INSTITUTE OF BUSINESS AND TECHNOLOGY Non Life Insurance Companies & Life Insurance Companies Submitted By: Faisal

Bin Hasan (BM/15024) Junaid Khalid ( BME / 738 ) Course Code : FIN - 604

MBA (Banking and Finance) FACULTY OF MANAGEMENT SCIENCES Fall - 2011

PART A LETTER OF TRANSMITTAL

To, Mr. Khalid Jamil Ansari Instructor Investing Banking BIZTEK EDC, Karachi. Dear Sir, It is with great pleasure and pride that we are submitting this report Non Life Insurance Companies & Life Insurance Companies to you. We were given the task of performing this project by you as a part of our course Investment Banking. We tried our best to get the related and relevant data from different sources in order to complete our project report. We sincerely hope that you find our report useful. Thanking You. Yours truly Faisal Bin Hasan Junaid Khalid.

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LETTER OF RECOMMENDATIONS
This report was recommended by Incharge of the course, Sir Khalid Jamil Ansari. The report was assigned to gain the knowledge about what is Insurance & how Insurance Companies work. This project helped us to gain an insight on the topic of the project.

This report as per your instruction covers all the authentic areas of concern and contains all the relevant information as per your instructions.

Yours Sincerely, Faisal Bin Hasan Junaid Khalid

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LETTER OF ACKNOWLEDGEMENT
First of all we would like to thank Almighty Allah who enabled us potency and courage to successfully research and pen this project, to achieve our target and complete this report up to our ultimate level. We would like to extend our special thanks and acknowledgement to
MR. KHALID JAMIL ANSARI,

who conducted our Project course and continuously guided and supported us during our project and enabled us the opportunity of practically performing all that we had studied during the semester. We are very thankful to him for his support throughout this project for proof reading, formulating and information gathering of this report. We are also grateful to him for the valuable time he has given us for this report in particular and for the over all learning of finance at large. We would also like to thank the endurance of our parents and family members for bearing up with us throughout this endeavor both time and money wise.

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TABLE OF CONTENTS Executive Summary Introduction Difference b/w Life Insurance & Non Life Insurance What does Life Insurance Companies offer / Do What does Non Life Insurance Companies offer / Do Background Products of Life Insurance Companies Products of Non Life Insurance Companies Major Insurance Companies of the World Major Insurance Companies Of Pakistan Current Scenario of Insurance In Pakistan Mutual Insurance Company Purpose of our Report
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 Scope of our Product Textual Discussion Findings Conclusions Recommendations

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EXECUTIVE SUMMARY
Insurance is a highly useful product / service for every segment of the society. In todays fast moving era there is more and more need for people to be insured for their better future. Both Life & General Insurance provide different useful benefits to the person / firm buying them . The purpose of this project (Non Life Insurance & Life Insurance) is to know the basic concepts of Insurance , what services Insurance companies provide , Analysis of which type of Insurance is more beneficial for people. We will also supply useful recommendations after doing in depth research on the topic , which we feel would be of good knowledge for report readers.

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PART B INTRODUCTION
What is Insurance?
Insurance is a form of risk management in which the insured transfers the cost of potential loss to another entity in exchange for monetary compensation known as the premium. Insurance allows individuals, businesses and other entities to protect themselves against significant potential losses and financial hardship at a reasonably affordable rate. We say "significant" because if the potential loss is small, then it doesn't make sense to pay a premium to protect against the loss. After all, you would not pay a monthly premium to protect against a $50 loss because this would not be considered a financial hardship for most. Insurance is appropriate when you want to protect against a significant monetary loss. Take life insurance as an example. If you are the primary breadwinner in your home, the loss of income that your family would experience as a result of our premature death is considered a significant loss and hardship that you should protect them against. It would be very difficult for your family to replace your income, so the monthly premiums ensure that if you die, your income will be replaced by the insured amount. The same principle applies to many other forms of insurance. If the potential loss will have a detrimental effect on the person or entity, insurance makes sense. A promise of compensation for specific potential future losses in exchange for a periodic payment. Insurance is designed to protect the financial well-being of an individual, company or other entity in the case of unexpected loss. Some forms of insurance are required by law, while others are optional. Agreeing to the terms of an insurance policy creates a contract between the insured and the insurer. In exchange for payments from the insured (called premiums), the insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event. In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays the rest. Examples include car insurance, health insurance, disability insurance, life insurance, and business insurance.

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Everyone that wants to protect themselves or someone else against financial hardship should consider insurance. This may include:

Protecting family after one's death from loss of income Ensuring debt repayment after death Covering contingent liabilities Protecting against the death of a key employee or person in your business Buying out a partner or co-shareholder after his or her death Protecting your business from business interruption and loss of income Protecting yourself against unforeseeable health expenses Protecting your home against theft, fire, flood and other hazards Protecting yourself against lawsuits Protecting yourself in the event of disability Protecting your car against theft or losses incurred because of accidents And many more

Life Insurance
Life Insurance is a risk policy against death. It involves two parties, the insured and the insurer. The insured transfers a risk to the insurer. In return, the insured receives a policy and pays a predetermined amount of premium for a set amount of time. There are two kinds of life insurance policies -- term life and permanent life. Further, permanent policies can be divided into whole, universal, limited-pay, endowment and accidental. The kind of life insurance policies that is best suited varies from person to person. Purchasing life insurance is always recommended, but it is necessary to do some research about the various policies available to make sure you are getting the one that is bested suited for you. Overinsurance, unsuitable life insurance and various other problems have made life insurance policies a pretty risky purchase. One of the best ways to make sure that you are getting the right policy is to select a wellqualified life insurance company. Every life insurance company has various policies that cater to people from all walks of life. One should think about various factors before opting for life insurance like time, monthly budget, liquidity and need of risk coverage before taking on any life insurance policy. Metropolitan Life Insurance Company, better known as MetLife is one of the oldest companies in the USA. MetLife is also one of the largest insurance companies in America. The New York Life Insurance Company is another major player in the insurance market in the US. It was founded in 1841 under the name of Nautilus Insurance Company. It was renamed

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New York Live Insurance Company in 1845. It is the largest mutual life insurance company in the US.

