CHAPTER 1

AN INTRODUCTION

Insurance can be defined as the process of reimbursing or

protecting a person from contingent risk of losses through financial

means, in return for relatively small, regular payments to the

insuring body or insurance company.

Insurance involves pooling funds from many insured entities

(known as exposures) to pay for the losses that some may incur.

The insured entities are therefore protected from risk for a fee, with

the fee being dependent upon the frequency and severity of the

event occurring. In order to be insurable, the risk insured against

must meet certain characteristics in order to be an insurable risk.

Insurance is a commercial enterprise and a major part of the

financial services industry, but individual entities can also self-

insure through saving money for possible future losses.

In the good olden days, the farming community used to live almost

self sufficiently. In the hours of crisis the members helped each

other. When the family head temporarily stayed back from farming

operations owing to sickness, the other members of the family

automatically took care of him. Industrialization has dramatically

changed the way of life around the world. There was rapid growth

growth in new industries and the existing industries looked to

expand domestically and internationally. Industrial revolution

brought opportunities as well as threats. The immediate

advantages were development of new tools and technological

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advancements, innovations in production methods, mechanization

of activities, large scale operations, cost reductions, cost

efficiency, creation of colossal employment opportunities, evolution

of new knowledge and emergence of new professions. On the

other hand, the concept of social security in the form of joint family

system was slowly getting eroded. Self – dependence and self –

sufficiency were lost when people started migrating from farms to

factories. The concept of nuclear family took birth and people

started feeling socially and economically insecure. In the process

every member of the society was compelled to work to gain

economic independence.

Though, life insurance offers protection to the family in the event of

the unfortunate death of the life assured, it is also true that majority

of the population cannot afford to buy sufficient insurance cover.

That’s where, group insurance steps in. Collection of people as a

group, union, corporation or trade association brings out the

“power of members” to bargain for a good price. Hence, group

insurance extends insurance coverage at an affordable price to

many. Even employers get encouraged to provide a welfare

package through group insurance schemes to their employees.

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ABOUT THE REPORT:

1) TITLE OF THE STUDY:

The present study is titled as – “A PROJECT REPORT ON

GROUP INSURANCE – A CASE STUDY”. The study is made with

special reference to “LIFE INSURANCE CORPORATION OF INDIA”.

2) OBJECTIVES OF THE STUDY:

i. To study the benefits of group insurance to customer.

ii. To study different schemes under group insurance.

iii. To know the group insurance schemes provided by Life

Insurance Corporation of India.

iv. To study the eligible groups for group insurance coverage.

3) LIMITATION OF THE STUDY:

The present study suffers from all limitations of case study method.

4) DATA & METHODOLOGY :

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For the purpose of the present study, both primary and secondary

data were used. Primary data collected from insurance company

visit, interviewing staff etc. Secondary data collected for books,

internets, etc.

5) CHAPTER LAYOUT :

The present study is arranged as follows:

a) Chapter 1: “AN INTRODUCTION” gives an introduction of title

and the report.

b) Chapter 2: Gives profile of Life Insurance Corporation of

India.

c) Chapter 3: Deals with Group Insurance – A Theoretical view.

d) Chapter 4: Group Insurance – A Case Study.

e) Chapter 5: Summarizes the result of the study.

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CHAPTER – 2

LIFE INSURANCE CORPORATION OF INDIA

– A PROFILE

The Life Insurance Corporation of India (LIC) is the largest state-

owned life insurance company in India, and also the country's

largest investor. It is fully owned by the Government of India. It

also funds close to 24.6% of the Indian Government's expenses. It

has assets estimated of 9.31 trillion (US$202.03 billion). It was

founded in 1956 with the merger of more than 200 insurance

companies and provident societies.

Headquartered in Mumbai, financial and commercial capital of

India, the Life Insurance Corporation of India currently has 8 zonal

Offices and 101 divisional offices located in different parts of India,

at least 2048 branches located in different cities and towns of India

along with satellite Offices attached to about some 50 Branches,

and has a network of around 1.2 million agents for soliciting life

insurance business from the public.

History:

The Oriental Life Insurance Company, the first corporate entity in

India offering life insurance coverage, was established in Calcutta

in 1818 by Bipin Behari Dasgupta and others. Europeans in India

were its primary target market, and it charged Indians heftier

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premiums. The Bombay Mutual Life Assurance Society, formed in

1870, was the first native insurance provider.

The first 150 years were marked mostly by turbulent economic

conditions. It witnessed, India's First War of Independence,

adverse effects of the World War I and World War II on the

economy of India, and in between them the period of world wide

economic crises triggered by the Great depression. The first half of

the 20th century also saw a heightened struggle for India's

independence. The aggregate effect of these events led to a high

rate of bankruptcies and liquidation of life insurance companies in

India. This had adversely affected the faith of the general public in

the utility of obtaining life cover.

The Life Insurance Act and the Provident Fund Act were passed in

1912, providing the first regulatory mechanisms in the Life

Insurance industry. The Indian Insurance Companies Act of 1928

authorized the government to obtain statistical information from

companies operating in both life and non-life insurance areas. The

subsequent Insurance Act of 1938 brought stricter state control

over an industry that had seen several financially unsound

ventures fail. A bill was also introduced in the Legislative Assembly

in 1944 to nationalize the insurance industry.

Nationalization:

In 1955, parliamentarian Amol Barate raised the matter of

insurance fraud by owners of private insurance companies. In the

ensuing investigations, one of India's wealthiest businessmen,

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Ram Kishan Dalmia, owner of the Times of India newspaper, was

sent to prison for two years. Eventually, the Parliament of India

passed the Life Insurance of India Act on 1956-06-19, and the Life

Insurance Corporation of India was created on 1956-09-01, by

consolidating the life insurance business of 245 private life insurers

and other entities offering life insurance services. Nationalization of

the life insurance business in India was a result of the Industrial

Policy Resolution of 1956, which had created a policy framework

for extending state control over at least seventeen sectors of the

economy, including the life insurance.

