1. Indian Insurance
Introduction:
The Insurance sector in India governed by Insurance Act, 1938,
the Life Insurance Corporation Act, 1956 and General Insurance
Business (Nationalisation) Act, 1972, Insurance Regulatory and
Development Authority (IRDA) Act, 1999 and other related Acts.
With such a large population and the untapped market area of
this population Insurance happens to be a very big opportunity
in India. Today it stands as a business growing at the rate of 15-
20 per cent annually. Together with banking services, it adds
about 7 per cent to the country’s GDP .In spite of all this growth
the statistics of the penetration of the insurance in the country is
very poor. Nearly 80% of Indian populations are without Life
insurance cover and the Health insurance. This is an indicator
that growth potential for the insurance sector is immense in India.
It was due to this immense growth that the regulations were
introduced in the insurance sector and in continuation
“Malhotra Committee” was constituted by the government in
1993 to examine the various aspects of the industry. The key
element of the reform process was Participation of overseas
insurance companies with 26% capital. Creating a more efficient

2. and competitive financial system suitable for the requirements of
the economy was the main idea behind this reform.
Since then the insurance industry has gone through many sea
changes .The competition LIC started facing from these
companies were threatening to the existence of LIC .since the
liberalization of the industry the insurance industry has never
looked back and today stand as the one of the most competitive
and exploring industry in India. The entry of the private players
and the increased use of the new distribution are in the limelight
today. The use of new distribution techniques and the IT tools has
increased the scope of the industry in the longer run.
Meaning of Insurance:
Insurance is a contract between two parties whereby one
party called insurer undertakes in exchange for a fixed sum called
premium, to pay the other party called insured a fixed amount of
money on the happening of certain event. Insurance indemnifies
assets and income. Every asset (living and non-living) has a value
and it generates income to its owner. The income has been
created through the expenditure of effort, time and money.
Every asset has expected lifetime during which it may
depreciate and at the end of life period it may not be useful, till
then it is expected to function. Sometimes it may cease to exist
or may not be able to function partially or fully before the
expected life period due to accidental occurrences like burglary,

3. collisions, earthquakes, fire, flood, theft, etc. These types of
possible occurrences are “risks”
Future is uncertain; nobody knows what is going to happen? It
may or may not? Insurance is the concept of risk management –
the need to manage uncertainty on account of above stated risks.
Insurance is a way of financing these risks either fully or
partially. Insurance industry has both economic and social
purpose and relevance Insurance business in India can be broadly
divided into two categories such as Life Insurance and General
Insurance of Non-life insurance.
History of Insurance in India:
Insurance has a long history in India. Life Insurance in its
current form was introduced in 1818 when Oriental Life Insurance
Company began its operations in India. General Insurance was
however a comparatively late entrant in 1850 when Triton
Insurance company set up its base in Kolkata. History of
Insurance in India can be broadly bifurcated into three eras:
a) Pre Nationalisation,
b) Nationalisation and,
c) Post Nationalisation.

4. Life Insurance was the first to be nationalized in 1956. Life
Insurance Corporation of India was formed by consolidating the
operations of various insurance companies. General Insurance
followed suit and was nationalized in 1973. General Insurance
Corporation of India was set up as the controlling body with New
India, United India, National and Oriental as its subsidiaries. The
process of opening up the insurance sector was initiated against
the background of Economic Reform process which commenced
from 1991.
For this purpose Malhotra Committee was formed during this
year who submitted their report in 1994 and Insurance Regulatory
Development Act (IRDA) was passed in 1999. Resultantly Indian
Insurance was opened for private companies and Private
Insurance Company effectively started operations from 2001.

5. Characteristics of Insurance:
• Sharing of risks
• Cooperative device
• Evaluation of risk
• Payment on happening of a special event
• The amount of payment depends on the nature of losses
incurred.

6. INSURANCE SECTOR – A PREVIEW:
The insurance sector in India dates back to 1818, when
Oriental Life Insurance Company was incorporated at Calcutta.
Thereafter, few other companies like Bombay Life Assurance
Company, in 1823 and Triton Insurance Company, for General
Insurance, in 1850 were incorporated. Insurance Act was passed
in 1928 but it was subsequently reviewed and comprehensive
legislation was enacted in 1938. The nationalisation of life
insurance business took place in 1956 when 245 Indian and
Foreign Insurance provident societies were first merged and then
nationalized. It paved the way towards the establishment of Life
Insurance Corporation (LIC) and since then it has enjoyed a
monopoly over the life insurance business in India. General
Insurance followed suit and in 1968, the insurance act was
amended to allow for social control over the general insurance
business. Subsequently in 1973, non-life insurance business was

