Role of Life Insurane Co

WE KNOW INDIA BETTER.
1. INTRODUCTION
Wherever there is uncertainty there is risk. The risk can’t be averted. It

involves multiple losses. And so, risk is uncertainty of financial losses. We
do not have any command on uncertainties. The insurance is a co- operative
device to spread the loss. Further, it is also a social device to accumulate
funds to meet uncertain losses. The main function of insurance is to provide
protection against the possible chances of generating losses. It eliminates
worries and miseries of losses at destruction of property and death. It also
provides capital to the society as the accumulated funds are invested in the
productive heads. The product of insurance benefits the industry, the
business, an individual and a group of persons.
THE INSURANCE MARKET
Insurance is a Rs.400 billion business in India, and together with banking

services adds about 7% to India’s GDP. Gross premium collection is about
2% of GDP and has been growing by 15-20% per annum. India also has the
highest number of life insurance policies in force in the world, and total
investible funds with the LIC are almost 8% of GDP.
Yet more than three-fourths of India’s insurable population has no life

insurance or pension cover. Health insurance of any kind is negligible and
other forms of non-life insurance are much below international standards.
Unfortunately the concept of insurance is not popular in our country. As per

the latest estimates, the total premium income generated by life and general
insurance in India is estimated at around a meagre 1.95% of GDP. However
India’s share of world insurance market has shown an increase of 10% from
0.31% in 1996-97 to 0.34% in 1997-98.
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India’s market share in the life insurance business showed a real growth of
11% thereby outperforming the global average of 7.7%. Non-life business
grew by 3.1% against global average of 0.20%. In India insurance spending
per capita was among the lowest in the world at $7.6 compared to $7 in the
previous year.
Amongst the emerging economies, India is one of the least insured countries
but the potential for further growth is phenomenal, as a significant portion of
its population is in services and the life expectancy has also increased over
the years.
PENETRATION OF INSURANCE
Though the public sector insurance has been successful in achieving the
growth and contributing to national exchequer over the years, a huge market
lies untapped due to reasons like:
o The monopolistic nature of market.
o Focused marketing.
o Indian psyche
Though the potential market in India for the insurance business is large, yet
the products offered and penetration achieved is far less as compared to
international standards. Estimates show that only a meager 30-40 million,
out of the total Indian population have so far come under the insurance
umbrella.
The life insurance sector is one of the key areas where enormous business
potential exists. In India currently, the life insurance premium as percentage
of GDP is 1.3% against 5.2% in the U.S. estimates say that the potential
market is so huge that it can grow by 15-17% per annum.
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INSURANCE INFRASTRUCTURE IN INDIA
With largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India. It’s a business growing at the rate of
15-20 per cent annually and presently is of the order of Rs 450 billion. Together
with banking services, it adds about 7 per cent to the country’s GDP. Gross
premium collection is nearly 2 per cent of GDP and funds available with LIC
for investments are 8 per cent of GDP.
Yet, nearly 80 per cent of Indian population is without life insurance cover
while health insurance and non-life insurance continues to be below
international standards. And this part of the population is also subject to weak
social security and pension systems with hardly any old age income security.
This itself is an indicator that growth potential for the insurance sector is
immense.
A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and
at the same time strengthens the risk taking ability. It is estimated that over the
next ten years India would require investments of the order of one trillion US
dollar. The Insurance sector, to some extent, can enable investments in
infrastructure development to sustain economic growth of the country.
Insurance is a federal subject in India. There are two legislations that govern the
sector- The Insurance Act- 1938 and the IRDA Act- 1999. The insurance sector
in India has come a full circle from being an open competitive market to
nationalization and back to a liberalized market again. Tracing the
developments in the Indian insurance sector reveals the 360 degree turn
witnessed over a period of almost two centuries.
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The Insurance regulatory development authority (IRDA) is the regulatory

authority, which looks over the related aspects of the insurance business.
The IRDA bill provides guidance for three levels of players- Insurance
companies, Insurance Brokers and insurance agents.
In the life insurance segments the life insurance corporation of India (LIC) is
the major player. The LIC has 2050 branches and it is constituted in to 7
zones. Currently there are more than 5,60,000 LIC agents in India.
New India Insurance, Oriental Insurance, National Insurance and United

India Insurance, are doing major business. The general Insurance Industry
has been growing at the rate of 19% per year. LIC and GIC could not ensure
very fast growth of insurance in India even in a long period extending over
four decades. Hence, the penetration of insurance is very low in India.
The market players

A number of foreign Insurance companies have set up representative office
in India and have also tied up with various asset management companies.
They have either signed Memorandum of Understanding with Indian
companies or are trying to do the same. A few of them have been around for
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the last four to five years. Some have carried out extensive research on the
Indian Insurance sector. Others have set up liaison offices. The following
tie-ups are already in place:
INDIAN PARTNER INTERNATIONAL PATRNER
Alpic Finance Allianz Holding, Germany
Tata American Int. Group, US
CK Birla Group Zurich Insurance, Switzerland
ICICI Prudential, UK
Hindustan Times Commercial Union, UK
Ranbaxy Cigna, US
HDFC Standard Life, UK
Bombay Dyeing General Accident, UK
Dabur Group Liberty Mutual Fund, US
Kotak Mahindra Chubb, US
Godrej J Rothschild, UK
Sanmar Group Gio, Australia
Cholamandalam Guardian Royal Exchange, UK
SK Modi Group Legal & General, Australia
20th Century Finance Canada Life
M A Chidambaram Met Life
Vysya Bank ING
2. TYPES OF INSURANCE
Insurance
Life Insurance General Insurance
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Fire Insurance Marine insurance Special Insurance Miscellaneous
“LIFE INSURANCE”
Life Insurance is a contract for payment of a sum of money to the person

assured (or failing him/her, to the person entitled to receive the same) on the
happening of the event insured against.
Usually the insurance contract provides for the payment of an amount on the
date of maturity or at specified dates at periodic intervals or at unfortunate
death if it occurs earlier. So, there is a price to be paid for this benefit.
Among other things, the contract also provides for the payment of premiums
by the assured. Life Insurance is universally acknowledged as a tool to
eliminate risk, substitute certainty for uncertainty and ensure timely aid of
the family in the unfortunate event of the death of the breadwinner. In other
words, it is the civilized world's partial solution to the problems caused by
death
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In a nutshell, life insurance helps in two ways: premature death, which

leaves dependent families to fend for itself and old age without visible
means of support.
Benefits of Life Insurance:

Insurance
1. Superior to Any Other Savings Plan:
Unlike any other savings plan, a life insurance policy affords full protection
against risk of death. In the event of death of a policyholder, the insurance
company makes available the full sum assured to the policyholders' near and
dear ones. In comparison, any other savings plan would amount to the total
savings accumulated till date. If the death occurs prematurely, such savings
can be much lesser than the sum assured. Evidently, the potential financial
loss to the family of the policyholder is sizable.
2. Encourages and Forces Thrift:
A savings deposit can easily be withdrawn. The payment of life insurance
premiums, however, is considered sacrosanct and is viewed with the same
seriousness as the payment of interest on a mortgage. Thus, a life insurance
policy in effect brings about compulsory savings.
3. Easy Settlement and Protection against Creditors:
A life insurance policy is the only financial instrument the proceeds of
which can be protected against the claims of a creditor of the assured by
effecting a valid assignment of the policy.
4. Administering the legacy for beneficiaries:
Speculative or unwise expenses can quickly cause the proceeds to be
squandered. Several policies have foreseen this possibility and provide for
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payments over a period of years or in a combination of installments and

lump sum amounts.
5. Disability benefits:
Death is not the only hazard that is insured; many polices also include
disability benefits. Typically, these provide for waiver of future premiums
and payment of monthly installments spread over certain time period.
6. Accidental death benefits:
Many policies can also provide for an extra sum to be paid (typically equal
to the sum assured) if death occurs as a result of accident.
7. Tax relief:
Under the Indian Income Tax Act, the following tax relief is available
a) 20 % of the premium paid can be deducted from your total income
tax liability.
b) 100 % of the premium paid is deductible from your total taxable

income.
When these benefits are factored in, it is found that most polices offer
returns that are or even better than other investment option.
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LIFE INSURANCE CORPORATION OF INDIA

