EXECUTIVE SUMMARY
Insurance is not the sale of products, but servicing customers. It is a system, by which the losses suffered by a few are spread over many, Exposed to similar risks. Insurance is a protection against financial loss arising: on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the premiums collected from the insuring public and the Insurance Companies act as trustees to the amount collected. The very fundamental principle of spreading of the risk is actually practiced by the insurance companies by reinsuring the risks that they have insured. The opening up of the Insurance Sector to Private Companies, has made available more products and world class service to Indian Customer. This project has been made with an objective to give an insight into various facts of General Insurance sector in India. An attempt has been made to explain the apex body of General Insurance. i.e.
INDEX
Serial no.
Topic
Page no.
1
Origin of Insurance
1
2
A brief history of the Insurance sector
2
3
Insurance Sector Reforms
5
4
Insurance Regulatory Authority
7
5
Insurance Industry Classification
8
6
4 I’s of Insurance
10
7
General Insurance
12
8
Product levels
15
9
Frequent Terms Used
20
INDEX
Serial no.
Topic
Page no.
1
Origin of Insurance
1
2
A brief history of the Insurance sector
2
3
Insurance Sector Reforms
5
4
Insurance Regulatory Authority
7
5
Insurance Industry Classification
8
6
4 I’s of Insurance
10
7
General Insurance
12
8
Product levels
15
9
Frequent Terms Used
20
Origin of Insurance Whenever there is uncertainty there is risk. We do not have any control over uncertainties which involves financial losses. The risk may be certain events like death, pension, retirement or uncertain events like theft, fire, accident, etc.
Insurance is a financial service for collecting the savings of the public and providing them with risk coverage. It comes under service sector and while marketing this service due care is taken in quality product and customer satisfaction. The main function of the Insurance is to provide protection against the possible chances of generating losses.
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a
Brief History of the Insurance Sector The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central
1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies’ viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company. INSURANCE SECTOR
The opening up of Insurance sector was a part of the on going liberalization in the financial sector of India. The changing face of the financial sector and the entry of several companies in the field of life and non life Insurance segment are one of the key results of these liberalization efforts. Insurance business by way of generating premium income adds significantly to be the GDP. Over the past three years, more than thirty companies have expressed interest in doing business in India. The IRDA (Insurance Regulatory Development Authority) is the
The entry of several private insurance companies, particularly international insurance companies, through joint ventures, will speed up the process of insurance mobilization. The competition will unleash new schemes and benefits, which will give consumers a better Chance to save as well as insure. The regulatory system in India is relatively new and takes some more time to make the Insurance sector a perfectly competitive one. Insurance Regulatory Authority of India issued regulations on 15 subjects which included appointed. Actuary, actuarial report, Insurance agents, Solvency margins, reinsurance, registration of Insurers, and obligation of insurers to rural and social sector, investment and accounting procedure. The reform in Insurance in India is guided by factors like availability of a variety of products at a competitive price, improvement in the quality of customer services etc. Also the employment opportunities in the Insurance sector wil1 increase as major players set their business plans in India. The policy of the government to open up the financial sector and the Insurance sector is expected to bring greater FDI inflow into the country. The increase in the investment limit in this vital
Insurance Sector Reforms: In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend its future, direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector.
In 1994, the committee submitted the report and some of the key recommendations included:
Structure: 1. Government stake in the insurance Companies to be brought down to 50%. 2. Government should take over the holdings of GlC and its subsidiaries so that these subsidiaries can act as independent corporations. 3. All the insurance companies should be given greater freedom to operate.
Regulatory Body: 1. The Insurance Act should be changed. 2. An Insurance Regulatory body should be set up. Controller of Insurance (Currently a part from the Finance Ministry) should be made independent.
Investment: 1. Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. 2. GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time.)
Customer Service: 1. LIC should pay interest on delays in payments beyond 30 days. 2. Insurance companies must be encouraged to set up unit linked pension plans. 3. Computerization of operations and updating of technology to be carried out in the
Insurance Regulatory Authority On the recommendations of the Malhotra Committee, government has set up an interim Insurance Regulatory Authority (IRA), with a view to activate an insurance regulatory apparatus essential for proper monitoring and control of the insurance industry. The IRA is headed by a chairman who is also Controller o0f insurance and chairman of TBC. The other members of the IRA, not exceeding seven in number of whom not more than three shall serve full time, shall be nominated by the central government.
INSURERS:
Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:
Life Insures:
INSURANCE INDUSTRY: CLASSIFICATION
INSURANCE
LIFE INSURANCE
GENERAL INSURANCE
SOME PLAYERS IN THE INDUSTRY:
Life Insurance
General Insurance
Life Insurance Corporation of India.
General Insurance Corporation of India. 1.
Oriental Insurance Company Ltd.
2.
New India Assurance Company Ltd.
3.
National Insurance Company Ltd.
4.
United India Insurance Company Ltd.
New Entrants ICICI Prudential Life Insurance Ltd.
