2.

PRICING: In the insurance business the pricing decisions are concerned with: i) The premium charged against the policies, ii) Interest charged for defaulting the payment of premium and credit facility, and iii) Commission charged for underwriting and consultancy activities. With a view of influencing the target market or prospects the formulation of pricing strategy becomes significant. In a developing country like India where the disposable income in the hands of prospects is low, the pricing decision also governs the transformation of potential policyholders into actual policyholders. The strategies may be high or low pricing keeping in view the level or standard of customers or the policyholders. The pricing in insurance is in the form of premium rates. The three main factors used for determining the premium rates under a life insurance plan are mortality, expense and interest. The premium rates are revised if there are any significant changes in any of these factors. Mortality (deaths in a particular area): When deciding upon the pricing strategy the average rate of mortality is one of the main considerations. In a country like South Africa the threat to life is very important as it is played by host of diseases. Expenses: The cost of processing, commission to agents, reinsurance companies as well as registration are all incorporated into the cost of installments and premium sum and forms the integral part of the

pricing strategy. Interest: The rate of interest is one of the major factors which determines people's willingness to invest in insurance. People would not be willing to put their funds to invest in insurance business if the interest rates provided by the banks or other financial instruments are much greater than the perceived returns from the insurance premiums.

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2. Price for ICICI Prudential Pricing is very important in life insurance as policyholders are attracted towards it more often. ICICI Prudential has some unique policies which is different from other companies. Example: ICICI Prudential- Pure Protect Below is the table that shows premium for various age-term combinations for a Sum Assured of Rs.50 lakhs. Age 30 year 35 year 40 year 10 years Rs.7608 Rs.9889 Rs.14394 15 years Rs.8378 Rs.11390 Rs.17064 20 years Rs.9444 Rs.13,327 Rs.20067

25 year

Rs.1255

Rs.1880

Rs.2707

Features of Pure Protect : 1. Entry Age

Policy Minimum age(years) Maximum age(years) 2. Policy Term: Policy Minimum age(years) Maximum age(years)

Pure Protect Classic 18 65

Pure Protect Elite 18 65

Pure Protect Classic 10 30

Pure Protect Elite 3 15

Pricing of Plans Pricing of life insurance plans are very important. It should be priced in such a manner that the company is able to book profits and also gives value to the policy holders. Life insurance industry is characterized by long break-even period. Only SBI Life and Shriram Life were able to achieve break-even and book profits. SBI Life is not an aggressive player and Shriram Life has small geographic presence. ICICI Prudential with its aggressive strategy and vast geographical presence has to price its products suitably to break-even at the earliest. In a developing country like India where the disposable income in the hands of prospects is low, the pricing decision is difficult to take. The company should transform the potential policy holders into actual policy holders. The pricing in insurance is in the form of premium rates. The three main factors used for determining premium rates are:

1. Mortality Rate: Mortality rate is a measure of the number of deaths in some population, scaled to the size of that population, per unit time. Mortality rate is typically expressed in units of deaths per 1000 individuals per year. 2. Expenses: The cost of processing, commission to agents, reinsurance companies as well as registration is all incorporated into cost of installments and premium sum. 3. Interest Rate: This is one of the major factors which determines people s willingness to invest in a particular company s plan. ICICI Prudential has one of the lowest premium structures in the industry. It is also active in alternate distribution channels apart from the traditional agent channel. By this it is able to cut down cost. The commission cost paid to intermediaries reduced. LIC 2. Price (Premium) :The price is another powerful element in the life insurance marketing mix and vitally affect the volume of sales. Price is the valuation placed upon the product by the offerer. In the case of life insurance, premium is the price which the person seeking insurance pays to LIC for purchase in the life insurance policy. The management must take decisions regarding pricing (premium), investment return, level of premium, node of premium, commission, insured sum, life to be covered, interest on loan, price strategy, under writing and price related situations. It deals with price competition.

