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SUMMER TRAINING PROJECT REPORT

ON

RISK MANAGEMENT IN LIFE INSURANCE

AT

SUBMITTED FOR THE PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF MASTERS IN BUSSINESS ADMINISTRATION

UNDER THE GUIDANCE OF MR.AMITESH KAPOOR

SUBMITTED BY: PUJA SINGH REG NO-11101242 M B A (2011-2013)

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DEPARTMENT OF BUSINESS MANAGEMENT LOVELY PROFESIONAL UNIVERSITY PHAGWARA (PUNJAB)

DECLARATION I hereby declare that the project titled RISK MANAGEMENT IN LIFE INSURANCE is an original piece of research work carried out by me from June 11th to July 26th 2012 under the guidance and supervision of MR.AMITESH KAPOOR. I also declare that this project has not been submitted nor shall it be submitted in future to any other University or Institution. The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfillment of the requirement of Masters in Business Administration to LOVELY PROFESIONAL UNIVERSITY.

Place: HAJIPUR, BIHAR Date:

Signature: Name of the student: PUJA SINGH

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ACKNOWLEDGEMENT A project will never be successful without the assistance and guidance from appropriate person. So now it is the right time to express my sincere gratitude to all those who helped me in this project. First and foremost, I would like to thank GOD for his blessings which helped me in completing this dissertation. I would also like to express my sincere thanks to my MENTOR MR.AMITESH KAPOOR for his support and guidance in successful completion of this project work

At the outset, I would like to thank Mr. Rakesh Ranjan, SBA, Life plus L.I.C of India for his undying support and strength during my laborious times to do summer internship project in L.I.C on RISK MANAGEMENT IN LIFE INSURANCE.

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CERTIFICATE

This is to certify that PUJA SINGH student of DEPARTMENT OF BUSINESS ADMINISTRATION, LOVELY PROFESSIONAL UNIVERSITY, PHAGWARA

(PUNJAB) has completed her summer training at LIFE INSURANCE CORPORATION on the topic of RISK MANAGEMENT IN LIFE INSURANCE from June,11,2012 to July 25,2012. During the tenure of her internship she has been found to be sincere and hardworking. We wish her all the bet in her future.

LIFE PLUS (LIC) RAKESH RANJAN SBA Date:Place:Office-Life plus, Soni Alankar complex,Gudri Road,Hajipur-844101(vaishali) Tel:06224-275785(0), Mob 9431055071, e-mail:ranjanlicindia@yahoo.co.in

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APPRECIATION LETTER

Miss.Puja Singh has done tremendous job at life plus during her tenure of summer internship. She has been punctual and hardworking during her training. We wish her best of luck for her future endeavors.

Rakesh Ranjan Senior business associate.

Office-Life plus, Soni Alankar complex,Gudri Road,Hajipur-844101(vaishali) Tel:06224-275785(0), Mob 9431055071, e-mail:ranjanlicindia@yahoo.co.in

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EXECUTIVE SUMMARY Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event. Life insurance is a contract under which the insurer (Insurance Company) in Consideration of a premium paid undertakes to pay a fixed sum of money on the death of the insured or on the expiry of a specified period of time whichever is earlier. In case of life insurance, the payment for life insurance policy is certain. Types of life insurance are Term Insurance Policy, Whole life Insurance Policy, Endowment Policy, and Pure Endowment Policy Money Back Policy. Function and characteristic of life insurance are Provide protection, Sharing of risk, Small capital to cover larger risk,Contribute towards the Development of country. Insurance Regulatory & Development Authority is regulatory and development authority under Government of India in order to protect the interests of the policyholders and to regulate, promote and ensure orderly growth of the insurance industry. Headquarter of IRDA is in Hyderabad. The creation of IRDA has brought revolutionary changes in the Insurance sector. In last 10 years of its establishment the insurance sector has seen tremendous growth. India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Life Insurance Corporation of India (LIC) (: ) is the largest insurance group and investment company in India. It is a state owned where government of India has 100% stake. Headquartered in Mumbai, financial and commercial capital of India, the Life Insurance Corporation of India currently has 8 zonal Offices and 113 divisional offices located in different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones. Risk is expressed in terms of variability of return. It is defined as possibility of loss. Degree of uncertainty of return on an asset. There are mainly two types of risk systematic and unsystematic risk. In LIC risk is of unsystematic this is diversifiable in nature. Risk management is a process for identifying, assessing, and prioritizing risks of different kinds. Once the risks are identified, the risk manager will create a plan to minimize or eliminate the impact of negative events. To understand the risk management ..we have to focus on the underwriting processes that helps us to understand how life insurance corporation manages its risk. Risk of life insurance Corporation is unsystematic risk. It is diversifiable in nature.

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In Life Insurance Corporation Company issues different policy, plans and schemes to policy holder. Company distributes funds to themthese processes involves a great amount of risk. So, in order to cover these risks company undergoes underwriting process. The life insurance process from filling the application form to getting the life insurance policy deliver at home. The process is called as underwriting process. Underwriting process has begun in LIC by the agent of the lic, therefore,Agent is the first underwriter. Agent of LIC has to fill a report from the proposer known as agent confidential report. Agent confidential report is the first report filled by the proposer After filing of all the above informations. This report is signed and stamped by the agent and it is verified by him that all the above information are true according to his knowledge and belief. Agent confidential report is verified and signed and stamped by any authorized agent and officers of L I C, IT itself becomes Moral Hazard report. Underwriting work is assigned to various offices of LIC based on Sum under consideration. Underwriter measure the risk and protect companies business from risk by verifying the agent confidential report and moral hazard report and documents such as age proof, gender etc of proposer or insurer. Two types of underwriting-Financial underwriting and Medical underwriting. Insurance can be given depends upon the financial income/status, age, Nature of Age proof, etc.Those who are not eligible in non medical scheme are to be considered for medical underwriting .In medical underwriting sum under consideration is considered. An Insurance Underwriter career requires having an extensive education. Underwriters must have good judgment skills, Good communication, and interpersonal skills, Specialized fields in underwriting insurance include: Health, life, property and liability. Underwriting processes are different for different categories of proponent. Proper underwriting process helps life insurance Corporation in keeping detail knowledge about the proponent. Underwriting process include the detail description of every document of proponent such as age gender, income and financial status that helps LIC in managing its risk properly. In this project report underwriting process of different categories along with all the important documents required during the process of conversion of proposal into policy is mentioned. The documents required are age proof; age proof has two categories standard age proof and non standard age proof. non standard age proof has three categories nonstandard age group1,2 and 3.Income and financial status of proponent and gender of proponent. Underwriting of different categories are mentioned in detail --1. Non medical lives--- It has three groups: Special, professional and general. No history of any operations, previous illnesses, Build within the normal limits for NON MEDICAL and service of minimum 1 year in Govt, Quasi govt, Local bodies, Schools, Colleges Hospitals run by Govt

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or allied institutions, Corporations, PSUs, Industrial Undertakings, and reputed Business Organizations, Persons employed in Army (not below A-1 cat). 2. Underwriting of female lives: it has three categories. Includes Married, single, or widow. Women with earned income by virtue of employment in institutions eligible for insurance cover under NMS. And employed with Govt., Quasi Govt., Reputed commercial institutions even if NMS is not introduced. Women employed in Commercial institutions should have passed SSC, submits Standard Age proof, Evidence of employment Minimum service of 1 year, & the institution established more than 3 years ago. All the different categories require different documents for underwriting. All the documents in detail are mentioned in the project. 3. Underwriting of Handicapped require different documents in underwriting of handicapped medical examination and deformity questionnaire must be filled. 4. Underwriting process of NRIs has two different methods-NRIs visit to India and other is Mail order business.

Underwriting process helps life insurance in managing risk of Life Insurance Corporation by keeping the knowledge of life of proponent. All the documents such as Age proof, income status and gender of proponent helps LIC in assessing and managing risk of life insurance.