Current status:

Over its existence of around 50 years, Life Insurance Corporation

of India, which commanded a monopoly of soliciting and selling life

insurance in India, created huge surpluses, and contributed around

7 % of India's GDP in 2006.

The Corporation, which started its business with around 300

offices, 5.6 million policies and a corpus of INR 459 million (US$

92 million as per the 1959 exchange rate of roughly Rs. 5 for a US

$, has grown to 25000 servicing around 180 million policies and a

corpus of over 8 trillion (US$173.6 billion).

The recent Economic Times Brand Equity Survey rated LIC as the

No. 1 Service Brand of the Country. The slogan of LIC is "Zindagi

ke saath bhi, Zindagi ke baad bhi" in hindi. In english it means

"with life also, after life also.”

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Mission:

"Explore and enhance the quality of life of people through financial

security by providing products and services of aspired attributes

with competitive returns, and by rendering resources for economic

development."

Vision:"A trans-nationally competitive financial conglomerate of

significance to societies and Pride of India."

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CHAPTER 3

THEORETICAL VIEW

Industrial Revolution became major source for spreading earlier

the concept of group insurance. Majority of the factories employed

huge machineries, and working with them more often led to

accidents resulting in injuries, disablements, and deaths. Hence, a

need for social protection was felt by individuals who suffered from

the occupational hazards and accidents. This need for providing

variety of benefits on a cost effective scale gave a boost to group

insurance. Low cost and liberal underwriting norms unlike those

followed in the individual insurance led to phenomenal growth of

the group insurance. Hence, those individuals who where denied

individual insurance could get insurance protection on group basis.

With the passage of time, different types of group insurance

policies based on combination of benefits decided for employee by

the employer and state emerged. Some of the benefits were

payable on untimely death, while some benefits were payable on

survival. Similar to the two basic plans in the Life Insurance i.e.,

term assurance and pure endowment, the Group Life Insurance

and Group Superannuation Schemes can be combined in a

multiple number of ways to form new schemes in order to meet

growing demands.The concept of group insurance emerged and

flourished in the western and developed countries, while it took a

late start in India. Major developments were observed only after

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independence, though in the initial years, the group insurance

market was not amenable to this kind of benefit to employees.

However, with gradual realization of importance of group

insurance, and demands by trade unions, a sudden rise in

business was noticed. Group insurance has almost become an

indispensable part of the employee benefit package. Group

insurance has indeed made great contribution to the society as

could be seen from the following:

Providing insurance facilitates to the small

enterprises, where the employees are not able to purchase the

individual insurance policy.

In the world of increasing cost of living,

group insurance is helping organizations by providing

insurance facilities at lower cost.

Group insurance offers insurance

coverage to unlimited number of employees under the same

contract; this makes it accessible to all types of organizations.

Employers are nowadays more concerned

with high productivity and morale of the employees. Thus,

group insurance has become quite handy to the employers in

offering healthcare coverage as employee benefits at a lower

cost.

Group insurance under the same umbrella

provides various products of life, accident and health

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insurance, which would ultimately help employers, retain

employees and their high productivity.

IMPORTANCE OF GROUP INSURANCE:Group insurance has changed the picture of the whole insurance

industry. Because of different insurance products, it has been a

blessing for both the employers and the employees. It offers an

element of certainty to employees by comforting the people

affecting by ill health, disability, unemployment and even

premature death, etc., at an affordable price.

Benefits to the Employees:Employees have been the major gainers of group insurance, which

has increased the scope of employee benefits manifold.

Low Cost:

The major benefit derived by the employee under group

insurance is the low cost of policy as compared to the

individual insurance policy. This is feasible due to large

number of employees under the same insurance policy that

ultimately reduced the administrative costs.

Employee Benefit Plan:

Group insurance is the most popular employee benefit plan

in the foreign countries. A large section of the working class

is found to be unable to obtain an individual insurance policy

for oneself/one’s spouse/family because of its high cost.

Thus, it depends solely on the employer to fund its insurance

policy.

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Flexibility:

The concept of group insurance is applicable to all the

sections of society and industry. This aspect of group

insurance has made it popular among different groups like

trade associations, etc.

Tax Deductions:

The employee under the group can avail the benefits of tax

deductions by contributing to the group insurance policy.

Benefits to the Employers:Group insurance has become an essential employee benefit, and

has helped employers in not only improving the productivity of the

employees but also employee morale in the organization.

Retention:

Many organizations provide group insurance to their

employees in the form of an additional benefit to retain them

for a longer period. Group insurance benefit not only

increases the retention ratio among the employees, but also

their productivity and morale.

Public Image:

An organization can always promote its public image through

group insurance schemes and thus, attract the major

productive cream of the market.

Tax Benefits:

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By providing the group insurance benefit plan, whether

contributory or non-contributory, to the employees, the

employer can avail tax deductions under the taxation rules.

Size of Organization:

Group insurance is beneficial to all types of organizations,

irrespective of size and number of employees.

FEATURES OF GROUP INSURANCE:

Master Contract:

In group insurance, large number of employees, belonging to

a homogeneous unit are insured collectively, under a “master

policy or a contract” for the whole group. The master contract

is issued to the employer, while the employees receive

“certificate of insurance”.

Premium Payment:

On the basis of premium payment, group insurance is

divided into two categories, contributory and non-

contributory. To obtain the benefits of high productivity,

organizations prefer to take the non-contributory policy by

paying fully by themselves or both the employer and the

employee sharing the cost as in the case of a contributory

policy. In both the cases the employer gets the benefits of

tax deduction to the extent of his contribution towards the

premium.

