SUBMITTED BY:
HafsaIdrees (BC09-061) Class : B.Com. (Hons.) Semester : 7th Section : A (Morning) Session: (2009-2013) Subject :IRM
Brief History
State Life Insurance Corporation of Pakistan was incorporated on November 1, 1972 under the Life Insurance Nationalization Order, 1972. Due to its well established Agency Network of more than 90,000 sales people, State Life is the largest Life Insurance Corporation since 1972 in Pakistan. The Life Insurance Business in Pakistan was nationalized in March 1972. Prior to 1972, 32 Life Insurance companies were involved in the life insurance business. These companies were later merged and placed under three Beema Units named A, B and C Beema Units. Later, these Beema Units were merged and State Life Insurance Corporation of Pakistan came into existence. The major function of State Life Insurance Corporation of Pakistan is to carry out Life Insurance Business; however, it is also involved in the other business activities such as investment of policyholders fund in Government securities, Stock market, Real Estate etc.
Mission
To remain the leading insurer in the country by extending the benefits of insurance to all sections of society and meeting our commitments to our policy holders and the nation.
Quality Policy
To ensure satisfaction of our valued policyholders in processing new business, providing after sales service and optimizing return on Life Fund through a quality culture and to maintain ourselves leading life insurer in Pakistan.
pg. 4
Organizational structure
The corporation is headed by chairman who is a chief executive of the corporation and appointed by the Government of Pakistan. Presently, Shahid Aziz Siddiqi is the chairman of the Corporation. The basic structure of the Corporation consists of Four Regional Offices, Twenty-Six Zonal Offices, a few Sub-Zonal Offices, 111 Sector Offices, and a network of 461 Area Offices across the country for Individual Life Insurance The organizational structure of the corporation is as follow:
A. Board of directors
It comprises ten Directors including Chairman who are appointed by the Government of Pakistan and are responsible for devising strategies & plans to achieve the goals of Corporation.
B. Executive Directors
It comprises ten Executive Directors responsible for implementation of policies set by the Board of Directors.
C. Divisional Heads
There are 14 Divisional Heads who are responsible for the functional area assigned to them.
D. Regions
There are 4 regions in Pakistan headed by regional chiefs responsible for looking after all the zones under his administration.
E. Zones
There are 26 zones in Pakistan headed by the zonal head responsible for procurement of business to achieve the set business target of the organization.
Objectives
To run life insurance business on sound line. To provide more efficient service to the policyholders. To maximize the return to the policyholders by economizing on expenses and increasing the yield on investment. To make life insurance a more effective means of mobilizing national savings.
pg. 4
To widen the area of operation of life insurance and making it available to as large a section of the population as possible, extending it from the comparatively more affluent sections of society to the common man in towns and villages. To use the policyholders fund in the wider interest of the community.
Major Achievements
The major achievements of State Life are as under: 1) On the commencement of the operations, the Corporation took a very important step by effecting reduction up to 33% in the premiums on the past and potential Life Policies for the benefit of the Policyholders. 2) State Life is profitable organization and it paid Rs.3.473 billion as dividend to the Government of Pakistan since its inception in 1972. 3) State Life has played very vital role in the economy by providing employment to the people of the country as permanent employees and as part of its marketing force and by investing the huge funds in different sectors of the economy. The Investment Portfolio of State Life as at 31.12.2011 stands at Rs.275.11 billions. 4) Investment portfolio also includes investment in Real Estate which stands at a book value of Rs.2.538 billion as at 31.12.2011 whereas it fair value is around Rs.21.622 billion in the same period. 5) The Paid up Capital increased from Rs.10 million in 1972 to Rs.1,100 million in 2011. 6) The Premium income increased from Rs.0.317 billion in 1972 to 44.81 billion in 2011. Similarly Investment income including rental income increased from Rs.0.81 billion in 1972 to 31.05 billion in 2011. 7) Total statutory fund of State Life stands at Rs.268.60 billion in 2011 as against Rs.1.494 billion in 1972. 8) State Life is smoothly striving towards its objective of making life insurance available to large section of the society by extending it to common man. As at December, 2011 the total number of policies inforce under individual life were 3.774 million and number of lives covered under group life insurance were 6.044 million.
