Report Internshipe State Life Rizwan
August 22, 2022 | Author: Anonymous | Category: N/A
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3.4.1 3.4.2 3.4.3 3.4.4 3.4.5 3.4.6 3.4.7
Accident Death & Indemnity Benefit (AIB)...................... .............................. ............... .............. .......... ... 17 Accidental Death Benefit (ADB)....................................................... ................................................................. ..........17 17 Family Income Benefit (FIB) ........................................... ................................................... ............... .............. .......... ... 18 Waiver of Premium (WP).................................................. ..................................................................... .......................... .......18 18 Special Waiver of Premium (SWP)................................................ ........................................................ ............ ....19 19 Term Insurance (TI)................................................. .................................................................................. .................................... ...19 19 Refund of Premium Rider (RPR)................................... ........................................... ............... .............. ............ ..... 19
7.4 SWOT Analysis Analysis of SLIC .............................................................................. ....................................................................... ............... ..........50 7.4.2 Weakness........................................................ ......................................................................................... ........................................ ............... ..........51 7.4.3 Opportunity................................................. .............................................................................................. .................................................... .........52 7.4.4 Threats.................................................... ....................................................................................... .......................................... .............. ............... ........ 53
Chapter No 1 Introduction To The Report
1. 1.11-
Ba Back ckgr grou ound nd of the the R Rep epor ortt
In today’s life Insurance has taken place as a need of human life because no part of our life remains untouched by the Insurance. State Life Insurance Corporation providing services to the people of all ages and stages. The main objective SLIC is the welfare of the people of the country. Government nationalize State Life Insurance Corporation at March 18, 1973 under the nationalization order1972. State life insurance corporation
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play a very important important role in every day lives of the people and also contributing contributing a lot to the economy of the country by providing the government a lot of fund.
1.1 Purpose of Study The purpose of the study possesses objectives which are as follows. 1. This study study has given given us chance chance to learn learn something something new new practicall practically y and this this is also the partial requirement of the degree of MBA. 2. This This study has has given us chance chance to get the practi practical cal experi experience ence in the large large organization, and this internship also endows us the knowledge of different departments and their working in the organization. 3. This This study is very very benefici beneficial al for us, it provide provide us an opportu opportunit nity y to acquaint acquaint herselff to the actual work, place and writing of its project hersel project requires her to use all the skills, abilities during the course of study. It makes us more practical, confident and professional.
1.2
Methodology
Methodology means way of collecting the data of report writing. There are two methods to conduct research. First methodology of research is primary data and other is secondary data base research. In this report I have methodology of primary data and secondary data. 1.2.1
Primary data
a) By meeting/ask meeting/asking ing questions questions from different different personal personal of different different departm departments. ents. Mr. Aftab Ahmed Khan, Deputy Manager of P&GS Department was the main source of getting information.
2
b) b) Pract ractiicall cally y
work workiing, ng, care careffull ully
watc watchi hing ng th thee wor orki king ng pr proc oced edur uree of the
organization. c) Visiting Visiting different different departments departments of the the or organiza ganization. tion. 1.2 1. 2.2
Second ondary Data Data
a) Study Study of writ written ten mart martial ial of SLIC SLIC.. b) Study of differen differentt books of of insurance, insurance, booklet booklets, s, broachers. broachers. c) Study Study the Annual Annual Report Report of SLIC SLIC.. d) Visiti Visiting ng the the webs website ite of SLIC SLIC
1. 1.3 3
Limi Limita tati tion onss During my internship training I had face to many problems/limitations which were
some times really discourage me to collect the basic and important information to make a strong and very good report on SLIC. Despite of the following limitation I tried my best and honest effort to collect the data and interpreted in this report:i.
Due Due to lack lack of time time it is very very diffi difficu cult lt to get get all info inform rmat atio ion n of depart departme ment ntss of SLIC.
ii.
There There were were no no specia speciall arrange arrangement mentss for intern internees ees.. Thanks Thanks to to Mr. Aftab Aftab Khan Khan who who guided me and remained cooperative at all the time.
iii. ii i.
Of Offi fice cers rs had no nott enou enough gh tim timee to re regu gula larl rly y help help us. us.
Introduction to Insurance
1.4
Defining Insurance “ Financial protection against loss or harm”
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Insurance, in law and economics, is a form of risk management primarily used to hedge
againstt the risk of a contingent agains contingent loss. Insurance Insurance is defined defined as the equitable equitable transfer transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company selling selling the insurance; an insured is the person or entity buying the insurance. The insuranc insurancee rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, called the premium. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.
1.4
Contract of Insurance
The insurance contract is a contract whereby the insurer will pay the insured (the person whom benefits would be paid to, or on the behalf of), if certain defined events occur. Subject to the "fortuity principle", the event must be uncertain. The uncertainty can be either as to when the event will happen (i.e. in a life insurance policy, the time of the insured's death is uncertain) or as to if it will happen at all (i.e. a fire insurance policy).
•
Insurance contracts are generally considered contracts of adhesion because the insurer draws up the contract and the insured has little or no ability to make material changes to it. This is interpreted to mean that the insurer bears the burden if there is any ambiguity in any terms of the contract.
•
Insurance contracts are aleatory in that the amounts exchanged by the insured and insurer are unequal and depend upon uncertain future events.
•
Insurance Insur ance contracts contracts are unilateral, mean meanin ing g th that at on only ly th thee in insu sure rerr make makess legally enforceable promises in the contract. The insured is not required to pay
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the premiums, but the insurer is required to pay the benefits under the contract if the insured has paid the premiums and met certain other basic provisions. •
Insurance Insur ance contracts are governed governed by the principle principle of utmost good faith which requires both parties of the insurance contact to deal in good faith and in particular it imparts on the insured a duty to disclose all material facts which relate to the risk to be covered. This contrasts with the legal doctrine that covers most other types of contracts, caveat emptor.
1.5 Rea Reason sonss fo forr In Insur suranc ancee Sometimes in life it is not possible to avoid the losses. For example People may become ill. They may die of illness or accidents or their homes or other property may undergo damage or theft. So in all these cases and they have to face the loss of income or savings. So insurance is a manner of financially insuring that if such an incident comes about then the loss does not affect the present well being of the person.
1.6 Doctrians Of Insurance 1. There should be a certain definite definite loss taken place at a known time, time, in a known place and from a known cause. Therefore the time, place and the cause of loss should be clear enough. 2. The incident that represent the cause of the claim should be accidental or beyond the control of the beneficiary 3. The size of the loss must be significant from from the perspective of the insured. Insurance premiums should cover both the estimated cost of losses, plus the cost of policy, regulating the losses, and providing the principal required to logically assure that the insurer would be able to reimburse claims.
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affordable. 4. The amount of premium should be affordable. 5.
The possibility possibility of loss and the cost of compensation should should be calculable or
estimable
1.7
Types of Incurance
Below are some kinds of insurances. 1.7.1 Life Insurance Life insurance policy insures the life of the insured. The insurance company is legally bound to provide a monetary benefit to a decedent's family or the beneficiary after the death of the polic policyhold yholder. er. The procee proceeds ds are paid to the benefi beneficiary ciary either either in a lump sum amount or an annuity
1.7.2
Medical Insurance
Medical insurance is also called med claim. Under this policy the insurance policy pays the amount to the insured for his health purpose. This amount covers the cost of medical treatment. 1.7.3
Disability Insurance.
There is two types of disability insurance. One is simple disability insurance and the other is total disability insurance. In case of simple disability insurance, a financial support on monthly basis is provided by the insurer to the policy holder if he is unable to work due to an injury or an illness. But permanent disability insurance provides the reimbursement if a person becomes permanently disabled.
1.8
General Insurance
It includes automobiles insurance, business insurance, property insurance etc.
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i)
Automobile insurance
In UK this insurance is called motor insurance. It compensates the loss or damage occurred to the vehicle. But in United States auto insurance policy is essential to legally operate a vehicle on public roads. ii)
Business insurance
Business insurance protects the businesses against risks of losses and damages and compensates in case of loss iii)
Property insurance
This type of insurance protects the property against the risks like fire, theft etc. This category also includes fire insurance, flood insurance, earthquake insurance etc iv)
Fire Insurance
It is an insurance covering the damage to the property caused by fire. v)
Flood Insurance
This type of insurance pays the policy holder in case of any loss or damage to the property due to flood. It protects the property against the flooding.
1.9 Policy Terms
Insurance policies also an amount at which coverage ends, known as the policy limit. Most types of insurance specify the limit as an amount written in the contract.
1.10 Premium An insurance company sets a policy’s premium by multiplying a rate for each unit of insurance coverage by the total amount of coverage being purchased. Most people pay insurance premium once or twice a year. Other people choose to make automatic monthly payments to their insurance company for a bank account.
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1.11 Claims, Benefits and Dividends Insurance contracts always contain a condition that the insured must provide a proof of loss in order to b paid.