Bajaj Alliaz General Insurance Company Ltd.
Tata AIG Life Insurance Corporation Ltd.
Reliance General Insurance Company Ltd.
ING Vysya Life Insurance Corporation Ltd.
Tata AIG General Insurance Company Ltd.
Om
Kotak
Mahindra
Life
Insurance Royal Sundaram Alliance Insurance Company
4 I’s of Insurance Service The 4 I’s refers to the different dimensions/ characteristics of any service. Unlike pure product, services have its own characteristics and its related problems. So the service provider needs to deal with these problems accordingly. The service provider has to design different strategies according the varying feature of the service. These 4 I’s not only represent the characteristics of different services but also the problems and advantages attached to it.
These 4 I’s can be broadly classified as: •
Intangibility
•
Inconsistency
•
Inconsistency
Service quality is often inconsistent. This is because service personnel have different capabilities, which vary in performance from day to day. This problem of inconsistency in service quality can be reduced through standardization, training and mechanization.
•
Inseparability
Services are produced and consumed simultaneously. Consumers cannot and do not separate the deliverer of the service from the service itself. Interaction between consumer and the service provider varies based on whether consumer must be physically present to receive the service.
GENERAL INSURANCE With the opening up of the insurance industry to the private sector, the need for a strong, independent and autonomous Insurance Regulatory Authority was felt. As the enacting of legislation would have taken time, the then Government constituted through a Government resolution an Interim Insurance Regulatory Authority pending the enactment of a comprehensive legislation. The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end the monopoly of the Life Insurance Corporation of India (for life insurance business) and General Insurance Corporation and its subsidiaries
2. GENERAL INSURANCE: General insurance means managing risk against financial loss arising due to fire, marine or miscellaneous events as a result of contingenc ies, which may or may not occur.
General Insurance means to “Cover the risk of the financial loss from any natural calamities viz. Flood, Fire, Earthquake, Burglary, etc.. i.e. the events which are beyond the control of the owner of the goods for the things having insurable interest with the utmost good faith by declaring the facts about the circumstances and the products by paying the stipulated sum , a premium and not having a motive of making profit from the insurance contract.”
Some of the General Rules:
3. Fraud : If any claim under the policy may be in any respect fraudulent or if any fraudulent means or device are used by the insured or any one acting on the insured’s behalf to obtain any benefit under the insurance policy, all the benefits under the insurance policy may be forfeited.
4. Few basic principles of general insurance are : 1. Insurable interest 2. Utmost good faith 3. Subrogation 4. Contribution 5. Indemnity
5
Risks of loss not covered under general insurance are: The loss or damage or liability or expenses whether direct or indirect occasion by
happening through or arising from any consequences of war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion revolution, civil
Product levels:
In this figure there is a nucleus or core in the center, which is supported by series of tangible and intangible features and benefits and these form a cluster around the core product.
E X P
AUGMENTED
Level
Type
of Contents
Insurance sector
service 1
Core service
Basic service product
•
Life
•
Non-life
insurance
policy 2
Expected
Basic
product
and
minimum
•
After sales service
service
purchase conditions that must be
•
Low
met. 3
claim
settling
period.
Augmented
Something
service
enables
one
different, product
which to
be
•
Technology
•
Online
differentiated from other
premium
payment •
Payment through credit cards
•
Standing instruction to
Today the technology is boosting in each and every field. Insurance is not an exception. Companies have started providing customers facility of online payment of premium through their websites. They also provide online assistant to the customer the policy status and how to calculate the premium. To calculate the premium they just need the present age, the type of police, sum assured, and accident covered if any. By filling in this information you can calculate the amount of premium you have to pay. The customer can pay their premiums by means of credit cards or can also give standing instruction to the bank in order to pay their monthly premiums. The insurance companies also provide loan facilities against their policies. At present loans are granted on unencumbered polices as follows:
•
Up to 90% of the Surrender Value for policies, where the premium due is fully paidup, and
•
Up to 85% of the Surrender Value for policies where the premium due is partly paidup.
FREQUENT TERMS USED Agent: An insurance company representative licensed by the state, who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder far the insurer.
Actual Total Loss: It is a loss where the goods are completely lost and become irrecoverable
Additional cover: An insurance policy extended to cover additional risk perils such as strikes. Riots and Civil commotion etc on payment of extra premium.
Agreed value policy:
Coverage: The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
Cargo insurance: A generic term used in both inland marine and ocean marine insurance to designate the type’s of insurance available to provide coverage for cargo that is being transported by truck, rail, air, ship, or boat.
Certificate of Insurance: A statement of coverage issued to an individual insured, specifying the insurance benefits and principal provisions applicable to the member.
Claim: The formal request by a policyholder or a claimant for payment of loss under an insurance policy.
Insurable Interest: A condition in which the person applying for insurance and the person who is to receive the policy benefit will suffer all emotional or financial loss, if any untouched event occurs. Without insurable interest, an insurance contract is invalid, Insurance: Social device for minimizing risk of uncertainty regarding loss by spreading the risk over a large enough number of similar exposures to predict the individual chance of loss.
