Professional Documents
Culture Documents
SUBMITTED BY
NAIR SHARI SIVAN
THIRD YEAR (BANKING & INSURANCE) (SEMESTER – VI)
2010 – 2011
MODEL COLLEGE
DOMBIVLI
UNIVERSITY OF MUMBAI
MARCH 2011
1
A PROJECT REPORT ON
GROUP INSURANCE – A CASE STUDY
SUBMITTED TO
BY
NAIR SHARI SIVAN
MODEL COLLEGE
DOMBIVLI
MARCH 2011
2
DECLARATION
3
ACKNOWLEDGEMENT
This project could not have been possible without the help of entire
library department of our college. They made as much data,
books, magazines etc. available as they can to facilitate the easy
collection of information.
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TABLE OF CONTENTS
LIST OF ABBREVIATIONS
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OYRGTA : One Year Renewable Group Term Assurance
Plan
GLES : Group Leave Encashment Scheme
EPS : Employees Pension Scheme
EPF : Employees Provident Fund
GPF : General Provident Fund
CPF : Contributory Provident Fund
PPF : Public Provident Fund
EDLIS : Employees Deposit Linked Insurance
Scheme
EPFO : Employees Provident Fund Organisation
FPS : Family Pension Scheme
PF : Pension Fund
EMI : Equated Monthly Installments
HIV : Human Immunodeficiency Virus
NGO : Non- Governmental Organisation
LIST OF DIAGRAMS
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DIAGRAM TOPICS PAGE NO
NO
4.1 GROUP SCHEMES 24
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CHA
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CHAPTER 1
AN INTRODUCTION
In the good olden days, the farming community used to live almost
self sufficiently. In the hours of crisis the members helped each
other. When the family head temporarily stayed back from farming
operations owing to sickness, the other members of the family
automatically took care of him. Industrialization has dramatically
changed the way of life around the world. There was rapid growth
growth in new industries and the existing industries looked to
expand domestically and internationally. Industrial revolution
brought opportunities as well as threats. The immediate
advantages were development of new tools and technological
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advancements, innovations in production methods, mechanization
of activities, large scale operations, cost reductions, cost
efficiency, creation of colossal employment opportunities, evolution
of new knowledge and emergence of new professions. On the
other hand, the concept of social security in the form of joint family
system was slowly getting eroded. Self – dependence and self –
sufficiency were lost when people started migrating from farms to
factories. The concept of nuclear family took birth and people
started feeling socially and economically insecure. In the process
every member of the society was compelled to work to gain
economic independence.
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ABOUT THE REPORT:
The present study suffers from all limitations of case study method.
15
For the purpose of the present study, both primary and secondary
data were used. Primary data collected from insurance company
visit, interviewing staff etc. Secondary data collected for books,
internets, etc.
5) CHAPTER LAYOUT :
India.
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CHAPTER – 2
– A PROFILE
History:
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premiums. The Bombay Mutual Life Assurance Society, formed in
1870, was the first native insurance provider.
The Life Insurance Act and the Provident Fund Act were passed in
1912, providing the first regulatory mechanisms in the Life
Insurance industry. The Indian Insurance Companies Act of 1928
authorized the government to obtain statistical information from
companies operating in both life and non-life insurance areas. The
subsequent Insurance Act of 1938 brought stricter state control
over an industry that had seen several financially unsound
ventures fail. A bill was also introduced in the Legislative Assembly
in 1944 to nationalize the insurance industry.
Nationalization:
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Ram Kishan Dalmia, owner of the Times of India newspaper, was
sent to prison for two years. Eventually, the Parliament of India
passed the Life Insurance of India Act on 1956-06-19, and the Life
Insurance Corporation of India was created on 1956-09-01, by
consolidating the life insurance business of 245 private life insurers
and other entities offering life insurance services. Nationalization of
the life insurance business in India was a result of the Industrial
Policy Resolution of 1956, which had created a policy framework
for extending state control over at least seventeen sectors of the
economy, including the life insurance.