7. nationalised and the General Insurance Business (Nationalisation)
Act, 1972 was promulgated. The General Insurance Corporation
(GIC) in its present form was incorporated in
1972 and maintains a very strong hold over the non-life insurance
business in India. Due to concerns of
(a)Relatively low spread of insurance in the country.
(b) The efficient and quality functioning of the Public Sector
insurance companies
(c) The untapped potential for mobilizing long-term contractual
savings funds for infrastructure the (Congress) government set up
an Insurance Reforms committee in April 1993.
How big is the insurance market?
Insurance is an Rs.400 billion business in India, and together with
banking services adds about 7% to India’s GDP. Gross premium
collection is about 2% of GDP and has been growing by 15-20%
per annum. India also has the highest number of life insurance
policies in force in the world, and total investible funds with the
LIC are almost 8% of GDP. Yet more than three-fourths of India’s
insurable population has no life insurance or pension cover.
Health insurance of any kind is negligible and other forms of non-
life insurance are much below international standards. To tap the
vast insurance potential and to mobilize long-term savings we
need reforms which include revitalizing and restructuring of the

8. public sector companies, and opening up the sector to private
players. A statutory body needs to be made to regulate the
market and promote a healthy market structure. Insurance
Regulatory Authority (IRA) is one such body, which checks on
these tendencies.
INDIVIDUAL LIFE INSURANCE COVERAGE INDEX,
2008.
COUNTRY NO. OF POLICIES PER 100
PERSONS
Indonesia 2.0
Philippines 5.6
India 12.4
Thailand 14.7
Malaysia 35.5

9. Hong Kong 69.4
South Korea 70.5
Taiwan 75.2
Singapore 112.6
Japan 198.
BOTTLENECKS – GOVERNMENT / RBI REGULATIONS:
The IRDA bill proposes tough solvency margins for private
insurance firms, a 26% cap on foreign equity and a minimum
capital of Rs.100 crores for life and general insurers and Rs. 200
crores for reinsurance firms. Section 27A of the Insurance Act
stipulates that LIC is required to invest 75% of its accretions
through a controlled fund in mandated government securities. LIC
may invest the remaining 25% in private corporate sector,
construction, and acquisition of immovable assets besides

10. sanctioning of loans to policyholders. These stipulations imposed
on the insurance companies had resulted in lack of flexibility in
the optimisation of risk and profit portfolio. If this inflexibility
continues, the insurance companies will have very little leverage
to earn more on their investments and they might not be able to
offer as flexible products as offered abroad. The government
might provide more autonomy to insurance companies by
allowing them to invest 50 % of their funds as per their own
discretions. Recently RBI has issued stiff guidelines, which had
dealt a severe blow to the plans of banks and financial institutions
to enter the insurance sector. It says that non-performing assets
(NPA) levels of the prospective players will have to be 1% point
lower than the industry average (presently 7.5%). RBI has also
stipulated that all prospective entrants need to have a net worth
of Rs. 500 crores. These guidelines have made it virtually
impossible for many banks to get into the insurance business.
Also banks and FI’s who are planning to enter the business cannot
float subsidiaries for insurance. RBI has taken too much caution to
make sure that the new sector does not experience the kind of
ups and downs that the non-bank financial sector has
experienced in the recent past.
They had to rethink about these guidelines if India’s strong banks
and financial institutions have to enter the new business. The
insurance employees’ union is offering stiff resistance to any
private entry.
Their objections are:

11. (a) That there is no major untapped potential in insurance
business in India;
(b) That there would be massive retrenchment and job losses due
to computerization and modernization; and
(c) That private and foreign firms would indulge in reckless
profiteering and skim the ‘urban cream’ market, and ignore the
rural areas. But all these fears are unfounded.
The real reason behind the protests is that the dismantling
of government monopoly would provide a benchmark to evaluate
the government’s insurance services.
CHRONOLOGICAL DEVELOPMENT OF INSURANCE
SECTOR:

12. •1818 - Establishment of British firm Oriental Life Insurance
Company in Calcutta
•1823 - Establishment of Bombay Life Assurance Company
•1912 - The Indian Life Assurance Companies Act 1912 (First
statutory measure to regulate Life Insurance business)
•1938 – The Act 1928 was consolidated and amended by the
Insurance Act with effective control over the activities of insurers
•1950 – The Act was amended resulting in far reaching changes
in the insurance sector, including, a statutory requirement of
equity capital for companies carrying on life insurance business,
ceiling on share holdings in such companies, strict control on
investments, submission of periodical returns relating to
investments and such other information to the controller.
•1956 – 154 Indian insurers, 16 foreign insurers and 75 provident
societies were carrying on life insurance business in India mostly
concentrated in Urban Areas.

13. •1956 – January 19, the management of life insurance business
of 245 Indian and Foreign insurers and provident fund societies,
then operating in India, was taken over by the Central
Government. By an Act of Parliament, viz., LIC Act 1956, with a
capital contribution of Rs.50 million, Life Insurance Corporation
(LIC) was formed in September 1956.
•1971 – Management of Non-Life insurers was taken over by the
Central Government as a prelude to nationalization
•1972 – General insurance was urban-centric, catering mainly to
the needs of organized trade and Industry. 107 insurers including
branches of foreign companies operating in the country were
amalgamated and grouped into four companies, viz., The National
Insurance Company Ltd., The Oriental Insurance Company Ltd.,
The New India Assurance Company Ltd., and The United India
Insurance Company Ltd.
•1973 – Watershed in the history of General Insurance Business
in India. The General Insurance Business was nationalized with
effect from January 1, 1973 by the General Insurance Business
(Nationalisation) Act, 1972.