Non-Life Insurance/General Insurance

General Insurance: It is a form of insurance mainly concerned with protecting the policyholder from loss or damage caused by specific risks. Examples include Property Insurance, Health/ Disability Insurance & Business/ Commercial Insurance. Property/Casualty Insurance Provides protection for property like home, car and house-hold possessions. It may also protect from liability as a result of their use. Health and Disability Insurance Pays for costs related to your health 1- Room rent 2- Surgeon/Physician's Fees 3- Diagnostics tests Business and Commercial Insurance This caters to the need of your business insurance requirements, provides wide coverage to your property at work for example offers protection against loss/damage to the building and its contents. It also covers liabilities of your employees, buyers and users.

Difference between Life Insurance & Non Life Insurance

Life Insurance: Life insurance is taken to cover for loss of life. All life insurance products have mortality charge. Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured
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individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. Life insurance refers to the compensation paid to the families in the event of the insured's death. What is compensated is the economic loss (earning capacity of the insured to the extent of the sum assured). This coverage only for persons. Non Life Insurance /General Insurance: General insurance is taken to cover for loss of any non life matter where loss of profit is possible or any monetary expense is possible like car, health, home, jewelry, fire insurance etc. General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and casualty insurance. General Insurance is indemnifying the economic loss of the property or the third party liability arising out of the incident or accident and generally covers the properties and life of persons in case of accident. General insurance covers household, motor, personal accident, travel, all risks, business insurance, the list is endless!! Life Insurance is known as a "valued" policy. In other words, you insure your life for a certain value and if you die, the policy pays up the sum insured in full, no deductions at all are made, no messing around! General Insurance Policies are policies of "indemnity", you cover something but if you claim on the policy, you may not get exactly the sum insured back due to circumstances such as under-insurance, over-insurance, policy excess, certain cover restrictions etc.

What Does Life Insurance Companies Offer / Do?

Life Insurance companies are offering attractive options for consumers who want to protect their dependents. However, some people delay the purchase of a life insurance policy until it is too late. Since thinking about your own mortality is not pleasant, some people try to avoid contemplating thoughts of their own demise. For example, as W. Somerset Maugham said:

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Dying is a very dull, dreary affair. And my advice to you is to have nothing whatever to do with it. It is, as if by avoidance, we can delay having to face the fact that dying will happen to all of us. Our daily routines continue, and we make new commitments, while not knowing whether our lives will end prematurely.

The motivating factors for people who do finally make the decision to purchase a life insurance policy usually coincide with the experience of a major life-altering event such as: getting married, starting a family, or purchasing a home. In fact, there are many other good reasons for purchasing a life insurance policy, and included among those reasons are that you will enhance your sense of personal security. In fact, since their inception, life insurance companies have largely been about transferring risks, thus providing their policyholders with the ability withstand any unplanned personal- financial emergencies. A Life Insurance policy will also provide money for expenses that you incur after your death. In fact, life insurance companies are in business to insure your survivors against suffering the harsh financial consequences of facing your funeral and medical bills. And when you pay your life insurance company premiums, you are responsibly ensuring that your family will be safe from the effects of losing your contribution to the household income. What is it worth to be sure that your family wont have to uproot their lives and change their living standards in the event their income level is affected by your premature or unexpected death. A life insurance policy will allow you to continue driving through the highway of life, without having to suffer the anxiety of wondering what will happen to those who depend on your earnings. And being insured will prevent you from suffering remorse and regret when you come to the realization that your loved ones will not be financially protected at a time when they most need the income you provide.

What Does Non-Life Insurance Companies Offer / Do?

General Insurance comprises offering Personal Accident cover are benefit policies. Health insurance covers offered by non-life insurers are mainly hospitalization covers either on reimbursement or cashless basis. The cashless service is offered through Third Party Administrators who have arrangements with various service providers, i.e., hospitals. The Third Party Administrators also provide service for reimbursement claims. Sometimes the insurers themselves process reimbursement claims. Personal insurance such as Accident and Health Insurance, and liability insurance which covers legal liabilities. There are also other covers such as Errors and Omissions insurance for professionals, credit insurance etc.

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Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and inundation, earthquake and so on. There are products that cover property against burglary, theft etc. The non-life companies also offer policies covering machinery against breakdown, there are policies that cover the hull of ships and so on. A Marine Cargo policy covers goods in transit including by sea, air and road. Further, insurance of motor vehicles against damages and theft forms a major chunk of non-life insurance business. Accident and health insurance policies are available for individuals as well as groups. A group could be a group of employees of an organization or holders of credit cards or deposit holders in a bank etc. Normally when a group is covered, insurers offer group discounts.

Liability insurance covers such as Motor Third Party Liability Insurance, Workmens Compensation Policy etc offer cover against legal liabilities that may arise under the respective statutes Motor Vehicles Act, The Workmens Compensation Act etc. Some of the covers such as the foregoing (Motor Third Party and Workmens Compensation policy) are compulsory by statute. Liability Insurance not compulsory by statute is also gaining popularity these days. Many industries insure against Public liability. There are liability covers available for Products as well. There are general insurance products that are in the nature of package policies offering a combination of the covers mentioned above. For instance, there are package policies available for householders, shop keepers and also for professionals such as doctors, chartered accountants etc. Apart from offering standard covers, insurers also offer customized or tailor-made ones. Suitable general Insurance covers are necessary for every family. It is important to protect ones property, which one might have acquired from ones hard earned income. A loss or damage to ones property can leave one shattered. Losses created by catastrophes such as the tsunami, earthquakes, cyclones etc have left many homeless and penniless. Such losses can be devastating but insurance could help mitigate them. Property can be covered, so also the people against Personal Accident. A Health Insurance policy can provide financial relief to a person undergoing medical treatment whether due to a disease or an injury.

