sip on underwriting process in reliance life insurance by adil khan

1

A Summer Internship Project Report on

UNDERWRITING IN RELIANCE LIFE INSURANCE

Submitted in partial fulfillment of the requirements for the degree of

Post Graduate Diploma in Management (Finance)

By

ADIL KHAN

(Roll No. B-2-F-03)

Under the guidance of

Ms. DEEKSHA JOHRI

Assistant Professor ISBS, PUNE

A Study Conducted for Reliance Life Insurance Company limited

At

Indira School of Business Studies,

Tathawade, Pune 411033

(2012-14)

2

ACKNOWLEDGEMENT

I am very much obliged and indebted to Mr. Ashish Sharma, Branch Service Manager – Operations

of Reliance Life Insurance Company Limited, Jaipur (Rajasthan Head Office) for his approval and

valuable suggestions to take up the project.

I express my deep sense of gratitude to entire operation team of Reliance Life Insurance Company

Limited, Jaipur (Rajasthan Head Office), for there valuable suggestions, consistent help during my

project work.

I also express my deep Sense of gratitude to Ms. Deeksha Johri, Assistant professor Indira School

of Business Studies, for his consistent encouragement and guidance.

3

Executive Summary

This project is about study of underwriting process in Reliance Life Insurance Company Limited. The

Basic purpose for doing the project is to analyze the process of Underwriting in the company So that

we can understand the Underwriting process of Life Insurance Company. Underwriting Process help

Insurance Company to minimize their Risk.

Industry/Company Overview:

In India, Insurance sector contributes approx. 7.6% to the GDP.

The sector of life insurance has witnessed immense growth in the past few years. Today, it is second

only to banks for mobilized savings and forms a formidable part of the capital market.

RELIANCE LIFE INSURANCE COMPANY LIMITED is a Part of RELIANCE CAPITAL

COMPANY Under ANIL DHIRUBHAI AMBANI GROUP (ADAG).

Reliance Capital is one of India is leading private sector financial services companies, and ranks

among the top three private sector financial services and banking companies, in terms of net worth.

Nippon Life Insurance Company acquired 26% interest in equity share capital of the Company

effective October 7, 2011 subsequent to receipt of all regulatory approval.

Nippon Life Insurance, also called Nissay, is Japan's largest private life insurer with revenues of Rs

346,834 cr. (US$ 80 Billion) and profits of over Rs 12,199 cr. (US$ 3 billion). The Company has over

14 million policies in Japan, offers a wide range of products, including individual and group life and

annuity policies through various distribution channels and mainly uses face-to-face sales channel for

its traditional insurance products. The company primarily operated in North America, Europe and Asia

and headquartered in Osaka, Japan. It is ranked 81st in Global Fortune 500 firms in 2011.

4

Objectives:

To study the life Insurance market in India

To study Underwriting in Reliance Life Insurance Company Limited.

To understand how an Insurance Company Minimize risk.

Research Methodology:

The Sources of Data collection in this project is Secondary Data. Sources of Secondary data collection

were Company‘s Article of Underwriting and Various articles on Underwriting and Life Insurance and

from IRDA website.

The research was both analytical and descriptive. In case of analytical research, the researcher already

has all the facts or information available to them and they make a critical evaluation of that

information for finding the solution (S) to certain problem.

Descriptive research is that exploration of the existing certain phenomena. In this Research I have

collected data from company and then analysis it.

Data Analysis:

The Data analysis and interpretation mainly involves the analytical study of various charts of

underwriting Process like Non-medical limit, KYC & AML requirement etc.

Conclusion:

The conclusion that has drawn from the entire project is that the underwriting process in Insurance

sector helps to minimize the Risk for the company.

5

Limitation:

The data available has taken from an Article of Reliance Life Insurance Company Limited.

“Underwriting guideline” Time Constraint was also one of the limitations.

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TABLE OF CONTENT:

S. No. Contents Pg. No.

1. Introduction 8

2. Industry / Company overview 12

3. Review of Literature/ Theoretical Background 24

4. Objectives 42

5. Research Methodology 44

6. Data Analysis, Results and Interpretation 47

7. Conclusions 68

8. Limitations of the Project 70

9. Bibliography 72

10. Abbreviations

74

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LIST OF TABLES:

S. No. Details Page No.

1 Financial Questionnaire 30

2 Standard or nonstandard Age proof table 32

3 Non Medical limit

Under Band 1

Under Band 2

33

34

4 Test Category Levels 35

5 Abbreviations of test category 35

6 Confidential Report countersignature limits table 36

7 Interpretation of Risk Profile 37

8 Customer Risk Profile 38

9 Product Risk Profile 38

10 AML & KYC – Risk Indicator Matrix 39

11 Photo Id Proof 39

12 A table show that in low risk transaction which kind of document

consider as ID proof, Address proof and Income proof

40

13 A table show that in High risk transaction which kind of document

consider as ID proof, Address proof and Income proof

41

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Chapter – 1

Introduction

9

Introduction:

The topic of the project is ―Underwriting process‖ in ―Reliance Life Insurance Company Limited‖ The

basic reason for doing the project is to understand the concept of Underwriting in Reliance Life

Insurance Company Limited.

Definition of 'Insurance Underwriting'

Insurance Underwriting is a financial process that evaluates the risks of insuring a particular person or

asset and uses that information to set premium pricing for insurance policies.

Underwriting Process minimize risk for the company. The underwriter checks various factors on

application form, and based on those factors risk is determined. Here are some factors that

underwriters typically look at:

A person‟s age: As far as life insurance cover is concerned, a person‘s age is an important

consideration.

