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INSURANCE AN INTRODUCTION

Insurance may be described as a social device to ensure protection of economic value

of life and other assets. Under the plan of insurance, a large number of people

associate themselves by sharing risks attached to individuals. The risks, which can be

insured against, include fire, the perils of sea, death and accidents and burglary. Any

risk contingent upon these, may be insured against at a premium commensurate with

the risk involved. Thus collective bearing of risk is insurance.

Insurance is a contract whereby, in return for the payment of premium by the insured,

the insurers pay the financial losses suffered by the insured as a result of the

occurrence of unforeseen events. The term "risk" is used to describe the possibility of

adverse results flowing from any occurrence or the accidental happenings, which

produce a monetary loss.

Insurance is a pool in which a large number of people exposed to a similar risk make

contributions to a common fund out of which the losses suffered by the unfortunate few,

due to accidental events, are made good. The sharing of risk among large groups of

people is the basis of insurance. The losses of an individual are distributed over a group

of individuals.

Definitions

General definition:

In the words of John Magee, Insurance is a plan by themselves which large

number of people associate and transfer to the shoulders of all, risks that

attach to individuals.

Fundamental definition:

In the words of !.. #ansell, $Insurance accumulated contributions of all parties

participating in the scheme.%


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Contractual definition: In the words of &ustice Tindall, $ Insurance is a contract in which

a sum of money is paid to the assured as consideration of insurer's incurring the risk of

paying a large sum upon a given contingency.%

Characteristics of insurance

haring of risks

(ooperative device

)valuation of risk

*ayment on happening of a special event

The amount of payment depends on the nature of losses incurred.

The success of insurance business depends on the large number of people

insured against similar risk.

Insurance is a plan, which spreads the risk and losses of few people among a large

number of people.

The insurance is a plan in which the insured transfers his risk on the insurer.

Insurance is a legal contract which is based upon certain principles of insurance

which includes, utmost good faith, insurable interest, contribution, indemnity, causas

proxima, subrogation, etc.

The scope of insurance is much wider and extensive.

Functions of insurance:

rimar! functions:

+. *rovide protection Insurance cannot check the happening of the risk, but can

provide for the losses of risk.

-. (ollective bearing of risk Insurance is a device to share the financial losses of few

among many others.


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. Assessment of risk Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk.

/. *rovide certainty Insurance is a device, which helps to change from uncertainty to

certainty.

Secondar! functions:

+. *revention of losses Insurance cautions businessman and individuals to adopt

suitable device to prevent unfortunate conse0uences of risk by observing safety

instructions.

-. mall capital to cover large risks Insurance relives the businessman from security

investment, by paying small amount of insurance against larger risks and

uncertainty.

. (ontributes towards development of larger industries.

Other Function:

1eans of savings and investment:

Insurance companies are business houses. The product they sell is financial protection.

To succeed and survive, they must cover theircosts, which

include payments to cover the losses of policyholders, as well as sales and

administrative expenses, taxes and dividends.

Insurance com"anies ha#e t$o sources of income for covering these costs

"remiums and in#estment income. The premiums are collected on a regular basis

and invested in 2overnment 3onds, 2ilt, stocks, mutual funds, real estates and other

conservative avenues. #owever, investment income depends on market conditions,

interest rates, economy etc. and varies from year to year. 3ecause of the uncertainty

associated with the investment income, insurance companies must generate enough

income from premiums to cover the bulk of their expenses.

The ris% &ecomes insura&le if the follo$in' re(uirements are com"lied $ith


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The insured must suffer financial loss if the risk operates.

The loss must be measurable in money,

The ob&ect of the insurance contract must be legal.

The insurer should have sufficient knowledge about the risks he accepts.

Fundamentals of Insurance

The fundamental *rinciples of the Insurance are as follows

Insura&le Interest Insurable interest means the legal right to insure. Insurable

Interest is a must and only then the insurance contract is enforceable at law. This

principle differentiates a(ontract of insurance from wager. 4ack of insurable interest

renders the contract null and void. 5or Insurable Interest to exist there must be

*roperty, 6ights,Interest, Life or

4iability7 this must be insured and the Insured should have a legally recogni8able

relationship thereto. The Insured should be benefited by the safety of the property or

is pre&udiced by its loss. Insurable Interest may arise in the following manner

+. O$nershi" Absolute ownership entitles the owner to insure the property. This is

the commonest method whereby Insurable Interest arises.

-. artial Interestis also insurable e.g. a mortgagee. A creditor can also insure the

life of his debtor but only to the extent of his loan.

. Administrators and e)ecutorsi.e. officials appointed by a court of law to take

care of a property may also insure the property.

/. Relationshi" does not automatically constitute insurable interest. The onlyrelationship recogni8ed by law for this purpose is the one between a husband and

wife.

9. An em"lo!ercan insure his employee under a *ersonal Accident *olicy as he

has insurable interest in them.