Background
Insurance probably made a beginning in the ancient land of Babylonia In the 18th century B.C., Babylonian king Hammurabi developed a code of law, known as the Code of Hammurabi, which codified many specific rules governing the practices of early risk-sharing activities. For instance, the code dictated that traders had to repay merchants who financed trading voyages unless thieves stole goods in transit, in which case debts would be cancelled.

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This was similar to the system of insurance known as bottomry which existed in Phoenicia in 1200 B.C.In this system, backers loaned money to merchants to finance voyages. Merchants offered their ships (the hull was known as the ships bottom) as collateral for such loans. When a trip succeeded, the merchant would pay the trips backer the original loan plus interest, the equivalent of a premium. If a ship went down on its voyage, the trips backer would cancel the merchants loan. The Greeks and Romans developed the earliest systems of life insurance. They formed societies which paid dues that went toward paying for the burial of members. Sometimes these societies also paid for the living expenses of deceased members families. During the Middle Ages (5th to 15th centuries A.D.), workers joined together in craft. Many guilds, particularly in England and Italy, provided benefits to workers and their families in the event of illness or death. In some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: natural or non-monetary economies (using barter and trade with neither centralized nor standardized set of financial instruments) and more modern monetary economies (with markets, currency, financial instruments and so on). The former is more primitive and the insurance in such economies entails agreements of mutual aid. If one family's house is destroyed the neighbors are committed to help rebuild. Granaries housed another primitive form of insurance to indemnify against famines. Often informal or formally intrinsic to local religious customs, this type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread. Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at sea.

Achaemenian monarchs of Ancient Persia were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices. The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a
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historian and writer, writes in one of his books on ancient Iran: "Whenever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much." A thousand years later, the inhabitants of Rhodes invented the concept of the general average. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were deliberately jettisoned in order to lighten the ship and save it from total loss.

The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies. Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.

Insurance Industry of Pakistan

In 1947 there were 77 insurance companies. All of these were foreign companies Only 7 were incorporated in the Pakistani area The share of Muslim companies was very low In 1948 the govt. established the department within domain of ministry of commerce The object was to supervise the industry and safeguard the interests of insured Pakistan insurance company was established in 1952 The object was to promote new insurance companies both financially and technically Provide Reinsurance facilities to insurance industry. In 1955 National Coinsurance scheme was initiated to promote insurance culture, assist small insurance companies NCS yielded favorable results In 1960s the number of insurance companies in Pak increased to26 and till 1971 it reached 47 Foreign companies were reduced to 25 till 1971 due to political issues and separation of East Pak The sum assured increased from 130 million to 51.7 billion in 1972 Life insurance was nationalized in 1972 The business of 41 nationalized insurance companies was consolidated in 1973 State life insurance enjoyed the corporate monopoly till 1990
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1973 govt. replaced NCS with NIF to manage the govt. & semi govt. property For cost reduction NIC was established in 1976 In 1980 s no significant progress in this sector.

Two local and two foreign companies started operating besides SLIC EFU commenced operation in1992 Metropolitan in Feb 1993 Alico in May 1995 CU in July 1996 Domestic insurance companies were 62 in 1995 while foreign participation was reduced to 9 The new ordinance in Aug 2000 by SECP increased the minimum paid up capital of nonlife insurance comp. to Rs. 80 million & 150 million for life insurance comp.s. At present 55 insurance companies 5 are foreign out of 55 The public sector consist of NICL, SLIC, & PRCL NICL provide coverage to public sector PRCL is alone in the business of Reinsurance

Products of Life Insurance Companies

Life Insurance products can be categorized into the following types:

Term Insurance Whole Life Insurance Endowment Insurance Annuities

Term Insurance It provides for life insurance protection for the selected term (period of years) only. In case the person (whose life is insured) dies during the term, the benefits are payable under the policy and in case of his survival till the end of the selected term the policy normally expires without any benefit becoming payable. Term insurance may be regarded as temporary insurance and is more nearly comparable with "Property & Casualty insurance" contracts than the other forms of Life insurance contracts. Whole Life Assurance As the name suggests, the whole life insurance policies are intended to provide Life Insurance protection over one's lifetime. The essence of whole life insurance is that it provides
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for payment of the assured amount upon the insured's death regardless of when it occurs. Under these policies, the payment of the assured sum is a certainty in contrast to the term insurance contracts. Only the time of payment of the assured sum is an uncertainty. Whole life policies can be either participating type or non-participating type. Participating type policies are those which are entitled to a share in the distributable surplus (profits) of the Life Insurance company, whereby the cash value of the policy can go up, with the announcement of bonus / dividend. Non-participating policies have the same benefit throughout the life of the policy. There can be the following types of whole life policies: 1. Ordinary Whole Life Insurance 2. Limited Payment Whole Life Insurance 3. Convertible Whole Life Insurance

Endowment Assurance These are the most commonly sold policies. These policies assure that the benefits under the policy will be paid on the death of the life insured during the selected term or on his survival to the end of the term. Hence the assured benefits are payable either on the date of maturity or on death of the life insured, if earlier. Endowment policies assist in providing for the payment of a lump sum amount for a specific purpose, say, provision for retirement, meeting the needs of the child etc. The money required for the purpose will be built up whether the person is alive till that date or not. Like whole life insurance policies, endowment policies can also be of participating and nonparticipating types.