Insured Insur ed indiv individual idualss who have suff suffered ered losses and want to recei receive ve payme payments nts must notify their insurance insurance company through a proces processs calle called d claim claim.. Insur Insurance ance contracts always contain a condition that the insured must provide a proof of loss in order to pay.
1.12
Buying Insurance
People have many choices while buying insurance policies. They commonly chose an insurance provider based on several criteria. Some of the most important of these include:
1. The financi financial al stabili stability ty of the the insuran insurance ce company. company. 2. Th Thee p pri rice ce of pol polic icie ies. s. 3. De Deta tail il cove covera rage ge and and servi service ce.. Only a financial sound company can fulfill its promise to pay in all circumstances. Company with proven records of stability can provide insurance security.
Chapter No 2
Introduction to State Life Insurance Corporation of Pakistan (SLIC) 2.1
Establishment of SLIC
The Life Insurance Business in Pakistan was nationalized during March 1972. Initially Life Insurance business of 32 Insurance Companies was merged and placed under three Beema Units named “A”, “B” and “C” Beema Units. However, later these Beema Units were merged and effective November 1, 1972 the Management of the Life Insurance Business was consolidated and entrusted to the State Life Insurance Corporation of
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Pakistan. State Life Insurance Corporation of Pakistan is headed by a Chairman and assisted by the Executive Directors appointed by Federal Government. Up to July 2000 the Corporation was run by Board of Directors constituted under Life Insurance (Nationalization) Order 1972. 197 2. In Ju July ly 20 2000, 00, under under Insu Insura ranc ncee Or Ordi dinan nance ce 20 2000, 00, th thee Fe Feder deral al Gove Govern rnme ment nt reco recons nsti titu tute ted d th thee Board Board of Di Dire rect ctor orss of St Stat atee Life Life whic which h ru runs ns th thee af affa fair ir of th this is Corporation. The basic structure of the Corporation consists of Four Regional Offices, Twenty-Six Zonal Offices, a few Sub-Zonal Offices, 111 Sector Offices, and a network of 461 Area Offices across the country for Individual Life Insurance; Four Zonal Offices and 6 Sector Offices with 20 Sector Heads for Group & Pension are involved in the Marketing of Life Insurance Plans policies and products offered by State Life and a Principal Office. The Zonal Offices deal exclusively with Sales and Marketing. Underwriting of Life Insurance Policies and the Policyholder’s Services. Regional Offices, each headed by a Regional Chief, supervise business activities of the Zones functioning under them. The Principal Office, based at Karachi, is responsible for corporate activities such as investment, real estate, actuarial, overseas operations, etc
2.2
Major Achievements
The major function of the State Life Insurance Corporation of Pakistan is to carry out Lifee Insura Lif Insurance nce Busine Business; ss; howeve however, r, it is also also involv involved ed in the other other relate related d busine business ss activities such as investment of policyholders’ fund in Government securities, Stock market, Real Estate etc. The major achievements of State Life are as under:
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i.
On the the commenc commencem ement ent of the the operat operatio ions ns,, the Corpo Corpora rati tion on took took a very impor importa tant nt step by effecting reduction up to 33% 33 % in the premiums on the p past ast and potential Life Policies for the benefit of the Policyholders.
ii.
State State Life Life is prof profit itabl ablee orga organiz nizati ation on and it it paid paid Rs.1.72 Rs.1.729 9 bil billio lion n as divid dividend end to the the Government of Pakistan since its inception in 1972.
iii. ii i.
St Stat atee Life Life has playe played d very very vital vital role role in the the econom economy y by provi providi ding ng empl employ oyme ment nt to the people of the country as permanent employees and as part of its marketing force and by investing the huge funds in different sectors of the economy. The Investment Portfolio of State Life as at 31.12.2005 stands at Rs.124.983 billions.
iv.
Invest Investmen mentt portfo portfolio lio aalso lso incl include udess investm investment ent in in Real Esta Estate te which which stands stands at at a book value of Rs.2.309 billion as at 31.12.2005 whereas it fair value is around Rs.17.625
v.
billion in the same period. The Paid Paid up Capit Capital al incr increas eased ed from from Rs.10 Rs.10 mill million ion in in 1972 1972 to Rs.900 Rs.900 milli million. on.
vi. vi.
The The Premiu Premium m incom incomee increa increase sed d from Rs.0. Rs.0.31 317 7 billi billion on in 1972 1972 to 13.820 13.820 billi billion on in 2005. Similarly Investment income including rental income increased from Rs.0.81 billion in 1972 to 13.106 billion in 2005.
vii. vii.
vii. vii. Total Total statu statutor tory y fun fund d of State State Lif Lifee stands stands at Rs.1 Rs.122. 22.775 775 bi billi llion on in 2005 2005 as again against st Rs.1.494 billion in 1972.
State Life is smoothly striving towards its objective of making life insurance available to large section of the society by extending it to common man. As at December, 2005 the total number of policies enforce under individual life were 2.044 million and number of lives covered under group life insurance were 3.731 million.
2.3
Objectives of SLIC
To run life insurance business on sound line.
To provide more efficient service to the policyholders. p olicyholders.
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To maximum the return to the policyholders by economizing on expenses and increasing the yield on investment.
To make life insurance a more effective means of mobilizing national savings.
To widen the area of operation of life insurance and making it available to as large a section of the population as possible, extending it from the comparatively more affluent sections of society to the common man in towns and villages.
2.4
To use the policyholders’ fund in he wider interest of the community.
Mission
To remain the leading insurer in the country by extending the benefits if insurance to all sections of society and meeting our commitments to our ou r policy holders and the nation.
2.5
Quality Policy
To ensure satisfaction of our valued policyholders in processing new business, providing after sales service and optimizing return on Life Fund through a quality culture and to maintain ourselves leading life insurer in Pakistan.
2.6 2.6
Basic asic stru struccture ture of S Sta tate te Li Life fe
The basic structure structure of the State Life Insurance Insurance Corporation Corporation consi consists sts of Zonal Offices in all-important towns, Regional Offices and a Principal Office. The Zonal Offices deal exclusi excl usivel vely y with with the sales sales and market marketing ing of polici policies es und underw erwrit riting ing of Life Life Insura Insurance nce Polici Pol icies es and the policy policyhol holder der servic services. es. Regiona Regionall Office Officess (South (South,, North, North, Centra Centrall and Multan) each headed by Regional Chief who supervises business activities of the zones in
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their Region effectively and the Principal Office, based at Karachi, is responsible for activities such as Investment, Advertising, Sales Promotion, Real Estate, Actuarial and International Operations etc. The Chief Executive of the Corporation is Chairman, who is presently assisted by three Executive Directors. State life is effectively providing life insurance cover to cater to individual needs of the country’s peoples through an organized and professionally trained field force comprising several thousand field workers and field supervisors. The policies issued by the state life are backed by the life fund exceeding Rs 94 billion at the end of April Apr il 2003. 2003. In additi addition, on, the governm government ent of Pakist Pakistan an guaran guarantee teess all indivi individual dual li life fe insurance policies. State life’s performance both in individual and group and pension, has been characterized by exemplary growth, brought about by the concerned efforts of its dedicated employees and members for its dynamic field force, under the guidance of a top management comprising men with a vision and wisdom. State life offers a large number of plans for the benefits of Pakistani families.
2 .7
Product of SLIC
Some of the popular plans are jeevansathi, shadbad, child education and marriage plan, child protection policy, three-payment plan, endowment plan, sunehri policy, and shehnai policy. The valiant field force makes such plans, which meets their needs most favorably.
Chapter No 3 Types of Insurance
3.1 Branches of Insurance i. ii.. ii
Gene Ge nera rall Insu Insura ranc ncee (it (it is con conce cern rned ed with with oth other er tha than n life life)) Life Li fe Ins Insur uran ance ce ( it is co conc ncer erne ned d with with hum human an bei being) ng)
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3.2 Modes of Insurance i.
Whole Li Life In Insurance
ii.
Endowment Ass Assurance
iii. ii i.
Term Te rm In Insu sura ranc ncee (Ge (Gene nera rall Ins Insur uran ance ce))
3.2.1 3.2 .1 Who Whole le Lif Lifee Ins Insura urance nce Whole life insurance plan is a unique combination of protection and savings. This can be purchased at a very economical premium payable annually or half yearly, quarterly or monthly installements. Death at any time before age 85 years terminates payments of premium and the sum insured (plus bonuses, if any) become payable.
Policies under this plan are available on “With Profits” and “Without Profits” basis
3.2. 3. 2.2 2 En Endo dowm wmen entt As Assu sura ranc ncee Endowment assurance is the safest and surest method of guaranteed cash provision at a specified or at death. It means the requirement of the family in various shapes byway of financi fin ancial al hel help p as at ret retire iremen ment, t, amo amount unt for the education education of chi childr ldren en or capi capital tal for business. Endowment assurance policies are available both on “With & Without Profit” basis.
