Professional Documents
Culture Documents
17
3.4.2 Accidental Death Benefit (ADB).................................................................17
3.4.3 Family Income Benefit (FIB) ....................................................................18
3.4.4 Waiver of Premium (WP)............................................................................18
3.4.5 Special Waiver of Premium (SWP)............................................................19
3.4.6 Term Insurance (TI).....................................................................................19
3.4.7 Refund of Premium Rider (RPR)..............................................................19
7.4 SWOT Analysis of SLIC .......................................................................................50
7.4.2 Weakness.........................................................................................................51
7.4.3 Opportunity......................................................................................................52
7.4.4 Threats.............................................................................................................53
Chapter No 1
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
1
play a very important role in every day lives of the people and also contributing a lot to
1. This study has given us chance to learn something new practically and this is
2. This study has given us chance to get the practical experience in the large
herself to the actual work, place and writing of its project requires her to use
all the skills, abilities during the course of study. It makes us more practical,
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.
Aftab Ahmed Khan, Deputy Manager of P&GS Department was the main source
of getting information.
2
b) Practically working, carefully watching the working procedure of the
organization.
1.3 Limitations
some times really discourage me to collect the basic and important information to make a
Despite of the following limitation I tried my best and honest effort to collect the data and
SLIC.
ii. There were no special arrangements for internees. Thanks to Mr. Aftab Khan who
Introduction to Insurance
3
Insurance, in law and economics, is a form of risk management primarily used to hedge
against the risk of a contingent loss. Insurance is defined as the equitable transfer of the
risk of a loss, from one entity to another, in exchange for a premium, and can be thought
company selling the insurance; an insured is the person or entity buying the insurance.
The insurance 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.
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).
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
• Insurance contracts are aleatory in that the amounts exchanged by the insured
and insurer are unequal and depend upon uncertain future events.
• Insurance contracts are unilateral, meaning that only the insurer makes
legally enforceable promises in the contract. The insured is not required to pay
4
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 contracts are governed by the 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
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. There should be a certain definite loss taken place at a known 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
3. The size of the loss must be significant 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
5
4. The amount of premium should be affordable.
estimable
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 policyholder. The proceeds are paid to the beneficiary either in a lump sum
amount or an annuity
There is two types of disability insurance. One is simple disability insurance and the
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
6
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.
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.
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
7
1.11 Claims, Benefits and Dividends
Insurance contracts always contain a condition that the insured must provide a proof of
Insured individuals who have suffered losses and want to receive payments must notify
their insurance company through a process called claim. Insurance contracts always
contain a condition that the insured must provide a proof of loss in order to pay.
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:
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
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
8
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 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
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
market, Real Estate etc. The major achievements of State Life are as under:
9
i. 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.
ii. State Life is profitable organization and it paid Rs.1.729 billion as dividend to the
iii. 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
iv. Investment portfolio also includes investment in Real Estate which stands at a book
value of Rs.2.309 billion as at 31.12.2005 whereas it fair value is around Rs.17.625
billion in the same period.
v. The Paid up Capital increased from Rs.10 million in 1972 to Rs.900 million.
vi. The Premium income increased from Rs.0.317 billion in 1972 to 13.820 billion in
2005. Similarly Investment income including rental income increased from Rs.0.81
vii. vii. Total statutory fund of State Life stands at Rs.122.775 billion in 2005 as against
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.
10
To maximum the return to the policyholders by economizing on expenses and
more affluent sections of society to the common man in towns and villages.
2.4 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 policy holders and the nation.
after sales service and optimizing return on Life Fund through a quality culture and to
all-important towns, Regional Offices and a Principal Office. The Zonal Offices deal
exclusively with the sales and marketing of policies underwriting of Life Insurance
Policies and the policyholder services. Regional Offices (South, North, Central and
Multan) each headed by Regional Chief who supervises business activities of the zones in
11
their Region effectively and the Principal Office, based at Karachi, is responsible for
activities such as Investment, Advertising, Sales Promotion, Real Estate, Actuarial and
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 2003. In addition, the government of Pakistan guarantees all individual life
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
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
12
3.2 Modes of Insurance
Whole life insurance plan is a unique combination of protection and savings. This can be
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
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
financial help as at retirement, amount for the education of children or capital for
business. Endowment assurance policies are available both on “With & Without Profit”
basis.
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 Child protection Policy
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.
