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| Life Insurance; source: Okwuagbala Uzochukwu Mike |
Currently, life insurance products sold by life insurance companies are the most selling than general insurance products. In the recent time, life insurance products are of many varieties.
What is Life Insurance?
Many authors have given their various views and understanding on what life insurance is. All these definitions still points to similar meaning. Life insurance is contract between a policyholder and an insurer (which can be an insurance company), where the insurer promises to pay a designated beneficiary a sum of money in exchange for a premium, upon the death of the insured person.
According to Policy Advisor, life insurance is an agreement between you and a life insurance company, where if you die, they will pay a lump-sum of tax-free money to someone you choose (Policy Advisor 2019).
According to the view of the company, the money paid to the beneficiary to the life assured in the event of death is not taxed. This is one of the reasons why many people invest in life insurance. The money paid to the policyholder or the beneficiary is not taxed. Some people prefer to go into short term endowment plan to fix deposits in some banks. Life insurance is an agreement between you and your insurance company. You make regular payments, called premiums, and the insurance company pays your beneficiaries a tax-free lump sum of money when you die (New York Life Insurance 2019).
Life insurance can be defined also as a contract between a policyholder and the insured whereby lump sum of money is paid to the beneficiary if the life insured dies or the accumulated premiums plus interest paid to the holder of the policy at the maturity.
According to the view of the company, the money paid to the beneficiary to the life assured in the event of death is not taxed. This is one of the reasons why many people invest in life insurance. The money paid to the policyholder or the beneficiary is not taxed. Some people prefer to go into short term endowment plan to fix deposits in some banks. Life insurance is an agreement between you and your insurance company. You make regular payments, called premiums, and the insurance company pays your beneficiaries a tax-free lump sum of money when you die (New York Life Insurance 2019).
Life insurance can be defined also as a contract between a policyholder and the insured whereby lump sum of money is paid to the beneficiary if the life insured dies or the accumulated premiums plus interest paid to the holder of the policy at the maturity.
In life insurance policies (protection policies) there are usually exclusion on areas the insurance does not cover. This makes insurance companies not to lose much money in the event of death of the life insured. Some areas where insurers will not pay claim at death are incidents that result from suicide, fraud, war, riot, and civil commotion.
This is in line with what is stated in life insurance policies documents of FBN Insurance. The Section 13 titled Exclusion states:
The Company will not recognise any claim occasioned or accelerated by any of the following:
Protection policies and
Investment policies
Also, for similar protection policies on death of the life of the assured, the same applies. If the policy states that $500,000 is to be paid to the family of the policyholder if he dies in the specified period when the policy is still active, that is done when it happens. The insurer pays the lumpsum.
According to Wikipedia, the main objective of these policies is to facilitate the growth of capital by regular or single premiums. Regular premiums mean the policyholder pays certain amount of money in certain intervals. The holder can choose to be paying once every month, quarterly, half yearly or yearly. Single premium means the policyholder pays the money once and leaves the money to grow over the year (s). Once the maturity time is reached, the policyholder claims his money and the interest.
Investment policies are also known as endowment policies. An endowment policy is essentially a life insurance policy which, apart from covering the life of the insured, helps the policyholder save regularly over a specific period of time so that he/she is able to get a lump sum amount on the policy maturity in case he/she survives the policy term (Sanjeev Sinha 2015). According to Sanjeev Sinha, endowment policies are good for people that spend a lot. The author stated that entering into this type of insurance contract can make the policyholder safe good amount of money that can be used for funding one's retirement, children's education and/or marriage or buying a house.
About sixty percent of all people in the United States were covered by some type of life insurance in 2018, according to LIMRA’s 2018 Insurance Barometer Study (Insurance Information Institute 2019) . That is a nice percentage coverage. At the end of the year 2018, insurance companies in United States of America invested $2,989.1 Billion in bonds (III 2019).
This amount is part of the premium obtained from the sales of Investments, Life/Annuity products.
According to report from Statista, in 2017, there were 584 stock life insurers in the United States. Also, in 2017, there were 112 mutual life insurance companies in the United States (Jennifer Rudden 2018). Report from Statista stated that in 2017, there were 781 U.S. life insurers.
Asian countries do well in life insurance. Among the countries is China which stands as technologically strong country and also sound in global economy. In 2018, overall premium income from life insurances in China had amounted to around 2.07 trillion yuan, up from about 2.15 trillion yuan in the previous year (Statista report). There are some leading insurance companies in China. Ping An Insurance had ranked first with an annual revenue of about 891 billion yuan in 2017 (Shu Han 2019).
