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INTRODUCTION Insurance
The business of insurance is related to the protection of the economic value of assets. Insurance is a mechanism that helps to reduce the effects of adverse events on an asset by compensating for the loss. Insurance can be defined as a promise of compensation for specific potential future losses in exchange for a periodic payment.
uninsured in India. Among those who were insured, it was found that many of them were not adequately covered. Most individuals with high salaries had paltry insurance cover of about 1-3 lakhs only. Thus low amount of life cover taken by individuals meant inadequate security for family in case of death of the bread winner of the family b) Low awareness on the need for financial planning and family security: There was low awareness among people on the need for taking up an insurance cover for family security and regular savings for financial security. The people werent being educated about the need to cover ones family and ones medical expenses. c) Purpose of taking Insurance in LIC:
Taking an insurance plan most of the time was more seen as an obligation towards some friend or a relative who was an agent in LIC. Also Indians have had a mindset to look at insurance as a means for saving on tax rather than protection or wealth generation. d) Low penetration of Insurance: There was low penetration of insurance in the Indian market in comparison to the total population of India. In India, less than 5 per cent of the population is covered by insurance. And they too are underinsured, as the risk cover isn't adequate. e) Demoted role of an insurance agent/ financial advisor: The role of an agent was seen more as someone who simply got you to take up a policy or LIC scheme without doing any sort of need analysis and then came to collect your premium year after year, without fail. Ascertaining the needs and requirements of an individual and providing suitable solutions were rarely done, which led people to being inadequately covered.
STATISTICAL REPORTS As can be seen in the below figure 1.1, which shows the trend in collection of yearly premium of various insurance companies in India, ICICI Prudential has been a hard line competitor with highest premium collection each year, the highest collection of premium being Rs.8034.75 Crore in the financial year 2007-2008, followed by Bajaj Alliance and SBI Life. MetLife compared to them is way behind with highest premium collection touching Rs.1144.70 Crore, in the financial year 2008-2009. MetLife has shown a slow but consistent improvement in yearly premium collection over the past 9 years of its incorporation in India. Though in the initial years MetLife had a weaker performance to show compared to its competitors, its performance has taken a leap from the year 2007-2008 to keep pace with its nearest competitor TATA AIG. In the year 2009-2009 MetLife registered an yearly premium collection of Rs.1,144.7 Crore surpassing TATA AIG by 2.03 Crore.
(Figure 1.1)
COMPARISION OF YEARLY PREMIUM COLLECTION WITH VARIOUS PRIVATE INSURANCE COMPANIES IN INDIA
Life Insurance Companies have been asked to maintain a 150% Solvency Margin which includes a 50% additional cushion over and above the norms specified in the regulations. 1.5 is the minimum solvency ratio which needs to be maintained by all insurance companies. In the below figure 1.2, the solvency ratios of various insurance companies are illustrated in the form of Bar graphs. The companies taken into consideration are the private competitors of MetLife Company and LIC. The red dotted line represents the minimum solvency ratio expected of a company as per IRDA Mandate which is a ratio of 1.5. MetLife had maintained an average solvency ratio of 1.85 over the past 4 years. AVIVA Insurance Company has for past 4 years maintained exceptional average solvency ratio of 4.83. All other companies had managed to maintain a solvency ratio above 1.5, except for Life Insurance Corporation of India (LIC) which had defaulted in the year 2006-2007 where its solvency ratio dipped down to 1.3 meaning its total liabilities exceeded its mandated limits.
(Figure
1.2)
But this is not the first time LICs solvency ratio had dipped below required standards; in the year 2004 controversy had surfaced over LICs solvency, with the Insurance Regulatory and Development Authority questioning the lack of capital while the organization was pushing the issue of Government guarantees. According to reports, LIC needs an additional capital infusion of up to Rs.20, 000 Crore to maintain the solvency criterion stipulated by the IRDA (Sept 1, 2004 Economics Times). The Life Insurance Corporation of India had then sought a five years time frame to meet the additional 50 percent Solvency Margin as asked by the IRDA.
MetLife Company
Fact File
: :
MetLife Insurance Corporation Ltd. MetLife India Insurance Company Limited. 5th Floor Orchid Centre Golf Course Road Sector 53 Gurgaon Phone : 0124-4179000 Pin : 122002
Head Office
MetLife India Insurance Company Limited. No.5 Brigade Seshmahal Vani Vilas Road Basava nagudi, Bangalore Pin : 560004
Services
: : :
: :
4 4305 Crores
Agent Base
66377+
139 years legacy of helping build financial freedom for all. Among Fortune 500 Company. Met Life started its Indian operations on April 11th 2001. MetLife India is a result of Joint Venture between MetLife International, J&K Bank and other investors. Among the Top Five private player in Insurance Sector in India Has a strong force of 25,000 financial advisors MetLife in India is headquartered in Bangalore. Present in 72 cities through 90 offices. In partnership with many Banks i.e. Barclays, UTI, J&K Bank etc. solicit Indian Operation started on April 11th 2001. MetLife India Insurance Co. Pvt. Ltd is a joint venture between MetLife Group and its Indian partners, including J&K Bank, Dhanalakshmi Bank, Karnataka Bank, Karvy Consultants, Geojit Securities, Way2Wealth, and Mini Muthoothu.
MARKET SHARE:
(Figure. 1.1)
Market share of private insurance companies is as shown above in the pie-chart. The company having the highest market share is ICICI Prudential at 21.60%, with SBI Life following at 14.80% followed by Bajaj Allianz at 13.20 %. MetLife India Insurance Co.s market share is about 3.30 %. As can be seen from the above pie chart, MetLifes nearest competitors are TATA AIG, Kotak Mahindra, Aviva Life and ING Vyasa.