14. •1993 – First Step to Liberalisation. In April 1993 Malhotra
Committee formed to recommend measures to deregulate Indian
Insurance Sector, and submitted its report in January 1994.
Ancient Indian History:
It finds mention in the writings of Manu ( Manusmrithi ),
Yagnavalkya (Dharmasastra ) and Kautilya
( Arthasastra ). The writings talk in terms of pooling of resources
that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to
modern day insurance. Ancient Indian history has preserved the
earliest traces of insurance in the form of marine trade loans and
carriers’ contracts. In 1818 saw the advent of life insurance
business in India with the establishment of the Oriental Life
Insurance Company in Calcutta. This Company however failed in
1834. In 1829, the Madras Equitable had begun transacting life
insurance business in the Madras Presidency. 1870 saw the
enactment of the British Insurance Act and in the last three
decades of the nineteenth century, the Bombay Mutual (1871),
Oriental (1874) and Empire of India (1897) were started in the
Bombay Residency. This era, however, was dominated by foreign
insurance offices which did good business in India, namely Albert
Life Assurance, Royal Insurance, Liverpool and London Globe
Insurance and the Indian offices were up for hard competition
from the foreign companies. In 1914, the Government of India
started publishing returns of Insurance Companies in India. The

15. Indian Life Assurance Companies Act, 1912 was the first statutory
measure to regulate life business. In 1928, the Indian Insurance
Companies Act was enacted to enable the Government to collect
statistical information about both life and non-life business
transacted in India by Indian and foreign insurers including
provident insurance societies.
In 1938, with a view to protecting the interest of the Insurance
public, the earlier legislation was consolidated and amended by
the Insurance Act, 1938 with comprehensive provisions for
effective control over the activities of insurers. The Insurance
Amendment Act of 1950 abolished Principal Agencies. However,
there were a large number of insurance companies and the level
of competition was high. There were also allegations of unfair
trade practices. The Government of India, therefore, decided to
nationalize insurance business. An Ordinance was issued on 19th
January, 1956 nationalizing the Life Insurance sector and Life
Insurance Corporation came into existence in the same year.
The history of general insurance dates back to the Industrial
Revolution in the west and the consequent growth of sea-faring
trade and commerce in the 17th century. It came to India as a
legacy of British occupation. In 1907, the Indian Mercantile
Insurance Ltd was set up. This was the first company to transact
all classes of general insurance business. In 1957 saw the
formation of the General Insurance Council, a wing of the

16. Insurance Association of India. The General Insurance Council
framed a code of conduct for ensuring fair conduct and sound
business practices. In 1968, the Insurance Act was amended to
regulate investments and set minimum solvency margins. The
Tariff Advisory Committee was also set up then. In 1972 with the
passing of the General Insurance Business (Nationalization) Act,
general insurance business was nationalized with effect from 1st
January, 1973. The General Insurance Corporation of India was
incorporated as a company in 1971 and it commence business on
January 1sst 1973.
This millennium has seen insurance come a full circle in a journey
extending to nearly 200 years. The process of re-opening of the
sector had begun in the early 1990s and the last decade and
more has seen it been opened up substantially.
In 1993, the Government set up a committee under the
chairmanship of RN Malhotra, former Governor of RBI, to propose
recommendations for reforms in the insurance sector. The
objective was to complement the reforms initiated in the financial
sector. The committee submitted its report in 1994 wherein,
among other things, it recommended that the private sector be
permitted to enter the insurance industry. They stated that
foreign companies be allowed to enter by floating Indian
companies, preferably a joint venture with Indian partners.

17. Following the recommendations of the Malhotra Committee
report, in 1999, the Insurance Regulatory and Development
Authority (IRDA) was constituted as an autonomous body to
regulate and develop the insurance industry. The IRDA was
incorporated as a statutory body in April, 2000. The key
objectives of the IRDA include promotion of competition so as to
enhance customer satisfaction through increased consumer
choice and lower premiums, while ensuring the financial security
of the insurance market. The IRDA opened up the market in
August 2000 with the invitation for application for registrations.
Foreign companies were allowed ownership of up to 26%. The
Authority has the power to frame regulations under Section 114A
of the Insurance Act, 1938 and has from 2000 onwards framed
various regulations ranging from registration of companies for
carrying on insurance business to protection of policyholders’
interests.
In December, 2000, the subsidiaries of the General
Insurance Corporation of India were restructured as independent
companies and at the same time GIC was converted into a
national re-insurer. Parliament passed a bill de-linking the four
subsidiaries from GIC in July, 2002.Today there are 14 general
insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 14 life insurance companies
operating in the country.