The Insurance sector in India governed by Insurance Act, 1938, the Life
Insurance Corporation Act, 1956 and General Insurance Business
(Nationalization) Act, 1972, Insurance Regulatory and Development Authority
(IRDA) Act, 1999 and other related Acts.
Life Insurance Corporation of India (LIC)

Life Insurance Corporation of India (LIC) was formed in September, 1956 by
an Act of Parliament, viz., Life Insurance Corporation Act, 1956, with capital
contribution of Rs.50 million, from the Government of India. Then the Finance
Minister, Shri C.D. Deshmukh, while piloting the bill, outlined the objectives of
LIC:
• To conduct the business with the utmost economy, in a spirit of

trusteeship to charge premium no higher than warranted by strict actuarial
considerations.
• To invest the funds for obtaining maximum yield for the policy holders
consistent with safety of the capital.
• To render prompt and efficient service to policy holders, thereby making
insurance widely popular.
Since nationalisation, LIC has built up a vast network of 2,048 branches, 100
divisions and 7 zonal offices spread over the country. The Life Insurance
Corporation of India also transacts business abroad and has offices in Fiji,
Mauritius and United Kingdom. LIC is associated with joint ventures abroad in
the field of insurance, namely, Ken-India Assurance Company Limited,
Nairobi, United Oriental Assurance Company Limited, Kuala Lumpur and Life
Insurance Corporation (International) E.C. Bahrain. The Corporation has
registered a joint venture company in 26th December, 2000 in Kathmandu,
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Nepal by the name of Life Insurance Corporation (Nepal) Limited in

collaboration with Vishal Group Limited, a local industrial Group. An off-shore
company L.I.C. (Mauritius) Off-shore Limited has also been set up in 2001 to
tap the African insurance market.
The Life Insurance Corporation of India (LICI) is the largest life insurance
company in India; it is fully owned by the Government of India. It has a
network of around one million agents for soliciting life insurance business from
the public.
Life Insurance in its existing form came to India from the United Kingdom
with the establishment of a British firm Oriental Life Insurance Company in
Calcutta in 1818 followed by Bombay Life Assurance Company in 1823.
The Indian Life Assurance Companies Act, 1912 was the first statutory
measure to regulate life insurance business. Later in 1928 the Indian
Insurance Companies Act was enacted to enable the Government to collect
statistical information about both life and non-life insurance business
transacted in India by Indian and foreign insurers including provident
insurance societies. In 1938 with a view to protecting the interest of insuring
public earlier legislation was consolidated and amended by the Insurance
Act 1938 with comprehensive provisions detailed and effective control over
the activities of insurers.
By 1956, 154 Indian insurers, 16 foreign insurers and 75 provident societies
were carrying on life insurance business in India. Life insurance business
was concentrated in urban areas and confined to the higher strata of the
society. On January 19, 1956, the management of life insurance business of
245 Indian and foreign insurers and provident societies then operating in
India was taken over by the Central Government.
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The nationalization of the life insurance aims at widening the channels of

public savings and is an important is an important step towards mobilizing
these savings more effectively than here to force, to finance National Plans.
The Corporation’s central office is located at Mumbai. There are seven zonal
offices, one each at Mumbai, Kolkatta, New Delhi, Kanpur, Bhopal,
Chennai and Hyderabad. Corporation has placed its 1530 branches on the
Internet for online payment of premium.
Contents
• 1 History
• 2 Current status
• 3 Subsidiaries
History
The Oriental Life Insurance Company, the first corporate entity in India offering
life insurance cover was established in Calcutta in 1818. Europeans in India
were its primary target market, and it charged Indians heftier premiums. The
Bombay Mutual Life Assurance Society, formed in 1870, was the first native
insurance provider. Other insurance companies established in the pre-
independence era included;
• Bharat Insurance Company (1896)

• United India (1906)
• National Indian (1906)
• National Insurance (1906)
• Co-operative Assurance (1906)
• Hindustan Co-operative (1907)
• Indian Mercantile
• General Assurance
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The first 150 years were marked mostly by turbulent economic conditions. It
witnessed, India’s First War of Independence, adverse affects of the World War
I and World War II on the economy of India, and in between them the period of
world wide economic crises triggered by the Great depression. The first half of
the 20th century also saw a heightened struggle for India’s independence. The
aggregate effect of these events led to a high rate of bankruptcies and
liquidation of life insurance companies in India. This had adversely affected the
faith of the general public in the utility of obtaining life cover.
The Life Insurance Companies Act and the Provident Fund Act were passed in
1912, providing the first regulatory mechanisms in the Life Insurance industry.
The Indian Insurance Companies Act of 1928 authorized the government to
obtain statistical information from companies operating in both life and non-life
insurance areas. The subsequent Insurance Act of 1938 brought stricter state
control over an industry that had seen several financially unsound ventures fail.
A bill was also introduced in the Legislative Assembly in 1944 to nationalize
the insurance industry.
Nearly a decade after India achieved independence, the Parliament of India

passed the Life Insurance of India Act on 19th June 1956. Nationalization of the
life insurance business in India was a result of the Industrial Policy Resolution
of 1956, which had created a policy framework for extending state control over
at least seventeen sectors of the economy, including the life insurance. The
company began operations with 5 zonal offices, 33 divisional offices and 212
branch offices.
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Current status
Over its existence of around 50 years, Life Insurance Corporation of India,

which commanded a monopoly of soliciting and selling life insurance in India,
created huge surpluses, and contributed around 7 % of India’s GDP in 2006.
The Corporation, which started its business with around 300 offices, 5.6 million
policies and a corpus of INR 45.9 Crores, has grown to 2,048 offices servicing
around 18 Crores policies and a corpus of over INR 3,40,000 Crores.
The organization now comprises 2048 branches, 100 divisional offices and 7
zonal offices, and employs over 10,00,000 agents. It also operates in 12 other
countries, primarily to cater to the needs of Non Resident Indians.
With the change in the India’s economic philosophy from the early 1990s, and
the subsequent relaxation of state control over several sectors of the economy,
the monopolistic position of the Life Insurance Corporation of India was
diluted, and it has had to compete with a number of other corporate entities,
Indian as well as transnational Life Insurance brand
Subsidiaries
LIC owns the following subsidiaries:
• Life Insurance Corporation of India International: This is a joint

venture offshore company promoted by LIC which commenced
operations in July, 1989 with the objectives of offering US$
demonimated policies to cater to the insurance needs of NRIs and
providing insurance services to holders of LIC policies currently residing
in the Gulf. LIC International operates in all GCC countries.
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• LIC Nepal: A joint venture company formed in 2001 with the Vishal
Group of Industries, Nepal.
• LIC Lanka: A joint venture company formed in 2003 with the Bartleet
Group of Companies, Sri Lanka.
• LIC Housing Finance: Incorporated in 19th June 1989, its main objective
is to provide long term finance for construction or purchase of houses or
apartments. It has a Dubai office.
o LICHFL Care Homes: A wholly owned subsidiary of LIC Housing
Finance, it builds and operates "Assisted Community Living
Centres" for senior citizens.
 MISSION OF LIC:
LIC
“Explore and enhance the quality of life of people through financial