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ro)imate cause 2enerally, the claims are payable under insurance policies if they

arise out of events which are proximately caused by the insured perils. In other

words, the proximate cause of the event has to be peril covered by the policy, so as

to constitute a valid claim.

Contri&ution An insured may have several insurance on the same sub&ect matter. If

he recovers his loss under all these insurance, he will obviously make a profit out of

loss. This will be an infringement of the principle of indemnity. (ommon 4aw has,

therefore, evolved the doctrine of contribution whereby the insured is prevented from

recovering more than his loss, despite his having several insurance on the sub&ect

matter.

Su&ro'ation:The principle of indemnity seeks to prevent the insured from making

profit out of loss. #owever, it may so happen that that the insured may recover his

loss under his policy and he may also have rights against third parties. If, after the

insurance claim is settled, the insured is allowed to enforce his rights against third

parties and to retain whatever damages he receives from them, he will certainly

make a profit and the principle of indemnity will be infringed.

(ommon 4aw has therefore, evolved the doctrine of subrogation as corollary to the

principle of indemnity. ubrogation may be defined as the transfer of rights and

remedies of the insured to the insurers who have indemnified the insured in respect

of the loss. The (ommon 4aw right of subrogation is implied an all contracts on

indemnity, as it arises only after payment of loss.

Utmost Good Faith: In all 2eneral Insurance contracts we know that a property or

interest or liability or life is offered for insurance and the insured has to take

decisions on the acceptance of the proposal. If he decides to accept the proposal a

premium commensurate with the risk has to be charged. To enable him to take

necessary decision in this regard, the insurer must have certain facts about the risk

offered. These facts influence the &udgment of the insurer in deciding about the


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acceptance or otherwise of the risk and the rate of premium to be charged, if

accepted. uch facts are known as material facts.

Nature of Insurance Contracts

:hen the insured pays the premium and the insurers accept the risks, the contract of

insurance is concluded. The policy issued by the insurers is the evidence of the

contract. The contract of insurance, likeany other contract,for

example a contract for the sale of goods, is sub&ect to the general law of contract as

embodied in the Indian (ontract Act,+;ffer and acceptance Usually, the offer is made by the proposer, and acceptance

made by the insurer.

b= (onsideration This means that the contract must involve some mutual benefit to the

parties. The premium is the consideration from the insured and the promise to indemnity

is the consideration from the insurers.

c= Agreement between the parties 3oth the parties should agree to the same thing in

the same sense.

d= (apacity of the parties 3oth the parties to the contract must legally competent to

enter into the contract. 5or example, minors cannot enter into insurance contracts.

e= 4egality The ob&ect of the contract must be legal and the contract should not violate

any legal re0uirements. ).g. no insurance can be had for smuggled goods.

6isk

6easonable or not, risks are inescapable in business. )very business venture is

something of a gamble, because the possibility of loss is as real as the prospects for

profits. And even though managers do everything possible to ensure that their business

succeeds, they cannot guard against every conceivable form of risk.


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*ure 6isk versus peculative 6isk

*ure 6isk )vents representing the kind of risk that no business can predict or

escape, known as *ure 6isk, it is the threat of a loss without the possibility of gain.

In other words, a disaster such as avalanche or fire is costly for the business it

strikes, but the fact that no disaster occurs contributes nothing to a firm?s profit.

peculative 6isk It is the type of risk that offers the prospect of making profit and

prompts people to go into business in the first place. )very business accepts the

possibility of losing money in order to make money.

Approaches to 6isk 1anagement

6isk 1anagement is the process of reducing the threat of loss due to uncontrollableevents. teps in selecting a risk management approach

To identify all the things those can possibly go wrong. @

To consider the probability that an event will occur.

Techni0ues of 6isk 1anagement are

+. Avoiding the 6isk :hen a company avoids risk, it eliminates the possibility that a

particular event will occur. To avoid the possibility of a suit, for example, not to produceany products which would, of course, eliminate both the threats of a lawsuit and the

opportunity to profit. :ith rare exceptions, avoiding risk entirely is extremely difficult.

-. 6educing 6isk A more practical approach is to reduce the risk by taking precautions.

6isk reduction is an important element in most companies? approach to risk

management. Typical precautions include putting safety locks on doors to prevent

robberies, installing overhead sprinklers to minimi8e fire damage, and periodic checking

motor vehicles to prevent accidents.

. Assuming risk 1any companies draw on current revenues or set aside a

"(ontingency 5und" to cover unexpected losses. etting aside money on regular basis

could be cheaper than purchasing insurance. 1oreover, the company can earn interest

on the reserved cash. uch assumption of risk is also called selfinsurance or risk

retention.


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/. Transferring the risk 1ost companies still rely on outside insurance firms for financial

protection against catastrophic losses. In buying insurance, companies transfer the risk

of loss to an insurance firm, which agrees to pay for certain types of losses. In

exchange, the insurance firm collects a fee known as a premium.