Net Premium: The portion of premium rate which is designed to cover benefits of the policy,
excluding expenses, contingencies and profit.
Policy: Is the legal document that has the conditions of the insurance contract.
Public Sector Subsidiaries I.
Oriental Insurance Company.
The Oriental Insurance Company Ltd. (OICL) is one of the leading General Insurance companies in India and is a subsidiary of the General Insurance Corporation (GIC) of India. It is one of the oldest Insurance. If companies and was established in the year 1947. The Company transacts all kinds of non-life insurance business ranging from insurance covers for very big projects to small rural insurance covers. OICL, is the –
•
First to have underwritten the biggest Grass Root Refinery Project, Reliance Jamnagar Refinery.
•
First to have issued a Package Policy under mega risk to PSU Oil giants. .
•
First to have issued Advance Loss of Profits policy in India.
•
First to have issued directors & Officers liability policy in India. First to introduce Kidnap & Ransom cover in India.
THE PROFILE The Oriental Insurance Company' Ltd. (OICL) is one of the leading General Insurance companies in India and is a subsidiary of the General Insurance Corporation (GIC) of India. It is one of the oldest Insurance companies and was established in the year 1947. The Company transacts all kinds of non-life insurance business ranging from insurance covers for very big projects to small rural insurance covers. OICL has its Head office in New Delhi, the capital of India. The Company has 21 Regional Offices, 311 Divisional Offices and 635 Branch offices in various cities of the country.
Reinsurance connections are spread all over the world. The Company has a very high reputation in the Reinsurance market.
OICL specializes in devising special covers for large projects like Power Plants,
VALUES
o
Highest priority to customer needs.
o
High standards of public conduct.
o
Transparency in operations.
COMMITMENTS TO THE CITIZENS
o
In areas coming within competence of GIC respond to all commercially viable general insurance requirements of the citizens, not hitherto available within three months from the date on which such a demand is received.
o
In areas covered by tariff, appropriate proposals will be submitted to the Tariff Advisory Committee with appropriate comments within two months.
CORPORATE OBJECTIVES:
o
To serve better the insurance needs of the entire community, keeping CUSTOMER as the focus.
o
To serve better the insurance needs of the entire community, keeping CUSTOMER as the focus.
o
To manage Business profitably, Manage funds judiciously and deploy investible funds for optimum Yield.
o
To manage Business profitably, Manage funds judiciously and deploy investible funds for optimum Yield.
To work towards minimization of losses and develop Risk Management
PRODUCTS:
The various products can be grouped under the following categories:
o
Individuals/Family
o
Marine
o
Professionals
o
Business/Office/Traders
o
Engineering/Industry
o
Agriculture/Sericulture/Poultry
o
Animals/Birds
o
Aviation
o
Motor Vehicle – Private/Commercial Health-Mediclaim/Overseas Mediclaim/Personal Accident
Documents requirement for various types of Claims
Different documents are required for settling different types of claims. The most commonly required ones are mentioned under each claims type listed below. Your full cooperation to surveyor/Investigator appointed by the Company would enable prompt settlement of claims.
o
Claim due to Fire and/or Explosion.
o
Claim due to Flood, Storm, Cyclone, Earthquake, and Subsidence/Landslide.
o
Claim due to Riot, Strike, Malicious Damage and Terrorism (RSMDT).
o
Marine Inland Transit Loss of cargo/machinery.
o
Marine Loss of cargo/machinery for export'
o
Marine Loss of cargo/machinery during Import Claim due to Electrical/Mechanical/Electronic Breakdown/mishandling/
II. The New India Assurance Company. Established by Sir Dorab tata in 1919, New India’ was the first fully Indian owned insurance company in India. There were nearly 150 insurance firms in India - including ones from France, the UK and America. These were operated through managing agencies in India largely held by Indian business houses.New India is a leading global insurance group, with offices and branches throughout India and various countries abroad. The company services the Indian subcontinent with a network of 1,130 offices, comprising 26 Regional offices, 366 Divisional offices and 738 Branches. With approximately 25,000 employees, New India has the largest number of specialist and technically qualified personnel at all levels of management, who are empowered to underwrite and settle claims of high magnitude New India has historically been a frontrunner in several diverse fields of business and industrial activity. New India are lead underwriters of India's Space programn1e having insured several INSAT and other, satellites. New India are pioneers in Engineering insurance, Financial risks insurance and are now offering customized Risk Management
II. The National Insurance Company Since incorporation in the year 1906, National Insurance~ Company has been carrying out general insurance business under private management until 1972, the year of its nationalization. In the same year 22 foreign and 11 Indian Insurance Companies were amalgamated with National Insurance Company Limited, as a subsidiary company of General Insurance Corporation of India Headquartered in Calcutta it has an organizational network of over 964 offices with around 20,077 trained workforces. The company also has operations in Hong Kong and Nepal and ranks among the top global business insurers. Later on in 2002, with the passage of Insurance amendment Bill (2002), National Insurance Company has been delinked from GlC and. has been functioning as an independent company Its product range includes motor vehicle insurance; fire insurance on buildings and other assets; various crime covers like burglary and theft of cash; machinery breakdown cover for industrial equipment; transit damage cover for imported or
IV. United India Insurance Company United India Insurance is one of the four subsidiaries of the General Insurance Company carrying on general insurance business with its head office at Chennai. Later on in 2002, with the passage of Insurance amendment Bill (2002), United India Insurance has been Del inked from GIC and has been functioning as an independent company.
