Insurance Awareness in India Main

Insurance awareness in India

1. 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 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.

2. History of Insurance Sector

The insurance sector in India has completed all the facets of

competition – from being an open competitive market to being

nationalized and then getting back to the form of a liberalized

market once again. The history of the insurance sector in India

reveals that it has witnessed complete dynamism for the past two

centuries approximately.

With the establishment of the Oriental Life Insurance Company

in Kolkata, the business of Indian life insurance started in the

year 1818.

Important milestones in the Indian life insurance business

1912: The Indian Life Assurance Companies Act came into force

for regulating the life insurance business.

1928: The Indian Insurance Companies Act was enacted for

enabling the government to collect statistical information on both

life and non-life insurance businesses.

1938: The earlier legislation consolidated the Insurance Act with

the aim of safeguarding the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies

were taken over by the central government and they got

nationalized. LIC was formed by an Act of Parliament, viz. LIC

Act, 1956. It started off with a capital of Rs. 5 crore and that too

from the Government of India.

The history of general insurance business in India can be traced

back to Triton Insurance Company Ltd. (the first general

insurance company) which was formed in the year 1850 in

Kolkata by the British.

Important milestones in the Indian general insurance business

1907: The Indian Mercantile Insurance Ltd. was set up which was

the first company of its type to transact all general insurance

business.

1957: General Insurance Council, an arm of the Insurance

Association of India, framed a code of conduct for guaranteeing

fair conduct and sound business patterns.

1968: The Insurance Act improved for regulating investments and

set minimal solvency levels and the Tariff Advisory Committee

was set up.

1972: The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India. It was with

effect from 1st January 1973.

107 insurers integrated 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 was incorporated as a

company.

3. Insurance awareness – Present:

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, nine private non-life insurers

and six public sector companies. With many more joint ventures

in the offing, the insurance industry in India today stands at a

crossroads as competition intensifies and companies prepare

survival strategies in a detariffed 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.

There are opportunities in the pensions sector where regulations

are being framed. Less than 10 % of Indians above the age of 60

receive pensions. The IRDA has issued the first licence for a

standalone health company in the country as many more players

wait to enter. The health insurance sector has tremendous growth

potential, and as it matures and new players enter, product

innovation and enhancement will increase. The deepening of the

health database over time will also allow players to develop and

price products for larger segments of society.

State Insurers Continue 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 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 in November 2005.

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% as of

October 2005. 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, corporate

agents, and bancassurance.

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

detariffed regime by 2007, there will be considerable improvement

in customer service levels, product innovation and newer

standards of underwriting.

Intense Competition – In a de-tariffed environment, competition

will manifest itself in prices, products, underwriting criteria,

innovative sales methods and creditworthiness. Insurance

companies will vie 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 a Rs280-crore

investment from the Indian government. The company now

operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal and will

soon start operations in Saudi Arabia. It also plans to venture into

the African and Asia-Pacific regions in 2006.

The year 2005 was a testing phase for the general insurance

industry with a series of catastrophes hitting the Indian sub-

continent.

However, with robust reinsurance programmes in place, insurers

have successfully managed to tide over the crisis without any

adverse impact on their balance sheets.

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.

Insurance companies in India

IRDA has till now provided registration to 12 private life

insurance companies and 9 general insurance companies. If the

existing public sector insurance companies are considered then

there are presently 13 insurance companies in the life side and 13

companies functioning in general insurance business. General

Insurance Corporation has been sanctioned as the "Indian

reinsurer" for underwriting only reinsurance business.

Insurers

Insurance industry, as on 1.4.2000, comprised mainly two players:

the state insurers:

Life Insurers:

Life Insurance Corporation of India (LIC)

General Insurers:

General Insurance Corporation of India (GIC) (with effect

from Dec'2000, a National Reinsurer)

GIC had four subsidary companies, namely (with effect from

Dec'2000, these subsidaries have been de-linked from the parent

company and made as independent insurance companies.

