INSURANCE (FUND) MANAGEMENT

CONTENTS
SR NO 1 2 3 INTRODUCTION TYPES ADVANTAGES AND DISADVANTAGES TOPIC PAGE NO 4 5 8

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LIFE INSURANCE IN INDIA LIST OF INSURER

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TOP 10 PRIVATE INSURANCE COMPANIES IN INDIA

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INTRODUCTION
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits. The advantage for the policy owner is "peace of mind", in knowing that the death of the insured person will not result in financial hardship for loved ones and lenders. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion. Life-based contracts tend to fall into two major categories:

Protection policies designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. Investment policies where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life andvariable life policies.

TYPES

Life insurance may be divided into two basic classes: temporary and permanent; or the following subclasses: term, universal, whole life and endowment life insurance.

Term insurance
Term assurance provides life insurance coverage for a specified term. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else. There are three key factors to be considered in term insurance: 1. Face amount (protection or death benefit), 2. Premium to be paid (cost to the insured), and 3. Length of coverage (term). Various insurance companies sell term insurance with many different combinations of these three parameters. The face amount can remain constant or decline. The term can be for one or more years. The premium can remain level or increase. Common types of term insurance include level, annual renewable and mortgage insurance. Level term policy features a premium fixed for a period longer than a year. These terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years. Level term is often used for long-term planning and asset management as premiums remain constant year to year, allowing for long-term budgeting. At the end of the term, some policies contain a renewal or conversion option. With guaranteed renewal, the insurance company guarantees it will issue a policy of an equal or lesser amount without regard to the insurability of the insured and with a premium set for the insured's age at that time. Some companies however do not guarantee renewal, and require proof of insurability at the time of renewal. Renewal that requires proof of insurability often includes a conversion option that allows the insured to convert the term policy to a permanent one, possibly compelling the applicant to agree to higher premiums. Renewal and conversion options can be very important when selecting a policy. Annual renewable term is a one-year policy, but the insurance company guarantees it will issue a policy of an equal or lesser amount regardless of the insurability of the applicant, and with a premium set for the applicant's age at that time. Another common type of term insurance is mortgage life insurance, which usually involves a level-premium, declining face value policy. The face amount is intended to equal the amount of the mortgage on the policy owner's property, such that any outstanding amount on the applicant's mortgage will be paid should the applicant die. A policy holder insures his life for a specified term. If he dies before that specified term is up (with the exception of suicide), his estate or named beneficiary receives a payout. If he does not die before the term is up, he

receives nothing. However, in some European countries (notably Serbia), insurance policy is such that the policy holder receives the amount he has insured himself to, or the amount he has paid to the insurance company in [when?] total. Suicide used to be excluded from all insurance policies . However, after a number of court judgements, many insurers began awarding payouts in the event of suicide (except for cases where it can be demonstrated that the insured committed suicide solely to access the policy payout). Generally, if an insured person commits suicide within the first two policy years, the insurer will simply return the premiums paid as a compromise. After this period, the full death benefit may be paid in the event of suicide.

Permanent life insurance

Permanent life insurance is life insurance that remains active until the policy matures, unless the owner fails to pay the premium when due. The policy cannot be cancelled by the insurer for any reason except fraudulent application, and any such cancellation must occur within a period of time defined by law (usually two years). A permanent insurance policy accumulates a cash value, reducing the risk to which the insurance company is exposed, and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70-year-old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value. The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.

Whole life coverage

Whole life insurance provides lifetime death benefit coverage for a level premium in most cases. Premiums are much higher than term insurance at younger ages, but as term insurance premiums rise with age at each renewal, the cumulative value of all premiums paid across a lifetime are roughly equal if policies are maintained until average life expectancy. Part of the insurance contract stipulates that the policyholder is entitled to a cash value reserve, which is part of the policy and guaranteed by the company. This cash value can be accessed at any time through policy loans and are received income tax free. Policy loans are available until the insured's death. If there are any unpaid loans upon death, the insurer subtracts the loan amount from the death benefit and pays the remainder to the beneficiary named in the policy. While the marketing divisions of some life insurance companies often explain whole life as a "death benefit with a savings component", this distinction is artificial according to life insurance actuaries Albert E. Easton and Timothy [11] F. Harris. The cash value reserve builds up against the death benefit of the policy and reduces the net amount at risk. The net amount at risk is the amount the insurer must pay to the beneficiary should the insured die before the policy has accumulated an amount equal to the death benefit. It is the difference between the current cash value amount and the total death benefit amount. Because of this relationship between the cash value and death benefit, it may be more accurate to describe the policy as a single, indivisible product, as no actual separation of the cash value and death benefit is possible. The insurer is actually setting aside money as a cash reserve to pay the future death benefit claim. This suggests that the cash value is technically part of the death benefit, which is "earned" as cash over time. The lack of separation between the cash value and death benefit also explains why insurers do not pay both the death benefit and the cash value to the beneficiary. The advantages of whole life insurance are guaranteed death benefits, guaranteed cash values, fixed, predictable annual premiums and mortality and expense charges that will not reduce the cash value of the policy. The disadvantages of whole life are inflexibility of premiums and the fact that the internal rate of return in the policy may not be competitive with other savings alternatives. Riders are available that can allow one to increase the death benefit by paying additional premium. One such rider is a paid-up additions rider. The death benefit can also be increased through the use of policy dividends, though these dividends cannot be [12] guaranteed and may be higher or lower than historical rates over time. According to internal documents from some life insurance companies, like Massachusetts Mutual, the internal rate of return and dividend payment realized by the policyholder is often a function of when the policyholder buys the policy and how long that policy remains in force. Dividends paid on a whole life policy can be utilized in many ways. First, if "paid-up additions" is elected, dividends will purchase additional death benefit which will increase the death benefit of the policy to the named beneficiary. Since this additional death benefit generates cash value, it also increases the cash value of the policy. Another alternative is to opt in for 'reduced premiums' on some policies. This reduces the owed