Insurable and Uninsurable 6isks

Insurable risks An insurable risk one that an insurable company will cover 2enerally

meets the following re0uirements. The peril insured against must not be under the

control of the Insured. This means, of course that insurer do not pay for losses that are

intentionally caused by an insured, caused at the Insured?s direction, or caused with the

insured?s collusion. 5or example, a fire insurance policy excludes loss caused by the

Insured's own arson. It does, however, include loss caused by an employee?s arson.

4osses must be calculable, and the cost of insuring must be economically feasible. To

operate profitably, insurance companies must have data on the fre0uency of losses

caused by a given peril. If this information covers a long period of time and is based on

a large number of cases, Insurance companies can usually predict 0uite accurately how

many losses will occur in the future. 5or example, the insurance companies to fix up the

rate of premium of *ersonal Accident Insurance may use the information of the number

of people who will die each year in India in accidents. The peril must be unlikely to affect

all insured simultaneously. Unless an insurance company spreads its coverage over

large geographic areas or a broad population base or different classes of Insurance, a

single disaster might force it to pay out all its policies at once. The possible loss must be

financially serious to the Insured. An Insurance company could not afford the paperwork

involved in handling numerous small claims of a few 6upees each. As a result, many

policies have a clause specifying that the insurance company will pay only that part of a

loss greater than an amount the deductible or excess stated in the policy. The excess

represents small losses that the Insured has to absorb.


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(hapter

IB!UT6C *6>5I4)

.+ >rigin of 4ife Insurance

4ife Assurance was born in )ngland when the first policy providing temporary cover for

a period of +- months was issued as easy as +9; A.!. The Amicable ociety started

granting fluctuating sum on death since +


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The 2overnment began to exercise a certain measure of control on Insurance business

by passing the HInsurance Act' in +F+-. 5or controlling investment of funds, expenditure

and management, a comprehensive Act was passed known as HThe Insurance Act

+F;'. 5or controlling the affairs, the office of (ontroller of Insurance was established.

The act was extensively amended in +F9D.

In the year +F99, approximately +ffices and ;D *rovident 5und ocieties

had been registered for transacting 4ife Assurance business in India. There were,

however, no full guarantees to the policyholders. The concept of trusteeship was

lacking. 1any insurance companies went into li0uidation. There were malpractices in

insurance business. 5or achieving the following purposes it was felt necessary to

nationali8e the insurance business in India. To provide security to the policyholders

Gi= To utili8e the funds for nationbuilding activities.

Gii= To avoid cut throat competition

Giii= To abolish malpractices

Giv=To spread the insurance message to the rural areas.

The first step in this direction was taken by the 2overnment of India by issuing the 4ife

Insurance Gthe )mergency provisions= >rdinance, +F9E on +F thJanuary, +F9E. The then

5inance 1inister, hri (. !. !eshmukh mentioned the purpose of nationalisation as

reaching the goal of socialistic pattern of society, rendering genuine service to the

people in the rural area. The 4ife Insurance

(orporation Act GAct KKKI of +F9E= was passed by the *arliament in June +F9E which

came in force on +stJuly +F9E. The 4ife Insurance (orporation of India came into

existence on +steptember +F9E.

. IBU6AB() )(T>6 6)5>61

#aving looked at the insurance sector, let us look at the efforts made by the government

to make the industry more dynamic and customer friendly. To begin with, the 1alhotra


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(ontroller of Insurance G(urrently a part from the 5inance 1inistry= should be made

independent

Investments

1andatory Investments of 4I( 4ife 5und in government securities to be reduced

from verall, the committee strongly felt that in order to improve the customer services and

increase the coverage of the insurance industry should be opened up to competition.

3ut at the same time, the committee felt the need to exercise caution as any failure on

the part of new players could ruin the public confidence in the industry.

#ence, it was decided to allow competition in a limited way by stipulating the minimum

capital re0uirement of 6s.+ bn. This amount is not very high for foreign firms, as it

translates to only about UM-9 million. 5urther, to date it is unclear

whether e0uity should be payable in one go or should be brought in as installments.Also, the foreign e0uity participation was to be restricted to only /DL.

The committee felt the need to provide greater autonomy to insurance companies in

order to improve their performance and enable them to act as independent companies


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with economic motives. 5or this purpose, it had proposed setting up an independent

regulatory body.

The industry and analysts find that there is lack of clarity in the following areas

Though coverage of rural areas was to be made compulsory, it raises the 0uestion

as to who would subsidies the rural policies as they would be difficult to service and

hence costs will go up.

There is some confusion with respect to investments. :here should the funds be

investedN (urrently I securitiesN

The report also does not enumerate exit options available to the new entrants. In the

event of failure, there should be an arrangement made whereby the other

(ompanies pool in to bail the customers, who in all probability would be middle class

individuals.

./ *>T)BTIA4ITC >5 IBU6AB() IB IB!IAB 1A6P)T

1arketing inefficiency of general insurers has kept society in dark even when so many

personal as well as commercial lines of insurance covers are available for them.