The Oriental Insurance Company Limited

The New India Assurance Company Limited

National Insurance Company Limited

United India Insurance Company Limited.

List of Insurance companies in India

LIFE INSURERS WebsitesPublic SectorLife Insurance Corporation of India www.licindia.comPrivate SectorAllianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in

Birla Sun-Life Insurance Company Limited www.birlasunlife.com

HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com

ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com

ING Vysya Life Insurance Company Limited www.ingvysayalife.com

Max New York Life Insurance Co. Limited

www.maxnewyorklife.com

MetLife Insurance Company Limited www.metlife.com

Life Insurance Corporation of India (LIC)

Life Insurance Corporation of India (LIC) was formed in

September, 1956 by an Act of Parliament, viz., Life Insurance

Corporation Act, 1956, with capital contribution from the

Government of India. The then Finance Minister, Shri C.D.

Deshmukh, while piloting the bill, outlined the objectives of LIC

thus: to conduct the business with the utmost economy, in a spirit

of trusteeship; to charge premium no higher than warranted by

strict actuarial considerations; to invest the funds for obtaining

maximum yield for the policy holders consistent with safety of the

capital; to render prompt and efficient service to policy holders,

thereby making insurance widely popular.

Since nationalisation, LIC has built up a vast network of 2,048

branches, 100 divisions and 7 zonal offices spread over the

country. The Life Insurance Corporation of India also transacts

business abroad and has offices in Fiji, Mauritius and United

Kingdom. LIC is associated with joint ventures abroad in the field

of insurance, namely, Ken-India Assurance Company Limited,

Nairobi; United Oriental Assurance Company Limited, Kuala

Lumpur and Life Insurance Corporation (International) E.C.

Bahrain. The Corporation has registered a joint venture company

in 26th December, 2000 in Kathmandu, Nepal by the name of Life

Insurance Corporation (Nepal) Limited in collaboration with

Vishal Group Limited, a local industrial Group. An off-shore

company L.I.C. (Mauritius) Off-shore Limited has also been set

up in 2001 to tap the African insurance market.

Some Areas of Future Growth&awareness

Life Insurance

The traditional life insurance business for the LIC has been a little

more than a savings policy. Term life (where the insurance

company pays a predetermined amount if the policyholder dies

within a given time but it pays nothing if the policyholder does not

die) has accounted for less than 2% of the insurance premium of

the LIC (Mitra and Nayak, 2001). For the new life insurance

companies, term life policies would be the main line of business.

Health Insurance

Health insurance expenditure in India is roughly 6% of GDP,

much higher than most other countries with the same level of

economic development. Of that, 4.7% is private and the rest is

public. What is even more striking is that 4.5% are out of pocket

expenditure (Berman, 1996). There has been an almost total

failure of the public health care system in India. This creates an

opportunity for the new insurance companies.

Thus, private insurance companies will be able to sell health

insurance to a vast number of families who would like to have

health care cover but do not have it.

Pension

The pension system in India is in its infancy. There are generally

three forms of plans: provident funds, gratuities and pension

funds. Most of the pension schemes are confined to government

employees (and some large companies). The vast majority of

workers are in the informal sector. As a result, most workers do

not have any retirement benefits to fall back on after retirement.

Total assets of all the pension plans in India amount to less than

USD 40 billion.

Therefore, there is a huge scope for the development of pension

funds in India. The finance minister of India has repeatedly

asserted that a Latin American style reform of the privatized

pension system in India would be welcome (Roy, 1997). Given all

the pros and cons, it is not clear whether such a wholesale

privatization would really benefit India or not (Sinha, 2000).

Market Share of Indian Insurance Industry

The introduction of private players in the industry has added

value to the industry. The initiatives taken by the private players

are very competitive and have given immense competition to the

on time monopoly of the market LIC. Since the advent of the

private players in the market the industry has seen new and

innovative steps taken by the players in this sector. The new

players have improved the service quality of the insurance. As a

result LIC down the years have seen the declining phase in its

career. The market share was distributed among the private

players. Though LIC still holds the 75% of the insurance sector

but the upcoming natures of these private players are enough to

give more competition to LIC in the near future. LIC market

share has decreased from 95% (2002-03) to 81 %( 2004-05).The

following companies has the rest of the market share of the

insurance industry.

