STATE LIFE

INSURANCE CORPORATION OF PAKISTAN

TABLE OF CONTENTS
CHAPTER 1
Page No:

introduction
1.1 1.2 1.3 1.4 1.5 INTRODUCTION TO SLCI OF PAKISTAN ... HISTORICAL BACKGROUND OF INSURANCE BUSINESS ............................................... THE DEVELOPMENT OF LIFE INSURANCE BUSINESS IN PAKISTAN.. OBJECTIVES, MISSION STATEMENT AND QUALITY POLICY OF SLIC . PURPOSE OF STUDY. 05 06 04 03 01

CHAPTER 2

KINDS / BRANCHES OF INSURANCE

2.1 2.2 2.3 KINDS OF INSURANCE TYPES OF INSURANCE MODES OF INSURANCE .. 07 07 08

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 3

Page No:

ORGANIZATIONAL SETUP AND FUNCTIONAL AREAS OF SLIC

3.1 3.2 3.3 3.4 3.5 3.6 3.7 SLICs ORGANIZATIONAL STRUCTURE.. 09 NEW BUSINESS DEPARTMENT.. 10 PERSONAL & GENERAL SERVICES DEPARTMENT 10 BUDGET AND ACCOUNT DEPARTMENT 11 HUMAN RESOURCES DEPARTMENT... INTERNAL AUDIT AND EVALUATION DEPARTMENT 12 AGENCY ADMINISTRATION DEPARTMENT.. 12 11

CHAPTER 4

Products of slic
4.1 4.2 4.3 4.4 ENDOWMENT ASSURANCE PAYMENT PLAN WHOLE LIFE ASSURANCE.. SUPPLEMENTARY CONTRACTS 13 16 16 16

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 5

Page No:

FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED 2009

5.1 5.2 5.3 5.4 BALANCE SHEET.. 17 PROFIT AND LOSS ACCOUNT 19 CASH FLOW STATEMENT... 20 STATEMENT OF CHANGE IN EQUITY.. 21

CHAPTER 6

CONCLUSIONS AND SUGGESTIONS

6.1 6.2 6.3 CONCLUSIONS. SUGGESTIONS... 22 22 BIBLIOGRAPHIES.. 24

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 1 introduction
1.1 INTRODUCTION TO SLIC OF PAKISTAN
State life Insurance Corporation of Pakistan is a semi government corporation of Pakistan, which works under the ministry of commerce in Pakistan. 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 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. In July 2000, under Insurance Ordinance 2000, the Federal Government reconstituted the Board of Directors of State Life which runs the affair of this 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 Policyholders 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.(www.slic.com.pk)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

Major Achievements
The major function of the State Life Insurance Corporation of Pakistan is to carry out Life Insurance Business; however, it is also involved in the other related business activities such as investment of policyholders fund in Government securities, Stock market, Real Estate etc. The major achievements of State Life are as under: 1. On the commencement of the operations, the Corporation took a very important step by effecting reduction up to 33% in the premiums on the past and potential Life Policies for the benefit of the Policyholders. 2. State Life is profitable organization and it paid Rs.2.657 billion as dividend to the Government of Pakistan since its inception in 1972. 3. State Life has played very vital role in the economy by providing employment 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 31.12.2009 stands at Rs.191.445 billions. 4. Investment portfolio also includes investment in Real Estate which stands at a book value of Rs.2.538 billion as at 31.12.2009 whereas it fair value is around Rs.21.681 billion in the same period. 5. The Paid up Capital increased from Rs.10 million in 1972 to Rs.1,100 million in 2009. 6. The Premium income increased from Rs.0.317 billion in 1972 to 28.367 billion in 2009. Similarly Investment income including rental income increased from Rs.0.81 billion in 1972 to 274.152 billion in 2009. 7. Total statutory fund of State Life stands at Rs.199.445 billion in 2009 as against Rs.1.494 billion in 1972.
8. 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, 2009 the total number of policies inforce under individual life were 2.895 million and number of lives covered under group life insurance were 3.754 million.(www.google.com)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

1.2 HISTORICAL BACKGROUND INSURANCE BUSINESS

OF

The idea of insurance is intimately concerned with the group of human combination in the earliest stage may have similar to that of social animal that is association for mutual aid and defense of family. Actually business of insurance came into existence in the fifteenth century after the industrial revolution because business transaction were increased and need for insurance companies were felt: Mostly men used to get insurance for their ships and cargoes. Specially when long distance were involved jri the trade then insurance companies came in to exist to insure shipping industries in the world and people were encouraged to invest in overseas trade that is why rapid industrial growth took place in Europe.(www.google.com)