Genetic medical history: if customer has a long history of serious illness such as cancer or heart

problems in his family, then the underwriters may assess his risk as high.

Current health conditions: If Customer is in good health, he obviously stands to be assessed as a

lower risk than someone is who has some illness or who has undergone serious surgeries in the past.

The nature of your occupation: The nature of occupation can also have a significant impact on

applicant‘s life insurance premiums. Generally, people who have jobs such as office jobs are regarded

as lower risk in terms of premature deaths.

10

Significance of the project:

Significance of project arises because of the importance of Underwriting in Insurance Company.

Inadequate Underwriting can lead to-

Loss of reputation of brand

Distortion of firm‘s profit

Non-achieving of firms target profit.

Stagnation of business growth.

Scope of the Project:

The scope of the project was mainly on-

HUMAN LIFE VALUE

FINANCIAL EVIDENCE

ACCEPTABLE AGE PROOF

NON-MEDICAL LIMITS

CONFIDENTIAL REPORT

KYC & AML REQUIREMENT

Time frame For The Project:

The study and analysis of Project was completed within a period of 2 months (45 working days).

11

Sailent Contribution of the Project:

The sailent contribution of the project will help to understand, how an insurance company use this

underwriting process to minimize the risk.

Outline of the Project:

The broad outline of the project are-

Introduction to the industry

Introduction to the company

Underwriting Guidelines

Data analysis and interpretation

12

Chapter – 2

Industry And Company Overview

13

Industry Overview:

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 nationalized 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 R.N. Malhotra Committee to lay down a road map for

privatization 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 IRDA—started

issuing licenses to private life insurers.

The life insurance sector controls:

More than Rs. 33,633 cr. of deployed capital

Over Rs. 1,618,544 cr. of managed assets

Investments in infrastructure exceeding Rs. 2, 20,866 cr.

Another indication of the sector's growth is its infrastructural strength.

Today the life insurance sector comprises of:

Over 11,082 branches

More than 23.45 lakh agents

2.48 lakh direct employees and growing significantly

34 cr. In-force policies

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Life_insurance

http://en.wikipedia.org/wiki/Government_of_India

14

Company Overview

Full name Reliance Life Insurance Co Ltd

Parent Company Reliance Capital ltd.

Status Listed

Legal Form: Other non-liability limited

Category NBFC

Sector Insurance and finance

Tagline/ Slogan Answer only 7 simple questions

USP Brand Reliance as its foundation

Financial Auditors Pathak H D & Associates (2010)

Legal Address H Block, 1st Floor, Dhirubhai Ambani Knowledge City, ; Navi

Mumbai; Maharashtra ; 400710.

15

Reliance Life Insurance Company Limited (Reliance Life Insurance) is a part of Reliance Capital

Ltd. of the Reliance Anil Dhirubhai Ambani Group. Reliance Capital is one of India‘s leading private

sector financial services companies, and ranks among the top three private sector financial services

and banking companies, in terms of net worth.

Nippon Life Insurance Company acquired 26% interest in equity share capital of the Company

effective October 7, 2011 subsequent to receipt of all regulatory approval.

Nippon Life Insurance, also called Nissay, is Japan's largest private life insurer with revenues of Rs

346,834 cr. (US$ 80 Billion) and profits of over Rs 12,199 crore (US$ 3 billion). The Company has

over 14 million policies in Japan, offers a wide range of products, including individual and group life

and annuity policies through various distribution channels and mainly uses face-to-face sales channel

for its traditional insurance products. The company primarily operated in North America, Europe and

Asia and it‘s headquartered in Osaka, Japan. It is ranked 81st in Global Fortune 500 firms in 2011.

Reliance Life Insurance offers products that fulfill savings and protection needs. Their aim is to

emerge as a transnational Life Insurer of global scale and standard.

Reliance Life insurance

Joint venture

Nippon Life insurance

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Vision & Mission of Company

Vision

―Empowering everyone live their dreams.‖

Mission

―Create unmatched value for everyone through dependable, effective, transparent and profitable life

insurance and pension plans.‖

Goal

Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:

Emerge as transnational Life Insurer of global scale and standard

Create best value for Customers, Shareholders and all Stake holders

Achieve impeccable reputation and credentials through best business practices

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Achievements of Company:

Largest Private Life Insurance in terms of Number of Policies for two consecutive

years as of 31 March 2012.

A wide network of 1230 branches and 1, 50, 000 advisors and over 9 million policies.

RLIC continues to be amongst the foremost Life Insurance companies in India to be

certified ISO 9008:2001

Winner of ―Best Non-Urban Coverage‖ Award at Indian Insurance Awards 2011.

RLIC‘s Boundaries for Books Campaign won the 'Silver' at the Indian Digital Media

Awards (IDMA) 2012, under Best Integrated Campaign – Social Cause and Best Use

of Social Network – Social Cause.

Amongst the top 3 Most Trusted Service Brands in the Insurance category as per the

Brand Equity‗s ‗Most Trusted Service Brands 2011‘ Survey.

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Leadership team of Company:

Board of directors:

Satya Pal Talwar, Independent Director

Satya Pal is an Independent Director of Reliance Life Insurance Company Limited. He holds an

experience of more than 35 years in operations and policy formulation.

Rajendra Chitale, Independent Director

Rajendra is an independent Director at Reliance Life Insurance Company Limited.

Rajendra is the Managing Partner of M/s. M.P. Chitale & Associates, India‘s leading financial

boutique specialist with converging expertise in financial structuring, legal, tax and regulatory advice,

Government of Maharashtra.