Table 3 shows the mane of the player in the market.

Insurance Business:

Insurance business is divided into four classes :

1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4)

Miscellaneous Insurance.

Life Insurers transact life insurance business; General Insurers

transact the rest.

No composites are permitted as per law.

Legislation (as on 1.4.2000):

Insurance is a federal subject in India. The primary legislation

that deals with insurance business in India is:

Insurance Act, 1938, and Insurance Regulatory &

Development Authority Act, 1999.

Life Insurance:

Popular Products: Endowment Assurance (Participating), and

Money Back (Participating). More than 80% of the life insurance

business is from these products.

General Insurance:

Fire and Miscellaneous insurance businesses are predominant.

Motor Vehicle insurance is compulsory.

Tariff Advisory Committee (TAC) lays down tariff rates for some

of the general insurance products (please visit website of GIC for

details)

Information

About the insurance industry, the following documents may be

helpful:

Malhotra Committee Report (The Report of the Committee

on Reforms in the Insurance Sector);

IRDA's First Annual Report - 2001

Customer Protection and awareness:

Insurance Industry has Ombudsmen in 12 cities. Each

Ombudsman is empowered to redress customer grievances in

respect of insurance contracts on personal lines where the insured

amount is less than Rs. 20 lakhs, in accordance with the

Ombudsman Scheme. Addresses can be obtained from the offices

of LIC and other insurers.

Protection of the interest of policy holders:

IRDA has the responsibility of protecting the interest of insurance

policyholders. Towards achieving this objective, the Authority has

taken the following steps:

IRDA has notified Protection of Policyholders Interest

Regulations 2001 to provide for: policy proposal documents in

easily understandable language; claims procedure in both life and

non-life; setting up of grievance redressal machinery; speedy

settlement of claims; and policyholders' servicing. The Regulation

also provides for payment of interest by insurers for the delay in

settlement of claim.

The insurers are required to maintain solvency margins so that

they are in a position to meet their obligations towards

policyholders with regard to payment of claims.

It is obligatory on the part of the insurance companies to disclose

clearly the benefits, terms and conditions under the policy. The

advertisements issued by the insurers should not mislead the

insuring public.

All insurers are required to set up proper grievance redress

machinery in their head office and at their other offices.

The Authority takes up with the insurers any complaint received

from the policyholders in connection with services provided by

them under the insurance contract.

Recent Scenario of Insurance Industry

India with about 200 million middle class household shows a

huge untapped potential for players in the insurance

industry. Saturation of markets in many developed

economies has made the Indian market even more attractive

for global insurance majors. The insurance sector in India

has come to a position of very high potential and

competitiveness in the market. Indians, have always seen

life insurance as a tax saving device, are now suddenly

turning to the private sector that are providing them new

products and variety for their choice.

Consumers remain the most important centre of the

insurance sector. After the entry of the foreign players the

industry is seeing a lot of competition and thus improvement

of the customer service in the industry. Computerisation of

operations and updating of technology has become

imperative in the current scenario. Foreign players are

bringing in international best practices in service through

use of latest technologies

The insurance agents still remain the main source through

which insurance products are sold. The concept is very well

established in the country like India but still the increasing

use of other sources is imperative. At present the

distribution channels that are available in the market are

listed below.

Direct selling

Corporate agents

Group selling

Brokers and cooperative societies

Bancassurance

Customers have tremendous choice from a large variety of

products from pure term (risk) insurance to unit-linked

investment products. Customers are offered unbundled

products with a variety of benefits as riders from which they

can choose. More customers are buying products and

services based on their true needs and not just traditional

moneyback policies, which is not considered very

appropriate for long-term protection and savings. There is

lots of saving and investment plans in the market. However,

there are still some key new products yet to be introduced -

e.g. health products.