UI spans the country with a network of 1123 offices and manpower of Over 21,000 employees. The organizational structure comprises 22 regional offices, 327 divisional offices.., and 777 branch offices, supported by 21,505 employees. ICRA has maintained the iAAA rating, indicating the claims paying ability of United India Insurance (UII) to be of the highest order. The rating takes into consideration the favorable prospects for the domestic general insurance industry following the deregulation of the sector.
PRIVATE COMPANIES 1.
Bajaj Allianz General Insurance Company:
Allianz AG:
Allianz group was founded in 1890 and is one of the world's leading insurance companies with over 100 year's experience in insurance and related services. It is also the largest insurer in Europe. Allianz group has multi-local structure and presence in over 70 countries. The key business areas of Allianz group include General Insurance (property, engineering,
marine,
motor,
casualty
and
miscellaneous),
Reinsurance,
Risk
Management, Life & health insurance, Asset Management and Pension Funds Management.
Bajaj Auto Ltd.
Bajaj Auto Ltd the flagship company of Bajaj Group was incorporated in 1945 as
2. Royal Sundaram General Insurance Company Limited: Sundaram Finance
Sundaram Finance Limited (SF) was established In 1954 with a paid-up capital of Rs. 0.02 million, primarily to assist the development of Roa d Transport Industry. SF has been providing financial assistance to road transport operators for acquiring commercial vehicles under hire purchase system. Emerging as the leader in the industry, SF has been staying at that position for over four decades. SF diversified into equipment leasing in 1981.
Royal & Sun Alliance
Royal & Sun Alliance is one of the world's leading international Insurance companies. The Sun was established in 1710 and is the oldest. Insurance company in existence still
3. ICICI Lombard General Insurance Company: ICICI ICICI Ltd. was established in 1955 by the World Bank, the Government of India and the Indian Industry, to promote industrial development of India by .Providing project and corporate finance to Indian industry. Since inception, ICICI has grown from a development bank to a financial conglomerate and has become one of the largest public financial institutions in India. ICICI has thus far financed all the major sectors of the economy, covering 6,848 companies and 16,851 projects.
Lombard
Lombard Canada Ltd., is a leading insurance management company responsible for providing insurance management services for all of the Lombard group's commercial,
4. Tata AIG General Insurance Company Limited: TATA Group
Tata Enterprises with 82 companies, spread over seven sectors and with an annual turnover exceeding US $ 8.8 billion, employs more than 262,000 people. Tata Group has shown over years that it is a value driven company and has" pioneering contributions in various fields including insurance, activation, iron and steel. Tata companies have forged a number of global alliances with eminent international partners in several fields. In terms of capital market performance as many as 40 listed Tata companies account for nearly 5% 6fthe total market capitalization of all listed companies.
TATA Group in Insurance
AIG
“American Insurance Group is the leading U.S. based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. Its member companies write a wide range of commercial and personal insurance products through a variety of distribution channels in over 130 countries and jurisdictions throughout the world.
AIG's global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products.
The Joint Venture
Tata AIG General Insurance Co. Ltd. has a start-up capital of Rs. 125 crores of
Bajaj Allianz General Insurance Products o
Personal Accident
o
Hospital Cash Daily Allowance Policy
o
Health Guard
o
Critical Illness
o
Burglary Insurance
o
Householders Insurance
o
Travel Companion
Tata AIG General Insurance Company Products
o
Executive Guard
o
Family Guard
o
Travel Guard
o
Home Secure
o
Business Guard Sanjeevani
o
Business Guard Jyothi
5. Reliance General Insurance Company Limited: Reliance Group'
Reliance 'Group is India's largest business house has annual sales turnover of Rs. 41,280 crore (US$ 9,003 million) and has posted a net profit of Rs. 2,940 crore (US $ 641 million) for the 12-month period ending June 30, 2000. The Group has total assets of Rs. 52,100 crore and net worth of Rs. 22,415 crore. It has a large investor base of over 5 million, as well as a large customer base in retail (textiles, LPG, Cellular phones, etc.) and commercial segments.
