ICICI Bank 2014 Annual Report Download - page 160

F72
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 based on management estimates or 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/
actuarial valuation. 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.
In the case of life insurance business, benefits paid comprise of policy benefits and claim settlement costs, if any. Death
and rider claims are accounted for on receipt of intimation. Survival and maturity benefits are accounted when due.
Withdrawals and surrenders under non linked policies are accounted on the receipt of intimation.
6. Liability for life policies in force
In the case of life insurance business, the liabilities for life policies in force are calculated in accordance with accepted
actuarial practice, requirements of Insurance Act, 1938, regulations notified by the Insurance Regulatory and Development
Authority of India and Actuarial Practice Standards of the Institute of Actuaries 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 50.00% of the aggregated premium, written on policies during the twelve months preceding the balance
sheet date for fire, marine, cargo and miscellaneous business and 100.00% 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, morbidity, 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 greater of liability calculated using discounted cash flows and unearned premium reserves is held for the unexpired
portion of the risk for the non-unit liabilities of linked business and attached riders.
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.
An unexpired risk reserve and a reserve in respect of claims incurred but not reported are created, for one year renewable
group term insurance.
The interest rates used for valuing the liabilities are in the range of 4.87% to 5.77% per annum (previous year – 4.43% to
6.26% per annum).
Mortality rates used are based on the published “Indian Assured Lives Mortality (2006 – 2008)”. 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 but
with an allowance for any expected worsening. Per policy renewal expenses for regular premium policies are assumed to
inflate at 4.84% (previous year – 5.41%).
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.
forming part of the Consolidated Accounts (Contd.)
schedules