The rural consumer is now exhibiting an increasing

propensity for insurance products. A research conducted

exhibited that the rural consumers are willing to dole out

anything between Rs 3,500 and Rs 2,900 as premium each

year. In the insurance the awareness level for life insurance

is the highest in rural India, but the consumers are also

aware about motor, accidents and cattle insurance. In a

study conducted by MART the results showed that nearly

one third said that they had purchased some kind of

insurance with the maximum penetration skewed in favor of

life insurance. The study also pointed out the private

companies have huge task to play in creating awareness and

credibility among the rural populace. The perceived benefits

of buying a life policy range from security of income bulk

return in future, daughter's marriage, children's education

and good return on savings, in that order.

Application of Information Technology in Insurance Sector to

make people aware :

There is an evolutionary change in the technology that has

revolutionized the entire insurance sector. Insurance industry is a

data-rich industry, and thus, there is a need to use the data for

trend analysis and personalization.

With increased competition among insurers, service has become a

key issue. Moreover, customers are getting increasingly

sophisticated and tech-savvy. People today don’t want to accept

the current value propositions, they want personalized

interactions and they look for more and more features and add

ones and better service

The insurance companies today must meet the need of the hour

for more and more personalized approach for handling the

customer. Today managing the customer intelligently is very

critical for the insurer especially in the very competitive

environment. Companies need to apply different set of rules and

treatment strategies to different customer segments. However, to

personalize interactions, insurers are required to capture

customer information in an integrated system.

With the explosion of Website and greater access to direct product

or policy information, there is a need to developing better

techniques to give customers a truly personalized experience.

Personalization helps organizations to reach their customers with

more impact and to generate new revenue through cross selling

and up selling activities. To ensure that the customers are

receiving personalized information, many organizations are

incorporating knowledge database-repositories of content that

typically include a search engine and lets the customers locate the

all document and information related to their queries of request

for services. Customers can hereby use the knowledge database to

mange their products or the company information and invoices,

claim records, and histories of the service inquiry. These products

also may be able to learn from the customer’s previous knowledge

database and to use their information when determining the

relevance to the customers search request.

WHAT IS LIFE INSURANCE IN INDIA?

Life insurance made its debut in India well over 100 years ago. Its salient features are not as widely understood in our country as they ought to be. What follows is an attempt to acquaint readers with some of the concepts of life insurance, with special reference to life insurance. It should, however, be clearly understood that the following narration is by no means an exhaustive description of the terms and conditions of a life insurance policy or its benefits or privileges. For more details, please contact our Branch or Divisional Office. Any life insurance Agent will be glad to help you choose the life insurance plan to meet your needs and render policy servicing.

Life Insurance sector is the fastest growing sector in India since 2000 when the Government allowed Private players and FDI [Foreign Direct Investment] up to 26%. Life Insurance in India was nationalized by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC.

In 2000, the legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000 was passed, where in the newly appointed insurance

regulator - Insurance Regulatory and Development Authority [IRDA] started to issue licenses to private life insurers.

What is Life Insurance?Life Insurance is a contract for payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) on the happening of the event insured against. Usually the contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the assured. Life insurance is universally acknowledged to be an institution which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilisation's partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: that of dying prematurely leaving a dependent family to fend for itself and that of living to old age without visible means of support.

Why is it superior to other forms of Savings?Protection: Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable.

Aid To Thrift: Life insurance encourages 'thrift'. Long term saving can be made in a relatively 'painless' manner because of the 'easy instalment' facility built into the scheme (method of paying premium either monthly, quarterly, half yearly or yearly). Take, for example, our Salary Saving Scheme popularly known as SSS. This scheme provides a convenient method of paying premium each month by deduction from one's salary. The deducted premium is remitted by the employer to the LIC. The Salary Saving Scheme can be introduced in an institution or establishment subject to specified terms and conditions.

Liquidity: Loans can be raised on the sole security of a policy which has acquired loan value. Besides, a life insurance policy is also generally accepted as security for even a commercial loan.