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TABLE & CONTENT CHAPTER PAGE NO. CHAPTER 1 1.1 1.4 1.2 1.3 1.5 1.6 1.7 CHAPTER 2 2.1 2.2 2.3 2.4 2.5 2.6 CHAPTER 3 3.1 3.2 3.3 INTRODUCTION TO INSURANCE INTRODUCTION FUNCTION OF LIFE INSURANCE LIFE INSURANCE TYPES OF LIFE INSURANCE ROLE OF INSURANCE IMPORTANCE OF INSURANCE CONTROLING AUTHORITY INTRODUCTION TO INDIAN INSURANCE INDUSTRY INDIAN INSURANCE INDUSTRY A BRIEF HISTORY OF INSURANCE SECTOR MILESTONES IN THE INSURANCE SECTOR LIST OF INSURANCE COMPANIES WORKS IN INDIA HOW BIG IS THE INSURANCE MARKET? INDIAN SCENERIO INTRODUCTION OF LIFE INSURANCE CORPORATION ORGANISATIONAL PROFILE HISTORY OF ORGANISATION CURRENT STATUS

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3.4 3.5 3.6 3.7 CHAPTER4 4.1 4.2 4.3 4.4 4.5 CHAPTER5 5.1 5.2 5.3 5.4 CHAPTER6 6.1 6.2

NATIOANALISATION AWARDS MISSION AND VISION ORGANISATIONAL STRUCTURE CONCEPT & METHADOLOGY

Concept Research Methodology Sources of Data Methods of Data Gathering Limitations RISK MANAGEMENT

MEANING OF RISK TYPES OF RISK CONCEPT OF RISK MANAGEMENT OBJECTIVE OF STUDYING RISK MANAGMAENT RISK MANAGEMENT IN LIFE INSURANCE

CORPORATION UNDERWRITING PROCESS SUM UNDER CONSIDERATION

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6.3 6.4 6.5 CHAPTER7 CHAPTER8 CHAPTER9 CHAPTER10 CHAPTER11

MEANING OF UNDERWRITER QUALIFICATIONS OF UNDERWRITER CALCULATION OF PREMIUM UNDERWRITING OF NON MEDICAL LIVES

UNDERWRITING OF FEMALE LIVES

UNDERWRITING OFPHYSICALLY HANDICAPPED

UNDERWRITING OF PROPOSALS ON THE LIVES OF NRIS DATA FINDINGS AND GRAPHICAL PRESENTATION

CONCLUSIONS BIBLIOGRAPHY RECOMMENDATIONS

FORM OF AGENT CONFEDENTIAL REPORT/MORAL HAZARD REPORT PROPOSAL FORM FOR INSURANCE FOR MAJOR AS WELL AS MINOR

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CHAPTER 1 INTRODUCTION TO INSURANCE

1.1. INTRODUCTION:"Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event." Insurance may be described as a social device to reduce or eliminate risk of life and property. Under the plan of insurance, a large number of people associate themselves by sharing risk, attached to individual. With the help of Insurance, large number of people exposed to a similar risk makes contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good. Insurance is a tool by which fatalities of a small number are compensated out of funds collected from plenteous. Gradually as competition increased benefits given by industry to its customers increased by leaps and bounds. Insurance is a basic form of risk management which provides protection against possible loss to life or physical assets. Person who seeks protection against such loss is termed as insured, and company that promises to honor claim, in case such loss is actually incurred by insured, is termed as Insurer. In order to get insurance, insured is required to pay to insurance company a certain amount called premium. Premium is collected by insurance companies which acts as trustee to pool created through contributions made by persons seeking to protect themselves from common risk. Any loss to the insured in case of happening of an uncertain event is paid out of this pool. Insurance business is divided into following parts: Life Insurance Property Insurance Health Insurance Auto Insurance

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Travel Insurance etc.

1.2. LIFE INSURANCE:Life insurance is a contract under which the insurer (Insurance Company) in Consideration of a premium paid undertakes to pay a fixed sum of money on The death of the insured or on the expiry of a specified period of time Whichever is earlier. In case of life insurance, the payment for life insurance policy is certain. The Event insured against is sure to happen only the time of its happening is not known. So life insurance is known as Life Assurance.The subject matter of insurance is life of human being. Life insurance provides risk coverage to the life of a person. On death of the person insurance offers protection against loss of income and compensate the titleholders of the policy.

1.3. TYPES OF LIFE INSURANCE: Term Insurance Policy Whole life Insurance Policy Endowment Policy Pure Endowment Policy Money Back Policy

Most of the products offered by Indian life insurers are developed and structured around these "basic" policies and are usually an extension or a combination of these policies. Term Insurance Policy:- A term insurance policy is a pure risk cover for a specified period of time. What this means is that the sum assured is payable only if the policyholder dies within the policy term. For instance, if a person buys Rs 2 lakh policy for 15-years, his family is entitled to the money if he dies within that 15-year period. there is no element of savings or investment in such a policy. It is a 100 per cent risk cover. It simply means that a person pays a certain premium to protect his family against his sudden death. He forfeits the amount if he outlives the period of the policy. This explains why the Term Insurance Policy comes at the lowest cost.

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Whole life Insurance Policy:- As the name suggests, a Whole Life Policy is an insurance cover against death, irrespective of when it happens. Under this plan, the policyholder pays regular premiums until his death, following which the money is handed over to his family. This policy, however, fails to fulfill the additional needs of the insured during his post-retirement years. It doesn't take into account a person's increasing needs either. While the insured buys the policy at a young age, his requirements increase over time. By the time he dies, the value of the sum assured is too low to meet his family's needs. As a result of these drawbacks, insurance firms now offer either a modified Whole Life Policy or combine in with another type of policy Endowment Policy:- Combining risk cover with financial savings, endowment policies is the most popular policies in the world of life insurance.

In an Endowment Policy, the sum assured is payable even if the insured survives the policy term. If the insured dies during the tenure of the policy, the insurance firm has to pay the sum assured just as any other pure risk cover.

Pure Endowment Policy:- A pure endowment policy is also a form of financial saving, whereby if the person covered remains alive beyond the tenure of the policy, he gets back the sum assured with some other investment benefits. Money Back Policy:- These policies are structured to provide sums required as anticipated expenses (marriage, education, etc) over a stipulated period of time. With inflation becoming a big issue, companies have realized that sometimes the money value of the policy is eroded. That is why with-profit policies are also being introduced to offset some of the losses incurred on account of inflation.

A portion of the sum assured is payable at regular intervals. On survival the remainder of the sum assured is payable. In case of death, the full sum assured is payable to the insured. The premium is payable for a particular period of time..

In addition to the basic policy, insurers offer various benefits such as double endowment and marriage/ education endowment plans. The cost of such a policy is slightly higher but worth its value.

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1.4. FUNCTION & CHARACTERSTICS OF INSURANCE:Provide protection:- The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others. Sharing of risk:- Insurance is an instrument to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. Small capital to cover larger risk:- Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contribute towards the Development of country :- Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery. Means of savings and investment:- Insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing income-tax exemptions also, people invest in insurance. 1.5. ROLE OF THE LIFE INSURANCE:Life insurance as an investment:- Insurance products yield more than any other investment instruments and it also provides added incentives or bonus offered by insurance companies. Life insurance as risk cover:- Insurance is all about risk cover and protection of life. Insurance provides a unique sense of security that no other form of invest can provide. Life insurance as tax planning:- Insurance serves as an excellent tax saving mechanism. government gives tax relaxation on every life insurance policy.

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1.6. IMPORTANCE OF THE LIFE INSURANCE:Protection against untimely death:- Life insurance provides protection to the dependents of the life insured and the family of the assured in case of his untimely death. The dependents or family members get a fixed sum of money in case of death of the assured. Saving for old age:- After retirement the earning capacity of a person reduces. Life insurance enables a person to enjoy peace of mind and a sense of security in his/her old age. Promotion of savings:- Life insurance encourages people to save money compulsorily. When life policy is taken, the assured is to pay premiums regularly to keep the policy in force .It creates saving habits among the people. Initiates investments:- Life Insurance Corporation encourages the public savings and canalizes the same in various investments for the economic development of the country. Life insurance is an important tool for the collection of small savings. Credit worthiness:- Life insurance policy can be used as a security to raise loans. It improves the credit worthiness of business. Social Security:- Life insurance is important for the society as a whole also. Life insurance enables a person to provide for education and marriage of children and for construction of house. It helps a person to make financial base for future. Tax Benefit:- Under the Income Tax Act, premium paid is allowed as a deduction from the total income under section 80C.

1.7. CONTROLING AUTHORITY:Insurance Regulatory & Development Authority is regulatory and development authority under Government of India in order to protect the interests of the policyholders and to regulate, promote and ensure orderly growth of the insurance industry. It is basically a ten members' team comprising of a Chairman, five full time members and four part-time members, all

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appointed by Government of India. This organization came into being in 1999 after the bill of IRDA was passed in the Indian parliament.

Composition of Authority:As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority. IRDA was constituted by an act of parliament. The Authority is a ten member team consisting of: (a) a Chairman (b) five whole-time members (c) four part-time members (all appointed by the Government of India) HEADQUARTER OF IRDA-HYDERABAD.