Insurers have failed to identify the need of the individual risk factors and thereafterselecting proper market segments and developing demand of these needs by adopting

proper marketing mix. There is great scope of commercial line of insurance as we are

developing at a very fast rate but the potentiality and scope of personal lines of

insurance is vast as this areas is still undertapped. *roduct designing and pricing is

also simple and growth of this portfolio is guaranteed in this country which has a base of

over +DD crore population, where there are about -9 crore dwellings, -D crore schools,

colleges and educational institutions and about 9 crore small and big shops. 3ut

despite this the Indian insurers share in personal line of business is very low or

negligible.

There are enormous growth opportunities to Indian as well as foreign insurers because

of such a huge base of population there is ample scope to introduce the new line of


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covers as per the changing needs and to increase the per capita share of the insurance

by encouraging risk transfer by investing small portion of the savings of the individuals.

3y opening up the sector far more opportunities has came up in insurance and

reinsurance market. After privati8ation of this sector presence of the foreign players hasalso increased. Therefore the insurers, in time to come, will have to change their

attitude from selling of the product to marketing of the protection needs of the insured

and for this what is re0uired is

)ffective product planning

uitable pricing

)fficient promotion and physical distribution.

*roper physical evidence.

2ood and well trained sales force.

Cour *lans, Cour !reams O Their 5uture

The )ssence of 4ife Insurance

Cour family counts on you every day for financial support food, shelter, transportation,

education, and much more. Cou and your spouse have plans for your future and dreamsfor your family another child, a bigger home, a new business, college education, travel,

retirementQ 4ife insurance is all about making sure your family has ade0uate financial

resources to make those plans and dreams come true, if you were to die prematurely.

And &ust as your spouse and children Gas beneficiaries= count on you, you count on your

spouse. That?s why coverage for your spouse is also important. If he or she were to die

unexpectedly, you would feel similar financial strains. This is especially true today, with

so many "double income" families.

:hen hould omeone InvestN

The answer, of course, is right nowR ince no one can tell when the best time to invest

is, it is whenever you have the moneyR >ne should first invest in any plans for which tax


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deductible contributions can be made because these types of savings reduce current

taxes. Then, any more surplus funds should be invested in a variable annuity, especially

in e0uities so as to get the maximum growth of the capital.

Insurance as a afety Bet

The function of insurance is to protect you against losses you can?t afford. This is done

by transferring the risks of a person, business, or organi8ation the "insured" to an

insurance company, or "insurer." The insurer then reimburses the insured for "covered"

losses i.e., those losses it pays for under the policy?s terms.

As the insurance consumer, you pay an amount of money, called a premium, to the

insurer to transfer the risk. The insurer pools all its premiums into a large fund, and

when a policyholder has a loss, the insurer draws funds from the pool to pay for the

loss. 4ife is full of unexpected events that can create large financial losses. 5or

example, whenever you drive, it is possible that you may have a costly accident. 6isks

affect you by causing worry about potential loss and how to deal with the

conse0uences. Insurance reduces anxiety over a possible loss and absorbs the

financial brunt of its conse0uences. #owever, while insurance coverage is essential,

how much and what type of insurance people need differ with each individual. Cou must

decide how much risk you?re willing to tolerate without insurance. 5or example, benefits

for disability policies typically begin after a waiting period of one to six months.

Therefore, you should ensure that you have some form of coverage or financial

resources before the policy period begin.

:here (an I 2et InsuranceN

ince insurance can be expensive, it makes sense to get more than one price 0uote for

coverage. At one time, we in India had no option but the nationali8ed insurancecompanies like 4I(, 2I(, etc. Bow several private players, often with foreign tieups, are

entering the fray. There are now several companies selling any one type of insurance,

each with its own price structures, coverage, and policy exclusions. To help consumers

choose among the various types of coverage's, companies train sales representatives

in the technical points of their insurance products. 1any representatives work for &ust


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one insurance company. There are also brokers and independent agents self

employed business people who sell insurance on commission for several insurers

who claim they can comparison shop to get the best coverage's for consumers. (ertain

banks also sell insurance.

:hat Type of Insurance Agent hould I TrustN

:ith multiple players in the life insurance field now, a choice should be first made

regarding the insurance company before choosing an agent. To determine a company?s

willingness to pay claims, ask a policyholder who has filed several claims. >bviously,

the more claims an insurer has handled with no complaints, the more likely that the

company will provide you with good service. 3arring 4I(, the remaining players in life

insurance are still new in the field, so this kind of information will not be available for

another few years at the least. It remains to be seen how the newer players will perform

on the claims front, but given the regulatory framework and their strong parentage, their

performance should be comparable, if not better than 4I(.

