Role and Impact of Lic

7/29/2019 Role and Impact of Lic

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ROLE AND IMPACT OF LIC

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CHAPTER1

INTRODUCTION OF LIC

MEANING OF LIC:

Insurance means a promise of compensation for any potential future losses. It facilitates

financial protection against by reimbursing losses during crisis. There are different insurance

companies that offer wide range of insurance options and an insurance purchaser can select as

per own convenience and preference.

Several insurances provide comprehensive coverage with affordable premiums. Premiums are

periodical payment and different insurers offer diverse premium options. The periodical

insurance premiums are calculated according to the total insurance amount. Mainly insurance is

used as an effective tool of risk management as quantified risks of different volumes can be

insured.

The life insurance company of India (LIC) is owned by the state and has been termed as

the biggest life insurance corporation in the republic. Since its inception in 1956 with the passage

of life insurance act bills, it has moved in full swing to serve the great masses of India rural

dwellers facing major life challenges.

LIC Company has its headquarters in Mumbai with approximately eight zonal administrativeunits, 101 offices at the divisions and over 2048 branches established across the land. The LIC

Company has began to assist its citizens find the lost meaning in life by encouraging them to

belong to many life insurance policies and striving to satisfy the needs of the people. A part from

India, it has subsidiaries in twelve others countries aiming to serve their interests to the

maximum. Serving so many people within and without India is no mean achievement for the LIC

India. It requires dedicated staff skilled, experienced and highly motivated to amass these great


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achievements. Its 112, 184 work force proves the companys vigor to serve the people with

diligence as it establishes the subsidiaries to render the services. The subsidiaries are LIC Nepal,

LIC Lanka, LIC International, LICHFL Care Homes and LIC Housing Finance all giving

satisfactory services to its customers.

Whenever the word life insurance rings in the mind of people, they imagine how delicatefragile their lives are on this earth. The tough terrains and uncertain future is very tormenting

especially when the going gets tough. LIC India has purposed to stand in for people who loose

their loved ones by helping create awareness for those left behind. The unfortunate peoples are

given options to choose the best policy to serve him / or her well.

LIC India offers whole life policy which has no eminent end as much as the policy owner

remains alive. Any risk the person faces is covered fully by the company. The uncertainty people

face in whole life situations is fully taken care of.The other befitting policy is the endowment

policy which provides an opportunity for people be insured for specific risks hence reducing the

economic burden and money they pay as premium. The endowment policy allows the policyowner to receive his money after the lapse of the period plus his accumulated bonuses earned

over the period. LIC India has therefore hit where most life insurance companies didnt touch.

Definition:

Life insurance is a contract between the insurance company and the insured, under which the

insurance company agrees to pay in consideration of regular payment of premium, a certain

amount to the insured on expiry of a specific period or to the legal heirs of the insured on his

death, whichever happens earlier.

CONCEPT OF INSURANCE

Life has always been an uncertain thing. To be secure against unpleasant possibilities, always

requires the utmost resourcefulness and foresight on the part of man. Man has been accustomed

to pray God for protection and security from time immemorial. In modern days Insurance

Companies want him to pay for protection and security. The insurance man says "God helps

those who help themselves"; probably he is correct.

Too many people in this country are not in employment; and work for too many no longer

guarantees income security. Several millions are part-time, self-employed and low-earning

workers living under pitiable circumstances where there is no security cover against risk. Furtherthe inherent changing employment risks, the prospect of continual change in the work place with

its attendant threats of unemployment and low pay especially after the adoption of New

Economic Policy and the imminent lifecycle risks - a new source of insecurity which includes

the changing demands of familys life, separation, divorce and elderly dependent are tormenting

the society. Risk has become central to one's life. It is within this background life insurance

policy has been introduced by the insurance companies covering risks at various levels. Life


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insurance coverage is against disablement or in the event of death of the insured, economic

support for the dependents. It is a measure of social security to livelihood for the insured or

dependents. This is to make the right to life meaningful, worth living and right to livelihood a

means for sustenance. Therefore, it goes without saying that an appropriate life insurance policy

within the paying capacity and means of the insured to pay premium is one of the social security

measures envisaged under the Indian Constitution. Hence, right to social security, protection of

the family, economic empowerment to the poor and disadvantaged are integral part of the right to

life and dignity of the person guaranteed in the constitution.

Man finds his security in income (money) which enables him to buy food, clothing, shelter

and other necessities of life. A person has to earn income not only for himself but also for his

dependents, viz., wife and children. He has to provide legally for his family needs, and so he has

to keep aside something regularly for a rainy day and for his old age. This fundamental need for

security for self and dependents proved to be the mother of invention of the institution of life

insurance.

INTRODUCTION

Insurance is a form of risk management in which the insured transfers the cost of potential loss to

another entity in exchange for monetary compensation known as the premium.

Insurance allows individuals, businesses and other entities to protect themselves against

significant potential losses and financial hardship at a reasonably affordable rate. We say

"significant" because if the potential loss is small, then it doesn't make sense to pay a premium to

protect against the loss. After all, you would not pay a monthly premium to protect against a $50

loss because this would not be considered a financial hardship for most.

Insurance is appropriate when you want to protect against a significant monetary loss. Take life

insurance as an example. If you are the primary breadwinner in your home, the loss of income

that your family would experience as a result of our premature death is considered a significant

loss and hardship that you should protect them against. It would be very difficult for your family

to replace your income, so the monthly premiums ensure that if you die, your income will be

replaced by the insured amount. The same principle applies to many other forms of insurance. Ifthe potential loss will have a detrimental effect on the person or entity, insurance makes sense.


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CHAPTER2

HISTORY OF LIC

The story of insurance is probably as old as the story of mankind. The same instinct that prompts

modern businessmen today to secure themselves against loss and disaster existed in primitive

men also. They too sought to avert the evil consequences of fire and flood and loss of life and

were willing to make some sort of sacrifice in order to achieve security. Though the concept of

insurance is largely a development of the recent past, particularly after the industrial era past

few centuriesyet its beginnings date back almost 6000 years.

Life Insurance in its modern form came to India from England in the year 1818. Oriental Life

Insurance Company started by Europeans in Calcutta was the first life insurance company on

Indian Soil. All the insurance companies established during that period were brought up with thepurpose of looking after the needs of European community and Indian natives were not being

insured by these companies. However, later with the efforts of eminent people like Babu

Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives

were being treated as sub-standard lives and heavy extra premiums were being charged on them.

Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company

in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with

highly patriotic motives, insurance companies came into existence to carry the message of

insurance and social security through insurance to various sectors of society. Bharat Insurance

Company (1896) was also one of such companies inspired by nationalism. The Swadeshi

movement of 1905-1907 gave rise to more insurance companies. The United India in Madras,

National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore

were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in

one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The

Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the

companies established during the same period. Prior to 1912 India had no legislation to regulate

insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund


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Act were passed. The Life Insurance Companies Act, 1912 made it necessary that the premium

rate tables and periodical valuations of companies should be certified by an actuary. But the Act

discriminated between foreign and Indian companies on many accounts, putting the Indian

companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance business.From 44 companies with total business-in-force as Rs.22.44 crore, it rose to 176 companies with

total business-in-force as Rs.298 crore in 1938. During the mushrooming of insurance companies

many financially unsound concerns were also floated which failed miserably. The Insurance Act

1938 was the first legislation governing not only life insurance but also non-life insurance to

provide strict state control over insurance business. The demand for nationalization of life

insurance industry was made repeatedly in the past but it gathered momentum in 1944 when a

bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly. However,

it was much later on the 19th of January, 1956, that life insurance in India was nationalized.

