(Abdul Haq Campus)

F INANCIAL
INSTITUTIONS

A Report On:

State Life Insurance Corporation of

Pakistan
Prepared For:

Sir Mumtaz Hassan

Prepared By:

Syed Tufail Haider

Roll No:

1204177

DATED:

11th, November, 2015

TABLE OF CONTENTS
S.No

Topic

Page
No

01

Executive summary

02

Introduction

03

Insurance- Definition & its Types

3-5

04

State Life Insurance Corporation- Brief History

05

Objectives, Mission & Quality policy

06

Major Achievements

07

Organizational structure

9-10

08

Financial Highlights

11

09

Income Statement & Balance sheet

12

10

Future Outlook

13

11

Procedures of Policy holder services (PHS)

Department

14-18

12

Recommendations

19

13

Conclusion

20

14

Appendix (A)

21

15

Bibliography

22

16

Index

23

EXECUTIVE SUMMARY
If we want to explain Insurance in a single line so we can say that
Financial protection against loss or harm.
harm. In todays life Insurance
has taken place as a need of human life because no part of our life
remains untouched by the Insurance. Insurance has evolved as a
process of safeguarding the interest of people from loss and
uncertainty.
uncertainty.
I have completed this report on State Life Insurance Corporation of
Pakistan, State Life Insurance Corporation of Pakistan (SLIC) has a
solid foundation since 1972 in Pakistan, and main objective is to
provide its customers with safe, secure and trustworthy service
through wide range of products. State Life Insurance Corporation
plays a very important role in everyday lives of the people and also
contributing a lot to the economy of the country by providing the
government a lot of fund.
In this report I have given a very brief review of profile of State Life
Insurance

Corporation

of

Pakistan

and

have

discussed

the

procedures and working methods of the financial department of

State Life Insurance Corporation.
I have made it possible to write each and every thing that I have
learnt during the completion of this report.

INTRODUCTION
Insurance is defined as the equitable transfer of the risk of a loss,
from one entity to another, in exchange for a premium, and can be
thought of as a guaranteed small loss to prevent a large, possibly
devastating loss.
An insurer is a company selling the insurance; an insured is the
person or entity buying the insurance. The insurance rate is a
factor used to determine the amount to be charged for a certain
amount

of

insurance

coverage,

called

the

premium.
premium.

Risk

management,
management, the practice of appraising and controlling risk, has
evolved as a discrete field of study and practice
The purpose of this report is to get deeper knowledge of the
procedures and working methods of a financial department of any
financial institutions. In this regard we were advised to visit any
financial institution (whether depository or non-depository) and
collect the relevant information regarding methods and procedures
of its any finance related department. I have visited the State Life
Insurance Corporation of

Pakistan (Head office- Karachi).The

manager was really co-operative and he gave us not only his

precious time but also his valuable and practical insights on Letter
of credit as he has years of experience in this field.
This report helped us a lot in getting deeper insights about the topic
and a great addition in our knowledge.

INSURANCE
Definition:

An arrangement by which a company or the state undertakes to provide a guarantee

of compensation for specified loss, damage, illness, death or any certain defined event
occurs in return for payment of a specified premium.

Contract of Insurance:

Insurance is a contract between two parties whereby one party agrees to undertake
the risk of another in exchange for consideration known as premium and promises to
pay a fixed sum of money to the other party on happening of an uncertain event
(death) or after the expiry of a certain period in case of life insurance or to indemnify
the other party on happening of an uncertain event in case of general insurance. The
party bearing the risk is known as the insurer or assurer and the party whose risk is
covered is known as the Insured or Assured
Insurance contracts are generally considered contracts of
adhesion because the insurer draws up the contract and the
insured has little or no ability to make material changes to it.
This is interpreted to mean that the insurer bears the burden if
there is any ambiguity in any terms of the contract.
Insurance contracts are aleatory in that the amounts
exchanged by the insured and insurer are unequal and depend
upon uncertain future events.
Insurance contracts are unilateral, meaning that only the
insurer makes legally enforceable promises in the contract.
The insured is not required to pay the premiums, but the
insurer is required to pay the benefits under the contract if the
insured has paid the premiums and met certain other basic
provisions.
Insurance contracts are governed by the principle of utmost
good faith which requires both parties of the insurance contact
to deal in good faith and in particular it imparts on the insured
a duty to disclose all material facts which relate to the risk to
be covered.