Powers and Functions of IRDA:

It issues the applicants in insurance arena, a certificate of registration as well as renewal, modification, withdrawal, suspension or cancellation of such registrations. It protects the interests of the policy holders in any insurance company in the matters related to the assignment of policy, nomination by policy holders, insurable interest, and resolution of insurance claim, submission value of policy and other terms and proposals in the contract. It also specifies obligatory credentials, code of conduct and practical instructions for mediator as well as the insurance company. Apart from this, it also defines the code of conduct for the surveyors and loss assessors involved with the insurance business. One of the major functions of IRDA includes endorsing competence in the insurance business. Apart from this, upholding and regulating professional organizations in insurance and re-insurance business is also a major duty of IRDA. IRDA is also entitled to for asking information, undertaking inspection and investigating the audit of the insurers, mediators, insurance intermediaries and other organizations related to the insurance sector.

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It is also concerned with the regulation of the rates, profits, provisions and conditions that may be offered by insurers in respect of general insurance business if it is not controlled or regulated by the Tariff Advisory Committee. It is also entitled to supervise the functioning of the Tariff Advisory Committee. IRDA specifies the terms and pattern in which books of accounts are to be maintained and statement of accounts shall be provided by insurers and other insurance mediators. It also regulates investment of funds by insurance companies as well as the maintenance of margin of solvency. It is also empowered to be involved in the arbitration of disagreements between insurers and intermediaries or insurance intermediaries. It is meant to specify the proportion of premium income of the insurer to finance policies. IRDA also specifies the share of life insurance business and general insurance business to be accepted by the insurer in the rural or social sector.

Impact of IRDA on Indian Insurance Sector:The creation of IRDA has brought revolutionary changes in the Insurance sector. In last 10 years of its establishment the insurance sector has seen tremendous growth. When IRDA came into being; only players in the insurance industry were Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC), however in last decade 23 new players have emerged in the field of insurance. The IRDA also successfully deals with any discrepancy in the insurance sector.

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CHAPTER 2

INTRODUCTION TO INDIAN INSURANCE INDUSTRY

2.1. INDIAN INSURANCE INDUSTRY:The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the countrys GDP .In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India. It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation Malhotra Committee was constituted by the government in 1993 to examine the various aspects of the industry. The key element of the reform process was Participation of overseas insurance companies with 26% capital. Creating a more efficient and competitive financial system suitable for the requirements of the economy was the main idea behind this reform. Since then the insurance industry has gone through many sea changes .The competition LIC started facing from these companies were threatening to the existence of LIC .since the liberalization of the industry the insurance industry has never looked back and today stand as the one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today. The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run.

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2.2. A BRIEF HISTORY OF INDIAN INSURANCE MARKET:Insurance has a long history in India. In India, insurance has a deep-rooted history. It finds mention in the writings of Manu ( Manusmrithi ), Dharmasastra and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Life Insurance in its current form was introduced in 1818 when Oriental Life Insurance Company began its operations in India. General Insurance was however a comparatively late entrant in 1850 when Triton Insurance company set up its base in Kolkata. History of Insurance in India can be broadly bifurcated into three eras: a)- Pre Nationalization b)- Nationalization and c)- Post Nationalization. Life Insurance was the first to be nationalized in 1956. Life Insurance Corporation of India was formed by consolidating the operations of various insurance companies. General Insurance followed suit and was nationalized in 1973. General Insurance Corporation of India was set up as the controlling body with New India, United India, National and Oriental as its subsidiaries. The process of opening up the insurance sector was initiated against the background of Economic Reform process which commenced from 1991. For this purpose Malhotra Committee was formed during this year who submitted their report in 1994 and Insurance Regulatory Development Act (IRDA) was passed in 999. Resultantly Indian Insurance was opened for private companies and Private Insurance Company effectively started operations from 2001.

2.3. MILESTONES IN THE INSURANCE SECTOR:The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are given in the following table.

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Years 1912:

Important milestones in the Indian life insurance business The Indian Life Assurance Companies Act came into force for regulating the life insurance business.

1928:

The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses.

1938:

The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.

1956:

245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that too from the Government of India.

2.4. LIST OF INSURANCE COMPANIES WORKS IN INDIA:Following is the list of all life insurance company granted permission by IRDA.

1. Bajaj Allianz Life Insurance Company Limited 2. Birla Sun Life Insurance Co. Ltd 3. HDFC Standard Life Insurance Co. Ltd 4. ICICI Prudential Life Insurance Co. Ltd. 5. ING Vysya Life Insurance Company Ltd. 6. Life Insurance Corporation of India 7. Max New York Life Insurance Co. Ltd 8. Met Life India Insurance Company Ltd. 9. Kotak Mahindra Old Mutual Life Insurance Limited

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10. SBI Life Insurance Co. Ltd 11. Tata AIG Life Insurance Company Limited 12. Reliance Life Insurance Company Limited. 13. Aviva Life Insurance Co. India Pvt. Ltd. 14. Sahara India Life Insurance Co, Ltd. 15. Shriram Life Insurance Co, Ltd. 16. Bharti AXA Life Insurance Company Ltd. 17. Future Generali Life Insurance Company Ltd. 18. IDBI Fortis Life Insurance Company Ltd. 19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd 20. AEGON Religare Life Insurance Company Limited. 21. DLF Pramerica Life Insurance Co. Ltd. 22. Star Union Dai-ichi Life Insurance Comp. Ltd. 23.India First Life Insurance Company Ltd. 2.5. HOW BIG IS THE INSURANCE MARKET? The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a fairly large number of insurers both life and nonlife segment. Most of the private insurance companies have formed joint venture partnering well recognized foreign players across the globe. There are now 29 insurance companies operating in the Indian market 14 private life insurers, nine private non-life insurers and six public sector companies. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario. There is pressure from both within the country and outside on the Government to increase the foreign direct investment (FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion. There are opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60 receive pensions. The IRDA has issued the first license for a standalone health company in the country as many more players wait to enter. The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase. The

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deepening of the health database over time will also allow players to develop and price products for larger segments of society. Insurance is a Rs.400 billion business in India, and together with banking services adds about 7% to India's Gap. 2.6. INDIAN SCENERIO:Indian economy is the 12th largest economy in the world, with a GDP of $1.25 trillion and 3rd largest in terms of purchasing power. With factors like a stable 8-9 per cent annual growth, rising foreign exchange reserves, a booming capital market and a rapidly expanding FDI inflows, it is on the hinge of an ever increasing growth curve. Indians have a tendency to invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small, 4-5%. This is itself is an indicator that growth potential for the insurance sector is very high. Its a business growing at the rate of 15-20% per annum and presently is of the order of $47.9 billion. India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with companys continuous effort to lure the customers with new product offerings. However, the market share of private insurance companies remains very low, in the range of 10-15%. Even to this day, Life Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints. The upward growth trend started from 2000 was mainly due to economic policies adopted by the then Indian government. In this year everyone saw the initiation of an era of economic liberalization and globalization in the Indian economy followed by several reforms and longterm policies that created a perfect roadmap for the success of Indian financial market.

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CHAPTER-3 3.1 INTRODUCTION:

LIFE INSURANCE CORPORATION Life Insurance Corporation of India (LIC) (: ) is the largest insurance group and investment company in India. It is a state owned where government of India has 100% stake.LIC has funds close to 24.6% of the Indian Government's expenses. It has assets estimated of 13.25 trillion. It was founded in 1956 with the merger of 243 insurance companies and provident societies. Headquartered in Mumbai, financial and commercial capital of India, the Life Insurance Corporation of India currently has 8 zonal Offices and 113 divisional offices located in different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located in different cities and towns of India and has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public. The slogan of LIC is "Yogakshemam Vahamyaham" which translates from Sanskrit to "Your welfare is our responsibility". The slogan is derived from the Ancient Hindu text, the Bhagwat Gitas 9th Chapter, 22nd verse. The literal translation from Sanskrit to English is "I carry what you require". The slogan can be seen in the logo and is written in Devanagiri script below the hands holding the lamp. 3.2 ORGANISATIONAL PROFILE : Life Insurance in its present form came to India from the United Kingdom with the establishment of a British firm Oriental Life Insurance Company in Calcutta in 1818 followed by Bombay Life Assurance Company in 1823. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life insurance business. In 1938, earlier legislation was consolidated and amended by the Insurance Act 1938, with comprehensive provisions aimed at exercising effective control over the activities of insurers. The main concern was to protect the interest of the insuring public. The Act was amended in 1950 resulting in far-reaching changes in the insurance sector. By 1956, 154 Indian

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Insurers, 16 Foreign Insurers and 75 Provident Societies were carrying on Life Insurance business in country. In January 1956, in keeping with the then prevailing political and Economical Philosophy of Socialism, 245 Indian and Foreign insurers and Provident Societies operating in India were taken over by the Central Government by an Act of Parliament, the Life Insurance Corporation A ct 1956. The LIC, with a capital of Rs.5crores was set up in September that year.