security by providing products and services of aspired attributes with
competitive returns, and by rendering resources for economic
development.”
 OBJECTIVES OF LIC:
1. Spread life insurance much more widely and in particular to
the rural areas and to the socially and economically
backward classes with a view to reaching all insurable
persons in the country and providing them adequate financial
cover against death at a reasonable cost.
2. Maximum mobilization of people’s savings by making
insurance linked savings adequately attractive.
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3. Conduct business with utmost economy and with the full

realization that the money belongs to the policy holders.
4. Meet the various life insurance needs of the community that
would arise in the changing social and economic

environment.
5. Involve all people working in the Corporation to the best of
their capability in furthering the interests of the insured

public by providing efficient service with courtesy.
6. Promote amongst all agents and employees of the
Corporations a sense of participation, pride and job
satisfaction through discharge of their duties with dedication
towards achievement of Corporate Objective.
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3. SERVICE MARKETING MIX

This service marketing mix is explained further by taking example of LIFE
INSURANCE
 PRODUCT
For LIC services is their product, hence the products of LIC is also a called a
bundled of utilities consisting of various product features and accompanying
services.
When an individual or a company buys a policy’s from LIC not only

policies are bought by him but the agent assistance and advice the prestige
of insurance organization, the facilities of claims and compensation are also
bought.
LIFE INSURANCE –A UNIQUE PRODUCT
Life insurance is a package of saving and investment products. So also a

package of several benefits and options, Life Insurance e also gives a tax
concession on payment of premium and also it exempt tax on the maturity
(including bonus) payment.
Why Life Insurance

Protection: savings through life insurance guarantees financial protection
against risk of death of the policy holder. In the life insurance, in death, the full
sum assured is payable (with bonuses wherever applicable) whereas in other
savings schemes, only the amount saved (with interest) id payable.
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Aid to Thrift
Life insurance encourages ‘thrift’. Long term saving can be made in a
relatively ‘painless’ manner because of the easy instalments facility (premium
can be paid through monthly, quarterly, half yearly or yearly instalments). The
Salary Savings Scheme, popularly known as SSS, provides a convenient
method of paying premium each month through deduction from one’s salary.
The employer remits the deducted premium to the LIC. The Salary Savings
Scheme can be introduced in an institution or establishment subject to specified
terms and conditions.
Who Can Buy A Life Insurance Policy?

Any person who has attained majority and is eligible to enter into a valid
contract can take out a life insurance policy for himself/herself and for those
he/she has insurable interest. Policies can also be taken out, subject to certain
conditions, on the life of one’s spouse or children. While underwriting
proposals, factors such as the state of health of the life to be assured are granted
to policyholder for house building or for purchases of flats.
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CLASSIFICATION OF LIC PLANS:-
PLANS
Combination plans
Money back
Endowment plans Terms assurance Whole life plans
plans
SALIENT FEATURES OF SOME OF THE PLANS / PRODUCT:
LIC has been introduced around 52 types of various plans, which are
attracting different customers as per their requirement. These plans are
design for various purposes such as purely risk covered, saving, children
education & marriage fund and also for annuity and pension at old age.
The following are the some of the plans:
 Table No. 11-Endowment Assurance policy without profit:
Premium payment term under this plan is restricted to 25 years. Even
if a policy is taken to assure a life up to maximum maturity period 70
years, premium payment will stop on completion of 25 years of
policy. Insurance cover will continue up to maturity without further
premium payment. This is eligible for Disability benefit, Accident
benefit and loan.
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 Table No. 75-93 Money back policies:

These policies are especially suitable to businessmen, since certain
amount is received back from LIC even during continuation of the
policy term. Even on receipt of such amounts from LIC risk coverage
equal to full assured continues. These policies are eligible for bonus,
disability and accident benefit but not for loan.
 Table No. 150 New Bima Kiran:

New Bima Kiran policy has been introduced with effect from 15 th
February 2002. This plan is replaced existing Bima Kiran.
This is a term assurance policy. In this policy policyholders will get
on maturity a sum equal to total amount of premium paid (including
accident benefits but excluding other extras) shall become payable on
end of the term.
 Table No. 151 New Jeevan Shree:

A New Jeevan Shree has been introduced by LIC w. e. f. 5th March
2002. Thereby the previous Jeevan Shree stands withdrawn w. e. f.
31st Jan 2002.
This plan is an endowment type of plan. In this plan LIC will give a
guaranteed addition @ Rs. 70/per 1000 sum assured.
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 PUBLIC RELATION IN LIFE INSURANCE
LIC also thinks in favour of publicity. Since this component of promotion if

use in right fashion makes the promotional affect proactive. Publicity is
effective since the messages, views, opinion, facts; figures are publicized by
media or by the vocal leaders. Strengthening the public relation activities is
another dimension which LIC gives due attention to.
At the apex and regional levels, the Public Relation officers bare the
responsibility of projecting a positive image of the organization and at the
branch level the responsibility is on the branch manager.
SALES PROMOTION IN LIFE INSURANCE
LIC gives various monetary as well as non-monetary incentives to its agents.

The agents are classified as members in 4 groups as follows: -
1. Chairmen Club Member

2. Zonal Club Member
3. Divisional Club Member
4. BM Club Member
The agents become members of these clubs on the basis of policies they
bring. They receive the benefit as per the membership. The benefits range
from perks to house loan.
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 PLACE IN LIFE INSURANCE
Some of the important dimensions of place mix in relation to the location of

LIC branches are as follows:
 Smooth accessibility.
 Availability of infrastructure facilities.
 Management of branch office.

Smooth accessibility
It helps LIC personnel and users in reaching its branches conveniently.
Availability of infrastructure facilities
It draws LIC’s attention on all weatherproof roads, power facilities, and

communication services and so on. Since LIC advocates in favour using
sophisticated information technologies by its branch offices, it is necessary
to have uninterrupted power supply and communication service.
LIC also gives due weightage to safety provision. Places found of vulnerable
nature are not selected.
Management of branch office
The management of office refers to office function, civic amenities and

facilities, parking facilities and interior décor.
These are essential to make the work place conducive, attractive, and
proactive to the generation of efficiency. The motives are to offer the
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promised to the end user without any distortions and making the branch
office a point of attraction.
LIC has a total of 2048 branches spread all over the country as well they
have foreign offices at London, Fiji, Mauritius. Distribution wise 60% of the
branches are situated in the rural and semi-urban areas, while only 40%
situated at urban areas.
 PEOPLE IN LIFE INSURANCE
People involved in the business organization of LIC are its Agents,

Developing Officers, frontline staff and Branch Managers.
The LIC management has a strong advocacy in favour of managing the

insurance personnel since they identify people as an important component of
the marketing mix.
Hence they provide due attention on the development of the insurance

professionals. The Front line staff and the Branch manager are given
intensive training so that they are in a position to make effective use of the
technology.
LIC bears the responsibility of developing the credential of their employees.