TYPES OF INSURANCE

There are two main types of insurance which are as follows.

1) Life assurance
2) General insurance

1) Life Assurance:
Life assurance policy insures the life of the insured. The insurance company is
legally bound to provide a monetary benefit to a decedent's family or the beneficiary
after the death of the policyholder. The proceeds are paid to the beneficiary either in a
lump sum amount or an annuity.
Life assurance include following types of insurance:
Whole of the life policy
Term life policy
Endowment policy

2) General Insurance:
General insurance is basically an insurance policy that protects you against losses and
damages other than those covered by life insurance. For more comprehensive
coverage, it is vital for you to know about the risks covered to ensure that you and
your family are protected from unforeseen losses.
It is of two types:
A. Marine Insurance
B. Non-Marine insurance

A. Marine Insurance:
Insurance against loss by damage or destruction of cargo, freight, merchandise, or the
means or instruments of transportation and communication whether on land, sea, or
air. It is further divided into two
Ocean cargo
Inland transit
Marine hull

B. Non-Marine insurance:

Property insurance
Health insurance
Home insurance
Fire insurance etc.

TYPES OF INSURANCE
Whole of
the life
policy
Life
Assurance

Term life
policy
endowmen
t policy
Health

Insurance
NonMarine
insurance

Property
Education
etc

General
insurance

Ocean
cargo
Marine
insurance

Inland
Transit
Marine Hull

INSURANCE
COMPANIES
Sources of
Funds

Uses of
Funds

premiu
m
Dividen
d
income

Corpora
te
Bonds
Govt.
securiti
es

Interest

Shares

Equity

Properti
es

Brief History:
The Life Insurance Business in Pakistan was nationalized during March 1972.
Initially Life Insurance business of 32 Insurance Companies was merged and placed
under three Beema Units named A, B and C Beema Units. However, later these
Beema Units were merged and effective November 1, 1972 the Management of the
Life Insurance Business was consolidated and entrusted to the State Life Insurance
Corporation of Pakistan.
State Life Insurance Corporation of Pakistan is headed by a
Chairman and assisted by the Executive Directors appointed by
Federal Government. Up to July 2000 the Corporation was run by
Board of Directors constituted under Life Insurance (Nationalization)
Order 1972. In July 2000, under Insurance Ordinance 2000, the
Federal Government reconstituted the Board of Directors of State
Life which runs the affair of this Corporation.
The basic structure of the Corporation consists of Six Regional
Offices, Thirty Two Zonal Offices, a few Sub-Zonal Offices, 180
Sector Offices, and a network of 1073 Area Offices across the
country for Individual Life Insurance; Four Zonal Offices and 6 Sector
Offices with 21 Sector Heads for Group & Pension are involved in the
Marketing of Life Insurance Plans policies and products offered by
State Life and a Principal Office. The Zonal Offices deal exclusively
with Sales and Marketing. Underwriting of Life Insurance Policies and
the Policyholder's Services. Regional Offices, each headed by a
Regional Chief, supervise business activities of the Zones
functioning under them. The Principal Office, based at Karachi, is
responsible for corporate activities such as investment, real estate,
actuarial, overseas operations, etc.

Major Objectives:

To run life insurance business on sound line.

To run life insurance business on sound line.

To provide more efficient service to the policyholders.

To maximize the return to the policyholders by economizing on expenses and

increasing the yield on investment.

To make life insurance a more effective means of mobilizing national savings.