It is 0uite imperative that your insurance agent be competent and professional enough

to clearly understand your insurance re0uirements and suggest a

suitable scheme. Also, with insurance companies offering varying rate of commissions

on different schemes, there is a likelihood that a ?notsoprofessional? agent may betempted to recommend a scheme which pays him a higher commission, though it may

not be very suitable for your needs. This is especially so in the case of 4I(, sole

provider of life insurance in our country till recently, where the eligibility criteria are not

very rigorous and very often the level of knowledge and competence of the agents

leaves a lot to be desired. The new players seem to be much more stringent in

appointing agents and more committed in providing training to them. In today?s context,

especially in case of 4I(, it may be advisable to go in for an agent who comes

recommended from one of your friends, relatives or associates. 5urther, the agent

should be able to provide you with a comparison of multiple schemes and also explain

them in simple terms, so that you are are able to make an informed decision. In case an

agent is not inclined to spend the time and resources to provide you with relevant

information and solve your 0ueries, it may be better to give a goby to such a person


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and start looking for a new agent. The market is becoming increasingly competitive and

it should not be a difficult task to find a good agent.

4ife Insurance *layers

3a&a& Allian8 2eneral Insurance 3a&a& Allian8 2eneral Insurance (ompany 4imited is

a &oint venture between 3a&a& Auto 4imited and Allian8 A2 of 2ermany. 3oth en&oy a

reputation of expertise, stability and strength.

3irla un 4ife Insurance The Aditya 3irla 2roup contributes its knowledge of the

Indian market while un 4ife 5inancial contributes global expertise in the areas of

protection and wealth management.

#!5( tandard 4ife Insurance #!5( and tandard 4ife have a long and close

relationship built upon shared values and trust. *roviding long term financial security

to policy holders will be the constant endeavor.

I(I(I *rudential 4ife Insurance The (ompany was granted (ertificate of

6egistration for carrying out 4ife Insurance business, by the Insurance 6egulatory

and !evelopment Authority.

IB2 ysya 4ife Insurance IB2, the world's second largest life insurance company

together with ysya 3ank, one of India's leading private sector banks, forms IB2

ysya 4ife Insurance.

4ife Insurance (orporation G4I(= 4ife Insurance (orporation G4I(= has been one of

the pioneering organi8ations in India who introduced use of Information Technology

in their business.

1et4ife India The 1etropolitan 4ife Insurance (ompany is the number one insurer

in the U.. It is helping build financial independence for its customers.

>riental Insurance The >riental Insurance (ompany 4td. G>I(4= is one of the

leading 2eneral Insurance companies in India and is a subsidiary of the 2eneral

Insurance (orporation G2I(= of India.


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6oyal undaram Alliance Insurance 6oyal undaram marks the coming together of

undaram 5inance, one of India's most respected and trusted finance companies,

and 6oyal and un Alliance, one of the largest insurance groups in the world.

Tata AI2 Insurance 4ife insurance O general insurance for individuals O corporatesby Tata AI2. This site will guide you on how to capitali8e on opportunities and protect

against uncertainties.


19/34

(hapter /

4I5) IBU6AB() *6>!U(T

/.+ :#>4) 4I5) *>4I(C

These are lowcost insurance plans where the sum assured is payable on the death of

the insured

A typical whole life policy runs as long as the policyholder is alive. In other words, the

risk is covered for the entire life of the policyholder, which is why it is known as whole

life policies.

The policy money and the bonus are payable only to the nominee of the beneficiary

upon the death of the policyholder. The policyholder is not entitled to any money duringhis or her own lifetime, i.e. there is no survival benefit.

:hole life policies are fairly rigid and inflexible and are suitable only in a few, very

specific cases.

:hole 4ife *olicy can be a good initial policy to buy since its cost is very low. That is an

important consideration when one is &ust starting a career.

/.- )B!>:1)BT *>4I(C

Under these plans, the sum assured is payable on the maturity of the policy or in case

of death of the insured individual before maturity of the policy. )ndowment policies

cover the risk for a specified period at the end of which the sum assured is paid back to

the policyholder along with the entire bonus accumulated during the term of the policy. It

is this feature the payment of the endowment to the policyholder upon the completion

of the policy's term , which rightly accounts for the popularity of endowment policies.

The original sum assured and the accumulated bonus received back comes handy

from the endowment can either be used for buying an annuity policy to generate a

monthly pension for the whole life, or put it in any other suitable investment of his

choice. As compared to whole life policies, the premium rates for endowment policies

are higher and the bonus rates are lower. >n the plus side, these polices offer an


20/34

endowment representing a return on his premium payments payable to him in his own

lifetime when the policy comes to an end.

/. 1>B)C 3A(P *>4I(C

Unlike ordinary endowment insurance plans where the survival benefits are payable

only at the end of the endowment period, money back policies provide for periodic

payments of partial survival benefits during the term of the policy, of course so long as

the policy holder is alive.

An important feature of this type of policies is that in the event of death at any time

within the policy term, the death claim comprises full sum assured without deducting

any of the survival benefit amounts, which may have already been paid as moneyback

components. imilarly, the bonus is also calculated on the full sum assured

Under money back policies premiums can be paid as per the insurance company's

policy. These could be 0uarterly, half yearly or annually. The premiums for these policies

are payable for the selected term of years, or till death if it occurs earlier.