Upendra Joshi, Independent Director

Upendra is an Independent Director of Reliance Life Insurance Company Limited.

Upendra is a partner of the corporate and infrastructure team of Khaitan & Co. He has rich experience

in all aspects of law and documentation relating to infrastructure including power, oil & gas, telecom,

mining, ports, airports and project financing and has headed several large infrastructure related

matters.

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Takeshi Furuichi, Non-Executive Director

Takeshi is a Non-Executive Director at Reliance Life Insurance Company Limited.

Takeshi is Representative Director & Senior Managing Executive Officer and Chief Investment

Officer (oversees the Investment and International Business) of Nippon Life Insurance Company,

Japan.

Soumen Ghosh, Non-Executive Director

Soumen is currently the Group President of Reliance Capital Limited and Non – Executive Director of

Reliance Life Insurance Company Limited.

Soumen has an experience of around 22 years in the areas of General Insurance and Life Insurance in

India and abroad.

Amit Bapna, Non-Executive Director

Amit is currently the Chief Financial Officer at Reliance Capital Limited and Non-Executive Director

of Reliance Life Insurance Company Limited.

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Financial Facts:

Total Income

(Rs. „000)

PARTICURLAR March 2013 March 2012 March 2011 March 2010 March 2009

TOTAL INCOME 61,165,291 50,614,503 82,731,336 103,564,516 50,504,701

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

March, 2013 March, 2012 March, 2011 March, 2010 March, 2009

61,165,291

50,614,503

82,731,336

103,564,516

50,504,701

TOTAL INCOME

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Surplus

(Rs. „000)

PARTICURLAR MARCH 2013 MARCH 2012 MARCH 2011 MARCH 2010 MARCH 2009

SURPLUS / (DEFICIT) 4,442,782 3,784,466 962,149 867,699 158,719

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000


4,442,782

3,784,466

962,149 867,699

158,719

SURPLUS

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Total Current Assets

(Rs. „000)

Particular MARCH 2013 MARCH 2012 MARCH 2011 MARCH 2010 MARCH 2009

Total Current Assets 6,329,210 4,941,020 4,778,622 6,332,983 5,815,326

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000


6,329,210

4,941,020 4,778,622

6,332,983

5,815,326

Total Current Assets

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SWOT Analysis:

Strength: Weakness:

Robust and Diverse Product portfolio.

Has network of 1252 offices and 165000

agents.

Strong Capital Base and strong brand

backing of Reliance.

Reliance Capital is one of India‘s leading

private sector financial services

companies, and ranks among the top 3

private sector financial services and

banking companies, in terms of net worth.

Controversies related to Reliance Capital

may have a negative impact

Low advertising as compared to

competitors.

Opportunity: Threats:

Opportunities in the newer semi-urban and

rural markets.

Earning Urban Youth looking for

investments.

Economic crisis and global financial

problems.

Entry of new NBFCs in the sector.

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Chapter – 3

Review of literature & Theoretical Background:

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Review of Literature:

Underwriting Guideline Vol. III Reliance life Insurance 2009.

This article published by Reliance life insurance company Limited, in year 2009. This article is all

about the Underwriting requirement or guideline in underwriting process. This article state about

medical, AML, KYC guideline and, Human life value, Sum assured value calculation in different

products.

Therefore, we can say that this article is the backbone for the Underwriter for underwriting process in

reliance life insurance.

I have also studies various IRDA and international journals related to Underwriting so that I can

understand it and explain it in my project.

26

Theoretical Background:

Underwriting In Life Insurance:

Underwriting is a financial process in life insurance that evaluates the risks of insuring a particular

person and uses that information to set premium pricing for insurance policies.

Underwriters use computer programs and actuarial data to determine the likelihood and magnitude of a

payout over the life of the policy. Higher-risk individuals and assets will have to pay more in

premiums to receive the same level of protection as a (perceived) lower-risk person or asset.

Factors in Underwriting

Age: Young people are given life insurance impromptu since probability of them living out the

complete term period is high.

Health Condition: Health individuals are accepted rapidly while others might have to undergo

medical tests. The test cost is generally borne by the insurer.

Income: More the income, more the cover we can get.

Health History: Any hereditary medical problems may lead to rejection of proposal.

Occupation: Hazardous occupation may lead to increase in premium.

Habits: Addictive habits like alcohol, drug abuse, and smoking will certainly result in higher

premium.

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Underwriting lets the insurer evaluate risk otherwise; the acceptance of every policy could lead to

heavy losses as well as fraudulent cases. If the proposal is thoroughly investigated, there is low

probability of fraud cases and claims that are more genuine. Higher standards of underwriting usually

leads to higher claim settlement ratio.

Factors to be Consider for Underwriting:

1. HUMAN LIFE VALUE

2. FINANCIAL EVIDENCE

3. ACCEPTABLE AGE PROOF

4. NON-MEDICAL LIMITS

5. CONFIDENTIAL REPORT

6. KYC & AML REQUIREMENT

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1. Human Life Value:

In Reliance Life Insurance for Calculation of Human Life Value simply known as Sum Assured

company use Online tools which provided in Company‘s website, all the sales person of the company

use that tools to calculation of human life value.

Calculation of Human Life Value Include below factors:

1. Age of Insurer

2. Income

3. Policy Tenure

4. Employment Risk

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2. Financial Evidence:

If the Sum assured is more than Rs. 15,00,000 but less than 25,00,000 than RLI would require a

financial questionnaire signed by the life assured and attested by sales manager or equivalent and a

detailed financial justification from the BM / AM in case the financial questionnaire is not sufficient to

justify the sum proposed, RLI may call for income proof documents.