Reliance Industries Limited, India's largest private sector enterprise, is a, major player in the Indian petrochemicals sector. Relianc6~s operations capture value addition at every stage from producing crude oil and gas to polyester and polymer products and are
Iffco Tokio General Insurance Company ltd
Iffco
Indian farmer’s fertilizers cooperative limited was created on Nov 3, 1967 as a multi unit cooperative society engaged in production and distribution of fertilizers the byelaws of the society provide a broad framework for the activities of IIFCO as a cooperative society the main emphasis is on production and distribution of fertilizers
The Tokio marine and fire insurance
The Joint Venture
IFFCO TOKIO General Insurance Company is a joint venture promoted by India Farmers Fertilizers Co-Operative, Tokio Marine and fire Insurance Company, Japan, the fifth largest insurance company in the world, Krishak bharathi Cooperative ltd. (KRIBHCO), and Indian potash. Their contribution to the Rs.100 crore equity capitals is 49 percent, 20 percent and 5 percent respectively. The head Office is in Delhi and operating Office are in about 20 cities.
IFFCO Tokio Insurance Products
•
Home & Family Protector
•
Standard Fire & Special Perils
•
Burglary and House Breaking
•
Personal accident
•
Trade Protector
Market Share As by this time we are well versed with all the General Insurance companies both Public and private we know how each company contributes serving the customers and also generating revenue through it. We also know that General Insurance contributes towards the Gross Domestic Profit, but now let us see how these companies individually contribute towards the Gross Domestic Profit through the way of Market Share of each company both Private & Public.
As we can see in the Pie Charts a comparison of 3 consecutive years have been taken which are 2003-04, 2004-05 & 2005-06.
Public Companies have been dominating the General Insurance Market since a long time, the market share of Private companies have been improving in the last few years by approximately 6 % each year, but then too Public sector companies
Companywise Market Share of Gross Premium Underwritten (In India)
Industry Total - 2003-04
New India; 25.90%
National; 21.87%
Industry Total - 2005-06
Industry Total - 2004-05
New India; 24.02%
Oriental; 18.13%
Private Co's Total - 2003-04
United India; 15.45% Private Co's; 26.57%
Private Co's; 20.29%
Private Co's; 14.46%
Oriental; 17.26%
National; 17.26%
United India; 16.80%
National; 21.68%
United India; 19.63%
New India; 23.46%
Oriental; 17.21%
Private Co's Total - 2005-06
Private Co's Total - 2004-05
Cholamandalam; 4.28% Bajaj Allianz; 24.06%
Bajaj Allianz; 21.08% TATA-AIG; 13.18%
TATA-AIG; 15.64%
HDFC Chubb; 4.94%
Royal Sundaram; 11.42%
Royal Sundaram; 9.30%
HDFC Chubb; 5.17%
ICICI Lombard; 22.43%
Reliance; 7.13% IFFCO Tokio; 13.08%
ICICI Lombard; 24.88% Reliance; 4.54%
IFFCO Tokio; 14.09%
4
Bajaj Allianz; 23.73%
Cholamandalam; 4.78%
Cholamandalam; 4.06%
TATA-AIG; 11.28%
Royal Sundaram; 8.36%
Reliance; 2.99% IFFCO Tokio; 16.51%
HDFC Chubb; 3.73%
ICICI Lombard; 29.34%
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITARIAN Insurance Regulatory and Development Authority Act, 1999, came into being from 19/04/2000.
Objects are stated in Act are as follows: "An Act to provide for establishment of Authority to protect interests of holders of insurance policies to regulate, promote and ensure orderly growth of insurance industry and for matters connected there with and further to amend Insurance Act, 1938, Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972".
Composition:
Powers and Function of Authority
1. To regulate, promote and ensure orderly growth of insurance and re- insurance business 2. To issue a certificate of registration, renew, modify, withdraw, suspend or cancel such registration of applicant, i.e. insurance company 3. To prepare a code of conduct for agents, surveyors and loss accesses and other intermediaries who take part in insurance business 4. To exercise all powers and perform all functions of controller of Insurance under Insurance Act, 1938 5. To protect interest of policy holders in matters concerning assignment of policy, settlement of claims, terms and conditions of contract etc. 6. To promote efficiency in conduct of insurance business 7. To promote and regulate professional organizations connected with insurance business 8. To regulate investment of funds of insurance companies
Insurance Advisory Committee:
Authority has power to appoint a committee to provide guidance to Authority and committee is called Insurance Advisory Committee. This committee contains not more than 25 members excluding ex-officio member representing interest of commerce, trade industry, agriculture, surveyors, agents, intermediaries etc. Chairperson and members ~f Authority are ex-officio members of Insurance Advisory Committee. 15) Code of conduct for insurance agent: Every insurer agent shall, •
Identify himself and insurance company of whom he is an agent
•
Disclose his license to prospect on demand
•
Give requisite information in respect of insurance product offered for sale by his insurer and into account needs of prospect while recommending a specific 'plan.
•
Disclose scales of commission payable to him if asked by prospect
Products The different types of General insurance products are listed below. While most policies are optional that is at the behest of the insured, some are mandatory. The mandatory ones are:
•
Motor Insurance
•
Public liability (for corporate class)
Other policies include:
Fire insurance
o
Building or flat
o
Furniture fixtures & other content’s
Marine Cargo Insurance
o
Cargo In Transit
o
Cargo Declaration Policy
Marine Hull Insurance
Inland vessels ocean going vessels, fishing & sailing vessels, freight at risk, construction of ships, voyage insurance of various vessels, ship breaking , insurance Awaiting break up, insurance Oil & energy in respect of onshore & offshore risks including construction risk.