Tax Relief: Tax relief in Income Tax and Wealth Tax is available for amounts paid by way of premium for life insurance subject to Income Tax rates in force. Assessees can avail themselves of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for his insurance than he would have to pay otherwise.

Money When You Need It: A suitable insurance plan or a combination of different plans can be taken out to meet specific needs that are likely to arise in future, such as children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time. Alternatively, policy moneys can be so arranged to be made available at the time of one's retirement from service to be used for any specific purpose, such as for the purchase of a house or for other investments. Subject to certain conditions, loans are granted to policyholders for house building or for purchase of flats.

Who Can Buy A Life Insurance Policy?Any person who has attained majority and is eligible to enter into a valid contract can take out a life insurance policy for himself and on those in whom he has insurable interest. Policies can also be taken out, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, factors such as the state of health of the life to be assured, the proponent's income and other relevant factors are considered by the Corporation.

Insurance On Women.Prior to nationalization (1956), many of the private insurance companies used to offer insurance to female lives with some extra premium or on restrictive conditions. After nationalization of life insurance, the terms under which life insurance is granted to female lives have been reviewed from time to time. At present, women with earned income are treated on par with male lives. In other cases, a restrictive clause is imposed and that too only if age of the female is up to 30 years and if she does not have an income attracting Income Tax.

Medical And Non-Medical Schemes.Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance and also as a measure of relaxation, LIC has been

extending insurance cover without any medical examination, subject to certain conditions.

With Profit And Without Profit Plans.An insurance policy can be 'with' or 'without' profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable alongwith the contracted amount. In 'without' profit plan the contracted amount is paid without any addition. The premium rate charged for a 'with' profit policy is therefore higher than for a 'without' profit policy.

Keyman Insurance.Keyman Insurance is taken by a business firm on the life of key employee(s) to project the firm against the finance loss which may occur due to the premature demise of the Keyman.

Life Insurance is the fastest growing sector in India since 2000 as Government allowed Private players and FDI up to 26%. Life Insurance in India was nationalised by incorporating Life Insurance Corporation (LIC) in 1956. All private life insurance companies at that time were taken over by LIC.

In 1993 the Government of Republic of India appointed RN Malhotra Committee to lay down a road map for privatisation of the life insurance sector.

While the committee submitted its report in 1994, it took another six years before the enabling legislation was passed in the year 2000, legislation amending the Insurance Act of 1938 and legislating the Insurance Regulatory and Development Authority Act of 2000. The same year that the newly appointed insurance regulator - Insurance Regulatory and Development Authority IRDA -- started issuing licenses to private life insurers.

List of Life Insurers (as of Sept, 2008)

Apart from Life Insurance Corporation, the public sector life insurer, there are 20 other private sector life insurers, most of them joint ventures between Indian groups and global insurance giants.

Life Insurer in Public Sector1. Life Insurance Corporation of India

Life Insurers in Private Sector1. SBI Life Insurance 2. Metlife India Life Insurance 3. ICICI Prudential Life Insurance 4. Bajaj Allianz Life 5. Max New York Life Insurance 6. Sahara Life Insurance 7. Tata AIG Life 8. HDFC Standard Life9. Birla Sunlife 10.Kotak Life Insurance 11.Aviva Life Insurance 12.Reliance Life Insurance Company Limited - Formerly

known as AMP Sanmar LIC13.ING Vysya Life Insurance 14.Shriram Life Insurance15.Bharti AXA Life Insurance Co Ltd 16.Future Generali Life Insurance Co Ltd17.IDBI Fortis Life Insurance 18.AEGON Religare Life Insurance 19.DLF Pramerica Life Insurance20.CANARA HSBC Oriental Bank of Commerce LIFE

INSURANCE

Foreign Direct Investment (FDI) Policy in Insurance Sector

As per the current (Mar 06) FDI norms, foreign participation in an Indian insurance company is restricted to 26.0% of its equity / ordinary share capital. The Union Budget for fiscal 2005 had recommended that the ceiling on foreign holding be increased to 49.0%.