EARLY LIFE INSURANCE

According to Danni-I-long life insurance was developed after property insurance. Record indicates that from of life insurance existed in the ancient world in the sixteenth century in England however those few life insurance contracts the existed were issued by individual properly underwriters. Life insurance provides a sum of money if the person who is insured, dies while the policy is in effect. Health insurance can be of two forms: 1) Medical expenses coverage and 2) Disability income coverage expenses. Medical expenses coverage provides account for payment of specified income benefits. Property and liabilities insurance are two other major kinds of insurance. Property insurance provides a benefit that bears the loss incurred by the property damaged or lost because of fire, theft, accident or causes described in the policy. Liabilities insurance provides a benefit payable on the behalf of a covered party who is held responsible for hearing or others or their property. Both property and liabilities policies place limit on the amount of the benefit that company will pay.(www.wikkipedia.com)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

1.3 THE DEVELOPMENT INSURANCE IN PAKISTAN

OF

LIFE

Life insurance has a bright future in Pakistan because of industrial advancement new industries are springing up. More and more facilities are being provided. Investment from foreign private sector is being encouraged; the entire communication system is being modernized to meet the growing need of the country. The working population is increasing tremendously. All these factors speak about bright future of insurance in Pakistan. In Pakistan two organizations are authorized to carry life insurance business i.e. postal life insurance corporation and state life Insurance Corporation. The postal life insurance was started about 100 years ago as scheme for benefits of postal employees. The benefits were intended to employees of other organizations from time to time; today the scheme is open to government and non-government employees and all other persons having assured, means employees income. Life insurance companies doing business in Pakistan as follows: American life insurance Co. Ltd. EFU (Eastern Federal Union) life insurance Co. Ltd.

Metropolitan life insurance Co. Ltd. And currently established Commercial Union life insurance

company Ltd, which is the largest life insurance corporation of UK, but entrance of private sector in life insurance business has not affected the life insurance of SLIC.(www.slic.com.pk)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

1.4 OBJECTIVES, MISSION STATEMENT & QUALITY POLICY

Objectives
To run life insurance business on sound line. To run life insurance business on sound line. To provide more efficient service to the policyholders. To maximize 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. To use the policyholders fund in the wider interest of the community. (www.google.com)

Mission
To remain the leading insurer in the country by extending the benefits of insurance to all sections of society and meeting our commitments to our policy holders and the nation.(annual report of slic of pk)

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.(staff)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

1.5 PURPOSE OF STUDY

A research evaluation project, aims at providing opportunity to young, acquaint him/her self to the actual work place and writing of its project requires him to use all the skills, abilities acquires during course of study BBA degree. However the following are the purpose of study: To study the importance of SLIC in the business process. To seek practical knowledge/ training under the supervision of professional and trained people. The aim to analyzing and studying the function of SLIC. To identify the areas of operation and there development. (HR Manager Dur Muhammad Baladi)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 2 KINDS / BRANCHES OF INSURANCE

Definition of Insurance
Life insurance can be defined in many ways such as:

A legal contract between policy holder and the insurer is called Insurance. Life insurance provides financial security against unforeseen but named Events. (www.google.com)

2.1 KINDS OF INSURANCE

Mainly there are only two kinds of insurance:

General Insurance
It is concerned with any thing other than life.

Life Insurance
It is concerned with human beings.

2.2 TYPES OF INSURANCE

Individual life Group life (Insurance Book)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

2.3 MODES OF INSURANCE

Term Insurance (General insurance) Endowment Insurance Whole Life Insurance

(Pervez Bhatti Area Manager)

Term Insurance
It use in general as well as life insurance it is conditional contract and for particular period it pays claim during and the contractual period after expiry of that period there is nothing to be paid for claim. It is risk covering and its cash value can not generated it is also called good and transit insurance. (www.google.com)

Endowment Insurance
It matures at the expiry of the term selected by the policyholder who gets sum assured and bonuses at the maturity or the beneficiary gets the sum assured plus bonuses in the event of death of policy holder. (www.google.com)

Whole Life Insurance

Matures at the age of 85 years the policyholder gets sum assured and bonuses at the maturity or the beneficiary gets the sum assured plus bonuses in the event of death of policyholder.(www.wikkipedia.com)

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 3 ORGANIZATIONAL SETUP AND FUNCTIONAL AREAS OF STATE LIFE INSURANCE CORPORATION OF PAKISTAN
3.1 SLICs ORGANIZATIONAL STRUCTURE

