Insurance Planning and Risk Planning, Life Insurance and General Insurance, Health Insurance, Term Plans and its benefits,

1. 9/23/2011
Risk Planning
A simple way to invest in equity and create wealth
INDEX
Origins of Insurance
Life insurance Industry in India
Types of Life Insurance Policies
Term Insurance Policy
Whole Life Policy
Endowment Policy
Money Back Policy
Unit-Linked Insurance Plans (ULIPS)
Annuities & Pension Plan
Riders
Term Plan Comparison
FAQs on Life Insurance
Myth Busters
General Insurance Industry
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2. 9/23/2011
Risks and uncertainties are part of life's great adventure --
accident, illness, theft, natural disaster - they're all built into
happen.
the working of the universe, waiting to happen.
Insurance then is man's answer to the vagaries of life. If you
life.
cannot beat man-made and natural calamities, well, at
man-
least be prepared for them and their aftermath.
aftermath.
PROCESS OF ANALYSING INSURANCE NEED
Identifications of Risks
Assessing Risk
Manage & Control the risk
Risk avoidance
Risk Reduction
Risk Retention
Risk transfer
Monitor & Review
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COMMON RISKS FACED BY US
Death (Loss of Income)
Disability (Loss of Income temporarily)
Critical Illness (High treatment charges)
Illness & injuries (Hospitalization expenses)
House: Fire, theft, calamity
Motor: Accidents, theft, calamity
ORIGINS OF INSURANCE
Insurance in India can be traced back to the Vedas. For instance, yogakshema,
Vedas.
the name of Life Insurance Corporation of India's corporate headquarters, is
Veda.
derived from the Rig Veda. The term suggests that a form of "community
insurance" was prevalent around 1000 BC and practised by the Aryans.
Aryans.
Life insurance had its origins in ancient Rome, where citizens formed burial clubs
that would meet the funeral expenses of its members as well as help survivors by
payments.
making some payments.
Marine Insurance (Europe) / Fire Insurance (London fire)
The government decided to nationalize the life assurance business in India. As a
India.
result, The Life Insurance Corporation of India was set up in 1956 to take over
companies.
around 250 life companies.
The Insurance Regulatory & Development Authority, an autonomous insurance
regulator set up in 2000
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4. 9/23/2011
LIFE INSURANCE INDUSTRY
1999-
Life Insurance Industry was liberalized in the year 1999-2000.
Currently there are 24 players in the Life Insurance Industry.
22 Insurance companies have JV’s with foreign partners.
LIC and Sahara Life Insurance company do not have JV’s.
All the major international players are present in the Indian Insurance market.
A high capital intensive industry - Rs.31,437 Cr deployed
Foreign partners have brought in capital of around Rs.5,053 Cr as FDI.
in-
India has the largest in-force policies in the world.
SNAPSHOT OF INDIAN LIFE INSURANCE INDUSTRY
Parameter FY 99-00 FY 06-07 FY 07-08 FY 09-10 FY 10-11
(provisional)
Number of players 1 16 18 23 24
Capital Deployed (Rs. Cr) 5 9,485 16,692 28,943 31437
Branches 2,048 5,373 8,913 12,018 11465
Employees (in Lacs) 1.23 1.87 2.54 2.70 2.42
Individual Agents (in Lacs) 7.14 19.93 25.20 29.78 26.47
New Business Policies (In Cr) 1.69 4.61 5.08 5.32 4.81
In force Policies (In Cr) 10.14 22.70 25.76 30.40 32.54
India’s share of world premium 0.50% 1.53% 1.83% NA NA
Penetration as % of GDP 1.39% 4.1% 4.0% 4.90* NA
Total Death Benefit paid(Rs.Cr) NA 4,794 5,288 8,385 10,270
Total Maturity claim paid(Rs. Cr) NA 34,356 34,543 NA NA
Over 70% of the branches are located in Class C cities or lower
Source: IRDA, Life Insurance Council
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5. 9/23/2011
FAQS ON LIFE INSURANCE
What is Life Insurance?
Do you need life insurance?
How much does life insurance cost?
How much do I insure myself for?
What will I receive on maturity of my policy?
Are there any advantages in buying insurance at an early age?
How do I buy a policy?
Where can I get all the relevant information?
TYPES OF LIFE INSURANCE POLICIES
Term Insurance Policy
Whole Life Policy
Endowment Policy
Money Back Policy
Unit-Linked Insurance Plans (ULIPS)
Unit-
Annuities & Pension Plan
Riders
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TERM INSURANCE POLICY
Provides cover for a specific period only
Premium is very low.