3y buying such policies one can receive income at regular intervals other than the risk

cover it provides. Also a good amount of bonus on the full sum assured is 0uite a good

bargain Individual before expiry of the policy

/./ T)61 *>4I(C

Term policies7 cover only the risk during the selected term period. If the policyholder

survives the term, the risk cover comes to an end.

A Term plan is designed to meet the needs of people who are initially unable to pay the

larger premium re0uired for a whole life or an endowment assurance policy, but they

hope to be able to pay for such a policy in the near future.

Bo surrender, loan or paidup values are granted under these policies because reserves

are not accumulated. If the premium is not paid with the days of grace, the policy will

lapse without ac0uiring a paidup value.


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#owever, a lapsed policy may be revived during the lifetime of the life assured but

before the expiry of the period of two years from the due date of the first unpaid

premium on the usual terms. Accident and S or !isability benefits are not granted on

policies under the Term plan.

/.9 ABBUITC G*)BI>B *4AB=

These plans provide for either immediate or deferred pension for life. The pension

payments are made till the death of the annuitant Gperson who has a pension plan=

unless the policy has provision of guaranteed period.

An annuity is an investment that one make, either in a single lump sum or through

installments paid over a certain number of years, in return for which one receive back a

specific sum every year, every halfyear or every month, either for life or for a fixednumber of years.

After the death of the annuitant or after the fixed annuity period expires for annuity

payments, the invested annuity fund is refunded, perhaps along with a small addition,

calculated at that time.

Annuities differ from all the other forms of life insurance discussed so far in one

fundamental way an annuity does not provide any life insurance cover but, instead,

offers a guaranteed income either for life or a certain period.

Typically annuities are bought to generate income during one's retired life, which is why

they are also called pension plans. Annuity premiums and payments are fixed with

reference to the duration of human life.

/.E J>IBT 4I5) *>4I(C

Joint life policies are similar to endowment policies in as much as these policies also

offer maturity benefits to the policyholders, apart form covering the risks as all life

insurance policies.


22/34

3ut these are categori8ed separately as these cover two lives together thus offering a

uni0ue advantage in some cases7 notable, for a married couple or for partners in a

business firm.

Under a &oint life policy the sum assured is payable on the first death and again on thedeath of the survivor during the term of the policy. ested bonuses would also be paid

besides the sum assured after the death of the survivor. If one or both the lives survive

to the maturity date, the sum assured as well as the vested bonuses are payable on the

maturity date.

The premiums payable cease on the first death or on the expiry of the selected term,

whichever is earlier.

Accident benefits e0uivalent to the sum assured are available under this plan on the firstdeath. #owever, if both lives are covered under !ouble Accident 3enefit G!A3=, the

surviving life is covered under !A3 until the end of the policy year, in which the first life

dies under the cover of the policy.

These benefits are available with respect to both lives if

3oth lives perish simultaneously owing to an accident. To avoid such an eventuality,

nomination is allowed under the policy >6

3oth die within the specified period as a result of the same accident >6

The second life also dies in the same policy year as result of another accident. To avoid

such an eventuality, nomination is allowed under the policy.

*articularly for couples Joint life policies provide dualpurpose income and risk

protection for both belonging to every income group and class of society.

Under a &oint life plan though the premium payment stops after the first life?s death,

bonuses continue to accrue on the basic um Assured till 1aturity !ate or till the death

of the second life, if earlier.

/.< 26>U* IBU6AB()


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2roup Insurance offers life insurance protection under group policies to various groups

such as employeremployee, professionals, cooperatives, weaker sections of society

etc. It also provides insurance coverage to people under certain approved occupations

at the lowest possible premium cost. 3esides providing insurance coverage, it also

offers group schemes to employers, which provide funding of gratuity and pension

liabilities of the employer's 2roup insurance plans have low premiums. uch plans are

particularly beneficial to those for whom other regular policies are a costlier proposition.

2roup insurance plans extend cover to large segments of the population including those

who cannot afford individual insurance. As such the premia one need to pay is

comparatively lower and at the same time one can avail of insurance benefits.

The main features of the schemes are low premium and simple insurability conditions.

*remiums are based upon age combination of members, occupation and working

conditions of the group.

A number of group insurance schemes have been designed for various groups. These

include employeremployee groups, associations of professionals Gsuch as doctors,

lawyers, chartered accountants etc.=, and members of cooperative banks, welfare

funds, credit societies and weaker sections of society. (reditor!ebtor groups are also

offered group insurance schemes. 2roup insurance schemes providing uniform cover

can be granted to outstanding loans. These groups are 1embers of primary housing

societies where housing loans are granted by tate Apex housing societies, borrowers

granted loans by Institutional agencies in *ublicSJoint ectors for housing purposes and

borrower members of cooperative societiesSbanks formed by employees of the same

employers

/.; *)(IA4 *4AB

pecial plans are insurance policy plans available from the national insurance providers

to serve the needs of citi8ens that cannot be commonly classified or segregated. These

special plans are designed to satisfy needs ranging from debtclearance in event of the

death of the insured to financial aid in the event of a medical mishap.