Determination of benefits:

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The insurance company has to decide the method of

determining the benefits in a way that individual selection

both by the employer and the employee does not generate

conflicts. Thus, the employer needs to determine a formula

or a specific level of salary or position that forms the basis for

determination of benefits.

TYPES OF GROUP INSURANCE PLANS:Several kinds of group plans are being offered by the insurance

companies but the following are the more common kind of plans

available in India and abroad:

Group Term Life Insurance:Group life insurance schemes aims at providing insurance

coverage to employees. These plans are usually renewable

annually. The scheme may be contributory or non-

contributory depending on the employment conditions. In

case of contributory scheme, the proportion of premium

shared by employee is deducted from the salary of

concerned and together with contribution of employer is paid

to the insurance company.

Group Supplemental Life Plans:The Supplemental Life Plans or optional life plans offer

additional insurance benefits beyond the basic benefits

provided under the group term life plans. The premiums are

usually shared by employer and employee. The premiums

under these plans are usually dependent on age of the

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employee with brackets of five years. Medical coverage is

also provided though members need not undergo a medical

check-up, and a declaration of good health from the

members is considered sufficient.

Group Accident Insurance:The Group Accident Insurance plan is a modified

version of the basic term assurance plan, which provides

coverage against accident risk to the member. Here, the

insurance amount is paid on total and permanent disability or

death of the member caused purely due to accident. On

temporary disability, regular income for the period of

unemployment is provided. The coverage is usually

extended full time i.e., non-occupational and twenty four hour

basis. In most cases the premium is fully borne by the

employer.

Group Credit Life Insurance:The Group Credit Life Insurance plan is a modified version of

the Group Term Life Insurance plan, which offers death

benefit that is equal to the outstanding debt amount of the

member. These plans are most popular in the banks, which

lend huge money and the credit risk assumed by them. The

member under the policy is usually the creditor who takes

loans from the lender. The lender can take a group credit life

insurance plan on the lives of his debtors, and the premium

is borne by lender on non-sharing basis.

Group Disability Income Insurance:

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Group Disability Income plans intend to provide periodical

income during the loss of income caused due to disability

like, accident or sickness. These plans help a member to

meet his/her basic financial needs caused due to unfortunate

event. Determining the amount of disability stands as a

challenge for the insurance company. The group disability

plans are issued on short-term and long-term basis.

Group Gratuity Scheme:According to the provisions of the Act, every employer needs

to pay gratuity on retirement or death of an employee at a

rate of 15 day’s salary for every completed year of service

rendered. An employer has got option on the creation of a

trust, to either manage it privately or enter into an agreement

with an insurance company for its management. Here, an

employer creates a trust, and the trustees enter into a group

gratuity scheme with a life insurance company. The trustees

delegate the management of the trust, the life insurance

company, and on such delegation, insurance company takes

care of the administration, investment and periodical

valuations of the fund.

Group Superannuation Scheme:The superannuation schemes were developed with an

intention to provide post-retirement income to the

employees. In India, these schemes were introduced much

later, while in western countries they where available from

the beginning of this century. A well designed and managed

group superannuation plan can provide a considerable

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amount to an employee, without the employer prone to much

complications and hardships.

Group Leave Encashment Scheme:A Group Leave Encashment Scheme provides employers a

method to fund the leave encashment liability of their

employees. An advantage of the scheme is that

employer/trustees need not bother about investment of funds

and actuarial valuation. Insurance companies also offer

death benefit under the schemes. Employers need to pay the

contributions in the form of premiums to the insurance

company. This is mainly non-contributory scheme. The

insurance company pays the leave encashment amounts as

and when an employee retires.

Group Disability Scheme:Disability is defined as the inability of the insured employee

to perform the duties of his job, owing to any occupational or

non-occupational injury, accident or sickness. Disability

insurance provides security in the form of stated amount of

periodic income against loss of income owing to an insured’s

inability to work due to a disability, illness or accident. Such

coverage could be had either for disabilities due to accidents

alone or accidents and illness.

Group Health Insurance:A couple of health insurance schemes are available in India,

which are offered by public and private insurance

companies.

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Group Mediclaim Scheme:The group mediclaim scheme is available to any

group/association/institution/corporate body of more than 50

persons, provided it has a central administration point. Only

one policy is issued for the entire group. It is not permissible

to issue any unmanned group policy.

SOCIAL SECURITY:Social security has emerged as a sequel to the society from

agricultural to industrial that changed the very social fabric as the

people who migrated to the big cities found themselves to be

financially insecure as they could find very few people around to

share their uncertainties/emotional needs with. This change

occurred first in Europe during the 19th century. Although industrial

revolution brought with it increased material benefits, it also led to

unsuitable living conditions, increased working hours and

disparities in wealth between the upper and the lower class of

people in the society. To arrest the ill effects of such disparities,

many governments came up with the concept of “Social Security”.

In the Indian scenario, the government is the major player in the

field of social security measures. Social security is mainly in the

form of government initiated employer benefits, rural insurance

and benefits for the social sector. Apart from the government, the

private employers and insurance companies are forging ahead in

the field of social security or social insurance in the form of various

employee benefit packages.

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EMPLOYEE BENEFIT SCHEMES:Over a period of time, employers too have realized that it is their

interest to protect and provide different kinds of benefits besides

wages to their employees. Thus, the term “employee benefits”

came into existence. In a broad sense, it includes everything that

an employer made available/provided to the employees, other than

direct wages and cash bonuses, including government-mandated

benefits and perks, etc., provided to managers / executives etc. To

start with, the “employee benefits” were mostly confined to all that

an employee would be requiring in situations like death, accident,

sickness, retirement and unemployment. However, as time

advanced the term “employee benefits” expanded its coverage.