About 154 Indian insurance companies, 16 non-Indian companies and 75 provident were

operating in India at the time of nationalization. Nationalization was accomplished in two stages;

initially the management of the companies was taken over by means of an Ordinance, and later,

the ownership too by means of a comprehensive bill. The Parliament of India passed the Life

Insurance Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India

was created on 1st September, 1956, with the objective of spreading life insurance much more

widely and in particular to the rural areas with a view to reach all insurable persons in the

country, providing them adequate financial cover at a reasonable cost.

LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its corporate

office in the year 1956. Since life insurance contracts are long term contracts and during the

currency of the policy it requires a variety of services need was felt in the later years to expand

the operations and place a branch office at each district headquarter. Re-organization of LIC took

place and large numbers of new branch offices were opened. As a result of re-organisation

servicing functions were transferred to the branches, and branches were made accounting units.

It worked wonders with the performance of the corporation. It may be seen that from about

200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in the year

1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of new business. But

with re-organisation happening in the early eighties, by 1985-86 LIC had already crossed

7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8

zonal offices, 992 satallite offices and the Corporate office. LICs Wide Area Network covers

109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied

up with some Banks and Service providers to offer on-line premium collection facility in

selected cities. LICs ECS and ATM premium payment facility is an addition to customer

convenience. Apart from on-line Kiosks and IVRS, Info Centres have been commissioned at


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Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many

other cities. With a vision of providing easy access to its policyholders, LIC has launched its

SATELLITE SAMPARK offices. The satellite offices are smaller, leaner and closer to the

customer. The digitalized records of the satellite offices will facilitate anywhere servicing and

many other conveniences in the future.

LIC continues to be the dominant life insurer even in the liberalized scenario of Indian

insurance and is moving fast on a new growth trajectory surpassing its own past records. LIC has

issued over one crore policies during the current year. It has crossed the milestone of issuing

1,01,32,955 new policies by 15th Oct, 2005, posting a healthy growth rate of 16.67% over the

corresponding period of the previous year.

From then to now, LIC has crossed many milestones and has set unprecedented

performance records in various aspects of life insurance business. The same motives which

inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take

this message of protection to light the lamps of security in as many homes as possible and to helpthe people in providing security to their families

Some of the important milestones in the life insurance business in India are:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started

functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its

business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the lifeinsurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect

statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of

protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central

government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a

capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to the Triton

Insurance Company Ltd., the first general insurance company established in the year 1850 in

Calcutta by the British.


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Types of Insurance:

Major types of insurances are as mentioned below:

Life insurance: Descendent's family receives financial benefits. Life insurances alsooffer paid proceeds to the beneficiary.

Automobile insurance: Usually automobile insurances cover damages and legalfinancial expenditures of the automobile driver.

Health insurance: covers the expenditures associated to treatment and medicalexpenditures.

Credit insurance: Borrowers often fail to repay debts, loans and mortgages due tocertain unavoidable circumstances, credit insurances can be of great help during such

crisis.

Property insurance: Property protection insurance provide protection from risksassociated to theft, fire, floods etc.


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CHAPTER3

FEATURES OF LIC

The main features of LIC are given below:

1. Saving Institution:

Life insurance both promotes and mobilizes saving in the country. The income tax concession

provides further incentive to higher income persons to save through LIC policies. The totalvolume of insurance business has also been growing with the spread of insurance-consciousness

in the country. The total new business of LIC during 1995-96 was Rs. 51815 crore sum assured

under 10.20 lakh policies.

The LIC business can grow at still faster speed if the following improvements are made:

The organizational and operational efficiency of the LIC should be increased.

(i) New types of insurance covers should be introduced.

(ii) The services of LIC should be extended to smaller places.

(iii) The message of life insurance should be made more popular.

(iv)The general price level should be kept stable so that the insuring public does not get cheated

of a large amount of the real value of its long-term saving through inflation.


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2. Term Financing Institution:

LIC also functions as a large term financing institution (or a capital market) in the

country. The annual net accrual of investible funds from life insurance business (after making all

kinds of payments liabilities to the policy holders) and net income from its vast investment are

quite large. During 1994-95, LIC's total income was Rs. 18,102.92crore, consisting of premium

income of Rs. 1152,80 crore investment income of Rs. 6336.19crore, and miscellaneous income

of Rs. 238.33crore.

3. Investment Institutions:

LIC is a big investor of funds in government securities. Under the law, LIC is required to invest

at least 50% of its accruals in the form of premium income in government and other approved

securities. LIC funds are also made available directly to the private sector through investment in

shares, debentures, and loans. LIC also plays a significant role in developing the business of

underwriting of new issues.

4. Stabilizer in Share Market:

LIC acts as a downward stabilizer in the share market. The continuous inflow of new funds

enables LIC to buy shares when the market is weak. However, the LIC does not usually sell

shares when the market is overshot. This is partly due to the continuous pressure for investing

new funds and partly due to the disincentive of the capital gains tax.

5. Withdraw early with no penalty

You can take loans or withdrawals from a life insurance policy prior to age 59 without the 10%early withdrawal penalty as long as the policy is not an MEC.

6. Death Benefit Options

The amount of death benefit payable under a universal life policy is based upon 1 of 4 different

options

a)Level death benefit: Level coverage throughout the lifetime of the policy.

b) Level death benefit plus cumulative gross premiums: Death benefit increases by the amount of

each gross deposit to the policy.

c) Level death benefit, indexed: The amount of death benefit increases, yearly, by a

predetermined percentage.

d) Level death benefit plus account value: The total amount of death benefit is always equal to

the initial face amount, plus the gross account value. This is the most popular chose by 90% of

universal life insurance policies owners because the gross account value is tax free.


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IMPORTANCES:-

1. Admission Of Age:Age is the main basis of calculation of premium under life insurance policies. The

following are accepted as evidence of age: Certified extract from Municipal or Local Bodys

records made at the time of birth. Certificate of Baptism or Certified Extract from Family Bible,

if it contains age or date of birth. Certified Extract from School or College records, if age or date

of birth is stated therein. Certified Extract from Service Register in the case of Govt. employees

and employees of Quasi-Govt. Institutions or Passport issued by the Passport Authorities in

India.

2. Payment Of Premium:By cash, local cheque (subject to realization of cheque), Demand Draft at Branch

Office.The DD and cheques or Money Order may be sent by post. Many Banks do accept

standing instructions to remit the premiums. So by providing a standing instruction to your Bank

to debit your account for the premium amount and send it vide a bankers cheque to LIC, on the

due dates and months mentioned on your policy bond. Through Internet : Payment of

premiums can be made through Internet through Service Providers viz. HDFC Bank, ICICI

Bank, Times of Money, Bill Junction, UTI Bank, Bank of Punjab, Citibank, Corporation Bank,

Federal Bank and Bill Desk. Premium payment can also be made through ATMs of Corporation

Bank and UTI Bank. Premium payment can also be made through Electronic Clearing Service

(ECS) which has been launched at Mumbai, Hyderabad, Chennai, Kolkata, New Delhi, Kanpur,

Bangalore, Vijaywada, Patna, Jaipur, Chandigarh, Trivandrum, Ahmedabad, Pune, Goa and

Nagpur, Secunderabad & Visakhapatnam.

3. Days Of Grace:

Policyholder should pay the premiums on due dates. However, a grace period of one month

but not less than 30 days will be allowed for payment of yearly/half- yearly/quarterly premiums

and 15 days for monthly premiums. When the days of grace expire on a Sunday or a public

holiday, the premium may be paid on the following working day to keep the policy in force. Ifthe premium is not paid before the expiry of the days of grace, the policy lapses.

4. Revival Of Lapsed Policy:

If the policy has lapsed, it can be revived during the life time of the life assured, within a

period of five years from the date of the first unpaid premium but before the date of maturity

subject to certain conditions. The Corporation offers three convenient schemes of revival viz.,


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Ordinary Revival, Special Revival and Installment Revival. Policies can also be revived under

Loan- cum-Revival and SB-cum-Revival schemes. Request for revival may be made to the

Branch Office servicing the policy.