Above Rs. 25,00,000 RLI would require 2 years ITR or SARAL form or Form 16 of Form 16 A or

Salary Slip for 2 Months, CA Certificate Detailing Personal Assests and liabilities. Business Accounts

like 2 years P/L account and Balance Sheet.

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Contract No: ______________________________________________________________________

Name of Life to be assured: __________________________________________________________

FINANCIAL QUESTIONNAIRE

(To be filled by life Assured and attested by Sales Manager or equivalent)

Personal Financial Information

Assessment

year

2010-2011

Assessment

year

2011-2012

Assessment

year

2012-2013

Salary Income

Business Income

Agriculture Income

Bonus/Dividend/Commission/Interest

Perquisites

Rental Income

Other Earned Income (Contract/Consultancy etc.)

TOTAL Rs.

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PERSONAL FINANCIAL INNFORMATION (ASSETS & LIABILITIES)

ASSETS

(A) Cash Amount (Rs.)

Saving Bank Deposit

Current Deposit

Term Deposit (including Recurring Deposit)

NRE/NRO/NRNR Deposit

National Saving Certificate (NSC)

Provident Fund

Cash Certificates/Government Bonds

(B) Fixed Deposits

Bank Name Amount

Invested (Rs)

Maturity Amount

(Rs)

Rate of Interest Maturity Date

(C) Investments

Total Net Worth

Assets (A+B+C) - Liabilities (D) Total Rs.

Have you Declatred personal Bankrutcy in last five years Yes/No

If yes, please give details:

__________________________________________________________________________________

__________________________________________________________________________________

Signature of life Assured

Date:

Attested By

Sales Manager‟s (or Equivalent) name: ________________________________________________

Sales Manager‟s Code: ______________________________________________________________

Sales Manager‟s Signature: __________________________________________________________

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3. Acceptable Age Proof:

One of the most difficult set of requirement involves the submission of adequate evidence of age as

required in all instances. We have reviewed the existing requirement including those currently utilized

by LIC and other private insurers and have developed the following revised guidelines.

STD. AGE PROOFS:

Birth Certificate certified from Municipality or other equivalent document.

Passport.

School/College Certificate with date of birth stated therein.

Domicile Certificate (Where age was admitted)

Employment Certificate government showing date of birth

Military Services record showing date of birth

Baptism Certificate

Marriage Certificate (Catholic only)

LIC policy provided age has been admitted on the basis of standard age proof and indicated

by evidence of age code on the policy document.

Income tax PAN card Showing date of birth/age

Driving License

(Extra Premium of RS. 1.50/1000 of SA will be charged for Non Standard age proof)

NON STD. AGE PROOF:

Voter‘s card (showing age)

Horoscope (not computerized)

Self-declaration which is on a stamp paper and notarized

Certificate issued by village Panchayat

Ration Card.

33

4. Non-Medical limits:

UNDER BAND 1 (Non std. age proof accepted)

(age : age last birthday)

BAND 1: For Non STD. AGE PROOFS

AGE AT ENTRY

SUM ASSURED Up to 18 18-35 36-45 46-50 51-55 56-65

Up to 50000 Nil Nil Nil Nil Nil Nil

50,001 –

1,00,000

Nil Nil Nil Nil Nil Level 2 plus

ECG

1,00,001 –

2,00,000

Nil Nil Nil Nil Level 2 plus

ECG

Level 2 plus

ECG

2,00,001 –

6,00,000

Nil Nil Nil Level 2 plus ECG Level 2 plus

ECG

Level 3 plus

ECG

6,00,001 –

10,00,000

Nil Nil Level 2 Level 3 plus ECG Level 3 plus

ECG

Level 4

10,00,001 –

15,00,000

Level 1 Level 2 Level 3 plus

ECG

Level 4 Level 4 Level 5

15,00,001 –

20,00,000

Level 1 Level 3 plus

HIV 1& 2

Level 4 plus

HIV 1& 2


20,00,001 –

50,00,000


HIV 1& 2

Level 5 Level 5 Level 5 Level 5

50,00,001 –

50,00,0000


HIV 1& 2


Over

50,000,000

Level 1 Level 5 Level 5 Level 5 Level 5 Level 5

34

UNDER BAND 2 (Std. age proof accepted)

(Age: age Last Birthday)

BAND 2: For STD. AGE PROOFS

AGE AT ENTRY

SUM ASSURED Up to 18 18-35 36-45 46-50 51-55 56-65

Up to 50,000 Nil Nil Nil Nil Nil Nil

50,001 –

1,00,000

Nil Nil Nil Nil Nil Level 2

1,00,001-

2,00,000

Nil Nil Nil Nil Level 2 plus

ECG

Level 2 plus ECG

2,00,001-

6,00,000

Nil Nil Nil Level 2 plus

ECG

Level 2 plus

ECG

Level 3 plus ECG

6,00,001-

10,00,000

Nil Nil Nil Level 3 plus

ECG

Level 3 plus

ECG

Level 4

10,00,001-

15,00,000

Level 1 Nil Level 3 plus

ECG


15,00,001-

20,00,000


HIV 1& 2

Level 4 plus

HIV 1& 2


20,00,001-

30,00,000


HIV 1& 2 less

ECG


30,00,001-

50,00,000


HIV 1 & 2


50,00,001-

50,00,0000


HIV 1& 2


Over 50,00,0000 Level 1 Level 5 Level 5 Level 5 Level 5 Level 5

35

Across the board up to age, 65 non- medical limits are 50000.