The prominent form of employee retirement benefits such as:

Provident Fund

Employees Deposit-Linked Insurance Scheme

Gratuity

Employees Pension Scheme

PROVIDENT FUNDProvident fund is a lump sum amount accumulated over a

period of service of employee, and is paid on

retirement/death/resignation of the employee. Both employer

and employee contribute towards provident fund account of

employee. It is a defined contribution scheme, with the

minimum amount of contribution fixed by the government. An

employee can be part of one of the following schemes:

Employees provident fund scheme.

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Recognized provident fund.

Provident fund schemes of government employees.

Public provident fund.

Employees Provident Fund SchemeThe Employees Provident Fund Act was passed with

the objective of providing adequate financial support to

the employees on their retirement. This act was amended

by introducing benefits for the dependants of the

employee, on his/her unfortunate death while in service.

This Act was later renamed as Miscellaneous Provision

Act. This Act included the Employees Family Pension

Scheme of the year 1971 and later on the Employees

Deposit Linked Insurance Scheme in the year 1976. For

those not covered by the EPF Act, the contributions to the

provident fund and other retirement benefits were

voluntary.

BENEFITS:

On retirement from service after reaching 55 years of

age.

Retirement due to permanent and total incapacity for

work on account of physical or mental disability.

Migration from India with the intention of permanent

settlement abroad.

Termination of services.

Recognized Provident Fund:

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Every employer who employs more than twenty people

statutorily obliged to set-up a provident fund. A provident

fund is in the nature of a savings plan in which the

employers and the employees contribute a fixed sum as a

percentage of their monthly earnings. The savings are,

thus, allowed to accumulate with interest so that a lump

sum is available to the employee at the time of retirement.

Provident Fund Schemes of Government Employees:The employees of the central government undertakings

who are entitled to pension as per service conditions,

usually receive monetary benefits, from the General

Provident Fund(GPF), while those who are not eligible for

pension as per service conditions, receive benefits from

the Contributory Provident Fund (CPF). The minimum rate

of contribution in the GPF account is 6% while they can

contribute an amount higher of this if desired. Apart from

employee’s contribution in case of CPF, employers also

contribute at a rate of 10% of salary of employees. Early

withdrawals and advance against available balance,

subject to certain limits is allowed. Public Provident Fund: The Public Provident Fund was instituted under the Public

Provident Fund Act, 1968. The PPF scheme is a financial

instrument for workers in the unorganized sector to

ensure old age income security through adequate

accumulated savings. It is a defined contributory scheme

with individual accounting system. A PPF Account can be

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opened by an individual on his own name. He can also

open an additional account on behalf of a minor of whom

he is the guardian. A PPF account can be opened at any

Nationalized Bank or Post Office.

EMPLOYEES DEPOSIT LINKED INSURANCE SCHEME:Though in the Employees Provident Fund Scheme monthly

contributions of the employees and employer to accumulate

with interest, these accumulations take time to become

sizeable amounts. Meantime, if the employee dies while in

service, the payment of contribution will cease and only

accumulated balance standing to his credit at that point of

time will become payable to his family. If this happens in the

early part of his employment, the amount outstanding in the

account will be meager to fulfill needs of family of deceased.

A need was felt to provide financial help to the members of

the family on the unfortunate death of the employee. Hence,

the Employees Deposit Linked Insurance Scheme was

introduced in the year 1976. Among all the schemes of

EPFO, the EDLIS is believed to be the most well performing

scheme.

GRATUITY BENEFIT:The Payment of Gratuity Act is one of the legislations passed

by the Indian government for providing old age income

security for both organized and unorganized sector working

population. The foremost purpose of the Act is to provide a

minimum amount to the workers depending on the number of

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years of service rendered by them to their employer. Gratuity

i.e., a lump sum is paid to the employees/workers on their

leaving the services due to retirement, resignation, disability

or death.

EMPLOYEES PENSION SCHEME:The Employees Pension Scheme was introduced in 1995 as

an important constituent for old age income benefit of

employees, under the Employees Provident Fund and

Miscellaneous Provisions Act. The earlier Family Pension

Scheme was substituted by the Employees Pension Scheme

in 1995. FPS was mandatory for all employees who joined

service on or after 1st march, 1971, and for employees who

joined prior to 1st march 1971; it was optional to join the

scheme. Neither employer not the employees needed to

make separate contributions towards the scheme, instead

from the existing contribution an amount equal to 2.33% of

the wages were made to the scheme. Neither employer not

the employees needed to make to the scheme. Government

also contributed an amount of 1.16% of the wages towards

the scheme. EPS is essentially a defined benefit scheme.

Being a defined benefit scheme the pension payable is

dependent on the final salary of the member and the number

of years of service rendered.

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CHAPTER 4

GROUP INSURANCE

- A CASE STUDY

Group Insurance Scheme is life insurance protection to groups of

people. This scheme is ideal for employers, associations, societies

etc. and allows you to enjoy group benefits at really low costs.

Following are the different types of group schemes:-

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DIAGRAM NO: 4.1

Different types of Social Security Scheme are as follows:-

Group Critical Illness Rider

Group

Mortgage

Redemption Assurance

Scheme

Group Leave Encashment Scheme

Group Savings

Linked

Insurance

Scheme

Group Super

Annuation

Scheme

Group Gratuity

Scheme

Group Insurance Scheme in Lieu

of EDLI

Group Term

Insurance Sche

mes

Group Schemes

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DIAGRAM NO: 4.2

1) Group Term Insurance Schemes: Nature of the Scheme:

Group Insurance Scheme is meant to provide life insurance

protection to groups of people. Administration of the

scheme is on group basis and cost is low. Under Group

(Term) Insurance Scheme, life insurance cover is allowed

to all the members of a group subject to some simple

insurability conditions without insisting upon any medical

evidence. Scheme offers covers only on death and there is

no maturity value at the end of the term.