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pecial plans also provide financial assistance for handicapped dependants as well as

emergency surgery re0uired if and when a medical condition arises. ince special plans

are designed for people with diverse and specific needs, the average citi8en may not

necessarily need or use them. Cet, in the normal course of life, situations may arise

when one may need to provide for unplanned or unexpected contingencies and

mishaps.


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COMPANY PROFILE

7.1 ABOUT MAX NEW YORK

*a) Ne$ +or% ,ife Insurance Com"an! ,td -is a &oint venture between Bew Cork

4ife7 a 5ortune +DD company and 1ax India 4imited7 one of India?s leading multi

business corporations. The company has positioned Itself on the 0uality platform. In line

with its #ision to &e the *ost Admired ,ife Insurance Com"an! in India , it has

developed a strong corporate governance model based on the core values of excellence,

honesty, knowledge, caring, integrity and teamwork. Thestrate'! is to esta&lish itself

as a Trusted ,ife Insurance S"ecialistthrough a 0uality approach to business.

Incorporated in -DDD, 1ax Bew Cork 4ife started commercial operation in -DD+. In linewith its values of financial responsibility, 1ax Bew Cork 4ife has adopted prudent

financial practices to ensure safety of policyholder?s funds. The (ompany?s paid up is

6s. +,-- crore.

#aving set a .est in Class A'enc! Distri&ution *odelin place, the company is spearheading

a ma&or thrust into additional distribution channels to further grow its business. The company

has multichannel distribution that includes the agency distribution, partnership distribution,

bancassurance, distribution focused on emerging markets and alliance marketing through

employed sales force. The company currently has// &ancassurance relationshi"s0 12

cor"orate a'enc! tie3u"s and direct sales force at 12 locations-1ax Bew Cork 4ife has putin place a uni0ue hub and spoke model of distribution to deepen rural penetration. The company

has F GF hub office D spoke offices= offices dedicated to emerging markets in *un&ab and

#aryana. 1ax Bew Cork 4ife offers a suite of flexible products. It now has/4 "roductscovering

both life and health insurance and ; riders that can be customi8ed to over ;DD combinations

enabling customers to choose the policy that best fits their need. 3esides this, the company

offers E products and / riders in group insurance business.

The company currently has more than +D,/-/ employees.

romoters:

1ax Bew Cork 4ife is a &oint venture between 1ax India 4td., one of India's leading

multibusiness corporate and Bew Cork life, a 5ortune +DD company. 1ax Bew Cork 4ife

Insurance, incorporated in -DDD, is one of India's leading private life insurance

companies. The company offers both individual and group life insurance solutions. It

has established a wide distribution network across India. Through its wide network of

highly competent life insurance agent advisors and flexible product solutions, 1ax Bew

Cork life Insurance is creating a partnership for life with its customers in India.


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1ax India 4td.

5ounded in +F;9, 1ax India 4imited is a *ublic 4imited company listed on theB) and 3) of India with over -E,DDD shareholders. Today, 1ax India 4imitedis a multibusiness corporate, driven by the spirit of )nterprise, focused onPnowledge, *eople and ervice oriented businesses of

#ealthcare G1ax #ealthcare=

4ife Insurance G1ax Bew Cork 4ife Insurance=

(linical 6esearch GBeeman 1edical International=

*a) also *aintains Interests in:

pecialty *lastic *roducts for the packaging industry G1ax peciality

*roducts=

#ealthcare taffing G1ax #ealth taff=

*rominent shareholders are 1r Anal&it ingh and a leading private e0uity firm,:arburg *incus which accounts for -;.


27/34

#utchison Telecom 4td. #ong Pong

(omsat Investment Inc., UA O 4ockheed 1artin, UA

Atotech, 2ermany

1ind (rossing, UA

In -DDD, the (ompany reinvented and restructured itself to focus on thebusinesses of 4ife' under the them, 4ifeQ>ur 5ocus.

1ax Bew Cork 4ife Insurance, founded as a Joint enture between 1ax India4imited and Bew Cork 4ife, a 5ortune +DD company, is one of the leadingprivate life insurers in India.

1ax #ealthcare, a subsidiary of 1ax India 4imited is India's first provider ofcomprehensive, standardi8ed, seamless, and integrated worldclass healthcareservices.

Beeman 1edical International GB1I= is an International (linical 6esearchprovider operating across three locations spanning Borth America, Asia and4atin America. )ach location is backed by comprehensive infrastructure andhighly skilled and experienced personnel.

Bew Cork 4ife 44(

Bew Cork 4ife Insurance (ompany,Gwww.newyorklife.com= a 5ortune +DD

company founded in +;/9, is the largest mutual life insurance company in the

United tates and one of the largest life insurers in the world. #ead0uartered in

Bew Cork (ity, Bew Cork 4ife's family of companies offer life insurance,

annuities and longterm care insurance. Bew Cork 4ife Investment 1anagement

44( provides institutional asset management and retirement plan services.

>ther Bew Cork 4ife affiliates provide an array of securities products and

services, as well as institutional and retail mutual funds.

