The supremacy of gold as an investment option and its store value has suffered setback in past few years and this precious yellow metal has lost its glitter and is no more branded as the most ideal investment. The investors have also discarded bullish phase of Real Estate that it enjoyed in eighties. Bank deposits are no longer the lifelines of the middle class investments.

Investment opportunities in stock market have either turned sour or dried up. Failure of flagship scheme US-64 has also badly shaken the public confidence in UTI. Mutual funds also went through a roller coaster ride even before settling down.

In such a changed economic scenario the Indian market has witnessed the entry of private players in Insurance sector with global experience and practices. These companies and the press have done a lot to educate the Indian public about the concept and worth of the life insurance products.

Reading the signals of the competition in time Life Insurance Corporation has also re-engineered itself to launch the products, which can attract the saving options of Indian middle class’s saving that has not been left with many competing options.

LIC has adopted new trends in concept and product design and have positioned its products on the need of the segments with suitable promotion and distribution strategies and better product and distribution options to fulfill the wish list of the customers.

All of these factors have contributed a record 137%  growth in LIC’s premium income to rise to Rs.71000 crore on the back of a 65% growth in previous year. Private players have also entered in the market with suitable add-ons in the traditional Whole Life, Endowment type, Money back and Annuity policies.

New trends in the product design of life insurance products have been overviewed in this paper to analyse the various type of products offered by public sector giant and the new global players in private sector. All these products are like medicine; each one is designed to meet certain needs depending upon the circumstances.

Whole Life Policies

Whole Life Plans are called as such as these policies cover up to age of 100 years. In fact, a whole life plan is also known as an endowment plan maturing at the age of 100, should the insurer live to that age. There have been occurrences where maturity proceeds were paid to the insured that were living at the age of 100.

The whole life policy is believed to be very elastic type of policy because of its long-term duration, low premiums and higher sum assured under this policy. These policies run for as long as the policy holder is alive. The policy monies and the bonus (if cover opted with profit option) are payable only to the nominee or the beneficiary upon the death of the policyholder. The policyholder is not entitled to any money during his or her own lifetime.

These policies were not sold in great number by the LIC and even the private players are not marketing this product in its traditional shape or even with little variation in grand way. Whole life covers do not provide any survival benefit and are based on pure risk and the saving element is missing in the product.

Those who have better understanding of risk and saving factors may opt for securing their earning power risk by purchasing this basic cover of life and the saving portion of life cover payable in other endowment and money back covers may be better invested in other premium portfolios like public provident fund.

It was expected that this perception will change and be corrected by the marketing and educating plans of the private players but the initial thrust of the private players is not on this type of policies though all of them have one or other whole life plan in their product basket.

Initially these policies were designed with a condition of paying premium for whole life. The policyholders keep paying the premium when his or her life has no economic value for others. Later on the whole life covers were introduced with the feature of selected period premium payment facility in shape of Limited Payment whole life policy. HDFC has launched Single premium Whole life that can be obtained by one time payment. It provides long-term stable growth.

It has no in-built maturity date. Birla Sun life has launched Flexi Life Line as whole life plan the duration of cover is for the entire life till 100 years of age. Plan has a free look period of 14 days from the date of dispatch of policy document to review one’s decision about the cover. Met Life’s MET 100 is also a limited pay whole life policy. Om Kotak Mahindra has whole life participating and non-participating plans.

Tata, Reliance, Royal Sundaram, ICICI  prudential and the public sector giant LIC provide Whole life cover without profit and with profit and also with limited payment and single payment options. Whole life policy is cheapest of all. The catch is that the premium payment term is indefinite i.e. one must pay the premium all his life.

In another variation of this type of plan is Limited Payment Whole life policy in which the policy premium is payable only for a selected period but the policy continues to attract bonus until the death of policy holder and it also continues to attract bonus over and above sum assured.