Premium Chargeable:

Group (Term) Insurance Scheme is at present offered

under One Year Renewable Group term assurance plan

(OYRGTA). Every year on Annual Renewal date LIC

Social Security Schemes

JanaShree Bima

Yojana

Shiksha Sahayog

Yojana

Aam Admi Bima

Yojana

26

charges the premium depending upon the changes in size

and age distribution of the age group.

Different Schemes:

Group (term) Insurance Scheme has a number of varieties.

The Scheme may provide for a uniform cover to all

members of the group or graded covers for different

categories of members, cover for all amounts of

outstanding housing loans or vehicle advances, or some

other benefits (e.g., life cover to supplement pension or PF

benefits in case of death). The schemes may have add-ons

like Double Accident Benefit, Critical Illness Benefit,

Disability benefit etc.

General Features of various Group Insurance Schemes:

1. PREMIUM:

The premium under such scheme may be wholly paid by

the employer or the Nodal Agency. However, the

scheme may be contributory i.e. the members may also

contribute.

2. DOUBLE ACCIDENT BENEFIT:

Double Accident Benefit, i.e. payment of double the sum

assured on death due to accident (without permanent

disability benefit), may be allowed under Group

Insurance Schemes for an extra premium.

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3. ELIGIBILITY:

For Group Insurance Scheme in lieu of EDLIS the

insurability condition is that should be a member of the

Provident Fund Scheme of the employer. For other GI

Schemes of employer-employee groups the insurability

condition is that the member should not be absent on

ground of sickness on the entry date. For all non-

employer-employee Group Schemes the basic

insurability condition is that the member should be in

good health on the date of entry.

4. ADMINISTRATION OF THE SCHEME:

At the commencement and thereafter on each Annual

Renewal Date, the Group Policyholder will have to send

all the member's data (and particulars of the new

entrants from time to time) to the P & GS unit of LIC.

Detailed OYRGTA premium calculation will be made on

each Annual Renewal Date.

2) Group Insurance Scheme in Lieu Of EDLI :

ADVANTAGES TO THE EMPLOYER :

1. The premium payable by the employer is usually less than

the total contribution being paid by the employer to

R.P.F.C; particularly when the salary level is high and

average age of the group is low.

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2. Settlement of claim is quicker; LIC requires only the death

certificate and the Claim Form from the employer.

3. Premium paid by the employer is treated as normal

business expenses for Income-Tax purpose.

ADVANTAGES TO THE EMPLOYEE:

Each employee is covered for a sum assured ranging

between 5,000 to 2,00,000 depending upon the current

salary and service put in from day one irrespective of the

actual balance in the Provident Fund. Alternatively every

employee/ worker can be covered for a uniform sum

assured which will be decided depending upon the group

size.

ACCIDENT BENEFIT:

Double accident benefit can be allowed to the extent of the

Sum Assured for an extra Premium.

3) Group gratuity scheme:

Life Insurance Corporation of India offers its Group Gratuity

Cash Accumulation scheme to enable employers to meet their

gratuity liability in a very simple and efficient manner. The

scheme is formulated in compliance with Part C of the IV

schedule of Income Tax Act and tax benefits are available as

provided in Income Tax rules.

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The gratuity arrangement with LIC provides the following

services to the company:

Fund management under interest accumulation system

Claim settlement on exit as per company rules/gratuity act

Built in Insurance arrangement for the employees for future

service

MIS related to Income Tax and trusts accounts and Actuarial

valuation

Fund management:

Critical issues

Safety:

Liability on account of gratuity experiences sharp increase

every year due to its nature of its computation. Apart from

increase in service, increase in salary also contributes to

increase in liability substantially as the benefits are payable on

last drawn salary. Hence funds have to be invested in a

conservative way with a consistent growth and insulated from

market risks. The unique advantage with LIC is the

contributions made by the company and interests credited by

LIC are irreversible. This ensures highest level of safety for the

total corpus and consistency in future contributions. As the

gratuity payments are statutory and LIC gratuity scheme being

the only investment tool which enjoys sovereign guarantee,

gives a greater comfort to employer.

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Liquidity:

A fund available with LIC is a single account for investment and

claim settlement. Hence 100% liquidity is ensured for the

purpose of claim settlement.

Yield:

LIC has been offering very competitive and consistent interest

rates over the years. For the year 2009-10, LIC has offered

9.00% - 9.65% depending on fund size. The interest declared is

net of administrative expenses incurred, hence no separate

charges are charged after crediting the interest. Interest rate

offered by LIC is on daily balancing method. Hence, there is no

idle time for earning interest, hence effective rate of interest is

much higher. Another significant aspect is interest gets

compounded annually, hence no reinvestment issues and no

time lags.

No responsibility on trustees on Investment decisions:

Trustees are free from all investment risks and hassles in cash

accumulation system. Advantage of ‘real outsourcing’ can be

derived by associating with LIC.

No hidden charges:

The scheme is focused on a long term association in

compliance with investment regulations and statutory payment

obligations and no charges are levied on the transactions for

which the fund is meant for.

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Funding can also be in a staggered pattern during the year, but

no charges at entry level for any number of payments. No

charges on withdrawals for resignation or retirement or death.

Total corpus comprising of money contributed by the company

and interest credited by LIC is available for claim settlement up

to 100% subject to availability of funds.

Actuarial recommendations:

On annual basis, LIC provides this information to the trustees

and recommends the level of contributions.