As a result they take due care about the behavior of the insurance personnel.
The senior executive while recruiting, training and developing the insurance
personnel make sure that the people serving the organization have a high
behavioral profile in which empathy has been due place.
In short LIC uses a rational plan for the development of insurance personnel.
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 PROCESS IN LIFE INSURANCE
In the service sector only recently process has been given much attention,
although it has been the subject of study in production.
Service process consists of a number of activities or transactions by

which the service is delivered.
The process should be friendly in insurance industry. The speed and

accuracy of payment is of great importance. The processing method should be
easy and convenient to the customers. Instalment schemes should be
streamlined to cater to the ever growing demands of the customers. IT and data
warehousing will smoothen the process flow.
Information Technology will help in servicing large number of customers

efficiently and bring down overheads. Technology can either complement or
supplement the channel of distribution cost effectively. It can also help to
improve customer service levels. The use of data warehousing management and
mining will help to find out the profitability and potential of various customers
and product segments.
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 CUSTOMER SATISFACTION – BEST SERVICE:
In this competitive scenario, a key difference will be the customer

experience that each life insurance player can offer in terms of quality of
advice on product choice, along with policy servicing, and settlement of
claims.
Service should focus on enhancing the customer experience and maximizing

customer convenience. Long-term growth in the business will depend
greatly on the distribution network, where the emphasis must evolve from
merely selling insurance to acting as financial advisors, helping customers
plan their finances depending on life stage and personal requirements.
This calls for a strong focus on training of the distribution force to act as
financial consultants and build a long lasting relationship with customer.
This would help create sustainable competitive advantage not easily
matched.
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4. “LIFE INSURANCE STAGES”

STAGES
Life Insurance has more to do with people you leave behind and their needs.
It is a way to ensure that your family has enough money to survive; they’ll
be able to maintain the same standard of living as they had before you
passed away.
This is information on insurance and financial planning for different stages
of your life. Information on life, health, disability, and long-term care
insurance are provided.
RAISING
RAISING
CHILDREN
CHILDREN
SINGLE
SINGLE STUDENT
STUDENT
LIFE
LIFE
INSURANCE
INSURANCE
STAGES
STAGES
SENIOR
SENIOR EMPLOY-
EMPLOY-
YEARS
YEARS MENT
MENT
MARRIED
MARRIED
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RAISING CHILDREN
Children are the future. We need to plan for their future and we need to protect
it. As the saying goes, it will be here before we know it. A family's insurance
and financial needs will grow and change over time as we take steps to manage
our finances; and protect our property and lifestyle against significant changes
in our life or health.
 LIFE INSURANCE
Couples should take a close look at life insurance once children arrive. This is
when it hits home that others are depending on you and your income. You want
to be sure the family has the resources to maintain the home and have all the
opportunities you want them to if you are not there. If you don't have a strong
savings program, a small life insurance policy on your children may make
sense.
 HEALTH
Most people get their health insurance through an employer. These plans
include family members. Medical inflation is rising dramatically today and
employers are increasing the amount they expect workers to pay as they cope
26
with health care costs. Families with two working spouses should compare
coverage, co-pays and costs and choose the best mix that offers the best
coverage for the least amount of money.
 DISABILITY
When you are a relatively younger, you are four times more likely to be
disabled than to die. Thankfully, neither one is likely, but it is something to
strongly consider, particularly if your lifestyle would be threatened if you are
physically unable to work. Most large companies offer group disability
coverage. Small companies may or may not have similar coverage.
 LONG-TERM CARE
Middle age is the best time to consider whether to buy long-term care insurance.
This is when you will most likely to be eligible and when the premiums will be
the lowest.
 FINANCIAL PLANNING
If kids were born with a price tag on how much they cost through age 21, we'd
undoubtedly have a moment of sticker shock. But once children come into our
lives, it's time to really get serious about a savings program. A major issue for
families with children is how to best prepare to send the kids to college. The
cost of tuition and room and board for four years now has increased
dramatically which ever field a student adopts for studies. In general, most
students qualify for some kind of financial aid. But the current budget squeeze
is requiring schools to raise tuition to close budget gaps, so costs are increasing
in double-digits in many cases. Depending on qualifying levels of income,
contributions to these accounts may be tax deductible. In both cases, money
grows tax-deferred. Families looking for additional ways to shelter income can
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also look at Uniform Gift to Minors accounts. Parents serve as custodians

during the early years, but when your kids reach the age of 18, the money is
theirs and they can spend it any way they want.
STUDENT
When a teenager gets a license, it's probably the first time he or she focuses on
insurance. And as young people graduate from high school and head off to
college or enter the working world, there are lots of insurance matters for young
people out on their own for the first time to think about.
 LIFE INSURANCE
Life insurance protects a family's way of life. As students approach college, not
only are families focused on how to pay for it, they should also be thinking of
how to keep things on track if tragedy strikes. Life insurance, whether whole
life or term, is one way to ensure that resources will be there for your student to
finish college if something happens to one of the family breadwinners.
 HEALTH
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In most cases, a full-time student will be covered in the family's health plan
until he or she graduates from college, or remains a full-time student up to 23
years of age. It is the parents’ discretion to buy additional individual health
coverage for their college going child.
 DISABILITY
Disability coverage provides for lost wages in the event you are injured and
unable to work. Most part-time jobs do not include such benefits, so disability
insurance is unlikely to be provided by employers to students who work while
going to school. For parents who are paying for their children's college
education, disability insurance would ensure that resources are there should the
primary wage earner become disabled and be unable to work.
 LONG-TERM CARE
The younger and healthier one is, the less paid for insurance. But long-term care
insurance is generally not an insurance priority for a young student unless there
are extenuating circumstances.
Helping your student establish a solid financial foundation -- managing student

loans, credit cards and day-to-day finances -- will help them in many ways,
including getting insurance at the best possible rate. Establishing a budget is a
good first step. Parents may want to set up a debit card account for their student.
Cash can be added conveniently to the account when needed, and expenses can
be reasonably monitored.
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EMPLOYMENT
Many people obtain certain kinds of insurance through their employment,

particularly health and disability coverage. Larger businesses may also offer
retirement benefits. When changing jobs, rearranging coverage and finding out
which accounts are portable becomes very important. A new job can also mean
a change in lifestyle, which can also have an impact on insurance.
 LIFE
A new job may mean a salary increase. The more you make, the more your
family depends on that income, and the more important it becomes to protect it.
Remember, the primary purpose for life insurance is to provide lost income if a
wage earner dies. You should also be aware of the type of policy you have. If
you participated in a group life insurance program with your former employer,
that life insurance coverage will probably end when you leave the job,
particularly if your employer purchased it. In some cases, you may be able to
convert this to an individual policy, for example, when retiring. On the other
hand, if you purchased insurance through a group insurance program and you
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paid for it through payroll deduction, for example, those policies are generally
portable and can be taken with you. You would continue to pay on your own.
 HEALTH
If you're changing jobs, one of your first concerns might be maintaining your
health care coverage. Dependents are also included in the coverage. There are
also interim or short-term options that provide medical insurance on a
temporary basis, usually a few months. You can only renew this coverage once.
The short term policy provides coverage for hospitalization, services such as X-
rays and laboratory test, intensive care and surgical needs.
 DISABILITY
It provides for work-related and non-work related injuries. Ask about disability
insurance when discussing benefits with your new employer. The availability of
this coverage will vary from one employer to the next. Some employers may
allow you to carry disability insurance to your new job, but it's not guaranteed.
Even if your employer offers this coverage, it may be beneficial for you to
obtain additional coverage through a private disability insurance policy. If you
pay some or all of the cost of this coverage, when you are injured and require
this benefit, the portion that you purchased will be tax deductible. If your
employer pays for the coverage, it is considered a benefit and is fully taxable.
 LONG-TERM CARE
Long term care provides coverage for nursing home care. Some policies cover
in home care, but not all. In order to qualify for long-term care, you must lose at
least two of the functions of daily activity, such as the ability to dress yourself,
or cognitive ability in order to trigger the coverage. You should be able to take
31
your policy with you by converting to an individual policy. A premium increase