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.
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
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.
14
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.
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.
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 of the policy.
v. Continuation Privileges
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
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
• Jeewan Sathi
• Three Payment Plan
• Shadabad Plan
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• Personel Pension Scheme
• Sunehry policy
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.
16
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
This supplementary cover will provide for payment of an additional amount equal to sum
cover. ADB is highly recommended for individuals who travel daily through 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
17
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
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
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.
18
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
With the help of SWP, the life insured gets relieved of vagaries of paying premiums
In the event of death of the life insured during term of TI supplementary cover, the sum
insured will be payable in addition to the benefits payable under the basic policy.
Suppose, Mr A, covered under a policy of Rs 1,000,000, and also attaches 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.
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
Departments. The total strength of the Zone comprises of 280 staff members and 80
officers. It is located in their own building (i.e. State Life building), Mall Road,
Rawalpindi.
Every zone has its own budget which comes from the head office. The zonal head and
zonal accountant with respective regional chief and regional accountant send a proposal
to the head office; they critically analyze it and then decide. First calculation is made
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.
20
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,
When an officer is transferred to any other zone or center, his budget will also be
Zonal Head calls a meeting of all departmental incharge. They all discuss the budget
amount. Then budget is allocated to each department according to their needs and
requirements.
If budget is in deficit, then an additional budget is demanded. The zones should give
justification for additional budget. It happens when unexpected expenses occur like for
Expenses of one quarter should be carried over to next quarter. However, saving of one
Chief Accountant and Regional Accountant should check the actual expenses on their
visits to zone.
Every department feeds its daily work in the computer. At the end of the month
computer summarizes it.
Cash premium in collection books
Cash paid in cash books.
Adjustment in journal ledger.
21
After preparing the net result they make quarterly trial balance at Zonal level. They
cannot prepare Balance Sheet because Head Office prepares it.
Format of Trial Balance
II Liabilities -
III Income -
IV Expenditure -
Total - -
This section deals with different allowances and loans which are offered to the
employees. Two employees are working in this section.
Allowances for officers: It includes
1. Conveyance Allowance
The officers would be paid house rent allowance @40 of their basic pays.
1. Utility Allowances
22
Utility allowance for an officer is 10 % of his basic pay.
1. House Rent:
The house rent allowance paid to the staff is 18 % of their basic pays.
2. Conveyance Allowance:
The staffs that possess motorcycle are paid Rs.800 per month, and those who
does not possess are paid Rs. 675 per month.
3. Tea Allowance:
Tea allowance is a fixed amount of Rs.535 paid to each staff member monthly.
4. Newspaper Allowance:
5. Utility Allowance:
6. Education Allowance
uniform rate of Rs. 435 per month per child to all children either school or college
7. Medical Allowance
A. Rs.1000 per month for married.
B. Rs. 725 per month for unmarried.
8. Technical Allowance:
adrenal operators, photo state machine operators, lift operators Rs. 175 per month.
23
This allowance is for employees who hold cash handle seats revenue stamps policy
stamps and cash counter. This allowance to cash counter is Rs. 800 per month, and for
the others it varies from Rs. 175 to Rs. 800 per month.
Loans
• 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
2. CPF Loans:
This is contributed provident fund loan. It has 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. House Rent Advance:
• 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. Conveyance 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. House Building Loan:
• 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)
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
• 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
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
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
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
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
to some financial or any other problem request and send their applications to PHS
surrender section. Then the staff of this section scrutinizes those applications and issue
After receiving vouchers the account section issues cheques to the clients. It also issues
bones certificates to the policy holders and keep their record in computers. Very technical
Procedure:
• First the surrender section receives application from the policy holder’s a long
• Than this section issues surrender discharge vouchers, they calculate the cash
value and mentioned in this voucher, the policy he written and this voucher
• 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
• 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
5.4.3 Loan Section.
Loan section is also very important and bllsy in calculating and issuing loans to the
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.
It gives the policy holder an extra benefit to get loans and then repay their outstanding
While the risk coverage of the policy holder is infact with in the specified time and due of
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
All these sections of PHS are interring links with other sections and professional staff
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
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
the field staff are send and received through this department. This department 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
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
30
The commission rates depend on their total business and the amount for which they sold
preceding year.
31
ii) Must have minimum second year persistency of 70% in the
immediate preceding year.
iii) Must have at least 8 policies in force in his organization.
iv) Must have minimum renewal persistency of 90% in the immediate
preceding year.