3.2. 3. 2.3 3 Te Term rm In Insu sura ranc ncee It is a popular in America because of its short payments and big claim benefits and used in general as well as life insurance, it is conditional contract and for particular period. It pays claim during the contractual period, after expiry of that period there is nothing to be paid for claim.
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3.2.4 3.2 .4 Chi Child ld prot protect ection ion Pol Policy icy Child protection policies are issued jointly on the lives of the child and the father. If the father is not alive or his life is not insurable, the mother will be allowed to be the payer prospers i.e. policyholder, subject to any special conditions applicable to female lives. No other relative will be allowed to be a payer. If the payer and the child both survive, the term of the policy the sum assured along with accrued bonuses (if any), become payable.
3.3.2
Group Endowment Insurance Scheme
Group Endowment Scheme is a unique saving and protection scheme through which the employees of an employer can enjoy insurance protection throughout their service and also get a lump sum cash amount upon their retirement if they survive upto retirement.
3.3.1
Benefits of Group Endowment Insurance Scheme
Under this scheme each employee is provided insurance protection for an amount which may be flat or depends upon the designation or salary of the employee. The amount of insurance is payable on maturity or death if it occurs earlier. In most cases the term of the endowment insurance for each employee is determined in such a way that the policy matures at or near his retirement date. This enables the maturity proceeds to coincide with retirement and supplement the retirement benefits.
i.
Profit Participation The endowment insurance is issued on a with profits basis. The same bonus rate is applicable as for the corresponding individual endowment insurance policies.
ii.
Premium Rates
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The same premium rates are applicable as for individual endowment policy but with the added attraction that in group form some volume discounts are also applicable depending upon the size of the annual premium. iii.
Surrender Va Value The policy acquires Surrender Value in respect of a member after insurance cover has been enforce for at least two years on that member and no premiums are in default.
iv.
Loan Facility Under this scheme if the member needs immediate liquidity and a policy has acquired Surrender Value in respect of member, he/she can avail a maximum loan of 80% of the net surrender value v alue of the policy.
v.
Continuation Pr Priivileges If an employee leaves the service of the employer, he can surrender his policy against the Net Surrender Value. He is also provided with the option of continuing his endowment insurance coverage in an individual capacity without any evidence of good health, for the same sum assured and term as he was enjoying during his service. The premium rates applicable to the policy are the same as are generally applicable to the same class of business bu siness in and individual capacity.
3.3 3.3.2 .2 Oth Other er Pol Polici icies es of SLIC •
Jeewan Sathi
•
Three Payment Plan
•
Shadabad Plan
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•
Personel Pension Scheme
•
Sunehry policy
3.4 Supplementary Contract/Riders Supplementary contracts are those contracts which make the insurance more attractive. They provide certain incentives on certain situations. They make the plan attractive in sense that if some one is purchasing supplementary contracts with a policy then he will be awarded the officers of the supplementary contracts too along with policy or insurance plans.
State Life offers a number of supplementary covers to enhance coverage under different plans. These supplementary covers can be attached with the main policy and are not available exclusively.
•
Accidental Death & Indemnity Benefit (AIB)
•
Accidental Death Benefit (ADB)
•
Family Income Benefit (FIB)
•
Waiver of Premium (WP)
•
Special Waiver of Premium (SWP)
•
Term Insurance (TI)
•
Refund of Premium Rider (RPR)
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3.4.1
Accident Death & Indemnity Benefit (AIB)
This supplementary cover provides for payment of additional amount equal to the sum insured under the policy in the event of death by accidental means, or in the event of loss of two or more limbs or loss of sight in both eyes. One-half of the sums insured will be paid for loss of one limb; one-third of sum insured in the event of loss of one eye and one-fourth of sum insured will be paid for loss of thumb and index finger. Moreover, weekly indemnities are also available for total and partial disability of the life insured as a result of the accident. If the life insured becomes permanent and total disable, an annuity of 10% of sum insured will be payable for a maximum period of ten years.
AIB is suitable for office commuters and individuals who travel and use different modes of transport. The rates of premium for this supplementary benefit range from Rs 4 to Rs10 per thousand sum insured depending upon the occupational rating of proposed for standard lives whose age should be between 18 to 55 years.
3.4.2
Accidental Death Benefit (ADB)
This supplementary cover will provide for payment of an additional amount equal to sum insured in the event of death by an accident as defined in the contract. On payment of a modest premium, a handsome accidental coverage is obtained through this supplementary cover. cove r. ADB is highly highly recomm recommende ended d for indivi individual dualss who travel travel daily daily throug through h road road transport.
The cover is available to lives between 5 and 55 years of ages. Maximum term of this supplementary benefit is not allowed to exceed the premium paying term of the basic policy, or 60 years of age of the life proposed whichever is earlier.
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3.4.3
Family Income Benefit (FIB)
This supplementary cover provides that incase of death of the life insured during term of this cover, an annuity of 10% to 50% per annum of the basic sum insured will be payable till the completion of term of this cover. For instance, if a life insured has taken 25% FIB supplementary cover for 20 years on his policy having sum insured of Rs 1,000,000. If the life insured expires during term of FIB, say at the end of fourth year, an annual sum of Rs 250,000 will be payable for rest of 16 years.
While the basic plan provides a lump sum, FIB provides a regular stream of income to the dependents and helps in meeting the day to day expenses. This supplementary cover is available to lives between 18 and 55 years of ages.
3.4.4
Waiver of Premium (WP)
This supplementary cover provides for waiver of due premiums in the event of the life insured’s Total and Permanent Disability caused by accident as defined in the contract. With the help of WP, the life insured gets relieved of vagaries of paying premiums incase of his or her being incapacitated as a result of accident. The rate of premium for standard risk will be Rs 0.50 to 1.00 per thousand of sum insured depending upon the age of life insured.
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3.4.5
Special Waiver of Premium (SWP)
This supplementary cover will provide for waiver of premiums under the policy incase of the life insured’s Total and Permanent Disability due to accident or disease which renders him unable to engage in any occupation.
With the help of SWP, the life insured gets relieved of vagaries of paying premiums incase of his or her being incapacitated as a result of accident or disease. SWP is available to lives between 20 and 55 years of ages.
3.4.6
Term Insurance (TI)
In the event of death of the life insured durin during g term of TI supplementary supplementary cover, the sum insure ins ured d will will be payabl payablee in additi addition on to the benefits benefits payabl payablee under under the basic policy. policy. Supp Su ppos ose, e, Mr A, co cove vere red d un unde derr a po poli licy cy of Rs 1,00 1,000, 0,00 000, 0, an and d al also so at atta tach ches es TI supplementary cover with his policy. Incase of his death during term of TI, a sum equal to Rs 1,000,000 will be payable under this supplementary cover. This will be in addition to the benefits payable under main policy. Thiss supple Thi supplemen mentar tary y cover cover is an excell excellent ent opportu opportunit nity y for indivi individua duals ls who want to enhance enha nce coverag coveragee of their their policy policy substant substantial ially ly on paymen paymentt of a meager meager amount amount of premium. TI is available to lives between 18 and 55 years of age
3.4.7
Refund of Premium Rider (RPR)
RPR provides for refund of premiums paid under the policy in the event of death of the life insured during term of the policy. It is an ideal form of enhancing the life cover under the policy with a modest increase in premium. This supplementary cover is available to lives between 20 and 60 years of ages. The available term ranges from 10 to 25 years.
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Chapter No 4 Chapter No 5 SLIC Rawalpindi
5 .1
Introduction
State Life Insurance Corporation, Rawalpindi Zone was established in 1975. At present it is hea heade ded d by a Zo Zona nall Ch Chie ieff an and d as assi sist sted ed by De Depar partm tmen entt He Head adss of th thee di diff ffer erent ent Departments. The total strength of the Zone comprises of 280 staff members and 80 offi of fice cers rs.. It is lo loca cate ted d in th thei eirr ow own n bui build ldin ing g (i (i.e. .e. St Stat atee Li Life fe bui build ldin ing) g),, Ma Mall ll Ro Road ad,, Rawalpindi.
5.2 Functional Areas
5.2.1 Budget / Journal Ledge Ledgerr Section With Mr. Zafar Iqbal (Executive Officer B & A) Introduction
Every zone has its own budget budget which comes from from the head office. The zonal head and zonal accountant with respective respective regional regional chief and regional accountant send a proposal proposal to the head office; they critic critically ally analyze analyze it and then decide. First First calculation calculation is made here, and then sent to head office. Process of Budget •
Budget proposal
•
Discuss with Executive Directors and Chairman
•
Submitted to The Board of Director for proposal.
Budgeted amount is equally distributed in four quarters. q uarters.