3.3 History: The Oriental Life Insurance Company, the first corporate entity in India offering life insurance coverage, was established in Calcutta in 1818 by Bipin Behari Dasgupta and others. Europeans in India were its primary target market, and it charged Indians heftier premiums. The Bombay Mutual Life Assurance Society, formed in 1870, was the first native insurance provider. Other insurance companies established in the pre-independence era included

Bharat Insurance Company (1896) United India (1906) National Indian (1906) National Insurance (1906) Co-operative Assurance (1906) Hindustan Co-operatives (1907) Indian Mercantile General Assurance Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic conditions. It witnessed Indias first war of independence adverse effects of the WORLD WAR 1 and WORLD WAR 11 on the economy of India and in between them the period of worldwide economic crises triggered by the great depression. The first half of the 20th century also saw a heightened struggle for Indias independence. The aggregate effect of these events led to a high rate of bankruptcies and liquidation Of life insurance companies in India. This had adversely affected the faith of the general public in the utility of obtaining life cover.

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3.4

Nationalization:

In 1955, parliamentarian AMOLE BARATE raised the matter of insurance fraud by owners of private insurance companies. In the ensuing investigations, one of India's wealthiest businessmen, Ram Krishna dalmia , owner of the times of india newspaper, was sent to prison for two years. Eventually, the parliament of India passed the Life Insurance of India Act on 1956-06-19, and the Life Insurance Corporation of India was created on 1956-09-01, by consolidating the life insurance business of 245 private life insurers and other entities offering life insurance services. Nationalization of the life insurance business in India was a result of the Industrial policy resolution of 1956 , which had created a policy framework for extending state control over at least seventeen sectors of the economy, including the life insurance.

3.5

Current status:

LIC Zonal Office, at Connaught place, New Delhi, 1986. Over its existence of around 50 years, Life Insurance Corporation of India, which commanded a monopoly of soliciting and selling life insurance in India, created huge surpluses, and contributed around 7 % of India's GDP in 2006. The Corporation, which started its business with around 300 offices, 5.7 million policies and a corpus of INR 459 million (US$ 92 million as per the 1959 exchange rate of roughly Rs. 5 for a US $, has grown to 25000 servicing around 350 million policies and a corpus of over 8 trillion The Economic Times Brand Equity Survey 2010 rated LIC as the No. 4 Service Brand of the Country. Though in the year 2010 is ranked at 4, the organization is consistently among the top rated service company of the India. From the year 2006, LIC is continuously winning the Readers' Digest Trusted brand award. According to The Brand Trust Report 2011, LIC is the 8th most trusted brand of India.

3.6

Awards and recognition :

The Economic Times Brand Equity Survey 2010 rated LIC as the No. 4 Service Brand of the Country. Though in the year 2010 is ranked at 4, the organization is consistently among the top rated service company of the India From the year 2006; LIC is continuously winning the Readers' Digest Trusted brand award. According to Brand trust report 2011, LIC is the 8th most trusted brand of India

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3.7 MISSION AND VISION

Mission "Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development." Vision "A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."

3.8

ORGANISATIONAL STRUCTURE

CENTRAL OFFICE

MUMBAI

ZONAL OFFICES

BHOPAL,CHENNAI,HYDERABAD,KANPUR,KOLKATA, MUMBAI,NEW DELHI,PATNA UNITED KINGDOM, MAURITIUS, FIJJI

FOREIGN OFFICES

DIVISIONAL OFFICES

105

BRANCH OFFICES AND SATELLITE OFFICES

2048

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CHAPTER -4

4. CONCEPT AND METHODOLOGY:

4.1 CONCEPT Research refers to a search for knowledge. It can be defined as a scientific and systematic search for pertinent information on a specific topic. Research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making deduction and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis.

4.2 Research Methodology It is a way to systematically solve the research problem. It may be understood as science of studying how research is done scientifically. In it we study the various steps that are generally adopted by the researcher in studying his research problem along with the logic behind them. In general methodology is an optional framework within which the facts are placed so that the meaning may be seen more clearly. The sources of data shown that designing of a research plan calls for decision on the data sources are research approaches (primary and secondary data) research instruments (observation survey experiment) sampling plan and contact methods(personal interviews). Research Design

A research design is the determination and statement of the general research approach or strategy adopted for the particular project. It is the heart of the planning. If the design adheres to the research objectives, it will ensure that the client need will be served. Research design is a plan structured and strategies of investigation. It is the arrangement of condition and analysis of data in a manner to combine relevance to the research purpose with

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economy in procedure.

Type of research

In this project Descriptive Research has been used. This is kind of research structure which is concerned with describing the characteristics of the problem. In this way the main purpose of such a research design is to present a descriptive picture about the insurance that has been done on the basis of actual datas. For this it is important to obtain the complete and actual information about the subjects. Nature of research Quantitative type of research has been used. 4.3 Sources of data In this research primary data as well as secondary data has been used. Primary data:

The data which is collected fresh and for the first time and thus happen to be the original one characteristic is called as the primary data. o Method of collecting primary data Actual datas of life insurance that has been done in LIFE INSURANCE CORPORATION. Secondary data:

The data which is already present and used by the researcher is known as secondary data. o Method of collecting secondary data Secondary data has been collected from various websites of internet and different books.

o Sampling Methods: The sampling method for the survey was random sampling. Random sampling suggest away of sample selection where in any item of the population is likely to be selected in a sample as any other item it means that all items of the population have equal probability of being located in the sample.

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o Sample description: No research work can be under taken without the co-operation of the respondents who are interviewed from whom data is collected. Therefore respondents play a vital role in this type of study. The data was collected through the questionnaire. The respondents were existing customers of LIC. 4.4 Methods of data gathering: Data has been gathered for this project from those who are policy holder and insurer And agents who are the persons responsible for gathering data while converting proposal Of persons into policy. Data has been gathered from the actual life insurance done in the firm. Agents report Moral Hazard Report Forms filled by the policy holder.

4.5 LIMITATIONS: 1. Since, the study was done by conducting random sampling , the samples drawn may not be the true representative of the universe. 2. Findings of the study are based on assumptions that the respondents have given correct or reliable information. 3. This study was limited to the life plus L.I.C firm only. 4. Sample size is small and has been restricted to the actual datas of L.I.C. However in spite of these limitations all efforts have been put to make the project correct, effective.

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CHAPTER-5 RISK MANAGMENT

5.1 MEANING OF RISK Risk is expressed in terms of variability of return. Risk is defined as possibility of loss. Degree of uncertainty of return on an asset. The chance that an investment's actual return will be different than expected. The volatility of unexpected outcomes, which can represent the value of assets, equity or earnings. When more and more securities are included in portfolio, the risk of individual securities in the portfolio is reduced. Risk even vanishes when there are large no of securities in the portfolio.

5.2 TYPES OF RISK: SYSTEMATIC RISK -> NON- DIVERSIFIABLE

UNSYSTEMATIC RISK-> DIVERSIFIABLE

SYSTEMATIC RISK- Systematic risk arises on account of economy wide uncertainities.Itis not diversifiable. It is caused by external factors such as economic, political and sociological condition .systematic risk cant be reduced through diversification and the tendency of individual securities to move together with the changes in market. It is also known as Market risk, interest rate risk, purchasing power risk. EXAMPLE- 1. IF govt change the interest tax rate, corporate tax rate increases. 2. Inflation rate increases

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UNSYSTEMATIC RISK- Unsystematic risk is diversifiable. Unsystematic risk arises from the Unique uncertainties of individual security. It can totally reduce, if There are large no of securities in any portfolio. Uncertainties of Individual Securities in a firm cancel each other.

It is specific and related to particular industry. It is caused by factors like managerial inefficiency, changes in consumer Preference, unavaibility of raw metarial, labour problem etc.

EXAMPLE- 1.labour strike 2. Reaserch and development experts leave the company. 3. A formidable competitor enters the market. (Unsystematic Risk is firm specific.)

5.3 CONCEPT OF RISK MANAGEMENT: DEFINITION:Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risk management is a process for identifying, assessing, and prioritizing risks of different kinds. Once the risks are identified, the risk manager will create a plan to minimize or eliminate the impact of negative events. A variety of strategies is available, depending on the type of risk and the type of business. There are a number of risk management standards, including those developed by the Project Management Institute, the International Organization for Standardization (ISO), the National Institute of Science and Technology, and actuarial societies.