Non – Traditional / Rural
o
Cattle / Hens
o
Crop Water Pump for agriculture
The premium for motor vehicles is decided on the following factors:
o
Value of the vehicle
o
Location where it is to registered .places having higher claim rates (like Mumbai) are likely to have higher premium
The premium for heavy commercial
o
Value of the vehicle
o
Gross laden weight, that is, the carrying capacity of the vehicle.
For HCV’s the driver is also insured along with the vehicle. A charge of rs.15/- is made as premium for the driver. For all sorts of vehicles insured, the policy would not cover the use on hire , reward or organized racing ,speed reliability trails and speed testing.
There is (NCB) No Claim Bonus applicable for each year an insured person does not claim .It is accrued as a 5% deduction from the premium amount for the next year,
Fire Insurance
Fire insurance is a comprehensive policy, which goes beyond only fire accidents. The policy, besides covering loss on account of fire, also covers loss on account of the following
o
Earthquake
o
Riots
o
Strikes
o
Malicious Intent
o
Floods
Fire insurance only can be taken by the owner of the premises to be insured. A tenant cannot insure rented premises since he does not have insurable interest. But the tenant has the option of insuring the contents of the premises. The premium is based on “Good faith” and depends on the value of property being insured.
Burglary
Burglary insurance covers all losses arisen out of burglary committed in one’s premises. The only condition for lodging a claim on the insurance party is that there should be a “forced entry” in to the premises. A forced entry may in the form of physical damage to the entry area, or to a person or entry gained through coercion. In this case too, the policy has no limitations and it is the right of the insured to decide upon the value of the insurance cover
Overseas Mediclaim Policy – Travel Insurance
Policies issued in India under Overseas Mediclaim Scheme, as approved by Reserve Bank Of Indian residents traveling abroad for any approved visits viz. Business, Study Tour, Specialized training conferences, Employment or higher studies. Premium on such policies may be collected in rupees but for employment in foreign currency.
The policy provides for following Sections:1) Medical Cover 2) Repatriation Of Remains 3) Checked Baggage Loss / Baggage Delay 4) Passport Loss 5) Personal Accident – Overseas 6) Personal Liability 7) Hijack Relief Benefit
The plan available now with various companies are however not the same as each company has introduced. Some variation in the cover to suit the varying requirements. Types of overseas Mediclaim insurance policy
1) Individual Overseas Mediclaim insurance policy 2) Student Overseas Mediclaim insurance policy
CHANGING SCENARIO OF GENERAL INSURANCE MARKET
'Looks to the future with confidence and optimism' Brief the history of general Insurance.
In India General Insurance business started, Marine Insurance started on later part of the 17th century. Before nationalization in 1947 we have 147 insurance companies, foreign and Indian both. But during there nationalization, in 1973 we have 107 companies that merge into four companies, i.e. taken over by Government. General Insurance Corporation of India (GIC) was set up in 1973 as a holding company, with four subsidiary operating companies - National Insurance co Ltd., New India
The GIC and its subsidiaries have a workforce of approximately 86,000 In 1973 tainted at various levels through in house training institutions. Now the total number of employees went up. The industry has also promoted the National Insurance Academy (NIA), which is the premier training institute in insurance, catering not only to Indian Nationals but also to select foreign nationals. The industry issues around 23 million documents and settles 2 million claims every year. Country wide computerization in the recently past has made the task of policy- holder's servicing easier and rapid. At the same time, profitable lines and premium components increases and we became a investment company.
Where does Indian Insurance sector stand compared to International Insurance Sector?
Technologically, Indian insurance sector is quiet comparable with the international sector. Our vast resources of skilled and technical manpower, huge market potentiality and technical know-how - all are comparable with the international market.
The Schemes
Recognizing its organizational strengths, the Govt. of India has also entrusted the corporation with the administration of various schemes for social melioration and public welfare. Social security schemes benefiting millions of Citizens below the poverty line. Personal Accident Insurance and Hut Insurance are operated all over the country for which the premiums are paid by the Government. The GIC administers on behalf of Government, the crop Insurance scheme for areas and crops notified under the crop Insurance Scheme. Various low cost mass insurance policies have been evolved over a period of time, e.g. 'Jan Arogya Bima Policy'. Role General Insurance Industry is playing in the growth of economy of the country:
The General Insurance Industry has an enviable track record among public sector units. It has a consistent profit and dividend paying record accompanied by a steady growth in its financial resources. Through investments in the- Government sector and: socially - oriented Sectors the
GIC'S International operation:
GIC'S international operations span over 31 countries around the globe. The reinsurance expertise built over a long period has made the Indian Insurance Industry a globally acknowledged reinsurer of repute GIC'S risk management skill has been backed by specialists with a vast insurance experience.
