An Assignment on QUALITY MANAGEMENT

TOPIC: LIFE

INSURANCE POLICY

Prepared By,

Tuttu Rajendran S4, MBA-IB SMS-CUSAT

Life Insurance is the fastest growing sector in India since 2000 as Government allowed Private players and FDI up to 26% and recently Cabinet approved a proposal to increase it to 49%. Life Insurance in India was nationalised by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC. In 1993, the Government of India appointed RN Malhotra Committee to lay down a road map for privatisation of the life insurance sector. While the committee submitted its report in 1994, it took another six years before the enabling legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. The same year the newly appointed insurance regulator - Insurance Regulatory and Development Authority IRDAstarted issuing licenses to private life insurers.

Basic Functions 0f Life Insurance Policies

Life insurance provides monetary funds to the people you name as beneficiaries in your life insurance policy. In exchange for paying the premiums, your insurance company will pay out a death benefit to your beneficiaries after you die. The majority of adults buy life insurance to cover immediate expenses after they die, like funeral, burial or cremation costs, as well as to cover any estate tax they may owe. But life insurance can be used for more than just taking care of your final arrangements. Life insurance is also used to provide money for long-term expenses for loved ones. Long-term expenses can include: *House payments *Car payments *Credit card debt *Utilities *Food and clothing *Childcare *College funds *Spousal retirement funds It's important to remember that the main purpose of life insurance is to alleviate financial stress after a loved one dies, which may mean compensating for a lost income. Therefore, taking long-term expenses into consideration will help to ensure that your beneficiaries are adequately protected if you were to die unexpectedly.

Don't have any dependents to support? While you may not need to supplement a lost income, unless you have the funds to cover all debts and last expenses, purchasing life insurance is a good idea. Doing so means not burdening friends and family with your expenses. In addition, the proceeds from your life insurance policy can be donated to charity in your name, allowing you to leave something behind after you're gone. Additional Benefits Depending on what kind of life insurance you buy, your policy may carry additional benefits that can increase your death benefit over time. This is especially true for permanent life insurance policies. These policies provide you with lifelong protection, which means a death benefit will be paid out no matter when you die, unlike term policies, which may be contingent on when or if you die during the policy's term. The most common trait of permanent policies is that they typically build cash value over time. As a policyholder, you can use this cash to pay your premiums, accrue for a greater death benefit or borrow against your policy. While stipulations may apply to how you use any earned cash value, many policyholders enjoy the versatility that permanent policies have to offer. Nonetheless, one size does not fit all when it comes to life insurance. Be sure to take the time to learn about the features of each respective life insurance policy before you buy to make sure you're purchasing the right policy for you. Buying a Policy Once you've become familiar with what life insurance has to offer, you'll probably be ready to start shopping for a policy. Many consumers are learning that the Internet has made this task immeasurably easier than calling multiple agents. You can get both information and free life insurance quotes online, helping to speed the buying process along that much faster. While you'll undoubtedly shop around for the best price, it's also important to find a licensed professional who will help you assess your exact needs and provide you with good customer service, as well as save you money. Your insurer's credentials, customer service rating and financial standing can be viewed free of charge through your state division of insurance and through consumer advocate groups like A.M. Best. Taking advantage of free resources like online life insurance quotes and other consumer resources will help you learn about life insurance and get the best possible deal. In the end, you'll rest easier knowing you've secured cheap life insurance to protect your family for years to come.

General Features of Life insurance Policies

The insurance contract or agreement is a contract whereby the insurer will pay the insured (the person whom benefits would be paid to, or on the behalf of), if certain defined events occur. Subject to the "fortuity principle", the event must be uncertain. The uncertainty can be either as to when the event will happen (e.g. in a life insurance policy, the time of the insured's death is uncertain) or as to if it will happen at all (e.g. in a fire insurance policy, whether or not a fire will occur at all).

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 policies are sold without the policyholder even seeing a copy of the contract. In 1970 Robert Keeton suggested that many courts were actually applying 'reasonable expectations' rather than interpreting ambiguities, which he called the 'reasonable expectations doctrine'. This doctrine has been controversial, with some courts adopting it and others explicitly rejecting it. In several jurisdictions, including California, Wyoming, and Pennsylvania, the insured is bound by clear and conspicuous terms in the contract even if the evidence suggests that the insured did not read or understand them. Insurance contracts are aleatory in that the amounts exchanged by the insured and insurer are unequal and depend upon uncertain future events. In contrast, ordinary non-insurance contracts are commutative in that the amounts (or values) exchanged are usually intended by the parties to be roughly equal. This distinction is particularly important in the context of exotic products like finite risk insurance which contain "commutation" provisions. 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 (uberrima fides) 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. This contrasts with the legal doctrine that covers most other types of contracts, caveat emptor (let the buyer beware). In the United States, the insured can sue an insurer in tort for acting in bad faith.