Commission rates for sale manager
4, 2004.
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 first a voucher is prepared or maintained. There are four types of
vouchers i.e. for each claim there is a different voucher. Each voucher has its own and
• 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
From budget department these vouchers come to audit department. They make the audit
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 department) and then these cheques are forward to concerned department
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
purpose, but one must know what is being measured to construct a ratio and to
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
i. A single ratio does not generally provide sufficient information to judge the
overall performance of the firm. Only when a group of ratios is used, a reasonable
ii. An analyst, when comparing financial statement, would ensure that predetermined
iii. It must be ensured that the data used in calculating financial ratios have been
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
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
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.
compare short-term obligations to short term (or current) resources available to meet
these obligations. From these ratios, much insight can be obtained into the present cash
simple words current ratio means that the current assets are sufficient for current
liabilities or not. If the result is 1, then it means it can satisfactory meet its financial
obligation but it should be tried to improve it, mathematically it can be written as.
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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
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 liquidity then does the current ratio.
Analysis:
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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 corporation indicate that its ability to pay current 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. Debt to Total Asset ratio
ii. Debt to Equity ratio
6.4.1 Debt to Equity Ratio
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 \
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Years Ratio Value
2006 86.1
2007 98.1
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 2002-
2003 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 are investing in insurance policies of sate life.
The debt to total assets ratio is derived by dividing a firm’s total debt by its total assets.
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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.
Years Ratio
Value
2006 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
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This ratio show the efficiency of the firm that how much efficiently a firm create
receivable and how much successfully the firm collect its receivable.
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
0.4
0.3
Values 0.2
0.1
0
2006 2007
Years
Analysis:
Receivable turn over ratio show the efficiency of an organization in collecting its
receivables. Receivable turnover ratio of SLIC for the year 2002- 2003 show 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 increase this ratio in order to increase collection of receivable. This will
help them to pay their liability on time and built their image
6.6 Profitability Ratios
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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 controlling cost of an organization. Problems related to profitability can 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.
6.6.1 Gross Profit Margin
This ratio shows gross profit as percentage of net sales. This can be computed by dividing
gross profit on net sales.
Mathematically
Years Ratio
Value
2006 1.16
2007 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
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6.6.2 Net Profit Margin
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
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- Return on Investment
The second group of profitability ratios are about profits on investment. One of these
This ratio measures the profitability of assets regardless of the Capital structure.
Mathematically
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An important test of management abilities that how much they can earn on funds supplied
Return on Investment
0.002
0.0015
Values 0.001
0.0005
0
2006 2007
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
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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.
equity compares net profit after taxes to the equity that shareholders have invested in the
firm.
frequently used. A high return on equity often reflects the firm’s effective management.
Years Ratio
Value
2006 0.19
2007 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 2002-
2003 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
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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
The political environment of Punjab is quite stable since the take over of the last
Government. Though some factors are always trying to pollute the social and political
environment of this province, Government has taken very positive initiatives in this
context and people fell no hesitance to invest their money in insurance packages. As the
nature reveals, insurance has always been a social and ethical code of business. So State
Life Insurance Corporation has a favorable political environment for investment and
business activities. On the other hand government policies that regulate the overall
The economical environment too is almost in the favor of businesses prevailing in the
province. Same is the case with State Life Insurance Corporation, because it is along
term high return project. The employment rate is at an increasing trend because most of
the people are coming towards their own businesses which lead to employment
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generation and indirect technology base environment. Than these factors as a whole
contribute to a higher per capita income. Due to positive and friendly economic factors
their vast set-up and business regulations people feel free to invest their savings for a
Socio cultural factors play an important role in the smooth running of business. As a fact
is a peaceful religion “Islam”. People of this province have great devotion towards the
principles and teaching of Islam. Due to these reasons a specific group of people are
against the Insurance policies, which affect the business of SLIC to a greater extent. In
such circumstances word of mouth and the social set-up matter a lot. But at the same
time the people of Punjab are also not in favor of foreign products and foreign
organizations, which is a positive sign for State Life Insurance Corporation of Pakistan.