SBI life is introducing a cheapest term cover for its depositors up to Rs.1 lakh and another accident cover up to Rs.2 lakhs by just paying a paltry premium of Rs.30 per month, LIC has also introduced a  Convertible Whole Life Policy.

This cover has an option for its conversion into an endowment insurance plan after 5 years. This could be suitable policy to buy at the start of one’s carrier when his or her income a relatively lower. Recently LIC has launched Jeevan Anand that is in essence a blend of Whole life plan and the admire Endowment Assurance Plan.

The plan provides the pre-decided Sum Assured and Bonuses at the end of stipulated premium paying term, but the risk cover on life continues till the policy owner is alive. This cover also feature accident benefit and is to meet the growing need of a flexible whole life cover.

To blend its whole life cover with that of money back plans LIC has launched Jeevan Rekha to cater the needs of those who like to have a regular inflow of income at regular intervals and at the same time provide for their family a lump sum amount on death.

The plan provides for survival benefit by way of return of 10% sum assured at an interval of 5 years from the date of commencement of policy during the lifetime of the policyholder.

The basic sum assured without deduction of any survival benefits already paid along with vested bonuses and final additional bonus will be payable on death of the policy holder at any point of time either during premium paying term or thereafter.

Met Life has introduced one spanking new Charitable Trust Policy that is whole life policy that can be purchased by one either in name of the institution or that institution can be made beneficiary. The person concerned pays the premium on life till his death and the sum assured is automatically gifted to the nominee. People who aspire to set temples in their names after passing away or who wish that money to be utilized for some societal and dignified cause can sight this an eye-catching cover. ICICI-Prudential has launched Level Term Insurance to provide financial support to family in case of death. It is term plan of 5-25 years. Its Single Premium Bond is for investing bonuses or a windfall as one time premium.

Endowment Policies

Endowment policies are the most popular of all insurance plans. They cover the risk for a specified period, at the end of which the sum assured is paid back to policyholder, along with the entire bonus accumulated during the term of the policy. The saving feature of the endowment cover is the USP of these policies.

The insurance experts believe that where protection need is dominant endowment policies should not be recommended but it has been observed that the major portfolio of the life insurance covers pertains to the endowment covers.

The importance of endowment policies can be seen from the fact that the first set of life cover unwrapped by HDFC  and ICICI-Prudential were endowment covers. As compared to whole life policies, the premium rates are higher and the bonus rate is lower in the case of these covers.

This endowment amount may be put in any suitable investment geared to provide an income for the remainder of one’s own life. Generally this amount is used by the Indian middle class for meeting major events of life such as marriage or children high education expenditure.

These policies not only provide financial risk for the family where the breadwinner dies prematurely but also the insurance is repaid once the risk is over. This policy does provide the survival benefit to the policyholder.

The cost of an endowment policy is typically double that of a whole life one. LIC has in its product kitty many endowment products to meet the specific need of various segments. It provides traditional endowment assurance covers with or without profit.

It has also positioned Jeevan Mitra Plan (Double cover endowment plan with profit), Jan Raksha (with profit), Bima Sandesh (without profit), Bhavishya Jeevan (with profit), Jeevan Griha (Double cover Endowment Plan), Bima Kiran, Jeevan Shree (with accident rider), Jeevan Mitra (double and triple cover endowment plan) and Jeevan Sneha. A straightforward endowment plan average cost is about 2.5% over a 25-year period. The paper discusses a few policies that deserve priority consideration.

Jeevan Mitra provides beside the usual benefits offered by any endowment insurance plan and additional insurance cover equal to or double the sum assured in the event of policyholders’ death during the term of the policy. In other words the death claims in the case of this policy is double or triple the sum assured as opted for. The survival benefits include the sum assured with final bonus depending upon the term and the death benefit includes double or the sum assured plus accrued bonus.

In case of accidental death one can get four times of the sum assured. It is an ideal cover suited both as an initial life protecting policy and for increasing one’s insurance portfolio once he or she has a family.