5. Change Of Address And Transfer Of Policy Records:

The policyholder should immediately intimate the change of his/her address to the

Branch Office servicing the policy. The correct address facilitates better service and quicker

settlement of claims. Policy records can also be transferred from one Branch Office to another

for servicing, as requested by the policyholder.

6. Loss Of Policy Document:

The Policy Document is an evidence of the contract between the Insurer and the Insured.

Hence the policyholder should preserve the Policy Bond till the contracted amount under it issettled. Loss of the Policy Document should be immediately intimated to the Branch Office

where it is serviced.

7. Loans:

Loans are granted on policies to the extent of 90% of Surrender Value of the policies which

are in force and 85% of the Surrender Value in case of policies which are paid-up, inclusive of

the cash value of bonus. The rate of interest charged at present is 9% p.a. payable half-yearly.

Loans are not granted for a period shorter than six months. The Conditions and Privileges printed

on the back of the Policy Bond states whether a particular policy is with or without the loanfacility.

8. Relief To Policyholders:

The Corporation generally allows concessions on payment of premiums, settlement of

claims, issue of duplicate policies, etc when the policyholder are affected by natural calamities

such as droughts, cyclones, floods, earthquakes, etc.

9. Nomination:

Nomination is a right conferred on the holder of a Policy of Life Assurance on his own life

to appoint a person/s to receive policy moneys in the event of the policy becoming a claim by

the assureds death. The Nominee does not get any other benefit except to receive the policy

moneys on the death of the Life Assured. A nomination may be changed or cancelled by the life


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assured whenever he likes without the consent of the Nominee. Ensure nomination exists in the

policy for easy settlement of claims.

10. Assignment:

Assignment means transfer of rights, title and interest. When an assignment is executed,

all rights, title and interest in respect of the property assigned are immediately transferred to the

Assignee/s and the Assignee/s become the owner/s of the policy subject to any lawful condition

made in the assignment. Assignment can be either conditional or absolute. On assignment (other

than to LIC), Nomination automatically stands cancelled. Hence, when such a policy is

reassigned, the policyholder will have to make a fresh nomination to avoid delay in settlement of

claim.11. Survival Benefit/Maturity Claims:

LIC settles survival benefit/maturity claims on or before the due date. Policyholder are

intimated well in advance by the Branch Office which services the policy regarding the

payment, and the necessary Discharge Voucher is also sent for execution by the assured. In case

the policyholder does not get any intimation from the Branch Office concerned, he/she should

contact them, quoting the Policy Number.Survival Benefit payment up to Rs.60,000/- are settled

without insisting for Policy Bond and Discharge Voucher.

12. Death Claims:

If the life assured dies during the term of the policy, death claim arises. The death of the

policyholder should be immediately intimated in writing to the Branch Office where the policy is

serviced along with the following particulars: The No./s of the policies The name of the

policyholder Death Certificate issued by concerned Authority The date of death The cause of

death and Claimants relationship with the deceased. On receipt of the intimation of death,

necessary claim forms are sent by the Branch Office for completion along with instructions

regarding the procedure to be followed by the claimant. The claims which have arisen after a

period of three years are treated as non-early claims and settled within 30 days from the date of

receipt of all requirements. The claims that have arisen within a period of two years from thedate of commencement of the policy, are treated as early claims and investigation is compulsory

in such cases. The claim is usually payable to the nominee/assignee or the legal heirs, as the case

may be. However, if the deceased policyholder has not nominated/assigned the policy or if

he/she has not made a suitable provision regarding the policy moneys by way of a Will, the

claims payable to the holder of a Succession Certificate or some such evidence of title from a

Court of Law. The Corporation settles a large number of Death Claims every year. Only in case


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of fraudulent suppression of material information is the liability repudiated. This is to ensure

that claims are not paid to fraudulent persons at the cost of honest policyholders. The number of

Death Claims repudiated is, however, very small. Even in these cases, an opportunity is given to

the claimant to make a representation for consideration by the Review Committees of the Zonal

office and the Central Office.

As a result of such review, depending on the merits of each case, appropriate decisions are

taken. The Claims Review Committees of the Central and Zonal Offices have among their

Members, a retired High Court/District Court Judge. This has helped providing transparency and

confidence in our operations and has resulted in greater satisfaction among claimants,

policyholders and public.

LIC's Products: Policies

I. Insurance Plans:

As individuals it is inherent to differ. Each individual's insurance needs and requirements

are different from that of the others. LIC's Insurance Plans are policies that talk to you

individually and give you the most suitable options that can fit your requirement.

1. Jeevan Arogya

2. Bima Account Plans:

a. Bima Account 1

b. Bima Account 2

3. Endowment Plus

4. Children Plans

a. Jeevan Anurag

b. Komal Jeevan

c. CDA Endowment Vesting At 21

d. CDA Endowment Vesting At 18

e. Marriage Endowment Or

f. Educational Annuity Plan

g. Jeevan Chhaya

h. Jeevan Kishore


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i. Child Career Plan

j. Child Future Plan

k. Jeevan Ankur

5. Plans for Handicapped Dependents

a. Jeevan Aadhar

b. Jeevan Vishwas

6. Endowment Assurance Plans

a. The Endowment Assurance Policy

b. The Endowment Assurance Policy-Limited Payment

c. Jeevan Mitra(Double Cover Endowment Plan)

d. Jeevan Mitra(Triple Cover Endowment Plan)

e. Jeevan Anand

f. New Janaraksha Plan

g. Jeevan Amrit

h. Jeevan Vriddhi

7. Plans for High worth Individuals

a. Jeevan Shree-I

b. Jeevan Pramukh

8. Money Back Plans

a. The Money Back Policy-20 Years

b. The Money Back Policy-25 Years


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c. Jeevan Surabhi-15 Years

d. Jeevan Surabhi-20 Years

e. Jeevan Surabhi-25 Years

f. Bima Bachat

9. Special Money Back Plan for Women

Jeevan Bharati - I

10. Whole Life Plans

a. The Whole Life Policy

b. The Whole Life Policy- Limited Payment

c. The Whole Life Policy- Single Premium

d. Jeevan Anand

e. Jeevan Tarang

11. Term Assurance Plans

a. Two Year Temporary Assurance Policy

b. The Convertible Term Assurance Policy

c. Anmol Jeevan-I

d. Amulya Jeevan-I

12. Joint Life Plans

Jeevan Saathi

13. Decreasing Term Assurance to Cover Loan Repayment

Mortgage Redemption


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II. Pension Plans:

Pension Plans are Individual Plans that gaze into your future and foresee financial stability

during your old age. These policies are most suited for senior citizens and those planning a

secure future, so that you never give up on the best things in life.

1. Jeevan Akshay VI

III. Unit plans:

Unit plans are investment plans for those who realise the worth of hard-earned money.

These plans help you see your savings yield rich benefits and help you save tax even if you don't

have consistent income.

1. Endowment Plus

IV. Special Plans:

LICs Special Plans are not plans but opportunities that knock on your door once in a

lifetime. These plans are a perfect blend of insurance, investment and a lifetime of happiness!

1. Golden Jubilee Plan

a. New Bima Gold

2. Health Plan:

a. Health Protection Plus

3. Special Plan:

a. Bima Nivesh 2005

b. Jeevan Saral

5. Micro Insurance Plans:


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a. Jeevan Madhur

b. Jeevan Mangal

V. Group Scheme:

Group Insurance Scheme is life insurance protection to groups of people. This scheme is

ideal for employers, associations, societies etc. and allows you to enjoy group benefits at really

low costs.