is likely to accompany a conversion.
MARRIED
The joining together of two lives is joyous. It's also nerve-wracking. There are a
number of adjustments couples have to make when thinking and planning for
two. They may need financial protection they haven't worried about before,
because spouses now depend on each other for support. In merging two
households and perhaps two careers, there are choices that couples may need to
make as to which spouse has the best existing insurance coverage.
 LIFE INSURANCE
Becoming a couple means sharing responsibility with and for someone else.
Both spouses may work, building a lifestyle that depends on two incomes.
There will be loans and other debts to pay off. At this stage, it makes sense to
protect what you have. Life insurance is a traditional way of ensuring that the
surviving spouse is taken care of in the event of a tragedy.
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The primary purpose for life insurance is to provide a spouse, children or other
beneficiary with resources in the event of the premature death of the other
spouse. There are two basic types of life insurance:
Term insurance provides a simple death benefit for a fixed period of time. The
premium may stay the same for many years. However, when the stated term
expires, the premium can go up; and
Cash value insurance, as the name implies, provides permanent protection as
long as you pay the premium. The premium does not increase over time. The
younger a person is when buying the policy, the lower the premium will be for
the life of the policy. But because premiums remain level, cash value coverage
tends to be more expensive than term insurance. There are different types of
cash value or permanent insurance as well - whole life, money back,
endowment.
 HEALTH
Most people who work full-time get health insurance through their employer.
Along with bringing two lives together, if both spouses work, the marriage also
brings two health insurance plans. These health plans frequently include
dependents.
Medical inflation is rising dramatically today and employers are increasing the
amount they expect workers to pay as they cope with health care costs. In
certain cases, they may not cover a family member who has another health care
plan. If you have a choice, families with two working spouses should compare
coverage, co-pays and costs and choose the best mix that offers the best
coverage for the least amount of money.
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 DISABILITY
Should a sickness or illness prevent one spouse from earning an income in his
or her occupation, couples can face severe economic impact. Many employers
offer an option of disability coverage. If the employee pays for disability
coverage, insurance proceeds are tax-free. However, if the company pays for the
coverage, this is viewed as a benefit and it is taxable.
 LONG-TERM CARE
Each year, the elderly population continues to grow. Due to advances in modern
medicine and life-style changes, the number of people over the age of 65 is
projected to double by the year 2050. Unfortunately, as people age, they are
more likely to suffer from chronic illnesses such as strokes or Alzheimer's or the
aftermath of strokes. Statistically, people over the age of 65 face a 40% risk of
entering a nursing home for long-term care services. Long-term care safeguards
couples from losing their most important asset -- the home -- if either one gets
sick and must be cared for.
At this stage, financial goals may include both saving for retirement and saving
for a specific purpose. Some investments can be long-term. Others perhaps need
to be more liquid. For example, newly married couples may want to save
aggressively for a home. If both work, one strategy might be to live off of one
salary and save the other.
Joint income could put a household into a higher tax bracket, which places
greater emphasis on means of deferring taxes on this income.
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SENIOR YEARS
Anyone enrolled in Social Security is automatically signed up for Medicare

when turning 65. Anyone not on Social Security can sign up for Medicare at the
local Social Security office.
By the time you retire, your accumulated wealth is probably at its height. The
challenge now is to manage your assets so that they last as long as you do.
Insurance still plays an important role at this stage of your life.
 LIFE
Life insurance is cheaper the earlier in life it is purchased. Retirees can still get
life insurance, but should be prepared to pay much more for it. For those who
already have coverage, premiums will generally move higher as existing term
insurance reaches the end of a set policy period and is up for renewal. Cash
value coverage tends to have a set premium that was locked in years earlier. In
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order to preserve the benefit for a surviving spouse, it is necessary to continue

to pay the premium.
 HEALTH
Most people under 65 get group health insurance through their or their spouse's
job. Group health insurance costs less than individual health insurance.
 LONG-TERM CARE
Long term care insurance is designed to pay for the many services needed by
people who suffer from chronic long-lasting illnesses and need regular care,
usually in a nursing home, but in some cases in-home care. While this primarily
affects the elderly, a substantial number of cases involve people under the age
of 60.
Married retirees need to review their financial situation and determine how
much income a surviving spouse would lose. A substantial loss of income also
can result from reduction in pension or annuity payments. The investment
strategy for seniors should emphasize income-producing and liquid instruments
that can supplement retirement income.
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SINGLE
You are part of the work force and out on your own. Establishing a solid
financial foundation should be a priority, including insurance in the mix. It's
important to understand what affects the cost and availability of insurance. If
you have accidents or health hazards, insurance will increase in cost. As a
result, an insurance company may see additional risk, making it more difficult
to get coverage at the best possible price. Conversely, if we take care of
ourselves and protect what we own, insurers will see good insurance risks and
are more likely to compete for your business.
 LIFE
Your parents probably have life insurance which will be part of their estate. But
now that you are on your own, you have to think about your own insurance
needs. When you are young, your life expectancy is high, which means the cost
of life insurance is low. Life insurance becomes increasingly important if you
have others who depend on you, including aging parents.
 HEALTH
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Once you are out of school or older than 23, your parents' health plan won't
cover you. As you sort through job prospects, it's tempting to go for the
opportunity that puts the most money in your pocket. Health coverage is
perhaps the most important job-related benefit you can get.
 DISABILITY
When we are young, we feel indestructible. In fact, at this stage, we are four
times more likely to be disabled than die. Many employers offer an option of
disability coverage, which provides for lost income if you are injured as a result
of non-work activities and unable to work. Most large businesses offer disability
coverage. Smaller businesses may not. If the injury is work-related, then
workers compensation coverage applies.
 LONG-TERM CARE
The good news is we are living longer. The challenge is how we as a society
will meet the expanded need for care for an aging population. In many cases,
the immediate question is how to best care for aging parents. Increasingly, late
in life, children serve as guardians for their parents. There are many options for
custodial care, ranging from in-house care to nursing homes. As a general rule,
for everyone in your family, the earlier you consider buying long-term care
coverage, the cheaper it will be.
You may not be making a lot of money, but it's probably more than you've had
before. You have an apartment to furnish, a wardrobe to build and perhaps
student loans to pay off. It's also important to save money. Most financial
experts emphasize that, even if you start small, becoming a saver or investor
earlier in life and keeping it up during your peak earning years is very
38
important. Put some money away regularly, even if it is only a small amount.
Treat it as a bill and pay yourself along with your other obligations. This can be
a rainy day fund or be for a specific purpose, such as a down payment on a
home or car.
At this point, it's also important to know what not to do. We live in a "credit-
card society" and are bombarded with advertising that suggests we can have it
all right now - the clothes, the car and the fast lane. It sounds old-fashioned, but
living within your means is important. In the future maintaining a good credit
rating will help you get the best rate when you apply for a home or car loan. It
can help you get a better job or apartment. It can even save you money on your
insurance.
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“TERM LIFE INSURANCE”
Term Life Insurance
Term Insurance is the simplest form of life insurance. It pays only if death
occurs during the term of the policy, which is usually from one to 30 years.
Most term policies have no other benefit provisions.
These are the cheapest Life Insurance products available.
Common types of term are:
• yearly- (or annually-) renewable term