Current status:
The recent Economic Times Brand Equity Survey rated LIC as the
No. 1 Service Brand of the Country. The slogan of LIC is "Zindagi
ke saath bhi, Zindagi ke baad bhi" in hindi. In english it means
"with life also, after life also.”
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Mission:
"Explore and enhance the quality of life of people through financial
security by providing products and services of aspired attributes
with competitive returns, and by rendering resources for economic
development."
Vision:
"A trans-nationally competitive financial conglomerate of
significance to societies and Pride of India."
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CHAPTER 3
THEORETICAL VIEW
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independence, though in the initial years, the group insurance
market was not amenable to this kind of benefit to employees.
However, with gradual realization of importance of group
insurance, and demands by trade unions, a sudden rise in
business was noticed. Group insurance has almost become an
indispensable part of the employee benefit package. Group
insurance has indeed made great contribution to the society as
could be seen from the following:
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• Group insurance under the same umbrella
provides various products of life, accident and health
insurance, which would ultimately help employers, retain
employees and their high productivity.
Low Cost:
The major benefit derived by the employee under group
insurance is the low cost of policy as compared to the
individual insurance policy. This is feasible due to large
number of employees under the same insurance policy that
ultimately reduced the administrative costs.
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Thus, it depends solely on the employer to fund its insurance
policy.
Flexibility:
The concept of group insurance is applicable to all the
sections of society and industry. This aspect of group
insurance has made it popular among different groups like
trade associations, etc.
Tax Deductions:
The employee under the group can avail the benefits of tax
deductions by contributing to the group insurance policy.
Retention:
Many organizations provide group insurance to their
employees in the form of an additional benefit to retain them
for a longer period. Group insurance benefit not only
increases the retention ratio among the employees, but also
their productivity and morale.
Public Image:
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An organization can always promote its public image through
group insurance schemes and thus, attract the major
productive cream of the market.
Tax Benefits:
By providing the group insurance benefit plan, whether
contributory or non-contributory, to the employees, the
employer can avail tax deductions under the taxation rules.
Size of Organization:
Group insurance is beneficial to all types of organizations,
irrespective of size and number of employees.
Master Contract:
In group insurance, large number of employees, belonging to
a homogeneous unit are insured collectively, under a “master
policy or a contract” for the whole group. The master contract
is issued to the employer, while the employees receive
“certificate of insurance”.
Premium Payment:
On the basis of premium payment, group insurance is
divided into two categories, contributory and non-
contributory. To obtain the benefits of high productivity,
organizations prefer to take the non-contributory policy by
paying fully by themselves or both the employer and the
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employee sharing the cost as in the case of a contributory
policy. In both the cases the employer gets the benefits of
tax deduction to the extent of his contribution towards the
premium.
Determination of benefits:
The insurance company has to decide the method of
determining the benefits in a way that individual selection
both by the employer and the employee does not generate
conflicts. Thus, the employer needs to determine a formula
or a specific level of salary or position that forms the basis for
determination of benefits.
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Group Supplemental Life Plans:
The Supplemental Life Plans or optional life plans offer
additional insurance benefits beyond the basic benefits
provided under the group term life plans. The premiums are
usually shared by employer and employee. The premiums
under these plans are usually dependent on age of the
employee with brackets of five years. Medical coverage is
also provided though members need not undergo a medical
check-up, and a declaration of good health from the
members is considered sufficient.
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member under the policy is usually the creditor who takes
loans from the lender. The lender can take a group credit life
insurance plan on the lives of his debtors, and the premium
is borne by lender on non-sharing basis.
28
The superannuation schemes were developed with an
intention to provide post-retirement income to the
employees. In India, these schemes were introduced much
later, while in western countries they where available from
the beginning of this century. A well designed and managed
group superannuation plan can provide a considerable
amount to an employee, without the employer prone to much
complications and hardships.
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coverage could be had either for disabilities due to accidents
alone or accidents and illness.
