To insert your company logo on this slide

1 To insert your company logo on this slideFrom the Inser...

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1 To insert your company logo on this slideFrom the Insert Menu Select “Picture” Locate your logo file Click OK To resize the logo Click anywhere inside the logo. The boxes that appear outside the logo are known as “resize handles.” Use these to resize the object. If you hold down the shift key before using the resize handles, you will maintain the proportions of the object you wish to resize. Our vision is for the preservation of wealth, for the well being of our aged, for the advancement of our youth, to provide for the unprovided for and for the protection of our children. Our endeavor is to witness the growth and progress and remain provided for whole of our life. life insurance Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

2 This however, unfortunately, does not happen alwaysThis however, unfortunately, does not happen always... As for illness and disease, it is hard for us to know the mind of God, but it may be that these trials... The fact that we live in a beautiful, orderly universe, our desire to live and live decently increases. This being so, we would be last to think of our loved ones being deprived of the pleasure and beauty of this wonderful universe. Life Insurance is one, which helps us realise some of our dreams To insert your company logo on this slide From the Insert Menu Select “Picture” Locate your logo file Click OK To resize the logo Click anywhere inside the logo. The boxes that appear outside the logo are known as “resize handles.” Use these to resize the object. If you hold down the shift key before using the resize handles, you will maintain the proportions of the object you wish to resize. life insurance Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

3 A Secured Tomorrow life insuranceTo insert your company logo on this slide From the Insert Menu Select “Picture” Locate your logo file Click OK To resize the logo Click anywhere inside the logo. The boxes that appear outside the logo are known as “resize handles.” Use these to resize the object. If you hold down the shift key before using the resize handles, you will maintain the proportions of the object you wish to resize. life insurance A Secured Tomorrow Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

4 To insert your company logo on this slideFrom the Insert Menu Select “Picture” Locate your logo file Click OK To resize the logo Click anywhere inside the logo. The boxes that appear outside the logo are known as “resize handles.” Use these to resize the object. If you hold down the shift key before using the resize handles, you will maintain the proportions of the object you wish to resize. what is life insurance? A life insurance is a contract stating that an insurance company will pay a benefit when the insured person dies. If you are the insured, this benefit will be paid to your family or business (called beneficiaries). Benefits Secured Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

5 why do I need it Life insurance is a fundamentalpart of a sound financial plan. Protecting your financial resources, such as your present and future income, against the uncertainties of life. The proceeds from a life insurance policy could mean that your family won't have to sell assets to pay outstanding bills or taxes. What's more, there is no income tax on life insurance benefits. financial plan with protection Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

7 what is risk it is uncertainty concerning the occurrence of a lossRisk is the Basic problem with which insurance deals An Event has Risk when there is 1. Indeterminacy: Outcome in question. 2. Potential for loss: At least one outcome is undesirable it is uncertainty concerning the occurrence of a loss Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

8 how does idea of risk affect me?The Burden of Risk Feeling of frustration, mental unrest, and fear & worry Deterrent effect on capital accumulation Higher cost of capital You may need an emergency fund Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

9 Loss control (risk reduction)How to deal with risk Methods Avoidance Loss control (risk reduction) Non-insurance Transfer Insurance insurance Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

10 Insurable risks Insurable risks Non-insurable risks 1. Financial2. Particular 3. Pure Non-insurable risks 1. Non-financial 2. Fundamental 3. Speculative Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

11 Elements of an Insurable RiskLarge numbers of exposure units Definite and measurable (Calculable) loss Random (fortuitous) loss Non-catastrophic loss Premium should be economically life insurance Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

12 Participating & Non-ParticipatingTypes of Life Insurance Participating & Non-Participating as you like Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

13 Participating business Life Insurance Participating business The policyholder shares in the overall profits of the business but takes on some of the risks ‘profits’ include investment, mortality, expenses, etc. Non-participating business: The shareholder takes all the profits and losses but bears all the risks Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

14 Life Insurance Coverage Types ofPure Protection Term Insurance Protection and Savings Whole Life Insurance Endowment Insurance Universal Life Insurance Adjustable Life Insurance Variable Life Insurance choice Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