• 5-year renewable term
• 10-year term
• 15-year term
• 20-year term
• 25-year term
• 30-year term
The most popular type is now 20-year term
If a policy is "renewable," that means it continues in force for an additional term

or terms, up to a specified age, even if the health of the insured (or other factors)
would cause him or her to be rejected if he or she applied for a new life
insurance policy.
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Generally, the premium for the policy is based on the insured person's age and
health at the policy's start, and the premium remains the same (level) for the
length of the term. So, premiums for 5-year renewable term can be level for 5
years, then to a new rate reflecting the new age of the insured, and so on every
five years. Some longer term policies will guarantee that the premium will not
increase during the term; others don't make that guarantee, enabling the
insurance company to raise the rate during the policy's term.
Some term policies are convertible. This means that the policy's owner has the
right to change it into a permanent type of life insurance without additional
evidence of insurability.
Term insurance can be linked to renting an apartment while permanent

insurance is more like buying a house. When you are renting you have a
contract for a specific amount of time. You can stay at the apartment as long as
you paying for it. The landlord increases the rent from time to time. You’ve
paid your rent, and you’ve had shelter while you’ve paid it, but that’s where it
ends. Your rent hasn’t given you any ownership in the place. The same happens
to the temporary insurance. It is an affordable way of protecting your
dependants in case of your premature death. You pay premiums and are covered
only for the duration of the contract. At the end of the term the policy ends. You
haven’t built any equity or savings in the policy, just as you don’t own a house
at the end of the lease. But the benefit of rent / term insurance is that you get
shelter/ coverage at a low cost. Generally various insurers provide 2 types of
options for Term Life Insurance.
• Return of Premium
In this kind of plan if the policy holder survives the policy term then all the
premiums paid by him during the term is returned to him.
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• No Maturity Benefits
In this kind of plan if the policy holder survives the policy term then he
does not get back anything in return.
8. “Whole Life/Permanent”
Whole life or permanent insurance pays a death benefit whenever you die - even
if you live to 100!
Permanent insurance, unlike term insurance, covers you for life (as long as you
pay the premiums!). When you buy a permanent policy, the insurance company
charges you a higher premium than it does for term. And that premium is
usually level – unlike term insurance, it’ll cost you the same amount when you
are twenty years old as it will when you are sixty. What the insurance company
does is spread the cost of insuring you over the course of your life and divide
that amount into equal premium payments. It then take part of that premium and
puts it in the reserve, where it grows over the years. The growing reserve partly
allows the company to keep the premiums level in the policy’s later years, when
they would otherwise increase to reflect your increased likelihood of dying. The
reserve is the cash value of the policy. If you cancel your policy, you get the
built-up cash value. If you die your beneficiaries get the death benefit. You can
also take out a policy loan against the cash value if you need the money (which
means, you can borrow money at a guaranteed low rate of interest).
So, with whole life your beneficiaries get the death benefit if you die, or you get
the cash value if you live. And you still have a loan available. Whole life is a
good choice unless you can invest your money and get a better return on it.
There is a saying: “buy term and invest the difference” – the difference between
term and whole life policies. The problem is that most people don’t invest the
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difference. So, whole life becomes a forced savings plan, in case people need
the money at their retirement age. Some people enjoy peace of mind of
knowing that their permanent needs will always be covered as long as they pay
the premiums. Some prefer to renew term polices, but term costs might become
very high as you get older. Your goal might be to become self-insured: when
your savings and investments are sufficient enough to cover your permanent
needs. When you are self-insured, you don’t need to buy insurance, permanent
or temporary, although you may buy it for other needs, like estate planning and
the like.
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9. “Universal Life Insurance”
Universal or adjustable life:
This is also called Unit Linked Insurance Plans (ULIP) in India.
44
This type of policy offers you more flexibility than whole life insurance. You
may be able to increase the death benefit, if you pass a medical examination.
The savings vehicle (called a cash value account) generally earns a money
market rate of interest or returns as per equity market as per the allocation done.
After money has accumulated in your account, you will also have the option of
altering your premium payments - providing there is enough money in your
account to cover the costs. This can be a useful feature if your economic
situation has suddenly changed. However, you would need to keep in mind that
if you stop or reduce your premiums and the saving accumulation gets used up,
the policy might lapse and your life insurance coverage will end. You should
check with your agent before deciding not to make premium payments for
extended periods because you might not have enough cash value to pay the
monthly charges to prevent a policy lapse.
Universal life insurance (UL) is like buying the term and investing the
difference, only you do it with the same insurance policy. The investment inside
the policy grows tax deferred, and can potentially be tax free. Universal life
insurance is a combination of term and permanent insurance. It is basically a
term-to-100 insurance policy with tax advantaged investment portfolio tacked
onto it. You do your own investment choice. UL has the added advantages of
tax shelter and a potentially lucrative investment. Whereas in traditional
permanent policies you could either cash in the policy and get the built up cash
value or your beneficiaries could get the death benefit if you died; with
universal life your beneficiaries could receive both the death benefit and the
built up cash value if you died. As well, they’d receive it tax free. What’s more,
you can withdraw cash that you’ve built up without having to cancel the policy.
When you minimum-fund a UL policy, you pay only enough in premiums to

cover the costs of your insurance coverage. When you over fund the policy, you
begin to accumulate tax deferred savings in the policy.
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10. “DISABILITY”
Your Ability to Earn is Your Most Valuable Asset.
If you are like most people, every month you're reminded of just how much
depends on a regular paycheck - your car, utilities, rent or mortgage payments -
to name just a few obligations.
46
But have you considered the fact that an illness or injury could take away your
ability to work and earn an income while these expenses do not go away?
All income is created in one of two ways, either from people at work or from
capital at work. Dividends, interest and appreciation are the products of capital
at work. Most people need disability income insurance because they have not
accumulated sufficient capital to replace their current income.
If you are like most people, your income is the foundation that supports all of
your future dreams, hopes and expectations. Your ability to earn an income is
truly your most valuable asset.
Disability insurance pays an insured person an income when that person is

unable to work because of an accident or illness.
11.“CRITICAL
11. ILLNESS”
Medical breakthroughs, and advances in patient care mean that most people
have a greater chance of surviving a critical illness. In most cases life, health,
and disability insurance do not cover all the income lost recovering from a
critical illness, and cannot protect retirement and other savings, or your
47
business. If you develop a critical illness you may be faced with unexpected
expenses like:
• Private home nursing;

• Medical care not covered by your provincial health care plan.
As well, your income may be reduced as a result of having to work fewer hours
or making a career change due to your illness. Struggling to meet these
additional expenses combined with meeting your everyday financial obligations
could create a stressful situation and may even affect your recovery.
Critical illness insurance is designed to protect you from these financial risks.
The proceeds from a critical illness policy are paid in a lump sum, usually 30
days after you have been diagnosed with a covered illness. The most common
critical illnesses affecting today are
• Heart Attack
• Life-Threatening Cancer
• Stroke
Every insurer has got a list of illnesses for which they offer insurance. A choice
can be made between them based on which illnesses you would like to get
covered for. Understanding Family history about illnesses and diseases is a
proper way to analyse for the required cover.
Proceeds from a critical illness policy can be used as you wish. Unlike
traditional disability insurance, when you make a claim under a critical illness
policy, your benefit is not based on a reduction in your income, but is paid in
full according to the terms of the insurance policy.
For example, you may wish to use the proceeds to:
48
• Pay off outstanding liabilities such as a mortgage or line of credit;