In Canada, both the government and individuals value the importance of life insurance. Though some people considers it to be expensive, but it does not override the need to buy one or two life insurance. Statistics has shown that Canadians really enter into life insurance contracts. In 2018, Canadian life insurers held 264 billion Canadian dollars worth of bonds in general funds and 23 billion Canadian dollars in segregated funds (Jennifer Rudden 2019).
African as a continent is not doing well in insurance though the penetration is growing gradually. Poor technology integration has been one of the challenges facing the industry and poor understanding of the industry by Africans. This was stated by TURNKEY. Technology has played a crucial role in not only enabling and transforming the US66.7 billion African insurance industry but also in helping the industry leapfrog developmental stages, particularly the ones that would require costly infrastructures (TURNKEY 2019).
South Africa and Kenya are among the major African countries that are doing well in insurance. Kenya for example analyze the nature of insurance business in the country every quarter of the year.
The total net premium income (NPI) reported by long term reinsurance companies in the fourth quarter of 2018 was KES 2.91 million compared to KES 2.45 million reported in the fourth quarter of 2017 representing an increase of 18.9%. Group Life contributed 92.2% of the total NPI recorded in the period under review in Kenya. According to Insurance Regulatory Authority of Kenya, in fourth quarter of 2018, Segment growth was higher in life insurance business at 5.3% compared to a growth of 3.5% experienced in the general insurance business (Insurance Regulatory Authority 2018). That implies that life insurance sales more in Kenya than none life. Group Life insurance contributed 92.2% of the total Net Premium Income (NPI) recorded in the fourth quarter of 2018 in Kenya Insurance Industry.
This is in line with what is stated in life insurance policies documents of FBN Insurance. The Section 13 titled Exclusion states:
The Company will not recognise any claim occasioned or accelerated by any of the following:
- Any act committed by the policyholder which constitutes a violation of criminal law
- No benefit will be paid in terms of this policy if, in the opinion of the Company, the claim arose, either directly or indirectly from war (nuclear, biological and chemical), riot, strike, rebellion, insurrection, military action or terrorist activity
- Non-disclosure of medical conditions on the application for this policy
- Suicide - the Company will have no liability under this Policy if the life Assured dies as a result of their intentional act, within two years of the commencement date of the Policy or any reinstatement date.
Classifications of Life Insurance Policies
There are two broad classifications of life insurance. The two classes are:Protection policies and
Investment policies
Protection Policies
These are policies designed by insurance companies or insurer to provide a benefit which is usually lumpsum payment to the policyholder or the beneficiaries if the stated occurrence happens. For example, if it is a policy that protects the life assured for accident, if the accident happens and the life assured is injured, the insurer pays lump sum of money to the life assured because the policy covers that.Also, for similar protection policies on death of the life of the assured, the same applies. If the policy states that $500,000 is to be paid to the family of the policyholder if he dies in the specified period when the policy is still active, that is done when it happens. The insurer pays the lumpsum.
Investment Policies
These policies are usually created for savings purpose which pays the sum assured to the policyholder at its maturity. In this kind of life insurance policy, payments can still be made to the beneficiary in the event of death of the life insured. Investment policies are more expensive than protection policies.According to Wikipedia, the main objective of these policies is to facilitate the growth of capital by regular or single premiums. Regular premiums mean the policyholder pays certain amount of money in certain intervals. The holder can choose to be paying once every month, quarterly, half yearly or yearly. Single premium means the policyholder pays the money once and leaves the money to grow over the year (s). Once the maturity time is reached, the policyholder claims his money and the interest.
Investment policies are also known as endowment policies. An endowment policy is essentially a life insurance policy which, apart from covering the life of the insured, helps the policyholder save regularly over a specific period of time so that he/she is able to get a lump sum amount on the policy maturity in case he/she survives the policy term (Sanjeev Sinha 2015). According to Sanjeev Sinha, endowment policies are good for people that spend a lot. The author stated that entering into this type of insurance contract can make the policyholder safe good amount of money that can be used for funding one's retirement, children's education and/or marriage or buying a house.
