structure of life insurance corporation

 

STRUCTURE OF INSURANCE INDUSTRY IN INDIA • •

Life Insurance Corporation of India – Fully owned by government. Postal Life Insurance

Private players: 1. Bajaj Allianz Life Insurance Co. Ltd. 2. Birla Sun Life Insurance Co. Ltd. (BSIL) 3. HDFC Prudential Life Insurance Co. Ltd. (HDFC STANDARD LIFE) 4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU) 5. ING Vyasa Life Insurance Co. Ltd. (ING VYASA) 6. Max New York Life Insurance Co. Ltd. (MNYL) 7. Met Life India Insurance Co. Ltd. (METLIFE) 8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd. 9. SBI Life Insurance Co. Ltd. (SBI Life)

10. TATA AIG Life Insurance Co. Ltd. (TATA AIG) 11. AMP Sanmar Assurance Co. Ltd. (AMP SANMAR) 12. Aviva Life Insurance Co. Ltd. (AVIVA) 13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE) 14. PNB Life Insurance 15. Reliance Life Insurance 16. Bharati Axa Life Insurance

RELATED ACTS The insurance sector went through through a full circle of phases from being unregul unre gulate ated d to be comple completel tely y regulat regulated ed and now bei being ng part partial ially ly deregulated. It is governed by number of acts, with the first one being the Insurance Act, 1938. The Insurance Act, 1938 The Insurance Act, 1938 was the first legislation governing all insurance titles to provide strict state over insurance business. Life Insurance Corporation Act, 1956

 

Even though the first legislation was enacted in 1938, it was only on 19 th January, 1956, that life insurance in India was completely nationalized through thro ugh the Lif Lifee Insu Insuran rance ce Cor Corpora poratio tion n Act, Act, 1956. 1956. There There were 245 insurance companies of both Indian and foreign origin companies in 1956.. The gov 1956 govern ernmen mentt acq acquir uiring ing the com compan panies ies accomp accomplis lished hed nationalization. The Life Insurance Corporation of India was then formed on 1st September, 1956. General Insurance Business (Nationalization) ACT, 1972 The general insurance business (nationalization) Act, 1972 was enacted to nationalize the 100 odd general insurance companies by merging them to form four different companies named National Insurance, New India Assurance, Oriental Insurance and United India Insurance headquartered in each of the four metropolitan cities of India.

Insurance Regulatory and Development Authority (IRDA) Act, 1999 Reforms in the Insurance sector were init initiated iated with the passage of the IRDA Bill in Par Parlia liamen mentt in Decemb December er 1999. 1999. The IRDA sin since ce its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector  insurance companies.

The other decisi decision on taken simulta simultaneousl neously y to provide the support supporting ing systems syst ems to the insura insurance nce sec sector tor and in par partic ticula ularr the life insu insuran rance ce compan com panies ies was the launc launch h of the IRDA' IRDA'ss onl online ine servi service ce for issue and renewal of licenses to agents. The approval of insti instituti tutions ons for impa imparting rting training to agents has also ensured that the insurance companies would have a trained workforce of  insurance agents in place to sell their products, which are expected to be introd int roduce uced d by earl early y nex nextt yea year. r. Sin Since ce bei being ng set up as an ind indepe epende ndent nt statutory body the IRDA has put in a framework of globally compatible regulations. In the private sector 12 life insurance and 6 general insurance companies have been registered.

LIFE INSURANCE PRODUCTS 2

 

Life insurance products are broadly classified into two categories: A) Traditional products which includes: 1. Term loan: It provides death risk cover for a specified term only.

