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INSURANCE (Governed by Insurance Act -1938,Now By – IRDA act-1999) •
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History:-Methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC. The Greeks and Romans introduced the origins of health and life insurance c. 600 AD. India:- First Indian insurance company was Calcutta Insurance Company which setup in 1798 exclusively for Europeans. The Bombay Life Assurance Society formed in 1870 Insured Indians first time.
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Indian life assurance companies act ,1912 . was first statutory act to regulate life business. In 1928 the indian insurance companies act enacted. In 1938 insurance act amended to consolidate legislation and effective control over the activities of insurer. 19th Jan.1956 LIC is formed by absorbing 154 Indian,16 non-indian insurer and 75 provident societies.
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GIC was Incorporated . as a company in Year 1971 . In 1972 General Insurance Business(Nationalization) Business(Nationalization) Act passed with effect from 1st Jan 1973 GIC is formed by amalgamation of 107 insurer and 4 company formed named as… • National Insurance Co. Ltd. • The New India Assurance Co. Ltd. • The Oriental Insurance Co. Ltd. • The United India insurance co. Ltd.
Cont… In Dec. 2000 subsidiaries of GIC were restructured as independent company. And in July 2002 parliament passed a bill of De-linking of four subsidiaries of GIC. • Today there are 14 General insurance companies including ECGC & Agricultural insurance corporation of India and 14 life Insurance company operating in India. •
Definition:•
Insurance is pooling of risks. In contract of insurance ,the insurer (insurance company) agree/undertakes, in consideration of a sum of money (premium) , to make good the loss suffered by the insured against a specified risk such as fire , accident etc or any contingency.
Indian Insurance company •
a company defined and registered under the companies act in which aggregate holding of equity shares by a foreign company either by itself or by nominees/subsidiaries ,does not exceed 26% paid up equity capital and whose sole purpose is to carry on life/general/reinsurance life/general/reinsurance business
Insurer •
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(a) any individual or unincorporated body of individuals or body corporate incorporated under the law of any country carrying on insurance business which– (i) carries on that business in or (ii) has his or its principal place of business or is domiciled in (iii) with the object of obtaining insurance business, employs a representative, or maintains a place of business, in India
CONTINUED…. •
(b) Any body corporate carrying on the business of insurance, which is a body corporate incorporated under any law for the time being in force in or stands to any such body corporate in the relation of a subsidiary company within the meaning of the Indian Companies Act, 1913
Insurance agent •
Means an insurance agent licensed under section 42 who receives or agrees to receive payment by way of commission or other remuneration in consideration of his soliciting or procuring.
Life insurance business •
Business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life.
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Parties :- There are two parties to an Insurance contracts as:Insurer/assurer/underwriter, Insured/assured/beneficiary Policy :- The document laying down the term of contract is called (insurance) policy.
Principal Agent •
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A person who is in consideration of any commission,-(i) performs any administrative and organising functions for the insurer, and (ii) procures general insurance business whether wholly or in part by employing or causing to be employed insurance agents on behalf of the insurer.
Special agent •
A person who is consideration of any commission, procures life insurance business for the insurer whether wholly or in part by employing or causing to be employed .
Restriction on name of insurer •
An insurer shall not be registered by a name identical with that by which an insurer in existence is already registered, or so nearly resembling that name .
Fundamental principals • • • • •
Principle Principle Principle Principle Principle
of of of of of
Insurable interest. Utmost good. Indemnity . Subrogation. Contribution.
Type of Insurance • •
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Life insurance Grant of disability and double/triple indemnity accident benefits, Grant of annuities upon human life and Grant of superannuation allowance/ annuities payable out of any fund applicable solely to the relief and maintenance of person engaged.