18. The insurance sector is a one and is growing at a speedy rate of
15-20%. Together with banking services, insurance services add
about 7% to the country’s GDP. A well-developed and evolved
insurance sector is a boon for economic development as it
provides long- term funds for infrastructure development at the
same time strengthening the risk taking ability of the country.
Principles of Insurance:
•Principle of Utmost good faith.
•Principle of Indemnity.
•Principle of Causa Proxima.
•Principle of Insurable Interest.
•Doctrine of Subrogation.
LIBERALISATION OF INSURANCE SECTOR:
•1990s saw the emergence of liberalisation. Liberalisation meant
lifting government controls, permits, licenses and allowing
competition to play its role in the economy. With respect to the
insurance business, liberalisation means allowing private
enterprises, including MNCs, to operate in the area that was
hitherto monopolised by the Government of India.

19. •As a first step towards allowing private sector entry,
Government of India appointed a committee under the
chairmanship of Sri. Malhotra. The Committee submitted its
report in 1994, recommended, among after things, that the
insurance sector in India be thrown open to private sector.
Government accepted the recommendations and allowed private
players to offer insurance cover to Indian citizens.
WHY LIBERALISATION OF INSURANCE SECTOR?
•To avoid monopolized (by the State run LIC and GICs) market.
•Create awareness in urban areas about the needs and benefits
of insurance.

20. •To reduce the yawning gap between the needs of customers and
products being offered by the state owned companies.
•To mobilize funds from the economy for the infrastructure
development.
•To provide multiple innovative products.
•To provide better customers’ service from existing state owned
player
MALHOTRA COMMITTEE RECOMMENDATION:
Structure
•Government stake in the insurance Companies to be brought
down to 50 per cent.

21. •Government should take over the holdings of GIC and its
subsidiaries, to act these as independent companies.
•All insurance companies should be given greater freedom to
operate. No special dimension is given to government
companies.
•Increase of capital base of LIC and GIC up to Rs. 200 crores, half
retained by the government and the rest sold to the public at
large with suitable reservations for its employees.
Competition:
•Private Companies are allowed to enter insurance industry with
a minimum paid up capital of Rs. 1billion.

22. •No company should deal in both Life and General Insurance
through a single entity.
•Foreign insurance may be allowed to enter the industry by
floating an Indian company as joint venture with Indian partner.
•Postal Life Insurance should be allowed to operate in the rural
market. Only and one State Level Life Insurance Company should
be allowed to operate in each State.
Regulatory Body:
•Establishment of a strong and effective insurance regulatory
body in the form of a statutory autonomous board on the lines of
SEBI.
•Controller of Insurance to be made independent Investments
•Mandatory Investments of LIC Life Fund in government securities
to be reduced from 75 per cent to 50 per cent.

23. •GIC and its subsidiaries are not to hold more than five per cent
in any company (the current holdings to be brought down to this
level over a period of time
Customer Service:
•LIC should pay interest on delays in payments beyond 30 days.
•Insurance companies must be encouraged to set up unit linked
pension plans.
•Computerisation of operations and updating of technology to be
carried out in insurance industry
Insurance Market - Present status:

24. The insurance sector was opened up for private participation four
years ago. For years now, the private players are active in the
liberalized environment. The insurance market have witnessed
dynamic changes which includes presence of a fairly large
number of insurers both life and non-life segment. Most of the
private insurance companies have formed joint venture
partnering well recognized foreign players across the globe.
There are now 29 insurance companies operating in the Indian
market – 14 private life insurers, 9 private non-life insurers and 6
public sector companies. With many more joint ventures, the
insurance industry in India today stands at a crossroads as
competition intensifies and companies prepare survival strategies
in a de terrified scenario. There is pressure from both within the
country and outside on the Government to increase the foreign
direct investment (FDI) limit from the current 26% to 49%, which
would help JV partners to bring in funds for expansion. Less than
10 % of Indians above the age of 60 receive pensions. The health
insurance sector has tremendous growth potential, and as it
matures and new players enter, product innovation and
enhancement will increase.
State continues to dominate: There may be room for many
more players in a large underinsured market like India with a
population of over one billion. But the reality is that the intense
competition in the last five years has made it difficult for new

25. entrants to keep pace with the leaders and thereby failing to
make any impact in the market.
Also as the private sector controls over 26.18% of the life
insurance market and over 26.53% of the non-life market, the
public sector companies still call the shots. The country’s largest
life insurer, Life Insurance Corporation of India (LIC), had a share
of 74.82% in new business premium income. Similarly, the four
public-sector non-life insurers – New India Assurance, National
Insurance, Oriental Insurance and United India Insurance – had a
combined market share of 73.47% .ICICI Prudential Life Insurance
Company continues to lead the private sector with a 7.26%
market share in terms of fresh premium, whereas ICICI Lombard
General Insurance Company is the leader among the private non-
life players with a 8.11% market share. ICICI Lombard has focused
on growing the market for general insurance products and
increasing penetration within existing customers through product
innovation and distribution.
Reaching Out To Customers: No doubt, the customer profile in
the insurance industry is changing with the introduction of large
number of divergent intermediaries such as brokers, and
corporate agents. The industry now deals with customers who
know what they want and when, and are more demanding in
terms of better service and speedier responses. With the industry
all set to move to a de terrified regime by 2007, there will be