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| Insurance life savings plan; image source:RL 360 |
Statistics on Life Insurance
United States of America is a strong buyer of life insurance policies. The US life insurance industry is in a strong position and continues to march ahead of countries like China and Japan, which are insurance giants in their own right. The total amount of premiums written by US insurers stood at $1.2 trillion in 2017, out of which 52% of the premiums were written by life and health insurance providers (John Holloway 2019).About sixty percent of all people in the United States were covered by some type of life insurance in 2018, according to LIMRA’s 2018 Insurance Barometer Study (Insurance Information Institute 2019) . That is a nice percentage coverage. At the end of the year 2018, insurance companies in United States of America invested $2,989.1 Billion in bonds (III 2019).
This amount is part of the premium obtained from the sales of Investments, Life/Annuity products.
According to report from Statista, in 2017, there were 584 stock life insurers in the United States. Also, in 2017, there were 112 mutual life insurance companies in the United States (Jennifer Rudden 2018). Report from Statista stated that in 2017, there were 781 U.S. life insurers.
Asian countries do well in life insurance. Among the countries is China which stands as technologically strong country and also sound in global economy. In 2018, overall premium income from life insurances in China had amounted to around 2.07 trillion yuan, up from about 2.15 trillion yuan in the previous year (Statista report). There are some leading insurance companies in China. Ping An Insurance had ranked first with an annual revenue of about 891 billion yuan in 2017 (Shu Han 2019).
In Canada, both the government and individuals value the importance of life insurance. Though some people considers it to be expensive, but it does not override the need to buy one or two life insurance. Statistics has shown that Canadians really enter into life insurance contracts. In 2018, Canadian life insurers held 264 billion Canadian dollars worth of bonds in general funds and 23 billion Canadian dollars in segregated funds (Jennifer Rudden 2019).
African as a continent is not doing well in insurance though the penetration is growing gradually. Poor technology integration has been one of the challenges facing the industry and poor understanding of the industry by Africans. This was stated by TURNKEY. Technology has played a crucial role in not only enabling and transforming the US66.7 billion African insurance industry but also in helping the industry leapfrog developmental stages, particularly the ones that would require costly infrastructures (TURNKEY 2019).
South Africa and Kenya are among the major African countries that are doing well in insurance. Kenya for example analyze the nature of insurance business in the country every quarter of the year.
The total net premium income (NPI) reported by long term reinsurance companies in the fourth quarter of 2018 was KES 2.91 million compared to KES 2.45 million reported in the fourth quarter of 2017 representing an increase of 18.9%. Group Life contributed 92.2% of the total NPI recorded in the period under review in Kenya. According to Insurance Regulatory Authority of Kenya, in fourth quarter of 2018, Segment growth was higher in life insurance business at 5.3% compared to a growth of 3.5% experienced in the general insurance business (Insurance Regulatory Authority 2018). That implies that life insurance sales more in Kenya than none life. Group Life insurance contributed 92.2% of the total Net Premium Income (NPI) recorded in the fourth quarter of 2018 in Kenya Insurance Industry.
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| When insurance works in a family; source: New York Life |
Life Insurance Companies
There are different life insurance companies in different countries. These companies have the way they design their products to give their customers maximum satisfaction. They pay claim and maturity benefits depending on the policy type. The products are designed to meet the need of the people in a particular location.Life Insurance Companies in United States
United States of America is one of the countries in the world that practice insurance. In some places, the insurance even sells more than banking. The insurance sector has contributed greatly to the GDP of the country.New York Life
New York Life Insurance is one of the most popular life insurance companies in the United States of America. The company sells diverse life insurance products including term, permanent and annuity services. New York life also sell endowment policies of many forms.
New York Life ranked among the best companies for customer service in Newsweek’s annual “America’s Best Customer Service” list. New York Life ranked second in the Life Insurance category based on a survey of more than 20,000 adults. Fortune Magazine ranks the company number 71 on the prestigious Fortune 500 list in 2019 and one of most admired company in the world. In 2017, New York Life ranks high among the largest employers of labour in America. The research was carried out by Forbes. The company ranked above prestigious companies such as Metlife, MassMutual, Nationwide and State Farm that are recognized on the insurance industry list in the country.
There are list of life insurance companies registered by Insurance Regulatory and Development Authority of India (IRDAI). IRDAI is the regulatory body of insurance companies in India. The top life insurance companies recognized by the body include AEGON Life Insurance Company, Aviva Life Insurance Company, Bajaj Allianz Life Insurance Company, Bharti AXA Life Insurance Company, Birla Sun Life Insurance Company, Reliance Life Insurance Company, Sahara Life Insurance Company, SBI Life Insurance Company, and others.