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Big zones are rated on total premium while small zones are rated on first year premium (FYP). Budgeted amount is written in a register and expenses are reduced gradually from it, commission commi ssion is not not included included in expenses. expenses. It is a variable variable expense. expense. In budget only only fixed fixed expenses should be included like salary etc. When an officer is transferred to any other zone or center, his budget will also be transferred to that zone or center. How the budget is allocated to each department within a zone: Zonal Head calls a meeting of all departmental incharge. They all discuss the budget amount amo unt..
Then Then budget budget is allocat allocated ed to each each departm department ent accordin according g to their needs needs and
requirements. If budget is in deficit, deficit, then an additional additional budget is demanded. The zones shoul should d give justification for additional budget. It happens when unexpected expenses occur like for AC plant or Compressor burnt etc. Expenses of one quarter should be carried over to next quarter quarter.. However, saving of one quarter may be counted for the next quarter. Chief Accountant and Regional Accountant should check the actual expenses on their visits to zone. 5.2.2 Journal Ledger
Every Ever y departme department nt feeds its its daily work work in the comput computer. er. computer summarizes it. Cash premium in collection books Cash paid in cash books. Adjustment in journal ledger.
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At the end of the month month
After preparing preparing the net result result they make quarterl quarterly y trial balance balance at Zonal level. They cannot prepare Balance Sheet because Head Office prepares it. Format of Trial Balance
Parts I
Particulars Assets
II
Liabilities
-
III
Income
-
IV
Expenditure Total • • • • •
Debit -
-
Credit
-
Depreciation is done on the straight line method. Depreciation of electric fitting. Depreciation of furniture & office equipments Depreciation of vehicles. Depreciation of computers.
5.3.1 Payroll Section With Mr. Mehmood Akhter Introduction
This Th is sect sectio ion n deals deals wi with th diff differ eren entt allo allowa wance ncess and lo loans ans which which ar aree of offe fere red d to th thee employees. Two employees are working in this this section. Allowances for officers: It includes 1. Conveyance Allowance
A. The conveyance allowance has been enhanced to Rs.850 per month. B. The employees who own or possess cars, registered in their name and which are under their use would be paid car allowance at the rate of Rs.1150 per month; it also includes car maintenance allowance. 2. House Rent
The officers would be paid house h ouse rent allowance @40 of their basic pays. 1. Ut Util ilit ity y All Allow owan ance cess
22
Utility allowance for an officer is 10 % of his basic b asic pay. Allowances for staff: 1. House ouse Rent:
The house rent allowance paid p aid to the staff is 18 % of their basic pays. 2. Conve Conveya yance nce Al Allow lowan ance: ce:
The staffs that possess motorcycle are paid Rs.800 per month, and those who does not possess are paid Rs. 675 67 5 per month. 3. Tea Tea All Allow owa anc nce: e:
Tea allowance is a fixed amount of Rs.535 paid to each staff member monthly. 4. News Newspa pape perr Al Allo lowa wanc nce: e:
This is also a fixed amount of Rs. 300. 5. Ut Util ilit ity y All Allow owan ance ce::
It is also a fixed amount of Rs.675. 6. Education Allowance The children education relief/ education allowance should be paid to an employ at a uniform rate of Rs. 435 per month per child to all children either school or college going or receiving religious education, for up to a maximum of four children and subject to a maximum of Rs. 1740 per month. 7. Medi Medica call Al Allo lowa wanc ncee
A. Rs.100 Rs.1000 0 per month month for for marrie married. d. B. Rs. 725 725 per month month for for unmarr unmarried ied.. 8. Te Tech chni nical cal Al Allo lowan wance ce:: Technical allowance to the telephone / telex / fax operators, franking machine / adrenal operators, photo state machine operators, operators, lift operators Rs. Rs. 175 per month. 9. Cash Cash Han Handl dlee Allo Allowa wanc ncee
23
This allowance is for employees who hold cash handle seats revenue stamps policy stampss and cash counter. stamp counter. This allowance allowance to cash counter counter is Rs. 800 per month, and for the others it varies from Rs. 175 to Rs. 800 per month. Loans
Different kinds of loans are given to employees of each level. 1. Two Two mont months hs salar salary y ad adva vance nce loan loan •
This is gross salary.
•
This is interest free loan.
•
This loan would be payable in 20 installments, i.e. deducted from the salary over 20 months.
For officers the maximum amount is ten (10) month gross salary advance, and the rules and regulations are same for both officers and staff. 2. CPF Loans:
This is contributed contributed provident fund loan. loan. It has two two types. 1. CPF 1: •
The maximum amount is three basic pays.
•
This is also interest free.
•
Deducted over 20 months.
2. CPF 2: •
The maximum amount is 12 basic pay or 90 % of CPF whichever is less.
•
This is also interest free loan
•
Deducted in 50 installments.
3. Hous Housee Ren Rentt Adv Advan ance ce:: •
This loan is only for staff.
•
The maximum amount is six current basic pays.
•
Having 10 % interest.
24
•
•
Deducted in 18 months. No deduction in the month of Eid.
4. Conv Convey eyan ance ce Loan Loan:: •
The maximum amount for staff is Rs. 55000, which is known as motorcycle
•
loan. 10 % interested is charged.
•
Deducted over 40 months.
•
•
No deduction in the month of Eid. Interest will be charged for the months of Eids, so interest is calculated for 48 months.
•
For officers the maximum amount is Rs 100000, which is known as car loan.
•
Rules and regulations are same as above.
5. Hous Housee Buil Buildi ding ng Loa Loan: n: •
The maximum amount varies from level to level, because it depends mostly on salary.
•
•
For the maximum amount they use this formula;
45 % of the salary x 1000 / 8.85 •
•
•
Charges 10 % interest. No deduction in the first year. This loan should be given to the employ in three installments.
In the payroll section they make calculations for all these allowances and loans and at the end they prepared vouchers. All these things should be adjusted in journal voucher. They use two vouchers; one is known as “Debit Voucher” (DV) and the other is journal voucher (JV) In the books of account the Dr the voucher and Cr the amount.
5. 5.4 4
Po Poli licy cy Ho Hold lder er Serv Servic ices es (P (PHS HS)) D Dep eptt tt..
With Malik Adnan and Dr Ishaq Deptt. Manager PHS.
25
Introduction:
Policyholder service is one of the most important departments in stat life insurance. Better services to policyholders are of course, necessary and fundamental for carrying good reputation among policyholders, which help in retaining business and increasing new business. Therefore policyholder’s service, counters have been establishing in majority of the zonal offices to provide one window services to the valued policy holders. This department is divided into following sections: •
Claim Section
•
Surrender Section
•
Loan Section
•
Alteration Section.
•
Suspense Account Section.
•
Lapse & Revival Section
Each and every section of this department plays an important role and they provide different services to policyholders.
5. 5.4. 4.1 1 Cl Clai aim m Secti Section on.. This section is always busy in entertaining claims of the policyholders. It has its own investigators and they investigate all claims and then recommend that a claim amount may be given to the nominees of the claimants or not. They also look into all such maturity claims and those policies which fall, mature all payments and the claim section of the policyholder services (PHS) give houses. Claims are of Two Types: • •
Death Claim Maturity
26
Death claims are further divided into two categories. Early death claim and non-early death claims. Death within the first two years is known as early death and after that it is non-early death claim. In case of early death claim they do a comprehensive inquiry. This inquiry may be from the general public, hospital. Police station etc. then they make a report. In case of muscularly death claim usually inquiry is done. Just look to the documentary requirements, but if there is a chance of fraud, than inquiry will take place. In case of suicide within the first 13 months. They just pay the premium amount which is paid in installments. Procedure: •
In case of death the nominees should make death certificate for the policy holder. It may be gross the hospital, Nazim, Political Agent, etc.
•
Then they issue 4 forms i.e. A, B, C, D. Form ‘A’ will be filled by the nominee. Form ‘B’ is for Attended Doctor, Form ‘C’, A person from village like Khan, and Malik etc. Form ‘D’ if a policy holder is govt. employ, than this form should be filled.
All these forms should be attested. If the amount is less than 300,000 then they call a meeting of zonal claim committee (ZCC) and this committee makes decision. If amount is more than 300,000 then they forward all documents to regional claim committee (RCC Islamabad). And if amount is more than 500,000 then this is the case of central claim committee after approving gram ZCC the claim file again to claim section, have they issue cheques and make vouchers thus payment is made.
27
In case of AIB (Accidental Indemnity Benefits) two extra forms will be issued, one will be filled from the policy holder and the other by the doctor. The policy holder should write about his accident.
5. 5.4. 4.2 2 Su Surr rren ende derr Sect Sectio ion. n.