No returns/refund of premium
No investment element
100% Risk Cover
Sum assured paid on death
Best policy for adequate life cover
Buy based on life insurance need analysis
WHOLE LIFE POLICY
Pays either at death or maturity
Maturity usually 100 years age.
Premium paid for life time
Works for estate planning as benefits are generally enjoyed
by family
Very High Commission (upto 35%)
Not Very flexible
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7. 9/23/2011
ENDOWMENT POLICY
Most popular insurance policy in India
Combines Investment + Risk Cover
Sum assured paid on death or survival at maturity
Bonus paid along with Sum Assured on maturity
Premiums are higher than term plan due to a savings
component
Very High Commission (upto 40%)
Not Flexible
MONEY BACK POLICY
Covers death & survival benefits
Lump sum paid periodically.
20% + 20% + 20% + 40% of SA at predefined intervals
Full sum assured paid on death
Popular for planning Children’s Education & Marriage
(upto
Very High Commission (upto 40%)
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8. 9/23/2011
ANNUITIES AND PENSION
Immediate Annuity Policy
Single Premium
Monthly Pension
Meant for Retirees investing Retirement Proceeds
Deferred Annuity Policy
Invest regularly for some years
Monthly pension starts at retirement age
Can commute upto 1/3 of accumulation
WHAT ARE RIDERS?
Accidental Death
Additional Sum Assured if death
Critical Illness
If critical illness diagnosed
Waiver of Premium
Waives off premium if something happens to person
who is paying premium
Used mainly in Children’s Policies
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9. 9/23/2011
UNIT LINKED INSURANCE PLANS (ULIPS)
Market linked investment where the premium paid is invested in funds
Different Options - Equity, Balanced, Debt. Switch facility available
Greater flexibility in policy structure
Sold as “Investment” Plans
Higher of the SA or Fund value is paid at death / maturity
Higher Liquidity
Mis-
Highest Mis-selling as earlier commission was very high
SEBI-
Recent SEBI-IRDA spat and subsequent IRDA clampdown on ULIPS
Highest NAV guaranteed - A big fraud
VARIOUS COSTS - ULIPS
Mortality charges
Cost of insurance coverage
Premium allocation charges
Usually goes towards agents commission
Fund management charges
To manage investment component like MFs
Policy administration charges
To cover operational costs
Surrender charges
Higher charges for early surrender
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10. 9/23/2011
LIC SAMRIDHI PLUS
Premium Allocation Charge
First Year – 27.5%
Second & Third Year – 7.5%
Thereafter 5%
Mortality Charge – 0.5%
Policy Administration Charge – Rs 360 p.a
Fund Management Charge – 0.40%
Surrender Charge – 1st year 6%
Guarantee Charge – 0.40%
Miscellaneous Charges
Dark side
of
insurance
mis-selling
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11. 9/23/2011
Policy date:
December 28, 2010
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Sum Assured: Rs
5,00,000
Highest NAV
guaranteed
Various Charges
Premium Allocation Charge : 4%
Premium Administration Charge : 3.6%
Fund Management Charge : 1.35%
Mortality Charge : As Applicable
Surrender Charge : 6%
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Highest NAV Charge : 0.5%
Additional Service Charge : Rs 250
Total First year Charges : 9.45%
Surrendered on January 5th, 2011
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HAPPY ENDING !!!!
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15. 9/23/2011
The name
inspires trust
A ULIP CUSTOMER & HIS AGENT
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TERM PLANS COMPARISON CHART
Sum Assured: Rs 5,00,000.00
Annual Premium: Rs 19,603.00
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17. 9/23/2011
Sum Assured: Rs 100,00,000.00
Annual Premium: Rs 22,500.00
Sum Assured: Rs 100,00,000.00
Annual Premium: Rs 15,111.00
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18. 9/23/2011
Sum Assured: Rs 2,50,00,000.00
Annual Premium: Rs 22,600.00
Sum Assured: Rs 1,50,00,000.00
Annual Premium: Rs 11,300.00
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LIC ASHA DEEP II – ENDOWMENT PLAN ICICI I-PROTECT – TERM PLAN
Sum Assured - Rs 5,00,000 Sum Assured - Rs 100,00,000
Annual premium - Rs 19,603 Annual premium - Rs 8,300
Value at maturity based on LIC’s Difference in Premium - Rs 11,303
projection chart - Rs 13,27,500 Invested in Mutual Funds -
@12% - Rs 18,80,073
@15% - Rs 31,38,062
@20% - Rs 74,80,026
ITS UPTO YOU TO DECIDE !!!!!