15 Term Insurance Benefit payable on defined event(death)Premium very small relative to potential payout Uncertainty as to - whether claim will eventuate - when it will occur Insurance company pools risks from many policyholders Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

16 features Term Life Yearly Renewable Key Features ProductYearly renewable term insurance contract Yearly Renewable Periodic income payments while totally disabled (commencing after an agreed waiting period) Income Protection Lump sum paid on health-related event - e.g. heart attack, stroke Trauma Lump sum paid on total and permanent disability (an ‘add-on’ to term cover) TPD Lump sum paid on death during the period of the contract Term Life Premiums Level Level or Increasing Increase with age Normally increasing (yearly renewable cover) Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

17 Whole Life Straight (ordinary) whole life provides protection for insured’s entire lifetime (until age 100) with premiums payable for lifetime. Limited-pay whole life provides protection for entire lifetime (until age 100) with (higher) premiums payable for a shorter time. Limitation is the ability to purchase an amount that meets insured’s needs Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

18 Endowment Life InsuranceEndowment policies promise to pay face amount if the insured dies during the policy period and also to pay the face amount if the insured survives the policy period. Endowment contracts are bundles of insurance and savings. Endowment policies are issued for a term period such as 10 or 20 years Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

19 annuities When faced with the change and uncertainty of the world around them, some members want an accumulation product that provides tax advantages, a death benefit, the potential for lifetime income, and the extra safety and security of guarantees. For these members, a fixed annuity—either single premium or flexible premium—may be a solution for their financial plan Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

20 Annuities Types Fully Guaranteed Non- Guaranteed Immediate AnnuityDeferred Annuity Allocated Annuity Income commences immediately contract is established Income commences from an agreed age Policyholder draws regular income (within specified limits) from account Life Insurer bears mortality and investment risk Policyholder bears risks Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

21 Underwriting principlesGroup Insurance Underwriting principles Insurance incidental to the group Flow of persons through the group Automatic determination of benefits Minimum participation requirements Third-party sharing of cost Simple and efficient administration Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

22 How does an individual contributeBy paying premium amounts check malafide acts Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

23 Rational of Insurance premiumSimplest form of life insurance is yearly renewable term. Provides coverage for one year only Permits insured to renew for successive years at higher premium Increasing mortality produces increasing rates as the insured grows older Level premiums are worked out and applied through out the term of contract Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

25 how does insurer manage riskincrease the size of your sample and accuracy of prediction improves. result risk reduction for Insurers. Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

26 Diversification Through Pooling (Risk reduction through combination)insurance Benefits Diversification Through Pooling (Risk reduction through combination) Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

27 Risks in Life InsuranceOperational Risk InvestmentRisk Life ALM Market InvestmentCreditRisk Mortality Morbidity Business Event Lapses / persistency New Business Pricing Margins Volumes Expenses Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

28 Distributable ProfitsLife Funds Life companies usually maintain several statutory funds Distributable Profits MoS profits are earned fairly evenly over the life of a policy. Distributable profits reflect capital requirements. MoS Profits (smoothed) Distributable Profits Year • capital released capital absorbed Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

29 Appraisal Value ‘Appraisal Value’ (AV) is a measure of the value of a life company and is used to support the Directors’ valuations. It comprises: 1. Net Tangible Assets 2. Value of Inforce Business present value of future margins less cost of tying up capital (discount rate > earning rate) 3. Value of future New Business present value of expected margins on expected future new business Like MoS, Appraisal Values also use DCF methodology and ‘best estimate’ assumptions. Unlike MoS, which calculates the value of future profits in order to derive the profit earned during a particular period, the AV is attempting to place an economic value on the business. The main differences between the MoS and AV approaches are: The AV includes the present value of all future profits and discounts these at a risk-adjusted discount rate The AV includes the value of capital tied up in the business - also discounted to the extent that it is tied up MoS does not use a risk-adjusted discount rate and therefore does not reflect the cost of capital In effect, AV values distributions to shareholders, at a risk discount rate, while MoS values accounting profits at the net earned rate. Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