1. Group Scheme:

a. Group Term Insurance Schemes

b. Group Insurance Scheme in Lieu Of EDLI

c. Group Gratuity Scheme

d. Group Super Annuation Scheme

e. Group Savings Linked Insurance Scheme

f. Group Leave Encashment Scheme

g. Group Mortgage Redemption Assurance Scheme

h. Group Critical Illness Rider

2. Social Security Scheme:

a. JanaShree Bima Yojana (JBY)

b. Shiksha Sahayog Yojana

c. Aam Admi Bima Yojana

VI. Withdrawn PlansJeevan Nischay

Market Plus I

Wealth Plus

Profit Plus


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Jeevan Aastha

Money Plus-I

Jeevan Varsha

Child Fortune Plus

Fortune Plus

Jeevan Saathi Plus

Health Plus

Procedure for life insurance contract:The following is the procedure to be adopted in taking out a Life Assurance Policy as per the

Rules and Regulations laid down by the L.I.C.

1. Proposal:Like any other contract, proposal is the first step for entering into a Life Insurance Contract.

The L.I.C. provides printed proposal forms free of cost to the prospects. This form consists of a

number of questions. The proposer has to fill in required information correctly and completely.

Information which is usually asked in the proposal form:

a. Name, address and occupation

b. Date of birth

c. Proposed Insurance scheme or plan

d. Purpose i.e. protection to family, old age provisions, etc.

e. Details of previous insurance, if any

At the bottom of the form the proposer has to give a declaration that the furnished information is

correct, complete and true to the best of his knowledge. He has to put his signature.

2. Personal statement:

Along with the proposal form one more printed form is issued by the the L.I.C. called the

personal statement. In this form the proposer has to submit his complete medical history and also

the health of his family.


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The acceptance or non-acceptance of the proposal is based on the information submitted by the

proposer in the proposal form and personal statement. The L.I.C. can cancel the contract in the

case of concealment or fact or false and wrong information.

3. Medical examination:

On submission of the proposal and personal statement, the L.I.C. directs the proposed

assured to go through a medical examination. This examination is to be conducted by the

approved doctors who are on the Official Panel of L.I.C. the proposer need not pay any charge

for this medical examination. The doctor then submits his report to the L.I.C.

4. Proof of age:

The proposer has to mention the correct date of birth in the proposal form. The proposer

has to submit some evidence for the age proof like leaving certificate or affidavit of court etc.

because age is an important factor for the fixing the amount of premium.

5. Reviewing stage/scrutiny of Reports:

The L.I.C. officers then fully examine the contents of the proposal form, personal

statement, medical report, agent's remarks and the certificate of proof of age. This scrutiny is

done for taking a decision for acceptance of the proposal.

6. Acceptance of the proposal:

On scrutinizing all the reports and documents, if everything is satisfactory the L.I.C. may

accept the proposal. The L.I.C. then sends intimation to the proposer about the acceptance of the

proposal. If the reports are completely un-satisfactory the proposal is refused and an intimation

about non-acceptance of the proposal.

7. Payment of premium:

The L.I.C. contract is completed when the first premium is paid by the assured and the

L.I.C. issues a valid receipt for it. The first premium is paid, when the first premium notice is

received by the proposer. When the first premium is paid along with the proposal only, the

receipt is issued after its acceptance. The L.I.C. runs the risk from the date of issue of first

premium receipt. After the first premium, the assured has to pay agreed premiums at agreed

intervals.

8. Issue of insurance policy:

Then the written agreement is prepared, this is called as an insurance policy. In this

document the name, address, occupation, age of the proposer, policy number, type amount and

term of policy, other terms and conditions of the insurance contract etc. things are mentioned.


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TYPES OF LIC POLICES:

Taking out a life insurance policy covers the risk of dying early, by providing for your family

in the event of your death. It also manages the risk of retirement providing an income for youin non-earning years. Choosing the right policy type with the coverage that is right for you

therefore becomes critical. There are a variety of policies available in the market, ranging from

Term Endowment and Whole Life Insurance, to Money Back Policies, ULIPs, and Pension plans

1. Term InsuranceTerm Insurance, as the name implies, is for a specific period, and has the lowest possible

premium among all insurance plans. You can select the length of the term for which you would

like coverage, up to 35 years. Payments are fixed and do not increase during your term period. In

case of an untimely death, your dependents will receive the benefit amount specified in the term

life insurance agreement. You can customize Term life insurance with the addition of riders,

such as Child, Waiver of Premium, or Accidental Death.

2. Endowment Insurance

Endowment Insurance is ideal if you have a short career path, and hope to enjoy the benefits of

the plan (the original sum and the accumulated bonus) in your life time. Endowment plans are


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especially useful when you retire; by buying an annuity policy with the sum received, it

generates a monthly pension for the rest of your life.

3. Whole Life Insurance

Whole Life Policies have no fixed end date for the policy; only the death benefit exists and is

paid to the named beneficiary. The policy holder is not entitled to any money during his or her

own lifetime, i.e., there is no survival benefit. This plan is ideal in the case of leaving behind an

estate. Primary advantages of Whole Life Insurance are guaranteed death benefits, guaranteed

cash values, and fixed and known annual premiums.

4. Money-Back Plan

In a Money-Back plan, you regularly receive a percentage of the sum assured during the lifetime

of the policy. Money-Back plans are ideal for those who are looking for a product that provides

both - insurance cover and savings.It creates a long-term savings opportunity with a reasonable

rate of return, especially since the payout is considered exempt from tax except under specified

situations.

5. ULIP

Unit-linked Insurance Plans (ULIPs), introduced by the private players, are hugely popular,

because they combine the benefits of life insurance policies with mutual funds. A certain part of

the premium is invested in listed equities/debt funds/bonds, and the balance is used to provide for

life insurance and fund management expenses.

6. Pension Plan

Insurance companies offer two kinds of pension plans - endowment and unit linked. Endowment

plans invest in fixed income products, so the rates of return are very low.Unit-linked plans are

more flexible. You can stop contributing after 10 years and the fund will keep compounding your

corpus till the vesting date. You can opt for higher exposure in the stock market for your plan if

your risk appetite allows it. Lower risk options like balanced funds are also offered.

7. Universal life

You decide how much you want to put in over and above a minimum premium. The company

chooses the investment vehicle, which is generally restricted to bonds and mortgages. The

investment and the returns go into a cash-value account, which you can use against premiums or

allow to build. With some policies, sometimes called Type I or Type A, the cash account goes

toward the face value of the policy on the death of the policyholder. With a second variety,


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sometimes called Type II or Type B, the beneficiary receives the face value of the policy plus all

or most of the cash account. While Type II is meant to provide a partial hedge against inflation, it

demands higher premiums as you get older than Type I.

8. Variable life

With a variable policy, there is usually a wider selection of investment products, including stock

funds. As with a universal policy, returns on investments can offset the cost of premiums or build

in the account. And depending on the type of policy, the beneficiaries will either receive the face

value of the policy or the face value plus all or part of the cash account.


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TYPES OF RISK

Whether dealing with auto, health or liability insurance, both the insurer and the

policyholder are weighing risk. While the policyholder is looking to limit the risk to his finances,

property or loved ones, the insurance company is betting against the risk. In fact, there are

several types of risk which different types of insurance companies deal with.

1. Systematic RiskSystematic risk influences a large number of assets. A significant political event,

for example, could affect several of the assets in your portfolio. It is virtually impossible

to protect yourself against this type of risk.

2. Unsystematic RiskUnsystematic risk is sometimes referred to as "specific risk". This kind of risk

affects a very small number of assets. An example is news that affects a specific stock

such as a sudden strike by employees. Diversification is the only way to protect yourself

from unsystematic risk. (We will discuss diversification later in this tutorial).


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Now that we've determined the fundamental types of risk, let's look at more specific types of

risk, particularly when we talk about stocks and bonds.

3. Credit or Default RiskCredit risk is the risk that a company or individual will be unable to pay the

contractual interest or principal on its debt obligations. This type of risk is of particular

concern to investors who hold bonds in their portfolios. Government bonds, especially

those issued by the federal government, have the least amount of default risk and the

lowest returns, while corporate bonds tend to have the highest amount of default risk but

also higher interest rates. Bonds with a lower chance of default are considered to be

investment grade, while bonds with higher chances are considered to be junk bonds.