SOCIAL SECURITY:
Social security has emerged as a sequel to the society from
agricultural to industrial that changed the very social fabric as the
people who migrated to the big cities found themselves to be
financially insecure as they could find very few people around to
share their uncertainties/emotional needs with. This change
occurred first in Europe during the 19th century. Although industrial
revolution brought with it increased material benefits, it also led to
unsuitable living conditions, increased working hours and
disparities in wealth between the upper and the lower class of
people in the society. To arrest the ill effects of such disparities,
many governments came up with the concept of “Social Security”.
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In the Indian scenario, the government is the major player in the
field of social security measures. Social security is mainly in the
form of government initiated employer benefits, rural insurance
and benefits for the social sector. Apart from the government, the
private employers and insurance companies are forging ahead in
the field of social security or social insurance in the form of various
employee benefit packages.
PROVIDENT FUND
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Provident fund is a lump sum amount accumulated over a
period of service of employee, and is paid on
retirement/death/resignation of the employee. Both employer
and employee contribute towards provident fund account of
employee. It is a defined contribution scheme, with the
minimum amount of contribution fixed by the government. An
employee can be part of one of the following schemes:
BENEFITS:
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• On retirement from service after reaching 55 years of
age.
• Retirement due to permanent and total incapacity for
work on account of physical or mental disability.
• Migration from India with the intention of permanent
settlement abroad.
• Termination of services.
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withdrawals and advance against available balance,
subject to certain limits is allowed.
34
introduced in the year 1976. Among all the schemes of
EPFO, the EDLIS is believed to be the most well performing
scheme.
GRATUITY BENEFIT:
The Payment of Gratuity Act is one of the legislations passed
by the Indian government for providing old age income
security for both organized and unorganized sector working
population. The foremost purpose of the Act is to provide a
minimum amount to the workers depending on the number of
years of service rendered by them to their employer. Gratuity
i.e., a lump sum is paid to the employees/workers on their
leaving the services due to retirement, resignation, disability
or death.
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also contributed an amount of 1.16% of the wages towards
the scheme. EPS is essentially a defined benefit scheme.
Being a defined benefit scheme the pension payable is
dependent on the final salary of the member and the number
of years of service rendered.
CHAPTER 4
GROUP INSURANCE
- A CASE STUDY
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Group Term
Insurance Sche
mes
Group Insurance
Group Critical Illness Rider Scheme in Lieu
of EDLI
Group
Mortgage
Group Gratuity
Redemption Group
Scheme
Assurance Schemes
Scheme
Group Super
Group Leave Encashment Scheme Annuation
Group Savings Scheme
Linked
Insurance
Scheme
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Social Security
Schemes
Premium Chargeable:
Group (Term) Insurance Scheme is at present offered
under One Year Renewable Group term assurance plan
(OYRGTA). Every year on Annual Renewal date LIC
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charges the premium depending upon the changes in size
and age distribution of the age group.
Different Schemes:
Group (term) Insurance Scheme has a number of varieties.
The Scheme may provide for a uniform cover to all
members of the group or graded covers for different
categories of members, cover for all amounts of
outstanding housing loans or vehicle advances, or some
other benefits (e.g., life cover to supplement pension or PF
benefits in case of death). The schemes may have add-ons
like Double Accident Benefit, Critical Illness Benefit,
Disability benefit etc.
1. PREMIUM:
The premium under such scheme may be wholly paid by
the employer or the Nodal Agency. However, the
scheme may be contributory i.e. the members may also
contribute.
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3. ELIGIBILITY:
For Group Insurance Scheme in lieu of EDLIS the
insurability condition is that should be a member of the
Provident Fund Scheme of the employer. For other GI
Schemes of employer-employee groups the insurability
condition is that the member should not be absent on
ground of sickness on the entry date. For all non-
employer-employee Group Schemes the basic
insurability condition is that the member should be in
good health on the date of entry.
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2. Settlement of claim is quicker; LIC requires only the
death certificate and the Claim Form from the employer.