LIC ASHA DEEP
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21. 9/23/2011
ASHA (NIRASHA) DEEP
Continue to pay annual premium Surrender value: Rs 79,271
Maturity value after 25 years – Annual Premium: Rs 19,603
Rs 13,27,500 Remaining Tenure: 18 years
Invests in Mutual Funds -
@12% - Rs 18,33,596
@15% - Rs 26,90,627
@20% - Rs 51,24,223
LIC ASHA DEEP SURRENDER
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22. 9/23/2011
LIC ASHA DEEP SURRENDER CHEQUE
ASHA DEEP INVESTED INTO MUTUAL FUND
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23. 9/23/2011
INVESTMENT BY LIFE INSURANCE COMPANIES
Parameter FY 09-10 % age
Central Government Securities 3,61,520 57%
State Government and other approved securities 1,36,998 21.5%
Investment in Infrastructure Sector 1,39,710 21.5%
Instruments FY 2009-10 FY 2010-11
Equity 4,46,881 5,06,895 (34%)
Fixed Income (Debt) 8,10,904 9,52,993 (64%)
Others 32,161 20,425 (2%)
Total 12,89,946 14,80,313 (100%)
LIFE INSURANCE DEATH CLAIMS
LIC Private Kotak Aegon Religare ICICI Pru
Amount in
Rs crs
4,799.55 1,158.58 55.91 1.08 218.04
No of Policies 6,53,909 72,200 1,983 24 14,479
Avg Amount
73,397.83 1,60,468.1 2,81,946.5 4,50,000 1,50,590.5
per policy
Sum Assured: More than 6 times
Tenure of LIC - Avg 15 years ; Private - 2 to 5 yrs
Agent / RM Mis-selling Vs Claims settled by Claims department
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MYTH BUSTERS
Myth 1: Insurance is for tax saving
Myth 2: Insurance is Investment
Myth 3: I don’t need Insurance.
5 EASY STEPS TO BUYING A POLICY
Initially, calculate the exact amount of insurance that you need;
need;
Decide which product suits you best based on your life stage and need
Calculate the premium
Once you have decided on all the above parameters, get in touch with a Life
Advisor
The Life Advisor will assist you in filling up a proposal form. In addition to a
proposal form, you need to submit some financial documents that are required
in order to buy a policy. The Life Advisor will notify the list of financial
documents required for the same.
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26. 9/23/2011
10 COMMANDMENTS OF LIFE INSURANCE
Thou shall buy insurance only for risk cover
Thou shall not consider insurance as an investment option
Thou shall preferably buy only a term policy
Thou shall not trust his agent blindly
Thou shall be wary of the hype (advertisements)
Thou shall not buy ULIP at any cost
Thou shall not insure yourself if you a lone bird
Thou shall not insure if you are wealthy
Thou shall not buy a child insurance plan or a plan for a non-earning member
Thou shall read the fine print carefully
HOW TO BUY LIFE INSURANCE
Buy insurance only from a licensed agent / intermediary
Shop around
Understand the scope of cover, terms and conditions of the policy
Fill in your application carefully – Never sign blank proposals
Health related particulars should be true
Age and Address Proof should be correct
Ensure premiums are paid to your insurance company
Read your policy when you receive it
15 day free look up period
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27. 9/23/2011
WHERE TO BUY LIFE INSURANCE?
Individual Agents -
Corporate Agents -
Bancassurance -
Insurance Brokers
Directly from companies
Branches
Online from websites
INFORMATION FOR EXISTING POLICY HOLDERS
Always remember your premium due dates to avoid a policy lapse.
Always insist on a premium receipt as a proof of payment.
Ensure your age is stated correctly in the proposal. If it is incorrect, get it rectified at
the earliest
Keep your policy in a safe place until the life insurance policy money is received.
Always keep the nomination under your policy alive and he/she should be aware
about it.
Always intimate change in address to insurance company immediately
Always clarify any doubts you have about your policy with the life insurance company
/ insurance advisor.
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28. 9/23/2011
5 COMMON LIFE INSURANCE MISTAKES
Treating life insurance as a savings avenue
Trusting your life insurance agent / advisor completely
Considering life insurance as a one time activity
Buying the wrong product (99% are victim of this) - Child plan,
Life insurance for non-earning spouse
Buy Life insurance purely to save Tax
FILING A LIFE INSURANCE CLAIM
Maturity claim
Fill the claim form
Original policy bond
Death claim
Claim intimation/notification
Contact the respective life insurance branch office.