Rajesh Relan
Managing Director
Rajesh has twenty years experience in the financial services sector, of which he has spent ten years in the Indian Life Insurance industry. Visualizing the scope and growth, he became a part of this sunrise industry in 1999, much before it was opened to the private players. Rajesh joined MetLife India in 2006 and has transformed the organization since then. With exceptional skills in business strategy & planning, he has laid the foundation for MetLifes success in the Indian market Other key people in MetLife Company:
P. S. Sankaran KS Raghavan Director Chief Administrative Compliance & Officer Internal Controls
Partners
Products
I. CHILD PLANS MET BHAVISHYA MetLife offers 'Met Bhavishya' - a guaranteed money back plan that pays out funds to help to meet the education and career milestones of children. With this plan, the Life Insured is that of the parent. The plan also has inbuilt guaranteed additions to add value to the policy over its term. There are two options to choose from and fixed term benefits, periodic additions & terminal additions are payable based on the option that select. The policy is suitable for parents with children between the ages 0-12 and parents in the age group of 20-50 years old. MET LITTLE STAR When child is born, a star is born in family. And, parents would like to provide their star with all the building blocks that could develop his or her potential to the fullest. This could mean special instruction sessions for talented children, unique training gear for exceptional athletes or qualified training for born singers to provide that extra-edge. To ensure this, parents would need an investment and protection package that is exclusively designed to help you plan for financial security, no matter what uncertainties life brings.
'Met Little Star', a Unit-Linked, regular premium, child insurance plan helps parents do just that. It secures finances for child's educational needs and ensures that plans go as planned, no matter what the circumstances. MET MAGIC MetLife offers 'Met Magic', a Unit-Linked (non-medical, regular premium) life insurance plan (Non Par). Parents always want their little angel to have the best, in every sphere of life. You don't want your child to have to compromise. No matter what the circumstances is, Met Magic, a unique life insurance plan, helps you secure the future of your loved one! (IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICY HOLDER)
MET GROWTH MetLife offers 'Met Growth' - a Unit-Linked solution to help in golden years. It is specially designed to provide financial security for future requirements. This plan allows to start planning immediately by ensuring the safety of first year premiums. It also helps create retirement fund faster by giving you 100% allocation from the second year onwards, coupled with attractive loyalty additions into fund. Guaranteed!
Entry Age (in completed years) Maturity Age Coverage Term Premium Payment Term Minimum Annualized Premium Basic Sum Assured
Min 0 years (3 months to be completed) Max 60 years Min 18 years Max 75 years 15 / 20 / 25 / 30 years Regular Rs. 12,000 Min - 5 times the Annualized Premium ***Other Sum Assured multiples - 10 times & 20 times the Annualized Premium. Monthly, Quarterly, Half-yearly, Yearly
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Benefit
Death Benefit In the unfortunate event of death, the higher of the Sum Assured or the Fund Value would be payable. If death of the Person Insured occurs before age 7, the Fund Value plus the regular premium received by us in the first policy year is payable. Maturity Benefit On maturity, you will receive the Fund Value including the Guaranteed Loyalty Addition or you can opt for the settlement options. Loyalty Additions You get the guarantee of enhancing your wealth creation through guaranteed loyalty additions (up to 120% of the first year annual premium) at the end of the 10th & 15th year plus Guaranteed Additions as a % of the Fund Value.
At the end of the 10th year: 50% of the first year annualized premium At the end of the 15th year: 70% of the first year annualized premium
Met Advantage Plus MetLife offers 'Met Advantage Plus' - a Unit-Linked Pension Plan that allows to effectively and efficiently accumulating retirement needs. As the name suggests, it comes with many advantages. One can choose from eight annuity options, two life cover options and get tax benefits under Section 80 C and 10 (10 A). One can buy the plan without any hassles and invest more as you approach retirement by using the top-up functionality. All in all, its a plan which works harder when one stop working. For one, it ensures that you lead a comfortable lifestyle post retirement.
Entry Age (in completed years) Minimum Term Minimum Vesting Age Maximum Vesting Age Minimum Premiums Premium Paying Term Benefits
Min 20 years Max 55 years 10 years 45 years 65 years Single Pay: Rs. 1,00,000 Regular Premium: Rs. 10,000 Single Pay & Regular Pay
Death Benefit In case of death during the accumulation period, the death benefit payable is:
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Under Option A: A guaranteed amount of 110% of the Fund Value is payable to the nominee. Under Option B: 100% of the Fund Value is payable to the nominee. Vesting Benefit On the vesting date, i.e. at the end of the accumulation term,you can take one-third of your retirement kitty as a tax-free lump sum and utilize the balance to buy annuities. Or you can use the entire retirement kitty to buy annuities.
Met Pension-Par
'Met Pension (Par)' serves as a friendly helping hand so one can stay financially independent even after retirement. It helps to build up a fund for golden years. With this plan,one can ensure his\her enjoy retirement as a happy new chapter. Entry Age (in completed years) Minimum Term Minimum Vesting Age Maximum Vesting Age Minimum Sum Assured Maximum Sum Assured Minimum Annual Premium Premium Payment Term Min 18 years Max 60 years 10 years 45 years 70 years Rs. 50,000 No Limit Rs. 4000 p.a. for Regular Pay Single Pay, Limited Pay (3 or 5 Pay) & Regular Pay
Benefits Death Benefit In case of death while one is saving for retirement, the death benefit payable is: 1. Return of premiums. 2. Accrued reversionary bonus, if any. 3. Any insurance on the life of the Insured that may be provided by riders to this policy. Vesting Benefit On the vesting date, you can take one third of your retirement kitty as a tax-free lump sum and utilize the balance to buy annuities or you can use the entire retirement kitty to buy annuities. The retirement fund on the date of vesting is equal to the Sum Assured plus Guaranteed Additions plus the compounded reversionary bonuses plus the terminal bonus, if any.