Annuities An annuity is a series of periodic payments. An annuity contract is an insurance policy, under which the annuity provider (insurer) agrees to pay the purchaser of annuity (annuitant) a series of regular periodical payments for a fixed period or during someone's life time. Classification of Annuities: Annuities can be classified on the basis of
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The number of lives covered o Single o Joint The beginning of the payment of annuity o Immediate annuity o Deferred annuity Method of premium payment o Single premium
o

Regular installment

Products of Non- Life Insurance Companies

Non-Life Insurance products can be categorized into the following types: Plans for Corporate/ Business Plans for Individuals

Corporate/Business Policies
A. B. C. D. Specialty Office Employee Property

A. Specialty:

These are the policies catered to meet special needs or needs of specific industries. Some of them are

Aviation Insurance Marine Hull Insurance Freight Forwarders Insurance Port Liabilities Film Insurance, Credit Insurance, Event Insurance
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Jewelers Block Policy Bankers Indemnity Policy Shopkeepers Policy Marine Cargo Policy Multi Peril Policy for L.P.G. Dealers

B. Employee policies Various policies available for employer to take care of employees or to meet legal obligations.

Group Personal Accident Group critical illness Group Travel Workmen's Compensation Keyman Insurance Overseas Travel insurance

C.Policies for Office /manufacturing units For protection of business, industrial units from contingencies

Fidelity Guarantee Insurance Policy Special Contingency Policy Plate Glass Insurance Neon Sign Insurance Fire Policy Burglary Policy Machinery Breakdown Policy Electronics Equipment Policy Consequential Loss Policy Contractors All Risk Policy Advanced Loss of Profit / Delay in Startup Policy Contractor Plant and Machinery Policy Mega Package Policies Marine cum Erection / Storage cum Erection Policy

D. Health Insurance Group Personal Accident Policy Mediclaim Policy Overseas Mediclaim Insurance- Business &Holiday Overseas Mediclaim Insurance- Frequent Corporate travelers
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Overseas Mediclaim Insurance- Employment & Studies Personal Accident Policy

Policies for Individuals Home Travel Motor Accident Health

Home Insurance There is a wide range of policies and packages available. They cover more than youre your home and its contents. Some of the perils covered are: Fire Explosion / Implosion Burglary Riot, Strike, Malicious Damage cover Damages due to Impact by rail / road vehicle or animal Bursting and / or overflowing of water tanks, apparatus and pipes Missile Testing operations Leakage from Automatic Sprinkler Installations Lightning Loss caused by Storm, Cyclone, Hurricane, Tornado, Flood and Inundation Destruction by subsidence of part of the site on which the property stands or landslide Bush Fire

Earthquakes and Terrorism are usually provided as add-ons due to the increase in frequency. The other perils included in some feature rich policies are: Rent for alternative accommodation Loan repayment for home/car Public liability Baggage Insurance Home Appliances cover Personal Accident Loss of cash in transit

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Travel Insurance There are various policies which cover International travel, domestic train travel, students overseas travel, and travel to specific countries.

Auto Insurance Policies They cover:

Repair / replacement of the parts of the vehicle Payment for the market value of the vehicle in case of a total loss, provided that the loss occurs due to an accident, theft, earthquake, flood, riot, strike and malicious acts. It covers the legal liability of insured towards third party personal injury and property damage arising out of an accident involving the insured vehicle.

Health Insurance Policies Health Insurance Policies may provide cover for:

Expensive medical care including pre & post hospitalization expenses. Provide a daily allowance for each day of hospitalization. Protection against the major life threatening illness like Cancer, Heart Attack, Paralysis, Kidney failure, Stroke, etc accidental death permanent disability hospital confinement allowance

Other Insurance Policies Baggage Insurance Mobile Phone Insurance Executive Travel Insurance Directors and officers Liability insurance Professional Indemnity Insurance Portable Equipment Insurance

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MAJOR INSURANCE COMPANIES OF THE WORLD These are the world's largest insurance companies: 1. Generali Group - Italy 2. China Life Insurance - China 3. Munich Re - Germany 4. MetLife - United States 5. Zurich Financial Services - Switzerland 6. AIG Group - United States 7. AXA Group - France 8. Travelers - United States 9. Ping An Insurance Group - China 10. Tokio Marine Insurance - Japan 11. CNP Assurances - France

MAJOR INSURANCE COMPANIES OF PAKISTAN

East West Life Assurance Company

East West Life is an important player for Pakistan's health and life insurance companies and offers a full range of insurance products, including: Health Insurance Life Insurance Fixed monthly income benefits for 20 years (in case of permanent disability) Accidental medical reimbursement insurance More products and many services can be customized to meet the needs of all people in all walks of life.

New Jubilee Insurance

Established in1953 & ranked third largest. First Pak Insurance Company to acquire share in foreign insurance company of commercial union. It acquired the major control of CU life insurance NJI is pioneer in health insurance It has flexible and customized plans
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AA rating by PACRA & JCR_VIS

New jubilee life insurance Company is a best PVT insurance company in Pakistan. New jubilee was a subsidiary of the Aga Khan Fund for Economic Development, Switzerland. Now, it offered a post-sales consulting and sales department of Lahore operation. We are the only Life Insurance Co. in Pakistan, offering salary correction COMMISSION energy sales.

Eastern Federal Union (EFU)

Established in 1932 with financial assistance from Agha Khan 3 & Nawab of Bhopal Mr. Abdur Rehman In 1947 it was leading Muslim insurance company In 1961 it was declared largest life company in Afro Asia It was nationalized in 1972 Thereafter it operated as General Insurance Company. 2nd largest non life insurance comp of the country

In 1992, the Government of Pakistan reopened the market for life insurance for private sector organizations and EFU Life Ltd was established in November 1992 as the first life insurance company in the private sector. In early 1993, UFC began writing life insurance life and in March 1994, the company began writing its individual life business. EFU Life manages a group of professionals with extensive experience of living in the United Kingdom. This has helped the company create a professional culture unique amongst life insurance companies in Pakistan. In 2002 Allianz AG signed a govt. venture with EFU to form a new comp. Allianz EFU Health Insurance Ltd.

