Welcome to Webinar on Insurance

Financial Services

• Banking

• Shares,Debentures,Bonds

• Mutual Funds

• Commodities• Derivatives

• Insurance

Difference between Insurance and other Financial Services

• Protection against risk or hazard• Securing an amount or estate for your

family• Tax concessions• Social Security• Provide funds for the development of

nation

• Insurance is a contract whereby a certain sum of money is paid on the happening of a contingent event

• It is sharing of financial losses of a few out of the contribution of many who are exposed to the same loss

• It is spreading the loss of an individual over group of individuals

Need for Insurance

Protection of propertyCoverage against liabilitySavings with tax benefitsCapital formation for the countryLife is full of uncertain eventsCreation of Employment

What is Insurance

• Insurance is a contract whereby the insurer agrees to pay the insured a certain sum of money on the happening of a contingent event

• It is a method of sharing the financial losses of a few from a common fund formed out of many

• It is a contract of utmost good faith

Types of Insurance

• Life Insurance

• Health Insurance

• Pension

• Group Insurance

Types of Insurance• Non Life Insurance

–Marine Insurance

–Fire Insurance

–Auto Insurance

–Others

(Types of Insurance)• Marine Insurance

–Location Risks

–Handling Risks

–Operational Risks

–Risk of Human Element

–Act of God

(Types of Insurance)

• Fire Insurance

–Actual Ignition

–Damage of the property which was not in fire

–Under accidental circumstances

(Types of Insurance)

• Auto Insurance– Unlimited liability towards third party

injury– Unlimited liability towards the

passengers of vehicle– Damage to the vehicle and its

accessories– Employees using the vehicle of the

owner under Workmen compensation

Life Insurance Principles• Insurable Interest

• Utmost Good faith

• Moral Hazard

• Warranty

• Indemnity

• Subrogation

Concepts of Life Insurance• Insurer

• Insured

• Proposal

• Policy

• Premium

• Evidence (Policy Document)

Concepts of Life Insurance

• Sum Assured

• Proximate Loss

• Human Life Value

• Annuity

• Present value

Concepts of Life Insurance• Calculation of Human Life Value• A person aged 30 has Annual salary 2lacs• His personal expenses annually is 1lac• He give for the family 1lac• His earning span is 30 years, so the family

requires 30lacs(this is over a period of 30years)• Human Life value= 100000*1-(1/(1+i)^30)/i• I=present bank rate of interest so at 8% it will be

1lac*11.2578=1125780

Underwriting

• First Line Underwriter• Proposal - Name and Address - Age - Object of Insurance - Family History - Personal History - Declaration and Witness

Underwriting• Non Medical General -Basic Education, cap on limits of SA

• Non Medical Special - Employees of reputed companies• Professionals• Medical & Special Reports• Financial Underwriting• Acceptance & Communication

• Nomination

• Appointee

• Policy Document

• Clauses

• Green Channel or Across the Counter

• Cooling off

• Minor & Women Lives

Claims• What is a Claim

• Types of Claim

- Survival Benefit

- Maturity Claim

- Death Claim

- Annuity Claim

- Disability Claim

Claim

• Payment of Full Sum Assured

• Payment of Sum Assured in Installments

• Payment of Double Sum Assured

• Payment of partial Sum Assured

• Payment of Annuity for a specified period

• Payment of Annuity for a specified period and capital on the happening of contingent event

Claims

• Claimant Form

• Evidence of Burial

• Medical Attendant Report

• Police inquest report

• Claim investigation report

• Policy Document or indemnity

Plans

• Term Assurance

• Whole Life policies

• Endowment Policies

• Money Back Policies

• Children policies

• Marriage/Educational Policies

• Annuity Plans

Premium• What is Premium

• Mode of Premium

- Single

- Yearly

- Half Yearly

- Quarterly

- Monthly

Premiums• Factors Affecting Premiums - Mortality - Interest - Expenses - ProfitsTypes of PremiumsBasicAB Premiums,Rider Premiums,

Premiums

• Mortatlity Table Out of 1lac personsage30 1st

year2nd year

3rd year 4th year

1956

1999

Mortality1999

326

117

.00117

343

117

.00117

355

120

.00120

370

125

.00125

(Premiums)

• Person Aged 30 wants take a term assurance of Rs. 1lacs for 1 year

• Premium= Sum Assured * Mortality Rate for 1 year from the table

• Premium=100000*0.00117=Rs.117(1999)

• Premium=100000*0.00326=Rs.326(1956)

Premiums• Person aged 30 wants to take a term

assurance of Rs.100000 for 4 year• Premium for 1st year=

100000*0.00117=117• 2nd year 100000*0.00117=117• 3rd year 100000*0.00120=120• 4th year 100000*0.00125=125Uniform

premium=(117+117+120+125)/4=120

Premiums

• In the same example if it is made endowment that is Rs.100000 will be death cover for 4 years and 1lac will be paid on maturity at the end of 4 years

• Term Assurance Premium for 4 years=120

• Endowment premium = 100000/4 = 25000

• Total premium to be paid 25000+120=25120

Premiums

• Calculation with interest @6% the above example

• Term Assurance premium=120• Endowment premium = 25000/(1.06)^1• = 25000/(1.06)^2 • = 25000/(1.06)^3• = 25000/(1.06)^4• Total Endowment premium =21658• Net Premium=21658+120+21778

Premiums

• Expenses loading in premium

• First year premium

• Renewal premium

• Premium Related expenses

• Policy Related expenses

Premiums• Expenses Loading

We arrived at the premium rate for a person

Aged 30 for 1lac endowment as 21778

Cost of premium expenses=5%

Loading of expense =21778/0.95=22924

Cost of premium including expenses of premium=22924

Premiums

• Cost of expenses per policy

Average expenses per policy=Total Administrative cost/No of policies issued

Suppose 200000 policies issued and administrative cost =40000

Average cost per policy=200000/40000=5

Premiums

• Calculation of loading for the example of person aged 30 Sum Assured 1lac for 5 years endowment

• Premium with interest = 21778• Premium expense is 5%• Administrative expense per policy is Rs. 5

Premium+Interest+expense=(21778+5)/0.95=21929

Servicing Concepts

• Days of Grace

• Paid up Value: Sum Assured*No of years premium paid/Total premium payable

• Surrender Value

• Loans

• Revival

• Assignment

Bonus• What is Bonus• Why it arises• Types of Bonus - Reversionary Bonus - Guaranteed Additions - Loyalty Bonus - Compounded Guarantee Additions - Cash Bonus

Insurance Intermediary

• Agents

• Brokers

• Consultants

• Surveyors

• Corporate Agents

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learning methodology needs an investment, in case you feel this helps you, kindly contribute any amount to the below mentioned account.

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