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MET SUKH MetLife offers 'Met Sukh'- a guaranteed money-back policy which provides guaranteed periodic survival benefits at the end of 5, 10, 15 & 20 years and guaranteed additions of 10% of the Sum Assured for the entire term. It not only covers your life, but also guarantees you cash payments at various milestones along with guaranteed growth of your savings. Entry Age Coverage Term Premium Payment Term Minimum Sum Assured Maximum Sum Assured Min - 15 years Max - 55 years 20 years Regular Rs. 75,000 No Limit
Benefits Death Benefit In the unfortunate event of death of the Person Insured, the Sum Assured along with the Guaranteed Additions are payable. The policyholder is entitled to Guaranteed Additions of Rs. 100 per Rs. 1,000 of the Sum Assured for each completed year. Maturity Benefit On maturity, the life insured will receive the Survival Benefits plus the Guaranteed Addition. Survival Benefits At the end of 5 years At the end of 10 years At the end of 15 years Upon survival to maturity 20% of the Sum Assured 20% of the Sum Assured 20% of the Sum Assured 40% of the Sum Assured plus Total Guaranteed Additions
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MET SUVIDHA 'Met Suvidha' is a flexible Endowment Plan that combines savings and security. In addition to providing you protection till the maturity of the plan, it helps you save for your specific long term financial objectives. This long term savings-cum-protection plan comes to a customer at affordable premiums. Met Suvidha is available in both participating as well as non-participating versions. Minimum Entry Age Term Premium Paying Terms Minimum Annual Premium Amount Minimum Sum Assured Maximum Sum Assured Par: 15 years - 60 years Non-Par: 15 years - 70 years Par: - 15 years - 30 years Non-Par: 5 years - 30 years Single Pay, Limited Pay (5 or 10) & Regular Pay Rs. 2,500 Rs. 75,000 No Limit
MET SARAL MetLife presents 'Met Saral' - a non- participating endowment plan. As the name suggests, its a simple savings plan which gets customer into the savings habit without any medical tests. All need to do is fill in a simple application form and are ensured a guaranteed maturity amount of Rs 100,000, even in the case of death during the term. Take the first step towards a better financial future for customer and his family. Ensure and insure the first Lakh.
MET SURAKSHA MetLife offers 'Met Suraksha - Term Assurance (TA)', a non participating term assurance plan which provides life cover at a nominal cost. To put it simply, it is a life insurance plan that gives complete
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protection to enjoy life to the fullest. Customer can further customize plan with two riders Accidental Death Benefit and Critical Illness. MET SURAKSHA- TROP MetLife offers 'Met Suraksha - Term with Return of Premium (TROP)', a non participating term assurance plan which provides life cover at a nominal cost. To put it simply, it is a life insurance plan that gives complete protection to enjoy life to the fullest. You can further customize your plan with two riders Accidental Death Benefit and Critical Illness. MET MORTGAGE PROTECTOR This plan provides life cover for home loans taken for any period above 5 years. It is a decreasing term insurance with single and limited premium options. The plan covers an amount equal to the outstanding amount as per the policy schedule. It ensures the assets that have created stays with family.
MetLifes Unit-Linked Insurance Plans ensure systematic enhancement of wealth. Be it higher returns or the right blend of protection and wealth optimization, they help to ensure the right choice and peace of mind. (IN THESE POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICY HOLDER)
MET EASY Met Easy is a simplified unit-linked plan which offers an opportunity to systematically build wealth and protection for you and your family.
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10 years Minimum Age at 8 Entry Maximum Age at 55 Entry Minimum Premium Maximum Premium Sum Assured 20,000 6,00,000
15 years 3 50
15,000 4,00,000
12,000 3,00,000
5 times the annualized 7.5 times the annualized 10 times the regular premium regular premium annualized regular premium Yearly, Half-yearly, Yearly, Half-yearly, Yearly, Half-yearly, Quarterly, Monthly Quarterly, Monthly Quarterly, Monthly
(The maximum Sum Assured available in this product is based on age, at the time of buying the policy.) Death BenefitIn the event of death in the 1st Policy Year: Higher of 50% of the Sum Assured or the Fund Value is payable. After the 1st Policy Year: Higher of 100% of the Sum Assured or Fund Value. If death of the Person Insured occurs before age 7, the Fund Value plus the Regular Premium received by us in the first policy year is payable. Maturity Benefit On maturity, you will receive the Fund Value including the Loyalty Addition or you can opt for the settlement options. Loyalty Additions With Met Easy, you get the benefit of potentially enhancing your wealth creation with loyalty additions that are added to your policy on maturity.
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MET SMART GOLD MetLife offers 'Met Smart Gold'- a Unit-Linked wealth creation cum protection plan for the wellheeled. It's specially conceived so that one can get a plan to match his specific financial requirements. If you are keen on investing lump sum amounts over a shorter horizon, this is the ideal plan for you.
MET SMART PLUS- REGULAR PAY 'Met Smart Plus' a Unit-Linked Whole life plan that matures at age 100. If you want to protect your family from lifes uncertainties; at the same time, you wish insurance would yield higher returns on your investments. You want your insurance policy to help realize all your dreams. Its a right plan to go with.
Entry Age (in completed years) Min 0 years (3 months to be completed) Max 70 years Maturity Age Premium Payment Term 100 years Regular
Minimum Annualized Premium Rs. 12,000 Minimum Basic Sum Assured Premium Payment Modes Rs. 60,000 Monthly, Quarterly, Half-yearly, Yearly
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Activities Undertaken
PART I - Induction program
1. Introductory Session
Training was conducted for the first 15 days where in the introductory session information was provided on MetLife Company and about insurance agency career. 2. Participated in IRDA training for Financial Advisor Attended 50 hours IRDA training given as per IRDA mandate, the training was sponsored by MetLife India Insurance Company Limited. Comprehensive training was given on the history of insurance in India, insurance terms and the various principles of insurance. Also basic orientation was given on various traditional insurance products and market-linked insurance products. Passed the IRDA exam with distinction and got licensed as a Certified Financial Advisor.
18 3. Product Training: In-depth training was provided on various MetLife traditional insurance
products and ULIP products. Role plays were conducted in the class where we participated as an advisor and also in the role of a customer to learn various questions which can be raised by clients. Also objection handling session was taken up by our guides to learn how to effectively handle objections and queries of customers. 4. Prospecting Customers: Did tele-calling to identify prospective customers and for collection of their data. Approached people from warm market i.e. my list of friends and relatives. Distributed pamphlets to newspaper vendors to target specific areas of Navi Mumbai. 1. Presentations to clients: Conducted presentations to clients after identifying their needs and requirements and successfully sold MetLife insurance products to many.
OBJECTIVES OF TRAINING
To understand the working of the company : Skill set acquired and the improvements during the training period Learning & Development in the area of specialization.