31 Benefits of Insurance to SocietyInsurance is an economic device for reducing and eliminating risk through the process of combining a sufficient number of homogeneous exposures to make the losses predictable for the group as a whole. Indemnification of loss Less worry and fear Source of funds for investment Loss prevention Enhancement of credit social care Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

32 Costs of Insurance to SocietyCost of doing business Fraudulent claims Inflated claims check malafide acts Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

34 How do I benefit protectionProtects your family against mishaps to bread earner Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

35 economic stability to familyHow do I benefit economic stability to family Money for immediate need & also a regular income keeps coming Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

36 provision for children educationHow do I benefit provision for children education Plans to make you money available for children education Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

37 How do I benefit redemption of loansPlans to make you money available for repayment of loans in future. Even if the situation in your life changes the burden of loan repayment would not affect your family Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

38 provision for retirementHow do I benefit provision for retirement It seems like this day may have never come, but you're finally nearing . Retirement lifetime benefit or survivor benefit option in which Tata AIG could play an important role. Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

39 insurance with us alwaysprotection education economic stability financial continuty loan redemption retirement care worryless Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

41 Reasons for Insurance RegulationSolvency Lack of Consumer Knowledge Rate Control Insurance Availability Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

42 Insurance Regulation GoalsOriginally Solvency and Equity Emerging goals Availability and Affordability supervision control Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

43 How is Insurance Regulated TodayAreas Regulated Formation and Licensing of companies Examination of companies Rates General Requirements: rates must be Reasonable Adequate Not unfairly discriminatory Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

45 Insurance Regulatory and Development Authority Act 1999Insurance business in India is governed by Insurance Act 1938 and Insurance Regulatory and Development Authority Act 1999 Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

46 Financial Regulation Admitted Assets Reserves SurplusRisk-based Capital Investments Dividend Policy Liquidation of Insurers Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

47 Other Areas Regulated rebating (commission kickback)Sale Practices and Consumer Protection Competence of agents Unfair agent practices rebating (commission kickback) twisting (illegal policy replacement) Policy forms Complaint process Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

48 Specific provisions Every year An Insurer has to deposit with RBI 1 % of its gross premium This deposit to be utilised to discharge liabilities to policy holders only Policy holders funds to be invested in India as per set Norms only Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

51 how do I plan Starting a new job can be a major change especially if it's in a new career field. Plan your insurance. Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

52 how do I plan Congratulations! You've found the love of your life. Now it's important to tie together your insurance programs. Getting married usually adds some form of financial dependency between spouses. Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

53 how do I plan Becoming a parent involves a complete change in lifestyle, namely a lack of sleep! In addition to planning your new baby's future, you may need to make adjustments in your life insurance plan Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

54 how do I plan This is major milestone in ones life. We generally go for housing loan to fund the acquisition. Reconsider your entire Insurance portfolio. The repayment of loan is a future obligation. Provide for its uninterrupted payment under all circumstances Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

55 how do I plan It seems like this day may have never come, but you're finally nearing .Retirement lifetime benefit or survivor benefit option in which Tata AIG could play an important role. Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

56 How Much Life Insurance Do I Need?We generally wonder if the life insurance we now have would be enough or too much to cover ourr needs. There is no standard formula yet there are generally accepted calculation guidelines: How Much Life Insurance Do I Need? . right cover Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002 choice is yours

57 Estimating the Amount of Life Insurance to ownIt requires you to do an inventory of all of your finances, and to think long and hard about how your beneficiaries would maintain their lifestyles. You also must consider inflation and, if you have children, future college education costs Short-term needs + long-term needs - resources = how much life insurance you need. do an analysis at least once every three years, or whenever you have had a major life change. "Some of your needs may decrease, some of your needs may never go away," Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

58 Estimating the Amount of Life Insurance to OwnHuman Life Value Approach: net present value of families share of future income (NPVIF n,i) (avg. annual earnings - (taxes and self-maintenance costs)) Needs Approach: Capital Retention Approach Capital Needs Analysis): determine the amount of capital needed to provide income to dependents (income = interest earned on principle; remainder is distributed at a later date) Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

