Page 139 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes Group Gratuity linked with One Year Group Term Assurance (OYRTA)

Under this provision, risk on the life of the members of the group is covered and in case of
premature death, the gratuity paid will be notionally calculated and we would receive higher
gratuity. The balance service of the deceased member is considered and gratuity calculated.

Group Pension Scheme

The benefit of pension has the advantages of retaining the talented people with the organization;
the employer is treated as a progressive and the tax advantages enjoyed by both the employer
and the employee. The employer can find the same ways to provide for pension as discussed in
the provision for Gratuity. But the Insurance Company can provide actuarial, legal and taxation
help to the employer. Again by conjunction with OYRTA, the employee can be helped to get a
higher pension in case of premature death.

Group Savings Linked Insurance Scheme

Under this scheme, the benefits offered include both death cover as well as savings. A part of the
contribution goes towards the cost of risk cover and in case of death of the employee; a certain
fixed amount is paid. On surviving to superannuating age, savings portion with interest is paid.

Employees Deposit Linked Insurance

All the employers have to provide for risk cover to those who come under PF Act. This provision
can be arranged with an Insurance Company, whereby the Insurer will cover risk on the life of
the employee to the extent of balance of PF account on the date of death or upto ` 62,500
whichever is lower.

Social Security Scheme

As per Article 41 of Indian Constitution, the Central Government has to provide Social Security
to vulnerable sections of the Society. Life Insurance is one of the ways by which such security can
be provided. Now IRDA has also prescribed that each Insurer has to compulsorily cover certain
number of lives under such schemes. The scheme has to be financed either wholly by the Insurer
or with nodal agencies.

8.3.6 Non-traditional Products

Let’s discuss about non-traditional products. Following are the non-traditional life insurance
products:

Market Linked Insurance (Unit Linked Insurance)

Traditional life insurance policies were issued to give some compensation if loss occurred in an
unforeseen manner. The insurers usually added some reversionary bonus to the sum assured
according to their experience in mortality, interest-earning and the office expenses. If these are
favourable, surplus would result in the annual valuation. The bonus rate depends upon the
investment also. The investment is regulated by the company’s rules and the Insurance Act as
well. The insured were growing more aware and were ambitious but the lower rate of bonus did
not match with their ambition or the increasing rate of inflation. Hence insurers were obliged to
introduce products which had a relationship to the financial market. The returns were also
satisfactory for the insured.

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