This is also an important section of the PHS. All those do not want to continue policy due to some some fi financ nancial ial or any other problem problem req reques uestt and send send their their applic applicati ations ons to PHS surrender section. Then the staff of this section scrutinizes those applications and issue surrender discharge vouchers of payment to the clients. After receiving receiving vouchers vouchers the account section issues cheques to the clients. clients. It also issues bones certificates to the policy holders and keep their record in computers. Very technical and professional staff has been recruited in this section. Procedure: •
First the surrender section receives application from the policy holder’s a long with other required documents like NIC etc.
•
Than this section issues surrender discharge vouchers, they calculate the cash value and mentioned in this voucher, the policy he written and this voucher should also he signed by the policy holder.
•
Then they send all these documents to audit department after making the audit, the audit department again sends its to surrender section (PHS).
•
If the amount is more than Rs. 10,000 then it is referred to account department, they issues cheques, these cheques again come to (PHS) surrender section and they give it to policy holders.
•
If amount is less than Rs. 10,000 then there is no need to send all the documents to account department PHS directly issues cheques to the clients.
28
5. 5.4. 4.3 3 Lo Loan an Se Sect ctio ion. n. Loan section is also very important and bllsy in calculating and issuing loans to the policy holders on their policies. All such policies that complete three years acquire surrender value. Loan is granted on every policy according to the surrender value of the policy and the rate is 80% of surrender value. The rate of interest on this loan is 14%. It gives the policy holder an extra benefit to get loans and then repay their outstanding amount to the corporation. While the risk coverage of the policy holder is infact with in the specified time and due of next premium the policy.
5. 5.4. 4.4 4 Al Alte terat ratio ion n Se Sect ctio ion. n. The alternation section is another important section of PHS. All such policies, which require any alternation for example. Change of nominee, change of address, change of terms, change of mode of premium and change of any other thing in the policy directs their applications to the PHS. Authority after altering the required things in the policy sends their policy documents to the concerned policy holder. All these sections of PHS are interring links with other sections and professional staff with trained officers is busy in providing services to the clients.
5.4.5 5.4 .5 Sus Suspen pense se A Acco ccount unt Sec Sectio tion. n. This section is an important section my giving an application to the manager PHS can enforce all such policies, which due lapsed. The under writers of the PHS department scrutinizes the applications and then revive and reinforce lapse policies, there is any
29
requirement in the policy the premium is placed in suspense. Account and a provisional receipt is issued to the client. A policy holder service is the heart of state life insurance corporation. All record of the policies is kept with the PHS department and all legal and official’s letters are written and send by this department. The code which is use for suspense account is 571.
5 .5
Agency Department
With Mr. Tariq sayed head of the Department and Mr. Ayub khan. September 8 to September 10, 2004. Introduction:-
It is an important department of state life insurance Corporation. It keeps the record of all the field staff in the zonal office, sector offices issues code numbers to field workers and maintain their all business record. It also deals with licensing authority and all licenses of thee fi th fiel eld d staf stafff ar aree se send nd an and d re rece ceiv ived ed thro throug ugh h th this is de depar partm tmen ent. t. This This depar departm tmen entt is controlled by the zonal head and run through a manager with the help of other supporting staff. It also keeps the record of promotion of the field workers and other related matters of the field force. The sale representatives (S.R) play a key role. Consequently upon his selection, the S.R received some basic training in sale management marketing, and on the job training the S.R works under the supervision and guidance of sale officer. After two years service as sale representative he is eligible for promotion, if fulfill other condition necessary for promotion. Requirements for SR
Minimum qualification for SR is metric. Minimum requirement is 12 policies in one year. Rs 50,000 should be achieved in one year. Commission rates for SR
30
The commission rates depend on their total business and the amount for which they sold policies in one year. Business amount (Rs)
commission (Rs)
50,000 to 60,000
75,000
60,000 to 150,000 150,000 to 250,000 Above 250,000
100,000 150,000 250,000
Conditions for Promotion A). From Sales representative to Sales officer
i)
Must Must ha have ve se secur cured ed mi mini nimu mum m Rs Rs 75000/ 75000/-- FYP FYP durin during g imm immed edia iate te pr prec eced edin ing g two two Calendar year, but in any one calendar year, the FYP should not be less than Rs 25000/-
ii) ii)
Must Must ha have ve at at lea least st 20 20 poli polici cies es in in forc forcee on dif diffe fere rent nt liv lives es..
ii iiii)
Mus Must have have achi achiev eved ed a minimu nimum m se seco cond nd year year per persi sist sten ency cy of 70% in the the immediate preceding year-
iv)) iv
Must Must hav havee achie achieve ved d a minim minimum um rene renewa wall pers persis iste tency ncy of of 70% 70% in the the imm immed edia iate te preceding year.
Commission rates for sale officer (SO)
Business amount (Rs) 200,000 to 400,000 400,000 to 600,000 600,000 to 800,000 Above 800,000
commission (Rs) 250,000 300,000 400,000 500,000
B) From Sales officer. To Sales manager
i)
Must Must hav havee secu secure red d mini minimu mum m Rs 250 25000 000/ 0/-- FYP FYP in in the the imm immed ediiat atee
preceding 2 calendar years, but the FYP in any one year must not be less than Rs 60000/-.
31
ii)
Must have minimum second year persistency of 70% in the
immediate preceding year. iii) iii) iv)
Mu Must st ha have ve at le leas astt 8 polic policie iess iin n for force ce in in his his org organ aniz izat atio ion. n.
Must ha hav ve minimum renewal wal persistency of 90 90% % in the immediate preceding year.
Commission rates for sale manager
Business amount (Rs) 400,000 to 600,000 600,000 to 1,000,000 Above 1,000,000
5 .6
commission (Rs) 350,000 500,000 600,000
Payment Section
With Sir, Manzoor senior officer assistant account department (payment section) Aug 34, 2004. The payment is mode in two forms. i. Payment in cash ii. Payment in ch cheque Payment is made to the following persons. Policy Holders In case of Surrender • •
Maturity
•
Policy loan
•
Death claim
3. Employees
Salaries • Loans GDV payment • GDV stands for General Disbursement Vouchers which includes payment to •
• • •
Employees Purchases Area manager
32
Payment Procedure
For each payment payment first a voucher is prepa prepared red or maintained. maintained. There are four types types of voucherss i.e. for each claim there voucher there is a different voucher. voucher. Each voucher voucher has its own and different color. It includes; • • • •
Surrender voucher Loan voucher Death claim voucher Maturity voucher
Voucher is made by concerned department like Surrender, Death Claim and Maturity etc. After this these vouchers are sent to budget department that either the budget is sufficient enough for these payments or not. From budget department these vouchers come to audit department. They make the audit of all the vouchers and other related documents. After approving from audit department these vouchers comes to payment section. Usually payments are made in cheques, they make cheque first then the cheque is sign by this (payment (payment department) department) and then these cheques are forwa forward rd to concerned concerned department department for 2nd sign. The vouchers remains in the concerned department for the purposes of punching and cheques are issued. Entry for payment in the books of Accounts:
Here the vouchers are debited and cheques are credited, like Voucher
____
Cheque
____
Chapter No 6 RATIO ANALYSIS
6.1 Financial Analysis
33
Financial analyses provide a meaningful comparison of a company to its industry, ratios are constructed to judge comparative performance. Financial ratios, serve the similar purp purpos ose, e, but on onee must must kn know ow what what is be bein ing g meas measur ured ed to co cons nstr truc uctt a ra rati tio o an and d to understand the significance of the resultant number.
6.2 Financial / Ratio Analysis A ratio is a quantitative relation between two magnitudes of the same kind. In ratio analysis, the financial ratios of the firm are compared to that of its competitors. This comparison allows the firm to detect major operating differences, which, if corrected, will increase its efficiency. Another very popular method of ratio analysis is to compare the firm’s financial ratio to industry averages. Before discussing financial ratios, three cautions are in order: i.
A si sing ngle le ra rati tio o do does es not ge gene nera rall lly y prov provid idee suff suffic icie ient nt in info form rmat atio ion n to ju judg dgee th thee overall performance of the firm. Only when a group of ratios is used, a reasonable judgment concerning firm’s overall financial state can be made.
ii.
An analy analyst, st, when when compa compari ring ng financi financial al state statemen ment, t, would would ensure ensure that that predet predeterm ermine ined d uniform standards are used for this purpose.
iii. ii i.
It must must be ensur ensured ed that that the the data data used in calc calcula ulati ting ng finan financi cial al ratio ratioss have have been developed in the same manner and are sound are reliable.
There is no doubt that financial ratios are a useful guide for managerial decision making but these are not exact and definite. Ratios only suggest the questions that need to be answered and provide no answers.
34
SLIC is a servicing concern and its financial analyses are as follows in order to know how the corporation is progressing. Because definition alone, carry little meaning to analyzing or dissecting the financial performance of the organization. In this chapter, light is thrown on the financial ratios of SLIC in order to determine its financial position. See the different ratios calculated for the last two years and comment on them.