26. considerable improvement in customer service levels, product
innovation and newer standards of underwriting.
Intense Competition: In a de terrified environment, competition
will manifest itself in prices, products, underwriting criteria,
innovative sales methods and creditworthiness. Insurance
companies with each other to capture market share through
better pricing and client segmentation. The battle has so far been
fought in the big urban cities, but in the next few years, increased
competition will drive insurers to rural and semi-urban markets.
Global Standards: While the world is eyeing India for growth
and expansion, Indian companies are becoming increasingly
world class. Take the case of LIC, which has set its sight on
becoming a major global player following an Rs280-crore
investment from the Indian government. The company now
operates in Mauritius, Fiji, UK, Sri Lanka, and Nepal and will soon
start operations in Saudi Arabia. It also plans to venture into the
African and Asia-Pacific regions.
With life insurance premiums being just 2.5% of GDP and general
insurance premiums being 0.65% of GDP, the opportunities in the
Indian market place is immense. The next five years will be
challenging but those that can build scale and market share will
survive and prosper.

27. Development of Insurance in India.

28. Types of Insurance
• Life Insurance
• General Insurance
• Fire Insurance
• Marine Insurance

29. Life Insurance:
Life insurance is a contract between the policy owner and the
insurer, where the insurer agrees to pay a designated beneficiary
a sum of money upon the occurrence of the insured individual's or
individuals' death or other event, such as terminal illness or
critical illness. In return, the policy owner agrees to pay a
stipulated amount at regular intervals or in lump sums.
Need for Life Insurance:
A life insurance policy assures complete peace of mind as it
prepares the family to face any financial crisis in case of untimely
demise of the insured person. Life insurance also serves as a tax
saving mechanism, and hence play a crucial role in the process of
one’s financial planning to secure the future of the survivors.
Types of life insurance policies:
Most of the products offered by Indian life insurers are developed
and structured around these "basic" policies and are usually an
extension or a combination of these policies.
• Term Insurance Policy
• Whole Life Policy

30. • Endowment Policy
• Money Back Policy
• Annuities And Pension
Term Insurance Policy:
• A term insurance policy is a pure risk cover for a specified
period of time. What this means is that the sum assured is
payable only if the policyholder dies within the policy
term. For instance, if a person buys Rs 2 lakh policy for
15-years, his family is entitled to the money if he dies
within that 15-year period.
• What if he survives the 15-year period? Well, then he is
not entitled to any payment; the insurance company
keeps the entire premium paid during the 15-year period.
• So, there is no element of savings or investment in such a
policy. It is a 100 per cent risk cover. It simply means that
a person pays a certain premium to protect his family
against his sudden death. He forfeits the amount if he
outlives the period of the policy. This explains why the
Term Insurance Policy comes at the lowest cost.
Whole Life policy:
• As the name suggests, a Whole Life Policy is an insurance
cover against death, irrespective of when it happens.

31. • Under this plan, the policyholder pays regular premiums
until his death, following which the money is handed over to
his family.
This policy, however, fails to address the additional needs of the
insured during his post-retirement years. It doesn't take into
account a person's increasing needs either.
Endowment Policy:
Combining risk cover with financial savings, endowment policies
is the most popular policies in the world of life insurance.
• In an Endowment Policy, the sum assured is payable even if
the insured survives the policy term.
• If the insured dies during the tenure of the policy, the
insurance firm has to pay the sum assured just as any other
pure risk cover.
• A pure endowment policy is also a form of financial saving,
whereby if the person covered remains alive beyond the
tenure of the policy, he gets back the sum assured with
some other investment benefits.
Money Back Policy:
• These policies are structured to provide sums required as
anticipated expenses (marriage, education, etc) over a
stipulated period of time. With inflation becoming a big
issue, companies have realized that sometimes the money
value of the policy is eroded. That is why with-profit policies

32. are also being introduced to offset some of the losses
incurred on account of inflation.
• A portion of the sum assured is payable at regular intervals.
On survival the remainder of the sum assured is payable.
• In case of death, the full sum assured is payable to the
insured.
• The premium is payable for a particular period of time.
Annuities and Pensions:
In an annuity, the insurer agrees to pay the insured a
stipulated sum of money periodically. The purpose of an
annuity is to protect against risk as well as provide money in
the form of pension at regular intervals. Over the years,
insurers have added various features to basic insurance
policies in order to address specific needs of a cross section
of people.

33. General Insurance
Insurance other than “Life Insurance” falls under the category of
General Insurance. General Insurance comprises of insurance of
property against fire, burglary etc, personal insurance such as
Accident and Health Insurance, and liability insurance which
covers legal liabilities. There are also other covers such as Errors
and Omissions insurance for professionals, credit insurance etc.
The non-life companies also offer policies covering machinery
against breakdown, there are policies that cover the hull of ships
and so on. A Marine Cargo policy covers goods in transit including
by sea, air and road. Further, insurance of motor vehicles against
damages and theft forms a major chunk of non-life insurance
business.
In respect of insurance of property, it is important that the
cover is taken for the actual value of the property to avoid being