premiums by the non-guaranteed dividends amount. A third option allows the owner to take the dividends as they are paid out (although some policies provide other/different/less options than these - it depends on the company for some cases). A final option is to invest the dividends in the insurance company's general or separate account.

Limited-pay
Another type of permanent insurance is Limited-pay life insurance, in which all the premiums are paid over a specified period after which no additional premiums are due to the policy in force. Common limited pay periods include 10-year, 20-year, and are paid out at the age of 65.

Endowments
Endowments are policies in which the cumulative cash value of the policy equals the death benefit at a certain age. The age at which this condition is reached is known as the endowment age. Endowments are considerably more expensive (in terms of annual premiums) than either whole life or universal life because the premium paying period is shortened and the endowment date is earlier. Endowment insurance is paid out whether the insured lives or dies, after a specific period (e.g. 15 years) or a specific age (e.g. 65).

Accidental death
Accidental death is a limited life insurance designed to cover the insured should they pass away due to an accident. Accidents include anything from an injury and upwards, but do not typically cover deaths resulting from health problems or suicide. Because they only cover accidents, these policies are much less expensive than other life insurance policies. It is also very commonly offered as accidental death and dismemberment insurance (AD&D) policy. In an AD&D policy, benefits are available not only for accidental death, but also for the loss of limbs or bodily functions, such as sight and hearing. Accidental death and AD&D policies very rarely pay a benefit, either because the cause of death is not covered by the policy, or the coverage is not maintained after the accident until death occurs. To be aware of what coverage they have, an insured should always review their policy for what it covers and what it excludes. Often, it does not cover an insured who puts themselves at risk in activities such as parachuting, flying, professional sports or involvement in a war (military or not). Also, some insurers will exclude death and injury due to (but not limited to) motor racing and mountaineering. Accidental death benefits can also be added to a standard life insurance policy as a rider. If this rider is purchased, the policy will generally pay double the face amount if the insured dies due to an accident. This used to be commonly referred to as a double indemnity policy. In some cases, insurers may even offer triple indemnity cover.

ADVANTAGES AND DISADVANTAGES

Life insurance refers to the protective cover on the life of the individual insured and provision of financial benefits in case of loss of life of that individual within a certain period. This policy is a mixed blessing.

ADVANTAGES;
Some of the various benefits of insurance policy are listed below:

1. Mental peace
The most important benefit of life insurance is that it assures mental peace. When a person goes for life insurance, he and his family are relieved from worries of future. Thus, it ensures mental peace.

2. Financial Security
The policy of life insurance provides economical security to the family of the policy holder in case of death of the breadwinner. On occurrence of this unfortunate event, the family is forced with a cash crunch. But by availing a life insurance policy, this problem of cash crunch is solved by a lump sum amount paid by the insurer.

3. Loan in case of need

There are circumstances in life when the individual needs funds but is unable to get from various sources. The life insurance policy also provides a solution to this problem as loan can be taken against the policy and need not be repaid as the loan amount is deducted from the police value on maturity.

4. Cover for whole life

The life insurance policy provides coverage for the whole life of the policyholder. It also provides protection in cases of serious illness.

5. Tax-free source of savings

In addition it is a source of savings which is completely tax-free

6. Source of mitigating certain liabilities

The life insurance policy provides a great source to satisfy certain needs and liabilities like loans and mortgages.

7. Maintenance of living standard

The life insurance policy helps in maintaining the living standard of the family even after the death of the breadwinner by providing financial benefits to the family.

8. Enhanced coverage
The policy provides enhanced coverage by providing for medical benefits.

DISADVANTAGES
The disadvantages of life insurance are as follows:

1. Expensive
The life insurance can prove to be a costly affair, particularly when suffering from illness and regarded by insurers as High Risk due to some reasons like old age etc.