6 .3
Liquidity Ratio
Thesee ratios Thes ratios are used used to measur measuree a firm firm abilit ability y to met short short-t -term erm obliga obligatio tion. n. The They y compare short-term obligations to short term (or current) resources available to meet these obligations. obligations. From these ratios, ratios, much insight insight can be obtained obtained into the present cash solvency of the firm’s ability to remain solvent in the event of adversity.
6. 6.3. 3.1 1 Cu Curr rren entt Rat Ratio io Current ratio can be obtained by dividing current assets on total current liabilities. In simple sim ple words words curren currentt ratio ratio means means that that the curren currentt assets assets are suffic sufficien ientt for curren currentt liabiliti liabi lities es or not. If the the result result is 1, then it it
means it can satisfact satisfactory ory meet its financial financial
obligation but it should be tried to improve it, mathematically it can be written as.
Current ratio =
Current Assets Current liabilities
Current Ratio
Table No : Current Ratio 0.86
YEARS 2006
Ratio Value 0.85
2007
0.79
0.84 0.82 Values
0.8 0.78
0.76
Analysis:
2006
2007 Years
35
Current ratio of State life insurance Corporation for the year 2002-2003 shows that there is a gradual decrease in the ratio. It means that there is problem with the current assets, while the ratio is also lower because of a slower increase in current liabilities as well. As we know that the current ratio show the liquidity position of an organization, that how much they can pay their current liabilities. In 2003 its capability of paying their current liabilities decrees. So they should utilize their current assets in efficient way and should reduce their current liability. By reducing their current liabilities they will be able to have less to pay and more to invest some where else.
6.3.2 6.3 .2 Aci Acid d te test st ((Or Or Q Quic uick) k) R Rati atio o Quick ratio is calculated by current assets minus inventories divided by current liabilities. It shows a firm ability to meet current liabilities with its most liquid (quick) assets. Mathematically Quick ratio
=
Current Assets – Inventory / Current Liabilities
This ratio also like current ratio show the liquidity position of organization. This ratio is the same as the current ratio except that it excludes inventories. This ratio show the company ability of paying their current liability out of their most liquid asset. Thus, this ratio provides a more penetrating measure of o f liquidity then does the current ratio. Table No: Quick Ratio
YEARS 2006 2007
Quick RatioRatio
Value
0.79
0.8 0.78 0.76 Values 0.74 0.72 0.7
0.74
200 2006 6
2007 2007 Years
Analysis:
36
Quick ratio shows the efficiency of a firm that how much it could pay their current liabilities out of its most liquid assets. So for the year 2002-2003 Quick ratio of state life insurance insur ance corporation corporation indicate indicate that its ability ability to pay current liability liability out of most current asset decrease. The reason is, decrease in current assets on one hand and inventory are not included on the other hand. Decrease in ratio also indicate that if the corporation can not pay their current liabilities out of their most liquid assets, payment of long term will be more difficult. Meaning that there is some problem with cash account. So they have to take care of their current assets and they should have handsome amount at the end to get red of their current liabilities in time.
6.4
Debt Ratio
These ratios show that up to what extant a firm is financed by debt and to which extent the firm is using borrowed money. This includes i. ii.
Debt to to To Total As Asset rraatio Debt to to Eq Equity ra ratio
6.4.1 6.4 .1 Deb Debtt tto o Equ Equity ity Rat Ratio io The debt to equity ratio is compared by simply dividing the total debt of the firm by its shareholders equity. If this ratio is high then it is negative sign, mean that borrowed money is more then equity. This ratio should be low. Mathematically Debt to equity ratio = Total debt / Shareholders’ Equit Table No: Debt to Equity Ratio \
37
Years
Ratio Value
2006
86.1
2007
98.1
Debt to Equity Ratio
100 95 Values
90 85 80
2006
2007 Years
Analysis:
Debt to Equity ratio shows the extent to which the firm is financed by creditors and shareholders. Debt to Equity ratio of state life insurance corporation for the year 20022003 shows that the corporation is financed by creditors to larger extent. According to principles of analysis the lower the debt to equity ratio the better it is for the organization, because by increase credit the liability of business will also increase which will create problems in payment of liability for the corporation. The ratio move up over the two years showing that the organization is financed by creditors but at the same time showing their efficiency as well. Because the people peo ple are investing in insurance policies of sate life.
6.4.2 6.4 .2 Deb Debt-to t-to-To -Total tal-ass -assets ets Ra Ratio tio The debt to total assets ratio is derived by dividing a firm’s total debt by its total assets.
38
Debt to total assets = Total debt / Total assets This ratio show the debt and asset position of a corporation, mean that how much the corporation have shareholder’s equity and how much they have credit. If this ratio is low then it mean that shareholder’s equity is more then credit and financial position will be sound. Table No: Debt to Asset Ratio
Years 2006
Ratio Value 0.99
2007
0.99
Analysis:
Debt to total assets ratio of the firm show that up to what extant the assets of a firm is financed by equity and how much is financed by debt. For the year 2002- 2003 debt to total assets ratio of state life insurance show that the ratio for both year is same, so it mean that for both the year SLIC financed their assets with same proportion, because ratio for both years is the same. It means that state life insurance assets are financed with the same proportion by both creditors and shareholders.
6 .5
Activity Ratio
Activ Act ivit ity y rati ratio, o, also also kn known own as effi effici cienc ency y or turn turn ov over er ra rati tio, o, it meas measur ures es th that at ho how w effectively a firm is using its assets.
6.5.1-- Rece 6.5.1 Receivabl ivablee Turn over Rat Ratio io
39
Thiss ratio Thi ratio show show the efficien efficiency cy of the firm that how much effici efficientl ently y a fi firm rm create create receivable and how much successfully the firm collect its receivable. This ratio is calculated by dividing receivables on annual sales.
Receivables turn over ratio
=
Sales Receivables
This ratio tell us that the number of times account receivables has been turned over (turned into cash) during the year. The higher the receivables turnover ratio, the shorter the time between the typical sales and cash collection taking place. Table No: Receivable Turnover Ratio
Years
Ratio Value
2006 2007
0.37 0.2
Receviable Turnover Ratio 0.4 0.3 Values 0.2 0.1 0 2006
2007 Years
Analysis: Receiva Rece ivable ble turn turn over over ratio ratio show show the effici efficiency ency of an organi organizat zation ion in collec collectin ting g its
receiv rec eivabl ables. es. Receiv Receivabl ablee turnov turnover er ratio ratio of SLIC SLIC for the year year 20022002- 2003 2003 show show that, that, efficiency of collecting receivable is decrease. Though there is a slight decrease but it may lead to delay payments, which may harm their image as compare to competitors. They should should increase increase this ratio in order to increase increase collection collection of receivable. receivable. This will help them to pay their liability on time and built their image
6 .6
Prof rofitability Ratios 40
Profitability ratio are the ratio through which we can find the ability of the firm to earn an adequate return on sales, total assets and invested capital, profitability ratio also give help in control controllin ling g cost cost of an organi organizat zation ion.. Proble Problems ms relate related d to profit profitabi abili lity ty can also also be explained through these ratio. Profitability ratios are important for all parties that are concerned with that company because if company earn profit , it will earn Good Will and people will invest in that organization.
6. 6.6. 6.1 1
Gr Gros osss Profi Profitt Ma Marg rgin in
This ratio shows gross profit as percentage of net sales. This can be computed by dividing gross profit on net sales. Mathematically Gross profit margin
=
Gross Profit x 100 Net Sales Gross profit margin is affected by cost of goods sold. If cost of goods is controlled and minimized, gross profit will be higher and ratio will be high which show a positive sign. This ratio tells the profit of the firm relation on sales, after deduction of the cost of producing goods. It is a measure of the efficiency of the firm’s operation, as well as an indication of how products are priced. Table No: Gross Profit Margin Ratio
Years 2006 2007
Ratio Value 1.16 1.40
Analysis: Gross profit margin ratio show the profit of the organization after deducting the cost of
good sold. Gross profit margin ratio of state life insurance for the years 2002-2003 show that they have a reasonable increase in ratio, it mean that profit of the organization for the year 2003 has increased as compared to 2002. So this is a positive sign .They will be able to pay their liability in time and they can invest the remaining amount to generate more profit. And can also pay for other o ther expenses as will.
41
6. 6.6. 6.2 2
Ne Nett Pro Profi fitt Ma Marg rgin in
A more specific measure of sales profitability is the net profit margin. Net profit margin = Net Income after taxes * 100 / Net Sales In this ratio is derived by dividing net income after taxes by total sale. So it is more specific. It tells a firm’s net income per Rupee of sales. Table No: Net Profit Margin Ratio Net Profit Margin
Years 2006 2007
Ratio Value 2.12 5.9
6 5 4 Values 3 2 1 0 20 200 06
2007 Years
Analysis: Net profit margin ratio shows the ability of the organization how much it generate net
income after the overall business activities. Net profit margin ratio of state life insurance for the years 2002-2003 show that SLIC generate quit favorable net income after the year end activities. Maximum net income for state life insurance mean, that SLIC will be able to pay to their policyholders in time. Organization can spent large amount on marketing and promotional activities. On the other hand in current arena of competition they can have modern and new tools and equipments to provide every type of services to the customers.