Types of Life Insurance Policy

Life insurance products come in a variety of offerings catering to the investment needs and objectives of different kinds of investors. Following is the list of broad categories of life insurance products: Term Insurance Policies The basic premise of a term insurance policy is to secure the immediate needs of nominees or beneficiaries in the event of sudden or unfortunate demise of the policy holder. The policy holder does not get any monetary benefit at the end of the policy term except for the tax benefits he or she can choose to avail of throughout the tenure of the policy. In the event of death of the policy holder, the sum assured is paid to his or her beneficiaries. Term insurance policies are also relatively cheap to acquire compared to other insurance products. Endowment Policies This basically falls into the category of an insurance-cum-investment product. Unlike a regular term insurance policy, an endowment plan provides returns on investment at the end of the policy term. There are several varieties of endowment plans, and the rate of returns and the type of benefits can vary based on the kind of endowment plan an individual has opted for. With an endowment plan, a person can opt for insurance products that provide both the benefit of insurance as well as investment. Money-back Policies Money back policies are basically an extension of endowment plans wherein the policy holder receives a fixed amount at specific intervals throughout the duration of the policy. In the event of the unfortunate death of the policy holder, the full sum assured is paid to the beneficiaries. The terms again might slightly vary from one insurance company to another. Unit-linked Insurance Policies (ULIP) Unit linked insurance policies again belong to the insurance-cum-investment category where one gets to enjoy the benefits of both insurance and investment. While a part of the monthly premium pay-out goes towards the insurance cover, the remaining money is invested in various types of funds that invest in debt and equity instruments. ULIP plans are more or less similar in comparison to mutual funds except for the difference that ULIPs offer the additional benefit of insurance. Pension Policies Pension policies let individuals determine a fixed stream of income post retirement. This basically is a retirement planning investment scheme where the sum assured or the monthly payout after retirement entirely depends on the capital invested, the investment timeframe, and the age at which one wishes to retire. There are again several types of pension plans that cater to different investment needs. Now it is recognized as insurance product and being regulated by IRDA.

Life Insurance Charter of Quality

This Life Insurance Charter of Quality is largely inspired by the ICMA Private Wealth Management Charter of Quality, which lists the guiding principles of best practice adopted by the cross-border private banking industry. The Life Insurance Charter of Quality adopts the same principles whilst adapting them to the particular characteristics of the life insurance wealth management business. 1. The Life Insurance Charter of Quality (the Charter of Quality) is a voluntary standard of recommended minimum good market practice. It is designed to be consistent with all relevant regulations at an international, European Union and national level, and to complement antimoney laundering directives and principles such as the Wolfsberg Principles on Anti Money Laundering and the Global recommendations of the Financial Action Task Force. 2. The Life Insurance industry typically provides life insurance products to private individuals and their families. 3. The purpose of the Charter of Quality, which has been established voluntarily by a group of life insurers who are also members of Association des Compagnies dAssurances (ACA) or of the national associations that participate in the Syndicat des Compagnies dassurances, is to set out in a single document the high standards of integrity, transparency and professionalism which participating life insurers meet in their dealings with their clients, counterparties, supervisors and regulators. 4. The Charter of Quality sets forth the functions of life insurers and the internal policies and procedures implemented for the appropriate conduct of their relationships with all external stakeholders. It is understood that the establishment of relevant internal policies and procedures, and the compliance with the Charter of Quality and such internal policies and procedures, respectively, is solely the responsibility of the management of the firms. 5. Life Insurers will self-certify that they have endorsed and complied with the Charter of Quality. Signatories of the Life Insurance Charter of Quality commit de facto to the highest standards of the industry, in customer relations and protection of clients interests. 6. The Charter of Quality is a public document. It is posted on the ACA website and those of other signatories at their discretion, along with a list of the Life Insurers which have endorsed the Charter. The status of the Charter of Quality is expected to be reviewed from time to time to ensure consistency of the Charter with evolving relevant regulatory developments and quality standards of Life Insurers.

This charter reflects, beyond laws and regulations applicable in the life insurance sector, the spirit in which the signatories of this chart intend to act in the Luxembourg territory and in different European markets in the life insurance distribution sector. The goal of this charter is to adopt rules of conduct in order to preserve the good reputation of, and to support the efforts of, the professionals acting in the sector in order to develop the Luxembourg financial center on an appropriate, sound, professional and efficient basis. Based on five principle ideas that take into account the characteristics of the sector, this charter guides the market players, signatories of this charter, on: 1. Integrity in business relations with clients, as well as partners and competitors. The same integrity is expected from the staff employed by the players of the sector. 2. Exemplary nature of the practices and loyalty of the players in the implementation of their means of action. 3. Compliance with local or foreign regulatory requirements applicable to the players. 4. Players should refrain from conduct facilitating mechanisms helping tax evasion. 5. Treating clients complaints according to the European EIOPA standards. The signatories of the Charter of Quality have adopted the following principles and requirements: 1. Principle of integrity and probity 1. 1. Integrity in business relations 1.1.1. Knowledge of clients Life insurers ensure that they have good knowledge of their clients by the following methods: e identity of their clients and beneficial owners before conducting any transaction. Knowledge of private individual clients by the life insurers or the intermediaries is necessary. For corporate entities, the ultimate beneficiaries and persons in control of funds have to be identified. nts or beneficiaries, which may include their domicile, their personal data, the reason and purpose of beginning a life insurance contract, the economic origin of the wealth and an estimate of it, the source of transferred funds and the future trend or use of the life insurance contract. ontracts or to pay a capital on an anonymous account.