Test Category Levels:

Level 1 MER

Level 2 MER, FBS, Total Cholesterol, GGT

Level 3 MER, FBS, TC, GGT, HDL, Trigs, SGOT, SGPT, Creatinine

Level 4 MER, FBS, TC, GGT,HDL, Trigs, SGOT, Creatinine, HBsAg, HbA1c, CBC,

ECG

Level 5 MER, FBS, TC, GGT, HDL, Trigs, SGOT, Creatinine, HBsAg, HbA1c,

CBC, H1V1 & 2, TMECG

Abbreviations

MER- Medical Exam Report

FBS- Fasting Blood Sugar

RUA- Routine Urine Analysis

ECG- Electro Cardiology

TMECG Treadmill Electro Cardiogram

CBC- Complete Blood count

Note:

MER includes urinalysis.

36

5. Confidential Report (Advisor/SM):

The Confidential Report is prepared by Human life value created tools on Reliance life Insurance

website, according to age, income, premium-paying capacity of customer.

This Report contains all the details about premium and sum assured.

This Report is attached with application form, signed by authorised person.

CR countersignature limits are as follows:

Authorised person to Sign CR Sum Assured

Insurance Advisor Up to 5,00,000

Sales Manager Up to 15,00,000

Branch Manager Up to 50,00,000

Area Manager Up to 1,00,00,000

Regional Manager Above 1,00,00,000

CR signed by SM is mandatory incase the premium is 1 00,000 and above.

37

6. KYC & AML Requirments:

KYC and AML documents depend upon the risk profile of product and customer, according that

underwriter asks for these documents.

Interpretation of Risk Profile as follow:

Interpretation of the Risk Profile

Single

Premium

Low Risk product and a low risk customer – Single Premium up to 4 lacs will

be low risk transaction.

High Risk product and low risk customer - Single Premium up to 3 lacs will


All other single premium contributions would be low risk transactions if the

single premium is less than 1 lakh.

Regular

premium

Low Risk product and a low risk customer – Regular Premium up to 5 lacs

will be low risk transaction.

High Risk product and low risk customer - Regular Premium up to 4 lacs will


All other single premium contributions would be low risk transactions if the

single premium is less than 3 lakh.

38

Customer Risk Profile as Follows:

Customer Risk Profile

High Risk

Customers

Person with varying income distribution (self-employed & businesspersons).

Person without standard address / ID proof

Jewelers – Dealers, Antique dealers, diamond traders, house wives, with high-

income subjects to their income declaration, unit linked products (including

pension‘s plans).

PEP (politically exposed person) means politicians from other countries more

than 1000000 receipts from nonprofit organization.

Low Risk

Customers

Salary holders including NRIs, Government servants, professionals,

customers who are farmers / iron worker economic strata.

Low risk Product: Regular premium products like pure medical/health

products catering to lower Economic strata.

Product risk Profiles as follows:

Product Risk Profile Low Risk High Risk

Term Y N

Term with return of premium Y N

Standalone Health Products Y N

ULIP N Y

Endowment Y N

Whole Life Y N

Pension N Y

Traditional Universal (ULIP) N Y

Rural Y N

39

This Matrix shows the KYC & AML Requirments according to above two tables:

AML & KYC – Risk Indicator Matrix

Risk

Indicator

Limits per

transactions or per

month or per year

Photograph Address

proof

ID Proof Income

Proof for

computed

annual

income

Accept cash –

Monthly for limits

from integrally

connected

customers

Low Risk 10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes

High Risk 10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes

Low Risk 50,001 to <= 99,999 Mandated Mandated Mandated Optional No

High Risk 50,001 to <= 99,999 Mandated Mandated Mandated Optional No

High Risk =/> 1.00.000 Mandated Mandated Mandated Mandated No

Low Risk <= 1,00,000 No Mandated Mandated No Yes

If annualized premium equal to or above 50,000, PAN card is a mandated document under the finance

Act, 2011.

A transaction that does not fall under the low risk transaction category is a High Risk transaction.

Foe Combo instances Single + Regular premium to be treated as a single: Low risk product + High-

risk customer to be treated as High Risk.

The Risk classification is needed because high-risk transaction require enhanced due diligence.

Photo

Id Proof

PAN Card, Passport, Voters Identity Card, driving License, SEM/GO/PA verification

Bank Certification/ Statement, provisional / Driving license, Employer‘s Certificate

Photograph certified by an insurance company Employee (ICE).

40

A table show that in low risk transaction which kind of document consider as ID proof, Address

proof and Income proof.

Transaction

Risk

ID Proof Address Proof + B22 Income Proof

Low

Risk

Transaction

Pan Card, Passport, Voters ID,

Driving License,

*SEM/GO/PA verification,

Bank certification, Photograph

certified by an insurance

company Employee (ICE),

Card issued by National Rural

Employment Gurantee Act

(NREGA), Employee

Certification, Adhar

Card/UID, Bihar Rajya

penchayat patra, identity card

issued in north east & bihar by

the state government .