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Risk management consists of identifying, measuring and managing financial risks within an organization. In recent years organizations have paid a lot of attention to improving their risk management function. Other financial and non-financial organizations, however, are increasingly acknowledging the need to improve their risk management as well. Despite the fact that the structure and operations of organizations can differ substantially, the concept of risk management typically can be applied in a similar fashion. However, different types of organizations are exposed to varying risks. For banks and other financial institutions the management of financial risks such as market and credit risk is part of the core activities. For corporate and public sector organizations, financial risks are more likely to result from their operations and capital structure. Operational and non-financial risks are inherent in business, irrespective of the type of organization.

The main objective of risk management is not to eliminate or to minimize the risks themselves. Instead, sound risk management helps to identify and understand the risk profile in order to align the business with the accepted level of risk

The purpose of risk management is to identify potential problems before they occur so that risk-handling activities may be planned and invoked as needed across the life of the product or project to mitigate adverse impacts on achieving objectives.

Risk management is a continuous, forward-looking process that is an important part of business and technical management processes. Risk management should address issues that could endanger achievement of critical objectives. A continuous risk management approach is applied to effectively anticipate and mitigate the risks that have critical impact on the project.

Effective risk management includes early and aggressive risk identification through the collaboration and involvement of relevant stakeholders. Strong leadership across all relevant stakeholders is needed to establish an environment for the free and open disclosure and discussion of risk.

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5.4

OBJECTIVES OF RISK MANAGEMENT:-

To identify and prioritize potential risk events Help develop risk management strategies and risk management plans Use established risk management methods, tools and techniques to assist in the analysis and reporting of identified risk events Find ways to identify and evaluate risks Develop strategies and plans for lasting risk management strategies A primary objective of risk management is to identify and to manage (take preventive steps) to handle the uncertainties that attend a business enterprise or that are personal to an individual. Regardless of the entity (business or person) which/whose risk is being managed, there are several primary ways to do it: 1. Recognize that there are a panoply of risks that attend any action and be prepared, to the extent possible, to withstand the financial impact of them. This is essentially the theory behind selfinsurance. 2. Minimize the chances of the adverse event occurring, by implementing and enforcing safety measures. 3. Minimize the potential severity of the adverse event. 4. Shifting the burden of the financial impact of the adverse event to a third part. This is the essence of insurance.

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CHAPTER-6 RISK MANAGEMENT IN LIFE INSURANCE CORPORATION To understand the risk management ..we have to focus on the underwriting processes that helps us to understand how life insurance corporation manages its risk. Risk of life insurance Corporation is unsystematic risk. It is diversifiable in nature. In life insurance corporation company issues different policy, plans and schemes to policy holder. Company distributes funds to themthese processes involves a great amount of risk. So, in order to cover these risks company undergoes underwriting process.

6.1

Underwriting Process for Life Insurance:-

Conversion of proposal into policy is known as underwriting. PROPOSAL--------CONVERSION---------POLICY

Underwriting is the basic process of the life insurance. Many people dont know what happens in the life insurance process from filling the application form to getting the life insurance policy deliver at home. The process is called as underwriting process. Underwriting process is a part of all life insurance policies, the money which you paid in the form of premium will become an investment if you live your life longer. The money will be given to beneficiaries if the owner of the policy dies. Underwriting process need all the basic information about the policy. Insurance application, Vehicle identification number, motor vehicle reports, photographs etc. should be collected before the underwriting process. Without the underwriting process company will not be able to bear losses. The underwriting process is the method by which the company will function smoothly with proper rules and regulations.

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All companies have some amount of financial stability, if the company spends the

saved reserves than it will affect the financial stability of the company. The company will issue policies with different plans and schemes to increase the financial stability. The risk taking process of the company and the process of distribution of funds is known as underwriting process. The person who predicts the risks on the life of policy holder is known as underwriter. Process of underwriting:-

When a person wants to insure life from an insurance company than the first step is to apply for the insurance policy. Every insurance company has rules and regulations to insure the life of a person. The insurance company needs the basic information like age, diseases, gender etc the company will earn the money depends on the payment of premiums by the customer. In case a woman wants to secure the life then the requirements are different such as pregnancy, use of alcohol etc woman has to answer about the job, hobbies, or any other activities etc depends on all the factors of the lifestyle and habits the policy goes into underwritten process and the premium on the policy will be decided. Every insurance company has different underwriting process. The policy which covers the average risk is known as Standard policy. The policy which covers lower than average risk is known was Preferred Policy. The policy which covers greater risk than average risk is knows as Rated policy. Low risk policies usually have low premiums and in case of Rated policies the cost will be more. Without the underwriting process company will not be able to bear losses. The underwriting process is the method by which the company will function smoothly with proper rules and regulations.

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Underwriting process has begun in LIC by the agent of the lic,therefore Agent is the first underwriter. AGENT: A person authorized to canvass and procure life insurance business and in possession of a license to act as a life insurance agent.

The agent's role:

Responsible for canvassing and procuring new insurance business. Helps the proposer in filling the forms completing formalities for obtaining life insurance. Advises on the type of policy best suited. Informs clients about new policies and schemes announced by LIC. Responsible for rendering after-sales services to the policyholder. Takes care of the policyholder's queries. Helps the policyholders or beneficiaries in making and realizing claims. Acts as a middle man between the corporation and the proposer/ policy-holder and is responsible for furnishing true and fair information about the proposer at the time of obtaining insurance.

The first step of underwriting that is conversion of proposal into policy is done by agent of LIC. Agent of LIC has to fill a report from the proposer known as agent confidential report. Agent confidential report is the first report filled by the proposer.

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Agent confidential report-----This report is confidential report which contains The name and age of proposer and life proposed. Sum proposed. Proposers occupation and nature of duties. Educational qualification of life proposed.

Details of annual income. General state of health of life proposed. Status of previous policy.

Any proposal of life proposed is declined or dropped. Anything in the occupation, financial and social position of the life proposed, his/her personnel habits which are likely to add to the risk.

Under non medical case:(A) Marks of identification. (B) Exact physical measurements.

After filing of all the above informations. This report is signed and stamped by the agent and it is verified by him that all the above information are true according to his knowledge and belief.

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MORAL HAZARD REPORT----The importance of Moral Hazard Report need not be overemphasized. There reports are expected to be written after collecting factual information from the life proposed and also from documents supporting the financial status of the proponent and making independent enquiries. These reports must reflect factual information, keeping in mind that the underwriter relies on this for financial underwriting. If an agent is competent to give MHR under a proposal, the Agents Confidential Report (ACR) itself can be treated as MHR. If as per the prescribed limits, the agent cannot give the MHR, the same has to be given independently by the Development Officer. Agents confidential report and Moral Hazard report are the same form. Agent confidential report is verified and signed and stamped by any authorized agent and officers of L I C, IT itself becomes Moral Hazard report.

APPORTIONMENT OF UNDERWRITING WORK TO VARIOUS OFFICES

SUC Based Limits of various offices

OFFICE

STANDARD LIVES

Branch office Divisional office Zonal office Central office

Rs 15 lacs Upto Rs 25 lacs Upto RS 75 lacs Above 75 lacs

Limits shown above are based upon Sum under consideration .Proposal with any special reports should be referred to divisional office.

After filling and verified and signed by agent and development officer, agents confidential report and moral hazard report is foreseen and verified by the underwriter.

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The person who predicts the risks on the life of policy holder is known as underwriter. The underwriter needs the basic information like age, diseases, gender etc. Insurance underwriters evaluate the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to protect the company's book of business from risks that they feel will make a loss and issue insurance policies at a premium that is commensurate with the exposure presented by a risk. Underwriter measure the risk and protect companies business from risk by verifying the agent confidential report and moral hazard report and documents such as age proof, gender etc of proposer or insurer.

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AGE PROOFS-

Standard age proof

A. Certificate of Municipal Records B. Certificate extract of school or college record. C. Certificate extract from service Service register in case of employees of govt/quasi govt/public ltd companies. D. Passport issued by Govt. of India. E. Identity card issued by govt of India/Defense department and Quasi govt. F. Domicile Certificate. G. Marriage certificate issued by roman catholic church.

NO RESTRICTIONS

NSAP-1

H. Horoscope maintained by Hindu family. I.PAN Issued by IT dept. J.Driving license issued by RTO. No age proof extra will be Charged.