Claim settlement:

On the exit of an employee due to retirement / death/

resignation, trust may prefer a claim from LIC by sending a

claim form. Claim amount will be made available to trustees.

Trustees can have the following options :

Preferring a claim from LIC and paying to

employee

Paying the money to employees and seek

reimbursement

Paying claims to employees at their end

and seeking annual reimbursement

MIS:

LIC provides statement of receipts and payments and actuarial

valuation certificate and certificate of balance for the trust

account.

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Besides the above said advantages, the scheme also provides

for employee welfare measures with built in insurance cover.

Insurance cover for future service gratuity:

Another salient feature of the Gratuity Scheme with LIC is that it

provides for insurance coverage to the employees to the tune of

future service gratuity subject to certain limits.The insurance

cover can be flexible depending on the requirements of the

Trust. The Group Insurance premium will be commensurate to

the cover provided.

Income Tax Benefit on Insurance Premium:

The insurance premium paid towards the above said benefits is

treated as deductible business expenses to the company.

The premium is not treated as perks in the hands of the

employees

4) Group Super Annuation Scheme:

Advantages of LIC managed Mutual Funds:

The LIC managed Pension fund has the following added and

distinct advantages:-

1. An attractive and competitive yield on the fund will be

credited to Fund A/c.

2. The problem of liquidity gets automatically eliminated as

soon as the fund is managed by LIC.

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3. We conduct free actuarial valuations of the funds

administered by us from time to time.

4. The Administration of the fund is carried out by us in a

scientific manner and claims are promptly settled.

5. Group Insurance in conjunction with the Group

Superannuation Scheme can be taken by an Organization to

provide for an attractive lump sum payment on the

unfortunate death of a member while in service, at very

nominal cost.

Superannuation Scheme Provided by LIC:

The employer contributes a certain fixed percentage of salary of

each member. Such Contributions are accumulated by LIC and

the accumulated amount is utilized to provide various benefits

as mentioned below.

BENEFITS:

1) ON RETIREMENT:

On Retirement of a member, the corpus (contributions plus

interest) is utilized to provide the pension as per his choice.

2) ON DEATH:

The Pension is payable on the life of the beneficiary. Corpus

is utilized towards the payment of pension of the type the

beneficiary may opt and the benefit so received is tax free. A

lump sum payable by way of death besides the pension, if

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the employer has taken Group Insurance Scheme in

conjunction with the Group Superannuation Scheme.

3) ON WITHDRAWAL:

He can get the equitable interest transferred to the

Superannuation Scheme of the new employer or opt for

immediate or deferred pension.

PENSION OPTIONS PROVIDED BY LIC:

1. Life Pension ceasing at death.

2. Life Pension with Return of Capital and Group Pension

Terminal Bonus on death.

3. Life Pension guaranteed for 5,10,15 or 20 years and life

thereafter.

4. Joint Life Pension payable on the last survivor of the

employee and spouse.

5. Joint Life Pension payable to the last survivor of the

employee and spouse with return of capital on the death of

the last survivor. If desired, 1/3rd of the pension can be

commuted at vesting.

ELIGIBILITY CONDITION:

It is not obligatory or statutory on the part of the employer to

provide for pension to all employees. It is entirely up to him

to decide to which class/ classes of employees he desires to

extend the scheme. The eligibility conditions may be defined

on the basis of designation or salary. (However, after the

categories are specified, employer cannot discriminate

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between the employees and thus extends the scheme

uniformly).

CONTRIBUTION:

The maximum annual contribution that an employer can

make to the Pension Fund and Provident Fund is restricted

by the Income Tax Provisions to 27% of the annual salary

(basic plus D.A.) The annual contributions are treated as

deductible business expenses.

WHO PAYS CONTRIBUTION?

Mostly the employer contributes, but is so desired, both the

employer and the employees may contribute, in which case

the scheme is called a Contributory Pension Fund Scheme.

5) Group Savings Linked Insurance Scheme :

OBJECTIVES OF THE SCHEME:

Protection at low cost without individual

evidence of health.

Attractive returns on savings to meet post

retirement needs.

Simple procedures for granting life cover to

large groups under one umbrella.

INTRODUCTION OF THE SCHEME:

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a) The Scheme can be introduced

by employers provided certain percentage of employees is

willing to join the Scheme.

b) For the new entrants to the

Company, the membership of the Scheme is compulsory.

PREMIUM:

It is decided on the basis of Group size and the occupation of

the group. Premium has two components i.e. Risk Premium and

Savings Premium. Risk Premium is utilized to offer life cover

and the Savings Premium is accumulated in members account.

ACCIDENT BENEFIT:

Double accident benefit can be allowed to the extent of the Sum

Assured for an extra Premium.

INTEREST ON SAVINGS

:

The present rate of interest allowed on saving portion of

premium is 8% compounding yearly.

ELIGIBILITY TO JOIN THE SCHEME:

Any employee irrespective of his present state of health is

eligible to join the scheme subject to certain conditions. The

only insurability condition is that the employee should not be

absent on medical ground on the date of commencement of the

scheme. All employees who have not crossed the retirement

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age are eligible to join the scheme. All future employees have to

join the scheme compulsorily.

TAX BENEFITS:

Employees' total contribution, savings as well as risk premium is

entitled for income-tax rebate under Sec. 80C of the Income

Tax Act. The entire claim amount including interest earned

payable on retirement or leaving service or on death is free from

income-tax. The premium paid by the employer towards

insurance cover is treated as business expenses.

6) Group Leave Encashment Scheme:

Funding of leave encashment:

End-of-the-year leave encashment facility available to

employees can be a huge liability to the company. So can be

Medical Leave Encashment, if provided for. To meet this need

of entrepreneurs and businesses, LIC has introduced Group

Leave Encashment Scheme. Just pay a yearly premium, fund

your leave encashment liability and let LIC take care of your

worries.