Voters ID driving license, Passport,

Electricity bill/telephone bill /mobile bill

(6 months), Bank account statement (3

months), letter from , *SEM/GO/PA,

Property document – Copy of registered

lease agreement with rent receipts (6

months), pension payment order issued to

retired employee by govt./PSU dept. if

they contain the current address, Life

insurance policy, certificate from ward

officer/equivalent rank officer

maintaining election roll certifying

address of applicant, cast and domicile

certificate with address and photograph,

Bihar Rajya penchayat patra, Banker‘s

certification, Consumer gas connection

card/book/pipe gas bill (6 months),

Income Tax or wealth tax assessment

order, Post office saving pass book,

Certified village extension officer, Credit

card statement (3 month) , Mutual fund

statement (3 month), Adhar Card / UID,

Require Any one of these

income proof Document.

CA certified cash flow

statement + Bank Statement,

Income Tax Assessment order

or pension orders or Income

tax return or Employers,

certificate or salary slip last 3

months appointment letter or

current year Audited P & L

and balance sheet or

agriculture income certificate

or pass book/Agriculture land

details – Mandi recipits + 7/12

Extract of form 16, form 16 A

For NRI/PIO: valid indian

Passport, driving

license/Social security card

For NRI/ POI: permanent residence

certificate, copy of valid visa with address

or P.O. box no. valid indian passport/

Bank Account statement (3 month) with

address/ copy of registered lease

agreement with rent receipt (recent) /

Banker‘s Certification + B56

For NRI/PIO: Appointment

letter/ last 2 months salary

slips/ salary statement last 2

years audited B/S & P & L

Audited computation of

income , bank statement /CA

certified cash flow statement +

bank statement.

41

A table show that in High-risk transaction which kind of document consider as ID proof,

Address proof and Income proof

Transaction

Risk

ID Proof Address Proof + B22 Income Proof

High Risk

Transaction

(enhance

due

Diligence is

required)

Pan Card, Passport, Voters

ID, Driving License,

*SEM/GO/PA verification,

Bank certification, Card

issued by National Rural

Employment Gurantee Act

(NREGA), Employee

Certification, Adhar

Card/UID, Bihar Rajya

penchayat patra, identity card

issued in north east & bihar

by the state government .

Passport, Electricity bill/telephone

bill /mobile bill (6 months), Bank

account statement (3 months),

Property document – Copy of

registered lease agreement with

rent receipts (6 months), Banker‘s

Certification, Income Tax or

wealth tax assessment order, Credit

card statement (3 month) , Mutual

fund statement (3 month).

Require Any one of these income

proof Document.

Income Tax assessment order.

Income Tax return.

Audited companies account (latest).

Audited Firm‘s account and

company deed.

Agriculture income certificate.

Agriculture land details and income

assessment i.e.

(mandi receipt) = 7/12 extract or

bank statement

CA certificate disclosing income

details + Bank statement CA

certified cash flow statement + bank

statement or salary slip last 3

month.

For NRI/PIO: valid indian

Passport, driving

license/Social security card

For NRI/ POI: permanent

residence certificate, copy of valid

visa with address or P.O. box no.

valid indian passport/ Bank

Account statement (3 month) with

address/ lease agreement with rent

receipt (6 month) / Banker‘s

Certification.

For NRI/PIO: Appointment letter/

last 2 months salary slips/ salary

statement last 2 years audited B/S &

P & L Audited computation of

income , bank statement /CA

certified cash flow statement + bank

statement

42

Chapter – 4

Objectives:

43

Objectives:

To study the life Insurance market in India

To study Underwriting in Reliance Life Insurance Company Limited.

To understand how an Insurance Company Minimize risk.

44

Chapter – 5

Research Methodology

45

Research Methodology:

Research is original contribution to the existing stock of knowledge. The Objectives of Research is the

systematic and in-depth study or search for any particular topic, subject of area of investigation,

backed by the collection, compilation, presentation and interpretation of relevant details of data.

Methodology followed in this project is-

Collection of data

Type of data

Analysis of data

Interpretation of data

Collection of Data:

All the Data, which has been used in this project, is secondary data, which has been collected from

company‘s article and RBI website and some cases of new customers.

Types of the Research:

Analytical Research

Descriptive Research

Analytical Research: Analytical research is that research where the researcher already has all the facts of information

available to them and they make a critical evaluation of that information for finding the solution(S) to

46

certain problem. In the project, the information used is mainly company‘s guideline of Underwriting.

That information‘s were used to make analysis of the project.

Descriptive Research:

In this type of research, we already have all the facts of information available to us and we make a

critical evaluation of that information for finding the solution(S) to certain problem. In the project, the

information used is mainly company‘s guideline of Underwriting and some new business Cases. That

information‘s were used to make analysis of the project

47

Chapter – 6

Analysis and Interpretation:

48

Analysis and Interpretation:

For the purpose of analysis of underwriting process, I have use two different products of Reliance Life

Insurance, and with the help of that products and new business cases, I have analyses the plan as well

as underwriting process in company.

Interpretations are as follows:

49

Plan 1

Reliance Endowment Plan:

50

Reliance Endowment Plan:

Product Details & features:

Lifeasia Product Code DEP

Underwriting Requirments Std. age proof/ NSAP with age extra

AML guidelineas applicable

1) Endowment Plan is a Traditional Plan.

2) Minimum Sum Assured is 25,000.

3) Maximum sum assured for ages up to 12 years is 5 lakh

HUF Plan Allowed

Key man Not Allowed

Employer Employee Allowed

Partnership Not Allowed

Policy Term:

Minimum = 5 years Maximum = 35 years

Age at Entry:

Minimum = 5 year Maximum = 65 year

Age at Maturity:


Sum Assured:

Minimum = Rs. 25000 (Regular

premium)

Maximum =

Entry age below 18 years – Rs. 500000

Entry age 18 years and above – No Limit.