6.6.3-- Retu 6.6.3 Return rn on Inves Investment tment The second group of profitability ratios are about profits on investment. One of these ratio is to find the rate of return on investment (ROI), or return on assets. This ratio measures the profitability of assets regardless of the Capital structure. Mathematically ROI = Net Income after Taxes Total assets
42
An important test of management abilities that how much they can earn on funds supplied from all sources. Table No: Return on Investment
Years 2006 2007
Ratio Value 0.002 0.002
Return on Investment
0.002 0.0015 Values
0.001 0.0005 0 20 06 06
2 00 007 Years
Analysis:
Return on investment show the how much an organization get return on what ever they had invested. Return on investment ratio of state life insurance for the years 2002-2003 show that it has same return on investment in both the year. It means that either the investment proportion is the same or the increase in return is consistent. So the
43
management should give importance return on investment, because higher return on investment will ultimately increase their net profit. Higher return on their investment is the key to their over all net profit. Specially their investment in capital assets must be consider the most because the return on such investment is longer and high as well. Moreover the management of state life insurance should focus on such projects which can give high and fast return.
6.6.4- Return on Equity Return on equity indicates that how much an organization can earn on equity. Return on equity compares net profit after taxes to the equity that shareholders have invested in the firm. ROE =
Net Income after Taxes x 100
Shareholder’s Equity This Th is rati ratio o te tell llss the the ea earn rnin ing g power power on sh shar areh ehol olde ders rs’’ book book va valu luee in inve vest stme ment nt and is frequently used. A high return return on equity often reflects reflects the firm’s effective effective management. Table no:
Years 2006 2007
Return on Equity
Ratio Value 0.19 0.21
Analysis
Return on equity ratio show that how much an organization can get return through the investment of equity. Return on equity ratio of state life insurance for the years 20022003 show that they are getting back a favorable return upon the investment of their equity in 2003 as compared 2002. It is a positive sign for state life insurance corporation
44
because on one hand the shareholders will can get maximum return and on other hand it will also add to net profit of corporation. But care should be taken because more equity investment will increase equity and will increase liability of the organization.
Chapter No 7
7 .1
PEST A An nalysis o off SL SLIC:
7. 7.1. 1.1 1 Po Poli liti tica call Fac Facto tors rs:: The politi political cal enviro environme nment nt of Punjab Punjab is quite quite stable stable since the take take over of the last Government. Governm ent. Though some factors factors are always tr trying ying to pollut pollutee the social and political political environment of this province, Government has taken very positive initiatives in this context and people fell no hesitance to invest ttheir heir money in insurance packages. As the nature reveals, insurance has always been a social and ethical code of busi business. ness. So State Life Insurance Corporation has a favorable political environment for investment and business business activities. activities. On the other hand government government policies policies that regulate the overall overall business have no harm to their activities.
7. 7.1. 1.2 2 Ec Econ onom omic ical al Fa Fact ctor orss The economical environment too is almost in the favor of businesses prevailing in the province. provi nce. Same is the case with State Life Life Insurance Corporati Corporation, on, because it is along term high return project. The employment rate is at an increasing trend because most of thee pe th peop ople le are are co comi ming ng towa toward rdss thei theirr own bu busi sines nesse sess whic which h le lead ad to em empl ploy oyme ment nt
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generation generat ion and indirect indirect technology technology base environment. environment. Than these factors factors as a whole contribute contri bute to a higher per capita capita income. Due to positive positive and friendly economic economic factors their vast set-up and business regulations people feel free to invest their savings for a long-term and safe return.
7.1.3 7.1 .3 Soc Socio io cul cultur tural al Fac Factor torss Socio cultural factors play an important role in tthe he smooth running of business. As a fact the dominant religion of Punjab is a peaceful religion religion “Islam”. People of this province have great great devotion towards the principles principles and teaching teaching of Islam. Due to these reasons reasons a specific group group of people are against the Insurance policies, policies, which affect the business of SLIC to a greater extent. In such circumstan circumstances ces word of mouth and the social set-up set-up matter a lot. But at the same time ti me th thee pe peop ople le of Punj Punjab ab ar aree also also no nott in fa favor vor of fo fore reig ign n pr prod oduc ucts ts an and d fo fore reig ign n organizations, which is a positive sign for State Life Insurance Corporation of Pakistan.
7.1.4 7.1 .4 Tec Techno hnolog logica icall Fac Factor torss In terms of technological advancement state life insurance corporation is behind its competitors in the race of insurance business. Few insurance corporations coming coming to this field with a new and modern technology has got a reasonable market share in a short span of life. But now state state life insurance corporation is launching online business. With this this facility people can get every type of information about SLIC. Their packages, rates and also can apply for online policies. policies. This service service will provide provide a new ways and segments, segments, where State Life Insurance Corporation can compete co mpete on strong grounds.
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7.2 Value Chain Analysis Broadly value chain analysis is divided into two categories. Primary Activities Support Activities
7.2.1-- Primar 7.2.1 Primary y Activ Activities ities As a sequence of value chain analysis analysis the primary primary activities activities of SLIC goes like like this. At the beginning stage when a customer applies for a policy, the first potential customer has a great importance importance to State Life Insurance Insurance Corporation. Corporation. That’s That’s why the documents are
submitt subm itted ed in new business business departm department ent with in no time. time. When When the codes codes and policy policy number are allotted to the policy holder, then the final information, are further processed to the customer. All the relevant information information regarding his policy, terms and conditions and the duration are made available to the customer. After this the most important stage is to create awareness regarding the new packages and incent inc entive ivess among among the potenti potential al and targeted targeted customer customers. s.
For this purpose purpose SLIC has
recruited well trained and qualified staff, so that to have a fair number of customers on their behalf. behalf. Beside Beside these activities activities state life insurance insurance corpora corporation tion has left no stone unturned to provide every type of service with their pos possible sible efforts. So in short the the chain starting from a customer applying for a new policy till he gets all the relevant details and services he needs is a smooth and without any difficulties and interruption.
7.2.2-- Suppo 7.2.2 Support rt Activ Activitie itiess
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State Life Insurance Corporation has a skilled, qualified and highly motivated staff to complete comple te every task in a short span of time time and with maximum resu results. lts. In the range of these activities of first stage SLIC emphasis on the purchase of new services and other accessories access ories to be efficient efficient in the arena of compet competition ition.. Then come the technology technology and modern equipment to provide all the services services to their customer customerss at their doorstep. In this context “Online “Online Insurance” Insurance” will have new horizons horizons to their business. business. The third step is human resource resource management. management. Human resource resource or employees are the vital and valuable asset of an organization. That’s way SLIC pays its its full attention at every moment to train train their employees and prepare them for every type of up-coming challenges. As a last stage of the chain SLIC staff is always busy to have best and implement able corporate decisions at all levels. Beside this the planning activit activities ies too play an important role, so also focused a lot on. As a concluding sentence the value chain of SLIC presents a clear picture of their efficiency, that’s why they are still in the market with a competitive image.\
7.3 Critical Analysis of C Corporation orporation The management of the corporation is too much centralized and all the policies making decisions are entrusted with the Board of Director. The field staff an assets to the corporation have no role in policy-making activities of the corporation. The sale representative, an important element in sale and promotion have little training opportunities and their period of training is too much short and it is difficult for them with little knowledge to prove better results.
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The trade union is too much strong and there is little scope for outsider to enter into the corporation revise with their good potential and capabilities, particularly in grade 1-8. The record is centralized in some of the matter for instance, the pension of the employees are dealt in principal office which sometime causes unwanted delays. The corporation pays bonus to their employees from grade 1-8, but the managerial cadre is ignore ignored, d, althoug although h they they are also also partne partners rs in the business business and develop developmen mentt of the corporation.
7.3.1 Training Training play a basic role in the development of manpower, the corporation impart training to their staff under two agencies held manpower Division (2) field training division, but a training institute on the pattern of banks dose not exit, which need of the time. An institute of insurance education must be established for more ling facilities to the field staff.
The advertisement is too much centralized and only one media (Television) Utilized; the services of press, magazine and newspapers should be utilized. Although the corporation has made some contribution in insurance business in rural areas, but the progress is not too much eventual, a major portion of rural areas have no knowledge of the insurance, nor the insurance sense. This segment of the society should not be ignored.
7.3.2 Policy Limits
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The minimum amount for policy is Rs 20,000/- which is beyond the approach of a major portion of the population. This ceiling should be minimized to the nearest figure as possible.