To widen the area of operation of life insurance and making it available to as large
a section of the population as possible, extending it from the comparatively more
affluent sections of society to the common man in towns and villages.

To use the policyholders fund in the wider interest of the community.

Mission:
To remain the leading insurer in the country by extending the benefits of insurance to
all sections of society and meeting our commitments to our policy holders and the
nation.

Quality Policy:

To ensure satisfaction of our valued policyholders in processing new business,

providing after sales service and optimizing return on Life Fund through a quality
culture and to maintain ourselves leading life insurer in Pakistan.

Major Achievements:
The major function of the State Life Insurance Corporation of Pakistan is to carry out
Life Insurance Business; however, it is also involved in the other related business
activities such as investment of policyholders fund in Government securities, Stock
market, Real Estate etc. The major achievements of State Life are as under:
On the commencement of the operations, the Corporation took a very important
step by effecting reduction up to 33% in the premiums on the past and potential
Life Policies for the benefit of the Policyholders.

State Life is profitable organization and it paid Rs.5.860 billion as dividend to the
Government of Pakistan since its inception in 1972.

State Life has played very vital role in the economy by providing employment to
the people of the country as permanent employees and as part of its marketing
force and by investing the huge funds in different sectors of the economy. The
Investment Portfolio of State Life as at 31.12.2014 stands at Rs.445.074 billions.

Investment portfolio also includes investment in Real Estate which stands at a

book value of Rs.2.955 billion as at 31.12.2014 whereas it fair value is around
Rs.26.562 billion in the same period.

The Paid up Capital increased from Rs.10 million in 1972 to Rs.3,000 million in
2014.

The Premium income increased from Rs.0.317 billion in 1972 to 76.342 billion in
2014. Similarly Investment income including rental income increased from
Rs.0.81 billion in 1972 to 50.715 billion in 2014.

Total statutory fund of State Life stands at Rs.450.025 billion in 2014 as against
Rs.1.494 billion in 1972

State Life is smoothly striving towards its objective of making life insurance
available to large section of the society by extending it to common man. As at
December, 2014 the total number of policies enforce under individual life were
4.997 million and number of lives covered under group life insurance were 8.732
million.

ORGANIZATIONAL
STRUCTURE

It is headed by chairman who is a CHIEF EXECUTIVE of the corporation and

appointed by the government the other administrative level and authorities is give n
below

Board of directors:

It comprises of 7 members who are responsible for making plans and policies to
achieve the set goals of the organization.

Executive Directors:

It comprises of 4 members responsible for implementation of policies and directives

of the board of directors.

Regions:

There are 4 regions in Pakistan headed by regional chiefs responsible for looking after
all the zones under his administration.

Zones:

There are 26 zones in Pakistan headed by the zonal head responsible for procurement
of business to achieve the set business target of the organization.
The basic structure of the Corporation consists of Four Regional Offices, Twenty-Six
Zonal Offices, a few Sub-Zonal Offices, 111 Sector Offices, and a network of 461
Area
Offices across the country for Individual Life Insurance; Four Zonal Offices and 6
Sector
Offices with 20 Sector Heads for Group & Pension are involved in the Marketing of
Life Insurance Plans policies and products offered by State Life and a Principal
Office. The Zonal
Offices deal exclusively with Sales and Marketing. Under writing of Life Insurance
policies and the Policyholders Services. Regional Offices, each headed by a Regional
Chief, super vise business activities of the Zones functioning under them. The
Principal
Office, based at Karachi, is responsible for corporate activities such as investment,
real estate, actuarial, overseas operations, etc.

MANAGEMENT HIERARCHY
Chairman

Executive
Directors

Divisional
Heads

Regional
Heads

Zonal
Heads

Departmen
tal Heads

Total Prem ium Income

Total Income

Total Assets

INCOME STATEMENT & BALANCE

SHEET
I

FUTURE OUTLOOK

Takaful insurance is another line of business which offers bright prospects in the
future. The Takaful rules were published by the Securities and Exchange
Commission of Pakistan (SECP) in 2005. In 2012, the SECP issued revised
Takaful rules allowing Conventional Insurers to initiate window Takaful
operations. State Lifes Board has also granted approval for initiating Takaful
Insurance. In this regard, a working committee has been constituted to formulate a
business plan to enter this market and setup operations accordingly. It is
anticipated that State Life will be formally able to start Takaful Operations shortly.