Jeevan Griha has been positioned for middle class people who desire to avail housing loan. Housing loan financers insist the life cover to the extent of loan amount and this cheap plan provides life cover for double of sum assured. This plan does not entitle the owner for a bonus on maturity and only sum assured is paid to him or her.

It is the non-profit version of the Jeevan Mitra and is much cheaper than Jeevan Mitra. Bhavishya Jeevan has been designed for international players, heroes and leading actresses and persons on foreign deputation who have very high income for a short period.

The premium is payable for a selected term of 15, 20 or 25 years but the premium for first five years is 3 times of the subsequent premium. The survival benefit and death benefit any time ensures sum assured with bonus as in traditional endowment plans with profit. Jan-Raksha is special social welfare cover provided by the LIC to provide endowment benefits to farmers who have irregular income.

The plan has a special feature, which ensures death risk temporary coverage for next three years, anytime, every time if premium is paid for 2 years at least. Bima-Sandesh is a unique endowment policy of LIC. This is the cheapest initial policy to buy. Cheaper than even a whole life policy to start with and at the same time it is an endowment policy insofar as that the policy holder does receives back premiums paid at the end of policy term.

The catch is that the payment received consists of only the premia during the policy’s term and not sum assured plus bonus. This is basically without profit policy. The survival benefit thus stands for practically a nil rate of return on premium investment.

This is how the premium of this policy is kept so low. On the other hand the risk of premature death is fully covered to the extent of sum assured. If one is not tempted by consideration of endowment and bonus but need life cover at the minimum possible premium he or she cannot find a better cover than Bima Sandesh.

Jeevan Sathi is purposely intended to offer insurance shield to working couples. The policies under this plan are issued only on the lives of a husband and wife, provided the wife also has an independent income or is actively engaged in her husband’s business.

What makes this plan unique is that a single policy covers both lives and policy contract continues unless both the partners happen to die within the policy term. In other Joint life policies typically the insurance cover comes to an end upon death of any of the two covered by the policy.

This is an endowment cover with profits and the maturity benefit includes bonus with sum assured. On first death sum assured is paid and the future payment of premium is waived and on second death sum assured is paid with vested bonus. This means the bonus continues to be earned till the second death or maturity when policy comes to an end. Marriage & Education Endowment Plans are tailor made specific policies for building a fund especially for education of children or their marriage.

The cover intends to provide expenses for the special events in the life of the assured. Under this plan the policy monies and bonus are paid only at the end of the selected term, irrespective of whether the policy holder survives the full term or not. It means the survival and death benefit is payable at the same time. Maturity benefit includes sum assured with lump sum bonus. In case of death of life assured payment of premium is stopped but the policy continues as fully paid up policy.

Instead of lump sum bonus the bonus may be taken in 10 half yearly instalments specially when the cover is to meet out the expenditure of education. Jeevan Kishore has been designed for future provision for the child. Bonus in this cover starts from the commencement of the policy but vests either after 5 years or start of the risk whichever is later.

At the age of 25 the policy provides accidental benefit of Rs.1 lakh without any extra premium. The policy may be purchased with premium waive rider and if the proposer dies premium need not be paid till vesting.

If the life assured dies during the deferment period the premium less waiver-extra is returned but if he dies after the deferment period Sum assured with final additional bonus is paid. Jeevan Sukanya is special plan for girl child. The entry age of child is 1 to 12 years.

The policy has been designed to provide the young woman provision for her old age and there is an automatic cover on husband’s life. If husband dies she gets sum assured and still the policy continues. If the assured dies after waiting period sum assured plus accrued bonus and final additional bonus becomes payable.

SBI Life’s Scholar is also a similar kind of child benefit cover. It is premeditated to meet the twin objectives that concern every parent: saving for proposer’s child education and securing his or her bright future despite the uncertainties of life. This cover is for children below 15 years of age.

