age at commencement is 6 and specified age
is 15, the gap of 9 years is deferrment period.
 Date at which risk begins is deferred date.
 No insurance cover during deferrment period –
if child dies, the premiums are refunded.
 Risk begins automatically on deferred date
without any medical test.

22. Contd……
 When risk commences , premium is low .
 Title automatically passes to child on attaining 18 .
 Process called vesting.
 After vesting, policy becomes a contract between
insurer and insured person.
 Vesting cannot be less than 18.
 Can be market-linked and traditional
 Benefits for the child like premium waiver and
payment of instalment claim in case of death of
proposer – useful for continuing education/expenses

23. Rural insurance
 Several companies have primarily microinsurance
term plans with refund of premia on survival.
 Microinsurance (life) is protection of poor, rural
people and their families against 3 Ds.
 Microinsurance also deals with health and general
insurance for the rural consumer

24. UNIT-LINKED INSURANCE PLANS
 Combination of insurance & investment of choice
 PH gets benefits from markets without keeping
track of market movements or monitoring his
investment portfolio
 Ulips balance risk & return, investing premia in a
variety of funds – debt/equity/balanced
 Amount invested is expressed in units.
 Based on fund value, value of units vary.
 Value of plan directly linked to value of fund.
 On death, prior to maturity, PH paid SA or value of
units whichever is greater

25. UNITS
 Unit prices calculated regularly for each fund
 UP = Total market value of assets plus current
assets less current provisions / Total number of
units on issue
 Unit account can be enhanced by top-up
premium
 Switches from funds are allowed
 Full value of unit account paid on maturity.

26. Investments
 Choice of funds
 Switch units between funds
 Redirect investments to other funds
 Vary premiums by making additional top-ups
 Insurance desired must be specified from the
beginning
 SA to be selected after considering various charges
; larger SA , more premium goes for insurance &
less for investment

27. NAV
 NAV is the total value of the asset in the fund minus
expenses paid/payable divided by number of units
issued.
 Issue value of a unit usually 10/-
 NAV of a fund is indicator of value of the fund.
 PH can find out value of his policy.
 Insurer has to exhibit all charges –
Contribution related charges – to cover running
expenses of policy - commission/policy charges- one-
time or regular depending on mode

28. Charges
 Fund management fees - costs of buying/ selling
various instruments for funds
 Mortality charges – risk cover – paid once or
recurring
 Rider charges – critical illness/AB
 Switching charges - some companies may give
free switches/year
 Administration charges – 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 Charge deducted
16,000 – 750 = 15,250
For the age 30 – 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
Units Allocated
953.125 units allocated
Fund Charges deducted
Represented as NAV
NAV of debt fund 16/- per unit

31. SUMMING UP
 ULIP provides
Life protection
Investment
Flexibility
Transparency
Rider options
Liquidity
Tax planning
 HENCE , ULIPs act as a one-stop solution

32. THANK
YOU