The government approved the much-awaited comprehensive Insurance Bill that seeks to raise foreign direct investment (FDI) cap in private sector to 49 per cent from 26 per cent.

Indian life insurance industry overview

All life insurance companies in India have to comply with the strict regulations laid out by Insurance Regulatory and Development Authority of India (IRDA). Therefore there is no risk in going in for private insurance players. In terms of being rated for financial strength like international players, only ICICI Prudential is rated by Fitch India at National Insurer Financial

Strength Rating of AAA(Ind) with stable outlook indicating the highest claims paying ability rating.

Life Insurance Corporation of India (LIC), the state owned behemoth, remains by far the largest player in the market. Among the private sector players, ICICI Prudential Life Insurance(JV between ICICI Bank and Prudential PLC) is the largest followed by Bajaj Allianz Life Insurance Company Limited (JV between Bajaj Group and Allianz).Among others, Kotak Life Insurance emerging as a one of the best product provider in the current market.It has been estimated that customer growth of Kotak Life Insurance is better than any private insurance company in India. The private companies are coming out with better products which are more beneficial to the customer. Among such products are the ULIPs or the Unit Linked Investment Plans which offer both life cover as well as scope for savings or investment options as the customer desires.Further, these type of plans are subject to a minimum lock-in period of three years to prevent misuse of the significant tax benefits offered to such plans under the Income Tax Act. Hence, comparison of such products with mutual funds would be erroneous.

Commission / intermediation fees The maximum commission limits as per statutory provisions

are:

Agency commission for retail life insurance business:

o

7- 90% for 1st year premium if the premium paying term is more than 20 years

7- 10% for 1st year premium if the premium paying term is more than 15 years

7- 10% for 1st year premium if the premium paying term is less than 10 years

7% - yr 2 and 3rd year and 3.5% - thereafter for all premium paying terms.

In case of Mutual fund related - Unit linked policies it varies between 1.5% to6% on the premium paid.

o Agency commission for retail pension policies 7.5% for 1st year premium and 2.5% thereafter

Maximum broker commission - 30%

Referral fees to banks – Max 55% for regular premium and 10% for single premium. However in any case this fee cannot be more than the agency commission as filed under the product.

However, the above commission may be further subject to the product wise limits specified by IRDA while approving the product

Information & awareness of major insurance policy

Miscellaneous insurance

Miscellaneous Insurance exists to help people gain a good understanding of the various kinds of insurance coverage's that are available to people today. Insurance has become a very important part of many people's lives as they realize the need to provide protection for different areas of their everyday life. There is a wide variety of types of insurance coverage available today.

The dictionary defines insurance as "coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril". This means that an individual enters into an agreement with an insurance company that will pay a set amount of money in case of a loss in a specified area. There are a number of inclusions and exclusions involved in each insurance policy with all kinds of variables that must be taken into consideration before purchasing the policy.

One of the most important things to remember is that an insurance policy is a contract between the insurance company and their customer. The insurance company agrees to pay certain amounts of money in case of loss and the customer agrees to pay the insurance premiums that are required to keep the policy in place. If the customer fails to pay the premiums due, the insurance may be revoked, leaving the customer vulnerable.

The contract specifically makes the insurance company liable to pay for any loss that is specifically stated in the insurance policy. Most policies will accurately describe the types of losses covered and the amount of money that the company will pay for those losses.

With the increase in public awareness and the consequent thrust of the Insurance Industry in the areas of Health Insurance, Liability Insurance and other personal lines of insurances, the miscellaneous portfolio of Insurance is poised to be a sunrise portfolio of General Insurance.

Glass Insurance Personal Accident Insurance

Money Insurance Golfer Insurance

Burglary Insurance General Public Legal Liability Insurance

Electronic Equipment Insurance

Contract Works Insurance

Workmen Compensation Insurance

Fidelity Guarantee Insurance

Machinery Insurance Aviation Insurance

Travel Accident Insurance All Risks Insurance

Boat Insurance  

Thus miscellaneous insurance is an addition to your existing insurance giving you an extra security.