The proposer will get back the sum assured either the lump sum or in four equal instalments. Should the unfortunate happen proposer’s family gets the sum assured and the accumulated bonus immediately and they need not pay the further premium. In addition to this they will receive all the instalments when the child completes 18 years of age.

The private players have launched their endowment covers almost similar to that of LIC but with value additions. These products have been introduced with certain riders. Riders are an advantage attached to main policy and extends the policy benefits. Max NY Life has introduced total of 8 products with 9 riders.

The payer benefit rider, five year term renewable and convertible rider have nothing new to the already available endowment covers of the LIC. Kotak Mahindra distinctiveness in the product lies in the automatic non-feature clause or automatic accumulation clause that entails that policy will not be lapsed and it will be in force through the interest accumulated from the deposit amount. Automatic maintenance facility ensures that policy remain in force in case one miss premium payment after 3 years of term. The plan draws upon the premium from accumulation account to make up the missing payment to keep the policy live.

HDFC Standard Life has 7 prepackaged and customizable endowment plans. Its individual insurance solutions through endowment plans include financial security within policy term, Lump sum payment on death/survival to maturity, which includes sum assured, bonus additions and terminal additions.

The Add-on Rider benefits include DSA-additional Sum Assured equal to basic sum assured in the event of death; ADB- additional sum assured equal to basic SA in the event of death due to accident; CI- additional SA equal to basic sum assured on diagnosis of critical illness and WOP- waiver of premium payment in case of total disability.

ICICI-Prudential’s Save “n” Protect is also an endowment assurance with extended life cover. This policy is designed for those who want to accumulate funds on regular basis while being covered. It works like traditional endowment cover.

The riders available are Accident disability benefit, Disability, Major Surgical Assistance benefit and flexible term. The critical illness rider provides accelerated payment of maturity benefit in case policyholder is afflicted by critical illness. This provides living benefits towards medical expenses. Major Surgical Assistance rider provides for payment of lump sum in the event of medical emergencies that involves surgical procedures.

The accident or and disability rider provides added protection against accidental death and disability caused by as a result of an accident. The difference lies in the various rider options that a person can opt for. Birla Sun Life has Flexi Save Plus and the unique features of this endowment cover are Investment options, Access to policyholders fund in form of loans, withdrawals and surrender, Death benefit and Automatic Premium payment. The plan provides a Holding account into which the excess earning over the guaranteed return of 3% is transferred.

In the event of death nominee gets the death benefit plus the balance in the additional holding account. SBI life’s Young sanjeevan and Sanjeevan are life cover and regular return policies with double cover option. Private sector players are banking on these value additions and they feel that these are the need-based products and allow customers to package the various options according to their needs.

Money Back Policies

Unlike regular endowment insurance plans where the survival benefits are payable only at the end of the endowment period, these schemes provide for intervallic payments of partial survival benefits during the term of the policy of course so long as the policy holder is alive.

A significant feature of this brand of policy is that on the happening of death of the policy holder at any time within the policy term, the death claim comprises full sum assured without deducting any of survival benefit amounts that may have already been paid as money back components. Distinction of money back plan is one of the survival benefits to a certain extent than insurance defense to the family.

Different term money back covers, Jeevan Chhaya, Jeevan Surbhi and Jeevan Sanchaya are some popular money back plans of the Life Insurance Corporation of India. In money back policies the bonus rate is normally lower than traditional endowment covers. Final additional bonus is either not payable or is paid at lower than endowment rate on maturity. In case of death it is not at all paid.

Term of the money back cover may be 15, 20 or25 years and survival benefits at fixed percentage are paid back after determined period during the term of the cover. Money back traditional covers of the LIC are with profit covers and bonus is added to the sum assured. Jeevan Chhaya is a combination of Jeevan Mitra and Money back plans. Under this blended cover either father or mother or each one of them individually can take the policy that enables to plan for higher education of children. Term of the cover may be between 18-25 years.