Bond rating services, such as Moody's, allows investors to determine which bonds areinvestment-grade, and which bonds are junk.

4. Country RiskCountry risk refers to the risk that a country won't be able to honor its financial

commitments. When a country defaults on its obligations, this can harm the performance of all

other financial instruments in that country as well as other countries it has relations with.

Country risk applies to stocks, bonds, mutual funds, options and futures that are issued within a

particular country. This type of risk is most often seen in emerging markets or countries that

have a severe deficit.

5. Foreign-Exchange RiskWhen investing in foreign countries you must consider the fact that currency exchange

rates can change the price of the asset as well. Foreign-exchange risk applies to all financial

instruments that are in a currency other than your domestic currency. As an example, if you

are a resident of America and invest in some Canadian stock in Canadian dollars, even if the

share value appreciates, you may lose money if the Canadian dollar depreciates in relation to

the American dollar.

6. Interest Rate RiskInterest rate risk is the risk that an investment's value will change as a result of a change

in interest rates. This risk affects the value of bonds more directly than stocks.


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7. Political RiskPolitical risk represents the financial risk that a country's government will suddenly

change its policies. This is a major reason why developing countries lack foreign

investment.

8. Market RiskThis is the most familiar of all risks. Also referred to as volatility, market risk is the the

day-to-day fluctuations in a stock's price. Market risk applies mainly to stocks and

options. As a whole, stocks tend to perform well during a bull market and poorly during a

bear market - volatility is not so much a cause but an effect of certain market forces.

Volatility is a measure of risk because it refers to the behavior, or "temperament", of your

investment rather than the reason for this behavior. Because market movement is the

reason why people can make money from stocks, volatility is essential for returns, andthe more unstable the investment the more chance there is that it will experience a

dramatic change in either direction.

9. Pure Risk-When the risk is either all or none, it is called a pure or static risk. Pure risks are straight

bets, and most insurance companies deal in these kinds of bets. This is because there are

only two possible outcomes for the risk of insuring the person or property: either the risk

will pay off, or it won't. This design is obviously at work in policies, such as life or flood

insurance. These policies only pay off in the event of total loss of the insured item.

10.Personal Risk-When an individual is personally affected by the risk involved, this is known as personal

risk. Personal risk is the basis behind a wide variety of insurance types, including

unemployment, health, homeowner's and renter's insurance. This is also where

policyholders find the most ambiguity in their policies.

11.Fundamental Risk-Fundamental risk is one that involves the entire community. These types of risk include

high inflation, stock market crashes, high instances of unemployment and widespread

natural disasters. Insurance companies occasionally find themselves wrapped up in these

types of fundamental risks (e.g., the homeowner's insurance companies were entangled in

debts to homeowners from hurricane Katrina for years), but most fundamental risks must

be insured by government agencies.As you can see, there are several types of risk that a

smart investor should consider and pay careful attention to.


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ROLE OF LIC IN INDIAN ECONONY:

Currently LIC has no other great role than making life insurance business successful in

India. This is the only role an Insurance company needs to and can play in a civilized

open economy. Once the insurance business is undertaken, investments have to take placeautomatically. This will help economic growth. But this is no important role. Life

insurance is considered by many financial experts to be the foundation of a total financial

plan. Thats because its uniquely designed to perform three vital roles in the life of an

individual, family or business, namely asset accumulation, estate planning, and estate

distribution.

Asset accumulation:During our productive earning years, the ability to generate an income is typically our

greatest asset. When income is saved and invested rather than consumed, the potential

result is asset accumulation, which takes a lead role in helping to assure that current and

future economic needs will be met. Its also a time when premature death may not only

undo asset accumulation but also create a critical need for funds, now and in the future.

Final expenses:The need for immediate cash at death is universal. Final expenses typically include the

cost of a last illnesswhich could span days, weeks or longeralong with funeral and


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burial expenses. Death can also create a tax liability requiring immediate funds to take

care of it.

Outstanding Debt:Debt includes charge card balances, auto and school loans, home equity loans and other

installment accounts that had formerly been met by an ongoing

income that is now lost.

Housing expenses:Survivors need money for mortgage or rent payments. Ideally, funds should be

earmarked to pay off a mortgage or make rental payments for a number of years.

Family income:The need to find replacement income usually is by far the largest and most important

consideration. Even when there is more than one breadwinner, the loss of just one incomecan be devastating.

Education fund:For a young family, an especially critical need is money to pay for a dependent

childs educationsomething a parents continuing income probably had been counted

upon to provide. Social Security blackout period:

Generally, a surviving spouse with young children receives Social Security benefits

until the youngest child reaches age 16. Then the spouses benefit stops until age 60 when

widows or widowers benefits become payable.

Special needs:Providing for children with special needs presents its own challenges. While life

insurance may be a cost-effective way to help provide money for supplemental needs,

careful planning is required. It is best to work closely with a qualified attorney to make

sure good intentions do not have unintended consequences.

While life insurance may be a cost-effective way to help provide money for

supplemental needs, careful planning is required. It is best to work closely with a

qualified attorney to make sure good intentions do not have unintended consequences.

When we reach the end of our working years and are in or near retirement, theres still a

need to help protect the assets we have built up over the years and to prevent needless

estate shrinkage.

A need for cash:Once an estate has reached a respectable sizethanks to increasing income, savings,

successful investing and similar wealth-building activitiesthere can still be a need for


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cash at the estate owners death. This is especially true when the property consists of non-

liquid assets such as real estate, a business, or other property that can t quickly be

converted to cash. Estate taxes cant be ignored. When estate assets are no longer needed

to provide for the individuals who accumulated them, they take on a new role.

Family members.An important consideration is how to give family members equitable and fair

treatment in the distribution of estate assets. Proper planning can go a long way in

avoiding conflicts and assuring family harmony. An example is the case where a son or

daughter may be in line to take over ownership and control of a family business. If the

business assets are given to that person, other family members may be shortchanged

unless there are other assets available to provide equitable estate distribution.

Charitable giving:An estate owner who has been providing funds and other support to

one or more favorite charities may want to assure continued support well into the future.

Earmarking estate assets for charitable giving is one way of accomplishing this, provided

plans.

THREE IMPORTANT ROLES


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Role 1:

Life insurance as "Investment"

Insurance is an attractive option for investment. While most people recognize the risk hedging

and tax saving potential of insurance, many are not aware of its advantages as an investmentoption as well. Insurance products yield more compared to regular investment options, and this is

besides the added incentives (read bonuses) offered by insurers.

You cannot compare an insurance product with other investment schemes for the simple

reason that it offers financial protection from risks, something that is missing in non-insurance

products. In fact, the premium you pay for an insurance policy is an investment against risk.

Thus, before comparing with other schemes, you must accept that a part of the total amount

invested in life insurance goes towards providing for the risk cover, while the rest is used for

savings.

In life insurance, unlike non-life products, you get maturity benefits on survival at the end of

the term. In other words, if you take a life insurance policy for 20 years and survive the term, the

amount invested as premium in the policy will come back to you with added returns. In the

unfortunate event of death within the tenure of the policy, the family of the deceased will

receive.

Now, let us compare insurance as an investment options. If you invest Rs 10,000 in PPF,your money grows to Rs 10,950 at 9.5 per cent interest over a year. But in this case, the access to

your funds will be limited. One can withdraw 50 per cent of the initial deposit only after 4 years.

The same amount of Rs 10,000 can give you an insurance cover of up to approximately Rs 5-12

lakh (depending upon the plan, age and medical condition of the life insured, etc) and this

amount can become immediately available to the nominee of the policyholder on death. Thus

insurance is a unique investment avenue that delivers sound returns in addition to protection.