To understand the working of the company The entire India operations in MetLife are divided into different zones, and each zone is headed by Zonal Business Head. Under each Zonal business Head are the various departmental heads such as the Zonal operation manager, Zonal human resource manager, Zonal territory manager and Assistant admin manager. Under the Zonal territory manager are Branch Sales Managers. Each Branch Sales Managers leads a team of 10 Assistant Sales Managers. Assistant Sales Managers are required to recruit financial advisors through their contacts. There is no limit up to how many advisors a manager should have as long as it is in his span of control. On an average a productive Assistant Sales manager should have a team of about 35 financial advisors. Thus the Territory managers, Regional Managers, BSMs and ASMs fall under the retail sales division. The sales department is responsible for reaching out to clients and expanding the customer base of the company. At the higher levels they come up with plans to attract new customers to invest in the company. The goal of human resource department is to help an organization to meet strategic goals by attracting, and maintaining employees and also to manage them effectively. Human resources department is involved in several processes. Together they are supposed to achieve the Companys strategic goal. The functions of the HR department consists of workforce planning, recruitment (sometimes separated into attraction and selection), induction, orientation and on-boarding, skills management, training and development, personnel administration, compensation in wage or salary, time management, travel management, payroll, employee benefits administration, personnel cost planning, performance appraisal and labor relations.
19 In the human resource department, training and development department is concerned with organizational activity aimed at bettering the performance of individuals and groups in organizational settings. Here the
training division within the company organizes training programs for the financial advisors, Assistant Sales Managers and Branch Sales Managers. The training division conducts trainings on various modules from basic training to new entrant advisors to advanced training for experienced advisors. There is an underwriter department which scrutinizes proposals to prevent adverse selections of people proposing for an insurance cover. Admin department processes policies and feeds the details into the companys software data base. IT department is responsible for maintenance, up-gradation of the IT systems of the company.
Zonal business
head
BSM
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Training manager
Sales manager
Training officer
Advisor
Acquired skills to make effective calls and fix appointments for insurance solutions from cold market data Sharpened on my communications and presentation skills by presenting insurance solution to various customer groups. Also acquired skills in handling objections and concerns of customer. Improved on my ability to build good relationship with clients.
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Indias population growth - Population to increase from 1029 Million to 1400 Million between 20012026 Demographic transition 1. Will raise the proportion of working-age people 2. Favorable implications for savings, investment, and overall GDP growth 3. With the fall in youth dependency ratio - GDP will rise & participation of women in the work force likely to improve. 4. The above factor is a huge opportunity for insurance growth in the coming years.
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Expectation of life at birth was 63 years in 2001 Health Life expectancy is increasing but so is indicators currently is over 66 years strongly Incidence of lifestyle related disorders. underlines the need for Pension Products. Opportunity for Stand Alone Health Products
From the above figure 1.5, it can be seen that there is a growing market for private players which are indicative of their acceptance.
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Projected GDP and Life Insurance Industry Growth as per Life Insurance Council Estimates are as follows: Particulars GDP(USD billion) Life Insurance (USD billion) Population (million) 2010 1,063 38 1,153 2015 1,562 75 1,218 62 2020 2,295 145 1,286 112 2025 3,373 280 1,358 206
the principle of sharing, probabilities of events happening, law of large numbers, trust, randomness of event happening, mutual and proportional contributions The occurrence of event has to be random, accidental, and not the deliberate creation of the insured person Insurance companies collect premium in advance and create a fund from which the losses are paid While it may not be possible to tell beforehand, which person will suffer ,it may be possible to tell, on the basis of past experiences , how many persons, on an average , may suffer the losses A human being is an income generating asset whose value is measured by considering the income generated by the person. Accidents may or may not happen. Death will happen, but the timing is uncertain. The risks in the case of a human being are related to Early death Living too long Disabilities Sickness unemployment The concept of insurance applies both to tangible assets and intangible assets Insurance companies are called insurers. The business of insurance is to (a) bring together persons with common insurance interests (sharing the same risks), (b) collect the share or
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contribution (called premium) from all of them, and (c) pay out compensations (called claims) to those who suffer from the risks. Insurance business is classified primarily as life and non-life or general. According to IRDA regulations micro-insurance can be done by both life and general insurers for small sums assureds, like 5 to 50 thousands, on the basis of mutual tie-ups. The premium for insurance is based on expectations of the losses the larger the spread of the business, the better the experience in relation to expectations. According to law of large numbers, the larger the numbers (of risks) included in the pool, the better the chances that the assumptions regarding the probability of the risk will be accurate. The probability of risk is the basis of premium calculation, large numbers are necessary to ensure that the premium charged is enough. The insurer is in the position of a trustee as it is managing the common fund, for and on behalf of the community of policyholders. Insurers protect themselves from situations, which may be beyond their capacity, by reinsuring the risk with other insurers. If there is a claim, the burden is shared by the primary insurer and the reinsurers. Life insurance helps to reduce social costs and is complimentary to the states efforts in social management. Life insurance has lot of advantages over other forms of savings, in terms of security, marketability, stability of value or liquidity. It enhances the standard of living. Useful for both businesses and individual homes. Insurance is useful in case of emergency.
1. Principle of Utmost good Faith 2. Principle of Insurable interest 3. Principle of Indemnity Principle of Utmost good Faith As per this principle, it is the duty of the proposer of insurance policy to voluntarily disclose all facts material to the risk. E.g. Personal details, family details, occupation details, health related facts must be disclosed to the insurer etc. Material facts are necessary to assess the risk. Misrepresentation or Non-disclosure of material facts can lead to avoidance of contract by the insurer Principle of Insurable interest It refers to the pecuniary ( financial ) interest which any individual has on the subject matter to be insured. E.g. Any individual has interest on his own life, on the life of spouse etc. In Life Insurance, Insurable Interest should necessarily be present at the time of entering into the contract.
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Principle of Indemnity It aims to prevent the insured from making any profit and intends to keep a person in the same place where he was before the happening of the event, it basically compensates for losses up to the exact loss on damage or up to the insurance limit. This principle is not applicable in life insurance as one cannot estimate the human life accurately but only reasonably.