In the US, the company is among the market leaders, and well known for their iconic skyscraper that is a landmark of the San Francisco skyline. It began operations 173 years ago, and today has over 30 million customers, more than 29,000 employees and manage investments worth 743 billion Euros.
AEGON Life paid Individual death claim of 96.45% in FY 2018-19. The company offers family protection plans, savings and investment plans, children's plans, retirement plans, whole life insurance and money-back policy.
In the recent time, many life insurance companies have been established in the country. These life insurance companies are accredited by NAICOM. The design of life insurance products in Nigeria is similar to those sold in India. Some life insurance companies in Nigeria has convinced citizens that insurance companies pay claim by keeping to their words.
Life insurance companies in Nigeria are A.R.M Life PLC, African Alliance Insurance Company Ltd, Capital Express Assurance Limited, Custodian Life Assurance Limited, FBN Insurance Limited, Metropolitan Nigeria Life Insurance Limited, Mutual Benefits Life Assurance Ltd, Prudential Zenith Life Insurance Company Limited, Royal Excahange Prudential Life Plc, Spring Life Assurance Plc, Wapic Life Assurance Ltd, Leadway Assurance Company, and Old Mutual Nigeria Life Assurance Company Limited.
The company has earned many local and international awards. It has a good brand name and large customers base. Leadway is innovative. It is one of the first Nigerian Insurance companies to develop customers mobile application. In 2015, Leadway Assurance has net income of ₦ 6.2 Billion NGN and total assets of ₦ 137.3 Billion.
FBN stands for First Bank of Nigeria. So, the company can be called First Bank of Nigeria Insurance. The company is jointly owned by First Bank of Nigeria (65% of the share) and Sanlam Group of South Africa (35% of the shares).
FBN Life Insurance sell term insurance, endowment, and savings plans. Under the company's endowment policies, they offer education savings plan and individual short and long term savings. Their are varies of life insurance policies sold by the company that were designed to meet a particular need.
New York Life ranked among the best companies for customer service in Newsweek’s annual “America’s Best Customer Service” list. New York Life ranked second in the Life Insurance category based on a survey of more than 20,000 adults. Fortune Magazine ranks the company number 71 on the prestigious Fortune 500 list in 2019 and one of most admired company in the world. In 2017, New York Life ranks high among the largest employers of labour in America. The research was carried out by Forbes. The company ranked above prestigious companies such as Metlife, MassMutual, Nationwide and State Farm that are recognized on the insurance industry list in the country.
Life Insurance Companies in India
India is gradually growing in the world of insurance. There is improvement in the insurance sector of the country in the recent time. According to Coronation Merchant Bank 2019 publication titled "From the Lagoon to the Ocean" India has insurance penetration of 3.69%. Many insurance companies are owned by private individuals in the recent time.There are list of life insurance companies registered by Insurance Regulatory and Development Authority of India (IRDAI). IRDAI is the regulatory body of insurance companies in India. The top life insurance companies recognized by the body include AEGON Life Insurance Company, Aviva Life Insurance Company, Bajaj Allianz Life Insurance Company, Bharti AXA Life Insurance Company, Birla Sun Life Insurance Company, Reliance Life Insurance Company, Sahara Life Insurance Company, SBI Life Insurance Company, and others.
AEGON Life Insurance Company
AEGON Life Insurance is not a baby in life insurance business. The company has sound brand name and does not operate locally only. Though situated in many cities in India, the insurance company has branches in Americas, Asia and Europe. The company has good customers base and also large number of employees.In the US, the company is among the market leaders, and well known for their iconic skyscraper that is a landmark of the San Francisco skyline. It began operations 173 years ago, and today has over 30 million customers, more than 29,000 employees and manage investments worth 743 billion Euros.
AEGON Life paid Individual death claim of 96.45% in FY 2018-19. The company offers family protection plans, savings and investment plans, children's plans, retirement plans, whole life insurance and money-back policy.
SBI Life Insurance Company
This insurance company began its operation in 2001. It is a Joint venture between State Bank of India and BNP Paribas Cardif. It holds a share of 6.12% of the total market in 2017. SBI Life is the biggest private sector insurance company in India as of 2017.Life Insurance Companies in Nigeria
Though an average Nigerian will tell you that insurance is scam, yet insurance companies in Nigeria has not given up. They keep on pushing forward and believing that the industry will improve. In Nigeria, life insurance companies sell more services then general insurance.In the recent time, many life insurance companies have been established in the country. These life insurance companies are accredited by NAICOM. The design of life insurance products in Nigeria is similar to those sold in India. Some life insurance companies in Nigeria has convinced citizens that insurance companies pay claim by keeping to their words.