Role 2:

Life insurance as "Risk cover"

First and foremost, insurance is about risk cover and protection - financial protection, to be more

precise - to help outlast life's unpredictable losses. Designed to safeguard against losses suffered

on account of any unforeseen event, insurance provides you with that unique sense of security

that no other form of investment provides. By buying life insurance, you buy peace of mind and


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are prepared to face any financial demand that would hit the family in case of an untimely

demise.

To provide such protection, insurance firms collect contributions from many people whoface the same risk. Insurance also provides a safeguard in the case of accidents or a drop in

income after retirement. An accident or disability can be devastating, and an insurance policy can

lend timely support to the family in such times. With the entry of private sector players in

insurance, you have a wide range of products and services to choose from. Further, many of

these can be further customized to fit individual/group specific needs. Considering the amount

you have to pay now, it's worth buying some extra sleep.

Role 3:

Life insurances Tax planning"

Insurance serves as an excellent tax saving mechanism too. The Government of India has

offered tax incentives to life insurance products in order to facilitate the flow of funds into

productive assets. Under Section 88 of Income Tax Act 1961, an individual is entitled to a rebate

of 20 per cent on the annual premium payable on his/her life and life of his/her children or adult

children. The rebate is deductible from tax payable by the individual or a Hindu Undivided

Family. This rebate is can be availed upto a maximum of Rs 12,000 on payment of yearly

premium of Rs 60,000. By paying Rs 60,000 a year, you can buy anything upwards of Rs 10 lakh

in sum assured. (depending upon the age of the insured and term of the policy) This means that

you get a Rs 12,000 tax benefit. The rebate is deductible from the tax payable by an individual or

a Hindu Undivided Family.


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ADVANTAGES OF LIC

Risk Cover - Life today is full of uncertainties; in this scenario Life Insurance ensuresthat your loved ones continue to enjoy a good quality of life against any unforeseen

event.

Planning for life stage needs - Life Insurance not only provides for financial support inthe event of untimely death but also acts as a long term investment. You can meet your

goals, be it your children's education, their marriage, building your dream home or

planning a relaxed retired life, according to your life stage and risk appetite. Traditional

life insurance policies i.e. traditional endowment plans, offer in-built guarantees and

defined maturity benefits through variety of product options such as Money Back,

Guaranteed Cash Values, Guaranteed Maturity Values.

Protection against rising health expenses - Life Insurers through riders or stand-alonehealth insurance plans offer the benefits of protection against critical diseases and

hospitalization expenses. This benefit has assumed critical importance given the

increasing incidence of lifestyle diseases and escalating medical costs.


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Builds the habit of thrift - Life Insurance is a long-term contract whereas policyholder,you have to pay a fixed amount at a defined periodicity. This builds the habit of long-

term savings. Regular savings over a long period ensures that a decent corpus is built to

meet financial needs at various life stages.

Safe and profitable long-term investment - Life Insurance is a highly regulated sector.IRDA, the regulatory body, through various rules and regulations ensures that the safety

of the policyholder's money is the primary responsibility of all stakeholders. Life

Insurance being a long-term savings instrument, also ensures that the life insurers focus

on returns over a long-term and do not take risky investment decisions for short term

gains.

Assured income through annuities - Life Insurance is one of the best instruments forretirement planning. The money saved during the earning life span is utilized to provide asteady source of income during the retired phase of life.

Protection plus savings over a long term - Since traditional policies are viewed both bythe distributors as well as the customers as a long term commitment; these policies help

the policyholders meet the dual need of protection and long term wealth creation

efficiently.

Growth through dividends - Traditional policies offer an opportunity to participate inthe economic growth without taking the investment risk. The investment income is

distributed among the policyholders through annual announcement of dividends/bonus.

Facility of loans without affecting the policy benefits - Policyholders have the optionof taking loan against the policy. This helps you meet your unplanned life stage needs

without adversely affecting the benefits of the policy they have bought. Tax Benefits-

Insurance plans provide attractive tax-benefits for both at the time of entry and exit under

most of the plans.

Mortgage Redemption- Insurance acts as an effective tool to cover mortgages and loanstaken by the policyholders so that, in case of any unforeseen event, the burden of

repayment does not fall on the bereaved family.


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DISADVANTAGE

The Cons of a Life Insurance chosen carefully is almost negligible. However thedisadvantage of Life Insurance arises when it is used as an investment product. Insurance

companies also promote these as people are uncomfortable in paying premiums on which

returns are uncertain. They think that if you are paying for insurance you must get back

something. This is because of the psychological makeup of humans where we

underestimate the chances of our demise.

Buying Life Insurance when you have no NeedPeople buy insurance when they haveno need for example an old woman buying life insurance. Also the example of buying life

insurance for a very long time period till you is 80 years old. At that age you have no

need since you would have no dependents and earning power as well


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.

Buying Complex Life Insurance Products like ULIPs, Endowment, Child Plans etcwhich give sub optimal returnsMillions of people every year buy insurance products

without understanding it. Most of the complex products give suboptimal returns and have

no suitability for the buyers. Agents frequently give bad advice to get more commissions.Companies also make more money by selling complex products which people dont

understand.

Buying Expensive Policies People have little clue and dont compare lifeinsurance products even from the same provider. Sometimes they buy insurance policies

which are far too expensive leading to heavy burden which is unnecessary.

Buying Life Insurance is not Rocket Science however this trillion dollar industry hasmade it complicated. There are hundreds of types of insurance and products which makes

choosing a difficult thing for a person. But keeping it simple like buying term insurance

for your insurance needs and other financial assets for your investment will keep it

simple.


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IRDA REGULATION

The Oriental Life Insurance Company of Calcutta introduced life insurance to India in 1818.

The notion of insurance as risk cover is rooted in ancient writings as the redistribution of pooled

resources to compensate for losses caused by calamities such as fire, floods, epidemics and

famine. In 1999, the Insurance Regulatory and Development Authority (IRDA) was established

to regulate and develop the insurance industry in India.

1. Composite Insurance

Current IRDA regulations don't favor composite insurance, which is the combination of life

and non-life insurance products sold through the same company. Recognizing the uniqueness of


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micro-insurance in rural areas, the IRDA relaxed its policy to enable "tie-up" relationships

between life and non-life insurance companies to offer consumers an integrated product. Insurers

were also permitted to issue policies with a maximum cover of Rs 50,000 for general and life

insurance under these new IRDA regulations.

2. Agent Commissions

A wide range of life insurance products is available as of 2011. Yet existing barriers, such

as a cumbersome claims-settlement process and a commission structure that favors new business

over existing ones, limit their penetration in rural areas. The IRDA Micro Insurance Guidelines

of 2005 sought to overcome this dilemma with a more equitable commission program that

encouraged agents to service existing policyholders. Another IRDA breakthrough embraced

NGOs, SHGs, MFIs and other organizations into the distribution channel with appropriate

compensation.

3. IRDA Policy Quotas

In 2002, the passage of a central regulation, referred to as "The Obligation of Insurers to

Rural Social Sectors," imposed a quota system on private insurers entering the Indian market

after it was liberalized. The quota applied to rural areas with a population density of less than

400 people per square kilometer. It stipulated that life insurance policies amount to 5 percent of

the total number sold in the first year and increased to 16 percent by year five. The quota system

placed considerable pressure on insurers to meet their targets to avoid IRDA fines. As a result, a

few insurers have developed innovative products and delivery channels while others have not

been as successful.

4. IRDA Training Requirements

In August 2004, the IRDA published a document entitled the "Concept Paper on Need for

Regulations on Micro-Insurance in India." This paper discussed product design and collaboration

of intermediaries with life and general insurance providers. However, it also raised quality-

control concerns with its recommendation to reduce the training requirements of NGO life-

insurance agents from 50 hours to 25 hours.