PREMIUMS AND BONUSES Premium is the consideration that the policyholder has to pay in order to secure the benefits offered by the insurance contract. A default in premium can endanger the continuance of the policy. The calculation of premium is a complex technical process, involving actuarial and statistical principles and is only done by actuaries. Tables of premium rates for each plan of insurance are made available by insurance companies for the use of agents The cost, to meet the risk of death for one year at a particular age, is called the risk premium. The risk premium is calculated on the basis of an expectation of how many persons are likely to die within a year in that age group. This expectation, regarding the number of persons likely to die within a year, at each age, is calculated by actuaries on the basis of past experiences and made available as Mortality tables. The premium worked out after taking into account the interest likely to be earned, is called the net premium or pure premium. The net or pure premium has to be increased for various reasons. Such increases are called loadings. These loadings are due to the following reasons The expenses of insurer, to procure and to administer the business
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Bonus has to be given to participating policyholders. Bonus is declared out of the surpluses determined after actuarial valuations. Unexpected contingencies and fluctuations .e.g.(Riots ,earthquake)
The premium is calculated on the basis of assumptions relating to the future experience on mortality, interest rates and expenses. These assumptions are based on the insurers own experience in the past Bonus is declared in various ways. The most common method is the Simple Reversionary Bonus. In a Compound Reversionary Bonus system, the bonus will be added to the existing SA including vested bonuses. A one-time bonus called terminal bonus or final additional bonus was declared for long-term policies which had been in force. This was in addition to the usual bonus already declared Interim bonuses payable on such policies, which become claims after the valuation date but before the declaration of valuation results.
UNDERWRITING The process of verifying the level of risk in each new proposal is called selection or underwriting. Underwriting has implications of fairness to the insurer and to policyholders, individually and collectively. If the underwriter finds that the life proposed to be insured has no adverse features affecting mortality it is considered as a normal or standard or first class life. The factors affecting risk on the life of an individual are called hazards. Hazards may be (i) physical (i) occupational or (iii) moral. There has to be a relation between the amount of insurance proposed and the income of the life to be insured. The extent of insurable interest of a person in his own life is unlimited. Making a judgment on these financial aspects is called financial underwriting. The underwriter makes his decision on the basis of details in proposal form, medical report and agent report. Insurers have medical referees on their panel who have specialized knowledge about the effect of medical conditions on mortality. The assessment of risk is mainly a matter of individual judgment. On the basis of the assessment of the risk, the underwriter decides on the acceptance of the proposal and may take one of the following decisions. Accept as proposed at ordinary rates Accept with extra premium. Accept with a lien Accept with modified terms Accept with (specified) clause Postpone for a specified period Decline INSURANCE DOCUMENTS
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A life insurance policy is a long term contract. Documentation is therefore important. The first document in the insurance file is the proposal or application for insurance. Declaration becomes necessary if someone other than the proposer has filled up the proposal form, or the proposer has answered the questions in a language different from the questions in proposal form or if the proposer is illiterate. The IRDA regulations require that the decision on the proposal should be made by the insurer within 15 days. The First Premium Receipt is the evidence that the insurance contract has begun. If the claim arises before the policy is issued, but after the FPR is issued, the insurer is liable. The following are usually accepted as proofs of age Certified extract from the municipal records Certificate of baptism Certified extract from family bible if it contains date of birth Certified extract from school or college records Certified extract from service register of employer Passport Identity cards issued by defense department in case of defense personnel Marriage certificate issued by a roman catholic church If none of these standard proofs of age are available, horoscopes, self-declaration by way of affidavit, elders declaration, or certificate by village panchayat, may be accepted as proof of age. These are referred to as non-standard proofs of age. The Insurance Act (Section 113) requires that every policy shall have a guaranteed surrender value, if at least three years premiums have been paid. The other non-forfeiture options are
Paid up policy: making the policy paid-up-under this option the sa is reduced to a sum which bears the same ratio to the full s.a as the number of premiums actually paid bears to the total number originally stipulated in the policy. A paid up policy is not entitled to bonus Loan advanced from surrender value: Keeping the policy in force through premiums advanced as a loan from surrender value Converting policy: providing term insurance cover from the surrender value by converting the policy into single premium term insurance for the full sa of the policy for such a period as the net surrender value will purchase.
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An assignment transfers the rights, title and interest of the assignor to the assignee. An assignment once made cannot be cancelled or even altered in form, by the assignor unless the assignee re-assigns the policy. Assignments are of two kinds, absolute, and conditional. Absolute Assignment is not reversible in nature. To change the title once again reassignment needs to be done. Conditional assignment on the other hand can be reversed on the fulfillment of some condition like loan repayment In both cases, all rights, title and interest of assignor in the policy pass to the assignee.
CLAIMS
A claim is the demand that the insurer should redeem the promise made in the contract. The insurer has then to perform his part of the contract i.e. Settle the claim, after satisfying himself that all the conditions and requirements for settlement of claim have been complied with. The date on which the term is complete, is the date of maturity and the settlement of the SA on that date is the maturity claim. If the loss of the original policy is genuine it is possible to settle the claim on the basis of an indemnity and also an advertisement in the newspapers. Maturity claims may be payable on the date of maturity in lump sum or later but in installments. A survival benefit is paid during the currency of the policy, before the date of maturity. The death claim action begins with an intimation being received in the insurers office. Documents Required
Death Claim Policy Document Assignment Deed Age Proof(if not submitted) Certificate of death Legal evidence of title Discharge Voucher
Maturity Claim Policy Document Assignment Deed Age Proof(if not submitted) Identity proof Discharge Form
If the life assured had an unnatural death, such as accident, suicide or unknown causes, police inquest report, panchanama, chemical examiners report, post mortem report, coroners report, etc. would be required The Indian Evidence Act provides for presumption of death, if a person has been reported missing for seven years.