State Life Insurance Corporation of Pakistan

Life insurance business of 32 insurance comps was merged and management was consolidated and named State Life Insurance of Pakistan. It has 4 regional offices & 26 zonal office,111 sector offices and network of 461 area offices For group and pension there are 4 zonal, 6 sectors & 20 sector head offices Main office in Karachi deals in investments, real estate, actuarial and over seas operation It has a large investment portfolio

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Offers both Whole life and Endowment plans Payments to policy holders in 2008 was Rs. 12.779 million vs. Rs.10783 million in 2007 with an increase of 18.25% State Life offers a very complete range of products and a wide range of clients, ranging from an average man in the street, and the wealthiest individuals. One of the unique plan to offer their insureds when the insured pays only 5 premium and get huge amounts of 4 to 5 times the sum insured. Our services would be beneficial for you and your family and plan design to your needs, giving you peace of mind and total financial freedom.

American life insurance Co. (PAK) LTD

Incorporated in Wilmington Started its operations in Pakistan in 1995 Its the first foreign life insurance company to enter in Pakistan Initial paid up capital of Rs. 130 million Largest capitalized with paid up capital of Rs. 325 million It is the only Multi National life Insurance Company in Pakistan.

Universal Insurance Co. of Pakistan LTD

Entered the market in 1960 & is among top ten in Pak presently Premium portfolio of Rs.550 million in 07 UIC underwrites marine, fire, motor, personal, accident, travel insurance, workmen, compensation, health insurance etc It has a sound reinsurance arrangements with world renowned Hanover Reinsurance Company West Germany & more Due to this it is able to underwrite risks of heavy magnitude.

Adamjee Insurance Company

Incorporated as public listed company on Sept. 28, 1980 Registered with CDC of Pak LTD Started with paid up capital of Rs. 2.5 million & current paid up capital is of Rs. 1.022 billionDeclared as 2nd best Insurance Comp in Asia by Euro money Best export award from FPCCI 18 times Top comp. award by KSE 17 times MCB acquired management rights in 2004 Recognized as one of the best managed Insurance Company between Vienna & Taipei Company covers personal insurance, motor insurance, travel insurance, corporate insurance, home insurance etc

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Pak Kuwait Takaful Company

It is the first Islamic Takaful Co in Pak Initial paid up capital of Rs. 250 million and an authorized capital of Rs 500 million Pak Kuwait investment comp, Meezan Bank and Saudi Pak are local share holders.

The Metropolitan life Insurance Co.of Pakistan LTD .

It is also one of the major insurance companies operating in the country successfully.

CURRENT SCENARIO OF INSURANCE IN PAKISTAN

Concept of Takaful is introduced It took 5 years to draft Takaful rules 5 Takaful comps are operating in Pak, 2 family & 3 general Takaful In Takaful participants share the risk The growth of insurance industry has been low Its GDP contribution is of 0.8% in Pak as compared to 4.8% in India, 8% in Malaysia, 7.6% in Singapore and 15.3% in South Africa Out of 0.8% 0.3 comes from life insurance while rest 0.5 from non life insurance The insurance business has been under stress during 2003-05 Sector posted strong gains in 2008 Private sector companies out performed public sector companies. Competition has gone stiff and premium collection has gone down In 2006 ADB allowed $260 million to restructure the insurance sector Min. paid up capital for life insurance comps was increased from Rs.150 million to Rs. 500 million For non-life-insurance comps paid up capital limit is increased from Rs.80 million to Rs.250 million till 2010 This will lead towards mergers Only Hailey college offering a course to develop insurance professionals Insurance penetration in India is 3 % while in Pakistan it is 0.3 % Insurance sector witnessed crisis due to assassination former P.M Benazir Bhutto and other political issues. Still the future of this industry is bright.
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Mutual Insurance Company

A mutual insurance company is one that is owned by its policyholders
A Mutual insurance company is an insurance company which has no shareholders but instead is owned entirely by its policyholders. The primary form of financial business set up as a mutual company in the United States has been mutual insurance. Under this idea, what would have been profits are instead rebated to the clients in the form of dividend distributions or reduced future premiums. A mutual, mutual organization, or mutual society is an organization (which is often, but not always, a company or business) based on the principle of mutuality. Unlike a true cooperative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship. A mutual organization or society is often simply referred to as a mutual. This could be seen as a competitive advantage to such companies the idea of owning a piece of the company could be more attractive to some potential clients than the idea of being a source of profits for investors. This ownership either extends to all its policyholders or is restricted to certain classes of policyholders. Ownership rights typically include voting rights, for instance in the election of the board of directors. In a mutual insurance company, any distributed surplus funds are paid entirely to policyholders, whereas in a proprietary or stock company (one with shareholders) a proportion of the surplus is paid to shareholders while the balance is held in reserve by the insurer. The American mutual property/casualty insurance industry was founded in 1752 by Benjamin Franklin when he established the Philadelphia Contribution ship for the Insurance of Houses From Loss by Fire although the mutual concept actually originated in England almost 60 years before when the first mutual fire insurer was conceived In nearly every country around the globe, there are mutual property/casualty insurance companies. The Association of European Cooperative and Mutual Insurers has argued that European mutual insurance companies promote active policyholder influence, are innovators of new products and services, and actively demonstrate social commitment. After the global economic crisis in 2008, the mutual property/casualty insurance industry was one segment within the financial services sector that neither needed nor wanted a financial bailout However, primarily because of news coverage of the role American International Group (AIG) played in the crisis, there were and still are some misconceptions about the role played by property/casualty insurance industry. News reports repeatedly and erroneously described the multinational corporation as an insurance giant, when in fact AIG was a holding company consisting of a diverse group of businesses of which about 70 insurance companies were included. The National Association of Mutual Insurance Companies (NAMIC) is the only U.S. trade association representing mutual property/casualty insurance companies. Since 1895, NAMIC has