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

Departments of SLIC
3.2 New Business Department
This is one of the most important departments of SLIC. Here new policy holders are invited for having life insurance policies. As it is clear from the name of the department that each new started business is initially processed from here. The forms i-e: proposals forms are issued to issued to new policy holders whatever directly or through life insurance agent. Not only this but also the complete assessment of customer also done here. For e.g. some one wants a term insurance plan for twenty years and showing himself healthy and ordinary business man. This is quite possible from so for that an "underwriting process" occurred, in which they can acquire whatever information of their client from its relative or co-workers e.g. getting information from his/her relative about character, health and dealing with others. The underwriter can acquire some medical reports his/her health. (www.insurance.com)

3.3 Personal & Department

Personal Service

General

Services

The personal department is concerned with all aspects of employment, employees, service, and safety and welfare of employees. This department is responsible for recruit new employees for this department, maintain management relations and look after employee's benefits and discipline.

General Service
The general department is concerned with allocation of resources like maintaining stationary, distribution of stationary items and printed material checking and posting to sub zones, areas and sectors handling petty cash account, maintain budget register, processing bill payments, repairing of future sales computer, contribution of uniform.(www.google.com)

10

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

3.4 Budget and Accounts Departments

Budget and Accounts department is responsible to formulate the co-operations annually budget by collecting and assessment of budget proposals of different sub zones, areas and sectors. For the smooth working the department is formulated in following cells.

Commission cell Disbursement cell Banking cell PHS claims cells Counter services dept:

pays commission to field staff. Each and every payment to staff for zones made through this cell. Records receipts and payments. Verification and checking of documents. Payment of vouchers and petty cash which is below Rs: 500/=

Others responsibilities of Budget & Accounts department are: Budget & Accounts department maintain the company's accounting record.
Prepare tax return. Analyze operating cost. Planning and controlling budget.(Financial Management H.Baker)

3.5 Human Recourses Department

Development

It is often called training department and given supplementary training to field workers SR's, FM's and even staff including officers within and outside the organization. State life focuses on education and recruitment it gives multi benefits to employees who are getting education. It has following courses: Sales representative basic course Sales officer basic course.(HRM by Gary Dessler)

11

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

3.6 Internal Audit Department

The rectification of record. Checking documents.

and

Evaluation

This department is concerned with critically examine:

To verify mistakes etc.(Dur Muhammad Baladi)

3.7 Agency Administration Department

Agency administration has a channel of: Sales representatives (SR). Sales officers (SO). Sales manager (SM). Area manager (AM). (www.slic.com.pk) The Sales representatives are the key man of the corporation. He is the first intermediary between the prospective policyholder and the corporation. After Appointing as sales representatives they will undergo for 5 days basic training in class room to be conducted by FMD dept; sales representatives are appointed-on commission basis. As sales representatives complete his task then he will promoted to SO then SM and then AM after AM he become a government employee. (www.google.com)

12

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 4 PRODUCTS OF STATE LIFE INSURANCE CORPORATION OF PAKISTAN

4.1 ENDOWMENT ASSURANCE
It is the safest and surest method of guaranteed cash provision either at specified time or at death it serves the requirement of the family in various shapes by way financial help at retirement education of children of capital for business.(www.slic.com.pk) Endowment assurance are available for both "with" and "without profit" basis. Under these policies the sum assured plus bonus is payable at the end of specified number of years or at death of assured if earlier premium are payable for the specified number of years or till death if earlier. It required the minimum age group of 10 years and the maximum age group of 65 years the term include in the policies also minimum 10 years and maximum 55 years.(www.slic.com.pk) Endowment assurance include following plans.
Shadabad Plan Sunehri Policy Child Education And Marriage Plan Child Protection Policy Jeevan Sathi Plan. (www.wikkipedia.com)

13

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

Shadabad Plan
This plan will meet the requirement of who appreciate the basic saving purpose of endowment insurance and the bonuses and terminal bonuses payable. This plan also protect their loved in case they die, all forbid before maturity the benefits of plant is that is case of dearth from any cause an additional Rs: 1,000 will be payable in lump sum and on the death of accident of and additional Rs:2,000 will be payable.(www.google.com)

Sunehri Policy
Sunehri policy is an innovative life instance it is flexible, and meets the challenges of inflation quite economically. In this the premium will increase by 6% P.A however the policyholder has a birth not to increase and pay the same amount of last year. The benefit of the plan is that if the insured dies during the first two years of the policy, then the initial basic sum assured will be payable if the insured dies in the 3rd of later policy years, then the death benefits will equal the sum assured applicable of the policy year of death plus the adjusted opening cash value. (www.slic.com.pk)

Child Education and Marriage Plan

Child education and marriage plan is concerned with the protection of child's future. It provides a lump sum benefits for the child at the completion of the policy term. The lump sum become payable when child attains the age of 18, 21 or 25 years, these ages may be selected considering the occasion at which children generally need financial assistance for higher education, marriage or setting business.(www.slic.com.pk)

14

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

Child Protection Plan

These 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 pay therefore policyholder subject to any special condition applicable to female lives.(www.google.com) The maximum age of child is 6 month therefore 1 year nearest birthday, and maximum age 15 years nearest birthday. The minimum age of the payer must be 20 years and maximum age is 50 years. This plan contains the supplementary contracts i.e. FIB, AIB etc.