34. imposed a penalty should there be a claim. Where a property is
undervalued for the purposes of insurance, the insured will have
to bear a ratable proportion of the loss. For instance if the value
of a property is Rs.150 and it is insured for Rs.100/-, in the event
of a loss to the extent of say Rs.100/-, the maximum claim
amount payable would be Rs.50.
Personal insurance covers include policies for Accident, Health
etc. Products offering Personal Accident cover are benefit policies.
Health insurance covers offered by non-life insurers are mainly
hospitalization covers either on reimbursement or cashless basis.
The cashless service is offered through Third Party Administrators
who have arrangements with various service providers.
Accident and health insurance policies are available for
individuals as well as groups. A group could be a group of
employees of an organization or holders of credit cards or deposit
holders in a bank etc. Normally when a group is covered, insurers
offer group discounts.
Liability insurance covers such as Motor Third Party Liability
Insurance, Workmen’s Compensation Policy etc offer cover
against legal liabilities that may arise under the respective
statutes— Motor Vehicles Act, The Workmen’s Compensation Act
etc. Some of the covers such as the foregoing (Motor Third Party

35. and Workmen’s Compensation policy ) are compulsory by
statute. Liability Insurance not compulsory by statute is also
gaining popularity these days. Many industries insure against
Public liability. There are liability covers available for Products as
well.
There are general insurance products that are in the nature of
package policies offering a combination of the covers mentioned
above. For instance, there are package policies available for
householders, shop keepers and also for professionals such as
doctors, chartered accountants etc. Apart from offering standard
covers, insurers also offer customized or tailor-made ones.
Suitable general Insurance covers are necessary for every family.
It is important to protect one’s property, which one might have
acquired from one’s hard earned income. A loss or damage to
one’s property can leave one shattered. Losses created by
catastrophes such as the tsunami, earthquakes, cyclones etc
have left many homeless and penniless. Such losses can be
devastating but insurance could help mitigate them. Property can
be covered, so also the people against Personal Accident. A
Health Insurance policy can provide financial relief to a person

36. undergoing medical treatment whether due to a disease or an
injury.
Industries also need to protect themselves by obtaining insurance
covers to protect their building, machinery, stocks etc. They need
to cover their liabilities as well. Financiers insist on insurance. So,
most industries or businesses that are financed by banks and
other institutions do obtain covers. But are they obtaining the
right covers? And are they insuring adequately are questions that
need to be given some thought. Also organizations or industries
that are self-financed should ensure that they are protected by
insurance.
Most general insurance covers are annual contracts. However,
there are few products that are long-term. It is important for
proposers to read and understand the terms and conditions of a
policy before they enter into an insurance contract. The proposal
form needs to be filled in completely and correctly by a proposer
to ensure that the cover is adequate and the right one
Fire Insurance:
A fire insurance policy involves an insurance company agreeing to
pay a certain amount equivalent to the estimated loss caused by

37. fire to the insured, within the time specified in the contract. The
indemnity is subject to change depending upon the policy. One
should confirm with the insurer about the types of risks covered,
since one cannot insure the property against all types of risks of
fire.
Need for Fire Insurance:
Fire insurance is important because a disaster can occur at any
time. There could be many factors behind a fire, for example
arson, natural elements, faulty wiring, etc. Some facts that stress
the importance of fire insurance include:
Fire contributes to the maximum number of deaths occurring in
America due to natural disasters.
Eight out of ten fire deaths take place at home. A residential fire
takes place after every 77 seconds. The major reason for a
residential fire is unattended cooking.
Types of Fire Insurance:
• Specific Policy:
The insurer is liable to pay a set amount lesser than the
property’s real value. In this policy, the property’s actual
value is not considered to determine the indemnity. The
average clause, which requires the insured to bear the loss
to some extent, does not play a role in this policy. In case

38. the insurer inserts the clause, the policy will be known as an
average policy.
• Comprehensive policy:
This all-in-one policy indemnifies for loss arising out of fire,
burglary, theft and third party risks. The policyholder may
also get paid for the loss of profits incurred due to fire till the
time the business remains shut.
• Valued policy:
This policy is a departure from the standard contract of
indemnity. The amount of indemnity is fixed and the actual
loss is not taken into consideration.
• Floating policy:
This policy is subject to the ‘average clause’. The extent of
coverage expands to different properties belonging to the
policyholder under the same contract and one premium. The
policy may also provide protection to goods kept at two
different stores.
• Replacement or Re-instatement policy:
This policy is subject to the re-instatement clause, which
requires the insurance company to pay for replacing the
damaged property. So, instead of giving out cash, the
insurer can re-instate the property as an alternative option.