59 Estimating the Amount of Life Insurance to OwnFive Steps to a needs analysis Step 1 Add up all of your short-term needs Step 2 Add up your long-term debts Step 3 Calculate family maintenance expenses Step 4 Figure out what resources you have Step 5 Subtract your resources from your total expenses. The figure you get should represent the amount of life insurance coverage you should buy Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

60 how do i go about Once you have thought about your financial needs and familiarized yourself with the basic of life insurance, you may decide to purchase a life insurance policy. time to act Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

61 begining of partnershiphow do i go about Selecting an Insurer Major consideration Financial stability Cost Service Rating Attitude toward claims begining of partnership Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

62 Ratings A+++ Highest A++, A+ Superior A, A- ExcellentB++, B+ Very Good B, B- Good C++, C+ Fair C, C- Marginal D Below minimum standards E Under state supervision F In Liquidation Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

63 Check whether the agent is experienced agent.Choosing an Insurance Advisor Check whether the agent is experienced agent. Look for an agent with specialized training in life insurance Determine if your agent has any professional designations Agents who also are financial planners are better equipped Talk with the agent yourself to determine compatibility Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

64 Choosing an Insurance AdvisorThe agent should be willing and able to explain various policies and other insurance-related matters. You should feel satisfied that the agent is listening to you and looking for ways to find you the right type and amount of insurance at an affordable price. If you are not comfortable with the agent, or you aren’t convinced he or she is providing the service you want, find another agent. Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

65 apprise you of insurance products and advise you one suitable to youWhat do I expect from the Advisor apprise you of insurance products and advise you one suitable to you provide you with all details give a point-by-point explanation remember choice is yours Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

66 ask Seek clarificationsHow long can I keep this policy? If I want the option to renew the policy for a specific number of years or until a certain age, what are the terms of renewal? Will my premiums increase? If yes, when? Can I convert to a permanent policy? Will I need a medical exam when I convert? Are the premiums within my budget? Can I commit to these premiums over the long term? Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

67 Seek clarifications askHow much will I receive if I surrender the policy? Keep in mind that permanent insurance provides protection for your entire life. If you don’t plan to keep the policy for many years, consider another type. Cashing in a permanent policy after only a few years can be a costly way to get short-term insurance protection. How much life insurance do I need? What's the difference between term, convertible term, and whole life insurance? What are the types of permanent insurance? By using medical tests are insurers trying to eliminate any applicant likely to develop a serious health condition Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

68 ask Seek clarificationsWhat should I consider in naming life insurance beneficiaries? Does it make sense to replace a policy? As a single person, do I need insurance? I have the option of retiring early. How can I make sure to make the right decision? What happens if I fail to make the required premium payments? What if I become disabled and can't pay the premiums Are other riders available? When will the policy be in effect? Is a buyer's guide available? Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

69 few tips to keep in mind about your life insurance purchaseTake your time. On the other hand, don’t put off an important decision that would provide protection for your family. Make sure you fully understand any policy you are considering and that you are comfortable with the company, agent, and product. When you purchase a policy, make your check payable to the insurance company, not to the agent. Be sure to get a receipt. Review the copy of your application contained in your policy. Promptly notify your agent or company of any errors or missing information. If an agent or company contacts you and wants you to cancel your current policy to buy a new one, contact your original agent or company before making a decision. Surrendering your policy to buy another could be very costly. If you have a complaint about your insurance agent or company, contact the customer service division of your insurance company. If you are still dissatisfied, contact IRDA. Review your policy periodically or when your situation changes to be sure your coverage is adequate Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

70 Virendra K Bhatt A postgraduate in commerce. Specializing in business finance, with extensive knowledge in diversified field of Investment Banking, Funds and Portfolio management, Corporate & Trade Finance and Project Appraisal Unauthorized reproduction or distribution of this material or part of it is not permitted with out prior consent Copyright© 2002

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