Indian Life Insurance Industry Until the early 21st century, the Indian life insurance industry was completely in the hands of LIC. In the 1950s, the industry had been nationalized in order to increase the penetration of insurance in the country and to make it available to less privileged segments of society. But even after 40 years of nationalization, only 25% of the insurable population was covered under insurance. This was one of major reasons for opening up the sector -- to allow private players to work towards extending the reach and coverage of insurance all over the country...

What IS LIFE INSURANCE? Life insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the happening of the event insured against. The contract is valid for payment of the insured amount during: The date of maturity, or Specified dates at periodic intervals, or Unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the policyholder. Life insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilisation's partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: That of dying prematurely leaving a dependent family to fend for itself. That of living till old age without visible means of support.

Who Can

Buy

Policy?

Any person who has attained majority and is eligible to enter into a valid contract can insure himself/herself and those in whom he/she has insurable interest. Policies can also be taken, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, certain factors such as the policyholder s state of health, the proponent's income and other relevant factors are considered by the Corporation.

Insurance For Women Prior to nationalisation (1956), many private insurance companies would offer insurance to female lives with some extra premium or on restrictive conditions. However, after nationalisation of life insurance, the terms under which life

insurance is granted to female lives have been reviewed from time-to-time. At present, women who work and earn an income are treated at par with men. In other cases, a restrictive clause is imposed, only if the age of the female is up to 30 years and if she does not have an income attracting Income Tax.

Medical And Non-Medical Schemes Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance and also to avoid inconvenience, LIC has been extending insurance cover without any medical examination, subject to certain conditions. With Profit And Without Profit Plans An insurance policy can be 'with' or 'without' profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable along with the contracted amount. In 'without' profit plan the contracted amount is paid without any addition. The premium rate charged for a 'with' profit policy is therefore higher than for a 'without' profit policy.

HELP TO SERVE BETTER

Admission

Of

Age:

Age is the main basis of calculation of premium under life insurance policies. The following are accepted as evidence of age: Certified extract from Municipal or Local Body s records made at the time of birth.

Certificate of Baptism or Certified Extract from Family Bible, if it contains age or date of birth. Certified Extract from School or College records, if age or date of birth is stated therein. Certified Extract from Service Register in the case of Govt. employees and employees of Quasi-Govt. Institutions or Passport issued by the Passport Authorities in India. Payment Of Premium: By cash, local cheque (subject to realization of cheque), Demand Draft at Branch Office. The DD and cheques or Money Order may be sent by post. You can pay your premiums at any of our Branches as 99% of our Branches are networked. Many Banks do accept standing instructions to remit the premiums. So by providing a standing instruction to your Bank to debit your account for the premium amount and send it vide a banker s cheque to LIC, on the due dates and months mentioned on your policy bond. Through Internet : Payment of premiums can be made through Internet through Service Providers viz.HDFC Bank, ICICI Bank, Times of Money, Bill Junction, UTI Bank, Bank of Punjab, Citibank, Corporation Bank, Federal Bank and BillDesk. Premium payment can also be made through ATMs of Corporation Bank and UTI Bank. Premium payment can also be made through Electronic Clearing Service (ECS) which has been launched at Mumbai, Hyderabad, Chennai, Kolkata, New Delhi, Kanpur, Bangalore, Vijaywada, Patna, Jaipur, Chandigarh, Trivandrum, Ahmedabad, Pune, Goa and Nagpur, Secunderabad& Visakhapatnam. A policyholder having an account in any Bank which is a Member of the local Clearing House can opt for ECS debit to pay premiums. The policyholders wishing to use this system would have to fill up a Mandate Form available at our Branches/DO and get it certified by the Bank. The certified Mandate Forms are to be submitted to our BO/DO. Policy can be anywhere in India. Citibank Kiosks at Industrial Assurance Building, Churchgate, New India Building, Santacruz, JeevanShikha Building, Borivili are dedicated for collection of premiums through cheques. Days Of Grace:

Policyholder should pay the premiums on due dates. However, a grace period of one month but not less than 30 days will be allowed for payment of yearly/halfyearly/quarterly premiums and 15 days for monthly premiums. When the days of grace expire on a Sunday or a public holiday, the premium may be paid on the following working day to keep the policy in force. If the premium is not paid before the expiry of the days of grace, the policy lapses. Revival Of Lapsed Policy: If the policy has lapsed, it can be revived during the life time of the life assured, within a period of five years from the date of the first unpaid premium but before the date of maturity subject to certain conditions. The Corporation offers three convenient schemes of revival viz., Ordinary Revival, Special Revival and Installment Revival. Policies can also be revived under Loancum-Revival and SB-cum-Revival schemes. Request for revival may be made to the Branch Office servicing the policy.