Subsidiaries
State Life has the following subsidiaries:
Alpha Insurance Company Limited State Life (Abdullah Haroon Road) Properties (Private) Limited State life (Lackie Road) Properties (Private) Limited State Assets Management Company Limited (SAMCO)
pg. 4
Annuities Conventional Life insurance (Home Business) Group Life Insurance Pension Services Universal Life Business (Home Business)
Investment of funds
State Life Insurance Corporation of Pakistan invests its funds in accordance with the provisions contained in Insurance Ordinance 2000, Insurance Rules 2002 and SRO(309) K of 1970 as amended to date by the Government of Pakistan.
Govt. Securities
These include instruments issued by Government of Pakistan such as Treasury bills, Pakistan Investment Bonds etc.
Loans
These include loans in the form of Term finance certificates etc.
Equities
These include shares of listed and unlisted companies
Immovable Property
These include buildings, plots etc.
pg. 4
Policies offered
There are a number of policies offered by state life insurance corporation. Some of them are as follows; State life endowment assurance policy Shehnai policy
pg. 4
SUPPLEMENTARY CONTRACTS
State Life offers a number of supplementary covers to enhance coverage under different plans. These supplementary covers can be attached with the main policy and are not available exclusively. Accidental Death & Indemnity Benefit (AIB) Accidental Death Benefit (ADB) Family Income Benefit (FIB) Waiver of Premium (WP) Special Waiver of Premium (SWP) Term Insurance (TI) Guaranteed Insurability (GI) Refund of Premium Rider (RPR) Hospital & Surgical Benefit (H&S)
pg. 4
pg. 4
With the help of SWP, the life insured gets relieved of vagaries of paying premiums incase of his or her being incapacitated as a result of accident or disease. SWP is available to lives between 20 and 55 years of ages
pg. 4
Payment of Premium
Premiums are payable yearly in advance directly to State Life. Advance payments of half-yearly, quarterly and monthly premiums will be accepted as installments of the yearly premiums. If the Life Insured dies, then the unpaid installments for that policy year (if any) will be deducted from whatever amount is otherwise payable by State Life. Receipts for premiums are valid only if issued on forms prescribed by State Life and signed by its duly authorized officers. The actual date of receipt of the premium by State Life will be taken as the date of payment of any premium.
Grace Period
The policyholders can pay to State Life any premium within a grace period of 31 days after it falls due. If the Life Insured dies during the grace period, before the due premium is received by State Life, then the due premium will be treated as received, but it will be deducted from whatever amount is otherwise payable by State Life.
Paid-up Policies
State Life will convert this policy into a paid-up policy, at the written request of the policyholder, provided the policy has been in force for at least two consecutive policy years and no premiums are in default. No further premiums will be payable but the sum insured will be reduced. The reduced paid-up sum insured will be quoted by State Life on the request of the policyholder. *Any bonuses attached to the policy will be taken into consideration while determining the paid-up sum insured. A policy once paid-up will not be entitled to any further bonuses. If there are any outstanding dues of State Life against the policy, the paid-up sum insured will be specially calculated to allow for the
pg. 4
Surrender Value
This policy will acquire a surrender value after it has been in force for at least two consecutive years provided no premiums are in default. The surrender value will be quoted by State Life on request of the policyholder. The surrender value is guaranteed to be not less than 30% of aggregate premiums less any amounts already paid by state life under this policy. Aggregate premiums mean all premiums paid under the policy excluding the following: Premiums for the first policy year, Extra premiums; Premiums for any supplementary covers
Loans
State Life may grant a loan to the policyholder on his/her written request, against the net surrender value of the policy. The amount of loan shall not exceed 80% of the said net surrender value. The rate of profit or return, and other terms and conditions will be determined by State Life at the time of granting the loan. Loans of less than Rs.100/- will not be given.
The option can be exercised at the time of taking the policy or at any time thereafter while the policy is in force. The option can be changed subsequently by written intimation to and endorsement in the policy by State Life, so long as no premiums remain unpaid beyond the grace period. If no option has been exercised by the policyholder, benefits under automatic paid-up option will apply.
pg. 4
Evidence of age
No benefits will be paid by State Life under this policy, unless the age of the life insured has been proved to its satisfaction. If the age of the life insured is proved to be different from that stated in the proposal of this policy, State Life will adjust the premiums or benefits under the policy as it deems fit. This policy will, however, become void from its commencement, if the age of the Life Insured at the commencement date is proved to be higher than the maximum entry age that was permissible by State Life under the table and term of insurance mentioned in the proposal of this policy.