Management of Miscellaneous Insurance Business

Background With the increase in public awareness and consequent thrust of the Insurance Industry in the areas of Health Insurance, Liability Insurance and other personal lines of insurances, the miscellaneous portfolio of Insurance is poised to be the sunrise portfolio of General Insurance business. This programme has been designed keeping in mind these developments in the market and attempts to address the need for increased awareness of the multidimensional miscellaneous portfolio.

Objectives To enhance the participants understanding of the miscellaneous

portfolio To acquaint them with various aspects of Health and Liability

Insurance in context with the Current scenario Help them explore the potential of rural insurance in line with the

regulatory guidelines.

To emphasize the importance of and explore the potential of personal line of business under miscellaneous portfolio.

Contents Analysis of the miscellaneous insurance products Health Care Management - Indian and Global Perspective TPA’s an Effective Service Provider

Legal framework and Liability Insurance Products Rural and Social Sector - regulations, product and marketing Personal line products - potential and marketing, distribution

channels Scope and Coverage of New Products Credit Default Cover Bankers Indemnity Insurance/ Jewelers Block Covers; Stock Brokers /

Insurance Brokers Indemnity Packaging & Product Development

Special Contingency Covers

Participants’ ProfileExecutives handling Technical Departments and Office In-charge of operating offices of General Insurance Companies.

Accident Insurance

Accident insurance provides a cash cover to a policyholder when s/he suffers injuries as a result of an accident. While insurance helps a policyholder pay off hospital and medical bills in case of accident injuries, it provides cash benefits to family members if the policyholder dies in the accident. This insurance, applicable 24 hours a day, 365 days a year, is also commonly referred to as personal accident insurance.

Types of Personal Accident Insurance Policies

Under personal accident insurance, the policyholder, if injured, receives cash benefits every month, just like income, for as long as s/he is unable to work due to the accidental injuries. This income is non-taxable and does not exceed the policyholder’s after-tax earnings minus the state benefits s/he can claim. In case of death of the policyholder due to an accident, the family receives a specific lump-sum amount.

There are eight common types of personal accident insurance policies:

Individual: This policy can be taken by any individual. The benefits usually enclose partners and children. Since several activities are excluded from this policy, it is not as useful for people who love adventurous sports, like mountaineering and rock climbing.

Children: The purpose of this policy is to provide financial help to parents if they are unable to work or if they incur expenses as a result of an accident.

Group: This policy is used by companies to cover employees for expenses related to accidents.

Self-employed: Since self employed individuals are not eligible for employee benefits, they are worse off when injured in an accident.

Team: Through a team accident insurance policy, organizers can seek cover for all the members of a sports team.

Professional: This policy is specifically for self employed professionals, such as a sportsperson, actor, lawyer or doctor, who have special requirements.

Over 50: This policy targets people over 50 years of age, as accidents can cause more grievous injuries to them.

Travel accidents: This policy offers benefits in case the policyholder meets with an accident while traveling.

There are varied accident insurance policies to suit different needs. One should understand and choose the policy with utmost care.

Burglary Insurance

With the increase in materialistic wealth and booming economy, the chances of burglary in business premises are also increasing. To counteract the situation and protect the hard earned wealth of the businesspersons, many insurance companies have come up with attractive insurance plans that promise to provide cover against the rise of loss or damage in the business premises, due to burglary. In India, a burglary insurance (business premises)

policy generally covers contents of business premises, against the risk of loss or damage by burglary and housebreaking. It is very important to know the basic clause of the insurance plans, although they may vary from company to company. In this article, we have provided the basic information that you need to know, before opting for a burglary insurance plan.

Burglary Insurance Policy The loss of materialistic wealth in a business organization,

due to burglary, is reimbursed by a burglary insurance policy.

The insurance companies provide insurance against nothing but burglary, in the business premises.

The property insured is covered only if loss or damage takes place, while contained in the insured premises and not in any other premises.