NSAP-2 K.Marriage certificate in the case of Muslim. L.Service record where age is not verified at the time of entry into the service or only year of birth is mentioned. AP extra subject to minimum of 1.50% will be charged. Maximum age at entry will not exceed 50 years. Maximum policy/premium

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paying term will be restricted to 25 years. Maximum maturity age will be restricted to 65 years.

NSAP-3

M. HOROSCOPE N. Elders declaration. O. Self declaration. P. Certificate issued by village panchayat. Q. Ration card R. Election identity card. S. Certificate issued by a village panchayat.

AP extra subject to minimum of 1.50% will be charged. Maximum age at entry will not exceed 50 years. Maximum premium paying term will be restricted to 25 years. Maximum insurance cover will be Rs 2 lacs.

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Two types of underwriting:(a) Financial underwriting-------(b) Medical underwriting--------

(a) Financial underwriting--

While accepting proposal proposals care should be taken to see that the total risk cover Should have a relation to the income level of the proponent. As insurance is mainly meant to meet unexpected loss of income due to the death of the life assured, the total amount payable upon death should be such that should only replace the financial loss and nothing more. In other words, death of the life assured should not give any additional financial advantage to the assured/ legal heirs as otherwise the possibility of adverse selection against the insurer may operate.

IN Financial Underwriting Total rated sum assured. (TRSA)

(IN total rated sum assured total policy undertaken by person is considered)

How much insurance can be given ? It depends upon the financial income/status, age, Nature of Age proof, etc. For a male life with Standard age proof/NSAP-I the limits are as follows.

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RELATIONSHIP BETWEEN ANNUAL INCOME AND ALLOWABLE COVER

AGE

NO OF TIMES OF AVERAGE INCOME

UPTO 30 years

22 times

31 to 40 years

17 times

41 to 5o years

12 times

50 years and more

10 times

FOR FINANCIAL UNDERWRITING------------ TRSA is to be calculated. Insurance policies on self, spouse, children DULY RATED UP are to be taken into account if premium for such policies are financed from the income of the proposer. Insurance cover taken from other insurers has to be considered.

Total rated sum assured. (TRSA)

(IN total rated sum assured total policy undertaken by person is considered)

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WHEN INCOME PROOF IS TO BE SUBMITTED?

Total rated up insurance is Up to 15 lacs -------MHR

15-25 lacs-------------IT Returns for the last 3yrs /A C A certificate showing income of last three years, giving permanent account no. duly countersigned by the proponent or personnel financial questionnaire duly signed by the proponent and countersigned by the official giving MHR.

25 lacs &>--------------

ITRs for the last three years.

WHERE 3 YRS ITRs ARE NOT AVAILABLE?

SALARIED EMPLOYEES: Latest ITR with Form No.16. Where less than 1 yr service, contract of employment where remuneration is given may be taken as income proof. BUSINESSMEN / PEOFESSIONALS: Minimum one year ITR be insisted upon. INCOME FROM OTHER SOURCES: Average income of last 3 yrs. Where income in ITRs is not sufficient, in case of professionals gross income given in audited accounts can be taken for deciding the maximum insurance

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(b) Medical underwriting ----Those who are not eligible in non medical scheme are to be considered. For medical underwriting .In medical underwriting sum under consideration is considered.(SUC)

(Last two years policy taken by person is considered.)

6.2 CONCEPT OF SUM UNDER CONSIDERATION:SUM UNDER CONSIDERATION IS BASED ON ACTUAL SUM ASSURED UNDER ALL THE CURRENT PROPOSALS AND POLICIES UNDER TAKEN IN LAST TWO YEARS ON THE BASIS OF DATE OF COMMENCEMENT OF RISK.

Sum under consideration in life insurance is actually the amount of risk the company is taking in insuring a particular life. All policies taken during the last 2 full years have to be taken into account and the plans have to be duly rated up according to the risk factors involved in the plans. To this all policies revived during the SUC period to be added. This amount is called SUC.

6.3 CALCULATION OF PREMIUM:-

MEANING OF PREMIUM-- The amount paid by the insured to the insurer. In other words, premium is the price of insurance. Premiums may be one-time or single premiums or they may be paid monthly, quarterly, half-yearly or annually. The mode of premium payment can be changed during the premium paying period. Policy holders are required to pay the premiums to LIC on the due dates. However, one month but not less than 30 days of grace is allowed for payment of quarterly, half-yearly and annual premiums and 15 days for monthly premiums. When the premium is not paid within the days of grace, the insurance policy lapses.

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PREMIUM IS CALCULATED ON THE BASIS OF-----(A)Prescribed rate of life insurance. (B)Tabular rate of L I C. (C)Age and Income. (D)Paying capacity of insurer. (age increases premium increases, term increases premium decreases)

MODE OF PAYMENT OF PREMIUM---- (a) Yearly ------There is rebate in payment of premium. (b) Half yearly-----In half yearly payment also, rebate is allowed. (c) Quarterly----No rebate is allowed. (d) Monthly----5% extra premium is charged. (e) Salary saving--No extra charge and no rebate is given.

6.4 MEANING OF UNDERWRITER:The person who predicts the risks on the life of policy holder is known as underwriter. Insurance underwriters evaluate the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to protect the company's book of business from risks that they feel will make a loss and issue insurance policies at a premium that is commensurate with the exposure presented by a risk. Underwriter measure the risk and protect companies business from risk by verifying the agent confidential report and moral hazard report and documents such as age proof, gender etc of proposer or insurer.

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The role of an underwriter is primarily related to risk assessment. An underwriter must evaluate whether an application is likely to be profitable in the long term for the company. Most insurance companies will have a set range of criteria which must be considered in the underwriting process. There will normally be a pro-forma set of requirements that must be ticked off but in certain circumstance the underwriter will have to use their discretion to ensure that a policy is not too risky. There will likely be a variety of relevant factors depending upon the type of insurance. For example, if someone was looking to take out health or critical illness insurance the underwriter might request details of any

ongoing medical conditions previous claims occupation history of heart disease or other medical conditions within the immediate family lifestyle risks e.g. excessive drinking, smoking or dangerous hobbies

The underwriter in the above circumstances might also insist upon a medical examination or other health checks. Factors like the above can pose a significant risk to an insurance company and if an underwriter perceives the risk as too great they may recommend that the company either rejects the application completely or offers a loaded or excluded policy. A loaded policy refers to a policy where the premiums are higher than standard. Exclusions refer to specific client provisions which may prevent the client from undertaking a specific activity or require them to follow a certain programmers. e.g. join a gym. Responsibilities As an underwriter, he is responsible for assessing risk and maintaining profitability. He will be expected to:

Evaluate application forms and other corresponding evidence Gather further information including liaising with other professionals such as doctors or lawyers Make quantitative and qualitative judgments on the risks of a particular policy Make recommendations as to whether a policy is reasonable and, if not, whether the policy should be accepted with an increased premium or whether certain elements of an application present too high a risk and should therefore be excluded

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Calculate premiums. Make recommendations on whether the risk should be re-insured Visit brokers, doctors and intermediaries to discuss products and assessment criteria Negotiate terms with policyholders Help to draft policies and advise lawyers of appropriate exclusion clauses. Keep meticulous records of individual policies and conditions

6.4 Qualifications for Becoming an Insurance Underwriter:-An Insurance Underwriter career requires having an extensive education. Each State has regulation or State Insurance Commission, that license underwrites, after completing required course studies, examinations, and continuing education. There is no Federal Regulatory System regarding any standard of education. Underwriters must have good judgment skills. Good communication, interpersonal skills.

Specialized fields in underwriting insurance include: Health, life, property and liability.

Continuing education is essential, and often is required to maintain a current license or degree. Insurance Underwriter profession requires having a Bachelor Degree in Business Administration, finance or math.

Required basic course studies in accounting, law, and computer knowledge. Upon completion, graduates would work as underwriter trainee or assistant underwriter.

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Responsibilities would include studying claims files, and become familiar with factors associated to certain types of losses. Many insurance companies offer Work Study Programs that teach, for several months or years. Insurance companies may pay for the tuition underwriting courses, their trainees successfully complete

CHAPTER-7

UNDERWRITING OF NON MEDICAL LIVES

NON MEDICAL LIVES ---- No history of any operations, previous illnesses, Build within the normal limits for NON MEDICAL and service of minimum 1 year in 1. Govt, Quasi govt, Local bodies, Schools, Colleges Hospitals run by Govt or allied institutions. 2. Corporations, PSUs, Industrial Undertakings, and reputed Business Organizations. 3. Persons employed in Army (not below A-1 cat)

Three categories of non medical lives---- Non- Medical Special. Non-Medical General to Professionals. Non -Medical General to Others.