Suicide
If the life insured commits suicide within thirteen months from the date this policy was signed or within thirteen months from the date this policy was last revived then State Life will only return premiums actually received under this policy.
Supplementary Benefits
Supplementary benefits (if any) and the corresponding premium payments will be governed by the terms of the supplementary covers attached to this policy. Premiums for these benefits will, however, be payable on the same dates as premiums under this policy.
Premium Notices
State Life may issue premium notices although there is no obligation on its part to do so. It is the
pg. 4
duty of the policyholder to pay the premium on its due date or within the grace period, whether premium notice is received or not.
Incontestability
Policies are incontestable with regard to statements made in the proposal after two years from the date of issue/revival/reinstatement of policy except for fraudulent and willful misstatement of material facts or on account of breach of any of the conditions of the policy.
Liquidated Damages
Where payment under this policy becomes due and the person entitled thereto has complied with all the requirements, including the filing of complete papers, for claiming the payment, the State Life shall, if it fails to make the payment within a period of ninety days from the date on which the payment becomes due or the date on which the claimant complies with the requirements, whichever is later, pay as liquidated damages on the amount so payable unless State Life proves that such a failure was due to circumstances beyond its control.
pg. 4
death.
Suitability
It is suitable for salaried people especially from the middle-income group.
Supplementary Covers
State Life offers 3 supplementary covers to enhance coverage under this policy plan, given as follows:
pg. 4
One-third of Face Value Incurable loss of sight in one eye. One-fourth of Face Value Amputation/ impairment/ loss of either a thumb or index finger from the knuckle joint.
Surrender Value
This policy will acquire a surrender value (The sum of money an insurance company will pay to the policyholder or annuity holder in the event his or her policy is voluntarily terminated before its maturity or the insured event occurs) after it has been in force for at least two consecutive years provided no premiums are in default. The surrender value will be quoted by State Life on request of the policyholder.
Premium Calculation
Premium for an endowment life policy is higher than that of a whole life policy.Premiums are unique for each policy and generally the calculation of premium is done by considering: A. Policy B. Term of Policy C. Gender D. Age E. Sum Assured F. Premium payment mode
pg. 4
2. SHEHNAI POLICY
Shehnai Policy has been designed to provide existing and potential clients an opportunity to secure the future of their children. It provides a solution to the problems of many concerned parents who want to save now in order to provide for their children's higher education, marriage and other expenses when the need arises. At the same time, Shehnai policy also provides a shield against inflation. Shehnai Policy will also have appeal to those individuals who wish to safeguard their children against the risk of their premature death. This plan provides coverage for a specified term with an increasing sum assured and cash value. State Life's Shehnai policy is an innovative life insurance policy. The term of the plan is such that the lump sum benefit becomes payable as the child attains the age of 25 years. This age is selected considering the occasions on which children generally need financial assistance. From third policy year onwards the sum insured and the premium increases in the same proportion, i.e, 6% per annum compound as long as the insured is alive. However, the policyholder retains the right to refuse the increase in sum insured and premium.
pg. 4
d) No evidence of insurability:
No Evidence of insurability is required for automatic increase in sum insured except when policyholders have refused the increase 3 times during the policy terms. if the policy holder has refused the increase 3 times evidence of insurability will be required.
e) Surrender values:
The surrender value is equal to the greater of Surrender value of the policy 30% of total premium paid less the 1st year premium
The policy holder can surrender the policy after completion of two policy years provided no premium is in default.
g) Benefits:
i. Maturity Benefit:
The policy matures when the child reaches age 25. At maturity, the cash value of the policy is paid to the child. The cash value includes all the bonuses that have been credited to the policy.
ii.