competitors in the race of insurance business. Few insurance corporations 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 life insurance corporation is launching online business. With this
facility people can get every type of information about SLIC. Their packages, rates and
also can apply for online policies. This service will provide a new ways and segments,
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7.2 Value Chain Analysis
Primary Activities
Support Activities
As a sequence of value chain analysis the primary activities of SLIC goes like this. At
the beginning stage when a customer applies for a policy, the first potential customer has
a great importance to State Life Insurance Corporation. That’s why the documents are
submitted in new business department with in no time. When the codes and policy
number are allotted to the policy holder, then the final information, are further processed
to the customer. All the relevant information regarding his policy, terms and conditions
After this the most important stage is to create awareness regarding the new packages and
incentives among the potential and targeted customers. For this purpose SLIC has
recruited well trained and qualified staff, so that to have a fair number of customers on
their behalf. Beside these activities state life insurance corporation has left no stone
unturned to provide every type of service with their possible efforts. So in short the chain
starting from a customer applying for a new policy till he gets all the relevant details and
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State Life Insurance Corporation has a skilled, qualified and highly motivated staff to
complete every task in a short span of time and with maximum results. In the range of
these activities of first stage SLIC emphasis on the purchase of new services and other
accessories to be efficient in the arena of competition. Then come the technology and
modern equipment to provide all the services to their customers at their doorstep. In this
context “Online Insurance” will have new horizons to their business. The third step is
human resource management. Human resource or employees are the vital and valuable
asset of an organization. That’s way SLIC pays its full attention at every moment to 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 activities too play an important
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.\
The management of the corporation is too much centralized and all the policies making
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
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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
The corporation pays bonus to their employees from grade 1-8, but the managerial cadre
is ignored, although they are also partners in the business and development 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 advertisement is too much centralized and only one media (Television) Utilized; the
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.
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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.
conducting its affair. Each issue remains relevant and useful for corporate strategy
formation
7.4.1- Strength
i. Adequate financial resources
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.
As SLIC is market leader, and big organization so it can lunch a better advertisement
As SLIC is a large organization, and there are large number of people who are
working . So they have adequate human resource, and they can meet any challenge
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iii. Capable top management
As they follow strict rule for promotion, so the top management of SLIC in a very
Employee of SLIC are very much competitive and very much skillful they know very
v. Good will
7.4.2 Weakness
i. Turnover of field force
As field worker are commission based, so turn over in SLIC high because those who
Because of economic 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.
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Economic condition of Pakistan is not so good, due to which people has lass saving,
A large part of population are leaving in rural areas, and people of that area is not
As SLIC is market leader, and there is no other close competitor, so they not give
7.4.3 Opportunity
i. Growth of financial sector in Pakistan
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
ii. Diversification
As SLIC is providing services in just only in life insurance, it can also start general
SLIC.
iv. Innovation
SLIC also bring so many innovation in their present product, like they decrease the
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7.4.4 Threats
New competitors
With the passage of time so many organization are coming to insurance business, so
Recession in economies
As Pakistan economic condition is not so stable so recession in economy can effect its
As customer’s needs are changing, like if they have saving they might use in some
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 the promotion development of the business of the corporation the following
suggestions and recommendation is given:
i. As the union in SLIC is very strong, so many time it interfere in the working of
SLIC specially in the recruiting low level employees from grade 1 to 8. Because
employees of these grade are appointed according to wishes of union. This often
ii. Recruitment problem also face by SLIC at manager’s level. For the manager 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
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iii. There is also found the lack of proper and channelized communication among the
different deportment of SLIC. The communication should be properly
channelized and should not be so much complicated.
iv. As it is accepted that field workers are very essential factor in bringing business.
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
permanent employees of the organization, there for they have no role in policy
making while they face the real problem on ground, so they must include
vii. So many policy holders are facing problems and depositing their premium,
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. Surrender of policy means the end of policy. So many people surrender their
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 their policy if they want.
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ix. Lapses in policies should also be reduce, And this can be done by continuous
motivating of policyholder to deposit their premium regularly. This will also help
x. State life insurance has more than 52 building through out the country. And most
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.
CONCLUSION
It is concluded from the report and other documents which were consulted 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
corporation will play its important role in the development of National Economy.
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Bibliography
P # 22,23,28, 54,55.
ii. Annual Report for the year 2003, State Life Insurance Corporation.
P # 8,9,10,11,20,21,26,27,29
iv. Tahaffuz “An In-house magazine” State Life Insurance Corporation of Pakistan,
2002, P # 5,6.
vii. www.statelife.com.pk
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