Thus, the technical and underwriting skills have been acknowledged in the international market. The corporation operates in 17 countries through branches and agencies, whereas in another 14 countries, it has subsidiaries and associate companies. The GIC has a subsidiary company known as 'India International Pvt, Ltd.,' operating in Singapore and a joint-venture company, Kenindia Insurance co. Ltd.
The impact of liberalization of economy in the activities of GlC. With the liberalization of economy, General Insurance in India is poised for a quantum
It is expected that the investment portfolio will touch around Rs. 2,50,000 millions by the end of the next decade, with the strength built up over the years since nationalization, GIC new looks to the future with confidence and optimism, takes on global chal1enge with its high standard of service, innovative initiative and a compelling social perspective.
GIC's plan - in new business areas:
The two new areas that GIC is getting into are the areas of health care and crop insurance. For the health care business, the corporation has received permission to set up a separate management services company. GIC has plans to increase the scope of cover in health care, personal accident and crop insurance and will require expertise in pricing the products.
The Research & Development activities:
They have just entered these areas and for the coming five years we are investing
TRENDS Trends in any sector basically refers to the up gradations or acquiring new technologies which has replaced the conventional methods in any organizations
In Today’s automated and modernized era any organization cannot take a chance by not maintaining pace with the competition.
With the passage of time and taking into consideration today’s needs and changing scenario insurance companies should also adopt new technology i.e. it should be trendy enough to meet customer needs and expectations.
Trends or use of technology should be such that it is eco friendly enough to be used by customers. Today, right from a grocery shop to I.T sector technologies is explored to the fullest
E-Business or E-commerce has sown its seeds in every sector of business which is one of
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Internet:
Internet usage has drastically improved in the last decade. There was a tremendous increase in the use of technology by GIC during the late 1990’s. The companies Launched its website in the mid 1990’s to offer basic services such as modifying policies (change of address, change of nominee, etc) and querying the status of the policy. But today, the internet has completely changed the service delivery process. Internet is today used to even sell insurance policies. Internet is, in fact, proving to be one of the widely used distribution networks for selling insurance policies. Also internet is used for sending premium notices to policy holders through e-mails.
Also GIC has a special feature on its website. It has a premium calculator which accurately displays the amount of premium month wise and the remaining balance. One just has to enter the age, name of the insurance policy, the sum assured and whether there is an accident cover or not. By keying in this information, the entire premium amounts are shown within no time. This has helped the customer in a way so that he/she doesn’t have to travel all the way to the branch to ascertain the amount of premium to be paid.
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Electronic Clearance Service (ECS):
Almost all the big organizations today provide the ECS facility to its customers. A policy holder having an account in any bank which is a member of the local clearing house can opt for ECS debit to pay premiums. The advantage here is that once the option is exercised, the policy holder need not visit a branch for paying the premium or collecting the receipts. On the day indicated by the policy holder, the premium amount will be directly debited to the bank account of the policyholder and the receipt will be issued by the designated branch office.
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Bank ATM’s:
Many insurance companies have a tie-up with commercial banks so as to enable policyholders to use the facility of paying premiums through the bank ATM’s. ICICI Lombard has a tie up with ICICI bank; Bajaj Allianz has a tie-up with Corporation bank and UTI Bank.
Claims The Settlement of claims constitutes one of the important functions in an insurance organisation. The proper settlement of claims requires a sound knowledge of thee law, principles and practices governing insurance contracts and in particular a thorough knowledge of the terms and conditions of the standard policies and various extensions and modifications there under. The procedure in respect of claim a under various classes of insurance follows a common pattern and may be considered under 3 broad headings
Preliminary procedure It is essential that early notification of the loss is received by insurance undue delay in notification would adversely affect the position of the insurer. However if there is any delay in notification or not or weather is material will be ultimately decided by the courts based on the facts of the individual cases The notice of loss condition in liability policies provides for two aspects a.) Notification of the happening of the accident immediately followed by b.) Notification of the receipt of claim or suit filed against the insured.
Procedural On receipt of intimation of loss or damage insurers chec k that: a.) the policy is in force on the date of occurrence of the loss or damage b.) The loss or damage is by a peril insured by the policy. c.) Notice of loss received without undue delay. After this check up the loss is allotted a number and entered in the claims register.
Claim Forms The contents of the claim form vary with each class of insurance .In general the claim in general the claim form is designed to elicit full information regarding the circumstances of the loss such as date of loss, time, cause of loss, extent of loss etc claim forms are invariably sued in fire and miscellaneous insurance.
Investigation and Assessment On receipt of the claim form duly completed from the insured the insurers decide about the investigation and assessment of loss if the loss is small the investigation to determine the cause and extent of loss is done by an officer of the insurers. Some times even this
Arbitration It is distinct from litigation and is a method of settling disputes under contract in accordance and conciliation act 1996.