Bancassurance is an alternate distribution channel to sell life insurance products

through banks. This line of insurance business ensures wide coverage at lesser
procurement cost. During the last quarter of 2012, this channel started its
operations after State Life signed an agreement with the United Bank Limited and
in 2013, also signed agreements with First Women Bank Limited and Bank
Alfalah. State Life has started to gain firm ground in this channel and negotiations
with more banks are underway. Recently, bancassurance agreements have been
signed with National Bank of Pakistan, NIB Bank, Samba Bank and Summit
Bank. Bolstered with State Lifes reputation in the market, its bancassurance
channel is steadily showing sustainable growth and will undoubtedly contribute to
significant all round improvement in the financial performance of state Life in
coming years while providing a new avenue for business growth.

State Life entered into an agreement with the Government of Pakistan to provide
Life and Health Insurance services to families covered under the Benazir Income
Support Program (BISP). We intend to expand our Health Insurance Operations
beyond the scope of BISP and provide competitive insurance packages that would
ultimately provide diversification to benchmark services that dene State Life
Insurance Corporation as the largest insurance provider of the country.

State Life has further enhanced the network of its zones in Pakistan. In this regard,
new zones have been created at Jhang, Vehari, Jhelum and Narowal. Besides, the
number of regions has been raised to six with the inclusion of Faisalabad Region.
It is expected that these new centers will further contribute in expanding and
carrying out the Pakistan business more convincingly

State Life also plans to enter this line of business. With the implementation of IT
infrastructure enhancements, which is in hand, State Life would be in a position to
enter this market segment also.

POLICY HOLDER SERVICES

(PHS) DEPARTMENT
Introduction:
Policyholder service is one of the most important departments in stat life insurance.
Better services to policyholders are of course, necessary and fundamental for carrying
good reputation among policyholders, which help in retaining business and increasing
new business. Therefore policyholders service, counters have been establishing in
majority of the zonal offices to provide one window services to the valued policy
holders. This department is divided into following sections:
Claim Section
Surrender Section
Loan Section
Alteration Section.
Suspense Account Section.
Lapse & Revival Section.
Each and every section of this department plays an important role and they provide
different services to policyholders.

Claim Section:

This section is always busy in entertaining claims of the policyholders. It has its own
investigators and they investigate all claims and then recommend that a claim amount
may be given to the nominees of the claimants or not. They also look into all such
maturity claims and those policies which fall, mature all payments and the claim
section of the policyholder services (PHS) give houses.
Claim section has two further sections.
I.
Individual life claims
II.
Group & pension claims

I.

Individual life claims:

In this section claims are of three types:

a) Maturity claims
b) Death claims
c) Other claims

a) Procedure for Maturity Claims:

For collecting maturity benefits, policyholders are requested to send a written request
along with following documents to their servicing State Life zonal office:

Original policy document

Copy of National Identity Card

Maturity discharge voucher duly verified by policy holders bank

If policy holders signature has changed over the years, he/she should send us
their three specimen signatures of old and new styles.

Immediately on receipt of above documents, SLIC process the case

further for payment of amount due, if any, against maturity claim
under above policy.

b) Procedure for Death Claims:

Death claims are further divided into two categories. Early death claim and non-early
death claims. Death within the first two years is known as early death and after that it
is non-early death claim. In case of early death claim they do a comprehensive
inquiry. This inquiry may be from the general public, hospital. Police station etc. then
they make a report. In case of suicide within the first 13 months, they just pay the
premium amount which is paid in installments.
In case of death the nominees should make death certificate for the policy
holder. It may be gross the hospital, Nazim, Political Agent, etc.
Then they issue 4 forms i.e. A, B, C. Form A will be filled by the nominee.
Form B is for Attended Doctor, Form C if a policy holder is govt. employ,
than this form should be filled (All these forms should be attested).
If the amount is less than 300,000 then they call a meeting of zonal claim

committee (ZCC) and this committee makes decision.