51

CASE. 1

Details of Customer:

Sum Assured Rs. 500000

Entry Age 30 years

Policy Term 30 years

Annual Income Rs. 600000

Occupation Govt. job

52


For Calculation of human Life Value, Underwriter use online tools, which gives amount of human life

value in this case human life value is 5,00,000. So according to that his Premium is as follows:

Annual Premium 14,260

Half Yearly Premium 7,130

Quarterly Premium 3,565

Monthly premium 1,188.33


His Sum Assured is 5,00,000 so there will be no financial evidence are required for the financial

evidence.

―If the total insurance is more than 15,00,000 but less than 25,00,000 than Underwriter would require

a financial questionnaire signed by the life assured and attested by sales manager or equivalent and a

detailed financial justification from the BM/ AM. In case the financial questionnaire is not sufficient to

justify the sum proposed, they may call for income proof documents‖.


This Customer has these Age proof…

Pass port

PAN Card,

Driving License,

School / College Certificate with date of birth stated therein.

This comes under Standard age proof….

53

4. Non-medical limits:

His Entry Age: 30

His total Sum Assured: 5,00,000

(―Medical cheak up limits depends upon age proof‖)

This Customer has Standard Age proof like PAN Card, Driving License, School /College Certificate

with date of birth stated therein

So

AGE AT ENTRY

SUM ASSURED 18-35

2,00,001-6,00,000 Nil

(“Age: age at Last Birthday”)

His age is 30 year and sum assured is 5,00,000 so there will be no medical cheak up are required for

that.

5. Confidential Report:

In this case, customer‘s Sum assured is 5,00,000 so according to confidential Report table Insurance

advisors generate a report and attest that report and attach with application form.

54


In this case, customer‘s annual premium is 14260, and a govt. employee so premium coverage risk is

low.

AML – Risk Indicator Matrix – Annexure VIII

Risk

Indicator

Limits per

transactions or per

month or per year

Photograph Address

proof

ID Proof Income

Proof for

computed

annual

income

Accept cash –

Monthly for

limits from

integrally

connected

customers

Low

Risk

10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes

ID Proof Pan Card, Passport, Voters ID, Driving License, Adhar Card/UID

Address Proof Voters ID, driving license, Passport, Electricity bill/telephone bill /mobile bill (6

months), Bank account statement (3 months), Credit card statement (3 month) ,

Mutual fund statement (3 month), Adhar Card / UID,

Income Proof His annual income is 6,00,000 so there will be no financial evidence are required

for the financial evidence

55

CASE. 2


Sum Assured Rs. 3,00,000

Entry Age 40 years

Policy Term 20 years

Annual Income Rs. 5,00,000

Occupation Business

56


For Calculation of human Life Value, we use online tools, which give amount of human life value in

this case human life value is 3,00,000. Therefore, according to that premium is as follows:

Annual Premium 14817

Half Yearly Premium 7408.50

Quarterly Premium 3704.25

Monthly premium 1234.75


His Sum Assured is 3,00,000, so there will be no financial evidence are required for the financial

evidence.


This Customer has these Age proof like…

Pass port

PAN Card,

Driving License,


This age proof comes under Standard age proof.

57


His Entry Age: 40


(“Medical cheak up limits depends upon age proof”)


with date of birth stated therein.

So

AGE AT ENTRY

SUM ASSURED 36-45

2,00,001-6,00,000 Nil

(Age: age at Last Birthday)

His age is 40 year and sum assured is 3,00,000 so there will be no medical cheak up are required for

that.


In this case, customer‘s Sum assured is 3,00,000 so according to confidential Report table Insurance

advisors generate a report and attest that report and attach with application form.

58


In this case, customer‘s annual premium is 14,260, and a govt. employee so premium coverage risk is

low.


Risk

Indicator

Limits per

transactions or per

month or per year

Photograph Address

proof

ID Proof Income

Proof for

computed

annual

income

Accept cash

– Monthly

for limits

from

integrally

connected

customers

High

Risk

10,001 to <= 50,000 Mandated Mandated Mandated Optional Yes


Address Proof Voters ID, driving license, Passport, Electricity bill/telephone bill /mobile bill (6



Income Proof His annual income is 5,00,000 so there will be no financial evidence are required

for the financial evidence

59

Plan: 2

Reliance Life Insurance Pay Five Plan:

60

Reliance Life Insurance Pay Five Plan:

Policy Term:

Fixed term of 10/15 years – If the age at entry is

up to 60 years.

Fixed term of 10 years – if the age at entry is above 60 years

Age at Entry:

Minimum = 7 year Maximum = 65 year

Age at Maturity:


Premium Paying Term:

Fixed term of 5 years.

Frequency of payment:

Only annual mode is allowed.

Sum Assured:

Age at entry

(last birthday)

Maximum sum assured as multiple of annualized

premium

7 to 11 Rs. 5 lacs ( across all policies with Reliance life)

12 to 45 30

46 to 50 20

51 to 65 10

66 & above 7

61

Case : 3


Annual Income 18,00,000

Occupation Businessman

Entry Age (years) 46

Policy Term (years) 10

Sum Assured 30,00,000

62


For Calculation of human Life Value in this policy, Underwriter use online tools, which gives amount

of human life value in this case human life value is 30,00,000.

Customer is able to pay 1,50,000 per year as a premium.

Therefore, his Sum Assured will be.

1,50,000 * 20 = 30,00,000 (20 time of annualized premium.)


Customer‘s total income is 18,00,000 so ―Financial Questionnaire‖ is required by the customer.