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been serving its U.S. and Canadian members in areas of advocacy and education. The global trade association for the industry, the International Cooperative and Mutual Insurance Federation, claims 216 members in 74 countries, in turn representing over 400 insurers. PURPOSE OF OUR REPORT The purpose of our report is to find out how Insurance Companies ( General & Life ) work and what are their future prospects. SCOPE OF OUR PRODUCT The scope of our product ( Insurance ) is very vast ; specially in western countries . In Pakistan surely but surely insurance business is progressing by way of introducing new products and services which cater for the needs of every segment of the society. Insurance sector showed a rapid growth following the political change of 1990AD and the enactment of the new Insurance Act 1992. However, still more than 95 per cent population is out of the purview of the insurance industry and there is a lot to do to make the sector well managed expanding its scope and services. It was necessary to run insurance services through joint effort with the micro finance companies to expand insurance coverage in the nation. However, the villagers and the low-income people are unable to avail of insurance service due to lack of special package programmes. The insurance companies should introduce special schemes for the villagers to bring them under the umbrella of insurance. Very few people are aware of the benefits of insurance and the financial security it provides. Incremental growth of insurance premium of the insurance companies has increased the income of insurance companies but there is a lack of conducive environment for the investment of the premium of insurance company. The insurance companies should invest in secure sectors including government bonds, fixed deposits and other sectors because they should pay the money to the insurers after the completion of the duration of the policy. The insurance companies are inclined to woo only rich people who could buy the policies of large amounts. Not only the companies but also the agents have been focusing on the rich people to earn big amount of commission through the sale of large amount of policies. The main reason for the lack of enthusiasm among people towards insurance is the low level of awareness among them. The literacy rate is still low. Next is the perspective of people towards insurance. We still have very little knowledge of insurance. Majority of the population has no idea why we need insurance and for what. As insurance is a means of secure future, very few numbers of people have been positive towards this. We still need to make them clear on it. Third is the level of income. We still have problem of hand-to-mouth and we spend 99 per cent
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of our income in food and other services. So, there is no saving. If there is problem in sustaining day-to-day life, how can we imaging of saving for future. And the fourth is that the activities of insurance companies are also somehow responsible for this. Their attitude and behavior towards the insurer counts a lot. Similarly, the fifth is the government policy and priority of other national and international financial institutions. If both the government and financial institutions had put the insurance sector on their priority acknowledging it as one of the major economic activities, it could have developed much.

TEXTUAL DISCUSSION Present Situation of General Insurance The Pakistani insurance market has undergone major structural changes in last few years through mergers of companies to meet the increased statutory requirement of minimum paid up capital as per Insurance Ordinance 2000. Some companies who were unable to raise this capital have been asked to close down their operations. The Security and Exchange Commission of Pakistan (SECP), Insurance Division, is trying to improve the image of Pakistan Insurance Industry by issuing directives on financial security and transparency, code of good governance and sound market practice. Key Market Players The general insurance market comprises two segments Private Sector and Public Sector. Private Sector is composed of 42 Local companies (29 are active) and 1 foreign company. National Insurance Company Limited (NICL) is the only direct insurer for public sector. Allianz-EFU Health insurance company was set up as the first Specialized Health Insurance Company in Pakistan. The Market Share of top four companies (including NICL) is 74%, while remaining companies share the balance of 26%. This shows that non-life insurance Sector is highly fragmented.

Allianz EFU It is the first specialized insurance company of Pakistan. E-Commerce - A new technology for selling insurance.

The future of Non Life Market The future looks very positive for the non-life insurance market in Pakistan. Although there are many challenges ahead.
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It is likely that general insurance market would lead to significant premium growth in the years ahead.

The future of Life Insurance Market

The future of life insurance is also bright with diversified plans being offered to cater for the needs of different segments of the society. Competitive Forces Threat of new entrants Bargaining power of suppliers Competitive rivalry within Industry Bargaining power of customers Threat of substitutes Takaful Insurance Government has taken keen interest in promoting Islamic modes of banking, investment and Insurance. Recently the SECP created a Task Force to draft Takaful Rules current regulations do not cater to Takaful products. Individual life Takaful products will primarily follow the unit linked structure Window operations for Family Takaful allowed - separate statutory fund required Separate Company for General Takaful Takaful operational model based on the principle of Wakalah. The Participants Takaful Fund may be based on the principle of Waqf. The investment of funds in the Participants Investment Fund may be based on the principle of Wakalah, Modarbah or combination of both SECP to have a Central Shariah Board Requirement to have a certain percentage of business from rural areas 5 banks offering credit life on group basis - premiums either explicitly charged from customer or 2 banks have commenced telemarketing of insurance products personal accident and critical illness products. 2 banks have entered into bancassurance agreements products offered: personal accident, unitlinked life assurance Major banking groups intend launching life insurance companies in future.