If amount is more than 300,000 then they forward all documents to regional

claim committee (RCC Islamabad).

if amount is more than 500,000 then this is the case of central claim committee
after approving gram ZCC the claim file again to claim section, have they
issue cheques and make vouchers thus payment is made.

c) Procedure for Other Claims:

Other claims are of two types:
Survival Benefit Claim
If policy holders Anticipated Endowment Assurance policy has completed
1/3rd or 2/3rd term of the policy, policy holder can withdraw a sum equal to
25% of the sum insured of his/her policy.
Injury Claim
If policy contains an Accidental Death & Indemnity Benefit (AIB)
supplementary cover, and policy holder have sustained an injury as specified
in the contract, he/she can apply to SLIC for an injury claim within 20 days of
sustaining the accident.
Following documents are required to claim any of the above type:
1. Original policy document
2. Copy of National Identity Card
3. Survival Benefit discharge voucher duly verified by policy holders bank
4. If policy holders signature has changed over the years, he/she should send us
their three specimen signatures of old and new styles.
Immediately on receipt of above documents, SLIC will process the case for payment
of amount due, if any, against survival benefit claim under above policy.

II.

Group & pension claims:

In this section claims are of two types:

a) Death claims.
b) Injury or disability claims.

a) Procedure for Death Claims (G&P):

When a claim occurs first of all a letter is sent to claim department from employer
of that person about his injury or death. Then when death comes into notice of
claim department first of all a letter of condolence is sent to employer and a set of
claim forms is enclosed and some documents are initially required like:
Death certificate issued by the municipality in original or its photocopy

dually attested.
Physicians statement
A copy of policy report (if applicable)
Post mortem report (if applicable)
Attested photocopy of NIC of deceased.

When all these requirements are completed and sent to claims department then it
is checked first of all that it is a new claim and it is not already paid. If there is no
duplication then
For all new claims it is entered in computer data base and it is given a claim
number and name of deceased and date of death is saved.
Separate file of every claim is prepared and all documents are attached in it.
Then file will be sent to premium collection department for entitlement certificate.
It shows the position of policy, sum assured, name and department of deceased
and policy is in force and premium up to date is paid and if there is any
requirement as:
Outstanding premium
Attested documentation is not complete
Any other requirement.
It is intimated to employer to fulfill all requirements. And on completion of all
requirements further processing starts (Entitlement certificate is not required for
government claims).
If claim is payable and all requirements and documents are complete then it is
approved by:

 Claim committee: This involves three members Manager Claims, Manager

B&A, Manager PHS.
Audited.
Approved by zonal head
In case claim is exceeding Rs.10,00,000 then it is approved by Divisional Claim
Committee in Karachi.
Once claim is approved and ready for payment firs a voucher is prepared and
maintained. There are four types of vouchers i.e. for each claim there is a different
voucher. Each voucher has its own and different color. It includes;
Surrender voucher
Loan voucher
Death claim voucher
Maturity voucher

Voucher is made by concerned section. After this these vouchers are sent to
payment department. Payment department will send the voucher to audit
department and they make the audit of all the vouchers and other related
documents.
After approving from audit department these vouchers comes again to payment
section. Usually payments are made in cheques, they make cheque first then the
cheque is sign by this (payment department) and then these cheques are forward to
concerned department (PHS department) for second sign.

The vouchers remains in the concerned department for the purposes of punching
and cheques are issued.

Now cheque forwarding letter is sent to employer and cheque is dispatched to

client.