Change Of Address And Transfer Of Policy Records: The policyholder should immediately intimate the change of his/her address to the Branch Office servicing the policy. The correct address facilitates better service and quicker settlement of claims. Policy records can also be transferred from one Branch Office to another for servicing, as requested by the policyholder. Loss Of Policy Document: The Policy Document is an evidence of the contract between the Insurer and the Insured. Hence the policyholder should preserve the Policy Bond till the contracted amount under it is settled. Loss of the Policy Document should be immediately intimated to the Branch Office where it is serviced. Loans: Loans are granted on policies to the extent of 90% of Surrender Value of the policies which are in force and 85% of the Surrender Value in case of policies which are

paid-up, inclusive of the cash value of bonus. The rate of interest charged at present is 9% p.a. payable half-yearly. Loans are not granted for a period shorter than six months. The Conditions and Privileges printed on the back of the Policy Bond states whether a particular policy is with or without the loan facility. Relief To Policyholders: The Corporation generally allows concessions on payment of premiums, settlement of claims, issue of duplicate policies, etc when the policyholder are affected by natural calamities such as droughts, cyclones, floods, earthquakes, etc.

Nomination: Nomination is a right conferred on the holder of a Policy of Life Assurance on his own life to appoint a person/s to receive policy moneys in the event of the policy becoming a claim by the assured s death. The Nominee does not get any other benefit except to receive the policy moneys on the death of the Life Assured. A nomination may be changed or cancelled by the life assured whenever he likes without the consent of the Nominee. Ensure nomination exists in the policy for easy settlement of claims. Assignment: Assignment means transfer of rights, title and interest. When an assignment is executed, all rights, title and interest in respect of the property assigned are immediately transferred to the Assignee/s and the Assignee/s become the owner/s of the policy subject to any lawful condition made in the assignment. Assignment can be either conditional or absolute. On assignment (other than to LIC), Nomination automatically stands cancelled. Hence, when such a policy is reassigned, the policyholder will have to make a fresh nomination to avoid delay in settlement of claim. Survival Benefit/Maturity Claims: LIC settles survival benefit/maturity claims on or before the due date. Policyholder are intimated well in advance by the Branch Office which services the policy regarding the payment, and the necessary Discharge Voucher is also sent for execution by the assured. In case the policyholder does not get any intimation from the Branch Office concerned, he/she should contact them, quoting the Policy Number.

Survival Benefit payment up to Rs.60,000/- are settled without insisting for Policy Bond and Discharge Voucher.

Death Claims: If the life assured dies during the term of the policy, death claim arises. The death of the policyholder should be immediately intimated in writing to the Branch Office where the policy is serviced along with the following particulars: The No./s of the policy/ies The name of the policyholder Death Certificate issued by concerned Authority The date of death The cause of death and Claimant s relationship with the deceased On receipt of the intimation of death, necessary claim forms are sent by the Branch Office for completion along with instructions regarding the procedure to be followed by the claimant. The claims which have arisen after a period of three years are treated as non-early claims and settled within 30 days from the date of receipt of all requirements. The claims that have arisen within a period of two years from the date of commencement of the policy, are treated as early claims and investigation is compulsory in such cases. The claim is usually payable to the nominee/assignee or the legal heirs, as the case may be. However, if the deceased policyholder has not nominated/assigned the policy or if he/she has not made a suitable provision regarding the policy moneys by way of a Will, the claim is payable to the holder of a Succession Certificate or some such evidence of title from a Court of Law. The Corporation grants claims concessions under certain Plans whereby payment of full sum assured is made, subject to the deduction of unpaid premiums with interest till the date of death and unpaid premiums falling due before the next anniversary of the policy, in the event of the death of the life assured within a period of six months or one year from the date of the first unpaid premium, provided premiums have been paid for at least three years and five years respectively.