The mission of Bew Cork 4ife is to maintain its superior ?financial strength?,

adhere to the highest standards of ?integrity? and demonstrate ?humanity? by

treating its customers, agents and employees with compassion, consideration

and respect.


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Bew Cork 4ife is one of the largest and strongest life insurance companies in

the world with more than U!M-+9 billion assets under management and has

received among the highest ratings for financial strength from the life insurance

industry?s principal rating agencies A.1. 3est GAA=, tandard O *oor?s GAA=,

1oody?s GAa+=, 5itch GAAA=. According to 1oody?s, "Bew Cork 4ife?s rating

reflects the company?s good 0uality investment portfolio, ample li0uidity, and

sound capitali8ation, as well as the good growth potential of its international

business.%

As a leader in the insurance industry, Bew Cork 4ife continues to bring to its

operations new management concepts, advanced technologies, new

distribution and training systems and innovative insurance products.

Children lans

*arenting is all about creating the right environment for your children to grow in. Thecare O love that you shower on them must also be accompanied with the properplanning for their future. #elping your child "win the battle of life" is the best gift that a*arent can give to his child. 1ax Bew Cork 4ife with their children plans makes itpossible for you to achieve this dream of giving your child a happy and financiallysecured future. 5ollowing are the products, which will provide financial support to your

children, while pursuing their dream careers, getting married, buying a home etc


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Children7s Endo$ment to 14 8ar9

Children7s Endo$ment to 2 8ar9

S*ART Ste"s;

S*ART Ste"s; lus

S*ART Ste"s; Sin'le remium

Retirement lans

*eople retire but needs don?t. 1ax Bew Cork 4ife with their retirement planscomes forward to support you in your old age and makes the unfulfilled dreams ofyour life come true. 6etirement is like a second life, where you can fulfill all yourdreams, which you have been pushing aside in your past because of lack of time.

>ur retirement plans make sure that you maintain your comfortable lifestyle anddon?t compromise with your wishes because of lack of financial resources in yourold age.

Eas! ,ife; Retirement 8ar9

S*ART In#est; ension


30/34


31/34

Sa#in's lans

It must be admitted that a certain degree of instability lies in every individual?s life.5oreseen and unforeseen needs can arrive at any point of time. 1ax Bew Cork4ife?s savings plans will help you. >ur dual benefits saving plans recogni8es yourneed for a complete all round financial protection and therefore provides you lifecover and helps in the growth of your money.

1oney will fly soon, if not taken care of. Therefore, we offer you diverse savingsplans, which would undoubtedly suit your needs and your budget.

=hole ,ife artici"atin'

,ife Gain; lus > 8ar9

? !ear Endo$ment 8ar9

,ife a!; *one! .ac%

Endo$ment to A'e @? 8ar9

,ife Gain; Endo$ment

,ife Gain; lus ? 8ar9,ife artner;


32/34

Rural lans

Can an!&od! remem&er $hen the times $ere not hard and mone! notscarce

1ax Bew Cork 4ife?s 6ural *lans have been tailored especially to meet all kindsof re0uirements of rural customers or investors. The #assle free procedures and4ow O affordable premiums, being the key features of rural plans, proves 1axBew Cork 4ife exceptional in offering their incredible services to all the classes ofour society. The following 6ural plans have been designed keeping in mind the

rural investors. o that they don?t have to worry about the high premium rates andcomplex application forms.

Eas! Term olic!


33/34

=hat is *a) Bia!

The 3ackground As human beings we all have dreams and aspirations, a desire to achieve andgo beyond. 2o beyond the present, changing our lives and for some, changingthe lives of others too for the better. :e are all firm believers in the hand ofdestiny', however that doesn't deter us from trying, thankfully. Cet there arethose, who through the drudgeries and miseries of their everyday life,sometimes feel trapped refusing to seek and explore an otherwise unexplored

path.

The ision (reated with the vision to empower every Indian to secure his dreams, 1axi&ay is an honest endeavor to provide financial security to the underservedmasses by creating a life insurance product rooted in a deep understanding oftheir financial needs.


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o what is 1ax i&ay, a salutation, a victory path or an insurance policyN1ax i&ay is not &ust another life insurance policy of 1BC47 1ax i&ay is thesymbol of victory of the common man, a beacon for a better tomorrow. :ebelieve that true win for India lies in encouraging people to save their hardearned money, a small contribution that would go on to change their future.:hile the underlying reality remains that $1oneyQIt &ust slips through% 1axi&ay initiative will empower people, provide hope and will offer insurance cumsaving solutions to the underserved packed in the form of an Insuranceavings 3ox G3eema 2ullak=*a) Ne$ +or% ,ife Insurance Com"an! ,imited "roudl! "resents a uni(ue,ife Insurance "olic! *a) Bia!which is

About making better tomorrow possible

A (lear sight of goal 5ulfillment of dream

A belief in the path to achieve the goal, and

$i&ay% is the Triumph of human life

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