When there is any dispute on payment of claims as if policy was not in force or there
was outstanding premium. So claims department stops payment of claim then these
cases can be filed in court or ombudsman office by client or nominee. So all these
cases are also handled separately and complete documentation is maintained for these
files. All this type of claims are called Legal claims.

RECOMMENDATION
SLIC is market leader and it has so strong management structure and there is
transparency of business management but I will like to give some recommendations.

Better training courses should be arranged for the uplifting and improving the

quality of employees work.

There is also a problem of work overload for the employees and it should be
control properly so that the employees are motivated. Responsibilities are also not

equally divided between employees.

System and operations should be more defined and organized.
SLIC management should give more incentives to the staff because they are the

asset of company. There are so many incentives for officers but staff is ignored.
IT lapses should be improved.
Expenditures must be control, which are very high.
SLIC is advertising only on Pakistan TV and Radio Pakistan but now there are
uncountable private channels where SLIC is not giving advertisement. It should
properly advertise and Communicate to public about the products provided by it,

so that more customers will be attracted.

Islamic mode of insurance is emerging rapidly so SLIC should reorganize its
strategies and introduce some pure Islamic products or invest only in interest free
business.

CONCLUSION
It is concluded from the report and other documents which
were consulted for the completion of this repot, that State
Life

Insurance

Corporation

is

one

of

the

leading

corporations of the country. It has provided a life Security

Protection to about more than 6.00 million person of the
country. Apart from this it provides self finance jobs to
thousands of the countrymen, and mobilized the country
economic and financial resources, and also contributes a
lot to Government in terms of providing funds. We hope
that the corporation will play its important role in the
development of National Economy.
It was splendid experience for me that make me familiar
with business environment, procedures, working methods
and culture of State Life Insurance Corporation. I have
really gained a lot of knowledge during preparation of this
report.

APPENDIX (A)

Insured: The person known as the policy holder, a person with

insurance coverage
Insurer: A company licensed to transact the business of
insurance and issue insurance policies.

Policy: It's the written contract between an insurance company

and its insured. It defines what the company agrees to cover for
what period of time and describes the obligations and
responsibilities of the insured.
Premium: It's the amount of money a policy-holder pays for
insurance protection
Claim: It's the notice to the insurance company that under the
terms of a policy, a loss may be covered.
Indemnity: Legal principle that specifies an insured should not
collect more than the actual cash value of a loss but should be
restored to approximately the same financial position as existed
before the loss.
Agent: A licensed person or organization that sells insurance and
represents the insurance company to the policyholder.
Broker: An organization or person paid by the policyholder to look
for insurance on their behalf.
Deductible: It's the amount of the loss, which the insured is
responsible to pay before the insurance company pays the benefits.
Expiration Date: This is the date on which the policy ends.

Grace Period:

A period (usually 30 or 31 days) following each

insurance premium due date, other than the first due date, during
which an overdue premium may be paid. All pro visions of the policy
remain in force throughout this period.
Limit: It's the maximum amount paid by the insurance company
under the terms of a policy.
Underwriting: The process of classifying applicants for
insurance by identifying characteristics such as age, gender, health,
occupation and hobbies. People with similar characteristics are
grouped together and are charged a premium based o n the group's
level of risk.

BIBLIOGRAPHY
Annual Report for the year 2014, State Life Insurance
Corporation.

 Annual Report for the year 2013, State Life Insurance

Corporation.
James

Van

Horne,

Fundamental

of

Financial

Management, Edition, Prentice-Hall International, Inc.

P # 128 144.
Tahaffuz An In-house magazine State Life Insurance
Corporation of Pakistan, 2002, P # 5,6.
Tahaffuz An In-house magazine State Life Insurance
Corporation of Pakistan, 2003, P # 8,9,10.
www.Statelife.com.pk
www.wikipedia.org
www.businessdictionary.com

www.investopedia.com

Insured
Insurer
Policy
Premium
Claim
Indemnity
Agent
Broker
Deductible
Expiration Date
Grace Period
Limit
Underwriting

INDEX