Claim Review Committee: The Corporation settles a large number of Death Claims every year. Only in case of fraudulent suppression of material information is the liability repudiated. This is to ensure that claims are not paid to fraudulent persons at the cost of honest policyholders. The number of Death Claims repudiated is, however, very small. Even in these cases, an opportunity is given to the claimant to make a representation for consideration by the Review Committees of the Zonal office and the Central Office. As a result of such review, depending on the merits of each case, appropriate decisions are taken. The Claims Review Committees of the Central and Zonal Offices have among their Members, a retired High Court/District Court Judge. This has helped providing transparency and confidence in our operations and has resulted in greater satisfaction among claimants, policyholders and public.

Insurance Ombudsman: The Grievance Redressal Machinery has been further expanded with the appointment of Insurance Ombudsman at different centers by the Government of India. At present there are 12 centres operating all over the country. Following type of complaints fall within the purview of the Ombdusman a) any partial or total repudiation of claims by an insurer; b) any dispute in regard to premiums paid if payable in terms of the policy; c) any dispute on the legal construction of the policies in so far as such disputes relate to claims; d) delay in settlement of claims; e)non-issue of any insurance document to customers after receipt of premium. Policyholder can approach the Insurance Ombudsman for th redressed of their complaints free of cost.

Incentive In Policy Servicing Areas:

All 2048 Branches of LIC are fully computerized covering all policy servicing aspects to give prompt computerized services from new policy introduction, acceptance of renewal premium, revivals, loans, etc to final claims settlement. Green Channel facility has been introduced for the speedy completion of proposals. Payment of premiums can be made through internet through service providers, viz., HDFC Bank, ICICI Bank, Times of money, Bill Junction, UTI Bank, Bank of Punjab,Citi Bank, Corporation Bank, Federal Bank and Billdesk. Grievance Redressed Machinery: Machinery for redressed of policyholders? grievances exist in all the offices of the Corporation. These are headed by designated Officers who are available at their respective Offices every Monday between 2.30 pm and 4.30 pm. except holidays. Policyholder can approach these officers to get their grievances redressed. The Designated Officers at the various offices of the Corporation are : At Branch Office --- Sr./Branch Manager At Divisional Office --- Marketing Manager At Zonal Office --- Regional Manager (Mktg) At Central Office --- Executive Director (Mktg/IO/CRM)

Citizens Charter: Citizens' Charter was presented to the Nation in November, 1997. In the Charter the bench marks were prescribed for 30 servicing areas

INFORMATION TECHNOLOGY & LIC LIC has been one of the pioneering organizations in India who introduced the leverage of Information Technology in servicing and in their business. Data pertaining to almost 10 crore policies is being held on computers in LIC. We have gone in for relevant and appropriate technology over the years. 1964 saw the introduction of computers in LIC. Unit Record Machines introduced in late 1950 s were phased out in 1980 s and replaced by Microprocessors based computers in Branch and Divisional Offices for Back Office Computerization. Standardization of Hardware and Software commenced in 1990 s. Standard Computer Packages were developed and implemented for Ordinary and Salary Savings Scheme (SSS) Policies.

FRONT END OPERATIONS With a view to enhancing customer responsiveness and services , in July 1995, LIC started a drive of On Line Service to Policyholders and Agents through Computer. This on line service enabled policyholders to receive immediate policy status report , prompt acceptance of their premium and get Revival Quotation, Loan Quotation on demand. Incorporating change of address can be done on line. Quicker completion of proposals and dispatch of policy documents have become a reality. All our 2048 branches across the country have been covered under front-end operations. Thus all our 100 divisional offices have achieved the distinction of 100% branch computerisation. New payment related Modules pertaining to both ordinary & SSS policies have been added to the Front End Package catering to Loan, Claims and Development Officers Appraisal. All these modules help to reduce time-lag and ensure accuracy.