Therefore, the Underwriter requires ―Financial Questionnaire‖ signed by life assured and attested by

sales manager or equivalent and a detailed financial justification from the BM / AM.

63

Contract No: D6176706

Name of Life to be Assure: Jay Prakash Singh

FINANCIAL QUESTIONNAIRE

(To be filled by life Assured and attested by Sales Manager or equivalent)

Personal Financial Information

Assessment

year

2010-2011

Assessment

year

2011-2012

Assessment

year

2012-2013

Salary Income - - -

Business Income 17,50,000 17,00,000 17,60,000

Agriculture Income - - -

Bonus/Dividend/Commission/Interest - - 40,000

Perquisites - - -

Rental Income - - -

Other Earned Income (Contract/Consultancy etc.) - - -

TOTAL Rs. 17,50,000 17,00,000 18,00,000

64

PERSONAL FINANCIAL INNFORMATION (ASSETS & LIABILITIES)

ASSETS

(A) Cash Amount (Rs.)

Saving Bank Deposit 3,75,000

Current Deposit 4,50,000

Term Deposit (including Recurring Deposit) 10,00,000

NRE/NRO/NRNR Deposit -

National Saving Certificate (NSC) -

Provident Fund -

Cash Certificates/Government Bonds -

(B) Fixed Deposits

Bank Name Amount

Invested (Rs)

Maturity

Amount (Rs)

Rate of Interest Maturity Date

SBBJ, Bikaner 6,00,000 9,18,256 7.35% 1 June 2019

DENA Bank, Jaipur 4,00,000 6,42,313 7.00% 1 June 2020

(C) Investments 15,00,000 (in land)

(D) liabilities 4,00,000

Total Net Worth

Assets (A+B+C) - Liabilities (E) Total Rs = 39,25,000

(18,25,000+10,00,000+15,00,000-4,00,000) =39,25,000

Have you Declatred personal Bankrutcy in last five years Yes/No

If yes, please give details: _________________________________________________________

Signature of life Assured

Date:

Attested By

Sales Manager‟s (or Equivalent) name: _____________________________________________

Sales Manager‟s Code: ___________________________________________________________

Sales Manager‟s Signature: _______________________________________________________

65


This Customer has these Age proof like…

Pass port

PAN Card,

Driving License,


These comes under standard age proof


His Entry Age: 46


(“Medical cheak up limits depends upon age proof”)


with date of birth stated therein.

So

AGE AT ENTRY

SUM ASSURED 46-50

20,00,001 – 50,00,000 Level 5

(Age: age at Last Birthday)

His age is 46 year and sum assured is 30,00,000 so there will be Level 5 medical cheak up are required

for that.

66

Test Category Levels:

Level 5 MER, FBS, TC, GGT, HDL, Trigs, SGOT, Creatinine, HBsAg, HbA1c, CBC,

H1V1 & 2, TMECG

Abbreviations

MER- Medical Exam Report

FBS- Fasting Blood Sugar

RUA- Routine Urine Analysis

ECG- Electro Cardiology

TMECG Treadmill Electro Cardiogram

CBC- Complete Blood count

Note:

MER includes urinalysis


In this case, customer‘s Sum assured is 30,00,000 so according to confidential Report table Branch

Manager generate a report and attest that report and attach with application form.

CR countersignature limits are as follows:

Branch Manager Up to 50,00,000

67


In this case, customer‘s annual premium is 1,50,000, and he is a Businessman so premium coverage

risk is high.


Risk

Indicator

Limits per

transactions or per

month or per year

Photograph Address

proof

ID Proof Income

Proof for

computed

annual

income

Accept cash

– Monthly

for limits

from

integrally

connected

customers

High Risk =/> 1,00,000 Mandated Mandated Mandated Mandated No


Address Proof

Voters ID, driving license, Passport, Electricity bill/telephone bill /mobile bill (6



Income Proof His annual income is 18,00,000 so there will be ―financial questionnaire‖ evidence

are required for the financial evidence

68

Chapter – 7

Conclusions:

69

Conclusions

I. Underwriting helps insurance companies to minimize their risk to insure someone.

II. Underwriting include various factors like Documentation, Medical Requirments, Human life

value etc.

III. Underwriting process change time to time to improve company‘s Risk management.

IV. KYC documentation set by governing authorities.

V. AML documentation set by governing authorities.

70

Chapter – 8

Limitation of the project:

71

Limitation of the project:

The data available was taken from company‘s article ―Underwriting Guideline‖ which changes time to

time. None of data is available on company‘s website so all of this data were collected from within the

company.

Project completion was restricted to 45 days.

72

Chapter 9

Bibliography:

73

Bibliography:

All the data taken for completing this project are taken from an article “Underwriting Guideline vol.

III” of Reliance Life Insurance company Ltd. Which contain all the details of underwriting process of

Reliance Life Insurance Company Ltd.

All the figures related to life insurance sector have taken from “Life Insurance Council” as on 18

May 2013.

All the Financial Facts has taken from company‘s annual Report.

74

Chapter 10

Abbreviations

75

Abbreviations:

S. No. Abbreviations

1 AML Anti-money launderings

2 KYC Know Your Customer

3 LA Life Assured

4 SA Sum Assured

5 SAP Standard Age Proof

6 NSAP Non Standard Age Proof

7 MER Medical Exam Report

8 FBS Fasting Blood Sugar

9 RUA Routine Urine Analysis

10 ECG Electro Cardiology

11 TMECG Treadmill Electro Cardiogram

12 CBC Complete Blood count

sip on underwriting process in reliance life insurance by adil khan

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