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(a) Non-Medical Special ELIGIBILITY AGE MAXIMUM SUM ASSURED BASED ON SUC Rs 15 lacs All plans excluding High Risk plan. NATURE OF DUTIES

Major literate Males and SSC passed females

Not more than 35 years

1.Not less than 1 year service length and employed in Govt and QUASI Govt. offices Schools, hospitals etc run by govt and quasi govt. State corporations. Industrial undertakings and reputed commercial firms Undertakings operating for a minimum of period of 3 years with average turnover of rs 50 crores during this period.

With Standard Age Proof 36 years to 45 years

Rs 10 lacs. All plans excluding High Risk plans.

46 years Rs 4 lacs. to 50 All plans excluding years High Risk plans.

2.Commissioned officers in armed forces. Length of services not less than 1 year Not below medical category A-1

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Summary: Who are eligible under NMS? Literate males & SSC passed females who are resident Indians. Commissioned officers in Army not below A-1 AGE 18 -35 Maximum sum assured 15 lacs sum under consideration. AGE 36 -45 Maximum sum under consideration 1o lacs 46 50 yrs NBD Maximum sum under consideration 4 lacs.

(b) NON-MEDICAL PROFESSIONAL All professionals, like Doctors, Engineers, CAs, Cost Accountants, Management consultants, Computers specialists, Advocates, Teachers, and LIC Agents. Along with the proposals, documentary evidence to show that they are professionals has to be enclosed. Standard Age proof is compulsory.

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Non medical professional (employed or self employed)

ELIGIBILITY

AGE

MAXIMUM SUM UNDER CONSIDERATION

NATURE OF DUTIES

Standard age proof

Not over Rs12 lacs 35 years All plans excluding High Risk plan Between Rs 8 lacs 36-45 All plans excluding years High Risk Plans

AND

Chartered Accountant, Cost Accountants, Engineers, Architect, Management/Computer Consultants, Doctors, Lawyers, Teachers, LIC AGENTS.

Proof of IncomeITRs with minimum income of rs1.50 lacs pa

46-50 years

Rs 4 lacs All plans excluding High Risk Plan.

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Summary: Age 18 35 NBD Maximum Sum under consideration 12 lacs

Age 36-45 NBD Maximum Sum under Consideration 8 lacs.

Age 46 -50 NBD Maximum Sum under Consideration 4 lacs.

(c) NON-MEDICAL OTHERS All males and literate females who do not fall under NMS or NM(P) and having their own income. Standard age proof or NSAP will be accepted subject to conditions. Insurability conditions are as applicable to NMS. Eligibility Age Sum Assured with st AP Major Males and literate Females Having Own Income (earned or unearned) Not over 35 years Rs 4 lacs NSAP-1 Rs 3 lacs (Sum Under Consideration) NSAP-2 Rs 2 lacs NSAP-3 RS 2 lacs

Between 36-45 years

Rs 2 lacs

Rs 1 lac

Rs 1 lac

Rs 1 lac

46-50 years

Rs 1 lac

Rs 50000

Rs 50000

Rs 50000

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CHAPTER-8 UNDERWRITING OF FEMALE LIVES 1ST CATEGORY

2ND CATEGORY

3RD CATEGORY

FEMALES

There are three different categories of females for underwriting-- Category 1 Category 2 Category 3

INSURANCE ON FEMALE LIVES Category I

Includes Married, single, or widow. Women with earned income by virtue of employment in institutions eligible for insurance cover under NMS. and employed with Govt., Quasi Govt., Reputed commercial institutions even if NMS is not introduced. Women employed in Commercial institutions should have passed SSC, submit Standard Age proof, Evidence of employment Minimum service of 1 year, & the institution established more than 3 years ago.

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Professionals such as Doctors, Lawyers, CAs, Architects, Engineers, Physiotherapists etc., and any insurance agent or carrying on any agency provided she satisfies conditions stated above. Other self employed women filing IncomeTax returns such as Tailors, Embroiding, Beautician, Caterers, Baby sitting, Typist, Data entry Operators, Giving Tuitions, Self employed with ownership of shops, business premises etc., subject satisfying the following conditions: Minimum Education HSC (12th standard) and professional qualification if necessary. Standard age proof. Should be filing I T Returns since last 2 yrs. Proof of income to be taken from copies of ITRs for the last 3 years. (2 years if started filing income tax returns since last 2 yrs)

UNDERWRITING OF FEMALE LIVES

CATEGORY

CONDITIONS

MAXIMUM SUM ASSURD ALLOWWED On par with male proposer depending upon the adequacy of income.

FEMALE 1.Women with earned income by CATEGORY virtue of employment in 1 institutions, which are eligible for insurance under NMS scheme 2.Women employed with Govtt, Quase Govtt & other reputed commercial establishments even if NMS is not introduced 3.Women employed with reputed commercial institutions even if NMS is not introduced may be treated as female category 1

All plans are allowed.

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Female category 1 a. Minimum educational qualification SSC or equivalent examination passed. b. Standard age proof. c. Minimum service with the present employer 1 yr. d. Firm/company /financial institutions established more than 3 yrs ago. 4. Professionals such as -Docters, Lawyers, CAs, Architects, Engineers etc and any insurance agent having educational qualification SSC or more and submits Standard age Proof.

Proof of income depends upon TRSA.

5.Other self employed women filling income tax returns such as tailoring, embroidery, Baby sitting ,Beauticians etc subject to fulfilling the following conditions. Minimum educational qualifications HSC (12TH) Professional qualification wherever applicable. Standard age proof or NSAP 1 Should be filling income tax returns for last 2 years.

FEMALE CATEGORY 2: Includes single, Married, and widows. Women with unearned income / having sizeable personal properties and / or investments yielding income and filing Income Tax Returns are treated as Category II females Proof of income to be submitted is IT Returns for the last 3 years.

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Cat II women can be given all types of policies. Maximum rated up Insurance that can be allowed is 1 crore. No linking with husbands Insurance Income factors as applicable to male lives Good educational, social background with other members of family adequately insured. MHR by competent Authority.

FEMALE Women with unearned income having CATEGORY 2 income from sizeable personnel properties, investments yielding filling personnel returns.

Rs 1 Crore Provided the other family members are adequately insured and female life to be assured has good educational background.

Proof of income should be copies of Marrried,single ITRs for last 3 years. or Widow A certificate of CA can be accepted if PAN has not be allotted. If the women is falling under female cat -2 and are taking active part in day to day running of business can be considered as female cat -1 .

Income from other family members .income from capital gains, and one time income from sale of properties has been excluded.

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FEMALE CTEGORY -3 Female category three has 4 categories---- a. Married women without income b.Married women with income c.Single women d.Widows.

married women without income female cat-3

married women with income

Single women

widows.

MARRIED WOMEN WITHOUT INCOME Maximum insurance allowed is 15 lakhs, not exceeding husbands insurance. Husband should have sufficient income to support his and his wifes & childrens policies. Educational, social background is good MHR by Dev. Officer/ DM club agent. Insurance up to 40 lacs (not exceeding husbands) if she is Graduate having Credit card / Pass port /driving license.

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MARRIED WOMEN WITH OWN INCOME Employed women not satisfying conditions under Category I Self employed, but not filing IT Returns. UN earned income not filing IT Returns.

Maximum Insurance allowed : 7 times of annual income subject to ceiling i) 1 lac if illiterate or educated up to 8th std ii) 5 lacs if educated 9th std or above.

MHR to be submitted by Dev. Officer/ DM club Agent.

Other conditions for with/ without own income.

Maximum age at entry up to 60 yrs only

Maximum SA under plan 89 is 2 lakhs. (15 lakhs if proof is given that she is a graduate with one of the requirements) Maximum SA is 5 lac (15 lacs if she is a graduate with one of the requirements) Total Insurance not to exceed 15 lacs / ( 40 lakhs if she is a graduate)

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Group 1

Eligibility Married women Without income-Not exceeding husbands insurance in force for full sum assured. With income- Self employed not filling income tax return or not comes within the purview of category-1 Maximum cover equal to 7 times of average annual income subject to an upper ceiling of Rs 1 lac if illiterate or educated upto 8th std. Rs 5 lacs if educated upto 9th Std or above. The cover will be allowed to these categories subject to MHR by Dev officer. Insurance cover will be allowed to these categories over and above insurance cover on the basis of their husbands income/insurance.

Other conditions

The maximum age at entry restricted to 60 years.

Maximum sum assured allowable Rs.2 lacs and rs 5 lacs.