METRO AREA NETWORK A Metropolitan Area Network, connecting 74 branches in Mumbai was commissioned in November, 1997, enabling policyholders in Mumbai to pay their Premium or get their Status Report, Surrender Value Quotation, Loan Quotation etc. from ANY Branch in the city. The System has been working successfully. More than 10,000 transactions are carried out over this Network on any given working day. Such Networks have been implemented in other cities also. WIDE AREA NETWORK All 7 Zonal Offices and all the MAN centres are connected through a Wide Area Network (WAN). This will enable a customer to view his policy data and pay premium from any branch of any MAN city. As at November 2005, we have 91 centers in India with more than 2035 branches networked under WAN. INTERACTIVE VOICE RESPONSE SYSTEMS (IVRS) IVRS has already been made functional in 59 centers all over the country. This would enable customers to ring up LIC and receive information (e.g. next premium due, Status, Loan Amount, Maturity payment due, Accumulated Bonus etc.) about their policies on the telephone. This information could also be faxed on demand to the customer. LIC ON THE INTERNET Our Internet site is an information bank. We have displayed information about LIC &

its offices . Efforts are on to upgrade our web site to make it dynamic and interactive.The addresses/e-mail Ids of ur Zonal Offices, Zonal Training Centers, Management Development Center, Overseas Branches, Divisional Offices and also all Branch Offices with a view to speed up the communication process. PAYMENT OF PREMIUM AND POLICY STATUS ON INTERNET (You have to register for these services) LIC has given its policyholders a unique facility to pay premiums through Internet absolutely free and also view their policy details on Internet premium payments.There are 11 service providers with whom L I C has signed the agreement to provide this service. INFORMATION KIOSKS We have set up 150 Interactive Touch screen based Multimedia KIOSKS in prime locations in metros and some major cities for dissemination information to general public on our products and services. These KIOSKS are enable to provide policy details and accept premium payments.

INFO-CENTRES We have also set up 8 call centres, manned by skilled employees to provide you with information about our Products, Policy Services, Branch addresses and otherorganizationalinformation.

Comment on product pricing of LIC Pricing of insurance products, as empirically available in india, shows that pricing is not in consequence with market realities. Life insurance premia are generally perceived as being too high while general insurance (especially motor insurance) is priced too low. LIC, has over a period of time affected reduction. For instance on without profit policies (that is those who are not eligible for bonuses), the premium rates were reduced between 2% to 7% during 1970 s. Subsequently in 1986, premium rates were reduced by 17% for such policies. Practices such as charging extra premium, on female insurance were also discontinued. However, these instances are an inadequate response to the changes going on in the market. One of the most significant changes has been the improvement in life expectancy of individuals. For males, this has improved from 41.89 years in 1961 to 62.80 years in

recent times. Similarly, female life expectancy has increased from 40.55 years in 1961 to 64.20 years. The problem faced by LIC in incorporating the trends in life expectancy in to their actuarial calculation has been partly technological and partly organisational. Recognising this LIC has indicated in its corporate plan 1997-2007 that they hope to put in place a year to year revision of mortality rates in the calculation of premium. Righteous Premium charge: During the modern days, the premium of the policies could be found out through the premium calculator of the web portal of LIC only by the computer literates not by all.. The fixation of the premiums normally done by the agents who do the major volume of sale of policies for LIC. The premium of the policies are normally fixed by the agents only in accordance with the actuarial tables, to the tune of 90s', are not verified but simply accepted by the administrators who at the helm of affairs to issue the policy documents. Now a days , the awareness among the policyholders/ prospective policyholders have gone up due to disclosure norms of IRDA , which elevated them to compare the various best possible rates of substitute products of the other private insurers. i) Premium payment VsConsumption : According to the Income theory , the consumption expenditure and investment or savings of the individuals are mutually exclusive out of the total incomes earned by them. During the globalization era, the consumption expenditure of the individuals have gone up due to invasion of Americanization which drastically inflicted the behaviour of savings or investment of the individuals. The consumption of the population is to be maintained not only for the welfare of industries but also to attain the growth rate of 9% during the year 2010, to the tune of our PM's expectation. The premium payment of the policyholders should not put them in trouble to meet out the consumption expenditure, to be collected by the insurance giant during the moment of purchase through the introduction E- Network across the country , which not only facilitates the business establishments to join under one family to enhance the volume of sales with the policy holders but also facilitating them to make the payment of premiums as a certain percentage of purchase without any hassle to insurer ii) Premium calculators at regional languages: The premium calculator, now available in the web portal should not be a stumbling block , instead it should pave way as a user friendly system, to overcome the linguistic barrier and so on. Right place :