FINDINGS
Our findings while doing this project are given below:

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Advantages of Life Insurance

1) Life Insurance is not an Investment , Life Insurance is an Expense and not an Asset. It is an expense just like your health insurance to make sure in case of serious illness you are covered and not in a position to pay the costs of your illness leading to your life ending in a bad manner. Life Insurance makes sure that your dependents can lead a decent life economically despite your death. This is the main purpose and advantage of life insurance 2) Tax Advantage - A number of countries allow you to offset the premiums that you pay for you life insurance in your taxable income. Also the maturity amount that you get is also not taxable in a number of places. Insurance is widely used by financial advisors to reduce your tax burden. 3) Advantage of Term Insurance While Insurance Companies sell a wide variety of insurance products like term, variable, universal insurance most are complex and intended to fleece customers. Term Insurance is the best life insurance product for its simplicity and cheapness. It gives you a lump sum amount in case of death and has no clauses and conditions. Its very simple to understand and the cheapest insurance product as well. 4) Flexibility in Coverage Life Insurance is supposed to cover you till the time you have enough of a corpus for your dependents. You can take life insurance for 5,10,15,20 years. This also depends on your age but you get the basic idea. Suppose you have $50,000 in savings and you need another $450,000 for your family to be comfortable in case of your death. If you save $50,000 every year then it means that you need 9 more years to get to your target. In that case you can take life insurance for 9 years 5) Government Regulation provides Safety The government heavily regulates the insurance sector making sure that your insurance company has enough assets to cover your liability. This means that you have the peace of mind that in case of your death the money will be given out by the life insurance company and it does not go bankrupt. Governments make sure that insurance companies dont fail like banks. Even if they do their liabilities are taken over by the government 6) Universal and Variable Life Insurance Advantages While in my opinion both of these 2 types of insurance are a complete waste of time and money they offer the advantage in some specific niche cases. These offer the option of investment and insurance by giving you an interest in the cash value of your insurance. Variable insurance allows you to change the premiums on your life insurance. However the complication of calculating mortality and investment in a hybrid product is beyond the intelligence of most people in my opinion and you are better staying away from these products.

7) Risk Cover - Life today is full of uncertainties; in this scenario Life Insurance ensures that

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your loved ones continue to enjoy a good quality of life against any unforeseen event. 8) Planning for life stage needs - Life Insurance not only provides for financial support in the event of untimely death but also acts as a long term investment. You can meet your goals, be it your children's education, their marriage, building your dream home or planning a relaxed retired life, according to your life stage and risk appetite. Traditional life insurance policies i.e. traditional endowment plans, offer in-built guarantees and defined maturity benefits through variety of product options such as Money Back, Guaranteed Cash Values, Guaranteed Maturity Values. 9) Protection against rising health expenses - Life Insurers through riders or stand alone health insurance plans offer the benefits of protection against critical diseases and hospitalization expenses. This benefit has assumed critical importance given the increasing incidence of lifestyle diseases and escalating medical costs. 10) Builds the habit of thrift - Life Insurance is a long-term contract where as policyholder, you have to pay a fixed amount at a defined periodicity. This builds the habit of long-term savings. Regular savings over a long period ensures that a decent corpus is built to meet financial needs at various life stages. 11) Assured income through annuities - Life Insurance is one of the best instruments for retirement planning. The money saved during the earning life span is utilized to provide a steady source of income during the retired phase of life. 12) Protection plus savings over a long term - Since traditional policies are viewed both by the distributors as well as the customers as a long term commitment; these policies help the policyholders meet the dual need of protection and long term wealth creation efficiently. 13) Growth through dividends - Traditional policies offer an opportunity to participate in the economic growth without taking the investment risk. The investment income is distributed among the policyholders through annual announcement of dividends/bonus. 14) Facility of loans without affecting the policy benefits - Policyholders have the option of taking loan against the policy. This helps you meet your unplanned life stage needs without adversely affecting the benefits of the policy they have bought. 15) Tax Benefits- Life Insurance plans provide attractive tax-benefits for both at the time of entry and exit under most of the plans. 16) Mortgage Redemption- Life Insurance acts as an effective tool to cover mortgages and loans taken by the policyholders so that, in case of any unforeseen event, the burden of repayment does not fall on the bereaved family.

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Disadvantages of Life Insurance

1) Disadvantage of Life Insurance arises when it is used as an investment product. The Cons of a Life Insurance chosen carefully is almost negligible. Insurance companies also promote these as people are uncomfortable in paying premiums on which returns are uncertain. They think that if you are paying for insurance you must get back something. This is because of the psychological makeup of humans where we underestimate the chances of our demise. 2) Buying Life Insurance when you have no Need People buy insurance when they have no need for example an old woman buying life insurance. Also the examples of buying life insurance for a very long time period till you are 80 years old. At that age you have no need since you would have no dependents and earning power as well. 3) Buying Complex Life Insurance Products like ULIPs,Endowment,Child Plans etc which give sub optimal returns Millions of people every year buy insurance products without understanding it. Most of the complex products give suboptimal returns and have no suitability for the buyers. Agents frequently give bad advice to get more commissions.Copmanies also make more money by selling complex products which people dont understand. 4) Buying Expensive Policies People have little clue and dont compare life insurance products even from the same provider. Sometimes they buy insurance policies which are far too expensive leading to heavy burden which is unnecessary. Buying Life Insurance is not Rocket Science however this trillion dollar industry has made it complicated. There are hundreds of types of insurance and products which makes choosing a difficult thing for a person. But keeping it simple like buying term insurance for your insurance needs and other financial assets for your investment will keep it simple.

Advantages of General Insurance

General insurance relieves policy holders from the financial burden in the event the risk covered materializes. This is a very important advantage of holding an insurance policy. It helps one cope with hard times and secures the financial state of an individual at all times. Imagine having to worry about money matters along with the emotional turmoil that come when life sometimes throws us a curve!
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There are some benefits of holding a General Insurance Policy.

Medical and Health insurance take care of your medical bills if you need to undergo any medical treatment. Accident Insurance takes care of expenses incurred in relation to an accident. For example, compensation to be paid to aggrieved party in case you are the defaulting party, medical bills cost of repairs etc. Motor vehicle/ Auto insurance takes care of the cost of repairs to your motor vehicle in case of an accident. Optionally, it also takes care of compensation for damage occurring due to the fault of any other party. Most insurance policies also provide a cover against theft or damage to the motor vehicle. Insurance cover is also available for two/ three wheelers. Travel Insurance takes care of expenses incurred due to any unforeseen event during travel. Pet insurance as the name suggests it takes care of certain expenses incurred for your pets. For example, if your pet is ill and you need to spend money at the vet, the insurance company takes care of payments. Home Insurance it covers expenses incurred in the event of robbery or damage to property in case of fire, earthquake etc. Mortgage insurance is a variant of home insurance that takes care of loan or mortgage payments in the event of a contingency. Unemployment Insurance- this type of insurance keeps one financially secure in the event of loss of employment. Personal liability insurance- this kind of insurance is relatively new in the insurance sector. It takes care of any liability arising while conducting ones profession. Doctors, lawyers and other professionals at risk of being sued by their clients may find this insurance very beneficial.