39. Marine Insurance:
Meaning:
Business today knows no boundaries. We have an access to
products and services across borders as countries continue to
globalise. However the farther our goods travel the more risk they
are exposed to. That’s why Bajaj Allianz brings to you the marine
cargo insurance cover, which compensates losses of goods in
transit.
Need for Marine Insurance:
The cost of marine insurance is quite small compared with the
cost of the goods shipped and the freight charges involved.
Therefore, the benefit of the marine insurance, in terms of
financial reimbursement if disaster strikes, is usually well worth
the cost. Not much help can be expected from the shipping
company for the exporter, if the goods are damaged or lost, even
while in its care. Various statutes, plus the printed clauses
in ocean bills of lading - the contract between the shipper and the
carrier, limit the liability of the shipping company for such losses.
In order to recover losses from the carrier, the exporter must be
able to prove want of due diligence, in other words, the shipping
company was negligent. It is difficult for an exporter to prove at
what point damage or loss occurred. However, a marine

40. insurance policy is often arranged on a warehouse-to-
warehouse basis. In other words, the risk of financial loss from
damage or loss occurring during inland transit in the exporting
country and abroad as well as during ocean shipment. Such a
policy relieves the exporter of the burden of proving when or
where any loss actually occurred. If, someone else's goods are
damaged or destroyed during the voyage and in order to save the
ship, then the exporter may be called upon to pay part of the
cost. This is known as general average. Here, the point that is
being made is that the exporter's goods may be held in the
foreign port until such a claim is settled. By having marine
insurance, including general average coverage, the exporter
avoids the risk of such a delay.
Scope of Cover:
It covers transit of goods:
1. By Sea. (All ocean voyages and inland water ways.)
2. Send by post or parcels
3. Bay rail/road/Air.
Basis of sum Insured:
Marine Insurance policies are issued on ‘agreed value bases and
should be based on invoice and covering incidental expenses.
What are the types of Coverage offered?
The following are the type of covers available: All Overseas
Transits are subjected to Institute Cargo Clauses, given by Lloyds
Underwriter and Technical Committee, London.

41. The brief coverage is: (*Can be bought back.)
Risks Institute Cargo Clauses
B C
A (Wider (Basic
(Proximate Cause)
(All Cover) Cover)
risk Cover)
Stranding , Grounding, Sinking or Yes Yes Yes
Capsizing
Overturning or Derailment of Land Yes Yes Yes
Conveyance
Collision of Ship or Craft with another Yes Yes Yes
Ship or Craft
Contact of Ship, Craft or Conveyance Yes Yes Yes
with anything other than
Ship or Craft (excludes Water but not
Ice)
Discharge of Cargo at Port of Distress Yes Yes Yes
Loss overboard during N/A Yes No
Loading/Discharge (total loss only).
Fire or Explosion Yes Yes Yes
Malicious Damage Yes No* No*
Theft/ Pilferage Yes No No
General Average Sacrifice Yes Yes Yes
Jettison Yes Yes Yes
Washing Overboard (deck cargo) Yes Yes No
War Risks No* No* No*
Seawater entering Ship, Craft, Hold, Yes Yes No
Conveyance Container Lift Van or Place
of Storage
River or Lake Water entering same Yes Yes No

42. Underwriting of Life Insurance
Meaning of Underwriting:
Underwriting is the insurance function that is responsible for
assessing and classifying the degree of risk a proposed insured or
group represents and making a decision concerning coverage of
that risk.
Objectives of Underwriting:
A)Product Equitable to Customer
The underwriter should fairly assess the risk in a proposal
and fix the premium justifiable to the consumer.
B)Deliverable to the Customer
Consumers are the final authority for buying the products. If
the marketers are not able to sell so that the product
becomes undeliverable, the onus is on the underwriters to
carry an introspection of the various factors that caused
differences between the consumers and company’s
expectations.
C)Financially Feasible to the insurance Company
The insurers are not in the business of charity. The
underwriting benefit must be reflected by the financial
statements. Although, the underwriters are not directly
involved in the pricing of insurance products, yet their

43. contribution is as vital as that of actuaries, because they
operationalise the business of risk.
Underwriting of Life Insurance:
In India, Life Insurance Business is defined under Section 2(11) of
Insurance Act 1938, which reads as follows:
“life insurance business” means the 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 and any contract which is subject to
payment of premium for a term dependent on human life and
shall be deemed to include - the granting of
(A) Disability and double or triple indemnity accident benefits, if
so provided in the contract of insurance
(B) Annuities upon human life
Underwriting of Non-Life Insurance:
The underwriting of commercial, business insurances is a much
more complicated and involved task. Commercial insurances
range from small shops and factories to large multinational
corporations, with operations in many countries throughout the
world. The degree of complexity of the underwriting required
would obviously vary with the sheer size of the risk, but certain
basic principles are fundamental.

44. The essence of the task is that the underwriter has to evaluate
the hazard associated with the risk, which is being proposed. In
small cases he may be able to do this from reading a proposal
form and corresponding with the sponsor. It may be that a local
inspector is asked to call and see the shop or factory for himself.
In large cases this is simply impossible. Detail of the risk could not
be confined to a proposal form since there is just too much
information to condense, no matter how large the form may be.
The insurance companies may take the help of brokers in these
cases. The broker in these cases will be in a position to prepare
the case for the underwriter. This may mean site inspections by
the broker and the preparation of plans and reports on the
relevant aspects of the risk. This documentation, which may be
extremely extensive, is then passed to the underwriter and
negotiation can commence on the terms, conditions, cover and
price.