• Provide an emergency fund for home care; or
• Supplement your income while you are unable to work.
12. “Long Term Care Insurance (Hospitalisation)”
What is LTC?
Because of physical illness, or injury, some people find themselves in need of

help with eating, bathing, dressing, toileting or continence, and/or transferring
(e.g., getting out of a chair or out of bed). These six actions are called Activities
of Daily Living-sometimes referred to as ADLs. In general, if you can't do two
49
or more of these activities, or if you have a cognitive impairment, you are said
to need "long-term care or Hospitalisation."
Long-term care isn't a very helpful name for this type of situation because, for
one thing, it might not last for a long time. Some people who need ADL
services might need them only for a few months or less.
Many people think that long-term care is provided exclusively in a nursing

home. It can be, but it can also be provided in an adult day care center, an
assisted living facility, or at home.
Should I buy long-term care (Hospitalisation) insurance?
Looking at the inflationary costs associated with medical and hospitalisation, it

is very difficult for any body to pay for a long stay in a hospital for some kind
of treatment or rehabilitation.
Some Insurance companies offer to pay Hospitalisation charges for long stays in
hospitals. These payments come in handy in times of need.
It is a personal selection to include any of the add-ons or riders as they are

called by different Insurance companies in India.
13. “PRODUCTS”
As individuals it is inherent to differ. Each individual’s insurance needs and

requirements are different from that of the others. LIC’s Insurance Plans are
polices that talk to you individually and give you the most suitable options that
can fit your requirement.
50
Jeevan Anurag Komal Jeevan

CDA Endowment Vesting At 21 Marriage Endowment Or
Educational Annuity
CDA Endowment Vesting At 18
Plan
Jeevan Kishore Jeevan Chhaya
Child Career Plan Child Future Plan
Jeevan Aadhar
Jeevan Vishwas
The Endowment Assurance Policy

The Endowment Assurance Policy-Limited Payment
Jeevan Mitra(Double Cover Endowment Plan)
Jeevan Mitra(Triple Cover Endowment Plan)
Jeevan Anand
New Janaraksha Plan
Jeevan Shree-I
Jeevan Pramukh
The Money Back Policy-20 Years

The Money Back Policy-25 Years
Jeevan Surabhi-15 Years
Jeevan Rekha (closed for sale)
Bima Bachat
Jeevan Bharati
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The Whole Life Policy

The Whole Life Policy- Limited Payment
The Whole Life Policy- Single Premium
Jeevan Rekha (closed for sale)
Jeevan Anand
Jeevan Tarang
Two Year Temporary Assurance Policy

The Convertible Term Assurance Policy
Anmol Jeevan-I
Amulya Jeevan
Pension Plans are Individual Plans that gaze into your future and foresee
financial stability during your old age. These policies are most suited for senior
citizens and those planning a secure future, so you never give up on the best
things in life.
Jeevan Nidhi
Future Plus (closed for sale)
Jeevan Akshay-III (closed for sale)
Jeevan Akshay-IV (closed for sale)
Jeevan Akshay-V
New Jeevan Dhara-I
New Jeevan Suraksha-I
Unit plans are investment plans for those who realize the worth of hard-earned
money. These plans help you see your savings yield rich benefits and help you
save tax even if you don’t have consistent income.
52
Jeevan Plus (closed for sale)

Future Plus (closed for sale)
Bima Plus (closed for sale)
Market Plus
Money Plus
LIC’s Special Plans are not plans but opportunities that knock on your door
once in a lifetime. These plans are a perfect blend of insurance, investment and
a lifetime of happiness!
Bima Gold (closed for sale)

New Bima Gold
Bima Nivesh 2005

Jeevan Saral
Jeevan Madhur
53
Group Insurance Scheme is life insurance protection to groups of people. This

scheme is ideal for employers, associations, societies etc. and allows you to
enjoy group benefits at really low costs.
Group Term Insurance Schemes

Group Insurance Scheme in Lieu Of EDLI
Group Gratuity Scheme
Group Super Annuation Scheme
Group Savings Linked Insurance Scheme
Group Leave Encashment Scheme
Group Mortgage Redemption Assurance Scheme
Gratuity Plus
JanaShree Bima Yojana (JBY)

Shiksha Sahayog Yojana
14. CURRENT STATUS

CURRENT SCENARIO
54
The insurance landscape in India is undergoing major change. Closed to

foreign competition since nationalization in 1956, the life insurance industry
had been protected from competitive pressures. Now, with the re-opening of
the sector, several new players have entered the scene.
The game is old but the rules are new and still developing. Ensconced in a
monopoly run from the nationalization days beginning in 1956, the
insurance industry has indeed awakened: to a deregulated environment in
which several private players have partnered with multinational insurance
giants.
However, despite its teeming one billion population, India still has a low
insurance penetration of 1.95 per cent, 51st in the world. Despite the fact that
India boasts a saving rate of around 25 per cent, less than 5 percent is spent
on insurance.
INSURANCE INTERMEDIARIES AND DISTRIBUTION CHANNELS AND SUGGESTIONS:

The intermediaries in the insurance business and the distribution channels
used by carriers will perhaps be the strongest drivers of growth in the sector.
Multi-channel distribution and marketing of insurance products will be the
smart strategy for the Indian market. While tied agents will continue to play
an important role in distribution, alternative channels like corporate agents,
brokers, and banc assurance will play a greater role in distribution. Firms
will need to forge relationships with the partners for strategic advantage.
The time has come for the industry to gradually move from traditional
individual agents towards new distribution channels, with a paradigm shift
in creating awareness and not just selling products. There are 850,000
55
insurance agents in India, and the qualitative selection of agents by

companies is imperative to gain the cutting edge.
Work-site marketing, relatively inexpensive and easy to launch, is one

potential distribution channel. In this scenario, the sale of financial products
and other services to employees is through workplace-participation and is
entirely on a voluntary basis, where the employee pays for the products
generally through a payroll deduction. Products must match the need of the
customers. Moreover, protection of policyholders must be paramount.
The movement is more likely to be led by those who adapt. Banks moving
towards cutting edge technology would have an upper edge in selling
insurance products. At present, 12 per cent of the world's insurance products
are sold through the Internet, a figure likely to grow exponentially with a
likely increase in customer usage of the Internet for their own research and
product comparisons.
Other approaches, like call-center, direct marketing, and the Internet will
grow dramatically in importance over the next several years. These ensure
direct contact with the customers. It will enable firms to acquire, retain and
build loyalty among customers while lowering transaction costs. To make
multiple channel delivery work, all channels must be integrated tightly to
deliver on the promise of service anytime, anywhere. Information gathered
by each channel must be combined to provide a consolidated view of the
customer relationship and identify likely financial needs.
A customer accessing any channel should be recognized as a client and not

required to provide information again. What's more, a client should be able
56
to move easily from one mode of service to another (for example, from on-
line to face-to-face to on-line) without disruption in service.
The four main challenges facing the industry are product innovation,
distribution, customer service, and investments. Unit-linked personal
insurance products might find greater acceptability with rising customer
awareness about customized, personalized and flexible products. Flexible
products and new technology will play a crucial role in reducing the cost
and, therefore, the price of insurance products. Finding the niche markets,
having the right product mix through add-on benefits and riders, effective
branding of products and services and product differentiation from
competitors' offering, will create new companies a few challenges.
In today's highly competitive financial services environment, effective

organizations will employ technology in a strategic role to achieve
competitive edge. Technology will play an increasing role in aiding design
and administering of products, as well in efforts to build life-long customer
relationships.
CURRENT TREND IN DEMAND
Shift in purpose of Insurance:
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There is presently building in India an upsurge in consumer awareness,

putting immense and unavoidable pressure on the insurance industry. A
lifting of the bar on composite insurance, where companies are allowed to
do only life or non-life business today, can also be expected. Instead of
categorizing insurance by class, the focus may shift more to the period for
which the cover was offered and the risk underwritten. Already there is
demand for permitting the industry to underwrite pure risk and leaving
investment decisions to policyholders.
• Market heterogeneity:
With the entry of competition, the rules of the game are set to change. The
market is already beginning to witness a wide array of products from players
whose number is set to grow. In such a Scenarios, the differentiators among
the different players are the products, pricing, and services.
• Insurance as the integrated financial solution:

Meanwhile, the profile of the Indian consumer is also evolving. Consumers
are increasingly more aware and are actively managing their financial
affairs. Today, while boundaries between various financial products are
blurring, people are increasingly looking not just at products, but at
integrated financial solutions that can offer stability of returns along with
total protection.
• Total protection:
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To satisfy these myriad needs of customers, insurance products will need to

be customized. Insurance today has emerged as an attractive and stable
investment alternative that offers total protection — Life, Health and
Wealth. In terms of returns, insurance products today offer competitive
returns ranging between 7% and 9%. Besides returns, what really increases
the appeal of insurance is the benefit of life protection from insurance
products along with health cover benefits.
• Flexible insurance:
Consumers today also seek products that offering flexible options, preferring
products with benefits unbundled and customizable to suit their diverse
needs.
• Insure the retirement:

The trend in developed economies where people not only live longer and
retire earlier are now emerging in India. Where once the fear was one of
dying too early, now, with increasing longevity, the fear also is one of living
too long and outliving one's assets. With the breakdown of traditional forms
of social security like the joint family system, consumers are now
concerning themselves with the need to provide for a comfortable
retirement.
• Interest rate:
This trend has been further driven by the long-term decline in interest rates,
which makes it all the more necessary to start saving early to ensure long
term wealth creation. Today's consumers are increasingly interested in
products to help build wealth and provide for retirement income.
59
THE LIMITATION OF DISTRIBUTION CHANNEL
The cost-effectiveness of this channel of distribution has thereby suffered,

with LIC paying bonuses and commissions twice -- to agents and
Development Officers -- for every new policy and every subsequent renewal
of premiums.
After a few years of agent recruitment, Development Officers actually

collect a large revenue stream in commissions almost effortlessly. Not
surprisingly, they are one of the wealthiest classes of government servants in
the country. Efforts by LIC to impose stricter incentive schemes have been
defeated by the powerful Union of Development Officers. And a halfhearted
attempt to introduce "career agent"-type distribution also failed.
• Present Scenario
The Government of India liberalised the insurance sector in March 2000 with
the passage of the Insurance Regulatory and Development Authority (IRDA)
Bill, lifting all entry restrictions for private players and allowing foreign players
to enter the market with some limits on direct foreign ownership. Under the
current guidelines, there is a 26 percent equity cap for foreign partners in an
insurance company. There is a proposal to increase this limit to 49 percent.
The opening up of the sector is likely to lead to greater spread and deepening of
insurance in India and this may also include restructuring and revitalizing of the
public sector companies. In the private sector 12 life insurance and 8 general
insurance companies have been registered. A host of private Insurance
companies operating in both life and non-life segments have started selling their
insurance policies since 2001.
60
• CUSTOMER PROTECTION:
Insurance Industry has Ombudsmen in 12 cities. Each Ombudsman is
empowered to redress customer grievances in respect of insurance
contracts on personal lines where the insured amount is less than Rs. 20
lakhs, in accordance with the Ombudsman Scheme. Addresses can be
obtained from the offices of LIC and other insurers.
61
CONCLUSION
Competition will surely cause the market to grow beyond current rates,
create a bigger "pie," and offer additional consumer choices through the
introduction of new products, services, and price options.
Yet, at the same time, public and private sector companies will be working
together to ensure healthy growth and development of the sector. Challenges
such as developing a common industry code of conduct, contributing to a
common catastrophe reserve fund, and chalking out agreements between
insurers to settle claims to the benefit of the consumer will require concerted
effort from both sectors.
The market is now in an evolving phase where one can expect a lot of
actions in coming days. The current impediments for foreign participation –
like 26% equity cap on foreign partner, ill defined regulatory role of IRDA
(Insurance Regulatory development Authority- the watchdog of the industry)
in pension business etc.—are expected to be removed in near future.
The early-adopters will then have a clear advantage compared to laggards in

gaining the market share and market leadership. The will need to make sure
right now that their entire infrastructure is in place so that they can reap the
benefit of an "unlimited potential."
WE MUST INSURE OURSELF.
62

Role of Life Insurane Co

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Role of Life Insurane Co

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WE KNOW INDIA BETTER.

Wherever there is uncertainty there is risk. The risk can’t be averted. It

Insurance is a Rs.400 billion business in India, and together with banking

Yet more than three-fourths of India’s insurable population has no life

Unfortunately the concept of insurance is not popular in our country. As per

INSURANCE INFRASTRUCTURE IN INDIA

A well-developed and evolved insurance sector is needed for economic

The Insurance regulatory development authority (IRDA) is the regulatory

New India Insurance, Oriental Insurance, National Insurance and United

The market players

Life Insurance General Insurance

Fire Insurance Marine insurance Special Insurance Miscellaneous

Life Insurance is a contract for payment of a sum of money to the person

In a nutshell, life insurance helps in two ways: premature death, which

Benefits of Life Insurance:

payments over a period of years or in a combination of installments and

b) 100 % of the premium paid is deductible from your total taxable

LIFE INSURANCE CORPORATION OF INDIA

Life Insurance Corporation of India (LIC)

• To conduct the business with the utmost economy, in a spirit of

Nepal by the name of Life Insurance Corporation (Nepal) Limited in

The nationalization of the life insurance aims at widening the channels of

• Bharat Insurance Company (1896)

Nearly a decade after India achieved independence, the Parliament of India

Over its existence of around 50 years, Life Insurance Corporation of India,

LIC owns the following subsidiaries:

• Life Insurance Corporation of India International: This is a joint

“Explore and enhance the quality of life of people through financial

3. Conduct business with utmost economy and with the full

would arise in the changing social and economic

their capability in furthering the interests of the insured

3. SERVICE MARKETING MIX

When an individual or a company buys a policy’s from LIC not only

LIFE INSURANCE –A UNIQUE PRODUCT

Life insurance is a package of saving and investment products. So also a

Why Life Insurance

Who Can Buy A Life Insurance Policy?

CLASSIFICATION OF LIC PLANS:-

SALIENT FEATURES OF SOME OF THE PLANS / PRODUCT:

 Table No. 75-93 Money back policies:

 Table No. 150 New Bima Kiran:

 Table No. 151 New Jeevan Shree:

 PUBLIC RELATION IN LIFE INSURANCE

LIC also thinks in favour of publicity. Since this component of promotion if

SALES PROMOTION IN LIFE INSURANCE

LIC gives various monetary as well as non-monetary incentives to its agents.

1. Chairmen Club Member

 PLACE IN LIFE INSURANCE

Some of the important dimensions of place mix in relation to the location of

It helps LIC personnel and users in reaching its branches conveniently.

Availability of infrastructure facilities

It draws LIC’s attention on all weatherproof roads, power facilities, and

Management of branch office

The management of office refers to office function, civic amenities and

 PEOPLE IN LIFE INSURANCE

People involved in the business organization of LIC are its Agents,

The LIC management has a strong advocacy in favour of managing the

Hence they provide due attention on the development of the insurance

LIC bears the responsibility of developing the credential of their employees.

 PROCESS IN LIFE INSURANCE

Service process consists of a number of activities or transactions by

The process should be friendly in insurance industry. The speed and

Information Technology will help in servicing large number of customers