Heart Structure and Blood Flow

Structure of the Heart

• The heart is a muscular organ that pumps blood throughout the body
• It is divided into four chambers:
  • Right atrium (upper right chamber)
  • Right ventricle (lower right chamber)
  • Left atrium (upper left chamber)
  • Left ventricle (lower left chamber)

Blood Flow Through the Heart

• Deoxygenated blood enters the right atrium through the superior and inferior vena cavae
• Blood flows from the right atrium to the right ventricle through the tricuspid valve
• The right ventricle pumps blood to the lungs through the pulmonary valve
• Oxygenated blood returns to the heart through the pulmonary veins and enters the left atrium
• Blood flows from the left atrium to the left ventricle through the mitral valve
• The left ventricle pumps blood to the rest of the body through the aortic valve

Heart Function

• The heart pumps around 2,000 gallons of blood per day
• It beats around 100,000 times per day
• The heart rate is regulated by the autonomic nervous system
• The heart is a self-sustaining organ, meaning it can continue to beat even if it is removed from the body

Heart Valves

• There are four heart valves:
  • Tricuspid valve (between right atrium and ventricle)
  • Pulmonary valve (between right ventricle and lungs)
  • Mitral valve (between left atrium and ventricle)
  • Aortic valve (between left ventricle and aorta)
• Heart valves ensure blood flows in one direction and prevent backflow

Blood Pressure and Circulation

• The heart generates blood pressure through contraction and relaxation
• Blood pressure is highest in the aorta and decreases as it flows through the circulatory system
• The heart is responsible for maintaining blood pressure and circulating blood throughout the body

Structure of the Heart

• Heart is a muscular organ that pumps blood throughout the body
• Divided into four chambers: right atrium, right ventricle, left atrium, and left ventricle

Blood Flow Through the Heart

• Deoxygenated blood enters right atrium through superior and inferior vena cavae
• Blood flows from right atrium to right ventricle through tricuspid valve
• Right ventricle pumps blood to lungs through pulmonary valve
• Oxygenated blood returns to heart through pulmonary veins and enters left atrium
• Blood flows from left atrium to left ventricle through mitral valve
• Left ventricle pumps blood to rest of body through aortic valve

Heart Function

• Heart pumps around 2,000 gallons of blood per day
• Heart beats around 100,000 times per day
• Heart rate is regulated by autonomic nervous system
• Heart is a self-sustaining organ, meaning it can continue to beat even if removed from body

Heart Valves

• Four heart valves: tricuspid valve, pulmonary valve, mitral valve, and aortic valve
• Valves ensure blood flows in one direction and prevent backflow
• Tricuspid valve is between right atrium and ventricle
• Pulmonary valve is between right ventricle and lungs
• Mitral valve is between left atrium and ventricle
• Aortic valve is between left ventricle and aorta

Blood Pressure and Circulation

• Heart generates blood pressure through contraction and relaxation
• Blood pressure is highest in aorta and decreases as it flows through circulatory system
• Heart is responsible for maintaining blood pressure and circulating blood throughout body

Life Insurance Products

• Life insurance contracts provide protection and savings to customers.
• There are different types of life insurance products:
  • Term Assurance Products
  • Whole Life Products
  • Pure Endowment Products
  • Endowment Assurance Products
  • Money Back Products
  • Unit Linked Products
  • Accumulating with Profit Products
  • Annuity Products

Term Assurance Products

• A term assurance policy provides a lump sum benefit payment on the death of the insured during the term of the policy.
• The lump sum amount may be constant or increase/decrease by a pre-specified amount.
• No benefit is payable on survival of the policyholder till the end of the term.
• Some insurers offer benefits like return of premiums or a portion of it on survival of the policyholder at the end of the term.
• Suitable for those who require a high amount of life cover but are initially unable to pay high premiums.

Whole Life Products

• A whole life policy provides a lump sum benefit payment on the death of the insured at any time during their lifetime.
• The lump sum amount may be constant or increase/decrease by a pre-specified amount.
• A whole life policy is usually costlier than a term assurance policy.
• Suitable for those with moderate income who require considerable financial protection for their family.

Pure Endowment Products

• A pure endowment policy provides a lump sum benefit payment on the survival of the insured till the date of maturity of the policy.
• No benefit is payable on death of the life insured during the specified term of the policy.
• Rarely sold in India.

Endowment Assurance Products

• An endowment assurance policy is a combination of term assurance and pure endowment in either similar or different proportions.
• Provides a lump sum benefit payment on survival of the insured up to a known date and also provides a significant benefit on death of the insured before that date.
• Can be used as a means of repaying the capital on an interest-only loan.
• Can be used as a means of saving money for retirement.

