Insurance

Insurance (Short Brief to assist deciding the prospect segment)

There are 7 lines of products which are sold as a life insurance policy through a certified (licensed) insurance advisor. A certified insurance advisor undergoes 100 hrs of training as per IRDA guidelines http://www.irdaindia.org , which is followed with an examination which needs to be passed. Later, the Insurance company conducts training on their products followed with a test prior to advisors selling their first policy. A contract is signed between the company and the advisor for an agreed period as per rules and regulations from IRDA. It is mandate for Company to get each product certified by IRDA prior to their promotions.

Product knowledge is the key factor in any business. The understanding of features and benefits enables the customer to gain from viz a viz market conditions. The information of the product should be communicated with pride & confidence to the prospect.

A prospect shows interest in the product due to the advice offered by the Advisor. The advisor must advice on product selections based on the needs for a long term. Misinformation or Misleading of the product features or benefits can lead to a disturbed prospect which ends up losing long term premiums and potential loss to the entire Insurance industry.

Product details have to be transparent and all the relevant terms & conditions explained to a customer prior to enrollment into a contract. Therefore, the insurance products are aligned based on their basic types. The features are altered to meet various segmented and periodical needs of the prospect.

Combination of products helps the prospect to meet up with the change in their needs through time.

7 Lines of Product types are:

1) Endowment
2) Term
3) TROP
4) Whole Life
5) Health
6) Pension
7) Unit Link

Rider is a top up on these product types for provisioning additional protection cover. They are not incorporated in the design for most of the base plans.

Endowment Policy: Premiums paid to this policy gives a guaranteed return at the end of maturity. Anticipated endowment policy will pay cash returns at an interval of 3 or more years. Bonuses accrued for each year is paid at maturity. Insurance coverage is paid in the event of death of an insured during the tenure of a policy. Few policies are developed with features to support education & marriage demands as per the age of the insured (lifecycle).

Term: Insurance coverage is paid in the event of death of an insured during the tenure of a policy. There are no returns paid at maturity. Insured is covered only during the tenure of the policy.

TROP: (Term return of premium) Premiums paid during the tenure of a policy is returned at maturity. Insurance coverage is paid in the event of death of an insured during the tenure of a policy. However, certain plans give coverage for few years extended from maturity date without any premium payment.

Whole Life: Whole life plan extends guaranteed fixed returns after maturity based on the age of the insured. Guaranteed returns and bonuses are paid at maturity. Insurance coverage is paid in the event of death of an insured during the tenure of a policy.

Heath: A plan which provides coverage benefits at hospitalization, surgical, accident or any other health issues for the tenure of a policy. There are no returns paid at maturity. There are several cashless policies floated in the market with multiple benefits.

Pension: Premiums paid are allocated to buy annuities (% of it) for paying pension at maturity. Insurance coverage is paid in the event of death of an insured during the tenure of a policy. Bonuses accrued for each year is paid at maturity along with benefits at vesting period near to sum assured.

Unit Link: Premiums paid are towards the insurance coverage along with an opportunity to decide on the choice of investment. Returns are based on market performance. Insurance coverage is paid in the event of death of an insured during the tenure of a policy. Premiums are paid for limited tenure. Several ULIP products are amalgamated with rest of the product type lines for dual benefits.

Combination of the plan types gives a customer a complete suite of protection, savings, retirement income and asset building options. Products are designed for the three areas of an insured life: 1st Area: End Point of Tenure - Endowment, TROP & Whole Life. 2nd Area: Middle Succession - Anticipated Endowment, Unit Link & Pensions. 3rd Area: Unforeseen Circumstances - Term & Health.

In addition to a lifelong insurance protection, a portion of the premium payments goes toward a separate cash account which grows over time (specific in the case of a participating policy):
The premiums are adjusted as follows:
1) "Mortality Expense": It is the main cost of providing insurance based on Mortality table.
2) Other Acquisition Costs: Processing fees, Commissions, Operations cost, Proposals, etc…
3) Cash Account: Cash Value Growth based on market performance.

As the insured ages, their cost of insuring goes up because the chance of dying goes up each year. Thus based on age of the insured a much larger portion of the premium is moved to mortality expense & less is put in the Cash Account.

The cash account is invested in funds which supports socio economic causes through infrastructure, schools, power, fuel, agriculture, Real estate, manufacturing etc…increasing the GDP of India.