Type of Life Insurance Polices Endowment Policy • Whole Life Policy • Limited Payment Life Policy • Joint Life Policy • Convertible Whole Life Policy • Annuities •
Contin… Sinking Fund Policy • Double Accident Indemnity Policy • Janata Policy •
General insurance •
It means fire, marine / miscellaneous insurance business whether carried on singly or in combination with one/more of them
Types of General Insurance • • • • • •
Fire insurance Policies (a) Specific Policy (b) Comprehensive Policy (c) Valued Policy (d) Floating Policy e) Replacement or Reinstatement Policy:
Marine Insurance Policies • • • • • •
(a) Voyage Policy (b) Time Policy (c) Mixed Policy (d) Valued Policy: (e) Open and Unvalued Policy (f) Floating Policy
Other Type of insurance • • • • • • •
Property insurance Automobile insurance Aviation insurance Boiler insurance Builder's risk insurance Crop insurance Earthquake insurance
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A fidelity bond Flood insurance Home insurance Landlord insurance Marine insurance Surety bond insurance Terrorism insurance etc.
Health/ medical insurance: •
This cover only two type of benefits
Re-imbursement
of medical expenses related to specific diseases and Hospitalization
Some of policies are as • •
Individual/Group Mediclaim policy Bhavishya Arogya policy
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Arogya Bima Overseas medical cover
Liability insurance/indemnity policies— • • • • •
Employee liabilities Employee state insurance liabilities Non-industrial risk Professional liabilities Product liabilities
IRDA •
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In 1993 Government setup a committee under chairmanship of RN Malhotra ,former Governor of RBI for reforms in Insurance sector. Recommendations are :IRDA was constituted as an autonomous body to regulate and develop the insurance industry. Foreign companies are allowed up to 26% of paid up capital and can operate with an Indian company.
Composition of Authority under IRDA Act, 1999 • The
Authority is a ten member team consisting of (a) (b) (c)
a Chairman; five whole-time members; four part-time members
Duties, Powers and Functions of IRDA To
regulate, promote and ensure orderly growth of the insurance business and re-insurance business. Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration . Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;
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Specifying requisite qualifications, qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents. Specifying the code of conduct for surveyors and loss assessors. Promoting efficiency in the conduct of insurance business.
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Levying fees and other charges for carrying out the purposes of this Act Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries. Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business .
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Specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance insurance intermediaries. Regulating investment of funds by insurance companies. Regulating maintenance of margin of solvency Adjudication of disputes between insurers and intermediaries or insurance intermediaries.
Registration under IRDA • The •
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application accompanied by:A certified copy of memorandum and article of association. Name, address and occupation of Directors. A statement of the classes of insurance business done/to be done along with a statement of deposits with the Reserve Bank of India.
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For life business , a sum equivalent to 1% of total gross premium not exceeding 10 crore written in India in any Financial year. For General business 3% of total gross premium not exceeding 10 crore. Reinsurance business Rs.20 crore; Rs.100,000. For cooperative life insurance business / assurance companies should be Rs.2 lakh.
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A declaration verified by an affidavit by the principal officer of the insurer that the requirement of paid up capital (Rs. 100 crore and Rs.200 crore for life/general and reinsurance business, respectively) Rs. 250 crore for reinsurance business or working capital. A certified copy of the the Published prospectus prospectus if any any and, Standard policy forms of the insurer and statements of the insurer and statements of the assured rates, advantages, terms and conditions to be offered in connection with insurance policies, together with a certificate in connection with life business by an actuary.
Cont… • The
receipt showing payment of fee (as determined by IRDA regulation) not exceeding Rs.50,000 for each class of business.
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Such other document as may be specified by IRDA.
Cancellation of Registration •
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He fails to comply with wi th the requirement of deposit with the RBI. He fails to comply with wi th the requirement relating to sufficiency of assets(assetsliabilities) The whole of his deposit has been refunded to him on court order when he cease to carry on business and all liabilities has been satisfied/provided for.
Cont… He defaults in complying with or contravenes any requirement of insurance act/any rule/order made or direction issued there under, • The IRDA has reason to believe that any claim are unpaid for 3 month after final court order in India. • He carries on any other business, •
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His business has been transferred to any other person/amalgamated with any other insurer. He defaults in complying with any directions issued/order maid by IRDA . He default in complying with or contravenes any requirement of Companies Act/LIC Act/GIC Act/FEMA etc
INVESTMENT….. Assets of insurer should be invested as … • 25% in Government securities(including deposit in RBI), • At least 25% in Government/other approved securities; • Up to 15% of the controlled fund of the insurers can be invested in other insurance; • Up to 25% of the assets of GIC can be invested in other investment; • No fund of policy holder can be invested outside India.