Settlement The claim is processed on the basis of Claim form Independent report from Surveyors, legal opinion, medical opinion etc as the case may be. Various documents furnished by the insured. Any other evidence secured by the insurers If the claim is in order settlement is effected by cheque the payment is entered in claims register as well as in the relevant process record. Appropriate recoveries are made from the insurers if any.
Case Study 26/7/2005 – Mumbai under water
Mumbai will never be the same again. And so will the insurance sector in Mumbai after the 26/7 floods. Torrential rains which killed thousands and rendered many homeless, also led to loss of business and vehicles.
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The facts:
As fallout of the torrential rains, the non-life insurance sector was flooded with more than 10000 claims totalling over Rs. 2000 crores. However, these did not include the 50000 cars that have been damaged in Maharashtra.
While the top four private sector general insurance companies, ICICI Lombard General Insurance, Bajaj Allianz General Insurance, Iffco Tokio General Insurance and Tata AIG have together received claims worth over Rs 1,000 crore; the four state-owned general
Insurance firms set up special cells to visit victims and settle claims. In many firms, the special teams worked round-the-clock to take stock of the loss and speed up the settlement process. Bajaj Allianz settled claims worth about Rs 200 crore without any documentation, to the victims of the recent floods in Mumbai.
After the natural calamity, the Finance Minister sought speedy redressal of claims. He directed the Chairmen and Managing Directors of the four public sector general insurance companies that claims below Rs 50,000, arising out of the recent floods in Maharashtra and Gujarat, should be settled by August 31.
Public sector player, National Insurance Company received 3,000 claims for Rs 350 crore from its customers in Mumbai for damage to property caused by the recent rains.
While some insurers had taken a re-insurance cover, some have not. Mumbai floods brought to fore the ill-preparedness both among the mega polis administrative officials and the insurance sector. While the latter seems to have realized the damages, the former
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The effect:
Here’s a warning to the lakhs of Mumbaikars who are planning to insure their houses in the wake of the recent deluge. One will have to read the fine print carefully. Public sector insurance firms are quietly planning to drop the word ‘flood’ from the policy.
As of now, a household insurance policy is basically a fire insurance policy, which also incorporates a flood insurance policy. However, with 10,000 policy-holders filing claims totalling Rs 1,500 crores, insurance firms are looking at new ways to keep their heads above water. After the last calamity—the Latur quake of 1993— insurance firms had dropped earthquakes from the household insurance policy.
Those wanting to insure their homes against flooding may now have to pay a separate premium. The insurance sector has suffered losses of about Rs 1,500 crore. These companies may not get re-insurance for these policies as they had not taken re-insurance for these small individual polices.
Classwise Break-up of Gross Premium Underwritten (In India)
2003-04
2004-05
Aviation; 1.88%
Motor TP; 13.32% Health; 8.64%
P. A.; 2.80% Liability; 2.30%
Motor TP; 13.30%
P. A.; 2.30% Motor OD; 28.04%
Liability; 2.05%
Health; 9.53%
Aviation; 3.01%
Others; 9.99%
Others; 10.05% Fire; 18.84%
Motor OD; 29.51% Fire; 20.36%
MRN Cargo; 4.22%
Engg.; 4.55% Engg.; 4.91%
MRN Cargo; MRN Hull; 2.94% 4.48% 2005-06
Aviation; 1.96% Health; 11.06%
Liability; 2.01%
Motor TP; 12.43%
P. A.; 2.89%
Others; 9.99%
Motor OD; 30.15% Fire; 18.36%
Engg.; 4.80% MRN Hull; 2.50%
MRN Cargo; 3.87%
MRN Hull; 2.97%
Company-wise Break-up of Gross Premium Underwritten (Industry Total) 50,000
45,000
40,000
9 9 9 , 7 3 0 7 1 , 4 3
35,000
s n o i l l i M R N I
8 0 1 , 2 4
1 4 2 , 5 3
2003-04
2004-05
2005-06
6 0 9 , 7 4
7 5 4 , 0 4
30,000
1 5 2 , 5 3 8 7 1 , 1 0 2 3 3 , 8 2
9 6 6 , 0 3
5 4 5 , 5 1 4 3 4 , 9 2
25,000
20,000
0 2 9 , 5 1
7 7 8 , 2 1
15,000
1 6 5 , 8
10,000
3 6 7 , 4
5,000
1 6 9 , 8
2 5 8 , 8
7 6 9
4 1 0 0 2 7 , , 2 1
4 8 2 3 0 , 7 8 , 2 1 1 1 , 1
7 6 0 , 5
6 5 9 , 2
3 1 0 , 5
3 7 1 1 2 1 6 6 , , 6 , 1 1 1
0 8 5 , 2
6 3 7 5 0 , 3 4 , 3
4 2 9 1 , 3 8 6 6 3 , 5 4 , 3
0 National
New India
Oriental
United India
Bajaj Allianz
Cholamandalam
6
HDFC Chubb
ICICI Lombard
IFFCO Tokio
Reliance
Royal Sundaram
TATA-AIG