The Features:

Group Leave Encashment Schemes (GLES) of LIC helps the

employers in funding of their lave encashment liability.

The salient features of the scheme are as follows:-

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1. The Company will submit the employees' data and rules for

Leave Encashment. LIC will make actuarial valuation and

find out the funding requirements which shall be quoted to

the company. The company will contribute as per the advice

of LIC.

2. A uniform life cover per employee or graded cover will be

provided under One Year Renewable Group Term

Assurance Plan of LIC. A small term insurance premium will

be charged in addition to contributions for funding.

3. A Running Account will be maintained under the scheme and

the contributions (excluding term assurance premium) will be

credited to this account and all claims except term assurance

cover will be settled out of the Running Account. Interest at

the rate declared by LIC from time to time will be credited to

the Running Account at the end of the financial year.

Benefits:

1. On the exit of an employee or encashment of leaves during

the service the Leave Encashment amount will be paid from

the Fund of the scheme maintained with LIC.

2. On the death of an employee, in addition to his / her leave

encashment benefit, his/her family will be entitled to the

amount of Insurance Cover, which will be tax-free.

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3. The Life Insurance Corporation of India will do the Actuarial

Valuation and will provide necessary certificate as per AS-

15.

4. The amount of Term Insurance Premium paid for Life

Insurance Cover will be treated as business expenses.

7) Group Mortgage Redemption Assurance Scheme : ‘Group Mortgage Redemption Assurance Scheme’, is a Group

Insurance Scheme for the borrowers of Housing/Vehicle Loans

from Financial Institutions where Loan is recovered under EMI.

Under the Scheme, the premium is payable in a single

installment covering a decreasing life cover. Insurance cover

every year will be almost equal to the loan outstanding at the

anniversary date of each borrower.

Under the scheme, the premium depends upon:

1. Age (nearer Birthday) at entry of the member into the

Scheme.

2. Outstanding loan amount at entry date.

3. Term of loan.

4. Schedule of repayment.

5. Rate of interest with which the loan was availed.

Any borrower may become member of this scheme. The

minimum term of assurance is 3 years. Existing Borrowers can

join the scheme with certain conditions within 6 months of the

commencement of scheme.

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In case of death of the member during the coverage period, life

cover on the anniversary date proceeding the date of death is

payable. The claim proceeds are used to square off the

outstanding loan.

8) Group Critical Illness Rider :Critical Illness product (accelerated benefit) is basically offered

as an optional Rider benefit to all Employer-Employee group

policyholders (both existing and new schemes) along with

Group term insurance schemes i.e. OYRGTA (One year

renewal group term assurance) type schemes. Schemes along

with which the rider can be given shall include Group insurance,

Group Gratuity (CA), Group Leave Encashment and Group

insurance in conjunction with Superannuation. The Benefit will

not be extended to spouses or dependants. Only full time

permanent employees who are actively at work will be eligible

for Critical Illness cover. The relevant premium is to be paid by

the Group Policyholder.

FEATURES:

1. The Group critical illness rider benefit to employees is

given as an add on benefit to the Group policy which

has an element of life cover.

2. The Group Critical Illness rider allowable for each

member shall be a minimum of 20 % of sum assured

under the base plan and shall not exceed 100% of the

sum assured under the base plan subject to minimum

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of Rs. 50 Thousands and maximum of Rs 20 lac per

member.

3. All members of the attached policy should participate at

inception and all eligible new members should

compulsorily participate.

4. The diseases covered under the rider (subject to

certain exclusions) are :

1. Cancer

2. Coronary Artery (Bye pass) Surgery 

3. Heart attack (Myocardial infarction) 

4. Stroke 

5. Kidney failure (End stage renal disease) 

6. Aorta (Surgery of Aorta) 

7. Heart valve replacement

8. Major Burns.

BENEFITS :

1. The Critical Illness Accelerated benefit is payable upon

the first incidence of any of the 8 specified diseases and

evidenced as per the diagnostic criteria specified. The rider

shall terminate on payment of the Critical Illness benefit.

2. The Group Critical illness (Accelerated) Benefit pays a

lump sum amount as a percentage of Sum assured out of

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the Sum assured under the life cover in the event of

occurrence of 8 diseases covered under the rider.

3. No Critical Illness Benefit shall become payable to a

member if the disease occurs within 90 days of the start of

the coverage for that member of the scheme. This period of

90 days shall be called “Waiting period”.

4. In case of death nothing is payable under this rider.

However, under the base plan (i.e., the scheme on which the

rider is opted for) benefits as under shall become payable :

A benefit equal to base sum assured if no

critical illness benefit is payable or has been paid 

earlier.

If critical illness benefit is payable or

already paid, the benefit is reduced by the amount of

critical illness benefit payable or already paid. In other

words, the difference between the base sum assured

and the critical illness benefit already paid is payable on

death.

EXCLUSIONS:

1. Diseases in the presence of an HIV infection.

2. Diseases that have previously occurred in the life of the

member of the scheme i.e. the benefit is payable only if the

disease is a first incidence , regardless of whether the

earlier incidence occurred before the individual was

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covered or whether the insured was covered by us or

another insurer.

3. Any disease occurring within 90 days of the start of the

coverage for each member of the scheme. (I.e. during the

waiting period).

4. No payment will be made for any claim directly or indirectly

caused by, based on, arising out of, or howsoever, to any

Critical Illness for which care, treatment, or advice was

recommended by or received from a Physician, or which

first manifested itself or was contracted before the start of

the policy period, or for which claim has or could have been

made under any earlier policy.