2. Irrelevant in case of no-family person

The life insurance policy is irrelevant for an individual who is not having any family or dependents

3. Increasing premiums
The premium payable increases with the increase in age. But the income gradually decreases which makes it difficult to strike a balance.

4. No benefit in case of long life

Some policies do not provide any cash benefit on the policy holder surviving the policy term. In that case, amount paid for premiums is wasted. From the above discussion, it becomes clear that though life insurance is a mixed blessing, yet its advantages outweigh its disadvantages. But at the same time, it depends on the requirements of the individual.

LIFE INSURANCE IN INDIA

Life Insurance is the fastest growing sector in India since 2000 as Government allowed Private players and FDI up to 26%. Life Insurance in India was nationalised by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC. In 1993 the Government of Republic of India appointed RN Malhotra Committee to lay down a road map for privatisation of the life insurance sector. While the committee submitted its report in 1994, it took another six years before the enabling legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. The same year that the newly appointed insurance regulator - Insurance Regulatory and Development Authority IRDAstarted issuing licenses to private life insurers.

LIST OF LIFE ISSUERS

Apart from Life Insurance Corporation, the public sector life insurer, there are 23 other private sector life insurers, most of them joint ventures between Indian groups and global insurance giants.

Life Insurer in Public Sector 1. Life Insurance Corporation of India Life Insurers in Private Sector 1. SBI Life Insurance 2. Metlife India Life Insurance 3. ICICI Prudential Life Insurance 4. Bajaj Allianz Life 5. Max New York Life Insurance 6. Sahara Life Insurance 7. Tata AIG Life 8. HDFC Standard Life 9. Birla Sunlife 10. Kotak Life Insurance 11. Aviva Life Insurance 12. Reliance Life Insurance Company Limited - Formerly known as AMP Sanmar LIC 13. ING Vysya Life Insurance 14. Shriram Life Insurance 15. Bharti AXA Life Insurance Co Ltd 16. Future Generali Life Insurance Co Ltd 17. IDBI Fedaral Life Insurance 18. AEGON Religare Life Insurance 19. DLF Pramerica Life Insurance 20. CANARA HSBC Oriental Bank of Commerce LIFE INSURANCE 21. IndiaFirst Life Insurance Company 22. Star Union Dia-ichi Life Insurance Co. Ltd 23. Edelweiss Tokio Life Insurance Company Ltd

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TOP 10 PRIVATE INSURANCE COMPANIES IN INDIA

1. ICICI Prudential: Its a joint venture of ICICI bank, one of the biggest bank of India and Prudential PLC, a financial monster from Britain with 74% and 26% holding respectively. ICICI Prudential has over 1500 offices nationwide and it holds the total asset of over $13 billion.

2. Bajaj Allianz: A joint venture between two big companies, Bajaj Group and Allianz AG. Headquartered in Pune, the company is one of the fastest growing general and life insurance company in India with over 1200 branches across India and variety of services in insurance sector.

3. Tata AIG: Another joint venture from India's monster Tata Group and America's insurance specialist, AIA (American International Assurance). Started operations in 2001, the stock holding is 74% and 26% for Tata and AIA respectively. It works in almost every verticals in its sector.

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4. Aviva India: Started its operation in 2002, its a joint venture between world's insurance mosnter Aviva and India's Dabur Group with a stock sharingof 26% and 74% respectevely. It has over 160 branches in India and an employee strength of over 5000. Apart from that, Aviva has already hasassociates in over 70 countries.

5. MetLife India: "Have you met life today?" this signature line is from Metropolitan Life InsuranceCompany, commonly known as MetLife. Founded in 1868 in New York, the company is one of the oldestlife insurance company

6. Max New York Life Insurance: Founded in 2000 and started its operation in 2001, Max New York Life Insurance is a joint venture between Max India Ltd and New York Life Enterprise. With over 25 life insurance policies, it has a turnover of around $400 million.

7. ING Vysya Life Insurance: Also known as ING Life, the company is headquartered in Bangalore. Started its operations in 2001, the company recently has completed a decade in India. Its a joint venture between Exide Industries and ING Insurance International BV. With over 1 miilion customers, it has presense in over 200 cities in India.

8. AEGON Religare Life Insurance: Its a joint venture among AEGON - an international life insurance company, Religare - world's financial service leader and India's financial service group, Bennett, Coleman and Company. Started its business in 2008, the company has gain good market share in short span of time.

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9. Birla Sun Life: Its a joint venture between Aditya Birla Group and Sun Life Financial from canada. Established in 2000, the company has experience of over 10 years. It has a network of over 600 branches across India, covers 1500 cities, around 1350000 life advisers and has a revenue of over $500 million.

10. Bharti AXA Life Insurance: Started in 2006, its a joint venture between Bharti Enterprise - a leading telecom company in India (Airtel) and AXA Group - an international market leader in insurance sector. with 74% and 26% market share respectively. With presence in all over India, the company provides many services in all verticals.

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