We could find out the details of general insurance policies from our insurance agents. There are several insurance providers in the market for our assets.

Disadvantages of General Insurance

As an informed consumer, you should know the common potential issues with various types of insurance. With some basic knowledge, you may be able to avoid expensive mistakes on your policies. While you cannot predict all issues, you can arm yourself with the knowledge of

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various general insurance issues in order to efficiently handle many auto, health and property insurance problems.

Auto Insurance
When you are first establishing an auto policy with a new insurance carrier, or when your existing policy is up for renewal, one common issue to look for is coverage you don't need. Personal medical coverage is one add-on that may already be addressed by your health care insurance, and it is unnecessary for you to pay for that twice. Also check the deductible on your policy. If you don't make a point of discussing the deductible--the amount you pay out-of-pocket for repairs before the insurance kicks in-your agent may select a low amount, say $250, that makes your premium much higher than with a $1,000 deductible. Finally, if you do make an auto insurance claim and it comes back denied, you are not obligated to take no for an answer. You can send your insurer further documentation, such as a witness' statement, to support your claim. If that doesn't work, you can make a formal appeal to the state insurance commissioner, or in extreme cases, sue your insurance company.

Health Insurance
One common health insurance issue is what happens to your coverage when you change jobs or lose your job. The good news is that since 1996, Americans do not have to suffer from "job lock"--being stuck in the same job--due to the threat of losing health coverage. In that year, Congress passed the Health Insurance Portability and Accountability Act that protects you from a gap in health coverage when you change jobs; take a leave of absence for family reasons or your insured spouse dies. Should you lose your job, the federal Consolidated Omnibus Budget Reconstruction Act offers stop-gap coverage until you find employment.

Property Insurance
When you are buying a home, be sure to look for specific features your insurance company may take issue with when inspecting the property for safety. The home inspection service you hire to check the house over before you close the deal may not raise the same objections an insurance company. One important issue is that all stairways in the home are safe and have hand railings. The roof must not show evidence of or potential for water damage. Also, while your home inspector might pass an older but reasonably functional electrical system, your insurance inspector may not approve a
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home with dated wiring for coverage. Your best chance of avoiding insurance coverage denial after the sale is closed is to consult with your agent in advance and find out the specific issues that may preclude coverage.

Contract
Always read your contract. It varies with different authors, so read the fine print before purchasing on the internet. Sometimes authors stipulate advertising restrictions, price restrictions, etc, that binds and traps you into a product not worth selling. Don't work for everyone. We have to first, choose a current eBook/software from a trusted creator. It should be somewhat current and should not be promoted everywhere on the internet. This is the result of way too many marketers for the same product; it dilutes the value. Can't rebrand to reflect yourself and your personality, like a Full Master Resale Right can. Sometimes it's better to pay more for a product that will produce more in the long run! Some contracts have surrender periods that can tie up your money longer than you want. IRS rules restrict how you take money out of an annuity. Distributions may be taxable and/or penalized.

CONCLUSION
After conducting this project we conclude here as under : Both Non life & life insurance are beneficial for people of different segments In western countries there is a huge demand for both forms of insurance In Pakistan slowly but surely the Insurance market is rising

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 In Pakistan people are generally skeptical about payment of claims by insurance companies. Some frauds have been found at the time of claims by policy holders Underwriters play a vital role at the time of settlement of claims In Pakistan General Insurance market is better than Life market Takaful would gain market strength in future hopefully. In the western countries normally people buy insurance policy of either form In Pakistan the Insurance Companies have launched different life & non llfe designed to cater for the needs of different segments of the society. plans

Sometimes premium payment is too expensive for the prospective policy buyer In Pakistan in the field of life insurance, State Life Insurance & EFU are leading companies. In the field of Non life insurance Adamjee Insurance & EFU are going better than others. Not enough incentives provided to Insurance Companies in Pakistan Marketing of insurance products needs to be improved In short in Pakistan , Insurance is a business which can bring average returns but it has good future prospects in case of better marketing strategies by companies & incentives provided by Government

RECOMMENDATIONS
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 Premium amount should be taken in to account by Insurance Companies with respect to rising inflation in Pakistan b/c purchasing power of people is not sufficient in Pakistan.

With regards to claim payment in case of accident or death , there should be fair dealing by every party involved

This would encourage people to buy life plans & life market would increase

General Market is reasonably stable in Pakistan specially b/c of rising vehicle theft but vehicle theft should be stopped by concerned authorities & other incentives should be provided by non life companies to sell their plans

MNCs need to enter the insurance market but premium amount of plans should be reasonable

In this regard our Government must facilitate foreign well trusted major insurance companies to commence business in Pakistan

In this regard law & order situation should be improved first of all

An investment climate should be promoted in Pakistan

The well educated class of Pakistan trust on major MNCs , so if they commence business here than this segment of society would be a major buyer of insurance plans

Marketing of insurance plans must be improved

New & improved marketing strategies must be applied by insurance companies to sell their plans

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 The Government should provide incentives to Insurance Industry specially with regards to sales & income tax

Insurance is essentially a social welfare plan so the Government must see this aspect of Insurance industry while applying taxes on it

Education is the key to progress. People are generally not aware of insurance benefits . Only educated masses can be taught benefits of insurance In this regard Pakistan must increase its literacy level also .

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