45. Reinsurance
Meaning
The practice of insurers transferring portions of risk portfolios to
other parties by some form of agreement in order to reduce the
likelihood of having to pay a large obligation resulting from an
insurance claim. The intent of reinsurance is for an insurance
company to reduce the risks associated with underwritten policies
by spreading risks across alternative institutions. Also known as
"insurance for insurers" or "stop-loss insurance"
Objectives of Reinsurance
1) To limit liability on specific risks
2) To stabilise loss experience
3) To protect against catastrophe
4) To increase capacity.
Types of Reinsurance
Treaty reinsurance

46. This method is defined to cover an entire category of risk or line
of business in advance. It is obligatory and binding in nature for
both the reinsured and reinsurers. So as long as a risk meets all
the conditions as given in the reinsurance contract, acceptance of
that risk by the insurer is automatic. Reinsurance by this method
creates capacity for insurers.
Capacity + Coverage of all perils with adequate limits +
confidence on security of reinsurers + continuity of reinsurance
after a loss.
Facultative reinsurance
This is for the reinsurance of current single risk and options are
open for both the reinsured and reinsurers. In a facultative
contract relationship, the reinsurer retains the faculty or power to
either accept or reject each individual risk offered to it by the
insurer.
No matter what kind of reinsurance contract it is, the risks
between the insurer and the reinsurer can be shared on a
proportional or (also known as excess of loss) basis. In a
proportional agreement the reinsurer pays for losses in the same
proportion as the amount of premium it receives.
Such contracts can be on a quota or surplus share basis. In a non-
proportional agreement, an attachment point is fixed. When a
claim arises, the reinsurer pays nothing unless the claim amount

47. is greater than the attachment point. Such a contract is written
per risk, per occurrence or as an aggregate loss.
Reinsurers always try to attach a global spread of risks. Hence
there are tie-ups with global reinsurers. When reinsurers are in
the global market they are not excessively affected by local
market bad losses and are capable of meeting liabilities.
Advantages of Reinsurance
In a highly volatile market it may sometimes be hard to correctly
price new products because of inadequate information. Incorrect
pricing could lead to unanticipated claims that the insurance
company cannot meet. If there were not reinsurance the
insurance company would have to settle these claims out of its
own capital therefore reinsurance helps to protect the solvency of
the insurance company.
Reinsurance enables the insurer to take up large claims and
expand capacity In India; regulations restrict the insurer from
risking more than 10 per cent of its surplus on any one risk.
Reinsurance provides the insurer with ability to cover large,
individual risks and guarantees timely settlement of the claim.
An insurance company can benefit immensely by tying up with a
successful reinsurer. The reinsurer can provide important

48. underwriting training and skill development and share expertise
gained from other countries. Since the success of the reinsurer is
linked to the profits of the insurance company, it is in the best
interest of the reinsurer to measure that the company is sound.
The reinsurer can contribute to designing the product, pricing and
marketing new products. It can also offer back office support such
as faster claims processing and automation of operations.
List of Life Insurance Players in India
Aviva Life Insurance y Bajaj Allianz
Birla Sun Life Insurance
HDFC Standard Life Insurance
ICICI Prudential
Kotak Life Insurance
Life Insurance Corporation of India
Max New York Life
Reliance Life Insurance

49. Sahara India Life Insurance
SBI Life Insurance
Shriram Life Insurance Co Ltd.
List of General Insurance Players in India
National Insurance Company Limited
Oriental Insurance Company Limited
United India Insurance Company Limited
Bajaj Allianz General Insurance Co. Limited
ICICI Lombard General Insurance Co. Ltd.
IFFCO-Tokio General Insurance Co. Ltd.
Reliance General Insurance Co. Limited
Royal Sundaram Alliance Insurance Co. Ltd.
TATAAIG General Insurance Co. Limited

50. Export Credit Guarantee Corporation
HDFC Chubb General Insurance Co. Ltd.
The questions and its answers which are submitted below, is
being asked to the agent of Life Insurance Company and few
other questions are asked to around 10 people who are directly or
indirectly affiliated with insurance business.
Questioners:
1) Do you have any past experience in Insurance Business?
Figure: 1.1
As per the diagram,
The Insurance business in India is flourishing these days, at very
fast pace around 15% of people working in insurance are skilled
enough to tackle the issues; whereas there is a new age group

51. who has joined the but lacks experience, the not interested are
those who lack education.
2) From how many years you are being employed in this
organization?
Figure 1.2
3) How is the Environment of your work place?
Figure 1.3
4) Does Management listen to employees?
Figure 1.4
5) What do you look for a new company when you join?
Figure 1.5
6) Have you ever faced a problem in your organization?
Figure 1.6
7) Is your organization flexible, with respect to your family
responsibilities?

52. Figure 1.7
8) Are you satisfied with the training and development of
employees?
Figure 1.8
9) Are you satisfied with organizations Culture and Politics?
Figure 1.9
10) Do you feel stressed out in your job?
Figure 1.10
11) How much are you satisfied with your job?
Figure 1.11
12) What according to you are the factors which motivate employ
to retain in life insurance companies?
Figure 1.12.1

53. Figure 1.12.2
Conclusion:

54. Biblography