5. ULIP Regulation

Unit-linked insurance plans, otherwise known as ULIPS, offer the features of a mutualfund coupled with life insurance. Under IRDA guidelines, traditional plans must invest at least

85 percent of their funds in low-yielding debt instruments. The popularity of ULIPs lies in their

potential for higher returns and flexible investment choices. The IRDA, and market watchdog,

SEBI, recently vied to become the official ULIP-regulating body in India. The Indian

government ended the rivalry in 2010 with an ordinance declaring that ULIPs would be regulated

by the IRDA.


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FOR LIFE INSURANCE AGENTS

In February 2011 IRDA had issued Guidelines for Individual Agents for Persistency of Life

Insurance Policies. Now IRDA has made these guidelines applicable to corporate insurance

agents as well.Reference is invited to IRDAs Circular Ref: IRDA/CAD/GDL/AGN/016/02/2011

dated 11th February, 2011 regarding Guidelines for Individual Agents for Persistency of Life

Insurance Policies.

In partial modification to Clause III (e) of the said guidelines, it is clarified that the

requirement of Insurers to endorse the record referred to in the said clause is now dispensed with.

It may, however be noted that maintenance of records of policies sold and their persistency on a

year to year basis needs to be complied by all agents and life insurers as stipulated.

Further all the provisions of the above referred Guidelines as modified vide IRDA Circular

IRDA/Life/GDL/GLD/217/09/2011 dated 20th September, 2011 together with the above referred

exemption are now made applicable to Corporate Agents that solicit life insurance business.

However, it is also clarified that Clause (5) of Modified Guidelines (Relatives of employees of

Insurers) issued vide Circular IRDA/Life/GDL/GLD/217/09/2011 dated 20th September, 2011 is

not applicable to the Corporate Agents.

The above guidelines are issued under Section 14 (2) of the IRDA Act, 1999 and all

Insurers are requested to put in place procedures for effective implementation of the same.


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LIFE INSURANCE RULES AND REGULATION

1. Free Look Period

Most states mandate a "free look" period for life insurance. This period, which can

typically last 10 to 20 days, varies depending on the state. New York, for example, offers a 10-

day free look period. The policy can be returned within this time frame for a full refund of the

first premium payment.

2. Guaranty CorporationEach state has a Guaranty Corporation, which backs the funds of an insurance contract.

The protections vary by state but always have a maximum limit. This regulation is designed to

provide some measure of protection if insurers fail so that policyholders receive at least some of

their policy death benefits and cash values.

3 .Medical Records

Some states, such as Illinois, mandate that the insured individual has the right to have his

medical records (collected by insurance companies during the process of underwriting) released

to a physician of his choice.

4. Grace Period For Late Premium Payments

Some states adopt a grace period for late payment of premiums. Without this provision,

policies would lapse because of nonpayment. Typical grace periods are 30 or 31 days. Payments

made within this time frame will keep the policy in force. 1889 A In exercise of the powers

conferred by section 48 of the Life Insurance Corporation Act, 1956 (31 of 1956), the Central

Government hereby makes the following rules, namely:-


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1. Short TitleThese Rules may be called the Life Insurance Corporation Rules, 1956.

[1]2. Definitions-

In these rules-means the Life Insurance Corporation Act, 1956(31 of 1956);

[2] [(i-a) Chairman means the Chairman appointed by the Central Government under sub-

section (1) of section 4];(ii) means a section of the Act;

(iii) Tribunal means the Tribunal constituted by the notification of the Government of India in

the Ministry of Finance S.R.O. No.1734 dated the 25th May, 1957.

3. Term of office of members-

1. An official member shall hold office during the pleasure of the Central Government.

2. A non-official member shall hold office for a period of three2A years unless a shorter period is

specified in the order of appointment.

3. An out-going member shall be eligible for re-appointment.

4. Resignation of members The Chairman or any member may, by writing under his hand

addressed to the Central Government, resign his office, and such resignation shall take effect

from the date on which it is accepted by the Central Government [4][or on the expiry of thirty

days from the date of resignation, whichever is earlier

5. Absence from meetings

Any member who absents himself from three consecutive meetings of the Corporation without

leave of the Corporation shall cease to be a member thereof.

6. Removal of a member

(1)The Central Government may remove any member, who, in the opinion of that Government,

has so flagrantly abused in any manner his position as a member as to render his continuance as a

member detrimental to the public interest.

(2) No member shall be removed under sub-rule(1) unless he has been given a reasonableopportunity of showing cause against his removal.

7. Casual vacancies among members

In the event of the occurrence of any vacancy in the office of a member by reason of his death,

resignation or removal, or otherwise, the Central Government may appoint another person to act

in his place.


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8. Fees of members

A member not being a whole-time officer of the Corporation or an officer of the Central

Government shall be paid fees by the Corporation as follows:-

a. for attending meetings of the Corporation [5][Rs.5000/- ]for each meeting

9. Traveling and daily allowances

(1)Every non-official member shall be entitled to-

(a) traveling allowances for journeys performed by him in connection with the work of the

Corporation at the rates admissible to officers of the first grade in the service of the Central

Government;

(b) rovided that every such member shall, when traveling by rail, be entitled to travel by air-

conditioned accommodation if such accommodation is available.

10. Apportionment of provident fund etc

(1) where all the employees of an insurer whose controlled business is transferred to and vested

in the Corporation under section 7 do not become employees of the Corporation under section

11, all the moneys and other assets belonging to the provident fund or superannuation fund or

any other like fund referred to in sub-section (1) of section 8 shall be apportioned between the

trustees of the fund and the Corporation in the following manner, namely;-

(i) the moneys and other assets of any provident fund shall be apportioned in the

proportion which the total of the amounts lying to the credit of the persons becoming employees

of the Corporation bears to the total of the amounts lying to the credit of the persons who do not

become employees of the Corporation;

(ii) the moneys and other assets of any superannuation fund shall be apportioned in the

proportion which the liability of the fund in respect of the persons becoming employees of the

Corporation bears to a similar liability in respect of the persons who do not become employees of

the Corporation, such liability to be ascertained on such basis as may be determined by the

Corporation and approved by the Central Government; and

(2) The provisions of sub-rule (1) shall, so far as may be, apply in relation to the valuation and

apportionment of moneys and other assets belonging to any provident fund or superannuation

fund or any other like fund referred to in clause (f) of sub-section (2) of section 10, as they apply

in relation to the apportionment and valuation of moneys and other assets belonging to a

provident fund, superannuation fund or any other like fund referred to in sub-section (1) of

section 8.


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11. Transfer of service of existing employees of chief agents

The provisions of section 12 shall apply only in respect of the employees of a chief agent

of an insurer who was, under the terms of his contract with the insurer, required to render the

following services to the policyholders, namely:-

(a) collection of premiums from the policyholders in respect of policies secured through his

insurance agents in the area for which he was appointed chief agent; and

(b) issuing of final (pucka) receipts for the premiums so collected.

12. Reference to the Tribunal

(1)Where the amount of compensation offered under sub-section (2) of section 16 is not

acceptable to an insurer, or where the compensation offered under section 36 is not acceptable to

a chief agent or a special agent, the insurer, the chief agent or the special agent, as the case may

be, for the purpose of having the matter referred to the Tribunal, apply to the Corporation alongwith the documents specified, if any, in this behalf by the Tribunal in regulations made by it

under section 17 (in this rule referred to as the regulations)-

(a) In cases where the compensation was offered before the 1st day of November, 1964, not

later than the 31st day of January, 1965 or, if the applicant is an insurer to whom compensation is

payable under Part B of the First Schedule to the Act, not later than the 31st day of April, 1965;

(b) In all other cases within three months from the date on which the compensation is offered,

or, if the applicant is an insurer to whom compensation is payable under Part B of the First

Schedule to the Act, within six months form the date on which the compensation is offered.

(2) The Corporation shall within three months of the date of receipt of an application under sub-

rule (1) refer the matter to the Tribunal for decision along with a written statement and other

documents specified, if any, by the Tribunal in the regulations.