Money Back Products

• A Money Back Policy provides a certain percentage of the specified sum assured at pre-specified periodic intervals.
• The sum assured along with accumulated bonuses is payable on death or at maturity.
• Suitable for those who require periodic payments during their lifetime to match their liabilities.

Unit Linked Products

• A unit linked product is a combination of insurance and investment.
• Provides risk cover and an opportunity to invest in various funds.
• The policyholder bears the investment risk.
• Charges are transparent and may include premium allocation charges, mortality charges, fund management charges, etc.

Accumulating with Profit Products

• An accumulating with-profits policy participates in the surplus/deficit arising out of specified business.
• Bonuses can be allocated as additional units or by changing the unit price.
• The guarantee provided is usually lower than that under a conventional with-profit policy.

Annuity Products

• An annuity policy is an insurance contract between the insurer and the annuitant.
• Provides a regular series of payments made at successive periods of time.
• Can be level, variable, or increasing at a fixed rate.
• Types of annuities include:
  • Annuity payable during the lifetime of the annuitant.
  • Annuity payable for a certain period and thereafter during the lifetime of the annuitant.
  • Annuity payable during the lifetime of the annuitant with return of purchase price on death.
  • Joint Life last survivor annuity.
  • Annuity increasing at a fixed rate.### Term Assurance Policy
• Cost is lower compared to endowment or whole life policy
• Claim is payable only in a small proportion of policies

Renewable Term Assurance Policy

• Insurer can charge extra premium to cover additional expected claims due to exercising option of renewal
• Renewal involves lower expenses than writing completely new business, resulting in savings for the insurer

Immediate Annuity

• No surrender value is offered
• Due to anti-selection risk, where annuitant may surrender annuity when having severe health problems and not expecting many more annuity payments

Exercise 1

• Arrange contracts in order of cost: Endowment Assurance Policy, Whole Life Policy, Money Back Policy
• Types of life annuity contracts offered by life insurers in India
• Whole life contract: savings or protection contract?
• Why pure endowment policies are not sold now by life insurers in India?
• Effect of special one-off reversionary bonus on PRE issues
• Option under term insurance policy more beneficial to life insurer: renew contract at end of term, convert policy into whole life contract, or convert policy into endowment assurance contract of same term

Office Premiums

• Calculation based on rate of mortality and rate of interest likely to be experienced and realized by insurer
• Net premiums arrived at as a quotient of value of benefits when divided by the appropriate annuity
• Mortality table selection is crucial, as it affects premium calculation
• Adverse mortality experience can lead to variation, and thus a provision is made to protect the insurer's interest
• This provision is known as 'mortality loading'

Effect of Interest Rates on Insurance Premiums

• Decrease in interest rate leads to increase in premium
• Increase in interest rate makes insurance more attractive

Loading in Premium Rates for Expenses

• Expenses are necessary for managing the business
• Initial expenses and renewal expenses are incurred
• Expenses are categorized into two groups: related to first-year premium income, and related to new sums assured
• Expenses during subsequent years are lower compared to the first year

Expression for Office Premiums

• Value of office premiums = Value of Benefits + Value of Expenses
• General expression for office annual premiums: P1 = S.Ax + (I2 - K2)S + K2.Sax / äx - (I1 - K1) - K1äx

Bonus Loading in Premium Rates

• Provision in premium to provide for bonuses to policyholders
• Bonus is distributed to policyholders after periodic actuarial valuations
• Bonus loading is the addition to each premium for an anticipated annual rate of bonus

With Profit and Without Profit Policies

• With profit policies: policyholders participate in profits, and bonus loading is included in premiums
• Without profit policies: no bonus loading in premiums, and no right to share in profits### Policy Values
• The previous chapter discussed the values of benefits, expenses, and gross premiums at the inception of insurance.
• At the inception of a contract, the values of benefits and expenses are equal if the premiums are just sufficient.
• However, the situation changes after an insurance policy has run for some years, with some premiums already paid.

Key Concepts

• Gross Premiums: The total amount of premiums paid, including the expenses and benefits.
• Benefits: The payments made to the policyholder or their beneficiaries in case of a claim.
• Expenses: The costs incurred by the insurer in operating the business, including administrative costs, marketing, and other overheads.

Key Takeaways

• The values of benefits and expenses are equal at the inception of a contract if the premiums are just sufficient.
• The situation changes after an insurance policy has run for some years, with some premiums already paid.