Every policy does not result into a claim. 2. Who Whole le lif lifee ins insura urance nce:: Her Heree the sum assu assured red is pai paid d on death whenever it occurs. The premium in this will be higher compared to term plan. 3. Endowment plan: It provides for the payment of the sum assured at the end of the specified term or on early death. A money back plan, where survival benefits become payable at definite interval, is also the variant of endowment plan. 4. Annuities: They are the series of periodic payments to the annuities for life or for a specified period. Annuities can be immediate (where the payment of annuity is immediate) or deferred (where the payment of annuity commences after a specific period). B) Non- traditional products:

Due to infle inflexibil xibility ity of life insuranc insurancee products, products, which results results into high liquation, inconvenience in sticking to premium payment regimen, lack  of tran transpa sparenc rency, y, etc etc.. ins insuran urance ce com compan pany y have have com comee out with non non-traditional tradit ional products mainly in the form of  unit linked product products, s, which have borrowed several beneficial features of mutual funds.

UNIT-LINKED INSURANCE PLANS (ULIP) Unit li Unit linke nked d ins insura urance nce pla plan n (UL (ULIP) IP) is a life life ins insuran urance ce sol soluti ution on tha thatt  provides the client with the benefits of protection and flexibility in investment. invest ment. It is a solution which provides for life insurance insurance where the  policy value at any time varies according to the value of the underlying assets at the time. The investment is denoted as unit and is represented by the value that it has attained called as Net Asset Ass et Value (NAV). ULIPs are a category of goal-based financial solutions that combine the safety of insura insurance nce protection protection with wealt wealth h creati creation on opport opportuniti unities. es. In

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ULIPs, a part of the investment goes towards providing a life cover. The residual portion of the ULIP is invested in a fund which in turn investing stocks or bonds; the value of investments alters with the performance of  the underlying fund opted by the customer. Simply put, ULIPs are structured in such that the protectio Simply protection n element and the savings element are distinguishable, and hence managed according to your specific specific need needs. s. In this this way, the ULI ULIP P plan plan off offers ers unp unprece receden dented ted flexibility and transparency. ULIPs came into play in 1960s and became very popula popularr in Western Western Europe Euro pe and Ameri America. ca. The reas reason on tha thatt is attrib attribute uted d to the wid widee spre spread ad  popularity of ULIP is because of the transparency and the flexibility which it offers to the clients. As time progressed the plans were also successfully mapped along with life insurance insurance needs to retire retirement ment plannin planning g in today’s times ULIP  provides solution for all the needs of a client like insurance planning financial needs financial planning for children’s future and retirement  planning The number of units represents the policyholder’s share in the fund. The value of the unit is determined by the total value of all the investments made by the fund divided by the number of units. If the insurance company offers a range of funds, the insured can direct the company to invest in the fund of his choice. Insurers usually offer  three choices — an equity (growth) fund, balanced fund and a fund, which invests in bonds.

STRUCTURE OF ULIPs ULIPs offered by differ different ent insurers have varying charge structur structures. es. Broadly the different types of fees and charges are given below. However  the insurers have the right to revise or cancel the fees and charges over a  period of time. Charges, Fees and Deductions in ULIP

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Premium Allocation Charge This is a premium-ba premium-based sed charge. After deducting this charge from  premiums, the remainder is invested to buy units. The Allocation charges are guaranteed for the entire duration of policy term. Mortality Charge The Mortality Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the Fund Value pertaining to regular premiums). It will be deducted deducte d by monthly cancellat cancellation ion of unit unitss from the accumul accumulation ation unit account. The Mortality Charge shall remain guaranteed throughout the  policy term. Fund Management Charge 1% p.a. on Wit With h Prof Profits its Fund, 1% p.a. on Deb Debtt Fun Fund, d, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth Fund. FMC will be applied on the fund while calculating NAV on a daily basis. The maximum FMC on any fund is 2% p.a. subject to prior pr ior approval by the IRDA. Policy Administration Charge Rs. 60 per month, which will increase by 5% p.a. on the 1st of January Conclusion: The insurance sector went through through a full circle of phases from being unregul unre gulate ated d to be comple completel tely y regulat regulated ed and now bei being ng part partial ially ly deregulated References: www.wikipedia.com

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