(3)(i) Where an application under sub-rule (1) is made after the expiry of the period specified

therefore in that sub-rule, the Corporation shall, notwithstanding the expiration of the said

period, refer the matter within three months of the date of receipt of the application to the

Tribunal for decision along with a written statement and other documents specified, if any, in theregulations.

(ii)The Tribunal may admit a reference made under clause (i) if the applicant satisfies the

Tribunal that he had sufficient cause for not making the application to the Corporation within the

period specified therefor in sub-rule (1).


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(4)An application to the Tribunal under section 15, or a reference to the Tribunal, other than a

reference referred to in sub-rule (2) or sub-rule (3), may be made-

(a) in cases, where the cause of action arose before the 1st day of November, 1964, not later

than 31st day of January, 1965,

(b) in all cases, within a period of three months from the date on which the cause of action

arose : Provided that the Tribunal may admit an application or a reference other than a reference

referred to in sub-rule (2) or sub-rule (3) after the expiry of the relevant period referred to in

clause (a) or clause (b) if the person making the application or reference satisfies the Tribunal

that there was sufficient cause for not making in within that period.

13. Compensation

The compensation payable under the Act shall be paid in cash.

14. Employees and Agents Relations Committee

The representatives of the Corporation on the Employees and Agents Relations

Committee constituted under sub-section (3) of section 22 of the Act for each zonal office of the

Corporation and the representatives of the employees and agents on such Committee shall be

nominated by the Corporation.

15. Term of office of members of Employees and Agents Relations Committee

A member of an Employees and Agents Relations Committee shall hold office for a

period of two years but shall be eligible for being re-nominated.

16. Causal vacancies in Employees and Agents Relations Committee -

1.If any casual vacancy occurs in the office of a member of an Employees and Agents Relations

Committee by death or resignation of such member or otherwise, the Corporation shall as soon

as may be after the occurrence of the vacancy take immediate steps to fill the vacancy.

2. Every member appointed to fill a casual vacancy of such Committee shall continue in office

for the unexpired term of his predecessor.

17. Report The Annual Report to be submitted by the Corporation to the Central Government

under section 27 of the Act regarding its activities during the previous financial year shall be in

such form as the Central Government may, from time to time, direct and shall inter-alia contain

particulars in respect of the following matters, namely;-

a. the extent of the new business;

b. the total amount of business in force;


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c. the total amount of claims;

d. nature of investment; and

e. the accounts

18. Allocation of paid-up capital of composite insurer

For the purposes of the Explanation to sub-section (2) of section 7 and of clause (b) of

sub-section (2) of section 10 of the Act, the part of the paid-up capital, or assets representing

such paid-up capital as the case may be, allocated to the controlled business of an insurer shall be

determined in the manner following namely;-

(i) in respect of an insurer entitled to receive compensation under Part A of the First Schedule

to the Act, the paid-up capital allocable to the controlled business shall be that proportion of the

total paid-up capital of the insurer which the annual average of the profits from the controlled

business during the period covered by the relevant actuarial investigation bears to the total of

such annual average of profits plus two times the annual average of the profits from other

business during that period;

(ii) in respect of an insurer entitled to compensation under Part B of the First Schedule to the

Act, the paid-up capital allocable to the controlled business shall be the excess, if any, of the

amount of liabilities of the insurer appertaining to such business in existence on the 19th day of

January, 1956, computed as at that date in accordance with the provisions of paragraph 4 of Part

B of the First Schedule to the Act over the value of the assets of the insurer appertaining to his

controlled business (excluding the paid-up capital allocable to controlled business) in existence

on the 19th day of January, 1956 computed as at that date in accordance with the provisions of

paragraph 3 of Part B of the First Schedule to the Act.

19. Transfer of business of certain composite insurers to the Corporation

Every transfer by the Administrator under clause (a) of section 45 of the Act shall be

made in pursuance of an agreement between the Administrator and the Corporation and no such

agreement shall be entered into except with the previous approval of the Central Government.

20. Vesting of the management of the affairs of the insurer in the persons entitled there to

As soon as the transfer in terms of rule 19 is effected, the Administrator shall by notice call

upon the persons in charge of the management of the insurer immediately prior to the

appointment of the Administrator to take charge of the management of any other kind of


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business not transferred to and vested in the Corporation and upon such notice being given, such

persons shall take the management of that other kind of business.

Case Study - LIC asked to pay Death Compensation

Shri Kailash Chandra Dashora was working as a teacher in a State Government school in

Jhalawar and had taken an insurance policy under salary savings scheme on 15.12.1993 for a

sum of Rs.50,000/-. The insurance premium was being paid by the employer of the insured.

Shri Kailash Chandra Dashora fell sick on 16.06.1995 and was treated for fever from 16.6.1995

to 10.7.1995 at Jhalawar. He was thereafter referred to Medical College, Udaipur where he was

diagnosed as suffering from liver tumour(Left Lobe Liver Tumor) and was given treatment from

11.7.1995 to 7.8.1995 in the hospital. He was then taken to Tata Memorial Hospital, Mumbai

and he subsequently died on 29.08.1995.

Claim was submitted by Smt. Santosh Kanwar (Wife of the deceased Shri Kailash Chandra

Dashora), but LIC repudiated the claim stating that in the Proposal/Personal Statement the

deceased had answered in the negative to the questions:

(a) Whether he had consulted any doctor in the last five years in connection with some ailment

which required treatment for more than a week

(b) Whether he had been on leave on the ground of sickness in the last 5 years and

(c) and whether he had been suffering from a decease related to stomach, heart, lever, brain and

nerves or whether he was suffering then(at the time of proposing).

LIC further stated that that all these answers were false as they hold indisputable proof to show

that before he proposed for above policy he had suffered from Myalgia, URI APD, Br. Dysp.

Lsc, Urticaria, Neuritis, Amaenia, Pyrexia, Amoebic Colitis for which he had consulted a

medical man and had taken treatment from him/in a Hospital and was also on medical leave for 3

days and 12 days from 20.8.90 to 22.8.90 and 7.12.90 to 18.12.90, and had also drawn medical


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reimbursement for the above diseases. He did not however, disclose these facts in his

Proposal/Personal Statement. Instead he gave false answers therein as stated above.

The Complainant approached the District Forum at Jhalawar and the District Forum allowed the

complaint and directed the LIC to pay the sum assured with interest @ 18% p.a and Rs. 5,000/-

towards compensation and Rs.500/- as costs.

LIC filed an appeal before the State Commission, Rajasthan against District Forums judgement.

The State Commission allowed the appeal on the ground allowed the appeal on the ground that

the assured knowingly suppressed the facts of the state of his health while making the proposal

for obtaining the policy in question, jointly with his wife. No doubt, the State Commission

recorded that, considering the facts, even the LIC had offered to pay Rs.25,000/- as ex gracia to

the complainant.

The State Commissions order was challenged by Mrs. Santosh Kanwar by filing a Petition

before the National Consumer Redressal Commission, New Delhi. Citing various earlier settledcases the Commission allowed the complaints petition and set aside the State Commissions

order in favour LIC. The Commission directed LIC to pay the insured an amount of Rs.50,000/-

with interest @ 10% p.a. from 1.3.1996 (i.e. after a period of 6 months from the death of the

insured) with cost of litigation at Rs.5,000/-

Following were the salient points considered by the Commission before giving its judgement in

favour of the Petitioner:

(1) Section 45 of the Insurance Act 1938 allows repudiation within a period of two years.

Therefore, a period of limitation of two years had, thus, been specified and on the expiry thereof

the policy was not capable of being called in question on the ground that certain facts have been

suppressed which were material to disclose.

(2) Keeping the provisions of law in mind, the insured deceased was not suffering from any

serious disease at the time of filing up the proposal form and therefore there was no material

suppression on his part.

(3) Th

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