-to-date information about their clients. 1.1.2. Prevention of money laundering, financing of terrorism and external fraud procedures for preventing money laundering and other criminal activities. They put in place an efficient mechanism of transaction analysis and fraud detection. An employee responsible for money laundering prevention is appointed in the organization. This position is usually separate from operational and commercial departments. -operation with authorities: Life insurers co-operate with the authorities and make the declarations and disclosures if they suspect criminal activities. 1.2. Probity of channels distribution markets, and contract law 1.2.1. Probity of channels distribution markets Life insurers ensure that their first priority is that life insurance contracts and services provided are compliant with the local regulations applied in the freedom of services business or on the local market. They establish rules for this purpose: - meeting clients needs, - appoint the fiscal representative in specific countries where applicable, - comply with laws and regulations which form part of the General Goods rules of the country of residence of the policyholders applicable to the business sold, comply with current distribution and intermediation rules. Any provider of financial services must avoid actively, systematically or knowingly contributing to tax evasion or any action contrary to the laws and regulations of the jurisdictions under which services are provided. Life insurers undertake to make available to their clients data enabling them to complete their tax declaration. 1.3. Integrity of staff 1.3.1. Recruitment criteria Life insurers undertake to recruit staff who demonstrates high standards of integrity and ethics. 1.3.3. Prevention of internal fraud

Life insurers take measures to prevent the risk of internal fraud: such measures may include inter alia security rules related to fund transfers, signature-process rules, monitoring of transactions and proper training. 1.3.4. Internal control Life insurers ensure an effective control environment is maintained. External audit together with internal audit and other independent control functions assist in validating life insurers to relevant policies and procedures. For this purpose independent inspection bodies for operational and commercial departments or insurers own internal audit and control functions may be necessary to check on an on-going basis the proper application of principles of integrity. 2. Probity/Conformity 2.1. Towards clients Life insurers make available to their clients at the outset a clear, appropriate and complete information regarding the product being provided. Information may contain inter alia: - an annual reporting - tax calculation details if required - any document necessary to complete the clients tax declaration 2.2. Regarding the regulatory environment 2.2.1. Guaranteed access to information on request Life insurers provide the relevant regulatory and other authorities of the jurisdictions where they are established access to any information that they require within the framework of currently applicable data protection legislation and to the extent permitted by relevant law and regulation governing disclosures to be made to the authorities. This guarantee covers any information given in accordance with the relevant law and regulations in the jurisdictions where customers contracts are held. The information issued is strictly limited to the request made and must not jeopardize the rules of confidentiality. Where applicable, life insurers also undertake to meet their obligations for the administrative exchange of information. 2.2.2. Collection of taxes Life insurers undertake to ensure the collection of taxes that they have an obligation to collect. 3. Professionalism

3.1. Primacy of clients legitimate interests Life insures apply this principle to all the transactions that they conduct for their clients, in particular in the following fields. 3.1.1. Respect for privacy and professional discretion Life insurers maintain a tradition of respecting privacy and exercise professional discretion while abiding by the laws of the country where they are established. They establish rules protecting the confidentiality of client information in all formats. They put in place policies and procedures intended to safeguard this information, in particular: - measures to protect confidential data, - restrictions on the disclosure of information limited to those who need to know, - access rules for staff to buildings, systems and IT tasks, - rules of access to buildings for outsiders. In addition, regular training is available to staff on data management and security for the purposes of continuing professional development, including the need for discretion in the performance of work. 3.1.2. Complaints management Life insurers implement appropriate arrangements for complaints management in order to handle any customer complaints. Life insurers inform their clients on how to file their complaints. The clients complaint may be addressed, without prejudice to the right to pursue other legal action within the applicable judicial system, to the Commissariat aux Assurances (CAA) or to the ACA mediator. 3.2. Efficiency 3.2.1. Efficiency of provision of information to clients Life insurers ensure the quality of the information sent to clients and the services they render. This applies in particular to: - the complete up-to-date character of any reports they make, - time-efficient processes for settling any transactions they carry out, - data provided on time for tax reporting purposes, - the accuracy and fairness of any calculations,

- clarity of information. 3.2.2. Efficiency of staff Life insurers permanently ensure that their staff acts in the clients best interests: - with responsibility, - with competence, - in compliance with professional rules. For this purpose life insurers make available training for their staff.