Total insurance to married women whether from husbands income or own will not exceed rs 15 lacs.

SINGLE WOMEN:Single women Cat - III aged between 25 - 50 yrs No independent income No insurance. With own income not satisfying Cat I , II conditions Maximum insurance cover 7 times of annual income subject to:

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o one lac if illiterate or studied up to 8th std o 5 lacs if studied 9th std and above. Special MHR by Dev. Officer / DM club agent satisfactory socioeconomic status.

GROUP 2.

ELIGIBILITY SINGLE WOMEN (aged 25 to 50 NBD) Without income-No insurance cover will allowed With income- Maximum cover equal to 7 times of average annual income subject to an upper ceiling of o Rs 1 lac if illiterate or educated upto 8th std. o Rs 5 lacs if educated upto 9th Std or above.

OTHER CONDITIONS Maximum age at entry 50 years.

The cover will be allowed to these categories subject to MHR by Dev officer

WIDOWS:INSURANCE ON THE LIVES OF WIDOWS: Widows without own income Insurance not allowed. Not satisfying the conditions for Cat I & II will come under this category. Age at entry not to exceed 50 yrs Age at Maturity not above 65 yrs, Maximum term 25yrs. They should have minor dependent children.

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Maximum Insurance allowed 7 times of annual income not exceeding one lakh. If merits of the case demands up to 2 lakhs. Widows who are pensioners: o 7 times of pension income subject to maximum of two lacs. (Pension pass book copy needed) o In such cases requirement of minor dependent child, minimum qualifications age at entry / Maturity will not be insisted. o Widows who received compensation from husbands Employers, Policy Claims, or any lump sums from some other sources can be given single premium policies up to 10 lacs. Pensioner widows and the above categories can be allowed Deferred Annuities / Immediate annuities (without life cover) without restriction.

o For these two categories restrictions like 9th class with standard age proof, Minor dependent child, Age at entry etc is not applicable. o Moral Hazard Report by Development Officer is compulsory in all these cases.

GROUP-3 WIDOWS A. Without any income no insurance cover B.widows who has received compensation from employers or claim under insurance policies on the life of their deceased husbands or get lump sum from other sources. C. widows getting family pension.

INSURANCE TREATMENT

No insurance cover will be allowed.

Rs 10 lacs.

Rs 2 lacs other than high risk plans subject to providing proof of receiving pension.

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D. Widows having their own income not falling under cat 1,2 and fulfilling the following conditionsa. Age at entry is less than 50 years. b. Standard age proof is produced. c. The life to be assured may have either minor or major children. if she has major earning children detail of insurance held by them must be called to that family is insurance minded. d. The life to be assured must be literate. e. Special MHR must be obtained under dev officer.

Maximum cover equal to 7 times of average annual income subject to Rs 1 lac.

FEMALE STUDENTS / CHILDREN (< 25 Yrs) They are treated separately. Insurance to this category will be given provided the proposing parents have matching insurance with sufficient income to cover all policies. Brothers, sisters should also have insurance cover. Good socio economic back ground is necessary.

PREGNANT WOMEN Pregnant women will not generally be given insurance during the period of pregnancy. However, women falling under Cat I & II can be given insurance subject to some conditions like : a) Proposal to be submitted with in 24 weeks of pregnancy. b) Medical Report and Gynecologist Report certifying that the proponent is under her care is required. c) The proponent must be in employment of Government, Quasi Govt, or reputed Organizations.

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CHAPTER-8

UNDERWRITING OF PHYSICALLY HANDICAPPED

FOR THE UNDERWRITING PURPOSE OF PHYSICALLY HANDICAPPED:-

SOME POINTS ARE TO BE DISCUSSED1 A special Questionnaire has to be completed by the life assured and the medical examiner. MEDICAL EXXAMINATION REPORT AND MHR should give full details of physical deformity.

2. The proposed can be entertained only if the life to be assured is gainfully employed and having adequate of his/her own income and capable of taking sufficient precautions to avoid accidents. RISK PLANS ARE NOT ALLOWED TO PHYSICALLY HANDICAPPED.

3. It may be noted that proposer with deformities mentioned below from (a) to (d) are standard lives otherwise non standard lives. (a) With loss of one limb.(including eye ,ear) due to accident (non-progressive at BO level. (b)With loss of both the ears. (c)Absence of both limbs since birth, non progressive ay BO level. (d) Polio affected with no residual paralysis.

4. There will be no restrictions on age, maturity, restrictions etc.

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5. Irrespective of what has been stated above, any minor disability such as loss of fingers and toes can be ignored provided manager is satisfied. (a)Such a minor impairment will not in any way affect the free movement of life to be assured. (b) Thumb and forefinger are not missing . (c)The impairment is not due to underlying diseases.

6. Physically handicapped concession has been allowed as per existing practice.

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CHAPTER-10

UNDERWRITING ON THE LIVES OF PROPOSAL OF NRIs

NRI means citizen of India temporarily residing in the country of his/her present residence and holding a valid passport issued by the Govt. of India.

NRI CAN BE ALLOWED INSURANCE: a. On their visit to India-formalities completed during their stay in India. b. From their present country by (MAIL ORDER BUSINESS).

In respect of---4ano max sum assured limit. 4b ---- above a min of Rs 2 lacs SA and thereafter a multiple of Rs.1 lac SA is allowed and the max SUM ASSURED of rs.1crore mat be allowed.

INCOME PROOF Total rated up sum assured (existing+proposed) SA does not increase 15 lacs Proof of income required

Proposals can be accepted on the basis of income shown in the proposal form and MHR.

Between 15 lacs and 25 lacs

PFQ signed by proponent and counter signed by official giving MHR.

Exceeds Rs 25 lacs

IT RETURNS for the last three years attested by life proposed and signed by Agent and DO/salary

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certificate. /Balance sheet and P/L account of firm if propose is Business man.

IN RESPECT OF MAIL ORDER BUSINESS:--- 1. Maximum sum assured is Rs 25 lacs. 2. Term rider and critical illness will not be allowed.

NON MEDICAL SCHEMES TO NRIs

Casual lives

Sum assured

Major males and females aged upto35 years

15 lacs

Between 36 to 45 years

10 lacs

Between 46 to 50 years

2 lacs

NRIs may obtain insurance cover under our Non-Medical (Special) schemesubject to certain restrictions, some of which are listed below: 1. Applicable if insurance is obtained during visit to India or through Mail Order Business when LIC Agents visits the country of residence of NRI for completing the necessary formalities. 2. Maximum age at entry would be 45 years

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3. Plans with high risk cover and term rider benefits would not be allowed. 4. The proposer should be employed in Government or reputed commercial firm or should be a professional such as Chartered Accountant, Doctor, Teacher, Lawyer, Accountant, Engineer, etc.

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DATA FINDINGS

DATA OF LIFE INSURANCE DONE AT LIC BRANCH OFFICE (FINANCIAL YEAR----2011-12)

1. NON-MEDICAL LIVES-- SPECIAL -7072 PROFESSIONAL---7488 OTHERS-------29120

TOTAL---43680

2.FEMALE---

CATEGORY 1--- 2150

CATEGORY 2---1920

CATEGORY 3- MARRIED WOMEN With income---9600 Without income---7500 Single---------1075 Widow-------1272 Total----19497

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3,HANDICAPPED--

1462

4.NRIs----- 987

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CONCLUSIONS

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RECOMONDATIONS

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BIBLIOGRAPHY

Book references:
Sarangi Prashant, RESEARCH METHODOLOGY , Taxmanns Publications,2010, p-54-57,p-102, p-118-125. S. Balachandran , IC -33 LIFE INSURANCE, Insurance Institute of India Publication , 1999, p-4, p-8. S P Gupta & M P Gupta , BUSINESS STATISTICES, Sultan Chand & Sons publication, tenth edition. I M PANDEY, FINANCIAL MANAGMENT,Vikash Publishing House Private Ltd,2010,tenth edition. UNDERWRITING AT A GLANCE L.I.C INDIA,New Bussiness Department,Divisional Office- Muzaffarpur.

Websites:
http://www.buzzle.com/articles/how-does-life-insurance-work.html http://www.buzzle.com/articles/life-insurance-underwriting.html http://www.astonishinglifestyle.com/underwriting-process-for-life-insurance.html http://en.wikipedia.org/wiki/Life_Insurance_Corporation_of_India http://voices.yahoo.com/qualifications-becoming-insurance-underwriter-6721.html?cat=12 http://en.wikipedia.org/wiki/Risk_management http://www.whatisriskmanagement.net/ http://www.licindia.in/nri_centre.htm