7.4 SWOT Analysis of SLIC It is an important tools to analysis the overall situation in which an organization is conduct cond ucting ing it itss affair affair.. Each Each issue issue remain remainss releva relevant nt and useful useful for corpor corporate ate str strate ategy gy formation
7.4.1- Strength i.
Adeq Adequa uatte ffiinanc nanciial res esou ourrces ces SLIC has adequate financial resource this is strength of SLIC. because it can invest in different project and can earn more, financially they have no problem.
ii.
Bett Better er adv adver erti tisi sing ng cam campa paiigns gns As SLIC is market leader, and big organization so it can lunch a better advertisement campaign through any kind of media.
Adequate human resources As SLIC SLIC is a large organiz organizati ation, on, and there there are large large number number of people people who are working . So they have adequate human resource, and they can meet any challenge relate to human resource.
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iii.
Capable ble to top m maanage gem ment As they follow strict rule for promotion, so the top management of SLIC in a very much competent experience. so their decision give benefit to organization.
iv. iv.
Comp Compet etit itiv ivee ski skill llss of of empl employ oyee eess Employee of SLIC are very much competitive and very much skillful they know very will the corporation activities, which increase the efficiency of an organization.
v.
Good will As SLIC is a old organization, so it develops a Goodwill, so policyholder policyholder built trust on it, and people want to invest in it.
vi.
Government sec security As SLIC SLIC is go gover vernm nmen entt organ organiz izat atio ion, n, so th ther eree is al also so go gove vern rnme ment nt su suppo pport rt to organization which also increase their, stability and Goodwill.
7.4.2 Weakness i.
Turnov oveer of field force
As field worker are commission based, so turn over in SLIC high because those who fail to bring business, leave the organization. ii ii..
Incr ncreasi easing ng ra ratte of of ssur urre rend nder er
Becausee of economic condition, Becaus condition, when the saving of people lower they cant continue their policy. so they surrender the policy, and this is one of the important weakness of SLIC. iii.
Economic condition onss
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Economic Econom ic condition of Pakistan Pakistan is not so good, due to which people has lass saving, so when saving will be lass they cant c ant be able start a policy. iv.
Less awareness of mass
A large part of population are leaving in rural areas, and people of that area is not aware about life insurance. v.
Weak marke ketting effort orts
As SLIC is market leader, and there is no other close competitor, so they not give proper attention to marketing activities.
7.4.3 Opportunity i.
Grow Growth th of fina financ ncia iall sec secto torr in in Pak Pakis ista tan n
As financial sector of Pakistan is starting better which will make better the financial position of people and will increase saving of people. So this is an opportunities for SLIC to increase their business. ii.
Diversification
As SLIC is providing services in just only in life insurance, it can also start general insurance, like the insurance of property etc. iii. iii.
Favo Favora rabl blee go gove vern rnme ment nt po poli lici cies es
As SLIC is a government organization, so all policies of government is in the favor of SLIC. iv.
Innovation
SLIC also bring so many innovation in their present product, like they decrease the maturity duration of policy or can decrease sun assured of policy etc.
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7.4.4 Threats New competitors With the passage of time so many organization are coming to insurance business, so there will be tuff competition for SLIC to face in future. Recession in economies As Pakistan economic condition is not so stable so recession in economy can effect its performance by increasing the surrender rate of policy by policy p olicy holder. Changing customer needs As customer’s needs are changing, like if they have saving they might use in some other business in stated investing in SLIC.
RECOMMENDATIONS The state life Insurance Corporation has a monopoly in the life insurance business. The only one competitor is postal life insurance. But as whole the market is monopolized by SLIC and market share of SLIC is about 80%. For For th thee prom promot otio ion n de deve velo lopm pmen entt of the the busin busines esss of th thee co corp rpor orat atio ion n th thee fo foll llow owin ing g suggestions and recommendation is given: i.
As the the union union in SLIC SLIC is is very very stro strong ng,, so many many time time it int inter erfe fere re in the the worki working ng of SLIC specially specially in the recruitin recruiting g low level employees employees from grade 1 to 8. Because Because employees of these grade are appointed according to wishes of union. This often leads to recruitment of incompetent people, which may affect the efficiency of SLIC. So the role union should be minimized.
ii.
Recrui Recruitme tment nt probl problem em also also face face by SLIC SLIC at at manager manager’s ’s level level.. For the the manage managerr level level posts relevant qualified people should be appointed e.g. MBA’s will be suitable for such type of job, but they also appointed lawyer which is totally irrelevant for the job they perform.
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iii iii..
There There is is also also foun found d the lack lack of prop proper er and and channe channeli lized zed commu communic nicati ation on among among the the di diff ffer eren entt de depo port rtme ment nt of SLIC SLIC.. The The co comm mmun unic icat atio ion n shou should ld be pr prop oper erly ly channelized and should not be so much complicated.
iv.
As it iiss accept accepted ed tha thatt field field worke workers rs are are very esse essenti ntial al facto factorr in bring bringing ing busin business ess.. So turn over of sale force is other sever problem of SLIC. To reduce turn over and retain experience and competent field workers their commission rate should be increase, in order to motivate them for better performance. p erformance.
v.
SLIC SLIC also also adopt adopted ed a proc proced edur uree for for prom promot otio ion n of thei theirr empl employ oyee eess in which which includes their performance and passing of FLMI test. This is conducted by an American institute, it consist of 10 papers, and cost of each paper is from Rs. 5000 to 6000. So this is very expensive test. And this may effect a person who is competent but can’t offered this expenses. So SLIC should reduce this cost or should help the competent employees in monitory terms.
vi vi..
As the fiel field d wor workers kers are commi commiss ssio ion n bas based so they hey ar aree not not cons consiidere dered d the permanent employees of the organization, there for they have no role in policy maki ma king ng whil whilee they they fa face ce the the re real al probl problem em on gr grou ound, nd, so th they ey must must in incl clud udee members of field force when they making policy for them.
vi vii. i.
So many many po poli licy cy hold holder erss ar aree faci facing ng prob proble lems ms an and d de depo posi siti ting ng th thei eirr pr prem emiu ium, m, especially people of rural area. Because most of the cash counter are situated in district cities which are far away from the side area of district. So SLIC should open cash counter in side areas also, this will make the people to deposit their premium easily.
viii viii..
Su Surr rrend ender er of polic policy y means means the end end of polic policy. y. So many many peopl peoplee surre surrend nder er thei their r policy because of less saving they can’t deposit their premium. So to stop the surrender of policy the SLIC should increase the time period for revival of policy. This will give extra time to policy holder to continue co ntinue their policy if they want.
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ix.. ix
La Laps pses es in poli polici cies es shoul should d also also be reduce reduce,, And this this can can be done done by conti continu nuous ous motivating of policyholder to deposit their premium regularly. This will also help them to attain persistency.
x.
State State life life insura insurance nce has has more more than than 52 52 buildi building ng throu through gh out out the the countr country. y. And And mo most st of the position of the building has given on rent. But when there is recession in economy most of the companies leave the offices in state life building because of its high rent, which leads to reduction in net income. So the state life should facilitate the rent of offices according economic condition. con dition.
CONCLUSION It is conclu concluded ded from from the report report and other documen documents ts which which were were consul consulted ted for the completion of this repot, that State Life Insurance Corporation is one of the leading corporations of the country. It has provided a life Security Protection to about 5.00 million person of the country. Apart from this it provides self finance jobs to thousands of the countrymen, and mobilized the country economic and financial resources, and also contr con trib ibut utes es a lot lot to Gove Govern rnme ment nt in te term rmss of pr provi ovidi ding ng fu fund nds. s. We hope hope th that at th thee corporation will play its important role in the development of National Economy.
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Bibliography i.
Annual Annual Report Report for the year year 2002,S 2002,Stat tatee Life Life Insu Insuran rance ce Corp Corpora oratio tion. n. P # 22,23,28, 54,55.
ii.
Annual Annual Report Report for the year year 2003, 2003, St State ate Life Life Insur Insurance ance Corpor Corporati ation. on. P # 8,9,10,11,20,21,26,27,29
iii iii..
James James C Van Van Horn Horne, e, Fundam Fundament ental al o off Fina Financi ncial al Mana Managem gement ent,, Editi Edition, on, Prent Prentice ice-Hall International, Inc. P # 128 – 144.
iv.
Tah Tahaff affuz uz “An “An In-hou In-house se magaz magazine” ine” Stat Statee Life Life Insuran Insurance ce Corpo Corporat ration ion of Paki Pakista stan, n, 2002, P # 5,6.
v.
Tahaff Tahaffuz uz “An “An In-hou In-house se magaz magazine ine”” Sta State te Life Life Insur Insuranc ancee Corpor Corporati ation on of Paki Pakista stan, n,
vi.
2003, P # 8,9,10.
vii.
www.statelife.com.pk www.statelife.com.pk
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