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Plans that combine the benefits of life insurance as well as giving various options of participating in the growth of the capital market are called linked life insurance plans. They are also called unit linked insurance plans or ulips. A ulip is a life insurance policy which provides a combination of life insurance protection and investment. In the case of a ulip, the proposer offers to pay a certain sum towards premium for a fixed term. The premium may be paid as a single premium at the start or periodically over the term in yearly, half-yearly, quarterly or monthly installments. The sa or death cover, payable in the event of death during the term, is related to this premium, A certain amount is adjusted towards the cost of the insurance (death) cover and charges. The balance, called the allocated premium, is invested in a fund that the proposer chooses and buys a certain number of units in the chosen fund at the price being offered. The death benefit is fixed but the maturity benefit is not guaranteed. The maturity benefit depends on market conditions and the fund in which the premium has been invested, on the date of maturity. In linked policies on the happening of the event, the sa or the value of units in the fund, whichever is higher, is payable. As the risk cover decreases, the premium adjusted towards the cover will decrease and the amount allocated to investment will increase. Some of the other features offered by insurers along with ulips are the following. The policyholder can pay additional premium for investment at any time. Partial or total withdrawal is allowed. Sometimes there are conditions attached. Some insurers, not all, charge a redemption fee in such cases. These policies will not be entitled to any bonus There is no annual bonus, but there may be a loyalty bonus paid at the end The NAV of a fund represents the net value of the fund on a particular date and reflects the total value of the assets of that fund, after some adjustments for expenses. As market values of shares vary, the nav will keep varying from day to day.
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In actual practice, the NAV used at the time of entry, called the offer price, and the NAV used while exiting, called the bid price. The difference between the bid price and the offer price is called the bid-offer spread. Insurers publish the NAV of the various funds, which are offered to the policyholders. The value of a persons investment on any day, is the number of units held by him multiplied by the NAV Lock-in period is that period during which withdrawal is not allowed. It is 3 years according to IRDA guidelines. The surrender value will be allowed only after 3 years. A detailed Portfolio of MetLife Indias Unit-Linked Fund as on 31st March 2010
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32
33
34
35
36
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The NAV in the protector fund has risen from Rs.10 per unit since inception in Feb 2005 to over Rs.14 per unit in February 2010. Taking a hypothetical example, if Rs.100, 000 had been allocated to the fund in February 2005, the total units purchased would be Rs.100,000/ 10 = 10,000 units. As per the NAV rise of Rs.14 in the year 2010, the investment would augment to 10,000 units x Rs.14 = Rs.140, 000/Basically all the funds right from Protector Fund, preserver fund, moderator fund, balancer fund, accelerator fund, multiplier fund and virtue fund consists of investments into debt, equity and money market in varying percentages. Debt instruments: They mainly give fixed return which could be regular or given end of a period. It is a stable source of investment, but is not a hedge against inflation or in situation of rising interests. There is risk of an investor losing his purchasing power over a long term if he or she invests in only debt instruments. All debt instruments are given a credit rating. One can understand the ratings provided in the Unit-Link fund portfolio by referring the following table.
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Credit Rating
Rating Agency Highest Safety AAA Investment Grades High Moderate Safety safety AA A Less than moderate BBB High risk Higher risk B Almost Default default grade C D
CRISIL (Credit Rating & Information Services of India Limited) CARE (Credit Analysis & Research) ICRA Fitch
BB
AA LAA AA (IND)
A LA A (IND)
BB LBB BB (IND)
B LB B (IND)
C LC C (IND)
D LD D (IND)
Credit rating assesses the ability of issuer to repay. Rating is compulsory for public issues and for Commercial Paper and Certificates of Deposit. Money Market Money market" refers to the market for short-term requirement and deployment of funds. Money market instruments are those instruments, which have a maturity period of less than one year. Liquidity is high, hence returns are moderate. It is suitable for short term requirements of Corporate, institutions and money market mutual funds. Returns are totally dependent on market conditions of demand and supply. Equity Equity refers to stock, shares representing an ownership interest. It is a piece of document that proves the ownership interest of stock holders in a company. It is represented by shares reflecting the assets and earnings. Equity investments give the possibility of high returns coupled with risk. Equity offers returns linked to inflation, which can help an investor beat the inflation. It is required to build and safeguard a portfolio. There is high risk involved in equity investment and potentially the highest returns. Insurers allow policyholders to switch their moneys from one fund to another during the term of the policy. Some insurers charge a fee for every such switch. Some others allow a certain number of switches free and then charge a fee.
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% of portfolio Type of investor Aggressive Moderate Conservative Risk tolerance 5 High 5 Moderate 5 Low
Equity 80 60 40
Debt 15 35 55
Cash
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RS.
LIQUID ASSETS
RS.
1.
annual household exp100current interest rate
1. Life Insurance
2. Outstanding Loans: a. Housing loans b. Personal loans c. Credit card Medical Contingency for family/ parents
3.
2. Savings (FDs, PF, MF, Shares, Others) 3. Other liquid assets SHORTFALL
TOTAL
TOTAL
A. ACCUMLATION NEED: a. Children education b. Children Marriage = = Rs. ______________ Rs. ______________
Rs. ______________
A. RETIREMENT NEED:
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= =
Rs. ____________
Section 27 of Insurance Act Investment of Assets This section states that 65% compulsorily to be put in Govt. Securities and the balance 35% in specified stocks. Section 27 C of Insurance Act Prohibition for investments of funds outside India. This section states No insurer shall directly or indirectly invest outside India the funds of the policy holders. Section40B of Insurance Act- Limitation of expenses of management in life insurance business This section states No insurer shall, in respect of life insurance business transacted by him in India, spend as expenses of management in any calendar year an amount in excess of the prescribed limits. Section 54 of Insurance Act- Voluntary Winding Up This section states Notwithstanding anything contained in the Indian Companies Act, 1913 (7 of 1913) an insurance company shall not be wound up voluntarily except for the purpose of affecting an amalgamation or a re-construction of the company. This regulation addresses the concern of policyholder regarding shutting down of private insurance companies. As such no insurance company can wind up its operations.
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13th May to 20th May 10:00am 5:00pm IRDA training conducted at MetLife office. Topics covered in this session are as follows: Premiums and bonuses Actuaries Introduction to various life insurance products such as term assurance, endowment, money back, whole life policy, pension plans.