ACCIDENT BENEFIT:
Double accident benefit can be allowed to the extent of the
Sum Assured for an extra Premium.
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The gratuity arrangement with LIC provides the following
services to the company:
Fund management:
Critical issues
Safety:
Liability on account of gratuity experiences sharp increase
every year due to its nature of its computation. Apart from
increase in service, increase in salary also contributes to
increase in liability substantially as the benefits are payable on
last drawn salary. Hence funds have to be invested in a
conservative way with a consistent growth and insulated from
market risks. The unique advantage with LIC is the
contributions made by the company and interests credited by
LIC are irreversible. This ensures highest level of safety for the
total corpus and consistency in future contributions. As the
gratuity payments are statutory and LIC gratuity scheme being
the only investment tool which enjoys sovereign guarantee,
gives a greater comfort to employer.
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Liquidity:
A fund available with LIC is a single account for investment and
claim settlement. Hence 100% liquidity is ensured for the
purpose of claim settlement.
Yield:
LIC has been offering very competitive and consistent interest
rates over the years. For the year 2009-10, LIC has offered
9.00% - 9.65% depending on fund size. The interest declared is
net of administrative expenses incurred, hence no separate
charges are charged after crediting the interest. Interest rate
offered by LIC is on daily balancing method. Hence, there is no
idle time for earning interest, hence effective rate of interest is
much higher. Another significant aspect is interest gets
compounded annually, hence no reinvestment issues and no
time lags.
No hidden charges:
The scheme is focused on a long term association in
compliance with investment regulations and statutory payment
obligations and no charges are levied on the transactions for
which the fund is meant for.
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Funding can also be in a staggered pattern during the year, but
no charges at entry level for any number of payments. No
charges on withdrawals for resignation or retirement or death.
Total corpus comprising of money contributed by the company
and interest credited by LIC is available for claim settlement up
to 100% subject to availability of funds.
Actuarial recommendations:
On annual basis, LIC provides this information to the trustees
and recommends the level of contributions.
Claim settlement:
On the exit of an employee due to retirement / death/
resignation, trust may prefer a claim from LIC by sending a
claim form. Claim amount will be made available to trustees.
MIS:
LIC provides statement of receipts and payments and actuarial
valuation certificate and certificate of balance for the trust
account.
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Besides the above said advantages, the scheme also provides
for employee welfare measures with built in insurance cover.
The LIC managed Pension fund has the following added and
distinct advantages:-
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3. We conduct free actuarial valuations of the funds
administered by us from time to time.
BENEFITS:
1) ON RETIREMENT:
On Retirement of a member, the corpus (contributions plus
interest) is utilized to provide the pension as per his choice.
2) ON DEATH:
The Pension is payable on the life of the beneficiary. Corpus
is utilized towards the payment of pension of the type the
beneficiary may opt and the benefit so received is tax free. A
lump sum payable by way of death besides the pension, if
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the employer has taken Group Insurance Scheme in
conjunction with the Group Superannuation Scheme.
3) ON WITHDRAWAL:
He can get the equitable interest transferred to the
Superannuation Scheme of the new employer or opt for
immediate or deferred pension.
ELIGIBILITY CONDITION:
It is not obligatory or statutory on the part of the employer to
provide for pension to all employees. It is entirely up to him
to decide to which class/ classes of employees he desires to
extend the scheme. The eligibility conditions may be defined
on the basis of designation or salary. (However, after the
categories are specified, employer cannot discriminate
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between the employees and thus extends the scheme
uniformly).
CONTRIBUTION:
The maximum annual contribution that an employer can
make to the Pension Fund and Provident Fund is restricted
by the Income Tax Provisions to 27% of the annual salary
(basic plus D.A.) The annual contributions are treated as
deductible business expenses.
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a) The Scheme can be introduced
by employers provided certain percentage of employees is
willing to join the Scheme.
PREMIUM:
It is decided on the basis of Group size and the occupation of
the group. Premium has two components i.e. Risk Premium and
Savings Premium. Risk Premium is utilized to offer life cover
and the Savings Premium is accumulated in members account.
