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Life Insurance Marketing in India (C) The Changing Product & Pricing Norms

            

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QUESTIONS FOR DISCUSSION:

1. Discuss the evolution of the Indian insurance industry over the decades and critically comment on LIC's products and pricing practices. Why do you think the average Indian insurance customer has largely been a buyer of money back and endowment policies?

2. Analyze the different kinds of innovative products being offered by various insurance companies in India in the early 21st century, highlighting the essential differences as compared to LIC's product portfolio.

3. Critically comment on LIC's decision to shuffle its portfolio in response to the product/pricing moves of the new companies. Do you think that the private players would be able to make a significant difference to the market with their strategies in the long run? Give reasons to support your stand.

EXHIBIT I
DIFFERENT TYPES OF LIFE INSURANCE POLICIES

            

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• Endowment Policy: This policy covers risk for a specified period, at the end of which the sum assured is paid back to the policyholder, along with the bonus accumulated during the term of the policy. It is this feature - the payment of endowment to the policyholder when the policy's term is complete - that rightly accounts for the popularity of endowment policies.

• Whole Life Policy: This policy runs as long as the policyholder is alive. In other words, risk is covered for the entire life of the policyholder. The whole life policy amount and bonus are payable only to the nominee of the policy on the death of the policyholder. The policyholder is not entitled to any money during his or her own lifetime – there is no survival benefit.

• Term Life Policy: This policy covers risk only during the selected term period. If policyholder survives the term, the risk cover comes to an end. A term policy is designed to meet the needs of people who are initially unable to pay the larger premium required for a whole life or an endowment assurance policy. No surrender, loan or paid-up values are granted under these policies because reserves are not accumulated. On the usual term assurance plans, accident and/or disability benefits are not granted.

• Money Back Policies: Unlike endowment insurance policies, where the survival benefits are payable at the end of the endowment period, money-back policies provide for periodic payments of partial survival benefits during the term of the policy, as long as the policyholder is alive. An important feature of this type of policies is that in the event of death at any time within the policy term, the death claim comprises the full sum assured, without deduction of any of the survival benefit amounts, which may have already been paid as money-back components. Similarly, the bonus is also calculated on the full sum assured.

• Joint Life Policies: This policy is similar to endowment policies offering maturity benefits to the policyholders, apart from covering risks like all life insurance policies. But joint life policies are categorized separately as they cover two lives simultaneously, thus offering a unique advantage in some cases, notably, for a married couple or for partners in a business firm.

• Children's Insurance Policies: This policy includes those through which parents or legal guardians can provide for life insurance for their child from birth. The risk cover commences from the child attaining the age of 12/17/18/21 (known as the Date of Risk), and will vest itself on the child upon his or her attaining adulthood at the completion of 21 years, if the case demands so. Until the child attains adulthood, the parents are owners of the policy and have to pay the premium periodically.

• Pension Plan or Annuities: An annuity is an investment that you make, either as a single lumpsum amount or through installments paid over a some years, in return for which you receive a specific sum every year, every half-year or every month, either for life or for a fixed number of years. After the death of the individual, or after the fixed annuity period expires for annuity payments, the invested annuity fund is refunded, perhaps along with a small addition, calculated at that time. Annuities differ from all the other forms of life insurance discussed so far in one fundamental way – an annuity does not provide any life insurance cover but, instead, offers a guaranteed income either for life or a certain period.

• Women's Policy: Women's Policy provides funds for women in times of needs like education, marriage or sickness, with Guaranteed and Loyalty Additions during the policy term and after maturity. At present, the sole women's policy available in the market in Jeevan Sneha from LIC.

• Group Insurance: Group Insurance offers life insurance protection under group policies to various groups such as employers – employees, professionals, co-operatives, and weaker sections of society. It also provides insurance coverage for people in certain approved occupations at the lowest possible premium cost. Besides providing insurance coverage, it also offers group schemes to employers that allow the funding of the gratuity and pension liabilities of the employers.

Source: www.myiris.com

EXHIBIT II PRODUCTS FOR INDIVIDUALS OFFERED BY DIFFERENT COMPANIES

EXHIBIT III COMPARING ENDOWMENT POLICIES

EXHIBIT IV COMPARING MONEY BACK POLICIES

EXHIBIT V COMPARING TERM LIFE POLICIES

ADDITIONAL READINGS & REFERENCES


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