20th May to 27th May 10:00 am 5:00pm IRDA training conducted at MetLife office. Topics covered in this session are as follows: Underwriting and its processes How to process insurance documents and important documents needed for various insurance proposals. Demo on policy documentation done in class
27th May to 3rd June 10:00 am 5:00pm IRDA training conducted at MetLife office. Topics covered in this session are as follows:
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Policy conditions Revival process Nomination in policies. Claims- Death claims, maturity claims How to process claims
3rd June to 10th June Session I. 10:00 am 2:00pm IRDA training conducted at MetLife office. Topics covered in this session are as follows: Unit Linked Insurance products Insurance Agency
Session II. 2:30pm- 6:30pm- Soft skills training and training on company information was conducted. Introduction to MetLife Company Participated in role plays on providing insurance solutions to clients. Objection handling Making prospect list.
10th June to 17th June 10:00 am 12:00pm 12:00am- 2:00pm 3:00pm 5:00pm Tele Calling prospects for appointments. On Field (Did need analysis for clients to understand their financial gaps) On Field (Prospecting new clients) Meeting prospects from warm market and acquaintances.
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5:00pm- 6:00pm
- Reporting to our guide to identify areas for improvement and to discuss new strategies. - Processing illustrations of clients.
17th June to 24th June 10:00 am 12:00pm 12:00am- 2:00pm 3:00pm 5:00pm Tele Calling prospects for appointments. On Field (Did need analysis for clients to understand their financial gaps) On Field (Prospecting new clients)
Presentation to clients. Client relationship building. Need Analysis of clients Recommendation of insurance products. Policy documentation Asking for referral
5:00pm- 6:00pm
Reporting to our guide to identify areas for improvement and to discuss new strategies.
24th June to 6th July 10:00 am 12:00pm 12:00am- 2:00pm Tele Calling prospects for appointments. Pamphlet Activities- Distributed pamphlets in housing societies in Powai. On Field (Did need analysis for clients to understand their financial gaps)
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3:00pm 5:00pm
Presentation to clients. Client relationship building. Need Analysis of clients Recommendation of insurance products. Policy documentation Asking for reference
Global Perspective: Financial advisors, who may be referred to as insurance sales agents, help clients choose insurance policies that suit their needs. Clients include individuals and families as well as businesses. In developed nations like United States, UK, Germany, France etc financial advisors are people who are looked up to for advise or counseling on ones insurance needs. There, people take appointment of financial advisors and also pay consulting fees just like how they would to a doctor. Financial consulting is a big business with most MDRTs coming from these developed nations. MDRT is an acronym for Million Dollar Round Table, an organization formed in 1927 to help insurance salespeople and financial advisors establish best business practices and develop ethical and effective ways to increase client interest in financial products, specifically risk based products like life insurance, disability and long term care. Their meeting over the years has enhanced technical knowledge, sales abilities and ethical standards of Insurance advisors world over and thus contributed to improve the professional image of Insurance advisors. Domestic Perspective: In India, financial advisors in general, have way to go before they are seen in the same light as their foreign counterparts. A financial advisor is usually is ascribed to agents who solicits policies for tax saving benefits from you. It is yet to be seen as profession where people actively seek advice on matters related to their insurance needs, however in many places in India it is happening. Many successful financial advisors services more than 25000 policies of people ranging from low level workers, professionals, corporate executives, other middle class people to top Bollywood actors and actresses, industrialists etc drawing handsome remunerations.
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WORK DESCRIPTION
My role of work in MetLife Company was in the position of a financial advisor which involved giving need based solutions to people to meet their insurance and investment requirements. The steps involved in this profile were: 1. Identifying people who can be prospective clients. 2. Fixing appointments with clients by Tele-calling or face to face. 3. Meeting with the client. 4. Understanding the clients needs and resources. 5. Understanding the investment alternatives. 6. Aid in evaluating the alternatives. 7. Designing and offering an optimum combination of products to meet his requirements. 8. Presenting the financial solution to him. 9. Handling any questions or doubts of the client. 10. Following up on the client to help him make an informed decision.
11. Helping the client with the documentation for presenting the insurance proposal to the company. 12. Updating the client on the financial environment. 13. Building continued relationship with the client. FINANCIAL ADVISOR- An upcoming form of entrepreneurship in India One of the missions of the agency development team in MetLife Company is to change the way people look at this industry and insurance planning. They are accomplishing this mission by training their advisors to see this profession in a fresh perspective as a WEALTH DOCTOR rather than as an agent of MetLife Company. As a licensed wealth doctor and advisor first as to start his practice just like the health doctor, he needs to popularize himself to the world in order to attract clients. He then needs to carry out fact finding (see the fact finding sheet attached in this section) or diagnose in order to understand the financial needs or requirements of people and prescribe medicine or solutions to their financial problems. With the advent of ecommerce, the documentation, premium collections etc has been all automated through various payment gateways such as online banking, electronic credit system (ECS), credit card payments, drops boxes for cheque payment and DD payments at various ATM centers etc. This leaves the advisor free to focus on prospecting, analyzing needs of his or her customer and giving them appropriate solutions, and mainly educating people at large on the importance of insurance and financial planning. The professional approach taken by financial advisors in MetLife is illustrated as below, which involves giving need based customized solutions, building a long term relationship based on trust which would give more business in the future.
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While analyzing a clients portfolio as an advisor one must take the following factors in account such as:
Psychological factors Liabilities Presence of dependents Stability of income Performance of the financial markets Available cushion Need for current income Number of years before income is required / Presence of social security
A Clients life stage is also considered before offering him a solution, as investment objectives vary over the investors life stage. The Life stage is analyzed as follows: Stage Younger (Accumulation phase) Middle age (Consolidation phase) Retirement age (Spending phase) Investor Profile Early to middle working years Midpoint of investor's working life Earning years have concluded Horizon Long term horizon Fairly long Short Earning capacity Growing Risk Taking ability High to obtain high nominal returns
Will exceed needs Moderate risk to protect existing assets Exhausted Low risk for protection, but some risk for guarding against inflation
At every life stage a client has different priorities which are also discussed with the client to help him meet them. These priorities which are milestones for the client can be listed as thus:
Stage Young Concerns Protection, house, car, interest payments, weddings, children and future School expenses, health expenses, lifestyle expenses, future etc. Retirement income Typical risk taking ability Highest
Middle aged
Lower
Older
Least
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To become a financial advisor with MetLife company one needs to first get 50 hours mandated IRDA training, after which one has to pass with minimum 50 % marks in the IRDA exam. Once both the stated criterias are fulfilled an advisor can start his practice of financial planning for his clients.