If the term of the cover is 18 years, 1/4th of the sum assured will be payable at the end of 15th, 16th, 17th and 18th year plus the accumulated bonus for the full term. Premium payment stops on expiry of term or death of the life assured.

In case of death of life assured the death benefit includes full sum assured and the policy continues without the liability to pay further premium as all future payments are waived. An improved version of the money back plan is Jeevan Surbhi.

This is an increased term cover. The death benefit increases with the duration of the cover. Premium paying period is 3 years shorter than the term of the policy. Policy terminates with the death of the life assured. Survival benefits if paid earlier are not deductible from death benefit anytime.

In this 15 years term cover the death benefit for the first five years is full sum assured and bonus. In the next 5 years this is increased to full sum assured plus additional 50% of sum assured and bonus and within the last five years this benefit is double the sum assured with bonus. LIC provides option of 15, 20 and 25 year term Jeevan Surbhi policies. To meet the changing preferences of the customer LIC  has launched a new money back plan named Jeevan Sanchay.

This policy ensures periodic payment of basic sum assured in instalments on survival with increasing life cover. Jeevan Sanchay gives the choice of four convenient terms of 12, 15, 20 and 25 years and added striking features like guaranteed addition and loyalty addition.

The extra premium for this benefit is very reasonable and worth it. Guaranteed addition is @ 70% for each year the policy is in force and the loyalty addition is the final addition depending upon the experience of the corporation.

HDFC Standard Life Insurance has filed 7 prepackaged and customizable money back covers that provide financial security within policy term and proportion of basic sum assured is paid back at 5 years intervals just like the money back covers of the LIC. Balance basic sum assured and bonus addition on survival is paid at the end of the term. HDFC has targeted this cover to the segment of middle class who needs money to meet expenses like marriage and children education.

Cash bank is ICICI – Prudential anticipated endowment assurance plan that has been designed to meet periodic financial requirements during 15 year term period. Flexi Cash Flow of Birla Sun Life is flexible life insurance plan for a specified term with periodic payback of face amount at fixed intervals coupled with saving growth.

Assured has an option to choose from any of Protector, Builder or Enhancer investment option. Insurers have designed this product as minimum guaranteed cover as well as higher market linked returns as accrued in additional holding account associated with the plan.

Annuity Plans

Annuity plans are exactly opposite of a whole life insurance policy. As certain period increases annuity decreases. The return on investment is quite high compared to bank rates. The disadvantage is that there is no return of capital after death. Insurers have products with immediate annuity options as well as deferred annuity options.

The premium for annuity plans can be paid either as single premium or in easy instalments. In immediate annuity single premium is paid and the policy terminates with death. In deferred annuity plan the premium can be paid in single or in more instalments.

During deferment period the survival benefit is nil. At vesting date cash option is available if deferment period is 10 years or more in lieu of annuity. Annuity payment starts under the different options like for life only or for 5,10,15 or 20 years certain and thereafter for life. In any case annuity continues till death.

If assured dies during deferment period within one year premium is returned. After one year notional cash option is returned based on calculation in the ratio of premium paid with premium payable. After deferment period death benefit is nil. LIC also markets Immediate Annuity Certain to meet certain fixed expenses like education of child or extra old age provision.

Annuity is payable for the number of years specified and premium is paid in single instalment. Deferred Annuity Certain is another annuity plan to meet future fixed huge expenses like higher education of child or marriage by providing for in advance in easy instalments.

Fixed survival benefits in this cover before vesting are nil. On vesting date there is cash option in lieu of annuity. After vesting the annuity for selected number of years only. Death benefit after deferment period ensures annuity for selected number of years irrespective of death of survival.

LIC’s Jeevan Dhara is an idyllic combination of a whole life insurance cover after vesting and annuity for life. It provides absolute old age provision with family protection after death. Premium is paid either by single premium or in stipulated number of instalments. In deferment period there is no survival benefit. On the date of vesting there is a provision for adding guaranteed maturity addition at stipulated rate of Gross Insurance Value Element (GIVE) is like sum assured.