Contact your insurance advisor
Call the respective Customer Helpline
Documents required for claim processing
Original policy document,
Death certificate,
Police FIR and post mortem exam report (for accidental death),
Certificate and records from the treating doctor/hospital (for death due to illness)
Settlement of Claim (within 30 days of receipt of all documents)
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PROTECTION OF POLICY HOLDERS INTEREST
Grievance Redressal Mechanism
Register a Complaint with the Toll free number /
helpline of the Company
Complaint to the Grievance officer of the company
Complaint to Council / IRDA / Ombudsman
Note:-
There are 12 ombudsman Centre's in India.
The companies cannot challenge the decision of the ombudsman
No time
Agent’s Job
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GENERAL INSURANCE
TYPES OF GENERAL INSURANCE
Motor Insurance
Health Insurance
Fire Insurance
Travel Insurance
Home Insurance
Critical Illness cover
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HEALTH INSURANCE
Why is Health Insurance important?
Rising medical costs
Uncertain hospital bills
Expensive / quality health care services
Family health insurance at a lesser premium
Tax benefit
Changing lifestyle – Most Important reason
POOR EATING HABITS RESULTING IN POOR HEALTH
Acidity, Diabetes, High Cholestrol, Obesity
and the list goes on………
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EVERY FAMILY HAS ONE……..
HOW MUCH HEALTH INSURANCE COSTS?
Source: www.icicilombard.com
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HEALTH INSURANCE
Hospitalization Expenses over 24 hours
Room charges, Medicine & Test Charges, Operation, doctor
fees etc covered
Family floaters available
Group mediclaim policy
Eligible for tax benefits under 80D
Rs 1 to 5 lakhs cover recommended based on affordability
CRITICAL ILLNESS COVER
Benefit paid immediately on first diagnosis of the covered Major Medical Illnesses
and Procedure, Accidental Death /Permanent Total Disablement (PTD) due to
accident
Choose between a cover of 3 Lakh, 6 Lakh or 12 Lakh sum insured and policy
duration between 1 year, 3 years or 5 years.
Major Medical Illness & Procedures :
Cancer
Coronary Artery Bypass Graft Surgery
Myocardial Infarction (Heart Attack)
End Stage Renal Failure
Major Organ Transplant
Stroke
Paralysis
Heart Valve Replacement Surgery
Multiple Sclerosis
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34. 9/23/2011
A grim reminder…. Before its too late
IS THIS THE TREND???
Mr Raghu Pillai, Mr Ranjan Das,
CEO, Future Group CEO, SAP India
Age - 54 yrs, Heart Attack Age - 42 yrs, Cardiac Arrest
Some reasons
Blackberry’s
Mr R Ravimohan, Excessive Travelling
Former CEO, Crisil Peer Pressure
Age - 52 yrs, Heart Attack Easy Lifestyle
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CRITICAL ILLNESS CHARGES
STEPS TO BUY A HEALTH INSURANCE
Pay attention to policy conditions
Read the exclusions and limitations very carefully
co-
Compare premium costs, deductibles, co-payments
Take an informed decision
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GET WELL SOON !!!
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LICENSE TO GOOD HEALTH….
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Last but not the least……..
If you have both knowledge & time, then you do not
require a financial advisor. However, if you donot have
any one of these, then hire someone to do it for you -
and be willing to pay for the service. Most of us at
some point have something in our body that needs
fixing and we happily pay a doctor to do so, but we
hesitate to pay someone to help fix the financial
mismatch most of us are born with.
QUESTIONS TO ASK A FINANCIAL PLANNER OR ADVISOR
What experience do you have?
What are your qualifications?
What services do you offer?
Are you independent of financial product sponsors?
How much do you typically charge?
How will I pay for your services?
Are you licensed by SEBI / IRDA / FPSB ?
Have you ever been publicly disciplined for any unlawful or
unethical actions in your professional career?
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SOURCE
Life Insurance Council, India
IRDA Annual Report
Valueresearchonline.com
Rediff.com
Outlook Money
Respective company websites
Special Thanks to:
Mr Virendra Kothari, Etica Wealth Management Pvt Ltd
Mr Nikhil Kothari, Axis Securities Ltd
THANK YOU
For any further information, please contact:
Mr. Gajendra Kothari, CFA, CAIA, ICFA
M:+91 98678 24321
E: gajendra.kothari @eticawealth.com
Ética Wealth Management Private Limited
501, T-39 Sunshine Building,
Shastri Nagar, Lokhandwala Complex Road,
Andheri West, Mumbai - 400 053
Landmark: Suburban Diagnostics, Near Lokhandwala Circle
T: +91 22 2632 9644
+91 22 4264 8740
E: info@eticawealth.com
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