To be a World Class Customer Service. To have Innovative Market Oriented Product Line
Vision Statement Financial Freedom for all Mission Statement To be recognized as the financial services firm of choice in the communities we serve, today and tomorrow. We succeed at accomplishing this by putting our client's needs first and making certain we focus on building financial freedom for them and their loved ones. Corporate Values:
"Com ing into your own", performing as a Leader to be really effective and successful by acting and making decisions independently to get results.
It's all about People, MetLife's key resource. MetLife will succeed because we are winning from within.
Functioning productively in teams towards a common purpose; realising the collective power of diverse work-groups.
Operating with an intense Conducting all business dedication to managing monetary endeavours with truth, resources for strong business sincerity and fairness. results. GOALS
Continuously creating and introducing new and original ideas and ways of doing things.
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The companys stated long-term goal is to become the recognized leader throughout the world for relationship building, connectedness and caring in financial services in the "giant league" with over 100 million people as MetLife customers by the year 2010.
Communication skills
As my role involved meeting and communicating with people on a daily basis, it was a great opportunity to hone my communication skills. I have been able to develop myself in the following areas: Non- verbal Ability to listen attentively and genuinely to customer without interrupting to understand his motivations, concerns, goals etc. Ability to create an environment of trust. Ability to listen to irate customers without being judgmental. Following business etiquettes when on a presentation with customer. Verbal
Improved on my skills of persuasion. Skill in persuading a customer who has had a bad experience with another company or product before to become positive again. Skill in handling objections, concerns of customers. Skill in closing calls effectively. Worked on the area of building relationship and strengthening trust among clients, as that would generate further growth through word of mouth.
Accolades: Incentives Awards Job Offers : : : Received commission on various policies sold. Got rewarded with The Quick Starter certificate. Got invitation from Regional Manager to join for Pegasus program to be trained as Assistant Sales Manager in MetLife Insurance Company Ltd.
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AREAS OF IMPROVEMENT
1. From my observation around the office, I found that that many advisors started off well with
enthusiasm, but after a period of doing business they stopped attending meetings and coming to the office which is a current problem being faced by other insurance companies also. Although there has been no specific study done on attrition rates, I would like to quote discussions published in Outlook Money magazine newspaper in April 30th 2005, where Mr. Gaurav Suri, director marketing, MetLife India said: "The attrition rate could be 40-65 per cent per annum. Agent attrition rate is as high as 70% in this industry, and the productivity is approximately 1.5 policies per active agent per month."
2. Many customers do not have confidence in investing with a private life insurance company.
Most of these customers believe in government run insurance company and assumes it to have sound financial foundations. Hence they refrain from investing in Private Life insurance companies. 3. MIS issues:
Software used for generating client illustrations was not compatible in many browsers. Processing of policies at the stage of feeding policy data into systems was comparatively very slow.
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By working on the lines of the above strategy, by activating 20,000 advisors through this program, the company for instance could keep an average targeted premium of Rs.20,000 each month from each advisor. This will boost their premium collection by Rs. 120 Crore in a quarter. The above strategy is an outline, the intricacies and modifications must be worked out on case to case basis based on actual figures of inactive FAs.
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Insert in company web sites FAQ (frequently asked questions)- question addressing, Is there a possibility of company shutting down, what happens to my policy? FAQ can answer the questions by mentioning laws from Insurance Act Section 27, Section 27 C, Section 40B & Section 54 which protect the right of the policy holders. Please refer to section on important Insurance Act mentioned in the Learning and development part of this report for the same. At the same time customers can be educated on solvency controls imposed by IRDA to secure the policy holders of Life Insurance Company as shown in the industry section. Company can launch programs to build awareness of clients on insurance products and private companies by sponsoring quiz competitions at colleges, workshops for
MIS Concerns
The company should look up into the issues of its IT systems, and can organize an open forum of IT experts to tackle this issue. They can look for strategies such as outsourcing as done by various other insurance companies to handle processing of data in their systems. This is would help them to increase their productivity of policy processing, give good IT support to their advisors and sales managers on field. This in turn would lower costs leading to higher profit margins.
CONCLUSIONS
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The insurance sector has an immense potential in India due to rising incomes, demographic changes in terms of younger population and increasing number of life style diseases. It is the next BOP (Biggest Opportunity Provider). The Indian Life Insurance industry is poised to double every 5 years till 2025. There is a potential to catch up Asias average penetration of 5% in 4-5 years and number of policies in force is likely to reach 180 million in 2010 as compared to 51 million policies in 2007, as per Life Insurance councils estimates. High growth is expected in pension and health insurance. The approach to insurance must be in tune with the changing times and financial advisors have a pivotal role to play in changing the way insurance is perceived in India. As a professional career, financial advisor is coming of age with more people leaving the security of full time careers and security, to choose the path of entrepreneurship. Job security was given more importance among the masses prior to globalization and liberalization in India. However the foundation of job security has been shaken in the recent times after nations across the globe faced many economic crisis like the dot com bubble, recession in the financial sector across the globe etc. There has been a slow paradigm shift among the masses with people moving away from employment and job security to become entrepreneurs, business men, business women, in pursuit of financial independence, being their own boss and earning income much more than they would earn in a professional career. And in this paradigm shift among people, the role of a Financial Advisor is drawing more people with its attractive proposition such as zero capital, low documentation, deciding your own pay checks, working as per your time, foreign trips and ultimately making a positive impact on peoples lives.
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Bibliography
www.money.outlookindia.com/article.aspx?88992 http://www.thehindu.com/news/article506121.ece
www.irdaindia.org http://www.crisil.com/credit-ratings-risk-assessment/rating-scales.htm IC-33 Insurance Manual http://www.metlife.co.in/MetLifeDownloads_fundsupdate.aspx http://www.un.org/esa/population/unpop.htm http://www.metlife.co.in/MetLifeAboutus_MgtTeam.aspx www.lifeinscouncil.org