ICICI Bank 2010 Annual Report Download - page 146

F66
schedules
forming part of the Consolidated Accounts (Contd.)
5. Claims and benefits paid
In the case of general insurance business, claims incurred comprise claims paid, estimated liability for outstanding claims
made following a loss occurrence reported and estimated liability for claims incurred but not reported (IBNR) and claims
incurred but not enough reported (IBNER). Further, claims incurred also include specific claim settlement costs such as
survey/legal fees and other directly attributable costs. Claims (net of amounts receivable from re-insurers/co-insurers) are
recognised on the date of intimation of the loss based on estimates from surveyors/insured in the respective revenue account.
Estimated liability for outstanding claims at the balance sheet date is recorded net of claims recoverable from/payable to
co-insurers/re-insurers and salvage to the extent there is certainty of realisation. Estimated liability for outstanding claim is
determined by the entity on the basis of ultimate amounts likely to be paid on each claim based on the past experience.
These estimates are progressively revalidated on availability of further information. Claims IBNR represent that amount of
claims that may have been incurred during the accounting period but have not been reported or claimed. The claims IBNR
provision also includes provision, if any, required for claims IBNER. Estimated liability for claims IBNR/claims IBNER is based
on an actuarial estimate duly certified by the appointed actuary of the entity. IBNR/IBNER has been created on re-insurance
accepted from Indian Motor Third Party Insurance Pool based on actuarial estimates received from them.
In the case of life insurance business, claims other than maturity claims are accounted for on receipt of intimation. Maturity
claims are accounted when due. Withdrawals and surrenders under linked policies are accounted in the respective schemes
when the associated units are cancelled/redeemed. Re-insurance recoveries on claims are accounted for, in the same period
as the related claims.
6. Liability for life policies in force
In the case of life insurance business, liability for life policies in force and also policies in respect of which premium has been
discontinued but a liability exists, is determined by the appointed actuary as per the gross premium method in accordance
with accepted actuarial practice, requirements of the IRDA and the Actuarial Society of India.
7. Reserve for unexpired risk
Reserve for unexpired risk is recognised net of re-insurance ceded and represents premium written that is attributable and to
be allocated to succeeding accounting periods for risks to be borne by the entity under contractual obligations on contract
period basis or risk period basis, whichever is appropriate. It is calculated on a daily pro-rata basis subject to a minimum of
50% of the aggregated premium, written on policies during the twelve months preceding the balance sheet date for fire,
marine, cargo and miscellaneous business and 100% for marine hull business, on all unexpired policies at balance sheet
date, in accordance with the provisions of the Insurance Act, 1938.
8. Actuarial method and valuation
In the case of life insurance business, the actuarial liability on both participating and non-participating policies is calculated
using the gross premium method, using assumptions for interest, mortality, expense and inflation, and in the case of
participating policies, future bonuses together with allowance for taxation and allocation of profits to shareholders. These
assumptions are determined as prudent estimates at the date of valuation with allowances for adverse deviations. No
allowance is made for expected lapses.
The interest rates used for valuing the liabilities are in the range of 5.10% to 6.78% per annum (previous year – 5.10% to
6.81% per annum).
Mortality rates used are based on the published LIC (1994 – 96) Ultimate Mortality Table for assurances and LIC 96-98 table
for annuities, adjusted to reflect expected experience while morbidity rates used are based on CIBT 93 table, adjusted for
expected experience, or on risk rates supplied by reinsurers.
Expenses are provided for at current levels, in respect of renewal expenses, with no allowance for future improvements.
Per policy renewal expenses for regular premium policies are assumed to inflate at 4.30% (previous year – 4.14%).
The greater of liability calculated using discounted cash flows and unearned premium reserves are held for the unexpired
portion of the risk for the general fund liabilities of linked business and attached riders. An unearned premium reserve is
held for one year renewable group term insurance.
The unit liability in respect of linked business has been taken as the value of the units standing to the credit of policyholders,
using the Net Asset Value (NAV) prevailing at the valuation date. The adequacy of charges under unit linked policies to meet
future expenses has been tested and provision made as appropriate. Provision has also been made for the cost of guarantee
under unit linked products that carry a guarantee. The units held in respect of lapsed policies are divided into a revival
reserve, which contributes to liabilities, and a fund for future appropriation, which contributes to regulatory capital.
9. Acquisition costs for insurance business
Acquisition costs are those costs that vary with and are primarily related to the acquisition of insurance contracts and are
expensed in the period in which they are incurred.
10. Staff retirement benefits
Gratuity
ICICI Bank pays gratuity to employees who retire or resign after a minimum period of five years of continuous service
and in the case of employees at the overseas locations, as per the rules in force in the respective countries. ICICI Bank
makes contributions to four separate gratuity funds, for employees inducted from erstwhile ICICI Limited (erstwhile ICICI),
employees inducted from erstwhile Bank of Madura, employees inducted from erstwhile The Sangli Bank Limited (erstwhile
Sangli Bank) and employees of ICICI Bank other than employees inducted from erstwhile ICICI, erstwhile Bank of Madura
and erstwhile Sangli Bank.