ACCIDENT BENEFIT:
Double accident benefit can be allowed to the extent of the Sum
Assured for an extra Premium.
INTEREST ON SAVINGS
:
The present rate of interest allowed on saving portion of
premium is 8% compounding yearly.
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age are eligible to join the scheme. All future employees have to
join the scheme compulsorily.
TAX BENEFITS:
Employees' total contribution, savings as well as risk premium is
entitled for income-tax rebate under Sec. 80C of the Income
Tax Act. The entire claim amount including interest earned
payable on retirement or leaving service or on death is free from
income-tax. The premium paid by the employer towards
insurance cover is treated as business expenses.
The Features:
Group Leave Encashment Schemes (GLES) of LIC helps the
employers in funding of their lave encashment liability.
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1. The Company will submit the employees' data and rules for
Leave Encashment. LIC will make actuarial valuation and
find out the funding requirements which shall be quoted to
the company. The company will contribute as per the advice
of LIC.
Benefits:
1. On the exit of an employee or encashment of leaves during
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3. The Life Insurance Corporation of India will do the Actuarial
Valuation and will provide necessary certificate as per AS-
15.
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In case of death of the member during the coverage period, life
cover on the anniversary date proceeding the date of death is
payable. The claim proceeds are used to square off the
outstanding loan.
FEATURES:
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of Rs. 50 Thousands and maximum of Rs 20 lac per
member.
1. Cancer
2. Coronary Artery (Bye pass) Surgery
3. Heart attack (Myocardial infarction)
4. Stroke
5. Kidney failure (End stage renal disease)
6. Aorta (Surgery of Aorta)
7. Heart valve replacement
8. Major Burns.
BENEFITS :
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the Sum assured under the life cover in the event of
occurrence of 8 diseases covered under the rider.
EXCLUSIONS:
1. Diseases in the presence of an HIV infection.
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covered or whether the insured was covered by us or
another insurer.
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9. Taking part in any naval, military or air force operation
during peace time.
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1) JanaShree Bima Yojana (JBY):
The objective of the scheme is to provide life insurance
protection to the rural and urban poor persons below poverty
line and marginally above the poverty line.
ELIGIBILITY:
A person who is
• Aged between 18 and 59 years.
• Below or marginally above poverty line
• A member of any of the approved
vocation/occupation groups
NODAL AGENCY:
A State Government Department which is concerned with the
welfare of any such vocation/occupation group, a Welfare
Fund/ Society, Village Panchayat,NGO,Self-Help Group,etc.
Twenty five.
ELIGIBILITY:
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BENEFIT:
Scholarship of Rs 300/- per quarter per child will be paid for
maximum period of 4 years. The benefit is restricted to two
children per member (family) only.
PREMIUM:
No premium is charged for the scholarship.
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In a rural landless household, when everyday living is a
struggle, it is difficult to face life with a smile. And it becomes
even more difficult when the future of your family is uncertain.
NODAL AGENCY :
The Nodal Agency shall mean the State / Union Territory
Government appointed to administer the scheme.
The Nodal Agency shall act for and on behalf of the insured
members in all matters relating to the Scheme.
IDENTIFICATION OF BENEFICIARIES:
The State / Union Territory Government in consultation with
the Panchayats will identify the persons to be covered under
the scheme. All the members will be provided with an identity
card by LIC with an unique identity number.
ELIGIBILITY:
The member should be aged between 18 and 59 years.
The member should be the head of the family or one earning
member in the family of rural landless household.
AGE PROOF:
• Ration Card
• Extract from Birth Certificate
• Extract from School Certificate.
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• Voters list
• Identity Card
In case of doubt, a certificate from Primary Health Centre can
be accepted as authentic proof of age.
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CHAPTER 5
CONCLUSION
1) GROUP INSURANCE
- THE ICFAI UNIVERSITY
WEBLIOGRAPHY:
1) www.ask.com
2) www.licindia.in