The place of demand for the insurance products should be identified .In India , untapped potential is amounted 70 % in the insurance industry ( Yojana ,April 2006., p.21). To grab the market potential , the place of reaching the insurance contract only should be at the door steps of the prospective policy holders during the initial periods, to install the principles of Customer relationship management. Right promotion: It is inevitable for the insurance giant to coin new promotional strategies to penetrate the prospects of the private players. The sales promotion of insurance policies are to be recasted to the modern environment , at the door steps of the prospective policy holders . Every player in the industry is very keen to mop up the untapped rural market potential 72% of the total population , which warrants not only a different strategy for public sector but also private sector players in the industry. Though LIC sells the insurance policies through 6 different nationalized banks and 2 District level co operative banks under the category of corporate agents, which further requires more sharpened tools of promotion, to overcome the threats of private players i) Orphanage Houses/Homes: In this country , more than 10,000 listed orphanage and old age houses are existing, could be made use of further promotion of insurance policies, paves way for them to earn marginally through the sale It not only portrays the concern on the above mentioned houses but also to partake in the insurance Olympiad ii) Self Help Groups: To tap the rural market potential as well as to reach the nook and corner of the rural belts of the entire sub continent, the Self help groups are the better entities to sell the insurance policies across the country , to reach the prospective policy holders at their door steps and to serve better to the tune of their requirements. To have the wider coverage to the tune of Public sector insurer, 4.6 lakh SHGs are the righteous and an appropriate tool of promotion of life insurance policies. iii) Non GovernmentalOrganisations: The third better entity classification for the promotion of sale of insurance policies in India is NGO, which are 2,155 in strength, mainly focusing on the rural development, to uplift the rural India in line with industrial sectors. The NGOs are the better network , whom are able to serve as smart as possible not only to the tune of rural population but also to the insurer. iv) Petro assurance: Now a days, the petrol pump agent business doesn't attract many business people due to frequent fluctuations in the oil prices, due to fluctuations in the international oil prices . Recently, most of the petrol pump owners are unhappy due to lesser

profit margins at where heavy gathering is normally taking place. This will be identified as a better opportunity for LIC to sell the policies at the door steps of the consumers of oil products, through an establishment of tie ups, to serve better not only to the tune of LIC's mission but also to the tune of mission of Petro corporation. v) Departmental stores assurance: During the era of LPG , there is an immense growth in the sector of departmental stores, where consumables alone available for resale, opened for MNCs. In India, there are many branded chain stores available for consumables vizPantaloon, Reliance fresh, could be utilized for the promotion LIC policies, where salaried people normally assemble during the first and second week at greater proportion than other classes. The hike of FDI% in this sector as well as metamorphic developments among the domestic players will pave congenial way for the promotion of insurance policies more specifically to the middle income group. vi) Right People: Who ever related with the life insurance business of LIC, should work together under the principles of WIN-WIN, not only to grab the opportunities but also to win over the confidence of the market. Due to stiff competition, LIC is warranted immediately to develop three tier system to penetrate the marketing strategies of the private insurers. The three tier system of relationship should prevail as follows : The above system should be mooted through the reduction of Govt holdings and by admitting the common public as investors through initial public offerings, which will certainly enhance the morale of the above enlisted.