This amount is again enhanced on the date of death by addition of additional lump sum bonus.

Before vesting the death benefit under this policy is restricted to notional gross insurance value element calculated as paid up value. After vesting the death benefit is enhanced GIVE plus the additional lump sum bonus. Jeevan Akshay is another annuity cover of LIC targeted on retired people who can invest their retired benefits for their old age and family protection after death. The policy contains only single premium provision.

The policy provides immediate annuity payment monthly @ Rs.10 per 1000 guaranteed insurance sum. 30% of this guaranteed insurance sum is returned after 7 years if the annuitant survives and pension is reduced to a stipulated sum. Death benefit in the policy any time is guaranteed insurance sum with final bonus.

Jeevan Sarita is another annuity cover of LIC positioned as joint life assurance cum last survivor annuity. Only an earning member can be the first life. Sum assured is reckoned in terms of units of Rs.75000 minimum of 5 and maximum of 30 units.

Premium paying terms is one year less than deferment period. Maturity age is minimum 50 years of the older life and maximum 65 of older life. Maximum term of the policy is 35 years.

On maturity date the payment of premium stops and annuity payment starts. Death accident benefit is allowed on both the lives. Jeevan Suraksha can be purchased with or without life cover. It has pension option for life and also the option of certain pension for stipulated period certain and a life thereafter to the spouse or pension for life with return of purchase price to the nominee.

Premium is payable till vesting date after which it becomes an annuity. If the cover is opted without life and death happens within 3 years the premium is returned without interest. Between 4 to 6 years the premium is returned with 8% interest and after 6 years the premium is returned with 9% interest.

This is a complete economic protection in old age and family protection cover after death. Jeevan Suraksha is also available with guaranteed addition and loyalty addition. This is an endowment plan from commencement to maturity with full death benefit. On maturity, it becomes an annuity plan with 6 options such as pension for life, certain thereafter for 5, 10 or 15 years and life thereafter and family pension.

Other Life Products

Life insurers have other life products like investment plans and health plans. Bima Nivesh is LIC’s popular and lucrative investment plan with tax benefit and life cover for lump sum fund like gratuity and provident fund.

Only single premium is accepted to grant such investment plan, which has 5 or 10 year term irrespective of age. Maturity benefit is sum assured with compounded guaranteed addition @85% annually and loyalty addition. If death happens to life assured within first 6 months 95% of the premium is returned.

Between 6 months and 12 months the full premium is returned but after a year guaranteed addition is also added to the sum assured. SBI life’s Sukh Jeevan Prathan is safe investment vehicle with tax benefits. It is single premium policy with 5 or 10-year term facility. Every year insurance cover increases.

On maturity sum assured is loaded with guaranteed addition and maturity guaranteed addition. Women are required to pay lesser premium than men. Asha Deep is LIC’s popular health plan with profits. This cover is to meet regular medical expenses or lump sum payment for major or minor surgical procedure.

Premium is required during the term of the policy but stops if stipulated disease strikes. In case there is an affliction of any of the major disease within one year this benefit is not payable and the policy shall be converted to an endowment plan with profit and premium is reduced. If the life assured continues to enjoy a healthy life throughout he gets sum assured and vested bonus on maturity.

Jeevan Adhar is limited payment whole life policy for person with handicapped dependent. The life assured takes this policy to provide for lump sum and annuity benefit after his death for the handicapped dependant. When the life assured outlives the handicapped dependant the premium is returned.

Analysis of life products of both the public sector and private sector players suggests that in time to come the customers will be having more choice in terms of value addition. The private players are also putting maximum selling efforts on money back and endowment policies. The main attraction of the Indian market is its sheer size and there is vast scope for LIC and new global players to explore the possibility to gain more and more share of it.

By: Mr. Vinay Verma, Published in Life Insurance Today, August,2011