Life insurance companies in Nigeria are A.R.M Life PLC, African Alliance Insurance Company Ltd, Capital Express Assurance Limited, Custodian Life Assurance Limited, FBN Insurance Limited, Metropolitan Nigeria Life Insurance Limited, Mutual Benefits Life Assurance Ltd, Prudential Zenith Life Insurance Company Limited, Royal Excahange Prudential Life Plc, Spring Life Assurance Plc, Wapic Life Assurance Ltd, Leadway Assurance Company, and Old Mutual Nigeria Life Assurance Company Limited.
Leadway Assurance Company
Leadway Assurance Company, also known as Leadway, is a Nigerian insurance corporation. The headquarter of the company is in Lagos, Nigeria. It is one of Nigeria's largest insurance companies. Leadway does not only deal on life insurance businesses but in general businesses as well.The company has earned many local and international awards. It has a good brand name and large customers base. Leadway is innovative. It is one of the first Nigerian Insurance companies to develop customers mobile application. In 2015, Leadway Assurance has net income of ₦ 6.2 Billion NGN and total assets of ₦ 137.3 Billion.
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| The joy of buying life insurance for family protection; source: New York Life |
FBN Life Insurance
Though this insurance company is not as old as Leadway Assurance Company but it has proven its worth. FBN Insurance has recently been ranked well as the company is good in many areas. The customers service is sound and are innovative.FBN stands for First Bank of Nigeria. So, the company can be called First Bank of Nigeria Insurance. The company is jointly owned by First Bank of Nigeria (65% of the share) and Sanlam Group of South Africa (35% of the shares).
FBN Life Insurance sell term insurance, endowment, and savings plans. Under the company's endowment policies, they offer education savings plan and individual short and long term savings. Their are varies of life insurance policies sold by the company that were designed to meet a particular need.
Importance of Life Insurance
What are the importance of life insurance? The importance of life insurance are as follow:- Life insurance is important because it provides financial security to families. In the death of the life insured in term and whole life insurance, some amount of money is paid to the family of the dead.
- Life insurance is helpful in keeping students in schools even when the sponsor is no longer living. Education policies make sure the students are always in school. There are education policies that parents sign up to use to save with even before the children get admission in higher institutions. This kind of policy works even when the life of the policyholder is not lost.
- Live insurance help people raise money for execution of important projects. I know many people who are able to buy landed properties and cars today because they saved using a savings plans of insurance companies. This kind of policy is one of the most selling in Nigeria.
- Life insurance has made many retirees enjoy their lives after retirement. Because of life insurance policies, many who have retire from public jobs are enjoying their lives today because they saved using life insurance products. They are comfortably happy.
- We see the importance of life insurance in financial management. Many young people in many countries today are able to save because of life insurance. They would have spent the money they earned in a wasteful way but life insurance have help them have control. Because some savings plan do not give room to liquidate money saved so easily, they are disciplined to save.
References
- Insurance Information Institute (2019), Facts + Statistics: Life insurance, published by Insurance Information Institute, United States
- Jennifer Rudden (2018), Life insurance - Statistics & Facts, published by Statista, Hamburg, Germany
- Jennifer Rudden (2019), Long-term investments of life insurers in Canada in 2018, by type, published by Statista, Hamburg, Germany
- John Holloway (2019), Life Insurance Statistita, published by No Exam, United States
- NAICOM (2019), LIST OF INSURANCE COMPANIES OFFERING LIFE INSURANCE BUSINESS IN NIGERIA AS AT 23rd JANUARY 2019, published by National Insurance Commission, Abuja, Nigeria
- New York Life Insurance (2019), Life Insurance 101, published by New York Life Insurance Company, New York, United States
- Policy Advisor (2019), What is Life Insurance, Published by Policy Advisor Brokerage, Ontario, Canada
- Sanjeev Sinha (2015), What is an Endowment Policy and when should you go for it, Published by Economic Times, Uttar Pradesh, India
- Shu Han (2019), Leading Chinese insurance companies on the Fortune China 500 ranking 2018, published by Statista, Hamburg, Germany
- TURNKEY (2019), African Insurance Barometer 2019: Technology and Data Facilitating Regional Expansion for African Insurers, published by Turnkey, House, No. 14 Chalbi Drive, Lavington, Kenya
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