Death Benefits:
If the insured dies before the expiry of the term of the policy, the future premium under the policy is waived but the policy continues to participate in State Life's surplus. At the time of death of the insured, sum insured applicable to the policy year of death is added to the adjusted opening cash value to be called enhanced cash value. The enhanced cash value will continue to participate in State Life's surplus. In case of child's death while the policyholder is still alive, the policyholder has three options:
pg. 4
I. II. III.
Switch the plan for the life of another child and continue the policy. Get the adjusted opening cash value at the beginning of the year of death of the child and terminate the contract. Continue the contract without naming another child.
i) Riders:
Accidental Death Benefit (ADB), Accidental Indemnity Benefit (AIB), Term Insurance Rider (TIR), Family Income Benefit (FIB) rider can be attached subject to the usual underwriting rules. However, where AIB is attached, in event of claim for waiver of premium, automatic increase in sum insured and premium will cease.
j) Bonus:
The rate of bonus will be determined by the statutory actuarial valuation, which is done every two years. It will be credited only at the end of the policy year, when the policy year is completed. Bonuses will be calculated on the adjusted opening cash value for the policy year (item V) and not on the basic sum insured.
pg. 4
ELIGIBLE AGES:
MINIMUM AGE: 10 YRS MAXIMUM AGE: 65 YEARS AGE MAXIMUM on MATURITY: 85 YEARS
Supplementary covers
State Life offers a number of supplementary covers to enhance coverage under whole life insurance plans. These supplementary covers can be attached with the main policy and are not available exclusively. Please click below for the details of these supplementary covers:
Accidental Death & Indemnity Benefit (AIB) Accidental Death Benefit (ADB) Family Income Benefit (FIB) Waiver of Premium (WP) Special Waiver of Premium (SWP) Term Insurance (TI) Guaranteed Insurability (GI) Hospital & Surgical Benefit (H&S)
pg. 4
Premiums are tax-deductible for the employer. Total premium under group term insurance is lower as compared to sum of premium of all policies if issued individually to each life, due to savings in expenses.
b) A.D.B. Rider
Under this rider the death benefit of an insured member is doubled if the death was caused by an accident.
pg. 4
Cancer Kidney Failure Major organ transplant such as heart, kidney or liver The insured member must survive for at least 31 days after contracting the illness to become eligible for the benefit. Some restrictions apply during the first two years of coverage.
Suitability
The plan is suitable for employers who desire to provide financial security to their employees by means of insurance coverage or for members of a professional body or association or some welfare association or a social club who desire to avail insurance protection on a collective basis.
BENEFITS
If the policy holder dies before the expiry of the term : A regular income benefits of Rs.240 per 1000 sum insured per annum is paid to the child until the completion of the policy term. Further, the future premiums under the policy are waived and the policy remains in force with full sum assured and continues to participate in state lifes surplus and receives bonuses. Upon the completion of the policy term, the child receives the full sum assured plus bonuses accrued over the entire term. At this stage the child has two options: a) Receives the proceeds in a lump sum;
pg. 4
b) Receives the proceeds in five equal annual installments In the case of death of the child while policy holder is alive: a) Continue the policy in the same manner as earlier by switching the plan for the benefit of another child b) Get a refund of all the previous premiums paid till the death of the child or the cash value of policy, whichever is higher and terminates the contract. c) Continue the policy without naming another child in which case the benefit of refund of premium [as provided above in b condition] will not be available.
Premiums
Under this plan a level premium is payable till the maturity date or earlier death of the policy holder.
Underwriting Requirements
Underwriting requirements for this plan will be similar to the underwriting requirements for an endowment plan with comparable age, term and sum assured i.e. according to the usual underwriting rules and procedures. No underwriting evidence will be required for childs life.
6. JEEVAN SAATHI
What is JeevanSathi Plan?
The family plays a vital role in our society. The prosperity of our society depends on the prosperity of the family. For the well-being and protection of the family, State Life has designed a policy on the lives of husband and wife which is named as JeevanSaathi Plan. This policy ensures financial protection and well-being to married couples.
pg. 4
pg. 4
Term Insurance
With a nominal addition in premium, term insurance contract can be added to the plan. If this supplementary contract is issued on any one of the lives assured, then on his/her death during the term of the contract, an amount equal to Basic Sum Assured, become payable.
pg. 4
Payment of premium:
Like other life insurance plans, the premium can be paid yearly, half yearly, quarterly or on monthly basis. The policyholder can opt for any mode of premium payment that suits him/her. However, yearly mode of premium payment is better because it saves time and money.
pg. 4