Loss of or damage to deeds, bonds, bills of exchange, promissory notes, cash, treasury notes and bank notes, cheque, securities for money stamps, stamp collections, books of account, documents of any kind, manuscripts, medals and coins, motor vehicles, and live stock cannot be claimed under office burglary insurance policy in India.

Damage to property by burglars is covered only when the insured is made good. In other words, damage to own premises are not covered.

With regard to cash in locked safe, the key to the safe or strong room should not be left in the premises overnight or at least anywhere near the safe.

Applicants need to submit the proposal form furnishing detailed information on the location of the risk and claims history.

Often inspection of the premises and its neighborhood is carried out by agents or brokers or marketing officers of the insurance company.

Premises located in isolated areas or the adjoining premises are those, which are not occupied in the night. These may include educational institution or a place of worship, which usually do not find favor with the insurers.

In order to substantiate a burglary insurance claim, one must produce the FIR and non-detection report from the police.

The insurers will depute and obtain a survey report even on the stolen goods, to determine the proximate cause of the loss and the quantum.

Stock books and other accounts are also verified before furnishing the insurance cover.

In some insurance plans, the theft is not valid, if it has been conducted by an internal staff, or a person who didn't break into the business premises.

Motor insurance

Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.

Legally, no motor vehicle is allowed to be driven on the road without valid insurance. Hence, it is obligatory to get the vehicle insured. Motor insurance policies cover against any loss or damage caused to the vehicle or its accessories due to the following natural and man made calamities.

Natural Calamities: Fire, explosion, self-ignition or lightning, earthquake, flood, typhoon, hurricane, storm, tempest, inundation, cyclone, hailstorm, frost, landslide, rockslide.

Man made Calamities: Burglary, theft, riot, strike, malicious act, accident by external means, terrorist activity, any damage in transit by road, rail, inland waterway, lift, elevator or air.

Motor insurance provides compulsory personal accident cover for individual owners of the vehicle while driving. One can also opt for a personal accident cover for passengers and third party legal liability.

Third party legal liability protects against legal liability arising due to accidental damages. It includes any permanent injury / death of a person and damage caused to the property.

The vehicles are insured at a fixed value called the Insured's

Declared Value (IDV). IDV is calculated on the basis of the manufacturer's listed selling price of the vehicle (plus the listed price of any accessories) after deducting the depreciation for every year as per the schedule provided by the Indian Motor Tariff. If the price of any electrical and / or electronic item installed in the vehicle is not included in the manufacturer's listed selling price, then the actual value (after depreciation) of this item can be added to the sum insured over and above the IDV.

In case the vehicle is fitted with CNG / LPG, the CNG/LPG kit fitted to the vehicle is to be insured separately at an additional premium.

GENERAL INSURANCE

What is 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.

Non-life insurance companies have products that cover property against Fire and allied perils, flood storm and inundation, earthquake and so on. There are products that cover property against burglary, theft 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

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 rateable proportion of the loss. For instance if the value of a property is Rs.100 and it is insured for Rs.50/-, in the event of a loss to the extent of say Rs.50/-, the maximum claim amount payable would be Rs.25/- ( 50% of the loss being borne by the insured for underinsuring the property by 50% ). This concept is quite often not understood by most insureds.

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, i.e., hospitals. The Third Party Administrators also provide service for reimbursement claims. Sometimes the insurers themselves process reimbursement claims.

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 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 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 correctlyby a proposer to ensure that the cover is adequate and the right one.

Conclusion

There is a probability of a spurt in employment opportunities. A number of web-sites are coming up on insurance, a few financial magazines exclusively devoted to insurance and also a few training institutes being set up hurriedly. Many of the universities and management institutes have already started or are contemplating new courses in insurance. Life insurance has today become a mainstay of any market economy since it offers plenty of scope for

garnering large sums of money for long periods of time. A well-regulated life insurance industry which moves with the times by offering its customers tailor-made products to satisfy their financial needs is, therefore, essential if we desire to progress towards a worry-free future. Awareness &Progress Of Life insurance in India since 2000 to 2012