5. Any congenital condition.

6. Alcohol or solvent abuse or taking of drugs, narcotics or

psychotropic substances unless taken in accordance with

the lawful directions and prescription of a registered

medical practitioner.

7. Failure to seek or follow medical advice.

8. War, invasion, act of foreign enemy, hostilities(whether war

be declared or not),armed or unarmed truce, civil

war ,mutiny, rebellion, revolution, insurrection, military  or

usurped power, riot or civil commotion, strikes.

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9. Taking part in any naval, military or air force operation

during peace time. 

10. Participation by the member of the scheme in any flying

activity, except as a bona fide, fare-paying passenger of a

recognized airline on regular routes and on a scheduled

timetable.

11. Participation by the member of the scheme in a criminal or

unlawful act.

12. Engaging or taking part in professional sport(s) or any

hazardous pursuits, including but not limited to , diving or

riding or any kind of race, underwater activities involving

the use of breathing apparatus or not, hunting,

mountaineering, parachuting , bungee-jumping.

13. Nuclear contamination, the radio active, explosive or

hazardous nature of nuclear fuel materials or property

contaminated by nuclear fuel materials or accident arising

from such nature.

14. Intentional self inflicted injury, suicide or attempted suicide,

while sane or insane.

15. Existing diseases are not covered.

SOCIAL SECURITY SCHEMES:

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1) JanaShree Bima Yojana (JBY):The objective of the scheme is to provide life insurance

protection to the rural and urban poor persons below poverty

line and marginally above the poverty line.

ELIGIBILITY:

A person who is

Aged between 18 and 59 years.

Below or marginally above poverty line

A member of any of the approved

vocation/occupation groups

NODAL AGENCY:

A State Government Department which is concerned with the

welfare of any such vocation/occupation group, a Welfare

Fund/ Society, Village Panchayat,NGO,Self-Help Group,etc.

MINIMUM MEMBERSHIP SIZE:

Twenty five.

2) Shiksha Sahayog Yojana :This is a scholarship scheme launched on 31.12.2001 for the

benefit of children of members of Janashree Bima Yojana.

ELIGIBILITY:

Students studying in ix to xii standards, whose parents are

covered under Janashree Bima Yojana. If a student fails and

is detained in the same standard, he will not be eligible for

scholarship for the next year in the same standard.

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BENEFIT:

Scholarship of Rs 300/- per quarter per child will be paid for

maximum period of 4 years. The benefit is restricted to two

children per member (family) only.

PREMIUM:

No premium is charged for the scholarship.

HOW TO CLAIM SCHOLARSHIP:

The Nodal Agency will identify the students. The member of

Janashree Bima Yojana whose child is eligible for

scholarship has to fill up an application form (available with

Nodal Agency) and submit to the Nodal Agency. The

applications duly filled up and certified will be sent along with

the list of the beneficiary students by the Nodal Agency to

the concerned LIC, P&GS Unit for disbursement of

scholarship/s. The scholarship/s will be disbursed to the

beneficiary students through the concerned Nodal Agency.

As only a limited number of beneficiaries will be provided

scholarship under the scheme, the selection for eligible

students will be made on the basis of poorest of the poor.

The scheme will be administered through Pension and

Group Schemes Department of LIC of India.

3) Aam Admi Bima Yojana :

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In a rural landless household, when everyday living is a

struggle, it is difficult to face life with a smile. And it becomes

even more difficult when the future of your family is uncertain.

AAM ADMI BIMA YOJANA, a prestigious scheme of the Central

and State / Union Territory Governments and administered by

LIC brings a ray of hope and smile to these households.

NODAL AGENCY :

The Nodal Agency shall mean the State / Union Territory

Government appointed to administer the scheme.

The Nodal Agency shall act for and on behalf of the insured

members in all matters relating to the Scheme.

IDENTIFICATION OF BENEFICIARIES:

The State / Union Territory Government in consultation with

the Panchayats will identify the persons to be covered under

the scheme. All the members will be provided with an identity

card by LIC with an unique identity number.

ELIGIBILITY:

The member should be aged between 18 and 59 years.

The member should be the head of the family or one earning

member in the family of rural landless household.

AGE PROOF:

Ration Card

Extract from Birth Certificate

Extract from School Certificate.

48

Voters list

Identity Card

In case of doubt, a certificate from Primary Health Centre can

be accepted as authentic proof of age.

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CHAPTER 5

CONCLUSION

Key to a successful business is keeping the employees motivated.

Happy and secured employees work better, which in turn reduces

the employer’s tension. Group Insurance is an insurance which

covers a group of people (like employees of a common employer

or professionals in a common group).

The concept of Group Insurance emerged and flourished in the

western and developed countries. While it took a late start in India,

the major developments were observed only after Independence.

The present form of Group Insurance originated in the United

Stated of America in the early 19th century.

The concept of Group Insurance was introduced; lot of hostility

came from different sections of public. The scope of Group

Insurance has been broadened with the passage of time. The

Group Insurance plays an important role in enabling the

employers, the employee’s benefit schemes at case. However, the

more demanding role the Group Insurance Schemes have to face

is to provide protection and coverage to those who are self

employed.

Industrialization has drastically changed the Socio-economic

aspects of human life around the world. Social and economic

insecurity has become the main cause of concern for individual,

50

employees and governments. Social Security, Welfare legislations

and employee benefits to a great extent have attempted to

address these issues. Employee benefit schemes provide

adequate financial security in two events namely premature death

and excess longevity. Group Insurance has become an

indispensable part of the employee benefit package which

provides financial benefit at a very low cost.

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BIBLIOGRAPHY:

1) GROUP INSURANCE

- THE ICFAI UNIVERSITY

WEBLIOGRAPHY:1) www.ask.com

2) www.licindia.in

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