INSURANCE BUSINESS IN RURAL/SOCIAL SECTOR For all new life insurer:-( percentage of total insurance) • First year-7% • Second year-9% • Third year-12% • Fourth year-14% • Fifth year-16% • Sixth year-18%
For general insurer…. • • •
First year- 2% Second year- 3%
Third year- 5% • Fourth year5% so on… All insurers are obliged to issue 5,7,10,15,20,and 25 thousand lives in first six years respectively.
LICENCING OF INSURANCE AGENTS An insurance agent is a licensed agent with IRDA. For getting license an agent has to pay Rs 250 • Eligibility:- The agent should not • Minor • Unsound mind • Guilty of criminal misappropriation /breach of trust/forgery
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Have not been found in the course of –
Any judicial proceeding relating to any insurance policy/winding up of an insurance company
-Guilty of knowingly participated in committing fraud/dishonesty/misrepresentation against an insurer/insured
An agent should be… • • • •
Possess requisite qualification and practical training not exceeding 12 months Passed examination by IRDA Not violated code of conduct as specified by IRDA. If any individual who act as an agent sans a license and the insurer who appoints so would be punishable with a fine of up to Rs.500and Rs.1000 respectively
PENALTIES:•
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Default in compliance with/Act in Contravention Furnish all report to IRDA Comply with its direction Maintain solvency margin Comply with the directions on insurance
Penalty up to Rs.5lakh for each failure
Cont…. Carrying on business in contravention of requirement of registration and deposits if not then fine up to Rs. 5lakh. • False statement in document Investment of assets • Prohibiting investment of fund outside • of India Manner and condition of investment • Fine up to Rs. 5lakh for each failure.
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Wrongfully obtaining/withhold property fine up to Rs. 2lakh Offence by companies Failure to comply with provision of insurance act in the social/rural sector invite a penalty of up to Rs.25 lakh for each failure and imprisonment up to 3 years or both.
CURRENT NEWS:•
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India’s insurance sector is expected to grow 17% in 2008-09 fiscal year if the economy expands at 7.6%, Insurance Regulatory and Development Authority (IRDA) chairman J. Hari Narayan said on Wednesday. In October, the federal cabinet approved changes to insurance laws and proposed raising the foreign investment limit to 49% from the present 26%.
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Life insurers grew their business by 23.3% to Rs930 billion in 2007-08 fiscal year, while general insurers posted growth of about 14% in premium income to Rs298 billion, according to IRDA data. If an agent left his job then it is the responsibility of insurance company to help customer and manage all future assistance.
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According to K N Bhandari, the Secretary General of General Insurance Council, India's general insurance sector growth @ 18% rate in 2008. In 2007 it was 13%. Present market value of the GIS is Rs 30,000-crore& Penetration level of the Indian insurance sector is 0.65 %.
List of Life Insurers.. • • • • • • • •
Bajaj Allianz Life Insurance Company Limited Birla Sun Life Insurance Co. Ltd HDFC Standard life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd. ING Vysya Life Insurance Company Ltd. Life Insurance Corporation of India Max New York Life Insurance Co. Ltd Met Life India Insurance Company Ltd.
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Kotak Mahindra Old Mutual Life Insurance Limited SBI Life Insurance Co. Ltd Tata AIG Life Insurance Company Limited Reliance Life Insurance Company Limited. Aviva Life Insurance Co. India Pvt. Ltd. Shriram Life Insurance Co, Ltd. Sahara India Life Insurance Bharti AXA Life Insurance Future Generali Life Insurance IDBI Fortis Life Insurance
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Canara HSBC Oriental Bank of Commerce Life Insurance Religare Life Insurance DLF Pramerica Life Insurance Star Union Dai-ichi Life Insurance Agriculture Insurance Company of India Apollo DKV Insurance Cholamandalam MS General Insurance HDFC Ergo General Insurance Company ICICI Lombard General Insurance IFFCO Tokio General Insurance
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National Insurance Company Ltd New India Assurance Oriental Insurance Company Reliance General Insurance Royal Sundaram Alliance Insurance Shriram General Insurance Company Limited Tata AIG General Insurance United India Insurance Universal Sompo General Insurance Co. Ltd
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