Jeevan Sathi Plan

Under this plan policies are issued on the lives of two people and simultaneously cover the risk on die lives of both partners for the sum assured. The minimum age group is 29 and maximum age group is 50 years term. It has 10 years 15, 20, 25, 30 and 35 years, as its name refers this policy is generally its slogan is single policy single premium two personal forms and risk coverage's for both lives. That are a life partner in particular other in general, is very much a like to joint life endowment.(www.wikkipedia.com)

15

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

4.2 PAYMENT PLAN

Three payment plan, which consist the minimum age group of 20 years and the maximum age group of 75 years. It has the fixed prescribed terms. The terms are 18,21,24,27 & 30 years, under this the contract policy holders have the right to draw 50% of sum assured in two installments. From 1st 25% can be drawn after the completion of 2/3 period of the term and other 25% can be drawn after the completion of another 1/3 of the term and 2/3 of over all term. (Insurance booklet)

4.3 WHOLE LIFE ASSURANCE

Whole life assurance plan is a unique combination of protection and sing which can be purchased at .very economical premium payable annually or in half yearly, quarterly or monthly installments. Death at any time before age 85 years terminates payment of premium and there sum assured (plus bonuses) become payable in the event the ensured survive to the policy anniversary nearest become payable. The minimum age groups of person are 10 years and maximum 65 years.(www.slic.com.pk)

4.4 SUPPLEMENTARY CONTRACTS

The following supplementary contracts are available on the policyholder's life.

Accident Indemnity Benefits Waiver of Premium Special Waiver of Premium Term Insurance Rider Hospital and Surgical Accidental Death Benefits Family Income Benefits Refund of Premium Rider Guarantee Insurability (www.slic.com.pk)

(AIB) (WP) (SWP) (TIR) (H&S) (ADB) (FIB) (RPR) (GI)

16

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 5 FINANCIAL HIGHLIGHTS FOR THE PERIOD ENDED 2009

5.1 BALANCE SHEET

17

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

(Annual Report of State Life Insurance Corporation of Pakistan)

18

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

5.2 PROFIT AND LOSS ACCOUNT

(Annual Report of State Life Insurance Corporation of Pakistan)

19

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

5.3 CASH FLOW STATEMENT

(Annual Report of State Life Insurance Corporation of Pakistan)

20

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

7.4 STATEMENT OF CHANGE IN EQUITY

(Annual Report of State Life Insurance Corporation of Pakistan)

21

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

CHAPTER 6 CONCLUSIONS AND SUGGESTIONS

6.1 CONCLUSIONS
After the completion of internship the following conclusions have been drawn. It seems that life insurance has not introduced its business in rural areas effectively so that people are not well aware of the insurance till yet which may consider a loss to the corporation. It seems that the agents of representatives are not fully trained, equipped with such skills could attract every type of people fir insuring policy. (Internee)

22

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

6.2 SUGGESTIONS
On the basis of conclusions the internee recommends the following suggestions. State life insurance should introduce its business more effectively internal areas with proper guidance so that the people can more benefits of the insurance. Life insurance should make the policy in such a way that it could meet the income level of rural insurance. To earn more profit strategies must be improved.
It is suggested that there is a need of effectively advertising in rural areas

and local people. And advertising material should be published in respective local language. (Internee)

23

STATE LIFE
INSURANCE CORPORATION OF PAKISTAN

6.3 BIBLIOGRAPHY
1. www.slic.com.pk 2. Gary Dessler 2008, HRM, 11th edition, Prentice Hall, USA. 3. Burns, T.and G.Stalker. (1961) The Management of Innovation. London: Tailstock. 4. Iqbal Ahmed Bhatti, 1996, statistics, 8th edition. 5. HRM, by SS Khanka. 6. Dur Muhammad Baladi, Hyderabad zonal head. 7. Muhammad Ali Shah, HR Manager. 8. Pervez Bhatti, Branch Manager. 9. Economic Survey of Pakistan. 10. Magazine Business Economist. 11. Security and exchange commission of Pakistan. 12. www.google.com 13. www.wikkipedia.com 14. www.businessweek .com 15. www.slic.com.pk

24